The Challenge of Being The Trust Bank

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1 Special Feature The Challenge of Being The Trust Bank A Trust Bank Group with Comprehensive Capabilities and Expertise The Group will continue to focus its efforts on its retail and global businesses. In this special feature, we introduce our private banking strategy for the retail business and our global strategy. Focusing on Key es We provide business owner clients with total solutions for their needs related to business management and personal assets by leveraging the Group s banking, trust and real estate functions. Strengthening Private Banking centered on corporate and individual businesses through collaboration by the Retail Financial Services, Wholesale Financial Services and Real Estate Accelerating the changeover to a business model that offers distinctive added value The Group is accelerating its global strategy through area strategies for Europe, the Americas, and Asia, a cooperation strategy with local banks in the countries where the Group is expanding, and a global investment solutions business strategy that leverages the Group s experience as a specialized trust bank. Enhancing our unique service offerings through the combination of the area strategies, cooperation strategy and global investment solutions business strategy Responding on a global basis to the diverse needs of Japanese and non-japanese companies as well as investors in Japan and overseas 13

2 : Private Banking Strategy With a trust-model private banking strategy, we leverage our banking, trust, and real estate functions to provide total solutions to challenges facing our clients that relate to asset management, administration, and inheritance. In particular, we actively support business owner clients in both business management and personal assets with a one-stop, tailor-made approach. Image of Total Solutions for Owner Clients Sumitomo Mitsui Trust Bank (SMTB) Owner Clients Banking Personal Assets Asset Management Asset Administration Trusts Real Estate Providing total solutions Management Asset Inheritance Total Corporate Transactions Financing, pensions, stock transfer agency services, real estate, asset management, asset securitization arrangements, foreign exchange transactions, syndicated loan arrangements, employee welfare programs, etc. Total Corporate Transactions We provide a wide range of services that combine our banking, trust, and real estate functions to cater to the diverse needs of our clients for growth and expansion of the corporate value of their companies and the value of their assets. 14

3 Financial Consultants Professionals in Asset Management, Administration and Inheritance We have solutions that only a trust bank can offer through its various functions. SMTB has professional financial consultants who satisfy clients needs regarding the management, administration and inheritance of assets. owner clients need to deal with various challenges in terms of both business management and personal assets in line with where their businesses are in their growth cycle. Asset Management Asset Administration Asset Inheritance In light of the dizzying transformations in the environment surrounding the assets of our business owner clients, including changes in economic conditions and tax reforms, we make use of expertise that is based on many years of experience to carefully untangle complex problems one by one and to propose effective solutions. We engage in consulting that benefits our clients in terms of the smooth succession of both business management and personal assets. Consultations on will writing succession consulting Kazuo Kitazawa Financial Consultant Private Banking Department With our complete lineup of products, we offer tailor-made asset management services adapted to the needs of individual clients. Investment trusts Discretionary investment management products (wrap accounts) Insurance We support our clients by drawing on the expertise unique to a trust bank to help them with the purchase, sale and effective utilization of real estate as well as stock sale trusts and other matters. Consulting on effective land utilization Real estate brokerage Stock sale trusts Tuition fund endowment trusts 15

4 : Global Strategy The Group is accelerating its global strategy through a strategic marshalling of its resources and funds. In order to respond on a global basis to the diverse needs of Japanese and non-japanese companies as well as domestic and overseas investors, we are striving to enhance services for clients through partnerships and cooperation with leading financial institutions in Europe and the United States and select local financial institutions and other bodies in emerging nations, in addition to strengthening our own unique services. Area Strategies Europe Setting up investment funds in cooperation with European financial institutions, and purchasing prime assets Enhancing European and U.S. stock management capabilities through investment in leading local asset management companies Acquiring asset administration companies as a way of expanding global asset administration operations The Americas Enhancing investment and loan products and services for North American companies Setting up investment funds in cooperation with North American financial institutions, and purchasing prime assets Supporting investment in North America-related credit products for domestic investors Expanding the trust business in China 16 Asia Providing asset management services and brokerage services for real estate within Japan to local investors in Taiwan and other areas Providing financial services (loans in local currency, etc.) for Japanese companies expanding overseas through partnerships with leading local banks

5 Cooperation Strategy Partnerships with Local Banks In order to successfully expand overseas, it is essential to work with foreign banks that are well acquainted with local communities. As we focus on countries and regions where a lot of our clients are expanding, we view local banks as strategic partners. We complement each other in terms of business bases, functions, and products, enabling us to provide our clients with a broad range of services Cooperation on loan arrangements and other matters Through cooperation with foreign banks, we can leverage their relationships with local businesses to promote the arrangement of loans and the establishment of investment funds. Provision of financial services to Japanese companies expanding overseas Utilizing the strong branch networks, information networks and product lineups of local banks, especially in rapidly growing emerging nations, we provide financial services for Japanese companies expanding overseas. Provision of investment products With the goal of enhancing services to clients, we provide asset management products for stocks, investment trusts, real estate, etc. to clients both in Japan and overseas. Global Investment Solutions Strategy We Can Differentiate Ourselves as a Specialized Trust Bank SMTB will make full use of the experience it has amassed as a specialized trust bank and the unique expertise it has built up through collaboration across our businesses to provide optimal asset management products tailored to the needs of financial institutions and investors in Japan and overseas. Wholesale Financial Services Marketing/consulting Retail Financial Services Collaboration among es Product development/structuring Sales/business promotion Utilization in marketing/consulting Global Markets Fiduciary Services Administration/observation/monitoring Real Estate 17

6 1 NISA (Japanese version of ISA) Initiatives N ISA (Japanese version of Individual Savings Account (ISA)) will commence in January 2014, following the elimination* of preferential taxation for securities investments. The system will be introduced for the purpose of supporting mid-to long-term asset formation of individuals. Dividends derived from up to 1 million per year of new investments in listed shares and stock investment trusts, and capital gains (gains due to sale at a higher price) arising from such investments will be tax-free. The system is based on the U.K. s ISA, a widely used asset-formation scheme, and is therefore referred to as NISA (Nippon Individual Savings Account). SMTB is also engaged in efforts to promote and advance NISA. * Currently, a reduced tax rate of 10% (preferential taxation for securities investments) is applied to dividends and capital gains from investments in listed shares and publicly offered stock investment trusts. This reduced tax rate will come to an end as of December 31, 2013, when the tax rate will revert to 20% (not including the Special Reconstruction Income Tax). Key Points about the System Applies to capital gains and dividend income from stock investment trusts, listed shares, etc., in tax-free accounts Limit of tax-free investment: 1 million per year Tax-free period: 5 years Maximum total amount of tax-free investment: 5 million Available to all residents in Japan aged 20 years and over Overview of the System 1st year million Maximum total amount: 5 million Tax-free period: 5 years At the conclusion of a tax-free period, a maximum of 1 million can be treated as the tax-free investment for the following year without being sold. 2nd year 1 million 3rd year 1 million 4th year 1 million The system will continue for a 10-year period from 2014 to th year 1 million 6th year 1 million 10th year 1 million 18

7 2 New Branches in Meguro, Shinyurigaoka and Ichikawa MTB plans to open the Meguro Branch on the starting point as we continue with our efforts to October 11, 2013, the Shinyurigaoka Branch expand our branch network in order to bring great- on November 1, 2013, and the Ichikawa Branch on er convenience to our clients. November 28, These are the first new branches to be opened in Japan since SMTB s establishment on April 1, Meguro Branch Ichikawa Branch S These three branches will offer services specializing in consultations for individual clients on areas including asset management, inheritance, real estate and loans. We seek to create a relaxed atmounhurried consultations with clients. The opening of these new branches will serve as Received Approval to Open Branch in Hong Kong S MTB received approval in May 2013 to open pansion in order to provide Japanese companies a branch in Hong Kong, helping us expand and other local clients with the unique financial ser- our business overseas in rapidly growing Asia. 3 sphere in our branches where we can have Shinyurigaoka Branch vices of a trust bank. This is the first new branch to be opened overseas since the establishment of SMTB. SMTB s network in Asia will consist of nine bases, including three branches (Singapore, Shanghai and Hong Kong), one local subsidiary (Hong Kong), and five representative offices (Jakarta, Beijing (bank), Beijing (securities), Seoul and Bangkok). SMTB, along with our local subsidiary in Hong Kong that handles investment consulting and in- vestment advisory services, will pursue business ex- 19

8 4 Offering Products and Services that Leverage Our Trust Functions SMTB has begun offering the Tuition Fund Endowment Trust (also referred to as Thinking of Our Grandchildren ) and the Family Consideration Trust (Lump-sum type/annuity type). By leveraging our trust functions, we give shape to our clients thoughts and consideration and deliver these to their families and grandchildren. Tuition Fund Endowment Trust (also referred to as Thinking of Our Grandchildren ) he enactment of a gift tax exemption on T lump-sum gifts for education* makes it possible to give tax-free, lump-sum gifts for educational costs such as tuition to grandchildren or others who are under the age of 30. In the cases that lump-sum gifts to pay for education are made to grandchildren or others through this product, the gift tax is exempted on amounts How it works <Donors> Great grandparents, grandparents, parents, etc. (Entrusters) SMTB (Trustee) Family Consideration Trust (Lump-sum type/annuity type) unds are deposited as cash in a trust F with a contract clause covering the principal against losses. Should anything occur to the client (donor), the pre-designated beneficiary may obtain necessary funds via some simple procedures. The funds may be collected in two ways: the lump-sum type and the annuity type, where the up to 15 million as a tax incentive (applications will be accepted through December 25, 2015). Funds deposited into the trust will be managed by SMTB as education funds that will enable the giver s grandchildren to receive a full education in the future. * This tax exemption is a new measure under the fiscal 2013 tax reforms. It is applied to education funds including admission fees and tuition paid to schools and fees of up to 5 million paid to institutions other than regular schools such as cram schools and for lessons. Educational institutions <Donees> including regular schools Children, grandchildren, and cram schools great grandchildren, etc. (Beneficiaries) beneficiary receives regular payments. Among the sentiments clients share with us: I would like to set aside (some money) so my family won t be short of immediate funds or funeral expenses and I want to make sure my family receives living expenses on a regular basis. We give shape to this kind of consideration that clients have toward their families. How it works <Lump-sum type> <Annuity type> Application [Lump-sum type] For immediate funds or funeral expenses Funds deposited as cash in trust. (Principal guaranteed) Inheritance takes effect [Lump-sum-type] d Beneficiary of trust assets may receive trust money in a lump sum. Application [Annuity type] For monthly living expenses Funds deposited as cash in trust. (principal guarantee) Inheritance takes effect [Annuity type] [Annuity type] [Annuity type] Beneficiary of trust assets may receive trust money on a regular basis. 20