ANNUAL REPORT

2016

Year Ended March 31,2016

This symbol in the shape of Kansai’s six prefectures is suitable for the new financial group,
leading the Kansai region characterized by a spirit of openness. The vertical lines stretching
upward express the spread of the various networks linking the Kansai area that were createdwith the birth of the new financial group.
The brand color is associated with water, a clear blue that symbolizes the growth potential of
the new financial group and the corporate culture of unrestricted freedom.

Management Principle

Strive to become a financial group that “endear ourselves to the regional
community by providing services tailored to customers’ needs, whilevaluing “broad networks of relationships” and “an enterprising spirit.”

Management Policy

1. Create a “most trusted by customers” financial group which
respects personal relationships and promotes honest andapproachable banking.
2. Create a financial group with a commanding regional presence byresearching and predicting trends to provide advanced, high-quality services.
3. Pursue transparent operations and live up to the trust of theshareholders, while maintaining a competitive edge through strong
financial standing, high profitability and management efficiency.
4. Promote “coexistence with the region” by utilizing industrial,academic and management networks for business matching.
5. Focus on gaining the trust of the community through compliancewith laws and regulations and corporate activities that are considerate of the environment.
6. Provide a workplace for employees of the financial group which
encourages employees to exercise talents and develop skills, with
an emphasis on proactive self improvement, thereby contributing to
the development of upstanding citizens.

CONTENTS
Message from the President …………………………… 2
We strive to become the “No. 1 Reliable Bankfor the Regional Communities and Customers”
to realize “Coexistence and Co-prosperity”
with the regional communities. ………………………… 3
Long-Term Business Plan ……………………………… 4
The Third Medium-Term Business Plan
CSR Activities……………… 5…………………………………………… 8

Business Overview of Senshu Ikeda Holdings……… 9

Business Overview of The Senshu Ikeda Bank ……… 10
Business Overview of The Senshu Ikeda Bankand Senshu Ikeda Tokai Tokyo Securities …………… 11

1

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

Corporate Governance ………………………………… 12
Compliance Structure …………………………………… 16
Risk Management Structure …………………………… 18
Approach to Facilitation of Financing ………………… 22
Corporate Information………………………………… 24

Business Description of the Group …………………… 26
Organization and Board of Directors ………………… 27
Consolidated Financial Informationof Senshu Ikeda Holdings ……………………………… 30
Non-consolidated Financial Informationof The Senshu Ikeda Bank (Unaudited) ……………… 64

To become the “No. 1 Reliable Bankfor the Regional Communities and Customers”
I sincerely thank you for your continued support and patronage of Senshu Ikeda Holdings Group.
With regard to the financial results for the fiscal year ended March 31, 2016, on a Senshu Ikeda Holdings consolidated basis, we recorded net income of ¥16.4 billion, mainly due to the effects of deteriorating market
conditions and tax reform. Although we did not mark a record high for the third consecutive year, our performance remained stable.
Senshu Ikeda Holdings has recently formulated the “Third Medium-Term Business Plan.”
We will aim to achieve “consolidated net income of ¥20.0 billion or more,” “return on equity (ROE) of 8% or
more,” “balance of loans for small and medium enterprises (“SMEs,” the Senshu Ikeda Bank, non-consolidated
basis) of ¥1.5 trillion or more,” “assets under management of individual customers of ¥5 trillion or more,” and a“non-interest income ratio of 20%” in the fiscal year ending March 31, 2019, building on the concept of “Seven
Structural Innovations.”
We will strive to become a bank group which can secure high profits and ROE through building firm revenue
stream from transactions with SMEs and individual customers, as well as interest income. To achieve that goal,
we will implement various measures focusing on regional SMEs and individual customers.
Furthermore, we will make every effort to build a sustainable business model that can keep on contributing torevitalize “regional communities” in five to ten years’ time from now.
Based on “community-oriented” and “customer-oriented” principles, we will strive to become the “No. 1 Relational Regional Financial Group in the Kansai Area” and the “No. 1 Reliable Bank for the Regional Communities
and Customers,” by valuing our “bond” and “relationships” with regional customers.
We look forward to serving you with the best services for many years to come.
July 2016

Hirohisa Fujita
Representative Director and President of Senshu Ikeda Holdings, Inc.
Representative Director and President of the Senshu Ikeda Bank, Ltd.

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 20162

We strive to become the “No. 1 Reliable Bank for the Regional
Communities and Customers” to realize “Coexistence
and Co-prosperity” with the regional communities.
“Coexistence and Co-prosperity” with the regional communities—“community-oriented” principle
Initiatives for revitalization of “regional communities”
Initiatives for “revitalization of communities, people and work”
Development and utilization of networks with local governments and universities
Enhancement of Senshu Ikeda’scontribution to and influence on regional
communities

Management
integration
Expand growth
power of Senshu
Ikeda Holdings
as a regional
financial group

Virtuous cycle of “Coexistence andCo-prosperity” with the regional communities
Contribute to theregional
revitalization

To become the “No.1 Relational Regional
Financial Group in the Kansai Area”

As a “regional financial group,” the Senshu
Ikeda Holdings Group believes that our own
growth stems from regional prosperity, andthat “Coexistence and Co-prosperity with theregional communities” is most important. We
consider our mission is to build a “virtuous
cycle of Coexistence and Co-prosperity withthe regional communities”.
We aim to make more contribution to theregional revitalization to enhance the regional
power, and we will achieve further growth.
We will continue to strive for achieving Coexistence and Co-prosperity with the regional
communities, and to become a distinctive
regional financial group through providing
products and services with “Kindness andInnovation.”Founding spirit,“Kindness and Innovation”
Expand “Regional Power and Potential”

Collaboration with local governments

Collaboration with universities

Through collaboration with local governments, we are striving
to revitalize regional communities by funding local customers,
developing “regional brands” and communicating thesebrands.

Through collaboration with universities, we are helping the developmentof regional communities in various fields including financial support foruniversity-launched venture companies, industries, business-academic
research, human resources development, and community building.
Ritsumeikan University

Mino-city

Ikeda-city

Hyogo Prefecture

Toyonaka-city

Inagawa-town

Settsu-city

Osaka Prefecture
Higashiosaka-city

Osaka-city

Kawanishi-cityNEWfrom May 23

Takaishi-city

Takarazuka-city

Osaka Prefecture

Izumiotsu-city

Matsubara-city
Sakai-city

Itami-city
Kishiwada-city
Izumisano-city

Kaizuka-city

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

Doshisha University

Konan University

Ryukoku University

Kobe University

Osaka University

University of Hyogo

Setsunan University

Kansai University
Osaka Institute of Technology

Izumi-city
Kumatori-town

3

Kwansei Gakuin University

Suita-city

Hyogo
Kyoto
Prefecture Prefecture

Kyoto University

Wakayama University

Osaka
Prefecture

Kindai University
Osaka City University
Osaka Prefecture University

Wakayama
Prefecture

SENSHU IKEDA HOLDINGS,INC.

Long-Term Business Plan

Senshu Ikeda Holdings has formulated its “Long-Term Business Plan,” and announced the “Long-Term Capital
Consolidated
Non-consolidated
Policy.” The “Long-Term Business Plan” presents priority strategies towards FY2020, and the “Long-Term Capital
Policy” presents the principles of our capital policy.
We will proceed with the redemption and retirement of subordinated borrowings and preferred stock, by theaccumulated retained earnings, and strive to offer better return to shareholders through the means including
dividends on common stock and acquisition of treasury stock.

Long-Term Business Plan
Priority strategies
Strengthen
profitability
Strengthen unique proposal andestablish “Business Model” torespond changes

Establish strong
company
constitution

Sufficient equity
capitalExhaustive BPR

Executing appropriate
long-term capital policy

Maximization of merger synergies

Our “New business target”
Loan business as introduction for profit business
Inheritance business
Diversification in sales proposal to housing loan users
Strengthen investment products sales
Strengthen in Asia and China strategy
Change in channel strategy
Business Process Re-engineering (cost reduction)

SME / Owners
Local estate owners
Senior customers

Long-Term Capital Policy
1. Optimization of capital structure
Current

2. Reduction of capital cost

FutureAccelerate accumulation of retained earnings
Financing

SubordinatedDebt.:¥72.0 billion

Redemption at call datePreferred stock:¥40.0 billion

Acquisition and retirement
by retained earnings

Zero after
July 2022

Accumulation of retained earnings
Acquisition of treasury stock, etc.

Common stock/retained earnings

March
2015

March
2016

March
2019 (Plan)

Dividends and subordinated borrowings (¥ billion)

7.1

7.1

5.6

EPS after deducting preferred dividends (¥)

66

55

69

BPS after deducting preferred stock (¥)

774

759

819

Expand shareholders return

3. Expected ROE
FY2015
Shareholders’ equity ROE (income before income taxes)

10.31%

Shareholders’ equity ROE

7.74%

FY2016 (forecast)
Around 7.5%

(Note) Shareholders’ equity basis after deduction of total accumulated other comprehensive income.

ROE (income before income taxes)

9.21%

ROE

6.92%

FY2020
Maintain and improvearound 8%

4. Maintain ROE exceeding shareholders’ equity cost (expected investment return)Shareholders’ equity ROE

7.7%

Shareholders’ equity cost

5.6%

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

4

The Third Medium-Term Business Plan

Senshu Ikeda Holdings formulated the “Third Medium-Term Business Plan,” in order to firm up its growthstrategies in response to the drastic changes in business environment, including the Negative Interest Rate
Policy (“NIRP”) adopted by the Bank of Japan.
We present the “Seven Structural Innovations” as a key concept under the “Third Medium-Term Business Plan,”thereby radically transforming the Group’s earnings structure, while tackling the regional revitalization evenmore aggressively than ever.

1. Positioning of the Third Medium-Term Business Plan
FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020Long-Term Business Plan ~ towards FY2020
The Third Medium-Term Business Plan

The Second Medium-Term Business Plan

FY2015
Senshu Ikeda Holdings (consolidated)
Management indicators[The Second Medium-Term[Results]
Business Plan]

FY2018[The Third Medium-TermBusiness Plan]

FY2020[Long-TermBusiness Plan]

Ordinary income¥18.5 billion or above¥22.3 billion¥23.5 billion or above¥25.0 billion or above

Income before income taxes ¥18.5 billion or above¥21.9 billion¥23.5 billion or above¥25.0 billion or above

Net income¥16.0 billion or above¥16.4 billion¥20.0 billion or above¥16.5 billion or above

Capital ratio

Around 10%

10.59%

Around 10%

Around 10%

2. Management indicators for the Third Medium-Term Business Plan
As targeted management indicators for FY2018, Senshu Ikeda has set “consolidated net income of ¥20.0
billion or above,” “shareholders’ equity ROE of 8% or above,” and “group total individual assets under management of ¥5 trillion or above” for the Holdings group, and “balance of loans for small and medium enterprises (“SMEs”) of ¥1.5 trillion or above” and “non-interest income ratio of 20%” for the Bank on the
non-consolidated basis. Achieving these targets, we are aiming to become a bank group with high profits andROE, which has individual customers and SMEs as its revenue base, and possesses strong income sources in
addition to interest income.
Management indicators

FY2015[Actual results]

FY2018[The Third Medium-Term Management Plan]

Net income¥16.4 billion¥20.0 billion
or above

Shareholders’equity ROE

7.7%

8% or above

Group total individual
assets under management¥4.4 trillion¥5 trillion or above

Balance of loans
for SMEs¥1.2 trillion

Increase by 20% or above¥1.5 trillion or above

Non-interest
income ratio

12.7%

20%

Holdingcompany(consolidated)Bank(nonconsolidated)
5

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

Prerequisites to this Plan
Gradual economic recovery
scenario-Short-term interest rate
to remain flat (negativeinterest rate to be continued)-Long-term interest rate
gradually increasing in thelatter half of the Plan period
Risk scenarios of possible
further reduction in
short-term interest rates arerecognized as well
We have confirmed that thestable dividend payment andcapital policy shall remainunchanged in the event ofthese risk scenarios.

SENSHU IKEDA HOLDINGS,INC.

3. “Change” and “Not change”“Change”“Not change”

Changes in environment

Decreasing
population

Increasingly
Decliningsevere competition lending rate

“Seven Structural Innovations”“Coexistence and Co-prosperity” with the regional
communities –” community-oriented” principle
1. Initiatives for revitalization of “regional communities”
2. Initiatives for “revitalization of communities, people and work”
3. Development and utilization of networks with local
governments and universities

NIRP

Radical transformation of earnings structure

Establishment of business models that should remain viable in five to ten years’ time, thereby continuing to contribute to regional communities“Seven Structural Innovations”
Loans

Lending structure focused on the “local SMEs and individuals”

Deposits“Enhancement of liquidity ratio” and “improvement in deposit rates”

Securities

Advancing “diversification of investment” and “enhancement of risk management”

Non-interest
incomeChanging sales of assets under management to the “interest business”
Expansion of “Inheritance business”

Customers(Corporate customers) Drastic expansion of market share in the “offensive areas”(Individual customers) Expand transactions for each generation of customers

Employees

From “reduction” to “strategic reinforcement”

Expenses

Into the second phase of BPR – Transformation of the “structure”

Expansion of local customer bases (Accelerating the implementation of the strategic themes under the Second Medium-Term Business Plan)

Radical transformation of earnings structure

4. <<Change>> “Seven Structural Innovations”

Development of organization: “Establishment of Relationship Unit” - for further strengthening presenting proposals and providing support“New” CS Headquarters
Reinforcement of“non-face-to-face” sales activities
Coordination of sales strategies

Business Management Unit
Business Management Division

Comprehensive proposal via “face-to-face” approach
Coordinating support
Integrating functions of the three strategic headquarters

Regional Headquarters
NEW

Relationship Unit

Customer Center

Branches Supporting Office
Securities and Insurance Business Promotion OfficeCall Center

Personal Loan Promotion OfficeNEW
ICT Planning Office

Utilization of FinTech
Expansion of business base for the future

Asia andChina Business
Promotion Division

Regional Revitalization Promotion
Office (Revitalization of regional communities)
RelationshipStart-up Supporting Desk
Promotion
Division
Financial
Advisory
Division
Advanced Technology
Business Promotion
Division

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

6

The Third Medium-Term Business Plan
5. <<Not change>> Enhancement of regional revitalization
Enhancement ofregional revitalization

Promotion of regional revitalization (“Creation of virtuous cycle of communities, people andwork”), while promoting the presence of Senshu Ikeda Holdings

Strengthen networks involving “regional communities,” while supporting creation of “work”

Supporting creation of “people” with “regional communities”
Youth/womenStart-up

Settlement/
move-in

GrowthTo thenext stage

To the next
generation<Cycle of work>

Marriage<Cycle of people>

Cyesis/childbearing

Child-rearing
Business
succession

InheritanceMaturity

Living/culture

Health/nursing care

Creation of “work” in regional communities

Creation of schemes that attract “people”•Support for start-ups/ expansion of networks, detection ofbusiness opportunities, follow-up services for start-up borrowers•Promotion of employment/ people-job matching that meets the
local needs•Generation of “work” through investment funds•Support for “marriage,” “cyesis/childbearing” and “child-rearing”
Collaboration with local governments utilizing existing products,
development of new services•Support for people settling down and utilization of housing stock
Countermeasures against increase in empty houses, effective use of used houses, etc.

Measures for the formation of “communities”

Promotion of business transactions with local governments•Promotion of PPP/PFI•Support for establishment of new business facilities•Initiatives targeting growth industries inregional communities
Related to “tourism,” “agriculture,” “ICT,” etc.

•Maintain lending/deposit balances of local governments•Streamlining of business processes and improvement of various fees
•Expansion of business transactions with local government employees

Start-up support
The three strategic headquarters-Asia and China Business Headquarters loan
-Advanced Technology BusinessSupporting Headquarters-Private Banking Headquarters
New Business Grant Program
2015
Consortium-based Research &2012
Development Grant Program

Business Encourage Fair
Kansai Revitalization Fair
Business Matching Fair

2006

2003

2000

2010

MergerCo-hosting joint-briefing withcorporations for recruitment
Housing loan for those who live
near parents
Kansai Revitalization Symposium
Symposium in Suzhou, China
Symposium in Hanoi, Vietnam

Solving issues jointly with
regional communities

Suzhou Representative
Office“Co-existence with regional communities”

Collaboration with universities-Proposal for technological consultation to universities-Exhibition at the “Business Encourage Fair”-Investing in venture funds-Consortium-based Research &Development Grant Program“Co-existence with local businesses”

Collaboration with local governments-Co-hosting joint-briefing with corporations for recruitment-Establishment of loan funds-Support through products such as
the housing loan for those who live
near parents

Continuous engagement in regional revitalization initiatives“Creating business” in the Kansai region faces the “dual industrial hollowing-out”

Utilization of collaboration networks“Industrial-academic-government” networks
Public institutions Universities Overseas parties Local governments

7

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

SENSHU IKEDA HOLDINGS,INC.

CSR Activities
Consolidated

Non-consolidated

Enhancement of CSR activities based on the concepts of “environment” and “education”<<CSR activities concept>> To become a financial group that is relied on by theregional customers and the most trusted by the regional communities

of financial
For customers Provisionintermediary function
For shareholders
and investors

Enhancement ofcorporate value

For regional Contributions to thecommunities regional communities
of jobFor employees Enhancement
satisfaction

Initiatives for enhancing CSR
Environment

CultureDonation to environmental protection organizations, etc. from
deposits/loan products-Time deposit for greenery promotion-Fund for Supporting Eco-friendly Companies
Participation to voluntary tree-planting and grass-cutting
activities at the “forests of symbiosis”
Eco-friendly arrangement of bank branch premises

Contest for the original image that features the promotional
calendar for Senshu Ikeda Bank
Special sponsorship for the Kishiwada Castle Music Festival
Sponsorship for National Chrysanthemum Exhibition
Organizing events featuring exclusive private performance by
the Takarazuka Revue
Support towards World Heritage Inscription of Mozu-Furuichi
Kofungun Ancient Tumulus Clusters

Initiatives for regional revitalization
Expansion of product line-up that meets the needs of “people”
in their respective life-stage-Housing loan for those who live near parents-“Angel” installment time deposit-Support loan for trying to conceive/child-rearing-Baby-friendly room in branches, etc.

Education
Organizing “ALL JAPAN HIGH SCHOOL ECONOMICS QUIZTOURNAMENT” for Hyogo Prefecture tournament
Jointly organizing Kwansei Gakuin Business Plan Contest
Organizing the “Soccer School for Kids and Parents”
Activities to improve financial literacy (visiting lecture atprimary schools)

HealthSpecial sponsorship for the Senshu International City
Marathon
Initiatives for enhancing cancer screening rate in Takarazukacity
Sponsorship for the Senshu Table Tennis TournamentCommit to further strengthen our initiatives for “environment” and “education” in particular.
SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 20168

Business Overview of Senshu Ikeda Holdings
Consolidated■ Consolidated ordinary income / Consolidated net income* (¥ million)
Consolidated ordinary income

21,34222,000■ Consolidated capital ratio (domestic standard)

Consolidated net income*

22,335

12.00

10.49
20,00018,000

(%)

10.09

10.59

17,584

17,551
16,604

16,4728.00

16,00014,0004.00

12,00010,00000March 2014

March 2015

* Profit attributable to owners of the parent

March 2016

Business Environment

The Japanese economy in the consolidated fiscal year under review
was on the path toward overcoming deflation completely andrealizing economic recovery, as corporate earnings continued to
improve thanks to economic measures led by the government andthe Bank of Japan, and individual consumption remained solidreflecting the steady improvement of employment and income
situations. Despite certain weaknesses resulting from the slowdown
in China and other emerging economies, the economy overall
remained on a moderated recovery trend.
With respect to prices, domestic corporate goods showed agradual increase followed by a gradual decline due to falling international commodities prices and deteriorating supply and demand in
Asia. In addition, while consumer prices (excluding fresh foods)
remained on the same level, they exhibited a moderate rise, if
petroleum products were excluded, due to the significant impact offalling energy prices.
In the financial markets, the monetary base continued to expand
amid the ongoing monetary easing by the Bank of Japan. With theintroduction of quantitative and qualitative monetary easing withnegative interest rates in February, the unsecured overnight call rate
which had previously stayed below 0.1% dipped into the negative
range. Long-term interest rates gradually declined to the 0.2% range
due to the effects of declining U.S. long-term interest rates andeconomic easing by the Bank of Japan. With the announcement of
the negative interest rate policy at the end of January, interest rates
declined further and dropped below negative 0.1% in March.
The Nikkei Stock Average rose thanks to the recovery of thedomestic economy and improvements in corporate performance,reaching the 20,000 yen levels in April for the first time in nearly 15
years. Subsequently, the Nikkei Stock Average dropped below
15,000 yen due to uncertainties about the slowdown of the Chinese
economy and geopolitical risks, among other factors. However, thestability was later restored and the Nikkei Stock Average closed out
the year in the 16,500-17,000 yen range.

9

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

End of March 2014 End of March 2015 End of March 2016

Business PerformanceWith regard to the consolidated performance of Senshu Ikeda
Holdings Group in the fiscal year under review, consolidated ordinary
revenue decreased ¥3,977 million from the previous fiscal year to¥110,347 million. This was due to a decrease in interest income
mainly as a result of the decline in interest on loans and bills discounted, a decrease in fees and commissions due to a decline incommission income on sales of assets under management and adecrease in other operating income due to decreased gains on salesof debt securities.
Consolidated ordinary expenses decreased ¥4,971 million fromthe previous fiscal year to ¥88,011 million. This was due to a decrease in interest expenses primarily because of a decline in thedeposit rate, a decrease in other operating expenses due to decreased losses on sales of debt securities and a decrease generaland administrative expenses due to cost reductions.
As a result, consolidated ordinary income increased ¥993 million
from the previous fiscal year to ¥22,335 million. The “Act on Partial
Revision of Income Tax Act, etc.” (Act No. 15 of 2016) and other laws
passed the Diet on March 29, 2016. As the corporate tax rate forfiscal years commencing on and after April 1, 2016 was lowered, it
became necessary to reverse ¥4,710 million in deferred tax assets
and total income taxes of ¥5,343 million were reported. As a result,profit attributable to owners of the parent decreased ¥1,112 million
from the previous fiscal year to ¥16,472 million.
Senshu Ikeda Holdings Group’s consolidated capital ratio was
10.59%, which is well above the 4% level required of banks subject
to domestic standards.

SENSHU IKEDA HOLDINGS,INC.

Business Overview of The Senshu Ikeda Bank
Consolidated■ Consolidated ordinary income / Consolidated net income* (¥ million)
Consolidated ordinary income
22,000■ Consolidated capital ratio (domestic standard)(%)

Consolidated net income*

22,26812.00

20,872

10.96

11.10

10.51

20,00018,00017,57016,67817,537
8.00

16,677

16,00014,0004.00

12,00010,00000March 2014

March 2015

* Profit attributable to owners of the parent

March 2016

End of March 2014 End of March 2015 End of March 2016

Non-consolidated■ Core banking profit(¥ million)■ Ordinary income / Net income(¥ million)

Ordinary income
20,00017,974

18,481

20,00019,062
17,70318,00015,00013,256

16,00014,746
10,00014,000Net income

15,034

14,424

13,517

12,0005,000
10,00000March 2014

March 2015

March 2016

March 2014

March 2015

March 2016

Business Performance (Consolidated)

With regard to the consolidated performance of Senshu
Ikeda Bank Group in the fiscal year under review,
consolidated ordinary revenue decreased ¥3,943 million
from the previous fiscal year to ¥108,643 million. Thiswas due to a decrease in interest income mainly as aresult of the decline in interest on loans and bills
discounted, a decrease in fees and commissions due toa decline in commission income on sales of assets undermanagement and a decrease in other operating income
due to decreased gains on sales of debt securities.
Consolidated ordinary expenses decreased ¥5,338
million from the previous fiscal year to ¥86,375 million.
This was due to a decrease in interest expenses
primarily because of a decline in the deposit rate, adecrease in other operating expenses due to decreased
losses on sales of debt securities and a decrease

general and administrative expenses due to cost
reductions.
As a result, consolidated ordinary income increased¥1,396 million from the previous fiscal year to ¥22,268
million. The “Act on Partial Revision of Income Tax Act,etc.” and other laws passed the Diet on March 29, 2016.
As the corporate tax rate for fiscal years commencing on
and after April 1, 2016 was lowered, it became
necessary to reverse ¥4,690 million in deferred tax
assets and total income taxes of ¥5,197 million werereported. As a result, profit attributable to owners of theparent decreased ¥860 million from the previous fiscal
year to ¥16,677 million.
Senshu Ikeda Bank Group’s consolidated capital ratio
was 11.10%, which is well above the 4% level required ofbanks subject to domestic standards.

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201610

Business Overview of The Senshu Ikeda Bank and Senshu Ikeda Tokai Tokyo Securities
Non-consolidated■ Non-consolidated capital ratio (domestic standard) (%) ■ Deposits(¥ billion)

Individual
4,800

12.00

9.69

■ Individual total assets under management (¥ billion)
Individual deposits

Corporate

4,772.5

4,777.6

4,617.3

Insurance

4,600

4,375.4

9.90

9.27

Public bonds

4,485.1

33.1

4,400
1,028.5

954.5

1,050.9

4,200

4,000

484.4

4.00

3,744.0

3,662.8

3,726.7

3,400

3,200

0

0

End of March 2014 End of March 2015 End of March 2016

■ Loans and bills discounted (¥ billion)

3,800

3,617.0

3,680.1

32.2

Small and medium-sized enterprises (right axis)

3,773.0

24.0

3,300

2,800

1,852.8

1,912.8

20.9

1,350

1,281.8

1,300

2,021.6

1,191.4

2,300

1,300

1,731.9

Balance
125

100

NPLs ratio

Non-consolidated

1.95%

Business rehabilitation subsidiaries
Ratio
2.50％

1.88%

2.00％

1.68%
1,250

75

71.1

69.6
20.3

13.3

1,730.3

1,100

End of March 2014 End of March 2015 End of March 2016

23.7

17.7

3,744.0

3,726.7

25

Ordinary income

50.8

56.3

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

613

600

387

400

386

11.5

250
200

52.4

0.50％

0％

0

End of March 2014 End of March 2015 End of March 2016

With regard to the non-consolidated performance of the Senshu Ikeda
Bank in the fiscal year under review, ordinary revenue decreased ¥3,808
million from the previous fiscal year to ¥95,931 million. This was due toa decrease in interest income mainly as a result of the decline in interest
on loans and bills discounted, a decrease in fees and commissions due
to a decline in commission income on sales of assets under management
and a decrease in other operating income due to decreased gains onsales of debt securities.
Ordinary expenses decreased ¥5,167 million from the previous fiscal
year to ¥76,869 million. This was due to a decrease in interest expenses
primarily because of a decline in the deposit rate, a decrease in otheroperating expenses due to decreased losses on sales of debt securities
and a decrease general and administrative expenses due to cost
reductions.
As a result, core banking profit increased ¥507 million from theprevious fiscal year to ¥18,481 million and ordinary income increased¥1,359 million to ¥19,062 million. The “Act on Partial Revision ofIncome Tax Act, etc.” and other laws passed the Diet on March 29, 2016.

Net income

800

1.00％

Business Performance (Non-consolidated)

11

501.0

End of March 2014 End of March 2015 End of March 201600

03,662.8

1.50％

63.9

1,150

1,743.1

489.8■ Balance and ratio of credits disclosed under Senshu Ikeda Tokai Tokyo Securities(¥ billion) ■ Ordinary income and net income (¥ million)
the Financial Revitalization Law

1,200

1,134.8

183.8

0End of March 2014 End of March 2015 End of March 2016

50
1,800

50.1

35.4

3,600

Business rehabilitation subsidiaries

4,479.6

194.3

181.0

3,800

Corporate

Senshu Ikeda Tokai Tokyo Securities

11.7

8.00

Consumer

Investment trusts▲28 ▲26

March 2014
March 2015
(Commencement year)

March 2016

As the corporate tax rate for fiscal years commencing on and after April 1,2016 was lowered, it became necessary to reverse ¥4,491 million indeferred tax assets and total income taxes of ¥4,279 million werereported. As a result, net income decreased ¥610 million from theprevious fiscal year to ¥14,424 million.
The balance of deposits at the end of March 2016 increased ¥5.1
billion from the end of March 2015 to ¥4,777.6 billion. Individual total
assets under management, including those at Senshu Ikeda Tokai Tokyo
Securities, at the end of March 2016, stood at ¥4,479.6 billion.
The balance of loans and bills discounted at the end of March 2016
increased ¥96.0 billion from the end of March 2015 to ¥3,752.0 billion,
mainly for regional small and medium-sized enterprises.
The balance of credits disclosed under the Financial Revitalization
Law at the end of March 2016, including two business rehabilitation
subsidiaries, decreased ¥5.7 billion from the end of March 2015 to ¥63.9
billion. As a result, the non-performing loans (NPLs) ratio at the end of
March 2016 declined 0.20% from the end of March 2015 to 1.68%.

SENSHU IKEDA HOLDINGS,INC.

Corporate GovernanceConsolidated

Non-consolidated

The Company is a holding company with subsidiaries such as the Senshu
Ikeda Bank, which upholds the Management Principle of striving to becomea financial group that is “relied on by the regional community” by providing
services tailored to customers’ needs, while valuing “broad networks ofrelationships” and “an enterprising spirit.” In order to ensure sustainablegrowth and the medium- to long-term enhancement of corporate value, theCompany is engaged in initiatives to develop its corporate governance inline with the following basic principles.
(1)	We respect the rights of our shareholders and strive to ensure theirequality.
(2)	We consider the interests of stakeholders and strive to ensure appropriate cooperation.
(3)	We disclose corporate information in an appropriate manner and strive
to ensure the transparency of such information.
(4)	The Board of Directors and the Audit & Supervisory Board strive toenhance the effectiveness of their supervision and audits of the execution of duties in line with their fiduciary responsibilities for our shareholders.
(5)	We strive to engage in constructive dialogue with our shareholders inorder to contribute to sustainable growth and the medium- to long-term
enhancement of corporate value.

independent outside directors, for the purpose of ensuring the objectivity
and transparency of board functions and strengthening corporate
governance.
The Audit & Supervisory Board
The Company has adopted a audit & supervisory board member system.
Under this system, the Company ensures transparency through appointing 2 outside audit & supervisory board members of the 4 audit &supervisory board members in all. Each audit & supervisory board
member audits business execution of directors through attendance toimportant meetings including the Board of Directors and the Management
Committee, inspection of critical documents and other means, according
to the auditing guidelines and audit schedule decided by the Audit &Supervisory Board. Outside audit & supervisory board members are
qualified with high degree of integrity along with superior insight andcapability, as well as expertise and hands-on experience in respective
area of specialty, providing advice on management from diversified pointsof view.
Management Committee
With the purpose to make more adequate and prompt management
decisions in the execution of company business, the Management
Committee has been established under the Board of Directors, whichmakes decisions on critical management matters based on the authorities
delegated from the Board of Directors while receiving relevant reports
from within the company. The Management Committee is held once aweek in principle inviting audit & supervisory board members, to makedecisions in due consideration of compliance and risk management.
Internal control, management and auditing functions
For the purpose of internal control, management and auditing functions,the Company has established Corporate Planning Division, General Risk
Management Division and Internal Audit Division.
The Corporate Planning Division is the department responsible for thecoordination of internal control, for the purpose of Companies Act and
Financial Instruments and Exchange Act. The General Risk Management
Division is responsible for compliance management that serves as alinchpin for internal management. Measures for compliance are planned
and their implementation status is managed under the complianceprogram approved by the Board of Directors. Furthermore, the General
Risk Management Division, as an overall supervisory function of risk
management, is responsible for regular review and reform of the risk
management structure, referring to the financial inspection rating systemby the Financial Services Agency.
On the other hand, the Internal Audit Division is responsible forinternal audits of all departments within the Company, according to theannual audit plan approved by the Board of Directors every fiscal year,
and for the integrated management of the overall internal audit work
across the Group. The Internal Audit Division also audits the respective
subsidiaries on its own or on a joint basis with the internal audit department of each subsidiary as appropriate, and provides specific instructions
and advice to improve business operation at each subsidiary.
Accounting auditors
Mr. Kenichiro Arai, Mr. Hirokazu Tanaka and Ms. Mayumi Ikai are thecertified public accountants that conducted the latest accounting audit of
the Company, while accounting auditors that conduct audits of theCompany for the purpose of Companies Act as well as for the purpose of
Financial Instruments and Exchange Act, belong to Ernst & Young
ShinNihon LLC. None of them have been engaged in the audit of theCompany for longer than seven years on continuous basis, hence nostatement in respect of the number of continuous years of service
engaged in the audit of the Company.
Assistants for the accounting audit of the Company are 11 certified
public accountants and 10 others.

Outline of Corporate Governance Structure
The Company has adopted a corporate governance structure for sustainable enhancement of its corporate value through reinforcing supervision ofmanagement by electing the outside directors and cooperating with the
Audit & Supervisory Board.
Specifically, directors who are familiar with banking business - involving
complex and sophisticated management decisions - supervise businessexecution of representative directors, while audit & supervisory board
members audit business execution of directors through attendance to important meetings and inspection of critical documents. The Company reinforces
its corporate governance structure through outside directors and outside
audit & supervisory board members who possess well-seasoned charactersand insights presenting meetings including the Board of Directors andexpressing their opinions actively.
Furthermore, with the purpose to enhance transparency and objectivityof management, the Company has established an Advisory Board as
consultative body to the Management Committee, for advice from outside
experts on the issues including critical management strategies and agenda,
latest issues in the financial industry and other matters concerning generalmanagement of the Company.
The Company has concluded a liability limitation agreement withoutside directors and outside audit & supervisory board members to theeffect that their liability for damages set forth in Article 423, Paragraph 1, of
the Companies Act shall be the amount prescribed by Article 425, Paragraph 1 of said Act, in accordance with the relevant provisions of the Articles
of Incorporation of the Company, as long as they perform their duties ingood faith and without gross negligence.
Corporate governance functions within the Company
The Board of Directors
The Board of Directors that comprises 10 directors (including two outside
directors) is responsible for making decisions on critical management
issues while receiving relevant reports from within the company, andsupervising the business execution of directors and executive officers
under the rules of the Board of Directors. The Board of Directors is held
once a month in principle, attended also by audit & supervisory board
members, to make decisions in due consideration of compliance and risk
management.
Personnel Committee
The Personnel Committee has been established to deliberate matters
including the selection of candidates for directors. The Committee
comprises three directors including one internal director who serves aschairman and two outside directors. The Committee, as a voluntary
advisory body to the Board of Directors, accepts the involvement andadvice of independent outside directors, for the purpose of ensuring theobjectivity and transparency of board functions and strengthening
corporate governance.
Remuneration Committee
The Remuneration Committee has been established to deliberate matters
including compensations for directors. The Committee comprises three
directors including one internal director and two outside directors, one ofwhom is elected as chairman. The Committee, as a voluntary advisory
body to the Board of Directors, accepts the involvement and advice ofBasic approach to the internal control system and its status of development
The Company and the Group companies are developing a structurenecessary to ensure the adequacy of operation based on the following
concepts through aiming to be a financial group which respects personal
relationship, sincerity and friendliness and become the most “trustworthy”
for customers.
(1)	Structure to ensure that directors and employees of the Company and
the Group companies execute business in compliance with laws andregulations as well as with the Articles of Incorporation
The Company and the Group companies focus on compliance with laws
and regulations (hereinafter “compliance”) as one of the most criticalmanagement task. The Company and the Group also set out the codeof ethics along with the code of conduct to ensure that directors and
SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201612

employees behave in compliance with laws and regulations as well associal norms, while setting out basic rules of compliance under which
overall compliance policies and specific measures are discussed at theCompliance Committee.
To ensure the above compliance implementation, the Company
and the Group companies appoint directors who are responsible forcompliance. In addition, the General Risk Management Division
coordinates compliance arrangement across the Company and theGroup companies, while conducting education and training for directors
and employees by developing compliance program and compliancemanual, and arranging compliance seminars.
Furthermore, the Group Compliance Hotline, a whistleblowing
system has been set up and managed to allow directors and employees of the Company and the Group companies to directly provide
information about questionable conduct in light of laws and regulations.
The hotline system is structured to guarantee that the informants who
provide such compliance-related information are protected from being
treated in a disadvantageous manner.
Basic rules that directors and employees must abide by are set out
for the prevention of insider trading.
Besides, the Company and the Group companies have taken
uncompromising stance against anti-social forces and organizations
that threaten the order and safety of the community, while making every
effort to eliminate their involvement in any trading activities. The
Company and the Group companies have also taken every measure toeliminate money laundering in consideration of the possibility that funds
transferred via financial institutions could be used for criminal purposes
including terrorism.
Moreover, the Company and the Group companies provide
effective customer management including customer protection, with the
purpose to reassure our customers of their security and to promote theirconvenience in an effort to implement a thorough ‘customer first policy.’(2)	Structure for the preservation and management of information concerning the directors’ business execution
The Company and the Group companies have prepared and kept documents such as minutes of important meetings including the Board of
Directors and the Management Committee, as records of directors’
execution of duties.
The Company and the Group companies have also prepared andkept documents and attachment sanctioned by directors as appropriate.
(3)	Arrangements including rules to manage the risk of potential losses of
the Company and the Group companies
With the purpose of ensuring the soundness of management and stablecorporate earnings, the Company and the Group companies have set
out basic rules of risk management. The Company and the Group
companies have classified risks into credit risk, market risk, funding
liquidity risk and operational risk, and defined the department responsible for the management of each category of risk, while establishing
the Risk Management Committee to monitor the status of managementof each such category.
Meanwhile, the Company and the Group have set out rules of risk
management, with the purpose to minimize the financial loss along withloss of confidence resulting from the crisis event, and to ensurebusiness continuity through prompt restoration of normal operational
functions.
(4)	Structure to ensure efficient business execution by directors of theCompany and the Group companies
The Board of Directors sets out the management objectives of theCompany and the Group companies with the purpose of enabling thedirectors and employees of the Company and the Group companies toefficiently execute their business. The Board of Directors also formulates
the Group Management Plan and sets forth operational plans on a semiannual basis to bring said Plan into shape.
In addition, the Board of Directors establishes the Management
Committee with the purpose of enabling directors to efficiently execute
their business. The Management Committee discusses beforehand theagenda of the Board of Directors to facilitate the decision-making
process at those meetings, while discussing the critical issues forresolution in implementing the basic management policies that havebeen resolved by the Board of Directors on the basis of such policies.
The Management Committee also defines the headquarters under
the command of each director, along with the authority and responsibility involved, while developing and maintaining a structure for efficientbusiness execution by utilizing IT.

13

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016(5)	Structure to ensure the adequacy of business operation at the Group,
which comprises the Company and the Group companies
The Company regards the respective Group companies as one group
under the flag of Senshu Ikeda Holdings. Thus each member companyof the Group runs its operation through developing an adequate internalmanagement structure according to its scale and nature of operation
under the adequate guidance of, and in coordination with the Company.
The Company, as a responsible entity for the administrative
management of the entire Group, has established administrative
management rules targeting its subsidiaries. The Company has
developed a structure in which it receives necessary reports concerning the business execution of directors and employees and otherrelevant matters from and consults on those issues with the respective
Group companies.
(6)	Matters concerning employees who assist audit & supervisory board
members in the performance of their duties, the independence of those
employees from directors, and structure to ensure the effectiveness of
the instructions to such employees
In order to support audit & supervisory board members’ businessexecution, the Company and the Group employ audit & supervisoryboard members’ staffs as secretariat for the Audit & Supervisory Board.
Such audit & supervisory board members’ staff shall receive instructions
from the audit & supervisory board members for their business execution, while their personnel changes and evaluations shall require anaccord of the relevant audit & supervisory board members to ensure thestaff’s independence from directors.
Thus the Company and the Group companies ensure their independence from directors.
(7)	Structure to facilitate reporting from directors and employees to audit &supervisory board members and other arrangements to ensure that audit& supervisory board members are adequately informed, as well as the
structure to ensure that no disadvantageous treatment is conductedbecause of having reported to audit & supervisory board members
Directors and employees of the Company and the Group companies
shall immediately report to audit & supervisory board members on
matters that could have significant impact on the Company and theGroup companies, or any other matters as necessary, in addition tomatters legally required to be reported.
In addition, the hotline system is structured to guarantee that the
informants who provide the Group Compliance Hotline with compliancerelated information are protected from being treated in a
disadvantageous manner.
Moreover, to complement this arrangement, the Company and theGroup companies have established a structure whereby audit &supervisory board members are permitted to attend important meetings
such as those of the Board of Directors, the Management Committee,
the Compliance Committee, the Risk Management Committee and the
ALM Committee.
(8)	Other structure to ensure that audit & supervisory board members
conduct effective audits
Audit & supervisory board members hold meetings to exchange
opinions with representative directors, internal audit division andaccounting auditors.
Audit & supervisory board members attend important meetings
such as the Board of Directors, the Management Committee, theCompliance Committee, the Risk Management Committee and the ALM
Committee, in an effort to find out various problems they need toaddress in the execution of their duties.
Furthermore, audit & supervisory board members shall be permitted to request posteriori for redemption of the expenses that they deem
necessary in executing their duties if such expenses were previously
budgeted by them and have been disbursed for an emergency or
temporarily.

Status of Internal Audits and Audits by Audit & Supervisory Board Members
Internal audits
The Company has established the Internal Audit Division that conducts
internal audits based on the basic rules of intra-group audits, set out toprovide objectives and guidelines of internal audits. The Company
develops effective internal audit structure that has independence andexpertise in order to ensure soundness and adequacy of operation. The
Company also inspects and evaluates adequacy and effectiveness of therisk management and internal control practices, and makes recommendations as appropriate to the senior management of the Company on ways
to improve and rectify questionable areas. Thus the Company’s internal

SENSHU IKEDA HOLDINGS,INC.

audit guidelines facilitate effective achievement of management objectives
including the improvement of the Group’s internal management structure
and the enhancement of its enterprise value.
The Company’s Internal Audit Division comprises eleven members ofwhom eight serve concurrently in the Internal Audit Division of the banking
subsidiary (as of March 31, 2016). The Internal Audit Division conducts
internal audits on each division of the Company based on the internal
audit plan approved by the Board of Directors each year. The Internal
Audit Division also conducts internal audits on each Group company, as
necessary, on its own or by cooperating and coordinating with internal
audit divisions of the subsidiaries, etc. and provides specific instructions
and advice on the improvement of operations, in addition to managing
and overseeing internal audit operations of the entire Group.
Audits by audit & supervisory board members
Each audit & supervisory board member audits the business execution of
directors through attendance to important meetings such as the Board of
Directors and the Management Committee, as well as inspection of critical
documents, according to guidelines such as the “guidelines for audits byaudit & supervisory board members” and the “guidelines for implementing
audits of internal control system,” generally subject to the auditing
guidelines and audit plan decided by the Audit & Supervisory Board, as
an independent body mandated by shareholders.
Audit & supervisory board members and accounting auditors are performing their audit duties efficiently and effectively through establishingclose mutual cooperation by exchanging opinions about various auditing
issues. In addition, working together with audit & supervisory board
members of banking subsidiary, audit & supervisory board members andinternal audit division are also performing their audit duties efficiently andeffectively through establishing close mutual cooperation by audit &supervisory board members’ attendance to internal audits and exchanging opinions about various auditing issues.
The Company has made every effort for efficient and effective
implementation of all audits including internal divisions, audit & supervisory board members, and accounting auditors through close cooperationand communication between the departments and functions concerned.
The Company has also made effort to audit efficiently and effectively
through receiving various reports from the internal control division.

Outside Directors and Outside Audit & Supervisory Board Members
The Company has 2 outside directors and 2 outside audit & supervisoryboard members. The Company has set forth the following standards for the
independence of outside directors and outside audit & supervisory board
members (hereinafter “outside officers”) in order to objectively determine
their independence and elects outside officers on the basis of thesestandards. All four outside officers, namely outside directors, Taro Ohashi
and Kazuo Hiramatsu, and outside audit & supervisory board members,
Toshiaki Imanaka and Toshiaki Sasaki, satisfy the standards for the independence. They have been designated and notified to the Tokyo Stock
Exchange as independent officers, as they satisfy the requirements of
independence stipulated by the relevant stock exchange and pose nopotential conflict of interests with general shareholders.
<Standard for judging the independence>
At the Senshu Ikeda Group, as a general rule, Outside Directors/Audit &Supervisory Board Members shall be those who do not fall under any of thefollowing requirements, at present or recently.1
1.	A person who deems the Group to be a major2 business partner, or in thecase of a company, an executing person thereof.
2.	A person who the Group deems to be a major business partner, or in thecase of a company, an executing person thereof.
3.	A business consultant, an accounting specialist or a legal specialist who
has received a large sum3 of money and other properties other than
Officers’ remuneration from the Group (or a quasi-executing person who
has belonged to the payee’s group).
4.	A person who the Company deems to be a major shareholder4 of theCompany, or in the case of a company, an executing person thereof.
5.	A payee of a large sum of donation from the Group, or a quasi-executing
person of the payee’s group, in the case where the receiver of the monies,
etc., is an entity.
6.	A former executing person of any of the Group companies in the past.5
7.	A relative6 of a person (excluding those who are not significant) mentioned below:
A. A person who is mentioned in the aforesaid items 1 through 6.
B. Directors, Audit & Supervisory Board Members, Executive Officers andimportant employees of any of the Group companies.

Notes:
1.	Definition of “recently”: Refers to cases that might be regarded as almost“at present,” for example, including the case where said person fell under
any infringement requirement item since the content of a proposal for theselection as Outside Director or Outside Audit & Supervisory Board
Member was determined.
2.	Definition of “major”: Refers to 2% or more of the consolidated net sales
per annum (Consolidated ordinary income in case of the Company) for
the nearest fiscal year, as a benchmark for judgment.
3.	Definition of “a large sum”: Refers to a three-year average amount of ¥10
million or more per annum for the past three years.
4.	Definition of “major shareholder”: Refers to a shareholder who held 10%
or more of the total voting rights at the end of the nearest fiscal year.
5. Definition of “past”: Refers to “within 10 years up to the present.”
6.	Definition of “relative”: Refers to “within the second degree of kinship of aperson.”Between the outside director Taro Ohashi and the Company or any of
the Group companies, there is no interest in terms of a personal or otherinterest relationship, except ordinary banking transactions with The Senshu
Ikeda Bank, Ltd. Also, he holds 16,010 shares of common stock of theCompany (as of March 31, 2016).
As he has experience in corporate management as a representative
director of a listed company, he will sufficiently perform supervision duties
over the business execution of directors.
Outside director Kazuo Hiramatsu serves as a standing trustee ofKwansei Gakuin. Between he or Kwansei Gakuin and the Company or any of
the Group companies, there is no interest in terms of personal, capital orother interest relationship, except ordinary banking transactions with The
Senshu Ikeda Bank. He also concurrently serves as an officer at Sumitomo
Electric Industries, Ltd., ShinMaywa Industries, Ltd., and DAIDO LIFE
INSURANCE COMPANY. The Senshu Ikeda Bank has ordinary banking
transactions with Sumitomo Electric Industries, Ltd.; The Senshu Ikeda Bank,DAIDO LIFE INSURANCE COMPANY, and the Company have a capital
relationship; and ShinMaywa Industries, Ltd. and The Senshu Ikeda Bank
has ordinary banking transactions.
As a director of the Company, he performs his duties of auditing thebusiness execution based on his extensive experience in educational corporations and in business.
The outside audit & supervisory board member Toshiaki Imanaka andthe Company or any of the Group companies, have no interest in terms of
personal or other interest relationship, except ordinary banking transactions
with The Senshu Ikeda Bank. He also concurrently serves as a member ofthe Kansai Law and Patent Office, which concludes an advisory contract
with The Senshu Ikeda Bank.
He is qualified as an attorney, and is also involved in general financeand accounting duties as a reorganization trustee, having accumulated aconsiderable degree of knowledge in those fields. Based on such qualification, he sufficiently performs his duties as an audit & supervisory board
member.
The outside audit & supervisory board member Toshiaki Sasaki serves
as the President of Senshu Gakuen. Between he or Senshu Gakuen, and theCompany or any of the Group companies, there is no interest in terms of
personal or other interest relationship, except ordinary banking transactions
with The Senshu Ikeda Bank. Also, he holds 29,560 shares of common stockof the Company (as of March 31, 2016).
He performs his duties as an audit & supervisory board member basedon his wealth of experience and broad insight earned over the years as anaudit & supervisory board member in financial institutions.
The Company has appointed 2 outside directors out of 10 directors
while two outside audit & supervisory board members out of four. Thus theCompany has developed a structure sufficient to continuously enhance its
enterprise value through such appointment of outside directors and outside
audit & supervisory board members.
Outside directors receive reports about the status of audits by audit &supervisory board members, internal audits and accounting audits, as wellas the status of internal control from the internal control division throughBoard of Directors. On the other hand, outside audit & supervisory board
members receive reports from full-time audit & supervisory board members
about the status of audits by audit & supervisory board members, internal
audits and accounting audits, as well as the status of internal control fromthe internal control division. Both outside directors and outside audit &supervisory board members give recommendations and advice in return forthese reports.

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201614

Corporate governance structure of the Group[Senshu Ikeda Holdings](As of the end of June, 2016)

General Meeting of
Shareholders
Appointment/Removal

Accounting Auditors
Accounting audit

Appointment/Removal
Joint coordination
Reporton Audit

Report on Audit
AdviceBoard of Directors

Bringing important
issues to meetings/
Reporting on business Appointment/
execution
Supervision

Audit & Supervisory Board

Personnel Committee
Remuneration Committee
Supervision

Reporton Audit

Representative Directors

Advisory Board

Appointment/Removal

Audit

Joint coordination

Internal Audit Division

Advice(Risk Management Committee)(Compliance Committee)(ALM Committee)

Bringing discussed
issues to meetings/
ReportingManagement Committee

Directors/Executive Officers
Internal audit

Instruction/
Direction

Personnel andGeneral Affairs DivisionCorporate Planning Division[The Senshu Ikeda Bank]

General Risk Management Division[Senshu Ikeda Tokai Tokyo Securities]

General Meeting of
Shareholders

General Meeting of
Shareholders
Audit & Supervisory Board

Board of Directors

Management Committee

Personnel Committee
Remuneration Committee(Risk Management Committee)

Audit & Supervisory Board

Board of Directors

Management Committee(Compliance Committee)(Compliance Committee)(ALM Committee)(SMES Supporting Committee)

Branches15

Head Office

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

Branches

Head OfficeSENSHU IKEDA HOLDINGS,INC.

Compliance Structure
Consolidated
The
Company and the Group sets “compliance” as oneof the most important management priorities. We are coping with it in order to fulfill our social responsibility andpublic duties, and to earn the trust of our customers andregional communities.
The Company has set up a “Compliance Committee”
to deliberate important matters regarding groupcompliance. We have also formed the General Risk
Management Division under the “Chief Compliance
Officer” to manage matters regarding compliance
unitarily.

Non-consolidated
The General Risk Management Division ensurescompliance by creating, reviewing, and following up the“Compliance Program,” which is a practical plan forreinforcement of compliance, by creating, updating, anddistributing the “Compliance Manual,” which stipulates
basics regarding compliance, and by conducting compliance education activities through various training
programs.
We assign “Compliance Officers” and “ComplianceManagers” to each division and branch in order to implement and penetration of compliance. In addition, weSenshu Ikeda Holdings

Board of Directors and Management Committee
Bringing issues to meetings/Reporting

Instruction

Compliance Committee(Administrative Office: General Risk Management Division)

Chief Compliance Officer(Director in charge of General Risk Management Division)
General Risk Management Division
Consultation /Reporting

Instruction

Compliance Officers in each Division (General Managers)
Compliance Managers (Deputy General Managers)

Consultation /Reporting

Instruction

The Senshu Ikeda Bank, Senshu Ikeda Tokai Tokyo Securities, Shizen Soken
Subsidiaries and affiliates

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201616

check the operations from compliance point of view andfacilitate the conduction of training programs to ensurecompliance.
We also set up and operate a hotline including external contact point in order to find compliance problems inearly stages and take corrective actions.
Compliance has become an increasingly important
issue for financial institutions. The Company and theGroup are committed to strict observance of the Banking
Act, Financial Instruments and Exchange Act, and related
laws and regulations. We also work toward the eliminationof anti-social forces, and strive to strengthen an appropriate protection system for our customers.
We intend to enrich and enhance our compliancestructure through improving various regulations andgiving training to our employees continuously so that customers can deal with us “reliably.”

Code of Ethics
The Group sets up Code of Ethics as follows that our directors and employees mustabide by. The directors and employees will regard the observance of the Code of
Ethics as a fundamental part of routine operations and will conduct fair and honest
corporate activities, while complying with laws and rules strictly to implement theGroup’s management philosophy and policies.
1. Winning the trust from our customers
Taking its social responsibility and public duties into consideration, we will intend
to become the most reliable financial group for the customers through conducting
sound and appropriate operations, including information management and proper
disclosure.
2. Implementing “customer first policy”
We will always consider any matters on customer first basis and will contribute to
the development of the regional economy and community through providing
high-quality financial services that are both original and innovative.
3. Strict compliance
We will strictly comply with all laws and rules, and will conduct fair and honest
corporate activities that are consistent with social code.
4. Respecting human rights and the environment
We will respect personal relationship, characters and personalities of the others,
and conduct environment-friendly corporate activities.
5. Eliminating anti-social forces
We will take an uncompromising stance against anti-social forces and organizations, and resolutely eliminate all undue intervention by such forces andorganizations which threaten the order and safety of the community.

17

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

SENSHU IKEDA HOLDINGS,INC.

Risk Management StructurenConsolidated
Basic Approach to Risk Management
While business opportunities for financial institutions
multiply as a result of deregulation, sophistication andglobalization of financial operations, and the significant
development in ICT, the risks that financial institutions
face are becoming more complicated and diverse qualitatively.
Moreover, it has been more important for financial
institutions to monitor, assess and manage risks properly,
and to respond to the changes quickly in the environment in order to earn the stable and continuous profits,
while serving various needs of customers. Under suchcircumstances, the Group regards enhancing andstrengthening risk-management structure as a highpriority management task in order to maintain andenhance the soundness of its business execution.
Specifically, the Group determines the structure andvarious rules regarding risk management and the departments in charge of each risk category at the Board of
Director. The group has also set up the risk management
division to oversee the departments regarding risk management. Furthermore, the Risk Management Committee
and the ALM Committee, consisting principally of management personnel have been established, with the
purpose to identify the risk situation within the Group as
well as its subsidiaries, and to discuss the relevant
agenda and countermeasures which shall subsequently
be reported and further discussed at the Board of Directors. Thus the Group ensures effective risk management
structure at management level.
Meanwhile, as action plans for risk management
based on the Group strategies, basic risk management
principles are set out semi-annually and reviewed continually in order to deal with the risks newly emerging asa result of changes in environment for timely and adequate way.
With the purpose to objectively examine the adequacy and effectiveness of the risk management structure,
the internal audit division which independents from theaudited departments conducts an audit. Thus the Group
ensures appropriate administrative processing andsound business operations through finding out andimproving the matters on risk management.

Non-consolidated

face. The Company evaluates the risks divided into
categories of credit risk, credit concentration risk
outside the calculation of capital ratio, interest rate risk
in banking accounts, market risk and operational risk,
and compares them with its management strength(capital ratio).
The Group regards development and reinforcement of risk management structure as its crucial
management task. Furthermore, the Group has developed an integrated risk management structure that therisk management division manages all risks in order tocomprehensively identify and appreciate various risks
associated with the Company’s operations by asuniform as possible measurement, and to earn thestable revenue, realize appropriate capital composition and allot management resources properly.
l Risk capital management system
The Group is running its operation based on the risk
capital management system that controls all risks
within certain proportion of capital base, under the
integrated risk management structure.
Specifically, the Company allocates risk capitalsourced from core capital base to credit risk, market
risk and operational risk, based on the calculated risk
amount in each category. The Company has also
monitored risk amount continuously to ensure that it is
kept within the tolerable limit from management pointof view. Thus the Company ensures smooth operations
and management soundness across the Group.

Risk buffer: Provisions against unpredictablerisks and risks associated withaffiliated companies

Risk buffer
Credit Risk
Core
capital baseRisk
capitalto beallotted

Credit Risk
Market Risk
Market Risk
Operational
Risk

n Integrated Risk Managementl Integrated risk management
Integrated risk management refers to the process toadequately manage the risks that financial institutions

Financialresource forallocation

Allocatablerisk capital

Risk capital
to beallocated

Operational
Risk
Risk amount

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201618

l Calculation method for capital ratio regulation
In respect to risk asset calculation for the purpose of
the capital ratio regulation, the Group applies thestandard method for credit risk and the gross profit
allocation method for operational risk.

n Credit Risk Management
Credit risk, as identified by the Group, is the risk of
suffering losses as a result of a decline or loss of thevalue of assets due to reasons such as the deteriorating
financial conditions of or default by the obligor.
The Group has set up “Credit Policy” in the banking
subsidiary that clarifies its policy for extending credit,
based on its management policy in order to maintain andenhance the soundness of its business execution.
Under this policy, the responsible division for the
management of credit risk, the Risk Management Division at banking subsidiary, in accordance with the
management methods stipulated in the Credit Management Regulations, administers finely-tuned responses torisks for the purpose of building up an optimum portfolio.
Specifically, the division analyzes and manages thecredit portfolio from various aspects including credit
concentration risk, type of business, borrower classification and credit ratings.
As for the credit analysis and management of eachloan at the banking subsidiary, the Group makes efforts
to ensure the independence of the audit division (Loan
Division and Solutions Division) from the business promotion division. The Board of Directors and otherappropriate body review each loan for large obligor aswell as the credit policy. Thus the Group has focused on
the development and improvement of its credit analysis
system. Meanwhile, Loan Business Division establishedwithin the Loan Headquarters, is managing housing
loans receivable.
The banking subsidiary has also established theInternal Audit Division, to manage auditing of the selfassessment of assets, in order to maintain and enhance
the soundness of its asset base.

n Market Risk Management
Market risk, as identified by the Group, points to “marketrisk” and “market liquidity risk.” Market risk is the risk of
suffering losses through changes in the prices of assets
and liabilities held by the Group due to the fluctuations ofmarket risk factors, such as interest rates, prices of secu19

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

rities, foreign exchange rates and so on. Market liquidity
risk is the risk of suffering losses arising from the inability
to execute sufficient transactions under appropriate
conditions, due to market confusion or an insufficient
trading base. The Group has established the Risk Management Committee and the ALM Committee, consisting
principally of management personnel, and discussed appropriate and timely measures to address the risks inorder to earn the stable and continuous profit throughmanaging its assets and liabilities in a comprehensiveway.

n Funding Liquidity Risk Management
Funding liquidity risk, as identified by the Group, is therisk of suffering funding difficulties from being unable toraise necessary funds due to market conditions or deterioration in the Group’s financial condition, as well as therisk of suffering losses from being forced to raise funds
at higher interest rates than usual.
The Group takes control of its funding situation
through careful monitoring of the fund management andfundraising. The Group also ensures liquidation of its
assets and diversifies the sources of fundraising. Thus
the Group has taken every possible measure to manage
funding liquidity risk.

n Operational Risk Management
Operational risk, as identified by the Group, is the risk of
suffering losses from the inappropriate business activityof the Group - including its employees-, systems, orexternal premises.
The Group has set a rule for operational risk management and classified the risks into the six categories asfollows; (1) administrative risk, (2) information asset(system) risk, (3) tangible fixed asset risk, (4) personnel
risk, (5) legal risk, and (6) reputation risk.
Furthermore, the Group identifies and evaluates all
risks associated with new products and services before
they are actually developed and provided, for the purpose of adequate risk management. Besides, the Groupmanages customer information sufficiently and ensuresmanagement soundness when outsources certain business operation.
l Administrative risk management
Administrative risk, as identified by the Group, is therisk of suffering losses from administration, fraud,

SENSHU IKEDA HOLDINGS,INC.

accidents and other risks that the Group’s operations
will not be carried out as intended.
The Group prescribes detailed rules on administrative procedures and strives to prevent accidents
through doing the administration promptly and accurately, so that the customer can enter into transactions
with the Group without any concern. Meanwhile, theGroup makes every effort to eliminate administrativerisk by measures such as review of the administrative
procedure from identification of potential risks throughthe analysis of administrative processes.
l Information asset (system) risk management
Information asset (system) risk, as identified by theGroup, is the risk of suffering losses due to loss, alteration, unauthorized use, leakage of information, as wellas to system defects caused by natural disasters or
breakdowns.
In consideration of the fact that its business operations are supported by various computer systems, theGroup ensures the reliability and security of systems
and has established back-up systems and structuresin case of emergency.
The Group is also working to establish appropriate
operation and management systems to prevent theleakage of information and unauthorized access to its
systems through encoding of data and strengtheningof access authority management.
l Tangible fixed asset risk
Tangible fixed asset risk, as identified by the Group, isthe risk of suffering losses associated with damage ofbuilding and equipment or deterioration of working
environment as a result of disasters or poor asset management.
The Group is preparing for disaster through conducting quake resistance tests and implementing
countermeasures against power failures in order toensure business continuity in the event of emergencies.

l Legal risk management
Legal risk, as identified by the Group, is the risk of
suffering losses from violations of laws and regulations,as well as inappropriate responses to changes invarious systems.
The Group strives to prevent the occurrence oflegal risk and to reduce the risk itself. To this end, theGroup has established the General Risk Management
Division to collect information concerning legal matters, and to manage legal risk identified from suchinformation, as well as appropriately responds to thelegal risk.
l Reputation risk management
Reputation risk, as identified by the Group, is the riskof suffering losses arising from deterioration of theGroup’s reputation due to circulation of unfounded
rumors or due to inadequate responses of the Group
concerning the facts.
The Group works to avoid reputation risk by disclosing information proactively thorough increases thetransparency of its management, taking into consideration the crucial influence on the management of theGroup.

n Crisis Management
The Group has established the “Crisis Management
Rules,” which set out the basic policies in responding toemergencies including large-scale disasters and system
failures. In the event of large-scale crisis, the Group sets
up a “Crisis Management Headquarters” take charge ofcompany-wide response. Specific action programs are
set out in a “Contingency Plan,” with the purpose toensure safety of customers and employees, as well as
set up business continuity structure of the financial
system.

l Personnel risk
Personnel risk, as identified by the Group, is the risk of
suffering losses associated with the delay of failing insuccession of expertise within the Group, as a result ofdrain or loss of key staff, or degradation of morale.
The Group is striving to develop working environment to enable each employee to fully exert ability,
while helping him or her to improve their skills.
SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201620

The risk management structure of the Group(As of the end of June, 2016)

Senshu Ikeda Holdings
Board of Directors

Audit & Supervisory Board
Crisis Management Headquarters

Management Committee

Supervising
division

Type of risks

Responsible
divisions

ALM Committee

Risk Management Committee

General Risk Management Division

Credit Risk Market Risk

Funding
Liquidity
Risk

Operational Risk
Administrative
Risk

Information
Asset(system) Risk

General Risk Management Division

Divisions in chargeof operating
and managing

Personnel
Risk

Legal Risk

Reputation
Risk

Personnel and General
Affairs Division

General Risk
Management DivisionCorporate Planning
Division

Tangible Fixed
Asset Risk

Internal Audit Division

Committee

Banking subsidiary and affiliates

Direction of basic policies, etc.

Administration and management

Reporting on status of risk management

Consultation on risk management

The Senshu Ikeda Bank
Audit & Supervisory Board

Board of Directors

Crisis Management Headquarters
Management Committee

Supervising
division

Type of risks

Responsible
divisions
Divisions in chargeof operating
and managing

Risk Management Division

Credit Risk Market Risk

Funding
Liquidity
Risk

Risk Management Division

Operational Risk
Information
Asset(system) Risk

Tangible Fixed
Asset Risk

Personnel
Risk

Legal Risk

Reputation
Risk

Operations Management
Division

General Affairs
Division

Personnel Affairs
Division

Risk
Management
Division

Corporate
Planning Division

Administrative
Risk

Each division of Headquarters, each branch, subsidiaries and affiliates

Senshu Ikeda Tokai Tokyo Securities

21

ALM Committee

Risk Management Committee

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

Shizen Soken

Internal Audit Division

Committee

SENSHU IKEDA HOLDINGS,INC.

Approach to Facilitation of Financing
Consolidated
The
Senshu Ikeda Bank (hereinafter the “Bank”) is focused on providing adequate and sufficient financial
intermediary function to customers in need of businessloans or housing loans, as one of the crucial management priorities. The Bank has formulated basic policy forfacilitation of financing (hereinafter the “Policy”) in orderNon-consolidated
topromote facilitation of financing to those in needparticularly under the current tight economic environment.
The Bank intends to communicate with our customers
and promote facilitation of financing positively.

l Organizational structure(1)	With the purpose to develop a management structurenecessary to supply facilitation of financing (hereinafter “Facilitation of Financing Management”) under the
Policy, the Bank appoints the Facilitation of Financing
Manager to check whether Facilitation of Financing
Management is effectively working.
(2)	The Facilitation of Financing Manager will engage inthe development and reinforcement of the structure
for Facilitation of Financing Management throughchecking the progress in respect of Facilitation of
Financing Management.
(3)	The Bank appoints the director in charge of the Loan
Headquarters to the Facilitation of Financing Manager. The Manager coordinates the overall businessin respect of Facilitation of Financing Management
such as instructions to the division responsible for

Facilitation of Financing Management, and drawing
up of the rules governing facilitation of financing, withthe purpose to ensure adequacy, sufficiency andeffectiveness of Facilitation of Financing Management.
(4)	The Solutions Division is responsible for Facilitation of
Financing Management. The Solutions Division engages in the adequate operation, examination andimprovement of Facilitation of Financing Management
under the command of the Facilitation of Financing
Manager through gathering information necessary for
Facilitation of Financing Management.

System for accepting consultation of facilitation of financing

The Senshu Ikeda Bank
[Headquarters][Branches]
Facilitation of Financing Manager
Consultation,
application andcomplaints

Reporting andconsultation

Development and reinforcement of the supervising structure

Facilitation of Financing Officer

Divisions managing Facilitation of Financing

Over-the-counter Consultation Service
Coordination[Consultation Service over holidays]

Sincere andadequate
respondence

Customers

Over-the-counter Consultation Service

Board
of
Directors

Facilitation of Financing Manager

Support andinstruction

Toll-free Consultation Service

Reporting

Divisions associated with Facilitation of Financing
Smooth financing
Appropriate explanations to customers
Dealing with complaints and consultations appropriately
Support in improving management
Support in restructuring
Personnel training
Analysis and improvement of management structureManagement
Committee
Instructions
SMES
Supporting
Committee[Consultation Service]Consultation, application and complaints

Toll-free Consultation Service
Repayment Consultation Approach

Sincere and adequate respondence

Coordination
Businesstransactions, etc.

Credit Guarantee Corporation, Enterprise
Turnaround Initiative Corporation of Japan,
Japan Housing Finance Agency and other financial institutions

Contact for opinions and requests(complaints) concerning facilitationof financing <Toll-free>

Reporting

Audit &
Supervisory
Board

Disclosure

ReportingPublicAuthorities

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201622

l Basic Policies(1)	On receiving consultations or applications for newloans, or changes in loan terms from customers, theBank intends to make sincere effort to conduct adequate and prompt credit screening throughconsidering customers’ recent financial results,
assets and income as well as future potential andprospect. The Bank also deals with the applications
for new loans, after changes in loan terms in a similar
way as referred to above.
(2)	The Bank intends to make efforts to supply funds(including new credit granting) smoothly as well as tomake changes in loan terms by monitoring the conditions of the customers carefully and fully coordinatingwith other related financial institutions including otherbusiness categories.
(3)	Additionally, keeping in mind the purpose of the provisions of Article 64 of the Act on Regional Economy
Vitalization Corporation of Japan (Law No. 63, 2009)(*), the Bank intends to appropriately and proactively
engage in the vitalization of the regional economy
and the facilitation of regional financing.
(Note) The provision sets forth, “The Corporation andfinancial institutions, when providing support
to business activities that contribute to thebusiness rehabilitation of business operatorsand the vitalization of the regional economy,
shall strive to mutually cooperate with eachother in order to vitalize the regional economy
and facilitate regional financing through theenhancement of overall economic capabilitiesof the region.”(4)	Consequently, the Bank intends to provide maximum

support to the business improvement efforts of its
customers not only through its role as a provider offinancing but also through various customer services
including business consultation and guidance.
(5)	Furthermore, keeping in mind the purpose of the“Guidelines on Proprietor Guarantees” (Study Groupon Guidelines on Proprietor Guarantees, December
5, 2013; hereinafter “Guidelines on Proprietor
Guarantees”), the Bank intends to further promoteloans that are not dependent on proprietor
guarantees, while at the same time making efforts todeal with its customers based on the concept ofreasonable guarantee contracts as set forth in the“Guidelines on Proprietor Guarantees.”(6)	On receiving consultations or applications for newloans, or changes in loan terms from customers, theBank intends to provide sufficient explanation in orderto gain customers’ understanding and satisfaction, on
the basis of past trading records, customers’
knowledge, experience and assets situation. If the
Bank has to decline customers’ application, we will
explain the reason background of the decision as
concretely and courteously as possible.
(7)	The Bank intends to improve capability of directors
and employees about facilitation of financing bygiving internal training, to enable them to makeappropriate decisions based on good understandingof customers' situations.
(8)	The Bank intends to respond to any comments,
requests, consultations and complaints from
customers in respect of facilitation of financing
promptly and sincerely.

l Policies for handling of application for loans from small and medium enterprises and sole proprietors(1)	On receiving applications for changes in businessterms such as loan terms from small and medium
enterprises and sole proprietors, the Bank intends toaccommodate such application and offer adequatechanges in terms adequately as far as possible,
taking into consideration of the specialty and thecircumstance of customers’ businesses.
(2)	The Bank intends to provide small and medium
enterprises and sole proprietors with management
consultation, guidance and other adequate assistance in support of their effort for management
improvement, taking into consideration the operational circumstance of customers.
(3)	In the cases that customers borrow from other financial institutions as well as the Bank, we will, uponcustomers’ approval, strive to make arrangements incoordination with the other financial institutions inorder to help to reduce the burden of repayment.
(4)	On receiving request for the corporate rehabilitation
procedure through Alternative Dispute Resolution(ADR) for corporate rehabilitation (*) or Enterprise
Turnaround Initiative Corporation of Japan, the Bank
makes utmost effort to respond adequately to such
request as far as possible, in full consideration of theprospect of improvement or rehabilitation of thebusiness.
(Note) This refers to certified dispute resolution procedure set out in Article 2, Paragraph 25 of the
Law on Special Measures for Industrial
Revitalization, in which a private third party
organization formulates a rehabilitation plan,
as coordinator of the interests of creditors.

l Policies for handling of application for housing loan(1)	On receiving applications for new loans or changes inhousing loan terms from housing loan customers, theBank intends to accommodate such application andoffer adequate new loans or changes in terms adequately as far as possible, taking into considerationof circumstances including customers’ assets andincome and transactions with other financial institu23

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

tions.
(2)	In the cases that customers have transaction withother financial institutions as well as the Bank or withJapan Housing Finance Agency, we will, upon customers’ approval, strive to make arrangements incoordination with the other financial institutions inorder to help to reduce the burden of repayment.

SENSHU IKEDA HOLDINGS,INC.

Corporate Information
Consolidated Data (As of the end of March 2016)
Corporate

Non-consolidated

Senshu Ikeda Holdings, Inc.
Establishment: October 1, 2009
Location:18-14 Chayamachi, Kita-ku, Osaka-City, Osaka 530-0013, Japan
Phone:
81-(0)6-4802-0181
URL:
http://www.senshuikeda-hd.co.jp
Share Capital:¥102.9 billion
Business Activities: Management and other related operations of banks and affiliates
whose shares can be held in accordance with the Banking Act
and other related operations.
Number of Employees: 97
Stock Listing:Tokyo Stock Exchange

The Senshu Ikeda Bank, Ltd.
Establishment: September 1, 1951
18-14 Chayamachi, Kita-ku, Osaka-City, Osaka 530-0013, Japan
Location:
Phone:
81-(0)6-6375-1005
URL:
http://www.sihd-bk.jp
Share Capital:¥61.3 billion
Deposits:¥4.7776 trillion
Loans:¥3.7520 trillion
Number of Branches: 139
Number of Employees: 2,470

Asia and China Business Promotion Division Financial Market Division:(International Division)Suzhou Representative Office:Phone:
81-(0)6-6375-3484
Facsimile :81-(0)6-6375-3492
SWIFT Address : BIKEJPJS

399 East Baodai Road,
Wuzhong District, Suzhou,
Jiangsu, China
Phone:
86-(0)512-6585-1791
Facsimile :86-(0)512-6585-2312

Phone:
Facsimile :81-(0)6-6375-3879
81-(0)6-6375-3998

Senshu Ikeda Tokai Tokyo Securities Co.,Ltd.
Establishment: January 30, 2013
Location:18-14 Chayamachi, Kita-ku, Osaka-City, Osaka 530-0013, Japan
Phone:
81-(0)6-6485-0031
URL:
http://www.sittsec.co.jp
Share Capital:¥1.25 billion
Number of Branches: 3
Number of Employees: 81

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201624

Major Shareholders (As of March 31, 2016)
1. Common stock
Name

Number of Shares Owned (Thousands)

Japan Trustee Services Bank, Ltd. (Trust Account) *1
The Bank of Tokyo-Mitsubishi UFJ, Ltd.

Proportion of Total Shares (%)

54,94719.55

11,869

4.22

*1

7,712

2.74

*1

6,718

2.39

Japan Trustee Services Bank, Ltd.(Trust Account 9G) .

6,657

2.36

The Senshu Ikeda Bank Employees’ Shareholders Association
The Nomura Trust and Banking Co., Ltd.
(Trust Account of The Senshu Ikeda Bank Employees’ Shareholders Association)

6,012

2.13

5,377

1.91

ITAMI SANGYO CO., LTD.

3,692

1.31

CBNY DFA INTL SMALL CAP VALUE PORTOFOLIO (Standing proxy: Citibank Japan)

3,542

1.26

OBAYASHI CORPORATION

3,318

1.18

Japan Trustee Services Bank, Ltd.(Trust Account 4G)
The Master Trust Bank of Japan, Ltd. (Trust Account)*1*1: These shares do not disclose the names of beneficiaries.

2. Third-class preferred stock
Name

Number of Shares Owned (Thousands)

Proportion of Total Shares (%)

Development Bank of Japan Inc.

1,500

20.00

Aozora Bank, Ltd.

1,500

20.00

DAIDO LIFE INSURANCE COMPANY

1,500

20.00

ITAMI SANGYO CO., LTD.

500

6.67

NEC Capital Solutions Limited

500

6.67

IBJ Leasing Company, Limited

500

6.67

SHIMA SEIKI MFG., LTD.

500

6.67

Sky Co., LTD.

250

3.33

Nankai Electric Railway Co.,Ltd.

250

3.33

Nihon Kolmar Co.,Ltd.

250

3.33

Fuyo General Lease Co.,Ltd.

250

3.33

Number of Shares Owned (Thousands)

Proportion of Total Shares (%)

3. First series of seventh-class preferred stock
Name

25

OC FINANCE CORPORATION

5,000

20.00

Daikin Industries, Ltd.

5,000

20.00

Aozora Bank, Ltd.

3,000

12.00

ITAMI SANGYO CO., LTD.

2,000

8.00

NICHIA STEEL WORKS, LTD.

2,000

8.00

Non-Destructive Inspection Company Limited.

2,000

8.00

NEC Capital Solutions Limited

1,000

4.00

IBJ Leasing Company, Limited

1,000

4.00

SHIMA SEIKI MFG., LTD.

1,000

4.00

Hankyu Hanshin Holdings, Inc.

1,000

4.00

ROHTO Pharmaceutical Co., Ltd.

1,000

4.00

Shionogi & Co., Ltd.

500

2.00

Nippon Paper Core Industrial Co., Ltd.

500

2.00

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

SENSHU IKEDA HOLDINGS,INC.

Business Description of the GroupnConsolidated
Organizational Chart of the Group (As of the end of June, 2016)
Non-consolidated
The Senshu Ikeda Bank, Ltd.
Senshu Ikeda Tokai Tokyo ●Securities Co.,Ltd.
Shizen Soken Co.,Ltd. ●Senshu Ikeda Holdings, Inc.

Head office and branches: 133
Sub-branches: 5
Banking services

Representative offices: 2● Senshu Ikeda Turnaround Partners Co., Ltd.
● Senshu Ikeda Corporate Partners Co., Ltd.

Leasing services● Senshu Ikeda Lease Co., Ltd.
● Senshu Ikeda Guarantee Co., Ltd.

Credit guarantee services● Kinki Credit Guarantee Company Limited● Senshu Ikeda JCB Co., Ltd.

Credit card services● Senshu Ikeda DC Co., Ltd.
● Senshu Ikeda VC Co., Ltd.
● Senshu Ikeda Capital Co., Ltd.
● Senshu Ikeda Business Service Company Limited● Senshu Ikeda Office Service Co., Ltd.
● S.I.M.S. Co., Ltd.

Other services● Senshu Ikeda System Co., Ltd.

(Note:● indicates consolidated subsidiaries and○ indicates equity-method affiliates)● Senshu Ikeda Investment Management Co., Ltd.
Station Network Kansai Co., Ltd.
● Investment enterprise partnerships: 13

Securities services

Head Office and branches: 3

Other services

Head Officen Subsidiaries and Affiliates (As of the end of June, 2016)

Affiliates

Subsidiaries

Name

Address

Date ofestablishment

Major Business

The Senshu Ikeda Bank, Ltd.
18-14, Chayamachi, Kita-ku, Osaka-city Banking services
18-14, Chayamachi, Kita-ku, Osaka-city Securities services
Senshu Ikeda Tokai Tokyo
Securities Co.,Ltd.
Senshu Ikeda Turnaround Partners 18-14, Chayamachi, Kita-ku, Osaka-city Banking services
Co., Ltd.
(Business rehabilitation services)
Senshu Ikeda Corporate Partners
18-14, Chayamachi, Kita-ku, Osaka-city Banking services
Co., Ltd.
(Business rehabilitation services)
Senshu Ikeda Lease Co., Ltd.
3-1-22, Toyosaki, Kita-ku, Osaka-city Leasing services
Senshu Ikeda Guarantee Co., Ltd.
2-1-11, Jonan, Ikeda-city
Credit guarantee services
Kinki Credit Guarantee Company
2-1-1, Nishiki, Kaizuka-city
Credit guarantee services
LimitedSenshu Ikeda JCB Co., Ltd.
8-10, Kurehacho, Ikeda-city
Credit card services
Senshu Ikeda DC Co., Ltd.
8-10, Kurehacho, Ikeda-city
Credit card services
Senshu Ikeda VC Co., Ltd.
8-10, Kurehacho, Ikeda-city
Credit card services
18-14, Chayamachi, Kita-ku, Osaka-city Venture capital services
Senshu Ikeda Capital Co., Ltd.
18-14, Chayamachi, Kita-ku, Osaka-city Back-office administration
Senshu Ikeda Business Service
Company Limited
Senshu Ikeda Office Service Co., Ltd. 2-1-11, Jonan, Ikeda-city
Personnel services
S.I.M.S. Co., Ltd.
6-2-5-301, Minoh, Minoh-city
Appraisal of real-estate collateraland real-estate research services
Senshu Ikeda System Co., Ltd.
18-14, Chayamachi, Kita-ku, Osaka-city Computer software development
and sale services
Senshu Ikeda Investment Manage- 3-1-22, Toyosaki, Kita-ku, Osaka-city Investment advisory and discretionary investment services
ment Co., Ltd.
Shizen Soken Co., Ltd.
2-1-11, Jonan, Ikeda-city
Information offering services
Planning and operation of ATM at station
Station Network Kansai Co., Ltd.
1-4-8, Shibata, Kita-ku, Osaka-city

Share Capital Investment ratio (%)(millions of
Subsidiaries
Japanese yen) The Company and affiliates

September 1, 1951
January 30, 2013

61,3851,250

100.0060.00––

January 4, 2013100–

100.00January 4, 2013100–

100.00April 1, 1986
July 20, 1973
April 1, 1975

50
180
100

–
–
–

96.92
100.00100.00February 1, 1983
September 5, 1990
November 2, 1990
March 6, 1989
April 1, 1983

60
30
40
90
30

–
–
–
–
–

100.00100.00100.00100.00100.00July 11, 1988
October 28, 1991

20
20

–
–

100.00100.00June 10, 1985

50

–

98.00

April 1, 1987

120–

100.00November 1, 1996
June 29, 2000

80
100

15.00
–

–
40.00

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201626

Organization and Board of Directors
SenshuSenshu Ikeda
Ikeda Holdings
Holdings
n Organization (As of the end of June, 2016)
Advisory
Advisory Board
Board

Accounting
Accounting Office
OfficeManagement
ManagementCommittee
Committee

PR
PR &
& IR
IR Office
OfficeGroup Strategy
Strategy Office
OfficeGroup

Personnel andand General
General Affairs
Affairs Division
Division
Personnel
ALM
ALMCommittee
Committee

Compliance
ComplianceCommittee
Committee

Risk
RiskManagement
ManagementCommittee
Committee

Remuneration
RemunerationCommittee
Committee

PersonnelCommittee
Committee
Personnel

Audit
Audit&&Supervisory
SupervisoryBoard
BoardMembers
MembersOffice
OfficeAudit
Audit&&Supervisory
SupervisoryBoard
BoardMembers
Members Audit
Audit&&Supervisory
SupervisoryBoard
Board

Board
BoardofofDirectors
Directors

GeneralGeneralMeeting
MeetingofofShareholders
Shareholders

Corporate
Corporate Planning
Planning Division
Division

General Risk
Risk Management
Management Division
Division
GeneralInternal Audit
Audit Division
DivisionInternal

Secretary Office
OfficeSecretaryn Board of Directors (As of June 28, 2016)27

Representative Director
and President

Hirohisa Fujita

Director

Atsushi Ukawa

Director

Hiro Maeno

Audit & Supervisory
Board Member(Full-time)

Takashi Nishi

Representative Director
and Chairman

Kazuyuki Kataoka

Director

Akira Tahara

Director

Yasuki Hosomi

Shigeru Aoyagi

Director

Takayuki Ota

Director(Outside)

Taro Ohashi

Director

Motoshi Inoue

Director(Outside)Kazuo Hiramatsu

Audit & Supervisory
Board Member(Full-time)
Audit & Supervisory
Board Member(Outside)
Audit & Supervisory
Board Member(Outside)

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

Toshiaki Imanaka
Toshiaki Sasaki

SENSHU IKEDA HOLDINGS,INC.

TheThe Senshu
Senshu Ikeda
Ikeda Bank
Bank
Corporate
Corporate Planning
Planning Division
Division
Personnel
Personnel Affairs
Affairs Division
Division

Remuneration
RemunerationCommittee
Committee

Personnel
PersonnelCommittee
Committee

n Organization (As of the end of June, 2016)
Career
Career Development
Development Supporting
Supporting Office
OfficeDiversity
Promotion
Diversity Promotion Office
OfficeHealthHealth Promotion
Promotion Office
OfficeGeneralGeneral Affairs
Affairs Division
Division
Tokyo
Tokyo Office
OfficeSuzhouSuzhou Representative
Representative Office
OfficeRisk Management
Risk
Management Division
DivisionManagement
ManagementCommittee
Committee

Operations
Operations Management
Management Division
Division

Business
BusinessManagement
ManagementUnit
Unit

Business
Business Management
Management Division
Division
Branches
Branches Supporting
Supporting Office
OfficeSecuri
Securittiieess andand Insurance
Insurance Busi
Businness
ess Promoti
Promotioonn Offi
Officcee
Personal
Personal Loan
Loan Promotion
Promotion Office
OfficeCustomer Center
CenterCustomer
Regional
Headquarters
Regional Headquarters

SMEs
SMEsSupporting
SupportingCommittee
Committee

Relationship
Relationship Promotion
Promotion Division
Division

Relationship
RelationshipUnit
Unit

ALM
ALMCommittee
Committee

OperatingOperating Center
CenterRisk
Risk Products
Products Operations
Operations Office
OfficeBranches
Branches (including(including Sub-branches):
Sub-branches): 138
138

Compliance
ComplianceCommittee
Committee

Risk
RiskManagement
ManagementCommittee
Committee

Audit
Audit& &Supervisory
SupervisoryBoard
BoardMembers
Members Audit
Audit&&Supervisory
SupervisoryBoard
Board

Audit
Audit& &Supervisory
SupervisoryBoard
BoardMembers
MembersOffice
OfficeBoard
BoardofofDirectors
Directors

GeneralGeneralMeeting
MeetingofofShareholders
Shareholders

Compliance
Compliance Management
Management Office
OfficeOperations
Operations andand System
System Headquarters
HeadquartersCS
CS Headquarters
Headquarters

Regional
Regional Revitalization
Revitalization Promotion
Promotion Office
OfficeAsia
Asia andand China
China BusinessBusiness Promotion
Promotion Division
DivisionInternational
International Division
Division
Advanced
Advanced Technology
Technology BusinessBusiness Supporting
Supporting Division
Division
Financial
Advisory
Division
Financial Advisory Division
M&A
M&A Advisory
Advisory Office
OfficePrivatePrivate Banking
Banking Office
OfficeICTICT Planning
Planning Office
OfficeFinancial Market
Market Division
Division
Financial

Financial
Financial Market
Market Headquarters
Headquarters

Market Operations
Operations Office
OfficeMarketLoan
Loan Headquarters
Headquarters

Loan
Loan Division
Division
Solutions
Solutions Division
Division
Loan
Loan BusinessBusiness Division
DivisionInternal
Internal Audit
Audit Division
Division
Secretary
Secretary Office
Officen Board of Directors (As of June 28, 2016)
Representative Director
and President

Hirohisa Fujita

Director & Senior
Managing
Executive Officer

Atsushi Ukawa

Director & Managing
Executive Officer

Hiro Maeno

Audit & Supervisory
Board Member(Full-time)

Hiroaki Kobayashi

Representative Director
and Chairman

Kazuyuki Kataoka

Director & Senior
Managing
Executive Officer
Director & Senior
Managing
Executive Officer
Director & Senior
Managing
Executive Officer

Akira Tahara

Director & Managing
Executive Officer

Yasuki Hosomi

Satoshi Kitagawa

Takayuki Ota

Director(Outside)

Minoru Furukawa

Motoshi Inoue

Director(Outside)

Takao Koyama

Audit & Supervisory
Board Member(Full-time)
Audit & Supervisory
Board Member(Outside)
Audit & Supervisory
Board Member(Outside)

Tsuneo Yamada
Kenichi Yoshimoton Executive Officers (As of June 28, 2016)
Senior Managing
Executive Officer

Masahiro Saito

Managing
Executive Officer

Koji Miyata

Executive
Officer

Akihito Okumura

Executive
Officer

Tsutomu Irie

Senior Managing
Executive Officer

Takashi Noda

Managing
Executive Officer

Shinji Inoue

Executive
Officer

Kou Tanaka

Executive
Officer

Susumu Yamagata

Senior Managing
Executive Officer

Susumu Kawakami

Executive
Officer

Osamu Horiuchi

Executive
Officer

Tadashi Ichikawa

Managing
Executive Officer

Hirotsugu Maekawa

Executive
Officer

Satoru Kusumoto

Executive
Officer

Jun Matsumura

Managing
Executive Officer

Masahiro Horikawa

Executive
Officer

Muneharu Kurita

Executive
Officer

Hirohito Sakaguchi
SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

28

SENSHU IKEDA HOLDINGS,INC.

Representative
Director andPresident

Yasuo Kitamura

Audit & Supervisory
Board Member(Full-time)

Yutaka Sakato

Representative
Director andVice PresidentManaging
Director

Hiromi Tajima

Audit & Supervisory
Board Member(Outside)
Audit & Supervisory
Board Member(Outside)

Satoshi Kitagawa

n Executive Officers (As of June 28, 2016)

29

Executive Officer

Toshiyuki Inoue

Executive Officer

Wataru Kondo

Deputy General Manager, Business Headquarters

General Manager, Business Headquarters

Branches

Business Management Division
Collaboration Promotion Office
Product Management Division

Planning and General Affairs Division

Business Compliance DivisionInternal Audit Divisionn Board of Directors (As of June 28, 2016)

Mamoru Kudo

General Manager, Management Headquarters

Representative Director and Vice President

Representative Director and President

Non-consolidated

Compliance Committee

Audit & Supervisory Board Members Audit & Supervisory Board

Management Committee

Board of Directors

General Meeting of Shareholders

Consolidated
SenshuIkeda Tokai Tokyo Securitiesn Organization (As of the end of June, 2016)

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

Hiroichi Wakita

SENSHU IKEDA HOLDINGS,INC.

Consolidated Financial Information of Senshu Ikeda Holdings
Consolidated Balance Sheets
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
As of 31st March, 2016 and 2015

AssetsCash and due from banks (Notes 27 and 33)
Call loans and bills bought (Note 33)
Monetary claims bought (Note 33)
Trading account securities (Notes 4 and 33)
Money held in trust (Notes 6 and 33)
Securities (Notes 5, 7, 12, 20 and 33)
Loans and bills discounted (Notes 8, 12 and 33)
Foreign exchange assets (Notes 9 and 33)
Other assets (Notes 10 and 12)
Tangible fixed assets (Note 11)
Intangible fixed assets
Net defined benefit assets (Note 18)
Deferred tax assets (Note 29)
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Total assets

Millions of yen
2016
2015

Thousands of U.S.
dollars (Note 1)2016¥460,293
885
67
221
27,0001,026,804
3,765,182
6,451
63,76538,714
6,123
13,01814,181
14,399(30,483)¥5,406,626¥544,513
616
87
177
27,0001,139,284
3,672,521
6,321
65,83537,276
7,470
16,014
17,22417,098(31,907)¥5,519,533$4,084,957
7,854
594
1,961
239,616
9,112,566
33,414,820
57,250565,894
343,574
54,339115,530
125,851
127,786(270,527)$47,982,126¥4,730,075
3,800
211,50986,216429
55,00043,488
1,787
741
39
456
223
343
0
110
14,3995,148,621¥4,737,122
1,543
251,176
159,198
538
70,00045,123
1,682
137
39
409
199
351
1
121
17,0985,284,745$41,977,946
33,723
1,877,076
765,140
3,807
488,107385,942
15,859
6,576
346
4,046
1,979
3,044
0
976
127,786
45,692,412

102,999
57,361
68,521(2,678)226,20379,811
59,19760,155(253)
198,910914,084
509,061
608,102(23,766)
2,007,481

21,753(144)
1,927
23,536
91
8,172
258,005¥5,406,626

21,101
5
6,214
27,321
69
8,485
234,788¥5,519,533

193,051(1,277)
17,101
208,874
807
72,5232,289,714$47,982,126

Liabilities and net assets

Liabilities
Deposits (Notes 12, 13 and 33)
Negotiable certificates of deposit (Note 33)
Payables under securities lending transactions (Notes 12 and 33)
Borrowed money (Notes 12, 14, 33, 34 and 36)
Foreign exchange liabilities (Notes 15 and 33)
Corporate bonds and notes (Notes 16 and 33)
Other liabilities (Notes 12 and 17)
Provision for employees’ bonuses
Net defined benefit liability (Note 18)
Accrued retirement benefits for directors and corporate auditors
Reserve for reimbursement of deposits
Reserve for point services
Reserve for contingent losses
Reserve under special laws
Deferred tax liabilities (Note 29)
Acceptances and guarantees (Note 20)
Total liabilities

Net assets
Shareholders’ equity (Note 21):
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized gain (loss) on available-for-sale securities (Note 7)
Net unrealized gain (loss) on deferred hedges (Note 34)

Remeasurements of defined benefit plans

Total accumulated other comprehensive income
Stock subscription rights (Note 21)
Non-controlling interests
Total net assets
Total liabilities and net assets
See accompanying notes to consolidated financial statements

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201630

Consolidated Statements of Operations
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the years ended 31st March, 2016 and 2015

IncomeInterest income:Interest on loans and bills discounted (Note 32)
Interest and dividends on securities
Other interest income
Fees and commissions
Other operating income (Note 22)
Reversal of provision for possible loan losses
Recoveries of written-off claims
Gain on negative goodwill
Other income (Note 23)
Total income

Millions of yen
2016
2015

Thousands of U.S.
dollars (Note 1)2016¥45,467
15,211686
20,281
8,532
117
1,481
–
18,567110,347¥48,164
15,058459
21,514
11,036
1,350
1,768
1,596
15,054116,002$403,505
134,992
6,088
179,987
75,718
1,038
13,143–
164,776
979,295

4,470
676
2,475
5,835
11,63150,063118
291–
12,85888,422
21,925

5,589
734
1,886
5,706
14,35051,79493
36
0
12,92093,112
22,89039,6695,999
21,96451,783103,221444,293
1,047
2,582
–
114,110784,717
194,577

632
4,710
5,343
16,582109¥16,472

1,869
2,407
4,277
18,613
1,028¥17,584

5,608
41,79947,417
147,160967$146,183

Millions of yen
2016
2015
¥16,582¥18,613

Thousands of U.S.
dollars (Note 1)
2016$147,160

652
(150)
(4,286)(3,784)¥12,797

21,2584
5,193
26,456¥45,069

5,786(1,331)(38,036)(33,581)$113,569

12,687110

44,030
1,038

112,593
976

Expenses

Interest expenses:
Interest on deposits
Interest on borrowings and rediscounts
Other interest expenses
Fees and commissions
Other operating expenses (Note 24)
General and administrative expenses
Loss on sales or disposal of fixed assets
Loss on impairment of fixed assets
Loss on change in ownership interest
Other expenses (Note 25)
Total expenses
Income before income taxes

Income taxes (Note 29)
Current
Deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of the parent
See accompanying notes to consolidated financial statements

Consolidated Statements of Comprehensive Income
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the years ended 31st March, 2016 and 2015

ProfitOther comprehensive income (Note 30)
Net unrealized gain (loss) on available-for-sale securities
Net unrealized gain (loss) on deferred hedges
Remeasurements of defined benefit plans
Total other comprehensive income
Comprehensive income
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests

31

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

SENSHU IKEDA HOLDINGS,INC.

Consolidated Statement of Changes in Net Assets
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
Year Ended March 31, 2016

BALANCE, APRIL 1, 2014
Cumulative effect of changein accounting policy (Note 3)
Balance at the beginning ofcurrent period which reflects
the change in accounting policy
Cash dividends
Profit attributable to ownersof the parent
Acquisition of treasury stock
Disposition of treasury stock
Change in scope of
consolidation
Net changes in items otherthan shareholders’ equity
Total changes during the period
BALANCE, MARCH 31, 2015
Issuance of capital stock
Cash dividends
Profit attributable to ownersof the parent
Acquisition of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Net changes in items otherthan shareholders’ equity
Total changes during the period
BALANCE, MARCH 31, 2016

BALANCE, APRIL 1, 2015
Issuance of capital stock
Cash dividends
Profit attributable to ownersof the parent
Acquisition of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Net changes in items otherthan shareholders’ equity
Total changes during the period
BALANCE, MARCH 31, 2016

Capitalstock
79,811

Capitalsurplus59,251Retainedearnings
46,949Millions of Yen
Accumulated othercomprehensive incomeNetNet
unrealized
gain (loss) on unrealized RemeasureTotal
available- gain (loss) ments of
Stock
NonTreasury shareholder’s for-sale on deferred defined subscription controlling
hedges benefit plans rights
stock
securities
equityinterests(728) 185,284
(147)
1
1,020
68
10,168466
79,811

59,25147,415466(728)

Capitalstock
708,297
205,777(1,836)57,361

Capitalsurplus525,354
205,777

68

10,168

196,863(4,832)
17,584

(118)
539

(118)
539

(11)

(11)

(118)
593

12,73960,155474(253)

21,248

4

5,193

1

(1,683)24,764

21,248
21,101

4
5

5,193
6,214

1
69

(1,683)
8,485

37,924
234,788
46,375(8,106)(8,106)

13,160198,910
46,375(8,106)

16,472

16,472

16,472(27,621)172–(27,621)172–(27,621)175
25,0208,366
68,521(2,424)(2,678)27,293
226,203

651

(150)

(4,286)22(312)(4,076)651
21,753

(150)
(144)

(4,286)
1,927

22
91

(312)
8,172

23,216
258,005

Thousands of U.S. Dollars (Note 1)
Accumulated othercomprehensive incomeNetNet
unrealized
gain (loss) on unrealized RemeasureTotal
available- gain (loss) ments of
Stock
NonRetained Treasury shareholder’s for-sale on deferred defined subscription controlling Total net
hedges benefit plans rights
earnings
stock
securities
equityinterests
assets533,856(2,245) 1,765,264
187,26444
55,147612
75,301 2,083,670
411,563411,563(71,938)(71,938)(71,938)(26)(222,044)(16,293)
509,061

1,020(4,832)

146,183

205,777
914,084

1

17,584(3)(25,020)
23,187
102,999(147)(4,832)(11)(53)
59,19723,187466

17,584(53)–
79,811
23,187

185,750

Total net
assets196,397

74,245608,102

146,183

146,183(245,127) (245,127)
1,553
1,526
222,044–(245,127)
1,526–(21,512) 242,216(23,766) 2,007,481

5,777(1,331)(38,036)

195(2,768)(36,173)

5,777
193,051(1,331)(1,277)(38,036)
17,101

195
807(2,768) 206,034
72,523 2,289,714

See notes to consolidated financial statements.

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201632

Consolidated Statements of Cash Flows
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the years ended 31st March, 2016 and 2015

Millions of yen
2016
2015
Cash flows from operating activities
Income before income taxes
Depreciation
Loss on impairment of fixed assets
Amortization of goodwill
Amortization of negative goodwill
Gains on negative goodwill incurred(Earnings) losses from investments under the equity method
Increase (decrease) in reserve for possible loan losses
Increase (decrease) in accrued bonuses
Decrease (increase) in net defined benefit asset¥21,925
5,050
291
190
–
–
3
(1,424)104¥22,890
4,833
36
208
(2)
(1,596)(40)(7,015)
3$194,577
44,817
2,582
1,686
–
–
26
(12,637)
922

Increase (decrease) in net defined benefit liability(1,662)
1(1,736)16(14,749)
8

Increase (decrease) in accrued retirement benefits for directors and corporate auditors
Increase (decrease) in reserve for reimbursement of deposits
Increase (decrease) in reserve for point services
Increase (decrease) in reserve for contingent losses
Interest income
Interest expenses(Gain) loss on securities(Gain) loss on money held in trust(Gain) loss on foreign exchange(Gain) loss on sales or disposal of fixed assets, net
Net (increase) decrease in loans and bills discounted
Net increase (decrease) in deposits
Net increase (decrease) in negotiable certificates of deposit

–
46
24
(7)
(61,366)
7,622
(883)
(1,593)
9,742
89(92,660)(7,047)
2,256

(22)
80
29
(28)
(63,681)
8,210
(560)
(1,670)(35,988)(17)(70,192)
156,353
1,543

–
408
212
(62)
(544,604)
67,642(7,836)(14,137)
86,457789(822,328)(62,539)
20,021

Net increase (decrease) in borrowed money (excluding subordinated borrowings)(72,981)

48,680(647,683)

Net (increase) decrease in due from banks (excluding due from the Bank of Japan)
Net (increase) decrease in trading account securities
Net (increase) decrease in call loans and bills bought

5,704
(43)
(250)

(2,687)(54)
1,200

50,621(381)(2,218)Net increase (decrease) in payables under securities lending transactions
Net (increase) decrease in foreign exchange (assets)
Net increase (decrease) in foreign exchange (liabilities)
Interest received
Interest paid
Other

(39,667)
(129)
(109)
62,015(8,285)(1,700)(64,514)(792)
172
65,823(9,444)2,947(352,032)(1,144)(967)
550,363(73,526)(15,086)(174,744)(1,414)¥(176,158)

52,981(1,342)¥51,639(1,550,798)(12,548)$(1,563,347)

Subtotal
Income taxes paid
Net cash provided by (used in) operating activities

33

Thousands of U.S.
dollars (Note 1)
2016

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

SENSHU IKEDA HOLDINGS,INC.

Consolidated Statements of Cash Flows
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the years ended 31st March, 2016 and 2015

Millions of yen
2016
2015
Cash flows from investing activities
Purchases of securities
Proceeds from sales of securities
Proceeds from maturity of securities
Increase in money held in trust
Decrease in money held in trust
Purchases of tangible fixed assets
Purchases of intangible fixed assets
Proceeds from sales of tangible fixed assets
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from issuance of capital stock
Decrease in subordinated borrowings
Decrease in subordinated bonds and bonds with stock subscription rights
Cash dividends paid
Cash dividends paid for non-controlling shareholders
Purchases of treasury stock
Proceeds from disposition of treasury stock
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 27)

Thousands of U.S.
dollars (Note 1)2016¥(724,154)
547,418
282,763(289)
1,860(4,204)(1,392)–102,002¥(841,250)
818,433
311,784(38)
1,691(1,761)(1,857)565
287,566$(6,426,641)
4,858,164
2,509,433(2,564)
16,506(37,309)(12,353)–905,236

46,375–(15,000)(8,106)(480)(27,621)172(4,660)–(8,000)–(4,832)
(480)
(118)
593
(12,839)

411,563–(133,120)(71,938)(4,259)(245,127)
1,526(41,356)

300

(199)

2,662

(78,515)
532,484¥453,968

326,167
206,317¥532,484(696,796)
4,725,630$4,028,824

See accompanying notes to consolidated financial statements

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201634

Notes to Consolidated Financial Statements
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the Years Ended 31st March, 2016 and 2015

1. Basis of Presentation
Senshu Ikeda Holdings, Inc. (the “Company”) is a holding
company and conducts its operations through its subsidiaries
and affiliates. The Company and its subsidiaries (collectively,
the “Group”) maintain their books of account in accordancewith the provisions set forth in the Companies Act of Japan(the “Act”) and in conformity with accounting principles andpractices generally accepted in Japan, which are different incertain respects as to the application and disclosure
requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements havebeen compiled from the consolidated financial statements
prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan. Certain accounts
have been reclassified for the convenience of readers outside
Japan.
In preparing the accompanying consolidated financial
statements, Japanese yen amounts are presented in millionsof yen by rounding down figures below one million. As a result,
the totals in yen in the accompanying consolidated financial
statements do not necessarily agree with the sums of theindividual amounts.
The translation of yen amounts into U.S. dollar amounts is
included solely for the convenience of readers outside Japanand has been made at ¥112.68 = U.S.$1.00, the exchange
rate prevailing on 31st March, 2016. This translation should
not be construed as a representation that yen can beconverted into U.S. dollars at the above or any other rate.

2. Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of the Company and the 30 (30 in 2015)
significant subsidiaries which it controls directly or indirectly.
Affiliates over which the Company exercises significant
influence in terms of their operating and financial policies
have been included in the accompanying consolidated
financial statements on an equity basis.
Change in the scope of consolidation
Senshu Ikeda Finance Co., Ltd, JS Venture Capital Investment,
L. P and Ikegin Capital Yumejikomi Fund D∙I Investment
Enterprise Partnership, all of which were consolidated
subsidiaries of the Company in the previous fiscal year, were
excluded from the scope of consolidation due to completionof their liquidation procedures.

35

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

Senshu Ikeda Capital Business Succession Fund Kizuna No. 2
Investment Enterprise Limited Partnership, SI Regional
Revitalization Fund Investment Enterprise Limited Partnershipand SI Start-up Supporting Fund Investment Enterprise Limited
Partnership have been included in the scope of consolidationfrom the fiscal year ended 31st March, 2016 as a result ofcontribution by the Company, respectively.
The company has applied the equity method to its investments
in two and three affiliates for the years ended 31th March,2016 and 2015, respectively.
All significant intercompany accounts and transactions havebeen eliminated in consolidation. All material unrealized profit
included in assets resulting from transactions within the Groupis eliminated.
The difference between the cost and the underlying equity inthe net assets of the consolidated subsidiaries measured atfair value at their respective dates of acquisition is presented
as “goodwill” or “negative goodwill”. Goodwill is amortized by
the straight-line method over a period of five years.
The balance sheet date of 12 subsidiaries is 31st December.
Appropriate adjustments have been made for significant
intervening transactions occurring during the period from 31st
December to 31st March.

3. Significant Accounting Policies(1) Trading account securities
Trading account securities are stated at fair value as of
the balance sheet date. Cost of trading account securities
sold is determined using the moving average method.
(2) Securities
Non-trading securities are classified into three categories:
held-to-maturity debt securities, equity securities of an
unconsolidated subsidiary and available-for-salesecurities. Held-to-maturity debt securities are carried atamortized cost, and the cost being determined by themoving average method. Equity securities of an
unconsolidated subsidiary are stated at cost determinedby the moving-average method. Equity securities andinvestment trusts classified as available-for-sale securities
whose fair values are available are stated at fair value
determined by the monthly average market price during
one month preceding the balance sheet date and othersecurities are stated at fair value determined based on
the quoted market price and other information at thebalance sheet date. Cost of sales of these available-forsale securities is determined using the moving averagemethod. Other securities, whose fair value is extremely
difficult to determine, are stated at cost determined by themoving-average method.
Unrealized gain or loss on available-for-sale securities is
included in net assets, net of income taxes.

SENSHU IKEDA HOLDINGS,INC.

(3) Investment securities held in money trusts
Investment securities that are part of trust assets in
independently managed money trusts with the primary
purpose to manage securities are stated at the fair value
as of the balance sheet date.
(4) Derivatives
Derivatives are stated at fair value.
(5) Tangible fixed assets
Depreciation of tangible fixed assets of the Group, except
for leased assets, is calculated principally by the straightline method. The principal useful lives are as follows:
Buildings···················3 to 50 years
Other·························2 to 20 years(6) Intangible fixed assets
Intangible fixed assets are amortized by the straight-line
method. Amortization of the cost of software intended forinternal use is calculated by the straight-line method
based on a useful life (5 years) determined by theCompany and its consolidated subsidiaries.
(7) Reserve for possible loan losses
A reserve for possible loan losses is provided byconsolidated subsidiaries engaged in the banking
business (the “banking subsidiaries”) in accordance withthe prescribed standards. For claims on borrowers who
have declared bankruptcy or have commenced special
liquidation proceedings or similar legal proceedings(“bankrupt borrowers”), or borrowers who are not legallyor formally insolvent but are regarded as substantially inthe same situation (“effectively bankrupt borrowers”), a
reserve is provided based on the book value of theclaims, after the write-off stated below, net of the
expected amount recoverable from collateral andguarantees.
For claims on borrowers who are not currently bankrupt
but are likely to become bankrupt (“potentially bankrupt
borrowers”), a reserve is provided at the amount deemednecessary based on the overall solvency assessment of
the borrowers and the amount of the claims, net of the
expected amount recoverable from collateral andguarantees.
For other claims, a reserve is provided based on thehistorical loan-loss ratio.
The Group conducts self-assessments of asset quality at
its loan offices. The assessments are audited by the
independent credit audit section in accordance with theGroup’s policy and guidelines for the self-assessment ofasset quality. Based on the results of these assessments,
an appropriate reserve is provided for the resulting losses
and for write-offs of doubtful assets.

For consolidated subsidiaries other than the banking
subsidiaries, a specific reserve for possible loan losses at
the total amount of loans deemed to be uncollectible
based on a solvency analysis of each loan, in addition toa general reserve at an amount calculated based on
historical experience, is provided.
For collateralized or guaranteed claims on bankrupt
borrowers and effectively bankrupt borrowers, the amountof the claims exceeding the estimated value of collateraland guarantees is deemed to be uncollectible and iswritten off against the total amount of the outstanding
claims. These write-offs amounted to ¥35,998 million($319,471 thousand) and ¥65,356 million for the years
ended 31st March, 2016 and 2015, respectively.
(8) Provision for employees’ bonuses
Provision for employees’ bonuses is calculated based onan estimated payment amount, which is attributable to thefiscal year.
(9)	Accrued retirement benefits for directors and corporate
auditors
Accrued retirement benefits for directors and corporate
auditors are provided at an amount that would be
required if all directors and corporate auditors retired at
the balance sheet date.
(10) Reserve for reimbursements of deposits
Reserve for reimbursements of deposits is provided at an
estimate of the future payments to be made forreimbursement claims on deposits which were
derecognized and credited from liability to income basedon the Group’s historical experience.
(11) Reserve for point services
Reserve for point services, which is provided to meet
future use of credits granted to customers, is recorded in
the amount deemed necessary based on the estimatedfuture use of unused credits.
(12) Reserve for contingent losses
Reserve for contingent losses is provided at an estimateof the future loss on contingencies other than those
covered by other reserves or provisions.
(13) Reserve under special laws
Reserve under special laws consist of the financial
instruments transaction liability reserve of ¥0 million ($0thousand) as of March 31, 2016, posted by Senshu Ikeda
Tokai Tokyo Securities Co., Ltd., which were calculated
according to the specifications of Article 46-5 of the
Financial Instruments and Exchange Act and Article 175of the Cabinet Office Ordinace Related to the Financial
Instruments Business, to prepare for losses originatingfrom incidents relating to the purchase and sale ofsecurities or other transactions.

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201636

(14) Accounting treatment for retirement benefits
In the calculation of retirement benefit obligation, theCompany applies the benefit formula basis in attributing
expected retirement benefits to periods until the end of
the fiscal year under review.
Prior service cost is amortized by the straight-line method
over a period of 11 to 12 years, which is within the
average estimated remaining years of service of theeligible employees.
Actuarial gain or loss is amortized commencing the year
following the year in which the gain or loss is recognizedby the straight-line method principally over a period of 11
to 12 years, which is within the average estimatedremaining years of service of the eligible employees.
Some of the consolidated subsidiaries calculate their net
defined benefit liability and retirement benefit expenses
by adopting the simplified method, assuming the amountof year-end retirement benefit payable due to voluntaryterminations as retirement benefit obligation.
(15) Foreign currency transactions
Assets and liabilities of consolidated subsidiaries
denominated in foreign currencies are translated into
Japanese yen at the exchange rates in effect at thebalance sheet date.
(16) Leases
Leased assets under finance lease arrangements which
do not transfer ownership of the leased assets to thelessee are depreciated over the respective lease contract
periods using the straight-line method with residual
values defined in the lease contracts, otherwise theresidual values is zero.

37(17) Hedge accounting
Interest rate risk hedging
With respect to hedge accounting for the interest rate risk
arising from financial assets and liabilities of the banking
subsidiaries, the Group applies deferral hedge
accounting or fair value hedge accounting, under whichgains or losses on derivatives are deferred until maturityof the hedged transactions, as stipulated in the JapaneseInstitute of Certified Public Accountants (JICPA) Industry
Audit Committee Report No. 24, 13th February, 2002.
Foreign exchange rate risk hedging
With respect to hedge accounting for derivativetransactions used to hedge the risk of financial assets
and liabilities denominated in foreign currencies of thebanking subsidiaries, the Group applies deferral hedge
accounting, under which gains or losses on derivatives
are deferred until maturity of the hedged transactions, as
stipulated in the JICPA Industry Audit Committee Report
No. 25, 29th July, 2002. The Group assesses theeffectiveness of its currency swaps and foreign exchange
swaps transactions, etc. entered into in order to hedge
the risk of fluctuation in foreign exchange rates bycomparing the foreign-currency amount of eachunderlying hedged item with the corresponding foreigncurrency amount of the respective hedging instruments.
(18) Cash flows
In preparing the consolidated statement of cash flows,
cash and deposits with the Bank of Japan are considered
to be cash and cash equivalents.
(19) Consumption taxes
Transactions are principally stated exclusive of nationaland municipal consumption taxes.

As lessee:
Finance leases which commenced prior to 1st April, 2008,
except for those substantially requiring the transfer ofownership of the leased assets to the lessee, areaccounted for as operating leases.

(20) Consolidated tax payment system
The Company and certain of its consolidated subsidiaries
have adopted the consolidated tax payment system inaccordance with the Corporation Tax Act (Act No. 34,
1965).

As lessor:
Finance lease income and related cost are recognizedwhen lease payment is received. Finance leases which
do not transfer ownership of the leased assets to thelessee and commenced prior to 1st April, 2008 aredeemed to have been entered into contracts at theamount of the cost less accumulated depreciation at 31st
March, 2008.

(21) Change in accounting policy(Application of “Revised Accounting Standard forBusiness Combinations” and other Standards)
Effective the fiscal year under review, the Company has
applied the “Revised Accounting Standard for Business
Combinations” (the Accounting Standards Board ofJapan (hereinafter “ASBJ”) Statement No. 21, 13th
September, 2013; hereinafter “Business Combinations
Accounting Standard”), “Revised Accounting Standard
for Consolidated Financial Statements” (ASBJ Statement
No. 22, 13th September, 2013; hereinafter “Consolidated
Financial Statements Accounting Standard”), and“Revised Accounting Standard for Business Divestitures”(ASBJ Statement No. 7, 13th September, 2013; hereinafter“Business Divestitures Accounting Standard”).
Accordingly, the Company’s accounting method has been

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

SENSHU IKEDA HOLDINGS,INC.

changed; the difference arising from a change in the
Company’s ownership interest in a subsidiary over which
the Company maintains control is recorded as capitalsurplus and expenses arising from acquisition of sharesof subsidiaries are recorded in the fiscal year when they
are incurred. For business combinations achieved on orafter the beginning of the fiscal year under review, theaccounting method has been changed to reflect
adjustments to the allocation of acquisition cost arisingfrom the finalization of the transitional accounting
treatment in the consolidated financial statements for the
consolidated fiscal year when the business combination
date is recorded. In addition, the Company has changed
the presentation of net income and other related items,
and the presentation of minority interests to noncontrolling interests. In order to reflect such changes inpresentation, reclassifications have been made to theconsolidated financial statements for the previous fiscal
year.
In the consolidated statements of cash flows for the fiscal
year under review, cash flows associated withinvestments in or sale of shares of subsidiaries not
resulting in change in scope of consolidation are stated in“Cash flows from financing activities,” while cash flows
associated with expenses arising from investments inshares of subsidiaries resulting in change in scope of
consolidation or expenses arising from investments in orsale of shares of subsidiaries not resulting in change inscope of consolidation are stated in “Cash flows fromoperating activities.”
The Business Combinations Accounting Standard andother Standards have been applied in accordance withtransitional treatments stipulated in Paragraph 58-2 (4) of
the Business Combinations Accounting Standard,Paragraph 44-5 (4) of the Consolidated Financial
Statements Accounting Standard and Paragraph 57-4 (4)of the Business Divestitures Accounting Standard, andthey have been prospectively applied from the beginningof the fiscal year under review.
These changes have no impact on the consolidated
financial statements and per share information for the
fiscal year under review.

(22) Unapplied Accounting Standards“Revised Implementation Guidance on Recoverability ofDeferred Tax Assets” (ASBJ Guidance No. 26, 28th
March, 2016)(1) Overview
While this Revised Implementation Guidancebasically follows the contents of the policy forrecoverability of deferred tax assets provided in theJapanese Institute of Certified Public Accountants(JICPA) Audit Committee Report No. 66 “Auditing
treatment on determining the recoverability ofdeferred tax assets,” certain revisions have been
made to some parts of the policy.

(2) Scheduled date of adoption
The Company will apply the Revised Implementation
Guidance from the fiscal year beginning on 1st April,
2016.
(3)	The effect of adopting the said Accounting Standard,etc.
The effect of adopting the said Accounting Standard,
etc. is currently under evaluation.

(23) Additional Information
The Company conducts transactions in which it delivers
Company shares to the Employees Shareholders
Association through a trust.
The Trust-type Employees Shareholding Incentive Plan
introduced in December 2015
(1) Overview of the transaction
The Company has introduced the “Trust-type
Employees’ Shareholding Incentive Plan (hereinafter“the Plan”)” in order to provide incentive to increase
the medium- to long-term corporate value of theCompany for the employees of the Senshu Ikeda
Bank.
The Plan is an incentive plan in which all employees
enrolled in the “Senshu Ikeda Bank Employees’
Shareholders Association (hereinafter “Shareholders
Association”)” are eligible. Under the Plan, theCompany establishes a “Senshu Ikeda Bank
Employees’ Shareholders Association Exclusive Trust
Account (hereinafter “Employees’ Shareholder Trust”)
at a trust bank, and the Employees’ Shareholder Trustpurchases in advance a certain number of theCompany’s shares equivalent to the number ofshares the Shareholders Association is expected topurchase over the next five years.
Subsequently, the Employees’ Shareholder Trust is tocontinuously sell the Company’s shares to the
Shareholders Association, and if any gains on sale ofshares have accumulated within the Employees’
Shareholder Trust at the termination of the trust, theamount equivalent to such gains on sale of sharesare to be distributed to those who meet therequirements for eligible beneficiaries as residual
assets.
Meanwhile, as the Company is to provide aguarantee on the loan for the Employees’
Shareholder Trust to acquire the Company’s shares,
should the price of the Company’s shares falls andshould losses on sale of shares accumulate within
the Employees’ Shareholder Trust, and if remaining
debt exists equivalent to the losses on sale of sharesat the time of termination of the trust, the Company is
to repay such remaining debt pursuant to theguarantee agreement.

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201638

(2)	The Company’s own shares held in trust	The Company’s own shares held in trust are recorded
as treasury stock under the category of Net assets attheir book value in the trust (excluding the amount ofancillary expenses). The book value and number ofshares of such treasury stock for the fiscal year
ended 31st March, 2016 was ¥2,539 million ($22,532
thousand) and 5,377 thousand shares, respectively.
(3)	Book value of borrowings recorded from applicationof the gross method	¥2,550 million ($22,630 thousand) for the fiscal year
ended 31st March, 2016

5. Securities
Securities at 31st March, 2016 and 2015 consisted of thefollowing:Thousands of
U.S. dollars

Millions of yen
2015

2016
Stocks2016¥69,297 ¥79,935 $614,989

Bonds:
Government bonds

76,259164,153

676,774

Local government bonds

49,33851,256437,859

Corporate bonds

277,505

273,480

2,462,770

554,402570,458

4,920,145

Other

4. Trading account securities

Total

Valuation gain or loss on trading account securities included
in income before income taxes and non-controlling interests
was ¥(0) million ($ (0) thousand) and ¥(1) million for the years
ended 31st March, 2016 and 2015, respectively.

Stocks in the above table include investments in affiliates of¥21 million ($186 thousand) and ¥306 million at 31st March,2016 and 2015, respectively.

¥1,026,804 ¥1,139,284 $9,112,566

Held-to-maturity debt securities with fair value at 31st March,2016 and 2015 were as follows:
Millions of yen
31st March, 2016

Carrying value

Fair value¥24,998¥25,143

Corporate bonds

23,70423,741Other

27,00027,282

Total¥75,702¥76,168

Government bonds

Millions of yen
31st March, 2016
Government bonds

Difference

Unrealized Unrealized
gain
loss

¥145 ¥145 ¥–Corporate bonds

37

37

–

Other

282

291

(8)

Total

¥465 ¥474 ¥(8)Millions of yen
31st March, 2015

Carrying value

Fair value¥24,997¥25,071

Corporate bonds

31,30731,390Other

27,00027,434

Total¥83,305¥83,895

Government bonds

Millions of yen
31st March, 2015
Government bonds

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

Unrealized Unrealized
gain
loss

¥73 ¥73 ¥–Corporate bonds

83

83

–

Other

434

436

(2)

Total

39

Difference¥590 ¥592 ¥(2)SENSHU IKEDA HOLDINGS,INC.

Thousands of U.S. dollars
31st March, 2016
Government bonds
Corporate bonds

Millions of yen

Carrying value

Fair value

31st March, 2015

$221,849$223,136

210,365

210,694

Other

239,616

242,119

Total$671,831$675,967

Thousands of U.S. dollars
31st March, 2016
Government bonds

Unrealized Unrealized
Difference
gain
loss
$1,286 $1,286 $–Corporate bonds

328

328

–

Other

2,502

2,582

(70)

Total

Equity securities

Available-for-sale securities with fair value at 31st March, 2016
and 2015 were as follows:
Millions of yen
Carrying value

Acquisitioncost¥63,277¥34,700

Government bonds

51,26051,151

Local government bonds

49,33849,149Corporate bonds

253,801

251,702

Subtotal

354,400

352,004

31st March, 2016
Equity securities

525,558

527,466¥943,236¥914,171

Millions of yen
31st March, 2016
Equity securities

Unrealized Unrealized
Difference
gain
loss
¥28,576 ¥30,218 ¥(1,642)
109

109

–

Local government bonds

188

193

(4)

Corporate bonds

2,098

2,124

(25)

Subtotal

2,396

2,426

(30)

(1,908)

7,197(9,105)

Other
Total

¥29,064 ¥39,843 ¥(10,778)

139,120

139,155
51,256

51,095

Corporate bonds

242,173

241,243

Subtotal

432,586

431,460

Other

542,135

546,672Total¥1,048,590¥1,020,516

Millions of yen
31st March, 2015
Equity securities

Difference

Unrealized Unrealized
gain
loss

¥31,484 ¥32,084 ¥(599)

Bonds:
Government bonds

35

35

–

Local government bonds

161

174

(13)

Corporate bonds

929

1,029

(99)

Subtotal

1,125

1,238

(112)

(4,537)

5,947(10,484)

Total¥28,073 ¥39,270 ¥(11,197)
Thousands of U.S. dollars
31st March, 2016

Equity securities

Carrying value

Acquisitioncost$561,563$307,951
453,949

Bonds:
Government bonds

454,916

Local government bonds

437,859

436,182

Corporate bonds

2,252,405

2,233,777

Subtotal

3,145,189

3,123,926

Other

4,664,164

4,681,096

Total$8,370,926$8,112,983

Bonds:
Government bonds¥42,384

Government bonds

Bonds:

Total¥73,869

Local government bonds

Other

Other

Acquisition
cost

Bonds:$4,126 $4,206 $(70)There were no held-to-maturity debt securities sold during theyears ended 31st March, 2016 and 2015.

Carrying value

Thousands of U.S. dollars
31st March, 2016
Equity securities

Difference

Unrealized Unrealized
gain
loss

$253,603 $268,175 $(14,572)

Bonds:
Government bonds

967

967

–

Local government bonds

1,668

1,712

(35)

Corporate bonds

18,61918,849(221)

Subtotal

21,263

21,529(266)(16,932)

63,871(80,804)

Other
Total

$257,933 $353,594 $(95,651)

Available-for-sale securities sold during the years ended 31st
March, 2016 and 2015 were as follows:

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201640

6. Money Held in Trust

Millions of yen
2016
Equity securities

Proceeds
from sales

Gain

Loss

¥14,602 ¥6,803 ¥–

Bonds:
Government bonds
Local government bonds
Corporate bonds
Subtotal
Other
Total

21,312

436

–

–

–

–

23,859421(0)45,171858(0)483,860

3,632(10,164)¥543,634 ¥11,294 ¥(10,164)

Equity securities

Proceeds
from sales

Gain

Government bonds

93,072

647

–

–

–

Corporate bonds

83,766

1,597(0)Subtotal

176,839

2,245

(0)

639,907

7,336(12,323)

Other
Total

–

Equity securities

Gain

Government bonds
Local government bonds
Corporate bonds
Subtotal
Total$129,588 $60,374 $–
189,137

3,869

–

–

–

–

211,741

3,736

(0)

400,878

7,614

(0)

4,294,107

32,232(90,202)$4,824,582 $100,230 $(90,202)

Impairment losses on securities
Available-for-sale securities whose fair value significantly
declined from the acquisition cost are valued at fair value andlosses on devaluation of those securities are recognized in the
consolidated statement of operations unless the value isconsidered recoverable.
Losses on devaluation of securities for the years ended 31st
March, 2016 and 2015 were ¥42 million ($372 thousand) and¥0 million, respectively, which consisted of ¥42 million ($372
thousand) on equity securities for the year ended 31st March,
2016, and ¥0 million on equity securities for the year ended
31st March, 2015.
Determining whether the fair value is “significantly declined” isbased on the fair value declining by more than 50% or thecriteria considering the trend of the fair value during a certain
past period and credit risks of the issuers when the fair value
declined between 30% and 50% of the acquisition cost.

41

Net unrealized gain (loss) on available-for-sale securities at
31st March, 2016 and 2015 consisted of the following:
Millions of yen

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

Thousands of
U.S. dollars

2015

2016

Available-for-sale securities

Loss

Bonds:

Other

7.	Net Unrealized Gain (Loss) on Availablefor-Sale Securities

2016

Differences between acquisition costand fair value:

Thousands of U.S. dollars
2016

2016

¥27,000 ¥27,000 $239,616

Valuation gain (loss) included in consolidated¥(91) ¥97 $(807)statements of income¥825,637 ¥13,400 ¥(12,752)

Proceeds
from sales

2015

2016
Carrying value

Thousands of
U.S. dollars

Loss¥8,890 ¥3,818 ¥(429)

Bonds:
Local government bonds

Millions of yen

There were no money held in trust owned for other purposes
at 31st March, 2016 and 2015.

Millions of yen
2015

Money held in trust at 31st March, 2016 and 2015 consistedof the following:
Money held in trust for trading purposes

Deferred tax liabilities
Differences between acquisition costand fair value, net of taxes¥29,064 ¥28,073 $257,933(7,308)(6,869)(64,856)

21,756

21,203

193,077

(3)

(101)

(26)

Amounts corresponding to
non-controlling interests

Net unrealized gain (loss) on availablefor-sale securities, net of taxes¥21,753 ¥21,101 $193,051

8.	Loans and Bills Discounted and Risk
Monitored Loans
Loans and bills discounted:
Loans and bills discounted at 31st March, 2016 and 2015
consisted of the following:
Millions of yen
2016
Bills discounted

2015

Thousands of
U.S. dollars
2016¥19,237 ¥20,335 $170,722

Loans on bills

72,212

78,562640,859

Loans on deeds

3,437,566

3,334,749

30,507,330

236,165

238,874

2,095,891

Overdrafts
Total¥3,765,182 ¥3,672,521 $33,414,820

SENSHU IKEDA HOLDINGS,INC.

Discounting of bills is accounted for as finance transactions
rather than as purchasing of bills in accordance with the
JICPA Industry Audit Committee Report No. 24. The Group
has the right to sell or pledge such bills without any
restrictions. These include bankers acceptances bought,
commercial bills discounted, documentary bills and foreignexchange bills. The total face value of such outstanding bills
at 31st March, 2016 and 2015 totaled ¥19,469 million($172,781 thousand) and ¥20,833 million, respectively.
At 31st March, 2016 and 2015, loans and bills discounted
included the portion of loans extended to original borrowers
based on loan participation agreements, as permitted by the
JICPA Accounting Committee Report No. 3, 28th November,
2014, in the amount of ¥19,990 million ($177,405 thousand)and ¥15,590 million, respectively.
Contracts for overdraft facilities and loan commitments arecontracts under which the Group lends money to customers
up to their prescribed limits at the customers’ request as longas there are no violations of any of the conditions in thecontracts. The aggregate unutilized balances within the limitsof these contracts totaled ¥708,987 million ($6,292,039
thousand) and ¥689,418 million at 31st March, 2016 and2015, respectively, including the contracts whose contractual
periods were either less than one year or revocable at any
time, in the amount of ¥697,784 million ($6,192,616 thousand)and ¥678,399 million, respectively.
Since many of these commitments expire without being fully
utilized, the unutilized amounts do not necessarily represent
future cash commitments. Most of these contracts include
provisions which stipulate that the consolidated subsidiaries
can reject customers’ requests or decrease the contract limits
for an appropriate reason, (for example, a change in financial
situation or a deterioration in customers’ creditworthiness).
At the inception of the contracts, the Group obtains collateralin the form of real estate, securities, and so forth, if deemednecessary. Subsequently, the Group, based on its internal
rules, performs periodic reviews of the customers’ businessresults and may take necessary measures such asreconsidering the terms of the contracts and/or requiring
additional collateral or guarantees.

Loans to bankrupt borrowers
Loans past due for 3 months or more
Restructured loans
Total

Loans past due for 3 months or more represent loans on which
the payment of principal and/or interest has not been received
for three months or more from the due date, and which are notclassified as “loans to bankrupt borrowers” or “delinquentloans.”
Restructured loans are loans which have been restructured tosupport the rehabilitation of borrowers who are encountering
financial difficulties, with the intention of ensuring the recoveryof the loans by providing more flexible repayment terms forthe borrowers (such as reducing the rate of interest or
suspending the payment of principal/interest, etc.) or loans
which are not classified in any of the above categories.
The amounts presented in the table above are stated before
the provision of specific loan loss reserves.

9. Foreign Exchange Assets
Foreign exchange assets at 31st March, 2016 and 2015
consisted of the following:

2015

Thousands of
U.S. dollars

Millions of yen
2016
Due from foreign correspondent banks

2015

2016

¥5,663 ¥5,151 $50,257

Foreign bills of exchange bought

215

429

1,908

Foreign bills of exchange receivable

572

740

5,076

Total

¥6,451 ¥6,321 $57,250

Other assets at 31st March, 2016 and 2015 consisted of thefollowing:Thousands of
U.S. dollars

Millions of yen

Delinquent loans

Delinquent loans represent non-accrual loans other than (i)loans to bankrupt borrowers and (ii) loans on which interest
payments have been suspended in order to assist or facilitate
the restructuring of borrowers who are experiencing financial
difficulties.

10. Other Assets

Risk monitored loans:
Risk monitored loans which were included in loans and bills
discounted at 31st March, 2016 and 2015 consisted of thefollowing:

2016

Loans to bankrupt borrowers represent non-accrual loans toborrowers who are legally bankrupt as defined in Articles
96-1-3 and 96-1-4 of the Order for Enforcement of the
Corporation Tax Act (the “Tax Act”) (Article 97 of the 1965
Cabinet Order).

2016

2016

¥2,628 ¥3,522 $23,322

Thousands of
U.S. dollars

Millions of yen
Investment in leased assets

2015

2016

¥14,658 ¥15,085 $130,085

50,252

54,195445,970

Other receivables

25,56326,082

226,8635–44

Accrued income

6,130

6,934

54,401

12,834

13,538113,897

Prepaid expenses

499

302

4,428

16,914

17,429150,106¥65,721 ¥71,255 $583,253

Other
Total

¥63,765 ¥65,835 $565,894

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201642

11. Tangible Fixed Assets

13. Deposits

At 31st March, 2016 and 2015, accumulated depreciation of
tangible fixed assets was ¥44,075 million ($391,151 thousand)and ¥45,130 million, respectively.
Under the Tax Act, capital gains arising from the exchange orreplacement of assets under certain conditions are permitted
to be deducted from the cost of tangible fixed assets in orderto obtain certain tax benefits. The amount deducted from thecost of tangible fixed assets at 31st March, 2016 and 2015was ¥376 million ($3,336 thousand) and ¥377 million,
respectively.

Deposits at 31st March, 2016 and 2015 consisted of thefollowing:Thousands of
U.S. dollars

Millions of yen
2016
Securities

2015

2016

¥348,435 ¥379,009 $3,092,252

Loans and bills discounted

45,23147,477401,411

Other assets

1,136

1,277

10,081The liabilities secured by the above pledged assets at 31st
March, 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2016
Deposits

2015

2016

¥6,828 ¥7,718 $60,596

Payables under securities
lending transactions

211,509251,176

1,877,076

Borrowed money

25,18899,094

223,535

Other liabilities

343

86

3,044

In addition to the pledged assets listed above, certain othersecurities were pledged as collateral for domestic exchangetransactions or as margins on futures contracts. Theseamounted to ¥28,004 million ($248,526 thousand) and¥29,003 million at 31st March, 2016 and 2015, respectively.
At 31st March, 2016 and 2015, margins on futures contracts inthe amounts of ¥3,575 million ($31,727 thousand) and ¥2,532
million, guarantee deposits of ¥4,749 million ($42,145
thousand) and ¥5,190 million, deposits for futures transactionsof ¥503 million ($4,463 thousand) and ¥503 million andcollateral money deposited for financial instruments of¥– million ($– thousand) and ¥1,000 million were included in“Other assets”, respectively.

43

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 20162016¥171,423 ¥165,353 $1,521,325

Ordinary deposits

2,010,283

1,958,234

17,840,637

Savings deposits

24,612

25,626

218,423

Deposits at notice

11,11028,996

98,5972,472,242

2,491,375

21,940,379

40,40367,536

358,564

Time deposits
Total

Assets pledged as collateral at 31st March, 2016 and 2015
consisted of the following:

2015

2016
Current deposits

Other deposits

12. Assets Pledged

Thousands of
U.S. dollars

Millions of yen¥4,730,075 ¥4,737,122 $41,977,946

14. Borrowed Money
Borrowed money at 31st March, 2016 and 2015 consisted ofborrowings from the Bank of Japan and certain other financial
institutions.
Subordinated borrowings of ¥17,000 million ($150,869
thousand) and ¥17,000 million were included in borrowed
money at 31st March, 2016 and 2015, respectively.
The average interest rate applicable to borrowed money at
31st March, 2016 and 2015 was 0.84% and 0.42%,
respectively.
The aggregate annual maturities of borrowed money
subsequent to 31st March, 2016 were summarized as follows:Year ending 31st March,Millions of yen

Thousands of
U.S. dollars

2017¥49,174$436,403

2018

2,290

20,323

2019

1,556

13,8092020

13,407

118,982

2021

2,752

24,4232022 and thereafter

17,036

151,189¥86,216$765,140

Total

SENSHU IKEDA HOLDINGS,INC.

15. Foreign Exchange Liabilities

17. Other Liabilities

Foreign exchange liabilities at 31st March, 2016 and 2015
consisted of the following:

Other liabilities at 31st March, 2016 and 2015 consisted of thefollowing:Thousands of
U.S. dollars

Millions of yen
2015

2016
Foreign bills sold

2016

2016

¥423 ¥518 $3,753

Foreign bills of exchange payable
Total

20

6

53

¥429 ¥538 $3,807

Thousands of
U.S. dollars

Millions of yen
Accrued expenses
Unearned income
Accrued income taxes
Other
Total

2015

2016

¥3,788 ¥4,370 $33,617
16,032

16,223

386

1,182

3,425

23,28023,347

206,602142,279¥43,488 ¥45,123 $385,942

16. Corporate Bonds and Notes
Short-term and long-term bonds payable at 31st March, 2016
and 2015 consisted of the following:
Millionsof yenIssuerDescription

Issued2016

The Senshu Ikeda
Bank, Ltd.

1st subordinated bonds

17th Dec., 2010

¥–
10,000

2nd subordinated bonds

21st Sep., 2011

3rd subordinated bonds

16th Dec., 2011

5,000

4th subordinated bonds

23rd Mar., 2012

20,000

5th subordinated bonds

25th Sep., 2013

10,000

6th subordinated bonds

27th Dec., 2013

10,000

Total

Issuer¥55,000Millions Thousands ofof yenU.S. dollars Interest
2015

2016

rates (%)

The Senshu Ikeda ¥15,000 $–Bank, Ltd.
10,00088,746

–

Total

5,000

44,373

Secured/unsecured
–

Due
–

2.01

Unsecured 21st Sep., 2021

2.06

Unsecured 16th Dec., 2021

20,000177,493

2.23

Unsecured 23rd Mar., 2022

10,00088,746

1.40

Unsecured 25th Sep., 2023

10,00088,746

1.35

Unsecured 27th Dec., 2023

¥70,000 $488,107

The aggregate annual maturities of short-term and long-termbonds payable subsequent to 31st March, 2016 weresummarized as follows:Year ending 31st March,Millions of yen

Thousands of
U.S. dollars

2017

¥–

$–

2018

–

–

2019

–

–

2020

–

–

2021

–

–

55,000488,107¥55,000$488,1072022 and thereafter
Total

The amounts of lease obligations included in “Other” were ¥17
million ($150 thousand) and ¥21 million at 31st March, 2016
and 2015, respectively. The average interest rates on leaseobligations at 31st March, 2016 with maturity dates on or
before and subsequent to 31st March, 2017 were 2.11% and2.53%, respectively. The average interest rates on leaseobligations at 31st March, 2015 with maturity dates on or
before and subsequent to 31st March, 2016 were 2.18% and1.99%, respectively.
The aggregate annual maturities of lease obligations
subsequent to 31st March, 2016 were summarized as follows:Year ending 31st March,Millions of yen

Thousands of
U.S. dollars

2017

¥8

$70

2018

4

35

2019

2

17

2020

1

8

2021

1

8

2022 and thereafter

–

–

¥17

$150

Total

18. Retirement Benefit Plans
Outline of the retirement benefit plan adopted by the Company
The consolidated subsidiaries have adopted funded defined
benefit plans to cover the payment of retirement benefits toemployees.
As for the defined benefit pension plans (funded) of theconsolidated subsidiaries, lump-sum benefits or pensions areprovided depending on the service years, etc. Retirement
benefit trust is established for the defined benefit pension
plan.

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201644

As for lump-sum payment plans of the consolidated
subsidiaries (which are unfunded plans, but after theestablishment of retirement benefit trust scheme, havebecome funded plans), lump-sum payments are made as
retirement benefits depending on the service years, etc.
Certain consolidated subsidiaries have adopted lump-sum
payment plans (all unfunded) as defined benefit plans, where
net defined benefit liability and retirement benefit expenses
are calculated by the simplified method.

Thousands of
U.S. dollars

2015

2016

2016

Retirement benefit obligation at¥30,625 ¥31,304 $271,787
beginning of the year
Cumulative effect of change inaccounting policy
Balance at the beginning ofcurrent period which reflects
the change in accounting
policy

–

(723)

2015

2016
Funded retirement benefit
obligation

Unfunded retirement benefit
obligation
Net amount of liability andasset on consolidatedbalance sheets(46,795)(46,502)(415,291)(12,416)(16,014)(110,188)

138

137

1,224

¥(12,277) ¥(15,877) $(108,954)
Thousands of
U.S. dollars

2015

2016
Net defined benefit asset

2016¥34,378 ¥30,488 $305,094

Millions of yen–
Net defined benefit liability

2016¥741 ¥137 $6,576(13,018)(16,014)(115,530)

30,62530,581

271,787

Service cost

795

793

7,055

Interest cost

410

395

3,638

Net amount of liability and asset
on consolidated balance¥(12,277) ¥(15,877) $(108,954)
sheets(4) Retirement benefit expenses consisted of the following:

Actuarial gain or loss incurred
during the year

4,150

433

36,829Payment of retirement benefits(1,478)(1,592)(13,116)

13

13

115

Other

Retirement benefit obligation at¥34,517 ¥30,625 $306,327
end of the year(2)	Reconciliation of the beginning balance to the endingbalance of pension plan assets
Thousands of
U.S. dollars

Millions of yen
2016
Pension plan assets at
beginning of the year

2015

2016

¥46,502 ¥37,680 $412,690

Expected return on plan assets

867

735

Actuarial gain or loss incurred
during the year

(1,109)7,490(9,842)Contributions from employer

1,730

1,750

15,353

Payment of retirement benefits(1,195)(1,154)(10,605)

Pension plan assets at end of
the year45

Thousands of
U.S. dollars

Millions of yen

Pension plan assets(1)	Reconciliation of the beginning balance to the endingbalance of retirement benefit obligation
Millions of yen(3)	Reconciliation of the ending balance of retirement benefit
obligation and pension plan assets to the consolidatedbalance sheet amounts of net defined benefit liability and
asset

7,694

¥46,795 ¥46,502 $415,291

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

Thousands of
U.S. dollars

Millions of yen
2015

2016
Service cost2016

¥795 ¥793 $7,055

Interest cost

410

395

3,638

Expected return on plan
assets

(867)

(735)

(7,694)

Amortization of actuarial loss

(793)

201

(7,037)

Amortization of prior service
cost

(336)

(336)

(2,981)

Amortization of transitional
obligation

–

659

–

Net periodic retirement
benefit expenses fordefined benefit pensionplans¥(790) ¥978 $(7,011)

SENSHU IKEDA HOLDINGS,INC.

(5)	Remeasurements of defined benefit plans included inother comprehensive income	Remeasurements of defined benefit plans included inother comprehensive income (before related tax effects)
consisted of the following:Thousands of
U.S. dollars

Millions of yen
2015

2016
Prior service cost
Actuarial gain or loss

Total

(6,053)

7,258(53,718)

–

659

–

¥(6,389) ¥7,581 $(56,700)(6)	Remeasurements of defined benefit plans included inaccumulated other comprehensive income
Remeasurements of defined benefit plans included inaccumulated other comprehensive income (before related
tax effects) consisted of the following:
Millions of yen
2015

2016
Unrecognized prior service
cost
Unrecognized actuarial gain or
loss
Total

Thousands of
U.S. dollars
2016¥(1,777) ¥(2,113) $(15,770)(7,052)(999)(8,865)¥(2,776) ¥(9,166) $(24,636)(7) Matters related to pension plan assets1)	Ratio of the main components in the total pension plan
assets are as follows:
2015

2016

Discount rate

2016

2015

0.01%-0.65%

0.08%-1.91%

Expected rate of return on plan
assets2.5%

2.5%

Expected rate of salary increase

1.72%-3.80%

1.66%-3.45%

2016¥(336) ¥(336) $(2,981)

Net retirement benefit
obligation at transition(8) The assumptions used for actuarial calculations

Bonds

11%

10%

Stocks60%

61%

Short-term investment fundincluding cash and deposits

14%

14%

Life insurance company
general accounts

4%4%

Others

11%

11%

Total

100%

100%

Note:
Total pension plan assets include retirement benefit trust ofwhich securities are contributed for the pension plan, which
accounts for 36% and 34% of the total at 31st March, 2016
and 2015, respectively.

19. Asset Retirement Obligations
Notes concerning asset retirement obligations are omitted due
to lack of significance of its total amount.

20. Contingent Liabilities
Contingent liabilities for guarantee of corporate bonds
included in “Securities,” which were issued by private
placement (Article 2, Paragraph 3 of the Financial Instruments
and Exchange Act of Japan) amounted to ¥3,429 million($30,431 thousand) and ¥4,247 million at 31st March, 2016
and 2015, respectively.

21. Shareholders’ Equity
Japanese banks, including the Company, are required tocomply with the Banking Act and the Act. The Act stipulates
that neither additional paid-in capital nor the legal reserve isavailable for dividends, but that both may be used to reduceor eliminate a deficit. Under the Banking Act, an amount which
is at least equal to 20% of the aggregate amount of cash
dividends and certain appropriations of retained earnings
associated with cash outlays applicable to each fiscal period
is to be appropriated to the legal reserve until the aggregate
amount of the legal reserve and the capital surplus accountequals 100% of the amount of share capital. The Act also
provides that if the aggregate amount of additional paid-in
capital and the legal reserve exceeds 100% of the amount ofshare capital, the excess may be distributed to theshareholders either as a return of capital or as dividends
subject to the approval of the shareholders.
The maximum amount which the Company can distribute as
dividends is calculated based on the non-consolidated
financial statements of the Company and in accordance with
the Act.

2)	Setting of long-term expected rates of return on plan
assetsFor the purpose of determining the long-term expected
return on plan assets, the present and anticipatedallocation of plan assets and the present and expectedlong-term rates of return on various assets composing
the plan assets are taken into account.

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201646

(1) Class and number of shares issued and treasury stock
Movements in common stock, second-class preferredstock, third-class preferred stock, first series of seventhclass preferred stock and treasury stock during the years
ended 31st March, 2016 and 2015 were summarized asfollows:
Number of shares (in thousands)
Year ended 31st
March, 2016

1st April,
31st March,2015 Increase Decrease 2016

Note

Outstanding shares:
Common stock

238,458

42,550–281,008 1

Second-class preferred stock

23,125–23,125– 2

Third-class preferred stock

7,500

–

–

7,500

first series of seventh-class preferred stock–

25,000–25,000 3

269,083

67,55023,125

Total

313,508

Treasury stock:
Common stock
Second-class preferred stock
Total

438

5,507

328

–

23,12523,125438

28,632

23,4535,616 4,5 and 6– 7 and 8
5,616

Notes:
1.	Increase in outstanding shares of common stock (42,550
thousand shares) was due to issuance of new sharesthrough a public offering (37,000 thousand shares) andthrough a third-party allotment (5,550 thousand shares).
2.	Decrease in outstanding shares of second-class preferredstock (23,125 thousand shares) was due to retirement oftreasury stock.
3.	Increase in outstanding shares of the first series of seventhclass preferred stock (25,000 thousand shares) was due toissuance of new shares through a third-party allotment.
4.	The number of treasury stock as of 1st April, 2015 and as of
31st March, 2016 includes the Company’s shares owned by
the trust of 196 thousand shares and 5,377 thousand
shares, respectively.
5.	Increase in treasury stock of common stock (5,507 thousand
shares) was due to acquisition of shares from theshareholders who owned fractional shares less than one
unit (3 thousand shares) and acquisition of shares from theSenshu Ikeda Bank Employees’ Shareholders Association
Exclusive Trust Account (5,503 thousand shares).
6.	Decrease in treasury stock of common stock (328 thousand
shares) consisted of disposal of shares following theacquisition request from the shareholders who owned
fractional shares less than one voting right (0 thousand
shares), transfer due to exercise of stock option (6 thousand
shares) and transfer to the Senshu Ikeda Bank Employees’
Shareholders Association (322 thousand shares).
7.	Increase in treasury stock of second-class preferred stock(23,125 thousand shares) was due to purchase of treasury
stock based on resolution of the Board of Directors.
8.	Decrease in treasury stock of second-class preferred stock(23,125 thousand shares) was due to retirement of treasury
stock based on resolution of the Board of Directors.

47

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

Number of shares (in thousands)
Year ended 31st
March, 2015

1st April,
31st March,2014 Increase Decrease 2015

Note

Outstanding shares:
Common stock

238,458––

238,458

Second-class preferred stock

23,125––23,125

Third-class preferred stock

7,500

–

–

7,500

269,083––

269,083

Common stock

1,269

203

1,034

438 1,2 and 3

Total

1,269

203

1,034

438

Total
Treasury stock:

Notes:
1.	The number of treasury stock as of 1st April, 2014 and as of
31st March, 2015 includes the Company’s shares owned by
the trust of 1,175 thousand shares and 196 thousand
shares, respectively.
2.	Increase in treasury stock of common stock (203 thousand
shares) was due to acquisition of shares based on
resolution of the Board of Directors (200 thousand shares)
and acquisition of shares from the shareholders who owned
fractional shares less than one unit (3 thousand shares).
3.	Decrease in treasury stock of common stock (1,034
thousand shares) consisted of disposal of shares following
the acquisition request from the shareholders who owned
fractional shares less than one voting right (0 thousand
shares), transfer due to exercise of stock option (54thousand shares) and transfer to the Senshu Ikeda Bank
Employees’ Shareholders Association (979 thousand
shares).
(2) Stock subscription rights
The Company resolved to grant stock subscription rights(stock option) to certain directors and executive officers
of its subsidiaries at the Board of Directors’ meeting heldon, 29th July, 2015, 30th July, 2014, 31st July, 2013, 31st
August, 2012, 28th July, 2011 and 24th February, 2011.
The balance of stock subscription rights granted for stock
option program are ¥91 million ($807 thousand) and ¥69
million at 31st March, 2016 and 2015, respectively.
Stock option related expenses for the years ended 31st
March, 2016 and 2015 amounted to ¥25 million ($221
thousand) and ¥26 million, respectively.

SENSHU IKEDA HOLDINGS,INC.

The stock option activity is as follows:

The stock option outstanding at 31st March, 2016 is asfollows:
Date of resolution
Persons granted

24th February, 2011
Directors of thesubsidiaries: 

22

Executive officers of
the subsidiaries: 19

28th July, 2011
Directors of thesubsidiaries: Date of resolution
16

Executive officers of
the subsidiaries:18

24th
28th
February, July,
2011
2011

31st
August,
2012

31st
July,
2013

30th
July,
2014

29th
July,
2015

17,12018,70034,00039,20054,400–Non-vested:
31st March,
2015-Outstanding

Number of stock option
by type of shares (*)

Common stock:
Common stock:
84,78072,760Granted

–

–

–

–

Forfeited

–

–

–

–

–

–

Date of grant

15th March, 2011

31st August, 2011

Vested

1,100

1,060

1,400

1,200

1,300

–

Vesting conditions

To exercise within 10
days after retirement

To exercise within 10
days after retirement

31st March,
2016-Outstanding

16,02017,64032,60038,00053,100 51,800

Applicable service
periodFrom 15th March, 2011 to
the date of retirement

From 31st August, 2011 to
the date of retirement

Vested:Exercise period

From 16th March, 2011
to 31st July, 2041

From 1st September,2011 to 31st July, 2041

–

–

–

–

–

–

Vested

1,100

1,060

1,400

1,200

1,300

–

Exercised

1,100

1,060

1,400

1,200

1,300

–

Forfeited

–

–

–

–

–

–

–

–

–

–

–

–

Date of resolution
Persons granted

31st August, 2012
Directors of thesubsidiaries: 

31st July, 2013

Directors of the
10 subsidiaries: 

Executive officers of
the subsidiaries: 16

10

Executive officers of
the subsidiaries: 16

31st March,
2015-Outstanding

31st March,
2016-Outstanding(*)	The number of stock options is converted into the numberof shares after the one-for-five reverse stock split ofcommon stock on 1st August, 2012.

Number of stock option
by type of shares (*)

Common stock:
Common stock:69,50053,800Date of grant

1st October, 2012

2nd September, 2013

Vesting conditions

To exercise within 10
days after retirement

To exercise within 10
days after retirement

Applicable service
periodFrom 1st October, 2012 to From 2nd September, 2013 to
the date of retirement
the date of retirement

Date of resolution

Exercise period

From 2nd October, 2012 From 3rd September,
to 31st July, 2042
2013 to 31st July, 2043

Exercise priceDate of resolution
Persons granted

30th July, 2014
Directors of thesubsidiaries: 

29th July, 2015
Directors of the
10 subsidiaries: 

Executive officers of
the subsidiaries: 15

10

Price information is as follows:

Common stock:
Common stock:55,90051,800Date of grant

28th August, 2014

1st September, 2015

Vesting conditions

To exercise within 10
days after retirement

To exercise within 10
days after retirement

Applicable service
periodFrom 28th August, 2014 to From 1st September, 2015 to
the date of retirement
the date of retirement

Exercise period

From 29th August, 2014
to 31st July, 2044

From 2nd September, 2015
to 31st July, 2045(*)	The number of stock options is converted into the numberof shares after the one-for-five reverse stock split ofcommon stock on 1st August, 2012.

24th
28th
February, July,
2011
2011

31st
August,
2012

31st
July,
2013

¥1 ¥1 ¥1 ¥1 ¥Average stock priceat exercise
Fair value price at
grant date

Executive officers of
the subsidiaries: 14

Number of stock option
by type of shares (*)– 51,800

Date of resolution
Exercise price

554

554

554

554

¥490 ¥535 ¥449 ¥430 ¥

24th
28th
February, July,
2011
2011

31st
August,
2012

31st
July,
2013

30th
July,
2014
1 ¥

29th
July,
2015
1

554

–

497 ¥

474

30th
July,
2014

29th
July,
2015

$0.00 $0.00 $0.00 $0.00 $ 0.00 $ 0.00

Average stock priceat exercise
Fair value price at
grant date

4.91

4.91

4.91

4.91

4.91

–

$4.34 $4.74 $3.98 $3.81 $ 4.41 $ 4.20

Note:
The impact of the one-for-five reverse stock split ofcommon stock on 1st August, 2012 is taken into
consideration.

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

48

The method for estimating the fair value price of 2015 stock
option granted in the year ended 31st March, 2016 was asfollows:
Measurement method: Black-Scholes model
Major fundamental factors and assumptions used to measurefair value
Date of resolution

Other income for the years ended 31st March, 2016 and 2015
consisted of the following:

24.58%

Thousands of
U.S. dollars

Millions of yen
2015

2016

29th July, 2015

Volatility of stock price *1

2016

Gain on sales of equity securities ¥7,773 ¥3,907 $68,982
Gain on money held in trust

1,869

1,707

16,586

Estimated dividend *3

2.885%

Other

8,923

9,439

79,188Interest rate with risk free *40.015%

Total

Estimated remaining outstanding period *2

3.146years*1	Actual stock price during the period (from 9th July, 2012 to
1st September, 2015) corresponding to the estimatedremaining outstanding period*2	For each director or executive officer in office, the difference
between “the average term of office of retired directors or
executive officers” and “the years in office of the director or
executive officer at the time stock options were granted”
was calculated, and if said difference was less than 0.8
years, the average of the estimated remaining outstanding
period was calculated using 0.8 years, by taking into
account the period remaining to the next annual
shareholders’ meeting.
*3	¥15 ($0.13) of latest annual dividend (including the effect ofreverse stock split) /¥520 ($4.61) of stock price on the basedate*4	Yield of Japanese government bonds approximating theestimated remaining outstanding period
In estimating the vested number of stock options, theCompany basically reflects only the actual forfeited number,since it is difficult to make a reasonable estimate on the future
forfeited number.

22. Other Operating Income
Other operating income for the years ended 31st March, 2016
and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2016
Gain on sales of securities andtrading account securities
Other
Total

49

23. Other Income

2015

2016

¥5,834 ¥10,074 $51,774
2,698

962

23,943¥8,532 ¥11,036 $75,718

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

¥18,567 ¥15,054 $164,776

24. Other Operating Expenses
Other operating expenses for the years ended 31st March,2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2015

2016

2016

Loss on sales of debt securities ¥11,631 ¥12,323 $103,221
Other
Total

–

2,027

–

¥11,631 ¥14,350 $103,221

25. Other Expenses
Other expenses for the years ended 31st March, 2016 and2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2016

2015

2016

Write-offs of loans and bills discounted ¥4,137 ¥4,720 $36,714
Loss on sales of equity securities

367

511

3,257

Loss on devaluation of equity securities

204

95

1,810

Loss on money held in trust

276

37

2,449

Other

7,872

7,555

69,861

Total¥12,858 ¥12,920 $114,110

SENSHU IKEDA HOLDINGS,INC.

26. Dividends

Cash dividends paid during the fiscal year ended 31st
March, 2015

Cash dividends paid during the fiscal year ended 31st
March, 2016

Resolution by annual shareholders’ meeting on 30th June, 2014
Dividend amount Dividends per share

Resolution by annual shareholders’ meeting on 26th June, 2015

Type ofstock

Dividend amount Dividends per share
Type ofstock
Commonstock

Recorddate

Effective Millions Thousands ofdateof yen U.S. dollars

Yen

U.S.
dollars

31st March, 29th June,¥3,573 $31,709 ¥15 $0.13
2015
2015

Second-class
31st March, 29th June,¥1,020 divided
preferred stock
2015
2015
¥1,275 $11,315
by 18.5 $9.05
Third-class
31st March, 29th June,¥530 $ 4,703 ¥70.7 $0.62
preferred stock
2015
2015

Note:
The amount of cash dividends on common stock by resolutionof annual shareholders’ meeting on 26th June, 2015 includes
the ¥2 million ($17 thousand) in cash dividends on the
Company’s shares owned by the trust.

Commonstock

Recorddate

Effective Millions Thousands ofdateof yen U.S. dollars

Yen

U.S.
dollars

31st March, 30th June,
2014
2014
¥3,575 $29,749 ¥15 $0.12

Second-class
31st March, 30th June,¥1,020 divided $8.48 divided¥1,275 $10,609
by 18.5by 18.5
preferred stock
2014
2014

Cash dividends with record dates falling in the fiscal year
ended 31st March, 2015 and effective dates coming after
the end of the fiscal year
Source ofdividends

Types of stock
Common stock

Record date

Effective date

Retained earnings 31st March, 2015 29th June, 2015

Second-class
Retained earnings 31st March, 2015 29th June, 2015
preferred stock
Third-class
Retained earnings 31st March, 2015 29th June, 2015
preferred stock

Resolution by Board of Directors on 11th November, 2015
Dividend amount Dividends per share
Type ofstock
Commonstock

Recorddate

Effective Millions Thousands ofdateof yen U.S. dollars

Yen

U.S.
dollars

30th September, 7th December,¥2,105 $18,681 ¥7.50 $
2015
2015

0.06

Third-class
30th September, 7th December,preferred stock
2015
2015
¥262 $ 2,325 ¥35.00 $

0.31

First series of seventh- 30th September, 7th December,¥362 $ 3,212 ¥14.51 $
class preferred stock
2015
2015

0.12

Cash dividends with record dates falling in the fiscal year
ended 31st March, 2016 and effective dates coming after
the end of the fiscal year
Source ofdividends

Types of stock
Common stock

Record date

Effective date

Retained earnings 31st March, 2016 29th June, 2016

27. Cash and Cash Equivalents
A reconciliation of cash and due from banks in theaccompanying consolidated balance sheets to cash and cash
equivalents in the accompanying consolidated statements ofcash flows at 31st March, 2016 and 2015 was summarized asfollows:
Millions of yen
2016
Cash and due from banks
Deposits other than deposits
with the Bank of Japan
Cash and cash equivalents

2015

Thousands of
U.S. dollars
2016¥460,293 ¥544,513 $4,084,957(6,324)(12,028)(56,123)¥453,968 ¥532,484 $4,028,824

Third-class
Retained earnings 31st March, 2016 29th June, 2016preferred stock
First series of seventh- Retained earnings 31st March, 2016 29th June, 2016class preferred stock
Dividend amountMillionsof yenTypes of stockThousands of
U.S. dollars

Dividends per share
Yen

U.S. dollars¥2,105 $

18,681 ¥

7.50 $0.06

Third-classpreferred stock ¥

262 $

2,325 ¥

35.00 $0.31

First series of seventhclass preferred stock ¥

375 $

3,328 ¥

15.00 $0.13

Common stock

28. Leasesa.

Finance leases
As Lessee
Information on finance leases is omitted due to lack ofsignificance.

Note:
The amount of cash dividends on common stock by resolutionof annual shareholders’ meeting on 28th June, 2016 includes
the ¥40 million ($354 thousand) in cash dividends on the
Company’s shares owned by the trust.

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

50

b.

A reconciliation of the statutory tax rate to the effective tax rate
for the years ended 31st March, 2016 and 2015 was asfollows:

Operating leases
As Lessee
Future minimum lease payments under non-cancellable
operating leases subsequent to 31st March, 2016 wereas follows:Year ending 31st MarchMillions of yen

Thousands of
U.S. dollars

2017

¥752

$6,6732018 and thereafter
Total

4,368

38,764¥5,120$45,438

29. Income Taxes
Income taxes applicable to the Company and its domestic
subsidiaries comprise corporate tax, inhabitants’ taxes andenterprise tax which, in the aggregate, resulted in a statutory
tax rate of 33.0% and 35.5% for the years ended 31st March,2016 and 2015, respectively.
The tax effect of temporary differences which gave rise tosignificant portions of the deferred tax assets and liabilities at
31st March, 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2016

2015

2016

Deferred tax assets:
Reserve for possible loan losses ¥16,377 ¥28,533 $145,340
Provision for employees’ bonuses

555

558

Net defined benefit liability

229

47

2,032

Loss on devaluation of securities

4,174

4,765

37,042

Tax loss carryforwards

13,803

8,220

122,497

665

689

5,901

Depreciation

4,925

Net unrealized loss on availablefor-sale securities

110

1

976

Other

2,759

3,352

24,485Gross deferred tax assets

38,676

46,167343,237

Valuation allowance(16,650)(20,430)(147,763)

Total deferred tax assets

22,02525,737

195,465

Non-taxable accrued dividend income

(222)

(264)

(1,970)Net unrealized gain on availablefor-sale securities(7,358)(6,922)(65,299)

Net defined benefit asset(240)(1,419)(2,129)

Other

(133)

(27)

(1,180)(7,954)(8,634)(70,589)

Deferred tax liabilities:

Total deferred tax liabilities
Net deferred tax assets

51¥14,070 ¥17,103 $124,866

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

2015

2016
Statutory tax rate

33.0%

35.5%

Permanently non–taxable income

(0.5)

(1.3)

Permanently non–deductible expenses

0.2

0.3

(13.1)(50.2)Per capita portion of inhabitants’ taxes

0.5

0.5

Unused tax loss carryforwards that
had expired

–

18.3

Valuation allowance

Deduction limit of tax loss
carryforwards

0.3

6.1

Decrease in deferred tax assets due
to changes in tax rate

4.7

12.0

Other

(0.7)

(2.5)

Effective tax rate

24.4%

18.7%

The “Act for Partial Amendment of the Income Tax Act” (ActNo. 15, 2016) and “Act for Partial Amendment of the Local Tax
Act” (Act No. 13, 2016) were enacted in the Diet session on
29th March, 2016, and the corporate tax rates, etc. werelowered from the year beginning on or after 1st April, 2016.
Accordingly, the effective statutory tax rate used to calculatedeferred tax assets and deferred tax liabilities was changed
from 32.21% to 30.81% with respect to the temporary
differences expected to be eliminated in the year beginningon 1st April, 2016 and the year beginning on 1st April, 2017or
30.58% with respect to the temporary differences expected tobe eliminated in the year beginning on or after 1st April, 2018.
Due to such change in tax rate, deferred tax assets decreasedby ¥709 million ($6,292 thousand), deferred tax liabilities
decreased by ¥9 million ($79 thousand), net unrealized gain
(loss) on available-for-sale securities increased by ¥393
million ($3,487 thousand), net unrealized gain (loss) on
deferred hedges decreased by ¥3 million ($26 thousand), andincome taxes-deferred increased by ¥1,090 million ($9,673
thousand). From the year beginning on or after 1st April, 2016,
the amount of deductible losses carried forward is limited up
to the amount corresponding to 60/100 of income before
deduction of losses carried forward. The limitation will bechanged to the amount corresponding to 55/100 of income
before deduction of losses carried forward for the year
beginning on or after 1st April, 2017. Following the change,deferred tax assets decreased by ¥60 million ($532 thousand)and income taxes-deferred increased by ¥60 million ($532
thousand).

SENSHU IKEDA HOLDINGS,INC.

30. Comprehensive Income
Reclassification adjustments and tax effect amounts of othercomprehensive income for the year ended 31st March, 2016
and 2015 were as follows:

2015

Thousands of U.S. dollars
Lending

2016(1,661)(595)(14,740)

Amount before tax effect

1,144

25,315

10,152

Tax effect amount(491)(4,056)(4,357)Net unrealized gain (loss) on
available-for-sale securities

Total

652

21,2585,786(5,573)b. Information about geographical areas(i) Income
Information about income has not been presented
as income from external customers inside Japanaccounts for more than 90% of the consolidated
income for the years ended 31st March, 2016 and2015.

Unrealized gain (loss) on deferred hedges:
Amount for the year

(628)

96

Reclassification adjustment

412

(91)

3,656

Amount before tax effect

(215)

4

(1,908)Tax effect amount

65

(0)

576

Net unrealized gain on
deferred hedges

(150)

4

(1,331)Remeasurements of defined
benefit plans(5,260)7,057(46,680)

Reclassification adjustment(1,129)524(10,019)

Amount before tax effect(6,389)7,581(56,700)

Tax effect amount

2,103(2,388)18,663Remeasurements ofdefined benefit plans(4,286)

5,193(38,036)(ii) Tangible fixed assets
Information about tangible fixed assets has notbeen presented as tangible fixed assets inside
Japan accounts for more than 90% of theconsolidated tangible fixed assets at 31st March,2016 and 2015.

Amount for the year

c. Information about main customers
Information about main customers has not beenpresented as there is no income from particularcustomer which accounts for more than 10% of theconsolidated income for the years ended 31st March,2016 and 2015.

Total other comprehensive income ¥(3,784) ¥(26,456) $(33,581)(2) Other information about reportable segments
Other information about reportable segments has notbeen presented as the Group is engaged only in banking
business for the years ended 31st March, 2016 and 2015.

31.	Segment Information and RelatedInformation
Segment information
Reportable segment information is omitted because the Groupis engaged only in banking business and “other” in ouroperating results, including leasing business was immaterial
for the years ended 31st March, 2016 and 2015.
(1) Related informationa. Information about services
For the year ended 31st March, 2016
Securities trading
and investment

Other

Total

Income from external¥45,467 ¥31,957 ¥32,921 ¥110,347
customers

For the year ended 31st March, 2015
Millions of yen
Securities trading
and investment

Other

32.	Related Party Transactions
There were no transactions between a consolidated subsidiaryand related parties for the years ended 31st March, 2016 and2015.

33.	Financial Instruments and Related
Disclosures

Millions of yen

LendingOther¥2,806 ¥25,911 $24,902

Reclassification adjustment

Lending

Securities trading
and investment

Income from external$403,505 $283,608 $292,163 $979,295
customers

Unrealized gain (loss) on
available-for-sale securities:
Amount for the year

For the year ended 31st March, 2016

Thousands of
U.S. dollars

Millions of yen
2016

Note:
“Income” is presented in lieu of net sales presented by
non-financial companies.

Total

Income from external¥48,164 ¥31,153 ¥35,007 ¥114,324
customers

1.

General Information(1) Policy for financial instruments
The Group, whose core operation is The Senshu Ikeda
Bank, Ltd. (the “Bank”), is engaged in the various
financial services as a regional financial institution. The
Group holds financial assets and liabilities which are
subject to fluctuations in the interest rates and market
prices in the principal businesses such as deposit-taking
SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201652

and lending services and market activities including
securities investment. In order to serve for setting up
strategic targets in response to the changes in market
environments, the Group conducts integrated asset andliability management (“ALM”) and utilizes derivative
contracts as a part of ALM.
(2) Contents of financial instruments and their risks
Financial assets held by the Group mainly consist of loans
to domestic corporate and individual customers, which
are exposed to credit risk arising from customers’
nonperformance of contractual obligations and interest
rate movement risk. Securities held by the Groupprincipally consist of equity securities, debt securities andinvestment trusts, which are held for pure investment
purpose and strategic investment purpose as availablefor-sale securities and partially, for holding to maturity andtrading purposes. These financial assets are exposed tocredit risk of issuers and market risk associated withinterest rates, stock prices and foreign exchanges.
Deposits which are major financial liabilities are exposed
to liquidity risk that unexpected cash flow might arise. In
addition, other fund raising sources are exposed to theliquidity risk that necessary fund might not be secured
when the Group fails to utilize the market under certain
circumstances, or that the Group might be obliged tofund at more unfavorable interest rates than normal. In
addition, these financial liabilities are exposed to the riskof fluctuations in interest rates as well as financial assets.
The Group uses derivative contracts to meet thecustomers’ needs and principally as a means of risk
control over the assets and liabilities. In addition, as apart of trading activities (to earn short-term trading gains),
futures instruments including equity and debt securities
are utilized. These derivatives are exposed to the credit
risk (counterparty risk) arising from customers’
nonperformance of contractual obligations and market
risk arising from the fluctuations in interest rates, stock
prices, foreign exchanges, etc.
(3) Risk management system for financial instruments
The Group has established the risk control department
independent from front offices and defines basic risk
management policies. Specifically, the risk management
system and various rules including the basic policy onrisk control are determined by the Board of Directors, andthe responsible functions by risk categories and theintegrated risk control function are clearly defined. In
addition, the “Risk Management Committee” and the“ALM Committee” have been established to monitor therisk profiles of the Group and discuss management issues
as well as risk control measures. And such matters arereported to the Board of Directors and accordingly,
effective risk management system at the managementlevel is structured.

53

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

a. Integrated risk management
The Group conducts integrated risk management inaccordance with the basic policy on risk control andvarious integrated risk control rules. Specifically, theGroup conducts integrated control by identifying therisks assessed by risk categories such as credit risk,
market risk and others including credit concentration
risk not considered in the computation process of thecapital ratio and interest rate risk of banking accounts
and compares them with management capacity(capital).
b. Credit risk management
The Group analyzes and controls the credit portfolio in
accordance with the Company’s policy on credit risk
control and various credit risk control rules. The Group
maintains and operates a system of investigation,internal rating, asset self-assessment in monitoring
individual transactions.
These credit control procedures are performed byeach operating office, credit investigation department
and risk control departments of the Bank. With respect
to credit risk of issuers of securities and counterparty
risk of derivative transactions, the risk control
departments of the Bank monitor the identification of
credit information and fair values. In addition, the risk
control department of the Company reports on aregular basis to the Board of Directors of the Company.
Furthermore the internal audit departments audit thestatus of credit control.
c. Market risk management(i) Market risk management
The Group controls market risk arising fromfluctuations in interest rates, stock prices, foreignexchanges, etc. in accordance with the Company’s
policy on market risk control and various market risk
control rules. Specifically, the risk control
department of the Company identifies the volume ofmarket risk using the Value-at-Risk (VaR) method
and monitors compliance with the risk limits
resolved by the Board of Directors throughcontinuous monitoring system. For securities, inaddition to above risk limit control policy, the Grouphas established and managed loss cut rules. The
relevant information is periodically reported by therisk control department to the Risk Management
Committee and the Board of Directors.
The ALM Committee identifies and confirms the
make-up of assets and liabilities and interest raterisk and discusses future measures. Specifically,
the responsible department of the Company for
ALM identifies comprehensively interest rates andperiods of financial assets and liabilities andmonitors using gap analysis and interest ratesensitivity analysis to secure stable and continuous
earnings.

SENSHU IKEDA HOLDINGS,INC.

The Bank executes foreign exchange transactions
and foreign currency bond investments, which areexposed to foreign exchange risk, but thesubsidiary strives to minimize foreign exchange risk
by balancing the foreign exchange positions where
possible.
(ii) Derivative transactions
With respect to derivative transactions, theCompany has established an internal control
system including segregation of duties of thedepartments responsible for execution oftransactions, risk control and operation
administration and complies with the various market
risk control rules.
(iii)Quantitative information of market risk
The Group monitors the value at market risk offinancial instruments, such as deposits, loans andbills discounted and securities, using VaR everyday
as the change in market risk is larger than otherrisks.
The Group calculates the value at market risk
according to the variance-covariance approach(holding period–120 business days, confidence
interval–99.0%, and observation period–240
business days).
The value of market risk on financial instrumentswas ¥39.9 billion ($354.1 million) for interest rateand ¥31.0 billion ($275.1 million) for stocks at 31st
March, 2016. The value of market risk as a wholewith correlation in consideration was ¥66.0 billion($585.7 million).
The Group carries out back-testing to compare themodel-calculating VaR of securities on the banking
activities which influenced by market fluctuation(holding period–one business day) with real gain
and loss in order to verify their accuracy. As real
loss exceeded the model-calculating VaR two times
for the year ended 31st March, 2016, the Groupconsiders that the model calculates the value ofmarket risk with sufficient confidence level.
However, VaR, which calculates the value of market
risk based on past fluctuations in the market,
sometimes cannot calculate the value of market risk
accurately under the condition that market
environment changes abruptly.
d. Liquidity risk management associated with fund raising
The Group conducts liquidity risk control for funding
activities in accordance with the Company’s policy on
liquidity risk control and various liquidity risk control
rules. Specifically, the department responsible for ALM
and the treasury department of the Bank identify theinvestment and funding status of the whole Group on atimely basis and control liquidity risk by securingliquidity of the assets, diversifying the funding
instruments and adjusting the short-term and longterm funding balances considering the market
environments to secure stable fund management.

The risk control department identifies its response
capability if liquidity risk is revealed through monitoring
periodically the amount of liquid reserve assets thatcan be readily converted into cash, monitors theappropriateness of its fund management and reports itto the Risk Management Committee and the Board of
Directors.
(4)	Supplementary explanation about fair value of financial
instruments
The fair value of financial instruments include, in addition
to the value determined based on the market price, avaluation calculated on a reasonable basis if no market
price is available. Since certain assumptions are used in
calculating the value, the result of such calculation mayvary if different assumptions are used.
2.

Fair value of financial instruments

The carrying value, the fair value and the difference as of 31st
March, 2016 and 2015 are summarized in the following tables:
Note that securities such as unlisted equity securities forwhich fair value is extremely difficult to determine were notincluded in the following tables (See (Note 2) below):
Millions of yen
31st March, 2016
Cash and due from banks

Carrying
value

Fair value Difference¥460,293 ¥460,293 ¥–Call loans and bills bought

885

885

–

Monetary claims bought (*1)

67

67

–

Trading account securities:
Trading securities
Money held in trust

221

221

–

27,00027,000–

Securities:
Held-to-maturity debt securities

75,702

76,168465

Available-for-sale securities

943,236

943,236–

3,736,050

3,751,477

15,427

6,450

6,451

0

Loans and bills discounted
Reserve for possible loan losses (*1)
Foreign exchange assets (*1)

3,765,182(29,131)

Total assets¥5,249,908 ¥5,265,802 ¥15,893

Deposits¥4,730,075 ¥4,730,284 ¥208

Negotiable certificates of deposit

3,800

3,800

Payables under securities
lending transactions–

211,509

211,509–

Borrowed money

86,21686,425209

Foreign exchange liabilities

429

429

–

Corporate bonds and notes

55,00055,805805

Total liabilities¥5,087,030 ¥5,088,254 ¥1,223

Derivative transactions (*2)
To which hedge accounting is
not applied
To which hedge accounting is applied
Total derivative transactions¥391 ¥391 ¥–
1,639

1,639

–

¥2,030 ¥2,030 ¥–

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

54

Millions of yen
31st March, 2015
Cash and due from banks

Carrying
value

Thousands of U.S. dollars

Fair value Difference

31st March, 2016

¥544,513 ¥544,513 ¥–Cash and due from banks

Carrying
value

Fair value Difference$4,084,957 $4,084,957 $–Call loans and bills bought

616

616

–

Call loans and bills bought

7,854

7,854

–

Monetary claims bought (*1)

80

80

–

Monetary claims bought (*1)

594

594

–

177

177

–

1,961

1,961

–

27,00027,000–239,616

239,616–

Trading account securities:
Trading securities
Money held in trust

Trading account securities:

Securities:

Trading securities
Money held in trust
Securities:

Held-to-maturity debt securities

83,30583,895590

Held-to-maturity debt securities

671,831675,967

4,126

Available-for-sale securities

1,048,590

1,048,590–

Available-for-sale securities

8,370,926

8,370,926–

33,156,283

33,293,193

136,90957,241

57,250–Loans and bills discounted
Reserve for possible loan losses (*1)
Foreign exchange assets (*1)

3,672,521

Loans and bills discounted(30,488)

Reserve for possible loan losses (*1)

3,642,033

3,654,870

12,837

6,320

6,321

0

Foreign exchange assets (*1)

33,414,820(258,528)

Total assets¥5,352,637 ¥5,366,065 ¥13,428

Total assets$46,591,302 $46,732,357 $141,045

Deposits¥4,737,122 ¥4,737,336 ¥213

Deposits$41,977,946 $41,979,801 $1,845

Negotiable certificates of deposit

1,543

1,543

–

Negotiable certificates of deposit

33,72333,723

Payables under securities
lending transactions

1,877,076

1,877,076–

Borrowed money

765,140

766,995

1,854

Payables under securities
lending transactions

251,176

251,176–

Borrowed money

159,198

159,638439–

Foreign exchange liabilities

538

538

–

Foreign exchange liabilities

3,807

3,807

–

Corporate bonds and notes

70,00071,336

1,336

Corporate bonds and notes

488,107495,252

7,144

Total liabilities¥5,219,580 ¥5,221,570 ¥1,989

Derivative transactions (*2)
To which hedge accounting is
not applied
To which hedge accounting is applied
Total derivative transactions

Total liabilities$45,145,811 $45,156,673 $10,853

Derivative transactions (*2)¥(1,121) ¥(1,121) ¥–
1,098

1,098

–

¥(22) ¥(22) ¥–

To which hedge accounting is
not applied
To which hedge accounting is applied
Total derivative transactions$3,470 $3,470 $–
14,545

14,545–$18,015 $18,015 $–(*1)	General and specific reserves for loan losses
corresponding to loans are deducted. With respect toreserve for loan losses related to monetary claims bought
and foreign exchange assets, carrying value is shown,net of reserve, since the amount is insignificant.
(*2)	Derivative transactions include all derivatives recorded inother assets and other liabilities. Assets and liabilities
arising from derivative transactions are shown on a net
basis.
(Note 1)	Valuation method for the fair value of financial
instruments
Assets:Cash and due from banks
The carrying value of due from banks without maturities ispresented as the fair value since the fair value approximatesthe carrying value. The carrying value of due from banks withmaturities is presented as the fair value since the fair value
approximates the carrying value due to remaining maturitiesof less than one year.

55

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

SENSHU IKEDA HOLDINGS,INC.

Call loans and bills bought
The carrying amount is presented as the fair value since thefair value approximates the carrying amount because thecontractual term is short (less than one year).
Monetary claims bought
Receivables related to factoring business are computed in thesame manner as loans.
Trading account securities
The fair value of securities such as debt securities held for
trading is determined using the quoted market price or the
price provided by counterparty financial institutions.
Money held in trust
For securities that are invested as part of trust assets in an
independently managed money trust with securities
management as the primary purpose, the fair value of equity
securities is determined using quoted market prices and thefair value of debt securities is determined using quoted market
prices or the prices provided by counterparty financial
institutions. Note that information on money held in trust byholding purpose is disclosed in Note 6.
Securities
The fair value of equity securities is determined using thequoted market prices and the fair value of debt securities isdetermined using the quoted market prices or the prices
provided by counterparty financial institutions. The fair valueof investment trusts is determined based on the published net
assets value. The fair value of privately placed guaranteedbonds issued by the Bank is determined in the same manner
as loans. Note that information on securities by holding
purposes is disclosed in Note 5.
Loans and bills discounted
The carrying value of the loans with floating interest rates,
which reflect short-term market interest rates, is presented as
the fair value since the fair value approximates the carrying
value as long as the creditworthiness of the borrower has notchanged significantly since the loan origination. The fair valueof the loans with fixed interest rates is determined based on
the aggregated value of principal and interest by categories
of types of loans, internal ratings and maturities discounted
using the interest rate assumed if the same loans were newly
originated. The carrying value of the loans with shortcontractual terms (less than one year) is presented as the fairvalue since the fair value approximates the carrying value.
Loan losses on receivables from bankrupt, effectively bankrupt
or likely to become bankrupt borrowers are estimated basedon factors such as the present value of expected future cash
flows or the expected amount to be collected from collateraland guarantees. Since the fair value of these items
approximates the carrying value, net of the currently expectedloan losses, such carrying value is presented as the fair value.
The carrying value of the loans which do not have defined
repayment due dates because the loans are limited to within
the amount of pledged assets is presented as the fair value

since the fair value approximates the carrying value
considering the expected repayment schedule and interest
rate conditions.
Foreign exchange assets
Foreign exchange assets consist of foreign currency deposits
with other banks (due from other foreign banks), export bills
and traveler’s checks, etc., (purchased foreign bills) and loans
on notes using import bills (foreign bills receivables). The
carrying value of these items is presented as the fair value,
since the fair value approximates the carrying value due tobeing deposits without maturity or having short contract terms(less than one year).
Liabilities:
Deposits and Negotiable certificates of deposit
The amount payable on demand as of the balance sheet date(i.e., the carrying value) is considered to be the fair value ofthe demand deposit. The fair value of time deposits isdetermined using the discounted present value of future cash
flows, grouped by certain maturity lengths. The discount rateused is the interest rate that would be applied to newly
accepted deposits. The carrying value of deposits whose
remaining maturity is within the short-term period (less than
one year) is presented as the fair value since the fair value
approximates the carrying value.
Payables under securities lending transactions
The carrying value is presented as the fair value since the fairvalue approximates the carrying value due to remaining
maturities of less than one year.
Borrowed money
The carrying value of floating rate borrowed money ispresented as fair value. This is because it reflects the market
interest rate in the short-term period, also the creditworthinessof the Company and the consolidated subsidiaries have notsignificantly changed since the borrowed money was
originated and accordingly fair value approximates the
carrying value. The fair value of fixed rate borrowed money iscalculated as the present value of expected future cash flows
from the aggregated value of principal and interest (theaggregated value of principal and interest using the interest
rate swap rate, in case of borrowings subject to special
treatment of hedge accounting for interest rate swaps) on
these borrowings grouped by certain maturity lengths, which
is discounted at an interest rate applicable to similarborrowings. The carrying value of borrowed money whose
remaining maturity is due within the short-term period (lessthan one year) is presented as the fair value since the fairvalue approximates the carrying value.
Foreign exchange liabilities
Foreign exchange liabilities consist of foreign bills sold andforeign bills payable. The carrying value is presented as thefair value since the fair value approximates the carrying value
due to remaining maturities of less than one year.

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201656

Corporate bonds and notes
The fair value of bonds and notes issued by the consolidated
subsidiary is determined using the market price.

(Note 3)	Repayment schedule of monetary receivables andsecurities with contractual maturities
Millions of yen

Derivative transactions:
31st March, 2016

See Note 34.

Due from banks(Note 2)	Financial instruments whose fair value is extremely
difficult to determine at 31st March, 2016 and 2015
were as follows: These securities are not included in“Securities” under “Assets” as part of the fair value
information of financial instruments.
Thousands of
U.S. dollars

Millions of yen
2015

2016

2016

Unlisted equity securities (*1) (*2) ¥5,999 ¥5,759 $53,239
Investments in partnerships (*3)
Other
Total

1,838

1,316

16,3115

6

44¥7,844 ¥7,082 $69,613(*1)	No market price is available for unlisted equity securities
and the fair value is not disclosed since it is extremely
difficult to determine the fair value.
(*2)	The Company recognized impairment losses on unlisted
equity securities in the amount of ¥161 million ($1,428
thousand) and ¥94 million for the years ended 31st
March, 2016 and 2015, respectively.
(*3)	The fair value of investments in partnerships, whose
assets consist of securities such as unlisted equity
securities for which fair value is extremely difficult todetermine, is not disclosed.

¥409,830 ¥– ¥–
885

–

–

Monetary claims bought (*1)

67

–

–

136,266

237,030

53,20525,90048,8001,000–

25,000–

Corporate bonds

20,900

2,800

–

Other

5,000

21,000

1,000

Securities:
Held-to maturity debt securities:
Government bonds

Available-for-sale securities
with maturities:

110,366

188,230

52,205Government bonds

14,10035,0002,000

Local government bonds

24,866

18,432

3,150

Corporate bonds

69,816

118,539

9,483

Other

1,583

16,25937,571

768,088638,999

476,428

6,451

–

–

Loans and bills discounted (*1, 2)
Foreign exchanges assets
Total¥1,321,589 ¥876,030 ¥529,633
Millions of yen

31st March, 2016
Due from banks

Due after
Due after
five years seven years
Due after
throughthroughseven years ten years ten years¥– ¥– ¥–Call loans and bills bought––

Monetary claims bought (*1)

–

–

–

29,051

172,781

146,040

Held-to maturity debt securities:

–

–

–

–

Government bonds

–

–

–

Corporate bonds

–

–

–

Other

–

–

–

29,051

172,781

146,040

–

–

–

2,580

–

–
50,820Available-for-sale securities
with maturities:
Government bonds
Local government bonds
Corporate bonds
Other
Loans and bills discounted (*1, 2)
Foreign exchanges assets
Total

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

Due after Due after
one year three years
throughthroughthree years five years

Call loans and bills bought

Securities:57

Due inone yearor less

65

2,804

26,405

169,977

95,219303,860

329,761

1,191,655–––¥332,911 ¥502,543 ¥1,337,696

SENSHU IKEDA HOLDINGS,INC.

Millions of yen

31st March, 2015
Due from banks

Due inone yearor less

Thousands of U.S. dollars

Due after Due after
one year three years
throughthroughthree years five years¥495,689 ¥– ¥–

31st March, 2016
Due from banks

Due inone yearor less

Due after Due after
one year three years
throughthroughthree years five years$3,637,113 $– $–Call loans and bills bought

616

–

–

Call loans and bills bought

7,854

–

–

Monetary claims bought (*1)

80

–

–

Monetary claims bought (*1)

594

–

–

235,797

253,585

86,355

1,209,318

2,103,567

472,177

7,600

64,70011,000229,854433,084

8,874–

25,000–Government bonds–

221,867–

7,600

23,700–

Corporate bonds

185,481

24,849––16,00011,000Other

44,373

186,368

8,874

228,197

188,885

75,355Government bonds

125,000

14,100–Local government bonds

17,773

26,212

Corporate bonds

70,372

Other

Securities:
Held-to maturity debt securities:
Government bonds
Corporate bonds
Other
Available-for-sale securities
with maturities:

Loans and bills discounted (*1, 2)
Foreign exchanges assets
Total

31st March, 2015

Held-to maturity debt securities:

Available-for-sale securities
with maturities:

979,463

1,670,482

463,303

Government bonds

125,133

310,614

17,7493,940

Local government bonds

220,678

163,578

27,955

104,680

24,025

Corporate bonds

619,595

1,051,996

84,15815,05243,89247,390Other

14,048144,293

333,430

741,513607,975

450,6816,816,542

5,670,917

4,228,150

6,321

–

–

57,250––¥1,480,020 ¥861,561 ¥537,037

Due from banks

Securities:

Loans and bills discounted (*1, 2)
Foreign exchanges assets
Total$11,728,691 $7,774,494 $4,700,328

Millions of yen

Thousands of U.S. dollars

Due after
Due after
five years seven years
Due after
throughthroughseven years ten years ten years

Due after
Due after
five years seven years
Due after
throughthroughseven years ten years ten years¥– ¥– ¥–

31st March, 2016
Due from banks$– $– $–Call loans and bills bought

–

–

–

Call loans and bills bought––

Monetary claims bought (*1)

–

–

–

Monetary claims bought (*1)

–

–

–

189,919

14,25599,010257,818

1,533,377

1,296,059

Securities:
Held-to maturity debt securities:

Securities:

–

–

–

–

–

–

Government bonds

–

–

–

Government bonds

–

–

–

Corporate bonds

–

–

–

Corporate bonds

–

–

–

Other

–

–

–

Other

–

–

–

257,818

1,533,377

1,296,059–––

22,896––576

24,884451,011Available-for-sale securities
with maturities:

Held-to maturity debt securities:–

Available-for-sale securities
with maturities:

189,919

14,25599,010–––Government bonds

Local government bonds

1,050

2,000

–

Local government bonds

Corporate bonds

372

304

41,352Government bonds

Other
Loans and bills discounted (*1, 2)
Foreign exchanges assets
Total

188,497

11,951

57,657306,197

314,915

1,189,918–––¥496,117 ¥329,170 ¥1,288,928

Corporate bonds
Other
Loans and bills discounted (*1, 2)
Foreign exchanges assets
Total

234,336

1,508,493

845,039

2,696,663

2,926,526

10,575,567

–

–

–

$2,954,481 $4,459,913 $11,871,636(*1)	Loans and bills discounted and monetary claims bought
do not include ¥56,388 million ($500,425 thousand) and¥61,324 million of receivables such as those due frombankrupt, effectively bankrupt or likely to becomebankrupt borrowers at 31st March, 2016 and 2015,
respectively, since it is not certain when they can becollected or redeemed.
(*2)	Overdraft accounts of loans are shown under “Due in one
year or less.”

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

58

(Note 4)	Repayment schedule of bonds, borrowed money andother interest bearing liabilities.

Thousands of U.S. dollars

Millions of yen

31st March, 2016
Deposits (*1)
Negotiable certificates of deposit

Due after Due after
Due in one one year three years
year orthroughthroughlessthree years five years¥4,441,205 ¥237,345 ¥23,701
3,800

–

–

Payables under securities
lending transactions

211,509––

Borrowed money

49,174

3,846

16,160–––

Corporate bonds
Total

31st March, 2016
Deposits (*1)
Negotiable certificates of deposit
Payables under securities
lending transactions
Borrowed money
Corporate bonds
Total

Negotiable certificates of deposit¥443 ¥882 ¥–
–

–

–

–

$41,761,519 $2,140,495 $353,753

31st March, 2016
Deposits (*1)
Negotiable certificates of deposit
Payables under securities
lending transactions

15,19359,560––¥4,744,997 ¥265,345 ¥91,828

Due after
Due after
five years seven years
Due after
throughthroughseven years ten years ten years¥721 ¥963 ¥–
–

–

–

–

–

–

10,072

7,000–

50,00020,000–¥60,793 ¥27,963 ¥–

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

–

–

–

–

–

310,614

177,493

–

–

–

–

–

20,000¥4,424,904 ¥250,152 ¥32,268–

151,189

35,000Due after Due after
Due in one one year three years
year orthroughthroughlessthree years five years$3,931 $7,827 $–Borrowed money
Total

Millions of yen

59

–

Total

–

67,372

Total–

Corporate bonds–

Borrowed money(*2)

Corporate bonds

143,414

17,036–

Borrowed money(*2)–

34,132

Corporate bonds–

Payables under securities
lending transactions–

436,403–251,176

Negotiable certificates of deposit

1,877,076–

Payables under securities
lending transactions

31st March, 2015–

Borrowed money––

Deposits (*1)–

Millions of yen
Due after
Due after
five years seven years
Due after
throughthroughseven years ten years ten years

–

Total

33,723

Payables under securities
lending transactions

Thousands of U.S. dollars

1,543

Corporate bonds$39,414,314 $2,106,363 $210,339

Due after
Due after
five years seven years
Due after
throughthroughseven years ten years ten years

Millions of yen

31st March, 2015

Negotiable certificates of deposit¥4,705,688 ¥241,191 ¥39,861¥52,479 ¥20,882 ¥–

Deposits (*1)

31st March, 2016
Deposits (*1)

Due after Due after
Due in one one year three years
year orthroughthroughlessthree years five years$465,734 $185,321 $–(*1)	Demand deposits are disclosed under “Due in one year
or less” of deposits.
	Deposits do not include ¥26,496 million ($235,143
thousand) and ¥28,112 million of time deposits beyond
maturity.

34. Derivatives
1.	Derivative transactions to which hedge accounting is notappliedWith respect to derivatives to which hedge accounting is
not applied, contract amount or notional principal, fair value
and related valuation gain or loss and computation methodof fair value are as follows: Note that contract amounts do
not represent the market risk exposure of derivativetransactions.

SENSHU IKEDA HOLDINGS,INC.

(1)	Currency related derivatives at 31st March, 2016 and2015
Millions of yen
Contract amount/notional principal
31st March, 2016Over
one year

Total

Fair
value

Valuation
gain (loss)

Over-the-counter transactions:
Currency swaps¥55,319 ¥51,853 ¥337 ¥337

Forward foreignexchange contracts:
Selling¥12,500

–

242

242

Buying¥6,450

–

(236)

(236)

Selling¥34,998 ¥23,929(1,403)

192

Buying¥34,998 ¥23,929

1,403

126

Currency options:

Total

–

– ¥343 ¥661
Millions of yen

Contract amount/notional principal
31st March, 2015Over
one year

Total

Fair
value

Valuation
gain (loss)

Over-the-counter transactions:
Currency swaps¥35,529 ¥26,239 ¥95 ¥95

Forward foreignexchange contracts:
Selling¥47,617

6(1,409)(1,409)Buying¥12,983

–

188

188

Selling¥17,382 ¥11,243

(528)

260

Buying¥17,382 ¥11,243

528

(94)

Currency options:Total¥(1,124) ¥(959)
Thousands of U.S. dollars
Contract amount/notional principal
31st March, 2016Over
one year

Total

Fair
value

Valuation
gain (loss)

Over-the-counter transactions:
Currency swaps

Millions of yen
Contract amount/notional principal
Over
Fair
Total one year value

31st March, 2016
Financial instruments exchanges:
Bond futures:
Selling–
Buying–Bond futures options:
Selling–
Buying ¥30,000
Total
–

–
–

–
–

–
–

–
–
–
– ¥48 ¥5– ¥48 ¥5Millions of yen
Contract amount/notional principal
Over
Fair
Total one year value

31st March, 2015
Financial instruments exchanges:
Bond futures:
Selling–
Buying–Bond futures options:
Selling–
Buying ¥30,000
Total

Valuation
gain (loss)

–
–

–
–

Valuation
gain (loss)

–
–

–
–
–
– ¥6 ¥3
¥6 ¥3

Thousands of U.S. dollars
Contract amount/notional principal
Over
Fair
Valuation
Total one year value gain (loss)

31st March, 2016
Financial instruments exchanges:
Bond futures:
Selling–
Buying–Bond futures options:
Selling–
Buying $266,240
Total
–

–
–

–
–

–
–

–
–
–
– $425 $44
– $425 $44

$490,938 $460,179 $2,990 $2,990

Forward foreignexchange contracts:
Selling$110,933

–

2,147

2,147

Buying$57,241–(2,094)(2,094)

Selling$310,596 $212,362(12,451)

1,703

Buying$310,596 $212,362

12,451

1,118

Currency options:

Total(2)	Bond related derivatives at 31st March, 2016 and 2015–

– $3,044 $5,866

Notes:
1.	Transactions in the table above are stated at the fairvalue and the related valuation gain (loss) is reported in
the consolidated statement of operations.
2.	Calculation method for fair value	The fair value of transactions listed on exchanges isdetermined using the last quoted market price at the
Osaka Exchange, Inc., etc.

Notes:
1.	Transactions in the table above are stated at the fairvalue and the related valuation gain (loss) is reported in
the consolidated statement of operations.
2.	The fair value is determined by using the discounted
cash flow method or others.
SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201660

35. Amounts per Share

2.	Derivative transactions to which hedge accounting isappliedWith respect to derivatives to which hedge accounting isapplied, contract amount or notional principal and fairvalue at the balance sheet date by transaction type andhedge accounting method and computation method of thefair value are as follows. Note that contract amount or
notional principal does not represent the market risk
exposure of derivative transactions.
(1)	Currency related derivatives at 31st March, 2016 and2015
31st March, 2016

Millions of yen
Contract amount/notional principal

Hedge accounting Transaction
methodtype
DeferralCurrency
hedge
swaps
accounting

Major hedged
item

Total

Over
one year

Fair
value

Loans
denominated inforeign currencies ¥26,592¥19,493¥1,639––

Forwardforeignexchange
contracts

–

–

Total

¥1,639
31st March, 2015

Millions of yen
Contract amount/notional principal

Hedge accounting Transaction
methodtype
DeferralCurrency
hedge
swaps
accounting

Major hedged
item

Total

Over
one year

Fair
value

Deposits
denominated inforeign currencies ¥–

¥–

¥–

Forwardforeignexchange
contracts–

25,172

–

Total

1,098
¥1,098

31st March, 2016

Thousands of U.S. dollars
Contract amount/notional principal

Hedge accounting Transaction
methodtype
DeferralCurrency
hedge
swaps
accounting
Forwardforeignexchange
contracts

Major hedged
item

Total

Over
one year

Fair
value

Loans
denominated inforeign currencies $235,995$172,994$14,545

–

–

Total

–

–
$14,545

Derivatives in the table above are mainly accounted for hedge
accounting (deferral hedge accounting) in accordance withJICPA Industry Audit Committee Report No.25 “Accounting
and Auditing Treatment Relating to the Adoption of the
Accounting Standard for Foreign Currency Transactions for
Banks.” The fair value is determined by using the discounted
cash flow method.

61

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

Amounts per share at 31st March, 2016 and 2015 and for theyears then ended were summarized as follows:
Yen
U.S. dollars
2016
2015
2016
¥759.29 ¥774.83 $6.73

Net assets
Net income:
55.07
66.38
Basic
Diluted47.49
66.34
Cash dividends¥15 ¥15
Common stock
Second-class preferred stock ¥– ¥1,020 divided
by 18.5
Third-class preferred stock¥70 ¥70.7
First series of seventh-class preferred stock ¥29.51
–

0.48
0.42
$0.13$–$0.62$0.26

Net assets per share as of 31st March, 2016 and 2015 werecomputed based on the following information:
Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
¥258,005 ¥234,788 $ 2,289,714

Total net assets
Payment for second-class preferred(25,000)
stock––
Dividends for second-class(1,275)preferred stock––
payment for third-class preferred stock(15,000)(15,000)(133,120)
Dividends for third-class
(262)
(530)
(2,325)preferred stock
payment for first series of(25,000)–(221,867)
seventh-class preferred stock
Dividends for first series of(375)–(3,328)seventh-class preferred stock
Stock subscription rights
(91)
(69)
(807)
Non-controlling interests(8,172)(8,485)(72,523)
Amounts to be deducted from total net assets(48,902)(50,360)(433,990)
Net assets attributable to common stock¥209,102 ¥184,427 $ 1,855,715
as of 31st March, 2016 and 2015
Number of shares of common stock as of 31st
March, 2016 and 2015 used to compute net
275,391
238,020
2,444,009
asset per share (Unit: thousand shares)

SENSHU IKEDA HOLDINGS,INC.

Net income per share for the years ended 31st March, 2016
and 2015 are computed based on the following information:
Millions of yen
2016
2015

Thousands of
U.S. dollars
2016

Net income attributable toowners of the parent for the year ¥16,472 ¥17,584 $146,183
Dividends for second-class preferredstock based on the resolution at the–(1,275)–regular general shareholders’ meeting
Dividends for third-class preferred stock based(262)–(2,325)on the resolution by Board of Directors
Dividends for third-class preferred stock
based on the resolution at the regular
(262)
(530)
(2,325)general shareholders’ meeting
Dividends for first series of seventh-classpreferred stock based on the resolution
(362)
–
3,212
by Board of Directors
Dividends for first series of seventh-classpreferred stock based on the resolution at
(375)
–
3,328
the regular general shareholders’ meeting
Amounts not attributed to(1,262)(1,805)(11,199)
common stock shareholders
Net income attributable to owners of theparent attributable to common stock ¥15,210 ¥15,778 $134,984
Average outstanding numberof shares of common stock
276,174
237,686(Unit: thousand shares)
Diluted net income per shareafter adjusting potential shares
Adjustment to net income attributableto owners of the parent¥– ¥– $–
Number of increased common
44,090146
stock (Unit: thousand shares)
Of which, stock subscription rights
179
146
Of which, for first series of seventh43,911–
class preferred stock

Note:
Cash dividends per share represent the cash dividends
proposed by the Board of Directors as applicable to thefiscal year.
 or the purpose of calculation of net income per shareFand diluted net income per share after adjusting potential
shares, own shares held in trust recorded as treasury
stock under the category of shareholders’ equity were
included in treasury stock to be subtracted from theaverage outstanding number of shares. Likewise, for the
purpose of calculation of net assets per share, these own
shares held in trust were included in treasury stock to be
subtracted from the total number of outstanding shares atthe end of the fiscal year.
The average outstanding number of shares of treasury
stock subtracted for the calculation of net income pershare and diluted net income per share after adjusting
potential shares is 644 thousand shares for the year
ended 31st March, 2015 and 1,031 thousand shares forthe year ended 31st March, 2016. The number of treasury
stock at the end of the fiscal year subtracted for the

calculation of net assets per share is 196 thousand sharesfor the year ended 31st March, 2015 and 5,377 thousand
shares for the year ended 31st March, 2016.
4. As described in “Change in accounting policy,” theCompany has applied the “Revised Accounting Standard
for Business Combinations” and other Standards inaccordance with transitional treatments stipulated in
Paragraph 58-2 (4) of the Accounting Standard forBusiness Combinations, Paragraph 44-5 (4) of the
Accounting Standard for Consolidated Financial
Statements and Paragraph 57-4 (4) of the AccountingStandard for Business Divestitures.
These changes have no impact on per share information
pertaining to the fiscal year under review.

36. Subsequent events
Significant acquisition of treasury stock
1.	Senshu Ikeda Turnaround Partners Co., Ltd., the Company’s
consolidated subsidiary, purchased treasury stock pursuant
to the resolution at the Board of Directors’ meeting, etc. heldon 25th February, 2016.
The above stocks were retired on 1st April, 2016.
(1) Class of shares subject Senshu Ikeda Turnaround Partners
to Acquisition
Co., Ltd.
A-class preferred stock(2) Total number of shares
4,800
subject to Acquisition(3) Amount of Acquisition ¥500,000 per A-class preferred stock(4) Total amount of¥2,400,000,000
Acquisition(5) Entities from which theCompany acquired the ORIX Corporation
shares(6) Acquisition date
Friday, 1st April, 20162. 	Senshu Ikeda Corporate Partners Co., Ltd., the Company’s
consolidated subsidiary, purchased treasury stock pursuant
to the resolution at the Board of Directors’ meeting, etc. heldon 26th February, 2016.
The above stocks were retired on 1st April, 2016.
(1) Class of shares subject Senshu Ikeda Corporate Partners Co.,
to AcquisitionLtd.
A-class preferred stock(2) Total number of shares
4,800
subject to Acquisition(3) Amount of Acquisition¥520,000 per A-class preferred stock(4) Total amount of
Acquisition¥2,496,000,000(5) Entities from which theCompany acquired the JFH Limited Liability Company
shares(6) Acquisition date

Friday, 1st April, 2016

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

62

Report of Independent Auditor
Senshu Ikeda Holdings, Inc.

63

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

SENSHU IKEDA HOLDINGS,INC.

Non-consolidated Financial Information of The Senshu Ikeda Bank (Unaudited)
Non-consolidated Balance Sheets (Unaudited)
The Senshu Ikeda Bank, Ltd.
As of 31st March, 2016 and 2015

Millions of yen
2016
2015

Thousands of U.S.
dollars (Note 1)
2016

AssetsCash and due from banks
Call loans and bills bought
Monetary claims bought
Trading account securities
Money held in trust
Securities
Loans and bills discounted
Foreign exchange assets
Other assets
Tangible fixed assets
Intangible fixed assets
Prepaid pension cost
Deferred tax assets
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Reserve for possible investment losses
Total assets¥458,409
885
67
221
27,0001,051,825
3,752,067
6,451
33,80338,0396,145
10,741
14,053
14,127(16,232)(2,310)¥5,395,297¥540,935
616
80
177
27,0001,163,549
3,656,051
6,321
36,95436,581
7,386
8,421
18,947
16,078(16,198)(1,830)¥5,501,072$4,068,237
7,854
594
1,961
239,616
9,334,620
33,298,429
57,250299,991
337,584
54,534
95,323
124,716
125,372(144,053)(20,500)$47,881,585

Liabilities
Deposits
Negotiable certificates of deposit
Payables under securities lending transactions
Borrowed money
Foreign exchange liabilities
Corporate bonds and notes
Other liabilities
Provision for employees’ bonuses
Accrued retirement benefits for employees
Accrued retirement benefits for directors and corporate auditors
Reserve for reimbursement of deposits
Reserve for point services
Reserve for contingent losses
Acceptances and guarantees
Total liabilities¥4,777,696
3,800
211,50973,181429
55,00021,448
1,554
1,101
35
456
138
334
14,127
5,160,814¥4,772,536
12,443
251,176
147,469538
70,00022,677
1,455
1,574
35
409
112
351
16,0785,296,860$42,400,567
33,723
1,877,076
649,458
3,807
488,107
190,344
13,791
9,771
310
4,046
1,224
2,964
125,372
45,800,621

Net assets
Shareholders’ equity:
Capital stock
Capital surplus
Retained earnings
Total shareholders’ equity
Net unrealized gain (loss) on available-for-sale securities
Net unrealized gain (loss) on deferred hedges
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

61,385
104,185
47,532
213,103
21,524(144)
21,380234,483¥5,395,297

50,71093,93238,608183,252
20,955
3
20,959204,212¥5,501,072

544,772
924,609421,831
1,891,222
191,018(1,277)
189,740
2,080,963$47,881,585

Liabilities and net assets

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201664

Non-consolidated Statements of Operations (Unaudited)
The Senshu Ikeda Bank, Ltd.
For the years ended 31st March, 2016 and 2015

Millions of yen
2016
2015

Thousands of U.S.
dollars (Note 1)
2016

IncomeInterest income:Interest on loans and bills discounted
Interest and dividends on securities
Other interest income
Fees and commissions
Other operating income
Recoveries of written-off claims
Other income
Total income¥45,035
15,867650
15,322
8,031
515
10,533
95,956¥47,605
16,949421
16,460
10,574477
7,357
99,847$399,671
140,814
5,768
135,977
71,272
4,570
93,477
851,579

4,505
596
2,479
8,291
11,63145,721
91
291
3,644
77,252
18,704

5,629
620
1,897
8,710
14,35047,79987
36
3,028
82,15917,68739,9805,289
22,00073,580103,221405,759807
2,582
32,339685,587
165,992

(212)
4,491
4,279
¥14,424

451
2,201
2,652
¥15,034(1,881)
39,85637,974$128,008

Expenses
Interest expenses:
Interest on deposits
Interest on borrowings and rediscounts
Other interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses
Loss on sales or disposal of fixed assets
Loss on impairment of fixed assets
Other expenses
Total expenses
Income before income taxes
Income taxes
Current
Deferred
Total income taxes
Net income

65

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2016

SENSHU IKEDA TOKAI TOKYOSECURITIES CO.,LTD.
18-14,Chayamachi,Kita-ku,Osaka 530-0013,Japan
Phone:81-(0)6-6485-0031
http://www.sittsec.co.jp/