Annual Report2018Profile
Musashino Bank is the only regional bank whose operationalbase consists of Saitama Prefecture in the Tokyo metropolitan
area. The prefecture lies immediately to the north of Tokyo,
and many of its residents commute to work in the capital.
Currently, 7.3 million (estimated) people live in Saitama,
making it the country’s fifth most populous prefecture after

Tokyo, Kanagawa, Osaka, and Aichi, and the population isstill climbing. Since its establishment in 1952, Musashino
Bank has been one of Saitama Prefecture’s core financial
institutions, and has played a major role in supporting thedevelopment of the regional economy and local industries forover 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”

To engage in bold management that anticipates change while providing the highest quality services throughout the organization
as a whole.

Bank Data (non-consolidated basis, as of March 31, 2018)

Subsidiaries and Affiliated Companies

Head Office:Home page:
Established:
Networks:

Name
The Bugin General Lease
Co., Ltd.
The Bugin Guarantee
Co., Ltd.
The Musashino Card
Co., Ltd.

333-13, OLS Building, Sakuragi-cho 4-chome, Omiya-ku, Saitama
http://www.musashinobank.co.jp
March 6, 1952
Number of branches: 98 (Saitama Prefecture: 93 [of which
2 are sub-branches], outside Saitama Prefecture: 5)(As of September 30, 2018)

Number ofmortgage loan centers:
Employees:
Total assets:
Deposits:
Loans:
Common stock:
Capital adequacy ratio:
Number of correspondent
arrangements:
Issued common stock:

9
2,170¥4,546.0 billion¥4,209.5 billion¥3,470.8 billion¥45.7 billion
9.03%
131
33,805 thousand shares

Yamanashi
Prefecture

SaitamaPrefecture

IbarakiPrefecture

Tokyo
Kanagawa
Prefecture

Contents

Credit card business (JCB, VISA),
loans and loan guarantees related tocard services
The Bugin System Service Development, sale and maintenanceCo., Ltd.
of computer systems
The Bugin Economic
Research into the regional economy,
Research Instituteconsultation, information services,Co., Ltd.
and holding of seminars
The Bugin Capital Co.,Management support for ventureLtd.
businesses
The Musashino Harmony Outsourcing of operational businessCo., Ltd.

Tochigi
Prefecture

Gunma
Prefecture
NaganoPrefectureLine of Business
General leases, installment-payment
services, auto leasing services
Loan guarantees for individuals

Chiba
Prefecture

1 Consolidated Financial Highlights
2 Message from the President
5 Long-term Vision/Medium-term Management Plan
6 Chiba-Musashino Alliance7	Strengthening Solution Marketing/
Providing SME Management Assistance8	Operational Base of Saitama Prefecture
Contributing to the Local Economy
9	
10	Nurturing Growth Fields/
Measures and Support for Regional Revitalization

11	Supporting a Sustainable Regional Community andCorporate Social Responsibility
12	Corporate Governance13 Risk Management
14 Compliance
15 Consolidated Balance Sheets
17 Consolidated Statements of Income and Comprehensive Income
18 Consolidated Statements of Changes in Equity
20 Consolidated Statements of Cash Flows21	DirectoryConsolidated Financial Highlights
The Musashino Bank, Ltd. and Consolidated Subsidiaries Years Ended March 31, 2018 and 2017

Thousands of
U.S. Dollars(Notes 1 and 2)
2018

Millions of Yen (Note 1)
2018
2017

At Year-end
Total Assets............................................................................................
Deposits including Negotiable Certificates of Deposit............................
Loans and Bills Discounted....................................................................
Trading Account Securities and Securities...............................................
Total Net Assets......................................................................................
Capital Adequacy Ratio (based on domestic standards) (%)...................

¥4,560,693
4,194,337
3,457,846
740,540
247,043
9.32¥4,507,139
4,127,056
3,412,133
782,505
233,974
9.46$42,928,210
39,479,829
32,547,496
6,970,444
2,325,329

For the Year
Ordinary Income...................................................................................
Ordinary Expenses.................................................................................
Profit before Income Taxes.....................................................................
Profit attributable to owners of parent....................................................

¥   72,263
56,53015,334
10,917¥   70,903
58,015
12,881
9,762$   680,186
532,097
144,334
102,758

Notes 1. In this annual report, Japanese yen (in millions) and U.S. dollars (in thousands) are indicated with fractions rounded off.
2. U.S. dollar figures have been translated at the rate ¥106.24 to U.S.$1, the prevailing market rate as of March 31, 2018.

Ordinary income

Ordinary expenses

Profit attributable to owners of parent(¥ million)(¥ million)(¥ million)

74,33472,26356,532FY2015FY2016FY2017

12,56356,53010,91755,56170,903

FY2014

14,46758,01576,077FY2014FY20159,762

FY2016FY2017FY2014FY2015FY2016FY2017

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

Continuing to Work Together with
People in the Region

Kikuo Kato
President

The Prefectural Economy
With progress on private sector capital investment as well as
public sector investment, Saitama Prefecture’s economy is ona modest recovery track. With two years remaining until the2020 Tokyo Olympic and Paralympic Games, we expect ourvarious initiatives for achieving regional invigoration to gain
speed going forward.

2

Initiatives for Medium-Term Management Plan
“MVP 2/3 (Two-Thirds)”
Based on the Bank’s medium-term management plan “MVP(Musashino Value-Making Plan) 2/3 (Two-Thirds),” which
covers the period from April 2016 to March 2019, and is thesecond phase of our efforts to realize our long-term vision of
becoming “the region’s number one bank that creates newvalue in Saitama,” we have been quickly executing our growthstrategy, including enhancing our branch network, providing
optimal solutions, and bolstering our initiatives in new

business fields.
At the same time, under the Chiba-Musashino Alliance,
which is our comprehensive alliance with Chiba Bank,in addition to developing various businesses such as theinheritance-related business and the financial instrumentsintermediary business, we are working on new initiatives,
such as jointly establishing branches, as we aim to provide
more convenience and high value-added products.
With respect to the branch network, in addition to making branches in Saitama Prefecture more convenient, having
more branches open on holidays, and enhancing consultingtype branches, we have been opening branches in Tokyo withthe aim of growing our business base in Tokyo. In June 2018,
we opened the Shibuya Branch and the Hamamatsucho
Office, and centered on these locations we will focus on our
unique, locally-rooted finance in Tokyo as well, and also
accumulate expertise in solutions, which we can then use tosupport our customers in Saitama Prefecture.
For individual customers, based on the “Basic Policy for
Fiduciary Duty.” we announced in June 2017, we are working to develop our personnel and enhance our product lineup
in order to sincerely respond to our customers’ individual
asset management needs.
Partnering with Chibagin Securities of the Chiba Bank
Group, we are working on the financial instruments intermediary business to address customers’ increasingly diverseand sophisticated asset management needs, and we are also
working to enhance our services, including those related toinheritance and real estate trusts.

Deposits including negotiable deposits(non-consolidated)

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

For corporate customers, based on business evaluations
that accurately assess the business details and growth possibilities of individual SMEs, we are focusing on extending
financing that does not excessively rely on loan collateral or
guarantees, as well as technological innovations and otherinitiatives to support companies’ core business activities.
Also, in addition to offering optimal solutions dependingon the customer’s growth stage, such as syndicated loans
and other types of corporate finance, business matching andM&A, we are also helping corporate executives resolve theirissues related to business succession through “Musashino
Business Succession Support” and a joint fund with Chiba
Bank.
Moreover, in addition to enhancing the functions of the“Musashino Bank Application” smartphone app, aiming
to create new services using FinTech, we are working with
Chiba Bank and the T&I Innovation Center to build up our
API platform, as well as working on partnerships with leading
companies.
In order to help revitalize the region, we have strengthened
collaboration with local governments to solve regional issues,
and are focusing on supporting PFI projects implemented by
local governments such as updating public infrastructure andfacilities.
We also aim to contribute to the creation of vibrant,
livable cities by proactively being involved in redevelopment
projects such as the Omiya Station East Exit area.

Loans(non-consolidated)(¥ billion)

776.7

4,209.5
4,140.6

743.7

3,939.7

3,223.2

682.9

FY2015FY2016FY2017FY20143,470.8

3,333.1

712.2

4,012.3

FY2014

3,425.3

FY2015FY2016FY2017FY2014FY2015FY2016FY20173

Financial Results Fiscal 2017

including responding and adapting to FinTech, boostingproductivity, and implementing work style reform.
In addition, financial institutions are now being asked
to give consideration to perspective of ESG (Environment,
Society, and Governance) more than ever before. For regional
financial institutions like Musashino Bank, we are deeply
aware of the fact that having a sustainable regional society isa condition for our existence, and we will continue to workwith our stakeholders to push forward with our day-to-day
operations.
Going forward, based on the corporate philosophy of“Working in harmony with the local community it serves”
and “Maintaining a deep respect toward customers,” which
has been in place since the Bank was founded, the directors
and employees of Musashino Bank will further commit
themselves to their work and strive for sustainable growthand development together with everyone in the community.
As a result, we will be able to meet the expectations of ourcustomers, shareholders, the local community, and all otherstakeholders.
In closing, we kindly request your continued support andunderstanding.

While carrying out these initiatives, as of March 31, 2018
our deposits, etc. were ¥4,209.5 billion, a year-on-yearincrease of ¥68.9 billion. Assets in custody, such as investment trusts and insurance products, were ¥776.7 billion, a
year-on-year increase of ¥33.0 billion. Loans outstanding
increased ¥45.5 billion year on year to ¥3,470.8 billion.
As market interest rates remained low due to negativeinterest rates, profit attributable to owners of parent was¥10.0 billion on a non-consolidated basis and ¥10.9 billion
on a consolidated basis. This was attributable to the increasein fees and commissions, especially assets in custody andcorporate-related fees, as well as other factors. Both income
and profit increased compared to the previous fiscal year,
and we appreciate all the support we received from ourstakeholders.

Continuing to Work Together with
People in the Region
The internal and external environment surroundingMusashino Bank is undergoing significant changes, andwe must establish a business model that will lead to better
growth prospects and profitability, as well as further exhibit
financial intermediary functions aimed at regional economic
revitalization. We also have other various challenges,

Profit attributable to owners of parent/
Net income

Kikuo Kato
President

Dividend payout ratio and annual dividend

5-year average of consolidated ROE

FY2014 FY2015 FY2016 FY2017(¥ billion)

14.4
12.5
10.7

11.2

10.9
9.7

9.0

10.0

Dividend
payout ratio (%)

24.8

26.7

29.7

26.5

Annualdividend (Yen)

80

90

80

80

5.7%

5.9%

FY2014FY2015

5.6%

5.2%

Shareholders return ratio
FY2014 FY2015 FY2016 FY2017
Shareholders
return ratio (%)

FY2014FY2015

Consolidated
Non-consolidated

4

FY2016FY2017

24.8

26.7

29.7

26.5

Consolidated
Non-consolidated

FY2016FY2017

Long-term Vision/Medium-term Management Plan
In April 2016, the Bank started its medium-term management plan “MVP (Musashino Value-making Plan) 2/3 (Two-Thirds),”
the second phase of its efforts to realize its long-term vision for turning itself into “the region’s number one bank (The Valuemaking Bank) that creates new value in Saitama,” and has been working to further expand its contact with customers and provide
optimal solutions.

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

The number one bank in the region that creates value in Saitama~ The Value-making Bank ~By creating value in Saitama, lead the economic development of Saitama,
and also grow ourselves by responding to the expectations of our customers

Phase 1
Previous medium-term
management plan

Phase 2Medium-term management plan
“MVP 2/3 (Two-Thirds)”(April 2016–March 2019)“MVP 1/3 (One-Third)”(April 2013–March 2016)

Enhance readiness to become
the number one bank in the region

Establish our reputation as thenumber one bank in the region

Phase 3
Next medium-term
management plan
(April 2019 onwards)

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

Medium-term management plan “MVP 2/3 (Two-Thirds)” Plan period: April 2016–March 2019
Plan vision

Become the bank which is the most familiar with the region and its customers
The bank that people will choose first to approach and consult when seeking answers to financial problems

Basic Policy■ To provide solutions that meet the needs of our customers■ Conduct the allocation of optimal management resources in order to support the economic development of regional communities

Basic Strategy
Increase contact with customers

Sales strategy

Human resources
strategy

Infrastructurebuilding

Provide optimal solutions
Rise to the challenge of entering new fields

Strengthen
Strengthen Groupsecurities investment
strategies

Fuse creation strategies and growth strategies
Strengthen management oversight systems
Improve brand, customer satisfaction and CSR

5

Chiba-Musashino Alliance
As the Chiba-Musashino Alliance that started in March 2016 celebrates its 2nd-year anniversary, the two banks’ coordinatedprojects and collaborations are accelerating. Musashino Bank and Chiba Bank will continue striving to further improve customer
services and better contribute to regional revitalization.

Creation of a new model for regional banks’ alliances

Minimal overlap of branches

Regional banks rooted ineach region

Share business issues
characteristic of Tokyo
Metropolitan area

Best partner as regards smoothly advancing the alliance

Both banks to maintain independent management

Main Initiatives for Individual
Customers

Main Initiatives for Corporate
Clients

FinTechInternational Operations

In March 2018, we entered into a partnership agreement
about using an API FinTech platform with Chiba Bank andthe T&I Innovation Center Co., Ltd.

In August 2018, we opened a representative office in Singapore
next to the representative office of Chiba Bank.

Financial Instruments IntermediaryBusiness
In August 2017 we started collaborating in the financial instruments intermediary business with the Chiba Bank
Group’s Chibagin Securities Co., Ltd.
to meet our customers’ sophisticatedasset management needs.

Together with the president of Chiba Bank at the representative office

A Chibagin Securities branchestablished inside one of our bases

Asset Management Operations
We are handling investment funds formed by Chibagin
Asset Management Co., Ltd. to contribute to our customer’s
medium- to long-term asset-building and asset management.

Inheritance-Related Services

6

By collaborating as regards inheritance-related services, weare able to offer our customers a variety of one-stop, over-thecounter consultations, including as regards inheritance, estateliquidation and testamentary trusts, for which customer
needs are increasing.

Joint Establishment of Sales Branch
In June 2018, we jointly established a corporate sales branchin the town of Hamamatsucho in Tokyo’s Minato Ward. We
are catering to a wide range of client needs, including byarranging the mutual introduction of clients and by proposing joint financing projects.

Business Succession Support
We established the Chiba-Musashino Alliance No. 1
Investment Business Limited Partnership joint fund witha total of ¥3 billion in venture capital from the two banks’groups, and are supporting corporate clients in carrying out
smooth business succession operations through the temporary holding of shares by this joint fund.

Strengthening Solution Marketing/Providing SME Management AssistanceStrengthening Solution Marketing

Offering a Variety of Financing Methods

Promotion Structure

The Bank has focused on offering a variety of financing
methods, including syndicated loans to diversify procurement
methods and implement financial rationalization when acooperative financing group has been formed by a number offinancial institutions, project financing that provides funding
after focusing on the cash flow of a business, private placement bonds that result in improving the corporate image ofa company conducting fund procurement, and Asset-Based
Lending (ABL) that makes use of the customer’s productinventory, accounts receivable or suchlike.

In April 2018, we established the Solution Marketing Divisionin order to further strengthen solution-based sales. The Bankis working together with client companies and management
to solve various problems and issues while also drawing on thefunctional capabilities of Group companies.
Solutions Marketing Division
Information-based sales

Business matching

Business financing

M&As

Founding businesses and new businesses

Trusts and inheritance

Development/area planning

Private banking

Providing SME Management
Assistant
Support for Start-Ups and New Entries

Musashino Bank Group companies
LeasesCredit cards

Loan guarantees

Think tanks

Systems

Venture capital

Support for Overseas Expansion
Through our overseas networks formed by alliances andpartnerships, we are responding to diverse needs that include
assisting our client companies to expand their businessoverseas, or to further develop our own existing businesses.
Furthermore, we opened a Representative Office inSingapore in August 2018 (as our sole overseas office). As
a result, from Singapore we can flexibly support clients’
activities in the ASEAN region, both those carrying out business expansion and those examining the launching of new
businesses.

M&A and Business Succession

The Bank recognizes that for the sustained development of
the regional economy it is indispensable for start-ups and new
entries to be done actively and continuously. Consequently,
we are working with a “support team for start-ups and new
entries” in Head Office and with branches to strengthen ourefforts in this area.

Business Evaluation
The Bank does not rely excessively on financial data, collateraland guarantees—it is carrying out initiatives that prioritize
business evaluation, including the business details and growth
possibilities of each individual company. The number ofborrowers based on a business evaluation have increased toapproximately 20% of our total lending (as of March 2018).

Supporting Excellent Technologies andProducts
We support the client’s core businesses by utilizing public
schemes such as standardization and intellectual property that
evaluates and visualizes client companies’ superior technologies and products.

In order to help local companies carry out smooth businesssuccession, we have been offering a one-stop service ranging
from the creation of an optimal plan, to the proposal towards
realization of that plan. In addition, we have been contributing
to maintain and create regional employment through theutilization of M&As.

7

Operational Base of Saitama Prefecture
Features and Attractiveness of Saitama Prefecture
Saitama Prefecture, the Bank’s operating base, has a vibrant economy. The prefecture is blessed with a favorable climate andtopography, has a well-developed transportation infrastructure, including expressway and railway networks, and has a highly
concentrated population and industry.

Well-developed Expressway and
Railway Networks
Saitama Prefecture is located in the heart of the Tokyo metropolitan area, which is home to one-third of Japan’s population (approximately 40 million people), and the prefecture
has a well-developed network of expressways and railways.
The Kanetsu, Tohoku, and Joban expressways run northto south through the prefecture, while the Metropolitan
Inter-City Expressway (Ken-O-do) and the Tokyo Gaikan
Expressway run east to west. The Ken-O-do provides accessto the Tomei and Chuo Expressways, and also connects with
the Higashi-Kanto Expressway, which extends to Narita
International Airport, east Japan’s gateway to the sky. This has
attracted logistics and production bases to the prefecture. As
for railways, Saitama Prefecture is directly connected to bothTokyo and other key cities via the Hokkaido, Tohoku, Akita,
Yamagata, Joetsu and Hokuriku Shinkansen (bullet trains),
which originate in Omiya.
Ken-O-do Kawajima
Interchange area
©Omiya National
Highway Office, Kanto
Regional Development
Bureau, Ministry of Land,
Infrastructure, Transport
and Tourism

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.

Fifth Largest Prefecture by Population
The population of Saitama Prefecture is 7.31 million (estimated population as of June 1, 2018), the highest level ever.
It has the fifth largest prefectural population in Japan.

Fifth Largest Economy in Japan
Total production in Saitama Prefecture is about ¥20 trillion,
making its prefectural economy the fifth largest in Japan.
Also, over the past 10 years, the increase in Saitama’s total
production has been the second greatest in Japan, as theprefecture’s economy continues to grow.

Collection of Diverse Manufacturing
Industries

An expressway and railway networkthat reaches all over Japan

Saitama Prefecture has a diverse range of local industries
centered on the automotive-related industry. With the prefecture’s strong transportation infrastructure, including the
Ken-O-do, the relatively small number of natural disasters,
as well as inexpensive land prices despite being adjacent tocentral Tokyo, over the 10 years from 2008 to 2017 there wasa net influx of 861* companies to the prefecture, the highest
number in the country.

Expressway
Railway (Shinkansen)* Based on Teikoku Databank Survey

NaritaInternational Airport
Tokyo
International Airport(Haneda)8

Contributing to the Local Economy
Deposits from the Region

Loans to the Region

As of March 31, 2018, deposits from the region increased¥74.9 billion year on year to ¥3,991.8 billion. The ratio of
deposits from the region continued to be high, at 86.58% of
the total balance of deposits.
The Bank’s share of deposits within the prefecture as ofMarch 31, 2018 declined to 18.91%.

Loans to the region as of March 31, 2018 rose ¥58.0 billion
to ¥3,005.1 billion, thereby maintaining a high loan-toregion ratio of 86.58%. The Bank’s share of loans in theprefecture improved to 18.91%.

Assets in Custody from the Region
As of March 31, 2018, assets in custody from the region
increased ¥32.8 billion year on year to ¥775.8 billion. The
breakdown comprises investment trusts of ¥142.6 billion,
life insurance of ¥564.6 billion, and government bonds andother assets of ¥68.6 billion.
* Investment trust figures are market value; life insurance figures are total sales.

Towards a Sounder Financial Position
The Bank is strengthening its capital adequacy and reducing
non-performing loans. The Bank has maintained a consolidated and non-consolidated capital adequacy ratio (Basel III
domestic standard) of 9.32% and 9.03%, respectively, so wehave continued to maintain a very sound financial position.
The Bank’s non-performing loan ratio based on standards
established by the Financial Reconstruction Act, declined by
0.10 of a percentage point to 1.71%.

Deposits from region/Ratio of deposits from region

Loans to region/Ratio of loans to region

Non-consolidated(¥ billion)

Non-consolidated(¥ billion)

99.34%

3,811.1

99.31%
3,822.4

99.12%
3,916.998.90%
3,991.8

86.19%
2,778.3

FY2014FY2015FY2016FY2017

Deposits from region
Ratio of deposits from region

FY201485.97%
2,865.5

FY201586.04%

86.58%

2,947.1

3,005.1

FY2016FY2017

11.4

11.4

38.3

31.4

1.81%

1.71%

Loans to region
Ratio of loans to region

Assets in custody from region

Non-performing loans

Non-consolidated(¥ billion)

Non-consolidated(¥ billion)

775.8
743.0

10.1

711.8

43.8

679.8

2.21%

FY2014FY2015FY2016FY2017

10.1
42.9
2.02%

17.8

14.9

12.8

FY2014FY2015FY201617.0
FY2017

Bankrupt 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* “Region” refers to Saitama Prefecture and the areas bordering the prefecture which are a part of the economic and local-living sphere(the Kumegawa Branch, Itabashi Branch, and Goka Branch sales areas).
9

Nurturing Growth Fields/Measures and Support for Regional Revitalization
Nurturing Growth Fields
Initiatives in the Manufacturing Field
The number of manufacturing business sites in Saitama
Prefecture exceeds 11,000 companies, making it the fourthlargest prefecture in the country. The Bank actively supports thecore businesses of manufacturing companies to enhance theircompetitiveness and differentiate themselves from their peers.
In addition to holding seminars and performing inspection
visits to provide ongoing support technological innovation andproductivity improvements, including lectures by experts andintroductions of examples of advanced companies, we have beencreating interaction opportunities between these companies.

branch manager to be “the person in charge of promoting
Regional Revitalization,” and built a structure for promoting
Regional Revitalization throughout the Bank.

Alliances and Partnerships with
Local Government Organizations, etc.
Prefectures

Saitama Prefecture (October 2013)

DesignatedMunicipalities

Saitama City (January 2016)

Municipalities

Tsurugashima City (December 2014)
Toda City (April 2016)
Yokoze Town (June 2016)
Gyoda City (July 2016)
Kumagaya City (September 2016)
Kasukabe City (December 2016)
Konosu City (June 2017)
Hasuda City (September 2017)
Kitamoto City (December 2017)
Yorii Town (March 2018)
Ogano Town (August 2018)

Activities in the Tourism Field
Nationwide, efforts are being made to attract foreign tourists, andSaitama Prefecture has sizable hopes about the establishment of asignificant tourism industry ahead of the Rugby World Cup andthe Tokyo Olympics and Paralympics to be held in Japan. The
Bank is issuing a The Bank is issuing a series of town guidebooks
and guide maps of Saitama named Buratte, and is working to
improve its branches’ ability to respond to foreign customers.
and is working to improve its branches’ ability to respond toforeign customers.

Activities in the Environment Field
Saitama Prefecture is blessed with a good climate and good terrain, and consequently is developing renewable energy businesses
in various locations. The Bank provides a variety of support tobusinesspeople and companies in this field.

Initiatives for Creating Towns
Through our participation in redevelopment projects making
progress throughout the prefecture, such as the east side of
Omiya Station, we are supporting the creation of towns forthe future of the region.

Support for Solar Power Projects
The Bank offers the “Musashino Solar Power Project Support
Loan: Blessings of the Sun,” which helps companies conduct
solar power projects through utilization of feed-in tariff
schemes for renewable energies.

Measures and Support for
Regional Revitalization
Promotion Structure
The Bank works to support its client companies in line with
their growth stage with the aim of enhancing their financial
intermediary capabilities for regional revitalization, and isactively participating in creating regional value by cooperating with local public entities and others.
The Bank has established the “Team for Promoting
Towns, People and Job Revitalization” at the head officeto support the promotion of the Regional Comprehensive
Strategy being undertaken by local government organizations
involved with the government’s “comprehensive strategy fortowns, people, and job revitalization.” The Bank assigned all10©Omiya Station East Entrance Daimoncho 2-Chome Center District Redevelopment

Initiatives for PPP and PFI
Against the backdrop of a declining population, we are also
working to improve public services that utilize PPP and
PFI schemes, and to support the creation of private-sectorbusiness opportunities, for the matters with which local
government organizations are involved, including theimprovement of community services, and the maintenanceand administration of public facilities.

Supporting a Sustainable Regional Community and Corporate Social Responsibility
The Bank proactively embraces Environment, Social, and Governance (ESG) perspectives in regards to the Bank’s management,
and focuses on initiatives that take sustainability into consideration. With respect to specific initiatives, the Bank also works tocooperate with stakeholders while keeping in mind the United Nations’ Sustainable Development Goals (SDGs).

Consideration for Biodiversity
The Bank strives to consider biodiversity and other environmental factors into consideration in the construction of its
branches and offices. For offices where administrative work
is concentrated, we plant native plant species formerly foundin the region around the buildings. Through such efforts, webecame the first in the banking industry to receive JHEP certification from the Ecosystem Conservation Society – Japan.

Special SubsidiaryMusashino Harmony Co., Ltd.
In May 2017, we established Musashino Harmony Co., Ltd.
with the aim of expanding working opportunities for people
with disabilities. Currently, five employees are active in thecompany, and in April 2018 it acquired “special subsidiary”
certification, which made us the first financial institution in
Saitama Prefecture to obtain such certification.

Musashino SDGs Private-Placement Bond
“Mirai no Chikara”
JHEP certificate

Initiatives Aimed at Promoting Active Roles
for Women
The Bank is engaged in conducting continuous training andcooperating with other regional banks in order to promote
more active roles for women in the workplace.
Promoting Active Roles for Diverse Human Resource
Female administrators and managers haveincreased tenfold in the last 10 years(Female employees)

Helping with Finance Education
We actively provide opportunities for children to learn about
the role of money and the banking business by providing aworkplace experience for study and by holding finance classes
at local events.

67
8

28
7
1
6
2008

We are offering the “Musashino SDGs Private-Placement
Bond” which contributes to creating a sustainable regional
community. Together with local companies, we aresupporting organizations working to achieve SDGs such as
educational institutions and NPOs.

1

59

27
2013

2018

Branch managers and deputy managers
Section managers (including equivalent positions at Head Office)Work experience at Musashino Bank—Aiming to be Japan’s Best Bank Staff(Held every year in August)11

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 havebeen elected, and they monitor and audit directors in theexecution 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.

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 (As of March 31, 2018)

General Meeting of Shareholders
Assignment

Assignment
Audit

Board of Directors
Directors

Supervision

Board of Corporate Auditors
Auditors

Discussion
Discussion

ReportAssignment

Business execution functions
Executive Committee

Indication/
Verification

Audit
Compliance Committee

Accounting auditors

Executive officers

Head office/Branches

12

Audit

AdviceAuditing Division

Law officeLicensed tax accountants

Risk Management
Risk Management Policy
As the risks associated with banking operations become
increasingly varied and complex, the Bank has formulated
a set of internal management policies that take into consideration the Bank’s strategic targets, in order to ensure thatthe manner in which it manages its business is both soundand pertinent. 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 andcontrol risks. The results of these activities are reported to theBoard of Directors and other relevant bodies on a regular 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 its 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 toappropriately manage liquidity risk. While ensuring the independence 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 thatis capable of harnessing the checks-and-balances function. At
the same time, the ALM Committee deliberates as and whenrequired.

(5) Operational Risk Management
Musashino Bank confronts broad and varied operationalrisks. In addition to classifying risks as (i) administrative risk,(ii) systems risk, and (iii) other operational risks (a. legalrisk, b. human risk, c. tangible asset risk, and d. reputationrisk), putting in place rules on an individual risk basis andpromoting the management of each risk by the appropriate
management department, the Bank has established the
Operational Risk Management Department to undertake themanagement of operational risks on a comprehensive basis.
The Bank also pushes forward measures aimed at establishingand developing a management structure that is capable ofharnessing the checks-and-balances function with respect
to each business division. Moreover, the Operational Risk
Management Committee deliberates on issues as and whenrequired.

Crisis Management/BCP Framework
To ensure business continuity in the event of a major earthquake or a system failure, the Bank has established a BusinessContinuity Plan (BCP) and prepared related manuals forhandling all situations. We make sure that all bank employees
understand the business continuity system in the event ofan emergency. Moreover, the Bank holds periodic drills toincrease the effectiveness and level of sophistication of the
BCP.

A Cyber Security Management Framework
We established the Cyber Security Management
Subcommittee as a CSIRT within the Bank, with the aimof ensuring a highly-effective cyber security framework that
includes trying to prevent any impact from the occurrence ofcyber attacks, and minimizing the damage and achieving an
early-stage recovery if there is any. We are developing diverse
activities for normal times and for emergencies (if someincident occurs).
*CSIRT: Computer Security Incident Response TeamA general term for teams responsible for cyber security management within an organization. At the Bank, the “Cyber Security
Management Subcommittee” and its secretariat are CSIRTs.

13

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, and social
norms.

Compliance ManualMusashino 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 employees,” “tacklingenvironmental problems,” “tackling social contribution
activities,” and “resolute responses to anti-social forces,” anddirectors and employees go about their daily duties guided bythese basic policies.

To 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, asection on the compliance framework that provides an explanation on various structures at the Bank including educationand verification structures, a section on laws and regulations
that require directors’ and employees’ compliance, and whichcontains an explanation of the laws and regulations that bank
employees are required to be knowledgeable of, and a pick-up
compliance section that provides a more detailed explanationof the matters that should be prioritized in the conduct ofdaily work. The compliance manual serves as a standard formaking decisions and taking actions in everyday businessactivities.

Compliance Management Structure

Elimination of Anti-Social Forces

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
to strengthen the compliance structure. Regular meetings
are held with the officers responsible for legal complianceappointed to each branch in order to improve the level of

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 thebank employees about this issue through training and othermeasures.

Basic Compliance Policy

14

compliance through the sharing of information and training
and also, meetings are held each month with the officers
responsible for legal compliance in the head office and eachdepartment. These meetings serve as a forum to deliberate oncompliance 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 status ofdaily compliance management.
Furthermore, Musashino Bank has established theCompliance Committee with the president of the bank serving as the chairperson, which serves as the organization thatchecks the status of compliance on a Bank-wide basis whileconsidering any and all other important matters throughregular meetings. In addition, the committee evaluates andchecks on the progress and implementation status of the“Compliance Program” approved by the Board of Directors.

Consolidated Balance Sheets
The Musashino Bank, Ltd. and Consolidated Subsidiaries As of March 31, 2018 and 2017

Thousands of
U.S. Dollars*
2018

Millions of Yen
2018
2017

AssetsCash and due from banks����������������������������������������������������������������������
Monetary claims bought������������������������������������������������������������������������
Trading account securities���������������������������������������������������������������������
Money held in trust�������������������������������������������������������������������������������
Securities�����������������������������������������������������������������������������������������������
Loans and bills discounted��������������������������������������������������������������������
Foreign exchanges���������������������������������������������������������������������������������
Lease receivables and investment assets��������������������������������������������������
Other assets�������������������������������������������������������������������������������������������
Tangible fixed assets������������������������������������������������������������������������������
Buildings, net�����������������������������������������������������������������������������������
Land�������������������������������������������������������������������������������������������������
Construction in progress�������������������������������������������������������������������
Other tangible fixed assets����������������������������������������������������������������
Intangible fixed assets����������������������������������������������������������������������������
Software��������������������������������������������������������������������������������������������
Other intangible fixed assets�������������������������������������������������������������
Net defined benefit asset�����������������������������������������������������������������������
Deferred tax assets���������������������������������������������������������������������������������
Customers’ liabilities for acceptances and guarantees�����������������������������
Allowance for loan losses�����������������������������������������������������������������������
Total assets�����������������������������������������������������������������������������

¥  250,530¥  211,372$ 2,358,151

10,558

8,626

99,379

364

621

3,426

1,490

1,500

14,025740,176

781,884

6,967,018

3,457,846

3,412,133

32,547,496

4,951

3,858

46,602

20,985

19,189197,524

34,45529,467324,31337,37437,398351,788

9,999

10,126

94,11725,32225,300238,347

244

133

2,297

1,808

1,836

17,018

2,863

3,050

26,948

2,688

2,875

25,301

175

175

1,647

6,659

5,843

62,679

1,010

1,050

9,507

4,802

6,516

45,200(13,377)(15,375)(125,913)¥4,560,693¥4,507,139$42,928,210

15

Thousands of
U.S. Dollars*
2018

Millions of Yen
2018
2017

Liabilities
Deposits������������������������������������������������������������������������������������������������
Negotiable certificates of deposit�����������������������������������������������������������
Call money and bills sold����������������������������������������������������������������������
Payables under securities lending transactions���������������������������������������
Borrowed money�����������������������������������������������������������������������������������
Foreign exchanges���������������������������������������������������������������������������������
Bonds payable���������������������������������������������������������������������������������������
Other liabilities�������������������������������������������������������������������������������������
Provision for bonuses����������������������������������������������������������������������������
Provision for directors’ bonuses�������������������������������������������������������������
Net defined benefit liability�������������������������������������������������������������������
Provision for directors’ retirement benefits��������������������������������������������
Provision for loss on interest repayment������������������������������������������������
Provision for reimbursement of deposits������������������������������������������������
Provision for point card certificates�������������������������������������������������������
Provision for contingent loss�����������������������������������������������������������������
Provision for share-based compensation������������������������������������������������
Allowance for demolition of non-current assets�������������������������������������
Deferred tax liabilities���������������������������������������������������������������������������
Deferred tax liabilities for land revaluation��������������������������������������������
Acceptances and guarantees�������������������������������������������������������������������
Total liabilities������������������������������������������������������������������������
Net assets
Capital stock�����������������������������������������������������������������������������������������
Capital surplus��������������������������������������������������������������������������������������
Retained earnings����������������������������������������������������������������������������������
Treasury shares��������������������������������������������������������������������������������������
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������������������������������������������������������������������
Non-controlling interests����������������������������������������������������������������������
Total net assets�����������������������������������������������������������������������
Total liabilities and net assets�������������������������������������������������

¥4,030,917¥3,938,291$37,941,613

163,420

188,765

1,538,215

22,187

24,706

208,838

21,62946,434

203,586

15,715

17,152

147,920

239

162

2,250

15,00015,000141,190

22,52920,710212,058

1,210

1,251

11,389

11

10

104

3,810

4,120

35,862

29

—

273

59

42

555

651

754

6,128

78

76

734

219

311

2,061

38

14

358

294

—

2,767

6,578

4,616

61,916

4,227

4,227

39,787

4,802

6,516

45,2004,313,650

4,273,164

40,602,880   45,743   45,743   430,563

38,291

38,290360,420

128,901

120,667

1,213,300

(900)

(907)

(8,471)

212,036

203,793

1,995,821

28,754

24,813

270,651(1,279)(1,399)(12,039)

8,286

8,286

77,993(1,105)(1,831)(10,401)

34,65529,869326,195

66

80

621

285

230

2,683

247,043

233,974

2,325,329¥4,560,693¥4,507,139$42,928,210* U.S. dollar figures have been translated at the rate ¥106.24 to U.S.$ 1, the prevailing market rate as of March 31, 2018.

16

Consolidated Statements of Income and Comprehensive Income
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2018 and 2017

Consolidated Statements of Income

Millions of Yen
2018
2017

Ordinary income���������������������������������������������������������������������������������
Interest income�������������������������������������������������������������������������������������
Interest on loans and discounts���������������������������������������������������������
Interest and dividends on securities���������������������������������������������������
Interest on call loans and bills bought�����������������������������������������������
Interest on deposits with banks���������������������������������������������������������
Other interest income�����������������������������������������������������������������������
Fees and commissions���������������������������������������������������������������������������
Other ordinary income��������������������������������������������������������������������������
Other income����������������������������������������������������������������������������������������
Recoveries of written off claims���������������������������������������������������������
Other������������������������������������������������������������������������������������������������
Ordinary expenses�������������������������������������������������������������������������������
Interest expenses������������������������������������������������������������������������������������
Interest on deposits���������������������������������������������������������������������������
Interest on negotiable certificates of deposit��������������������������������������
Interest on call money and bills sold�������������������������������������������������
Interest on payables under securities lending transactions�����������������
Interest on borrowings and rediscounts���������������������������������������������
Interest on bonds������������������������������������������������������������������������������
Other interest expenses���������������������������������������������������������������������
Fees and commissions payments������������������������������������������������������������
Other ordinary expenses������������������������������������������������������������������������
General and administrative expenses�����������������������������������������������������
Other expenses��������������������������������������������������������������������������������������
Provision of allowance for loan losses������������������������������������������������
Other������������������������������������������������������������������������������������������������
Ordinary profit������������������������������������������������������������������������������������
Extraordinary income��������������������������������������������������������������������������
Gain on disposal of non-current assets����������������������������������������������
Extraordinary losses����������������������������������������������������������������������������
Loss on disposal of non-current assets
Impairment loss��������������������������������������������������������������������������������
Other������������������������������������������������������������������������������������������������
Profit before income taxes�������������������������������������������������������������������
Income taxes—current��������������������������������������������������������������������������
Income taxes—deferred�������������������������������������������������������������������������
Total income taxes�������������������������������������������������������������������
Profit����������������������������������������������������������������������������������������������������
Profit (loss) attributable to non-controlling interests������������������������
Profit attributable to owners of parent�����������������������������������������������

¥72,263
42,37333,731
8,387
(4)
0
259
13,824
1,365
14,699568
14,131
56,530
1,938
624
31
301
258
113
91
518
3,751
1,525
36,587
12,727
1,716
11,01015,732
0
0
399
7
1
390
15,334
4,573
(207)
4,366
10,96750¥10,917¥70,903
43,33135,496
7,600
(15)
0
249
12,826
1,487
13,257
1,022
12,23458,015
2,132
830
45
218
143
123
133
636
3,874
851
36,851
14,306
4,239
10,066
12,887——6
5—
1
12,881
3,571
(354)
3,216
9,664
(98)
¥ 9,762

Thousands of
U.S. Dollars*
2018$680,186
398,842
317,498
78,944(38)
0
2,438
130,120
12,848138,357
5,346
133,010532,097
18,242
5,873
292
2,833
2,428
1,064
857
4,876
35,307
14,354344,381
119,795
16,152
103,633
148,080
0
0
3,756
66
9
3,671
144,334
43,044(1,948)41,096103,229471$102,758* U.S. dollar figures have been translated at the rate ¥106.24 to U.S.$ 1, the prevailing market rate as of March 31, 2018.

Consolidated Statements of Comprehensive Income
Profit�����������������������������������������������������������������������������������������������������
Other comprehensive income����������������������������������������������������������������
Valuation difference on available-for-sale securities���������������������������
Deferred gains or losses on hedges����������������������������������������������������
Remeasurements of defined benefit plans, net of tax�������������������������
Comprehensive income�������������������������������������������������������������������������
Comprehensive income attributable to��������������������������������������������������
Comprehensive income attributable to owners of parent������������������
Comprehensive income attributable to non-controlling interests������

Millions of Yen
2018
2017

Thousands of
U.S. Dollars*
2018¥10,967
4,787
3,942
119
725
¥15,755¥ 9,664(762)(2,301)657
881¥ 8,902$103,229
45,05837,105
1,120
6,824$148,296¥15,70351¥ 8,998(96)$147,807
480* U.S. dollar figures have been translated at the rate ¥106.24 to U.S.$ 1, the prevailing market rate as of March 31, 2018.
17

Consolidated Statements of Changes in Equity
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2018 and 2017
Millions of yen
Shareholders’ equity

Balance as of April 1, 2016................................................
Changes of items during period:
Dividends of surplus����������������������������������������������������
Profit attributable to owners of parent�������������������������
Purchase of treasury shares�������������������������������������������
Disposal of treasury shares��������������������������������������������
Transfer to capital surplus from retained earnings��������
Purchase of share of consolidated subsidiaries treasury stock���Net changes of items other than shareholders’ equity���Total changes of items during period���������������������������
Balance as of March 31, 2017...........................................
Changes of items during period:
Dividends of surplus����������������������������������������������������
Profit attributable to owners of parent�������������������������
Purchase of treasury shares�������������������������������������������
Disposal of treasury shares��������������������������������������������
Transfer to capital surplus from retained earnings��������
Purchase of share of consolidated subsidiaries treasury stock���
Sales of shares of consolidated subsidiaries��������������������
Net changes of items other than shareholders’ equity���Total changes of items during period���������������������������
Balance as of March 31, 2018...........................................

Capitalstock

CapitalsurplusRetainedearnings

TreasurysharesTotalshareholders’ equity¥45,743¥38,351¥113,922¥(804)¥197,213(3,018)(3,018)

9,762

9,762
(104)

0

(104)

0

—

0

—

—

(60)

(60)

—

(60)

6,744

(103)

6,580

45,74338,290120,667(907)

203,793(2,682)(2,682)

10,917

10,917

(0)
0

(11)

(11)

18

18

(0)

—

—

—

1

1

—

1

8,233

7

8,242

¥45,743¥38,291¥128,901¥(900)¥212,036

Millions of yen
Accumulated other comprehensive income

18

Valuationdifference on
available-for-salesecurities

Deferred
gains orlosses onhedgesBalance as of April 1, 2016................................................ ¥27,116
Changes of items during period:
Dividends of surplus����������������������������������������������������
Profit attributable to owners of parent�������������������������
Purchase of treasury shares�������������������������������������������
Disposal of treasury shares��������������������������������������������
Transfer to capital surplus from retained earnings��������
Purchase of share of consolidated subsidiaries treasury stock���Net changes of items other than shareholders’ equity���(2,303)
Total changes of items during period���������������������������
(2,303)
Balance as of March 31, 2017........................................... 24,813
Changes of items during period:
Dividends of surplus����������������������������������������������������
Profit attributable to owners of parent�������������������������
Purchase of treasury shares�������������������������������������������
Disposal of treasury shares��������������������������������������������
Transfer to capital surplus from retained earnings��������
Purchase of share of consolidated subsidiaries treasury stock���
Sales of shares of consolidated subsidiaries��������������������
Net changes of items other than shareholders’ equity���3,941
Total changes of items during period���������������������������
3,941
Balance as of March 31, 2018........................................... ¥28,754¥(2,056)

Total accuRevaluation Remeasurements mulated other Subscription
Nonreserve forof defined comprehensive rights tocontrolling
land
benefit plansincomesharesinterests¥8,286¥(2,712)¥30,633¥ 74¥1,157

Total net
assets¥229,078(3,018)
9,762
(104)
0
—
(60)

657

—

881

(764)

6

(926)

(1,684)

657

—

881

(764)

6

(926)

4,895

(1,399)8,286(1,831)

29,86980  230

233,974(2,682)
10,917
(11)
18
—
—
1

119

—

725

4,786

(14)

54

4,826

119

—

725

4,786

(14)

54

13,068¥(1,279)¥8,286¥(1,105)¥34,655¥ 66¥  285¥247,043

Thousands of U.S. Dollars*
Shareholders’ equity

Balance as of March 31, 2017������������������������������������������
Changes of items during period:
Dividends of surplus����������������������������������������������������
Profit attributable to owners of parent�������������������������
Purchase of treasury shares�������������������������������������������
Disposal of treasury shares��������������������������������������������
Transfer to capital surplus from retained earnings��������
Purchase of share of consolidated subsidiaries treasury stock���
Sales of shares of consolidated subsidiaries��������������������
Net changes of items other than shareholders’ equity���Total changes of items during period���������������������������
Balance as of March 31, 2018...........................................

Capitalstock

CapitalsurplusRetainedearnings

TreasurysharesTotalshareholders’ equity$430,563$360,410$1,135,796$(8,537)$1,918,232(25,245)(25,245)

102,758

102,758

(0)
0

(104)

(104)

169

169

(0)

—

—

—

9

9

—

9

77,49466

77,579$430,563$360,420$1,213,300$(8,471)$1,995,821

Thousands of U.S. Dollars*
Accumulated other comprehensive income
Valuationdifference on
available-for-salesecurities

Deferred
gains orlosses onhedgesBalance as of March 31, 2017������������������������������������������ $233,556 $(13,168)
Changes of items during period:
Dividends of surplus����������������������������������������������������
Profit attributable to owners of parent�������������������������
Purchase of treasury shares�������������������������������������������
Disposal of treasury shares��������������������������������������������
Transfer to capital surplus from retained earnings��������
Purchase of share of consolidated subsidiaries treasury stock���
Sales of shares of consolidated subsidiaries��������������������
Net changes of items other than shareholders’ equity��� 37,095
1,120
Total changes of items during period��������������������������� 37,095
1,120
Balance as of March 31, 2018........................................... $270,651 $(12,039)

Total accuRevaluation Remeasurements mulated other Subscription
Nonreserve forof defined comprehensive rights tocontrolling
land
benefit plansincomesharesinterests

Total net
assets$77,993$2,202,316$(17,235)$281,146$ 753$2,165(25,245)
102,758
(104)
169
—
—
9
—

6,824

45,049(132)508

45,425—

6,824

45,049(132)508

123,005$77,993$(10,401)$326,195$ 621$2,683$2,325,329* U.S. dollar figures have been translated at the rate ¥106.24 to U.S.$ 1, the prevailing market rate as of March 31, 2018.

19

Consolidated Statements of Cash Flows
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2018 and 2017

Millions of Yen
2018
2017

Cash flows from operating activities
Profit before income taxes���������������������������������������������������������������������
Depreciation�����������������������������������������������������������������������������������������
Impairment loss������������������������������������������������������������������������������������
Share of (profit) loss of entities accounted for using equity method�������
Increase (decrease) in allowance for loan losses��������������������������������������
Increase (decrease) in provision for bonuses�������������������������������������������
Increase (decrease) in provision for directors’ bonuses����������������������������
Decrease (increase) in net defined benefit asset��������������������������������������
Increase (decrease) in net defined benefit liability����������������������������������
Increase (decrease) in provision for directors’ retirement benefits����������
Increase (decrease) in provision for loss on interest repayment���������������
Increase (decrease) in provision for reimbursement of deposits��������������
Increase (decrease) in provision for point card certificates����������������������
Increase (decrease) in provision for contingent loss��������������������������������
Increase (decrease) in provision for share-based compensation���������������
Increase (decrease) in allowance for demolition of non-current assets����
Gain on fund management�������������������������������������������������������������������
Financing expenses��������������������������������������������������������������������������������
Loss (gain) related to securities��������������������������������������������������������������
Loss (gain) on money held in trust��������������������������������������������������������
Foreign exchange losses (gains)��������������������������������������������������������������
Loss (gain) on disposal of non-current assets�����������������������������������������
Net decrease (increase) in trading account securities������������������������������
Net decrease (increase) in loans and bills discounted�����������������������������
Net increase (decrease) in deposit����������������������������������������������������������
Net increase (decrease) in negotiable certificates of deposit��������������������
Net increase (decrease) in payables under securities lending transactions���Net increase (decrease) in borrowed money (excluding subordinated borrowings)����
Net decrease (increase) in deposit (excluding deposit paid to Bank of Japan)�������������
Net decrease (increase) in call loans�������������������������������������������������������
Net increase (decrease) in call money����������������������������������������������������
Net decrease (increase) in foreign exchanges—assets������������������������������
Net increase (decrease) in foreign exchanges—liabilities������������������������
Proceeds from fund management
Payments for finance�����������������������������������������������������������������������������
Other, net���������������������������������������������������������������������������������������������
Subtotal�����������������������������������������������������������������������������������
Income taxes paid����������������������������������������������������������������������������������
Net cash provided by (used in) operating activities����������������Cash flows from investing activities
Purchase of securities�����������������������������������������������������������������������������
Proceeds from sales of securities�������������������������������������������������������������
Proceeds from redemption of securities�������������������������������������������������
Increase in money held in trust��������������������������������������������������������������
Decrease in money held in trust������������������������������������������������������������
Purchase of tangible fixed assets�������������������������������������������������������������
Proceeds from sales of property, plant and equipment���������������������������
Purchase of intangible assets������������������������������������������������������������������
Payments for asset retirement obligations����������������������������������������������
Net cash provided by (used in) investing activities�����������������Cash flows from financing activities
Decrease in subordinated borrowings����������������������������������������������������
Redemption of subordinated bonds�������������������������������������������������������Cash dividends paid������������������������������������������������������������������������������
Dividends paid to non-controlling interests�������������������������������������������
Purchase of treasury shares��������������������������������������������������������������������
Purchase of treasury shares of subsidiaries����������������������������������������������
Proceeds from sales of treasury shares����������������������������������������������������
Proceeds from changes in ownership interests in subsidiaries�����������������
Net cash provided by (used in) financing activities�����������������
Net increase (decrease) in cash and cash equivalents��������������������������Cash and cash equivalents at beginning of period������������������������������Cash and cash equivalents at end of period����������������������������������������

¥ 15,334
3,271
1
(8)
(1,998)
(41)
1
(438)
(314)
29
16
(102)
2
(91)
23
294
(42,373)
1,938
(578)
6
2,579
7
257
(45,713)92,626(25,345)(24,805)
1,062
108(1,932)(2,519)(1,092)76
42,636(1,904)(9,137)
1,877(3,187)(1,310)¥ 12,881
2,617
—
(28)
101
(1)
(0)
(356)
(252)
—
(14)
214
7
(101)
14
—
(43,331)
2,132
(985)
(1)
114
5
(126)
(92,966)
93,25632,93839,177
1,157
24
2,926
24,706(1,543)(174)
44,157(2,417)(1,602)
112,532(5,091)
107,440$   144,334
30,7899(75 )(18,806)(386)
9(4,123)(2,956)
273
151
(960)
19
(857)
216
2,767
(398,842)
18,242(5,441)
56
24,27566
2,419(430,280)
871,856(238,564)(233,481)
9,996
1,017
(18,185)(23,710)(10,279)715
401,318(17,922)(86,003)
17,668(29,998)(12,331)(161,253)
47,093
162,748—
0(1,945)1(892)(2)
45,749(171,083)
30,192
114,236(9)—(1,214)—(1,040)(13)(28,933)(1,517,818)
443,270
1,531,890—
0(18,308)9(8,396)(19)
430,619(2,500)—(2,682)
(0)
(11)
—
17
4
(5,172)39,266
210,826¥ 250,092(2,500)(10,000)(3,018)
(0)
(104)
(890)
0
—
(16,513)61,994
148,831¥ 210,826(23,532)—(25,245)
0
(104)
—
160
38
(48,682)369,597
1,984,431$ 2,354,029* U.S. dollar figures have been translated at the rate ¥106.24 to U.S.$ 1, the prevailing market rate as of March 31, 2018.
20

Thousands of
U.S. Dollars*
2018Directory
Organization Chart (as of September 1, 2018)
General Meeting of Shareholders

Board of Corporate Auditors

Corporate Auditors
OutsideCorporate Auditor

Board of Directors* and Representative Director

Executive Committee
President*

Vice President*

Senior Managing Director*
Managing Directors
Director (outside)

General Planning and Management Division
Strategic Planning Office
Chiba-Musashino Alliance Management OfficeFinancial Affairs Office
Tokyo Office
Risk Management Division
Legal Affairs Office
Customer Service Promotion Office
Personnel Division
Secretariat
Career Development Office
Health Support Office
Human Resources Activities Promotion OfficeBusiness Management Division
Business Planning Office
Assets in Custody Promotion Office
FinTech Promotion Office
Local Community Support Division
Community Value Creation Office
Solutions Marketing Division
Credit DivisionCorporate Management Support OfficeInternational and Treasury Division
Global Business Advisory Office
Singapore Representative Office
General Affairs Division
Administration Division
Systems Management Office
Operation Services Division
Auditing Division

Board of Directors, Corporate Auditors and Executive Officers (as of July 1, 2018)
President

Senior Managing Directors

Directors

Corporate Auditors

Executive Officers

Kikuo Kato

Koichi Akagi
Kazumasa Nagahori

Emi Ishida (outside)
Takeshi Higuchi (outside)

Makoto Ishikawa (standing)
Yoshio Kenmochi (standing)Atsumu Kuroishi (outside)
Tomio Kezuka (outside)
Kenji Tamura (outside)

Ichiro Noda
Tsutomu Kainuma
Tadashi Uehara
Kazuhiro Wakabayashi

Vice President

Hideo Machida

Managing Directors

Kazuya Koyama
Toshiyuki Shirai
Susumu Kurosawa

Managing Executive Officer

Ritsu Kumagai
Masaharu Saito
Ken Otomo

Investor Information (as of March 31, 2018)
Number of Shares Held by Type of Shareholders

 uthorized: 80,000 thousand shares
A
Issued:33,805 thousand shares
Number of Shareholders: 11,089
Common Stock

Financial institutions
45.34%

Major Shareholders
NameJapan Trustee Services Bank, Ltd. (trust account)
Japan Trustee Services Bank, Ltd. (trust account 4)
The Master Trust Bank of Japan, Ltd. (trust account)
The Chiba Bank, Ltd.
Japan Trustee Services Bank, Ltd. (trust account 9)
Meiji Yasuda Life Insurance Company
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
CBNY DFA INTL SMALL CAP VALUE PORTFOLIO(Standing proxy: Citibank Japan Ltd.)
Sumitomo Life Insurance Company
Musashino Bank Industries Employees’ Stockholding Association* Shareholding percentages are rounded down to two decimal places.

Shares held asa percentage of
total outstanding
shares (%)
2,969,600
8.85
1,258,500
3.75
1,149,900
3.42925,000
2.75
752,800
2.24
735,858
2.19
727,587
2.16

Other corporations
23.67%

Number ofshares721,500

2.15

702,900
697,153

2.09
2.07

Foreign companies
and others
15.73%
Individuals and others
14.00%

Financial instruments
business operators
1.25%

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.

21

333-13, OLS Building, Sakuragi-cho 4-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 always ask themselves“What can I do for everyone?” and“What kind of service do I want to give everyone?”“Everyone” includes the Bank’s customers,
the members of local communities, our shareholders,and friends of the Bank, together with their families.
Accordingly, the Musashino Bank aspires to provide
everyone with better services and to contribute to
our local communities.