Annual Report2012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, 7.20 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”“Maintaining a deep respect toward customers”

To contribute to the prosperity of the local community and to secure

To engage in bold management that anticipates change while provid-

growth and development in partnership with the region.

ing the highest quality services throughout the organization as a whole.

Bank Data (nonconsolidated basis, as of March 31, 2012)

Subsidiaries and Affiliated Companies

Head office:Home page:
Established:
Networks:

NameLine of Business

The Bugin Business
Service Co., Ltd.

Clerical work for Musashino Bank

The Bugin General Lease
Co., Ltd.

Leasing, factoring and corporate
financing

The Bugin Guarantee
Co., Ltd.

Loan guarantees for individuals

10-8, Sakuragi-cho 1-chome, Omiya-ku, Saitama
http://www.musashinobank.co.jp/
March 6, 1952
Number of branches: 93 (Saitama Prefecture: 91 [of which
1 is a sub-branch], outside Saitama Prefecture: 2)
Number of mortgage loan centers: 9
Number of corporate office: 1
Number of ATMs outside of branches: 119
Number of ATMs and cash dispensers (CDs) installed: 479
2,187¥3,792.3 billion¥3,549.5 billion¥2,867.3 billion¥45.7 billion

Employees:
Total assets:
Deposits:
Loans:
Common stock:
Number of correspondent
220
arrangements:
Issued common stock:34,155,456

The Musashino Card Co., Credit card business ( JCB, VISA),
Ltd.
loans and loan guarantees
The Bugin System Service Development, sale and maintenanceCo., Ltd.
of computer systems
The Bugin Economic
Research Institute Co.,Ltd.

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

The Bugin Capital Co.,Ltd.

Management support for venturebusinesses

Head Office

SaitamaPrefecture

IbarakiPrefecture

Tokyo
Kanagawa
Prefecture

Chiba
Prefecture

Contents
12
456

Consolidated Financial Highlights
Message from the President
History
Medium-Term Management Plan “NEWPROJECT 60” (April 2010-March 2013)
Corporate Governance

7
8
9
10
16

Risk Management
ComplianceAppealing Business Foundation(Saitama Prefecture)
Corporate Social Responsibility (Main Initiatives)
Consolidated Balance Sheets

17
18
20
21

Consolidated Statements ofIncome and Comprehensive Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Directory

Consolidated Financial Highlights
The Musashino Bank, Ltd. and Consolidated Subsidiaries Years Ended March 31, 2012 and 2011

Thousands of
U.S. Dollars(Notes 1 and 2)
2012

Millions of Yen (Note 1)
2012
2011

At Year-end
Total Assets ...........................................................................................
Deposits ................................................................................................
Loans and Bills Discounted ...................................................................
Trading Account Securities and Investment Securities...........................
Total Net Assets ....................................................................................
Capital Ratio (based on domestic standards) (%) ..................................
For the Year
Total Income ........................................................................................
Total Expenses ......................................................................................
Income before Income Taxes.................................................................
Net Income for Year..............................................................................

¥3,806,355
3,539,534
2,856,298
735,057
177,984
10.88¥3,696,211
3,437,747
2,785,295
644,854
160,718
10.79$46,311,658
43,065,265
34,752,386
8,943,395
2,165,522¥¥$

78,96859,562
19,406
9,621

81,93867,372
14,5657,443

960,807724,695
236,112
117,066

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 ¥82.19 to U.S.$1, the prevailing market rate as of March 31, 2012.

Total Assets

Deposits(¥ billion)(¥ billion)

3,442

3,571

3,696

3,806

FY2008 FY2009 FY2010 FY2011

3,192

Loans and Bills Discounted
3,307

3,437

3,539

FY2008 FY2009 FY2010 FY2011(¥ billion)

2,717

2,715

2,785

2,856

FY2008 FY2009 FY2010 FY2011

1

Message from the President

Musashino Bank celebrated its 60th anniversary in April 2012. I would like to express
my sincere gratitude to all stakeholders including business partners, who provided the
Bank with the invaluable support necessary to achieve this milestone.

Economic Trends

Kikuo Kato
President
2

Looking back over fiscal 2011, the fiscal year ended March 31, 2012,
the global economy was thrown into considerable confusion due tochanges in weather conditions and wide-ranging geopolitical risks
including the so-called Arab Spring.
In Japan, economic conditions experienced a rapid recovery during
the first half of the fiscal year under review, reflecting restoration of
the supply chain following the Great East Japan Earthquake thatcaused a slump in production and export activity. Despite this positive
turnaround, the real economy continued to stall during the second
half. This was largely attributable to the debt crisis in Europe thattriggered unprecedented and prolonged appreciation in the value ofthe yen, the slowdown in overseas economies and the impact of flood
damage in Thailand.
Casting an eye over Saitama Prefecture, economic conditions weremixed. On the one hand, personal consumption was firm while, on
the other hand, production activity stalled. Looking ahead, there areconcerns surrounding the downside risks of such factors as high crude
oil prices and issues relating to the supply of energy. As the gateway
to eastern Japan, however, Saitama Prefecture is showing signs of thepositive flow-on effects of full-fledged public-sector as well as housing
investment in the wake of the earthquake disaster and efforts to bringabout reconstruction and recovery. Taking into account the aforementioned factors, I envisage a gradual recovery in production activity andimprovements in corporate-sector earnings.
Saitama Prefecture continues to enjoy population growth, particularly within its southern-most area. The entire prefecture is also experiencing ongoing development as an industrial destination due largely
to its competitive advantage as a major hub that offers transportation
infrastructure including advanced rail and road networks connecting
the Tokyo Metropolitan area with the Tohoku and east Japan regions.
In addition, the Prefecture is expected to benefit from both publicand private-sector support, development and training in the growthenvironment, energy, medical, nursing care and health fields.

Year ended March 31, 2012

Medium-Term Management Plan

Deposits and assets in custody
Buoyed by sales and marketing activities, deposits
and assets in custody in fiscal 2011 grew ¥102.3
billion compared with the previous fiscal year to¥3,549.5 billion. Assets in custody increased ¥25.3
billion year on year to ¥565.4 billion, driven by
our efforts to meet the diverse asset management
needs of our customers through investment trusts,
JGBs, and life insurance products.

Each and every member of the Group is actively
engaged in implementing the medium-term
management plan, NEW PROJECT 60, which
was launched in April 2010. In this regard, fiscal
2012 is positioned as the year in which the Plan
will be brought to fruition. Working in unison andwith a strong sense of mission, the Bank’s directors
and employees will strive tirelessly to implement
all appropriate measures to ensure that establishedtargets are achieved.
In order to take the first steps toward the next
significant leap forward, the Bank is working to formulate the necessary long-term policies and vision
with a view to the ideal scenario a decade hence.

Loans
Loans outstanding climbed ¥72.4 billion to¥2,867.3 billion owing mainly to active efforts to
respond to the needs of local businesses within the
Prefecture and to individual customers.
Earnings
Amid weak demand for funds and continuing low
interest rates, the Bank was able to maintain capitalprofits at ¥51.6 billion, roughly the same level as
the previous fiscal year. This was largely attributable to successful efforts to more efficiently manage
loaned money and securities investments. During
the fiscal year under review, the Bank bolstered its
efforts to improve the management of corporate
customers. As a result, bad debt disposal expenses
declined substantially. Accounting for the aforementioned factors, recurring income amounted
to ¥17.9 billion and net income came in at ¥9.3
billion, representing the third consecutive fiscal
year of earnings growth. On a consolidated basis,recurring income and net income totaled ¥19.5
billion and ¥9.6 billion, respectively, again reflecting year-on-year growth. This was primarily due tothe profits recorded by all related subsidiaries.
Capital ratio
The Bank’s capital ratios for fiscal 2011 were 10.59%
and 10.88% on a non-consolidated and consolidated
basis, respectively. From an overall Group perspective, the Bank is confident that current levels are an
ample measure of sound financial health.

Together with the people of Saitama
Looking both 5 and 10 years into the future, Japanand Saitama Prefecture are expected to undergo
considerable structural change. In addition to therapid aging of the population, industry is anticipated to experience a hollowing out.
Guided by its foundation corporate philosophyof “working in harmony with the local community
it serves” and “maintaining a deep respect toward
customers,” Musashino Bank will take the initiativein providing products and services that match theneeds of customers, continuously implementing avariety of appropriate support measures, and further
enhancing compliance. Through these means, wewill build strong relationships with customers withthe aim of enhancing customer trust and satisfaction.
Moving forward, the Bank will continue topractice community-based finance and to become
an irreplaceable part of the community. As wework toward achieving our established goals,
we kindly request your continued support andunderstanding.
Kikuo Kato
President3

History *excerpt

Apr. 1952

Eight branches with a head office located in Omiya City (current Saitama City) opened(Number of employees: 155; Capital: ¥100 million)

Aug. 1969

Head office relocated to its current site; former head office commenced operations as the Bank’s Omiya BranchOct. 1969

The Bank’s share listed on the Second Section of the Tokyo Stock ExchangeAug. 1970

The Bank’s shares listed on the First Section of the Tokyo Stock Exchange(Securities code: 8336)

Aug. 1972

The Bank authorized to handle and exchange foreign currencies

Dec. 1978

The bank commenced foreign currency exchange services

Sep. 1980

The Bank installed its first ATM

Dec. 1980

The Bank commenced handling of Musashino US$ fixed-term deposits

May 1981

The Bank executed its first impact loan

Oct. 1981

The Bank acquired blanket approval to newly open foreign currency exchange branches

Oct. 1983

The Bank commenced foreign currency correspondent banking operations(commenced foreign currency exchange transactions with the overseas branches of the former Bank of Tokyoand Daiwa Bank)

Aug. 1986

The Bank authorized as a comprehensive correspondent bankFeb. 1991

The Bank commenced comprehensive online system international banking transaction operations

Oct. 1993

The Bank opened its first housing loan centerMay 1997

The Bank commenced handling of the Musashino L/C Pack

Jul. 2005

The Bank officially adopted its current symbol mark and corporate color (Musashino red)

Oct. 2009

The Bank commenced handling of Musashino foreign currency web services

Apr. 2010

The Bank launched the medium-term management plan, NEW PROJECT 60

Oct. 2011

The Bank commenced handling of Chinese yuan-denominated trading and other transactions
The Bank entered into a business alliance with Thailand-based KASIKORNBANK PCL with the cooperationof the Japan Bank for International Cooperation (JBIC)

Apr. 2012

The Bank celebrated its 60th anniversary

Loans and Bills Discounted and Deposits(billions of Yen)
4,000

■ Loans and Bills Discounted■ Deposits

3,516.2
2,867.3

3,000
2,483.8
1,894.4
2,000

745.4

1,000

543.2
1.5

0

4

1,785.3

1,496.4

1951

2.1

13.8
1961

19.4

156.5

183.5

1971

1981

1991

2001

2011

(FY)

Medium-Term Management Plan “NEW PROJECT 60” (April 2010–March 2013)•

Plan course of action

Three keywords for the future of the Bank
Under a harsh environment,
to be a strong bank that survives
No matter what happens in the businessenvironment, financial strength and earnings
power sufficient to withstand change =Management ability

STRONG

Financial strength

A bank with presence

A bank that is trusted

A rock-solid business foundationin the prefecture

Staff that can win the trust of customers,a smooth supply of funds

STATUSSUPPORT

Raise the profile of the Bank
to heighten status

Winning the trust of customers
through customer support

For the future of the Bank

Honest practices in community-based financeAccumulate quality loan
assets / Lower credit costs
through insight
Expand service benefits

Raise the productivity ofeach employee /Expand flow profitability

Accumulation of capital /Improve the Tier 1 ratio

Restructure deposit
procurement /Expand core deposits•“NEW PROJECT 60” Basic Strategy

Three pillars of the basic strategy
Ready for business promotion reform•

Strengthen human resource
development

Establish efficient operating conditions
and strengthen internal controls

Target figures

Net profit on core banking operations

Fiscal 2009¥21.1 billion

Fiscal 2012 target¥22.0 billion

Net profit¥4.1 billion¥10.0 billion

Capital adequacy ratio

10.5%

Around 10.5% (Tier 1 ratio approx. 8%)

ROE

2.78%

6.0%

Non-performing loan ratio

2.53%

1% level(Guidelines)
Balance of loans +¥200.0 billion (annual rate of 2.5%)
Balance of deposits +¥300.0 billion (annual rate of 3%)
Balance of assets in custody +¥150.0 billion (annual rate of 10%)5

Corporate Governance

Basic Stance

Corporate Governance Structure

Musashino Bank recognizes that upgrading andexpanding its corporate governance capabilities are
key priorities of management. In addition to adhering
strictly to a policy of compliance with statutory andregulatory requirements as well as in-house rules
and regulations, every effort is made to ensure thatthe Board of Directors and the Board of Corporate
Auditors stringently monitor directors in the executionof their duties.
Moreover, the Bank has adopted an executive officer
system in order to reduce the number of directors andto ensure a speedier decision-making process. Directors
delegate authority to executive officers, who are charged
with the responsibility of swiftly and efficiently carrying out their duties as leaders of the Bank’s mainstay
divisions.

The Board of Directors is positioned as the ultimate
decision-making body of the Bank. While strictly
adhering to the Bank’s variety of in-house rules andregulations, the introduction of an executive officer
system allows the Bank to separate and clarify the management and business execution functions. A structure
has therefore been put in place to allow directors andexecutive officers to go about their assigned duties andresponsibilities.
Musashino Bank’s management decision-making,business execution and oversight structure is presented
as follows.

Corporate Governance Structure
General meeting of shareholders
Assignment

Assignment
Audit

Board of directors

Board of corporate auditors

Directors

Supervision

Auditors

Discussion

Business execution functions

Discussion

reportAssignment

Executive committee

Indication/
Verification

Audit
Accounting auditors

Compliance committee
Executive officers
AdviceAudit
Head office/Branches

6

Auditing division

Law officeLicensed tax accountants

Risk Management

Risk Management Policy
The risks associated with banking operations are
becoming increasingly varied and complex. In order toensure that the manner in which it manages its businessis both sound and pertinent, Musashino Bank has formulated a set of internal management policies that take
into consideration the Bank strategic targets. Guided bythese 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 andsystem risks). These individual risks are then 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 ofrisks on a comprehensive basis, the Bank has established
the Comprehensive Risk Management Department
and is working to develop and improve its management
structure. The Comprehensive Risk Management
Department puts in place rules 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 andcharacteristics. Based on these rules and criteria the
ALM (Asset Liability Management) and other appropriate committees monitor and control risks. The resultsof these activities are reported to the Board of Directors
and other relevant bodies on a regular basis.

(2) Credit Risk Management
Musashino Bank has historically taken steps to maintainthe independence of the Credit Screening Divisionand to build a stringent screening and management
structure in order to maintain and strengthen thesoundness of its assets. At the same time, the Bank has
adopted a ranking system and endeavored to upgradeand expand its credit risk management capabilities as apart of efforts to put in place objective determinationand 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 the checks-and-balance function.
At the same time, deliberations are undertaken by the
ALM and Credit Portfolio Management committees as
and when required.

(4) Liquidity Risk Management
Musashino Bank has established the Liquidity Risk
Management and Cash Management departments inorder to appropriately manage liquidity risk. While
ensuring the independence of the Liquidity Risk
Management Department from the Cash Management
Department, Market Management Department andBusiness Promotion Division, every effort is madeto establish and develop a structure that is capable ofharnessing the checks-and-balance function. At thesame time, deliberations are undertaken by the ALM
Committee as and when required.

(5) Operational Risk Management
Musashino Bank confronts broad and varied operational risks. In addition to classifying each 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 toundertake the management of operational risks on acomprehensive basis. The Bank also pushes forward
measures aimed at establishing and developing amanagement structure that is capable of harnessing
the checks-and-balance function with respect to eachbusiness division. Moreover, issues are deliberated by
the Operational Risk Management Committee as andwhen required.

7

Compliance

Compliance Frame Work
The social and public mission for banking work makes
high demands for operations based on fair and transparent corporate activities in compliance with laws, regulations, and social norms and in accordance the principals
of self-discipline and self-responsibility. Accordingly, theBank considers the thorough compliance of its directors
and employees in business operations to be a top priority, and to this end management is actively involved in
the fulfillment of the Bank’s social and public mission as
the Bank works to strengthen its compliance framework
through steps such as system improvements and theestablishment of teaching methods.
However, with the liberalization, globalization, andderegulation of finance accompanying financial system
reform, society expects Banks to be even more publicly
and socially responsible. With a full awareness of theseissues, in the future the Bank will further strengthen
its corporate activities based on a strong sense of
ethics and integrity and its management approach inaccordance with principles of self-responsibility as it
further strengthens the compliance framework so thatthe Bank’s daily business activities and actions ensurecompliance with laws, regulations, and social norms.

Basic compliance policy
Musashino Bank’s basic compliance policy entails that
directors and employees go about their daily duties inaccordance with the Bank’s two fundamental management guidelines, namely its corporate philosophy and
Code of Behavior.
Under its unwavering corporate philosophy, theBank strives to work in harmony with the local community it serves while maintaining a deep respect toward
customers. This corporate philosophy is complemented
by the Code of Behavior which emphasizes the Bank’ssense of public mission toward society. Aspiring toaddress a variety of needs including the provision ofhigh-quality financial services and strict compliancewith statutory and regulatory requirements, directors
and employees go about their daily duties guided bythese basic policies.

8

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
management of all legal issues relating to compliancewhile providing instructions based on investigation andresearch. At the same time, the Office coordinates with
officers responsible for legal compliance appointed to allbranches while working to strengthen the compliancestructure. Regular meetings are held with the officers
responsible for legal compliance appointed to eachbranch. These meetings serve as a forum to deliberateon compliance issues and to share information.
In addition to the aforementioned, periodic
compliance checks are undertaken at each branch by
the officers responsible for legal compliance. In thismanner, the Bank has put in place a mechanism thatis capable of grasping the status of daily compliancemanagement. Furthermore, Musashino Bank has
established the Compliance Committee, which serves as
the organization that checks the status of compliance on
a Bank-wide basis while considering any and all otherimportant matters through regularly held meetings.

Compliance manualTo ensure the compliance of its directors and employees, the Bank has distributed a compliance manual thathas been approved by the board of directors to all of its
directors and employees and is working to ensure thatall staff members are fully aware of its contents.
The compliance manual contains sections on the
Bank’s corporate philosophy, code of behavior, andbasic policies. It contains a section on compliancestandards that stipulates the matters directors andemployees should comply with, a section on thecompliance framework that provides an explanation onvarious structures at the Bank including education andverification structures, a section on laws and regulations
that require directors and employees compliance whichcontains an explanation on the laws and regulations
that bank employees are required to be knowledgeableof, and a pick-up compliance section that provides amore detailed explanation on matters that should beprioritized in the conduct of daily work. The compliance manual serves as a standard for making decisions
and taking actions in everyday business activities.

Appealing Business Foundation (Saitama Prefecture)

1. The Huge Tokyo Area Market andContinuing Population Growth

3. Collection of diverse manufacturing industries

Saitama Prefecture, which is Musashino Bank’s mainarea of operations, borders Tokyo and six prefectures.
The Prefecture is located in the heart of the huge market comprising the Tokyo metropolitan area, in which
lives one-third of the population of Japan (approximately 40 million people). While urbanization andindustrialization are progressing in Saitama Prefecture
due to the great convenience gained from being next toTokyo, the population has grown consistently thanks
to an abundance of nature and a comfortable living
environment.
(An estimated population of 7.2 million as of April
2012)

Saitama has a diversity of local industries with theautomotive-related industry at its core.
(e.g., molds and castings in Kawaguchi City, opticalequipment in Saitama City, etc.)

1) Diverse Manufacturing Industries

Saitama Prefecture population(10,000 people)
800
640
600

542

675

693

705

719

720

586

From April 2007 through March 2009, Saitama rolled
out the “Chancemaker Saitama Strategy” with the goalof attracting 120 companies into Saitama Prefecture,
but wound up attracting 192 companies (72 morethan our goal). Moreover, with the goal of attracting
an additional 100 companies to Saitama, we initiatedChancemaker Saitama Strategy II, which covered theperiod from April 2010 through March 2013. As aresult of this second initiative, we attracted 122 companies (22 more than our goal).

4. Concentration of Universities and ResearchInstitutes

400

200

0

2) Aggressive Development by Attracting
Companies to Saitama Prefecture

1980

1985

1990

1995

2000

2005

2010

2012

Data: “Population Census” published by the Statistics Bureau, Ministry ofInternal Affairs and Communications, population estimate for 2012.

2. Advanced Traffic Network
1) Advanced Road Traffic Network
With the Kan’etsu, Tohoku, and Joban expressways
traversing north to south and the Tokyo Gaikan
Expressway traversing east to west, traffic in Saitama is
strategically positioned.

2) A High-Quality Railway Network
With our head office based in Omiya, the Bank is
directly connected to major cities via the Tohoku, Akita,
Yamagata, Joetsu, and Nagano Shinkansen (bullet train)
network.

More than 250 research institutes and 59 college
campuses are located in Saitama Prefecture. The Bank
has formed alliances with seven universities as part ofits commitment to meeting customer needs in areas
such as research and development and management
issue resolution through cooperation with industry andacademia.

Economic and financial position of
Saitama Prefecture■ Number of companies (2009)

262,000 companies (5th among the 47 prefectures)■ Total prefecture production (nominal) (2008)¥20,796.1 billion (5th among the 47 prefectures)■ Value of product shipments (2009)¥11,891.5 billion (7th among the 47 prefectures)9Corporate Social Responsibility (Main Initiatives)
Loans to region

Contributing to the Local Economy
Deposits from region
In response to the lifestyles of our regions’ customers,
the Bank is enhancing its products and services so that
customers can use them with peace of mind.
As a result of these efforts, deposits from theregion as of March 31, 2012 climbed ¥94.7 billion,to ¥3,497.6 billion. Moreover, the ratio of deposits
from region rose 0.19 percentage points, to 99.47%,
continuing to maintain its level at 99%. Despite thesteady increase in deposits from the region, the Bank’s
share of deposits within the prefecture as of March 31,
2012, contracted 0.06 of a percentage point to 11.55%.
Deposits from region(100 million)
40,000100

99.33
30,000■ Deposits from region (scale on left side)● Deposit ratio from region (scale on right side) (%)

31,53499.09
32,704

99.28

99.47

34,02934,97695

20,00090

10,00085

0FY2008FY2009FY2010FY2011

11.61

11.55

FY2010FY201180

Share of deposits within prefecture
(%)
13.00
12.00

11.37

11.42

FY2008FY2009

11.00
10.00
9.00

Musashino Bank 11.55%

Other banks
72.70%

The four Shinkin banks
within the prefecture
15.75%

Total balance of deposits in Saitama Prefecture ¥30,280.1 billion
Source:In addition to materials from the Business Survey, Research and Statistics Department of the Bank of Japan, the total of
all bank branches (based on the principle of territoriality) and data on a head office location basis for Shinkin banks

10

In response to the lifestyles of our regions’ customers,
the Bank has prepared a variety of individual loans inorder to support a wide range of financial planning.
Further, in all of Japan, Saitama Prefecture is mostfavorably situated with the best transportation access,has the most new housing starts, and a home-buyer
segment comprised mainly of the 35 to 40-year oldchildren of baby-boomer generation. At the same time,with convenient access to Tokyo, an accumulation of
office facilities and other factors, demand for rental
housing is high. For these reasons, we have enhanced
our individual loan products and upgraded our promotion system so that customers can use them with greater
convenience.
As a result, the balance of individual loans as ofMarch 31, 2012 increased ¥37.9 billion, to ¥1,227.9
billion.
In addition, we are contributing to the sustainable
development of the region by implementing a variety
of initiatives. This includes providing a stable flow offunds to SMEs and individual business owners, thepillars of Saitama Prefecture’s regional economy.
Specifically, corporate managers and sales managers
are aggressively pursuing solution-based sales andmarketing so that customers only use those products of
the Bank that meet their needs.
In our head office, we have assigned specialists to be
in charge of the medical, public welfare and agricultural
fields, new growth fields in Saitama Prefecture, and weare aggressively supporting these fields which remain
our traditional strengths.
In addition, we are actively promoting collaboration
with outside professional agencies in various areas ofwork, such as leveraging local information including
business matching services that provide financial
services tailored to companies’ life-cycles, assisting companies enter overseas markets and helping companies
go public, and forging deeper business relations withlocal public agencies. As a result, loans to the region asof March 31, 2012 increased ¥47.7 billion, to ¥2,573.8
billion, for a loan to region ratio of 89.77%. The Bank’s
share of loans in the prefecture rose 0.10 of a percentage
point to 15.66%.

Loans to region(100 million)
30,00024,000■ Loans to region (scale on left side)● Ratio of loans to region (scale on right side)

91.24

90.68

90.38

89.77

24,873

24,69325,26125,7382) Activities in the Medical and Welfare Fields
(%)
100

80

18,00060

12,000

40

6,000

20

0

FY2008FY2009FY2010FY2011

15.56

15.66

0

Share of loans within prefecture
(%)
16.00

15.32

15.27

Saitama Prefecture ranks in the top echelons of prefectures in Japan in terms of the number of hospitals anddoctors. In contrast, it ranks last among prefectures forthe number of doctors per capita. Accordingly, there is a
substantial gap between demand and supply.
In April 2005, the Bank established a medical andwelfare team. As of March 31, 2012, the balance ofloans to medical institutions within the Prefecture withan annual turnover of ¥500 million or more stood at¥62.8 billion, an increase of 6.8% compared with theprevious fiscal year. The Bank’s share of the number ofborrowers has also risen to 50%.

15.00

3) Strengthening the Growth Platform of theRegional Economy
The Bank is supporting sustainable development of theregional economy through measures aimed at strengthening the growth platform.

14.00

Products designed to strengthen the growth platform

13.00
12.00
FY2008FY2009FY2010FY2011

Musashino Bank 15.66%
The four Shinkin banks
within the prefecture
15.04%

Other banks
69.30%

Total balance of loans in Saitama Prefecture ¥16,437.8 billion
Source:In addition to materials from the Business Survey, Research and Statistics Department of the Bank of Japan, the total of
all bank branches (based on the principle of territoriality) and data on a head office location basis for Shinkin banks

Initiatives for New Growth Fields
1) Activities in the Agricultural Field
Total agricultural output for Saitama Prefectureamounted to ¥200.4 billion in 2010. On this basis, thePrefecture ranked 17th in terms of produce among all
prefectures in Japan. Agriculture in suburban areas is
widespread, with produce being shipped to 34 million
people in the Tokyo metropolitan area.
Established by the Bank within its head office inApril 2008, the agriculture team takes the lead insupporting agriculturerelated businesses.
Proactive efforts are
made to expand sales
channels for farmers
and to promote farmmanagement innovation.
A seminar held by the Bank

• Saitama Growth Platform FundTaking steps to bolster measures in industries andfields where future growth is expected; providing
comprehensive financial services including funding
assistance that addresses customers’ needs; contributing to the revitalization of the region• ABL Fund
Helping to promote growth and energizing theregional economy by providing finance with assets
and receivables as collateral to small and mediumsized enterprises

Industrial Research Office Established
The Industrial Research Office was established within
the Credit Division in April 2012. Information on business partner companies, information on an individual
industry basis as well as other information including
development information within the region held by theMusashino Bank Group is collated and managed in thiscentral location. This information is provided and used
to deliver sophisticated solutions sales and marketing.

Strengthen the Consulting System
1) Inheritance and Business Succession Initiatives
With expectations that Saitama Prefecture will experience a rapid decline in its birthrates and an aging population in the future, head office staff with specialized
knowledge are collaborating with such business partners
as trust banks, trust companies, tax accounting firms
11and other outside professional institutions while putting
forward a variety of initiatives. Moreover, the Bank has
formed business alliances with Mitsubishi UFJ Trustand Banking Corporation and Asahi Trust Co., Ltd. asa part of efforts to strengthen its inheritance and business succession operations including trusts under wills.

2) Assisting Companies Enter Overseas Markets
As companies within the Prefecture increasingly
expand their business overseas including Southeast
Asia, the Bank established the International Investment
Supporting Office within its head office. In this manner, the Bank is taking steps to put in place a structurethat is capable of addressing customers’ needs.
As a specific measure, the Bank is bolstering its
alliances with other banks and companies that maintainbases overseas. For example, the Bank is cooperatingwith the KASIKOMBANK PCL in Thailand utilizing
the JBIC scheme. Every effort is being made to offer
a wide range of solutions including the provision of
local information and financial services. The Bank also
works diligently to hold a variety of seminars as well as
conduct study workshops.

3) Meeting M&A Needs
While responding to the various merger and acquisitionneeds including business succession (absence of a
successor), business expansion, and diversification of
SMEs in Saitama Prefecture, we are contributing to thesurvival and growth of SMEs in the region and developing the regional economy.

4) Other
The Bank responds to requests for consultations involving such business problems as the listing of shares andexpansion of sales channels while leveraging the knowhow of outside institutions that our head office staff
and branch staff, which have specialized knowledge, arepartnered with.

Support for Corporate Rehabilitation
To provide specialized support to client companies
that seek corporate rehabilitation, we established the
Corporate Management Support Office in the Credit
Division, which offers help with advice on management
analytics and improvement policies and support forcompiling business improvement plans. Further, we
assist in corporate rehabilitation and management
improvement based on the circumstances of eachindividual client company in collaboration with the
Saitama SME Support Council and outside consulting
companies.
In light of the “Act Concerning Temporary Measures
to Facilitate Financing for SMEs, etc.” we actively
supported the management improvement of clientcompanies that have changed their borrowing conditions. We are working closely with clients by helping
them formulate management improvement plans
using our proprietary Management Plan Formulation
Support System, providing them with counseling andreviewing their management improvement plans andcontinuously monitoring the progress of those plans.
The Bank continues to demonstrate its consulting
capabilities and support client companies in order tofacilitate their business rehabilitation.

Consulting Support System
Unified response to various inquiries frombranches and consulting services based on
specialized knowledge and skill

Diverse needs of customers

Consulting by experts withhigh-level knowledge and skill

Business matching

Corporate

Meticulous andspeedy response

Branches

Coordinator

Inheritance/Business succession/M&A
Effective use of real estate
Overseas market entry support

Individual

401K/Trusts
Business financeIndustry and university collaboration
IPO/New business

12

Corporate Social Responsibility (Main Initiatives)

Human Resource Development Initiatives

3) A New Operations Center Established

The Bank promotes the creation of a corporate culturethat values the development of human resources byfocusing on the eduction of its employees in order tomake sustainable contributions to the development of
the regional economy.
The Bank aims to fully develop young employees
at an early stage through a rich program of businesstraining, specialized training based on the rank of
employees, and on-the-job training. At the same time,
the Bank actively supports career building through the
adoption of a human resources development policy thatclarifies skills development targets for each and every
employee.
As one project commemorating the Bank’s 60th
anniversary in fiscal 2012, the Bank plans to conduct
overseas training for its employees for the purpose ofdeveloping global human resources so the Bank canbetter support the various needs of its customers in the
future.

Among a host of initiatives to celebrate its 60th anniversary, Musashino Bank constructed a new five-story
operations center next to its existing operations centerin Chuo-ku, Saitama City. By consolidating administrative operations, the Bank is seeking to increase the timespent directly attending
to customers while
enhancing customer
service. Construction isscheduled to be completed in October 2012.

Commemorative Events of the Bank’s 60th
Anniversary
1) Cash Dividend Commemorating the Bank’s
60th Anniversary
Musashino Bank declared a period-end cash dividendof ¥40 per share, which included an additional cash
dividend of ¥10 per share to commemorate the Bank’s
60th anniversary, for the fiscal year ended March 31,
2012. This brought the annual cash dividend to ¥70
per share.

4) Commenced the Handling of a New Passbook
and Cash Card
Among a host of initiatives aimed at celebrating theBank’s 60th anniversary, Musashino Bank launched a
new design for its ordinary and multi-purpose bankaccount passbook.
Focusing on the Bank’s symbol mark, steps have beentaken to accentuate the Bank’s founding in 1952. The
design is intended to capture the history of the Bank
since its foundation while shining a light on its future
growth and development.
Working in collaboration with the soccer J-league
club OMIYA ARDIJA and as a part of efforts to support the advancement of local sports, the Bank also put
forward a new design for its passbook and cash card in
July 2012.

2) A First for the Prefecture! Handling Moneyin Trust
As one of several initiatives implemented to commemorate the Bank’s 60th anniversary, Musashino Bank
called for participants in a jointly-managed money trust
referred to as Musashino Funds.
The Bank’s call was met with overwhelming support
with 873 parties contracted. After only one business dayfrom when calls were first made, the Bank achieved its
goal of ¥10 billion.
This trust is a jointly-managed money trust designed
mainly for asset management purposes with specificemphasis on the Bank’s subordinated loans. Musashino
Bank is the second financial institution in Japan tohandle this type of financial instrument and the first in
Saitama Prefecture.

13

Contributing to the Local Community
Measures to Prevent Financial Crime
Damage caused by bank transfer fraud, cash card forgery and theft, illicit internet access and other financial
crimes is increasing. With a designated unit, the Bankis working to prevent damage caused by financial crimeby assigning two individuals to work in the General
Affairs Division as security officers.

Developing an Operating Continuity System
Recognizing the considerable public nature of banking
operations, it is imperative that banks ensure continuous operations in order to fulfill their corporate social
responsibility.
Musashino Bank implements a wide range ofcountermeasures to ensure operating continuity in theevent of a large-scale earthquake, system failure, or
any other forecast contingency that may have a major
impact on its operations. In specific terms, the Bank
has formulated an operating continuity plan within its
overall plans in the event of an earthquake disaster, put
in place a variety of manuals with respect to specificaction criteria and countermeasures and taken steps toensure that all employees are fully aware of them.

Responding to the Needs of Foreign Customers
Musashino Bank has put in place a communication
board in the English, Chinese andKorean languages to assist foreign
nationals when calling into the Bank
to open a new bank account. Thisinitiative is aimed at providing nonJapanese customers with increased
peace of mind with respect toprocedural requirements.

Commemorative Events of the Bank’s 60th
Anniversary1) Supporting the Development of Global
Human Resources
Musashino Bank began handling scholarship loans forstudents and working persons from Saitama seeking tostudy abroad in collaboration with Saitama Prefecturefrom April 2011.
As one of several initiatives aimed at celebrating theBank’s 60th anniversary, Musashino Bank was the firstprivate-sector enterprise to participate in the Saitama
Global Human Resources Development Fund donating¥20 million in July 2011.
142) Donating to Saitama Prefecture’s Four Funds
Among a number of initiatives aimed at commemorating the Bank’s 60th anniversary, Musashino Bank
donated a total of ¥30 million to four funds establishedby Saitama Prefecture in July 2011. These funds andthe Bank’s contribution are designed to assist the region
across a wide range of fields.

3) Executed a Top Partner Agreement withOMIYA ARDIJA
As one of many initiatives undertaken to celebrate theBank’s 60th anniversary, Musashino Bank executed
a top partner agreement with the soccer J-League (aJapanese soccer league) Club OMIYA ARDIJA in
January 2012 for the 2012 season to further promote
sport deeply rooted in the region.

4) Soccer Classes
In June 2012, the Bank organized a soccer class for 100
elementary school students
as one of several initiatives
undertaken to celebrate theBank’s 60th anniversary.

5) Concert to Celebrate the Bank’s 60th
Anniversary
With the cooperation of master musicians, Musashino
Bank held a concert at the Sai-no-Kuni Saitama Arts
Theater to celebrate its 60th anniversary in March
2012. The concert coincided with the first anniversaryof the Great East Japan Earthquake. The Bank also took
steps to collect donations for the victims of the disasterin the theater lobby. A totalof ¥73,145 was collected.
On the day after the concert,these funds were presented to
the Saitama Office of the Red
Cross Society of Japan.

6) The Musashino Volunteer Club EstablishedMusashino Bank established the Musashino Volunteer
Club in May 2012 as one of several initiatives undertaken to celebrate the Bank’s 60th anniversary. Thisclub is designed to provide directors and employees of
the Bank with a forum to put
their interest and enthusiasm
to practical use and to further
contribute to the regionalsociety.

Corporate Social Responsibility (Main Initiatives)

Concern for the Environment
Received the 13th Saitama Environment Award
Musashino Bank received the 13th Saitama
Environment Award in March 2012.
The Saitama Environment Award recognizes
contributions toward raising awareness among Saitama
Prefecture residents with respect to environmental
protection concerns and the promotion of various
related activities. This award was presented in appreciation of the Bank’s ongoing efforts toward environmental
protection.

• Protecting and nurturing the water resources andgreenery of Saitama Prefecture
Musashino Bank has handled limited-periodMusashino Water and Greenery Fixed Deposits since
fiscal 2008.
This product forms part of the Bank’s efforts to
support the Prefecture’s endeavors to revitalize thenatural greenery and rivers of the area and to help
protect and nurture the water resources and greeneryof Saitama Prefecture. Under the Musashino Water
and Greenery Fixed Deposits scheme, the Bank
donates an amount equivalent to 0.01% of theamount deposited by each customer in this product(maximum amount stipulated separately) to thePrefecture’s Sai-no-Kuni Green Fund.
In fiscal 2011, the Bank donated ¥3 million. The
aggregate total of donations to date is ¥10 million.

Environmental Education for Employees

Major ongoing activities undertaken by the Bank:• Donations through the Musashino Green Fund
Charitable Trust Fund (a fund that over the 20 years
since its foundation has totaled 151 organizations anddonations amounting to approximately ¥51,958,796)• Coordination with Saitama Prefecture in environmental fields• Development of branches that take into consideration
environmental protection concerns• Promotion of employee environmental education (theBugin Environmental College)• Implementation of environmental protection activities
through the Bank’s business endeavors (purchase ofgreen bonds; handling of environment-related products such as water and greenery fixed deposits, etc.)

Implementation of Environmental Protection
Activities through the Bank’s Business Endeavors• Cooperating in global warming prevention businesses
in developing countries
In April 2011, Musashino Bank purchased US$10
million in Green Bonds issued by the World Bank forthe purpose of investing in businesses thatwork to prevent global
warming in developing
countries.

With the support of the
Ecosystem Conservation
Society – Saitama,Musashino Bank openeda College in fiscal 2008.
The College provides an
educational forum thatstrives to enhance natural environment conservationand ecosystem protection knowledge.

Signatory to the Principles for Financial Action
towards a Sustainable SocietyMusashino Bank signed the Principles for Financial
Action towards a Sustainable Society (Principles for
Financial Action for the 21st Century).
These principles are a set of action guidelines formulated by a drafting committee made up of a wide rangeof financial institutions. Based on the recommendationsof the Central Environment Council of Japan’s Ministryof the Environment, these principles are designed to
expand the breadth and depth of environmental financeactivities. In order to enhance the perspectives andquality of Japan’s environmental finance, plans are being
made to fulfill the essential responsibilities and roles
required to form a sustainable society.

15Consolidated Balance Sheets
The Musashino Bank, Ltd. and Consolidated Subsidiaries As of March 31, 2012 and 2011

Millions of Yen
2012
2011

AssetsCash and due from banks ......................................................................
Call loans ..............................................................................................
Commercial paper and other debt purchased ........................................
Trading account securities .....................................................................
Money held in trust...............................................................................
Investment securities .............................................................................
Loans and bills discounted ....................................................................
Foreign exchanges .................................................................................
Lease receivables and lease investment assets ..........................................
Other assets ...........................................................................................
Tangible fixed assets ..............................................................................
Intangible fixed assets ............................................................................
Deferred income taxes assets ..................................................................
Customers’ liabilities for acceptances and guarantees .............................
Reserve for possible loan losses ..............................................................
Total assets..............................................................................

¥ 105,269
30,000
2,327
203
1,500
734,854
2,856,298
2,292
14,94022,12635,680
2,967
8,812
9,674
(20,592)¥3,806,355¥ 132,046
40,602
10,704501
1,489
644,353
2,785,295
2,407
14,901
21,75735,077
2,672
18,06810,659(24,326)¥3,696,211$ 1,280,808
365,00728,313
2,476
18,2508,940,919
34,752,386
27,896
181,782
269,211434,116
36,105
107,223
117,706(250,546)$46,311,658

Liabilities
Deposits ................................................................................................
Call money and bills sold ......................................................................
Borrowed money ...................................................................................
Foreign exchanges .................................................................................
Bonds ....................................................................................................
Other liabilities .....................................................................................
Reserve for employees’ bonuses .............................................................
Reserve for directors’ bonuses ................................................................
Reserve for employees’ retirement benefits ............................................
Reserve for directors’ retirement benefits ...............................................
Reserve for loss on interest refunded......................................................
Reserve for reimbursement of dormant deposits ....................................
Reserve for point loyalty programs ........................................................
Reserve for contingent losses .................................................................
Deferred income taxes liability on land revaluation ...............................
Acceptances and guarantees ...................................................................
Total liabilities ........................................................................

¥3,539,534
2,652
28,919134
10,00024,545
1,226
15
5,549
—
81
236
70
791
4,937
9,674
¥3,628,370¥3,437,747—
26,72681
18,00027,980
1,276
15
5,688
281
100
329
58
908
5,639
10,659¥3,535,493$43,065,265
32,277
351,861
1,642
121,669
298,646
14,928183
67,522
—
992
2,873
861
9,624
60,078
117,706$44,146,135

¥

¥

$

Net assets
Common stock .....................................................................................
Capital surplus ......................................................................................
Retained earnings ..................................................................................
Treasury stock .......................................................................................
Total shareholders’ equity ........................................................
Unrealized gain on available-for-sale securities.......................................
Deferred loss under hedge accounting ...................................................
Land revaluation excess .........................................................................
Total accumulated other comprehensive income .....................
Share warrant ........................................................................................
Minority interests ..................................................................................
Total net assets .......................................................................
Total liabilities and net assets .................................................

45,74338,35173,996(905)
157,186
9,683(1,408)
7,653
15,92719
4,850
177,984¥3,806,355

45,74338,351
66,407(900)
149,602
1,381(1,477)
6,951
6,855
—
4,260
160,718¥3,696,211* U.S. dollar figures have been translated at the rate ¥82.19 to U.S.$1, the prevailing market rate as of March 31, 2012.
16

Thousands of
U.S. Dollars*
2012

556,563466,616
900,311(11,012)1,912,478
117,814(17,139)
93,113
193,788240
59,0152,165,522$46,311,658

Consolidated Statements of Income and Comprehensive Income
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2012 and 2011

Consolidated Statements of Income

Millions of Yen
2012
2011

Thousands of
U.S. Dollars*
2012

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 ...........................................................................

¥48,516
7,724
153
9,676
1,780
11,11778,968¥50,517
7,303
260
9,760
3,163
10,933
81,938$590,299
93,977
1,871
117,732
21,661
135,264
960,807

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 ..................................................................

2,692
347
1,685
4,276
1,412
37,392
11,75559,562
19,406

3,680
373
2,281
4,055
2,180
37,137
17,66367,372
14,56532,765
4,232
20,50252,033
17,184454,953
143,023
724,695
236,112

4,510
4,701
9,212
571
¥ 9,621¥284.01

2,673
3,972
6,646
476
¥ 7,443¥219.44

54,881
57,205
112,087
6,958$117,066$
3.46

Income taxes
Current .................................................................................................
Deferred ................................................................................................
Minority interests .................................................................................
Net income for year ..............................................................................
Net income per share (yen and dollars) .................................................

* U.S. dollar figures have been translated at the rate ¥82.19 to U.S.$1, the prevailing market rate as of March 31, 2012.

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 .............................................
Total other comprehensive income ...................................................
Comprehensive income .........................................................................
Comprehensive income attributable to:Shareholders of the Company ...........................................................
Minority interests .............................................................................

Millions of Yen
2012
2011

Thousands of
U.S. Dollars*
2012¥10,193¥7,919$124,024

8,323
69
701
9,094
¥19,287(1,774)162—(1,612)¥6,306

101,275
839
8,532
110,647$234,672¥18,693594¥5,843463$227,443
7,229* U.S. dollar figures have been translated at the rate ¥82.19 to U.S.$1, the prevailing market rate as of March 31, 201217

Consolidated Statements of Changes in Net Assets
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2012 and 2011

Millions of Yen
2012
2011

Shareholders’ equity
Common stock
Balance at end of previous year ..............................................................
Changes during the accounting period ..................................................
Balance at end of year ............................................................................
Capital surplus
Balance at end of previous year ..............................................................
Changes during the accounting period:
Disposition of treasury stock .............................................................
Cancellation of shares .......................................................................
Total changes during the accounting period ....................................
Balance at end of year ............................................................................
Retained earnings
Balance at end of previous year ..............................................................
Changes during the accounting period:
Cash dividends .................................................................................
Net income.......................................................................................
Cancellation of shares .......................................................................
Reversal of revaluation reserve for land .............................................
Total changes during the accounting period .....................................
Balance at end of year ............................................................................
Treasury stock
Balance at end of previous year ..............................................................
Changes during the accounting period:
Purchase of treasury stock .................................................................
Disposition of treasury stock .............................................................
Cancellation of shares .......................................................................
Total changes during the accounting period .....................................
Balance at end of year ............................................................................
Total shareholders’ equity
Balance at end of previous year ..............................................................
Changes during the accounting period:
Cash dividends .................................................................................
Net income.......................................................................................
Purchase of treasury stock .................................................................
Disposition of treasury stock .............................................................
Cancellation of shares .......................................................................
Reversal of revaluation reserve for land .............................................
Total changes during the accounting period .....................................
Balance at end of year ............................................................................

¥ 45,743—¥ 45,743¥ 45,743—¥ 45,743$ 556,563—$ 556,563¥ 38,351¥ 39,438$ 466,616———¥ 38,351

(412)
(674)
(1,087)¥ 38,351———$ 466,616¥ 66,407¥ 61,296$ 807,976(2,032)
9,621
—
—
7,588
¥ 73,996(2,034)
7,443
(301)
3
5,110
¥ 66,407(24,731)
117,066——
92,334$ 900,311

¥

(900)

¥ (2,050)$ (10,953)

¥

(4)
—
—
(4)
(905)

(841)
1,016
975
1,150
(900)

(59)
—
—
(59)
$ (11,012)¥149,602¥144,428$1,820,203(2,032)
9,621
(4)
—
—
—
7,584
¥157,186(2,034)
7,443
(841)
603
—
3
5,173
¥149,602(24,731)
117,066(59)———
92,275$1,912,478¥* U.S. dollar figures have been translated at the rate ¥82.19 to U.S.$1, the prevailing market rate as of March 31, 2012.

18

Thousands of
U.S. Dollars*
2012Accumulated other comprehensive income
Unrealized gain on available-for-sale securities
Balance at end of previous year ..............................................................
Changes during the accounting period:
Net change in items other than shareholders’ equity .........................
Total changes during the accounting period .....................................
Balance at end of year ............................................................................
Deferred loss under hedge accounting
Balance at end of previous year ..............................................................
Changes during the accounting period:
Net change in items other than shareholders’ equity .........................
Total changes during the accounting period .....................................
Balance at end of year ............................................................................

Millions of Yen
2012
2011

Thousands of
U.S. Dollars*
2012

¥

1,381

¥

$

¥

8,301
8,301
9,683

(1,761)(1,761)¥ 1,381

101,004
101,004$ 117,814¥ (1,477)¥ (1,639)$ (17,979)

69
69¥ (1,408)

162
162¥ (1,477)

839
839$ (17,139)

¥

6,955

$

84,581701
701¥7,653

¥

(3)
(3)
6,951

$

8,532
8,532
93,113

6,855

¥

8,458

$

83,411

Land revaluation excess
Balance at end of previous year ..............................................................
Changes during the accounting period:
Net change in items other than shareholders’ equity .........................
Total changes during the accounting period .....................................
Balance at end of year ............................................................................
Accumulated other comprehensive income
Balance at end of previous year ..............................................................
Changes during the accounting period:
Net change in items other than shareholders’ equity .........................
Total changes during the accounting period .....................................
Balance at end of year ............................................................................
Share warrant
Balance at end of previous year ..............................................................
Changes during the accounting period:
Net change in items other than shareholders’ equity .........................
Total changes during the accounting period .....................................
Balance at end of year ............................................................................
Minority interests
Balance at end of previous year ..............................................................
Changes during the accounting period:
Net change in items other than shareholders’ equity .........................
Total changes during the accounting period .....................................
Balance at end of year ............................................................................
Total net assets
Balance at end of previous year ..............................................................
Changes during the accounting period:
Cash dividends .................................................................................
Net income.......................................................................................
Purchase of treasury stock .................................................................
Disposition of treasury stock .............................................................
Reversal of revaluation reserve for land .............................................
Net change in items other than shareholders’ equity .........................
Total changes during the accounting period .....................................
Balance at end of year ............................................................................

¥6,951

¥

9,071
9,071
¥ 15,927

3,143(1,603)(1,603)¥ 6,855

¥

—

—

¥

19
19
19

¥

4,260

¥

590
590
4,850

16,809110,376
110,376$ 193,788

$

—

—
—
—

$

240
240
240

¥

3,800

$

51,831

¥

459
459
4,260

$

7,184
7,184
59,015¥160,718¥156,687$1,955,446(2,032)
9,621
(4)
—
—
9,682
17,266¥177,984(2,034)
7,443
(841)
603
3
(1,143)
4,030¥160,718(24,731)
117,066(59)——
117,801
210,076$2,165,522* U.S. dollar figures have been translated at the rate ¥82.19 to U.S.$1, the prevailing market rate as of March 31, 2012.
19

Consolidated Statements of Cash Flows
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2012 and 2011

Millions of Yen
2012
2011

Cash flows from operating activities
Income before income taxes ..................................................................
Depreciation .........................................................................................
Impairment losses..................................................................................
Amortization of negative goodwill .........................................................
Decrease in reserve for possible loan losses.............................................
Increase (decrease) in reserve for employees’ bonuses .............................
Increase (decrease) in reserve for directors’ bonuses ...............................
Decrease in reserve for employees’ retirement benefits ...........................
Decrease in reserve for directors’ retirement benefits .............................
Increase (decrease) in reserve for loss on interest refunded .....................
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....................................................................................
Gain on investment securities ................................................................
Loss (gain) on money held in trust ........................................................
Foreign exchanges loss (gain) .................................................................
Loss on disposition of fixed assets ..........................................................
Net decrease (increase) in trading account securities ..............................
Net increase in loans and bills discounted .............................................
Net increase in deposits .........................................................................
Net decrease in negotiable certificate of deposits ...................................
Net decrease in borrowed money (excluding subordinated loans) ..........
Net increase in due from banks (excluding due from the Bank of Japan) ...
Net increase in call loans and others ......................................................
Net increase in call money.....................................................................
Net increase (decrease) 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 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..............................................................
Purchases of tangible fixed assets ...........................................................
Proceeds from tangible fixed assets ........................................................
Purchases of intangible fixed assets ........................................................
Payments for execution of asset retirement obligations ..........................
Net cash used in investing activities .......................................
Cash flows from financing activities
Borrowing of subordinated loans ...........................................................
Repayment of subordinated loans..........................................................
Issuance of subordinated bonds .............................................................
Redemption of subordinated bonds.......................................................
Cash dividends paid ..............................................................................
Cash dividends paid to minority shareholders .......................................
Purchase of treasury stock......................................................................
Proceeds from sales of treasury stock .....................................................
Net cash used in financing activities .......................................
Net (decrease) increase in cash and cash equivalents ............................
Cash and cash equivalents at beginning of year ....................................
Cash and cash equivalents at end of year ..............................................

¥ 19,406
2,376
106
18
(3,733)
(49)
0
(138)
(281)
(18)
(93)
12
(117)
(56,394)
4,725
4,614
(6)
(339)
31
298
(71,003)
87,94913,838(2,806)615
18,9792,652
114
53
57,478(5,558)(4,335)68,391(1,566)
66,825¥ 14,565
2,488
16
18
(780)
3
(6)
(18)
(43)
11
(53)
(2)
908
(58,080)
6,335
2,976
8
405
48
(72)
(70,187)
126,999
3,390(1,491)
444
93,945—(302)(90)
59,003(7,300)3,875
177,013(7,464)
169,548$ 236,112
28,9081,292
219(45,428)(607)(8)(1,686)(3,430)(224)(1,139)153(1,430)(686,149)
57,50056,148(78)(4,130)387
3,626(863,888)
1,070,070
168,365(34,147)
7,483
230,927
32,2771,395
648
699,339(67,633)(52,754)
832,120(19,054)
813,065(258,923)
119,91454,520(10)(2,495)0(941)(9)(87,946)(395,803)
239,547
76,232—(1,136)19(1,703)(6)(82,850)(3,150,309)
1,458,987
663,345(127)(30,363)1(11,453)(118)(1,070,036)

14,000(9,000)10,000(18,000)(2,032)(3)(4)—(5,041)(26,161)
130,923¥104,762————(2,034)
(3)
(841)
603
(2,276)84,42146,502¥130,923

170,337(109,502)
121,669(219,004)(24,731)
(45)
(59)
—
(61,337)(318,308)
1,592,939$1,274,631* U.S. dollar figures have been translated at the rate ¥82.19 to U.S.$1, the prevailing market rate as of March 31, 2012.
20

Thousands of
U.S. Dollars*
2012Directory

Organization Chart (as of July 1, 2012)
General Meeting of Shareholders

General Planning and Management Division
Strategic Planning OfficeFinancial Affairs Office
Tokyo Office

Corporate Auditors
Board ofCorporate Auditors

Risk Management Division
Legal Affairs Office
Personnel Division
Secretariat

Board of Directors

Business Promotion Division
Mortgage Loan Center

Executive Committee

Business Planning Division
Customer Service Promotion Office

President*

Credit DivisionCorporate Management Support Office
Industrial Research OfficeVice President*
Managing Directors

Credit Planning Division
Public Sector Marketing Division
Public Funds Management Office* and Representative Director

Capital Markets Division
General Affairs Division
Administration Division
Systems Management Office
Auditing Division

Board of Directors, Corporate Auditors and Executive Officers (as of July 1, 2012)
President
Kikuo Kato
Vice President
Masami Kurihara

Managing Directors
Masaaki Okano
Makoto Ishikawa
Motonobu Nakamura
Kenichiro Inaba
Koichi Akagi

Corporate Auditors
Nobuhiro Fukazawa (standing)Hidemi Shimizu (standing)Shozo Nishijima
Emi Yano
Atsumu Kuroishi

Managing Executive Officer
Soe Iijima
Executive Officers
Teiji Komoriya
Takeshi Sekiya
Minoru Watanabe
Kazuya Koyama

Hiromasa Miyazaki
Yuichi Tanaka
Yoshiro Kenmochi
Kazumasa Nagahori
Hiroshi Akimoto
Masahiro Saito
Takafumi Hoshina

Investor Information (as of March 31, 2012)
Common Stock
Authorized:
Issued:Number of shareholders:Number of Shares Held by Type of Shareholders
80,000 thousand shares
34,155 thousand shares
13,880Financial Institutions
42.93%

Major Shareholders
Name

Number ofsharesJapan Trustee Services Bank, Ltd. (trust account)
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Japan Trustee Services Bank, Ltd. (trust account 4)
The Master Trust Bank of Japan, Ltd. (trust account)
Musashino Bank Industries Employees’ Stockholding Association
Meiji Yasuda Life Insurance Company
Sumitomo Life Insurance Company
Nippon Life Insurance Company
The Chase Manhattan Bank, N.A. London Secs Lending
Omnibus Account (Standing proxy: Mizuho Corporate
Bank, Ltd. Custody & Proxy Dept.)
MAEDA GLASS CO., LTD.

2,485,700
1,218,987
1,213,900
851,500
806,275
735,858
702,900
540,222

Shares held asa percentage of
total outstanding
shares (%)
7.27
3.56
3.55
2.49
2.36
2.15
2.05
1.58

526,4421.54

507,300

1.48

Other corporations
26.15%

Foreign companies
and others
12.61%
Financial instruments
business operators
1.25%

Individuals and others
17.06%

Notes: 1. Some treasury stock is contained in “Individuals andothers”.
2. “Other corporations” includes a unit of 14 shares under
the name of 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