FUKOKU MUTUAL LIFE
INSURANCE COMPANY
Annual Report 2007
Year Ended March 31, 2007

Fukoku Life was founded in 1923. Since then, we have held as ourfundamental principle that the interests of policyholders must be
protected to the utmost of our ability. Throughout the life insurance industry, Fukoku Life is noted for its distinguished investment
record and efficient corporate management.
The operating environment for the life insurance industry is becoming increasingly difficult, as a result of ongoing deregulation.
Given these conditions, Fukoku Life will devote still more attention to ensuring the soundness of insurance operations, and endeavor to develop products tailored to meet increasingly diverse
customer needs. At the same time, it is committed to enhancing
efficiency throughout its businesses and to making active efforts
to establish a highly competitive operating base. In this way, it willcontinue to translate into practice its management principle of protecting the interests of policyholders.

16Financial Highlights (Non-Consolidated)

Millions of
U.S. dollars

Millions of yen

2005

2006

2007

2007

Life insurance in force ............................................

¥50,811,690¥50,026,617¥49,974,534$423,333

Total assets ...............................................................

5,088,630

5,684,365

5,893,024

49,919Securities ............................................................

3,318,250

3,916,311

4,109,729

34,813Loans ..................................................................

1,282,439

1,250,813

1,266,226

10,726

Real estate and movables ...................................

195,086

196,413——

Tangible fixed assets ..........................................

——

206,472

1,749

Total liabilities .........................................................

4,875,749

5,317,957

5,497,755

46,571

Policy reserves ...................................................

4,713,388

5,033,427

5,189,257

43,958Subordinated bonds ...........................................

32,50042,84347,092398

Total capital .............................................................

212,881366,408——

Total net assets ........................................................

——

395,268

3,348

Total ordinary revenues ..........................................

859,811

1,028,769

888,739

7,528

Premium and other income ..............................

731,704

846,008

721,989

6,115

Investment income ............................................

107,238

165,112147,397

1,248

Total ordinary expenditures ....................................

807,157

971,311

828,525

7,018

Net surplus for the year ..........................................

26,48237,87443,502368

Solvency margin ratio (%) ......................................

925.0

1,139.6

1,228.8

Employees ...............................................................

13,922

13,954

13,771

As of March 31,

For the year ended March 31,

Notes 1. U.S. dollar amounts are converted from yen, for convenience only, at the rate of U.S.$1=¥118.05, the rate of exchange on March 31, 2007.
2. Yen and U.S. dollar amounts are rounded down to the nearest million yen or million dollars.

Contents
Message from the President ...........................................

2

Management Philosophy and Business Policies .............

3

Review of Operations (Non-Consolidated)
Overview .....................................................................

4

Business Performance in FY2006 ...............................

5

Investment Activities of General
Account Assets in FY2006 .........................................

7

Investment Policies for FY2007 ..................................

9

Internal Control System and Corporate Citizenship ...... 10
Non-consolidated Financial Statements ......................... 12
Consolidated Financial Statements ................................ 31
Corporate Organization .................................................. 50
Corporate Information .................................................... 51

1

Message from the President

During fiscal 2006, ended March 31, 2007, the Japanese life insurance industry saw shrinking demand for protection-type products, stemming from the aging society and falling birthrate. However, there was firm demand for products related to medical and nursing care, as well as individual
annuities and other asset building products. Meanwhile, the asset management environment wasfavorable owing to a strong Japanese economy, underpinned primarily by corporate earnings.
On the insurance sales side, the Company reinforced its sales system to offer insurance products
designed to meet customers’ needs and provide comprehensive follow-up services. On the asset
management side, we worked hard to raise profitability while paying due attention to risk management.
As a result, in fiscal 2006 the Company achieved a significant increase in fundamental profits.
We used this to return profits to policyholders through dividends, and maintained a sound financial
status by boosting retained earnings. We further strengthened our financial position by raising additional foundation funds in September 2006.
Fukoku Life will continue returning profits to customers and taking advantage of higher retained earnings to maintain a sound financial position.

Tomofumi Akiyama
President
2

MANAGEMENT PHILOSOPHY
To protect the interests ofour policyholders

To contribute to society

Fukoku Life will continue striving to become a company that provides its customers with greater
peace of mind. To this end, we will adhere to our philosophy of “protecting the interests of ourpolicyholders,” which we have maintained since our establishment. We will also continue contributing to society through our insurance business activities.

BUSINESS POLICIES
Adhering to our management philosophy and supported by our “Customer-Centric” policy, we
have endeavored to differentiate ourselves from our competitors and become more efficient. To thisend, we are committed to implementing the business policies outlined below.

Reinforce sales staff structure
Meticulous services by each salesperson are vital for assuring customer satisfaction during eachprocess, from initial contract to follow-up services. We are emphasizing our finely tuned services
when in contact with customers, and we will continue providing insurance products where the customer comes first.

Reaffirm focus on net increase in policies in force
Fukoku Life is not interested solely in expanding the balance of policies in force. Rather, we emphasize provision of insurance products that meet customer needs, thus encouraging them to deal withus. We also give high priority to delivering peace of mind through comprehensive follow-up, so that
customers will retain our services indefinitely. By rigorously implementing this policy, we will seek
to generate a net increase in customers, which in turn will help increase net policies in force. The
entire company will continue working together toward this goal of increasing net policies in force.

Enhance business efficiency
To obtain an even higher level of customer satisfaction amid more intensified competition, we must
further highlight our strengths. To this end, we will continue to improve the efficiency of our business processes. Through these measures, we will make effective use of our management resourcesand enhance customer services.

3

Review of Operations (Non-Consolidated)

Overview

Business Policies
Based on its management policy, Fukoku Life always takes the customer’s perspective when selling life insurance and financial products by proposing the best possible options. We accord top priority to frequent communications with individual
customers to ensure that we accurately meet their needs. We also strive to offer
optimal solutions tailored to customers’ individual life plans and lifestyles. Moreover, our sales managers take the responsibility to provide long-term follow-up to
ensure ongoing support.
Fukoku Life’s sales approach is based on three main principles: Face-to-face contract, proposals carefully tailored to the specific needs of each customer, and a personal sales manager system.
Individual Insurance
Recently, the needs of our customers have become increasingly diverse in response
to social and lifestyle changes. In our constant quest to assure the satisfaction ofindividual customers, we provide the best possible service by developing optimal
products and scrutinizing the services we provide from every possible angle.
In addition to providing protection-type products and health insurance, we havedeveloped a variety of products and services to meet the diverse needs of our customers. Today we provide nursing care insurance and medical insurance productsthat provide customers with optimum insurance, covering the various risks they are
exposed to during the course of their lives.
Fukoku Life’s nationwide sales network consists of 65 branches and more than
11,000 salespeople promoting insurance and annuities to individuals and companies. We have upgraded our mobile computers, known as “PlanDo,” to raise theefficiency of sales staff when conducting face-to-face sales.
Shinkin Banks and other financial institutions nationwide also sell individual
annuities and single-premium whole life insurance on our behalf. During fiscal 2006,
we strengthened sales support for Shinkin Banks throughout Japan.
We have also increased sales of juvenile insurance, individual annuities, and singlepremium endowment insurance sold via the Internet and at agent offices located inlarge shopping centers.
Fukoku Life believes that it is important to maintain communication with its
customers. In addition to providing consulting services at all of our sales offices, wehave a customer call center that enables customers to receive guidance via the telephone.
Group Insurance
Fukoku Life’s group insurance system provides professional consulting services forthe design of corporate retirement funds and pension plans. We provide a separate
account for corporate pension plans for socially responsible investments (SRIs) as avehicle for investments in companies that work proactively in areas of environmental protection and social contribution. We also have the Fukoku Life SRI Fund, an
investment trust fund offered in defined contribution pension plans.

4

Business Performance in FY2006

Life insurance in force(¥ trillions)
51.0

51.8

50.8

FY2002 ’03

’04

50.0

’05

49.9

’06

Life Insurance in ForceIn the year under review, the total balance of life insurance in force edged down
0.1%, to ¥49,974.5 billion. Within this amount, life insurance for individuals declined 2.8%, to ¥32,858.9 billion, mainly due to a drop in protection-type insurance. Individual annuities rose 3.3%, to ¥2,886.8 billion, and the balance of life
insurance in force for groups increased 5.9%, to ¥14,228.6 billion.
The main factor behind the fall in individual life insurance was the declining
need for protection-type products, stemming from the aging society and the fallingbirthrate. The increase in individual annuities was attributable to higher demand
for asset-building products, also attributable to Japan’s aging low-birthrate society.
Premium Income and Other Income
In the year under review, premium and other income fell 14.7%, to ¥721.9 billion.
This was mainly the result of the decline in premium income from individual annuities.

Breakdown of life insurance in force(¥ billions)Group insurance:
14,228.6 (28.5%)

Individual annuities:

Individual life insurance:

2,886.8 (5.8%)

32,858.9 (65.8%)

Total: ¥49,974.5 billion

Premium and other income(¥ billions)
846.0
762.6

740.9

731.7

FY2002 ’03

’04

721.9

’05

’06

5

Review of Operations (Non-Consolidated)

Total assets(¥ billions)
5,684.3

5,893.0

5,004.7 5,088.6
4,732.9

FY2002 ’03

’04

’05

’06

Assets, Liabilities and Net Assets
Non-consolidated total assets, including separate accounts, rose 3.7%, to ¥5,893.0
billion. This included a 3.6% increase in general account assets, to ¥5,763.9 billion.
The main factor for the increase in total assets was an increase of the balance of
securities, consisting mainly of domestic and foreign bonds.
Policy reserves grew 3.1%, to ¥5,189.2 billion, and total liabilities, including
policy reserves, increased 3.4%, to ¥5,497.7 billion.
In the year under review, a change in accounting policy led to the adoption of adifferent method that focuses on net assets instead of capital. Net assets at fiscal
year-end amounted to ¥395.2 billion, up 7.9% from total capital at the end of theprevious fiscal year.
On a consolidated basis, total assets rose 3.7%, to ¥5,895.1 billion, and net assets
reached ¥397.2 billion, up ¥29.9 billion from total capital at the end of the previous
fiscal year.

1,139.6

Strengthening Our Capital Base
Fukoku Life has further reinforced its financial fundamentals to prepare for various
risks. During the year under review, we increased our contingency reserve by ¥22.1
billion, to ¥130.7 billion and our reserve for price fluctuation of securities by ¥7.4
billion, to ¥50.0 billion. Our financial foundation was further enhanced by the raising of ¥40.0 billion in additional foundation funds in September 2006.

’05

Solvency Margin
The solvency margin ratio is a benchmark indicator for management soundness oflife insurance companies. Fukoku Life’s solvency margin ratio at fiscal year-end was
1,228.8%, up 89.2 points year-on-year. This far exceeds the 200% set by the government as an indicator of financial soundness, and clearly illustrates our ability tomeet a high level of payments. The high ratio is attributable to a rise in retained
earnings owing to increases in contingency reserves and reserves for price fluctuation of securities, the raising of additional foundation funds, and an increase in unrealized gains on securities and land.
We make every effort to maintain a high solvency margin ratio as we continue toprovide our customers with peace of mind.

Solvency margin ratio(%)
1,228.8

925.0
854.0
650.5

FY2002 ’03

6

’04

’06

Investment Activities of General Account Assets in FY2006

General account assets(¥ billions)
5,563.4

5,763.9

4,915.0 4,989.7
4,640.8

FY2002 ’03

’04

’05

’06

Investment income
minus expenses(¥ billions)
103.9

105.2

’05

’06

81.0
74.6

31.9

FY2002 ’03

’04

Bonds
(¥ billions)
2,362.1

2,431.1

Overview
In fiscal 2006, ended March 31, 2007, the Japanese economy continued to grow.
Corporate earnings remained high on the back of export growth, supported by strong
economic conditions overseas. These higher earnings contributed to increased capital
investments across a wide range of industries. Private consumption also grew, underpinned by an improvement in the employment situation. Such conditions
prompted the Bank of Japan to abolish its zero interest rate policy in July 2006, andraise its policy rate in February 2007.
Against this backdrop, Fukoku Life allocated funds centered on foreign bonds inorder to raise profitability while maintaining liquidity. We transferred previous lowinterest bearing domestic bonds to those with higher rates of return.
At fiscal year-end, general account assets rose 3.6%, or ¥200.5 billion, to ¥5,763.9
billion.
Investment income rose 1.4%, or ¥1.9 billion, to ¥141.5 billion. Interest anddividends income — the main component of investment income — rose 28.0%, or¥23.3 billion, to ¥106.4 billion. Investment expenses inBreakdown of general account assets(¥ billions)creased 2.0%, or ¥0.7 billion,
Ordinary loans:
Others:to ¥36.3 billion, on the back
1,186.9 (20.6%)
50.1 (0.9%)of an increase in provision forReal estate:201.4 (3.5%)
allowance for possible loan
Cash and deposits, and others(Note): 262.1 (4.5%)
losses despite a decline in
Other securities:
losses from derivative instru41.8 (0.7%)
Loans:
ments.
Foreign securities:
1,266.2
709.9 (12.3%)
Policyloans:(22.0%)As a result, investment in79.2 (1.4%)
come, minus expenses, inSecurities:
3,984.0 (69.1%)
creased 1.2%, or ¥1.2 billion,
Stocks:801.1 (13.9%)
to ¥105.2 billion. However,Bonds:
2,431.1 (42.2%)
the rate of return edged
down 0.07 point, to 1.98%.
Total: ¥5,763.9 billion
Note:

Cash and deposits, call loans, monetary claims bought and money held in trust

2,183.5
2,040.3

Bonds
In response to the increase in long-term interest rates during fiscal 2006, we transferred previous low-interest-bearing investments to higher-coupon bonds, and also
lengthened the duration of our bond portfolio. As a result, the Company’s bondholdings at fiscal year-end stood at ¥2,431.1 billion, up 2.9%, or ¥68.9 billion, froma year earlier.

1,791.5

FY2002 ’03

’04

’05

’06

7

Review of Operations (Non-Consolidated)

StocksWe increased our equities holdings in companies with strong indications of mediumterm growth and stable dividends. As a result, our year-end holdings of domestic
equities were up 1.3%, or ¥10.3 billion, to ¥801.1 billion.

Stocks(¥ billions)
790.7

537.8

549.6

FY2002 ’03

’04

801.1

Foreign Securities
We increased our foreign securities holdings, primarily through euro-denominatedbonds, while considering differences in domestic and foreign interest rates and currencies. As a result, the Company’s holdings of foreign securities, including equity
holdings, rose 16.6%, or ¥101.0 billion, to ¥709.9 billion.

375.4

’05

Loans
Fukoku Life increased the balance of outstanding corporate loans owing to recovery in demand from Japanese companies for long-term funding. Despite an increasein housing loans, individual loans declined overall, stemming from a drop in consumer loans. As a result, the fiscal year-end balance of outstanding loans grew 1.2%,
or ¥15.4 billion, to ¥1,266.2 billion.

’06

Foreign securities(¥ billions)
709.9
608.9

Real Estate
March 2007 saw the completion of construction of Tokyo Midtown, a large-scalecommercial project on the former Defense Agency site in Roppongi, Tokyo. Fukoku
Life has been involved in the project since 2001. During the year, we also invested
in real estate funds. As a result, the balance of our real estate holdings rose 5.4%, or¥10.3 billion, to ¥201.4 billion.

460.6
379.2

254.8

FY2002 ’03

’04

’05

’06

Real estateLoans(¥ billions)(¥ billions)
1,379.9205.1

1,336.4
1,282.4 1,250.8 1,266.2

FY2002 ’03

8

’04

’05

’06

196.2

FY2002 ’03

201.4
191.7

191.0

’04

’05

’06

Investment Policies for FY2007

Investment Environment
In the fiscal year ending March 31, 2008, we anticipate strong growth in capital
investment by corporations, owing to favorable business results. We also notice signsof an increase in overall private consumption. In the domestic financial environment, the Bank of Japan is expected to raise interest rates once again halfway throughthe year, which should cause a slight rise in unsecured overnight call money. Longterm interest rates are also forecast to increase amid continued signs of economic
growth. Meanwhile, we predict a continuation of moderate rises in equity prices,
underpinned by the international competitiveness of Japanese corporations.
Bonds
Fukoku Life will continue to restrain increases in its bond holdings while raisingoverall profitability by replacing investments from low rates of return to higher
coupon bonds and lengthening the duration of our bond portfolio.
Stocks
We will maintain our level of equities holdings and increase profits by investing in
corporations earmarked for medium-to-long-term growth and companies that havebeen carefully selected for their ability to pay steady dividends.
Foreign Securities
We will increase our foreign bond holdings, centering on open foreign bonds, while
carefully monitoring monetary policy and exchange rates in Japan, the United States,
and Europe.
Loans
We will enhance the profitability of corporate loans by applying stringent selection
criteria to prospective customers. We will expand loans to individuals while paying
due regard to the profit margin and loan levels.
Real Estate
In fiscal 2007, we plan to continue making real estate investments based on a medium- to long-term perspective that emphasizes profitability and geographic distribution. We will also continue investing in real estate funds as a means of diversifying investment methods.

9Internal Control System and Corporate Citizenship

Internal Control, Risk Management, and Compliance Systems

Following the revision of the Insurance Business Law accompanying the enactment
of Japan’s new Company Law, the Board of Directors, at its meeting held in May
2006, adopted a basic policy for the Company’s internal control systems. The policyemphasizes ongoing protection of the policyholders’ interests and contribution tosociety in line with the Company’s management philosophy. We are currently in theprocess of establishing and implementing our internal control systems based on thispolicy.
Fukoku Life is engaged in the highly public business of protecting policyholders’ rights, and is also an institutional investor obliged to safely and profitably manage other people’s assets. Therefore, we constantly strive to enhance the Company’s
internal control systems, which consist of a risk management system, compliancesystem, insurance claim payment administration system, and personal information
protection system.
We undertake our business in the life insurance industry while recognizing themany risks in our business environment. We have established a risk management
system that sets permissible limits for the different types of risks and ensures thatthey are controlled within those limits. In the unlikely event that a risk should arise,
we will deal with it swiftly and minimize damage. We will also inform our policyholders and society about the exact details of the risk in question.
As members of the Company, all executives undergo ongoing training in compliance-related matters so that they not only observe laws and regulations, but also
comply with protocols and social conventions. Our system ensures that in the unlikely event of improper conduct, it will be detected early and dealt with swiftly andappropriately.

10

Corporate Citizenship

Fukoku Life is engaged in various public relations activities that contribute towardbuilding an affluent and heartfelt society.

Fukoku Life Charity Concert
Since 1993, the Company has held regular classical music Charity Concerts aroundthe country as part of its commitment to enhancing interaction with customers
through music and fostering community welfare. Although entry to the concerts isfree, the audience is asked to make donations, which are given to local welfare groups.
Since 2003, we have also held “Mini Concerts,” where musicians visit schools fordisabled children, homes for the elderly, and other welfare facilities before or after
our classical concerts. To date, we have held 127 charity concerts and 79 Mini Concerts.
Sanrio Puroland
Fukoku Life uses Sanrio’s world-famous Hello Kitty character in posters, pamphlets,and other promotional materials. In addition, Fukoku Life is a sponsor of the “Sanrio
Character Boat Ride,” one of the many attractions in the Sanrio Puroland indoor
theme park.
Communicating with Stakeholders
Every year, Fukoku Life publishes a variety of materials as a means of disclosing
information on its business activities to stakeholders. These include its Japaneselanguage magazine, “Disclosure” (and abridged versions thereof), booklets written
for policyholders, and this English-language annual report. In addition, we produce
a variety of publications as needed, in order to strengthen the channels of communication between the Company, its policyholders, and its many other customers.

CC

1976, 2007 SANRIO CO., LTD. APPROVAL NO. S8082018'76, '90, '93, '96, '98, '99, '07 SANRIO APPROVAL No. P2108246

11

Non-consolidated Financial Statements
Non-consolidated Balance Sheets
As of March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Assets:Cash and deposits:
Cash ........................................................................................
Bank deposits ..........................................................................
Call loans ....................................................................................
Monetary claims bought ............................................................
Money held in trust ....................................................................
Securities:
Government bonds ................................................................
Local government bonds .......................................................
Corporate bonds ....................................................................
Stocks ......................................................................................
Foreign securities ...................................................................
Other securities ......................................................................
Loans:
Policy loans ..............................................................................
Ordinary loans ........................................................................
Real estate and movables:
Land ........................................................................................
Buildings .................................................................................
Movables ................................................................................
Construction in progress .......................................................
Tangible fixed assets:
Land ........................................................................................
Buildings .................................................................................
Construction in progress .......................................................
Other tangible fixed assets .....................................................
Intangible fixed assets:
Software ..................................................................................
Other intangible fixed assets ..................................................
Reinsurance receivables .............................................................
Other assets:
Accounts receivable ................................................................
Prepaid expenses ....................................................................
Accrued income ......................................................................
Deposits ..................................................................................
Differential account for futures trading .................................
Derivatives ..............................................................................
Deferred valuation losses on hedge .......................................
Suspense payment ..................................................................
Other assets ............................................................................
Deferred tax assets ......................................................................
Allowance for possible loan losses .............................................
Total assets ...............................................................................
12

¥

106
26,112
26,219131,300
3,563
79,554¥125
69,96770,09265,0003,211
95,849

2007

¥

115
60,76460,88096,4002,865
102,186

$

0
514
515
816
24
865

1,702,075
83,079428,753586,706
485,199
32,436
3,318,250

1,918,058
83,086395,303
840,970
639,408
39,484
3,916,311

1,891,859
114,761
460,854853,113746,343
42,7964,109,729

16,025
972
3,903
7,226
6,322
362
34,81378,1771,204,261
1,282,439

79,2181,171,595
1,250,813

79,286
1,186,939
1,266,226

671
10,054
10,72699,65890,7303,308
1,388
195,086

100,998
85,311
5,378
4,725
196,413

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

103,200
97,384819
5,068
206,472

874
824
6
42
1,749

—
—
—
77

—
—
—
108

7,942
451
8,393
52

67
3
71
0

8,429
1,252
20,210
2,360
352
2,272
124
2,304
13,17750,483
4,813(3,157)¥5,088,630

46,287703
20,464
2,408
—
310
1,537
3,753
13,80589,270—(2,704)¥5,684,365

11,625587
25,024
2,416
—
197
—
5,471
3,893
49,215—(9,399)¥5,893,024

98
4
211
20
—
1
—
46
32
416
—
(79)
$49,919

Non-consolidated Balance Sheets (Continued)
As of March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Liabilities:
Policy reserves:
Reserve for outstanding claims ............................................
Policy reserve .......................................................................
Reserve for dividends to policyholders ................................

27,472
4,951,438
54,516
5,033,427
85
42,843¥ 28,371
5,108,013
52,872
5,189,257
74
47,092$ 240
43,269447
43,958
0
398

5,000
4,261
3,762
9,689
725
5,389
10,391
42
2,003
2,182
1,349
44,7975,000
7,426
38,658
11,821
758
5,217
11,599
—
1,856
250
1,114
83,7055,000
10,15528,84911,368797
5,056
12,672
10
1,210
—
1,297
76,419

42
86
244
96
6
42
107
0
10
—
10
647

Reserve for employees' retirement benefits ............................
Reserve for directors' and corporate auditors'
retirement benefits ...............................................................
Reserve for price fluctuation of securities ...............................
Deferred tax liabilities ..............................................................
Deferred tax liabilities for revaluation reserve for land ...........

51,62751,461

50,248425—
30,813—
2,543—
42,59760,8602,977

547
50,06663,851
20,199

4
424
540
171

Total liabilities ........................................................................

4,875,749

5,317,957

5,497,755

46,571

Reinsurance payables ...............................................................
Subordinated bonds .................................................................
Other liabilities:
Subordinated debt loans .......................................................
Corporate income tax payable .............................................
Accounts payable ..................................................................
Accrued expenses ..................................................................
Unearned income .................................................................
Deposits received .................................................................
Guarantee deposits received ................................................
Differential account for futures trading ...............................
Derivatives ............................................................................
Deferred valuation gains on hedge ......................................
Suspense receipt ...................................................................

¥ 25,294
4,630,543
57,5504,713,388
78
32,500

¥

2007

13

Non-consolidated Balance Sheets (Continued)
As of March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Capital:Foundation funds ......................................................................
Accumulated foundation funds redeemed ...............................
Reserve for revaluation ............................................................
Surplus:
Legal reserve for future losses..............................................
Voluntary surplus reserves:
Reserve for redemption of foundation funds ...................
Reserve for dividend allowances ......................................
Reserve for advanced depreciation of real

30,0001,000
112

30,000
1,000
112

—
—
—

—
—
—

1,187

1,387

—

—

18,000
3,895

24,000
3,895

—
—

—
—

427
2,805
767
25,89535,847
26,48262,9304,480
114,358
212,881¥5,088,630

412
2,770
767
31,84547,27037,87480,503
5,244
249,548
366,408¥5,684,365

—
—
—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—
—
—

—
—
—

—
—
—

40,00031,000
112

338
262
0

—

—

1,587

13

—

—

3,895

32

Total foundation funds and surplus .........................................
Net unrealized gains on securities, net of tax ..........................
Deferred valuation gains (losses)
under hedge accounting .........................................................
Revaluation reserve for land, net of tax ...................................
Total valuation and translation adjustments ............................
Total net assets .................................................................

—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—

343
2,770
767
53,77161,54863,135
134,247
273,377

2
23
6
455
521
534
1,137
2,315

—
—
—
—

—
—
—
—

(152)
(12,204)
261,020395,268

(1)
(103)
2,211
3,348

Total liabilities and net assets ...........................................

——¥5,893,024$49,919

estate for tax purpose ...................................................
Reserve for directors' retirement allowances ..................
Other reserves ..................................................................
Unappropriated surplus .......................................................
Net surplus for the year ...................................................
Revaluation reserve for land, net of tax ...................................
Net unrealized gains on securities, net of tax ..........................
Total capital ............................................................................
Total liabilities and capital ....................................................
Net assets:
Foundation funds .....................................................................
Accumulated foundation funds redeemed ...............................
Reserve for revaluation ............................................................
Surplus:
Legal reserve for future losses .............................................
Other surplus:
Reserve for dividend allowances ......................................
Reserve for advanced depreciation ofreal estate for tax purpose ..............................................
Reserve for directors' retirement allowances ..................
Other reserves ..................................................................
Unappropriated surplus ...................................................

See notes to the non-consolidated financial statements.

14

2007

Non-consolidated Statements of Operations
Year ended March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Ordinary revenues:
Premium and other income:Premium income ..................................................................
Reinsurance income .............................................................
Investment income:Interest, dividends and other income:Interest from deposits ......................................................
Interest and dividends from securities .............................
Interest from loans ...........................................................
Income from real estate for rent ......................................
Other interest and dividends ............................................
Gains from money held in trust, net ....................................
Gains from trading securities, net ........................................
Gains on sales of securities ...................................................
Gains on redemption of securities .......................................
Other investment income ....................................................
Gains from separate accounts, net .......................................
Other ordinary revenues:
Fund receipt from annuity rider ..........................................
Fund receipt from deposit of claims paid ............................
Reversal of reserve for employees' retirement benefits ......
Others ...................................................................................
Total ordinary revenues ........................................................
Ordinary expenditures:
Claims and other payments:
Claims ...................................................................................
Annuities ...............................................................................
Benefits .................................................................................
Surrenders ............................................................................
Other payments ....................................................................
Reinsurance premiums .........................................................
Provision for policy reserve and others:
Provision for reserve for outstanding claims .......................
Provision for policy reserve .................................................
Interest on accumulated dividends to policyholders ...........

2007¥731,327
376
731,704¥ 845,604
403
846,008¥721,858130
721,989$6,114
1
6,115

61
41,18427,756
10,502
979,514
5,080
9,671
8,486
—
529
3,955
107,238

1,358
45,74925,101
10,887
86
83,184
11,05016,21428,448—701
25,514
165,1121,135
69,70424,981
10,371
302
106,495
3,846
13,025
17,82326
365
5,813
147,397

9
590
211
87
2
902
32
110
150
0
3
49
1,248

485
19,590487
304
20,868404
16,371
166
705
17,647432
16,552
1,213
1,153
19,351

3
140
10
9
163

859,811

1,028,769

888,7397,528

201,237
58,477
127,417
98,39577,938335
563,801

197,973
64,442
123,924
87,322
23,841
315
497,819

185,048
71,522
133,961
106,851
22,019292
519,696

1,567
605
1,134
905
186
2
4,402

790
110,34862¥111,200

2,178
320,89455¥ 323,128

898
156,575
51¥157,525

7
1,326
0$1,33415

Non-consolidated Statements of Operations (Continued)
Year ended March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Investment expenses:
Interest expenses ..................................................................
Losses on sales of securities .................................................
Losses on valuation of securities ..........................................
Losses on redemption of securities ......................................
Losses from derivative instruments, net ..............................
Foreign exchange losses, net ................................................
Provision for allowance for possible loan losses ..................
Depreciation of real estate for rent and other assets ...........
Other investment expenses ..................................................
Operating expenses ..................................................................
Other ordinary expenditures:
Claim deposit payments .......................................................
Taxes .....................................................................................
Depreciation .........................................................................
Others ...................................................................................
Total ordinary expenditures .................................................
Ordinary profits .....................................................................
Extraordinary gains:
Gains on disposal of real estate and movables .....................
Gains on disposal of fixed assets ..........................................
Reversal of allowance for possible loan losses .....................
Total extraordinary gains ......................................................
Extraordinary losses:
Losses on disposal of real estate and movables ....................
Losses on disposal of fixed assets .........................................
Impairment losses .................................................................
Provision for reserve for
employees' retirement benefits .........................................

Provision for reserve for directors' andcorporate auditors' retirement benefits ............................
Provision for reserve for price fluctuation of securities ......
Total extraordinary losses .....................................................
Surplus before income taxes ................................................
Income taxes:
Current .................................................................................
Deferred ...............................................................................
Net surplus for the year ........................................................
Surplus carried from the previous year ..............................
Reversal of revaluation reserve for land .............................
Reversal of reserve for directors' retirement .....................
Unappropriated surplus ........................................................
See notes to the non-consolidated financial statements.

16

¥

666
3,814
760
2
8,273
84
—
4,704
3,962
22,267
87,912

¥

1,655
5,941
266
19
17,834
1,294
—
4,453
4,149
35,61591,376

2007

¥

2,342
11,168
1,296
—
4,353
993
6,855
4,383
4,939
36,33389,574

$

19
94
10
—
36
8
58
37
41
307
758

11,055
5,346
5,507
64
21,975807,157
52,653

11,236
5,931
5,612
590
23,370971,31157,457

13,681
5,265
6,094
353
25,395
828,525
60,213

115
44
51
2
215
7,018
510

170
—
2,076
2,247

1,165
—
750
1,916

—
46
—
46

—
0
—
0

4,985
—
—

2,570
—
3,920

—
1,015
466

—
8
3

7,887

—

—

—

—
9,130
22,00232,898—
11,784
18,27541,098

547
7,468
9,496
50,762

4
63
80
430

11,665(5,249)26,482
10,124(778)
20

13,856(10,632)
37,874
10,124(764)
35

17,792(10,532)
43,502
—
—
—

150
(89)
368
—
—
—

¥ 35,847¥ 47,270

¥

—

$

—

Non-consolidated Statements of Surplus
Year ended March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Unappropriated surplus ...........................................................

2007¥ 35,847¥ 47,270¥53,771$ 455

of real estate for tax purpose ............................................

14

69

23

0

Reversal of reserve for directors' retirement .......................

—

—

2,770

23

14

69

2,793

23

35,86247,33956,565479

18,96630,45435,525300

Legal reserves for future losses ........................................

200

200

200

1

Interest payment for foundation funds ............................

531

531

716

6

Bonus to directors ............................................................

30

30

—

—

Bonus to corporate auditors .............................................

10

—

—

—

6,000

6,000

10,000

84

6,771

6,761

10,91692

Total appropriation of surplus .............................................

25,737

37,21546,441

393

Unappropriated surplus carried forward ............................

¥ 10,124¥ 10,124¥10,124

Reversal of voluntary surplus reserve:
Reversal of reserve for advanced depreciation

Total .........................................................................................
Appropriation of surplus:
Reserve for dividends to policyholders ................................
Net surplus:

Voluntary reserve:
Reserve for redemption of foundation funds ..............

$

85

See notes to the non-consolidated financial statements.

17

Non-Consolidated Statement of Changes in Net Assets(For the year ended March 31, 2007)
Millions of yen

Foundation
funds

Balance at the end of previous
fiscal year ........................................
Changes in the current fiscal year:
Financing of additionalfoundation funds .........................
Additions to reserve fordividends to policyholders ..........
Additions to legal reserve for
future losses ................................
Additions to accumulated
foundation funds redeemed ........
Payment of interest on
foundation funds .........................
Payment of bonus to directors ......
Net surplus for the year .................
Redemption of foundation
funds ...........................................
Additions to reserve forredemption of foundation funds ...
Reversal of reserve forredemption of foundation funds ...
Reversal of reserve foradvanced depreciation ofreal estate for tax purpose ...........
Reversal of revaluation
reserve for land ...........................
Net change, excluding
foundation funds and surplus .....
Total changes in the current
fiscal year ........................................
Balance at the end of current
fiscal year ........................................

¥ 30,000

Accumulated
foundation
Reserve
funds
forredeemed revaluation

Foundation funds and surplus
Surplus
Other surplus
Reserve forReserve
Reserve foradvancedforLegalredemption Reserve
depreciation of directors'
reserveofforreal estate for retirement
for future foundation dividend
tax purpose
allowances
lossesfunds
allowances¥ 1,000¥1,387¥112¥24,000¥3,895¥412¥2,770

UnappropriOtherated
reserves
surplus200—

40,000(30,454)(30,454)(30,454)

(200)

—

—

—

30,000(531)(30)
43,502(531)(30)
43,502—(30,000)——(30,000)(30,000)

69

—

—

144

144

144

6,501

(17,367)

22,63230,000(531)(30)
43,502(30,000)
6,000(6,000)(30,000)(69)

30,000—200(24,000)¥ 40,000¥31,000¥112¥1,587 ¥

—

—

(69)

—

¥3,895¥343¥2,770Total
surplus¥767 ¥ 47,270 ¥ 80,503 ¥111,615

40,00010,000Total
foundation
funds andsurplus—¥767 ¥ 53,771 ¥ 63,135 ¥134,247

Millions of yen
Valuation and translation adjustments

Balance at the end of previous fiscal year .......................................
Changes in the current fiscal year:
Financing of additional foundation funds .................................
Additions to reserve for dividends to policyholders .................
Additions to legal reserve for future losses ...............................
Additions to accumulated foundation funds redeemed ............
Payment of interest on foundation funds .................................
Payment of bonus to directors ..................................................
Net surplus for the year ............................................................
Redemption of foundation funds ..............................................
Additions to reserve for redemption of foundation funds ........
Reversal of reserve for redemption of foundation funds ..........
Reversal of reserve for advanced depreciation of realestate for tax purpose .............................................................
Reversal of revaluation reserve for land ....................................
Net change, excluding foundation funds and surplus ..............
Total changes in the current fiscal year ..........................................
Balance at the end of current fiscal year .........................................

18

Net unrealized
gains onsecurities, netof taxDeferredvaluation gains(losses) under hedge
accounting

Revaluation
reserve for land,
net of tax

Total valuationand translation
adjustments

Total
net assets¥249,548¥ —¥ 5,244¥254,792¥ 366,408
40,000(30,454)—
30,000(531)(30)
43,502(30,000)—(30,000)

23,82923,829¥273,377

(152)
(152)
¥(152)(17,449)(17,449)¥(12,204)

6,227
6,227
¥261,020

—
144
6,227
28,860¥ 395,268

Non-Consolidated Statement of Changes in Net Assets (Continued)(For the year ended March 31, 2007)
Millions of U.S. dollars
Foundation funds and surplus
Surplus
Other surplus

Foundation
funds

Balance at the end of previous
fiscal year ........................................
Changes in the current fiscal year:
Financing of additionalfoundation funds .........................
Additions to reserve fordividends to policyholders ..........
Additions to legal reserve for
future losses ................................
Additions to accumulated
foundation funds redeemed ........
Payment of interest on
foundation funds .........................
Payment of bonus to directors ......
Net surplus for the year .................
Redemption of foundation
funds ...........................................
Additions to reserve forredemption of foundation funds ...
Reversal of reserve forredemption of foundation funds ...
Reversal of reserve foradvanced depreciation ofreal estate for tax purpose ...........
Reversal of revaluation
reserve for land ...........................
Net change, excluding
foundation funds and surplus .....
Total changes in the current
fiscal year ........................................
Balance at the end of current
fiscal year ........................................

$ 254

AccumuReserve for
lated
Legal
redemption
foundation
Reserve
reserve
of
funds
for
for future foundation
redeemed revaluation
losses
funds

$

8

$ 0

$ 11

$ 203

Reservefordividend
allowances

Reserve foradvanceddepreciation ofreal estate fortax purpose

Reservefordirectors'
retirement
allowances

$ 32

$ 3

$ 23

UnappropriOtherated
reserves
surplus

$ 6

$ 400

338

1

(257)

(257)

(1)

—

—

—

254

(4)
(0)
368

(4)
(0)
368

—

(254)

—

—

(254)

(254)

0

—

—

1

1

1

(50)

(254)

(0)

—

1

$ 338

$ 262

$ 0

$ 13

$

945

(257)

(254)

254

$

338

(4)
(0)
368

84

$ 681

—

254

(50)

Total
surplusTotal
foundation
funds andsurplus

(203)

—

(0)

—

—

55

(147)

191

—

$ 32

$ 2

$ 23

$ 6

$ 455

$ 534

$ 1,137

Millions of U.S. dollars
Valuation and translation adjustments
Net unrealized
gains onsecurities, netof taxBalance at the end of previous fiscal year .......................................
Changes in the current fiscal year:
Financing of additional foundation funds .................................
Additions to reserve for dividends to policyholders .................
Additions to legal reserve for future losses ...............................
Additions to accumulated foundation funds redeemed ............
Payment of interest on foundation funds .................................
Payment of bonus to directors ..................................................
Net surplus for the year ............................................................
Redemption of foundation funds ..............................................
Additions to reserve for redemption of foundation funds ........
Reversal of reserve for redemption of foundation funds ..........
Reversal of reserve for advanced depreciation of realestate for tax purpose .............................................................
Reversal of revaluation reserve for land ....................................
Net change, excluding foundation funds and surplus ..............
Total changes in the current fiscal year ..........................................
Balance at the end of current fiscal year .........................................

$ 2,113

Deferredvaluation gains(losses) under hedge
accounting

Revaluation
reserve for land,
net of tax

$ —

$

44

Total valuationand translation
adjustments$ 2,158

Total
net assets$ 3,103
338
(257)
—
254
(4)
(0)
368
(254)
—
(254)

201
201
$ 2,315

(1)
(1)
$ (1)

(147)
(147)
$ (103)52
52$ 2,211—1
52244$ 3,348

19

Notes to the Non-consolidated Financial Statements
I. Presentation of the Non-consolidated Financial Statements
1. Basis of Presentation
The accompanying non-consolidated financial statements have been prepared from the accounts maintained by Fukoku
Mutual Life Insurance Company (the "Company") in accordance with the provisions set forth in the Insurance Business
Law of Japan and its related rules and regulations and in conformity with accounting principles generally accepted inJapan, which are different in certain respects from accounting principles generally accepted in countries and jurisdictions
other than Japan.
In addition, the notes to the non-consolidated financial statements include information which is not required underaccounting principles generally accepted in Japan but is presented herein as additional information.
Amounts of less than one million yen have been eliminated. As a result, total in yen shown herein do not necessarily
agree with the sum of the individual amounts.

2. U.S. Dollar Amounts
The translations of yen amounts into U.S. dollar amounts are included solely for the convenience of the reader and havebeen made, as a matter of arithmetical computation only, at the rate of ¥118.05 = US$1.00, the effective rate of exchange
at the balance sheet date of March 31, 2007. The translations should not be construed as representations that such yen
amounts have been or could in the future be, converted into U.S. dollars at that or any other rates.

II. Notes to Balance Sheets
1. Significant Accounting Policies(1) Valuation methods of securities
The valuations of securities, including bank deposits and monetary claims bought which are equivalent to securities, andsecurities managed as trust assets in money held in trust, are as follows:i) Trading securities are stated at fair market value. Costs of their sales are determined by the moving averagemethod.
ii) Held-to-maturity debt securities are stated at amortized cost under the straight-line method, cost being determined by the moving average method.
iii) Policy-reserve-matching bonds are stated at amortized cost under the straight-line method, cost being determined by the moving average method in accordance with "Temporary Treatment of Accounting and Auditing
Concerning Policy-reserve-matching Bonds in Insurance Industry" (Industry Audit Committee Report No.21
issued by the Japanese Institute of Certified Public Accountants on November 16, 2000).
iv) Investments in subsidiaries and affiliates are stated at cost, cost being determined by the moving average method.
v) Available-for-sale securities with fair market value are stated at fair market value based on the market prices at theend of fiscal year. Costs of their sales are determined by the moving average method. Net unrealized gains orlosses on these available-for-sale securities, net of taxes, are recorded as a separate component of net assets.
Available-for-sale securities with no fair market value are stated at cost, cost being determined by the moving
average method, except for public and corporate bonds including foreign bonds, of which the difference between
acquisition cost and face value is considered to be an adjustment of interest. Such bonds are stated at amortizedcost under the straight-line method, cost being determined by the moving average method.
(2) Valuation methods of derivative instruments
Derivative instruments are stated at fair market value.

20(3) Revaluation of land
The Company revalued the land for business purposes based on the Law for Revaluation of Land (Law No.34 promulgated on March 31, 1998). The difference between fair value and book value resulting from the revaluation, net of related
taxes, is recorded as revaluation reserve for land as a separate component of net assets and the related tax is recorded asdeferred tax liabilities for revaluation reserve for land.
Date of revaluation: March 31, 2002
Method of revaluation as prescribed for in Article 3 Paragraph 3 of the said Law:
Calculation is based on the appraisal value for property tax set forth in Article 2 item 3 of the Enforcement
Ordinance of the Law for Revaluation of Land (Government Ordinance No.119 promulgated on March 31,
1998) and the road rate set forth in Article 2 item 4 of the said Ordinance with certain reasonable adjustments.
The excess of the aggregate new book value of land for business purposes after revaluation over the total fair valueof land, which is required to be disclosed in accordance with Article 10 of the Law for Revaluation of Land, was¥4,178 million as of March 31, 2005. The total fair value of land exceeded the aggregated new book value of land
after revaluation as of March 31, 2006 and 2007.
(4) Depreciation of tangible fixed assets
Depreciation of tangible fixed assets held by the Company, except for the buildings acquired on and after April 1, 1998
which are depreciated based on the straight-line method, is computed based on the declining-balance method. Other
tangible assets acquired for ¥100,000 or more but less than ¥200,000 are depreciated by equal amounts over three years.
(5) Foreign currency translation
Foreign currency-denominated assets and liabilities, except for investments in subsidiaries and affiliates, are translated
into Japanese yen at the effective exchange rate prevailing at the balance sheet date. Investments in subsidiaries andaffiliates are translated into Japanese yen at the exchange rate on the date of acquisition.
(6) Allowance for possible loan losses
Allowance for possible loan losses is provided in accordance with the Company's standards of self-assessment and writeoffs and reserves on credit quality:i) For the credits of borrowers who are legally bankrupt such as being in the proceedings of bankruptcy or civil
rehabilitation (hereinafter called "legally bankrupt borrowers") and who are substantially bankrupt (hereinafter
called "substantially bankrupt borrowers"), the Company provides the remaining amount of credits after the
direct write-off described below and the deductions of the amount expected to be collected through the disposalof collateral or the execution of guarantees.
ii) For the credits of borrowers who are not currently bankrupt but have a high possibility of bankruptcy, the Company provides the amounts deemed as necessary considering the borrowers' ability to pay, within the amounts
after deductions of the amount expected to be collected through the disposal of collateral or the execution ofguarantees.
iii) For the credits of borrowers other than the above, the Company provides the amounts calculated by multiplying
the borrowers' balance by the actual ratio of bad debt losses on defaults during a certain past period.
All credits are assessed by the relevant departments in accordance with the Company's standards of self-assessment on
credit quality. The results of the assessment are reviewed by the audit department, which is independent of businessrelated divisions. Subsequently, the allowance for possible loan losses are provided based on the results of these assessments.

21

For the credits of legally bankrupt borrowers and substantially bankrupt borrowers, the amounts remaining after
deductions of collateral value or the amounts collectible through the execution of guarantees is written-off directly fromthe borrower's balance as the estimated uncollectible amounts. The amounts written-off as of March 31, 2005, 2006 and2007 were ¥22,408 million, ¥833 million and ¥784 million (US$6 million), respectively.
(7) Reserve for employees' retirement benefits
The Company adopts accounting standards for employees' retirement benefits (Business Accounting Council dated June
16, 1998) and accounts for the reserve for employees' retirement benefits based on the projected benefit obligation andplan assets at the balance sheet date.
(8) Reserve for directors' and corporate auditors' retirement benefits
Reserve for directors' and corporate auditors' retirement benefits represents the estimated amounts to be paid due toabolishing internal rule of retirement benefit plan in relation to directors and corporate auditors.
(9) Reserve for price fluctuation of securities
Reserve for price fluctuation of securities is calculated in accordance with the ruling in Article 115 of the Insurance
Business Law.
(10) Lease transactions
Finance leases, except those leases for which the ownership of the leased property is considered to be transferred to thelessee, are primarily accounted for as operating leases.
(11) Accounting for hedge activities
Hedge accounting is based on "Accounting Standards for Financial Instruments" (ASBJ Statement No.10 issued by the
Accounting Standards Board of Japan on August 11, 2006).
Primarily, for the interest rate swaps on loans qualifying for hedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged item, gains and losses on the interest rate swaps are deferred
until the maturity of the hedged transactions.
Deposits and bonds denominated in foreign currencies for which forward foreign exchange contracts are used tohedge the foreign currency fluctuations are translated at the contract rates if the forward contracts qualify for specifichedge accounting. In this case, exchange differences between exchange rate on trade date and forward contract rate areallocated to each fiscal year from the date contracted to the date settled.
For judging the effectiveness of hedge used, ratio analysis of comparing the cash flow fluctuation of hedged item withthe same of hedging instruments is mostly applied.
(12) Accounting for consumption taxes
The Company accounts for consumption taxes by the tax-exclusion method. The consumption taxes on certain assets,
which are not deductible from consumption taxes withheld and that are stipulated to be deferred under the Tax Law, aredeferred as prepaid expenses and amortized equally over five years. Consumption taxes other than deferred consumption
taxes are recognized as an expense when incurred.
(13) Policy reserve
Policy reserve is based on Article 116 of the Insurance Business Law, and the premium reserve at the end of fiscal year is
calculated by the following method:
In regard to the policies subject to the standard policy reserve, the method as prescribed by the Commissioner ofFinancial Services Agency (Ministry of Finance Ordinance No. 48, 1996) is applied.
In regard to the policies not subject to the standard policy reserve, the net level premium method is applied.

22

(14) Software
The software for internal use, which was included in other assets as of March 31, 2005 and 2006 and in software as ofMarch 31, 2007, is amortized based on straight-line method over the estimated useful lives.
(15) Deferred assets
Bond issuance expenses are charged to income when paid.
Discount on bonds is amortized equally over the period for which interest on bonds is fixed. For the year ended March
31, 2007, discount on bonds which was recorded in other assets in previous year is deducted from bonds in accordancewith "Tentative Solution on Accounting for Deferred Assets" (ASBJ PITF No.19 issued by the Accounting Standards
Board of Japan on August 11, 2006).
(16) Policy-reserve-matching bonds
Of the bonds corresponding to the sub-groups which are set by insurance types and investment policies, the bonds thatare held to match the duration of liabilities are classified as policy-reserve-matching bonds in accordance with "Temporary Treatment of Accounting and Auditing Concerning Policy-reserve-matching Bonds in Insurance Industry" (Industry Audit Committee Report No.21 issued by the Japanese Institute of Certified Public Accountants on November 16,2000).
The amount of policy-reserve-matching bonds recorded on the balance sheets as of March 31, 2007 was ¥540,923
million (US$4,582 million). The market value of these bonds as of March 31, 2007 was ¥542,462 million (US$4,595
million).

2. Changes in Accounting Policy(1) Effective for the year ended March 31, 2007, the Company adopted "Accounting Standards for Presentation of Net
Assets in the Balance Sheet" (ASBJ Statement No.5 issued by the Accounting Standards Board of Japan on December 9,2005). If the previous accounting policy were to be applied, the amount of "Total capital" as of March 31, 2007 was¥395,420 million (US$3,349 million).
(2) Effective for the year ended March 31, 2007, the Company adopted "Tentative Solution on Accounting for Deferred
Assets" (ASBJ PITF No.19 issued by the Accounting Standards Board of Japan on August 11, 2006). As a result, discounton bonds of ¥106 million (US$905 thousand) as of March 31, 2007, which was recorded in other assets in previous year,
is deducted from bonds.
(3) In accordance with the revised form of the Enforcement Regulation of the Insurance Business Law, the balance sheet
presentation has been changed as follows, effective for the year ended March 31, 2007.
(a) "Real estate and movables" which was presented as a separate line item is presented as "tangible fixed assets".
(b) "Intangible fixed assets" which was included in "Other assets" is presented as a separate line item. The amount of"Intangible fixed assets" included in "Other assets" was ¥9,649 million as of March 31, 2006.

3. Loans Receivable
The total amounts of credits to bankrupt borrowers, delinquent loans, delinquent loans past 3 months or more andrestructured loans, which were included in loans, were ¥1,971 million, ¥2,317 million and ¥11,332 million (US$95
million) as of March 31, 2005, 2006 and 2007, respectively.
i) The balances of credits to bankrupt borrowers were ¥556 million, ¥429 million and ¥443 million (US$3 million)
as of March 31, 2005, 2006 and 2007, respectively.
ii) The balances of delinquent loans were ¥807 million, ¥1,882 million and ¥10,889 million (US$92 million) as ofMarch 31, 2005, 2006 and 2007, respectively.
iii) There were no balances of delinquent loans past 3 months or more as of March 31, 2005, 2006 and 2007.
iv) The balance of restructured loans was ¥607 million and ¥5 million as of March 31, 2005 and 2006, and there wasno balance as of March 31, 2007.
23

Credits to bankrupt borrowers represent loans, excluding the balances already written-off, which meet the conditionsprescribed in Article 96 Paragraph 1 Item 3 and 4 of the Enforcement Regulations of the Corporate Tax Law. Moreover,accruing interest of these loans is not recorded as income after determining that principal of or interest on these loans isunlikely to be collected due to the significant delay in repayment of principal or interest payment or for some otherreasons.
Delinquent loans are credits whose accruing interest is not recorded as income due to the same reasons as describedabove, and exclude credits to bankrupt borrowers and loans for which interest payments have been suspended and rescheduled to assist and support the borrowers in the restructuring of their business.
Delinquent loans past 3 months or more are loans for which interest payment or repayment of principal are delinquent
for 3 months or more from the due date under the terms of the related loan agreements, excluding those loans classified
as credits to bankrupt borrowers and delinquent loans.
Restructured loans are loans for which certain concessions favorable to borrowers, such as interest reduction or exemptions, rescheduling of due date of principal or interest payment, waiver of claim or other terms, have been negotiatedfor the purpose of assisting and supporting the borrowers in the restructuring of their business. This category excludes
loans classified as credits to bankrupt borrowers, delinquent loans and delinquent loans past 3 months or more.
The direct write-offs related to loans decreased credits to bankrupt borrowers described above by ¥21,615 million,¥51 million and ¥2 million (US$21 thousand) as of March 31, 2005, 2006 and 2007, respectively.
The direct write-offs related to loans decreased delinquent loans described above by ¥793 million, ¥782 million and¥782 million (US$6 million) as of March 31, 2005, 2006 and 2007, respectively.

4. Accumulated Depreciation of Tangible Fixed Assets
Accumulated depreciation of tangible fixed assets which was presented as accumulated depreciation of real estate andmovables until previous fiscal year totaled to ¥112,678 million, ¥113,289 million and ¥116,318 million (US$985 million)
as of March 31, 2005, 2006 and 2007, respectively.

5. Separate Accounts
Total assets in separate accounts provided for in Article 118 of the Insurance Business Law were ¥101,227 million,¥123,046 million and ¥131,182 million (US$1,111 million) as of March 31, 2005, 2006 and 2007, respectively. The
amounts of liabilities were the same as these figures.

6. Receivables from / Payables to Subsidiaries
The total amounts of receivables from / payables to subsidiaries were ¥23 million and ¥1,231 million as of March 31,
2005, ¥21 million and ¥1,602 million as of March 31, 2006, and ¥2,886 million (US$24 million) and ¥1,933 million(US$16 million) as of March 31, 2007, respectively.

7. Monetary Claims to Directors
Monetary claims to directors as of March 31, 2005, 2006 and 2007 were ¥21 million, ¥16 million and ¥11 million (US$99
thousand), respectively.

24

8. Income Taxes
Deferred tax assets and deferred tax liabilities as of March 31, 2005 and 2006 were ¥71,200 million and ¥66,387 million,and ¥82,460 million and ¥143,320 million, respectively.
Deferred tax assets and deferred tax liabilities as of March 31, 2007 were ¥93,069 million (US$788 million) and ¥156,920
million (US$1,329 million), respectively. Valuation allowance for deferred tax assets was ¥2,653 million (US$22 million).
Major components of deferred tax assets and liabilities were as follows:
As of March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Deferred tax assets:
Policy reserves .............................................................
Reserve for employees' retirement benefits ...............
Reserve for price fluctuation of securities ..................
Allowance for possible loan losses ..............................
Deferred tax liabilities:
Net unrealized gains on securities ..............................

2007¥32,962
18,35911,1574,610¥ 43,026
18,634
15,424—¥ 51,572
18,194
18,128
—

$ 436
154
153
—

64,914

141,654

155,181

1,314

The statutory tax rate and the actual effective tax rates for the years ended March 31, 2005, 2006 and 2007 were 36.2%
and 19.5%, 36.2% and 7.8% and 36.2% and 14.3%, respectively. The major differences between the statutory tax rate
and the actual effective tax rate were reserve for dividends to policyholders of 20.9%, 26.8% and 25.3% for the years
ended March 31, 2005, 2006 and 2007, respectively.

9. Contingent Liabilities
Contingent liabilities as of March 31, 2007 related to the cost for system development in The Kyoei Kasai Shinrai Life
Insurance Company, Limited were ¥233 million (US$1 million).

10. Reserve for Dividends to Policyholders
Changes in reserve for dividends to policyholders were as follows:
As of March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Balance at the end of previous fiscal year ........................
Transfer from surplus in previous fiscal year ..................
Dividends paid in fiscal year ............................................
Increase in interest ...........................................................
Balance at the end of fiscal year ......................................

¥ 63,879
16,688(23,079)62¥ 57,550¥ 57,550
18,966(22,057)
55¥ 54,516

2007¥ 54,516
30,454(32,149)51¥ 52,872

$ 461
257
(272)
0
$ 447

11. Stocks of Subsidiaries
The amounts of stocks of subsidiaries the Company held as of March 31, 2005, 2006 and 2007 were ¥2,826 million,¥2,826 million and ¥2,828 million (US$23 million), respectively.

12. Pledged Assets and Secured Debts
Assets pledged as collateral as of March 31, 2005 and 2006 were ¥20,834 million and ¥19,440 million. Secured debts as ofMarch 31, 2005 and 2006 were ¥5,080 million and ¥4,868 million.
Assets pledged as collateral as of March 31, 2007 were ¥18,050 million (US$152 million) of securities and ¥856
million (US$7 million) of money held in trust. Secured debts as of March 31, 2007 was ¥4,710 million (US$39 million).
25

13. Policy Reserves for the Reinsurance Contracts
Reserve for outstanding claims for the reinsurance contracts provided in accordance with Article 71 Item 1 of the Enforcement Regulation of the Insurance Business Law ("reserve for outstanding claims for ceded reinsurance") were ¥27
million, ¥900 thousand and ¥43 million (US$367 thousand) as of March 31, 2005, 2006 and 2007, respectively.
Policy reserve for the reinsurance contracts provided in accordance with Article 71 Item 1 of the Enforcement Regulation of the Insurance Business Law ("policy reserve for ceded reinsurance") were ¥39 million, ¥31 million and ¥32
million (US$273 thousand) as of March 31, 2005, 2006 and 2007, respectively.

14. Net Assets
Net assets defined in Article 30 Paragraph 2 (former Article 24-2 Paragraph 2 Item 2) of the Enforcement Regulation of
the Insurance Business Law were ¥120,090 million, ¥259,925 million and ¥273,337 million (US$2,315 million) as ofMarch 31, 2005, 2006 and 2007, respectively.

15. Additional Foundation Funds
The Company raised additional foundation funds of ¥40,000 million (US$338 million) during the year ended March 31,
2007 in accordance with Article 60 of the Insurance Business Law.

16. Redemption of Foundation Funds
In the year ended March 31, 2007, according to the redemption of foundation funds of ¥30,000 million (US$254 million), the Company reversed the reserve for redemption of foundation funds and provided the equivalent amount for
accumulated foundation founds redeemed in accordance with Article 56 of the Insurance Business Law.

17. Commitment LineAs of March 31, 2005, 2006 and 2007, there were unused commitment line agreements under which the Company is thelender of ¥12,812 million, ¥3,624 million and ¥1,581 million (US$13 million), respectively.

18. Subordinated Bonds
Repayments of subordinated bonds are subordinated to other obligations.

19. Subordinated Debt Loans
Repayments of subordinated debt loans are subordinated to other obligations.

20. Assets Denominated in Foreign Currencies
Assets denominated in foreign currencies as of March 31, 2005, 2006 and 2007 totaled to ¥396,364 million, ¥569,822
million and ¥672,918 million (US$5,700 million), respectively. The principal foreign currency asset amounts as of March
31, 2005, 2006 and 2007 were US$1,644 million and 1,017 million euros, US$2,567 million and 1,487 million euros and2,022 million euros and US$2,579 million, respectively.
Liabilities denominated in foreign currencies as of March 31, 2006 and 2007 totaled to ¥43,820 million and ¥48,275million, respectively. The foreign currency liability amounts as of March 31, 2006 and 2007 were 306 million euros.

21. Contribution to Policyholders Protection FundThe future contribution to the former Insurance Policyholders Protection Fund of Japan, which was succeeded by theLife Insurance Policyholders Protection Corporation of Japan based on the Supplementary Article 140 Paragraph 5 of
the Financial System Reform Law, were estimated at ¥1,306 million, ¥800 million and ¥285million (US$2 million) as ofMarch 31, 2005, 2006 and 2007, respectively. The contribution is charged as operating expenses in the year in which they
are paid.

26

22. Contribution to Policyholders Protection Corporation
The future contribution to the Life Insurance Policyholders Protection Corporation of Japan under Article 259 of the
Insurance Business Law were estimated at ¥7,243 million, ¥10,615 million and ¥11,174 million (US$94 million) as ofMarch 31, 2005, 2006 and 2007, respectively. The contribution is charged as operating expenses in the year in which they
are paid.

23. Reserve for Employees’ Retirement Benefits(1) The reserve for retirement benefits as of March 31, 2005, 2006 and 2007 were calculated as follows:
As of March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

a. Projected benefit obligation ............................
b. Fair value of pension plan assets......................
c. Unfunded benefit obligation (a+b) ..................
d. Unrecognized actuarial differences .................
e. Unrecognized prior service cost ......................
f. Reserve for employees' retirement
benefits (c+d+e) ..............................................

2007¥ (73,281)
15,771(57,510)5,572
310¥ (73,568)
19,810(53,758)
2,020
276¥ (73,651)
21,438(52,212)1,722
241$ (623)
181
(442)
14
2

¥ (51,627)¥ (51,461)¥ (50,248)$ (425)(2) Gross amount of retirement benefit expenses for the years ended March 31, 2005, 2006 and 2007 were as follows:Year ended March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Service cost ..........................................................
Interest cost ..........................................................
Expected return on plan assets ............................
Amortization of transition obligation .................
Recognized actuarial differences .........................
Amortization of prior service cost .......................
Notes:¥ 3,826
1,478
(501)
7,887
851
34
¥13,576¥ 3,563
1,464
(551)
—
780
34
¥5,2902007¥ 3,472
1,470
(792)
—
502
34
¥ 4,687

$ 29
12
(6)
—
4
0
$ 39

The amortization of transition obligation is recorded as provision for reserve for retirement benefits which isincluded in extraordinary losses.

(3) The assumptions used in calculation of the above information were as follows:
Method of attributing the projected benefits to periods of service .......
Straight-line basis
Discount rate ...........................................................................................
2.0%
Expected rate of return on pension plan assets (See Note) ...................
4.0%
Amortization period of transition obligation .........................................
5 years
Recognition period of actuarial differences ............................................
10 years
Amortization period of prior service cost ...............................................
10 years
Note: Expected rate of return on pension plan assets for the year ended March 31, 2005 and 2006 were 3.5%.

27

III. Notes to Statements of Operations
1. Changes in Accounting Policy(1) Effective for the year ended March 31, 2007, the Company adopted "Guidance on Accounting for Other Compound
Financial Instruments (Compound Financial Instruments Other than Those with Option to Increase Paid-in Capital)"(ASBJ Guidance No.12 issued by the Accounting Standards Board of Japan on March 30, 2006). As a result, ordinary
profits decreased by ¥33 million (US$282 thousand), compared to the previous methods.
(2) In accordance with the revised form of the Enforcement Regulation of the Insurance Business Law, the presentationof statements of operations has been changed as follows, effective for the year ended March 31, 2007.
(a) "Gains (losses) on disposal of real estate and movables" which was presented as a separate line item is presented as"gains (losses) on disposal of fixed assets."(b) The bottom line of statements of operations has been changed from "Unappropriated surplus" to "Net surplus forthe year."

2. Transactions with Subsidiaries
The total amounts of revenues and expenditures in connection with subsidiaries for the years ended March 31, 2005, 006
and 2007 were ¥351 million and ¥6,226 million, ¥405 million and ¥6,746 million, and ¥516 million (US$4 million) and¥7,811 million (US$66 million), respectively.

3. Gains on Sales of Securities
Major items of gains on sales of securities were as follows:Year ended March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Domestic bonds ...............................................................
Domestic stocks and other ..............................................
Foreign securities .............................................................

¥1,731
6,405
350¥ 1,341
25,607
1,499

2007

¥
93
15,033
2,697

$

0
127
22

4. Losses on Sales of Securities
Major items of losses on sales of securities were as follows:Year ended March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Domestic bonds ...............................................................
Domestic stocks and other ..............................................
Foreign securities .............................................................

¥ 534
3,051
228

¥ 702
4,994
244

2007

¥ 9,232
1,739
197

$ 78
14
1

5. Losses on Valuation of Securities
Major items of losses on valuation of securities were as follows:Year ended March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Domestic stocks and other ..............................................
Foreign securities .............................................................
28

¥693
67

¥266
—

2007

¥1,296—$ 10—

6. Policy Reserve for the Reinsurance Contracts
For the year ended March 31, 2006, reversal of reserve for outstanding claims for ceded reinsurance considered in
calculation of provision for reserve for outstanding claims was ¥26 million and reversal of policy reserve for ceded
reinsurance considered in calculation of provision for policy reserve was ¥8 million.
For the year ended March 31, 2007, provision for reserve for outstanding claims for ceded reinsurance considered in
calculation of provision for reserve for outstanding claims was ¥42 million (US$360 thousand) and provision for policy
reserve for ceded reinsurance considered in calculation of provision for policy reserve was ¥718 thousand (US$6 thousand).

7. Gains from Trading Securities
Major items of gains from trading securities were as follows:Year ended March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Interest, dividends and other income ..............................
Gains (Losses) on sales of trading securities ...................
Gains (Losses) on valuation of trading securities ............

¥ 6,518
(538)
3,475

¥ 8,310
3,299
4,036

2007

¥ 5,706
5,702
1,357

$ 48
48
11

8. Gains from Money Held in Trust
Gains from money held in trust for the years ended March 31, 2005, 2006 and 2007 included valuation gains of ¥2,446
million, ¥2,447 million and ¥1,945 million (US$16 million), respectively.

9. Gains/Losses from derivative Instruments
Losses from derivative instruments for the years ended March 31, 2005, 2006 and 2007 included valuation losses of¥3,965 million, valuation gains of ¥1,539 million and valuation losses of ¥513 million (US$4 million), respectively.

10. Impairment of Fixed Assets
Effective for fiscal years beginning on or after April 1, 2005, the Company adopted accounting standards for impairmentof fixed assets (Business Accounting Council dated August 9, 2002). As a result, surplus before income taxes for the year
decreased by ¥3,920 million for the year ended March 31, 2006.
(1) Method of grouping
Real estate and other assets used for insurance business operations are classified as one asset group as a whole. Other
assets such as lease property and unused real estate are classified as one group individually.
(2) Background of recognizing the impairment losses
As a result of decline in profitability due to decrease of rental income and of continuous decline of market value of land,
the Company reduced the book value of lease property and unused real estate to recoverable amount. The amountreduced were recognized as impairment losses included in extraordinary losses.
(3) Asset groups recognized impairment losses and losses by fixed assets• Year ended March 31, 2006

Millions of yen
Impairment losses

Asset

Land

Buildings

OthersTotal(i) Lease property ......................................................................
¥ 952¥1,701¥559¥3,214(ii) Unused real estate ................................................................
307
397
1
706
Total (i)+(ii) ................................................................................
¥1,259¥2,099¥561¥3,920Note : Major item of others was impairment losses of land lease rights which were included in other assets of ¥559 million.
(4) Calculation method of recoverable amount
Recoverable amount is based on net sales value. Net sales value is determined based on appraisal value, posted price orroad rate.
29

Report of Independent Auditors

The Board of Directors of Fukoku Mutual Life Insurance Company

We have audited the accompanying non-consolidated balance sheets of Fukoku Mutual Life
Insurance Company as of March 31, 2005, 2006 and 2007, and the related non-consolidated statements of operations and surplus for the years then ended, and the non-consolidated statement ofchanges in net assets for the year ended March 31, 2007, all expressed in Japanese yen. These nonconsolidated financial statements are the responsibility of the Company’s management. Our responsibility is to independently express an opinion on these non-consolidated financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the non-consolidated financial statements referred to above present fairly, in allmaterial respects, the non-consolidated financial position of Fukoku Mutual Life Insurance Company as of March 31, 2005, 2006 and 2007, and the non-consolidated results of its operations for theyears then ended in conformity with accounting principles generally accepted in Japan.
As described in Note III. 10 in the year ended march 31, 2006, the Company adopted the new
accounting standards for impairment of fixed assets.
The amounts expressed in U.S. dollars, which are provided solely for the convenience of thereader, have been translated on the basis set forth in Note I. 2 to the accompanying non-consolidated financial statements.
Tokyo, JapanMay 22, 2007

The Fuji Accounting Office30Consolidated Financial Statements
Consolidated Balance Sheets
As of March 31,

2005

2006

2007

2007
Millions of
U.S. dollars

Millions of yen

Assets:Cash and deposits .....................................................................

¥

29,419¥73,841¥

65,223$552

Call loans ..................................................................................

131,300

65,00096,400816

Monetary claims bought ..........................................................

3,563

3,211

2,865

24

Money held in trust ..................................................................

79,554

95,849102,186865

Securities ..................................................................................

3,315,697

3,913,767

4,107,183

34,791Loans ........................................................................................

1,282,439

1,250,813

1,266,226

10,726

Real estate and movables ..........................................................

195,172

196,510——

Tangible fixed assets .................................................................

——

206,565

1,749

Intangible fixed assets ...............................................................

—

—

8,343

70

Reinsurance receivables ...........................................................

77

108

52

0

Other assets ..............................................................................

50,846

89,66849,575

419

Deferred tax assets ....................................................................

4,898

191

190

1

Allowance for possible loan losses ...........................................

(3,183)(2,989)(9,648)(81)

Total assets .............................................................................

¥5,089,787¥5,685,972¥5,895,164$49,937

¥

¥

¥

$

Liabilities:
Policy reserves:
Reserve for outstanding claims ............................................

25,29427,472

28,371

240

Policy reserve .......................................................................

4,630,543

4,951,438

5,108,013

43,269Reserve for dividends to policyholders ................................

57,55054,51652,872447

4,713,388

5,033,427

5,189,257

43,958——20Agency payable .........................................................................
Reinsurance payables ...............................................................

78

85

74

0

Subordinated bonds .................................................................

32,50042,84347,092398

Other liabilities .........................................................................

45,08583,93776,521

648

Reserve for employees' retirement benefits ............................

51,63951,47750,260425

Reserve for directors' and corporate auditors'
retirement benefits .................................................................

—

—

573

4

Reserve for price fluctuation of securities ...............................

30,81342,59750,066424

Deferred tax liabilities ..............................................................

—

60,86063,856

540

Deferred tax liabilities for revaluation reserve for land ...........

2,543

2,977

20,199171

Total liabilities ........................................................................

4,876,048

5,318,205

5,497,903

46,572

Minority interest ....................................................................

367

468

—

—

See notes to the consolidated financial statements.

31

Consolidated Balance Sheets (Continued)
As of March 31,

2005

2006

2007

2007
Millions of
U.S. dollars

Millions of yen

Capital:Foundation funds .....................................................................

30,00030,000——

Accumulated foundation funds redeemed ...............................

1,000

1,000

—

—

Reserve for revaluation ............................................................

112

112

—

—

Surplus ......................................................................................

63,59981,488——

Revaluation reserve for land, net of tax ...................................

4,480

5,244

—

—

Net unrealized gains on securities, net of tax ..........................

114,360

249,554——

Foreign currency translation adjustment .................................

(181)

(101)

—

—

Total capital ............................................................................

213,370

367,298——

Total liabilities, minority interest and capital ....................

¥5,089,787¥5,685,972——

Foundation funds .....................................................................

——

40,000338

Accumulated foundation funds redeemed ...............................

——

31,000262

Reserve for revaluation ............................................................

—

—

112

0

Surplus ......................................................................................

——

64,559546

Total foundation funds and surplus .........................................

——

135,671

1,149

Net unrealized gains on securities, net of tax ..........................

——

273,382

2,315

under hedge accounting .........................................................

—

—

(152)

(1)

Revaluation reserve for land, net of tax ...................................

——(12,204)(103)

Foreign currency translation adjustment .................................

—

—

53

0

Total valuation and translation adjustments ............................

——

261,079

2,211

Minority interests .....................................................................

—

—

511

4

Total net assets .....................................................................

——

397,261

3,365

Total liabilities and net assets ............................................

——¥5,895,164$49,937

Net assets:

Deferred valuation gains (losses)

See notes to the consolidated financial statements.

32

Consolidated Statements of Operations
Year ended March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Ordinary revenues:
Premium and other income .......................................................
Investment income:Interest, dividends and other income ....................................
Gains from money held in trust, net ......................................
Gains from trading securities, net ..........................................
Gains on sales of securities .....................................................
Gains on redemption of securities .........................................
Other investment income ......................................................
Gains from separate accounts, net .........................................

2007¥731,703¥846,007¥721,935$6,115

Other ordinary revenues ............................................................

79,552
5,103
9,671
8,486
—
557
3,955
107,327
21,706

83,22911,07016,21428,448—730
25,514
165,207
18,654106,296
3,867
13,025
17,82326
365
5,813
147,219
20,687

900
32
110
150
0
3
49
1,247
175

Total ordinary revenues ..........................................................

860,738

1,029,869

889,8427,537

201,237
58,477
127,417
98,39578,273563,801

197,973
64,442
123,924
87,322
24,156497,819

185,00971,522
133,961
106,851
22,312519,657

1,567
605
1,134
905
189
4,402

790
110,34862
111,200

2,178
320,89455
323,128898
156,57551
157,525

7
1,326
0
1,334

Operating expenses ....................................................................
Other ordinary expenditures ......................................................

666
3,814
760
2
8,273
84
—
4,704
3,437
21,742
88,83922,020

1,655
5,941
266
19
17,834
1,294
—
4,453
3,499
34,96592,061
23,417

2,342
11,168
1,296
—
4,353
995
6,830
4,383
4,175
35,54690,40525,446

19
94
10
—
36
8
57
37
35
301
765
215

Total ordinary expenditures ...................................................

807,605

971,392

828,580

7,018

Ordinary profits .......................................................................

53,13258,476

61,261

518

Ordinary expenditures:
Claims and other payments:
Claims .....................................................................................
Annuities .................................................................................
Benefits ...................................................................................
Surrenders ..............................................................................
Other payments ......................................................................
Provision for policy reserve and others:
Provision for reserve for outstanding claims .........................
Provision for policy reserve ...................................................
Interest on accumulated dividends to policyholders .............
Investment expenses:
Interest expenses ....................................................................
Losses on sales of securities ...................................................
Losses on valuation of securities ............................................
Losses on redemption of securities ........................................
Losses from derivative instruments, net ................................
Foreign exchange losses, net ..................................................
Provision for allowance for possible loan losses ....................
Depreciation of real estate for rent and other assets .............
Other investment expenses ....................................................

33

Consolidated Statements of Operations (Continued)
Year ended March 31,

2005

2006

2007

2007
Millions of
U.S. dollars

Millions of yen

Extraordinary gains:
Gains on disposal of real estate and movables .......................

¥

170¥ 1,165

¥

—

$

—

Gains on disposal of fixed assets ............................................

—

—

46

0

Reversal of allowance for possible loan losses .......................

2,159

492

—

—

Total extraordinary gains ........................................................

2,330

1,657

46

0

Losses on disposal of real estate and movables ......................

4,985

2,607

—

—

Losses on disposal of fixed assets ...........................................

—

—

1,026

8

Impairment loss ......................................................................

—

3,920

466

3

Provision for reserve for employees' retirement benefits .....

7,887

—

—

—

corporate auditors' retirement benefits ..............................

—

—

547

4

Provision for reserve for price fluctuation of securities ........

9,130

11,784

7,468

63

Total extraordinary losses .......................................................

22,002

18,312

9,508

80Surplus before income taxes ..................................................

33,46041,821

51,799438

Current ...................................................................................

11,954

14,31018,359155

Deferred .................................................................................

(5,253)(10,741)(10,525)(89)

Minority interest ......................................................................

39

118

72

0

Net surplus for the year ..........................................................

¥ 26,720¥38,134¥43,893$ 371

Extraordinary losses:

Provision for reserve for directors' andIncome taxes:

See notes to the consolidated financial statements.

34

Consolidated Statements of Surplus

Year ended March 31,

2005

2006

2007

2007
Millions of
U.S. dollars

Millions of yen¥54,840¥63,599——

26,72038,134——

26,72038,134——

Transfer to reserve for dividends to policyholders ..............

16,611

18,910——Interest payment for foundation funds ................................

531

531

—

—

Bonus to directors and statutory auditors ...........................

40

40

—

—

Reversal of revaluation reserve for land .................................

778

764

—

—

17,961

20,245——¥63,599¥81,488——

Surplus at the beginning of the year ...................................
Additions:
Net surplus for the year .......................................................

Deductions:Surplus at the end of the year ..................................................
See notes to the consolidated financial statements.

35

Consolidated Statement of Changes in Net Assets(For the year ended March 31, 2007)
Millions of yen
Foundation funds and surplus

Valuation and translation adjustments
Net
Deferred
unrealized valuation gains
Total(losses) undergains onfoundation
hedge
funds and securities, net
accountingof taxsurplusFoundation
funds

Accumulated
foundation
funds
redeemedReserveforrevaluation¥ 30,000¥ 1,000¥112 ¥ 81,488 ¥112,600 ¥249,554 ¥Surplus

RevaluaTotal
Foreigntion
valuation
reserve for currency
andtranslation translation
land,
net of tax adjustment adjustments

Minority
interests

Total
net assets¥468¥367,767

Balance at the end of previous
fiscal year ........................................

—

¥

5,244

¥(101)¥254,697

Changes in the current fiscal year:
Financing of additionalfoundation funds ......................

40,00040,00040,000(30,406)(30,406)

30,00030,000

(531)

(531)

Additions to reserve fordividends to policyholders .......

(30,406)

Additions to accumulated
foundation funds redeemed .....

30,000

Payment of interest on
foundation funds ......................

(531)

Payment of bonus to directors ....

(30)

(30)

(30)

Net surplus for the year ..............

43,89343,89343,893(30,000)(30,000)(30,000)(30,000)(30,000)

144

144

144

Redemption of foundation
funds .........................................

(30,000)

Reversal of reserve forredemption of foundation funds ...
Reversal of revaluation
reserve for land .........................
Net change, excluding
foundation funds and surplus ...

23,828(152)(17,449)

154

6,381

42

6,423

23,828(152)(17,449)

154

6,381

42

29,494¥112 ¥ 64,559 ¥135,671 ¥273,382¥(152)¥ (12,204)

53¥261,079¥511¥397,261

Total changes in the current
fiscal year ........................................

10,00030,000¥ 40,000¥31,000—(16,929)

23,070

Balance at the end of current
fiscal year ........................................

36¥

Consolidated Statement of Changes in Net Assets (Continued)(For the year ended March 31, 2007)
Millions of U.S. dollars
Foundation funds and surplus

Foundation
funds

Accumulated
foundation
funds
redeemed

Valuation and translation adjustments

Reserveforrevaluation

Surplus

$

$ 690

Net
unrealized
Total
gains onfoundation
funds and securities, netof taxsurplusDeferred
Revaluavaluation gains
tion(losses) under reserve for
hedge
land,
accounting
net of tax

Total
Foreignvaluation
currencyandtranslation translation
adjustment adjustments

Minority
interests

Total
net assets$ 3$ 3,115

Balance at the end of previous
fiscal year ........................................

$ 254

$

8

0

$ 953

$2,113

$ —

$

44

$ (0)

$2,157

Changes in the current fiscal year:
Financing of additionalfoundation funds ......................

338

338

338

(257)

(257)

254

254

(4)

(4)

Additions to reserve fordividends to policyholders .......

(257)

Additions to accumulated
foundation funds redeemed .....

254

Payment of interest on
foundation funds ......................

(4)

Payment of bonus to directors ....

(0)

(0)

(0)

Net surplus for the year ..............

371

371

371

(254)

(254)

(254)

(254)

(254)

1

1

1

Redemption of foundation
funds .........................................

(254)

Reversal of reserve forredemption of foundation funds ...
Reversal of revaluation
reserve for land .........................
Net change, excluding
foundation funds and surplus ...

201

(1)

(147)

1

54

0

54

Total changes in the current
fiscal year ........................................

84

254

—

(143)

195

201

(1)

(147)

1

54

0

249

$ 338

$ 262

$ 0

$ 546

$1,149$2,315$ (1)$ (103)$ 0$ 2,211$ 4$ 3,365

Balance at the end of current
fiscal year ........................................

37

Consolidated Statements of Cash Flows

Year ended March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Cash flows from operating activities:
Surplus before income taxes ..................................................................
Depreciation of real estate for rent and other assets .............................
Depreciation ...........................................................................................
Impairment loss ......................................................................................
Increase (Decrease) in reserve for outstanding claims ..........................
Increase (Decrease) in policy reserve .....................................................
Interest on accumulated dividends to policyholders .............................
Increase (Decrease) in allowance for possible loan losses .....................
Increase (Decrease) in reserve for employees' retirement benefits .......
Increase (Decrease) in reserve for price fluctuation of securities ...............
Interest, dividends and other income ....................................................
(Gains) Losses on securities ...................................................................
Interest expenses ....................................................................................
Foreign exchange (gains) losses, net ......................................................
(Gains) Losses on real estate and movables ...........................................
(Gains) Losses on tangible fixed assets ..................................................
(Increase) Decrease in reinsurance receivables ......................................
(Increase) Decrease in other assets ........................................................
Increase (Decrease) in agency payable ...................................................
Increase (Decrease) in reinsurance payables ..........................................
Increase (Decrease) in other liabilities ...................................................
Others .....................................................................................................
Subtotal ..............................................................................................

33,460
4,704
5,536
—
790
110,34862(2,159)7,402
9,130(79,552)(14,366)
666
84
4,814
—
107
892
—
(8)
(1,985)2,612
82,540¥41,821
4,453
5,643
3,920
2,178
320,894
55
(492)
(162)
11,784(83,229)(57,185)
1,655
1,294
1,441
—
(30)
(5,768)
—
6
195
4,461
252,940¥

51,799
4,383
6,118
466
898
156,57551
6,830(1,216)
7,468(106,296)(23,739)
2,342
995
—
980
55
(3,307)
2
(10)
1,777
3,479
109,653

$

438
37
51
3
7
1,326
0
57
(10)
63
(900)
(201)
19
8
—
8
0
(28)
0
(0)
15
29
928

Interest, dividends and other income received ......................................
Interest paid ............................................................................................
Dividends to policyholders paid ............................................................
Others .....................................................................................................
Corporate income tax paid .....................................................................
Net cash provided by (used in) operating activities ...........................

90,509(666)(23,002)4(20,779)
128,605

97,732(1,649)(22,000)—(11,059)
315,963

108,523(2,230)(32,101)—(15,594)
168,251

919
(18)
(271)
—
(132)
1,425

Cash flows from investing activities:(Increase) Decrease in deposits ..............................................................
Proceeds from sales and redemption of monetary claims bought ........
Payments for increase in money held in trust .......................................
Proceeds from decrease in money held in trust .....................................
Payments for purchase of securities .......................................................
Proceeds from sales and redemption of securities .................................
Payments for additions to loans .............................................................
Proceeds from collections of loans ........................................................
Proceeds from settlement of derivative .................................................
Others .....................................................................................................
Subtotal ..............................................................................................

(233)—(11,007)
13,375(861,434)
609,363(327,026)
379,926—(5,342)(202,379)(15)
351(10,299)
5,006(1,102,731)
762,325(364,582)
398,529(19,373)(728)(331,517)

(412)
201
(14,582)
12,017(1,459,246)
1,345,372(331,387)
317,902(3,839)(3,087)(137,061)

(3)
1
(123)
101
(12,361)
11,396(2,807)
2,692
(32)
(26)
(1,161)

Payments for purchase of real estate and movables ..............................
Proceeds from sales of real estate and movables ...................................
Payments for purchase of tangible fixed assets ......................................
Proceeds from sales of tangible fixed assets ...........................................
Net cash provided by (used in) investing activities ............................

(4,911)
1,001——(206,289)(17,728)5,204——(344,041)——(17,621)277(154,405)

—
—
(149)
2
(1,307)

Cash flows from financing activities:
Proceeds from issueing bonds ................................................................
Payments for redemption of bonds .......................................................
Raising of foundation funds ...................................................................
Redemption of foundation funds ...........................................................
Interest payment for foundation funds ..................................................
Others .....................................................................................................
Net cash provided by (used in) financing activities ...........................
Effect of exchange rate changes on cash and cash equivalents ...............
Net increase (decrease) in cash and cash equivalents .........................
Cash and cash equivalents at the beginning of the year .....................
Cash and cash equivalents at the end of the year ................................

—
—
—
—
(531)
(10)
(541)
(27)
(78,251)
238,737¥ 160,485

40,524(32,500)
—
—
(531)
(18)
7,475
(1,290)(21,893)
160,485
138,592——
40,000(30,000)
(531)
(30)
9,439
(952)
22,332
138,592
160,924

—
—
338
(254)
(4)
(0)
79
(8)
189
1,174
1,363

See notes to the consolidated financial statements.

38

¥

2007

¥

¥

$

Notes to the Consolidated Financial Statements

I. Presentation of the Consolidated Financial Statements
1. Basis of Presentation
The accompanying consolidated financial statements have been prepared from the accounts maintained by Fukoku
Mutual Life Insurance Company (the "Company") and its consolidated subsidiaries in accordance with the provisions set
forth in the Insurance Business Law of Japan and its related rules and regulations and in conformity with accounting
principles generally accepted in Japan, which are different in certain respects from accounting principles generally accepted in countries and jurisdictions other than Japan.
In addition, the notes to the consolidated financial statements include information which is not required under accounting principles generally accepted in Japan but is presented herein as additional information.
Amounts of less than one million yen have been eliminated. As a result, total in yen shown herein do not necessarily
agree with the sum of the individual amounts.

2. U.S. Dollar Amounts
The translations of yen amounts into U.S. dollar amounts are included solely for the convenience of the reader and havebeen made, as a matter of arithmetical computation only, at the rate of ¥118.05 = US$1.00, the effective rate of exchange
at the balance sheet date of March 31, 2007. The translations should not be construed as representations that such yen
amounts have been or could in the future be, converted into U.S. dollars at that or any other rates.

3. Principles of Consolidation(1) Scope of consolidation
Consolidated subsidiaries for the year ended March 31, 2007 are listed below:
Fukoku Shinyo Hosho Company Limited
Fukoku Capital Management, Inc.
Fukoku Information Systems Co., Ltd.
Fukoku Life International (U.K.) Limited
Fukoku Life International (America) Inc.
Major unconsolidated subsidiary is Fukoku Seimei Building Company Limited.
Seven subsidiaries are excluded from the scope of consolidation, as each one of them is small in its total assets,
amount of sales, net surplus for the year and surplus and is sufficiently insignificant to reasonable judgement on its
impact on the financial position and results of operation of the Company's group.
(2) Application of equity method
Unconsolidated subsidiaries (such as Fukoku Seimei building Company Limited, etc.) are insignificant in their impact on
net surplus for the year and surplus, and also immaterial as a whole, therefore, application of equity method is withheld.
There are no affiliates for the years ended March 31, 2005, 2006 and 2007.
(3) Fiscal year of consolidated subsidiaries
Among the subsidiaries to be consolidated, fiscal year-end of overseas subsidiaries is December 31. For the preparationof consolidated financial statements, financial statements as of that date are used and concerning any important transaction taking place in between December 31 and the consolidated closing date, necessary adjustments for consolidation are
made.

39

(4) Valuation of subsidiary's assets and liabilities on acquisition
On acquisition of a subsidiary, all of the subsidiary’s assets and liabilities that exist at the date of acquisition are recordedat their fair value.
(5) Amortization of consolidation goodwill
Consolidation goodwill is charged to operating expenses for the year in which it is incurred.
(6) Treatment of appropriation of surplus
Consolidated statements of surplus are prepared based on the final appropriation of surplus within the fiscal year.
(7) Cash and cash equivalents
Cash and cash equivalents, for the purpose of reporting cash flows, are composed of cash in hand, postal saving, current
deposit, ordinary deposit, deposit at notice and call loan. They also include time deposit, foreign currency deposit andnegotiable certificate of deposit, with maturity of three months or less when purchased.

II. Notes to Balance Sheets
1. Significant Accounting Policies(1) Valuation methods of securities
The valuations of securities, including bank deposits and monetary claims bought which are equivalent to securities, andsecurities managed as trust assets in money held in trust, are as follows:i) Trading securities are stated at fair market value. Costs of their sales are determined by the moving averagemethod.
ii) Held-to-maturity debt securities are stated at amortized cost under the straight-line method, cost being determined by the moving average method.
iii) Policy-reserve-matching bonds are stated at amortized cost under the straight-line method, cost being determined by the moving average method in accordance with "Temporary Treatment of Accounting and Auditing
Concerning Policy-reserve-matching Bonds in Insurance Industry" (Industry Audit Committee Report No.21
issued by the Japanese Institute of Certified Public Accountants on November 16, 2000).
iv) Investments in non-consolidated subsidiaries and affiliates which are not accounted for under the equity method
are stated at cost, cost being determined by the moving average method.
v) Available-for-sale securities with fair market value are stated at fair market value based on the market prices at theend of fiscal year. Costs of their sales are determined by the moving average method. Net unrealized gains orlosses on these available-for-sale securities, net of taxes, are recorded as a separate component of net assets.
Available-for-sale securities with no fair market value are stated at cost, cost being determined by the moving
average method, except for public and corporate bonds including foreign bonds, of which the difference between
acquisition cost and face value is considered to be an adjustment of interest. Such bonds are stated at amortizedcost under the straight-line method, cost being determined by the moving average method.
(2) Valuation methods of derivative instruments
Derivative instruments are stated at fair market value.

40

(3) Revaluation of land
The Company revalued the land for business purposes based on the Law for Revaluation of Land (Law No.34 promulgated on March 31, 1998). The difference between fair value and book value resulting from the revaluation, net of related
taxes, is recorded as revaluation reserve for land as a separate component of net assets and the related tax is recorded asdeferred tax liabilities for revaluation reserve for land.
Date of revaluation: March 31, 2002
Method of revaluation as prescribed for in Article 3 Paragraph 3 of the said Law:
Calculation is based on the appraisal value for property tax set forth in Article 2 item 3 of the Enforcement
Ordinance of the Law for Revaluation of Land (Government Ordinance No.119 promulgated on March 31,
1998) and the road rate set forth in Article 2 item 4 of the said Ordinance with certain reasonable adjustments.
The excess of the aggregate new book value of land for business purposes after revaluation over the total fair valueof land, which is required to be disclosed in accordance with Article 10 of the Law for Revaluation of Land, was¥4,178 million as of March 31, 2005. The total fair value of land exceeded the aggregated new book value of land
after revaluation as of March 31, 2006 and 2007.
(4) Depreciation of tangible assets
Depreciation of tangible fixed assets held by the Company, except for the buildings acquired on and after April 1, 1998
which are depreciated based on the straight-line method, is computed based on the declining-balance method. Other
tangible fixed assets acquired for ¥100,000 or more but less than ¥200,000 are depreciated by equal amounts over three
years.
(5) Foreign currency translation
Foreign currency-denominated assets and liabilities are translated into Japanese yen at the effective exchange rate prevailing at the balance sheet date.
(6) Allowance for possible loan losses
Allowance for possible loan losses is provided in accordance with the Company's standards of self-assessment and writeoffs and reserves on credit quality:i) For the credits of borrowers who are legally bankrupt such as being in the proceedings of bankruptcy or civil
rehabilitation (hereinafter called "legally bankrupt borrowers") and who are substantially bankrupt (hereinafter
called "substantially bankrupt borrowers"), the Company provides the remaining amount of credits after the
direct write-off described below and the deductions of the amount expected to be collected through the disposalof collateral or the execution of guarantees.
ii) For the credits of borrowers who are not currently bankrupt but have a high possibility of bankruptcy, the Company provides the amounts deemed as necessary considering the borrowers' ability to pay, within the amounts
after deductions of the amount expected to be collected through the disposal of collateral or the execution ofguarantees.
iii) For the credits of borrowers other than the above, the Company provides the amounts calculated by multiplying
the borrowers' balance by the actual ratio of bad debt losses on defaults during a certain past period.
All credits are assessed by the relevant departments in accordance with the Company's standards of self-assessment
on credit quality. The results of the assessment are reviewed by the audit department, which is independent of businessrelated divisions. Subsequently, the allowance for possible loan losses are provided based on the results of these assessments.

41

For the credits of legally bankrupt borrowers and substantially bankrupt borrowers, the amounts remaining after
deductions of collateral value or the amounts collectible through the execution of guarantees is written-off directly fromthe borrower's balance as the estimated uncollectible amounts. The amounts written-off as of March 31, 2005, 2006 and2007 were ¥22,408 million, ¥833 million and ¥784 million (US$6 million), respectively.
The allowance for possible loan losses of consolidated subsidiaries conforms to the standard used by the Company.
(7) Reserve for employees' retirement benefits
The Company and its consolidated subsidiaries adopt accounting standards for employees' retirement benefits (BusinessAccounting Deliberation Council dated June 16, 1998) and account for the reserve for retirement benefits based on the
projected benefit obligation and plan assets at the balance sheet date.
(8) Reserve for directors' and corporate auditors' retirement benefits
Reserve for directors' and corporate auditors' retirement benefits represents the estimated amounts to be paid due toabolishing internal rule of retirement benefit plan in relation to directors and corporate auditors.
(9) Reserve for price fluctuation of securities
Reserve for price fluctuation of securities is calculated in accordance with the ruling in Article 115 of the Insurance
Business Law.
(10) Lease transactions
Finance leases, except those leases for which the ownership of the leased property is considered to be transferred to thelessee, are primarily accounted for as operating leases.
(11) Accounting for hedge activities
Hedge accounting is based on "Accounting Standards for Financial Instruments" issued on January 22, 1999 by theBusiness Accounting Deliberation Council.
Primarily, for the interest rate swaps on loans qualifying for hedge accounting because of high correlation andeffectiveness between the hedging instruments and the hedged item, gains and losses on the interest rate swaps aredeferred until the maturity of the hedged transactions.
Deposits, bonds and loans denominated in foreign currencies for which forward foreign exchange contracts are used
to hedge the foreign currency fluctuations are translated at the contract rates if the forward contracts qualify for specifichedge accounting. In this case, exchange differences between exchange rate on trade date and forward contract rate areallocated to each fiscal year from the date contracted to the date settled.
For judging the effectiveness of hedge used, ratio analysis of comparing the cash flow fluctuation of hedged itemwith the same of hedging instruments is mostly applied.
(12) Accounting for consumption taxes
The Company and its consolidated subsidiaries account for consumption taxes by the tax-exclusion method. The consumption taxes on certain assets, which are not deductible from consumption taxes withheld and that are stipulated to bedeferred under the Tax Law, are deferred as prepaid expenses and amortized equally over five years. Consumption taxes
other than deferred consumption taxes are recognized as an expense when incurred.
(13) Policy reserve
Policy reserve is based on Article 116 of the Insurance Business Law, and the premium reserve at the end of fiscal year is
calculated by the following method:
In regard to the policies subject to the standard policy reserve, the method as prescribed by the Commissioner ofFinancial Services Agency (Ministry of Finance Ordinance No. 48, 1996) is applied.
In regard to the policies not subject to the standard policy reserve, the net level premium method is applied.
42

(14) Software
The software for internal use, which was included in other assets as of March 31, 2005 and 2006 and in intangible fixed
assets as of March 31, 2007, is amortized based on straight-line method over the estimated useful lives.
(15) Deferred assets
Bond issuance expenses are charged to income when paid.
Discount on bonds is amortized equally over the period for which interest on bonds is fixed. For the year ended
March 31, 2007, discount on bonds which was recorded in other assets in previous year is deducted from bonds inaccordance with "Tentative Solution on Accounting for Deferred Assets" (ASBJ PITF No.19 issued by the AccountingStandards Board of Japan on August 11, 2006).
(16) Policy-reserve-matching bonds
Of the bonds corresponding to the sub-groups which are set by insurance types and investment policies, the bonds thatare held to match the duration of liabilities are classified as policy-reserve-matching bonds in accordance with "Temporary Treatment of Accounting and Auditing Concerning Policy-reserve-matching Bonds in Insurance Industry" (Industry Audit Committee Report No.21 issued by the Japanese Institute of Certified Public Accountants on November 16,2000).
The amount of policy-reserve-matching bonds recorded on the balance sheets as of March 31, 2007 was ¥540,923
million (US$4,582 million). The market value of these bonds as of March 31, 2007 was ¥542,462 million (US$4,595
million).

2. Changes in Accounting Policy(1) Effective for the year ended March 31, 2007, the Company adopted "Accounting Standards for Presentation of Net
Assets in the Balance Sheet" (ASBJ Statement No.5 issued by the Accounting Standards Board of Japan on December 9,2005). If the previous accounting policy were to be applied, the amount of "Total capital" as of March 31, 2007 was¥396,902 million (US$ 3,362 million) .
(2) Effective for the year ended March 31, 2007, the Company adopted "Tentative Solution on Accounting for Deferred
Assets" (ASBJ PITF No.19 issued by the Accounting Standards Board of Japan on August 11, 2006). As a result, discounton bonds of ¥106 million (US$905 thousand) as of March 31, 2007, which was recorded in other assets in previous year,
is deducted from bonds.
(3) In accordance with the revised form of the Enforcement Regulation of the Insurance Business Law, the balance sheet
presentation has been changed as follows, effective for the year ended March 31, 2007.
(a) "Real estate and movables" which was presented as a separate line item is presented as "tangible fixed assets".
(b) "Intangible fixed assets" which was included in "Other assets" is presented as a separate line item. The amount of"Intangible fixed assets" included in "Other assets" was ¥9,663 million as of March 31, 2006.

3. Loans Receivable
The total amounts of credits to bankrupt borrowers, delinquent loans, delinquent loans past 3 months or more andrestructured loans, which were included in loans, were ¥1,971 million, ¥2,317 million and ¥11,332 million (US$96
million) as of March 31, 2005, 2006 and 2007, respectively.

43i) The balances of credits to bankrupt borrowers were ¥556 million, ¥429 million and ¥443 million (US$3 million)
as of March 31, 2005, 2006 and 2007, respectively.
ii) The balances of delinquent loans were ¥807 million, ¥1,882 million and ¥10,889 million (US$92 million) as ofMarch 31, 2005, 2006 and 2007, respectively.
iii) The balances of delinquent loans past 3 months or more were no balances as of March 31, 2005, 2006 and 2007.
iv) The balance of restructured loans was ¥607 million and ¥5 million as of March 31, 2005 and 2006, and there wasno balance as of March 31, 2007.
Credits to bankrupt borrowers represent loans, excluding the balances already written-off, which meet the conditions prescribed in Article 96 Paragraph 1 Item 3 and 4 of the Enforcement Regulations of the Corporate Tax Law.
Moreover, accruing interest of these loans is not recorded as income after determining that principal of or interest on
these loans is unlikely to be collected due to the significant delay in repayment of principal or interest payment or forsome other reasons.
Delinquent loans are credits whose accruing interest is not recorded as income due to the same reasons as describedabove, and exclude credits to bankrupt borrowers and loans for which interest payments have been suspended and rescheduled to assist and support the borrowers in the restructuring of their business.
Delinquent loans past 3 months or more are loans for which interest payment or repayment of principal are delinquent for 3 months or more from the due date under the terms of the related loan agreements, excluding those loansclassified as credits to bankrupt borrowers and delinquent loans.
Restructured loans are loans for which certain concessions favorable to borrowers, such as interest reduction or
exemptions, rescheduling of due date of principal or interest payment, waiver of claim or other terms, have been negotiated for the purpose of assisting and supporting the borrowers in the restructuring of their business. This category
excludes loans classified as credits to bankrupt borrowers, delinquent loans and delinquent loans past 3 months or more.
The direct write-offs related to loans decreased credits to bankrupt borrowers described above by ¥21,615 million,¥51 million and ¥2 million (US$21 thousand) as of March 31, 2005, 2006 and 2007, respectively.
The direct write-offs related to loans decreased delinquent loans described above by ¥793 million, ¥782 million and¥782 million (US$6 million) as of March 31, 2005, 2006 and 2007, respectively.

4. Accumulated Depreciation of Tangible Fixed Assets
Accumulated depreciation of tangible fixed assets which was presented as accumulated depreciation of real estate andmovables until previous fiscal year totaled to ¥112,744 million, ¥113,363 million and ¥116,397 million (US$986 million)
as of March 31, 2005, 2006 and 2007, respectively.

5. Separate Accounts
Total assets in separate accounts provided for in Article 118 of the Insurance Business Law were ¥101,227 million,¥123,046 million and ¥131,182 million (US$1,111 million) as of March 31, 2005, 2006 and 2007, respectively. The
amounts of liabilities were the same as these figures.

6. Receivables from / Payables to Unconsolidated Subsidiaries
The total amounts of receivables from / payables to subsidiaries were ¥2,714 million and ¥184 million as of March 31,
2005, ¥2,869 million and ¥182 million as of March 31, 2006, and ¥2,872 million (US$24 million) and ¥166 million(US$1 million) as of March 31, 2007, respectively.

7. Monetary Claims to Directors
Monetary claims to directors as of March 31, 2005, 2006 and 2007 were ¥21 million, ¥16 million and ¥11 million (US$99
thousand), respectively.

44

8. Income Taxes
Deferred tax assets and deferred tax liabilities as of March 31, 2005 and 2006 were ¥71,289 million and ¥66,390 million,and ¥82,658 million and ¥143,328 million, respectively.
Deferred tax assets and deferred tax liabilities as of March 31, 2007 were ¥93,260 million (US$790 million) and¥156,925 million (US$1,329 million), respectively. Valuation allowance for deferred tax assets was ¥2,653 million (US$22
million).
Major components of deferred tax assets and liabilities were as follows:
As of March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Deferred tax assets:
Policy reserves .................................................................
Reserve for employees’ retirement benefits ...................
Reserve for price fluctuation of securities ......................
Allowance for possible loan losses ..................................
Deferred tax liabilities:
Net unrealized gains on securities ..................................

2007¥32,962
18,364
11,1574,610¥43,026
18,64015,424—¥51,572
18,19918,128
—

$436
154
153
—

64,916

141,659

155,185

1,314

The statutory tax rate and the actual effective tax rates for the years ended March 31, 2005, 2006 and 2007 were 36.2%
and 20.0%, 36.2% and 8.5% and 36.2% and 15.1%, respectively. The major differences between the statutory tax rate
and the actual effective tax rate were reserve for dividends to policyholders of 20.5%, 26.3% and 24.8% for the years
ended March 31, 2005, 2006 and 2007, respectively.

9. Contingent Liabilities
Contingent liabilities as of March 31, 2007 related to the cost for system development in The Kyoei Kasai Shinrai Life
Insurance Company, Limited were ¥233 million (US$1 million).

10. Reserve for Dividends to Policyholders
Changes in reserve for dividends to policyholders were as follows:Year ended March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Balance at the end of previous fiscal year ........................
Transfer from surplus in previous fiscal year ..................
Dividends paid in fiscal year ............................................
Increase in interest ...........................................................
Balance at the end of fiscal year ......................................

¥63,879
16,688(23,079)
62¥57,550¥57,550
18,966(22,057)
55¥54,516

2007¥54,516
30,454(32,149)
51¥52,872

$461
257
(272)
0
$447

11. Stocks of Unconsolidated Subsidiaries
The amounts of stocks of subsidiaries the Company held as of March 31, 2005, 2006 and 2007 were ¥240 million, ¥240
million and ¥240 million (US$2 million), respectively.

45

12. Pledged Assets and Secured Debts
Assets pledged as collateral as of March 31, 2005 and 2006 were ¥20,834 million and ¥19,440 million. Secured debts as ofMarch 31, 2005 and 2006 were ¥5,080 million and ¥4,868 million.
Assets pledged as collateral as of March 31, 2007 were ¥18,050 million (US$152 million) of securities and ¥856
million (US$7 million) of money held in trust. Secured debts as of March 31, 2007 was ¥4,710 million (US$39 million).

13. Additional Foundation Funds
The Company raised additional foundation funds of ¥40,000 million (US$338 million) during the year ended March 31,
2007 in accordance with Article 60 of the Insurance Business Law.

14. Redemption of Foundation Funds
In the year ended March 31, 2007, according to the redemption of foundation funds of ¥30,000 million (US$254 million), the Company reversed the reserve for redemption of foundation funds and provided the equivalent amount for
accumulated foundation founds redeemed in accordance with Article 56 of the Insurance Business Law.

15. Commitment LineAs of March 31, 2005, 2006 and 2007, there were unused commitment line agreements under which the Company is thelender of ¥12,812 million, ¥3,624 million and ¥1,581 million (US$13 million), respectively.

16. Subordinated Bonds
Repayments of subordinated bonds are subordinated to other obligations.

17. Subordinated Debt Loans
Repayments of subordinated debt loans are subordinated to other obligations.

18. Contribution to Policyholders Protection FundThe future contribution to the former Insurance Policyholders Protection Fund of Japan, which was succeeded by theLife Insurance Policyholders Protection Corporation of Japan based on the Supplementary Article 140 Paragraph 5 of
the Financial System Reform Law, were estimated at ¥1,306 million, ¥800 million and ¥285 million (US$2 million) as ofMarch 31, 2005, 2006 and 2007, respectively. The contribution is charged as operating expenses in the year in which they
are paid.

19. Contribution to Policyholders Protection Corporation
The future contribution to the Life Insurance Policyholders Protection Corporation of Japan under Article 259 of the
Insurance Business Law were estimated at ¥7,243 million, ¥10,615 million and ¥11,174 million (US$94 million) as ofMarch 31, 2005, 2006 and 2007, respectively. The contribution is charged as operating expenses in the year in which they
are paid.

46

20. Reserve for Employees’ Retirement Benefits(1) The reserve for retirement benefits as of March 31, 2005, 2006 and 2007 were calculated as follows:
As of March 31,

2005

2006

2007

2007
Millions of
U.S. dollars

Millions of yen

a. Projected benefit obligation ............................
b. Fair value of pension plan assets ......................

¥(73,293)
15,771¥(73,584)
19,810¥(73,663)
21,438$(624)
181c. Unfunded benefit obligation (a + b) ................
d. Unrecognized actuarial differences .................
e. Unrecognized prior service cost ......................

(57,522)5,572
310(53,774)
2,020
276(52,224)
1,722
241

(442)
14
2

f. Reserve for employees'
retirement benefits (c+d+e) ...........................

¥(51,639)¥(51,477)¥(50,260)$(425)(2) Gross amount of retirement benefit expenses for the years ended March 31, 2005, 2006 and 2007 were as follows:Year ended March 31,

2005

2006

2007

Millions of
U.S. dollars

Millions of yen

Service cost ..........................................................
Interest cost ..........................................................
Expected return on plan assets ............................
Amortization of transition obligation .................
Recognized actuarial differences .........................
Amortization of prior service cost .......................

¥ 3,830
1,478
(501)
7,887
851
34
¥ 13,580¥ 3,568
1,464
(551)
—
780
34
¥ 5,2962007¥3,476
1,470
(792)
—
502
34
¥4,692

$29
12
(6)
—
4
0
39

Note: The amortization of transition obligation is recorded as provision for reserve for retirement benefits which isincluded in extraordinary losses.
(3) The assumptions used in calculation of the above information were as follows:
Method of attributing the projected benefits to periods of service .......
Straight-line basis
Discount rate ...........................................................................................
2.0%
Expected rate of return on pension plan assets (Note) ..........................
4.0%
Recognition period of actuarial differences ............................................
10 years
Amortization period of prior service cost ...............................................
10 years
Note: Expected rate of return on pension plan assets for the year ended March 31, 2005 and 2006 were 3.5%.

47

III. Notes to Statements of Operations
1. Changes in Accounting Policy(1) Effective for the year ended March 31, 2007, the Company adopted "Guidance on Accounting for Other Compound
Financial Instruments (Compound Financial Instruments Other than Those with Option to Increase Paid-in Capital)"(ASBJ Guidance No.12 issued by the Accounting Standards Board of Japan on March 30, 2006). As a result, ordinary
profits decreased by ¥33 million (US$282 thousand), compared to the previous methods.
(2) In accordance with the revised form of the Enforcement Regulation of the Insurance Business Law, the presentationof statements of operations has been changed as follows, effective for the year ended March 31, 2007.
(a) "Gains (losses) on disposal of real estate and movables" which was presented as a separate line item is presented as"gains (losses) on disposal of fixed assets".
(b) The bottom line of statements of operations has been changed from "Unappropriated surplus" to "Net surplus forthe year".

2. Transactions with Unconsolidated Subsidiaries
The total amounts of revenues and expenditures in connection with subsidiaries were ¥98 million and ¥2,296 million,¥104 million and ¥2,441 million, and ¥103 million (US$874 thousand) and ¥2,536 million (US$21 million) for the years
ended March 31, 2005, 2006, and 2007, respectively.

3. Impairment of fixed assets
Effective for fiscal years beginning on or after April 1, 2005, the Company adopted accounting standards for impairmentof fixed assets (Business Accounting Council dated August 9, 2002). As a result, surplus before income taxes for the year
decreased by ¥3,920 million for the year ended March 31, 2006.
(1) Method of grouping
Real estate and other assets used for insurance business operations are classified as one asset group as a whole. Other
assets such as lease property and unused real estate are classified as one group individually.
(2) Background of recognizing the impairment losses
As a result of decline in profitability due to decrease of rental income and of continuous decline of market value of land,
the Company reduced the book value of lease property and unused real estate to recoverable amount. The amountreduced were recognized as impairment losses included in extraordinary losses.
(3) Asset groups recognized impairment losses and losses by fixed assets• Year ended March 31, 2006

Millions of yen
Impairment losses

Asset

Land

Buildings

OthersTotal(i) Lease property .....................................................................
¥ 952¥1,701¥559¥3,214(ii) Unused real estate ...............................................................
307
397
1
706
Total (i)+(ii) ...............................................................................
¥1,259¥2,099¥561¥3,920Note : Major item of others was impairment losses of land lease rights which were included in other assets of ¥559 million.
(4) Calculation method of recoverable amount
Recoverable amount is based on net sales value. Net sales value is determined based on appraisal value, posted price orroad rate.

48

Report of Independent Auditors

The Board of Directors of Fukoku Mutual Life Insurance Company

We have audited the accompanying consolidated balance sheets of Fukoku Mutual Life Insurance Company and its consolidated subsidiaries as of March 31, 2005, 2006 and 2007, and therelated consolidated statements of operations for the years then ended, the consolidated statementsof surplus for the years ended March 31, 2005 and 2006,the consolidated statement of changes in
net assets for the year ended March 31, 2007, and the consolidated statements of cash flows for theyears ended March 31, 2005, 2006 and 2007, all expressed in Japanese yen. These consolidated
financial statements are the responsibility of the Company’s management. Our responsibility is toindependently express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of Fukoku Mutual Life Insurance Company
and its consolidated subsidiaries as of March 31, 2005, 2006, and 2007, and the consolidated resultsof their operations and their cash flows for the years then ended in conformity with accounting
principles generally accepted in Japan.
As described in Note III. 3 in the year ended march 31, 2006, the Company and its consolidated
subsidiaries adopted the new accounting standards for impairment of fixed assets.
The amounts expressed in U.S. dollars, which are provided solely for the convenience of thereader, have been translated on the basis set forth in Note I. 2 to the accompanying consolidated
financial statements.
Tokyo, JapanMay 22, 2007

The Fuji Accounting Office49

Corporate Organization
Secretarial Div.
Strategic Planning Dept.

Organization (as of April 1, 2007)
Branch Office65
Field Office510

Compliance Control Dept.
Corporate Risk Management Dept.
General Affairs Dept.

Employees (as of March 31, 2007)
Office Staff
2,681
Sales Representative 11,090

Personnel Dept.
Marketing Headquarters
Market Planning Dept.
Retail Management Dept.
Independent Auditors

Market Developing Dept.
Strategic Market Promotion Dept.

Board of Statutory
Auditors

Group Credit Div. Related toJapan Housing Finance Agency
Wholesale Management Dept.

Assistant to the
Statutory Auditors

Human Resources Development Dept.
Customer Service Headquarters

Board of Representative
Members of Policyholders

President
Board of Directors

Group Insurance Dept.
Group Annuity Dept.
Customer Service Planning Div.
Customer Service Dept.

Nomination Committee of
Candidates for
Representative Members

Chief Actuary

Secretariat for Nomination
Committee of Candidates for
Representative Members

Executive Committee

Underwriting & Claims Dept.
Policy Administration Dept.

President

Medical Dept.
Operation & System Planning Dept.
Claim Inspection Dept.
Financial and Investment Planning Dept.

CouncilEquities Dept.
Fixed Income Dept.
Loans Dept.
Separate Accounts Management Div.
Securities Administrative Div.
Real Estate Dept.
Financial and Investment Risk
Management Dept.
Accounting Dept.
Actuarial Dept.
Internal Auditing Dept.
Affiliated Business Dept.
Committee for Editing History of the Company
Branch Offices

1250

Corporate Information

Board of Directors and Statutory Auditors
President

Tomofumi Akiyama*

Statutory Auditors:

Yoshizumi Nezu
Mitsuo Ohashi

Senior Managing Director

Akihiro Mochizuki

Haruhiko Sugimoto
Statutory Auditors (Standing):
Managing Directors:

Yoshiki Murayama

Shuuichi Maeda
Akio Imai

Mikio Yamamoto
Katsumasa Furuya

Senior Advisers to the Board:

Yoshiteru Yoneyama

Tetsuo Furuya

Kenji Hirai

Takashi Kobayashi

Directors:

Katsuhiro Utada
Kozo Isshiki(as of September 1, 2007)

Hitoshi Sakai
Tsutomu Hiruma
Toshihiro Hayashi
Toshihide Fujiwara
Tadashi Akikawa
Yuuki Sakurai*Representative Director

1351

Directory

52
14

Head Office

Fukoku Life International

Fukoku Life International

2-2, Uchisaiwaicho 2-chome,(U.K.) Ltd.

(America) Inc.

Chiyoda-ku, Tokyo 100-0011,

3rd Floor, Baltic Exchange,

Times Square Tower,

Japan

38 St. Mary Axe, London,

7 Times Square, 35th Floor,

Phone: 81-3-3508-1101

EC3A 8EX, U.K.

New York, NY 10036, U.S.A.

Facsimile: 81-3-3591-6446

Phone: 44-20-7283-1331

Phone: 1-212-221-7760

Facsimile: 44-20-7626-7096

Facsimile: 1-212-221-7794

Fukoku Life International (U.K.) Ltd.

Fukoku Life International (America) Inc.

from left: J. Doran, K. Sato, Y. Onodera,

from left (back): M. Xu, Y. Suzuki, and T. Yoshimoto

D. Reynolds, and A. Satofrom left (front): J. Johanson, and A. Suzuki

17Printed in Japan