Annual Report2016Profile
Musashino Bank is the only regional bank whose operationalbase consists of Saitama Prefecture in the Tokyo metropolitan
area. The prefecture lies immediately to the north of Tokyo,
and many of its residents commute to work in the capital.
Currently, 7.26 million (estimated) people live in Saitama,
making it the country’s fifth most populous prefecture after

Tokyo, Kanagawa, Osaka, and Aichi, and the population isstill climbing. Since its establishment in 1952, Musashino
Bank has been one of Saitama Prefecture’s core financial
institutions, and has played a major role in supporting thedevelopment of the regional economy and local industries forover six decades.

Corporate Philosophy“Working in harmony with the local community it serves”

To contribute to the prosperity of the local community and to secure growth and development in partnership with the region.

“Maintaining a deep respect toward customers”

To engage in bold management that anticipates change while providing the highest quality services throughout the organization
as a whole.
Bank Data (non-consolidated basis, as of March 31, 2016)

Subsidiaries and Affiliated Companies

Head Office:Home page:
Established:
Networks:

10-8, Sakuragi-cho 1-chome, Omiya-ku, Saitama
http://www.musashinobank.co.jp (Japanese only)
March 6, 1952
Number of branches: 96 (Saitama Prefecture: 92 [of which
1 is a sub-branch], outside Saitama Prefecture: 4)Name

Line of Business

The Bugin General Lease
Co., Ltd.

General leases, installment-payment
services, auto leasing services

The Bugin Guarantee
Co., Ltd.

Loan guarantees for individuals

9

The Musashino Card
Co., Ltd.

Credit card business (JCB, VISA),
loans and loan guarantees related tocard services(As of September 30, 2016)

Number ofmortgage loan centers:
Employees:
Total assets:
Deposits:
Loans:
Common stock:
Capital adequacy ratio:
Number of correspondent
arrangements:
Issued common stock:

2,255¥4,316.0 billion¥4,012.3 billion¥3,333.1 billion¥45.7 billion
9.81%

The Bugin System Service Development, sale and maintenanceCo., Ltd.
of computer systems

178
33,805 thousand shares

The Bugin Economic
Research InstituteCo., Ltd.

Research into the regional economy,
consultation, information services,and holding of seminars

The Bugin Capital Co.,Ltd.

Management support for venturebusinesses

Head OfficeTochigi
Prefecture

Gunma
Prefecture
NaganoPrefecture

Yamanashi
Prefecture

SaitamaPrefecture
Tokyo
Kanagawa
Prefecture

Contents

1 Message from the President
4 Consolidated Financial Highlights
5	About the Musashino Bank
6	Long-term Vision/Medium-term Management Plan
7 Chiba-Musashino Alliance
8 Corporate Governance
9 Risk Management
10	Compliance
11 Operational Base of Saitama Prefecture
12	Contributing to the Local Economy
13 Measures and Support for Regional Revitalization

IbarakiPrefecture

Chiba
Prefecture

14 Initiatives Related to Revitalization of the Region
15 Nurturing Growth Fields
16 Promoting the Region’s Beauty
17 Providing SME Management Assistance
19 Corporate Social Responsibility
20 Consolidated Balance Sheets
21	Consolidated Statements of Income and Comprehensive Income
22	Consolidated Statements of Changes in Net Assets
24	Consolidated Statements of Cash Flows
25 Directory

Message from the President“ More For You
— For the Sake of Towns,
Daily Living, and Smiling Faces”

Kikuo Kato
President

The Prefectural Economy
We anticipate the further invigoration of Saitama Prefecture’s
economy with investments ahead of the Tokyo Olympic andParalympic Games in 2020. The Metropolitan Inter-City
Expressway (Ken-O-do) and the extension of high-speed
Shinkansen bullet train lines are set to enhance theconvenient transport links to the rest of Japan, supporting
accelerated relocations and capital investments by companies.

Main Initiatives in Fiscal 2015
Fiscal 2015, the year ended March 31, 2016 was the
final year of our medium-term management plan “MVP(Musashino Value-making Plan) 1/3 (One Third).” Based on
this plan, we engaged in a range of initiatives to realize ourgrowth strategy and regional revitalization.
To upgrade our branch network, we opened the Itabashi
Branch in Itabashi Ward, Tokyo, which is immediately adjacent to Saitama Prefecture and has close economic ties with
our region. We also renovated a number of existing branches

to make them easier for customers to use.
The Bank was the first financial institution in our region
to introduce the Musashino Account Opening mobile phone
application to enable retail customers to apply for new
accounts using a smartphone. To support households
bringing up children, we began offering housing loan even to
income-earners on maternity leave via this channel.
We also launched the special “Musashino Vacant Housing
Loan” in a bid
to address thegrowing social
issue of vacantresidential
properties.
For corporate
customers, we
focused efforts
on evaluating
the business
Honjo Branch/Honjo Minami Branch
viability of
New build and relocation/integration1

We also concluded comprehensive partnership agreements
to reinforce links with public-sector entities, aimed at
improving public services for regional residents and addressing related issues.

Financial Results Fiscal 2015

Deposits and assets in custody (non-consolidated)
Deposits, etc. rose by ¥72.6 billion in fiscal 2015 to ¥4,012.3
billion, surpassing the ¥4 trillion mark for the first time.
Assets in custody such as investment trusts and insurance
products grew by ¥29.3 billion to ¥712.2 billion.

Loans (non-consolidated)
Koshigaya Branch New build and relocation

SMEs based on accurately assessing their business scope andgrowth prospects and extending finance where possible not toeasily relying on loan collateral or guarantees.
As a result of these initiatives, the balance of our corporate
lending marketed as the Musashino SME Active Fund loans
continued to grow steadily.
The Bank’s Information Center actively collected,
processed and provided information to serve the needs of ourcorporate clients in the region.
As part of our efforts to create regional value and tosupport the formulation and implementation of the public
sector’s Regional Comprehensive Strategy, we have set up the“Team for Promoting Towns, People and Job Revitalization”
within our head office and have established the Musashino
Fund to Promote Regional Revitalization.

Deposits including negotiable deposits(non-consolidated)

Assets in custody(non-consolidated)(¥ billion)(¥ billion)

Loans outstanding continued to be robust, increasing by¥109.9 billion year on year to ¥3,333.1 billion.

Earnings
Net income was robust for the second year in a row, risingby ¥0.4 billion to ¥11.2 billion. This surpassed the target of¥10 billion set under the MVP 1/3 (One-Third) plan for thethree-year period starting in April 2013.

Returns to shareholders
The Bank’s basic policy on shareholder returns is to maintainconsistent and stable dividends.
For fiscal 2015, based on the results achieved in the final
year of the MVP 1/3 (One-Third) plan, we decided to pay anannual dividend of ¥90 per share.

Loans(non-consolidated)(¥ billion)

3,939.7682.9

3,078.9603.7

3,660.3

2

3,223.2

637.8

3,788.7

FY2012FY2013

3,333.1

712.2

4,012.3

FY2014FY2015FY2012

2,962.6

FY2013

FY2014FY2015FY2012FY2013

FY2014FY2015Return on equity (ROE)The consolidated return on equity (ROE) was 5.9% on a
5-year average, and the non-consolidated ROE was 5.3%.

Medium-term Management Plan
“MVP 2/3 (Two-Thirds)”
In April 2016, we embarked on the Bank’s new medium-term
management plan “MVP 2/3 (Two-Thirds).”
This plan marks the second phase of a long-term vision tobe “the region’s number one bank that creates new value in
Saitama.” Under this plan, we will continue to upgrade ourbranch network in Saitama Prefecture and Saitama borderareas, while focusing on reinforcing sales capabilities so that
we can supply customers with optimal financial solutions.
We will also actively work to promote workforce diversity
and the development of human resources, including female
employees.
Through such initiatives, we aim to be the bank thatpeople in the region will choose first to approach and consult
when seeking answers to financial problems. To this end, we
will seek to upgrade our services to customers and expand ourpoints of contact with our entire customer base.
In March 2016, we entered into an agreement to form acomprehensive alliance with Chiba Bank, another regionalbank, that operates mainly in Chiba Prefecture. Under thisalliance, our two banks operating in the Tokyo metropolitan
area will work together to further boost the value that we add
for our respective regional communities by seeking to address
local issues and by partnering for the benefit of our customers.

Net income

Looking ahead, the directors and employees of the Musashino
Bank Group remain committed to earning the trust and meeting the expectations of our customers based on our “MoreFor You — For the Sake of Towns, Daily Living, and Smiling
Faces” brand message.
In closing, we kindly request your continued support andunderstanding.
Kikuo Kato
President

Dividend payout ratio and annual dividend(¥ billion)

FY2012 FY2013 FY2014 FY2015

14.4
12.5
11.1

With the president of The Chiba Bank, Ltd.

10.5 10.3

9.7

10.7

11.2

Dividend
payout ratio (%)

22.46

25.79

24.84

26.74

Annualdividend (Yen)

70

75

80

90

ROE
Consolidated ROE:
5.9% for 5-year average
6.8%
6.1%
5.8%

5.0%

Shareholders return ratio

5.5%

5.3%
5.1%

5.0%

Non-consolidated ROE:
5.3% for 5-year average

FY2012 FY2013 FY2014 FY2015
Shareholders
return ratio (%)

FY2012FY2013

Consolidated
Non-consolidated

FY2014FY2015

31.4

25.7

24.8

26.7

FY2012FY2013

FY2014FY2015

Consolidated
Non-consolidated3

Consolidated Financial Highlights
The Musashino Bank, Ltd. and Consolidated Subsidiaries Years Ended March 31, 2016 and 2015

Thousands of
U.S. Dollars(Notes 1 and 2)
2016

Millions of Yen (Note 1)
2016
2015

At Year-end
Total Assets............................................................................................
Deposits including negotiable deposits...................................................
Loans and Bills Discounted....................................................................
Trading Account Securities and Investment Securities............................
Total Net Assets.....................................................................................
Capital Adequacy Ratio (based on domestic standards) (%)...................

¥4,328,909
4,000,861
3,319,167
765,160
229,078
10.09¥4,257,062
3,930,283
3,210,605
748,206
229,377
10.32$38,417,723
35,506,400
29,456,576
6,790,559
2,033,003

For the Year
Total Income.........................................................................................
Total Expenses.......................................................................................
Income before Income Taxes..................................................................
Profit attributable to owners of parent....................................................

¥   75,680
55,58420,095
12,563¥   78,737
56,64522,091
14,467$   671,637
493,297
178,339
111,501

Notes 1. In this annual report, Japanese yen (in millions) and U.S. dollars (in thousands) are indicated with fractions omitted.
2. U.S. dollar figures have been translated at the rate ¥112.68 to U.S.$1, the prevailing market rate as of March 31, 2016.

Total income

Total expenses

Profit attributable to owners of parent(¥ million)(¥ million)(¥ million)

14,46759,06778,737

58,15577,68076,91912,56356,64575,680FY2012FY2013

11,142FY2014FY2015

10,31555,584FY2012FY2013

FY2014FY2015FY2012FY2013

FY2014FY2015

Forward-Looking Statements: This annual report contains forward-looking statements regarding the Bank’s financial condition and results ofoperations. These forward-looking statements, which include the Bank’s views and assumptions with respect to future events, involve certain
risks and uncertainties. Actual results may differ from forecasts due to changes in economic conditions and other factors.

4About the Musashino Bank
Stable earnings capabilities
Loan-to-deposit ratio*

Continuous increase for 2 fiscal years
Net income¥11.2 billion

Loan-to-deposit ratio%

Top level for a regional bank(¥0.4 billion increase year on year)*Loan-to-deposit ratio:
This ratio is one of a bank’s management
indicators and is expressed as a percentage
figure obtained by dividing a bank’s loans by
its deposits, This figure indicates how muchthe deposits that have been entrusted toa bank by its customers have been
devoted to financing (lending).

Expansion of business scope

Growing deposits and loans
Deposits, etc.

¥4.01 trillion

83.1

Return to shareholders(1.8% increase year on year)

Stable dividends

Loans¥3.33 trillion

Annual dividend of¥90 (FY2015)

3.4% increase year on year)(

Number of business-loan customers

21,108customers(Increase of 568 customers year on year)

Share of total loans is rising
Share of total loans provided in Saitama Prefecture

Share of total deposits taken in Saitama Prefecture

(%)

(%)

18.38% 18.47%

FY2012FY201318.61%FY201418.77%

13.76%FY2015FY2012

Source: Data from the Bank of Japan’s Research and Statistics Department(Based on bank accounts of domestic banks)

13.61%FY201313.78%FY201413.55%FY2015

Source: Data from the Bank of Japan’s Research and Statistics Department(Based on bank accounts of domestic banks)

Characteristics of Saitama Prefecture
The number of private companies

Population (estimated)

7.26

249,078

million people(Japan’s fifth largest prefecture in terms of population)companies(Japan’s fifth largest prefecture in terms of number of companies)

Nationwide Census Early Release (2016)

Economic Census for Business Frame (July 2014)

Total prefectural production (nominal)

20.7¥
trillion(Japan’s fifth largest prefecture in terms of production)
Prefectural Accounts (fiscal 2013)

Shinkansen railway andexpressway networks
Expressway
Railway (Shinkansen)

NaritaInternational
AirportTokyo
International
Airport(Haneda)5

Long-term Vision/Medium-term Management Plan
In April 2016, the Bank started its medium-term management plan “MVP (Musashino Value-making Plan) 2/3 (Two-Thirds),”
the second phase of its efforts to realize its long-term vision for turning itself into “the region’s number one bank (The Valuemaking Bank) that creates new value in Saitama,” and has been working to further expand its contact with customers and provide
optimal solutions.

Long-term Vision: “MVP (Musashino Value-making Plan)”

The number one bank in the region that creates value in Saitama~ The Value-making Bank ~By creating value in Saitama, lead the economic development of Saitama,
and also grow ourselves by responding to the expectations of our customers
Phase 1
Previous medium-term
management plan

Phase 2Medium-term management plan

Enhance readiness to become
the number one bank in the region

Next medium-term
management plan

“MVP 2/3 (Two-Thirds)”(April 2019 onwards)(April 2016–March 2019)“MVP 1/3 (One-Third)”(April 2013–March 2016)

Phase 3

Maintain our overwhelming position
as the number one bank in the region

Establish our reputation as thenumber one bank in the region

Medium-term management plan “MVP 2/3 (Two-Thirds)” Plan period: April 2016–March 2019
Become the bank which is the most familiar with the region and its customers

Plan vision

The bank that people will choose first to approach and consult when seeking answers to financial problems

Basic Policy■ To provide solutions that meet the needs of our customers■ Conduct the allocation of optimal management resources in order to support the economic development of regional communities

Basic Strategy
Increase contact with customers

Sales strategy

Human resources
strategy

Infrastructurebuilding

Provide optimal solutions
Rise to the challenge of entering new fields

Strengthen
Strengthen Groupsecurities investment
strategies

Fuse creation strategies and growth strategies
Strengthen management oversight systems
Improve brand, customer satisfaction and CSR

Financial targets
Item
Balance of loans (year-end)
Balance of deposits including assets in custody (year-end)
Net income (non-consolidated)
ROE (return on equity, consolidated five-year average)

6

Target for Fiscal Year Ending March 2019
¥3,700.0 billion¥5,600.0 billion¥   10.5 billion
Over 5%

Chiba-Musashino Alliance
In order to provide even more convenient services to customers in the region, and to make a further contribution to regional
revitalization, in March 2016 we concluded a comprehensive alliance with Chiba Bank entitled the “Chiba-Musashino Alliance.”

Creation of a new model for regional banks’ alliances

Regional banks rooted ineach region

Minimal overlap of branches

Share business issues
characteristic of Tokyo
Metropolitan area

Best partner as regards smoothly advancing the alliance

Both banks to maintain independent management

Business alliance

Increase
earnings

Capital alliance
Mutually hold some of each other’s
stock in order to increase
the alliance’s effectReduce costs

Enhance regional-oriented financing andfurther contribute to the region

Both banks will collaborate with a sense of speed
to realize business objectives of the allianceFurther accelerate growth strategies aimed at achieving our long-term vision

Saitama

Chiba
Musashino Bank Head Office (Omiya-ku, Saitama City)

Chiba Bank Head Office (Chuo-ku, Chiba City)

7

Corporate Governance
Basic StanceMusashino Bank recognizes that upgrading and expanding
its corporate governance capabilities are key priorities ofmanagement. In addition to adhering strictly to a policyof compliance with statutory and regulatory requirements
as well as in-house rules and regulations, every effort ismade to ensure that the Board of Directors and the Boardof Corporate Auditors stringently monitor directors in theexecution of their duties.
Two outside directors and three outside auditors who
pose no threat of conflicts of interest with shareholders havebeen elected, and they monitor and audit directors in theexecution of their duties. They also take part in meetingsof the Board of Directors where they are able to proactively
voice their opinions and offer advice on management from a
broad, independent and neutral perspective. This ensures thatthe management monitoring function is both objective andimpartial.

Also, the Bank has adopted an executive officer system
in order to reduce the number of directors and to ensure
a speedier decision-making process. Directors delegate
authority to executive officers, who are charged with the
responsibility of swiftly and efficiently carrying out theirduties as leaders of the Bank’s mainstay divisions.

Corporate Governance Structure
The Board of Directors is positioned as the ultimate
decision-making body of the Bank. While strictly adheringto the Bank’s variety of in-house rules and regulations, theintroduction of an executive officer system allows the Bank toseparate and clarify the management and business executionfunctions. A structure has therefore been put in place to allow
directors and executive officers to go about their assigned
duties and responsibilities.
Musashino Bank’s management decision-making, businessexecution and oversight structure is presented as follows.

Corporate Governance Structure (As of March 31, 2016)

General Meeting of Shareholders
Assignment

Assignment
Audit

Board of Directors
Directors

Supervision

Board of Corporate Auditors
Auditors

Discussion
Discussion

ReportAssignment

Business execution functions
Executive Committee

Indication/
Verification

Audit
Compliance Committee

Accounting auditors

Executive officers

Head office/Branches

8

Audit

AdviceAuditing Division

Law officeLicensed tax accountants

Risk Management
Risk Management Policy
As the risks associated with banking operations become
increasingly varied and complex, the Bank has formulated
a set of internal management policies that take into consideration the Bank’s strategic targets, in order to ensure thatthe manner in which it manages its business is both soundand pertinent. Guided by these policies, the Bank works
diligently to manage risk.
In specific terms, the Bank classifies all pertinent risks
according to their nature and attributes. Classifications
comprise (1) comprehensive risks; (2) credit risks; (3) market
risks; (4) liquidity risks; and (5) operational risks (including
administrative and system risks). These individual risks arethen managed according to their particular characteristics andrequirements.

Management Structure by Type of Risk
(1) Comprehensive Risk Management
In order to appropriately manage the wide variety of risks
on a comprehensive basis, the Bank has established theComprehensive Risk Management Department and is working to develop and improve its management structure. The
Comprehensive Risk Management Department puts in placerules and criteria for determining the scope of comprehensive
risk management, management methods, evaluation of new
products and operations as well as the level of acceptable risk
after taking into consideration management strategies, management capacity as well as business scale and characteristics.
Based on these rules and criteria the ALM (Asset Liability
Management) and other appropriate committees monitor andcontrol risks. The results of these activities are reported to theBoard of Directors and other relevant bodies on a regular basis.

(2) Credit Risk Management
Musashino Bank has historically taken steps to maintain the
independence of the Credit Screening Division and to build
a stringent screening and management structure in orderto maintain and strengthen the soundness of its assets. At
the same time, the Bank has adopted a ranking system andendeavored to upgrade and expand its credit risk management capabilities as a part of its efforts to establish objective
decisions and lending policies on an individual transaction
counterparty basis.

(3) Market Risk Management
Musashino Bank has established the Market Risk
Management Department in order to appropriately manage
market risks. Relevant steps are taken to ensure the independence of the Department from the Market Management
Department and Business Promotion Division, and to establish and develop a structure that is capable of harnessing thechecks-and-balances function. At the same time, the ALM
and Credit Portfolio Management committees deliberate as
and when required.

(4) Liquidity Risk Management
Musashino Bank has established the Liquidity Risk
Management and Cash Management departments in order toappropriately manage liquidity risk. While ensuring the independence of the Liquidity Risk Management Department
from the Cash Management Department, Market
Management Department and Business Promotion Division,
every effort is made to establish and develop a structure thatis capable of harnessing the checks-and-balances function. At
the same time, the ALM Committee deliberates as and whenrequired.

(5) Operational Risk Management
Musashino Bank confronts broad and varied operationalrisks. In addition to classifying risks as (i) administrative risk,(ii) systems risk, and (iii) other operational risks (a. legalrisk, b. human risk, c. tangible asset risk, and d. reputationrisk), putting in place rules on an individual risk basis andpromoting the management of each risk by the appropriate
management department, the Bank has established the
Operational Risk Management Department to undertake themanagement of operational risks on a comprehensive basis.
The Bank also pushes forward measures aimed at establishingand developing a management structure that is capable ofharnessing the checks-and-balances function with respect
to each business division. Moreover, the Operational Risk
Management Committee deliberates on issues as and whenrequired.

Crisis Management / BCP Structure
Because bank services such as deposits and foreign exchange
are services that are highly beneficial to society and the
public, banks are strongly called on to ensure business
continuity as a social responsibility they must fulfill, and thisis recognized as an important management issue.
As a regional financial institution with its operationalbase in Saitama Prefecture, Musashino Bank has establisheda Business Continuity Plan (BCP) as part of its contingency
planning to ensure operations will continue in the case of
events that are likely to have a major impact on business
continuity, such as large-scale earthquakes, system faults andpandemic influenza. The Bank has compiled manuals that
establish concrete codes of behavior and countermeasures,and is working to ensure that all employees are thoroughlyfamiliar with business continuity management measures toapply during emergencies.
The Bank carries out drills to train its employees in how
to deal with emergencies such as large-scale earthquakes anddamage to account-related systems. Systematic training likethis enables the Bank to improve its BCP by enhancing its
effectiveness and rectifying problems that emerge during
drills.

9Compliance
Compliance Framework
The social and public mission of the banking business makes
high demands for operations based on fair and transparent
corporate activities in compliance with laws, regulations,and social norms and in accordance with the principles ofself-discipline and self-responsibility. Accordingly, the Bank
considers the thorough compliance of its directors andemployees in business operations to be a top priority, and to
this end management is actively involved in the fulfillmentof the Bank’s social and public mission as the Bank works
to strengthen its compliance framework through steps suchas system improvements and the establishment of teaching
methods.
In the future the Bank will further strengthen its corporate
activities based on a strong sense of ethics and integrity andits management approach in accordance with principles ofself-responsibility as it further strengthens the complianceframework so that the Bank’s daily business activities andactions ensure compliance with laws, regulations, and social
norms.

Compliance ManualMusashino Bank’s basic compliance policy entails that officers
and employees go about their daily duties in accordance with
the Bank’s two fundamental management guidelines, namely
its Corporate Philosophy and Code of Behavior.
Under its unwavering Corporate Philosophy, the Bank
strives to work in harmony with the local community it
serves while maintaining a deep respect toward customers.
As a local bank in Saitama Prefecture, we continue tocontribute to the local community and society. Furthermore,
the Code of Behavior is founded on “the public mission of
the bank” and stipulates “provision of high quality financial
services,” “compliance with laws, regulations, rules, etc.,”“open business management through communication withsociety,” “respecting the personalities of employees,” “tacklingenvironmental problems,” “tackling social contribution
activities,” and “resolute responses to anti-social forces,” anddirectors and employees go about their daily duties guided bythese basic policies.

To ensure the compliance of its officers and employees, theBank has distributed a compliance manual that has been
approved by the Board of Directors to all of its officers andemployees and is working to ensure that all staff members are
fully aware of its contents.
The compliance manual contains sections on the Bank’s
Corporate Philosophy, Code of Behavior, and basic policies.
It contains a section on compliance standards that stipulates
the matters officers and employees should comply with,a section on the compliance framework that provides an
explanation on various structures at the Bank including
education and verification structures, a section on laws andregulations that require directors’ and employees’ compliancewhich contains an explanation on the laws and regulations
that bank employees are required to be knowledgeable of, anda pick-up compliance section that provides a more detailed
explanation on matters that should be prioritized in the
conduct of daily work. The compliance manual serves as astandard for making decisions and taking actions in everyday
business activities.

Compliance Management Structure

Elimination of Anti-Social Forces

The Legal Affairs Office of the Risk Management Division
serves as the compliance management department for the
Bank. This Office undertakes the uniform managementof all legal issues relating to compliance while providing
instructions based on investigation and research. At the sametime, the Office coordinates with officers responsible forlegal compliance appointed to all branches while working
to strengthen the compliance structure. Regular meetings
are held with the officers responsible for legal complianceappointed to each branch in order to improve the level of

The Bank has stipulated the elimination of anti-social forces
as a basic policy and is working toward blocking all relationships with anti-social forces. Furthermore, in accordancewith the basic policy, we have established a manual which
stipulates our specific initiatives for blocking relationships
with anti-social forces, and we are endeavoring to educate thebank employees about this issue through training and othermeasures.

Basic Compliance Policy

10compliance through the sharing of information and training
and also, meetings are held each month with the officers
responsible for legal compliance in the head office and eachdepartment. These meetings serve as a forum to deliberate oncompliance issues and to share information.
In addition to the aforementioned, periodic compliancechecks are undertaken at each branch by the officers responsible for legal compliance. In this manner, the Bank has put
in place a mechanism that is capable of grasping the status ofdaily compliance management.
Furthermore, Musashino Bank has established theCompliance Committee with the president of the bank serving as the chairperson, which serves as the organization thatchecks the status of compliance on a Bank-wide basis whileconsidering any and all other important matters throughregular meetings. In addition, the committee evaluates andchecks on the progress and implementation status of the“Compliance Program” approved by the Board of Directors.

Operational Base of Saitama Prefecture
Well-developed Expressway and
Railway Networks
Saitama Prefecture is locatedin the heart of the hugemarket comprising theTokyo metropolitan area,
in which one-third of the
population of Japan lives(approximately 40 million
Hokuriku Shinkansen
people). The prefecture
also contains well-developed and advanced expressway andrailway networks.
Saitama is well-positioned as a transportation hub, with
the Kan’etsu, Tohoku, and Joban expressways traversing
north to south, and the Tokyo Gaikan Expressway and theMetropolitan Inter-City Expressway (Ken-O-do) traversing
east to west. Moreover, there is now improved access to theTomei Expressway and the Chuo Expressway with the fully
opened Ken-O-do enhancing the convenient transport links
to the rest of Japan.
As for railways, with our head office based in Omiya, theBank is directly connected to major cities via the Hokkaido,
Tohoku, Akita, Yamagata, Joetsu and Hokuriku Shinkansen(bullet train) network.

An expressway and railway networkthat reaches all over JapanA Favorable Climate and Topography
Located on the borders of Tokyo and six prefectures, Saitama
Prefecture is an inland prefecture on the Kanto Plain, and allparts are less than 100 km from central Tokyo.
Saitama Prefecture covers 3,798 square kilometers andaccounts for around 1% of Japan’s land area. The area of prefectural land covered by mountains is less than the national
average, while the area of lowlands and tableland is greater.
Rivers account for 3.90% of the prefecture’s area, the highest
figure for a prefecture in the country.
It is very comfortable to live in because it has more clear
days annually than anywhere else in Japan, and has few
natural disasters.

Fifth Largest Prefecture by Population
The population of Saitama Prefecture continues to increase
every year. In 2016 the population had reached 7.26 million,
making Saitama the fifth largest prefecture in Japan.
Moreover, the percentage of working-age people (aged 15
to 64) was 64.1% in 2013, and this figure was the third highest prefectural percentage in Japan. Conversely, the percentage of people aged 65 or older was 23.0%, and of these 9.7%
are aged 75 or older, on a par with Okinawa Prefecture, thelowest figures in Japan. In other words, Saitama Prefectureis one of the youngest and most vigorous prefectures in the
country.

Collection of Diverse Manufacturing
Industries

Expressway
Railway (Shinkansen)

Fifth Largest Economy in Japan
Saitama Prefecture is home to about 250,000 companies.
Total prefectural production is about ¥20 trillion, making it
the fifth largest prefectural economy in Japan.
Saitama Prefecture has a diversity of local industries withthe automotive-related industry at its core. (For example,
molds and castings are produced in Kawaguchi City, andoptical equipment in Saitama City.)
NaritaInternational Airport
Tokyo
International Airport(Haneda)249,078
Private companies

Total prefectural
production (nominal)(Japan’s fifth largest prefecture in terms ofnumber of companies)
Economic Census for Business Frame (July 2014)¥20.7 trillion(Japan’s fifth largest prefecture in terms of
production)
Prefectural Accounts (fiscal 2013)11

Contributing to the Local Economy
Deposits from the Region

Loans to the Region

As of March 31, 2016, deposits from the region increased¥11.3 billion year on year to ¥3,822.4 billion. The ratio of
deposits from the region continued to be high, at 99.31% of
the total balance of deposits.
Conversely, the Bank’s share of deposits within the prefecture as of March 31, 2016 declined 0.23 of a percentage point
to 13.55%.

Loans to the region as of March 31, 2016 rose ¥87.2 billion
to ¥2,865.5 billion, thereby maintaining a high loans to
the region ratio of 85.97%. The Bank’s share of loans in theprefecture improved 0.16 of a percentage point to 18.77%.

Assets in Custody from the Region
As of March 31, 2016, assets in custody from the region
increased ¥32.0 billion year on year to ¥711.8 billion. The
breakdown comprises investment trusts of ¥159.9 billion(up ¥2.7 billion), life insurance of ¥459.8 billion (up ¥58.6
billion), and government bonds and other assets of ¥92.1
billion (down ¥29.3 billion).

Towards a Sounder Financial Position
The Bank is strengthening its capital adequacy and reducing
non-performing loans. The Bank has maintained a consolidated and non-consolidated capital adequacy ratio (Basel III
domestic standard) of 10.09% and 9.81%, respectively, so wehave continued to maintain a very sound financial position.
The Bank’s non-performing loan ratio based on standards
established by the Financial Reconstruction Act, declined by
0.19 of a percentage point to 2.02%.

* Investment trust figures are market value; life insurance figures are total sales.

Deposits from region/Ratio of deposits from region

Loans to region/Ratio of loans to region

Non-consolidated(¥ billion)

Non-consolidated(¥ billion)

99.46%

3,615.2

99.26%

99.34%

99.31%

3,811.1

3,822.4

88.26%

3,667.9
2,614.7

FY201286.94%FY2013

FY2014FY2015

Deposits from region
Ratio of deposits from region

FY2012

2,676.4

FY201386.19%
2,778.3

FY201485.97%
2,865.5

FY2015Loans to region
Ratio of loans to region

Assets in custody from region

Non-performing loans

Non-consolidated(¥ billion)

Non-consolidated(¥ billion)

711.8
11.3

679.8
637.3
603.3

FY2012FY2013

FY2014FY2015

10.2

10.1

44.7

43.9

43.8

2.50%

2.30%

2.21%

2.02%

18.7

17.1

17.8

14.9

FY2012FY2013

FY2014FY201510.1
42.9

Bankrupt and quasi-bankrupt assets (unrecoverable claims)
Claims on potentially bankrupt borrowers
Substandard loans
Ratio of loans subject to mandatory disclosure ofclaims under the Financial Reconstruction Law

12

Measures and Support for Regional Revitalization
Promotion Structure

Basic StanceIn April 2015, the Bank established the “Team for Promoting
Towns, People and Job Revitalization” at the head officein order to formulate and support the promotion of theRegional Comprehensive Strategy being undertaken by
local government organizations involved with the government’s “comprehensive strategy for towns, people, and job
revitalization.” The Bank assigned all branch managers to be“the person in charge of promoting Regional Revitalization,”and built a structure for promoting Regional Revitalization
throughout the Bank.

The Bank had already commenced working with local
government organizations before this collaboration in
formulating the Regional Comprehensive Strategy. Looking
ahead, as a regional financial institution, the Bank recognizes
these initiatives for Regional Community Revitalization
to be one of the most important tasks, and supports theimplementation of the Regional Comprehensive Strategy.
Consequently, we are one participant in regional creation andhave a policy of proactively collaborating with private-sector
companies, NPOs, educational institutions and other bodies
based on the relevant administrative policies to solve a varietyof regional issues and to create regional value.

Local
communities
Cooperation for regional revitalization

Local
governmentorganizations

Sales branches

Head OfficeGroup companies

Officer responsible for promoting
regional revitalization (Branch manager)

Team for Promoting Towns,
People and Job Revitalization

The Bugin Economic Research Institute, Co., Ltd.
Bugin Capital Co., Ltd., etc.

Educational
institutions

Towns

Corporations
and businessowners

NPOs

PeopleJobs

Initiatives to solve local issues
Support for business start-ups
and new entries

Create employment Expand consumption

Establishment of Musashino Fund to Promote
Regional Revitalization
In August 2015, the Bank established the Musashino Fund to
Promote Regional Revitalization, comprising a total of ¥500
million, together with the Bugin Capital Co., Ltd.
From the perspective of the comprehensive strategy for

Support child-rearing

Enhance healthcare
and welfare

regional revitalization, namely, supporting the core key
companies for the region, the Bank is contributing to a
positive cycle of the revitalization of towns, people and jobs
by investing in the companies’ stocks and supporting growthin such a thorough manner.

13

Initiatives Related to Revitalization of the Region
Promoting Transactions with
Local Governments
The Bank works to promote transactions with local governments and other bodies, and to enhance its consulting
activities. It has business with every municipality in Saitama
Prefecture.
In addition, as shown in the table below, the Bank serves
as the designated financial institution for local governments
and also meets the financing needs of small- and mediumsized enterprises as the program financing counter for various
local public bodies.
Designated Financial
Institution
Financial Institution
Handling General Receipts
and Expenditure
Designated Proxy Financial
Institution

Yokoze Town, Asaka Special District
Authority, Soka-Yashio Fire Department,
Goka Town, (Ibaraki Prefecture)Handling of public fund administrationfor Saitama Prefecture Public Sewage
works Bureau
Saitama City, Asaka City, Hidaka City,
Satte City

Alliances and Partnerships with Local
Government Organizations, etc.
The Bank promotes alliances and partnerships with local
governments through comprehensive agreements with themand other bodies for regional revitalization and enhancementof citizen services.

Prefectures

Saitama Prefecture (October 2013)

DesignatedMunicipalities

Saitama City (January 2016)

Municipalities

Tsurugashima City (December 2014),
Toda City (April 2016),
Yokoze Town (June 2016)

Business Groups

Satte City Society of commerce & industry(September 2015),
Kawaguchi Chamber of Commerce &Industry (March 2016)

Participation in Joint Industry-BusinessAcademia-Government Research on Policy Issues
The Bank has participated in joint research on policy issues
sponsored by Sai-no-Kuni Regional Alliance for Human
Development since fiscal 2014, and engages in research on
solving issues faced by Saitama Prefecture together with members of the prefectural government, municipal governments,
corporations, non-profit organizations, universities and otherinstitutions.

Research Areas<Fiscal 2014> (1) Big Data / Open Data Utilization Strategy(2) Regional Brand Promotion: Road to 2020
Olympics and Paralympics<Fiscal 2015> (1) Breakthrough Strategy for a Society with a
Declining Population: Toward the Security of
7.05 Million Saitama Prefecture Residents in
2040(2) Identifying Patterns in Saitama Prefecture
Vacant Housing Problem and Solution
Recommendations<Fiscal 2016> (1) Comprehensive Town Management for UltraAging Society: Designing Saitama’s Near Future(2) Promoting “Saitama Style” Diverse Work Formats

Announcement of Fiscal 2015 Results

Initiatives for PPP and PFI
Against the backdrop of a declining population, we are also
working to improve the community services with which local
government organizations are involved, to improve public
services that utilize PPP*1 and PFI*2 schemes for such mattersas the maintenance and administration of public facilities,
and to support the creation of private-sector business
opportunities.
*1 PPP: Public-Private Partnership*2 PFI: Private Finance Initiative

Support for NPOs
The Bank began offering the “Musashino NPO Support
Loan,” a specialized financial product, designed to solve avariety of issues faced by NPOs, and so are engaged in helping NPOs finance their activities.
In addition, in partnership with Saitama Prefecture the
Bank provides integrated support for NPOs that are starting
new businesses.

14

Nurturing Growth Fields
Activities in the Medical and Welfare Field

Initiatives for Automotive Companies

Financing support

The Bugin “Monozukuri” Management Course was held
five times beginning in March 2015 for automotive parts
manufacturers striving to become domestic and global leadersin their respective niche markets. The curriculum centered onstrengthening technologies and forming alliances for entering
overseas markets.

“Musashino Medical Partner” is a specialized financial productfor medical institutions designed to be easy to utilize even for
doctors newly establishing private practices. Through offering thisproduct, we contribute to the advancement of regional medicine.
Co-financing with the Japan Housing Finance Agency forserviced housing for elderly people

In February 2014, the Bank became the first financial institution in the Kanto region to conclude a co-financing agreement with the Japan Housing Finance Agency in the housing
funding support field as regards financing the construction ofshared-style serviced housing for elderly people.

Activities in the Agricultural Field
Support for management innovation

The Bugin Agricultural Management Course, a seminar for
agricultural producers, was held seven times in 2015, and a
total of 939 people in the agricultural industry participated.
The curriculum includes tours of cutting edge agriculturaland research facilities and lectures by various experts (university professors, supermarket buyers, etc.).
Support for exploring new business opportunities

The Bank is actively involved in business matching to help
agricultural producers expand their sales opportunities.

Activities in the Kankyo (Environment) Field
Saitama Prefecture is blessed with a good climate and goodterrain, and consequently is developing mega-solar and otherrenewable energy businesses in various locations.
Support for solar power projects

The Bank offers the “Musashino Solar Power Project Support
Loan: Blessings of the Sun,” which helps companies conduct
solar power projects through utilization of feed-in tariff
schemes for renewable energies.
Environment-related loan products

The Bank offers “Nitoryu (Eco-Best)” and “Eco Private
Placement Bonds,” financial products that support companies
involved in eco-friendly businesses.

Bugin “Monozukuri” Management Course

Leading-Edge Industry Initiatives
Saitama Prefecture, in partnership with the national government, has started the “Saitama Leading Edge Project” tocultivate leading-edge industries, and Musashino Bank is
a participant in it. Working jointly with other prefectural
financial institutions, we actively support the development
and promotion of new industries.
In addition, the Bank intends to promote assistance inpartnership with the Leading-Edge Industry Support Centerof Saitama, which was established in May 2015.

Saitama Prefecture Leading-Edge Project Initiative
Areas• Nano-carbon• Air and space• Robotics• New energy• Medicine

Support for Standardization of Excellent
Technologies and Products of Local Companies
The Bank provides support for standardization (adoption as
the domestic or international standard) of the dimensions,manufacturing methods, and performance evaluation procedures, etc. of products developed by client companies.
In November 2015 we held the “Seminar on Use of theStandardization Program for Expanding Sales Channels”
in partnership with the Ministry of Economy, Trade andIndustry and Japan Standards Association, and introduced
the standardization program.
Domestic standards:
Japan Industrial Standards (JIS)International standards:	International Organization forStandardization (ISO),International Electrotechnical Commission
(IEC)

15

Promoting the Region’s Beauty
Creation of a “Senary” Industryin Minuma Tanbo Area
Saitama City is a major consumer of wheat products,
especially noodles, bread and pastries, but the area of wheatgrowing in the city and amounts harvested have both been
declining, so in September 2014, a project was launchedto revive wheat production and turn it into a “senary” (i.e.,
primary + secondary + tertiary) industry, centering on the
Minuma Tanbo area. A research group was established byagricultural producers, mainly in the Minuma area, andprivate-sector food product companies, as well as by people
in a variety of other fields from the government, research
institutions and other organizations, and efforts are now
being made to make wheat production in Minuma Tanbo a“senary” industry.
The Saitama Wheat Trial Farm opened in November 2015as part of the project, began growing wheat and collected
its first harvest in June 2016. The harvested wheat will be
provided free of charge to food processing companies andrestaurants in Saitama City and research and development
will be conducted aimed at commercialization.

Saitama Wheat Trial Farm ready for harvest

Senary (6th-Order) Industry

A management format in which Primary (1st-order) producers in agriculture, forestry and fishing effectively utilize
rich local resources, and secondary (2nd-order) industries(processing and manufacturing) and tertiary (3rd-order)industries (distribution and sales) are developed, not only the
supply of raw materials. It is an initiative to effectively utilize
rich local resources to generate new added value.

Project Overview<Industry>
Producers
Agricultural Businesses
Food Products Companies<Financial Institutions>

Minuma Tanbo “Wheat” Research Group<Schools>
Universities and Research Institutions

Currently researching production, commercialization andsales of wheat not grown in Minuma Tanbo<Government>
Saitama Prefecture
Saitama City
Chamber of Commerceand Industry<Private Sector>
Local Partners

Saitama Wheat Trial Farm

Processed Products
Ramen, Pasta, Udon

Locally Produced Fruits and Vegetables

16

Sales

Bread, Cake, Pastries

Local Restaurants

Soccer Stadiums

Potential Future Developments

Local Convenience Stores

Other

Providing SME Management Assistance
Policy Initiatives
Under its Corporate Philosophy, the Bank strives to work inharmony with the local community while maintaining a deep
respect toward customers. On this basis, the Bank’s duty is topromote regional-oriented financing, and we implement thisin practice by providing a smooth flow of funding to customers while also offering management support.
Against the backdrop of significant changes in theeconomic environment and elsewhere, we are seeing increasing societal demands for smooth flows of funding. In order
to align ourselves with our customers’ growth stages andto respond even more appropriately and in more detail, we
strive to comply with the basic policy shown on the right.
On the basis of this basic policy, we are moving ahead inan organized and continuous manner with a variety of initiatives that offer management support to customers.

prefectural system financing, such as "entrepreneurshipfunds" and others.

Loan Initiatives that Prioritize Business Assessments
The Bank does not rely excessively on financial data,collateral and guarantees—it is strengthening its loans thatprioritize the making of business viability assessments,
including the business details and growth possibilities of eachindividual company.
The Musashino SME Active Fund (fund amount increased
from ¥30.0 billion to ¥40.0 billion), a financing productstarted in December 2014 that emphasizes feasibility assessments, executed financing of ¥24.2 billion over the course of
the year, for a cumulative total of ¥28.3 billion as of March
31, 2016. The product is used by a wide range of clientcompanies.

Strengthening Solution Sales

Cumulative Financing through Musashino SME Active Fund

The Bank established the Solutions Marketing Office at
its head office in April 2016 in order to further strengthen
solution-based sales and is working together with client companies and management to solve various problems and issues
while also drawing on the resources of Group companies.

(¥ billion)

1,753 cases

28.3
billionSolutions Marketing OfficeInformation-based sales

Business matching

Business financing

M&As

4.1 billion

Founding businesses and new businesses

Pensions

March 2015

TrustsDevelopment/area planning
Private banking

Musashino Bank Group companies
LeasesCredit cards

Loan guarantees

Think tanks

Systems

Venture capital

Support for Start-ups and New Entries
The Bank recognizes that for the sustained developmentof the regional economy it is indispensable for start-ups
and new entries to be done actively and continuously.
Consequently, in October 2014 we created a “support teamfor start-ups and new entries” in Head Office. In collaboration with Saitama Prefecture credit guarantee companies, theJapan Finance Corporation and others, we offer wide-ranging
support that includes financing-oriented support, formulating start-up plans, providing a variety of subsidy information,and holding seminars as well as taking advantage of various

267 cases
March 2016

Offering a Variety of Financing Methods
In collaboration with Saitama Prefecture, various municipalities, Saitama Prefecture Credit Guarantee Corporation andothers, the Bank has responded to the needs of its clientcompanies and expanded its financing program lineup.
Moreover, the Bank has also focused on offering various
new financing methods, including syndicated loans todiversify procurement methods and implement financial
rationalization when a cooperative financing group has been
formed by a number of financial institutions, project financing that provides funding after focusing on the cash flow ofa business, private placement bonds that can be expected to
improve the corporate image of a company conducting fundprocurement, and Asset-Based Lending (ABL) that makes useof the customer’s product inventory, accounts receivable orsuchlike.

Support for Solving Various Issues by Utilizing
Information
In line with expanding the Bank’s consulting activities
for its client companies, in April 2014 we established theInformation Center in Head Office. We are significantly
expanding our information volume and contracts, throughthe full-fledged operation of an information business.
The Information Center mainly collects business matching17

information, information related to real estate, and a variety ofregional information in order to respond to our clients’ needs toexpand their sales channels, develop markets, form technologicalcollaborations, and open offices and build new plants. All thisinformation that the Information Center disseminates is providing useful support to solve various business management issues.
Incidentally, information items provided, including businessmatching, totaled approximately 6,300, 1.9 times more than theprevious year, and contracts totaled approximately 1,000, as bothinformation and contracts have been increasing significantly.
Information Center
Business matching
information(Supplier andvendor referrals)

Real estate-related
information

Head officeSubsidy-related
information

Government agencies

Various types of local
information

Industry groups

Information Center(Collect and send out information)
Branches

Clients

Business Matching Information Items and Contracts(No. of contracts)

6,250 items

3,332 items
997
1,303 items 1,483 items
119
FY2012578

139
FY2013

FY2014FY2015Contracts
Information(Since October 2014; contracts include paid business matching)Support for Overseas Expansion
We are also proactively assisting our corporate customers to
expand business overseas. As of the end of March 2016, we
had offered support in approximately 40 cases of companies
expanding overseas, mainly to such ASEAN countries as
Thailand, Vietnam, and the Philippines.
Furthermore, we assigned employees to the
KASIKORNBANK in Thailand and to the Hong Kongbranch of the Hachijuni Bank (a regional bank mainly basedin Nagano Prefecture) to locally and directly handle consultations from companies that have already started doing businessin these countries. Through participation in the regionalbank alliance scheme of the Japan Bank for International
Cooperation, we have formed business alliances with leading
regional banks in Indonesia, India, the Philippines, Vietnam,
18

and the Mexico State Government and others, providing
various forms of assistance, including opening accounts andproviding local information.
In addition, we are utilizing government measures toactively help our clients enter overseas markets and develop
their businesses overseas.

Management Innovation Assistance with
Government and Outside Institutions
In November 2012, the Bank was certified as a “Management
Innovation Support Institution” by the Kanto Local Finance
Bureau and Kanto Bureau of Economy, Trade and Industry.
We offer highly specialized assistance programs for small andmedium-sized companies and other clients.

Support for Management Improvement andBusiness Revitalization
The Bank offers specialized support for client companies that
require management improvement.
We provide advice to client companies on analyzing
current conditions and improving management and help thecompanies formulate management improvement plans.
In addition, we provide support for management improvement in line with the specific conditions of client companies
through partnerships with outside institutions and specialists
like the Saitama Prefecture SME Assistance Council.

Support for Changing Business Sectors
Drawing on bank-wide assistance resources, including Group
companies, the Bank provides optimal support for management improvement and revitalization and helps companies
change their business sectors.

Corporate Social Responsibility
Protecting the Invaluable Assets of Customers

Protecting our Natural Environment

The Bank conducts various security measures to ensure
online banking is used safely, including initiatives throughour website and other media to raise customer awareness.

The Bank actively carries out activities for environmental
protection and creation to pass on Saitama’s rich andirreplaceable natural environment to the next generation.
We offer environment-related financial products, build
and renovate branches with LED lighting, wall greening andother measures, and also support local greening promotion
initiatives. Through the Musashino Green Fund, a charitable
trust, we provided a total of ¥3.0 million in assistance to 16
organizations in fiscal 2016, and we continue to actively support the preservation and creation of natural environments
for everyone in the prefecture.
The Bank also focuses on educating employees about theenvironment.

Designing Highly People-Friendly Branches
Musashino Bank is enhancing its branch facilities and making
them barrier-free so that they are more pleasant and convenient to use for customers. We have also equipped branchcounters and teller windows with hearing aids, writing aids,
communication boards and other devices so that transactions
and procedures can be conducted without undue difficulty.

Writing aid

Hearing aid

Support for Children, the Bearers of the Future
To support our region’schildren who are thebearers of the future, theBank actively provides
these children with
opportunities to study
the role of money andhow banking works.
Work experience at Musashino Bank
To promote local
culture and the arts, the Musashino Bank has been holding
concerts by professional violinists in music rooms and otherlocations at elementary schools since fiscal 2009. By July
2016 approximately 2,400 children from 30 schools had
attended these concerts.
To promote sports with the cooperation of coaches from
J-League (Japanese soccer league) club OMIYA ARDIJA,
with which the Musashino Bank concluded an official
sponsorship agreement, we held soccer and baseball classes.
We also invited former players from the Saitama Seibu
Lions to be the coaches for local boys baseball teams to attend.

Removal of alien plants at the Mitsumata-numa Biotope

Building a Workplace in which Diverse Human
Resources can be Successful
The Bank established the Human Resources Activities
Promotion Office in October 2015 to enhance diversityand develop workplace conditions that empower diverse
personnel. We are also conducting initiatives to enhancework-life balance that include support for balancing workand home life, promotion of women’s advancement throughtheir promotion to managerial positions and support for theactivities of middle-age and senior employees and employeeswith disabilities.
The Bank has formulated an action plan for developing
employment conditions that enable women to participate andadvance as managers based on the Women’s Advancement
Promotion Act (Act on Promotion of Women’s Participation
and Advancement in the Workplace) and is conducting
initiatives based on the plan.

A soccer class19Consolidated Balance Sheets
The Musashino Bank, Ltd. and Consolidated Subsidiaries As of March 31, 2016 and 2015

Millions of Yen
2016
2015

AssetsCash and due from banks.......................................................................
Call loans and bills bought.....................................................................
Debt purchased......................................................................................
Trading securities...................................................................................
Money held in trust................................................................................
Investment securities..............................................................................
Loans and bills discounted��������������������������������������������������������������������
Foreign exchange assets�������������������������������������������������������������������������
Lease receivables and investment assets��������������������������������������������������
Other assets�������������������������������������������������������������������������������������������
Property, plant and equipment��������������������������������������������������������������
Intangible fixed assets����������������������������������������������������������������������������
Net defined benefit assets����������������������������������������������������������������������
Deferred taxes assets������������������������������������������������������������������������������
Customers’ liabilities for acceptances and guarantees..............................
Allowance for loans losses.......................................................................
Total assets...............................................................................

¥  149,402—
11,553495
1,490
764,664
3,319,167
2,315
19,12521,071
37,584
3,176
5,173
1,233
7,730
(15,273)¥4,328,909¥  196,684
5,000
11,613138
1,500
748,068
3,210,605
2,005
17,992
20,28337,162
2,942
9,466
1,379
8,141
(15,922)¥4,257,062$ 1,325,902—
102,529
4,398
13,223
6,786,160
29,456,576
20,549169,736
186,998
333,549
28,18845,91010,942
68,605(135,551)$38,417,723

Liabilities
Deposits, including negotiable certificates of deposits����������������������������
Payables under securities lending transactions���������������������������������������
Borrowed money�����������������������������������������������������������������������������������
Foreign exchange liabilities��������������������������������������������������������������������
Corporate bonds�����������������������������������������������������������������������������������
Other liabilities�������������������������������������������������������������������������������������
Provision for bonuses����������������������������������������������������������������������������
Provision for directors’ bonuses�������������������������������������������������������������
Net defined benefit liability�������������������������������������������������������������������
Provision for loss on interest repayment������������������������������������������������
Provision for reimbursement of deposits������������������������������������������������
Provision for point loyalty programs������������������������������������������������������
Provision for other contingent losses�����������������������������������������������������
Deferred tax liabilities���������������������������������������������������������������������������
Deferred tax liabilities for land revaluation��������������������������������������������
Acceptances and guarantees....................................................................
Total liabilities.........................................................................

¥4,000,861
7,257
18,494336
25,00023,490
1,253
10
4,363
57
539
68
412
5,727
4,227
7,730
¥4,099,830¥3,930,283—
17,586342
25,00024,458
1,228
10
5,803
85
474
68
536
9,214
4,449
8,141
¥4,027,684$35,506,400
64,405
164,134
2,984
221,867
208,475
11,12090
38,723
507
4,785
609
3,659
50,83037,52068,605$36,384,719

Net assets
Capital stock�����������������������������������������������������������������������������������������
Capital surplus��������������������������������������������������������������������������������������
Retained earnings����������������������������������������������������������������������������������
Treasury stock���������������������������������������������������������������������������������������
Total shareholders’ equity.........................................................
Valuation difference on available-for-sale securities.................................
Deferred gains or losses on hedges..........................................................
Revaluation reserve for land....................................................................
Remeasurements of defined benefit plans...............................................
Total accumulated other comprehensive income.......................
Subscription rights to shares...................................................................
Non-controlling interests........................................................................
Total net assets.........................................................................
Total liabilities and net assets...................................................

¥   45,743
38,351
113,922(804)
197,213
27,116(2,056)
8,286(2,712)
30,633
74
1,157
229,078¥4,328,909¥   45,743
38,351
104,042(802)
187,334
32,976(1,190)8,064
1,073
40,922
58
1,061
229,377¥4,257,062$   405,963
340,355
1,011,025(7,135)1,750,207
240,652(18,252)
73,537(24,071)
271,866
659
10,2702,033,003$38,417,723* U.S. dollar figures have been translated at the rate ¥112.68 to U.S.$1, the prevailing market rate as of March 31, 2016.
20

Thousands of
U.S. Dollars*
2016Consolidated Statements of Income and Comprehensive Income
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2016 and 2015

Consolidated Statements of Income
IncomeInterest income:Interest on loans and discounts���������������������������������������������������������
Interest and dividends on securities���������������������������������������������������
Other interest income�����������������������������������������������������������������������
Fees and commissions���������������������������������������������������������������������������
Other operating income������������������������������������������������������������������������
Other income����������������������������������������������������������������������������������������
Total income............................................................................
Expenses
Interest expenses:
Interest on deposits���������������������������������������������������������������������������
Interest on borrowings and rediscounts���������������������������������������������
Other interest expenses���������������������������������������������������������������������
Fees and commissions���������������������������������������������������������������������������
Other operating expenses����������������������������������������������������������������������
General and administrative expenses�����������������������������������������������������
Other expenses��������������������������������������������������������������������������������������
Total expenses..........................................................................
Income before income taxes...................................................................
Income taxes
Current�������������������������������������������������������������������������������������������������
Deferred������������������������������������������������������������������������������������������������
Profit attributable to non-controlling interests.....................................
Profit attributable to owners of parent..................................................
Net profit per share (yen and dollars).....................................................

Millions of Yen
2016
2015

Thousands of
U.S. Dollars*
2016¥38,460¥39,932$341,321

7,776

7,363

69,017

269

219

2,392

12,478

11,846

110,746

2,497

3,708

22,16814,196

15,666125,991

75,68078,737

671,637

1,801

1,860

15,989

167

242

1,488

951

966

8,446

3,926

4,618

34,844

1,337

1,267

11,871

36,20637,751

321,324

11,192

9,939

99,33355,58456,645493,297

20,09522,091

178,339

5,332

5,626

47,328

2,103

1,619

18,670

7,436

7,245

65,998

94

378

840

¥12,563¥14,467$111,501¥374.65¥431.44$   3.32* U.S. dollar figures have been translated at the rate ¥112.68 to U.S.$1, the prevailing market rate as of March 31, 2016.

Consolidated Statements of Comprehensive Income
Profit......................................................................................................
Other comprehensive income:Net unrealized losses on securities�����������������������������������������������������
Unrealized gains on hedging derivatives��������������������������������������������
Reversal of revaluation reserve for land���������������������������������������������
Remeasurements of defined benefit plans������������������������������������������
Total other comprehensive income���������������������������������������������������
Comprehensive income..........................................................................
Comprehensive income attributable to:Shareholders of parent.......................................................................
Non-controlling interests...................................................................

Millions of Yen
2016
2015

Thousands of
U.S. Dollars*
2016¥ 12,658¥14,846$112,341(5,857)

14,572(51,986)

(866)

(191)

(7,686)

222

460

1,970

(3,785)

1,997(33,594)(10,287)

16,838(91,296)¥ 2,371¥31,684$ 21,045¥ 2,275¥31,250$ 20,190

96

434

854

* U.S. dollar figures have been translated at the rate ¥112.68 to U.S.$1, the prevailing market rate as of March 31, 2016.
21

Consolidated Statements of Changes in Net Assets
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2016 and 2015
Millions of yen
Shareholders’ equity

Balance as of March 31, 2014...........................................
Cumulative effect of accounting change............................
Balance as of April 1, 2014 (as restated)���������������������������
Changes during the accounting period:
Cash dividends�������������������������������������������������������������
Net income������������������������������������������������������������������
Purchases of treasury stock�������������������������������������������
Disposition of treasury stock����������������������������������������
Transfer to capital surplus from retained earnings��������
Net changes in items other than stockholders’ equity���Total changes during the accounting period�����������������
Balance as of March 31, 2015...........................................
Changes during the accounting period:
Cash dividends�������������������������������������������������������������
Net income������������������������������������������������������������������
Purchases of treasury stock�������������������������������������������
Disposition of treasury stock����������������������������������������
Transfer to capital surplus from retained earnings��������
Net changes in items other than stockholders’ equity���Total changes during the accounting period�����������������
Balance as of March 31, 2016...........................................

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
stockholders equity¥45,743¥38,351¥ 89,584¥(819)¥172,859

45,74338,351

92,261(819)

175,537

2,677

2,677

(2,682)(2,682)

14,467

14,467
(12)

(4)

(12)

29

4

24

(4)

—

—

—

11,78016

11,79745,74338,351

104,042(802)

187,334(2,682)(2,682)

12,563

12,563
(11)

(11)

9

8

(0)
0

(0)

—

—

—

9,880

(1)

9,878

¥45,743¥38,351¥113,922¥(804)¥197,213

Millions of yen
Accumulated other comprehensive income
Unrealized
Deferredgain onloss underavailable-for-salehedge
securities
accounting

Balance as of March 31, 2014........................................... ¥18,460
Cumulative effect of accounting change............................
Balance as of April 1, 2014 (as restated)��������������������������� 18,460
Changes during the accounting period:
Cash dividends�������������������������������������������������������������
Net income������������������������������������������������������������������
Purchases of treasury stock�������������������������������������������
Disposition of treasury stock����������������������������������������
Transfer to capital surplus from retained earnings��������
Net changes in items other than stockholders’ equity��� 14,516
Total changes during the accounting period����������������� 14,516
Balance as of March 31, 2015........................................... 32,976
Changes during the accounting period:
Cash dividends�������������������������������������������������������������
Net income������������������������������������������������������������������
Purchases of treasury stock�������������������������������������������
Disposition of treasury stock����������������������������������������
Transfer to capital surplus from retained earnings��������
Net changes in items other than stockholders’ equity��� (5,859)
Total changes during the accounting period����������������� (5,859)
Balance as of March 31, 2016........................................... ¥27,116

22

Land
excess

Accumulated
other
Subscription
NonRetirement of comprehensive rights tocontrolling
benefit plansincomesharesinterests

Total net
assets¥  (999)¥7,603¥  (924)¥ 24,140¥57¥ 5,708¥202,766

(999)

7,603

(924)

24,14057

5,708

205,443

2,677(2,682)
14,467
(12)
24
—
(191)

460

1,997

16,7820(4,646)

(191)

460

1,997

16,7820(4,646)

12,13623,934(1,190)

8,064

1,073

40,922

58

1,061

229,377(2,682)
12,563
(11)
8
—

(866)

222

(3,785)(10,288)

16

95(10,177)

(866)

222

(3,785)(10,288)

16

95

(298)

¥(2,056)¥8,286¥(2,712)¥ 30,633¥74¥ 1,157¥229,078

Thousands of U.S. Dollars*
Shareholders’ equity

Balance as of March 31, 2015������������������������������������������
Changes during the accounting period:
Cash dividends�������������������������������������������������������������
Net income������������������������������������������������������������������
Purchases of treasury stock�������������������������������������������
Disposition of treasury stock����������������������������������������
Transfer to capital surplus from retained earnings��������
Net changes in items other than stockholders’ equity���Total changes during the accounting period�����������������
Balance as of March 31, 2016...........................................

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
stockholders equity$405,963$340,355$  923,341$(7,121)$1,662,538(23,809)(23,809)111,501

111,501
(101)

(101)

86

78

(8)
8

(8)

—

—

—

87,684(14)

87,669$405,963$340,355$1,011,025$(7,135)$1,750,207

Thousands of U.S. Dollars*
Accumulated other comprehensive income
Unrealized
Deferredgain onloss underavailable-for-salehedge
securities
accounting

Balance as of March 31, 2015������������������������������������������ $292,653 $(10,566)
Changes during the accounting period:
Cash dividends�������������������������������������������������������������
Net income������������������������������������������������������������������
Purchases of treasury stock�������������������������������������������
Disposition of treasury stock����������������������������������������
Transfer to capital surplus from retained earnings��������
Net changes in items other than stockholders’ equity��� (52,001) (7,686)
Total changes during the accounting period����������������� (52,001) (7,686)
Balance as of March 31, 2016........................................... $240,652 $(18,252)

Land
excess

Accumulated
other
Subscription
NonRetirement of comprehensive rights tocontrolling
benefit plansincomesharesinterests

Total net
assets$71,566$ 9,522$2,035,653$363,176$516$ 9,421(23,809)111,501
(101)
78
—
1,970

(33,594)(91,310)142848(90,319)

1,970(33,594)(91,310)142848(2,650)$73,537$(24,071)$271,866$659$10,270$2,033,003* U.S. dollar figures have been translated at the rate ¥112.68 to U.S.$1, the prevailing market rate as of March 31, 2016.

23

Consolidated Statements of Cash Flows
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2016 and 2015

Millions of Yen
2016
2015

Cash flows from operating activities
Income before income taxes������������������������������������������������������������������
Depreciation�����������������������������������������������������������������������������������������
Amortization of negative goodwill���������������������������������������������������������
Gain on negative goodwill���������������������������������������������������������������������
Increase (decrease) in reserve for possible loan losses������������������������������
Increase (decrease) in reserve for employees’ bonuses�����������������������������
Increase (decrease) in reserve for directors’ bonuses�������������������������������
Decrease (increase) in net defined benefit asset��������������������������������������
Increase (decrease) in net defined benefit liability����������������������������������
Increase (decrease) in reserve for loss on interest refunded���������������������
Increase (decrease) in reserve for reimbursement of dormant deposits����
Increase (decrease) in reserve for point loyalty programs������������������������
Increase (decrease) in reserve for contingent losses���������������������������������
Interest income�������������������������������������������������������������������������������������
Interest expenses������������������������������������������������������������������������������������
Loss (gain) on investment securities�������������������������������������������������������
Loss (gain) on money held in trust��������������������������������������������������������
Foreign exchanges loss (gain)�����������������������������������������������������������������
Loss (gain) on disposition of fixed assets������������������������������������������������
Net decrease (increase) in trading account securities������������������������������
Net decrease (increase) in loans and bills discounted�����������������������������
Net increase (decrease) in deposits���������������������������������������������������������
Net increase (decrease) in negotiable certificate of deposits��������������������
Net increase (decrease) in payables under securities lending transactions���Net increase (decrease) in borrowed money (excluding subordinated loans)����
Net decrease (increase) in due from banks (excluding due from the Bank of Japan)���
Net decrease (increase) in call loans and others��������������������������������������
Net increase (decrease) in call money����������������������������������������������������
Net decrease (increase) in foreign exchange, assets���������������������������������
Net increase (decrease) in foreign exchange, liabilities���������������������������
Interest received.....................................................................................
Interest paid...........................................................................................
Other, net..............................................................................................
Subtotal...................................................................................
Income taxes paid...................................................................................
Net cash provided by (used in) operating activities.................
Cash flows from investing activities
Purchases of securities���������������������������������������������������������������������������
Proceeds from sales of securities������������������������������������������������������������
Proceeds from maturities of securities����������������������������������������������������
Decrease in money held in trust������������������������������������������������������������
Purchases of tangible fixed assets�����������������������������������������������������������
Proceeds from tangible fixed assets��������������������������������������������������������
Purchases of intangible fixed assets��������������������������������������������������������
Payments for execution of asset retirement obligations��������������������������
Payments for investments in subsidiaries�����������������������������������������������
Net cash provided by (used in) investing activities..................
Cash flows from financing activities
Repayment of subordinated loans����������������������������������������������������������Cash dividends paid������������������������������������������������������������������������������Cash dividends paid to minority shareholders���������������������������������������
Purchase of treasury stock����������������������������������������������������������������������
Proceeds from sales of treasury stock�����������������������������������������������������
Net cash provided by (used in) financing activities.................
Net increase (decrease) in cash and cash equivalents.............................
Cash and cash equivalents at beginning of year.....................................
Cash and cash equivalents at end of year...............................................

¥ 20,095
2,634
—
—
(648)
24
(0)
(416)
(1,769)
(28)
64
0
(123)
(46,506)
2,921(1,673)
7
3,563
22
(357)
(108,561)
13,65856,9197,257
907
21,913
5,060
—
(310)
(6)
47,318(3,048)(3,798)15,120(5,901)
9,219¥ 22,091
2,506
9(2,660)(2,055)
9
0
(726)
(125)
(3)
90
4
(76)
(47,516)
3,069(1,431)(3)(4,521)86(105)(144,582)
144,378
5,567
—
1,632
3,049
(653)
(926)
1,314
165
48,750(3,140)(2,197)22,001(5,052)
16,949$   178,339
23,381——(5,752)219(6)(3,692)(15,699)
(251)
572
1
(1,097)(412,731)
25,924(14,850)70
31,621200(3,173)(963,452)
121,212505,143
64,405
8,056
194,473
44,908—(2,752)(54)419,939(27,054)(33,714)134,186(52,369)
81,817(226,673)
89,658108,437
0(1,918)0(1,379)(17)—(31,892)(337,375)
274,557
111,547
0(1,736)15(1,092)(17)(2,411)
43,486(2,011,655)
795,688962,3460(17,029)3(12,239)(151)—(283,037)—(2,682)(0)(11)—(2,694)(25,368)
174,200¥ 148,831(9,000)(2,682)(3)(12)
0(11,698)
48,738125,462¥ 174,200—(23,809)
(6)
(101)
—
(23,917)(225,137)
1,545,973$ 1,320,835* U.S. dollar figures have been translated at the rate ¥112.68 to U.S.$1, the prevailing market rate as of March 31, 2016.
24

Thousands of
U.S. Dollars*
2016Directory
Organization Chart (as of July 1, 2016)
General Meeting of Shareholders

Board of Corporate Auditors

General Planning and Management Division
Strategic Planning OfficeFinancial Affairs Office
Tokyo Office
Risk Management Division
Legal Affairs Office
Customer Service Promotion Office
Personnel Division
Secretariat
Career Development Office
Health Support Office
Human Resources Activities Promotion Office
Local Community Support Division
Public Funds Management OfficeCommunity Value Creation Office
Solutions Marketing OfficeBusiness Management Division
Business Planning Office
Assets in Custody Promotion Office
FinTech Promotion Office
Credit DivisionCorporate Management Support OfficeInternational and Treasury Division
Global Business Advisory Office
General Affairs Division
Administration Division
Systems Management Office
Operation Services Division
Auditing DivisionCorporate Auditors
OutsideCorporate Auditor

Board of Directors* and Representative Director

Executive Committee
Senior Managing Director*
President*
Managing Directors
Director (outside)

Board of Directors, Corporate Auditors and Executive Officers (as of July 1, 2016)
President

Managing Directors

Directors

Corporate Auditors

Executive Officers

Kikuo Kato

Motonobu Nakamura
Koichi Akagi
Kazuya Koyama
Kazumasa Nagahori
Toshiyuki Shirai

Emi Ishida (outside)
Takeshi Higuchi (outside)

Makoto Ishikawa (standing)
Yoshiro Kenmochi (standing)Atsumu Kuroishi (outside)
Tomio Kezuka (outside)
Kenji Tamura (outside)

Takafumi Hoshina
Kenji Sakamoto
Isamu Takeuchi
Susumu Kurosawa
Ritsu Kumagai
Masaharu Saito
Ken Otomo

Senior Managing Director

Hideo Machida

Managing Executive Officer

Yuichi Tanaka

Investor Information (as of March 31, 2016)
Number of Shares Held by Type of Shareholders

 uthorized: 80,000 thousand shares
A
Issued:33,805 thousand shares
Number of Shareholders: 11,861
Common Stock

Financial institutions
40.88%

Major Shareholders
NameJapan Trustee Services Bank, Ltd. (trust account)
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Japan Trustee Services Bank, Ltd. (trust account 4)
CBNY–GOVERNMENT OF NORWAY(Standing proxy: Citibank Japan Ltd.)The Master Trust Bank of Japan, Ltd. (trust account)
Meiji Yasuda Life Insurance Company
Musashino Bank Industries Employees’ Stockholding Association
Sumitomo Life Insurance Company
CBNY DFA INTL SMALL CAP VALUE PORTFOLIO(Standing proxy: Citibank Japan Ltd.)
Japan Trustee Services Bank, Ltd. (trust account 9)

Shares held asa percentage of
total outstanding
shares (%)
2,482,800
7.34
1,218,987
3.60
1,217,900
3.60

Other corporations
24.98%

Number ofshares782,7102.31

752,300
735,858
730,986
702,900

2.22
2.17
2.16
2.07

646,100

1.91

564,200

1.66

Foreign companies
and others
18.15%
Individuals and others
14.72%

Financial instruments
business operators
1.27%

Notes: 1. Some treasury stock is contained in “Individuals and others.”
2. “Other corporations” includes a unit of 14 shares under the nameof Japan Securities Depository Center, Inc.

* Shareholding percentages are rounded down to two decimal places.

2510-8, Sakuragi-cho 1-chome, Omiya-ku,
Saitama 330-0854
Phone: +81-48-641-6111

Brand Message

The Musashino Bank’s brand message is “More for You.”
The Bank personnel consider “What can I do for everyone?”and “What kind of service do I want to give everyone?”“Everyone” includes the Bank’s customers, the membersof local communities, our shareholders, and friends of theBank, together with their families.
Accordingly, the Musashino Bank aspires to implement theactions of providing everyone with better services and ofcontributing to our local communities.