FY2017
Earnings Results
Briefing
June 4, 2018

Summary of FY2017 Earnings Results

FY2018 Forecasts and Major Initiatives

For inquiries regarding this document, please contact:
Management Planning Department, The Chugoku Bank, Ltd.
Mr. Fumiyama / Mr. Maniwa
TEL： +81-86-234-6519

FAX：+81-86-234-6587 Email: souki01@chugin.jp

2Section I
Summary of FY2017
Earnings Results

FY2017 Earnings Results —Summary —FY2014FY2015FY2016FY2017(100 million yen)Core business gross profit
Interest income
Fees and commissions
Other operating income
Expenses (-)

882
724
148
9
572

855
700
150
5
554

820
677
152
-9
548

795
662
146
-12
556

-25
-15
-6
-3
8

vs. Plan*
16
13
4
0
-7

Core business net profit
OHR (%)

309
64.9

301
64.8

271
66.9

239
69.9

-32
3.0

24
-2.4

Bond sales gains/redemption
Equity sales gains/redemption
Other

-2
0
37
12

37
17
33
16

2
-20
43
-7

17
-24
44
2

15
-4
1
9

-8
-41
34
5

Recurring profit
Extraordinary gain/loss
Net income

357
-3
209

406
-3
259

289
-4
190

279
-1
194

-10
3
4

15
2
14

Consolidated recurring profit

391
247

434
272

316
203

309
212

-7
9

20
17

Credit expense (+ is reversal (profit))

Net income attributable to owners of parent

YoY* Profit results released on Nov. 10, 2017

• Core business net profit decreased by 3.2 billion yen year on year due to a decrease in
securities interest and increases in foreign currency procurement costs and expenses related
to TSUBASA (shared system).
• Recurring profit only decreased by 1.0 billion yen year on year reflecting an increase in reversalof credit expense.

4

FY2017 Earnings Results — Change in net interest income (YoY) —Note: Calculated based on margin with deposit yield

Impact from increase inaverage loan balance+19

Impact from increase in
security deposit spread+29(100 million yen)

Investment trust redemption gain
¥1600 million yen(+¥1100 million yen YoY)

+12

[Asset management]
Impact from an increase inaverage balance of foreign
currency denominated loans,and management yields

Impact from increase inaverage short-term asset
management balance+0-0Impact from reduction
in loan deposit spread

-23

-23

[Procurement]
Impact from increased
procurement from foreign
currency market and rise infunding expense

Other impact,
including narrower
short-term asset
management margins

Impact from decline inaverage balance of
yen-denominatedsecurities-29

Yen loans

Yen securities

Short-term asset
management

Foreign currency dept.

-4

-11

-0

+0

Yen-based net interest income

Foreign currency-based
net interest income-15
Total net interest
income5

FY2017 Earnings Results —Major accounts (1) Deposits & assets in custody—

59,54160,86363,044

Other

3,470

3,121

4,096

Domestic
corporate clients

13,192

13,916

14,724(100 million yen)

60,000

+2.0%

+2.4%

[Average balance of deposits and NCD]

64,577
3,914

65,904
3,914
+3.5%

+5.1%

16,01915,47540,000+1.7%+2.1%
20,000

Domestic privateclients

42,87843,82544,22445,18745,969FY2014FY2015FY2016FY2017FY20180
Ref: Balance of assets in custodyPlan
FY2014FY2015

3,486
1,968

2,965
1,814

Change
-521
-154

2,880
1,539

Change
-85
-275

2,927
1,444

Change
47
-95

Plan
2,970
1,510

Change
43
66

1,734

1,867

133

2,045

178

1,951

-94

1,885

-66

652
3,423
10,611
2,620
931

806
3,402
10,048
2,620
795

154
-21
-563
0
-136

840
3,464
9,928
2,379
830

34
62
-120
-241
35

743
3,471
9,793
2,187
897

-97
7
-135
-192
67

705
3,660
10,025
2,215
918

-38
189
232
28
21

(100 million yen)
Public bonds
Investment trusts (1)Financial instrument
intermediary services
Investment tr ust por tion (2)Insurance
Bank parent
Total investment trusts (1)+(2)Chugin Securities

FY2016FY2017FY2018* Public bonds are based on the value of the average balance. Investment trusts are based on the average balance of net assets. Financial product intermediary services are based on the averagebalance of the acquisition value. Insurance is based on the average balance taking into account cancellations.
Chugin securities are based on the ending balance of bonds, equities and investment trusts.

• Private client deposits increased due to the inflow of funds for management through profit-taking.
• Corporate client deposits grew steadily on the back of robust corporate earnings.

6

FY2017 Earnings Results —Major accounts (2) Loans—+3.5%[Average loan balance]+7.5%(100 million yen)

42,32438,74836,35140,000
Other *3
Personal loans

30,000Non-Japanese &structured finance centers
Local government loans

20,00045,518Urban
Development *2

150

161

136

+6.4%

10,514

2,045
4,952
-6.5%

4,584

5,055

4,920

Local
Development *1

-7.9%

6,170

+5.0%

+6.1%
10,00011,012

3,833

6,699

7,170

7,040

6,609

+4.7%

9,873

523
4,688

85
4,093

233

177

9,501

9,253

47,12916,172

16,832

18,131

19,237

20,208FY2014FY2015FY2016FY2017FY20180Plan*1 Local development: Regions other than Tokyo and Osaka *2 Urban development: Tokyo and Osaka*3 Other: Hong Kong branch, credit cashing(Reference) Loan/deposit ratio
End of Mar 2009 End of Mar 2010 End of Mar 2011 End of Mar 2012 End of Mar 2013 End of Mar 2014 End of Mar 2015 End of Mar 2016 End of Mar 2017 End of Mar 2018
Loan/deposit ratio(Ending balance basis)

66.5%

63.3%

61.8%

62.3%

61.1%

60.9%

61.6%

65.1%

68.5%

• The annual growth rate of local development capital remained high by identifying and capturing fund demand through local
promotion activities.
• Personal loans grew 6.4% annually due to an increase in apartment loans. However, growth is expected to slow in FY2018 to
4.7% per annum.

70.4%

7

FY2017 Earnings Results —Major accounts (3) Securities—[Average balance of securities](100 million yen)

30,773Equities

30,000
Other securities (*1)
Foreign-currency
denominated foreign
securities
Corporate bonds

20,000

1,206
1,615
4,690

28,95029,030

1,215
1,714

1,155
1,875

5,199

-176

-1,268

4,754

5,628

25,311

25,135

1,071
1,644

1,200
1,902

4,571
4,116

Municipal bonds

5,839-3,719

3,835
5,559

3,400

+493

3,916

-412

3,423
4,988

-1,171

+816

6,375

+540

6,915

10,000JGBs

12,878

11,715

10,765-2,540

-423

8,225

7,802

FY2017FY20180
FY2014FY2015FY2016Plan*1 Other securities: Investment trusts, yen-denominated foreign bonds, investment partnerships• In FY2017, the balance of securities decreased by 371.9 billion yen year on year due to a decrease in the loan/deposit balance.
• In FY2018, we intend to reduce foreign bonds that are expected to face a rise in interest rates. We plan to curb the decline ofrevenue by increasing municipal and corporate bonds, which provide spreads, as well as investments in robust equity assets(equities and investment trusts).

8

FY2017 Earnings Results —Major yields and margins—[Securities yield and duration][Loan/deposit spread, credit cost ratio, net margin]
2.00

7.0
Credit cost ratio(%)(years)(%)

Yen-based loan-deposit spread

1.50

Net margin ratio

6.0

1.50

1.16

5.5

1.16
0.10

0.94

0.91
0.04

1.00

4.5

0.81
Bond
duration

0.01

1.17
1.06

1.00

0.93

0.50

5.0

1.25

0.87

Securities
yield

5.0

4.7

4.2
1.03
0.95

0.98

0.97

4.0

0.94

0.85
3.0

0.75

0.00

- 0.04- 0.01

Bond
yield

0.71

0.70

0.72
0.65

2.0

0.58
-0.50

0.50
FY2014FY2015FY2016FY2017FY2018Plan

1.0
FY2014FY2015FY2016FY2017FY2018Plan• The breadth of the decline in the yen-based loan-deposit spread is gradually shrinking, and we plan to reduce the decline to 2 bp
in FY2018.
• Bond durations are lengthening and are expected to remain at around five years in the coming years.

9

FY2017 Earnings Results —Change in fees and commissions—[Fee and commission (revenue) trends](Million yen)

14,83415,024

15,214+1,071-604

15,681

14,61015,000+684
Assets in custody

10,0005,000

Investment banking
operations

5,235

1,288

4,513

2,048

4,217

2,459

+42

4,943
4,259
+163

-434

-211

Other

2,188

2,025

8,310

8,463

8,537

8,326

FY2014FY2015FY2016FY2017

+224

8,550

0
FY2018Plan• In FY2017, revenues from investment banking operations decreased due to the removal of the upward impact due to a large-lot
client in the previous year, which led to a 604 million yen drop year on year.
• In FY2018, we plan to see an increase of 1,071 million yen in fees and commissions revenue by enhancing revenues mainly
related to assets in custody.

10

FY2017 Earnings Results —Change in assets in custody—[Revenues related to assets in custody](Million yen)Group total(bank parent)

8,015(5,235)

8,000

7,053
(4,513)Group
subsidiaries(securities, assets)

294

1,229
190

Bank parent

1,766

2,000

Investment trusts

+466

2,491

2,957

-263

(securities, assets)

2,694

1,490

4,000

Life insurance

+421

Group
subsidiaries
2,540

Municipal bonds

6,709(4,217)

7,216(4,259)

2,780

6,000

Financial instrument
intermediary services

+507

7,637
(4,943)

1,683

+274

1,346
206

1,753

1,505

1,341

1,160

FY2015FY2016

1,620
-132

74
-304

1,201

+202

1,362

+684

Bank parent
4,943

0FY2014FY2017FY2018Plan• In FY2017, total group revenues related to assets in custody increased by 507 million yen year on year due to a rise in financial
instruments intermediary revenue in cooperation with group subsidiaries.
• In FY2018, we plan to enhance revenues by strengthening life plan support activities, increasing the amount of activities, andimproving their quality.

11

FY2017 Earnings Results —Change in expenses—[Expense trends]
700(100 million
yen)

+8

572

600
Taxes

500

400

27

Other property
expenses

120

Deposit insurance
premium

37

System expenses

554
30

548

+2

556

558

+5

-6

36

31
-1

121

123

23

24

73

81

74

+13

87

312

295
(4)

-6

(20)

297
(4)

289
(7)

FY2014FY2015FY2016

122
-3

+5

30
127
22

21
+12

99

300

200

Personnel costs(Retirement expense
portion)

100

-11

278
(5)

0
FY2017FY2018Plan• In FY2017, expenses increased by 800 million yen year on year due to a rise in TSUBASA-related expenses (depreciation cost,
tax).
• Although we plan to increase system investment projects based on the 10-year strategy project in FY2018, we expect to maintainexpenses unchanged from the previous year by reducing personnel expenses such as by cutting overtime work.

12

FY2017 Earnings Results —Credit cost trends—[Credit cost trends](100 million
yen)[Non-performing loan (NPL) trends]
Other credit costs
General provisions for doubtful receivables
Individual provisions for doubtful accounts

2,000* We do not implement
partial direct write-offs.

(100 million
yen)

(%)

NPL ratio

20

3.0* NPL ratio after partial
direct write-offs

2.04%
1.80%

2.0

1.50%

1.74%
1.52%

1
-2

18

0
0

-1
-1

-0

-2

-17

-36

1

1,000

843
Substandard

1.0

719

0.0

812
161
163

-17
Doubtful

458

444

Bankrupt

207

206

209

FY2015FY2016FY2017-37FY2015176

1.23%

FY2016FY2017FY2018

347

-2.0

0

Estimate-1.0

Credit cost =general provisions for doubtful receivables + individual provisions for doubtful accounts + loan write-offs + specific foreign
borrowers + provisions for loss on claim sales + loss on claim sales - gain on reversal to loan loss account
Other credit costs = Loan loss write-offs, specific foreign borrowers, provisions for loss on claim sales, loss on claim sales• We expect credit cost to increase, since general provisions for doubtful receivables are expected to be booked, although we
continue to assume that a low level of defaults will occur regarding individual provisions.
• With a continued decline in the NPL ratio, we maintained the quality of assets.

13

FY2017 Earnings Results —Capital adequacy ratio—[Capital adequacy ratio (Basel III) (consolidated) trends]

Capital adequacy ratio (consolidated)

18.0
(%)

(100 million yen)

16.0

Total capital adequacy ratio

FY2016

Total equity

14.94

5,250

272

4,863

5,247

384

114

3

-111

37,181

39,691

2,510

Credit risks

35,49438,054

2,560

Operational risks

1,687

1,637

-50

Tier 1, including common shares

12.0

14.11

13.38

13.22

Tier 1 capitalratio, includingcommon shares

13.08

13.22

YoY

4,978

Tier 214.0

FY2017

Risk weighted assets, etc.

[Other Basel regulations]

10.0

FY20168.0
End-March 2016

End-March 2017

FY2017<Regulatory standards>

Consolidated leverage ratio

5.70%

6.03%

3% and above

Consolidated liquidity coverage ratio (LCR)

114.9%

142.9%

90% and above

End-March 2018

• The total capital adequacy ratio and the Tier 1 capital ratio, including common shares, remained at stable levels.

14

Section II
FY2018 Forecasts andMajor Initiatives

FY2018 Forecasts —Earnings forecasts—(100 million yen)

FY2017FY2018ActualPlan• Core business net profit is expected to decrease due
to a drop in interest income.

YoYCore business gross profit

795

767

-28

Interest income

662

611

-51

Fees and commissions

146

156

10

Other operating income

-12

-0

12

Expenses (-)

556

558

2

Core business net profit

239

208

-31

• Recurring profit is also expected to decrease due tothe expected increase in credit cost.
■ Factors relating to changes in interest income, etc.
Change(100 million yen)

(Impact on profit)

Interest income-9

Loan interest

OHR (%)

69.9

72.8

2.9

Credit expense (+ is reversal profit)

17

-20

-37

Bond sales gains/redemption

-24

10

34

Equity sales gains/redemption

44

23

-21

Other

2

-5

-7

279

215

-64

Extraordinary gain/loss

-1

-4

-3

Net income

194

147

-47

Recurring profit

Consolidated recurring profit
Net income attributable to owners of parent

309
212

231
154

-78
-58

+1

Details―
Avg. balance factor +10
Yield factor
Bonds

-9
-10

Securities interest &dividends-9 Inv. Trusts +2

Others-1 Hedging cost -1

Foreign-currency interest income
Loan interest
Securities interest &dividends
Foreign currency
procurement cost

Equities

-42
+29
-9
-62

Total interest income-51

Foreign currency procurement cost
included in other business profit

+20

-1

―
Avg. balance factor +12
Yield factor+17

Avg. balance factor -25
Yield factor+16

Avg. balance factor +3
Yield factor-65―
Decrease in currency
swap costs

16

Progress of Medium-Term Management Plan “Plan for Creating the Future Together: Stage I”[Numerical targets of the current
medium-term management plan][Positioning of the current medium-term management plan]

20.3 billion
yen

Current medium-termplan period
2017.4 - 2020.3

Structural reformperiod during the longterm management plan
(10 years)

30.0 billion
yen

16.0 billion
yenWithout structuralreforms

In three years

In 10 years

Overall points of the local promotion project*1

15,000pt

20,000pt

Overall points of life plan support activities*2

Continuous improvement

Continuous improvement

Customer satisfaction survey

Continuous improvement

Continuous improvement

Net income attributable to owners of parent¥16.0 billion¥30.0 billion

Consolidated capital adequacy ratio (Basel III)

Stable at 12%

Stable at 12%

Consolidated ROE

FY2016
Actual

FY2019Plan

FY2026
Plan

Target figures in the 10-year strategy(Vision 2027 “Plan for Creating the Future Together”)(FY ending March 2027 Single year) 5% or more

*1 Overall points of the local promotion project are activities that involve the provision of optimal solutions to theneeds and issues of the community and client companies by appropriately evaluating the client company’sbusiness content, managerial issues and growth potential (i.e., business assessment) that have beenstandardized in our original way.
*2 Overall points of life plan support activities involve the provision of precise information that suits the customer’slife plan and providing products and services that we think are the best through our understanding of eachcustomer’s life events.

[Four major strategies of the medium-term management plan]
Improve the quality of services
provided.

Expand opportunities toprovide services.

Enhance service provision capability.

Reform the stances of individual
employees and the corporate culture.

1. Advance local promotion activities.
2. Strengthen sales activities basedon life planning.
3. Maximize group synergy.
4. Cultivate new business domains.

5. Restructure sales channels.
6. Generate business hours and sales
personnel.
7. Re-allocate human resources.

8. Strengthen the development of humanresources.
9. Implement organizational reforms.
10. Enhance ALM functions.
11. Manage costs.

12. Reform the stances of individual
employees and corporate culture,and improve customer andemployee satisfaction.
13. Compliance

We are carrying out the four major strategies to establish our footing toward future growth.
Structural reforms are proceeding steadily.
17

Improve the Quality of Services Provided —Corporate sales— Strengthen the solution sales system by further deepening business assessments and local promotion activities.
 Establish strong relationships with customers and seek differentiation from other banks.

Advance local promotion activities.
[Image of advancement of business assessment &local promotion activities]

 Initiatives in business assessment and local
promotion activities• Strengthen the ability to advance from business assessment to local
promotion activities by reviewing the business assessment process anddeveloping the assessment into a tool to discuss managerial issues.
• Appoint dedicated staff at HQ and start charged consultation.
• Carry out comprehensive consulting such as management diagnosis
in cooperation with external partners and assistance in personnel
systems and formulating medium-term plans.

Advancement

 Provision of consulting services

Consulting
targetbased on business assessment.

Foundation & second foundation support
Product appeal
enhancement support

Personnel/organizational Establishment & development of
human resources support
management

depending on the stage

consulting services.

Develop into local promotion activities

Promotion enhancement
supportBusiness succession

Business process
improvement

Production management

Operational improvement

Overseas business

Overseas sales channel
development

Establishment of local
subsidiary

Management
improvement

Management plan
formulation support

Business closure support

Conventional central
activities

Sales expansion

sales offices and HQ,
Provide charged

Local promotion
activity target[Examples of local promotion activities]
New business(foundation)

Provide integrated support for

Business assessment target
Expand the range of businessassessment with depth.

Business loan target

18

Improve the Quality of Services Provided —Individual sales— Establish new process assessment to thoroughly enforce customer-oriented sales activities.
 Promote comprehensive support according to life plans and lead it to an increase in main business.

Strengthen sales activities based on life planning.
Enhance contact with customers.

Catch phrase: “Want to meet more, want to know more”
Establish new process assessment in FY2018.

Main activity items

Process

AchievementsCollect customer information.

Cooperation between channels

No. of customer contacts

Hold seminars for customers.

Opening of youth
accounts

Credit cards

Unsecured loans

Internet banking

NISA accounts

Level premium
insurance

iDeCo, installment
investment trust

Housing loans

Assets in custody

Pension receipt

Will trusts

Average personal loan balance
11,012(100 million yen)

Improve the qualityof proposals.

Number of depositors and averagebalance of assets in custody

150,256

10,514
OthersUnsecured loans

Number ofdepositors“Want to meet more, wantto know more” as thetheme of the activities

Expandopportunities for
proposals.

152,374

155,000

147,934

148,913

9,946

9,913

9,820

9,766

9,880

H1 2016

H2 2016

H1 2017

H2 2017

H1 2018 plan

9,873
Avg. balance(100 million yen)

Housing loans
Apartment loans
FY2016FY2017FY2018 plan19

Improve the Quality of Services Provided –Group strategy, new business–
 Strengthen Group strategy and consolidated management, and make efforts to maximize group synergies andcultivate new business domains.

Cultivate new business domains.

Maximize group synergy.
 Advance the group management structure.
• Improve the effectiveness of performance management and speed up
decision making by delegation of authority.

 Strengthen sales cooperation.
• Strengthen cooperation following the reorganization of the bank sales
division, and revise the performance awards system.

 Enhance the power of human resources.

• Revitalize personnel exchange, allocate personnel in strategic positions, andshare know-how in human resources development and hiring.
(million yen)

－Performance of consolidated subsidiaries－

Company
Chugin Lease
Chugin Credit
Guarantee
Chugin Card

Chugin AssetManagement

Main initiatives during the
medium-term plan period• Start of auto lease business• Strengthening of cooperation within
the Group• Partnership in loan promotion• Increase in risk tolerance• Promotion of platinum corporatecard• Increase in credit card member
stores• Increase in publicly offeredinvestment trusts• Improvement in performance• Advancement in cooperation
between the Bank, securities, andChugin Securities
asset management• Promotion of introduction-type
intermediary businessCBS• Promotion of BPR through increasein contracted business from the
Chugin Operation
Bank
CenterTotal of seven consolidated subsidiaries

 Study and gather information toward entry into new
business.

• Joint research by the TSUBASA New Business Domain Cultivation ResearchGroup (est. Jan. 2018)

 Consider partnership with different industries andother banks.
• Initiatives toward expanding networks in the fintech field－Map of Group strategy－

Note: New business proposals are examples.

Corporate services
Started consulting
in Apr. 2018

Performance in FY ended Mar. 2018
Recurring profit
Net income
823

553

1,344

885

354

240

54

Corporate
guarantee

Chugin Card
ChuginSecurities

Chugin Card
(Guarantee)

Chugoku
Bank

232

151

30

17

3,572

2,406

Chugin Credit
Guarantee
CBS
ChuginOperation
CenterChugin AM
521

Personal
guarantee

Chugoku Bank GroupFundbusiness
OCM
Started auto
lease in Apr.
Chugin Lease
2018

39

735

Personal loans
and credit

New domain (example)

FintechAdministrationconsignment

Payment
collection

Assets in custodyIT, system-related

OthersBack-officeoutsourcing

20

Expand Opportunities to Provide Services
 Carry out thorough structural reforms and generate sales personnel and business hours to establish a truly
customer-oriented sales system.

Generate business hours and sales personnel.
HQ(Business office)

Loans(Business office)Stores(Business office)Sales

Thorough reduction of operations at HQ

Planning to increase personnel by 110 by the end of
March 2020
(Increased by approx. 100 in FY ended Mar. 2018)

Centralization of loan administration at HQ
By establishing a loan administration center (scheduled in July 2018),
we will carry out the centralization of loan administrative work instages starting from this fiscal year and shift administrative personnel
to sales personnel.
We plan to increase sales personnel by 40 by the end of March 2020
(150 by the end of March 2021).

Execution of store operation reforms
By developing multi-skilled employees and introducing store tablets,
we will seek to improve the efficiency of counter and back-officeadministration.
We plan to increase sales personnel by 30 by the end of March
2020.

Execution of sales activity reforms
Introduce tablets for negotiation (around October 2018).
This not only allows access to information during visits tocustomers but also enables the complete execution ofadministration of sales of assets in custody, reducing the burdenof administrative work upon returning to the office.

Goal of the current medium-term plan
(until end of March 2020)
Increase of
personnel
Increase personnel
through BPR
measures180 persons• We managed to increase personnel by approx. 100 by the end of March2018 and re-allocate them.
→ Approx. 40 to business offices, approx. 30 seconded or allocated astrainees, approx. 30 allocated to strategic positions• We plan to increase personnel by an additional 80 during the current
medium-term plan period and re-allocate them mainly to the sales
division.
• We plan to increase personnel by a total of 700 in the long-term
management plan (10-year strategy). We will further strengthen oursales structure.

Generation ofbusiness hours
Increase the number ofcustomer visits by externalsales representatives.

30 - 40% increase

Strengthen sales
capabilities.

Improve the quality of sales
through OJT and role playing.

21

Reform the Stance of Individual Employees and the Corporate Culture Aim to help the company grow and evolve by promoting diversity and workstyle reforms so that diverse humanresources can exercise their capabilities to their fullest extent.

Initiatives in the reform of stances and corporate culture Initiatives in the reform of corporate culture toachieve our long-term vision

We will aim to achieve our long-term vision by promoting diversity
and workstyle reforms based on Chugin-no-kokoro (Philosophy of
Chugoku Bank).

Long-term vision

Basic policy on diversity

Create a rich future that can be shared with the community, customers
and employees together.

Making efforts in diversity is a managerial issue aimed at achieving ourmanagement vision; we aim to grow and evolve the company by accepting
diversity within the organization and connecting diverse skills with thecompany’s management.

Workstyle reforms

Diversity

Basic policy on workstyle reforms

Chugin-no-kokoro (Philosophy of Chugoku Bank)
 Initiatives in workstyle reforms
Cultivating a culture thatenables diverse talents toexercise their skills

Improving employees’
motivation and work-lifebalance

Workstyle reforms
Individual growth achieved
as a synergetic effectCorporate growth andevolution throughproductivity improvement

Examine measures topromote workstylereforms from threeperspectives.

We will develop a workplace culture where diverse human resources can
exercise their talents and seek to improve work-life balance and productivity
as well as providing a place for fulfillment and growth.
Three perspectives

Examples of measures

Environment
development• Consider a flextime system or a discretionary work
system.
• Encourage the taking of paid leave.

Awareness reforms

BPR• Promote Iku-boss.
• Utilize flat meetings.** Opportunities within the workplace to discuss serious matters freely,irrespective of one’s position or status.

• Review administrative work that is over
specification.
• Improve work efficiency by introducing systems.

22

Securities management strategy —Asset allocation trends—[Premise: plans for average balance of market operations](100 million yen)

35,00033,72332,99732,500416
1,861

30,000Measure to improve earnings

35,304

1,206

336
32,355329
4,512

 Improve earnings through asset allocation operation thattakes risk and return into consideration.

6,026

382

1,155

6,777

Other*1

31,866

 Maintain the earnings level by increasing equity assets.

442

 In yen-based bonds, control management so that interest
rate risks do not become excessive.

[563]

1,206

1,215
[603]

27,500

1,354

[575]

Yen-based short-term
investment(incl. excess reserves in BoJ
current account)

1,499

6,424

 In foreign bonds, shift to investment that raises thepercentage of variable bonds.

4,690
25,000

1,071
5,199

[451]

5,839

1,350

22,500Equities[net investment][594]
Investment trusts

Yields by type of investment assets

1,200
1,650

4.5%
4.0%
3.5%

20,00017,500

2.81%

2.5%

Equities

23,6152.0%
1.5%

20,447
18,201

15,00018,750
Yen-based bonds*2

1.0%
0.5%

FY2016FY2017*1 Other: money held in trust, derivative time deposits, long-term beneficiary rights,
investment partnerships, etc.
*2 Includes yen-denominated foreign bonds

FY2018
Plan

3.44%
3.33%

2.48%
1.44%

Yen-basedbonds

Foreign currency-based
foreign securities*3

1.01%
0.61%

0.69%

0.72%

0.66%

0.58%
0.18%

FY201830年度
Plan
計画
Cover decline in domestic and foreign bond yields with gainfrom equities and investment trusts
FY2014
26年度

FY2015

3.95%
3.88%

3.24%

1.57%

0.71%

3.56%

0.0%

12,500FY2014

3.44%

3.75%

4,571 Foreign currency-based 3,400 3.0%
foreign securities

21,112

Investment
trust

FY2015
27年度

FY2016
28年度

FY201729年度*3 Management-procurement spread for foreign currency-based foreign securities

23

Shareholder returns
Actual returns in FY2017
 Planning an annual per-share dividend of ¥20, with a term-end dividend of ¥10
 Carried out share buyback of ¥3 billion in total (of which ¥1-billion worth was bought back between May 11 and May 28, 2018) in FY2017.
 The total payout ratio, which includes dividends and share buybacks, will be 35.1%, and is expected to exceed the initial target (around 35%).

Return policy for FY2018
 The total payout ratio target, which includes dividends and share buybacks, will be around 35%, the same as in the previous year.
 An annual per-share dividend of ¥20 is expected based on the current profit forecast.

Shareholder returns
Payout ratio

Share buybacks

Unreturned
portion[2] ÷ [1]

[3]

[4]

([2] + [3] + [4]) ÷ [1](¥10.00)

25.9%

－

14

about 35%

¥20.00(¥10.00)

19.6%

30

0

35.1%

38.5

¥20.00(¥10.00)

20.3%

29

0

35.4%

259

39.2

¥20.00(¥10.00)

15.1%

52

0

35.2%

209

35.6

¥18.00(¥8.00)

17.0%

33

0

32.8%

Net income

Total dividends

[1]

[2]

FY2018 E

147

38.0

¥20.00FY2017194

38.1

FY2016190

FY2015FY2014Per-share dividend (interim)*Share buy back as a factor in calculating pay out ratio: Calculated based on buy backs during one y ear from time of shareholders meeting.

Total payout ratio

24This document includes forward-looking statements. These statements are not a guarantee of future performance,
and involve risks and uncertainties. Note that future performance could possibly differ from the goals and targets herein
due to factors, including changes in the business environment.