ANNUAL REPORT
Ending March 31, 2016

Corporate Profile
Okasan Securities Group is a stand-alone securities company group
established in 1923. Headed by the holding company, Okasan Securities
Group Inc., it consists of nine domestic companies and one overseas company.
Okasan Securities Group is committed to a wide spectrum of securities
investment and asset management businesses, through a network of six
domestic and overseas securities firms centering on the core firm, Okasan
Securities Co., Ltd. It is also involved in asset-management business, such as
investment trusts, information-processing/system-development business, aswell as office-support business, such as alternate back-office jobs.
Taking advantage of nurtured expertise since its inception, Okasan
Securities Group engages in unique and community-based “face to face”
securities sales activities, and it also provides a cutting-edge online trading
environment. We are always ready to offer optimum performances by way ofhighly sophisticated and professional investment and asset management
services, which include the development of innovative products, extensive
and abundant market information, and high quality analyst information.

Contents
Corporate Profile

1

Consolidated Financial Highlights

2

Management Policy

3

Operating and Financial Review

6

Consolidated Balance Sheets

10

Consolidated Statement of Income

12

Consolidated Statement of Comprehensive Income

13

Consolidated Statement of Changes in Net Assets

14

Consolidated Statement of Cash Flows17

Notes to Consolidated Financial Statements

19

Independent Auditors' Report

55

Reference Data
Okasan Securities Co.,Ltd.

Non-Consolidated Balance Sheet

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, 2016
Thousands of
U.S.dollars(note)Millions of yen
2016

2015

2016

(4/1/15～3/31/16)(4/1/14～3/31/15)(4/1/15～3/31/16)

Operating revenues ･･････････････････¥ 82,927¥ 94,633$ 735,951

Operating income ･･････････････････

14,15926,295

125,657

Net income ･････････････････････････

11,068

14,10098,225

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

515,743

649,490

4,577,059

Net assets ･････････････････････････

172,097

171,411

1,527,307

Per share of common stock

Yen

U.S.dollars(note)･･･････････････････¥ 55.94¥ 71.20$ 0.50Cash dividends applicable to the year･･

25.00

25.00

0.22

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 31, 2016, which was ¥112.68 to U.S.$1.

－2－

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

2．Basic policy on the distribution of profits and dividend for the term
The Company sees shareholder returns as an important management benchmark and would like to
distribute the payout in consideration of the trends in earnings, while also taking into account thesustainability and continuity of a stable dividend.

3．Important management index
In rapidly changing market conditions, it is important to secure stable profits. Based on thisunderstanding, we consider return on equity (ROE) an important management index. We aim to achievea stable consolidated ROE of 10% as a business objective.

4．Medium and long-term management strategy
With respect to policies for making significant progress ahead of the 95th and 100th anniversaries of
its establishment, the company has formulated and is currently implementing a medium-termbusiness plan for the three-year period from April 2014 to March 2017. Under this medium-termbusiness plan and based on its “Customer First” management philosophy, the company intends toincrease enterprise value as a body of professional investment advisors and to improve its
management structure to ensure stable growth in any environment.
In the fiscal year under review, the second year of the business plan, we turned the two companies inthe same industry with whom memorandums of agreement concerning operational and capitalalliances were signed at the end of the preceding fiscal year into equity method affiliates, enabling us
to expand our own network of securities companies. We also took steps to strengthen ourmanagement structure and management supervision structure through improved corporate
governance using various measures, including establishing an audit and supervisory committee andformulating corporate governance guidelines. Subsidiaries such as Okasan Securities Co., Ltd. took
action to strengthen sales functions and develop professional human resources. The Group willcontinue to enhance its operating foundations in pursuit of customer interests.

Okasan Securities Group medium-term business plan
There will be no change in the management philosophy emphasizing the "Customer First" that thecompany has followed since it was established. Different customers certainly have different needs,
and customer satisfaction means a variety of things, but we see the ultimate prioritization of thecustomer's interests by focusing thoroughly on professionalism as our social mission.
To achieve this management philosophy, we train personnel to take "pride" in their work, and tocreate a group of professionals formed from staff who do have such "pride."
As a result, we think it will be possible to improve Okasan Securities Group's enterprise value.

－3－

1. Period of plan
Three years starting April 2014 and ending March 2017
2. Management philosophy
Customer First In the role of professional advisors, we respond to a broad range of customer needs,
and aim to put customer interests first.
3. Management objectives[Qualitative objectives](1) Aiming for a professional group of investment advisors.
(2) Being a company of even greater "pride" by thanks to satisfying work.
(3) Increase enterprise value as a result of (1) and (2) above, and thereby fulfil our
responsibilities as a listed company.
[Quantitative objectives]
Achieve following numerical results as a result of pursuing customers' interests.
(1) Consolidated net assets of 200 billion yen (final year)(2) Consolidated ROE Of 10% (consistently achieve)

By fully implementing the management philosophy and pursuing the management goals, thecompany aims to achieve as soon as possible before its 100th anniversary the goals of 1.0 million
accounts and assets under custody of ¥10trn.

5．Challenges the Company should address
Based on observations of financial markets from a medium- to long-term perspective, the financial
economy appears to have grown even larger relative to and to have growing impact on the real
economy. For example, the assets of investment companies around the world, particularly hedge
funds, have grown after Lehman's fall. However, the US’s move away from its ultraliberal monetary
policy has upset the money supply, the flow of which had been ample around the world, while
uncertainty has grown concerning factors like the Chinese economy and oil prices. All these factors
have made financial markets more volatile. In Japan, meanwhile, the so-called “Abenomics”—the Abeadministration’s package of economic policies—has entered a critical phase in which its success or
failure in dragging the country out of deflation will become clearer. Reforms of corporate governanceand other factors are making the management of Japanese companies more dynamic than ever before
during the postwar period. It is therefore possible that the unwinding of cross-shareholdings and thesale and acquisition of businesses will make clarify far clearer which companies are succeeding andwhich are failing.
In this environment, the company sees an increasingly important societal role for the Group, which
provides optimal investment advice and financial products based on customer needs. Winningsupport from a broad range of customers will require building a unique brand that fits the Group. We
are formulating and implementing various policies to this end.
In particular, to further strengthen the foundations of the Group’s mainstay face-to-face business, weare aiming to become, as stated in our medium-term business plan, Aiming for a professional group ofinvestment advisors. To achieve this goal, we are strengthening investment information capabilities,
developing human resources, and enhancing the quality of our sales operations. In addition toreinforcing our core face-to-face business, we are strengthening areas such as asset management,
alliances, and online trading. In the area of asset management, for example, we are raising the
profile of the Okasan brand by providing customers products from both inside and outside the Group.
At the same time, we are expanding our unique network of securities companies through operational－4－and capital alliances. And with regard to the online business, we are stepping up our approaches to
new customer segments. Through initiatives like these, we are striving to raise the enterprise valueof the Group in a sustained manner.

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 obligations to shareholders and forge
cordial relationships with stakeholders.

(2) Structure of business execution
With regard to the structure of business execution, the Board of Directors as the supreme decision
making organ on management makes a decision on items provided in laws and regulations and articles
of incorporation and maps out plans of 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 15 directors(including 5 Audit & Supervisory Committee Members),
which enables it to make a quick decision.
We set up the “Management Conference” to clarify the roles of the Board of Directors, which makes
management decisions and supervises management, and the Management Conference, which is incharge of business execution, to strengthen the business management of the Group.
The Management Conference, according to the basic management policies adopted in the Board of
Directors, deliberates on laying out specific policies and plans of business execution and other importantmanagerial subjects.

(3) Management monitoring structure
The structure of management monitoring is composed of five total Audit & Supervisory Committee
Members, including two statutory members 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
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 secure appropriate business operations such as reducing management
risks and preventing wrongdoings, we set up internally Group Compliance Dept. and assigned sevenstaff there. Group Compliance Dept. makes up an audit plan in each fiscal year, periodically implements
an on-the-spot audit based on the plan and inspects documents when necessary. The results of auditing
are reported to the Board of Directors from the director in charge of auditing, in the form of the audit
report.

－5－

Operating and Financial Review
Okasan Securities Group Inc. and Consolidated Subsidiaries Years ended March 31, 2016

Ⅰ. Analysis of operating results
During the fiscal year under review, the Japanese economy continued to tread water. Although capital
investment by companies registered moderate growth, the lackluster performance of the world economy,
particularly in emerging countries, made declining exports increasingly likely. Production ebbed and flowed
accordingly. The number of foreign visitors to Japan continued to grow rapidly and employment continued to
improve, with the unemployment rate hovering at around 3%. Nevertheless, wage increases were minor, andpersonal consumption stalled.
In the forex market, the yen dropped to ¥125/$ at one point in June, after which the dollar/yen rate became
unstable. In December, the FRB (Federal Reserve Board) raised interest rates, while the Bank of Japan
adopted a policy of negative interest rates in January, the following month. However, even with market
participants moving to offload risk, the yen actually began to climb against the dollar. The fiscal year ended
with the yen/dollar rate at ¥112/$. Similarly, the euro initially appreciated against the yen, with rates
temporarily hitting ¥141/€ in June; from the end of the year, however, the ECB (European Central Bank)
further loosened its monetary policies and the euro/dollar rate stood at around ¥128/€ at the end of the fiscal
year.
In the equity market, corporate governance reforms and strong operating performance by Japanesecompanies initially spurred buying by overseas investors, boosting stock prices. On June 24, the Nikkei 225
reached ¥20,868.03, surpassing the peak set during the IT bubble of 2000. However, selling accelerated from
August on developing concerns for the outlook of the world economy. This situation abated temporarily at theend of the year, with a bullish outlook returning due to various factors, including yen depreciation. Once the
new year began, however, turmoil in the Chinese stock market, uncertainty regarding the impact of USinterest rate hikes, and other factors generated turbulence once again. The Nikkei 225 dropped below the¥15,000 barrier at one point and stood at ¥16,758.67 at the end of the fiscal year.
In bond markets, yields initially climbed, as share prices rose and the likelihood grew of an interest rate
hike in the US. However, yields began falling thereafter and continued to do so throughout the year,
supported by aggressive monetary easing by the Bank of Japan. The drop in yields accelerated in January,
when the Bank of Japan decided to adopt its negative interest rate policy. The 10-year government bondyield ended the fiscal year at -0.05%.
In this environment, Okasan Securities Co., Ltd., the core Group company, further strengthened its sales
capabilities through various initiatives, including opening new branches and refurbishing existing branches.
Its sales activities remained firmly rooted in local communities, taking advantage of the company’s wealth ofinvestment information and strong product lineup. At the same time, Okasan Online Securities Co., Ltd., theGroup’s specialist online brokerage, sought to improve services in various ways: for example, upgrading
order tools, introducing a new futures trading service, and offering a new on-exchange FX margin trading
product called “Click 365 Large.” Okasan Asset Management Co., Ltd., made systematic investments thatemphasized fundamentals; distributed information in timely fashion; and endeavored to grow its assets
under management by offering products suited to the medium- to long-term investment environment.
Due to these efforts, Group operating revenues in the fiscal year under review were ¥82,927 million (87.6%of the figure for the previous year), and net operating revenues were ¥81,617 million (87.4% of the figure forthe previous year). SG&A expenses were ¥67,459 million (100.5% of the figure for the previous year);
operating income was ¥14,158 million (53.8% of the figure for the previous year); and net income was¥11,068 million (78.5% of the figure for the previous year).

－6－1. Fees and commissions received
Fees and commissions received stood at ¥57,666 million (91.0% of the figure for the previous year).
These can be broken down as follows.

(1) Brokerage commissions
Average daily trading volumes on the First Section of the Tokyo Stock Exchange (Japanese common shares)
were 2,954 million shares (103.4% of the figure for the previous year), while turnover was ¥3,082.7 billion(115.7% of the figure for the previous year). In this environment, equity brokerage commissions were¥19,239 million (101.5% of the figure for the previous year). Bond brokerage commissions were ¥5 million(71.4% of the figure for the previous year). Other brokerage commissions amounted to ¥1,560 million(294.9% of the figure for the previous year). Total brokerage commissions were ¥20,805 million (106.7% 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
During the fiscal year under review, we served as a designated lead underwriter for the Japanese offering ofstock in the three Japanese postal companies when they were listed on the stock market. We also served aslead managers for other equity listings and as underwriters for other large stock offerings. As a result, ourequity underwriting income increased significantly. In bond underwriting, while appetite for bondspurchases receded (particularly among institutional investors) as interest rates plunged and volatility
increased, our underwritings of government bonds for individuals proceeded smoothly. The resulting
commissions on equity were ¥402 million (128.4% of the figure for the previous year). Commissions on bonds
totaled ¥144 million (102.1% of the figure for the previous year). Total underwriting fees, selling concessions,and commissions on solicitation for sale of financial instruments to specific investors and others amounted to¥546 million (120.3% 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
During the fiscal year, the company enjoyed relatively strong sales of funds that invest in Asia, healthcare
equity funds, high-yield bond funds, Indian equity funds, and so forth. We sought to expand our productlineup, launching new wrap-type funds and commencing the handling of funds that invest in specific types of
equities, such as robotics or security stocks. Nevertheless, sales of funds were down from the previous fiscal
year. Administrative charges on offering, selling, and solicitation for sales of financial instruments to specificinvestors totaled ¥15,747 million (62.0% of the figure for the previous year). Other fees and commissions
received amounted to ¥20,569 million (114.2% of the figure for the previous year) due to a rise in income
from trust fees on investment trusts attributable to a high balance of investment trusts.

Fees and commissions received
Fees and commissions
received

Breakdown by category(Millions of yen except percentage)(\ billions)
Brokerage commissions
Equities

2016<A>

2015<A>

Ratio(4/1/15～3/31/16)(4/1/14～3/31/15)<A>/<B>¥20,805¥19,490106.7

19,23918,954

101.5

Bonds

5

7

71.4

Others

1,560

529

294.9

546

454

120.3

402

313

128.4

Underwriting fees and selling concessions
Equities

144

141

102.1

Placement commissions

15,74725,392

62.0

Other commissions

20,56918,006114.2¥57,666¥63,342

91.0

Bonds

Total

－7－

Breakdown by product(Millions of yen except percentage)

Equities
Bonds

2016<A>

2015<A>

Ratio(4/1/15～3/31/16)(4/1/14～3/31/15)<A>/<B>¥19,926¥19,575

101.8

391

344

113.7

Investment trusts

36,09942,264

85.4

Others

1,251

1,159

107.9

Total

¥57,666¥63,342

91.0

2. Trading profits
Profits on equity trading are earned mainly from domestic over-the-counter trading of foreign equities,
particularly US stocks, while those on bond trading arise mainly in conjunction with income from thehandling of foreign bonds for customers. The US economy was relatively strongly during the first half ofthe fiscal year under review, and stock prices rose and the yen depreciated as a result. In the second half,
however, sudden changes in the Chinese markets triggered turmoil, while the value of emerging-country
currencies declined. In addition, the impact of US interest rate hikes and falling oil prices spilled over into
global equity markets, creating a more bearish outlook. Consequently, total profits on equity trading were
¥9,875 million (60.5% of the figure for the previous year). Total bond trading profits were ¥12,123 million(102.4% of the figure for the previous year). Total trading profits, including other trading profits of ¥235
million (14.7 times the figure for the previous year), were ¥22,233 million (78.9% of the figure for theprevious year).

Tr ading Profits(\ billions)30

Trading profits(Millions of yen except percentage)

2016<A>

2015<A>

Ratio(4/1/15～3/31/16)(4/1/14～3/31/15)<A>/<B>

Equities¥9,875¥16,328

60.5

Bonds

12,123

11,837

102.4

Others235

16-¥22,233¥28,181

78.9

20

10

Total

0
'12 '13 '14 '15 '16

3. Net financial income
Financial income amounted to ¥2,237 million (95.6% of the figure for the previous year). Financial expenses
stood at ¥1,309 million (106.4%). Net financial income—i.e., the difference between the two—was ¥928
million (83.6%).

4. Other operating income
Other operating income—i.e., operating income other than that related to the financial products transaction
business and incidental operations—declined stood at ¥791 million (102.7% of the figure for the previousyear).

5. Selling, general and administrative expenses
Selling, general, and administrative expenses were ¥67,459 million (100.5% of the figure for the previousyear), due to lower personnel expenses and increase of business relations expenses.

6. Other income (expenses)
The Company posted other income of ¥4,817 million, due to resultes from factors such as the posting of gainon sale of investment securities and equity in gain of affiliates.

－8－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 will pay a dividend for the fiscal year of ¥25 per share.

Ⅱ．Analysis of financial position
1. Assets, liabilities and net assets
Consolidated total assets at fiscal year-end declined ¥133,747 million to ¥515,743 million year on year, due
mainly to a decline of ¥74,519 million in receivables on collateralized securities transactions, ¥45,486
million in trading products, and ¥15,932 million in receivables on margin transactions.
Liabilities at fiscal year-end fell ¥134,433 million year on year to ¥343,646 million, due mainly to a declineof ¥67,900 million in trading products, ¥44,958 million in payables on collateralized securities transactions,¥11,962 million in deposits received, and ¥8,274 million in payables on margin transactions.
Net assets at fiscal year-end increased ¥686 million year on year to ¥172,097 million, due mainly to anincrease of ¥6,196 million in retained earnings and declines of ¥3,103 million in unrealized gains onavailable-for-sale securities and ¥1,565 million in minority interests.

2. Cash flows
Cash and deposits (“cash” hereafter) at the end of the consolidated fiscal year increased ¥2,684 million year
on year to ¥53,250 million.
Each cash flow item and factors affecting it were as follows.

＜Cash flows from operating activities＞
Cash inflows from operating activities were ¥13,734 million, due mainly to the difference between cash
inflows from an increase of ¥18,976 million in income before income taxes and minority interests and achange of ¥29,560 million in receivables on collateralized securities transactions and payables oncollateralized securities transactions and cash outflows from a change of ¥25,733 million in trading products
and a decline in deposits received of ¥11,732 million.

＜Cash flows from investing activities＞
Cash outflows due to investment activities were ¥10,395 million, due mainly to the difference between cash
inflows of ¥3,222 million from the sale of investment securities and cash outflows of ¥4,295 million from theacquisition of intangible fixed assets, ¥4,013 million from the acquisition of investment securities, and¥2,588 million from the acquisition of shares in affiliates.

＜Cash flows from financing activities＞
Cash outflows due to financing activities were ¥342 million, due mainly to the difference between cash
inflow of ¥9,920 million from a net change in short-term borrowings and cash outflows from ¥4,873 million
from dividend payments, ¥2,961 million from the repayment of long-term borrowings, and ¥2,675 million
from the acquisition by subsidiaries of their own shares.

－9－

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Balance Sheet － March 31, 2016
Thousands of
U.S. dollars(note 3)

Millions of yen
2016

2015

2016

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

57,301¥

55,583$

508,529

Cash segregated as deposits for customers and58,842

63,610522,204

Trading assets (notes 4 and 10)

170,852

216,338

1,516,258

Receivables on margin transactions (note 5)

42,341

58,273375,763

Receivables on collateralized securities transactions(note 6)

95,461

169,980

847,187

Short-term investments (note 7)

2,004

503

17,785

Deferred income taxes (note 11)

811

1,377

7,197

7,576

8,030

67,235

(0)

(14)

(0)

435,188573,680

3,862,158

Property and equipment, net of accumulated
depreciation of ¥13,370 million ($118,655 thousand)in 2016 and ¥12,429 million in 2015 (note 10)

19,595

18,961

173,900

Intangible assets, net

9,869

7,585

87,584

Investment securities (notes 7, 8 and 10)

43,96842,049390,202

Long-term guarantee deposits

3,795

3,393

33,679Other current assets
Allowance for doubtful accounts
Total current assets

Investments and other assets:

Asset for retirement benefits (note 12)
Deferred income taxes (note 11)

395

994

3,506

1,623

1,445

14,404

Other

2,878

3,049

25,541

Allowance for doubtful accounts(1,568)(1,666)(13,915)

51,09149,264453,417

Total investments and other assets
TOTAL

¥

515,743

See accompanying notes to consolidated financial statements.
－ 10 －¥

649,490$

4,577,059

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Balance Sheet－(Continued) － March 31, 2016
Thousands of
U.S. dollars(note 3)

Millions of yen
2016
LIABILITIES AND NET ASSETS
Current liabilities:
Trading liabilities (note 4)
Payables arising from unsettled trades
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)
Deferred income taxes (note 11)
Other current liabilities (notes 9 and 13)
Total current liabilities

¥

2015

77,20616,146
10,468¥

2016

145,106
19,466
18,742$685,179
143,291
92,90024,737
27,52936,285109,534
1,252
30
7,770
310,957

69,69539,491
36,679104,796
2,770
33
8,717
445,495

219,533
244,312
322,018
972,080
11,111
266
68,9572,759,647

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

12,300
774
7,508
5,740
3,724
30,046

9,210
1,021
9,089
7,654
2,992
29,966109,159
6,869
66,63150,941
33,049266,649

Financial instruments transactions reserve (note 14)
Total liabilities

2,643
343,6462,618
478,079

23,456
3,049,752

18,59012,982
106,669

18,59012,913
100,473

164,981
115,211
946,654(3,790)(3,730)(33,635)

134,451

128,246

1,193,211

11,371
401
180
(41)

14,474389
429
660

100,914
3,559
1,597
(364)

11,911

15,952

105,706

87

-

772

Non-controlling interests

25,64827,213

227,618

Total net assets

172,097

171,411

1,527,307

649,490$ 4,577,059

Net assets
Shareholders' equity (note 15):
Common stock
Authorized―750,000,000 shares in 2016 and2015
Capital surplus
Retained earnings
Treasury stock, at cost, 10,381,520 shares in 2016
and 10,211,055 shares in 2015
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

¥

515,743

See accompanying notes to consolidated financial statements.
－ 11 －¥

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Statement of Income － Year ended March 31, 2016
Thousands of
U.S. dollars(note 3)

Millions of yen
2016

2015

2016

Operating revenues:
Commissions¥

57,666¥

63,342$

511,768

Net gain on trading

22,23328,181

197,311

Interest and dividend income

2,237

2,340

19,852Service fee and other revenues

791

770

7,020

82,927

94,633735,951

1,309

1,230

11,617

Interest expense
Net operating revenues

81,61893,403724,334

Selling, general and administrative expenses (note19)

67,45967,108598,677

14,15926,295

125,657

946

773

8,395

Operating income
Other income (expenses):Dividend income
Reversal of allowance for doubtful accounts
Gain on sale of investment securities
Gain on sale of property and equipment
Equity in gain (losses) of affiliates

14

6

124

1,796

339

15,939

11

-

98

2,435

(10)

21,610Interest expense

(85)

(96)

(754)

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

(48)
(87)

(700)
(58)

(426)
(772)

Loss on devaluation of investment securities

(24)

(58)

(213)

Provision for financial instruments transactions
reserve
Impairment loss

(25)
(3)

(292)
-

(222)
(27)

Compensation expense

(294)

-

(2,609)Loss on cancellation of lease contracts

(68)

-

(604)

Provision for liabilities for retirement benefits for
directors and corporate auditors
Other, net

249(1,000)
282

2,210

4,817

(814)

42,74918,97625,481

168,406

Current

4,513

9,040

40,052

Deferred

1,403

617

12,451

5,916

9,657

52,503

Net income

13,06015,824

115,903

Net income attributable to non-controllinginterests

1,992

1,724

17,678

Income before income taxes andnon-controlling interests
Income taxes (note 11):Net income attributable to owners of theparent¥11,068See accompanying notes to consolidated financial statements.
－ 12 －¥

14,100$98,225

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income － Year ended March 31, 2016

Net income¥

Millions of yen
2015
2016

Thousands of
U.S. dollars(note 3)2016

13,060$¥15,824

115,903

Other comprehensive income (loss) (note 20):
Unrealized gain (loss) on available-for-sale securities(3,844)

Surplus on land revaluation

6,721(34,114)

44

88

390

Foreign currency translation adjustments

(249)

574

(2,210)Remeasurements of defined benefit plans

(724)

314

(6,425)

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

(61)

-

(541)

Total other comprehensive income (loss)(4,834)

7,697(42,900)

Comprehensive income

¥

8,226

¥

23,521$73,003

¥

7,028

¥

20,313$62,371

Comprehensive income attributable to:
Owners of the parent
Non-controlling interests

1,198

See accompanying notes to consolidated financial statements.

－ 13 －

3,208

10,632

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Statement of Changes in Net Assets － Year ended March 31, 2016
Millions of yen
Shareholders’ equity
Commonstock
Balances at March 31, 2014¥

18,590 ¥Capitalsurplus12,913Retainedearnings¥

91,223 ¥Treasurystock,
at cost(3,701) ¥Totalshareholders’equity119,025

Cumulative effects of changes
17in accounting policies

17

Restated balance at March 31,
18,5902014

12,91391,240(3,701)

119,042

Changes arising during the year:

Cash dividends(4,874)(4,874)

Net income attributable toowners of the parent

14,10014,100Purchase of treasury stock
Disposition of treasury stock0(0)

Reversal of surplus on land
revaluation

(29)

(29)

0

0

7

7

Net changes other thanshareholders’ equity
Total changes during the year
Balances at March 31, 2015

-

0

9,233

(29)

9,204

18,59012,913

100,473(3,730)128,246

Changes arising during the year:

Cash dividends(4,873)

Net income attributable toowners of the parent

11,068Purchase of treasury stock
Disposition of treasury stock0

Changes in equity resulting
from transactions with
non-controlling interests

69

(0)

Reversal of surplus on land
revaluation(4,873)
11,068
(27)

(27)

0

0

(33)

36

1

1

Net changes other thanshareholders’ equity
Total changes during the year
Balances at March 31, 2016¥

18,590 ¥69
12,982－ 14 －

¥

6,196

(60)

6,205

106,669 ¥(3,790) ¥134,451

Millions of yen
Accumulated other comprehensive income (loss)
Unrealized

Total

Foreign

Remeasure-available-

Surplus on

currency

ments

other

for-salelandtranslationof definedcomprehensive

securities

revaluation

adjustments

benefit plansincomegain onBalances at March 31, 2014¥

9,180 ¥

371 ¥(144) ¥

339 ¥

accumulated

9,746 ¥

Stock

Non-

acquisition

controllingrightsinterests-¥

24,069 ¥Total net
assets152,840

Cumulative effects ofchanges in accounting

1

18

24,070152,858

Restated balance at March
9,180

31, 2014

371

(144)

339

9,746

-

Changes arising during the year:

Cash dividends(4,874)

Net income attributable toowners of the parent

14,100Purchase of treasury stock(29)

Disposition of treasury

0

Reversal of surplus on land
revaluation

7

Net changes other thanshareholders’ equity

5,294

18

573

321

6,206

-

3,143

9,349

Total changes during the year

5,294

18

573

321

6,206

-

3,143

18,553

Balances at March 31, 2015

14,474

389

429

660

15,952-

27,213

171,411

Changes arising during the year:

Cash dividends(4,873)

Net income attributable toowners of the parent

11,068Purchase of treasury stock(27)

Disposition of treasury

0

Changes in equity resulting
from transactions with36

non-controlling interests

Reversal of surplus on land
revaluation

1

Net changes other thanshareholders’ equity(3,103)

Total changes during the year

Balances at March 31, 2016

¥

12

(249)

(701)

(4,041)87(1,565)(5,519)(1,565)686

25,648 ¥(3,103)

12

(249)

(701)

(4,041)

87

11,371 ¥

401 ¥

180 ¥

(41) ¥

11,911 ¥87 ¥－ 15 －

172,097

Thousands of U.S. dollars(note 3)
Shareholders’ equity
Commonstock
Balances at March 31, 2015$

Capitalsurplus164,981 $Treasurystock,
at costRetainedearnings

114,599$

891,666$

Total
shareholders'equity(33,103) $1,138,143

Changes arising during the year:

Cash dividends(43,246)(43,246)

Net income attributable toowners of the parent

98,22598,225Purchase of treasury stock
Disposition of treasury stock0

Changes in equity resulting
from transactions with
non-controlling interests

612

(0)

Reversal of surplus on land
revaluation

(239)

(239)

0

0

(293)

319

9

9

Net changes other thanshareholders’ equity
Total changes during the year
Balances at March 31, 2016$

612

164,981 $54,988115,211$

946,654$(532)

55,068(33,635) $1,193,211

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

Total

Foreign

gain onRemeasure-accumulated

available-

Surplus on

currency

ments

other

for-salelandtranslationof definedcomprehensive

securities

revaluation

adjustments

benefit plansincomeBalances at March 31, 2015 $ 128,452 $3,453 $

3,807 $

5,857 $

141,569 $

Stock

Non-

acquisition

controllingrightsinterests

Total net
assets- $ 241,507 $ 1,521,219

Changes arising during theCash dividends(43,246)

Net income attributableto owners of the parent

98,225Purchase of treasury(239)

Disposition of treasury

0

Changes in equity resulting
from transactions with319

non-controlling interests

Reversal of surplus onland revaluation

9

Net changes other thanshareholders’ equity(27,538)106(2,210)(6,221)(35,863)772(13,889)(48,980)

Total changes during the year

(27,538)106(2,210)(6,221)(35,863)772(13,889)

6,088

3,559 $

1,597 $

105,706 $772 $ 227,618 $ 1,527,307

Balances at March 31, 2016 $ 100,914 $(364) $

See accompanying notes to consolidated financial statements.
－ 16 －

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Statement of Cash Flows － Year ended March 31, 2016
Thousands of
U.S. dollars(note 3)

Millions of yen
2016

2015

2016

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

18,976¥25,481$

168,406

Adjustments to reconcile income before income taxes andnon-controlling interests to net cash provided by operating
Depreciation and amortization

3,259

4,042

28,923

3-

27

Interest and dividend income(3,191)(3,119)(28,319)

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

1,394
0(1,763)

1,326
621
(292)

12,371
0(15,646)

Loss on devaluation of investment securities

24

58

213

4,050

(6,100)35,942(25,733)

10,997(228,372)

7,635

7,179

67,758

Impairment loss

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

29,56025,833

262,336(11,732)

9,972(104,118)

Decrease (increase) in short-term guarantee deposits

732

734

6,496

Increase (decrease) in guarantee deposits received

(394)

874

(3,497)

Increase (decrease) in allowance for doubtful accounts

(112)

(215)

(994)

Increase (decrease) in liabilities for retirement benefits(1,316)59(11,679)

Increase (decrease) in deposits received

Increase (decrease) in financial instruments transactions reserve
Other, net
Sub-total

25

292

222

(3,303)

348(29,313)

18,11478,090160,756

Interest and dividend received

3,098

3,229

27,494

Interest paid

(1,403)(1,318)(12,451)

Income taxes paid

(6,075)(15,726)(53,914)

13,73464,275

121,885(2,002)(3,400)(17,767)

-

4,500

-

Payment for purchase of property and equipment(1,621)(1,039)(14,386)

Payment for purchase of intangible assets(4,295)(2,636)(38,117)

Payment for purchase of investment securities(4,013)(748)(35,614)

Proceeds from sale of investment securities

3,222

3,137

28,594

Payment for investments in affiliates(2,588)(20)(22,967)

902

(600)

8,005

(10,395)(806)(92,252)

Net cash provided by operating activities
Cash flows from investing activities:
Payment for short-term investments
Proceeds from sale of short-term investments

Other, net
Net cash used in investing activities－ 17 －Cash flows from financing activities:
Increase (decrease) in short-term borrowings

9,920(55,110)88,037

Proceeds from long-term borrowings

900

6,000

7,987

Payments on long-term borrowings(2,961)(4,270)(26,278)

Proceeds from sale of treasury stock

1

0

9

Purchase of treasury stock

(28)

(29)

(248)

Purchase of treasury stock by subsidiaries(2,675)-(23,740)

Dividends paid

(4,873)(4,874)(43,246)

Dividends paid to non-controlling interests of subsidiaries

(51)

(65)

(453)

Other, net

(575)

(550)

(5,103)(342)(58,898)(3,035)

(313)

559

(2,779)Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents

2,684

5,130

23,819Cash and cash equivalents, beginning of year

50,56645,436448,758

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

53,250See accompanying notes to consolidated financial statements.

－ 18 －¥

50,566$

472,577

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

Year ended March 31, 2016

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 10 subsidiaries. Three affiliates are accounted for by equity method at
March 31, 2016. 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 tradedate 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－ 19 －

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.

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.
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 after April 1, 1998. And in an overseas subsidiary, depreciation is computed by
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－ 20 －

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.
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.

Business combinations— Effective from the current consolidated fiscal year (hereinafterreferred as the “year”), the Company adopted the “Revised Accounting Standard forBusiness Combinations” (Accounting Standards Board of Japan (ASBJ) Statement No.21,
issued September 13, 2013, hereinafter referred to as the “Accounting Standard forBusiness Combinations”), “Revised Accounting Standard for Consolidated Financial
Statements” (ASBJ Statement No. 22, issued September 13, 2013, hereinafter referred to as
the “Accounting Standard for Consolidated Financial Statements”), “Revised AccountingStandard for Business Divestitures” (ASBJ Statement No. 7, issued September 13, 2013,
hereinafter referred to as the “Accounting Standard for Business Divestitures”) and otherrelated standards and implementation guidance.
In applying these revised accounting standards, the Company records any differences
arising from changes in ownership interest in a subsidiary when it retains control as capitalsurplus and the acquisition-related costs are recognized as expenses when incurred. Also,
for business combinations conducted after the beginning of the year, the disclosure method
was revised regarding to the adjustment of purchase price allocation based on provisional
accounting applicable to the consolidated financial statements of the fiscal year when thebusiness combination occurred. In addition, the presentation method of net income wasamended and the reference to “minority interests” was changed to “non-controllinginterests”.
The Company has applied these standards in accordance with the transitional treatmentprescribed in Section 58-2 (4) of the Accounting Standard for Business Combinations,
Section 44-5 (4) of the Accounting Standard for Consolidated Financial Statements, andSection 57-4 (4) of the Accounting Standard for Business Divestitures, and The Company
applied these standards from the beginning of the year.
－ 21 －

As a result of these changes, operating income increased by ¥100 million ($887 thousand)and income before income taxes and non-controlling interests decreased by ¥68 million($603 thousand) for the year ended March 31, 2016. Capital surplus increased by ¥68
million ($603 thousand) at March 31, 2016.
For the year ended March 31, 2016, cash flows from changes in ownership interests in
subsidiaries that do not result in change in scope of consolidation are recognized under“cash flows from financing activities”.
The impact on net income per share and net assets per share is immaterial.

3.

p.

Reclassifications— Certain reclassifications have been made to the prior years’
consolidated financial statements to conform to the presentation used in consolidated
statements as of and for the year ended March 31, 2016.

q.

New accounting pronouncements not yet adopted—Regarding the treatment related to therecoverability of deferred tax assets, “Implementation Guidance on Recoverability ofDeferred Tax Assets (ASBJ Guidance No.26, issued March 28, 2016)” has been reviewed,
basically following the framework of the Audit Committee Report No. 66 “Audit Treatment
related to Judgment of the Recoverability of Deferred Tax Assets,” namely, a frameworkthat classifies companies into five categories and estimates the recorded amount ofdeferred tax assets according to each category.
The following treatment has been reviewed.
1) Treatment of companies that do not satisfy any of the category requirements for
Category 1 through Category 52) Category requirements for Category 2 and Category 3
3) Treatment related to a future deductible temporary difference for which scheduling is
not possible, in a company that qualifies as Category 24) Treatment related to the reasonable estimable period for taxable income before future
additions and deductions such as temporary difference, etc., in a company that qualifies
as Category 35) Treatment in the case that a company that satisfies the category requirements for
Category 4 qualifies as Category 2 or Category 3
The Company is scheduled to apply these accounting standards from the beginning of theyear ending March 31, 2017.
The effect of adoption of these revised accounting standards is now under assessment at thetime of preparation of the accompanying consolidated financial statements.

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 31, 2016, which was ¥112.68 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.

－ 22 －

4.

TRADING ASSETS AND LIABILITIES
Trading assets and trading liabilities at March 31, 2016 and 2015 consist of the following:

Trading assets:
Securities and other
Derivatives

Trading liabilities:
Securities and other
Derivatives

Millions of yen
2016
2015

Thousands
ofU.S. dollars
2016¥ 170,824 ¥ 216,262
28
76¥ 170,852 ¥ 216,338$ 1,516,010
248$ 1,516,258

77,194 ¥ 145,103
12
3
77,206 ¥ 145,106$ 685,073
106$ 685,179¥¥

5.

MARGIN TRANSACTIONS
Margin transactions at March 31, 2016 and 2015 consist of the following:

Millions of yen
2016
2015
Assets:Loans receivable from customers
Cash deposits as collateral for securities borrowed fromsecurities finance companies

Liabilities:
Borrowings from securities finance companies
Proceeds from securities sold for customers’ accounts

Thousands
ofU.S. dollars
2016¥ 38,795¥ 54,678$ 344,293

3,546¥ 42,341

3,595¥ 58,273

31,470$ 375,763¥¥ 10,531
8,211¥ 18,742

$

3,617
6,851
¥ 10,468$

32,10060,80092,900Loans receivable from customers are stated at amounts equal to the purchase price of therelevant securities, which are collateralized by customers’ securities and customers’ deposits
in the form of cash or securities. Proceeds from securities sold for customers’ accounts arestated at the sales prices of the relevant securities on the respective transaction dates.
6.

COLLATERALIZED SECURITIES TRANSACTIONSCollateralized securities transactions at March 31, 2016 and 2015 consist of the following:

Millions of yen
2016
2015

Thousands
ofU.S. dollars
2016

Assets:Cash collateral for securities borrowed¥ 95,461¥ 169,980$ 847,187

Liabilities:
Cash collateral for securities loaned¥ 24,737¥ 69,695$ 219,533－ 23 －

7.

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, 2016 and 2015 are summarized as follows:

Balancesheett

At March 31, 2016
Government, corporate and other bonds

Millions of yen
Gross
Gross
unrealized unrealized
gain
loss

Fair value

¥

46

¥

-

¥

5

¥

41

¥

54

¥

-

¥

6

¥

48

At March 31, 2015
Government, corporate and other bonds

Thousands of U.S. dollars
Gross
Gross
Balance unrealized unrealized Fair value
sheet
gain
loss
t

At March 31, 2016
Government, corporate and other bonds

$

408

$

-

$

44

$

364

Acquisition cost, balance sheet amount, gross unrealized gain and gross unrealized loss ofavailable-for-salesecurities with fair value at March 31, 2016 and 2015 are summarized as follows:

Millions of yen
Gross
Gross
Acquisition unrealized unrealized
cost
gain
loss

Balancesheett

At March 31, 2016
Current:
Government, corporate and other bonds ¥Other¥
Non-current:
Equity securities
Other

2,001
2
2,003

¥ 12,446
3,897¥ 16,343

¥

1
1

¥

¥ 22,62047¥ 22,667

¥

¥

¥

¥

¥

¥

- ¥
(0)
(0) ¥

2,002
2
2,004

(1,359) ¥ 33,707
(191)
3,753
(1,550) ¥ 37,460

At March 31, 2015
Current:
Government, corporate and other bonds ¥Other¥
Non-current:
Equity securities
Other

300
143
443

¥ 12,604
745¥ 13,349－ 24 －¥

3
57
60¥ 27,067
98¥ 27,165

¥
¥
¥

-

¥
¥

303
200
503

(16) ¥ 39,655(34)809(50) ¥ 40,464

Thousands of U.S. dollars
Gross
Gross
Acquisition unrealized unrealized
Balance
cost
gain
loss
sheet
t

At March 31, 2016
Current:

Government, corporate and other bonds $Other$
Non-current:
Equity securities
Other

17,75818
17,776$ 110,454
34,585$ 145,039

$

9
9

$

$ 200,746
417$ 201,163

$
$

- $
(0)
(0) $

17,76718
17,785$ (12,061) $ 299,139(1,695)33,307$ (13,756) $ 332,446

Securities classified as available-for-sale securities for which fair value is not available areunlisted equity securities amounting to ¥6,460 million ($57,330 thousand) and ¥1,523
million, and investments in limited partnership and similar partnership amounting to ¥2
million ($18 thousand) and ¥18 million at March 31, 2016 and 2015, respectively.
For the years ended March 31, 2016 and 2015, proceeds from sales of available-for-salesecurities, gross realized gains and gross realized losses are as follows:
Millions of yen
Proceeds fromsales of
Gross realized Gross realized
available-for-sa
gains
lossesle securities
March 31, 2016
Equity securities¥

Government, corporate and other bonds

Other¥
March 31, 2015
Equity securities¥

Government, corporate and other bonds

Other
¥

2,096
300
825
3,221

¥

2,617
4,500
520
7,637

¥

¥

¥

1,693
157
1,850

¥

299
51
350

¥

¥

¥

(2)
(86)
(88)

(41)
(17)
(58)

Thousands of U.S. dollars
Proceeds fromsales of
Gross realized Gross realized
available-for-sa
gains
lossesle securities
March 31, 2016
Equity securities$

Government, corporate and other bonds

Other
$

18,601
2,662
7,322
28,585－ 25 －$$

15,025
1,393
16,418

$

$

(18)
(763)
(781)

8.

INVESTMENTS IN AFFILIATES
The aggregate carrying amount of investments in affiliates at March 31, 2016 and 2015 are¥5,019 million ($44,542 thousand) and ¥57 million, respectively.

9.

BORROWINGS
The weighted-average interest rates applicable to the short-term borrowings are 0.55% and0.68% at March 31, 2016 and 2015, respectively.
Long-term borrowings at March 31, 2016 and 2015 consist of the following:
Millions of yen
2016
2015
Borrowings, maturing in installments through2021; bearing weighted average interest of 2.13%
at March 31, 2016
¥ 13,404
Borrowings, maturing in installments through2020; bearing weighted average interest of 2.53%
at March 31, 2015
Less current installments

¥

1,104
¥ 12,300¥-$ 118,957

15,465

-

6,255

9,798

9,210

$ 109,159

Lease liabilities at March 31, 2016 and 2015 consist of the following:Thousands
ofU.S. dollars
2016

Millions of yen
2016
2015
Lease liabilities maturing in installments through2022; bearing weighted average interest of 2.99%
at March 31, 2016¥
Lease liabilities maturing in installments through2021; bearing weighted average interest of 3.16%
at March 31, 2015
Less current installments¥－ 26 －

1,305¥

Thousands
ofU.S. dollars
2016

-

$

11,581

-

1,552

-

531

531

4,712

774

¥

1,021

$

6,869

(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:
ThousandsofMillions of Yen
U.S. dollars
2016
2015
2016
Long-term borrowings
Current installments of long-term borrowings

¥

6,000
-

¥

6,000
2,775

Annual maturities of borrowings after March 31, 2017, are as follows:Year ending March 31
2018
2019
2020
2021

53,248-Millions ofyen

Thousands
ofU.S. dollars

¥

$

3,140
2,320
4,000
2,840

Annual maturities of lease liabilities after March 31, 2017, are as follows:Year ending March 31
2018
2019
2020
2021

$

27,867
20,58935,49925,204

Millions ofyen

Thousands
ofU.S. dollars

¥

$

412
231
88
40

3,656
2,050
781
355

To meet its liquidity needs stably and expeditiously and to strengthen financial operations,the Company established a commitment line of ¥21,000 million ($186,368 thousand) with 7
financial institutions at both March 31, 2016 and 2015, respectively.
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 rightto offset cash deposits against obligations that have become due or, in the event of default,
against all obligations due the bank.

－ 27 －

10. PLEDGED ASSETSAt March 31, 2016 and 2015, the carrying value of assets pledged is as follows:
ThousandsofMillions of Yen
U.S. dollars
2016
2015
2016
¥

Cash in banks
Trading assets
Property and equipment
Investment securities

2,084
32,9807,256
19,472¥ 61,792

¥

2,214
7,049
7,911
23,939¥ 41,113

Assets in the above table are pledged for the following liabilities:
Millions of yen
2016
2015
Short-term borrowings
Borrowings from securities finance companies
Long-term borrowings¥ 37,073
935
6,300¥ 44,308¥ 19,431
4,772
3,210
¥ 27,413$

18,495
292,687
64,395
172,808$ 548,385

Thousands
ofU.S. dollars
2016$ 329,011
8,298
55,911$ 393,220

In addition to above, at March 31, 2016, trading assets, etc. amounting to ¥59,542 million($528,417 thousand) and investments securities amounting to ¥133 million ($1,180
thousand) are deposited as guarantee for settlement of trading accounts and securities
borrowed, respectively. At March 31, 2015, trading assets, etc. amounting to ¥70,834
million and investments securities amounting to ¥204 million are deposited as guarantee
for settlement of trading accounts and securities borrowed, respectively.
The fair value of the securities pledged as collateral at March 31, 2016 and 2015, except for
those disclosed in the above table, are as follows:
ThousandsofMillions of yen
U.S. dollars
2016
2015
2016
Securities loaned on margin transactions
Securities pledged for borrowings on margin
i loaned
Securities
Other

¥

6,950
3,177
24,70933,614¥ 68,450¥

8,627
10,63469,50931,828¥ 120,598$

61,67928,195219,285
298,313$ 607,472

The fair value of the securities received as collateral at March 31, 2016 and 2015 are as
follows:
ThousandsofMillions of Yen
U.S. dollars
2016
2015
2016
Securities received on margin transactions
Securities borrowed
Securities pledged as collateral
Other－ 28 －¥ 35,591
107,717
36,952
4,079¥ 184,339¥ 52,533
174,377
59,8784,276¥ 291,064$ 315,859
955,955
327,937
36,200$ 1,635,951

11.

INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese corporate, inhabitantand business taxes based on income.
Because "Act for Partial Amendment of the Income Tax Act, etc." (Act No. 15 of 2016) and"Act for Partial Amendment of the Local Tax Act, etc." (Act No. 13 of 2016) were enacted by
the Diet on March 29, 2016, the effective statutory tax rate is to be lowered from the year
beginning on or after April 1, 2016.
As a result of the change in tax rates, the amount of deferred tax liabilities (the amountafter offsetting deferred tax assets) decreased by ¥138 million ($1,225 thousand),remeasurements of defined benefit plans decreased by ¥2 million ($18 thousand), income
taxes-deferred for the current year increased by ¥203 million ($1,802 thousand) andunrealized gain on available-for-sale securities increased by ¥343 million ($3,044 thousand).
The tax effects of significant temporary differences and tax loss carryforwards which
resulted in deferred tax assets and deferred tax liabilities at March 31, 2016 and 2015 are as
follows:
ThousandsofMillions of yen
U.S. dollars
2016
2015
2016
Deferred tax assets:
Tax loss carryforwards¥
Liability for retirement benefits (employees)
Financial instruments transactions reserve
Accrued bonuses
Liability for retirement benefits (directors andcorporate auditors)
Allowance for doubtful accounts
Impairment loss
Accrued business tax
Asset retirement obligations
Loss on devaluation of investment securities
Retirement benefits payable for directors andcorporate auditors
Depreciation and amortization
Loss on devaluation of golf memberships
Other
Valuation allowance
Total
Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Land revaluation excess
Other
Total
Net deferred tax liabilities¥－ 29 －

3,144
1,686
807
559

¥

3,304
1,415
845
785

$

27,902
14,963
7,162
4,961

35
477
349
82
315
229

765
506
362
299
279
241

311
4,233
3,097
728
2,795
2,032

181
165
107
424
8,560
(5,296)
3,264

186
114
545
9,646
(5,487)
4,159

1,606
1,464
950
3,763
75,967(47,000)
28,967(6,514)(8,694)(1,457)(1,503)(397)(262)(8,368)(10,459)(5,104) ¥ (6,300)(57,810)(12,930)(3,523)(74,263)$ (45,296)

Net deferred tax assets at March 31, 2016 and 2015 are reflected in the accompanying
consolidated balance sheet under the following captions:

Millions of yen
2016
2015
Current assets – Deferred income taxes
Investments and other assets – Deferred income
Current liabilities – Deferred income taxes
Non-current liabilities – Deferred income taxes

¥

¥

811
1,623
(30)
(7,508)(5,104)

¥

¥

1,377
1,445
(33)
(9,089)(6,300)Thousands
ofU.S. dollars
2016
$

7,197
14,404(266)(66,631)$ (45,296)

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, 2016 and2015 is as follows:
2016
2015
Statutory tax rate
Expenses not deductible for tax purposes
Income not credited for tax purposes
Per capita tax
Equity in gains of affiliates
Valuation allowance
Adjustments of deferred tax assets due to change in tax rate

Expiration of tax loss carryforwards
Tax credits for salary increase
Other
Effective tax rate

33.0%
0.9
(0.0)
0.4
(4.2)
1.3
1.1
(1.5)
0.2
31.2%

35.5%
0.6
(0.3)
0.3
0.0
(1.0)
1.6
2.4
(2.0)
0.8
37.9%

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 forlump-sum payment of benefits.
Defined benefit plans
Followings are the information of defined benefit plans at March 31, 2016 and 2015 and forthe years then ended.
(1) Reconciliation of changes in retirement benefit obligation
Millions of yen
2016
2015
Retirement benefit obligation at beginning of year ¥ 13,730
Cumulative effects of changes in accounting policies
Restated balance at beginning of year
13,730704Service cost
Interest cost
53
Actuarial gain and loss
537
Benefits paid
(849)
Other
0
¥ 14,175
Retirement benefit obligation at end of year

－ 30 －¥ 13,594(28)
13,566
633
83
333
(885)
¥ 13,730

Thousands
ofU.S. dollars
2016$ 121,850
121,850
6,248
470
4,766
(7,535)0$ 125,799

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
2016
2015
¥

Plan assets at beginning of year
Expected return on plan assets
Actuarial gain and loss
Employer contributions
Benefits paid
Other
Plan assets at end of year

¥

9,403
45
(412)
343
(436)
0
8,943

¥

¥

8,404
40
897
564
(502)
9,403

Thousands
ofU.S. dollars
2016
$

$

83,449399(3,657)
3,044(3,869)079,366(3) Reconciliation between net of retirement benefit obligation and plan assets, and liability
or asset for retirement benefits recognized in consolidated balance sheet
ThousandsofMillions of yen
U.S. dollars
2016
2015
2016
¥

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

¥
¥
¥

8,548
(8,943)
(395)
5,627
5,232

¥

5,627
395
5,232

¥

¥

¥

8,409
(9,403)
(994)
5,321
4,327

$

5,321
994
4,327

$

(4) The components of retirement benefit expenses
Millions of yen
2016
2015
¥

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss (gain)
Retirement benefit expenses¥－ 31 －

704
53
(45)
(118)
594

¥

¥

633
82
(40)
(124)
551

75,860(79,366)(3,506)49,938$ 46,432$

49,9383,506
46,432Thousands
ofU.S. dollars
2016
$

$

6,248
470
(399)
(1,047)
5,272

(5) Remeasurements of retirement benefit plans before related tax effects

Thousands
ofU.S. dollars
2016

Millions of yen
2016
2015
¥

Actuarial loss

(1,067)¥440$(9,469)(6) Accumulated remeasurements of retirement benefit plans before related tax effects
ThousandsofMillions of yen
U.S. dollars
2016
2015
2016
¥

Unrecognized actuarial loss

(106)

¥

961

$

(941)

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

Equity securities
General accountDebt securities
Other
Total

2016

2015

33%
35
19
13
100%

42 %
34
21
3
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, 2016 and 2015 are
as follows:
2016
2015
(a) Discount rate(b) Long-term expected rate of return

0.00%
0.50%

0.41%
0.50%

Defined contribution plans
The amount to be paid by the Company and consolidated subsidiaries to the defined
contribution plans is ¥197 million ($1,748 thousand) and ¥192 million for the years ended
March 31, 2016 and 2015, respectively.
Retirement benefits for directors and corporate auditors
Directors and corporate auditors are not covered by the plans described above. For such
persons, at March 31, 2015, the Company and certain consolidated subsidiaries have
unfunded defined benefit pension plans. Under the plans, directors and corporate auditors
are entitled to lump-sum payments based on the current rate of pay and length of service
when they leave the Company.
The Company and certain domestic consolidated
subsidiaries provide for the amount of vested benefits of ¥2,334 million to which directors
and corporate auditors are entitled if they were to retire or sever immediately at the balance
sheet date.
At March 31, 2016, certain domestic consolidated subsidiaries provide for the amount of ¥113
million ($1,003 thousand).

－ 32 －

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 anddiscounted rate of 0.00% to 2.33%.
The following table provides the Company’s total asset retirement obligation for the years
ended March 31, 2016 and 2015:
ThousandsofMillions of yen
U.S. dollars
2016
2015
2016
Balance, beginning of year
Liabilities incurred by asset acquisition
Accretion expenses
Liabilities settled
Other increase (decrease)
Balance, end of year

¥

¥

700 ¥
152
13
(23)
842 ¥

633
112
12
(66)
9
700

$

$

6,212
1,349
115
(204)
7,472

14. 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 1of 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
capital surplus). No further appropriations are required when the total amount of theadditional 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 areavailable for appropriations 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, 2016 and 2015 represent dividends paid out during those years andthe related appropriations to the legal reserve. The amount available for dividends is basedon the amount recorded in the Company’s non-consolidated books of account in accordancewith the Companies Act.
Dividends paid during the year ended March 31, 2015 which was approved by the General
Meeting of Shareholders held on June 27, 2014 are as follows:(a) Total dividends¥4,874 million(b) Cash dividends per common share¥25(c) Record date
March 31, 2014(d) Effective dateJune 30, 2014
Cash dividends for treasury stock held by subsidiaries of ¥122 million were excluded fromthe above table.

－ 33 －

Dividends paid during the year ended March 31, 2016 which was approved by the General
Meeting of Shareholders held on June 26, 2015 are as follows:(a) Total dividends¥4,873million ($43,246 thousand)(b) Cash dividends per common share¥25 ($0.22)(c) Record date
March 31, 2015(d) Effective dateJune 29, 2015
Cash dividends for treasury stock held by subsidiaries of ¥122 million ($1,083 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, 2016 which was approved by the Board of Directors held on May
17, 2016 are as follows:(a) Total dividends¥4,995 million ($44,329 thousand)(b) Dividend source
Retained earnings(c) Cash dividends per common share¥25 ($0.22)(d) Record date
March 31, 2016(e) Effective dateJune 8, 201616. STOCK OPTIONS
The cost recognized for the stock options is ¥73 million ($648 thousand) which is included inselling, general and administrative expenses and the income recognized for the forfeitedstock options is ¥5 million ($44 thousand) for the year ended March 31, 2016.
The General Meeting of Shareholders held on June 26, 2015 approved grant stock options for
issue of 129,400 shares of common stock to the directors of the Company and its subsidiaryand the stock options were granted to 6 directors of the Company and 23 directors of its
subsidiary on July 13, 2015. They are exercisable in the period from July 14, 2015 to July 13,2045. No condition for execution of right is required. There are no stipulations on requisite
service period.
A summary of the scale and movement of the stock option plan for the year ended March 31,
2016 is as follows:
Approval dateJune 26, 2015
Non-vested:
Outstanding at March 31, 2015
GrantedForfeited
VestedOutstanding at March 31, 2016
Vested:Outstanding at March 31, 2015
VestedExercised
Forfeited
Outstanding at March 31, 2016

129,400
129,400
129,400
7,600
121,800

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

－ 34 －¥1 ($0.01)¥715 ($6.35)

The fair value of the stock options was estimated using the Black-Scholes option-valuation
model with the following assumptions:
Expected volatility *1
36.963%
Expected remaining outstanding period *2
6.1 years
Expected dividend *3¥25 per share
Risk-free interest rate *40.128%*1 Expected volatility is based on the actual stock prices traded from June 7, 2009 to July 13,
2015.
*2 Expected remaining outstanding period is based on the actual directors’ service period andtheir retired age.
*3 Expected dividend is based on the dividends paid in the year ended march 31, 2015.
*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
in accordance with the “Law Concerning Land Revaluation” (the “Law”) effective March 31,
1998. The net unrealized gain, net of related taxes and non-controlling interests, arereported 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 and2-5 of the Enforcement Ordinance of the Law concerning Land Revaluation.
The fair value of the land increased by ¥302 million ($2,680 thousand) at March 31, 2016 anddecreased by ¥883 million at March 31, 2015 in comparison with the book value of the land
after the revaluation.

18.

CAPITAL ADEQUACY REQUIREMENTS
In Japan, securities companies are subjected to risk-based capital adequacy rules establishedand administered by the Financial Services Agency. Securities subsidiaries report theircapital adequacy ratio as defined pursuant to these rules. The authorities will take certain
administrative measures if such ratio declines below 120%. Capital adequacy ratios of
Okasan Securities Co., Ltd. are 449.5% and 467.3% at March 31, 2016 and 2015, respectively.

19.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Major elements of selling, general and administrative expenses for the years ended March 31,
2016 and 2015 are summarized as follows:
ThousandsofMillions of yen
U.S. dollars
2016
2015
2016
¥ 14,765 ¥ 13,518
33,331
34,440
6,273
6,159
5,688
5,083
3,259
4,042
846
754
(4)
(7)
3,301
3,119
¥ 67,459 ¥ 67,108

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－ 35 －$ 131,035
295,80255,67150,47928,9237,508(36)
29,295$ 598,677

20.

OTHER COMPREHENSIVE INCOME (LOSS)
The reclassification adjustment and the related income tax effects allocated to eachcomponent of other comprehensive income (loss) for the years ended March 31, 2016 and2015 are as follows:
ThousandsofMillions of yen
U.S. dollars
2016
2015
2016
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¥(4,324) ¥(1,733)(6,057)
2,213(3,844)

9,297
(276)
9,021
(2,300)6,721$ (38,374)(15,380)(53,754)
19,640(34,114)

44

88

390

Foreign currency translation adjustments:
Arising during the year

(249)

574

(2,210)Remeasurements of defined benefit plans:Arising during the year
Reclassification adjustment
Before tax amountTax benefit (expense)
Net-of-tax amount

(949)
(118)
(1,067)
343
(724)

564
(124)
440
(126)
314

(8,422)(1,047)(9,469)3,044(6,425)

(61)

-

(541)

7,697

$ (42,900)

Surplus on land revaluation:
Tax benefit (expense)

Share of other comprehensive income (loss) ofaffiliates accounted for by equity method:
Arising during the year¥

Total other comprehensive income (loss)(4,834) ¥21.

PER SHARE INFORMATION(a)Net Income per Share
Basic net income per share, and reconciliation of the numbers and the amounts used in thebasic net income per share computations for the years ended March 31, 2016 and 2015 are as
follows:
Yen
U.S. dollars
2016
2015
2016
¥

Basic net income per share

55.94

¥

71.20

Millions of yen
2016
2015
¥ 11,068
Net income attributable to owners of the parent
Net income not applicable to common shareholders
Net income attributable to owners of the parent¥ 11,068
available to common shares－ 36 －$

0.50

Thousands
ofU.S. dollars
2016¥ 14,100-$

98,225-¥ 14,100$

98,225

Number of shares(Thousand)
2016
2015
Weighted average number of shares outstanding on
which basic net income per share is calculated(b)

197,849

198,021

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, 2016 and 2015 are as follows:
Yen
U.S. dollars
2016
2015
2016
¥ 739.82

Net assets per share¥ 728.26

Millions of yen
2016
2015
Total net assets
Amount deducted from total net assets:
Stock acquisition rights
Non-controlling interests
Total
Net assets applicable to common stockholders

$

6.57

Thousands
ofU.S. dollars
2016¥ 172,097¥ 171,411$ 1,527,307

87
25,64825,735¥ 146,362

27,213
27,213¥ 144,198

772
227,618
228,390$ 1,298,917

Number of shares(Thousand)
2016
2015
Number of shares outstanding at the end of year on
which net assets per share is calculated
22.

197,833

198,004

SUPPLEMENTARY CASH FLOW INFORMATION
Reconciliation between “Cash on hand and in banks” in the accompanying consolidatedbalance sheet and “Cash and cash equivalents” in the accompanying consolidated statement ofcash flows at March 31, 2016 and 2015 are as follows:
ThousandsofMillions of yen
U.S. dollars
2016
2015
2016
Cash on hand and in banks
Time deposits that have maturities of over threemonths when acquired
Cash and cash equivalents

23.

¥ 55,583$ 508,529(4,051)(5,017)¥ 53,250 ¥ 50,566(35,952)$ 472,577¥ 57,301

COMMITMENTS AND CONTINGENCIESAt March 31, 2016 and 2015, the Company and certain subsidiaries have guaranteed
approximately ¥14 million ($124 thousand) and ¥18 million of employee mortgage loans tofinancial institutions, respectively. If an employee defaults on his/her loan payments, theCompany and/or certain subsidiaries are required to perform under the guarantee.

－ 37 －

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, 2016 and 2015 are as follows:
ThousandsofMillions of yen
U.S. dollars
2016
2015
2016
¥

Within one year
Over one year

¥
25.

757
119
876

¥ 1,225677¥ 1,902$ 6,718
1,056$ 7,774

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,
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 as－ 38 －

collateral 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 ¥277 million ($2,458 thousand)calculated using historical method (holding period: one day, confidence interval: 99%,
observation period: 1,250 days) at March 31, 2016. 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
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.

－ 39 －

Fair value of financial instruments
The carrying amounts on the consolidated balance sheet, fair value, and differences at March
31, 2016 and 2015 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
2016

2015

Carrying
value

Fair value Differences

Carrying
value

Fair value Differences¥ 57,301¥ 57,301-¥ 55,583¥ 55,583

58,842

58,842-

63,61063,610-170,824
46
39,464

170,824
42
39,464(4)-

216,26254
40,967

216,26249
40,967(5)-

42,34142,341-

58,27358,273-

95,461
2,070

95,461
2,070-

169,980
2,802

169,980
2,802-¥ 466,349¥466,345¥(4)¥ 607,531¥ 607,526¥(5)¥ 77,194¥ 77,194¥-¥ 145,103¥ 145,103¥-

16,146
10,46816,146
10,468-19,466
18,742

19,466
18,742-

24,737
27,52936,285109,534
12,30024,737
27,52936,285109,535
12,475

1
175

69,69539,491
36,679104,796
9,210

69,69539,491
36,679104,825
9,401

29
191

Total

¥ 314,193¥314,369¥

176¥ 443,182¥ 443,402¥

220

Derivative transactions

¥

¥

¥

-

¥

¥

¥

-

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

Available-for-sale securities
Receivables on margintransactions
Receivables on collateralized
securities transactions
Short-term guarantee deposits
Total
Liabilities:
Trading liabilities
Trading securities
Payables arising from unsettled
tradesPayables on margin transactions
Payables on collateralized
securities transactions
Deposits received
Guarantee deposits received
Short-term borrowings
Long-term borrowings

16

16－ 40 －

¥

73

73

¥

-

Thousands of U.S. dollars
2016
Carrying
value
Fair value
Differences
Assets:Cash on hand and in banks
Cash segregated as deposits forcustomers and others
Trading assets, short-term
investments and investment
securities
Trading securities$

Held-to-maturity debt securities

Available-for-salesecurities
Receivables on margintransactions
Receivables on collateralized
securities transactions
Short-term guarantee deposits
Total

$

Liabilities:
Trading liabilities
Trading securities$
Payables arising from unsettled
tradesPayables on margin transactions
Payables on collateralized
securities transactions
Deposits received
Guarantee deposits received
Short-term borrowings
Long-term borrowings

508,529 $508,529 $-522,204

522,204-

1,516,010
408

1,516,010
373

(35)

350,231350,231-375,763375,763-

847,187
18,370847,187
18,370-4,138,702 $

4,138,667 $(35)

685,073 $685,073 $-

143,291
92,900143,291
92,900-219,533
244,312
322,018
972,080
109,159

219,533
244,312
322,018
972,089
110,712

9
1,553

Total

$

2,788,366 $2,789,928 $1,562

Derivative transactions

$

142 $

142 $

-

* 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 on margin transactions, Receivables on collateralized securities transactions andShort-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.
Please see note 4. TRADING ASSETS AND LIABILITIES and see note 7. SECURITIESFOR NON-TRADING PURPOSES for information by category.

－ 41 －

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 arising from unsettled trades, Payables on margin transactions, Payables oncollateralized securities transactions, Deposits received, Guarantee deposits received andShort-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
ThousandsofMillions of yen
U.S. dollars
2016
2015
2016
¥
Unlisted equity securities
Investments in limited partnership and similar¥
Total－ 42 －

6,460
2
6,462

¥
¥

1,523
18
1,541

$
$

57,33018
57,348

(3) Projected future redemption of monetary claim and securities with maturities
March 31, 2016
Millions of yen
Due after
Due after
one yearfive years
Due within
throughthroughDue after
one yearfive years
ten yearsten years
Cash on hand and in banks
Cash segregated as deposits forcustomers and others
Trading assets, short-term
investments and investment
securities:¥

57,301

¥

-

¥

-

¥

-

58,842

-

-

-

-

47

-

-

2,000
2

3,506

220

-

42,341---

95,461
2,070

-

-

-

Held-to-maturity debt securities:

Government bonds
Available-for-sale securities
with maturities:
Debt securities:
Government bonds
Other
Receivables on margintransactions
Receivables on collateralized
securities transactions
Short-term guarantee deposits¥ 258,017¥$

508,529¥

220¥

Thousands of U.S. dollars
Due after
Due after
one yearfive years
throughthroughfive years
ten years

Due within
one year
Cash on hand and in banks
Cash segregated as deposits forcustomers and others
Trading assets, short-term
investments and investment
securities:

3,553

$

-

$

-

-

Due after
ten years$-

522,204

-

-

-

-

417

-

-

17,74918

31,115

1,952-

375,763---

847,187
18,370---

Held-to-maturity debt securities:

Government bonds
Available-for-sale securities
with maturities:
Debt securities:
Government bonds
Other
Receivables on margintransactions
Receivables on collateralized
securities transactions
Short-term guarantee deposits$ 2,289,820－ 43 －$

31,532

$

1,952

¥

-

March 31, 2015

Millions of yen
Due after
Due after
one yearfive years
throughthroughfive years
ten years

Due within
one year
Cash on hand and in banks
Cash segregated as deposits forcustomers and others
Trading assets, short-term
investments and investment
securities:¥

55,583¥-¥-Due after
ten years¥-

63,610

-

-

-

-

-

55

-

300
200

475

278

-

58,273---

169,980
2,802

-

-

-

Held-to-maturity debt securities:

Government bonds
Available-for-salesecurities with maturities:
Debt securities:
Government bonds
Other
Receivables on margintransactions
Receivables on collateralized
securities transactions
Short-term guarantee deposits¥ 350,748

¥

475

¥

333

¥

-

(4) The annual maturities of the long-term debt and other interest-bearing debt
March 31, 2016
Millions of yen
Due after

Due

Short-termborrowings
Long-term
borrowings
Borrowings from securities
finance companies

Total

Due afterthree

Due after

two years

years

four

one yearthroughthroughyears

Due after

withinthrough

three

four

throughDue after

one year

two years

years

years

five years

five years¥ 108,430 ¥
1,104
3,617
¥ 113,151 ¥

- ¥

- ¥

- ¥

- ¥

-

3,140

2,320

4,000

2,840

-

3,140 ¥

2,320 ¥

4,000 ¥

2,840 ¥-

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-termborrowings
Long-term
borrowings$

962,282

$

9,798

-

$

-

$

-

$

-

$

-

27,867

20,58935,49925,204-

27,867 $

20,589 $35,499 $25,204 $-Borrowings from securities
finance companies

Total

32,100$ 1,004,180 $－ 44 －

March 31, 2015

Millions of yen
Due after

Due

Short-termborrowings
Long-term
borrowings¥

Due afterthree

Due after

two years

years

four

one yearthroughthroughyears

Due after

withinthrough

three

four

throughDue after

one year

two years

years

years

five years

five years

98,541

¥

6,255

-

¥

-

¥

-

¥

-

¥

-

1,000

2,210

2,000

4,000

-

1,000 ¥

2,210 ¥

2,000 ¥

4,000 ¥-

Borrowings from securities
finance companies

Total

10,531¥ 115,327 ¥* Borrowings from securities finance companies are deemed to be settled within one year.

－ 45 －

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, 2016 and 2015 are summarized as follows:(1) Stocks
March 31, 2016

Stock index futures:
Written
Purchased
Stock index options:
Written
Purchased

Millions of yen
Contractornotional
Valuationamounts Fair value gain (loss)¥

1,873 ¥
1,276
4
10

2¥
1

2
1

4
10

0
0
3

¥

Thousands of U.S. dollars
Contractornotional
Valuationamounts Fair value gain (loss)
Stock index futures:
Written
Purchased
Stock index options:
Written
Purchased$ 16,622 $
11,324
35
89

18 $
9

18
9

35
89

0
0
27

$
March 31, 2015

Millions of yen
Contractornotional
Valuationamounts Fair value gain (loss)
Stock index futures:
Written
Purchased
Stock index options:
Written
Purchased¥

1,289 ¥
1,621

4¥
(1)

4
(1)

2
2

3
2

(1)
0
2

¥

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

－ 46 －

(2) Bond
March 31, 2016
Millions of yen
Contractornotional
Valuationamounts Fair value gain (loss)
Bond futures:
Written
Purchased
Bond options:
Written
Purchased¥

4,095 ¥
-

10 ¥
-

10
-

4

5

1
11

¥

Thousands of U.S. dollars
Contractornotional
Valuationamounts Fair value gain (loss)
Bond futures:
Written
Purchased
Bond options:
Written
Purchased$ 36,342 $
35

89 $
-

89
-

44

9
98

$
March 31, 2015

Millions of yen
Contractornotional
Valuationamounts Fair value gain (loss)
Bond futures:
Written
Purchased
Bond options:
Written
Purchased¥

2,800 ¥
5,741

3 ¥
0

3
0

3

3

(0)
3

¥

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.

－ 47 －

(3) Foreign exchange
March 31, 2016
Millions of yen
Contractornotional
Valuationamounts Fair value gain (loss)
Forward foreign exchange:
Written:Australian dollar
Mexican Peso
Turkish liraU.S. dollar
Brazilian real
Russian ruble
Other

¥

809 ¥
551
434
393
328
306
892

(1) ¥
(3)
(2)
(2)
2
2
(4)
¥

(1)
(3)
(2)
(2)
2
2
(4)
(8)

Thousands of U.S. dollars
Contractornotional
Valuationamounts Fair value gain (loss)
Forward foreign exchange:
Written:Australian dollar
Mexican Peso
Turkish liraU.S. dollar
Brazilian real
Russian ruble
Other

$

7,180 $
4,890
3,852
3,488
2,911
2,716
7,916

(9) $
(27)
(18)
(18)
18
18
(35)
$

(9)
(27)
(18)
(18)
18
18
(35)
(71)

March 31, 2015
Millions of yen
Contractornotional
Valuationamounts Fair value gain (loss)
Foreign exchange margin trading:

Written:
Forward foreign exchange:
Written:Australian dollar
Brazilian real
Mexican Peso
U.S. dollar
New Zealand dollar
Turkish lira
Other

¥

26 ¥
1,223
605
536
430
429
284
443

0¥

0

27
18
9
(3)
5
3
6

27
18
9
(3)
5
3
6
65

¥

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.

－ 48 －

Derivatives utilized for non-trading purposes
Derivative transactions to which hedge accounting are applied at March 31, 2016 and 2015
are summarized as follows:

Nature of transaction

Hedged items

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

Contract or notional amounts
ThousandsofMillions of yen
U.S. dollars
2016
2015
2016

¥

5,340

¥

7,915

$

47,391*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.

－ 49 －

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¥65 million ($577 thousand), compensation expense is ¥294 million ($2,609 thousand) and
impairment loss is ¥3 million ($27 thousand) for the year ended March 31, 2016 and income
from the rental property was ¥133 million for the year ended March 31, 2015.
The amounts recognized in the consolidated balance sheet and fair values related to therental property are as follows:
ThousandsofMillions of yen
U.S. dollars
2016
2015
2016
Consolidated balance sheet amount:$ 47,133¥
Balance at beginning of the year
5,311 ¥ 5,333
Increase/(decrease)
179
(22)
1,589
Balance at end of the year
$ 48,722¥ 5,490 ¥5,311¥

Fair value

6,521

¥

5,359

$

57,872

The above fair value is based on real-estate appraisals, and is estimated by the Company.
28. BALANCES AND TRANSACTIONS WITH RELATED PARTY
For the year ended March 31, 2016, the Company provided condolence money of ¥60 million($532 thousand) to Ms. Miyoko Kato who owns 0.15% shares of the Company, the bereaved of
Mr. Seiichi Kato, former chairman of the Board of Directors. The amount is determined on
the basis of his service period and contribution to the Company.
The subsidiary of the Company purchased land at a price of ¥21 million from Mr. Seiichi
Kato, chairman of the Board of Directors who owns 0.1% shares of the Company during theyear ended March 31, 2015.
The transaction price is determined based on the appraisal value calculated by a real estateappraiser.
29.

SEGMENT INFORMATIONThe reported segments of the Company are the business units for which the Company is able
to obtain respective financial information separately in order for the Board of Directors to
conduct periodic investigation to determine distribution of management resources andevaluate their business results.
“Securities business”, “Asset management business” and “Support business” are theCompany’s reported segments.
“Securities business” renders trading and brokerage for trading in securities, underwriting
and distribution of securities, public offering and secondary distribution of securities andprivate offering of securities.
“Asset management business” renders investment
management and investment 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 byaccounting 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.
Intersegment revenues and transfer are based on arms-length transactions.

－ 50 －

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, 2016 and 2015 are summarized as follows:
Millions of yen
2016
Reported segments
Asset

Securities

management

SupportOperating revenues:
Revenues from third
partiesIntersegment
revenues
Total¥

65,590 ¥16,418 ¥

906 ¥

¥

5,459
71,049 ¥16,418 ¥Segment income¥

11,141 ¥Segment assets
Segment liabilities

Total
82,914 ¥Adjustments

Consolidated

13 ¥82,927

10,978
11,884 ¥16,437(16,437)
99,351 ¥ (16,424) ¥82,927

2,671 ¥

1,184 ¥

14,996 ¥(837) ¥

14,159¥ 465,027 ¥

17,319 ¥29,702 ¥ 512,048 ¥3,695 ¥

515,743¥ 345,363 ¥

1,860 ¥

18,667 ¥ 365,890 ¥ (22,244) ¥343,646

Others:¥Depreciation
Interest and dividend
incomeInterest expense
Equity in gain (losses)of affiliates
Impairment loss
Investments inaffiliates
Increase in property
and equipment andintangible assets

712 ¥

34 ¥

2,320 ¥

3,066 ¥

193 ¥

3,259

2,605
1,580

-

12
-

2,617
1,580

(380)
(271)

2,237
1,309

2,444
-

-

(9)
3

2,435
3

-

2,435
3

4,972

-

-

4,972

-

4,972

875

26

5,501

6,402

1

6,403

－ 51 －

Millions of yen
2015
Reported segments
Asset

Securities

Operating revenues:
Revenues from third
partiesIntersegment
revenues
Totalmanagement¥

79,667 ¥

14,070 ¥¥5,411
85,078 ¥Segment income¥

SupportTotal
94,623 ¥10¥

94,633

14,070 ¥11,41916,83012,305 ¥ 111,453 ¥(16,830)(16,820)¥

94,63324,054 ¥1,570 ¥

1,035 ¥

26,659 ¥(364)¥

26,295

Segment assets¥ 609,552 ¥

16,973 ¥28,579 ¥ 655,104 ¥(5,614)¥ 649,490

Segment liabilities¥ 492,661 ¥

2,684 ¥

16,995 ¥ 512,340 ¥(34,261)¥ 478,079

Others:Depreciation
Interest and dividend
incomeInterest expense
Equity in losses ofaffiliates
Investments inaffiliates
Increase in property
and equipment andintangible assets

¥

689 ¥

886 ¥

Consolidated

Adjustments

30 ¥3,048 ¥

3,767 ¥

275

2,683
1,515

-

-

¥

15
-

2,698
1,515

(358)
(285)

2,340
1,230

-

(10)

(10)

-

(10)

-

-

10

10

-

10

866

40

2,784

3,690

187

3,877

4,042

Thousands of U.S. dollars
2016
Reported segments
Asset

Securities

Operating revenues:
Revenues from third
partiesIntersegment
revenues
Total$ 582,091$ 145,704

48,447
630,538

145,704

115 $(145,873)

735,951

97,426
105,467

145,873881,70910,508 $133,085 $(7,428) $125,657(145,758)

735,951$ 4,126,970 $ 153,701$ 263,596 $ 4,544,267 $

32,792 $4,577,059

Segment liabilities$ 3,064,989 $$ 165,664 $ 3,247,160 $(197,408) $3,049,752

16,507302$

735,836 $Consolidated

Segment assets$

23,704

8,041 $

Adjustments

$

6,319

$

$

Total

Segment income

Others:$Depreciation
Interest and dividend
incomeInterest expense
Equity in gain (losses)of affiliates
Impairment loss
Investments inaffiliates
Increase in property
and equipment andintangible assets

98,873

Supportmanagement$

20,589 $27,210 $1,713 $

28,923

23,11914,022-

106-

23,225
14,022(3,373)(2,405)19,852
11,617

21,690
-

-

(80)
27

21,61027-

21,61027

44,125--44,125

7,765

231

48,82056,816－ 52 －-

944,12556,825

1.

(1) Components of “Adjustments in segment income” are as follows:
Millions of yen
2016
2015
Elimination of intersegment
Unallocated company-wide expenses

¥

2,652
(3,489)
¥
(837)

¥

2,771
(3,135)¥(364)

Thousands
ofU.S. dollars
2016$ 23,536(30,964)$ (7,428)

Company-wide expenses are holding company’s expenses.
(2) Components of “Adjustments in segment assets” are as follows:
Millions of yen
2016
2015
Elimination of intersegment balances
Unallocated company-wide assets¥ (41,747)
45,442¥ 3,695¥ (60,588)
54,974¥ (5,614)

Thousands
ofU.S. dollars
2016$ (370,492)
403,284$ 32,792

Company-wide assets are holding company’s assets.
(3) Components of “Adjustments in segment liabilities” are as follows:
Millions of yen
2016
2015
Elimination of intersegment balances
Unallocated company-wide liabilities¥ (40,186)
17,942¥ (22,244)¥ (54,063)
19,802¥ (34,261)

Thousands
ofU.S. dollars
2016$ (356,638)
159,230$ (197,408)

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

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

－ 53 －

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
The information is not applicable for the year ended March 31, 2016 and 2015.
Goodwill by reported segments
The information is not applicable for the years ended March 31, 2016 and 2015.
Negative goodwill incurred by reported segments
The information is not applicable for the years ended March 31, 2016 and 2015.

－ 54 －

－ 55 －

REFERENCE

DATA－ 56 －

Okasan Securities Co., Ltd.
Balance Sheet － March 31, 2016
Thousands of
U.S. dollars

Millions of yen
2016

2015

2016

ASSETS
Current assets:
Cash on hand and in banks¥

12,738¥15,457$113,046

Cash segregated as deposits for customers andothers

19,67922,444

174,645

Trading assets

170,741

215,909

1,515,273

Receivables on margin transactions

38,60848,318342,634

Receivables on collateralized securities transactions

95,461

169,980

847,187

Short-term guarantee deposits

1,058

1,913

9,389

Deferred income taxes

586

1,080

5,201

Other current assets

2,981

2,786

26,455

(0)

(14)

(0)

Total current assets

341,852

477,873

3,033,830

Property and equipment, net of accumulated
depreciation

2,824

2,633

25,062

300

304

2,662

Investment securities

413

439

3,665

Securities in associated companies

211

211

1,873

Long-term guarantee deposits

3,755

3,338

33,325

Deferred income taxes

1,333

1,490

11,830Allowance for doubtful accounts

Intangible assets, net
Investments and other assets:

Prepaid pension cost

198

-

1,757

Other

1,040

1,124

9,230

Allowance for doubtful accounts

(729)

(809)

(6,470)

6,221

5,793

55,210Total investments and other assets
TOTAL

¥

－ 57 －

351,197¥

486,603$3,116,764

Okasan Securities Co., Ltd.
Balance Sheet－(Continued)－ March 31, 2016
Thousands of
U.S. dollar

Millions of yen
2016

2015

2016

LIABILITIES AND NET ASSETS
Current liabilities:
Trading liabilities¥

77,198¥145,103$685,108

Payables arising from unsettled trades

16,35820,360145,172

Payables on margin transactions

9,434

13,794

83,724

Payables on collateralized securities transactions

24,737

69,696

219,533

Deposits received

16,791

25,397

149,015

Guarantee deposits received

7,656

7,942

67,945

Short-term borrowings

94,365

95,040837,460

Income tax payables

10

1,116

89

5,934

10,52052,662

252,483

388,968

2,240,708

Long-term borrowings

6,000

7,000

53,248

Liability for retirement benefits

4,480

4,700

39,758Other current liabilities
Total current liabilities
Non-current liabilities:

Other non-current liabilities

1,407

1,149

12,487

11,887

12,849105,493

1,487

1,461

13,197

265,857

403,278

2,359,398

Common stock
Authorized―240,000 shares
Issued―100,000 shares in 2016 and 2015

5,000

5,000

44,373

Capital surplus

29,20029,200259,141

Total non-current liabilities
Financial instruments transactions reserve
Total liabilities
Net assets
Shareholder's equity:

Retained earnings
Total shareholder's equity

51,141

49,114453,861

85,341

83,314757,375

(1)

11

(9)

85,34083,325757,366

Accumulated other comprehensive income (loss):
Unrealized gain (loss) on available-for-salesecurities
Total net assets
TOTAL

¥

－ 58 －

351,197¥

486,603$3,116,764

Okasan Securities Co., Ltd.
Statement of Income － Year ended March 31, 2016
Thousands of
U.S. dollar

Millions of yen
2016

2015

2016

Operating revenues:
Commissions¥

38,079¥45,589$337,939

Net gain on trading

21,271

27,040188,774

Interest and dividend income

1,657

1,716

14,70561,00774,345541,418

Interest expense

1,210

1,148

10,738Net operating revenues

59,79773,197

530,680

Selling, general and administrative expenses

49,29850,633

437,505

10,49922,564

93,175

Provision for financial instruments transactions
reserve

(27)

(181)

(239)

Other, net

230

300

2,041

203

119

1,802

10,702

22,683

94,977

3,019

7,621

26,793Operating income
Other income (expenses):

Income before income taxes
Income taxes:
Current
Deferred

Net income¥－ 59 －

656

516

5,822

3,675

8,137

32,615

7,027¥

14,546$62,362

BOARD OF DIRECTORSCORPORATE DATA(At August, 2016)
Company Name
OKASAN SECURITIES GROUP INC.
Date of Establishment
August 25, 1944
Head Office
1-17-6 Nihonbashi, Chuo-ku,
Tokyo 103-8268, Japan
Muromachi Head Office2-2-1 Nihonbashi Muromachi, Chuo-ku,
Tokyo 103-0022, Japan
Phone Number+81-3-3272-2222
Paid-in Capital
18,590 Million Yen
Subsidiaries
10 companies(At August, 2016)
Vice Chairman
Tetsuo Kato
President
Hiroyuki Shinshiba
Senior Managing Director
Kazuhiko Nonaka
Director
Hiroyuki Shindo
Director
Hiroyuki Murai
Director
Masahiro Hayakawa
Director
Masanori Kanai
Director
Toshiyuki Yoshino
Director
Akira Terayama
Director
Kenjiro Takemiya
Audit & Supervisory Committee Members
Director
Tetsumi Iwaki
Director
Nobuyuki Natsume
Outside Director
Tetsuo Narukawa
Outside Director
Seishi Higo
Outside Director
Hirokazu Kono

Listed Stock Exchanges
Tokyo Stock Exchange
Nagoya Stock Exchange

ORGANIZATION CHART(At August, 2016)
General m eeting of shareholders

Board of Directors

Audit & Supervisory Com m ittee
Audit & Supervisory Com m ittee Offic e

President

Managem ent ConferenceGroup General Planning Dept.
Group Business Strategy Dept.
Corporate P lanning Division

Group P ublic and Investors Relations Dept.
Group Inform ation T echnology Dept.
Group Com pliance Dept.
Group Secretariat

Personnel Division

Group P ersonnel Planning Dept.
Group T reasury Planning Dept.

Adm inistrative Division

Group General Affairs Dept.
Group Internal Control Prom otion Office
Corporate Relationship Managem ent Dept.

－ 60 －

http://www.okasan.jp/