2018(April 2017～March 2018)
Annual Report

Mizuho Financial Group

Trust & Custody Services Bank, Ltd.

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.
1

Contents

Message from Management

page 3

Corporate Data

page 4

Financial Data
Results of Operations

page 7■ Overview of Business in Fiscal 2017

Financial Statement

page 8■ Balance Sheets■ Statements of Income■ Statements of Changes in Net Assets

Results of Trust Banking Businesspage23■Statements of Trust Assets and Liabilities

Capital Adequacy Ratio (Basel III)

page 242

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 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 services, reinforced our operational and IT infrastructure,reformed our internal control structure, and developed human resources who would become
professionals in asset management.
With our customers’ support and understanding of our initiatives, we have continued to further
expand the size of our business platform.
In today’s severe investment environment, customers’ investment styles are becoming much morediverse and sophisticated at a faster pace. For example, investment targets and regions are moreglobalized and alternative/derivative investment is generalized. Asset management institutions that
support these moves are also expected to become more diverse and sophisticated to meet the needsof customers.

While making sure to respond to such changes in customer needs, we shall not only take initiatives
to provide high-quality administration services and make tireless efforts to improve, but also respondto the new styles and needs of customers with new administration services, thereby offering highadded value. Furthermore, in an environment where digital innovation is advancing at an accelerating
pace, we will actively take initiatives to promote “smart operation” that makes full use of IT, and pursue
high quality, high efficiency, speed and expertise that are one rank higher.

Our consideration regarding management integration with the Japan Trustee Services Bank, Ltd.,
aimed at becoming the country’s top trust bank specializing in asset management, has now enteredwhat we could call a stage of “second founding”.

All of us at TCSB are committed to refining our operational services more than ever to provide ourcustomers with truly satisfying services as “the best asset administration partner, helping customers toincrease their level of sophistication in asset management as the Most Trusted Partner Chosen by
Customers.”
We would greatly appreciate your continued support for and patronage of our company.

Nobumitsu Watanabe, President & CEO

3

Corporate Data
■Profile (as of July 1, 2018)
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
JAPAN POST INSURANCE Co., Ltd.
Fukoku Mutual Life Insurance Company

540,000 shares (54%)
160,000 shares (16%)
100,000 shares (10%)
90,000 shares (9%)
70,000 shares (7%)
40,000 shares (4%)

Employees:
671 (as of March 31, 2018)* Number of employees includes persons on secondment from outside organizations. It does notinclude executive officers and temporary employees.
Main Activities

1. Asset Administration Services
Trust Services
Domestic Custody Services
Overseas Custody Services
Asset Administration Services for Defined Contribution Pensions
Master Trust Services (Master Trust Record-keeping Services)
2. Other Value-Added Asset Administration Services
Securities Lending Services
Comprehensive Securities Management Outsourcing Services
Collateral Management and Administration Services for OTC Derivative
Transactions
Administration Services for middle- and back-office operations of asset
management companies

URL:

http://www.tcsb.co.jp/■Credit Ratings

S&P
Moody’s
R&I

Long-term
A－
A1
AA－

* Bank financial strength rating

4

Short-term
A-2
Prime-1
a-1+

■Organization Chart (as of July 1, 2018)
Internal Audit Department
Accounting Office
Corporate Planning Department
Fiduciary Duty Promotion OfficeGroup Strategy Development Department

Human Resources Department
Corporate Auditors
OfficeCorporate
Auditors/Board of
Corporate Auditors

Risk Management Department

Internal Audit
Committee

Compliance & Legal Affairs Department

Digital Innovation Office

Operations Planning Department

Quality Management Office

IT & Systems Planning Department

Information Technology
Risk Management Office

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
CS OfficeExecutive Management Committee
Products
Division
Business Policy Committees*

International Custody Operations Department
CS OfficeCustody Client Services Department
CS OfficeInternational Settlement Office
Investment Information Services Office

Investment Trust Services Department
CS OfficeLife Insurance Company Asset Custody Department
CS OfficeSettlement Management Department
CS OfficeSettlement Management Office

Management Administration Services Department
CS OfficeCollateral Operations Department
CS Office(CS Office: Customer Services Office)* Business Policy Committees consist of eight committees including the Compliance Committee and others■Corporate Officers (as of July 1, 2018)
President & CEO Nobumitsu Watanabe
Deputy President Akira Noguchi
Managing Director Hiroyuki Obata
Managing Director Yasushi Makino
Director Masao Kanamaru
Director Goji Fujishiro
Director Yukihiro Fujioka
Director Tomohiro Nishio
Director Shigeaki Asai
Corporate Auditor Noboru Senni
Corporate Auditor Hiroto Uchino
Corporate Auditor Masato Monguchi
Corporate Auditor Takehiko Watabe

5Senior Managing Executive Officer, Head of Products Division and General Manager, Custody Client
Services Department Makoto Saito
Managing Executive Officer Masafumi Yoshida
Executive Officer and General Manager, Group Strategy Development Department
Mochizuki
Executive Officer and General Manager, Business Promotion Division

6

MinoruKenji Yoshikawa

Financial Data
Results of Operations
Overview of Business in Fiscal 2017
The Financial and Economic Environment
During the period under review (fiscal 2017), the world economy continued to recover at a moderatepace overall on the backdrop of recovery of the Chinese economy, improvement in the IT cycle,
improvement in the corporate sentiment primarily in developed countries, and other factors.
Meanwhile, the Japanese economy continued to recover moderately due to expanding overseas
economies and strong domestic demand. Factors contributing to the favorable domestic demand
included inventory cycle improvements, growth in capital investments related to the Tokyo Olympic
Games and productivity enhancement, and execution of public investment associated with economic
measures. In addition, consumer spending turned for the better due to the positive effects fromconsumer needs to replace durable goods while small-and-medium-sized businesses increased
wages.

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.
In the area of income and expenditures during the fiscal year, ordinary income increased ¥421
million from the year before to ¥23,884 million mainly due to countering a decline in interest income
associated with funds investment caused primarily by the impact of negative interest rates with anincrease in revenue from service transactions. Key components were revenue from service
transactions of ¥14,311 million and trust transactions of ¥11,425 million.
Meanwhile, ordinary expenses increased ¥555 million from a year earlier to ¥23,027 million due
primarily to higher systems expenses. Major components were general and administrative expenses of¥21,064 million and expenses from service transactions of ¥1,950 million.
As a result, ordinary income was ¥857 million (a decrease of ¥133 million year on year) and net
income for the fiscal year came to ¥507 million (a decrease of ¥167 million year on year).
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 – amounted to ¥382 trillion.

7

Financial Statement■Balance Sheets(UNITS: Millions of yen)2015
As of 31.Mar.20162016
As of 31.Mar.20172017
As of 31.Mar.2018

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

4,105,296
694,000
292,596
210,496
1,383
154,962580
13,762
154
5,473,232

5,976,756
620,000
188,945
4,508,796
2,103
110,773872
16,219235
11,424,703

6,639,229
420,000
263,932
6,209,728
329
104,143
1,202
18,388299
13,657,253

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

558,411500,000
292,375
4,047,935
13,88586
97
54
5,412,846

7,199,573
500,000
131,900
3,511,928
20,21999
140
69
11,363,931

9,375,034
500,000
95,5003,598,948
26,380103
188
72
13,596,228

50,00010,30960,30976
76

50,00010,75360,75318
18

50,00011,125
61,125（101）（101）

Net Assets
Capital Stock
Retained Earnings
Shareholders’ Equity
Valuation Difference on Available-for-Sale Securities
Valuation and Translation Adjustments
Total Net Assets
Total Liabilities and Net Assets

60,38560,771

61,024

5,473,232

11,424,703

13,657,253(NOTE 1) Amounts less than one million yen are rounded down.

8

■Statements of Income(UNITS: Millions of yen)

2015
From 1.Apr.2015
To 31.Mar.2016

2016
From 1.Apr.2016
To 31.Mar.2017

2017
From 1.Apr.2017
To 31.Mar.2018

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

10,5202,249
11,68333
1224,50011,165（152）
12,442
6
023,462

11,425（1,869）14,31110
723,884

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

1,051
1,678
0
20,045
3
22,77932
1,749
120,682
6
22,472（5）
1,950－
21,06418
23,027

Ordinary Profit

1,721

990

857

Extraordinary Loss
Loss on Disposal of Noncurrent Assets
Management Integration-related Expenses

4
－

1
－

12
96

Total Extraordinary Losses

4

1

109

1,716
590
（3）
587
1,129

988
369
（54）
314
674

747
251
（11）
240
507

Income Before Income Taxes
Income Taxes-Current
Income Taxes-Deferred
Total Income Taxes
Net Income(NOTE 1) Amounts less than one million yen are rounded down.

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

2015
From 1.Apr.2015
To 31.Mar.2016

2016
From 1.Apr.2016
To 31.Mar.2017

2017
From 1.Apr.2017
To 31.Mar.2018

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

9,409

10,30910,753

（230）
1,129
899
10,309

（230）
674
444
10,753

（135）
507
372
11,12559,40960,30960,753

（230）
1,129
899
60,309

（230）
674
444
60,753

（135）
507
372
61,125

9

76

18

66

（58）

（119）

66
76

（58）
18

（119）
（101）

59,41960,38560,771

（230）
1,129

（230）
674

（135）
507

66

（58）

（119）

966
60,385386
60,771

252
61,024

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

10Notes (Fiscal 2017)
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) and equipment accessory to buildings andstructures acquired on or after April 1, 2016, which are depreciated using the straight-line
method). Depreciation is mainly computed using the following ranges of useful life:
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, July 4, 2012) are classified into thecorresponding categories and posted on the basis of loan-loss ratios calculated according toindividual 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． Accounting for Consumption Taxes, etc.
Consumption taxes and local consumption taxes are excluded from transaction amounts.

11

Notes(Balance Sheets)
1. Loans and bills discounted are for the Japanese Government or are for Japanese
Government-related organizations.
2. The following assets have been pledged as collateral:
Assets pledged as collateral
Securities: ¥3,000 million
Loans and Bills Discounted: ¥714,071 million
Liabilities collateralized by the above assets
There are no outstanding liabilities as of the end of the fiscal year under review.
In addition to the above, securities to the value of ¥22,445 million have been pledged as collateralfor exchange settlement transactions.
Other Assets include “Margin for CCP” of ¥64,604 million, “Guarantee deposits for CCP” of¥33,200 million and guarantee money in the amount of ¥659 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 ¥2,332,400 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’sbusiness 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¥1,621 million
5. The principal amount promised to be indemnified for Money Trusts is ¥639,533 million.
6. Total monetary claims due to Related companies¥332 million
7. 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¥27 million.

(Statements of Income)
1. Negative figures for interest on loans and bills discounted and interest on call loans which areincluded in interest income and for interest on call money included in interest expenses are theresults of netting in conjunction with the conclusion of contracts with negative interest rates.
2. 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 other ordinary transactions

12¥41 million¥2,557 million¥62 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,
2017

Increaseduring the
fiscal year

Decreaseduring the
fiscal year

As of
March 31,2018

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, 2018
Total dividend
Type of sharesamountOrdinary General Meetingof Shareholders held on
Common stock¥135 million
June 13, 2017

Dividend
per share

Recorddate

Effective
date

¥135

March 31,2017

June 14,2017(2) Of the dividends for which the record date belongs to the fiscal year ended March 31, 2018,
those for which the effective date of the dividends will be after March 31, 2018.
Total
Source ofType of
Dividend
RecordEffective
dividend
funds forsharesper sharedate
dateamountdividends
Ordinary General
Meeting ofCommonRetained
March 31,
June 15,
Shareholders¥100 million
¥100
stock
earnings
2018
2018
held on June 14,
2018(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-guaranteed bonds” and “call loans” on the asset investment side, as well as
financial liabilities such as “liquid deposits” 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 bonds andcall 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 the deterioration offinancial conditions at any borrower or issuer and the risk (market risk) that the value of thefinancial instruments could be reduced due to the fluctuation of interest rates.
Financial liabilities mainly refer to financing that uses liquid deposits and due to a 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 toreluctant 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
TCSB to various risks including the credit, market and liquidity risks detailed above.

13

(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
TCSB does not engage in trading operations, ceiling limits are set on the losses that it could

14

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 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 include bonds such as government-guaranteed bonds,
call loans, etc. and they are mainly influenced by interest rate risk, which is a primarymarket 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, 2018, the BPV for the financial instruments heldby TCSB was set to ¥269 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.

15

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, 2018, 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

6,639,229

6,639,229－

420,000

420,000－

Other Securities

263,487

263,487－(4) Loans and Bills Discounted

6,209,728

6,208,340（1,388）

Total Assets

13,532,446

13,531,057（1,388）(1) Deposits

9,375,034

9,375,034－(2) Negotiable Certificates of Deposit

500,000

500,000－(3) Call Money95,50095,500－(4) Due to Trust Accounts

3,598,948

3,598,948－

Total Liabilities

13,569,483

13,569,483－(1) Those to which Hedge Accounting is not applied

－

－

－

Total Derivative Transactions

－

－

－

(1) Cash and Due from Banks(2) Call Loans(3) Securities

Derivative Transactions (*1)(*1) The derivative transactions recorded in “Other Assets” and “Other Liabilities” are collectively
indicated above. Net receivables and payables, which were derived from derivative transactions, arepresented 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, since maturity periods are short (within six months) andthe fair value approximates the book value, the book value concerned is recorded as thefair value.
(2) Call Loans
Since maturity periods are short (within six months) and the fair value approximates thebook value, 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
For loans and bills discounted, the present value is calculated by discounting the future
cash flows for each of the certain fixed periods set. The full amount of loans and bills
discounted is for the Japanese government or Japanese government-related organizations
and the market interest rate is used as the discount rate. Note that for those with shortmaturity periods (within six months), since the fair value approximates the book value, thebook value concerned is recorded as the fair value.

16

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 are currency-related transactions (exchange contracts) and use
prices which are calculated based on exchange prices, forward foreign exchange rates anddiscounted present values.
(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
445445(*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.

17

(NOTE 3)

Redemption schedule of monetary claims and securities with maturity dates for years
subsequent to the closing date (March 31, 2018)(UNITS: Millions of yen)

Within1 year

7-10
years

Over
10 years

1-3 years

3-5 years

5-7 years

6,629,167

－

－

－

－

－

420,000

－

－

－

－

－

Securities with Maturity
Dates included in“Other Securities”

53,570209,917

－

－

－

－

Loans and Bills Discounted

6,209,728

－

－

－

－

－

Total

13,312,466

209,917

－

－

－

－

Cash and Due from Banks
Call Loans
Securities(NOTE 4)

Redemption schedule of borrowings and other interest-bearing debt for years subsequent
to the closing date (March 31, 2018)(UNITS: Millions of yen)

Within1 year

7-10
years

Over
10 years

1-3 years

3-5 years

5-7 years

9,375,034

－

－

－

－

－

Negotiable Certificatesof Deposit

500,000

－

－

－

－

－

Call Money95,500

－

－

－

－

－

Due to Trust Accounts

3,598,948

－

－

－

－

－

Total

13,569,483

－

－

－

－

－

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

18

(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, 2018)(UNITS: Millions of yen)Amount shown inBalance sheet

Acquisition cost

Government Bonds

2,601

2,601

（0）

Corporate Bonds

260,886

261,031

（145）

Other

100,000

100,000－

363,487

363,633（145）

363,487

363,633

（145）

Type

Difference

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

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

3
Total

445

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

(Retirement benefits)
Retirement benefit system adopted
TCSB adopts the defined contribution pension plan for part of its lump-sum retirement allowancesystem. The amount of contribution required for the defined contribution pension plan is ¥18 million.

19

(Tax-Effect Accounting)
1. Principal deferred tax assets and liabilities, broken down by cause, are shown below.
Deferred tax assets
Asset retirement obligations¥101 million
Provision for retirement benefits and provision for directors’ retirement80
benefits
Accrued business and business facility taxes
60
Valuation difference on Available-for-Sale Securities
44
Provision for bonus payments
31
Tangible Fixed Assets
0
Other
48
Total deferred tax assets
367
Deferred tax liabilities
Tangible Fixed Assets
68
Valuation difference on Available-for-Sale Securities
0
Total deferred tax liabilities
68
Net deferred tax assets
299 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
16%

Relationshipwith related
party

Details oftransactions

Transactio
n amounts(Note 2)

Accountclassification

The
Entrustment
Entrustment
2,341 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.

20

Balanceat term
end
293

(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
amounts(Note 3)

Accountclassification

Performance
Performance
9,989 Suspenseof trustof trust
receipt
services forservices fortrust banktrust bank
Sharing of(Note 1)
directors
Subsidiary Mizuho
None
Performance
Outsourcing
3,964－
of Parent
Trustof outsourcedof system
Company Systems
systemoperation
Company,
operation and Outsourcing
4,809
Suspense
Limitedsoftwareof software
payments
development
development
for software
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 software development
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¥61,024.87

Net income per share¥507.26(Business combination/business divestiture-related)
1. Business combination
The Company and Japan Trustee Services Bank, Ltd. (hereinafter, “JTSB”) entered into anagreement on management integration by way of joint share transfer on March 28, 2018 asoutlined below.
(1) Names of parties concerned in the business combination and business description
JTSB

Trust banking business

the Company
Trust banking business(2) Reasons for the business combination
This management integration is executed with the purpose of contributing to thefurther development of the domestic securities market and to increasing
sophistication of Japan’s investment chain. This can be achieved by combining themanagement resources and know-how of the Company engaging in the asset
management business and JTSB and gaining the benefit of scale to realize stable
and high-quality operations and reinforce systems development capabilities.
(3) Scheduled date of business combination
October 1, 2018(4) Legal format of business combination
Establishment of a holding company through a joint share transfer(5) Name of company after combination
JTC Holdings, Ltd.

21

Balanceat term
end
10,689－4,139

2. Business divestiture
Looking ahead to the above management integration with JTSB and other related matters,
the Company and Mizuho Trust & Banking Co., Ltd. entered into an agreement on business
transfer by way of company split on February 28, 2018 as outlined below.
(1) Name of successor company
Mizuho Trust & Banking Co., Ltd.
(2) Description of business to be separated
Trust service business (excluding business activities related to re-entrustment byanother firm and those related to defined contribution plan);Custody service business (excluding foreign bank agency services);
Securities lending service business (excluding business activities related to thetrust service business); andCollateral management administration services business for OTC derivativetransactions.
(3) Reason for the business divestitureThis business transfer by way of company split is executed with the purpose ofconcentrating the function of providing asset management solutions by Mizuho at
Mizuho Trust & Banking Co., Ltd.
(4) Scheduled date of business divestiture
July 1, 2018(5) Legal format of business divestiture
Absorption-type split with the Company as the splitting company and Mizuho Trust& Banking Co., Ltd. as the successor company

22

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

2015

2016

2017

As of 31.Mar.2016

As of 31.Mar.2017

As of 31.Mar.2018

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

88,539,659
18,472,080
6,189,068
652,457
688,338
4,047,935
6,244,065
16,252,935
141,086,540

84,565,099
18,697,165
5,728,389
731,203
663,774
3,511,928
12,737,497
19,431,352
146,066,410

81,754,495
18,335,132
5,766,986
765,826
851,857
3,598,948
15,310,485
16,983,137
143,366,870

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

63,129,346
13,77265,424
9,913,311
67,964,685
141,086,540

65,557,811－
316,855
10,242,335
69,949,406
146,066,410

61,517,159－
592,615
9,813,003
71,444,091
143,366,870(NOTE 1) Amounts less than one million yen are rounded down.

23Capital Adequacy Ratio (Basel III)

Core capital: instruments and reserves
Core capital: regulatory adjustments
Capital (A) – (B)Risk-Weighted Assets
Capital Adequacy Ratio

2016

2017

As of 31.Mar.2017

As of 31.Mar.2018

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

60,6189,731
50,887
230,957
22.03％(C)÷(D)×100(NOTE 1) Amounts less than one million yen are rounded down.

24

61,025
14,71046,315204,298
22.67％