To Our Shareholders and Customers — The Dawn of a New Era — Review of Fiscal 1999 For the Japanese financial sector, fiscal 1999 During fiscal 1999, we strengthened our man- marked the start of a totally new era in the his- agement infrastructure and corporate structure tory of finance in Japan. by improving business performance, restructur- In August 1999, The Fuji Bank, Limited, ing operations, strengthening risk management The Dai-Ichi Kangyo Bank, Limited, and The and managing consolidated business activities Industrial Bank of Japan, Limited, reached full under a stronger group strategy. agreement to consolidate their operations into a comprehensive financial services group to be • Improving Business Performance called the Mizuho Financial Group. In the fol- We have identified the domestic corporate and lowing six months after the announcement, retail markets as our priority business areas. several other major Japanese financial institu- Our goals in these markets are to enhance our tions announced mergers and consolidations of products and services to meet the wide-ranging one form or another. needs of our customers, and to improve cus- At the same time, conditions in the financial tomer convenience by using information tech- sector changed dramatically as foreign-owned nology to diversify our service channels. financial institutions began in earnest to With respect to enhancing products and expand their presence in Japan, companies services, we focused on services provided to from other sectors started to move into the members of the Fuji First Club, a membership To Our Shareholders and Customers To financial business, and a number of Internet- reward program that offers special benefits to based strategic alliances were formed across dif- member customers, and on our product lineup ferent sectors and industries. We believe that in the strategic area of housing loans. We also our ability to anticipate and adapt to change, made further enhancements to marketing sys- and to do so with speed, is the key to succeed in tems for asset management services. In addi- this business environment. tion, our sales organization and loan products In keeping with this, in fiscal 1999, we con- were expanded to meet the changing financial tinued to work at top speed toward the achieve- needs of our customers especially focusing on ment of our challenging management goal of small and medium-sized enterprises. becoming a leading bank in the 21st century. One key focus of our efforts to improve cus- The following sections summarize the specific tomer convenience through the diversification policies implemented in fiscal 1999 and the key of our service channels was the enhancement issues we face in fiscal 2000. of Internet banking services provided through the Fuji Cyber Bank. We also introduced the Fuji Mobile Banking service based on mobile 2 telephones connected to NTT DoCoMo’s Division and the Internal Audit Division as “i-mode” system. Another enhancement was part of a major enhancement of our asset the launch of the Fuji Everyday Bank, which assessment system and the auditing system for allows customers to access banking services on group companies and other organizations. We weekends and public holidays through fully further strengthened the compliance system in functioning in-store branches. We also began the head office, domestic and overseas To Our Shareholders and Customers To full-scale development of debit card services. branches, and group companies. • Restructuring Operations • Managing Consolidated Business Activities We exceeded our restructuring and cost cutting under Stronger Group Strategy targets through increased efforts in such areas We worked to strengthen our consolidated busi- as branch rationalization and the reduction of ness management to enhance our ability to pro- our payroll, including board members and exec- vide customers with the best possible services utives. We improved the efficiency of our based on our total group resources. We brought branch network by closing and amalgamating affiliated companies into our business groups manned branches in Japan and overseas, while and strengthened cooperation among the taking care to maintain customer convenience. various business units. At the same time, we We reduced our work force by approximately continued to improve the management and 400 people and worked to reduce expenses evaluation of group performance on to a con- while maintaining a sufficient level of informa- solidated footing and created the position of tion technology (IT) investment. Chief Financial Officer (CFO). As part of our efforts to bolster group strategy, we fostered • Strengthening Risk Management closer cooperation between The Yasuda Trust Because we consider the development of strong and Banking Co., Ltd. (YTB) and The Dai-Ichi risk management an essential aspect of the Kangyo Fuji Trust and Banking Co., Ltd. The banking business, we further reinforced our former became a consolidated subsidiary in risk management system. At the same time, we March 1999, and the latter took over YTB’s established the Executive Committee and spe- asset management and administration opera- cialist committees to deal with particular types tions, including pension trust, custody and of risk, including credit and market risk. To stock transfer agency services, on October 1, provide overall management across the entire 1999. Fuji Securities Co., Ltd. was recapital- spectrum of risk, we established the position ized in preparation for a full-scale involvement of Chief Risk Officer (CRO). In addition, we in the equity business. We fully underwrote its created the Credit Assessment and Audit ¥30 billion rights issue. 3 (Formation of the Mizuho Financial Group) and functional expertise in various business In August 1999, Fuji Bank, Dai-Ichi Kangyo areas, and integrating and building on its vari- Bank and Industrial Bank of Japan reached ous strengths. Its activities as a provider of agreement on forming the Mizuho Financial financial services will be based on a total com- Group. mitment to putting the customer first, and on Japan’s financial institutions are entering a recognition of the importance of “heart to new era with the globalization of the economy heart” relationship with customers and busi- and the powerful impact of “Big Bang” finan- ness partners. cial reforms, as well as environmental changes In preparation for establishing a holding that include dramatic advances in financial and company in September 2000, the three banks information technology. In order to be success- are developing new, common products and ful in the face of escalating competition in an services, including the following: increasingly borderless world and establish • Introduction of the “Spark Card,” which themselves as major international players, integrates cash cards and credit cards, was launched in March 2000 by Fuji Bank and Japanese financial institutions will need to Dai-Ichi Kangyo Bank. improve themselves in two areas. First, • In April, the three banks made their cash dis- enhance their ability to respond quickly and penser and ATM networks available to each appropriately to the increasingly sophisticated other’s customers so customers would not be financial needs of their customers. Second, charged interbank transaction fees. enhance creditworthiness supported by solid • In May, the three banks established the financial strength. In the 21st century, a pow- Mizuho Venture Fund, the largest of its type in Japan. erful leader of the Japanese financial services • Plans were announced in May for the devel- industry is needed that will serve as an anchor opment of the “em-town” business, under for the stabilized financial system, contributing which the three banks will jointly develop to the development of the economy and the new Internet businesses that transcend tradi- enhancement of the international competitive- tional business format boundaries with the participation of more than 60 leading compa- ness of Japanese industry. To Our Shareholders and Customers To nies in Japan. It was with this view of the financial envi- • In May, the three banks, together with Itochu ronment as a backdrop that Fuji Bank, Dai-Ichi Corporation and Marubeni Corporation, Kangyo Bank and Industrial Bank of Japan announced the establishment of a new com- decided to form the Mizuho Financial Group, pany to provide trading-related business-to- business e-commerce services. an integrated financial services group with the • In May, we announced a decision to create a aim of becoming a mainstay of the Japanese real estate fund jointly with Mitsui Fudosan financial system, and to earn the full confi- Co., Ltd. dence of the Japanese public. • Kankaku Securities Co., Ltd. announced in The Mizuho Financial Group intends to May that it would change its name to The become a leading Japanese player in global Mizuho Investors Securities Co., Ltd. in financial markets and to establish itself as one October this year, and plans to develop its business as a retail securities company assum- of the top five financial groups in the world. It ing a role of developing the middle/retail busi- will achieve this goal by improving its business ness of the Mizuho Financial Group. efficiency, taking full advantage of its sectoral 4 The three banks will continue to promote We are committed to continuing our efforts to numerous joint projects designed to realize as optimize our business performance. rapidly as possible the benefits of the formation As in the previous fiscal year, the annual of the Mizuho Financial Group. dividend for common shares was set at ¥7 per share. The annual dividend for preferred (Financial Results) shares was maintained at the level set previ- To Our Shareholders and Customers To In fiscal 1999, Core Net Business Profits, the ously by the Board of Directors according to the amount after subtracting Net Gains Related to various types of preferred shares issued. Bonds from Net Business Profits, increased by ¥24.6 billion to ¥251.7 billion, although Net Issues for Fiscal 2000 Business Profits (before Provision of General The environment in which the financial indus- Reserve for Possible Loan Losses) amounted to try operates is changing rapidly.