Shizuoka Bank : Annual Report 2016

Shizuoka Bank Group

Annual Report 2016

Economic Overview of Shizuoka Prefecture

Osaka

Tokyo

Shizuoka Prefecture is situated midway between the two major con- sumer markets and industrial centers of Japan - the Nagoya region plus the Osaka-Kyoto region to the west, and the Yokohama-Tokyo region to the east. Because of this location at a busy "crossroads" of the nation, it has historically developed into a significant center of manufacturing industry. The convenient location of Shizuoka Prefecture in transportation terms has caused the growth of a strong

regional economy. We expect that Shizuoka prefecture will be more internationalized, stimulat- ing the interchange of people and ideas with the major urban centers of Eastern Asia, and act

as an important driving force for the regional economy.

Shizuoka

industrial base. The prefecture is one of the country's leading manu- facturing areas. The wide variety of industries represented within Shizuoka has led to it being dubbed "the industrial department store." Corporations active in Shizuoka include world-leading enterprises such as Toyota, Honda, Suzuki, and Yamaha, and the prefecture is renowned for its concentration of export-oriented manufacturing com- panies. Many of these firms have set up production subsidiaries overseas, which is creating a growing international aspect to the

In recent years the prefectural authorities have been operating a number of schemes to encourage companies in the medical treat- ment, pharmaceuticals, chemicals, and optical technology industries, among others, to set up operations in the so-called "Shizuoka Triangle Research Cluster" (spread across the prefecture's eastern, central, and western districts) as a means of developing a next-generation industrial base.

● Positioned as distribution hub between Tokyo and Osaka/Kyoto.

● Represents a leading manufacturing prefecture in Japan.

● Owns a lot of export-driven companies related to handling machinery of transportation

Percentage distribution of Shizuoka Prefecture GDP by industry

Manufacturing Service Real estate

and musical instruments and so forth.

● Has many of representative tourist locations coming from its rich natural environment.

● Mt. Fuji and other inscribed properties were registered for the UNESCO World Heritage List on June 22 2013 as "Fujisan, sacred place and source of artistic inspiration."

Wholesale / Retail Construction

Other

(%)

Mt. Fuji

Source :Shizuoka Prefectural

Tourism Association

UNESCO World Cultural Heritage

All-Japan Shizuoka Pref.

Source: Cabinet Office , Government of Japan, FY2013

Shin-Tomei Expressway

The Port of Tagonoura

eShizuoka Bank

eTOSHIBA MACHINE

No. of listed companies with HQs in Shizuoka Prefecture

Listing No.of

companies

TSE 1st section 22

Tomei Expressway

eHamamatsu Photonics

eYamaha

eSuzuki eYamaha Motor

The Port of Shimizu

eSTAR MICRONICS

Mt. Fuji Shizuoka Airport

The Port of Omaezaki

Hot-spring area

TSE 2nd section 11

Mothers 1

Jasdaq 18

Total 52

*As of the end of Oct. 2015, companies listed on more than one exchange were counted as TSE-listed

● Accounts for 3% share of all-Japan. Ranks 10th in the scale of economy in Japan.

● Has greater GDP than total GDP of 4 prefectures in Shikoku or 3 prefectures in Hokuriku.

● Compared to countries, its GDP is ranked next to Kuwait, Vietnam, and Bangladesh.

Shizuoka Prefecture indices

Share of all-Japan National ranking

Population(*) 3.70m 2.9% 10th of 47 (2015)

No. of households(*) 1.43m 2.7% 10th of 47 (2015)

Shizuoka Prefecture economic scale

Prefectural GDP (FY2013, Nominal)

Rank Prefecture/Region (US$ billions)

10 Shizuoka Prefecture 158.4

9 Fukuoka Prefecture 181.5

11 Ibaraki Prefecture 114.8

- 4 prefectures of Shikoku 135.9

Cabinet Office, Government of Japan

Shizuoka Bank Group at a Glance

NURTURING THE VISION OF A PROSPEROUS COMMUNITY

True to a corporate philosophy, which aims to "expand dreams and affluence with our community," the Shizuoka Bank Group makes an ongoing contribution to the development of the region around Shizuoka Prefecture, which forms the core of its business base. This corporate philosophy incorporates not only an economic dimension but also a cultural one: living in harmony with the local communities and the people we serve, sharing prosperity with them as a home-grown local banking group and a member of the regional community, and also helping local people to live more fulfilling lives.

A FIRST-CLASS REGIONAL BANK GROUP

The Shizuoka Bank Group comprises Shizuoka Bank and thirteen Group companies, and is one of the largest regional banking groups in Japan. Centered on Shizuoka Bank with the Head Office, 174 branches and 24 sub-branches, the Group serves the needs of customers not only within Shizuoka Prefecture, its home region, but also three major economic centers in Japan, namely Tokyo, Osaka, and Nagoya, all of which are comparatively nearby. For overseas operation, the Bank operates in New York, Los Angeles, Brussels, Hong Kong, Shanghai, and Singapore.

Domestic

Head Office and Branches 175 Sub-branches 24

Shizugin Lease Co., Ltd.

Subsidiaries 12

Shizugin Lease Co., Ltd.

Shizugin Lease Co., Ltd.

Consolidated Subsidiaries

The Shizuoka Bank, Ltd.

Americas

Equity-method Affiliate

Shizugin Saison Card Co., Ltd.

Branches 2 Europe

Subsidiary 1 Asia

Branch 1

Representative Offices 2

New York, Los Angeles Shizuoka Bank (Europe) S.A.

Hong Kong Shanghai, Singapore

* Other than the above mentioned Group companies, Monex Group, Inc. and Commons Asset Management, Inc. are equity-method affiliates of Shizuoka Bank.

Contents

Economic Overview of Shizuoka Prefecture 1

Shizuoka Bank Group at a Glance 2

To Our Shareholders 3

Message from the President 4

12th Medium-term Business Plan TOBIRA - Open a Gate for the Next .. 5 Grand Opening of the SHIZUGIN Headquarters Tower 6

Financial Highlights 7

Sound Financial Condition 8

Results of Initiatives in Fiscal 2015 9

Corporate Governance Structure 11

Risk Management System 13

Region-based Relationship Banking 15

Support for Business Start-ups and Entry to New Business Fields and Initiatives in Growth Fields 16

Support for Overseas Business Development 17

Independent Auditor's Report 18

Consolidated Balance Sheet 19

Consolidated Statement of Income 20

Consolidated Statement of Comprehensive Income 20

Consolidated Statement of Changes in Equity 21

Consolidated Statement of Cash Flows 22

Notes to Consolidated Financial Statements 23

Key Consolidated Financial Indicators 41

The Shizuoka Bank 44

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To Our Shareholders

Katsunori Nakanishi

President & Chief Executive Officer

As we survey the Japanese economy, it is expected to remain on a moderate recovery track led by domestic demand. However, uncertainties about the outlook per- sist in light of slowing economic growth of emerging- market countries in Asia and turmoil following the UK referendum result in favor of Brexit. As market interest rates will be at low levels owing to the unprecedented extent of monetary easing, the business environment for financial institutions is expected to remain challenging.

In these circumstances, the Shizuoka Bank Group is committed to realizing the vision-"'Shizugin' that ven- tures on new possibilities"-embodied in the 12th Medi- um-term Business Plan "TOBIRA-Open a Gate for the Next." While managing various business risks, we are promoting a growth strategy based on our commitment to region-based relationship banking. At the same time, we will vigorously tackle new business fields and pursue profitable opportunities.

We request all of you-our shareholders and other stakeholders-to offer us your continued support and encouragement far into the future.

July 2016

Katsunori Nakanishi

President & Chief Executive Officer

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