Founding Prospectuses

As wealth accumulation grows along with the development of the national economy, social conditions have become more complex with a highly diverse range of industries. It is by no means an easy task to address these circumstances and successfully achieve the goal of generating profit while safeguarding and protecting one’s assets. If one is unfamiliar with the economic situation, lacks the time to perform dedicated research, or has not laid the necessary legal groundwork, they may be exposed to various risks as a result of flawed investment methods, the pursuit of problematic investment objectives, or entrusting the administration of their assets to the wrong person. There have been many cases of investors not only failing to receive the expected profit but even losing their principal, incurring unforeseen losses, and eventually becoming disappointed. Therefore, in order to safeguard and protect the assets of individuals and organizations, as well as to achieve the objective of generating profit, the need has arisen for a credit institution (i.e., trust company) capable of acting as an asset management advisor, a trustee for asset management and disposal, and a proxy for related receipts and payments, to fulfill these entrusted responsibilities in the safest, most effective, and organized manner, both legally and financially, while taking into account the circumstances specific to each client.

Major trust companies have thrived in the developed countries of Europe and the United States early on, and it is no coincidence that the United States, in particular, has made tremendous progress in the trust business. This is a result of meeting the needs of society in line with the trend of economic evolution, and the need for such trusts is being felt more and more keenly as economic frameworks become increasingly complex and wealth accumulation grows. It cannot be overstated how asset management can compensate for individual deficiencies while simultaneously contributing to the social economy. While there has been a remarkable rise of trust companies in Japan in recent years, it is regrettable that these trust companies have yet to demonstrate a proven track record, partly because of the lack of a legal framework for trusts and partly because of the imperfect organization and management of these companies. Fortunately, a new law on trusts was enacted last year and came into force on January 1 of this year, which has allowed for the management of trust companies on the basis of a new legal foundation. This has ushered in a new era for trust businesses.

The existence of banks as financial institutions that serve as the source of dynamic funds for promoting commercial activities, coupled with the existence of trust companies as institutions for the management of society’s static assets and profit generation, is an inevitable product of a rapidly advancing economic society. The two differ in the scope and function of their business operations, as well as in the duration of fund management. Banks and trust companies should avoid competition with each other and engage in mutual cooperation as they are both indispensable for supporting a country’s economic organization and the undisrupted flow of its capital, and they should fulfill their respective unique functions as two major credit institutions for both industry and finance. Trust companies must ensure that they build public confidence and a complete organization to implement this new law properly, repay the public for its entrusted assets through the company’s operating activities, and meet the public’s needs adequately. In view of the reasons outlined above and the needs of the present era, we hereby establish this trust company and pledge to contribute to the economic society of Japan.

December 1923

The trust system, which first emerged in ancient Rome and expanded in medieval Britain, was introduced to the United States in recent years. Drawing on the country’s natural resources and unique national conditions (specifically, the development of the United States from a former British colony and the need to raise funds for its westward expansion), the system made remarkable progress as a business and led to the rise of trust businesses and trust companies. The trust system, which has distant origins and an extensive history, was recently brought into Japan in response to the needs of the times, leading to the enactment of the Trust Act and the Trust Business Act in 1922 and ushering in a new era for Japan’s asset system. Our plan is to establish the Sumitomo Trust Co., Ltd. in Osaka City and to manage a trust business on the basis of these laws. Our sole goal in establishing this trust company is to serve the nation and society and to contribute to the national economy. The following is an overview of our goal, and we would like to appeal to various like-minded parties to support us on this front.

Let us begin by explaining the basic concept of a trust. While it is natural for a person to manage their own assets to generate profit, entrusting this work to others will generally allow the person to achieve this goal by utilizing systems (stipulated in the Civil Code) such as agencies and depositories. However, there are cases in which entrusting this work to others goes beyond agencies and depositories and requires changing the asset holder’s name to the name of that person (to whom the asset is entrusted). For example, real estate held by an unincorporated club or association may be registered in the name of its representative or another individual, and one’s money may be deposited in the name of another person for convenience due to various reasons. In such cases, the person to whom the asset is entrusted will be the owner of said asset to the outside world, but since the asset has neither been purchased nor gifted in the first place, it must be eventually returned to the original owner or transferred to a specific person along with all profits accrued. This is the so-called trust relationship. Trusts are part of a new asset system established based on the above principles and governed by the law known as the Trust Act.

Next, we will briefly explain the key points of a trust. Firstly, as mentioned in the concept of a trust outlined above, the asset owner (the settlor) changes the asset holder’s name to the name of another person (the trustee) for the purpose of having the trustee manage the asset to generate profit. The fundamental difference between a trust and agencies and depositories in Japan’s existing asset system is that a trust requires a change in the asset holder’s name despite sharing the same goal, an essential feature of any trust. By changing the asset holder’s name, the law (the Trust Act) stipulates that even creditors of the person entrusting the asset (the settlor) cannot subject the asset that has been entrusted (trust property) to compulsory execution or auction, unless these rights had accrued prior to entrustment. The law also protects trust property by establishing various provisions regarding the relationship between the settlor and the person to whom the asset is entrusted (the trustee). For example, creditors cannot seize trust property, put it up for auction, or use it to set off any existing debt unrelated to the trust of the trustee. Furthermore, if the trustee unlawfully sells trust property to a third party against the will of the settlor, the settlor can recover it from the buyer. Of course, for these purposes, the asset in question must have been entrusted in good faith and registered as trust property. At the same time, trust property must not be transferred to inheritors of the trustee, and the trustee must manage all trust property separately from their own personal assets. Because of these reasons, trust property can be said to be held in a completely safe place.

Next, the second key point of a trust is confidence. As the saying goes, “Family is irrelevant where money is concerned.” It is not an easy task to trust another person with one’s assets or to gain the trust of someone with respect to theirs. Even in the mere act of appointing another person as their proxy, one must have tremendous confidence in that person. When going a step further and entrusting one’s asset to another person while changing the asset holder’s name to theirs, the settlor must have absolute confidence in the trustee. At the same time, the trustee must fulfill their duty with the utmost fidelity and integrity in order for the trust to gain the confidence of others. In other words, the fundamental elements of a trust are confidence and integrity, and it must naturally be the case that the trust system is the final product of a credit system.

As for the mission of trust business, although it is natural for people to manage their own assets and generate profit on their own as outlined above, there are many people in the world, who are unable to manage assets to generate profit on their own due to various reasons, such as lacking sufficient knowledge or ability to do so or because they are too busy with work to grow their wealth even if they have the necessary knowledge and ability. Such people may have custodians, guardians, or stewards, agents, advisors, etc., who manage assets on their behalf to generate profit, but with the progress of society and development of the economy, utilizing these methods alone is not only associated with growing inconvenience and disadvantages but has also led to many unfortunate cases around the world of people having their valuable assets squandered by their administrators, etc. In short, under the existing asset system, those who cannot manage their own assets to generate profit will face growing threats to their livelihood as the times evolve, and they will not be able to bequeath the assets they have painstakingly accrued to their descendants with peace of mind. This may eventually lead to the end of ancestral worship, their descendants being stranded on the streets, and Japan’s family system becoming obsolete. If this were to happen, the result would not simply be the problem of a single individual but a major problem for society as a whole. Moreover, unlike the business capital of those engaged in commerce and industry, these assets are not being utilized. It is highly regrettable from the perspective of the national economy if these assets are simply locked away and not harnessed for economic activities. In order to resolve and prevent the future occurrence of such problems, a new asset system that meets the needs of the times is no doubt necessary. It must be said that it was inevitable for the trust system and trust businesses to find their way into Japan in recent years.

The fundamental elements of trusts, as well as the goal and mission of trust businesses, are as described above, and trust businesses can be considered truly indispensable for a full-fledged society.

In this sense, it is only natural that the management of trust business should be carried out primarily in the spirit of public service and not merely for the purpose of profit. This can be inferred from the fact that Japan’s law (the Trust Act) stipulates that trusts are, in principle, free of charge, and that only trust companies operating trusts are allowed to receive remuneration. Also, Japan’s Trust Business Act limits the management of trust businesses to companies and stock companies. The reason for this is that companies, unlike individuals, are not swayed by emotions or subject to illness or death, and they possess certain advantages over individuals such as a large amount of capital, organized business operations, and a wealth of knowledge and experience in socioeconomic affairs. Furthermore, stock companies boast advantages such as having a larger number of investors than other corporate organizations and various supervisory bodies in place, allowing these companies to fully accomplish the mission of trust businesses and command confidence, which is at the core of trusts. For these reasons, there is no doubt that major trust companies that are established and managed with the utmost fidelity and integrity will, on the one hand, serve as institutions for safe and reliable asset management and profit generation, thereby contributing to the sound development of society, and on the other hand, serve as major financial institutions whose functions differ from those of banks, thereby spurring the economic activities of the people alongside banks.

Since trust business is operated in the spirit of public service and trust companies are institutions for the public good, our plan is to play our part by establishing a trust company.

In view of the inherent qualities of trust business and trust companies, they should not be established and managed by a small number of shareholders but should ideally involve the participation of a wide range of volunteers. We sincerely hope that you will offer us your full support for the establishment of this trust company.

As mentioned above, a trust company should not be established or managed merely for the purpose of profit, and since it is based on absolute confidence and the utmost integrity, the foundation of a trust must be as strong and robust as possible and its management as safe and reliable as possible. Therefore, there are no plans for our trust company to distribute dividends to shareholders for the first year or two. However, in addition to its primary trust business, a trust company can engage in a wide range of ancillary operations such as agency services, and the fees earned from these operations, in combination with the profits earned from management of the company’s owned assets, should gradually grow the company’s revenue. Moreover, given the tremendous and boundless value of trusts, it is clear that trust companies will become more familiar entities that are increasingly utilized moving forward as the general public develops a deeper understanding of trusts, which will create ample opportunities for trust companies to expand their ancillary operations. The current number of trust companies is extremely small, and the establishment of a new trust company must be licensed by regulatory authorities after careful deliberation. Taking all of the above into consideration, there is no doubt that trust companies have a promising future and will eventually achieve remarkable business results.

In light of the above, we sincerely hope that you will evaluate the future potential of the company that we plan to establish in the spirit of public service and that you will offer us your full support for its establishment.

April 1925

Tokai Bank, Ltd., Daiichi Trust Bank Co., Ltd., and Japan Securities Agents, Ltd. have reached an agreement to establish a new trust bank in partnership with one another. As outlined in the Memorandum of Understanding,^* the concept of the new trust bank will involve Tokai Bank, Ltd., Daiichi Trust Bank Co., Ltd., and Japan Securities Agents, Ltd., bringing together their respective trust-related and stock transfer agency services to establish a new and powerful trust bank led by the three companies with the support of the Industrial Bank of Japan, Ltd., Daiichi Bank, Ltd., and others in the securities industry, and backed by strong collaborative ties with the Nagoya business community in the Nagoya area.

Japan’s economy has achieved remarkable growth while remaining relatively stable in recent years. This has led to more diverse saving methods and the rising importance of stable financing along with a growing demand for new trust services to ensure proper financial management. We believe that the establishment of a new and powerful trust bank in response to these circumstances will be of great value to the national economy.

We will work with related parties to leverage our respective strengths and unique attributes, and cooperate with each other to fulfill the primary functions of a trust business and to contribute to the development of Japan’s economy while meeting the needs of the Japanese people.

May 1962