Annual Report2015Profile
Musashino Bank is the only regional bank whose operationalbase consists of Saitama Prefecture. The prefecture lies
immediately to the north of Tokyo, and many of its residents
commute to work in the capital. Currently, 7.24 million(estimated) people live in Saitama, making it the country’s
fifth most populous prefecture after Tokyo, Kanagawa, Osaka,

and Aichi, and the population is still climbing.
Since its establishment in 1952, Musashino Bank has been
one of Saitama Prefecture’s core financial institutions, andhas played a major role in supporting the development of theregional economy and local industries for six decades.

Corporate Philosophy“Working in harmony with the local community it serves”

To contribute to the prosperity of the local community and to secure growth and development in partnership with the region.

“Maintaining a deep respect toward customers”

 o engage in bold management that anticipates change while providing the highest quality services throughout the organizationT
as a whole.

Bank Data (non-consolidated basis, as of March 31, 2015)

Subsidiaries and Affiliated Companies

Head Office:Home page:
Security code:
Established:
Networks:

NameLine of Business

The Bugin Guarantee
Co., Ltd.

Loan guarantees for individuals

The Bugin General Lease
Co., Ltd.

General leases, installment-payment
services, auto leasing services(As of September 30, 2015)

10-8, Sakuragi-cho 1-chome, Omiya-ku, Saitama
http://www.musashinobank.co.jp/8336 (First section of the Tokyo Stock Exchange)
March 6, 1952
Number of branches: 96 (Saitama Prefecture: 92 [of which
1 is a sub-branch], outside Saitama Prefecture: 4)
Number of mortgage loan centers: 92,232¥4,237.9 billion¥3,939.7 billion¥3,223.2 billion¥45.7 billion
10.08%The Bugin System Service Development, sale and maintenanceCo., Ltd.
of computer systems

Employees:
Total assets:
Deposits:
Loans:
Common stock:
Capital adequacy ratio:
Number of correspondent
184
arrangements:
Issued common stock:33,805 thousand shares

The Bugin Economic
Research InstituteCo., Ltd.

Research into the regional economy,
consultation, information services,and holding of seminars

The Bugin CapitalCo., Ltd.

Management support for venturebusinesses

The Musashino Card
Co., Ltd.

Credit card business ( JCB, VISA),
loans and loan guarantees related tocard services

Head OfficeTochigi
Prefecture

Gunma
Prefecture
NaganoPrefecture

Yamanashi
Prefecture

SaitamaPrefecture
Tokyo
Kanagawa
Prefecture

Contents

1 Consolidated Financial Highlights
2 Message from the President5	Long-term Vision/Medium-term Management Plan
6 Corporate Governance
7 Risk Management
8 Compliance9	Operational Base of Saitama Prefecture
10	Contributing to the Local Economy
11 Measures and Support for Regional Revitalization

IbarakiPrefecture

Chiba
Prefecture

12 Initiatives Related to Revitalization of the Region
13 Nurturing Growth Fields
14 Providing SME Management Assistance
15 Corporate Social Responsibility
16 Consolidated Balance Sheets
17	Consolidated Statements of Income and Comprehensive Income
18	Consolidated Statements of Changes in Net Assets
20	Consolidated Statements of Cash Flows
21 DirectoryConsolidated Financial Highlights
The Musashino Bank, Ltd. and Consolidated Subsidiaries Years Ended March 31, 2015 and 2014

Thousands of
U.S. Dollars(Notes 1 and 2)
2015

Millions of Yen (Note 1)
2015
2014

At Year-end
Total Assets............................................................................................
Deposits including negotiable deposits...................................................
Loans and Bills Discounted....................................................................
Trading Account Securities and Investment Securities............................
Total Net Assets.....................................................................................
Capital Adequacy Ratio (based on domestic standards) (%)...................

¥4,257,062
3,930,283
3,210,605
748,206
229,377
10.32¥4,079,797
3,780,337
3,066,023
772,397
202,766
11.22$35,425,331
32,706,028
26,717,194
6,226,231
1,908,774

For the Year
Total Income.........................................................................................
Total Expenses.......................................................................................
Income before Income Taxes..................................................................
Net Income............................................................................................

¥   78,737
56,64522,091
14,467¥   76,919
58,15518,763
10,315$   655,220
471,380
183,839
120,394

Notes 1. In this annual report, Japanese yen (in millions) and U.S. dollars (in thousands) are indicated with fractions omitted.
2. U.S. dollar figures have been translated at the rate ¥120.17 to U.S.$1, the prevailing market rate as of March 31, 2015.

Total income

Total expenses

Net income(¥ million)(¥ million)(¥ million)

78,96878,737
77,680FY2011FY201259,56258,15576,919FY2013

14,46759,067FY2014FY2011FY2012FY2013

11,142

56,6459,621

FY2014FY2011FY2012

10,315FY2013

FY2014

Forward-Looking Statements: This annual report contains forward-looking statements regarding the Bank’s financial condition and results ofoperations. These forward-looking statements, which include the Bank’s views and assumptions with respect to future events, involve certain
risks and uncertainties. Actual results may differ from forecasts due to changes in economic conditions and other factors.
1Message from the President

Aiming to Become
the Region’s Number One Bank

Kikuo Kato
President
I would like to sincerely thank all our stakeholders for theircontinued support of the Musashino Bank Group.

The Prefectural Economy
The economy of Saitama Prefecture has continued to slacken
off to the point of standstill in housing construction andcapital investment. However, as consumer spending is starting to pick up, mainly due to improvements in employment
and income conditions, there are signs of a gentle recovery inbusiness conditions.
Looking forward, the prefectural economy is expected to
be further invigorated, especially by improvements to convenience from the new Metropolitan Inter-City Expressway(Ken-O-do) and the JR railway line being directly connectedto Tokyo Station—the Ueno-Tokyo Line—and spurs fromthe development of a variety of facilities related to theupcoming Tokyo Olympics.

Main Initiatives in Fiscal 2014
Under these circumstances, the Bank has been working torealize its long-term vision for turning itself into “the region’s
number one bank (a Value-making Bank) that creates newvalue in Saitama,” as called for by our medium-term management plan “MVP (Musashino Value-making Plan) 1/3.” Fiscal
2014, the fiscal year ended March 31, 2015, was the middle
year of this plan, and the Bank has been implementing avariety of initiatives focused on growth and creation strategies.
In terms of growth strategies, the Bank has been opening
branches in Tokyo-Saitama border areas that have a strong
relationship with Saitama Prefecture, both geographically andeconomically. In fiscal 2014, the Bank opened the Kumegawa
2

Branch (Higashimurayama City) and the Itabashi-Nerima
Office (Nerima Ward).
Moreover, the Bank has opened the Saitama Shintoshin(Saitama New Urban Center) Personal Plaza as a branch
open on weekends and public holidays as well as weekdaysthat combines a mortgage loan center and a Hoken Plaza(Insurance Plaza). This branch will satisfy a variety of needsof individual customers, including by offering free consultations with permanently available specialists such as tax
accountants. In addition, the Bank has renewed the Kasukabebranch to be even more convenient than before.
For individual customers, in order to accurately respondto their needs at each stage of their life cycle, the Bank hascommenced various services. These comprise the Musashino
Inheritance Fixed Deposit, the first to be offered by a prefectural financial institution, the Musashino ATM Card Loan
for which customers can make a contract by merely using an
ATM screen, and the Musashino Premium Education Loanthat responds to customers who need significant funds foreducational purposes.
For corporate customers, the Bank is strengthening
its loans that emphasize assessing the business excellence,creativity and other aspects of corporate customers who aresmall and medium-sized enterprises (SMEs), and in this connection has commenced handling the Musashino SME Active
Fund, a loan product. The Musashino NPO Support Loan is
directed at supporting NPOs (non-profit organizations) thatare working to solve various regional problems.
Moreover, the Bank collects a variety of information, bothinternally and externally, and has established the Information
Center in the Head Office to disseminate this businessmatching information which is useful in solving various
customers’ business management issues.

In addition, the Bank has strengthened its support forcorporate customers active in growth fields, including healthand welfare, the environment, and high-technology industries.
As for our creation strategies, the Bank has been the firstprefectural financial institution to participate in research
publications in connection with the “Joint Research Into
Policy Issues” project directed at the future of Saitama
Prefecture. This participation is one of the Bank’s initiatives
arising from the Agreement on Comprehensive Partnershipthat we concluded with Saitama Prefecture. The Bank has
also been cooperating with local government organizations
as regards regional invigoration, including by concluding acomprehensive cooperation agreement with Tsurugashima
City, the first such agreement with a municipality.
In April 2015, the Bank established the “Team for
Promoting Towns, People and Job Revitalization,” andbecame proactively engaged with formulating the comprehensive regional strategy being undertaken by local government organizations involved with overcoming population
decline and vitalizing local economies in Japan.

Financial Results for the Year
Ended March 31, 2015

Deposits and assets in custody (non-consolidated)
As a result of efforts to expand our community-based business foundation and promote comprehensive transactions,
deposits, etc.,* in fiscal 2014 increased ¥151.0 billion compared with the previous fiscal year, to reach ¥3,939.7 billion.
Assets in custody rose ¥45.0 billion year on year to ¥682.9
billion due to favorable sales of investment trusts and insurance products.
* Deposits, etc., means deposits including CDs.

Loans (non-consolidated)
Loans outstanding increased ¥144.5 billion to ¥3,223.2
billion owing mainly to efforts to respond to the needs ofsmall- and medium-sized enterprises (SMEs) and individual
customers within the prefecture.
This marks the first time since the Bank’s founding thatthe total of deposits and outstanding loans exceeded a figureof ¥7 trillion.

Earnings
Recurring income increased by ¥600 million to ¥17.4 billion,
and net income rose by ¥1.0 billion to ¥10.7 billion.
On a consolidated basis, recurring income increased by¥600 million to ¥19.5 billion, while net income rose by ¥4.1
billion to ¥14.4 billion, as a result of efforts by the entire
Group to strengthen its marketing capabilities. Thanks tothese efforts, the Bank has posted both record recurringincome and record net income.
Saitama Shintoshin (Saitama New Urban Center) Personal Plaza

Deposits including negotiable deposits(non-consolidated)

Assets in custody(non-consolidated)(¥ billion)(¥ billion)

Loans(non-consolidated)(¥ billion)

3,223.2

682.9

3,939.7
637.8

3,788.7

3,078.9603.7

2,962.6

3,660.3
565.4

3,549.5

FY2011FY2012FY2013

FY2014FY2011

2,867.3

FY2012FY2013

FY2014FY2011FY2012FY2013

FY20143

Return to Shareholders

In our role as a regional financial institution in Saitama
Prefecture, we recognize that one of the most important
issues is in the area of overcoming population decline andvitalizing local economies in Japan. In this context, the Bank
has strengthened its cooperation with local government andNPO organizations, and educational institutions and thelike, and is proactively working at solving a wide variety ofregional issues.
Going forward, we will continue to make the utmost
efforts to meet the trust and expectations of all our stakeholders, centered on customers, shareholders and regional
communities, as we aspire to become “the region’s number
one bank.” As we work toward achieving our goal, we kindly
request your continued support and understanding.

The Bank’s basic policy is to continuously pay stabledividends to all shareholders. In fact, over the 45 years since
its listing on the Tokyo Stock Exchange in 1969, the Bank
has continuously paid out stable dividends, despite majorchanges in all aspects of the surrounding environment.
In the fiscal year ended March 31, 2015, we decided to
pay a year-end dividend of ¥40 per share (an annual dividendof ¥80 per share) in order to repay the constant support we
receive from all of our shareholders. The shareholders’ return
ratio in fiscal 2014 was 24.8%.

ROE
The consolidated return on equity (ROE) was 5.7% on a
5-year average, and the non-consolidated ROE was 5.2%.

Kikuo Kato

Aiming to be the Region’s Number One Bank

President

The environment surrounding the Bank is changing
significantly, and going forward the competition with otherbanks and business formats is predicted to intensify further.
Entering the final year of our medium-term management plan
“MVP 1/3 (Musashino Value-making Plan),” we will establish
a competitive management structure under which directors
and employees unite to achieve this plan by carrying out avariety of measures with a sense of urgency, and under which
initiatives are implemented to promote women’s careers andimprove customer satisfaction, thereby enhancing our earnings capabilities and further improving our financial position.

Net income

Dividend payout ratio and annual dividend(¥ billion)

FY2011 FY2012 FY2013 FY2014

14.4
11.1
9.6 9.3

10.5 10.3

9.7

10.7

Dividend
payout ratio (%)

25.27

22.46

25.79

24.84

Annualdividend (Yen)

70

70

75

80

ROE
Consolidated ROE:
5.7% for 5-year average
6.8%
5.8%
5.7%

6.1%
5.8%

5.3%
5.0%

Shareholders return ratio

5.1%

Non-consolidated ROE:
5.2% for 5-year average

FY2011 FY2012 FY2013 FY2014
Shareholders
return ratio (%)

FY2011FY2012

Consolidated
Non-consolidated

4

FY2013

FY2014

25.2

31.4

25.7

24.8

FY2011FY2012

Consolidated
Non-consolidated

FY2013

FY2014

Long-term Vision/Medium-term Management Plan
The Bank formulated a long-term vision aiming 10 years into the future to become the region’s number one bank that creates
new value in Saitama. To achieve this vision, the Bank started the medium-term management plan “MVP 1/3,” in April 2013,
built a stable operating base and branch network, and strengthened its management structure.

Long-term Vision “MVP (Musashino Value-making Plan)”

The region’s number one bankthat creates new value in Saitama~ Value-making Bank ~Playing a leading role in Saitama’s development by producing new value in Saitama andgrowing on its own initiative by meeting customer expectations
Reason for
Existence

To contribute to Saitama’s growth and to support its future, not only in its role as a leader ofcommunity-based finance, but by also playing a leading role in the creation of new local initiatives

Basic Policy: Build the Bank to be number one in the region in two business domains that will lead to Saitama’s growth
GrowthDomainImprove financial intermediary functions and support local
growth as a local financial institution

Phase 1

Shift

Phase 2Create new local industries and business models by ourselves
and stimulate local growth

Creation
DomainGrowthPhase 3Completion

Medium-term management plan “MVP 1/3”
(April 2013–March 2016)

Second Medium-term management plan
(April 2016–March 2019)

Third Medium-term management plan
(April 2019–)

Enhance readiness to become
the number one bank in the region.

Establish our reputation
as the number one bank in the region.

Maintain our overwhelming position
as the number one bank in the region.

Medium-term management plan “MVP 1/3”: April 2013 – March 2016
Completion of phase one (period for enhancing readiness) to become thenumber one bank in the region that contributes to the growth of Saitama Prefecture
GrowthDomainAs a local financial institution, build a foundation capable ofsustaining our growth strategy into the future by reinforcing sales
channels and human resources, and allocating business resources

Maintain readiness so that we can plan and achieve by ourselvesa framework for commercialization including new local
industries and business models

Creation
DomainOverall Target
Three pillars for achieving our growth strategy
Sales strategy• Intensify sales coverage with focus on branches and expand area
• Increase contact with customers with focus on people and strengthen problem resolution capabilities• Carry out measures focusing on non-face-to-face banking channels

Initiate creation strategy

Strengthen business
management readiness•

Human resource strategy
Build infrastructure

Widelypromote theMusashino
brand

Strengthen Group strategy

Target figures

Item
Balance of deposits (year-end) *Includes balance of assets in custody
Balance of loans (year-end)
Net income
Core OHR
Capital ratio (Basel II Standard at the time of announcement of the Management Plan)

Fiscal 2016 target¥5,000.0 billion¥3,500.0 billion¥10.0 billion
Less than 68%
10% or more

5

Corporate Governance
Basic StanceMusashino Bank recognizes that upgrading and expanding
its corporate governance capabilities are key priorities ofmanagement. In addition to adhering strictly to a policyof compliance with statutory and regulatory requirements
as well as in-house rules and regulations, every effort ismade to ensure that the Board of Directors and the Boardof Corporate Auditors stringently monitor directors in theexecution of their duties.
Two outside directors and three outside auditors who
pose no threat of conflicts of interest with shareholders were
elected in June 2015, and they monitor and audit directors in
the execution of their duties. They also take part in meetingsof the Board of Directors where they are able to proactively
voice their opinions and offer advice on management from a
broad, independent and neutral perspective. This ensures thatthe management monitoring function is both objective andimpartial.
Also, the Bank has adopted an executive officer system
in order to reduce the number of directors and to ensure
a speedier decision-making process. Directors delegate

authority to executive officers, who are charged with the
responsibility of swiftly and efficiently carrying out theirduties as leaders of the Bank’s mainstay divisions.
The Bank has made efforts to prepare a structure thattakes into account the five basic principles of corporate governance that we started to apply in June 2015. This structure
has been designed to bring about a more effective system ofcorporate governance.

Corporate Governance Structure
The Board of Directors is positioned as the ultimate
decision-making body of the Bank. While strictly adheringto the Bank’s variety of in-house rules and regulations, theintroduction of an executive officer system allows the Bank toseparate and clarify the management and business executionfunctions. A structure has therefore been put in place to allow
directors and executive officers to go about their assigned
duties and responsibilities.
Musashino Bank’s management decision-making, businessexecution and oversight structure is presented as follows.

Corporate Governance Structure
General Meeting of Shareholders
Assignment

Assignment
Audit

Board of Directors
Directors

Supervision

Board of Corporate Auditors
Auditors

Discussion

Business execution functions
Executive Committee

Discussion

ReportAssignment

Indication/
Verification

Audit
Compliance Committee

Accounting auditors

Executive officers

Head office/Branches

6

Audit

AdviceAuditing Division

Law officeLicensed tax accountants

Risk Management
Risk Management Policy
The risks associated with banking operations are becoming
increasingly varied and complex. In order to ensure that themanner in which it manages its business is both sound andpertinent, Musashino Bank has formulated a set of internalmanagement policies that take into consideration the Bank’s
strategic targets. Guided by these policies, the Bank works
diligently to manage risk.
In specific terms, the Bank classifies all pertinent risks
according to their nature and attributes. Classifications
comprise (1) comprehensive risks; (2) credit risks; (3) market
risks; (4) liquidity risks; and (5) operational risks (including
administrative and system risks). These individual risks arethen managed according to their particular characteristics andrequirements.

Management Structure by Type of Risk
(1) Comprehensive Risk Management
In order to appropriately manage the wide variety of risks
on a comprehensive basis, the Bank has established theComprehensive Risk Management Department and is working to develop and improve its management structure. The
Comprehensive Risk Management Department puts in placerules and criteria for determining the scope of comprehensive
risk management, management methods, evaluation of new
products and operations as well as the level of acceptable risk
after taking into consideration management strategies, management capacity as well as business scale and characteristics.
Based on these rules and criteria the ALM (Asset Liability
Management) and other appropriate committees monitor
and control risks. The results of these activities are reported
to the Board of Directors and other relevant bodies on aregular basis.

(2) Credit Risk Management
Musashino Bank has historically taken steps to maintain the
independence of the Credit Screening Division and to build
a stringent screening and management structure in orderto maintain and strengthen the soundness of its assets. At
the same time, the Bank has adopted a ranking system andendeavored to upgrade and expand its credit risk management capabilities as a part of efforts to establish objective
decisions and lending policies on an individual transaction
counterparty basis.

(3) Market Risk Management
Musashino Bank has established the Market Risk
Management Department in order to appropriately manage
market risks. Relevant steps are taken to ensure the independence of the Department from the Market Management
Department and Business Promotion Division and to establish and develop a structure that is capable of harnessing thechecks-and-balances function. At the same time, the ALM
and Credit Portfolio Management committees deliberate as
and when required.

(4) Liquidity Risk Management
Musashino Bank has established the Liquidity Risk
Management and Cash Management departments in order
to appropriately manage liquidity risk. While ensuring theindependence of the Liquidity Risk Management Department
from the Cash Management Department, Market Management
Department and Business Promotion Division, every effort
is made to establish and develop a structure that is capable ofharnessing the checks-and-balances function. At the same time,
the ALM Committee deliberates as and when required.

(5) Operational Risk Management
Musashino Bank confronts broad and varied operational risks.
In addition to classifying risks as (i) administrative risk, (ii)systems risk, and (iii) other operational risks (a. legal risk, b.
human risk, c. tangible asset risk, and d. reputation risk), putting in place rules on an individual risk basis and promoting
the management of each risk by the appropriate management
department, the Bank has established the Operational Risk
Management Department to undertake the management ofoperational risks on a comprehensive basis. The Bank also
pushes forward measures aimed at establishing and developinga management structure that is capable of harnessing thechecks-and-balances function with respect to each businessdivision. Moreover, the Operational Risk Management
Committee deliberates on issues as and when required.

Crisis Management / BCP Structure
Because bank services such as deposits and foreign exchange
are services that are highly beneficial to society and the
public, banks are strongly called on to ensure business continuity as a social responsibility they must fulfill, and this is
recognized as an important management issue. As a regional
financial institution with its operational base in Saitama
Prefecture, Musashino Bank has established a BusinessContinuity Plan (BCP) as part of its contingency planning toensure operations will continue in the case of events that arelikely to have a major impact on business, such as large-scale
earthquakes, system faults and pandemic influenza. The
Bank has compiled manuals that establish concrete codes of
behavior and countermeasures, and is working to ensure that
all employees are thoroughly familiar with business continuity management measures to apply during emergencies.
The Bank carries out drills to train its employees in how todeal with emergencies such as large-scale earthquakes anddamage to account-related systems. Systematic training likethis enables the Bank to improve its BCP by enhancing its
effectiveness andrectifying problems
that emerge during
drills.

Holding systematic training

7

Compliance
Compliance Framework
The social and public mission of the banking business makes
high demands for operations based on fair and transparent
corporate activities in compliance with laws, regulations,and social norms and in accordance with the principles ofself-discipline and self-responsibility. Accordingly, the Bank
considers the thorough compliance of its directors andemployees in business operations to be a top priority, and to
this end management is actively involved in the fulfillmentof the Bank’s social and public mission as the Bank works
to strengthen its compliance framework through steps suchas system improvements and the establishment of teaching
methods.
In the future the Bank will further strengthen its corporate
activities based on a strong sense of ethics and integrity andits management approach in accordance with principles ofself-responsibility as it further strengthens the complianceframework so that the Bank’s daily business activities andactions ensure compliance with laws, regulations, andsocial norms.

Basic Compliance Policy
Musashino Bank’s basic compliance policy entails that officers
and employees go about their daily duties in accordance with
the Bank’s two fundamental management guidelines, namely
its Corporate Philosophy and Code of Behavior.
Under its unwavering Corporate Philosophy, the Bank
strives to work in harmony with the local community it
serves while maintaining a deep respect toward customers.
As a local bank in Saitama Prefecture, we continue tocontribute to the local community and society. Furthermore,
the Code of Behavior is founded on “the public mission of
the bank” and stipulates “provision of high quality financial
services,” “compliance with laws, regulations, rules, etc.,”“open business management through communication withsociety,” “respecting the personalities of the employees,”“tackling environmental problems,” “tackling social
contribution activities,” and “resolute responses to anti-social
forces,” and directors and employees go about their daily
duties guided by these basic policies.

Compliance Management Structure
The Legal Affairs Office of the Risk Management Division
serves as the compliance management department for the
Bank. This Office undertakes the uniform managementof all legal issues relating to compliance while providing
instructions based on investigation and research. At the sametime, the Office coordinates with officers responsible forlegal compliance appointed to all branches while working tostrengthen the compliance structure.
Regular meetings are held with the officers responsible
for legal compliance appointed to each branch in order toimprove the level of compliance through the sharing of information and training and also, meetings are held each monthwith the officers responsible for legal compliance in the head
8

office and each department. These meetings serve as a forum
to deliberate on compliance issues and to share information.
In addition to the aforementioned, periodic compliancechecks are undertaken at each branch by the officers responsible for legal compliance. In this manner, the Bank has put
in place a mechanism that is capable of grasping the statusof daily compliance management. Furthermore, Musashino
Bank has established the Compliance Committee with thepresident of the bank serving as the chairperson, which serves
as the organization that checks the status of complianceon a Bank-wide basis while considering any and all otherimportant matters through regularly held meetings.
In addition, the committee evaluates and checks on the
progress and implementation status of the “Compliance
Program” approved by the Board of Directors.

Compliance ManualTo ensure the compliance of its officers and employees, theBank has distributed a compliance manual that has been
approved by the Board of Directors to all of its officers andemployees and is working to ensure that all staff members are
fully aware of its contents.
The compliance manual contains sections on the Bank’s
Corporate Philosophy, Code of Behavior, and basic policies.
It contains a section on compliance standards that stipulates
the matters officers and employees should comply with,a section on the compliance framework that provides an
explanation on various structures at the Bank including
education and verification structures, a section on laws andregulations that require directors’ and employees’ compliancewhich contains an explanation on the laws and regulations
that bank employees are required to be knowledgeable of, anda pick-up compliance section that provides a more detailed
explanation on matters that should be prioritized in the
conduct of daily work. The compliance manual serves as astandard for making decisions and taking actions in everyday
business activities.

Elimination of Anti-Social Forces
The Bank has stipulated the elimination of anti-social forces
as a basic policy and is working toward blocking all relationships with anti-social forces. Furthermore, in accordancewith the basic policy we have established a manual which
stipulates our specific initiatives for blocking relationships
with anti-social forces, and we are endeavoring to educate
the bank employees about this issue through training andother measures.

Operational Base of Saitama Prefecture
Well-developed Expressway and Railway
Networks
Saitama Prefecture is located in the heart of the huge market
comprising the Tokyo metropolitan area, in which lives onethird (approximately 40 million people) of the populationof Japan. The prefecture also contains well-developed andadvanced expressway and railway networks.
Saitama is well-positioned as a transportation hub, with
the Kan’etsu, Tohoku, and Joban expressways traversing
north to south, and the Tokyo Gaikan Expressway and theMetropolitan Inter-City Expressway (Ken-O-do) traversing
east to west. This network of expressways provides convenient
access to the two gateways to the skies of Narita and Haneda
airports, and also to the Chubu and Kansai regions.
As for railways, with our head office based in Omiya, theBank is directly connected to major cities via the Tohoku,
Akita, Yamagata, and Joetsu Shinkansen (bullet train) network.
In March 2015, the Hokuriku Shinkansen (between
Tokyo and Kanazawa) commenced operations, and the
Ueno-Tokyo Line also opened.
An expressway and railway networkthat reaches all over Japan

Fifth Largest Prefecture by Population
The population of Saitama Prefecture continues to increase
every year. In April 2015 the population had reached7,240,000, making Saitama the fifth largest prefecture
in Japan.
Moreover, the percentage of working-age people (aged
15 to 64) was 66.1% in 2012, and this figure was the third
highest prefectural percentage in Japan. Conversely, thepercentage of people aged 65 or older was 20.6% in 2012,
and this was the fifth lowest figure in Japan. In other words,
Saitama Prefecture is one of the youngest and most vigorous
prefectures in the country.

Concentration of Universities andResearch Institutes
More than 250 research institutes and 61 college campuses
are located in Saitama Prefecture.

Collection of Diverse Manufacturing
Industries
Fifth Largest Economy in Japan
Saitama Prefecture is home to about 250,000 companies.
Total prefectural production is about ¥20 trillion, making it
the fifth largest prefectural economy in Japan.
Saitama Prefecture has a diversity of local industries withthe automotive-related industry at its core. (For example,
molds and castings are produced in Kawaguchi City, andoptical equipment in Saitama City.)

Expressway
Railway (Shinkansen)

Record High Number of Companies Attracted
in Fiscal 2014
NaritaInternational Airport

Tokyo
International Airport(Haneda)A Favorable Climate and Topography
Located on the borders of Tokyo and six prefectures, Saitama
Prefecture is an inland prefecture on the Kanto Plain, and allparts are less than 100 km from central Tokyo.
Saitama Prefecture covers 3,798 square kilometers andaccounts for around 1% of Japan’s land area. The area of prefectural land covered by mountains is less than the national
average, while the area of lowlands and tableland is greater.
Rivers account for 3.90% of the prefecture’s area, the highest
figure for a prefecture in the country.
It is very comfortable to live in because it has more clear
days annually than anywhere else in Japan, and has few
natural disasters.

Saitama is continuously encouraging companies to establish
operations within the prefecture as part the “Chancemaker
Saitama Strategy” initiative. In fiscal 2014, we achieved therecord of having attracted an additional 88 companies in one
year. Furthermore, the prefecture has cumulatively attracted
about 800 companies in the 10 years from 2005.
Over the past 10 years, Saitama Prefecture has also welcomed an extra large number of companies from other partsof Japan, and the prefectural figure of an increase of 1,324
companies is the highest in Japan.
It seems likely that this influx of companies will continue
in the future, mainly due to the well-developed and advanced
transportation infrastructure and the favorable topographythat results in few natural disasters occurring. In a survey
regarding where companies would like to locate a new plant,
Saitama Prefecture was ranked third after “overseas” and“Aichi Prefecture.”9

Contributing to the Local Economy
Deposits* from the Region

Loans to the Region

As of March 31, 2015, deposits* from the region increased¥143.2 billion year on year to ¥3,811.1 billion yen. The ratio
of deposits* from the region continued to be high, at 99.34%
of the total balance of deposits. Accordingly, the Bank’s shareof deposits* within the prefecture as of March 31, 2015 rose
0.17 of a percentage point to 13.78%.

Loans to the region as of March 31, 2015 rose ¥101.8 billion
to ¥2,778.3 billion, thereby maintaining a high loan to theregion ratio of 86.19%. The Bank’s share of loans in theprefecture improved 0.14 of a percentage point to 18.61%.

* Deposits exclude negotiable deposits.

Assets in Custody from the Region
As of March 31, 2015, assets in custody from the region
increased ¥42.5 billion year on year to ¥679.8 billion.
The breakdown comprises investment trusts of ¥157.2 billion(up ¥29.2 billion), life insurance of ¥401.2 billion (up ¥49.8
billion), and government bonds and other assets of ¥121.4
billion (down ¥36.5 billion).

Towards a Sounder Financial Position
The Bank is strengthening its capital adequacy and reducing
nonperforming loans (NPL). The Bank has maintained aconsolidated and non-consolidated capital adequacy ratio(Basel III domestic standard) of 10.32% and 10.08%,
respectively, so we have continued to maintain a very soundfinancial position.
The Bank’s non-performing loan ratio based on standards
established by the Financial Reconstruction Act, declined by
0.90 of a percentage point to 2.21%.

* Investment trusts figures are market value; life insurance figures are total sales.

Deposits from region/Ratio of deposits from region

Loans to region/Ratio of loans to region

Non-consolidated(¥ billion)

Non-consolidated(¥ billion)

99.47%

99.46%

99.26%

99.34%
3,811.1

3,615.2

FY201288.26%

2,573.8

2,614.7

FY2011FY2012

3,667.9

3,497.6

FY201189.77%FY2013

FY2014

Deposits from region
Ratio of deposits from region

86.94%
2,676.4

86.19%
2,778.3

FY2013

FY2014Loans to region
Ratio of loans to region

Assets in custody from region

Non-performing loans

Non-consolidated(¥ billion)

Non-consolidated(¥ billion)

679.8
13.0

637.3

10.2

10.1

44.7

43.9

43.8

2.50%

2.50%

2.30%

2.21%

16.4

18.7

17.1

17.8

FY2011FY2012FY2013

FY2014

42.7

603.3

11.3

565.1

FY2011FY2012FY2013

FY2014Bankrupt and quasi-bankrupt assets (unrecoverable claims)
Claims on potentially bankrupt borrowers
Substandard loans
Ratio of loans subject to mandatory disclosure ofclaims under the Financial Reconstruction Law

10

Measures and Support for Regional Revitalization
Promotion Structure
In April 2015, the Bank established the “Team for Promoting
Towns, People and Job Revitalization” at the head officein order to formulate and support the promotion of theRegional Comprehensive Strategy being undertaken by
local government organizations involved with the government’s “comprehensive strategy for towns, people, and job
revitalization.” The Bank assigned all branch managers to be“the person in charge of promoting Regional Revitalization,”and built a structure for promoting Regional Revitalization
throughout the Bank.

The Bank had already commenced collaborating andworking with local government organizations before thiscollaboration in formulating the Regional Comprehensive
Strategy. Looking ahead, as a regional financial institution,
the Bank recognizes these initiatives for Regional Community
Revitalization to be one of the most important tasks.
Consequently, we are one participant in regional creation andhave a policy of proactively collaborating with private-sector
companies, NPOs, educational institutions and other bodies
based on the relevant administrative policies to solve a varietyof regional issues and to create regional value.

Musashino Bank
Head Office

External institutions

Team for Promoting Towns, People and Job Revitalization

Collaboration

Branch(Branch Manager) The person in charge of promoting Regional Revitalization

Musashino Bank Group

Private-sector
companies

NPOs

Educational
institutions
Other

Main regional issues· Promotion of public-/private sector collaborations· Promotion of the active participation of women· Promotion of long-term housing for the childrearing generation· Revitalization of SMEs
(small- and medium-sized enterprises)· Creating safe, secure and comfortable towns· Promotion of an eagerness to start a company andbe at work
· Improving the lives of the elderly· Creating a new industry and suchlike

Regional local government organizations“Comprehensive strategy for towns, people, and job revitalization”

Town

Job

Establishment of Musashino Fund to Promote
Regional Revitalization
In August 2015, the Bank established the Musashino Fundto Promote Regional Revitalization, a total of ¥500 million,
together with Bugin Capital Co., Ltd.
This fund targets investment in the stocks of companies at

Peoplethe founding and startup phases, and companies engaged insuch fields as medical and welfare, agriculture, the environment and tourism, where further growth is anticipated. By
supporting growth in such a thorough manner, the Bank iscontributing to a positive cycle of the revitalization of towns,
people and jobs.

11Initiatives Related to Revitalization of the Region
Conclusion of a Comprehensive Partnership
Agreement with Saitama Prefecture
In October 2013 we became the first financial institution
in the prefecture to conclude a Comprehensive Partnership
Agreement with Saitama Prefecture. There are 16 areas ofcollaboration, and the agreement has been designed to resolvea variety of regional issues.
Since fiscal 2014, together with various employees of
Saitama Prefecture, municipalities, private-sector companies,
NPOs, universities and elsewhere, the Bank has been engaged
in research into how to solve some issues related to Saitama
Prefecture. Against the backdrop of a declining population,
we are also working to improve the housing services withwhich local government organizations are involved, toimprove public services that utilize PPP and PFI schemes
for such matters as the maintenance and administration of
public facilities, and to support the creation of private-sectorbusiness opportunities.

Moreover, with the aim of strengthening support forNPOs that are important in creating mutual assistance communities in the region, in July 2014 the Bank concluded anagreement with Saitama Prefecture in which we committed
ourselves to cooperate in the creation of mutual-help communities, and started offering the loan product “Musashino
NPO Support Loan” targeting NPO organizations.

The Bank concluded an agreement with Saitama Prefecture in which we committed ourselves to cooperate in the creation of mutual-help communities

Conclusion of a Comprehensive Cooperation
Agreement with Tsurugashima City

Conducting joint research into policy issues

In December 2014, the Bank concluded a Comprehensive
Partnership Agreement covering 11 fields with Tsurugashima
City, designed to improve services to all citizens and toenhance cooperation as regards regional invigoration.
In January 2015, the Bank held a symposium on thetheme of supporting working women, and followed this in
February 2015 by holding a seminar on the topics of
encouraging women to start up new companies andcontinuing support for women. Moreover, in April
2015, the Bank started to offer the Tsurugashima City
Housing Loan designed to support long-term housing for
employees of companies that have expanded their business
into Tsurugashima City and others of the child-rearing
generation.

A PPP/PFI study group engaged in research activities

Symposium on the theme of supporting working women

12

Nurturing Growth Fields
Activities in the Medical and Welfare Field

Activities in the Agricultural Field

Against the backdrop of the rapid increase in elderly people
in Saitama Prefecture, various large medical and nursing carefacilities are being developed, and these markets are expected
to expand further in the future.
The Bank is responding to a wide variety of needs inthis area by developing proactive activities conducted by aspecialist team, who develop support for business operatorsand match the medical and nursing care facilities.
Since April 2015 the Bank has been assigning “a leader
to promote medical and welfare fields” at all branches, anddeveloping relevant activities in cooperation with
Head Office.
In February 2014, the Bank became the first financial
institution in the Kanto region to conclude a co-financing
agreement with the Japan Housing Finance Agency in the
housing funding support field as regards financing the construction of shared-style serviced housing for elderly people.

Saitama Prefecture is an agricultural production area within
the large region of consumers known as Greater Tokyo.
Accordingly, the prefecture conducts agricultural productionthat is considered top class nationwide, and the number ofagricultural enterprises along with the number of people
involved in new agricultural ventures, are steadily increasing.
The Bank supports agricultural-related businesses,
especially through its agricultural team, and provides the
Bugin Agricultural Management Course in order to support
management reorganization. The Bank is also proactively
engaged in business matching as a support for expanding
sales channels.

Bugin Agricultural Management Course

Activities in the Kankyo (Environment) Field

Training session for leaders who will promote medical and welfare fields

Saitama Prefecture is blessed by a good climate and goodterrain, and consequently is developing mega-solar and otherrenewable energy businesses in various locations.
The Bank offers a loan product that supports companies
involved in solar power generation, and we also handle aloan product that supports the founding of environmentallyfriendly businesses.

Activities in the Kanko (Tourism) Field
Nationwide, efforts are being made to attract foreign tourists,and 2020 will see the holding of the Tokyo Olympics andParalympics. Like the rest of Japan, Saitama Prefecture hassizeable hopes about the establishment of a significant tourism industry.
The Bank is working on invigorating tourism in Saitama
through an industry-academia collaboration with Rikkyo
University and other measures.

13

Providing SME Management Assistance
Policy Initiatives
Under its Corporate Philosophy, the Bank strives to work inharmony with the local community while maintaining a deep
respect toward customers. On this basis, the Bank’s duty is topromote regional-oriented financing, and we implement thisin practice by providing a smooth flow of funding to customers while also offering management support.
Against the backdrop of significant changes in theeconomic environment and elsewhere, we are seeing increasing societal demands for smooth flows of funding. In order
to align ourselves with our customers’ growth stages andto respond even more appropriately and in more detail, we
have established a basic policy and are moving ahead in an
organized and continuous manner with a variety of initiatives
that offer management support to customers.

Status of Support Structures
The Bank provides solutions for general management issues
that customers face during their growth stages, and provides
finely tuned responses by leveraging its consulting functions
while collaborating with external institutions as needed.

Offering a Variety of Financing Methods
In collaboration with Saitama Prefecture, various municipalities, Saitama Prefecture Credit Guarantee Corporation andothers, the Bank has responded to the needs of its clientcompanies and expanded its financing program lineup.
Moreover, the Bank has also focused on offering various
new financing methods, including syndicated loans todiversify procurement methods and implement financial
rationalization when a cooperative financing group has been
formed by a number of financial institutions, project financing that provides funding after focusing on the cash flow ofa business, private placement bonds that can be expected to
improve the corporate image of a company conducting fundprocurement, and Asset-Based Lending (ABL) that makes
use of the customer’s product inventory, accounts receivableor suchlike.

Support for Founding Businesses and
New Businesses
The Bank recognizes that to contribute to thesustained development of the regional economy it is

New Business Creation Seminar

14

indispensable for it to participate in founding businesses andin new businesses, in a flexible, active and continuous manner. Consequently, in October 2014 we created a “support
team for founding businesses and new businesses” in Head
Office. In addition to collaborating with external entities andoffering financing-oriented support, we offer wide-ranging
support that includes formulating business plans, providing avariety of subsidy information, and holding seminars.

Support for Solving Various Issues by Utilizing
Information
In line with expanding the Bank’s consulting activities
for its client companies, in April 2014 we established theInformation Center in Head Office. We are significantly
expanding our business volume and started the full-fledged
operation of an information business. The Information
Center mainly collects business matching information,
information related to real estate, and a variety of regional
information in order to respond to our clients’ needs
to expand their sales channels, develop markets, form
technological collaborations, and open offices and build newplants. All this information that the Information Center
disseminates is providing useful support to solve various
business management issues.

Strengthening Loans that Prioritize Viability
Assessments
The Bank does not rely excessively on financial data,collateral and guarantees—it is strengthening its loans thatprioritize the making of business viability assessments thatappropriately evaluate such qualitative aspects as the businessdetails and growth possibilities of client companies. In
December 2014, the Bank commenced the Musashino SME
Active Fund, and promoted this loan product, especially byconducting detailed interviews with corporate customers on a
one-to-one basis.

Support for Overseas Expansion
We are also proactively assisting our corporate customers to
expand business overseas. As of the end of March 2015, we
had offered support in approximately 30 cases of companies
expanding overseas, mainly to such ASEAN countries as
Thailand, Vietnam, and Indonesia. Furthermore, in April
2014, we assigned employees to the KASIKORNBANK in
Thailand to locally and directly handle consultations fromcompanies that have already started doing their business inThailand.
In addition to Thailand, we have formed businessalliances with leading regional banks in Indonesia, India,
the Philippines, and Vietnam, and we are providing various
forms of assistance, including opening accounts andproviding local information.
In addition, we are utilizing government measures toactively help our clients enter overseas markets and develop
their businesses overseas.

Corporate Social Responsibility
Improving CS
The Bank is strengthening its initiatives for improving
customer satisfaction (“CS”) to satisfy customers in a mannerthat exceeds their expectations, in line with our aim of
becoming the Bank that is chosen first of all by customers
in the region. In April
2015, we established the
CS Promotion Office,and it is now carryingout these CS measuresin coordination with
Head Office and branch
offices.
We are continuing toenhance our branchfacilities and making
them barrier-free sothat our customers canuse the branches withgreater peace of mind
and greater comfort.
Studded paving blocks (to aid the blind)

Support for Children, the Bearers of the Future

To promote local culture and the arts, the Musashino
Bank has been holding concerts by professional violinists inmusic rooms and other locations at elementary schools since
fiscal 2009. By June 2015 approximately 2,400 children from
22 schools had attended these concerts.
To promote sports, the Musashino Bank concluded an
official sponsor agreement with J-League (a Japanese soccer
league) club OMIYA ARDIJA and we also held soccer andbaseball classes for which we invited former players from the
Saitama Seibu Lions to be the coaches and invited local boys
baseball teams to attend.

Protecting our Natural Environment
In order to protect the irreplaceable natural environment of
Saitama Prefecture, the Bank is engaged in environmentallyfriendly construction of new branches and renovationsof existing branches, for example by using environmental
products, and introducing LED lighting and wall greening.
Musashino Bank donates to the Saitama Green Trust Fund,which was established to appropriate funds to bankroll the
expenses required to protect the prefecture’s natural environment. Furthermore, The Musashino Green Fund, a charitable
trust, has made financial donations to organizations thatare actively involved in programs to protect and create thenatural environment of Saitama Prefecture.
The Bank also focuses on educating employees aboutbiodiversity and environmental conservation and protection.

Children getting an experience of work at a study-occupations seminar

New Bank employees and trainees remove alien plants
at the Mitsumata-numa Biotope

Building a Workplace in which Diverse Human
Resources can be Successful

A soccer class

To support our region’s children who are the bearers of the
future, the Bank actively provides these children with opportunities to study the role of money and how banking works.

The Bank strives to nurture and train its employees throughwork so that they themselves can grow, and contribute to thedevelopment of the Saitama region.
We are also actively promoting every employee who has been
impartially evaluated as being motivated and talented, regardlessof their age and gender, to a variety of fields and posts.
Furthermore, the Bank is working to enable all employees
to fulfil their roles in their family life (work-life balance), andto build a workplace where employees can actively work formany years in good health.
15

Consolidated Balance Sheets
The Musashino Bank, Ltd. and Consolidated Subsidiaries As of March 31, 2015 and 2014

Millions of Yen
2015
2014

AssetsCash and due from banks.......................................................................
Call loans and bills bought.....................................................................
Debt purchased......................................................................................
Trading securities ..................................................................................
Money held in trust................................................................................
Investment securities..............................................................................
Loans and bills discounted.....................................................................
Foreign exchange assets..........................................................................
Lease receivables and investment assets...................................................
Other assets............................................................................................
Property, plant and equipment...............................................................
Intangible fixed assets.............................................................................
Net defined benefit assets.......................................................................
Deferred tax assets..................................................................................
Customers’ liabilities for acceptances and guarantees..............................
Allowance for loans losses.......................................................................
Total assets...............................................................................

¥  196,684
5,000
11,613138
1,500
748,068
3,210,605
2,005
17,992
20,28337,162
2,942
9,466
1,379
8,141
(15,922)¥4,257,062¥  150,996
10,000
5,959
32
1,500
772,365
3,066,023
3,320
16,31919,91737,049
2,902
1,164
1,658
8,566
(17,977)¥4,079,797$ 1,636,719
41,60796,641
1,148
12,4826,225,083
26,717,194
16,688
149,725
168,791309,250
24,48878,774
11,48067,751(132,495)$35,425,331

Liabilities
Deposits, including negotiable certificates of deposit..............................
Call money and bills sold.......................................................................
Borrowed money....................................................................................
Foreign exchange liabilities.....................................................................
Corporate bonds....................................................................................
Other liabilities......................................................................................
Provision for bonuses.............................................................................
Provision for directors’ bonuses..............................................................
Net defined benefit liability....................................................................
Provision for loss on interest repayment.................................................
Provision for reimbursement of deposits.................................................
Provision for point loyalty programs.......................................................
Provision for other contingent losses......................................................
Deferred tax liabilities............................................................................
Deferred tax liabilities for land revaluation ............................................
Acceptances and guarantees....................................................................
Total liabilities.........................................................................

¥3,930,283—
17,586342
25,00024,458
1,228
10
5,803
85
474
68
536
9,214
4,449
8,141
¥4,027,684¥3,780,337
926
24,954177
25,00024,026
1,218
10
5,211
89
384
63
612
543
4,910
8,566
¥3,877,031$32,706,028—
146,350
2,850
208,038
203,532
10,22091
48,291
711
3,950
570
4,460
76,67837,02967,751$33,516,557

Net assets
Capital stock..........................................................................................
Capital surplus.......................................................................................
Retained earnings...................................................................................
Treasury stock .......................................................................................
Total shareholders’ equity.........................................................
Valuation difference on available-for-sale securities.................................
Deferred gains or losses on hedges..........................................................
Revaluation reserve for land....................................................................
Remeasurements of defined benefit plans...............................................
Total accumulated other comprehensive income.......................
Subscription rights to shares...................................................................
Minority interests...................................................................................
Total net assets.........................................................................
Total liabilities and net assets...................................................

¥   45,743
38,351
104,042(802)
187,334
32,976(1,190)8,064
1,073
40,922
58
1,061
229,377¥4,257,062¥   45,743
38,351
89,584(819)
172,859
18,460
(999)
7,603
(924)
24,14057
5,708
202,766¥4,079,797$   380,660
319,141865,790(6,677)
1,558,915
274,413(9,907)
67,1058,929
340,540484
8,834
1,908,774$35,425,331* U.S. dollar figures have been translated at the rate ¥120.17 to U.S.$1, the prevailing market rate as of March 31, 2015.

16

Thousands of
U.S. Dollars*
2015Consolidated Statements of Income and Comprehensive Income
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2015 and 2014

Consolidated Statements of Income
IncomeInterest income:Interest on loans and discounts..........................................................
Interest and dividends on securities....................................................
Other interest income........................................................................
Fees and commissions............................................................................
Other operating income.........................................................................
Other income.........................................................................................
Total income............................................................................
Expenses
Interest expenses:
Interest on deposits............................................................................
Interest on borrowings and rediscounts..............................................
Other interest expenses......................................................................
Fees and commissions............................................................................
Other operating expenses.......................................................................
General and administrative expenses......................................................
Other expenses.......................................................................................
Total expenses..........................................................................
Income before income taxes...................................................................
Income taxes
Current..................................................................................................
Deferred.................................................................................................
Minority interests..................................................................................
Net income for year...............................................................................
Net income per share (yen and U.S. dollars)...........................................

Millions of Yen
2015
2014

Thousands of
U.S. Dollars*
2015¥39,932¥42,215$332,298

7,363

7,724

61,279

219

258

1,829

11,846

10,76598,582

3,708

3,246

30,85915,666

12,709130,369

78,73776,919655,220

1,860

1,997

15,479

242

256

2,016

966

1,027

8,043

4,618

4,482

38,432

1,267

1,536

10,54537,751

38,445314,153

9,939

10,40982,71056,64558,155471,380

22,091

18,763

183,839

5,626

5,529

46,822

1,619

2,416

13,474

7,245

7,946

60,297

378

502

3,148

¥14,467¥10,315$120,394¥431.44¥307.66$   3.59* U.S. dollar figures have been translated at the rate ¥120.17 to U.S.$1, the prevailing market rate as of March 31, 2015.

Consolidated Statements of Comprehensive Income
Income before minority interests............................................................
Other comprehensive income:Net unrealized losses on securities......................................................
Unrealized gains on hedging derivatives.............................................
Reversal of revaluation reserve for land..............................................
Remeasurements of defined benefit plans...........................................
Total other comprehensive income....................................................
Comprehensive income..........................................................................
Comprehensive income attributable to:Shareholders of the Company............................................................
Minority interests..............................................................................

Millions of Yen
2015
2014

Thousands of
U.S. Dollars*
2015¥14,846¥10,817$123,542

14,572295

121,263

(191)

424

(1,593)

460

—

3,834

1,997

—

16,61916,838719

140,124¥31,684¥11,537$263,667¥31,250¥10,997$260,052

434

539

3,614

* U.S. dollar figures have been translated at the rate ¥120.17 to U.S.$1, the prevailing market rate as of March 31, 2015.
17

Consolidated Statements of Changes in Net Assets
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2015 and 2014
Millions of yen
Shareholders’ equity

Balance as of March 31, 2013...........................................
Changes during the accounting period:
Cash dividends..............................................................
Net income...................................................................
Purchases of treasury stock............................................
Disposition of treasury stock.........................................
Write-off from land revaluation excess..........................
Transfer to capital surplus from retained earnings.........
Net changes in items other than shareholders’ equity....
Total changes during the accounting period..................
Balance as of March 31, 2014...........................................
Cumulative effect of accounting change............................
Balance as of April 1, 2014 (as restated)............................
Changes during the accounting period:
Cash dividends..............................................................
Net income...................................................................
Purchases of treasury stock............................................
Disposition of treasury stock.........................................
Transfer to capital surplus from retained earnings.........
Net changes in items other than shareholders’ equity....
Total changes during the accounting period..................
Balance as of March 31, 2015...........................................

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’ equity¥45,743¥38,351¥ 81,735¥(816)¥165,013(11)
8(2,514)
10,315(11)
649—(2,514)
10,315
(2)
49
(2)

2
—
45,743—38,35145,74338,351

7,848
89,584
2,677
92,261

(2)
(819)

7,846
172,859
2,677
175,537(819)(2,682)
14,467—¥45,743(2,682)
14,467
(12)
24
—

(12)
29

(4)
4

(4)

—
¥38,351

11,780¥104,04216¥(802)

11,797¥187,334

Millions of yen
Accumulated other comprehensive income
Unrealized
Deferredgain onloss underavailable-for-salehedge
securities
accounting

Balance as of March 31, 2013........................................... ¥18,202
Changes during the accounting period:
Cash dividends..............................................................
Net income...................................................................
Purchases of treasury stock............................................
Disposition of treasury stock.........................................
Write-off from land revaluation excess..........................
Transfer to capital surplus from retained earnings.........
Net changes in items other than shareholders’ equity....
257
Total changes during the accounting period..................
257
Balance as of March 31, 2014........................................... 18,460
Cumulative effect of accounting change............................
Balance as of April 1, 2014 (as restated)............................ 18,460
Changes during the accounting period:
Cash dividends..............................................................
Net income...................................................................
Purchases of treasury stock............................................
Disposition of treasury stock.........................................
Transfer to capital surplus from retained earnings.........
Net changes in items other than shareholders’ equity.... 14,516
Total changes during the accounting period.................. 14,516
Balance as of March 31, 2015........................................... ¥32,976

18¥(1,423)

Accumulated
Land
Remeasurements
otherrevaluationof defined comprehensive
excessbenefit plansincome¥7,653¥     —

¥24,431

Share
warrant

Minority
interests

Total net
assets¥37¥ 5,172¥194,654

424
424
(999)

(49)
(49)
7,603

(924)
(924)
(924)

(291)
(291)
24,140

20
20
57

536
536
5,708

(999)

7,603

(924)

24,14057

5,708(2,514)
10,315
(11)
6
49
—
264
8,111
202,766
2,677
205,443(4,646)(4,646)¥ 1,061(2,682)
14,467(12)
24—
12,13623,934¥229,377

(191)
(191)
¥(1,190)460
460¥8,064

1,997
1,997¥1,073

16,782
16,782¥40,92200¥58Thousands of U.S. Dollars*
Shareholders’ equity

Balance as of March 31, 2014
Cumulative effect of accounting change............................
Balance as of April 1, 2014 (as restated)............................
Changes during the accounting period:
Cash dividends..............................................................
Net income...................................................................
Purchases of treasury stock............................................
Disposition of treasury stock.........................................
Transfer to capital surplus from retained earnings.........
Net changes in items other than shareholders’ equity....
Total changes during the accounting period..................
Balance as of March 31, 2015...........................................

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’ equity$380,660$319,141$(6,817)

380,660

319,141$745,477
22,278
767,756$1,438,461
22,2781,460,739(6,817)(22,322)
120,394—$380,660(22,322)
120,394
(101)
205
—

(101)
242

(36)
36

(36)

—
$319,141

98,034$865,790

140$(6,677)

98,175$1,558,915

Thousands of U.S. Dollars*
Accumulated other comprehensive income
Unrealized
Deferredgain onloss underavailable-for-salehedge
securities
accounting

Balance as of March 31, 2014
$153,615
Cumulative effect of accounting change............................
Balance as of April 1, 2014 (as restated)............................ 153,615
Changes during the accounting period:
Cash dividends..............................................................
Net income...................................................................
Purchases of treasury stock............................................
Disposition of treasury stock.........................................
Transfer to capital surplus from retained earnings.........
Net changes in items other than shareholders’ equity.... 120,797
Total changes during the accounting period.................. 120,797
Balance as of March 31, 2015........................................... $274,413

Accumulated
Land
Remeasurements
otherrevaluationof defined comprehensive
excessbenefit plansincomeShare
warrant

Minority
interests

Total net
assets$(8,314)$63,271$ (7,690)$200,882$478$ 47,503(8,314)

63,271(7,690)200,882478

47,503$1,687,326
22,278
1,709,605(1,593)(1,593)$(9,907)

3,834
3,834
$67,105

16,61916,619$ 8,929

139,658
139,658$340,54055$484(22,322)
120,394(101)
205—(38,669)
100,994(38,669)
199,169$ 8,834 $1,908,774* U.S. dollar figures have been translated at the rate ¥120.17 to U.S.$1, the prevailing market rate as of March 31, 2015.

19

Consolidated Statements of Cash Flows
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2015 and 2014

Millions of Yen
2015
2014

Cash flows from operating activities
Income before income taxes...................................................................
Depreciation..........................................................................................
Impairment losses...................................................................................
Amortization of negative goodwill..........................................................
Gain on negative goodwill......................................................................
Increase (decrease) in reserve for possible loan losses...............................
Increase (decrease) in reserve for employees’ bonuses..............................
Increase (decrease) in reserve for directors’ bonuses.................................
Decrease (increase) in net defined benefit asset.......................................
Increase (decrease) in net defined benefit liability...................................
Increase (decrease) in reserve for loss on interest refunded......................
Increase (decrease) in reserve for reimbursement of dormant deposits.....
Increase (decrease) in reserve for point loyalty programs.........................
Increase (decrease) in reserve for contingent losses..................................
Interest income......................................................................................
Interest expenses.....................................................................................
Loss (gain) on investment securities........................................................
Loss (gain) on money held in trust.........................................................
Foreign exchanges loss (gain)..................................................................
Loss (gain) on disposition of fixed assets.................................................
Net decrease (increase) in trading account securities...............................
Net decrease (increase) in loans and bills discounted..............................
Net increase (decrease) in deposits..........................................................
Net increase (decrease) in negotiable certificate of deposits.....................
Net increase (decrease) in borrowed money (excluding subordinated loans)......
Net decrease (increase) in due from banks (excluding due from the Bank of Japan).....
Net decrease (increase) in call loans and others.......................................
Net increase (decrease) in call money.....................................................
Net decrease (increase) in foreign exchange, assets..................................
Net increase (decrease) in foreign exchange, liabilities.............................
Interest received.....................................................................................
Interest paid...........................................................................................
Other, net..............................................................................................
Subtotal...................................................................................
Income taxes paid...................................................................................
Net cash provided by (used in) operating activities.................
Cash flows from investing activities
Purchases of securities.............................................................................
Proceeds from sales of securities..............................................................
Proceeds from maturities of securities.....................................................
Increase in money held in trust...............................................................
Decrease in money held in trust.............................................................
Purchases of tangible fixed assets............................................................
Proceeds from tangible fixed assets.........................................................
Purchases of intangible fixed assets.........................................................
Payments for execution of asset retirement obligations...........................
Payments for investments in subsidiaries................................................
Net cash provided by (used in) investing activities..................
Cash flows from financing activities
Repayment of subordinated loans...........................................................
Issuance of subordinated bonds..............................................................
Cash dividends paid...............................................................................
Cash dividends paid to minority shareholders........................................
Purchase of treasury stock.......................................................................
Proceeds from sales of treasury stock......................................................
Net cash provided by (used in) financing activities..................
Net increase (decrease) in cash and cash equivalents..............................
Cash and cash equivalents at beginning of year.....................................
Cash and cash equivalents at end of year...............................................

¥ 22,091
2,506—
9(2,660)(2,055)
9
0
(726)
(125)
(3)
90
4
(76)
(47,516)
3,069(1,431)(3)(4,521)86(105)(144,582)
144,378
5,567
1,632
3,049
(653)
(926)
1,314
165
48,750(3,140)(2,197)22,001(5,052)
16,949¥ 18,763
2,674
58
18
(1,605)
(9)
(2)
345
102
(19)
105
2
(97)
(50,198)
3,280(1,453)
(13)
(312)
35
250
(115,125)
62,996
67,830(842)
15,054(14,414)
(14)
(774)
62
52,448(3,787)(3,191)
32,167(7,420)24,747$   183,839
20,857—75(22,137)(17,105)
79
1(6,047)(1,044)
(29)
754
41
(633)
(395,408)
25,539(11,908)(26)(37,628)718(880)(1,203,146)
1,201,450
46,33013,58725,378(5,438)(7,708)
10,942
1,374
405,676(26,130)(18,286)
183,087(42,040)
141,046(337,375)
274,557
111,547—
0(1,736)15(1,092)(17)(2,411)
43,486(319,008)
193,026
79,001(4)—(2,402)
115
(656)
(20)
—
(49,949)(2,807,483)
2,284,739
928,250—0(14,452)
132(9,090)(147)(20,070)
361,877(9,000)—(2,682)(3)(12)
0(11,698)
48,738125,462¥ 174,200—
15,000(2,514)(3)(11)
6
12,477(12,725)
138,187¥ 125,462(74,893)—(22,322)
(30)
(101)
1
(97,347)
405,576
1,044,039$ 1,449,615* U.S. dollar figures have been translated at the rate ¥120.17 to U.S.$1, the prevailing market rate as of March 31, 2015.
20

Thousands of
U.S. Dollars*2015Directory
Organization Chart (as of July 1, 2015)
General Meeting of Shareholders
Board of Corporate Auditors

General Planning and Management Division
Strategic Planning OfficeFinancial Affairs Office
Tokyo Office
Risk Management Division
Legal Affairs Office
Customer Service Promotion Office
Personnel Division
Secretariat
Career Development Office
Health Support Office
Local Community Support Division
Public Funds Management OfficeCommunity Value Creation OfficeBusiness Management Division
Business Planning Office
Assets in Custody Promotion OfficeMortgage Loan Center
Credit DivisionCorporate Management Support OfficeInternational and Treasury Division
Global Business Advisory Office
General Affairs Division
Administration Division
Systems Management Office
Operation Services Division
Auditing DivisionCorporate Auditors
OutsideCorporate Auditor

Board of Directors
Executive Committee
President*
Senior Managing Director*
Managing Directors
Director (outside)* and Representative Director

Board of Directors, Corporate Auditors and Executive Officers (as of July 1, 2015)
President

Managing Directors

Corporate Auditors

Managing Executive Officers

Executive Officers

Kikuo Kato

Motonobu Nakamura
Koichi Akagi
Kazuya Koyama
Kazumasa Nagahori
Toshiyuki Shirai

Hidemi Shimizu (standing)
Makoto Ishikawa (standing)Atsumu Kuroishi (outside)
Tomio Kezuka (outside)
Kenji Tamura (outside)

Hiromasa Miyazaki
Yuichi Tanaka
Yoshiro Kenmochi

Takeshi Sekiya
Masahiro Saito
Takafumi Hoshina
Kenji Sakamoto
Masahiko Kato
Isamu Takeuchi
Susumu Kurosawa

Senior Managing Director

Hideo MachidaDirectors

Emi Ishida (outside)
Takeshi Higuchi (outside)

Investor Information (as of March 31, 2015)
Number of Shares Held by Type of Shareholders

 uthorized: 80,000 thousand shares
A
Issued:33,805 thousand shares
Number of Shareholders: 12,210
Common Stock

Financial institutions
40.25%

Major Shareholders
NameJapan Trustee Services Bank, Ltd. (trust account)
Japan Trustee Services Bank, Ltd. (trust account 4)
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Musashino Bank Industries Employees’ Stockholding Association
The Master Trust Bank of Japan, Ltd. (trust account)
Meiji Yasuda Life Insurance Company
Sumitomo Life Insurance Company
CBNY DFA INTL SMALL CAP VALUE PORTFOLIO(Standing proxy: Citibank Japan Ltd.)CBNY–GOVERNMENT OF NORWAY(Standing proxy: Citibank Japan Ltd.)BNP PARIBAS SERVICES LUXEMBOURG/JADEC/ABERDEENGLOBAL CLIENT ASSETS (Standing proxy: The Hongkong andShanghai Banking Corporation Limited Tokyo Branch)

Shares held asa percentage of
total outstanding
shares (%)
2,442,600
7.22
1,224,800
3.62
1,218,987
3.60
778,7452.30
767,000
2.26
735,858
2.17
702,900
2.07

Other corporations
25.31%

Number ofshares580,000

1.71

537,272

1.58

534,900

1.58

Foreign companies
and others
18.00%
Individuals and others
15.03%

Financial instruments
business operators
1.41%

Notes: 1. Some treasury stock is contained in “Individuals and others.”
2. “Other corporations” includes a unit of 14 shares under the nameof Japan Securities Depository Center, Inc.

* The above figures have been rounded to the second decimal place.

2110-8, Sakuragi-cho 1-chome, Omiya-ku,
Saitama 330-0854
Phone: +81-48-641-6111

Brand Message

The Musashino Bank’s brand message is “More for You.”
The Bank personnel consider “What can I do for everyone?”and “What kind of service do I want to give everyone?”“Everyone” includes the Bank’s customers, the membersof local communities, our shareholders, and friends of theBank, together with their families.
Accordingly, the Musashino Bank aspires to implement theactions of providing everyone with better services and ofcontributing to our local communities.