ANNUAL REPORT

2014

Year Ended March 31,2014

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

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

Management Principle

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

Management Policy

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

CONTENTS
Message from the President …………………………… 2
We strive to become the “No. 1 Reliable Bankfor the Regional Communities and Customers”
in Japan’s leading market area. ………………………… 3
Business Strategies of The Senshu Ikeda Bank ……… 5
CSR Activities…………………………………………… 7

Business Overview of Senshu Ikeda Holdings……… 8

Business Overview of The Senshu Ikeda Bank ……… 9
Corporate Governance ………………………………… 11
Compliance Structure …………………………………… 15

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SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

Risk Management Structure …………………………… 17
Approach to Facilitation of Financing ………………… 21………………………………… 23
Business Description of the Group …………………… 25
Organization and Board of Directors ………………… 26

Corporate Information

Consolidated Financial Informationof Senshu Ikeda Holdings ……………………………… 29
Non-consolidated Financial Informationof The Senshu Ikeda Bank (Unaudited) ……………… 62

To become the “No. 1 Reliable Bankfor the Regional Communities and Customers”
I sincerely thank you for your continued support and patronage of Senshu Ikeda Holdings and the Senshu Ikeda
Bank.
With regard to financial results in the fiscal year ended March 31, 2014, on a Senshu Ikeda Holdings consolidated basis, we recorded highest ever - including sum of the each former bank prior to the merger - net incomeof ¥16.6 billion.
On a Senshu Ikeda Bank non-consolidated basis, we recorded core banking profit of ¥13.2 billion, and net
income of ¥14.7 billion.
Senshu Ikeda Tokai Tokyo Securities, which commenced operations in September of last year, also showedsteady results.
I’m pleased to say that Senshu Ikeda Holdings will mark the fifth anniversary of its founding on October 1 of thisyear.
“To serve the local communities and customers,” we have promoted basic business strategies consisting of“improved efficiency strategies,” “alliance strategies,” and “growth strategies.”
Moreover, we have formulated the “Long-Term Business Plan” toward the fiscal year 2020 in order to further
enhance growth strategies for uncertain future such as a decline of local population and economy.
In addition to the existing “basic business strategies”, the “Long-Term Business Plan” further clarifies
management challenges such as uncertain future. As a regional financial institution, we strive to maximize
corporate value and contribute to all our stakeholders by “co-existence with the region” more than ever.
Based on “community-oriented” and “customer-oriented” principles, we will strive to become “the No. 1 Relational Regional Financial Group in the Kansai Area” and “No. 1 Reliable Bank for the Regional Communities andCustomers.”
Thank you for your continued support and goodwill.
July 2014

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

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 20142

We strive to become the “No. 1 Reliable Bank for the Regional
Communities and Customers” in Japan’s leading market area.
Population and businesses of a high density equivalent to that in Metropolitan Tokyo

13.48

Total Populationof Japan126.39 million

BeijingSuzhou680

millionMetropolitan
Tokyo
12.76 million

thousand

Total Number ofBusinesses in Japan
5.76 million

Metropolitan
Tokyo
700 thousand

Shanghai(Data Source)
Population = Statistics from the Ministry of Internal Affairs and Communications (2012)
Number of businesses = Statistics from the Ministry of Internal Affairs and Communications (2012)

Advanced Traffic Network
Gateway to Asia and China
Sanda
Kyoto

Kobe
Osaka

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

Sakai

Osaka/Kobe Ports: 15.2%

Kishiwada
Nagoya Port: 9.5%
Other:
52.6%

Tokyo Port: 12.3%

Yokohama Port: 8.8%
Moji Port: 1.5% (Data source)
Trade Statistics of Japan (2012)by the Ministry of Finance

3

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

Wakayama

Four Government-OrdinanceDesignated Cities

The business areas we cover are Japan’s leading market area and have an advanced traffic network, twoPorts in Osaka and Kobe, three airports called “a gateway into Asia and China” and four government-ordinance-designated cities. The number of business offices and population in those areas are comparable withthat of Metropolitan Tokyo.
Furthermore, in addition to the existing well-balanced industrial structure, large-scale projects are currently
underway in Osaka. For example, “GRAND FRONT OSAKA” had been launched as a first stage project inthe “Umekita” redevelopment area north of Osaka Station in April 2013, and “ABENO HARUKAS,” the tallest
complex building in Japan, had been launched in the Abeno and Tennoji area in March 2014. As such,these market areas have extremely high potential power called “Regional Power” and will further grow.
In above circumstances, in order to further enhance growth strategies for uncertain future such as a declineof regional population and economy, we have formulated the “Long-Term Business Plan” toward the fiscal
year 2020, in addition to promoting our existing “Medium-Term Business Plan.” The “Long-Term BusinessPlan” has a sustainable earning model to cope with the future business environment changes.

Long-Term Business Plan – Towards Fiscal Year 2020
Strive to become the “No. 1 Relational Regional Financial Group in the Kansai Area”
No. 1 Reliable Bank for the Regional Communities and Customers[Priority Strategies]➀
Strengthen
profitability➁
Establish
Strong Company
Constitution➂
Sufficient
equitycapitalStrengthen uniqueproposal and establish“Business Model” torespond changes

Exhaustive BPR

Executing appropriate
long-term capital policy

Maximization ofmerger synergies

Management Targets for Fiscal Year 2020
Fiscal year 2013
(Actual)Fiscal year 2015
(Medium-Term Management Plan)

Fiscal year 2020
(Long-Term Management Plan)

Ordinary income¥17.5 billion¥18.5 billion or higher¥25.0 billion or higher

Income before income taxes and minority interests¥19.6 billion¥18.5 billion or higher¥25.0 billion or higher

Net income¥16.6 billion¥16.0 billion or higher¥16.5 billion or higher

Capital ratio

10.49%

Approx. 10%

Approx. 10%

Core banking profit¥13.2 billion¥21.0 billion or higher¥27.0 billion or higher

Total assets¥5,338.6 billion¥5.5 trillion or higher¥6 trillion or higher

ROA based on core banking profit (less net credit costs)

0.29%

Approx 0.35%

Approx 0.45%

Core OHR

77.7%

60% range

lower 60% level

Capital ratio

9.69%

Approx. 10%

Approx. 10%

Senshu Ikeda Holdings (Consolidated)

The Senshu Ikeda Bank (Non-consolidated)

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

4

Business Strategies of The Senshu Ikeda Bank
Improved efficiency Strategies
Achieve merger synergies and strengthening the low-cost system
Realize maximal merger synergies by resolute low-cost operations.
Strengthen the low-cost system through revision of IT investment and framework for administrative consolidation.

Alliance Strategies
As an independent regional bank, we will develop the “unique business networks without conglomerate groups.”(Local governments, domestic and overseas financial institutions, universities and research institutions, government agencies, etc.)
In addition, to meet the various needs of customers, we will utilize these high-quality business networks and offer excellent products and services.

Collaboration with Local Governments

Through efforts such as “Basic Agreements for
Business-Academia Collaboration,” we have enteredpartnerships with a total of 16 leading universities in the
Kansai region.
We will contribute to the development of local
communities through mutual exchange and stronger
business-academia collaboration in various fields
including financial support for university-launched venturecompanies, industries, business-academia research,human resources development, and community building.

Legal firms
Accountancy firms
Consultants

Japan Bank forInternational Cooperation
Japanese financial
institutions

With the conclusion of collaborative agreements with
Osaka Prefecture and Osaka City in January 2014, we
now have collaborative agreements with a total of 18
municipalities and prefectures.
Furthermore, in conjunction with these collaborative
agreements, we have established funds including“Industrial Promotion Funds” and “Energy Creation andEnergy Conservation Funds.” We will revitalize regional
communities and improve customer service by funding
local customers, developing “regional brands” andcommunicating these brands throughout Japan.

Collaboration with Universities

Experts

Financial institutions

International logistics
NIPPON EXPRESS
CO., LTD.

Nippon Export andInvestment Insurance
Tokio Marine & Nichido
Fire Insurance Co., Ltd.

Japanese companies
Overseas expansion
Client Companies
Trading companies

Local banks

Bank of China
Industrial and Commercial
Bank of China Limited
Bank of Communications
UOB

Overseas insurance
Local bank
State Bank of India(India)Local bank
UOB
(Myanmar)SuzhouPeople’s
Government

UOB(Hong Kong)

Local bankVietcombank
UOB(Vietnam)

Local bank
Metrobank(Philippines)

Local bank
KASIKORNBANKUOB(Thailand)

Local
institutions
Local bank
(Malaysia)

Agreements concluded with Osaka Institute of Technology and Setsunan
University in May 2014

Collaboration with Overseas Banks
In addition to banks in China, South Korea, and ASEAN countries, we concluded a Business Cooperation Agreement in March 2014
with “State Bank of India,” India’s largest bank.
With the conclusion of this agreement, we have expanded the number of business partnerships with local banks overseas to 10
banks in 11 countries.
We will actively support the Asia and China business of our local customers by expanding business networks in Asia.
SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

SuzhouRepresentative
OfficeKorea Exchange
Bank

Local bank

Local bankUOB
UOB(Singapore)5

Local bank

China and South Korea

ASEAN(Thailand, Indonesia, Vietnam, etc.)

Local bank
Bank Negara
Indonesia
UOB(Indonesia)

SENSHU IKEDA HOLDINGS,INC.

Three Challenging Strategies
Asia and China Business Headquarters: Enhance support for the Asia and China businessWe will support the overseas expansion and trade of local customers, “heartily”, “widely” and “concretely” throughutilizing the collaborative networks between trading companies, banks, and legal firms.
We will support our customers with useful information and services such as seminars with local governments andchambers of commerce and industry, overseas missions, and import product expositions.

Advanced Technology Business Supporting Headquarters: Promote of industrial-academia-government collaboration and support for advanced technology companies
We will support growing companies with advanced technologies, start-up business, and the creation of new industries by means such as utilizing and expanding
close networks between countries, local governments, universities, and public research (support) organizations, etc. and operating grant program systems (NewBusiness Grant Program, Consortium-based Research & Development Grant Program) and technology matching to companies applying for our grants.

Private Banking Headquarters: Promote private banking business
Our experienced “private bankers” provide our customers with “custom-made” services in order to meet thevarious needs such as business succession, asset succession, fund management, M&As, loan arrangement
and investment trust agent operations from a “professional” “long-term” and “wide-range” perspective.

Lease and Credit

Life and Non-life Insurance
Public Assistance Agencies
The Kansai Bureau of Economy, Trade and Industry
National Institute of Advanced Industrial Scienceand Technology
Organization for Small & Medium Enterprises andRegional Innovation, JAPANJapan International Training Cooperation Organization

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

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

Securities Companies andInvestment Companies
Securities companies
Investment companies:
Domestically and internationallyManagement support,
technology
development support

Product provision(Insurance)

Asset based lending,card, leasing
Product provision(Investment trusts)

Senshu Ikeda
Bank GroupBanks

Total support in alliance
Personnel exchange, personnel training
Investment promotion, coordinated investment

Think Tank
Proposals and consulting

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

Responding to sophisticated needs
The business-academia collaboration

Megabanks
Development Bank of Japan Inc.
Japan Bank for International Cooperation
The Shoko Chukin Bank, Ltd.
Other regional banks

Collaboration on environment and energy policies
Collaboration for regional industrial promotion
Experts

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,
Ryukoku University, Ritsumeikan University,
Osaka Institute of Technology and Setsunan University

Local governments

Lawyers
Accountants
Tax accountants

Osaka Prefecture, Osaka-city, Sakai-city, Mino-city, Itami-city,
Kishiwada-city, Toyonaka-city, Kawanishi-city, Ikeda-city, Suita-city,
Settsu-city, Izumi-city, Kaizuka-city, Izumisano-city, Matsubara-city,
Takarazuka-city, Takaishi-city, and Kumatori-town

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

6

CSR Activities
Senshu Ikeda Holdings promotes CSR Activities
Based on management principle, we will strive to become “a financial groupthat is relied on the regional customers and the most trusted by the regional communities”.
We will also live up to the expectations of all stakeholders
such as customers, regional communities,
shareholders(investors) and employees through business activities.
We will aggressively promote CSR activities“permanently” and “more deeply than ever”.
CSR: Corporate Social Responsibility

Contribute to the economy,
community andenvironment

Hospitality basedon the stageof life

Customers

Management
principle

Regional
communities

To become a financial group that is relied on the regionalcustomers and the most trusted by the regional communities

Live up to the expectations of all stakeholders
through funding regional communities and customers

Shareholders
andinvestors
Sustain steady dividend
Consideration of shareholder
return ratio, etc.

7

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

Employees

Improve job satisfaction
Establish ideal working
environments andSupport humnan
resource development
Work-life balance

SENSHU IKEDA HOLDINGS,INC.

Business Overview of Senshu Ikeda Holdings
Consolidated

Non-consolidated■ Consolidated ordinary income / Consolidated net income (¥ million)■ Consolidated capital ratio (domestic standard)

Consolidated ordinary income

17,551

18,000

By the old standards

Consolidated net income

16,604

12.00

10.92

10.39

(%)

By the new standards*
10.49

15,00012,806
12,0008.00

10,905

10,102

9,000

4.00

6,000

3,810
3,000
0

0

March 2012

March 2013

Business Environment

March 2014

As the Government and the Bank of Japan have been powerfully
promoting economic and fiscal policies radically different from thosein the past both in quality and quantity, with a view to materializing
earlier breakaway from the deflation and economic renewal, theJapanese economy in the consolidated fiscal year under review
showed a moderate recovery trend, in which individual consumption
remained solid thanks to an improvement in employment and income
situation while corporate earnings also continued to be on a recovery
track.
With respect to prices, domestic corporate goods prices showed
gradual increase, on the back of the trends in international commodities market and foreign exchange. Meanwhile, consumer prices(excluding fresh food) turned to a positive figure compared to theprevious fiscal year and moved within the positive range, on the backof a rise in electricity price and solid individual consumption.
In the financial markets, as monetary base remarkably expanded
thanks to the qualitative as well as quantitative monetary easing by
the Bank of Japan, the unsecured overnight call rate stayed at a level
below 0.1%.
Referring to long-term interest rate, rate of return on 10-year
Japanese government bonds once dropped to record low at 0.315%
before reaching the level close to 1% in May amid recurring wild
fluctuations, and subsequently showed a declining trend hovering
between 0.6% and 0.65% at the end of March.
Nikkei Stock Average price started to climb, helped by factors
including monetary easing by the Bank of Japan, high stock prices in
the U.S. stock market, and further progress of the yen depreciation,
pushing the Nikkei Stock Average up to the level close to the 16,000
yen mark in May. The Nikkei Stock Average, however, dropped to thelevel around the 12,500 yen mark in June, adversely affected by thestagnant world stock markets among others, before becoming
buoyant again in September mainly due to Tokyo’s selection as hostof the 2020 Olympic Games and the yen’s continued downward
trend, to reach the level in excess of the 16,000 yen mark at the endof December. Subsequently, it was dragged into yet another downward phase primarily by a sign of yen appreciation, and reached thehigher 14,000-yen range at the end of March.

End of March 2012 End of March 2013 End of March 2014

* Calculated in compliance with the new capital ratio regulation (Basel III) from the end of March 2014.

Business PerformanceWith regard to consolidated performance of Senshu Ikeda HoldingsGroup (“the Group”) in the fiscal year under review, consolidated
ordinary revenue decreased ¥6,703 million from the previous fiscal
year to ¥104,855 million. This was mainly due to a decrease ininterest income by decline in loan rate, and other operating income
such as gains on sales of debt securities, partially offset by anincrease in fees and commissions income such as investment
product sales at the Senshu Ikeda Bank and other income such as
gain on sales of equity securities.
Consolidated ordinary expenses decreased ¥11,449 million fromthe previous fiscal year to ¥87,303 million due to a decrease ininterest expenses by decline of deposit rate, general and administrative expenses by cost reduction, and other expenses such as net
credit costs at the Senshu Ikeda Bank.
As a result, consolidated ordinary income increased ¥4,745
million from the previous fiscal year to ¥17,551 million.
Consolidated net income, increased ¥6,502 million from theprevious fiscal year to record-high ¥16,604 million. This was mainly
due to ¥2,291 million in gain on contribution of securities to retirement
benefit trust as extraordinary income, and ¥2,521 million as total
income taxes.
The Group’s consolidated capital ratio still sustained as high as
10.49% after the adoption of the new capital ratio regulation (Basel
III), which is well above the 4% level required of banks subject todomestic standards.

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 20148

Business Overview of The Senshu Ikeda Bank
Consolidated■ Consolidated ordinary income / Consolidated net income (¥ million)
Consolidated ordinary income

Consolidated net income

17,57018,000■ Consolidated capital ratio (domestic standard)
Old standards

New standards*

12.00

16,678

10.72

(%)

10.96

10.35

15,00012,74912,00010,792

8.00

10,095

9,000

6,000

4.00

3,770
3,000
0

March 2012

March 2013

End of March 2012 End of March 2013 End of March 2014

March 2014

* Calculated in compliance with the new capital ratio regulation (Basel III) from the end of March 2014.

Non-consolidated■ Core banking profit / Banking profit
Core banking profit(¥ million)
Banking profit

24,46025,000■ Ordinary income / Net income(¥ million)

Ordinary income

Net income

14,74615,00013,517

20,881
20,00015,00018,08914,031

9,492
13,163

13,2569,000

10,000

6,000

5,000

3,000

0

8,075

7,716

2,050

0

March 2012

March 2013

March 2014

Business Performance (Consolidated)

With regard to consolidated performance of the Senshu
Ikeda Bank in the fiscal year under review, consolidated
ordinary revenue decreased ¥7,282 million from theprevious fiscal year to ¥104,315 million. This was mainly
due to a decrease in interest income by decline in loanrate, and other operating income such as gains on salesof debt securities, partially offset by an increase in fees
and commissions income such as investment productsales and other income such as gain on sales of equity
securities.
Consolidated ordinary expenses decreased ¥12,104
million from the previous fiscal year to ¥86,744 million.
This was mainly due to a decrease in interest expenses
by decline of deposit rate, general and administrative
9

12,000SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

March 2012

March 2013

March 2014

expenses by cost reduction, and other expenses suchas net credit costs.
As a result, ordinary income increased ¥4,821 million
from the previous fiscal year to ¥17,570 million.
Consolidated net income increased ¥6,583 million fromthe previous fiscal year to ¥16,678 million This was
mainly due to ¥2,291 million in gain on contribution of
securities to retirement benefit trust as extraordinary
income, and ¥2,531 million of total income taxes.

SENSHU IKEDA HOLDINGS,INC.

Non-consolidated■ Non-consolidated capital ratio (domestic standard) (%) ■ Deposits
Old standards(¥ billion)

Corporate

New standards*
4,800

12.00

10.66

9.91

9.69

4,407.7

4,512.8

20.4

200

169.6
136.4

111.8

150

893.3

66.7

100

3,600

12.1

12.8

3.9

4.00

3,619.5

3,200

End of March 2012 End of March 2013 End of March 2014

50

Consumer

3,527.4

90.0

3,500

33.7

3,617.0

32.2

81.8

March 2012 March 2013 March 2014(¥ billion)■ Balance and ratio of credits disclosed under
the Financial Revitalization Law(¥ billion)

Business rehabilitation subsidiaries

3,596.7

90.7

0End of March 2012 End of March 2013 End of March 2014

■ Loans and bills discounted (¥ billion) ■ Housing loans
Corporate

3,662.8

3,566.8

0* Calculated in compliance with the new capital ratio regulation (Basel III) from the end of March 2014.

Non-consolidated
1,800

Business rehabilitation subsidiaries

100

86.1
1,720.2

3,000
2,500

Senshu Ikeda Tokai Tokyo Securities

242.6

954.5

840.8

Life insurance sales

214.7

4,400

4,000

Public bonds sales

250

4,617.3

8.00

0■ Investment product sales (¥ billion)
Investment trusts sales

Individual

1,768.6

1,806.0

1,852.8

1,700

1,721.0

1,700.3

80

64.7

20.3

20.3

60
65.8

2,000

1,600

1,758.8

1,756.9

1,731.9

50.8

40

1,500
1,000

71.1

20

1,500

500

0
(Including two business rehabilitation subsidiaries)

End of March 2012 End of March 2013 End of March 2014

00(Including two business rehabilitation subsidiaries)

End of March 2012 End of March 2013 End of March 2014

End of March 2012 End of March 2013 End of March 2014

Business Performance (Non-consolidated)

With regard to non-consolidated performance of theSenshu Ikeda Bank in the fiscal year under review,
ordinary revenue were ¥92,884 million. This was mainly
due to a decrease in interest income ,partially offset by
an increase in fees and commissions. Ordinary
expenses were ¥79,367 million, due to decreases ininterest expenses, general and administrative expenses
and net credit costs.
As a result ordinary income increased ¥4,025 million
from the previous fiscal year to ¥13,517 million, and corebanking profit increased ¥93 million from the fiscal year
2012 to ¥13,256 million, while banking profit decreased¥6,371 million to ¥18,089 million.
Net income for the fiscal year increased ¥6,671
million to ¥14,746 million.

NPL ratio

1.81%

2.37%

1.95%

The balance of deposits as at the end of March 2014
increased ¥104.5 billion from the end of March 2013 to¥4,617.3 billion. Due to the launch of Senshu Ikeda Tokai
Tokyo Securities, investment trusts sales and assets
under management increased.
The balance of loans and bills discounted including
two business rehabilitation subsidiaries as at the end of
March 2014 increased ¥20.3 billion from the end of
March 2013 to ¥3,617.0 billion.
The balance of credits disclosed under the Financial
Revitalization Law as at the end of March 2014 including
two business rehabilitation subsidiaries, decreased¥14.9 billion from the end of March 2013 to ¥71.1 billion.
As a result, NPL ratio as at the end of March 2014
declined 0.42% from the end of March 2013 to 1.95%.

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201410

Corporate Governance

The Company is a holding company which has subsidiaries such as
the Senshu Ikeda Bank. In light of the public nature of our operation
as a regional financial institutions group, the Company is focused onan adequate development and maintenance of corporate governancestructure, which is one of the crucial management tasks.
Under the policy, the Company aims to be the trustworthy andindispensable institution for all of our stakeholders including customers and employees, as well as shareholders and investors. To thisend, the Company adopts the basic management policies focused oncompliance (with laws and regulations,) risk management and management transparency through emphasizing contribution to theregional communities, and sustaining management soundness andindependence.

Outline of Corporate Governance Structure
The Company has adopted a corporate governance structure forsustainable enhancement of its corporate value through reinforcing
supervision of management by electing the outside directors andcooperating with the Audit & Supervisory Board.
Specifically, directors who are familiar with banking business- involving complex and sophisticated management decisions - supervise business execution of representative directors, while audit &supervisory board members audit business execution of directors
through attendance to important meetings and inspection of critical
documents. The Company reinforces its corporate governancestructure through outside directors and outside audit & supervisoryboard members who possess well-seasoned characters and insights
presenting meetings including the Board of Directors and expressing
their opinions actively.
Furthermore, with the purpose to enhance transparency andobjectivity of management, the Company has established an Advisory
Board as consultative body to the Management Committee, for advice
from outside experts on the issues including critical management
strategies and agenda, latest issues in the financial industry and othermatters concerning general management of the Company.
The Company has concluded liability limitation agreement withoutside directors and outside audit & supervisory board members.
Under this agreement, their liabilities to the Company are restricted tothe minimum level as required by the applicable laws and regulations.
Corporate governance functions within the Company
The Board of Directors
The Board of Directors that comprises eleven directors (including
one outside director) is responsible for making decisions on criticalmanagement issues while receiving relevant reports from within thecompany, and supervising the business execution of directors andexecutive officers under the rules of the Board of Directors. The
Board of Directors is held once a month in principle, attended also
by audit & supervisory board members, to make decisions in due
consideration of compliance and risk management.
The Audit & Supervisory Board
The Company has adopted a audit & supervisory board member
system. Under this system, the Company ensures transparency
through appointing two outside audit & supervisory board membersof the four audit & supervisory board members in all. Each audit &supervisory board member audits business execution of directors
through attendance to important meetings including the Board of
Directors and the Management Committee, inspection of critical
documents and other means, according to the auditing guidelines
and audit schedule decided by the Audit & Supervisory Board.
Outside audit & supervisory board members are qualified with high11

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014degree of integrity along with superior insight and capability, as well
as expertise and hands-on experience in respective area of specialty, providing advice on management from diversified points ofview.
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
the authorities 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 audit & supervisoryboard members, to make decisions in due consideration of compliance and risk management.
Internal control, management and auditing functions
For the purpose of internal control, management and auditing
functions, the Company has established Corporate Planning
Division, General Risk Management Division and Internal Audit
Division.
The Corporate Planning Division is the department responsible
for the coordination of internal control, for the purpose of Companies
Act and Financial Instruments and Exchange Act. The General Risk
Management Division is responsible for compliance managementthat serves as a linchpin for internal management. Measures forcompliance are 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 reform of 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 forcoordinated management of the overall internal audit work acrossthe Group according to the annual audit plan approved by the
Board of Directors, while it audits subsidiaries on its own or on a
joint basis with the internal audit department of each subsidiary as
appropriate, and provides specific instruction and advice to improvebusiness operation at concerned subsidiary.
Accounting auditors
Mr. Kenichiro Arai, Mr. Hirokazu Tanaka and Ms. Mayumi Ikai are thecertified public accountants that conducted the latest accounting
audit of the Company, while accounting auditors that conduct auditsof 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 theaudit of the Company for longer than seven years on continuous
basis, hence no statement in respect of the number of continuous
years of service engaged in the audit of the Company.
Assistants for the accounting audit of the Company are fourteen
certified public accountants and ten others.
Basic approach to the internal control system and its status ofdevelopment
The Company as well as the Group is developing a structure necessary to ensure the adequacy of operation based on the following
concepts through aiming to be a financial group which respects
personal relationship, sincerity and friendliness and become the most“trustworthy” for customers.

SENSHU IKEDA HOLDINGS,INC.

(1)	Structure to ensure that directors and employees execute businessin compliance with laws and regulations as well as the articles ofincorporation
The Company and the Group focus on compliance with laws andregulations (hereinafter “compliance”) as one of the most criticalmanagement task. The Company and the Group also set out thecode of ethics along with the code of conduct to ensure that directors and employees behave in compliance with laws andregulations as well as the articles of incorporation and othercompany rules, while setting out basic rules of compliance underwhich overall compliance policies and specific measures are
discussed at the Compliance Committee.
To ensure the above compliance implementation, the Company and the Group appoint directors who are responsible forcompliance. In addition, the General Risk Management Division
coordinates compliance arrangement across the Company and
the Group, while conducting education and training for directors
and employees by developing compliance program and compliance manual, and arranging compliance seminars.
Furthermore, a hot line has been set up and managed inorder to allow employees to directly provide information about anyquestionable conducts in light of laws and regulations.
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 and organizations thatthreaten the order and safety of the community, while making
every effort to eliminate their involvement in any trading activities.
The Company and the Group have also taken every measure toeliminate 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 their security and topromote their convenience in an effort to implement a thorough‘customer first policy.’(2)	Structure for the preservation and management of information
concerning the directors’ business execution
The Company and the Group 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 and kept
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 stablecorporate earnings, the Company and the Group 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 and operational risk, and defined the department
responsible for the management of each category of risk, while
establishing the Risk Management Committee to monitor the
status of management of each such category.
Meanwhile, the Company and the Group have set out rules ofrisk management, with the purpose to minimize the financial loss
along with loss of confidence resulting from the crisis event, andto 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 Committeewith the purpose to enable directors to efficiently execute theirbusiness, while setting out management objectives and developing management plans.
The Management Committee discusses beforehand the agenda of the Board of Directors, to facilitate decision-making 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 of such policies.
The Management Committee also defines the headquarters
under the command of each director, along with the authority andresponsibility involved, while developing and maintaining a
structure for efficient business execution by utilizing IT.
(5)	Structure to ensure adequacy of operation at the Group thatcomprises the Company and the Group companies
The Company regards all subsidiaries and affiliated companies as
one group under the flag of Senshu Ikeda Holdings. Thus eachmember company of the Group runs its operation through developing an adequate internal management structure according to
its scale and nature of operation under the adequate guidance of,and in coordination with the Company.
The Company, as a responsible party for the management of
the Group, develops a structure in which it receives necessary
reports from, and consults business with its subsidiaries andaffiliates.
(6)	Arrangement for employing staff at the request of audit &supervisory board members as their assistants, as well as thearrangement to ensure such assistants’ independence fromdirectors
In order to support audit & supervisory board members’ businessexecution, the Company and the Group employ audit & supervisory board members’ staffs as secretariat for the Audit &Supervisory Board. Such audit & supervisory board members’
staffs receive instructions from the Audit & Supervisory Board fortheir business execution, while their personnel change andevaluation duly reflect the opinions of the Audit & Supervisory
Board.
Thus the Company and the Group ensure their independence
from directors.
(7)	Structure to facilitate reporting from directors and employees toaudit & supervisory board members and other arrangement toensure that audit & supervisory board members are adequately
informed
Directors and employees shall immediately report to audit &supervisory board members on matters that could have significant
impact on the Company as well as the Group, or any other matters
as necessary, in addition to matters legally required to be reported.
To reinforce this arrangement, the Company and the Groupdevelop a structure that audit & supervisory board members areallowed to attend important meetings such as the Board of
Directors, the Management Committee, the Compliance Committee, the Risk Management Committee and the ALM Committee.
(8)	Other structure to ensure that audit & supervisory board members
conduct effective audits
Audit & supervisory board members hold meetings to exchange
opinions with representative directors, internal audit division andaccounting auditors.
Audit & supervisory board members attend important meetings such as the Board of Directors, the Management Committee,
SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201412

the Compliance Committee, the Risk Management Committee andthe ALM Committee, in an effort to find out various problems theyneed to address in the execution of their duties.

Status of Internal Audits and Audits by Audit & Supervisory Board Members
Internal audits
The Company has established the Internal Audit Division that
conducts internal audits based on the basic rules of intra-groupaudits, set out to provide objectives and guidelines of internal
audits. The Company develops effective internal audit structure that
has independence and expertise in order to ensure soundness andadequacy of operation. The Company also inspects and evaluates
adequacy and effectiveness of the risk management and internal
control practices, and makes recommendations as appropriate to
the senior management of the Company on ways to improve andrectify questionable areas. Thus the Company’s internal audit
guidelines facilitate effective achievement of management objectives including the improvement of the Group’s internal management
structure and the enhancement of its enterprise value.
The Internal Audit Division of the Company, which comprises
nine members who have been seconded from banking subsidiary(three full-time members and six members serving concurrently withother posts; as of March 31, 2014), conducts 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 thebanking subsidiary as appropriate under the relevant auditing
contracts. Results of these audits are regularly reported to the Boardof Directors and so on.
Audits by audit & supervisory board members
Each audit & supervisory board member audits the businessexecution 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 audit & supervisory board
members” and the “guidelines for implementing audits of internal
control system,” generally subject to the auditing guidelines andaudit plan decided by the Audit & Supervisory Board, as an independent body mandated by shareholders.
Audit & supervisory board members and accounting auditors
are performing their audit duties efficiently and effectively throughestablishing close mutual cooperation by exchanging opinions
about various auditing issues. In addition, working together withaudit & supervisory board members of banking subsidiary, audit &supervisory board members and internal audit division are also
performing their audit duties efficiently and effectively throughestablishing close mutual cooperation by audit & supervisory board
members’ attendance to internal audits and exchanging opinions
about various auditing issues.
The Company has made every effort for efficient and effective
implementation of all audits including internal divisions, audit &supervisory board members, and accounting auditors through close
cooperation and communication between the departments andfunctions concerned. The Company has also made effort to audit
efficiently and effectively through receiving various reports from theinternal control division.

Outside Directors and Outside Audit & Supervisory Board Members
The Company has one outside director and two outside audit &supervisory board members. Although we have no specific appointment criteria or policies to evaluate the independence of outside

13

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

directors and outside audit & supervisory board members, appointment is made in reference to each candidate’s business relationshipwith the Company or its subsidiaries, along with the assessment
criteria of the independence of independent officers provided byexchanges.
Outside director, Kazuo Hiramatsu, serves as a trustee of Kwansei
Gakuin.
Between he or Kwansei Gakuin, and the Company or the Group,
there is no interest in terms of personnel, capital or other relationship,
except ordinary banking transactions with the Senshu Ikeda Bank,
Ltd. He also concurrently serves as an officer at Sumitomo ElectricIndustries, Ltd. and ShinMaywa Industries, Ltd. as well as DAIDO LIFE
INSURANCE COMPANY. The Senshu Ikeda Bank has ordinarybanking transactions with the first two, capital relationship with thelast. He is an independent officer without any potential conflict ofinterest with general shareholders as required to be designated by
Tokyo Stock Exchange. As a director of the Company, he performs his
duties by supervising the execution of business, based on his extensive experience in educational corporations and in business. He
serves concurrently as an outside director of the Company’s whollyowned subsidiary, The Senshu Ikeda Bank.
Outside audit & supervisory board member, Toshiaki Imanaka, isan independent officer without any potential conflict of interest withgeneral shareholders, as required to be designated by Tokyo Stock
Exchange, and has no interest in the Company or the Group in termsof personnel, capital or other relationship, except ordinary banking
transactions with the Senshu Ikeda Bank, Ltd. He also concurrently
serves as a farm member of Kansai Law and Patent Office, which is incontractual relationship with the Senshu Ikeda Bank as the bank’s
legal advisor.
Qualified as an attorney, he has good deal of knowledge infinance and accounting as has been earned through his hands-on
experience in corporate accounting as reorganization trustee, and is
performing his duties as an audit & supervisory board member fromhis professional standpoint.
Outside audit & supervisory board member, Toshiaki Sasaki,
serves as a president of Senshu Gakuen.
Between he or Senshu Gakuen, and the Company or the Group,
there is no interest in terms of personnel or other relationship, except
ordinary banking transactions with the Senshu Ikeda Bank, Ltd. Also,
he holds 26,360 shares of the common stock of the Company.
He performs his duties as an audit & supervisory board member
based on his wealth of experience and broad insight earned over theyears as an audit & supervisory board member in financial institutions.
The Company has appointed one outside director out of elevendirectors while two outside audit & supervisory board members out offour. Thus the Company has developed a structure sufficient tocontinuously enhance its enterprise value through such appointmentof outside directors and outside audit & supervisory board members.
Outside directors receive reports about the status of audits byaudit & supervisory board members, 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 audit &supervisory board members receive reports from full-time audit &supervisory board members about the status of audits by audit &supervisory board members, internal audits and accounting audits, aswell as the status of internal control from the internal control division.
Both outside directors and outside audit & supervisory board members give recommendations and advice in return for these reports.

SENSHU IKEDA HOLDINGS,INC.

Corporate governance structure of the Group[Senshu Ikeda Holdings](As of the end of July, 2014)

General Meeting of
Shareholders
Appointment/Removal

Accounting Auditors
Accounting audit

Appointment/Removal
Joint coordination
Reporton Audit

Reporton Audit

Board of Directors

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

Supervision

Audit & Supervisory Board
Audit

Joint
coordination

Reporton Audit

Representative Directors

Advisory Board

Appointment/RemovalInternal Audit Division

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

Bringing discussed
issues to meetings/
ReportingManagement Committee

Directors/Executive Officers
Internal audit

Instruction/
Direction

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

General Risk Management Division[Senshu Ikeda Tokai Tokyo Securities]
General Meeting of
Shareholders

General Meeting of
Shareholders
Audit & Supervisory Board

Board of Directors

Board of Directors

Management Committee

Audit & Supervisory Board(Risk Management Committee)

Management Committee(Compliance Committee)(Compliance Committee)(ALM Committee)(Facilitation of Financing Promotion Committee)

Branches

Head Office

Branches

Head Office

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201414

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

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

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

Instruction

Compliance Committee(Administrative Office: General Risk Management Division)

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

Instruction

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

Consultation /Reporting

Instruction

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

15

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

SENSHU IKEDA HOLDINGS,INC.

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

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

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201416

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

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

Risk buffer: Provisions against unpredictablerisks and risks associated withaffiliated companies

Risk buffer
Credit Risk
Core
capital baseRisk
capitalto beallotted

Credit Risk
Market Risk
Market Risk
Operational
Risk

n Integrated Risk Managementl Integrated risk management
Integrated risk management refers to the process toadequately manage the risks that financial institutions
17

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

Financialresource forallocation

Allocatablerisk capital

Risk capital
to beallocated

Operational
Risk
Risk amountSENSHU IKEDA HOLDINGS,INC.

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

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

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

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

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

n Operational Risk Management
Operational risk, as identified by the Group, is the risk of
suffering losses from the inappropriate business activityof the Group - including its employees-, systems, orexternal premises.
The Group has set a rule for operational risk management and classified the risks into the six categories asfollows; (1) administrative risk, (2) information asset(system) risk, (3) tangible fixed asset risk, (4) personnel
risk, (5) legal risk, and (6) reputation risk.
Furthermore, the Group identifies and evaluates all
risks associated with new products and services before
they are actually developed and provided, for the purpose of adequate risk management. Besides, the Groupmanages customer information sufficiently and ensuresmanagement soundness when outsources certain business operation.
l Administrative risk management
Administrative risk, as identified by the Group, is therisk of suffering losses from administration, fraud,
SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201418

accidents and other risks that the Group’s operations
will not be carried out as intended.
The Group prescribes detailed rules on administrative procedures and strives to prevent accidents
through doing the administration promptly and accurately, so that the customer can enter into transactions
with the Group without any concern. Meanwhile, theGroup makes every effort to eliminate administrativerisk by measures such as review of the administrative
procedure from identification of potential risks throughthe analysis of administrative processes.
l Information asset (system) risk management
Information asset (system) risk, as identified by theGroup, is the risk of suffering losses due to loss, alteration, unauthorized use, leakage of information, as wellas to system defects caused by natural disasters or
breakdowns.
In consideration of the fact that its business operations are supported by various computer systems, theGroup ensures the reliability and security of systems
and has established back-up systems and structuresin case of emergency.
The Group is also working to establish appropriate
operation and management systems to prevent theleakage of information and unauthorized access to its
systems through encoding of data and strengtheningof access authority management.
l Tangible fixed asset risk
Tangible fixed asset risk, as identified by the Group, isthe risk of suffering losses associated with damage ofbuilding and equipment or deterioration of working
environment as a result of disasters or poor asset management.
The Group is preparing for disaster through conducting quake resistance tests and implementing
countermeasures against power failures in order toensure business continuity in the event of emergencies.
l Personnel risk
Personnel risk, as identified by the Group, is the risk of
suffering losses associated with the delay of failing insuccession of expertise within the Group, as a result ofdrain or loss of key staff, or degradation of morale.
The Group is striving to develop working environment to enable each employee to fully exert ability,
while helping him or her to improve their skills.
19

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014l Legal risk management
Legal risk, as identified by the Group, is the risk of
suffering losses from violations of laws and regulations,as well as inappropriate responses to changes invarious systems.
The Group strives to prevent the occurrence oflegal risk and to reduce the risk itself. To this end, theGroup has established the General Risk Management
Division to collect information concerning legal matters, and to manage legal risk identified from suchinformation, as well as appropriately responds to thelegal risk.
l Reputation risk management
Reputation risk, as identified by the Group, is the riskof suffering losses arising from deterioration of theGroup’s reputation due to circulation of unfounded
rumors or due to inadequate responses of the Group
concerning the facts.
The Group works to avoid reputation risk by disclosing information proactively thorough increases thetransparency of its management, taking into consideration the crucial influence on the management of theGroup.

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

SENSHU IKEDA HOLDINGS,INC.

The risk management structure of the Group(As of the end of July, 2014)

Senshu Ikeda Holdings
Board of Directors

Audit & Supervisory Board
Crisis Management Headquarters

Management Committee

Supervising
division

Type of risks

Responsible
divisions

ALM Committee

Risk Management Committee

General Risk Management Division

Credit Risk Market Risk

Funding
Liquidity
Risk

Operational Risk
Administrative
Risk

Information
Asset(system) Risk

General Risk Management Division

Divisions in chargeof operating
and managing

Personnel
Risk

Legal Risk

Reputation
Risk

Personnel and General
Affairs Division

General Risk
Management DivisionCorporate Planning
Division

Tangible Fixed
Asset Risk

Internal Audit Division

Committee

Banking subsidiary and outsiders

Direction of basic policies, etc.

Administration and management

Reporting on status of risk management

Consultation on risk management

The Senshu Ikeda Bank
Audit & Supervisory Board

Board of Directors

Crisis Management Headquarters
Management Committee

Supervising
division

Type of risks

Responsible
divisions
Divisions in chargeof operating
and managing

ALM Committee

Risk Management Committee

Risk Management Division

Credit Risk Market Risk

Funding
Liquidity
Risk

Risk Management Division

Operational Risk
Information
Asset(system) Risk

Tangible Fixed
Asset Risk

Personnel
Risk

Legal Risk

Reputation
Risk

Operations Management
Division

General Affairs
Division

Personnel Affairs
Division

Risk
Management
Division

Corporate
Planning Division

Administrative
Risk

Internal Audit Division

Committee

Each division of Headquarters, each branch, affiliates and outsiders

Senshu Ikeda Tokai Tokyo Securities

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201420

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

l Organizational structure(1)	With the purpose to develop a management structurenecessary to supply facilitation of financing (hereinafter “Facilitation of Financing Management”) under the
Policy, the Bank establishes the Facilitation of Financing Promotion Committee along with the Facilitation of
Financing Manager to check whether Facilitation of
Financing Management is effectively working.
(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 the Risk
Management Division to the Facilitation of Financing
Manager. Under the Facilitation of Financing Promotion Committee, the Manager coordinates the overallbusiness in respect of Facilitation of Financing Management such as instructions to the division
responsible for Facilitation of Financing Management,
and drawing up of the rules governing facilitation offinancing, with the purpose to ensure adequacy,
sufficiency and effectiveness of Facilitation of Financing Management.
(4)	The Solutions Division is responsible for Facilitation of
Financing Management. The Solutions Division engages in the adequate operation, examination andimprovement of Facilitation of Financing Management
under the command of the Facilitation of Financing
Manager through gathering information necessary for
Facilitation of Financing Management.

System for accepting consultation of facilitation of financing

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

Reporting andconsultation

Facilitation of Financing
Promotion Committee
Boardof
Directors

Deliberation

Facilitation of Financing Officer
Facilitation of Financing Manager

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

Sincere andadequate
respondence

Customers

Over-the-counter Consultation Service

Support andinstruction

Toll-free Consultation Service

Divisions managing Facilitation of Financing
Divisions associated with Facilitation of Financing
Smooth financing
Appropriate explanations to customers
Dealing with complaints and consultations appropriately
Support in improving management
Support in restructuring
Personnel training
Analysis and improvement of management structure

Instructions
Management
Committee[Consultation Service]Consultation, application and complaints

Toll-free Consultation Service
Repayment Consultation Approach

Sincere and adequate respondence

Coordination
Businesstransactions, etc.

21

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

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

Reporting

Audit &
Supervisory
Board

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

ReportingPublicAuthorities

SENSHU IKEDA HOLDINGS,INC.

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

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

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

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

tions.
(2)	In the cases that customers have transaction withother financial institutions as well as the Bank or withJapan Housing Finance Agency, we will, upon customers’ approval, strive to make arrangements incoordination with the other financial institutions inorder to help to reduce the burden of repayment.
SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201422

Corporate Information
Corporate Data (As of the end of July, 2014)
Senshu Ikeda Holdings, Inc.
Establishment: October 1, 2009
Location:18-14 Chayamachi, Kita-ku, Osaka-City, Osaka 530-0013, Japan
Phone:
81-(0)6-4802-0181
URL:
http://www.senshuikeda-hd.co.jp
Share Capital:¥79.8 billion
Business Activities: Management and other related operations of banks and affiliates
whose shares can be held in accordance with the Banking Act
and other related operations.
Number of Employees: 95
Stock Listing:Tokyo Stock Exchange

The Senshu Ikeda Bank, Ltd.
Establishment:

September
1, 1951
18-14 Chayamachi, Kita-ku, Osaka-City, Osaka 530-0013, Japan
Location:
Phone:
81-(0)6-6375-1005
URL:
http://www.sihd-bk.jp
Share Capital:¥50.7 billion
Deposits:¥4.6173 trillion
Loans:¥3.5848 trillion
Number of Branches: 139
Number of Employees: 2,624

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

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

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

Senshu Ikeda Tokai Tokyo Securities Co.,Ltd.
Establishment: January 30, 2013
Location:18-14 Chayamachi, Kita-ku, Osaka-City, Osaka 530-0013, Japan
Phone:
81-(0)6-6485-0031
URL:
http://www.sittsec.co.jp
Share Capital:¥1.25 billion
Number of Branches: 3
Number of Employees: 67

23

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

SENSHU IKEDA HOLDINGS,INC.

Major Shareholders (As of March 31, 2014)
1. Common stock
Name

Number of Shares Owned (Thousands)

Japan Trustee Services Bank, Ltd. (Trust Account) *1

Proportion of Total Shares (%)

50,38721.13

18,887

7.92

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

11,869

4.97

The Senshu Ikeda Bank Employees’ Shareholders Association

4,700

1.97

Mizuho Corporate Bank, Ltd.

4,192

1.75

The Master Trust Bank of Japan, Ltd. (Trust Account)*1

ITAMI SANGYO CO., LTD.

3,692

1.54

OBAYASHI CORPORATION

3,318

1.39

Japan Trustee Services Bank, Ltd.(Trust Account 4G)*1

2,312

0.96

Tokio Marine & Nichido Fire Insurance Co., Ltd.

2,211

0.92

Hankyu Hanshin Holdings, Inc.

2,100

0.88

*1: These shares do not disclose the names of beneficiaries.

2. Second-class preferred stock
Name

Number of Shares Owned (Thousands)

Proportion of Total Shares (%)

OC FINANCE CORPORATION

6,475

28.00

Daikin Industries, Ltd.

4,625

20.00

Fukoku Mutual Life Insurance Company

1,850

8.00

ITAMI SANGYO CO., LTD.

1,850

8.00

NICHIA STEEL WORKS, LTD.

1,850

8.00

ROHTO Pharmaceutical Co., Ltd.

1,850

8.00

DAINIHON JOCHUGIKU CO., LTD.

925

4.00

Hankyu Hanshin Holdings, Inc.

925

4.00

T.T CO., LTD.

925

4.00

Non-Destructive Inspection Company Limited.

925

4.00

Shionogi & Co., Ltd.

462

2.00

Nippon Paper Core Industrial Co., Ltd.

462

2.00

Number of Shares Owned (Thousands)

Proportion of Total Shares (%)

3. Third-class preferred stock
Name

Development Bank of Japan Inc.

1,500

20.00

Aozora Bank, Ltd.

1,500

20.00

DAIDO LIFE INSURANCE COMPANY

1,500

20.00

ITAMI SANGYO CO., LTD.

500

6.66

NEC Capital Solutions Limited

500

6.66

IBJ Leasing Company, Limited

500

6.66

SHIMA SEIKI MFG., LTD.

500

6.66

Sky Co., LTD.

250

3.33

Nankai Electric Railway Co.,Ltd.

250

3.33

Nihon Kolmar Co.,Ltd.

250

3.33

Fuyo General Lease Co.,Ltd.

250

3.33

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201424

Business Description of the Groupn Organizational Chart of the Group (As of the end of July, 2014)
The Senshu Ikeda Bank, Ltd.

Sub-branches: 5
Banking services

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

Leasing services● Sengin General Leasing Company Limited● Senshu Ikeda Guarantee Co., Ltd.

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

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

Other services● Senshu Ikeda Finance Co., Ltd.

(Note:● indicates consolidated subsidiaries and○ indicates equity-method affiliates)

Shizen Soken Co., Ltd.
Bank Computer Service Corporation
Station Network Kansai Co., Ltd.
● Investment enterprise partnerships: 12●

Senshu Ikeda Tokai Tokyo
Securities Co.,Ltd.

●

Senshu Ikeda Holdings, Inc.

Head office and branches: 134

Head Office and branches: 3

Securities services

n Subsidiaries and Affiliates (As of the end of July, 2014)

Affiliates

Subsidiaries

Name

25

Address

Major Business

The Senshu Ikeda Bank, Ltd.
18-14, Chayamachi, Kita-ku, Osaka-city Banking services
Senshu Ikeda Tokai Tokyo
18-14, Chayamachi, Kita-ku, Osaka-city Securities services
Securities Co.,Ltd.
Senshu Ikeda Turnaround Partners 18-14, Chayamachi, Kita-ku, Osaka-city Banking services
Co., Ltd.
(Business rehabilitation services)
Senshu Ikeda Corporate Partners
18-14, Chayamachi, Kita-ku, Osaka-city Banking services
Co., Ltd.
(Business rehabilitation services)
Senshu Ikeda Lease Co., Ltd.
3-1-22, Toyosaki, Kita-ku, Osaka-city Leasing services
Sengin General Leasing Company Limited 27-1, Miyamotocho, Kishiwada-city
Leasing services
Senshu Ikeda Guarantee Co., Ltd.
2-1-11, Jonan, Ikeda-city
Credit guarantee services
Kinki Credit Guarantee Company
2-1-1, Nishiki, Kaizuka-city
Credit guarantee services
LimitedSenshu Ikeda JCB Co., Ltd.
8-10, Kurehacho, Ikeda-city
Credit card services
D. I. Co., Ltd.
8-10, Kurehacho, Ikeda-city
Credit card services
Senshu Ikeda VC Co., Ltd.
8-10, Kurehacho, Ikeda-city
Credit card services
Senshu Ikeda Capital Co., Ltd.
18-14, Chayamachi, Kita-ku, Osaka-city Venture capital services
18-14, Chayamachi, Kita-ku, Osaka-city Back-office administration
Senshu Ikeda Business Service
Company Limited
Senshu Ikeda Office Service Co., Ltd. 2-1-11, Jonan, Ikeda-city
Personnel services
S.I.M.S. Co., Ltd.
6-2-5-301, Minoh, Minoh-city
Appraisal of real-estate collateraland real-estate research services
Senshu Ikeda System Co., Ltd.
18-14, Chayamachi, Kita-ku, Osaka-city Computer software development
and sale services
Senshu Ikeda Investment Manage- 3-1-22, Toyosaki, Kita-ku, Osaka-city Investment advisory and discrement Co., Ltd.
tionary investment services
Senshu Ikeda Finance Co., Ltd.
18-14, Chayamachi, Kita-ku, Osaka-city Money-lending services
Shizen Soken Co., Ltd.
2-1-11, Jonan, Ikeda-city
Information offering services
Bank Computer Service Corporation 1-5, Rinku Oraikita, Izumisano-city
Development and sale of computer programs used for
operations at financial institutions
Planning and operation of ATM at station
Station Network Kansai Co., Ltd.
1-4-8, Shibata, Kita-ku, Osaka-city

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

Date ofestablishment

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

September 1, 1951
January 30, 2013

50,7101,250

100.0060.00––

January 4, 2013100–

100.00January 4, 2013100–

100.00April 1, 1986
October 23, 1985
July 20, 1973
April 1, 1975

50
120
180
100

–
–
–
–

81.00
95.60
48.37
100.00February 1, 1983
September 5, 1990
November 2, 1990
March 6, 1989
April 1, 1983

60
30
40
90
30

–
–
–
–
–

88.37
90.00
100.00100.00100.00July 11, 1988
October 28, 1991

20
20

–
–

100.00100.00June 10, 1985

50

–

63.10

April 1, 1987

120–

100.00March 15, 2013
November 1, 1996
December 27, 2000

10
80
400

–
–
–

100.0015.00
45.00

June 29, 2000

100

–

40.00

SENSHU IKEDA HOLDINGS,INC.

Organization and Board of Directors
Senshu Ikeda Holdingsn Organization (As of the end of July, 2014)(Note)

Management Committee

Corporate Planning Division

Accounting Office

PR & IR Office

ALM Committee

Compliance Committee

Risk Management Committee

Related Business Management Office

Audit & Supervisory Board Members Office

Audit & Supervisory Board Members Audit & Supervisory Board

Board of Directors

General Meeting of Shareholders

Advisory Board

Personnel and General Affairs Division

Secretary 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.
Members: (In the order of the Japanese syllabary)·Noriyuki Inoue(Chairman of the Board 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.)

General Risk Management DivisionInternal Audit Divisionn Board of Directors (As of June 27, 2014)
Representative Director
and President

Hirohisa Fujita

Director

Akira Tahara

Director

Hirotsugu Maekawa

Representative Director
and Chairman

Kazuyuki Kataoka

Director

Atsushi Ukawa

Director

Hiro Maeno

Representative
Director
Representative
Director

Hiroshi Kubota
Jiro Tsuji

Director

Motoshi Inoue

Director

Koji Miyata

Director(Outside)Kazuo Hiramatsu

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

Kazuhiro Masao

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

Toshiaki Imanaka

Takashi Nishi

Toshiaki Sasaki

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

26

The Senshu Ikeda Bankn Organization (As of the end of July, 2014)
Corporate Planning Division
Personnel Affairs Division
Career Development Supporting Office
General Affairs Division
Secretary Office
Diversity Promotion Office

Management Committee

Suzhou Representative Office
Risk Management Division
Compliance Management Office
Operations and System Headquarters

Operations Management Division
Operating Center
Risk Products Operations Office

ALM Committee

Regional Headquarters

Facilitation of Financing Promotion Committee

Compliance Committee

Risk Management Committee

Branches (including Sub-branches): 139

Audit & Supervisory Board Members Office

Audit & Supervisory Board Members Audit & Supervisory Board

Board of Directors

General Meeting of Shareholders

Tokyo Office

CS Headquarters

Business Planning Division
Business Promotion Division
Securities and Insurance Business Promotion Office
Personal Loan Promotion Office
Proposal Offering Promotion Office
Customer Center

Asia and China Business Headquarters

Asia and China Business Promotion Division

Advanced Technology Business Supporting Headquarters

Advanced Technology Business Supporting DivisionInternational Division

Private Banking Headquarters

Private Banking Division

Financial Market Headquarters

Financial Market DivisionMarket Operations Office

Loan Headquarters

Loan Division
Solutions Division
Loan Business DivisionInternal Audit Divisionn Board of Directors (As of June 27, 2014)27

Representative Director
and President

Hirohisa Fujita

Managing
Director

Akira Tahara

Director

Hirotsugu Maekawa

Audit & Supervisory
Board Member(Full-time)

Hiroaki Kobayashi

Representative Director
and Chairman

Kazuyuki Kataoka

Managing
Director

Atsushi Ukawa

Director

Hiro Maeno

Satoshi Kitagawa

Representative Senior
Managing Director

Hiroshi Kubota

Managing
Director

Motoshi Inoue

Director

Koji Miyata

Representative Senior
Managing Director

Jiro Tsuji

Director(Outside)Kazuo Hiramatsu

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

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

Taro Ohashi
Tsuneo Yamada

SENSHU IKEDA HOLDINGS,INC.

Deputy General Manager, Business Headquarters

General Manager, Business Headquarters

Representative Director and Vice President

Representative Director and President
Compliance Committee

Audit & Supervisory Board Members Audit & Supervisory Board

Management Committee

Board of Directors

General Meeting of Shareholders

Senshu Ikeda Tokai Tokyo Securitiesn Organization (As of the end of July, 2014)
BranchBusiness Management Division

Product Management Division

Planning and General Affairs Division

Business Compliance DivisionInternal Audit Divisionn Board of Directors (As of June 27, 2014)
Representative
Director andPresident
Representative
Director andVice PresidentManaging
Director

Yasuo Kitamura
Hiromi Tajima
Noriaki Katayama

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

Yutaka Sakato
Kazuhiro Masao
Hiroichi Wakita

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201428

Consolidated Financial Information of Senshu Ikeda Holdings
Consolidated Balance Sheets
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
As of 31st March, 2014 and 2013

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

Millions of yen
2014
2013

Thousands of U.S.
dollars (Note 1)
2014¥215,658
775
1,128
122
27,0001,375,525
3,602,329
5,529
61,28238,447
8,045
6,496
26,36619,992(38,923)¥5,349,776¥100,867
5,603
956
108
19,0001,169,201
3,578,225
4,376
73,975
38,105
7,617–
29,47821,758(54,814)¥4,994,458$2,095,394
7,530
10,9591,185
262,339
13,364,992
35,001,253
53,721
595,433
373,561
78,167
63,116
256,179
194,247(378,186)$51,979,945¥4,580,769
315,691
118,517366
70,00045,146
1,678
–
120
62
328
170
379
0
151
2
19,992
5,153,379¥4,490,736
124,915
71,909208
50,00042,239
1,708
4,511
–
136
315
163
393
–
68
5
21,7584,809,069$44,508,054
3,067,343
1,151,544
3,556
680,139438,651
16,303
–
1,165
602
3,186
1,651
3,682
0
1,467
19
194,247
50,071,696

79,811
59,251
46,949(728)
185,284

72,311
62,23535,431(1,350)168,627

775,466
575,699
456,169(7,073)1,800,272

(147)
1
1,020
875
68
10,168196,397¥5,349,776

7,808
0
–
7,809
63
8,888
185,389¥4,994,458(1,428)
9
9,910
8,501
660
98,795
1,908,249$51,979,945

Liabilities and net assets

Liabilities
Deposits (Notes 12, 13 and 33)
Payables under securities lending transactions (Notes 12 and 33)
Borrowed money (Notes 12, 14, 33, 34 and 37)
Foreign exchange liabilities (Notes 15 and 33)
Corporate bonds and notes (Notes 16 and 33)
Other liabilities (Note 17)
Provision for employees’ bonuses
Accrued retirement benefits for employees (Note 18)
Net defined benefit liability (Note 18)
Accrued retirement benefits for directors and corporate auditors
Reserve for reimbursement of deposits
Reserve for point services
Reserve for contingent losses
Reserve under special laws
Deferred tax liabilities (Note 29)
Negative goodwill
Acceptances and guarantees (Note 20)
Total liabilities

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

Remeasurements of defined benefit plans

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

29

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

SENSHU IKEDA HOLDINGS,INC.

Consolidated Statements of Operations
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the years ended 31st March, 2014 and 2013

Millions of yen
2014
2013

Thousands of U.S.
dollars (Note 1)
2014

IncomeInterest income:Interest on loans and bills discounted (Note 32)
Interest and dividends on securities
Other interest income
Fees and commissions
Other operating income (Note 22)
Recoveries of written-off claims
Gain on contribution of securities to retirement benefit
Other income (Note 23)
Total income¥51,103
9,459
307
19,784
6,933
1,634
2,291
15,636
107,150¥54,701
9,470
211
17,900
16,543
1,419–
11,801
112,049$496,531
91,906
2,982
192,226
67,363
15,87622,260151,923
1,041,099

6,203
866
1,736
5,672
6,592
52,58258
22
112
13,65087,496
19,653

6,769
944
1,681
5,307
7,290
54,46074
25–
22,29898,851
13,19760,2708,414
16,867
55,11064,049510,901
563
213
1,088
132,627
850,136
190,954

889
1,631
2,521
17,132527¥16,604

998
1,784
2,783
10,414312¥10,102

8,637
15,847
24,494
166,459
5,120$161,329

Millions of yen
2014
2013
17,132¥10,414

Thousands of U.S.
dollars (Note 1)2014$166,459(7,931)
0(7,930)¥9,201

19,7142
19,717¥30,132(77,059)0(77,050)$89,399

8,649
551

29,792
340

84,036
5,353

Expenses

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

Income taxes (Note 29)
Current
Deferred
Total income taxes
Net income before minority interests
Minority interests
Net income
See accompanying notes to consolidated financial statements

Consolidated Statements of Comprehensive Income
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the years ended 31st March, 2014 and 2013

Net income before minority interests
Other comprehensive income (Note 30)
Net unrealized gain (loss) on available-for-sale securities
Net unrealized gain on deferred hedges
Total other comprehensive income
Comprehensive income
Total comprehensive income attributable to:
Owners of the parent
Minority interests¥

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201430

Consolidated Statement of Changes in Net Assets
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
Year Ended March 31, 2014

BALANCE, APRIL 1, 2012
Increase by merger
Net income
Cash dividends
Acquisition of treasury stock
Disposition of treasury stock
Retirement of treasury stock
Net changes in items otherthan shareholder’s equity
Total changes during the year
BALANCE, MARCH 31, 2013
Issuance of common stock
Increase by merger
Net income
Cash dividends
Acquisition of treasury stock
Disposition of treasury stock
Retirement of treasury stock
Change in scope of
consolidation
Net changes in items otherthan shareholder’s equity
Total changes during the year
BALANCE, MARCH 31, 2014

BALANCE, MARCH 31, 2013
Issuance of common stock
Increase by merger
Net income
Cash dividends
Acquisition of treasury stock
Disposition of treasury stock
Retirement of treasury stock
Change in scope of
consolidation
Net changes in items otherthan shareholder’s equity
Total changes during the year
BALANCE, MARCH 31, 2014

Commonstock
72,311

72,311
7,500

Millions of Yen
Accumulated othercomprehensive incomeNetNet
unrealized
gain (loss) on unrealized RemeasureTotal
available- gain (loss) on ments of
Stock
CapitalRetained Treasury shareholder’s for-saledeferreddefined subscription Minority
surplusearnings
stock
securities
equityhedges benefit plans rights
interests
72,67530,910(1,944) 173,952(11,878)
(2)
–
62
1,177
3
3
10,102
10,102(5,585)(5,585)(10,369) (10,369)
(73)
596
523
(10,366)
10,366–

Total net
assets163,311
3
10,102(5,585)(10,369)
523–

19,6862

19,686
7,808

2
0(10,439)
62,2357,500

4,520
35,431
131
16,604(5,208)(10,390)624
10,387(96)(10,387)(8)

7,500
79,811

Commonstock
702,594
72,872(2,983)59,251

11,51846,949(77)

72,872775,466(5,325)
168,627
15,000131
16,604(5,208)(10,390)
528
–

–
–

7,711

27,402

1
63

7,711
8,888

22,077
185,389
15,000131
16,604(5,208)(10,390)
528
–

(8)

622
(728)

16,657
185,284(8)(7,955)

0

1,020

4

1,280

(5,648)(7,955)
(147)

0
1

1,020
1,020

4
68

1,280
10,16811,008196,397

Thousands of U.S. Dollars (Note 1)
Accumulated othercomprehensive incomeNetNet
unrealized
gain (loss) on unrealized RemeasureTotal
available- gain (loss) on ments of
Stock
CapitalRetained Treasury shareholder’s for-saledeferreddefined subscription Minority
Total netsurplusearnings
stock
securities
equityhedges benefit plans rights
interests
assets604,692 344,257(13,116) 1,638,427
75,8640–612
86,358 1,801,292
72,872
145,744
145,744
1,272
1,272
1,272
161,329
161,329
161,329(50,602)(50,602)(50,602)(100,952) (100,952)(100,952)
(932)
6,062
5,130
5,130
(100,923)
100,923––(28,983)
575,699

111,912456,169

See notes to consolidated financial statements.

31

593(1,350)1

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

(77)

6,043 161,844(7,073) 1,800,272(77)(77,293)

0

9,910

38

12,436(54,877)(77,293)(1,428)

0
9

9,910
9,910

38
660

12,436 106,956
98,795 1,908,249

SENSHU IKEDA HOLDINGS,INC.

Consolidated Statements of Cash Flows
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the years ended 31st March, 2014 and 2013

Thousands of U.S.
dollars (Note 1)
2014

Millions of yen
2014
2013
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(Earnings) losses from investments under the equity method
Increase (decrease) in reserve for possible loan losses
Increase (decrease) in accrued bonuses
Loss (gain) on contribution of securities to retirement benefit¥19,653
4,656
22
133
(2)
(3)
(29)
(15,890)(29)¥13,197
5,004
25
84
(2)
(491)
(1)
6,510
(41)

$190,954
45,239
213
1,292
(19)
(29)
(281)
(154,391)(281)

Decrease (increase) in net defined benefit asset
Increase (decrease) in net defined benefit liability
Increase (decrease) in accrued retirement benefits for employees(2,291)(1,538)
12
–

–
–
–
(3)

(22,260)(14,943)
116–

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

(74)
13
7
(13)
(60,870)
8,806(5,060)219(31,497)57(24,104)
90,033

(198)
56
22
(79)
(64,383)
9,394(7,269)64(20,465)74(62,082)
100,282

(719)
126
68
(126)
(591,430)
85,561(49,164)
2,127(306,033)
553(234,201)874,786

Net increase (decrease) in borrowed money (excluding subordinated borrowings)

46,6088,645

452,856

Net (increase) decrease in due from banks (excluding due from the Bank of Japan)
Net (increase) decrease in trading account securities
Net (increase) decrease in call loans and bills bought(3,836)(14)
4,655(2,500)(39)(4,366)(37,271)(136)
45,229Net increase (decrease) in payables under securities lending transactions
Net (increase) decrease in foreign exchange (assets)
Net increase (decrease) in foreign exchange (liabilities)
Interest received
Interest paid
Other

190,776(1,153)
157
61,215(10,313)8,300(112,392)
(47)
(223)
65,857(11,219)102

1,853,633(11,202)
1,525
594,782(100,204)
80,645

278,607(1,255)¥277,352(76,486)(908)¥(77,395)

2,707,024(12,193)$2,694,830

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

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201432

Consolidated Statements of Cash Flows
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the years ended 31st March, 2014 and 2013

Thousands of U.S.
dollars (Note 1)
2014

Millions of yen
2014
2013
Cash flows from investing activities
Purchases of securities
Proceeds from sales of securities
Proceeds from maturity of securities
Increase in money held in trust
Decrease in money held in trust
Purchases of tangible fixed assets
Purchases of intangible fixed assets
Proceeds from sales of tangible fixed assets¥(1,123,362)
291,683
660,551(8,612)381(2,733)(1,500)56¥(1,056,879)
830,989
287,658(205)
135(2,689)(668)
27$(10,914,904)
2,834,075
6,418,101(83,676)
3,701(26,554)(14,574)544

Proceeds of investments in subsidiaries resulting in charge in scope of consolidation (Note 27)
Payments for execution of assets retirement obligations
Net cash provided by (used in) investing activities(2,400)–(185,936)–(22)
58,346(23,319)–(1,806,607)

Cash flows from financing activities
Proceeds from issuance of common stock
Increase in subordinated borrowings
Decrease in subordinated borrowings
Increase in subordinated bonds and bonds with stock subscription rights

15,000––20,000–7,000(13,500)–

145,744––
194,325

Decrease in subordinated bonds and bonds with stock subscription rights
Proceeds from stock issuance for minority shareholders
Cash dividends paid
Cash dividends paid for minority shareholders
Purchases of treasury stock
Proceeds from disposal of treasury stock
Net cash provided by (used in) financing activities––(5,208)(247)(10,390)624
19,778(3,000)8,000(5,585)(19)(10,369)596(16,877)––(50,602)(2,399)(100,952)
6,062
192,168

Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 27)
See accompanying notes to consolidated financial statements

33

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

(239)

291

(2,322)110,955
95,361¥206,317(35,634)
130,996¥95,361

1,078,070
926,554$2,004,634

SENSHU IKEDA HOLDINGS,INC.

Notes to Consolidated Financial Statements
Senshu Ikeda Holdings, Inc. and Consolidated Subsidiaries
For the Years Ended 31st March, 2014 and 2013

1. Basis of Presentation
Senshu Ikeda Holdings, Inc. (the “Company”) is a holding
company and conducts its operations through its subsidiaries
and affiliates. The Company and its subsidiaries (collectively,
the “Group”) maintain their books of account in accordancewith the provisions set forth in the Companies Act of Japan(the “Act”) and in conformity with accounting principles andpractices generally accepted in Japan, which are different incertain respects as to the application and disclosure
requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements havebeen compiled from the consolidated financial statements
prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan. Certain accounts
have been reclassified for the convenience of readers outside
Japan.
In preparing the accompanying consolidated financial
statements, Japanese yen amounts are presented in millionsof yen by rounding down figures below one million. As a result,
the totals in yen in the accompanying consolidated financial
statements do not necessarily agree with the sums of theindividual amounts.
The translation of yen amounts into U.S. dollar amounts is
included solely for the convenience of readers outside Japanand has been made at ¥102.92 = U.S.$1.00, the exchange
rate prevailing on 31st March, 2014. This translation should
not be construed as a representation that yen can beconverted into U.S. dollars at the above or any other rate.

2. Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of the Company and the 30 (30 in 2013)
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.
Senshu Ikeda Tokai Tokyo Securities Co., Ltd. and Senshu
Ikeda Capital New Business Fund No.4 Investment Enterprise
Limited Partnership have been included in the scope of
consolidation from the fiscal year ended 31st March, 2014, asa result of acquisition of shares and its establishment,
respectively.
J.I. Co., Ltd. (current trade name: Senshu Ikeda JCB Co., Ltd.)and The Senshu Card Company Limited, both of which wereconsolidated subsidiaries of the Company in the previous
fiscal year, were merged effective 1st July, 2013, whereby J.I.
Co., Ltd. was the surviving company.

Ikegin Capital New Business Fund No.1 Investment Enterprise
Limited Partnership, which was a consolidated subsidiary of
the Company in the previous fiscal year, was excluded fromthe scope of consolidation due to completion of its liquidation
procedures.
The Company has applied the equity method to its
investments in three affiliates for the years ended 31st March,2014 and 2013, respectively.
All significant intercompany accounts and transactions havebeen eliminated in consolidation. All material unrealized profit
included in assets resulting from transactions within the Groupis eliminated.
The difference between the cost and the underlying equity inthe net assets of the consolidated subsidiaries measured atfair value at their respective dates of acquisition is presented
as “goodwill” or “negative goodwill”, and is amortized by thestraight-line method over a period of five years.
The balance sheet date of 12 subsidiaries is 31st December.
Appropriate adjustments have been made for significant
intervening transactions occurring during the period from 31st
December to 31st March.

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

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201434

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

35

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

For consolidated subsidiaries other than the banking
subsidiaries, a specific reserve for possible loan losses at
the total amount of loans deemed to be uncollectible
based on a solvency analysis of each loan, in addition toa general reserve at an amount calculated based on
historical experience, is provided.
For collateralized or guaranteed claims on bankrupt
borrowers and effectively bankrupt borrowers, the amountof the claims exceeding the estimated value of collateraland guarantees is deemed to be uncollectible and iswritten off against the total amount of the outstanding
claims. These write-offs amounted to ¥62,365 million($605,956 thousand) and ¥56,999 million for the years
ended 31st March, 2014 and 2013, respectively.
(8) Provision for employees’ bonuses
Provision for employees’ bonuses is calculated based onan estimated payment amount, which is attributable to thefiscal year.
(9)	Accrued retirement benefits for directors and corporate
auditors
Accrued retirement benefits for directors and corporate
auditors are provided at an amount that would be
required if all directors and corporate auditors retired at
the balance sheet date.
(10) Reserve for reimbursements of deposits
Reserve for reimbursements of deposits is provided at an
estimate of the future payments to be made forreimbursement claims on deposits which were
derecognized and credited from liability to income basedon the Group’s historical experience.
(11) Reserve for point services
Reserve for point services, which is provided to meet
future use of credits granted to customers, is recorded in
the amount deemed necessary based on the estimatedfuture use of unused credits.
(12) Reserve for contingent losses
Reserve for contingent losses is provided at an estimateof the future loss on contingencies other than those
covered by other reserves or provisions.
(13) Reserve under special laws
Reserve under special laws consist of the financial
instruments transaction liability reserve of ¥0 million ($0thousand) as of March 31, 2014, posted by Senshu Ikeda
Tokai Tokyo Securities Co., Ltd., which were calculated
according to the specifications of Article 46-5 of the
Financial Instruments and Exchange Act and Article 175of the Cabinet Office Ordinace Related to the Financial
Instruments Business, to prepare for losses originatingfrom incidents relating to the purchase and sale ofsecurities or other transactions.

SENSHU IKEDA HOLDINGS,INC.

(14) Accounting treatment for retirement benefits
In the calculation of retirement benefit obligation, theCompany applies the straight-line basis in attributing
expected retirement benefits to periods until the end of
the fiscal year under review.
Prior service cost is amortized by the straight-line method
over a period of 11 to 12 years, which is within the
average estimated remaining years of service of theeligible employees.
Actuarial gain or loss is amortized commencing the year
following the year in which the gain or loss is recognizedby the straight-line method principally over a period of 11
to 12 years, which is within the average estimatedremaining years of service of the eligible employees.
Unrecognized transitional obligation incurred at the timeof the accounting change in the amount of ¥9,894 million($96,132 thousand) is amortized over a period of 15
years.
Some of the consolidated subsidiaries calculate their net
defined benefit liability and retirement benefit expenses
by adopting the simplified method, assuming the amountof year-end retirement benefit payable due to voluntaryterminations as retirement benefit obligation.
(15) Foreign currency transactions
Assets and liabilities of consolidated subsidiaries
denominated in foreign currencies are translated into
Japanese yen at the exchange rates in effect at thebalance sheet date.
(16) Leases
Leased assets under finance lease arrangements which
do not transfer ownership of the leased assets to thelessee are depreciated over the respective lease contract
periods using the straight-line method with residual
values defined in the lease contracts, otherwise theresidual values is zero.
As lessee:
Finance leases which commenced prior to 1st April, 2008,
except for those substantially requiring the transfer ofownership of the leased assets to the lessee, areaccounted for as operating leases.
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 rate risk
arising from financial assets and liabilities of the banking
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 for hedge
accounting are accounted for as if the interest rate for theswap 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
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 enteredinto in order to hedge the risk of fluctuation in foreignexchange rates by comparing the foreign-currency
amount of each underlying hedged item with thecorresponding foreign-currency amount of the respective
hedging instruments.
(18) Cash flows
In preparing the consolidated statement of cash flows,
cash and deposits with the Bank of Japan are considered
to be cash and cash equivalents.
(19) Consumption taxes
Transactions are principally stated exclusive of nationaland municipal consumption taxes.
(20) Consolidated tax payment system
The Company and certain of its consolidated subsidiaries
have adopted the consolidated tax payment system inaccordance with the Corporation Tax Act (Act No. 34,
1965).
(21) Change in accounting policy“Accounting Standard for Retirement Benefits” (theAccounting Standards Board of Japan (hereinafter“ASBJ”) Statement No. 26, 17th May, 2012; hereinafter“Accounting Standard Retirement Benefits”) and“Guidance on Accounting Standard for Retirement
Benefits” (ASBJ Guidance No. 25, 17th May, 2012;
hereinafter “Retirement Benefits Guidance”) have been
applied effective from the end of the fiscal year underreview (except for the provisions specified in the mainclause of Paragraph 35 of the Accounting Standard
Retirement Benefits and the main clause of Paragraph 67of the Retirement Benefits Guidance), and the amount of

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201436

retirement benefit obligation less pension plan assets has
been recorded as net defined benefit liability, effectivefrom the end of the fiscal year under review.
The application of Accounting Standard Retirement
Benefits and others by the Company is subject totransitional handling provided for in Paragraph 37 of the
Accounting Standard Retirement Benefits. Consequently,
unrecognized actuarial gain or loss and unrecognizedprior service cost after adjustment for tax effects wererecorded in remeasurements of defined benefit plans
under accumulated other comprehensive income at theend of the fiscal year under review.
As a result, as of 31st March, 2014, net defined benefit
asset of ¥6,496 million ($63,116 thousand) and net
defined benefit liability of ¥120 million ($1,165 thousand)were recorded. Additionally, deferred tax assets
decreased by ¥564 million ($5,479 thousand), andaccumulated other comprehensive income increased by¥1,020 million ($9,910 thousand).
(22) Issued but not yet adopted accounting standard and others“Accounting Standard for Retirement Benefits” and“Guidance on Accounting Standard for Retirement
Benefits”(1) Overview
Accounting standard for retirement benefits has beenrevised from the viewpoint of improvement to financial
reporting and international convergence, mainly
focusing on the accounting treatment forunrecognized actuarial gain or loss andunrecognized prior service cost, the calculation ofretirement benefit obligation and service cost, andthe enhancement of disclosures.
(2) Scheduled date of adoption
The Company will adopt the amendments to themethod for calculating retirement benefit obligationand service cost from the beginning of the fiscal year
ending 31st March, 2015.
(3) The effect of adopting this accounting standard
The effect of adopting this accounting standard is
expected to be an increase in retained earnings at
the beginning of the fiscal year ending 31st March,2015 by ¥466 million ($4,527 thousand).

4. Trading account securities
Valuation gain or loss on trading account securities included
in income before income taxes and minority interests was ¥(1)million ($ (9) thousand) and ¥(0) million for the years ended
31st March, 2014 and 2013, respectively.

5. Securities
Securities at 31st March, 2014 and 2013 consisted of thefollowing:2014¥68,880 ¥76,074 $669,257

Bonds:
Government bonds

319,287

401,161

Local government bonds

53,64256,333521,200

Corporate bonds

315,224

229,218

3,062,806

618,490

406,413

6,009,424

Other
Total

3,102,283¥1,375,525 ¥1,169,201 $13,364,992

Stocks in the above table include investments in affiliates of¥265 million ($2,574 thousand) and ¥236 million at 31st
March, 2014 and 2013, respectively.
Held-to-maturity debt securities with fair value at 31st March,2014 and 2013 were as follows:
Millions of yen
31st March, 2014
Government bonds

Carrying value¥

24,997

Fair value¥

25,024

Corporate bonds

45,406

Other

18,00018,321

Total¥88,403¥88,946

45,601Millions of yen
31st March, 2014
Government bonds

Difference

Unrealized Unrealized
gain
loss

¥26 ¥26 ¥–Corporate bonds

195

200

(5)

Other

321

321

–

Total

¥542 ¥548 ¥(5)Millions of yen
31st March, 2013

Corporate bonds

Carrying value

Fair value¥32,079¥32,451

Other

16,00016,131

Total¥48,079¥48,582

Millions of yen
31st March, 2013
Corporate bonds
Total

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

2013

2014
Stocks

Other

37

Thousands of
U.S. dollars

Millions of yen

Difference

Unrealized Unrealized
gain
loss

¥372 ¥372 ¥–
131

186

(55)

¥503 ¥559 ¥(55)SENSHU IKEDA HOLDINGS,INC.

Thousands of U.S. dollars
31st March, 2014
Government bonds
Corporate bonds

Millions of yen

Carrying value

Fair value

31st March, 2013$242,877$243,140

441,177

443,072

Other

174,893

178,012Total$858,948$864,224

Thousands of U.S. dollars
31st March, 2014
Government bonds

Unrealized Unrealized
Difference
gain
loss
$252 $252 $–Corporate bonds

1,894

1,943

(48)

Other

3,118

3,118

–

Total

Equity securities

Available-for-sale securities with fair value at 31st March, 2014
and 2013 were as follows:
Millions of yen
Carrying value¥62,852¥47,885

Government bonds

294,290

294,110

Local government bonds

53,64253,478

Corporate bonds

269,818

268,398

Subtotal

617,750

615,986

31st March, 2014
Equity securities

599,415

613,388¥1,280,018¥1,277,260

Millions of yen
31st March, 2014
Equity securities

Unrealized Unrealized
Difference
gain
loss
¥14,966 ¥17,332 ¥(2,365)

56,33356,047

Corporate bonds

197,138

195,104

Subtotal

654,633

652,166

Other

389,166

394,597Total¥1,113,986¥1,104,297

Millions of yen
31st March, 2013
Equity securities

179

194

(14)

Local government bonds

163

173

(9)

Corporate bonds

1,420

1,512

(92)

Subtotal

1,763

1,880

(117)

(13,972)

2,245(16,217)

Other
Total

¥2,757 ¥21,458 ¥(18,700)

Difference

Unrealized Unrealized
gain
loss

¥12,652 ¥15,454 ¥(2,802)

Bonds:
Government bonds

147

254

Local government bonds

285

293

(8)

Corporate bonds

2,034

2,079

(44)

Total

(107)

2,467

2,628

(161)

(5,430)

9,682(15,113)¥9,689 ¥27,766 ¥(18,076)
Thousands of U.S. dollars
31st March, 2014

Equity securities

Carrying value

Acquisitioncost$610,687$465,264
2,857,656

Bonds:
Government bonds

2,859,405

Local government bonds

521,200

519,607

Corporate bonds

2,621,628

2,607,831

Subtotal

6,002,234

5,985,095

Other

5,824,086

5,959,852

Total$12,437,019$12,410,221

Bonds:
Government bonds

401,014401,161

Bonds:

Total¥57,533

Government bonds

Other

Other

¥70,185

Local government bonds

Subtotal

Acquisition
cost

Acquisition
cost

Bonds:$5,266 $5,324 $(48)There were no held-to-maturity debt securities sold during theyears ended 31st March, 2014 and 2013.

Carrying value

Thousands of U.S. dollars
31st March, 2014
Equity securities

Difference

Unrealized Unrealized
gain
loss

$145,413 $168,402 $(22,979)

Bonds:
Government bonds

1,739

1,884

Local government bonds

1,583

1,680

(87)

Corporate bonds

13,797

14,691(893)

Subtotal
Other
Total

(136)

17,12918,266(1,136)(135,755)

21,813(157,568)$26,787 $208,492 $(181,694)

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201438

past period and credit risks of the issuers when the fair value
declined between 30% and 50% of the acquisition cost.

Available-for-sale securities sold during the years ended 31st
March, 2014 and 2013 were as follows:
Millions of yen
2014
Equity securities

Proceeds
from sales

Gain

6. Money Held in TrustLoss¥13,966 ¥5,822 ¥(472)

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

58,472

233

–

–

(17)
–

32,078490(4)90,550724(21)

175,927

5,357(2,927)¥280,445 ¥11,903 ¥(3,421)
Millions of yen
2013

Equity securities

Proceeds
from sales

Gain

Loss

¥3,774 ¥338 ¥(970)

Money held in trust at 31st March, 2014 and 2013 consistedof the following:
Money held in trust for trading purposes
Thousands of
U.S. dollars

Millions of yen
2013

2014
Carrying value

2014¥27,000 ¥19,000 $262,339

Valuation gain (loss) included in consolidated¥(2) ¥49 $(19)statements of income

There were no money held in trust owned for other purposes
at 31st March, 2014 and 2013.

Bonds:
Government bonds

198,714

821

(162)

Local government bonds

10,719141–

Corporate bonds

78,169

1,352

(107)

Subtotal

287,603

2,315

(269)

554,332

13,046(1,161)

Other
Total

7.	Net Unrealized Gain (Loss) on Availablefor-Sale Securities
Net unrealized gain (loss) on available-for-sale securities at
31st March, 2014 and 2013 consisted of the following:¥845,710 ¥15,699 ¥(2,402)
Thousands of U.S. dollars
2014

Equity securities

Proceeds
from sales

Gain

Loss

$135,697 $56,568 $(4,586)
2,263

(165)

–

–

–

Corporate bonds

311,678

4,760

(38)

Subtotal

879,809

7,034

(204)

1,709,356

52,050(28,439)

Other
Total

2014

¥2,757 ¥9,689 $26,787(2,813)(1,813)Differences between acquisition costand fair value, net of taxes

(55)

7,876

(534)

Amounts corresponding to minority interests

(91)

(67)

(884)

(27,331)

Net unrealized gain (loss) on availablefor-sale securities, net of taxes¥(147) ¥7,808 $(1,428)$2,724,883 $115,652 $(33,239)

Impairment losses on securities
Available-for-sale securities whose fair value significantly
declined from the acquisition cost are valued at fair value andlosses on devaluation of those securities are recognized in the
consolidated statement of operations unless the value isconsidered recoverable.
Losses on devaluation of securities for the years ended 31st
March, 2014 and 2013 were ¥3,375 million ($32,792 thousand)and ¥212 million, respectively, which consisted of ¥7 million($68 thousand) on equity securities and 3,367 million($32,714)
on investment trusts for the year ended 31st March, 2014, and¥212 million on equity securities for the year ended 31st
March, 2013.
Determining whether the fair value is “significantly declined” isbased on the fair value declining by more than 50% or thecriteria considering the trend of the fair value during a certain

39

Available-for-sale securities
Deferred tax liabilities

568,130

Local government bonds

2013

2014
Differences between acquisition costand fair value:

Bonds:
Government bonds

Thousands of
U.S. dollars

Millions of yen

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

8.	Loans and Bills Discounted and Risk
Monitored Loans
Loans and bills discounted:
Loans and bills discounted at 31st March, 2014 and 2013
consisted of the following:Thousands of
U.S. dollars

Millions of yen
2013

2014
Bills discounted

2014¥18,256 ¥20,591 $177,380

Loans on bills

83,43087,890810,629

Loans on deeds

3,275,517

3,256,470

31,825,855

Overdrafts

225,125

212,670

2,187,378

–

601

–

Other
Total

¥3,602,329 ¥3,578,225 $35,001,253

SENSHU IKEDA HOLDINGS,INC.

Discounting of bills is accounted for as finance transactions
rather than as purchasing of bills in accordance with the
JICPA Industry Audit Committee Report No. 24. The Group
has the right to sell or pledge such bills without any
restrictions. These include bankers acceptances bought,
commercial bills discounted, documentary bills and foreignexchange bills. The total face value of such outstanding bills
at 31st March, 2014 and 2013 totaled ¥18,686 million($181,558 thousand) and ¥20,956 million, respectively.
At 31st March, 2014 and 2013, 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¥15,600 million ($151,574 thousand) and ¥15,600 million,
respectively.
Contracts for overdraft facilities and loan commitments arecontracts under which the Group lends money to customers
up to their prescribed limits at the customers’ request as longas there are no violations of any of the conditions in thecontracts. The aggregate unutilized balances within the limitsof these contracts totaled ¥659,510 million ($6,407,986
thousand) and ¥662,018 million at 31st March, 2014 and2013, respectively, including the contracts whose contractual
periods were either less than one year or revocable at any
time, in the amount of ¥648,268 million ($6,298,756 thousand)and ¥651,749 million, respectively.
Since many of these commitments expire without being fully
utilized, the unutilized amounts do not necessarily represent
future cash commitments. Most of these contracts include
provisions which stipulate that the consolidated subsidiaries
can reject customers’ requests or decrease the contract limits
for an appropriate reason, (for example, a change in financial
situation or a deterioration in customers’ creditworthiness).
At the inception of the contracts, the Group obtains collateralin the form of real estate, securities, and so forth, if deemednecessary. Subsequently, the Group, based on its internal
rules, performs periodic reviews of the customers’ businessresults and may take necessary measures such asreconsidering the terms of the contracts and/or requiring
additional collateral or guarantees.

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

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

9. Foreign Exchange Assets
Foreign exchange assets at 31st March, 2014 and 2013
consisted of the following:

2013

Thousands of
U.S. dollars

Millions of yen
2014
Due from foreign correspondent banks

2013

2014

¥4,485 ¥3,316 $43,577

Foreign bills of exchange bought

362

273

3,517

Foreign bills of exchange receivable

681

786

6,616

Total

¥5,529 ¥4,376 $53,721

Other assets at 31st March, 2014 and 2013 consisted of thefollowing:Thousands of
U.S. dollars

Millions of yen

Delinquent loans

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

10. Other Assets

Risk monitored loans:
Risk monitored loans which were included in loans and bills
discounted at 31st March, 2014 and 2013 consisted of thefollowing:

2014

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

2014

2014

¥4,000 ¥5,355 $38,865

Thousands of
U.S. dollars

Millions of yen
Investment in leased assets

2013

2014

¥15,937 ¥15,237 $154,848

62,17368,436604,090

Other receivables

18,85427,439183,190–14–

Accrued income

8,318

7,778

80,8206,706

14,34965,157

Prepaid expenses

301

253

2,924

17,871

23,266

173,639¥72,881 ¥88,156 $708,132

Other
Total

¥61,282 ¥73,975 $595,433

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201440

11. Tangible Fixed Assets

13. Deposits

At 31st March, 2014 and 2013, accumulated depreciation of
tangible fixed assets was ¥43,656 million ($424,174 thousand)and ¥42,104 million, respectively.
Under the Tax Act, capital gains arising from the exchange orreplacement of assets under certain conditions are permitted
to be deducted from the cost of tangible fixed assets in orderto obtain certain tax benefits. The amount deducted from thecost of tangible fixed assets at 31st March, 2014 and 2013was ¥517 million ($5,023 thousand) and ¥517 million,
respectively.

Deposits at 31st March, 2014 and 2013 consisted of thefollowing:

12. Assets Pledged

Thousands of
U.S. dollars

Millions of yen
2013

2014
Current deposits

2014¥149,018 ¥151,963 $1,447,901

Ordinary deposits

1,789,366

1,690,783

17,385,989

Savings deposits

26,474

27,382257,228

Deposits at notice

10,3598,995

100,650

Time deposits

2,524,345

2,544,899

24,527,254

Other deposits

81,204

66,712

789,001

Total$¥4,580,769 ¥4,490,736 44,508,054

Assets pledged as collateral at 31st March, 2014 and 2013
consisted of the following:Thousands of
U.S. dollars

Millions of yen
2014
Securities
Other assets

2013

2014

¥488,918 ¥244,044 $4,750,466
1,069

1,608

10,386The liabilities secured by the above pledged assets at 31st
March, 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2014
Deposits

2013

2014

¥14,537 ¥2,685 $141,245

Payables under securities
lending transactions

315,691

124,915

3,067,343

Borrowed money

54,222

34,487

526,836

Other liabilities

205

–

1,991

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 ¥34,982 million ($339,895 thousand) and¥38,516 million at 31st March, 2014 and 2013, respectively.
At 31st March, 2014 and 2013, margins on futures contracts inthe amounts of ¥3,076 million ($29,887 thousand) and ¥2,778
million, guarantee deposits of ¥5,263 million ($51,136
thousand) and ¥5,143 million, deposits for futures transactionsof ¥503 million ($4,887 thousand) and ¥503 million andcollateral money deposited for financial instruments of ¥1,200
million ($11,659 thousand) and ¥500 million were included in“Other assets”, respectively.

41

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

14. Borrowed Money
Borrowed money at 31st March, 2014 and 2013 consisted ofborrowings from the Bank of Japan and certain other financial
institutions.
Subordinated borrowings of ¥25,000 million ($242,907
thousand) and ¥25,000 million were included in borrowed
money at 31st March, 2014 and 2013, respectively.
The average interest rate applicable to borrowed money at
31st March, 2014 and 2013 was 0.75% and 1.11%,
respectively.
The aggregate annual maturities of borrowed money
subsequent to 31st March, 2014 were summarized as follows:Year ending 31st March,Millions of yen

Thousands of
U.S. dollars

2015¥85,075$826,612

2016

1,732

16,8282017

13,274

128,973

2018

844

8,200

2019

402

3,905

2020 and thereafter
Total

–

–

¥118,517$1,151,544

As described in “Significant subsequent events” of notes toconsolidated financial statements, borrowed money of The
Senshu Ikeda Bank, Ltd., one of the Company’s subsidiaries,
whose borrowing of ¥8,000 million ($77,730 thousand) were
repaid before maturity on 9th June, 2014, is disclosed under2015 of borrowed money.

SENSHU IKEDA HOLDINGS,INC.

15. Foreign Exchange Liabilities

17. Other Liabilities

Foreign exchange liabilities at 31st March, 2014 and 2013
consisted of the following:

Other liabilities at 31st March, 2014 and 2013 consisted of thefollowing:Thousands of
U.S. dollars

Millions of yen
2013

2014
Foreign bills sold

2014

2014

¥363 ¥199 $3,527

Foreign bills of exchange payable
Total

9

2

19

¥366 ¥208 $3,556

Thousands of
U.S. dollars

Millions of yen
Accrued expenses

2013

2014

¥5,541 ¥7,284 $53,837

Unearned income

9,666

10,899Accrued income taxes

620

766

6,024

29,31723,288284,852

Other
Total

93,917¥45,146 ¥42,239 $438,651

16. Corporate Bonds and Notes
Short-term and long-term bonds payable at 31st March, 2014
and 2013 consisted of the following:
Millionsof yenIssuerDescription

Issued2014

The Senshu Ikeda
Bank, Ltd.

1st subordinated bonds

17th Dec., 2010

¥15,000
10,000

2nd subordinated bonds

21st Sep., 2011

3rd subordinated bonds

16th Dec., 2011

5,000

4th subordinated bonds

23rd Mar., 2012

20,000

5th subordinated bonds

25th Sep., 2013

10,000

6th subordinated bonds

27th Dec., 2013

Total

Issuer

10,000¥70,000Millions Thousands ofof yenU.S. dollars Interest
2013

Secured/unsecured

Due

2014

rates (%)

The Senshu Ikeda ¥15,000 $145,744
Bank, Ltd.
10,00097,162

1.67

Unsecured 17th Dec., 2020

2.01

Unsecured 21st Sep., 2021

2.06

Unsecured 16th Dec., 2021

Total

5,000

48,581

20,000

194,325

2.23

Unsecured 23rd Mar., 2022–

97,162

1.40

Unsecured 25th Sep., 2023–

97,162

1.35

Unsecured 27th Dec., 2023

¥50,000 $680,139

The aggregate annual maturities of short-term and long-termbonds payable subsequent to 31st March, 2014 weresummarized as follows:Year ending 31st March,Millions of yen

Thousands of
U.S. dollars

2015

¥–

$–

2016

–

–

2017

–

–

2018

–

–

2019

–

–

2020 and thereafter
Total

70,000680,139¥70,000$680,139

The amounts of lease obligations included in “Other” were ¥31
million ($301 thousand) and ¥24 million at 31st March, 2014
and 2013, respectively. The average interest rates on leaseobligations at 31st March, 2014 with maturity dates on or
before and subsequent to 31st March, 2015 were 2.28% and2.07%, respectively. The average interest rates on leaseobligations at 31st March, 2013 with maturity dates on or
before and subsequent to 31st March, 2014 were 2.87% and2.33%, respectively.
The aggregate annual maturities of lease obligations
subsequent to 31st March, 2014 were summarized as follows:Year ending 31st March,Millions of yen

Thousands of
U.S. dollars

2015

¥9

$87

2016

9

87

2017

7

68

2018

3

29

2019

0

0

2020 and thereafter

–

–

¥31

$301

Total

18. Retirement Benefit Plans
Fiscal year under review (from 1st April, 2013 to 31st March,
2014)
Outline of the retirement benefit plan adopted by the Company
The consolidated subsidiaries have adopted funded defined
benefit plans to cover the payment of retirement benefits toemployees.
As for the defined benefit pension plans (funded) of theconsolidated subsidiaries, lump-sum benefits or pensions areprovided depending on the service years, etc. Retirement
benefit trust is established for the defined benefit pension
plan.

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201442

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

(3)	Reconciliation of the ending balance of retirement benefit
obligation and pension plan assets to the consolidatedbalance sheet amounts of net defined benefit liability andasset
Millions ofyen

Thousands of
U.S. dollars

Funded retirement benefit obligation ¥31,184$302,992

Pension plan assets
Unfunded retirement benefit
obligation(1)	Reconciliation of the beginning balance to the endingbalance of retirement benefit obligation

Net amount of liability and asset on
consolidated balance sheets(37,680)(366,109)(6,496)(63,116)

120

1,165

¥(6,376)$(61,951)

Millions ofyen

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars¥32,008$310,998

Service cost

1,029

9,998

Net defined benefit liability¥120$1,165Interest cost

401

3,896

Net defined benefit asset(6,496)(63,116)

Net amount of liability and asset on
consolidated balance sheets¥(6,376)$(61,951)

Retirement benefit obligation at
beginning of the year

Actuarial gain or loss incurred
during the year(356)

(3,458)

Payment of retirement benefits(1,791)(17,401)

Prior service cost incurred during
the year

–

Other

12

116

¥31,304$304,158

Retirement benefit obligation at
end of the year

(4) Retirement benefit expenses consisted of the following:(2)	Reconciliation of the beginning balance to the endingbalance of pension plan assets

Pension plan assets at beginningof the year

Millions of yen

Thousands of
U.S. dollars¥29,370$285,367

Expected return on plan assets

624

6,062

Actuarial gain or loss incurred
during the year

3,752

36,455Contributions from employer

1,756

17,061

Payment of retirement benefits(1,202)(11,678)

Contribution of securities toretirement benefit trust

3,378

32,821

Other

–

–

Pension plan assets at end of the year ¥37,680$366,109

Millions ofyen

Thousands of
U.S. dollars

Service cost¥1,029$9,998

Interest cost

401

3,896

Expected return on plan assets(624)(6,062)

Amortization of actuarial loss

892

8,666

Amortization of prior service cost

(336)

(3,264)

Amortization of transitional obligation

659

6,403

¥2,022$19,646

Net periodic retirement benefit
expenses for defined benefit
pension plans(5) Remeasurements of defined benefit plans
Remeasurements of defined benefit plans (before related
tax effects) consisted of the following:

Unrecognized prior service cost
Unrecognized actuarial gain or loss
Unrecognized net retirement benefit
obligation at transition
Total

Millions ofyen

Thousands of
U.S. dollars¥(2,450)$(23,804)

205

1,991

659

6,403

¥(1,585)$(15,400)(6) Matters related to pension plan assets1)	Ratio of the main components in the total pension plan
assets are as follows:

43

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

Bonds

10%

Stocks67%

Short-term investment fundincluding cash and deposits

6%Life insurance company
general accounts

4%

Others

13%

Total

100%

SENSHU IKEDA HOLDINGS,INC.

Note:
Total pension plan assets include retirement benefit trust ofwhich securities are contributed for the pension plan, which
accounts for 31% of the total.
2)	Setting of long-term expected rates of return on plan
assetsFor the purpose of determining the long-term expected
return on plan assets, the present and anticipatedallocation of plan assets and the present and expectedlong-term rates of return on various assets composing
the plan assets are taken into account.
(7) The assumptions used for actuarial calculations
The assumptions used for actuarial calculations at 31st
March, 2014
1.0%-1.3%
Discount rate
Expected rate of return on plan assets
2.5%
Previous fiscal year(from 1st April, 2012 to 31st March, 2013)
Certain consolidated subsidiaries have defined benefit
pension plans consisting of corporate pension plans andlump-sum payment plans. In addition, increased retirement
benefits are paid for retirement, etc. of employees in certain
circumstances.
Certain consolidated subsidiaries have lump-sum payment
plans as defined benefit pension plans.
(1)	The assets and liabilities of the employees’ retirement
benefit plans at 31st March 2013 consisted of the following:
Millions of yen
2013
Retirement benefit obligation¥(32,008)

Pension plan assets at fair value

29,370Unfunded benefit obligation(2,637)

Unrecognized net retirement benefit
obligation at transition

1,319

Unrecognized actuarial loss

5,206

Unrecognized prior service cost

(2,786)

Net retirement benefit obligation

1,102

Prepaid pension costAccrued retirement benefits for employees

5,613¥(4,511)

Notes:
1.	Increased retirement benefits paid on a temporary
basis are not included.
2.	Certain consolidated subsidiaries apply the simplified
method in calculating retirement benefit obligation.

(2)	Retirement benefit expenses for the years ended 31st
March, 2013 consisted of the following:
Millions of yen
2013
Service cost¥996Interest cost

614

Expected return on plan assets(564)

Amortization of prior service cost

(427)

Amortization of actuarial loss

1,263

Amortization of transitional obligation
Net periodic retirement benefit expenses659¥2,541

Note:
Retirement benefit expenses of consolidated subsidiaries
which apply the simplified method are included in“service cost” collectively.
(3)	The assumptions used in accounting for the above plans
for the years ended 31st March, 2013 were as follows:
2013
Discount rates

1.0%-1.3%

Expected rates of return onplan assets

2.5%

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

20. Contingent Liabilities
Contingent liabilities for guarantee of corporate bonds
included in “Securities,” which were issued by private
placement (Article 2, Paragraph 3 of the Financial Instruments
and Exchange Act of Japan) amounted to ¥7,879 million($76,554 thousand) and ¥12,460 million at 31st March, 2014
and 2013, respectively.

21. Shareholders’ Equity
Japanese banks, including the Company, are required tocomply with the Banking Act and the Act. The Act stipulates
that neither additional paid-in capital nor the legal reserve isavailable for dividends, but that both may be used to reduceor eliminate a deficit. Under the Banking Act, an amount which
is at least equal to 20% of the aggregate amount of cash
dividends and certain appropriations of retained earnings
associated with cash outlays applicable to each fiscal period
is to be appropriated to the legal reserve until the aggregate
amount of the legal reserve and the capital surplus accountequals 100% of the amount of share capital. The Act also
provides that if the aggregate amount of additional paid-in
capital and the legal reserve exceeds 100% of the amount of

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201444

share capital, the excess may be distributed to theshareholders either as a return of capital or as dividends
subject to the approval of the shareholders.

Number of shares (in thousands)
Year ended 31st
March, 2013
Common stock(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, 2014 and 2013 weresummarized as follows:
Number of shares (in thousands)
1st April,
31st March,2013 Increase Decrease 2014

Note

Outstanding shares:
Common stock

238,458––

First-class preferred stock

7,400

–

7,400

–

Second-class preferred stock

23,125––23,125

–

7,500

–

7,500

268,983

7,500

7,400

269,083

2,352

4

1,088

1,269

3 and 4

–

7,400

7,400

–

5 and 6

2,352

7,404

8,488

1,269

Third-class preferred stockTotal

238,458
1
2

Treasury stock:
Common stock
First-class preferred stock
Total

Notes:
1.	Decrease in outstanding shares of first-class preferred stock(7,400 thousand shares) was due to retirement of treasury
stock.
2.	Increase in outstanding shares of third-class preferred stock(7,500 thousand shares) was due to issuance of new sharesthrough a third-party allotment.
3.	Increase in treasury stock of common stock (4 thousand
shares) was due to acquisition of shares from theshareholders who owned fractional shares less than one
unit.
4.	Decrease in treasury stock of common stock (1,088
thousand shares) consisted of disposal of shares following
the acquisition request from the shareholders who owned
fractional shares less than one voting right (0 thousand
shares), transfer due to exercise of stock option (45thousand shares) and transfer to the Senshu Ikeda Bank
Employees’ Shareholders Association (1,043 thousand
shares).
5.	Increase in treasury stock of first-class preferred stock(7,400 thousand shares) was due to purchase of treasury
stock based on resolution of the Board of Directors.
6.	Decrease in treasury stock of first-class preferred stock(7,400 thousand shares) was due to retirement of treasury
stock based on resolution of the Board of Directors.

45

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

Note

Outstanding shares:

The maximum amount which the Company can distribute as
dividends is calculated based on the non-consolidated
financial statements of the Company and in accordance with
the Act.

Year ended 31st
March, 2014

1st April,
31st March,2012 Increase Decrease 2013
1,192,293–

953,834

238,458

First-class preferred stock

74,000–66,6007,400

12Second-class preferred stock

115,625–

92,50023,125

1

Total

1,381,918– 1,112,934

268,983

Treasury stock:
Common stock
First-class preferred stock
Total

16,9296

14,5832,352

3 and 4

–

7,400

7,400

–

5 and 6

16,9297,406

21,983

2,352

Notes:
1.	Decrease in outstanding shares of common stock (953,834
thousand shares) and outstanding shares of second-classpreferred stock (92,500 thousand shares) was due toreverse stock split.
2.	Decrease in outstanding shares of first-class preferred stock(66,600 thousand shares) consisted of reverse stock split(59,200 thousand shares) and retirement of treasury stock
based on resolution of the Board of Directors (7,400
thousand shares).
3.	Increase in treasury stock of common stock (6 thousand
shares) was due to acquisition of shares from theshareholders who owned fractional shares less than one
voting right (before reverse stock split: 0 thousand shares,
after reverse stock split: 5 thousand shares).
4.	Decrease in treasury stock of common stock (14,583
thousand shares) consisted of reverse stock split (11,630
thousand shares), disposal of shares following theacquisition request from the shareholders who owned
fractional shares less than one voting right (0 thousand
shares, before reverse stock split: 0 thousand shares, after
reverse stock split: 0 thousand shares), transfer due toexercise of stock option (298 thousand shares, before
reverse stock split: 298 thousand shares) and transfer to the
Senshu Ikeda Bank Employees’ Shareholders Association(2,653 thousand shares, before reverse stock split: 2,093
thousand shares, after reverse stock split: 560 thousand
shares).
5.	Increase in treasury stock of first-class preferred stock(7,400 thousand shares) was due to purchase of treasury
stock based on resolution of annual shareholders’ meeting.
6.	Decrease in treasury stock of first-class preferred stock(7,400 thousand shares) was due to retirement of treasury
stock based on resolution of the Board of Directors.
(2) Stock subscription rights
The Company resolved to grant stock subscription rights(stock option) to certain directors and executive officers
of its subsidiaries at the Board of Directors’ meeting heldon 31st July, 2013, 31st August, 2012, 28th July, 2011
and 24th February, 2011.
The balance of stock subscription rights granted for stock
option program are ¥68 million ($660 thousand) and ¥63
million at 31st March, 2014 and 2013, respectively.

SENSHU IKEDA HOLDINGS,INC.

Stock option related expenses for the years ended 31st
March, 2014 and 2013 amounted to ¥26 million ($252
thousand) and ¥32 million, respectively.

Price information is as follows:

The stock option outstanding at 31st March, 2014 is asfollows:

Exercise priceDate of resolution
Persons granted

24th February, 2011
Directors of thesubsidiaries: 

22

Executive officers of
the subsidiaries: 19

Date of resolution

Directors of thesubsidiaries: 

Fair value price at grant date
16

Executive officers of
the subsidiaries:18

Number of stock option
by type of shares (*)

Common stock:
Common stock:
84,78072,760Date of grant

15th March, 2011

31st August, 2011

Vesting conditions

To exercise within 10
days after retirement

To exercise within 10
days after retirement

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

From 31st August, 2011 to
the date of retirement

Exercise period

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

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

31st August, 2012

31st July, 2013

Date of resolution
Persons granted

Directors of thesubsidiaries: 

Directors of the
10 subsidiaries: 

Executive officers of
the subsidiaries: 16

10

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

1st October, 2012

2nd September, 2013

Vesting conditions

To exercise within 10
days after retirement

To exercise within 10
days after retirement

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

Exercise period

From 2nd October, 2012 From 3rd September,
to 31st July, 2042
2013 to 31st July, 2043(*)	The number of stock options is converted into the numberof shares after the one-for-five reverse stock split ofcommon stock on 1st August, 2012.
The stock option activity is as follows:
Date of resolution

24th
February,
2011

28th
July,
2011

31st
July,
2013

41,14042,80069,500––––53,800Non-vested:
31st March, 2012-Outstanding
GrantedForfeited
Vested31st March, 2013-Outstanding

–

–

–

–

12,80012,40020,000–28,34030,40049,50053,80031st
August,
2012

31st
July,
2013

517

1

517

–

¥490 ¥535 ¥449

430

Note:
The impact of the one-for-five reverse stock split ofcommon stock on 1st August, 2012 is taken into
consideration.
The method for estimating the fair value price of 2013 stock
option granted in the year ended 31st March, 2014 was asfollows:
Measurement method: Black-Scholes model
Major fundamental factors and assumptions used to measurefair value
Date of resolution
Estimated remaining outstanding period *2

Number of stock option
by type of shares (*)

31st
August,2012

517

Volatility of stock price *1

Executive officers of
the subsidiaries: 16

28th
July,
2011

¥1 ¥1 ¥1Average stock price at exercise

28th July, 2011

24th
February,
2011

31st July, 201334.79%
3.614years

Estimated dividend *3

3.112%

Interest rate with risk free *40.178%*1	Actual stock price during the period (from 21st January,
2010 to 2nd September, 2013) corresponding to theestimated remaining outstanding period*2	For each director or executive officer in office, the difference
between “the average term of office of retired directors or
executive officers” and “the years in office of the director or
executive officer at the time stock options were granted”
was calculated, and if said difference was less than 0.8
years, the average of the estimated remaining outstanding
period was calculated using 0.8 years, by taking into
account the period remaining to the next annual
shareholders’ meeting.
*3	¥15 of latest annual dividend (including the effect of reverse
stock split) /¥482 of stock price on the base 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.

Vested:31st March, 2012-Outstanding

–

–

–

–

Vested12,80012,40020,000–Exercised

12,80012,40020,000–Forfeited

–

–

–

–

–

–

–

–

31st March, 2013-Outstanding(*)	The number of stock options is converted into the numberof shares after the one-for-five reverse stock split ofcommon stock on 1st August, 2012.

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201446

22. Other Operating Income

26. Dividends

Other operating income for the years ended 31st March, 2014
and 2013 consisted of the following:

Cash dividends paid during the fiscal year ended 31st
March, 2014

Thousands of
U.S. dollars

Millions of yen
2013

2014
Gain on sales of securities andtrading account securities
Other
Total

2014

Resolution by annual shareholders’ meeting on 26th June,
2013
Dividend amount Dividends per share¥6,192 ¥15,361 $60,163
740

1,182

7,190

¥6,933 ¥16,543 $67,363

Type ofstock
Commonstock

Recorddate

Effective Millions Thousands ofdateof yen U.S. dollars

Thousands of
U.S. dollars

Millions of yen
2013

2014
Gain on money held in trust

384

138

3,731

Other

9,373

11,30891,070¥15,636 ¥11,801 $151,923

Common stockThousands of
U.S. dollars

Millions of yen
2013

Record date

Dividend amountMillionsof yenDividends per share

Thousands of
U.S. dollars

Yen3,575 $

34,735 ¥15 $0.14

Second-classpreferred stock ¥

1,275 $

12,388¥1,020 divided $ 9.91 divided
by 18.5by 18.5

Cash dividends paid during the fiscal year ended 31st
March, 2013

Loss on redemption of debt securities

–

5,710

–

Loss on devaluation of debt securities

3,367

–

32,714

275

149

2,671

¥6,592 ¥7,290 $64,049

Resolution by annual shareholders’ meeting on 28th June,
2012

Type of stock
Common stock

Record date Effective date

Dividend
amountDividends
per share

Millions of
yen

Yen

31st March, 2012 29th June, 2012 ¥3,574 ¥3First-class
31st March, 2012 29th June, 2012¥ 196 divided
preferred stockby 18.5¥784

25. Other Expenses
Other expenses for the years ended 31st March, 2014 and2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2014

2013

2014

Second-class
31st March, 2012 29th June, 2012¥ 204 divided¥1,275
preferred stockby 18.5

Cash dividends with record dates falling in the fiscal year
ended 31st March, 2013 and effective dates coming after
the end of the fiscal year

Provision for possible loan losses ¥745 ¥7,878 $7,238

47

U.S. dollars

¥

2014

Loss on sales of debt securities ¥2,948 ¥1,431 $28,643

Write-offs of loans and bills discounted

3,984

4,646

38,709Loss on sales of equity securities

480

976

4,663

Type of stock

Loss on devaluation of equity securities

104

327

1,010

Common stock

Loss on money held in trust

603

202

5,858

Other

7,732

8,266

75,126

Total

Effective date

Retained earnings 31st March, 2014 30th June, 2014

Second-class
Retained earnings 31st March, 2014 30th June, 2014
preferred stock

Common stock

Other operating expenses for the years ended 31st March,2014 and 2013 consisted of the following:

2014

Source ofdividends

Types of stock

Types of stock

24. Other Operating Expenses

Total¥980 divided $9.52 divided
by 18.5by 18.5

Cash dividends with record dates falling in the fiscal year
ended 31st March, 2014 and effective dates coming after
the end of the fiscal year

2014

Gain on sales of equity securities ¥5,879 ¥354 $57,122

Other

392 $ 3,808

Second-class
31st March, 27th June,¥1,020 divided $9.91 divided
preferred stock
2013
2013
¥ 1,275 $12,388
by 18.5by 18.5

Other income for the years ended 31st March, 2014 and 2013
consisted of the following:

Total

U.S.
dollars

31st March, 27th June,
2013
2013
¥ 3,574 $34,726 ¥15 $0.14

First-class
31st March, 27th June,
preferred stock
2013
2013
¥

23. Other Income

Yen¥13,650 ¥22,298 $132,627

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

Source of Record
dividends
dateEffective
date

Dividend
amountDividends
per share

Millions of
yen

Yen

Retained 31st March, 27th June,earnings¥3,574 ¥15
2013
2013

First-class
Retained 31st March, 27th June,¥ 980 divided
preferred stockearnings
2013
2013
by 18.5¥392
Second-class
Retained 31st March, 27th June,¥1,020 divided¥1,275
preferred stockearnings
2013
2013
by 18.5

SENSHU IKEDA HOLDINGS,INC.

27. Cash and Cash Equivalentsb.

Operating leases

A reconciliation of cash and due from banks in theaccompanying consolidated balance sheets to cash and cash
equivalents in the accompanying consolidated statements ofcash flows at 31st March, 2014 and 2013 was summarized asfollows:
Thousands of
U.S. dollars

Millions of yen
2013

2014
Cash and due from banks
Deposits other than deposits
with the Bank of Japan
Cash and cash equivalents

2014¥215,658 ¥100,867 $2,095,394(5,505)(9,341)(90,759)

Millions of yen

Thousands of
U.S. dollars¥3,219$31,276

Fixed assets

219

21,278Goodwill

951

9,240

Current liabilities

Future minimum lease payments under non-cancellable
operating leases subsequent to 31st March, 2014 wereas follows:Year ending 31st MarchMillions of yen

Thousands of
U.S. dollars

2015

¥691

$6,7132016 and thereafter
Total

5,313

51,622¥6,004$58,336¥206,317 ¥95,361 $2,004,634

Main components of assets and liabilities of the company that
became a newly consolidated subsidiary following theacquisition of its shares by the Company
Main components of assets and liabilities of the newly
consolidated Senshu Ikeda Tokai Tokyo Securities Co., Ltd. atthe start of consolidation following the acquisition of its sharesby the Company, along with the relation between its
acquisition cost and acquisition-related expenditures (net) are
as follows:

Current assets

As Lessee

29. Income Taxes
Income taxes applicable to the Company and its domestic
subsidiaries comprise corporate tax, inhabitants’ taxes andenterprise tax which, in the aggregate, resulted in a statutory
tax rate of 37.9% and 70% for the years ended 31st March,2014 and 2013, respectively.
The tax effect of temporary differences which gave rise tosignificant portions of the deferred tax assets and liabilities at
31st March, 2014 and 2013 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2013

2014

2014

Deferred tax assets:
Reserve for possible loan losses ¥31,867 ¥35,348 $309,628(1,022)(9,930)

Fixed liabilities

(2)

(19)

Provision for employees’ bonuses

599

649

Minority interests(965)(9,376)

Accrued retirement benefits for employees

–

3,275

–

Acquisition cost of shares

2,400

23,319Net defined benefit liability

1,791

–

17,401

Cash and cash equivalents––

Balance: Expenditure for theacquisition¥2,400$23,319

28. Leasesa.

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

5,820

Loss on devaluation of securities

6,747

8,144

65,555

Tax loss carryforwards

16,562

17,273160,921

Depreciation

777

762

7,549

Net unrealized loss on availablefor-sale securities

3,680

3,088

35,755

Other

3,350

3,693

32,549Gross deferred tax assets

65,377

72,236635,221

Valuation allowance(35,831)(40,576)(348,144)

Total deferred tax assets

29,54531,659287,067

Non-taxable accrued dividend income

(324)

(354)

(3,148)Net unrealized gain on availablefor-sale securities(2,991)(1,871)(29,061)

(14)

(23)

(136)

(3,330)(2,249)(32,355)

Deferred tax liabilities:

Other
Total deferred tax liabilities
Net deferred tax assets¥26,215 ¥29,409 $254,712

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201448

A reconciliation of the statutory tax rate to the effective tax rate
for the years ended 31st March, 2014 and 2013 was asfollows:
2013

2014
Statutory tax rate

37.9%

37.9%

Permanently non–taxable income

(0.0)

(0.8)

Permanently non–deductible expenses

0.3

0.5

(26.6)(14.5)Per capita portion of inhabitants’ taxes

0.5

0.7

Unused tax loss carryforwards that
had expired–

1.0

Valuation allowance

Decrease in deferred tax assets due
to changes in tax rate

1.7

Other

(1.0)

Effective tax rate

12.8%

–
(3.8)
21.0%

Revision to the amounts of deferred tax assets and deferred
tax liabilities following changes in the corporate tax rate, etc.
Following the promulgation of the “Act for Partial Amendmentof the Income Tax Act, etc.” (Act No. 10, 2014) on 31st March,
2014, Special Corporation Tax for Reconstruction will be
discontinued for years beginning on or after 1st April, 2014.
Accordingly, the effective statutory tax rate used to calculatedeferred tax assets and deferred tax liabilities was changed
from 37.96% to 35.59% with respect to the temporary
differences expected to be eliminated in the year beginningon 1st April, 2014 and other matters. Due to such change intax rate, deferred tax assets decreased ¥537 million ($5,217
thousand) and net unrealized gain (loss) on available-for-salesecurities decreased ¥5 million ($48 thousand), while income
taxes-deferred increased ¥531 million ($5,159 thousand).

30. Comprehensive Income
Reclassification adjustments and tax effect amounts of othercomprehensive income for the year ended 31st March, 2014
and 2013 were as follows:
Thousands of
U.S. dollars

Millions of yen
2013

2014

2014

Unrealized gain (loss) on
available-for-sale securities:
Amount for the year¥(3,107) ¥23,589 $(30,188)

Reclassification adjustment(3,823)(2,229)(37,145)

Amount before tax effect(6,931)

21,359(67,343)

Tax effect amount(999)(1,645)(9,706)

Net unrealized gain (loss) on
available-for-sale securities(7,931)

19,714(77,059)

Amount for the year

(43)

(19)

(417)

Reclassification adjustment

42

25

408

Amount before tax effect

(0)

5

(0)

Tax effect amount

0

(2)

0

Net unrealized gain on
deferred hedges

0

2

0

Unrealized gain (loss) on deferred hedges:

Total other comprehensive income ¥(7,930) ¥19,717 $(77,050)

31.	Segment Information and RelatedInformation
Segment information
Reportable segment information is omitted because the Groupis engaged only in banking business and “other” in ouroperating results, including leasing business was immaterial
for the years ended 31st March, 2014 and 2013.
(1) Related informationa. Information about services
For the year ended 31st March, 2014
Millions of yen
Lending

Securities trading
and investment

Other

Total

Income from external¥51,103 ¥22,831 ¥30,920 ¥104,855
customers

For the year ended 31st March, 2013
Millions of yen
Lending

Securities trading
and investment

Other

Total

Income from external¥54,701 ¥27,321 ¥29,535 ¥111,558
customers

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

49

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

SENSHU IKEDA HOLDINGS,INC.

For the year ended 31st March, 2014

liability management (“ALM”) and utilizes derivative
contracts as a part of ALM.

Thousands of U.S. dollars
Lending

Securities trading
and investment

Other

Total

Income from external$496,531 $221,832 $300,427 $1,018,801
customersb. Information about geographical areas(i) Income
Information about income has not been presented
as income from external customers inside Japanaccounts for more than 90% of the consolidated
income for the years ended 31st March, 2014 and2013.
(ii) Tangible fixed assets
Information about tangible fixed assets has notbeen presented as tangible fixed assets inside
Japan accounts for more than 90% of theconsolidated tangible fixed assets at 31st March,2014 and 2013.
c. Information about main customers
Information about main customers has not beenpresented as there is no income from particularcustomer which accounts for more than 10% of theconsolidated income for the years ended 31st March,2014 and 2013.
(2) Other information about reportable segments
Other information about reportable segments has notbeen presented as the Group is engaged only in banking
business for the years ended 31st March, 2014 and 2013.

32.	Related Party Transactions
There were no transactions between a consolidated subsidiaryand related parties for the years ended 31st March, 2014 and2013.

33.	Financial Instruments and Related
Disclosures
1.

General Information(1) Policy for financial instruments
The Group, whose core operation is The Senshu Ikeda
Bank, Ltd. (the “Bank”), is engaged in the various
financial services as a regional financial institution. The
Group holds financial assets and liabilities which are
subject to fluctuations in the interest rates and market
prices in the principal businesses such as deposit-taking
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 and(2) Contents of financial instruments and their risks
Financial assets held by the Group mainly consist of loans
to domestic corporate and individual customers, which
are exposed to credit risk arising from customers’
nonperformance of contractual obligations and interest
rate movement risk. Securities held by the Groupprincipally consist of equity securities, debt securities andinvestment trusts, which are held for pure investment
purpose and strategic investment purpose as availablefor-sale securities and partially, for holding to maturity andtrading purposes. These financial assets are exposed tocredit risk of issuers and market risk associated withinterest rates, stock prices and foreign exchanges.
Deposits which are major financial liabilities are exposed
to liquidity risk that unexpected cash flow might arise. In
addition, other fund raising sources are exposed to theliquidity risk that necessary fund might not be secured
when the Group fails to utilize the market under certain
circumstances, or that the Group might be obliged tofund at more unfavorable interest rates than normal. In
addition, these financial liabilities are exposed to the riskof fluctuations in interest rates as well as financial assets.
The Group uses derivative contracts to meet thecustomers’ needs and principally as a means of risk
control over the assets and liabilities. In addition, as apart of trading activities (to earn short-term trading gains),
futures instruments including equity and debt securities
are utilized. These derivatives are exposed to the credit
risk (counterparty risk) arising from customers’
nonperformance of contractual obligations and market
risk arising from the fluctuations in interest rates, stock
prices, foreign exchanges, etc.
(3) Risk management system for financial instruments
The Group has established the risk control department
independent from front offices and defines basic risk
management policies. Specifically, the risk management
system and various rules including the basic policy onrisk control are determined by the Board of Directors, andthe responsible functions by risk categories and theintegrated risk control function are clearly defined. In
addition, the “Risk Management Committee” and the“ALM Committee” have been established to monitor therisk profiles of the Group and discuss management issues
as well as risk control measures. And such matters arereported to the Board of Directors and accordingly,
effective risk management system at the managementlevel is structured.
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,

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201450

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

51

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

by balancing the foreign exchange positions where
possible.
(ii) Derivative transactions
With respect to derivative transactions, theCompany has established an internal control
system including segregation of duties of thedepartments responsible for execution oftransactions, risk control and operation
administration and complies with the various market
risk control rules.
(iii)Quantitative information of market risk
The Group monitors the value at market risk offinancial instruments, such as deposits, loans andbills discounted and securities, using VaR everyday
as the change in market risk is larger than otherrisks.
The Group calculates the value at market risk
according to the variance-covariance approach(holding period–120 business days, confidence
interval–99.0%, and observation period–240
business days).
The value of market risk on financial instrumentswas ¥27.5 billion ($267.1 million) for interest rateand ¥7.2 billion ($69.9 million) for stocks at 31st
March, 2014. The value of market risk as a wholewith correlation in consideration was ¥35.9 billion($348.8 million).
The Group carries out back-testing to compare themodel-calculating VaR of securities on the banking
activities which influenced by market fluctuation(holding period–one business day) with real gain
and loss in order to verify their accuracy. As real
loss exceeded the model-calculating VaR threetimes for the year ended 31st March, 2014, theGroup considers that the model calculates thevalue of market risk with sufficient confidence level.
However, VaR, which calculates the value of market
risk based on past fluctuations in the market,
sometimes cannot calculate the value of market risk
accurately under the condition that market
environment changes abruptly.
d. Liquidity risk management associated with fund raising
The Group conducts liquidity risk control for funding
activities in accordance with the Company’s policy on
liquidity risk control and various liquidity risk control
rules. Specifically, the department responsible for ALM
and the treasury department of the Bank identify theinvestment and funding status of the whole Group on atimely basis and control liquidity risk by securingliquidity of the assets, diversifying the funding
instruments and adjusting the short-term and longterm funding balances considering the market
environments to secure stable fund management.

SENSHU IKEDA HOLDINGS,INC.

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

The carrying value, the fair value and the difference as of 31st
March, 2014 and 2013 are summarized in the following tables:
Note that securities such as unlisted equity securities forwhich fair value is extremely difficult to determine were notincluded in the following tables (See (Note 2) below):

Carrying
value

Fair value Difference¥100,867 ¥100,867 ¥–Call loans and bills bought

5,603

5,603

–

Monetary claims bought (*1)

946

946

–

Trading account securities:
Trading securities
Money held in trust

108

108

–

19,00019,000–

Securities:
Held-to-maturity debt securities

48,07948,582503

Available-for-sale securities

1,113,986

1,113,986–

3,526,295

3,546,899

20,603

4,374

4,376

1

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

3,578,225(51,929)

Total assets¥4,819,262 ¥4,840,370 ¥21,107

Deposits¥4,490,736 ¥4,491,736 ¥1,000

Payables under securities
lending transactions

124,915

124,915–

Borrowed money

71,90972,631721

Foreign exchange liabilities

208

208

–

Corporate bonds and notes

50,00051,167

1,167

Total liabilities

Millions of yen
31st March, 2014

31st March, 2013
Cash and due from banks

Foreign exchange assets (*1)

Fair value of financial instruments

Cash and due from banks

Millions of yen
Carryingvalue¥4,737,769 ¥4,740,659 ¥2,889

Derivative transactions (*2)
Fair value Difference¥215,658 ¥215,658 ¥–Call loans and bills bought

775

775

–

Monetary claims bought (*1)

1,121

1,121

–

To which hedge accounting is
not applied
To which hedge accounting is applied
Total derivative transactions¥(615) ¥(615) ¥–
616

616

–

¥1 ¥1 ¥–

Trading account securities:
Trading securities
Money held in trust

122

122

–

27,00027,000–

Securities:
Held-to-maturity debt securities

88,403

88,946542

Available-for-sale securities

1,280,018

1,280,018–

3,565,246

3,583,502

18,256

5,528

5,529

1

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

3,602,329(37,082)

Total assets¥5,183,875 ¥5,202,675 ¥18,800

Deposits¥4,580,769 ¥4,581,200 ¥431

Payables under securities
lending transactions

315,691

315,691–

Borrowed money

118,517

119,132

614

Foreign exchange liabilities

366

366

–

Corporate bonds and notes

70,00071,529

1,529

Total liabilities¥5,085,345 ¥5,087,921 ¥2,575

Derivative transactions (*2)
To which hedge accounting is
not applied
To which hedge accounting is applied
Total derivative transactions¥(336) ¥(336) ¥–
358

358

–

¥22 ¥22 ¥–

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201452

Thousands of U.S. dollars
31st March, 2014
Cash and due from banks

Carrying
value

Fair value Difference$2,095,394 $2,095,394 $–Call loans and bills bought

7,530

7,530

–

Monetary claims bought (*1)

10,891

10,891

–

1,185

1,185

–

262,339

262,339–

Trading account securities:
Trading securities
Money held in trust
Securities:
Held-to-maturity debt securities

858,948864,224

5,266

Available-for-sale securities

12,437,019

12,437,019–

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

35,001,253(360,299)
34,640,944

34,818,324

177,380

53,71153,721

9

Total assets$50,368,004 $50,550,670 $182,666

Deposits$44,508,054 $44,512,242 $4,187

Payables under securities
lending transactions

3,067,343

3,067,343–

Borrowed money

1,151,544

1,157,520

5,965

Foreign exchange liabilities

3,556

3,556

–

Corporate bonds and notes

680,139

694,996

14,856

Total liabilities$49,410,658 $49,435,687 $25,019

Derivative transactions (*2)
To which hedge accounting is
not applied
To which hedge accounting is applied
Total derivative transactions$(3,264) $(3,264) $–
3,478

3,478

–

$213 $213 $–(*1)	General and specific reserves for loan losses
corresponding to loans are deducted. With respect toreserve for loan losses related to monetary claims bought
and foreign exchange assets, carrying value is shown,net of reserve, since the amount is insignificant.
(*2)	Derivative transactions include all derivatives recorded inother assets and other liabilities. Assets and liabilities
arising from derivative transactions are shown on a net
basis.
(Note 1)	Valuation method for the fair value of financial
instruments
Assets:Cash and due from banks
The carrying value of due from banks without maturities ispresented as the fair value since the fair value approximatesthe carrying value. The carrying value of due from banks withmaturities is presented as the fair value since the fair value
approximates the carrying value due to remaining maturitiesof less than one year.

53

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

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

SENSHU IKEDA HOLDINGS,INC.

since the fair value approximates the carrying value
considering the expected repayment schedule and interest
rate conditions.

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

Foreign exchange assets
Foreign exchange assets consist of foreign currency deposits
with other banks (due from other foreign banks), export bills
and traveler’s checks, etc., (purchased foreign bills) and loans
on notes using import bills (foreign bills receivables). The
carrying value of these items is presented as the fair value,
since the fair value approximates the carrying value due tobeing deposits without maturity or having short contract terms(less than one year).

Derivative transactions:
See Note 34.
(Note 2)	Financial instruments whose fair value is extremely
difficult to determine at 31st March, 2014 and 2013
were as follows: These securities are not included in“Securities” under “Assets” as part of the fair value
information of financial instruments.

Liabilities:
Deposits
The amount payable on demand as of the balance sheet date(i.e., the carrying value) is considered to be the fair value ofthe demand deposit. The fair value of time deposits isdetermined using the discounted present value of future cash
flows, grouped by certain maturity lengths. The discount rateused is the interest rate that would be applied to newly
accepted deposits. The carrying value of deposits whose
remaining maturity is within the short-term period (less than
one year) is presented as the fair value since the fair value
approximates the carrying value.
Payables under securities lending transactions
The carrying value is presented as the fair value since the fairvalue approximates the carrying value due to remaining
maturities of less than one year.
Borrowed money
The carrying value of floating rate borrowed money ispresented as fair value. This is because it reflects the market
interest rate in the short-term period, also the creditworthinessof the Company and the consolidated subsidiaries have notsignificantly changed since the borrowed money was
originated and accordingly fair value approximates the
carrying value. The fair value of fixed rate borrowed money iscalculated as the present value of expected future cash flows
from the aggregated value of principal and interest (theaggregated value of principal and interest using the interest
rate swap rate, in case of borrowings subject to special
treatment of hedge accounting for interest rate swaps) on
these borrowings grouped by certain maturity lengths, which
is discounted at an interest rate applicable to similarborrowings. The carrying value of borrowed money whose
remaining maturity is due within the short-term period (lessthan one year) is presented as the fair value since the fairvalue approximates the carrying value.

Thousands of
U.S. dollars

Millions of yen
2013

2014

2014

Unlisted equity securities (*1) (*2) ¥5,763 ¥5,652 $55,994
Investments in partnerships (*3)
Other
Total

1,068

1,241

10,3765

4

48¥6,837 ¥6,899 $66,430(*1)	No market price is available for unlisted equity securities
and the fair value is not disclosed since it is extremely
difficult to determine the fair value.
(*2)	The Company recognized impairment losses on unlisted
equity securities in the amount of ¥96 million ($932
thousand) and ¥114 million for the years ended 31st
March, 2014 and 2013, 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.

Foreign exchange liabilities
Foreign exchange liabilities consist of foreign bills sold andforeign bills payable. The carrying value is presented as thefair value since the fair value approximates the carrying value
due to remaining maturities of less than one year.

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

54

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

Millions of yen

Millions of yen

31st March, 2014
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:

Due inone yearor less

Due after Due after
one year three years
throughthroughthree years five years¥163,565 ¥– ¥–
775

–

–

31st March, 2013
Due from banks

5,603

–

946

–

–

359,739

198,046

224,855

7,000

21,70019,4007,000

21,700

3,400

–

–

16,000205,455

Securities:––

389,430

382,957

Corporate bonds

14,10033,50040,800Other–

25,00028,500

2,800

–

5,000

13,000

Held-to maturity debt securities:

Available-for-sale securities
with maturities:–

352,739

176,346

Government bonds

316,500

41,0002,000

Local government bonds

13,05639,322

1,770

173,789355,930

342,157

Corporate bonds

18,77367,362

56,247

Government bonds

105,000

134,100

15,000

Other

4,409

28,662

145,437

Local government bonds

25,04923,4531,350

Loans and bills discounted (*1, 2)

682,522574,916

427,255

Corporate bonds

42,914

114,038

50,932Foreign exchanges assets

4,376

–

–

826

84,338274,875

684,986

613,908

436,033

5,529

–

–

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

Total

¥1,094,444 ¥772,963 ¥652,110
Millions of yen¥1,043,868 ¥1,003,339 ¥818,991
Millions of yen

31st March, 2014
Due from banks

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

31st March, 2013
Due from banks

–

–

–

–

–

49,13034,635

104,762

Securities:

–

–

–

–

–

–

73,402

52,910105,555–––

Government bonds

–

–

–

Corporate bonds

–

–

–

Government bonds

Other

–

–

–

Local government bonds

73,402

52,910105,555

35,5002,500–

Local government bonds

950

2,580

–

Corporate bonds

2,463

304

57,405

Available-for-sale securities
with maturities:
Government bonds

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

34,48847,52648,149288,451

324,227

1,184,523–––¥361,853 ¥377,138 ¥1,290,079

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

¥– ¥– ¥–

Monetary claims bought (*1)

Monetary claims bought (*1)
Held-to maturity debt securities:

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

Call loans and bills bought

Call loans and bills bought
Securities:55¥41,255 ¥– ¥–

Monetary claims bought (*1)

1,121

–

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

Call loans and bills bought

187,889

14,100Due inone yearor less

Held-to maturity debt securities:

–

–

–

–

Corporate bonds

–

–

–

Other

–

–

–

49,13034,635

104,762

21,00018,500

–

740

1,050

–
49,493Available-for-sale securities
with maturities:

Corporate bonds

2,724

303

Other

24,666

14,78255,268279,146

326,430

1,212,848–––

Loans and bills discounted (*1, 2)
Foreign exchanges assets
Total¥328,277 ¥361,066 ¥1,317,611

SENSHU IKEDA HOLDINGS,INC.

Thousands of U.S. dollars

31st March, 2014
Due from banks

Due inone yearor less

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

7,530

–

–

Monetary claims bought (*1)

10,891––

1,825,582

3,783,812

3,720,919

136,999

325,495

396,424

Held-to maturity debt securities:
Government bonds

Millions of yen$1,589,244 $– $–Call loans and bills bought
Securities:(Note 4)	Repayment schedule of bonds, borrowed money andother interest bearing liabilities.

31st March, 2014
Deposits (*1)

¥4,239,778 ¥272,112 ¥39,004

Payables under securities
lending transactions

315,691––

Borrowed money

85,07515,007

1,247

–

–

–

–

–

242,907

136,999

276,914

27,205–48,581

126,311

1,688,583

3,458,317

3,324,494

Government bonds

1,020,209

1,302,953

145,744

Local government bonds

243,383

227,876

13,116

Corporate bonds

416,964

1,108,025

494,8698,025

819,452

2,670,763

Deposits (*1)

6,655,518

5,964,904

4,236,620

53,721––

Payables under securities
lending transactions

Corporate bonds
Other
Available-for-sale securities
with maturities:

Other
Loans and bills discounted (*1, 2)
Foreign exchanges assets
Total$10,142,518 $9,748,727 $7,957,549
Thousands of U.S. dollars

31st March, 2014
Due from banks

Total¥4,640,544 ¥287,120 ¥40,251
Millions of yen

31st March, 2014

Borrowed money
Corporate bonds

–

–

–

–

–

713,194

514,088

1,025,602

31st March, 2013

–

–

–

–

–

–

Borrowed money

Corporate bonds

–

–

–

Corporate bonds

Other

–

–

–

Total

713,194

514,088

1,025,602

344,928

24,290–Local government bonds

9,230

25,068–

Corporate bonds

23,931

2,953

557,763

Other

335,095

461,776

467,829

2,802,671

3,150,281

11,509,162

–

–

–

Government bonds

Loans and bills discounted (*1, 2)
Foreign exchanges assets
Total$3,515,866 $3,664,380 $12,534,774

15,00055,000–Due after Due after
Due in one one year three years
year orthroughthroughlessthree years five years

124,915––

42,144

2,161

2,427

–

–

–

¥4,301,152 ¥291,888 ¥41,344
Millions of yen

31st March, 2013
Payables under securities
lending transactions
Borrowed money
Total

Due after
Due after
five years seven years
Due after
throughthroughseven years ten years ten years¥455 ¥1,041 ¥–

Deposits (*1)

Corporate bonds(*1)	Loans and bills discounted and monetary claims bought
do not include ¥70,204 million ($682,122 thousand) and¥75,113 million of receivables such as those due frombankrupt, effectively bankrupt or likely to becomebankrupt borrowers at 31st March, 2014 and 2013,
respectively, since it is not certain when they can becollected or redeemed.
(*2)	Overdraft accounts of loans are shown under “Due in one
year or less.”––¥4,134,093 ¥289,726 ¥38,917

Deposits (*1)

Government bonds

Available-for-sale securities
with maturities:–
17,032Millions of yen

Payables under securities
lending transactions

Held-to maturity debt securities:–154¥16,038 ¥72,656 ¥–$– $– $––

Due after
Due after
five years seven years
Due after
throughthroughseven years ten years ten years¥883 ¥623 ¥–Due after
Due after
five years seven years
Due after
throughthroughseven years ten years ten years

Monetary claims bought (*1)
Securities:

Corporate bonds

Total

Call loans and bills bought

Due after Due after
Due in one one year three years
year orthroughthroughlessthree years five years

–

–

–

8,176

17,000––50,000–¥8,631 ¥68,041 ¥–

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

56

Thousands of U.S. dollars

31st March, 2014
Deposits (*1)

Due after Due after
Due in one one year three years
year orthroughthroughlessthree years five years

Millions of yen
Contract amount/notional principal$41,194,889 $2,643,917 $378,973

Payables under securities
lending transactions

3,067,343––

Borrowed money

826,127

145,812

12,116

Corporate bonds

–

–

–

Total

(1)	Currency related derivatives at 31st March, 2014 and2013$45,088,845 $2,789,739 $391,090

31st March, 2014

Deposits (*1)
Payables under securities
lending transactions

Currency swaps

Currency options:$8,579 $6,053 $–

Total

–

1,496

165,487–

Corporate bonds

145,744534,395–

Total

Selling¥44,331

12

(478)

(478)

Buying¥9,463–

69

69

Selling¥10,507 ¥6,591

(400)

291

Buying¥10,507 ¥6,591

400

(167)

¥(336) ¥(212)Millions of yen
Contract amount/notional principal$155,829 $705,946 $–(*1)	Demand deposits are disclosed under “Due in one year
or less” of deposits.
(*2)	As described in “Significant subsequent events” of notes
to consolidated financial statements, borrowed money of
The Senshu Ikeda Bank, Ltd., one of the Company’s
subsidiaries, whose borrowing of ¥8,000 million ($77,730
thousand) were repaid before maturity on 9th June, 2014,is disclosed under “Due in one year or less” of borrowed
money.

31st March, 2013

Total

Over
one year

Fair
value

Valuation
gain (loss)

Over-the-counter transactions:
Currency swaps¥46,607 ¥36,111 ¥75 ¥75

Forward foreignexchange contracts:
Selling¥35,471

–

(673)

(673)

Buying¥8,260

–

(17)

(17)

Selling¥6,938 ¥4,792

(351)

271

Buying¥6,938 ¥4,792

351

(186)

Currency options:Total¥(615) ¥(530)

34. Derivatives

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

1.	Derivative transactions to which hedge accounting is notapplied
31st March, 2014

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

Valuation
gain (loss)¥34,606 ¥22,934 ¥72 ¥72–

Borrowed money

Fair
value

Forward foreignexchange contracts:

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

Over
one year

Over-the-counter transactions:Thousands of U.S. dollars

31st March, 2014

Total

Total

Over
one year

Fair
value

Valuation
gain (loss)

Over-the-counter transactions:
Currency swaps$336,241 $222,833 $699 $699

Forward foreignexchange contracts:
Selling$430,732

116(4,644)(4,644)

Buying$91,945

–

670

670

Selling$102,089 $64,040(3,886)

2,827

Buying$102,089 $64,040

3,886(1,622)Currency options:Total$(3,264) $(2,059)

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

57

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

SENSHU IKEDA HOLDINGS,INC.

2.	Derivative transactions to which hedge accounting isapplied

31st March, 2013

With respect to derivatives to which hedge accounting isapplied, contract amount or notional principal and fairvalue at the balance sheet date by transaction type andhedge accounting method and computation method of thefair value are as follows. Note that contract amount or
notional principal does not represent the market risk
exposure of derivative transactions.

Swap rateapplied tounderlying
debtInterest rate swaps:
Receivable floating
rate/
Borrowed
Payable fixed rate money

¥100

¥–

(*2)

(2)	Currency related derivatives at 31st March, 2014 and2013
31st March, 2014

Millions of yen
Contract amount/notional principal

DeferralCurrency
hedge
swaps
accounting
Forwardforeignexchange
contracts
Total

Major hedged
item

Total

Securities
denominated inforeign currencies ¥5,664–

Securities
denominated inforeign currencies ¥5,165

¥940

¥(3)

–

29,768Over
one year¥––

30,882–

619

Thousands of U.S. dollars

Forwardforeignexchange
contracts

Major hedged
item

Total

Over
one year

Fair
value

Securities
denominated inforeign currencies $55,033

$–

$(0)

–

Total

*1	The fair value of transactions listed on exchanges isdetermined using the last quoted market price at theTokyo Financial Exchange, Inc. or others. The fair value ofover-the-counter transactions is determined by using thediscounted cash flow method, option pricing models orothers.
*2	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 fair value ofinterest rate swaps is considered to be included in the fairvalue of the borrowed money disclosed in Note 33.

Hedge accounting Transaction
method
type

Fair
value

¥616

DeferralCurrency
hedge
swaps
accounting

Over one
Fair
year
value (*1)

Total

Over
one year

Forwardforeignexchange
contracts

Hedge accounting Transaction
methodtype

Millions of yen

Major hedged
item

Total

Contract amount/notional principal

Contract amount/notional principal
Transaction
type

DeferralCurrency
hedge
swaps
accounting

Major hedged
item

31st March, 2014

	There were no interest related derivatives at 31st
March, 2014.

Hedge accounting
methodHedge accounting Transaction
methodtype

Total(1)	Interest related derivatives at 31st March, 2014 and2013

31st March, 2013

Millions of yen
Contract amount/notional principal

Fair
value

¥(0)

359
¥358

289,234–

3,488$3,478

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

35. Business Combination
1.	Name and description of business of the acquired company,
major reasons for the business combination, date of thebusiness combination, legal form of the businesscombination, name of the company after the combination,
percentage of voting rights acquired and major grounds forthe decision to acquire the company(1)	Name and description of business of the acquiredcompany
Name of the acquired company: Senshu Ikeda Tokai
Tokyo Securities Co., Ltd.
Description of business: Operation of financial
instruments business(2)	Major reasons for the business combination
Senshu Ikeda Tokai Tokyo Securities Co., Ltd. is a new
type of securities company rooted in its local community
which has both the solid business foundation of theGroup and the highly professional skills and functions thatare possessed by the Tokai Tokyo Financial Group,particularly in the securities business. By including thecompany within the Group as a subsidiary, the Company
SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201458

aims to accurately respond to the local customers’
diversifying and sophisticating needs in the asset
management field, along with the enhancement of theGroup’s comprehensive financial functions and ability toformulate proposals.
(3)	Date of business combination
September 2, 2013(4)	Legal form of the business combination and name of thecompany after the combination
Legal form of the business combination: Acquisition ofsharesName of the company after the combination: The nameremains unchanged.
(5)	Percentage of voting rights acquired
60.0%(6)	Major grounds for the decision to acquire the company
The Company decided to acquire Senshu Ikeda Tokai
Tokyo Securities Co., Ltd. with the aim of establishing asecurities company that serves its community and local
customers by fully leveraging its extensive network in thebusiness area of the Company and the Senshu Ikeda
Bank as well as the expertise in the operation of financial
instruments business that has been accumulated by Tokai
Tokyo Securities, an independent and full line firm.
2.	Period of performance of the acquired company
incorporated in the consolidated financial statements
From October 1, 2013 to March 31, 2014
3.	Acquisition cost of the acquired company and its breakdown
Acquisition cost: ¥2,400 million ($23,319 thousand)Cost to acquire shares (in cash): ¥2,400 million ($23,319
thousand)
4.	Amounts of acquired assets and assumed liabilities on thedate of business combination and their main items
Cash and due from banks: ¥222 million ($2,157 thousand)
Other assets: ¥264 million ($2,565 thousand)
Property, plant and equipment: ¥11 million ($106 thousand)Intangible assets: ¥2 million ($19 thousand)Total assets: ¥501 million ($4,867 thousand)
Other liabilities: ¥393 million ($3,818 thousand)Total liabilities: ¥393 million ($3,818 thousand)
5.	Amount of goodwill recognized, basis for recognition andmethod and period for amortization(2) Basis for recognition
The amount of difference between the acquisition cost
and the underlying equity of the Group in the net assetsof the acquired company was recognized as goodwill.
(3) Method and period for amortization
The goodwill will be amortized by the straight-line method
over a period of five years.
6.	Approximate amount of impact of the business combinationon the consolidated statements of operations for the fiscal
year under review, assuming that the business combination
had been completed on the first day of the fiscal year underreview
The business combination has a minor impact on the
consolidated statements of operations.

36. Amounts per Share
Amounts per share at 31st March, 2014 and 2013 and for theyears then ended were summarized as follows:Yen
Net assets
Basic

64.77

35.80

0.62

Diluted

64.73

35.77

0.62

Cash dividends
Common stock¥15 ¥15 $0.14

First-class preferred stock¥

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014– ¥ 980 divided $
by 18.5–

Second-class preferred stock ¥1,020 divided ¥1,020 divided $ 9.91 divided
by 18.5by 18.5by 18.5

Net assets per share as of 31st March, 2014 and 2013 werecomputed based on the following information:
Thousands of
U.S. dollars

Millions of yen
2013

2014
Total net assets

2014¥196,397 ¥185,389 $ 1,898,328

Payment for first-class preferred stock–(10,000)–

Dividends for first-classpreferred stock

–

(392)

–
(242,907)

Payment for second-class preferredstock(25,000)(25,000)

Dividends for second-classpreferred stock(1,275)(1,275)(12,388)

payment for third-class preferred stock(15,000)–(145,744)

Stock subscription rights
Minority interests

(68)

(63)

(660)

(10,168)(8,888)(98,795)(51,512)(45,619)(500,505)

Net assets attributable to common stock¥144,884 ¥139,769 $ 1,397,813
as of 31st March, 2014 and 2013
Number of shares of common stock as of 31st
March, 2014 and 2013 used to compute net
asset per share (Unit: thousand shares)

59

2014

¥610.84 ¥591.97 $5.93

Net income:Amounts to be deducted from total net assets(1) Amount of goodwill recognized¥951 million ($9,240 thousand)

U.S. dollars
2013

2014

237,189

236,105SENSHU IKEDA HOLDINGS,INC.

37. Subsequent events

Net income per share for the years ended 31st March, 2014
and 2013 are computed based on the following information:
Thousands of
U.S. dollars

Millions of yen
2013

2014
Net income for the year2014

¥16,604 ¥10,102 ¥161,329

Dividends for first-class preferred stock
based on the resolution at the regular
general shareholders’ meeting

–

(392)

–

Dividends for second-class preferredstock based on the resolution at theregular general shareholders’ meeting(1,275)(1,275)(12,388)(1,275)(1,667)(12,388)

Amounts not attributed tocommon stock shareholders
Net income attributable tocommon stock
Average outstanding numberof shares of common stock(Unit: thousand shares)

1.	Reasons for prepayment
Since the said borrowing comes with a provision that allows
its prepayment, the Company decided to make a
prepayment in order to reduce the amount of interest
expenses.

¥15,329 ¥8,435 ¥148,940

2. 	Amount of prepayment
236,671

235,617

Diluted net income per shareafter adjusting potential shares
Adjustment to net income

Prepayment of borrowed money of a significant amountOn 9th June, 2014, The Senshu Ikeda Bank, Ltd., one of theCompany’s subsidiaries, made the prepayment of asubordinated borrowing made on 8th June, 2009, which was
resolved at the Board of Directors’ meeting held on 30th May,2014.

¥– ¥– $–

Number of increased common
stock (Unit: thousand shares)

138

147

Of which, stock subscription rights

138

147

Note:
Cash dividends per share represent the cash dividends
proposed by the Board of Directors as applicable to thefiscal year.
(Change in accounting policy)“Accounting Standard for Retirement Benefits” (ASBJ
Statement No. 26, 17th May, 2012; hereinafter“Accounting Standard Retirement Benefits”) and“Guidance on Accounting Standard for Retirement
Benefits” (ASBJ Guidance No. 25, 17th May, 2012;
hereinafter “Retirement Benefits Guidance”) have been
applied effective from the end of the fiscal year underreview (except for the provisions specified in the mainclause of Paragraph 35 of the Accounting Standard
Retirement Benefits and the main clause of Paragraph 67of the Retirement Benefits Guidance), while in conformity
to transitional handling provided for in Paragraph 37 of
the Accounting Standard Retirement Benefits.
As a result, net assets per share increased ¥4.31 ($0.04)
in the fiscal year under review.

¥8,000 million ($77,730 thousand)
3. 	Method of prepayment
The total unpaid amount has been prepaid.
4. 	Method of raising funds for prepayment
The total amount of prepayment has been covered by theCompany’s own funds.
5. 	Amount of interest expenses expected to decrease by the
prepayment (approximate value)
Accumulated amount of 5 years: ¥1,592 million ($15,468
thousand)

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

60

Report of Independent Auditors
Senshu Ikeda Holdings, Inc.

61

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

SENSHU IKEDA HOLDINGS,INC.

Non-consolidated Financial Information of The Senshu Ikeda Bank (Unaudited)
Non-consolidated Balance Sheets (Unaudited)
The Senshu Ikeda Bank, Ltd.
As of 31st March, 2014 and 2013

Millions of yen
2014
2013

Thousands of U.S.
dollars (Note 1)
2014

AssetsCash and due from banks
Call loans and bills bought
Monetary claims bought
Trading account securities
Money held in trust
Securities
Loans and bills discounted
Foreign exchange assets
Other assets
Tangible fixed assets
Intangible fixed assets
Prepaid pension cost
Deferred tax assets
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Reserve for possible investment losses
Total assets¥213,940
775
1,121
122
27,0001,399,377
3,584,827
5,529
30,55537,905
7,798
5,683
25,536
18,220(18,188)(1,599)¥5,338,605¥100,384
5,603
946
108
19,0001,193,126
3,563,023
4,376
41,24837,6758,435
5,613
27,592
19,071(32,302)(559)¥4,993,344$2,078,701
7,530
10,891
1,185
262,339
13,596,745
34,831,198
53,721
296,881368,295
75,76755,217248,115
177,030(176,719)(15,536)$51,871,404

Liabilities
Deposits
Negotiable certificates of deposit
Payables under securities lending transactions
Borrowed money
Foreign exchange liabilities
Corporate bonds and notes
Other liabilities
Provision for employees’ bonuses
Accrued retirement benefits for employees
Accrued retirement benefits for directors and corporate auditors
Reserve for reimbursement of deposits
Reserve for point services
Reserve for contingent losses
Acceptances and guarantees
Total liabilities¥4,617,334
11,100315,691
107,383366
70,00022,483
1,444
772
57
328
86
379
18,2205,165,649¥4,512,893
19,900124,915
62,036208
50,00021,213
1,540
4,403
114
315
79
393
19,071
4,817,085$44,863,330
107,850
3,067,343
1,043,363
3,556
680,139
218,451
14,030
7,500
553
3,186
835
3,682
177,030
50,190,915

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

50,71093,93228,513
173,156
(201)
1
(200)
172,956¥5,338,605

50,71093,932
23,812
168,456
7,802
0
7,802
176,259¥4,993,344

49,712
912,670277,040
1,682,432(1,952)
9(1,943)
1,680,489$51,871,404

Liabilities and net assets

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 201462

Non-consolidated Statements of Operations (Unaudited)
The Senshu Ikeda Bank, Ltd.
For the years ended 31st March, 2014 and 2013

Millions of yen
2014
2013

Thousands of U.S.
dollars (Note 1)
2014

IncomeInterest income:Interest on loans and bills discounted
Interest and dividends on securities
Other interest income
Fees and commissions
Other operating income
Recoveries of written-off claims

Gain on contribution of securities to retirement benefit
Other income
Total income¥50,538
11,017272
15,441
6,839
685
2,291
8,117
95,202¥54,633
9,582
175
14,10816,542902—
3,842
99,787$491,041
107,0442,642
150,029
66,4496,655
22,26078,867925,009

6,231
752
1,761
9,443
6,592
49,22652
22
5,358
79,442
15,760

6,772
825
1,721
9,445
7,290
51,54370
25
12,66390,357
9,429

60,542
7,306
17,11091,75064,049478,293505
213
52,059771,881
153,128

(130)
1,144
1,013
¥14,746

(135)
1,489
1,354
¥8,075(1,263)
11,1159,842$143,276

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

63

SENSHU IKEDA HOLDINGS,INC. ANNUAL REPORT 2014

ANNUAL REPORT

2014

Year Ended March 31,2014

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