ANNUAL REPORTFor Fiscal Year Ended March 31, 2019

Corporate Profile
The Okasan Securities Group Inc. is a standalone securities company that
traces its roots back to 1923, and now it is a holding company with ten
domestic companies and one overseas company. Okasan Securities Co., Ltd.
serves as the leader of six domestic and overseas companies that conduct theGroup’s securities operations. It also maintains asset management operations
centered on investment trusts, in addition to the support business, in which
the Group provides system infrastructure primarily to group companies, aswell as back office agency services and real estate management.
Its long year of experience in the securities industry has enlightened the
Okasan Securities Group to the need to engage the communities it serveswith face-to-face securities making and cutting-edge online trading
technologies. The Group consistently offers optimal professional investment
and asset management services, made possible by the development ofinnovative products and the generous provision of corporate, industry, andmacroeconomic analysis.

Contents
Corporate Profile

1

Consolidated Financial Highlights

2

Management Policy

3

Operating and Financial Review

7

Consolidated Balance Sheets

12

Consolidated Statement of Income

14

Consolidated Statement of Comprehensive Income(Loss)

15

Consolidated Statement of Changes in Net Assets

16

Consolidated Statement of Cash Flows

19

Notes to Consolidated Financial Statements

21

Independent Auditor's Report

56

Reference Data
Okasan Securities Co.,Ltd.

Non-Consolidated Balance Sheets

57

Non-Consolidated Statement of Income

59

Corporate Data

60

-1-

Consolidated Financial Highlights
Okasan Securities Group Inc. and consolidated Subsidiaries Years ended March 31, 2019
Thousands of
U.S.dollars(note)Millions of yen
2019

2018

2019

(4/1/18～3/31/19)(4/1/17～3/31/18)(4/1/18～3/31/19)

Operating revenues ･･････････････････¥67,876¥81,921$ 611,551

Operating income ･･････････････････

1,840

11,72016,578Net income ･････････････････････････

853

5,853

7,685

Total assets ･････････････････････････

425,700

475,163

3,835,480

Net assets ･････････････････････････

175,184

180,049

1,578,376

Per share of common stock

Yen

U.S.dollars(note)･･･････････････････¥ 4.30¥ 29.56$ 0.04

Cash dividends applicable to the year･･

15.00

25.00

0.14

Basic net income

Note: The translation of the yen amount into U.S. dollars is included solely for the convenience of the reader,using the prevailing exchange rate at March 29, 2019, which was ¥110.99 to U.S.$1.

120(¥ billions)

15

30

100

Net Income

Operating Income

Operating Revenues(¥ billions)

Net Assets(¥ billions)200(¥ billions)

25
150

80

20

60

15

40

10

10
100
5
50

20

5

0

0
'15'16'17'18'19

0

0'15 '16 '17 '18 '19'15 '16 '17 '18 '19-2-'15 '16 '17 '18 '19

Management Policy
Okasan Securities Group Inc. and Consolidated Subsidiaries
1．Basic management policy for the Company
Okasan Securities Group Inc. manages a corporate group composed of a holding company and its
Japanese and overseas consolidated subsidiaries. The Group strives to strengthen its enterprise value
in a sustained manner through the provision of investment services centered on the securities businessand asset management.

2．Basic policy on the distribution of profits and dividends
The Group sees shareholder returns as an important gauge of management success and intend to
distribute payouts in consideration of the earnings trends in tandem with the sustainability of stabledividends.

3．Important management indicator
It is important to generate stable profits irrespective of the market conditions. In keeping with thisprinciple, the Group maintains a stable, consolidated return on equity (ROE) of 10% as a long-termbusiness objective.

4．Management strategies, etc.
The Okasan Securities Group will mark the centennial of its founding in April 2023. With this milestone
in mind, the Group has formulated a grand design toward establishing a structure that will ensure
continuing growth while winning and retaining the trust of its customers beyond the centennial. The“BEYOND 2020” medium-term management plan addresses the first three-year period of this vision,
the period from April 2017 through March 2020. During this time, the Group will invest strategically togive the Group the strength needed to achieve these objectives.

The fiscal year under review is the second of the medium-term management plan. During this fiscal
year, in addition to establishing Okasan Capital Partners and launching investments in startups, theGroup enhanced alliances with external companies, expanding its exchange-traded margin transaction
agencies and strengthening alliances with overseas securities firms for investment information, such as
international market and corporate information, at each securities subsidiary. The Group also moved
forward with the utilization of FinTech in providing customers with products and services, including thelaunch of AI-driven provision of investment information and advising. The Group will continue toenhance its strengths, thereby increasing corporate value.

-3-

BEYOND 2020: The new medium-term management plan
1. Period covered
The three-year period from April 2017 through March 2020
2. Management philosophy“Customer-First”
3. Social mission:[Statements to stakeholders](1) Customers
We seek to be a group of investment advising professionals focusing on advancing
the best interests of our customers.
(2) Employees
We seek to be a company in which employees can take even greater pride to makethe work of our employees as rewarding as possible.
(3) Shareholders
We strive to increase corporate value to meet the expectations of our shareholders.
4. Qualitative targets:[Six measures to strengthen the Group](1) Customer-First management(2) Cooperation within the Group(3) Partnerships outside the Group(4) Brand strategy(5) Human resources, rewarding work
(6) FinTech[Quantitative target]
ROE of 10%: While growing the Group, we plan to achieve a ROE of 10% as a stable,
long-term target.
5. Marking the centennial of the Group's founding
Leading up to the Group’s centennial, our goal, to be achieved at the earliest possible
date, is to achieve the targets of one million accounts and ten trillion yen in assets
managed across the entire Group.

5．Business conditions and challenges the Company should address
A bird’s eye view of the business environment in which the Group operates suggests major changes areunderway in various spheres, including a new cold war between the United States and China, involving
the struggle for technological hegemony, and a fourth industrial revolution led by advances in artificial
intelligence (AI). Even the business models of Google, Apple, Facebook, and Amazon, companies thathave driven the economy in recent years, are being reconsidered.
Although a look at financial assets held by individuals in Japan shows a gradual trend toward
investments, cash and deposits still continue to account for the majority of personal financial assets.
Among seniors, the Japan and the US differ by a factor of three to four in average financial assets held
per household. In the US, equities and investment trusts account for high proportions of personal
financial assets; the asset-building gap between the US and Japan remains considerable. However, thislong-standing pattern has begun to shift. With the approach of an era in which it may becomecommonplace to live to the age of 100, people have begun to recognize the importance of extending asset-4-

lifespans, prompting systemic preparations through NISA, iDeCo, and other instruments. We expect a
growth of investments in risk assets as well as increased financial assets and the broadening of theinvestor base. The securities business in Japan presents very high growth potential. We believe we havea significant role to play here. Amid this growth, innovations in products and technologies are likely toaccelerate. Developing business models that go beyond extending the current trajectories will become
critical.
The Group is striving to increase added value by adding new business creation to efforts to strengthen
existing businesses. During the fiscal year under review, we prepared a structure to move ahead withvarious measures, establishing a wide range of projects targeting sustained growth for the entire Group.
We see both strengthening coordination within the Group and expanding alliances outside the Group as
important elements of Group growth. Drawing on the Group’s various resources, including products,
information, human resources, and information technologies, we intend to maximize Group synergies.
To meet the needs of our customers in the areas of asset building, investment management, and asset
management as a team of investment-advising professionals, we intend to further intensify an approachbased on the “customer first” management philosophy, a philosophy in place since our founding. As welook forward to our 2023 centennial and beyond, we seek to achieve sustained growth based on the trustof our customers.

6．Outline of corporate governance structure(1) Basic concepts regarding corporate governanceTo remain a company that retains society’s trust, we have positioned corporate governance as a key
management issue. By securing the rights and equality of shareholders, making the right decisions in atimely manner, and putting together the structures for business execution and appropriate management
supervision and monitoring, we will fulfill our fiduciary duties and accountability to shareholders andforge cordial relationships with stakeholders.

(2) Structure of business execution
Regarding the structure of business execution, the Board of Directors as the supreme decision-making
organ on management makes decisions on items provided in laws and regulations and the articles ofincorporation and maps out plans for the management strategy of the Group and supervises them. The
President - CEO executes decisions of the Board of Directors and supervises overall management. The
Board of Directors consists of nine directors (including four directors who are Audit & Supervisory
Committee members), which enables it to make quick decisions.
We also have set up the Management Conference. To strengthen the business management of the Groupby clarifying the roles of both bodies, the Board of Directors makes management decisions andsupervises management while the Management Conference is in charge of business execution. The
Management Conference, according to the basic management policies adopted by the Board of Directors,
deliberates on the laying out of specific policies, business execution plans, and other importantmanagerial subjects.

(3) Management monitoring structure
The structure of management monitoring is composed of four total Audit & Supervisory Committee
Members, including one statutory auditor and three outside directors. They make up the Audit &Supervisory Committee and decide on auditing policies in accordance with laws and regulations andthe company’s articles of incorporation, based on the rules of Audit & Supervisory Committee Members.
They will also work to formulate audit opinions for the Audit & Supervisory Committee Members. Other
member obligations include attendance at meetings of the Board of Directors and other important
meetings, interviews with directors (excluding directors who are Audit & Supervisory Committee
Members), and the duty to review important approval documents in order to oversee decision-making by
the Board of Directors and the state of business execution by directors. In addition, Audit & Supervisory-5-

Committee Members work with independent auditors and the divisions in charge of internal auditing tohelp ensure effective, appropriate audits. Okasan Securities Group Inc. has entered into agreementswith these five Audit & Supervisory Committee Members to curtail their liabilities under Article 423,
Paragraph 1 of the Companies Act, in accordance with Article 427, Paragraph 1 of the Act, to theminimum level required under laws and regulations.

(4) Internal auditing structure
As part of efforts to contribute to securing appropriate business operations such as reducing
management risks and preventing wrongdoings, we have set up the Group Internal Audit Dept. andassigned nine staff to this department. The Group Internal Audit Dept. makes up an audit plan in eachfiscal year, periodically implements on-the-spot audits based on these plans, and inspects documents
when necessary. The results of the audits are presented regularly to the Board of Directors in the formof an audit report.

-6-

Operating and Financial Review
Okasan Securities Group Inc. and Consolidated Subsidiaries Years ended March 31, 2019
Ⅰ．Financial conditions and operating results
Although Japan’s economy continued to expand during the consolidated fiscal year under review, signs ofslowing emerged in the second half. While conditions in the labor market continued to improve, concerns
about a global economic slowdown and a series of natural disasters weighted heavily on consumer confidence.
Personal consumption remained slow throughout the year, while year-on-year inflation in consumer prices
continued to trend around 1%. US-China trade frictions and the effects of the slowing economy in China
affected Japan’s exports and production. Bright signs included the first increase in nationwide benchmark
land values in 27 years, spurred by factors including demand for hotel construction in response to growing
numbers of visitors to Japan.
With mixed domestic economic indicators and the economy continuing to lack strength, the Bank of Japan
maintained its policy of monetary easing. In its July meeting, the BoJ’s Monetary Policy Meeting chose topermit a broader range of fluctuations in the 10-year government bond yield, resulting in a brief rise in thatyield to 0.155%; toward the end of the fiscal year, the bond yield once again fell into negative territory. Overthe course of the fiscal year, it trended near the BoJ’s monetary operation target of around 0%.
The 225-issue Nikkei Stock Average began the fiscal year trending around 22,000-23,000 yen, then climbed
to 24,448 yen in early October, its highest mark in 27 years. This was in response to various factors,
including the rising value of the US dollar against the yen (which reached ¥114/$1 due to positive US
economic conditions in the summer and beyond) and policy expectations in the run-up to the election for thepresident of the Liberal Democratic Party of Japan. Equities markets in the US followed by those in othermajor economies dropped significantly from autumn, due largely to indications that the US Federal Reserve
Board would continue to raise interest rates despite concerns about sustained US-China trade frictions andthe potential for a slowing global economy. At one point toward the end of the calendar year, the Nikkei
Stock Average dropped below 19,000. These swings in equities markets galvanized risk avoidance in foreignexchange markets, leading to rapid revaluation of the yen, which briefly reached levels of ¥104/$1 and¥118/€1 at the start of the year. From that point until the end of the fiscal year, prompted by signs of a halt
in interest rate increases in the US and anticipated progress on US-China trade negotiations, equities
markets in major economies gradually stabilized and even regained earlier levels. This was despite festering
concerns about Brexit and deepening confusion in advance of the end-of-March deadline for negotiations.
The Nikkei Stock Average promptly recovered to the ¥20,000 range; at the end of the fiscal year, it had
climbed to ¥21,205.81. Corrections returned the overvalued yen to roughly ¥110.5-110.9/$1 and ¥124.5/€1 by
the end of the fiscal year.
Okasan Securities Co., Ltd., our core subsidiary, sought to deploy sales activities with strong roots in local
communities, strengthening its sales capabilities through various initiatives, including opening new
branches and relocating and renovating current locations. In response to market trends, it also updated how
it provides investment information, including launching streaming video of investment seminars at its
website. Okasan Online Securities Co., Ltd., the Group’s specialist online brokerage, sought to grow its
business foundations by improving customer services; it began providing AI-driven information services anddistributing information on recommended issues to each customer based on trading data. Okasan AssetManagement Co., Ltd. sought to improve investment performance by stressing economic analysis, corporate
research, and other aspects; it also sought to strengthen engagement with and exercise of voting rights incompanies in which it invests to help increase their corporate value. The company sought to increase assets
under management by enhancing products that contribute to customer asset building, including establishing
the world’s first Yuan Sovereign Open based on the Bond Connect Scheme and proposing private placement
investment trusts and discretionary investment contracts to institutional investors.

-7-

Ⅱ．Financial standing
Total assets at the end of the consolidated fiscal year under review stood at ¥425,700 million, down ¥49,464
million from the end of the previous consolidated fiscal year. Total liabilities were ¥250,516 million, down
¥44,599 million from the end of the previous consolidated fiscal year, while net assets were down ¥4,865
million over the same period to ¥175,184 million.

1. Total assets
Total assets at the end of the consolidated fiscal year under review stood at ¥425,700 million, down ¥49,463
million from the end of the previous consolidated fiscal year. This was due mainly to decreases of ¥24,907
million in receivables on collateralized securities transactions, ¥19,048 million in receivables on margintransactions, and ¥18,523 million in trading assets, despite an increase of ¥11,379 million in cash anddeposits.

2. Total liabilities
Total liabilities at the end of the consolidated fiscal year under review stood at ¥250,516 million, down
¥44,597 million from the end of the previous consolidated fiscal year. This was due mainly to decreases of¥19,281 million in payables on collateralized securities transactions, ¥16,301 million in short-termborrowings, and ¥6,428 million in guarantee deposits received, despite an increase of ¥1,979 million in
deposits received.

3. Net assets
Net assets at the end of the consolidated fiscal year under review stood at ¥175,184 million, down ¥4,865
million from the end of the previous consolidated fiscal year. This was due mainly to decreases of ¥4,058
million in retained earnings and ¥1,794 million in unrealized gain on available-for-sale securities, while
non-controlling interests increased by ¥800 million.

Ⅲ．Business resultsGroup operating revenues in the consolidated fiscal year under review were ¥67,876 million (82.9% of the
figure for the previous year); net operating revenues were ¥66,804 million (82.7% of the figure for theprevious year). SG&A expenses were ¥64,964 million (94.1% of the figure for the previous year); operating
income was ¥1,840 million (15.7% of the figure for the previous year); and net income attributable to ownersof the parent was ¥853 million (14.6% of the figure for the previous year).

1.Fees and commissions received
Fees and commissions received stood at ¥42,996 million (81.5% of the figure for the previous year). Thesecan be broken down as follows:(1)Brokerage commissions
Average daily trading volumes on the First Section of the Tokyo Stock Exchange (Japanese common shares)in the consolidated fiscal year under review were 1,849 million shares (80.1% of the figure for the previousyear), while turnover was ¥3,051.2 billion (95.0% of the figure for the previous year). In this environment,
equity brokerage commissions were ¥13,904 million (70.4% of the figure for the previous year). Bond
brokerage commissions were ¥2 million (80.7% of the figure for the previous year). Other brokerage-8-commissions amounted to ¥408 million (100.3% of the figure for the previous year). Total brokeragecommissions were ¥14,315 million (71.0% of the figure for the previous year).

(2)Underwriting fees, selling concessions, and commissions on solicitation for sales of financial
instruments to specified investors and others
As for our equity underwriting efforts during the consolidated fiscal year under review, commissions
increased thanks to factors including our role as lead underwriter and major transactions of newly listed
stocks. Commissions fell year-on-year in bond underwriting efforts, although the value of underwriting
increased due to our role as lead underwriter for several local government and corporate bond issuances andour role as underwriter for corporate bond issuances targeting individual investors.
The resulting commissions on equity were ¥568 million (110.9% of the figure for the previous year).
Commissions on bonds totaled ¥109 million (93.3% of the figure for the previous year). Total underwriting
fees, selling concessions, and commissions on solicitation for sales of financial instruments to specified
investors and others, related to both equity and bond transactions, amounted to ¥677 million (107.7% of the
figure for the previous year).

(3)Administrative charges on offering, selling, and solicitation for sales of financial instruments
to specified investors, and other fees and commissions received
Income related to investment trusts accounted for the bulk of our income from administrative charges onoffering, selling, and solicitation for sales of financial instruments to specified investors, and other fees andcommissions received.
During the consolidated fiscal year under review, amid spreading uncertainty in markets through the second
half of the fiscal year, sales of public offerings of investment trusts showed increases in sales of products
resistant to market instability, including funds reflecting awareness of dividends, interest, and otherparameters and SME equity funds promising relatively high growth. Nevertheless, the impact of market
conditions could not be avoided entirely. The value of sales fell year-on-year, and administrative charges onoffering, selling, and solicitation for sales of financial instruments to specified investors totaled ¥11,776
million (80.3% of the figure for the previous year). Other fees and commissions received, related mainly toinvestment trusts, amounted to ¥16,227 million (93.7% of the figure for the previous year).

Fees and commissions
received

70

Fees and commissions received
Breakdown by category(¥ billions)

60

Brokerage commissions
Equities

50
40

20
10
0
'15 '16 '17 '18 '19

2019<A>

2018<B>

Ratio(4/1/18～3/31/19)(4/1/17～3/31/18)<A>/<B>¥14,315¥20,163

71.0

13,90419,753

70.4

Bonds

2

3

66.7

Others

408

407

100.2

677

629

107.6

Equities

568

512

110.9

Bonds

109

117

93.2

Underwriting fees and selling concessions

30(Millions of yen except percentage)

Placement commissions

11,776

14,672

80.3

Other commissions

16,227

17,313

93.7

Total

42,996

52,77781.5-9-

Breakdown by product(Millions of yen except percentage)

2019<A>

2018<B>

Ratio(4/1/18～3/31/19)(4/1/17～3/31/18)<A>/<B>¥14,788¥20,527

72.0

259

247

104.9

Investment trusts

26,38430,733

85.8

Others

1,565

1,270

123.2

Total

42,996

52,77781.5

Equities
Bonds

2.Trading profits
Profits on equity trading are earned mainly from domestic over-the-counter trading of foreign equities,
particularly US stocks. Profits on bond trading arise mainly in conjunction with income from the handling of
foreign bonds for customers.
Due to unstable market conditions emerging in the autumn, domestic over-the-counter trading of foreign
equities fell year-on-year during the consolidated fiscal year under review. However, the value of sales offoreign bonds increased, thanks in part to our handling of social bonds.
Consequently, total profits on equity trading were ¥12,880 million (69.5% of the figure for the previous year).
Total bond trading profits were ¥9,479 million (117.3% of the figure for the previous year). Total trading
profits, including loss from other trading of ¥53 million (compared to a loss of ¥66 million in the previousyear), were ¥22,306 million (84.0% of the figure for the previous year).
Trading profits

35(¥ billions)

Trading profits(Millions of yen except percentage)

30

2019<A>

2018<B>

Ratio(4/1/18～3/31/19)(4/1/17～3/31/18)<A>/<B>

Equities

12,88018,530

69.5

Bonds

9,479

8,078

117.3

Others

-53

-66

-

22,306

26,541

84.0

25
20
15
10

Total

5
0
'15 '16 '17 '18 '19

3.Net financial income
Financial income amounted to ¥1,696 million (97.2% of the figure for the previous year). Financial expenses
stood at ¥1,072 million (92.2%). Net financial income—i.e., the difference between financial income andfinancial expenses—was ¥624 million (107.1%).

4.Other operating income
Other operating income—i.e., operating income other than that related to the financial products transaction
business and incidental operations—stood at ¥878 million (102.5% of the figure for the previous year).

5.Selling, general, and administrative expenses
Due to lower expenses, including personnel expenses and trading-related expenses, selling, general, andadministrative expenses were ¥64,964 million (94.1% of the figure for the previous year).
- 10 -

6.Other income (expenses)
Other income amounted to ¥1,066 million.

7.Dividends
The company sees shareholder returns as a critical management issue. Its basic policy is to maintain astable dividend while distributing profits in line with earnings.
Based on the policies above, the company set dividends for the fiscal year at ¥15 per share.

Ⅳ．Cash flows
Cash and cash equivalents at the end of the consolidated fiscal year was up ¥10,043 million from the end of
the previous fiscal year to ¥64,183 million.
Presented below is information on each type of cash flow during the consolidated fiscal year under review
and the underlying factors:＜Cash flows from operating activities＞
Net cash provided by operating activities were ¥39,870 million. This is mainly attributable to the difference
between cash inflows resulting from a change of ¥21,522 million decrease in trading assets and increase in
trading liabilities and a change of ¥19,860 million decrease in receivables on margin transactions andincrease payables on margin transactions and cash outflows from a change of ¥6,429 million decrease inguarantee deposits received.

＜Cash flows from investing activities＞
Net cash used in investment activities were ¥5,142 million, due mainly to the difference between cash
outflows of ¥2,402 million payment for purchase of intangible assets, ¥1,000 million payment for short-term
investments, ¥809 million payment for purchase of investment securities and cash inflows of ¥622 million
proceeds from sale of investment securities.

＜Cash flows from financing activities＞
Net cash provided by financing activities were ¥24,880 million, due mainly to cash outflows resulting fromdecrease in short-term borrowings of ¥17,522 million, ¥4,912 million on dividends paid, and ¥2,260 million
payments on long-term borrowings.

- 11 -

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Balance Sheet － March 31, 2019
Thousands of
U.S. dollars(note 3)

Millions of yen
2019

2018

2019

ASSETS
Current assets:
Cash on hand and in banks (notes 10 and 22)¥

71,228¥59,848$641,752

Cash segregated as deposits for customers andothers69,27868,932

624,182

Trading assets (notes 4 and 10)

93,615

112,138

843,454

Receivables arising from unsettled trades

8,346

9,689

75,196

Receivables on margin transactions (note 5)

32,43051,478292,189

Receivables on collateralized securities transactions(note 6)

62,64187,549564,384

Short-term investments (note 7)

2,590

1,500

23,335

Other current assets

12,543

8,984

113,010

(11)

(6)

(99)

352,660

400,1123,177,403

Property and equipment, net of accumulated
depreciation of ¥15,245 million ($137,355 thousand)in 2019 and ¥14,658 million in 2018 (note 10)18,927

19,470170,529

Intangible assets, net

6,397

5,905

57,636

Investment securities (notes 7, 8 and 10)

40,24242,648362,573

Long-term guarantee deposits

3,838

3,824

34,580Asset for retirement benefits (note 12)

1,371

1,434

12,352

Allowance for doubtful accounts
Total current assets

Investments and other assets:

Deferred income taxes (note 11)

1,324

854

11,929

Other

2,464

2,343

22,200Allowance for doubtful accounts(1,523)(1,427)(13,722)47,71649,676429,912

Total investments and other assets
TOTAL

¥

425,700

See accompanying notes to consolidated financial statements.
- 12 -¥

475,163$

3,835,480

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Balance Sheet－(Continued) － March 31, 2019
Thousands of
U.S. dollars(note 3)

Millions of yen
2019
LIABILITIES AND NET ASSETS
Current liabilities:
Trading liabilities (note 4)
Payables on margin transactions (notes 5 and 10)
Payables on collateralized securities transactions(note 6)
Deposits received
Guarantee deposits received
Short-term borrowings (notes 9 and 10)
Income tax payables (note 11)
Other current liabilities (notes 9 and 13)
Total current liabilities¥

64,668
12,7782018¥

63,011
12,006

2019$582,647
115,12892
39,46430,07873,345351
5,671
226,447

19,37337,48436,50789,6472,043
7,366
267,437829
355,564
270,997
660,825
3,162
51,0952,040,247

Non-current liabilities:
Long-term borrowings (notes 9 and 10)
Lease liabilities (note 9)
Deferred income taxes (note 11)
Liability for retirement benefits (note 12)
Other non-current liabilities (note 13)
Total non-current liabilities

6,610
835
4,973
6,556
3,879
22,853

10,048
877
5,020
6,489
3,957
26,391

59,555
7,523
44,80659,06834,949205,901

Financial instruments transactions reserve (note 14)
Total liabilities

1,216
250,516

1,286
295,114

10,956
2,257,104

18,59016,466109,166

18,59016,420113,225

167,492
148,356
983,566(3,682)(3,755)(33,174)

140,540

144,480

1,266,240

9,833
401
89
109

11,627
401
(70)
275

88,593
3,613
802
982

10,432

12,233

93,990

311

236

2,802

Non-controlling interests

23,901

23,100215,344

Total net assets

175,184

180,049

1,578,376

475,163$ 3,835,480

Net assets
Shareholders' equity (note 15):
Common stock
Authorized―750,000,000 shares;
issued―208,214,969 shares in 2019 and 2018
Capital surplus
Retained earnings
Treasury stock, at cost, 9,967,021 shares in 2019
and 10,210,310 shares in 2018
Total shareholders' equity
Accumulated other comprehensive income (loss):
Unrealized gain on available-for-sale securities(note 7)
Surplus on land revaluation (note 17)
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive
incomeStock acquisition rights (note 16)

Commitments and contingencies (note 23)
TOTAL

¥

425,700

See accompanying notes to consolidated financial statements.

- 13 -¥

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Statement of Income － Year ended March 31, 2019
Thousands of
U.S. dollars(note 3)

Millions of yen
2019

2018

2019

Operating revenues:
Commissions¥

42,996¥

52,777$387,386

Net gain on trading

22,306

26,541200,973

Interest and dividend income

1,696

1,746

15,281Service fee and other revenues

878

857

7,911

67,876

81,921

611,551

Interest expense

1,072

1,163

9,659

Net operating revenues

66,80480,758601,892

Selling, general and administrative expenses (note18)

64,964

69,038585,314

1,840

11,72016,578Dividend income

978

927

8,812

Exchange gain

68

233

613

Gain on sale of investment securities

72

5,019

649

Operating income
Other income (expenses):

Equity in gain of affiliates

51

93

459

Interest expense

(53)

(56)

(478)

Loss on sale and disposal of property andequipment and intangible assets
Loss on sale of investment securities

(27)
(15)

(2,499)
(63)

(243)
(135)

Reversal of financial instruments transactions
reserve
Impairment loss (note 19)

70
(122)

47
(4,823)631(1,099)Gain on sale of property and equipment

-

3

-

Loss on devaluation of investment securities

-

(9)

-

Other, net
Income before income taxes and noncontrolling interests

44

81

396

1,066

(1,047)

9,605

2,906

10,673

26,183

1,012

4,658

9,118

Income taxes (note 11):
Current
Deferred

Net income
Net income attributable to non-controllinginterests
Net income attributable to owners of theparent¥281(1,029)

2,532

1,293

3,629

11,650

1,613

7,044

14,533

760

1,191

6,848

853

See accompanying notes to consolidated financial statements.

- 14 -

¥

5,853

$

7,685

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income (Loss) － Year ended March 31, 2019
Thousands of
U.S. dollars(note 3)2019

Millions of yen
2018
2019
Net income

¥

1,613

¥

7,044

$

14,533

Other comprehensive income (loss) (note 20):
Unrealized loss on available-for-sale securities(1,682)(506)

Foreign currency translation adjustments

159

(227)

1,433

Remeasurements of defined benefit plans

(160)

(25)

(1,442)

Share of other comprehensive gain (loss) of affiliates
accounted for by equity method

(124)

332

(1,117)(1,807)(426)(16,281)

Total other comprehensive loss
Comprehensive income (loss)(15,155)

¥

(194)

¥

6,618

$

(1,748)

¥

(947)

¥

4,834

$

(8,532)Comprehensive income attributable to:
Owners of the parent
Non-controlling interests

753

See accompanying notes to consolidated financial statements.

- 15 -

1,784

6,784

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Statement of Changes in Net Assets － Year ended March 31, 2019
Millions of yen
Shareholders’ equity
Commonstock
Balances at March 31, 2017¥

Capitalsurplus18,590 ¥16,422Retainedearnings¥

112,283 ¥Treasurystock,
at cost(3,786) ¥Totalshareholders’equity143,509

Changes arising during the year:
Cash dividends(4,910)(4,910)Net income attributable toowners of the parent

5,853

5,853

Purchase of treasury stock
Disposition of treasury stock

2

Changes in equity resulting
from transactions with noncontrolling interests

(4)

(1)

(22)

(22)

53

54

(4)

Net changes other thanshareholders’ equity
Total changes during the year
Balances at March 31, 2018

-

(2)

942

31

971

18,59016,420113,225(3,755)

144,480

Changes arising during the year:
Cash dividends(4,912)

Net income attributable toowners of the parent(4,912)853

Purchase of treasury stock
Disposition of treasury stock

853
(6)

(6)

46

(0)

79

125

46

(4,059)73(3,940)109,166 ¥(3,682) ¥140,540

Net changes other thanshareholders’ equity
Total changes during the year
Balances at March 31, 2019¥18,590 ¥- 16 -

16,466¥

Millions of yen
Accumulated other comprehensive income (loss)
Unrealized

Foreign

gain onBalances at March 31, 2017¥

available-

Surplus on

currency

for-salelandtranslation

securities

revaluation

adjustments

12,382 ¥

401 ¥

157 ¥

Remeasurementsof defined
benefit
plans

311 ¥

Total
accumulated
othercomprehensive
income13,251 ¥

Stock

Non-

acquisition

controllingrightsinterests

162 ¥Total net
assets21,335 ¥ 178,257

Changes arising during theyear:
Cash dividends(4,910)Net income attributable toowners of the parent

5,853

Purchase of treasury stock(22)

Disposition of treasury stock

54

Changes in equity resulting
from transactions with

(4)

non-controlling interests

Net changes other thanshareholders’ equity

(755)

-

(227)

(36)

(1,018)

74

1,765

821

1,765

1,792

23,100180,049

Total changes during the year

(755)

-

(227)

(36)

(1,018)74

Balances at March 31, 2018

11,627

401

(70)

275

12,233236

Changes arising during theyear:
Cash dividends(4,912)

Net income attributable toowners of the parent

853

Purchase of treasury stock(6)

Disposition of treasury stock125

Net changes other thanshareholders’ equity(1,794)

-

159

(166)

(1,801)

75

801

(925)

Total changes during the year

(1,794)

-

159

(166)

(1,801)75

801(4,865)

89 ¥

109 ¥

10,432 ¥311 ¥Balances at March 31, 2019¥

9,833 ¥

401 ¥- 17 -

23,901 ¥ 175,184

Thousands of U.S. dollars(note 3)
Shareholders’ equity
Commonstock
Balances at March 31, 2018$

167,492 $CapitalsurplusRetainedearnings

147,941$ 1,020,137

Treasurystock,
at cost$(33,832) $Totalshareholders'equity1,301,738

Changes arising during the year:

Cash dividends(44,256)(44,256)

7,685

7,685

Net income attributable toowners of the parent
Purchase of treasury stock
Disposition of treasury stock

(54)

(54)

415

(0)

712

1,127

415

(36,571)658(35,498)(33,174) $1,266,240

Net changes other thanshareholders’ equity
Total changes during the year
Balances at March 31, 2019$

167,492 $

148,356$

983,566$

Thousands of U.S. dollars(note 3)
Accumulated other comprehensive income (loss)
Unrealized

Totalgain onForeign

Remeasure-accumulated

available-

Surplus on

currency

ments

other

for-salelandtranslationof definedcomprehensive

securities

revaluation

adjustments

benefit plansincomeBalances at March 31, 2018 $ 104,757 $

3,613 $

(631) $

2,478 $ 110,217 $

Stock

Non-

acquisition

controllingrightsinterests

Total net
assets2,126 $ 208,127 $ 1,622,208

Changes arising during the year:

Cash dividends(44,256)

Net income attributableto owners of the parent

7,685

Purchase of treasury stock(54)

Disposition of treasury stock

1,127

Net changes other thanshareholders’ equity(16,164)-

1,433(1,496)(16,227)

676

7,217

(8,334)

Total changes during the year

(16,164)-

1,433(1,496)(16,227)

676

7,217

(43,832)

Balances at March 31, 2019 $

88,593 $3,613 $

802 $

982 $

See accompanying notes to consolidated financial statements.

- 18 -

93,990 $2,802 $ 215,344 $ 1,578,376

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Statement of Cash Flows － Year ended March 31, 2019
Thousands of
U.S. dollars(note 3)

Millions of yen
2019

2018

2019

Cash flows from operating activities:
Income before income taxes and non-controlling interests

¥

2,906

¥

10,673$

26,183Adjustments to reconcile income before income taxes and noncontrolling interests to net cash provided by (used in)operating activities:
Depreciation and amortization

3,098

Impairment loss

3,609

27,912

122

4,824

1,099

Interest and dividend income(2,681)(2,679)(24,155)

Interest expense
Loss on disposal of intangible assets
Gain on sale of investment securities

1,125
0
(83)

1,219
2,457
(4,956)

10,1360(748)

Loss on devaluation of investment securities
Decrease (increase) in deposits segregated for customer
Decrease (increase) in trading assets and increase (decrease) intrading liabilities
Decrease (increase) in receivables on margin transactions andincrease (decrease) in payables on margin transactions
Decrease (increase) in receivables on collateralized securities
transactions and increase (decrease) in payables on collateralized
securities transactions
Increase (decrease) in deposits received

-

9

-

(150)

(3,500)(1,351)

21,523(40,605)

193,918

19,860(11,328)

178,935

5,627

26,68750,698

1,833

3,411

16,515Decrease (increase) in short-term guarantee deposits

(512)

(625)

(4,613)

Increase (decrease) in guarantee deposits received(6,429)1,315(57,924)

Increase (decrease) in allowance for doubtful accounts

101

(12)

910

Decrease (increase) in assets for retirement benefits and increase(decrease) in liabilities for retirement benefits
Increase (decrease) in financial instruments transactions reserve

131
(70)

(62)
(47)

1,180
（631）

(3,440)994(30,993)

42,961(8,616)

387,071

Other, net
Sub-totalInterest and dividend received

2,677

2,725

24,119Interest paid

(1,127)(1,144)(10,154)

Income taxes paid
Net cash provided by (used in) operating activities(4,641)(5,842)(41,815)

39,870(12,877)359,221(1,000)(1,500)(9,010)

(329)

(584)

(2,964)(2,402)(2,606)(21,642)

(809)

(280)

(7,289)Cash flows from investing activities:
Payment for short-term investments
Payment for purchase of property and equipment
Payment for purchase of intangible assets
Payment for purchase of investment securities
Proceeds from sale of investment securities
Other, net
Net cash provided by (used in) investing activities- 19 -

622

5,980

5,604

(1,224)(349)(11,028)(5,142)

661(46,329)Cash flows from financing activities:
Increase (decrease) in short-term borrowings(17,523)

20,507

Proceeds from long-term borrowings

-

1,000

-

Payments on long-term borrowings(2,260)(692)(20,362)

(6)

(22)

(54)

Purchase of treasury stock
Proceeds from sale of parent’s stock held by subsidiaries
Dividends paid

(157,879)

283

56

2,550

(4,912)(4,910)(44,256)

Dividends paid to non-controlling interests of subsidiaries

(32)

(31)

(289)

Other, net

(430)

(490)

(3,874)(24,880)

15,418(224,164)

196

(253)

1,766

Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents

10,044

2,949

90,494

Cash and cash equivalents, beginning of year

54,14051,191

487,792

Cash and cash equivalents, end of year (note 22)¥

64,184

See accompanying notes to consolidated financial statements.

- 20 -¥

54,140$578,286

Notes to Consolidated Financial Statements
Okasan Securities Group Inc. and Consolidated Subsidiaries－

Year ended March 31, 2019

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements include the accounts of Okasan Securities
Group Inc. (the “Company”) and its subsidiaries.
The Company and its domestic subsidiaries maintain their books of account and prepare theirfinancial statements in conformity with financial accounting standards of Japan, and its
foreign subsidiary in conformity with those of the country of its domicile.
“Practical Solution on unification of Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements” (ASBJ Practical Issues Task Force (PITF) No. 18, May 17,2006) requires that for the preparation of consolidated financial statements, the accounting
policies and procedures applied to a parent company and its subsidiaries for similartransactions and events under similar circumstances should be unified, in principle, andfinancial statements prepared by foreign subsidiaries in accordance with IFRSs or thegenerally accepted accounting principles in the United States (U.S. GAAP) tentatively may be
used for the consolidation process, however, the items listed in the PITF should be adjusted in
the consolidation process so that net income is accounted for in accordance with Japan GAAP
unless they are not material. The Company made necessary modification to the consolidated
financial statements according to the PITF.
The accompanying consolidated financial statements have been prepared in accordance withthe provisions set forth in the Japanese Financial Instruments and Exchange Law and its
related accounting regulations, and in conformity with accounting principles and practices
generally accepted in Japan and applicable to Japanese securities companies.
In preparing the accompanying consolidated financial statements, certain reclassifications
have been made in the financial statements issued domestically in Japan in order to present
them in a form which is more familiar to readers outside Japan. In addition, the notes to theconsolidated financial statements include information which is not required under accounting
principles generally accepted in Japan but is presented herein as additional information.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.

Consolidation— The consolidated financial statements include the accounts of theCompany and its 12 subsidiaries. Two affiliates are accounted for by equity method at
March 31, 2019. The “Accounting Standards for Consolidation” require the control or
influence concept for the consolidation scope of subsidiaries and affiliates. Under thecontrol or influence concept, a company in which the Company or its consolidated
subsidiaries, directly or indirectly, are able to exercise control over operations is fully
consolidated, and a company over which the Company and/or its consolidated subsidiaries
have the ability to exercise significant influence is accounted for by the equity method.
Investments in affiliates are accounted for by the equity method.
All significant intercompany balances and transactions have been eliminated inconsolidation.

b.

Cash and cash equivalents— For the purposes of the statement of cash flows, the Company
considers all highly liquid investments with insignificant risk of changes in value whichhave maturities of generally three months or less when purchased to be cash equivalents.

c.

Trading assets and liabilities— Trading assets and liabilities, including securities andfinancial derivatives for trading purposes are recorded on a trade date basis at fair value.
Revenues and expenses related to trading securities transactions are recorded on a trade- 21 -

date basis. Changes in the fair values are reflected in “net gain on trading” in theaccompanying consolidated statement of income. Gains and losses arose from derivatives
held or issued for trading purposes are also reported as “net gain on trading” in theaccompanying consolidated statement of income, which includes realized gains and losses
as well as changes in the fair values of such instruments. Securities owned for
non-trading purposes, shown in the accompanying consolidated balance sheet as“Short-term investments” and “Investment securities” are discussed below.
d.

Securities—The Company examines the intent of holding securities for non-trading
purposes, and classifies those securities as (a) debt securities intended to be held tomaturity (“held-to-maturity debt securities”), (b) equity securities issued by an affiliatedcompany and (c) all other securities not classified in any of the above categories(“available-for-sale securities”).
Held-to-maturity debt securities are stated at amortized cost. Available-for-sale securities
with market value are stated at market, based on quoted market prices. Realized gains
and losses on sale of such securities are computed using the gross-average cost.
Unrealized gains or losses on such securities, net of related taxes, are recorded in otheraccumulated comprehensive income. Debt securities classified as “available-for-salesecurities” for which fair value is not available are stated at the amortized cost. Equity
securities classified as “available-for-sale securities” for which market value is not available
are stated at the gross-average cost.

e.

Hedging transactions— The Company states derivative financial instruments at fair value
and recognize changes in the fair value as gains or losses unless derivative financial
instruments are used for hedging purposes. Valuation gains or losses on hedging
instruments are mainly deferred as assets or liabilities until the gains or losses onunderlying hedged instruments are realized.
The Company and certain subsidiaries
have entered into interest rate swap agreements for hedging interest rate exposures. The
difference in amounts to be paid or received on interest rate swap agreements is recognizedover the life of the agreement as an adjustment to interest expense.

f.

Collateralized securities transactions— Collateralized securities transactions consist of
securities borrowed and loaned transactions. Securities borrowed transactions generally
require the Company to provide the counterparty with collateral in the form of cash. And
securities loaned transactions, the Company generally receives collateral in the form of
cash. The Company monitors the market value of the securities borrowed or loaned andrequires additional cash, as necessary, to ensure that such transactions are adequately
collateralized. Under the “Uniform Accounting Standards of Securities Companies”,
securities borrowed and loaned transactions are accounted for as financing transactions.
Securities borrowed or loaned that are cash collateralized are recorded at the amount ofcash collateral advanced or received. Gensaki transactions originate in the Japanesefinancialmarkets,
andinvolvetheselling(“Borrowingson
Gensakitransactions”)/purchasing (“Loans on Gensaki transactions”) of commercial paper,
certificates of deposit, Japanese government bonds and various other debt securities
to/from an institution wishing to make a short-term investment, with the Company
agreeing to repurchase/resell them from/to the institution on a specified date at a specified
price.
Under the “Accounting Standards for Financial Instruments”, Gensaki
transactions are accounted for as financing transactions. Gensaki transactions arecarried at their contractual amounts.

g. Allowance for doubtful accounts— Allowance for doubtful accounts of the Company and its
domestic consolidated subsidiaries are provided on the estimated historical deterioration
rate for normal accounts, and based on specifically assessed amounts for doubtful accounts.
An overseas consolidated subsidiary provides specifically assessed amount for doubtful
accounts.

- 22 -

h. Property and equipment— Property and equipment are stated at cost. Depreciation ofproperty and equipment of the Company and its domestic consolidated subsidiaries iscomputed substantially by the declining-balance method at rates based on the estimateduseful lives of the assets, while the straight-line method is applied to buildings purchased
in Japan on or after April 1, 1998 and to leasehold improvements and structures purchased
in Japan on or after April 1, 2016. And in an overseas subsidiary, depreciation is computedby the straight-line method.
The range of useful lives is principally from 3 to 50 years for buildings and from 3 to 15
years for equipment.
i.

Intangible assets— Intangible assets are carried at cost less amortization. Software forinternal use is amortized under straight-line method based on internally estimated usefullife (5 years). Amortization of other intangible assets is calculated by the straight-line
method at rates based on the estimated useful lives of respective assets.

j.

Retirement and severance benefits— Liabilities for retirement benefits are provided mainly
at an amount calculated based on the retirement benefit obligation and the fair value of thepension plan assets at the balance sheet dates, as adjusted for the unrecognized actuarial
gain or loss and unrecognized prior service benefit or cost. The retirement benefit
obligation is attributed to each period by the benefit formula basis. Actuarial gain or loss
is amortized in the subsequent year that it occurs by the straight-line method within the
average remaining years of service of the employees of 5 years.
Certain domestic consolidated subsidiaries have unfunded defined benefit pension plans for
directors and corporate auditors based on their internal rule. The provision for the plans
has been made in the accompanying consolidated financial statements for vested benefits towhich directors and corporate auditors are entitled if they were to retire and severimmediately at the balance sheet date.

k.

Leases—Leased assets related to finance lease transactions without title transfer are
depreciated on a straight-line basis, with the lease periods as their useful lives and noresidual value.

l.

Income taxes—Income taxes in Japan applicable to the Company and its domestic
consolidated subsidiaries consist of corporate tax, inhabitant tax and business tax.
The “Accounting Standards for Income Taxes” require that deferred income taxes be
accounted for under the asset and liability method. Deferred tax assets and liabilities arerecognized for the expected future tax consequences of events that have been included on
the financial statements or tax return. Under this method, deferred tax assets andliabilities are measured using enacted tax rates expected to apply to taxable income in theyears in which those temporary difference are expected to be recovered or settled, and theeffect on deferred tax assets and liabilities of a change in tax rates is recognized in incomein the period that includes the enactment date.
The Company has filed consolidated tax returns in Japan.

m. Foreign currency transactions— Under the “Accounting Standards for Foreign Currency
Transactions,” receivables and payables denominated in foreign currencies are translated
into yen at the rate of exchange at the balance sheet dates and gains or losses resulting
from the translation of foreign currencies are credited or charged to income. Assets andliabilities, and revenues and expenses of an overseas subsidiary are translated into yen at
the rate of exchange at the balance sheet dates, a comprehensive adjustment resulting fromtranslation is presented as “Foreign currency translation adjustments” in a component of
net assets.

- 23 -

n.

Asset retirement obligations— The Company recognizes an asset retirement obligation
which is a statutory or similar obligation with regard to the removal of assets as a liability.
An asset retirement obligation is recognized as a liability at the time that the asset isincurred by its acquisition, construction, development or ordinary use. When an asset
retirement obligation is recognized as a liability, the asset retirement cost corresponding to
it is included in the cost of the relevant asset by the same amount.

o.

Accounting standards issued but not yet applied
1. Accounting Standards for Revenue Recognition etc.
・ Accounting Standards for Revenue Recognition (ASBJ Statement No. 29, March 30,
2018)
・ Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ
Guidance No. 30, March 30, 2018)(1) Overview
The International Accounting Standards Board (IASB) and US Financial AccountingStandards Board (FASB) co-developed a new comprehensive revenue recognition
standard and published “Revenue from Contracts with Customers” in May 2014 (IFRS
No. 15 in IASB, Topic 606 in FASB). Given that IFRS No. 15 will be applied from thefiscal year starting on or after January 1, 2018 and Topic 606 from the fiscal year
starting after December 15, 2017, the Accounting Standards Board of Japan has
developed comprehensive accounting standards for revenue recognition and publishedthem together with implementation guidance.
The ASBJ basic policy in developing accounting standards for revenue recognition isthought to be setting accounting standards, with the incorporation of the basic principles
of IFRS No. 15 as a starting point, from a standpoint of comparability between financial
statements, which is one of the benefits of ensuring consistency with IFRS No. 15, and tobe adding alternative accounting treatments without losing comparability if there is an
item that we should take into account in practices, etc. that have been conducted inJapan.
(2) Planned applicable date
The accounting standards are to be applied from the beginning of the year ending March
31, 2022.
(3) Impact of application on these accounting standards
The Company is currently evaluating the impact of application of these accounting
standards to the consolidated financial statements.
2. Revised Practical Solution on Unification of Accounting Policies Applied to Foreign
Subsidiaries, etc. for Consolidated Financial Statements
・ Revised Practical Solution on Unification of Accounting Policies Applied to Foreign
Subsidiaries for Consolidated Financial Statements (ASBJ Practical Issues Task Force(PITF) No. 18, September 14, 2018)
・ Revised Practical Solution on Unification of Accounting Policies Applied to Associates
Accounted for Using the Equity Method (PITF No. 24, September 14, 2018)(1) Overview
The ASBJ has examined the revision of “Practical Solution on unification of Accounting
Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements” (PITF
No. 18) and “Practical Solution on unification of Accounting Policies Applied to
Associates Accounted for Using the Equity Method” (PITF No. 24)
When foreign subsidiaries have chosen to recognize subsequent changes in the fair valueof equity instruments in other comprehensive income in accordance with the practicalsolution on “Unification of Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements”, the differences between acquisition costs and sales
prices should be recognized in income when the investments are sold for consolidated
financial statements.
When the Company should be required to record impairment losses, valuationdifferences should be recorded as loss for the year.

- 24 -

(2) Planned applicable date
The accounting standards are to be applied from the beginning of the year ending March
31, 2020.
(3) Impact of application on these accounting standards
The Company is currently evaluating the impact of application of these accounting
standards to the consolidated financial statements.
p.

3.

Reclassifications— Certain reclassifications have been made to the prior years’ consolidated
financial statements to conform to the presentation used in consolidated statements as ofand for the year ended March 31, 2019.

BASIS OF FINANCIAL STATEMENT TRANSLATION
The translations of the yen amounts into U.S. dollars are included solely for the convenience ofthe reader, using the prevailing exchange rate at March 29, 2019, which was ¥110.99 to U.S. $1.
The convenience translations should not be construed as representations that the yen amounts
have been, could have been, or could in the future be, converted into U.S. dollars at this or any
other rate of exchange.

4.

TRADING ASSETS AND LIABILITIES
Trading assets and trading liabilities at March 31, 2019 and 2018 consist of the following:
Millions of yen
2019
2018
Trading assets:
Securities and other
Derivatives¥¥

Trading liabilities:
Securities and other
Derivatives

¥
¥

5.

93,599 ¥ 112,118
16
20
93,615 ¥ 112,138
64,661 ¥7
64,668 ¥62,961
50
63,011Thousands of
U.S. dollars

2019
$
$
$
$

843,310
144
843,454582,58463
582,647MARGIN TRANSACTIONS
Margin transactions at March 31, 2019 and 2018 consist of the following:
Millions of yen
2019
2018
Assets:Loans receivable from customers
Cash deposits as collateral for securities
borrowed from securities finance companies
Liabilities:
Borrowings from securities finance companies
Proceeds from securities sold for customers’
accounts

Thousands of
U.S. dollars

2019¥ 26,165¥ 48,517$ 235,742

6,265¥ 32,430

2,961¥ 51,478

56,447$ 292,189

¥

¥

$

3,161

9,617
¥ 12,778

6,503

5,503
¥ 12,006

28,48086,648$ 115,128

Loans receivable from customers are stated at amounts equal to the purchase price of therelevant securities, which are collateralized by customers’ securities and customers’ deposits inthe form of cash or securities. Proceeds from securities sold for customers’ accounts are statedat the sales prices of the relevant securities on the respective transaction dates.

- 25 -

6.

COLLATERALIZED SECURITIES TRANSACTIONSCollateralized securities transactions at March 31, 2019 and 2018 consist of the following:Thousands of
U.S. dollars

Millions of yen
2019
2018
Assets:Cash collateral for securities borrowed
Loans on Gensaki transactions
Liabilities:
Cash collateral for securities loaned
7.

2019

¥

30
62,61162,641¥ 87,549
87,549$270
564,114564,384¥

92¥ 19,373$

829

SECURITIES FOR NON-TRADING PURPOSES
Balance sheet amount, fair value, gross unrealized gain and gross unrealized loss ofheld-to-maturity debt securities with fair value at March 31, 2019 and 2018 are summarized asfollows:
Millions of yen
Gross
Gross
Balance unrealized unrealized Fair value
loss
gain
sheet
At March 31, 2019
Government, corporate and other bonds ¥
41 ¥
3 ¥
- ¥
44
At March 31, 2018
Government, corporate and other bonds

¥

47

¥

3

¥

-

¥

50

Thousands of U.S. dollars
Gross
Gross
Balance unrealized unrealized Fair value
loss
gain
sheet
At March 31, 2019
Government, corporate and other bonds$- 26 -

369

$

27

$

-

$

396

Acquisition cost, balance sheet amount, gross unrealized gain and gross unrealized loss ofavailable-for-sale securities with fair value at March 31, 2019 and 2018 are summarized asfollows:
Millions of yen
Gross
Gross
BalanceAcquisition unrealized unrealized
sheet
loss
gain
cost
At March 31, 2019
Current:
Government, corporate and other bonds ¥
- ¥
- ¥
- ¥
Other
2,600
10
(20)
2,590
¥ 2,600 ¥10 ¥(20) ¥
2,590
Non-current:
Equity securities¥ 12,946 ¥ 20,036 ¥(738) ¥ 32,244
Other
922
77
(37)
962
¥ 13,868 ¥ 20,113 ¥(775) ¥ 33,206
At March 31, 2018
Current:
Government, corporate and other bonds ¥

1,500
1,500

Other
¥
Non-current:
Equity securities
Other¥ 12,848
1,086¥ 13,934¥¥-¥ 21,784
120¥ 21,904

¥
¥
¥
¥

-

¥
¥

1,500
1,500

(125) ¥ 34,507
(66)
1,140
(191) ¥ 35,647

Thousands of U.S. dollars
Gross
Gross
BalanceAcquisition unrealized unrealized
sheet
loss
gain
cost
At March 31, 2019
Current:
Government, corporate and other bonds $Other$
Non-current:
Equity securities
Other

23,42523,425$ 116,641
8,307$ 124,948

$
$

90
90

$ 180,521
694$ 181,215

$
$
$
$

- $
(180)
(180) $

23,33523,335(6,649) $ 290,513
(334)
8,667
(6,983) $ 299,180

Securities classified as available-for-sale securities for which fair value is not available areunlisted equity securities amounting to ¥6,669 million ($60,086 thousand) and ¥6,748 million,
and investments in limited partnership and similar partnership amounting to ¥325 million($2,928 thousand) and ¥205 million at March 31, 2019 and 2018, respectively.

- 27 -

For the years ended March 31, 2019 and 2018, proceeds from sales of available-for-salesecurities, gross realized gains and gross realized losses are as follows:
Millions of yen
Proceeds from
Gross realized Gross realized
sales oflossesgains
available-for-sa
le securities
March 31, 2019
Equity securities
¥
358
¥
30
¥
Government, corporate and other bonds
Other
264
1
15
¥
622
¥
31
¥
15
March 31, 2018
Equity securities¥

Government, corporate and other bonds

Other
¥

5,036
944
5,980

¥

¥

4,965
45
5,010

¥

0
63
63

¥

Thousands of U.S. dollars
Proceeds from
Gross realized Gross realized
sales oflossesgains
available-for-sa
le securities
March 31, 2019
Equity securities$

Government, corporate and other bonds

Other
$
8.

3,225
2,379
5,604

$

$

270
9
279

$

135
135

$

INVESTMENTS IN AFFILIATES
The aggregate carrying amount of investments in affiliates at March 31, 2019 and 2018 are¥5,174 million ($46,617 thousand) and ¥5,287 million, respectively.

9.

BORROWINGS
The weighted-average interest rates applicable to the short-term borrowings are 0.70 % and0.56% at March 31, 2019 and 2018, respectively.
Long-term borrowings at March 31, 2019 and 2018 consist of the following:Thousands of
U.S. dollars

Millions of yen
2019
2018
Borrowings, maturing in installments through2022; bearing weighted average interest of 1.79%
at March 31, 2019
¥ 11,048
Borrowings, maturing in installments through2022; bearing weighted average interest of 2.01%
at March 31, 2018
Less current installments¥- 28 -

¥

2019

-

$

99,54013,308

-

4,438

3,260

39,985

6,610¥ 10,048$

59,555

Lease liabilities at March 31, 2019 and 2018 consist of the following:Thousands of
U.S. dollars

Millions of yen
2019
2018
Lease liabilities maturing in installments through2025; bearing weighted average interest of 3.11%¥
at March 31, 2019
Lease liabilities maturing in installments through2023; bearing weighted average interest of 3.09%
at March 31, 2018
Less current installments
¥

1,135

¥

2019

-

$

10,226

-

1,268

-

300

391

2,703

835

¥

877

$

7,523

(1) Current installments of long-term borrowings are included in short-term borrowings in
the accompanying balance sheet.
(2) Long-term borrowings included subordinated borrowings provided in Article 176 of the“Cabinet Office Ordinance Concerning Financial Instruments Business” (the Prime
Minister’s Office Ordinance No. 52, 2007) as follows:
Millions of Yen
2019
2018
Long-term borrowings
Current installments of long-term borrowings

¥

4,000

¥

4,000
2,000

Annual maturities of borrowings after March 31, 2020, are as follows:
Millions ofyenYear ending March 31
2021¥ 3,750
2022
2,660
2023
200
2024
Annual maturities of lease liabilities after March 31, 2020, are as follows:
Millions ofyenYear ending March 31
2021
¥
264
2022
222
2023
180
2024
162

Thousands of
U.S. dollars

2019$

36,039Thousands of
U.S. dollars$

33,78723,966
1,802-

Thousands of
U.S. dollars

$

2,379
2,000
1,622
1,460

To meet its liquidity needs stably and expeditiously and to strengthen financial operations,Okasan Securities Co., Ltd. (a subsidiary of the Company) established a commitment line of¥21,000 million ($189,206 thousand) with 6 financial institutions at March 31, 2019 and¥21,000 million with 7 financial institutions 2018.
As is customary in Japan, both short-term and long-term bank borrowings are made undergeneral agreements which provide that security and guarantees for present and futureindebtedness will be given upon request of the bank, and that the bank shall have the right tooffset cash deposits against obligations that have become due or, in the event of default, against
all obligations due the bank.

- 29 -

10. PLEDGED ASSETSAt March 31, 2019 and 2018, the carrying value of assets pledged is as follows:
Millions of Yen
2019
2018
¥

Cash in banks
Trading assets
Property and equipment
Investment securities

1,910
7,451
4,498
11,985¥ 25,844¥

1,827
13,436
4,525
14,094¥ 33,882

Thousands of
U.S. dollars

2019$17,20967,132
40,526
107,983$ 232,850

Assets in the above table are pledged for the following liabilities:
Millions of yen
2019
2018
Short-term borrowings
Borrowings from securities finance companies
Long-term borrowings

¥

7,573
673
5,910
¥ 14,156¥ 13,441
606
5,946¥ 19,993

Thousands of
U.S. dollars

2019$68,231
6,064
53,248$ 127,543

In addition to above, at March 31, 2019, trading assets, etc. amounting to ¥37,264 million($335,742 thousand) and investments securities amounting to ¥1,428 million ($12,866
thousand) are deposited as guarantee for settlement of trading accounts and securities borrowed,
respectively. In addition to above, at March 31, 2018, trading assets, etc. amounting to ¥53,143
million and investments securities amounting to ¥1,313 million were deposited as guarantee forsettlement of trading accounts and securities borrowed, respectively.
The fair value of the securities pledged at March 31, 2019 and 2018 are as follows:
Millions of Yen
2019
2018
¥ 9,778
Loaned securities on margin transactions
Securities pledged as collateral for borrowing fromsecurities finance companies
3,292
Loaned securities
189
Other
34,047¥ 47,306

¥

5,514

6,842
19,36043,804¥ 75,520

Thousands of
U.S. dollars

2019$

88,09829,6601,703
306,758$ 426,219

The fair value of the securities received as collateral at March 31, 2019 and 2018 are as follows:
Millions of Yen
2019
2018
Securities received on margin transactions
Securities borrowed
Securities pledged as collateral
Other- 30 -¥ 24,347
290
49,45869,478¥ 143,573¥ 44,122
87,41859,5144,790¥ 195,844

Thousands of
U.S. dollars

2019$219,3622,613
445,608
625,984$ 1,293,567

11.

INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese corporate, inhabitant andbusiness taxes based on income.
The tax effects of significant temporary differences and tax loss carryforwards which resulted indeferred tax assets and deferred tax liabilities at March 31, 2019 and 2018 are as follows:
Millions of yen
2019
2018
Deferred tax assets:
Tax loss carryforwards
Liability for retirement benefits (employees)
Depreciation and amortization
Accrued bonuses
Allowance for doubtful accounts
Asset retirement obligations
Financial instruments transactions reserve
Impairment loss on land etc.
Retirement benefits payable for directors andcorporate auditors
Loss on devaluation of investment securities
Cost recognized for the stock options
Social insurance costs for accrued bonuses
Loss on devaluation of golf memberships
Other

¥

Valuation allowance for tax loss carryforwards
Valuation allowance for deductible temporary
differences
Total valuation allowance
Total
Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Land revaluation excess
Asset for retirement benefits (employees)
Asset retirement obligations
Dividends receivable
Other
Total
Net deferred tax liabilities
¥

3,240
1,848
1,142
506
466
408
371
229

¥

2,898
1,721
1,460
719
435
396
392
226

Thousands of
U.S. dollars

2019$29,192
16,65010,289
4,559
4,199
3,676
3,343
2,063

158
125
95
70
51
164
8,873
(2,589)

162
136
72
96
50
481
9,244
-

1,423
1,126
856
631
459
1,478
79,944(23,327)(1,904)(4,493)4,380(4,750)4,494(17,154)(40,481)
39,463(5,911)(1,457)
(295)
(209)
(130)
(27)
(8,029)(3,649) ¥(6,616)(1,457)
(222)
(208)
(136)
(21)
(8,660)(4,166)(53,257)(13,128)(2,658)(1,883)(1,171)(243)(72,340)$ (32,877)

The Company applies the “Partial Amendments to Accounting Standard for Tax EffectAccounting” (ASBJ Statement No. 28 issued on February 16, 2018, hereinafter the “Partial
Amendments to Tax Effect Accounting Standard”) from the beginning of the year ended March
31, 2019. Deferred tax assets are shown in the segment of investments and other assets, anddeferred tax liabilities are shown in the segment of non-current liabilities. As a result,“deferred tax assets” classified as “current assets” decreased by ¥1,036 million and “deferred tax
assets” classified as “investments and other assets” decreased by ¥1,559 million, and “deferred
tax liabilities” classified as “current liabilities” decreased by ¥24 million and “deferred tax
liabilities” classified as “non-current liabilities” decreased by ¥2,571 million for the year ended
March 31, 2018. The Company offset deferred tax assets and liabilities when the deferred tax
assets liabilities are associated with the income taxes levied on the same taxable entity. As aresult, total assets decreased by ¥2,596 million for the year ended March 31, 2018.
In addition, the Company added descriptions stated in the annotation No. 8 (excluding the total
amount of valuation allowances) and No. 9 of the “Accounting Standard for Tax Effect- 31 -

Accounting” set forth in Paragraph 3 to 5 of the Partial Amendments to Tax Effect AccountingStandard as follows. The Company does not add the descriptions for the year ended March 31,2018 in accordance with the transition provision set forth in Paragraph 7.
Tax loss carryforwards (the amounts shown in the table below represent the deferred tax assets
on the tax loss carryforwards that obtained by multiplying by a statutory tax rate) will expire as
follows:

Tax loss carryforwards
Valuation allowance
Deferred tax assets
recognizedTax loss carryforwards
Valuation allowance
Deferred tax assets
recognizedOver 1year
through 2
years
440
(440)

Over 2years
through 3
years
550
(479)

-

-

71

1 year or
less$ 2,982(2,982)

Over 1year
through 2
years
3,964
(3,964)

1 year or
less
¥
331
(331)
¥

$

-

Millions of yen
Over 3
Over 4years
years
through 4
through 5
years
years
86
91
(86)
(84)
7

573

Thousands of U.S. dollars
Over 2
Over 3
Over 4
years
years
years
through 3
through 4
through 5
years
years
years
4,956
775
820
(4,316)
(775)
(757)

Over 5years
15,695(10,533)

-

640

-

Over 5years
1,742(1,169)

-

63

5,162

¥

Total
3,240
(2,589)

¥

651

Total
$ 29,192(23,327)$

5,865

The Company recognized deferred tax assets of ¥651 million ($5,865 thousand) for tax loss
carryforwards (the amounts by multiplying by the statutory tax rate) of ¥3,240 million ($29,192
thousand). The deferred tax assets include the deferred tax assets of the Company of ¥189
million ($1,703 thousand) for tax loss carryforwards and the deferred tax assets of two
subsidiaries in the Company’s tax filing group of ¥462 million ($4,162 thousand) for tax loss
carryforwards. The tax loss carryforwards of the Company have been incurred because theCompany recorded the loss before income taxes for the years ended March 31, 2013 and 2019 in
its non-consolidated financial statements. And the tax loss carryforwards of the two
subsidiaries have been incurred because they recorded the loss before income taxes for the year
ended March 31, 2019 in their non-consolidated financial statements. The amount of thedeferred tax assets for the tax loss carryforwards considered realizable by taking into
consideration of the estimated taxable income based on future Group profitability.
A reconciliation of the statutory tax rate and the effective tax rate as a percentage of income
before income taxes and non-controlling interests for the years ended March 31, 2019 and 2018is as follows:
2019
2018
Statutory tax rate
Expenses not deductible for tax purposes
Income not credited for tax purposes
Per capita tax
Equity in gain of affiliates
Valuation allowance
Tax credits for salary increase
Differences in income tax rates applicable toconsolidated subsidiaries
Other
Effective tax rate

- 32 -

30.5%
15.6(12.2)
3.1
(0.1)
6.4
-

30.7%
1.3
(0.3)
0.9
(0.2)
(2.7)
(2.4)

1.2
0.0
44.5%

6.7
34.0%

12. RETIREMENT AND PENSION PLANS
The Company and its domestic consolidated subsidiaries have a defined contribution retirement
and pension plan (Securities Omnibus DC Okasan Plan), a corporate defined benefit pension
plan and an unfunded retirement and severance plan that provide for lump-sum payment ofbenefits.
Defined benefit plans
Followings are the information of defined benefit plans at March 31, 2019 and 2018 and for theyears then ended.
(1) Reconciliation of changes in retirement benefit obligation
Millions of yen
2019
2018
Retirement benefit obligation at beginning of year ¥ 14,423
Service cost
814
Interest cost
9
Actuarial gain or loss
31
Benefits paid
(791)
Other
1
Retirement benefit obligation at end of year
¥ 14,487¥ 14,158
774
11
150
(670)
¥ 14,423

Thousands of
U.S. dollars

2019$ 129,949
7,334
81
279
(7,127)9$ 130,525

Note: 1. Certain consolidated subsidiaries adopt the simplified method for calculation ofretirement benefit obligation
2. Retirement benefit expenses of the consolidated subsidiaries adopted the simplified
method are included in above service cost.
(2) Reconciliation of changes in plan assets
Millions of yen
2019
2018
Plan assets at beginning of year
Expected return on plan assets
Actuarial gain or loss
Employer contributions
Benefits paid
Other
Plan assets at end of year

¥

¥

9,516
46
(27)
281
(418)
1
9,399

¥

¥

9,173
44
425
273
(399)
9,516

Thousands of
U.S. dollars

2019
$

$

85,737
414
(243)
2,532
(3,766)
984,683(3) Reconciliation between net of retirement benefit obligation and plan assets, and liability
or asset for retirement benefits recognized in consolidated balance sheet
Millions of yen
2019
2018
Funded retirement benefit obligation
Plan assets¥

Unfunded retirement benefit obligation
Net of liability and assets for retirement benefits
Liability for retirement benefits
Asset for retirement benefits
Net of liability and asset for retirement benefits- 33 -

¥
¥
¥

8,406
(9,399)
(993)
6,081
5,088

¥

6,459
1,371
5,088

¥

¥

¥

Thousands of
U.S. dollars

2019

8,463
(9,516)(1,053)
5,960
4,907

$

6,341
1,434
4,907

$

75,736(84,683)(8,947)54,789$ 45,842$

58,194
12,35245,842

(4) The components of retirement benefit expenses
Thousands of
U.S. dollars

Millions of yen
2019
2018
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gain or loss
Retirement benefit expenses

¥

814
9
(46)
(173)
604

¥

¥

¥

2019

774
11
(44)
(311)
430

$

$

7,334
81
(414)
(1,559)5,442(5) Remeasurements of retirement benefit plans before related tax effects
Thousands of
U.S. dollars

Millions of yen
2019
2018
¥

Actuarial gain or loss

(231)

¥

2019

(36)

$

(2,081)(6) Accumulated remeasurements of retirement benefit plans before related tax effects
Thousands of
U.S. dollars

Millions of yen
2019
2018
¥

Unrecognized actuarial gain or loss

159

¥

2019

389

$

1,433

(7) Plan assets(a) Percentage by major category of plan assets

Equity securities
General accountDebt securities
Other
Total

2019

2018

37%
32
18
13
100%

36%
32
19
13
100%

(b) Determination procedure of long-term expected rate of return
In determining long-term expected rate of return on plan assets, the Company
considers the current portfolio of plans assets, actual performance result,investment policy and market trend.
(8) Basis for calculation of actuarial assumptions
The assumptions used in accounting for the above plans at March 31, 2019 and 2018 are
as follows:
2019
2018
(a) Discount rate(b) Long-term expected rate of return

0.00%
0.50%

0.07%
0.50%

Defined contribution plans
The amount to be paid by the Company and consolidated subsidiaries to the defined contributionplans is ¥207 million ($1,865 thousand) and ¥202 million for the years ended March 31, 2019and 2018, respectively.
Retirement benefits for directors and corporate auditors
Directors and corporate auditors are not covered by the plans described above. For such
persons, certain consolidated subsidiaries have unfunded defined benefit pension plans. Under
the plans, directors and corporate auditors are entitled to lump-sum payments based on thecurrent rate of pay and length of service when they leave the Company.
At March 31, 2019 and 2018, the subsidiaries provide for the amount of ¥97 million ($874
thousand) and ¥147 million, respectively.
- 34 -

13.

ASSET RETIREMENT OBLIGATIONS
The asset retirement obligation is based on estimated future restoration liabilities related toleasehold contracts of branch offices and so on.
The obligation is calculated based on the estimated period of use of 9 to 58 years and discounted
rate of 0.00% to 2.33%.
The following table provides the Company’s total asset retirement obligation for the years ended
March 31, 2019 and 2018:
Millions of yen
2019
2018
Balance, beginning of year
Liabilities incurred by asset acquisition
Accretion expenses
Liabilities settled
Other increase (decrease)
Balance, end of year

14.

¥

¥

1,099 ¥
45
13
(22)
1,135 ¥

1,041
61
12
(15)
1,099

Thousands of
U.S. dollars

2019
$

$

9,902
405
117
(198)
10,226

FINANCIAL INSTRUMENTS TRANSACTIONS RESERVEThe Financial Instruments and Exchange Law of Japan requires a securities company to set
aside a reserve in proportion to its securities and other related trading or derivativetransactions to cover possible customer losses incurred by default of the securities company on
securities or derivative transactions.
Financial instruments transactions reserve is calculated based on Article 46-5, Paragraph 1 of
the Financial Instruments and Exchange Law.

15.

SHAREHOLDERS' EQUITYThe Companies Act provides that an amount equal to 10% of distributions from retained
earnings paid by the Company and its Japanese subsidiaries be appropriated as a legal reserve(a component of retained earnings) or as additional paid-in capital (a component of capitalsurplus). No further appropriations are required when the total amount of the additional
paid-in capital and the legal reserve equals 25% of their respective stated capital. The
Companies Act also provides that additional paid-in capital and legal reserve are available forappropriations by the resolution of the shareholders. Balances of the legal reserve are included
in retained earnings in the accompanying consolidated balance sheet.
Cash dividends and appropriations to the legal reserve charged to retained earnings for theyears ended March 31, 2019 and 2018 represent dividends paid out during those years and therelated appropriations to the legal reserve. The amount available for dividends is based on theamount recorded in the Company’s non-consolidated books of account in accordance with theCompanies Act.
Dividends paid during the year ended March 31, 2018 which was approved by the Board of
Directors held on May 17, 2017 are as follows:(a) Total dividends¥4,910 million(b) Cash dividends per common share¥25(c) Record date
March 31, 2017(d) Effective dateJune 8, 2017
Cash dividends for treasury stock held by subsidiaries of ¥85 million were excluded from theabove table.

- 35 -

Dividends paid during the year ended March 31, 2019 which was approved by the Board of
Directors held on May 22, 2018 are as follows:(a) Total dividends¥4,912 million ($44,256 thousand)(b) Cash dividends per common share¥25 ($0.23)(c) Record date
March 31, 2018(d) Effective dateJune 8, 2018
Cash dividends for treasury stock held by subsidiaries of ¥85 million ($766 thousand) were
excluded from the above table.
Dividends to be paid after the balance sheet date but the record date for the payment belongs to
the year ended March 31, 2019 which was approved by the Board of Directors held on May 15,
2019 are as follows:(a) Total dividends¥2,998 million ($27,011 thousand)(b) Dividend source
Retained earnings
percommonshare(c) Cash dividends¥15 ($0.14)(d) Record date
March 31, 2019(e) Effective dateJune 7, 2019
Cash dividends for treasury stock held by subsidiaries are not excluded from the above table.
16.

STOCK OPTIONS
The cost recognized for the stock options is ¥84 million ($757 thousand) and ¥87 million whichis included in selling, general and administrative expenses for the years ended March 31, 2019and 2018, respectively.

Description of each stock option plans at March 31, 2019 is as follows:
Stock option plans
1st
2nd
3rd

4th

Plan approved onJune 26, 2015

Plan approved onJune 29, 2016

Plan approved onJune 29, 2017

Plan approved onJune 28, 2018

Individuals
granted the stock
option6 directors of theCompany (except
for audit andsupervisorycommittee
members) and 23
directors of its
subsidiary(Okasan Securities
Co., Ltd.)

5 directors of theCompany (except
for audit andsupervisorycommittee
members) and 22
directors of its
subsidiary(Okasan Securities
Co., Ltd.)

Type and numberof shares to beissued upon theexercise of thestock option
Grant dateCondition for
execution of right

129,400 shares ofcommon stock

216,000 shares ofcommon stock

5 directors of theCompany (except
for audit andsupervisorycommittee
members), 4
directors of its
subsidiary(Okasan Securities
Co., Ltd.) and 17
executive officers
of its subsidiary(Okasan Securities
Co., Ltd.)144,700 shares ofcommon stock

3 directors of theCompany (except
for audit andsupervisorycommittee
members), 7
directors of its
subsidiary(Okasan Securities
Co., Ltd.) and 19
executive officers
of its subsidiary(Okasan Securities
Co., Ltd.)202,900 shares ofcommon stock

July 13, 2015
No condition for
execution of rightis required.
There are no
stipulations onrequisite service
period.

July 14, 2016
No condition for
execution of rightis required.
There are no
stipulations onrequisite service
period.

July 14, 2017
No condition for
execution of rightis required.
There are no
stipulations onrequisite service
period.

July 13, 2018
No condition for
execution of rightis required.
There are no
stipulations onrequisite service
period.

Stipulations onrequisite service
period- 36 -

Exercisable period

From July 14,2015 to July 13,
2045

From July 14,
2018 to July 13,
2048

From July 15,2017 to July 14,
2047

From July 15,
2016 to July 14,
2046

A summary of the scale and movement of the stock option plan for the year ended March 31,
2019 is as follows:
1st
Non-vested:
Outstanding at March 31, 2018
GrantedForfeited
VestedOutstanding at March 31, 2019
Vested:Outstanding at March 31, 2018
VestedExercised
Forfeited
Outstanding at March 31, 2019

2nd

3rd

4th

-

-

-

202,900
202,900-

100,100
2,600
97,500196,000
5,100
190,900

144,700
5,000
139,700

202,900
202,900

A summary of information for the stock option plan is as follows:
Exercise price
Average stock price at exercise
Fair value at the grant date

1st

2nd

3rd

4th

¥1 ($0.01)¥580 ($5.23)¥715 ($6.44)¥1 ($0.01)¥580 ($5.23)¥383 ($3.45)¥1 ($0.01)¥580 ($5.23)¥614 ($5.53)¥1 ($0.01)¥403 ($3.63)

The fair value of the 4th stock options was estimated using the Black-Scholes option-valuation
model with the following assumptions:
Expected volatility *1
35.836%
Expected remaining outstanding period *2
5.4 years
Expected dividend *3¥25 ($0.23) per share
Risk-free interest rate *4-0.099%*1 Expected volatility is based on the actual stock prices traded from February 17, 2013 toJuly 13, 2018.
*2 Expected remaining outstanding period is based on the actual service period of theCompany’s directors, directors, executive officers and corporate auditors of its subsidiaryand their retired age.
*3 Expected dividend is based on the dividends applicable for the year ended March 31, 2018.
*4 Risk-free interest rate is the government bond yield for a term consistent with the
expected remaining outstanding period.
The number of rights to vest in the future periods is determined based on the actual forfeited
number of the stock options because it is difficult to estimate forfeiture in the future.
17.

SURPLUS ON LAND REVALUATIONAt March 31, 2002, a consolidated subsidiary revaluated its own land for business activities inaccordance with the “Law Concerning Land Revaluation” (the “Law”) effective March 31, 1998.
The net unrealized gain, net of related taxes and non-controlling interests, are reported as“Surplus on land revaluation” in a component of net assets and the related deferred tax
liabilities are included in non-current deferred income taxes.
Fair values of the land are determined based on the values specified in Article 2-1, 2-3 and 2-5 of
the Enforcement Ordinance of the Law concerning Land Revaluation.
Because the fair value of the land at both March 31, 2019 and 2018 is over the book value of theland after the revaluation, the difference between the fair value and the book value of the land is
not disclosed.
- 37 -

18.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Major elements of selling, general and administrative expenses for the years ended March 31,
2019 and 2018 are summarized as follows:
Millions of yen
2019
2018
¥ 12,039
32,555
7,530
5,326
3,098
1,050
96
3,270
¥ 64,964

Commissions and brokerage
Employees’ compensation and benefits
Occupancy and rental
Data processing and office supplies
Depreciation and amortization
Taxes other than income taxes
Provision for doubtful accounts
Other- 38 -¥ 13,164
33,818
7,463
6,432
3,609
1,287
(3)
3,268
¥ 69,038

Thousands of
U.S. dollars

2019$ 108,469
293,315
67,84447,986
27,912
9,461
865
29,462$ 585,314

19. IMPAIRMENT LOSS
Because the Company revised the utilization plan for the internet trading system of theconsolidated subsidiary, Okasan Information Systems Co., Ltd., an impairment loss on thesystem was recognized for the year ended March 31, 2018 as follows:
Location
Taito City, Tokyo

Usage
Business assets

Classification
Software and Other

Millions ofyenClassification
SoftwareLease assets
Furniture and fixtures

¥

4,693
125
5
4,823

The assets that are used for business are grouped according to the classification for
management reporting on the basis of each company.
The recoverable value for the assets is measured by its value in use and the assets whose cash
flow is not expected in the future are determined to have no value.
20.

OTHER COMPREHENSIVE INCOME (LOSS)
The reclassification adjustment and the related income tax effects allocated to each componentof other comprehensive income (loss) for the years ended March 31, 2019 and 2018 are as
follows:
Millions of yen
2019
2018
Net unrealized holding gain (loss) on
available-for-sale securities:
Arising during the year
Reclassification adjustment
Before tax amountTax benefit (expense)
Net-of-tax amount¥Thousands of
U.S. dollars

2019(2,372) ¥(12)(2,384)702(1,682)

4,253(4,938)
(685)
179
(506)

$ (21,372)(108)(21,480)
6,325(15,155)

Foreign currency translation adjustments:
Arising during the year

159

(227)

1,433

Remeasurements of defined benefit plans:Arising during the year
Reclassification adjustment
Before tax amountTax benefit (expense)
Net-of-tax amount

(57)
(174)
(231)
71
(160)

275
(311)
(36)
11
(25)

(514)
(1,568)(2,082)640(1,442)

Share of other comprehensive gain (loss) of affiliates
accounted for by equity method:
Arising during the year

(124)

332

(1,117)(1,807) ¥(426)$ (16,281)¥

Total other comprehensive loss

- 39 -

21.

PER SHARE INFORMATION(a)Net Income per Share
Basic and diluted net income per share, and reconciliation of the numbers and the amounts usedin the basic and diluted net income per share computations for the years ended March 31, 2019and 2018 are as follows:
Yen
U.S. dollars
2019
2018
2019
¥

Basic net income per share
Diluted net income per share

4.30
4.29

¥

29.56
29.50

Millions of yen
2019
2018
¥
Net income attributable to owners of the parent
Net income not applicable to common shareholders
Net income attributable to owners of the parent¥
available to common shares

$

0.04
0.04

Thousands of
U.S. dollars

2019

853
-

¥

5,853
-

$

7,685
-

853

¥

5,853

$

7,685

Number of shares(Thousand)
2019
2018
Weighted average number of shares outstanding on
which basic net income per share is calculated
Number of diluted shares (stock acquisition rights)(b)198,229

198,010590

407

Net Assets per Share
Net assets per share, and reconciliation of the numbers and the amounts used in the net assets
per share computations at March 31, 2019 and 2018 are as follows:
Yen
U.S. dollars
2019
2018
2019
¥ 761.53

Net assets per share¥ 791.46

Millions of yen
2019
2018
Total net assets
Amount deducted from total net assets:
Stock acquisition rights
Non-controlling interests
Net assets applicable to common stockholders- 40 -

6.86

Thousands of
U.S. dollars

2019¥ 175,184¥ 180,049$ 1,578,376

311
23,901¥ 150,972

236
23,100¥ 156,713

2,802
215,344$ 1,360,230

Number of shares(Thousand)
2019
2018
Number of shares outstanding at the end of year on
which net assets per share is calculated$

198,248

198,005

22.

SUPPLEMENTARY CASH FLOW INFORMATION
Reconciliation between “Cash on hand and in banks” in the accompanying consolidated balance
sheet and “Cash and cash equivalents” in the accompanying consolidated statement of cash
flows at March 31, 2019 and 2018 are as follows:
Millions of yen
2019
2018
Cash on hand and in banks¥ 71,228 ¥ 59,848
Time deposits that have maturities of over three(7,044)(5,708)months when acquired
Cash and cash equivalents¥ 64,184 ¥ 54,140

23.

Thousands of
U.S. dollars

2019$ 641,752(63,466)$ 578,286

COMMITMENTS AND CONTINGENCIESAt March 31, 2019 and 2018, the Company and certain subsidiaries have guaranteed
approximately ¥4 million ($36 thousand) and ¥6 million of employee mortgage loans to financial
institutions, respectively. If an employee defaults on his/her loan payments, the Company
and/or certain subsidiaries are required to perform under the guarantee.

24.

LEASES(a)Finance Lease
The Company leases certain computer terminals, communication equipment and software
under finance leases.

(b)

Operating Lease
Future minimum lease payments required under noncancellable operating leases at March
31, 2019 and 2018 are as follows:
Millions of yen
2019
2018
¥ 1,787
7,036¥ 8,823

Within one year
Over one year25.

¥ 1,759
1,946¥ 3,705

Thousands of
U.S. dollars

2019$ 16,101
63,393$ 79,494

FINANCIAL INSTRUMENTS
Conditions of Financial instruments(1) Management policy
The Company and subsidiaries (the “Group”) primary engages in financial instruments
trading business, which include trading in securities, brokerage for trading in securities,
underwriting and distribution of securities, public offering and secondary distribution of
securities and private offering of securities. For the above mentioned business, the Group
uses its own resources and finances funds through bank loans and call money etc.
The Group makes short-term deposits and loans for margin transaction, and operates
securities trading for the Group own accounts for fund management purposes.
Regarding the trading business, the Group works to do brokerage for trading in securities
smoothly and contribute to a sound market system in an Exchange transaction, and works tomake fair prices and transact smoothly in a Non-Exchange transaction and to reduce losses
from deals etc.
Regarding the derivative financial instruments, the Group uses interest rate swaps to hedge
future fluctuations of interest rates and does not enter into interest rate swaps for trading or
speculative purposes.
(2) Financial instruments and risks
The main financial assets of the Group consist of cash on hand and in banks, cash segregatedas deposits for customers and others, trading assets, receivables on margin transactions,- 41 -

receivables on collateralized securities transactions and investment securities.
The cash in banks are exposed to credit risk of banks. Most of cash segregated as deposits
for customers and others are cash segregated as deposits for customers, and are segregatedfrom the Group own assets and trusted to banks in accordance with the Japanese Financial
Instruments and Exchange Law. The trusted funds are secured by the Trust Act.
Trading position is made for meeting customers’ various needs, complementing the market
and hedging the position. Such trading involves market and counterparty risks which
possibly effect on the financial position of the Group. Market risk is the risk arising fromfuture changes in the market values of securities, interest rates and foreign currency
exchange rates, and counterparty risk is the risk arising from default by the counterparty.
Receivables on margin transactions consist of loans receivable from customers and cash
deposits as collateral for securities borrowed from securities finance companies, and are
exposed to credit risk of counterparties. Receivables on collateralized securities transactions
consist of cash collateral for securities borrowed, and are exposed to counterparty risk.
Investment securities are exposed to issuer’s credit risk and market risk.
The main financial liabilities of the Group consist of trading liabilities, payables on margintransactions, payables on collateralized securities transactions, deposits received, guarantee
deposits received and borrowings.
Payables on margin transactions consist of borrowings from securities finance companies
and proceeds from securities sold for customers’ accounts. Payables on collateralized
securities transactions consist of cash collateral for securities loaned and are received ascollateral for a loan of bonds such as government bonds. Deposit received is temporary
unsettled amount arising from transaction with customers. Guarantee deposits received isdeposit received for margin transactions from customers. Part of financial liabilities, suchas borrowings, are exposed to liquidity risk that is the risk for the Group not to make apayment on due date. The borrowings with variable interest rate are exposed to interest
rate fluctuation risk.
The Group uses derivative financial instruments as part of asset and liability management.
For trading purpose, the Group uses derivatives listed on exchange such as stock index
futures and bond futures, as well as over-the-counter derivatives such as forward foreignexchange transactions. For non-trading purpose, the Group uses interest rate swaps.
Interest rate swaps are used to hedge future cash flow fluctuation arising from interest rate
fluctuations on the borrowings. The difference in amounts to be paid or received on interest
rate swaps is recognized over the life of the agreements as an adjustment to interest expense,
if the agreements meet certain hedging criteria (“exceptional accounting method”). Interest
rate swaps are exposed to interest rate fluctuation risk, however, counterparties are limited
to the lender.
(3) Financial instruments risk management
The Group maintains appropriate risk management and control measures in order tomaintain the Group financial stability and to effectively use the Group business resources.
The Company controls its purchases, sales and market risk of investment securities inaccordance with investment securities management rules.
Okasan Securities Co., Ltd., our core firm, controls market fluctuation risk principally
through position limits, and counterparty risk principally through credit limits by eachfinancial instrument. Primarily, trading department checks the position and the gain or
loss. Secondarily, risk control department ascertains the position and the assessed risks
reported by the trading department, and supervise the position.
The loss on proprietary trading position estimated by VaR is ¥171 million ($1,541 thousand)calculated using historical method (holding period: one day, confidence interval: 99%,
observation period: 1,250 days) at March 31, 2019. The Company ascertained the reliability
and validity of the model daily by performing a comparison back-test of VaR and actual profit
and loss.
In order to reduce the risks, receivables on margin transactions are controlled by daily credit
management through setup of inception criteria for margin transactions and limits for open
interest, deposits reception when market fluctuates in accordance with customer
management rules. Liquidity risk is controlled based on fund management plan inaccordance with liquidity risk management rules. The Group also makes contingency plan
- 42 -

to mitigate liquidity crisis.
Securities subsidiaries other than Okasan Securities Co., Ltd. also maintain appropriate risk
controls.
(4) Supplemental explanation regarding fair value of financial instruments
The contract amount of the derivative transactions does not represent the risk of thederivative transactions.
Fair value of financial instruments
The carrying amounts on the consolidated balance sheet, fair value, and differences at March
31, 2019 and 2018 are as follows.
Financial instruments, of which it is extremely difficult to measure the fair value, are notincluded. (Please see “(2) Financial instruments of which the fair value is extremely difficult
to measure”.)
Millions of yen
2019

2018

Carrying
value

Fair value

Differences

Carrying
value

Fair value

Differences¥ 71,228¥ 71,228¥-¥ 59,848¥ 59,848¥

69,27869,278-68,932

68,932-

93,59993,599-112,118

112,118

-

42

44

2

47

50

3

35,79635,796-37,14837,148

-

8,346

8,346

-

9,689

9,689

-

32,43032,430-51,47851,478-62,641
4,195

62,641
4,195-

87,5493,682

87,5493,682-¥ 377,555¥377,557¥

2¥ 430,491¥ 430,494¥

3¥ 64,661¥ 64,661¥-¥ 62,961¥ 62,961¥-

12,778

12,77812,006

12,00692
39,46430,07873,3456,610

92
39,46430,07873,3706,619

25
919,37337,48436,50789,647
10,04819,37337,48436,507
89,663
10,119Total¥ 227,028¥227,062¥

34¥ 268,026¥ 268,113

Derivative transactions

¥

¥

¥

-

¥

¥

Assets:Cash on hand and in banks
Cash segregated as deposits
for customers and others
Trading assets, short-term
investments and investment
securities
Trading securities
Held-to-maturity debt
securities

Available-for-salesecurities
Receivables arising fromunsettled trades
Receivables on margintransactions
Receivables on collateralized
securities transactions
Short-term guarantee deposits
Total
Liabilities:
Trading liabilities
Trading securities
Payables on margintransactions
Payables on collateralized
securities transactions
Deposits received
Guarantee deposits received
Short-term borrowings
Long-term borrowings

99- 43 -

-

(30)

-

16
71
¥

87

(30) ¥-

Thousands of U.S. dollars
2019
Carrying
Fair value Differences
value
Assets:Cash on hand and in banks
Cash segregated as deposits
for customers and others
Trading assets, short-term
investments and investment
securities
Trading securities$ 641,752 $-

624,182

624,182-

843,310

843,310

-

378

396

18

322,516

322,516-

75,19675,196-292,189

292,189-564,384
37,796564,384
37,796-$ 3,401,703$ 3,401,721 $18$ 582,584$ 582,584 $-

115,128

115,128-829
355,564829
355,564

270,997

270,997-

660,825

661,050

225

59,55559,63681306$ 641,752

Held-to-maturity debt
securities

Available-for-salesecurities
Receivables arising fromunsettled trades
Receivables on margintransactions
Receivables on collateralized
securities transactions
Short-term guarantee deposits
Total
Liabilities:
Trading liabilities
Trading securities
Payables on margintransactions
Payables on collateralized
securities transactions
Deposits received
Guarantee deposits received
Short-term borrowings
Long-term borrowings
Total$ 2,045,482$ 2,045,788 $Derivative transactions

$

$

81

81

$

-

* Derivative receivables and payables are on net basis. Items that are net payables areshown in parenthesis.
(1) Fair value measurement of financial instruments
Assets:Cash on hand and in banks, Cash segregated as deposits for customers and others,
Receivables arising from unsettled trades, Receivables on margin transactions, Receivables
on collateralized securities transactions and Short-term guarantee deposits
The carrying amount approximates fair value because of the short maturity of these
instruments.
Trading assets, Short-term investments and Investment securities
The carrying amount approximates fair value because the carrying amount of equity
securities, debt securities and beneficiary certificates is calculated by quoted market price.
The carrying amount of certificate of deposit approximates fair value because of the shortmaturity of these instruments. Please see note 4. TRADING ASSETS AND
LIABILITIES and see note 7. SECURITIES FOR NON-TRADING PURPOSES for- 44 -

information by category.
Liabilities:
Trading liabilities
The carrying amount approximates fair value because the carrying amount of equity
securities, debt securities and beneficiary certificates is calculated by quoted market price.
Please see note 4. TRADING ASSETS AND LIABILITIES for information by category.
Payables on margin transactions, Payables on collateralized securities transactions, Deposits
received, Guarantee deposits received and Short-term borrowings
The carrying amount approximates fair value because of the short maturity of these
instruments. Fair value of current installments of long-term borrowings included in
short-term borrowings is calculated as below. (See Long-term borrowings.)
Long-term borrowings
The carrying amount of long-term borrowings with variable interest rate approximatesfair value because the fair value is reflected the fluctuation of interest market in a shortperiod and credit status of the Company does not change so much from when the Company
borrowed. Fair value of long-term borrowings with fixed interest rate is based on thepresent value of future cash flows of interest and principal payments discounted using thecurrent borrowing rate for similar borrowings of a comparable maturity.
Fair value of certain long-term borrowings with interest rate swaps for which exceptional
accounting method applied are based on the present value of future cash flows of interest
and principal payments discounted using the current borrowing rate for similarborrowings of a comparable maturity.
Derivative Transactions:
Please see note 26. DERIVATIVES.
(2) Financial instruments of which the fair value is extremely difficult to measure
Millions of yen
2019
2018
¥
Unlisted equity securities
Investments in limited partnership and similar
partnership¥Total- 45 -

Thousands of
U.S. dollars

2019

6,669

¥

6,748

$

60,087

326
6,995

¥

205
6,953

$

2,937
63,024

(3) Projected future redemption of monetary claim and securities with maturities
March 31, 2019
Millions of yen
Due after
Due after
five years
one year
Due after
throughthrough
Due within
ten yearsten years
five years
one year
Cash on hand and in banks
Cash segregated as
deposits for customers
and others¥

71,228

¥

-

¥

-

¥

-

69,278

-

-

-

-

42

-

-

2,590

749

183

-

32,430---62,641

-

-

-

4,195

-

-

-

Trading assets, short-term
investments and investment
securities:
Held-to-maturity debt
securities:

Government bonds
Available-for-sale securities
with maturities:

Other
Receivables on margintransactions
Receivables on collateralized
securities transactions
Short-term guarantee
deposits¥ 242,362¥$

641,752¥

183¥

Thousands of U.S. dollars
Due after
Due after
five years
one yearthroughthroughten years
five years

Due within
one year
Cash on hand and in banks
Cash segregated as
deposits for customers
and others

791

$

-

$

-

-

Due after
ten years$-

624,182

-

-

-

-

379

-

-

23,335

6,748

1,649

-

292,189---564,384---

37,796---

Trading assets, short-term
investments and investment
securities:
Held-to-maturity debt
securities:

Government bonds
Available-for-sale securities
with maturities:

Other
Receivables on margintransactions
Receivables on collateralized
securities transactions
Short-term guarantee
deposits$ 2,183,638- 46 -

$

7,127

$

1,649

¥

-

March 31, 2018
Millions of yen
Due after
Due after
five years
one yearthroughthroughten years
five years

Due within
one year
Cash on hand and in banks
Cash segregated as
deposits for customers
and others¥

59,848¥-¥-Due after
ten years¥-

68,932

-

-

-

-

48

-

-

1,500

889

235

-

51,478---87,549

-

-

-

3,682

-

-

-

Trading assets, short-term
investments and investment
securities:
Held-to-maturity debt
securities:

Government bonds
Available-for-sale securities
with maturities:

Other
Receivables on margintransactions
Receivables on collateralized
securities transactions
Short-term guarantee
deposits¥ 272,989

¥

937

¥

235

¥

-

(4) The annual maturities of the long-term debt and other interest-bearing debt
March 31, 2019
Millions of yen
Due after

Due after

Due after

Due afterDue

one year

two years

three

four

withinthroughthrough

years

years

Due after

one year

two years

three

throughthroughfive years

years

four

five years

years

Short-term borrowings
Long-term borrowings
Borrowings fromsecurities finance

Total

¥

¥

68,907 ¥
4,438

- ¥
3,750

- ¥
2,660

- ¥
200

- ¥
-

-

3,161
76,506 ¥3,750 ¥

2,660 ¥

200 ¥

- ¥

-

Thousands of U.S. dollars
Due after

Due after

Due afterDue

one year

two years

three

four

withinthroughthrough

years

years

Due after

one year

two years

three

throughthroughfive years

four

five years

years

Due after

years

Short-term borrowings
Long-term borrowings
Borrowings fromsecurities finance

Total$ 620,840 $
39,985- $33,787- $23,966

- $
1,802

- $
-

-

28,480689,305$$

33,787 $23,966 $1,802 $

- $-- 47 -

March 31, 2018
Millions of yen
Due after

Due after

Due afterDue

one year

two years

three

four

withinthroughthrough

years

years

Due after

one year

two years

three

throughthroughfive years

four

five years

years

Due after

years

Short-term borrowings
Long-term borrowings
Borrowings fromsecurities finance

¥

Total

¥

86,387 ¥
3,260

- ¥
4,438

- ¥
3,050

- ¥
2,360

- ¥
200

-

6,503
96,150 ¥4,438 ¥

3,050 ¥

2,360 ¥200 ¥-* Borrowings from securities finance companies are deemed to be settled within one year.
26.

DERIVATIVES
Derivatives utilized for trading purposes
The contract or notional amounts and fair value of derivative financial instruments for trading
purposes held at March 31, 2019 and 2018 are summarized as follows:(1) Stocks
March 31, 2019
Millions of yen
Contract orValuation
notional
amounts Fair value gain (loss)

Stock index futures:
Written
Purchased
Stock index options:
Written
Purchased
Stock options traded over-the-counter:
Written
Purchased

¥

902 ¥
1,410

0
0

¥

7
19

4
15

3
(4)

1
1

0
0

1
(1)
(1)

¥

0
0

Thousands of U.S. dollars
Contract orValuation
notional
amounts Fair value gain (loss)

Stock index futures:
Written
Purchased
Stock index options:
Written
Purchased
Stock options traded over-the-counter:
Written
Purchased$

8,127 $
12,704

0
0

$

63
171

36
135

27
(36)

9
9

0
0

9
(9)
(9)

$

- 48 -

00March 31, 2018
Millions of yen
Contract orValuation
notional
amounts Fair value gain (loss)

Stock index futures:
Written
Purchased
Stock index options:
Written
Purchased
Stock options traded over-the-counter:
Written
Purchased¥

2,554 ¥
1,166

(27) ¥
0

(27)
0

6
10

5
6

1
(4)

2
1

2
2

(0)
1
(29)

¥

The fair value of stock index futures and stock index options is computed using prices on themarket and the fair value of stock options traded over-the-counter is computed based on theunderlying stock prices, volatilities and interest rate.
Gain or loss on deemed settlement is disclosed in the “Fair value” column of stock index
futures above.
(2) Bond
March 31, 2019
Millions of yen
Contract orValuation
notional
amounts Fair value gain (loss)

Bond futures:
Written
Purchased¥

3,678 ¥
-

(1) ¥
¥

(1)
(1)

Thousands of U.S. dollars
Contract orValuation
notional
amounts Fair value gain (loss)

Bond futures:
Written
Purchased$ 33,138 $
-

(9)
-

$
$

(9)
(9)

March 31, 2018
Millions of yen
Contract orValuation
notional
amounts Fair value gain (loss)

Bond futures:
Written
Purchased¥ 16,447 ¥
906

13 ¥
(1)
¥

13
(1)
12

The fair value of bond futures and bond options is computed using prices on the market.
Gain or loss on deemed settlement is disclosed in the “Fair value” column above.

- 49 -

(3) Foreign exchange
March 31, 2019
Millions of yen
Contract orValuation
notional
amounts Fair value gain (loss)

Forward foreign exchange:
Written:U.S. dollars
Mexican Peso
Indian rupee
Australian dollar
Russian ruble
Brazilian realOther

¥ 1,580
490
447
416
324
257
393

¥

(6) ¥
2
(3)
(1)
(0)
6
(0)
¥

(6)
2
(3)
(1)
(0)
6
(0)
(2)

Thousands of U.S. dollars
Contract orValuation
notional
amounts Fair value gain (loss)

Forward foreign exchange:
Written:U.S. dollars
Mexican Peso
Indian rupee
Australian dollar
Russian ruble
Brazilian real
Other

$ 14,236 $
4,415
4,027
3,748
2,919
2,316
3,541

(54)
18
(27)
(9)
0
54
0

$

$

(54)
18
(27)
(9)
0
54
0
(18)

March 31, 2018
Millions of yen
Contract orValuation
notional
amounts Fair value gain (loss)

Forward foreign exchange:
Written:
Russian ruble
Brazilian real
Australian dollar
Mexican Peso
Indian rupee
South African rand
Other
Purchased:
U.S. dollars

¥

330
322
311
283
259
186
284
170

¥

(2) ¥
2
1
(9)
(5)
(3)
(1)

(2)
2
1
(9)
(5)
(3)
(1)

0

0
(17)

¥

The fair value of foreign exchange margin trading is computed using prices on the market.
The fair value of forward foreign exchange is based on the difference between the present
value of future cash flows of receipt amount and the present value of future cash flows of
payment amount. Gain or loss on deemed settlement is disclosed in the “Fair value” column
of forward foreign exchange above.

- 50 -

Derivatives utilized for non-trading purposes
Derivative transactions to which hedge accounting are applied at March 31, 2019 and 2018
are summarized as follows:
Contract or notional amounts

Nature of transaction

Hedged items

Interest rate swaps:
Variable rate received
for fixed rateLong-term
borrowings

Millions of yen
2019
2018

¥

6,200

¥

6,200

Thousands of
U.S. dollars

2019

$

55,861*1 Hedge accounting method is the exceptional accounting method which is the difference inamounts to be paid or received on interest rate swaps being recognized over the life of theagreements as an adjustment to interest expense.
*2 Fair value of derivative financial instrument is included in fair value of the long-termborrowings as hedged items for certain long-term borrowings for which interest rate swap
contracts are used to hedge the interest rate fluctuations.
27.

INVESTMENT AND RENTAL PROPERTYThe Company and certain consolidated subsidiaries own their rental office buildings, land etc.
(hereafter “rental property”) in Tokyo and other areas. Income from the rental property is ¥49
million ($441 thousand) and ¥32 million for the years ended March 31, 2019 and 2018,
respectively.
The amounts recognized in the consolidated balance sheet and fair values related to the rental
property are as follows:
Millions of yen
2019
2018
Consolidated balance sheet amount:
Balance at beginning of the year

Fair value

2019

5,421
14
5,435

$

¥

5,435 ¥
(33)
5,402 ¥$

48,968(297)
48,671

¥

8,341

6,303

$

75,151¥

Increase/(decrease)
Balance at end of the year

Thousands of
U.S. dollars¥

The above fair value is based on real-estate appraisals, and is estimated by the Company.
28.

SEGMENT INFORMATIONThe reported segments of the Company are the business units for which the Company is able toobtain respective financial information separately in order for the Board of Directors to conductperiodic investigation to determine distribution of management resources and evaluate theirbusiness results.
“Securities business”, “Asset management business” and “Support business” are the Company’s
reported segments.
“Securities business” renders trading and brokerage for trading in securities, underwriting anddistribution of securities, public offering and secondary distribution of securities and private
offering of securities. “Asset management business” renders investment management andinvestment advisory.
“Support business” renders information processing services,administrative support services, custodianship and temping services, etc.
Segment operating revenues, income, assets, liabilities and others are calculated by accounting
methods similar to those employed to prepare the accompanying consolidated financial
statements.
Segment income is calculated based on operating income in the consolidated statement ofincome.
- 51 -

Intersegment revenues and transfer are based on arms-length transactions.
Operating revenues, income, assets, liabilities and others by reported segments
The reported segment information for the Company and its consolidated subsidiaries for theyears ended March 31, 2019 and 2018 are summarized as follows:
Millions of yen
2019
Reported segments
Asset

Securities

Operating revenues:
Revenues from third
parties¥Intersegment
revenues
Total¥management

Support

Total

Adjustments

Consolidated

55,861 ¥11,032 ¥980 ¥67,873 ¥3¥67,876

4,012
59,873 ¥47
11,079 ¥11,38012,360 ¥15,43983,312 ¥(15,439)(15,436) ¥67,876976 ¥

2,670 ¥

(830) ¥

1,840

Segment income

¥

746 ¥

948 ¥

Segment assets¥

372,511 ¥19,828 ¥28,298 ¥ 420,637 ¥

5,063 ¥ 425,700

Segment liabilities¥ 253,724 ¥

1,522 ¥

14,057 ¥ 269,303 ¥(18,787) ¥ 250,516

Others:Depreciation
Interest anddividend income
Interest expense
Equity in gain ofaffiliates
Impairment loss
Investments inaffiliates
Increase in property
and equipment andintangible assets

¥

586 ¥

32 ¥

2,372 ¥

2,990 ¥

108 ¥

3,098

1,998
1,269

0
-

-

1,998
1,269

(302)
(197)

1,696
1,072

51
111

-

11

51
122

-

51
122

5,127

-

-

5,127

-

5,127

504

12

2,577

3,093

41

3,134

- 52 -

Millions of yen
2018
Reported segments
Asset

Securities

Operating revenues:
Revenues from third
parties¥Intersegment
revenues
Total¥management

Support

Total

Adjustments

Consolidated

68,575 ¥12,379 ¥963 ¥81,917 ¥4¥

81,921

4,434
73,009 ¥1
12,380 ¥11,331
12,294 ¥15,766
97,683 ¥(15,766)(15,762) ¥81,921(847) ¥

12,595 ¥(875) ¥

11,720

Segment income¥

12,044 ¥1,398 ¥

Segment assets¥ 434,080 ¥

19,452 ¥28,710 ¥ 482,242 ¥(7,079) ¥ 475,163

Segment liabilities¥ 308,450 ¥

1,749 ¥

15,011 ¥ 325,210 ¥(30,096) ¥295,114

95 ¥

3,609

Others:Depreciation
Interest anddividend income
Interest expense
Equity in gain ofaffiliates
Impairment loss¥

Investments inaffiliates
Increase in property
and equipment andintangible assets

608 ¥

34 ¥

2,872 ¥

3,514 ¥

2,077
1,390

-

1
-

2,078
1,390

(332)
(227)

1,746
1,163

93
-

-

0
4,823

93
4,823

-

93
4,823

5,240

-

-

5,240

-

5,240

574

4

3,474

4,052

4

4,056

Thousands of U.S. dollars
2019
Reported segments
Asset

Securities

Operating revenues:
Revenues from third
parties$Intersegment
revenues
Totalmanagement503,298 $

99,396 $36,147539,445423
99,819Support8,830 $
102,532
111,362

611,524 $Adjustments

Consolidated

27 $

611,551(139,102)(139,075)

611,551

24,056 $(7,478) $16,578139,102750,626

Segment income$

6,721 $

8,541 $

Segment assets$ 3,356,257 $

178,647 $

254,960 $ 3,789,864 $

45,616 $3,835,480

Segment liabilities$ 2,286,008 $

13,713 $126,651 $ 2,426,372 $(169,268) $2,257,104

973 $

27,912Others:Depreciation
Interest anddividend income
Interest expense
Equity in gain ofaffiliates
Impairment loss
Investments inaffiliates$

5,280 $

288 $

8,794 $

Total

21,371 $26,939 $18,002
11,434--18,002
11,434(2,721)(1,775)

15,281
9,659

460
1,000

-

99

460
1,099

-

460
1,099

46,193--

46,193-

46,193- 53 -

Increase in property
and equipment andintangible assets

1.

4,541

23,218108

27,86728,236369(1) Components of “Adjustments in segment income” are as follows:
Millions of yen
2019
2018
Elimination of intersegment transactions

Unallocated company-wide expenses

¥

2,621
(3,451)
¥
(830)

¥

2,858
(3,733)¥(875)

Thousands of
U.S. dollars

2019
$
$

23,615(31,093)(7,478)Company-wide expenses are holding company’s expenses.
(2) Components of “Adjustments in segment assets” are as follows:
Millions of yen
2019
2018
Elimination of intersegment balances
Unallocated company-wide assets¥ (36,543) ¥ (50,849)
41,606
43,770¥5,063 ¥ (7,079)

Thousands of
U.S. dollars

2019$ (329,246)
374,862$
45,616Company-wide assets are holding company’s assets.
(3) Components of “Adjustments in segment liabilities” are as follows:
Millions of yen
2019
2018
Elimination of intersegment balances
Unallocated company-wide liabilities¥ (35,039) ¥ (48,660)
16,252
18,564¥ (18,787) ¥ (30,096)

Thousands of
U.S. dollars

2019$ (315,695)
146,427$ (169,268)

Company-wide liabilities are holding company’s liabilities.
2.

Segment income is adjusted with operating income in the consolidated statement of income.

Related information
1. Information by products and services
Disclosures are omitted because the required information is given in the above segment information.
2. Geographical information(1) Operating revenues
Disclosures are omitted because operating revenues from customers in Japan are over 90% of
operating revenues in the consolidated statement of income.
(2) Property and equipment

Disclosures are omitted because property and equipment located in Japan are over 90% of property
and equipment in the consolidated balance sheet.
3. Information by major customers
Disclosures are omitted because no particular third party whose operating revenues are over 10% of
operating revenues in the consolidated statement of income exists.
Information of impairment loss on fixed assets by reported segments- 54 -

The information is not applicable for the years ended March 31, 2019 and 2018.
Goodwill by reported segments
The information is not applicable for the years ended March 31, 2019 and 2018.
Negative goodwill incurred by reported segments
The information is not applicable for the years ended March 31, 2019 and 2018.

- 55 -

- 56 -

Okasan Securities Co., Ltd.
Balance Sheet － March 31, 2019
Thousands of
U.S. dollars

Millions of yen
2019

2018

2019

ASSETS
Current assets:
Cash on hand and in banks¥

20,543¥13,009$185,089

Cash segregated as deposits for customers andothers32,37927,779291,729

Trading assets

92,709111,120835,292

Receivables arising from unsettled trades

8,870

10,22079,917

Receivables on margin transactions

27,98944,653

252,176

Receivables on collateralized securities transactions

62,64187,549564,384

Short-term guarantee deposits

3,184

2,064

28,687

Other current assets

3,980

2,902

35,859

(11)

(6)

(99)

Total current assets

252,284

299,290

2,273,034

Property and equipment, net of accumulated
depreciation

2,920

3,120

26,309

447

282

4,027

Investment securities

761

663

6,856

Securities in associated companies

211

211

1,901

Long-term guarantee deposits

3,670

3,653

33,066

Deferred income taxes

1,793

2,162

16,155

Allowance for doubtful accounts

Intangible assets, net
Investments and other assets:

Prepaid pension cost

888

647

8,001

Other

1,034

1,041

9,316

Allowance for doubtful accounts

(686)

(674)

(6,181)

7,671

7,703

69,114

Total investments and other assets
TOTAL

¥

- 57 -

263,322¥

310,395$

2,372,484

Okasan Securities Co., Ltd.
Balance Sheet－(Continued)－ March 31, 2019
Thousands of
U.S. dollar

Millions of yen
2019

2018

2019

LIABILITIES AND NET ASSETS
Current liabilities:
Trading liabilities¥

Payables on margin transactions

64,542¥

62,983$

581,512

11,097

10,061

99,982-

19,332-

Deposits received

28,511

24,717

256,879

Guarantee deposits received

6,647

7,670

59,888

Short-term borrowings

59,81578,515538,922

12

643

108

Payables on collateralized securities transactions

Income tax payables
Other current liabilities

4,041

7,811

36,409174,665

211,732

1,573,700

700

4,000

6,307

Liability for retirement benefits

5,131

4,946

46,230

Other non-current liabilities

1,536

1,498

13,8397,367

10,444

66,376

837

847

7,541

182,869

223,023

1,647,617

5,000

5,000

45,049

Capital surplus

29,20029,200263,087

Retained earnings

46,24853,155

416,686

80,44887,355

724,8225

17

45

80,45387,372724,867

Total current liabilities
Non-current liabilities:
Long-term borrowings

Total non-current liabilities
Financial instruments transactions reserve
Total liabilities
Net assets
Shareholder's equity:
Common stock
Authorized―240,000 shares
Issued―100,000 shares in 2019 and 2018

Total shareholder's equity
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Total net assets
TOTAL

¥

- 58 -

263,322¥

310,395$

2,372,484

Okasan Securities Co., Ltd.
Statement of Income － Year ended March 31, 2019
Thousands of
U.S. dollar

Millions of yen
2019

2018

2019

Operating revenues:
Commissions¥

Net gain on trading

28,612¥22,002

Interest and dividend income

36,266$25,748257,789
198,234

1,189

1,230

10,71351,80363,244

466,736

957

1,051

8,623

Net operating revenues

50,846

62,193458,113

Selling, general and administrative expenses

49,21650,357443,427

1,630

11,836

14,686

Interest expense

Operating income
Other income (expenses):
Reversal of (provision for) financial instruments
transactions reserve

10

(46)

90

Other, net

189

338

1,703

199

292

1,793

1,829

12,12816,479Current

362

3,652

3,261

Deferred

374

99

3,370

736

3,751

6,631

Income before income taxes
Income taxes:

Net income¥- 59 -

1,093

¥

8,377

$

9,848

BOARD OF DIRECTORSCORPORATE DATA(At August, 2019)(At August, 2019)
Company Name

Vice Chairman

OKASAN SECURITIES GROUP INC.

Tetsuo Kato

Date of Establishment

President
Hiroyuki Shinshiba

August 25, 1944

Director

Head Office

Mitsuru Tanaka

1-17-6 Nihonbashi, Chuo-ku,

Director

Tokyo 103-8268, Japan

Hiroyuki Shindo

Muromachi Head OfficeDirector

2-2-1 Nihonbashi Muromachi, Chuo-ku,

Hiroyuki Murai

Tokyo 103-0022, Japan

Audit & Supervisory Committee Members

Phone Number

Director+81-3-3272-2222

Nobuyuki Natsume

Paid-in Capital

Outside Director

18,590 Million Yen

Seishi Higo

Subsidiaries

Outside Director

11 companies

Hirokazu Kono

Listed Stock Exchanges

Outside Director

Tokyo Stock Exchange

Mikito Nagai

Nagoya Stock Exchange

ORGANIZATION CHART(At August, 2019)
General meeting of shareholders

Board of Directors
President

Audit & Supervisory Committee
Audit & Supervisory Committee Office
Management Conference
Executive MeetingGroup System Control ConferenceGroup Internal Audit Dept.
Corporate Strategy Dept.

Corporate Strategy DivisionCorporate Legal Dept.

Group CSO
Group CLO

Group Affiliated Companies Support Dept.
Public and Investor Relations Dept.
Information Technology Strategy Dept.

Group CIO
Personnel Division
Group CHRO
Administrative Division
Group CFO

Secretariat
Personnel Planning Dept.
Treasury Planning Dept.
Internal Control Promotion Office
General Affairs Dept.
Group Risk Management Dept.

Group CRO

Corporate Relationship Management Dept.

- 60 -

http://www.okasan.jp/