50p10/66p2

50p10/66p2

THE INDUSTRIAL BANK OF JAPAN, LIMITED

C4

Annual Report 1999
Year ended March 31, 1999

ANNUAL REPORT 1999

Printed in Japan’99

The Industrial Bank of Japan, Limited

C1

50p10/66p2

50p10/66p2

Introduction

IBJ was originally founded as a publicsector bank under the Industrial Bankof Japan Act of 1902. At that time, Japanwas in the throes of its industrial revolution, and there was a strong demand forlong-term investment capital. IBJ raised
funds by issuing bank debentures.
The Bank also acted as the trustee incorporate debenture issues—notably, themajor Japanese railway company issueof 1906 in London, amounting to thethen-enormous sum of £1 million. These
activities contributed to the building of
the domestic securities market and to thegenerating of a higher profile for Japanese borrowers in the international market.
This early experience of a sophisticatedmix of corporate and investment banking with exposure to trust work is uniqueto the Bank among Japanese banks. In
the original Act, there was the wording,“trust business related to local government bonds, corporate bonds, and equities”. This was the first time for the term
“trust”, or “shintaku”, to appear in theJapanese statute book.

The 1918 amendment to the IBJ Act
permitted the underwriting and offeringof equities. At that point, the Bank had
the full capabilities for what is now
termed investment banking. However,that was at what proved to be the peakof the demand created for Japanese
products by the First World War and theconsequent economic boom.
Thereafter, the next 30 years of Japanese history encompassed many adversities for society in general and for financial
institutions in particular: the Great Kanto
Earthquake, the Showa Financial Panic,
and, finally, the Second World War andthe postwar recovery.
The Bank became a private-sector bankin 1950 and took on its current legal form
under the Long-Term Bank Act of 1952.
However, the Act was framed within theterms of the U.S.-led Occupation policyof compartmentalizing financial services.
IBJ was forced to retreat from much of its
former investment banking activities andreturn principally to long-term lending
funded by issuing bank debentures.

During the high-growth period of theJapanese economy in the 1960s, the Bank
was particularly active in financing steel
production, shipping, shipbuilding, andvehicle manufacturing. Following thefirst oil crisis, Japan moved to a pattern oflower growth as a mature economy, andthe Bank expanded its customer base athome and started the process of expansion overseas.
Domestically, the wholesaling of bankdebentures to major financial institutions
and the regional banks led to a networkof strong relationships. This was all supported by the fact that, originally a public-sector bank, the Bank had no keiretsu
affiliations: the Bank has always been independent of the large corporate groupings characteristic of Japan. Internationally,
the Bank was free to pursue its investment banking ambitions.
The current round of liberalization,
Japan’s Big Bang, is enabling the Bank
to return to its domestic investmentbanking roots and more fully explore
the benefits of its independence andrelationship networks.

Contents
Financial Highlights
1
Message from the President
2Management Rationale and Strategy at IBJ
Frequently Asked Questions
Rationale
6

Funding Reliance on Bank Debentures
13

Market Risk
27

Non-Performing Loans
14

Liquidity Risk
31

Emerging Market Exposure
15

Operational Risk
32

Year 2000 Problem
16

Systems Risk
32

Steps to “First Call Bank” Status
7

Restructuring and Re-orientation
Preparing for Heightened Competitionin the Post-Big Bang Era

Corporate Governance
8

Revenue Plan
17

Transparency in the Management Strategy
9

Rationalization
18

IBJ’s Future-Oriented Business Strategy
10

Personnel Policy
20

Differentiation with
Other Leading Domestic Banks
11

Strategic Alliances
22

Competition with Leading Foreign Banks
11

Risk Control and Compliance Issues
Controlling Risk and Ensuring Compliance

Specialist Subsidiaries and Affiliates
12

Risk
24

Legal Risk
32
Internal Control
33
Compliance33
Operations in Outline
Balancing the Center and the Periphery
35
Financial Section
49
Corporate Data
103

Credit Risk
25

C2

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Financial Highlights

1999

1998

1999

For the Years Ended March 31
Total Income
Total Expense
Loss before Income Taxes and Others
Net Loss¥ 3,386,760
3,642,993(256,232)(181,276)¥ 3,321,902
3,635,020(313,118)(202,660)$ 28,094,239
30,219,769(2,125,530)(1,503,748)

At March 31
Total Assets
Loans and Bills Discounted
Investment Securities
Debentures
Deposits
Total Shareholders’ Equity

46,166,409
23,327,907
8,942,151
20,461,865
8,116,321
1,561,350

49,229,785
24,001,429
8,847,249
20,840,941
10,053,551
1,320,019

382,964,825
193,512,295
74,177,945
169,737,583
67,327,432
12,951,888(in yen)

For the Years Ended March 31
Per Common Stock
Net Loss
Cash Dividends
Return on Equity¥

At March 31
BIS Capital Adequacy Ratio(70.64)7.00(14.3%)(in U.S. dollars)**

1998

1999

¥

1999

(79.80)8.50(14.2%)$(0.586)0.058

10.26%

11.30%* All figures are on a consolidated basis, unless stated otherwise.
** U.S. dollar amounts are converted, for convenience only, at ¥120.55 per dollar (interbank rate in Tokyo at March 31, 1999).

U Net Income (Loss)

U Total Assets

U Total Shareholders’ Equity

U BIS Capital Adequacy Ratio(¥ billion)(¥ billion)(¥ billion)(%)

50,000

2,000

12

1,500

9

1,000

6

500

3

50

40,000030,00020,000(50)
10,000
(200)

(250)
95

96

97

98

99

0

0

0
94

94

95

96

97

98

99

94

95

96

97

98

99

94

95

96

97

98

99

(Years ended March 31)

1

Financial Highlights(in thousands of
U.S. dollars)**(in millions of yen)Message from the President

Message from the President

I

would like to thank all our friends for their interest and support
during the past year. We are at a crucial stage in implementing ourstrategy of focusing our resources in commercial banking, investmentbanking, treasury operations, and securities and asset management, while
selectively strengthening international banking operations and substantiallyenhancing our capabilities for the development of sophisticated financial
technologies. We are also taking steps to increase our competitiveness byrationalizing our cost structure and strengthening our capital base. Achieving
these aims will ideally position us to take the maximum advantage ofopportunities presented by Japan’s Big Bang and to be a player in the
fast-changing global market.

Operating Environment
Fiscal 1998, ended March 31, 1999, was marked by a number of importantdevelopments. Japan’s financial Big Bang was formally launched, with aseries of new laws and administrative measures. These included the enactment in April 1998 of a revised foreign exchange law and the authorizationin December of investment trust sales at bank offices. The year also saw
decisions on the timing of other important Big Bang measures to be introduced over the next few years. For example, the government decided toallow bank-related securities companies to begin handling equities from
October 1999.
Another important legal development of the year was the enactmentof a series of laws and other measures to provide a safety net as well as toreform and strengthen the Japanese banking system. In October, the Dietapproved a proposal for public funds to be used to strengthen the capitalbase of banks. This resulted in ¥7.5 trillion in public funds being invested
in preferred shares and subordinated liabilities of the 15 largest Japanesebanks before the end of March 1999. IBJ was the first among these banks toannounce its willingness to cooperate with the government’s restructuring
program.
In response to these developments, not only banks but also other financial institutions, including securities companies and life insurance companies in Japan and overseas, embarked on a series of business tie-ups andmergers to maintain and strengthen their competitiveness as well as provide the services required in the new financial environment. IBJ remains
one of the most active players in this area and has concluded alliances with
the Nomura Securities Co., Ltd., and the Dai-ichi Mutual Life Insurance
Company.

2Message from the President

Anticipating these developments, in April 1998, we identified five principal
tasks to substantially reform the management of our operations in the year
ended March 31, 1999, and the year ending March 31, 2000. These were to•conduct a thorough review of our business and financial positions,•take decisive steps to dispose of non-performing loans,•proceed with the restructuring of our operations,•strengthen our position in core businesses, and•respond effectively to the Big Bang and the reorganization of Japan’s
financial sector.
As part of our efforts to fulfill these tasks, we adopted aggressive measures to make our final write-off of non-performing loans and provided
conservatively for the reserve for possible loan losses. We accordingly
reported the highest level of credit costs in IBJ’s history, ¥924.3 billion.
As a result of this and other factors, we reported a net loss for the second
consecutive year, of ¥195.7 billion, on a non-consolidated basis.
With a view to maintaining our BIS capital adequacy ratio at a level appropriate for a leading international bank, we made a third-party capital
allocation of ¥67.0 billion to Dai-ichi Mutual Life Insurance and issued¥176.0 billion in preferred shares through overseas subsidiaries and ¥64.0
billion in subordinated bonds, for a total of ¥307.0 billion in new capital
Masao Nishimura
President and Chief Executive Officer

raised through our own efforts. In addition, we received ¥600.0 billion
in public funds through the issuance of convertible bond-type preferredstocks and perpetual subordinated bonds. As a consequence of these measures, we were able to raise our BIS capital adequacy ratio on a consolidated basis from 9.22% before introducing public funds to 11.30% at March 31,
1999, comfortably above the 10% level.

Organizational Changes Responding to the Big Bang
One of the principal results of the Big Bang will be to allow financial institutions to offer a wider range of services to customers instead of being confined to specific financial service sectors. The IBJ Group began to makepreparations for deregulation more than 10 years ago. As deregulation
accelerates, to establish IBJ as a “First Call Bank” capable of providing abroad range of the highest-quality services, we have made a number ofinternal organizational changes and established new subsidiaries and joint
ventures. Some of the most important changes were as follows:•We organized our customer-related business into four sectors: theCorporate Banking Unit, the Investment Banking Unit, the Treasury
Unit, and the Securities and Asset Management Unit, with a view tohaving these develop into autonomous profit centers.
3

Message from the President

Business Results for Fiscal 1998

Message from the President

Message from the President•We raised the division in charge of planning for the IBJ Group to
departmental status—the Business Planning Department (IBJ Group)—
to coordinate the development of an expanded range of financial services offered by the Group.
•We established the Risk Management Department to oversee credit,
market, and liquidity risk comprehensively.
In addition to these organizational changes, we are adopting measures toreform our operations. These include reviewing our operations and office
network to increase efficiency and creating personnel management systems
that make it possible to fully utilize the services of more specialized andefficient personnel.
In May 1998, to expand the scope of services in response to Japan’s Big
Bang, we announced the formation of several joint ventures with Nomura
Securities. These companies will engage in promising growth areas, including derivatives, asset management and administration business, especially
record-keeping for Japanese-style 401(k) defined contribution pension
schemes, and asset management advisory services. In parallel with these
activities, we reached an agreement with Dai-ichi Mutual Life Insurance in
October 1998 on the formation of an across-the-board alliance. Thus far,
we have cooperated in lending and other financing activities, the joint
development of real estate securitization programs, the cross-selling ofinvestment trusts, and the development of financial technologies andinstruments through the establishment of a joint venture for this purpose.
Moreover, we have decided to merge our asset management companies
and operate the merged company as a joint venture in October 1999.

Management Strategy and Directions
For almost two decades, IBJ has recognized that it must move beyond its role
as a long-term credit bank primarily engaged in financing the developmentof Japanese industry. To that end, we have prepared a series of management
plans, the first of which started in 1988. Our Fourth Medium-Term Management Plan, which began in April this year and will extend through the year
ending March 31, 2002, sets a number of concrete goals, namely,•focusing on the needs of our customers and providing high-valueadded services that win customer satisfaction and trust,•developing and applying the most advanced financial technologies,•training of personnel and encouraging them to realize their fullpotential, and•contributing to society and encouraging an awareness of social
responsibility.

4Message from the President

finance activities, centering around commercial and investment banking,and offering our customers a diverse range of high-value-added financial
services that meet their needs promptly and accurately. It is our aim to become Japan’s leading “First Call Bank.”
To this end, we have made three additional major reforms in our management framework. The first is the introduction of the Executive Director
System that clarifies authority and responsibility in various operating units.
The second is the appointment of an Advisory Board made up of prominent
individuals from various fields to provide frank advice to IBJ management.
The third is the establishment of the business unit system that we envision
will lead eventually to the management of core businesses as profit centers.
In addition to these reforms, we are planning to establish a financial holding
company in the autumn of 2000, which is expected to enable IBJ Group companies to pursue greater specialization and allow us to realize the full potential of our management resources in providing a broad range of services forour customers.
The introduction of a fully consolidated Group structure, for financial
and management accounting purposes, should raise the levels of responsibility and transparency to global standards.
And, further, on August 20, 1999, IBJ agreed to consolidate its operations
with those of the Dai-Ichi Kangyo Bank, Limited, and the Fuji Bank, Limited,on an equal basis under a holding company to be established, subject toregulatory and shareholders’ approval (Please refer to the appendix foryour inquiries.). In this way, we plan to fulfill our responsibility for building
a strong earnings base and achieving an early recovery in performance.
Realizing all of our aims in the coming years will be a major challenge,
but we are sure that, with your support, we can continue to make progressin building a new IBJ for the 21st century.
August 1999

Masao Nishimura
President and Chief Executive Officer

5

Message from the President

Based on these goals, we plan to continue developing our industrial

Management Rationale and Strategy at IBJ

Management Rationale
and Strategy at IBJ

Frequently Asked Questions[

Rationale]<

What type of bank is IBJ attempting to become?

=

IBJ is aiming to become theleading “First Call Bank”—
the first bank to be contacted—for
the wholesale financial requirementsof Japanese corporations, bothfinancial and non-financial.
That means being able to offer
Japanese corporations, both financial
and non-financial, the right productat the right time. In the globalized
financial markets of today, thatmeans providing competitively
priced value-added service as andwhen the demand arises. As a nonkeiretsu bank with a long tradition of
independence, the Bank is surprisingly well placed to achieve its aim.
In specific terms, being a “First
Call Bank” means not only providing

6

the standard commercial banking
products of deposits, lending, andforex, but also the investment banking products of the securitization ofassets and receivables, the syndicationof issues, M&A advisory services,balance sheet restructurings, andother similarly highly specialized
professional services, such as securities and asset management related
services, which require financial
engineering expertise and IT-related
database know-how. The long history of the Bank and its large customer
base mean that if such services andproducts are provided competitively
and in a timely fashion, the Bank
should indeed become the “First Call
Bank” of much of non-financial corporate Japan.

Because of its peculiar history
among the major Japanese financial
institutions, the Bank maintains aunique independence from any
keiretsu grouping. Also, the Bank’slong use of bank debentures as ameans of funding has created an
extensive network of relationships
with many financial institutions,principally regional banks and investing institutions. The wholesale orientation should enable IBJ to make the“First Call Bank” concept also apply
to financial corporate Japan. In particular, the network should prove
useful in the retailing of asset management related products wholesaled
by the Bank.

Management Rationale and Strategy at IBJ]<

Steps to “First Call
Bank” status

To achieve “First Call Bank” status, what fundamental steps are being taken?

=

The current medium-term
management plan runningfrom the year ending March 31, 2000
to 2003, is now being acted on.
The three key points of this plan are:
1. Efficiency: an improved return on
equity and an improved balance
sheet position, 2. Accountability:
restructured corporate governance,and 3. Transparency: clearly enunciated management strategies. The aim
is to become a bank that is clear in
its thinking, speedy in its execution,and creative in its product and service
development. Only in these ways
will IBJ achieve the vital “First Call
Bank” status.

Efficiency, an improved returnon equity and an improved balance
sheet position require that there has
to be an increase in profitability, a
restructured balance sheet, and considerable rationalization of operations. Profitability means being able
to provide value-added services efficiently and being able to market theseaggressively. Balance sheet restructuring depends on being able towrite off non-performing loans andprovide adequately for doubtful
loans as well as on being able to liquidate the capital locked up in IBJ’s
large portfolio of equities held forpurely relationship reasons. The
painful process of rationalization
requires the Bank to consolidate its

branch network at home and overseas, to reduce the size of the Board,and to improve performance.
Senior management is emphasizing the detailed management of risk
and return to minimize volatility inrevenues. Senior management is also
positioning the IBJ Group to takeadvantage, as soon as practicable, ofthe new financial holding company(FHC) structure in the quest for greater
efficiency, accountability, and transparency. The IBJ Group is working
to increase ROE on a core businessprofit basis from the forecast resultof 11.8% for the year ending March
31, 2000, to 14.8% for 2003: the period of the current medium-term
management plan.

 The New IBJ Group in Summary

IBJ FHC Structure•IBJ

Corporatebanking•IBJ
Securities,
etc.

Securitiesrelated
services

Investment banking

ServingIndustrial corporations•IBJ NW AssetManagement•IBJ Investment
Trust Management
and Dai-ichi Life
Asset Management[Three companies areto be merged into
DLIBJ AssetManagement on
October 1, 1999]•IBJ Trustand Banking,etc.

Asset management services

Assetadministration
services

Individuals•OtherFinancial institutions

7

Management Rationale
and Strategy at IBJ[

Management Rationale
and Strategy at IBJ

Management Rationale and Strategy at IBJ[

Corporate governance

How is IBJ reforming its system of corporate governance to meet global standards<] for greater accountability?

=

Despite the various conventional and legal constraints inthis respect, management is putting
into place a system of clear responsibility by business units, eachheaded by a managing director andreporting to an executive board, theExecutive Committee, and this executive board is then accountable to apolicy board, the Board of Directors,
acting as a supervisory board responsible to the shareholders.

It is now widely recognized that the conventional Japanese extended board of
directors leads to confusion and conflictsof interest regarding its function as thesenior management body deciding
strategic policy with final responsibility
to the shareholders and its function as
the forum for day-to-day operational
decision making by the directors as senior
management employees. The separationof the day-to-day management of theexecution of business in the Executive
Committee and the long-term determination of policy and the monitoring of its
implementation by the Board of Directors
resolves the conflict.
In June 1999, the Executive Director
System was established with 27 members,
and the Board of Directors is to be reduced
from 30 members for the year ended
March 31, 1999, to approximately 13
members by March 2003. Currently, many
individuals are members of both the executive and the policy board; however,this is an inescapable transitional measure.
It is IBJ’s intention to isolate membershipof the Executive Committee as much as
possible from membership of the Board

8

of Directors. The committee would thenbe fully and clearly accountable for the
implementation of policy as laid downby the Board, and the Board itself wouldin turn be composed of a limited numberof directors approved by, and fully andclearly accountable to, the shareholders.
Also in June 1999, an advisory board
comprising external opinion leaders was쏹 New Organization

established to meet quarterly as theAdvisory Board and review the businessof the Bank. The intention is to expand
this advisory process into a fully functioning system of external nonexecutive
directors as members of the Board of
Directors and therefore achieve global
standards of accountability, delegationof authority, and corporate governance.

GeneralMeeting of
Shareholders

Management

Corporate
Auditors
OfficeCompliance/Auditing

Board ofAuditors

Auditors

Board ofDirectors

Compliance
Auditing

Executive
Committee

Personnel, Administration, Corporate
Planning

Middle-Office Infrastructure

IT
Operations
Supervisory

Integrated Risk
Management
ResearchCredit Risk
Management

Back Office

Operations

Profit Center(Front Office)Corporate
Banking Unit

Investment
Banking Unit

Treasury Unit
ALM and Treasury
Sales and Trading

Liaison Offices (Relationship Management)

Securities
and Asset
Management
Unit
Subsidiaries

Management Rationale and Strategy at IBJ[

Transparency in the
management strategy]<

included for maximum efficiency. The four
core business units—corporate banking,investment banking, treasury, and securities and asset management—now
report independently for the purposes ofmanagement accounts. They could thentake advantage of legislative developments in company law, anticipated to beenacted shortly, and incorporate themselves as fully stand-alone subsidiaries
and therefore will completely separate
risk, personnel, and budget management.

In the continuing consolidation of theJapanese financial services industry, it islikely that attractive and complementaryfinancial players will become available
from time to time. The FHC structure
would obviously make the opportunistic
incorporation of such players into theGroup eminently practicable. The
IBJ Group would then be increasingly
better able to offer products and services
in its key competencies.

What is meant by “transparency” in the management strategy?

=

To raise ROE and to enhanceshareholder value, senior management has to adopt a clear andlogical evaluation of business operations: the IBJ Group can no longer
afford to try to do everything.
The core businesses of the IBJ
Group have been determined as
1. Commercial banking, 2. Investmentbanking, 3. Treasury operations, and
4. Securities and asset management.
To support these four core businesses, it is necessary to build strength in

the two related areas of international
operations and financial engineering.
However, IBJ is withdrawing fromall other areas that are non-core, suchas retail banking for individual customers and international operations
outside the four core businesses.
The “New IBJ” structure is set out
conceptually below: the four corebusinesses supported by international

operations plus financial technologies. The current financial productretailing will be withdrawn from,and emphasis will be placed on
product wholesaling via cooperating financial institutions. International
activity superfluous to the core businesses will also be abandoned.

 Core Businesses and Areas for Strategic Focus
International Operations

Commercial Banking

IBJ Group
Investment Banking
Treasury Operations
Securities and Asset Management

Financial Technologies

 Businesses IBJ Will Abandon
Retail Banking
Non-Core International Operations

9

Management Rationale
and Strategy at IBJ

While these changes appear complex
and involved, they form the only
practicable route possible from Japanesestandards to global standards within the
restrictions of current conventions andlegislation. It is the intention of the IBJ
Group to take advantage of the newly
permitted financial holding company(FHC) structure as soon as possible. The
IBJ Group should move to an FHC structure in the autumn of 2000, with its
strategic specialist subsidiaries fully

Management Rationale
and Strategy at IBJ

Management Rationale and Strategy at IBJ[

IBJ’s future-oriented
business strategy]<

What strategy is the management of IBJ adopting for the future?

=

Taking full advantage of the
wave of liberalization in
Japan, IBJ is building a broadly
based but targeted financial services
provider capability.
The liberalization of the Japanesefinancial services industry started
with the impetus of the U.S.-Japanbilateral agreement of 1984. One
consequence was the legislation thatmade it possible, through so-calledcross-over subsidiaries, for banks
and other institutions to enter into
the securities and trust banking businesses, while the securities companies could enter the new fields ofbanking and trust banking.
Foreseeing the long-term impactof these various liberalization measures, the Bank expanded the Industrial Bank of Japan (Germany) and
IBJ International plc presences insecurities operations, acquired the
U.S. banking operation of Schroders
US Holdings Inc. and the U.S. primary dealer, Aubrey G. Lanston, andestablished The Bridgeford Group
as a specialist M&A boutique subsidiary in the United States. In the10domestic market, the Bank established these important strategic subsidiaries: IBJ Securities Co., Ltd.; IBJ
NW Asset Management Co., Ltd.; IBJ
Investment Trust Management Co.,
Ltd.; IBJ Trust and Banking Co., Ltd.;and IBJ-DL Financial Technology
Co., Ltd.
Further, New Japan Securities Co.,
Ltd., and Wako Securities Co., Ltd.,are to be merged, and the IBJ Group’s
interest in the new company, Shinko
Securities Co., Ltd., will be raised
to 25%, and the share capital of IBJ
Securities has already been increased.
In this fashion, the IBJ Group willtake a significant position in bothwholesale and retail securities.

Further in line with developments
among other world-leading financial
institutions, a product-oriented matrixorganization, rather than the previous region/corporate entity oriented
management organization, has been
constructed, within which these specialist subsidiaries fit naturally.

Management Rationale and Strategy at IBJ]<

Other leading Japanese banks are emphasizing retail operations, and, in a disintermediating
financial economy, retail business is generally thought to be more profitable than wholesale
business. Is the right decision being made?

=IBJ has quite different origins
from other leading Japanesebanks. It is clear and logical to use
a fundamentally different strategy.
In the current environment of liberalization associated with Japan’s Big
Bang, each bank is attempting to
refocus its strategy on its inherent
strengths. The other leading banks

are being forced to go back to providing retail banking services to individuals and smaller businesses. The
regional banks are being forced tore-emphasize their local connections.
In all this, the Bank is positioned witha uniquely corporate orientation andhas comparatively strong overseas
capabilities. Specialization in thewholesale business rather than in theretail business makes perfect sense.

Being wholesale means that it
is possible to distribute products
through the retail network of otherbanks: the independence of the Bank
makes that practicable. It is the longterm aim of the Bank to exploit the
networks of those banks specializing
in retail both in Japan and overseas.

 IBJ’s Position by Customer Segment
As of March 31, 1998
Ranking of shares amongindividual financial institutions

Number of companies(including customer group companies)

Average outstanding balanceof transactions (¥ trillion)

Second
First
First
First

3,365
275
458
1,807
825

10.9
2.7
1.1
5.7
1.4

Other customers

6,289

10.3

Total

9,654

21.3

Core customer segments
Japanese blue chips
Foreign blue chips
Large companies with credit ratings from A to BBB
Other core customers

Note: Core customers are those companies that make use of IBJ as their “First Call Bank” and include many of the internationally best-known Japanese companies.
Source: IBJ survey[]<

Competition withleading foreign banks

Emphasizing the areas of commercial banking, investment banking, treasury operations,and securities and asset management is going to bring IBJ into direct competition withleading foreign banks. Will its profitability suffer?

=

IBJ has already started theprocess of emphasizing its
core businesses, and, as a matterof fact, this is already improving
profitability.
Investment banking and securities
and asset management have been
receiving the preferential investmentof funds and personnel, and this process is leading to overall improved
profitability. IBJ is fully capable infinancial engineering products, suchas structured finance, and that typeof specialist knowledge is absolutely
imperative in the provision of valueadded services to its corporate customer base.
As a consequence of the Big Bangliberalization measures, the old compartmentalized separations of financial services providers are disappearing,and the four core businesses andtheir various support operations
should eventually be reorganized
as IBJ Group subsidiaries under afinancial holding company (FHC)
consolidated structure.

These Big Bang processes meanthat the previously existing institutional brakes on the competitivenessof Japanese institutions are being
removed. Their competitivenessshould rise over the longer term, andthe first-tier Japanese banks should
eventually be fully on a par with theleading European and U.S. banks.
The IBJ Group, which has the aimof serving its corporate customers
with such sophisticated products
as a “Problem Solution Provider,”should be at the forefront of thesedevelopments.

11

Management Rationale
and Strategy at IBJ[

Differentiation withother leading
domestic banks

Management Rationale
and Strategy at IBJ

Management Rationale and Strategy at IBJ[

Specialist subsidiaries
and affiliates]<

Recently, a number of specialist subsidiaries have been formed. What is the strategy?

=

The strategy is to build the IBJ
Group into a financial services
institution that is the “First Call
Bank” in its key competencies.
Customer requirements are becoming more demanding and varied, and
it is necessary to set up a number of
specialized subsidiaries and affiliates
in such areas as securities, asset management, defined contribution pension
related record-keeping, and otherareas. The wholly owned subsidiary
IBJ Securities Co., Ltd., was incorporated in 1993 and has been successful
in carving out a large market share incorporate straight bonds. In the secondary markets, it has also taken market
share in sales and trading. Up until
now, IBJ Securities had one arm tiedbehind its back: it was largely restricted to public and corporate entity
straight bonds. In the autumn of thisyear, the restriction on entering equities is scheduled to be lifted. Aheadof that deregulation, the capital andstaffing of IBJ Securities have been
increased.

IBJ Securities is active in the international markets and becoming fully able
to satisfy the requirements of customers at home and overseas. This
process will be accelerated with thescheduled merger of two securities
affiliates, Wako Securities Co., Ltd.,and New Japan Securities Co., Ltd.,
into Shinko Securities Co., Ltd. The IBJ
Group should further establish a majorpresence in the securities business.
In asset management, in 1985, IBJ
NW Asset Management Co., Ltd., wasincorporated, and in 1994 and 1995,
IBJ Investment Trust Management
Co., Ltd., and IBJ Trust and Banking
Co., Ltd., were incorporated, respectively. The Japanese asset management industry is facing substantial
liberalization and deregulation, andthese companies are playing a significant role in the process. In particular, the introduction of Japanese-style401(k) defined contribution pension
schemes is likely to have a major
impact on the market.
IBJ has entered into an allianceagreement with Dai-ichi MutualLife Insurance Company, and bothcompanies’ asset management subsidiaries are to be merged into DLIBJ
Asset Management Co., Ltd., on
October 1, 1999. The considerable merits of scale of the merger should position the IBJ/Dai-ichi alliance well.
Also, the introduction of defined
contribution pension schemes is likely to lead to an immense demand forthe back-office services associatedwith such schemes. IBJ and Nomura
Securities Co., Ltd., have formed ajoint venture, Nomura-IBJ Investment Services Co., Ltd. (NIIS), andthis company is to play an importantrole in the system that is being currently put into place: the so-called
Japanese-style 401(k) defined contribution pension schemes.
Behind these specialist subsidiaries
lies the basic rationale of moving the
IBJ Group toward value-added
wholesale products and services: as
an independent group of financial
institutions that has targeted andfully restructured its chosen businessareas of competence and can truly
aspire to be the “First Call Bank”
of choice.

Core BusinessIndustrial Corporations
Private Sector
andPublic Sector

Commercial Banking
Investment Banking
Treasury Operations

Financial Institutions
Retail BanksandInstitutional Investors

Securities and Asset Management

Strengthening
Financial Service Capabilitiesof the IBJ Group•Securities: IBJ Securities•Asset Management: IBJ NW Asset Management, IBJ Investment Trust Management, and Dai-ichi Life AssetManagement [Three companies are to be merged into DLIBJ Asset Management on October 1, 1999]•Asset Administration: IBJ Trust and Banking•Financial Technologies: IBJ-DL Financial Technology
12

Management Rationale and Strategy at IBJ]<

It is thought probable that ordinarily licensed banks will be permitted to issue straight bonds
and that five-year Japanese governmental bonds (“JGBs”) will also be issued. What is going tobe the impact on the Bank and its reliance on funding by the issue of five-year bank debentures?

=

The impact on IBJ funding ofapparently competing andsubstitute bonds has been minimal
to date. With different terms, there
is no real substitution effect.
The bank debenture market has been
limited to the long-term credit banks
and a limited number of other specialpurpose financial institutions.
The market is worth around ¥60.0
trillion and is second only to the JGB
market itself. The IBJ issue accounts
for some ¥20.0 trillion of the total ¥60.0
trillion, and there has been steadydemand from a variety of customers,such as financial institutions andinstitutional investors. This has beenon account of the liquidity and sizeof the market with its wide variety
of maturity dates available in thesecondary market. If the special factors of the currently abnormally low
interest rates and the reaction to theenormous success of the high coupon
product, “Wide,” in 1990 maturing
in 1995 are ignored, the basic trend
has been for the IBJ issue balance torise. In the previous year, the balanceof bank debentures outstanding fellby ¥373.0 billion on account of the
Ministry of Finance (MOF)’s TrustFund Bureau (TFB) reducing its exposure. However, the Bank has had
a history of nearly 100 years of issuing bank debentures and has verystrong distribution channels. Thus,
despite the adverse environment
during the previous fiscal year, IBJ’s
balance of five-year bank debenturesrose by ¥590.0 billion, and the number of active customer accounts
increased.

The ordinarily licensed banks
have exploited their large branch
networks to gather deposits andused this deposit base for funding
their operations. The Bank and otherspecial-purpose banks have a limited
network of branches, and, hence, theprivilege of issuing bank debentures
is an important source of funds.
However, for those banks not accustomed to the process of issuingbonds, there should be little enthusiasm for straight bond issues on
account of the various entry barriers
to such a novel funding route. Bondissues are therefore likely to be only
a supplementary form of funding.
The issue amounts are likely to belimited and the issue timetable irregular. Given the structural weaknessof the domestic straight bond market, there is unlikely to be muchinvestor enthusiasm for the product.
The impact on the Bank’s issue program is therefore expected to be
extremely limited.
With regard to five-year JGBs, thereis as yet no clear outline available, as
the matter is still under discussion
and debate within the government
and in the Diet. However, there are
already four- and six-year JGBs out
in the market, and these have not
had any appreciable impact on the
IBJ bank debenture market. The fiveyear JGB is again likely to attract avery different type of investor on
account of its different terms.
Accordingly, if the Bank continues
to issue bank debentures with due
concern for market conditions, there
should be little negative impact onfunding.

 Trends in IBJ’s Five-Year
Debenture Issues(¥ billion)
12,00010,000

8,000

6,000

4,000

2,000

0

3/96 9/96 3/97 9/97 3/98 9/98 3/99

Sold to TFB of MOF
Sold to others Number of Regular Institutional

Investor Purchasers of the Bank’s
Five-Year Debentures(Number of purchasers)
700

600

500

400

300

200

100

0
3/96

3/97

3/98

3/99

13

Management Rationale
and Strategy at IBJ[

Funding reliance onbank debentures

Management Rationale
and Strategy at IBJ

Management Rationale and Strategy at IBJ[

Non-performing loans=

What is IBJ’s exposure to non-performing loans? In what case does IBJ make loan<
] forgiveness to a customer?

As of March 31, 1999, on an
IBJ-only basis, Loans underSpecial Risk Review amounted to¥1,844.1 billion—namely, Bankruptcy Loans were ¥45.2 billion,
Nonaccrual Loans were ¥1,236.0 billion, Accruing Loans Past Due 3
Months or More were ¥8.4 billion,
and Restructured Loans were ¥554.4
billion. As of March 31, 1999, on an
IBJ-only basis, Claims Subject to the
Financial Reconstruction Law (FRL)
Disclosure Requirements were ¥1,872.3
billion—namely, Claims under
Bankruptcy or Virtual Bankruptcy
were ¥111.6 billion, Claims underHigh Risk were ¥1,197.7 billion, andClaims under Close Observation
were ¥562.9 billion. The main reason
for the increase in Nonaccrual Loans
is the change in the nonaccrual standard. Accruing Loans Past Due 3
Months or More, Restructured Loans,
and Claims under Close Observation
are not necessarily irrecoverable.
Therefore, the two totals, Loans
under Special Risk Review andClaims Subject to FRL Disclosure
Requirements, should not be viewed
as measures of the non-performing
loan position. (See pages 52~57.)

In fiscal 1998, IBJ took decisive measures
to substantially improve the soundnessof its asset portfolio, adopting measures
to deal with ¥857.8 billion in non-performing loans (¥924.3 billion, if additions
to the General Reserve for Possible Loan
Losses are included), the highest level ofcredit losses in the Bank’s history.
As of March 31, 1999, the Coverage
Ratios* for Claims Subject to FRL Disclosure Requirements were 100% for Claims
under Bankruptcy or Virtual Bankruptcy,
83.8% for Claims under High Risk, and52.7% for Claims under Close Observation.
Management believes that these levelsof write-offs and provisioning are fully
adequate. The possibility of a further
increase in the level of credit losses
should be quite limited, as the Bank

has also introduced stricter credit risk
control procedures.
* Coverage Ratio = (Collateral + Third Parties’
Guarantees + Reserves for Possible Loan
Losses)/Claims

The loan forgiveness made by a bankto a customer is, in principle, impermissible. However, there may be some exceptions where the social consequences ofrigidly applying the principle may resultin excessive disruption and damage tothe overall economy.
For example, there may be exceptional
cases where a company’s technology,
production capacity, or marketing network are recognized as a general social
good. Other cases are where the bankruptcy of a company could lead to aseries of bankruptcies of subcontractors,

 Loan Losses(¥ billion)
For the years ended March 31

1996

1997

1998

Write-offs, Specific Provisioning and Bulk Sale, etc. (net)General Provisioning (net)856.0 261.2 633.8 857.8 2,608.9
0.4 21.1 14.0 66.5
102.1

Total

856.4 282.3 647.8 924.3 2,711.1

1999

Total

 Loans under Special Risk Review(¥ billion)
At March 31

1998

1999

ChangeBankruptcy Loans
Nonaccrual Loans
Accruing Loans Past Due 3 Months or More
Restructured Loans

64.2
209.5
14.5
820.6

45.2
1,236.0
8.4
554.4(19.0)
1,026.4(6.0)(266.2)

1,109.0

1,844.1

735.1

Total

Notes: 1. Bankruptcy Loans and Nonaccrual Loans are net of uncollectable portion.
2. The deducted amounts of Bankruptcy Loans at March 31, 1999 and 1998, were ¥100.9 billion and¥235.4 billion, respectively.
3. The deducted amounts of Nonaccrual Loans at March 31, 1999 and 1998, were ¥146.2 billion and¥225.0 billion, respectively.

 Claims Subject to FRL Disclosure Requirements(¥ billion)
At March 31

1999

Coverage Ratio

Reserve Ratio

Claims under Bankruptcy or Virtual Bankruptcy
Claims under High Risk
Claims under Close Observation

111.6
1,197.7
562.9

100.0%
83.8%
52.7%

100.0%
77.1%
15.0%

Total

1,872.3

75.4%

60.7%

Notes: 1. Claims under Bankruptcy or Virtual Bankruptcy are net of uncollectable portion.
2. The deducted amounts at March 31, 1999, are ¥272.4 billion.

14

Management Rationale and Strategy at IBJ[

Emerging market
exposure]<

In such cases, for the banks to insist
on the repayment of the loan may beunreasonable, as it would only force anotherwise sound business into unnecessary bankruptcy and it would be to no
one’s advantage. Forgiveness may evenbe a means for reducing the bad loan
exposure of the Bank in the long run.

The senior management of IBJ considers the situation carefully and agrees toforgiveness if it is more appropriate andresults in greater overall benefits for IBJ.

Please explain IBJ’s lending exposure to emerging markets.

=

IBJ’s exposure on a consolidated
basis at the end of March 1999
was ¥778.3 billion to Asia, ¥102.4
billion to Latin America, and ¥8.7
billion to Russia and Eastern
Europe.

On a Financial Reconstruction
Law Disclosure Requirements basis,
disclosed problem loans to Asiaamounted to ¥83.1 billion. Suchloans to Latin America were only
¥0.1 billion, and those to Russia andEastern Europe were ¥3.2 billion.

The outlook of the markets remains
uncertain, and the Bank will continue to review the situation carefully.
With continuing cooperation withinternational financial institutions
and with the expectation of a prompt
return to a vital economy as soon as
possible, the Bank intends to playa responsible role.

 Balance of Exposure to Emerging Markets (Consolidated basis as of March 31, 1999)(¥ billion)
ThailandThe
China Hong Kong Korea Indonesia Singapore Malaysia Philippines Sub-total

Taiwan India Others

Total

Japanese Borrowers(IBJ only)

56.7(47.3)

45.3(34.5)

39.0(35.5)

0.0
(0.0)

18.9
(16.1)

44.4(35.8)

7.7
(6.1)

0.0
(0.0)

212.2
(175.6)

0.0
(0.0)

0.0
(0.0)

0.0 212.2(0.0) (175.6)

Non-Japanese
Borrowers(IBJ only)

109.2(97.6)

93.4(85.3)

91.8(88.7)

94.3(94.2)

63.1(37.8)

21.8(19.0)

36.4(32.7)

4.5
(4.5)

514.8
(460.2)25.1 24.3(21.9) (23.6)

1.6 566.1(1.6) (507.5)

Total(IBJ only)

165.9(145.0)138.7(119.9)130.9(124.2)

94.3(94.2)

82.0(54.0)

66.3(54.8)

44.1(38.9)

4.5
(4.5)

727.1
(635.9)25.1 24.3(21.9) (23.6)

1.6 778.3(1.6) (683.1)

Chile

Colombia

MexicoBrazil

Other

Total

RussiaOthers

Total

Japanese Borrowers(IBJ only)
Non-Japanese Borrowers(IBJ only)

0.0
(0.0)
29.2
(28.2)

0.0
(0.0)
24.9
(23.7)

0.0
(0.0)
22.4
(21.2)

0.0
(0.0)
7.2
(7.2)

0.3
(0.3)
18.2
(15.4)

0.3
(0.3)
102.1
(95.8)

0.0
(0.0)
1.3
(1.3)

0.0
(0.0)
7.4
(3.4)

0.0
(0.0)
8.7
(4.8)

Total
(IBJ only)

29.2(28.2)

24.9(23.7)

22.4(21.2)

7.2
(7.2)

18.5
(15.7)

102.4(96.1)

1.3
(1.3)

7.4
(3.4)

8.7
(4.8)

Notes: 1. Exposure includes loans as well as acceptances and guarantees. Conversions to yen were made at the rate of ¥120.55 per U.S. dollar (interbank rate inTokyo at March 31, 1999).
2. Japanese borrowers are companies in Asia that are 50% or more owned by Japanese companies (excluding companies for which the Bank has obtained
guarantees from the parent company).

15

Management Rationale
and Strategy at IBJ

an increase in unemployment, and severe
economic impact for a particular regional economy.
If such a company develops a restructuring plan and the senior managementtakes responsibility, then it may be reasonable for banks to assist the company
through the restructuring process.

Management Rationale
and Strategy at IBJ

Management Rationale and Strategy at IBJ[

Year 2000 problem]<

What measures are being taken to deal with the Year 2000 Problem?

=

IBJ regards the Year 2000 (Y2K)
Problem as a very serious
management issue and a top priority
for the Group. The managing director responsible for the Information
Technology Department and the
managing director responsible for
the Corporate Planning Department
head up the Year 2000 Committeethat includes the heads of all 14
affected departments. The committee
is in charge of dealing with the problem and reporting the progress madein resolving the various issues to theBoard.
The possibility of failure of IT systems has been thoroughly investigated, with programs checked andrewritten and tested on a comprehensive basis. There is also a backup
crisis control plan in the unlikely
event of IT failure.
By March 1999, most core systems
related to business operations wereY2K compliant, and, by the end ofJune 1999, all systems, facilities, andenvironmental equipment were compliant. For external systems connected to the IBJ Group’s IT systems, there16

has been a series of financial industrywide tests involving the Bank ofJapan network and the Zengin (theJapan Bankers’ Federation) system.
As systems are certified Y2K compliant, their configurations are tightly managed, and further alterations
are restricted in the interest of maintaining compliance until March 2000.
In the area of customer Y2K readiness, the Bank is tracking its counterparty risk by considering a numberof factors: the commitment of thesenior management to the problem,the extent of the response to the
problem, the progress made inensuring compliance, and theprogress made in preparing a crisis
management program.
The Bank had prepared a crisis
management program, the Contingency Plan, by the end of June 1999
to deal with the possibility that thesocial infrastructure necessary for
the Bank’s operations may fail, forexample, electricity, gas, telecommunications, water supply, transportation systems, and financial
settlement infrastructure, and that
there may be associated credit risk,

liquidity risk, legal risk, reputation
risk, and other types of risk. Measures
to reduce risk in advance, measures
to ensure the normal functioning of
the Bank despite possible system
failures, and a command center
strategy have been determined, anda staff training program has been
put in place, which commenced
in July.
The total cost of dealing with the
Y2K Problem has been estimated at¥12.1 billion, including all ancillary
charges and costs.
The Y2K Problem is under theconstant surveillance of the internal
audit team, which receives updatesof the implicit legal risk from thelegal section.
For all account holders with
the Bank, pamphlets have been
prepared to answer concernsand questions, and these havebeen distributed to all branches
for availability.
For those readers of this annual
report interested in the details concerning this problem, the IBJ Web
site at www.ibjbank.co.jp should bevisited for the latest information.

RESTRUCTURING AND RE-ORIENTATION

Revenue Plan
In March 1999, the Bank published the Plan to Revitalize Management inconnection with the application for the injection of public funds. This plan
has core business profit rising from the forecast result of ¥162.8 billion forthe year ending March 31, 2000, on a non-consolidated basis to ¥215.5 billion for the year ending March 31, 2003, with the new subsidiaries’ contribution at that point being approximately ¥45.0 billion, making the total inexcess of ¥260.0 billion.
The basis of these revenue projections is the strength of the commercial
banking, investment banking, and securities and asset management businesses as well as the new and growing emphasis on asset-liability management (ALM) in the area of exposure to market risks at the parent company
in treasury plus the growing strength of subsidiary operations.
Within commercial banking, it is imperative to assess risk correctly andensure that the loan book quality is raised. Investment banking and securities and asset management businesses are important strategic areas ofemphasis for management and should see higher revenues as increased
resources are applied. Market risk control using ALM techniques should
lead to greater stability in revenues from treasury operations. Strategic subsidiaries, such as IBJ-DL Financial Technology Co., Ltd. (IBJ-DL FT), and IBJ
Nomura Financial Products Co., Ltd. (INFP), are active in financial engineering development, and their new and sophisticated techniques should
 Profit by Business Line(¥ billion)
For the years ended

March 31, 1997
(Actual)March 31, 1998
(Actual)March 31, 1999
(Actual)March 31, 2000
(Projected)

March 31, 2001
(Projected)

March 31, 2002
(Projected)

March 31, 2003
(Projected)

Domestic Business

222.4

239.5

250.6

182.2

195.8

210.0

215.8

Customer-related

122.1

155.0

140.8

126.3

140.9

151.8

161.1

Treasury-related

100.3

84.5

109.8

55.9

54.9

58.2

54.7

International Business

22.8

26.7

65.6

31.0

34.2

36.8

33.1

Customer-related

8.8

4.3

(5.6)

3.4

6.1

10.2

15.4

Treasury-related

14.0

22.4

71.2

27.6

28.1

26.6

17.7
21.6

Investment Banking Related Business (Note 1)

—

2.5

2.2

5.8

8.3

14.5

Capital Cost of Group Companies (Note 2)

(7.3)

(8.5)

(6.3)

(9.0)

(8.2)

(8.6)

(6.9)

Headquarters (Note 3)(29.4)(38.2)(43.7)(46.9)(45.4)(45.8)(45.2)

Virtual Core Business Profit (Note 4)

225.8

244.7

278.6

162.8

184.4

206.8

215.5

IBJ Group Companies

13.5

1.1

21.2

19.7

30.8

43.2

46.5

2.9

3.2

9.8

5.1

8.7

11.7

14.3

Including IBJ Securities
Group Income

239.3

245.8

299.8

182.5

215.2

250.0

262.0

Group ROE

18.3%

19.6%

22.3%

11.8%

13.4%

14.9%

14.8%

Notes: 1. Non-interest income from investment banking business (structured finance, M&A, and project finance)
2. Amount of the parent bank’s capital cost in securities-related subsidiaries and other companies
3. Overhead costs of the general administration headquarters, expenses related to seconding personnel, welfare, and other expenses
4. The difference between the total profit and loss by business line is the other adjustment item.

17

Restructuring and Re-orientation

Preparing for Heightened Competition in the Post-Big Bang Era

Restructuring and Re-orientation

Restructuring and Re-orientation

provide a solutions-based approach to customer requirements and them-쏹 Projected Profit

selves contribute strongly to revenues. The re-orientation and restructuring(Years Ended/Ending March 31)of the overseas operations should also assist in revenue growth.

(%)

The ROE should rise from the forecast for the year ending March 31,

by Business Line

100

2000, of 11.8% to the projected result for the year ending March 31, 2003,
of 14.8%, a 3.0 percentage point increase.

80

The plan is based on the Bank’s current medium-term management
plan, which is based on input from the various divisions of the Bank. In the60

past, this style of forecast has proven very reliable and conservative, withthe achieved results of the last three years surpassing those of the original40

plan results. The revenue plan as published should be seen as being realistic, achievable targets.

Rationalization
IBJ has always been a small and focused organization. However, in the

20

0
99

00

01

02

03

changing environment of the financial services industry in Japan, and espe-

Treasury-related income

cially since the year ended March 31, 1996, there have had to be further

Investment banking related
and IBJ Group income

focusing and accompanying rationalization measures. These rationalization
measures include the reduction in the number of board members, the abolition of the counselors’ system, the reduction of directors’ remuneration andbonuses, the outsourcing of administrative functions where possible, andthe closing of excessive staff welfare and recreation facilities.
Further rounds of rationalization will be necessary, as a result of the
impact of the continuing processes of financial services liberalization andJapan’s Big Bang reforms.
For example, there is a review of the domestic branch network andcurrent marketing structures. The intention is to improve efficiency andreduce costs. Similarly, overseas, while the overall structure of the IBJ international network will be maintained, from the year ended March 31, 1998
through the year ending March 31, 2003, 30% of the branches will be closed,
and the efficiency of the remaining operations improved.
With the introduction of the Executive Committee system, from theyear ended March 31, 1998 through the year ending March 31, 2003, thenumber of members of the Board of Directors should be reduced from 35

18

Customer-related income

Restructuring and Re-orientation

same period. Back-office administrative functions in areas such as forex
and retail deposit-taking will be outsourced whenever possible.
In this fashion, it should be possible to reduce personnel and non-personnel
expenses to ¥141.9 billion as mandated by the current medium-term management plan to the year ending March 31, 2003, and this represents a reduction
in costs of 8% from the year ended March 31, 1998. It must be stressed that
this is being done while due attention is given to efficiency and improving
services and products.
 Plans for Restructuring
March 31, 1997
(Actual)March 31, 1998
(Actual)March 31, 1999
(Actual)March 31, 2000
(Projected)

March 31, 2001
(Projected)

March 31, 2002
(Projected)

March 31, 2003
(Projected)

35
5,175

35
4,971

30
4,752

21
4,599

19
4,545

15
4,496

13
4,482

Number of Directors
Number of Staff

Note: The number of staff include operational and general affairs personnel. Staff seconded to other companies are also included. Contract and part-time staff
are excluded.
March 31, 1997
(Actual)Number of Domestic and Overseas Offices
Head Office and Domestic Branches (Note 1)
Overseas Branches and Agencies (Note 2)(For reference: Overseas subsidiaries) (Note 3)

50
28
22
(15)

March 31, 1998
(Actual)March 31, 1999
(Actual)March 31, 2000
(Projected)

March 31, 2001
(Projected)

March 31, 2002
(Projected)

March 31, 2003
(Projected)

50
28
22
(16)

48
27
21
(16)

38
24
14
(15)

38
24
14
(15)

38
24
14
(14)

38
24
14
(14)

Notes: 1. Excludes sub-branches and agencies
2. Excludes loan production office and representative offices
3. Overseas subsidiaries are defined as companies in which the Bank has a majority ownership.
For the years ended

March 31, 1997
(Actual)March 31, 1998
(Actual)March 31, 1999
(Actual)March 31, 2000
(Projected)

March 31, 2001
(Projected)

March 31, 2002
(Projected)

March 31, 2003
(Projected)

Personnel Expenses (¥ billion)(Salaries and Bonuses (¥ billion))

72.9(36.8)

74.3(36.3)

68.0(33.4)

70.6(33.4)

68.1(32.7)

68.0(32.5)

68.0(32.2)

Average Monthly Salary (¥ thousand)

489

482

482

488

489

490

490

March 31, 1997
(Actual)March 31, 1998
(Actual)March 31, 1999
(Actual)March 31, 2000
(Projected)

March 31, 2001
(Projected)

March 31, 2002
(Projected)

March 31, 2003
(Projected)(¥ million)
For the years ended

Directors’ Remuneration and Bonuses (Note 1)(Directors’ Bonuses)(Directors’ Remuneration)

1,171(1,036)
(135)

1,249
(1,102)
(147)

778
(713)
(64)

704
(672)
(32)

601
(601)
(0)

658
(658)
(0)

589
(589)
(0)

Average Directors’ Compensation and Bonuses

30

32

22

28

28

27

27

Average Retirement Allowancefor Directors (Note 2)

33

70

40

42

41

41

41

Notes: 1. Total for personnel expenses and directors’ bonuses within Statements of Retained Earnings. When directors have responsibilities as employees, thecompensation for performance of those responsibilities is included.
2. Anticipated actual amount for year ending March 31, 2000. The figures for the period from the years ending March 31, 2001, and March 31, 2002, assume
a 10% reduction from the level over average retirement allowances for the previous four years.
(¥ billion)
For the years ended

March 31, 1997
(Actual)Non-Personnel Expenses(Costs Related to Purchasesof Laborsaving Machinery and Equipment)

March 31, 1998
(Actual)March 31, 1999
(Actual)March 31, 2000
(Projected)

March 31, 2001
(Projected)

March 31, 2002
(Projected)

March 31, 2003
(Projected)

74.3

79.2

79.6

79.4

76.8

74.7

73.9

(11.3)(14.2)(18.4)(23.6)(26.4)(24.8)(24.1)

19

Restructuring and Re-orientation

to approximately 13. Overall staff numbers should fall by 10% over theRestructuring and Re-orientation

Restructuring and Re-orientation

Personnel policy
To prepare for the impact of Japan’s financial liberalization, Japan’s Big
Bang, and for the increased competition between financial institutions, both
domestic and foreign, and to attain the objectives of long-term management, IBJ has made major changes in personnel policy since the second halfof 1997. First, IBJ is placing greater emphasis on the suitability of the individual for a job; second, the Bank is securing a wider variety of personnel
and educating and training them more systematically; and, third, the personnel system has been designed to draw the best from each staff member.
Changes in the personnel system have been made in many areas, andimportant examples are given below. For example, the prior emphasis on
an undifferentiated style of internal training for professional entry staff intheir early years in the Bank and on-the-job rotation has been changed. The
rapid advance in the specialization in financial techniques and the increasing sophistication of the financial services industry have meant thatchanges have to be made in the overall pattern of early training.
Professional-entry staff are given one year in the corporate banking sections in the Head Office and domestic branches to orient themselves to theenvironment of general corporate finance, and then they spend the next
five years in two departments, one market-related and one special-skillsrelated, such as investment banking, securities, or research. The previous
system of initial training, which was spread over three years, has been
reduced to a concentrated one year. This is to ensure that the necessaryknow-how is assimilated at the earliest possible opportunity. Then, in theseventh year of employment, the staff member is assigned an appropriate
responsibility that is of a more-extended duration than previously.
To facilitate the growth of greater specialization, two new career paths
have been made available since July 1998. The first new path is the“Professional Staff S Course,” a specialist course for full-time contract
employees, which has been set up for those professional staff who wish
to pursue a career on the basis of specialization and performance-based
bonuses. The second new path is the “Specialist Course,” a specialist
course for short-term contract employees that has been set up for those
professionals in the market who wish to join the Bank on a strictly marketbased salary or for those existing full-time contract employees who wish
to move over to a strictly market value remuneration system as short-term
contract employees.

20Restructuring and Re-orientation

neration system based on the number of years of service as part of theJapanese “lifetime employment” system and in moving toward individualcareer paths as well as placing greater emphasis on performance-related
remuneration. However, to restrain overall personnel costs, at the sametime, the old system of salary increases determined by the number of yearsof service has been largely replaced in favor of higher emphasis placed oncapability and responsibility. The system of salary based on the responsibility of the position assigned was introduced for managers and above. The
general managers of departments and branches now have authority to determine the performance element of bonuses paid to their subordinates. Those
staff members on both the Professional Staff S Course and the Specialist
Course are subject to a system of internal evaluation from those staff members that they serve, irrespective of departmental location. This is to ensurethat there is also continuing teamwork within the shift to specialization.
Individual career paths are being made possible by a system of internal
consultation and guidance by one-on-one interviews with Personnel
Department staff at the stages of 6 years, 12 years, and 20 years of employment at the Bank. These changes in the personnel practices of the Bank arein line with the intentions of the current medium-term management planto achieve maximum capabilities within an overall personnel budget. Also,
it is particularly important to ensure that there is adequate synergy between
the various strategic subsidiaries and the other member companies of the
IBJ Group.

21

Restructuring and Re-orientation

These are practicable steps in providing flexibility to the previous remu-

Restructuring and Re-orientation

Restructuring and Re-orientation

Strategic alliances
Given the foreseen demands of the post-Big Bang environment, it is necessary for the IBJ Group not just to rely on its own in-house capabilities, butalso to bring in capabilities from outside. In connection with this, thealliances with Nomura Securities Co., Ltd. (Nomura) and Dai-ichi MutualLife Insurance Company (Dai-ichi) are described in some detail as follows.
In May 1998, IBJ and Nomura agreed to set up several joint venture companies in promising growth areas, including derivatives and asset management related business. These are areas where competition is particularly
intense and involve not only domestic but also foreign institutions. It was
judged most appropriate to combine the strengths of the two partners in

Joint press conference with the Nomura
Securities Co., Ltd.
(Right, Junichi Ujiie, President & CEO,The Nomura Securities Co., Ltd.; Left,
Masao Nishimura, President & CEO, IBJ)

these several joint ventures in the interests of providing customers withthe optimum services.
First, in derivatives, IBJ Nomura Financial Products plc (INFP) has been
incorporated, and it has already started to provide customers with novel
financial products. Second, in asset management related business, three
new companies have been formed: Nomura-IBJ Investment Services Co.,
Ltd. (NIIS), Japan Investor Solutions & Technologies Co., Ltd. (JIS&T), andNomura IBJ Global Investment Advisors, Inc. (NI-GIA).
NIIS offers consulting advice and its affiliate JIS&T offers record-keeping
services for Japanese-style 401(k) defined contribution pension schemesthat will shortly be introduced. A successful campaign is under way toinvite other foreign and domestic financial institutions to equity participation in JIS&T to enjoy further economies of scale. NI-GIA engages in funds
evaluation to structure funds of funds and to offer asset managementadvisory services.
In regard to the alliance with Dai-ichi, an agreement was made in
October 1998 to cooperate on a comprehensive basis. The nature of thisagreement reflects the complementarity of the two organizations: IBJ,
strong in the wholesaling of financial products and services to corporate
customers, and Dai-ichi, strong in the retailing of insurance and pension
products to individuals. This complementarity means that both companies’
management resources and capabilities will be efficiently exploited, andcustomers will receive a value-added integrated service. There are many
examples of immediate application of the complementarity: IBJ will be

22

Joint press conference with the Dai-ichi
Mutual Life Insurance Company(Right, Tomijiro Morita, President,
The Dai-ichi Mutual Life Insurance
Company; Left, Masao Nishimura,President & CEO, IBJ)

Restructuring and Re-orientation

Name of department
Area of responsibility

able to apply its securitization know-how to the Dai-ichi portfolio of officebuildings, and the two alliance partners have experience in the cross-sellingof each other’s investment trust products, quite apart from the existing history

Financial Technology Department No. 1
Financial technologies related to credit, market risk management, and credit derivatives
Financial Technology Department No. 2
Technologies for interest rate derivatives and related analysis, computation, and systems technology
development
Financial Technology Department No. 3
Technologies for currency, commodity, equity, and climate and earthquake
risks derivatives
Investment Technology Department
Investment technologies for stocks
and bonds
Financial and Actuarial R&D Department
Technologies related to pensions andinsurance as well as investment management
Emerging Financial Technology Department
Technologies related to structured
finance and information
President’s Office
Global-warming issues (including
emission rights transactions), educational software for financial technology, and other mattersof the two companies having already cooperated in syndicated loans work.
Another important agreement with Dai-ichi covers IBJ’s originally 100%owned strategic subsidiary IBJ Financial Technology Co., Ltd., incorporated
in April 1998. In April 1999, the subsidiary became a joint venture with
Dai-ichi, and the name was changed to IBJ-DL Financial Technology Co.,
Ltd. The joint venture acts as the core of the whole Group R&D of applied
technology in the fields of derivatives, risk management, and investment
technology.
In October 1999, it is planned to merge the asset management operationsof IBJ NW Asset Management, IBJ Investment Trust Management, and Daiichi Life Asset Management into DLIBJ Asset Management Co., Ltd.
IBJ intends to pursue a similar course with other leading financial
institutions, both at home and abroad, to build a leading financial
products group.

 Strategic Alliances

Areas of Cooperation

Supplementing each other’s
products and services
Areas of Cooperation

Co-financing operations

Global financial products

NomuraSecurities

Asset management
and advisory

Asset administration

IBJ Group

Development of real estate
securitization products

Dai-ichiMutual Life
Insurance

Integration of asset
management companies
Development of new
products and technologies
in the finance, insurance, andfund management fields

23

Restructuring and Re-orientation

 R&D Organization of IBJ-DL
Financial Technology

Risk Control and Compliance Issues

RISK CONTROL AND COMPLIANCE ISSUES
Controlling Risk and Ensuring Compliance

Risk
IBJ faces a variety of risks in its business: credit risk, market risk, liquidity
risk, operational risk, systems risk, legal risk, and other risks, and with thegrowth of financial engineering techniques, the importance of risk control
and compliance systems is growing rapidly.
To have integrated control of risk, the various forms of risk have to be
reduced to one single measure. In June 1999, the Risk Management Department was established to cover credit, market, and liquidity risk comprehensively as well as plans to employ a quantitative methodology for
determining credit and market risk.
쏹 Integrated Risk Management Structure

Board of Directors
Executive
Committee

Establishmentof risk limits

Risk management policies
Risk-taking capability
Evaluation of risk and return

Preparation ofbusiness plans

Financial Control
Committee
Risk
Management
Department
Credit Committee
Credit Risk
Management
Department

ALM Committee
Creditrisk

Marketrisk

Business Units

24

Risk Control and Compliance Issues

Credit risk is the risk that the credit extended will not be recovered andthat the Bank will sustain a loss. It is necessary to control the extent and thesize of the exposure to credit risk; otherwise, the assets of the Bank cannot
be secured, an adequate return on the assets cannot be achieved, and thefiduciary duty to the shareholders cannot be performed.
The credit evaluation process of the Bank involves not only an analysisof the financial standing of the borrower but also a full understanding of
the underlying business and of the industry prospects. Such an impartial
evaluation process gives the Bank a clear view of the situation of the prospective borrower. It is therefore possible to make informed credit decisions
and to assist the customer with appropriate advice.
In concrete terms, the Credit Risk Management Department has been
established independent of the Corporate Banking Unit and is responsible
for credit risk control of the Bank on a fully integrated basis. The responsibility is the investigation and evaluation of specific risks and research into
improved systems of credit control. Whether originating in Japan or overseas, all proposals, borrowers, internal credit rating procedures, internalloan audit functions, credit approval guidelines and policy, and loan portfolio management are supervised by the department.
In particular, the internal credit rating system gives a clear indication of
the creditworthiness of the borrower on an objective quantitative basis as
well as qualitative basis using a 10-point scale. This is used not only to
decide the initial level of the credit risk acceptable but also to continuously
monitor the credit risk, particularly during the self-assessment process, andto measure the quantitative level of the credit risk.

25

Risk Control and Compliance Issues

Credit risk

Risk Control and Compliance Issues

Risk Control and Compliance Issues

In the process of marketing corporate banking services, loan applications
are received and the first-stage credit evaluation is made. The proposed
terms are agreed to at the working level, and this is part of the application
for approval from the Credit Risk Management Department. The department reviews the application, conducts the second-stage credit evaluation,and gives or withholds approval for the loan to be made. There is then aprocess of regular review of the loan portfolio at the working level and at
the Credit Risk Management Department level. The Credit Examination
Department is responsible for monitoring the process in a third-stage check
function.
In addition to the above process, the Risk Management Department
quantifies and monitors the level of credit risk borne by the Bank as awhole periodically to check the aggregated level of risk and the effect ofconcentration of the portfolio.
Concerning credit risk quantification methodology, IBJ-DL Financial
Technology Co., Ltd., has provided a sophisticated methodology as packaged software, Credit Scope, jointly developed with NTT DATA CORPORATION. To date, over 60 banks have already adopted the software.
쏹 Credit Risk Management Structure

Board of Directors
Executive
Committee

Credit Risk
Management Department
Risk Management
Department

Quantificationof credit risk

Analysis of loan applications
Analysis of companies
Assigning of internal credit ratings
Self-assessment of asset quality(secondary)
Credit portfolio supervision

Head Office and Branches

Self-assessment of asset
quality (primary)

26

CreditExamination
Department
Internal auditingof self-assessmentof asset quality

Risk Control and Compliance Issues

Market risk arises when fluctuations in interest rates, stock prices, foreignexchange rates, and other market variables result in changes in the valueof financial assets and liabilities, including derivatives.

Market Risk
Management System

At all of the Bank’s offices that are engaged inmarket transactions, in addition to the units

engaged in actual transactions (the front offices), independent units (themiddle offices) have been established to be in charge of measuring net
income and risk. In addition, the Risk Management Department in the
Bank’s Head Office is responsible for measuring the maximum expected
loss, or Value at Risk (VaR) for the Bank as a whole. This department is in쏹 Market Risk Management Structure(As of June 1999)

Board of Directors

Executive Committee

ALM Committee
Risk Management
Department

Responsible formeasurement ofmarket risk of all the
Bank’s offices, using
an integrated standard and analysis ofrisks as well as making suggestions tomanagement. Also
engaged in R&D related to risk management techniques

Treasury
Department

ALM for yen
assets andliabilities

Derivatives and
Fixed Income
Department

Securities
Business
Department

International
Treasury
Department

Sales andtrading ofderivatives
and trading
account
securities

Investments
in stocks

Tokyo
London
New York
Singapore
Sales andtrading inforeigncurrencies

Overseas
Branches andSubsidiaries

Supervision and control
through monitoring ofincome and risk conditions
Risk Management Department

Acts as middle office for the Treasury Department, Derivatives and Fixed Income Department, Securities Business
Department, and International Treasury Department

Middle office for theabove offices

Supervision and control
through checks on individualtransactions
Market Business Operations Department, International Treasury Operations Department

Back office for overseas branches and subsidiaries

27

Risk Control and Compliance Issues

Market risk

Risk Control and Compliance Issues

Risk Control and Compliance Issues

charge of analyzing risks borne by the Bank from a multiplicity of perspectives and reporting the results to management. Besides monthly reports
presented at meetings of the Board of Directors, the Executive Committee,

Table A Methods Currently Used to
Monitor Market Risk and SpecificContent
VaR

and the ALM Committee, the department also prepares daily reports. At

Calculation of maximum losses
within a specified probability limit (IBJ
uses 99%) due to future fluctuationsin interest rates, currency rates, andother indicators is made based on
statistical analysis of past data.

the meetings of the Board of Directors, the Executive Committee, and the
ALM Committee, participants discuss the Bank’s risk positions and set
policies for risk-taking activities.

Methods for Managing

The Bank uses VaR as the unified measure

Market Riskof risk for all its operations. In addition tocomputing VaR, the Bank establishes limits on the extent of the impact ofmarket fluctuations as outlined in Table A and, through tests, monitorsand controls the level of risk.
The Bank’s risk management activities are based on an understanding of
the most advanced financial theories, and staff well versed in this area havebeen assigned to risk management and are engaged in R&D related to risk
management techniques.
The principal methods for risk monitoring and control are shown in
Table A, but, in addition to these approaches, other methods are employedthat are suited to the nature of individual types of risk.

Risk Measurement Methodology
and the Bank’s Risk Position

Value at Risk

The market risk

exposure of the Bank’s trading

activities at its Head Office, branches, and consolidated subsidiaries (hereafter referred to as all trading offices) is measured by the VaR approach
utilizing the Bank’s internal model. VaR is defined as the maximum potential loss of a portfolio with a given probability over a given period oftime. It is calculated based on parameters (volatility and correlation coefficients) that estimate the future movements in interest rates, foreign currency rates, and other risk factors based on the analysis of past data on market
fluctuations.
IBJ’s model employs simultaneously the variance-covariance method andthe Monte Carlo Simulation Method, and the model incorporates about 200
market data series, such as yen interest rates and yen-dollar exchange rates,
representing various risk factors.

28

Stress Tests
To prepare for times when market
rates diverge substantially from statistical fluctuations assumed by VaR
analysis, computations of losses are
made assuming extreme market fluctuations (stress scenarios).
Interest Rate Sensitivity (Delta)
Delta shows the amount that theBank’s portfolio would change invalue if interest rates should move bya certain percentage (usually one basis
point, or 0.01 percentage point).
Upper position limits for each interestrelated position are usually set for
detailed management.
Gamma
Gamma is the change in delta for only
a one basis point change in interest rates.
Upper limits are set when managing
option positions.
Vega
Vega indicates the change in value of
assets and liabilities when volatility
brings a one percentage point change.
Upper limits are set when managing
option positions.
(Note: Volatility is the expected rate ofchange in market rates during a specified
future period.)
Position Limits by Financial Instrument
As there are differences in the volume
of financial instruments of specified
types that can be purchased in themarket at one time, when necessary,
limits are placed on positions in individual financial instruments.
Loss Limits
For each position limit, the Bank sets
upper limits on accumulated losses
that can be sustained over a specified
interval.

Risk Control and Compliance Issues

ments, greater weight is given to more recent data, and less emphasis is(¥ billion)

Daily average

3.20

Maximum on daily basis

6.10

Minimum on daily basis

1.45

Year-end

2.83

placed on historical data to ensure that the parameters better reflect recent
market trends. (See graphs 1 and 2.)
Trends in VaR for all trading offices for the year ended March 31, 1999,
are shown in Graph 3 and Table B. (These estimates assume a holding
period of one day and a confidence level of 99%. When VaR at all trading
offices is computed, positions held by various offices are netted out.) Graph
4 shows the impact of individual risk factors on VaR as of March 31, 1999.

 Graph 1: Weight Graph 2: Image Simulation of Market Trends Accompanying Volatility
(¥)

(%)

122

3.0

120

Foreign exchange rate

116

2.0

114
112

1.5

Volatility

2.5

118

110
1.0

108
106

0.5

104
102
0

5

10

15

20

25

30

35

40

45

50

U.S. dollar/yen exchange rate

0Volatility

Days transpiring after delta Graph 3: Trends in VaR for All Trading Offices
for the Year Ended March 31, 1999

 Graph 4: Composition of Risk(¥ billion)

Foreigncurrency
related
30%

Factors to VaR as of March 31, 1999

7

Equity-related
1%

6

5

4

3
Interest
rate related
69%

2

1

0
4/98

5/98

6/98

7/98

8/98

9/98

10/98

11/98

12/98

1/99

2/99

3/99

29

Risk Control and Compliance Issues

When parameters are estimated based on past data on market move-

Table B Actual VaR for theYear Ended March 31, 1999

Back Testing

The Bank tests the accuracy of its internal model throughback testing, which involves comparing the daily profit/loss statements ofall trading offices with the estimated VaR to determine whether actual
profit or loss exceeds maximum expected loss (VaR).
Graph 5 shows the results of back testing for the year ended March 31,
1999. All points above the slanted line in the graph show the days when
actual profit or loss was below the VaR. On the 260 business days in theyear ended March 31, 1999, there were no instances when actual loss
exceeded VaR. These results verify the accuracy of the Bank’s internal
model.
Stress Testing

The VaR method indicates the maximum expected loss

that may occur in a normal market environment. In addition to VaR, theBank also employs stress testing to estimate the impact of unusual market
movements on the Bank’s trading profit/loss statement that cannot be measured by VaR. Under the Bank’s stress testing, which is called the “Steepest
Descent Model,” maximum loss is derived by estimating the worst market
scenario based on the characteristics of the Bank’s trading portfolio, taking
into account the volatility and correlation of approximately 200 risk factors,
such as yen interest rates and dollar/yen exchange rates. Graph 6 isa plot of the Bank’s stress testing in cases where there are only two risk
factors.
The results of stress testing for positions held by all trading offices as ofMarch 31, 1999, show a maximum loss of ¥9.04 billion, compared with VaRof ¥2.83 billion on the same date.
쏹 Graph 5: Results of Back Testing for All Trading Offices

 Graph 6: Image of the Results of a Stress Scenario
with Two Risk Factors

for the Year Ended March 31, 1999
Assumptions for VaR calculations
Holding period: One-day confidence interval: 99%
8
6

2

Occurrence of Stress

0

Fac

tor

1

-2

Facto
-4
-6
-8
-8

30

Market Value

4
Profit/Loss (¥ billion)

Risk Control and Compliance Issues

Risk Control and Compliance Issues

-7

-6

-5

-4

-3

VaR after Sign Change (¥ billion)

-2

-1

0

r2

Notes: 1. The Bank’s method corresponds to the stress test cited in the
Amendment to the Capital Accord to Incorporate Market Risk, prepared by
the Basle Committee on Banking Supervision (January 1996) as the“Scenarios developed by the Bank itself to capture the specific characteristics of its portfolio.”
2. The Bank’s stress tests measure the maximum loss that may
occur with a holding period of one day.

Risk Control and Compliance Issues

Liquidity risk management is an important aspect of ALM that ensures thatsufficient cash flow is available at any time to meet the various financial
needs of IBJ’s customers. The Bank’s primary source of funding is couponand discount debentures, which are issued every month. The Bank’s strong
distribution network, based on close contact with various institutional
investors, provides the Bank with a competitive edge in managing its liquidity. In addition, the Bank has wide access to various funding instruments, investors, and money markets around the world. This ensures thatthe Bank has alternative funding sources to maintain sufficient liquidity,
even if a liquidity crisis occurs in a specific market. The Bank continuously
attempts to maintain and expand the investor network for its debentures
and works to enhance its presence in the short-term money markets aroundthe world.
In managing liquidity, the Bank places limits on the amount of its
overnight money position (the necessary amount of overnight funding forbalance sheet equilibrium) as well as on the amount of positions in certain
financial instruments. The overnight money position is measured on adaily basis by projecting the cash flow of current assets and liabilities andthat of anticipated future transactions. This limit is monitored on a global
basis by aggregating the cash position of both the Bank’s foreign offices
and subsidiaries, thus allowing the centralized assessment and control of
the Bank’s liquidity profile. Also, the Bank holds a certain amount of highlymarketable assets, such as government bonds that can be easily liquidated
when necessary. In addition to this conservative process as adopted innormal market situations, various contingency plans exist to cope withsevere liquidity problems.

31

Risk Control and Compliance Issues

Liquidity risk

Risk Control and Compliance Issues

Risk Control and Compliance Issues

Operational risk
Operational risk means the risk of loss caused by mistakes in the conductof businesses or by the occurrence of irregularities or similar incidents.
The Operations Supervisory Department is responsible for ensuring that
operating standards contained in the ‘Procedures Manual’ are properly established and, consequently, operational risk is minimized. The Auditing
Department conducts an independent check approximately once a year
to ensure that the Procedures Manual is being correctly followed in all
operational areas.
In line with the increasing variety and complexity of banking transactions, the Operations Supervisory Department is conducting the continual
revision and provision of the Procedures Manual and other related documents.
To foster improvement in the operational quality of the Bank, the Operations
Supervisory Department is also managing the proper observance of theProcedures Manual, and promotes training and gives guidance to the staff.

Systems risk
Systems risk means the risk that damage and loss may be incurred by
the Bank due to a total failure of IT systems, by IT systems operating incorrectly, or by IT systems being accessed illegally and manipulated. The
Information Technology Department is responsible for systems risk. For
example, there is the danger of earthquake disruption of IT systems. Under
these circumstances, backup systems are relied upon and are located in
Osaka, some 500 kilometers from Tokyo. As for unauthorized access to thesystem, there are a variety of control barriers in place to prevent such access.

Legal risk
Legal risk is either the risk of direct financial loss or indirect financial
loss, through disputed transactions with customers, outright illegalities by
the Bank, or the conclusion of inappropriate contractual agreements by the
Bank in the course of operational transactions or management decisions.
It is the responsibility of the Legal Department to control legal risk.
Both at home and overseas, this involves close cooperation with leading law
offices and legal specialists to ensure that, on a global basis, the legal position of the Bank is not prejudiced. There is always a danger that operations
staff may regard legal affairs purely as the responsibility of the department.
To avoid this, all responsible staff are required to attend courses on legal
affairs so that, at all times, there is an acute awareness of the legal dimension of all operations involving the Bank.
32

Risk Control and Compliance Issuesof the various laws and regulations applicable to the Bank and by considering all possible legal risk that may develop in the management and operation of the Bank. In the globalization and increasing complexity of the Bank’sbusiness, it is also necessary to have the capability of avoiding court actions
and, if reluctantly entered into, the capability of dealing with the action
expeditiously and favorably in the Bank’s interests.
In all this, it is essential for the department to maintain a very closeworking relationship with the operating departments and be able tounderstand the essential legal issues involved in each case.

Internal control
To ensure compliance with internal accounting and procedural requirements and thereby prevent irregularities, the Bank’s Auditing Department
is responsible for the auditing of the Head Office and all the branches. With
the increasing scope and sophistication of the Bank’s operations, all operating units are subject to surprise audits approximately once a year. In particular, with the growing importance of IT systems, audits on IT operations
and IT system programs are conducted by a special IT team.
Recent revisions to the Banking Law have introduced the provisions for“Prompt Corrective Action” when a bank is judged to have insufficient
capital adequacy, and the Credit Examination Department is responsible
for auditing and monitoring the loan portfolio.
In U.S. operations, the Americas Division works independently to ensurethat internal auditing standards are maintained, the loan portfolio is adequately monitored, and local U.S. legal requirements are fully observed.

Compliance
Compliance issues are of great importance to senior management. Compliance not only represents compliance with financial regulatory laws andother laws but also compliance with generally accepted social values. The
management believes that this broader view of compliance is important,given the Bank’s unique position as a leader of the Japanese financial
community.
From this perspective, it is necessary not only to accommodate the rapidly changing regulatory framework surrounding banking in Japan but also
to accommodate the rapid change in social attitudes. To prevent breachesof compliance, it is necessary for all staff to understand the importance of33

Risk Control and Compliance Issues

The Legal Department controls legal risk by using its full understandingRisk Control and Compliance Issues

Risk Control and Compliance Issues

the compliance function and to have a detailed understanding of the regulatory situation. If compliance is ever breached, then it is necessary to beable to detect the breach, immediately deal with the consequences, andprevent any further occurrence.
To achieve these various goals, the Compliance Division was set up in
February 1998. A compliance manual was prepared and has been used
extensively in internal education and training programs, and a compliance
audit process has been launched.
Not only is the environment in which the Bank operates changing rapidly and the regulatory environment similarly changing with the implementation of Japan’s Big Bang, but there is also the impact of new strategic
subsidiaries entering entirely new areas of financial activity. In line withthe overall reorganization conducted in June 1999, the Compliance Division
was raised to departmental status, and it was further expanded and madefully independent to guarantee its compliance function. The Legal Department, the Credit Examination Department, and the Auditing Department
have been placed together under the Compliance Department as an independent group to oversee compliance.
The Compliance Department is responsible in this position for planningand promoting the objective and verifiable level of compliance throughout
the Bank. This means that the Compliance Department must draw up the
program for compliance supervision and ensure its execution.
To ensure the thoroughgoing institution of a compliance culture in the
Bank, each business unit has been
taking an overall compliance responsibility in its area, and in each sectionof the Bank and in each of its branch-쏹 Compliance Structure
General Meetingof Shareholders
Auditors

es, one staff member has been maderesponsible for enforcing compliance.

Board ofAuditors Office

Board ofDirectors

There is a reporting and monitoring
system in place to ensure that theCompliance Department can immediately give advice and warnings

Executive
Committee

Compliance Department
Legal Department

as needed.
Credit Examination Department
Auditing Department

34

Corporate
Auditors OfficeOPERATIONS IN OUTLINE
Balancing the Center and the Periphery
Contents
The IBJ Group at a Glance
36

Corporate Banking Unit
38

Investment Banking Unit
40

Treasury Unit
42

Securities and Asset Management Unit
44

International
46

Research
47

Systems
48

35

The IBJ Group at a Glance

Major Overseas Affiliate

Operations in Outline

IBJ–BA Consulting
Investitionsberatung GmbHE
R

TreasuryO

Japan
Asia & Oceania

Investment
BankingC

Americas

I

EuropeB

VentureCapital & MBO

Financial
Technology

Major Subsidiary& Affiliate in Japan
Kogin Investment, Ltd.
3i-Kogin Buyouts Ltd.

M

M

M

M

36

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iar
y

ic S

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ajo

ub

rO

sid

ffil
ia

ve

aj
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rse

iari
e

as

s&

te i
n Ja

Ov

e rs
e as

Aff

Affi

p an

iliat

l ia t e

e

s

Sub

s id i arie sMajor Overseas Subsidiaries
PT. Bank IBJ Indonesia
IBJ International plc
Banque IBJ (France) S.A.
The Industrial Bank of Japan
Trust Company
IBJ Whitehall Bank & Trust Company
The Industrial Bank of Japan (Canada)
The Bridgeford GroupUThe Industrial Bank of Japan (Germany)I

CapitalMarkets

The Industrial Bank of Japan - NJ
(Switzerland) Limited

Securities
and Asset
Management

N

Asset
Management
and Administration
Business

E

J

The Industrial Bank of Japan(Luxembourg) S.A.

S

Corporate
Banking

IBJ Asset Management International Ltd.
Aubrey G. Lanston & Co. Inc.

S
IBJ Lanston Futures Pte. Ltd.

S

Futures &Brokerage

IBJ Asia Securities Limited

Major Strategic Subsidiaries &Affiliates
IBJ Securities Co., Ltd.
Shinko Securities Co., Ltd. (Note 1)
IBJ NW Asset Management Co., Ltd.
(Note 2)IBJ Investment Trust Management
Co., Ltd. (Note 2)
IBJ Trust and Banking Co., Ltd.
IBJ Nomura Financial Productsplc (INFP)
Nomura IBJ Global Investment
Advisors, Inc. (NI-GIA)
Nomura-IBJ Investment Services
Co., Ltd. (NIIS)
IBJ-DL Financial Technology Co., Ltd.

Notes: 1. New Japan Securities Co., Ltd. and Wako Securities Co., Ltd. are due to be merged into
Shinko Securities Co., Ltd., in April 2000, and IBJ Group companies’ interest is set to be
increased to 25% in the amalgamated entity, Shinko Securities.
2. IBJ NW Asset Management Co., Ltd. and IBJ Investment Trust Management Co., Ltd.,and Dai-ichi Life Asset Management Co., Ltd., are due to be merged into DLIBJ AssetManagement Co., Ltd., on October 1, 1999.

37

Operations in Outline

IBJ Australia Bank Limited

BCorporate Banking Unit

This unit provides a full range of corporate banking services to the corporate customer
base of IBJ: corporate banking, including corporate deposit-taking and lending, forex, andother commercial banking services. These are provided to foreign and domestic blue chipmajors, medium and small-sized growth businesses, other financial institutions, institutional investors, and public-sector entities.
From the very early days of the Bank, it has been involved in the financing of industrial capital investment as its very name implies. Management has always taken an aggressive approach to the funding of the legitimate capital investment requirements ofOperations in Outline

first-rate companies. This has meant the provision of long-term credit at fixed rates ofinterest for the funding of plant investment and the provision of shorter-term funds tofinance working capital requirements. Exceptionally for a commercial bank, IBJ has always been active in the underwriting of public-sector entity bonds for historical reasons.
For private-sector bonds, the Bank has always been active in the trustee and administrative work of corporate bond issues as the “commissioned bank,” with the Bank acting as the trustee of bondholders and protecting their interests.
On account of this long experience in dealing with bonds, both public-entity andcorporate bonds, the Bank has underwritten many government-guaranteed bonds
and local government bonds, including those of the Tokyo metropolitan government.
The range of funding methods for customers is now so much more than simple bankborrowing, and many more customers are employing straight bonds and commercial
paper. At the Bank, there is a long history of experience in the bond market and theprocess from issue to redemption can be carried out smoothly and efficiently, thus protecting both the interests of the investing customer and the borrower.
This long history and the pivotal role of the operation within the Bank historicallymeans that the account executive for each customer is based in the unit as it has now
become. These account executives are responsible for keeping abreast of customer
쏹 Loans Outstanding for Plant and Equipment Investment by Industry (¥ billion)
Electric power(47.8%)

Transportation and telecommunications(15.5%)

Chemicals(16.7%)

Transportation machinery and equipment(12.3%)

Electric machinery(9.5%)Petroleum refining(22.9%)

Iron and steel(22.7%)

8,092.7
1,383.1
1,168.3
1,098.1
821.3
720.7

Ceramics(9.8%)

553.0

Paper and pulp

(16.1%)

516.1

Nonferrous metals(31.1%)

Note: Figures in parentheses are the Bank’s share of the total.

38

2,745.3

365.8

Total for the manufacturing sector¥13,067.9 billion¥1,362.8 billion (10.4%)
All industries¥175,833.6 billion¥8,153.0 billion (4.6%)
Outstanding loans for capital investment fromdomestic banks (excluding loans from trust
accounts)
Outstanding loans for capital investment from IBJ(As of March 31, 1999)

Corporate Banking Unit

requirements and ensuring that the IBJ Group responds to these requirements in a timely and appropriate fashion.
In March 1998, legislation providing for the opening of commitment lines has meantthat another item has been added to the IBJ menu of financial services the Bank provides to its corporate customer base. Also, the syndicated loan product, which enables avariety of financial institutions and institutional investors to participate in the financing
of a single customer, is now attracting much attention and offers new avenues of customer financing for the unit.
Liberalization is having a large number of follow-on effects. For example, the recent

guidelines on consolidation are causing much interest in Cash Management Services(CMS) among major Japanese companies. The senior management is now concerned
about the global management of cash resources in the consolidated balance sheet on aworldwide basis in a variety of currencies.
The globalization of business continues apace and the trend toward the liberalization of capital flows is making greater demands on companies’ treasury operations.
To respond to such customer needs, the IBJ Global CMS product was launched in
November 1998 and is the first such CMS product to be Internet based. The customer
can keep track of balances, remittances, and netting of debtor and creditor balances by
currency. This system has a number of highly sophisticated technical features, including the use of a “virtual private network” function to ensure the integrity of information
despite its transmission over the Internet.
One further impact of globalization is the growing emphasis on open market evaluations of companies, such as published credit ratings and stock prices. There is therefore growing work in advising companies on achieving higher levels of shareholder
value. As the unit having the account executive responsible for overall contact with thecustomer, it is active in promoting IBJ as the “Problem Solution Provider” through suchactivities as the unlocking of balance sheet assets, the restructuring of Japanese multinationals, the provision of M&A advisory services, as well as methods to solve theproblem of underfunded corporate pension schemes.
쏹 Commissioned Bank/Fiscal Agent Activities of IBJ (¥ billion)
Lead Commissioned Bank (Note 1)
Public-Sector Bonds

4,363.9(66.3%)

Lead Commissioned Bank (Note 1)/Fiscal Agent
Electric Power Utility Bonds(50.7%)

Other Corporate Bonds (Note 2)(12.3%)

Samurai Bonds (Note 2)(9.3%)

0

1,000

2,000

3,000

4,000

5,000

2,270.0
8,561.4
392.9
Amount for which IBJ acted as Lead Commissioned Bank (Note 1)
Notes: 1. Includes acting as registrar and fiduciary agent
2. Includes asset-backed securities
3. Figures in parentheses are the Bank’s share of the total.

39

Operations in Outline

amendment to the Foreign Exchange Act and the International Accounting Standards

Investment Banking Unit

With the changing legal and accounting environment in Japan, the Bank’s
customers require ever more sophisticated balance sheet advisory services.
This type of advisory work then extends into such issues as the concentration of management resources on certain selected strategic core businesses

쏹 M&A Advisory Mandates

Newly Won
400

350

and the downsizing and disposal of non-core businesses. There is muchadvisory work now being done in the general area of corporate restructuring and M&A.

300

Indexes basedon calendar or
fiscal 1993 = 100

250

Much attention is now being given to the Private Finance Initiative typeOperations in Outlineof funding vehicle that involves the basic principles of project finance. To
provide solutions to customers’ requirements requires a wide-ranging,

200

150

sophisticated, and integrated set of capabilities within the unit. The unit
is managed on a global basis, around the three competencies of structured
finance, M&A, and project finance. These competencies are supported by
the other capabilities within the IBJ Group, such as derivatives, research, anddistribution, and the unit is clearly positioned as the “Problem Solution
Provider” for the customers of the Bank. In this way, the unit is assisting
the Bank in achieving its “First Call Bank” status.

100

50
93
94
95
96
97
M&A advisory mandates won by IBJ(fiscal-year basis ended March 31)

Japanese M&A deals disclosed(calendar-year basis ended December 31)
Source: IBJ survey

The Bank has developed itself to structuring new financing schemes thatmeet the needs of individual customers and to creating new products andservices that are tailor-made for particular customers. Using such schemes
as the securitization of financial assets and real estate, and lease financing,for example, IBJ provides customers with a greater variety of fund-raising
options while also helping them to improve their financial ratios and providing financial techniques that meet their financing requirements.
One unusual structuring was the pension trust scheme provided to Sony
Corporation, which faced the problem of an actuarially underfunded corporate defined-benefit scheme for its employees. Relationship holdings ofequities held by Sony were settled in a trust for the benefit of the pension
fund, and this made a major contribution to resolving the problem ofunderfunding.

April 25, 1999

40

98

Investment Banking Unit

 Project Finance: Recent Examplesof Large-Scale Projects with Major
IBJ Involvement

The U.S.-based M&A boutique, The Bridgeford Group, is an IBJ subsidiary and contributes to the IBJ global network of M&A information

Resources & Energy
Premier Transco Gas Pipeline (U.K.)
Minera Los Pelambres Copper
Mining (Chile)
Oleoducto Central S.A. Pipeline (Colombia)
Ras Laffan LNG (Qatar): 1996 Middle East
Deal of the Year award from Project
Finance International magazine

flows. IBJ offers a customer-centered, long-term view in its advisory ser-Petrochemicals & Manufactured Products
Eastern Petrochemical (“Sharq”)(Saudi Arabia)
Al-Jubail Petrochemical (“Kemya”)(Saudi Arabia)
Ibn Rushd Petrochemical (Saudi Arabia)
SUS Cold Mill (Thailand)

to concentrate on opportunities in the Japanese management buyout (MBO)

Other Infrastructure Projects
Autolink (M6) (U.K.)
Autolink (A19) (U.K.)
Hong Kong Air Cargo Terminal(Hong Kong)the years. In particular, in April 1999, IBJ and the leading U.K. venture capital company, 3i Group plc, formed a joint venture, 3i-Kogin Buyouts Ltd.,

market, and the first fund of ¥20 billion is being set up.
The graph on page 40 shows the index trend of advisory mandates won
by the Bank and the number of disclosed M&A transactions year by year
set at 100. Clearly, the Japanese M&A market is growing, albeit slowly,
while the leading indicator of advisory mandates won by the leading bank,
IBJ, is growing more rapidly.
A specific example of an M&A transaction the Bank conducted is thehigh-profile case of the unusual troika equity agreement between AT&T
Corp., British Telecommunications plc, and Japan Telecom Co., Ltd., where
the Bank advised Japan Telecom. Attention was drawn to the Bank’s success in resolving the different corporate management philosophies in the
United Kingdom, the United States, and Japan in a single deal.
Project finance—the financing of large-scale projects in such industries
as energy, basic materials, and infrastructure construction/development—
requires the maintenance of a broad intelligence network to successfully
assist customers from the early stages of project discussions. It also requires
being able to propose innovative financial solutions to often exceptionallycomplicated situations. In the case of the AES Barry Power Plant project,attention was drawn to IBJ’s solution to the risk inherent in supplying electricity to a competitive market and the price volatility associated with suchan environment. In the case of the Shandong Zhonghua Power Plant project, the Bank was lauded for its capability in carrying the financing struc-Shandong ZhonghuaPower Plant

turing through the turmoil of the recent Asian currency crisis.

41

Operations in Outline

Power Generation
Shandong Zhonghua Power Plant (China):
1998 Power Deal of the Year award from
Project Finance magazine
AES Barry Power Plant (U.K.):
1997 Power Deal of the Year award
from Project Finance magazine
KEGCO Power Plant (Thailand)

vices to the large customer base of companies that has been built up over

Treasury Unit

This unit encompasses the Bank’s ALM operations, investment portfolio

 Quarterly VaR and 10-Year

Government Bonds

management, and trading activities. The unit has operations in major(¥ billion)(%)

international markets and handles a variety of products, including

400

7

foreign exchange, swaps, options, and futures.
The ALM operations are responsible for optimizing the interest rate risk
associated with the Bank’s lending and funding activities. The Bank continu-

6
300

5

ally issues five-year debentures as the main funding source and attributes
such funds to long-term fixed loans to meet our customers’ financing needs.

Operations in Outline

Due to the long-term nature of the Bank’s assets and liabilities, we have de-

4
200
3

veloped, over the long run, an ALM methodology specifically tailored to2control the sensitivity risk associated with the fluctuation of long-term interest rates. The important concepts of our ALM methodology include

100

1• the elaborate matching operations of our customer-related assets with0

liabilities to ensure a sufficient net spread is maintained in the future,• the dynamic control of the sensitivity gap utilizing flexible instruments,
such as swaps and government bonds aimed at enhancing the long-term
economic value of our balance sheet, and• the enhancement of profitability of the net fair value of total assets andTo facilitate the ALM methodology described above, we have created an
ALM system which measures various risk parameters, such as PVBP (basispoint value), gamma, and VaR (Value at Risk).
PVBP represents the marginal change in the fair value of all assets and liabilities as a result of a one basis point change in the interest rate. Total PVBP
is distributed to the respective time band based on the remaining contractual maturity or repricing period of assets and liabilities, which allows us toTable A PVBP as of March 31, 1998 and 1999(¥ million)
Total Within 1 year

Over 1 year andwithin 5 years

Over 5 years

March 31, 1998
Lending and Debenture Block
Risk Management Block(1,500)
(600)
(900)

0
100
(100)

(500)
0
(500)

(1,000)
(700)
(300)

March 31, 1999
Lending and Debenture Block
Risk Management Block(2,900)(400)(2,400)

0
200
(100)

(1,300)100(1,400)(1,600)
(700)
(900)

Table B
 VaR as of March 31, 1998 and 1999(¥ billion)
March 31, 1998

March 31, 1999

61.6

162.4

*Holding period one month, 99% confidence level*Both delta and VaR exclude real estate, equipment, and equity holdings, which are funded by capital.

42

Yen interest rate(yield on 10-year Japanese
government bonds)
U.S. dollar interest rate(yield on 10-year U.S. Treasury bonds)
VaR

liabilities.

VaR

4~6/98 7~9/98 10~12/98 1~3/99

0Treasury Unit

쏹 Risk Management Flowanalyze the yield curve risk. Table A shows the PVBP of our ALM book at
March 31, 1998 and 1999. A negative amount reflects a potential decrease in

Board ofDirectors

fair value when the interest rate increases by one basis point. On the other
hand, a positive amount reflects a potential increase in fair value when theinterest rate increases by one basis point. VaR is a statistical approach to

RiskManagement
Department

Executive
Committee

capture the maximum potential loss from adverse market movements.
Table B shows the VaR of our ALM book at March 31, 1998 and 1999.
During fiscal 1998, “flight to quality” triggered by global deflation and

ALM
Committee

the Russian crisis led to a downtrend in yen long-term interest rates in thethis move. However, in December, long-term interest rates rose immediateFront Offices
Banking/Trading

ly as fear of large issues of Japanese Government Bonds (JGBs) appeared on
the horizon. Thereafter, starting from February 1999, they resumed the downtrend after the easing of the overnight target rate by the BOJ and decreases
in new JGB issues.

Back
OfficeIn the U.S. financial market, the Russian crisis caused money to flow into
U.S. treasuries from all over the world, leading to historically low yields.
In autumn, the outbreak of the hedge-fund crisis provoked a global credit
crunch and high volatility in financial markets. To stabilize the crisis, the
FRB eased its targeted federal fund rate three consecutive times. The U.S.
stock market recovered, and the turmoil in financial markets subsided.
Under these market conditions, IBJ has increased its VaR gradually during
the second quarter, expecting a decline in interest rates. In the fourth quarter, the Bank operated moderately and decreased its VaR. As a result, ahigh level of profitability was realized for the fiscal year, and the net fairvalue of total assets and liabilities amounted to ¥190.0 billion as of March
31, 1999 (this amount excludes the present value of real estate and equity
holdings funded by capital, the evaluation of credit risk premiums, andvarious fee revenues).
The other important function of the Treasury Unit is trading. Trading
activities involve customer-related and proprietary activities. The unit
develops and provides various kinds of customized products at competitive
prices to help customers manage risk. In proprietary activities, the unit emphasizes a relative-value approach, trying to capture arbitrage opportunities
in related markets as well as distortions between the theoretical and actual
market prices of certain instruments. For the fiscal year under review, revenue from our trading activities resulted in a profit of ¥71.0 billion, which
included profit of ¥17.1 billion from foreign-exchange activities on a consolidated basis. With respect to the risk profile of the trading operations, pleaserefer to pages 27~30.

43

Operations in Outline

first half. Also, the cut in the overnight target rate by the BOJ reinforced

Securities and Asset Management Unit

 Lead Manager League Table
for Straight Bond Issues in Japanfor the year ended March 31, 1999

This unit encompasses many of the new strategic subsidiaries, and for the benefit of
the reader, the chart below sets out the overall structure.
In the field of wholesale securities, IBJ Securities Co., Ltd., was established as a(¥ billion, %)fully owned subsidiary in July 1993 and has been active in those areas permitted for
Ranking Underwriterbank cross-over subsidiaries, principally corporate finance, bond sales and trading,1

Nomura Securities

139

2,758

25.4

and certain equity-related businesses. Following the liberalization scheduled for2

Daiwa Securities

85

1,488

13.7

3

Nikko Salomon
Smith Barney

93

1,325

12.2

4

IBJ Securities

54

1,055

9.7

5

DKB Securities

45

641

5.9

6

Sakura Securities

34

603

5.5

7

Tokyo-Mitsubishi
Securities

60

586

5.4

bonds that now already rivals that of the major and long-established securities

8

Fuji Securities

38

556

5.1

houses. Working in close cooperation with IBJ Securities, the two long-established9

Sumitomo Capital
Securities

35

361

3.3

European subsidiaries, IBJ International plc in London and The Industrial Bank

10

Sanwa Securities

38

332

3.0

October 1999, this subsidiary will be able to enter the equity business without restriction. Ahead of this, the capital of the subsidiary was increased by ¥35 billion, to¥70 billion, in March.
Operations in Outline

Value of
Numberissues asof issues lead manager ShareIBJ Securities has a record of underwriting domestically issued corporate straight

Source: THOMSON DealWatch League Tablesof Japan-NJ (Switzerland) Limited in Zurich, provide a wide range of securities
services in the overseas primary andsecondary markets.

 Securities and Asset Management Unit

In November 1998, a joint venture
was established in the United Kingdom
between IBJ and Nomura Securities

IBJ•Business Planning Department (IBJ Group)•Investment Research Department•Securities Services Department•Financial Engineering Department

Co., Ltd., and IBJ Nomura Financial
Products Holding plc, and this venture has a securities subsidiary (INFP)
that opened a Tokyo branch in
January 1999. After approval by theregulatory authorities in Japan andthe United Kingdom, the branch
opened for business in April. It is
intended that this branch will offer
derivatives and structured products
to customers in Japan.
In retail securities, the two IBJ affili-

Asset Management/
Asset Administration

Securities
IBJ Securities
Joint Projects with Nomura Securities•IBJ Nomura Financial Products (INFP)
Overseas Subsidiaries•IBJ International•The Industrial Bank of Japan-NJ(Switzerland)•Aubrey G. Lanston•IBJ Asia Securities
New Japan Securities/Wako Securities[Two companies are to be merged into
Shinko Securities.](25% holding by the IBJ Group)

IBJ NW Asset Management
IBJ Investment Trust Management
and Dai-ichi Life Asset Management[These three companies are to be merged into
DLIBJ Asset Management on October 1, 1999.]
IBJ Trust and Banking
Joint Projects with Nomura Securities•Nomura-IBJ Investment Services (NIIS)•Nomura IBJ Global Investment Advisors(NI-GIA)
Overseas Subsidiaries•IBJ Asset Management International•IBJ International•The Industrial Bank of Japan (Luxembourg)ates, New Japan Securities Co., Ltd.,and Wako Securities Co., Ltd., are due

Other Related Activities

to be merged in April 2000, and the•IBJ-DL Financial Technology •IBJ Nikko Information•Kogin Investment
System•Kyodo Computer Service •3i-Kogin Buyouts

IBJ Group companies’ interest is set to
be increased to 25% into the merged
entity, Shinko Securities Co., Ltd.

44

Securities and Asset Management Unit

 Financial Results of IBJ Securities(¥ million)
For the years ended March 31
Operating Revenue
Income before
Income Taxes
Net Income
At March 31
Shareholders’EquityTotal Assets

IBJ NW Asset Management Co., Ltd., incorporated in 1985, is an investment management company with a full discretionary license and is active in the management

1998

1999

20,20222,805of portfolio assets of a large number of institutional investors, including leading

1,723
204

10,175
5,310

Japanese pension funds. Currently, there is over ¥2 trillion under management,

1998

1999

25,00050,0003,308,249 3,274,479

and it is one of Japan’s leading investment management companies.
In July 1994, IBJ Investment Trust Management Co., Ltd., was set up to manage
securities investment trust products for both the retail and the wholesale markets.
Major products being marketed are “IBJ ITM Japan Selection,” “Global Bond

 Financial Results of IBJ NW Asset

Portfolio,” and “Prime One” to cater to a variety of risk/return profile preferences.

Management(¥ million, except as indicated)
1998

1999

Operating Revenue
Income before
Income Taxes
Net Income

2,900

3,000

441
231

150
72

At March 31

1998

1999

0.4

0.4

Shareholders’Equity (¥ billion)
Assets underManagement(¥ billion)

In October 1995, IBJ Trust and Banking Co., Ltd., was established as a wholly
owned subsidiary in response to growing interest among customers in financial
products utilizing trust structures. In addition to the acceptance and administrationof the usual monetary claims, IBJ Trust and Banking provides administrative services related to securitization, including services in connection with the issuanceof asset-backed securities, asset-backed CP, and other securities.

2,084.7

2,250.9

On account of a number of factors, such as the selling of investment trusts by banksfrom December 1998, the underwriting of investment trusts by private issues fromthe same month, the likely introduction of defined contribution pension schemes,
and the rapid maturation of Japanese demographics, there is considerable interestin the asset management market as it is set to grow very strongly over the longterm. In fact, IBJ and The Dai-ichi Mutual Life Insurance Company have agreed tomerge the two IBJ asset management companies, IBJ NWAsset Management
and IBJ Investment Trust Management, with Dai-ichi Life Asset Management Co., Results of IBJ Investment TrustLtd., into DLIBJ Asset Management Co., Ltd. The intention, as part of the strategic

Management

alliance between the Bank and Dai-ichi, is to form the leading asset management(¥ million, except as indicated)
For the years ended March 31

1998

1999

Operating Revenue
Income (Loss) before
Income Taxes
Net Loss

1,958

1,658

1
(5)

(249)
(250)

At March 31

1998

1999

Shareholders’Equity (¥ billion)
Total Assets (¥ billion)

1.5
274.1

1.5
244.0

 Results of IBJ Trust and Banking(¥ million, except as indicated)
For the years ended March 31

1998

1999

Operating Revenue
Income before
Income Taxes
Net Income

1,643

2,514

269
265

1,097
505

At March 31

1998

1999

Shareholders’Equity (¥ billion)
Trust Assets (¥ billion)

company in Japan based on the two parent companies’ long experience and knowhow in the field.
Also of note is joint venture Nomura-IBJ Investment Services Co., Ltd. (NIIS),
formed between Nomura and IBJ in the area of pension consulting services andJapan Investor Solutions & Technologies Co., Ltd. (JIS&T), formed among many
major financial institutions, including IBJ, in record-keeping services. It is anticipated that a Japanese-style 401(k) defined contribution type of pension scheme will be
introduced into Japan by autumn 2000.

15.0
15.0
4,148.6 4,165.5

45

Operations in Outline

For the years ended March 31

International

While IBJ expanded its overseas network vigorously during the last 20
years, there is now a requirement to retrench and to achieve greater efficiency in overseas operations. In the three regions of the Americas, Europe,and Asia/Oceania, the Bank is re-concentrating on the major offices and on
more sophisticated products, such as project and structured finance. IBJ
senior management is convinced that maintaining a fully competitive international presence is a sine qua non to be a major global player in financial
markets.

Operations in Outline

In the Americas, IBJ offers both Japanese and non-Japanese corporationscommercial and investment banking services. Substantial investments havebeen made in improving the IT system based on the New York office andthe other five offices in the competitive U.S. market—the system went online in May 1999. IBJ continues to work to offer its many customers in the
United States the first-rate service that they deserve.
In Europe, the introduction of the single currency among the 11 Euroland
member states has created an economic entity the size of the U.S. and isclearly propelling EU industry toward greater consolidation via M&A.
Exploiting the investment banking strengths of the London Branch and thewide spread of the continental European branch network, IBJ is offeringvalue-added financial services throughout Europe. The EU market is ofgreat importance.
In Asia/Oceania, which continues to be strategically important for IBJ,
the countries in the region are recovering from the recent currency crisisand endeavoring to regain strong economic growth. In early 1999, IBJ
placed a project finance team in Hong Kong and a treasury team in
Singapore. From these two new specialist centers, IBJ is offering valueadded services throughout the region via its strong branch network. IBJ has
close links with China and has a wide network of cooperation and training
agreements. With over 20 years’ experience in this country, the Bank cancarefully weigh business opportunities and risks in what is both a challenging and promising market.

46

Research

One of the most important tasks of a full-line financial institution is its
research efforts. Only with relevant and up-to-date information can senior
management decisions be made.
Employing the global network of the IBJ Group, macro- and microeconomic information is gathered and analyzed related to economies, fiscal
and financial issues, capital markets, financial institutions, and industries.
This data is used internally and is provided to customers in policy proposals and for other purposes. In certain cases, the data is published as promotional material for use in marketing. For example, the semi-annual survey

research organization and is generally regarded as important primary data
for economic forecasting.
The Industrial Research Department specializes in research on Japan’smajor industries. Results of this research are used in the Bank’s various
customer-oriented proposals. In the area of infrastructure projects, thedepartment is going to be of increasing importance because of the growinginterest in such new structures as PFI (Private Finance Initiative) and realestate securitization.
U IBJ Major Publications
Name of Publication

Frequency

Description of Content

IBJ Monthly ReportMonthly

IBJ’s monthly report on the economy and industries

Outlook for the Japanese Economy

Quarterly

IBJ’s forecast for the Japanese economy for approximately the next one-year period

IBJ Industry Research

Annually

IBJ’s special report on trends and outlook in
Japanese major industries

Occasionally

IBJ’s industrial report. Each issue focuses on a
specific industry.

In English

In Japanese
Kogin Chosa47

Operations in Outlineof capital expenditure plans has the widest coverage of any private-sector

Systems

The information technology departments of the Bank are responsible for vital
support for business improvement, analysis of profit and risk information
for senior management, and dissemination of this information speedily andaccurately.
In June 1997, IBJ divided the IT function in each business division to deal
efficiently with business action and instituted the post of Chief Information
Officer (CIO), a managing director, to integrate the IT function. Then, IBJ
established the Information Technology Department to support the CIO

Operations in Outline

and to be responsible for ensuring that the department efficiently coordinates the IT function across the various business divisions. In this fashion,
the IT requirements can be integrated over the entire IBJ Group to obtainmaximum coordination and thereby achieve economies of scale by the
avoidance of unnecessary IT duplications.
In light of the rapid changes characterizing the Bank’s business environment, the information technology departments will be called on to performsystems development with a tighter focus on strategically emphasized projects and with even greater timeliness. One of the fields that IBJ recognizes
is new business projects, such as the introduction of Japanese-style 401(k)pension schemes. The Bank is giving high priority to promote the sounddevelopment of such new businesses by building systems for the moredetailed management of risks and profits.
To realize such investment programs, IBJ will proceed further withmoves to reduce fixed costs and free up funds for investment through thescrapping of existing systems and to increase the efficiency of systems
development through the upgrading of development technologies.

48

FINANCIAL SECTION
Contents
Six-Year Summary
50

Management’s Discussion and Analysis
51

Consolidated Balance Sheets
64

Consolidated Statements of Income
65

Consolidated Statements of Shareholders’ Equity
66

Consolidated Statements of Cash Flows67

Notes to Consolidated Financial Statements
68

Report of Independent Certified Public Accountants
97

Non-Consolidated Balance Sheets98

Non-Consolidated Statements of Income
99

Non-Consolidated Statements of Shareholders’ Equity
100

Notes to Non-Consolidated Financial Statements
101

Report of Independent Certified Public Accountants
10249

Six-Year Summary

Statements of Income(for the years ended March 31)

Total Income
Total Expense
Income (Loss) before Income Taxes
and Others
Net Income (Loss)(in millions of yen)
1999

1998

1997

1996

1995

1994

¥3,386,760
3,642,993¥3,321,902
3,635,020¥3,403,347
3,358,870¥3,731,847
3,838,173¥3,087,404
3,032,577¥3,063,399
3,017,877(256,232)(181,276)(313,118)(202,660)

44,477
12,740(106,325)(63,551)

54,826
29,68545,521
21,897

1999

1998

1997

1996

1995

1994

¥(70.64)¥(79.80)¥5.24¥(27.02)¥12.62

¥9.31

1999

1998

1997

1996

1995

1994

¥46,166,409
806,9103,729,005—
8,942,151
23,327,907
44,308,984
20,461,865
8,116,321
2,854,950
1,167,976
1,516,602
1,561,350¥49,229,785
553,2033,466,255—
8,847,249
24,001,429
47,909,766
20,840,941
10,053,551
2,286,959
993,292
2,024,337
1,320,019¥46,966,968
2,318,157—
943,457
6,808,045
25,518,440
45,422,988
22,137,519
10,871,309—
649,985
2,382,608
1,543,979¥40,737,733
2,987,739—
537,932
6,686,872
24,267,385
39,412,622
21,470,815
8,960,767—
556,791
2,331,153
1,325,110¥40,858,245
3,951,856—
726,995
6,351,897
23,808,552
39,449,385
21,658,109
9,273,126—
383,999
2,144,478
1,408,860¥42,488,374
4,549,916—
977,715
6,382,275
24,023,625
41,089,687
22,790,004
9,421,241—
328,3392,578,011
1,398,686

1999

1998

1997

1996

1995

1994

11.30%

10.26%

9.04%

8.59%

8.82%

9.10%

Per Common Stock(for the years ended March 31)

Net Income (Loss)(in yen)(in millions of yen)

Balance Sheets (at March 31)
Total Assets
Cash and Due from Banks
Trading Assets
Trading Account Securities
Investment Securities
Loans and Bills Discounted
Total Liabilities
Debentures
Deposits
Trading Liabilities
Reserves
Acceptances and Guarantees
Total Shareholders’ Equity

Financial Section

Capital Adequacy Ratio (at March 31)
BIS Capital Adequacy Ratio
All figures are on a consolidated basis.

50

Management’s Discussion and Analysis

Summary
In the year ended March 31, 1999 (“fiscal 1998”), IBJ and its subsidiaries (“IBJ Group”) reported a net loss of¥181.2 billion, or ¥70.64 per common stock, compared with a net loss of ¥202.6 billion, or ¥79.80 per common
stock in the year ended March 31, 1998. This was the second consecutive net loss for the IBJ Group even thoughsome subsidiaries reported increased profits. This net loss is principally due to the disposal of and provisions forconservative reserves for non-performing loans by IBJ.
For IBJ only, Core Business Profit before Transfer to General Reserve amounted to ¥278.6 billion. This was anincrease of ¥33.9 billion from the previous year and was the highest figure in IBJ’s history. However, to improve
the quality of assets, IBJ disposed of and conservatively provided reserves for non-performing loans, which intotal amounted to ¥857.8 billion. Together with Transfer to General Reserve for Possible Loan Losses, the total
for loan losses amounted to ¥924.3 billion.
As a result, IBJ recorded a non-consolidated Loss before Income Taxes of ¥345.4 billion. Net Loss for the year
reached ¥195.7 billion.
In compiling fiscal 1998 business results, IBJ introduced important accounting changes as listed below.
IBJ adopted the effective-control standard, replacing the percentage-of-ownership standard in the classification and identification of its subsidiaries and affiliates. The effective-control standard takes into account management relationships as well as the extent of IBJ’s shareholdings in companies. For example, if IBJ sends staff tohelp manage a company, it may be classified as a subsidiary or an affiliate regardless of IBJ’s ownership percentage. Because of this new standard and establishment of new companies, the number of consolidated subsidiaries
increased by 25, to 67. The number of affiliates being accounted for under the equity method increased to 14.
No affiliates were accounted for under the equity method in the previous year.

 Number of Consolidated Subsidiaries and Affiliates being accounted for under the Equity Method
March 31, 1999 (a)March 31, 1998 (b)March 31, 1997(a)–(b)Consolidated Subsidiaries
Affiliates being accounted for under the Equity Method

67
14

42
0

36
0

25
14

Total

81

42

36

39

cost or market, and Japanese national and local government bonds were stated at cost. As a result of this change,
Other Expense and Loss before Income Taxes and Others decreased by ¥190.4 billion for fiscal 1998.
In fiscal 1998, IBJ adopted the balance sheet method of accounting for income taxes. This method recognizes
Deferred Tax Assets and Liabilities for temporary differences in recognition of gains and losses between reporting
purposes and income tax purposes. This method has already been adopted for consolidated financial statements.

Income Analysis
IBJ Group
The following is an analysis of income by principal components. Net Interest Income rose by ¥11.7 billion
from the previous year’s level, to ¥301.8 billion. This reflected better performances by both the parent company
and by subsidiaries. Net Fees and Commissions, on the other hand, declined by ¥19.8 billion, to ¥83.2 billion.
Subsidiaries reported higher net fees and commissions. On the other hand, IBJ recorded decreased net fees
and commissions as a result of lower loan related charges. Other Business Profit increased by ¥17.7 billion,to ¥59.2 billion, mainly due to the increased gains on sales of bonds by IBJ.
Efforts were made throughout the Group to cut costs, but the increase in the number of consolidated subsidiaries, due to the adoption of the effective-control standard, caused General and Administrative Expenses
to rise by ¥5.3 billion, to ¥222.7 billion. In addition, disposing of and providing for conservative reserves for
non-performing loans resulted in Other Operating Losses of ¥531.6 billion. As a result, Loss before Income
Taxes and Others amounted to ¥256.2 billion. Net Loss amounted to ¥181.2 billion.

51

Financial Section

Effective as of March 31, 1999, Investment Securities of IBJ are stated at cost. As of and prior to March 31, 1998,
corporate bonds, stocks and shares, and other securities listed on stock exchanges were stated at the lower ofManagement’s Discussion and Analysis

 Summary of Consolidated Statements of Income(in billions of yen)
Fiscal 1998 (a)Fiscal 1997 (b)Fiscal 1996(a)–(b)Net Interest Income
Net Fees and Commissions
Trading Profit
Other Business Profit
General and Administrative Expenses
Others¥ 301.8
83.2
53.9
59.2
222.7
(531.6)¥ 290.0
103.1
1.0
41.5
217.4
(531.3)¥323.3
57.2
—
24.3
202.8
(157.6)¥11.7(19.8)
52.9
17.7
5.3
(0.4)

Income (Loss) before Income Taxes and Others
Income Taxes Expense (Benefit)
Minority Interests in Net Income
Amortization of Consolidation Difference(256.2)(83.2)
8.3—(313.1)(110.7)
0.1
0.1

44.4
30.6
1.1
0

56.8
27.4
8.1
(0.1)

Net Income (Loss)¥(181.2)¥(202.6)¥ 12.7¥21.3

 Loan Losses(in billions of yen)
Fiscal 1999

Written-off Claims
Transfer to Specific Reserve for Possible Loan Losses
Transfer to Reserve for Loans to Restructuring Countries
Transfer to Reserve for Contingent Losses relating to Loans Sold to CCPC
Losses on Sales of Loans to CCPC
Other Losses on Sales of Loans¥140.6
543.2
8.6
44.0
2.1
62.4

Subtotal
Transfer to General Reserve for Possible Loan Losses

801.2
70.4

Total

¥871.7

Financial Section

IBJ Only
Core Business Profit declined by ¥18.6 billion, to ¥212.0 billion, because of a conservative provision to General
Reserve for Possible Loan Losses. However, as stated previously, IBJ recorded ¥278.6 billion in Core BusinessProfit before Transfer to General Reserve, the highest level in IBJ’s history. This result reflects good performances from trading divisions and a reduction in expenses in a number of areas.
A breakdown of profits by business activity is as follows: Net Interest Income from domestic operations
declined by ¥3.9 billion, to ¥236.7 billion. This is attributed to a reduction in the average loan balance, despite
overall increases in loan spreads. On the other hand, net interest income from international operations increasedby ¥4.4 billion, to ¥61.5 billion. Taken together, the total net interest income amounted to ¥298.2 billion for fiscal
1998, a small increase from fiscal 1997.
Net Profit related to Bonds increased by ¥21.6 billion, to ¥55.9 billion. This was the result of an increase ingains on sales of bonds. Net Fees and Commissions declined by ¥26.4 billion, to ¥50.5 billion, mainly because ofa decrease in loan-related charges. Trading Profit amounted to ¥22.1 billion, an increase of ¥28.3 billion from theprevious year. This was a result of a timely response to market movements.
General and Administrative Expenses fell by ¥9.6 billion, to ¥156.8 billion, for fiscal 1998. This reduction wasachieved despite an increase in systems-related costs from Japan’s financial Big Bang, Y2K compliance measures,and re-orientation. Savings were obtained by reducing directors’ salaries, lowering staff bonuses, and cutting
special allowances and entertainment costs. Transfer to General Reserve for Possible Loan Losses increased by¥52.5 billion, to ¥66.5 billion, since a more conservative standard for estimating possible losses was establishedin accordance with guidelines laid down by the Financial Supervisory Agency and the Financial Reconstruction
Commission.

52

Management’s Discussion and Analysis

Despite Core Business Profit of ¥212.0 billion, IBJ recorded a Loss before Income Taxes of ¥345.4 billion, thesecond consecutive year of Net Loss. The loss resulted from the large-scale loan losses based on the adoption ofconservative standards. In dealing with non-performing loans, IBJ conformed to Standards for Self-Assessmentsof Assets and Standards for Write-offs and Provisions, which were internally established in conformity with the
Accounting Standards for Banks. In accordance with these standards, IBJ charged to income for non-performing
loans totaling ¥857.8 billion (¥924.3 billion, when combined with Transfer to General Reserve for Possible Loan
Losses).
The ¥857.8 billion charges include Transfer to Reserve for Possible Loan Losses of ¥656.2 billion, consisting of¥603.6 billion for the transfer to the specific reserve for possible loan losses based on overall solvency analysis,¥44.0 billion for the reserve for possible losses on claims sold to the Cooperative Credit Purchasing Company,
Limited (“CCPC”), and ¥8.6 billion for the specific reserve for loans to borrowers in restructuring countries.
Losses related to the disposal of unrecoverable loans totaled ¥201.5 billion, consisting of ¥138.9 billion in
forgiveness of claims, ¥2.1 billion in losses on sales of claims to the CCPC, and ¥60.4 billion in losses from bulk
sales of loans.
Net Profit related to Stocks in fiscal 1998 rose ¥250.2 billion from fiscal 1997, to ¥318.1 billion. This is due to adecrease in the devaluation of stocks caused by the change in accounting policy for listed securities from the lowerof cost or market method to the cost method. Net Profit related to Stocks consists of the net of gains on sales ofstocks, losses on sales of stocks, and losses on devaluation of stocks. In addition, IBJ recorded ¥7.4 billion from
Gains on Sales of Premises and Equipment.
IBJ incurred a Net Loss of ¥195.7 billion, the second consecutive annual Net Loss. The adoption of the balancesheet method of accounting for income taxes resulted in an Income Taxes Benefit of ¥149.6 billion.

 Summary of Non-Consolidated Statements of Income(in billions of yen)
Fiscal 1997 (b)Fiscal 1996(a)–(b)¥ 236.7
61.5
55.9
50.5
22.1
16.6
(3.1)

¥ 240.6
57.1
34.3
76.9
(6.2)
11.7
3.7

¥248.8
87.6
(5.2)
36.9
—
16.2
9.2

¥ (3.9)4.4
21.6(26.4)
28.3
4.9
(6.8)

Gross Core Business Profit
General and Administrative Expenses:
Personnel Expenses
OthersDebenture Cost

440.3

418.2

393.7

22.1

68.0
87.7
5.9

74.3
91.1
8.0

72.9
84.3
10.6

6.3
3.4
2.1

Core Business Profit before Transfer to General Reserve

278.6

244.7

225.8

33.9

Transfer to General Reserve for Possible Loan Losses

66.5

14.0

21.1

52.5

Core Business Profit
Funding Cost of Money Trusts
Loan Losses
Net Profit related to Stocks
Others

212.0
13.5
857.8
318.1
(4.2)

230.6
20.5
633.8
67.9
14.1

204.6
32.9
261.2
103.1
27.6

(18.6)
(7.0)
224.0
250.2
(18.2)

Income (Loss) before Income Taxes
Income Taxes Expense (Benefit)(345.4)(149.6)(341.7)
0.1

41.2
0.1

(3.6)
(149.8)Net Income (Loss)¥(195.7)¥(341.9)¥ 41.1¥146.2Net Interest Income:Domestic Operations
International Operations
Net Profit (Loss) related to Bonds
Net Fees and Commissions
Trading Profit (Loss)
Gains on Foreign Exchange Transactions
Other Core Business Profit (Loss)

53

Financial Section

Fiscal 1998 (a)Management’s Discussion and Analysis

 Loan Losses(in billions of yen)
Fiscal 1998 (a)Fiscal 1997 (b)(a)–(b)Written-off Claims
Transfer to Specific Reserve for Possible Loan Losses
Transfer to Reserve for Loans to Restructuring Countries
Transfer to Reserve for Contingent Losses relating to Loans Sold to CCPC
Losses on Sales of Loans to CCPC
Other Losses on Sales of Loans¥138.9
603.6
8.6
44.0
2.1
60.4

¥ 61.1
530.3
—
15.8
17.3
9.1

¥ 77.8
73.3
8.6
28.2
(15.2)
51.3

Subtotal
Transfer to General Reserve for Possible Loan Losses

857.8
66.5

633.8
14.0

224.0
52.5

Total

¥924.3¥647.8¥276.5

Balance Sheet Analysis
IBJ Group
Total assets at March 31, 1999, amounted to ¥46,166.4 billion. This was a ¥3,063.3 billion decrease from March 31,
1998. The decrease was caused in part by a depreciation in the value of foreign currency assets resulting from astronger yen exchange rate. Assets related to repo transactions by IBJ also decreased. Repo transactions represent lending and the borrowing of bonds against the cash collateral.
Loans and Bills Discounted declined to ¥23,327.9 billion. Trading Assets rose by ¥262.7 billion, to ¥3,729.0 billion. This was the result of an increase in IBJ’s trading assets and the introduction of the mark-to-market valuation at a domestic securities subsidiary. Deferred Tax Assets rose by ¥114.2 billion, to ¥400.1 billion. This was theresult of charges relating to non-performing loans by IBJ which gave rise to deductible temporary differences.
Other Assets totaled ¥3,923.2 billion, down ¥1,610.2 billion from the previous year’s level. The main reason forthis was a decrease in assets related to IBJ’s repo transactions, as explained above.
Liabilities totaled ¥44,308.9 billion, down by ¥3,600.7 billion from the previous year-end. The decline was
Financial Section

mainly caused by decreases in borrowed securities related to repo transactions, debentures, and deposits by IBJ.
This decline is related to IBJ’s asset-liability management. Minority Interests in Consolidated Subsidiaries, which
was previously included in Liabilities, now appears as a separate item after Liabilities and before Shareholders’Equity in the balance sheets.
Shareholders’ Equity totaled ¥1,561.3 billion. This was an increase of ¥241.3 billion from the previous year’slevel. The main reasons for the increase were the issuances of Preferred Stock and Common Stock.

54

Management’s Discussion and Analysis

 Summary of Consolidated Balance Sheets(in billions of yen)March 31, 1999 (a)March 31, 1998 (b)March 31, 1997(a)–(b)

Total Assets
Trading Assets
Investment Securities
Loans and Bills Discounted
Deferred Tax Assets¥46,166.4
3,729.0
8,942.1
23,327.9
400.1¥49,229.7
3,466.2
8,847.2
24,001.4
285.9¥46,966.9—
6,808.0
25,518.4
126.8¥(3,063.3)
262.7
94.9
(673.5)
114.2

Total Liabilities
Debentures
Deposits
Trading Liabilities
Minority Interests in Consolidated Subsidiaries

44,308.9
20,461.8
8,116.3
2,854.9—

47,909.7
20,840.9
10,053.5
2,286.9
135.2

45,422.9
22,137.5
10,871.3—
3.2(3,600.7)(379.0)(1,937.2)
567.9(135.2)

Minority Interests in Consolidated Subsidiaries
Shareholders’ Equity

296.0
1,561.3

1,320.0

1,543.9

296.0
241.3

¥46,166.4¥49,229.7¥46,966.9¥(3,063.3)

Total Liabilities, Minority Interests in Consolidated
Subsidiaries and Shareholders’ Equity

IBJ Only
Total assets fell by ¥3,051.5 billion, to ¥42,089.3 billion. The decrease was caused partly by a sharp increase in thevalue of the yen from the fiscal 1997 level. A second major factor was a decrease of ¥2,296.2 billion in Other
Assets, including collateral related to repo transactions, which decreased by ¥1,111.4 billion. Repo transactions
represent lending and borrowing of bonds against cash collateral. The decrease in repo transactions will reducethe balances for “Cash Placed as Collateral on Securities Borrowed” and “Securities in Custody”, both of which
are in Other Assets.
Loans and Bills Discounted totaled ¥22,872.0 billion, a decrease of ¥369.5 billion from the previous year’s level.
The decline was caused partly by the impact of yen appreciation on foreign currency loans and the securitization of certain loan assets. Also, to improve the quality of assets, IBJ sold or otherwise disposed of non-performOn the basis of the Bank of Japan (BOJ)’s industrial-sector definitions, loans to the finance and insurance
industry totaled ¥3,990.3 billion, or 19.6% of all loans issued by IBJ’s domestic offices. This rather high ratio
includes loans to finance companies of IBJ’s customers in such industries as electrical machinery, steel, automobiles, and trading. These companies are classified by the BOJ as part of the financial sector.
IBJ’s Investment Securities portfolio was ¥9,024.5 billion, up by ¥324.9 billion from the previous year’s level.
This includes unrealized gains on listed securities of ¥12.3 billion. Assets related to trading transactions totaled¥2,197.0 billion, an increase of ¥77.4 billion from the previous year-end. It includes positions in derivative financial instruments, such as interest rate swaps designed to meet customers’ needs as well as to seek short-term
gains. IBJ applies the mark-to-market valuation for these positions.
As explained previously, IBJ adopted the balance-sheet method of accounting for income taxes in fiscal 1998.
This resulted in the recognition of Deferred Tax Assets amounting to ¥406.2 billion.
Liabilities fell by ¥3,608.6 billion, to ¥40,465.3 billion. Debentures fell by ¥372.9 billion, to ¥19,866.8 billion,
as a result of a decline in the issuance of debentures. The balances for outstanding coupon debentures and discount debentures were ¥14,067.8 billion and ¥5,799.0 billion, respectively. Deposits totaled ¥8,175.0 billion. This
figure includes certificates of deposit, which totaled ¥2,482.6 billion. Trading Liabilities totaled ¥1,465.1 billion.
Securities borrowed included in Other Liabilities decreased by ¥1,099.3 billion. This resulted from the decline
in repo transactions as mentioned above.
Presentation of land revaluation was changed in accordance with the revision of the Land Revaluation Law.
At March 31, 1998, Surplus from Land Revaluation was included in Liabilities. At March 31, 1999, the income
tax liability portion of the surplus of ¥72.5 billion is presented as Deferred Tax Liabilities related to Land
Revaluation and is included in Liabilities. The remaining balance of ¥98.9 billion is presented as Surplus fromLand Revaluation and is included in Shareholders’ Equity.
55

Financial Section

ing loans. However, IBJ remains committed to meeting the need for funds from financially sound customers.

Management’s Discussion and Analysis

Shareholders’ Equity increased by ¥557.0 billion, to ¥1,623.9 billion, in fiscal 1998. This increase is attributed
to the following: the issuance of preferred stock to the Resolution and Collection Bank for ¥350.0 billion; theissuance of common stock to Dai-Ichi Mutual Life Insurance Company for ¥67.0 billion; the adoption of thebalance sheet method of accounting for income taxes with the cumulative effect of a change in accounting of¥256.4 billion; the reclassification from liabilities of Surplus from Land Revaluation of ¥98.9 billion; and Net
Loss of ¥195.7 billion, due, in large part, to the charges of non-performing loans for ¥857.8 billion.

 Summary of Non-Consolidated Balance Sheets(in billions of yen)March 31, 1999 (a)March 31, 1998 (b)March 31, 1997(a)–(b)

Total Assets
Trading Assets
Investment Securities
Loans and Bills Discounted¥42,089.3
2,197.0
9,024.5
22,872.0¥41,140.8
2,119.6
8,699.6
23,241.5¥43,450.0—
6,827.6
24,713.5¥(3,051.5)
77.4
324.9
(369.5)

Total Liabilities
Debentures
Deposits
Trading Liabilities

40,465.3
19,866.8
8,175.0
1,465.1

44,073.9
20,239.7
10,139.9
1,738.7

42,019.5
21,559.6
10,716.2—(3,608.6)(372.9)(1,964.8)(273.6)

Shareholders’ Equity

1,623.9

1,066.9

1,430.5

557.0¥42,089.3¥45,140.8¥43,450.0¥(3,051.5)

Total Liabilities and Shareholders’ Equity

Loans under Special Risk Review
IBJ Group
The total balance of Loans under Special Risk Review reached ¥1,771.4 billion. This figure consists of the following four categories.
(1) Bankruptcy Loans
Nonaccrual loans to borrowers who are legally bankrupt as defined in Articles 96-1-3 and 4 of the Japanese
Financial Section

Tax Law Enforcement Regulation (Article 97 of 1965 Cabinet Order)(2) Nonaccrual Loans
Nonaccrual loans other than (i) Bankruptcy Loans and (ii) loans for which payments of interest are deferred inorder to assist or facilitate the restructuring of borrowers in financial difficulties(3) Accruing Loans Past Due 3 Months or More
Accruing Loans for which payments of principal or interests are past due for more than 3 months. Bankruptcy
Loans and Nonaccrual Loans, both of which are non-accruing, are not included in this category.
(4) Restructured Loans
Loans on which contracts were amended in favor of borrowers (e.g., the reduction of or exemption fromstated interest, the deferral of interest payments, the extension of maturity dates, the renunciation of claims)
in order to assist or facilitate the restructuring of borrowers in financial difficulties

 Loans under Special Risk Review(in billions of yen)March 31, 1999

Bankruptcy Loans
Nonaccrual Loans
Accruing Loans Past Due 3 Months or More
Restructured Loans

¥

Total

¥1,771.4

46.8
1,160.9
8.9
554.6

Note: Bankruptcy Loans and Nonaccrual Loans are net of uncollectable portion. The deducted amounts from Bankruptcy Loans andNonaccrual Loans at March 31, 1999, were ¥100.9 billion and ¥146.2 billion, respectively.

56

Management’s Discussion and Analysis

This disclosure includes loans that require a certain degree of special risk review but do not raise concern as torecovery of the principal. Accordingly, not all of the loans in these categories are non-performing.
Reserves at March 31, 1999, for all claims are shown in the following table: Reserve for Possible Loan Losses(in billions of yen)March 31, 1999

General Reserve for Possible Loan Losses
Specific Reserve for Possible Loan Losses
Reserve for Loans to Restructuring Countries¥ 189.1
870.0
7.5

Total

¥1,066.7

IBJ Only Loans under Special Risk Review(in billions of yen)March 31, 1999 (a)March 31, 1998 (b)(a)–(b)Bankruptcy Loans
Nonaccrual Loans
Accruing Loans Past Due 3 Months or More
Restructured Loans¥

45.2
1,236.0
8.4
554.4

¥

64.2
209.5
14.5
820.6

¥ (19.0)
1,026.4(6.0)(266.2)

Total¥1,844.1¥1,109.0¥ 735.1

Note: Bankruptcy Loans and Nonaccrual Loans are net of uncollectable portion.
The deducted amounts from Bankruptcy Loans at March 31, 1999 and 1998 were ¥100.9 billion and ¥235.4 billion, respectively.
The deducted amounts from Nonaccrual Loans at March 31, 1999 and 1998 were ¥146.2 billion and ¥225.0 billion, respectively.

In previous years, IBJ accrued interest income on loans until principal payments became overdue beyond final
maturity or interest payments became more than six months past due regardless of the borrower’s financial condition. Starting in fiscal 1998, loans are classified as nonaccrual if the borrowers are determined to be Insolvent,
overdue or not.

 Ratio of Loans and Bills Discounted(in billions of yen)March 31, 1999 (a)March 31, 1998 (b)(a)–(b)Balance of Loans and Bills Discounted
Average Balance of Loans and Bills Discounted¥22,624.8
23,026.7¥22,781.1
25,012.5¥ (156.2)(1,985.8)

Ratio to Balance of Loans and Bills Discounted

8.2%

4.9%

3.3%

Ratio to Average Balance of Loans and Bills Discounted

8.0%

4.4%

3.6%

March 31, 1999 (a)March 31, 1998 (b)(a)–(b)Reserve Ratio (before net of uncollectable portion)
Reserve Ratio (after net of uncollectable portion)

53.4%
45.8%

57.3%
39.6%

(3.9%)
6.2%

Reserve for Possible Loan Losses(after net of uncollectable portion)¥843.8¥439.4¥404.3

Note: Figures are net of uncollectable portion.

 Reserve Ratio(in billions of yen)

Note: Reserve Ratio=Reserve for Possible Loan Losses/Loans under Special Risk Review

57

Financial Section

Unrecoverable or To Be Insolvent based on the result of self-assessment, regardless of whether the loan isManagement’s Discussion and Analysis

The Financial Reconstruction Law (“FRL”) Disclosure Requirements
The FRL, enacted by the Diet in October 1998, introduced a new series of disclosure requirements for problem
claims at the parent company level.
The FRL establishes the following four categories of claims:(1) Claims under Bankruptcy or Virtual Bankruptcy(2) Claims under High Risk
(3) Claims under Close Observation(4) Normal Claims
The amount of such claims held by IBJ at March 31, 1999, was ¥1,872.3 billion, consisting of Claims under
Bankruptcy or Virtual Bankruptcy, Claims under High Risk, and Claims under Close Observation.
Since the change in the criteria for accruing unpaid interest, IBJ’s disclosure for Loans under Special Risk
Review corresponds closely to the FRL disclosure (See figure below.).

 Disclosed Loans(in billions of yen)Classificationof Borrowers

Ordinary

Claims Subject to FRL
Disclosure Requirements

Reserve for Possible
Loan Losses

Loans under Special
Risk Review

General Reserve for
Possible Loan Losses
124.8
NormalClaimsReserve for Loans to
Restructuring Countries
7.5

Financial Section

Special Attention

Claims under Close
Observation(Loans Only)
562.9
Coverage Ratio 52.7%
Reserve Ratio 15.0%

General Reserve for
Possible Loan Losses
48.0

Restructured Loans
554.4
Accruing Loans Past
Due 3 Months or More
8.4

Claims under High Risk
1,197.7
To Be Insolvent
1,197.7

Unrecoverable
60.2(Loans: 1,188.1)
Coverage Ratio 83.8%
Reserve Ratio 77.1%

Claims under Bankruptcy
or Virtual Bankruptcy
111.6(Loans: 93.1)

Insolvent
51.4

Coverage Ratio 100.0%
Reserve Ratio 100.0%

Total(Uncollectable
Portion)1,872.3(272.4)

Specific Reserve for
Possible Loan Losses
651.7

Specific Reserve for
Possible Loan Losses
11.7

Nonaccrual Loans
47.9
Bankruptcy Loans
45.2

843.8
(272.4)

Coverage Ratio=(Collateral+Third Party’s Guarantees+Reserves for Possible Loan Losses)/Claims
Reserve Ratio=Reserve for Possible Loan Losses/Unsecured Portion of Claims

58

Nonaccrual Loans
1,188.1

1,844.1(247.2)

Management’s Discussion and Analysis

Claims under Bankruptcy or Virtual Bankruptcy by FRL classification corresponds to the sum of Bankruptcy
Loans and Nonaccrual Loans to borrowers who are classified as Unrecoverable. Claims under High Risk by FRLclassification corresponds to Nonaccrual Loans to borrowers who are in To Be Insolvent. Claims under Close
Observation by the FRL classification corresponds to the sum of Accruing Loans Past Due 3 Months or Moreand Restructured Loans.
Not all claims subject to the FRL disclosure requirements raise immediate concern as to recoverability of theprincipal amounts.
IBJ significantly increased Transfer to Reserve for Possible Loan Losses in fiscal 1998. As a result, the ratiosof the reserve to the unsecured portion under the FRL classification are as follows: 100% for Claims under
Bankruptcy or Virtual Bankruptcy, 77.1% for Claims under High Risk, and 15.0% for Claims under Close
Observation. These reserve levels satisfy guidelines established by the Financial Reconstruction Commission.
In addition to providing conservative reserves for the unsecured portion of the claims, IBJ sought to increase
the secured portion. As a result, 100% of Claims under Bankruptcy or Virtual Bankruptcy, 83.8% of Claims
under High Risk, and 52.7% of Claims under Close Observation were either secured or reserved. IBJ believes
that these levels are fully adequate. Having tightened its credit risk management, IBJ believes that the losses
related to non-performing loans will decrease significantly in the future.

 Claims Subject to FRL Disclosure Requirements(in billions of yen)March 31, 1999

Claims under Bankruptcy or Virtual Bankruptcy
Claims under High Risk
Claims under Close Observation¥

Subtotal
Normal Claims

1,872.3
25,437.5

Total¥27,309.8

111.6
1,197.7
562.9

Note: Claims under Bankruptcy or Virtual Bankruptcy is net of uncollectable portion.
The deducted amounts at March 31, 1999, were ¥272.4 billion.

(in billions of yen)March 31, 1999

Reserve Ratio (before net of uncollectable portion)
Reserve Ratio (after net of uncollectable portion)

52.0%
45.1

Reserve for Possible Loan Losses (after net of uncollectable portion)¥843.8

Note: Reserve Ratio=Reserve for Possible Loan Losses/(Claims under Bankruptcy or Virtual Bankruptcy + Claims under High Risk + Claims
under Close Observation)

 Coverage Ratio
March 31, 1999

Claims under Bankruptcy or Virtual Bankruptcy
Claims under High Risk
Claims under Close Observation

100.0%
83.8
52.7

Total

75.4

Note: Figures are net of uncollectable portion.
Coverage Ratio=(Collateral + Third Party’s Guarantees + Reserves for Possible Loan Losses)/Claims

59

Financial Section

 Reserve Ratio

Management’s Discussion and Analysis

 Reserve Ratio to Unsecured Portion
March 31, 1999

Claims under Bankruptcy or Virtual Bankruptcy
Claims under High Risk
Claims under Close Observation

100.0%
77.1
15.0

Total

60.7

Note: Figures are net of uncollectable portion.
Reserve Ratio to Unsecured Portion=Reserve for Possible Loan Losses/Unsecured Portion of Claims

 Reserve Ratio to Normal Claims
March 31, 1999

Claims to Special Attention Borrowers not Classified as Claims under Close Observation
Claims to Ordinary Borrowers

3.98%
0.08

Note: Reserve Ratio to Normal Claims=General Reserve for Possible Loan Losses/Claims

 Breakdown of Claims Subject to FRL Disclosure Requirements by Industries of Borrowers(in billions of yen)March 31, 1999

Manufacturing
Construction
Finance and Insurance
Real Estate
Other Industries¥

Domestic Offices
Overseas Offices

1,792.7
79.6

Total

¥1,872.3

57.0
129.8
153.2
740.1
712.4

Note: Figures are net of uncollectable portion.

Financial Section

 Breakdown of Claims Subject to FRL Disclosure Requirements by Nationality of Borrowers(in billions of yen)March 31, 1999

Asia
Europe*North America
Central & South America¥

Overseas
Japan

144.6
1,727.7

Total¥1,872.3

Note: Figures are net of uncollectable portion.
* It includes the amount for Russia/East Europe of ¥3.2 billion.

60

83.1
28.5
32.8
0.1

Management’s Discussion and Analysis

Reserves at March 31, 1999, for all claims are shown in the following table: Reserve for Possible Loan Losses(in billions of yen)March 31, 1999 (a)March 31, 1998 (b)(a)–(b)General Reserve for Possible Loan Losses
Specific Reserve for Possible Loan Losses
Reserve for Loans to Restructuring Countries¥ 172.8935.8
7.5¥106.2793.3
0.2¥ 66.5
142.4
7.3

Total

¥1,116.2¥899.8¥216.3

Capital Adequacy Ratio
IBJ Group
To ensure the stability of the world’s financial system, the BIS maintains a set of standards which require banks
to maintain capital ratios in relation to assets at a certain level. The current system includes off-balance-sheettransaction items in the category of risk assets and is applied on a consolidated basis.
These standards incorporate risk asset ratios, the inclusion of off-balance-sheet transactions in risk assets, andan overall evaluation on a consolidated basis. Japanese banks involved in international business have beenrequired to maintain a capital asset ratio of at least 8% since March 1993. The BIS standard originally identified
only credit risks. However, market risks have also been taken into consideration following the introduction of
new regulations in March 1998. Market risk includes possible losses resulting from price changes in both onbalance-sheet and off-balance-sheet transactions.
At March 31, 1999, the IBJ Group’s capital adequacy ratio was 11.30%, compared with 10.26% at March 31,
1998. The Tier I capital adequacy ratio was 6.03%, and the Tier II capital adequacy ratio was 5.26%. Efforts weremade to strengthen capital as follows: a third-party capital allocation of ¥67.0 billion; the issuance of preferredshares through overseas subsidiaries of ¥176.0 billion; and the issuance of subordinated bonds of ¥64.0 billion.
In addition, IBJ received ¥600.0 billion in public funds. This consisted of ¥350.0 billion of preferred stock and¥250.0 billion of subordinated bonds. As a result, IBJ Group’s capital increased by ¥429.3 billion, to ¥3,273.4 bilbillion.
Risk assets totaled ¥28,963.5 billion, an increase of ¥1,246.6 billion during the year. The increase breaks down
into the following elements: on-balance-sheet exposure increased by ¥1,435.4 billion, while off-balance-sheet
exposure decreased by ¥361.3 billion. Market risk related exposure increased by ¥172.5 billion.

61

Financial Section

lion, at the year-end. Within this total, Tier I capital amounted to ¥1,749.2 billion. Tier II capital totaled ¥1,524.2

Management’s Discussion and Analysis

 BIS Capital Adequacy Ratios (Uniform International Standards)(in billions of yen)March 31, 1999

Preferred Stock
Common Stock
Capital Surplus
Retained Earnings
Minority Interests:
Preferred Stocks Issued by SPCs
Others

175.0
498.6
570.1
209.4
291.7
4.3
1,749.2¥ 1,444.4¥ 1,536.3

45% Unrealized Gains on Securities
45% Unrealized Gains on Land Used in Business
General Reserve for Possible Loan Losses
Subordinated Debt
Sub-total

—
77.1
189.1
1,257.9
1,524.2

183.4
81.2
116.4
1,074.6
1,455.8

384.4
104.2
853.6
1,342.2

Total Tier II Capital (B)Total Tier III Capital (C)1,524.2—

1,399.7—

1,342.2—

Capital (D) = (A) + (B) + (C)3,273.4

2,844.1

2,878.6

On-Balance-Sheet Exposure
Off-Balance-Sheet Exposure

25,556.6
3,023.9

24,121.1
3,385.3

28,107.1
3,723.5

Credit Risk Asset (E)Market Risk Related Exposure (F)28,580.6
382.8

27,506.5
210.2

31,830.6

Total (G) = (E) + (F)¥28,963.5¥27,716.8¥31,830.6

11.30%

10.26%

9.04%

Note: The components of Tier I were disclosed starting from March 31, 1999.

Financial Section

March 31, 1997

Total Tier I Capital (A)BIS Capital Adequacy Ratios (Uniform International Standards)= (D)/(G) x100

62¥

March 31, 1998

Management’s Discussion and Analysis

 Financial Derivatives and Forward Foreign Exchange(in billions of yen)March 31, 1998

March 31, 1999

March 31, 1997

Notional
principal
amountCreditequivalentamountNotional
principal
amountCreditequivalentamountNotional
principal
amountCreditequivalentamountInterest Rate Swaps
Currency Swaps
Forward Foreign ExchangeInterest Rate Options (Purchased)
Currency Options (Purchased)
Other Derivative Instruments
Impact of Master Netting Instruments¥ 89,495.7
4,633.9
17,943.9
4,666.3
3,118.9
5,680.2—¥2,222.7
454.8
702.7
44.5
101.2
49.5
(1,242.8)¥ 77,978.2
6,177.5
31,712.6
4,904.0
717.5
5,392.3—¥1,763.1736.7
1,777.7
46.7
30.1
39.1
(948.1)¥ 67,955.4
6,140.8
40,375.3
4,298.5
1,620.1
2,515.7—¥1,269.2
647.8
1,887.1
33.6
90.1
4.9
—

Total

¥125,593.2¥2,332.8¥126,882.3¥3,445.4¥122,906.1¥3,932.8

Notes: 1. Figures listed above are on a consolidated basis and are calculated in accordance with the BIS guidelines.
2. In computing the credit equivalent amount, the current exposure method was used (From March 31, 1997, the original exposure

method was used in some cases.).
3. The impact of netting agreements was taken into account from March 31, 1997, and was separately disclosed from March 31, 1998.
4. The amounts of transactions that are excluded for capital adequacy guidelines are public exchange transactions and foreignexchange related transactions for which the original contract has a duration of 14 days or less as shown below.
(in billions of yen)March 31, 1999

March 31, 1998

March 31, 1997

Notional principal
amountNotional principal
amountNotional principal
amountForward Foreign ExchangeInterest Rate Options (Written)
Interest Rate Options (Purchased)
Currency Options (Written)
Currency Options (Purchased)
Other Derivative Instruments

¥

Total

¥120,106.9

3,677.1
18,628.0
10,725.7
58.4
57.8
86,959.5¥

5,560.2
9,898.0
5,647.1887.0
1.6
83,388.6¥105,382.8¥

2,342.9
14,233.9
8,765.2
1,107.1
16.3
73,956.3¥100,421.9

Changes in the Bank Law, which took effect on December 1, 1998, require banks involved in international transactions to meet the BIS standards at the parent company and the consolidated level effective on and after March
31, 1999.
IBJ’s capital adequacy ratio at the parent company level at March 31, 1999, was 11.53%. Capital amounted to¥3,316.0 billion, consisting of Tier I capital of ¥1,807.4 billion and Tier II capital of ¥1,508.5 billion. Risk assets
totaled ¥28,737.9 billion, consisting of credit risk assets of ¥28,516.6 billion and market risk equivalents of¥221.2 billion.
Core capital of ¥1,807.4 billion includes Preferred Stock of ¥175.0 billion, Common Stock of ¥498.6 billion,
Capital Surplus of ¥570.1 billion, Legal Reserve of ¥82.2 billion, and Retained Earnings of ¥189.8 billion, andpreferred shares issued by overseas special-purpose companies (SPCs) totaled ¥291.7 billion.

63

Financial Section

IBJ OnlyConsolidated Balance Sheets(in millions of yen)(in thousands of
U.S. dollars)

March 31, 1998

March 31, 1999¥

806,9102,712,690
133,008
3,729,005
54,331
8,942,151
23,327,907
290,585
3,923,235
313,726
16,055400,198
1,516,602¥

553,2033,646,837
14,491
3,466,255
171,157
8,847,249
24,001,429
373,592
5,533,487
295,762
15,994285,9872,024,337$¥46,166,409¥49,229,785$382,964,825(in millions of yen)(in thousands of
U.S. dollars)

March 31, 1999

March 31, 1998

March 31, 1999

Liabilities, Minority Interests
in Consolidated Subsidiaries and Shareholders’ Equity
Liabilities
Debentures (Note 11)
Deposits (Note 12)
Call Money and Bills Sold
Commercial Paper
Borrowed Money (Note 13)
Trading Liabilities (Notes 1 (d) and 3)
Foreign Exchanges (Note 6)
Other Liabilities (Note 14)
Reserve for Possible Loan Losses (Note 15)
Reserve for Retirement Allowances
Reserve for Contingent Losses relating to Loans Sold
Other Reserves (Note 16)
Deferred Tax Liabilities (Note 10)
Deferred Tax Liabilities related to Land Revaluation (Note 8)
Minority Interests in Consolidated Subsidiaries (Notes 1 (n) and 17)
Acceptances and Guarantees (Note 18)
Surplus from Land Revaluation (Note 1 (g))¥20,461,865
8,116,321
4,857,493
30,0001,390,208
2,854,950
23,3993,810,402
1,066,714
53,08848,14429
7,245
72,518—1,516,602—¥20,840,941
10,053,551
4,251,988—
1,804,335
2,286,959
12,953
5,325,539
922,235
50,802
19,776478——
135,218
2,024,337
180,648$169,737,583
67,327,432
40,294,431
248,859
11,532,213
23,682,709
194,10231,608,486
8,848,732
440,385
399,371244
60,101
601,564—
12,580,692—

Total Liabilities

44,308,984

47,909,766

367,556,904

Minority Interests in Consolidated Subsidiaries (Notes 1 (n) and 17)

296,074—

2,456,033

Shareholders’ Equity
Preferred Stock (Note 19)
Common Stock (Note 20)
Capital Surplus
Surplus from Land Revaluation (Note 8)
Retained Earnings (Note 21)
Treasury Stock

175,000
498,605
570,132
98,920218,694(2)—
465,105
361,632—
493,287(5)

1,451,680
4,136,087
4,729,424
820,574
1,814,142(19)

1,561,350

1,320,019

12,951,888¥46,166,409¥49,229,785$382,964,825

March 31, 1999

AssetsCash and Due from Banks (Note 2)
Call Loans and Bills Purchased
Commercial Paper and Other Debt Purchased
Trading Assets (Notes 1 (d) and 3)
Money Held in Trust (Note 33)
Investment Securities (Notes 1 (e), 4 and 32)
Loans and Bills Discounted (Note 5)
Foreign Exchanges (Note 6)
Other Assets (Note 7)
Premises and Equipment (Notes 1 (g) and 8)
Deferred Debenture Charges (Note 9)
Deferred Tax Assets (Note 10)
Customers’ Liabilities for Acceptances and Guarantees (Note 18)

Financial Section

Total Assets

Total Shareholders’ Equity
Total Liabilities, Minority Interests in Consolidated Subsidiaries
and Shareholders’ Equity

See accompanying “Notes to Consolidated Financial Statements" which are an integral part of these statements.
64

6,693,579
22,502,621
1,103,345
30,933,268
450,694
74,177,945
193,512,295
2,410,502
32,544,465
2,602,460
133,185
3,319,774
12,580,692

Consolidated Statements of Income(in millions of yen)(in thousands of
U.S. dollars)

Fiscal 1997*

Fiscal 1996*

Fiscal 1998*

IncomeInterest Income (Note 22)
Fees and Commissions
Trading Income (Note 23)
Other Operating Income (Note 24)
Other Income (Note 25)
Transfer from Other Reserves¥1,974,674
97,50553,936854,050
406,143450¥2,305,998
122,8499,467
473,434
397,938
12,213¥2,518,077
75,276—563,997245,9970$16,380,545
808,836
447,420
7,084,614
3,369,088
3,735

Total Income

3,386,760

3,321,902

3,403,347

28,094,239

ExpenseInterest Expense (Note 22)
Amortization of Debenture Discounts
Fees and Commissions
Trading Expense (Note 23)
Other Operating Expense (Note 26)
General and Administrative Expenses
Other Expense (Note 27)
Transfer to Other Reserves

1,645,753
27,117
14,264—
794,768
222,792
938,295
0

1,981,009
34,952
19,7388,452
431,913217,453
941,4973

2,142,314
52,401
18,068—539,661
202,847
402,544
1,031

13,652,042
224,948
118,330—
6,592,850
1,848,132
7,783,459
8

Total Expense

3,642,993

3,635,020

3,358,870

30,219,769

Income (Loss) before Income Taxes and Others
Income Taxes Expense (Benefit) (Note 28):
Current
Deferred
Minority Interests in Net Income
Amortization of Consolidation Difference (Note 1 (n))(256,232)(313,118)

44,477(2,125,530)

10,816(94,093)
8,321
—

3,935
(114,695)
169
131

5,628
25,0491,137(76)

89,727(780,537)
69,028—Net Income (Loss)¥ (181,276)¥ (202,660)¥

12,740$ (1,503,748)

Per Common Stock (Note 29)
Net Income (Loss)
Cash Dividends(in yen)(in U.S. dollars)

¥

¥

¥

(70.64)7.00(79.80)
8.50

5.24
8.50

$

(0.586)0.058

See accompanying “Notes to Consolidated Financial Statements" which are an integral part of these statements.
* Fiscal 1998, 1997 and 1996 represent the fiscal years ended March 31, 1999, 1998 and 1997, respectively.

65

Financial Section

Fiscal 1998*

Consolidated Statements of Shareholders’ Equity(in millions of yen)
Surplus fromLand Revaluation(Note 8)Retained
Earnings(Note 21)

Treasury
Stock

Total
Shareholders’Equity

¥

—
—
—
—
—

¥724,500—(19,987)
12,740
—

¥ (7)
—
—
—
(5)

¥1,325,110
226,120(19,987)
12,740(5)

361,632—

717,253(12)

1,543,979

—
—
—
—

—
—
—
—

—
—
—
—

280
(21,586)(202,660)
—

—
—
—
7

280
(21,586)(202,660)
7—465,105

361,632—

493,287(5)

1,320,019

Issuance of Preferred Stock
175,000
Issuance of Common Stock—
Transfer from Liabilities—
Cash Dividends—
Initial Consolidation of Subsidiaries Not Consolidated in thePrevious Year (Note 1 (b))—
Initial Adoption of Equity Methodof Affiliates Stated at Costin the Previous Year (Note 1 (b))—
Net Loss for Fiscal 1998—
Treasury Stock Transactions——
33,500——175,000
33,500————98,920————(19,681)————

350,000
67,00098,920(19,681)———(20,900)—(20,900)

—
—
—

—
—
—

—
—
—

(52,733)(181,276)———3(52,733)(181,276)
3¥175,000¥498,605¥570,132¥98,920¥218,694¥ (2)¥1,561,350

Preferred
Stock(Note 19)

CommonStock(Note 20)

CapitalSurplus

Surplus fromLand Revaluation(Note 8)Retained
Earnings(Note 21)

Treasury
Stock

Total
Shareholders’Equity—$3,858,194$2,999,851$—$4,091,973$(43)$10,949,975

1,451,680————
277,893——

1,451,680
277,893————
820,574————(163,266)————

2,903,360
555,786
820,574(163,266)

—

—

—

—

(173,376)—(173,376)

—
—
—

—
—
—

—
—
—

—
—
—

(437,441)(1,503,748)
—

—
—
24

(437,441)(1,503,748)
24$1,451,680$4,136,087$4,729,424$820,574$1,814,142$(19)$12,951,888

Balance at March 31, 1996
Issuance of Common Stock
Cash Dividends
Net Income for Fiscal 1996
Treasury Stock Transactions
Balance at March 31, 1997
Initial Consolidation of a Subsidiary Not Consolidated in thePrevious Year
Cash Dividends
Net Loss for Fiscal 1997
Treasury Stock Transactions
Balance at March 31, 1998

Balance at March 31, 1999

Preferred
Stock(Note 19)

CommonStock(Note 20)

CapitalSurplus

¥

—
—
—
—
—

¥352,045
113,060———¥248,572
113,060————

465,105————

Financial Section(in thousands of U.S. dollars)

Balance at March 31, 1998
Issuance of Preferred Stock
Issuance of Common Stock
Transfer from Liabilities
Cash Dividends
Initial Consolidation of Subsidiaries Not Consolidated in thePrevious Year (Note 1 (b))
Initial Adoption of Equity
Method of Affiliates Statedat Cost in the Previous Year
(Note 1 (b))
Net Loss for Fiscal 1998
Treasury Stock Transactions
Balance at March 31, 1999$

See accompanying “Notes to Consolidated Financial Statements" which are an integral part of these statements.
* Fiscal 1998, 1997 and 1996 represent the fiscal years ended March 31, 1999, 1998 and 1997, respectively.

66

Consolidated Statements of Cash Flows(in millions of yen)

Cash Flows from Operating Activities:
Net Income (Loss)
Adjustments to Reconcile Net Cash Providedby (Used in) Operating Activities:
Depreciation and Amortization
Net Transfer to Reserve for Possible Loan Losses
Written-off Claims
Losses on Sales of Loans
Investment Securities Gains, Net
Deferred Tax Assets/Liabilities
Minority Interests in Net Income
Net Change in Trading Account Securities (Note 1 (d))
Net Change in Trading Assets/Liabilities (Note 1 (d))
Net Change in Accruals and Others, Net

Fiscal 1998*

Fiscal 1997*¥ (181,276)¥ (202,660)

7,284
613,741
77,434
63,232(381,555)(94,093)8,321—
478,871
325,261

Fiscal 1998*

12,740$ (1,503,748)

8,401
522,358
11,88550,583(368,774)(114,695)
169—(235,839)
676,418

8,359
214,377
11,90436,721(99,142)
25,0491,137(405,525)—(1,143,386)

60,423
5,091,174
642,339
524,529(3,165,108)(780,537)
69,028—3,972,395
2,698,165

917,224

347,847(1,337,766)

7,608,660

934,147(118,517)
116,816(509,492)
3,542,258
94,317(3,276,090)
1,783
75,966(799,877)(9,339)503,770
1,275,023
1,123,981
72,073(3,527,041)(9,833)62,582(1,454,534)
17,846(199,945)(1,435,402)
783,468
75,843(815,150)(29,500)(87,719)

7,749,042(983,136)
969,025(4,226,396)
29,384,139
782,389(27,176,192)
14,791
630,162

861,188(1,308,661)(3,145,092)

7,143,824(1,937,230)
605,505(817,758)
848,126

1,910,542
867,884(16,069,929)
5,022,854(368,827)(140,000)
9,465,519(9,769,629)
67,000350,000
176,000(19,681)
40,446418,203—
10,392,563(11,776,972)——
131,847(21,586)
1,775

92,065
10,00013,796,654(13,112,910)
226,120——(19,987)(4,047)(3,059,535)(1,161,344)
78,519,444(81,042,132)
555,786
2,903,360
1,459,975(163,266)
335,525(1,530,896)(823,801)

3,766,320(12,699,262)

6,190

19,662

46,956

51,348

253,707553,203(1,764,954)
2,318,157(669,582)
2,987,739

2,104,570
4,589,009

553,203¥ 2,318,157$ 6,693,579

Net Cash Provided by (Used in) Investing Activities
Cash Flows from Financing Activities:
Net Change in Deposits
Net Change in Call Money
Net Change in Borrowed Money, Other
than Subordinated Borrowed Money
Net Change in Subordinated Borrowed Money
Proceeds from Issuance of Debentures
Repayment of Debentures
Proceeds from Issuance of Common Stock
Proceeds from Issuance of Preferred Stock
Issuance of Preferred Shares by Consolidated Subsidiaries
Dividends Paid
Others, Net
Net Cash Provided by (Used in) Financing Activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Change in Cash and Cash Equivalents
Cash and Cash Equivalents at the Beginning of Year
Cash and Cash Equivalents at the End of Year¥806,910¥¥

See accompanying “Notes to Consolidated Financial Statements” which are an integral part of these statements.
* Fiscal 1998, 1997 and 1996 represent the fiscal years ended March 31, 1999, 1998 and 1997, respectively.

67

Financial Section

Fiscal 1996*

Net Cash Provided by (Used in) Operating Activities
Cash Flows from Investing Activities:
Net Change in Call Loans
Net Change in Commercial Paper and Other Debt Purchased
Net Change in Money Held in Trust
Net Change in Loans and Bills Discounted
Proceeds from Sales of Investment Securities
Proceeds from Maturities of Investment Securities
Purchase of Investment Securities
Purchase of Premises and Equipment, Net
Others, Net(in thousands of
U.S. dollars)Notes to Consolidated Financial Statements

1. Basis of Presentation and Summary of Significant Accounting Policies
The Industrial Bank of Japan, Limited (“IBJ”) is a long-term credit bank under the Long-Term Credit Bank Law
in Japan, providing global financial services together with its subsidiaries (“IBJ Group”) . The subsidiaries of IBJ
includes IBJ Securities Co., Ltd. (a domestic corporation) , IBJ Trust and Banking Co., Ltd. (a domestic corporation), The Industrial Bank of Japan Trust Company (a U.S. corporation), IBJ Whitehall Bank & Trust Company (aU.S. corporation, formerly IBJ Schroder Bank & Trust Company), Aubrey G. Lanston & Co. Inc. and IBJ
International plc (a U.K. corporation).

(a) Basis of Presentation: The accompanying consolidated financial statements have been prepared from theaccounts maintained by IBJ and its consolidated subsidiaries in accordance with the provisions set forth in theJapanese Commercial Code (the “Code”) and in conformity with accounting principles and practices generally
accepted in Japan, such as the Accounting Standards for Banks as prescribed by the Japanese Bankers Association(the “Accounting Standards for Banks”), which are different in certain respects as to application and disclosure
requirements of International Accounting Standards.
Certain items presented in the consolidated financial statements filed with the Ministry of Finance (the“MOF”) in Japan are reclassified for the convenience of readers outside Japan. In addition, the Consolidated
Statements of Shareholders’ Equity and the Consolidated Statements of Cash Flows are prepared and included
in consolidated financial statements, though they are not required to be filed with the MOF. In place of the Consolidated Statements of Shareholders’ Equity, the Consolidated Statements of Retained Earnings are filed with
the MOF, the information of which are all included in the Consolidated Statements of Shareholders’ Equity.
The amounts indicated in millions of yen are rounded down by truncating the figures below one million.
Totals may not add up exactly because of such truncation.
The consolidated financial statements are not intended to present the consolidated financial position, resultsof operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Japan.
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥120.55 =US$1.00, the rate of exchange on March 31, 1999, has been used in translation. The inclusion of such amounts
Financial Section

is not intended to imply that Japanese yen has been or could be readily converted, realized or settled into U.S.
dollars at that rate or any other rate.

(b) Principles of Consolidation: The consolidated financial statements include the accounts of IBJ and its
subsidiaries. The number of the consolidated subsidiaries for fiscal 1998, 1997 and 1996 was 67, 42 and36, respectively.
Investments in affiliates, except for those immaterial to the consolidated financial statements which are carried at cost, are accounted for under the equity method. The number of the affiliates being accounted for underthe equity method was 14 for fiscal 1998. No affiliate was accounted for under the equity method for fiscal 1997
and 1996. These investments are included in Investment Securities, and the net loss from these investments is
included in Other Expense.
In fiscal 1998, in determining subsidiaries and affiliates, IBJ has adopted “Implementation Guideline on
Revised Definition of Subsidiaries and Affiliates under Reporting System of Consolidated Financial Statements”
issued by the Business Accounting Deliberation Council in Japan in October 30, 1998 . Under this new guideline,
companies controlled by IBJ are accounted for as subsidiaries regardless of the ownership percentage by IBJ,
and companies influenced by IBJ in material degree on their financial and operating or business policies throughinvestment, personnel, finance, technology, trading or other relationship, are accounted for as affiliates regardless of the ownership percentage by IBJ. Before fiscal 1997, IBJ determined subsidiaries and affiliates only
by ownership.

68

Notes to Consolidated Financial Statements

Any difference between the cost of an investment in a subsidiary and the amount of underlying equity in net
assets of the subsidiary is allocated to the applicable accounts, where identifiable, and the remaining portion ischarged or credited to income, as the case may be, in the year in which it occurs.
All material intercompany transactions, account balances and unrealized profits have been eliminated inconsolidation.
The majority of domestic subsidiaries are consolidated based on the fiscal years ended March 31, and the
majority of foreign subsidiaries are consolidated based on the fiscal years ended December 31.

(c) Cash Flows: For the purpose of the Consolidated Statements of Cash Flows, Cash and Cash Equivalents consistsof Cash and Due from Banks on the Consolidated Balance Sheets.

(d) Trading Assets and Liabilities: From fiscal 1997, trading transactions intended to take advantage of short-term
fluctuations and arbitrage in interest rates, currency exchange rates, market prices of securities and related
indices are recognized on the transaction date basis and recorded in Trading Assets or Trading Liabilities on theConsolidated Balance Sheets.
Securities and other short-term credit instruments held for trading purposes are stated at fair value at thebalance sheet date. Derivative financial products such as swaps, forward contracts and option transactions arestated at their hypothetical termination values, assuming that such transactions were terminated and settled
at the balance sheet date.
Trading Income and Trading Expense are recorded as interest income or expense actually paid or received plus:
Marketable securities and commercial paper
The difference in valuation gains or losses between the beginning balance and the ending balance; orDerivative financial products
The difference in hypothetical settlement gains or losses between the beginning balance and the endingbalanceIn fiscal 1997, IBJ modified the format for its consolidated financial statements in accordance with the revisionof the Enforcement Regulation of the Long-Term Credit Bank Law.
The format for the Consolidated Statements of Income for fiscal 1998 and 1997 was modified as follows:(i) Gains or losses on sales and losses on devaluation of Trading Securities, previously included in “Other
Operating Income” or “Other Operating Expense”(ii) Interest and dividends received from Trading Securities, previously included in “Interest andDividends on Securities”(iii) Interest expense on Trading Securities, previously included in “Interest Expense on Others”(iv) Exchange taxes on transacting Trading Securities, previously included in “General and Administrative
Expenses”(v) Commission income from underwriting agreements, previously included in “Fees and Commissions”

69

Financial Section(1) “Trading Income” and “Trading Expense” included the following income or expense from Trading
Securities:

Notes to Consolidated Financial Statements(2) “Trading Income” and “Trading Expense” included the following income or expense from Securities held
to hedge Trading Transactions:(i) Gains or losses on sales, redemption or devaluation of bonds held to hedge trading transactions, previously included in “Other Operating Income” or “Other Operating Expense”(ii) Interest and dividends received from bonds held to hedge trading transactions, previously included
in “Other Operating Income” or “Other Operating Expense”(iii) Exchange taxes on transacting Securities Held to Hedge trading transactions, previously included in“General and Administrative Expenses”(3) “Trading Income” and “Trading Expense” included the following income or expense from derivative
financial products for trading transactions:(i) Interest income, interest expense or valuation gains or losses from derivative financial products for
trading transactions, previously included in “Interest Income on Others” and “Interest Expense on
Others”(ii) Exchange taxes on transacting derivative financial products for trading transactions, previously
included in “General and Administrative Expenses”(4) “Trading Income” and “Trading Expense” included the following income or expense from other tradingtransactions:(i) Interest income, interest expense or valuation gains or losses on certificates of deposit and commercial
paper held for trading transactions, previously included in “Interest Income on Others” or “Interest
Expense on Others”.
Establishing trading accounts in accordance with the Bank Law, Article 17-2, referred by the Long-Term
Credit Bank Law, Article 17, had the following effect on the Consolidated Statements of Income for fiscal 1997:
Net decrease in Total Income:¥97,372 million

Decrease in Interest Income¥121,926 million

Increase in Trading Income¥ 24,553 million

Financial Section

Net decrease in Total Expense:¥115,525 million

Decrease in Interest Expense¥117,194 million

Increase in Trading Expense¥

Decrease in Loss before Income Taxes and Others

1,669 million¥18,152 million

Some elements in Trading Income and Trading Expense were offset in the presentation of the Consolidated
Statements of Income.
The consolidated subsidiaries record trading transactions and other similar transactions in the same manneras IBJ.

70

Notes to Consolidated Financial Statements(e) Investment Securities: Effective March 31, 1999, Investment Securities are stated at cost, cost being determined by
the moving-average method. As of and prior to March 31, 1998, corporate bonds, stocks and shares and othersecurities listed on stock exchanges were stated at the lower of cost or market, and Japanese national and local
government bonds were stated at cost, cost being determined by the moving-average method. As a result of thischange, Other Expense and Loss before Income Taxes and Others decreased by ¥190,464 million for fiscal 1998.
Corporate bonds, stocks and shares and other listed securities in Money Held in Trust for short-term investments in designated securities are stated at the lower of cost or market: cost being determined by the movingaverage method. Non-listed securities in Money Held in Trust are stated at cost, cost being determined by themoving-average method.
Investment Securities held by the consolidated subsidiaries are principally valued at cost as determined by
the specific identification method.

(f) Translation of Foreign Currencies: (1) Assets and liabilities denominated in foreign currencies as well as assets
and liabilities of foreign branches are translated into yen primarily using the exchange rates in effect at the balance sheet date. Certain assets and liabilities denominated in foreign currencies, including certain investments
in foreign companies, are valued at historical exchange rates prevailing at the transaction dates if funded inJapanese yen.
Forward foreign contracts except for those relating to funding transactions are valued at the forward rates
prevailing at the balance sheet date for the remaining maturity of the contract. Gains and losses on these forward foreign exchange contracts are recognized in Other Operating Income in the Consolidated Statements ofIncome. Premiums or discounts on spot and forward exchange swaps related to funding transactions are recognized as part of interest income or expense over the life of the contract.
(2) Foreign currency accounts of the consolidated overseas subsidiaries are translated into their home currencies at the respective exchange rates in effect at the balance sheet date.
The financial statements of the consolidated overseas subsidiaries are translated into yen at the exchange rates
in effect at the balance sheet date, except for accounts in shareholders’ equity which are translated at the historical rates. Translation differences resulting from the changes in the exchange rates from year to year are accumulated in Other Assets in the Consolidated Balance Sheets.

with the Accounting Standards for Banks, depreciation of IBJ is computed as follows:
Buildings: Depreciation of buildings, excluding building equipment and structures, acquired on or after
April 1, 1998, is computed using the straight-line method in accordance with the Japanese Tax Law and
the Japanese Tax Law Enforcement Regulation Article 48-1 as amended. For other buildings, the decliningbalance method is used at rates prescribed under the Japanese Tax Law. This change of method in accordance with the Japanese Tax Law Enforcement Regulation as amended resulted in a decrease in Loss before
Income Taxes and Others by ¥6 million for fiscal 1998. The Japanese Tax Law was also amended in fiscal
1998 to shorten depreciation periods for buildings. This change in line with the amendment resulted in an
increase in Loss before Income Taxes and Others by ¥202 million for fiscal 1998.
Equipment: Depreciation of equipment is computed using the declining-balance method, based on rates
prescribed under the Japanese Tax Law.

71

Financial Section(g) Premises and Equipment: Premises and Equipment is stated at cost less accumulated depreciation. In accordanceNotes to Consolidated Financial Statements

Other premises and equipment: Depreciation of other premises and equipment is computed in accordancewith methods prescribed under the Japanese Tax Law.
Until fiscal 1996, depreciation expenses for buildings was calculated under the declining-balance method at
160% of rates under the Japanese Tax Law. IBJ changed the depreciation rates for buildings in fiscal 1997 reflecting the revision in the Accounting Standards for Banks. This change resulted in a decrease in Loss before Income
Taxes and Others by ¥2,306 million.
Premises and Equipment of the consolidated subsidiaries are depreciated principally by the straight-line
method over the estimated useful lives.

(h) Deferred Debenture Charges: Deferred Debenture Charges represents discounts and issuance costs of debentures
which have been deferred and amortized over the term of the debenture using the straight-line method. The costsof issuing new stocks are expensed as incurred.

(i) Reserve for Possible Loan Losses: Reserve for Possible Loan Losses of IBJ at March 31, 1999 and 1998 is maintained in accordance with the Standards for Write-offs and Provisions which were internally established in conformity with the Accounting Standards for Banks.
—For credits extended to borrowers who are in legal or de facto bankruptcy, reserves are maintained for 100%of the said credits less amounts recoverable from collateral and guarantees.
—For credits extended to borrowers who are likely to become legally insolvent, reserves are maintained forthe amount deemed necessary based on overall solvency analyses less amounts recoverable from collateral andguarantees.
—For credits extended to other borrowers, reserves are maintained at rates formulated from historical credit
loss experiences.
—Reserves for credits extended to specific foreign borrowers are maintained in order to cover possible losses
based on analyses of political and economic climates of the countries.
All credits are assessed by each credit origination department, and a result of the assessments is verified andaudited by an independent examination department. Reserve for Possible Loan Losses is provided on the basisof such audited assessments.
Financial Section

Reserve for Possible Loan Losses of IBJ at March 31, 1997 consisted of: (i) a general provision calculated bymultiplying the outstanding amount of loans by a rate (current 0.3%) specified in the Accounting Standard forBanks; (ii) a further provision based on the consideration of the possibility of specific loan losses; and (iii) a provision to cover potential losses from loans to certain restructuring countries in accordance with the AccountingStandard for Banks.
Reserve for Possible Loan Losses of the consolidated subsidiaries is provided at the amount considered necessary based on the management’s risk assessment of the loan portfolio.

(j) Reserve for Contingent Losses relating to Loans Sold: Reserve for Contingent Losses relating to Loans Sold ismaintained to cover contingent losses on loans sold to the Cooperative Credit Purchasing Company, Limited,taking into account the value of collateral pledged. This reserve is provided in accordance with Article 287-2 of
the Code.

(k) Reserve for Retirement Allowances and Pension Plan: In accordance with the Accounting Standards for
Banks, Reserve for Retirement Allowances of IBJ is provided for payments to employees based on the amountthat would have been required assuming the voluntary retirement of all employees on the date of the balance
sheet. In addition, IBJ has a non-contributory funded pension plan for eligible employees. IBJ’s policy for theplan is to fund and charge to income normal costs as accrued on the basis of an actuarial method accepted inJapan.
The consolidated subsidiaries principally have funded pension plans for their employees.

(l) Income Taxes: Accounting for allocation of income taxes, which is corporate income tax, inhabitant tax andenterprise tax, is adopted. The asset and liability method is applied to provide income taxes on all transactions
recorded in the consolidated financial statements. Deferred Tax Assets and Deferred Tax Liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, using
enacted tax rates which will be in effect when the differences are expected to reverse. The aggregate tax rates
72

were approximately 42.3% for fiscal 1998, 47.9% for fiscal 1997 and 51.6% for fiscal 1996.

Notes to Consolidated Financial Statements(m) Lease Transactions: Accounting principles applicable to operating leases are applied for finance leases of IBJ and
its domestic subsidiaries that do not involve transferring of ownership to the lessees at the end of lease terms.

(n) Changes in Presentation: Due to the change of the Rules for the Consolidated Financial Statements, effective
March 31, 1999, IBJ has changed the format of consolidated financial statements as follows:(1) Legal Reserve is included in Retained Earnings in the Consolidated Balance Sheets and the Consolidated
Statements of Shareholders’ Equity. The amounts at March 31, 1998 and prior have been reclassified to conformto the presentation at March 31, 1999.
(2) Minority Interests in Consolidated Subsidiaries is presented after Liabilities and before Shareholders’Equity in the Consolidated Balance Sheets. It was included in Liabilities at March 31, 1998.
(3) Enterprise Taxes is included in Income Taxes Expense (Benefit). It was previously included in Other
Expense in the Consolidated Statements of Income for fiscal 1997 and 1996.
(4) Amortization of Consolidation Difference is included in General and Administration Expenses. It was presented as the item of increase/decrease of Income (Loss) before Income Taxes and Others in the Consolidated
Statements of Income for fiscal 1997 and 1996.

2. Cash and Due from Banks
Cash and Due from Banks included certificates of deposit outstanding.

3. Trading Assets and Liabilities
Trading Assets and Liabilities at March 31, 1999 and 1998 consisted of the following:(in millions of yen)(in thousands of
U.S. dollars)

March 31, 1998

March 31, 1999

¥1,635,269
112,762
23,193143
1,443,051
514,585¥1,620,929
34
40,21364
1,637,121
167,892$13,565,074
935,400
192,395
1,192
11,970,563
4,268,644

Total¥3,729,005¥3,466,255$30,933,268

Trading Liabilities:
Trading Securities Oversold
Derivatives for Trading Securities
Securities Oversold to Hedge Trading Transactions
Derivatives for Securities Held to Hedge Trading Transactions
Derivatives for Trading Transactions¥ 746,636
689,469
24,375108
1,394,360¥ 786,972
17
3,567
127
1,496,275$ 6,193,583
5,719,365
202,205
898
11,566,658

Total¥2,854,950¥2,286,959$23,682,709(in millions of yen)(in thousands of
U.S. dollars)

4. Investment Securities
Investment Securities at March 31, 1999 and 1998 consisted of the following:

March 31, 1999

March 31, 1998

March 31, 1999

Japanese National Government Bonds
Japanese Local Government Bonds
Corporate Bonds
Stocks and Shares (1)Others (2)¥3,321,912
167,675
362,710
2,661,519
2,428,333¥3,513,430
131,430
348,382
2,428,820
2,425,185$27,556,306
1,390,920
3,008,799
22,078,137
20,143,783

Total¥8,942,151¥8,847,249$74,177,945

73

Financial Section

March 31, 1999

Trading Assets:
Trading Securities
Derivatives for Trading Securities
Securities Held to Hedge Trading Transactions
Derivatives for Securities Held to Hedge Trading Transactions
Derivatives for Trading Transactions
Other Trading Assets

Notes to Consolidated Financial Statements(1) Stocks and Shares included investments in affiliates of ¥8,416 million at March 31, 1999 and investments inunconsolidated subsidiaries and affiliates of ¥6,363 million at March 31, 1998.
(2) Others included investments in affiliates of ¥1,577 million and ¥486 million at March 31, 1999 and 1998,
respectively.

5. Loans and Bills Discounted
Loans and Bills Discounted at March 31, 1999 and 1998 consisted of the following:

March 31, 1999

(in millions of yen)(in thousands of
U.S. dollars)

March 31, 1998

March 31, 1999

Bills Discounted
Loans on Notes
Loans on Deeds
Overdrafts¥

133,341
4,528,129
15,769,648
2,896,787¥

166,932
4,673,142
16,868,577
2,292,776

$

Total

¥23,327,907¥24,001,429$193,512,295(in millions of yen)(in thousands of
U.S. dollars)

1,106,106
37,562,251
130,814,177
24,029,761

Loans and Bills Discounted at March 31, 1999 included the following:

March 31, 1999

March 31, 1999

Bankruptcy Loans (1)Nonaccrual Loans (2)Accruing Loans Past Due 3 Months or More
Restructured Loans (3)¥ 147,785
1,307,274
8,944
554,669$ 1,225,923
10,844,253
74,194
4,601,158

Total¥2,018,673$16,745,527(1) Bankruptcy Loans represent nonaccrual loans to borrowers who are legally bankrupt as defined in Article
96-1-3 and 4 of the Japanese Tax Law Enforcement Regulation (Article 97 of 1965 Cabinet Order).
(2) Nonaccrual Loans represent nonaccrual loans other than (i) Bankruptcy Loans and (ii) loans of which payFinancial Section

ments of interest are deferred in order to assist or facilitate the restructuring of borrowers in financial difficulties.
(3) Restructured Loans represent loans on which contracts were amended in favor of borrowers (e.g., thereduction of or exemption from stated interest, the deferral of interest payments, the extension of maturity dates,
the renunciation of claims) in order to assist or facilitate the restructuring of borrowers in financial difficulties.

6. Foreign Exchange Assets and Liabilities
Foreign Exchange Assets and Liabilities at March 31, 1999 and 1998 consisted of the following:(in thousands of
U.S. dollars)

March 31, 1999

March 31, 1998

March 31, 1999

Foreign Exchange Assets:
Foreign Bills Bought
Foreign Bills Receivable
Advance to Foreign Banks
Due from Banks (Foreign)¥124,974
77,17133,29255,147¥167,250
138,264
10,78957,287$1,036,702
640,164
276,173
457,463

Total¥290,585¥373,592$2,410,502

¥

¥

$

Foreign Exchange Liabilities:
Foreign Bills Sold
Foreign Bills Payable
Advance from Foreign Banks
Due to Banks (Foreign)
Total

74

(in millions of yen)

10
1,253
4,564
17,570¥ 23,399

5
791
1,821
10,334¥ 12,953

85
10,401
37,861
145,755$ 194,102

Notes to Consolidated Financial Statements

7. Other Assets
Other Assets at March 31, 1999 and 1998 consisted of the following:(in millions of yen)(in thousands of
U.S. dollars)

March 31, 1999

March 31, 1998

March 31, 1999

Accrued Income
Prepaid Expense
Cash Placed as Collateral on Securities Borrowed
Securities in Custody and Other (1)Others (2)¥ 422,080
9,509
1,326,515
1,347,016
818,112¥ 577,388
10,5782,205,802
2,111,931
627,785$ 3,501,288
78,887
11,003,866
11,173,922
6,786,503

Total¥3,923,235¥5,533,487$32,544,465(1) Securities in Custody and Other represents securities borrowed from financial institutions under contracts
which allow IBJ to use these securities for the settlement of securities sold and securities deposited by customers
as collateral for margin.
(2) Others at March 31, 1999 and 1998 included provisional tax payments of ¥222,682 million. IBJ made thesepayments upon receipt of the Correction Notice from the Tokyo Regional Taxation Bureau on August 23, 1996
in connection with the write-off of credits due from Japan Housing Loan, Inc., amounting to ¥376,055 million
recorded in fiscal 1996. IBJ disputed the rationale for the proposed correction and filed an application seeking
to void the proposed correction to the National Tax Tribunal for administrative review, which was dismissedon October 28, 1997. IBJ filed a lawsuit at Tokyo District Court on October 30, 1997.

8. Premises and Equipment
Premises and Equipment at March 31, 1999 and 1998 consisted of the following:(in millions of yen)(in thousands of
U.S. dollars)

March 31, 1998

March 31, 1999

¥212,167
131,183
50,17842,484¥206,077
114,81153,99934,634$1,759,992
1,088,206
416,247
352,419

Subtotal

436,012409,5213,616,864

Less: Accumulated Depreciation

122,286

113,759

1,914,404

Total¥313,726¥295,762$2,602,460

In accordance with the Land Revaluation Law, land used for business operations of IBJ was revalued as follows:
Date of revaluation: March 31, 1998
Method of revaluation set forth in Article 3-3 of the above law:

In accordance with Article 119 of 1998 Cabinet Order - Article 2-4 of the Enforcement Ordinance relating
to the Land Revaluation Law, revaluation is performed by the method of calculating land value for a taxablebasis of Land Value Tax amounts along with reasonable adjustments, such as shape of land and accessibility.
This method is established and published by the Director General of National Tax Administration.
The difference between total fair value of land used in business at the year-end and the total book value after
revaluation of said land used in business in accordance with Article 10 of the above law: ¥3,148 million
At March 31, 1998, the entire excess on revaluation was presented as Surplus from Land Revaluation includedin Liabilities. At March 31, 1999, due to the revision of the above law on March 31, 1999, the taxable portion of
the excess on revaluation is presented as Deferred Tax Liabilities Related to Land Revaluation which is includedin Liabilities, and the remainder, net of income taxes portion of the excess on revaluation, is presented as Surplus
from Land Revaluation which is included in Shareholders’ Equity. As a result of this change, Total Liabilities
decreased by ¥98,920 million and Total Shareholders’ Equity increased by ¥98,920 million.

75

Financial Section

March 31, 1999

Land
Buildings
Equipment
OthersNotes to Consolidated Financial Statements

9. Deferred Debenture Charges
Deferred Debenture Charges at March 31, 1999 and 1998 consisted of the following:(in millions of yen)(in thousands of
U.S. dollars)

March 31, 1999

March 31, 1998

March 31, 1999

Deferred Discounts of Debentures
Deferred Debenture Issuance Costs¥13,191
2,863¥13,9202,074$109,431
23,754

Total¥16,055¥15,994$133,185

10. Deferred Tax Assets and Liabilities
The components of Deferred Tax Assets and Liabilities at March 31, 1999 were as follows:(in millions of yen)(in thousands of
U.S. dollars

March 31, 1999

March 31, 1999

Deferred Tax Assets:
Reserve for Possible Loan Losses
Net Loss Carryforwards
Investments in Subsidiaries and Affiliates
Reserve for Losses on Sales of Loans relating to Loans Sold
Reserve for Retirement Allowances
Investments in Stocks and Others
Others¥246,077
55,506
31,221
20,365
15,531
11,30820,189$2,041,288
460,441
258,991
168,934
128,838
93,804
167,478

Total¥400,198$3,319,774

Deferred Tax Liabilities:
Depreciation and Others

¥

$

7,245

60,101The disclosure of the above components was not required at March 31, 1998.

11. Debentures
Financial Section

Debentures at March 31, 1999 and 1998 consisted of the following:(in millions of yen)(in thousands of
U.S. dollars)

March 31, 1999

March 31, 1998

March 31, 1999

One-Year Discount Debentures (1)Long-Term Coupon Debentures (1)Others (Principally Overseas) (2)¥ 5,799,005
13,684,919
977,940¥ 6,467,524
13,617,861
755,555$ 48,104,567
113,520,689
8,112,327

Total¥20,461,865¥20,840,941$169,737,583(1) One-Year Discount Debentures and Long-Term Coupon Debentures are principally yen-denominated andissued in Japan by IBJ on a regular and continuing basis.
(2) Others included subordinated debentures of ¥692,973 million and ¥383,598 million at March 31, 1999 and
1998, respectively.

76

Notes to Consolidated Financial Statements

12. Deposits
Deposits at March 31, 1999 and 1998 consisted of the following:

March 31, 1999

(in millions of yen)(in thousands of
U.S. dollars)

March 31, 1998

March 31, 1999

Current Deposits
Ordinary Deposits
Deposits at NoticeTime Deposits
Certificates of Deposit
Other Deposits¥ 359,531
680,482
287,710
2,711,244
2,545,055
1,532,297¥

401,769
599,307247,158
3,749,662
3,408,696
1,646,957$ 2,982,427
5,644,816
2,386,649
22,490,620
21,112,035
12,710,885

Total¥8,116,321¥10,053,551$67,327,432

13. Borrowed Money
Borrowed Money included subordinated debt of ¥752,000 million and ¥892,000 million at March 31, 1999 and 1998,
respectively.

14. Other Liabilities
Other Liabilities at March 31, 1999 and 1998 consisted of the following:(in millions of yen)(in thousands of
U.S. dollars)

March 31, 1999

March 31, 1998

March 31, 1999

Accrued Expense
Unearned Income
Income Taxes Payable
Cash Received as Collateral on Securities Lent
Securities Borrowed
Others¥ 404,644
27,131
16,856
831,2141,313,737
1,216,818¥ 501,332
32,391
15,433
1,147,884
561,600
3,066,898$ 3,356,656
225,063
139,829
6,895,186
10,897,861
10,093,891

Total¥3,810,402¥5,325,539$31,608,486

Reserve for Possible Loan Losses at March 31, 1999 and 1998 consisted of the following:

General Reserve for Possible Loan Losses
Specific Reserve for Possible Loan Losses(in millions of yen)(in thousands of
U.S. dollars)

March 31, 1999

March 31, 1998

March 31, 1999

¥ 189,120
870,008¥116,498
802,884$1,568,814
7,216,990

7,586

2,853

62,928¥1,066,714¥922,235$8,848,732(in millions of yen)(in thousands of
U.S. dollars)

Reserve for Loans to Restructuring Countries
Total

16. Other Reserves
Other Reserves at March 31, 1999 and 1998 consisted of the following:

March 31, 1999

March 31, 1998

March 31, 1999

Reserve for Losses on Sales of Trading Account Securities
Reserve for Contingent Liabilities from Futures Transactions

¥—
13

¥450
12

$ —
108

Reserve for Contingent Liabilities from Securities Transactions

16

16

136

Total

¥29

¥478

$244

77

Financial Section

15. Reserve for Possible Loan Losses

Notes to Consolidated Financial Statements

17. Minority Interests in Consolidated Subsidiaries
Minority Interests in Consolidated Subsidiaries included preferred stocks issued by the IBJ subsidiariesof ¥291,700 million and ¥132,100 million at March 31, 1999 and 1998, respectively. These stocks are preferred
as to distribution at liquidation of the issuing subsidiaries.

18. Acceptances and Guarantees
All commitments and contingent liabilities of a material nature resulting from guarantees or otherwise areincluded in the contra-accounts “Acceptances and Guarantees” and “Customers’ Liabilities for Acceptancesand Guarantees”.
Outstanding commitments and contingent liabilities at March 31, 1999 and 1998 consisted of the following:

March 31, 1999

(in millions of yen)(in thousands of
U.S. dollars)

March 31, 1998

March 31, 1999

Acceptances
Letters of Credit
Guarantees

¥

3,670
75,205
1,437,726¥

11,859161,901
1,850,577

$

Total

¥1,516,602¥2,024,337$12,580,692

30,446
623,857
11,926,389

19. Preferred Stock
In connection with the Financial Function Early Strengthening Law, IBJ issued 140,000,000 shares of Series II (1)Preferred Stock and 140,000,000 shares of Series II (2) Preferred Stock to the Resolution and Collection Bankat March 31, 1999.
The Series II (1) Preferred Stock has no par value, is entitled to a non-cumulative annual dividend of ¥17.50,
has a liquidation preference of ¥1,250, and is convertible to common stock from September 1, 2003 to August 31,
2009, at which time all remaining shares will be converted to common stock.
The Series II (2) Preferred Stock has no par value, is entitled to a non-cumulative annual dividend of ¥5.80, hasa liquidation preference of ¥1,250, and is convertible to common stock from July 1, 2003 to August 31, 2009, atFinancial Section

which time all remaining shares will be converted to common stock.
The number of authorized, issued and outstanding shares of Preferred Stock at March 31, 1999 was as follows:(shares)March 31, 1999

Authorized Shares:
Preferred Stock, Series I
Preferred Stock, Series II
Issued and Outstanding Shares:
Preferred Stock, Series I
Preferred Stock, Series II(1) Cash dividend per Series II (1) Preferred Stock for Fiscal 1998 was ¥0.05.
(2) Cash dividend per Series II (2) Preferred Stock for Fiscal 1998 was ¥0.02.

78

200,000,000
400,000,000—
280,000,000Notes to Consolidated Financial Statements

20. Common Stock
In connection with the mutual business corporation agreement, IBJ issued 100,000,000 shares of Common Stockto Dai-Ichi Mutual Life Insurance Company at ¥670 per share at December 25, 1998.
The number of authorized, issued and outstanding shares of Common Stock at March 31, 1999 and 1998 was
as follows:(shares)March 31, 1999

March 31, 1998

Authorized Shares

6,000,000,000

4,000,000,000

Issued and Outstanding Shares

2,639,579,392

2,539,579,392

21. Retained Earnings
Retained Earnings includes the legal reserve. In accordance with the Long-Term Credit Banking Law, IBJ isrequired to appropriate as the legal reserve an amount equivalent to at least 20% of the amount of cash disbursements until such reserve equals 100% of its common stock.
The legal reserve is not available for dividends but may be used to reduce a deficit by approval at the shareholders’ meeting or may be capitalized by resolution of the Board of Directors.
The legal reserve, totaling ¥80,369 million and ¥76,431 million at March 31, 1999 and 1998, respectively, is
included in Retained Earnings.

22. Interest Income and Expense
Interest Income and Expense for fiscal 1998, 1997 and 1996 consisted of the following:(in millions of yen)(in thousands of(U.S. dollars)

Fiscal 1997

Fiscal 1996

Fiscal 1998

¥ 700,371
279,617260,098
40,539617,258
76,790¥ 859,112
243,380
186,133
79,123814,933
123,316¥ 901,477
212,443
143,223
130,939
1,079,398
50,594$ 5,809,799
2,319,513
2,157,602
336,285
5,120,348
636,998

Total¥1,974,674¥2,305,998¥2,518,077$16,380,545

Interest Expense:
Interest on Debentures
Interest on Deposits
Interest on Borrowed Money
Interest on Commercial Paper
Interest on Call Money and Bills Sold
Interest on Interest Swap

¥ 309,620
244,686
51,506
91
356,006
592,524¥ 374,840
352,186
53,153—
268,435
800,983¥ 430,254
382,598
67,195—
175,944
991,052$ 2,568,401
2,029,748
427,259762
2,953,189
4,915,178

91,317

131,409

95,269757,505

Total¥1,645,753¥1,981,009¥2,142,314$13,652,042

Net¥ 328,920¥ 324,989¥ 375,762$ 2,728,503

Others79

Financial Section

Fiscal 1998

Interest Income:Interest on Loans and Discounts
Interest and Dividends on Securities
Interest on Call Loans and Bills Purchased
Interest on Due from Banks
Interest on Interest Swap
OthersNotes to Consolidated Financial Statements

23. Trading Income and Expense
Trading Income and Expense for fiscal 1998 and 1997 consisted of the following:(in millions of yen)(in thousands of
U.S. dollars)

Fiscal 1998

Fiscal 1997

Fiscal 1998

Trading Income:Net Gains on Trading Securities and Derivatives
Net Gains on Securities Held to Hedge Trading Transactions
Net Gains on Derivatives for Trading Transactions
Other Trading Income¥22,995
5,280
21,6693,991¥8,630——837$190,753
43,800179,757
33,100Total¥53,936¥9,467$447,420

Trading Expense:
Net Losses on Securities Held to Hedge Trading Transactions
Other Trading Expense

¥

—
—

¥ 401
8,051

$

—
—

Total

¥

—

¥8,452$—

Net¥53,936¥1,014$477,420(in millions of yen)(in thousands of
U.S. dollars)

24. Other Operating Income

Financial Section

Other Operating Income for fiscal 1998, 1997 and 1996 consisted of the following:

Fiscal 1998

Fiscal 1997

Fiscal 1996

Fiscal 1998

Gains on Foreign Exchange Transactions
Gains on Trading Account Securities Transactions
Gains on Sales of Bonds
Gains on Redemption of Bonds
Others¥ 17,127—
817,294
10,635
8,993¥ 12,066—
444,595
11,372
5,400¥ 16,731
19,918503,017
6,317
18,013$ 142,076—
6,779,715
88,221
74,602

Total¥854,050¥473,434¥563,997$7,084,614(in millions of yen)(in thousands of
U.S. dollars)

25. Other Income
Other Income for fiscal 1998, 1997 and 1996 consisted of the following:

Fiscal 1998

Fiscal 1997

Fiscal 1996

Fiscal 1998

¥383,365
201
7,506¥373,162
8,751
5,418

¥212,482
17,089508$3,180,137
1,673
62,272Others

15,06910,606

15,916125,006

Total¥406,143¥397,938¥245,997$3,369,088

Gains on Sales of Stocks and Other Securities
Gains on Money Held in Trust
Gains on Sales of Premises and Equipment80Notes to Consolidated Financial Statements

26. Other Operating Expense
Other Operating Expense for fiscal 1998, 1997 and 1996 consisted of the following:(in millions of yen)(in thousands of
U.S. dollars)

Fiscal 1998

Fiscal 1997

Fiscal 1996

Fiscal 1998

Amortization of Debenture Issuance Costs
Losses on Sales of Bonds
Losses on Redemption of Bonds
Losses on Devaluation of Bonds
Others¥ 5,132
768,513
9,144
69
11,908¥ 6,849
418,194
2,234
2,058
2,577

¥ 9,450
508,168
2,664
2,563
16,814$ 42,572
6,375,060
75,853580
98,785

Total¥794,768¥431,913¥539,661$6,592,850(in millions of yen)(in thousands of
U.S. dollars)

27. Other Expense
Other Expense for fiscal 1998, 1997 and 1996 consisted of the following:

Fiscal 1998

Fiscal 1997

Fiscal 1996

Fiscal 1998

Transfer to Reserve for Possible Loan Losses
Written-off Claims
Losses on Sales of Stocks and Other Securities
Losses on Devaluation of Stocks and Other Securities
Losses on Money Held in TrustEnterprise Taxes (1)Losses on Disposal of Premises and Equipment
Others (2)¥613,741
140,667
35,356
12,416300—
1,016
134,796¥522,358
62,46835,297267,247
1,187(34,416)
1,585
85,768¥214,379
11,904
5,158
104,118
1,167
7,018
2,004
56,793$5,091,182
1,166,881
293,291
103,002
2,492
—
8,431
1,118,180

Total¥938,295¥941,497¥402,544$7,783,459(1) Enterprise Taxes for fiscal 1998 were included in Income Taxes Expense (Benefit) in the Consolidated Statements of Income. Enterprise Taxes for fiscal 1997 had credit balances due to recognition of deferred income taxes.

(in millions of yen)(in thousands of
U.S. dollars)

Fiscal 1998

Fiscal 1997

Fiscal 1996

Fiscal 1998

¥ 2,158¥21,701¥10,190$ 17,909

44,02660,47115,80528,882

11,115
26,216365,216
501,634

Losses on Sales of Loans to CCPC
Transfer to Reserve for Contingent
Losses relating to Loans Sold
Other Losses on Sales of Loans

28. Income Taxes Expense (Benefit)
From fiscal 1998, the reconciliation of the difference between the statutory tax rate and effective tax rate wasprepared under the new disclosure requirement as follows:
Fiscal 1998

Statutory Tax Rate
Influence of the Change of Tax Rate (1)Others47.9%(16.3%)
0.9%

Effective Tax Rate

32.5%(1) Adjustments due to the change of tax rate resulted in the decrease of Deferred Tax Assets of ¥27,652 million at March 31, 1999.

81

Financial Section(2) Others included the following IBJ losses:

Notes to Consolidated Financial Statements

29. Net Income (Loss) and Cash Dividends per Common StockNet Income (Loss) per common stock is computed by dividing net income (loss) applicable to common stock byweighted average number of common stock outstanding during each year. Cash dividends per common stockshown for each year in the Consolidated Statements of Income represent dividends declared as applicable to therespective periods.
Net Income (Loss) per Common Stock for fiscal 1998, 1997 and 1996 were computed as follows:(in millions of yen
except per share,
thousands of shares)(in thousands of
U.S. dollars
except per share,
thousands of shares)

Fiscal 1998

Fiscal 1997

Fiscal 1996

Fiscal 1998

Net Income (Loss)
Less: Preferred Stock Dividends¥ (181,276)
9¥ (202,660)—¥

12,740—$(1,503,748)
82

Net Income (Loss) Applicable to Common Stock¥ (181,286)¥ (202,660)¥

12,740$(1,503,830)

Weighted Average Numberof Common Stock Outstanding

2,566,154

2,539,572

2,431,309—

Net Income (Loss) per Common Stock

¥

¥

¥

(70.64)(79.80)5.24$(0.586)

30. Subsequent Events
The following appropriation of Retained Earnings of IBJ was approved at the shareholders’ meeting held on
June 26, 1999:(in millions of yen)

Financial Section

Cash Dividends:
Series II (1) Preferred Stock
Series II (2) Preferred Stock
Common Stock(in thousands of
U.S. dollars)

¥

7
2
9,238

$

58
23
76,636

31. Segment Information(a) Segment Information by Type of Business: The IBJ Group is engaged in securities, trust, leasing and otheractivities. Such segment information, however, has not been presented, as the percentages of those activities
are insignificant.

(b) Segment Information by Geographic Area: Geographic analyses of the IBJ Group’s operations for fiscal 1998
and 1997 are presented based on geographic contiguity, similarities in economic activities, and relation of business operations. For fiscal 1996, overseas operations of the IBJ Group were presented in “Overseas”.

82Notes to Consolidated Financial Statements

Figures relating to the overseas branches of IBJ were included in “Overseas” for fiscal 1996, and were classified by the geographic areas for fiscal 1998 and 1997. The financial data presented are Operating Income andOperating Expense in lieu of sales, cost of sales and operating expense as is the case for a nonfinancial services
company.
(in millions of yen)
Fiscal 1998

March 31, 1999

Operating Income from
Outside Customers

Inter-segment
Operating Income

Operating
IncomeOperatingExpenseOperating
Profit (Loss)

AssetsJapan
Americas
EuropeAsia/Oceania
excluding Japan¥2,455,776
528,673
270,990¥22,670
3,519
20,451¥2,478,446
532,192
291,442¥2,690,213
508,626
297,542¥(211,766)
23,566(6,099)¥35,802,233
6,575,174
3,665,924

123,154585

123,739

190,032(66,292)

2,387,531

Total
Elimination and General
Corporate Assets

3,378,594

47,226

3,425,821

3,686,414(260,592)

48,430,862—(47,226)(47,226)(44,438)(2,788)(2,264,453)

Consolidated Results¥3,378,594¥3,378,594¥3,641,975¥(263,381)¥46,166,409

Geographic Area¥—(in millions of yen)
Fiscal 1997

March 31, 1998

Inter-segment
Operating Income

Operating
IncomeOperatingExpenseOperating
Profit (Loss)

AssetsJapan
Americas
EuropeAsia/Oceania
excluding Japan¥2,150,983
512,243
337,136¥37,772
20,27830,609¥2,188,755
532,522367,745¥2,488,417
514,477
403,542¥(299,661)
18,045(35,797)¥36,334,490
7,064,997
5,367,504

303,890617

304,507

312,820(8,313)2,856,405

Total
Elimination and General
Corporate Assets

3,304,253

89,277

3,393,530

3,719,258(325,727)

51,623,398—(89,277)(89,277)(85,826)(3,450)(2,393,612)

Consolidated Results¥3,304,253¥3,304,253¥3,633,431¥ (329,178)¥49,229,785

Geographic Area¥—(in millions of yen)
Fiscal 1996

March 31, 1997

Operating Income from
Outside Customers

Inter-segment
Operating Income

Operating
IncomeOperatingExpenseOperating
ProfitAssets¥ 2,104,761
1,297,773¥60,446
17,829¥2,165,208
1,315,602¥2,138,553
1,293,269¥26,654
22,333¥37,115,320
11,929,435

Total
Elimination and General
Corporate Assets

3,402,534

78,276

3,480,810

3,431,823

48,98749,044,755—(78,276)(78,276)(75,989)(2,287)(2,077,787)

Consolidated Results¥3,402,534¥3,402,534¥3,355,833¥46,700¥46,966,968

Geographic Area

Japan
Overseas¥—(in thousands of U.S. dollars)
Fiscal 1998

March 31, 1999

Operating Income from
Outside Customers

Inter-segment
Operating Income

Operating
IncomeOperatingExpenseOperating
Profit (Loss)

AssetsJapan
Americas
EuropeAsia/Oceania
excluding Japan$20,371,433
4,385,514
2,247,950$188,058
29,191
169,654$20,559,491
4,414,705
2,417,604$22,316,162
4,219,214
2,468,204$(1,756,671)
195,491(50,600)$296,990,735
54,543,131
30,409,989

1,021,601

4,859

1,026,460

1,576,380(549,920)

19,805,319

Total
Elimination and General
Corporate Assets

28,026,498

391,762

28,418,260

30,579,960(2,161,700)

401,749,174—(391,762)(391,762)(368,629)(23,133)(18,784,349)

Consolidated Results$28,026,498$28,026,498$30,211,331$(2,184,833)$382,964,825

Geographic Area

$

—

83

Financial Section

Operating Income from
Outside Customers

Notes to Consolidated Financial Statements(1) Operating Income represents Total Income less certain special income. Operating Expense represents Total
Expense less certain special expense.
(2) Operating Profit represents Operating Income less Operating Expense.
(3) Americas includes the United States of America and Canada, etc., Europe includes the United Kingdom
and Republic of France, etc., and Asia/Oceania excluding Japan includes the People’s Republic of China (including Hong Kong) and the Republic of Singapore, etc.
(4) Effects of changes in accounting policies on the segment information are as follows:(i) The change in valuation method of Investment Securities resulted in a decrease in Operating Expense of¥189,666 million, ¥54 million, and ¥742 million for “Japan”, “Europe” and “Asia/Oceania”, respectively.
(ii) The change in depreciation methods and depreciable life for property and equipment resulted in an
increase in Operating Expense of ¥189 million, ¥1 million, ¥2 million, and ¥2 million for “Japan”, “Americas”,“Europe” and “Asia/Oceania”, respectively.

(c) Operating Income from International Operations: Operating Income of the IBJ Group from International
Operations was analyzed as follows:(in thousands of
U.S. dollars)(in millions of yen)

Operating Income from International Operations (1)Total Operating Income
International Operations’ Ratio (2)Fiscal 1998

Fiscal 1997

Fiscal 1996

Fiscal 1998

¥1,429,157
3,378,594¥1,555,875
3,304,253¥1,752,396
3,402,534$11,855,308
28,026,498

42.3%

47.0%

51.5%

(1) Operating Income from International Operations (Net of inter-company transactions) consists of that of
IBJ, consolidated domestic subsidiaries and overseas consolidated subsidiaries.
(2) International Operations’ Ratio=Operating Income from International Operations/Total Operating
Income.

32. Market Value of Investment Securities
The market value of Investment Securities held by IBJ at March 31, 1999 and 1998 was as follows:
Financial Section(in millions of yen)March 31, 1998

March 31, 1999
Book Value Market ValueBook Value Market Value Net Unrealized Gain

Net Unrealized Gain

ListedSecurities:

Unrealized
Gain

Unrealized
Loss

Unrealized
Gain

Unrealized
Loss

Bonds
StocksOthers¥1,585,383
2,802,767
991,381¥1,582,444
2,822,305
987,167¥(2,939) ¥ 12,586
19,538201,529(4,214)
5,032¥ 15,525
181,991
9,246¥1,452,837 ¥1,525,716 ¥ 72,878
2,548,056 2,935,618 387,561
581,060
598,205
17,145¥ 73,324
387,974
17,375

¥ 446
412
230

Total

¥5,379,531¥5,391,916¥12,385¥206,762¥4,581,955 ¥5,059,540 ¥477,584¥478,674¥1,089¥219,147(in thousands of U.S. dollars)
March 31, 1999
Book Value Market Value

ListedSecurities:

Net Unrealized Gain
Unrealized
Gain

Unrealized
Loss

Bonds
StocksOthers$13,151,252 $13,126,870 $ (24,382) $ 104,406 $ 128,788
23,249,830 23,411,901
162,071 1,671,744 1,509,673
8,223,816
8,188,862(34,954)
41,744
76,698

Total$44,624,898 $44,727,633 $102,735 $1,817,894 $1,715,159(1) Trading Securities and Securities Held to Hedge Trading Transactions were included in Trading Assets
and excluded from the following tables as they were marked to market and the valuation gains or losses wererecognized in the Consolidated Statements of Income.

84

Notes to Consolidated Financial Statements(2) Bonds included Japanese National Government Bonds, Japanese Local Government Bonds and Corporate
Bonds.
(3) The market value of listed securities is based on the closing prices on the Tokyo Stock Exchange.
(4) Others consisted mainly of foreign securities.
(5) The estimated market value of non-listed securities held by IBJ for which it is practicable to evaluate
market value was as follows:(in millions of yen)March 31, 1998

March 31, 1999
Book Value Market ValueBook Value Market Value Net Unrealized Gain

Net Unrealized Gain

Non-listed
Securities:

Unrealized
Gain

Unrealized
Loss

Unrealized
Gain

Unrealized(Loss)

Bonds
StocksOthers¥156,927
26,69399,031¥160,251
34,52899,264¥160,251
34,52899,264¥ 3,514
10,715
255

¥ 190
2,881
23

¥141,253
33,39377,652¥144,722
33,36875,978¥3,468(25)(1,673)¥ 3,553
8,978
378

¥

85
9,004
2,051

Total

¥282,651¥294,042¥294,042¥14,484¥3,094¥252,299¥254,069¥1,769¥12,911¥11,141(in thousands of U.S. dollars)
March 31, 1999
Book Value Market ValueNet Unrealized Gain

Non-listed
Securities:

Unrealized
Gain

Unrealized
Loss

Bonds
StocksOthers$1,301,759
221,427
821,494$1,329,329
286,417
823,423$27,570
64,9901,929$ 29,146
88,8882,117$ 1,576
23,898188

Total$2,344,680$2,439,169$94,489$120,151$25,662(6) The market value of non-listed securities held by IBJ is based on the following:(i) Over-the-counter securities
Trading price table published by the Japan Securities Dealers Association.
(ii) Publicly offered non-listed securities(iii) Beneficiary certificates of securities investments trusts
Market prices announced by authorized fund management companies(7) Securities excluded from above tables mainly consisted of the following:

Publicly offered non-listed bonds with maturities within 1 year or lessDomestic non-listed bonds, excluding publicly offered bonds
Non-listed bonds, excluding domestic bonds
Non-listed stocks of subsidiaries and affiliates(in millions of yen)(in thousands of
U.S. dollars)

March 31, 1999

March 31, 1998

March 31, 1999

¥1,613,828
331,061
895,783
364,280¥1,951,401
288,907
1,085,118
336,044$13,387,209
2,746,251
7,430,803
3,021,820

85

Financial Section

Securities bid-offer table published by the Japan Securities Dealers Association

Notes to Consolidated Financial Statements

33. Market Value of Money Held in Trust
The market value of Money Held in Trust held by IBJ at March 31, 1999 and 1998 was as follows:(in millions of yen)March 31, 1998

March 31, 1999
Book Value Market ValueBook Value Market Value Net Unrealized Gain

Net Unrealized Gain

Unrealized Unrealized
Gain
Loss

Unrealized Unrealized
Gain
Loss

Money Heldin Trust¥59,807¥60,167

¥361

¥418

¥58

¥172,502¥171,334 ¥(1,167)¥637¥1,805(in thousands of U.S. dollars)
March 31, 1999
Book Value Market Value Net Unrealized Gain
Unrealized Unrealized
Gain
Loss

Money Heldin Trust$496,115$499,107 $2,992$3,472$480(1) The market value is calculated by the trustee of the money held in trust as following:(i) The market value of listed securities is based on the closing prices on the Tokyo Stock Exchange.
(ii) The market value of over-the-counter securities is based on the Trading Price Table published by theJapan Securities Dealers Association.

34. Market Value of Derivatives
The market value of derivatives held by IBJ at March 31, 1999 and 1998 was as follows:
In the following tables:(i) Contract value represents notional amounts for swap transactions and contract amounts for other transactions.
(ii) Amounts shown in italic characters represent book value of option premium assets/liabilities on the
Balance Sheets.
Financial Section(iii) Market value of standardized contracts is based on the closing prices of the Tokyo Stock Exchange
and the Tokyo International Financial Futures Exchange and others. Market values of over-the-countercontracts are based on the discounted value of future cash flows or option pricing models.

86

Notes to Consolidated Financial Statements(a) Interest Rate Related Transactions(in millions of yen)March 31, 1998

March 31, 1999
Contract Value

Standardized Contracts
FuturesSold¥27,452,532
BoughtOptions
Sold

Call

Market Value UnrealizedOver 1 Year

Gain (Loss)¥5,085,615 ¥27,486,596¥ (34,063)
12,06026,919,702

5,646,773

10,023,237

—

2,866
Put

7,373,561

6,356,811¥6,787,093 ¥26,882,415¥ (65,091)

26,043,650

7,130,200

5,158,515—

2,446
4,286,676

45,075

2,027

419

1,492

893

2,463

66

1,369

(615)

—

2,385
3,214,257

26,088,726

—

2,396

1,985

—

770

770

1,567,823

11,053635

635

831,940

—

(831)

(831)

1,623,624

35,818(1,011)(1,011)

Rec: Fix 23,461,497
Pay: Flt

17,664,012

831,895

616,32128,408,864

16,151,446

899,974

617,912

Rec: Flt 15,573,272
Pay: Fix

11,738,458(787,639) (669,271)

20,841,319

12,189,007(783,963) (641,304)

Rec: Flt
Pay: Flt

3,110,943

3,028,940(1,060)(1,853)469,838

302,424

(789)

(899)

Rec: Fix
Pay: Fix

101,973

92,547

2,562

1,426

185,931

140,629

3,501

1,559

96,296

13,00042,60418,044
577

337

2,304

(1,595)

735

656

218

(1,769)(1,394)

3,144

(57)

(1,775)

264

(170)

872

341

921
Put

18,451

13,451

58,94391

169(1,343)

(521)

1,464

(117)

490

270
¥(77,186)

24,769120
153,620

5,607

154,209

1,876
41,769169

329,2313,513
196,939

3,193

60,936

1,987
490,406(1,007)

8,389

115
92,49666

29
88,710794

13,389709
10,389877—

915
33,38970,716

1,141
22,592(586)

136,147

1,736
148,340836

26,772

1,513
321,592(1,147)

—

95
Put

2,068
10,000250
Bought Call

2,255,226—

467

97,390¥ (43,189)
87

Financial Section

Swaptions
Sold
Call

Total

¥26,817,323(428)

BoughtBoughtGain (Loss)

1,500

3,833,906

Over-the-Counter Contracts
FRAs
Sold
859,765

FloorsSold

534

UnrealizedOver 1 Year

(1,489)1,929

Bought2,192

Market Value

2,021

Put

Caps
Sold

1,311

—

3,510

Swaps

1,554
—

2,727
Bought Call

26,919,702

Contract ValueNotes to Consolidated Financial Statements(in thousands of U.S. dollars)
March 31, 1999
Contract Value

Market Value

Gain (Loss)

Standardized Contracts
FuturesSold$227,727,358 $ 42,186,776$228,009,922 $ (282,564)

BoughtOptions
Sold

Call

223,207,319

46,841,754

83,145,893—

23,776
Put

61,166,005

Bought Call

52,731,739

31,803,458

10,87818,188

4,435

16,769(12,353)

12,450(3,558)

—

6,393

6,393

6,901,204—(6,896)(6,896)

Rec: Fix
Pay: Flt

194,620,466

146,528,518

6,900,836

5,112,579

Rec: Flt
Pay: Fix

129,185,171

97,374,190(6,533,716) (5,551,818)

Rec: Flt
Pay: Flt

25,806,251

25,126,013(8,795)(15,378)

Rec: Fix
Pay: Fix

845,905

767,70921,254

11,833

Swaptions
Sold
Call

798,810

107,839
17,158(9,516)

Put

153,063

6,943(4,869)

7,279

6,587

1,406

(11,148)(4,323)

12,151553(8,354)

1,410

(977)

4,072

2,248

BoughtSwaps

Financial Section

12,898—16,008Over-the-Counter Contracts
FRAs
Sold
7,132,027

100,044—

29,122
Put

223,307,363—

22,623

7,642
82,953

2,074
Bought Call

111,586

—

790
Put

488,958

222,085

12,554Caps
Sold

2,667,715

1,129,385

14,407
Bought1,230,533

586,613

9,467
FloorsSold

187,41426,487

241
Bought735,881
758

Total

88

UnrealizedOver 1 Year46,512$ (640,283)

Notes to Consolidated Financial Statements(1) Derivatives held by IBJ included in Trading Transactions at March 31, 1999 and 1998 are excluded from thepreviously mentioned tables, as they are marked to market and the valuation gains or losses are recognized in
the Consolidated Statements of Income. The contract value and market value of derivatives held by IBJ includedin Trading Transactions at March 31, 1999 and 1998 were as follows:Standardized Contracts
Futures
Sold
BoughtOptionsSold

Call¥7,130,758¥7,161,734¥ 9,098,772¥9,147,044$59,151,875$59,408,834

7,373,902

7,408,791

8,747,833

8,799,915

61,168,828

61,458,245

Over-the-Counter Contracts
FRAs
Sold
Bought
Swaps

601

—

6,500

4,434

3,416,256
15

—

4,565

4,002

3,386,466
—

—

6,256

4,987

1,052,075

628

427

—

—

5,217

3,543

1,544,085

454

442,051(115)

12,808,670

3,774

(539)

213,007(13)

11,445,635(4,476)30,801,390

1,183,095

33,157,397

1,207,777

255,507,182

9,814,150

Rec: Flt
Pay: Fix

30,678,052(1,133,162)

31,409,699(1,179,401)

254,484,056(9,399,937)

Rec: Flt
Pay: Flt

1,627,481(418)

1,242,206(970)

13,500,471(3,470)

Rec: Fix
Pay: Fix

211,748(5,054)

339,742530

1,756,518(41,925)

740,687775,220

Bought Call

678,451

Put

912,399

6,466

8,255

12,224

6,136

10,576

16,694

5,869

8,651

12,223

8,779

28,035

19,066

21,714

3,700

8,678

9,971

6,845

68,480138,484

101,407

48,686

157,780

72,827

14,794,252
12,788111,748

84,315

6,908,635
11,174

1,127,603
11,23687,737

20,823,489

817,240
13,02653,641

7,568,639

2,200,188
10,16450,9055,627,964

2,955,205

942,335
5,537

13,056

772,726

832,835
6,656

6,297

80,504
5,314,009

561,082

1,783,447
13,4716,430,701
3,365

579,059

2,510,271
19,02010,64655,220108,057

7,816,964
10,01645,935

93,21289

Financial Section

1,379,771

640,603

Bought23

126,827

Put

FloorsSold

2

125,000
482

408,238

9,704

Bought2

6,797,084

Rec: Fix
Pay: Flt

Swaptions
Sold
Call

Caps
Sold

534

411,829754
Put

10,000819,388

550
Bought Call(in thousands of U.S. dollars)
March 31, 1999
Contract Value
Market ValueContract Value

783
Put

(in millions of yen)March 31, 1998
Contract Value
Market Value

March 31, 1999
Market ValueNotes to Consolidated Financial Statements(b) Currency-Related Transactions(in millions of yen)March 31, 1998

March 31, 1999
Contract Value
Currency

Over 1 Year

Over-the-Counter Contracts
Currency Swaps
USD¥4,392,925
GBP
101,393
DEM
223,144
CHF
200,902
FRF
62,048AUD
160,836
Others149,776¥3,521,601
89,564
193,168
160,758
62,048142,614103,097

Total¥4,272,854¥5,291,028

Market ValueContract Value

Unrealized
Gain (Loss)

Market Value

Unrealized
Gain (Loss)

Over 1 Year¥(109,843)(2,439)
3,933
3,086
2,894
(181)
4,114

¥25,055(3,308)(4,491)(2,286)
(260)
(859)
3,769

¥5,230,761
111,447
276,829
367,991
220,710
205,614
119,708¥4,463,793
108,295
245,431224,076
67,202
185,778
97,055¥(196,489)(3,445)
3,858
(512)
6,572
(2,281)
5,925¥41,828(1,768)(3,609)(2,751)(383)(3,186)(1,449)¥ (98,434)¥17,617¥6,533,063¥5,391,634¥(186,372)¥28,679(in thousands of U.S. dollars)
March 31, 1999
Contract Value

Market Value

Unrealized
Gain (Loss)

Over-the-Counter Contracts
Currency Swaps
USD$36,440,695 $29,212,791
GBP
841,094742,967DEM
1,851,055
1,602,394
CHF
1,666,552
1,333,545
FRF
514,714514,714
AUD
1,334,188
1,183,030
Others1,242,442
855,226$(911,186)(20,236)
32,63325,60724,010(1,505)34,129$207,842(27,444)(37,261)(18,966)(2,165)(7,130)31,269

Total$(816,548)$146,145

Currency

Over 1 Year

$43,890,740 $35,444,667

Financial Section(1) The difference between market value and unrealized gains or losses is a sum of (i) difference in rates
between contract date and year-end for the currency swaps recorded on the balance sheets and (ii) accrued
interest.
(2) Derivatives held by IBJ included in Trading Transactions at March 31, 1999 and 1998 are excluded fromabove tables, as they are marked to market and the valuation gains or losses are recognized in the Consolidated
Statements of Income. The contract value and market value of derivatives held by IBJ included in Trading
Transactions at March 31, 1999 and 1998 were as follows:(in millions of yen)
Currency

90

Contract Value

Market Value(in thousands of U.S. dollars)

March 31, 1998

March 31, 1999

March 31, 1999

Contract Value

Market ValueContract Value

Market Value

Over-the-Counter Contracts
Currency Swaps
USD
GBP
DEM
CAD
CHF
FRF
AUD
Others¥7,678,807
186,245471,795
146,787
587,645
87,354
151,951
277,401¥1,428 ¥ 8,732,055(2,521)
322,171(1,715)564,850224
235,6994,992
800,178(3,223)
253,457
153
168,726
1,666
186,392¥ 8,130(16,464)(6,037)(1,523)
3,557(7,351)
1,377
7,985

$63,698,115
1,544,961
3,913,689
1,217,649
4,874,700
724,630
1,260,483
2,301,136$11,852(20,918)(14,232)
1,865
41,413(26,744)
1,274
13,826

Total¥9,587,988¥1,004¥11,263,532¥(10,326)$79,535,363$ 8,336

Notes to Consolidated Financial Statements(3) The contract value of foreign exchange forward contracts and currency options at March 31, 1999 and 1998
was as follows:(in millions of yen)(in thousand of U.S. dollars)

March 31, 1999

March 31, 1998

March 31, 1999

Contract ValueContract ValueContract Value

Standardized Contracts
Futures
Sold¥

BoughtOptions
Sold

Call

Put

Bought Call

Put

Over-the-Counter Contracts
Forwards
Sold
BoughtOptions
Sold

Call

Bought Call

Put

¥

—

$

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

9,198,980

23,776,709

76,308,423

6,694,354

12,290,454

55,531,768

496,561

497,189

4,119,132

13,625

16,506

113,029

402,778

389,896

3,341,175

10,1302,861

84,036419,147

556,985

3,476,961

10,702

17,57988,781

379,979

240,903

3,152,046

10,202

1,683

84,634

The forward contracts to exchange foreign currencies for other foreign currencies are included in the “Sold” column only in the above table.

91

Financial Section

Put—Notes to Consolidated Financial Statements(c) Stock-Related Transactions(in millions of yen)March 31, 1998

March 31, 1999
Contract Value

Market Value UnrealizedOver 1 Year

Standardized Contracts
Index Futures
Sold¥45,011
BoughtIndex Options
Sold
Call

¥46,618¥(1,606)¥111,074

40,534—40,950

415

—

—

—

—

—

—

Bought Call——

Financial Section

Rec: Flt
Pay: Index
Others
Sold

Total

92

—

—

—

—

—

54,605(1,876)

—

—
—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
—

—

—

—

—

—
—

—
—

—
—

—

—

—

—
—

—

—

—

—

—

56,481———¥3,818———
Bought———Index Swap
Rec: Index
Pay: Flt

—

—

—
Put

—

—

—

¥107,255——¥

Unrealized
Gain (Loss)

—

—

—

—
Put

—

—

—
Over-the-Counter Contracts
Options
Sold
Call
—

—
—

—
Put

—

—

—
Bought Call—

Market Value

Over 1 Year

Gain (Loss)

—

¥

—
Put

Contract Value

—

—
—

—

—
—

—

—
—

—

—
¥(1,191)¥1,941

Notes to Consolidated Financial Statements(in thousands of U.S. dollars)
March 31, 1999
Contract Value

Market Value UnrealizedOver 1 Year

Standardized Contracts
Index Futures
Sold$373,383
BoughtIndex Options
Sold
Call

$—

$386,712$(13,329)

336,245—

339,693

3,448

—

—
—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Put

—

—

—
Bought Call

—

—

—
Put

—

—

—
Over-the-Counter Contracts
Options
Sold
Call
—

—

—
Put

—

—

—
Bought Call

—

—

—
Put

Gain (Loss)

—

—

—

—
—

—

—

—

Rec: Flt
Pay: Index

—
—

—

—

—

—
—

—
—

—

—
—

—
—

—

OthersSold
BoughtTotal

Financial Section

Index Swap
Rec: Index
Pay: Flt$ (9,881)

93

Notes to Consolidated Financial Statements(d) Bond-Related Transactions(in millions of yen)March 31, 1998

March 31, 1999
Contract Value

Futures Options
Sold
Call

¥5,790,664¥—¥5,825,521¥(34,857)

7,822,534—

7,853,570

3,952,109—

3,944,707(7,402)

218,667—

211,055

—
661

163

178

(19)

148

(95)

213

(276)

—

—

—

—

—

—

—

—

423,582

988

137,926

291,974

Over-the-Counter Contracts
Options
Sold
Call
90,000Financial Section—

90,000
1,546

Total

94

825

(406)

2,763

(422)

770

526

—

—

—

—

1,803

256
¥(100,334)

—

—
—

—

—

—
—

—

—

—
—

—

—

490

—

—

—

244
101,709——159
66,345

641

—
Put

295

—

—
Bought Call

732

45,564
3,798

1,297
—

31,035

—

3,185

Put

Unrealized
Gain (Loss)¥8,846,753 ¥(132,353)

1,048
Put

Over 1 Year

¥—

4,093
Bought Call

Market Value

Gain (Loss)

1,720
Put

Contract Value

Over 1 Year

Standardized Contracts
FuturesSold¥8,714,400
BoughtMarket Value Unrealized——¥(42,488)

Notes to Consolidated Financial Statements(in thousands of U.S. dollars)
March 31, 1999
Contract Value

Market Value
Over 1 Year

Standardized Contracts
FuturesSold$72,288,680
BoughtFutures Options
Sold
Call

$— $73,386,590 $(1,097,910)

64,890,374—

1,813,911—

14,275Put

3,513,749

1,144,146

2,422,017——

12,831
Total

5,324

(3,370)22,922(3,501)

6,393

4,366

—

—

—

—

14,962

2,131

Financial Section

746,578

2,448

—

—
Put

31,510——Bought Call

6,075

—

10,759
Put

8,200

—

26,423Over-the-Counter Contracts
OptionsSold
Call746,578

257,452

—

8,694
Put

65,147,826—

33,958
Bought Call

Unrealized
Gain (Loss)—$(832,309)

95

Notes to Consolidated Financial Statements

Derivatives held by IBJ included in Trading Transactions at March 31, 1999 and 1998 are excluded from thepreviously mentioned tables, as they are marked to market and the valuation gains or losses are recognized in
the Consolidated Statements of Income. The contract values and market values of derivatives held by IBJ included in Trading Transactions at March 31, 1999 and 1998 were as follows:(im millions of yen)Standardized Contracts
Futures
Sold
BoughtFutures Options
Sold
Call

Contract Value

Market Value¥109,095¥109,696$ 904,985$ 909,965

143,611

144,345

1,191,302

1,197,388

21,437
25

Put

33

—

Put

—

—

—

Financial Section

Put(e) Commodity-Related Transactions
IBJ did not have any commodity-related transactions for fiscal 1998.

96

599

653

902

843

80,830
42

281

349

—
—

—

—

—
—

—

—

—

—

—

—

—

—
—

153

221,773
101

—
—

212
106,82978

9,744Over-the-Counter Contracts
Options
Sold
Call

Bought Call

18

26,734
108

Put

177,828

12,87872

Bought Call(in thousands of U.S. dollars)
March 31, 1999
Contract Value
Market Value———Report of Independent Certified Public Accountantscertified public accountants

Head office:Kasumigaseki Building
32nd Floor
3-2-5 Kasumigaseki
Chiyoda-ku
Tokyo 100-6088

telephone: (03) 3581-6281

To the Board of Directors,
The Industrial Bank of Japan, Limited:
We have audited the accompanying consolidated balance sheets of The Industrial Bank of Japan, Limited (“IBJ”) and its consolidated subsidiaries as of March 31, 1999, and 1998, and the related consolidated statements of income, shareholders’ equity andcash flows for each of the three years in the period ended March 31, 1999, all expressed in Japanese Yen. Our audits were made inaccordance with auditing standards, procedures and practices generally accepted and applied in Japan and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the consolidated financial statements referred to above present fairly the consolidated financial position of IBJ
and its consolidated subsidiaries at March 31, 1999 and 1998, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended March 31, 1999, in conformity with accounting principles and practices generally
accepted in Japan (See Note 1 (a)) consistently applied during the periods, except for the change with which we concur, in theaccounting for Investment Securities as described in Note 1 (e) to the accompanying consolidated financial statements.
The amounts expressed in U.S. dollars, provided solely for the convenience of the reader, have been translated on the basis set
forth in Note 1 (a) to the accompanying consolidated financial statements.

Tokyo, Japan
June 29, 1999
Financial Section

Chuo Audit Corporation
Independent Certified Public Accountants

Chuo Audit Corporation is a member of Coopers & Lybrand International, a limited liability association incorporated in Switzerland.

97

Financial Section

Non-Consolidated Balance Sheets(in millions of yen)(in thousands of
U.S. dollars)

March 31, 1999

March 31, 1998

March 31, 1999

AssetsCash and Due from Banks
Call Loans and Bills Purchased
Commercial Paper and Other Debt Purchased
Trading Assets
Money Held in Trust
Investment Securities
Loans and Bills Discounted
Foreign Exchanges
Other Assets
Premises and Equipment
Deferred Debenture Charges
Deferred Tax Assets
Customers’ Liabilities for Acceptances and Guarantees¥ 1,167,336
1,345,925
128,064
2,197,033
59,806
9,024,595
22,872,065
277,8212,377,508
278,285
15,396406,253
1,939,210¥ 1,367,328
1,860,262
8,895
2,119,627
172,5028,699,667
23,241,545
310,724
4,673,773
283,748
16,729—2,386,058$

Total Assets¥42,089,303¥45,140,863$349,143,955(in millions of yen)(in thousands of
U.S. dollars)

March 31, 1999

March 31, 1998

March 31, 1999

Liabilities and Shareholders’ Equity
Liabilities
Debentures
Deposits
Call Money and Bills Sold
Commercial Paper
Borrowed Money
Trading Liabilities
Foreign Exchanges
Other Liabilities
Reserve for Possible Loan Losses
Reserve for Retirement Allowances
Reserve for Contingent Losses relating to Loans Sold
Other Reserves
Deferred Tax Liabilities related to Land Revaluation
Acceptances and Guarantees
Surplus from Land Revaluation¥19,866,858
8,175,082
3,261,224
30,0001,585,575
1,465,170
20,3902,833,002
1,116,278
51,88848,144
5
72,5181,939,210—¥20,239,792
10,139,950
2,322,905—
1,917,824
1,738,742
11,2984,166,228
899,892
50,794
19,776
7—2,386,058
180,648$164,801,817
67,814,871
27,052,876
248,859
13,152,841
12,154,047
169,145
23,500,647
9,259,876
430,436
399,37145
601,564
16,086,359—

Total Liabilities

40,465,350

44,073,919

335,672,754

175,000
498,605
570,132
80,36998,920200,926—
465,105
361,632
76,431—
163,775

1,451,680
4,136,087
4,729,425
666,687
820,574
1,666,749

1,623,953

1,066,944

13,471,201¥42,089,303¥45,140,863$349,143,955

Shareholders’ Equity
Preferred Stock
Common Stock
Capital Surplus
Legal Reserve
Surplus from Land Revaluation
Retained Earnings
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity

See accompanying "Notes to Non-Consolidated Financial Statements" which are an integral part of these statements.

98

9,683,418
11,164,872
1,062,335
18,225,085
496,116
74,861,843
189,730,947
2,304,613
19,722,177
2,308,470
127,7223,369,998
16,086,359

Non-Consolidated Statements of Income(in millions of yen)(in thousands of
U.S. dollars)

Fiscal 1997*

Fiscal 1996*

Fiscal 1998*

IncomeInterest Income on:
Loans and Discounts
Securities
OthersFees and Commissions
Trading Income
Other Operating Income
Other Income
Transfer from Other Reserves¥ 656,425
239,541795,316
67,30025,334
843,416
398,8192¥ 800,004
212,073
1,069,039
94,774
2,788
470,977
390,874
12,467¥ 847,471
187,303
1,276,246
52,599—532,904
244,2483$ 5,445,256
1,987,075
6,597,396
558,278
210,158
6,996,403
3,308,333
19

Total Income

3,026,156

3,053,000

3,140,778

25,102,918

ExpenseInterest Expense on:
Debentures
Deposits
Borrowings and Rediscounts
OthersAmortization of Debenture Discounts
Fees and Commissions
Trading Expense
Other Operating Expense
General and Administrative Expenses
Other Expense
Transfer to Other Reserves

293,581
231,601
54,839799,432
27,117
17,624
3,206
778,830
156,809
1,008,522
0350,756
356,871
162,210899,028
34,952
18,744
9,077
428,075
166,498
968,564—

422,415
358,204
110,4311,064,091
52,39916,656—
521,914
157,991
394,544833

2,435,346
1,921,211
454,914
6,631,541
224,948
146,202
26,5996,460,642
1,300,780
8,366,009—

Total Expense

3,371,565

3,394,779

3,099,482

27,968,192

Income (Loss) before Income Taxes
Income Taxes Expense (Benefit):
Current
Deferred(345,408)(341,778)

41,295(2,865,273)

74(149,754)

190
—

123
—

614
(1,242,265)

Net Income (Loss)¥ (195,727)¥ (341,969)¥

41,172$ (1,623,622)

Per Common StockNet Income (Loss)
Cash Dividends(in yen)(in U.S. dollars)¥¥ (134.65)
8.50¥(76.27)
7.00

16.94
8.50

$

(0.633)0.058

See accompanying “Notes to Non-Consolidated Financial Statements” which are an integral part of these statements.
*Fiscal 1998, 1997 and 1996 represent the fiscal years ended March 31, 1999, 1998 and 1997, respectively.

99

Financial Section

Fiscal 1998*

Non-Consolidated Statements of Shareholders’ Equity(in millions of yen)Preferred
Stock

CommonStockCapitalSurplus

Legal
Reserve

Surplus fromLand Revaluation

Retained
Earnings

Total
Shareholders’Equity¥——¥514,463—¥1,183,195
226,120

Balance at March 31, 1996¥
Issuance of Common Stock
Transfer from Retained Earnings
to Legal Reserve
Cash Dividends
Net Income for Fiscal 1996——

¥352,045
113,060¥248,572
113,060¥68,113
—

—
—
—

—
—
—

—
—
—

3,998
—
—

—
—
—

(3,998)(19,987)
41,172—(19,987)
41,172

Balance at March 31, 1997—

465,105

361,632

72,112—531,649

1,430,500

—
—
—

—
—
—

—
—
—

4,318
—
—

—
—
—

(4,318)(21,586)(341,969)—(21,586)(341,969)—

465,105

361,632

76,431—

163,775

1,066,944——
33,500—175,000
33,500

—
—
—

—
—
—

256,498——

256,498
350,000
67,000

—
—
—
—

—
—
—
—

3,937
—
—
—

—
98,920——(3,937)—(19,681)(195,727)—
98,920(19,681)(195,727)¥498,605¥570,132¥80,369¥98,920¥200,926¥1,623,953

Transfer from Retained Earnings
to Legal Reserve
Cash Dividends
Net Loss for Fiscal 1997
Balance at March 31, 1998

Adoption of Accounting
for Deferred Tax—
Issuance of Preferred Stock
175,000
Issuance of Common Stock—
Transfer from Retained Earnings
to Legal Reserve—
Transfer from Liabilities—
Cash Dividends—
Net Loss for Fiscal 1998—
Balance at March 31, 1999

¥175,000Financial Section(in thousands of U.S. dollars)
Retained
Earnings

Total
Shareholders’Equity—$1,358,568$ 8,850,636

—
—
—

—
—
—

2,127,734——

2,127,734
2,903,360
555,786

Preferred
Stock

CommonStockCapitalSurplus

Legal
Reserve

Surplus fromLand Revaluation—$3,858,194$2,999,852$634,022$—
1,451,680———
277,893—
1,451,680
277,893

Balance at March 31, 1998
Adoption of Accounting
for Deferred Tax
Issuance of Preferred Stock
Issuance of Common Stock
Transfer from Retained
Earnings to Legal Reserve
Transfer from Liabilities
Cash Dividends
Net Loss for Fiscal 1998

$

—
—
—
—

—
—
—
—

—
—
—
—

32,664————
820,574——(32,664)—(163,266)(1,623,622)—
820,574(163,266)(1,623,622)

Balance at March 31, 1999

$1,451,680$4,136,087$4,729,425$666,687$820,574$1,666,749$13,471,201

See accompanying “Notes to Consolidated Financial Statements" which are an integral part of these statements.
* Fiscal 1998, 1997 and 1996 represent the fiscal years ended March 31, 1999, 1998 and 1997, respectively.

100

Notes to Non-Consolidated Financial Statements

1. Basis of Presentation
The accompanying non-consolidated financial statements have been prepared from the accounts maintainedby The Industrial Bank of Japan, Ltd. (“IBJ”) in accordance with the provisions set forth in the JapaneseCommercial Code and in conformity with accounting principles and practices generally accepted in Japan, suchas the Accounting Standards for Banks as prescribed by the Japanese Bankers Association which are different incertain respects as to application and disclosure requirements of International Accounting Standards.
Certain items presented in the non-consolidated financial statements filed with the Ministry of Finance (the“MOF”) in Japan are reclassified for the convenience of readers outside Japan. In addition, the Non-Consolidated
Statements of Shareholders’ Equity is prepared and included in non-consolidated financial statements, though
they are not required to be filed with the MOF.
The amounts indicated in millions of yen are rounded down by truncating the figures below one million.
Totals may not add up exactly because of such truncation.
The non-consolidated financial statements are not intended to present the non-consolidated financial position
and results of operations in accordance with accounting principles and practices generally accepted in countries
and jurisdictions other than Japan.
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥120.55=US$1.00, the rate of exchange on March 31, 1999, has been used in translation. The inclusion of such amounts
is not intended to imply that Japanese yen has been or could be readily converted, realized or settled into U.S.
dollars at that rate or any other rate.

2. Significant Accounting Policies
Refer to Notes to Consolidated Financial Statements.

3. Subsequent Events
Refer to Notes to Consolidated Financial Statements.

Financial Section

101Report of Independent Certified Public Accountants

Head office:Kasumigaseki Building
32nd Floor
3-2-5 Kasumigaseki
Chiyoda-ku
Tokyo 100-6088

telephone: (03) 3581-6281

To the Board of Directors,
The Industrial Bank of Japan, Limited:
We have audited the accompanying non-consolidated balance sheets of The Industrial Bank of Japan, Limited (“IBJ”) as of March
31, 1999 and 1998, and the related non-consolidated statements of income and shareholders’ equity for each of the three years in
the period ended March 31, 1999, all expressed in Japanese Yen. Our audits were made in accordance with auditing standards,
procedures and practices generally accepted and applied in Japan and, accordingly, included such tests of the accounting records
and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the non-consolidated financial statements referred to above present fairly the non-consolidated financial positionof IBJ at March 31, 1999, and 1998, and the non-consolidated results of its operations for each of the three years in the period ended
March 31, 1999, in conformity with accounting principles and practices generally accepted in Japan (See Note 1) consistently
applied during the periods, except for the change with which we concur, in the accounting for Investment Securities as describedin Note 2 to the accompanying non-consolidated financial statements.
The amounts expressed in U.S. dollars, provided solely for the convenience of the reader, have been translated on the basis set
forth in Note 1 to the accompanying non-consolidated financial statements.
Tokyo, Japan

Financial Section

June 29, 1999

Chuo Audit Corporation
Independent Certified Public Accountants

Chuo Audit Corporation is a member of Coopers & Lybrand International, a limited liability association incorporated in Switzerland.

102

Directors and Auditors

 Managing Directors
Members of the Boardof Directors

 Chairmanof the Board of Directors
Yoh Kurosawa

 President
and Chief Executive Officer
Masao Nishimura

Yuji Igarashi
Yuji Suzuki
Hiroshi Saito
Kisaburo Ikeda
Mitsunori Kanesaka
Shinji Kubo
Hiroshi Suzuki
Shoji Noguchi
Yuji Watanabe
Takashi Okamoto
Masayuki Yasuoka
Toshiaki Ohuchi
Ikuo Kaminishi
Takao Suzuki

 Managing Directors
Masatake Yashiro
Tsutomu Abe Directors

 Deputy President
Yoshiyuki Fujisawa Deputy President
Yozo Okumoto

Takeo Sekihara
Hiroki Yamada
Shizuhiro Yamauchi
Ryuju Funayama
Norio Nakajima
Tsunehiro Nakayama
Mikio Nakura
Takeo Otsubo
Takashi Kusama
Makoto Fukuda
Toyohiro Ozaki Auditors
Standing Auditors

Corporate Data

Naoyuki Hori
Yoshitada Shiratori
Shusai Nagai

Auditors
Setsuo Umezawa
Kunihisa Hama

103

IBJ Organization Chart

GeneralMeeting of
Shareholders
Auditors
Board ofDirectors

Board ofAuditors
Corporate Planning Dept.

Executive
Committee

Corporate
Auditors OfficePublic Relations Dept.
Administration Dept.
Personnel Dept.
Secretariat

Management
Committee

Managing
Directors
Council for
Business
Coordination

Information Technology Dept.
Information Technology Promotion Dept.
Operations Supervisory Dept.
Business Supporting Dept.
Business Operations Dept.
Securities Processing Dept.
Bond-Recording Dept.
Market Business Operations Dept.
International Treasury Operations Dept.
Research Headquarters
Research Dept.
Industrial Research Dept.
Credit Risk Management Dept.
Risk Management Dept.
Compliance Dept.
Legal Dept.
Credit Examination Dept.

Corporate Data

Auditing Dept.

104

Financial Control & Tax Div.

Organization Chart

Business Co-ordination Dept.
Corporate
Banking Unit

Syndication Div.

Private Banking Promotion Dept.
Employee Benefit Plan Business Promotion Dept.
Bank Debentures Dept.
Financial Institutions Dept. No. 1~2
Corporate Banking Dept. No. 1~11
Corporate Banking Dept. (Media & Telecommunication)
Loan Dept.
Securities Dept.
Securities Business Dept.
Network Business Promotion Dept.
International Headquarters
America Committee
Europe Committee
Southeast Asia Committee
International Dept.

Industrial Finance Seminar Div.

Americas Div.
China Dept.
Corporate Banking Dept. (International)International Finance Div.

International Loan Dept.
International Business Dept.
Tokyo Corporate Banking Dept.
Tokyo Corporate Banking Dept. No. 1~4
Tokyo Finance Dept.
Osaka Branch
Osaka Corporate Banking Dept. No. 1~3
Osaka Finance Dept.
Kansai Loan Dept.
Domestic Branches
New York Branch

Loan Production OfficeBusiness Administration and Control Div. (Americas)

Treasury Unit

New York Corporate Finance Div. No. 1~2

Loan Production Office

Overseas Branches

Loan Production Office

Representative Offices

Marketing OfficeTreasury Dept.

Treasury Div.

Derivatives and Fixed Income Dept.

Forex Div.

International Treasury Dept.

London Div.

Corporate Data

New York Div.
Singapore Div.
Investment Banking Headquarters
Investment
Banking Unit

Securities& AssetManagement
Unit

Structured Finance Dept.

Structured Finance Dept.
(Americas Div.)

Investment Banking Dept. (M&A, F.D.I.)

Asian Business Development Div.

Project Finance Dept.

Americas Div.

Business Planning Dept. (IBJ Group)Hong Kong Div.

Securities Services Dept.
Investment Research Dept.

(As of August 2, 1999)

Financial Engineering Dept.

105

IBJ’s Presence Worldwide

THE AMERICAS New York Branch
Shoji Noguchi
Managing Director and General Manager
1251 Avenue of The Americas,
New York, NY 10020, U.S.A.
Phone: 1-(212) 282-3000
Telex: 420802 (420802 KOGI UI),
170998 (170998 IBJBR UT)
Cable: KOGYOGINKO NEWYORK
Fax: 1-(212) 282-4250

 Chicago Branch
Masashi Sakai
General Manager
227 West Monroe Street, Suite 2600,
Chicago, IL 60606, U.S.A.
Phone: 1-(312) 855-1111
Fax: 1-(312) 855-8200
e-mail: ibjcbd@ibjusa.com

San Francisco OfficeKensaku Iwata
Senior Vice President
555 California Street, Suite 3110,
San Francisco, CA 94104, U.S.A.
Phone: 1-(415) 981-3131
Fax: 1-(415) 982-1917

 Grand Cayman Branch
Shoji Noguchi
Managing Director
and General Manager
P.O. Box 1040, West Wind Building,
George Town, Grand Cayman,
Cayman Islands, B.W.I.

 Nassau Branch
Shoji Noguchi
Managing Director
and General Manager
NatWest Building, West Bay Street,
Nassau, Bahamas

 Atlanta Office
Minami Miura
Vice President
One Ninety One Peachtree Tower,
Suite 3600,
191 Peachtree Street, N.E.,
Atlanta, GA 30303, U.S.A.
Phone: 1-(404) 524-8770
Fax: 1-(404) 524-8509

 Houston Office
Michael N. Oakes
Senior Vice President
Three Allen Center, Suite 4850,
333 Clay Street,
Houston, TX 77002, U.S.A.
Phone: 1-(713) 651-9444
Fax: 1-(713) 651-9209

 Los Angeles Agency

Corporate Data

Kazutoshi Kuwahara
General Manager
350 South Grand Avenue, Suite 1500,
Los Angeles, CA 90071, U.S.A.
Phone: 1-(213) 628-7241
Telex: 6831123 (KOGIN LSA)
Fax: 1-(213) 488-9840
URL: http://www.ibjla.com
e-mail: postmaster@ibjla.com

106

 Mexico Representative Office
Masaki Oishi
Chief Representative
Edificio Omega,
Campos Eliseos No. 345-11,
Col. Chapultepec Polanco,
Deleg. Miguel Hidalgo,
11560 México, D.F., México
Phone: 52-(5) 281-5037,
52-(5) 281-3206,
52-(5) 281-5291,
52-(5) 281-5162
Fax: 52-(5) 281-5374
e-mail: yeibjmex@mpsnet.com.mx

 São Paulo Representative Office
Hideo Yamaura
Chief Representative
Avenida Paulista, 1842-22
Andar Conjunto 228, Edificio,
Cetenco Plaza-Torre Norte,
01310-200 São Paulo-SP, Brazil
Phone: 55-(11) 289-2666
Fax: 55-(11) 251-4241
e-mail: ibjbrsp@nethall.com.br The Industrial Bank of Japan
Trust Company
Hajime Nakai
President and Chief Executive Officer
Head Office:1251 Avenue of The Americas,
New York, NY 10020, U.S.A.
Phone: 1-(212) 282-3030
Telex: 425754 (425754 IBTC UI),
175598 (175598 IBJTC UT)Cable: KOGINTRUST NEWYORK
Fax: 1-(212) 282-4252
Branch: Nassau, Bahamas
Representative Office: Atlanta, GA,
U.S.A.

 The Industrial Bank of Japan(Canada)Mitsuo Iwamoto
President and Chief Executive Officer
Head Office:Box 29, Suite 1102, 100 Yonge Street,Toronto, Ontario, Canada M5C 2W1
Phone: 1-(416) 365-9550
Telex: 06-219881 (IBJCDA TOR)
Fax: 1-(416) 367-3452

Vancouver Branch
Shunichiro Miyanaga
Executive Vice President
and General Manager
Suite 1220, 666 Burrard Street,
Vancouver, B.C., Canada V6C 2X8
Phone: 1-(604) 682-4511
Fax: 1-(604) 688-7079
e-mail: ibjcdav@direct.ca

 IBJ Whitehall Bank
& Trust Company
Dennis G. Buchert
President and Chief Executive Officer
Head Office:One State Street,
New York, NY 10004, U.S.A.
Phone: 1-(212) 858-2000
Telex: 62820, 177754
Fax: 1-(212) 425-0542
Branch: Grand Cayman,
Cayman Islands, B.W.I.

IBJ’s Presence Worldwide

 The Bridgeford Group
Haruhiko Masuda
President and Chief Executive Officer
399 Park Avenue, 18th Floor,
New York, NY 10022, U.S.A.
Phone: 1-(212) 705-0880
Fax: 1-(212) 755-8900

 Aubrey G. Lanston & Co. Inc.
Ralph A. Hallenborg
President and Chief Executive Officer
One Chase Manhattan Plaza,
Fifty-Third Floor,
New York, NY 10005, U.S.A.
Phone: 1-(212) 612-1600,
1-(800) 221-5750
Telex: 233746, 971272
Fax: 1-(212) 363-3423
URL: http://www.lanston.com
e-mail: aubrey@lanston.com

 Nomura IBJ Global Investment
Advisors, Inc.
Toshinori Kurihara
President
2 World Finance Center, Building B,
New York, NY 10281, U.S.A.
Phone: 1-(212) 667-9523
Fax: 1-(212) 667-1099

EUROPE AND THE MIDDLE EAST

 London Branch
Hiroki Yamada
Director and General Manager
Bracken House, One Friday Street,
London EC4M 9JA, United Kingdom
Phone: 44-(171) 248-1111
Telex: 886939 (886939 KOGINL G)
Cable: KOGYOGINKO LONDON EC4
Fax: 44-(171) 248-1114

 Paris Branch
Atsushi Nakajima
General Manager
Washington Plaza,40, rue Washington,
75408 Paris Cedex 08, France
Phone: 33-(1) 53-83-40-00
Telex: 642105 (KOGPA 642105F)
Fax: 33-(1) 53-83-40-99

 Madrid Branch
Yasuo Nakamura
General Manager
Torre Picasso Planta 9,
Plaza Pablo Ruiz Picasso, s/n. AZCA,
28020 Madrid, Spain
Phone: 34-91-597-2612
Telex: 44066 KGN E
Fax: 34-91-597-4697
e-mail: ibj@sarenet.es

 Milan Branch
Shunsuke Imaoka
General Manager
Via Senato 14/16, 20121 Milan, Italy
Phone: 39-02-760861
Telex: 331541 (331541 IBJMIL)
Fax: 39-02-76015311
e-mail: ibjmilano@tin.it Frankfurt Branch
Kazuya Yoshida
General Manager

Toshihiro Kodama
Chief Representative
Manama Centre (Entrance 4, 4th Floor),
P.O. Box 5759, Manama, Bahrain
Phone: 973-228868
Telex: 9775 (9775 IBJBAH BN)
Fax: 973-224828
e-mail: ibjbahcr@batelco.com.bh Industriebank von Japan(Deutschland) Aktiengesellschaft— The Industrial Bank of Japan(Germany) —Tetsuo Narukawa
Chairman of the Boardof Managing Directors
Head Office:Taunustor 2,
60311 Frankfurt am Main,
F.R. Germany
Phone: 49-(69) 27282-0
Telex: 414939 (414939 KOGIN D)
Fax: 49-(69) 27282-512
e-mail: info@ibjg.de

Düsseldorf BranchToshihiro Kitamura
General Manager
Immermannstr. 45,
40210 Düsseldorf,
F.R. Germany
Phone: 49-(211) 16830
Telex: 8582442
Fax: 49-(211) 365602
e-mail: info@ibjg.de The Industrial Bank of Japan(Luxembourg) S.A.
Akira ImaiManaging Director(Mailing Address)
P.O. Box 68, L-2010 Luxembourg,
GD de Luxembourg(Address) 6, rue Jean Monnet,
L-2180 Luxembourg,
GD de Luxembourg
Phone: 352-4216171
Telex: 1289 (1289 IBJLX LU)
Fax: 352-421617-489

Corporate Data

Taunustor 2,
60311 Frankfurt am Main,
F.R. Germany
Phone: 49-(69) 27282-100
Telex: 414939 (414939 KOGIN D)
Fax: 49-(69) 27282-511
e-mail: info@ibjg.de Bahrain Representative Office107

IBJ’s Presence Worldwide

 IBJ International plc
Nobuo Oya
Chief Executive and Managing Director
Bracken House, One Friday Street,
London EC4M 9JA, United Kingdom
Phone: 44-(171) 236-1090
Telex: 925621 (925621 IBJITA G),
266582 (266582 IBJITA G)
Cable: IBJINTL LONDON EC4
Fax: 44-(171) 236-0484

 The Industrial Bank of Japan-NJ(Switzerland) Limited
Takehiro Mikoda
President
Bahnhofstrasse 82a,CH-8023 Zurich, Switzerland
Phone: 41-(1) 218-9595
Telex: 812298 (812298 IBJCH)
Fax: 41-(1) 218-9945

 Banque IBJ (France) S.A.
Atsushi Nakajima
President
Washington Plaza,42, rue Washington,
75408 Paris Cedex 08, France
Phone: 33-(1) 53-83-41-00
Telex: 642247 (IBJFSA 642247F)
Fax: 33-(1) 53-83-41-69

 IBJ Asset Management
International Ltd.
Toyohide Tanaka
Chief Executive
Bracken House, One Friday Street,
London EC4M 9JA, United Kingdom
Phone: 44-(171) 329-3777
Fax: 44-(171) 489-6932
e-mail: ibjami@ibj.co.uk

 IBJ–BA Consulting
Investitionsberatung GmbH

Corporate Data

Yasuji Tajima
Managing Director
Landhausgasse 4/7,
1010 Vienna, Austria
Phone: 43-(1) 5355868
Fax: 43-(1) 5355519
e-mail: ibj-ba.wien@aon.at

108

 IBJ Nomura Financial Products
Holding plc
Shozo Nurishi
ChairmanBracken House, One Friday Street,
London EC4M 9JA, United Kingdom
Phone: 44-(171) 762-3306
Fax: 44-(171) 762-3338

 IBJ Nomura Financial
Products plc
Shozo Nurishi
ChairmanBracken House, One Friday Street,
London EC4M 9JA, United Kingdom
Phone: 44-(171) 762-3333
Fax: 44-(171) 762-3338

ASIA AND OCEANIA Singapore Branch
Naoki Izawa
General Manager
16 Collyer Quay,#14-00, Hitachi Tower,
Singapore 049318, Republic of Singapore
Phone: 65-5387366
Telex: RS21880 (KOGINPO RS21880)
Cable: KOGYOGINKO SINGAPORE
Fax: 65-5387779

 Hong Kong Branch
Shinichi Watanabe
General Manager
17th Floor, Two Pacific Place,
88 Queensway, Hong Kong,
S.A.R., The People’s Republic of China
Phone: 852-21033000
Telex: 63035 IBJBR HX
Cable: KOGYOGINKO HONG KONG
Fax: 852-28459187

 Dalian Branch
Taizo Watanabe
General Manager
8th Floor, Senmao Building,
147 Zhong Shan Lu,
Xi Gang Qu, Dalian 116011,
The People’s Republic of China
Phone: 86-(411) 3692712
Telex: 86212 (86212 IBJDL CN)
Fax: 86-(411) 3603581

 Beijing Branch
Kotaro Nakazawa
General Manager
8th Floor,
Chang-Fu-Gong Office Building,Jia 26, Jianguomenwai Street,
Chaoyang District, Beijing 100022,
The People’s Republic of China
Phone: 86-(10) 6513-9026
Telex: 22457 (22457 IBJPK CN)
Fax: 86-(10) 6512-7126

 Bangkok Branch
Masatsugu Nagato
General Manager
15th Floor, Thai Obayashi Building,
161 Rajdamri Road,
Lumpini, Pathumwan,
Bangkok 10330, Thailand
Phone: 66-(2) 255-5991
Telex: 20544 (20544 IBJBKK TH)
Fax: 66-(2) 255-5990

 Labuan Branch
Yasuo Sato
General Manager
Level 11 (A), Main Office Tower,
Financial Park Labuan,
Jalan Merdeka, 87000
Federal Territory of Labuan, Malaysia
Phone: 60-(87) 419115
Telex: 85061 (IBJLB MA85061)
Fax: 60-(87) 419121

 Shanghai Branch
Kiyoshige Akamatsu
General Manager

Labuan Branch, Kuala Lumpur
Marketing Office

6th Floor, Shanghai Senmao
International Building,
101 Yin Cheng East Road,
Pudong New Area,
Shanghai 200120,
The People’s Republic of China
Phone: 86-(21) 6841-0000
Telex: 33144 (33144 IBJSH CN)
Fax: 86-(21) 6841-0399

Suite No. 1403, 14th Floor,
Pernas International,
Jalan Sultan Ismail,50250 Kuala Lumpur, Malaysia
Phone: 60-(3) 2636970
Fax: 60-(3) 2636837

IBJ’s Presence Worldwide

 Jakarta Representative Office Seoul Representative Office IBJ Asia Securities Limited

Toru Sumiyoshi
Chief Representative

Takafumi Yoshida
Chief Representative

Akinori Han
Acting Managing Director

BNI Building, 23rd Floor,
Jl. Jenderal Sudirman Kav. 1,
Jakarta 10220, Indonesia
Phone: 62-(21) 251-2024~5,
62-(21) 570-1010
Telex: 65263 (65263 IBJIND IA),65495 (65495 IBJIND IA)
Fax: 62-(21) 570-1225~6,
62-(21) 574-3581 (direct)

Press Center Building, 10th Floor, 25,
Taepyung-Ro 1-Ga, Chung-Ku,
Seoul 100-101, Korea
Phone: 82-(2) 736-2684~5
Fax: 82-(2) 736-2686
e-mail: ibjseoul@chollian.dacom.co.kr

17th Floor, Two Pacific Place, 88
Queensway, Hong Kong, S.A.R.,
The People’s Republic of China
Phone: 852-2103-3883
Fax: 852-2103-3702

 Kuala Lumpur Representative
OfficeTakahiko Matsushita
Representative
Suite No. 1403, 14th Floor,
Pernas International,
Jalan Sultan Ismail,50250 Kuala Lumpur, Malaysia
Phone: 60-(3) 2615111
Telex: 32298 (IBJKL MA32298)
Fax: 60-(3) 2615620

 Guangzhou Representative Office
Kiyofumi Ota
Chief Representative
Room 1252, Garden Tower,
368 Huanshi Dong Lu,
Guangzhou 510064,
The People’s Republic of China
Phone: 86-(20) 83342017
Telex: 44263 (44263 IBJGZ CN)
Fax: 86-(20) 83355847

 Wuhan Representative OfficeChen Jianguo
Chief Representative
Room 305,
Holiday Inn Tian-an Wuhan,
868 Jiefang Dadao,
Wuhan 430022,
The People’s Republic of China
Phone: 86-(27) 8582-1155
Fax: 86-(27) 8582-1177
e-mail: ibjwuhan@public.wh.hb.cn

 P.T. Bumi Daya—IBJ Leasing
Hiyoshi Kozaki
President Director
BNI Building, 21st Floor,
Jl. Jenderal Sudirman Kav. 1,
Jakarta 10220, Indonesia
Phone: 62-(21) 570-2588
Telex: 65191 (65191 BDIBJL IA)
Cable: BDIBJL IA
Fax: 62-(21) 570-1218

 IBJ Lanston Futures Pte. Ltd.
(A subsidiary of Aubrey G. Lanston)John C. Gavin
Chief Executive Officer
16 Collyer Quay,#14-00, Hitachi Tower,
Singapore 049318,
Republic of Singapore
Phone: 65-5383400
Fax: 65-5384100

 CCIC Finance Limited
Paul S. Muther
Managing Director
38th Floor A, Bank of China Tower,
1 Garden Road, Central, Hong Kong,
S.A.R., The People’s Republic of China
Phone: 852-28200888
Fax: 852-28772105

 Krung Thai IBJ Leasing Co., Ltd.
Phinyavat Chantrakantanond
President
18th Floor, Thai Obayashi Building,
161 Rajdamri Road,
Lumpini, Pathumwan,
Bangkok 10330, Thailand
Phone: 66-(2) 651-8120
Fax: 66-(2) 254-6119

 IBJ Australia Bank Limited
Tomoo Inose
Managing Director and Chief Executive
Level 21, Colonial Centre,
52 Martin Place,
Sydney, N.S.W. 2000, Australia
Phone: 61-(2) 9377-8888
Fax: 61-(2) 9377-8884
e-mail: ibja@ibj.com.au

 PT. Bank IBJ Indonesia
Hiroo Harada
President Director
Branches and Agencies Loan Production Offices Representative Offices Overseas Subsidiaries Overseas Affiliates 
All telephone numbers given are fortelephone calls placed from outside the country.
(As of June 29, 1999)

109

Corporate Data

BNI Building, 23rd Floor,
Jl. Jenderal Sudirman Kav. 1,
Jakarta 10220, Indonesia
Phone: 62-(21) 570-1010
Telex: 65263 (65263 IBJIND IA),65495 (65495 IBJIND IA)
Fax: 62-(21) 570-1225~6e-mail: sysdept@ibjjkt.co.id

IBJ’s Presence in Japan Head Office Shinjuku Branch Shizuoka Branch

3-3, Marunouchi 1-chome, Chiyoda-ku,
Tokyo 100-8210, Japan
Phone: 81-(3) 3214-1111
Telex: J22325 (KOGIN J22325),
J23215 (KOGIN J23215)
Cable: KOGIN TOKYO
Fax: 81-(3) 3201-7643
SWIFT: IBJT JP JT

17-1, Nishi-Shinjuku 1-chome,
Shinjuku-ku, Tokyo 160-0023
Phone: 81-(3) 3344-6111

5-6, Miyukicho, Shizuoka 420-8715
Phone: 81-(54) 251-2111

 Sapporo Branch
2, Kita 1-joh Nishi 5-chome,
Chuo-ku, Sapporo 060-0001
Phone: 81-(11) 231-0101

 Sendai Branch
4-1, Ichibancho 2-chome,
Aoba-ku, Sendai 980-0811
Phone: 81-(22) 266-3111

 Fukushima Branch
6-5, Motomachi, Fukushima 960-8035
Phone: 81-(24) 523-1111

 Chiba Branch1000 Shinmachi, Chuo-ku,
Chiba 260-0028
Phone: 81-(43) 238-6111

 Tokyo Corporate Banking
Department
2-16, Yaesu 1-chome,
Chuo-ku, Tokyo 103-8677
Phone: 81-(3) 3272-1311

 Kanda Branch
3-1, Kanda-Ogawamachi 1-chome,
Chiyoda-ku, Tokyo 101-0052
Phone: 81-(3) 3296-0111

 Hibiya Branch

Corporate Data

2-9, Nishi-Shinbashi 1-chome,
Minato-ku, Tokyo 105-0003
Phone: 81-(3) 3507-0888

 Shibuya Branch
24-10, Shibuya 1-chome,
Shibuya-ku, Tokyo 150-0002
Phone: 81-(3) 3498-3111

 Ikebukuro Branch Nagoya Branch
11-18, Nishiki 1-chome,
Naka-ku, Nagoya 460-0003
Phone: 81-(52) 201-7151

 Kyoto Branch

12-1, Higashi-Ikebukuro 1-chome,
Toshima-ku, Tokyo 170-0013
Phone: 81-(3) 3982-0111

630 Shichikannon-cho, Rokkaku-sagaru,
Karasuma-dori, Nakagyo-ku,
Kyoto 604-8162
Phone: 81-(75) 223-1123

 Kichijoji Branch Osaka Branch

14-5, Kichijoji-Honcho 1-chome,
Musashino, Tokyo 180-0004
Phone: 81-(422) 21-0211

1-1, Koraibashi 4-chome,
Chuo-ku, Osaka 541-0043
Phone: 81-(6) 6202-2351

 Machida Branch

 Umeda Branch

13-15, Morino 1-chome,
Machida, Tokyo 194-0022
Phone: 81-(42) 723-2111

8-17, Umeda 1-chome,
Kita-ku, Osaka 530-0001
Phone: 81-(6) 6341-2111

 Yokohama Branch Nanba Branch

4-1, Kitasaiwai 1-chome,
Nishi-ku, Yokohama 220-0004
Phone: 81-(45) 319-3320

4-14, Nanba 3-chome,
Chuo-ku, Osaka 542-0076
Phone: 81-(6) 6644-1123

 Fujisawa Branch Kobe Branch

20-10-101, Minami-Fujisawa,
Fujisawa 251-0055
Phone: 81-(466) 22-7111

1-1, Onoe-dori 7-chome,
Chuo-ku, Kobe 651-0088
Phone: 81-(78) 222-1101

 Niigata Branch Hiroshima Branch5942 Rokubancho, Nishibori-dori,Niigata 951-8061
Phone: 81-(25) 229-2331

1-1, Kamiyacho 2-chome,
Naka-ku, Hiroshima 730-8710
Phone: 81-(82) 247-7111

 Toyama Branch Takamatsu Branch

5-13, Sakurabashi-dori,
Toyama 930-0004
Phone: 81-(764) 41-1111

6-8, Bancho 1-chome,
Takamatsu 760-8677
Phone: 81-(878) 21-5051

 Fukuoka Branch
13-1, Tenjin 1-chome,
Chuo-ku, Fukuoka 810-0001
Phone: 81-(92) 711-1234

110

IBJ’s Presence in Japan Japan Management Systems Inc.
4-1, Yaesu 2-chome, Chuo-ku,
Tokyo 104-0028, Japan
Tel: 81-(3) 3274-1391
Fax: 81-(3) 3275-0514
e-mail: info-jms@jmsinc.co.jp

 IBJ Systems, Ltd.
15-1, Konan 2-chome,
Minato-ku, Tokyo 108-6008, Japan
Tel: 81-(3) 5783-7800
Fax: 81-(3) 5463-0163

 IBJ Card Service Co., Ltd.
4-1, Yaesu 2-chome, Chuo-ku,
Tokyo 104-0028, Japan
Tel: 81-(3) 3275-3051
Fax: 81-(3) 3275-3223

 IBJ NW Asset Management
Co., Ltd.
* Scheduled to change the name to
DLIBJ Asset Management Co., Ltd.
on October 1, 1999

6-1, Marunouchi 1-chome,
Chiyoda-ku, Tokyo 100-0005, Japan
Tel: 81-(3) 5221-7700
Fax: 81-(3) 3215-3736
Telex: J33125

 IBJ Investment TrustManagement Co., Ltd.
6-1, Marunouchi 1-chome,
Chiyoda-ku, Tokyo 100-0005, Japan
Tel: 81-(3) 3287-3111
Fax: 81-(3) 3287-1601
e-mail: webmaster@ibjitm.co.jp

 Kogin Investment, Ltd.

 Nomura-IBJ Investment Services
Co., Ltd.

12-2, Gobancho, Chiyoda-ku,
Tokyo 102-0076, Japan
Tel: 81-(3) 3239-5670
Fax: 81-(3) 3239-6828
e-mail: tky-3ibj@po.iijnet.or.jp

2-1, Marunouchi 2-chome,
Chiyoda-ku, Tokyo 100-0005, Japan
Tel: 81-(3) 5223-2101
Fax: 81-(3) 5223-2105

 IBJ Securities Co., Ltd.
5-1, Otemachi 1-chome, Chiyoda-ku,
Tokyo 100-0004, Japan
Tel: 81-(3) 5252-3111
URL: http://www.ibjs.co.jp
e-mail: webmaster@ibjs.co.jp

 3i-Kogin Buyouts Ltd.
8-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-0004, Japan
Tel: 81-(3) 3243-1261
Fax: 81-(3) 3243-1262

IBJ Trust and Banking Co., Ltd.
11-19, Nibancho, Chiyoda-ku,
Tokyo 102-0084, Japan
Tel: 81-(3) 3262-2011
Fax: 81-(3) 3262-9550

 IBJ-DL Financial Technology
Co., Ltd.
5-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-0004, Japan
Tel: 81-(3) 5200-7611
Fax: 81-(3) 3201-0698

111

Corporate Data

Head Office 
Branches 
Subsidiaries Affiliates Investor Information

THE INDUSTRIAL BANK OF JAPAN, LIMITED■ Head Office■ Stock Exchange Listings

3-3, Marunouchi 1-chome, Chiyoda-ku,
Tokyo 100-8210, Japan
Phone: 81-(3) 3214-1111
Telex: J22325 (KOGIN J22325),
J23215 (KOGIN J23215)
Cable: KOGIN TOKYO
Fax: 81-(3) 3201-7643
SWIFT: IBJT JP JT

Tokyo Stock Exchange
Osaka Securities Exchange■ Established

26 Branches

1902■ Overseas Network■ Capital

18 Branches and Agencies
4 Loan Production Offices
1 Marketing Office
8 Representative Offices
62 Subsidiaries and Affiliates¥673,605 million■ Authorized Shares
6,600,000,000■ Independent Certified Public
Accountants
Chuo Audit Corporation■ Branches in Japan■ Number of Employees■ Outstanding Shares

URL: http://www.ibjbank.co.jp

Domestic employees: 4,752
Part-time, temporary: 471
Foreign employees: 1,272

Common Shares: 2,637,579,392
Preferred Shares: 280,000,000■ Number of Shareholders
38,608 (Number of shareholders holding
one or more full units of 1,000 shares)■ Principal Shareholders
Name of Shareholder
The Dai-ichi Mutual Life Insurance Company
Meiji Life Insurance Company
Nippon Life Insurance Company
The Sumitomo Trust and Banking Company, Limited
The Daiwa Bank, Limited
The Mitsui Trust and Banking Co., Limited
Nissan Motor Co., Ltd.
Nippon Steel Corporation
The Mitsubishi Trust and Banking Corporation
The Toyo Trust and Banking Company, Limited

Number of Shares Held(thousands)

Percentage of Total
Shares Outstanding (%)

164,149
98,832
87,847
57,69349,58247,15938,59737,27931,792
28,816

6.21
3.74
3.32
2.18
1.87
1.78
1.46
1.41
1.20
1.09

■ Changes in Paid-in Capital

Corporate Data

Date
February 1, 1972
February 1, 1975
February 1, 1978
August 1, 1981
October 1, 1987
October 1, 1988
November 1, 1996
December 25, 1998
March 31, 1999

Amount of
Capital Increase

Paid-in Capital
after Increase¥ 16,000
16,00022,40017,280108,898
139,466
113,059
33,500175,000¥ 48,000
64,00086,400103,680
212,578
352,045465,105
498,605
673,605

Type of Issue(¥ million)

Allotment (Par value, 0.5 share for 1 share held)
Allotment (Par value, 1/3 share for 1 share held)
Allotment (Par value, 0.35 share for 1 share held)
Allotment (Par value, 0.2 share for 1 share held)
Allotment (Price between par and market, 0.05 share for 1 share held)
Allotment (Price between par and market, 0.08 share for 1 share held)
Allotment (Price between par and market, 0.08 share for 1 share held)
A third-party allotment of shares
A third-party allotment of shares

For further information, please contact the Public Relations Department.
(As of June 29, 1999)112

50p10/66p2

50p10/66p2

Introduction

IBJ was originally founded as a publicsector bank under the Industrial Bankof Japan Act of 1902. At that time, Japanwas in the throes of its industrial revolution, and there was a strong demand forlong-term investment capital. IBJ raised
funds by issuing bank debentures.
The Bank also acted as the trustee incorporate debenture issues—notably, themajor Japanese railway company issueof 1906 in London, amounting to thethen-enormous sum of £1 million. These
activities contributed to the building of
the domestic securities market and to thegenerating of a higher profile for Japanese borrowers in the international market.
This early experience of a sophisticatedmix of corporate and investment banking with exposure to trust work is uniqueto the Bank among Japanese banks. In
the original Act, there was the wording,“trust business related to local government bonds, corporate bonds, and equities”. This was the first time for the term
“trust”, or “shintaku”, to appear in theJapanese statute book.

The 1918 amendment to the IBJ Act
permitted the underwriting and offeringof equities. At that point, the Bank had
the full capabilities for what is now
termed investment banking. However,that was at what proved to be the peakof the demand created for Japanese
products by the First World War and theconsequent economic boom.
Thereafter, the next 30 years of Japanese history encompassed many adversities for society in general and for financial
institutions in particular: the Great Kanto
Earthquake, the Showa Financial Panic,
and, finally, the Second World War andthe postwar recovery.
The Bank became a private-sector bankin 1950 and took on its current legal form
under the Long-Term Bank Act of 1952.
However, the Act was framed within theterms of the U.S.-led Occupation policyof compartmentalizing financial services.
IBJ was forced to retreat from much of its
former investment banking activities andreturn principally to long-term lending
funded by issuing bank debentures.

During the high-growth period of theJapanese economy in the 1960s, the Bank
was particularly active in financing steel
production, shipping, shipbuilding, andvehicle manufacturing. Following thefirst oil crisis, Japan moved to a pattern oflower growth as a mature economy, andthe Bank expanded its customer base athome and started the process of expansion overseas.
Domestically, the wholesaling of bankdebentures to major financial institutions
and the regional banks led to a networkof strong relationships. This was all supported by the fact that, originally a public-sector bank, the Bank had no keiretsu
affiliations: the Bank has always been independent of the large corporate groupings characteristic of Japan. Internationally,
the Bank was free to pursue its investment banking ambitions.
The current round of liberalization,
Japan’s Big Bang, is enabling the Bank
to return to its domestic investmentbanking roots and more fully explore
the benefits of its independence andrelationship networks.

Contents
Financial Highlights
1
Message from the President
2Management Rationale and Strategy at IBJ
Frequently Asked Questions
Rationale
6

Funding Reliance on Bank Debentures
13

Market Risk
27

Non-Performing Loans
14

Liquidity Risk
31

Emerging Market Exposure
15

Operational Risk
32

Year 2000 Problem
16

Systems Risk
32

Steps to “First Call Bank” Status
7

Restructuring and Re-orientation
Preparing for Heightened Competitionin the Post-Big Bang Era

Corporate Governance
8

Revenue Plan
17

Transparency in the Management Strategy
9

Rationalization
18

IBJ’s Future-Oriented Business Strategy
10

Personnel Policy
20

Differentiation with
Other Leading Domestic Banks
11

Strategic Alliances
22

Competition with Leading Foreign Banks
11

Risk Control and Compliance Issues
Controlling Risk and Ensuring Compliance

Specialist Subsidiaries and Affiliates
12

Risk
24

Legal Risk
32
Internal Control
33
Compliance33
Operations in Outline
Balancing the Center and the Periphery
35
Financial Section
49
Corporate Data
103

Credit Risk
25

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50p10/66p2

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THE INDUSTRIAL BANK OF JAPAN, LIMITED

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Annual Report 1999
Year ended March 31, 1999

ANNUAL REPORT 1999

Printed in Japan’99

The Industrial Bank of Japan, Limited

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