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A late 17th-century flowerpot with overglaze enameling showing
flowers and butterflies in a ring pattern (height: 11.3 cm;
interior diameter: 25 cm; base diameter: 11.2 cm). Designated an
important cultural property of Saga Prefecture, it is in the
kakiemon style, with the ko-imari and nabeshima styles, one of
three major porcelain styles of the Arita region. (Saga Prefectural
Museum collection) Copyright(c) 2005 THE BANK OF SAGA LTD. All
rights reserved.
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The Bank of Saga is a regional bank whose primary business base
comprises Saga and Fukuoka prefectures in northern Kyushu at the
western tip of the Japanese archipelago. The Bank benefits from
both this region's location in close proximity to Japan's Asian
neighbors and Fukuoka Prefecture's position as Kyushu's economic
center. The Bank of Saga's history began with the establishment of
the Imari Bank in 1882 and continued through the merger of a number
of banks, mainly in Saga Prefecture, to its establishment as The
Bank of Saga in 1955. The Bank, which celebrated the 50th
anniversary of its foundation in July 2005, currently enjoys an
overwhelming market share in its home prefecture. Our fundamental
management policy calls for maintaining close relationships with
customers in our region and for ensuring sound management. This
policy underpins our efforts as a regional bank to support the
promotion and development of local industries and to help ensure
the people of our local community a good standard of living, as
well as to offer high-quality services that satisfy our customers.
We introduced our 11th medium-term management plan in April 2004
with the objective of establishing a familiar image of the Bank as
“Sagin-san” ( a way of referring to The Bank of Saga with affinity
or affection ) among our customers. As of March 31, 2005, the
Bank's balance of deposits (including negotiable certificates of
deposit) stood at ¥1,737,247 million (US$16,176 million) on a
non-consolidated basis and its total assets at ¥1,891,204 million
(US$17,610 million). It had 1,579 full-time employees serving
customers through a network of 113 branches.
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We would like to take this opportunity to express our sincere
appreciation to all our customers and shareholders for their
continued support. The Japanese economy pursued a steady recovery
course fueled by private-sector demand in the first half of fiscal
2004 in an environment of improved corporate profits and increased
capital investment, primarily by large-scale manufacturing
industries. Doubts concerning the longevity of the recovery
remained, however, due to such factors as weakness in exports and
production influenced by slowdowns in overseas economies and
inventory adjustments in information-related fields in the latter
half. A look at the economies of Saga and Fukuoka prefectures, our
primary business base, reveals that consumer spending was lethargic
in Saga Prefecture due to severe employment and income conditions,
while a recovery trend was observed in some areas, including
increased investment in manufacturing and housing. Fukuoka
Prefecture enjoyed a stable recovery centered on private-sector
demand, meanwhile, as evidenced by improved corporate profits and
increased capital and housing investment accompanied by steady
exports, primarily to Asia. As concerns our own operating
environment, on the other hand, competition among financial
institutions has intensified due to the further lowering of the
deposit insurance cap on April 1, 2005, and the difficulty of
finding attractive means of fund management continues unalleviated.
In April 2004, we introduced our 11th medium-term management plan,
a three-year plan scheduled to remain in effect until March 2007,
as an appropriate response to these circumstances. We are deploying
various measures under this plan in accordance with five basic
policies: enhancing profitability, assuring asset soundness,
promoting efficiency, reinforcing risk management and developing
human resources.
Performance (Non-consolidated)
The balance of deposits amounted to ¥1,708,559 million
(US$15,909 million) as of March 31, 2005, an increase of ¥69,716
million from the previous year-end. The balance of loans fell by
just ¥23,075 million to a year-end total of ¥1,225,203 million
(US$11,408 million), meanwhile. The downturn was held to a minimum
through such efforts as increased lending in the form of housing
loans to individuals in the amount of ¥40,000 million, despite
downward pressure from such factors as continuing sluggish demand
for corporate financing and our disposal of a total of ¥32,000
million in nonperforming loans within the past year.As concerns our
securities holdings, we moved to diversify our operations in
consideration of future interest rate risks in the current
low-interest environment. As a result, our holdings rose by ¥33,444
million during the term to a total of ¥464,428 million (US$4,324
million). As regards our profit-and-loss situation in fiscal 2004,
profits from funds fell by ¥1,709 million from the previous fiscal
year due to the situation concerning loans and securities mentioned
above. Ordinary profit grew by ¥24,631 million from the previous
fiscal year to ¥9,045 million, however, and current net income
expanded by ¥22,009 million from the previous fiscal year to a
record-high ¥4,793 million due to our success in trimming operating
expenses by ¥1,143 million as compared with the previous fiscal
year and in reducing transfers to the reserve for doubtful accounts
by a significant ¥29,109 million.
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As a result, the Bank's capital ratio stood at 9.46% as of March
31, 2005, compared with 8.87% as of March 31, 2004, measured by
domestic standards.
Outlook
With the current difficulties facing financial operations
expected to continue for the time being due to slumping demand for
funding, the future of the economy does not invite optimism. We are
striving to improve our management efficiency and to stabilize
profits further, therefore, while continuing to upgrade our
responses to risks. In assessing the prospects for operations by
the Bank and its consolidated subsidiaries during fiscal 2005 as a
whole, we have estimated achievement of ¥9,300 million in ordinary
profit and ¥3,400 million in current net income. In celebration of
the 50th anniversary of our foundation on July 10, 2005, meanwhile,
we plan to distribute a commemorative midterm dividend of ¥1 per
share in addition to our usual midterm dividend of ¥2.5 and
year-end dividend of ¥2.5. We will be grateful if this annual
report enables you to deepen your understanding of our Bank and its
operations. We look forward to your continued support and patronage
of The Bank of Saga. July 2005
Hiroyasu Sashiyama, Chairman Yasuhiko Matsuo, President
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Disposal of Nonperforming Loans
Having identified disposal of our nonperforming loans as the
most pressing issue for management in fiscal 2004, and having
pursued this goal through establishment of a reserve for doubtful
accounts, we succeeded in paving the way toward their disposal. As
a result of this progress in disposing of nonperforming loans in
fiscal 2004, the ratio of the Bank's loan assets for which
disclosure is mandatory under the Financial Reconstruction Law, or
the ratio of nonperforming loans to total receivables, stood at
7.75% as of March 31, 2005, as compared with 9.17% as of March 31,
2004. When this ratio is considered after deduction of the reserve
for doubtful accounts, moreover, the ratio was 2.59% as of March
31, 2005, as compared with 3.31% a year earlier. This positions us
among financial institutions nationwide as one of the banks with a
notably low ratio of nonperforming loans after deduction of the
reserve for doubtful accounts. In our commitment to providing the
greatest support possible to local corporations in our capacity as
a regional bank, we also consider it necessary to pursue
nonperforming loan disposal as a two-pronged operation that
includes maintaining a sufficient reserve for doubtful accounts,
rather than writing off nonperforming loans hastily through such
activities as bulk sales.
(Billion yen, %)
March 31, 2005 March 31, 2004
Loan assets for which disclosure is mandatory under the
Financial Reconstruction Law (A)
96.8 117.1
Reserve for doubtful accounts (B) (Note) 64.4 74.8
Deduction (C) = (A) -(B) 32.3 42.3
Total receivables, including ordinary receivables (D) 1248.1
1277.0
(A) ÷ (D) x 100 7.75% 9.17%
(C) ÷ (D) x 100 2.59% 3.31%
(Note) The reserve for doubtful accounts is a general reserve
for doubtful accounts as opposed to an individual reserve for
doubtful accounts and claims/receivables requiring supervision.
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Management Soundness
Capital Ratio The capital ratio rose to 9.46% as of March 31,
2005, from 8.87% at the previous fiscal year-end. This ratio is
more than double the 4% capital adequacy ratio required of banks,
such as The Bank of Saga, whose business operations are limited to
Japan (banks to which domestic standards apply). According to the
international standards applied by the Bank for International
Settlements for banks operating internationally, our capital
adequacy ratio would be 11.00% as of March 31, 2005. Although the
ratio of deferred tax assets in our total capital accounted for
44.34% compared to Tier I (core capital) as of March 31, 2004, due
to our disposal of a large volume of nonperforming loans on a
tax-deductible basis, moreover, we reduced deferred tax assets
significantly to 28.95% as of March 31, 2005.
(Billion yen, %)
March 31, 2005 March 31, 2004
Basic item (A) (Tier I) 52.8 49.0
Complementary item (B) 30.7 30.8
Capital (A + B) 83.6 79.8
Risk weight-adjusted assets (C) 884.0 900.2
Capital ratio (A + B)/(C) 9.46% 8.87%
Deferred tax assets (balance sheet amount) 15.3 21.7
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Five Basic Policies
1. Enhancing profitability Ensuring our continued ability to
attract customers and to maintain ongoing development requires that
we further enhance our reputation as a soundly managed bank. We
have consequently taken up the challenge of securing accumulation
of net profits by boosting our profitability and increasing our net
assets. To this end, we are pursuing efforts to reinforce our sales
capabilities, including development of an “area sales structure”
and “loan-oriented branch strategy.” We also provide diversified
forms of support, including business matching, M&A and venture
finance, customers require for their corporate operations
today.
2. Assuring asset soundness Determined to provide the greatest
possible support for local corporations in our capacity as a
regional bank, we have centralized our efforts to support corporate
revival in the Corporate Support Group of the Loan Management
Department ll, while reserving a sufficient reserve for doubtful
accounts, rather than hastily disposing of nonperforming loans
through such means as bulk sales. Besides deploying such new
financial techniques as DES (debt equity swap), DDS (debt debt
swap) and corporate reconstruction funding as revitalization
support measures, we are making use of the Small and Medium Sized
Enterprises Revitalization Support Council of Saga Prefecture. In
these and other ways, we are continuing to provide positive support
for the management of our corporate customers and for regional
business revitalization.
3. Promoting efficiency We expanded the number of branches
employing our “area sales structure,” under which sales activities
treat the sales areas of multiple branches with shared or
overlapping business territories as a single sales area. We have
also begun eliminating unprofitable ATMs and reexamining our branch
functions in an effort to concentrate and reinforce our sales
capabilities and conduct efficient sales activities. We have
introduced a seal impression verification system and electronic
business form control system as well and taken other measures to
reduce back office work at the branches. We will continue to
examine and implement measures to enhance the efficiency of our
operations.
4. Reinforcing risk management Aware of the growing importance
of securing the trust of our customers and shareholders, we are
constantly reexamining our risk management techniques and
structures and, at the same time, taking steps to raise awareness
of the issues involved in risk management, including asset
soundness. Each individual executive officer and employee must
ascertain clearly before taking action, moreover, that the action
is free from problems concerning
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compliance with applicable laws or regulations to assure that
the Bank maintains a high standard of compliance. Since the
enforcement of the Personal Information Protection Law in April
2005, in particular, it is essential that we raise our awareness
and level of compliance with relevant laws and regulations. With
this in mind, we are adding effective new Bank-wide measures
concerning compliance to our current legal compliance
structures.
5. Developing human resources Our human resources development
efforts include both OJT and various internal and external
consultation training activities. In line with our plan to
reinforce our relationship banking functions, moreover, we are
seeking to upgrade our employees' corporate support and
revitalization support capabilities by conducting training in the
areas of judgment and business revitalization. As we celebrate the
first half-century of our foundation in 2005, moreover, we are
working to establish ourselves as a bank to whose name customers
append the suffix “san,” as in “Sagin-san” or “Saga Ginko-san.”Each
and every executive officer and employee accepts responsibility for
discerning the requirements for achieving this purpose and for
acting such as to ensure the Bank's popularity among customers and
to earn their trust, or to raise the Bank to an even higher level.
( “san” is a suffix that is appended to a name to express affinity
or affection, and “Sagin-san” and “Saga Ginko-san” are ways of
referring to The Bank of Saga with affinity or affection.)
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Measures with Respect to Corporate Governance
1. Structure for execution of operations and management
surveillance We are striving to deepen the deliberations of the
Board of Directors and other bodies and to accelerate their
decision-making to cope quickly and satisfactorily with rapid
changes in the management environment as well as to execute
operations appropriately in response to changes. The Board of
Directors meets once a month, as a rule, to determine matters
prescribed by the Commercial Law and to make important decisions
with respect to management. We have also clarified the position of
the executive officers and elaborated the content of their reports
to the Board of Directors as part of efforts to strengthen the
Board's functions. The Executive Committee comprising the President
and the managing directors meets twice a week to consider matters
concerning the Bank's regular operations at the request of the
Board of Directors for purposes of speedy decision-making. The
President, managing directors and managers of the departments
concerned also gather for monthly and bimonthly meetings of the
Management Conference and Compliance Committee, respectively,
bodies organized to augment corporate governance through
consultations and discussions concerning the promotion of
operations and Bank-wide risk management. The auditors attend
important management meetings, moreover, including meetings of the
Executive Committee and Board of Directors, thus enhancing our
“dynamic auditing function.”
2. Structure for compliance with laws and regulations The
Corporate Management and Coordination Department serves as a
supervisory body overseeing our systems for compliance with laws
and regulations (compliance). It takes every opportunity to create
a climate of compliance with laws and regulations based on our
Basic Compliance Objectives and Compliance Standards formulated by
the Board of Directors. We established the Compliance Committee
under the chairmanship of the President in December 2004, moreover,
for the purpose of establishing, propagating and institutionalizing
a structure for compliance with laws and regulations. To ensure
that every director and employee maintains a high standard with
respect to compliance with laws and regulations, furthermore, we
are careful to appoint directors and key employees (managers of
Headquarters departments and offices and of major branches) who
exhibit a strong commitment to compliance. We assure this by
employing a “360-degree evaluation” system under which employees
evaluate all directors and key employees with respect to their
attitude toward legal compliance. In the case of employees, we
place greater stress on targeted employees’ attitudes toward
compliance with laws and regulations in personnel evaluations. We
also intend to increase our emphasis on efforts to comply with laws
and regulations in evaluating the branches’ performances.
3. Personal information management With the full enforcement of
the Personal Information Protection Law in April
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2005, we place the highest priority, as advocated in our
Personal Information Protection Declaration (Privacy Policy), on
earning the trust of customers (business partners, shareholders and
regional residents), complying with the Personal Information
Protection Law and related legislation and protecting personal
information received from customers. Besides pursuing thorough
efforts to ensure appropriate handling of personal information by
every employee, we are implementing various organizational, human
and technological security measures to achieve these goals. These
measures include clarification of management responsibilities,
maintenance of rules, introduction of IC card-based building
entry/exit control systems, promotion of paperless documentation
and limiting use of recording media.
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Measures with Respect to Corporate Governance
4. Risk management The ongoing diversification and advancement
of financial operations is generating increasingly varied and
complex risks as well. As the accompanying risk management
structure diagram shows, we have not only grasped currently
existent risks but we have also identified risks with the potential
to occur. We are taking steps to prevent the occurrence of these
risks and to respond to them should they occur.
Risk Management Structure
5. Information disclosure Besides publishing an annual
disclosure brochure for purposes of enhancing our management
transparency, we issue a semiannual pamphlet (mini-disclosure
brochure) that provides easily understandable explanations of our
management. Our positive efforts toward information disclosure also
include IR activities (corporate information sessions) as well as a
new policy of announcing quarterly results instituted in the first
quarter of fiscal 2004.
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The Bank of Saga Ltd. Years ended March 31
Millions of yenThousands ofU.S. dollars
Consolidated 2005 2004 2003 2002 2005Total Assets ¥1,892,234
¥1,826,280 ¥1,916,281 ¥1,947,914 $17,620,214Deposits (including
NCDs)
1,732,135 1,676,920 1,748,690 1,768,844 16,129,399
Loans and Bills Discounted
1,225,203 1,248,278 1,278,917 1,267,393 11,408,916
Securities 464,852 431,407 436,693 440,750
4,328,638Shareholders' Equity 77,366 67,558 87,587 90,307
720,423
Total Income ¥42,895 ¥53,752 ¥49,599 ¥46,350 $399,438Total
Expenses 34,385 66,934 45,753 74,951 320,194
Income (Loss) before Income Taxes
8,509 (13,181) 3,845 (28,601) 79,243
Net Income (Loss) 4,855 (17,236) 1,324 (16,635) 45,214
Cash Dividends 855 855 856 864 7,967
U.S. dollar amounts are converted, solely for convenience, at
¥107.39=US$1, the prevailing rate on March 31, 2005.
Millions of yenThousands ofU.S. dollars
Non-Consolidated 2005
2004 2003 2002 2001 2005
Total Assets ¥1,891,204 ¥1,825,192 ¥1,915,209 ¥1,946,783
¥1,979,199 $17,610,618Deposits (including NCDs)
1,737,247 1,681,031 1,752,182 1,771,822 1,726,549 16,176,995
Loans and Bills Discounted
1,225,203 1,248,278 1,278,917 1,267,393 1,275,952 11,408,916
Securities 464,428 430,984 436,293 440,328 389,738
4,324,686Shareholders' Equity 76,787 67,040 87,047 89,837 112,184
715,032
Total Income ¥41,677 ¥52,664 ¥48,589 ¥45,172 ¥55,716
$388,097Total Expenses 33,678 65,975 45,121 73,982 53,572
313,607
Income (Loss) before Income Taxes
7,999 (13,310) 3,467 (28,810) 2,144 74,490
Net Income (Loss) 4,793 (17,216) 1,293 (16,656) 1,093 44,638
Cash Dividends 856 856 857 864 866 7,967
Yen U.S. dollars
Net Income
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(Loss) per Share ¥27.99 ¥(100.49) ¥7.54 ¥(96.39) ¥6.30
$0.261
Cash Dividends per Share
5.00 5.00 5.00 5.00 5.00 0.047
U.S. dollar amounts are converted, solely for convenience, at
¥107.39=US$1, the prevailing rate on March 31, 2005.
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Organization
As of June 30, 2005
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Directors and Corporate Auditors
As of June 30, 2005
Chairman Directors Hiroyasu Sashiyama Yoshikazu Hara
Mitsuki AsaoPresident Kaoru KatagiriYasuhiko Matsuo Hirohisa
Furuzono
Managing Directors Corporate Auditors Tsunenori Edayoshi Issei
Sagara (Standing)Masanori Uchida Ryouhei SoudaAkihiko Hayashi
Fukumaro FukuokaKiyosumi Nishi Naohisa HachiyaYoshihiro
Jinnouchi
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Bank Data
As of June 30, 2005
Head Office 7-20, Tojin 2-chome, Saga City, Saga 840-0813,
JapanPhone: (0952) 24-5111
Securities & International Administration Department 7-20,
Tojin 2-chome, Saga City, Saga 840-0813, JapanTelephone: (0952)
25-4571
Date of Incorporation July 1955
Capital ¥16 Billion
Number of Offices 112
Number of Employees 1,579
Network
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1
Consolidated Balance SheetsThe Bank of Saga Ltd. and its
consolidated subsidiaries
March 31, 2005 and 2004
Assets
Cash and Due from Banks
Call Loans and Bills Bought
Commercial Paper and Other Debt Purchased
Trading Assets
Money Held in Trust
Securities
Loans and Bills Discounted (Note 4)
Foreign Exchanges
Other Assets
Premises and Equipment
Deferred Tax Assets
Customers' Liabilities for Acceptances and Guarantees
Reserve for Possible Loan Losses
Total
Liabilities
Deposits
Call Money
Borrowed Money
Foreign Exchanges
Other Liabilities
Accrued Employees' Bonuses
Accrued Retirement Benefits
Deferred Tax Liabilities for Land Revaluation (Note 5)
Acceptances and Guarantees
Total
Minority Interests
Shareholders' Equity
Common Stock (Note 6)
Capital Surplus
Retained Earnings
Land Revaluation Reserve, Net of Tax (Note 5)
Unrealized Gains on Securities Available for Sale
Less: Treasury Stock, at Cost
Total
Total Liabilities, Minority Interests and Shareholders'
Equity
¥ 114,380
80,157
790
1,278
995
464,852
1,225,203
1,203
6,021
31,480
16,060
20,555
(70,743)
¥ 1,892,234
¥ 1,732,136
5,154
18,189
152
17,744
710
11,397
6,935
20,555
¥ 1,812,975
1,893
16,062
11,374
27,413
10,273
13,193
(951)
77,366
¥ 1,892,234
¥ 86,209
42,535
845
1,322
995
431,407
1,248,278
3,206
16,376
31,767
22,409
24,283
(83,357)
¥1,826,280
¥1,676,920
5,897
17,698
89
15,102
747
9,404
6,921
24,283
¥1,757,065
1,656
16,062
11,374
23,434
10,252
7,352
(919)
67,558
¥1,826,280
$ 1,065,092
746,411
7,357
11,906
9,269
4,328,638
11,408,916
11,208
56,068
293,139
149,550
191,407
(658,752)
$17,620,214
$16,129,399
48,000
169,377
1,422
165,235
6,612
106,128
64,578
191,407
$16,882,162
17,628
149,568
105,918
255,274
95,665
122,860
(8,864)
720,423
$17,620,214
Thousands ofU.S. dollars
Millions of yen (Note 2) (Note 2)2005 2004 2005
The accompanying notes are an integral part of these financial
statements.
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2
Consolidated Statements of Operations and Retained EarningsThe
Bank of Saga Ltd. and its consolidated subsidiaries
Years ended March 31, 2005 and 2004
Income
Interest Income:
Loans and Discounts
Securities
Others
Fees and Commissions
Other Operating Income
Other Income
Total Income
Expenses
Interest Expenses:
Deposits
Borrowings and Call Money
Others
Fees and Commissions
Other Operating Expenses
General and Administrative Expenses
Other Expenses
Total Expenses
Income (Loss) before Income Taxes
Income Taxes:
Current
Deferred
Minority Interests
Net Income (Loss)
Retained Earnings
Net Cash Provided by (Used in) Operating Activities
Net Income (Loss)
Reversal of Land Revaluation Reserve (Provision)
Appropriations:
Cash Dividends
Total Appropriation
Retained Earnings at End of year
Per Share of Common Stock:
Net Income (Loss)
¥ 26,947
5,984
167
7,062
587
2,146
42,895
690
444
335
2,431
523
24,317
5,642
34,385
8,509
979
2,424
250
¥ 4,855
¥ 23,434
4,855
(20)
855
855
¥ 27,413
¥ 28.35
¥ 28,728
5,880
178
6,855
1,834
10,274
53,752
816
373
259
2,448
981
25,478
36,576
66,934
(13,181)
422
3,544
87
(¥17,236)
¥ 41,418
(17,236)
108
855
855
¥ 23,434
(¥100.62)
$ 250,929
55,728
1,558
65,760
5,475
19,985
399,438
6,429
4,137
3,122
22,645
4,878
226,442
52,538
320,194
79,243
9,121
22,577
2,329
$ 45,214
218,221
45,214
(192)
7,967
7,967
$ 255,274
$ 0.264
Thousands ofU.S. dollars
Millions of yen (Note 2) (Note 2)2005 2004 2005
U.S. dollarsYen (Note 2)
The accompanying notes are an integral part of these financial
statements.
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3
Consolidated Statements of Cash FlowsThe Bank of Saga Ltd. and
its consolidated subsidiaries
Years ended March 31, 2005 and 2004
Cash Flows from Operating Activities:Income (Loss) before Income
Taxes and Minority InterestsDepreciationIncome on Equity
MethodIncrease in Reserve for Possible Loan Losses(Decrease)
Increase in Accrued Bonuses (Decrease) Increase in Accrued
Retirement BenefitsInterest on Loans and Discounts ReceivedInterest
on Deposits(Income) Loss on Securities Transaction(Income) Loss on
Money Trust(Income) Loss on Disposal of PropertiesNet (Increase)
Decrease in Trading AssetsNet (Increase) Decrease in Loans and
Bills DiscountedNet Increase (Decrease) in DepositsNet Increase
(Decrease) in Negotiable Certificates of DepositsNet (Increase)
Decrease in Due from Banks (other than The Bank of Japan)Net
(Increase) Decrease in Call LoansNet Increase (Decrease) in Call
Money and Bills SoldNet (Increase) Decrease in Foreign Exchange
AssetsNet Increase (Decrease) in Foreign Exchange
LiabilitiesRevenues from Fund OperationsExpenditures on Fund
ProcurementOthers
Sub-totalPayment of Income TaxesNet Cash Provided by (Used in)
Operating ActivitiesCash Flows from Investing Activities:Purchase
of SecuritiesSales of SecuritiesRedemption of SecuritiesIncrease in
Money Held in TrustDecrease in Money Held in TrustPurchase of
Premises and EquipmentSales of Premises and EquipmentNet Cash
Provided by (Used in) Investing ActivitiesCash Flows from Financing
Activities:Purchase of treasury stockSales of treasury stockPayment
of Cash DividendsPayment of Cash Dividends to Minority InterestsNet
Cash Used in Financing ActivitiesTranslation Adjustment of Cash and
Cash EquivalentsNet Increase (Decrease) in Cash and Cash
EquivalentsCash and Cash Equivalents at Beginning of the YearCash
and Cash Equivalents at End of the Year
¥ 8,509 752 (13)
(12,613)(37)
1,992 (33,099)
1,470 112
(0) 72 43
22,939 68,716 (13,500)(1,041)
(37,566)(252)
2,002 63
33,419 (1,419)1,342
41,890 0
41,890
(200,554)26,668
160,548 0 0
(675)145
(13,867)
(37)3
(854)(5)
(894)0
27,128 85,626
¥ 112,754
(¥13,181)837
(6)15,463
(128)(2,088)
(34,788)1,449 (5,481)
(4)334
9,830 27,946 (59,881)(11,739)
(189)20,188
2,636 1,170
7 35,224 (1,732)
496 (13,633)
(2,179)(15,813)
(222,988)85,449
144,354 0 4
(431)354
6,743
(29)0
(855)(5)
(890)(6)
(9,966)95,592
¥ 85,626
$ 79,243 7,006
(129)(117,459)
(349)18,552
(308,216)13,6891,043
(7)671408
213,609 639,875 (125,716)
(9,701)(349,815)
(2,348)18,650
590 311,197 (13,220)12,503
390,079 3
390,079
(1,867,533)248,333
1,495,006 0 0
(6,294)1,350
(129,132)
(347)29
(7,956)(52)
(8,327)1
252,620 797,337
$ 1,049,957
Thousands ofU.S. dollars
Millions of yen (Note 2) (Note 2)2005 2004 2005
The accompanying notes are an integral part of these financial
statements.
-
4
Notes to Consolidated Financial StatementsThe Bank of Saga Ltd.
and its consolidated subsidiaries
1. Consolidation PolicyThe accompanying consolidated financial
statements of The Bankof Saga Ltd. (the “Bank”) have been prepared
on the basis ofgenerally accepted principles in Japan and the
ConsolidatedFinancial Statements Regulations.
In the preparation of these financial statements, certain
itemson the domestically issued financial statements have
beenreclassified and rearranged, for the convenience of
readersoutside Japan.
The Bank had three majority-owned subsidiaries as of March31,
2005. The consolidated financial statements include theaccounts of
the Bank and these subsidiaries.
The investments of the Bank in all two affiliated companiesare
accounted for by the equity method.
2. Japanese Yen and U.S. Dollar AmountsYen amounts of less than
¥1 million have been disregarded.Accordingly, the sum of each
account may in fact not be equal tothe combined sum of the
individual items. All U.S. dollar amountsincluded herein are
presented solely for the convenience ofreaders, and are nothing
more than arithmetical computations.They are converted at the rate
of ¥107.39=US$1, the prevailingrate on the Tokyo foreign exchange
market on March 31, 2005.
3. Significant Accounting Policies(a) Financial InstrumentsThe
Bank and its consolidated subsidiaries apply the
AccountingStandards for Financial Instruments to valuation of
trading accountsecurities, securities and derivative transactions,
and hedgeaccounting.(b) Transactions for Trading
PurposesTransactions for “Trading Purposes” (purposes of seeking
tocapture gains arising from short-term changes in interest
rates,currency exchange rates or market prices of securities and
othermarket-related indices or from arbitrage between markets)
arevalued at market or fair value as of the balance sheet dates,
andincluded in “Trading Assets” on a trade-date basis. Profits
andlosses on trading transactions are included in other
operatingincome or expenses.(c) Securitiesi. In conformity with the
Accounting Standards for Financial
Instruments, securities are stated as follows:Held-to-maturity
debt securities are stated at amortized costusing the straight-line
method, cost being determined by themoving average method.
“Securities Available for Sale” defined by the standards are
stated at fair market value when having market price andare stated
at moving average cost or amortized cost whenhaving no market
price. Unrealized valuation gains or losses
on securities available for sale, net of applicable incometaxes,
are stated as a separate item in the consolidatedbalance sheets.
Cost of the securities sold, in principle, iscomputed by the moving
average method.
ii. In accordance with the Uniform Rules for Bank
Accounting,securities included in “Money Held in Trust,” which
aredesignated for investments in securities and separatelymanaged
from other beneficiaries are valued by the samemethod as in i.
above.
(d) Derivatives and Hedge AccountingUnder the Accounting
Standards for Financial Instruments,derivative transactions except
for trading purposes transactionsare stated at fair value.
Derivative transactions are executed and managed under
theinternal check system of the Bank in accordance with
theestablished policies.
The method of hedge accounting used by the Bank is a“macro
hedge,” in which the Bank comprehensively managesinterest rate
risks arising from various assets and liabilities withderivative
transactions as a whole.(e) DepreciationDepreciation of premises
and equipment of the Bank is calculatedusing the declining-balance
method except for the buildingsacquired after April 1, 1998 which
are depreciated using thestraight-line method. Main useful lives of
premises and equipmentare as follows:
Buildings 2 to 36 yearsEquipment 2 to 20 years
Premises and equipment held by the consolidated subsidiariesare
depreciated over the useful lives of the respective
assetsprincipally using the declining-balance method.
Software for internal use held by the Bank is accounted forbased
on the guidelines promulgated by the Japanese Institute ofCPAs.
During the years ended March 31, 2005 and 2004 nosoftware was
capitalized.
Depreciation of software for internal use held by
theconsolidated subsidiaries is calculated using the
straight-linemethod over the useful lives (principally 3 years).(f)
Foreign Currency TranslationThe financial statements of the Bank
and its consolidatedsubsidiaries are maintained in or translated
into Japanese yen.Foreign currency assets and liabilities are
translated into yen atthe prevailing rates on the Tokyo foreign
exchange market as ofthe balance sheet date of each fiscal year.(g)
Reserve for Possible Loan LossesThe Bank makes provision for
possible loan losses in accordancewith predetermined standards for
write-offs and reserves. In linewith the Guidelines for Governance
on Asset Self-Assessment ofFinancial Institutions and Audits on
Write-Offs and Reserves for
-
5
Possible Loan Losses (JICPA Bank Auditing Special
CommitteeReport No.4), the Bank has implemented a self-assessment
rule forthe credit quality of assets subject to disclosure under
the FinancialReconstruction Law, and has classified them into four
riskcategories: bankrupted, doubtful, substandard and normal.
The Bank provides a non-specific reserve for assets
classifiedunder “substandard” or “normal,” based on historical
defaultrates. For assets classified under “doubtful,” the Bank
provides aspecific reserve in an amount deemed necessary after
deductionof the estimated recoverable portion through disposition
ofcollateral or implementation of guarantees. For assets
classifiedunder “bankrupted,” the Bank provides a specific reserve
in anamount equivalent to the remaining portion of the assets
afterdeduction of the estimated recoverable amounts
throughdisposition of collateral or implementation of
guarantees.
The consolidated subsidiaries provide a non-specific reservein
an amount deemed necessary based on historical default ratesand a
specific reserve for loans to potentially bankrupt borrowersand
other specific loans in the amount deemed uncollectiblebased on
individual fair value assessment of collateral.(h) Accrued
Retirement BenefitsThe Bank and its major consolidated subsidiaries
have fundedpension plans in addition to lump-sum payment plans.
The Bank and its consolidated subsidiaries apply theAccounting
Standards for Post-employment Benefits. Under thestandards accrued
retirement benefits are provided to state thepost-employment
benefit obligations less the fair value of thepension assets. The
excess of benefit obligations over fair value ofthe pension assets
of the Bank amounted to ¥6,834 million,which was to be amortized
over 5 years.(i) Income TaxesCurrent taxes are accounted for on
accrual basis. Deferred taxassets are recorded based on the
temporary differences betweenthe financial statement and tax bases
of assets and liabilities.
Income taxes comprise corporation, inhabitants’ andenterprise
taxes, and the aggregate statutory income tax rate forcalculation
of deferred income tax assets and liabilities and anincome tax rate
only differ minimal as a percentage the yearended March 2005.
An aggregate income tax rate for calculation of deferredincome
tax assets and liabilities was not applicable due to adeficit for
the year ended March 2004.
(j) Statement of Cash FlowsThe balances of cash and due from
banks on the balance sheetas of March 31, 2005 and 2004 were
reconciled with cashand cash equivalents at end of year on the
statement of cashflows as follows:
Millions of yen2005 2004
Cash and Due from Banks ¥114,380 ¥ 86,209Deposits with Banks
(other than The Bank of Japan) (1,625) (583)Cash and Cash
Equivalents at
End of Year ¥112,754 ¥ 85,626
4. Loans and Bills DiscountedMillions of yen
2005 2004Bills Discounted ¥ 26,691 ¥ 29,822Loans on Notes
153,171 163,794Loans on Deeds 908,116 900,679Overdrafts 137,223
153,982
Total ¥ 1,225,203 ¥1,248,278
As of March 31, 2005 non-performing loans of the Bank,classified
in accordance with the Uniform Rules for BankAccounting, consisted
of loans in bankruptcy and loans past dueover six months, amounting
to ¥3,658 million and ¥80,973million, respectively.
In addition, loans past due over three months and
restructuredloans amounted zero and ¥10,604 million as of March
31,2005, respectively.
5. Land Revaluation ReserveIn accordance with the Law concerning
the Revaluation of Land,the Bank revalued land held for its
operations on March 31,1998. Net unrealized gain was stated in
shareholders’ equity netof applicable income taxes as “Land
Revaluation Reserve, Net ofTax,” amounting to ¥10,273 million as of
March 31, 2005.
6. Common StockAs of March 31, 2005, Common Stock of the Bank
consisted of173,359 thousand shares issued. The authorized number
ofshares was 499,142 thousand.
-
6
Certified Public Accountants’ Report
Certified Public AccountantsHibiya Kokusai Bldg.2-2-3,
Uchisaiwai-choChiyoda-ku, Tokyo 100-0011C.P.O. Box 1196, Tokyo
100-8641
Telephone +81(3)3503-1100Facsimile +81(3)3503-1197
To the Board of Directors of The Bank of Saga Ltd.
We have audited the consolidated financial statements, namely,
the consolidated balance sheets of
The Bank of Saga Ltd. and its consolidated subsidiaries as of
March 31, 2005 and 2004, and the
related consolidated statements of operations and retained
earnings and of cash flows for the years
then ended, all expressed in yen.
Our audit was made in accordance with generally accepted
auditing standards, procedures and
practices in Japan and all relevant auditing procedures as are
normally required ware carried out.
Based on our audit, we express the opinion that the
above-mentioned consolidated financial state-
ments present fairly the financial position of The Bank of Saga
Ltd. and its subsidiaries as of March
31, 2005 and 2004, and the results of their operations and cash
flows for the years then ended in
confor-mity with generally accepted accounting principles in
Japan applied on a consistent basis.
The accompanying consolidated financial statements expressed in
United States dollars have
been translated into dollars solely for the convenience of the
reader. We have recomputed the
translation and, in our opinion, the consolidated financial
statements expressed in yen have been
translated into dollars on the basis described in note 2 to the
consolidated financial statements.
Tokyo, Japan
June 30, 2005
Shin Nihon & Co.
See note 1 to the consolidated financial statements which
explains the basis of preparing the consoli-
dated financial statements of The Bank of Saga Ltd. and its
consolidated subsidiaries under Japanese
accounting principles and practices.
-
7
Non-Consolidated Balance SheetsThe Bank of Saga Ltd.
March 31, 2005 and 2004
Assets
Cash and Due from Banks
Bill Bought
Call Loans
Commercial Paper and Other Debt Purchased
Trading Assets
Money Held in Trust
Securities (Note 3)
Loans and Bills Discounted (Note 4)
Foreign Exchanges (Note 5)
Other Assets (Note 6)
Premises and Equipment (Note 7)
Deferred Tax Assets
Customers' Liabilities for Acceptances and Guarantees
Reserve for Possible Loan Losses
Total
Liabilities
Deposits (Note 8)
Call Money
Borrowed Money (Note 9)
Foreign Exchanges (Note 5)
Other Liabilities (Note 10)
Accrued Employees' Bonuses
Accrued Retirement Benefits
Deferred Tax Liabilities for Land Revaluation (Note 7)
Acceptances and Guarantees
Total
Shareholders' Equity
Common Stock (Note 11)
Capital Surplus
Legal Reserve (Note12)
Voluntary Reserve
Retained Earnings (Deficit) (Note 17)
Land Revaluation Reserve, Net of Tax (Note7)
Unrealized Gains on Securities Available for Sale
Less: Treasury Stock, at Cost
Total
Total Liabilities, Minority Interests and Shareholders'
Equity
¥ 114,379
28,600
51,557
790
1,278
995
464,428
1,225,203
1,203
4,684
31,326
15,314
20,550
(69,108)
¥ 1,891,204
¥ 1,737,247
5,154
18,189
152
14,229
671
11,285
6,935
20,550
¥ 1,814,416
16,062
11,374
14,926
6,926
4,979
10,273
13,188
(943)
76,787
¥ 1,891,204
¥ 86,209
–
42,535
845
1,322
995
430,984
1,248,278
3,206
15,035
31,624
21,736
24,278
(81,858)
¥1,825,192
¥1,681,031
5,897
17,698
89
12,228
710
9,296
6,921
24,278
¥1,758,151
16,062
11,374
14,926
23,926
(15,937)
10,252
7,346
(910)
67,040
¥1,825,192
$ 1,065,088
266,319
480,092
7,357
11,906
9,269
4,324,686
11,408,916
11,208
43,622
291,703
142,607
191,364
(643,525)
$17,610,618
$16,176,995
48,000
169,377
1,422
132,507
6,249
105,089
64,578
191,364
$16,895,585
149,568
105,918
138,995
64,494
46,364
95,665
122,810
(8,784)
715,032
$17,610,618
Thousands ofU.S. dollars
Millions of yen (Note 2) (Note 2)2005 2004 2005
The accompanying notes are an integral part of these financial
statements.
-
8
Non-Consolidated Statements of Operations and Retained
EarningsThe Bank of Saga Ltd.
Years ended March 31, 2005 and 2004
Income
Interest Income:
Loans and Discounts
Securities
Others
Fees and Commissions
Other Operating Income (Note 13)
Other Income (Note 14)
Total Income
Expenses
Interest Expenses:
Deposits
Borrowings and Call Money
Others
Fees and Commissions
Other Operating Expenses (Note 15)
General and Administrative Expenses
Other Expenses (Note 16)
Total Expenses
Income (Loss) before Income Taxes
Income Taxes:
Current
Deferred
Net Income (Loss)
Retained Earnings
Net Cash Provided by (Used in) Operating Activities
Net Income (Loss)
Reversal of Voluntary Reserve
Reversal of Land Revaluation Reserve (Provision)
Appropriations:
Transfer to Voluntary Reserve
Cash Dividends
Total Appropriation
Retained Earnings (Deficit) at End of year (Note 17)
Per Share of Common Stock:
Net Income (Loss)
Cash Dividends Applicable to the Year
¥ 26,947
5,982
167
6,500
568
1,512
41,677
691
444
335
2,822
523
24,051
4,808
33,678
7,999
713
2,491
¥ 4,793
¥ 1,062
4,793
–
(20)
0
856
856
¥ 4,979
¥ 27.99
5.00
¥ 28,728
5,877
178
6,396
1,820
9,662
52,664
817
373
259
2,843
981
25,194
35,504
65,975
(13,310)
256
3,649
(¥17,216)
¥ 2,029
(17,216)
–
108
1
856
857
(¥15,937)
(¥100.49)
5.00
$ 250,929
55,703
1,558
60,531
5,294
14,080
388,097
6,438
4,137
3,122
26,286
4,878
223,967
44,775
313,607
74,490
6,646
23,205
$ 44,638
$ 9,894
44,638
158,302
(192)
0
7,967
7,967
$ 0.261
0.047
Thousands ofU.S. dollars
Millions of yen (Note 2) (Note 2)2005 2004 2005
U.S. dollarsYen (Note 2)
The accompanying notes are an integral part of these financial
statements.
-
9
Notes to Non-ConsoLidated Financial StatementsThe Bank of Saga
Ltd.
1. Basis of PresentationThe accompanying non-consolidated
financial statements of TheBank of Saga Ltd. (the “Bank”) are
prepared in accordance withthe Japanese Commercial Code, Banking
Law, and in conformitywith generally accepted accounting principles
and, whereapplicable, with the accounting and reporting
guidelinesprescribed by banking regulatory authorities.
In the preparation of these financial statements, certain
itemson the domestically issued financial statements have
beenreclassified and rearranged, for the convenience of
readersoutside Japan.
Yen amounts of less than ¥1 million have been
disregarded.Accordingly, the sum of each account may in fact not be
equal tothe combined sum of the individual items. All U.S. dollar
amountsincluded herein are presented solely for the convenience
ofreaders, and are nothing more than arithmetical computations.They
are converted at the rate of ¥107.39=US$1, the prevailingrate on
the Tokyo foreign exchange market on March 31, 2005.
2. Significant Accounting Policies(a) Financial InstrumentsThe
Bank applies the Accounting Standards for FinancialInstruments to
valuation of trading account securities, securitiesand derivative
transactions, and hedge accounting.(b) Transactions for Trading
PurposesTransactions for “Trading Purposes” (purposes of seeking
tocapture gains arising from short-term changes in interest
rates,currency exchange rates or market prices of securities and
othermarket-related indices or from arbitrage between markets)
arevalued at market or fair value as of the balance sheet dates,
andincluded in “Trading Assets” on a trade-date basis. Profits
andlosses on trading transactions are included in other
operatingincome or expenses.(c) Securitiesi. In conformity with the
Accounting Standards for Financial
Instruments, securities are stated as follows:Held-to-maturity
debt securities are stated at amortized costusing the straight-line
method, cost being determined by themoving average method.
Investments in subsidiaries and affiliated companies arestated
at moving average cost.
“Securities Available for Sale” defined by the standardsare
stated at fair market value when having market price andare stated
at moving average cost or amortized cost whenhaving no market
price. Unrealized valuation gains or losseson securities available
for sale, net of applicable incometaxes, are stated as a separate
item in the non-consolidatedbalance sheets. Cost of the securities
sold, in principle, iscomputed by the moving average method.
ii. In accordance with the Uniform Rules for Bank
Accounting,securities included in “Money Held in Trust,” which
aredesignated for investments in securities and separatelymanaged
from other beneficiaries are valued by the samemethod as in i.
above.
(d) Derivatives and Hedge AccountingUnder the Accounting
Standards for Financial Instruments,derivative transactions except
for trading purposes transactionsare stated at fair value.
Derivative transactions are executed and managed under
theinternal check system of the Bank in accordance with
theestablished policies.
The method of hedge accounting used by the Bank is a“macro
hedge,” in which the Bank comprehensively managesinterest rate
risks arising from various assets and liabilities withderivative
transactions as a whole.(e) DepreciationDepreciation of premises
and equipment of the Bank is calculatedusing the declining-balance
method except for the buildingsacquired after April 1, 1998 which
are depreciated using thestraight-line method. Main useful lives of
premises and equipmentare as follows:
Buildings 2 to 36 yearsEquipment 2 to 20 years
Software for internal use held by the Bank is accounted forbased
on the guidelines promulgated by the Japanese Institute ofCPAs.
During the years ended March 31, 2005 and 2004 nosoftware was
capitalized.(f) Foreign Currency TranslationThe financial
statements of the Bank are maintained in ortranslated into Japanese
yen. Foreign currency assets andliabilities are translated into yen
at the prevailing rates on theTokyo foreign exchange market as of
the balance sheet date ofeach fiscal year.(g) Reserve for Possible
Loan LossesThe Bank makes provision for possible loan losses in
accordancewith predetermined standards for write-offs and reserves.
In linewith the Guidelines for Governance on Asset Self-Assessment
ofFinancial Institutions and Audits on Write-Offs and Reserves
forPossible Loan Losses (JICPA Bank Auditing Special
CommitteeReport No.4), the Bank has implemented a self-assessment
rule forthe credit quality of assets subject to disclosure under
the FinancialReconstruction Law and classified them into four risk
categories:bankrupted, doubtful, substandard and normal.
The Bank provides a non-specific reserve for assets
classifiedunder “substandard” and “normal,” based on historical
defaultrates. For assets classified under "doubtful," the Bank
provides aspecific reserve in an amount deemed necessary after
deductionof the estimated recoverable portion through disposition
of
-
10
collateral or implementation of guarantees. For assets
classifiedunder “bankrupted,” the Bank provides a specific reserve
in anamount equivalent to the remaining portion of the assets
afterdeduction of the estimated recoverable amounts
throughdisposition of collateral or implementation of
guarantees.(h) Accrued Retirement BenefitsThe Bank has a funded
pension plan in addition to a lump-sumpayment plan.
The Bank applies the Accounting Standards for Pos-employment
Benefits. Under the standards accrued retirementbenefits are
provided to state the post-employment benefitobligations less the
fair value of the pension assets.(i) Income TaxesCurrent taxes are
accounted for on accrual basis. Deferred taxassets are recorded
based on the temporary differences betweenthe financial statement
and tax bases of assets and liabilities.Income taxes comprise
corporation, inhabitants’ and enterprisetaxes, and the aggregate
statutory income tax rate for calculationof deferred income tax
assets and liabilities and an income taxrate only differ minimal as
a percentage the year ended March2005.
An aggregate income tax rate for calculation of deferredincome
tax assets and liabilities was not applicable due to adeficit for
the year ended March 2004.
3. SecuritiesMillions of yen
2005 2004Government Bonds ¥ 194,418 ¥ 191,042Municipal Bonds
149,152 136,315Corporate Bonds and Debentures 47,896 46,723Stocks
44,678 38,351Other Securities 28,282 18,551Total ¥ 464,428 ¥
430,984
4. Loans and Bills DiscountedMillions of yen
2005 2004Bills Discounted ¥ 26,691 ¥ 29,822Loans on Notes
153,171 163,794Loans on Deeds 908,116 900,679Overdrafts 137,223
153,982Total ¥ 1,225,203 ¥1,248,278
As of March 31, 2005 non-performing loans of the Bank,classified
in accordance with the Uniform Rules for BankAccounting, consisted
of loans in bankruptcy and loans past dueover six months, amounting
to ¥2,504 million and ¥80,973million, respectively.
In addition, loans past due over three months and
restructuredloans amounted zero and ¥10,604 million as of March
31,2005, respectively.
5. Foreign Exchange (Assets and Liabilities)Millions of yen
2005 2004(Assets)Due from Foreign Correspondents ¥ 540 ¥
450Foreign Bills of Exchange Bought 125 213Foreign Bills of
Exchange Receivable 537 2,542Total ¥ 1,203 ¥ 3,206
Millions of yen2005 2004
(Liabilities)Foreign Exchange Bills Sold ¥ 75 ¥ 33Foreign Bills
Payable 77 56Total ¥ 152 ¥ 89
6. Other AssetsMillions of yen
2005 2004Prepaid Expenses ¥ 25 ¥ 26Accrued Income 1,958
2,599Derivative Assets 253 404Deferred Hedge Loss 359 836Others
2,087 11,169Total ¥ 4,684 ¥ 15,035
7. Premises and Equipment, and Land Revaluation ReserveMillions
of yen
2005 2004Land, Buildings and Equipment ¥ 53,446 ¥
53,247Guarantees and Premiums 1,286 1,361Total 54,733
54,608Accumulated Depreciation 23,407 22,984Net Premises and
Equipment ¥ 31,326 ¥ 31,624
In accordance with the Law concerning the Revaluation of Landthe
Bank revalued land held for its operations on March 31,1998.
Net unrealized gain was stated in shareholders’ equity net
ofapplicable income taxes as “Land Revaluation Reserve, Net ofTax,”
amounting to ¥10,273 million as of March 31, 2005.
-
11
8. DepositsMillions of yen
2005 2004Current Deposits ¥ 64,475 ¥ 55,612Ordinary Deposits
751,768 683,370Savings Deposits 8,530 9,503Deposits at Notice 3,538
3,779Time Deposits 839,288 846,720Installment Savings 12,266
13,358Other Deposits 28,692 26,498Negotiable Certificates
of Deposit 28,687 42,188Total ¥ 1,737,247 ¥1,681,031
9. Borrowed MoneyBorrowed money consisted of loans from other
banks, including asubordinated loan in the amount of ¥17,500
million as of March31, 2005.
10. Other LiabilitiesMillions of yen
2005 2004Domestic Exchange Settlement
Account Cr. ¥ 104 ¥ 142Income Taxes Payable 311 –Accrued
Expenses 833 801Unearned Income 1,181 1,181Provisions for Benefits
2 3Derivative Liabilities 809 832Others 10,987 9,266Total ¥ 14,229
¥ 12,228
11. Common StockAs of March 31, 2005, Common Stock of the Bank
consisted of173,359 thousand shares issued. The authorized number
ofshares was 499,142 thousand.
12. Legal ReserveThe Banking Law provides that at least 20% of
cash dividendsand bonuses to directors and statutory auditors must
beappropriated as a legal reserve until total of such reserve
andcapital surplus equals the amount of the Bank’s paid-up
capital.Legal Reserve is, in principle, not available for dividends
but maybe used to reduce a deficit by resolution of shareholders or
maybe capitalized by resolution of the Board of Directors.
13. Other Operating IncomeMillions of yen
2005 2004Gain on Foreign Exchange Transactions ¥ 169 ¥ 167Gain
on Trading Purpose Transactions 320 321Gain on Sales of Bonds 78
1,331Gain on Derivative Instruments – –Total ¥ 568 ¥ 1,820
14. Other IncomeMillions of yen
2005 2004Gain on Sales of Stocks andOther Securities ¥ 38 ¥
5,049
Gain on Money Held in Trust 0 4Gain on Return of the
SubstitutionalPortion of Pension Insurance – 3,583
Others 1,470 1,025Total ¥ 1,509 ¥ 9,662
15. Other Operating ExpensesMillions of yen
2005 2004Losses on Sales of Bonds ¥ 78 ¥ 531Loss on Devaluation
of Bonds 36 –Losses on Derivative Instruments 409 450Total ¥ 523 ¥
981
16. Other ExpensesMillions of yen
2005 2004Provision for Reserve for PossibleLoan Losses ¥ 2,766 ¥
31,876Written-off Loans 31 36Losses on Sales of Stocks and Other
Securities 5 136Losses on Devaluation of Stocksand Other Securities
109 230Loss on Adopting Post-Employment Accounting 976 976Others
919 2,248Total ¥ 4,808 ¥ 35,504
17. Subsequent EventThe following proposal of Appropriation of
Profit was approvedat the shareholders’ meeting held on June 29,
2005.
Millions of yenUnappropriated Retained Earnings at End of Year ¥
4,979Profit Appropriated as Follows: Cash Dividends 428Voluntary
Reserves 3,000Balance of Retained Earnings Carried Forward ¥
1,551
-
12
Certified Public Accountants’ Report
Certified Public AccountantsHibiya Kokusai Bldg.2-2-3,
Uchisaiwai-choChiyoda-ku, Tokyo 100-0011C.P.O. Box 1196, Tokyo
100-8641
Telephone +81(3)3503-1100Facsimile +81(3)3503-1197
To the Board of Directors of The Bank of Saga Ltd.
We have audited the non-consolidated financial statements,
namely, the non-consolidated balance
sheets of The Bank of Saga Ltd. as of March 31, 2005 and 2004,
and the related non-consolidated
statements of operations and retained earnings for the years
then ended, all expressed in yen.
Our audit was made in accordance with generally accepted
auditing standards, procedures and
practices in Japan and all relevant auditing procedures as are
normally required ware carried out.
Based on our audit, we express the opinion that the
above-mentioned non-consolidated financial
statements present fairly the financial position of The Bank of
Saga Ltd. as of March 31, 2005 and
2004, and the results of its operations for the years then ended
in conformity with generally accepted
accounting principles in Japan applied on a consistent
basis.
The accompanying non-consolidated financial statements expressed
in United States dollars have
been translated into dollars solely for the convenience of the
reader. We have recomputed the
transla-tion and, in our opinion, the non-consolidated financial
statements expressed in yen have
been trans-lated into dollars on the basis described in note 1
to the non-consolidated financial
statements.
Tokyo, Japan
June 30, 2005
Shin Nihon & Co.
See note 1 to the non-consolidated financial statements which
explains the basis of preparing the
non-consolidated financial statements of The Bank of Saga Ltd.
under Japanese accounting principles
and practices.