ASHIKAGA HOLDINGS CO., LTD.
Annual Report 20162016Year Ended March 31, 2016

Printed in Japan

Profile
The Ashikaga Holdings Group is comprised of the five companies of Ashikaga Holdings, Ashikaga Bankand three other consolidated subsidiaries and primarily provides banking services and other financial
services including credit card services. The Ashikaga Bank is a regional bank that operates mainly in thefour prefectures comprising the North Kanto area, primarily Tochigi Prefecture, where its head office islocated, as well as Saitama, Gunma, Ibaraki prefectures and hereafter, “our region.”
As of March 31, 2016, the Bank had a total balance of deposits and negotiable certificates ofdeposit of ¥5,449.4 billion, a balance of loans and bills discounted of ¥4,274.4 billion, and a capitalratio of 8.67%. Its branch network consisted of 152 branches and sub-branch-level offices.

Corporate Philosophy
All of Ashikaga Holdings and Ashikaga Bank’s actions are rooted in the Group corporate philosophy,
comprising the three concepts of our mission, our business approach, and our code of conduct.
Based on our corporate philosophy, we are determined as a bank to justify the trust and meet the expectations of our customers in the community, in our role as a comprehensive financial institution for our region.

Our mission— To contribute to the creation of affluence —As a comprehensive financial institution for our region,
the Ashikaga Bank continues to contribute to the generation of affluence for all in the regional community.

Business approach— In harmony with our region —With a customer-oriented focus,
the Ashikaga Bank is committed to operational soundness in harmony with our region.

Code of conduct— With pride in our hearts and a smile on our faces —In full awareness of our mission and role,
we will tirelessly meet our customers’ expectations and justify their trust,with self-improvement as our watchword, with pride in our hearts and a smile on our faces.

Contents
P.1

Financial Highlights (Consolidated)

P.15-16 Business Integration with Joyo Bank

P.2-3

A Message from the Management

P.17-20 Risk Management at the Ashikaga Holdings Group

P.4-5

Area of Operation

P.21-23 System of Legal Compliance at the Ashikaga Holdings Group

P.6-7

Earnings Highlights

P.24-56 Financial Data

P.8-9

Efforts to Promote Relationship Banking

P.57

Corporate Data / Organization

P.10-11 Corporate Social Responsibility Activities

P.58

List of Directors and Executive Officers / Stock Information

P.12-14 Corporate GovernanceFinancial Highlights (Consolidated)
Millions of Yen*

Years ended March 31

Thousands of U.S. Dollars**

2016

2015

2016

¥6,106,037¥5,864,239$54,189,190

Cash and due from banks

437,509

365,3223,882,759

Loans and bills discounted

4,235,174

4,150,466

37,585,857

Securities

1,296,769

1,207,938

11,508,428

Deposits

5,206,700

5,071,110

46,207,852

Total equity

303,105

287,1212,689,964

Common stock

117,495

117,495

1,042,737

At year-end:
Total assets

For the year:
Total income¥¥ 102,474

96,739$

909,432

Total expenses

72,30475,691

641,680

Net income

22,452

17,076

199,260* Yen amounts have been rounded down to millions of yen.
** U.S. dollar amounts are translated, for reference only, at the rate of ¥112.68=$1 effective on March 31, 2016.

Total Income

Total Expenses

Net Income(¥ billion)(¥ billion)(¥ billion)

120

100

Years ended March 31

100

101.2 98.6

Years ended March 31

108.0
96.7

102.4

Years ended March 31

30

84.2
80

80.2 80.1

75.6

24.3

25

22.4

72.3
20

80

17.1

60
15

60

17.0

15.4

40
10

40
20

20
0

12

13

14

15

16

0

5

12

13

14

15

16

0

12

13

14

15

16

Annual Report 2016

1

A Message from the Management
We would like to express our greatest appreciation
to our stakeholders for their continued support andpatronage of Ashikaga Holdings and the Ashikaga
Bank (hereinafter, “Ashikaga Bank” or “the Bank”).
During the fiscal year under review, although
being partially affected by sluggish exports andproduction activities in developing countries, theJapanese economy continued a mild recovery. The
local economy of Tochigi Prefecture continued a mild

Masanao Matsushita
President and Chief Executive Officer
Ashikaga Holdings Co., Ltd.
The Ashikaga Bank, Ltd.

recovery as well, driven by solid capital investment andorder to assist business startups and second

improvement in consumer spending and employment.

launches, apart from organizing “company founder

Under these circumstances, the Ashikaga

conferences” and “Ashigin Business Plan Grand

Holdings Group (hereinafter, “the Group”) focused on

Prix,” we also set up a staffed representative office infulfilling a smooth financial intermediary function in

Hong Kong, and supported business matching by

the local community and offering financial services

holding overseas business confabs so as to providethat meet its customers’ needs mainly throughsupport for overseas business expansion.

Ashikaga Bank, based on its medium-term

In individual banking, we proactively developed

management plan “Challenges 120 – Valiant

and enriched our customer life event support

challenges toward 120-year anniversary of

products and services. These include enhancing

foundation,” which started in April 2013.

products for investment trust and insurance,

In corporate banking, we made greater contact

organizing seminars for succession consultation andwith customers and actively worked to provide aseminars for parents and their children as a part ofsmooth supply of funds by using multiple financing

the plan to make education on investment activities

methods such as syndicated loan, private placement

available to all. In addition to working on housing andbond and asset-based lending (ABL). Furthermore, inapartment loans, we also made an effort in enhancing

Long-term Vision/ Mid-term Management Targets

Investment ofmanagement
resources

Growth in harmony
with our region

Our region
Provision of services
required by our region
Stable and sustainableprofit baseEnhancement ofoperationalbase	The bank that grows inharmony with our region	Enhance our core strengths
for that purpose

Our mission is contribution to the growth of our region
Become the bank that grows in harmony with our region, in compliance with our corporate
philosophies: “In harmony with our region” and “To contribute to the creation of affluence”.
Enhance our core strength for the growth of our region
A stable and sustainable profit base is required in order to continue to provide services
required by our region and to contribute to the growth of our region for many years
Mid termmanagement target

2

ASHIKAGA HOLDINGS CO., LTD.

Contribute to the regional revitalization through “Enhancement of our corestrength” and “Realization of the integration synergy”

unsecured loan products by launching interest ratefunctions for both approaches,” and “effective

discounts and other campaigns.

relocation of management resources.”

In our branch channel, we renewed the Higashi

On April 25, 2016, we have achieved a final

Branch in May and the Gyoda Branch in June

agreement of business integration through a sharerespectively, and opened the Tsukuba Loan Centerexchange with The Joyo Bank, Ltd. (hereinafter,in October.

“Joyo Bank”) with whom we have already completed

As a consequence of these initiatives, theGroup’s consolidated net income for fiscal 2015
amounted to ¥22.452 billion, exceeding the initial

the processes of basic agreement, on November 2,
2015, subsequent negotiation and examination.
On October 1, 2016, the Group will change its
trade name to “Mebuki Financial Group Inc.”

business forecast.
During fiscal 2016, we have started a new

Together, Ashikaga Bank and Joyo Bank will retain

medium-term management plan “ASHIGIN WAY

and strengthen their full grasp of the region and the2016.” In the new medium-term management plan,customer relationship they have built up over the

our long term vision is to be “the bank that grows inyears, while taking advantage of the extensive

harmony with our region,” and “enhance our core

network etc. created through the businessstrengths for that purpose.” Therefore, we have set

integration, faciliating development and increasing“contribute to the regional revitalization throughbusiness efficiency of comprehensive financial‘enhancement of our core strength’ and ‘realization

services. On the other hand, we will also contributeof the integration synergy’” as our medium-termto the region’s long-term growth by providing

management targets. In order to achieve this goal,comprehensive financial services of greater

we are working on initiatives in line with “contribution

convenience and higher quality.

to the regional economic growth,” “business scopes

To meet the expectations of our stakeholders, allidentifying the business environment,” “theof our executives and employees will make their best

relationship-based approach (through consulting andefforts. We would like to ask all of you for yourbusiness potential assessments) and the function-

continued support.

based approach (pursuing familiarity andJuly 2016

convenience),” “enhancement of management

Key Performance Indicators (KPIs)
FY2016The Ashikaga Bank, Ltd. (Non-Consolidated basis)
Profitability

GrowthEfficiency
Soundness

Gross Business Profit
Net business income (before general allowance for loan losses)¥81bn¥32.5bn

Deposits (Average Balance)¥5.4tnLoans (Average Balance)¥4.2tnLoans to corporate customers (exc. Tokyo branch and prefectural
office branch) + Loans to individual customers¥3.3tnInvestment Trust under Custody¥370bnOHR

50-60%

Capital Adequacy Ratio
Non-performing Loan Ratio

8.5%
less than 2.2%

Annual Report 20163

Area of Operation
Our home market “the North Kanto area”

The Ashikaga Bank mainly operates in the four prefectures comprising the North
Kanto area, primarily Tochigi Prefecture, Where its head office is located, as well as
Saitama, Gunma, and Ibaraki Prefectures.

Kan-Etsu Expressway

Tohoku Expressway

Tochigi
Nikko

Joban Expressway

Gunma

Utsunomiya
Ashikaga
Kita-Kanto Expressway
Within 100km of Tokyo—

Number of
offices

153 offices

Tochigi
Gunma
Ibaraki
Saitama
Others111 offices
15 offices
8 offices
17 offices
2 offices

Ken-O Expressway

Ibaraki

SaitamaTokyo

as of April 30,2016

Economic scale of our operating area
Tochigi National Gunma National Ibaraki National Saitama National
Prefecture Rank Prefecture Rank Prefecture Rank Prefecture Rank

Prefectural gross product (2013)

(¥ trillion)

8.2

16

7.8

17

11.5

11

20.7

5

(thousand)

1,975

18

1,973

19

2,918

11

7,261

5

Prefectural income per capita (2013)  (¥ thousand)

3,255

5

3,054

11

3,138

8

2,859

19

Number of businesses (2014)

91,23420

96,07718

122,835

12

254,161

5

8.2

12

8.2

13

11.3

8

12.0

7

7/3

57 / 45ha

3/5

78 / 102ha

1/1

Population (2015)

Manufactured goods shipped (2014)

(¥ trillion)

New Factory Locations (excluding power supply
40 / 50ha
sector) (2015)
(number / area(ha))

41 / 34ha 6 / 13

Note: The above ranks are the ranks among the 47 prefectures.
Source: Prefectural gross product and prefectural income per capita data is from the Cabinet Office. Population data and Number of businesses arefrom the Ministry of Internal Affairs and Communications. Manufactured goods shipped and new factory locations data come from the Ministryof Economy, Trade and Industry.

Feature01

Geographical advantage, transportation infrastructure

The four prefectures of Tochigi, Gunma, Ibaraki, and Saitama (the four prefectures of North Kanto) are within
100km of Tokyo and are directly connected by the high-speed transportation infrastructure including the Tohoku/
Joetsu bullet trains, the Tohoku, Joban, and Kan-Etsu Expressways, and the Kita-Kanto Expressway. In addition,with the opening of all sections of the Ken-O Expressway in the near future, this region has one of the highest
concentrations of factories in the country.
The population of the four prefectures totals 14 million and exceeds the 13 million population of the Tokyo
metropolitan area. In fiscal 2013, the total production of these four prefectures came to ¥48 trillion, rivaling the
GDP of Norway or Belgium.
4

ASHIKAGA HOLDINGS CO., LTD.

02

FeatureEnchanting "Tochigi Prefecture"

Tochigi Prefecture is a strategic point or the hub of the North Kanto area for transportation and the distribution of
goods. The prefectural capital “Utsunomiya” is about one hour from Tokyo. In the distribution of goods, Tochigi
Prefecture has a close relationship with Tokyo and three other North Kanto prefectures. The region has built up agood balance of various industries, among which are transportation equipment, such as automobiles and aircraft,and pharmaceutical and medical-related industries that have located factories here that serve as their nationwide
core. There are also many SMEs with highly developed technological capabilities and Tochigi has the distinctive
feature of being known as Monozukuri (manufacturing) Prefecture.
Furthermore, Tochigi is also an agricultural prefecture that plays a role as a base for the supply of food to theTokyo metropolitan area and many of its agricultural products are ranked as the nation’s top.

03

FeatureAbundant tourism resources

The area’s tourism resources are abundant and include UNESCO World Heritage
sites of "two Shinto shrines and one Buddhist temple located in Nikko", "Tomioka
Silk Mill and Related Sites"and the famous hot springs resorts of Kinugawa, Nasu
and Kusatsu. The area is full of enchantment becauseof its ability to attract tourists not only from the Tokyo

Yomeimon Gate in“Nikko Toshogu Shrine”

metropolitan area, but also from all over the world. It israre to have several world heritage sites within one’s area of operation, and locations
such as the “Ashikaga Gakko” and the “Kodokan” have been awarded Japan
Heritage status, so there is hope that the tourism industry will bring about an
The oldest school in Japan“Ashikaga Gakko”

Feature04

economic ripple effect.

Seeking to demonstrate its financial intermediary function
leveraging its growth potential as a widely operating regional bank

Meanwhile, Saitama and Gunma prefectures are near Ashikaga City, the birthplace of the Bank, where it has
opened many branches from very early on. Saitama Prefecture is a large market that rivals the other threeprefectures combined in economic scale, and with 17 branches already setup within Saitama Prefecture, theBank has a befitting business base for the Prefecture’s large economic scale. As a widely operating regionalbank, it conducts sales activities that leverage features and growth potential of local operating areas. As a local—

financial institution, it is working to contribute to the development of local communities.

The Bank’s Position in Tochigi Prefecture

Agricultural cooperatives

Ashikaga Bank
43.6%

5.7%

Shinkin banks andcredit associations
10.5%
Other banks
in Japan
5.1%

Loans andBills Discounted(March 2015)

Agricultural cooperatives
15.3%

Shinkin banks andcredit associations
12.5%

Ashikaga Bank
38.4%

Deposits(March 2015)

Other banks in Japan

7.3%
Second-tier regional banks
22.9%

Other regional banks
12.0%

Second-tier regional banks
20.3%

Other regional banks
5.9%

Annual Report 20165

Earnings Highlights
Major business indicators (Ashikaga Bank, non-consolidated)
Gross business profit

Expenses and Core OHR

Gross business profit

Personnel
Non-personnel(¥ billion)

Core gross business profit(¥ billion)

80.0

90.0

80.0

79.9

78.6

80.5 80.1

62.3

84.3 83.5

70.0

40.0

60.0

20.0

FY3/14

FY3/15

Core OHR
(%)

70

59.9

56.3

0

FY3/16Gross business profit increased by ¥3.7 billion year on year due to anincrease in interest income and fees and commission.
Core gross business profit after deducting the gains (losses) on
bonds including government bonds increased by ¥3.3 billion year on
year.

50
2.1

48.0

2.3

2.8

40

19.6

18.8

30

26.6

26.0

25.3

20

FY3/14

FY3/15Net business income(¥ billion)

Ordinary profit

30.0

31.0

29.6

32.5 32.0

32.1
30.0

20.0

10.0

10.0

FY3/14

39.8
35.4

20.0

0

FY3/150

Net income(¥ billion)

40.0

37.3 36.4

FY3/16

10

Overhead costs declined by ¥0.9 billion year on year.
Core overhead ratio (Core OHR) with also improved by 3.6 points
year on year.

Ordinary profit and Net income

Core net business income

47.0

20.1

Net business income and Core net business income
40.0

60

60.0
48.9

50.0

Taxes

0

FY3/16

Net business income increased by ¥4.7 billion year on year due tofactors such as an increase in core gross business profit and adecrease in overhead costs.
Core net business income after deducting the gains (losses) on
bonds including government bonds also increased by ¥4.3 billion
year on year to ¥36.4 billion.

30.8

29.7

19.7

FY3/14

FY3/15

FY3/16

Ordinary profit increased by ¥10.0 billion year on year due to anincrease in core net business income and decrease in credit related
costs. Net income also increased by ¥11.0 billion year on year.

Capital adequacy ratio
Ashikaga Holdings (consolidated)
Total capital

Ashikaga Bank (non-consolidated)
Total capital

Capital adequacy ratio(¥ billion)

(%)

8.54

8.49

8.61

10
8

300
234.7

248.7

262.0

Capital adequacy ratio(¥ billion)

(%)

8.68

8.58

242.9

251.3

8.67

8

300

6

266.0
6

200

200

4

4
100

0

2

Mar. 31,2014

Mar. 31,2015

Mar. 31,
2016

0

100

0

2

Mar. 31,
2014

Ashikaga Holdings on a consolidated basis increased by 0.07 points year on year to 8.61%.
Ashikaga Bank on a non-consolidated basis increased by 0.09 points year on year to 8.67%.

6

10

ASHIKAGA HOLDINGS CO., LTD.

Mar. 31,2015

Mar. 31,2016

0Balance of loans and bills discounted

Balance of deposits and negotiable certificates of deposit

Individual

Individual(¥ billion)

4,000

Corporate

Public sector + financial institutions

4,189.4

4,007.3

532.4

504.9

4,274.4

Corporate

519.2

6,000
5,000

3,000
1,983.1

1,957.3

1,970.1

5,337.7
252.3
386.4

5,183.9
226.0
396.3

4,000

Negotiable certificates of deposit

5,449.4
224.8
394.5

1,112.3

1,150.3

1,234.1

3,449.2

3,548.5

3,595.7

3,000

2,000

2,000
1,000

0

Public sector + financial institutions(¥ billion)

1,673.7

1,544.9

Mar. 31,2014

Mar. 31,2015

1,785.01,000
0Mar. 31,2016

The balance of loans and bills discounted, primarily with loans to
individual customers and small and medium-sized firms, increased by¥85.0 billion year on year.

Mar. 31,2014

Mar. 31,2015

The balance of deposits and negotiable certificates of deposit(deposits + negotiable certificates of deposit), primarily with individual
deposits and corporate deposits, increased by ¥111.6 billion year on
year.

Balance of SMEs loans and housing loans

Assets under custody

SMEs Loans

Investment trusts

Housing Loans

1,640.8 1,647.5(¥ billion)

1,600

1,566.4

Mar. 31,2016

Insurance

Bonds(¥ billion)

800

1,546.9

754.5

747.0

1,500 1,490.6

180.6
1,425.1

732.5
127.5

87.6

285.8

311.6

341.1

333.2

600

1,400
272.8

400

1,300
1,200

200

293.5

1,100
1,000

Mar. 31,2014

Mar. 31,2015

0Mar. 31,2016

Loans to small and medium-sized firms increased by ¥74.3 billion
year on year to ¥1,640.8 billion, up 4.7%.
Housing loans increased by ¥100.5 billion year on year to ¥1,647.5
billion; annual rate greatly increased by 6.4%.

Mar. 31,2014

Mar. 31,2015

Mar. 31,
2016

Assets under custody decreased by ¥22.0 billion year on year to¥732.5 billion. Bonds decreased by ¥39.9 billion due to redemption ofbonds at maturity. Investment trust decreased by ¥7.9 billion year on
year due to the decrease of standard price as caused by the decreasein stock market prices and the effects of exchange rate. On the other
hand, insurance steadily increased by ¥25.8 billion year on year.

Risk-monitored loans
Risk-monitored loans in fiscal 2016 based on the Banking Act came to ¥91.1 billion, a decrease of ¥6.8 billion year on year. Among risk-monitoredloans, loans of self-assessed bankrupt debtors are recorded as “loans to bankrupt borrowers,” loans of effectively bankrupt debtors and potentiallybankrupt debtors are recorded as “non-accrual delinquent loans,” and among debtors requiring caution, those loans that are three or more months
delinquent are recorded as “loans past due 3 months or more” and those that are being restructured are recorded as “restructured loans.”(¥ billion)

Loans to bankrupt borrowers
Non-accrual delinquent loans
Risk-monitored
Loans past due 3 months or moreloans
Restructured loans
Total risk-monitored loans
Amount of partial write-off executed
Balance of loans and bills discounted (term-end)
Ratio of risk-monitored loans (%)

Mar. 31, 2014

Mar. 31, 2015

Mar. 31, 2016

Compared with
Mar. 31, 2015

3.0
76.5
0.0
34.7
114.3
9.5
4,007.3
2.85

1.6
77.3
—
19.0
98.0
8.2
4,189.4
2.33

1.6
69.2
—
20.3
91.1
9.5
4,274.4
2.13

(0.0)
(8.1)
—
1.3
(6.8)
1.2
85.0
(0.20)

Disclosed claims under the Financial Revitalization Law
As of March 31, 2016, disclosed claims under the Act on Emergency
Measures for the Revitalization of the Financial Functions (hereinafter,“Financial Revitalization Law”) came to ¥91.4 billion, down ¥6.9 billion year on
year.
Disclosed claims under the Financial Revitalization Law are “bankrupt andsubstantially bankrupt claims” of self-assessed bankrupt debtors andeffectively bankrupt debtors, “doubtful claims” of potentially bankrupt debtors,
and among debtors requiring supervision, those that fall under the category ofloans past due 3 months or more or restructured loans are disclosed as“claims requiring supervision.”

Claims requiring supervision
Ratio of disclosed claims

Doubtful claims

Bankrupt and substantially bankrupt claims(¥ billion)

(%)

200
150
100

4

2.81
114.4
8.1
71.5

50
0

34.7
Mar. 31,
2014

3

2.31
98.4

2.10
6.8

91.4

4.9

72.5

66.1

19.0
Mar. 31,2015

20.3
Mar. 31,
2016

2
1
0

Annual Report 20167

Efforts to Promote Relationship Banking
Ashigin (the name by which the Bank is commonly known in Japan) seeks to raise corporate value
by fulfilling its function as a regional financial institution and growing together with its customers.

Fulfilling consulting functions for corporate customers
Management challenges and financing needs vary
widely among corporate customers, and the external
environment changes day by day. Amid such an environment, we strive to understand the actual circumstances of corporate customers, share management
challenges, and provide optimal solutions.

Support during growth phase

Use of financing methods based on the evaluation ofbusiness value• Creation of syndicated loans where we serve as thearranger: 33 cases (¥72.9 billion)• Underwriting of private placement bonds through “theAshigin Growth Platform Support Fund” and “theAshigin Support Fund for Environment Initiatives,”
etc.: 265 cases (¥27.3 billion)• Deal with ABLs that do not depend on real estate collateral or personal guarantees: 271 cases (¥29.1 billion) (Balance as of March 2016)

Business confabs held

• June 2015	The Bank, The Joyo Bank, Ltd. and The
Gunma Bank, Ltd. jointly organized the“Agri-Food Fest 2015” (a total of 320
exhibitors joined, 115 of which are theBank’s corporate clients)• November 2015	The Bank, together with 6 shinkin banks
and 2 credit associations in Tochigi prefecture, held the“Monozukuri Kigyo
Tenji/Shodankai
2015” in order tosupport local manufacturers in expanding their sales
channels (a total of
155 exhibitors joined,
213 cases of individ“Monozukuri Kigyo Tenji/Shodankai 2015,”
ual business negotiaa supporting event for local manufactures
tion)
in November 2015
• November 2015	The Bank, along with 41 other local
banks, organized the “food” exhibition-cum-business confab “Regional
Banks’ Food Selection 2015” (a total of
22 corporate clients of the Bank)• January 2016	The Bank, together with the Tochigi prefecture, organized
the “Tochigi Shokuno Tenji/Shodankai
2016”, a businessmatching for foodand agriculture (a total of 149 exhibitors
joined, 324 cases ofindividual business“Tochigi Shoku no Tenji/Shodankai 2016,”
negotiation)a business matching for local food andagriculture in January 20168

ASHIKAGA HOLDINGS CO., LTD.

• August 2015	Together with highway service area (SA)
February 2016 and parking area (PA) managementcompany Nex-area Company Ltd. and 8other SA and PA restaurants and shops,
the Bank held a mini business confab(targeted at food related corporations)(August 2015: a total of 6 exhibitors
joined, 48 cases of individual businessnegotiation. February 2016: a total of 5
exhibitors joined, 40 cases of individual
business negotiation)

Cooperation with The Regional Economy Vitalization
Corporation of Japan (REVIC)• In order to contribute to the development of the medical, nursing and healthcare field, the Bank invested in
the “Regional Healthcare Industry Support Fund” runby REVIC• In order to contribute to profitability improvement ofJapanese mid-tier enterprises with useful resources(competitiveness), the Bank invested in “Core Regional Enterprises Revitalization Support Fund” which was
also run by REVIC• May 2015	In order to enhance customer support
abilities, the Bank has signed “dispatchof experts” related contracts with REVIC.

“Ashigin Business Plan Grand Prix” Launched
The “Ashigin Business Plan Grand Prix” was launched
to award outstanding business plans that contribute to
local industrial innovation and job creation, and to endeavor support for clients’ business expansion. Since
its commencement in November 2015, we have received 214 business plans, and after three rounds ofscreening, we have chosen the awardees for 1 GrandPrix award, 3 awards of excellence, 4 encouragement
awards and 5 special prizes. (Awards presentation plan
was decided in March 2016)

An awards ceremony for the First Ashigin Business Plan
Grand Prix in March 2016

Overseas business support[Overseas business matching]• June 2015	The Bank joined “Mfair Bangkok 2015”
sponsored by Factory Network Asia
(Thailand) as co-host• September 2015	The Bank joined “FBC Shanghai 2015”
sponsored by Factory Network China as
co-host[Organizing overseas business seminars]• November 2015	The Bank organized a “Seminar and individual consultation session regarding
regulations on external foreign currency
borrowings in Indonesia” to explain therules of new regulations regarding foreign currency denominated offshoredebts within Indonesia[Other overseas business support]• The Bank joined the Japan Bank for International Cooperation’s signing of the “Memorandum of Understanding for Supporting Overseas Business

Deployment of Japanese Mid-Tier Enterprises and
SMEs in Partnership” with the State of Jalisco andState of Aguascalientes, Mexico, in October 2015
and November 2015 respectively, thus having formeda partnership with the said states.
• February 2016	Signed the “Business Cooperation
Agreement” with Pronexus Inc.

The First Mfair Bangkok 2015 in June 2015

Proactive initiatives for customer's convenience and regional revitalization
Branch network enhancement

Disaster recovery support• In October 2015, “Tsukuba Loan Center” was opened
inside the Tsukuba branch• In April 2016, the Kawaguchi branch was opened inside the Urawa branch. The grand opening of the
new branch will be held in December 2016.

• In September 2015, in order to provide support to disaster victims of Tropical Storm Etau and to assist in
disaster recovery, the Bank has donated ¥20 million
to Tochigi prefecture, and made additional sympathy
donations to 8 cities in the Tochigi prefecture that areunder the Disaster Relief Act.

Kawaguchi branch opened (inside the Urawa branch)

Enhancement of non face-to-face services throughsmartphones and the Internet• In March 2016, smartphone application “Ashigin account opening app” was launched. By taking a photoof personal identification documents (driving license)with the smartphone camera and filling in and submitting required information, the user can access services through the application, such as opening asavings account.
• In March 2016, regarding making deposits to savings
accounts of the current
branch via personal internet banking, the commencement of “sameday transactions” service
allows urgent payments
and deposits to be completed anytime, all year
long.

Donation to Tochigi prefecture for the damage causedby the season’s 18th typhoon in September 2015

Measures for the Social Security and Tax Number System• Through Ashigin Research Institute Ltd., the Bank developed in-house a package software for integrated
management of individual social security and tax
numbers. We started the sales of “m-Bank,” a USB
management system for the social security and tax
number in April 2016.

Annual Report 20169

Corporate Social Responsibility Activities
Efforts for solving environmental issues
Developing Ashigin’s Forest
Since 2012, the Bank has developed Ashigin’s Forest in the Tochigi Prefecture Prefectural Citizen’s forest in Yaita City. We are carrying out various development activities in order to promote the natural beauty of the forest throughout the four seasons. In fiscal 2015, around 70
staff members took part in walkway maintenance and undergrowth clearance, as well as theplanting of mountain hydrangea.
Working at the project sites

Development activities in Ashigin’s Forest

Protection of Nikko Cedar Avenue

Tree Planting in the Ashio Mountain

The Bank supports the Nikko Cedar Avenue Ownership
System operated by Tochigi Prefecture to protect thisworld-famous arboreal asset at the Nikko cluster oftemples and halls. Since then we have continuously
stepped up purchases, and now own 80 cedar trees,
the most cedar trees owned by one group, at a cost of¥10 million per tree. In addition, the Bank is working on
beautification activities, including participation in thecleanup at the Avenue.

The Bank addressed environmental problems, mainlythat of the water circulation system, through its tree
planting activities in the Ashio Mountains, which had
been devastated by smoke pollution. Considering the
problems in the headwaters area of the Watarasegawa
River, we support the activities of the NPO
Grow Green in
Ashio and engage intree-planting
activities there
every year.

Tree Planting in the Ashio Mountain

Nikko Cedar Avenue

Promoting financial education
Organizing financial education events
Every year, we hold the “Ashigin Kids School: Handson Lessons on Money” for local elementary school students. Moreover, we held the 10th All Japan HighSchool Quiz of Finance and Economics Championship“Economics Koshien” Tochigi Tournament.

10

ASHIKAGA HOLDINGS CO., LTD.

“Economics Koshien” Tochigi TournamentEfforts toward local communities
Promoting financial education
In January 2016, the Bank held an “Ashigin Parent-Child
Seminar” for fourth to sixth grade elementary school students
and their parents, in which they learned the proper use andimportance of money through an amusing experience.

Donation to the Tochigi Future Talents
Supporting FundIn March 2016, as part of the 120th anniversary commemoration project, we donated ¥20 million to the Tochigi Future
Talents Supporting Fund for facilitating the redemption of
bursaries for college graduates who have found jobs in local
companies in Tochigi.

“Presentation of Donation”

Installation of conversation-friendly system
COMUOONIn February 2016, in order to provide an environment where
the elderly can easily use our services, a desktop type conversation-friendly system COMUOON that facilitates voice reception was introduced.

“Counters with COMUOON”

Assistance for welfare-related businesses
In December 2015, we donated 3000 pin badges to Tochigi
Prefecture for supporting the activities of the Tochigi Community Welfare Fund. Also, we offered help in the Nice Heart
Bazaar at the prefectural office which sells products from Office of Employment Support for the Disabled, and organized
the Nice Heart Bazaar in Ashigin.

“Nice Heart Bazaar in Ashigin”

Support to local sports teams
In December 2015, as part of the120th anniversary commemoration project, we held an ice hockey match between H.C. Tochigi Nikko ICE BUCKS and OJI EAGLES.

Annual Report 201611

Corporate GovernanceTo strengthen and enhance corporate governance, the Group seeks to establish a responsible
management system and ensure management transparency.
Ashikaga Holdings is working to reinforce and improve management supervisory functions andbusiness operations under the committee-based management system.

Basic Approach to Corporate Governance
A commitment to management characterized byresponsibility, and sound, appropriate business operations will earn greater trust for the Group from all stakeholders — customers, shareholders, local communities
and employees — and boost corporate value. By following the approaches listed below, we are working tostrengthen and improve corporate governance.
(1) We respect shareholders’ rights and ensure equality.
(2) We consider the benefits of stakeholders including
shareholders and cooperate appropriately withstakeholders.
(3) We disclose company information appropriately
and ensure transparency.
(4) We ensure the effectiveness of supervision of theBoard of Directors on business execution by utilizing independent outside directors.
(5) We work to communicate with shareholders constructively about the continuous growth and improvement of medium-to-long term corporate
values.
Ashikaga Holdings have adopted the company withcommittees system under which it had been working toreinforce and improve management supervisory andbusiness functions. Since then, we have been working
for greater management transparency and objectivity.
Moreover, as a subsidiary, the Ashikaga Bank, Ltd.
transitioned from a company with committees to acompany with audit and supervisory committee under
the approval of the regular shareholder’s meeting on
June 28, 2016.
In order to take over the operations of the Ashikaga
Bank, Ashikaga Holdings adopted a stock transfer andholding company scheme to take over the entire business while maintaining the corporate status of the Ashikaga Bank. For these background, the Ashikaga Bankis Ashikaga Holdings’ only direct subsidiary and manyof the officers of Ashikaga Holdings also serve as board
members of the Ashikaga Bank. With respect to overlapping management functions between Ashikaga
Holdings and the Ashikaga Bank, we will ensure effective and efficient business operations and governanceof the Group as a whole through close mutual collaboration between each division.

Management Structure
Board of Directors

Compensation Committee

The Board of Directors is composed of six directors (ofwhich three are outside directors). It has decision-making powers over basic management policies and important operational matters, and supervises theexecution of duties by directors and executive officers.
The outside directors comprise an experienced lawyer
with successful track records in corporate legal affairs,
a certified public accountant and a member of the regional business community. This system enables us to
implement management decisions and carry out supervisory tasks from a wide range of perspectives, resulting in improved management and stronger corporate
governance. The board of directors’ meeting is held, inprinciple, once a month.

The Compensation Committee is composed of four directors (of which three are outside directors) and decides on policy for decision-making on compensation
for individual directors and executive officers, as well as
individual compensation levels.

Nominating Committee
The Nominating Committee is composed of four directors (of which three are outside directors) and decides
on proposals to be submitted to the annual meeting ofshareholders concerning the election and dismissal of
directors.

12

ASHIKAGA HOLDINGS CO., LTD.

Audit Committee
The Audit Committee is composed of four directors(of which three are outside directors and the Committee
Chairman is an outside director) and audits the performance of duties by directors and executive officers. It
also decides on proposals to be submitted to the annual meeting of shareholders concerning the election anddismissal of accounting auditors, or refusal to reelectthem. The Audit Committee is held, in principle, once amonth.

Executive Officers and GroupManagement Meeting, etc.
Ashikaga Holdings has five executive officers — theChairman and the President (both are Chief Executive
Officers), and three Executive Officers authorized by the
Board of Directors to supervise respectively theCorporate Planning Department, Business Administration Department and Auditing Department. While maintaining close contacts with divisions of the Ashikaga
Bank, they supervise operations on a Group-wide basis, carrying out their management duties promptly andin a manner befitting the management of the holding
company.

We hold various Group meetings, such as theGroup Management Meeting, Group ALM Meeting andGroup Compliance Meeting, through which Executive
Officers, to the extent approved by the Board of Directors, discuss and decide on important issues concerning business operations.

Internal Control System
As a regional financial institution, in order to contributeto the stability and development of the region and its
people by ensuring the soundness and appropriatenessof its business and providing a smooth and appropriate
supply of funds and financial services, we observe strict
compliance with laws and regulations, rigorously protect its customers, and appropriately manages risks inall of the business of Ashikaga Holdings and its subsidiaries (hereafter “the Group”) based on appropriate corporate governance. At the same time, it recognizes theneed to ensure business efficiency. Based on this recognition, the Company’s Board of Directors has adopted a “Basic Policy for Internal Controls (Whole Group)”
for effective development and implementation of internal controls as below.
1. Conformity of performance of duties by Executive
Officers and employees with laws, ordinances andarticles of incorporation(1) The Group positions compliance as a management priority. It has compiled a basic Group compliance policy to which all directors and employees
are subject.
(2) It has established a legal compliance management
section to prepare and establish the legal compliance system.
(3) The Board of Directors monitors whether or not
the compliance system is functioning effectively,
through supervision of Executive Officers’ performance and assessment and evaluation at the Audit Committee.
(4) The Group takes a strict line with illegal or wrongful conduct, including disciplinary penalties. When
directors and employees find evidence of actualor suspected illegality or misconduct, they shouldreport the details to the Audit Committee or thesection responsible for compliance management.
2. Systems for storage and management of
information concerning the performance of duties
by Executive Officers(1) The Group requires Executive Officers to document their performance of duties and create an
appropriate document management system.
(2) The Audit Committee or personnel designated by
the Committee have access at all times to documents concerning the performance of duties by
Executive Officers.
3. Rules and other systems for management of risk oflosses(1) The Group has formulated a basic Group risk
management policy to develop and establish risk
management systems. It also carries out

appropriate risk management through establishinga section responsible for risk management.
(2) The Board of Directors and the Audit Committee
require the section responsible for risk management to periodically file reports on the status ofrisk controls, and work to develop and upgradeGroup risk management systems.
4. System for ensuring the efficiency of performanceof duties by Executive Officers(1) The Board of Directors decides on basic mattersregarding organizational structure, division of authority, organization of staff positions and otherbusiness matters, to ensure smooth and appropriate operations.
(2) Executive Officers carry out their duties in line withthe basic policy of management and division of
authority decided by the Board of Directors.
(3) Executive Officers perform their duties assignedby the Board of Directors appropriately and effectively to the extent that they are authorized, andperiodically report on the status of their performance of duties at meetings of the Board of Directors.
5. Systems for ensuring appropriate conduct ofoperations by the Group(1) The Company aims to achieve its business goals
through conducting the Group management control by receiving necessary reports from its subsidiary to secure legality and appropriateness of theGroup business as a whole, while securing efficiency in business and adhering to sound corporate management of the Group as a whole.
(2) The Group drafts management policies, andworks to ensure full legal compliance, customer
protection and appropriate risk management.
(3) The Auditing Department verifies the legality andappropriateness of overall operations at the Group,and reports its findings to the President and Chief
Executive Officer, Executive Officers in charge of
departments and the Audit Committee.
6. Support staff for the Audit Committee
We have established an Office of Audit Committee
and have deployed support staff for the Audit Committee.
7. Independence of support staff in the previous article from Executive Officers and ensuring effectiveness of the instructions by the Audit Committee tothe staff
Executive Officers shall ensure that undue restrictions
are not imposed by Executive Officers on the staff
Annual Report 201613

that supports the duties of the Audit Committee inthe execution of their duties. In addition, the Group
ensures the independence of the staff and effectiveness of the instructions by the Audit Committee tothe staff by requiring the approval of the Audit Committee for matters regarding personnel transfer andpersonnel evaluations of the staff.

9. Mechanisms for ensuring that the persons who
have made reports pursuant to the previous article
are not treated unfavorably because of such reports
The Group shall not take disciplinary measuresagainst, discriminate or take other reprisals against,
make disadvantageous personnel evaluation on, or
treat unfavorably in any other forms the persons who
have made reports to the Audit Committee becauseof such reports.

8. Mechanisms for reporting to the Audit Committee,
and other reporting to the Audit Committee by theCompany’s Directors (excluding members of the
Audit Committee), Executive Officers and employees,
as well as its subsidiary’s Directors, Corporate
Auditors, Executive Officers, employees or those
who received report from any of the foregoing
personnel(1) To enable the Audit Committee to appropriately
handle important matters affecting the Group, we
have specified certain matters the Company’s Directors (excluding members of the Audit Committee), Executive Officers and employees, as well as
its subsidiary’s Directors, Corporate Auditors,
employees or those who received report from anyof the foregoing personnel must report on to the
Audit Committee.
(2) Members of the Audit Committee may, at any time
when it is deemed necessary for the execution of
their duties, ask the Company’s Directors (excluding members of the Audit Committee), Executive
Officers and employees, as well as its subsidiary’s
Directors, Corporate Auditors, employees or those
who received report from any of the foregoing personnel to file reports.

10. Matters concerning procedures for advancepayment or reimbursement of costs incurred by amember of the Audit Committee in the process of
executing duties and any other policy for processing
costs and obligations
Costs incurred in appointing or consigning investigation and other administrative work to lawyers, certified public accountants and other external experts asnecessary in order for the Audit Committee or members of the Audit Committee to conduct audit work
shall be covered by the Company, unless such costis deemed unnecessary for the execution of duties by
the Audit Committee or members of the Audit Committee.
11. Other mechanisms for ensuring effective auditingby the Audit Committee
To ensure the effectiveness of its auditing, the Audit
Committee works together with the Internal Audit Department, which devises its audit plan and reports it,
as well as audit results, to the Audit Committee.

Shareholder’s Meeting

Ashikaga Holdings Co., Ltd.

Appoint/
RemoveSelect/Dismiss

Board of Directors(6, of which 3 are outside directors)
Appoint/SelectRemove/Dismiss

Supervise

Appoint/
RemoveReportReport/Audit
Supervise

Chief Executive Officers
Executive Officers
Earnings control
Internal audit

Management
by operation

Risk management
and others

Nominating Committee (4, of which 3 are outside directors)

Compensation Committee (4, of which 3 are outside directors)
Audit Committee (4, of which 3 are outside directors)

Group
ALM
Meeting

Group
Management
Meeting

Appoint/
RemoveMonitor/Supervise

The Ashikaga Bank, Ltd.

Group
Compliance
Meeting

Supervise

SuperviseInternal Audit
Department
Accounting
AuditorReport/Apply*Collaborates
with Audit
Committee/
Internal Audit
Department

Board of Directors (15 members, 2 outside members)
Corporate GovernanceCommittee

Advise andreportRepresentative Director

Audit andsupervise

Executive Directors

Audit and Supervisory
Committee (3 members,of which 2 are outside directors

Instruct
andcooperate
Supervise

Compliance
Meeting

14

ASHIKAGA HOLDINGS CO., LTD.

ALM
Meeting

Management
Meeting

CreditPortfolio
Meeting

IT
Investment
Meeting

SuperviseInternal Audit
Department

Business Integration with Joyo Bank
Joyo Bank and Ashikaga Holdings’ subsidiary,Ashikaga Bank offer
smooth financial functions as local leading banks with solid business grounds in North Kanto area, primarily Ibaraki and Tochigi.
As the surrounding business environment undergoes changes,
the two banks will maintain each other’s deep-rooted brand nameand work together at the same time. As we move toward the expansion of our business foundation and the enrichment of ourmanagement foundation due to the integration, we aim at growing
together with the community by sharing and making the best useof our management resources and know-how. In concrete terms,
Joyo Bank and Ashikaga Holdings will conduct share exchange,
and under the integrated holding company, Ashikaga Bank andJoyo Bank will develop business as fellow subsidiaries. Accordingly, we will meet the expectations of our customers, the communityand our shareholders with high quality and speed which cannot be
achieved alone.

Company
Name

Mebuki Financial Group, Inc.
* Note: Ashikaga Holdings Co., Ltd. will change its name to the above.

Our wish implied in the company nameMebuki, or green shoots, means “new leaves sprouting from the trees.” This word is used in the Group name toexpress how fresh ideas and new values will be continually brought about by bringing the Group companies’
knowledge and ingenuity together.
The company name implies its wish to sprout new value and vital energy in local communities and realize
sustainable growth of the company together with local communities.

Location of Headquarters (Registered Address)

7-2, Yaesu 2-chome, Chuo-ku, Tokyo(Note) The headquarters of Ashikaga Holdings Co., Ltd. will be relocated tothe above address. The locations of Joyo Bank and Ashikaga Bank
will not change.

Location of Head Offices

Mebuki Financial Group

Ashikaga Holdings Co., Ltd. will change its name to the above.

JOYO BANK ito Head OfficeM5-5, Minami-machi 2-chome, Mito, Ibaraki
Utsunomiya Head Office
1-25, Sakura 4-chome, Utsunomiya, Tochigi

ASHIKAGABANK(Note) The head office functions of Mebuki Financial Group, Inc. willcomprise its full-time officers and employees as well asconcurrent officers and employees of Joyo Bank or Ashikaga
Bank, and will be located in Mito, Ibaraki and Utsunomiya,Tochigi.

Schedule
October 1, 2016 (Saturday) (planned)
Effective date of stock exchange
Under Mebuki Financial Group, Inc., Ashikaga Bank and Joyo Bank will form a new financial group and function as
fellow subsidiaries, and develop business together.
(note) This integration is valid only with the necessary approval of the authorities concerned.

Annual Report 201615

GroupManagement
Philosophy

The new financial group will provide high-quality
comprehensive financial services to continue creating aprosperous future with local communities.
We will bring the Group’s ingenuity together to contribute to sustainable growth of local communities. We
will endeavor to resolve challenges of local communities by providing high-quality comprehensive
financial services to create a prosperous future with local communities.

Group Ideal (Strategic Target)
The new Group will maintain and promote the relationships withcustomers and local communities as well as deep understandingof local communities that the Banks have developed over theyears. At the same time, the new Group will seek to expand theeconomic interaction zone by utilizing its wide-area network,
endeavor to increase the size and range of comprehensive
financial services and work toward the “development of local
industries, revitalization of local economy and creation of newmarkets” for the growth of the company together with local
communities.

Comprehensive financial service
group that will create the future of
local communities

The New Group’s Fundamental Strategies for theBusiness Integration

Consolidation of ingenuity
for regional revitalization

Expansion ofcomprehensive financial
services

Expansion of area andchannels

Building of the new financial group’s
management structure

Operational reform

Synergy Target (FY 2021)
Synergy emerges as the two banks promote efforts based on integrated basic strategies, at the same time sharemutual strengths and know-how, and combine their creative capacities.
For specific synergy targets, we will increase balance of loans and bills discounted, increase gross business profit,
reduce costs, shift personnel generated from higher business efficiency to customer-responsive departments.

Increase due tosynergy ofbalance of loans
and bills
discounted+¥700.0 billion

Synergy of top
line and cost+¥15.0 billion roughly

Personnel shift
toward business areaand strategic area
150 employees

Results for the year ended March 31, 2016
Sum
Balance of deposits¥8,103.3 billion¥5,224.5 billion¥13,327.9 billion

Balance of loans
and bills discounted¥5,912.7 billion¥4,274.4 billion¥10,187.1 billion

Ordinary profit(consolidated)¥47.6 billion¥30.3 billion (*)¥78.0 billion(*) Ashikaga Holdings consolidated

New branches: about 15 (lease and securities inclusive)

16

ASHIKAGA HOLDINGS CO., LTD.

Risk Management at the Ashikaga Holdings GroupIn addition to managing each of the various risks that we face individually, the Group has in placeand is committed to improving an overall risk management framework to control risk within
acceptable limits. It does this by forming a clear idea of overall possible risk limits, and thencomparing and contrasting them with the financial resources of the Group.

ALM and risk management frameworks
We manage risk based on the Comprehensive Group
Risk Management Policy compiled by the Board of Directors of Ashikaga Holdings. We have established aGroup ALM Meeting as a management-level committee
charged with implementing specific measures laid
down in the Comprehensive Group Risk Management
Policy. The necessary decision-making authority has
been vested in this Council.
The Group ALM Meeting ensures that management
always focuses on the risk-return balance and takes
measures to accelerate and streamline decision-making, by ensuring that reviews and consultation are carried out with risk and revenue management closely
linked, while maintaining due controls on risk. In addition, we have set up a Risk Management Group in theBusiness Administration Department, to ensure oversight and integration of various kinds of risk management.
Based on Group policy, risk management at
the Ashikaga Bank includes the compilation of theComprehensive Risk Management Policy and theestablishment of an ALM Meeting as a managementlevel committee, as with Ashikaga Holdings. In addition,
we are creating a Risk Management Division tosupervise risk management, and divisions in charge ofmanagement of individual risk categories.
The Group ALM Meeting and the ALM Meeting held
on a monthly basis are attended by full-time (Head Office) executives at Ashikaga Holdings and the Ashikaga
Bank and reports about progress in comprehensive risk
management and management of individual risk categories are received. In addition, they discuss possible
steps to be taken to deal with changes in the internal orexternal business environment.
To ensure effective communication regarding risk,
we have various information-relaying systems in place.
We plan to strengthen our mechanisms for gathering
information.

Comprehensive Risk Management
We use the Value-at-Risk (VaR) method to quantify thevarious types of risk that arise in our various businesses
including lending and market trading, and apply the results of such analysis in our business management(comprehensive risk management). At the Ashikaga
Bank, we use the Risk Capital System as a specific toolfor comprehensively managing risk.
In concrete terms, we allocate capital (risk capital)
for internal management purposes within the scope ofcredit risk, market risk, strategic stock investment risk,banking account interest rate risk and operational risk,
ensuring that the total amount does not exceed core

capital. Based on risk capital, we establish risk limit
amounts every six months.
During the term, we ensure sound management by
respecting risk limits in risk-taking and risk control. In
addition, we confirm risk quantification results and theappropriateness and effectiveness of risk management
methods using back-testing and stress-testing.
We have established a clear-cut Comprehensive
Risk Management Policy and set of rules, governing
basic approaches to the Risk Capital System, andmethods of evaluation and monitoring of risk.

Annual Report 201617

Risk Management Framework
Ashikaga Holdings Co., Ltd.
Nominating Committee

Governance

Board of Directors

Audit Committee
Compensation Committee

Basic Risk
Management
PolicyComprehensive Group Risk
Management Policy

Conferring
Entities(decision-making
bodies)Group ALM Meeting

Department
responsible foroversight of risk
management

Risk Management Group in Business
Administration Department

Group Management Meeting

Reports, Consults(risk status, response measures)

Instructs(risk management readiness, etc.)

The Ashikaga Bank, Ltd.
Governance

Board of Directors

Basic Risk
Management
PolicyComprehensive Risk Management
PolicyConferring
Entities(decision-making
bodies)Credit Portfolio Meeting

Division
responsible foroversight of risk
management

Audit and Supervisory Committee

ALM Meeting

Management Meeting

Risk Management Division

Riskmanagement
working group

Credit Portfolio
Working Group

Types of risk

Credit risk

Individual risk
management
policies

Credit risk
management
policyMarket risk
management
policyLiquidity risk
management
policyDivision in
charge of risk
management

Risk Management
Division, Loan
Supervision
Division

Risk Management
Division

Risk Management
Division
Treasury andSecurities Division

ALM Working GroupOperational Risk Working GroupOperational risk

Division fortaking action
when riskmaterializes

18

ASHIKAGA HOLDINGS CO., LTD.

Market risk

Liquidity risk

Administrative
risk

System risk

Administrativerisk management policy

Tangible
Reputational
System risk
Legal risk
Personnel risk
asset risk
riskmanagement management management management management
policypolicypolicypolicypolicyLegal risk

Personnel risk

Tangible asset
risk

Reputational
risk

Operational risk management policy

Operation
Planning
Division

IT Planning and Compliance
Administration Management
Division
Division

Branches, Head Office divisions, subsidiaries

Personnel
Division

GeneralAffairs
OfficePublicRelations
OfficeCredit risk management
Credit risk is the risk of losses from reduction or loss ofthe value of loans and bills discounted and other assets
held by the Bank due to deterioration of the financial
standing of borrowers.
Based on the credit risk management policy approved at a meeting of the Board of Directors, theCredit policy

Ashikaga Bank clarifies the risk, etc. that needs to beappraised and managed, and, in the conviction thatcredit risk management is an essential prerequisite for
ensuring sound financial health and profitability, adopts
the following policies to further control risk.

• ‌The Bank’s credit policy clearly lays down basic policy for community contributions, borrower profiles, appropriate lending practices, soundness of assets, and ensuring adequate levels of profitability.
• ‌As a regional financial institution with its core business based in the North Kanto area centering on
Tochigi Prefecture, our lending activities chiefly target regional small-and-medium-sized enterprises, individual business owners and individuals who have close relations with this area.

Credit risk
management• ‌Division in charge of credit risk management, which is organizationally and functionally independent from the business promotion, credit-screening and management divisions, is responsible forplanning and operational management of borrower rating systems, asset self-assessment andwrite-offs and provisions to the reserve for loan losses. In addition, it monitors loan assets and is
the specialized organization responsible for comprehensive oversight of the credit portfolio.
• ‌In addition, the Credit Portfolio Meeting regularly deliberates and reviews the Bank’s credit risk status and issues on an organization-wide basis.

Borrower rating
system• ‌Under our borrower rating system, borrowers are divided into 14 categories based on quantitative
analysis of their assets and qualitative analysis of the business environment and other issues they
face. The borrower rating system is the basis of credit risk management. It enables instant appraisal of changes in credit circumstances at borrowers, helps make the credit screening decision-making process more efficient, and helps us set interest rates on loans and acts as a standard for
credit portfolio management.

Credit portfolio
management• ‌We analyze portfolio characteristics in terms of borrower credit rating, industrial sector, geographical area and other criteria, and carry out regular reviews of increases or decreases in credit in specific corporate groups or industries, and strengthen monitoring to ensure credit risk is not overly
concentrated in certain sectors. In addition, in tandem with strengthening measures for loans for
SMEs and individuals, we aim to create a portfolio that is capable of credit asset small-lot diversification and generation of steady earnings.

Quantification of
credit risk

• ‌We calculate credit risk amounts on a monthly basis using credit risk measurement systems. The
amount of measured credit risk and changes in such amount are mainly analyzed to identify contributing factors, and a report is made to the ALM Meeting regarding future measures.

Market risk management
Market risk is the risk of losses from changes in the value of financial assets and liabilities held by the Ashikaga
Bank, due to changes in market interest rates, foreignexchange rates and stock market prices.
When we engage in market transactions, we carryout prior investigations and analyses, and make investments based on appraisal of identified risk. In addition
to ensuring market liquidity and a suitable balance between returns and risk, we apply risk control parameters, in as much as they are feasible, to use andmanage financial derivative products. Market risk management is carried out in an appropriate way based on
a comparison of our own financial resources andamount at risk, while paying due consideration to secondary risk from the above-mentioned market transactions.
We set clear risk management parameters, measurement (monitoring) standards, control standards andreporting measures for market transactions, strategic
stock investments and interest rate risk affecting banking account transactions. Every six months, we set risk
management benchmarks (risk limits, loss limits, etc.)
under a strict management regime.

Annual Report 201619

Liquidity risk management
Liquidity risk is the risk of incurring a loss due to difficulties in raising funds needed for settlements and otherpurposes, or being forced to procure funds at a higher
interest rate than normal.
The Ashikaga Bank has positioned itself to respondswiftly to all liquidity risk situations from normal banking
operations to emergencies, and has compiled countermeasures for each possible situation. Specifically, inconventional cash flow management operations, weavoid increasing liquidity risk by managing trends in deposits and loan balances and managing indicators suchas upper limits for fund procurement, in addition tousing major benchmarks such as funding gaps and thebalance of liquidity assets.
In a response to liquidity emergencies (establishment of a crisis headquarters, liaison and reporting
mechanisms, response measures, delegation of decision-making, and chain of command), we have established a liquidity risk contingency plan. Based on it, we
carry out regular drills to ensure its effectiveness during
an actual emergency.

Operational risk management
Because operational risk is very diverse, comprisingadministrative risk, system risk, legal risk, personnel
risk, tangible asset risk and reputational risk, it is jointly
managed by a range of different divisions.
Management ofadministrative risk

At the same time, operational risk is supervised on
an integrated basis by the Risk Management Division,
because all of our operations and divisions are subject
to risk that could prevent continuation of business.

• ‌Administrative risk refers to the risk of losses due to errors, accidents, fraud or other irregularity on
the part of executives or other employees.
• ‌Depending on the nature of business and risk profile, the Bank has in place administrative regulations that are comprehensive and compliant with laws and regulations, enabling us to ensure that
all employees from executives down perform their administrative duties correctly, without accidents
or fraud or other irregularity.
• ‌We comprehensively collect information on losses due to administrative risk that occur during thecourse of business. By analyzing the accumulated data concerning such risk, we have strengthened our administrative risk management structure by establishing appropriate procedures for
identification, evaluation, monitoring, control and reduction of administrative risk.

Management ofsystem risk

• ‌System risk is the risk of losses arising from computer system failure or system malfunction, as
well as abuse of computer systems.
• ‌The Bank has compiled a system risk management policy, to serve as a basic policy for taking
measures to assure the security and reliability of computer systems. In the event that computersstop functioning normally, due to causes such as disaster impact, we have duplicated backbone
systems and established a contingency plan for dealing with emergencies. We are taking measures to ensure we can respond swiftly to such failure scenarios.

Management of
information
security• ‌The adoption of appropriate security policies for information assets is a key requirement not only
for continuation and stable conduct of our business, but also for upholding our public reputation.

Business
continuity
system• ‌Natural disasters, computer-system failures and epidemics of infectious diseases are among theevents that can trigger an unavoidable suspension of operations. In the event of an emergency situation, we have in place business continuation measures that enable us to quickly resume or
maintain as many core services as possible, as a matter of public duty.

• ‌We have compiled a Data Security Policy as a management policy for due protection of information assets in our possession. We take care to rigorously manage all information relating to ourcustomers, having created information asset manager positions at Head Office and in branches,
as well as an information security management system.

• ‌Under our basic policy on creating a business continuity system, the roles of individual employees
are clarified. We are committed to ensuring as rapid a response to a crisis as possible.

20

ASHIKAGA HOLDINGS CO., LTD.

System of Legal Compliance at the Ashikaga Holdings GroupThe Group has positioned compliance as one of the most important priorities facing management,
and has drawn up a basic compliance policy for the Group.
All employees from executives down are constantly aware of the public roles and responsibilities
that we have as a banking group. We are committed to compliance with laws, regulations and social
norms, establishment of trust through sound business management, and to pursuing our corporate
activities in a spirit of sincerity and fairness.

Management awareness and response
Management is fully aware that ensuring rigorous legal
compliance is one of the most important priorities it
faces, and directors of the board and executive officers
themselves take care to avoid violation of laws and regulations during the performance of duties.
On April 25, 2016, Ashikaga Holdings and the Ashikaga Bank concluded a business integration agreementwith the Joyo Bank. It was then approved in the shareholder’s meeting of the two parties dated on June 28,
2016, and this integration is scheduled on October 1,
2016 with the approval of the concerned authorities as
the premise. Although we are adopting the committee-based management system at the moment, it will
shift to the one with audit and supervisory committee
shortly after the integration. The placement of multiple
outside directors ensures transparent and fairdecision-making as well as high standard of audit andsupervision while delegating more authorities on business execution to directors facilitates decisive decision-making and business execution.
Also, the corporate governance committee led byoutside directors will be set as our advisory body after
the integration. In the same committee, nominating ofcandidates for directors and compensation for directors
will be discussed, and the Group’s governance will be
evaluated. As a result, the effectiveness of governancewill be enhanced.
Moreover, establishing an executive session comprised of only outside directors allows them to exchange information and share views with each other.
Accordingly, we will actively incorporate diverse opinions from the outside directors.

Instilling rigorous compliance throughout the Ashikaga BankTo ensure a culture of compliance, it is necessary toensure that compliance awareness and commitment
permeates from management downward and throughout the Bank organization, using various platforms andmechanisms.
To achieve this, we set strict compliance as one of
the management policies and the management instills

the concepts of legal compliance through meetings ofall division, office and branch managers of the Bank. At
the same time, specific compliance action plans are
drawn up based on a compliance manual and action
guidelines, to ensure the effectiveness of complianceawareness-raising.

The Group’s basic compliance policy comprises the following concepts
Ensuring trust

In awareness of its social responsibilities and public mission, the Group provides comprehensive financial services rooted in the community, engages in sound business operations and ensures publictrust.

Compliancewith laws andregulations

The Group regards compliance with laws and regulations as a cardinal priority for management. In
addition to legal compliance, the Group will engage in its corporate activities in a spirit of sincerity
and fairness, without overstepping social norms or conventions.

Measures against
antisocial forces

The Group will take decisive action against forces that threaten orderly public activity and security, orthat undermine the development of a sound economy and society.

Managementtransparency

The Group shall, in a fair, timely, and appropriate way, disclose management information to customers, employees, shareholders, and local communities and industries, as a trust-building measure.

Creating andupholding compliance frameworks

The Group will thoroughly familiarize all employees with the importance of compliance, and establish
and maintain a compliance framework based on implementation and planning of internal controls including sets of regulations, creation of dedicated organizations and employee training programs.
Annual Report 201621

Improving compliance effectivenessWe have compiled the following seven Compliance
Principles as a behavioral guideline for Group employees, who will do their best to abide by the principles.

Seven Compliance Principles• ‌Comply with laws and regulations affecting ourbusiness and social norms• Always keep promises• Do not mix private and public business• Keep your surroundings clean and tidy
• ‌Be scrupulously careful about information
management• Uphold and improve workplace order• ‌Thoroughly internalize the importance of reporting,liaising and consulting

In addition, the Bank has set up a Compliance
Working Group, which checks compliance progressand status and discusses important matters every
month, thereby improving the effectiveness of our compliance measures.
We have incorporated compliance programs into allof our training courses for different seniority grades at
the Bank, to thoroughly instill a sense of the importanceof legal compliance in all employees from executives
downwards.
In fiscal 2016 as well, we compiled a complianceprogram to ensure systematic compliance with laws
and regulations, and it is now in operation.

Compliance organizations and measures for the future
The Group has established a Compliance Management
Group within the Business Administration Department
to further strengthen our compliance framework.
In addition, in order to ensure compliance with laws
and regulations at the Ashikaga Bank at the Head Office and branch level, we have also established theposts of Compliance Manager and Compliance Officer
in every division, office and branch.
In the future, we will strive to further develop ourcompliance frameworks so as to further deepen publictrust.

Compliance System (As of June 28, 2016)
Ashikaga Holdings Co., Ltd.

Board of Directors

Nominating Committee
Compensation Committee

Group Compliance Meeting

Corporate Planning Department

Business Administration Department

Monitor/Supervise

The Ashikaga Bank, Ltd.

Audit Committee

Auditing Department
Report/Application

Audit and Supervisory Committee

Board of Directors
Compliance Meeting

Compliance Working Group
Oversight Division(Compliance Management Division)
Oversight

Head OfficeCompliance Manager
Compliance Officer

22

ASHIKAGA HOLDINGS CO., LTD.

Oversight
Management/GuidanceConsultation/Report

BranchesCompliance Manager
Compliance Officer

Measures to protect customer interests
The Group recognizes that establishment of a management framework for protection of the customer’sinterests is vital not only for the customer and theenhancement of customer convenience, but also forthe soundness and propriety of Group business operations. Accordingly, it has established the following management policies for protection of customer interests.
Executives and employees recognize that continuous assessment and improvement of their own performance of duties from the customer’s perspective areimportant to safeguarding customer interests, and arecommitted to improvement.
1. Ensuring customer understanding of explanations
We have mechanisms to ensure full and due customer understanding of our explanations of their transactions with the Group, as well as with subsidiaries(credit transactions (loan contracts and related collateral and guarantee agreements), acceptance of
deposits, etc., domestic and foreign exchangetransactions, marketing, intermediary services andsolicitation relating to financial products).
2. Customer support
We have established within the Group a general office
for responding appropriately when a customer has an
inquiry, seeks consultation, or expresses a wish orcomplaint. We are committed to improvement in all
our operations, not just to resolution of single issues.
At the same time, we always treat the customer withfriendly and appropriate courtesy, without letting personal feelings get in the way, and take care to ensure
provision of financial products and services that complies with regulations.
3. Using the Alternative Dispute Resolution system
We will use the Alternative Dispute Resolution (ADR)
model of dispute settlement without resort to courts,
which prioritizes the customer more and better suits
the needs of an aging population and the diversification and increasing complexity of financial products.
The Bank has concluded a basic agreement on
procedures with the Japanese Bankers Association,a designated ADR organization (institution designatedunder the Banking Act as a dispute resolution organization).

external leakage of, loss of or damage to information
about customers.
5. Sharing customer information within the GroupTo ensure greater protection and convenience for thecustomer, and better risk management within theGroup, customer information is shared by Ashikaga
Holdings with its subsidiaries (including consolidated
subsidiaries).
To protect customer information subject to shared
use within the Group, we set clear limits on the category of information used, whom it is shared among,and what it is used for. We also have in place management mechanisms to ensure appropriate handlingin conformity with laws protecting personal information, and with guidelines and laws and regulations
relating to protection of personal information specificto the financial sector.
6. Management of conflict of interest
In transactions between the Group and its customers, the Group protects customers we are advisingfrom adverse effects, such as firewalls between different business sections, to avoid events that constitute conflict-of-interest or other impropriety.
In particular, in cases where Ashikaga Holdings
and its subsidiaries provide multiple services to thesame customer, we have in place appropriate safeguards such as firewalls to prevent abuse of customer information and conflict-of-interest situations(including firewalls with affiliated companies), andmeasures to prevent unfair trading such as selling tiein products.
7. Management of outsourcing
When Ashikaga Holdings outsources operations toexternal providers, it ensures the outsourced task is
performed exactly as required and that both customer information and customer interests are handledappropriately.
8. Management of other operations
We ensure appropriate management of operations
that we judge to be essential for the protection andconvenience for the customer.

4. Management of customer information
Except where otherwise laid down under laws andregulations, information concerning customers ismanaged within the parameters deemed necessary
for achievement of purposes relating to such information. In addition, we take measures to prevent
Annual Report 201623

Consolidated Financial Statements

Consolidated Balance Sheet
March 31, 2016

Ashikaga Holdings Co., Ltd. and Consolidated Subsidiaries

Millions of Yen
2016
2015

ASSETSCash and due from banks (Notes 3, 10, and 21)�������������������������������������������������������
Call loans and bills bought (Note 21)������������������������������������������������������������������������
Monetary claims bought (Note 21)���������������������������������������������������������������������������
Trading account securities (Notes 4 and 21)�������������������������������������������������������������
Securities (Notes 4, 10, and 21)������������������������������������������������������������������������������
Loans and bills discounted (Notes 6, 10, 21, and 25)�����������������������������������������������
Foreign exchanges (Note 6)�������������������������������������������������������������������������������������
Tangible fixed assets (Note 7)����������������������������������������������������������������������������������
Intangible fixed assets (Note 8)��������������������������������������������������������������������������������
Asset for retirement benefits (Note 13)���������������������������������������������������������������������
Deferred tax assets (Note 20)����������������������������������������������������������������������������������
Customers’ liabilities for acceptances and guarantees (Note 9)����������������������������������
Other assets (Note 10 and 22)���������������������������������������������������������������������������������
Allowance for loan losses����������������������������������������������������������������������������������������
Total�����������������������������������������������������������������������������������������������������������������

¥ 437,509
414
7,627
3,596
1,296,769
4,235,174
4,377
24,42478,601
10,446584
12,91334,277(40,679)¥6,106,037¥ 365,322
1,644
7,727
4,164
1,207,938
4,150,466
5,837
24,29185,754
13,884604
16,56623,938(43,901)¥5,864,239$ 3,882,759
3,679
67,691
31,917
11,508,428
37,585,857
38,846
216,762
697,567
92,713
5,183
114,603304,200(361,014)$54,189,190

LIABILITIES AND EQUITY
LIABILITIES:
Deposits (Notes 10 and 21)�������������������������������������������������������������������������������������
Negotiable certificates of deposit (Note 21)���������������������������������������������������������������
Call money and bills sold (Note 21)��������������������������������������������������������������������������
Payables under securities lending transactions (Notes 10 and 21)�����������������������������
Borrowed money (Notes 10, 11, and 21)������������������������������������������������������������������
Foreign exchanges��������������������������������������������������������������������������������������������������
Other liabilities (Note 12 and 22)�����������������������������������������������������������������������������
Provision for directors’ bonuses ������������������������������������������������������������������������������
Provision for directors’ retirement benefits���������������������������������������������������������������
Provision for reimbursement of deposits�������������������������������������������������������������������
Provision for contingent losses �������������������������������������������������������������������������������
Provision for point card certificates��������������������������������������������������������������������������
Deferred tax liabilities (Note 20)�������������������������������������������������������������������������������
Acceptances and guarantees (Note 9)����������������������������������������������������������������������
Total liabilities���������������������������������������������������������������������������������������������������

¥5,206,700
174,878
78,00025,263
251,726
282
46,266
57
311
858
464
134
5,074
12,913¥5,802,932¥5,071,110
197,379—
2,473
232,546365
49,169
54
262
803
495
115
5,774
16,566¥5,577,117$46,207,852
1,551,994
692,226
224,2022,233,999
2,508
410,601
514
2,762
7,614
4,120
1,198
45,034
114,603$51,499,227¥ 117,495
29,025
113,594
260,115¥ 117,495
29,025
94,474240,994$ 1,042,737
257,590
1,008,113
2,308,440

48,527(3,951)(1,585)42,990303,105¥6,106,037

44,704(650)
2,072
46,126287,121¥5,864,239

430,663(35,067)(14,073)
381,523
2,689,964$54,189,190

EQUITY (Notes 14 and 15):
Common stock:
Authorized, 990,000 thousand shares;Issued, 333,250 thousands
shares in 2016 and 2015�������������������������������������������������������������������������������������
Capital surplus�������������������������������������������������������������������������������������������������������
Retained earnings���������������������������������������������������������������������������������������������������
Total shareholders’ equity
Accumulated other comprehensive income:Unrealized gains on available-for-sale securities (Note 5)�������������������������������������
Deferred losses on hedges (Note 22)������������������������������������������������������������������
Defined retirement benefit plans (Note 13)����������������������������������������������������������
Total accumulated other comprehensive income��������������������������������������������
Total equity���������������������������������������������������������������������������������������������
TOTAL�������������������������������������������������������������������������������������������������������������������������
See notes to consolidated financial statements.

24

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

ASHIKAGA HOLDINGS CO., LTD.

Consolidated Statement of Income
Year Ended March 31, 2016

Ashikaga Holdings Co., Ltd. and Consolidated Subsidiaries

Millions of Yen
2016
2015

INCOME:Interest income:Interest on loans and bills discounted�����������������������������������������������������������������
Interest and dividends on securities��������������������������������������������������������������������
Interest on call loans and bills bought�����������������������������������������������������������������
Interest on deposits with banks��������������������������������������������������������������������������
Other interest income����������������������������������������������������������������������������������������
Fees and commissions��������������������������������������������������������������������������������������������
Other operating income�������������������������������������������������������������������������������������������
Other income (Note 17)�������������������������������������������������������������������������������������������
Total income������������������������������������������������������������������������������������������������
EXPENSES:Interest expenses:
Interest on deposits�������������������������������������������������������������������������������������������
Interest on negotiable certificates of deposit��������������������������������������������������������
Interest on call money and bills sold�������������������������������������������������������������������
Interest on payables under securities lending transactions�����������������������������������
Interest on borrowed money�������������������������������������������������������������������������������
Other interest expenses�������������������������������������������������������������������������������������
Fees and commissions payments����������������������������������������������������������������������������
Other operating expenses����������������������������������������������������������������������������������������
General and administrative expenses (Note 18)��������������������������������������������������������
Provision of allowance for loan losses����������������������������������������������������������������������
Other expenses (Note 19)����������������������������������������������������������������������������������������
Total expenses���������������������������������������������������������������������������������������������
INCOME BEFORE INCOME TAXES����������������������������������������������������������������������������������
INCOME TAXES (Note 20):
Current������������������������������������������������������������������������������������������������������������������
Deferred�����������������������������������������������������������������������������������������������������������������
Total income taxes���������������������������������������������������������������������������������������NET INCOME���������������������������������������������������������������������������������������������������������������NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT�������������������������������������������

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

¥ 55,936
16,958393
404
114
22,138
1,692
4,838
102,474¥57,010
13,118331275
125
21,8391,272
2,766
96,739$496,415
150,498
3,491
3,586
1,014
196,469
15,02042,938909,432

2,079
212
8
211
1,537
783
6,198
192
55,471
2,013
3,595
72,30430,170

2,308
206
77
69
1,924
296
6,056
144
56,636
4,097
3,874
75,691
21,04818,457
1,882
73
1,873
13,644
6,957
55,006
1,713
492,296
17,867
31,913641,680
267,752

5,805
1,912
7,717
¥ 22,452¥ 22,452

10,592(6,620)3,972¥17,076¥17,076

51,521
16,97068,492$199,260$199,260

Yen

PER SHARE OF COMMON STOCK (Note 16):
Basic net income����������������������������������������������������������������������������������������������������Cash dividends applicable to the year (Note 14)��������������������������������������������������������

¥67.37
10.00

U.S. Dollars¥51.24
9.00

$0.60
0.09

See notes to consolidated financial statements.

Consolidated Statement of Comprehensive Income
Year Ended March 31, 2016

Ashikaga Holdings Co., Ltd. and Consolidated Subsidiaries

Millions of Yen
2016
2015

NET INCOME���������������������������������������������������������������������������������������������������������������
OTHER COMPREHENSIVE INCOME (LOSS) (Note 23):
Unrealized gains on available-for-sale securities�������������������������������������������������������
Deferred losses on hedges��������������������������������������������������������������������������������������
Defined retirement benefit plans ����������������������������������������������������������������������������
Total other comprehensive income (loss)������������������������������������������������������������������COMPREHENSIVE INCOME�������������������������������������������������������������������������������������������
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent����������������������������������������������������������������������������������������������
Noncontrolling interests�������������������������������������������������������������������������������������������
See notes to consolidated financial statements.

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

¥22,452¥17,076$199,260

3,822(3,301)(3,658)(3,136)¥19,315

24,473(619)
3,032
26,887¥43,963

33,927(29,298)(32,467)(27,838)$171,423¥19,315—¥43,963—$171,423—
Annual Report 201625

Consolidated Statement of Changes in Equity
Year Ended March 31, 2016

Ashikaga Holdings Co., Ltd. and Consolidated Subsidiaries

BALANCE, APRIL 1, 2014 (as previously
reported)�����������������������������������������������������
Cumulative effect of accounting change(Note 2.k)�����������������������������������������������
BALANCE, APRIL 1, 2014 (as restated)�����������
Net income attributable to owners of theparent ���������������������������������������������������Cash dividends ����������������������������������������
Net changes except for shareholders’equity during the year�����������������������������
Net change in the year������������������������������
BALANCE, APRIL 1, 2015�������������������������������
Net income attributable to owners of theparent ���������������������������������������������������Cash dividends ����������������������������������������
Net changes except for shareholders’equity during the year�����������������������������
Net change in the year������������������������������
BALANCE, MARCH 31, 2016��������������������������

Commonstock(Note 14)

CapitalsurplusRetainedearnings¥117,495¥29,025¥ 75,375¥20,230—
117,495—
29,025

4,855
80,230

—
—

—
—

—
—
117,495¥ (960)¥241,135—
20,230

—
(30)

—
(960)

4,855
245,990

17,076(2,832)

—
—

—
—

—
—

17,076(2,832)——
29,025—
14,243
94,47424,47324,47344,704

(619)
(619)
(650)

3,032
3,032
2,072

26,887
41,131
287,121————

22,452(3,332)

—
—

—
—

—
—

22,452(3,332)——¥117,495——¥29,025—
19,120¥113,594

3,822
3,822
¥48,527(3,301)(3,301)¥(3,951)(3,658)(3,658)¥(1,585)(3,136)
15,983¥303,105

CapitalsurplusThousands of U.S. Dollars (Note 1)
Accumulated othercomprehensive income
Unrealized
gains onDefinedavailableretirement
Deferred
Retainedfor-salelosses on
benefitearnings
securities
hedgesplans

BALANCE, APRIL 1, 2015������������������������������� $1,042,737
Net income attributable to owners of theparent ���������������������������������������������������——Cash dividends ����������������������������������������
Net changes except for shareholders’equity during the year�����������������������������
——Net change in the year������������������������������
BALANCE, MARCH 31, 2016�������������������������� $1,042,737

26

ASHIKAGA HOLDINGS CO., LTD.

$257,590 $ 838,428

¥

Total
equity(30)

Commonstock(Note 14)

See notes to consolidated financial statements.

Millions of Yen
Accumulated othercomprehensive income
Unrealized
gains onDefinedavailableDeferredretirementfor-salelosses on
benefitsecurities
hedgesplans$396,736$ (5,769)

199,260(29,575)

—
—

—
—

—
—
—
169,685$257,590 $1,008,113

33,92733,927$430,663(29,298)(29,298)$(35,067)

—
—

Total
equity$ 18,394 $2,548,116——

199,260(29,575)(32,467)(27,838)(32,467)
141,848$(14,073) $2,689,964

Consolidated Statement of Cash Flows
Year Ended March 31, 2016

Ashikaga Holdings Co., Ltd. and Consolidated Subsidiaries

OPERATING ACTIVITIES:
Income before income taxes�������������������������������������������������������������������������������������������������������������������
Adjustments for :Income taxes paid����������������������������������������������������������������������������������������������������������������������������
Depreciation and amortization����������������������������������������������������������������������������������������������������������
Impairment loss�������������������������������������������������������������������������������������������������������������������������������
Amortization of goodwill�������������������������������������������������������������������������������������������������������������������
Decrease in allowance for loan losses�����������������������������������������������������������������������������������������������
Increase in provision for directors’ bonuses���������������������������������������������������������������������������������������
Increase in asset for retirement benefits��������������������������������������������������������������������������������������������
Increase in provision for directors’ retirement benefits������������������������������������������������������������������������
Increase (decrease) in provision for reimbursement of deposits�����������������������������������������������������������
(Decrease) increase in provision for contingent losses������������������������������������������������������������������������
Increase in provision for point card certificates����������������������������������������������������������������������������������
Interest income (accrual basis)���������������������������������������������������������������������������������������������������������
Interest expenses (accrual basis)������������������������������������������������������������������������������������������������������
(Gain) loss related to securities���������������������������������������������������������������������������������������������������������
Foreign exchange (losses) gains�������������������������������������������������������������������������������������������������������
Loss on disposal of fixed assets��������������������������������������������������������������������������������������������������������
Loss on reduction of fixed assets������������������������������������������������������������������������������������������������������
Net increase in loans and bills discounted�����������������������������������������������������������������������������������������
Net increase in deposit���������������������������������������������������������������������������������������������������������������������
Net (decrease) increase in negotiable certificates of deposit���������������������������������������������������������������
Net increase in borrowed money (excluding subordinated borrowings)������������������������������������������������
Net decrease in due from banks (excluding deposit paid to Bank of Japan)�����������������������������������������
Net decrease in call loans����������������������������������������������������������������������������������������������������������������
Net decrease in trading account securities����������������������������������������������������������������������������������������
Net increase (decrease) in call money�����������������������������������������������������������������������������������������������
Net increase (decrease) in payables under securities lending transactions�������������������������������������������
Net decrease in foreign exchanges - assets��������������������������������������������������������������������������������������
Net decrease in foreign exchanges - liabilities�����������������������������������������������������������������������������������
Interest and dividends received (cash basis)��������������������������������������������������������������������������������������
Interest paid (cash basis)������������������������������������������������������������������������������������������������������������������
Other, net���������������������������������������������������������������������������������������������������������������������������������������
Total adjustments����������������������������������������������������������������������������������������������������������������������������
Net cash provided by operating activities�������������������������������������������������������������������������������������������INVESTING ACTIVITIES:
Purchases of securities��������������������������������������������������������������������������������������������������������������������
Proceeds from sales of securities�����������������������������������������������������������������������������������������������������
Proceeds from redemption of securities��������������������������������������������������������������������������������������������
Purchases of tangible fixed assets����������������������������������������������������������������������������������������������������
Proceeds from sales of tangible fixed assets�������������������������������������������������������������������������������������
Purchases of intangible fixed assets�������������������������������������������������������������������������������������������������
Other, net���������������������������������������������������������������������������������������������������������������������������������������
Net cash (used in) provided by investing activities������������������������������������������������������������������������������
FINANCING ACTIVITIES:
Repayments of subordinated borrowings�������������������������������������������������������������������������������������������Cash dividends paid�������������������������������������������������������������������������������������������������������������������������
Net cash used in financing activities�������������������������������������������������������������������������������������������������
Effect of exchange rate changes on cash and cash equivalents�����������������������������������������������������������������
Net increase in cash and cash equivalents�����������������������������������������������������������������������������������������������Cash and cash equivalents, beginning of year �����������������������������������������������������������������������������������������Cash and cash equivalents, end of year (Note 3)��������������������������������������������������������������������������������������

Millions of Yen
2016
2015

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

¥ 30,170¥ 21,048$ 267,752(12,405)
3,495
50
6,202
(3,222)
3(1,893)
48
55
(31)
19
(73,805)
4,832(1,212)
7,905
108
26
(84,707)
135,589(22,500)
29,180
251
1,569
607
78,00022,7891,460(83)
73,908(7,692)(9,273)
149,277
179,447(3,645)
3,446
—
6,202
(149)
6
(1,248)
73
(803)
71
26
(70,861)
4,882
2,337
(11,116)
15—(192,383)
127,973
26,33851,901391
301
125(6,175)(3,491)131(397)
68,191(2,020)(2,564)(2,439)18,608(110,095)
31,022446
55,045(28,601)
32(16,803)
432
488
(280)
172
(655,004)
42,885(10,759)
70,157965
239(751,755)
1,203,318(199,687)
258,970
2,235
13,932
5,394
692,226
202,247
12,959(737)
655,915(68,268)(82,299)
1,324,791
1,592,543(330,762)
85,566
154,466(2,093)
0
(760)
(71)
(93,654)(257,319)
72,826
193,323(2,618)
34
(664)
(56)
5,525

(2,935,416)
759,375
1,370,846(18,582)
5(6,753)(632)(831,157)(10,000)(3,332)(13,332)(21)
72,438363,712¥436,150—(2,832)(2,832)
42
21,344342,368¥363,712(88,747)(29,575)(118,322)(194)
642,869
3,227,834$3,870,703

NONCASH FINANCING ACTIVITY:
Not applicable.
See notes to consolidated financial statements.

Annual Report 201627

Notes to Consolidated Financial Statements
Year Ended March 31, 2016

Ashikaga Holdings Co., Ltd. and Consolidated Subsidiaries

1. BASIS OF PRESENTATION
The accompanying consolidated financial statements of Ashikaga Holdings Co.,
Ltd. (the “Company”) and its consolidated subsidiaries (together, the “Group”)
have been prepared in accordance with the provisions set forth in the Japanese
Financial Instruments and Exchange Act and its related accounting regulations, inaccordance with the Enforcement Regulation for the Banking Act and in accordance with accounting principles generally accepted in Japan, which are different
in certain respects as to the application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is morefamiliar to readers outside Japan. In addition, certain reclassifications have been
made in the 2015 consolidated financial statements to conform to the classifications used in 2016.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated and operates. As permitted by the Japanese Financial Instruments and Exchange Act, amounts lessthan one million yen have been omitted. As a result, the totals do not necessarily
agree with the sum of the individual amounts. Yen amounts, other than per shareamounts, have been rounded down to millions of yen. Yen per share amounts
have been rounded down to two decimal places.
The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been madeat the rate of ¥112.68 to $1, the rate of exchange at March 31, 2016. Suchtranslations should not be construed as representations that the Japanese yenamounts could be converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation—The consolidated financial statements include the accountsof the Company and its significant subsidiaries. There were four consolidated
subsidiaries as of March 31, 2016 and 2015.
Under the control and influence concepts, those companies in which theCompany, directly or indirectly, is able to exercise control over operations are fully consolidated.
All consolidated subsidiaries have a fiscal year ending on March 31, whichis the same as the fiscal year of the Company.
The consolidated financial statements do not include the accounts of one
subsidiary in 2016 and 2015 because the total assets, total income, net income,and retained earnings of the entity would not have had a material effect on the
consolidated financial statements.
Investments in the unconsolidated subsidiary and associated companies
were stated at cost. If the equity method of accounting had been applied to theinvestments in these companies, the effect on the accompanying consolidated financial statements would not be material.
All significant intercompany balances, transactions, and unrealized profits
included in assets have been eliminated in consolidation.
Goodwill, which was included in intangible fixed assets, represents the difference between the cost of an acquisition and the fair value of the net assets of
the acquired subsidiary at the date of acquisition.
Goodwill on acquisition of subsidiaries is amortized using the straight-line
method over 20 years (see Note 8).
b. Business Combinations— In October 2003, the Business Accounting Council (the “BAC”) issued a Statement of Opinion, “Accounting for Business Combinations,” and in December 2005, the Accounting Standards Board of Japan (the“ASBJ”) issued ASBJ Statement No. 7, “Accounting Standard for Business Divestitures” and ASBJ Guidance No. 10, “Guidance for Accounting Standard for Business Combinations and Business Divestitures.”
In December 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ Statement No. 21, “Accounting Standard for Business

28

ASHIKAGA HOLDINGS CO., LTD.

Combinations.” Major accounting changes under the revised accounting standard
are as follows: (1) The revised standard requires accounting for business combinations only by the purchase method. As a result, the pooling-of-interests method of accounting is no longer allowed. (2) The previous accounting standard
required research and development costs to be charged to income as incurred.
Under the revised standard, in-process research and development costs (IPR&D)
acquired in the business combination are capitalized as an intangible asset. (3)The previous accounting standard provided for a bargain purchase gain (negative
goodwill) to be systematically amortized over a period not exceeding 20 years.
Under the revised standard, the acquirer recognizes the bargain purchase gain in
profit or loss immediately on the acquisition date after reassessing and confirming that all of the assets acquired and all of the liabilities assumed have been
identified after a review of the procedures used in the purchase price allocation.
The revised standard was applicable to business combinations undertaken on orafter April 1, 2010.
In September, 2013, the ASBJ issued revised ASBJ Statement No. 21, “Accounting Standard for Business Combinations,” revised ASBJ Guidance No. 10,“Guidance on Accounting Standards for Business Combinations and Business Divestitures,” and revised ASBJ Statement No. 22, “Accounting Standard for Consolidated Financial Statements.” Major accounting changes are as follows:(a) Transactions with noncontrolling interest - A parent’s ownership interest in a
subsidiary might change if the parent purchases or sells ownership interests
in its subsidiary. The carrying amount of noncontrolling interest is adjusted toreflect the change in the parent’s ownership interest in its subsidiary while
the parent retains its controlling interest in its subsidiary. Under the previous
accounting standard, any difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interest is
adjusted is accounted for as an adjustment of goodwill or as profit or loss inthe consolidated statement of income. Under the revised accounting standard, such difference is accounted for as capital surplus as long as the parent
retains control over its subsidiary.
(b) Presentation of the consolidated balance sheet - In the consolidated balance
sheet, “minority interest” under the previous accounting standard is changed
to “noncontrolling interest” under the revised accounting standard.
(c) Presentation of the consolidated statement of income - In the consolidated
statement of income, “income before minority interest” under the previous
accounting standard is changed to “net income” under the revised accounting standard, and “net income” under the previous accounting standard ischanged to “net income attributable to owners of the parent” under the revised accounting standard.
(d) Provisional accounting treatments for a business combination - If the initialaccounting for a business combination is incomplete by the end of the reporting period in which the business combination occurs, an acquirer shall reportin its financial statements provisional amounts for the items for which the accounting is incomplete. Under the previous accounting standard guidance,
the impact of adjustments to provisional amounts recorded in a businesscombination on profit or loss is recognized as profit or loss in the year inwhich the measurement is completed. Under the revised accounting standard
guidance, during the measurement period, which shall not exceed one year
from the acquisition, the acquirer shall retrospectively adjust the provisionalamounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date
and that would have affected the measurement of the amounts recognized asof that date. Such adjustments shall be recognized as if the accounting forthe business combination had been completed at the acquisition date.
(e) Acquisition-related costs - Acquisition-related costs are costs, such as advisory fees or professional fees, which an acquirer incurs to effect a businesscombination. Under the previous accounting standard, the acquirer accounts
for acquisition-related costs by including them in the acquisition costs of theinvestment. Under the revised accounting standard, acquisition-related costs
shall be accounted for as expenses in the periods in which the costs are incurred.
The above accounting standards and guidance for (a) transactions with noncontrolling interest, (b) presentation of the consolidated balance sheet, (c) presentation of the consolidated statement of income, and (e) acquisition-related
costs are effective for the beginning of annual periods beginning on or after April
1, 2015. Earlier application is permitted from the beginning of annual periods
beginning on or after April 1, 2014, except for (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated statement of income.
In case of earlier application, all accounting standards and guidance above, except for (b) presentation of the consolidated balance sheet and (c) presentation of
the consolidated statement of income, should be applied simultaneously.
Either retrospective or prospective application of the revised accounting
standards and guidance for (a) transactions with noncontrolling interest and (e)acquisition-related costs is permitted. In retrospective application of the revised
standards and guidance, the accumulated effects of retrospective adjustments
for all (a) transactions with noncontrolling interest and (e) acquisition-related
costs which occurred in the past shall be reflected as adjustments to the beginning balance of capital surplus and retained earnings for the year of the first-time
application. In prospective application, the new standards and guidance shall beapplied prospectively from the beginning of the year of the first-time application.
The revised accounting standards and guidance for (b) presentation of theconsolidated balance sheet and (c) presentation of the consolidated statement ofincome shall be applied to all periods presented in financial statements containing the first-time application of the revised standards and guidance.
The revised standards and guidance for (d) provisional accounting treatments for a business combination are effective for a business combination which
occurs on or after the beginning of annual periods beginning on or after April 1,
2015. Earlier application is permitted for a business combination which occurs
on or after the beginning of annual periods beginning on or after April 1, 2014.
The Company applied the revised accounting standards and guidance for (b)presentation of the consolidated balance sheet and (c) presentation of the consolidated statement of income, effective April 1, 2015.
With respect to (b) presentation of the consolidated balance sheet and (c)presentation of the consolidated statement of income, the applicable line items inthe 2015 consolidated financial statements have been accordingly reclassified
and presented in line with those in 2016.
There was no impact from these accounting changes.
c. Trading Account Securities—Trading account securities, which are held forthe purpose of earning capital gains in the short term, are reported at fair value
and the related unrealized gains and losses are included in “Other operating income (expenses)” in the consolidated statement of income.
d. Securities— Securities are classified and accounted for, depending on management’s intent, as follows:(1) held-to-maturity debt securities, which are expected to be held-to-maturity
with the positive intent and ability to hold to maturity, are stated at amortizedcost using the straight-line method.
(2) investments in unconsolidated subsidiary that are not accounted for by theequity method are stated at cost determined by the moving-average method.
(3) available-for-sale securities are stated at fair value with unrealized gains
and losses, net of applicable taxes, reported in a separate component of equity. Securities whose fair values cannot be reliably determined are stated atcost determined by the moving-average cost method.
For other-than-temporary declines in fair value, securities are reduced to
net realizable value by a charge to income.

e. Tangible Fixed Assets (Except for Leased Assets)—Tangible fixed assets(except for leased assets) are stated at cost, less accumulated depreciation. Depreciation of tangible fixed assets owned by the consolidated banking subsidiaryis computed by the declining-balance method.
The range of useful lives is from 3 to 50 years for buildings and from 3 to
20 years for the others.
Depreciation of tangible fixed assets owned by the other subsidiaries iscomputed by the declining-balance method in estimated useful lives.
f. Intangible Fixed Assets (Except for Leased Assets)—Amortization of intangible fixed assets (except for leased assets) is mainly computed by the straightline method. The cost of computer software obtained for internal use is amortizedprincipally using the straight-line method over the estimated useful lives of mainly
5 years.
g. Leased Assets— Depreciation of leased assets from finance lease transactions that do not deem to transfer ownership of the leased property to the lessee
is computed using the straight-line method over the respective lease periods.
The residual value of leased assets is determined using the guaranteed residual
value indicated on the lease contracts where provided; otherwise, they have a nil
residual value.
h. Long-Lived Assets—The Group reviews its long-lived assets for impairment
whenever events or changes in circumstances indicate the carrying amount of anasset or asset group may not be recoverable. An impairment loss is recognized if
the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would bemeasured as the amount by which the carrying amount of the asset exceeds its
recoverable amount, which is the higher of the discounted cash flows from thecontinued use and eventual disposition of the asset or the net selling price at disposition.
i. Allowance for Loan Losses—The consolidated banking subsidiary has provided an allowance for loan losses, which is determined based on management’s
judgment and assessment of future losses based on their self-assessment systems. These systems reflect past experience of credit losses; possible credit
losses; business and economic conditions; the character, quality, and performance of the portfolio; value of collateral or guarantees; and other pertinent indicators.
The consolidated banking subsidiary has implemented a self-assessment
system to determine its asset quality. The quality of all loans is assessed by thebranches and the credit supervisory division with a subsequent audit by the Internal Audit division, which is independent from these divisions in accordance withthe consolidated banking subsidiary’s policy and guidelines for the self-assessment of asset quality.
The consolidated banking subsidiary has established a credit rating system
under which its customers are classified into five categories. The credit rating
system is used in the self-assessment of asset quality. All loans are classified
into five categories for self-assessment purposes: “normal,” “in need of caution,”“possible bankruptcy,” “virtual bankruptcy,” and “legal bankruptcy.”
For claims on borrowers that have entered into bankruptcy, special liquidation proceedings, or similar legal proceedings (“legal bankruptcy”), or borrowersthat are not legally or formally insolvent but are regarded as substantially in same
situation (“virtual bankruptcy”), an allowance is provided based on the amount ofclaims, after the write-offs as stated below, net of the expected amount of recoveries from collateral and guarantees.
For claims on borrowers that are not currently bankrupt but are likely to become bankrupt in the future (“possible bankruptcy”), an allowance is provided in
the amount deemed necessary based on an overall solvency assessment of theclaims, net of the expected amount of recoveries from collateral and guarantees.

Annual Report 2016

29

The allowance for loan losses is calculated based on the actual historicalloss ratio for “normal” and “in need of caution” categories. For claims on borrowers whose loans are classified as “restructured loans” over a certain amount, forwhich future cash flows from the collection of principal and interest are reasonably estimated, an allowances is provided for the difference between the present
value of expected future cash flows discounted at the contracted interest rate
and the carrying value of the claims based on the discounted cash flow method.
For collateralized or guaranteed claims of borrowers who are in “virtual
bankruptcy” or “legal bankruptcy,” the amount exceeding the estimated value ofcollateral or guarantees has been deducted as deemed uncollectible directly fromthose claims. As of March 31, 2016 and 2015, the deducted amounts were
¥11,342 million ($100,659 thousand) and ¥10,333 million, respectively.
Other consolidated subsidiaries determine allowances for loan losses thatare provided as deemed necessary to cover expected losses based on their own
experience.
j. Provision for Directors’ Bonuses — Provision for directors’ bonuses is provided in the amount of the estimated bonuses that are attributable to each fiscal
year.
k. Employees’ Retirement Benefits—The Company accounts for the liability
for retirement benefits based on the projected benefit obligations and plan assets
at the consolidated balance sheet date. The projected benefit obligations are attributed to periods using the benefit formula basis. Actuarial gains and losses areamortized on a straight-line basis over the average remaining service period.
Past service costs are amortized on a straight-line basis over the average remaining service period.
In May 2012, the ASBJ issued ASBJ Statement No. 26, “Accounting Standard for Retirement Benefits” and ASBJ Guidance No. 25, “Guidance on Accounting Standard for Retirement Benefits,” which replaced the accounting
standard for retirement benefits that had been issued by the Business Accounting Council in 1998 with an effective date of April 1, 2000, and the other related
practical guidance, and were followed by partial amendments from time to timethrough 2009.
(a) Under the revised accounting standard, actuarial gains and losses and past
service costs that are yet to be recognized in profit or loss are recognizedwithin equity (accumulated other comprehensive income), after adjusting fortax effects, and any resulting deficit or surplus is recognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits).
(b) The revised accounting standard does not change how to recognize actuarial
gains and losses and past service costs in profit or loss. Those amounts arerecognized in profit or loss over a certain period no longer than the expected
average remaining service period of the employees. However, actuarial gains
and losses and past service costs that arose in the current period and have
not yet been recognized in profit or loss are included in other comprehensive
income and actuarial gains and losses and past service costs that were recognized in other comprehensive income in prior periods and then recognizedin profit or loss in the current period are treated as reclassification adjustments (see Note 13).
(c) The revised accounting standard also made certain amendments relating to
the method of attributing expected benefit to periods and relating to the discount rate and expected future salary increases.
This accounting standard and the guidance for (a) and (b) above are effective for the end of annual periods beginning on or after April 1, 2013, and for (c)above are effective for the beginning of annual periods beginning on or after April
1, 2014, or for the beginning of annual periods beginning on or after April 1,
2015, subject to certain disclosure in March 2015, both with earlier application
being permitted from the beginning of annual periods beginning on or after April
1, 2013. However, no retrospective application of this accounting standard toconsolidated financial statements in prior periods is required.
The Company applied the revised accounting standard and guidance for retirement benefits for (a) and (b) above, effective March 31, 2014, and for (c)above, effective April 1, 2014.

30

ASHIKAGA HOLDINGS CO., LTD.

With respect to (c) above, the Company changed the method of attributing
the expected benefit to periods from a straight-line basis to a benefit formula basis and the method of determining the discount rate from using the period whichapproximates the expected average remaining service period to using a single
weighted average discount rate reflecting the estimated timing and amount ofbenefit payment, and recorded the effect of (c) above as of April 1, 2014, in retained earnings. As a result, retained earnings as of April 1, 2014, increased by¥4,855 million.
l. Provision for Directors’ Retirement Benefits— Provision for directors’ retirement benefits, which is provided for payments of retirement benefits to directors, is recorded in the amount deemed accrued at the fiscal year end datebased on the estimated amount of benefits.
m. Provision for Reimbursement of Deposits— Provision for reimbursementof deposits, which were derecognized as liabilities under certain conditions, isprovided for possible losses on future claims based on historical reimbursement
experience.
n. Provision for Contingent Losses— Provision for contingent losses is provided for contingent liabilities not covered by other reserves in an amount deemednecessary based on estimated losses in the future.
o. Provision for Point Card Certificates— Provision for point card certificates,
which is provided for the future use of points granted to customers under credit
card points program, is calculated by converting the outstanding points into amonetary amount and rationally estimating and recognizing the amount that will
be redeemed in the future.
p. Asset Retirement Obligation— In March 2008, the ASBJ issued ASBJ
Statement No. 18, “Accounting Standard for Asset Retirement Obligations” andASBJ Guidance No. 21, “Guidance on Accounting Standard for Asset Retirement
Obligations.” Under this accounting standard, an asset retirement obligation isdefined as a legal obligation imposed either by law or contract that results fromthe acquisition, construction, development and normal operation of a tangible
fixed asset and is associated with the retirement of such tangible fixed asset. The
asset retirement obligation is recognized as the sum of the discounted cash flows
required for the future asset retirement and is recorded in the period in which the
obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset
retirement obligation is incurred, the liability should be recognized when a reasonable estimate of the asset retirement obligation can be made. Upon initialrecognition of a liability for an asset retirement obligation, an asset retirement
cost is capitalized by increasing the carrying amount of the related fixed asset by
the amount of the liability. The asset retirement cost is subsequently allocated to
expense through depreciation over the remaining useful life of the asset. Overtime, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash
flows are reflected as an adjustment to the carrying amount of the liability andthe capitalized amount of the related asset retirement cost.
q. Stock Options— In December 2005, the ASBJ issued ASBJ Statement No.
8, “Accounting Standard for Stock Options” and related guidance. The new standard and guidance are applicable to stock options newly granted on and after
May 1, 2006. This standard requires companies to measure the cost of employee stock options based on the fair value at the date of grant and recognizedcompensation expense over the vesting period as consideration for receiving
goods or services. The standard also requires companies to account for stock
options granted to non-employees based on the fair value of either the stock options or the goods or services received. In the balance sheet, stock options arepresented as stock acquisition rights as a separate component of equity until exercised. The standard covers equity-settled, share-based payment transactions,but does not cover cash-settled, share-based payment transactions. In addition,the standard allows unlisted companies to measure options at their intrinsic value
if they cannot reliably estimate fair value.
r. Income Taxes—The provision for income taxes is computed based on thepretax income included in the consolidated statement of income. The asset andliability approach is used to recognize deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. Deferred taxes are measured
by applying currently enacted income tax rates to the temporary differences.
The Group files a tax return under the consolidated corporate-tax system,
which allows companies to base tax payments on the combined profits or lossesof the parent company and its wholly owned subsidiaries.
s. Translation of Foreign Currencies— Assets and liabilities denominated inforeign currencies are translated at exchange rates prevailing as of the consolidated balance sheet date.
t. Derivatives and Hedging Activities— Derivative financial instruments areclassified and accounted for as follows: (a) all derivatives, except those enteredinto for hedging purposes, are recognized as either assets or liabilities and measured at fair value with gains or losses on derivative transactions recognized in
the consolidated statement of income or (b) for derivatives used for hedging purposes, if the derivatives qualify for hedge accounting because of high correlationand effectiveness between the hedging instruments and the hedged items, gains
or losses on the derivatives are deferred until maturity of the hedged transactions(deferral hedge accounting).
The consolidated banking subsidiary applies deferral hedge accounting
based on the rules of the Japanese Institute of Certified Public Accountants (the“JICPA”) Industry Audit Committee Report No. 24, “Accounting and Auditing
Treatments on the Application of Accounting Standards for Financial Instrumentsin the Banking Industry,” for interest rate derivatives to manage interest rate risk
from various financial assets and liabilities as a whole. Under these rules, the effectiveness of a fair value hedge is assessed by an identified group of hedge deposits, loans, and similar instruments and by a corresponding group of hedging
instruments, such as interest rate swaps in the same maturity category. Also,
under these rules, the effectiveness of cash flow hedges is assessed based on
the correlation between a base interest rate index of the hedged cash flow andthat of the hedging instrument.
The consolidated banking subsidiary applies deferral hedge accounting
based on the rules of the JICPA Industry Audit Committee Report No. 25, “Accounting and Auditing Treatments for Foreign Currency Transactions in the Banking Industry,” to currency swaps and funding swaps used for the purpose ofcurrency exchange. Under the deferral hedge accounting, hedged items are
identified by grouping the foreign currency-denominated financial assets and liabilities by currencies and designating derivative transactions, such as currency
swap transactions and foreign exchange swaps as hedging instruments. Effectiveness of derivative transactions, such as currency swap transactions and foreign exchange swap transactions, is reviewed by comparing the total foreign
currency position of the hedged items and the hedging instrument by currency.
u. Cash and Cash Equivalents— For the purpose of the consolidated statement of cash flows, cash and cash equivalents represent cash and due from the
Bank of Japan.

weighted-average number of shares of common stock outstanding for the period,
retroactively adjusted for stock splits.
Diluted net income per share is not presented as the effect of including potential common shares is anti-dilutive.
Cash dividends per share presented in the accompanying consolidated
statement of income are dividends applicable to the respective years, including
dividends to be paid after the end of the year.
x. Accounting Changes and Error Corrections— In December 2009, the ASBJ
issued ASBJ Statement No. 24, “Accounting Standard for Accounting Changes
and Error Corrections” and ASBJ Guidance No. 24, “Guidance on AccountingStandard for Accounting Changes and Error Corrections.” Accounting treatments
under this standard and guidance are as follows: (1) Changes in Accounting Policies—When a new accounting policy is applied following revision of an accounting standard, the new policy is applied retrospectively unless the revised
accounting standard includes specific transitional provisions, in which case theentity shall comply with the specific transitional provisions. (2) Changes in Presentation—When the presentation of financial statements is changed, prior-period financial statements are reclassified in accordance with the new presentation.
(3) Changes in Accounting Estimates—A change in an accounting estimate isaccounted for in the period of the change if the change affects that period only,
and is accounted for prospectively if the change affects both the period of thechange and future periods. (4) Corrections of Prior-Period Errors—When an error
in prior-period financial statements is discovered, those statements are restated.
y. New Accounting Pronouncements
Tax Effect Accounting— On December 28, 2015, the ASBJ issued ASBJ Guidance No. 26, “Guidance on Recoverability of Deferred Tax Assets,” which included certain revisions of the previous accounting and auditing guidance issued by
the Japanese Institute of Certified Public Accountants. While the new guidancecontinues to follow the basic framework of the previous guidance, it provides new
guidance for the application of judgment in assessing the recoverability of deferred tax assets.
The previous guidance provided a basic framework which included certain
specific restrictions on recognizing deferred tax assets depending on the company’s classification in respect of its profitability, taxable profit and temporary differences, etc.
The new guidance does not change such basic framework but, in limited
cases, allows companies to recognize deferred tax assets even for a deductible
temporary difference for which it was specifically prohibited to recognize a deferred tax asset under the previous guidance, if the company can justify, withreasonable grounds, that it is probable that the deductible temporary difference
will be utilized against future taxable profit in some future period.
The new guidance is effective for the beginning of annual periods beginningon or after April 1, 2016. Earlier application is permitted for annual periods ending on or after March 31, 2016. The new guidance shall not be applied retrospectively and any adjustments from the application of the new guidance at the
beginning of the reporting period shall be reflected within retained earnings oraccumulated other comprehensive income at the beginning of the reporting period.
The Company expects to apply the new guidance on recoverability of deferred tax assets effective April 1, 2016, and is in the process of measuring theeffects of applying the new guidance in future applicable periods.

v. Consumption Taxes—The Company and its consolidated subsidiaries account for consumption tax and local consumption tax by the tax-exclusion method, whereby receipts and payments of consumption taxes are not included in thetransaction amounts, and accordingly, consumption tax amounts do not affectthe measurement of profit or loss transactions.
w. Per Share Information— Basic net income per share of common stocks iscomputed by dividing net income attributable to common shareholders by the

Annual Report 201631

3. CASH AND CASH EQUIVALENTS
The reconciliation of “Cash and cash equivalents” in the consolidated statementof cash flows and “Cash and due from banks” in the consolidated balance sheet
as of March 31, 2016 and 2015, was as follows:
Thousands of
U.S. Dollars
2016

Millions of Yen
2016
2015

Cash and due from banks������������������� ¥437,509 ¥365,322
Interest-bearing deposits included
in due from banks (other than due
from the Bank of Japan)��������������������
(1,358)(1,610)Cash and cash equivalents����������������� ¥436,150 ¥363,712$3,882,759(12,056)$3,870,703

4. TRADING ACCOUNT SECURITIES AND SECURITIESSecurities as of March 31, 2016 and 2015, consisted of the following:Thousands of
U.S. Dollars
2016

Millions of Yen
2016
2015

Japanese national government bonds���� ¥351,547 ¥ 351,981
Japanese local government bonds������
251,967
241,943
Japanese corporate bonds�����������������
205,872
238,602
Japanese corporate stocks�����������������
48,64956,099Other securities���������������������������������
438,732
319,311
Total������������������������������������������������� ¥1,296,769 ¥1,207,938$ 3,119,877
2,236,133
1,827,057
431,749
3,893,613$11,508,428

Net unrealized gains on trading account securities were ¥39 million ($354
thousand) and ¥29 million for the years ended March 2016 and 2015, respectively.
The cost and aggregate fair value of available-for-sale securities andheld-to-maturity securities as of March 31, 2016 and 2015, is as follows:

March 31, 2016

Cost

Millions of Yen
Unrealized Unrealized
gains
lossesSecurities classified as:
Available-for-sale:¥1,137,194 ¥72,825
Equity securities���������������
21,195 26,717
Debt securities:
703,624 31,283
Japanese national
government bonds����� 260,457 18,300
Japanese local
government bonds����� 243,646
8,332Japanese corporate
bonds������������������������ 199,520
4,650
Others:412,374 14,825
Foreign bonds������������� 156,610
3,075
Held-to-maturity:
88,788 13,840
Japanese national
government bonds����������
72,789 13,734
Japanese corporate
bonds����������������������������
1,999
46
Others:
14,00058
Foreign bonds�������������
14,00058

32

ASHIKAGA HOLDINGS CO., LTD.

Fair value¥4,600 ¥1,205,419
686
47,225308
734,599—

278,75811

251,967

297
3,605
590
—

203,873423,594
159,095
102,628—

86,524

—
—
—

2,045
14,05814,058March 31, 2015

Cost

Millions of Yen
Unrealized Unrealized
gains
lossesSecurities classified as:
Available-for-sale:¥1,045,974 ¥65,536
Equity securities���������������
21,947 33,101
Debt securities:
735,651 15,478
Japanese national
government bonds����� 271,703
7,528Japanese local
government bonds����� 236,552
5,395Japanese corporate
bonds������������������������ 227,395
2,554
Others:288,376 16,956
Foreign bonds������������� 152,539
2,280
Held-to-maturity:
95,745 10,045
Japanese national
government bonds����������
72,7499,704
Japanese corporate
bonds����������������������������
8,996
180
Others:
14,000160
Foreign bonds�������������
14,000160

March 31, 2016

Cost

Fair value¥1,638 ¥1,109,872
466
54,582
347
750,782—279,2324

241,943

342
824
93
—

229,606
304,508
154,727
105,791—

82,453

—
—
—

9,177
14,16014,160Thousands of U.S. Dollars
Unrealized Unrealized
gains
lossesFair value

Securities classified as:
Available-for-sale:$10,092,248 $646,308
Equity securities���������������
188,101 237,109
Debt securities:
6,244,450 277,632
Japanese national
government bonds����� 2,311,482 162,413
Japanese local
government bonds����� 2,162,287
73,946
Japanese corporate
bonds������������������������ 1,770,682
41,273
Others:3,659,697 131,568
Foreign bonds������������� 1,389,866
27,296
Held-to-maturity:
787,970 122,827
Japanese national
government bonds����������
645,982 121,892
Japanese corporate
bonds����������������������������
17,743
413
Others:124,246
522
Foreign bonds�������������
124,246522$40,832 $10,697,725
6,093
419,116
2,741
6,519,342—

2,473,895

100

2,236,133

2,641
31,9985,238—

1,809,314
3,759,267
1,411,924
910,797—

767,874———

18,156
124,768
124,768

The information for available-for-sale securities which were sold during theyears ended March 31, 2016 and 2015, was as follows:

March 31, 2016

Millions of Yen
Realized
Realized
Proceeds
gains
lossesAvailable-for-sale:
Equity securities������������������������������������� ¥ 4,135
Debt securities:�������������������������������������� 51,980
Japanese national government bonds���� 51,104875
Japanese corporate bonds������������������
Other securities�������������������������������������� 12,480
Total���������������������������������������������������������� ¥68,596

March 31, 2015

¥ 2
0
—
0
978
¥980

Millions of Yen
Realized
Realized
Proceeds
gains
lossesAvailable-for-sale:
Equity securities������������������������������������� ¥ 505
Debt securities:�������������������������������������� 55,457
Japanese national government bonds���� 50,777
Japanese corporate bonds������������������
4,679
Other securities��������������������������������������
6,361
Total���������������������������������������������������������� ¥62,324

March 31, 2016

¥3,290
684
678
5
210
¥4,185

¥505
486
481
4
—
¥992

¥ —
0
—
0
871
¥871

Thousands of U.S. Dollars
Realized
Realized
Proceeds
gains
lossesAvailable-for-sale:
Equity securities������������������������������������� $ 36,702
Debt securities:�������������������������������������� 461,308
Japanese national government bonds���� 453,538
Japanese corporate bonds������������������
7,770
Other securities�������������������������������������� 110,761
Total���������������������������������������������������������� $608,772$29,198
6,072
6,022
50
1,872
$37,142

20
0
—
0
8,681
$8,702

5. UNREALIZED GAINS ON AVAILABLE-FOR-SALE SECURITIES
Unrealized gains on available-for-sale securities as of March 31, 2016 and2015, consisted of the following:
Millions of Yen
2016
2015

Unrealized gains:������������������������������� ¥68,225
Available-for-sale securities����������� 68,225
Money held in trust, except
for trading and held-to-maturity
purpose���������������������������������������
—Deferred tax liabilities:������������������������ 19,697
Unrealized gains on available-for-salesecurities before adjustments
by ownership share�������������������������� 48,527
Noncontrolling interests����������������������
—Company’s ownership sharein unrealized gains (losses)
on available-for-sale securities heldby affiliates accounted for using—
the equity method����������������������������
Unrealized gains on available-for-salesecurities����������������������������������������� ¥48,527¥63,898
63,898$605,477
605,477—
19,193—
174,81344,704—

430,663———¥44,704$430,663

6. LOANS AND BILLS DISCOUNTED
The following loans were included in loans and bills discounted as of March 31,
2016 and 2015:$

Marketable available-for-sale securities whose fair value significantly declined in comparison with the acquisition cost and whose fair value is not considered likely to recover to their acquisition cost are written down and recognized as
impairment losses.
The criteria for determining whether the fair value was “significantly declined” are defined as follows:(a) Securities whose fair value has declined by 50% or more of the acquisition
cost are deemed to be impaired.
(b) Securities whose fair value has declined by 30% or more but less than 50%of the acquisition cost and their fair value are deemed not recoverable by individual assessment.
The impairment losses on marketable available-for-sale securities for theyears ended March 31, 2016 and 2015, were ¥36 million ($319 thousand) including bonds of ¥36 million ($319 thousand) and nil, respectively.
As of March 31, 2016 and 2015, securities included equity investments inunconsolidated subsidiaries and associated companies of ¥9 million ($82 thousand) and ¥9 million, and capital subscriptions of ¥452 million ($4,019 thousand) and ¥440 million, respectively.

Thousands of
U.S. Dollars
2016

Loans to borrowers
in legal bankruptcy ��������������������������
Past due loans�����������������������������������
Loans past due
for three months or more������������������
Restructured loans�����������������������������
Total�������������������������������������������������

Millions of Yen
2016
2015

Thousands of
U.S. Dollars
2016¥ 1,704
69,914¥ 1,774
78,203$ 15,125
620,472—
20,340¥91,959—
19,037¥99,016—
180,520$816,116

The amounts above are stated before the deduction of the allowance forloan losses.
“Loans to borrowers in legal bankruptcy” are nonaccrual loans, which arehighly probable of becoming unrecoverable. Specific conditions for inclusion inthis category are as follows:(i) Borrowers have applied for procedures under the Corporate Reorganization
Act, Civil Rehabilitation Act, Bankruptcy Act, liquidation under the Companies
Act of Japan (the “Companies Act”), or liquidation under other legal provisions.
(ii) Clearance of promissory notes or bills issued by the borrower is suspended.
“Past due loans” are loans on which accrued interest income is not recognized, excluding “loans to borrowers in legal bankruptcy” and loans on which interest payments are deferred in order to support the borrowers’ recovery from financial difficulties.
“Loans past due for three months or more” include accruing loans for whichprincipal or interest is past due three months or more.
“Restructured loans” are loans to borrowers in financial difficulty to whom
the Group has provided financial support through modification of the lending
terms to be more favorable to the borrower, including reduction of interest rates,
suspension of repayment of principal and interest, and debt forgiveness.

Annual Report 201633

Contracts of overdraft facilities and loan commitment limits are contracts
under which the consolidated banking subsidiary and certain consolidated subsidiaries lend to customers up to the prescribed limits in response to customer
applications for loans as long as there is no violation of any conditions in thecontracts. As of March 31, 2016 and 2015, the amounts of unused commitments were ¥1,249,546 million ($11,089,341 thousand) and ¥1,226,867 million, respectively. As of March 31, 2016 and 2015, the amounts of unused commitments whose remaining contract terms were within one year were¥1,213,114 million ($10,766,016 thousand) and ¥1,194,633 million, respectively.
As many of these commitments expire without being drawn down, the unused amount does not necessarily represent a future cash requirement. Most ofthese contracts have conditions whereby the consolidated banking subsidiaryand certain consolidated subsidiaries can refuse customer applications for loans
or decrease the contract limits for certain reason (e.g., changes in financial situation and deterioration in customers’ creditworthiness). At the inception of thecontracts, the consolidated banking subsidiary and certain consolidated subsidiaries obtain real estate, securities, or other assets as collateral if considered tobe necessary. Subsequently, the consolidated banking subsidiary and certain
consolidated subsidiaries perform periodic reviews of the customers’ businessresults based on the internal rules and take necessary measures to reconsider
conditions in the contracts and/or require additional collateral and guarantees.
Discounting bills are treated as secured lending transactions. As of March
31, 2016 and 2015, the consolidated banking subsidiary has the right to sell or
repledge bills discounted and foreign exchange bills bought and their total facevalue was ¥25,527 million ($226,544 thousand) and ¥27,674 million, respectively.

Tangible fixed assets as of March 31, 2016 and 2015, consisted of the following:
Millions of Yen
2016
2015

Buildings������������������������������������������� ¥ 7,527
Land������������������������������������������������� 12,798
Leased assets������������������������������������
16
435
Construction in progress���������������������
Other������������������������������������������������
3,647
Total�������������������������������������������������� ¥24,424¥ 7,074
12,831
18
1,025
3,341
¥24,291

Thousands of
U.S. Dollars
2016$ 66,801
113,579
146
3,862
32,374$216,762

The accumulated depreciation of tangible fixed assets as of March 31,
2016 and 2015, amounted to ¥39,480 million ($350,380 thousand) and¥39,055 million, respectively.
Under certain conditions, such as exchanges of fixed assets of similar kinds
and sales and purchases resulting from expropriation, Japanese tax laws permit
companies to defer the profit arising from such transactions by reducing the costof the assets acquired or by providing a special reserve in the equity section. Asof March 31, 2016 and 2015, such deferred profit amounted to ¥2,774 million($24,619 thousand) and ¥2,747 million, respectively, and for the years ended
March 31, 2016 and 2015, were ¥26 million ($239 thousand) and nil,respectively.

ASHIKAGA HOLDINGS CO., LTD.

Intangible fixed assets as of March 31, 2016 and 2015, consisted of thefollowing:
Millions of Yen
2016
2015

Software�������������������������������������������� ¥ 2,087
Goodwill�������������������������������������������� 75,979
Leased assets������������������������������������
—Other������������������������������������������������
534
Total������������������������������������������������� ¥78,601¥ 3,037
82,182—534¥85,754

Thousands of
U.S. Dollars
2016$ 18,527
674,297—
4,743$697,567

The amortization expense for goodwill included in general and administrative
expenses for the years ended March 31, 2016 and 2015, amounted to ¥6,202
million ($55,045 thousand) and ¥6,202 million, respectively.

9.	CUSTOMERS’ LIABILITIES FOR ACCEPTANCES AND GUARANTEESAll contingent liabilities arising from acceptances and guarantees are reflected in
acceptances and guarantees. As a contra account, customers’ liabilities for
acceptances and guarantees are presented as assets, representing theconsolidated banking subsidiary’s and certain consolidated subsidiaries’ rights ofindemnity from the applicants.
Guarantee obligations for private placement bonds included in “Securities”(provided in accordance with the Article 2-3 of the “Financial Instruments andExchange Act”) as of March 31, 2016 and 2015, were ¥63,410 million($562,748 thousand) and ¥47,512 million, respectively.

10. ASSETS PLEDGED AS COLLATERAL

7. TANGIBLE FIXED ASSETS

34

8. INTANGIBLE FIXED ASSETS

Assets pledged as collateral and the related liabilities as of March 31, 2016 and2015, were as follows:
Millions of Yen
2016
2015

Assets pledged as collateral:
Cash and due from banks�������������� ¥      4Securities�������������������������������������� 280,162
Loans and bills discounted�������������
11,050Total��������������������������������������������� ¥291,217
Relevant liabilities to above assets:
Deposits��������������������������������������� ¥113,379
Payables under securities
lending transactions���������������������
25,263
Borrowed money��������������������������� 181,710

Thousands of
U.S. Dollars
2016¥      4266,660
26,100¥292,765$       402,486,357
98,065$2,584,462¥115,438$1,006,208

2,473
152,500

224,2021,612,620

Additionally, securities amounting to ¥67,707 million ($600,886 thousand)and ¥73,080 million as of March 31, 2016 and 2015, respectively, were
pledged as collateral for settlements of exchange or as substitute securities for
margins on futures transactions.
Moreover, other assets included cash collateral paid for financial instruments amounting to ¥5,090 million ($45,172 thousand) and nil and guarantee
deposits amounting to 745 million ($6,614 thousand) and ¥741 million as ofMarch 31, 2016 and 2015, respectively.

11. BORROWED MONEY
As of March 31, 2016 and 2015, the weighted-average annual interest rates
applicable to borrowed money were 0.52% and 0.84%, respectively.
Borrowed money includes borrowings from the Bank of Japan and otherfinancial institutions. In addition, borrowed money included subordinatedborrowings totaling ¥70,000 million ($621,228 thousand) and ¥80,000 million
as of March 31, 2016 and 2015, respectively.

12. OTHER LIABILITIESOther liabilities included asset retirement obligations of ¥544 million ($4,828
thousand) and ¥539 million as of March 31, 2016 and 2015, respectively.
(a) Overview of asset retirement obligations
Asset retirement obligations, which were recognized for restoring leased
buildings, such as branch premises, to their original state, are based on the realestate lease contracts.
(b) Calculation of asset retirement obligations
Asset retirement obligations are calculated based on an estimated available
period of 19 to 39 years using the discount rates from 1.6% to 2.3%.
Millions of Yen
2016
2015

Balance at beginning of year���������������
Reconciliation associatedwith passage of time������������������������
Balance at end of year�����������������������

Thousands of
U.S. Dollars
2016

¥539

¥534

$4,789

4
¥544

4
¥539

39
$4,828

2. Defined benefit plans(a) The changes in defined benefit obligation for the years ended March
31, 2016 and 2015, were as follows:
Millions of Yen
2016
2015

Balance at beginning of year
(as previously reported)��������������������� ¥38,872
Cumulative effect of accountingchange����������������������������������������
—Balance at beginning of year—
(as restated)�������������������������������������
Current service cost�����������������������
1,520
443
Interest cost����������������������������������
Actuarial (gains) losses������������������
4,198
Benefits paid���������������������������������
(2,331)Others������������������������������������������
48
Balance at end of year����������������������� ¥42,752

Thousands of
U.S. Dollars
2016¥47,382$ 344,982(7,511)—

39,870
1,627
454
(671)
(2,458)50¥38,872—
13,497
3,939
37,256(20,693)431$(379,413)(b) The changes in plan assets for the years ended March 31, 2016 and2015, were as follows:
Millions of Yen
2016
2015

Balance at beginning of year��������������� ¥52,757
1,740
Expected return on plan assets�������
Actuarial gains (losses)������������������
(1,755)Contributions from the employer�����
2,045
Benefits paid���������������������������������
(1,624)
Others������������������������������������������
36
Balance at end of year����������������������� ¥53,199

Thousands of
U.S. Dollars
2016¥47,960
1,294
3,001

$468,207
15,451(15,584)

2,044(1,579)35¥52,757

18,152(14,421)321$472,126

13. RETIREMENT AND PENSION PLANS
1. Outline of the adopted retirement benefit plans
The Company’s consolidated subsidiaries have adopted funded and unfunded
defined benefit plans as well as defined contribution plans to provide for theemployees’ retirement benefits. All of the retirement benefit plans are managed
in an integrated manner through retirement benefit points which are determinedbased on years of service and capabilities of employees, as well as employee
performance evaluation. The determined points are then allocated to each plan.
The defined benefit pension plans (funded plan) have introduced pension
plans similar to cash balance plan-type pension plans. Under the plan, eachparticipant will set up a virtual individual account where pension or lump-sum
payments will be made based on the accumulated retirement benefit points
allocated. A retirement benefit trust is established for this defined benefit pension
plan.
Under the lump-sum retirement benefit plans (unfunded plans that havebecome funded plans due to the establishment of a retirement benefit trust),
lump-sum payments are made based on the accumulated retirement benefit
points allocated. In some cases, premium severance payments may be made to
employees in conjunction with the employees’ retirement, etc.
Under the defined contribution plans, contribution amount is decided basedon the accumulated retirement benefit points allocated.
Regarding the lump-sum retirement benefit plans adopted by certain
consolidated subsidiaries, liability for retirement benefits and retirement benefit
expenses are calculated by the simplified method.
The Company’s consolidated subsidiaries are members of the defined
benefit pension funds under the multi-employer plans, and as the amount of plan
assets corresponding to the contribution of each subsidiary may be reasonably
calculated, such information is included in the notes to defined benefit plans.

(c) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligation and plan
assets was as follows:
Millions of Yen
2016
2015

Defined benefit obligation������������������� ¥ 42,752 ¥ 38,872
Plan assets���������������������������������������� (53,199) (52,757)
Total������������������������������������������������� (10,446) (13,884)
Unfunded defined benefit
obligation�����������������������������������������
——Net asset arising from defined
benefit obligation������������������������������ ¥(10,446) ¥(13,884)
Millions of Yen
2016
2015

Liability for retirement benefits������������ ¥     — ¥    —Asset for retirement benefits��������������� (10,446) (13,884)
Net asset arising from defined
benefit obligation������������������������������ ¥(10,446) ¥(13,884)

Thousands of
U.S. Dollars
2016$379,413(472,126)(92,713)—$ (92,713)
Thousands of
U.S. Dollars
2016$    —(92,713)$(92,713)

Annual Report 201635

(d) The components of net periodic benefit costs for the years ended
March 31, 2016 and 2015, were as follows:
Thousands of
U.S. Dollars
2016

Millions of Yen
2016
2015

Service cost���������������������������������������
Interest cost��������������������������������������
Expected return on plan assets�����������
Recognized actuarial losses ���������������
Amortization of prior service cost��������
Others (non-actuarial-basis cost)��������
Net periodic benefit costs�������������������

¥1,520443(1,740)¥1,627454(1,294)$13,497
3,939(15,451)

767
(144)
12
¥ 858

1,018
(144)
14
¥1,675

6,811(1,285)111$ 7,621(e) Amounts recognized in other comprehensive income (before income
tax effect) in respect of defined retirement benefit plans for the years
ended March 31, 2016 and 2015, were as follows:

Prior service cost�������������������������������
Actuarial losses���������������������������������
Total�������������������������������������������������

Millions of Yen
2016
2015

Thousands of
U.S. Dollars
2016¥ (144)(5,186)¥(5,331)$ (1,285)(46,030)$(47,315)¥ (144)
4,690¥4,546(f) Amounts recognized in accumulated other comprehensive income(before income tax effect) in respect of defined retirement benefit
plans as of March 31, 2016 and 2015, were as follows:

Unrecognized prior service cost����������
Unrecognized actuarial (gains) losses��
Total�������������������������������������������������

Millions of Yen
2016
2015

Thousands of
U.S. Dollars
2016¥ 1,013(3,292)¥(2,278)$ 8,997(29,220)$(20,223)¥1,1581,894¥3,052(g) Plan assets
a. Components of plan assets
Plan assets as of March 31, 2016 and 2015, consisted of the following:
Debt investments�������������������������������������������������������
Equity investments�����������������������������������������������������
General accounts of life insurance company����������������
Short-term assets������������������������������������������������������
Others�����������������������������������������������������������������������
Total�������������������������������������������������������������������������

2016

2015

63%
21%
8%
4%
4%
100%

66%
22%
5%
3%
4%
100%

* Total plan assets include retirement benefit trust of 25% which was set up on corporate
pension plans.

b. Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the longterm rates of return which are expected currently and in the future from the various components of the plan assets.
(h) Assumptions used for the years ended March 31, 2016 and 2015,
were set forth as follows:
2016

Discount rate���������������������������������������������� 0.3% — 1.0%
Long-run expected rate of returnon plan assets�������������������������������������������
3.3%
Expected rate of increase in salary���������������
9.0%

2015

1.0% — 1.2%
2.7%
9.0%

3. Defined contribution plans
The amounts of the required contribution to the defined contribution plans of theCompany and certain consolidated subsidiaries were ¥298 million ($2,647 thousand) and ¥294 million as of March 31, 2016 and 2015, respectively.

36

ASHIKAGA HOLDINGS CO., LTD.

14.EQUITY
Japanese companies are subject to the Companies Act. The significant provisions in the Companies Act that affect financial and accounting matters are summarized below:
a. Dividends
Under the Companies Act, companies can pay dividends at any time during the
fiscal year in addition to the year-end dividend upon resolution at theshareholders’ meeting. Additionally, for companies that meet certain criteria
including (1) having a Board of Directors, (2) having independent auditors, (3)having an Audit & Supervisory Board, and (4) the term of service of the directors
being prescribed as one year rather than the normal two-year term by its articles
of incorporation, the Board of Directors may declare dividends (except for
dividends-in-kind) at any time during the fiscal year if the company hasprescribed so in its articles of incorporation. With respect to the third condition
above, the Board of Directors of companies with (a) board committees (namely,
nominating committee, compensation committee and audit committee) or (b) anaudit and supervisory committee (as implemented under the Companies Act
effective May 1, 2015) may also declare dividends at any time because suchcompanies, by nature, meet the criteria under the Companies Act. The Company
is organized as a company with board committees . The Company meets all theabove criteria, and accordingly, the Board of Directors may declare dividends(except for dividends-in-kind) at any time during the fiscal year.
The Companies Act permits companies to distribute dividends-in-kind (noncash assets) to shareholders subject to certain limitations and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution
by the Board of Directors if the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available fordividends or the purchase of treasury stock. The limitation is defined as theamount available for distribution to the shareholders, but the amount of equity
after dividends must be maintained at no less than ¥3 million.
b. Increases/Decreases and Transfer of Common Stock, Reserve, andSurplus
The Companies Act requires that an amount equal to 10% of dividends must be
appropriated as a legal reserve (a component of retained earnings) or as
additional paid-in capital (a component of capital surplus) depending on theequity account that was charged upon the payment of such dividends until theaggregate amount of the legal reserve and additional paid-in capital equals 25%
of capital stock. Under the Companies Act, the total amount of additional paid-in
capital and legal reserve may be reversed without limitation. The Companies Act
also provides that capital stock, legal reserve, additional paid-in capital, othercapital surplus, and retained earnings can be transferred among the accounts
under certain conditions upon resolution of the shareholders.
c. Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock anddispose of such treasury stock by resolution of the Board of Directors. The
amount of treasury stock purchased cannot exceed the amount available for
distribution to the shareholders which is determined by a specific formula. Under
the Companies Act, stock acquisition rights are presented as a separate
component of equity. The Companies Act also provides that companies canpurchase both treasury stock acquisition rights and treasury stock. Such treasury
stock acquisition rights are presented as a separate component of equity or
deducted directly from stock acquisition rights.

Capital Stock Changes during the YearThe changes in the number and class of issued stock and treasury stock for the year ended March 31, 2016, were as follows:

As of March 31, 2015

Issued stock:
Common stock
Total

333,250
333,250

Shares in Thousands
Changes during the year
Increase
Decrease——

As of March 31, 2016——

333,250
333,250

The changes in the number and class of issued stock and treasury stock for the year ended March 31, 2015, were as follows:

As of March 31, 2014

Issued stock:
Common stock
Total

333,250
333,250

Shares in Thousands
Changes during the year
Increase
Decrease——

As of March 31, 2015——

333,250
333,250

Cash Dividends per Share
Cash dividends per share for the years ended March 31, 2016 and 2015, were as follows:Year ended March 31, 2016:
Dividends paid in the fiscal year ended March 31, 2016
The following cash dividend payments were approved at the Board of Directors’ meeting held on May 13, 2015, and November 10, 2015:
Cash dividends approved at the Board of Directors’ meeting held on May 13, 2015:

Common stock
Cash dividends approved at the Board of Directors’ meeting held on Nov. 10, 2015:

Common stock

Cash dividends approved at the Board of Directors’ meeting held on May 13, 2015:

Common stock
Cash dividends approved at the Board of Directors’ meeting held on Nov. 10, 2015:

Common stock

Total amount(Millions of Yen)

Per share amount(Yen)

Dividend record date

Effective date

¥1,499¥4.50

Mar. 31, 2015

Jun. 4, 2015

Total amount(Millions of Yen)

Per share amount(Yen)

Dividend record date

Effective date

¥1,832¥5.50

Sep. 30, 2015

Dec. 3, 2015

Total amount(Thousands of
U.S. Dollars)

Per share amount(U.S. Dollars)

Dividend record date

Effective date

$13,309$0.04

Mar. 31, 2015

Jun. 4, 2015

Total amount(Thousands of
U.S. Dollars)

Per share amount(U.S. Dollars)

Dividend record date

Effective date

$16,266$0.05

Sep. 30, 2015

Dec. 3, 2015

Total amount(Millions of Yen)

Per share amount(Yen)

Dividend record date

Effective date

¥1,499¥4.50

Mar. 31, 2016

Jun. 8, 2016

Total amount(Thousands of
U.S. Dollars)

Per share amount(U.S. Dollars)

Dividend record date

Effective date

$13,309$0.04

Mar. 31, 2016

Jun. 8, 2016

Dividends to be paid after March 31, 2016
Cash dividends approved at the Board of Directors’ meeting held on May 13, 2016:

Common stock
Cash dividends approved at the Board of Directors’ meeting held on May 13, 2016:

Common stock

Annual Report 201637

Year ended March 31, 2015:
Dividends paid in the fiscal year ended March 31, 2015
The following cash dividend payments were approved at the Board of Directors’ meeting held on May 12, 2014, and November 7, 2014:
Cash dividends approved at the Board of Directors’ meeting held on May 12, 2014:

Common stock
Cash dividends approved at the Board of Directors’ meeting held on Nov. 7, 2014:

Common stock

Total amount(Millions of Yen)

Per share amount(Yen)

Dividend record date

Effective date

¥1,333¥4.00

Mar. 31, 2014

Jun. 5, 2014

Total amount(Millions of Yen)

Per share amount(Yen)

Dividend record date

Effective date

¥1,499¥4.50

Sep. 30, 2014

Dec. 10, 2014

Dividends to be paid after March 31, 2015
Cash dividends approved at the Board of Directors’ meeting held on May 13, 2015:

Common stock

Total Amount(Millions of Yen)

Per Share Amount(Yen)
Dividend Record Date

¥1,499¥4.50

Mar. 31, 2015

Effective Date

Jun. 4, 201515. STOCK OPTIONSThe Company’s stock option plans grant options to directors and others to purchase certain shares of the Company’s common stock in the respective exercise periods.
The stock options outstanding as of March 31, 2016, are as follows:
Stock option

Persons granted

6 directors and executive officers of the Company
2009 Stock Option 10 directors and executive officers of the consolidated banking subsidiary
1,848 employees of the consolidated banking subsidiary
6 directors and executive officers of the Company
2010 Stock Option 10 directors and executive officers of the consolidated banking subsidiary
1,878 employees of the consolidated banking subsidiary

Number of options
granted (Shares)*1

Date of grant

Exercise
price (Yen)

Exercise period

2,684,900

March 2, 2009

¥550

From March 1, 2011,
to December 31, 2018

2,698,700

January 4, 2010

550

From January 1, 2012,
to December 31, 2018

*1 On October 19, 2013, the Company made a stock split by way of a free share distribution at the rate of 0.01 shares for each outstanding common stock. All share amounts of options granted
in above table have been adjusted to reflect the stock split.

The stock option activity is as follows:2009 Stock option

2010 Stock option

For the year ended March 31, 2016
Nonvested (shares):
March 31, 2015 — outstanding
GrantedCanceled
VestedMarch 31, 2016 — outstanding

2,642,600—
699,400—
1,943,200

2,655,900—
638,700—
2,017,200

Vested (shares):
March 31, 2015 — outstanding
VestedExercised
Canceled
March 31, 2016 — outstanding

—
—
—
—
—

—
—
—
—
—

The Assumptions Used to Measure Fair Value of Stock Option
As the Company was an unlisted company when stock option rights were granted, they were measured at their intrinsic value because the fair value of stock option cannot
be reliably estimated. The Company does not recognize relevant expenses since their fair value on the date of grant was zero. The amounts of their intrinsic value as ofMarch 31, 2016 and 2015, were nil.

38

ASHIKAGA HOLDINGS CO., LTD.

16. PER SHARE OF COMMON STOCK

17. OTHER INCOME

a. Net income per share
Reconciliation of the differences between basic and diluted net income per share(“EPS”) for the years ended March 31, 2016 and 2015, was as follows:

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

Millions of Thousands ofYenshares
Net income
attributable Weightedaverage
to owners ofsharesthe parent

Year Ended March 31, 2016
Basic EPS —Net income available
to common shareholders��������� ¥22,452—
Effect of dilutive securities���������
Diluted EPS —Net income
for computation*1��������������������
—Year Ended March 31, 2015
Basic EPS —Net income available
to common shareholders��������� ¥17,076—
Effect of dilutive securities���������
Diluted EPS —Net income
for computation*1��������������������—Yen

U.S. Dollars

Gain on sales of stock andother securities��������������������������������
Gain on disposal of fixed assets����������
Recoveries of write-off claims�������������
Other������������������������������������������������
Total�������������������������������������������������

EPS

333,250—¥67.37
—

$0.60
—

—

—

—

¥3,290—524
1,023¥4,838¥  50516
707
1,536¥2,766

Thousands of
U.S. Dollars
2016$29,198
—
4,655
9,085
$42,938

18. GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the years ended March 31, 2016 and2015, consisted of the following:
Millions of Yen
2016
2015

333,250—¥51.24———

Salaries and allowances��������������������� ¥20,165
Amortization of goodwill���������������������
6,202
Other������������������������������������������������ 29,103
Total�������������������������������������������������� ¥55,471

EPS for the years ended March 31, 2016 and 2015, is calculated based on thefollowing:
Millions of Yen
2016
2015

Net income
Amount not available to commonshareholders
Net income available to commonshareholders

Millions of Yen
2016
2015

Thousands of
U.S. Dollars
2016¥22,452¥17,076$199,260———¥22,452¥17,076$199,260*1. Since the average share price during the fiscal year did not exceed the exercise priceand the shares were not dilutive, diluted EPS is not shown because decrease in net income available to common shareholders as a result of dilution did not incur.

b. Total equity per share
Total equity per share as of March 31, 2016 and 2015, was as follows:
Yen
2016

Total equity per share������������������������� ¥909.54

2015

U.S. Dollars
2016¥861.58$8.07¥19,861
6,202
30,572¥56,636

Thousands of
U.S. Dollars
2016$178,966
55,045258,285$492,296

19. OTHER EXPENSES
Other expenses for the years ended March 31, 2016 and 2015, consisted of thefollowing:

Write-off amount of loans�������������������
Loss on sales of stocks andother securities��������������������������������
Loss on devaluation of stocks andother securities��������������������������������
Loss on sales of loans������������������������
Loss on disposal of fixed assets����������
Impairment losses������������������������������
Other������������������������������������������������
Total��������������������������������������������������

Millions of Yen
2016
2015

Thousands of
U.S. Dollars
2016¥1,656¥2,304$14,700

980

871

8,702

8
110
108
50
680
¥3,595

43
184
32
—
438
¥3,874

79
985
966
446
6,036
$31,913

Total equity per share as of March 31, 2016 and 2015, is calculated based on
the following:
Millions of Yen
2016
2015

Total equity���������������������������������������� ¥303,105
Deductions from total equity:—
Total equity available
to common shareholders������������������ ¥303,105

Thousands of
U.S. Dollars
2016¥287,121—$2,689,964—¥287,121$2,689,964

Number of shares in thousands
2016
2015

Number of shares of common stock used incomputing total equity per shareat the year-end������������������������������������������������������

333,250

333,250

Annual Report 201639

20. INCOME TAXES

21. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURESThe Group is subject to Japanese national and local income taxes, which, in theaggregate, resulted in a normal effective statutory tax rate of 32.8% and 35.4%
for the years ended March 31, 2016 and 2015, respectively.
The tax effects of significant temporary differences and loss carry forwards,
which result in deferred tax assets and liabilities as of March 31, 2016 and2015, were as follows:(1) Group Policies for Financial Instruments
The Group provides various financial services centering on banking business. The
Company is a bank holding company and financed by subordinate debts to acquire shares of the consolidated banking subsidiary, Ashikaga Bank Co., Ltd. As
the central business operation of the Group, the consolidated banking subsidiaryraises funds by deposits as its basic function as a bank; the consolidated banking
subsidiary also procures funds by call money transactions from short-term markets to maintain an adequate degree of liquidity. The consolidated banking subsidiary manages those funds lending to corporate customers and individuals,
such as mortgages and investing securities, mainly bonds, and lending to counterparties in short-term markets.
The Group utilizes Asset Liability Management (ALM) to avoid unfavorable
floating interest rate fluctuations of financial assets and liabilities it holds. As apart of ALM, the Group has entered into derivative transactions.

Deferred tax assets:
Tax loss carryforwards�������������������
Liability for retirement benefits�������
Allowance for loan losses���������������
Write-offs of securities�������������������
Other��������������������������������������������
Subtotal deferred tax assets�������
Less valuation allowance����������������
Total deferred tax assets�����������
Deferred tax liabilities:
Unrealized gains
on available-for-sale securities�����
Property revaluationsin preparing consolidated financial
statements����������������������������������
Other��������������������������������������������
Total deferred tax liabilities��������
Net deferred tax liabilities�������������������

Millions of Yen
2016
2015

Thousands of
U.S. Dollars
2016¥ 1,593
3,493
14,44011,592
5,968
37,087(21,049)
16,038¥ 6,956
2,499
15,644
12,2855,056
42,441(27,623)
14,818$ 14,143
31,004
128,151
102,877
52,966329,141(186,805)
142,336

19,697

19,193

174,813737
93
20,528¥(4,490)777
16
19,988¥(5,170)

6,545
829
182,187$(39,851)

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying consolidated statement ofincome for the year ended March 31, 2016, with the corresponding figures for2015, was as follows:
Normal effective statutory tax rate����������������������������
Change in valuation allowance���������������������������������
Dividends exempted from taxation����������������������������
Effect of change in income tax rate��������������������������
Consolidation adjustments,
such as amortization of goodwill�����������������������������
Adjustments, such as residential tax
on a per capita basis���������������������������������������������
Expenses that are not deductiblefor income tax purposes ����������������������������������������
Effect of consolidated tax payment���������������������������
Other — net�����������������������������������������������������������
Actual effective tax rate�������������������������������������������

2016

2015

32.8%
(19.0)(13.4)
5.7

35.4%(25.5)(26.3)
20.7

19.6

38.0

0.3

0.4

0.3
(0.4)
(0.3)
25.6%

0.4
(23.8)(0.4)
18.9%

On March 31, 2016, a tax reform law was enacted in Japan that changed
the normal effective statutory tax rate from 32.06% for the fiscal year beginningon or after April 1, 2016, to 30.69% and the fiscal year beginning on or after
April 1, 2017, to 30.45%. As a result of this rate change, deferred tax assets,deferred tax liabilities, and deferred losses on hedges in the consolidated balance
sheet as of March 31, 2016, decreased by ¥70 million ($622 thousand), ¥461
million ($4,098 thousand), and ¥91 million ($812 thousand), respectively. In addition, unrealized gains on available-for-sale securities increased by ¥1,067 million ($9,472 thousand). Income taxes-deferred in the consolidated statement ofincome for the year ended March 31, 2016, increased by ¥547 million ($4,858
thousand).
The use of tax loss carryforwards has been limited to the equivalent of 60%
of taxable income before deducting tax loss carryforwards since the fiscal year
beginning on or after April 1, 2016, to the equivalent of 55% of taxable income
before deducting tax loss carryforwards since the fiscal year beginning on or after April 1, 2017, and to the equivalent of 50% of taxable income before deducting tax loss carryforwards since the fiscal year beginning on or after April 1,
2018. The effect of these changes was immaterial.

40

ASHIKAGA HOLDINGS CO., LTD.

(2) Nature and Extent of Risks Arising from Financial Instruments
The Group’s financial assets are mainly loans made by the consolidated banking
subsidiary to domestic corporations and individuals in Japan. These loans are
exposed to not only interest rate fluctuation risks but also customers’ credit risks.
Securities and investment securities, such as bonds, stocks, and investment
trusts, are held to their maturity dates to generate stable interest income to promote business relationships with issuers. These securities are exposed to the issuers’ credit risks, interest rate fluctuation risks, and market price fluctuation
risks.
The Group’s main financial liabilities are deposits received by the consolidated banking subsidiary. These deposits are exposed to interest rate fluctuation
risks and liquidity risks. Subordinated debts raised by the Company and otherborrowed money raised by the consolidated banking subsidiary are exposed to
the risks that the Group may not be able to repay them on their maturity dates if,
under certain circumstances, the Group is not able to access to a capital market.
The consolidated banking subsidiary utilizes derivative transactions to hedge
the customers’ interest and currency risks, to control the interest rate fluctuation
risks in ALM, and to treat as the alternative way of on-balance-asset management under the appropriate risk control. Derivatives mainly include interest-rate
swaps, currency swaps, and bond futures, and are exposed to the interest rate
fluctuation risks, market price fluctuation risks, foreign exchange fluctuation
risks, and credit risks.
Hedge accounting is applied to certain derivatives that address currency
rate fluctuation risks.
The consolidated banking subsidiary applies deferral hedge accounting
based on the rules of the JICPA Industry Audit Committee Report No. 25 for currency swaps and funding swaps used for the purpose of currency exchange. Under deferral hedge accounting, hedged items are identified by grouping theforeign currency-denominated financial assets and liabilities by currencies anddesignating derivative transactions, such as currency swap transactions and foreign exchange swaps, as hedging instruments. Hedge effectiveness is reviewed
by comparing the total foreign currency position of the hedged items and hedging
instrument by currency.
In addition, the Company conducts interest rate swaps to offset the market
fluctuations of securities held in “Available-for sale securities” and uses deferredhedges. Regarding swaps that meet the requirements for the special treatment
of interest rate swaps, the Company continues to verify whether they meet special requirements with “back testing.”
Derivative transactions that do not qualify for hedge accounting are exposed
to interest rate fluctuation risks, foreign exchange rate fluctuation risks, pricefluctuation risks, and credit risks.
(3) Risk Management for Financial Instruments(a) Credit risk management
The Group has implemented and operates a credit control system that includes
credit review of each individual loan application, establishing credit limits, managing credit information, internal credit rating, securing adequate guarantees andcollateral, and handling troubled loans. Credit control management is performedby the Credit Supervising Division I and the Credit Supervising Division II, as well
as at each banking office of the consolidated banking subsidiary. In addition,
credit information and related matters are regularly reported to and discussed by
the Credit Portfolio Meeting and the Board of Directors. The Internal Audit Division monitors the status of credit management.
To monitor the credit risks of security issuers and counterparty risks of derivatives, the International and Treasury Administration Division of the consolidated banking subsidiary regularly obtains and reviews relevant credit and fair value
information.
(b) Market risk management(i) Interest risk management
The Group manages risks of interest rate fluctuations by ALM. Risk management
policies and procedures are prescribed in relevant ALM rules and manuals, andany policies decided to be implemented are closely monitored and regularly discussed in the ALM Meeting. The Company’s Risk Management Group in theBusiness Administration Department maintains comprehensive information of interest rates and durations of financials assets and liabilities, performs gap analysis and interest rate sensitive analysis, and reports monthly results to the ALM
Meeting. The Group utilizes derivative transactions, such as interest rate swaps,
to hedge the interest rate fluctuation risks.
(ii) Currency risk management
The International and Treasury Administration Division of the consolidated banking subsidiary manages the subsidiary’s foreign exchange positions and hedges
the risks of exchange rate fluctuations by using derivative transactions, such as
funding swaps.
(iii) Price fluctuation risk management
The Group manages investment instruments, including securities, in accordancewith security investment and market risk management policies and procedures
after certain policies are determined at the ALM Meeting. The International andTreasury Administration Division of the consolidated banking subsidiary reduces
price fluctuation risks through advance screening, establishing investment limits,and constant monitoring. The Group holds most stocks for the purpose of business promotion and regularly monitors financial conditions of issuers.
Such financial conditions of the issuers are regularly reported to the Boardof Directors and the ALM Meeting by the Risk Management Division and the International and Treasury Administration Division.
The Risk Management Division and the International and Treasury Administration Division monitor market risk quantity of derivative transactions relating tosecurities, currencies, and interest rates using value at risk (VaR), and monitor
the Group’s compliance with the aforementioned policies and procedures.
(iv) Derivative transactions
The consolidated banking subsidiary has established separate divisions to manage derivative transactions in order to achieve proper internal controls. Each division is separately responsible for executing the transactions, assessing effectiveness of the hedge transactions, or managing business administration. It also engages in derivative transactions in accordance with the aforementioned market
risk management policies and procedures.
(v) Market risk quantitative information
Financial instruments exposed to major risk factors, such as interest rate risk andprice fluctuation risk, are mainly “Loans and bills discounted,” “Securities,” “Deposits,” “Negotiable certificates of deposit,” “Subordinate debts of borrowed
money,” and “Derivatives.” The Group performs quantitative analysis on these financial instruments held by the consolidated banking subsidiary and utilizes its
results to allocate risk capital and control market risks. The Company and subsidiaries other than the consolidated banking subsidiary do not perform quantitative analysis.

① Financial instruments held by the consolidated banking subsidiarya. “Loans and bills discounted,” yen-denominated bonds of “Securities,” “Deposits,” and “Negotiable certificates of deposit”
The consolidated banking subsidiary classifies its financial assets and financial liabilities into a fixed interest rate group and a floating interest rate group in its
quantitative analysis. In each group, the financial assets and liabilities are disaggregated by each interest due date and analyze the effects of interest fluctuation
by period. If all risk factors, other than interest rate, are constant and the interest
rate is assumed to have increased by 10 basis points (0.10%), the net fair valueof financial assets after offsetting with financial liabilities decreases by ¥72 million ($647 thousand). As previously mentioned, this net fair value amount is obtained assuming that all risk factors are constant, except for the interest rate,
and no correlation between the interest rate and other risk factors was considered. If the interest rate fluctuates by more than 10 basis points (0.10%), the impact may be greater than the net fair value amount above.
The consolidated banking subsidiary considers liquid deposits classified as“Deposits” that have no activities for certain periods as “core” deposits and manages the interest rate risk by categorizing them as having maturity periods of up
to 10 years.
b. Financial instruments excepting a.
The Group performs quantitative analysis using VaR. For the calculation of VaR,
the consolidated banking subsidiary uses the variance-covariance method (holding period: appropriate period depends on the nature of the instruments from one
month to six months, confidence interval: 99.9% (stocks held to promote business relationships with issuers only are 99%), and observation period: one year).
The simple aggregated VaR of each instrument is ¥55,631 million ($493,708
thousand) as of March 31, 2016.
The Group carries out back testing to compare the VaR calculated based on
the above model with hypothetical profits and losses calculated assuming that all
positions were fixed at the point of the risk amount measurement. It should be
noted that VaR measures the amount of market risk at certain probability levels
statistically calculated based on historical market fluctuations; therefore, there
may be cases where market risks cannot be captured in such situations whenmarket conditions are changing dramatically beyond what was historically experienced.
② Financial instruments held by the Company and subsidiaries other than the
consolidated banking subsidiary
Financial instruments held by the Company and subsidiaries other than the consolidated banking subsidiary, which are affected by interest risk, are subordinate
debts of “Borrowed money.” If all risk factors, other than an interest rate, areconstant, the fair value of the financial liabilities decreases by ¥235 million($2,094 thousand) when the interest rate increases by 10 basis points (0.10%).
As previously mentioned, this fair value amount is obtained assuming that all risk
factors are constant except for the interest rate, and no correlation between theinterest rate and other risk factors was considered. If the interest rate fluctuatesby more than 10 basis points (0.10%), the impact may be greater than the fairvalue amount above.
(c) Liquidity risk management
The Group carries out adequate timely cash management through the ALM
Meeting, and also manages liquidity risk by diversifying financing methods, andbalancing long-term and short-term funding with the consideration of the market
environment.
(4) Supplementary Explanation on Fair Values ofFinancial Instruments
The fair values of financial instruments are based on their market prices and, incases where market prices are not readily available, reasonably calculated prices. Such prices have been calculated using certain assumptions and may differ if
calculated based on different assumptions.

Annual Report 201641

(5) Fair Values of Financial Instruments(a) Fair value of financial instruments

March 31, 2016

Millions of Yen
March 31, 2016

Carrying
amountFair value(1) Cash and due from banks����������������������� ¥ 437,509 ¥ 437,509(2) Call loans and bills bought����������������������
414414(3) Monetary claims bought*1�����������������������
7,604
7,604
(4) Trading account securities —Securities held for trading purposes�������
3,596
3,596
(5) Securities:
Held-to-maturity securities����������������������
88,788102,628
Available-for-sale securities��������������������� 1,205,419 1,205,419(6) Loans and bills discounted���������������������� 4,235,174
Allowance for loan losses*1���������������������
(40,564)
Net���������������������������������������������������� 4,194,609 4,242,480
Total assets������������������������������������������������ ¥5,937,942 ¥5,999,653(1) Deposits������������������������������������������������ ¥5,206,700 ¥5,209,198(2) Negotiable certificates of deposit�������������
174,878
174,921(3) Call money and bills sold������������������������
78,00078,000

Unrealized
gains

¥

—
—
—
—
13,840—47,870¥61,710¥ 2,49742(4) Payables under securities lendingtransactions�����������������������������������������
25,26325,263—(5) Borrowed money������������������������������������
251,726
252,869
1,142
Total liabilities��������������������������������������������� ¥5,736,569 ¥5,740,252 ¥ 3,682
Derivative instruments*2 —Hedge accounting is not applied�������������� ¥608 ¥608 ¥ —
Hedge accounting is applied��������������������
(3,126)(3,126)—
Total derivative instruments������������������������� ¥ (2,517) ¥ (2,517) ¥ —Millions of Yen
March 31, 2015

Carrying
amountFair value(1) Cash and due from banks����������������������� ¥ 365,322 ¥ 365,322(2) Call loans and bills bought����������������������
1,644
1,644
(3) Monetary claims bought*1�����������������������
7,704
7,704
(4) Trading account securities —Securities held for trading purposes ������
4,164
4,164
(5) Securities:
Held-to-maturity securities����������������������
95,745
105,791
Available-for-sale securities��������������������� 1,109,872 1,109,872(6) Loans and bills discounted���������������������� 4,150,466
Allowance for loan losses*1���������������������
(43,755)
Net���������������������������������������������������� 4,106,711 4,145,348
Total assets������������������������������������������������ ¥5,691,165 ¥5,739,849(1) Deposits������������������������������������������������ ¥5,071,110 ¥5,073,869(2) Negotiable certificates of deposit�������������
197,379
197,442(3) Payables under securities
lending transactions�����������������������������
2,473
2,473
(4) Borrowed money������������������������������������
232,546
233,728
Total liabilities��������������������������������������������� ¥5,503,510 ¥5,507,514
Derivative instruments*2 —Hedge accounting is not applied�������������� ¥
318 ¥
318
Hedge accounting is applied��������������������
(2,103)(2,103)
Total derivative instruments������������������������� ¥ (1,785) ¥ (1,785)

42

ASHIKAGA HOLDINGS CO., LTD.

Unrealized
gains

¥

—
—
—
—

10,045—38,637¥48,683¥ 2,758
63—
1,182¥ 4,004¥¥———

Thousands of U.S. Dollars
Carrying
Unrealized
amountFair value
gains(1) Cash and due from banks����������������������� $ 3,882,759 $ 3,882,759 $—(2) Call loans and bills bought����������������������
3,679
3,679
—
(3) Monetary claims bought*1�����������������������
67,486
67,486—(4) Trading account securities —Securities held for trading purposes�������
31,917
31,917—(5) Securities:
Held-to-maturity securities����������������������
787,970
910,797 122,827
Available-for-sale securities��������������������� 10,697,725 10,697,725—(6) Loans and bills discounted���������������������� 37,585,857
Allowance for loan losses*1��������������������� (359,998)
Net���������������������������������������������������� 37,225,859 37,650,696 424,837
Total assets������������������������������������������������ $52,697,396 $53,245,061 $547,665(1) Deposits������������������������������������������������ $46,207,852 $46,230,015 $ 22,163(2) Negotiable certificates of deposit������������� 1,551,994 1,552,373
379(3) Call money and bills sold������������������������
692,226
692,226—(4) Payables under securities lendingtransactions�����������������������������������������
224,202224,202—(5) Borrowed money������������������������������������ 2,233,999 2,244,138
10,139Total liabilities��������������������������������������������� $50,910,273 $50,942,954 $ 32,681
Derivative instruments*2 —��������������������������
Hedge accounting is not applied�������������� $5,403 $
5,403 $—
Hedge accounting is applied��������������������
(27,749)(27,749)—
Total derivative instruments������������������������� $ (22,346) $ (22,346) $—*1 Allowances for loan losses relevant to loans and bills discounted have been deducted. Allowances for loan losses relevant to monetary claims bought are excluded from the consolidated balance sheet amounts directly due to its immateriality.
*2 Derivative instruments include derivative transactions both in other assets and liabilities.
Derivative instruments are presented as net of assets and liabilities associated with derivative transactions.

Assets(1) Cash and due from banks
The carrying amounts of due from banks with no maturities approximate fairvalues. For due from banks with maturities, the carrying amounts approximate
fair values because they have short maturities of one year or less.
(2) Call loans and bills bought
The carrying amounts of call loans and bills bought and monetary claims bought
approximate fair values because they have short contract terms of one year or
less.

Liabilities(1) Deposits
The fair values of demand deposits are recognized as the payment at the date of
the consolidated balance sheet. The fair values of time deposits and negotiablecertificates of deposit are determined by discounting the contractual cash flowsgrouped by the remaining duration at the rates that would be applied for similar
new contracts.
(2) Negotiable certificates of deposit
Refer to (1) Deposits.

(3) Monetary claims bought
Refer to (2) Call loans and bills bought.

(3) Call money and bills sold
The carrying amounts of call money and bills sold approximate fair value because
they have short maturities of one year or less.

(4) Trading account securities
The fair values of securities held for trading purposes are measured at the market price or the quoted price obtained from financial institutions.

(4) Payables under securities lending transactions
Refer to (3) Call money and bills sold.

(5) Securities
The fair values of marketable equity securities are measured at the quoted market price of the stock exchange for equity instruments. Fair values of bonds aremeasured at the market price or the quoted price obtained from financial institutions. Fair values of investment trusts are measured at the quoted price.
The fair values of private placement bonds are determined by discounting future
cash flows at the rate that consists of the risk-free rate and the credit risk premium that corresponds to the internal credit rating.
(6) Loans and bills discounted
The carrying amounts of loans and bills discounted with floating interest rates
approximate fair value as long as customers’ credit risks have not changed significantly after lending because the market rates are promptly reflected in the
floating interest rates.
The fair values of loans and bills discounted with fixed interest rates are
determined by discounting the principal and interest amount with the interest
rate used for new loans for each category of loan, internal credit rating, and loan
period. The carrying amounts of loans and bills discounted with maturities of lessthan one year approximate fair value because of their short maturities.
For loans to obligors classified as “legal bankruptcy,” “virtual bankruptcy,”and “possible bankruptcy,” a reserve is provided based on the discounted cash
flow method or based on amounts expected to be collected through the disposalof collateral or execution of guarantees. The carrying value, net of the reserve, asof the consolidated balance sheet date is a reasonable estimate of the fair valuesof those loans.
The carrying amounts of loans and bills discounted that do not have fixedmaturities due to loan characteristics, such as limited loan amounts within thevalue of pledged assets, approximate fair value due to their expected repayment
periods and interest rate conditions.

(5) Borrowed Money
The fair value of borrowed money with fixed interest rates is determined bydiscounting the principal and interest amount grouped by the remaining duration
at the rate that would be applied for similar new contracts. The carrying amountof borrowed money with maturity of less than one year approximates fair value
because of its short maturity period.
Derivatives
Derivative transactions consist of interest rate derivatives (swaps), currency
derivatives (currency futures, options, and swaps), and bond derivatives (bondfutures). The fair values of derivative instruments are measured at the market
price or determined using the discounted cash flow method or option-pricing
model.
(b) Carrying amount of financial instruments whose fair value cannot be reliably
determined
Millions of Yen
2016
2015

Equity securities without readily
available market price*1*3������������������
Investments in partnerships*2�������������
Total��������������������������������������������������

¥1,423
1,138¥2,561¥1,517803¥2,320Thousands of
U.S. Dollars
2016$12,633
10,100$22,733*1 Equity securities without readily available market price are out of the scope of the fair value disclosure because their fair values cannot be reliably determined.
*2 Investments in partnerships, the assets which comprise equity securities without readily
available market price, are out of the scope of the fair value disclosure.
*3 During the years ended March 31, 2016 and 2015, impairment losses on equity securities without readily available market price of ¥8 million ($79 thousand) and ¥43 million,
respectively, were recognized.

Annual Report 201643

(6) Maturity Analysis for Financial Assets and Liabilities with Contractual Maturities

March 31, 2016

Due from banks�������������������������������������������������
Call loans and bills bought����������������������������������
Monetary claims bought�������������������������������������
Securities:���������������������������������������������������������
Held-to-maturity securities�����������������������������
Japanese national government bonds���������
Japanese corporate bonds�������������������������
Other��������������������������������������������������������
Available-for-sale securities
with contractual maturities����������������������������
Japanese national government bonds���������
Japanese local government bonds�������������
Japanese corporate bonds�������������������������
Other��������������������������������������������������������
Loans and bills discounted*1�������������������������������
Total�����������������������������������������������������������������

March 31, 2015

Due from banks�������������������������������������������������
Call loans and bills bought����������������������������������
Monetary claims bought�������������������������������������
Securities:���������������������������������������������������������
Held-to-maturity securities�����������������������������
Japanese national government bonds���������
Japanese corporate bonds�������������������������
Other��������������������������������������������������������
Available-for-sale securities
with contractual maturities����������������������������
Japanese national government bonds���������
Japanese local government bonds�������������
Japanese corporate bonds�������������������������
Other��������������������������������������������������������
Loans and bills discounted*2�������������������������������
Total�����������������������������������������������������������������

March 31, 2016

Due from banks�������������������������������������������������
Call loans and bills bought����������������������������������
Monetary claims bought�������������������������������������
Securities:���������������������������������������������������������
Held-to-maturity securities�����������������������������
Japanese national government bonds���������
Japanese corporate bonds�������������������������
Other��������������������������������������������������������
Available-for-sale securities
with contractual maturities����������������������������
Japanese national government bonds���������
Japanese local government bonds�������������
Japanese corporate bonds�������������������������
Other��������������������������������������������������������
Loans and bills discounted*1�������������������������������
Total�����������������������������������������������������������������

Due in 1 Yearor Less

Due after 1 Yearthrough 3 Years

Millions of Yen
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years¥ 377,621
414
7,627
107,987
14,000——14,000¥———176,411
2,000
—
2,000
—

¥

—
—
—
141,470
23,00023,000
—
—

¥

—
—
—
70,440————93,98730,00018,981
38,6256,380
983,209¥1,476,861

174,41130,00042,97953,52947,902
719,915¥896,326

118,470
25,00034,66918,954
39,846557,710¥699,180

70,44045,0008,730
1,397
15,313362,221¥432,661

Due in 1 Yearor Less

Due after 1 Yearthrough 3 Years

Millions of Yen
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years¥ 308,555
1,644
7,727
150,160
7,000
—
7,000
—

¥

—
—
—
222,223
16,000—2,000
14,000¥———126,767
7,000
7,000
—
—

¥

—
—
—
58,29316,00016,000——143,160
10,00033,92363,53135,705960,852¥1,428,941

206,223
60,00050,67961,72833,815754,851¥977,075

119,767
20,00023,20823,58552,973523,991¥650,758

42,29325,00015,213
398
1,682
367,394¥425,687

Due in 1 Yearor Less

Due after 1 Yearthrough 3 Years$ 3,351,277
3,679
67,691
958,358
124,246——
124,246$———
1,565,594
17,749—17,749—$———1,255,503
204,118
204,118——$

834,112266,241
168,459
342,788
56,624
8,725,677$13,106,681

1,547,844
266,241
381,431475,058
425,115
6,389,025$7,954,618

1,051,385
221,867
307,682
168,214353,622
4,949,507$6,205,010

625,135
399,361
77,476
12,398135,900
3,214,605$3,839,740

Thousands of U.S. Dollars
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years———
625,135————

Due after 7 Years
through 10 Years¥

Due after 10 Years———
242,151————¥

242,151
20,000137,616
37,424
47,111
402,033¥644,185

149,380
100,000—
49,380—1,042,697¥1,242,077

Due after 7 Years
through 10 Years

Due after 10 Years

¥

—
—
—
199,380
50,00050,000—————255,040————¥

255,040
85,000112,376
28,824
28,840414,779¥669,819

108,756
60,000—48,756—
969,703¥1,128,459

Due after 7 Years
through 10 Years

Due after 10 Years

$

—
—
—
158,756
50,00050,000—————2,149,020
—
—
—
—

$

—
—
—
1,769,443
443,734
443,734——

2,149,020
177,494
1,221,300
332,126
418,100
3,567,924$5,716,944

1,325,709
887,469—
438,240—
9,253,612$11,023,055*1 As of March 31, 2016, loans and bills discounted with no contractual maturities amounting to ¥114,900 million ($1,019,706 thousand) and loans and bills discounted whose cash flow cannot
be estimated, such as “legal bankruptcy,” “virtual bankruptcy,” and “possible bankruptcy” loans, amounting to ¥63,828 million ($566,456 thousand) are not included.
*2 As of March 31, 2015, loans and bills discounted with no contractual maturities amounting to ¥99,512 million and loans and bills discounted whose cash flow cannot be estimated, such as“legal bankruptcy,” “virtual bankruptcy,” and “possible bankruptcy” loans, amounting to ¥69,716 million are not included.

44

ASHIKAGA HOLDINGS CO., LTD.

Millions of Yen
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years

March 31, 2016

Due in 1 Yearor Less

Due after 1 Yearthrough 3 Years

Deposits * ��������������������������������������������������������
Negotiable certificates of deposit������������������������
Borrowed money������������������������������������������������
Total�����������������������������������������������������������������

¥4,752,916
174,878
62,014¥4,989,810¥382,418—
118,110¥500,528

March 31, 2015

Due in 1 Yearor Less

Due after 1 Yearthrough 3 Years

Deposits *1��������������������������������������������������������
Negotiable certificates of deposit������������������������
Borrowed money*2���������������������������������������������
Total�����������������������������������������������������������������

¥4,622,520
197,379
11,346¥4,831,246¥365,492—
60,900¥426,392

March 31, 2016

Due in 1 Yearor Less

Due after 1 Yearthrough 3 Years

Thousands of U.S. Dollars
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years

Deposits *1�������������������������������������������������������� $42,180,660
Negotiable certificates of deposit������������������������
1,551,994
550,364
Borrowed money������������������������������������������������
Total����������������������������������������������������������������� $44,283,018$3,393,841—
1,048,190$4,442,031$ 616,267—
635,446$1,251,713

1¥ 69,441—
71,602¥141,043

Due after 7 Years
through 10 Years

¥733
—
—
¥733

¥1,192——¥1,192Millions of Yen
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years¥ 80,783—
120,300¥201,083

Due after 7 Years
through 10 Years¥ 1,123—
30,000¥31,123¥1,192——¥1,192

Due after 7 Years
through 10 Years$6,505——$6,505$10,579——$10,579

Due after 10 Years

¥—
—
—
¥—

Due after 10 Years

¥—
—
—
¥—

Due after 10 Years

$—
—
—
$—

*1 The cash flow of demanded deposits is included in “Due in one year or less.”*2 As of March 31, 2015, perpetual subordinated borrowings with no contractual maturities amounting to ¥10,000 million are not included.

22. DERIVATIVES
Derivative Transactions to Which Hedge Accounting Is Not Applied at March 31, 2016 and 2015
With respect to derivatives to which hedge accounting is not applied, contract amount or notional principal, fair value and the related valuation gains (losses) at the fiscal
year end date by transaction type and valuation method of fair value are as follows. Note that contract amounts do not represent the market risk exposure associated with
derivatives.
The consolidated banking subsidiary had the following derivative contracts, which were quoted on listed exchanges, outstanding as of March 31, 2016 and 2015, as
follows:

March 31, 2016

Contract
amountBond contracts —Futures written �������������������������������
Futures purchased���������������������������
Total���������������������������������������������������

¥3,465453—

March 31, 2015

Contract
amountBond contracts —Futures written��������������������������������
Total���������������������������������������������������

¥3,388—Millions of Yen
Contract amountdue after
Fair
one year
value

¥—
—
—

¥(14)
—
¥(14)

Millions of Yen
Contract amountdue after
Fair
one year
value

¥—
—

¥1
¥1

Unrealized
gains/losses

Contract
amount

¥(14)
—
¥(14)

$30,758
4,028—

Thousands of U.S. Dollars
Contract amountdue after
Fair
one year
value

$—
—
—

$(125)—$(125)

Unrealized
gains/losses$(125)—$(125)

Unrealized
gains/losses¥1¥1Note: 1 The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statement of income.
2 Fair values of transactions listed on exchange are calculated using the last quoted market price at the Osaka Financial Exchange (Tokyo Exchange in 2015).

Annual Report 201645

The consolidated banking subsidiary had the following derivative contracts, which were not quoted on listed exchanges, outstanding as of March 31, 2016 and 2015, as
follows:

March 31, 2016

Contract
amountMillions of Yen
Contract amountdue after
Fair
one yearvalue

Unrealized
gains/losses

Contract
amountThousands of U.S. Dollars
Contract amountdue after
Fair
one yearvalue

Unrealized
gains/losses

Interest rate contracts:
Interest rate swaps:
Receive fixed and pay floating ����
Receive floating and pay fixed�����
Total����������������������������������������������������
Foreign exchange:¥6,0006,000—¥6,000
6,000
—

¥30
58
¥88

¥30
58
¥88

$53,248
53,248—$53,248
53,248
—

$267
517
$785

$267
517
$785

Currency swaps�������������������������������
Forward exchange
contracts-written����������������������������
Forward exchange
contracts-purchased����������������������
Total����������������������������������������������������

¥194,402¥160,906

¥311

¥311

$1,725,258$1,427,999$2,768$2,768

5,650

135

188

188

50,146

1,200

1,675

1,675

14,651
—

—
—

33
¥534

33
¥534

130,030———

301$4,743301$4,743

March 31, 2015

Interest rate contracts:
Interest rate swaps:
Receive fixed and pay floating �����
Receive floating and pay fixed������
Total����������������������������������������������������
Foreign exchange:
Currency swaps�������������������������������
Forward exchange
contracts-written����������������������������
Forward exchange
contracts-purchased����������������������
Total����������������������������������������������������

Contract
amountMillions of Yen
Contract amountdue after
Fair
one yearvalue

Unrealized
gains/losses

¥—
—
—

¥—
—
—

¥—
—
¥—

¥—
—
¥—

¥220,058¥186,012

¥390

¥390

2,574

—

(46)

(46)

11,425
—

—
—

(28)
¥316

(28)
¥316

Note: 1 The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statement of income.
2 Fair values of transactions above are calculated using the discounted present value method.

46

ASHIKAGA HOLDINGS CO., LTD.

Derivative Transactions to Which Hedge Accounting Is Applied at March 31, 2016 and 2015
With respect to derivatives to which hedge accounting is applied, contract amount or notional principal and fair value at the fiscal year end date by transaction type andhedge accounting method and valuation method of fair value are as follows. Note that contract amounts do not represent the market risk exposure associated with derivatives.
The consolidated banking subsidiary had the following derivative contracts, which were not quoted on listed exchanges, outstanding as of March 31, 2016 and 2015,
as follows:

Contract
amountMillions of Yen
Contract amountdue after
one year

Receive floating and pay fixed �����Bonds (available-for-sale securities)¥50,000¥50,000¥(5,691)$443,734$443,734$(50,508)

Total�����������������������������������������������
Foreign exchange:
Currency swaps�������������������������������Loans, deposits, due from banks,etc., which are denominatedForward exchange contracts������������ in foreign currencies——¥(5,691)——$(50,508)¥45,072¥45,072¥803$400,000$400,000$7,12743,156—

1,761

383,000—

15,633——¥ 2,564——$ 22,759

March 31, 2016

Hedged Item

Fair
value

Thousands of U.S. Dollars
Contract amountdue after
Fair
Contract
one yearvalue
amountInterest rate contracts:
Interest rate swaps:

Total�����������������������������������������������

March 31, 2015

Hedged Item

Interest rate contracts:
Interest rate swaps:
Receive floating and pay fixed �����Bonds (available-for-sale securities)
Total�����������������������������������������������
Foreign exchange:
Currency swaps�������������������������������Loans, deposits, due from banks,etc., which are denominatedForward exchange contracts������������ in foreign currencies
Total�����������������������������������������������

Contract
amountMillions of Yen
Contract amountdue after
one year¥50,000¥50,000¥ (977)——¥ (977)——¥—¥(1,126)¥ 2,403
81,670
—

¥

Fair
value

(23)
(1,103)

Note: 1 These derivatives are accounted for using deferred hedge accounting.
2 Fair values of the transactions above are calculated using the discounted present value method.

Annual Report 201647

23. OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income (loss) for the years ended
March 31, 2016 and 2015, were as follows:

Unrealized gains (losses)
on available-for- sale securities���������
Gains arising during the year����������
Reclassification adjustments
to profit or loss�����������������������������
Amount before
income tax effect���������������������
Income tax effect����������������������
Total�������������������������������������������������
Deferred gains (losses) on hedges
Gains arising during the year����������
Reclassification adjustments
to profit or loss�����������������������������
Amount before
income tax effect���������������������
Income tax effect����������������������
Total�������������������������������������������������
Defined retirement benefit plans
Gains arising during the year����������
Reclassification adjustments
to profit or loss�����������������������������
Amount before
income tax effect���������������������
Income tax effect����������������������
Total�������������������������������������������������
Total other comprehensive
income (loss)������������������������������������

Millions of Yen
2016
2015

Thousands of
U.S. Dollars
2016¥ 7,455¥34,056$ 66,166(3,128)355(27,765)

4,326
(504)
¥ 3,822

34,411(9,938)¥24,473

38,401(4,474)$ 33,927¥(6,786)¥ (1,446)$(60,225)

2,061

537

18,297(4,724)
1,423¥(3,301)(908)
289¥ (619)(41,928)
12,630$(29,298)¥(5,954)¥ 3,672$(52,840)

622

873

5,525

(5,331)
1,673¥(3,658)

4,546(1,513)¥ 3,032(47,315)
14,848$(32,467)¥(3,136)¥26,887$(27,838)

Other segment related information:1) Information by service

March 31, 2016

Ordinary income
from external customers���������� ¥55,936

March 31, 2015

For the years ended March 31, 2016 and 2015
Under ASBJ revised ASBJ Statement No. 17, “Accounting Standard for Segment
Information Disclosures” and ASBJ Guidance No. 20, “Guidance on AccountingStandard for Segment Information Disclosures,” an entity is required to report financial and descriptive information about its reportable segments. Reportablesegments are operating segments or aggregations of operating segments thatmeet specified criteria. Operating segments are components of an entity about
which separate financial information is available and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information isrequired to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.
The Group engages in the business of banking and other related activities,
such as credit card. Segment information is not disclosed due to the immateriality of businesses other than banking.

¥21,201¥14,152¥25,560

Thousands of U.S. Dollars
Lending Investment
operations operations
Other

Ordinary income
from external customers���������� $496,415$188,160

Total¥25,336 ¥102,474

Millions of Yen
Lending Investment
operations operations
Other

Ordinary income
from external customers���������� ¥57,010

March 31, 201624. SEGMENT INFORMATION

Millions of Yen
Lending Investment
operations operations
Other$224,858

Total¥96,723

Total$909,432

2) Information by geographic region
Since the ordinary income and total tangible fixed assets attributable to the “Japan” segment account for more than 90% of the total of all geographic segments, geographical segment information has not been presented.
3) Information by major customer
Since there has been no specific customer to which the Group sells more than
10% of total ordinary income on the consolidated statement of income, information on major customers has not been presented.
4) Information on loss on impairment of fixed assets by reportable segment
Information on loss on impairment of fixed assets is not disclosed due to immateriality.
5) Information on amortization and unamortized balance of goodwill by reportablesegment
Information on amortization and unamortized balance of goodwill is not disclosed
due to immateriality, except for the banking business.
6) Information on gain on negative goodwill by reportable segment
Not applicable.

25. RELATED PARTY TRANSACTIONS
Related party transactions for the years ended March 31, 2016 and 2015, wereas follows:(1) Transactions between the Company and its related parties
a. The parent and major shareholders
There was no applicable transaction to be reported for the years ended March
31, 2016 and 2015.
b. Unconsolidated subsidiaries and affiliates
There was no applicable transaction to be reported for the years ended March
31, 2016 and 2015.
c. Companies that are owned by the same parent company as the Company andother affiliates’ subsidiaries
There was no applicable transaction to be reported for the years ended March
31, 2016 and 2015.
d. Directors or major individual shareholders
There was no applicable transaction to be reported for the years ended March
31, 2016 and 2015.

48

ASHIKAGA HOLDINGS CO., LTD.

(2) Transactions between subsidiaries of the Company and its related parties
a. The parent and major shareholders
There was no applicable transaction to be reported for the years ended March 31, 2016 and 2015.
b. Unconsolidated subsidiaries and affiliates
There was no applicable transaction to be reported for the years ended March 31, 2016 and 2015.
c. Companies that are owned by the same parent company as the Company and other affiliates’ subsidiaries
There was no applicable transaction to be reported for the years ended March 31, 2016 and 2015.
d. Directors or major individual shareholders
Year ended March 31, 2016
Type

Name

Yokokura Honten
CO., LTD. (*2, 3)Companies in which amajority of voting rights isCO.,owned by a director or its ITATSU
LTD. (*2, 4, 6)
close relatives
Ryomo Seikeihin
Toso Co., Ltd (*2, 5, 6)

Location

Capital(Millions of Yen)

Business

Ownerships

RelationshipTransaction
amountTransactions (Millions of Yen)*1¥145

Tochigi¥20

Wholesale

None

Loans

Loan
Underwriting private
placement bondTochigi

30

Wholesale

None

Loans

Loan

458

Gunma

20

Manufacturing

None

Loans

Loan

13

100

Account

Loans and bills
discounted
Securities
Loans and bills
discounted
Loans and bills
discounted

Outstandingbalance(Millions of Yen)

¥100
100
438
12

Terms and conditions on transactions and transaction policy:
Note 1: Transaction amounts were reported at the average balance for the period.
Note 2: The interest rate on loans is reasonably determined considering the market rate.
Note 3: A majority of the voting rights are owned by a close relative of Mr. Mitsuhiro Kitamura, an outside director of the Company.
Note 4: A majority of the voting rights are owned by a close relative of Mr. Toshio Itabashi, retired an outside director of the Company on June 25, 2015.
Note 5: A majority of the voting rights are owned by ITATSU Co., LTD.
Note 6: It is not a related party as Mr. Toshio Itabashi retired as outside director of the Company on June 25, 2015. Transaction amounts were reported at the average balance during the periodof an outside director of the Company. Outstanding balances were reported at the end of the period in which it ceased to be a related party.
Note 7: Transaction amounts do not include consumption taxes.

Year ended March 31, 2015
Type

Name

Companies in which amajority of voting rights isowned by a director or its
close relatives

ITATSU CO.,LTD. (*2, 3)
Ryomo Seikeihin
Toso Co., Ltd (*2, 4)

Transaction
amountTransactions (Millions of Yen)*1

Location

Capital(Millions of Yen)

Business

Ownerships

RelationshipTochigi¥30

Wholesale

None

Loans

Loan

¥548

Gunma

20

Manufacturing

None

Loans

Loan

16

Account

Loans and bills
discounted
Loans and bills
discounted

Outstandingbalance(Millions of Yen)

¥502
14

Terms and conditions on transactions and transaction policy:
Note 1: Transaction amounts were reported at the average balance for the period.
Note 2: The interest rate on loans is reasonably determined considering the market rate.
Note 3: A majority of the voting rights are owned by a close relative of Mr. Toshio Itabashi, an outside director of the Company.
Note 4: A majority of the voting rights are owned by ITATSU Co., LTD.
Note 5: Transaction amounts do not include consumption taxes.

Year ended March 31, 2016

Type

Name

Yokokura Honten
CO., LTD. (*2, 3)Companies in which amajority of voting rights isCO.,owned by a director or its ITATSU
LTD. (*2, 4, 6)
close relatives
Ryomo Seikeihin
Toso Co., Ltd (*2, 5, 6)

Location

Capital(Thousands of
U.S. Dollars)

Business

Ownerships

RelationshipTransaction
amount(Thousands ofTransactions U.S. Dollars)*1$1,293

Tochigi$177

Wholesale

None

Loans

Loan
Underwriting private
placement bondTochigi

266

Wholesale

None

Loans

Loan

4,071

Gunma

177

Manufacturing

None

Loans

Loan

116

887

Account

Outstandingbalance(Thousands of
U.S. Dollars)

Loans and bills $ 887
discounted
Securities
887
Loans and bills
3,888
discounted
Loans and bills
111
discounted

Terms and conditions on transactions and transaction policy:
Note 1: Transaction amounts were reported at the average balance for the period.
Note 2: The interest rate on loans is reasonably determined considering the market rate.
Note 3: A majority of the voting rights are owned by a close relative of Mr. Mitsuhiro Kitamura, an outside director of the Company.
Note 4: A majority of the voting rights are owned by a close relative of Mr. Toshio Itabashi, retired an outside director of the Company on June 25, 2015.
Note 5: A majority of the voting rights are owned by ITATSU Co., LTD.
Note 6: It is not a related party as Mr. Toshio Itabashi retired as outside director of the Company on June 25, 2015. Transaction amounts were reported at the average balance during the periodof an outside director of the Company. Outstanding balances were reported at the end of the period in which it ceased to be a related party.
Note 7: Transaction amounts do not include consumption taxes.

Annual Report 201649

26. SUBSEQUENT EVENTS
1. Definitive Agreement Concerning the Business Integration of Joyo
Bank, Ltd. and the Company through a Share Exchange
The Company and Joyo Bank, Ltd. (President: Kazuyoshi Terakado; hereinafterreferred to as “Joyo”) (together, the “Companies”), in accordance with the basic
agreement on the business integration (hereinafter referred to as the “Business
Integration”) through a share exchange (hereinafter referred to as the “Share
Exchange”) made on November 2, 2015, have resolved to integrate themanagement through a share exchange at their respective meetings of the Boardof Directors held on April 25, 2016 and have concluded a share exchange
agreement (hereinafter referred to as the “Share Exchange Agreement”), on thepremise of the approval of their shareholders at each general meeting and of theauthorities concerned. At the same time, the Company, Joyo, and Ashikaga
Bank, Ltd. (hereinafter referred to as “Ashikaga Bank”) have concluded theBusiness Integration agreement. The details are as follows.
On June 28, 2016, the share exchange agreement mentioned above wasapproved at the general shareholders’ meetings of the Companies.
(1) Purpose of the Business Integration
The new financial group that will be established through the integration of theCompanies will aim to maintain and promote the relationships with customers
and deep understanding of local communities that Joyo and Ashikaga Bank havedeveloped over the years, and to realize the advancement of comprehensive
financial services and operational efficiencies by taking advantage of a wide area
network and other connections formed through the Business Integration.
Through the above-mentioned efforts, the Companies will provide moreconvenient and high-quality comprehensive financial services that can beachieved only through the integration of leading regional banks. In addition, theCompanies will aim to become a group that is highly evaluated by eachstakeholder through the achievement of persistent growth as a driving force ofregional development and revitalization, the improvement of corporate value in
response to the expectations of shareholders and markets, and the expansion of
the opportunities for officers and employees to play an active part and enhancetheir pride and enjoyment in their duties. Furthermore, the Companies will aim tobecome a financial group that is open to other regional financial institutions whoshare the corporate ideals with each other.
(2) Method of Share Exchange and Details of Allocation in Relation to
the Share Exchange (Share Exchange Ratio)① Method of Share Exchange
The business integration will be carried out by the holding company method.
In order to complete the business integration at an early stage, the plan is to
use the Company, which already has a holding company structure, as theholding company of the new financial group.
Specifically, on the premise of the approval of the Companies’
shareholders at each general meeting and of the authorities concerned on
the matters necessary for the Business Integration, Joyo plans to carry out
the Share Exchange with the Company, and the Company plans to change its
company name to Mebuki Financial Group, Inc. (hereinafter referred to as“Mebuki FG”).
The schedule of the Business Integration is as follows:
November 2, 2015
Execution of the Basic Agreement
March 31, 2016	Record date for the general shareholders’meetings of the Companies
April 25, 2016	Resolution of the Board of Directors of
the Companies’ directors
	Execution of the Share Exchange
Agreement and the business integrationagreement
June 28, 2016	General shareholders’ meetings of theCompanies

50

ASHIKAGA HOLDINGS CO., LTD.

September 27, 2016 (planned)
September 28, 2016 (planned)
October 1, 2016 (planned)

Last trading day of the shares of Joyo
Date of delisting of Joyo shares
Effective date of the Share Exchange

Furthermore, the above schedule may be changed upon consultation
between the Companies where necessary or for other reasons in the courseof moving towards the Share Exchange.
② Details of allotment in the Share Exchange (Share Exchange Ratio)
Company NameJoyo

The Company

Share Exchange Ratio

1.170

1

(Note 1) Details of allotment in the Share Exchange
Joyo shareholders will receive 1.170 shares of Mebuki FG’s common stock for every
1 share of Joyo common stock.
If the fractional shares less than one are included in the Mebuki FG’s sharesthat Joyo shareholders will receive through the Share Exchange, the shareholders
will be paid cash in the amount corresponding to the value of the fractional sharespursuant to Article 234 of the Companies Act and other related laws and regulations.
Furthermore, the above share exchange ratio may be adjusted in consultation
between the Companies in the event that matters that cause a material effect on theshare exchange ratio are found to exist.
(Note 2) The number of new shares issued by Mebuki FG for the Business Integration(planned)
Common stock845,758,343 shares
The above number has been calculated based on the total number of Joyo’s
outstanding common stocks (766,231,875 shares) as of March 31, 2016. However,
Joyo plans to cancel all of its treasury stock by the effective time of the Share Exchange (hereinafter referred to as the “Reference Time”). Accordingly, treasury
stock held by Joyo (43,361,496 shares) as of March 31, 2016, was not been included in calculating the above number.
The number of new shares issued by Mebuki FG for the Share Exchange may
change if the number of Joyo’s treasury stocks as of March 31, 2016, changes before the Record Date due to reasons such as Joyo shareholders exercising the rightto require Joyo to purchase their shares.
(Note 3) The treatment of fractional shares than one unit
After the Business Integration is consummated, Joyo’s shareholders who receive
fractional shares less than one unit (100 shares) of Mebuki FG’s common stock(hereinafter referred to as “Shares Less than One Unit”) cannot sell the Shares Less
than One Unit on the Tokyo Stock Exchange or any other financial instruments exchange market. The holders of the Shares Less than One Unit may require Mebuki
FG to purchase its Shares Less than One Unit pursuant to Article 192, Paragraph (1)of the Companies Act or to sell so many shares that the total shares add up to one
unit, together with the number of their Shares Less than One Unit, pursuant to Article 194, Paragraph (1) of the Companies Act and the Articles of Incorporation, except in the case where Mebuki FG does not possess enough shares requested to besold.

③ Treatment of stock acquisition rights and bonds with stock acquisitionrights under the Share Exchange
In connection with the Share Exchange, Mebuki FG will deliver to the holdersof stock acquisition rights (including stock acquisition rights attached tobonds) issued by Joyo outstanding as of the Reference Time stock acquisitionrights of Mebuki FG based on the terms of stock acquisition rights and theshare exchange ratio.
In addition, Mebuki FG will succeed to the liabilities of bonds with stockacquisition rights issued by Joyo and Joyo will guarantee such liabilities.

(3) Outline of the Holding Company (Mebuki FG) following the business integration
Name

Mebuki Financial Group, Inc.

Location of
headquarters

7-2, Yaesu 2-chome, Chuo-ku, Tokyo(Note)The head office functions of the Mebuki Financial Group, Inc. will comprise its full-time officers and employees as well as concurrent officers
and employees of Joyo or Ashikaga Bank, and the head offices will be located in Mito, Ibaraki and Utsunomiya, Tochigi.
In addition, there is no change in the location of the head office of Joyo (Mito City, Ibaraki Prefecture) and the head office of Ashikaga
Bank (Utsunomiya City, Tochigi Prefecture).

Representatives
and directors
expected toassume office

Representative Director
and President

Kazuyoshi Terakado(Currently, President of Joyo)

Representative Directorand Executive Vice President

Masanao Matsushita(Currently, Director, President, and CEO of the Company and Director, President, and CEO of Ashikaga Bank)

Director

Eiji Murashima(Currently, Managing Director of Joyo)

Director

Kiyoshi Kato

(Currently, Executive Officer of Ashikaga Bank)

Director

Ritsuo Sasajima(Currently, Managing Director of Joyo)

Director

Kazuyuki Shimizu(Currently, Executive Officer and General Manager of Corporate Planning
Department of the Company and Managing Executive Officer of Ashikaga
Bank)

Director

Hidebumi Nishino(Currently, Managing Executive Officer of Joyo)

Director(Audit and Supervisory
Committee Member)

Yoshiaki Terakado(Currently, Corporate Auditor of Joyo)

Director(Audit and Supervisory
Committee Member)

Kunihiro Ono(Currently, Director of the Company and Director of Ashikaga Bank)

Director(Audit and Supervisory
Committee Member)

Ryuzaburo Kikuchi(Currently, Outside Director of Joyo)

Director(Audit and Supervisory
Committee Member)

Toru Nagasawa(Currently, a representative lawyer of Nagasawa Law Offices)

Director(Audit and Supervisory
Committee Member)

Takashi Shimizu(Currently, a professor of the Graduate School of Accountancy, Waseda University)(Note) Directors (Audit and Supervisory Committee Members): Ryuzaburo Kikuchi, Toru Nagasawa, and Takashi Shimizu, are the directors
who are Outside Directors as defined in Article 2, item (xv) of the Companies Act.
Capital117,495 million yen

Net assets

Details have not been determined yet.

Total assets

Details have not been determined yet.

Fiscal year end

March 31Nature of businessBank holding company (management and operation of banks and other companies that Mebuki FG may own as its subsidiaries under the
Banking Act and other businesses incidental or related to the banking business.)

Annual Report 201651

(4) Outline of the parties to the Share Exchange (as of December 31, 2015)
Name

The Joyo Bank, Ltd.

Location

5-5, Minami-machi 2-chome, Mito, Ibaraki

Representative

Kazuyoshi Terakado, President

Business

Banking business

Capital85,113 million yen

Date established

July 30, 1935

The number of issued shares

766,231 thousand sharesFiscal year end

March 31

Total assets (consolidated)

9,182,730 million yen

Net assets (consolidated)608,065 million yen

Deposits (non-consolidated)

7,920.1 billion yen

Loans and bills discounted(non-consolidated)

5,870.7 billion yen

The number of employees(consolidated)

3,773

The number of branches(including subbranches)

179 branches

Major shareholders andshareholding ratio(as of September 30, 2015)

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

3.78%

Nippon Life Insurance Company

3.28%

Japan Trustee Services Bank, Ltd. (Trust Account)

3.02%

Sompo Japan Nipponkoa Insurance Inc.

3.02%

STATE STREET BANK AND TRUST COMPANY 505223

2.70%(5) Outline of Accounting Treatment in relation to the Share Exchange
The Share Exchange is a reverse acquisition under the Accounting Standard for Business Combinations and it is considered that the purchase method will be applied tothe transaction, under which Joyo is the acquiring company and the Company is the acquired company. The amount of goodwill (or negative goodwill) which is accounted
for as a result of the Share Exchange is yet to be determined.

52

ASHIKAGA HOLDINGS CO., LTD.

Annual Report 201653

Non-Consolidated Financial Statements

Non-Consolidated Balance Sheet
March 31, 2016 (unaudited)

The Ashikaga Bank, Ltd.

Millions of Yen
2016
2015

ASSETSCash and due from banks���������������������������������������������������������������������������������������
Call loans and bills bought���������������������������������������������������������������������������������������
Monetary claims bought������������������������������������������������������������������������������������������
Trading account securities��������������������������������������������������������������������������������������
Securities���������������������������������������������������������������������������������������������������������������
Loans and bills discounted��������������������������������������������������������������������������������������
Foreign exchanges��������������������������������������������������������������������������������������������������
Tangible fixed assets����������������������������������������������������������������������������������������������
Intangible fixed assets���������������������������������������������������������������������������������������������
Prepaid pension cost����������������������������������������������������������������������������������������������
Customers’ liabilities for acceptances and guarantees����������������������������������������������
Other assets�����������������������������������������������������������������������������������������������������������
Allowance for loan losses����������������������������������������������������������������������������������������
Total�����������������������������������������������������������������������������������������������������������������

¥ 437,507
414
7,627
3,596
1,325,749
4,274,437
4,377
25,2752,569
12,786
12,91324,916(33,328)¥6,098,844¥ 365,317
1,644
7,727
4,164
1,236,859
4,189,420
5,837
25,397
3,555
10,89916,566
18,946(39,009)¥5,847,327$ 3,882,746
3,679
67,691
31,917
11,765,619
37,934,304
38,846
224,31422,804
113,476
114,603
221,130(295,778)$54,125,351

LIABILITIES AND EQUITY
LIABILITIES:
Deposits�����������������������������������������������������������������������������������������������������������������
Negotiable certificates of deposit�����������������������������������������������������������������������������
Call money and bills sold�����������������������������������������������������������������������������������������
Payables under securities lending transactions���������������������������������������������������������
Borrowed money����������������������������������������������������������������������������������������������������
Foreign exchanges��������������������������������������������������������������������������������������������������
Other liabilities��������������������������������������������������������������������������������������������������������
Provision for directors’ bonuses�������������������������������������������������������������������������������
Provision for directors’ retirement benefits���������������������������������������������������������������
Provision for reimbursement of deposits�������������������������������������������������������������������
Provision for contingent losses��������������������������������������������������������������������������������
Provision for point card certificates��������������������������������������������������������������������������
Deffered tax liabilities����������������������������������������������������������������������������������������������
Acceptances and guarantees�����������������������������������������������������������������������������������
Total liabilities���������������������������������������������������������������������������������������������������

¥5,224,561
224,878
78,00025,263
181,726282
30,426
25
132
858
464
90
7,296
12,913¥5,786,919¥5,085,385
252,379—
2,473
152,546
365
33,212
24
116
803
495
74
10,12916,566¥5,554,571$46,366,358
1,995,729
692,226
224,2021,612,771
2,508
270,024
228
1,177
7,614
4,120
800
64,759114,603$51,357,116¥ 135,000¥ 135,000$ 1,198,083

17,694
111,733
264,428

15,281
95,352
245,634

157,036
991,604
2,346,724

51,447(3,951)47,495
311,924¥6,098,844

47,771(650)
47,121
292,755¥5,847,327

456,578(35,067)
421,5112,768,235$54,125,351

EQUITY:
Common stock�������������������������������������������������������������������������������������������������������
Retained earnings:
Legal retained earnings�������������������������������������������������������������������������������������
Other retained earnings�������������������������������������������������������������������������������������
Total shareholders’ equity�����������������������������������������������������������������������������
Valuation adjustments:
Unrealized gains on available-for-sale securities��������������������������������������������������
Deferred losses on hedges���������������������������������������������������������������������������������
Total valuation adjustments���������������������������������������������������������������������������
Total equity���������������������������������������������������������������������������������������������
TOTAL�������������������������������������������������������������������������������������������������������������������������

54

Thousands of
U.S. Dollars
2016

ASHIKAGA HOLDINGS CO., LTD.

Non-Consolidated Statement of Income
Year Ended March 31, 2016 (unaudited)

The Ashikaga Bank, Ltd.

Millions of Yen
2016
2015

INCOME:Interest income:Interest on loans and bills discounted�����������������������������������������������������������������
Interest and dividends on securities��������������������������������������������������������������������
Interest on call loans and bills bought�����������������������������������������������������������������
Interest on deposits with banks��������������������������������������������������������������������������
Other interest income����������������������������������������������������������������������������������������
Fees and commissions��������������������������������������������������������������������������������������������
Other operating income�������������������������������������������������������������������������������������������
Other income���������������������������������������������������������������������������������������������������������
Total income������������������������������������������������������������������������������������������������
EXPENSES:Interest expenses:
Interest on deposits�������������������������������������������������������������������������������������������
Interest on negotiable certificates of deposit��������������������������������������������������������
Interest on call money and bills sold�������������������������������������������������������������������
Interest on payables under securities lending transactions�����������������������������������
Interest on borrowed money�������������������������������������������������������������������������������
Other interest expenses�������������������������������������������������������������������������������������
Fees and commissions payments����������������������������������������������������������������������������
Other operating expenses����������������������������������������������������������������������������������������
General and administrative expenses�����������������������������������������������������������������������
Provision of allowance for loan losses����������������������������������������������������������������������
Other expenses������������������������������������������������������������������������������������������������������
Total expenses���������������������������������������������������������������������������������������������
INCOME BEFORE INCOME TAXES���������������������������������������������������������������������������������
INCOME TAXES:
Current������������������������������������������������������������������������������������������������������������������
Deferred�����������������������������������������������������������������������������������������������������������������
Total income taxes���������������������������������������������������������������������������������������NET INCOME���������������������������������������������������������������������������������������������������������������

Thousands of
U.S. Dollars
2016¥ 53,724
16,958393
404
102
21,253
1,343
6,366
100,545¥55,008
12,430331
275
115
20,716952
2,084
92,633$476,785
150,498
3,491
3,586
908
188,618
11,92556,499892,310

2,082
226
8
211
150
779
6,314
36
47,711—
3,559
61,07939,466

2,312
220
77
69
104
291
6,155
0
48,962
1,742
2,939
62,87529,75718,482
2,008
73
1,873
1,337
6,916
56,038320
423,426—
31,585542,058
350,252

10,468(1,861)
8,607¥ 30,859

10,192(224)
9,968¥19,789

92,907(16,520)
76,387$273,865

Annual Report 201655

Non-Consolidated Statement of Changes in Equity
Year Ended March 31, 2016 (unaudited)

The Ashikaga Bank, Ltd.

Commonstock

BALANCE, APRIL 1, 2014(as previously reported)������������������������ ¥135,000—
Cumulative effect of accounting change���������������������������������
BALANCE, APRIL 1,2014(as restated)����������������������������������������� 135,000
Net income���������������������������������������������������������������������������——Cash dividends���������������������������������������������������������������������
Net changes except for shareholders’ equity
during the year�������������������������������������������������������������������
——Net change in the year����������������������������������������������������������
BALANCE, APRIL 1, 2015����������������������������������������������������������� 135,000
Net income���������������������������������������������������������������������������—Cash dividends���������������������������������������������������������������������
—Net changes except for shareholders’ equity
during the year�������������������������������������������������������������������
—Net change in the year����������������������������������������������������������
—BALANCE, MARCH 31, 2016������������������������������������������������������ ¥135,000

Commonstock

BALANCE, APRIL 1, 2015����������������������������������������������������������� $1,198,083
Net income���������������������������������������������������������������������������—Cash dividends���������������������������������������������������������������������
—Net changes except for shareholders’ equity
during the year�������������������������������������������������������������������
—Net change in the year����������������������������������������������������������
—BALANCE, MARCH 31, 2016������������������������������������������������������ $1,198,083

56

ASHIKAGA HOLDINGS CO., LTD.

Millions of Yen
Retained earnings
Unrealized
Legal
Other
gains onretainedretained
available-forearnings
earnings
sale securities¥12,332—
12,332—
2,949¥ 88,404
4,853
93,257
19,789(17,694)¥22,907—22,907———
2,949
15,281
—
2,412

—
2,094
95,35230,859(14,477)—
2,412¥17,694—
16,381¥111,733

Deferred
losseson hedges¥

Total
equity

(30)
—
(30)
—
—

¥258,614
4,853
263,467
19,789(14,745)

24,86324,86347,771
—
—

(619)
(619)
(650)
—
—

24,24429,288292,755
30,859(12,064)

3,675
3,675
¥51,447(3,301)(3,301)¥(3,951)374
19,169¥311,924

Thousands of U.S. Dollars
Retained earnings
Unrealized
Legal
Other
gains onretainedretained
available-forearnings
earnings
sale securities

Deferred
losseson hedges$135,622—
21,414$846,223
273,865(128,484)$423,956——$ (5,769) $2,598,116—
273,865—(107,070)—
21,414$157,036—
145,381$991,604

32,622
32,622$456,578(29,298)
3,324(29,298)
170,119$(35,067) $2,768,235

Total
equityCorporate Data (as of June 28, 2016)
Ashikaga Holdings Co., Ltd.

The Ashikaga Bank, Ltd.

Trade name:

Ashikaga Holdings Co., Ltd.

Representative:

Masanao Matsushita,
President and Chief Executive Officer

Trade name:
Representative:

Established:

April 1, 2008

Paid in capital:¥117,495 million

Head Office:1-25, Sakura 4-chome, Utsunomiya,Tochigi Prefecture
http: // www. ashikaga-hd. co. jp /Internet Address:

Note: The Trade name will be changed to “Mebuki Financial Group, Inc.” on October 1,
2016 along with the Business Integration with The Joyo Bank, Ltd.

The Ashikaga Bank, Ltd.
Masanao Matsushita,
President, Representative Director
Founded:
October 1, 1895
Paid in capital:¥135,000 million(The Ashikaga Bank, Ltd. is a wholly owned
subsidiary of Ashikaga Holdings Co., Ltd.)
Head Office:1-25, Sakura 4-chome, Utsunomiya,Tochigi Prefecture
Overseas Office:Hong Kong Representative Office
Suite 1601, 16th Floor, Tower2, The Gateway,
Harbour City, Kowloon, Hong Kong
TEL 852-2251-9475
Number of employees: 2,889 (as of March 31, 2016)
Consolidated Subsidiaries: Ashikaga Credit Guarantee Co., Ltd.
Ashigin Research Institute, Ltd.
Ashigin Card Co., Ltd.
Internet Address:
http: // www. ashikagabank. co. jp /Organization (as of April 1, 2016)
Ashikaga Holdings Co., Ltd.
Shareholder’s Meeting
Board of Directors
Executive Officers

Nominating Committee

Corporate Planning Department

Audit Committee

Planning GroupTokyo Liaison Office Group

Office of Audit Committee

Public and Investor Relations Group

Compensation Committee

Accounting Group

Business Administration Department

Personnel Group
General Affairs Group
Risk Management Group
Compliance Management Group

Auditing Department

The Ashikaga Bank, Ltd.
Shareholder’s Meeting
Board of Directors

Audit and Supervisory Committee

Representative Director

Business Promotion Division

Operation Planning Division

Business Planning Division

Operation Support Division

Retail Business OfficeConsulting Business Division

IT Planning and Administration Division
Management Planning Division

Personal Loan Business DivisionTokyo Liaison Office

Solution Business Division

Public Relations Office

Regional Development Division
Treasury and Securities Division

Personnel Division
In-house Training OfficeInternational and Treasury Administration Division

General Affairs Office

Loan Supervision Division

Risk Management Division

Credit Supervision Division I

Compliance Management Division

Credit Supervision Division II

Internal Audit Division

Area Hubs
Customer
Branches

19 Divisions and 5 Offices (As of June 28, 2016)
Annual Report 2016

57

List of Directors and Executive Officers (as of June 28, 2016)
Ashikaga Holdings Co., Ltd. (Company with Nominating Committee, etc.)
Directors

Executive Officers

Director

Satoshi Fujisawa

Chairman and Chief Executive Officer

Satoshi Fujisawa

Director

Masanao Matsushita *1, *2

President and Chief Executive Officer

Masanao Matsushita

Director

Kunihiro Ono *3

Outside Director

Yoshio Kohra *1,*2,*3

Executive Officer
Yutaka Horie(General Manager of Business Administration Department)

Outside Director

Mitsuhiro Kitamura *1,*2,*3

Outside Director

Toru Nagasawa *1,*2,*3

Executive Officer(General Manager of Auditing Department)

Hiroshi Mori

Executive Officer
Kazuyuki Shimizu(General Manager of Corporate Planning Department)

Directors shown above belong to *1: Nominating Committee,*2: Compensation Committee, *3: Audit Committee

The Ashikaga Bank, Ltd. (Company with Audit and Supervisory Committee)
Directors (except Directors who are the Audit and Supervisory Committee members)
Chairman and Director

Satoshi Fujisawa

Director

Mitsuo Sugiyama

President and Representative Director

Masanao Matsushita

Director

Takashi Satake

Senior Managing Director

Kiyoshi Kato

Director

Keizo Shinozaki

Senior Managing Director

Yutaka Horie

Managing Director

Hiroshi Mori

Yoshiaki Kosugi
Director(Chief Officer of Ken’ou and Nikko Area Hub)Managing Director

Kazuyuki Shimizu

Eisuke Suzuki
Director(General Manager of Treasury and Securities Division)
Director

Hiroo Shimada

Directors who are the Audit and Supervisory Committee members
Akihiko Kuwako

Director

Outside Director

Junichi Sato

Outside Director

Shoji Fukui

Stock Information (as of March 31, 2016)
Number of shares:

333,250 thousands (issued)

Number of shareholders: 8,675
Term-end:

End of March

Stock exchange listing: Tokyo Stock Exchange(First section code: 7167)
Unit of Trading:

100 shares

Principal shareholders (top ten)
Shareholder

Nomura Financial Partners Co., Ltd.
122,900
ORIX Corporation
40,000
Sompo Japan Nipponkoa Insurance Inc.
19,000Mitsui Sumitomo Insurance Company, Limited
15,000BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC)
7,253
JP Morgan Chase Bank 385632
6,662
Nippon Life Insurance Company
5,169Japan Trustee Services Bank, Ltd. (Trust Account 9)
4,867
JAFCO Super V-3 Investment Limited Partnership
4,534
The Master Trust Bank of Japan ,Ltd. (Trust Account)
4,338
Note: % shareholdings are expressed to second decimal places

58

ASHIKAGA HOLDINGS CO., LTD.

Shareholding%(thou. shares) shareholding

36.87
12.00
5.70
4.50
2.17
1.99
1.55
1.46
1.36
1.30

ASHIKAGA HOLDINGS CO., LTD.
Annual Report 20162016Year Ended March 31, 2016

Printed in Japan