Sumitomo Mitsui Financial Group, Inc.
Sumitomo Mitsui Banking Corporation
SMBC Nikko Securities Inc.
SMBC Friend Securities Co., Ltd.
Memorandum of Understanding on the Merger between
SMBC Nikko Securities and SMBC Friend Securities

Tokyo, May 12, 2016 --- Sumitomo Mitsui Financial Group, Inc. (SMFG, President: Koichi
Miyata), Sumitomo Mitsui Banking Corporation (SMBC, President and CEO: Takeshi Kunibe),
SMBC Nikko Securities Inc. (SMBC Nikko, President and CEO: Yoshihiko Shimizu) andSMBC Friend Securities Co., Ltd. (SMBC Friend, President: Koichi Danno, and together withSMBC Nikko, the “Two Securities Companies”) hereby announce that they have approved, inprinciple, at their respective meetings of the board of directors held today, the basic policies for
conducting a merger of SMBC Nikko and SMBC Friend (the “Merger”) subject to approvals
and authorizations from the relevant authorities, and they have entered into a memorandum ofunderstanding (the “MoU”) in order to proceed with further considerations and discussions
regarding the Merger.

1. Background and Objectives of the Merger
SMFG has been making group-wide efforts to strengthen the SMFG group’s securities
businesses, including the commencement of a securities brokerage business at SMBC inDecember 2004 with SMBC Friend as the consignor (such business was transferred toSMBC Nikko in January 2011), the conversion of SMBC Friend into a wholly owned
subsidiary of SMFG in June 2006, and the acquisition of SMBC Nikko’s business in October
2009.
Currently, due to the slowdown in the emerging economies and the plunge of commodity
prices coupled with the increase in geopolitical risks, the global economy is in a period ofheightened uncertainty and the volatility of the global securities market and financial market
has risen. However, the importance of the securities businesses within the SMFG group has
dramatically increased. In the wholesale sector, the fundraising through capital markets havecontinued to diversify and restructurings through M&A have rapidly increased, and in theretail sector, the trend of “from savings to investment” is gaining greater momentum.
Through discussions among the four companies, SMFG, SMBC, SMBC Nikko and SMBC
Friend, and considering the above circumstances, it was decided that a further strengtheningof the group’s securities businesses through the merger of the Two Securities Companies isessential to improve competitiveness of the group. The Merger will fundamentally strengthen
the competitiveness by taking full advantage of synergies from the Merger while capitalizingon the strengths of each of the Two Securities Companies.

Specifically, it is contemplated that the Merger will result in: (1) improved customer
satisfaction as a result of the increased product offering and product-related research, theenhancement of sales channels, and the reinforcement of consulting type sales, (2)enhancement of productivity through the optimization of sales personnel staffing as well as
the improvement of employee motivation from strengthening of competitiveness and betterindustry positioning, (3) streamlining of corporate management units which will allow toachieve cost saving synergies resulting from the consolidation of management infrastructuresuch as overlapping functions, systems, sales channels and others.
In order to realize the synergies from an earlier stage, the implementation of personnel
secondments and the supply of certain SMBC Nikko’s products to SMBC Friend will beconsidered prior to the Merger.
2. Outline of the Merger(1) Contemplated Schedule for the Merger
Approval of the MoU by the relevant boards of directors
May 12, 2016
Execution of the MoU
May 12, 2016
Execution of the merger agreement
In the first half of fiscal year 2016
(tentative)
Effective date of the Merger
January 2018 (tentative)(2) Structure of the Merger
Upon completion of the Merger, SMBC Nikko will be the surviving company andSMBC Friend will be the absorbed company. Prior to the Merger, in October 2016,
SMBC Nikko will become a wholly owned direct subsidiary of SMFG.
(3) Summary of the Merged Company (tentative)
Company name:SMBC Nikko Securities Inc.
Capital relationship:
Wholly owned subsidiary of SMFG
Location of the head office: 3-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo(Currently, the location of SMBC Nikko’s head office)Business Profile:
Securities services(4) Preparations for the Merger
In order to facilitate preparations for the Merger, the “Merger Preparation Committee”
will be established. Sub-committees to be established under the Merger Preparation
Committee will conduct individual merger preparations such as front office functions,planning, personnel, office work, system, risk management and compliance andothers.
3. Outlook
Details of the impact of the Merger on business results will be announced, where necessary,
after the details of the Merger are determined.

[Corporate Profile of the Companies to be merged](As of the end of March 2016)(1) Company NameSMBC Nikko Securities Inc. SMBC Friend Securities Co., Ltd.

(3) Title and Name ofRepresentative

3-1, Marunouchi 3-chome,
Chiyoda-ku, Tokyo
Yoshihiko Shimizu,
President and CEO

7-12, Nihonbashi-Kabutocho,
Chuo-ku, Tokyo
Koichi Danno,
President(4) Business Profile

Securities services

Securities services(5) Establishment

June 15, 2009

March 2, 1948

(6) Fiscal Year EndMarchMarch(2) Location of Head Office(7) Total Assets (Consolidated) 10,479,163 million yen

306,558 million yen(8) Net Assets (Consolidated)

697,808 million yen

221,353 million yen(9) Number of Employees

8,944

1,890

(10) Number of Branches

123 branches

61 branches(58 branches, 3 satellites)

End.