2014（April 2013〜March 2014）
Annual Report

Mizuho Financial Group

Trust & Custody Services Bank, Ltd.

1TCSB's Challenge: To Become Japan's Leading Player in the Area of Asset Administration
Services

Our Corporate Logo

Trust & Custody Services Bank, Ltd.

Our corporate logo is modeled after a large door.
This door has two meanings.

First, it signifies the trust between our customers and us.
It is a "door of security," tightly closed against everyone except our customers.
However, it does not remain permanently closed.
It is also a "door of trust" that opens immediately in response to our customers' needs.
Second, it signifies a threshold leading towards our customers' futures.
We at TCSB stand ready to act as a reliable partner in helping our customers realize a brighter, more
prosperous future.
The orange we use as our corporate color signifies both "progressiveness" and "warmth."
As a trust bank specializing in asset administration, we aim to build a sophisticated IT framework foradvanced systems support and a solid service base to provide a warmhearted response to ourcustomers' needs.
We sincerely hope that this Annual Report will serve to open the door to ever more successful
partnerships between our customers and us.

This document is a partial translation of TCSB’s Japanese Disclosure Report that has been preparedin accordance with the provisions of Article 21 of the Banking Law of Japan.

Note: This translation is provided for reference purposes only, and the Japaneseoriginal supercedes it in case of any discrepancy.

2

■Profile (as of June 30, 2014)
Established:

January 22, 2001

Address:

Tower Z, Harumi Triton Square, Harumi 1-8-12, Chuo-ku, Tokyo 104-6228

TEL+81-3-6220-4000

Capital:¥50,000,000,000

Shareholders:Mizuho Financial Group, Inc.
(equity position in %) The Dai-ichi Life Insurance Company, Limited
Asahi Mutual Life Insurance Company
Meiji Yasuda Life Insurance Company
Fukoku Mutual Life Insurance Company

540,000 shares (54%)
230,000 shares (23%)
100,000 shares (10%)
90,000 shares (9%)
40,000 shares (4%)

Employees:
597 (as of March 31, 2014)* Number of employees includes persons on secondment from outside organizations. It does notinclude executive officers and temporary employees.
URL:

http://www.tcsb.co.jp/■Credit Ratings (as of June 30, 2014)
Long-term

Short-term

Other

S&P

A+

A-1

-

Moody's

A1

Prime-1

C*

R&I

A+

a-1

-

* Bank financial strength rating

3

Contents

Message from Management

page 5

TCSB’s Challenge: To Become Japan’s Leading Player in the Area of
Asset Administration Services

page 6● TCSB's Management Strategy● TCSB's Commitment● Performance Highlights● Issues That TCSB Must Address
Optimized Solutions to Customers’ Needs

page 15

1.

Asset Administration Services

2.

Pension Services

3.

Various Value-added Services in Asset Administration

Business Foundations to Support Optimized Solutions
1.

Operations and Information Technology Infrastructure

2.

Internal Control Structure

page 32

Corporate Data

page 47

Financial Data

page 49

4

Message from Management

TCSB's Challenge: To Become Japan's Leading Player in the Area of Asset Administration
Services

I would like to start by once again thanking our shareholders and customers for constantly
supporting Trust & Custody Services Bank, Ltd. (TCSB).

Since TCSB's founding in January 2001, we have adhered to the principle of growing our asset
administration services into competitive products, then developing further into a company that provides
comprehensive services associated with asset administration. Using this as a base, we haveconsistently worked on developing new, forward-looking services, reinforced our operational and IT
infrastructure, and reformed our internal control structure as part of our efforts to become Japan's
leading player in the area of asset administration services.
With our customers' support and understanding of our initiatives, we succeeded in further expanding
the size of our business in fiscal 2013, when assets under custody and administration grew toapproximately ¥370 trillion. We will continue to take on challenges with the aim of becoming “the Most
Trusted Partner that Continues to be Chosen by Customers”.

The area of asset administration services has witnessed not only progress in a succession of
securities settlement system reforms, but also an acceleration in developments such as adiversification of investment choices, regions and styles. Customer needs have consequently becomethat much more diverse and sophisticated.

While keeping an eye on these needs, we shall focus thoroughly on improving quality and makeuntiring efforts to improve. At the same time we shall continue with our proactive efforts tostrategically channel management resources into reinforcing our operational, IT and human resource
infrastructure with a view to offering customers higher quality and higher value-added services. We
are a full-range custodian bank offering a wide array of products, ranging from trust services tovarious kinds of custody services, the most advanced securities management models(comprehensive outsourcing models that extend to accounting operations) as well as value added
services (lending services and foreign exchange services, etc.). As such, TCSB will further
strengthen its capabilities and customer relationships as a means of responding more proactively tocustomers' needs through a new group operational structure which unifies banking, trust banking andsecurities businesses with Mizuho Bank, Ltd., Mizuho Trust & Banking Co., Ltd. and other groupcompanies.

In the years ahead, we will continue to listen carefully to our customers, thoroughly promote
improvement of our own ability to provide solutions and service quality, strive to reinforce our internal
control structrure and stabilize our profit foundation in order to be regarded as an asset administration
partner that customers can really trust.
We look forward to your continuing support and patronage in these endeavors.

Akira Moriwaki, President & CEO

5

TCSB's Challenge: To Become Japan's Leading Player in the Area of Asset Administration Services

TCSB’s Management Strategy
Aspiration
Based on the philosophy of growing ourasset administration services into
competitive products, then developing
further into a company that provides
comprehensive services associated withasset administration, we aspire to becomea full-line custody bank that can respondquickly and precisely to all customers'
needs.

A
A FullFull Line
Line ofof Custody
Custody Services
Services

Trust Services

Foreign
Exchange

Domestic Custody
Services

We offercustomers
optimized
solutions

Securities
Lending

Master Trust
Services(Record-keeping
Services)

6

Overseas
CustodyServices

Outsorcing Models
Outsourcing
Modelsfor Comprehensive
Securities
Management

Basic Vision1

We will aim to become Japan's largest and mostsophisticated trust bank specializing in asset
administration services, with an unimpeachable
reputation for adherence to best practices.

2

We will offer considerable benefits to our clients thanks
to the economies of scale backed by the assets
entrusted to us.

3

We will build a rigorous, effective and highlysophisticated back-office system based on global
standards.

4

We will seek to obtain an accurate grasp of customers'
needs so that we can offer them optimized solutions.

Code of Conduct (Excerpt)
Basic Policies
1. Social Responsibilities and Public Mission
As Japan’s leading and open-minded trust bank specializing in asset
administration, we are constantly aware of the gravity of our social
responsibilities and public mission, and devote our efforts to soundmanagement based on self-responsibility.
Through close communications with society, we work hard at ensuring that our
corporate behavior is in harmony with social common sense.

2. Customer-oriented Practices
We provide the highest- level of services at all times in line with ourcustomer-first approach.
We believe that winning our customers' trust lays the foundations for earning
the trust of our shareholders, local communities and all other stakeholders.

3. Adherence to Laws and Regulations
We strictly observe all laws, ordinances and regulations as we pursue
corporate activities in a fair and honest manner that conforms to the norms
accepted by society.
We comply with international rules and local laws, as well as respect local
customs and cultures.

4. Respect for Human Rights
We respect the dignity and fundamental human rights of all people in all our
activities, including our customers, executives and staff, and are working tobuild a corporate culture that is imbued with the spirit of respect for humanrights.

5. Opposition to Antisocial Forces
We are resolutely opposed to antisocial forces that threaten the order andsafety of civil society.

7

TCSB’s Commitment

TCSB has earned high praise from rating agencies because of
its healthy financial fundamentals, specifically its:
● Advanced Operations and IT Infrastructure● Rigorous Internal Control Structure● Customer oriented Philosophy
Based on these, we can:
● Provide Customers with the Best Possible Solutions

Best Possible Solutions

Customer

Advanced Operations
and IT Infrastructure

Rigorous Internal
Control StructureHigh Ratings

8

Customer-oriented
Philosophy

Milestones■January 2001
Trust & Custody Services Bank, Ltd. (TCSB) established.
■February 2001
Commences record-keeping services.
Receives mandate to administer assets of the investing life insurance companies.
■May 2001
Acquires long term and short term credit ratings from Moody's Investors Service.
■December 2001
Under a Saishintaku (re-entrustment) agreement, accepts assets entrusted to Mizuho Trust &Banking.
Acquires debtor rating from R&I.
■January-March 2002
Accepts stocks held by Dai-Ichi Kangyo Bank, Ltd., Fuji Bank, Ltd. and The Industrial Bank of Japan,
Limited.
■March-April 2002
Entrusted with the resident-oriented custody operations of the banks currently known as Mizuho
Bank and Mizuho Corporate Bank.
■May 2002
Head Office moved to Harumi Island Triton Square.
■August 2002
Perfects a common basic system for new settlement procedures.
■January 2003
Commences outsourcing services for comprehensive asset administration.
■March 2003
Offsite Backup Center goes on-line.
■May 2004
Acquires debtor rating from Standard & Poor's.
■September 2005
Commences Performance Monitoring Service (PMS).
Commences “TCSB Custody-net”.
■November 2008
Outstanding assets under custody and administration grew to more than ¥300 trillion.
■January 2009
Commences response to respond to the Electric Share Certificate System.
■September 2009
Implements the Advanced Measurement Approach for the calculation of operational risk equivalent
in association with capital adequacy ratios based on Basel II.
■June 2013
Commences entrusted administration services for middle- and back-office operations of asset
management companies.

9■Advanced Operations and IT Infrastructure
More than ever before, advanced asset management systems and sophisticated information
technology (IT) are essential for asset administration operations that can process large volumes ofhigh-level, globalized securities transactions quickly and accurately.
We have adopted various initiatives designed to enhance operational quality while further reinforcing
our human resources with the view of providing customers with optimal asset administration services
at all times.
In order to provide customers with the best possible solutions to their needs while accommodating
securities settlement system reforms, we are taking full advantage of the economies of scale offeredby outstanding assets under custody and administration of more than ¥370 trillion and working
proactively to strengthen our IT infrastructure further.
Looking ahead, we will continue to offer next-generation financial services based on our advanced
operations and IT infrastructure.
■Rigorous Internal Control Structure
We constantly recognize the gravity of our social responsibilities and public mission as Japan's leading
trust bank specializing in asset administration. To this end, we strictly observe all laws, ordinances andregulations as we pursue corporate activities in a fair and honest manner that conforms to the norms
accepted by society. We view thoroughgoing compliance as a fundamental management principle andare working to build a rigorous compliance structure.
As a company that provides customers with asset administration services, TCSB believes it isextremely important to protect and use information assets properly. TCSB is working to strengthen its
information management structure through measures to protect information security and personal
information.
Financial institutions face a variety of risks as deregulation and globalization advance, and financial
operations rapidly become more diverse and complex. TCSB is proactively strengthening its risk
management systems in order to respond even better to the trust placed in it by customers by
ensuring healthier, more stable management.
As befits a custody bank of our standing, we have also built a rigorous audit structure. Morespecifically, our Internal Audit Department monitors the appropriateness and effectiveness of business
operations from the perspective of compliance and risk management independently of operational
reporting lines. At the same time, we have introduced audits utilizing external auditing organizations to
put our business operations on a sounder, more appropriate footing.
We have also adopted a proactive approach to internal controls pertaining to financial reporting as
mandated by the Sarbanes-Oxley Act and other measures.
■Customer-oriented Philosophy
Based on our customer-oriented practices, we are working proactively to raise CS (Customer
Satisfaction) levels.
Putting ourselves in the customer's place when identifying customer needs, we are working to
improve our services through more rapid responses, professional services and the challenge ofdeveloping new services.
As TCSB marked its 10th anniversary in January 2011, TCSB’s fiscal 2011 is the first year of its next
decade (Next Ten!). Taking this opportunity, TCSB formulated the TCSB “Next Ten!” Core Value asconcrete guidelines to realize its Customer-oriented Philosophy and is currently committed to its
practice companywide.

10

TCSB “Next Ten!” Core Value“TCSB for the Customer”
Team Play: We will respect and trust each other, and work together to achieve our common goal.
Change & Challenge: We will think outside the box and act proactively, and address the challenges ofinnovation.
Satisfaction: We will take pride in our own jobs, and endeavor to create vigorous, enthusiastic andrewarding workplace.
Be Professional: We will enhance our expertise and skills as professionals of asset administration
services.

■High Ratings from Ratings Agencies
As a trust bank specializing in asset administration, TCSB has been awarded high ratings for its
healthy financial fundamentals and strong customer base by Standard & Poor’s (S&P), Moody's
Investors Service (Moody's) and Japan Rating and Investment Information, Inc. (R&I).
Looking ahead, we intend to maintain our sound financial health, provide high quality advanced
services and reinforce customer trust.
(Jun. 30th 2013)

Long-term

Short-term

Other

S&P

A+

A-1

-

Moody's

A1

Prime-1

C*

R&I

A+

a-1

-

* Bank financial strength rating

11Performance Highlights

At the end of March 2014, assets under custody and administration increased by ¥12 trillion
year-on-year to ¥370 trillion.
Assets Under
Management¥ 370 trillion(¥ trillions)
400
350

¥ 332
trillion¥ 338
trillion¥ 339
trillion

Mar.
2010

Mar.
2011

Mar.
2012

¥ 358
trillion

300
250
200
150
100
50
0

Mar.
2013

Mar.
2014

■Trends in Assets under custody and administration
At the end of the fiscal year under review, assets under custody and administration ― based on
entrusted trust assets and assets managed under custody agreements ― increased by ¥12 trillion
year-on-year to more than ¥370 trillion on the back of a rise in new customers concluding asset
administration contracts and the number of existing customers concluding additional contracts.
■Trends in Profits and Losses
In the area of income and expenditures during the fiscal year under review, gross profits fromoperations increased ¥840 million year on year and amounted to ¥20,610 million mainly due toincreases in fees and commissions, and Use and Source of Funds. Efforts to make the administrationof expenditures more efficient while endeavoring to invest in management resources to offer
high-quality, high-value-added services resulted in a ¥237 million-increase in expenditures, excluding
those from temporary measures taken from the last fiscal year to ¥18,674 million. As a result, net
business profits were ¥1,936 million (an increase of ¥602 million year over year).
Net Business Profits(¥ millions)
2,500¥ 1,936
million

2,000

1,500

¥ 1,343
million¥ 1,005
million¥ 1,113
million¥ 1,333
million

1,000

500

0
Mar.
2010

Mar.
2011

Mar.
2012

Mar.
2013

Mar.
2014

Issues That TCSB Must Address
In Asset Administration Services, securities settlement system reforms are progressing and investment
decision making (what to invest in and where to invest) and management styles are increasingly
varied, thereby customer needs are increasingly diverse and sophisticated.
Under these circumstances, with the aim of becoming the Most Trusted Partner that Continues to be

12

Chosen by Customers, we are taking measures such as (a) establishing a competitive advantage inexisting business areas, (b) creating new markets and businesses, (c) pursuing structural reforms toachieve a good balance between cost competitiveness and service quality, and (d) reinforcing themanagement base to support business strategies, while continuing to promote alliances with otherMizuho Financial Group companies.

13

Optimized Solutions to Customers' Needs

Contents

1. Asset Administration Services

page 15

Trust Services
Domestic Custody Services
Overseas Custody Services
Outsourcing Models for Comprehensive Securities Management Services

2. Pension Services

page 23

Asset Administration Services for Defined Contribution Pensions
Master Trust Services (Master Trust Record-keeping Services)

3. Various Value-added Services in Asset Administration
Securities Lending Services
Foreign Exchange Services

14

page 27

Optimized Solutions to Customers' Needs
1. Asset Administration Services

A Custody Bank that Pays Close Attention to Customers' Needs
The emergence of new financial products and progress in securities settlement system reforms arefeeding the need for securities administration outsourcing. Meanwhile, against the backdrop of the
global financial crisis, the role of custodians in securities settlement has been increasing dramatically.
We offer a wide range of products that extends from securities administration under trust andre-entrustment (Saishintaku) agreements to various kinds of custody services as we strive to becomea custody bank that provides meticulous services in response to the respective needs of ourcustomers.

A Full Line of Custody Services
TCSB offers a truly comprehensive line-up of services, ranging from trust services and basic custody
services such as securities settlement, safekeeping, cash settlement and corporate action, to flexible
foreign exchange packages, securities lending, performance analyses, portfolio management andaccounting services to these basic services. We are also working proactively to offer consulting
services to customers that require tailored solutions such as transition management and theoutsourcing of back-office operations.

Outsourcing models forcomprehensive securities
management services
Administration services for middle- andback-office operations of asset
management companies

Value-added
services

Master trust services(Master trust recordkeeping services)
Transition management

Securities lending

Foreign exchange

Corporate action

Cash settlements

Securities settlement and custody
services

Basic
services

Safe custody services

Customers’ needs→Custody Services
Collective name for services whereby customers entrust us with the task of acting on their behalf insecurities-related operations such as deliveries and settlements in connection with securities custodyand trading, or the collection of principal, interest and cash dividends. In addition to custody services
based on blanket proxy rights vis-à-vis issuers, we offer "account management institution services"
based on the book-entry system that emerged as a result of securities settlement system reforms.
→Transition Management

15

The series of transactions and services needed to minimize the total cost of transaction fees, market
impact and other factors when restructuring portfolios or changing investment institutions, using avariety of transaction techniques while maintaining an appropriately balanced portfolio during thetransition period.

16

Proactive Commitment to Institutional Reforms and Focus on Enhancing the Service Level
The shift to the paperless treatment of securities completed in line with the dematerialization of sharecertificates for Japanese equities in January 2009. The securities settlement system reforms in Japan
continue to progress, as seen with the shortening of the settlement period for government bonds
implemented in April 2012. Our custody services have been developed in line with these reforms andhave been highly acclaimed by many financial institutions and institutional investors. As the securities
settlement system reforms require immense implementation costs and materially affect many
administrative practices, TCSB believes it has a mission to timely deliver information to help reducethe clerical burden of customers while maintaining its reputation as an “affordable and easy-to-use”
custody bank. We are committed to further improvement of service content by carefully monitoringmarket trends and continuously taking into account the progress of reforms.
We stand committed to strengthening our services still more, bearing in mind at all times the factthat our mission and our roots lie in taking our fiduciary duties seriously and pursuing our duties
faithfully in order to maximize profits for our beneficiaries.

Progress in securities settlement system reforms
2003

Government
bonds

Short-term
corporate
bonds

2004

2005

2006

2007

2008

2009

2010

2011

2012

z April 2012
Shortening of
the settlement period

z January 2003 New book-entry transfer and settlement system started
z January 2003 The Law Concerning Book-Entry Transfer of Corporate Bonds, etc., implementedz March 2003 Book-entry transfer system startedz November 2006 Collective transfer of already issued bonds started

Non-JGBsz January 2006 Book-entry transfer system started
z January 2008 Registration system abolished(Registration system)

Investment
trust
beneficiaryrightsEquitiesz January 2007 Book-entry transfer system startedz June 2004

The Law Concerning Book-Entry Transfer ofCorporate Bonds, Stocks, etc., enacted

z May 2004

DVP (Delivery Versus Payment) service fornon-exchange transaction deliveries started(Book-entry transfer system in accordance with the Act on Custody and Transfer of Share Certificates, etc.)

17

z January 20092013

New book-entry transfer system started
Conversion to a paperless system

2014

2015

Trust Services

Cooperation with Mizuho Trust & Banking Co., Ltd.
In our capacity as a trust bank specializing in asset administration, we accept, under re-entrustment(Saishintaku) agreements with other trust banks, entrustment of the administration of pension trusts
and other trust assets entrusted to said other trust banks.
Of all the re-entrustment (Saishintaku) agreements, as for those with Mizuho Trust & Banking, we
accepted entrustment of asset administration services in connection with pension trusts, specified
money trusts, pecuniary trusts other than money trusts and investment trusts entrusted to Mizuho
Trust & Banking.
Mizuho Trust & Banking is the primary contact for customers as the trustee for the underlying(original) trust agreement and also offers sophisticated professional expertise in the areas of asset
investment and actuarial and management services. Meanwhile, acting as the trustee for the
Saishintaku, TCSB offers various asset management services and other sophisticated value-added
services such as security lending services that make the most of its high-grade know-how as a trustbank specializing in asset administration.
As of the end of March 2013, assets entrusted to TCSB under Saishintaku agreements amounted toapproximately ¥50 trillion, constituting a very important part of our operations.
Re-entrustment and Direct Entrustment
Re-entrustment

Direct entrustment

Customers

Customers

Trustagreement(Underlying(original)
trust)

Fiduciary
dutiesFiduciary
dutiesTrustagreement

Trust Banks

Fiduciary
dutiesFiduciary
dutiesSaishintaku(re-entrustment)
agreement

Trust & Custody Services Bank, Ltd. (TCSB)

Providing Direct Trust Services
We provide customers with trust services under direct contracts as well as Saishintaku agreements. Asof March 31, 2013 assets entrusted to TCSB under direct contracts amounted to approximately ¥91
trillion.
In the case of trust services based on direct contracts, TCSB and the customer conclude a trust
contract and TCSB engages in administration services including the administration of securities, andcash settlements in accordance with instructions from the customer or the asset managementcompany entrusted by the customer with the decision making for investments.
As the segregation of investment and administration operations moves ahead, we foresee a further
expansion and diversification of customers’ needs in the services of trust banks specializing in asset
administration. We will offer optimal solutions that satisfy the varied needs of customers and asset18

management companies, with Investors Services Department acting as an all-round interface for ourcustomers.

Domestic Custody Services
Enhancement of Custody Services
As a result of a series of securities settlement system reforms, customers’ needs for the outsourcing of
securities administration services are changing to cover a broader cross-section of products.
In view of these environmental conditions, our future-oriented custody service allows our customers
to use various services pertaining to securities management on an integrated system, irrespective ofthe type of security. We have also quickly adapted ourselves to new procedures implemented alongwith the system reforms. In particular, we pay close attention to the trends of system reforms inassociation with government bonds and focus on providing timely services.

“TCSB Custody-net”
Our custody services are provided through the “TCSB Custody-net” system, which connects every
customer with us via the Internet. Customers using the TCSB Custody-net can transmit settlement
instructions to TCSB via the Internet. Transmitted instructions are encrypted and handled electronicallyby TCSB using STP (Straight Through Processing). The balance and trading data are also provided
through the TCSB Custody-net system. These measures reduce operational risk and offering users
greater peace of mind. The TCSB Custody-net has been well received and is now used by more than
100 corporate customers. In particular, it is one of the core products strongly supported byapproximately 70% of the regional and second-tier regional banks.
TCSB provides its customers with necessary information through the TCSB Custody-net systemafter analyzing in detail the information provided by Japan Securities Depository Center, Inc., the Bankof Japan and other organizations with regard to securities settlement system reforms. In addition,
analyzing inquiries from customers, TCSB prepares FAQs to enhance the convenience of customers
who use the TCSB Custody-net system. To contribute to increasing the know-how of our customers,
we will continue to provide the timely delivery of information regarding the securities settlement system
reforms when it is issued by the Japan Securities Depository Center, the Bank of Japan and otherorganizations.

Custody Service●

Centralized Provision of Tailored Services via “TCSB Custody- Net”

CustomerTCSB

JASDEC pre-s ettlement and matching s ys tem

Input
instruction
Book-entrybonds

Book-entry bonds custody service
JASDEC Book-Entry Trans fer Sys tem
for Corporate Bonds

Internet●“TCSB Custody-Net”

Japanesegov ernmentbonds

JGB custody service

Domestic
stocksDomestic stocks custody service

Report19

Settlement process control

BOJ-NETJASDEC Book-Entry Trans fer Sys tem
for Stocks

High-Quality Services
As for the stocks custody service, TCSB provides high-quality back-office services including thesafekeeping, securities settlement, cash settlement and corporate actions of listed stocks, REITs,
ETFs and preferential subscription certificates. Since the dematerialization of Japanese sharecertificates, we have addressed increasing our service levels based on customers’ requests, including
the transmission of information concerning stocks on which the postponement of the general meetingof shareholders has been announced and the distribution of dividends.
As for the bonds custody service, TCSB provides services including the safekeeping, securities
settlement, cash settlement and income processing of domestic bonds such as government andnon-JGBs and the receipt by proxy of principal and interest. TCSB precisely and promptly provides its
customers with necessary information by communicating with them through the TCSB Custody-net
with regard to important documents related to the protection of customers’ rights, which aretransmitted by the security issuer through the Japan Securities Depository Center and of which thenumber of issuances has increased recently.

Display notices shared by customers

Select usage function
Display notices for individual customers

Client Support System
The Investors Services Department offers various proposals based on customers’ respective needs,
follows up on issues related to the securities settlement system and copes with other diverse referrals
from customers. Our Domestic Asset Management Department responds to practical referrals from
customers and monitors the TCSB Custody-net in order to support clients’ operations on a real-timebasis. We have established an operating system to respond quickly and precisely to a variety ofinquiries from customers through the efficient collaboration of the aforementioned departments.

20

Overseas Custody Services

Global Custody Network
As customers increasingly engage in internationally diversified investment, their investments in foreign
securities have become more active and diversified. TCSB offers foreign securities custody services tocustomers using overseas custodians as well as the global network of the Mizuho Financial Group.
When TCSB selects overseas custodians, we evaluate their safety as measured by external ratings,
clerical handling ability such as corporate actions, and fee levels. In addition, we also carry out regularreassessments of overseas custodians through local on-site visits, service review meetings and theconfirmation of external audit reports.

Agency Service for Foreign Banks and Client Support Functions
Pursuant to the revision to the Banking Law of Japan implemented in December 2008, TCSB has
conducted the agency service for foreign banks since February 2010. Currently, our Investors Services
Department engages in intermediary services for the custody service of several overseas offices of theMizuho Financial Group (Mizuho Trust & Banking Co. (USA) and Mizuho Trust & Banking(Luxembourg) S.A.). In addition, TCSB's Investors Services Department offers liaison support
operations for customers, along with Japanese staff deployed at key overseas offices of the Mizuho
Financial Group. To support customers with regard to the custody and securities lending services that
our overseas offices provide, we have deployed expert personnel within the company to respondquickly to inquiries from customers through close contacts with main overseas offices.

Web Site Services
We offer web site services that allow customers to transmit settlement instructions, receive reports,
and download data files using their own personal computers. These services not only enhance thespeed and accuracy of foreign securities settlements but also allow centralized, efficient managementof securities investment operations in multiple regions and markets.

Inquiries
Customers
Sending Settlement Instructions
Receiving Reports

Overseas Custody Institutions
Mizuho Trust & Banking Co. (USA)Mizuho Trust & Banking (Luxembourg) S.A.
Major Overseas Custodians

21

Trust & Custody Services Bank, Ltd.
(TCSB)

Outsourcing Models for Comprehensive Securities Management Services

Business Models that Are the First of Their Kind for a Japanese Trust Bank
We have created business models to provide full-scale outsourcing services that offer asset
administration and back-office functions, including securities accounting operations, pertaining to thesecurities holdings of institutional investors such as life insurance companies, launching these
services in January 2003.
This business model extends conventional custody services to the outsourcing of integrated
administration covering domestic and foreign securities (including derivative transactions, REITs, ETFs
and other investment trusts, investment enterprise partnerships, and LPSs) and ancillary transactions
in general, as well as securities and fund settlement operations. Its salient feature is that it is acomprehensive, across-the-board outsourcing model extending to the complex securities accounting
operations that institutional investors have traditionally performed through their own back offices,
including asset evaluation and the preparation of accounting journal data, financial data, and various
administration and reporting materials. TCSB is the first Japanese trust bank to offer theserevolutionary services.

Remarkable Cost Reductions
While institutional investors have no choice but to develop responses to the rapid progress insecurities settlement system reforms, including the introduction of STP (Straight Through Processing)and the reduction of the settlement period, developing and maintaining proprietary systems is
expected to result in substantial IT investment and maintenance personnel costs.
The comprehensive outsourcing models we offer consist of purpose-built systems designed forjoint use by institutional investors to enable them to make significant savings in comparison with
developing and maintaining their own in-house systems separately.
In addition, since these outsourcing models go beyond conventional custody services by offering
securities accounting operations, they allow enormous savings not just in systems development andmaintenance costs but also in the labor costs that would otherwise be incurred in IT and operations,savings that will continue well into the future.

Carefully Tailored Responses to Diverse Requirements
We have deployed planning staff who are equipped with exactly the right kind of consulting skills toprovide customized solutions to the needs of our institutional investor customers. While existingcustomers already rate our services very highly, we are committed to ongoing efforts to draw on thesolid expertise of our staffers to offer high quality back-office services, as well as respond proactively
to the individual needs of each customer through our outsourcing models.

22

Basic outsourcing models
Securities settlement operations + Securities accounting operations = Comprehensive outsourcing models

Investment decision
Order
Execute sale or purchase(Securities companies)

Asset investment division
Trade confirmation
Asset administration
status reports

Asset administration division●Monitor and study new products,
regulatory changes, etc.
●Performance and risk management●Compliance checks●Exercise voting rights

Trade andsettlement confirmation
Trade notification andsettlement instructions
Asset administration status reports
Settlement completion status report

Trust & Custody Services Bank, Ltd.
(TCSB)

Outsource asset administration
Securities settlement
operations

Institutional
investors

Trade notification＋
Securities accounting
operations●Trade data checks with securities companies●Settlement of cash and securities●Collection of interest and cash dividend;
processes relating to other corporate actions●Produce accounting journal data
●Produce asset evaluation data
●Produce asset administration data
●Produce corporate fiscal data

The models described above are our basic models, and we will continue to respond to our customers'
needs.

Service Details● Settlements of domestic and foreign stock (including derivative transactions) and ancillarytransactions, and administration services.
● Asset assessments, and accounting operations such as the preparation of accounting journal data
and financial data.
● Preparation of various kinds of administrative and reporting materials.
● Administrative operations in connection with general meetings of shareholders and complimentary
items.
● Automatic yen conversion services.
● Securities Lending Services

23

2. Pension Services

Asset Administration Services for Defined Contribution Pensions

Defined Contribution Pension Market Expanding
The market for defined contribution pensions has expanded steadily in the twelve and a half years
since the Defined Contribution Pension Law came into force in October 2001. An overview of themarket reveals that as of March 31, 2014, pension rules had been approved for 4,434 corporate
schemes (up 187 year-on-year), and the number of current participants in personal schemes, which
are comprised of Category-1 insured persons and Category-2 insured persons, had reached 183,543(up 25,334 year-on-year).

Proactive Approach to Infrastructure Improvements
As of the end of March 2014, we had been entrusted with 1,665 (an increase of 46 over last year)
defined contribution pension plans and had connections with four record-keepers, more than any otherJapanese asset administration institution. Our flexible entrustment acceptance system has won thetrust and admiration of existing customers, such as Mizuho Financial Group and life insurancecompanies investing in us, as well as a large number of regional financial institutions.
Looking ahead, we are strongly committed to streamlining our IT and operational infrastructures
and will offer even higher quality services, so that we can better satisfy the needs of customers
handling a variety of investment products as well as those of pension management and administration
institutions.

Contributions

Company

Institutions
offering
investment
products

Asset administration
institutions
Pension management andadministration institutions

Employees:
A

Investment
instructions

B
C

Trust & Custody
Services Bank, Ltd.
(TCSB)*

Recordkeeper
Benefit instructions

Application for
benefits

Trading procedures,fund settlements,
etc.

Banks
Trust banks
Securities companies
Insurance companies,
etc.

Recipients
Benefits*We offer customers trust services through direct agreements, and through a Saishintaku agreementwith Mizuho Trust & Banking.

Service Details● Manage paying-in procedures such as verifying contributions.

24

● Handle trading procedures for investment products and manage assets through fund settlements,
etc., on the basis of investment instructions collected by the record-keeper.
● Segregated custody and administration of contributions of pension assets.
● Handle remittances of benefits to beneficiaries on the basis of benefit instructions from therecord-keeper.
● Handle tax payments associated with benefits.
→ Defined Contribution Pension Plans
Traditionally, Japan's corporate pension schemes (Employees Pension Fund and defined benefit
corporate pension plans) have been defined benefit pension schemes under which the amount ofbenefits is decided in advance. In contrast, the defined contribution pension schemes typified by the401(k) plans common in the United States determine the amount of contribution in advance and pay
benefits according to how well investments of these contributions perform.
→ Record-keeper
A pension management and administration institution that handles record-keeping operations. It
coordinates the investment instructions of participants, manages personal data records and arbitrates
benefits. TCSB has established connections with four companies — Japan Investor Solutions &Technologies Co., Ltd., Sompo Japan DC Securities Inc., SBI Benefit Systems Co., Ltd. and Nippon
Record Keeping Network Co., Ltd.

25

Master Trust Services (Master Trust Record-keeping Services)

Responding to the Need for Centralized Asset Administration (Master Trust) Services
As pension system reforms advance, investors are attaching more importance to the provision ofvarious high quality asset administration services. In particular, asset administration institutions face a
growing need for centralized asset administration (master trust) services. As a pioneer of master trusts
in Japan, we offer full-scale “information integration services” that allow a selection of services
associated with asset management information.

Highly Convenient Service Line-up
As an element of TCSB's Japanese-style master trust services, "information integration services" use
the Internet to provide pension sponsors and other customers with timely overall investment
performance data for pension plans using aggregated analyses of standardized investment
information concerning multiple investment institutions. Since October 2010, the daily appraisal
method has been adopted for the calculation of the time weighted rate of return.
These services go beyond monitoring investment performance by strengthening rating checks,
cost analyses and other risk management functions, and incorporating functions that allow customers
to download data for secondary processing. They also include a "Multiple Pension Scheme
Aggregation Service” function designed for centralized pension plan management.
Furthermore, as for the investment performance-related data prepared and provided by theinvestment institutions and an investment guideline checking function, TCSB provides an online
Performance Monitoring Service (PMS).

Service Details
Performance Analysis
Return assessment / Benchmark
comparison and factor analysis /Risk-return analysis
Portfolio Management

Book Value Data

Identify divergence fromasset mix

Relative comparison
analysis

Customers select theservices they require
Compliance Checks/Cost
analysis

Balance/Transaction
Statement

Investment guideline checks /Investment Cost counting

Data download function /Description search function

26

→ Master Trust"Master trust" refers to an arrangement whereby a single trust bank provides centralized management,
accounting and reporting in connection with pension funds under a single trust agreement established
for the purpose of managing multiple pension plans or multiple investment managers.
Master trusts first appeared in the United States in the 1970s, but today gigantic master trusts are
emerging as the sector steadily becomes more oligopolistic.
Master trusts were launched in Japan in earnest after the authorities lifted the prohibition on theparticipation of trust banks in the discretionary investment business in fiscal 2004.
→ Multiple Pension Scheme Aggregation Services
In cases where multiple pension plans are involved, such as tax-qualified pension plans, employees'
pension funds and defined benefit corporate pension plans, this function allows analyses ofinvestment performance using aggregation. Overall management transcending individual pension
schemes is thus possible.

27

3. Various Value-added Services in Asset Administration
Securities Lending Services
What Are Securities Lending Services?
When customers deposit securities with TCSB, these services create the opportunity of additional
revenue for the customers from lending out these securities in securities lending markets at home andoverseas. With movements underway to improve investment performance in pension funds and thelike, and investment strategies becoming increasingly diversified and sophisticated, the securities
lending market has become indispensable to market participants.
Lending Structure that Makes the Most of TCSB's Superior Market Presence
One of the most important considerations for players in the securities lending market is whether an
institution's asset base and market presence are sufficient to enable it to respond to borrowers' broadneeds on an ongoing basis. Thanks to the economies of scale we can offer through asset
consolidation, we are in a position to return to clients considerable benefits from securities lending.
We have organized a specialist department (the Securities Lending & Management Department) tohandle lending transactions, staffing it with personnel who are well-versed in the business. We havealso designated these services as a strategic function and are channeling IT, personnel and othermanagement resources into it.
We are building a full-range lending program that covers domestic bonds (repo), domestic stocks,
foreign bonds and foreign stocks. We have already established a strong market presence in thedomestic bond (repo) and domestic stock lending markets, and have constructed an agency lending
network for foreign bonds and stocks.
Repo Services (Lending Transactions in Claims with Cash Collateral)
We are active in the domestic repo market and short-term money market by making use of thedomestic bonds held in securities trusts. In terms of assets entrusted and outstanding lendings, weboast one of the best records in this sector, and have earned an excellent reputation as a key market
player among prominent domestic institutional investors and other customers, as well as market
participants.
Domestic Stock Lending Services
In the domestic stock lending market, we mainly engage in the lending of pension-related assets(under both direct contracts with TCSB and Saishintaku (re-entrustment) from Mizuho Trust &Banking) and domestic stocks held by institutional investors. We are endeavoring to increase
investment performance by seizing on opportunities to meet the borrowing needs of the market.
Balance of Lending(¥ billions)¥10,950
billion12,00010,0008,000¥11,711billion¥10,045
billion¥8,595billion¥8,876billion¥9,975billion¥9,765billion

FY2010FY2011¥11,335
billion¥9,299billion¥7,248billion

6,000

4,000

2,000

0
FY2004

FY2005

FY2006

FY2007

FY2008FY2009Note: Lending data for four asset types, average month-end balance

28

FY2012FY2013

Foreign Bond and Stock Lending Services
With regard to pension-related assets entrusted to us by Mizuho Trust & Banking and foreign bonds
and stocks held by institutional investors, we selected overseas custodians as lending agents and are
conducting lending services in overseas markets (USA and Europe). We intend to continue work on
expanding the issues that constitute our target assets and our asset base.

Strict Risk Monitoring System
We are building a system for managing the various kinds of risk involved in these transactions,
including credit risk associated with borrowers and investment/liquidity risk associated with collateral.
More specifically, in addition to the risk monitoring of the lending divisions responsible, the selection ofborrowers is one of the criteria subject to approval by an independent credit assessment department(Risk Management Department). This department also monitors credit standing as measured byratings and other yardsticks, adherence to credit lines and collateral coverage ratios, on a daily basis.
Outline of Securities Lending Services

Trust agreements(pension trusts,
etc.)

Saishintaku(re-entrustment)
agreement

Loan out
Collateral

MizuhoTrust &
Banking

Domestic
stocksand bonds

Trust &
CustodyServices
Bank, Ltd.
(TCSB)

Customers

Foreignstocksand bonds

Repo / Lending Authorized agreements/ Memorandums

Lending fees

Lendingagencyagreements

Tripartite Memorandum

Trust agreements / Custodian agreements

Disposition of cash collateral

Lending
fees

Domestic
securities
companies,
etc.

Securities
lending
Overseas
custodians, Collateral Overseas
securities
lendingcompanies,
agentsetc.
LendingfeesService Details
Create additional revenue opportunity by making loans in the lending market of securities entrusted
under trust and custody contracts.
<Points of asset management>● Select borrowers in accordance with selection criteria set by customers.
● Perform daily monitoring of various risks (monitoring of credit standing as measured by ratings andother yardsticks, adherence to credit lines and collateral coverage ratios).
● Understand market conditions and maintain ready access to a great many potential borrowers.
Maximize lending performance.

29

Foreign Exchange Services

Asset Administration Services to Meet Our Customers’ Needs
We offer foreign exchange services for customers who buy or sell securities denominated in foreign
currencies or need to hedge against the exchange risks such transactions involve.
TCSB is the sole asset management–based trust bank that has the exchange dealing function. An
exchange bank that is concurrently a trustee bank is advantageous to customers from the viewpoint of
reducing operational risk.

The Pursuit of "Best Practices"
Since the launching of CLS (Continuous Linked Settlements) in the interbank market, we have been
pursuing best practices with a view to providing customers with optimum prices by working to reduce
settlement risk associated with foreign exchange settlements and strengthening our market access.

Internet-based Foreign Exchange Transaction Service
We offer an Internet-based foreign exchange transaction service for asset managers.
In addition to asking for foreign exchange rate information in the conventional way via telephone,customers are able to ask for pricings via the Internet using dedicated screens. The system not only
allows transaction details to be confirmed the instant a contract is concluded, but also provides
transaction records for verification.
We are therefore able to offer a high quality, high value-added service using Internet-based foreignexchange transactions backed by state-of-the-art technology.
Outline of Foreign Exchange Services

Trust & Custody Services Bank, Ltd. (TCSB)

TrustsCustomers

Trustaccounts

Foreign exchangetransactions
The market
Bankaccounts

Foreign exchangetransactions

Foreign exchange transactions

Service Details● Satisfaction of actual currency requirements and provision of exchange hedges.
● Support for derivatives operations (currency options).

30

● Internet-based foreign exchange transaction service.
→CLS(Continuous Linked Settlement)
Designed to reduce Herstatt risk (settlement risk arising from international time differences), CLS
refers to the simultaneous settlement of foreign exchange transactions in currency pairs, such as the
US dollar and the Japanese yen, at a certain time on the settlement date.

31

Business Foundations to Support Optimized Solutions

Contents

1. Operations and Information Technology Infrastructure

page 32

IT Systems Development and Operations Framework
Offsite Backup Center
Operational Quality Control
2. Internal Control Structure

page 36

Compliance Structure
Information Management Structure
Risk Management StructureInternal Audit Structure
External Audits

Corporate Data

page 47

Organization Chart, Corporate Officers, Workforce Information

32

Business Foundations to Support Optimized Solutions
1. Operations and Information Technology Infrastructure

IT Systems Development and Operations Framework

More sophisticated information technology (IT) is essential for asset administration business becauseof the need to process increasingly large volumes of high-level, globalized transactions with speed
and accuracy. As a trust bank specializing in asset administration services, we are committed tobuilding an IT infrastructure in order to provide customers with the best possible solutions for theirdemands.

Adoption of Open System Platforms
To keep up with changes in the external environment, TCSB is one of the first trust banks in Japan touse open system platforms, which employ UNIX servers for the entire range of business applications.
This has enabled us to respond flexibly to wide-ranging changes in the business environment while
drastically reducing investment costs.

Four-layer System Architecture
A key feature of our technology solutions is that they comprise a comprehensive suite consisting offour layers (components).
Layer 1 provides the various interfaces necessary for external communication. Layer 2 handles
typical post-trade processing including settlements and market data management. Layer 3 is
responsible for fund accounting. Layer 4 takes care of portfolio valuation and reporting centered on
disclosure. Layer 3 is comprised of several modules depending on asset administration products suchthat each module can deal precisely with the specific characteristics of the relevant product, including
pension trust, investment trust, Tokkin and others. In contrast, Layers 2 and 4 retain functional
modules that are shared by all products.
This system architecture enables us to rapidly address institutional changes ranging from thosespecific to individual products to those affecting all the products. As an example, our settlement
system on Layer 2 is available to support 24/7 trading operations without being affected by fundaccounting procedures on Layer 3, on the assumption that settlement cycle will be shortened in the
future.

Ongoing Transition to STP (Straight Through Processing)
The evolution of STP is crucial for processing a large volume of transactions. The focus of ourdevelopment efforts in upgrades to technology each year is to facilitate the automated processes thatincorporate receiving instructions, confirmation, settlement and reconciliation for both of domestic andcross-border transactions. In particular, we offer seamless interfaces to investment managers andbrokers, those are the core of STP, via or through CPU connection, package tools, SWIFT or theInternet.

33

Schematic of TCSB's IT Systems
The fourth layer（Information systems）

The third layer（Fund accounting systems ）External
institutions

Pension
Funds

Clearing
house

Investment
trustsComprehensive
outsourcing

Disclosure services

Securities
companies

Specifiedmoney
trustsCustody

４０１Ｋ

The first layer(External
Interfacesystems)

Investment
institutions

The second layer（Common systems）

Information
vendors

Commoninformation
management

Settlement
systems

Entruster

Investment
institutions

Challenges Faced in Fiscal 2013
During fiscal 2013, we addressed the following important issues in order to enhance our IT
infrastructure and expand our services to customers.

NO

Name of initiatives

Purpose1

Reconstruction of the overseas investment trust system

2

Response to the next system adopted by Japan Securities Depository
Center, Inc.

Address the new system

3

Address the system related to Securities Lending Services

Address the new system

Enhance services for customers

Our fiscal 2014 plans call for IT investment aimed at further improvements in our service levels,
including improving the management and offering function for information on our overseas rights;
addressing participation in a government bond transaction clearing institution; and enhancing theplatforms of Tokkin, 401K and disclose service systems.

34Offsite Backup Center

Backup Center and Backup Office Provide Ample Security
Our Head Office at Harumi Island Triton Square and the Main Center for our systems are both built towithstand earthquakes as large as the Great Hanshin-Awaji Earthquake (intensity 7 on the Japaneseseismic scale) and feature their own auxiliary generators. Full redundancy has been built into oursystem servers and circuits to create a robust infrastructure that should be able to withstand any
disasters or accidents that might occur.
In readiness for eventualities such as major earthquakes, fires, or terrorist attacks that may render
our Head Office or Main Center inoperable, we have built a Backup Office and an Offsite Backup
Center at a regional location some distance away to ensure that operations can continue.
Our Offsite Backup Center conforms to FISC (The Center for Financial Industry Information
Systems) Security Guidelines, and was the first such facility of its type to be established by a domestic
trust bank specializing in asset administration services when it went into operation in March 2003. It
also uses the latest technology for remote copying between disks for secure data protection andnon-stop business operation at the time of disaster.
Our Backup Office was expanded and enhanced within the Main Center in October 2006, andreplicates the daily data updates at the Head Office. In the eventuality that it becomes impossible tocontinue operations at Head Office, we can quickly establish an operational environment at our
Backup Office and continue operations.

Schematic Diagram of Backup Center and Office

Data processed at the main centeris transferred to the backup centerby remote copy, where it is thensaved.

Main center

External institutions（Settlement institutions, etc. ）（Disk to disk remote copy ）Backup center

Main circuit
Sub-circuit

In order to minimize the risk ofboth of circuits being down atonce, the main and sub circuits
are laid on different channels.
Headquarters

Everyday, data from
Headquarters is transferred
to and saved at the Backup
Office35

The Headquarters is able todirectly switch to a connection
to the backup center.

Operational Quality Control
Providing the Best-quality Back-office Services
We constantly strive to offer the best-quality back-office services for our customers. Specific measuresfor ensuring higher quality are reported to or deliberated by the Product Improvement Committee on aregular basis and as the need arises. We also set a theme every year and implement measures on a
corporate-wide basis to improve quality of operations and provide high-quality, high-value-added
services. In recent years, Japan has been moving ahead with reforms designed to create a securities
settlement system that is safe, efficient and convenient with a view to strengthening the international
competitiveness of its securities market. We makes concerted efforts to highlight all related mattersand devise concrete ways of satisfying these requirements in actual practice.
The “Quality Management Office”, established inside of our Operations Planning Department, issteadily progressing with the formulation and execution of solutions by sorting out and analyzing areasof back-office operations that could be made more accurate and efficient. And this movement isspreading throughout the company as a comon measure.
In addition, we are making efforts to carefully heed the wants and needs of customers in order tooffer response that is prompt and appropriate, and to facilitate improvements of back-office services byanalyzing operational issues.
We will continue to work on improving its operational services and operational quality.

Activities for Further Improving Operational Quality
Each department treats the proposal and execution of measures to enhance quality through morerobust, more efficient back-office operations as common issues within their business plans, andengages in activities to ensure excellence.
Mainly for high-risk areas and areas that require focused efforts, the Operations Planning
Department and other departments are working together to sort out and analyze further issues, andpropose and implement countermeasures.
The aim is to further improve the quality of back-office operations by repeatedly conducting analyses
and implementing countermeasures aimed at resolving issues. This is how we endeavor to provide
customers with the finest service.

Operational Quality Control Organization

Board of Directors

Product Improvement Committee

Ｐroducts Division●Execute business(Contracts, settlements,rights, reporting, etc.)
Corporate Division
Business Promotion Division

Operations Planning Department
Operations
management
guidance &Operations support

Quality Management Office
Tackle issue of standardizing
operations methods)

Various working groups36

2. Internal Control Structure

Compliance Structure

Basic Concepts
In addition to viewing thoroughgoing compliance as a fundamental management principle andconstantly recognizing the gravity of our social responsibilities and public mission as Japan's leading
trust bank specializing in asset administration, we are working to promote the creation of a compliancestructure that satisfies global standards while winning high praise from customers and the markets,and the trust of society at large.

Thoroughgoing Compliance
Based on a decision of the Board of Directors, we established a Compliance Committee to enablesenior management to discuss compliance directly, and manage it on a comprehensive basis. The
Compliance & Legal Affairs Department serves as the secretariat to this Committee and supervises
compliance management in each department to ensure its thoroughgoing enforcement. The
Compliance & Legal Affairs Department Manager appoints compliance officers who check compliancein operations independently of the direction and supervision of each department.
In each department, the Department Manager is the person responsible for ensuring thoroughgoingcompliance within the department. The Compliance Manager who is appointed, dismissed and judged
by the Compliance & Legal Affairs Department Manager, checks the status of compliance within thedepartment, assists the Department Manager, and works toward thoroughgoing compliance within thedepartment.

Compliance Structure
Board of Directors

Compliance Committee

Compliance & Legal Affairs
Department
Compliance
Complianceofficers
officers
Department managers

Division
Appoint/Dismiss

ReportCompliance officers
Compliance managers
Compliance managers

Department Manager

Assist37

Approaches to the Financial Alternative Dispute Resolution (ADR) System
In order to deal expeditiously, fairly and appropriately with complaints, etc., from customers TCSB has
concluded the basic contract for the implementation of dispute resolution procedures with theJapanese Bankers Association, the designated dispute resolution organization under the Banking Law
of Japan, and the Trust Companies Association of Japan, another legal dispute resolution organization
under the Trust Business Law and the Act on Provision, etc., of Trust Business by Financial
Institutions. The designated dispute resolution organization takes the steps towards resolution from afair and neutral standpoint in cases where the solutions to customers’ complaints adopted by TCSB
are not accepted.
Dispute resolution organization designated under the Banking Law of Japan, as well as under the
Trust Business Law and the Act on Provision, etc., of Trust Business by Financial Institutions

Dispute resolution organization designated under the Banking Law of Japan:
Designated dispute resolution organization: Japanese Bankers Association
Contact: Advisory Center of the Japanese Bankers Association
TEL: 0570-017109 (charged service available only within Japan) or +81-3-5252-3772

Dispute resolution organization designated under the Trust Business Law and the Act on Provision,etc., of Trust Business by Financial Institutions:
Designated dispute resolution organization: Trust Companies Association of Japan
Contact: Trust Consulting Office
TEL: 0120-817335 (toll-free service available only within Japan) or +81-3-3241-7335

Information Management Structure

Basic Concepts
As the use of information expands at a prodigious rate in line with the evolution of the advanced IT
society, companies are tasked by society with the responsibility of protecting the information they holdin an appropriate manner. As a company that provides customers with asset administration services,
TCSB believes it is extremely important to protect and use information assets properly.
To ensure that it does so, TCSB is working to strengthen its information management structure
through measures to protect information security and personal information.

Overview of Information Management Structure
TCSB has formulated an Information Security Policy, an Information Security Standard and otherinformation management-related regulations, based on which it has created an information
management structure within the common framework adopted by the Mizuho Financial Group for
information management. The Information Security and Customer Protection Management Committee
discusses and coordinates matters pertaining to progress of implementing measures dealing withinformation management, management of risks associated with information security, and responses torelevant laws and regulations. TCSB has appointed a Chief Information Security Officer (Director in38

charge of the Compliance & Legal Affairs Department) to oversee planning and proposals inconnection with information management in general, and the execution thereof. It has also establisheda new expert group specializing in information management (the Information Management Group)
within the Compliance & Legal Affairs Department.
We also believe that, in order to ensure proper use and protection of information assets, it is vitally
important that each employee shows high awareness of, and interest in information security. To thisend, we implement regular education and training programs in connection with information
management.
Based on this information management structure, TCSB has drawn up and published privacy
policies that comply with the Law Concerning the Protection of Personal Information, which came intofull force in April 2005. It is also building a system to deal with disclosure requests, and strengthening
its safety management measures.

Chief Information Security Officer(Director in charge of Compliance &Legal Affairs Department)

Compliance & Legal Affairs
Department
Information Management Group

Departments

Information
Security
Officer

Information Manager

Information Security
Manager

39

Relevant Departments

Information Security and Customer Protection Management Committee

Information Management System

Operations
Planning
Department

IT & Systems
Planning
Department

Risk Management Structure

Basic Approach
Progress in financial deregulation and internationalization has led to rapid growth in the diversity andcomplexity of banking operations, exposing financial institutions to various risks.
We are acutely aware that in this kind of environment, creating a solid risk management structure
to ensure the kind of sound and stable management is one of the fiduciary duties we must fulfill inorder to confirm our trustworthiness in the eyes of customers.
At TCSB, we classify the risks arising in connection with operations by factor into credit risk,
market risk, liquidity risk and operational risk and so on, and manage them according to theircharacteristics in line with risk management policies laid down by the Board of Directors. In otherwords, we have stipulated the departments responsible for each risk classification and for drawing up
and executing plans concerning risk management. Further, we have established specialist committees
made up of the relevant corporate officers and department managers to deal with important risks by
discussing and determining company policies, identifying and analyzing risk, and implementing
measures to deal with it. We are also working to strengthen our internal audit structure centered on
our Internal Audit Department to ensure and monitor the effectiveness of our structures for managing
various types of risk.

General Concept of Risk Management
Under the basic policies for risk management jointly adopted by members of the Mizuho Financial
Group, in addition to managing each type of risk individually, TCSB has also established a risk
management structure to identify and evaluate overall risk and, where necessary, to devise
appropriate responses in order to keep risk within managerially acceptable limits in both qualitativeand quantitative terms.
Reports on the individual and the overall risk management situation are submitted to the Board of
Directors both regularly and as required.

Credit, Market and Liquidity Risk Management
The Risk Management Department is in charge of credit, market and liquidity risk management, andhas established an ALM Committee.
Credit risk management is carried out in accordance with our internal credit rating system, andindividual credit lines are as a general rule set and controlled by the final decisions of our credit
assessment group every half year in line with the credit operation guidelines set by the ALM
Committee.
In the case of market risk, caps are set according to interest rate sensitivity, while in the case of
liquidity risk, ceilings are set on procuring finance from the market. As a general rule, the ALM
Committee then determines risk-specific ceilings and financing limits every half-year.
The Risk Management Department measures and monitors observance of individual risk ceilingsand caps on a daily basis and submits regular reports to the Board of Directors and other supervisory
entities.
→Credit Risk
The risk that TCSB may incur losses due to a decline in, or total loss of, the value of assets(including off-balance sheet items) as a result of a deterioration in a counterparty's financial position.
→Market Risk
The risk that TCSB may incur losses due to changes in the value of its holdings of assets or40

liabilities (including off-balance sheet items) caused by fluctuations in market risk factors such as
interest rates, securities prices and foreign exchange rates.
→Liquidity Risk
The risk that TCSB may incur losses in the case where it faces funding difficulties due to a
deterioration in its financial position that makes it difficult to raise necessary funds, or that forces toraise funds at significantly higher interest rates than usual.
→Operational Risk
The risk that TCSB may incur losses due to inadequate or failed internal processes, people andsystems, or from external events.

41

Operational Risk Management
TCSB sees operational risk in broad terms, embracing operations risk, IT risk, legal risk, humanresources risk, tangible asset risk, regulatory change risk and reputational risk, and places it under thejurisdiction of the Risk Management Department, where the Operational Risk Management Committee
manages it.
At the end of March 2007, operational risk was additionally included under the regulatory capitalrequirements (Basel II). At the end of September 2009, TCSB implemented the Advanced
Measurement Approach, which is the most advanced of the three methods proposed for the
calculation of operational risk equivalent in association with capital adequacy ratios based on Basel II.
Management intended to suit each kind of risk as determined by scale and nature is implemented
as follows.
The Operations Planning Department is in charge of operations risk management. As the trustee
business associated with trust and custody operations becomes increasingly varied and complex
and the number of transactions increases, we are seeking to deal with operations risk bystrengthening our operations management system, raising our operational standards and tightening up
our back-office procedures in an attempt to prevent operational errors altogether.
The IT & Systems Planning Department is responsible for IT risk management We are doing
everything we can to ensure the stable operations of our computers by controlling the quality of oursoftware and building redundancy into our systems and equipment. Based on a long-term strategic
vision, we are also creating a high-level systems development infrastructure manned by specialist
systems engineers.
The Compliance & Legal Affairs Department is in charge of legal risk management and endeavors
to identify the origins and scale of risks of tangible and intangible losses that may arise from violationsof laws, ordinances and contracts and other legal factors, and devise appropriate responses to deal
with such risks.
The Human Resources Department is responsible for human resources risk and oversees thestatus of working hours, vacation days taken and other relevant matters based on the scale and natureof human resources risk inherent in each operational area under an appropriate management
framework.
The Corporate Planning Department oversees tangible asset risk, regulatory change risk andreputational risk, working to identify, assess and monitor the origins, scale and nature of these risks ina timely and accurate fashion, and to devise appropriate measures for controlling and reducing them.
In addition, we also recognize and manage “Information Security Risk”, “Compliance Risk” and“Trust Business Risk”, which constitute a combination of more than one of the above components ofoperational risk, as operational risk.

42

Risk Management Organization (Departments, etc., in charge of each kind of risk category)
Risk category

Departments in charge

Committees in charge

Credit risk
Market risk

Risk Management Dept.

ALM Committee

Liquidity risk
Operational risk
Operations risk

Operations Planning Dept.

IT risk

IT & Systems Planning Dept.

Legal risk

Compliance & Legal Affairs Dept.

Human resources risk

Human Resources Department

Operational Risk Management
Committee

Tangible asset risk
Regulatory risk

Corporate Planning Dept.

Reputational risk

→Operations Risk
The risk that any customer and/or TCSB may incur losses because inappropriate procedures resulting
from unlawful acts, negligence or nonfeasance on the part of executives or employees, or from theoperational framework itself may throw customer services into disarray.
→IT risk
The risk that any customer and/or TCSB may incur losses because systems defects such as failures,
faults, or incompleteness in computer operations, or illegal or unauthorized use of computer systems
may throw customer services into disarray.
→Legal Risk
The risk that TCSB may incur losses due to violations of laws and regulations, breach of contract,entering into improper contract or other legal factors.
→Human Resources Risk
The risk that TCSB may incur losses due to drain or loss of personnel, deterioration of morale,
inadequate development of human resources, or inappropriate working schedule, inappropriate
working and safety environment,inequality or inequity in human resource or discriminatory conduct.
→Tangible Asset Risk
The risk that TCSB may incur losses from damage to tangible assets or a decline in the quality of theworking environment as a result of disasters, criminal actions or defects in asset maintenance.

43

→Regulatory Change Risk
The risk that TCSB may incur losses due to changes in various regulations or systems, such as thoserelated to law, taxation and accounting.
→Reputational Risk
The risk that TCSB may incur losses due to damage to its credibility or the value of the “Mizuho” brandwhen market participants or others learn about, or the media reports on, various adverse events,
including actual materialization of risks or false rumors.
→Advanced Measurement Approaches (AMA)
Advanced Measurement Approaches (AMA) is one of the methods for calculating operational risk
under Basel. It is a statistical approach to calculate operational risk equivalent, employing both internal
loss data and scenario data to reflect potential future loss events in the measurement.

Responses to Emergencies
In line with its efforts to build a strong in-house organization for ensuring operational continuity andearly restoration of full services, TCSB has clarified the basic policies, priorities and countermeasures
included in its contingency plans for dealing with emergencies such as large-scale natural disasters,
system failures, terrorist attacks, criminal acts and other events that are likely to cause business oroperational difficulties.

44

Internal Audit Structure

Basic Concepts
Independently of operational reporting lines, the Internal Audit Department carries out comprehensive
and objective evaluations of the extent to which key internal control objectives are met in line with the"Basic Policies on Internal Audits" and provides advice and corrective recommendations with a view toresolving problems. The key internal control objectives include compliance with laws, regulations andinternal rules, appropriate risk management, efficient and effective business operations and reliablefinancial reporting.

Internal Audit Management System
Our internal audit system covers various types of audits. Audits based on a general scope assess thecontrol of risk management and compliance structures, as well as the state of business operations indepartments throughout the company. Audits based on physical inspection verify the status ofmanagement of the actual valuables and important items, etc. and information. Audits based onthemes look at specific operations across departments, while special audits clarify the truth about
wrongful actions, violations of service discipline, mistakes in the course of business and violations ofinternal rules and regulations, etc., and investigate the reasons why they occur. The Internal Audit
Department conducts these audits in such a way as to ensure that they combine dynamically into
effective assessments of appropriateness and adequacy of internal management.
The results of internal audits and the status of improvement activities at the audited departments arereported to the Board of Directors by way of the Internal Audit Committee.

45

Audit structure
General Meeting of
Shareholders
Board of Corporate Auditors
Board of Directors
President & CEO(Chairperson ofInternal Audit
Committee)

Reports

Internal Audit
Committee

SSAE 16 audit
Audit for Auditing andAssurance PracticeCommittee Practical
Guideline No. 86

Directors in charge

Internal Audit
Department
Audits based on
general scope
Audits based on physicalinspection

Executive divisions

Internal audit & inspection

Audits based on themes

Corporate Planning
Department

Asset audits(Audits of write-offs /Provisions)Self-assessments ofwrite-offs and provisions
Capital adequacy ratio
calculation

Audit for capital adequacy
ratio calculation

Individual divisions
execute businessIndividual divisions
self-assessments

Self-assessments

Risk Management
Department
Self-assessmentsof assets (Second)

Audits entrusted toexternal auditing institutions(E.g., systems audits)

External audits

AuditsOperations Planning
Department
In charge ofself-assessments

46

Self-assessmentsof assets (First)
Assessments ofwrite-offs andprovisions

External Audits

Proactive Use of External Audits
To put our business operations on a sounder, more appropriate, more transparent footing, we makeproactive use of external as well as internal audits.
Our key Custody Client Services have been subject to external audits. The design andimplementation of internal controls of all operations have received "suitably qualified" opinions in thoseexternal audits.

Supplement
Internal control audits based on U.S. service organization reporting standard implemented by external
auditors shall comply with the “SSAE 16” (Statement on Standards for Attestation Engagements No.
16), which was stipulated by the American Institute of Certified Public Accountants (AICPA).
Meanwhile, with regard to the internal control audits based on the Japanese service organization
reporting standard, TCSB will comply with the Auditing and Assurance Practice Committee Practical
Guideline No. 86, “Assurance Reports on Controls at a Service Organization,” stipulated by theJapanese Institute of Certified Public Accountants.

47

Corporate Data
■Organization Chart (as of June 30, 2014)
Internal Audit Department
Corporate Planning Department

Accounting Office

Human Resources Department
Risk Management Department
Compliance & Legal Affairs Department
Corporate
Auditors/Board of
Corporate Auditors

Internal Audit
Committee

Operations Planning Department

Quality Management Office

IT & Systems Planning Department
System Development Department
Treasury Department
GeneralMeeting of
Shareholders

Board ofDirectors

President &CEOBusiness
Promotion
Division

Investors Services Department
Securities Lending & Management Department

Domestic Custody Operations Department
International Custody Operations Department

International Settlement Office

Custody Client Services Department

Investment Information Services Office

Investment Trust Services Department

Customer Services Office

Executive Management Committee
Products
Division
Business Policy Committees*

Life Insurance Company Asset Custody Department

Settlement Management Department

Settlement Management Office

Management Administration Services Department* Business Policy Committees consist of eight committees including the Compliance Committee and others■Corporate Officers (as of June 30, 2014)
President & CEO Akira Moriwaki
Deputy President Yoshifumi Miyata
Senior Managing Director, Head of Business Promotion Division Atsushi Takahashi
Managing Director Makoto Ihori
Director Nobumitsu Watanabe
Director Koji Fujiwara
Director Shouzou Fujii
Director Koichi Nagao
Corporate Auditor Shinsuke Kuboyama
Corporate Auditor Yutaka Yoshimura
Corporate Auditor Hidekatsu Take
Corporate Auditor Takehiko Watabe
Managing Executive Officer Ichiro Iijima
Managing Executive Officer, Head of Products Division Noboru Senni
Executive Officer and General Manager, Domestic Custody Operations Department
Yasufumi Kamiguchi48

Executive Officer and General Manager, Operations Planning Department Makoto Saito
Executive Officer and General Manager, Life Insurance Company Asset Custody Department
Masafumi Yoshida
Executive Officer and General Manager, Corporate Planning Department

Hiroyuki Obata■ Workforce Information (as of March 31, 2014)
Number of employees

597

Note: The number of employees includes persons on secondment from outside organizations. It does
not include executive officers and temporary employees.

49

Financial Data

Contents

Results of Operations

page 51■ Overview of Business in Fiscal 2013

Financial Statement

page 52■ Balance Sheets■ Statements of Income■ Statements of Changes in Net Assets

Results of Trust Banking Businesspage 66■Statements of Trust Assets and Liabilities

Capital Adequacy Ratio（Basel II）

page 6750

Results of Operations
Overview of Business in Fiscal 2013
The Financial and Economic Environment
During the period under review (fiscal 2013), the world economy continued to recover at a moderatepace although it showed weak elements in part. The outlook for the future also anticipates an ongoingrecovery trend, driven mainly by advanced nations. Meanwhile, the Japanese economy also remainedon a moderate recovery path due to the improvements in revenues from exports backed by the
weaker yen and to the effects of economic and monetary stimulus measures implemented. Consumer
spending also strengthened thanks to last-minute demand before the consumption tax hike. Looking
ahead, there is anticipation that the economy will gradually pick up in line with the moderate recoveryof the global economy although a temporary slowdown is expected in reaction to the last-minutedemand associated with the increase in consumption tax.

Business Developments and Results
TCSB has steadily pushed forward with operations with particular emphases on (a) establishing acompetitive advantage in existing business areas, (b) creating new markets and businesses, (c)pursuing structural reforms to achieve good balance between cost competitiveness and service quality,and (d) reinforcing the management structure to support business strategies.
At the end of the fiscal year under review, assets under custody and administration ― based on
entrusted trust assets and assets managed under custody agreements ― increased approximately¥12 trillion from the previous period to more than ¥370 trillion on the back of efforts made to acquire
new asset administration contracts and seek additional contracts from existing customers.
In the area of income and expenditures during the fiscal year, gross profits from operations
increased ¥840 million from the year before to ¥20,610 million mainly due to increases in fees andcommissions, and Use and Source of Funds. Efforts to make the administration of expenditures more
efficient while endeavoring to invest in management resources to offer high-quality, high-value-added
services resulted in a ¥237million increase in expenditures, excluding those from temporary measurestaken from the last fiscal year, to ¥18,674 million.
As a result, net business profits were ¥1,936 million (¥602 million increase from the last year),ordinary profit was ¥1,911 million (¥614 million increase from the last year) and net income for the
fiscal year was ¥1,169 million (¥374 million increase from the last year).

51

Financial Statement■Balance Sheets(UNITS: Millions of yen)

2011
As of 31.Mar.2012

2012
As of 31.Mar.2013

2013
As of 31.Mar.2014

AssetsCash and Due from Banks
Call Loans
Securities
Loans and Bills Discounted
Foreign Exchanges
Other Assets
Tangible Fixed Assets
Intangible Fixed Assets
Deferred Tax Assets
Total Assets

65,764
223,000
299,372
43,164264
13,788634
14,84696
660,933

2,358,122
195,000
212,20998,565620
21,648609
13,462116
2,900,354

191,241
185,000
281,942
48,000967
14,904639
12,757
195735,648

Liabilities
Deposits
Negotiable Certificates of Deposit
Call Money
Due to Trust Accounts
Other Liabilities
Provision for Bonus Payments
Provision for Retirement Benefits
Provision for Directors’ Retirement Benefits
Total Liabilities

37,981
3,453
341,671
197,887
22,95721
37
97604,10744,281
2,258,094
305,888202,241
32,17825
48
51
2,842,808

43,29659,002319,263
215,71739,70727
65
33
677,112Net Assets
Capital Stock
Retained Earnings
Shareholders’ Equity
Valuation Difference on Available-for-Sale Securities
Valuation and Translation Adjustments
Total Net Assets

50,0006,822
56,822
3
3
56,82550,0007,511
57,51133
33
57,54550,0008,520
58,52015
1558,535

Total Liabilities and Net Assets

660,933

2,900,354

735,648（NOTE 1）Amounts less than one million yen are rounded down.

52

■Statements of Income(UNITS: Millions of yen)

2011
From 1.Apr.2011
To 31.Mar.2012

2012
From 1.Apr.2012
To 31.Mar.2013

2013
From 1.Apr.2013
To 31.Mar.2014

Ordinary Income
Fiduciary Fees
Interest Income
Fees and Commissions
Other Operating Income
Other Ordinary Income
Total Ordinary Income

10,082
1,355
10,061321
421,825

9,935
1,528
9,638
420
2
21,526

9,894
1,869
10,576309
222,651

Ordinary Expenses
Interest Expenses
Fees and Commissions Payments
Other Operating Expenses
General and Administrative Expenses
Other Ordinary Expenses
Total Ordinary Expenses

461
1,165
12
19,09016
20,746589
1,163
18,45817
20,229740
1,298
18,697
3
20,740Ordinary Profit

1,078

1,296

1,911

Extraordinary Loss
Loss on Disposal of Noncurrent Assets
Total Extraordinary Losses

164
164

10
10

2
2

Income Before Income Taxes
Income Taxes-Current
Income Taxes-Deferred
Total Income Taxes
Net Income

913
323
62
386
527

1,286
528
（36）
492
794

1,908
808
（69）
739
1,169

（NOTE 1）Amounts less than one million yen are rounded down.

53

■Statements of Changes in Net Assets(UNITS: Millions of yen)

Shareholder’s Equity
Capital Stock
Balance at the Beginning of the Current Period
Balance at the End of the Current Period
Retained Earnings
Balance at the Beginning of the Current Period
Changes of Items During the Period
Dividends from Surplus
Net Income
Total Changes of Items During the Period
Balance at the End of the Current Period
Shareholders’ Equity
Balance at the Beginning of the Current Period
Changes of Items During the Period
Dividends from Surplus
Net Income
Total Changes of Items During the Period
Balance at the End of the Current Period
Valuation and Translation Adjustments
Balance at the Beginning of the Current Period
Changes of Items During the Period
Net Changes of Items Other than Shareholders’EquityTotal Changes of Items During the Period
Balance at the End of the Current Period
Total Net Assets
Balance at the Beginning of the Current Period
Changes of Items During the Period
Dividends from Surplus
Net Income
Net Changes of Items Other than Shareholders’EquityTotal Changes of Items During the Period
Balance at the End of the Current Period

2011
From 1.Apr.2011
To 31.Mar.2012

2012
From 1.Apr.2012
To 31.Mar.2013

2013
From 1.Apr.2013
To 31.Mar.2014

50,00050,00050,00050,00050,00050,000

6,404

6,822

7,511

(110)
527
417
6,822

(105)
794
689
7,511

(160)
1,169
1,009
8,520

56,40456,82257,511

(110)
527
417
56,822

(105)
794
689
57,511

(160)
1,169
1,009
58,520

(12)

3

33

16

30

(18)

16
3

30
33

(18)
15

56, 392

56,82557,545

(110)
527

(105)
794

(160)
1,169

16

30

(18)

433
56,825719
57,545990
58,535（NOTE 1）Amounts less than one million yen are rounded down.

54

Notes (Fiscal 2013)
Significant Accounting Policies
1． Evaluation Standards and Methods for Investment Securities
In regard to evaluation of securities, Other Securities are stated, in principle, at fair value basedon the market price, etc., on the settlement day (cost of sale primarily calculated using the moving
average method), except for those whose fair value it is deemed extremely difficult to measure.
These are stated on a cost basis using the moving average method. Valuation differences on
Other Securities are treated as comprehensive income.
2． Evaluation Standards and Methods for Derivative Transactions
Derivatives transactions are valued at fair value.
3． Methods for Depreciating Fixed Assets(1) Tangible Fixed Assets
Tangible fixed assets are depreciated using the declining balance method except for buildings(excluding equipment accessory to buildings), which are depreciated using the straight-line
method. Depreciation is mainly computed using the following range of useful lives:
Buildings 6 years to 50 years
Equipment 3 years to 20 years(2) Intangible Fixed Assets
Intangible fixed assets are depreciated using the straight-line method. Internally used software
items are amortized over their useful lives within the company (primarily five years).
4． Standards for Translating Foreign Currency-Denominated Assets and Liabilities into Yen
Foreign currency-denominated assets and liabilities are primarily translated into yen at theexchange rates prevailing on the balance sheet date.
5． Standards for Recording Reserves(1) Allowance for Loan Losses
Allowance for loan losses are stated as follows in accordance with standards for write-offs andprovisions stipulated in advance.
Claims equivalent to "normal credits" and "credits to need attention borrowers" as provided forin "Self-assessments of the Assets of Banks and other Financial Institutions, and Operating
Guidelines Concerning Audits of Loan-Loss Write-Offs and Provisioning against Possible
Loan Losses" (Report No. 4 of the Special Committee on Banking, etc., Supervision of theJapanese Institute of Certified Public Accountants) are classified into the corresponding
categories and posted on the basis of loan-loss ratios calculated according to individual
historical credit loss experiences.
Based on these asset self-assessment standards, asset assessment departments assess all
claims in cooperation with the business promoting divisions concerned.
At the end of the year, however, there is no balance of the allowance for loan losses.
(2) Provision for Bonus Payments
To provide for employees’ bonus, that portion of estimated bonuses payable to employees thatcan be attributed to the current fiscal year has been posted in the accounts under Provision
for Bonus Payments.
(3) Provision for Retirement Benefits
To provide for retirement benefits to employees (including executive officers), that portion of
estimated retirement benefit obligations payable to employees that can be attributed to thecurrent fiscal year has been posted in the accounts under Provision for Retirement Benefits.
(4) Provision for Directors’ Retirement Benefits
To provide for retirement benefits to directors, that portion of estimated directors’ retirement
benefits attributable to the current fiscal year has been recorded.
6． Hedge Accounting Method
For some assets, special accounting treatment for interest rate swaps is applied.
7． Accounting for Consumption Taxes, etc
Consumption taxes and local consumption taxes are excluded from transaction amounts.

55

Notes(Balance Sheets)
1. Entire amount of loans and bills discounted is for the Japanese Government.
2. The following assets have been pledged as collateral:
Assets pledged as collateral
Securities: ¥229,475 million
Loans and Bills Discounted: ¥48,000 million
Liabilities collateralized by the above assets
Call money: ¥6,000 million
In addition to the above, securities to the value of ¥33,418 million have been pledged as collateralfor exchange settlement transactions, etc.
Other Assets include guarantee money in the amount of ¥598 million.
3. Current account overdraft contracts are contracts by which the company is bound to extend loans
up to the prearranged amount at the customer's request unless the customer is in breach ofcontract conditions. The unutilized balance of these contracts amounts to ¥2,154,500 million, andthe original contractual terms for the total amount are one year or less.
Since many of these contracts expire without the rights being exercised, the unutilized balance
itself does not necessarily affect TCSB's future cash flows. A provision is included in many ofthese contracts that entitles TCSB to refuse applications for the execution of loans, or reduce themaximum contracted amount when there is a change in the financial situation, necessity topreserve a claim, or other similar reasons. Where necessary, TCSB also obtains real estate or
securities as collateral at the time the contracts are concluded and regularly monitors customer's
business conditions thereafter under in-house procedures established in advance, amending
contracts and taking other steps to control credit risks if needed.
4. Accumulated depreciation of Tangible Fixed Assets¥1,386 million
5. The principal amount promised to be indemnified for Money Trusts is ¥222 million.
6. Total monetary claims due to Related companies¥269 million
7. Total monetary liabilities due to Related companies¥59,000 million
8. TCSB is subject to the restriction on dividends from surplus in accordance with the provisions ofArticle 18 of the Banking Law of Japan.
If TCSB intends to distribute dividends from surplus, regardless of the provision of Article 445,
Paragraph 4, of the Banking Law of Japan, “Amounts of Capital and Reserves,” TCSB records anamount that corresponds to a decrease in the surplus by distributing the dividends from surplus,
multiplied by one-fifth (1/5) as the legal reserve.
The legal reserve recorded for the fiscal year under review related to the dividends from surplus is¥32 million.

(Statements of Income)
Income related to transactions with Related companies
Total revenue from trust transactions
Total revenue from service transactions
Expenses related to transactions with Related companies
Total expenses related to financing transactions
Total expenses related to other operating and other ordinary transactions

56¥16 million¥2,539 million¥43 million¥40 million

(Statement of Changes in Net Assets)
1.

Types and number of shares issued and outstanding are as shown below.
(UNITS: Thousands of shares)

As ofApril 1,
2013

Increaseduring the
fiscal year

Decreaseduring the
fiscal year

As of
March 31,
2014

Remarks

Shares Issued andOutstanding

2.

Common Stock

1,000

−

−

1,000

Total

1,000

−

−

1,000

Dividend(1) Dividends paid during the year ended March 31, 2014
Total dividend
Type of sharesamountOrdinary General Meetingof Shareholders held on
Common stock¥160 million
June 14, 2013

Dividend
per share

Recorddate

Effective
date

¥160

March 31,2013

June 17,2013(2) Of the dividends for which the record date belongs to the fiscal year ended March 31, 2014,
those for which the effective date of the dividends will be after March 31, 2014.
Total
Source ofType of
Dividend
RecordEffective
dividend
funds forsharesper sharedate
dateamountdividends
Ordinary General
Meeting ofCommonRetained
March 31,
June 20,
Shareholders¥240 million
¥240
stock
earnings
2014
2014
held on June 19,
2014(Financial Instruments)
1.

Status of Financial Instruments(1) Policies on financial instruments
TCSB specializes in the asset management business and maintains a basic policy ofrisk-restrictive business administration. TCSB holds financial assets mainly consisting of“loans and bills discounted” to the Japanese Government, bonds such as government bondsand “call loans” on the asset investment side, as well as financial liabilities such as “callmoney” and “due to trust account” on the financing side.
TCSB is committed to the financing and asset investment of these financial instruments by
taking into account various risk factors while paying attention to appropriate management inresponse to each risk by financial instrument.
(2) Description of financial instruments and related risks
The major financial assets held by TCSB are loans and bills discounted to the Japanese
government, securities held to be deposited as collateral for settlement such as government
bonds and call loans to financial institutions. These financial assets are exposed to the risk(credit risk) that the value of the financial instruments could be reduced or lost due to thedeterioration of financial conditions at any borrower or issuer and the risk (market risk) that thevalue of the financial instruments could be reduced due to the fluctuation of interest rates.
Financial liabilities mainly refer to financing that uses call money and due to trust account.
These financing methods could face cash flow problems due to the deterioration of TCSB’s
financial conditions or TCSB could be exposed to the risk of incurring losses due to reluctant
financing because of significantly higher interest rates (liquidity risk).
Given the ongoing financial liberalization and internationalization, the financial assets andliabilities held by TCSB are becoming diversified and increasingly complicated, exposing

57

TCSB to various risks including the credit, market and liquidity risks detailed above.
(3) Risk management structure for financial instruments
1) Commitment to risk management
As a dedicated banking and trust company specializing in the asset management business,
TCSB maintains a basic policy of risk-restrictive business administration.
To raise its corporate value while ensuring sound and stable management, TCSB isproactively improving its risk management structure based on the recognition thatappropriately managing and controlling risks according to the characteristics of its
operations and risks is a critical managerial task.
At TCSB, the Board of Directors has stipulated basic policies on risk management. The
policies set forth diverse related matters: specific definitions of various risks, improvementof the structure for appropriate risk management and human resource development, andimplementation of audits to verify the appropriateness and effectiveness of the risk
management structure. TCSB endeavors to strengthen its risk management by drawing on
a variety of techniques compliant with its basic policies to ensure increasingly sophisticatedrisk management.
2) Comprehensive risk management
At TCSB, we classify the risks to which our various financial assets and liabilities are
exposed by factor into credit risk, market risk, liquidity risk, operational risk and so on, andmanage them according to their respective characteristics.
TCSB manages each type of risk individually. It has also established a comprehensive risk
management structure to identify and evaluate overall risk and, where necessary, to devise
appropriate responses to keep risk within manageable limits in both qualitative andquantitative terms.
3) Credit risk management
Credit risk management is carried out by the credit administration, which manages theprocesses from granting credit to collection, in order to control the losses that TCSB could
incur due to the emerging credit risk by transaction category based on the credit
investigation of customers.
At TCSB, the Board of Directors determines important credit risk related matters inaccordance with the Basic Policies on Credit Risk Management. Meanwhile, the ALM
Committee deliberates on and coordinates basic policies and administration-related mattersspecific to credit risk and credit risk monitoring. The Risk Management Department, whichis led by the officer responsible for the Department, draws up and executes plans andpromotes the basic matters concerning credit risk management.
Credit risk management is carried out in accordance with our internal credit rating system,
and individual credit lines, as a general rule, are set and controlled by the final decisions of
our credit assessment department every half year. The individual credit lines are set inaccordance with the credit business policies and determined through the screening of
ceiling limits compared with the total amounts of on-balance transactions and derivativetransactions (credit amounts are calculated with the current exposure method). Moreover,from the viewpoint of enhancing the check-and-balance function, the Internal Audit
Department is established as an internal auditing organ independent from the operating
departments.
4) Market risk management
At TCSB, the Board of Directors determines important market risk related matters inaccordance with the Basic Policies on Market Risk Management. Meanwhile, the ALM
Committee deliberates on and coordinates ALM-related basic policies, risk plans, market
risk administration related matters and countermeasures in case of emergencies such as asudden change in the market.
The officer responsible for the Risk Management Department holds jurisdiction overgeneral matters concerning the planning and administration of market risk management.
The Risk Management Department assumes practical operations such as monitoring,
reporting and analysis of and proposals on market risk, and setting limits thereon, as wellas drawing up and executing plans and promoting matters concerning market risk
management. The Risk Management Department also works to identify and evaluate
TCSB’s risk situation, reports to the President on a daily basis and periodically reports to
the Board of Directors and other relevant entities.
As a market risk management method, various limits are set and controlled. Although

58

TCSB does not engage in trading operations, ceiling limits are set on the losses that it could
incur with regard to the banking operations and position boundaries are set using theinterest-rate sensitivity analysis, as required.
Moreover, as for market operations, a middle office (Risk Management Department) is
established as an internal entity independent from the front office (market departments) andthe back office so that the check-and-balance function can effectively operate. The middle
office manages market risk in detail with diverse measures: managing risk indicators suchas 10 BPV (basis point value), conducting stress tests and applying the loss limits.
5) Status of market risk
TCSB has determined in the Basic Policies on Market Risk Management that its
operations be conducted in a restrictive manner to minimize market risk exposure for its
deals with customers and endeavors to ensure safe and reliable investments.
Major financial instruments at TCSB are government bonds and call loans, and they aremainly influenced by interest rate risk, which is a primary market risk. The Risk
Management Department computes the BPV on the financial instruments on a daily basis
and monitors whether the prearranged amounts (i.e., the upper limit) thereof are observed.
As of March 31, 2014, the BPV for the financial instruments held by TCSB was set to ¥31
million.
6) Financing-specific liquidity risk management
TCSB’s liquidity risk management structure is basically the same as the market risk
management structure described in the preceding item 4) “Market risk management.” In
addition, the Treasury Department assumes practical operations such as cash flow
management and draws up and executes plans and promotes matters concerning cash
flow management. The cash flow situation is reported to the ALM Committee and thePresident.
Liquidity risk is measured using cash flow related indicators such as the ceiling limits
concerning financing from the markets. The ALM Committee deliberates on andcoordinates the limits specific to liquidity risk and so forth. Furthermore, the Committee
determines the liquidity risk categories of “Ordinary,” “Concerned” and “Critical” in responseto the cash flow situation, as well as responsive actions to cope with the “Concerned” and“Critical” situations. The Committee has also established an emergency structure thatallows us to take swift action in case of an “emergency” that could have a negative effect on
TCSB’s cash flow situation.
(4) Supplemental explanation on fair value of financial instruments, etc.
The fair values of financial instruments include not only the amounts based on the market
value but also certain amounts reasonably calculated if no market value exists. As thecalculation of such amounts adopts certain preconditions, the resulting values may differ
depending on the preconditions used for calculation.

59

2.

Fair value of financial instruments, etc.
The following table indicates the amount on the balance sheet, the fair value and the unrealized
gain (loss) as of March 31, 2014, related to financial instruments. Unlisted stocks and the like, forwhich it is deemed extremely difficult to measure the fair value, are not included in the table below.
(Refer to (NOTE 2.))
(UNITS: Millions of yen)Amountshown in
Balance
sheet

Fair value

Difference(1) Cash and Due from Banks

191,241

191,225▲15(2) Call Loans

185,000

185,000−

Other Securities

281,495

281,495−(4) Loans and Bills Discounted

48,00048,000−Total Assets

705,736

705,721▲15(1) Deposits

43,29643,296−(2) Negotiable Certificates of Deposit

59,00259,002−(3) Call Money319,263319,263−(4) Due to Trust Accounts

215,717

215,717−

Total Liabilities

637,278

637,278−▲2,311▲2,311−(3) Securities

Derivative Transactions (*1)
(1) Those to which Hedge Accounting is not applied

Total Derivative Transactions▲2,311▲2,311−(*1) The derivative transactions recorded in “Other Assets” and “Other Liabilities” are collectively
indicated above. Net receivables and payables, which were derived from derivativetransactions, are presented in net amounts.
（NOTE 1） Calculation method of the fair value of financial instruments
Assets(1) Cash and Due from Banks
As the fair value of the amounts of “due from banks” without maturity approximates thebook value, the book value concerned is recorded as the fair value.
For “due from banks” with maturity, the present value is calculated by discounting the future
cash flows for each of the certain fixed periods set. The market interest rate is used as thediscount rate. For those with short maturity periods (within six months) the fair value
approximates the book value, and therefore the book value concerned is recorded as thefair value.
(2) Call LoansAs the current maturity is short (within six months) and the fair value approximates the bookvalue, the book value concerned is recorded as the fair value.
(3) Securities
The fair value of bonds is based on the prices traded at the stock exchange. The notes on
securities by holding purpose are stated in (Securities) below.
(4) Loans and Bills Discounted
As the residual period is short (within six months) and the fair value approximates the bookvalue, the book value concerned is recorded as the fair value.

60

Liabilities(1) Deposits
For the demand deposits, the amount paid (book value) when requested at the end of theyear under review is deemed the fair value.
(2) Negotiable Certificates of Deposit
The maturity period of negotiable certificates of deposit is short (within six months) and thefair value approximates the book value, therefore the book value concerned is recorded as
the fair value.
(3) Call Money
As the current maturity is short (within six months) and the fair value approximates the bookvalue, the book value concerned is recorded as the fair value.
(4) Due to Trust Account
The amount paid (book value) when requested at the end of the year under review isdeemed the fair value.
Derivative Transactions
Derivative transactions to which Hedge Accounting is not applied
For derivative transactions to which hedge accounting is not applied, the contract amount at
the closing date by transaction type or notional amount specified in the contract, fair value
and unrealized gains (losses), as well as the calculation method of the fair value concerned,
are as shown below. The contract amounts, etc., do not show a market risk related toderivative transactions.
1) Currency-related(UNITS: Millions of yen)Type of derivativetransaction

Category

Contract value

Fair value(*1)

Over oneyear

Unrealized
gains(losses)

Forward exchange
contracts
Over thecounter

Sold

1,062,261−▲8,935▲8,935

Bought1,008,160

−

6,624

6,624

2,070,421−▲2,311▲2,311

Total(*1) The fair value of the above transactions is measured, and the resulting profits and losses
are recorded on the statements of income. The calculation method of fair value is based on
the forward foreign exchange rates.
（NOTE 2） Financial instruments for which it is deemed extremely difficult to measure the fair value
are as shown below, and they are not included in Other Securities in (3) Securities of“Fair value of financial instruments, etc.”(UNITS: Millions of yen)

Category
Unlisted stocks (*1)
TotalAmount shown inBalance sheet
447447(*1) As unlisted stocks have no market value and it is deemed extremely difficult to measure
the fair value thereof, they are not subject to the disclosure of fair value information.

61

（NOTE 3） Redemption schedule of monetary claims and securities with maturity dates for years
subsequent to the closing date (March 31, 2014)(UNITS: Millions of yen)

Within1 year

1-3 years

3-5 years

5-7 years

7-10
years

Over
10 years

Cash and Due from Banks

176,129

−

−

−

−

−

Call Loans

185,000

−

−

−

−

−

Securities with Maturity
Dates included in“Other Securities”

161,660

119,834

−

−

−

−

Loans and Bills Discounted

48,000

−

−

−

−

−

Total

570,790

119,834

−

−

−

−

Securities（NOTE 4） Redemption schedule of borrowings and other interest-bearing debt for years subsequent
to the closing date (March 31, 2014)(UNITS: Millions of yen)

Within1 year

1-3 years

3-5 years

5-7 years

7-10
years

Over
10 years

Deposits (*1)

43,296

−

−

−

−

−

Negotiable Certificatesof Deposit

59,002

−

−

−

−

−

Call Money319,263

−

−

−

−

−

Due to Trust Accounts

215,717

−

−

−

−

−

Total

637,278

−

−

−

−

−

(*1) Of the deposits in the banking business, demand deposits are disclosed under “Within 1
year.”

62

(Securities)
Other than government bonds, corporate bonds, stocks and other securities on the balance sheets,
negotiable certificates of deposit in “Cash and Due from Banks” are included.
Other securities (As of March 31, 2014)(UNITS: Millions of yen)Amount shown inBalance sheet

Acquisition cost

Government Bonds

122,440

122,407

33

Corporate Bonds

47,52447,5194

Subtotal

169,964

169,927

37

Government Bonds

56,80156,804▲2

Corporate Bonds

54,72854,740▲11

Other

125,000

125,000−

236,530

236,544▲14

406,495

406,471

23

Type

Difference

Japanese Bonds
Those of which
the amount on thebalance sheet
exceeds theacquisition costThose of which
the amount on thebalance sheet
does not exceed
the acquisition
cost

Japanese Bonds

Subtotal
Total(NOTE) Other securities for which it is deemed extremely difficult to measure the fair value(UNITS: Millions of yen)Amount shown inBalance sheet
Stocks

442

Other

4
Total

447

As these securities have no market value, they are not included in “Other securities” in the list
above.

63

(Tax-Effect Accounting)
1. Principal deferred tax assets and liabilities, broken down by cause, are shown below.
Deferred tax assets
Accrued business and business facility taxes¥68 million
Asset retirement obligations
50
Provision for retirement benefits and provision for directors’ retirement benefits
35
Valuation difference on Available-for-Sale Securities
5
Other
80
Total deferred tax assets
239
Deferred tax liabilities
Tangible Fixed Assets
30
Valuation difference on Available-for-Sale Securities
13
Other
0
Total deferred tax liabilities
43
Net deferred tax assets
195 million
2. Following the promulgation of the Act on Partial Revision of the Income Tax Act, etc. (Act No. 10 of 2014)
on March 31, 2014, we are no longer subject to the special reconstruction tax effective the business year
starting on or after April 1, 2014. Consequently, the statutory effective tax rate for the calculation ofdeferred tax assets and deferred tax liabilities will be lowered from 38.01% to 35.64% for temporary
differences expected to be eliminated in the business year beginning on April 1, 2014. As a result of thischange, deferred tax assets decreased by ¥8 million while income taxes-deferred increased by ¥8 million.

（Related party transactions）(1) Transactions with the parent company and principal corporate shareholders ,etc.
(UNITS: Millions of yen)

Category
Other relatedcompanies

Name ofcompany,etc.

Percentage
of votingrights (orownership)
Directownership
23%

Relationshipwith related
party

Details oftransactions

Transactio
n amounts（Note 2）

Balan
Account
at termclassification
end

The
Entrustment
Entrustment
2,465 Accrued
Dai-ichiof securities
of securities
incomeLifeadministration administration
Insurance
operations
operations
Company,（Note 1）
LimitedTransaction terms and determination thereof（NOTE 1）Fees for the performance of outsourced securities administration operations are set
according to the company’s fee rates table.
（NOTE 2）Transaction amounts do not include consumption tax. Balance at term end includes
consumption tax.

642

(2) Sister companies, etc.
(UNITS: Millions of yen)

Category

Name ofcompany,
etc

Subsidiary Mizuho
of Parent
Trust &
Company Banking
Company,
Limited

Percentage
of votingrights (orownership)
None

Relationshipwith related
party

Details oftransactions

Transaction
Balance
Account
amounts
at termclassification
end（Note 3）

Performance
Performance
9,008 Suspenseof trustof trust
receipt
services forservices fortrust banktrust bank
Sharing of（Note 1）
directors
Subsidiary Mizuho
None
Performance
Outsourcing
3,807−
of Parent
Trustof outsourced of system
Company Systems
systemoperation
Company,
operation and Outsourcing
3,949−
Limitedsoftwareof softwaredevelopment
development
services（Note 2）
Transaction terms and determination thereof（NOTE 1）Fees for the performance of outsourced trust services are determined throughnegotiations based on fee amounts calculated by the company.
（NOTE 2）Fees for the performance of outsourced system operation and softwaredevelopment services are determined through negotiations based on fee amounts
calculated by MHTS Co., Ltd.
（NOTE 3）Transaction amounts do not include consumption tax. Balance at term end include
consumption tax.
(Per share information)
Net assets per share¥58,535.98

Net income per share¥1,169.04

65

8,875

−

−

Results of Trust Banking Business■Statements of Trust Assets and Liabilities(UNITS: Millions of yen)

2011
As of 31.Mar.2012

2012
As of 31.Mar.2013

2013
As of 31.Mar.2014

AssetsSecurities
Beneficiary Rights to the Trusts
Securities Held in Custody Accounts
Money Claims
Call Loans
Due from Banking AccountCash and Due from Banks
Other Assets
Total Assets

104,126,326
13,770,697
5,034,925
2,184,814
2,751,604
197,8873,524,385
7,917,221
139,507,862

100,981,285
15,023,397
4,357,127
1,131,658
2,941,544
202,241
7,009,287
10,002,858
141,649,400

103,945,600
17,392,887
4,433,320
589,576
3,390,783
215,717
6,229,435
11,881,265
148,078,586

Liabilities
Money Trusts
Investment Trusts
Money Entrusted Other than Money Trusts
Securities Trusts
Composite Trusts
Total Liabilities

82,121,325
6,171
95,8596,818,659
50,465,846
139,507,862

81,992,173
21,46861,8596,881,445
52,692,452
141,649,400

79,467,630
69,56862,371
7,393,969
61,085,047
148,078,586（NOTE 1）Amounts less than one million yen are rounded down.

66Capital Adequacy Ratio (Basel II)
2012
As of
31.Mar.2013

Tier Ⅰ Capital
Tier Ⅱ Capital
Total Risk-based Capital（A）+（B）
Risk-Weighted Assets
Capital Adequacy Ratio (C)÷(D)×100

(A)
(B)

57,351-(C)(D)

57,351
147,298
38.93%（NOTE 1）Amounts less than one million yen are rounded down.

Capital Adequacy Ratio (Basel III)
2013
As of
31.Mar.2014

Core capital: instruments and reserves
Core capital: regulatory adjustments
Capital (A) – (B)

(A)
(B)
(C)
(D)

Risk-Weighted Assets
Capital Adequacy Ratio (C)÷(D)×100

67

58,28058,280148,287
39.30%