ASHIKAGA HOLDINGS CO., LTD.

Annual Report 2015

Year Ended March 31, 2015

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, 2015, the Bank had a total balance of deposits and negotiable certificates ofdeposit of ¥5,337.7 billion, a balance of loans and bills discounted of ¥4,189.4 billion, and a capitalratio of 8.58%. Its branch network consisted of 153 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.12-14 Corporate Governance

P.2-3

A Message from the Management

P.15-18 Risk Management at the Ashikaga Holdings Group

P.4-5

Area of Operation

P.19-21 System of Legal Compliance at the Ashikaga Holdings Group

P.6-7

Earnings Highlights

P.22-50 Financial Data

P.8-9

Efforts to Promote Relationship Banking

P.51

Corporate Data / Organization

P.10-11 Corporate Social Responsibility Activities

P.52

List of Directors and Executive Officers / Stock Information

About the cover commemorative logo and corporate slogan< Logo concept>
The logo signifies The Ashikaga Bank’s position of focusing on harmony and symbiosis with the region, which it has continued for 120 years.
<Corporate slogan: “Gaining Strength from Gratitude”>
Along with expressing our gratitude to regional customers that have supported us through our long journey of 120 years, it also expresses our strong
commitment to continue moving forward with the region in the future.

Financial Highlights (Consolidated)
Millions of Yen*

Years ended March 31

Thousands of U.S. Dollars**

2015

2014

2015

¥5,864,239¥5,612,355$48,799,530

Cash and due from banks

365,322344,3693,040,048

Loans and bills discounted

4,150,466

3,958,083

34,538,292

Securities

1,207,938

1,176,469

10,051,912

Deposits

5,071,110

4,943,137

42,199,475

Total equity

287,121241,135

2,389,296

Common stock

117,495

117,495

977,744

96,739¥ 108,073

Total expenses

75,69180,151

629,867

Net income

17,07624,314142,100

At year-end:
Total assets

For the year:
Total income¥$

805,024* Yen amounts have been rounded down to millions of yen.
** U.S. dollar amounts are translated, for reference only, at the rate of ¥120.17=$1 effective on March 31, 2015.

Total Income

Total Expenses

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

120

100

Years ended March 31

105.5
100

Years ended March 31

101.2 98.6

30

90.1

108.0
96.7

Years ended March 31

84.2

80

80.2 80.1

75.6

24.3

25
20

80
60

15.9

17.1

15

60

17.0

15.4

40
10

40
20

20
0

11

12

13

14

15

0

5

11

12

13

14

15

0

11

12

13

14

15

Annual Report 2015

1

A Message from the Management

Satoshi Fujisawa

Masanao Matsushita

Chairman and Chief Executive Officer
Ashikaga Holdings Co., Ltd.

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

We would like to express our greatest appreciation to

However, the pace of its economic recovery slowed

our stakeholders for their continued support anddown as seen in the sluggish consumer spending.

patronage of Ashikaga Holdings and the Ashikaga
Bank (hereinafter, “Ashikaga Bank” or “the Bank”).

Under these circumstances, the Ashikaga
Holdings Group (hereinafter, “the Group”) focused on
fulfilling a smooth financial intermediary function in

During the fiscal year under review, although being

the local community and offering financial services

partially affected by backlash against the last-minutethat meet its customers’ needs mainly throughdemand prior to the consumption tax increase, theAshikaga Bank, based on its medium-term

Japanese economy continued a mild recovery, driven

management plan “Challenges 120 – Valiant

by robust capital and public investment. In the local

c h a l l e n g e s t o w a rd 1 2 0 - y e a r a n n i v e r s a r y o feconomy of Tochigi Prefecture, production activities

foundation,” which started in April 2013.

picked up gradually and capital investment was firm.

Outline of New Medium-term Management Plan

2

Name

Challenges 120— Valiant Challenges Toward 120-year Anniversary of Foundation

Term

From fiscal 2013 to fiscal 2015 (3 years)

Vision for the Bank

• Reliable and trusted partner for our customers• Convenient and assured bank
• Contribute to regional development and growing together

Goals of Medium-termManagement Plan

• Augmenting profitability through commitment to the region• Listing on the Tokyo Stock Exchange

ASHIKAGA HOLDINGS CO., LTD.

In corporate banking, we made greater contact

aggressively work to promote and support thosewith customers and actively worked to provide a

economies through financial support as well as bysmooth supply of funds by using multiple financing

leveraging the Group’s functions and knowhow

methods such as syndicated loan, private placement

including consulting and think tank capabilities. At

bond and asset-based lending (ABL). Furthermore,

the same time, in light of the promulgation of theby launching “Ashigin New Business Support Loan”,

revised Companies Act and formulation of thewe supported business startups and venture

Corporate Governance Code, we will strive to further

companies while working to assist the expansion ofstrengthen and enhance our business management

sales channel of clients by holding exhibitions andsystem.

business confabs relating to manufacturing(monozukuri) and food.

On October 1, 2015, Ashikaga Bank will mark the120th anniversary since its foundation. We would like

In individual banking, we enhanced products forto take this opportunity to express our sincerest

investment trust and insurance and engaged in

gratitude to all of our shareholders and clients in theacquiring accounts for Nippon Individual Savings

region who have provided warm support over the

Account (NISA) scheme and promoting use of theyears. To meet the expectations of our stakeholders,scheme. We also strengthened the housing andall of our executives and employees will make theirapartment loans and expanded the lineup of

best efforts. We would like to ask all of you for yourunsecured loan products by introducing new freecontinued support.

loan products and other measures.
In our branch channel, Oyama-minami Branch andJuly 2015

Oyama Loan Center were relocated in a new buildingin November 2014.
As a consequence of these initiatives, the Group’s
consolidated net income for fiscal 2014 amounted to¥17.0 billion in line with the initial business forecast.
During fiscal 2015, in order to contribute to therevitalization of regional economies, we will

Significant Management Indicators (Fiscal 2015)(¥ billion)

Target indicators for
Fiscal 2015

Results in
Fiscal 2014

The Bank (Non-Consolidated basis)

Profitability
GrowthEfficiency
Soundness

Gross business profit

78.0Core net business income

30.0

80.5
32.0

Deposits (term-end balance)

5,200.0

5,337.7

Loans (term-end balance)

4,100.0

4,189.4

Individual assets under custody

950.0

704.0

OHR

60.0%

59.61%

at 3% or below

2.31%

Non-performing loan ratio

Ashikaga Holdings Co., Ltd. (Consolidated basis)

Profitability
Soundness

Ordinary profit
Capital adequacy ratio (Baseldomestic standard)

19.0

21.0

8.2%

8.54%

Annual Report 20153

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
Others112 offices
15 offices
8 offices
16 offices
2 offices

Ken-O Expressway

Ibaraki

SaitamaTokyo

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 (2012)

(¥ trillion)

7.7

16

7.5

17

11.6

11

20.3

5

(thousand)

1,980

18

1,976

19

2,919

11

7,239

5

Prefectural income per capita (2012) (¥ thousand)

3,008

7

2,901

14

3,137

4

2,806

19

Number of businesses (2014)

91,521

19

95,584

18

122,716

13

261,178

5

8.1

12

7.7

14

10.9

8

11.7

7

7/2

63 / 76ha

2/4

75 / 109ha

1/1

49 / 85ha

4/3

Population (2014)

Manufactured goods shipped (2013)

(¥ trillion)

New Factory Locations (excluding power supply
44 / 93ha
sector) (2014)
(number / area(ha))

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 is from the Ministry of Internal
Affairs and Communications. Number of businesses, manufactured goods shipped and new factory locations data come from the Ministry of
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 Kan-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 2012, the total production of these four prefectures came to ¥47 trillion, rivaling the
GDP of Norway or Sweden.
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 16 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
42.9%

6.0%

Shinkin banks andcredit associations
10.6%
Other banks
in Japan
5.3%

Loans andBills Discounted(March 2014)

Agricultural cooperatives
15.3%

Shinkin banks andcredit associations
12.5%

Ashikaga Bank
38.2%

Deposits(March 2014)

Other banks in Japan

7.4%
Second-tier regional banks
23.2%

Other regional banks
11.7%

Second-tier regional banks
20.2%

Other regional banks
6.1%

Annual Report 20155

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

Expenses and OHR

Gross business profit

Personnel
Non-personnel(¥ billion)

Core gross business profit(¥ billion)

80.0

90.0

80.0

81.0

79.9

78.6

80.5 80.1

49.7

70.0

40.0

60.0

20.0

FY3/13

FY3/14

OHR
(%)

61.23

0

FY3/15Gross business profit increased by ¥0.6 billion year on year to ¥80.5
billion due to a ¥1.2 billion increase in interest income to ¥65.0 billion,
and a ¥0.2 billion increase in fees and commission to ¥14.5 billion.
Core gross business profit after deducting the gains (losses) on
bonds including government bonds was ¥80.1 billion, a year on year
increase of ¥1.5 billion.

2.2

48.9

2.3

40
30

20.1

19.6

27.2

26.6

26.0

20

FY3/13

FY3/14

FY3/15100Overhead costs declined by ¥0.9 billion year on year to ¥48.0 billion.
As a result, the overhead cost ratio (OHR) was 59.61%, lower than
the target of 60%.
OHR=Expenses÷Gross business profit

Net business income(¥ billion)

Ordinary profit

Net income(¥ billion)

40.0

40.0

31.3

31.0

29.6

35.4

32.5 32.0

32.1
30.0

25.7

20.0

20.0

10.0

10.0

0

48.0

20.2

Ordinary profit and Net income

Core net business income

60
50

2.1

Net business income and Core net business income

30.0

70

59.61

60.0

75.4

50.0

61.32

Taxes

FY3/13

FY3/140

FY3/15Net business income was ¥32.5 billion, an increase of ¥1.5 billion
year on year due to factors such as lower overhead costs. Core net
business income also increased by ¥2.4 billion year on year to ¥32.0
billion.

26.8

29.7

24.6
19.7

FY3/13

FY3/14

FY3/15

Net income decreased by ¥12.3 billion year on year due to lower
gains on sale of stocks, which decreased by ¥12.7 billion, and higher
tax expenses, which increased by ¥7.1 billion. Ordinary profit
amounted to ¥29.7 billion and net income amounted to ¥19.7 billion,
exceeding initial forecasts.

Capital adequacy ratio
Ashikaga Holdings (consolidated)
Total capital(¥ billion)

New standard

Ashikaga Bank (non-consolidated)
Total capital

Capital adequacy ratio
(%)

9.70

10

8.49

8.54

252.9

234.7

248.7

Capital adequacy ratio
(%)

8.36
8

300

New standard(¥ billion)

8.68

8.58

242.9

251.3

8

300

6

219.9

6

200

200

4

4
100

0

10

2

Mar. 31,2013

Mar. 31,2014

Mar. 31,
2015

0

100

0

2

Mar. 31,2013

Mar. 31,2014

Mar. 31,2015

0

From March 31, 2014, the capital adequacy ratio is calculated using a new domestic standard based on Basel III.
Although profits accumulated steadily, there was an increase in risk assets due to an increase in loans and bills discounted, resulting in capital
adequacy ratio of 8.54%, a year on year increase of 0.05%, for Ashikaga Holdings on a consolidated basis, and the ratio of 8.58%, a decrease of
0.10%, for Ashikaga Bank on a non-consolidated basis.

6

ASHIKAGA HOLDINGS CO., LTD.

Balance of loans and bills discounted

Balance of deposits and negotiable certificates of deposit

Individual

Individual

Corporate

Public sector + financial institutions(¥ billion)

4,000

4,007.3

3,775.2

4,189.4

5,000

3,000
1,983.1

1,957.3

1,857.0

5,183.9
226.0
396.3

4,963.0
180.9
388.0

4,000

2,000
1,000

1,673.7

1,544.9

1,419.4

5,337.7
252.3
386.4

1,057.1

1,112.3

1,150.3

3,337.0

3,449.2

3,548.5

Mar. 31,2013

Mar. 31,
2014

1,000
0

Mar. 31,2015

The balance of loans and bills discounted rose ¥182.1 billion
compared to the end of the previous fiscal year to ¥4,189.4 billion
due to a ¥128.8 billion increase to ¥1,673.7 billion in loans to
individual customers, primarily for housing loans, and a ¥25.7 billion
increase to ¥1,983.1 billion in corporate loans.

Mar. 31,2013

Mar. 31,2014

Mar. 31,2015

The balance of deposits and negotiable certificates of deposit rose
¥153.8 billion compared to the end of the previous fiscal year to¥5,337.7 billion due to a ¥99.2 billion increase to ¥3,548.5 billion in
individual deposits and a ¥38.0 billion increase to ¥1,150.3 billion incorporate deposits.

Balance of SMEs loans and housing loans

Assets under custody

SMEs Loans

Investment trusts

Housing Loans(¥ billion)

Insurance

Bonds(¥ billion)

1,600

1,566.4800

1,546.9753.5

1,490.6

1,500
1,400 1,392.8
1,300

Negotiable certificates of deposit

3,000

2,000

0

Public sector + financial institutions

6,000

532.4

504.9

498.7

Corporate(¥ billion)

1,425.1

1,298.5

285.8

272.8

258.9

400

127.5

180.6

213.0

600

754.5

747.0

1,200
200

281.5

1,100
1,000

Mar. 31,2013

Mar. 31,2014

0Mar. 31,2015

The balance of SME loans climbed ¥75.8 billion to ¥1,566.4 billion asa result of capturing the growing capital demand by strengthening
relations with the core customers.
The balance of housing loans climbed ¥121.8 billion to ¥1,546.9
billion due to efforts to actively meet both the borrowing needs for
new housing loans and the need for refinancing.

341.1

293.5

Mar. 31,2013

Mar. 31,2014

Mar. 31,
2015

Assets under custody increased by 7.5 billion yen from the end of theprevious fiscal year, to 754.5 billion yen. Of that, investment trusts
increased by 47.6 billion yen and insurances increased by 13.0 billion
yen, while bonds decreased by 53.1 billion yen owing to redemptionof large amount of JGB for individual investors.

Risk-monitored loans
Risk-monitored loans in fiscal 2014 based on the Banking Act came to ¥98.0 billion, a decrease of ¥16.3 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, 2013

Mar. 31, 2014

Mar. 31, 2015

Compared with
Mar. 31, 2014

3.2
87.3
0.0
31.7
122.4
12.4
3,775.2
3.24

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

(1.4)
0.8
(0.0)
(15.7)(16.3)(1.3)
182.1(0.52)

Disclosed claims under the Financial Revitalization Law
As of March 31, 2015, disclosed claims under the Act on Emergency
Measures for the Revitalization of the Financial Functions (hereinafter,“Financial Revitalization Law”) came to ¥98.4 billion, down ¥16.0 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

4

3.20
150
100

2.81
122.5
9.5

114.4
8.1

81.3

71.5

31.7

34.7

50
0

Mar. 31,2013

Mar. 31,
2014

3

2.31
98.4

6.8
72.5

19.0
Mar. 31,
2015

2
1
0

Annual Report 20157

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.

Business startup and development support• ‌In October 2014, we held the “Venture Company
Support Event by Local Financial Institutions,” a venue where venture companies and companies established in Utsunomiya City make presentations on theirbusiness efforts and products to gain advice from organizations such as administrative agencies and local
financial institutions in attendance in relation to sales
channel expansion• ‌In December, we began offering “Ashigin New Business Support Loan,” a specialized financing producttargeting founders of startup business that create
new demands via providing new technologies, newknow-how, and new services

confab, with 20 of our corporate customers participating in the exhibition.
In November, the Bank, six shinkin banks and two
credit associations in Tochigi Prefecture jointly held “theMonozukuri Kigyo Tenji/Shodankai 2014 (manufacturers’ exhibition/business confab)” with 166 companies
participating in the exhibition. The event was intended
to support expanding sales channel of local manufacturers.
In January 2015, the Bank and Tochigi Prefecture
jointly held “the Tochigi Shoku no Tenji/Shodankai 2015
(Tochigi Prefecture food exhibition and business confab
2015)” with 157 companies participating in the exhibition. The event was intended to support businessmatching in food and agricultural fields.
In March, we held the “Exchange meetings withretired persons” which matched local businesses withmanagement challenges such as new productdevelopment and sales channel expansion withcorporate alumni that have extensive knowledge,
experience, and networks.

Financed to separate package
development project for large
strawberry “Sky-berry”, expecting
to sales expansion by export
Regional Bank Food Selection 2014

• ‌Made loans for 58 customers (total value: ¥322 million) for the support of their new business startups anddevelopment.

Support during growth phase
Use of financing methods based on the evaluation ofbusiness value• Creation of syndicated loans where we serve as thearranger: 31 cases (¥78.3 billion)• Underwriting of private placement bonds through “theAshigin Growth Platform Support Fund” and “theAshigin Support Fund for Environment initiatives,”
etc.: 162 cases (¥15.0 billion)• Deal with ABLs that do not depend on real estate collateral or personal guarantees: 157 cases (¥25.1 billion)

Held business matching events and business confabs
In November 2014, 38 local banks including the Ashikaga Bank jointly held “the Food Selection 2014 Business Confab,” which is a food exhibition and business

8

ASHIKAGA HOLDINGS CO., LTD.

Strengthening the overseas business support system

Based on the high level of interest in customer entry
into overseas markets against a backdrop of expanding
overseas markets, we are strengthening our overseas
business support system for those customers.
In fiscal 2014, the Bank held numerous seminars
and business confabs in order to provide information tocustomers seeking to expand their business in Asia.
• ‌In June 2014, we participated as co-host of the “1stMonozukuri Shodankai@Bangkok 2014 (manufacturers’ business confab),” which was sponsored by Factory Network Asia (Thailand).
• In September, we held the “FBC Shanghai 2014 (Nicchu Monozukuri Shodankai),” which was co-hosted
by 40 groups including the Ashikaga Bank, other regional banks, and local governments, and sponsored
by Factory Network China• In September, we held an overseas business seminarwhich focused on personnel and labor managementof executives at local subsidiaries in the Asia region,
as well as transfer pricing taxation• In November, we participated in the “World Business
Symposium and Mega Matching 2014,” which targeted companies engaged in industries related to food,beverages, and daily necessities, and is sponsoredby KASIKORNBANK, a partner bank in Thailand• In March 2015, we held the “Cultivation of Overseas
Markets via the Internet Seminar”

Opening ribbon cutting at the Hong Kong Representative Office

Furthermore, in April 2015, we established a representative office in Hong Kong. In the future, we will placefurther emphasis on collecting and providing local information such as the financial and economic conditionsin the Asia region, while supporting clients with established bases in the Asia region as well as those who are
considering establishment in the future as well.

Business succession support

For the continuation and further growth of companies,
we provide proposals on various measures including
smooth business succession and cooperation among
companies.
• ‌Number of cases in which the Bank offered consultancy services on business succession matters suchas transfer of own stock to a successor: 425• ‌Number of cases in which M&A consultation services
were offered: 103 (of these, two contracts weresigned)• ‌In June and September 2014, we held the “Ashigin
M&A Seminar” for corporate managers with the intent
of providing information regarding M&A• In November and December, we held the “Ashigin
Business Succession and M&A Seminar” for corporate managers with the intent of providing information
regarding business succession and M&A for small andmedium-sized companies (SMEs)

Proactive initiatives for regionel revitalization
Active participation in wide scale regional revitalization
Collaboration with regional public organizations• ‌From July to October 2014, we promoted the “Tochigi
Tour Passport Business,” a tourism business of
Tochigi Prefecture, via the monitors on our ATMs
• In September, we cooperated with Tochigi Prefecture, Utsunomiya City, and tourism-related organizations to hold a Hospitality Skill Improvement Seminar• ‌In March 2015, we concluded the “Tochigi Prefecture
Small and Medium Sized Business Support Agreement” with the Tochigi Industrial Promotion Center• ‌In cooperation with 14 cities and towns, we beganoffering “Permanent Resident Support Loans,” targeting regional residents who utilizes subsidies and othersupport related to promotion of permanent residency
Use of the Tochimaru Sixth Industrialization Growth
Support Fund
In addition to investment, this fund provides comprehensive management support for producers and businesspersons engaged in creating sixth-sector*
agriculture, forestry, and fishery businesses.
•	In September 2014, as the first project, we invested
in Tsuchinoka Co., Ltd. (headquartered in Ashikaga
City, Tochigi Prefecture)

First invested project, “Farmer’s café TSUCHINOCA”•	In January 2015, as the second project, we invested
in Mottainebe Co., Ltd. (headquartered in Mito City,
Ibaraki Prefecture)* Sixth-sector creation: Measures in which first-sector producers (in the
agricultural, forestry, and fishery industries) also engage in second-sector
industry (processing, etc.) and third-sector industry (logistics, etc.) as a single
business, creating additional value to realize higher profitability.

PFI* measures• ‌In March 2015, we were tasked as the monitoring
agent for “the Akiyama River Cleansing Center
Renewable Energy Generation Business,” which is
the third PFI Business in Tochigi Prefecture (orderedby Tochigi Prefecture and Sano City)•	In cooperation with Tochigi Prefecture, we held two
PPP/PFI Seminars targeting regional public organizations and regional companies during fiscal 2014 (80attendees in May 2014 and 40 attendees in October
2014)* PFI : Private Finance Initiative

Measures for Town, People, Work Creation
Comprehensive Strategy (Regional Revitalization)
In April 2015, with an aim of actively supporting andpromoting matters related to regional revitalization,
we changed the name of our Regional Development
Promotion Group to the Regional Revitalization
Promotion Group, while also establishing the Regional
Revitalization Promotion Project Team as across-sectional promotional body. Moving forward,
we will actively support measures for the formulationand promotion of Comprehensive Regional Strategies at the regional government level.
Annual Report 20159

Corporate Social Responsibility Activities
Efforts for solving environmental issues
Tree Planting in the Ashio MountainProtection of Nikko Cedar Avenue

The Bank addressed an environmental problem, 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 Greenin Ashio and engage in tree-planting activities there every year. The purpose of the NPO is to contribute to
making healthy natural environment and prosperous local communities. In July 2015, 80 new employees of
the Ashikaga Bank and 102 new employees of member
companies of the
Tochigi Prefecture
Industrial Cooperation Council planted
about 360 young
trees in the Ashio
Mountains.

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. The Bank became a tree-owner in
1996. Since then we have continuously stepped uppurchases, 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,
includingparticipation in thecleanup at
the Avenue.

Developing Ashigin’s Forest
Since 2012, the Bank has developed Ashigin’s Forest in
the Tochigi Prefecture Prefectural Citizen’s forest in Yaita City. In fiscal 2015, in order to create a more
growth-friendly environment for young
trees, we will remove
the underbrush that
obstructs growth anddevelop walkways.
New employees participating in tree-planting activities

Promoting financial education
Holding of financial education events
Every year, we hold the “Ashigin Kids School: Handson Lessons on Money” for local elementary school students, and in December 2014, we held the 9th All
Japan High School Quiz of Finance and Economics
Championship “Economics Koshien” Tochigi Tournament.

Inclusion of activities such as
extracurricular hands-on lessons
To provide opportunities for work experience and extracurricular learning, we accept a wide range of students,from elementary to university students.

Ashigin Kids’ School“Economics Koshien” Tochigi Tournament

10

ASHIKAGA HOLDINGS CO., LTD.

Bank tour

Culture and sports promotion
In fiscal 2011, we became a naming rights partner ofmusic concerts, Ashigin Marronnier Kencho Concert,
hosted by Tochigi Prefecture, and have been providing
support for organizing presentations of cultural activities
and events by residents in the prefecture.

So that we can cheer for local professional sport
clubs with local people, we are the official partner ofTochigi SC (Tochigi Soccer Club Co., Ltd.) as well as
the official sponsors of the Utsunomiya Blitzen (Cycle
Sports Management Co., Ltd.) and H.C. Nikko Ice
Bucks (Tochigi United Co., Ltd.)

Ashigin Marronnier Kencho Concert by local hand bell performers

Official game of H.C. Nikko Ice Bucks

Measures for employees
Creating a workplace with safety and peaceof mind
To support success in both the workplace and at
home, we are proactively implementing measures toreduce working hours including promotion of the use ofvacation days and leaving the office early. Furthermore,
to enable employees to work with peace of mind, wework to maintain and improve various systems (parental
leave, nursing leave, special medical leave, etc.), in addition to maintaining of structure that enables employees to stay with the company for many years.

Promotion of active participation of women
In addition to activities such as establishing the “Project
Team for Active Participation of Women,” we implemented surveys targeting all employees regarding creation of a workplace that allows active participation of
women, and held the “Ashigin Women School” aimed
at improving team management skills. We updated our
personnel policy in October 2014, newly establishing areemployment system, position reinstatement system,and half-day holiday system.

Parental Support System
We held a “Reinstatement After Parental Leave Support
Seminar” targeting employees that are currently away onparental leave, and by initiatives such as listening to theexperiences of employees who took parental leave, we
provide a venue for these persons to discuss and resolve feelings of uneasiness or anxiety regarding reinstatement.

Reinstatement After Parental Leave Support Seminar

Annual Report 201511

Corporate GovernanceTo strengthen and enhance corporate governance, the Group seeks to establish a responsible
management system and ensure management transparency.
Ashikaga Holdings and the Ashikaga Bank are working to reinforce and improve management
supervisory functions and business 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. We see
higher standards of corporate governance as a management priority. We are committed to ensuring transparency, reinforcing management supervisory functions,
speeding up decision-making and strengthening business operations.
Asikaga Holdings and the Ashikaga Bank, have adopted the company with committees system underwhich it had been working to reinforce and improve
management supervisory and business operation functions. Since then, we have been working for greater

management transparency and objectivity.
In order to become the receiver 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. Against this backdrop, the Ashikaga Bankis Ashikaga Holdings’ only direct subsidiary and mostofficers 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 governance of theGroup as a whole through close mutual collaboration
between each division.

Management Structure
Board of Directors

Audit Committee

The Board of Directors is composed of eight directors(of which four 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 a lawyer rich in experience and with successful track records in corporate
turnarounds, a certified public accountant, a businessperson well versed in finance and securities and amember of the regional business community. This system enables us to implement management decisions
and carry out supervisory tasks from a wide range ofperspectives, resulting in improved management andstronger corporate governance. The board of directors’
meeting is held, in principle, once a month.

The Audit Committee is composed of three directors(of which two 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.

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

Compensation Committee
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.

12

ASHIKAGA HOLDINGS CO., LTD.

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 and in amanner 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 establishing a 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
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.
Annual Report 201513

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,
Executive Officers, employees or those who received report from any of 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, Executive Officers,
employees or those who received report from anyof the foregoing personnel to file reports.

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.
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
Appoint/
RemoveAshikaga Holdings Co., Ltd.

Select/Dismiss

Board of Directors(8, of which 4 are outside directors)
Appoint/SelectRemove/Dismiss

Appoint/
RemoveSupervise

ReportReport/Audit
Supervise

Chief Executive Officers
Executive Officers
Earnings control
Internal audit

Management
by operation

Nominating Committee (3, of which 2 are outside directors)

Compensation Committee (4, of which 3 are outside directors)
Audit Committee (3, of which 2 are outside directors)

Group
ALM
Meeting

Risk management
and others

Group
Management
Meeting
Monitor/Supervise

Appoint/
RemoveThe Ashikaga Bank, Ltd.
Select/Dismiss

Board of Directors(7, of which 4 are outside directors)
Appoint/SelectRemove/Dismiss

Supervise

ReportReport/Audit
Supervise

Chief Executive Officer

Group
Compliance
Meeting

Supervise

SuperviseInternal Audit
Department
Accounting
AuditorReport/Apply

Nominating Committee (3, of which 2 are outside directors)

Compensation Committee (4, of which 3 are outside directors)
Audit Committee (3, of which 2 are outside directors)

Executive Officers
Supervise

ALM
Meeting

Management
Meeting(BPR = Business Process Reengineering)

14

ASHIKAGA HOLDINGS CO., LTD.

Compliance
Meeting

CreditPortfolio
Meeting

IT
Investment
Meeting

BPR
Promotion
Meeting

SuperviseInternal Audit
Department*Collaborates
with Audit
Committee/
Internal Audit
Department

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 areheld on a monthly basis, attended by full-time (Head
Office) executives at Ashikaga Holdings and the Ashikaga Bank, and Audit Committee members, and receive
reports about progress in comprehensive risk management and management of individual risk categories. In
addition, they discuss possible steps to be taken to
deal with changes in the internal or external businessenvironment.
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 2015

15

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.
Nominating Committee

Governance

Board of Directors

Audit Committee
Compensation Committee

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

Division
responsible foroversight of risk
management

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

16

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 201517

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.

18

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.
Ashikaga Holdings has adopted the committeebased system of corporate governance, with establishmentof Nominating, Audit and Compensation committees,
and established executive officer posts. This clearly
separates management oversight and execution ofbusiness.
The Board of Directors establishes internal controls
including our compliance system, while the Audit

Committee audits and examines whether or not thesemechanisms are functioning effectively.
Executive officers are empowered to carry out tasks
set by the Board of Directors, and to execute business
operations. Powers of decision-making are vested inchief executive officers after approval from the GroupManagement Meeting, Group ALM Meeting and Group
Compliance Meeting. Chief executive officers are thus
subject to restraints on individual actions. Executive officers also must report at least once every three months
to the Board of Directors on their own performance infulfilling duties.

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 for fiscal 2015 and the

management instills the concept of legal compliancethrough meetings of all division, office and branch managers of the Bank. At the same time, specific compliance action plans are drawn up based on a compliancemanual and action guidelines, to ensure the effectiveness of compliance awareness-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 201519

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 2015 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
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

Nominating Committee

Board of Directors

Compensation Committee

Compliance Meeting

Audit Committee
Compliance Working Group
Oversight Division(Compliance Management Division)
Oversight

Head OfficeCompliance Manager
Compliance Officer

20

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 201521

Consolidated Financial Statements

Consolidated Balance Sheet
March 31, 2015

Ashikaga Holdings Co., Ltd. and Consolidated Subsidiaries

Millions of Yen
2015
2014

ASSETS:Cash and due from banks (Notes 3, 10, and 20)������������������������������������������������������������������� ¥ 365,322
Call loans and bills bought (Note 20)������������������������������������������������������������������������������������������
1,644
7,727
Monetary claims bought (Note 20)�����������������������������������������������������������������������������������������������
Trading account securities (Notes 4 and 20)��������������������������������������������������������������������������
4,164
Securities (Notes 4, 10, and 20)�������������������������������������������������������������������������������������������������������� 1,207,938
Loans and bills discounted (Notes 6, 10, 20, and 24)��������������������������������������������������������� 4,150,466
Foreign exchanges (Note 6)��������������������������������������������������������������������������������������������������������������
5,837
Tangible fixed assets (Note 7)�����������������������������������������������������������������������������������������������������������
24,291Intangible fixed assets (Note 8)�������������������������������������������������������������������������������������������������������
85,754
Asset for retirement benefits (Note 13)��������������������������������������������������������������������������������������
13,884
Deferred tax assets (Note 19)������������������������������������������������������������������������������������������������������������
604
Customers’ liabilities for acceptances and guarantees (Note 9)���������������������������������
16,566
Other assets (Note 10)���������������������������������������������������������������������������������������������������������������������������
23,938
Allowance for loan losses��������������������������������������������������������������������������������������������������������������������
(43,901)
Total����������������������������������������������������������������������������������������������������������������������������������������������������������� ¥5,864,239¥ 344,369
1,520
8,180
4,266
1,176,469
3,958,083
5,969
23,37893,141
3,357
2,027
15,333
20,307(44,051)¥5,612,355$ 3,040,048
13,68464,30634,654
10,051,912
34,538,292
48,577202,141
713,610
115,544
5,027
137,858
199,207(365,331)$48,799,530

LIABILITIES AND EQUITY
LIABILITIES:
Deposits (Notes 10 and 20)................................................................................................................ ¥5,071,110
Negotiable certificates of deposit (Note 20)...........................................................................
197,379
Call money and bills sold (Note 20)..............................................................................................
—
Payables under securities lending transactions (Notes 10 and 20)...........................
2,473
Borrowed money (Notes 10, 11, and 20)...................................................................................
232,546
Foreign exchanges..................................................................................................................................
365
Other liabilities (Note 12).....................................................................................................................
49,169Provision for directors’ bonuses .....................................................................................................
54
Liability for retirement benefits (Note 13).................................................................................
—
Provision for directors’ retirement benefits.............................................................................
262
Provision for reimbursement of deposits..................................................................................
803
Provision for contingent losses ......................................................................................................
495
Provision for point card certificates..............................................................................................
115
Deferred tax liabilities (Note 19)......................................................................................................
5,774
Acceptances and guarantees (Note 9).......................................................................................
16,566
Total liabilities...................................................................................................................................... ¥5,577,117¥4,943,137
171,040
6,175
5,965
180,644763
43,022
48
2,779
189
1,606
424
88
—
15,333¥5,371,220$42,199,475
1,642,502—
20,587
1,935,144
3,042
409,167
452
—
2,185
6,682
4,126
961
48,053
137,858$46,410,234¥ 117,495
29,02575,375
221,896$

20,230(30)(960)
19,239241,135¥5,612,355

372,008(5,410)17,248383,846
2,389,296$48,799,530

EQUITY (Notes 14 and 15):
Common stock:
Authorized, 990,000 thousand shares; Issued, 333,250 thousands
shares in 2015 and 2014�������������������������������������������������������������������������������������������������������������������� ¥ 117,495
Capital surplus��������������������������������������������������������������������������������������������������������������������������������������������
29,025
94,474Retained earnings������������������������������������������������������������������������������������������������������������������������������������
Total shareholders’ equity
240,994
Accumulated other comprehensive income
Unrealized gains on available-for-sale securities (Note 5)���������������������������������������
44,704
Deferred losses on hedges���������������������������������������������������������������������������������������������������������
(650)
Defined retirement benefit plans�������������������������������������������������������������������������������������������
2,072
Total accumulated other comprehensive income�����������������������������������������������
46,126
Total equity����������������������������������������������������������������������������������������������������������������������������
287,121
TOTAL��������������������������������������������������������������������������������������������������������������������������������������������������������������������� ¥5,864,239
See notes to consolidated financial statements.

22

Thousands of
U.S. Dollars(Note 1)2015

ASHIKAGA HOLDINGS CO., LTD.

977,744
241,535
786,170
2,005,450

Consolidated Statement of Income
Year Ended March 31, 2015

Ashikaga Holdings Co., Ltd. and Consolidated Subsidiaries

Millions of Yen
2015
2014

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�����������������������������������������������������������������������������������������
Provision of allowance for loan losses����������������������������������������������������������������������������������������
Other expenses (Note 18)�������������������������������������������������������������������������������������������������������������������
Total expenses�����������������������������������������������������������������������������������������������������������������������������
INCOME BEFORE INCOME TAXES�������������������������������������������������������������������������������������������������������
INCOME TAXES (Note 19):
Current������������������������������������������������������������������������������������������������������������������������������������������������������������
Deferred���������������������������������������������������������������������������������������������������������������������������������������������������������
Total income taxes��������������������������������������������������������������������������������������������������������������������NET INCOME������������������������������������������������������������������������������������������������������������������������������������������������������

¥57,010
13,118331275
125
21,8391,272
2,766
96,739¥ 57,751
11,196204
187
116
21,317
3,437
13,862
108,073$474,417
109,167
2,755
2,295
1,042
181,738
10,591
23,020805,024

2,308
206
77
69
1,924
296
6,056
144
56,636
4,097
3,874
75,691
21,048

2,487
158
19
62
1,871
24
5,759
1,461
57,547
6,791
3,968
80,151
27,921

19,212
1,719
644
578
16,014
2,465
50,3981,202
471,301
34,09432,240629,867
175,157

10,592(6,620)3,972¥17,076

2,708
898
3,607
¥ 24,314

88,147(55,090)
33,057$142,100Yen

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

Thousands of
U.S. Dollars(Note 1)
2015

¥51.24
9.00

U.S. Dollars¥69.85
4.00

$0.43
0.07

See notes to consolidated financial statements.

Consolidated Statement of Comprehensive Income
Year Ended March 31, 2015

Ashikaga Holdings Co., Ltd. and Consolidated Subsidiaries

Millions of Yen
2015
2014

Thousands of
U.S. Dollars(Note 1)2015

NET INCOME������������������������������������������������������������������������������������������������������������������������������������������������������

¥17,076¥24,314$142,100

OTHER COMPREHENSIVE INCOME (LOSS) (Note 22)
Unrealized gains (losses) on available-for-sale securities������������������������������������������������
Deferred gains (losses) on hedges������������������������������������������������������������������������������������������������
Defined retirement benefit plans ��������������������������������������������������������������������������������������������
Total other comprehensive income (loss)��������������������������������������������������������������������������������COMPREHENSIVE INCOME (Note 22)�����������������������������������������������������������������������������������������������

24,473(619)
3,032
26,887¥43,963(1,724)101—(1,622)¥22,691

203,660(5,152)

25,237
223,745$365,845

See notes to consolidated financial statements.

Annual Report 201523

Consolidated Statement of Changes in Equity
Year Ended March 31, 2015

Ashikaga Holdings Co., Ltd. and Consolidated Subsidiaries

Millions of Yen

Commonstock(Note 14)

Preferredstock(Note 14)

CapitalsurplusRetainedearnings

Treasury
stock

BALANCE, APRIL 1, 2013�������������������������������������� ¥ 67,510
Net income�������������������������������������������������������������—Cash dividends������������������������������������������������������
—Purchases of treasury stock���������������������������
—Retirement of treasury stock������������������������ 37,500
Issuance of new shares������������������������������������ 12,485
Net changes except forshareholders’ equity during the year���—Net change in the year������������������������������������ 49,985
BALANCE, MARCH 31, 2014������������������������������� 117,495
Cumulative effect of accountingchange��������������������������������������������������������������������
—BALANCE, APRIL 1, 2014 (as restated)�������� 117,495
Net income�������������������������������������������������������������—Cash dividends ����������������������������������������������������
—Net changes except forshareholders' equity during the year���—Net change in the year������������������������������������
—BALANCE, MARCH 31, 2015������������������������������� ¥117,495¥ 37,500———(37,500)—¥95,780———(79,240)
12,485¥56,730
24,314(5,670)———¥—(37,500)——(66,755)
29,025

—
—
—
—
—
—
—

—
—
—
(79,240)
79,240—¥21,954—————¥(132)——————
18,64475,375———(1,724)(1,724)
20,230—29,025——

4,855
80,23017,076(2,832)

—
—
—
—

—
—
¥29,025—
14,243¥94,474

—
—
—

¥

¥

Total
equity

—
—
—
—
—
—

¥279,343
24,314(5,670)(79,240)—
24,971

101
101
(30)

(960)
(960)
(960)

(2,583)(38,208)
241,135—
20,230
—
—

—
(30)
—
—

—
(960)
—
—

4,855
245,990
17,076(2,832)

24,47324,473¥44,704

(619)
(619)
¥(650)

3,032
3,032¥2,072

26,887
41,131¥287,121

Total
equityCommonstock(Note 14)

Preferredstock(Note 14)

CapitalsurplusThousands of U.S. Dollars (Note 1)
Accumulated othercomprehensive income
Unrealized
gains onDefinedavailableDeferred retirement
Retained
Treasury
for-salelosses on
benefitearnings
stock
securities
hedgesplans

BALANCE, MARCH 31, 2014������������������������������� $977,744
Cumulative effect of accountingchange��������������������������������������������������������������������
—BALANCE, APRIL 1, 2014 (as restated)�������� 977,744
Net income�������������������������������������������������������������—Cash dividends ����������������������������������������������������
—Net changes except forshareholders' equity during the year���—Net change in the year������������������������������������
—BALANCE, MARCH 31, 2015������������������������������� $977,744$—$241,535$627,238$—$168,348$ (258)$ (7,989) $2,006,619

—
—
—
—

—
241,535——

40,404
667,642
142,100(23,572)

—
—
—
—

—
168,348
—
—

—
(258)
—
—

—
40,404(7,989) 2,047,022— 142,100—(23,572)

—
—
$—

—
—
$241,535—
118,528$786,170——$—

203,660
203,660$372,008(5,152)(5,152)$(5,410)

25,237 223,746
25,237 342,274$17,248 $2,389,296

See notes to consolidated financial statements.

24¥

Accumulated othercomprehensive income
Unrealized
gains onDefinedavailableDeferred retirementfor-salelosses on
benefitsecurities
hedgesplans

ASHIKAGA HOLDINGS CO., LTD.

Consolidated Statement of Cash Flows
Year Ended March 31, 2015

Ashikaga Holdings Co., Ltd. and Consolidated Subsidiaries

Millions of Yen
2015
2014
OPERATING ACTIVITIES:
Income before income taxes�������������������������������������������������������������������������������������������������������������������������������������������������������
Adjustments for :Income taxes paid����������������������������������������������������������������������������������������������������������������������������������������������������������������������
Depreciation and amortization������������������������������������������������������������������������������������������������������������������������������������������
Impairment loss���������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Amortization of goodwill�������������������������������������������������������������������������������������������������������������������������������������������������������
(Decrease) increase in allowance for loan losses����������������������������������������������������������������������������������������������������
Increase (decrease) in provision for directors' bonuses��������������������������������������������������������������������������������������
Increase in asset for retirement benefits����������������������������������������������������������������������������������������������������������������������
Decrease in liability for retirement benefits���������������������������������������������������������������������������������������������������������������
Increase (decrease) in provision for directors’ retirement benefits�������������������������������������������������������������
(Decrease) increase in provision for reimbursement of deposits�����������������������������������������������������������������
Increase in provision for contingent losses����������������������������������������������������������������������������������������������������������������
Increase in provision for point card certificates�������������������������������������������������������������������������������������������������������
Decrease in provision for loss on disaster�������������������������������������������������������������������������������������������������������������������
Interest income (accrual basis)�������������������������������������������������������������������������������������������������������������������������������������������
Interest expenses (accrual basis)���������������������������������������������������������������������������������������������������������������������������������������
Loss (gain) related to securities������������������������������������������������������������������������������������������������������������������������������������������
Foreign exchange gains���������������������������������������������������������������������������������������������������������������������������������������������������������
Losses on disposal of fixed assets�������������������������������������������������������������������������������������������������������������������������������������
Net increase in loans and bills discounted�����������������������������������������������������������������������������������������������������������������
Net increase in deposit�����������������������������������������������������������������������������������������������������������������������������������������������������������
Net 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 (decrease) increase in call money���������������������������������������������������������������������������������������������������������������������������
Net decrease in payables under securities lending transactions�����������������������������������������������������������������
Net decrease in foreign exchanges - assets���������������������������������������������������������������������������������������������������������������
Net (decrease) increase in foreign exchanges - liabilities����������������������������������������������������������������������������������
Interest and dividends received (cash basis)�������������������������������������������������������������������������������������������������������������
Interest paid (cash basis)��������������������������������������������������������������������������������������������������������������������������������������������������������
Other, net�����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Total adjustments�����������������������������������������������������������������������������������������������������������������������������������������������������������������������
Net cash provided by (used in) 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 provided by investing activities��������������������������������������������������������������������������������������������������������������������
FINANCING ACTIVITIES:
Proceeds from subordinated borrowings�������������������������������������������������������������������������������������������������������������������
Repayments of subordinated borrowings������������������������������������������������������������������������������������������������������������������
Proceeds from issuance of common stock����������������������������������������������������������������������������������������������������������������Cash dividends paid������������������������������������������������������������������������������������������������������������������������������������������������������������������
Purchases of treasury stock��������������������������������������������������������������������������������������������������������������������������������������������������
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)������������������������������������������������������������������������������������������������������������

¥ 21,048¥ 27,921$ 175,157(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(2,565)
3,702
71
6,202
1,012
(8)
(1,076)
(446)
(65)
88
97
14
(70)
(69,456)
4,624(9,758)(1,515)34(182,108)
197,325
20,11358,94040,808
127,749
13
6,175(65,985)
1,481
213
70,772(5,448)(1,674)
199,260
227,182(30,336)
28,677—51,614(1,245)51(10,393)—611(6,682)592
222—(589,675)
40,633
19,448(92,503)130(1,600,926)
1,064,940
219,178
431,902
3,254
2,511
1,046
(51,387)(29,058)
1,098(3,311)
567,461(16,813)(21,340)(20,304)
154,853(257,319)
72,826
193,323(2,618)
34
(664)
(56)
5,525

(385,180)
189,879
217,544(1,605)
48
(647)
(4)
20,035(2,141,298)
606,028
1,608,747(21,789)291(5,533)(467)
45,979———(2,832)—(2,832)
42
21,344342,368¥363,712

70,000(70,000)
24,971(5,670)(79,240)(59,939)29
187,307
155,060¥342,368———(23,572)—(23,572)
356
177,617
2,849,031$3,026,648

Millions of Yen
2015
2014
NONCASH FINANCING ACTIVITY
Retirement of treasury stock��������������������������������������������������������������������������������������������������������������������������������������������������������

Thousands of
U.S. Dollars(Note 1)
2015¥—

¥79,240

Thousands of
U.S. Dollars(Note 1)
2015$—

See notes to consolidated financial statements.

Annual Report 201525

Notes to Consolidated Financial Statements
Year Ended March 31, 2015

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 andits related accounting regulations, in accordance 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 aform which is more familiar to readers outside Japan. In addition, certain
reclassifications have been made in the 2014 consolidated financial
statements to conform to the classifications used in 2015.
The consolidated financial statements are stated in Japanese yen,
the currency of the country in which the Company is incorporated andoperates. As permitted by the Japanese Financial Instruments and Exchange Act, amounts less than one million yen have been omitted. As aresult, the totals do not necessarily agree with the sum of the individual
amounts. Yen amounts, other than per share amounts, have beenrounded down to millions of yen. Yen per share amounts have beenrounded 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 andhave been made at the rate of ¥120.17 to U.S. $1, the rate of exchange
at March 31, 2015. Such translations should not be construed as representations that the Japanese yen amounts 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 theaccounts of the Company and its significant subsidiaries. There werefour consolidated subsidiaries as of March 31, 2015 and 2014.
Under the control and influence concept, those companies inwhich the Company, directly or indirectly, is able to exercise control
over operations are fully consolidated.
All consolidated subsidiaries have a fiscal year ending on March 31,
which is the same as the fiscal year of the Company.
The consolidated financial statements do not include the accountsof one subsidiary in 2015 and 2014, 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 the investments 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 ofthe net assets of the acquired subsidiary at the date of acquisition.
Goodwill on acquisition of subsidiaries is amortized using the straightline method over 20 years (see Note 8).
b. Trading Account Securities— Trading account securities, which areheld for the 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.

26

ASHIKAGA HOLDINGS CO., LTD.

c. 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 andability to hold to maturity, are stated at amortized cost using thestraight-line method; (2) investments in unconsolidated subsidiary thatare not accounted for by the equity method are stated at cost determined by the moving-average method; and (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 at cost 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.
d. 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 consolidatedbanking subsidiary is 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 equipments.
Depreciation of tangible fixed assets owned by the other subsidiaries is computed by the declining-balance method in estimated useful
lives.
e. Intangible fixed assets (except for leased assets)—Amortization of intangible fixed assets (except for leased assets) is mainly computed by
the straight-line method. The cost of computer software obtained forinternal use is amortized principally using the straight-line method overthe estimated useful lives of mainly 5 years.
f. 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 lease assets is determinedusing the guaranteed residual value indicated on the lease contracts
where provided or shall otherwise have a nil residual value.
g. Long-Lived Assets—The Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset 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 be measured as the amountby which the carrying amount of the asset exceeds its recoverable
amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling priceat disposition.
h. 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 ofcredit 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 the branches and the credit supervisory division with a subsequent audit by the asset review and Internal Audit division in accordance with the 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. Allloans 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 borrowers that are not legally or formally insolvent, but are regarded as substantially in a same situation (“virtual bankruptcy”), an
allowance is provided based on the amount of claims, after the writeoffs as stated below, net of the expected amounts of recoveries fromcollateral and guarantees.
For claims on borrowers that are not currently bankrupt, but arelikely to become bankrupt in the future (“possible bankruptcy”), an allowance is provided in the amount deemed necessary based on an
overall solvency assessment of the claims, net of the expected amountof recoveries from collateral and guarantees.
The allowance for loan losses is calculated based on the actual historical loss ratio for “normal” and “in need of caution” categories. For
claims on borrowers whose loans are classified as “restructured loans”
over a certain amount, for which future cash flows from the collection ofprincipal 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 valueof 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 of collateral or guarantees has been deducted as deemed
uncollectible directly from those claims. As of March 31, 2015 and 2014,
the deducted amounts were ¥10,333 million ($85,988 thousand) and¥11,008 million, respectively.
Other consolidated subsidiaries determine allowances for loan losses that are provided as deemed necessary to cover expected losses
based on their own experience.
i. Provision for directors’ bonuses —Provision for directors’ bonuses isprovided in the amount of the estimated bonuses that are attributableto each fiscal year.
j. 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 formulabasis. Actuarial gains and losses are amortized 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 Accounting Standards Board of Japan (“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 fromtime to time through 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 recognized within equity (accumulated other comprehensive income), after adjusting for tax 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 are recognized in profit or loss over a certain period
no longer than the expected average remaining service period of theemployees. 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 recognized in profit or loss in the current period shall be treated asreclassification adjustments (see Note 13).
(c) The revised accounting standard also made certain amendments relating to the method of attributing expected benefit to periods andrelating 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 to consolidated
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.
With respect to (c) above, the Company changed the method of attributing the expected benefit to periods from a straight-line basis to abenefit formula basis, the method of determining the discount ratefrom using the period which approximates the expected average remaining service period to using a single weighted average discount rate
reflecting the estimated timing and amount of benefit payment, and recorded the effect of (c) above as of April 1, 2014, in retained earnings. As
a result, asset for retirement benefits as of April 1, 2014, increased by¥4,732 million ($39,378 thousand), liability for retirement benefits as ofApril 1, 2014, decreased by ¥2,779 million ($23,132 thousand), and retained earnings as of April 1, 2014, increased by ¥4,855 million ($40,404
thousand), respectively, and operating income and income before income taxes for the year ended March 31, 2015, decreased by ¥361 million ($3,009 thousand). In addition, total equity per share as of April 1,
2014, increased by ¥14.56 ($0.12), and basic net income per share forthe year ended March 31, 2015, decreased by ¥0.70 ($0.01), respectively.
k. 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 date based on the estimated amount of benefits.
l. Provision for reimbursement of deposits—Provision for reimbursementof deposits, which were derecognized as liabilities under certain conditions, is provided for possible losses on future claims on the historicalreimbursement experience.
m. Provision for contingent losses— Provision for contingent losses isprovided for contingent liabilities not covered by other reserves in an
amount deemed necessary based on estimated losses in the future.
n. 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 programs, is calculated by converting theoutstanding points into a monetary amount, and rationally estimating
and recognizing the amount that will be redeemed in the future.

Annual Report 201527

o. Provision for loss on disaster— Provision for loss on disaster is provided for the estimated payments for repair of damaged fixed assets by theGreat East Japan Earthquake.
p. Asset retirement obligation—In March 2008, the ASBJ published theaccounting standard for asset retirement obligations, ASBJ Statement
No. 18, “Accounting Standard for Asset Retirement Obligations” andASBJ Guidance No. 21, “Guidance on Accounting Standard for Asset Retirement Obligations.” Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law
or contract that results from the acquisition, construction, development
and normal operation of a tangible fixed asset and is associated withthe retirement of such tangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted cash flows required forthe future asset retirement and is recorded in the period in which the
obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the
period the asset retirement obligation is incurred, the liability should berecognized when a reasonable estimate of the asset retirement obligation can be made. Upon initial recognition 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 ofundiscounted cash flows are reflected as an adjustment to the carrying
amount of the liability and the 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 tomeasure the cost of employee stock options based on the fair value atthe date of grant and recognized compensation 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 option or the
goods or services received. In the balance sheet, stock options are presented 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
the pretax income included in the consolidated statement of income.
The asset and liability 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 tax laws to the temporary differences. A valuation allowance is provided for any portion of the deferred tax assets if it is considered more
likely than not that they will not be realized.
Application of consolidated taxation system
The Company and its domestic subsidiaries have been approved by
the Commissioner of the National Tax Agency regarding the applicationof the consolidated taxation system from the year ending March 31,
2016. Accordingly, effective the fiscal year ended March 31, 2015, related accounting procedures have been implemented based on the guid-

28

ASHIKAGA HOLDINGS CO., LTD.

ance of Practical Issues Task Force (“PITF”) No. 5 of January 16, 2015,“Practical Solution on Tentative Treatment of Tax Effect Accounting under Consolidated Taxation System (Part 1)” issued by the AccountingStandards Board of Japan (the “ASBJ”) and the guidance of PITF No. 7 ofJanuary 16, 2015, “Practical Solution on Tentative Treatment of Tax EffectAccounting under Consolidated Taxation System (Part 2)” issued by the
ASBJ.
s. Translation of foreign currencies—Assets and liabilities denominatedin foreign currencies are translated at exchange rates prevailing as of
the balance sheet date.
t. Derivatives and Hedging Activities—Derivative financial instruments
are classified and accounted for as follows: (a) all derivatives, except
those entered into for hedging purposes, are recognized as either assets
or liabilities and measured at fair value with gains or losses on derivativetransactions recognized in the consolidated statement of income or (b)for derivatives used for hedging purposes, if the derivatives qualify forhedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losseson 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 (“JICPA”) Industry Audit Committee Report No. 24 ”Accounting and Auditing Treatments on the Application of AccountingStandards for Financial Instruments in 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 fairvalue 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 thehedged cash flow and that 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 of currency exchange. Under the deferral
hedge accounting, hedged items are identified by grouping the foreign
currency-denominated financial assets and liabilities by currencies anddesignating derivative transactions such as currency swap transactions
and foreign exchange swaps as hedging instruments. Effectiveness ofderivative transactions such as currency swap transactions and foreignexchange 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 anddue from the Bank of Japan.
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 the transaction amounts and, accordingly, consumption tax amounts do not affect the measurement of profit or loss transactions.

w. Per Share Information—Basic net income per share of common
stocks is computed by dividing net income available to common shareholders by the 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. New Accounting Pronouncements
Accounting Standards for Business Combinations and Consolidated
Financial Statements—On September 13, 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 minority interest is adjusted to reflect the change in the parent’s ownership interest in its subsidiary while the parent retains its controlling interest in its subsidiary. Under the current accounting standard,
any difference between the fair value of the consideration received or
paid and the amount by which the minority interest is adjusted is accounted for as an adjustment of goodwill or as profit or loss in the consolidated statement of income. Under the revised accounting standard,such difference shall be accounted for as capital surplus as long as theparent retains control over its subsidiary.
(b) Presentation of the consolidated balance sheet
In the consolidated balance sheet, “minority interest” under the current
accounting standard will be 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 current accounting standard will be changed to “net income” under the revised accounting standard, and “net income” under
the current accounting standard will be changed to “net income attributable to owners of the parent” under the revised accounting standard.
(d) Provisional accounting treatments for a business combination
If the initial accounting for a business combination is incomplete by theend of the reporting period in which the business combination occurs,
an acquirer shall report in its financial statements provisional amounts
for the items for which the accounting is incomplete. Under the current
accounting standard guidance, the impact of adjustments to provisionalamounts recorded in a business combination on profit or loss is recognized as profit or loss in the year in which the measurement is completed. Under the revised accounting standard guidance, during themeasurement period, which shall not exceed one year from the acquisition, the acquirer shall retrospectively adjust the provisional amounts
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 as of that date. Such adjustments shall be recognized as if the accounting for the business combination had been completed at theacquisition date.

(e) Acquisition-related costs
Acquisition-related costs are costs, such as advisory fees or professionalfees, which an acquirer incurs to effect a business combination. Under
the current accounting standard, the acquirer accounts for acquisition-related costs by including them in the acquisition costs of the investment. Under the revised accounting standard, acquisition-related
costs shall be accounted for as expenses in the periods in which thecosts 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 thecase 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 beginningbalance of capital surplus and retained earnings for the year of the firsttime application. In prospective application, the new standards andguidance shall be applied prospectively from the beginning of the yearof the first-time application.
The revised accounting standards and guidance for (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated statement of income 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 abusiness combination which occurs on or after the beginning of annual
periods beginning on or after April 1, 2014.
The Group expects to apply the revised accounting standards andguidance for (a), (b), (c) and (e) above from April 1, 2015, and for (d)above for a business combination which will occur on or after April 1,
2015, and is in the process of measuring the effects of applying the revised accounting standards and guidance in future applicable periods.

Annual Report 201529

3. CASH AND CASH EQUIVALENTS
The reconciliation of “Cash and cash equivalents” in the consolidated
statement of cash flows and “Cash and due from banks” in the consolidated balance sheet as of March 31, 2015 and 2014, was as follows:
Thousands of
U.S. Dollars
2015

Millions of Yen
2015
2014

Cash and due from banks������������������������� ¥365,322 ¥344,369
Interest-bearing deposits included
in due from banks (other than due
from the Bank of Japan)���������������������������
(1,610)(2,001)
Cash and cash equivalents����������������������� ¥363,712 ¥342,368$3,040,048(13,400)$3,026,648

4. TRADING ACCOUNT SECURITIES AND SECURITIESSecurities as of March 31, 2015 and 2014, consisted of the following:Thousands of
U.S. Dollars
2015

Millions of Yen
2015
2014

Japanese national government bonds��� ¥351,981 ¥ 439,400
Japanese local government bonds������
241,943
257,005
Japanese corporate bonds�����������������������
238,602269,572
Japanese corporate stocks������������������
56,09942,949Other securities������������������������������������������
319,311
167,542
Total������������������������������������������������������������������� ¥1,207,938 ¥1,176,469$2,929,026
2,013,342
1,985,544
466,835
2,657,165$10,051,912

Net unrealized (losses) gains on trading account securities were ¥29
million ($243 thousand) and ¥(8) million for the years ended March 2015
and 2014, respectively.
The cost and aggregate fair value of available-for-sale securities andheld-to-maturity securities as of March 31, 2015 and 2014, were as follows:

March 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������������������
14,00016030ASHIKAGA HOLDINGS CO., LTD.

Fair value¥1,638466
347¥1,109,872
54,582
750,782—279,2324

241,943

342
824
93
—

229,606
304,508
154,727
105,791—

82,453

—
—
—

9,177
14,16014,160March 31, 2014

Cost

Millions of Yen
Unrealized Unrealized
gains
lossesSecurities classified as:
Available-for-sale:¥1,047,380 ¥31,163
Equity securities��������������������
21,949 20,585
Debt securities:
876,724
7,015
Japanese national
government bonds����� 364,407
2,428Japanese local
government bonds����� 253,723
3,362Japanese corporate
bonds��������������������������������� 258,593
1,224
Others:148,706
3,563
Foreign bonds������������������
98,680401
Held-to-maturity:
97,695
7,942
Japanese national
government bonds������������
72,708
7,395Japanese corporate
bonds���������������������������������������
9,987
337
Others:14,999209
Foreign bonds������������������
14,999209

March 31, 2015

Cost

Fair value¥1,677
1,067
457¥1,076,866
41,466883,282144

366,69180

257,005

232
151
144
—

259,585
152,118
98,937
105,638—

80,104———

10,324
15,20915,209Thousands of U.S. Dollars
Unrealized Unrealized
gains
lossesFair value

Securities classified as:
Available-for-sale:$8,704,126 $545,362
Equity securities��������������������
182,634 275,456
Debt securities:
6,121,753 128,805
Japanese national
government bonds����� 2,260,990
62,651
Japanese local
government bonds����� 1,968,484
44,899Japanese corporate
bonds��������������������������������� 1,892,279
21,255
Others:2,399,738 141,101
Foreign bonds������������������ 1,269,367
18,978
Held-to-maturity:
796,747
83,597
Japanese national
government bonds������������
605,384
80,754
Japanese corporate
bonds���������������������������������������
74,862
1,506
Others:116,502
1,337
Foreign bonds������������������
116,502
1,337$13,631
3,880
2,892

$9,235,857
454,210
6,247,667—

2,323,642

40

2,013,342

2,852
6,859
775
—

1,910,683
2,533,981
1,287,569
880,345—686,138———

76,368117,839
117,839

The information for available-for-sale securities which were soldduring the years ended March 31, 2015 and 2014, was as follows:

March 31, 2015

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

March 31, 2014

¥  —
0
—
0
871
¥871

Millions of Yen
Realized
Realized
Proceeds
gains
lossesAvailable-for-sale:
Equity securities��������������������������������������������������� ¥ 20,445
Debt securities:����������������������������������������������������� 163,456
Japanese national government bonds��� 162,382
1,073Japanese corporate bonds������������������������
Other securities�����������������������������������������������������
1,826
Total��������������������������������������������������������������������������������� ¥185,728

March 31, 2015

¥505
486
481
4
—
¥992

¥11,325
2,706
2,699
6
—
¥14,032¥   54
1,326
1,324
1
91
¥1,472Thousands of U.S. Dollars
Realized
Realized
Proceeds
gains
lossesAvailable-for-sale:
Equity securities��������������������������������������������������� $  4,207
Debt securities:����������������������������������������������������� 461,491
Japanese national government bonds��� 422,548
Japanese corporate bonds������������������������
38,942Other securities�����������������������������������������������������
52,939Total��������������������������������������������������������������������������������� $518,637$4,207
4,049
4,010
40
—
$8,256

$   —
2
—
2
7,254
$7,256

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 is “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 lessthan 50% of the acquisition cost and their fair value is deemed notrecoverable by individual assessment.
Impairment losses on marketable available-for-sale securities did
not incur for the years ended March 31, 2015 and 2014.
As of March 31, 2015 and 2014, securities included equity investments in unconsolidated subsidiaries and associated companies of ¥9million ($77 thousand), and capital subscriptions of ¥440 million ($3,667
thousand) and ¥421 million, respectively.

5. UNREALIZED GAINS ON AVAILABLE-FOR-SALE SECURITIES
Unrealized gains on available-for-sale securities as of March 31, 2015
and 2014, consisted of the following:
Millions of Yen
2015
2014

Unrealized gains:������������������������������������������� ¥63,898
Available-for-sale securities��������������� 63,898
Money held in trust except
for trading and held-to-maturity
purpose�����������������������������������������������������
—Deferred tax liabilities:�������������������������������� 19,193
Unrealized gains on available-for-salesecurities before adjustments
by ownership share����������������������������������� 44,704
Minority 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��������������������������������������������������������� ¥44,704

Thousands of
U.S. Dollars
2015¥29,486
29,486$531,731
531,731—
9,255—
159,723

20,230—372,008———¥20,230$372,008

6. LOANS AND BILLS DISCOUNTED
The following loans were included in loans and bills discounted as ofMarch 31, 2015 and 2014:
Millions of Yen
2015
2014

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

Thousands of
U.S. Dollars
2015¥ 1,774
78,203¥  3,165
77,250$ 14,769
650,778—
19,037¥99,0162
34,741¥115,159—
158,425$823,972

The amounts above are stated before the deduction of the allowance for loan losses.
“Loans to borrowers in legal bankruptcy” are nonaccrual loans,which are highly probable to become unrecoverable. Specific conditions for inclusion in this category are as follows:(i) Borrowers have made application for procedures under the Corporate Reorganization Act, Civil Rehabilitation Act, Bankruptcy Act, liquidation under the Companies Act of Japan, or liquidation under otherlegal 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 notrecognized, excluding “loans to borrowers in legal bankruptcy” andloans on which interest payments are deferred in order to support theborrowers’ recovery from financial difficulties.
“Loans past due for three months or more” include accruing loans
for which principal or interest is past due three months or more.
“Restructured loans” are loans to borrowers in financial difficulty towhom the Group has provided financial support through modificationof 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 201531

Contracts of overdraft facilities and loan commitment limits arecontracts 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 condition in the contracts. As of March 31, 2015 and 2014,
the amounts of unused commitments were ¥1,226,867 million($10,209,434 thousand) and ¥1,183,354 million, respectively. As of March
31, 2015 and 2014, the amounts of unused commitments whose remaining contract terms were within one year were ¥1,194,633 million($9,941,198 thousand) and ¥1,159,022 million, respectively.
As many of these commitments expire without being drawn down,
the unused amount does not necessarily represent a future cash requirement. Most of these contracts have conditions whereby the consolidated banking subsidiary and certain consolidated subsidiaries canrefuse customer applications for loans or decrease the contract limits forcertain reason (e.g., changes in financial situation and deterioration incustomers’ creditworthiness). At the inception of the contracts, the consolidated banking subsidiary and certain consolidated subsidiaries obtain real estate, securities, or other assets as collateral if considered to benecessary. Subsequently, the consolidated banking subsidiary andcertain consolidated subsidiaries perform periodic reviews of thecustomers’ business results 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, 2015 and 2014, consolidated banking subsidiary has the rightto sell or repledge bills discounted and foreign exchange bills bought
and their total face value was ¥27,674 million ($230,298 thousand) and¥27,692 million, respectively.

Tangible fixed assets as of March 31, 2015 and 2014, consisted of thefollowing:
Millions of Yen
2015
2014

Buildings����������������������������������������������������������� ¥ 7,074
Land�������������������������������������������������������������������� 12,831
18
Leased assets��������������������������������������������������
Construction in progress���������������������������
1,025
Other������������������������������������������������������������������
3,341
Total�������������������������������������������������������������������� ¥24,291¥ 7,294
12,46712
238
3,366¥23,378

Thousands of
U.S. Dollars
2015$ 58,874
106,779
151
8,533
27,804$202,141

The accumulated depreciation of tangible fixed assets as of March
31, 2015 and 2014, amounted to ¥39,055million ($324,999 thousand)and ¥38,865 million, respectively.
Under certain conditions, such as exchanges of fixed assets ofsimilar kinds and sales and purchases resulting from expropriation,
Japanese tax laws permit companies to defer the profit arising fromsuch transactions by reducing the cost of the assets acquired or byproviding a special reserve in the equity section. As of March 31, 2015
and 2014, such deferred profit amounted to ¥2,747 million ($22,861
thousand) and ¥2,771 million, respectively.

ASHIKAGA HOLDINGS CO., LTD.

Intangible fixed assets as of March 31, 2015 and 2014, consisted of thefollowing:
Millions of Yen
2015
2014

Software������������������������������������������������������������ ¥ 3,037
Goodwill������������������������������������������������������������ 82,182
Leased assets��������������������������������������������������
—Other������������������������������������������������������������������
534
Total�������������������������������������������������������������������� ¥85,754¥ 4,219
88,3842
535¥93,141

Thousands of
U.S. Dollars
2014$ 25,278
683,883—
4,449$713,610

The amortization expense for goodwill was included in general andadministrative expenses for the years ended March 31, 2015 and 2014,
amounted to ¥6,202 million ($51,614 thousand) and ¥6,202 million.

9.	CUSTOMERS’ LIABILITIES FOR ACCEPTANCES AND
GUARANTEESAll contingent liabilities arising from acceptances and guarantees arereflected in acceptances and guarantees. As a contra account,customers’ liabilities for acceptances and guarantees are presented asassets, representing the consolidated banking subsidiary’s and certain
consolidated subsidiaries’ rights of indemnity from the applicants.
Guarantee obligations for private placement bonds included in “Securities” (provided in accordance with the Article 2-3 of the “Financial
Instruments and Exchange Act”) as of March 2015 and 2014, were¥47,512 million ($395,381 thousand) and ¥41,628 million, respectively.

10. ASSETS PLEDGED AS COLLATERAL
Assets pledged as collateral and the related liabilities as of March 31,
2015 and 2014, were as follows:

7. TANGIBLE FIXED ASSETS

32

8. INTANGIBLE FIXED ASSETS

Millions of Yen
2015
2014

Assets pledged as collateral:
Cash and due from banks������������������� ¥      4Securities���������������������������������������������������� 266,660
Loans and bills discounted�����������������
26,100
Relevant liabilities to above assets:
Deposits������������������������������������������������������ ¥115,438
Payables under securities
lending transactions����������������������������
2,473
Borrowed money������������������������������������ 152,500

Thousands of
U.S. Dollars
2015¥      2266,669
41,150$       372,219,029
217,192¥118,551$960,623

5,965
100,570

20,587
1,269,036

Additionally, securities amounting to ¥73,080 million ($608,139
thousand) and ¥72,981 million as of March 31, 2015 and 2014, respectively, were pledged as collateral for settlements of exchange or as substitute securities for margins on futures transactions.
Moreover, other assets included security deposits amounting to¥741 million ($6,173 thousand) and ¥686 million as of March 31, 2015
and 2014, respectively.

11. BORROWED MONEY
As of March 31, 2015 and 2014, the weighted-average annual interest
rates applicable to borrowed money were 0.84 % and 1.06%,
respectively.
Borrowed money includes borrowings from the Bank of Japan andother financial institutions. In addition, borrowed money included
subordinated borrowings totaling ¥80,000 million ($665,724 thousand)and ¥80,000 million as of March 31, 2015 and 2014, respectively.

12. OTHER LIABILITIESOther liabilities included asset retirement obligations of ¥539 million($4,491 thousand) and ¥534 million as of March 31, 2015 and 2014,
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, based on thereal estate lease contracts.
(b) Calculation of asset retirement obligations
Asset retirement obligations are calculated based on the estimatedavailable period of 19 to 39 years using the discount rates from 1.6% to
2.3%.
Millions of Yen
2015
2014

Balance at beginning of year�������������������
Additional provisions associatedwith the acquisition of
tangible fixed assets����������������������������������
Reconciliation associatedwith passage of time���������������������������������
Reduction associated with settlementof asset retirement obligations�������������
Balance at end of year��������������������������������

Thousands of
U.S. Dollars
2015

¥534

¥527

$4,450

—

7

—

4

4

41

—
¥539

(5)
¥534

—
$4,491

13. RETIREMENT AND PENSION PLANS
1. Outline of the adopted retirement benefit plans
The Company’s consolidated subsidiaries have adopted funded andunfunded defined benefit plans as well as defined contribution plans toappropriate for the employees’ retirement benefits. The entire
retirement benefit plans are managed in an integrated manner throughretirement benefit points which are determined based on years ofservice 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, each participant will set up a virtual individual account where
pension or lump-sum payments will be made based on theaccumulated 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, buthave become 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 theemployees’ retirement, etc.
Under the defined contribution plans, contribution amount isdecided based on the accumulated retirement benefit points allocated.
Regarding the lump-sum retirement benefit plans adopted bycertain consolidated subsidiaries, liability for retirement benefits andretirement benefit expenses are calculated by the simplified method.

The Company’s consolidated subsidiaries are members of thedefined benefit pension funds under the multi-employer plans, and as
the amount of plan assets corresponding to the contribution of eachsubsidiary may be reasonably calculated, such information is included in
the notes to defined benefit plans.
2, Defined benefit plans(a) The changes in defined benefit obligation for the years ended
March 31, 2015 and 2014, were as follows:
Millions of Yen
2015
2014

Balance at beginning of year
(as previously reported)��������������������������� ¥47,382
Cumulative effect of accounting(7,511)change�������������������������������������������������������
Balance at beginning of year
(as restated)��������������������������������������������������� 39,870
Current service cost�������������������������������
1,627Interest cost�����������������������������������������������
454
Actuarial (gains) losses�������������������������
(671)
Benefits paid���������������������������������������������
(2,458)Others����������������������������������������������������������
50
Balance at end of year�������������������������������� ¥38,872

Thousands of
U.S. Dollars
2015¥47,041$ 394,293—(62,511)47,041
1,150
533
1,459
(2,855)52¥47,382

331,783
13,544
3,781(5,586)(20,461)418$(323,480)(b) The changes in plan assets for the years ended March 31, 2015
and 2014, were as follows:
Millions of Yen
2015
2014

Balance at beginning of year������������������� ¥47,960
Expected return on plan assets��������
1,294
Actuarial gains������������������������������������������
3,001
Contributions from the employer���
2,044
Benefits paid���������������������������������������������
(1,579)35
Others����������������������������������������������������������
Balance at end of year�������������������������������� ¥52,757

Thousands of
U.S. Dollars
2015¥44,697
893
1,947$399,104
10,77624,974

2,028(1,642)35¥47,960

17,014(13,140)297$439,024(c) Reconciliation between the liability recorded in the consolidatedbalance sheet and the balances of defined benefit obligation andplan assets
Millions of Yen
2015
2014

Defined benefit obligation����������������������� ¥ 38,872
Plan assets�������������������������������������������������������� (52,757)
Total�������������������������������������������������������������������� (13,884)
Unfunded defined benefit
obligation unfunded���������������������������������
—Net asset arising from defined
benefit obligation��������������������������������������� ¥(13,884)¥47,382$ 323,480(47,960)(578)(439,024)(115,544)——¥ (578)$(115,544)

Millions of Yen
2015
2014

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

Thousands of
U.S. Dollars
2015

Thousands of
U.S. Dollars
2015¥2,779(3,357)$      —
(115,544)¥   (578)$(115,544)

Annual Report 201533

(d) The components of net periodic benefit costs for the years ended
March 31, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars
2015

Millions of Yen
2015
2014

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

¥1,627454(1,294)¥1,150533(893)$13,544
3,781(10,776)

1,018
(144)
14
¥1,675

1,055
(144)
17
¥1,717

8,476(1,205)
122$13,943(e) Amounts recognized in other comprehensive income (before
income tax effect) in respect of defined retirement benefit plans
for the years ended March 31, 2015 and 2014
Thousands of
U.S. Dollars
2015

Millions of Yen
2015
2014

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

¥—
—
¥—

¥ (144)
4,690¥4,546$ (1,205)
39,036$37,831(f ) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined retirement
benefit plans as of March 31, 2015 and 2014
Thousands of
U.S. Dollars
2015

Millions of Yen
2015
2014

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

¥ 1,303(2,796)¥(1,493)¥1,1581,894¥3,052$ 9,641
15,762$25,403(g) Plan assets
a. Components of plan assets
Plan assets as of March 31, 2015 and 2014, consisted of the following:
Debt investments��������������������������������������������������������������������������
Equity investments�����������������������������������������������������������������������
General accounts of life insurance company��������������������
Short-term assets���������������������������������������������������������������������������
Others��������������������������������������������������������������������������������������������������
Total�����������������������������������������������������������������������������������������������������

2015

2014

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

71%
21%
—
3%
5%
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 long-term 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, 2015 and 2014,
are set forth as follows:
2015

Discount rate��������������������������������������������������������������� 1.0% — 1.2%
Long-run expected rate of returnon plan assets������������������������������������������������������������
2.7%
Expected rate of increase in salary���������������������
9.0%

2014

1.0% — 1.2%
2.0%
9.0%

3. Defined Contribution Plans
The amount of the required contribution to the defined contributionplans of the Company and certain consolidated subsidiaries were ¥294
million ($2,448 thousand) and ¥291 million as of March 31, 2015 and2014, respectively.

34

ASHIKAGA HOLDINGS CO., LTD.

14.EQUITY
Japanese companies are subject to the Companies Act of Japan (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 the shareholders meeting. For companies that meet certain criteria including (1) having the Board of Directors, (2) having independent
auditors, (3) having the Board of Corporate Auditors, and (4) the term ofservice of the directors is prescribed as one year rather than two years ofnormal 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 has prescribed so in its articles of incorporation. The Company meets all the above criteria. The Board of Directorsof companies with board committees (including nominating committee, compensation committee, and audit committee) can also do so because such companies with board committees already, by nature, meet
the above criteria under the Companies Act, even though such companies have an audit committee instead of an Audit & Supervisory Board.
The Company is organized as a company with board committees.
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 thecompany so stipulate. The Companies Act provides certain limitations
on the amounts available for dividends or the purchase of treasury
stock. The limitation is defined as the amount 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 the equity account that was charged upon the paymentof such dividends until the aggregate amount of the legal reserve andadditional 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, other capitalsurplus, 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 and dispose of such treasury stock by resolution of the Board of
Directors. The amount of treasury stock purchased cannot exceed theamount available for distribution to the shareholders which is determined by specific formula. Under the Companies Act, stock acquisitionrights are presented as a separate component of equity. The Companies
Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights
are presented as a separate component of equity or deducted directlyfrom 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, 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

The changes in the number and class of issued stock and treasury stock for the year ended March 31, 2014, were as follows:

As of March 31, 2013

Issued stock:
Common stock�������������������������������������������������������������������������������������������������������������������������������������������������
Preferred stock:
Class No. 1 preferred stock��������������������������������������������������������������������������������������������������������������������
Class No. 2 preferred stock��������������������������������������������������������������������������������������������������������������������
Total�����������������������������������������������������������������������������������������������������������������������������������������������������������������
Treasury stock:
Preferred stock:
Class No. 1 preferred stock��������������������������������������������������������������������������������������������������������������������
Class No. 2 preferred stock��������������������������������������������������������������������������������������������������������������������
Total�����������������������������������������������������������������������������������������������������������������������������������������������������������������

Shares in thousands
Changes during the year
Increase
Decrease

As of March 31, 2014

2,700

330,550*1, 2—

333,250

20
10
2,730

—
—
330,550

20*3
10*4
30

—
—
333,250

—
—
—

20*3
10*4
30

20
10
30

—
—
—

*1. On October 19, 2013, the Company made stock spilt by way of a free share distribution at the rate of 0.01 shares for each outstanding common stock. As a result,
267,300,000 shares were issued to shareholders of record*2. At the Board of Directors meeting held on November 14, 2013, and November 29, 2013, the Board of Directors approved the issuance of 55,000,000 shares for the public
placement with the date of payment to be December 18, 2013. Also the Board of Directors approved to allocate newly issued common stocks of 8,250,000 shares to athird party, with the payment date of January 17, 2014, due to overallotment of secondary offering.
*3. On May 31, 2013, the Board of Directors authorized the treasury stock repurchase program. The Company repurchased 10,000 shares of Class No. 1 preferred stock as treasury stock on September 9, 2013, and retired that stock on the same day. Further, based on the repurchase clause stipulated in the Company’s articles of incorporation,
the Company repurchased 10,000 shares of Class No. 1 preferred stock as treasury stock on January 17, 2014, and retired that stock on the same day.
*4. Based on a repurchase clause stipulated in the Company’s articles of incorporation, the Company repurchased 10,000 shares of Class No. 2 preferred stock as treasury
stock on March 31, 2014, and retired that stock on the same day.

Cash Dividends per Share
Cash dividends per share for the years ended March 31, 2015 and 2014, were as follows: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

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

Total amount(Thousands of
U.S. Dollars)

Per share amount(U.S. Dollars)

Dividend record date

Effective date

$11,093$0.03

Mar. 31, 2014

Jun. 5, 2014

Total amount(Thousands of
U.S. Dollars)

Per share amount(U.S. Dollars)

Dividend record date

Effective date

$12,479$0.04

Sep. 30, 2014

Dec. 10, 2014

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(Thousands of
U.S. Dollars)

Per share amount(U.S. Dollars)

Dividend record date

Effective date

$12,479$0.04

Mar. 31, 2015

Jun. 4, 2015

Dividends to be paid after March 31, 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 May 13, 2015:

Common stock

Annual Report 201535

Year ended March 31, 2014:
Dividends paid in the fiscal year ended March 31, 2014
The following cash dividend payments were approved at the Board of Directors’ meeting held on May 10, 2013 :Cash dividends approved at the Board of Directors’ meeting held on May 10, 2013:

Class No. 1 preferred stock��������������������������������������������������������������������������������������������������������������������������������
Class No. 2 preferred stock��������������������������������������������������������������������������������������������������������������������������������
Total�����������������������������������������������������������������������������������������������������������������������������������������������������������������������������

Total amount(Millions of Yen)

Per share amount(Yen)

Dividend record date

Effective date

¥3,7801,890¥5,670¥189,000.00
189,000.00

Mar. 31, 2013
Mar. 31, 2013

Jun. 10, 2013
Jun. 10, 2013

Dividends to be paid after March 31, 2014
Cash dividends approved at the Board of Directors’ meeting held on May 12, 2014:

Common stock

Total Amount(Millions of Yen)

Per Share Amount(Yen)
Dividend Record Date

¥1,333¥4.00

Mar. 31, 2014

Effective Date

Jun. 5, 201415. 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, 2015, 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
price2,684,900

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

Exercise period*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 amountsof 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, 2015
Nonvested (shares):
March 31, 2014 — outstanding
GrantedCanceled
VestedMarch 31, 2015 — outstanding

2,652,600—
10,000—2,642,600

2,665,900—
10,000—2,655,900

Vested (shares):
March 31, 2014 — outstanding
VestedExercised
Canceled
March 31, 2015 — 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 ofstock option cannot be reliably estimated. The Company does not recognize relevant expenses since their fair value on the date of grant was zero. The
amount of their intrinsic value as of March 31, 2015 and 2014, were nil.

36

ASHIKAGA HOLDINGS CO., LTD.

16. PER SHARE OF COMMON STOCK
a. Net income per share
Reconciliation of the differences between basic and diluted net income
per share (“EPS”) for the years ended March 31, 2015 and 2014, was asfollows:
Millions ofYen

Thousands ofshares
Weightedaverage
shares*1
Net income

Year Ended March 31, 2015
Basic EPS —Net income available
to common shareholders........... ¥17,076
Effect of dilutive warrants.............
—
Diluted EPS —Net income
for computation*2..........................
—
Year Ended March 31, 2014
Basic EPS —Net income available
to common shareholders........... ¥20,073
Effect of dilutive warrants.............
—
Diluted EPS —Net income
for computation*2 *3.....................
—Yen

U.S. Dollars

b. Total equity per share
Total equity per share as of March 31, 2015 and 2014, was as follows:
Yen
2015

Total equity per share��������������������������������� ¥861.58

2014

U.S. Dollars
2015¥723.58$7.17

Total equity per share as of March 31, 2015 and 2014, is calculated basedon the following:

EPS
Millions of Yen
2015
2014

333,250—¥51.24———

287,343—¥69.85
—

—

—

$0.43
—
—

Net income¥17,076
Amount not available to commonshareholders:
Redemption of preferred stock������������
—Preferred dividends������������������������������������
—Net income available to commonshareholders¥17,076

Thousands of
U.S. Dollars
2015¥24,314$142,100(4,240)———¥20,073$142,100*1. On October 19, 2013, the Company split its common stock at a ratio of 100
shares to one common share. As a result, fully diluted net income per share,
basic EPS and diluted EPS has been calculated assuming that the stock split
was made at the beginning of the year ended March 31, 2014.
*2. Since the average share price during the fiscal year did not exceed the exercise
price and the shares did not dilute, diluted EPS is not shown because decreasein net income available to common shareholders as a result of dilution did notincur.
*3. With regard to diluted EPS in the year ended March 31, 2014, since the Company started to list its stock on Tokyo Stock Exchange on December 19, 2013, theaverage share price during the period from the date of listing until the year
ended March 31, 2014, has been calculated as though it was the average shareprice for the fiscal year.

¥241,135—$2,389,296—¥241,135$2,389,296

Number of shares in thousands
2015
2014

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

Net income per share for the years ended March 31, 2015 and 2014, iscalculated based on the following:
Millions of Yen
2015
2014

Total equity������������������������������������������������������ ¥287,121—
Deductions from total equity:
Total equity available
to common shareholders������������������������ ¥287,121

Thousands of
U.S. Dollars
2015

333,250

333,250

Note:	As noted in Note 2, the Company has applied ASBJ Statement No. 26, “Accounting Standard for Retirement Benefits” and ASBJ Guidance No. 25,“Guidance on Accounting Standard for Retirement Benefits,” effective March
31, 2015, and followed the transitional treatment prescribed in Paragraph 37of the Accounting Standard.
	As a result, total equity per share as of April 1, 2014, increased by ¥14.56($0.12), and basic net income per share for the year ended March 31, 2015,
decreased by ¥0.70 ($0.01), respectively.

17. OTHER INCOME
Other income for the years ended March 31, 2015 and 2014, consistedof the following:

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

Millions of Yen
2015
2014

Thousands of
U.S. Dollars
2015¥11,325
4
1,631
899¥13,862$ 4,207
138
5,885
12,790$23,020¥  50516
707
1,536¥2,766

18. OTHER EXPENSES
Other expenses for the years ended March 31, 2015 and 2014, consistedof the following:
Millions of Yen
2015
2014

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��������������������������������������������������������������������

Thousands of
U.S. Dollars
2015¥2,304¥1,999$19,173

871

145

7,254

43
184
32
—
438
¥3,874

0
612
39
71
1,098
¥3,968

359
1,534
268
—
3,652
$32,240

Annual Report 201537

19. INCOME TAXES

20. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURESThe Group is subject to Japanese national and local income taxes,
which, in the aggregate, resulted in a normal effective statutory tax rateof 35.4% and 37.8% for the years ended March 31, 2015 and 2014, respectively.
The tax effects of significant temporary differences and loss carryforwards, which result in deferred tax assets and liabilities as of March
31, 2015 and 2014, 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 bysubordinate debts to acquire shares of the consolidated banking subsidiary, the Ashikaga Bank Co., Ltd. As the central business operation of
the Group, the consolidated banking subsidiary raises 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 tomaintain an adequate degree of liquidity. The consolidated banking
subsidiary manages those funds lending to company customers and individuals, such as mortgages and investing securities, mainly bonds, andlending 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 a part of ALM, the Group has entered into derivativetransactions.

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 assets (liabilities)���������

Millions of Yen
2015
2014

Thousands of
U.S. Dollars
2015¥   6,956 ¥ 6,542
2,499
7,113
15,64416,08012,285
14,0885,056
5,342
42,441
49,166(27,623) (37,005)
14,818
12,161$   57,885
20,797130,184
102,237
42,079353,181(229,871)
123,310

9,255

159,723

777
858
16
20
19,988
10,133¥(5,170) ¥ 2,027

6,471
141
166,335$(43,025)

19,193

A reconciliation between the normal effective statutory tax rate andthe actual effective tax rate reflected in the accompanying consolidated
statement of income for the years ended March 31, 2015, with the corresponding figures for 2014, 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����������������������������������������������������������

2015

2014

35.4%
(25.5)(26.3)
20.7

37.8%(34.0)(20.8)
(1.2)

38.0

29.7

0.4

0.3

0.4
(23.8)
(0.4)
18.9%

0.3
—
0.8
12.9%

On March 31, 2015, a tax reform law was enacted in Japan thatchanged the normal effective statutory tax rate from 35.37% for the fiscal year beginning on or after April 1, 2015, to 32.82% and the fiscal year
beginning on or after April 1, 2016, to 32.06%. As the result of this ratechange, deferred tax assets, deferred tax liabilities, and deferred losses
on hedges in the consolidated balance sheet as of March 31, 2015, decreased by ¥11 million ($97 thousand), ¥1,011 million ($8,419 thousand),and ¥31 million ($264 thousand), respectively. In addition, unrealized
gains on available-for-sale securities and defined retirement benefit
plans increased by ¥2,038 million ($16,961 thousand) and ¥101 million($842 thousand), respectively. Income taxes-deferred in the consolidated statement of income for the year ended March 31, 2015, by ¥1,107
million ($9,219 thousand).

38

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 consolidatedbanking 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 togenerate stable interest income to promote business relationships withissuers. 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 theCompany and other borrowed 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 bondfutures, 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 purposeof currency exchange. Under 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. 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 whose purpose is to offset the market fluctuations of securities held in “Available-for sale securities” and uses deferred hedges. Regarding swaps thatmeet the requirements for the special treatment of interest rate swaps,
the Company continues to verify whether they meet special requirements with “post testing.”
Derivative transactions that do not qualify for hedge accounting are
exposed to interest rate fluctuation risks, foreign exchange rate fluctuation risks, price fluctuation risks, and credit risks.

(3) Risk Management for Financial Instruments(a) Credit risk management
The Group has implemented and operated the credit control systemthat includes credit review of each individual loan application, establishing credit limits, managing credit information, internal credit rating, securing adequate guarantees and collaterals, and handling troubledloans. The credit control management is performed by the Credit Supervising Division I and the Credit Supervising Division II as well as at eachbanking office of the consolidated banking subsidiary. In addition, thosecredit information and 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 risksof 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 and any policies decided to be implemented are closely
monitored and regularly discussed in the ALM Meeting. The Company’s
Risk Management Group in Business Administration Department maintains comprehensive information of interest rates and durations of financials assets and liabilities, performs gap analyses and the interest
rate sensitive analyses, and reports monthly results to the ALM Meeting.
The Group utilizes derivative transactions, such as interest rate swaps, tohedge 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 accordance with security investment and market risk management policies and procedures after certain policies are determined in the ALM
Meeting. The International and Treasury Administration Division of theconsolidated banking subsidiary reduces the 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 theBoard of 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 its market risk quantity of derivativetransactions relating to securities, currencies, and interest rates using
value at risk (“VaR”), and monitor its 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 the derivative transactions inaccordance with the aforementioned market risk management policies
and procedures.

(v) Market risk quantitative information
Financial instruments exposed to major risk factors, such as interest raterisk and price 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 capitaland 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 analyzed
effects of interest fluctuations by period. If all risk factors, other than aninterest rate, are constant and the interest rate is assumed to be increased by 10 basis points (0.10%), the net fair value of financial assets
after offsetting with financial liabilities decreases by ¥1,185 million($9,867 thousand). As previously mentioned, this net fair value amountis 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 more than 10 basis
points (0.10%), the impact may be greater than the net fair value
amount above.
The consolidated banking subsidiary considers those liquid deposits of “Deposit” that have no activities for certain periods as “core” deposits and manages the interest rate risk by categorizing them tomaturity periods of up to 10 years.
b. Financial instruments excepting a.
The Group performs quantitative analysis using VaR. For the calculationof 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: 99.0%, and observation period: one year). The simple aggregated VaR of each instrument is ¥34,017 million ($283,074thousand) as ofMarch 31, 2015.
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 amountmeasurement. It should be noted that VaR measures the amount ofmarket 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 when market conditions
are changing dramatically beyond what was historically experienced.
② Financial instruments held by the Company and subsidiaries otherthan the consolidated banking subsidiary
Financial instruments held by the Company and subsidiaries other thanthe consolidated banking subsidiary, which are affected by interest risk,
are subordinate debts of “Borrowed money.” If all risk factors, other thanan interest rate, are constant, the fair value of the financial liabilities decreases by ¥303 million ($2,527thousand) 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 the interest rate and otherrisk factors was considered. If the interest rate fluctuates more than 10
basis points (0.10%), the impact may be greater than the fair value
amount above.

Annual Report 201539

(c) Liquidity risk management
The Group carries out adequate timely cash management through the
ALM Meeting, and also manages the liquidity risks by diversifying financing methods, and balancing long-term and short-term funding with theconsideration of market environment.
.
(4) Supplementary Explanation on Fair Values ofFinancial Instruments
The fair values of financial instruments are based on their market prices
and, in cases, 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.
(5) Fair Values of Financial Instruments(a) Fair value of financial instruments
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)

Unrealized
gains

¥

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

Millions of Yen
March 31, 2014

(1) Cash and due from banks�������������������������������
(2) Call loans and bills bought�����������������������������
(3) Monetary claims bought*1������������������������������
(4) Trading account securities —Securities held for trading purposes��������
(5) Securities:
Held-to-maturity securities�����������������������������
Available-for-sale securities����������������������������
(6) Loans and bills discounted�����������������������������
Allowance for loan losses*1�����������������������������
Net������������������������������������������������������������������������
Total assets�������������������������������������������������������������������
(1) Deposits�������������������������������������������������������������������
(2) Negotiable certificates of deposit����������������
(3) Call money and bills sold���������������������������������
(4) Payables under securities
lending transactions����������������������������������������
(5) Borrowed money������������������������������������������������
Total liabilities��������������������������������������������������������������
Derivative instruments*2 —Hedge accounting is not applied�����������������
Hedge accounting is applied�������������������������
Total derivative instruments���������������������������������

March 31, 2015

Carrying
amountFair value¥ 344,369
1,520
8,167

¥ 344,369
1,520
8,167

4,266

4,266

—

97,695
105,638
1,076,866 1,076,866
3,958,083(43,918)
3,914,164 3,953,082¥5,447,051 ¥5,493,912¥4,943,137 ¥4,947,496
171,040
171,100
6,175
6,175

7,942
—

38,918¥ 46,860¥ 4,359
59—

5,965
180,644¥5,306,963—
1,302¥ 5,721¥¥5,965
181,947¥5,312,685

451 ¥
(129)
322 ¥

451
(129)
322

Unrealized
gains

¥

¥
¥

—
—
—

—
—
—

Thousands of U.S. Dollars
Carrying
Unrealized
amountFair value
gains(1) Cash and due from banks�������������������������������� $3,040,048 $3,040,048 $
—(2) Call loans and bills bought�����������������������������
13,684
13,684—(3) Monetary claims bought*1�����������������������������
64,11564,115—(4) Trading account securities —Securities held for trading purposes �������
34,65434,654—(5) Securities:
Held-to-maturity securities����������������������������� 796,747
880,345
83,597Available-for-sale securities���������������������������� 9,235,857 9,235,857—(6) Loans and bills discounted����������������������������� 34,538,292
Allowance for loan losses*1����������������������������� (364,110)
Net������������������������������������������������������������������������ 34,174,182 34,495,705 321,524
Total assets�������������������������������������������������������������������� $47,359,288 $47,764,409 $405,121(1) Deposits������������������������������������������������������������������ $42,199,475 $42,222,428 $ 22,953(2) Negotiable certificates of deposit���������������� 1,642,502 1,643,030
528(3) Payables under securities
lending transactions����������������������������������������
20,587
20,587—(4) Borrowed money������������������������������������������������ 1,935,144 1,944,983
9,839
Total liabilities�������������������������������������������������������������� $45,797,707 $45,831,027 $33,320
Derivative instruments*2 —Hedge accounting is not applied����������������� $
2,647 $
2,647 $—
Hedge accounting is applied�������������������������
(17,506)(17,506)—
Total derivative instruments���������������������������������� $ (14,860) $ (14,860) $
—*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 andliabilities. Derivative instruments are presented as net of assets and liabilities associated with derivative transactions.

40

ASHIKAGA HOLDINGS CO., LTD.

Assets(1) Cash and due from banks
The carrying amounts of due from banks with no maturities
approximate fair values. For due from banks with maturities, the carrying
amounts approximate fair values because they have short maturities 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
deposit and negotiable certificates of deposit are determined bydiscounting the contractual cash flows grouped by the remaining
duration at the rates that would be applied for similar new contracts.

(2) Call loans and bills bought
The carrying amounts of call loans and bills bought and monetaryclaims bought approximate fair values because they have short contract
terms of one year or less.

(2) Negotiable certificates of deposit
Refer to (1) Deposits.

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

(3) Payables under securities lending transactions
The carrying amounts of payables under securities lending transactions
approximate fair values 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.
(5) Securities
The fair values of marketable equity securities are measured at thequoted market price of the stock exchange for equity instruments. Fairvalues of bonds are measured at the market price or the quoted priceobtained from financial institutions. Fair values of investment trusts aremeasured at the quoted price.
The fair values of private placement bonds are determined bydiscounting future cash flows at the rate that consists of the risk-freerate 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 notchanged significantly after lending because the market rates arepromptly 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 maturity less than one year approximate fair value
because of their short maturities.
For loans to obligors “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 disposal of collateral or execution of guarantees. The
carrying value net of the reserve as of the consolidated balance sheet
date is a reasonable estimate of the fair values of those loans.
The carrying amounts of loans and bills discounted that do nothave fixed maturities due to loan characteristics, such as limited loan
amounts within the value of pledged assets, approximate fair value dueto their expected repayment periods and interest rate conditions.

(4) Borrowed Money
The fair value of borrowed money with fixed interest rates is determinedby discounting the principal and interest amount grouped by theremaining duration at the rate that would be applied for similar new
contracts. The carrying amount of borrowed money with maturity ofless 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 bondderivatives (bond futures). The fair values of derivative instruments aremeasured 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

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

Millions of Yen
2015
2014

Thousands of
U.S. Dollars
2015¥1,482424¥1,907$12,625
6,683$19,307¥1,517803¥2,320*1. Equity securities without readily available market price are out of the scope ofthe fair value disclosure because their fair values cannot be reliably determined.
*2. Investments in partnerships, the assets of 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, 2015 and 2014, impairment losses on equity
securities without readily available market price of ¥43 million ($359 thousand)and ¥0 million, respectively, were recognized.

Annual Report 201541

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

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*1������������������������������������������
Total�������������������������������������������������������������������������������������������

March 31, 2014

Due in 1 Yearor Less

Due after 1 Yearthrough 3 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
—
—

¥

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

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�������������������������������������������������������������������������������������������

¥ 285,430
1,520
8,180
194,735
2,000
—
1,000
1,000

¥

192,735
40,70061,847
84,187
6,000
906,460¥1,396,327

227,956
40,00051,397
95,283
41,275786,311¥1,035,267

March 31, 2015

Due in 1 Yearor Less

Due after 1 Yearthrough 3 Years

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�������������������������������������������������������������������������������������������

Millions of Yen
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years———
58,29316,00016,000——Millions of Yen
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years———
248,956
21,000—7,000
14,000¥———148,871
2,000
—
2,000
—

¥

146,870
30,00039,96335,49741,408
512,815¥661,685

55,611
25,00029,653957—
329,066¥407,677

Due after 7 Years
through 10 Years¥¥

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———
78,611
23,00023,000——Thousands of U.S. Dollars
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years$ 2,567,662
13,68464,306
1,249,568
58,251—
58,251—$———
1,849,246
133,145—
16,643
116,502$———
1,054,900
58,251
58,251
—
—

$

—
—
—
485,093
133,145
133,145——

1,191,318
83,215282,298
528,682
297,122
7,995,776$11,890,997

1,716,102
499,293421,735
513,678
281,396
6,281,527$8,130,773

996,649
166,431
193,128
196,267
440,823
4,360,420$5,415,319

351,948
208,039
126,5963,314
14,0003,057,286$3,542,378

Due after 10 Years———
255,040
—
—
—
—

¥

—
—
—
158,756
50,00050,000—————224,365————¥

224,365
145,000
69,073—
10,292385,609¥609,974

111,545
70,000—41,545—
874,617¥1,036,162

Due after 7 Years
through 10 Years

Due after 10 Years

$

—
—
—
161,545
50,00050,000—————2,122,334
—
—
—
—

$

—
—
—
1,321,098
416,077
416,077——

2,122,334
707,331
935,143
239,860
240,000
3,451,602$5,573,936

905,021499,293—405,728—
8,069,427$9,390,525*1. As of March 31, 2015, loans and bills discounted with no contractual maturities amounting to ¥99,512 million ($828,094 thousand) and loans and bills discounted whosecash flow cannot be estimated, such as “legal bankruptcy,” “virtual bankruptcy,” and “possible bankruptcy” loans, amounting to ¥69,716 million ($580,150 thousand) are notincluded.
*2. As of March 31, 2014, loans and bills discounted with no contractual maturities amounting to ¥103,313 million and loans and bills discounted whose cash flow cannot be
estimated, such as “legal bankruptcy,” “virtual bankruptcy,” and “possible bankruptcy” loans, amounting to ¥70,899 million are not included.

42

ASHIKAGA HOLDINGS CO., LTD.

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

March 31, 2015

Due in 1 Yearor Less

Due after 1 Yearthrough 3 Years

Deposits* ��������������������������������������������������������������������������������
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, 2014

Due in 1 Yearor Less

Due after 1 Yearthrough 3 Years

Deposits*1��������������������������������������������������������������������������������
Negotiable certificates of deposit��������������������������������
Borrowed money*3�������������������������������������������������������������
Total�������������������������������������������������������������������������������������������

¥4,474,995
171,040
41,144¥4,687,180¥390,309—
59,500¥449,809

March 31, 2015

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�������������������������������������������������������������������������������� $38,466,513
Negotiable certificates of deposit��������������������������������
1,642,502
Borrowed money*2�������������������������������������������������������������
94,418
Total������������������������������������������������������������������������������������������� $40,203,433$3,041,458—
506,782$3,548,240$ 672,239—
1,001,082$1,673,321

1¥ 80,783—
120,300¥201,083

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

Millions of Yen
Due after 3 Years
Due after 5 Years
through 5 Years
through 7 Years¥ 74,944—
40,000¥114,944

Due after10 Years¥1,192——¥1,192

Due after 7 Years
through 10 Years¥ 1,519—30,000¥31,519¥———¥—

Due after10 Years¥1,370——¥1,370Due after 7 Years
through 10 Years$ 9,345—249,646$258,991

¥—
—
—
¥—

Due after10 Years$9,919——$9,919

$———$—*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 ($83,215 thousand) is not included.
*3. As of March 31, 2014, perpetual subordinated borrowings with no contractual maturities amounting to ¥10,000 million is not included.

21. DERIVATIVES
Derivative Transactions to Which Hedge Accounting Is Not Applied at March 31, 2015 and 2014
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.
Consolidated banking subsidiary had the following derivative contracts, which were quoted on listed exchanges, outstanding as of March 31, 2015
and 2014, as follows:

March 31, 2015

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

¥3,388March 31, 2014

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

¥3,908Millions of Yen
Contract amountdue after
Fair
one year
value

¥—

¥1

Millions of Yen
Contract amountdue after
Fair
one year
value

¥—

¥3

Unrealized
gains/losses

Contract
amount¥1$28,193

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

$—

$16

Unrealized
gains/losses$16

Unrealized
gains/losses¥3

Notes: 1. The transactions above are stated at fair value and the related valuation gains (losses) is 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 2014).

Annual Report 201543

Consolidated banking subsidiary had the following derivative contracts, which were not quoted on listed exchanges, outstanding as of March 31, 2015
and 2014, as follows:

March 31, 2015

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

March 31, 2014

Interest rate contracts:
Interest rate swaps:
Receive fixed and pay floating�������
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

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

Unrealized
gains/losses¥220,058¥186,012

¥390

¥390

$1,831,227$1,547,907$3,250$3,250

2,574

—

(46)

(46)

21,427

—

(385)

(385)

11,425
—

—
—

(28)
¥316

(28)
¥316

95,081
—

—
—

(234)
$2,630(234)$2,630Contract
amountMillions of Yen
Contract amountdue after
Fair
one yearvalue

Unrealized
gains/losses¥    200¥    200

¥  0

¥  0

248,624

168,917

448

448

2,304

—

(3)

(3)

800
—

—
—

2
¥447

2
¥447

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

Derivative Transactions to Which Hedge Accounting Is Applied at March 31, 2015 and 2014
With respect to derivatives to which hedge accounting is applied, contract amount or notional principal and fair value at the fiscal year end date bytransaction type and hedge accounting method and valuation method of fair value are as follows: Note that contract amounts do not represent themarket risk exposure associated with derivatives.
Consolidated banking subsidiary had the following derivative contracts, which were not quoted on listed exchanges, outstanding as of March 31, 2015
and 2014, as follows:

March 31, 2015

Hedged Item

Contract
amountMillions of Yen
Contract amountdue after
one yearThousands of U.S. Dollars
Contract amountdue after
Fair
Contract
one yearvalue
amountFair
value¥50,000¥50,000¥ (977)$416,077$416,077$ (8,131)

2,403

—

(23)

20,000—(192)

81,670—(1,103)

679,627—

Interest rate contracts:
Interest rate swaps:
Receive floating and pay fixed�������Bonds (available-for-sale securities)
Foreign exchange:
Currency swaps������������������������������������������Loans, deposits, due from banks,etc., which are denominatedForward exchange contracts���������������� in foreign currencies(1,126)

Total

March 31, 2014

Hedged Item

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

Contract
amountMillions of Yen
Contract amountdue after
one year¥ 50,000¥ 50,000

10,292—

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

44

ASHIKAGA HOLDINGS CO., LTD.

Fair
value

¥

(56)

(73)

(9,184)(9,376)

22. OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income (loss) for the years
ended March 31, 2015 and 2014, 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
2015
2014

Thousands of
U.S. Dollars
2015¥ 34,056¥10,086$283,405

355(11,967)

2,956

34,411(9,938)¥ 24,473(1,880)156¥ (1,724)

286,361(82,701)$203,660¥ (1,446)¥(79)$ (12,033)

537

236

4,470

(908)
289
¥ (619)

¥

157
(55)
101

(7,563)2,412$ (5,152)¥ 3,672¥—$ 30,560

873

—

7,271

4,546
(1,513)¥ 3,032¥———

37,831(12,594)$ 25,237¥ 26,887¥ (1,622)$223,746

Other segment related information:1) Information by services

March 31, 2015

Millions of Yen
Lending Investment
operations operations
Other

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

March 31, 2014

¥25,560

Millions of Yen
Lending Investment
operations operations
Other

Ordinary income
from external customers������������� ¥57,751

March 31, 2015

¥14,152¥25,228¥25,089

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

Ordinary income
from external customers������������� $474,417$117,770$212,700

Total¥96,723

Total¥108,069

Total$804,886

2) Information by geographic region
Since the ordinary income and total tangible fixed assets attributable tothe “Japan” segment account for more than 90% of the total of all geographic segments, geographical segment information has not beenpresented.
3) Information by major customers
Since there has been no specific customer to which the Group sells
more than 10% of total ordinary income on the consolidated statementof 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.

23. SEGMENT INFORMATION
For the years ended March 31, 2015 and 2014
Under the ASBJ revised ASBJ Statement No. 17, “Accounting Standard
for Segment Information Disclosures” and issued ASBJ Guidance No. 20,“Guidance on Accounting Standard for Segment Information Disclosures.” Under the standard and guidance, an entity is required to reportfinancial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments arecomponents of an entity about which separate financial information isavailable 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 is required to bereported 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 immateriality of businesses other than banking.

5) Information on amortization and unamortized balance of goodwill byreportable segment
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.

24. RELATED PARTY TRANSACTIONS
Related party transactions for the years ended March 31, 2015 and 2014,
were as follows:(1) Transactions between the Company and its related parties
a. The parent and major share holders
There was no applicable transaction to be reported for the years ended
March 31, 2015 and 2014.
b. Unconsolidated subsidiaries and affiliates
There was no applicable transaction to be reported for the years ended
March 31, 2015 and 2014.
c. Companies that are owned by the same parent company with theCompany and other affiliates’ subsidiaries
There was no applicable transaction to be reported for the years ended
March 31, 2015 and 2014.
d. Directors or major individual shareholders
There was no applicable transaction to be reported for the years ended
March 31, 2015 and 2014.
Annual Report 201545

(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, 2015 and 2014.
b. Unconsolidated subsidiaries and affiliates
There was no applicable transaction to be reported for the years ended March 31, 2015 and 2014.
c. Companies that are owned by the same parent company with the Company and other affiliates’ subsidiaries
There was no applicable transaction to be reported for the years ended March 31, 2015 and 2014.
d. Directors or major individual shareholders
Year ended March 31, 2015
Type

Name

Companies in which a
ITATSU CO.,majority of voting rights is LTD.*2*3
owned by a director or its Ryomo Seikeihinclose relatives
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.
2. The interest rate on loans is reasonably determined considering the market rate.
3. A majority of the voting rights is owned by a close relative of Mr. Toshio Itabashi, an outside director of the Company.
4. A majority of the voting rights is owned by ITATSU Co., LTD.
5. Transaction amounts do not include consumption taxes.

Year ended March 31, 2014
Type

Name

Companies in which a
ITATSU CO.,majority of voting rights is LTD. *2*3
owned by a director or its Ryomo Seikeihinclose relatives
Toso Co.,Ltd *2*4

Transaction
amountTransactions (Millions of Yen)*1

Location

Capital(Millions of Yen)

Business

Ownerships

RelationshipTochigi¥30

Wholesale

None

Loans

Loan

¥582

Gunma

20

Manufacturing

None

Loans

Loan

22

Account

Loans and bills
discounted
Loans and bills
discounted

Outstandingbalance(Millions of Yen)

¥659
20

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

Year ended March 31, 2015

Type

Name

Companies in which a
ITATSU CO.,majority of voting rights is LTD.*2*3
owned by a director or its Ryomo Seikeihinclose relatives
Toso Co.,Ltd. *2*4

Transaction
amount(Thousands ofTransactions U.S. Dollars)*1

Location

Capital(Thousands of
U.S. Dollars)

Business

Ownerships

RelationshipTochigi$250

Wholesale

None

Loans

Loan

$4,567

Gunma

166

Manufacturing

None

Loans

Loan

140

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

25. SUBSEQUENT EVENTS
Not applicable.

46

ASHIKAGA HOLDINGS CO., LTD.

Account

Loans and bills
discounted
Loans and bills
discounted

Outstandingbalance(Thousands of
U.S. Dollars)$4,184117

Annual Report 201547

Non-Consolidated Financial Statements

Non-Consolidated Balance Sheet
March 31, 2015 (unaudited)

The Ashikaga Bank, Ltd.

Millions of Yen
2015
2014

ASSETS:Cash and due from banks������������������������������������������������������������������������������������������������������������������� ¥ 365,317
1,644
Call loans and bills bought�����������������������������������������������������������������������������������������������������������������
Monetary claims bought���������������������������������������������������������������������������������������������������������������������
7,727
Trading account securities�����������������������������������������������������������������������������������������������������������������
4,164
Securities������������������������������������������������������������������������������������������������������������������������������������������������������� 1,236,859
Loans and bills discounted���������������������������������������������������������������������������������������������������������������� 4,189,420
Foreign exchange������������������������������������������������������������������������������������������������������������������������������������
5,837
Tangible fixed assets������������������������������������������������������������������������������������������������������������������������������
25,397
Intangible fixed assets���������������������������������������������������������������������������������������������������������������������������
3,555
Prepaid pension cost�����������������������������������������������������������������������������������������������������������������������������
10,899Deferred tax assets����������������������������������������������������������������������������������������������������������������������������������
—Customers’ liabilities for acceptances and guarantees����������������������������������������������������
16,566
Other assets�������������������������������������������������������������������������������������������������������������������������������������������������
18,946
Allowance for loan losses��������������������������������������������������������������������������������������������������������������������
(39,009)
Total����������������������������������������������������������������������������������������������������������������������������������������������������������� ¥5,847,327¥ 344,367
1,520
8,180
4,266
1,205,418
4,007,311
5,969
24,536
4,739
2,955
2,219
15,333
15,142(40,715)¥5,601,246$ 3,040,003
13,68464,30634,654
10,292,578
34,862,452
48,577211,349
29,58790,705—
137,858
157,662(324,617)$48,658,797

LIABILITIES AND EQUITY
LIABILITIES:
Deposits��������������������������������������������������������������������������������������������������������������������������������������������������������� ¥5,085,385
Negotiable certificates of deposit��������������������������������������������������������������������������������������������������
252,379—
Call money and bills sold��������������������������������������������������������������������������������������������������������������������
Payables under securities lending transactions��������������������������������������������������������������������
2,473
Borrowed money�������������������������������������������������������������������������������������������������������������������������������������
152,546
Foreign exchanges����������������������������������������������������������������������������������������������������������������������������������
365
Other liabilities�������������������������������������������������������������������������������������������������������������������������������������������
33,212
24
Provision for directors’ bonuses������������������������������������������������������������������������������������������������������
Liability for retirement benefits�������������������������������������������������������������������������������������������������������
—Provision for directors’ retirement benefits�����������������������������������������������������������������������������
116
Provision for reimbursement of deposits���������������������������������������������������������������������������������
803
Provision for contingent losses�������������������������������������������������������������������������������������������������������
495
Provision for point card certificates����������������������������������������������������������������������������������������������
74
Deffered tax liabilities����������������������������������������������������������������������������������������������������������������������������
10,129Acceptances and guarantees�����������������������������������������������������������������������������������������������������������
16,566
Total liabilities�������������������������������������������������������������������������������������������������������������������������������������� ¥5,554,571¥4,957,892
226,040
6,175
5,965
100,644763
26,812
21
812
86
1,606
424
51
—
15,333¥5,342,632$42,318,259
2,100,187—
20,587
1,269,420
3,042
276,380
201
—
965
6,682
4,126
621
84,289137,858$46,222,618¥ 135,000$ 1,123,409

12,332
88,404
235,737

127,169
793,479
2,044,057

22,907(30)
22,876258,614¥5,601,246

397,532(5,410)392,1222,436,179$48,658,797

EQUITY:
Common stock������������������������������������������������������������������������������������������������������������������������������������������ ¥ 135,000
Retained earnings:
Legal retained earnings����������������������������������������������������������������������������������������������������������������
15,281Other retained earnings����������������������������������������������������������������������������������������������������������������
95,352
Total shareholders’ equity����������������������������������������������������������������������������������������������������
245,634
Valuation adjustments:
Unrealized gains on available-for-sale securities����������������������������������������������������������
47,771
Deferred losses on hedges���������������������������������������������������������������������������������������������������������
(650)
Total valuation adjustments�����������������������������������������������������������������������������������������������
47,121
Total equity����������������������������������������������������������������������������������������������������������������������������
292,755
TOTAL��������������������������������������������������������������������������������������������������������������������������������������������������������������������� ¥5,847,327

48

Thousands of
U.S. Dollars
2015

ASHIKAGA HOLDINGS CO., LTD.

Non-Consolidated Statement of Income
Year Ended March 31, 2015 (unaudited)

The Ashikaga Bank, Ltd.

Millions of Yen
2015
2014

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
2015¥55,008
12,430331
275
115
20,716952
2,084
92,633¥ 55,574
10,630204
187
10520,1893,114
14,988104,995$457,752
103,439
2,755
2,295
962
172,390
7,927
23,335
770,855

2,312
220
77
69
104
291
6,155
0
48,962
1,742
2,939
62,87529,757

2,493
169
19
62
80
19
5,840
1,331
49,931
6,749
3,295
69,99335,002

19,244
1,833
644
578
872
2,423
51,221
2
407,447
14,49924,460523,225
247,631

10,192(224)
9,968¥19,789

2,158
663
2,821
¥ 32,180

84,820(1,867)
82,953$164,677

Annual Report 201549

Non-Consolidated Statement of Changes in Equity
Year Ended March 31, 2015 (unaudited)

The Ashikaga Bank, Ltd.

Commonstock

BALANCE, APRIL 1, 2013���������������������������������������������������������������������������� ¥135,000—
Net income���������������������������������������������������������������������������������������������������Cash dividends��������������������������������������������������������������������������������������������
—Net changes except for shareholders’ equity
during the year����������������������������������������������������������������������������������������
——Net change in the year��������������������������������������������������������������������������
BALANCE, MARCH 31, 2014��������������������������������������������������������������������� 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, MARCH 31, 2015��������������������������������������������������������������������� ¥135,000

Commonstock

BALANCE, MARCH 31, 2014��������������������������������������������������������������������� $1,123,409
Cumulative effect of accounting change����������������������������������
—BALANCE, APRIL 1, 2014 (as restated)���������������������������������������������� 1,123,409
Net income���������������������������������������������������������������������������������������������������—Cash dividends ������������������������������������������������������������������������������������������
—Net changes except for shareholders’ equity
during the year����������������������������������������������������������������������������������������
—Net change in the year��������������������������������������������������������������������������
—BALANCE, MARCH 31, 2015��������������������������������������������������������������������� $1,123,409

50

ASHIKAGA HOLDINGS CO., LTD.

Millions of Yen
Retained earnings
Unrealized
Legal
Other
gains onretainedretained
available-forearnings
earnings
sale securities

Deferred
losseson hedges

Total
equity¥ 9,383—
2,949¥73,919
32,180(17,694)¥25,522——¥(132)——¥243,693
32,180(14,745)—
2,949
12,332—
12,332—
2,949—
14,48588,404
4,853
93,257
19,789(17,694)(2,615)(2,615)22,907—22,907
—
—

101
101
(30)
—
(30)
—
—

(2,513)
14,921¥258,614
4,853
263,467
19,789(14,745)—
2,949¥15,281—
2,094¥95,352

24,86324,863¥47,771

Thousands of U.S. Dollars
Retained earnings
Unrealized
Legal
Other
gains onretainedretained
available-forearnings
earnings
sale securities(619)(24,244)(619)
29,288¥(650) ¥292,755

Deferred
losseson hedges

Total
equity$ 102,628—
102,628—
24,541$735,663
40,387776,050
164,677(147,249)$190,628—
190,628——$(258) $2,152,070—
40,387(258) 2,192,457—
164,677—(122,707)—
24,541$127,169—
17,429$793,479

206,904
206,904$397,532(5,152)(201,752)(5,152)
243,723$(5,410) $2,436,179

Corporate Data
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:

The Ashikaga Bank, Ltd.
Masanao Matsushita,
President and Chief Executive Officer
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: 2,935 (as of March 31, 2015)
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, 2015)
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
Executive Officers

Nominating Committee
Audit Committee
Office of Audit Committee
Compensation Committee

Business Promotion Division
Consulting Business OfficeBusiness Planning Division
Retail Business Office

Operation Planning Division
Operation Support Division
IT Planning and Administration Division
Management Planning Division

Solution Business DivisionTokyo Liaison Office

Personal Loan 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

18 Divisions and 6 Offices (As of April 1, 2015)
Annual Report 2015

51

List of Directors and Executive Officers (as of June 25, 2015)
Ashikaga Holdings Co., Ltd.
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

Director

Masataka Komata

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

Outside Director

Shinjiro Takagi *1,*2

Outside Director

Yoshio Kohra *3

Outside Director

Mitsuhiro Kitamura *2,*3

Outside Director

Shoji Fukui *1,*2

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

Hideo Saito

The Ashikaga Bank, Ltd.
Directors

Executive Officers

Director

Masanao Matsushita *1,*2

President and Chief Executive Officer

Masanao Matsushita

Director

Kunihiro Ono

Senior Executive Officer

Kiyoshi Kato

Director

Masataka Komata *3

Senior Executive Officer

Yutaka Horie

Outside Director

Shinjiro Takagi *1,*2

Managing Executive Officer

Hiroshi Mori

Outside Director

Yoshio Kohra *3

Managing Executive Officer

Kazuyuki Shimizu

Outside Director

Mitsuhiro Kitamura *2,*3

Executive Officer

Mitsuo Sugiyama

Outside Director

Shoji Fukui *1,*2

Executive Officer(Chief Officer of Ken’ou and Nikko Area Hub)

Zenichi Komaba

Executive Officer

Hideo Saito

Executive Officer

Takashi Satake

Executive Officer

Keizo Shinozaki

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

Stock Information (as of March 31, 2015)
Number of shares:

333,250 thousands (issued)

Number of shareholders: 9,286
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
15,000Japan Trustee Services Bank, Ltd. (Trust Account)
10,723
JAFCO Super V-3 Investment Limited Partnership
10,000
Northern Trust Co. (AVFC) Re 15PCT Treaty Account
9,844
JP Morgan Chase Bank 385632
6,861
The Master Trust Bank of Japan ,Ltd.(Trust Account)
6,713
Nippon Life Insurance Company
5,000
Note: % shareholdings are expressed to second decimal places

52

ASHIKAGA HOLDINGS CO., LTD.

Shareholding%(thou. shares) shareholding

36.87
12.00
5.70
4.50
3.21
3.00
2.95
2.05
2.01
1.50

ASHIKAGA HOLDINGS CO., LTD.

Annual Report 2015

Year Ended March 31, 2015

Printed in Japan