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Transcript of [Disclosure Booklet] - Citi | Japan | Home · I Outline and Organization 1. Corporate Name...
<Translation>
[Disclosure Booklet]
Explanatory Documents on the Status of Business and Propertyfor the fiscal year ended Dec 31, 2016
This disclosure booklet is prepared by the Company to publish with utilization
of internet under Article 46-4 of the Financial Instruments and Exchange Law.
I Outline and Organization
1. Corporate Name ………………………………………………………………………………………………………… 1
2. Registration Date ( Registration Number ) …………………………………………………………………………… 1
3. History and Organization ………………………………………………………………………………………………… 1
4. Shareholders in the Top 10, Number of Shares Held and Percentage of Voting Rights ………………………… 3
5. Names of Board of Directors and Statutory Auditor ………………………………………………………………… 3
6. Names of Employees Specified by Cabinet Order …………………………………………………………………… 3
7. Business Operation ……………………………………………………………………………………………………… 4
8. Addresses of Head Office and Other Branches ……………………………………………………………………… 5
9. Other Business Operation ……………………………………………………………………………………………… 5
10.
(3)-2, (3)-3(a) and from (4) to (9) of the Cabinet Office Ordinance on Concerning Financial Instruments
Business …………………………………………………………………………………………………………………… 6
11. 6
12. Financial Instruments Firms Associations and Certified Investor Protection Organization Memberships………… 7
13. Financial Instruments Exchange Memberships………………………………………………………………………… 7
14. 7
II Business Overview
1. Business Outline for the Current Period ……………………………………………………………………………… 8
2. Key Financial Data ……………………………………………………………………………………………………… 10
III Financial Matters
1. Financial Information ………………………………………………………………………………………………………12
2. Major Lenders and Borrowings ………………………………………………………………………………………… 18
3. Securities Held (Non-Trading) ……………………………………………………………………………………………18
4. Derivative Transactions (Non-Trading) …………………………………………………………………………………18
5. External Audit ………………………………………………………………………………………………………………19
6. Others ……………………………………………………………………………………………………………………… 19
IV Internal Control Structure
1. Overview of Internal Control …………………………………………………………………………………………… 20
2. Condition of Customers' Assets Segregation ………………………………………………………………………… 22
V Status of Consolidated Subsidiaries, etc. …………………………………………………………………………………26
Contents
Engaged Businesses included in the Matters Set Forth in Article 29-2(1)(VI) of FIEL and Article 7(3)(a),
Complaint Processing and Dispute Resolution ………………………………………………………………
Investor Protection Fund Membership …………………………………………………………………………
I Outline and Organization
1. Corporate Name Citigroup Global Markets Japan Inc. (the Company)
2. Registration Date September 30, 2007( Registration Number ) (The Director-General of the Kanto Finance Bureau (Kinsho) No.130)
3. History and Organization
(1) History
Year
1972 ・ Smith Barney opens Tokyo Representative Office
1977 ・ Salomon Brothers Asia Limited established in Hong Kong
1980 ・ Salomon Brothers Asia International opens Tokyo Representative Office
・ Smith Barney Tokyo Representative Office becomes Tokyo Branch
1982 ・ Salomon Brothers Asia Limited receives approval for opening its branch in Tokyo
・ Begin operation in Tokyo Branch and moves its operation to Tokyo from Hong Kong
1987 ・ Obtain remote membership of Osaka Securities Exchange
1988 ・ Begin business in Tokyo Stock Exchange as an official member
・ Begin futures trading as a remote member of Osaka Securities Exchange
1989 ・ Become "standing underwriting manager" for JGB syndicate
・ Begin option trading as a remote member of Osaka Securities Exchange
・ Begin business in Tokyo International Financial Futures Exchange as a clearing member
・ Begin business in Nagoya Stock Exchange as a special participant
1991 ・ Begin business in Osaka Securities Exchange as an official member
1997 ・ Salomon Brothers Asia Limited Tokyo Branch (A Cayman Entity)begins its operation
1998 ・ Salomon Brothers Asia Limited acquires all operations of Smith Barney's Tokyo Branch and
renamed to Salomon Smith Barney (Japan) Limited
1999 ・ Acquires investment banking, wholesale, and research divisions from Nikko Securities Co., Ltd.
and renamed to Nikko Salomon Smith Barney Limited
・ Begin operation in Nagoya Branch
・ Begin business in Nagoya Stock Exchange as an official member
2003 ・ Rename to Nikko Citigroup Limited
・ Establish Nikko Citigroup Limited Preparatory Company as its subsidiary
・ Nikko Citigroup Limited Preparatory Company acquires all business from Nikko Citigroup
Limited (A Cayman Entity) and renames to Nikko Citigroup Limited
2004 ・ Begin operation as Nikko Citigroup Limited (a Japanese legal entity)
・ Close Nagoya Branch
2007 ・ Relocate its headquarter to Shin Marunouchi Building
2008 ・ Establish Nikko Citi Holdings Inc.
(Citigroup Japan Holdings Inc. and Nikko Cordial Group merges)
・ Re-open Nagoya Branch
2009 ・ Renamed to Citigroup Global Markets Japan Inc., after the sale of Nikko Cordial Securities Inc.
to Sumitomo Mitsui Banking Corporation
2010 ・ Close Osaka Branch
・ Close Nagoya Branch
History
1
4. Shareholders in the Top 10, Number of Shares Held and Percentage of Voting RightsAs of December31, 2016
Name of shareholdersNumber of shares
held
Citigroup Japan Holdings G.K. 3,842,000 100.00%
5. Names of Board of Directors and Statutory AuditorAs of December31, 2016
Name Representation
Luke Randell Yes
Kuniyoshi Hayashi No
Yusuke Asai No
Akihiko Sakashita No
Tatsuo Tanaka No
Mamoru Sato
(Note) Anthony P. Della Pietra, Jr. assumed the office of Representative Director, CEO on April 1, 2017.Luke Randell assumed the office of Representative Director, President on April 1, 2017.Tatsuo Tanaka assumed the office of Director, Chairman on April 1, 2017.
6. Names of Employees Specified by Cabinet Order
(1)
As of December31, 2016
Akihiko Sakashita Director, Chief Administrative Officer, Chief Internal Control Officer
Robert Itsuo Nakamura Head of Multi-Asset Group
Daisaku Fujikawa Head of Capital Markets Origination
Fumito Okuyama Head of Financial Institution Relationship Management
Akimoto Kawamura General Counsel
Ayumi Tomoda Head of Operations
Joel Fasternberg Head of Human Resources
Matt van Weezel
(Note) The registration has been replaced on April 1, 2017 as shown below.
Koichi Tanaka Head of Compliance Division, Chief Internal Control Officer Akimoto Kawamura General Counsel Matt van Weezel Deputy Head of Compliance Division, Deputy Chief Internal Control Officer
(2) Persons overseeing the division to make an advice or conducting management with respect
to the investment advisory business and investment management business
Not applicable
Percentage ofvoting rights
Total 1 party
Positionexecutive/
non-executive
Representative Director, President and CEO executive
Director non-executive
Statutory Auditor non-executive
Director, Deputy President executive
Director, Deputy President executive
Director executive
Persons overseeing the operations concerning the guidance for compliance with the lawsand regulations, etc. with respect to the financial instruments business
Name Title
Head of Compliance Division, Deputy Chief Internal Control Officer
3
7.Business Operation
(1) Type I Financial Instruments Business
① Businesses under Article 28(1) (i) of Financial Instruments and Exchange Law (hereinafter referred to as the
"FIEL")
(i)
(ii)
agency service ("Dairi") for sale and purchase of Securities falling under Article 2(8) (x) of FIEL)
(iii)
following transactions;
(a)
Exchange traded Derivatives; or
(b)
apply hereinafter) or Foreign Exchange traded Derivatives Transactions
(iv) Brokerage for Clearing of Securities, etc.; or
(v)
(vi)
Placement of Securities or exclusive Offer to Sell, etc. to Professional Investors
② Business under Article 28(1) (ii) of FIEL
Over-the-Counter Transactions of Derivatives or intermediary ("Baikai"), brokerage ("Toritsugi") ( excluding
Brokerage for Clearing of Securities,etc.) or agency service ("Dairi") therefor; or, Brokerage for Clearing of
Securities, etc in relation to Over-the-Counter Transactions
③ Business under Article 28(1) (iii) (a) of FIEL
Wholesale Underwriting of Securities that are specified by a Cabinet Order as those for which management
of risks of loss is highly necessary
④ Business under Article 28(1) (iii) (b) of FIEL
Wholesale Underwriting of Securities other than those listed in Article 28(1) (iii) (a) of FIEL
⑤ Business under Article 28(1) (iii) (c) of FIEL
Acts listed in Article 2(8) (vi) that are other than Wholesale Underwriting of Securities
⑥ Securities, etc. Management Business
(2) Type II Financial Instruments Business
(3) Supplemental Business Operation to Financial Instruments Business
(i.e. the business conducted by the Company listed in Article 35(1) of FIEL)
① Lending and borrowing of Securities, or intermediary ("Baikai") or agency service ("Dairi") thereof
② Money loan incidental to a margin transaction
Transactions (excluding sale and purchase of Securities falling under Article 2(8) (x) of FIEL)
Sale and purchase of Securities (excluding those falling under the category of Derivative Transactions;
the same shall apply hereinafter), Exchange traded Derivatives (excluding Financial Instruments (limited
to those in Article 2(24) (iii-2)) or Financial Indices (limited to the value of the Financial Instruments or
figures calculated based thereon) related Exchange traded Derivatives (the same shall apply " @@@
Commodities related Exchange traded Derivatives" hereinafter ) or Foreign Exchange traded Derivatives
Sale and purchase of Securities conducted in a Foreign Financial Instruments Market (meaning
a market in a Foreign State similar to Financial Instruments Exchange Market; the same shall
Secondary Distribution of Securities or exclusive Offer to Sell, etc. to Professional Investors
The handling of a Public Offering or Secondary Distribution of Securities, or the handling of a Private
Intermediary ("Baikai"), brokerage ("Toritsugi") (excluding Brokerage for Clearing of Securities,etc.) or
agency service ("Dairi") for sale and purchase of Securities, Exchange traded Derivatives or Foreign
Exchange traded Derivatives Transactions (excluding intermediary ("Baikai"), brokerage ("Toritsugi") or
Intermediary ("Baikai"), brokerage ("Toritsugi") or agency service ("Dairi") for agency ("Itaku") of the
Sale and purchase of Securities conducted in a Financial Instruments Exchange Market or
4
③ Money loan secured by Securities that are deposited for safe custody from customers
④ Agency service ("Dairi") for customers concerning Securities
⑤ Agency service ("Dairi") of the business pertaining to payment of earnings, redemption money or cancellation
Securities
⑥
Subscription Rights Certificates or Investment Corporation Bonds, or Foreign Investment Securities
⑦ Conclusion of a Contract for Cumulative Investment
⑧ Provision of information or advice in relation to Securities
⑨ Agency service ("Dairi") of the business of any Counterparty Financial Business Operator, etc.
⑩ Retention of assets of a registered investment corporation
⑪
share exchange or share transfer, or intermediation for these matters
⑫ Consultation to any other business operator with regard to management
⑬
brokerage ("Toritsugi") or agency service ("Dairi") thereof
⑭
category of Securities), or intermediary ("Baikai"), brokerage ("Toritsugi") or agency service ("Dairi") thereof
8.
As of December 31, 2016
9.Other Business Operation
(1) Registered businesses conducted by the Company listed in Article 35(2) of FIEL
① Business pertaining to transactions conducted by using fluctuations in commodity prices and other indicators,
market gaps, etc. as specified by a Cabinet Office Ordinance (excluding business pertaining to transactions on
a commodity market, etc. defined in Article 2(21) of the Commodity Futures Act)
② Business pertaining to money lending business defined in Article 2(1) of the Act on Controls, etc. on Money
Lending or other money loan, or intermediary service of lending and borrowing of money
③ Business pertaining to conclusion of a Loan Participation Contract, or an intermediary, brokerage or agency
service
④ Goods leasing business
⑤ Business pertaining to creation and sale of computer programs for the business of any other business operator,
and a business to accept the entrustment of computing service
⑥ Business of a conclusion of a contract on the acquisition or transfer of Carbon Dioxide Equivalent Quotas, or
an intermediary, brokerage or agency service
⑦ Derivertives transactions pertaining to Carbon Dioxide Equivalent Quaotas, or an intermediary, brokerage or
agency service
Head Office 5-1, Marunouchi 1-Chome, Chiyoda-ku, Tokyo 100-6520
money with regard to beneficiary securities of Investment Trusts or foreign investment trusts, or the business
pertaining to delivery of the Securities or any other assets belonging to the trust property pertaining to the
Agency service ("Dairi") of the business pertaining to distribution of money, distribution of refunds or residual
assets or payment of interest or redemption money with regard to Investment Securities, Investment Equity
Consultation to any other business operator with regard to a business assignment, merger, company split,
Sale and purchase of currencies and other assets designated by a Cabinet Order as being related to
Derivative Transactions (excluding Transactions of Securities-Related Derivatives) or intermediary ("Baikai"),
Sale and purchase of negotiable deposits and other monetary claims (excluding those that fall under the
Addresses of Head Office and Other Branches
Category Address
5
⑧ Business of concluding a contract for a guarantee or assumption of an obligation, or an intermediary,
brokerage or agency service
⑨ Business of making an arrangement with or introducing another business operator, to customers of
its Business
(Note) Business for Bank Agency Service has been discontinued on September 30, 2016.
(2) Approved Businesses conducted by the Company listed in Article 35(4) of FIEL
① Business for intermediary, etc. of custody business, business for intermediary, etc. of fund service business
and business for intermediary, etc. of foreign depositary receipt business
② Business for intermediary business related to LNG physical trading
③ Business for maritime freight index derivative transactions including intermediary and agency thereof
10.Engaged Businesses included in the Matters Set Forth in Article 29-2(1)(VI) of FIEL and Article
① Securities-related business
② Sale and purchase of real estate trust beneficiary interests
11.Complaint Processing and Dispute Resolution
(1) Type I Financial Instruments Business
Measures to conclude a Basic Contract for Implementation of Dispute Resolution Procedure with Financial
Instruments Mediation Assistance Center (hereinafter referred to as the "FINMAC")
(2) Type II Financial Instruments Business
Measures to utilize the Financial Futures Association of Japan (outsourcing to FINMAC) or measures to
utilize Type II Financial Instruments Firms(outsourcing to FINMAC); otherwise, measures to utilize FINMAC
(3) Investment Advisory and Agency Business
Not applicable
(4) Investment Management Business
Not applicable
(5) Money Lending Business
Measures to conclude a Basic Contract for Implementation of Dispute Resolution Procedure with Japan
Financial Services Association
7(3)(a), (3)-2, (3)-3 (a) and from (4) to (9) of the Cabinet Office Ordinance on Concerning
directly as grievance procedure and dispute resolution prescribed in article 37-7(1) (ii) (b) of FIEL.
Financial Instruments Business
6
12.Financial Instruments Firms Associations and Certified Investor Protection Organization
Memberships
・ Financial Instruments Firms Association : Japan Securities Dealers Association
The Financial Futures Association of Japan
Type II Financial Instruments Firms Association
・ Certified Investor Protection Organization : Financial Instruments Mediation Assistance Center
(Type II Financial Instruments Business)
13.Financial Instruments Exchange Memberships
Tokyo Stock Exchange
Osaka Exchange
Nagoya Stock Exchange
Tokyo Financial Exchange
14. Investor Protection Fund Membership
Japan Investor Protection Fund
7
II Business Overview
1. Business Outline for the Current Period
In foreign exchange markets, the yen appreciated against the dollar since demand for the yen as a safe havencurrency strengthened following increasing uncertainty of emerging countries ’ economy. It reached 99 levelsagainst the U.S. dollar in June and remained in a high range towards autumn. In November following Trump’svictory in the U.S. president election, U.S. interest rate hiked reflecting expectation for further expansionary andfiscal policy. This caused a sharp depreciation of the yen and it temporarily reached 118 against the dollar. Theyen appreciated against the euro from the beginning of the fiscal year impacted by increasing political risk inEurope such as U.K referendum. The yen temporarily appreciated to 110 against the euro in July based onBrexit or the BOJ’s Monetary Policy Meeting result. It moved within a narrow range until autumn. However itdepreciated against the euro following a lower interest rate under BOJ QQE (yield curve control) and reached124 against the euro in December. The yen closed at the 116 and 122 levels against the dollar and the euro,respectively.
During the fiscal year under review, Japanese stock prices had been relatively flat accompanying with smallfluctuation until early June. When a majority of voters in the United Kingdom chose to leave the EuropeanUnion at a referendum, the Nikkei Stock Index (“Nikkei225”) made a sudden drop with concern in the futureeconomy of Europe. And the Nikkei Stock Index reached 14,864 on June 24, which was the lowest sinceOctober 2014. The consumption tax increase was decided to postpone. As ruling party in the election for Houseof Councilors was overwhelming, the expectation to a policy increased. Backed by those, the market turned to arising trend. In October, Nikkei225 recovered to 17,000 reflecting factors such as the rise in U.S. and Europeaninterest rates and the further depreciation of the yen against the dollar. In November following Trump’s victoryin the U.S. presidential election, Subsequently, Japanese stock prices temporarily dropped sharply. But USstock market turned to raising trend since investors expected that market might benefit under coming Trump’spolicies and deregulation. Japanese stock prices followed this rising trend toward the end of 2016 with theexpectation of favorable corporate performance of Japanese firms under the depreciation of Yen against thedollar. As a result, Nikkei225 marked 19,592 in December, which was the highest in the fiscal year. At the endof this fiscal year, the Nikkei stood at 19,114 and the Tokyo Stock Price Index (TOPIX) stood at 1,518, whichwas 2,356 and 171 higher, respectively from the fiscal year end of March 2016.
In the Japanese bond market, 10-year JGBs yields started within the negative range under the Bank of Japan(“BOJ”) negative interest rate policy. Based on the observation that BOJ might expand the negative interest raterange or the concerns on the future economy of Europe impacted by the U.K referendum result, the yields on10-year JGBs temporarily declined (prices increased) to around minus 0.3 percent in June. However, Japannegative interest rate was not lowered at BOJ’s Monetary Policy Meeting in July. As interest rate rose globallybased on the observation of early rise in US interest rates, 10-year JGBs yield rose as well. At the SeptemberMonetary Policy Meeting, BOJ decided to introduce QQE (Quantitative and Qualitative Monetary Easing withYield Curve Control). As the result, the market calmed down and 10-year JGBs yields moved relatively flatduring October. In November, long-term JGB yields instantly rose (prices decreased) to positive rangereflecting the rise in U.S. interest rate due to the result of the US president election. At the end of this fiscalyear, 10-year JGBs yield marked at 0.04%.
Based on the resolution of the general meeting of shareholders on June 27, 2016, the Company changed thefiscal year-end from March 31 to December 31. As a transitional period, the accounting period of the currentfiscal year is the 9 months from April 1, 2016 to December 31, 2016.Operating revenue totaled 36.8 billion yen, and Operating revenue, net of interest expense, amounted to 34.9billion yen. Selling, general and administrative expenses totaled 29.9 billion yen, the operating incomeamounted to 5.0 billion yen and the ordinary income including non-operating income and expenses amountedto 5.0 billion yen. The net income before income tax amounted to 10.9 billion yen and the net income amountedto 12.0 billion yen with extraordinary income and loss and income taxes. Summaries by accounts are asfollows.
8
(1) Commission received
Commission received was 30.5 billion yen. The following is the breakdown by category.
① Brokerage commissions
② Underwriting and selling commissions
③ Subscription and distribution commissions
④ Other commissions
(2) Net trading income
(3) Financial revenue and expenses
(4) Selling, general and administrative expenses
(5) Non-operating income and expenses
(6) Extraordinary income and loss
(7) Income taxes
Brokerage commissions were 9.7 billion yen. Equity trading volume was 17,231.2 billion yen.Brokerage commissions on equities were 9.5 billion yen and brokerage commissions on JGBfutures and ETFs totaled 0.2 billion yen.
Underwriting and selling commissions were 0.3 billion yen.
There was no subscription and distribution commissions in the current fiscal year.
Other commissions were 20.3 billion yen.
Net trading income recorded 4.3 billion yen. Trading revenue related to equities was 0.3 billion yen.Trading revenue related to bonds was 0.5 billion yen and trading revenue related to foreign exchange,etc. were 3.4 billion yen.
Net financial revenue and expenses were 0.1 billion yen income.
Selling, general and administrative expenses were 29.9 billion yen.
Net operating income was 0.04 billion yen, mainly due to dividends from investment securities and arevaluation gain generated from assets and liabilities in foreign currencies.
6.1 billion yen of gain on forgiveness of debts on consolidated tax payable was recorded inextraordinary income.
Income taxes amounted to net benefit of 1.1 billion yen as CGMJ restarted the recognition of deferredtax assets in the amount of 3.6 billion yen in current year.
9
2.Key Financial Data
(1) Overall Operating Results
(Millions of Yen)
Operating revenue
(Commission received)
((Brokerage commissions))
((Underwriting & sellingcommissions))
((Other commissions))
(Net trading income)
((Equities and other))
((Bonds))
((Foreign exchange and other))
(Financial revenue)
Financial expenses
Ordinary income
Net income
(2) Trading and underwriting volume in securities
① Equity Trading Activity (Millions of Yen)
Brokerage
Proprietary
Total
FY 2014 FY 2015FY 2016
( 9 months )
Capital stock 96,307 96,307 96,307
52,167 58,111 36,818
43,522 50,680 30,539
Total number of issued shares (thousands)
3,842 3,842 3,842
571 718 384
19,640 21,093 9,766
23,310 28,868 20,388
6,499 4,453 4,327
865 751 324
5,816 21,327 515
(182) (17,626) 3,488
2,145 2,977 1,951
2,159 2,985 1,834
Operating revenue, net of interest expense
50,007 55,126 34,984
10,060 14,799 5,052
7,357 8,309 12,092
FY 2014 FY 2015FY 2016
( 9 months )
21,084,082 25,878,946 17,231,237
7,400,125 7,839,577 6,774,643
28,484,207 33,718,523 24,005,880
10
②
offering placement, private placement and solicitation for placement for professional investors
(Millions of Yen)
(3) Other business activities
(4) Regulatory capital adequacy ratio (Millions of Yen)
(5) Number of employees and registered sales representatives
Underwriting, offering and solicitation for selling and others for professional investors, and subscription placement,
Type Underwriting Offering
Total salessolicitation toprofessional
investors
SubscriptionPlacement
OfferingPlacement
PrivatePlacement
Placementsolicitation toprofessional
investors
FY
201
4
Stocks 483 - - 893
Special bonds 46,500 - -
Corporate bonds 112,700 - 1,600 112,700
- - -
Bon
ds
JGBs - - - -
Municipal bonds 30,074 30,074 - -
46,500 - - -
- - 8,200
Total 189,274 - 1,600 189,274 - - 8,200
126,030 -
Other - - - - - - -
Beneficiary certificate - -
FY
201
5
Stocks 1,335 36 - 1,738
Special bonds 36,700 - -
Corporate bonds 83,600 - 21,200 66,900
- - -
Bon
ds
JGBs - - - -
Municipal bonds 35,600 35,600 - -
36,700 - - -
- 1,200 60,300
Total 155,900 - 21,200 139,200 - 1,200 60,300
190,891 -
Other - - - - - - -
Beneficiary certificate - -
- - -
Bon
ds
JGBs - -
Stocks 889 40 - 1,029
Special bonds 216,400 - -
- -
Municipal bonds 22,604 22,604 - -
216,400 - - -
30,100 - - 29,100 - - -
Total 269,104 - - 268,104 - - -
519,954 -
Other - - - - - - -
Beneficiary certificate - -
FY
201
6(
9 m
onth
s)
Corporate bonds
FY 2014 FY 2015 FY 2016
Net capital ratio ( A / B X 100 ) 414.6% 371.6% 411.1%
The Businesses listed in Article 35(2) and (4) of FIEL have been omitted in consideration of financial statements impact.
Net capital ( A ) 147,967 180,082 190,409
Risk total ( B ) 35,688 48,457 46,313 Market risk 9,284 20,003 19,749 Counterparty risk 16,613 18,503 15,890
Employees 577 561 610
(Registered sales representatives ) ( 280 ) ( 250 ) ( 266 )
Basic risk 9,790 9,950 10,673
FY 2014 FY 2015 FY 2016
11
III Financial Matters
1. Financial Information
Previous fiscal year Current fiscal year
( As of March 31, 2016 ) ( As of December 31, 2016 )
1,547,659 1,907,445
80,269 164,424
11,369 38,268
594,623 519,697
Trading securities and other 479,032 309,634
Derivatives 115,591 210,063
676,011 936,912
Cash collateral pledged for securities borrowed 256,985 465,368
Loans on Gensaki transactions 419,026 471,544
100 142
175,936 240,532
52 -
285 266
8,904 3,879
- 3,175
107 148
(2) (1)
2,812 3,073
0 0
Furniture & fixtures 0 0
3 41
Software 3 0
Others - 41
2,809 3,031
742 742
941 808
1,125 1,111
- 369
1,550,472 1,910,518Total Assets
Accounts receivable
Accrued income
Deferred tax assets
Others
Allowance for doubtful accounts
Noncurrent assets
Property, plant and equipment
Intangible assets
Investments and other assets
Investment securities
Deferred tax assets
Long-term loans receivable
Long-term guarantee deposits
Advance paid
Short-term guarantee deposits
Variation margin paid
Cash and deposits
Cash segregated as deposits
Trading products
Loans secured by securities
(1) Statement of financial condition
Account
( ASSETS )
Current assets
12
Previous fiscal year Current fiscal year
( As of March 31, 2016 ) ( As of December 31, 2016 )
1,297,749 1,646,177
507,672 637,529
Trading securities and other 396,216 424,014
Derivatives 111,456 213,514
767 22,513
547,161 732,481
Cash received on debt credit transaction of securities 74,700 41,104
Borrowings on Gensaki transactions 472,460 691,377
459 269
100,707 159,034
- 483
125,000 80,000
1,700 -
789 589
86 -
5,322 846
4,364 5,119
1,095 4,452
2,622 2,859
95,443 94,706
3,600 3,600
81,900 81,500
4,013 3,773
5,929 5,832
2,465 2,463
2,465 2,463
1,395,658 1,743,346
160,277 172,369
96,307 96,307
55,660 55,660
Legal capital surplus 55,660 55,660
8,309 20,401
Other retained earnings/ (deficits) 8,309 20,401
Retained earnings brought forward 8,309 20,401
(5,463) (5,197)
(5,463) (5,197)
154,813 167,172
1,550,472 1,910,518
( NET ASSETS )
Shareholders' equity
Capital stock
Capital surplus
Valuation and translation adjustments
Deferred net gain/ (loss) on hedges
Total Net Assets
Total Liabilities and Net Assets
Retained earnings/ (deficits)
Deferred tax liabilities
Accounts payable
Total Liabilities
Reserve for bonuses
Others
Noncurrent liabilities
Bonds payable
Long-term loans payable
Reserve for retirement benefits
Accrued expenses
Others
Reserves under the special laws
Reserve for financial products transaction liabilities
Short-term loans payable
Current portion of bonds payable
Income taxes payable
Trade date accrual
Loans payable secured by securities
Deposits received
Guarantee deposits received
Variation margin received
Account
( LIABILITIES )
Current liabilities
Trading products
13
Previous fiscal year Current fiscal year
( ) ( )
58,111 36,818
50,680 30,539
4,453 4,327
2,977 1,951
2,985 1,834
40,746 29,972
8,711 6,091
16,886 13,086
6,150 4,226
6,769 4,605
6 3
1,027 1,035
1,194 924
14,379 5,012
421 40
1 0
14,799 5,052
- 6,170
- 6,168
- 1
1,662 295
439 -
189 295
1,033 -
13,136 10,928
4,883 2,455
(56) (3,618)
8,309 12,092
Litigation settlement
Extraordinary loss
Net income
Reserve for financial products transactionliabilities
Net income before income taxes
Income taxes - current
Income taxes - deferred
Restructuring loss
Compensation
Occupancy
Administrative expenses
Others
Operating income
Non-operating income
Non-operating expenses
Ordinary income
Extraordinary income
Reversal of reserve for financial productstransaction liabilities
Gain on forgiveness of debts on consolidatedtax payable
Depreciation
Taxes
(2) Statement of operations
Account
Operating revenue
Commission received
Net trading income
Financial revenue
Financial expenses
Operating revenue, net of interest expense 55,126 34,984
Selling, general and administrative expenses
Trade-related expenses
from April 1, 2015to March 31, 2016
from April 1, 2016to December 31, 2016
14
(3) Statement of changes in net assets
(Millions of Yen)
96,307 96,641 - 96,641 (40,981) 151,967 (4,500) 147,467
Reversal of legal capital surplus - (40,981) 40,981 - - - - -
Deficit disposition - - (40,981) (40,981) 40,981 - - -
Net income - - - - 8,309 8,309 - 8,309
Net changes of net assetsother than shareholders'equity
- - - - - - (963) (963)
- (40,981) - (40,981) 49,291 8,309 (963) 7,346
96,307 55,660 - 55,660 8,309 160,277 (5,463) 154,813
(Millions of Yen)
96,307 55,660 - 55,660 8,309 160,277 (5,463) 154,813
Net income - - - - 12,092 12,092 - 12,092
Net changes of net assetsother than shareholders'equity
- - - - - - 266 266
- - - - 12,092 12,092 266 12,358
96,307 55,660 - 55,660 20,401 172,369 (5,197) 167,172Closing balance
Total capitalsurplus
Otherretainedearnings
Retainedearningsbroughtforward
Beginning balance
Changes of itemsduring the fiscal year
Total changes of items during thefiscal year
Shareholders' equityValuation and
translationadjustments
Totalnet assetsCapital
stock
Capital surplusRetainedearnings
Totalshareholder's
equity
Deferrednet gain/ (loss)
on hedgesLegal capital
surplusOther capital
surplus
FY 2016 (from April 1, 2016 to December 31, 2016)
Other capitalsurplus
Total capitalsurplus
Otherretainedearnings
Retainedearningsbroughtforward
Beginning balance
Changes of itemsduring the fiscal year
Total changes of items during thefiscal year
Closing balance
FY 2015 (from April 1, 2015 to March 31, 2016)
Shareholders' equityValuation and
translationadjustments
Totalnet assetsCapital
stock
Capital surplusRetainedearnings
Totalshareholder's
equity
Deferrednet gain/ (loss)
on hedgesLegal capital
surplus
15
(4) Notes to the financial statements
① Notes to statement of financial condition
1) Assets pledged as collateral and collateralized liabilities
(Millions of Yen) (Millions of Yen)
・ Assets pledged as collateral FY2015 FY2016y
46,192
(Note)
FY2015
FY2016
(Millions of Yen) (Millions of Yen)
・ Collateralized liabilities FY2015 FY2016
110,000 65,000
2) Collateralized securities (Millions of Yen) (Millions of Yen)
・ Securities pledged out FY2015 FY2016
142,820 98,461
480,368 702,196
666 4,190
122,003 73,196
(Millions of Yen) (Millions of Yen)
・ Securities received in FY2015 FY2016
328,098 555,797
416,253 471,371
(Millions of Yen) (Millions of Yen)
3) Accumulated depreciation of property, plant and equipment FY2015 FY2016
1 1
Securities pledged related to securities sold under Gensakitransactions
Securities pledged as margin
Securities pledged as collateral for other transactions
Securities borrowed under financing agreements
Securities received related to securities purchased underGensaki transactions
Securities loaned as collateral under financing agreements
Trading products of 7,856 million yen and securities borrowed of 529 million yen were pledged as
collateral with Japan Securities Clearing Corporation, Tokyo Financial Exchange, etc.
Short-term loans payable
642 million yen were pledged as collateral in lieu of guarantee deposits for listed futures transactions.
collateral with Japan Securities Clearing Corporation, Tokyo Financial Exchange, etc.
Trading products of 8,781 million yen and securities borrowed of 509 million yen were pledged as
Securities borrowed of 20,661 million yen were used as collateral for short-term loans payable. Trading
products of 150 million yen were used as collateral for short-term borrowed securities. Trading products of
1,996 million yen were pledged as collateral in lieu of guarantee deposits for listed futures transactions.
Trading products 91,631
In addition to the above, following assets are pledged as collateral.
Securities borrowed of 21,072 million yen were used as collateral for short-term loans payable. Trading
products of 31 million yen were used as collateral for short-term borrowed securities. Trading products of
16
(Millions of Yen) (Millions of Yen)
4) FY2015 FY2016y
・ 105 105
・ 15,625 11,052
・ 20,320 20,541
② (Millions of Yen) (Millions of Yen)
1)FY2015 FY2016y
( 9 months)
・ 189 339
・ 444 357
・ - 6,168
2)
FY2015
FY2016 ( 9 months)
parent company of consolidated tax group.
3)
FY2015
LIBOR/TIBOR case.
FY2016 ( 9 months)
③ Notes to statement of changes in net assets
1) Outstanding shares
(FY2015) (Unit: shares)
Numberincreased
Numberdecreased
Numberat the end of
the fiscal year
- - 3,842,000
(FY2016) (Unit: shares)
Numberincreased
Numberdecreased
Numberat the end of
the fiscal year
- - 3,842,000
Types of sharesNumber
at the beginning ofthe fiscal year
Common stock 3,842,000
Types of sharesNumber
at the beginning ofthe fiscal year
Common stock 3,842,000
Extraordinary loss
Other than Operating transactions
6,168 million yen is recorded in Extraordinary income, as the individually attributed amount of consolidated
corporation tax payable and consolidated local corporate tax payable of the Company were forgiven by the
1,033 million yen of the pending settlement payment is recorded in Extraordinary loss, reflecting the fact that
the Company reached settlement with the plaintiffs in the US class action lawsuit with regard to the Yen
Not applicable
Monetary claims from the affiliates and monetary debts to the affiliates
Short-term monetary claims from the affiliates
Short-term monetary debts to the affiliates
Long-term monetary debts to the affiliates
Notes to statement of operations
Extraordinary income
Not applicable
Volume of transactions with the affiliates
Operating revenue from the affiliates
Operating expenses to the affiliates
17
2. Major Lenders and Borrowings
(Millions of Yen)
3.
(Millions of Yen)
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - -
- - - -
- - - - - -
- - - - - -
4. Derivative Transactions (Non-Trading)
(Millions of Yen)
(5,276)
FX forward trade on cash collateralin foreign currency pledged forbonds borrowed
19,126 39 39 - - -
Interest rate swap on long-termcash collateral pledged for bondsborrowed
73,000 (5,559) (5,559) 43,000 (5,276)
Transaction type
FY2015 FY2016
Notionalamount
Fair valueAsset
(Liability)
Unrealizedgain/ (loss)
Notionalamount
Fair valueAsset
(Liability)
Unrealizedgain/ (loss)
Bonds
Others
Securities Held (Non-Trading)
FY2015 FY2016
Book Value Fair ValueUnrealizedgain/ (loss)
Book Value Fair ValueUnrealizedgain/ (loss)
Currentassets
Equities
Bonds
Others
Noncurrentassets
742 742
Equities 742 742
Long-term
Citigroup Financial Products Inc. 59,000 Citigroup Financial Products Inc. 59,000
Citigroup Japan Treasury G.K. 20,000 Citigroup Japan Holdings G.K. 20,000
FY2015 FY2016
Lender
Balanceat theend of
the fiscalyear
Lender
Balanceat theend of
the fiscalyear
Short-term
Bank of Japan 110,000 Bank of Japan 65,000
Citigroup Japan Treasury G.K. 10,000 Citigroup Japan Holdings G.K. 10,000
18
5. External Audit
6. Others
Change in fiscal year
were audited by KPMG AZSA LLC. And the Company received audit report with unqualified opinion from KPMG
Based on the resolution of the general meeting of shareholders on June 27, 2016, the Company changed the fiscal
year-end from March 31 to December 31. As a transitional period, the accounting period of the current fiscal year is
the 9 months from April 1, 2016 to December 31, 2016.
AZSA LLC.
Pursuant to the Article 436(2) (i) of the Companies Act, the Company’s financial report and its supplementary schedules
19
IV Internal Control Structure
1. Overview of Internal Control
・ O&T and Global Functions
・ Legal
・ Compliance
・ Risk Management
・ Finance
・ Operational Risk Management
transactions, the duty to have the officers and employees of the Company abide by the foregoing or give advice to
them on such matters, as the case may be.
Compliance Division consists of Markets Compliance, Surveillance, Central Compliance, AML Compliance,
Banking & Research Compliance / Control Group and Compliance Testing Departments. The Division is seen as
The Company has the following divisions and departments which are responsible for internal control of the Company.
O&T and Global Functions Division is responsible for supporting firm-wide internal control and administration and
coordination among divisions and departments.
Legal Division consists of Legal Department and Derivatives Documentation Group and has, in connection with
general legal affairs and various laws and regulations and miscellaneous rules relating to financial instruments
a key advocate within Citi of "Responsible Finance". This is accomplished by the following:
・ Setting standards through the creation and maintenance of Compliance policies and embedding the required
oversight of new products, underwriting review, and analysis/establishment of internal risk models including
・ Managing the regulatory environment by tracking Japanese and overseas regulatory developments and active
participation in industry organizations
・ Providing advisory and support to other divisions to promote appropriate business behavior and activity that is
consistent with the required standards
・ Conducting testing and surveillance to evaluate compliance with policies and regulations
・ Promoting appropriate risk management and governance through the development of procedures and systems
to comply with applicable laws and regulations
standards into the business and operation of the company
・ Providing live and on-line trainings to increase understanding of employees regarding key laws, regulations and
policies
Risk Management Division consists of Credit Risk Management, Markets Risk Management, UDCS, Underwriting
Review and Risk Analytics. The Division is responsible for tracking credit status, management of markets risks,
research and development, governance process.
Finance Division consists of Regulatory Reporting, Treasury, Product Control and Financial Planning & Analysis
Departments. The Division is responsible for production, maintenance, and management of legal ledgers such as
the general ledger of the company's finance and accounting, tickets/vouchers, reports, etc., management of the
company's assets, risk management based on the company's capital adequacy ratio, liquidity analysis, fund
raising, fund management and planning of management accounting and budget of the Company.
Operational Risk Management Department is responsible for identification, assessment, monitoring, control,
mitigation, and reporting of operational risks for overall business including control and management of
self-assessment program conducted by each business.
20
・ Corporate Planning
・ Corporate Affairs
・ O&T Planning
・ Operations (excluding Middle Office)
・ Information Technology
・ Government Affairs
・ Internal Audit
responsible for the promotion of the Company's CSR activities.
The O&T Planning Department is responsible for the matters concerning risk management around Operations &
Technology of the franchise, specifically, Information Security, Personal Information Protection, JIMU risk,
Continuity of Business, Information Technology, Record Management and outsourcing management.
The Corporate Planning Department is responsible for the matters related to corporate planning of the Company,
the matters related to assistance to President of the Company and the matters related to handling orders, etc.
from authorities, etc.
The Corporate Affairs Division is responsible for the planning and execution of communications and public affairs
programs designed to strengthen the Company's recognition, enhance its brand and protect its reputation and also
The Operations Division is responsible for the matters related to settlement of financial products trades, etc. with
Japanese and foreign customers.
related strategies and control of the Company’s information technology departments and functions, etc.
The Office of Government Affairs is responsible for information gathering, research and analysis for the Company
on government policies/activities as well as consultancy and advisory regarding relationship management with
government agencies. It is also responsible for engagement in activities of business associations which the
Company is involved in.
The Company also has established the below division which directly report to Board of Directors.
The Division conducts internal audits on the business of the Company and reports their results and evaluations
The Information Technology Division is responsible for development of Company’s information technology
to the Board of Directors.
21
2. Condition of Customers' Assets Segregation
securities at the end of March 2016 and December 2016 are as follows.
(1) Asset segregation based on article 43-2 of FIEL
① Condition of trust funds (Millions of Yen)
② Condition of securities segregation
A. Securities for safe keeping
1,231,538 thousandshares
8,966,469 thousandshares
989,951 thousandshares
thousandshares
334,728 millions ofyen
1,050,811 millions ofyen
303,881 millionsof yen
millionsof yen
45,164 millionaccounts
105,443 millionaccounts
83,310 millionaccounts
millionaccounts
- units 24 units - units units
B. Securities received as collateral
B. Not applicable
We have managed deposited cash and securities to secure and orderly stored them separately from our own property.
Thus, even in the event of bankruptcy, deposited money and securities are refunded to customers under certainty. Asset
segregation balance of cash and securities, and type of storage condition of the securities or the amount or quantity of
Type As of March 31, 2016 As of December 31, 2016
Required segregation of customers’cashdeposits at the latest calculation date
4,319
Funds entrusted for segregatedcustomers' cash deposits at the end ofthe fiscal year
11,348
Required segregation of cash depositsat the end of the fiscal year
211
2,944
38,247
12
Security TypeAs of March 31, 2016 As of December 31, 2016
Domestic securities Foreign securities Domestic securities Foreign securities
Equities (shares) 8,960,445
Bonds (face amount) 1,041,242
Beneficiary certificates(number of accounts)
152,086
Stock purchase warrants(number of units)
24
22
C. Condition of securities segregation
1.
2.
4.
Security Type Depositary agent and segregation method
Convertible bond-type corporatebonds with stock acquisition rights,equity securities of investmentcorporations, beneficiary securitiesand investment securities that arelisted on financial instrumentsexchange markets
① With respect to CB-type corporate bonds with stock acquisition rights (includingCB certificates, the same shall apply hereinafter), equity securities of investmentcorporations, beneficiary certificates and investment securities that are listed onFinancial Instruments Exchange Markets (the hereinafter referred to as the“Domestically Listed Securities”), those securities that are the assets of theCompany and the other securities that are not Customer-owned Securities(hereinafter referred to as "Company-owned Securities"), in principle, shall bemanaged separately from Customer-owned Securities by means of a ledger, etc.,but stored together at Japan Securities Depository Center (hereinafter referred toas the "Depository", including the organization that is entrusted by the Depositary,the same shall apply hereinafter).
② Customer-owned Securities shall be managed in a manner whereby the holdingsof each customer can be immediately identified by means of the Company’s ledger,etc.; provided, however, that Domestically Listed Securities that are not re-deposited in the Depository at the customer’s request shall be stored in JapanInformation Processing, Ltd. or any other outside place of custody clearlysegregated from Company-owned Securities and managed in a manner wherebythe customer to whom the particular securities belong can be immediatelyidentified.
Customer-owned Securities that have been delivered to the issuing company(including the transfer agent; the same shall apply hereinafter) for the exercise ofstock acquisition rights of CB-type corporate bonds with stock acquisition rights etc.at the request of a customer shall be managed appropriately by means of theCompany’s ledger, etc., in a manner whereby the issue, the amount and the issuingparty of the particular securities can be immediately identified for eachcommissioning customer.
Domestically listed foreign securities
With respect to domestically listed foreign securities, Company-owned Securitiesand Customer-owned Securities, in principle, shall be managed separately bymeans of a ledger, etc. but stored together at Depository. Customer-ownedSecurities shall be managed in a manner whereby the holdings of each customercan be immediately identified by means of the Company’s ledger, etc.
3. Corporate debt securities, stocks etc.handled at book-entry system underthe transfer law
① The Japanese Government Bonds shall be managed at the Bank of Japanpursuant to the Transfer Law in a manner whereby Company-owned Securities etc.and Customer-owned Securities are clearly segregated and, with respect toCustomer-owned Securities, the holdings of each customer can be immediatelyidentified by means of the Company’s ledger of the book-entry accounts.
② The corporate debt securities stocks etc.(excluding JGBs described in ① above)shall be managed at the Depository pursuant to the Transfer Law in a mannerwhereby Company-owned Securities etc. and Customer-owned Securities areclearly segregated and, with respect to Customer-owned Securities, the holdings ofeach customer can be immediately identified by means of the Company’s ledger ofbook-entry accounts.
Domestic bonds other than CB-typecorporate bonds with stockacquisition rights and securities setforth in section 3 above, and stockacquisition rights securities, etc.
In principle, these securities shall be stored in Japan Information Processing, Ltd.or any other outside place of custody where Company-owned Securities, etc., andCustomer-owned Securities are clearly segregated and managed in a mannerwhereby the holdings of each customer can be immediately identified by means ofthe Company’s ledger, etc. However, in the case of securities of largedenomination, etc., where a single certificate is held in common by the Companyand the customer, and it is not possible to clearly segregate the place of custody ofCompany-owned portion etc. and Customer-owned portion, the place of custodyshall be made clear and Company-owned portion etc. and Customer-owned portionshall be segregated by means of the Company’s ledger, etc. and Customer-ownedSecurities shall be managed in a manner whereby the holdings of each customercan be immediately identified.
23
5.
6.
[Overview of overseas custody]
③ Condition of asset segregation for Over-the-Counter Transactions of subject Securities-Related
Derivatives
Not applicable
Security Type Depositary agent and segregation method
Beneficiary certificates of investmenttrust
With respect to domestic Beneficiary certificates of investment trust, in principle,these certificates shall be stored together at the Depository. In such a case, theplace of custody of Company-owned Securities, etc. and Customer-ownedSecurities shall be clearly segregated at said trustee trust bank and Customer-owned Securities shall be managed in a manner whereby the holdings of eachcustomer can be immediately identified by means of the Company’s ledger, etc.However, in the case where a single certificate is held in common by the Companyand the customer, and it is not possible to clearly segregate the place of custody ofCompany-owned portion etc. and Customer-owned portion, the place of custodyshall be made clear and Company-owned portion etc. and Customer-owned portionshall be segregated by means of the Company’s ledger etc. and Customer-ownedSecurities shall be managed in a manner whereby the holdings of each customercan be immediately identified.With respect to foreign Beneficiary certificates of investment trust, in principle, thesecertificates shall be managed clearly as Customer-owned Securities at an overseasAgency's facility and Customer-owned Securities shall be managed in a mannerwhereby the state of such management of Customer-owned Securities at theAgency can be immediately available and identified by means of the Company’sledger.
Securities stored or managed atoverseas custodial facilities
With respect to the securities stored or managed at an overseas Custodial Facility,Company-owned Securities and Customer-owned Securities shall be segregated byestablishing separate accounts, etc. as shown in the chart below, and Customer-owned Securities shall be managed in a manner whereby the holdings of eachcustomer can be immediately identified by means of the Company’s ledger, etc.;provided, however, that in the case it is not possible to store or manage Customer-owned Securities at the Custodial Facility in a manner whereby the holdings of eachcustomer can be immediately identified, the Company shall manage these securitiesby means of the Company’s ledger in such a way that the Company-owned portionand the Customer-owned portion is segregated and the holdings of each customercan be immediately identified.
Separate accounts have beenestablished for Company-ownedSecurities and customer-ownedSecurities at each custodial facility,and the securities for the customers’account is on a separate basis.
Name of custodial facilityCountry of
establishmentType of securities
depositedExistence of segregated accounts
and method of segregation
Euroclear Belgium
Australian bonds,Italy national bonds,UK bonds,UK stocks, etc.
Separate accounts have beenestablished for Company-ownedSecurities and customer-ownedSecurities at each custodial facility,and the securities for the customers’account is on a commingle basis.
Citibank, N.A. USAHong Kong stocks,Thailand stocks, etc.
Citigroup Global Markets Inc. USA
US stocks,Canadian stocks,US bonds,Canadian bonds, etc.
24
(2) Asset segregation based on article 43-2-2 of FIEL
Not applicable
(3) Asset segregation based on article 43-3 of FIEL
Not applicable
25