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010̲0161301372309.qxd 11.9.5 2:35 PM ページ 1

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

Management Principle

Strive to become a financial group that is “loved” by the regional community
by providing services tailored to customers’ needs, while valuing “broad
networks of relationships” and “an enterprising spirit.”
Management Policy
1. Create a “most trusted by customers” financial group which respects personal
relationships and promotes honest and approachable banking.
2. Create a financial group with a commanding regional presence by researching andpredicting trends to provide advanced, high-quality services.
3. Pursue transparent operations and live up to the trust of the shareholders, while
maintaining a competitive edge through strong financial standing, high profitability andmanagement efficiency.
4. Promote “coexistence with the region” by utilizing industrial, academic andmanagement networks for business matching.
5. Focus on gaining the trust of the community through compliance with laws andregulations and corporate activities that are considerate of the environment.
6. Provide a workplace for employees of the financial group which encourages employees
to exercise talents and develop skills, with an emphasis on proactive self improvement,
thereby contributing to the development of upstanding citizens.

ProfileSenshu Ikeda Holdings, Inc.

The Senshu Ikeda Bank, Ltd.
(As of March 31, 2011)

Establishment: October 1, 2009
Location:18-14 Chayamachi, Kita-ku, Osaka-City, Osaka
Share Capital:¥72.3 billion
Business Activities: Management and other related operationsof banks and affiliates whose shares canbe held in accordance with the Banking
Act and other related operations.
Number of Employees: 187
Tokyo Stock Exchange, Osaka Securities Exchange
Stock Listing:

1

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

(As of March 31, 2011)

Establishment: September 1, 1951
Location:18-14 Chayamachi, Kita-ku, Osaka-City, Osaka
Share Capital:¥50.7 billion
Deposits:¥4.3570 trillion
Loans:¥3.5123 trillion
Number of Branches: 141
Number of Employees: 2,885

010̲0161301372309.qxd 11.9.5 2:35 PM ページ 2

Message from the President áááááááááááááááááááááááááááááááááááá

3

To be the ÒNo.1 Reliable Bankfor the Regional Communities and CustomersÓ ááááááá

5

Management Strategies of
the Senshu Ikeda Bank áááááááááááááááááááááááááááááááááááááááááááá

7

Celebrating the 60th Anniversary ááááááááááááááááááááááááááááá

9Business Overview of Senshu Ikeda Holdings ááááááááá 10

Business Overview of The Senshu Ikeda Bank áááááááá 11

Soundness of The Senshu Ikeda BankÕs Operation ááá 13

Corporate Governance ááááááááááááááááááááááááááááááááááááááááááááá 15

Compliance Structure ááááááááááááááááááááááááááááááááááááááááááááááá 19

Risk Management Structure ááááááááááááááááááááááááááááááááááááá 21

Approach to Facilitation of Financing ááááááááááááááááááááááá 25

Approach toÒCommunity-based Financing (Fiscal Year 2010)Ó áááá 27

Business Description of the Group ááááááááááááááááááááááááááá 28

Organization and Board of Directors áááááááááááááááááááááááá 29

Consolidated Financial Information of
Senshu Ikeda Holdings áááááááááááááááááááááááááááááááááááááááááááá 31

Non-consolidated Financial Information of
The Senshu Ikeda Bank (Unaudited) ááááááááááááááááááááááá 67

Corporate Data áááááááááááááááááááááááááááááááááááááááááááááááááááááááá 69

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 20112

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To be the "No.1 Reliable Bank for the Regional
Communities and Customers"Thankof our

We would first like to express our gratitude for your ongoing support and patronage.
We would also like to extend our heartfelt sympathy to those suffered from the Great East Japan Earthquake and wish forthe earliest reconstruction.
I hope you will take the opportunity to read through the business performance report of Senshu Ikeda Holdings for the
fiscal year ended March 2011 (fiscal year 2010).
Banking profit was ¥22.0 billion, and net income for the fiscal year 2010 was ¥6.3 billion.
Deposit balance increased by ¥90.2 billion over the year, mainly due to an increase in deposits held by individuals,
reaching ¥4,357.0 billion.
Sales figures for assets in custody increased steadily, reaching ¥169.0 billion for the fiscal year ended March 2011.
Loan balance increased by ¥48.8 billion over the year to ¥3,512.3 billion.
A capital adequacy (consolidated Senshu Ikeda Holdings) was 10.80%.
Furthermore, the NPLs ratio for the fiscal year 2010 dropped from 2.02% to 1.76%, which is one of the lowest levels forany other regional banks in Japan.
One year has passed since the founding of the Senshu Ikeda Bank.
We have been striving to take full advantage of effect from the merger, while developing three challenging strategies asfollows.
(1) Reinforce “Asia and China Business” through utilizing the local benefits and advantages of the region.
(2) Put into practice “Advanced Technologies” cultivated through “the business-academia-government collaboration.”(3) Promote “Private Banking Business” which meets various needs of our customers.
As part of the “business-academia-government collaboration” stated above, we concluded the “Collaborative
Agreement for Industrial Promotion” with Sakai-city in March 2011. On this occasion, we set up the “Sakai-city Industrial
Promotion Fund”, and in April, we also established the “Sakai Emergency Loan Scheme for Earthquake Disasters”
based on the aforementioned Agreement. In addition, we held the “Symposium Celebrating the Conclusion ofCollaborative Agreement” on May 27 in collaboration with Sakai-city.
We concluded “Basic Agreements for Business-Academia Collaboration” with Kinki University in February, Ryukoku
University in March, and Wakayama University in May, 2010. Thus we have built the collaboration networks with 10
Kansai’s leading universities.
We will continue to promote cooperation among business, academia and government and to contribute to the regional
economic development.
On March 28, 2011, we have relocated the Kyoto branch to a larger and more convenient area in Karasuma Oike.
We are planning to open new branches at Hanshin Area, and will continue striving to offer an enhanced branches network.
In January 2012, we will integrate our computer systems as a mop-up of the integration and merger.
There may be some inconvenience in the meantime, but after the system integration, we will be able to provide our customers with better services.
This year also marks the 60th anniversary of the founding of the former Bank of
Ikeda and the former Senshu Bank.
On this landmark year, our “mission” is to be the No.1 bank in terms of “being
there anytime for our customers,” “actively taking the new challenges,” as aresult, the “No.1 reliable bank for the regional communities and customers.”
We would appreciate your continued support.
July 2011

Moritaka Hattori

Senshu Ikeda Holdings Representative Director, President and CEO
Senshu Ikeda Bank Representative Director, President and CEO

3

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

Kobe

SuzhouSha

010̲0161301372309.qxd 11.9.5 2:36 PM ページ 4

Thanks to your support, we are celebrating the first anniversaryof our merger, and the 60th anniversary of our founding.

Kyoto

Sanda

Ikeda
Takarazuka

Umeda
Namba
Kobe

Sakai

SuzhouShanghai

Kishiwada

Izumisano"Celebration of the 60th anniversary" Logo

Wakayama

The Senshu Ikeda Bank, Ltd. marked the first anniversary of
its merger in May 2011.
It has been 60 years since the founding of the two former banks, and we havedesigned a celebration logo.
The logo is to express our gratitude for the loyal patronage of our customers
over the years, and to convey our desire to be “the bank that serves all of theregional communities and customers.”
The number “60” in the logo consists of two “jointing circles,” which symbolize
the “linkage and incidental bond” between the “customers” and “The Senshu
Ikeda Bank,” as well as the various networks that we have.
In pursuit of our mission to be the “No.1 Reliable Bank for the Regional
Communities and Customers,” we keep the basic principles, “kindness andinnovation.”

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 20114

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We aim to be the "No.1 Reliable Bankfor the Regional Communities and Customers"in Japan's leading market area.
13.7

640

millionMetropolitan Tokyo
12.5 million

Total Japanese
Population
127.06 million

thousandMetropolitan Tokyo
690 thousand

Total Number ofBusinesses in Japan
5.91 million

Advanced Traffic Network[Population and businesses of a high density equivalent
to that in Metropolitan Tokyo]

Ports of Osaka and Kobe, and three airports
in the area
No. 1 in Japan for Asia trade
Export/Import
Volume Share (with Asia)

Strength

Sanda

Osaka/Kobe Ports:
15.57%

Kyoto
Nagoya Port:
8.93%
Tokyo Port:
11.69%

Other:
53.43%(Data source)“Trade Statistics of Japan (2010)”
by the Ministry of FinanceRegionIkeda

CommuniYokohama Port:
8.90%
Moji Port: 1.48%

Our mission“service for t
and for the lo

Kobe
Umeda

T
Namba

Beijing

Sakai
Kishiwada

SuzhouShanghaiG a t e w a y to Asia

C
and

hin

a

Four Government-Ordinance-Designated Cities
Wakayama

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SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

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The business area we cover comprises an advanced traffic network and includes four government-ordinancedesignated cities. The number of business offices within this area along with the population is comparable with that ofMetropolitan Tokyo, with the Ports of Osaka and Kobe and its three airports which themselves provide a gateway into
Asia and China, regarded as Japan’s leading market area.
Furthermore, in addition to the existing well-balanced industrial structure, new large-scale projects are underway,
including the JR Osaka Station, Umekita, Kintetsu Abenobashi Terminal Building, Panel Bay, Saito Life Science Park,and Kobe Medical Industry Development Project. The area is expected to grow further and has extremely highpotential, so-called “Regional Power.”In this environment, we will use its signature strategies, “Three Survival Strategies” and “Three Challenging Strategies,”
to create a “new regional bank model,” to be the “No.1 Reliable Bank for the Regional Communities and Customers,”
and becoming as Japan’s leading regional bank.

Strengths of the Senshu Ikeda Bank

Three Survival Strategies[What We can do]

Regional Bank

Independent Regional Bank

Community-oriented

Optimized proposals

Our mission is to offer the“service for the communities
and for the local residents.”

By increasing our
independent brand power,
we will achieve “the highest
priority to communities.”

1. Exhaustive
Efficiency

2. Promotion ofBusiness
Alliance

3. Three Challenging Strategies

The Senshu Ikeda Bank

Urbane Regional Bank
Differentiation fromcompetitors
We will provide challenging andcompetitive service, strengthen
our “capabilities to offer proposals”
that can beat competitors.

Asia and China
Business
Headquarters
Advanced Technology
Business Supporting
Headquarters

PrivateBanking
Headquarters[As one and only Bank]SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 20116

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Management Strategies of the Senshu Ikeda Bank

Three Challenging Strategies

Alliance S

Asia and China Business Headquarters
Reinforce ÒAsia and China BusinessÓ throughutilizing the local benefits and advantagesof the region
In order to strengthen our functions in the “gateway to Asia
and China” utilizing the local benefits and advantages of
the region including the Kansai Bay Area, the Ports ofOsaka and Kobe, and the region’s three airports, thenetwork with clients with whom we have lose ties will beutilized such as the regional bank’s sole expatriate Suzhou
Representative Office. We will significantly strengthen ourcapability to respond and support Asia and China
businesses.

Asia

Network inoverseascompanies

Tradingcompanies

Actively capita
between Ikeda
and Suzhou cit

Suzhou People’s
Government

Legal firms andAccountancy
firms

Enthusiastic Support for New Advances

As an indep
conglomera
allows us to*Other friendly comunicipalities a
Sakai-city – Viet

SuzhouRepresentative
OfficeMegabanks andLocal banks

Japan-China busin
Economic and cultinto Foreign Markets and Business

Providing information and mediation of businessmatching between companies and governments
Supporting overseas visits
Making various proposals related to overseas business
Further expansion of our challenging network capitalizingon the strength of an independent financial institution
Capable to offer proposals at branches
Personnel training

Public Ass

The Kansai Bureau of Economy
National Institute ofAdvanced In
Organization for Small & Medium
Innovation, JAPANAdvanced Technology Business Supporting Headquarters
Put into practice ÒAdvanced TechnologiesÓ cultivatedthrough Òthe business-academia-government collaboration.Ó

Kyoto
Wakay
Osaka
Konan
Kinki UThrough the employment of hitherto established close-knit business-academia-government network with Kansai’s
leading universities and public organizations and so on, and support for the next generation of industry and technology,
the Advanced Technology Business Supporting Headquarters will work enthusiastically to utilize advanced
technologies to provide new products and services such as a new and more convenient multi-functional IC cash cards.

Advanced Technology BusinessSupporting Headquarters
Our advanced
technology businessnetwork is made up of
more than 1000 companies.

. Accumulation of information about the “companies with excellent
technologies and/or business models” that apply for our New Business
Grant Program or Consortium-based R&D Grant Program. Network of the appraisers including universities, institutions,municipalities, trading companies, and media that evaluate
the above applications

Supporting the growing companies
with advanced technologies
Mediation of businesses concerningadvanced technologies between
governments and companies, as wellas those between companies
Providing new products and services
capitalizing on innovative technologies
Expansion of business-academiagovernment collaborative networks

Improved

Demonst

A synergis
Specificallywill additio

System I

The improv
operations
Moreover, tfurther imp

Private Banking Headquarters
Promote ÒPrivate Banking BusinessÓ which meets various needs of our customers
The Private Banking Headquarters will provide advanced corporate and individual
integrated services, which in addition to the provision of asset management advice toindividual customer, comprise the utilization of our broad network of experts to extensively
fulfill the diversity of advanced needs of company owners pertaining to, for example,
business succession, inheritance measures, fund procurement associated therewith, and
M&A (mergers and acquisitions).

7

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

System In

January 20

The experience
Bank of Ikeda w
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SENSHU IKEDA HOLDINGS,INC.

Alliance Strategies
As an independent regional bank, we are building the “original business network that possesses great flexibility beyond
conglomerate groups,” and we offer our customers improved and superior products and services without any restriction. This
allows us to provide customer-oriented products and services meeting the various different needs of our customers.
Being an independent financial agency, we

Actively capitalizing on the friendly relationshipbetween Ikeda-city, the BankÕs hometown,
and Suzhou city

*Other friendly collaborations between local
municipalities and overseas municipalities
Sakai-city – Vietnam, Kishiwada-city – China (Shantou)

Òhave great flexibility beyond conglomerate groupsÓ
Òoffer proposals that meet our customersÕ needsÓ
Òhave the original network across the area which

Lease and Credit

Life and Non-life
Insurancea regional presence is demonstratedÓ

Mitsubishi UFJ Lease &Finance Company Limited
IBJ Leasing Company, Limited
JACCS CO., LTD.
JCB Co., Ltd.
Visa Inc.

Life Insurance: Domestically andinternationallyNon-life Insurance:
Domestically and internationally

Securities Companies andInvestment Companies

Securities companies
Investment companies:
Domestically and internationally

Product provision
Asset based lending,(Insurance)

card, leasing

Japan-China business promotion
Economic and cultural exchange

Product provision(Investment trusts)

Banks

Megabanks
Development Bank ofJapan Inc.
Other regional banks
Public financial institutions

Total support in alliance
Personnel exchange, personnel training

Public Assistance Agencies

The Kansai Bureau of Economy, Trade and Industry
National Institute ofAdvanced Industrial Science and Technology
Organization for Small & Medium Enterprises and Regional
Innovation, JAPANInvestment promotion, coordinated investment

Senshu Ikeda
Bank GroupManagement support,
technology development
support

Proposals to local government bodies

The business-academia collaboration
Responding to sophisticated needs
Universities

Kyoto University, Osaka University, Kobe University,
Wakayama University, Osaka Prefecture University,
Osaka City University, University of Hyogo, Kwansei Gakuin University,
Konan University, Doshisha University, Kansai University,
Kinki University and Ryukoku University, etc.

Industrial promotion collaboration

Local governments

Experts

Lawyers
Accountants
Tax accountants

Think Tank

Mitsubishi Research Institute, Inc.
Japan Economic ResearchInstitute Inc.
Mitsubishi UFJ Research andConsulting Co., Ltd.

Sakai-city

Improved Efficiency Strategies
Demonstration of Synergistic EffectA synergistic effect will be swiftly demonstrated and will be evidenced in low-cost operations.
Specifically, the individual strengths of the two banks will be mutually expanded across a shared mother market, and thiswill additionally reinforce our operational strength.

System Integration

The improved efficiency in business branch operations, together with the credit screening flow and the integration of otheroperations afforded by the system integration (scheduled for January 2012) will give rise to improved operational quality.
Moreover, the implementation of integrated operations processing and the centralization of outsourcing will ensure evenfurther improvements in administration efficiency.

The (former) Bank of Ikeda

System Integration

January 2012

The experience of The former
Bank of Ikeda will be utilized toensure a smooth transition

Regional Bank Integrated
Services Center

Unifying Administrative
Process

The (former) Senshu Bank

Improving the Quality of
Administration

Improving Administration
Efficiency. Improving efficiency of. Concentrating operation

branch operations. Unification of verification
flow and other operations

processes. Integration of theoutsourcing

The Senshu Ikeda BankSENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 20118

010̲0161301372309.qxd 11.9.5 2:38 PM ページ 9

Celebrating the 60th Anniversary

Busin

ConsolidateÒBusiness Networking EventÓ Celebrating
the 60th Anniversary of Our Founding
Our mission is “above all else, we would like to support
the revitalization of the Kansai region” and to that end,
we have continued our contribution to the goal of “avibrant future of Kansai region” through theimplementation of various policies.
Thanks to your support, this year we are celebrating thefirst anniversary of our merger, and the 60th anniversaryof our founding.
Our basic principle remains unchanged, and we will
strive to support further revitalization of Kansai region
with an increasingly global perspective.
On May 9, 2011, we held a “Business Networking Event”
celebrating the 60th anniversary of our founding.
In the first session, we announced the chosen plans of
the “2010 Consortium-based Research & Development
Grant.” At this time we received record-high 71 plans, ofwhich 15 selected after comprehensive assessment by
the Evaluation Committee, and awarded grant a total of¥30 million.
The total number of plans submitted over the seven years

since the establishment of this system in 2004 is 347, of
which a total of 99 were selected, and the total amount ofgrant awarded is over ¥210 million.
The second session, we hosted a lecture meeting on“Global Economics –Future Scenarios” by
Noriko Hama, Professor
and Economist of
Doshisha Business
School.
The third session, we had
a social gathering
attended by guests fromapproximately 500 of theBank’s corporate
customers, as well as 40organizations essential to
the “revitalization of
Kansai region,” including
the Kansai Bureau of Economy, Trade, and Industry, theBank of Japan, local governments, research institutions fromour region and 16 leading regional universities. The
gathering provided an opportunity for an active exchange of
information and dialogue among representatives ofbusiness, academia, and government across various
industries.

Practicing a Campaign of Time Deposit Celebrating the 60th Anniversary
As we mark 60th anniversary of its founding this year, we
are holding a “Campaign for Time Deposit Celebrating
the 60th Anniversary” to show our appreciation to thecustomers for their loyal patronage over the years. The
first 100,000 customers to make a new and eligible
fixed-term deposit of ¥300,000 or over at our branches
during the campaign will receive “familiar’s cooler bag”
designed exclusively for us.
Furthermore, 4,000 winners selected in a drawing will
receive magnificent prizes including the Grand Prize andthe 60th Anniversary Prize.
The campaign ends on September 30, 2011. For details,
please see the brochure available at any branch, orcheck our website.

9

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011familiarÕs Òcooler bagÓdesigned exclusively
for the Senshu Ikeda Bank

010̲0161301372309.qxd 11.9.5 2:38 PM ページ 10

SENSHU IKEDA HOLDINGS,INC.

Business Overview of Senshu Ikeda Holdings
Consolidated

Non-consolidated■ Summary of Profit and Loss
Items(¥ million)

Fiscal year 2009

Fiscal year 2010

Ordinary revenue

118,332

117,255

Ordinary expenses

112,274

109,723

Ordinary income

6,057

7,532

Net income (loss)(2,845)

7,690

Business Environment
The Japanese economy was picking up in the
consolidated fiscal year 2010, due to a recovery tendency
in exports and production as well as an improvement incorporate earnings. However, autonomy was weak, and
the Great East Japan Earthquake has generated concern
about the economic impact.
With respect to prices, the forecast for consumer prices
is expected to fall two years in a row, although the drop
was getting smaller due to the shrinking GDP gap andother factors, resulting in continued mild deflation.
In the financial markets, the unsecured overnight callrate generally stayed at a level slightly below 0.1%
because the Bank of Japan continued to provide sufficient
funds to the market. A pessimistic economic forecast
mixed with concern over the deteriorating supply-demandsituation of government bonds and other worrisome
factors meant that the rate of return on 10-year Japanese
government bonds fluctuated from the mid 0.8% range toaround 1.4%.
Although overall stock prices sagged in the first half ofthe fiscal year due to a rising yen and financial problems
in European countries, additional monetary easing by
Japan and the U.S. spurred an increase in stock prices
towards the latter half of the fiscal year.
However, stock prices tumbled rapidly at the end of the
fiscal year due to the Great East Japan Earthquake,
resulting in a drop in the Nikkei Stock Average toapproximately 12% for the year.

■ Summary of Profit and Loss
Items

Fiscal year 2009(¥ million)

Fiscal year 2010

Operating revenue

6,971

6,793

Operating expenses

543

881

Operating income

6,428

5,912

Ordinary income

5,944

5,806

Net income

5,955

5,802

(“the Company”) posted operating revenue of ¥6,793
million, mainly due to dividends from its subsidiary bank.
At the same time, the Company recorded operating
expenses, including selling, general and administrative
expenses of ¥881 million, resulting in operating income of¥5,912 million. Furthermore, non-operating expenses
reached ¥114 million mainly due to costs related tointegration, consequently posting net income of ¥5,802
million for the fiscal year 2010.

Matters to Be Addressed
The Group’s operating bases are located in the densely
populated Kansai Bay area, encompassing highly
integrated industries. The Group is aware that its mostfundamental mission is to “strengthen the relationshipbanking” and “carefully-crafted services.” In considerationof the mission, the Group is striving to conduct its
business by addressing to “enhance relationshipnetworks” as the important matters of the financial group,
which contributes to regional customers and evolves
together with the region.
The Group also intends to “contribute to therevitalization of the Kansai economy” through the creationof business networks from a broad viewpoint and theintroduction of high-quality financial products andservices, as well as contributing to the regional customers
as the “No.1 reliable bank for the regional communities
and customers.”

Dividend Policy
Business PerformanceWith regard to consolidated performance of Senshu Ikeda
Holdings Group (“the Group”), consolidated ordinary
revenue for the fiscal year under review decreased ¥1,077
million from the fiscal year 2009 to ¥117,255 million, mainly
due to a decrease in interest income resulting from lower
yields on loans. On the other hand, consolidated ordinary
expenses decreased ¥2,551 million from the year-earlier
levels to ¥109,723 million. This was because of
decreasing interest expenses resulting from lower yields
on funding.
As a result of the preceding factors, ordinary income forthe fiscal year under review increased ¥1,475 million fromthe fiscal year 2009 to ¥7,532 million. In addition, net
income for the fiscal year increased ¥10,535 million fromthe fiscal year 2009 to ¥7,690 million, due to the absenceof special factors, namely the reversal of deferred tax
assets at the subsidiary bank in fiscal year 2009.
On a non-consolidated basis, Senshu Ikeda Holdings

With a view to its highly public nature as a bank’s holding
company, the Company has a basic policy of positively
returning profits to our shareholders, whilst sustaining asound financial standing through the enhancement of anadequate retained earnings base and keeping up thepolicy of stable dividends.
In respect of the dividend of retained earnings for the
fiscal year under review, based on the basic policy and inconsideration of its overall business performance and thecurrent management environment, the Company decided
to pay dividend of ¥3.00 per common stock. With regard
to first-class preferred stock and second-class preferredstock, the Company plans to pay the amount of ¥196.00
divided by 18.5 and ¥204.00 divided by 18.5 for eachstock respectively, in accordance with the provisions of
the Articles of Incorporation.
Meanwhile, the Company intends to utilize its retained
earnings for future business developments or improve its
financial strength.
SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201110

010̲0161301372309.qxd 11.9.5 3:18 PM ページ 11

Business Overview of The Senshu Ikeda Bank
*Results for fiscal year 2008 and 2009 as well as results at the end of March 2009 and 2010 were the sum simply combining the figure for the former Bank of Ikeda and that for the former Senshu Bank.

Non-consoli

Consolidated■ Summary of Profit and Loss
Items

Fiscal year 2009(¥ million)

Fiscal year 2010

■ Net income (loss)(¥ million)
7,652

8,000

Ordinary revenue

118,430

117,308

6,000

Ordinary expenses

110,727

109,827

4,000

Ordinary income

7,702

7,481

2,000

4,500

4,000

3,500

Net credit costs

18,795

15,937

Net income (loss)(2,648)

7,652(37,389)(2,648)March 2009

March 20100

(40,000)

0March 2011

Non-consolidated■ Summary of Profit and Loss
Items

Fiscal year 2009(¥ million)

Fiscal year 2010

Gross profit

72,78274,439Net interest income

61,93760,823

Net fees and commissions income

2,141

3,515

Net other operation income

8,703

10,100

Expenses

50,38048,972

Personnel expenses

23,094

23,511

Non-personnel expenses

24,79922,959Core banking profit

14,002

16,472

Banking profit

16,582

22,057

Ordinary income

3,943

5,786

Net credit costs

11,407

13,201

Net income (loss)(4,636)■ Banking profit(¥ million)

3,500

25,00022,05720,0003,400

16,582

15,0003,300
10,000

3,200

4,859

5,000

0

0
March 2009

6,343

■ Core banking profit(¥ million)

March 2010

March 2011

■ Net income (loss)(¥ million)

7,500

30,0006,343

26,0155,000
20,00016,4722,500

14,002

10,000(37,064)(4,636)

March 2009

March 20100

(40,000)
0March 200911

SENSHU IKEDA HOLDINGS,INC.

March 2010

March 2011

ANNUAL REPORT 2011

March 2011

010̲0161301372309.qxd 11.9.5 3:18 PM ページ 12

SENSHU IKEDA HOLDINGS,INC.

Non-consolidated■ Deposits(¥ billion)
Deposits■ Assets in custody sales

Deposits held by individuals

Investment trusts sales(¥ billion)

Public bonds sales

Pension benefit insurance sales

200

4,500
4,357.0

169.0

4,266.8
153.6

4,098.7

150

4,000

73.5
66.4

106.1

100
40.1

4.6
11.2

3,500
3,508.8

3,425.6

3,562.6

15.7

50

90.8
75.9

50.2

0

0
March 2009

March 2010

March 2011

■ Loans and bills discounted

March 2009(¥ billion)
3,512.3

3,500

3,395.6

March 2011

■ Housing loans(¥ billion)

1,800

3,463.5

3,400

March 2010

1,748.5

1,753.8

March 2010

March 2011

1,700
1,637.6

3,300

1,600

3,200

1,500

0

0
March 2009

March 2010

March 2011

March 2009

Business Performance(Summary of Profit and Loss)
With regard to consolidated performance of the Senshu
Ikeda Bank Group (“the Bank Group”), ordinary revenue
for the consolidated fiscal year under review was¥117,308 million, including interest income of ¥76,281
million, fees and commissions of ¥17,440 million, otheroperating income of ¥12,556 million, and other ordinary
revenue of ¥11,030 million. Ordinary expenses were
¥109,827 million, including interest expenses of ¥12,999
million, fees and commissions expenses of ¥6,295 million,
other operating expenses of ¥2,070 million, general andadministrative expenses of ¥56,278 million, and otherordinary expenses of ¥32,183 million.
As a result of the factors above, the Bank Group posted

ordinary income of ¥7,481 million, and income before
income taxes and minority interests was ¥8,947 million
after recording extraordinary income or loss such as
recoveries of written-off claims. Net income for the fiscal
year was ¥7,652 million after allocated total income taxesof ¥1,217 million and minority interests in income of ¥77
million.
On a non-consolidated basis, gross profit was ¥74,439
million, including net interest income of ¥60,823 million,
net fees and commissions income of ¥3,515 million, andnet other operation income of ¥10,100 million. After
deducting personnel expenses and non-personnel
expenses, as well as provision for general reserve for

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201112

010̲0161301372309.qxd 11.9.5 3:18 PM ページ 13

Soundness of The Senshu Ikeda BankÕs Operation■ Capital ratio (domestic standard, non-consolidated)
The former Bank of Ikeda

12.00

9.55

10.32

The former Senshu Bank

10.42

(%)

The Senshu Ikeda Bank

■ Securing a sound asset

Disclosure under the Financial Revitalization Law

10.54

9.33

Bankruptcy and quasi-bankrupt credit

78.0

80

8.00
60

Doubtful credit

71.6(¥ billion)
Substandard credit

63.0

28.8

26.2

41.2

37.6

41.5

7.9

7.7

7.4

13.9

40
4.00
20

0.00

March 2009

March 2010

0March 2011

* Method of Calculating the Capital Ratio (domestic standard)

Basic components + Supplemental components(Capital, retained earnings, etc.) (Generalreserveforpossible loanlosses,subordinateddebt, etc.)
Risk-weighted assets, etc. (Credit risk-weighted equivalent amount) 100■ Balance of Securities

1,250

March 2009
2.24%

Bankruptcy andquasi-bankrupt credit
Doubtful credit

1,081.5

Substandard credit
Total

1,000

Normal credit

500

1.76%

(¥ billion)

Amount of loans

Secured amount

Coverage ratio

13.9
41.5
7.4
63.0
3,504.7

13.9
38.2
5.6
57.9

100.00%92.12%
75.99%
91.96%

Coverage amount:Amount of coverage by collaterals, etc.
+ Reserve for possible loan losses

Bankruptcy and quasi-bankrupt credits represent the credits held by borrowers who
have been declared insolvent, on the grounds of the commencement of bankruptcy or
rehabilitation proceedings, filing for the proceedings of rehabilitation or other similar
legal proceedings.

Borrower clas

Doubtful credits represent the credits held by borrowers who have not yet failed but
their financial conditions and business performances have deteriorated, with a highpossibility that the principal and interest on these credits are not received as per
agreement.

Classificatio
Outstanding lo

Doubtful credit

250

0

2.02%

Bankruptcy and quasi-bankrupt credit

750

March 2011

March 2010

Coverage of credits (End of March 2011)(¥ billion)

1,243.4
1,056.8

NPLs ratio

End of March 2009 End of March 2010 End of March 2011

Substandard credit

Substandard credits represent the credits that are past due three months or more, andconsidered as restructured loans among the credits requiring special caution.
(Borrowers requiring special caution: Borrowers who have concerns in lending
conditions, exercising their obligations and financial situation, requiring special caution
on their future situations.)

Normal credit

Bankrupt

3.3

Effectively bank

10.6

Potentially bank

41.5

Normal credits represent the credits held by borrowers who show no particular
problems regarding financial conditions and business performances; therefore they areclassified other than the aforementioned credits.

(Assets and Liabilities)
The balance of deposits at the end of the consolidated
fiscal year under review was ¥4,349.3 billion.
The balance of loans and bills discounted at the end of theconsolidated fiscal year under review was ¥3,501.0 billion.

13

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

The balance of securities at the end of the consolidated
fiscal year under review was ¥1,077.3 billion.
On a non-consolidated basis, the balance of deposits
increased ¥90.2 billion from the end of the previous fiscal
year to ¥4,357.0 billion due mainly to an increase of thedeposits held by individuals. The balance of loans andbills discounted increased ¥48.8 billion from the end of theprevious fiscal year to ¥3,512.3 billion mainly due to anincrease of the corporate lending, while the balance of
securities decreased ¥161.9 billion to ¥1,081.5 billion.

Requirin
special cau
Watch list

possible loan losses, banking profit was ¥22,057 million.
The Bank posted ordinary income of ¥5,786 million after
moderated NPL write-offs and nonrecurring income orloss, such as gains or losses on stock to banking profit.
After allocating extraordinary income or loss and income
taxes, net income for the fiscal year under review was¥6,343 million.

8.8

Other borro
requiring ca

281.3
Normal3,222.0
Total

3,567.7

Notes 1. Credits i
private p
and Suslease co2. The figu
bankrup010̲0161301372309.qxd 11.9.5 2:38 PM ページ 14

SENSHU IKEDA HOLDINGS,INC.

■ Disclosure of Risk-Monitored Loans
It should be noted that not all of the disclosed amountof risk-monitored loans are irrecoverable. The majority ofsuch loans are secured by collaterals and guarantees,
and the reserves for possible loan losses have been set
aside for the portion deemed irrecoverable.

Risk-monitored loans are stipulated in the Banking Law
and classified into the four subcategories of “Loans tobankrupt borrowers,” “Delinquent loans,” “Loans past due
three months or more,” and “Restructured loans.” Riskmonitored loans are subject to mandatory disclosure on
both a consolidated and non-consolidated basis.

● Consolidated(¥ billion)

Subcategories

March 2010

March 2011

12.1
52.7
0.6
7.5
73.1
2.12%

4.7
53.6
—
7.4
65.8
1.88%

Loans to bankrupt borrowers
Delinquent loans
Loans past due three months or more
Restructured loans
Total
Ratio of total risk-monitored loans● Non-consolidated
Subcategories(¥ billion)

March 2010

March 2011

11.0
50.8
0.5
7.1
69.5
2.00%

3.3
51.7
—
7.4
62.4
1.77%

Loans to bankrupt borrowers
Delinquent loans
Loans past due three months or more
Restructured loans
Total
Ratio of total risk-monitored loans

Loans to bankrupt borrowers

Loans with high possibility of their principals becoming irrecoverable. Specifically, among the loans and bills discounted on which accrued
interest is not recorded as accrued revenues, they are the loans to borrowers who have been declared failed on grounds of thecommencement of legal bankruptcy or special liquidation proceedings under applicable laws such as Corporate Reorganization Act orBankruptcy Act, or whose notes have been dishonored and suspended from processing through clearing houses.

Delinquent loans

Among the loans and bills discounted on which accrued interest is not recorded as accrued revenues, they are the loans excluding those on
which interest payments are reprieved with a view to recovery, reconstructing or supporting of the loans to bankrupt borrowers andborrowers.

Loans past due three months or moreAmong the loans and bills discounted on which the principal or interest is in arrears of payment for three months or more after the contracted
payment due date. These are not classified into the loans to bankrupt borrowers or delinquent loans.

Restructured loans

These are loans which have been restructured in favor of the borrower (such as by reducing or suspending the rate of interest, suspending
the capital, loan forgiveness, cash donation, acceptance of substitute payment, etc.) with the aim of restructuring and supporting financiallydistressed obligators and facilitating the recovery of relevant loans.

■ Self-assessment results, and categories and coverage by disclosure standard (Non-consolidated)(End of March 2011)

Borrower classification under self-assessment guidelines(Credit exposures)Classification
Outstanding loans
Bankrupt

3.3

Category
No assetclassification Category II Category III Category IV

1.3

2.0

---

(0)
---

---

(---)
---

2.0 8.6 (0.1) (0.1)
3.2
Potentially bankrupt
15.8 22.4 (9.4)
41.5
Effectively bankrupt

10.6

Requiring
special caution
Watch list

8.8

Other borrowers
requiring caution

281.3
Normal3,222.0
Total

3,567.7

Claims disclosed under the Financial Revitalization Law(Credit exposures)Classification
Secured or
Reserve
Outstanding loans guaranteed
Bankruptcy andquasi-bankrupt

13.9
Doubtful

41.5

Substandard

1.1

7.6

100.2 181.0
3,222.0
3.2 --3,342.6 221.7 (9.6)
(0.1)

7.4

Subtotal

63.0

Normal

3,504.7
Total

3,567.7

Coverage
ratio

13.6

0.2 100.00%

28.8

9.4 92.12%(¥ billion)

Risk monitored loans
under the Banking Law
Classification

Outstandingbalance ofloans

Loans to bankrupt
borrowers

3.3

Delinquent loans

51.7

Loans past due three months or more--3.0 75.99% Restructured
loans
7.4
Total
45.2 12.7 91.96%
62.4

2.6

Ratio of NPLs (subtotal) pursuant to Ratio of risk managed loans to total
the disclosure standards of theloans: 1.77%
Financial Revitalization Law to total
credit: 1.76%[Definition of Borrower Classification]
Bankrupt: Borrowers who are in bankrupt legally and formally.
Effectively bankrupt: Borrowers who are not yet in bankrupt legally or formally, but are recognized thatthey have no prospect of reconstruction or rehabilitation of their business.
Potentially bankrupt: Borrowers who are not yet in bankrupt, but are in financial difficulties and the progress of management
improvement plans is not good so that the future bankruptcy possibility is highly concerned.
Requiring special Borrowers whose lending conditions is concerned, and repayment of principal or
caution: payment for interest is not according to the schedule as contracted, or financial
situation is not prosperous that their situation requires to be addressed and managed.
Normal: Borrowers whose business is prosperous and their financial situation has no particularconcerns.

Notes 1. Credits include: Corporate Bonds (when financial institutions holding the bonds guarantee all or part of the repayment of principal and payments of interest, when such bonds are issued throughprivate placement in accordance with the Article 2, paragraph 3 of the Financial Instruments and Exchange Act (No.25 in 1948)); Loans and bills discounted; Foreign exchanges; Accrued income
and Suspense payment account under Other assets; and Customers’ liabilities for acceptances and guarantees in the Balance Sheet; as well as the lended securities (limited for use agreements orlease contracts,) which are required to be stated in a note to the Balance Sheet.
2. The figures in the parentheses under Borrower classification under self-assessment guidelines represent reserved amounts for classified loans. All amounts for Categories III and IV for borrowers inbankrupt and effectively bankruptcy are reserved.

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201114

010̲0161301372309.qxd 11.9.5 2:38 PM ページ 15

Corporate GovernanceIn light of the public nature of our operation as a regional
financial institutions group, the Group is focused on an
adequate development and maintenance of corporate
governance structure, which is one of the crucial
management tasks.
Under the policy, the Company aims to be the trustworthy
and indispensable institution for all of our stakeholders
including customers and employees, as well as shareholders
and investors. To this end, the Company adopts the basic
management policies focused on compliance (with laws andregulations) risk management and management transparency
through emphasizing contribution to the regional
communities, and sustaining management soundness andindependence.

Outline of Corporate Governance Structure
The Company has adopted a corporate governance structure
for sustainable enhancement of its corporate value throughreinforcing supervision of management by electing theoutside directors and cooperating with the Board of
Corporate Auditors.
Specifically, directors who are familiar with banking
business - involving complex and sophisticated management
decisions - supervise business execution of representative
directors, while corporate auditors audit business execution of
directors through attendance to important meetings andinspection of critical documents. The Company reinforces its
corporate governance structure through outside directors andoutside corporate auditors who possess well-seasoned
characters and insights presenting meetings including theBoard of Directors and expressing their opinions actively.
Furthermore, with the purpose to enhance transparency
and objectivity of management, the Company has
established an Advisory Board as consultative body to theManagement Committee, for advice from outside experts on
the issues including critical management strategies andagenda, latest issues in the financial industry and othermatters concerning general management of the Company.
The Company has concluded liability limitation agreementwith outside directors and outside corporate auditors. Under
this agreement, their liabilities to the Company are restricted
to the minimum level as required by the applicable laws andregulations.
Corporate governance functions within the Company● The Board of Directors
The Board of Directors that comprises twelve directors(including two outside director) is responsible for making
decisions on critical management issues while receiving
relevant reports from within the company, and supervising
the business execution of directors and executive officers
under the rules of the Board of Directors. The Board of
Directors is held once a month in principle, attended also bycorporate auditors, to make decisions in due considerationof compliance and risk management.
● The Board of Corporate Auditors
The Company has adopted a corporate auditor system.
Under this system, the Company ensures transparency
through appointing two outside corporate auditors of thefour corporate auditors in all. Each corporate auditor audits
business execution of directors through attendance toimportant meetings including the Board of Directors and theManagement Committee, inspection of critical documents

15

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

and other means, according to the auditing guidelines andaudit schedule decided by the Board of Corporate Auditors.
Outside corporate auditors are qualified with high degree of
integrity along with superior insight and capability, as well
as expertise and hands-on experience in respective area ofspecialty, providing advice on management from diversified
points of view.
● Management Committee
With the purpose to make more adequate and prompt
management decisions in the execution of company
business, the Management Committee has been
established under the Board of Directors, which makes
decisions on critical management matters based on theauthorities delegated from the Board of Directors while
receiving relevant reports from within the company. The
Management Committee is held once a week in principle
inviting corporate auditors, to make decisions in due
consideration of compliance and risk management.
● Internal control, management and auditing functions
For the purpose of internal control, management andauditing functions, the Company has established Corporate
Planning Division, General Risk Management Division andInternal Audit Division.
The Corporate Planning Division is the department
responsible for the coordination of internal control, for the
purpose of Companies Act and Financial Instruments andExchange Act. The General Risk Management Division is
responsible for compliance management that serves as alinchpin for internal management. Measures for complianceare planned and their implementation status is managed
under the compliance program approved by the Board of
Directors. Furthermore, the General Risk Management
Division, as an overall supervisory function of risk
management, is responsible for regular review and reformof the risk management structure, referring to the financial
inspection rating system by the Financial Services Agency.
On the other hand, the Internal Audit Division is
responsible for coordinated management of the overall
internal audit work across the Group according to theannual audit plan approved by the Board of Directors, while
it audits subsidiaries on its own or on a joint basis with theinternal audit department of each subsidiary as appropriate,
and provides specific instruction and advice to improvebusiness operation at concerned subsidiary.
● Accounting auditors
Mr. Tamon Tsuda, Mr. Hisashi Tsurumori and Ms. Mayumi
Ikai are the certified public accountants that conducted thelatest accounting audit of the Company, while accounting
auditors that conduct audits of the Company for the
purpose of Companies Act as well as for the purpose of
Financial Instruments and Exchange Act, belong to Ernst &Young ShinNihon LLC. None of them have been engaged in
the audit of the Company for longer than seven years on
continuous basis, hence no statement in respect of thenumber of continuous years of service engaged in the auditof the Company.
Assistants for the accounting audit of the Company are
five certified public accountants and fourteen others.
Basic approach to the internal control system and its
status of development
The Company as well as the Group is developing a structurenecessary to ensure the adequacy of operation based on the010̲0161301372309.qxd 11.9.5 2:38 PM ページ 16

SENSHU IKEDA HOLDINGS,INC.

following concepts through aiming to be a financial groupwhich respects personal relationship, sincerity andfriendliness and become the most “trustworthy” forcustomers.
(1) Structure to ensure that directors and employees executebusiness in compliance with laws and regulations as wellas the articles of incorporation
The Company and the Group focus on compliance withlaws and regulations (hereinafter “compliance”) as one of
the most critical management task. The Company and theGroup also set out the code of ethics along with the codeof conduct to ensure that directors and employees behave
in compliance with laws and regulations as well as thearticles of incorporation and other company rules, whilesetting out basic rules of compliance under which overall
compliance policies and specific measures are discussed
at the Compliance Committee.
To ensure the above compliance implementation, theCompany and the Group appoint directors who areresponsible for compliance. In addition, the General Risk
Management Division coordinates compliancearrangement across the Company and the Group, while
conducting education and training for directors andemployees by developing compliance program andcompliance manual, and arranging compliance seminars.
Furthermore, a hot line has been set up and managed inorder to allow employees to directly provide information
about any questionable conducts in light of laws andregulations.
Basic rules that directors and employees must abide by
are set out for the prevention of insider trading.
Besides, the Company and the Group have taken
uncompromising stance against anti-social forces andorganizations that threaten the order and safety of thecommunity, while making every effort to eliminate theirinvolvement in any trading activities. The Company and
the Group have also taken every measure to eliminate
money laundering in consideration of the possibility thatfunds transferred via financial institutions could be used
for criminal purposes including terrorism.
Moreover, the Company and the Group provide effective
customer management including customer protection,with the purpose to reassure our customers of theirsecurity and to promote their convenience in an effort toimplement a thorough ‘customer first policy.’(2) Structure for the preservation and management of
information concerning the directors’ business execution
The Company and the Group have prepared and kept
documents such as minutes of important meetings
including the Board of Directors and the Management
Committee, as records of directors’ execution of duties.
The Company and the Group have also prepared andkept documents and attachment sanctioned by directors
as appropriate.
(3) Arrangement including the rules to manage risk of potential
loss
With the purpose to ensure soundness of management
and stable corporate earnings, the Company and theGroup has set out basic rules of risk management. The
Company and the Group have also classified risks into
credit risk, market risk, funding liquidity risk andoperational risk, and defined the department responsible
for the management of each category of risk, while

establishing the Risk Management Committee to monitor
the status of management of each such category.
Meanwhile, the Company and the Group have set out
rules of risk management are, with the purpose tominimize the financial loss along with loss of confidence
resulting from the crisis event, and to ensure business
continuity through prompt restoration of normal operational
functions.
(4) Structure to ensure efficient business execution of directors
The Board of Directors establishes the Management
Committee with the purpose to enable directors toefficiently execute their business, while setting out
management objectives and developing management
plans.
The Management Committee discusses beforehand theagenda of the Board of Directors, to facilitate decisionmaking process at the board meeting, while discussing
the critical issues in implementing the basic management
policies decided by the Board of Directors on the basis ofsuch policies.
The Management Committee also defines theheadquarters under the command of each director, alongwith the authority and responsibility involved, whiledeveloping and maintaining a structure for efficientbusiness execution by utilizing IT.
(5) Structure to ensure adequacy of operation at the Group
that comprises the Company and the Group companies
The Company regards all subsidiaries and affiliatedcompanies as one group under the flag of Senshu Ikeda
Holdings. Thus each member company of the Group runs
its operation through developing an adequate internalmanagement structure according to its scale and nature ofoperation under the adequate guidance of, and incoordination with the Company.
The Company, as a responsible party for the
management of the Group, develops a structure in which it
receives necessary reports from, and consults businesswith its subsidiaries and affiliates.
(6) Arrangement for employing staff at the request of corporate
auditors as their assistants, as well as the arrangement toensure such assistants’ independence from executive
officers
In order to support corporate auditors’ businessexecution, the Company and the Group employ corporate
auditors’ staff as secretariat for the Board of Corporate
Auditors. Such corporate auditors’ staff receive
instructions from the Board of Corporate Auditors for theirbusiness execution, while their personnel change andevaluation duly reflect the opinions of the Board of
Corporate Auditors.
Thus the Company and the Group ensure their
independence from directors.
(7) Structure to facilitate reporting from directors andemployees to corporate auditors and other arrangement toensure that corporate auditors are adequately informed
Directors and employees shall immediately report tocorporate auditors on matters that could have significant
impact on the Company as well as the Group, or any othermatters as necessary, in addition to matters legallyrequired to be reported.
To reinforce this arrangement, the Company and theGroup develop a structure that corporate auditors areallowed to attend important meetings such as the Board of
SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201116

010̲0161301372309.qxd 11.9.5 2:38 PM ページ 17

Directors, the Management Committee, the Compliance
Committee, the Risk Management Committee and the
ALM Committee.
(8) Other structure to ensure that corporate auditors conduct
effective audits
Corporate auditors hold meetings to exchange opinionswith representative directors, internal audit division andaccounting auditors.
Corporate auditors attend important meetings such as
the Board of Directors, the Management Committee, theCompliance Committee, the Risk Management Committee
and the ALM Committee, in an effort to find out various
problems they need to address in the execution of theirduties.

Status of Internal Audits and Audits by Corporate Auditors● Internal audits

The Company has established the Internal Audit Divisionthat conducts internal audits based on the basic rules of
intra-group audits, set out to provide objectives andguidelines of internal audits. The Company develops
effective internal audit structure that has independence andexpertise in order to ensure soundness and adequacy ofoperation. The Company also inspects and evaluates
adequacy and effectiveness of the risk management andinternal control practices, and makes recommendations as
appropriate to the senior management of the Company on
ways to improve and rectify questionable areas. Thus theCompany's internal audit guidelines facilitate effective
achievement of management objectives including theimprovement of the Group's internal management structure
and the enhancement of its enterprise value.
The Internal Audit Division of the Company currently
comprises ten staff (three full-time staff and sevenconcurrent staff), and they are all transferred fromsubsidiary banks. They conduct internal audits of all
departments within the Company according to the audit
plan approved by the Board of Directors, as well as internal
audits of subsidiary banks as appropriate under the relevant
auditing contracts. Results of these audits are regularly
reported to the Board of Directors and so on.
● Audits by corporate auditors
Each corporate auditor audits the business execution of
directors through attendance to important meetings such as
the Board of Directors and the Management Committee, as
well as inspection of critical documents, according to
guidelines such as the guidelines for audits by corporate
auditors and the guidelines for implementing audits ofinternal control system, generally subject to the auditing
guidelines and audit plan decided by the Board of
Corporate Auditors.
Corporate auditors and accounting auditors are
performing their audit duties efficiently and effectively
through establishing close mutual cooperation byexchanging opinions about various auditing issues. In
addition, working together with subsidiary bank corporate
auditors, corporate auditors and internal audit division are
also performing their audit duties efficiently and effectively
through establishing close mutual cooperation by corporate
auditors’ attendance to internal audits and exchanging
opinions about various auditing issues.
The Company has made every effort for efficient andeffective implementation of all audits including internal

17

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

divisions, corporate auditors, and accounting auditors
through close cooperation and communication between thedepartments and functions concerned. The Company has
also made effort to audit efficiently and effectively throughreceiving various reports from the internal control division.

[Senshu I

Outside directors and outside corporate
auditors
The Company has two outside directors and two outside
corporate auditors.
Outside director, Nobuo Kuroyanagi, is from major
shareholder of the Company, Mitsubishi UFJ Financial Group,
Inc. and The Bank of Tokyo-Mitsubishi UFJ, Ltd., and has nointerest in the Company in terms of personnel, capital, tradingor other relationship. He performs his duties by supervising
the business execution as a director of the Company, which isbased on his wealth of experience over the years as senior
management of financial institutions. He serves concurrently
as an outside director of the Company's wholly-owned
subsidiary, The Senshu Ikeda Bank.
Outside director, Kazuo Hiramatsu, has no interest in the
Company in terms of personnel, capital, trading or otherrelationship. As a director of the Company, he is expected tofulfill the role of supervising the execution of business, basedon his extensive experience in educational corporations andin business. He serves concurrently as outside director of theCompany’s wholly-owned subsidiary, The Senshu Ikeda
Bank.
Outside corporate auditor, Toshiaki Imanaka, is anindependent officer without any potential conflict of interest
with general shareholders, as required to be designated by
Tokyo Stock Exchange and Osaka Securities Exchange, andhas no interest in the Company in terms of personnel, capital,
trading or other relationship. Qualified as an attorney, he has
good deal of knowledge in finance and accounting as has
been earned through his hands-on experience in corporate
accounting as reorganization trustee, and is performing his
duties as corporate auditor from his professional standpoint.
Outside corporate auditor, Toshiaki Sasaki, has no interestin the Company in terms of personnel, capital, trading or otherrelationship. He performs his duties as corporate auditor
based on his wealth of experience and broad insight earned
over the years as corporate auditor in financial institutions.
The Company has appointed two outside directors out of
twelve directors while two outside corporate auditors out offour. Thus the Company has developed a structure sufficient
to continuously enhance its enterprise value through suchappointment of outside directors and outside corporate
auditors.
Outside directors receive reports about the status of audits
by corporate auditors, internal audits and accounting audits,
as well as the status of internal control from the internal control
division through Board of Directors. On the other hand,outside corporate auditors receive reports about the status ofaudits by corporate auditors, internal audits and accounting
audits, as well as the status of internal control from thecorporate auditors. Both outside directors and outside
corporate auditors give recommendations and advice inreturn for these reports.

<Org

(

[The Sens

<Org

(F

010̲0161301372309.qxd 11.9.5 2:38 PM ページ 18

SENSHU IKEDA HOLDINGS,INC.

Corporate governance structure of the Group[Senshu Ikeda Holdings](As of July 1, 2011)

General Meeting of
Shareholders
Appointment/Removal

Accounting Auditors

Appointment/Removal
Joint coordination
Reporton Audit

Accounting audit

Reporton Audit

Board of Directors

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

Supervision

Appointment/Removal

Board of Corporate Auditors

Joint
coordination

Audit<Organizations in business execution>
Representative Directors

Advisory Board

Reporton AuditInternal Audit Division

AdviceCommittees(Risk Management Committee)(Compliance Committee)(ALM Committee)

Bringing discussed
issues to meetings/
ReportingManagement Committee

Directors/Executive Officers
Internal audit
Instruction/
Direction

Corporate Planning Division[The Senshu Ikeda Bank]

Personnel andGeneral Affairs Division

General Risk Management Division

General Meeting of
Shareholders

Appointment/Removal

Accounting Auditors
Accounting audit

Appointment/Removal
Joint coordination

Appointment/Removal

ReportReportBoard of Directors
Board of Corporate Auditors
on Auditon Audit
Bringing important
issues to meetings/
Audit
Joint
Reporting on business Appointment/ Supervision
coordination
execution
Supervision<Organizations in business execution>
Representative Directors

Committees(Risk Management Committee)(Compliance Committee)(ALM Committee)(Facilitation of Financing Promotion Committee)(System Integration Committee)(Business Improvement Committee)

Bringing
discussed
issues to meetings/
ReportingManagement Committee

Reporton AuditInternal Audit Division

Directors/Executive Officers
Internal audit
Instruction/
Direction

7 Headquarters, 16 Divisions, 1 Regional Headquarters, 2 Representative Offices, 1 Center
134 Head Office and Branches, 7 Sub-branches

SENSHU IKEDA HOLDINGS,INC.

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Compliance Structure
The Company and the Group sets “compliance” as one of themost important management priority. We are coping with it inorder to fulfill our social responsibility and public duties, andto earn the trust of our customers and regional communities.
The Company has set up a “Compliance Committee” todeliberate important matters regarding group compliance.
We have also formed the General Risk Management Division
under the director in charge of compliance to manage
matters regarding compliance unitarily.

The General Risk Management Division ensurescompliance by creating, reviewing, and following up the“Compliance Program,” which is a practical plan forreinforcement of compliance, by creating, updating, anddistributing the “Compliance Manual,” which stipulates basics
regarding compliance, and by conducting complianceeducation activities though various training programs.
We assign “Compliance Officers” and “ComplianceManagers” to each division and branch in order to implement

Senshu Ikeda Holdings
Board of Directors and Management Committee

Bringing issues to meetings/Reporting

Instruction

Compliance Committee(Administrative Office: General Risk Management Division)

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

General Risk Management Division

Consultation /Reporting

Instruction

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

Consultation /Reporting

Instruction

The Senshu Ikeda Bank
Subsidiaries and affiliates of The Senshu Ikeda Bank

19

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

010̲0161301372309.qxd 11.9.5 2:38 PM ページ 20

SENSHU IKEDA HOLDINGS,INC.

and penetration of compliance. In addition, we check theoperations from compliance point of view and facilitate theconduction of training programs to ensure compliance.
We also set up an internal hotline including external contact
point in order to find compliance problems in early stages
and take corrective actions.
Compliance has become an increasingly important issue
for financial institutions in recent years. The Company and theGroup are committed to strict observance of the Banking

Law, Financial Instruments and Exchange Act, and related
laws and regulations. We also work toward the elimination ofanti-social forces, and strive to strengthen an appropriate
protection system for our customers.
We intend to enrich and enhance our compliance structure
through improving various regulations and giving training toour employees continuously so that customers can deal withus “reliably.”

Code of Ethics
The Group sets up Code of Ethics as follows that our directors and employees mustabide by. The directors and employees will regard the observance of the Code of Ethics
as a fundamental part of routine operations and will conduct fair and honest corporate
activities, while complying with laws and rules strictly to implement the Group's
management philosophy and policies.

1. Winning the trust from our customers
Taking its social responsibility and public duties into consideration, we will intend to
become the most reliable financial group for the customers through conducting
sound and appropriate operations, including information management and proper
disclosure.
2. Implementing “customer first policy”
We will always consider any matters on customer first basis and will contribute to thedevelopment of the regional economy and community through providing high-quality
financial services that are both original and innovative.
3. Strict compliance
We will strictly comply with all laws and rules, and will conduct fair and honest
corporate activities that are consistent with social code.
4. Respecting human rights and the environment
We will respect personal relationship, characters and personalities of the others, andconduct environment-friendly corporate activities.
5. Eliminating anti-social forces
We will take an uncompromising stance against anti-social forces and organizations,and resolutely eliminate all undue intervention by such forces and organizations
which threaten the order and safety of the community.

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201120

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Risk Management Structure■ Basic Approach to Risk Management

face. The Company evaluates the risks divided into

While business opportunities for financial institutions

categories of credit risk, credit concentration risk outside

multiply as a result of deregulation, sophistication andthe calculation of capital ratio, interest rate risk inglobalization of financial operations, and the significant

banking accounts, market risk and operational risk, anddevelopment in ICT, the risks that financial institutions facecompares them with its management strength (capitalare becoming more complicated and diverse qualitatively.

ratio).

Moreover, it has been more important for banks to

The Group regards development and reinforcement ofmonitor, assess and manage risks properly, and torisk management structure as its crucial management

respond to the changes quickly in the environment intask. Furthermore, the Group has developed anorder to earn the stable and continuous profits, while

integrated risk management structure that the risk

serving various needs of customers. Under suchmanagement division manages all risks in order tocircumstances, the Group regards enhancing andcomprehensively identify and appreciate various risks

strengthening risk-management structure as a high-priority

associated with the Company’s operations by as uniform

management task in order to maintain and enhance theas possible measurement, and to earn the stablesoundness of its business execution.

revenue, realize appropriate capital composition andSpecifically, the Group determines the structure andvarious rules regarding risk management and theallot management resources properly.
● Risk capital management system

departments in charge of each risk category at the Board

The Group is running its operation based on the riskof Director. The group has also set up the risk

capital management system that controls all risks withinmanagement division to oversee the departments

certain proportion of capital base, under the integrated

regarding risk management. Furthermore, the Risk

risk management structure.

Management Committee and the ALM Committee,

Specifically, the Company allocates risk capital thatconsisting principally of management personnel havesourced from Tier I capital base to credit risk, market risk

been established, with the purpose to identify the risk

and operational risk, based on the calculated risk

situation within the Group as well as the subsidiary bank,amount in each category. The Company has also

and to discuss the relevant agenda and countermeasuresmonitored risk amount continuously to ensure that it iswhich shall subsequently be reported and further

kept within the tolerable limit from management point of

discussed at the Board of Directors. Thus the Group

view. Thus the Company ensures smooth operations andensures effective risk management structure atmanagement soundness across the Group.

management level.
Meanwhile, as action plans for risk management basedon the Group strategies, basic risk management principles

Tier II

are set out semi-annually and reviewed continually inorder to deal with the risks newly emerging as a result of

Deduction item

Deduction item: Net exceeded amount of unrealized
loss on available-for-sale securities
Risk buffer: Provisions against unpredictablerisks and risks associated withaffiliated companies

Risk bufferchanges in environment for timely and adequate way.
With the purpose to objectively examine the adequacy

Credit Risk

and effectiveness of the risk management structure, theinternal audit division which independents from theTier I

audited departments conducts an audit. Thus the Group
ensures appropriate administrative processing and soundRisk
capitalto beallottedbusiness operations through finding out and improving the● Integrated risk management

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

21

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011Market Risk
Market Risk
Operational
Risk

matters on risk management.

■ Integrated Risk Management

Credit Risk

Capital ratio

Financialresource forallocation

Risk capital
to beallocated

Operational
Risk
Risk amount

Sta

Sensh

The Se010̲0161301372309.qxd 11.9.5 2:38 PM ページ 22

SENSHU IKEDA HOLDINGS,INC.

■ Market Risk Management● Dealing with Basel II

In respect of capital ratio calculation for the purpose ofMarket risk, as identified by the Group, points to “market

the new capital ratio regulation (Basel II) enforced inrisk” and “market liquidity risk.” Market risk is the risk ofJapan from the end of March 2007, the Group’s current

suffering losses through changes in the prices of assets

status is as follows:

and liabilities held by the Group due to the fluctuations ofmarket risk factors, such as interest rates, foreign

Credit Risk

Operational Risk

Standard method

Gross profit allocation method

Senshu Ikeda Holdings

Senshu Ikeda Holdings

The Senshu Ikeda BankThe Senshu Ikeda Bank

exchange rates, stock prices and so on. Market liquidity
risk is the risk of suffering losses arising from the inability
to execute sufficient transactions under appropriate
conditions, due to market confusion or an insufficient
trading base. The Group has established the Risk
Management Committee and the ALM Committee,
consisting principally of management personnel, anddiscussed appropriate and timely measures to address■ Credit Risk Management

the risks in order to earn the stable and continuous profit

Credit risk, as identified by the Group, is the risk that thethrough managing its assets and liabilities in ainterest and principal of loans and other amounts payable

comprehensive way.

by the borrower may not be able to be collected, due todeterioration of the financial condition of the borrower.

■ Funding Liquidity Risk Management

The Group has set up “Credit Policy” in the subsidiary

Funding liquidity risk, as identified by the Group, is the riskbank that clarifies its policy for extending credit, based onof suffering funding difficulties from being unable to raise

its management policy in order to maintain and enhancenecessary funds due to market conditions or deterioration

the soundness of its business execution.

in the Group’s financial condition, as well as the risk ofUnder this policy, the responsible division for the
management of credit risk, the Loan Planning Division at
subsidiary bank, in accordance with the management

suffering losses from being forced to raise funds at higher
interest rates than usual.
The Group takes control of its funding situation throughmethods stipulated in the Credit Management

careful monitoring of the fund management andRegulations, administers finely-tuned responses to risks

fundraising. The Group also ensures liquidation of its

for the purpose of building up an optimum portfolio.

assets and diversifies the sources of fundraising. Thus theSpecifically, the division analyzes and manages the credit

Group has taken every possible measure to manage

portfolio from various aspects including credit

funding liquidity risk.

concentration risk, type of business, borrowerclassification and credit ratings.
As for the credit analysis and management of each loan at■ Operational Risk Management
Operational risk, as identified by the Group, is the risk ofthe subsidiary bank, the Group makes efforts to ensure thesuffering losses from the inappropriate business activity of

independence of the audit division (Loan Division and Loan

the Group - including its employees-, systems, or externalBusiness Division) from the business promotion division. The

premises.

Board of Directors and other appropriate body review each

The Group has set a rule for operational risk management

loan for large obligor as well as the credit policy. Thus theand classified the risks into the six categories as follows; (1)Group has focused on the development and improvement ofadministrative risk, (2) information asset (system) risk, (3)its credit analysis system. Meanwhile, Loan Business Division

tangible fixed asset risk, (4) personnel risk, (5) legal risk, andestablished within the Loan Headquarters, is managing(6) reputation risk.

housing loans receivable.
The subsidiary bank has also established the Internal
Audit Division, to manage auditing of the self-assessmentof assets, in order to maintain and enhance the soundnessof its asset base.
SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201122

010̲0161301372309.qxd 11.9.5 2:38 PM ページ 23

Furthermore, the Group identifies and evaluates all risks
associated with new products and services before they
are actually developed and provided, for the purpose ofcountermeasures against power failures in order toensure business continuity in the event of emergencies.
● Personnel risk

adequate risk management. Besides, the Group manages

Personnel risk, as identified by the Group, is the risk ofcustomer information sufficiently and ensuressuffering losses associated with the delay of failing inmanagement soundness when outsources certain

succession of expertise within the Group, as a result of

business operation.

drain or loss of key staff, or degradation of morale.

● Administrative risk management

to enable each employee to fully exert ability, while

The Group is striving to develop working environment
Administrative risk, as identified by the Group, is the riskof suffering losses from administration, fraud, accidents

helping him or her to improve their skills.
● Legal risk management

and other risks that the Group’s operations will not be

Legal risk, as identified by the Group, is the risk ofcarried out as intended.

suffering losses from violations of laws and regulations,

The Group prescribes detailed rules on administrative
procedures and strives to prevent accidents throughsystems.
The Group strives to prevent the occurrence of legal

that the customer can enter into transactions with therisk and to reduce the risk itself. To this end, the Group

Group without any concern. Meanwhile, the Grouphas established the General Risk Management Division

makes every effort to eliminate administrative risk by

to collect information concerning legal matters, and tomeasures such as review of the administrative

manage legal risk identified from such information, as

the analysis of administrative processes.
● Information asset (system) risk management

Supervisin
division

as well as inappropriate responses to changes in various

doing the administration promptly and accurately, so

procedure from identification of potential risks throughCommittee

well as appropriately responds to the legal risk.

Type of ris

Responsib
divisions

Divisions in cof operating
and managin● Reputation risk management

Reputation risk, as identified by the Group, is the risk ofInformation asset (system) risk, as identified by the

suffering losses arising from deterioration of the Group’sGroup, is the risk of suffering losses due to loss,

reputation due to circulation of unfounded rumors or due

alteration, unauthorized use, leakage of information, as

to inadequate responses of the Group concerning thewell as to system defects caused by natural disasters orfacts.

Direc

The Group works to avoid reputation risk by

breakdowns.
In consideration of the fact that its businessdisclosing information proactively thorough increases

operations are supported by various computer systems,

the transparency of its management, taking into

the Group ensures the reliability and security of systems

consideration the crucial influence on the management

and has established back-up systems and structures inof the Group.

case of emergency.
The Group is also working to establish appropriate
operation and management systems to prevent the

The Group has established the “Crisis Management

leakage of information and unauthorized access to its

Rules,” which set out the basic policies in responding tosystems through encoding of data and strengthening of

emergencies including large-scale disasters and systemaccess authority management.

failures. In the event of large-scale crisis, the Group sets

● Tangible fixed asset risk

up a “Crisis Management Headquarters” take charge of

Tangible fixed asset risk, as identified by the Group, iscompany-wide response. Specific action programs are set

the risk of suffering losses associated with damage ofout in a “Contingency Plan,” with the purpose to ensurebuilding and equipment or deterioration of working

safety of customers and employees, as well asset up

environment as a result of disasters or poor asset

business continuity structure of the financial system.

management.
The Group is preparing for disaster throughconducting quake resistance tests and implementing

23■ Crisis Management

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

Committee

Supervisin
division

Type of ris

Responsib
divisions

Divisions in cof operating
and managin

010̲0161301372309.qxd 11.9.5 2:38 PM ページ 24

SENSHU IKEDA HOLDINGS,INC.

The risk management structure of the Group(As of July 1, 2011)

Senshu Ikeda Holdings
Board of Directors

Board of Corporate Auditors
Crisis Management Headquarters

Management Committee

Risk Management Committee

Supervising
division

Type of risks

ALM Committee
Internal Audit Division

Committee

General Risk Management Division

Credit Risk Market Risk

Responsible
divisions

Funding
Liquidity
Risk

Operational Risk
Administrative
Risk

Information
Asset(system) Risk

General Risk Management Division

Divisions in chargeof operating
and managing

Personnel
Risk

Legal Risk

Reputation
Risk

Personnel and General
Affairs Division

General Risk
Management DivisionCorporate Planning
Division

Tangible Fixed
Asset Risk

Subsidiary bank and outsiders

Direction of basic policies, etc.

Administration and management

Reporting on status of risk management

Consultation on risk management

The Senshu Ikeda Bank
Board of Corporate Auditors

Board of Directors

Crisis Management Headquarters
Management Committee

Risk Management Committee

Supervising
division

Type of risks

Responsible
divisions
Divisions in chargeof operating
and managing

ALM Committee

Risk Management Division

Credit Risk Market Risk

Loan Planning
Division

Funding
Liquidity
Risk

Risk Management
Division

Operational Risk
Administrative
Risk

Information
Asset(system) Risk

Tangible Fixed
Asset Risk

Personnel
Risk

Legal Risk

Reputation
Risk

Operations
Management
Division

Operations Management
Division/System
Management Division

General Affairs
Division

Personnel Affairs
Division

ComplianceManagement
Division

Corporate
Planning DivisionInternal Audit Division

Committee

Each division of Headquarters, each branch, affiliates and outsiders

SENSHU IKEDA HOLDINGS,INC.

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

● Organizational structure(2) The Facilitation of Financing Promotion Committee will
engage in the development and reinforcement of thestructure for Facilitation of Financing Management
through checking the progress in respect of Facilitation of
Financing Management.
(3) The Bank appoints the director in charge of theCompliance Management Division to the Facilitation of(1) With the purpose to develop a management structurenecessary to supply facilitation of financing (hereinafter“Facilitation of Financing Management”) under the Policy,
the Bank establishes the Facilitation of Financing
Promotion Committee along with the Facilitation of
Financing Manager to check whether Facilitation of
Financing Management is effectively working.

System for accepting consultation of facilitation of financing

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

Reporting andconsultation

Facilitation of Financing
Promotion Committee
Boardof
Directors

Deliberation

Facilitation of Financing Officer
Facilitation of Financing Manager
ReportingOver-the-counter Consultation Service
Coordination

Divisions managing Facilitation of Financing
Divisions associated with Facilitation of Financing

Sincere andadequate
respondenceOver-the-counter Consultation Service

Customers

Facilitation of Financing Promotion Office[Consultation Service over holidays]
Support andinstruction

Toll-free Consultation Service

Instructions

Smooth financing
Appropriate explanations to customers
Dealing with complaints and consultations appropriately
Support in improving management
Support in restructuring
Personnel training
Analysis and improvement of management structureManagement
Committee[Consultation Service]Consultation, application and complaints
Toll-free Consultation Service

Sincere and adequate respondence

ReportingBoard ofCorporate
Auditors

Repayment Consultation ApproachContact for opinions and requests(complaints) concerning facilitationof financing <Toll-free>

Coordination

Businesstransactions, etc.

25

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

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

Disclosure

ReportingPublicAuthorities

010̲0161301372309.qxd 11.9.5 2:38 PM ページ 26

SENSHU IKEDA HOLDINGS,INC.

Financing Manager. Under the Facilitation of Financing
Promotion Committee, the Manager coordinates theoverall business in respect of Facilitation of Financing
Management such as instructions to the division
responsible for Facilitation of Financing Management, anddrawing up of the rules governing facilitation of financing,with the purpose to ensure adequacy, sufficiency andeffectiveness of Facilitation of Financing Management.

(4) The Facilitation of Financing Promotion Office within the
Loan Planning Division is responsible for Facilitation of
Financing Management. The Facilitation of Financing
Promotion Office engages in the adequate operation,
examination and improvement of Facilitation of Financing
Management under the command of the Facilitation of
Financing Manager through gathering informationnecessary for Facilitation of Financing Management.

● Basic Policies(1) On receiving consultations or applications for new loans,or changes in loan terms from customers, the Bank
intends to make sincere effort to conduct adequate andprompt credit screening through considering customers’
recent financial results, assets and income as well as
future potential and prospect. The Bank also deals withthe applications for new loans, after changes in loan
terms in a similar way as referred to above.
(2) On receiving consultations or applications for new loans,or changes in loan terms from customers, the Bank
intends to provide sufficient explanation in order to gaincustomers’ understanding and satisfaction, on the basisof past trading records, customers’ knowledge,

experience and assets situation. If the Bank has to
decline customers’ application, we will explain the reason
background of the decision as concretely andcourteously as possible.
(3) The Bank intends to improve capability of directors andemployees about facilitation of financing by giving internal
training, to enable them to make appropriate decisions
based on good understanding of customers’ situations.
(4) The Bank intends to respond to any comments, requests,
consultations and complaints from customers in respectof facilitation of financing promptly and sincerely.

● Policies for handling of application for loans from small and medium enterprises and sole proprietors(1) On receiving applications for changes in business terms
such as loan terms from small and medium enterprises
and sole proprietors, the Bank intends to accommodate
such application and offer adequate changes in terms
adequately as far as possible, taking into consideration of
the specialty and the circumstance of customers’
businesses.
(2) The Bank intends to provide small and medium enterprises
and sole proprietors with management consultation,
guidance and other adequate assistance in support oftheir effort for management improvement, taking into
consideration the operational circumstance of customers.
(3) In the cases that customers borrow from other financial
institutions as well as the Bank, we will, upon customers’
approval, strive to make arrangements in coordination

with the other financial institutions in order to help toreduce the burden of repayment.
(4) On receiving request for the corporate rehabilitation
procedure through Alternative Dispute Resolution (ADR)
for corporate rehabilitation (*) or Enterprise Turnaround
Initiative Corporation of Japan, the Bank makes utmost
effort to respond adequately to such request as far as
possible, in full consideration of the prospect ofimprovement or rehabilitation of the business.
(Note) This refers to certified dispute resolution procedure
set out in Article 2, Paragraph 26 of the Law on
Special Measures for Industrial Revitalization, in
which a private third party organization formulates
a rehabilitation plan, as coordinator of the interestsof creditors.

● Policies for handling of application for housing loan
(1) On receiving applications for changes in housing loan
terms from housing loan customers, the Bank intends toaccommodate such application and offer adequatechanges in terms adequately as far as possible, taking
into consideration of circumstances including customers’
assets and income and transactions with other financial
institutions.

(2) In the cases that customers have transaction with otherfinancial institutions as well as the Bank or with Japan
Housing Finance Agency, we will, upon customers’
approval, strive to make arrangements in coordination
with the other financial institutions in order to help toreduce the burden of repayment.

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201126

010̲0161301372309.qxd 11.9.5 2:39 PM ページ 27

Approach to "Community-based Financing (Fiscal Year 2010)"

Busin

Organi

We place a high priority on Òliving together with the regional communities,Ó and therefore
intends to further promote the community-based financing more positively thorough dealing
with the following three fields:
1. Enhancing support for corporate customers based on their life cycle

financing methods to grasp business value
3. Contribute to a sustainable local economy by utilizing collected information about the region

Specific measures include:
We held a “Fair for revitalization of Kansai economy collaboratingwith the business-academia-government” on November 17 and 18,
2010. With the support of the Kinki Bureau of Economy, Trade andIndustry and other groups, 33 organizations presented “Research,
Technology, and Industrial Revitalization Measures to Support theKansai of Tomorrow,” and conducted various individual consultations.
A number of lectures were held, as well as a “seminar for investment
promotion” by Suzhou City, China.

Senshu Ikeda Holdings, Inc.

2. Developing appropriate methods to provide funds to small and medium enterprises, including(Note:
ind
sub
ind
affi

We concluded a “Collaborative Agreement for Industrial Promotion”
with Sakai-city on March 11, 2011 in order to focus on revitalizationof small and medium enterprises and to aim at sustainable
development of the Sakai-city economy. On this occasion, we alsoestablished the “Sakai-city Industrial Promotion Fund”. In addition,
we held the “Symposium Celebrating the Conclusion ofCollaborative Agreement” on May 27 in collaboration with Sakai-city.
It was the first time for both Sakai-city and us to sign such acomprehensive agreement.
On May 9, 2011, we held the “Business Networking Event”
celebrating the 60th anniversary of our founding. Attended byguests from approximately 500 of our corporate customers, as well
as 40 organizations essential to the “revitalization of Kansai region.”
The event provided an opportunity for a active exchange of
information and dialogue among representatives of business,academia, and government across various industries.
We established the “Consortium-based Research & Development
Grant Program” with the aim of further “improving thecompetitiveness” of local small and medium enterprises and leading
to the “new job creation.” 2010 marked the seventh year for theConsortium, and we announced the selected plans at the BusinessNetworking event on May 9. We selected 15 plans and awarded
grant, totaling ¥30 million.

SubsidThe S

60th anniversary Business Networking Event

Sens

SenginSensh

Kinki CJ. I. C
D. I.

Consortium-based Research & Development
Grant award ceremony

Subsidiaries

As part of the business-academia collaboration, we concluded“Agreements for Business-Academia Collaboration” with Kansai
University on August 27, 2010, Kinki University on February 24,
2011, Ryukoku University on March 8, 2011, and Wakayama
University on May 24, 2011, making a total of 10 universities thathave signed Collaboration Agreements.

Vui I

The S

Sens
Senshu

Sensh
I. M.

We will work hard in order to stimulate the regional power, and to be able to contribute to

Hitac

..

revitalization of the regional community, bearing in mind our commitment to being the ÒbankS I S

that serves all of the regional communities and customers.Ó To that end, our directors andRegional Communities and Customers.Ó

27

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

Affiliates

employees will make every effort to ensure our standing as the ÒNo.1 Reliable Bank for the

SenshuShize
BankStatio010̲0161301372309.qxd 11.9.5 2:39 PM ページ 28

SENSHU IKEDA HOLDINGS,INC.

Business Description of the Group
Organizational Chart of the Group(As of July 1, 2011)

Head office and branches: 134
Banking services

Sub-branches:

7

Representative offices:2

Senshu Ikeda Lease Co., Ltd.
Leasing services

Senshu Ikeda Holdings, Inc.

The Senshu Ikeda Bank, Ltd.

Sengin General Leasing Company Limited
Senshu Ikeda Guarantee Co., Ltd.
Credit guarantee services
Kinki Credit Guarantee Company Limited
J. I. Co., Ltd.
D. I. Co., Ltd.
Credit card services
Vui I Co., Ltd.
The Senshu Card Company Limited
Senshu Ikeda Capital Co., Ltd.
Senshu Ikeda Business Service Company Limited
Senshu Ikeda Office Service Co., Ltd.

(Note:
indicates consolidated
subsidiaries andindicates equity-method
affiliates)

I. M. S. Co., Ltd.
Hitachi & Ikeda Brains, Co., Ltd.

..

S I Soft CO., LTD.
Other services
Senshu Ikeda Investment Management Co., Ltd.
Shizen Soken Co., Ltd.
Bank Computer Service Corporation
Station Network Kansai Co., Ltd.
Investment enterprise partnerships: 11

Subsidiaries and Affiliates

Subsidiaries

Name

Ikeda Preferred Capital Cayman Limited(As of July 1, 2011)

Address

Date ofestablishment

Share Capital(millions ofJapanese yen)

The Senshu Ikeda Bank, Ltd.

18-14, Chayamachi, Kita-ku, Osaka-city Banking services

September 1, 1951

Senshu Ikeda Lease Co., Ltd.

3-3-6, Kyutaromachi, Chuo-ku, Osaka-city Leasing services

April 1, 1986

50

50,710

Sengin General Leasing Company Limited 27-1, Miyamotocho, Kishiwada-city

Leasing services

October 23, 1985

120

Senshu Ikeda Guarantee Co., Ltd. 2-1-11, Jonan, Ikeda-city

Credit guarantee services

July 20, 1973

180

Kinki Credit Guarantee Company Limited 2-1-1, Nishiki, Kaizuka-city

Credit guarantee services

April 1, 1975

6,400

J. I. Co., Ltd.

8-10, Kurehacho, Ikeda-city

Credit card services

February 1, 1983

30

D. I. Co., Ltd.

8-10, Kurehacho, Ikeda-city

Credit card services

September 5, 1990

30

Vui I Co., Ltd.

8-10, Kurehacho, Ikeda-city

Credit card services

November 2, 1990

40

Credit card services

The Senshu Card Company Limited 27-1, Miyamotocho, Kishiwada-city

August 28, 1987

30

Senshu Ikeda Capital Co., Ltd. 18-14, Chayamachi, Kita-ku, Osaka-city Venture capital services

March 6, 1989

426

Senshu Ikeda Business Service Company Limited 18-14, Chayamachi, Kita-ku, Osaka-city Back-office administration

April 1, 1983

30

Senshu Ikeda Office Service Co., Ltd. 2-1-11, Jonan, Ikeda-city

Personnel services

July 11, 1988

20

Appraisal of real-estate collateral and realestate research services

October 28, 1991

20

I. M. S. Co., Ltd.

6-2-5-301, Mino, Mino-city

Hitachi & Ikeda Brains, Co., Ltd. 2-1-11, Jonan, Ikeda-city..

S I Soft Company Limited

1-5, Rinku Oraikita, Izumisano-city

Senshu Ikeda Investment Management Co.,Ltd. 3-3-6, Kyutaromachi, Chuo-ku, Osaka-city
Affiliates

Major Business

Development of computer software June 10, 1985

50

Computer software development and sale October 6, 1986

30

Investment advisory and discretionary
investment services

April 1, 1987

120

Information offering services

November 1, 1996

80

Bank Computer Service Corporation 1-5, Rinku Oraikita, Izumisano-city

Development and sale of computer programs
used for operations at financial institutions

December 27, 2000

400

Station Network Kansai Co., Ltd. 1-4-8, Shibata, Kita-ku, Osaka-city

Planning and operation of ATM at station June 29, 2000

Shizen Soken Co., Ltd.

2-1-11, Jonan, Ikeda-city

100

SENSHU IKEDA HOLDINGS,INC.

Investment ratio (%)
The Company

Subsidiaries
and affiliates

100.0

-

-

81.0
95.6
58.7
100.0
90.0
90.0
100.0
85.0
65.9
100.0
100.0
100.0
63.1
85.0
100.0
15.0
45.0
40.0

ANNUAL REPORT 201128

010̲0161301372309.qxd 11.9.5 2:39 PM ページ 29

Organization and Board of Directors
Senshu Ikeda Holdings

Organi(As of July 1, 2011)(Note)

Corporate Planning Division

Personnel and Genaral Affairs Division
ALM Committee

Compliance Committee

PR & IR OfficeSecretary Office(Note) The Advisory Board was established as aconsultative body for Management Committee toseek external advice from experts and specialists inacademic circle and various fields. The Company
intends to enhance corporate governance throughthe transparent management while developing deep
relationship with local communities.

General Risk Management DivisionInternal Audit Division

Board of Directors
Representative Director,
President and CEO

Representative Director
and Chairman

Norimasa Yoshida

SENSHU IKEDA HOLDINGS,INC.

Board

Director

Kiyotsugu Ito

Director

Hirohisa Fujita

Corporate Auditor(Full-time)

Director

Kazuhiro Masao

Director

Naoya Fukuchi

Corporate Auditor(Full-time)

Motoyasu Tsuji

Representative Director
and Chairman

Director

Akihide Takigawa

Director

Kazuhiro Isumi

Corporate Auditor(Outside)

Toshiaki Imanaka

Representative Director
and Deputy President

Director

Kazuyuki Kataoka

Director(Outside)Nobuo Kuroyanagi

Corporate Auditor(Outside)

Toshiaki Sasaki

Representative Director
and Deputy President

Director

29

Members: (In the order of the Japanese syllabary)·Noriyuki Inoue(Chairman of the Board and CEO of Daikin Industries, Ltd.)·Masahiro Shima(President of SHIMA SEIKI Mfg., Ltd.)·Motohiro Sugai(Former president of Hankyu Corporation)·Hidenobu Hiraoka(Chairman of the Board of Trustee of Seifu Gakuen Junior and Senior High School)·Makoto Yamanaka(Chairman and CEO of Nankai Electric Railway Co., Ltd.)(as of June 29, 2011)

Moritaka Hattori

Corporate Auditors Office

Accounting Office

Corporate Auditors Board of Corporate Auditors

Management Committee
Risk Management Committee

Corporate Auditors Office

Corporate Auditors

Board of Corporate Auditors

Board of Directors

General Meeting of Shareholders

Advisory Board

General Meeting of Shareholders

Organization

The SenNoboru Komiya

ANNUAL REPORT 2011

Director(Outside)(Chairman of The Bank of Tokyo-Mitsubishi UFJ, Ltd.)

Kazuo Hiramatsu(Professor, School of Business Administration, Kwansei
Gakuin University, Trustee of Kwansei Gakuin)

Katsutoshi Horii

Representative Director,
President and CEO

010̲0161301372309.qxd 11.9.5 2:39 PM ページ 30

SENSHU IKEDA HOLDINGS,INC.

The Senshu Ikeda Bank
Organization(As of July 1, 2011)

Corporate Planning Division
Business Integration Promotion Office
Personnel Affairs Division
Career Development Supporting Office
General Affairs Division

Management Committee

Board of Directors

General Meeting of Shareholders

Secretary Office
Tokyo OfficeSuzhou Representative Office
Risk Management Division
Compliance Management Division
Risk Product Management Office
Operations and System Headquarters

System Management Division

Operating Center

System Integration Committee

Business Improvement Committee

ALM Committee

Facilitation of Financing Promotion Committee

Compliance Committee

Risk Management Committee

Risk Products Operations Office

Corporate Auditors Office

Corporate Auditors Board of Corporate Auditors

Operations Management Division

Branches (including Sub-branches): 141
Regional Headquarters
Business Planning Division

CS Headquarters

Business Promotion Division
Securities and Insurance Business Promotion Office
Personal Loan Promotion Office
Customer Center
Asia and China Business Headquarters

Asia and China Business Promotion Division

Advanced Technology Business Supporting Headquarters

Advanced Technology Business Supporting Division

Private Banking Headquarters

Private Banking Division

Financial Market Headquarters

Financial Market Division

Loan Headquarters

Loan Planning DivisionInternational DivisionMarket Operations Office

Facilitation of Financing Promotion Office
Loan Division
Loan Business DivisionInternal Audit Division

Board of Directors(As of June 29, 2011)

Nobuo Kuroyanagi

Representative Director,
President and CEO

Moritaka Hattori

Senior Managing
Director

Kazuyuki Kataoka

Managing
Director

Kazuhiro Isumi

Director(Outside)

Representative Director
and Chairman

Norimasa Yoshida

Senior Managing
Director

Noboru Komiya

Managing
Director

Takashi Nishi

Director(Outside)

Representative Director
and Deputy President

Kiyotsugu Ito

Senior Managing
Director

Akihide Takigawa

Managing
Director

Hiroshi Kubota

Corporate Auditor(Full-time)

Hironobu Sugita

Hiroaki Kobayashi

Corporate Auditor(Full-time)

Masanori Ueki

Hirokazu Morihata

Corporate Auditor(Outside)

Taro Ohashi

Director

Akira Tahara

Corporate Auditor(Outside)

Hisanori Uzawa

Director

Atsushi Ukawa

Representative Director
and Deputy President

Kazuhiro Masao

Senior Managing
Director
Senior Managing
Director

Hirohisa Fujita
Naoya Fukuchi

Managing
Director
Director(Chairman of The Bank of Tokyo-Mitsubishi UFJ, Ltd.)

Kazuo Hiramatsu(Professor, School of Business Administration,
Kwansei Gakuin University, Trustee of Kwansei Gakuin)

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201130

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 31

Consolidated Balance Sheets
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
As of 31st March, 2011 and 2010

Thousands of U.S.
dollars (Note 1)

Millions of yen

2011

2010

2011

¥

144,348–
1,311
36
19,0001,077,342
3,501,016
6,210
62,42638,142
5,606
38,99929,459(42,748)¥ 4,881,152¥

111,817
10,0001,250
919,0001,239,135
3,448,581
5,064
69,26837,2703,874
39,94037,796(45,352)¥ 4,977,656$ 1,735,995–
15,766432
228,502
12,956,608
42,104,822
74,684
750,763458,71367,420469,019354,287(514,107)$ 58,702,970¥ 4,348,871––
172,725
44,417480
48,00050,184
1,778
6,525
386
309
135
465
717
10
29,4594,704,468¥ 4,252,016
12,50045,000255,324
101,887394
33,30056,544
968
6,072
446
321
–
793
–
13
37,796
4,803,380$ 52,301,515––
2,077,269
534,179
5,772
577,269
603,535
21,38378,472
4,642
3,716
1,623
5,592
8,622
120
354,287
56,578,087

72,311
83,06333,125(116)
188,383

72,311
83,063
31,107(1)
186,480

869,645998,953
398,376(1,395)2,265,580(12,884)(19)(12,904)
6
1,197
176,684¥ 4,881,152(13,110)(0)(13,111)–907
174,276¥ 4,977,656(154,948)(228)(155,189)
72
14,395
2,124,882$ 58,702,970

AssetsCash and due from banks (Notes 28 and 34)
Call loans and bills bought (Note 34)
Monetary claims bought (Note 34)
Trading account securities (Notes 5 and 34)
Money held in trust (Notes 7 and 34)
Securities (Notes 6, 8, 13, 21 and 34)
Loans and bills discounted (Notes 9, 13, 33 and 34)
Foreign exchange assets (Notes 10 and 34)
Other assets (Notes 11 and 13)
Tangible fixed assets (Notes12 and 13)
Intangible fixed assets (Note 13)
Deferred tax assets (Note 30)
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Total assets

Liabilities and net assets
Liabilities
Deposits (Notes 13, 14 and 34)
Negotiable certificates of deposit (Note 34)
Call money and bills sold (Notes 13 and 34)
Payables under securities lending transactions (Notes 13 and 34)
Borrowed money (Notes 13, 15, 34 and 35)
Foreign exchange liabilities (Notes 16 and 34)
Corporate bonds and notes (Notes 17 and 34)
Other liabilities (Note 18)
Provision for employees’ bonuses
Accrued retirement benefits for employees (Note 19)
Accrued retirement benefits for directors and corporate auditors
Reserve for reimbursement of deposits
Reserve for point services
Reserve for contingent losses
Reserve for loss on integration
Negative goodwill
Acceptances and guarantees (Note 21)
Total liabilities
Net assets
Shareholders’ equity (Note 22):
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized loss on available-for-sale securities (Note 8)
Net unrealized loss on deferred hedges (Note 35)
Total accumulated other comprehensive income
Stock subscription rights (Note 22)
Minority interests
Total net assets
Total liabilities and net assets
See accompanying notes to consolidated financial statements

31

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 32

SENSHU IKEDA HOLDINGS,INC.

Consolidated Statements of Operations
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the years ended 31st March, 2011 and 2010

Thousands of U.S.
dollars (Note 1)

Millions of yen

2011

2010

2011

IncomeInterest income:Interest on loans and bills discounted (Note 33)
Interest and dividends on securities
Other interest income
Fees and commissions
Other operating income (Note 23)
Gain on sales of fixed assets
Recoveries of written-off claims
Other income (Note 24)
Total income¥

59,69916,463122
17,42912,556–
1,863
11,002
119,136¥

62,635
15,973
149
16,936
10,5780
1,471
12,059
119,804$

717,967
197,991
1,467
209,609
151,004–
22,405
132,315
1,432,784

Expenses
Interest expenses:
Interest on deposits
Interest on borrowings and rediscounts
Other interest expenses
Fees and commissions
Other operating expenses (Note 25)
General and administrative expenses
Loss on sales or disposal of fixed assets
Loss on impairment of fixed assets
Other expenses (Note 26)
Total expenses
Income before income taxes and minority interests
Income taxes (Note 30)
Current
Deferred
Total income taxes
Income before minority interests
Minority interests
Net income (loss)¥

10,681
752
1,563
5,269
2,070
57,089155
189
32,371
110,144
8,991

14,184
757
1,817
5,665
1,550
55,926107
1032,373112,392
7,412

128,454
9,043
18,79763,367
24,894
686,578
1,864
2,273
389,308
1,324,642
108,129

347
874
1,222
7,769
78
7,690

687
9,662
10,3504,173
10,511
14,69693,433938
92,483¥(92)(2,845)$

See accompanying notes to consolidated financial statements

Consolidated Statement of Comprehensive Income
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the year ended 31st March, 2011

Income before minority interests
Other comprehensive income (Note 31)
Net unrealized gain on available-for-sale securities
Net unrealized loss on deferred hedges
Total other comprehensive income
Comprehensive income (Note 31)
Total comprehensive income attributable to (Note 31):
Owners of the parent
Minority interests

Millions of yen

Thousands of U.S.
dollars (Note 1)

2011

2011

¥

7,769

¥

227
(19)
208
7,977
7,898
79

SENSHU IKEDA HOLDINGS,INC.

$

93,433

$

2,730
(228)
2,501
95,93594,984950

ANNUAL REPORT 201132

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 33

Consolidated Statements of Changes in Net Assets
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the years ended 31st March, 2011 and 2010

Thousands of U.S.
dollars (Note 1)

Millions of yen

2011
Shareholders’ equity
Common stock
Balance at beginning of the year
Changes during the year:
Issuance of common stock
Total changes during the year
Balance at end of the year
Capital surplus
Balance at beginning of the year
Changes during the year:
Issuance of common stock
Transfer from capital surplus to retained earnings
Disposition of treasury stock
Retirement of treasury stock
Total changes during the year
Balance at end of the year
Retained earnings
Balance at beginning of the year
Changes during the year:
Transfer from capital surplus to retained earnings
Cash dividends
Net income (loss)
Change in scope of consolidation
Retirement of treasury stock
Total changes during the year
Balance at end of the year
Treasury stock
Balance at beginning of the year
Changes during the year:
Acquisition of treasury stock
Disposition of treasury stock
Retirement of treasury stock
Total changes during the year
Balance at end of the year
Total shareholders’ equity
Balance at beginning of the year
Changes during the year:
Issuance of common stock
Transfer from capital surplus to retained earnings
Cash dividends
Net income (loss)
Change in scope of consolidation
Acquisition of treasury stock
Disposition of treasury stock
Retirement of treasury stock
Total changes during the year
Balance at end of the year

33

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

¥

¥

2010

72,311¥50,0002011$

869,645––
72,311

22,311
22,311
72,311––
869,645

83,063

98,201

998,953–––––
83,06322,311(37,234)(1)(213)(15,138)
83,063–––––998,953

31,107(792)

374,107–(5,673)
7,690
–
–
2,017
33,12537,234(2,286)(2,845)(117)(85)
31,90031,107–(68,226)
92,483––24,257398,376

(1)

(327)

(12)

(114)
–
–
(114)
(116)

(9)
36
298
325
(1)

(1,371)––(1,371)(1,395)

186,480

147,0812,242,693––(5,673)
7,690
–
(114)
–
–
1,902
188,383

44,623–(2,286)(2,845)
(117)
(9)
34
–
39,399186,480––(68,226)
92,483–(1,371)––
22,874$ 2,265,580¥

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 34

SENSHU IKEDA HOLDINGS,INC.

Consolidated Statements of Changes in Net Assets
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the years ended 31st March, 2011 and 2010

Thousands of U.S.
dollars (Note 1)

Millions of yen

2011
Accumulated other comprehensive income
Net unrealized loss on available-for-sale securities
Balance at beginning of the year
Net changes in items other than shareholders’ equity
Balance at end of the year
Net unrealized loss on deferred hedges
Balance at beginning of the year
Net changes in items other than shareholders’ equity
Balance at end of the year
Total accumulated other comprehensive income
Balance at beginning of the year
Net changes in items other than shareholders’ equity
Balance at end of the year
Stock subscription rights
Balance at beginning of the year
Net changes in items other than shareholders’ equity
Balance at end of the year
Minority interests
Balance at beginning of the year
Net changes in items other than shareholders’ equity
Balance at end of the year
Total net assets
Balance at beginning of the year
Changes during the year:
Issuance of common stock
Cash dividends
Net income (loss)
Change in scope of consolidation
Acquisition of treasury stock
Disposition of treasury stock
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

¥

¥

2010

(13,110)226(12,884)¥

2011(16,457)
3,346(13,110)$(157,666)
2,717(154,948)

(0)
(19)
(19)

(0)
(0)
(0)

0
(228)
(228)

(13,111)207(12,904)(16,458)
3,346(13,111)(157,678)
2,489(155,189)

–
6
6

–
–
–

–
72
72

907
290
1,197

1,020
(113)
907

10,907
3,487
14,395

174,276

131,643

2,095,923–(5,673)
7,690
–
(114)
–
505
2,407
176,684

44,623(2,286)(2,845)
(117)
(9)
34
3,233
42,632
174,276–(68,226)
92,483–(1,371)–
6,073
28,947$ 2,124,882¥

See accompanying notes to consolidated financial statements

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201134

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 35

Consolidated Statements of Cash Flows
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the years ended 31st March, 2011 and 2010

Thousands of U.S.
dollars (Note 1)

Millions of yen

2011
Cash flows from operating activities
Income before income taxes and minority interests
Depreciation
Loss on impairment of fixed assets
Amortization of goodwill
Amortization of negative goodwill
Gains on negative goodwill incurred(Decrease) increase in reserve for possible loan losses(Decrease) increase in accrued bonuses
Earnings from investments under the equity method
Increase in accrued retirement benefits for employees
Decrease in accrued retirement benefits for directors and corporate auditors(Decrease) increase in reserve for reimbursement of deposits
Increase in reserve for point services(Decrease) increase in reserve for contingent losses
Increase in reserve for loss on integration
Interest income
Interest expenses
Gain on securities
Loss (gain) on money held in trust
Loss on foreign exchange
Loss on sales or disposal of fixed assets, net
Effect of applying the accounting standard for asset retirement obligation
Net increase in loans and bills discounted
Net increase in deposits
Net decrease in negotiable certificates of deposits
Net (decrease) increase in borrowed money (excluding subordinated borrowings)
Net decrease (increase) in due from banks (excluding due from the Bank of Japan)
Net (increase) decrease in trading account securities
Net decrease in call loans and bills bought
Net decrease in call money and bills soldNet (decrease) increase in payables under securities lending transactions
Net increase in foreign exchange (assets)
Net increase in foreign exchange (liabilities)
Decrease in bonds
Interest received
Interest paid
Other
Subtotal
Income taxes paid
Net cash (used in) provided by operating activities

35

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

¥

¥

8,991
4,172
189
111
(2)
(4)
(2,603)
(13)
(155)
452
(59)
(12)
36
(83)
473
(76,285)
12,998(7,659)25
21,428155
74(52,435)
96,855(12,500)(57,470)
2,906
(27)
9,939
(45,000)(82,598)(1,146)85(300)
77,243(13,998)
3,210(113,004)(1,063)(114,068)

2010
¥

¥

7,412
4,776
10
2
(2)
–
6,772
100
(161)
477
(110)
19
–
492
–
(78,758)
16,759(10,615)
(134)
3,046
106
(66,417)160,682(8,000)36,919(2,538)510
20,182(50,000)
75,526(1,113)150–
77,989(16,527)
6,435
183,993(450)
183,543

2011$

108,129
50,174
2,273
1,334
(24)
(48)
(31,304)(156)(1,864)
5,435
(709)
(144)
432
(998)
5,688
(917,438)
156,319(92,110)300
257,7021,864
889(630,607)
1,164,822(150,330)(691,160)
34,948(324)
119,530(541,190)(993,361)(13,782)
1,022(3,607)928,959(168,346)
38,604(1,359,037)(12,784)$ (1,371,834)

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 36

SENSHU IKEDA HOLDINGS,INC.

Consolidated Statements of Cash Flows
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the years ended 31st March, 2011 and 2010

Thousands of U.S.
dollars (Note 1)

Millions of yen

2011

2010

2011

¥ (1,111,068)
949,870
308,731(4,069)(3,324)17
140,156¥ (1,771,223)
1,319,860
270,717(1,613)(1,019)9(183,269)$ (13,362,212)
11,423,571
3,712,940(48,935)(39,975)
204
1,685,580

Cash flows from financing activities
Increase in subordinated borrowings
Decrease in subordinated borrowings
Increase in subordinated bonds and bonds with stock subscription rights
Decrease in subordinated bonds and bonds with stock subscription rights
Proceeds from issuance of common stock
Cash dividends paid
Payment for minority shareholders
Purchases of treasury stock
Proceeds from disposal of treasury stock
Net cash provided by financing activities––
15,000––(5,673)
(0)
(114)
–
9,212

8,000
(8,000)–(32,342)
44,623(2,286)–(9)
79
10,065––
180,396––(68,226)(0)(1,371)–
110,787

Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Net increase in cash and cash equivalents resulting from consolidation
Cash and cash equivalents at end of year (Note 28)

138
35,438105,897–
141,335(73)
10,265
95,631
0
105,897

1,659
426,193
1,273,565–
1,699,759

Cash flows from investing activities
Purchases of securities
Proceeds from sales of securities
Proceeds from maturity of securities
Purchases of tangible fixed assets
Purchases of intangible fixed assets
Proceeds from sales of tangible fixed assets
Net cash provided by (used in) investing activities

¥

¥

$

See accompanying notes to consolidated financial statements

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201136

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 37

Notes to Consolidated Financial Statements
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the Years Ended 31st March, 2011 and 2010

1. Basis of Presentation
Senshu Ikeda Holdings, Inc. (the “Company”) is a holding
company and conducts its operations through its
subsidiaries and affiliates. The Company was established asa joint holding company between The Bank of Ikeda, Ltd.
(“Ikeda”) and The Senshu Bank, Ltd. (“Senshu”) on 1st
October, 2009 by way of a transfer of shares.
The Company accounted for the transfer of shares under thepooling of interest method in accordance with “AccountingStandard for Business Combinations” (issued on 31st
October, 2003 by the Business Accounting Council ofJapan) and “Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business
Divestitures” (Accounting Standards Board of Japan(“ASBJ”) Guidance No. 10 issued on 15th November, 2007).
These standards require the Company to prepare its
consolidated financial statements as if the transfer of shareswere made at the beginning of the fiscal year. As a result,the accompanying consolidated financial statements include
financial positions and operating results of Ikeda and Senshu
as of 31st March, 2010 and for the year then ended.
The Company and its subsidiaries (collectively, the “Group”)
maintain their books of account in accordance with theprovisions set forth in the Corporation Law of Japan (the“Law”) and in conformity with accounting principles andpractices generally accepted in Japan, which are different incertain respects as to the application and disclosure
requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements havebeen compiled from the consolidated financial statements
prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan. Certain accounts
have been reclassified for the convenience of readers
outside Japan.
As discussed in Note 3 (20), a consolidated statement ofcomprehensive income is required from the fiscal year
ended 31st March, 2011 and has been presented herein.
Accordingly, accumulated other comprehensive income ispresented in the consolidated balance sheets and theconsolidated statements of changes in net assets.
Information with respect to other comprehensive income forthe year ended 31st March, 2010 is disclosed in Note 31. In
addition, “income before minority interests” is disclosed in
the consolidated statements of operations.
In preparing the accompanying consolidated financial
statements, Japanese yen amounts are presented in millionsof yen by rounding down figures below one million. As aresult, the totals in yen in the accompanying consolidated
financial statements do not necessarily agree with the sumsof the individual amounts.

37

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

The translation of yen amounts into U.S. dollar amounts is
included solely for the convenience of readers outside Japanand has been made at ¥83.15 = U.S.$1.00, the exchange
rate prevailing on 31st March, 2011. This translation should
not be construed as a representation that yen can beconverted into U.S. dollars at the above or any other rate.

2. Principles of Consolidation
The accompanying consolidated financial statements
include the accounts of the Company and the 28 (29 in2010) significant subsidiaries which it controls directly or
indirectly. Affiliates over which the Company exercises
significant influence in terms of their operating and financial
policies have been included in the accompanying
consolidated financial statements on an equity basis.
Ikeda and Senshu, both of which are wholly owned
subsidiaries of the Company, were merged effective 1st
May, 2010 in accordance with the resolution approving themerger agreement between Ikeda and Senshu at theextraordinary shareholders’ meeting of each subsidiary heldon 13th January, 2010. As a result, Ikeda changed its nameto “The Senshu Ikeda Bank, Ltd.” and took over all theassets, liabilities, rights and obligations of Senshu.
The Company has applied the equity method to its
investment in three and two affiliates for the years ended
31st March, 2011 and 2010, respectively. The consolidated
financial statements do not include the accounts of Ikeda
Preferred Capital Cayman Limited, since its total assets,
operating income, ownership percentage of net profits andlosses, retained earnings and net unrealized gain or loss ondeferred hedges do not have a material impact on the
consolidated financial statements of the Company.
All significant intercompany accounts and transactions havebeen eliminated in consolidation. All material unrealized
profit included in assets resulting from transactions within theGroup is eliminated.
The difference between the cost and the underlying equity inthe net assets of the consolidated subsidiaries measured atfair value at their respective dates of acquisition is presented
as “goodwill” or “negative goodwill”, and is amortized by thestraight-line method over a period of five years. However,goodwill recognized in the year ended 31st March, 2011 isamortized over a year.
The balance sheet date of 11 subsidiaries is 31st December.
Appropriate adjustments have been made for significant
intervening transactions occurring during the period from31st December to 31st March.

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 38

SENSHU IKEDA HOLDINGS,INC.

3. Significant Accounting Policies(1) Trading account securities
Trading account securities are stated at fair value as of thebalance sheet date. Cost of trading account securities soldis determined using the moving average method.
(2) Securities
Non-trading securities are classified into three
categories: held-to-maturity debt securities, equity
securities of an unconsolidated subsidiary andavailable-for-sale securities. Held-to-maturity debt
securities are carried at amortized cost, and the cost
being determined by the moving average method.
Equity securities of an unconsolidated subsidiary arestated at cost determined by the moving-averagemethod. Equity securities and investment trusts
classified as available-for-sale securities whose fairvalues are available are stated at fair value determinedby the monthly average market price during one month
preceding the balance sheet date and other securities
are stated at fair value determined based on the quoted
market price and other information at the balance sheet
date. Cost of sales of these available-for sale securities
is determined using the moving average method. Other
securities, whose fair value is extremely difficult todetermine, are stated at cost determined by the movingaverage method.
Unrealized gain or loss on available-for-sale securities is
included in net assets, net of income taxes.
(3) Investment securities held in money trusts
Investment securities that are part of trust assets in
independently managed money trusts with the primary
purpose to manage securities are stated at the fair value
as of the balance sheet date.
(4) Derivatives
Derivatives are stated at fair value.
(5) Tangible fixed assets
Depreciation of tangible fixed assets of the Group,
except for leased assets, is calculated principally by thestraight-line method. The principal useful lives are as
follows:
Buildings ..................3 to 50 years
Other ........................2 to 20 years(6) Intangible fixed assets
Intangible fixed assets, except for leased assets, areamortized by the straight-line method. Amortization of
the cost of software intended for internal use iscalculated by the straight-line method based on a usefullife (5 years) determined by the Company and its
consolidated subsidiaries.

(7) Reserve for possible loan losses
A reserve for possible loan losses is provided byconsolidated subsidiaries engaged in the banking
business (the “banking subsidiaries”) in accordancewith the prescribed standards. For claims on borrowers
who have declared bankruptcy or have commenced
special liquidation proceedings or similar legal
proceedings (“bankrupt borrowers”), or borrowers who
are not legally or formally insolvent but are regarded as
substantially in the same situation (“effectively bankrupt
borrowers”), a reserve is provided based on the bookvalue of the claims, after the write-off stated below, netof the expected amount recoverable from collateral andguarantees.
For claims on borrowers who are not currently bankrupt
but are likely to become bankrupt (“potentially bankrupt
borrowers”), a reserve is provided at the amountdeemed necessary based on the overall solvency
assessment of the borrowers and the amount of theclaims, net of the expected amount recoverable fromcollateral and guarantees.
For other claims, a reserve is provided based on thehistorical loan-loss ratio.
The Group conducts self-assessments of asset quality
at its loan offices. The assessments are audited by the
independent credit audit section in accordance with theGroup’s policy and guidelines for the self-assessment ofasset quality. Based on the results of theseassessments, an appropriate reserve is provided for the
resulting losses and for write-offs of doubtful assets.
For consolidated subsidiaries other than the banking
subsidiaries, a specific reserve for possible loan losses
at the total amount of loans deemed to be uncollectible
based on a solvency analysis of each loan, in addition toa general reserve at an amount calculated based on
historical experience, is provided.
For collateralized or guaranteed claims on bankrupt
borrowers and effectively bankrupt borrowers, theamount of the claims exceeding the estimated value ofcollateral and guarantees is deemed to be uncollectible
and is written off against the total amount of theoutstanding claims. These write-offs amounted to¥61,041 million ($734,107 thousand) and ¥55,546 million
for the years ended 31st March, 2011 and 2010,
respectively.
(8) Provision for employees’ bonuses
Provision for employees’ bonuses is calculated basedon an estimated payment amount, which is attributable
to the fiscal year.
Certain consolidated subsidiaries included the amount

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201138

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 39

of accrued bonuses in “Other liabilities” as of 31st
March, 2010, but the Group included it in “Provision for
employees’ bonuses” from the year ended 31st March,2011 as a result of having reviewed calculation of theemployees’ bonuses after the business combination.
(9) Accrued retirement benefits for employees
Accrued retirement benefits for employees are provided
at an estimated amount based on an actuarial
calculation of the retirement benefit obligation and thepension plan assets at the balance sheet date. Certain
consolidated subsidiaries estimate the retirement benefit
obligation using the simplified method whereby theamount that would be payable if the eligible employees
terminate at the balance sheet date.
Prior service cost is amortized by the straight-line
method over a period of 11 to 12 years, which is within
the average estimated remaining years of service of theeligible employees.
Actuarial gain or loss is amortized commencing the year
following the year in which the gain or loss is recognizedby the straight-line method principally over a period of
11 to 12 years, which is within the average estimatedremaining years of service of the eligible employees.
Unrecognized transitional obligation incurred at the timeof the accounting change in the amount of ¥9,894
million ($118,989 thousand) is amortized over a periodof 15 years.
(10) Accrued retirement benefits for directors and corporate
auditors
Accrued retirement benefits for directors and corporate
auditors are provided at an amount that would be
required if all directors and corporate auditors retired at
the balance sheet date.
(11) Reserve for reimbursements of deposits
Reserve for reimbursements of deposits is provided at
an estimate of the future payments to be made forreimbursement claims on deposits which were
derecognized and credited from liability to income
based on the Group’s historical experience.
(12) Reserve for point services
Reserve for point services, which is provided to meet
future use of credits granted to customers, is recordedin the amount deemed necessary based on theestimated future use of unused credits.
Reserve for point services, which was included in “Otherliabilities” previously (¥99 million at 31st March, 2010),
was presented as a separate account from the year
ended 31st March, 2011 due to increase in materiality.

39

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011(13) Reserve for loss on system integration
Reserve for loss on integration is provided for possible
future losses on systems integration, based on areasonable estimate of possible future losses.
(14) Reserve for contingent losses
Reserve for contingent losses is provided at an estimateof the future loss on contingencies other than those
covered by other reserves or provisions.
(15) Foreign currency transactions
Assets and liabilities of consolidated subsidiaries
denominated in foreign currencies are translated into
Japanese yen at the exchange rates in effect at thebalance sheet date.
(16) Leases
Leased assets under finance lease arrangements which
do not transfer ownership of the leased assets to thelessee are depreciated over the respective lease
contract periods using the straight-line method withresidual values defined in the lease contracts, otherwise
the residual values is zero.
As lessee:
Finance leases which commenced prior to 1st April,
2008, except for those substantially requiring thetransfer of ownership of the leased assets to the lessee,
are accounted for as operating leases.
As lessor:
Finance lease income and related cost are recognizedwhen lease payment is received. Finance leases which
do not transfer ownership of the leased assets to thelessee and commenced prior to 1st April, 2008 aredeemed to have been entered into contracts at theamount of the cost less accumulated depreciation at
31st March, 2008.
(17) Hedge accounting
Interest rate risk hedging
With respect to hedge accounting for the interest raterisk arising from financial assets and liabilities of thebanking subsidiaries, the Group applies deferral hedge
accounting, under which gains or losses on derivatives
are deferred until maturity of the hedged transactions,as stipulated in the Japanese Institute of Certified Public
Accountants (JICPA) Industry Audit Committee Report
No. 24. Interest rate swap contracts entered into bycertain consolidated subsidiaries which qualify forhedge accounting are accounted for as if the interest
rate for the swap contract is applied to the underlying
debt.
Foreign exchange rate risk hedging
With respect to hedge accounting for derivativetransactions used to hedge the risk of financial assets

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 40

SENSHU IKEDA HOLDINGS,INC.

and liabilities denominated in foreign currencies of thebanking subsidiaries, the Group applies deferral hedge
accounting, under which gains or losses on derivatives
are deferred until maturity of the hedged transactions,as stipulated in the JICPA Industry Audit Committee
Report No. 25. The Group assesses the effectiveness of
its currency swaps and foreign exchange swaps
entered into in order to hedge the risk of fluctuation inforeign exchange rates by comparing the foreigncurrency amount of each underlying hedged item withthe corresponding foreign-currency amount of therespective hedging instruments.
(18) Cash flows
In preparing the consolidated statement of cash flows,
cash and deposits with the Bank of Japan are
considered to be cash and cash equivalents.
(19) Consumption taxes
Transactions are principally stated exclusive of nationaland municipal consumption taxes.
(20) Presentation of comprehensive income
On 30th June, 2010, the Accounting Standards Board ofJapan (“ASBJ”) issued ASBJ Statement No. 25 “AccountingStandard for Presentation of Comprehensive Income”. This
standard requires the entities to present comprehensive
income which refers to the change in net assets in an
entity’s financial statements for a period, other than thosechanges resulting from direct transactions with equity
holders in the entity’s net assets in either of a format
composed of the statement of income that presents net
income and the statement of comprehensive income that
presents calculation of comprehensive income (twostatement format) or a format using one statement(statement of income and comprehensive income) that
presents net income and comprehensive income (onestatement format). Calculation of comprehensive income forconsolidated financial statements shall present net income
before adjusting minority interests and additions or
deductions of other comprehensive income consisting of
net unrealized gain or loss on available-for-sale securities,
net unrealized loss on deferred hedges and translation
adjustments. Effective 31st March, 2011, the Company
adopted this standard.

4. Accounting change
Asset retirement obligations
On 31st March, 2008, the ASBJ published the accounting
standard for asset retirement obligations, ASBJ Statement No.18“Accounting Standard for Asset Retirement Obligations” andASBJ Guidance No.21 “Guidance on Accounting Standard for
Asset Retirement Obligations”. Under this accounting standard,
an asset retirement obligation is defined as a legal obligation
imposed either by law or contract that results from theacquisition, construction, development and the normal operationof a tangible fixed asset and is associated with the retirement ofsuch tangible fixed asset. The asset retirement obligation isrecognized as the sum of the discounted cash flows required forthe future asset retirement and is recorded in the period in which
the obligation is incurred if a reasonable estimate can be made.
If a reasonable estimate of the asset retirement obligation cannot
be made in the period the asset retirement obligation is incurred,
the liability should be recognized when a reasonable estimate ofasset retirement obligation can be made. Upon initial recognitionof a liability for an asset retirement obligation, an asset retirement
cost is capitalized by increasing the carrying amount of therelated fixed asset by the amount of the liability. The asset
retirement cost is subsequently allocated to expense throughdepreciation over the remaining useful life of the asset. Overtime, the liability is accreted to its present value each period. Any
subsequent revisions to the timing or the amount of the original
estimate of undiscounted cash flows are reflected as an increaseor a decrease in the carrying amount of the liability and thecapitalized amount of the related asset retirement cost. This
standard was effective for fiscal years beginning on or after 1st
April, 2010. The Group applied this accounting standard
effective 1st April, 2010.
The effect of applying this accounting standard was to decrease“Income before income taxes and minority interests” and “Net
income” for the year ended 31st March, 2011 by ¥125 million($1,503 thousand) and ¥74 million ($889 thousand), respectively.

5. Trading account securities
Valuation gain or loss on trading account securities included
in income before income taxes and minority interests was ¥(0) million ($ (0) thousand) and ¥0 million for the years ended
31st March, 2011 and 2010, respectively.

6. Securities
Securities at 31st March, 2011 and 2010 consisted of thefollowing:
Millions of yen
2011
2010
StocksBonds:
Government bonds
Local government bonds
Corporate bonds
Other
Total

¥

63,105 ¥Thousands of
U.S. dollars
2011

71,410 $758,929

4,179,891
347,558
535,905
1,014,107
84,32378,9782,535,081
210,792
174,134
4,468,562
371,561
378,705¥ 1,077,342 ¥ 1,239,135 $ 12,956,608

Stocks in the above table include investments in affiliates of¥272 million ($3,271 thousand) and ¥79 million at 31st
March, 2011 and 2010, respectively.

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201140

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 41

Held-to-maturity debt securities with fair value at 31st March,2011 and 2010 were as follows:

Available-for-sale securities with fair value at 31st March,2011 and 2010 were as follows:

Millions of yen
31st March, 2011
Corporate bonds
Total

Carrying value¥¥

49,19849,198Millions of yen

Fair value¥¥

49,79349,793

Millions of yen
31st March, 2011
Corporate bonds
Total

Difference¥¥

Unrealized Unrealized
gain
loss

594 ¥
594 ¥

612 ¥
612 ¥

(17)
(17)

31st March, 2011
Equity securities
Bonds:
Government bonds
Local government bonds
Corporate bonds
Subtotal
Other
Total

Acquisition
cost

Carrying value¥

56,970¥347,558
84,323
161,594
593,476
370,154
1,020,601¥

63,580¥338,404
83,696
160,518
582,619
387,165
1,033,365

Millions of yen
Millions of yen
31st March, 2010
Government bonds
Corporate bonds
Other
Total

Carrying value¥¥

54,66438,4545,000
98,11931st March, 2011

Fair value¥

54,38338,866
4,630
97,880¥Millions of yen
31st March, 2010
Government bonds
Corporate bonds
Other
Total

Difference¥¥

31st March, 2011(280) ¥
411
(369)(238) ¥

739 ¥
435
22
1,197 ¥

Carrying value$$(1,020)(23)(391)(1,435)591,677
591,677

Corporate bonds
Total

41

SENSHU IKEDA HOLDINGS,INC.

Difference$$¥ (6,609) ¥3,699 ¥ (10,309)

(198)
9,352
9,154
(12)
638
626
(364)
1,440
1,075
(575)
11,432
10,856(19,296)2,286(17,010)¥(12,763) ¥ 17,418 ¥ (30,182)

Fair value$$

598,833
598,833

Millions of yen
31st March, 2010
Equity securities
Bonds:
Government bonds
Local government bonds
Corporate bonds
Subtotal
Other
Total

Unrealized Unrealized
gain
loss

7,143 $
7,143 $

7,360 $
7,360 $

ANNUAL REPORT 2011

(204)
(204)

Acquisition
cost

Carrying value¥

64,981¥

481,241
78,978135,679
695,899371,250
1,132,131¥

66,963¥476,193
78,175
134,307
688,676
389,540
1,145,181

Millions of yen

Thousands of U.S. dollars
31st March, 2011

Unrealized Unrealized
gain
loss

Unrealized Unrealized
gain
loss

Thousands of U.S. dollars

Corporate bonds
Total

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

Difference

31st March, 2010
Equity securities
Bonds:
Government bonds
Local government bonds
Corporate bonds
Subtotal
Other
Total

Difference

Unrealized Unrealized
gain
loss

¥ (1,982) ¥5,633 ¥

(7,616)

5,048
5,950
(902)
802
827
(24)
(33)
1,372
1,405
(960)
7,223
8,184
(18,289)
3,658(21,948)¥(13,049) ¥ 17,476 ¥ (30,525)

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 42

SENSHU IKEDA HOLDINGS,INC.

Thousands of U.S. dollars
Carrying
amount31st March, 2011$

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

Thousands of U.S. dollars

Acquisition
cost$

685,1472011

764,642

4,069,801
1,006,566
1,930,463
7,006,843
4,656,223$ 12,427,720

4,179,891
1,014,107
1,943,403
7,137,414
4,451,641$ 12,274,215

Thousands of U.S. dollars
31st March, 2011

Difference

Unrealized Unrealized
gain
loss

$ (79,482) $Equity securities
Bonds:
Government bonds
Local government bonds
Corporate bonds
Subtotal
Other
Total

44,485 $ (123,980)(2,381)
112,471
110,090
(144)
7,672
7,528
(4,377)
17,31812,928(6,915)
137,486
130,559(232,062)
27,492(204,570)$(153,493) $ 209,476 $ (362,982)

There were no held-to-maturity debt securities sold during theyears ended 31st March, 2011 and 2010.
Available-for-sale securities sold during the years ended 31st
March, 2011 and 2010 were as follows:
Millions of yen
2011
Equity securities
Bonds:
Government bonds
Corporate bonds
Subtotal
Other
Total

Proceeds
from sales

Gain

Loss

2,862 ¥

504 ¥

(675)

329,692
7,698
337,390
604,470¥ 944,723 ¥

3,842
64
3,906
6,936
11,347 ¥

(132)
(1)
(133)
(2,352)(3,162)¥Millions of yen
2010
Equity securities
Bonds:
Government bonds
Municipal bonds
Corporate bonds
Subtotal
Other
Total

Proceeds
from sales

Gain

Loss

¥ 10,148 ¥2,568 ¥

(131)

765,900
23,742
24,707814,350
475,118¥1,299,618 ¥

4,835
298
253
5,387
4,395
12,351 ¥

(46)

–
(1)
(47)
(422)
(602)

Equity securities
Bonds:
Government bonds
Corporate bonds
Subtotal
Other
Total

Proceeds
from sales$

Gain34,419 $6,061 $

Loss
(8,117)(1,587)
3,965,027
46,205(12)
92,579769(1,599)4,057,606
46,975(28,286)
7,269,633
83,415$11,361,671 $ 136,464 $ (38,027)

Securities for which the holding purpose were changed during
the year ended 31st March, 2011
¥59,666 million ($717,570 thousand) securities formerly heldby Senshu were reclassified from “held-to-maturity
securities” to “available-for-sale securities” during the year
ended 31st March, 2011, as Ikeda and Senshu
consummated a merger, under which Ikeda became thesurviving entity and Senshu became the absorbed entity.
This change had no effect on income before income taxes
and minority interests and net income for the year ended
31st March, 2011.
In addition, investment securities in amount of ¥40 million($481 thousand), which had been classified as “availablefor-sale securities”, was reclassified to “investments inaffiliates” during the year ended 31st March, 2011, as theinvestee became an affiliate accounted for by the equity
method. This change had no effect on income before income
taxes and minority interests and net income for the year
ended 31st March, 2011.
Impairment losses on securities
Available-for-sale securities whose fair value significantly
declined from the acquisition cost are valued at fair value
and losses on devaluation of those securities are recognizedin the consolidated statements of operations unless the value
is considered recoverable.
Losses on devaluation of securities for the years ended 31st
March, 2011 and 2010 were ¥725 million ($8,719 thousand)and ¥218 million, which consisted of ¥716 million ($8,610
thousand) and ¥210 million on equity securities and ¥8
million ($96 thousand) and ¥8 million on corporate bonds,
respectively.
Determining whether the fair value is “significantly declined”
is based on the fair value declining by more than 50% or thecriteria considering the trend of the fair value during a certain
past period and credit risks of the issuers when the fair value
declined between 30% and 50% of the acquisition cost.

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201142

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 43

7. Money Held in Trust
Money held in trust at 31st March, 2011 and 2010 consistedof the following:
Money held in trust for trading purposes
Thousands of
U.S. dollars
2011

Millions of yen
2011
2010
Carrying value
Valuation gain included in consolidated
statements of operations¥

19,000 ¥¥20 ¥19,000 $ 228,502
10 $

240

There were no money held in trust owned for other purposes
at 31st March, 2011 and 2010.

8. Net Unrealized Loss on Available-for-Sale
Securities
Net unrealized loss on available-for-sale securities at 31st
March, 2011 and 2010 consisted of the following:
Millions of yen
2011
2010

Thousands of
U.S. dollars
2011

Differences between acquisition costand fair value:
Available-for-sale securities ¥ (12,763) ¥ (13,049) $ (153,493)(1,106)(92)(34)
Deferred tax liabilities
Differences between acquisition cost(154,612)(12,856)(13,084)
and fair value, net of taxes
(324)
(27)
(26)
Amounts corresponding to minority interests
Net unrealized loss on available-for-sale¥ (12,884) ¥ (13,110) $ (154,948)
securities, net of taxes

9. Loans and Bills Discounted and Risk
Monitored Loans
Loans and bills discounted:
Loans and bills discounted at 31st March, 2011 and 2010
consisted of the following:
Millions of yen
2011
2010
Bills discounted
Loans on bills
Loans on deeds
Overdrafts
Other
Total

Thousands of
U.S. dollars
2011

20,696 ¥ 18,541 $ 248,899
113,170
134,887
1,361,034
3,146,883
3,088,137 37,845,856
219,343
205,8422,637,919
922
1,172
11,088¥ 3,501,016 ¥ 3,448,581 $ 42,104,822

SENSHU IKEDA HOLDINGS,INC.

Contracts for overdraft facilities and loan commitments arecontracts under which the Group lends money to customers
up to their prescribed limits at the customers’ request as
long as there are no violations of any of the conditions in thecontracts. The aggregate unutilized balances within the limitsof these contracts totaled ¥603,581 million ($7,258,941
thousand) and ¥613,893 million at 31st March, 2011 and2010, respectively, including the contracts whose
contractual periods were either less than one year or
revocable at any time, in the amount of ¥603,224 million($7,254,648 thousand) and ¥613,356 million, respectively.
Since many of these commitments expire without being fully
utilized, the unutilized amounts do not necessarily represent
future cash commitments. Most of these contracts include
provisions which stipulate that the consolidated subsidiaries
can reject customers’ requests or decrease the contract
limits for an appropriate reason, (for example, a change infinancial situation or a deterioration in customers’
creditworthiness).
At the inception of the contracts, the Group obtains collateralin the form of real estate, securities, and so forth, if deemednecessary. Subsequently, the Group, based on its internal
rules, performs periodic reviews of the customers’ businessresults and may take necessary measures such asreconsidering the terms of the contracts and/or requiring
additional collateral or guarantees.
Risk monitored loans:
Risk monitored loans which were included in loans and bills
discounted at 31st March, 2011 and 2010 consisted of thefollowing:¥

Discounting of bills is accounted for as finance transactions
rather than as purchasing of bills in accordance with the
JICPA Industry Audit Committee Report No. 24. The Group43

has the right to sell or pledge such bills without any
restrictions. These include bankers acceptances bought,
commercial bills discounted, documentary bills and foreignexchange bills. The total face value of such outstanding bills
at 31st March, 2011 and 2010 totaled ¥21,118 million($253,974 thousand) and ¥18,865 million, respectively.
At 31st March, 2011 and 2010, loans and bills discounted
included the portion of loans extended to original borrowers
based on loan participation agreements, as permitted by the
JICPA Accounting Committee Report No. 3, in the amount of¥21,700 million ($260,974 thousand) and ¥23,620 million,
respectively.

ANNUAL REPORT 2011

Millions of yen
2011
2010
Loans to bankrupt borrowers
Delinquent loans
Loans past due for 3 months or more
Restructured loans
Total

¥

¥

4,733 ¥
53,653–7,460
65,847 ¥Thousands of
U.S. dollars
2011

12,199 $ 56,921
52,709645,255
619–
7,590
89,717
73,119 $ 791,906

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 44

SENSHU IKEDA HOLDINGS,INC.

Loans to bankrupt borrowers represent non-accrual loans toborrowers who are legally bankrupt as defined in Articles 961-3 and 96-1-4 of the Corporation Tax Law Enforcement
Regulations (Article 97 of the 1965 Cabinet Order).
Delinquent loans represent non-accrual loans other than (i)loans to bankrupt borrowers and (ii) loans on which interest
payments have been suspended in order to assist or
facilitate the restructuring of borrowers who are experiencing
financial difficulties.
Loans past due for 3 months or more represent loans on
which the payment of principal and/or interest has not been
received for three months or more from the due date, andwhich are not classified as “loans to bankrupt borrowers” or“delinquent loans.”
Restructured loans are loans which have been restructured
to support the rehabilitation of borrowers who areencountering financial difficulties, with the intention of
ensuring the recovery of the loans by providing more flexible
repayment terms for the borrowers (such as reducing therate of interest or suspending the payment ofprincipal/interest, etc.) or loans which are not classified inany of the above categories.

12. Tangible Fixed Assets
At 31st March, 2011 and 2010, accumulated depreciation of
tangible fixed assets was ¥41,382 million ($497,678
thousand) and ¥40,927 million, respectively.
Under the Tax Law, capital gains arising from the exchangeor replacement of assets under certain conditions are
permitted to be deducted from the cost of tangible fixed
assets in order to obtain certain tax benefits. The amountdeducted from the cost of tangible fixed assets at 31st
March, 2011 and 2010 was ¥517 million ($6,217 thousand)and ¥517 million, respectively.

13. Assets Pledged
Assets pledged as collateral at 31st March, 2011 and 2010
consisted of the following:
Millions of yen
2011
2010

Thousands of
U.S. dollars
2011¥ 257,709 ¥ 436,175 $ 3,099,326––
60,00040,156
3,339
4,272
2,140
178
391

The amounts presented in the table above are stated before
the provision of specific loan loss reserves.

Securities
Loans
Other assets
Tangible fixed assets
Software which is included
in intangible fixed assets

10. Foreign Exchange Assets

The liabilities secured by the above pledged assets at 31st
March, 2011 and 2010 consisted of the following:349

Foreign exchange assets at 31st March, 2011 and 2010
consisted of the following:
Millions of yen
2011
2010
¥
Due from foreign correspondent banks
Foreign bills of exchange bought
Foreign bills of exchange receivable¥
Total

5,061 ¥
248
900
6,210 ¥

Thousands of
U.S. dollars
2011

4,097 $
225
741
5,064 $

60,865
2,982
10,82374,684

11. Other Assets
Other assets at 31st March, 2011 and 2010 consisted of thefollowing:
Millions of yen
2011
2010
Investments in leased assets
Other receivables
Accrued income
Prepaid expenses
Other
Total

¥

¥

15,937 ¥11,001
7,982
253
27,25162,426 ¥Thousands of
U.S. dollars
2011

15,823 $ 191,665
13,297
132,303
9,145
95,995106
3,042
30,894
327,733
69,268 $ 750,763

606

Millions of yen
2011
2010
Deposits
Call money and bills soldPayables under securities
lending transactions
Borrowed money

¥

4,197

Thousands of
U.S. dollars
2011

15,586 ¥–6,384 $ 187,444
20,000–172,725
17,965

255,324
76,3682,077,269
216,055

In addition to the pledged assets listed above, certain othersecurities were pledged as collateral for domestic exchangetransactions or as margins on futures contracts. Theseamounted to ¥76,639 million ($921,695 thousand) and¥74,742 million at 31st March, 2011 and 2010, respectively.
At 31st March, 2011 and 2010, margins on futures contracts
in the amounts of ¥2,017 million ($24,257 thousand) and¥2,307 million, guarantee deposits of ¥5,515 million ($66,325
thousand) and ¥5,474 million, deposits for futurestransactions of ¥503 million ($6,049 thousand) and ¥503
million and guarantee deposits pledged for derivativetransactions of ¥500 million ($6,013 thousand) and ¥500
million were included in “Other assets”, respectively.

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201144

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 45

14. Deposits

17. Corporate Bonds and Notes

Deposits at 31st March, 2011 and 2010 consisted of thefollowing:

Short-term and long-term bonds payable at 31st March,2011 and 2010 consisted of the following:Thousands of
U.S. dollars
2011

Millions of yen
2011
2010

154,345 ¥ 152,036 $ 1,856,223
1,499,858
1,439,752 18,037,979
364,533
30,311
32,079159,134
13,232
16,8182,600,084
2,566,644 31,269,801
613,806
51,03844,685¥ 4,348,871 ¥ 4,252,016 $ 52,301,515¥

Current deposits
Ordinary deposits
Savings deposits
Deposits at noticeTime deposits
Other deposits
Total

Millionsof yenIssuer

15. Borrowed Money

Millionsof yenBorrowed money at 31st March, 2011 and 2010 consisted ofborrowings from the Bank of Japan and certain otherfinancial institutions.
Subordinated borrowings of ¥21,500 million ($258,568
thousand) and ¥21,500 million were included in borrowed
money at 31st March, 2011 and 2010, respectively.
The average interest rate applicable to borrowed money at
31st March, 2011 and 2010 was 1.65% and 0.78%,
respectively.
The aggregate annual maturities of borrowed money
subsequent to 31st March, 2011 were summarized asfollows:
Year ending 31st March,Millions of yen

2012
2013
2014
2015
2016
2017 and thereafter
Total

¥

¥

21,349
922
415
130
100
21,50044,417

Thousands of
U.S. dollars$

256,752
11,088
4,990
1,563
1,202
258,568
534,179$

IssuedDescription

IssuerThe Senshu
Ikeda Bank, Ltd.

Sengin General
Leasing Company
Limited
Total

2010

Millions of yen
2011
2010

45

SENSHU IKEDA HOLDINGS,INC.

¥
¥

428 ¥
52
480 ¥

Thousands of
U.S. dollars
2011

373 $
21
394 $

ANNUAL REPORT 2011

5,147
625
5,772

–
¥ 48,000Thousands of
U.S. dollars Interest Secured/2011 rates (%) UnsecuredDue¥ 15,000 $ 180,396
5,000
60,1323,000
36,07910,000120,264– 180,396

1.78
1.79
3.06
1.97
1.67

300
–
¥ 33,300 $ 577,269

1.16 Unsecured 28th Mar., 2011

Unsecured
Unsecured
Unsecured
Unsecured
Unsecured

29th Sep., 2016
17th Mar. 2017–27th Feb., 201717th Dec., 2020

The aggregate annual maturities of short-term and long-termbonds payable subsequent to 31st March, 2011 weresummarized as follows:Year ending 31st March,Millions of yen

2012
2021
Total

¥
¥

–
48,00048,000Thousands of
U.S. dollars$$–
577,269
577,269

18. Other Liabilities
Other liabilities at 31st March, 2011 and 2010 consisted of
the following:
Millions of yen
2011
2010

Foreign exchange liabilities at 31st March, 2011 and 2010
consisted of the following:¥ 15,000
5,000
3,000
10,00015,00028th Mar., 2008

16. Foreign Exchange Liabilities

Foreign bills sold
Foreign bills of exchange payable
Total

2011

29th Sep., 2006
20th Mar., 2007
28th Dec., 2007
27th Feb., 2007
17th Dec., 2010

The Senshu
7th subordinated bonds
Ikeda Bank, Ltd. 8th subordinated bonds
9th subordinated bonds
2nd subordinated bonds
1st subordinated bonds
Sengin General
Leasing Company
2nd unsecured bonds
Limited
Total

Accrued expenses
Unearned income
Accrued income taxes
Other
Total

¥

¥

11,993 ¥14,199456
23,53550,184 ¥Thousands of
U.S. dollars
2011

13,324 $ 144,233
170,763
15,0865,484
889
283,042
27,24456,544 $ 603,535

The amounts of lease obligations included in “Other” were
¥26 million ($312 thousand) and ¥33 million at 31st March,2011 and 2010, respectively. The average interest rates on

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 46

SENSHU IKEDA HOLDINGS,INC.

lease obligations at 31st March, 2011 with maturity dates onor before and subsequent to 31st March, 2012 were 3.30%
and 3.16%, respectively. The average interest rates on leaseobligations at 31st March, 2010 with maturity dates on or
before and subsequent to 31st March, 2011 were 3.29% and3.20%, respectively.
The aggregate annual maturities of lease obligations
subsequent to 31st March, 2011 were summarized asfollows:
Year ending 31st March,Millions of yen

2012
2013
2014
2015
2016
2017 and thereafter

¥

6
6
6
3
2
0
26

¥

Thousands of
U.S. dollars

$

$

72
72
72
36
24
0
312

19. Retirement Benefit Plans
Certain consolidated subsidiaries have defined benefit
pension plans consisting of corporate pension plans, taxqualified pension plans and lump-sum payment plans.
(1) The assets and liabilities of the employees’ retirement
benefit plans at 31st March, 2011 and 2010 consisted of
the following:
Millions of yen
2011
2010
Retirement benefit obligation
Pension plan assets at fair value
Unfunded benefit obligation
Unrecognized net retirement benefit
obligation at transition
Unrecognized actuarial loss
Unrecognized prior service cost
Net retirement benefit obligation
Prepaid pension costAccrued retirement benefits for employees

Thousands of
U.S. dollars
2011¥ (33,154) ¥ (33,088) $ (398,725)
290,018
24,11525,307(108,695)(9,038)(7,781)

¥

2,638
9,041
(687)
1,953
8,478
(6,525) ¥31,725
3,298
108,731
7,838(8,262)(913)
23,487
2,442
101,960
8,514(6,072) $ (78,472)(2) Retirement benefit expenses for the years ended 31st
March, 2011 and 2010 consisted of the following:
Millions of yen
2011
2010
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of actuarial loss
Amortization of transitional obligation
Additional retirement benefits and other
Net periodic retirement benefit expenses¥

1,168 ¥
576
(542)
(225)
1,201
659

¥

2,837

–
¥

Thousands of
U.S. dollars
2011

1,208 $
520
(445)
(225)
1,538
659
28
3,283 $

14,046
6,927(6,518)(2,705)
14,443
7,925–
34,119(3) The assumptions used in accounting for the above plans
for the year ended 31st March, 2011 and 2010 were as
follows:

Discount rates
Expected rates of return onplan assets

2011

2010

1.4%-2.1%

1.3%-2.2%

2.1%-3.0%

2.1%-3.0%

20. Asset Retirement Obligations
As explained in Note 4, the Company applied the new
accounting standard for asset retirement obligations
effective 1st April, 2010.
(1) Outline of asset retirement obligation
The Group recognizes asset retirement obligations
associated with leasehold contracts of certain
subsidiaries’ branches and offices and removal costs ofcertain branches for hazardous substances such as
asbestos.
(2) Method of determining the amount of asset retirement
obligation
The Group recognizes asset retirement obligations
using a discount rate of 2.3% with the useful life
estimated to be 37 years after acquisition.
(3) Changes in asset retirement obligations for the year
ended 31st March, 2011 were as follows:
Thousands of
U.S. dollars

Millions of yen

Balance at beginning of the year (Note)
Additional provisions associated withthe acquisition of tangible fixed assets
Other
Balance at end of the year
(Note):

¥

104

¥

96
(9)
192

$

1,250

$

1,154
(108)
2,309

Balance at beginning of the year is recognizedbased on the adoption of “Accounting Standards
for Asset Retirement Obligations” (ASBJ Statement
SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201146

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 47

No.18 issued on 31st March, 2008) and “Guidanceon Accounting Standards for Asset Retirement
Obligations” (ASBJ Guidance No.21 issued on 31st
March, 2008).

21. Contingent Liabilities
Contingent liabilities for guarantee of corporate bonds
included in “Securities,” which were issued by private
placement (Article 2, Paragraph 3 of the Financial
Instruments and Exchange Law) amounted to ¥27,054 million($325,363 thousand) and ¥33,796 million at 31st March,2011 and 2010, respectively.

22. Shareholders’ Equity

Notes:
1. Increase in treasury stock of common stock (1,002
thousand shares) consisted of purchase of treasury stock
based on resolution of the Board of Directors (1,000
thousand shares) and issuance request from theshareholders who owned fractional shares less than one
voting right (2 thousand shares).
Number of shares (in thousands)
Year ended 31st
March, 2010

The maximum amount which the Company can distribute as
dividends is calculated based on the non-consolidated
financial statements of the Company and in accordance with
the Law.
(1) Class and number of shares issued and treasury stock
Movements in common stock, first-class preferred stock,second-class preferred stock and treasury stock during
the years ended 31st March, 2011 and 2010 weresummarized as follows:
Number of shares (in thousands)
Year ended 31st
March, 2011

1st April,
31st March,
Increase Decrease
2010
2011

Note

Outstanding shares:
1,192,293–– 1,192,293

First-class preferred stock

111,000––

111,000

Second-class preferred stock

115,625––

115,625

1,418,918–– 1,418,918

Common stock

5

1,002

–

1,008

Total

5

1,002

–

1,008

Common stock

Total
Treasury stock:

47

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

1

Note

Outstanding shares:
Common stock

940,231

253,134First-class preferred stock

111,000–

Second-class preferred stock

115,625First series preferred stock

7,530
1,174,386

253,134

Total

Japanese banks, including the Company, are required tocomply with the Banking Law and the Law. The Law
stipulates that neither additional paid-in capital nor the legal
reserve is available for dividends, but that both may be used
to reduce or eliminate a deficit. Under the Banking Law, anamount which is at least equal to 20% of the aggregate
amount of cash dividends and certain appropriations ofretained earnings associated with cash outlays applicable toeach fiscal period is to be appropriated to the legal reserve
until the aggregate amount of the legal reserve and thecapital surplus account equals 100% of the amount of sharecapital. The Law also provides that if the aggregate amountof additional paid-in capital and the legal reserve exceeds
100% of the amount of share capital, the excess may be
distributed to the shareholders either as a return of capital oras dividends subject to the approval of the shareholders.

1st April,
31st March,
2009
2010
Increase Decrease

1,073 1,192,293–

111,000––

115,625

–

7,530

–

1 and 2

3

8,603 1,418,918

Treasury stock:
Common stock

1,203

40

1,238

5

4 and 5First series preferred stock

1,250

6,280

7,530

–

6 and 7

Total

2,453

6,320

8,768

5

Notes:
1. Increase in common stock (253,134 thousand shares)
consisted of issuance due to the exercise of right of claim
for acquisition by first series preferred stock shareholders(20,382 thousand shares), issuance by public offering(210,000 thousand shares) and issuance by allotment tothird parties (22,751 thousand shares).
2. Decrease in common stock (1,073 thousand shares) was
due to disposal of treasury stock pursuant to Article 178 of
the Law.
3. Decrease in first series preferred stock (7,530 thousand
shares) was due to disposal of treasury stock pursuant to
Article 178 of the Law.
4. Increase in treasury stock of common stock (40 thousand
shares) was due to issuance request from theshareholders who owned fractional shares less than one
voting right.
5. Decrease in treasury stock of common stock (1,238
thousand shares) consisted of decrease (1,073 thousand
shares) due to disposal of treasury stock pursuant to
Article 178 of the Law, sales of common stock (160thousand shares) owned by a subsidiary and disposition(5 thousand shares) by purchase request from theshareholders who owned fractional shares less than one
voting right.
6. Increase in treasury stock of first series preferred stock(6,280 thousand shares) is due to the exercise of right ofclaim for acquisition by first series preferred stock
shareholders.
7. Decrease in treasury stock of first series preferred stock(7,530 thousand shares) is due to disposal of treasury
stock pursuant to Article 178 of the Law.

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 48

SENSHU IKEDA HOLDINGS,INC.

(2) Stock subscription rights
The Company resolved to grant stock subscription
rights (stock option) to certain directors and executive
officers of its subsidiaries at the Board of Directors’
meeting held on 24th February, 2011.
The balance of stock subscription rights granted forstock option program at 31st March, 2011 is ¥6 million($72 thousand).
Stock option related expenses for the year ended 31st
March, 2011 amounted to ¥6 million ($72 thousand).
The stock option outstanding at 31st March, 2011 is asfollows:
Date of resolution
24th February, 2011
Persons granted
Directors of the subsidiaries:
22
Executive officers of the subsidiaries:
19
Number of stock option
by type of shares (*) Common stock:423,900
Date of grant
15th March, 2011
Vesting conditions To exercise within 10 days after retirement
Applicable service period From 15th March, 2011 to the date of retirement
Exercise period
From 16th March, 2011 to 31st July, 2041(*) The number of stock option is converted into the numberof shares.
The stock option activity is as follows:
Date of resolution

The method for estimating the fair value price of 2010 stock
option granted in the year ended 31st March, 2011 was asfollows:
Measurement method: Black-Scholes model
Major fundamental factors and assumptions used tomeasure fair value
24th February, 2011

Date of resolution

39.78%
Half a year
2.7%
0.129%

Volatility of stock price *1
Estimated remaining outstanding period *2
Estimated dividend *3
Interest rate with risk free *4*1 Actual stock price during the period (from 13th
September, 2010 to 15th March, 2011) corresponding to
the estimated remaining outstanding period*2 Half of the term of office of the applicable directors*3 ¥2.70 of latest annual dividend/¥100 of stock price on thebase date*4 Yield of Japanese government bonds approximating theestimated remaining outstanding period
In estimating the vested number of stock options, theCompany basically reflects only the actual forfeited number,since it is difficult to make a reasonable estimate on the
future forfeited number.

24th February, 2011Non-vested:
31st March, 2010-Outstanding
GrantedForfeited
Vested31st March, 2011-Outstanding
Vested:31st March, 2010-Outstanding
VestedExercised
Forfeited
31st March, 2011-Outstanding

23. Other Operating Income–

423,900–

Other operating income for the years ended 31st March,2011 and 2010 consisted of the following:–

423,900

Millions of yen
2011
2010

–
–
–
–
–

Gain on sales of securities and¥trading account securities
Other
¥
Total

10,857 ¥1,698
12,556 ¥Thousands of
U.S. dollars
2011

9,762 $ 130,571
815
20,420
10,578 $ 151,004

Price information is as follows:
Date of resolution

24th February, 2011

Exercise price
Average stock price at exercise
Fair value price at grant date

¥

1
–

¥

24. Other Income
Other income for the years ended 31st March, 2011 and2010 consisted of the following:

98
Millions of yen
2011
2010
Gain on sales of equity securities
Gain on money held in trust
Other
Total

¥

¥

506 ¥
220
10,274
11,002 ¥SENSHU IKEDA HOLDINGS,INC.

Thousands of
U.S. dollars
2011

6,085
2,590 $
2,645
173
123,559
9,294
12,059 $ 132,315

ANNUAL REPORT 201148

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 49

25. Other Operating Expenses
Other operating expenses for the years ended 31st March,2011 and 2010 consisted of the following:

Cash dividends with record dates falling in the fiscal year
ended 31st March, 2011 and effective dates coming after
the end of the fiscal year
Source ofdividends

Record date

Effective date

Retained earnings
Retained earnings

31st March, 2011
31st March, 2011

30th June, 2011
30th June, 2011

Retained earnings

31st March, 2011

30th June, 2011

Types of stock

Millions of yen
2011
2010
¥

Loss on sales of debt securities
Loss on redemption of debt securities
Loss on devaluation of debt securities
Other
Total

¥

2,011 ¥–
849
2,070 ¥

Thousands of
U.S. dollars
2011

367 $
483
194
505
1,550 $

24,185–96589
24,894

Other expenses for the years ended 31st March, 2011 and2010 consisted of the following:
Millions of yen
2011
2010
¥

Provision for possible loan losses
Write-offs of loans and bills discounted
Loss on sales of equity securities
Loss on devaluation of equity securities
Loss on money held in trust
Other
Total

¥

4,126 ¥
11,952
1,168
1,079
246
13,79832,371 ¥Thousands of
U.S. dollars
2011

9,749 $ 49,621
143,740
9,035
14,046
243
12,976454
2,958
38
165,941
12,851
32,373 $ 389,308

Cash dividends paid during the fiscal year ended 31st
March, 2011
Resolution by annual shareholders’ meeting on 29th June,
2010
Dividend amount
Effective
date

Common31st March, 30th June,
stock
2010
2010
31st March, 30th June,First-classpreferred stock 20102010
31st March, 30th June,
Second-classpreferred stock 2010
2010

Millions Thousands ofof yenU.S. dollars¥¥¥

3,219 $ 38,713 ¥ 2.70 $ 0.03
¥ 196 divided $ 2.35 divided
1,176 $ 14,143
by 18.5by 18.5¥ 204.5 divided $ 2.45 divided
1,278 $ 15,369
by 18.5by 18.5

Common stock
First series
preferred stock

Common stock

1,176 $¥

1,275 $

U.S. dollars

Recorddate

Effective
date

31st Mar., 2009
31st Mar., 2009

29th June, 2009 ¥29th June, 2009¥

Dividend
amountDividends
per share

Millions of
yen

Yen

1,149 ¥

2.50

31 ¥

5.00

Recorddate

Effectivedate

30th Sep., 2009

Dividend
amountDividends
per share

Millions of
yen

Yen

9th Dec.,2009 ¥1,105 ¥

2.30

Cash
Cash
dividends
dividends per shareFirst-classpreferred stock
Second-classpreferred stock

ANNUAL REPORT 2011

¥

Yen

3 $
42,970 ¥0.03¥196 divided$2.35 divided
14,143by 18.5by 18.5¥204.5 divided$2.45 divided
15,333by 18.5by 18.5

Cash dividends with record dates falling in the fiscal year
ended 31st March, 2010 and effective dates coming after
the end of the fiscal year

Common stock

SENSHU IKEDA HOLDINGS,INC.

3,573 $(b) Resolution by Board of Directors’ meeting on 13th
November, 2009

Types of stock

49¥

The Company was established as a joint holding company
between Ikeda and Senshu on 1st October, 2009 by way of atransfer of shares. Accordingly, cash dividends presented in
the table below were resolved by the annual shareholders’meeting and the Board of Directors’ meeting of Senshu, awholly owned subsidiary of the Company.
(a) Resolution by annual shareholders’ meeting on 26th
June, 2009

Types of stock
U.S. dollars

Dividends per share

Thousands of
U.S. dollars

Cash dividends paid during the fiscal year ended 31st
March, 2010

Dividends per share
Yen

Millionsof yenTypes of stock

Types of stock

27. Dividends

Recorddate

Dividend amount

Common stock
First-classpreferred stock
Second-classpreferred stock

26. Other Expenses

Type ofstock

Common stock
First-classpreferred stock
Second-classpreferred stock

Source ofdividends

Recorddate

Effective
dateMillions ofyen

Retainedearnings
Retainedearnings
Retainedearnings

31st Mar.,2010
31st Mar.,2010
31st Mar.,2010

30th June,2010
30th June,2010
30th June,
2010

2.70
¥ 3,219 ¥¥ 196 divided¥ 1,176by 18.5¥204.5 divided¥ 1,278
by 18.5Yen011̲0161301372309.qxd 11.9.5 3:10 PM ページ 50

SENSHU IKEDA HOLDINGS,INC.

Future minimum lease payments subsequent to 31st
March, 2011 for finance leases accounted for in amanner similar to the accounting treatment for operatinglease transactions are summarized as follows:

28. Cash and Cash Equivalents
A reconciliation of cash and due from banks in theaccompanying consolidated balance sheets to cash andcash equivalents in the accompanying consolidated
statements of cash flows at 31st March, 2011 and 2010 issummarized as follows:
Thousands of
U.S. dollars
2011

Millions of yen
2011
2010
Cash and due from banks
Deposits other than deposits
with the Bank of Japan
Cash and cash equivalents¥ 144,348¥ 111,817

Year ending 31st March,Millions of yen

2012
2013 and thereafter
Total

¥

$ 1,735,995(3,013)(5,919)(36,235)¥ 141,335 ¥ 105,897 $ 1,699,759

60
24
84

$

Total lease payments related to finance leases
accounted for as operating leases and depreciation
expense, which have not been reflected in theaccompanying consolidated statement of operations forthe years ended 31st March, 2011 and 2010, aresummarized as follows:

Finance leases
As Lessee
The Group leases vehicles under finance leasearrangements, which do not transfer ownership of thelease assets to the lessee.
The Group accounts for finance leases commencing
prior to 1st April, 2008 that do not transfer ownership ofthe leased assets to the lessee as operating leasetransactions as permitted by the accounting standard.
The following pro forma amounts represent theacquisition costs, accumulated depreciation and net
book value of the leased tangible fixed assets as of 31st
March, 2011 and 2010, which would have beenreflected in the accompanying consolidated balance
sheet if finance lease accounting had been applied to
the finance leases for which the Group is a lessee andwhich are currently accounted for in a manner similar to
the accounting treatment for operating leasetransactions:
Millions of yen
2011
2010
¥
¥

49 ¥
41
7 ¥

Thousands of
U.S. dollars
2011
70 $
53
16 $

589
493
84

The above acquisition costs include amounts
corresponding to interest expense not presented
separately because the total balance of the future
minimum lease payments was immaterial to the net bookvalue of tangible fixed assets.

Thousands of
U.S. dollars
2011

Millions of yen
2011
2010
Total lease payments
Depreciation expense

¥

9 ¥
9

12 $
12

108
108

Depreciation expense has been computed by thestraight-line method assuming the lease periods to be
the useful lives of the respective assets and a nil
residual value.
There was no loss on impairment of fixed assets
allocated to leased assets or reversal of the reserve for
impairment of tangible fixed assets under finance leases
for the years ended 31st March, 2011 and 2010.
b.

Acquisition costs
Accumulated depreciation
Net book value¥$

The above future minimum lease payments include
amounts corresponding to interest expense notpresented separately because the total balance of the
future minimum lease payments was immaterial to thenet book value of tangible fixed assets.

29. Leases
a.

5
2
7

Thousands of
U.S. dollars

Operating leases
As Lessee
Future minimum lease payments under non-cancellable
operating leases subsequent to 31st March, 2011 wereas follows:Year ending 31st March,Millions of yen

2012
2013 and thereafter
Total

¥
¥

665
5,250
5,915

SENSHU IKEDA HOLDINGS,INC.

Thousands of
U.S. dollars

$
$

7,997
63,13871,136

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011̲0161301372309.qxd 11.9.5 3:10 PM ページ 51

30. Income Taxes

31. Comprehensive Income

Income taxes applicable to the Company and its domestic
subsidiaries comprise corporate tax, inhabitants’ taxes andenterprise tax which, in the aggregate, resulted in a statutory
tax rate of 40.6% for the years ended 31st March, 2011 and2010.

For the year ended March 31, 2010
Other comprehensive income for the year ended 31st March,2010 consisted of the following:

The tax effect of temporary differences which gave rise tosignificant portions of the deferred tax assets and liabilities at
31st March, 2011 and 2010 consisted of the following:
Millions of yen
2011
2010

Thousands of
U.S. dollars
2011

Deferred tax assets:¥ 35,495 ¥ 33,808 $ 426,879
Reserve for possible loan losses
724
729
8,707
Provision for employees’ bonuses
3,254
3,006
39,134
Accrued retirement benefits for employees
170,823
14,20415,083
Loss on devaluation of securities
317,065
26,364
31,842
Tax loss carryforwards
702
633
8,442
Depreciation
Net unrealized loss on available65,291
5,429
5,431
for-sale securities
61,587
5,121
3,586
Other
91,294
94,122 1,097,943
Gross deferred tax assets(51,669)(53,784)(621,395)
Valuation allowance
39,62540,338476,548
Total deferred tax assets
Deferred tax liabilities:
Non-taxable accrued dividend income
Net unrealized gain on availablefor-sale securities
Other
Total deferred tax liabilities
Net deferred tax assets

(345)

(371)

(4,149)(244)(26)(2,934)
(36)
(0)
(432)
(7,528)(626)(398)¥ 38,999 ¥ 39,940 $ 469,019

A reconciliation of the statutory tax rate to the effective tax
rate for the years ended 31st March, 2011 and 2010 was asfollows:
2011

Statutory tax rate
Permanently non-deductible expenses
Valuation allowance
Per capita portion of inhabitants’ taxes
Unused tax loss carryforwards that
had expired
Other
Effective tax rate

2010

40.6%
1.2
(50.2)
1.1

40.6%
–
88.1
1.2

18.9
2.0
13.6%

4.4
5.3
139.6%

Millions of yen

Other comprehensive income:Net unrealized gain on availablefor-sale securities
Net unrealized loss on deferred hedges
Total other comprehensive income

¥
¥

3,376
(0)
3,376

Total comprehensive income for the year ended 31st March,2010 was the following:
Millions of yen

Total comprehensive income attributable to:
Owners of the parent
Minority interests
Total comprehensive income

¥
¥

500
(62)
438

32. Segment Information and RelatedInformation
For the year ended 31st March, 2011
The company has adopted the ASBJ Statement No.17“Accounting Standard for Segment Information Disclosures”
revised on 27th March, 2009 and ASBJ Guidance No.20“Guidance on Accounting Standard for Segment Information
Disclosures” issued on 21st March, 2008. Under the
standard and guidance, an entity is required to reportfinancial and descriptive information about its reportablesegments. Reportable segments are operating segments oraggregations of operating segments that meet specified
criteria. Operating segments are components of an entity
about which separate financial information is available andsuch information is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and inassessing performance. Generally, segment information isrequired to be reported on the same basis as is usedinternally for evaluating operating segment performance anddeciding how to allocate resources to operating segments.
This accounting standard and the guidance are applicable
to segment information disclosures for the fiscal years
beginning on or after 1st April, 2010.
Effective from the year ended 31st March, 2011, the Group
adopted this revised accounting standard and guidance.
Segment information
Reportable segment information is omitted because theGroup is engaged only in banking business and “other” inour operating results, including leasing business, wasimmaterial.

51

SENSHU IKEDA HOLDINGS,INC.

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011̲0161301372309.qxd 11.9.5 3:10 PM ページ 52

SENSHU IKEDA HOLDINGS,INC.

(3) Ordinary income from international operations
Ordinary income from international operations has notbeen presented as it accounts for less than 10% of theconsolidated ordinary income.

(1) Related informationa. Information about services
Millions of yen
Lending
Income from externalcustomers¥

Securities trading
and investment

59,699 ¥29,561 ¥

Other

Total

27,995 ¥117,255

Note: “Income” is presented in lieu of net sales presented by
non-financial companies.
Thousands of U.S. dollars
Lending
Income from external$customers

Securities trading
and investment

717,96 $355,514 ¥Other336,680

33. Related Party Transactions
Transactions between a consolidated subsidiary andrelated parties:
HIMENO GIKEN CO., LTD.

Total

$ 1,410,162

b. Information about geographical areas(i) Income
Information about income has not been presented
as income from external customers inside Japanaccounts for more than 90% of the consolidated
income.
(ii) Tangible fixed assets
Information about tangible fixed assets has notbeen presented as tangible fixed assets inside
Japan accounts for more than 90% of theconsolidated tangible fixed assets.
c. Information about main customers
Information about main customers has not beenpresented as there is no income from particularcustomer which accounts for more than 10% of theconsolidated income.
(2) Other information about reportable segments
Other information about reportable segments has notbeen presented as the Group is engaged in onlybanking business.
For the year ended 31st March, 2010
(1) Business segment information
The Group has leasing and other businesses in addition
to its principal commercial banking business. Segment
information by type of business has been omitted assuch other businesses constitute only an immaterial
portion of the whole business segments of the Company
and its consolidated subsidiaries.
(2) Geographic segment information
Segment information by geographic area has not beenpresented as the Group had no overseas subsidiaries orbranches.

An executive officer of the Company, Yutaka Himeno directly
owns 5% shares and his relatives directly own 95% shares in
HIMENO GIKEN Co., Ltd. (“HIMENO GIKEN”) HIMENO
GIKEN is located in Higashiyodogawa-ku, Osaka, records
share capital of ¥20 million ($240 thousand) and is engaged
in the construction business.
Transactions and balances with HIMENO GIKEN as of 31st
March, 2011 and 2010 and for the years then ended weresummarized as follows.
2011
Transactions

Balances

Type of
Millions Thousands oftransaction of yen U.S. dollars

Loan

¥

–

$

Interest
income¥0$

Account
nameMillions Thousands ofof yen U.S. dollars

Loans and bills
discounted
Other assets
0 Other
liabilities
–

¥
¥

–
–

$
$

–
–

¥

–

$

–

Yutaka Himeno had been a director of the Company’s
subsidiary until 30th April, 2010, and accordingly, abovetable presents the transaction between the consolidated
subsidiary and HIMENO GIKEN during the period from 1st
April, 2010 to 30th April, 2010 and the balance at 31st
March, 2011 is not presented since the company does notmeet the definition of the related party of the Company at
31st March, 2011.
2010
Transactions
Type oftransaction

Balances

Millions of yen

Loan

¥

Interest
income¥Account
nameLoans and bills
114
discounted
Other assets
1 Other
liabilities

SENSHU IKEDA HOLDINGS,INC.

Millions of yen

¥
¥

117
0

¥

0

ANNUAL REPORT 201152

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 53

Setsuko Sasaki
Transaction and balances with Setsuko Sasaki who was a
relative of a director and engaged in the property leasing
business, Transactions and balances with Setsuko Sasaki asof 31st March, 2011 and 2010 and for the years then ended
were summarized as follows:
2011
Transactions

Balances

Type of
Millions Thousands oftransaction of yen U.S. dollars

Loan

¥

–

$

Interest
income¥2$

Account
nameMillions Thousands ofof yen U.S. dollars

Loans and bills
discounted
Other assets
24 Otherliabilities
–

¥
¥

73
0

$ 877
$
0

¥

0

$

0

2010
Transactions
Type oftransaction

Interest
incomeBalances

Millions of yen¥

Account
nameMillions of yen

Loans and bills
Discounted
2

¥

80

The conditions of the loan transactions are determinedbased on the general conditions of similar transactions withthird parties.

34. Financial Instruments and Related
Disclosures
1.

General Information(1) Policy for financial instruments
The Group, whose core operation is The Senshu Ikeda
Bank, Ltd., is engaged in the various financial services
as a regional financial institution. The Group holds
financial assets and liabilities which are subject tofluctuations in the interest rates and market prices in theprincipal businesses such as deposit-taking and lending
services and market activities including securities
investment. In order to serve for setting up strategic
targets in response to the changes in market
environments, the Group conducts integrated asset andliability management (“ALM”) and utilizes derivative
contracts as a part of ALM.
(2) Contents of financial instruments and their risks
Financial assets held by the Group mainly consist ofloans to domestic corporate and individual customers,
which are exposed to credit risk arising from customers’
nonperformance of contractual obligations and interest
rate movement risk. Securities held by the Groupprincipally consist of equity securities, debt securities
and investment trusts, which are held for pure53

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

investment purpose and strategic investment purpose
as available-for-sale securities and partially, for holding
to maturity and trading purposes. These financial assets
are exposed to credit risk of issuers and market risk
associated with interest rates, stock prices and foreignexchanges.
Deposits which are major financial liabilities are
exposed to liquidity risk that unexpected cash flow
might arise. In addition, other fund raising sources are
exposed to the liquidity risk that necessary fund might
not be secured when the Group fails to utilize the market
under certain circumstances, or that the Group might beobliged to fund at more unfavorable interest rates thannormal. In addition, these financial liabilities are
exposed to the risk of fluctuations in interest rates aswell as financial assets.
The Group uses derivative contracts to meet thecustomers’ needs and principally as a means of risk
control over the assets and liabilities. In addition, as apart of trading activities (to earn short-term trading
gains), futures instruments including equity and debt
securities are utilized. These derivatives are exposed tothe credit risk (counterparty risk) arising from customers’
nonperformance of contractual obligations and market
risk arising from the fluctuations in interest rates, stock
prices, foreign exchanges, etc.
(3) Risk management system for financial instruments
The Group has established the risk control department
independent from front offices and defines basic risk
management policies. Specifically, the risk management
system and various rules including the basic policy onrisk control are determined by the Board of Directors,
and the responsible functions by risk categories and theintegrated risk control function are clearly defined. In
addition, the “Risk Management Committee” and the“ALM Committee” have been established to monitor therisk profiles of the Group and discuss management
issues as well as risk control measures. And suchmatters are reported to the Board of Directors andaccordingly, effective risk management system at the
management level is structured.
a. Integrated risk management
The Group conducts integrated risk management inaccordance with the basic policy on risk control andvarious integrated risk control rules. Specifically, theGroup conducts integrated control by identifying therisks assessed by risk categories such as credit risk,
market risk and others including credit concentration
risk not considered in the computation process of thecapital ratio and interest rate risk of banking accounts
and compares them with management capacity(capital).

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 54

SENSHU IKEDA HOLDINGS,INC.

b. Credit risk management
The Group analyzes and controls the credit portfolioin accordance with the Company’s policy on credit
risk control and various credit risk control rules. The
Group maintains and operates a system ofinvestigation, internal rating, asset self-assessment inmonitoring individual transactions.
These credit control procedures are performed byeach operating office, credit investigation department
and risk control departments of the consolidatedbanking subsidiaries. With respect to credit risk ofissuers of securities and counterparty risk ofderivative transactions, the risk control departmentsof the banking subsidiaries monitor the identificationof credit information and fair values. In addition, therisk control department of the Company reports on aregular basis to the Board of Directors of theCompany. Furthermore the internal audit departments
audit the status of credit control.
c. Market risk management(i) Market risk management
The Group controls market risk arising fromfluctuations in interest rates, stock prices, foreignexchanges, etc. in accordance with theCompany’s policy on market risk control andvarious market risk control rules. Specifically, therisk control department of the Company identifies
the volume of market risk using the Value-at-Risk(VaR) method and monitors compliance with therisk limits resolved by the Board of Directors
through continuous monitoring system. For
securities, in addition to above risk limit control
policy, the Group has established and managed
loss cut rules. The relevant information isperiodically reported by the risk control
department to the Risk Management Committee
and the Board of Directors.
The ALM Committee identifies and confirms the
make-up of assets and liabilities and interest raterisk and discusses future measures. Specifically,
the responsible department of the Company for
ALM identifies comprehensively interest rates andperiods of financial assets and liabilities andmonitors using gap analysis and interest ratesensitivity analysis to secure stable andcontinuous earnings.
The banking subsidiaries execute foreignexchange transactions and foreign currency bondinvestments, which are exposed to foreignexchange risk, but the subsidiaries strive tominimize foreign exchange risk by balancing theforeign exchange positions where possible.

(ii) Derivative transactions
With respect to derivative transactions, theCompany has established an internal control
system including segregation of duties of thedepartments responsible for execution oftransactions, risk control and operation
administration and complies with the various
market risk control rules.
(iii)Quantitative information of market risk
The Group monitors the value at market risk whichis measured with VaR everyday as the change inmarket risk is larger than other risks.
The Group calculates the value at market risk
according to the variance-covariance approach(holding period-120 business days, confidence
interval-99%, and observation period-240
business days).
The value of market risk on the banking activitieswas ¥32,700 million ($393,265 thousand) which
consisted of ¥27,800 million ($334,335 thousand)interest rate and ¥9,900 million ($119,061
thousand) stocks at 31st March, 2011.
The Group carries out back-testing to compare themodel-calculating VaR of securities on thebanking activities which influenced by market
fluctuation (holding period-one business day) withreal gain and loss in order to verify their accuracy.
As real loss exceeded the model-calculating VaR
only one time for the year ended 31st March,
2011, the Group considers that the model
calculates the value of market risk with sufficientconfidence revel.
However, VaR, which calculates the value ofmarket risk based on past exchange ratechanges, sometimes cannot calculate the value ofmarket risk accurately under the condition thatmarket environment changes abruptly.
d. Liquidity risk management associated with fundraising
The Group conducts liquidity risk control for funding
activities in accordance with the Company’s policy on
liquidity risk control and various liquidity risk control
rules. Specifically, the department responsible for
ALM and the treasury department of the banking
subsidiaries identify the investment and funding
status of the whole Group on a timely basis andcontrol liquidity risk by securing liquidity of theassets, diversifying the funding instruments andadjusting the short-term and long-term fundingbalances considering the market environments tosecure stable fund management.

SENSHU IKEDA HOLDINGS,INC.

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011̲0161301372309.qxd 11.9.5 3:10 PM ページ 55

The risk control department identifies its response
capability if liquidity risk is revealed throughmonitoring periodically the amount of liquid reserve
assets that can be readily converted into cash,
monitors the appropriateness of its fund management
and reports it to the Risk Management Committee
and the Board of Directors.
(4) Supplementary explanation about fair value of financial
instruments
The fair value of financial instruments include, in
addition to the value determined based on the market
price, a valuation calculated on a reasonable basis if nomarket price is available. Since certain assumptions areused in calculating the value, the result of suchcalculation may vary if different assumptions are used.
2.

Fair value of financial instruments

The carrying value, the fair value and the difference as of
31st March, 2011 and 2010 are summarized in the following
tables: Note that securities such as unlisted equity securities
for which fair value is extremely difficult to determine were
not included in the following tables (See (Note 2) below):
Millions of yen
31st March, 2011
Cash and due from banks
Monetary claims bought (*1)
Trading account securities:
Trading securities
Money held in trust
Securities:
Held-to-maturity debt securities
Available-for-sale securities
Loans and bills discounted
Reserve for possible loan losses
Foreign exchange assets (*1)
Total assets
Deposits
Payables under securities
lending transactions
Borrowed money
Foreign exchange liabilities
Corporate bonds and notes
Total liabilities
Derivative transactions (*2)
To which hedge accounting is
not applied
To which hedge accounting is applied
Total derivative transactions

55

SENSHU IKEDA HOLDINGS,INC.

Carrying
value

Fair value Difference¥¥

144,348
1,271

144,348
1,271

¥

–
–

36
19,000––49,79349,1981,020,601
1,020,601
3,501,016(40,991)
3,487,598
3,460,024
6,210
6,203
¥ 4,700,685 ¥ 4,728,861¥ 4,348,871 ¥ 4,353,519

594–

27,5737¥ 28,176¥ 4,647

172,725
44,277480
47,548¥ 4,618,551

¥

–
(139)
–
(451)
4,056

26 ¥
(1,129)(1,103) ¥

–
–
–

36
19,000172,725
44,417480
48,000¥ 4,614,495

¥
¥

26 ¥
(1,129)(1,103) ¥ANNUAL REPORT 2011

Millions of yen
31st March, 2010
Cash and due from banks
Call loans and bills bought
Monetary claims bought (*1)
Trading account securities:
Trading securities
Money held in trust
Securities:
Held-to-maturity debt securities
Available-for-sale securities
Loans and bills discounted
Reserve for possible loan losses
Foreign exchange assets (*1)
Total assets
Deposits
Negotiable certificates of deposit
Call money and bills soldPayables under securities
lending transactions
Borrowed money
Foreign exchange liabilities
Corporate bonds and notes
Total liabilities
Derivative transactions (*2)
To which hedge accounting is
not applied
To which hedge accounting is applied
Total derivative transactions

Carrying
value

Fair value Difference¥¥

111,817
10,0001,173

111,817
10,000
1,173

¥

–
–
–

9
19,000––97,88098,1191,132,131
1,132,131
3,448,581(41,688)3,434,271
3,406,892
5,064
5,058
¥ 4,784,202 ¥ 4,811,348¥ 4,252,016 ¥ 4,258,251
12,50012,50045,00045,000(238)–

27,3786¥ 27,146¥ 6,235––

255,324
102,267394
32,486¥ 4,706,226

¥

–
380
–
(813)
5,803

121 ¥
(93)
28 ¥

–
–
–

9
19,000255,324
101,887394
33,300¥ 4,700,423

¥
¥

121 ¥
(93)
28 ¥

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 56

SENSHU IKEDA HOLDINGS,INC.

Thousands of U.S. dollars
31st March, 2011
Cash and due from banks
Monetary claims bought (*1)
Trading account securities:
Trading securities
Monetary held in trust
Securities:
Held-to-maturity debt securities
Available-for-sale securities
Loans and bills discounted
Reserve for possible loan losses
Foreign exchange assets (*1)
Total assets
Deposits
Payables under securities
lending transactions
Borrowed money
Foreign exchange liabilities
Corporate bonds and notes
Total liabilities
Derivative transactions (*2)
To which hedge accounting is
not applied
To which hedge accounting is applied
Total derivative transactions

Carrying
value

Fair value Difference$ 1,735,995 $ 1,735,995 $
15,285
15,285432
228,502432
228,502

–
–
–
–

7,143
598,833
591,677–
12,274,215
12,274,215
42,104,822(492,976)
331,605
41,943,451
41,611,834
84
74,68474,600$ 56,532,591 $ 56,871,449 $ 338,857$ 52,301,515 $ 52,357,414 $ 55,886
2,077,269
534,179
5,772
577,269$ 55,496,031$$

2,077,269
532,495
5,772
571,834$ 55,544,810 $–(1,671)–(5,423)
48,779312 $(13,577)(13,265) $

–
–
–

312 $
(13,577)(13,265) $(*1) General and specific reserves for loan losses
corresponding to loans are deducted. With respect toreserve for loan losses related to monetary claimsbought and foreign exchange assets, carrying value isshown, net of reserve, since the amount is insignificant.
(*2) Derivative transactions include all derivatives recordedin other assets and other liabilities. Assets and liabilities
arising from derivative transactions are shown on a net
basis.
(Note 1) Valuation method for the fair value of financial
instruments

Monetary claims bought
Receivables related to factoring business are computed in
the same manner as loans.
Trading account securities
The fair value of securities such as debt securities held for
trading is determined using the quoted market price or the
price provided by counterparty financial institutions.
Money held in trust
For securities that are invested as part of trust assets in an
independently managed money trust with securities
management as the primary purpose, the fair value of equity
securities is determined using quoted market prices and thefair value of debt securities is determined using quoted
market prices or the prices provided by counterparty
financial institutions. Note that information on money held in
trust by holding purpose is disclosed in Note 7.
Securities
The fair value of equity securities is determined using thequoted market prices and the fair value of debt securities isdetermined using the quoted market prices or the prices
provided by counterparty financial institutions. The fair valueof investment trusts is determined based on the published
net assets value. The fair value of privately placed
guaranteed bonds issued by the banking subsidiaries isdetermined in the same manner as loans.
(Valuation of fair value of financial assets)
For floating rate Japanese government bonds, if there is awide spread between the offer price and the bid price, theirfair value is determined using a value calculated on areasonable basis based on the management’s estimates,
since the market price cannot be deemed as the fair value.
The carrying value of “Securities” and “Net unrealized loss
on available-for-sale securities” as of 31st March, 2011 and2010 increased by ¥7,366 million ($88,586 thousand) and¥3,455 million, respectively, from the corresponding amounts
that would have been reported using the market prices.

Cash and due from banks
The carrying value of due from banks without maturities ispresented as the fair value since the fair value approximatesthe carrying value. The carrying value of due from banks withmaturities is presented as the fair value since the fair value
approximates the carrying value due to remaining maturitiesof less than one year.

The fair value of floating rate Japanese government bonds
computed on a reasonable basis is determined using theprices obtained from reliable and independent external
brokers. The value computed on a reasonable basis iscomputed based on the discounted present value assuming
future cash flows that are derived from the model of futureinterest rate trends based on the discount rates consisting of
the price of fixed rate Japanese government bonds and adiversification of interest rates corresponding to swaption
volatility quoted in the market.

Call loans and bills bought
The carrying amount is presented as the fair value since thefair value approximates the carrying amount because thecontractual term is short (less than one year).

Major pricing parameters adopted in above computation are
discounted short-term government bonds, 10-year
government bonds, 20-year government bonds and 30-year
government bonds for discount rates, one month to ten years

Assets:SENSHU IKEDA HOLDINGS,INC.

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011̲0161301372309.qxd 11.9.5 3:10 PM ページ 57

for the period of swaption volatility and one year to ten years
for the period of swaps.
Note that information on securities by holding purposes isdisclosed in Note 6.
Loans and bills discounted
The carrying value of the loans with floating interest rates,
which reflect short-term market interest rates, is presented as
the fair value since the fair value approximates the carrying
value as long as the creditworthiness of the borrower has notchanged significantly since the loan origination. The fairvalue of the loans with fixed interest rates is determinedbased on the aggregated value of principal and interest by
categories of types of loans, internal ratings and maturities
discounted using the interest rate assumed if the same loans
were newly originated. The carrying value of the loans withshort contractual terms (less than one year) is presented as
the fair value since the fair value approximates the carrying
value.
Loan losses on receivables from bankrupt, effectively
bankrupt or likely to become bankrupt borrowers are
estimated based on factors such as the present value of
expected future cash flows or the expected amount to becollected from collateral and guarantees. Since the fair valueof these items approximates the carrying value, net of thecurrently expected loan losses, such carrying value ispresented as the fair value. The carrying value of the loans
which do not have defined repayment due dates because
the loans are limited to within the amount of pledged assets
is presented as the fair value since the fair value
approximates the carrying value considering the expected
repayment schedule and interest rate conditions.
Foreign exchange assets
Foreign exchange assets consist of foreign currency
deposits with other banks (due from other foreign banks),
export bills and traveler’s checks, etc, (purchased foreign
bills) and loans on notes using import bills (foreign bills
receivables). The carrying value of these items is presented
as the fair value, since the fair value approximates the
carrying value due to being deposits without maturity or
having short contract terms (less than one year).
Liabilities:
Deposits
The amount payable on demand as of the balance sheet
date (i.e., the carrying value) is considered to be the fairvalue of the demand deposit. The fair value of time deposits
is determined using the discounted present value of future
cash flows, grouped by certain maturity lengths. The
discount rate used is the interest rate that would be applied
to newly accepted deposits. The carrying value of deposits
whose remaining maturity is within the short-term period (lessthan one year) is presented as the fair value since the fair

57

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

value approximates the carrying value.
Payables under securities lending transactions
The carrying value is presented as the fair value since thefair value approximates the carrying value due to remaining
maturities of less than one year.
Borrowed money
The carrying value of floating rate borrowed money ispresented as fair value. This is because it reflects the market
interest rate in the short-term period, also thecreditworthiness of the consolidated subsidiaries which areengaged in banking business has not significantly changed
since the borrowed money was originated and accordingly
fair value approximates the carrying value. The fair value of
fixed rate borrowed money is calculated as the present valueof expected future cash flows from the aggregated value ofprincipal and interest (the aggregated value of principal andinterest using the interest rate swap rate, in case ofborrowings subject to special treatment of hedge accounting
for interest rate swaps) on these borrowings grouped bycertain maturity lengths, which is discounted at an interest
rate applicable to similar borrowings. The carrying value ofborrowed money whose remaining maturity is due within the
short-term period (less than one year) is presented as the fairvalue since the fair value approximates the carrying value.
Foreign exchange liabilities
Foreign exchange liabilities consist of foreign bills sold andforeign bills payable. The carrying value is presented as thefair value since the fair value approximates the carrying
value due to remaining maturities of less than one year.
Corporate bonds and notes
The fair value of bonds and notes issued by the Group isdetermined using the market price.
Derivative transactions:
See Note 35.
(Note 2) Financial instruments whose fair value is extremely
difficult to determine are as follows: These
securities are not included in “Securities” under“Assets” as part of the fair value information offinancial instruments.
Millions of yen
2011
2010
Unlisted equity securities (*1) (*2)
Investment in partnerships (*3)
Other
Total

¥

¥

5,862 ¥
1,406
0
7,269 ¥

Thousands of
U.S. dollars
2011

6,349 $
2,454
08,804 $

70,49916,909087,420(*1) No market price is available for unlisted equity securities
and the fair value is not disclosed since it is extremely011̲0161301372309.qxd 11.9.5 3:10 PM ページ 58

SENSHU IKEDA HOLDINGS,INC.

difficult to determine the fair value.
(*2) The Company recognized impairment losses on unlisted
equity securities in the amount of ¥362 million ($4,353
thousand) and ¥244 million for the years ended 31st
March, 2011 and 2010, respectively.
(*3) The fair value of investments in partnerships, whose
assets consist of securities such as unlisted equity
securities for which fair value is extremely difficult todetermine, is not disclosed.
(Note 3) Repayment schedule of monetary receivables andsecurities with contractual maturities
Millions of yen

31st March, 2011

Due after Due after
Due inone year three years
one year throughthroughor less three years five years¥
Due from banks
Monetary claims bought (*1)
Securities:
Held-to maturity debt securities:
Corporate bonds
Available-for-sale securities
with maturities:
Government bonds
Local government bonds
Corporate bonds
Other
Loans and bills discounted (*1, 2)
Foreign exchanges assets¥
Total

93,053 ¥
1,270
68,796
3,200
3,200

– ¥
–
153,294
21,60021,600––382,067
24,50024,50065,59630,012
12,72822,683
172
695,6626,210
864,993 ¥

131,694
18,00037,58250,422
25,690489,372–
642,666 ¥357,567
108,000
31,292
31,450186,824
411,520–
793,588

Millions of yen

31st March, 2011

Due after
Due after
five years seven years
throughthroughseven years ten years¥
Due from banks
Monetary claims bought (*1)
Securities:
Held-to maturity debt securities:
Corporate bonds
Available-for-sale securities
with maturities:
Government bonds
Local government bonds
Corporate bonds
Other
Loans and bills discounted (*1, 2)
Foreign exchanges assets¥
Total

Due after
ten years– ¥–81,590––– ¥–99,304––––140,360––

81,59059,700770
6,206
14,914
247,521–329,111 ¥

140,360
99,30439,50086,000–1,210
46,7383,004
54,1219,090
1,273,030
325,491––
424,795 ¥ 1,413,390

Millions of yen

31st March, 2010

Due after Due after
Due inone year three years
one year throughthroughor less three years five years¥
Due from banks
Call loans and bills bought
Monetary claims bought (*1)
Securities:
Held-to maturity debt securities:
Government bonds
Corporate bonds
Other
Available-for-sale securities
with maturities:
Government bonds
Local government bonds
Corporate bonds (*1)
Other
Loans and bills discounted (*1, 2)
Foreign exchange assets¥
Total

63,130 ¥10,0001,173
128,749
4,400
–
400
4,000

– ¥
–
–
213,325
17,800–17,800––––300,890
20,400–20,400–124,349
100,000
6,282
15,681
2,385
691,232
5,064
899,349 ¥

195,525
25,01232,09353,85584,564
498,581–
711,907 ¥280,490103,000
37,812
37,629102,047
362,748–
663,639

Millions of yen

31st March, 2010

Due after
Due after
five years seven years
throughthroughseven years ten years¥
Due from banks
Call loans and bills bought
Monetary claims bought (*1)
Securities:
Held-to maturity debt securities:
Government bonds
Corporate bonds
Other
Available-for-sale securities
with maturities:
Government bonds
Local government bonds
Corporate bonds (*1)
Other
Loans and bills discounted (*1, 2)
Foreign exchange assets¥
Total

Due after
ten years– ¥––87,217
11,00010,000
–
1,000

– ¥
–
–
228,899
16,00016,000–––––105,762
29,00029,000––76,217
46,200965
10,12818,924
259,542–
346,760 ¥

76,762
212,899
58,500143,600
–
830
8,666
8,223
9,595
60,246
1,249,952
322,908––551,808 ¥ 1,355,714(*1) Loans and bills discounted, monetary claims bought
and corporate bonds do not include ¥63,764 million ofreceivables such as those due from bankrupt, effectively
bankrupt or likely to become bankrupt borrowers, since
it is not certain when they can be collected orredeemed.
(*2) Overdraft accounts of loans are shown under “Due in
one year or less.”

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201158

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 59

Thousands of U.S. dollars

31st March, 2011

Due after Due after
Due inone year three years
one year throughthroughor less three years five years–– $$ 1,119,098 $Due from banks––
15,273
Monetary claims bought (*1)
4,594,912
1,843,583
827,372
Securities:
294,648259,771
38,484
Held-to maturity debt securities:
294,648259,771
38,484
Corporate bonds
Available-for-sale securities
4,300,264
1,583,812
788,887with maturities:
1,298,857
216,476
360,938
Government bonds
376,331451,978
153,072
Local government bonds
378,232
606,398
272,796
Corporate bonds
2,246,831
308,959
2,068
Other
4,949,128
5,885,411
8,366,349
Loans and bills discounted (*1, 2)––
74,684Foreign exchanges assets$10,402,802 $ 7,728,995 $ 9,544,052
Total

Thousands of U.S. dollars

31st March, 2011

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

Due after
ten years

–
– $
$
– $
Due from banks–––
Monetary claims bought (*1)
1,688,033
1,194,275
981,238
Securities:–––
Held-to maturity debt securities:–––
Corporate bonds
Available-for-sale securities
1,688,033
1,194,275
981,238
with maturities:
475,045
1,034,275
717,979
Government bonds–
14,552
9,260
Local government bonds
562,092
36,127
74,636
Corporate bonds
650,883
109,320
179,362
Other
3,914,503 15,310,042
2,976,800
Loans and bills discounted (*1, 2)–––
Foreign exchanges assets$ 3,958,039 $ 5,108,779 $ 16,998,075
Total(*1) Loans and bills discounted and monetary claims bought
do not include ¥58,459million ($703,054 thousand) ofreceivables such as those due from bankrupt, effectively
bankrupt or likely to become bankrupt borrowers, since
it is not certain when they can be collected orredeemed.
(*2) Overdraft accounts of loans are shown under “Due in
one year or less.”

59

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

(Note 4) Repayment schedule of bonds, borrowed moneyand other interest bearing liabilities.
Millions of yen

31st March, 2011
Deposits (*1)
Payables under securities
lending transactions
Borrowed money (*2)
Corporate bonds (*3)
Total

Due after Due after
Due inone year three years
one year throughthroughor less three years five years¥ 3,965,277 ¥

328,742 ¥

52,748

172,725
21,349–¥ 4,159,352 ¥

–
1,337
–
330,080 ¥–230–
52,978Millions of yen

31st March, 2011
Deposits (*1)
Payables under securities
lending transactions
Borrowed money (*2)
Corporate bonds (*3)
Total

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

Due after
ten years

¥

788 ¥

1,314 ¥

–

¥

–
1,500
30,00032,288 ¥–8,000
15,00024,314 ¥––––Millions of yen

31st March, 2010

Due after Due after
one year three years
Due inone year throughthroughor less three years five years¥ 3,720,118 ¥Deposits (*1)
12,500
Negotiable certificates of deposits
45,000Call money and bills soldPayables under securities
255,324
lending transactions
78,787
Borrowed money (*2)
300
Corporate bonds (*3)
¥ 4,112,030 ¥Total

452,006 ¥––78,176
–
–

–
1,421
–
453,427 ¥–178–
78,355

Millions of yen

31st March, 2010

Due after
Due after
five years seven years
throughthroughseven years ten years¥
Deposits (*1)
Negotiable certificates of deposits
Call money and bills soldPayables under securities
lending transactions
Borrowed money (*2)
Corporate bonds (*3)¥
Total

Due after
ten years

725 ¥
–
–

989 ¥
–
–

–
–
–

–
–
30,00030,725 ¥–9,500–
10,489 ¥––––011̲0161301372309.qxd 11.9.5 3:10 PM ページ 60

SENSHU IKEDA HOLDINGS,INC.

(*1) Demand deposits are disclosed under “Due in one year
or less” of deposits.
(*2) Borrowed money whose repayment schedule is notdetermined in the amount of ¥12,000 million is notincluded.
(*3) Corporate bonds whose repayment schedule is notdetermined in the amount of ¥3,000 million are notincluded.
Thousands of U.S. dollars

31st March, 2011
Deposits (*1)
Payables under securities
lending transactions
Borrowed money (*2)
Corporate bonds (*3)
Total

Due after Due after
Due in one one year three years
year orthroughthroughlessthree years five years$ 47,688,238 $ 3,953,601 $–2,077,269
16,079256,752––$ 50,022,273 $ 3,969,693 $35. Derivatives
1. Derivative transactions to which hedge accounting is notappliedWith respect to derivatives to which hedge accounting is
not applied, contract amount or notional principal, fairvalue and related valuation gain or loss and computation
method of fair value are as follows: Note that contract
amounts do not represent the market risk exposure ofderivative transactions.
(1) Interest related derivatives at 31st March, 2011 and 2010

634,371–
2,766–
637,137

31st March, 2011
There were no interest related derivatives at 31st
March, 2011.
Millions of yen
Contract amount/notional principal

Thousands of U.S. dollars

31st March, 2011
Deposits (*1)
Payables under securities
lending transactions
Borrowed money (*2)
Corporate bonds (*3)
Total

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

9,476 $–
18,039360,793
388,310 $15,802 $–96,211
180,396
292,411 $31st March, 2010

Total

Over
one year

Fair
value

Valuation
gain (loss)

Over-the-counter transactions:Due after
ten years

Interest rate
swaps

–
–
–
–
–

(*1) Demand deposits are disclosed under “Due in one year
or less” of deposits.
(*2) Borrowed money whose repayment schedule is notdetermined in the amount of ¥12,000 million ($144,317
thousand) is not included.
(*3) Corporate bonds whose repayment schedule is notdetermined in the amount of ¥3,000 million ($ 36,079
thousand) are not included.

Total

Receivable fixed rate/
7 ¥– ¥Payable floating rate ¥Receivable floating rate/¥ 4,007 ¥ 4,000
Payable fixed rate
¥

0

¥

0

(84)
(84) ¥(84)(84)

Notes:
1. Transactions in the table above are stated at the fairvalue and the related valuation gain (loss) is reported
in the consolidated statements of operations.
2. The fair value of transactions listed on exchanges isdetermined using the last quoted market price at theTokyo Financial Exchange Inc. or others. The fairvalue of over-the-counter transactions is determinedby using the discounted cash flow method, option
pricing models or others.
(2) Currency related derivatives at 31st March, 2011 and 2010
Millions of yen
Contract amount/notional principal
31st March, 2011

Total

Over
one year

Fair
value

Valuation
gain (loss)

Over-the-counter transactions:¥ 98,138 ¥ 75,626 ¥159

Selling
Buying

¥
¥

(28)
34

(28)
34

Selling
Buying¥ 15,254 ¥ 10,531¥ 15,254 ¥ 10,531(1,653)
1,641¥ 153 ¥

(440)
621
345

Currency swaps
Forward foreignexchange contracts:

3,573
2,632

–
–

¥

159

Currency options:

Total

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201160

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 61

Millions of yen

Thousands of U.S. dollars

Contract amount/notional principal
31st March, 2010

Contract amount/notional principal

Over
one year

Total

Fair
value

Valuation
gain (loss)

Over-the-counter transactions:
208

¥

208

Over
one year

Fair
value

Valuation
gain (loss)

Equity index futures:
Selling
BuyingSelling
Buying

¥
¥

2,185
3,611

Selling
Buying¥ 19,121 ¥ 14,174¥ 19,121 ¥ 14,174

(53)
50

(53)
50

(1,518)1,518¥ 206 ¥

(73)
310
443

–
–

Currency options:

Total

Notes:
1. Transactions in the table above are stated at the fairvalue and the related valuation gain (loss) is reported
in the consolidated statements of operations.
2. The fair value is determined by using the discounted
cash flow method or others.

Contract amount/notional principal
Fair
value

Valuation
gain (loss)$1,180,252 $ 909,512 $ 1,912$ 1,912Total

31st March, 2011Over
one year

Over-the-counter transactions:

Selling
Buying$$42,97031,653––

Selling
Buying$ 183,451$ 183,451$ 126,650$ 126,650

(336)
408

(336)
408

Currency options:Total$ 33,686 $$–– $ (1,527) $ (1,527)–––$ (1,527) $ (1,527)

Total

Notes:
1. Transactions in the table above are stated at the fairvalue and the related valuation gain (loss) is reported
in the consolidated statement of operations.
2. The fair value of transactions listed on exchanges isdetermined using the last quoted market price at theTokyo Stock Exchange, Inc. or others. The fair valueof over-the-counter transactions is determined byusing the discounted cash flow method, option
pricing models or others.
There were no transactions of equity related
derivatives at 31st March, 2010.

Thousands of U.S. dollars

Currency swaps
Forward foreignexchange contracts:

Total

Transactions listed on the exchange:¥ 122,397 ¥100,371 ¥Currency swaps
Forward foreignexchange contracts:

31st March, 2011

(5,291)(19,879)
7,468
19,735$ 1,840 $ 4,149

2. Derivative transactions to which hedge accounting isappliedWith respect to derivatives to which hedge accounting isapplied, contract amount or notional principal and fairvalue at the balance sheet date by transaction type andhedge accounting method and computation method of
the fair value are as follows. Note that contract amount or
notional principal does not represent the market risk
exposure of derivative transactions.
(1) Interest related derivatives at 31st March, 2011 and 2010
31st March, 2011

Notes:
1. Transactions in the table above are stated at the fairvalue and the related valuation gain (loss) is reported
in the consolidated statements of operations.
2. The fair value is determined by using the discounted
cash flow method or others.
(3) Equity related derivatives at 31st March, 2011

Millions of yen
Contract amount/notional principal

Hedge accounting
methodTransaction
type

Major hedged
item

Total

Swap rate Interest rate swaps
applied to Receivable floating
Borrowed
underlyingrate/money ¥
debt
Payable fixed rateOver
one year

1,050 ¥

Fair
value (*1)

450

*2

Millions of yen
31st March, 2010

Millions of yen

Contract amount/notional principal
31st March, 2011

Total

Over
one yearContract amount/notional principal
Fair
value

Valuation
gain (loss)

Hedge accounting
methodTransaction
type

Major hedged
itemTransactions listed on the exchange:
Equity index futures:
Selling
Buying
Total

61

SENSHU IKEDA HOLDINGS,INC.

¥¥

2,801 ¥–– ¥–¥(127) ¥–
(127) ¥

ANNUAL REPORT 2011

(127)
–
(127)

Swap rate Interest rate swaps
applied to Receivable floating
Borrowed
underlyingrate/money ¥
debt
Payable fixed rateOver
one yearFairvalue (*1)

1,800 ¥ 1,050

*2

Total

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 62

SENSHU IKEDA HOLDINGS,INC.

31st March, 2011

Thousands of U.S. dollars

31st March, 2011

Contract amount/notional principal
Hedge accounting
methodTransaction
type

Major hedged
item

Total

Over
one yearFairvalue (*1)

Swap rate Interest rate swaps
applied to Receivable floating
Borrowed
underlyingrate/money $ 12,627 $ 5,411
debt
Payable fixed rate

*1

*2

Millions of yen
Contract amount/notional principal

Transaction
type

DeferralCurrency
hedge
swaps
accounting

Major hedged
item

Total

Over
one year

Securities
denominated inforeign currencies ¥ 23,683 ¥31st March, 2010

Fair
value

– ¥ (1,129)

Millions of yen
Contract amount/notional principal

Hedge accounting
methodTransaction
type

DeferralCurrency
hedge
swaps
accounting

Major hedged
item
Securities
denominated inforeign currencies ¥

Total

Over
one year

6,245 ¥

– ¥Transaction
type

Major hedged
item

Total

Over
one year

Securities
denominated inforeign currencies $284,822 $

Fair
value

– $ (13,577)*2(2) Currency related derivatives at 31st March, 2011 and 2010

Hedge accounting
methodHedge accounting
methodDeferralCurrency
hedge
swaps
accounting

The fair value of transactions listed on exchanges isdetermined using the last quoted market price at theTokyo Financial Exchange, Inc. or others. The fair valueof over-the-counter transactions is determined by using
the discounted cash flow method, option pricing models
or others.
The interest rate swaps which qualify for hedge
accounting and meet specific matching criteria are notvalued at the fair value, but the differential paid or
received under the swap agreements is recognized andincluded in interest expenses or income on the
borrowed money as hedged items. Accordingly, the fairvalue of interest rate swaps is considered to be includedin the fair value of the borrowed money disclosed in
Note 34.

31st March, 2011

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

Fair
value

(93)

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

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

36. Business Combination
The year ended 31st March, 2011
Ikeda and Senshu, both of which are wholly owned
subsidiaries of the Company, were merged effective 1st
May, 2010 in accordance with the resolution approving themerger agreement between Ikeda and Senshu at theextraordinary shareholders’ meeting of each subsidiary heldon 13th January, 2010. As a result, Ikeda changed its nameto “The Senshu Ikeda Bank, Ltd.” and took over all theassets, liabilities, rights and obligations of Senshu.
1. Summary of the business combination is as follows:(1) The companies which were the parties of businesscombinations and their businessIkeda: Ordinary banking business
Senshu: Ordinary banking business(2) Legal form of the business combination
Absorption type merger under which Ikeda was thesurviving company and Senshu was an acquiree
based on the equality policy.
(3) Name of the company after the business combination
The Senshu Ikeda Bank, Ltd.
(4) Outline of the transactions including the objectives ofthe business combination
Ikeda and Senshu established the Company on 1st
October, 2009 achieving management integration
aiming to become the best regional financial
institution as an independent financial grouprepresenting the Kansai area. Ikeda and Senshu
merged to maximize the integration effect under theobjective of the management integration.

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201162

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 63

2. Accounting method
The Company accounted for the business combination asa transaction under the common control in accordancewith “Accounting Standard for Business Combinations”(ASBJ Statement No. 21 issued on 26th December, 2008)
and “Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business
Divestitures” (ASBJ Guidance No. 10 issued on 26th
December, 2008).
The year ended 31st March, 2010
Ikeda and Senshu achieved a business integration throughthe incorporation of a joint-holding company on 1st October,2009. This business combination is accounted for under thepooling-of-interest method. The summary of the businesscombination is as follows:
1. Names of the companies involved, their businesses,
purpose of the business combination, date of the businesscombination, legal form of the business combination andname of the company after business combination(1) Name of the companies involved and their businesses
Ikeda: ordinary banking business
Senshu: ordinary banking business(2) Purpose of the business combination
The aim of the integration of Ikeda and Senshu is tobecome the best regional financial institution as anindependent financial group representing the Kansaiarea. The new financial group consisting of Ikeda,
Senshu and the joint holding company plans topromote regional financial stability and sounddevelopment of the regional economy through an
expansion of its operating structure considering its
public mission as a regional financial institution. In
addition, the new financial group also plans toenhance convenience for regional customers, itsquality of service and internal control system,
maintaining its independence of management.
(3) Date of the business combination
1st October, 2009(4) Legal form of the business combination
Transfer of shares(5) Name of the company after the business combination
Senshu Ikeda Holdings, Inc.

63

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

2. Share transfer ratio, number of shares issued,
computation method of share transfer ratio and the reason
why this business combination was determined to be a
combination of interest.
(1) Share transfer ratio and number of shares issued
a. Share transfer ratio–Allotment of 18.5 shares of common stock of thejoint-holding company for one share of common
stock of Ikeda–Allotment of one share of common stock of thejoint-holding company for one share of common
stock of Senshu–Allotment of 18.5 shares of first-class preferredstock of the joint-holding company for one shareof the first-class preferred stock of Ikeda–Allotment of 18.5 shares of second-classpreferred stock of the joint-holding company for
one share of the second-class preferred stock of
Ikeda
The Company paid to the holders of shares of lessthan one unit in cash for the shares less than one
unit of common stock, of first-class preferred stockand of second-class preferred stock of the jointholding company to be issued to the shareholders
of Ikeda and Senshu as a result of the sharetransfer in accordance with Article 234 of the Law
and other related laws and regulations.
b. Number of shares to be issued by the joint-holding
company
Common stock:959,541,463 sharesFirst-class preferred stock:
111,000,000 shares
Second-class preferred stock:
115,625,000 shares(2) Computation method of share transfer ratioa. Common stock
To ensure the fairness in computing the sharetransfer ratio to be used for the share transfer,
Ikeda designated Nomura Securities Co., Ltd. and
Senshu designated Morgan Stanley Securities
Co., Ltd. and American Appraisal Japan Co., Ltd.
as their respective advisors to perform thecalculation of the share transfer ratio.
b. Preferred stock
Both parties agreed that with respect to first-classpreferred stock and the second-class preferred stock
issued by Ikeda, the same conditions through theshare transfer ratio be defined in the issue terms as
the respective issue terms of the corresponding
preferred stock to be newly issued by the jointholding company, considering the share transfer ratioof common stock, since their market prices are notavailable unlike those for common stock.
Consequently, 18.5 shares of the first-class preferred011̲0161301372309.qxd 11.9.5 3:10 PM ページ 64

SENSHU IKEDA HOLDINGS,INC.

stock of the joint-holding company were issued forone share of the first-class preferred stock issued by
Ikeda and 18.5 shares of the second-class preferredstock of the joint-holding company were issued forone share of the second-class preferred stock issued
by Ikeda.
(3) Reason why this business combination wasdetermined to be a combination of interest
With respect to the ownerships of voting rights ofSenshu Ikeda Holdings, Inc. owned by the former
shareholders of Ikeda and Senshu as a result of thebusiness combination, which is the base todistinguish whether the business combination shouldbe accounted for by the purchase method or thepooling-of-interest method, 55% are owned byshareholders of Ikeda and 45% by Senshu.
Accordingly, either company is not deemed to havecontrol over the other and risks and benefits after thebusiness combination will be successfully andcontinuously shared between both parties.
3. Operating results for the year from 1st April, 2009 to 31st
March, 2010 of the combined entities are included in theaccompanying consolidated financial statements.
4. Assets, liabilities and net assets succeeded from the
combined entities are as follows:
Ikeda:
Total assets
Total liabilities
Total net assets¥2,529,655 million¥2,473,088 million¥ 56,567 million

Senshu:Total assets
Total liabilities
Total net assets¥2,226,858 million¥2,150,983 million¥ 75,874 million

There was no transaction to be eliminated before thebusiness combination.

c.

Expenditures and their nature of expenses required
for the business combination
Millions of yen

Stock issuance expenses
Incorporation expenses
Initial public offering expenses
Total

Unification of accounting policies
Prior to the business combination, certain
consolidated subsidiaries stated stocks andinvestment trusts with market value classified asavailable-for-sale securities at fair value determinedbased on the quoted market prices as of the balance
sheet date. However, effective the year ended 31st
March, 2010, these securities are stated at fair value
based on the average quoted market price during themonth before the balance sheet date.

¥

4
175
13
192

¥

6. There was no significant business to be disposed as aresult of the business combination.

37. Amounts per Share
Amounts per share at 31st March, 2011 and 2010 and for theyears then ended are summarized as follows:
Yen
2011

Net assets
Net income (loss):
Basic
DilutedCash dividends
Common stock
First-class preferred stock
Second-class preferred stock

5. Unification of accounting policies, details of elimination oftransactions before the business combination and
expenditures and nature of expenses required for thebusiness combination
a.

b.

¥

99.07

U.S. dollars
2011

2010
¥

97.22

$

1.19

4.39
4.39

(5.47)
–

0.05
0.05

¥
3
¥ 196 divided
by 18.5¥ 204 divided
by 18.5¥
2.7¥ 196 divided
by 18.5¥ 204.5 divided
by 18.5$
0.03$ 2.35 divided
by 18.5$ 2.45 divided
by 18.5

Net assets per share as of 31st March, 2011 and 2010 are
computed based on the following information:

Total net assets
Payment for First class preferred stock
Dividends for First classpreferred stock
Payment for Second classpreferred stock
Dividends for Second classpreferred stock
Stock subscription rights
Minority interests
Amounts to be deducted from total net assets
Net assets attributable to common stock
as of 31st March, 2011 and 2010
Number of shares of common stock as of 31st
March, 2011 and 2010 used to compute net
asset per share (Unit: thousand shares)

Millions of yen
2011
2010

Thousands of
U.S. dollars
2011¥ 176,684 ¥ 174,276(30,000)(30,000)$ 2,124,882(360,793)(1,176)(1,176)(14,143)(25,000)(25,000)(300,661)(1,275)(6)(1,197)(58,655)(1,278)(907)(58,361)(15,333)(72)(14,395)(705,411)¥ 118,028¥ 115,915$ 1,419,458

1,191,285

1,192,287

14,326,939–

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201164

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 65

Net income (loss) per share for the years ended 31st March,2011 and 2010 are computed based on the following
information:
Millions of yen
2011
2010

Thousands of
U.S. dollars
2011¥
7,690 ¥ (2,845) $92,483
Net income (loss) for the year
Dividends for first-class preferred stock
based on the resolution at the regular(1,176)(14,143)(1,176)
general shareholders’ meeting
Dividends for second-classpreferred stock based on the
resolution at the regular general(1,275)(15,333)(1,278)shareholders’ meeting
Amounts not attributed to(2,451)(29,476)(2,454)common stock shareholders
Net income (loss) attributable¥
5,239 ¥ (5,299) $63,006
to common stock
Average outstanding numberof shares of common stock
1,192,267
967,232 14,338,749(Unit: thousand shares)
Diluted net income (loss) per share
– ¥
–
¥
– $
Adjustment to net income
Number of increased common
19–
stock (Unit: thousand shares)
19–
Of which, stock subscription rights

Outline of potential shares not included in computing diluted
earnings per share by potential shares since there is no
dilutive effect for the year ended 31st March, 2010 were as
follows:
Ikeda:
3rd unsecured subordinated convertible bonds with
subscription rights to shares
Number of potential shares:
473 thousand
Balance of convertible bonds: ¥5,342 million
Conversion price:¥5,043
These bonds were fully redeemed before the maturity on
11th September, 2009.
Senshu:First series preferred stock
Number of potential shares:
6,618 thousand
Conversion price:¥308.10
All the stocks were claimed for conversion by 31st July,2009.
Although potential shares exist, diluted earnings per shareare not presented, since the Company recorded net loss per
share.
Diluted net income per share is computed based on the net
income available for distribution to the shareholders and theweighted-average number of shares of common stock
outstanding during each year after giving effect to thedilutive potential of shares of common stock to be issued

65

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

upon the conversion of convertible bonds or the exercise ofstock subscription rights. Diluted net income per share forthe year ended 31st March, 2010 is not disclosed because
net loss was recorded for the year then ended.
Cash dividends per share represent the cash dividends
proposed by the Board of Directors as applicable to thefiscal year.

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 66

SENSHU IKEDA HOLDINGS,INC.

Report of Independent Auditors
Senshu Ikeda Holdings, Inc.

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201166

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 67

Non-consolidated Balance Sheets (Unaudited)
The Senshu Ikeda Bank, Ltd.
As of 31st March, 2011 and 2010

Thousands of U.S.
dollars

Millions of yen
The Bank of Ikeda, Ltd.

The Senshu Bank, Ltd.

2010

2010

2011

72,737
10,0001,173
619,000830,784
1,670,505
2,751
27,927
21,861
3,116
21,875
17,465(24,457)¥ 2,674,747

38,877–02–412,633
1,793,040
2,312
12,855
13,848282
14,347
12,532(8,466)¥ 2,292,266$ 1,728,538–
15,273432
228,502
13,007,396
42,241,623
74,684
412,760
450,414
67,696433,156
282,465(385,904)$ 58,557,101

2011

AssetsCash and due from banks
Call loans and bills bought
Monetary claims bought
Trading account securities
Money held in trust
Securities
Loans and bills discounted
Foreign exchange assets
Other assets
Tangible fixed assets
Intangible fixed assets
Deferred tax assets
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Total assets¥

143,728–
1,270
36
19,0001,081,565
3,512,391
6,210
34,32137,452
5,629
36,01723,487(32,088)¥ 4,869,023¥¥

Liabilities and net assets
Liabilities
Deposits
Negotiable certificates of deposit
Call money and bills soldPayables under securities lending transactions
Borrowed money
Foreign exchange liabilities
Corporate bonds and notes
Other liabilities
Provision for employees' bonuses
Accrued retirement benefits for employees
Accrued retirement benefits for directors and corporate auditors
Reserve for reimbursement of deposits
Reserve for point services
Reserve for loss on integration
Reserve for contingent losses
Acceptances and guarantees
Total liabilities

4,357,005
24,300–172,725
36,352480
48,00028,948
1,593
6,440
372
309
41
717
465
23,4874,701,241

2,314,245––
204,670
13,79342
23,000
16,233
–
377
435
51
–
–
386
17,4652,590,701

1,952,575
33,02045,00050,65480,300352
10,00017,744
813
5,619
–
269
–
–
407
12,532
2,209,288

52,399,338
292,242–2,077,269
437,185
5,772
577,269
348,141
19,15877,450
4,473
3,716
493
8,622
5,592
282,465
56,539,278

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

50,710104,361
25,625
180,698(12,895)(19)(12,915)
167,782¥ 4,869,023

50,71033,651
7,104
91,466(7,420)(0)(7,421)
84,045¥ 2,674,747

55,655
15,054
17,96388,673(5,696)–(5,696)82,977¥ 2,292,266

609,861
1,255,093
308,177
2,173,156(155,081)(228)(155,321)
2,017,823$ 58,557,101

See accompanying notes to consolidated financial statements

67

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

011̲0161301372309.qxd 11.9.5 3:10 PM ページ 68

SENSHU IKEDA HOLDINGS,INC.

Non-consolidated Statements of Operations (Unaudited)
The Senshu Ikeda Bank, Ltd.
For the years ended 31st March, 2011 and 2010

Thousands of U.S.
dollars

Millions of yen
The Bank of Ikeda, Ltd.

The Senshu Bank, Ltd.

2010

2010

2011

2011

IncomeInterest income:Interest on loans and bills discounted¥

Interest and dividends on securities

56,861¥

28,021¥

34,450$683,836

16,084

11,577

4,395

193,433

Other interest income
Fees and commissions

90
12,866

78
8,021

41
5,115

1,082
154,732

Other operating income
Gain on sale of fixed assets

12,465
–

7,974
–

2,603
0

149,909
–

–

–

844

–

1,169
–

584
–

436
128

14,058–Gain on reversal of reserve for possible loan losses
Recoveries of written-off claims
Gain on reversal of reserve for possible losses oninvestment securities
Other income

2,635

3,048

824

31,689Total income

102,17359,306

48,8401,228,779

10,056

6,675

7,448

120,938

582
1,624

337
1,324

270
631

6,999
19,530Fees and commissions

9,351

3,953

7,042

112,459

Other operating expenses
General and administrative expenses

2,364
50,536

1,551
26,404322
26,25928,430607,769

Loss on disposal of fixed assets
Loss on impairment of fixed assets

143
189

29
1

52
8

1,719
2,273

Expenses
Interest expenses:
Interest on deposits
Interest on borrowings and rediscounts
Other interest expenses

Expense for business integration
Other expenses
Total expenses
Income (loss) before income taxes
Income taxes

–

–

1,550

–

20,75595,605

12,54052,8187,447
51,034

249,609
1,149,789

6,568

6,488

(2,193)78,989Current

82

45

(84)

986

Deferred
Total income taxes

141
224

(661)
(615)

9,632
(9,547)

1,695
2,693

Net income (loss)

¥

6,343

¥

7,104

¥

(11,741)$

76,283

See accompanying notes to consolidated financial statements

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 201168

069.qxd 11.9.5 2:23 PM ページ 69(As of July 1, 2011)

Senshu Ikeda Holdings,Inc

18-14, Chayamachi, Kita-ku,
Osaka 530-0013, Japan
Phone: 81-(0)6-4802-0181
URL: http://www.senshuikeda-hd.co.jp

The Senshu Ikeda Bank, Ltd.

Asia and China Business

Head Office:Promotion Division

18-14, Chayamachi, Kita-ku,
Osaka 530-0013, Japan
Phone: 81-(0)6-6375-1005
URL: http://www.sihd-bk.jp(International Division)

18-14, Chayamachi, Kita-ku,
Osaka 530-0013, Japan
Phone : 81-(0)6-6375-3484
Facsimile : 81-(0)6-6375-3492
SWIFT Address : BIKEJPJSFinancial Market Division:Suzhou Representative Office:18-14, Chayamachi, Kita-ku, 110 North Dongwu Road,
Osaka 530-0013, Japan
Wuzhong District, Suzhou,
Phone : 81-(0)6-6375-3879 Jiangsu, China
Facsimile : 81-(0)6-6375-3998 Phone : 86-(0)512-6585-1791
Facsimile : 86-(0)512-6585-2312(As of March 31, 2011)

1. Common stock
Name

Japan Trustee Services Bank, Ltd. (Trust Account)*1
The Master Trust Bank of Japan, Ltd. (Trust Account)*1
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Mitsubishi UFJ Financial Group, Inc.
Mitsubishi UFJ Trust and Banking Corporation
ITAMI SANGYO CO., LTD.
Mizuho Corporate Bank, Ltd.
OBAYASHI CORPORATION
Tokio Marine & Nichido Fire Insurance Co., Ltd.
The Senshu Ikeda Bank EmployeesÕ Shareholders Association*1: These shares do not disclose the names of beneficiaries.

2. First-class preferred stockName

The Bank of Tokyo-Mitsubishi UFJ, Ltd.
3. Second-class preferred stockName

OC FINANCE CORPORATION
Daikin Industries, Ltd.
Fukoku Mutual Life Insurance Company
ITAMI SANGYO CO., LTD.
NICHIA STEEL WORKS, LTD.
ROHTO Pharmaceutical Co., Ltd.
DAINIHON JOCHUGIKU CO., LTD.
Hankyu Hanshin Holdings, Inc.
T.T CO., LTD.
Non-Destructive Inspection Company Limited.
Shionogi & Co., Ltd.
Nippon Paper Core Industrial Co., Ltd.

69

SENSHU IKEDA HOLDINGS,INC.

ANNUAL REPORT 2011

154,221
138,560
59,597
29,79928,607
17,66817,282
16,594
14,05913,996

12.94
11.63
5.00
2.50
2.40
1.48
1.45
1.39
1.18
1.17

111,000

100.0032,37523,125
9,250
9,250
9,250
9,250
4,625
4,625
4,625
4,625
2,312
2,312

28.00
20.00
8.00
8.00
8.00
8.00
4.00
4.00
4.00
4.00
2.00
2.00

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