Shizuoka Bank Group

1 Shizuoka Bank Group Annual Report 2016. Economic Overview of Shizuoka Prefecture Osaka Industrial Characteristics Tokyo Shizuoka Prefecture is situated midway between the two major con- regional economy. We expect Shizuoka sumer markets and industrial centers of Japan the Nagoya region that Shizuoka prefecture will be plus the Osaka-Kyoto region to the west, and the Yokohama-Tokyo more internationalized, stimulat- region to the east. Because of this location at a busy crossroads of ing the interchange of people the nation, it has historically developed into a significant center of and ideas with the major urban manufacturing industry. The convenient location of Shizuoka centers of Eastern Asia, and act Prefecture in transportation terms has caused the growth of a strong as an important driving force for the regional economy.

2 Industrial base. The prefecture is one of the country's leading manu- In recent years the prefectural authorities have been operating a facturing areas. The wide variety of industries represented within number of schemes to encourage companies in the medical treat- Shizuoka has led to it being dubbed the industrial department store. ment, pharmaceuticals, chemicals, and optical technology industries, Corporations active in Shizuoka include world-leading enterprises among others, to set up operations in the so-called Shizuoka Triangle such as Toyota, Honda, Suzuki, and Yamaha, and the prefecture is Research Cluster (spread across the prefecture's eastern, central, renowned for its concentration of export-oriented manufacturing com- and western districts) as a means of developing a next-generation panies.

3 Many of these firms have set up production subsidiaries industrial base. overseas, which is creating a growing international aspect to the Economy in Shizuoka Prefecture and current state Positioned as distribution hub between Tokyo and Osaka/Kyoto. Percentage distribution of Shizuoka R epresents a leading manufacturing prefecture in Japan. Prefecture GDP by industry Owns a lot of export-driven companies related to handling machinery of transportation Manufacturing Service Real estate and musical instruments and so forth. Wholesale / Retail Construction Other (%). 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.

4 Mt. Fuji Source : Shizuoka Prefectural Tourism Association UNESCO World Cultural Heritage All-Japan Shizuoka Pref. Source: Cabinet Office , Government of Japan, FY2013. The Port of No. of listed companies with Tagonoura HQs in Shizuoka Prefecture TOSHIBA MACHINE No. of Shin-Tomei Listing Expressway Shizuoka Bank companies The Port of Shimizu TSE 1st section 22. STAR MICRONICS TSE 2nd section 11. Hot-spring area Mothers 1. Mt. Fuji Shizuoka Airport Jasdaq 18. Tomei Expressway Total 52. Hamamatsu Photonics Yamaha * As of the end of Oct. 2015, companies listed on more than one exchange were counted as TSE-listed Suzuki Yamaha Motor The Port of Omaezaki Economic scale of Shizuoka Prefecture Accounts for 3% share of all-Japan. Ranks 10th in the scale of economy in Japan.

5 Shizuoka Prefecture economic scale H as 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. Prefectural GDP (FY2013, Nominal). Rank Prefecture/Region (US$ billions). Shizuoka Prefecture indices 9 Fukuoka Prefecture Share of all-Japan National ranking 10 Shizuoka Prefecture Population(*) 10th of 47 (2015) 11 Ibaraki Prefecture No. of households(*) 10th of 47 (2015) - 4 prefectures of Shikoku Nominal prefectural GDP JPY 10th of 47 (FY2013) - 3 prefectures of Hokuriku GDP comparison with various countries (2013). Per-capita income JPY - 3rd of 47 (FY2013). Rank Country (Region) (US$ billions). No. of business establishments 180k 10th of 47 (2014).

6 57 Kuwait Amount of shipments of manufactured goods, etc. JPY 4th of 47 (2014). 58 Vietnam Agricultural output JPY 15th of 47 (2014) 59 Bangladesh Fishery production volume 210k tons 4th of 47 (2015) - Shizuoka Prefecture No. of industrial locations(*) 55 4th of 47 (2015) 60 Hungary No. of new housing starts 24k 10th of 47 (2015) 61 Angola 1 *Based on flash reports *Sources: Economic and Social Research Institute (ESRI). 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.

7 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.

8 For overseas operation, the Bank operates in New York, Los Angeles, Brussels, Hong Kong, Shanghai, and Singapore. The Structure of the Shizuoka Bank Group (As of July 1, 2016). Domestic Shizugin Management Consulting Co., Ltd. Head Office and Branches 175. Shizugin Lease Co., Ltd. Sub-branches 24. Shizugin Computer Service Co., Ltd. Subsidiaries 12. Shizugin Credit Guaranty Co., Ltd. ShizuginDC. Shizugin Lease CardCo., Co.,Ltd. Ltd. Shizugin Capital Shizuoka Lease Co., Ltd. Co., Ltd. Consolidated Subsidiaries ShizuginTM. Shizugin Lease Co., Ltd. Securities Co., Ltd. Shizugin General Service Co., Ltd. The Shizuoka Shizugin Mortgage Service Co., Ltd. Bank, Ltd. Shizugin Business Create Co., Ltd. Shizuoka Liquidity Reserve Limited Equity-method Affiliate Shizugin Saison Card Co.

9 , Ltd. Americas Branches 2 New York, Los Angeles Europe Subsidiary 1 Shizuoka Bank (Europe) Asia Branch 1 Hong Kong Representative Offices 2 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 Support for Business Start-ups and Entry to New Business Fields and Shizuoka Bank Group at a Glance .. 2 Initiatives in Growth Fields .. 16. To Our Shareholders .. 3 Support for Overseas Business Development .. 17. Message from the President .. 4 Independent Auditor's Report .. 18. 12th Medium-term Business Plan TOBIRA Open a Gate for the Next .. 5 Consolidated Balance Sheet .. 19. Grand Opening of the SHIZUGIN Headquarters Tower.

10 6 Consolidated Statement of Income .. 20. Financial Highlights .. 7 Consolidated Statement of Comprehensive Income .. 20. Sound Financial Condition .. 8 Consolidated Statement of Changes in Equity .. 21. Results of Initiatives in Fiscal 2015 .. 9 Consolidated Statement of Cash Flows .. 22. Corporate Governance Structure .. 11 Notes to Consolidated Financial Statements .. 23. Risk Management System .. 13 Key Consolidated Financial Indicators .. 41. Region-based Relationship Banking .. 15 The Shizuoka Bank .. 44. 2. To Our Shareholders 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.