ANNUAL REPORT
Ending March 31, 2017

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

7

Consolidated Balance Sheets

11

Consolidated Statement of Income

13

Consolidated Statement of Comprehensive Income

14

Consolidated Statement of Changes in Net Assets

15

Consolidated Statement of Cash Flows

18

Notes to Consolidated Financial Statements

20

Independent Auditors' Report

51

Reference Data
Okasan Securities Co.,Ltd.

Non-Consolidated Balance Sheet

53

Non-Consolidated Statement of Income

55

Corporate Data

56

1

Consolidated Financial Highlights
Okasan Securities Group Inc. and consolidated Subsidiaries Years ended March 31, 2017
Thousands of
U.S.dollars(note)Millions of yen
2017

2016

2017

(4/1/16～3/31/17)(4/1/15～3/31/16)(4/1/16～3/31/17)

Operating revenues ･･････････････････¥ 80,641¥ 82,927$ 718,790

Operating income ･･････････････････

14,15614,159126,179

Net income ･････････････････････････

10,487

11,06893,475

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

552,845

515,743

4,927,756

Net assets ･････････････････････････

178,257

172,097

1,588,885

Per share of common stock

Yen

U.S.dollars(note)･･･････････････････¥ 52.93¥ 55.94$ 0.47

Cash 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, 2017, which was ¥112.19 to U.S.$1.

Operating Revenues

Operating Income(\ billions)(\ billions)

2

Net Income(\ billions)

Net Assets(\ billions)

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
Under the medium-term business plan formulated for the period from April 2014 to March 2017, we
pursued a management philosophy based on prioritizing our customers. In keeping with this approach,
we built on our corporate value as a team of investment professionals and strengthened our financial
foundations to enable stable growth in any business environment. The fiscal year under review marks
the final year of the medium-term business plan. Over the course of this year, we merged ourmanagement and executive committees to strengthen group management functions as a holding
company. We also sought to enhance the Group’s overall value. With regard to key subsidiaries, Okasan
Securities Co., Ltd., sought to strengthen the functions offered by its branches and to develop
professional personnel, while Okasan Asset Management Co., Ltd., worked to leverage its sales
channels inside and outside the Group to expand recognition of the Okasan brand.
The Okasan Group will mark the centennial of its founding in April 2023. With this milestone inmind, the Group has announced a new management vision that focuses primarily on establishing a
grand design toward a structure that will ensure continuing growth while winning and retaining thetrust of its customers beyond the centennial.
The "BEYOND 2020" medium-term management plan addresses the first three-year period of thisvision, the period through 2020. During this time, the Group will invest strategically to give the
Okasan Group the strengthen needed to achieve these objectives.

3

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

5．Challenges the Company should address
The global business environment in which we operate creates a general impression of uncertainty andinstability, as exemplified by developments such as Britain’s decision to leave the EU and the rise of
President Trump in the United States. The world focus has increasingly shifted to the growing
disparities and other negative aspects of globalization, which has driven global growth over the past 30
years or longer. The pendulum appears to be swinging toward an antiglobalism outlook. At the sametime, digital innovations are expected to generate revolutionary growth. Attention is turning to various
emerging areas, including the rapid spread in the application of artificial intelligence (AI) and theInternet of things (IoT), along with the sharing economy and singularities in which AI can surpass
human capabilities.
Alongside FinTech innovations, emerging signs in the financial industry point to reforms that would
rival the Japan Big Bang policies of roughly 20 years ago. All around the world, the business model ofthe securities industry itself is being called into question, as seen in the strengthening of regulations on
securities accounts linked to pension plans in the U.S. and the MiFID II directive in Europe. These4

developments are now prompting structural reforms. As we move forward, how a company chooses to
respond to such developments may have an even clearer bearing on its success or failure.
Under such conditions, the Group believes its societal role of providing optimal investment advice andfinancial instruments tailored to customer needs will grow ever more important. To win even broader
and deeper support from our wide range of customers, we believe we will need to strengthen the uniquebrand as a securities company established in the more than 94 years since our founding. To do so, in linewith the new medium-term management plan that took effect in April 2017, we plan to implement awide range of measures.
In our role as a team of investment advising professionals, we will promote human resource
development and qualitative improvements in our marketing to strengthen the foundations of ourpersonalized service, the core of our business. In addition, cooperation and partnerships both inside andoutside the Group are growing stronger, as demonstrated by the penetration of the Okasan brand in theprovision of products via a wide range of sales channels in our asset-management business, an
expanding and unmatched network of securities companies achieved through business and capitalalliances, and efforts to approach new customer bases in the online securities business. Through theseand other initiatives, we plan to achieve sustained improvements in the corporate value of our Group.

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 13 directors (including 4 Directors who are 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 four total Audit & Supervisory Committee
Members, including one statutory auditor and three outside directors. They make up the Audit &Supervisory Committee and decide on auditing policies in accordance with laws and regulations andthe company’s articles of incorporation, based on the rules of Audit & Supervisory Committee Members.
They will also work to formulate audit opinions for the Audit & Supervisory Committee Members. Other
member obligations include attendance at meetings of the Board of Directors and other important
meetings, interviews with directors (excluding directors who are Audit & Supervisory Committee
Members), and the duty to review important approval documents in order to oversee decision-making by
the Board of Directors and the state of business execution by directors. In addition, Audit & Supervisory
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 agreements
5with 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 regularly reported to the Board of Directors in the form of an audit report.

6

Operating and Financial Review
Okasan Securities Group Inc. and Consolidated Subsidiaries Years ended March 31, 2017
Ⅰ. Analysis of operating results
During the fiscal year under review, the Japanese economy continued to tread water; nevertheless, signs
suggested the economy had begun to bottom out. With unemployment still falling, economic indicators
related to personal consumption, such as retail sales and new car sales, showed signs of bottoming out
during the second half. Exports remained fairly robust. Industrial output picked up, thanks to the ongoing
expansion of the US economy.
In the forex market, the yen climbed to ¥99/$1 in June following the victory in a UK referendum of Brexit,
the campaign to leave the EU. Following the US presidential elections in November, due to strong
expectations for measures to stimulate the US economy, the yen slipped back to ¥118/$1. While the FRB(Federal Reserve Board) raised interest rates on two occasions, few observers took the view that this marked
the start of an acceleration in rate hikes. The yen/dollar rate ended the fiscal year at ¥111/$1. The yen/eurorate, meanwhile, passed through a tumultuous phase due to confusion generated by political risks in Europe.
Nevertheless, the euro strengthened in the second half, aided by the policies of the ECB (European CentralBank) and other factors. The fiscal year ended with the rate at ¥118/€1.
In the equity market, prices were turbulent, affected significantly by events in overseas stock markets andthe forex market. Amid fears that the strong yen would negatively impact the bottom line of Japanesecompanies and compounded by the results of the UK referendum in June, the Nikkei 225 spent the first half
in a sullen mood, at one point below ¥15,000. However, it began to recover following the US presidential
election in November, buoyed by hopes for the Trump administration and the sharp depreciation in the yen
against the dollar. While caution increasingly prevailed from the New Year, the Nikkei held firm, ending the
fiscal year at ¥18,909.26 after rising almost as far as ¥19,700.
In bond markets, yields on 10-year government bonds slipped as low as -0.30% in June against a backdrop ofstrong demand for bonds resulting from the Bank of Japan’s negative interest rate policy. In September,
however, the Bank of Japan declared a policy to maintain the 10-year government bond yield at around 0%.
In November, long-term government bond yields climbed worldwide in response to the outcome of the US
presidential election. These developments saw the 10-year government bond yield return to positive territory.
However, the margin of increase was lower than in the major Western economies due to the loose monetary
policies of the Bank of Japan. The 10-year government bond yield ended the fiscal year at +0.065%.
In this environment, Okasan Securities Co., Ltd., the core Group company, further strengthened its sales
capabilities through various initiatives, including opening new branches and relocating and refurbishingregional flagship branches. Its sales activities remained firmly rooted in local communities, taking
advantage of the company’s possession of market-sensitive investment information and strong productlineup. At the same time, Okasan Online Securities Co., Ltd., the Group’s specialist online brokerage, sought
to improve services in various ways: for example, rolling out new user-friendly and multifunctional order
tools, offering new products, and effectively scrapping investment trust purchase fees. Okasan AssetManagement Co., Ltd., sought to improve performance and distribute information in timely fashion. It also
revised dividends from investment trusts that make monthly payments and offered early redemption of bondinvestment trusts to accommodate changes in the market environment. Furthermore, the company
aggressively marketed private-placement investment trusts to institutional investors.
Due to these efforts, Group operating revenues in the fiscal year under review were ¥80,641 million (97.2%of the figure for the previous year), and net operating revenues were ¥79,462 million (97.4% of the figure forthe previous year). SG&A expenses were ¥65,306 million (96.8% of the figure for the previous year);
operating income was ¥14,156 million (100.0% of the figure for the previous year); and net income was¥10,487 million (94.7% of the figure for the previous year).

71. Fees and commissions received
Fees and commissions received stood at ¥47,074 million (81.6% 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 2,540 million shares (86.0% of the figure for the previous year), while turnover was ¥2,739.9 billion(88.9% of the figure for the previous year). In this environment, equity brokerage commissions were ¥15,479
million (80.5% of the figure for the previous year). Bond brokerage commissions were ¥14 million (271.9% of
the figure for the previous year). Other brokerage commissions amounted to ¥637 million (40.8% of the
figure for the previous year). Total brokerage commissions were ¥16,130 million (77.5% of the figure for theprevious 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, while we served as designated lead underwriter for certain new equity
listings, our equity underwriting income was significantly lower than in the previous year, during which we
handled the massive offering of stock in conjunction with postal privatization. In our bond underwriting
efforts, aggressive measures to secure major deals proved successful. We served as lead underwriter for local
government and corporate bond issuances and as administrative underwriter for FILP agency bondissuances.
The resulting commissions on equity were ¥240 million (59.7% of the figure for the previous year).
Commissions on bonds totaled ¥161 million (111.7% of the figure for the previous year). Total underwriting
fees, selling concessions, and commissions on solicitation for sale of financial instruments to specificinvestors and others amounted to ¥400 million (73.4% of the figure for the previous year).

(3) Administrative charges on offering, selling and solicitation for sales of financial instruments
to specified investors, and other fees and commissions received
Income related to investment trusts account for the bulk of our income from administrative charges onoffering, selling, and solicitation for sales of financial instruments to specified investors, and other fees andcommissions received. During the fiscal year, the company enjoyed relatively strong sales of funds offering
prospects of comparatively high yields. These included funds that invest in high-yield bonds or high-dividend
equities. During the second half, as the US stock market and commodity prices recovered, funds invested in
specific types of equities sold relatively well, such as Russian stocks or stocks issued by companies in the AI
field. Nevertheless, sales of funds were down from the previous fiscal year. Administrative charges onoffering, selling, and solicitation for sales of financial instruments to specific investors totaled ¥13,381
million (85.0% of the figure for the previous year). Other fees and commissions received amounted to¥17,162 million (83.4% of the figure for the previous year) due to lower income from trust fees on investment
trusts.

Fees and commissions received
Breakdown by category(Millions of yen except percentage)

Brokerage commissions

2017<A>

2016<A>

Ratio(4/1/16～3/31/17)(4/1/15～3/31/16)<A>/<B>¥16,130¥20,805

77.5

15,47919,239

80.5

Bonds

14

5

280.0

Others

637

1,560

40.8

400

546

73.3

Equities

240

402

59.7

Bonds

161

144

111.8

Equities

Underwriting fees and selling concessions

8

Fees andcommissions(\ billions)

Placement commissions

13,381

15,74785.0

Other commissions

17,162

20,56983.4¥47,074¥57,666

81.6

Total

Breakdown by product(Millions of yen except percentage)

2017<A>

2016<A>

Ratio(4/1/16～3/31/17)(4/1/15～3/31/16)<A>/<B>

Equities
Bonds¥15,985¥19,926

80.2

410

391

104.9

Investment trusts

29,29336,09981.1

Others

1,384

1,251

110.6

Total

¥47,074¥57,666

81.6

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.
Investors appeared to focus on risk avoidance during the first half of the fiscal year under review. However,following the US presidential election, expectations for US economic policy, coupled with the release ofstrong economic data, exerted downward pressure on the yen and boosted stock prices. Consequently, total
profits on equity trading were ¥19,686 million (199.3% of the figure for the previous year). Total bondtrading profits were ¥11,872 million (97.9% of the figure for the previous year). Total trading profits,
including loss from other trading of ¥286 million (compared to profits of ¥235 million the previous year),
were ¥31,272 million (140.7% of the figure for the previous year).
Trading profits(\ billion

Trading profits(Millions of yen except percentage)

2017<A>

2016<A>

Ratio(4/1/16～3/31/17)(4/1/15～3/31/16)<A>/<B>

Equities

19,686¥9,875

199.4

Bonds

11,872

12,123

97.9

Others

-286

235

－

Total

31,272¥22,233

82.2

3. Net financial income
Financial income amounted to ¥1,493 million (66.7% of the figure for the previous year). Financial expenses
stood at ¥1,178 million (90.0%). Net financial income—i.e., the difference between the two—was ¥314
million (33.9%).

4. Other operating income
Other operating income—i.e., operating income other than that related to the financial products transaction
business and incidental operations—stood at ¥802 million (101.5% of the figure for the previous year).

95. Selling, general and administrative expenses
Selling, general, and administrative expenses were ¥65,306 million (96.8% of the figure for the previousyear), due to lower personnel expenses and business relations expenses.

6. Other income (expenses)
Other income amounted to ¥3,051 million, due to factors such as a reversal on the security transaction
responsibility reserve and gains on the sale of investment securities.

7. Dividends
The company sees shareholder returns as a critical management issue. Its basic policy is to maintain astable dividend while distributing profits in line with earnings.
Based on the policies above, the company set dividends for the fiscal year at ¥25 per share.

Ⅱ．Analysis of financial position
1. Assets, liabilities and net assets
Consolidated total assets at fiscal year-end increased ¥37,101 million to ¥552,845 million year on year, due
mainly to increases of ¥46,060 million in receivables on collateralized securities transactions, ¥7,036 million
in trade date accruals, and ¥6,554 million in cash segregated as deposits, as well as declines of ¥21,370
million in trading products and ¥2,081 million in receivables on margin transactions.
Liabilities at fiscal year-end increased ¥30,942 million year on year to ¥374,588 million, due mainly toincreases of ¥61,101 million in trading products, ¥21,921 million in payables on collateralized securities
transactions, and ¥6,714 million in deposits received, as well as declines of ¥40,464 million in short-termborrowings and ¥16,146 in trade date accruals.
Net assets at fiscal year-end increased ¥6,158 million year on year to ¥178,257 million, due mainly toincreases of ¥5,613 million in retained earnings, ¥3,440 million in capital surplus, ¥1,011 in unrealized
gains on available-for-sale securities, as well as a decline of ¥4,313 million in minority interests.

2. Cash flows
Cash and deposits (“cash” hereafter) at the end of the consolidated fiscal year fell ¥2,058 million year on
year to ¥51,191 million.
Presented below is information on each type of cash flow during the fiscal year under review and theunderlying factors:＜Cash flows from operating activities＞
Cash inflows from operating activities were ¥52,217 million, due mainly to the difference between cash
inflows from an increase of ¥17,207 million in income before income taxes and minority interests and achange of ¥59,289 million in trading products and cash outflows from a change of ¥24,139 million inreceivables on collateralized securities transactions and payables on collateralized securities transactions.

＜Cash flows from investing activities＞
Cash outflows due to investment activities were ¥4,095 million, due mainly to the difference between cash
inflows of ¥3,069 million from the sale of investment securities and ¥3,001 million from the sale of securities
and cash outflows of ¥5,314 million from the acquisition of intangible fixed assets, ¥1,515 million from theacquisition of investment securities, ¥1,011 million from the acquisition of securities, and ¥900 million fromthe acquisition of tangible fixed assets.

＜Cash flows from financing activities＞
Cash outflows due to financing activities were ¥50,154 million, due mainly to cash outflows from ¥42,498
million from a net change in short-term borrowings, ¥4,872 million from dividend payments, and ¥2,393
million from the acquisition of shares in subsidiaries resulting in no change in the scope of consolidation.

10

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Balance Sheet － March 31, 2017
Thousands of
U.S. dollars(note 3)

Millions of yen
2017

2016

2017

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

56,700¥57,301$

505,393

Cash segregated as deposits for customers and65,396

58,842582,904

Trading assets (notes 4 and 10)

149,482

170,852

1,332,400

Receivables arising from unsettled trades

7,036

-

62,715

Receivables on margin transactions (note 5)

40,26042,341

358,856

Receivables on collateralized securities transactions(note 6)

141,522

95,461

1,261,449

Short-term investments (note 7)

95

2,004

847

Deferred income taxes (note 11)

1,002

811

8,931

Other current assets

8,460

7,576

75,408

(5)

(0)

(45)

469,948

435,188

4,188,858

Property and equipment, net of accumulated
depreciation of ¥13,881 million ($123,728 thousand)in 2017 and ¥13,370 million in 2016 (note 10)

19,34019,595

172,386

Intangible assets, net

12,8999,869

114,975

Investment securities (notes 7, 8 and 10)

43,632

43,968

388,912Long-term guarantee deposits

3,791

3,795

33,791

768

395

6,845

Allowance for doubtful accounts
Total current assets

Investments and other assets:

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

1,441

1,623

12,844

Other

2,467

2,878

21,989Allowance for doubtful accounts(1,441)(1,568)(12,844)

50,65851,091

451,537

Total investments and other assets
TOTAL

¥

552,845

See accompanying notes to consolidated financial statements.
11¥515,743$

4,927,756

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Balance Sheet－(Continued) － March 31, 2017
Thousands of
U.S. dollars(note 3)

Millions of yen
2017
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¥$ 1,232,792
107,755

46,65934,24335,192
69,070
3,319
38
6,445
345,362

24,737
27,52936,285109,534
1,252
30
7,770
310,957

415,893
305,223
313,682
615,652
29,584339
57,447
3,078,367

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

9,860
449
7,790
5,884
3,910
27,893

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

87,887
4,002
69,43552,44734,852
248,623

Financial instruments transactions reserve (note 14)
Total liabilities

1,333
374,588

2,643
343,646

11,881
3,338,871

18,59016,422112,283

18,59012,982
106,669

165,701
146,377
1,000,829

Capital surplus
Retained earnings

¥

2017

77,20616,146
10,468

Net assets
Shareholders' equity (note 15):
Common stock
Authorized―750,000,000 shares;
issued―208,214,969 shares in 2017 and 2016

138,307
12,0892016

Treasury stock, at cost, 10,297,377 shares in 2017
(3,786)(3,790)(33,747)

143,509

134,451

1,279,160

12,382
401
157
311

11,371
401
180
(41)

110,366
3,574
1,400
2,772

13,251

11,911

118,112

162

87

1,444

Non-controlling interests

21,33525,648190,169

Total net assets

178,257

172,097

1,588,885

515,743$ 4,927,756

and 10,381,520 shares in 2016
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

¥

552,845

See accompanying notes to consolidated financial statements.
12¥

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Statement of Income － Year ended March 31, 2017
Thousands of
U.S. dollars(note 3)

Millions of yen
2017

2016

2017

Operating revenues:
Commissions¥

47,074¥

57,666$

419,592

Net gain on trading

31,272

22,233

278,741

Interest and dividend income

1,493

2,237

13,308Service fee and other revenues

802

791

7,149

80,641

82,927

718,790

Interest expense

1,179

1,309

10,509Net operating revenues

79,462

81,618708,281

Selling, general and administrative expenses (note19)

65,30667,459582,102

14,15614,159126,179

Dividend income

957

946

8,530

Exchange gain

195

69

1,738

Gain on sale of investment securities

615

1,796

5,482

Gain on sale of property and equipment

93

11

829

Equity in gain (losses) of affiliates

41

2,435

365

Interest expense

(69)

(85)

(615)

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

(160)
(182)

(48)
(87)

(1,426)(1,622)

0

(24)

0

1,309
(233)

(25)
(3)

11,668(2,077)Compensation income

390

-

3,476

Moving costs(94)

Operating income
Other income (expenses):

Loss on devaluation of investment securities
Reversal of (provision for) financial instruments
transactions reserve
Impairment loss

(838)

Compensation expense

-

(294)

-

Loss on cancellation of lease contracts

-

(68)

-

189

194

1,685

3,051

4,817

27,195

17,207

18,976

153,374

5,497

4,513

48,997

Other, net
Income before income taxes andnon-controlling interests
Income taxes (note 11):
Current
Deferred

(202)

1,403

(1,800)

5,295

5,916

47,197

Net income

11,912

13,060106,177

Net income attributable to non-controllinginterests

1,425

1,992

12,702

Net income attributable to owners of theparent¥10,487

See accompanying notes to consolidated financial statements.
13¥

11,068$93,475

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income － Year ended March 31, 2017
Thousands of
U.S. dollars(note 3)2017

Millions of yen
2016
2017
Net income¥

11,912¥

13,060$106,177

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

959(3,844)

8,548

-

44

-

Foreign currency translation adjustments

(23)

(249)

(205)

Remeasurements of defined benefit plans

369

(724)

3,289

Share of other comprehensive loss of affiliates
accounted for by equity method

(122)

(61)

(1,087)

1,183(4,834)

10,545

Surplus on land revaluation

Total other comprehensive income (loss)
Comprehensive income¥

13,095¥¥

11,826

¥

8,226

$

116,722

7,028$

105,411Comprehensive income attributable to:
Owners of the parent
Non-controlling interests

1,269

See accompanying notes to consolidated financial statements.

14

1,198

11,311Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Statement of Changes in Net Assets － Year ended March 31, 2017
Millions of yen
Shareholders’ equity
Commonstock
Balances at March 31, 2015¥

18,590 ¥Capitalsurplus12,913Retainedearnings¥

100,473 ¥Treasurystock,
at cost(3,730) ¥Totalshareholders’equity128,246

Changes arising during the year:
Cash dividends(4,873)(4,873)

Net income attributable toowners of the parent

11,068

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

(27)

(27)

0

0

(33)

36

1

1

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

-

69

6,196

(60)

6,205

18,59012,982

106,669(3,790)134,451

Changes arising during the year:
Cash dividends(4,873)(4,873)

Net income attributable toowners of the parent

10,487

10,487Purchase of treasury stock
Disposition of treasury stock

122

Changes in equity resulting
from transactions with
non-controlling interests

3,318

(0)

(14)

(14)

159

281

(141)

3,177

Reversal of surplus on land
revaluation-

Net changes other thanshareholders’ equity
Total changes during the year
Balances at March 31, 2017

¥

-

3,440

18,590 ¥16,422

15

¥

5,614

4

9,058

112,283 ¥(3,786) ¥143,509

Millions of yen
Accumulated other comprehensive income (loss)
Unrealized

Total

Foreign

gain onBalances at March 31, 2015¥

Remeasure-accumulated

available-

Surplus on

currency

ments

other

for-salelandtranslationof definedcomprehensive

securities

revaluation

adjustments

benefit plansincome14,474 ¥

389 ¥

429 ¥

660 ¥

15,952 ¥

Stock

Non-

acquisition

controllingrightsinterests- ¥Total net
assets27,213 ¥ 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 with
non-controlling interests

36

Reversal of surplus on land
revaluation

1

Net changes other thanshareholders’ equity(3,103)

12

(249)

(701)

(4,041)87(1,565)(5,519)Total changes during the year

(3,103)

12

(249)

(701)

(4,041)87(1,565)

686

Balances at March 31, 2016

11,371

401

180

(41)

11,911

87

25,648172,097

Changes arising during the year:

Cash dividends(4,873)

Net income attributable toowners of the parent

10,487Purchase of treasury stock(14)

Disposition of treasury

281

Changes in equity resulting
from transactions with

3,177

non-controlling interests

Reversal of surplus on land
revaluation-

Net changes other thanshareholders’ equity

1,011

0

(23)

352

1,340

75

(4,313)(2,898)

Total changes during the year

1,011

0

(23)

352

1,340

75

(4,313)

6,160

12,382 ¥

401 ¥

157 ¥

311 ¥

13,251 ¥162 ¥21,335 ¥ 178,257

Balances at March 31, 2017¥16

Thousands of U.S. dollars(note 3)
Shareholders’ equity
Commonstock
Balances at March 31, 2016$

Capitalsurplus165,701 $Treasurystock,
at costRetainedearnings

115,714$950,789$

Total
shareholders'equity(33,782) $1,198,422

Changes arising during the year:

Cash dividends(43,435)(43,435)

Net income attributable toowners of the parent

93,47593,475Purchase of treasury stock

(125)

(125)

Disposition of treasury stock

1,088

1,417

2,505

Changes in equity resulting
from transactions with
non-controlling interests

29,575(1,257)28,318

Reversal of surplus on land
revaluation-

Net changes other thanshareholders’ equity
Total changes during the year
Balances at March 31, 2017$

165,701 $30,66350,040146,377$ 1,000,829$

35

80,738(33,747) $1,279,160

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

Totalgain onForeign

Remeasure-accumulated

available-

Surplus on

currency

ments

other

for-salelandtranslationof definedcomprehensive

securities

revaluation

adjustments

benefit plansincomeBalances at March 31, 2016 $ 101,355 $3,574 $

1,605 $

(366) $

106,168 $

Stock

Non-

acquisition

controllingrightsinterests

Total net
assets776 $ 228,612 $ 1,533,978

Changes arising during the year:

Cash dividends(43,435)

Net income attributableto owners of the parent

93,475Purchase of treasury stock(125)

Disposition of treasury stock

2,505

Changes in equity resulting
from transactions with
non-controlling interests

28,318

Reversal of surplus onland revaluation-

Net changes other thanshareholders’ equity

9,011

0

(205)

3,138

11,944668(38,443)(25,831)

Total changes during the year

9,011

0

(205)

3,138

11,944668(38,443)

54,907

3,574 $

1,400 $

2,772 $

118,112 $Balances at March 31, 2017 $ 110,366 $See accompanying notes to consolidated financial statements.
17

1,444 $ 190,169 $ 1,588,885

Okasan Securities Group Inc. and Consolidated Subsidiaries
Consolidated Statement of Cash Flows － Year ended March 31, 2017
Thousands of
U.S. dollars(note 3)

Millions of yen
2017

2016

2017

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

17,207¥

18,976$

153,374

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

3,504

3,259

31,233

233

3

2,077

Interest and dividend income(2,456)(3,191)(21,891)

Interest expense
Gain on sale of investment securities

1,247
(192)

1,394
(1,763)

11,115(1,711)Gain on sale of investments in affiliates

(245)

-

(2,184)024

0(6,650)4,050(59,274)

59,289(25,733)

528,467

3,700

7,635

32,980(24,139)

29,560(215,162)

6,734(11,732)

60,023

Impairment loss

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

(988)

732

(8,806)

Increase (decrease) in guarantee deposits received(1,093)(394)(9,742)

Increase (decrease) in allowance for doubtful accounts

(123)

(112)

(1,096)

Decrease (increase) in assets for retirement benefits andincrease (decrease) in liabilities for retirement benefits(229)(1,316)(2,041)(1,309)25(11,668)180(3,303)

1,604

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

54,67018,114487,298

Interest and dividend received

Sub-total

2,589

3,098

23,077

Interest paid

(1,235)(1,403)(11,008)

Income taxes paid

(3,807)(6,075)(33,933)

52,217

13,734465,434

Payment for short-term investments(1,011)(2,002)(9,011)

Proceeds from sale of short-term investments

3,001

-

26,749Payment for purchase of property and equipment(900)(1,621)(8,022)

Net cash provided by operating activities
Cash flows from investing activities:

Payment for purchase of intangible assets(5,314)(4,295)(47,366)

Payment for purchase of investment securities(1,515)(4,013)(13,504)

Proceeds from sale of investment securities

3,069

3,222

27,355

Payment for investments in affiliates
Other, net
Net cash used in investing activities

18-(2,588)-(1,425)902(12,702)(4,095)(10,395)(36,501)

Cash flows from financing activities:
Increase (decrease) in short-term borrowings(42,498)

9,920(378,804)

Proceeds from long-term borrowings

200

900

1,783

Payments on long-term borrowings(604)(2,961)(5,384)

Proceeds from sale of treasury stock

1

1

9

(14)

(28)

(125)

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

808

-

7,202

Purchase of treasury stock by subsidiaries(215)(2,675)(1,916)(4,872)(4,873)(43,426)

(35)

(51)

(312)

(2,393)
(532)

(575)

(21,330)(4,742)(50,154)(342)(447,045)

(27)

(313)

(241)

Dividends paid
Dividends paid to non-controlling interests of subsidiaries
Purchase of subsidiaries’ stock that do not result in change inscope of consolidation
Other, net
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents(2,059)2,684(18,353)

Cash and cash equivalents, beginning of year

53,25050,566474,641

Cash and cash equivalents, end of year (note 22)¥51,191

See accompanying notes to consolidated financial statements.

19¥

53,250$456,288

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

Year ended March 31, 2017

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, 2017. 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 for20

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 on or after April 1, 1998 and to leasehold improvements and structures purchased
in Japan on or after April 1, 2016. And in an overseas subsidiary, depreciation is computedby the straight-line method.
The range of useful lives is principally from 3 to 50 years for buildings and from 3 to 15
years for equipment.
According to the amendment of Corporation Tax Law, the Company applied Practical
Solution on a Change in Depreciation Method Due to Tax Reform 2016 (ASBJ Practical
Issues Task Force (PITF) No. 32, June 17, 2016) from the year ended March 31, 2017, andthe depreciation method for leasehold improvements and structures purchased on or after
April 1, 2016 has been changed from the declining-balance method to the straight-line
method. The effect on net income of this change is immaterial.
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.
21

j.

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

k.

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

l.

Income taxes—Income taxes in Japan applicable to the Company and its domestic
consolidated subsidiaries consist of corporate tax, inhabitant tax and business tax.
The “Accounting Standards for Income Taxes” require that deferred income taxes be
accounted for under the asset and liability method. Deferred tax assets and liabilities arerecognized for the expected future tax consequences of events that have been included on
the financial statements or tax return. Under this method, deferred tax assets andliabilities are measured using enacted tax rates expected to apply to taxable income in theyears in which those temporary difference are expected to be recovered or settled, and theeffect on deferred tax assets and liabilities of a change in tax rates is recognized in incomein the period that includes the enactment date.
The Company applied the Implementation Guidance on Recoverability of Deferred Tax
Assets (ASBJ Guidance No.26, issued March 28, 2016) from the year ended March 31, 2017.
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.

3.

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.

Reclassifications— Certain reclassifications have been made to the prior years’ consolidated
financial statements to conform to the presentation used in consolidated statements as ofand for the year ended March 31, 2017.

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, 2017, which was ¥112.19 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, 2017 and 2016 consist of the following:
Millions of yen
2017
2016
Trading assets:
Securities and other
Derivatives
Trading liabilities:
Securities and other
Derivatives

5.

Thousands of
U.S. dollars

2017¥ 149,438 ¥ 170,824
44
28¥ 149,482 ¥ 170,852$ 1,332,008
392$ 1,332,400¥ 138,256 ¥51¥ 138,307 ¥$ 1,232,338
454$ 1,232,792

77,19412
77,206MARGIN TRANSACTIONS
Margin transactions at March 31, 2017 and 2016 consist of the following:
Millions of yen
2017
2016
Assets:Loans receivable from customers
Cash deposits as collateral for securities
borrowed from securities finance companies
Liabilities:
Borrowings from securities finance companies
Proceeds from securities sold for customers’
accounts

Thousands of
U.S. dollars

2017¥ 35,432¥ 38,795$ 315,822

4,828¥ 40,260

3,546¥ 42,341

43,034$ 358,856

¥

¥

$

4,071

3,617

36,287

8,018

6,851

71,468¥ 12,089¥ 10,468$ 107,755

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

COLLATERALIZED SECURITIES TRANSACTIONSCollateralized securities transactions at March 31, 2017 and 2016 consist of the following:
Millions of yen
2017
2016

Thousands of
U.S. dollars

2017

Assets:Cash collateral for securities borrowed¥ 141,522¥ 95,461$ 1,261,449

Liabilities:
Cash collateral for securities loaned¥ 46,659¥ 24,737$ 415,893

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, 2017 and 2016 are summarized asfollows:
Millions of yen
Gross
Gross
Balance unrealized unrealized Fair value
gain
loss
sheet
t
At March 31, 2017
Government, corporate and other bonds

¥

53

¥

1

¥

-

¥

54

¥

46

¥

-

¥

5

¥

41

At March 31, 2016
Government, corporate and other bonds

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

At March 31, 2017
Government, corporate and other bonds

$

472

$

9

$

-

$

481

Acquisition cost, balance sheet amount, gross unrealized gain and gross unrealized loss ofavailable-for-sale securities with fair value at March 31, 2017 and 2016 are summarized asfollows:
Millions of yen
Gross
Gross
Acquisition unrealized unrealized
Balance
cost
gain
loss
sheet
t
At March 31, 2017
Current:
Government, corporate and other bonds ¥Other¥
Non-current:
Equity securities
Other

77
77

¥ 12,822
1,936¥ 14,758

¥

27
27

¥

¥ 22,721
55¥ 22,776

¥

¥

1
1

¥

¥ 22,62047¥ 22,667

¥

¥

¥

¥

- ¥
(9)
(9) ¥

95
95

(298) ¥ 35,245
(97)
1,894
(395) ¥ 37,139

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

24

¥

¥

¥

- ¥
(0)
(0) ¥

2,002
2
2,004

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

At March 31, 2017
Current:

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

Government, corporate and other bonds $

686
686

Other
$
Non-current:
Equity securities
Other$ 114,288
17,257$ 131,545

$

241
241

$

$ 202,523
490$ 203,013

$
$
$
$

- $
(80)
(80) $

847
847(2,656) $ 314,155(865)
16,882(3,521) $ 331,037

Securities classified as available-for-sale securities for which fair value is not available areunlisted equity securities amounting to ¥6,340 million ($56,511 thousand) and ¥6,460 million,
and investments in limited partnership and similar partnership amounting to ¥100 million($891 thousand) and ¥2 million at March 31, 2017 and 2016, respectively.
For the years ended March 31, 2017 and 2016, 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, 2017¥¥¥
Equity securities
1,150
372
(64)
Government, corporate and other bonds
3,001
0
(0)
Other
1,919
3
(119)
¥
¥
¥
6,070
375
(183)
March 31, 2016
Equity securities¥

Government, corporate and other bonds

Other
¥

2,096
300
825
3,221

¥

¥

1,693
157
1,850

¥

¥

(2)
(86)
(88)

Thousands of U.S. dollars
Proceeds fromsales of
Gross realized Gross realized
available-for-sa
gains
lossesle securities
March 31, 2017
Equity securities$

10,251
26,74917,105
54,105Government, corporate and other bonds

Other
$
8.

$

$

3,316
0
27
3,343

$

$

(570)
(0)
(1,061)(1,631)INVESTMENTS IN AFFILIATES
The aggregate carrying amount of investments in affiliates at March 31, 2017 and 2016 are¥4,899 million ($43,667 thousand) and ¥5,019 million, respectively.

25

9.

BORROWINGS
The weighted-average interest rates applicable to the short-term borrowings are 0.77 % and0.55% at March 31, 2017 and 2016, respectively.
Long-term borrowings at March 31, 2017 and 2016 consist of the following:Thousands of
U.S. dollars

Millions of yen
2017
2016
Borrowings, maturing in installments through2021; bearing weighted average interest of 2.16%
at March 31, 2017
¥ 13,000
Borrowings, maturing in installments through2021; bearing weighted average interest of 2.13%
at March 31, 2016
Less current installments
¥

¥

2017

-

$ 115,875

13,404

-

3,140

1,104

27,9889,860¥ 12,300$

87,887

Lease liabilities at March 31, 2017 and 2016 consist of the following:Thousands of
U.S. dollars

Millions of yen
2017
2016

2017

Lease liabilities maturing in installments through2023; bearing weighted average interest of 2.98%
at March 31, 2017¥884

Lease liabilities maturing in installments through2022; bearing weighted average interest of 2.99%
at March 31, 2016

-

1,305

-

435

531

3,877

Less current installments
¥

449

¥

¥

-

774

$

$

7,879

4,002

(1) Current installments of long-term borrowings are included in short-term borrowings in
the accompanying balance sheet.
(2) Long-term borrowings included subordinated borrowings provided in Article 176 of the“Cabinet Office Ordinance Concerning Financial Instruments Business” (the Prime
Minister’s Office Ordinance No. 52, 2007) as follows:
Millions of Yen
2017
2016
¥

Long-term borrowings

6,000

¥

6,000

Thousands of
U.S. dollars

2017$

53,481

Annual maturities of borrowings after March 31, 2018, are as follows:Year ending March 31
2019
2020
2021
2022

26

Millions ofyen

Thousands of
U.S. dollars

¥

$

3,020
4,000
2,840
-

26,91935,65425,314-

Annual maturities of lease liabilities after March 31, 2018, are as follows:Year ending March 31
2019
2020
2021
2022

Millions ofyen

Thousands of
U.S. dollars

¥

$

254
107
60
18

2,264
954
535
160

To meet its liquidity needs stably and expeditiously and to strengthen financial operations, theCompany established a commitment line of ¥21,000 million ($187,182 thousand) with 7
financial institutions at both March 31, 2017 and 2016, 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 right tooffset cash deposits against obligations that have become due or, in the event of default, against
all obligations due the bank.
10. PLEDGED ASSETSAt March 31, 2017 and 2016, the carrying value of assets pledged is as follows:
Millions of Yen
2017
2016
¥

Cash in banks
Trading assets
Property and equipment
Investment securities

2,044
2,554
7,205
12,184¥ 23,987¥

2,084
32,9807,256
19,472¥ 61,792

Thousands of
U.S. dollars

2017$18,21922,76564,221
108,602$ 213,807

Assets in the above table are pledged for the following liabilities:
Millions of yen
2017
2016
Short-term borrowings
Borrowings from securities finance companies
Long-term borrowings

¥

¥

5,754
736
3,360
9,850

¥ 37,073
935
6,300¥ 44,308

Thousands of
U.S. dollars

2017
$

$

51,2886,560
29,94987,797

In addition to above, at March 31, 2017, trading assets, etc. amounting to ¥66,601 million($593,645 thousand) and investments securities amounting to ¥300 million ($2,674 thousand)are deposited as guarantee for settlement of trading accounts and securities borrowed,
respectively. At March 31, 2016, trading assets, etc. amounting to ¥59,542 million andinvestments securities amounting to ¥133 million are deposited as guarantee for settlement oftrading accounts and securities borrowed, respectively.
The fair value of the securities pledged as collateral at March 31, 2017 and 2016, except for
those disclosed in the above table, are as follows:
Millions of yen
2017
2016
¥

Securities loaned on margin transactions

8,196
Securities pledged for borrowings on margin transactions
4,047
Securities loaned
46,604
Other
27,994¥ 86,841
27

¥

6,950
3,177
24,70933,614¥ 68,450

Thousands of
U.S. dollars

2017$

73,05536,073
415,402249,523$ 774,053

The fair value of the securities received as collateral at March 31, 2017 and 2016 are as follows:
Millions of Yen
2017
2016
Securities received on margin transactions
Securities borrowed
Securities pledged as collateral
Other

11.

¥ 33,597
146,305
37,321
6,572¥ 223,795¥ 35,591
107,717
36,952
4,079¥ 184,339

Thousands of
U.S. dollars

2017$299,465
1,304,083
332,659
58,579$ 1,994,786

INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese corporate, inhabitant andbusiness taxes based on income.
The tax effects of significant temporary differences and tax loss carryforwards which resulted indeferred tax assets and deferred tax liabilities at March 31, 2017 and 2016 are as follows:
Millions of yen
2017
2016
Deferred tax assets:
Tax loss carryforwards
Liability for retirement benefits (employees)
Accrued bonuses
Allowance for doubtful accounts
Financial instruments transactions reserve
Asset retirement obligations
Accrued business tax
Impairment loss
Depreciation and amortization
Retirement benefits payable for directors andcorporate auditors
Loss on devaluation of investment securities
Loss on devaluation of golf memberships
Liability for retirement benefits (directors andcorporate auditors)
Other

¥

Valuation allowance
Total
Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Land revaluation excess
Other
Total
Net deferred tax liabilities
¥

28

2,938
1,633
652
407
378
376
275
225
182

¥

3,144
1,686
559
477
807
315
82
349
165

Thousands of
U.S. dollars

2017$26,18814,556
5,812
3,628
3,369
3,351
2,451
2,006
1,622

176
170
52

181
229
107

1,569
1,515
463

43
278
7,785
(4,431)
3,354

35
424
8,560
(5,296)
3,264

383
2,478
69,391(39,495)
29,896(6,809)(1,457)(473)(8,739)(5,385) ¥(6,514)(1,457)(397)(8,368)(5,104)(60,692)(12,987)(4,216)(77,895)$ (47,999)

Net deferred tax assets at March 31, 2017 and 2016 are reflected in the accompanying
consolidated balance sheet under the following captions:
Millions of yen
2017
2016
¥

Current assets – Deferred income taxes
Investments and other assets – Deferred income taxes

Current liabilities – Deferred income taxes
Non-current liabilities – Deferred income taxes
¥

1,002
1,441
(38)
(7,790)(5,385)

¥

¥

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

Thousands of
U.S. dollars

2017
$

8,931
12,844(339)(69,435)$ (47,999)

The reconciliation of the statutory tax rate and the effective tax rate for the year ended March
31, 2017 is not subject to disclosure because the difference between the rates does not exceed 5%of the statutory tax rate.
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 year ended March 31, 2016 was asfollows:
Statutory tax rate
Expenses not deductible for tax purposes
Income not credited for tax purposes
Per capita tax
Equity in gain of affiliates
Valuation allowance
Adjustments of deferred tax assets due to change in tax rate

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%

12. RETIREMENT AND PENSION PLANS
The Company and its domestic consolidated subsidiaries have a defined contribution retirement
and pension plan (Securities Omnibus DC Okasan Plan), a corporate defined benefit pension
plan and an unfunded retirement and severance plan that provide for lump-sum payment ofbenefits.
Defined benefit plans
Followings are the information of defined benefit plans at March 31, 2017 and 2016 and for theyears then ended.
(1) Reconciliation of changes in retirement benefit obligation
Millions of yen
2017
2016
Retirement benefit obligation at beginning of year ¥ 14,175
Service cost
762
Interest cost
Actuarial gain or loss
(139)
Benefits paid
(643)
Other
3
¥ 14,158
Retirement benefit obligation at end of year

¥ 13,730
704
53
537
(849)
0
¥ 14,175

Thousands of
U.S. dollars

2017$ 126,348
6,792(1,239)(5,731)27$ 126,197

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.
29

(2) Reconciliation of changes in plan assets
Millions of yen
2017
2016
¥

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

¥

8,943
43
306
267
(389)
3
9,173

¥

¥

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

Thousands of
U.S. dollars

2017
$

$

79,713
383
2,727
2,380
(3,467)
27
81,763(3) Reconciliation between net of retirement benefit obligation and plan assets, and liability
or asset for retirement benefits recognized in consolidated balance sheet
Millions of yen
2017
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

¥
¥
¥

8,405
(9,173)
(768)
5,753
4,985

¥

5,753
768
4,985

¥

¥

¥

Thousands of
U.S. dollars

2017

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

$

5,627
395
5,232

$

74,918(81,763)(6,845)51,279$ 44,434$

51,2796,845
44,434(4) The components of retirement benefit expenses
Millions of yen
2017
2016
¥

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

¥

762
(43)
86
805

¥

¥

704
53
(45)
(118)
594

Thousands of
U.S. dollars

2017
$

$

6,792
(383)
766
7,175

(5) Remeasurements of retirement benefit plans before related tax effects
Millions of yen
2017
2016
¥

Actuarial gain or loss

532¥

(1,067)

Thousands of
U.S. dollars

2017
$

4,742

(6) Accumulated remeasurements of retirement benefit plans before related tax effects
Millions of yen
2017
2016
¥

Unrecognized actuarial gain or loss

30

425

¥

(106)

Thousands of
U.S. dollars

2017
$

3,788

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

Equity securities
General accountDebt securities
Other
Total

2017

2016

35 %
34
18
13
100%

33%
35
19
13
100%

(b) Determination procedure of long-term expected rate of return
In determining long-term expected rate of return on plan assets, the Company
considers the current portfolio of plans assets, actual performance result,investment policy and market trend.
(8) Basis for calculation of actuarial assumptions
The assumptions used in accounting for the above plans at March 31, 2017 and 2016 are
as follows:
2017
2016

0.08%
0.50%

(a) Discount rate(b) Long-term expected rate of return

0.00%
0.50%

Defined contribution plans
The amount to be paid by the Company and consolidated subsidiaries to the defined contributionplans is ¥199 million ($1,774 thousand) and ¥197 million for the years ended March 31, 2017and 2016, respectively.
Retirement benefits for directors and corporate auditors
Directors and corporate auditors are not covered by the plans described above. For such
persons, certain consolidated subsidiaries have unfunded defined benefit pension plans. Under
the plans, directors and corporate auditors are entitled to lump-sum payments based on thecurrent rate of pay and length of service when they leave the Company.
At March 31, 2017 and 2016, the subsidiaries provide for the amount of ¥132 million ($1,177
thousand) and ¥113 million, respectively.
13.

ASSET RETIREMENT OBLIGATIONS
The asset retirement obligation is based on estimated future restoration liabilities related toleasehold contracts of branch offices and so on.
The obligation is calculated based on the estimated period of use of 9 to 58 years and discounted
rate of 0.00% to 2.33%.
The following table provides the Company’s total asset retirement obligation for the years ended
March 31, 2017 and 2016:
Millions of yen
2017
2016
¥

Balance, beginning of year
Liabilities incurred by asset acquisition
Accretion expenses
Liabilities settled
Other increase (decrease)
Balance, end of year

¥

31

842 ¥
253
12
(66)
1,041 ¥

700
152
13
(23)
842

Thousands of
U.S. dollars

2017
$

$

7,505
2,255
107
(588)
9,279

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 1 of
the Financial Instruments and Exchange Law.

15.

SHAREHOLDERS' EQUITYThe Companies Act provides that an amount equal to 10% of distributions from retained
earnings paid by the Company and its Japanese subsidiaries be appropriated as a legal reserve(a component of retained earnings) or as additional paid-in capital (a component of capitalsurplus). No further appropriations are required when the total amount of the additional
paid-in capital and the legal reserve equals 25% of their respective stated capital. The
Companies Act also provides that additional paid-in capital and legal reserve are available forappropriations by the resolution of the shareholders. Balances of the legal reserve are included
in retained earnings in the accompanying consolidated balance sheet.
Cash dividends and appropriations to the legal reserve charged to retained earnings for theyears ended March 31, 2017 and 2016 represent dividends paid out during those years and therelated appropriations to the legal reserve. The amount available for dividends is based on theamount recorded in the Company’s non-consolidated books of account in accordance with theCompanies Act.
Dividends paid during the year ended March 31, 2016 which was approved by the General
Meeting of Shareholders held on June 26, 2015 are as follows:(a) Total dividends¥4,873million(b) Cash dividends per common share¥25(c) Record date
March 31, 2015(d) Effective dateJune 29, 2015
Cash dividends for treasury stock held by subsidiaries of ¥122 million were excluded from theabove table.
Dividends paid during the year ended March 31, 2017 which was approved by the Board of
Directors held on May 17, 2016 are as follows:(a) Total dividends¥4,873 million ($43,435 thousand)(b) Cash dividends per common share¥25 ($0.22)(c) Record date
March 31, 2016(d) Effective dateJune 8, 2016
Cash dividends for treasury stock held by subsidiaries of ¥122 million ($1,087 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, 2017 which was approved by the Board of Directors held on May 17,2017 are as follows:(a) Total dividends¥4,995 million ($44,523 thousand)(b) Dividend source
Retained earnings(c) Cash dividends per common share¥25 ($0.22)(d) Record date
March 31, 2017(e) Effective dateJune 8, 2017
Cash dividends for treasury stock held by subsidiaries were not excluded from the above table.

32

16.

STOCK OPTIONS
The cost recognized for the stock options is ¥82 million ($731 thousand) and ¥73 million whichis included in selling, general and administrative expenses and the income recognized for theforfeited stock options is nil and ¥5 million for the years ended March 31, 2017 and 2016,
respectively.
Description of each stock option plans at March 31, 2017 is as follows:
Stock option plans
1st
Individuals granted the stock
optionType and number of shares
to be issued upon theexercise of the stock option
Grant dateCondition for execution ofright
Stipulations on requisite
service period
Exercisable period

2ndPlan approved on June 26, 2015

Plan approved on June 29, 2016

6 directors of the Company(except for audit andsupervisory committee
members) and 23 directors of
its subsidiary (Okasan
Securities Co., Ltd.)
129,400 shares of common
stock

5 directors of the Company(except for audit andsupervisory committee
members) and 22 directors of
its subsidiary (Okasan
Securities Co., Ltd.)
216,000 shares of common
stock

July 13, 2015
No condition for execution ofright is required.
There are no stipulations onrequisite service period.
From July 14, 2015 to July13, 2045

July 14, 2016
No condition for execution ofright is required.
There are no stipulations onrequisite service period.
From July 15, 2016 to July
14, 2046

A summary of the scale and movement of the stock option plan for the year ended March 31,2017 is as follows:
1st
2nd
Non-vested:
Outstanding at March 31, 2016
GrantedForfeited
VestedOutstanding at March 31, 2017
Vested:Outstanding at March 31, 2016
VestedExercised
Forfeited
Outstanding at March 31, 2017-

216,000
216,000-

121,800
11,500110,300

216,000
216,000

A summary of information for the stock option plan is as follows:
1st
Exercise price
Average stock price at exercise
Fair value at the grant date

¥1 ($0.01)¥507 ($4.52)¥715 ($6.37)

33

2nd¥1 ($0.01)¥383 ($3.41)

The fair value of the stock options was estimated using the Black-Scholes option-valuation
model with the following assumptions:
Expected volatility *1
39.207%
Expected remaining outstanding period *2
5.5 years
Expected dividend *3¥25 per share
Risk-free interest rate *4-0.376%*1 Expected volatility is based on the actual stock prices traded from January 14, 2011 toJuly 14, 2016.
*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, 2016.
*4 Risk-free interest rate is the government bond yield for a term consistent with the
expected remaining outstanding period.
The number of rights to vest in the future periods is determined based on the actual forfeited
number of the stock options because it is difficult to estimate forfeiture in the future.
17.

SURPLUS ON LAND REVALUATIONAt March 31, 2002, a consolidated subsidiary revaluated its own land for business activities inaccordance with the “Law Concerning Land Revaluation” (the “Law”) effective March 31, 1998.
The net unrealized gain, net of related taxes and non-controlling interests, are reported as“Surplus on land revaluation” in a component of net assets and the related deferred tax
liabilities are included in non-current deferred income taxes.
Fair values of the land are determined based on the values specified in Article 2-1, 2-3 and 2-5 of
the Enforcement Ordinance of the Law concerning Land Revaluation.
The fair value of the land increased by ¥307 million ($2,736 thousand) at March 31, 2017 andincreased by ¥302 million at March 31, 2016 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 their capital
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 505.2% and 449.5% at March 31, 2017 and 2016, respectively.

19.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Major elements of selling, general and administrative expenses for the years ended March 31,2017 and 2016 are summarized as follows:
Millions of yen
2017
2016
¥ 12,809
32,409
6,794
5,773
3,504
1,196
17
2,804
¥ 65,306

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

34

¥ 14,765
33,331
6,273
5,688
3,259
846
(4)
3,301
¥ 67,459

Thousands of
U.S. dollars

2017$ 114,172
288,876
60,55851,457
31,233
10,661
152
24,993$ 582,102

20.

OTHER COMPREHENSIVE INCOME (LOSS)
The reclassification adjustment and the related income tax effects allocated to each componentof other comprehensive income (loss) for the years ended March 31, 2017 and 2016 are as
follows:
Millions of yen
2017
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¥Thousands of
U.S. dollars

2017

1,107 ¥
172
1,279
(320)
959

(4,324)(1,733)(6,057)
2,213(3,844)-44-

Foreign currency translation adjustments:
Arising during the year

(23)

(249)

(205)

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

445
87
532
(163)
369

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

3,967
775
4,742
(1,453)
3,289

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

(122)

(61)

(1,087)

Surplus on land revaluation:
Tax benefit (expense)¥

Total other comprehensive income (loss)

1,183

¥

(4,834)

$

$

9,867
1,533
11,400(2,852)
8,548

10,54521.

PER SHARE INFORMATION(a)Net Income per Share
Basic net income per share, and reconciliation of the numbers and the amounts used in the basic
net income per share computations for the years ended March 31, 2017 and 2016 are as follows:
Yen
U.S. dollars
2017
2016
2017
¥

Basic net income per share

52.93

¥

55.94

Millions of yen
2017
2016
¥ 10,487
Net income attributable to owners of the parent
Net income not applicable to common shareholders
Net income attributable to owners of the parent¥ 10,487
available to common shares

35

198,115

0.47

Thousands of
U.S. dollars

2017¥ 11,068-$

93,475-¥ 11,068$

93,475

Number of shares(Thousand)
2017
2016
Weighted average number of shares outstanding on
which basic net income per share is calculated$

197,849

(b)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, 2017 and 2016 are as follows:
Yen
U.S. dollars
2017
2016
2017
¥ 792.05

Net assets per share¥ 739.82

Millions of yen
2017
2016
Total net assets
Amount deducted from total net assets:
Stock acquisition rights
Non-controlling interests
Total
Net assets applicable to common stockholders

$

7.06

Thousands of
U.S. dollars

2017¥ 178,257¥ 172,097$ 1,588,885

162
21,335
21,497¥ 156,760

87
25,64825,735¥ 146,362

1,444
190,169
191,613$ 1,397,272

Number of shares(Thousand)
2017
2016
Number of shares outstanding at the end of year on
which net assets per share is calculated
22.

197,917

197,833

SUPPLEMENTARY CASH FLOW INFORMATION
Reconciliation between “Cash on hand and in banks” in the accompanying consolidated balance
sheet and “Cash and cash equivalents” in the accompanying consolidated statement of cash
flows at March 31, 2017 and 2016 are as follows:
Millions of yen
2017
2016
Cash on hand and in banks¥ 56,700 ¥ 57,301
Time deposits that have maturities of over three(5,509)(4,051)months when acquired¥ 51,191 ¥ 53,250
Cash and cash equivalents

23.

Thousands of
U.S. dollars

2017$ 505,393(49,105)$ 456,288

COMMITMENTS AND CONTINGENCIESAt March 31, 2017 and 2016, the Company and certain subsidiaries have guaranteed
approximately ¥7 million ($62 thousand) and ¥14 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.

24.

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

36

(b)

Operating Lease
Future minimum lease payments required under noncancellable operating leases at March
31, 2017 and 2016 are as follows:
Millions of yen
2017
2016
¥ 1,599
3,488¥ 5,087

Within one year
Over one year

25.

¥
¥

757
119
876

Thousands of
U.S. dollars

2017$ 14,253
31,090$ 45,343

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 ascollateral for a loan of bonds such as government bonds. Deposit received is temporary
unsettled amount arising from transaction with customers. Guarantee deposits received isdeposit received for margin transactions from customers. Part of financial liabilities, suchas borrowings, are exposed to liquidity risk that is the risk for the Group not to make apayment on due date. The borrowings with variable interest rate are exposed to interest
rate fluctuation risk.
The Group uses derivative financial instruments as part of asset and liability management.
For trading purpose, the Group uses derivatives listed on exchange such as stock index
futures and bond futures, as well as over-the-counter derivatives such as forward foreignexchange transactions. For non-trading purpose, the Group uses interest rate swaps.
37

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 ¥281 million ($2,505 thousand)calculated using historical method (holding period: one day, confidence interval: 99%,
observation period: 1,250 days) at March 31, 2017. 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.

38Fair value of financial instruments
The carrying amounts on the consolidated balance sheet, fair value, and differences at March
31, 2017 and 2016 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
2017

2016

Carrying
value

Fair value

Differences

Carrying
value

Fair value

Differences¥ 56,700¥ 56,700¥-¥ 57,301¥ 57,301¥

65,39665,396-

58,842

58,842

149,438

149,438-

170,824

170,824

-

53

54

1

46

42

(4)

37,23437,234-

39,464

39,464

-

7,036

7,036

-

-

-

-

40,26040,260-42,34142,341-

141,522

141,522-

95,461

95,461

3,058

3,058

-

2,070

2,070

¥ 500,697¥500,698¥

1¥ 466,349¥ 466,345¥(4)¥ 138,256¥138,256¥-¥ 77,194¥ 77,194

¥

-

-

-

-

16,14616,146

12,08912,089-10,468

10,46846,65946,659-24,737

24,73734,24335,192
69,0709,860

34,24335,192
69,070
9,995

0
135

27,52936,285109,534
12,30027,52936,285109,535
12,475

Total¥ 345,369¥345,504¥

135¥ 314,193¥ 314,369¥

176

Derivative transactions

¥

¥

¥

-

¥

¥

¥

-

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

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

(8)

(8)

39

16

16

-

-

1
175

Thousands of U.S. dollars
2017
Carrying
value
Fair value Differences
Assets:Cash on hand and in banks
Cash segregated as deposits
for customers and others
Trading assets, short-term
investments and investment
securities
Trading securities$ 505,393

582,904

1,332,008

1,332,008

-

472

481

9

331,884

331,884-

62,71562,715-358,856

358,856-

1,261,449

1,261,449-

27,25727,257-$ 4,462,938$ 4,462,947 $9$ 1,232,338$ 1,232,338 $-

107,755

107,755-

415,893415,893-

305,223
313,682

305,223
313,682-

615,652

615,652

087,88789,0901,203$ 3,079,633 $1,203

Available-for-salesecurities
Receivables arising fromunsettled trades
Receivables on margintransactions
Receivables on collateralized
securities transactions
Short-term guarantee deposits

Liabilities:
Trading liabilities
Trading securities
Payables on margintransactions
Payables on collateralized
securities transactions
Deposits received
Guarantee deposits received
Short-term borrowings
Long-term borrowings-

582,904

Held-to-maturity debt
securities

Total$ 505,393 $Total$ 3,078,430

Derivative transactions$(71) $(71) $--* Derivative receivables and payables are on net basis. Items that are net payables areshown in parenthesis.
(1) Fair value measurement of financial instruments
Assets:Cash on hand and in banks, Cash segregated as deposits for customers and others,
Receivables arising from unsettled trades, Receivables on margin transactions, Receivables
on collateralized securities transactions and Short-term guarantee deposits
The carrying amount approximates fair value because of the short maturity of these
instruments.
Trading assets, short-term investments and investment securities
The carrying amount approximates fair value because the carrying amount of equity
securities, debt securities and beneficiary certificates is calculated by quoted market price.
Please see note 4. TRADING ASSETS AND LIABILITIES and see note 7. SECURITIESFOR NON-TRADING PURPOSES for information by category.

40

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

Millions of yen
2017
2016
¥
Unlisted equity securities
Investments in limited partnership and similar
partnership
¥
Total

41

6,340

¥

100
6,440

2017

6,460

$

2
¥

6,462

56,511892$

57,403

(3) Projected future redemption of monetary claim and securities with maturities
March 31, 2017
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 for customers andothers

¥56,700

¥

-

¥

-

¥

-

65,396

-

-

-

-

54

-

-

95

1,647

230

-

40,260---141,522

-

-

-

3,058

-

-

-

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

Government bonds
Available-for-salesecurities with maturities:
Other
Receivables on margintransactions
Receivables on collateralized
securities transactions
Short-term guarantee
deposits¥ 307,031¥$

505,393¥

230¥

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 for customers andothers

1,701

$

-

$

-

-

Due after
ten years$-

582,904

-

-

-

-

481

-

-

847

14,681

2,050-

358,856---

1,261,449---

27,257---

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

Government bonds
Available-for-salesecurities with maturities:
Other
Receivables on margintransactions
Receivables on collateralized
securities transactions
Short-term guarantee
deposits$ 2,736,706$

42

15,162

$

2,050

¥

-

March 31, 2016

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 for customers andothers¥57,301¥-¥-

Due after
ten years¥-

58,842

-

-

-

-

47

-

-

2,000
2

3,506

220

-

42,341---

95,461

-

-

-

2,070

-

-

-

Trading assets, short-term
investments and investment
securities:
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¥ 258,017

¥

3,553

¥

220

¥

-

(4) The annual maturities of the long-term debt and other interest-bearing debt
March 31, 2017
Millions of yen
Due after

Due after

Due afterDue

one year

two years

three

four

withinthroughthrough

years

years

Due after

one year

two years

three

throughthroughfive years

four

five years

years

Due after

years

Short-term borrowings
Long-term borrowings
Borrowings fromsecurities finance

¥

Total

¥

65,930 ¥
3,140

- ¥
3,020

- ¥
4,000

- ¥
2,840

- ¥
-

-

4,071
73,141 ¥3,020 ¥

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-term borrowings
Long-term borrowings
Borrowings fromsecurities finance

Total$ 587,664 $
27,988- $26,919- $35,654- $25,314- $--36,287$ 651,939 $

26,919 $35,654 $25,314 $

- $

-

43

March 31, 2016

Millions of yen
Due after

Due after

Due afterDue

one year

two years

three

four

withinthroughthrough

years

years

Due after

one year

two years

three

throughthroughfive years

four

five years

years

Due after

years

Short-term borrowings
Long-term borrowings
Borrowings fromsecurities finance

Total¥ 108,430 ¥
1,104

- ¥
3,140

- ¥
2,320

- ¥
4,000

- ¥
2,840

-

3,617
¥ 113,151 ¥

3,140 ¥

2,320 ¥

4,000 ¥

2,840 ¥-* Borrowings from securities finance companies are deemed to be settled within one year.
26.

DERIVATIVES
Derivatives utilized for trading purposes
The contract or notional amounts and fair value of derivative financial instruments for trading
purposes held at March 31, 2017 and 2016 are summarized as follows:(1) Stocks
March 31, 2017

Millions of yen
Contract ornotional
Valuationamounts Fair value gain (loss)

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

1,393 ¥
1,582
9
21

7 ¥
(2)

7
(2)

9
35

0
14
19

¥

Thousands of U.S. dollars
Contract ornotional
Valuationamounts Fair value gain (loss)

Stock index futures:
Written
Purchased
Stock index options:
Written
Purchased$ 12,416 $
14,101
80
187

62
(18)

$

80
312
$

44

62
(18)
0
125
169

March 31, 2016

Millions of yen
Contract ornotional
Valuationamounts Fair value gain (loss)

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

1,873 ¥
1,276

2
1

4
10

4
10

¥

¥

2
1
0
0
3

The fair value of stock index futures and stock index options is computed using prices on themarket.
Gain or loss on deemed settlement is disclosed in the “Fair value” column of stock index
futures above.
(2) Bond
March 31, 2017
Millions of yen
Contract ornotional
Valuationamounts Fair value gain (loss)

Bond futures:
Written¥

4,510 ¥

2

¥
¥

2
2

Thousands of U.S. dollars
Contract ornotional
Valuationamounts Fair value gain (loss)

Bond futures:
Written$ 40,200 $

18

$
$

18
18

March 31, 2016
Millions of yen
Contract ornotional
Valuationamounts Fair value gain (loss)

Bond futures:
WrittenBond options:Purchased¥

4,095 ¥

10

4

5

¥

10

¥

1
11

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.

45

(3) Foreign exchange
March 31, 2017
Millions of yen
Contract ornotional
Valuationamounts Fair value gain (loss)

Forward foreign exchange:
Written:Indian rupee
Australian dollar
Russian ruble
Brazilian real
Mexican PesoSouth African rand
Other

¥

604
569
544
388
316
280
547

¥

(10) ¥
(6)
(15)
(3)
(8)
5
(4)
¥

(10)
(6)
(15)
(3)
(8)
5
(4)
(41)

Thousands of U.S. dollars
Contract ornotional
Valuationamounts Fair value gain (loss)

Forward foreign exchange:
Written:Indian rupee
Australian dollar
Russian ruble
Brazilian real
Mexican PesoSouth African rand
Other

$

5,384 $ (89)
5,072
(53)
4,849
(134)
3,458
(27)
2,817
(71)
2,496
45
4,876
(36)

$

(89)
(53)
(134)
(27)
(71)
45
(36)
$ (365)

March 31, 2016
Millions of yen
Contract ornotional
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)

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.

46

Derivatives utilized for non-trading purposes
Derivative transactions to which hedge accounting are applied at March 31, 2017 and 2016
are summarized as follows:
Contract or notional amounts
Nature of transaction

Hedged items

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

Millions of yen
2017
2016

¥

5,340

¥

5,340

Thousands of
U.S. dollars

2017

$

47,598*1 Hedge accounting method is the exceptional accounting method which is the difference inamounts to be paid or received on interest rate swaps being recognized over the life of theagreements as an adjustment to interest expense.
*2 Fair value of derivative financial instrument is included in fair value of the long-termborrowings as hedged items for certain long-term borrowings for which interest rate swap
contracts are used to hedge the interest rate fluctuations.
27.

INVESTMENT AND RENTAL PROPERTYThe Company and certain consolidated subsidiaries own their rental office buildings, land etc(hereafter “rental property”) in Tokyo and other areas. Income from the rental property is ¥25
million ($223 thousand) and ¥65 million, respectively. Compensation expense was ¥294
million and impairment loss was ¥3 million for the year ended March 31, 2016.
The amounts recognized in the consolidated balance sheet and fair values related to the rental
property are as follows:
Millions of yen
2017
2016
Consolidated balance sheet amount:
Balance at beginning of the year

Fair value

2017

5,311
179
5,490

$

¥

5,490 ¥
(69)
5,421 ¥$

48,935(615)
48,320

¥

6,322

¥

6,521

$

56,351¥

Increase/(decrease)
Balance at end of the year

Thousands of
U.S. dollars

The above fair value is based on real-estate appraisals, and is estimated by the Company.
28. BALANCES AND TRANSACTIONS WITH RELATED PARTY
For the year ended March 31, 2017, the Company purchased associated company’ stocks from Mr.
Tetsuo Kato who owns 0.28% shares of the Company and is Vice Chairman of the Board of
Directors in the amount of ¥700 million ($6,239 thousand), from Ms. Yasuko Kato who owns
0.02% shares of the Company and is close relatives of the Company’s directors in the amount of¥337 million ($3,004 thousand) and from Santo Co., Ltd. who owns 0.25% shares of theCompany and whose major shares are owned by the Company’s directors and their close
relatives in the amount of ¥1,357 million ($12,096 thousand). The amount is determined basedon the price appraised by the third party.
For the year ended March 31, 2016, the Company provided condolence money of ¥60 million 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.

47

29.

SEGMENT INFORMATIONThe reported segments of the Company are the business units for which the Company is able toobtain respective financial information separately in order for the Board of Directors to conductperiodic investigation to determine distribution of management resources and evaluate theirbusiness results.
“Securities business”, “Asset management business” and “Support business” are the Company’s
reported segments.
“Securities business” renders trading and brokerage for trading in securities, underwriting anddistribution of securities, public offering and secondary distribution of securities and private
offering of securities. “Asset management business” renders investment management andinvestment advisory.
“Support business” renders information processing services,administrative support services, custodianship and temping services, etc.
Segment operating revenues, income, assets, liabilities and others are calculated by accounting
methods similar to those employed to prepare the accompanying consolidated financial
statements.
Segment income is calculated based on operating income in the consolidated statement ofincome.
Intersegment revenues and transfer are based on arms-length transactions.
Operating revenues, income, assets, liabilities and others by reported segments
The reported segment information for the Company and its consolidated subsidiaries for theyears ended March 31, 2017 and 2016 are summarized as follows:
Millions of yen
2017
Reported segments
Asset

Securities

Operating revenues:
Revenues from third¥
partiesIntersegment
revenues¥
Total

67,053 ¥4,269

Supportmanagement

12,672 ¥
-

908 ¥

Total
80,633 ¥Adjustments

8¥

11,03815,307(15,307)

Consolidated

80,641-

71,322 ¥12,672 ¥11,946 ¥95,940 ¥(15,299) ¥80,641427 ¥

14,303 ¥(147) ¥

14,156

Segment income¥

12,505 ¥1,371 ¥

Segment assets¥ 508,595 ¥

18,400 ¥32,953 ¥ 559,948 ¥(7,103) ¥ 552,845

Segment liabilities¥ 386,939 ¥

1,658 ¥

21,036 ¥ 409,633 ¥(35,045) ¥ 374,588

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

Increase in property
and equipment andintangible assets

¥

701 ¥

29 ¥

2,632 ¥

3,362 ¥

142 ¥

3,504

1,788
1,380

-

6
-

1,794
1,380

(301)
(201)

1,493
1,179

41
233

-

-

41
233

-

41
233

4,852

-

-

4,852

-

4,852

937

291

6,035

7,263

3

7,266

48

Millions of yen
2016
Reported segments
Asset

Securities

Operating revenues:
Revenues from third¥
partiesIntersegment
revenues¥
Total

65,590 ¥Supportmanagement

16,418 ¥

5,459

-

906 ¥

Total

Adjustments

82,914 ¥13 ¥10,97816,437(16,437)

Consolidated

82,927-71,049 ¥16,418 ¥11,884 ¥99,351 ¥(16,424) ¥82,927

14,996 ¥(837) ¥

14,159Segment income¥

11,141 ¥

2,671 ¥

1,184 ¥

Segment assets¥ 465,027 ¥

17,319 ¥29,702 ¥ 512,048 ¥3,695 ¥ 515,743

Segment liabilities¥ 345,363 ¥

1,860 ¥

18,667 ¥ 365,890 ¥(22,244) ¥ 343,646

Others:¥Depreciation
Interest anddividend income
Interest 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

Thousands of U.S. dollars
2017
Reported segments
Asset

Operating revenues:
Revenues from third
parties$Intersegment
revenues
Total

SupportSecurities

management597,674 $112,951 $Total

8,093 $

718,718 $Adjustments

Consolidated

72 $

718,790

38,051-

98,387

136,438(136,438)-

635,725

112,951

106,480

855,156(136,366)

718,790

127,489 $(1,310) $126,179

Segment income$

111,463 $

12,220 $Segment assets$ 4,533,336 $

164,007 $

293,725 $ 4,991,068 $(63,312) $4,927,756

Segment liabilities$ 3,448,962 $

14,778 $187,503 $ 3,651,243 $(312,372) $3,338,871

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

Increase in property
and equipment andintangible assets$

6,248 $

3,806 $

259 $

23,460 $29,967 $1,266 $

31,233

15,937
12,301-54-

15,991
12,301(2,683)(1,792)

13,30810,509

365
2,077

-

-

365
2,077

-

365
2,077

43,248--43,248-43,248

8,352

2,594

53,79264,73827

64,76549

1.

(1) Components of “Adjustments in segment income” are as follows:
Millions of yen
2017
2016
Elimination of intersegment transactions

Unallocated company-wide expenses

¥

2,770
(2,917)
¥
(147)

¥

2,652
(3,489)¥(837)

Thousands of
U.S. dollars

2017
$
$

24,690(26,000)(1,310)Company-wide expenses are holding company’s expenses.
(2) Components of “Adjustments in segment assets” are as follows:
Millions of yen
2017
2016
Elimination of intersegment balances
Unallocated company-wide assets¥ (57,400) ¥ (41,747)
50,29745,442¥ (7,103) ¥3,695

Thousands of
U.S. dollars

2017$ (511,632)
448,320$ (63,312)

Company-wide assets are holding company’s assets.
(3) Components of “Adjustments in segment liabilities” are as follows:
Millions of yen
2017
2016
Elimination of intersegment balances
Unallocated company-wide liabilities¥ (54,616) ¥ (40,186)
19,571
17,942¥ (35,045) ¥ (22,244)

Thousands of
U.S. dollars

2017$ (486,817)
174,445$ (312,372)

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

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

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

Disclosures are omitted because property and equipment located in Japan are over 90% of property
and equipment in the consolidated balance sheet.

3. Information by major customers
Disclosures are omitted because no particular third party whose operating revenues are over 10% of
operating revenues in the consolidated statement of income exists.
Information of impairment loss on fixed assets by reported segments
The information is not applicable for the years ended March 31, 2017 and 2016.
Goodwill by reported segments
The information is not applicable for the years ended March 31, 2017 and 2016.
Negative goodwill incurred by reported segments
The information is not applicable for the years ended March 31, 2017 and 2016.
50

51

㻾㻱㻲㻱㻾㻱㻺㻯㻱 㻰㻭㼀㻭52

Okasan Securities Co., Ltd.
Balance Sheet － March 31, 2017
Thousands of
U.S. dollars

Millions of yen
2017

2016

2017

ASSETS
Current assets:
Cash on hand and in banks¥

15,117¥

12,738$

134,745

Cash segregated as deposits for customers andothers24,47919,679218,192

Trading assets

149,171

170,741

1,329,628

6,439

-

57,394

Receivables arising from unsettled trades
Receivables on margin transactions

36,54238,608

325,715

Receivables on collateralized securities transactions

141,522

95,461

1,261,449

Short-term guarantee deposits

2,309

1,058

20,581

Deferred income taxes

911

586

8,120

Other current assets

2,985

2,981

26,607

(5)

(0)

(44)

Total current assets

379,470

341,852

3,382,387

Property and equipment, net of accumulated
depreciation

3,128

2,824

27,881

290

300

2,585

540

413

4,813

Allowance for doubtful accounts

Intangible assets, net
Investments and other assets:
Investment securities
Securities in associated companies

211

211

1,881

Long-term guarantee deposits

3,630

3,755

32,356

Deferred income taxes

1,349

1,333

12,024

Prepaid pension cost

293

198

2,612

Other

1,021

1,040

9,101

Allowance for doubtful accounts

(682)

(729)

(6,079)

6,362

6,221

56,708

Total investments and other assets
TOTAL

¥

53

389,250¥

351,197$3,469,561

Okasan Securities Co., Ltd.
Balance Sheet－(Continued)－ March 31, 2017
Thousands of
U.S. dollar

Millions of yen
2017

2016

2017

LIABILITIES AND NET ASSETS
Current liabilities:
Trading liabilities¥

Payables arising from unsettled trades
Payables on margin transactions

138,274¥

77,198$1,232,498-

16,358-

11,073

9,434

98,699

Payables on collateralized securities transactions

46,65924,737415,893

Deposits received

22,535

16,791200,865

Guarantee deposits received

7,485

7,656

66,717

Short-term borrowings

52,31594,365466,307

Income tax payables

1,133

10

10,099Other current liabilities

8,016

5,934

71,450287,490

252,483

2,562,528

Long-term borrowings

6,700

6,000

59,720Liability for retirement benefits

4,775

4,480

42,562

Total current liabilities
Non-current liabilities:

Other non-current liabilities

1,488

1,407

13,263

12,963

11,887

115,545

800

1,487

7,131

301,253

265,857

2,685,204

Common stock
Authorized―240,000 shares
Issued―100,000 shares in 2017 and 2016

5,000

5,000

44,567

Capital surplus

29,20029,200260,273

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

Retained earnings
Total shareholder's equity

53,77851,141

479,348

87,97885,341

784,188

19

(1)

169

87,997

85,340784,357

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

¥

54

389,250¥

351,197$3,469,561

Okasan Securities Co., Ltd.
Statement of Income － Year ended March 31, 2017
Thousands of
U.S. dollar

Millions of yen
2017

2016

2017

Operating revenues:
Commissions¥

Net gain on trading

31,380¥30,318Interest and dividend income

38,079$21,271

279,704
270,238

1,044

1,657

9,306

62,74261,007559,248

Interest expense

1,070

1,210

9,538

Net operating revenues

61,672

59,797549,710

Selling, general and administrative expenses

48,79949,298434,967

12,873

10,499114,743

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

687

(27)

6,124

Other, net

392

230

3,494

1,079

203

9,618

13,952

10,702

124,361

Current

4,666

3,019

41,590

Deferred

(351)

656

(3,129)

4,315

3,675

38,461

Income before income taxes
Income taxes:

Net income

¥

55

9,637

¥

7,027

$

85,900BOARD OF DIRECTORSCORPORATE DATA(At August, 2017)
Vice Chairman
Tetsuo Kato
President
Hiroyuki Shinshiba
Director
Hiroyuki Shindo
Director
Hiroyuki Murai
Director
Masahiro Hayakawa
Director
Masanori Kanai
Director
Akira Terayama
Director
Yoshio Sakaki
Director
Makoto Egoshi(At August, 2017)
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

Audit & Supervisory Committee Members
Director
Nobuyuki Natsume
Outside Director
Seishi Higo
Outside Director
Hirokazu Kono
Outside Director
Tsuneo Muneoka

Subsidiaries
10 companies
Listed Stock Exchanges
Tokyo Stock Exchange
Nagoya Stock Exchange

ORGANIZATION CHART(At August, 2017)
General m eeting of shar eholders

Board of Director s

Audit & Super visory Com m ittee
Audit & Super visory Com m ittee Office

Pr esidentManagem ent Conference
Gr oup Com pliance Dept.
Gr oup General Planning Dept.
Cor porate Planning Division

Gr oup Affiliated Com panies Strategy Dept.
Gr oup Business Strategy Dept.
Gr oup Public and Investors Relations Dept.
Gr oup Inform ation Technology Dept.
Gr oup Secretariat

Per sonnel Division

Gr oup Personnel Planning Dept.
Gr oup Treasury Planning Dept.

Adm inistrative Division

Gr oup General Affairs Dept.
Gr oup Internal Control P rom otion Office
Corporate Relationship Managem ent Dept.

56

http://www.okasan.jp/