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<Translation>
[Disclosure Booklet]
Explanatory Documents on the Status of Business and Propertyfor the fiscal year ended Dec 31, 2019
This disclosure booklet is prepared by the Company for publication
on the Internet under Article 46-4 of the Financial Instruments and Exchange Law.
I Outline and Organization
1. Corporate Name ………………………………………………………………………………………………………… 1
2. Registration Date ( Registration Number ) …………………………………………………………………………… 1
3. History and Organization ………………………………………………………………………………………………… 1
4. Shareholders in the Top 10, Number of Shares Held and Percentage of Voting Rights ………………………… 3
5. Names of Board of Directors and Statutory Auditor ………………………………………………………………… 3
6. Names of Employees Specified by Cabinet Order …………………………………………………………………… 3
7. Business Operation ……………………………………………………………………………………………………… 4
8. Addresses of Head Office and Other Branches ……………………………………………………………………… 5
9. Other Business Operation ……………………………………………………………………………………………… 5
10. Engaged Businesses included in the Matters Set Forth in Article 7(3)(a), (3)-2, (3)-3(a) and from (4) to (9) of
the Cabinet Office Ordinance on Concerning Financial Instruments Business …………………………………… 6
11. 6
12. Financial Instruments Firms Associations and Certified Investor Protection Organization Memberships……… 7
13. Financial Instruments Exchange Memberships………………………………………………………………………… 7
14. 7
II Business Overview
1. Business Outline for the Current Period ……………………………………………………………………………… 8
2. Key Financial Data ……………………………………………………………………………………………………… 10
III Financial Matters
1. Financial Information ………………………………………………………………………………………………………12
2. Major Lenders and Borrowings ………………………………………………………………………………………… 18
3. Securities Held (Non-Trading) ……………………………………………………………………………………………18
4. Derivative Transactions (Non-Trading) …………………………………………………………………………………18
5. External Audit ………………………………………………………………………………………………………………19
6. Others ……………………………………………………………………………………………………………………… 19
IV Internal Control Structure
1. Overview of Internal Control …………………………………………………………………………………………… 20
2. Condition of Customers' Assets Segregation ………………………………………………………………………… 22
V Status of Consolidated Subsidiaries, etc. …………………………………………………………………………………26
Contents
Complaint Processing and Dispute Resolution …………………………………………………………………….
Investor Protection Fund Membership ……………………………………………………………………………
1
I Outline and Organization1. Corporate Name Citigroup Global Markets Japan Inc. (the Company)
2. Registration Date September 30, 2007( Registration Number ) (The Director-General of the Kanto Finance Bureau (Kinsho) No.130)
3. History and Organization
(1) HistoryYear
1972 ・ Smith Barney Tokyo Representative Office established
1977 ・ Salomon Brothers Asia Limited established in Hong Kong
1980 ・ Salomon Brothers Asia International Tokyo Representative Office established・ Smith Barney Tokyo Branch opened
1982 ・ Salomon Brothers Asia Limited Tokyo Branch opened
1987 ・ Becomes Remote Member of Osaka Securities Exchange
1988 ・ Becomes Official Member of Tokyo Stock Exchange
1989 ・ Becomes Standing Underwriting Manager for JGB syndication・ Becomes Clearing Member of Tokyo International Financial Futures Exchange・ Becomes Special Participant of Nagoya Stock Exchange
1991 ・ Becomes Official Member of Osaka Securities Exchange
1998 ・ Salomon Smith Barney (Japan) Limited formed upon Salomon Brothers Asia Limited's acquisition of all operations of Smith Barney Tokyo Branch
1999 ・ Name changed to Nikko Salomon Smith Barney Limited upon acquisition of Nikko Securities' institutional businesses・ Becomes Official Member of Nagoya Stock Exchange
2004 ・ Begins operation as Nikko Citigroup Limited
2008 ・ Nikko Citi Holdings Inc. established
2009 ・ Name changed to Citigroup Global Markets Japan Inc.
2017 ・ Japan headquarters moved to Otemachi Park Building
History
2
(2) Organization ChartAs of December 31, 2019
Shareholders' Meeting
Board of Directors' Meeting
Chairman
Statutory Auditor
President& CEO
Managem
ent Comm
ittee
Markets and Securities Services
RatesRates Trading
Markets Planning and Control
UnitDepartmentDivision
CVA TradingRates Quantitative Analys is
Finance DeskSpread Products Spread Products Equity Trading
Equity Execution Services
Equity SalesCorporate Access
Prime Finance
Equity Markets
Prime, Futures and Securities ServicesFutures, Clearing and Collateral
Custody and Fund ServicesFX SalesForeign Exchange
Client Management Group
Spread Products SalesInvestor Sales
Multi-Product SalesRetail Cross Asset Solutions
Multi-Asset Sales GroupSolutions Sales Corporate Solutions Group
Strategic Risk Solutions
Multi-Asset Group MAG Solutions Structured Products
Investor Relationship Management
Securitized Products
Banking, Capital Markets and Advisory
Corporate Clients Financial Inst itutions
M&AGlobal Asset Managers GroupTransaction Structuring Group
Management
Citi R esearch Fundamental AnalysisStrategy & Macro Analysis
Research Administration & Operations
Chief Operating Officer
Legal LegalDerivatives Documentation Group
Independent Compliance Risk Management
ICRM Compliance AssuranceAML Compliance
Central ComplianceMarkets ICRM
ICRM Surveillance
Risk Management
Credit Risk ManagementMarket Risk Management
NPAC
Quantitative Risk and Stress TestingOperational Risk Management
Risk Governance
Human ResourcesHR Advisors Unit
Employee Relations & ControlReward & Mobility
RecruitingTalent, Learning & Performance
Finance
Banking & Research ICRM/ Control Group
Financial P lanning & AnalysisControllers
Tax
TreasuryCountry TreasurerOperat ions and Technology Markets O perations Cash Management
Information Service GroupRisk & Control
Foreign Securities OperationsDomestic Securities Operations
KYC UtilityOTC Derivatives Operations
Okinawa OperationsKYCユーティリティ部FX& Treasury Operations
Middle Office
Production SupportFixed Income Technology
Prime, Futures and Securit ies Services Technology
Technology
FX & Risk Treasury TechnologyEquity Technology
Operations TechnologyGlobal Functions Technology Services
IT Governance and Administration O&T Planning
Corporate Planning
Corporate Affairs
Government Affairs
Internal Audit
Underwriting Review
Equity Derivative Sales
Sales and Client Executive
ICRM Sanctions
FX Prime BrokerageDeputy Head of Prime, Futures and Securit ies Services covering Securities Services
Rates Sales
Deputy Head of Investor Sales and Head of Cross Asset Solutions
General Department
Capital Markets Originat ion
Investment Banking
Investor Relationship Managers
Equity Capital Markets
Debt Capital Markets
Debt Syndicate
Vice Chariman
Markets and Securities Services Chief Operating Officer
Credit Analytics
3
4. Shareholders in the Top 10, Number of Shares Held and Percentage of Voting RightsAs of December 31, 2019
Name of shareholders Number of sharesheld
Citigroup Japan Holdings G.K. 3,842,000 100.00%
5. Names of Board of Directors and Statutory AuditorAs of December 31, 2019
Name Representation
Lee Robert Waite Yes
Kuniyoshi Hayashi No
Tatsuo Tanaka No
Fumiaki Kurahara No
Muneyuki Kuzushima No
Matthew van Weezel No
Yuichi Ito
( Note ) Matthew van Weezel resigned the office of Director on Jan 27, 2020.( Note ) Robert Itsuo Nakamura assumed the office of Director on Mar 13, 2020.
6. Names of Employees Specified by Cabinet Order(1)
As of December 31, 2019
Matthew van Weezel
Hiroko Tanaka General Counsel
( Note ) Matthew van Weezel resigned the Employee Specified by Cabinet Order on Jan 27, 2020 and Muneyuki ( Note ) Kuzushima assumed the role on the same day.
(2) Persons overseeing the division to make an advice or conducting management with respect to the investment advisory business and investment management business
Not applicable
Director Full-time
Director, Deputy President Full-time
Director, Chairman Full-time
Director Full-time
Percentage ofvoting rights
Total 1 party
Position Full-time/Non-Full-time
Representative Director, President and CEO Full-time
Director Full-time
Statutory Auditor Full-time
Persons overseeing the operations concerning the guidance for compliance with the lawsand regulations, etc. with respect to the financial instruments business
Name Title
Bord of Director, Head of Compliance Division, Chief Internal Control Officer
4
7.Business Operation
(1) Type I Financial Instruments Business① Businesses under Article 28(1) (i) of Financial Instruments and Exchange Law (hereinafter referred to as the
"FIEL")
(i)
(ii)
agency service ("Dairi") for sale and purchase of Securities falling under Article 2(8) (x) of FIEL)
(iii)
following transactions;
(a)
Exchange traded Derivatives; or
(b)
apply hereinafter) or Foreign Exchange traded Derivatives Transactions
(iv) Brokerage for Clearing of Securities, etc.; or
(v)
(vi)
Placement of Securities or exclusive Offer to Sell, etc. to Professional Investors
② Business under Article 28(1) (ii) of FIEL
Over-the-Counter Transactions of Derivatives or intermediary ("Baikai"), brokerage ("Toritsugi") ( excluding
Brokerage for Clearing of Securities,etc.) or agency service ("Dairi") therefor; or, Brokerage for Clearing of
Securities, etc. in relation to Over-the-Counter Transactions
③ Business under Article 28(1) (iii) (a) of FIEL
Wholesale Underwriting of Securities that are specified by a Cabinet Order as those for which management
of risks of loss is highly necessary
④ Business under Article 28(1) (iii) (b) of FIEL
Wholesale Underwriting of Securities other than those listed in Article 28(1) (iii) (a) of FIEL
⑤ Business under Article 28(1) (iii) (c) of FIEL
Acts listed in Article 2(8) (vi) that are other than Wholesale Underwriting of Securities
⑥ Securities, etc. Management Business
(2) Type II Financial Instruments Business
(3) Investment Advisory and Agency Business① Business under Article 28(3) (ii) of FIEL.
Sale and purchase of Securities conducted in a Foreign Financial Instruments Market (meaning
a market in a Foreign State similar to Financial Instruments Exchange Market; the same shall
Secondary Distribution of Securities or exclusive Offer to Sell, etc. to Professional Investors
The handling of a Public Offering or Secondary Distribution of Securities, or the handling of a Private
Agency or intermediation for the conclusion of an Investment Advisory Contract or a Discretionary InvestmentContract
Intermediary ("Baikai"), brokerage ("Toritsugi") (excluding Brokerage for Clearing of Securities,etc.) or
agency service ("Dairi") for sale and purchase of Securities, Exchange traded Derivatives or Foreign
Exchange traded Derivatives Transactions (excluding intermediary ("Baikai"), brokerage ("Toritsugi") or
Intermediary ("Baikai"), brokerage ("Toritsugi") or agency service ("Dairi") for agency ("Itaku") of the
Sale and purchase of Securities conducted in a Financial Instruments Exchange Market or
Transactions (excluding sale and purchase of Securities falling under Article 2(8) (x) of FIEL)
Sale and purchase of Securities (excluding those falling under the category of Derivative Transactions;
the same shall apply hereinafter), Exchange traded Derivatives (excluding Financial Instruments (limited
to those in Article 2(24) (iii-2)) or Financial Indices (limited to the value of the Financial Instruments or
figures calculated based thereon) related Exchange traded Derivatives (the same shall apply
"Commodities related Exchange traded Derivatives" hereinafter ) or Foreign Exchange traded Derivative
5
(4) Supplemental Business Operation to Financial Instruments Business (i.e. the business conducted by the Company listed in Article 35(1) of FIEL)
① Lending and borrowing of Securities, or intermediary ("Baikai") or agency service ("Dairi") thereof
② Money loan incidental to a margin transaction
③ Money loan secured by Securities that are deposited for safe custody from customers
④ Agency service ("Dairi") for customers concerning Securities
⑤ Agency service ("Dairi") of the business pertaining to payment of earnings, redemption money or cancellation
Securities⑥
Subscription Rights Certificates or Investment Corporation Bonds, or Foreign Investment Securities⑦ Conclusion of a Contract for Cumulative Investment
⑧ Provision of information or advice in relation to Securities
⑨ Agency service ("Dairi") of the business of any Counterparty Financial Business Operator, etc.
⑩ Retention of assets of a registered investment corporation
⑪
share exchange or share transfer, or intermediation for these matters⑫ Consultation to any other business operator with regard to management
⑬
brokerage ("Toritsugi") or agency service ("Dairi") thereof⑭
category of Securities), or intermediary ("Baikai"), brokerage ("Toritsugi") or agency service ("Dairi") thereof
8.As of December 31, 2019
9.Other Business Operation(1) Registered businesses conducted by the Company listed in Article 35(2) of FIEL ① Business pertaining to transactions conducted by using fluctuations in commodity prices and other indicators, market gaps, etc. as specified by a Cabinet Office Ordinance (excluding business pertaining to transactions on a commodity market, etc. defined in Article 2(21) of the Commodity Futures Act) ② Business pertaining to money lending business defined in Article 2(1) of the Act on Controls, etc. on Money Lending or other money loan, or intermediary service of lending and borrowing of money
③ Business pertaining to conclusion of a Loan Participation Contract, or an intermediary, brokerage or agencyservice
④ Goods leasing business
⑤ Business pertaining to creation and sale of computer programs for the business of any other business operator, and a business to accept the entrustment of computing service
⑥ Business of a conclusion of a contract on the acquisition or transfer of Carbon Dioxide Equivalent Quotas, or an intermediary, brokerage or agency service
⑦ Derivertives transactions pertaining to Carbon Dioxide Equivalent Quaotas, or an intermediary, brokerage oragency service
Head Office 1-1, Otemachi 1-Chome, Chiyoda-ku, Tokyo 100-8132
money with regard to beneficiary securities of Investment Trusts or foreign investment trusts, or the business pertaining to delivery of the Securities or any other assets belonging to the trust property pertaining to the
Agency service ("Dairi") of the business pertaining to distribution of money, distribution of refunds or residualassets or payment of interest or redemption money with regard to Investment Securities, Investment Equity
Consultation to any other business operator with regard to a business assignment, merger, company split,
Sale and purchase of currencies and other assets designated by a Cabinet Order as being related toDerivative Transactions (excluding Transactions of Securities-Related Derivatives) or intermediary ("Baikai"),
Sale and purchase of negotiable deposits and other monetary claims (excluding those that fall under the
Addresses of Head Office and Other Branches
Category Address
6
⑧ Business of concluding a contract for a guarantee or assumption of an obligation, or an intermediary, brokerage or agency service
⑨ Business of making an arrangement with or introducing another business operator, to customers ofits Business
(2) Approved Businesses conducted by the Company listed in Article 35(4) of FIEL ① Business for intermediary, etc. of custody business, business for intermediary, etc. of fund service business
and business for intermediary, etc. of foreign depositary receipt business ② Business for intermediary business related to LNG physical trading
③ Business for maritime freight index derivative transactions including intermediary and agency thereof
10.Engaged Businesses included in the Matters Set Forth in Article 7(3)(a), (3)-2, (3)-3 (a) and from (4) to (9) of the Cabinet Office Ordinance on Concerning Financial Instruments Business
① Securities-related business ② Sale and purchase of real estate trust beneficiary interests
11.Complaint Processing and Dispute Resolution
(1) Type I Financial Instruments BusinessMeasures to conclude a Basic Contract for Implementation of Dispute Resolution Procedure with Financial Instruments Mediation Assistance Center (hereinafter referred to as the "FINMAC")
(2) Type II Financial Instruments BusinessMeasures to utilize the Financial Futures Association of Japan (outsourcing to FINMAC) or measures toutilize Type II Financial Instruments Firms(outsourcing to FINMAC); otherwise, measures to utilize FINMAC
(3) Investment Advisory and Agency BusinessMeasures to utilize the Center of Tokyo Bar Association, Daiichi Tokyo Bar Association, and Diani Tokyo Bar Association as the measures for dispute resolution prescribed in article 37-7(1)(iii)(b) of FIEA Measures to publicize the business operation system and internal policy on public website of theCompany.
(4) Investment Management BusinessNot applicable
(5) Money Lending BusinessMeasures to conclude a Basic Contract for Implementation of Dispute Resolution Procedure with Japan Financial Services Association
directly as grievance procedure and dispute resolution prescribed in article 37-7(1) (ii) (b) of FIEL.
7
12.Financial Instruments Firms Associations and Certified Investor Protection OrganizationMemberships
・ Financial Instruments Firms Association : Japan Securities Dealers Association
The Financial Futures Association of Japan
Type II Financial Instruments Firms Association
13.Financial Instruments Exchange Memberships
Tokyo Stock Exchange
Osaka Exchange
Nagoya Stock Exchange
Tokyo Financial Exchange
14. Investor Protection Fund Membership
Japan Investor Protection Fund
8
II Business Overview
1. Business Outline for the Current Period
During the fiscal year under review, Japanese stock prices declined in the beginning driven by thedownward trend from the prior year. On the first trading day of the year, Nikkei225 fell to 19,561 thatwas the lowest in 2019. Subsequently, the market turned to an upward trend in response to the rise inU.S. stock market, driven by heightened expectations for U.S.-China Trade Talks and monetary easingby the Federal Reserve (FRB). Nikkei225 temporarily recovered to 22,000 range in April, however ittraded generally within a range towards summer as U.S. announced additional tariff on imports fromChina. After September, stock prices turned to a rising trend again with heightened expectations forprogress in U.S.-China Trade Talks and global monetary easing. Nikkei225 marked 24,066 inDecember, which was the highest in 2019. At the end of this fiscal year, the Nikkei stood at 23,656 andthe Tokyo Stock Price Index (TOPIX) stood at 1,721, which were up 3,642 and 227, respectively yearover year.In the Japanese bond market, 10-year JGBs yields moved within negative range in the beginning of theyear. Subsequently it declined (prices increased) significantly toward summer driven by policy rate cutsby FRB amid market participants' heightened concern over U.S.-China trade war as well as slowdown ofthe world economy. 10-year JGBs yield temporarily fell to -0.29% in September. However, it revertedback following market participants' expectations for U.S.-China Trade Talks and 10-year JGBs yieldclosed at -0.022% at the end of 2019.In foreign exchange markets, dollar buying resumed towards spring on back of a strong upturn in USeconomy and the yen temporarily depreciated to 112 against dollar in April. Subsequently, the dollarweakened substantially towards summer under heightened tensions in U.S.-China trade war andvigilance against global recession. The yen temporarily appreciated to 104 in August. On back ofheightened expectation for U.S.-China Trade Talks and rising U.S. stock prices, the yen resumeddepreciation against the dollar towards the year-end and closed at the 108 level at the end of 2019.The yen depreciated against the euro gradually from the beginning of 2019 reflecting expectations forU.S.-China Trade Talks and temporarily reached 127 against the euro in March. Towards summer, theyen turned to an appreciating trend against the euro, amid economic slowdown in Europe and monetaryeasing by the European Central Bank ( “ ECB ” ) and temporarily marked 115 against the euro inSeptember and the yen closed at the 121 level at the end of 2019.
Operating revenue totaled 78.8 billion yen, and Operating revenue, net of interest expense, amountedto 46.8 billion yen. Selling, general and administrative expenses totaled 37.5 billion yen, the operatingincome amounted to 9.2 billion yen and the ordinary income including non-operating income andexpenses amounted to 9.1 billion yen. The net income before income tax amounted to 8.8 billion yenand the net income amounted to 5.6 billion yen with extraordinary income and loss and income taxes.Summaries by accounts are as follows.
9
(1) Commission receivedCommission received was 36.3 billion yen. The following is the breakdown by category.
① Brokerage commissions
② Underwriting and selling commissions
③ Subscription and distribution commissions
④ Other commissions
(2) Net trading income
(3) Interest revenue and expenses
(4) Selling, general and administrative expenses
(5) Non-operating income and expenses
(6) Extraordinary income and loss
(7) Income taxes
(8) Net incomeNet income amounted to 5.6 billion yen and net income per share was 1,483 yen.
Net trading income recorded 6.5 billion yen. Trading loss related to equities was 4.4 billion yen. Tradinggain related to bonds was 7.7 billion yen and trading gain related to foreign exchange and other were3.2 billion yen.
Net interest revenue and expenses were 4.0 billion yen income.
Selling, general and administrative expenses were 37.5 billion yen.
Net non-operating expense was 0.1 billion yen, including revaluation loss generated from assets andliabilities in foreign currencies and dividend income of life insurance.
Extraordinary income included 0.9 billion yen of gain on early redemption of loan. Extraordinary losswas 1.2 billion yen mainly comprised of 1.0 billion yen from restructuring loss and 0.1 billion loss onearly redemption of loan.
Net income before income taxes amounted to 8.8 billion yen. Income taxes-current amounted to 3.3billion yen and income taxes-deferred amounted to a benefit of 0.2 billion yen.
Brokerage commissions were 8.6 billion yen. Equity trading volume was 23,103.2 billion yen.Brokerage commissions on equities were 8.4 billion yen and brokerage commissions on JGBfutures and ETFs totaled 0.1 billion yen.
Underwriting and selling commissions were 0.2 billion yen.
There was no subscription and distribution commissions in the current fiscal year.
Other commissions were 27.4 billion yen, mainly due to commissions from overseas subsidiariesand affiliates.
10
2.Key Financial Data
(1) Overall Operating Results(Millions of Yen)
Operating revenue
(Commission received)
((Brokerage commissions))
((Underwriting & sellingcommissions))
((Other commissions))
(Net trading income)
((Equities and other))
((Bonds))
((Foreign exchange and other))
(Financial revenue)
Financial expenses
Ordinary income
Net income
(2) Trading and underwriting volume in securities
① Equity Trading Activity (Millions of Yen)
Brokerage
Proprietary
Total
FY 2017 FY 2018 FY 2019
27,228,312 34,431,776 23,103,217
9,949,256 13,233,918 10,545,399
37,177,569 47,665,695 33,648,617
6,924 9,744 9,171
4,404 5,517 5,699
Operating revenue, net of interest expense 47,135 49,461 46,879
10,647 25,798 36,044
9,132 20,622 31,995
(144) 7,434 7,753
1,619 (463) 3,220
1,786 3,679 6,516
312 (3,290) (4,457)
30,584 25,690 27,424
426 970 236
12,823 13,944 8,652
Total number of issued shares (thousands) 3,842 3,842 3,842
56,268 70,083 78,875
43,834 40,605 36,314
FY 2017 FY 2018 FY 2019
Capital stock 96,307 96,307 96,307
11
② Underwriting, offering and solicitation for selling and others for professional investors, and subscription placement, offering placement, private placement and solicitation for placement for professional investors
(Millions of Yen)
(3) Other business activitiesThe Businesses listed in Article 35(2) and (4) of FIEL have been omitted in consideration of financial statements impact.
(4) Regulatory capital adequacy ratio (Millions of Yen)
(5) Number of employees and registered sales representatives
833 774 783 ( Registered sales representatives ) ( 263 ) ( 252 ) ( 254 )
Basic risk 10,958 11,409 10,436
FY 2017 FY 2018 FY 2019 Employees
Market risk 22,904 25,759 22,772 Counterparty risk 15,085 18,823 14,990
Net capital ( A ) 194,840 192,980 196,134 Risk total ( B ) 48,948 55,992 48,199
-
FY 2019 Net capital ratio ( A / B X 100 ) 398.0% 344.6% 406.9%
FY 2017 FY 2018
47,313 -
Other - - - - - - -
Beneficiary certificate - -
FY 2019 Corporate bonds 38,600-Special bonds 94,100 - -
Municipal bonds 10,628
- -Bonds Total- -
143,328
- -
94,100 - -
- - 179,428 -
- 2,356 -
JGBs - -
Stocks 1,441 45 - 360- -
10,628
- - 74,700
288,608 - - -
53,306 -
Other - - - - - - -
Beneficiary certificate - -
- -
206,000 - - -
- - -
- 1,301 -
JGBs - - - -
FY 2018
Stocks 5,749 2,022 - 4,118
Special bonds 206,000 - -
Corporate bonds 53,060 - - 68,900Bonds Total
Municipal bonds 13,708 13,708
272,768 - -
192,416 -
Other - - - - - - -
Beneficiary certificate - -
- - -
- - -
185,282 - - 172,282 - - -
- -
124,300 - - --
42,900 - - 29,900Bonds Total
Municipal bonds 18,082 18,082
PrivatePlacement
Placementsolicitation toprofessional
investors
- - -
FY 2017
Stocks 1,708 - - 845
Special bonds 124,300 -
JGBs -
Type Underwriting Offering
Total salessolicitation toprofessional
investors
SubscriptionPlacement
OfferingPlacement
Corporate bonds
12
III Financial Matters
1. Financial Information
(Millions of Yen)
Previous fiscal year Current fiscal year
( As of December 31, 2018 ) ( As of December 31, 2019 )
3,192,032 3,156,162195,693 230,973
5,293 8,891742,995 646,054
Trading securities and other 540,753 504,646Derivatives 202,241 141,408
6,126 3,893 Cash collateral pledged for securitiesborrowing on margin transactions 6,126 3,893
2,043,797 2,100,091Cash collateral pledged for securities borrowed 1,768,637 1,632,794Loans on Gensaki transactions 275,159 467,297
7,151 302181,812 152,930
- 820 1,132 5717,820 11,440
208 192
6,312 6,5863 2
Furniture & fixtures 3 2269 412
Software 114 225Others 154 187
6,039 6,172742 742701 648
1,269 1,25968 -
3,077 3,341 180 180
3,198,344 3,162,748
Cash and deposits
(1) Statement of financial condition
Account
( ASSETS )
Current assets
Cash segregated as depositsTrading products
Margin transaction assets
Loans secured by securities
Advance paidShort-term guarantee depositsVariation margin paidAccounts receivableAccrued income
Investments and other assetsInvestment securitiesLong-term loans receivableLong-term guarantee depositsLong-term prepaid expensesDeferred tax assets
Others
Noncurrent assetsProperty, plant and equipment
Intangible assets
Others
Total Assets
13
(Millions of Yen)
Previous fiscal year Current fiscal year
( As of December 31, 2018 ) ( As of December 31, 2019 )
2,879,072 2,868,779424,840 370,203
Trading securities and other 230,534 244,292Derivatives 194,305 125,911
7,692 51,428 7,558 3,462
Cash collateral received for securities lending on margin transactions 7,558 3,462
2,218,936 2,229,962Cash received on debt credit transaction of securities 662,690 346,148Borrowings on Gensaki transactions 1,556,246 1,883,813
1,986 4,841170,874 134,542
14,532 - 13,000 55,000
2,056 2,0978,345 7,911
554 1,0004,493 4,7834,201 3,543
138,379 107,0402,600 2,600
126,000 94,5009,198 9,241
580 698
3,119 3,1213,119 3,121
3,020,571 2,978,940
182,291 187,99096,307 96,30755,660 55,660
Legal capital surplus 55,660 55,66030,323 36,022
Other retained earnings/ (deficits) 30,323 36,022Retained earnings brought forward 30,323 36,022
(4,518) (4,182)(4,518) (4,182)
177,772 183,807
3,198,344 3,162,748
Account
( LIABILITIES )
Current liabilitiesTrading products
Trade date accrualMargin transaction liabilities
Loans payable secured by securities
Deposits receivedGuarantee deposits receivedVariation margin receivedShort-term loans payable
Reserve for retirement benefitsOthers
Accounts payableAccrued expensesIncome taxes payable
Reserves under the special lawsReserve for financial products transaction liabilities
Reserve for bonusesOthers
Noncurrent liabilitiesBonds payableLong-term loans payable
Total Liabilities
( NET ASSETS )Shareholders' equity
Capital stockCapital surplus
Retained earnings/ (deficits)
Valuation and translation adjustmentsDeferred net gain/ (loss) on hedges
Total Net Assets
Total Liabilities and Net Assets
14
(Millions of Yen)
Previous fiscal year Current fiscal year
( ) ( )70,083 78,87540,605 36,3143,679 6,516
25,798 36,044
20,622 31,995
39,837 37,589
9,131 7,54316,087 17,4145,016 5,2737,197 4,974
41 691,541 1,569
821 744
9,623 9,290
140 104
19 222
9,744 9,171
292 930
292 930
1,626 1,286
1,090 1,082- 145 1 57
534 1
8,410 8,815
2,357 3,380 535 (264)
5,517 5,699
46,879
(2) Statement of operations
Account
Operating revenueCommission receivedNet trading income
49,461
Financial revenue
Financial expenses
Operating revenue, net of interest expense
Depreciation
Selling, general and administrative expenses
Trade-related expensesCompensationOccupancyAdministrative expenses
Gain on early redemption of loan
TaxesOthers
Operating income
Non-operating income
Non-operating expenses
Ordinary income
Extraordinary income
Extraordinary loss
Restructuring lossLoss on early redemption of loan
Reserve for financial products transactionliabilities
Loss on disposal of fixed assets
Net income before income taxes
Income taxes - currentIncome taxes - deferred
Net income
from January 1, 2018to December 31, 2018
from January 1, 2019to December 31, 2019
15
(3) Statement of changes in net assets
(Millions of Yen)
96,307 55,660 24,805 176,773 (4,687) 172,086
Net income - - 5,517 5,517 - 5,517
Net changes of net assetsother than shareholders'equity
- - - - 168 168
- - 5,517 5,517 168 5,685
96,307 55,660 30,323 182,291 (4,518) 177,772
(Millions of Yen)
96,307 55,660 30,323 182,291 (4,518) 177,772
Net income - - 5,699 5,699 - 5,699
Net changes of net assetsother than shareholders'equity
- - - - 336 336
- - 5,699 5,699 336 6,035
96,307 55,660 36,022 187,990 (4,182) 183,807
Total changes of items during thefiscal yearClosing balance
FY 2018 (from January 1, 2018 to December 31, 2018)
Shareholders' equityValuation and
translationadjustments
Totalnet assetsCapital
stock
Capitalsurplus
Retainedearnings
Totalshareholder's
equity
Deferrednet gain/ (loss)
on hedgesLegal capitalsurplus
Otherretainedearnings
Retainedearningsbroughtforward
Beginning balanceChanges of itemsduring the fiscal year
FY 2019 (from January 1, 2019 to December 31, 2019)
Shareholders' equityValuation and
translationadjustments
Totalnet assetsCapital
stock
Capitalsurplus
Retainedearnings
Totalshareholder's
equity
Deferrednet gain/ (loss)
on hedges
Closing balance
Legal capitalsurplus
Otherretainedearnings
Retainedearningsbroughtforward
Beginning balanceChanges of itemsduring the fiscal year
Total changes of items during thefiscal year
16
(4) Notes to the financial statements
① Notes to statement of financial condition
1) Assets pledged as collateral and collateralized liabilities(Millions of Yen) (Millions of Yen)
・ Assets pledged as collateral FY2018 FY2019
2,264
(Note)
FY2018
FY2019
(Millions of Yen) (Millions of Yen)・ Collateralized liabilities FY2018 FY2019
8,000 2,000
2) Collateralized securities (Millions of Yen) (Millions of Yen)・ Securities pledged out FY2018 FY2019
6,605 3,819
787,189 442,727
1,631,919 1,917,544
30,587 24,028
86,485 87,973
(Millions of Yen) (Millions of Yen)・ Securities received in FY2018 FY2019
6,605 3,819
2,029,258 1,901,903
260,398 466,855
(Millions of Yen) (Millions of Yen) 3) Accumulated depreciation of property, plant and equipment FY2018 FY2019
2 3
(Millions of Yen) (Millions of Yen) 4) FY2018 FY2019
・ 191 52
・ 2,317 43,147・ 109,305 79,439
Trading products 5,456
In addition to the above, following assets are pledged as collateral.
Securities borrowed of 3,596 million yen were used as collateral for short-term loans payable.
Securities borrowed of 204 million yen were used as collateral for short-term loans payable.
Securities received related to securities purchased underGensaki transactions
Short-term loans payable
Securities loaned to customers for margin transactions
Securities loaned as collateral under financing agreementSecurities pledged related to securities sold under GensakitransactionsSecurities pledged as margin
Securities pledged as collateral for other transactions
Securities borrowed on margin transactions
Securities borrowed under financing agreements
Monetary claims from the affiliates and monetary debts to the affiliates
Short-term monetary claims from the affiliates
Short-term monetary debts to the affiliatesLong-term monetary debts to the affiliates
17
② (Millions of Yen) (Millions of Yen)FY2018 FY2019y
Operating transactions
・ 1,084 771
・ 521 787
Other than Operating transactions 273 785
③ Notes to statement of changes in net assets
1) Outstanding shares
(FY2018) (Unit: shares)
Numberincreased
Numberdecreased
Numberat the end of
the fiscal year
- - 3,842,000
(FY2019) (Unit: shares)
Numberincreased
Numberdecreased
Numberat the end of
the fiscal year
- - 3,842,000
④
As the result, the deferred tax assets of 2,597 million yen presented as current assets on the previous fiscal
year's balance sheet is classified as "Investments and other assets" in this report.
classified as "Investments and other assets" on the balance sheet. In addition, all deferred tax liabilities are
classified as "Noncurrent liabilities" on the balance sheet.
Notes to Changes in Presentation
(Application of "Partial Amendments to Accounting Standard for Tax Effect Accounting")
The Company has applied "Partial Amendments to Accounting Standard for Tax Effect Accounting" (ASBJ
Guidance No. 28, February 16, 2018) from the beginning of this fiscal year. Thus, all deferred tax assets are
Notes to statement of operations
Types of sharesNumber
at the beginning ofthe fiscal year
Volume of transactions with the affiliates
Operating revenue from the affiliates
Operating expenses to the affiliates
Common stock 3,842,000
Types of sharesNumber
at the beginning ofthe fiscal year
Common stock 3,842,000
18
2. Major Lenders and Borrowings(Millions of Yen)
3. (Millions of Yen)
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - -
- - - -
- - - - - -
- - - - - -
4. Derivative Transactions (Non-Trading)(Millions of Yen)
FY2018 FY2019
Lender
Balanceat theend of
the fiscalyear
Lender
Balanceat theend of
the fiscalyear
Short-termBank of Japan 8,000 Citicorp LLC 40,000
Citigroup Financial Products Inc. 8,000
Long-term
Citicorp LLC 97,000 Citicorp LLC 67,000
Citigroup Japan Holdings G.K. 12,000 Citigroup Japan Holdings G.K. 12,000
Citigroup Financial Products Inc. 16,000 Citigroup Financial Products Inc. 8,000
Securities Held (Non-Trading)
FY2018 FY2019
Book Value Fair Value Unrealizedgain/ (loss) Book Value Fair Value Unrealized
gain/ (loss)
Bonds
Others
Transaction type
FY2018 FY2019
Notionalamount
Fair valueAsset
(Liability)
Unrealizedgain/ (loss)
Currentassets
Equities
Bonds
Notionalamount
Fair valueAsset
(Liability)
Others
Noncurrentassets 742 742
Equities 742 742
Unrealizedgain/ (loss)
Interest rate swap on long-termcash collateral pledged for bondsborrowed
20,000 (4,518) (4,518) 20,000 (4,182) (4,182)
19
5. External Audit
were audited by KPMG AZSA LLC. And the Company received audit report with unqualified opinion from KPMG
AZSA LLC.
Pursuant to the Article 436(2) (i) of the Companies Act, the Company’s financial report and its supplementary schedules
20
IV Internal Control Structure
1. Overview of Internal Control
・ Legal Division
・ Independent Compliance Risk Management Division
・ Risk Management Division
・ Finance Division
・ Corporate Planning Division
Independent Compliance Risk Management Division consists of Markets Compliance, Surveillance, Central
The Company has the following divisions and departments which are responsible for internal control of the Company.
Legal Division consists of Legal Department and Derivatives Documentation Group. The Division provides support
to business operations including provision of legal advice in connection with general legal affairs, laws, regulations
and rules relating to financial instruments transactions, implementation of legal, regulatory and compliance
policies and procedures and also provides supervision of dispute resolution, etc.
・ Providing live and on-line trainings to increase understanding of employees regarding key laws, regulations and
Compliance, AML Compliance, Banking & Research Compliance / Control Group and ICRM Compliance
Finance". This is accomplished by the following:
・ Setting standards through the creation and maintenance of Compliance policies and embedding the required standards into the business and operation of the company・ Managing the regulatory environment by tracking Japanese and overseas regulatory developments and active participation in industry organizations・ Providing advisory and support to other divisions to promote appropriate business behavior and activity that is consistent with the required standards・ Conducting testing and surveillance to evaluate compliance with policies and regulations
・ Promoting appropriate risk management and governance through the development of procedures and systems to comply with applicable laws and regulations
Assurance and Sanctions Compliance Units. The Division is seen as a key advocate within Citi of "Responsible
The Corporate Planning Division is responsible for the matters related to corporate planning of the Company,
policies
Risk Management Division consists of Credit Risk Management, Market Risk Management, NPAC, Underwriting
Review, Quantitative Risk and Stress Testing, Operational Risk Management and Risk Governance Units.
The Division is responsible for tracking credit status, management of markets risks, oversight of new products,
underwriting review, development and management of risk models, management of risk operational risks and
preparations / management of risk related reports.
Finance Division consists of Controllers, Treasury, Financial Planning & Analysis and Tax Units. The Division is
responsible for production, maintenance, and management of ledgers / reports, etc. of the Company's finance,
accounting and tax, risk management based on the Company's Capital Adequacy Ratio, liquidity analysis, fund
raising, fund management and planning of management accounting and budget of the Company.
the matters related to assistance to President of the Company and the matters related to handling orders, etc.
from authorities, etc.
21
・ Corporate Affairs Division
・ Government Affairs
・ Operations and Technology Division
・ Internal Audit Division
management with government agencies. It is also responsible for engagement in activities of business
The Corporate Affairs Division is responsible for the planning and execution of communications and public
affairs programs designed to strengthen the Company's recognition, enhance its brand and protect its
reputation and also responsible for the promotion of the Company's CSR activities.
The office of Government Affairs is responsible for information gathering, research and analysis for the
Company on government policies/activities as well as consultancy and advisory regarding relationship
associations which the Company is involved in.
Operations and Technology Division consists of Markets Operations Department, Technology Department
and O&T Planning Unit. The Division is responsible for matters concerning settlement of financial products
trades, etc. with Japanese and foreign customers, development of Company’s information technology
strategies, systems development, systems operations and maintenance and risk management around
JIMU risk, Continuity of Business, Information Technology, Record Management and outsourcing management.
The Company also has established the below division which directly report to Board of Directors.
The Division conducts internal audits on the business of the Company and reports their results and evaluations
to the Board of Directors.
Operations & Technology of the franchise, specifically, Information Security, Personal Information Protection,
22
2. Condition of Customers' Assets Segregation
securities at the end of December 2018 and December 2019 are as follows.
(1) Asset segregation based on article 43-2 of FIEL① Condition of trust funds (Millions of Yen)
② Condition of securities segregationA. Securities for safe keeping
682,393 thousandshares 9,028,572 thousand
shares 685,016 thousandshares
thousandshares
196,021 millions ofyen 1,134,337 millions of
yen 142,023 millionsof yen
millionsof yen
115,810 millionaccounts 144,463 million
accounts 109,836 millionaccounts
millionaccounts
- units - units - units units
B. Securities received as collateral
B. Not applicable
We have managed deposited cash and securities to secure and orderly stored them separately from our own property.
Thus, even in the event of bankruptcy, deposited money and securities are refunded to customers under certainty. Asset
segregation balance of cash and securities, and type of storage condition of the securities or the amount or quantity of
Type As of December 31, 2018 As of December 31, 2019
Required segregation of customers’cashdeposits at the latest calculation date 4,239 7,729
Funds entrusted for segregatedcustomers' cash deposits at the end ofthe fiscal year
5,247 8,847
Required segregation of cash depositsat the end of the fiscal year 3,788 7,048
122,722
Security TypeAs of December 31, 2018 As of December 31, 2019
Domestic securities Foreign securities Domestic securities
Equities (shares) 9,054,560
Bonds (face amount) 1,241,492
Beneficiary certificates(number of accounts)
Foreign securities
-Stock purchase warrants(number of units)
23
C. Condition of securities segregation
1.
2.
4.
Security Type Depositary agent and segregation method
Convertible bond-type corporatebonds with stock acquisition rights,equity securities of investmentcorporations, beneficiary securitiesand investment securities that arelisted on financial instrumentsexchange markets
① With respect to CB-type corporate bonds with stock acquisition rights (includingCB certificates, the same shall apply hereinafter), equity securities of investmentcorporations, beneficiary certificates and investment securities that are listed onFinancial Instruments Exchange Markets (the hereinafter referred to as the“Domestically Listed Securities”), those securities that are the assets of theCompany and the other securities that are not Customer-owned Securities(hereinafter referred to as "Company-owned Securities"), in principle, shall bemanaged separately from Customer-owned Securities by means of a ledger, etc.,but stored together at Japan Securities Depository Center (hereinafter referred toas the "Depository", including the organization that is entrusted by the Depositary,the same shall apply hereinafter).② Customer-owned Securities shall be managed in a manner whereby the holdingsof each customer can be immediately identified by means of the Company’s ledger,etc.; provided, however, that Domestically Listed Securities that are not re-deposited in the Depository at the customer’s request shall be stored in JapanInformation Processing, Ltd. or any other outside place of custody clearlysegregated from Company-owned Securities and managed in a manner wherebythe customer to whom the particular securities belong can be immediatelyidentified.
Customer-owned Securities that have been delivered to the issuing company(including the transfer agent; the same shall apply hereinafter) for the exercise ofstock acquisition rights of CB-type corporate bonds with stock acquisition rights etc.at the request of a customer shall be managed appropriately by means of theCompany’s ledger, etc., in a manner whereby the issue, the amount and the issuingparty of the particular securities can be immediately identified for eachcommissioning customer.
Domestically listed foreign securities
With respect to domestically listed foreign securities, Company-owned Securitiesand Customer-owned Securities, in principle, shall be managed separately bymeans of a ledger, etc. but stored together at Depository. Customer-ownedSecurities shall be managed in a manner whereby the holdings of each customercan be immediately identified by means of the Company’s ledger, etc.
3. Corporate debt securities, stocks etc.handled at book-entry system underthe transfer law
① The Japanese Government Bonds shall be managed at the Bank of Japanpursuant to the Transfer Law in a manner whereby Company-owned Securities etc.and Customer-owned Securities are clearly segregated and, with respect toCustomer-owned Securities, the holdings of each customer can be immediatelyidentified by means of the Company’s ledger of the book-entry accounts.② The corporate debt securities stocks etc.(excluding JGBs described in ① above)shall be managed at the Depository pursuant to the Transfer Law in a mannerwhereby Company-owned Securities etc. and Customer-owned Securities areclearly segregated and, with respect to Customer-owned Securities, the holdings ofeach customer can be immediately identified by means of the Company’s ledger ofbook-entry accounts.
Domestic bonds other than CB-typecorporate bonds with stockacquisition rights and securities setforth in section 3 above, and stockacquisition rights securities, etc.
In principle, these securities shall be stored in Japan Information Processing, Ltd.or any other outside place of custody where Company-owned Securities, etc., andCustomer-owned Securities are clearly segregated and managed in a mannerwhereby the holdings of each customer can be immediately identified by means ofthe Company’s ledger, etc. However, in the case of securities of largedenomination, etc., where a single certificate is held in common by the Companyand the customer, and it is not possible to clearly segregate the place of custody ofCompany-owned portion etc. and Customer-owned portion, the place of custodyshall be made clear and Company-owned portion etc. and Customer-owned portionshall be segregated by means of the Company’s ledger, etc. and Customer-ownedSecurities shall be managed in a manner whereby the holdings of each customercan be immediately identified.
24
5.
6.
[Overview of overseas custody]
③ Condition of asset segregation for Over-the-Counter Transactions of subject Securities-RelatedDerivativesNot applicable
Security Type Depositary agent and segregation method
Beneficiary certificates of investmenttrust
With respect to domestic Beneficiary certificates of investment trust, in principle,these certificates shall be stored together at the Depository. In such a case, theplace of custody of Company-owned Securities, etc. and Customer-ownedSecurities shall be clearly segregated and Customer-owned Securities shall bemanaged in a manner whereby the holdings of each customer can be immediatelyidentified by means of the Company’s ledger, etc. However, in the case where asingle certificate is held in common by the Company and the customer, and it is notpossible to clearly segregate the place of custody of Company-owned portion etc.and Customer-owned portion, the place of custody shall be made clear andCompany-owned portion etc. and Customer-owned portion shall be segregated bymeans of the Company’s ledger etc. and Customer-owned Securities shall bemanaged in a manner whereby the holdings of each customer can be immediatelyidentified.With respect to foreign Beneficiary certificates of investment trust, in principle, thesecertificates shall be managed clearly as Customer-owned Securities at an overseasAgency's facility and Customer-owned Securities shall be managed in a mannerwhereby the state of such management of Customer-owned Securities at theAgency can be immediately available and identified by means of the Company’sledger.
Securities stored or managed atoverseas custodial facilities
With respect to the securities stored or managed at an overseas Custodial Facility,Company-owned Securities and Customer-owned Securities shall be segregated byestablishing separate accounts, etc. as shown in the chart below, and Customer-owned Securities shall be managed in a manner whereby the holdings of eachcustomer can be immediately identified by means of the Company’s ledger, etc.;provided, however, that in the case it is not possible to store or manage Customer-owned Securities at the Custodial Facility in a manner whereby the holdings of eachcustomer can be immediately identified, the Company shall manage these securitiesby means of the Company’s ledger in such a way that the Company-owned portionand the Customer-owned portion is segregated and the holdings of each customercan be immediately identified.
Separate accounts have beenestablished for Company-ownedSecurities and customer-ownedSecurities at each custodial facility,and the securities for the customers’account is on a separate basis.
Name of custodial facility Country ofestablishment
Type of securitiesdeposited
Existence of segregated accountsand method of segregation
Euroclear Belgium
Euro denominatedbonds,Australian bonds,Euro Yen bonds,UK bonds, UK stocks
Separate accounts have beenestablished for Company-ownedSecurities and customer-ownedSecurities at each custodial facility,and the securities for the customers’account is on a commingle basis.
Citibank (Hong Kong) Ltd. Hong KongTurkish bonds,Hong Kong stocks,Thailand stocks
Citigroup Global Markets Inc. USA
US stocks,Canadian stocks,US bonds,Canadian bonds, etc.
25
(2) Asset segregation based on article 43-2-2 of FIEL
Not applicable
(3) Asset segregation based on article 43-3 of FIEL
Not applicable
26
Status of Consolidated Subsidiaries, etc.
respectively.
End
V
The Company has no subsidiary and affiliate provided by the “Regulation for Terminology, Forms and Preparation of
Consolidated Financial Statements” (Ordinance of the Finance Ministry No. 28 of 1976), article 2(3) and (7),