ANNUAL REPORT 2011

Profile

Musashino Bank is the only regional bank whose operational base consists of Saitama Prefecture. The prefecturelies 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,and has played a major role in supporting the development of the regional economy and local industries.
The Bank’s paid-in capital as of March 31, 2011, stood at ¥45.7 billion, with total assets of ¥3,681.0 billion, abalance of deposits (excluding CDs) of ¥3,447.1 billion and a balance of loans of ¥2,794.9 billion. The Bank has 91
branches, of which 89 are inside Saitama Prefecture, and a workforce of 2,104.

SaitamaPrefecture

IbarakiPrefecture

Tokyo
Kanagawa
Prefecture

Head Office

Chiba
PrefectureConsolidated Financial Highlights

The Musashino Bank, Ltd. and Consolidated Subsidiaries Years Ended March 31, 2011 and 2010

Thousands of
U.S. Dollars*
2011

Millions of Yen
2011
2010

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) (%)...................................

¥3,696,211
3,437,747
2,785,295
644,854
160,718
10.79¥3,571,535
3,307,357
2,715,108
569,966
156,687
10.58$44,452,334
41,343,921
33,497,241
7,755,318
1,932,869

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

¥    81,938
67,372
14,5657,443¥    86,894
79,2947,600
3,554$   985,431
810,257
175,174
89,516* U.S. dollar figures have been translated at the rate ¥83.15 to U.S.$1, the prevailing market rate as of March 31, 2011.

Total Assets

Deposits(¥ billion)(¥ billion)

3,418

3,442

3,571

3,696

FY2007 FY2008 FY2009 FY2010

3,146

Loans and Bills Discounted

3,192

3,307

3,437

FY2007 FY2008 FY2009 FY2010

1(¥ billion)

2,624

2,717

2,715

2,785

FY2007 FY2008 FY2009 FY2010

Message from the President

Economic Trends
During fiscal 2010, the Japanese economy showedsigns of recovery in the first half due to the economic
stimulus effects of favorable exports, mainly toSoutheast Asia, lower taxes on eco-cars, the eco-point
system (a government subsidy program to promote
the use of energy efficient products), and other factors.
Subsequently, despite the slow recovery of the Europeanand U.S. economies and the standstill caused by theongoing appreciation of the yen, both exports andproduction turned around buoyed by U.S. financial andfiscal policies.
Nevertheless, the electric power outages and supply
chain disruption caused by the Great East Japan
Earthquake that struck in March 2011, has had a negative economic effect that has resulted in a growing senseof uncertainty about the future.
Although production, which had been on an upswing
for automobiles, electronic parts, and other products,
was a standstill up to the middle of the year, and capital
investments and home construction remained at low
levels, the economy of Saitama Prefecture overall
showed signs of recovery with consumer spending
becoming stable after bottoming out.
As for the future outlook of Saitama Prefecture, inthe first half of fiscal 2011, production activities andconsumer spending in particular are expected to growweaker due to the effects of the Great East Japan
Earthquake. However, in the second half, home investments and public spending for the reconstruction ofearthquake-stricken areas should move into full swing.
The economy of Saitama Prefecture, the gateway to the
Tohoku Region, is expected to turnaround and the
supply chain restored.
As Saitama Prefecture’s population continues toincrease, the market continues to grow. Further development of the local economy is expected through thesupport and fostering of industries with future growthprospects such as the environmental, medical, nursing
care, and health fields.

Kikuo Kato
President2Year ended March 31, 2011

Response to the Great East Japan Earthquake

Deposits and assets in custody
Deposits and assets in custody grew steadily during theyear under review, rising ¥127.1 billion year on year,to ¥3,427.6 billion. Assets in custody grew by ¥29.5
billion, to ¥540.1 billion, driven by our efforts to meetthe diverse asset management needs of our customers,
through investment trusts, JGBs, and pension products.

Nearly 70% of the companies in Saitama Prefecture
were directly or indirectly affected by the earthquake
disaster. To assist those customers affected by thedisaster, we began offering the Musashino Disaster
Reconstruction Support Loan, and to facilitate theflow of funds, we established the Disaster Victim
Consultation Counter, which carefully responds to customer inquiries.
With nearly 3,000 earthquake victims in Saitama
Prefecture, including those from Futaba Town inFukushima Prefecture, the Bank began quickly refunding deposits to customers in devastated areas onbehalf of other financial institutes. Currently, we haverefunded deposits to earthquake victims on behalf of
22 financial institutions, many of whom have expressed
tremendous gratitude.
In addition to these efforts, the Musashino Bank
Group has donated financially and sent relief aid to thestricken areas.
With regard to electricity-saving measures in thewake of power supply shortages during the summer, theGroup has actively undertaken a variety of measures tosave electricity following power supply shortages during
the summer months.

Loans
Loans outstanding increased ¥71.5 billion, to ¥2,794.9
billion due 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 raise earnings withrecurring income of ¥12.6 billion and net income of¥7.3 billion. The increase was primarily due to efforts
made to better manage loaned money and securities
investments, improve the profitability of such service
transactions as fee and commission income, and control expenses, and to a substantial decrease in bad debt
disposal expenses. On a consolidated basis, recurringincome came to ¥13.7 billion and net income was ¥7.4
billion.

Together with the people of Saitama

Capital ratio
The Bank’s capital ratio for fiscal 2010 stayed at thehealthy level of 10.79% (consolidated basis), slightly
higher than the non-consolidated figure of 10.67%.

The Bank will commemorate its 60th anniversary in
April 2012. Since its founding in 1952, the Bank hasreceived tremendous local support from many customers
in Saitama Prefecture, and is walking together with theprefecture’s citizens. As a regional financial institution,
we will continue to build strong relationships with ourcustomers with the goal of raising customer trust and satisfaction through strict compliance. We will also respondflexibly and appropriately to drastic changes in the economic environment, build an efficient system of businessdevelopment to achieve sustained growth, and focus on
strengthening the organization and training personnel.
Through these efforts, we will establish a competitive
business structure and together all of our employees will
make their utmost effort to meet the expectations of
our regions’ customers.
We thank you for your unwavering and ongoingsupport.

Medium-Term Management Plan
The Bank is now implementing its medium-term management plan, NEW PROJECT 60, with the goal of
becoming the most trusted and top-ranked bank in theregion. In this plan, we aim to position ourselves as“a strong bank that survives,” “a bank with presence”
and “a bank that is trusted,” as well as striving to be“ready for business promotion reforms,” “strengthening
human resource development,” and “establishing efficient operating conditions and strengthening internal
controls.”
Looking back on the first year of the plan, we
achieved steady results and felt a definite positive
response thanks to the Bank’s sincere practice ofcommunity-based finance as we move toward the realization of our goal.

Kikuo Kato
President3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

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%)4

Appealing Business Foundation (Saitama Prefecture)

1. The Huge Tokyo Area Market andContinuing Population Growth

3. Collection of diverse manufacturing industries
1) Diverse manufacturing industries
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.)

Saitama Prefecture, which borders Tokyo and six
prefectures, 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 and industrialization are progressing in Saitama Prefecture due to thegreat convenience gained from being next to Tokyo, thepopulation has grown consistently thanks to an abundance of nature and a comfortable living environment.
(7.2 million people as of April 2011)2) Aggressive development by attracting companies to
Saitama Prefecture
From April 2007 through March 2009, we 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 covers theperiod from April 2010 through March 2012.

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

542

675

693

705

720

586

4. Concentration of Universities and ResearchInstitutes

400

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

200

0

1980

1985

1990

1995

2000

2005

2011

Data: “Population Census” published by the Statistics Bureau, Ministry ofInternal Affairs and Communications, population estimate for 2011.

2. Development of transportation system

Economic and financial position of
Saitama Prefecture1) 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.

■ Number of companies (2006)

248,000 companies (5th among the 47 prefectures)■ Total prefecture production (nominal) (2007)¥21,108.0 billion (5th among the 47 prefectures)

2) Enhancement of 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.

■ Value of product shipments (2008)¥14,947.5 billion (7th among the 47 prefectures)5Corporate Social Responsibility (Main Initiatives)
Under its management principles of “regional harmony” and “respect for the customer,” the Musashino
Bank recognizes that achieving sustained growth
while gaining the understanding, empathy, trust andsupport of all people within the Bank’s operational
sphere, including shareholders and investors, as well as
customers, the community and employees, is its social
responsibility as a good corporate citizen.
Having positioned the strengthening of CSR initiatives as a key strategy in its medium-term management
plan “NEW PROJECT 60,” the Musashino Bankis contributing to the regional economy and local
community while carrying out environment-friendly
initiatives far and wide.

Loans to region
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 for the best transportation access, has
the most new housing starts, and a home-buyer segment comprised mainly of 35 to 40-year old childrenof baby-boomers. For these reasons, we have enhanced
our home loan products and upgraded our home loan
promotion system so that customers can use them withgreater convenience.
As a result, the balance of individual loans as of March
31, 2011 increased ¥58.9 billion, to ¥1,190.0 billion.
In addition, we are contributing to the sustainable
development of the region by providing a stable flow offunds to SMEs and individual business owners, the pillars of Saitama Prefecture’s regional economy.
Specifically, corporate managers and sales managers
are aggressively pursuing new business development andconsulting activities 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 we aresupporting these fields and making them our 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, 2011 increased ¥56.8 billion, to ¥2,526.1
billion, for a loan to region ratio of ¥90.38%. The
Bank’s share of loans in the prefecture rose 0.29 percentage points to 15.56%.

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 the region
as of March 31, 2011 climbed ¥132.5 billion, to¥3,402.9 billion. Moreover, the ratio of deposits fromregion rose 0.19 percentage points, to 99.28%, continuing to maintain its level at 99%. As a result of thesteady increase in deposits from region, the Bank’s shareof deposits within prefecture as of March 31, 2011, rose
0.19 percentage points, to 11.61%.
Deposits from Region(100 million)
40,000100

99.30
30,000■ Deposits from region (scale on left side)● Deposit ratio from region (scale on right side) (%)

30,22099.33
31,53499.09
32,70499.28
34,02995

20,00090

10,00085

Loans to Region(100 million)
30,0000

FY2007

FY2008FY2009FY201080
24,00090.49
23,844■ Loans to region (scale on left side)● Ratio of loans to region (scale on right side)

91.24
24,873

90.68

90.38

24,69325,261

(%)
100

80

Share of Deposits within Prefecture
(%)
13.00
12.00

11.21

11.37

11.42

11.61

18,00060

12,000

40

6,000

20

11.00
10.00
9.00

FY2007

FY2008FY20090

FY20106

FY2007

FY2008FY2009FY20100Corporate Social Responsibility (Main Initiatives)

Food Selection, a large business forum. These efforts
have led to the commercialization of farm crops, andin some cases best-selling products. As a result of these
agricultural initiatives, we received an award from the
Kanto Finance Bureau.

Share of Loans within Prefecture
(%)
16.00
15.00

15.32

15.27

FY2008FY2009

15.56

14.53

14.00
13.00
12.00

FY2007FY2010Supporting Alliances with Industry and Universities
The Bank has formed alliances with seven universities as part of its commitment to meeting customer
needs in areas such as research and development andmanagement issue resolution through cooperation withindustry and academia. The special characteristic of
the Bank’s alliance with industry and academia goesbeyond the needs of individual customers, and, throughour alliance with Rikkyo University, seeks the tourism
revitalization of Saitama Prefecture as a regional development activity.

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
for compiling 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 fiscal 2010, in light of the “Act Concerning
Temporary Measures to Facilitate Financing for SMEs,
etc.” we actively supported the management improvement of client companies that have changed their borrowing conditions. We have expanded the scope of thecompanies we support and are working closely with clients by helping them formulate management improvement plans using our proprietary Management Plan
Formulation Support System, providing them withcounseling and reviewing their management improvement plans and continuously monitoring the progressof those plans.
The Bank continues to demonstrate its consulting
capabilities and support client companies in order tofacilitate their business rehabilitation.

Initiatives for New Growth Fields
The Bank has set up an agriculture team to strengthen
support for agriculture-related businesses. To actively
meet the funding needs of farmers, the Bank offers
the Musashino Hanamizuki, a loan solely for farmers,
and has concluded a loan guarantee agreement with
the Saitama Agriculture Credit Guarantee Fund
Association.
In addition, we concluded a business cooperationagreement for the agriculture and livestock industries
with Japan Finance Corporation with the goal of revitalizing the agriculture and livestock industries, promoting local production for local consumption, andimproving training of leaders in the agricultural fieldwithin Saitama Prefecture.
We are also conducting solution sales throughBugin Farming Wall, a Bank-held seminar that promotes training and assistance to farmers and exchanges
between food-related businesses, and Regional Bank

7

Corporate Social Responsibility (Main Initiatives)

Strengthen the consulting system
1) Approaches to inheritance and business succession
	To respond to customers' inheritance and businesssuccession needs, we are collaborating with outside
professional institutions such as tax accounting firms,of which our head office staff with their specialized
knowledge is a business partner, and providing inheritance and business succession consulting services.
2) Assisting companies enter overseas markets
	The entry of SMEs into overseas markets (globalization) in the wake of economic growth in China andSoutheast Asia has become commonplace. To support these companies, we are providing information
about countries, business customs, and other areas tocompanies that want to establish factories and bases
overseas.
3) Meeting M&A needs	While responding to the various merger and acquisition needs, such as for business succession (absenceof a successor), business expansion, and diversification, of SMEs in Saitama Prefecture, we are contributing to the survival and growth of SMEs in theregion and developing the regional economy. The
Bank has concluded M&A business agreementswith six outside professional agency partners including the Saitama Certified Public Tax Accountant
Cooperative Society.

4)	Handling electronically recorded monetary claim
rebates	In response to diversifying customer financing needs,
the Bank is participating in the Electronic Settlement
Service provided by the Japan Electronic Monetary
Claim Organization, a wholly owned subsidiary of
The Bank of Tokyo-Mitsubishi UFJ, Ltd. We are
the first financial institution in Saitama Prefecture
to initiate an electronically recorded monetary claim(electronic promissory note) rebate service.
5) Other	The Bank responds to requests for consultations
involving business problems such as expansion ofsales channels while leveraging the know-how of outside institutions that our head office staff and branchstaff, which have specialized knowledge, are partnered with. Further, we operate the Bugin Managers’
Club, which provides various information support
services including the publication of an in-house
journal loaded with business information for members and the sponsorship of seminars.

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
401K/Trusts

IndividualBusiness financeIndustry and university collaboration
IPO/New business8

Corporate Social Responsibility (Main Initiatives)

Contributing to the Local Community

The Environment

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 unit in charge of responding to financial crime, the Bank is working to prevent
damage caused by financial crime by assigning two
individuals to work in the General Affairs Division as
security officers.

Helping Preserve the Environment through Banking
Services
As a regional financial provider, the Bank has a range ofservices for customers who show environmental commitment, helping them reduce costs and offering support in their environmental initiatives.
Environmental Education for Employees (the only
environmental program offered by a regional bank)
In 2008, in cooperation with the Ecosystem
Conservation Society, we began holding the “Bugin
Environmental College” to help employees acquire
knowledge about preserving the natural environmentand conserving the ecosystem. The fifth semester of thiscourse began in July 2011.
The college meets for nine sessions and when thecourses are completed the employees can receive“Ecosystem Instructor - 2nd Level” certification fromthe Ecosystem Conservation Society (as of June 2011,77 certifications had been issued).
In addition, new bank employees who joinedMusashino Bank in 2011, in cooperation with the
Ecosystem Conservation Society and the Association
for Arakawa Nature Conservation, an NPO, conductednatural environment preservation activities, which
included the disinfesting of alien plants on the Arakawa
River bed (Mitsumata-numa Biotope).

Supporting Educational Programs(Supporting Financial Education)
As a part of our education support program, the Bank
conducts workplace observation tours and on-site training for children who are the bearers of the country’s
future. In August 2011, we participated in Saitama
Prefecture Youngsters
Bridge of Dreams Businesssponsored by Saitama
Prefecture and provided
opportunities for youngsters
to learn and experience.
(Fostering a Work Awareness)
To help foster a work awareness among students, we
provide internships for college students in cooperation
with Musashino Bank and Bugin Economic ResearchInstitute, Ltd., a Group company. As part of thisprogram, the students are taught about the banking
business, given a tour of our head office, and visit companies. This provides students with an opportunity tounderstand the work performed by bank staff.

9Consolidated Balance Sheets

The Musashino Bank, Ltd. and Consolidated Subsidiaries As of March 31, 2011 and 2010

Millions of Yen
2011
2010

Thousands of
U.S. Dollars*
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..............................................................................

¥  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¥    48,068
131,364
13,887429
1,500
569,536
2,715,108
2,104
16,151
27,87635,435
2,039
20,936
12,200(25,106)¥3,571,535$ 1,588,050
488,304
128,736
6,032
17,914
7,749,286
33,497,241
28,953
179,214261,667
421,856
32,141
217,296
128,194(292,557)$44,452,334

Liabilities
Deposits.................................................................................................
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.........................................................................

¥3,437,747
26,72681
18,00027,980
1,276
15
5,688
281
100
329
58
908
5,639
10,659¥3,535,493¥3,307,357
28,218172
18,00035,395
1,273
22
5,706
324
88
383
60
—
5,641
12,200¥3,414,847$41,343,921
321,420982
216,476
336,505
15,357
189
68,410
3,391
1,202
3,966
699
10,926
67,819128,194$42,519,464

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 valuation and translation adjustments.............................
Minority interests...................................................................................
Total net assets........................................................................
Total liabilities and net assets..................................................

¥    45,743
38,351
66,407(900)
149,602
1,381(1,477)
6,951
6,855
4,260
160,718¥3,696,211¥    45,743
39,43861,296(2,050)144,428
3,143(1,639)
6,955
8,458
3,800
156,687¥3,571,535$   550,137
461,229
798,648(10,826)
1,799,188
16,615(17,771)
83,60482,44851,232
1,932,869$44,452,334* U.S. dollar figures have been translated at the rate ¥83.15 to U.S.$1, the prevailing market rate as of March 31, 2011.
10

Consolidated Statements of Income and Comprehensive Income
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2011 and 2010

Millions of Yen
2011
2010

Consolidated Statements of Income

Thousands of
U.S. Dollars*
2011

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

¥50,517
7,303
260
9,760
3,163
10,933
81,938¥52,722
6,560
393
9,280
5,156
12,78086,894$607,545
87,832
3,129
117,385
38,044131,493
985,431

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

3,680
373
2,281
4,055
2,180
37,137
17,66367,372
14,565

6,187
464
2,085
3,924
3,452
37,83325,34579,2947,600

44,265
4,488
27,442
48,772
26,222446,631
212,434
810,257
175,174

2,673
3,972
6,646
476
¥ 7,443¥219.44

5,332(1,655)
3,677
368¥ 3,554¥104.82

32,154
47,77579,9305,727$ 89,516$    2.63

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 ¥83.15 to U.S.$1, the prevailing market rate as of March 31, 2011.

Millions of Yen
2011
2010

Consolidated Statements of Comprehensive Income
Income before minority interests............................................................
Other comprehensive income:Net unrealized losses on securities......................................................
Unrealized gains on hedging derivatives.............................................
Total other comprehensive income.....................................................
Comprehensive income..........................................................................
Comprehensive income attributable to:Shareholders of the Company............................................................
Minority interests..............................................................................

¥7,919¥—$95,243(1,774)162(1,612)¥6,306———¥—(21,346)
1,950(19,396)$75,847¥5,843
463¥——$70,276
5,571* U.S. dollar figures have been translated at the rate ¥83.15 to U.S.$1, the prevailing market rate as of March 31, 201111

Thousands of
U.S. Dollars*
2011Consolidated Statements of Changes in Net Assets
The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2011 and 2010

Millions of Yen
2011
2010

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..............................................................
Other changes....................................................................................
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........................................................................................
Other changes....................................................................................
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..............................................................
Other changes....................................................................................
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..............................................................
Other changes....................................................................................
Total changes during the accounting period......................................
Balance at end of year.............................................................................

¥ 45,743—¥ 45,743¥ 45,743—¥ 45,743$  550,137—$  550,137¥ 39,438¥ 39,438$  474,305

(412)
(674)
(1,087)¥ 38,351(0)—(0)¥ 39,438(4,964)(8,112)(13,076)$  461,229¥ 61,296¥ 59,776$  737,182(2,034)
7,443
(297)
5,110
¥ 66,407(2,034)
3,554
—
1,520
¥ 61,296(24,469)
89,516(3,581)
61,465$  798,648¥  (2,050)¥  (2,042)$   (24,662)

(841)
1,016
975
1,150
¥    (900)

(9)
1
—
(8)
¥  (2,050)(10,122)
12,221
11,736
13,835$   (10,826)¥144,428¥142,916$1,736,963(2,034)
7,443
(841)
603
3
5,173
¥149,602(2,034)
3,554
(9)
0
—
1,511
¥144,428(24,469)
89,516(10,122)
7,256
42
62,224$1,799,188* U.S. dollar figures have been translated at the rate ¥83.15 to U.S.$1, the prevailing market rate as of March 31, 2011.

12

Thousands of
U.S. Dollars*
2011Millions of Yen
2011
2010

Accumulated other comprehensive income
Unrealized gain (loss) 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.............................................................................
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.............................................................................
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..............................................................
Other changes....................................................................................
Net change in items other than shareholders’ equity..........................
Total changes during the accounting period......................................
Balance at end of year.............................................................................

¥   3,143¥  (3,990)$    37,806(1,761)(1,761)¥   1,381

7,133
7,133
¥   3,143(21,190)(21,190)$    16,615¥  (1,639)¥  (1,414)$   (19,722)

162
162¥  (1,477)

(225)
(225)
¥  (1,639)

1,950
1,950
$   (17,771)¥   6,955¥   6,955$    83,647(3)(3)¥   6,951——¥   6,955

(42)
(42)
$    83,604¥   8,458¥   1,550$  101,731(1,603)(1,603)¥   6,855

6,908
6,908
¥   8,458(19,283)(19,283)$  82,448¥   3,800¥   3,328$    45,706

459
459¥   4,260

471
471¥   3,800

5,526
5,526
$    51,232¥156,687¥147,795$1,884,401(2,034)
7,443
(841)
603
3
(1,143)
4,030¥160,718(2,034)
3,554
(9)
0
—
7,380
8,892
¥156,687(24,469)
89,516(10,122)7,256
42(13,756)
48,468$1,932,869* U.S. dollar figures have been translated at the rate ¥83.15 to U.S.$1, the prevailing market rate as of March 31, 2011.
13

Thousands of
U.S. Dollars*
2011Consolidated Statements of Cash Flows

The Musashino Bank, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2011 and 2010

Millions of Yen
2011
2010

Cash flows from operating activities
Income before income taxes...................................................................
Depreciation..........................................................................................
Impairment losses...................................................................................
Amortization of negative goodwill..........................................................
Increase (decrease) in reserve for possible loan losses...............................
Increase (decrease) in reserve for employees’ bonuses..............................
Increase (decrease) in reserve for directors’ bonuses................................
Decrease in reserve for employees’ retirement benefits............................
Increase (decrease) in reserve for directors’ retirement benefits...............
Increase in reserve for loss on interest refunded......................................
Increase (decrease) in reserve for reimbursement of dormant deposits.....
Decrease in reserve for point loyalty programs........................................
Increase 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 decrease (increase) in loans and bills discounted..............................
Net increase in deposits..........................................................................
Net increase (decrease) in negotiable certificate of deposits.....................
Net decrease in borrowed money (excluding subordinated loans)...........
Net decrease (increase) in due from banks(excluding due from the Bank of Japan).............................................
Net decrease (increase) in call loans and others.......................................
Net increase (decrease) in foreign exchange, assets..................................
Net decrease in foreign exchange, liabilities............................................
Interest received.....................................................................................
Interest paid...........................................................................................
Other, net..............................................................................................
Subtotal...................................................................................
Income taxes received.............................................................................
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..............................................................
Decrease in money held in trust.............................................................
Purchases of tangible fixed assets............................................................
Proceeds from tangible fixed assets.........................................................
Purchases of intangible fixed assets.........................................................
Payments for execution of asset retirement obligations...........................
Net cash used in investing activities........................................
Cash flows from financing activities
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 increase (decrease) in cash and cash equivalents.............................
Cash and cash equivalents at beginning of year.....................................
Cash and cash equivalents at end of year...............................................

¥ 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)¥   7,600
2,525
12
9
282
(71)
3
(20)
75
10
56
(3)
—
(59,676)
8,738
1,231
(4)
(540)
33
855
2,374
124,339(9,578)(602)$  175,174
29,922
194
96(9,389)
40
(80)
(217)
(517)
133
(647)
(28)
10,926(698,507)
76,19635,800
101
4,881
586
(869)
(844,102)
1,527,352
40,769(17,942)444
93,945(302)(90)
59,003(7,300)3,875
177,013—(7,464)
169,548(447)(44,729)344
144
60,133(9,128)3,339
87,306
3,427(603)
90,1315,340
1,129,826(3,639)(1,094)
709,605(87,799)
46,6092,128,845—(89,772)
2,039,073(395,803)
239,547
76,232—0(1,136)19(1,703)(6)(82,850)(520,732)
355,384
71,333(2)—(1,069)—(615)—(95,702)(4,760,112)
2,880,904
916,811—0(13,667)
234(20,492)(79)(996,401)(2,034)
(3)
(841)
603
(2,276)84,42146,502¥130,923(2,034)(3)(9)
0(2,046)(7,618)54,120¥ 46,502(24,469)(44)(10,122)
7,256(27,379)
1,015,293
559,255$1,574,548* U.S. dollar figures have been translated at the rate ¥83.15 to U.S.$1, the prevailing market rate as of March 31, 2011.

14

Thousands of
U.S. Dollars*
2011Directory(As of July 1, 2011)

Organization Chart
General Meeting of Shareholders
Corporate Auditors
Board ofCorporate Auditors
Board of Directors
Executive Committee
President*
Vice President*
Senior Managing Director*
Managing Directors* and Representive Director

General Planning and Management Division
Strategic Planning OfficeFinancial Affairs Office
Risk Management Division
Legal Affairs Office
Personnel Division
Secretariat
Business Promotion Division
Mortgage Loan Center
Business Planning Division
Customer Service Promotion Office
Credit DivisionCorporate Management Support Office
Credit Planning Division
Public Sector Marketing Division
Public Funds Management Office
Capital Markets Division
General Affairs Division
Administration Division
Systems Management Office
Auditing Division

Board of Directors, Corporate Auditors and Executive Officers
Managing Executive Officers
Corporate Auditors
Managing Directors
Hideo Nomoto
Nobuhiro Fukazawa (standing)
Masaaki Okano
Kenichiro Inaba
Hidemi Shimizu (standing)
Makoto Ishikawa
Vice President
Soe Iijima
Shozo Nishijima
Hiroshi Shimao
Masami Kurihara
Emi Yano
Motonobu Nakamura
Senior Managing Director
Atsumu Kuroishi
Tsuneshi Kurihara
President
Kikuo Kato

Executive Officers
Teiji Komoriya
Takeshi Sekiya
Koichi Akagi
Minoru Watanabe
Kazuya Koyama
Hiromasa Miyazaki
Yuichi Tanaka
Yoshiro Kenmochi
Kazumasa Nagahori

Subsidiaries and Affiliated Companies
Name

Line of Business

The Bugin Business Service Co., Ltd.
The Bugin General Lease Co., Ltd.
The Bugin Guarantee Co., Ltd.
The Musashino Card Co., Ltd.
The Bugin System Service Co., Ltd.
The Bugin Economic Research Institute Co., Ltd.
The Bugin Capital Co., Ltd.

Clerical work for Musashino Bank
Leasing, factoring and corporate financing
Loan guarantees for individuals
Credit card business ( JCB, VISA), loans and loan guarantees
Development, sale and maintenance of computer systems
Research into the regional economy, consultation, information services, and holding of seminars
Management support for venture businesses1510-8, Sakuragi-cho 1-chome, Omiya-ku,
Saitama 330-0854
Phone: (048) 641-6111