year ended march 31, 2017p.2 p.2 p.51 p.12 p.6 contents notice concerning forward-looking statements...

Integrated Reporting Year ended March 31, 2017

P.2 P.24 P.51P.12 P.36

CONTENTS

Notice Concerning Forward-looking StatementsThis corporate report is intended to provide information concerning the Company’s operating results for the period April 1, 2016 to March 31, 2017

and the management vision for the future of the Company. This report is not intended to solicit investment in marketable securities issued by the

Company and does not constitute any guarantee or commitment regarding the presented data or statements. The strategies, opinions, and for-

ward-looking statements offered in this integrated corporate report are based on the judgment of the Company at the time the report was pre-

pared. The Company does not guarantee the accuracy or completeness of the information contained herein, and the information is subject to

change without notice.

Editorial PolicyThis report is issued to communicate information to stakeholders about the Company’s management strategy, earnings performance, and its activi-

ties related to the environment and society for the fiscal year period to March 2017.

About the Integrated Corporate Report 2017

The Tokai Tokyo Financial Group has introduced numerous innovations to withstand and

prevail against tough tides of the changing times since its founding in 2000.

Last year, in addition to financial data, we expanded our report to allude to non-financial

environment, social, and governance (ESG) information.

This year, we have broadened our non-financial reporting even further to present our image

of how we envision the business activities of the Tokai Tokyo Financial Group in the future.

History 2

Management Philosophy 4

Group Overview 5

Business Model 6

Group Description 8

Financial Highlights 10

Fiscal 2016 Initiatives 11

Interview with the CEO 12

Results of the Ambitious 5 Management Plan 18

New Management Plan “New Age’s Flag Bearer 5” 20

Interview with Top Management at Tokai Tokyo Securities Co., Ltd. 24

Business Strategies and Overview 26

Retail Business Segment |

Retail Sales 26

Corporate Sales Segment |

Market Sales Segment 28

Corporate Finance Segment 30

Expanding the Platform Business 31

Affiliated Joint Venture Securities Companies 32

Investment in Asset Management Companies 33

Strategic Subsidiaries 34

Expanding the Group 35

ESG Initiatives 36

Corporate Governance 37

Leadership 40

Interview with an Outside Director 42

Compliance & Risk Management 44

Global Advisory Board 46

Initiatives Geared Toward Society 47

Environmental Initiatives 50

Financial Statements 52

Company Information 59

Share Information 60

About the Tokai Tokyo Financial Group Creating Our Future

Value for Tomorrow Systems for Enhancing

Corporate Value

Performance Review

INTEGRATED REPORTING 2017 1

October 2007

YM Securities

started its operations*3

November 2008

Hamagin Tokai Tokyo Securities


May 2010

Nishi-Nippon City

Tokai Tokyo Securities


September 2013

Senshu Ikeda Tokai Tokyo Securities


Premier House

IT strategy supporting 5 Reformsand Alliance strategy

Innovation Jump Up 5

Blue Ocean Strategy

M&A Strategy

TT Revolution

◎Growth

◎Productivity

◎Communication

◎Customer loyalty

◎Super Community House

Leading Player in Asia

Ambitious 5

1. Community & the Middle

2. Alliance & Platform

3. Expertise

4. Humanity

5. Risk Management

New Age’s Flag Bearer 5

Further Strengthen Operating Base and More Growth

� Implement unique segment-speci�c strategy to enhance originality of

marketing

� Expanded operations through corporate trilateral initiatives and

advance in global markets

� Great Platform

� Enhance organizational administration and safeguard against risk

� Pursue humanity and professionality

� Productivity revolution

Strategy Themes

� Inorganic growth (M&A with other �nancial industry companies)

� Asset management competence

� Diverse pension and insurance competence

� Banking competence

� Overseas operation enhancement

� Metropolis operation expansion

October 2000

Tokyo Securities and Tokai Maruman

Securities merged and started

operations as Tokai Tokyo Securities

(Head Office in Tokyo)

April 2006 to March 2009Management plan

January 2017

Hokuhoku Tokai Tokyo Securities


March 2017

Comprehensive insurance

agency Eternal became

a wholly owned subsidiary

April 2017

Utsunomiya Securities, formerly our consolidated subsidiary,

was converted to a joint venture company owned*3 and

operated together by The Tochigi Bank and the Group

April 2017

Takagi Securities will become

a consolidated subsidiary




Tokyo Securities

Tokai Maruman Securities

April 2009

Tokai Tokyo Financial Holdings

inaugurated its operations

April 2010

The Head Office of


was relocated to Nagoya

April 2010

Tokai Tokyo Securities and

Toyota Financial Services

Securities merged

*1 Now SMBC Nikko Securities*2 Now the Bank of Tokyo-Mitsubishi UFJ*3 An af�liated securities company that is a joint venture with a regional bank

Nikko Securities*1 business group

Tokai Bank*2 group

◎Reform the corporate governance/

corporate culture

◎Reform the business portfolio/

business model

◎Reform the network

◎Reform products and services

◎Reform employees’ productivity

About the Tokai Tokyo Financial Group

History–The Development and Growth of Tokai Tokyo Financial Holdings

Tokai Tokyo Securities (now Tokai Tokyo Financial Holdings) was created in October 2000 by way of

merger with Tokyo Securities, an affiliate of Nikko Securities, and Tokai Maruman Securities, an affiliate

of The Tokai Bank.

Tokai Tokyo Financial Holdings is an independent financial group developed by distinctly growing the

operations of its flagship subsidiary, Tokai Tokyo Securities, which has a strong operating base in the

Chubu region of Japan, and by deploying an innovative alliance strategy with regional banks.

INTEGRATED REPORTING 2017 INTEGRATED REPORTING 20172 3


Group Overview Management Philosophy

Our Vision

Our Mission

Our Actions

Catchphrases

We will contribute to the growth of our nation’s economy by fulfilling the role as a financial

service provider to help customers with their wealth formation and capital enhancement.

We shall keep learning.

We shall challenge.

We shall respect communications.

We shall embrace the motto, “To get stronger and more resilient”.

We respect our “corporate discipline”.

We will help customers realize affluent lives and promote corporate values by advising about appropriate use of wealth and assets. Toward that end, we will keep striving to be the group with full commitment and devotion.

We will read the times right and see things in a global perspective to prevail as an innovative group.

We are the group that will care about the community in which we operate and render the help to elevate the prosperity there now and in the future.

We will remain the group that encourages employees with varying experience and expertise to attain sparkling self-realization in their respective ways.

We will remain the group that negotiates even the toughest adverse stream of the times with the matching strength and resilience with a view to winning the confidence from our stakeholders.

Customers:

Global:

Region:

Employees:

Trust:

Exciting company

Ever-learning company

Company nurturing sense of fellowship

Company with integrity

Strong and resilient company

The Tokai Tokyo Financial Group is a comprehensive securities company group led by its holding com-

pany, Tokai Tokyo Financial Holdings, Inc. The Group comprises 16 subsidiaries, including 5 located

overseas, and 9 affiliates, including 1 overseas. In recent years, Tokai Tokyo Financial Holdings has

focused on establishing and expanding its overseas network, particularly in Asia, and continues to ele-

vate its presence as a global corporation.

Holding Company (Listed company)

Tokai Tokyo Securities Co., Ltd. Financial instruments business

Consolidated subsidiaries

(Excluding the seven investment corporations)

Takagi Securities Co., Ltd. Financial instruments business

Tokai Tokyo Asset Management Co., Ltd. Financial instruments business

Tokai Tokyo Investment Co., Ltd. Creation and management of funds, self-financed investment

Tokai Tokyo Wealth Consulting Co., Ltd. Consulting on handling of testamentary trusts, inheritance property, especially for wealthy clients

Tokai Tokyo Research Institute Co., Ltd. Research on economic conditions and corporate performance

Tokai Tokyo Academy Co., Ltd. Education and training

Tokai Tokyo Services Co., Ltd. Transfer agent, merchandising, printing, real- estate rental management, insurance agency

Tokai Tokyo Business Service Co., Ltd. Provide back-office operations to the Group companies and others

Eternal Co., Ltd. Insurance agency, Management consulting, Financial planning

Pinnacle Inc. M&A advisory, Cross-border advisory, Restructuring advisory, Consulting

Tokai Tokyo Securities (Asia) Limited Securities business

Tokai Tokyo Securities Europe Limited Securities business

Tokai Tokyo Securities (USA), Inc. Researching U.S. companies and collecting information on the overall U.S. market

Tokai Tokyo Investment Management Singapore Pte. Ltd. Asset management

Tokai Tokyo Global Investments Pte. Ltd. Fund investment

YM Securities Co., Ltd. Financial instruments business

Equity-method affiliates

Hamagin Tokai Tokyo Securities Co., Ltd. Financial instruments business

Nishi-Nippon City Tokai Tokyo Securities Co., Ltd. Financial instruments business

Senshu Ikeda Tokai Tokyo Securities Co., Ltd. Financial instruments business

Hokuhoku Tokai Tokyo Securities Co., Ltd. Financial instruments business

Utsunomiya Securities Co., Ltd. Financial instruments business

Ace Securities Co., Ltd. Financial instruments business

All Nippon Asset Management Co., Ltd. Investment practical use work and investment advice, Factorage

Phillip Tokai Tokyo Investment Management Pte. Ltd. Fund management

(As of September 30, 2017)



Business Model

The Tokai Tokyo Financial Group has designed an innovative business model incorporating the Platform

operating format developed to supply the full range of products and services necessary to run securities

brokerage operation to the affiliated joint venture securities companies established with regional banks as

well as to peer securities brokerage houses. Concurrently, we have undertaken various creative endeavors

at Tokai Tokyo Securities, the core member of the Group. The Group will continue developing more

diverse and more value-added products and services, while adding more-sophisticated operational

competence to such Platform operations. Also, we consider it imperative to expand the client base

of the said Platform operations to achieve the goal of increasing our corporate value.

The Tokai Tokyo Financial Group provides leading-edge financial products and services to individual and

corporate customers, and conducts market trading.

We are committed to offering the solutions we consider most suitable to meet diversifying needs of

customers while at the same time fulfilling our fiduciary duties.

We aim to provide high function

Platform services to our customers

and alliance partners to maximize

the synergy potential by deploying

business models tailored to the seg-

mented customers of Wealth, Retail,

and Corporate.

The Tokai Tokyo Financial Group

embarked on the new management

plan, New Age’s Flag Bearer 5, in April

2017. The name of the plan reflects

the Group’s steadfast determination to

become the leader, the New Age’s

Flag Bearer, establishing the “Third

Pillar” in the financial service arena. In

five years, we will build our unique

business model, aiming to be an inte-

grated financial group and financial

service provider that customers select

most.


will meet all the needs of

our customers.

Alliance Strategy and Platform

Establish a commanding presence as an integrated financial group that stands as the Third Pillar in the financial industry

BusinessProcess

Our Vision

Information

FinTech (IT, AI)

Call Center

Overseas

OperationsWealthy

Customers

Investment Banking

Operations

Insurance

Instruction

Asset Management

Affiliated Joint Venture Securities Companies with Regional Banks

Securities Companies

Other Financial Institutions

Services dedicated to

individual customers

Service dedicated to

corporate customers

Financial products and

trading

We help customers with asset formation through exceptional knowledge and expertise.P �Consulting on asset management

P �Offering wide range of investment products

P �Consulting on succession (business transfers, real estate transfers)

P �Providing research and market information and organizing seminars

We meet the diverse needs of customers with professional ideas.P �Trading operations

(Japanese and foreign equities, bonds, currency exchange, derivatives, etc.)

P �Research, develop, and formulate financial products

P �Provide market information

We optimally solve our customers’ management issues.P Advice on fund management

P Advice on POs, IPOs, and bond underwriting for fund procurement purposes

P M&A advisory service

P Advice on business transfers

P Provision of research and market information and holding of seminars


South Korea

Shanghai

Tokyo

China

Hong Kong

Vietnam

Thailand

Singapore

Malaysia

London

New York

Mirae Asset Daewoo Securities

Philippines

Head Of�ce

Overseas Group company

Overseas joint venture company

Financial institution in alliance with us

Guotai Junan Securities

Tokai Tokyo Global Investments

Phillip Securities

Stifel Financial Corp.

Tokai Tokyo Securities Europe Tokai Tokyo Securities (USA)

Baoviet Securities

Bualuang Securities

K & N Kenanga Holdings

Tokai Tokyo Securities (Asia)

The Bank of East Asia

Tokai Tokyo Investment Management Singapore

Phillip Tokai Tokyo Investment Management

First Metro Investment Corporation


Group Description

Kanto region 13 sales outlets

(including 8 in Tokyo)

Tohoku region

1 sales outlet

Koshin-etsu/Hokuriku regions 2 sales outlets

Kinki region 3 sales outlets

Chugoku/Shikoku regions 4 sales outlets

Kyushu region

1 sales outlet


Utsunomiya Securities

Hamagin Tokai Tokyo Securities

YM Securities


Nishi-Nippon City Tokai Tokyo Securities

(3 sales offices)Eternal (72 Insurance Terrace sales offices, including 58 directly run agencies)



Takagi Securities Co., Ltd.

Joint venture securi-ties companies

69

Tokai44 sales offices

(including 35 in Aichi Prefecture)

Takagi Securities Co., Ltd.

14


68 sales outlets nationwide

(6 sales offices)

(16 sales offices)

(7 sales offices)

(19 sales offices)

(18 sales offices)

Diverse Business Portfolio and ProductsTokai Tokyo Securities, the flagship company of the Tokai Tokyo Financial Group, has created a diverse and broad-rang-

ing product and service portfolio. The Tokai Tokyo Financial Group has grown to be one of Japan’s leading comprehen-

sive securities company groups, steadily expanding non-retail market share and thus maintaining a wholesome balance

of weight among its retail, wholesale (corporate sales, corporate finance), and market trading operations. The Group con-

tinues diversifying its lineup of financial products and services generating revenues from its four primary products of

domestic equities, foreign equities, bonds, and investment trusts with no reliance on any one of them specifically.

Alliance Strategy with Regional BanksTokai Tokyo Financial Holdings has constantly established affiliated joint venture securities companies in alliance with

regional banks across Japan. Now, customers migrate their savings from bank deposit accounts to those with securities

brokerage firms for asset formation purposes. And customers’ needs for financial products are getting ever diverse. We are

now asked to provide increasingly more diverse and sophisticated services to meet such complex needs. We identify the

needs of respective regional markets that each allied regional bank serves. Based on such data, we offer quality financial

services and products to as many customers as we can through the network of the allied regional banks. During this pro-

cess, we make the most of product development resources and consulting service competence.

Assets under Custody of the Affiliated Joint Venture Securities Companies

(Billions of yen)

245.3

371.7

540.0642.0

780.8884.4

1,048.0998.5

1,244.5

2017.32016.32015.32014.32013.32012.32011.32010.32009.3

Retail 58%

Non-retail 42%

Foreign equities

20%

Domestic bonds 11%

Investment trusts

18%

Others 3%

Domestic equities

23%

Diversification of the Business Portfolio Diversity of Products

2017.32017.3

Foreign bonds/structured bonds 25%Retail 85%

Non-retail 15%

2007.3

(Wholesale, Market) (Wholesale, Market)

Worldwide Expansion from Our Strong Launching Pad in ChubuTokai Tokyo Securities and Takagi Securities operate 82 sales offices nationwide. Over half of these offices are concen-

trated in the Chubu region, where we maintain an unrivaled presence and have built strong relationships of trust with

local customers. We are building a network of domestic sales offices, including those of our joint venture securities com-

panies, and overseas alliances to expand our network from Chubu across Japan and around the world.

Overseas ExpansionThe Tokai Tokyo Financial Group operates six overseas subsidiaries and affiliates, including Tokai Tokyo Securities (Asia)

Limited and Tokai Tokyo Securities Europe Limited. The Group also has close alliances with 9 financial institutions overseas,

mainly in Asia, enabling access to overseas markets and further upgrading the caliber of our financial services. The compa-

ny also provides Group companies with information supplied by several companies overseas with whom we have some

partner relationship in one way or another, and Global Advisory Board members (Please see page 46.) of the Company.




Fiscal 2016 Initiatives Financial Highlights

(Millions of yen)

Operating income

2017.32016.32015.32014.32013.3

30,248

25,071

12,64315,252

9,498

(Millions of yen)

Total equity / Total assets

2017.32016.32015.32014.32013.3

630,061 617,270

458,106

568,549

■■ Total equity　　■■Total assets

122,397 142,929 157,351 155,204

741,936

157,230

Cash dividends per share / Dividends payout ratio

2017.32016.32015.32014.32013.3

32.0034.00

28.00

16.00

26.00

(Yen)■■ Cash dividends per share Dividends payout ratio

37.4% 36.5%

48.9%

59.7%

56.9%

2017.32016.32015.32014.32013.3

9.7%

17.7%

12.6%

8.1%7.8%

(Millions of yen)

Net income attributable to owners of the parent / ROE

12,423

■■

11,273

18,499

23,243

11,990

Net income attributable to owners of the parent ROE

(Millions of yen)

Total revenues

67,854

90,54782,700

2017.32016.32015.32014.32013.3

67,585 65,412

Breakdown of operating income

4.2%

Interest and Dividend Income

41.2%

Fees and Commissions

54.6%

Trading Pro�t and Loss

2017.3

Acquisition of Ace Securities SharesIn September 2016, the Group

made Ace Securities an equity-

method affiliate. Operating in the

Kansai region since 1914, Ace

Securities’ nationwide network of

registered independent financial

advisors is the largest in Japan. By

mutually sharing expertise, com-

bining the strengths of both and

thus by growing each business

and foundation, we will enhance

jointly the corporate value of each

entity.

KALAIS Robo-advisorIn November 2016, a subsidiary,

Tokai Tokyo Securities, launched

KALAIS, a robotic advisory service

designed to support first-time per-

sonal investors. The answers from

would-be customers to seven sim-

ple questions prompt the automat-

ed online service to determine

respondents’ risk tolerance, and,

based on that result, the service

suggests the most-suitable portfo-

lio and balanced funds (including a

rebalancing option).

Hokuhoku Tokai Tokyo SecuritiesIn January 2017, the Company

established Hokuhoku Tokai Tokyo

Securities under joint investment

with the Hokuhoku Financial

Group. The new securities compa-

ny takes advantage of the

Hokuhoku Financial Group’s vast

client base, sales office network,

and the brand strength firmly

anchored in Hokuhoku’s home

region of Hokuriku and Hokkaido.

With the addition of the Group’s

operating expertise, the Hokuhoku

Financial Group is aiming to

become a highly trusted regional

securities brokerage firm that is the

first choice of customers.

Eternal Becomes a 100% SubsidiaryThe Company acquired Eternal

and made it a 100% subsidiary in

March 2017. Eternal is a nation-

wide network of insurance agen-

cies with a customer base largely

made up of younger individuals to

which it offers services through its

Insurance Terrace agencies. Tokai

Tokyo Financial Holdings acquired

the company to increase its expo-

sure to customers in this demo-

graphic, which it considers key to

broadening its client base to sup-

port the Group’s business growth

in the medium-to-long term.

Takagi Securities Becomes a Consolidated SubsidiaryThe Group e levated Takagi

Securities to a consolidated subsid-

iary in April 2017. Founded in

Osaka in 1873, Takagi Securities is

one of the oldest securities compa-

nies in Japan and in 2014 celebrat-

ed 140 years of offering specialized

services. The company provides

these services through its Toshin no

Madoguchi (Investment Trust Out-

lets), which have earned the trust of

customers by consistently provid-

ing fair and neutral product com-

parisons and investment proposals.

The Group consolidated Takagi

Securities to enhance corporate

value by combining management

resources and accelerating the syn-

ergy effect between the companies.

New MONEQUE Brand IntroducedThe Group created the new

MONEQUE brand to appeal to

younger generations just starting

their asset forming. “MONEQUE

Tokai” was established in Tokai-city,

Aichi Pre fecture in April 2017. With

services ranging from securities

investment products to insurance

and housing loans, MONEQUE

agencies are one-stop shops to

meet a wide range of the financial

needs of young customers seeking

to form asset portfolios.Note: MONEQUE: MONEQUE is a combination of the

words “money” and “unique”.


Creating Our Future

Interview with the CEO

Tateaki IshidaPresident & CEO

As an integrated financial group, we will continue to diversify our business content and use our unique presence as “the Flag Bearer for the New Age” of innovative financial services.

QPlease tell me about the end result of your management plan, “Ambitious 5”, that had lasted for five years until the end of March in 2017.

The financial industry in Japan now stands at a historical turning point. So, I think it is imperative to originate a new business model that prepares us ready to respond timely to the ever-changing environment and achieve sustainable growth. Since I became Chief Executive Officer of the Company, we have grappled with three medium-term management plans designed to elevate ourselves to a unique integrated financial group. During that process, we reformed both our operating structure and management framework while accurately foreseeing the changing envi-ronment. Under the plan, “Innovation Jump Up 5”, that started in 2006, we intended to build the foundation to transform ourselves from a conventional stock broker to a unique comprehensive securities group, and, for that purpose, we caused Company-wide changes in our business portfolio and employees’ consciousness under the slogan of “Let’s change ourselves and things around us”. We, as a group, grew stronger than before through those changes. Under the next plan, “TT Revolution”, executed during the period of 2009 through 2012, we adopted the catchword of “Let’s grow big”, and, toward that goal, we enhanced our

operating foothold in the Chubu region, our home market, by relocating the headquarters of Tokai Tokyo Securities Co., Ltd. to Nagoya, and consummating a merger with Toyota Financial Services Securities Corporation. Also, we expanded business volume and network coverage through joint operation with regional banks. During the same period, we made an organizational transition to a holding company structure with a view to growing and diversifying business smoothly. Then, we touched on “Ambitious 5” in 2012, our third management plan. One of the five strategic themes under this plan was “Alliance & Platform”, and our endeavor toward this theme further propelled collaboration with leading regional banks result-ing in the jointly run securities firms increasing then up to six. Our joint venture operating network now reached nation-wide coverage. We also made an investment con-tribution to All Nippon Asset Management Co., Ltd., which was established on the initiative of influential regional banks. As such, we have achieved significant progress in line with the consistent strategic theme of “region first”. In addition, we have expanded “Platform Business” that offers an operating infrastructure and capability to small to medium-sized securities brokerage houses, establishing a unique “win-win” relationship with peers in our industry. On the theme “Community & the Middle”, we drove for-ward our “Segment-Specific Marketing Strategy” targeting

Earnings Results (Quarterly)

(Yen) Nikkei Average

14,000

17,000

20,000

4,500

6,000

7,500

3,000

1,500

10,500

9,000

11,000

0

23,000

5,000

15,000

25,000

0

35,000

30,000

20,000

10,000

FY2012 FY2013 FY2014 FY2015 FY20164Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q

(Millions of yen) L Total revenues L Ordinary income Net income attributable to owners of the parent (Quarterly) (Millions of yen)

14,000

17,000

20,000

4,500

6,000

7,500

3,000

1,500

10,500

9,000

11,000

0

23,000

5,000

15,000

25,000

0

35,000

30,000

20,000

10,000

FY2012 FY2013 FY2014 FY2015 FY20164Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q

26 consecutive quarters of profitability

INTEGRATED REPORTING 2017 13INTEGRATED REPORTING 201712

Creating Our Future L Interview with the CEO

specifically “Wealth Customers” and “Wealth-Forming Customers”. On “Wealth Customers”, we introduced a new service concept, “Orque d’or”, and set us ready to provide a wide range of consulting and information ser-vices covering such matters as real estate investment, inheritance and business succession, and medical and health besides asset management per se. As part of the Orque d’or service, we regularly organize high-quality events like concerts and art exhibitions on the top floor of the Meieki Building located right in front of JR Nagoya Station. We are extremely well received by the customers in arranging such events, and we have been successful in lifting our name recognition significantly in the Chubu region thanks to this new activity. Toward the segment of “Wealth-Forming Customers”, we started another new service branded as “MONEQUE” to meet customers’ con-sulting needs about insurance, housing loans, and asset formation. In addition to the industry’s first one-stop con-sulting service, we started offering KALAIS, a robotic advi-sory service, which is a leading FinTech application. Thus, we are making the first step in launching the business model that wins acceptance from the next generation of customers. At the Market Division, we strengthened human resources and upgraded our system to become able to offer a variety of products on a timely basis, and such an attempt by the division increased the volume of transac-tions with customers including those of jointly operating securities firms and other purchasers of our Platform service. Thus, the division, by its growth, helped us earn

bolstered profit. Also, they played a significant role in our efforts to convert our business portfolio.

Q

I know that you are committed to the enhancement of governance and compliance under the management plan, Ambitious 5. Please elaborate on your idea and the prog-ress so far.

We inevitably remain connected with the market day to day in conducting our business, and we cannot forget about risk management at any moment. So, we considered “Risk Management” a material strategic task under the manage-ment plan Ambitious 5, and we improved our capability to manage various risks associated with our operations. We are an independent player belonging to no group formed by a bank or any other industry. We, therefore, are free to develop our business operations independently and ambi-tiously. We, for that reason, however, must stay on guard all the time to cope with any emergency. That is why we constantly exert our efforts to enhance governance and risk management competences. About our governance- related practices, our outside director has been manning the chairperson of the Board of Directors Meeting since more than 10 years ago. Also, in 2016, we made an organi-zational shift to a company that bears an Audit & Supervisory Committee, speeding up decision making by management and freeing up time for more-strategic and in-depth discus-sion at the Board of Directors Meetings. Now, I am proud of being ahead of the Japanese competitors, having taken advanced steps in raising the degree of governance quality.

Since human resources replete with humanity and expertise are the core driving force of our growth, I think it is most imperative to hire and develop such personnel. To foster diversity with an intent on supporting employees with diverse backgrounds, we are focusing among others on encouraging female employees to work more actively. For that purpose, we are making our working environment friendlier to female employees and revising internal rules so that mothers can do both child caring and working more easily. We are actively promoting female employees up to managerial positions and directors, and we are receiving a high reputation from various organizations due to such efforts. Also, we adopted a unique policy to have young employees immerse themselves exclusively in training during the first two years after joining us. This is an unprecedented practice in our industry here. Further, we offer them various “career-up learning opportunities” beginning in their third year with us, including a scholar-ship for reputable MBA program enrollment either in Japan or overseas, OJT training overseas at both our offices and alliance partners, and other chances open to any qualify-ing candidate Company-wide. Also, we revised HR prac-tices as they relate to fair evaluation and suitable compensation packages in response to our expanded operating base and diversifying business portfolio.

QWhat is the background that induced you to adopt a management plan, “New Age’s Flag Bearer 5” for the fiscal year ending in March 2018?

I can tell that the measures taken under Ambitious 5 were proven surely effective with our Group’s business portfolio now being converted to what we had designed it to be. But, I think we must keep innovating a more-sophisticated business model toward the goal of creating a genuine inte-grated financial group. The model we aim to establish should entail • Advancement of segment-specific strategy for Retail• Full-blown penetration to huge metropolitan markets• Stepped-up resource enhancement for market operations• Significant expertise and productivity improvement for

employees• Operations conscious of capital efficiency for manage-

ment. The operating environment changes ever faster, and its expanse, depth, and complexity we must deal with keep growing. The securities brokerage industry, I consider, is

now facing a critical turning point. The fact that the elderly population segment owns the majority of personal financial assets in Japan is a serious imminent challenge deserving national attention. So, we, as an industry member, must proactively support wealth formation for the young people on whose shoulders rest the future of Japan since this sit-uation presents us a big business chance as well as a challenging vital mission. IT, exemplified by FinTech and AI, permeates the world rapidly, and, because of that, visualizing what the financial industry will look like even in the very near future is becom-ing difficult. Not only that, we must fulfill our fiduciary duties more vigorously. Further, we must meet the emerg-ing social requirement of “work-style reform” as well. I think that we are requested to deal with every one of those various issues meticulously, and then finally we can raise the corporate value of our Group. The challenges we could not even imagine just five years ago now surround us, and the next management plan formulation should be premised upon the vision about what we must do to pre-vail over such challenges. As such, we designed the plan, “New Age’s Flag Bearer 5”, to take on the new challenges while carrying on the gist of basic strategy under the previous Ambitious 5.

QCould you please explain about the basic strategy you embedded with the plan New Age’s Flag Bearer 5?

My observation about our current industry is this. Neither megabank affiliated members nor major players have yet

Ambitious 5 Results

Five years ago Present

Assets under Custody(Including equity method) ¥4.4 trillion ¥6.1 trillion

Retail Percentage(Tokai Tokyo Securities) 73% 58%

Affiliated Joint Venture Securities Companies 3 companies 6 companies

Platform Users 13 companies 50 companies

2012.3 2017.3


Creating Our Future L Interview with the CEO

to demonstrate a business model fitting to the changing times, and Internet brokers now appear standing at a bend. Up to now, we have developed our “Platform” jointly with partner regional banks and allied securities brokers. Now, I set a big goal to become the third power in the industry that belongs to neither any megabank nor big securities house. Toward this end, we will evolve the cur-rent Platform to the “Great Platform” under which both we and partner banks and allied brokers can mutually enjoy synergy benefits. By naming the next management plan as the New Age’s Flag Bearer, we infused the plan with a strong desire to become a new age’s leader in the financial industry. For that desire to be accomplished, we, the Group, must create a unique business model and then make such a model available for use by partner banks and allied bro-kers in addition to existing products and operating infra-structures. To be more precise, we build services and distribution channels that fit to the profile and needs of individual clients of varying segments, such as Wealth, Asset Forming, and Matured. Also, we will focus on advancing corporate “trilateral strategy” intending to expand our customer base and business flow and strengthen the competence of Market by way of cross-sectional cooperation among three divisions: Corporate Finance, Corporate Sales, and Market.

We aim to evolve Platform operations as a basis for sharing common management challenges and solving those together with partner banks and allied brokers. If we, the Group, and partner banks and allied brokers jointly take on the changing environment and mutually share cus-tomer bases as well as integrate operating know-how, we should be able to develop the Great Platform. By reaching this stage, we can acquire insight, know-how, and exper-tise to survive the upcoming uncharted environment. To elevate ourselves to the higher stage, we need some boost to our services providing competence that may not be available by merely holding onto past strategies. We will, therefore, constantly keep our eyes on potential M&A targets and transactions, and, when occasion presents, we will take actions swiftly and timely. Then, we will be able to evolve ourselves into an inte-grated financial group that embraces a unique business model in five years.

Q Could you tell me about your basic policy in driving forward the new management plan?

I think that the crucial factor to complete the implementa-tion successfully is human resource development. When we introduce our products and services, we must ascertain that the customer sitting in front of us does understand correctly what we are talking about. We are

supposed to deliver such products and services only if the customer is satisfied with our explanation. To perform the said routine, we must possess solid consulting compe-tence given the complexity of the products and services available now. Particularly, the prices of securities products change every second, and that makes the product we handle different from other kinds. Consequently, we must deal with risk in doing our business day to day as a “risk specialist”, and we are always being closely monitored on how good a risk managing professional we are. Because we deliver the products and services that inherently con-tain risk, we are subject to severe scrutiny of what we are and what we do. In other words, we must remain humble and non-complacent to market trends and be honest and sincere to customers. The foregoing would apply to our joint operations with allied partners as well. I think what matters most to us continues to be a “sincere” and “relied on” company. Accordingly, we will put the following essential measures into action:• Fostering employees to be the human resources pos-

sessing both “professionalism” and “heart (humanity)”• Promoting diversity with one of its focuses on reactiva-

tion of old employees• Attaining drastic productivity improvement and radical

work-style reform• Reviewing and overhauling the existing HR practices to

make all of the above measures feasible

QLet me ask you about the Group’s capital policy particularly regarding future invest-ment and profit distribution to shareholders.

About profit distribution to the shareholders, we will do the best we can to continue stable dividend payment at the target range of a 30% to 50% payout ratio. In addition, we will buy back our own stocks when necessary. And, of course, we consider it more important than anything else to increase our shareholders’ value by achieving sustained profit growth. To that end, we will make investment by setting high pri-orities on M&A of peers, network expansion into growing Asian markets, and a proactive response to the rapidly progressing financial technology business. Now and onward, we will make another preeminent stride in steering our operations for further growth, and then we will return the fruit of our endeavors to our

shareholders. So, we sincerely ask you, valued sharehold-ers and investors, to provide your continuing support and understanding.

QCan you brief me on the activities the Company currently conducts to fulfill its role and mission in the region of its primary oper-ating territory?

We, the Group, as a part of our CSR policy, are striving to assist the development of capital markets and the peo-ple’s wealth formation as our main lines of duty. We, at the same time, proclaim the contribution to activate regional societies also as one of our basic CSR policy items. Particularly, doing something to help the Chubu region prosper and develop now and onward is our mission as a conscientious corporate citizen because the region is our home for operations where we have been a long-time beneficiary of the support provided by the region and the people living there. Therefore, we are engaged in various activities. Here, you see below are some of the examples of our actions.• Sponsoring a global program jointly with Nagoya

University, including student exchanges between Japan and the United Kingdom, and global seminars for the public and students for training the people who can help the community handle various globalization related tasks in the future,

• Granting scholarships to student-athletes at Chukyo University, Nagoya to induce the community to be filled with culture to stimulate enthusiasm for sports in the community,

• Making our reception facility, “Salon de Orque d’or”, available free of charge as a venue for various seminars and other events for “open innovation initiatives”, hoping to facilitate the creation of new industries in the Chubu region, known as the hub for the manufacturing industry,

• Setting up in August 2016 the “Tokai Tokyo Foundation”, a general incorporated foundation, and it provided fund-ing to the “Tongali Project”, an initiative started by Nagoya University to encourage new business start-ups to spring up, and to the region’s efforts to preserve cul-tural heritage, such as local folk festivals

For us to promote the activities mentioned above and others, we will keep proactively taking on such duties to invigorate the region’s future prosperity. So, please count on the future Tokai Tokyo Financial Group!

Fortify framework for devel-oping highly refined expertise

Secure professional employees + appropriate evaluation and position appointment

Create a “Humanity in Action” marketing style

Humanity and Expertise, The Pursuit of Heart and Professionality

Pursuit of Expertise/Professionality

Identify human resources and skill sets

Create a human resource profile database

Evaluation and compensation

Adopt a human resources structure with bonuses• Separate evaluation and compensation sys-

tems for professional staff

• Provide feedback on professionalism in per-sonnel and performance evaluations

Effective employees and employee assignments to expand business and hone professionalism

Create an employee education plan to boost product recommendation capa-bilities

Recruit, assign, educateWealthy customers

Dual securities- insurance shop MONEQUE

Market segment

Pursue humanity (heart): Boost interpersonal skills and work styles with a human touch

Institute work-style reform to support individual employees and pursuit of professionalism

Cultivate employees that provide value (professionalism and heart) to customers

Deepen diversity to support further business diversity and specialization


Creating Our Future

Results of the Ambitious 5 Management Plan

Under the management plan, Ambitious 5, that was launched in April 2012, we have implemented various

measures including expanding the business base of Wealthy customers, adding more regional banks as alli-

ance members, increasing the securities brokerage firms that purchase Platform services through which we

supply our Group products and services, and acquiring insurance service capabilities. Those measures

enabled us to accomplish two significant results and those are 1) enhanced earning ability and 2) profit struc-

ture reformation by freeing ourselves from over-dependence on retail business.

The Five Strategies under Ambitious 5The Ambitious 5 management plan launched in April 2012 encompassed various initiatives pursuing five strategic themes: 1) Community & the Middle with strategic focus on selected regions and customer segments, 2) Alliance & Platform to actively expand our business base, 3) Expertise to bolster product development and proposal offering capabilities, 4) Humanity to create a company with a human touch, and 5) Risk Management to fortify the Group against risk scenarios. You see below the things we achieved in line with the said themes• Community & the Middle led us to the creation of a new

service brand concept of “Orque d’or” catered to Wealthy customers to broaden the business base of higher-income customers. Not only that, we introduced “MONEQUE” which is a one-stop does-it-all financial service outlet offering insurance, housing loans, and securities brokerage to Asset Forming customers.

• On the Alliance & Platform front, we started both Senshu Ikeda Tokai Tokyo Securities and Hokuhoku Tokai Tokyo

Securities up and running as newly added affiliated joint venture securities companies in alliance with prominent regional banks. And we converted Utsunomiya Securities, formerly our consolidated subsidiary, to a joint venture securities company owned and operated together by The Tochigi Bank. Also, with a view to expanding the Group’s customer base, we acquired shares of Ace Securities that had been our affiliate com-pany, and made Takagi Securities a consolidated sub-sidiary of ours. Furthermore, we purchased Eternal, a comprehensive insurance agency, as a wholly owned subsidiary to develop insurance product offering compe-tence aiming to offer entry-level insurance products with a target on next-generation customers.

• We also made great strides with our in-house initiatives under the themes of Expertise, Humanity, and Risk Management, including reform of HR management prac-tices, diversity acceleration, and corporate governance enhancement.

Earnings Power BoostThe initiatives we undertook in accordance with the plan, Ambitious 5, to advance our management strategy to pro-duce significant results include 1) expanding the business base of Wealthy customers, 2) adopting a new brand con-cept and opening new outlets geared to customers con-sidering Asset Forming, 3) widening alliances with new partner regional banks, 4) increasing the number of Platform service contracts whereby we wholesale prod-ucts and services to peer securities brokerage firms for their operations, 5) injecting capital to, and purchasing interests in, peer securities brokerage houses, and 6) acquiring insurance service capabilities. At the outset of Ambitious 5 implementation, we had just three joint venture securities companies operating with regional banks. Now, we have doubled those to six. We

increased the number of Platform service clients from 13 to 50, which is nearly a quadrupling leap. Thanks to those operating base enhancement and expansion, we achieved a markedly improved balance of profit contribution among divisions. For instance, we have reduced dependence on retail operation from 73% to 58% over the five years and we recognized the corporate sales and market trading, both formerly carrying lower weights, now surpass retail in profit generation. These efforts have enabled us to increase our total assets* under custody from ¥4.4 trillion to ¥6.1 trillion over the past five years. As such, we are growing our earnings power steadily.

* Total assets held by subsidiaries and equity-method affiliated companies

Toward Further GrowthWe, the Tokai Tokyo Financial Group, have completed three sets of management plan—Innovation Jump Up 5, April 2006 through March 2009, TT Revolution, April 2009 through March 2012, and Ambitious 5, April 2012 through March 2017. Innovation Jump Up 5 was designed to overhaul every aspect of our operations, including reorganizing our busi-ness portfolio and reframing the mind-set of our employ-ees. The TT Revolution plan sought to expand our business base while highlighting the distinguishing features of the Group. The main objectives of the just-completed Ambitious 5 plan, while adapting ourselves well to dramat-ically changing times, were to raise the Group’s presence both in the securities industry as a whole, and in the Chubu region geographically, and to strengthen the Group’s distinctiveness to anchor its position. We believe

we have been very successful in achieving the said goals including the one related to our operating results. However, these achievements making process also made clear the areas we must continue to improve, suggesting the following newly emerged tasks: Deepening the right sales approach to each customer segment, Establishing a business model to capture next-generation customers, Enriching the assortment of products and services we offer to joint venture securities companies and Platform service customers, and Enhancing the productivity of organizational operation. We will, from now onwards, tackle the new manage-ment plan, “New Age’s Flag Bearer 5”, on the new stage coming up in front of our eyes, for a definite purpose of making our presence felt more.

2009.4 2012.3

Blue OceanStrategy

TT Revolution(Expansion)

M&A Strategy

Super Community

House

Customer loyalty

Productivity

Growth

Communication

2012.4 2017.3

Ambitious 5(New Stage)

Leading Player in Asia

Community & the Middle

Alliance & Platform

Expertise Humanity

Risk Management

2017.4 2022.3

Management plan


Please see page 20 for more details

Management Plan

Reform the corporate gov-ernance/corporate culture

Reform the business portfo-lio/business model

Reform the network

Reform products and services

Reform employees’productivity

IT strategy supporting 5 Reforms and Alliance Strategy

Premier House

Innovation Jump Up 5(Change)

2006.4 2009.3


Creating Our Future

New Management Plan “New Age’s Flag Bearer 5”

Establish the Foundation to Boost Our Profit Generation Capabilities and Reorienting Our FocusThe “New Age’s Flag Bearer 5” management plan consists of two core initiatives – “further strengthening and expand-ing our operating base” and “advancing strategic themes.” In drawing the plan first, we reviewed the achievement and the tasks that emerged during the implementation process of the previous plan, “Ambitious 5.” As a result of review, we formulated the new plan predicated upon the following fierce changes that surround us now and likely in the near future. • the beginning of financial asset decline in Japan in a few

years due to aging of society• heavier fiduciary duty to be imposed under the spread of

rigorous customer-first principles• additional requirement from society such as “work-style

reform”• further permeation of digital financial service including,

Internet trading, FinTech, and AI This plan will give us an unparalleled business model in five years and will bring us to our next stage as an inte-grated financial group.

Toward the goal of laying a further enhanced operating foundation and its growth, we will pursue the uniqueness of the Group by way of designing and implementing our original business model while maintaining what we have accomplished in the past. In addition, we set another goal of “The Quest for Strategic Themes” to secure the compe-tence that helps us prepare a new stage for the growth of the next dimension.

In making endeavors under this goal, “The Quest for Strategic Themes”, we formulate six supporting growth themes and they are: • Inorganic growth in the industry (M&A of securities bro-

kerage)• Asset management competence• Diverse pension and insurance handling competence• Banking service competence• Overseas operation enhancement• Metropolis operation expansion In grappling with these themes, we will carefully assess specific proposals and take actions at the right timing in the right manner.

Retail: Pursuit of the Uniqueness of the Group by Way of Segment-Specific Strategy Catered to Retail CustomersFor the goal of laying a further enhanced operating foundation and its growth at the Retail operation, we will implement a segment-specific strategy dealing with each segmented retail customer.• Addressing Wealth segment customers, we aim to broaden

the customer base in the Chubu region and in large cities including Tokyo and its peripheral areas as well as other pop-ulous cities. We will make the most of “Orque d’or” resources for the expansion of this specific customer segment.

• To the customers of the Matured segment, we will do the following. —Responding to the need of family wealth transfer by offer-ing “asset assessment service” —Suggesting and providing the product and service fitting best to the customers at each varying life stage

• To the non-risk aversive customers, invigorating transac-tions with customers who possess a risk taking appetite by using personal investment specialists

• Toward small and mid-sized business owners, organiz-ing seamless and cross-departmental sales activities and deploying a “catch fish with one cast of the net” sales approach to potential customers at workplaces jointly by corporate sales and retail personnel

• For the Youth and Asset Forming segments, expanding the “MONEQUE” outlet using insurance as an entry point for introducing our housing loans and securities broker-age services with a view to broadening the base of potential future customers

We launched our new management plan “New Age’s Flag Bearer 5” in April 2017. When we named this plan,

we did mean to become the leader, or flag bearer, for a new age in the financial world. We mean to build in

five years the business model that no competitor in the industry can duplicate, and we mean to bring our-

selves forward to the next stage as an integrated financial service group.

The Group aims to further strengthen and expand the operating base by framing strategies geared to each

specific retail customer segment, implementing corporate “trilateral strategy,” realizing the Great Platform,

and advancing initiatives including an in-house productivity revolution.

The New Age’s Flag Bearer 5 manage-

ment plan is designed to give our man-

agement the agility and speed to keep

us always at the forefront of the indus-

try even during the times of drastic

changes in the operating environment.

The new plan will continue and build

on the strategic advances attained

under the previous “Ambitious 5” man-

agement plan, and presents viable

solutions to the Group to prepare for

the testing crisis of financial assets

contraction expected to take place in

just a few years. The plan also aims to

establish a firm foundation for the

future upon which we will grow into an

integrated financial group in five years

as the Third Pillar in the industry with a

significant presence without belonging

to any megabank group. The Group

then will embrace its unique business

model and become the financial group

chosen widely by customers as the

leader and New Age’s Flag Bearer in

the financial world.

TOPICS

In formulating the management plan, “New Age’s Flag Bearer 5”

Hiroshi Maezono Deputy President (Representative Director), Aide to the CEO

Overview of the Management Plan, “New Age’s Flag Bearer 5”


Grow into an integrated financial group as the Third Pillar in the financial industry, an industry leader developing our own markets

Further strengthen operating base and business growth Strategy themesWhile keeping the orientation and the achievement of Ambitious 5,

pursue the originality of the Group, and establish and deploy the unique business model that no rivals can duplicate

Obtain capabilities necessary for advancement to the next stage and when made available, feed those to the process of strategy implementation

Implement unique segment- specific strategy

Expand corporate trilateral initiatives

and advance to global market operations

Great Platform

Pursue

humanity and

professionality

Enhance

organi-

zational

adminis-

tration and

safeguard

against risk

Inorganic growth in the industry (M&A of securities brokerage)

Asset management competence

Diverse pension and insurance handling competence

Banking service competence

Overseas operation enhancement

Metropolis operation expansionProductivity revolution

Matured customers

Asset assessment service

Identify the customers possessing risk appetite and assign personal investment specialist as

account officer for such customersIntegrated Corporate and Retail Operations

Financial advisory and inheritance service for elderly customers

Wealthy customers

Deploy “Orque d’or”

Develop presence in major metropolitan areas

Asset Forming customers

Internet transactions FinTech

MONEQUE, One-stop “does-it-all” service covering insurance, housing loans, securities brokerage

Insurance: Increase lineup of entry-level products for younger customers

Enhance the quality of services and products

Broaden the range of services


Creating Our Future

Corporate Sales and Market Toward the goal of laying a further enhanced operating foundation and its growth, we will engage in fulfilling the theme to achieve the expansion by way of the Trilateral Approach and advancing to global markets. More specifi-cally, we intend to grow business volume in the framework of cross-divisional collaboration among Corporate Sales, Corporate Finance, and Market Trading and, through this collaboration, we will deliver our unique information about overseas markets, further enrich the assortment of prod-ucts of overseas origin, and enlarge the caliber of M&A brokerage.

Group Synergies and the Great PlatformTo produce higher synergy among our Group to move up to the next stage, we will elevate our current business model up to the Great Platform. We are currently supply-ing various services and products to the affiliated joint ven-ture securities companies as well as to peer securities brokerage houses under the framework of the Platform. The said services and products include data processing

systems, training, market information, products, online-transaction capability, and trust function. Our idea is to combine all the said operating resources, M&A advisory capability, and the marketing approach developed within the Group to create a new model, now referred to as “The Great Platform”, with a view to strengthening our service providing competence.

Productivity Revolution and Human Resource TrainingThe Group will continue advancing its “Productivity Revolution.” In Retail operation, we will consolidate offices and enhance operating efficiency by carefully analyzing the regional characteristics of operating locations and deploy-ing big data-based marketing activity. On the administrative front, we review internal rules and meaning of meetings as well as HR practices. By performing the above said, we would like to become an entity that can prove with pride the quality we have as a group. Further, we raise the stan-dard of governance quality. To do this, we expedite the decision-making process across the Company and induce the Board of Directors to conduct more in-depth discus-sions. Also, we will advance our steps in assuming fuller fiduciary duties. With those endeavors, we should be able to focus on enhancing organizational administration, which then ultimately leads us to further fortification of governance quality.

We, however, consider it necessary to develop human resources and furnish a working environment that employ-ees find easy to work under for steady and successful implementation of the above said measures. So, with respect to HR practices overhaul, we promote diversity under which we assign more-active roles to senior and female staff and adopt a compensation method that encourages employees to acquire specialized job skills. Concerning day-to-day sales activities, we introduce the change in the business promotion method and take seg-ment-specific sales approaches. Based on such efforts, we will improve productivity. As such, we, within our Group, exert efforts to raise the caliber of employees each as a matured person with a human touch as well as com-pany personnel with greater professionalism. Thus, we take seriously the task to nurture the human resources possessing both heart and professionality.

Market Trading Division

Corporate Sales Division

Corporate Finance Division

Product Strategy

Information Provision

Customer Development

Personnel System

System Infrastructure

Organization

Business Operations

Sales Promotion (retail, person-to-person)

Sales Promotion (non-person-to-person)

Produce Group Synergies

Integrate the Group’s data processing system that is currently scattered to achieve better efficiency

More active use of Call Center

Sales office efficiency

Revise internal rules

Introduce efficiency tools such as iPad and RPA*

Segment-specific strategies

Review both meetings and clerical workflows companywide

Advance work-style reform

Review our operation and scrap and build it as necessary Review sales approach

Optimal staff allocation

Review the assessment and compensation methods placing higher priority on rewarding specialists

Clearly identify employees’ areas of expertise and provide training to breed specialists

Optimal managerial resource allocation and higher productivity

Established Business ModelExisting Platform Functions New High-Function Platform

Great Platform

Operations

Training

Product Development and Supply

Information Provision

Consultant Solutions

Delivery to Tokai Tokyo Securities, Joint Venture Securities Companies,

and Allied Banks

Wealth Segment Customers Model

(Orque d’or)

Corporate Trilateral Model

Retail Model(Insurance, MONEQUE)

Maintain supply to existing users

IFA (Independent

Financial Advisor)

Upscale the operations in Tokyo and other large and populous markets besides Chubu region

Source the business from acquired subsidiary and equity-method affiliate such as Takagi and Ace

Development for allied banks

Trust Banking Functions M&A Functions

Online Functions Insurance Functions

Banking Functions

Asset Management

Functions

Toshin no Madoguchi*

X X

Current Functions

* RPA (robotic process automation) is application software to automate and make administrative and clerical work more efficient.* Investment Trust Outlets


Value for Tomorrow L Interview with Top Management at Tokai Tokyo Securities Co., Ltd.

the loss of customers’ assets accompanying assets and business interests transfers. So, we intend to increase the points of connection with the customers of wealth-forming generation by accelerating the expansion of the MONEQUE outlet. At the same time, we will make our sales approach tailored to each individual customer’s needs by suggesting various products, such as insurance, housing loans, or monthly contribution types of Nippon Individual Savings Accounts (NISAs), to name a few, for entry-level customers. Turning to our geographic marketing perspective, we understand that we must raise higher our name recogni-tion in Tokyo, Osaka, and their peripheral areas and further cultivate the Wealth Customers. We cannot afford to remain complacent only with our strong market presence in the Chubu region. In corporate sales, we seek to further heightening the level of our coordinated market approach among three arenas, which include corporate finance, corporate sales, and market dealings, and we named these coordinated efforts as the “trilateral strategy” to corporate custom-ers. Our aim is to expand business in global markets by upgrading both the quality and scale of our solution ser-vices. We will emphasize particularly on winning lead- manager status for IPOs, besides the bonds issued by local governments and corporates. So, we will try hard to support venture and start-up businesses. One more area of business chances we aggressively pursue is the engagement in M&A arising from business succession. For that purpose, we will boost the related capability and uplift the level of coordination between corporate sales and retail. The objective of this cross-departmental approach is to become able to handle both business succession and personal asset transfers as one integrated group of per-sonnel rather than two separate departments. Another point we bear in mind is that our performance is only as good as what we, Tokai Tokyo people, can do for our customers. So, I think it is necessary for us all at Tokai Tokyo to nurture loyalty to both customers and the Company. Since we are here at the Company for custom-ers, we all should share the awareness that the principle of duty lies in our efforts to execute thorough customer-first business operations. Further, employees joining us in mid-career (employees excluding those joining us with no previous work experiences) now account for more than a quarter of all staff on the Company’s entire payroll amid the expanding operations and diversifying business port-folio. Facing this reality, we will breed the corporate culture

and spirit that induce livelier communication and facilitate more-cohesive endeavors at the Company toward the achievement of common goals. I hope it will be wonderful if we can drive forth such processes while promoting Company-wide “work-style reform.”

QMay I hear about the role Tokai Tokyo Securities assumes in the overall picture of the Tokai Tokyo Financial Group?

Our assignment from that perspective, I think, is to work as the Group’s engine. First, concerning the Platform ser-vice the Group established through alliances, we will raise higher the level of sophistication and usefulness that the said service can achieve. Then, we add the new business model thereto and evolve the current Platform into the Great Platform so that we become able to offer better products to our service recipients like regional banks and peer securities houses. So, it is our single most-important assignment to cement viability of the Great Platform, the evolved Platform service, through arduous trial and error testing in various hypothetical business scenarios pertain-ing, of course, to varying product lineups, the distributions thereof, and other factors. At the same time, we must allocate the human resourc-es suitable to operate affiliated joint venture securities companies established with regional banks, which means that training and sending such qualifying personnel are also our assignments. Human resource development at the Group thus requires this sort of depth and scope. For whatever the area of service we operate as the core of the Group, we must build first a solid business model, and deliver the service from such a sound operational foothold. I believe this is how we are expected by our cus-tomers to win higher confidence and evaluation from them.

We, Tokai Tokyo Securities, will provide comprehensive financial services of ever-improving quality as a core driving force of the Tokai Tokyo Financial Group.

Toshiyuki Hayakawa President & COO, Tokai Tokyo Securities Co., Ltd. Director of Tokai Tokyo Financial Holdings, Inc.

QWill you please update me on Tokai Tokyo Securities’ performance for the fiscal year ended in March 2017, and what tasks do you think are remaining to be undertaken?

I should say that the market during the year was full of turbu-lences. As everyone would agree, the most-astonishing developments were these two. The first, in June 2016, the people in the U.K. voted for their exit from the EU, and, the next, Mr. Trump won the U.S. presidential election in November. Despite such a restless environment, the staff in the retail arena faced their duties in high sincerity and integri-ty and increased in the end assets under custody. They painstakingly made scrupulous and ingenious efforts to meet the needs of customers through close discussion. Thanks to their efforts, we could more than offset slow results of the year’s first half when the market turned around in the second half and our revenues quickly shot up accordingly. In corporate sales, we secured the position just next to the five major securities houses in Japan in terms of our bond underwriting track record. In particular, we won

lead-manager status nine months in a row during the year in managing the class of bonds issued jointly by multiple local governments. We, while at the same time, recognize that a great many elderly investors/customers will exit soon from the securi-ties market as their heirs inherit assets. So, we must acquire at the soonest timing new-generation customers who will fill the void to be left by those exiting customers. So far, however, we have not been quite successful in this endeavor yet.

QCan you tell me about your goal and the focused tasks under the management plan for the fiscal year ending March 31, 2018?

We continue focusing on the implementation of a unique segment-specific strategy that separates us from our peers. Under our previous management plan, we attained some success in Wealth Customer base expansion. But, we think it is imperative to deploy an aggressively consulting-based marketing approach. We must cut down to the minimum


Value for Tomorrow L Tokai Tokyo Securities L Business Strategies and Overview

Retail Business Segment Retail Sales

In the fiscal year ended March 31, 2017, the Retail Business Segment posted total revenues of ¥37,411 million, a decrease of 10.2% year on year, while individual customer assets under custody grew to ¥2,512.3 billion, an increase of 2.9%. The market environment was very volatile during the year, affected by such developments as the decision by the United Kingdom to withdraw from the European Union and the election of Mr. Trump as President of the United States. During the first half of the fiscal year when the financial markets were stagnant, we did our best to propose effective investment advice to navigate the market conditions and meet customer needs. These efforts ultimately drove business growth when market conditions improved in the second half of the year.

We respond to the diversifying needs of our customers and help them realize optimal asset formation.

Osamu YagisawaDeputy President Head of Retail Sales Business Unit Tokai Tokyo Securities

Strengths In the final year of the Ambitious 5 management plan, we focused our energies on developing effective marketing catered to specific customer categories and on diversify-ing our product and service menu. Development of marketing geared to specific customer categories included creating the Orque d’or brand target-ing Wealthy customers. The new brand combining com-prehensive investment solutions with asset management services is quickly gaining traction in the Chubu region led by the opening of the Salon de Orque d’or during the year. We also strengthened our consulting capabilities to effec-tively meet the increasingly diverse and sophisticated needs of a wider range of customers. Amid growing cus-tomer needs for inheritance and business succession advice, we broadened our range of advanced investment solutions by collaborating with Tokai Tokyo Wealth Consulting to offer services that include an “asset

assessment service” and “basic valuation service for the shares of customers’ firm.” We have also reached out to younger generations that securities companies have often seen as outside the reach of their financial services. We created the MONEQUE brand and opened outlets follow-ing a new concept designed to offer services geared to their life stage and help them become more aware of the uses for their finances. The MONEQUE shops offer one-stop financial services answering all of their insurance, housing loan, and asset management needs. The strength of our Group arises from two sources. The first source is the solutions created by Tokai Tokyo Wealth Consulting and the expert investment information supplied by the Tokai Tokyo Research Institute. The second source is the abilities of the Wealth Management Unit and One-Stop Channel Unit of Tokai Tokyo Securities to provide services suitable to each specific customer segment.

Tokai Tokyo Securities Retail Business Segment Results

L Breakdown of revenues (Within Tokai Tokyo Securities) (The revenues made by respective retail sales related unit, i.e. the Retail Sales Unit, Wealth Management Unit, and One-Stop Channel Unit within Tokai Tokyo Securities)

2017.3

L Total revenues (The revenues made by respective retail sales related unit, i.e. the Retail Sales Unit, Wealth Management Unit, and One-Stop Channel Unit within Tokai Tokyo Securities)

(Millions of yen)

20,662

16,748

22,878

18,717

41,595 37,411

2016.3 2017.31H 1H 2H2H

L Individual customer assets

under custody

(Billions of yen)

2016.3 2017.3

2,512.32,339.6

2,441.42,492.6

1H 1H 2H2H

Initiatives Following our management plan, “New Age’s Flag Bearer 5” that proclaims to be a leader for a new era in the finan-cial industry and opening up new markets, we will maxi-mize our strengths as a securities company focused on personalized, face-to-face sales while advancing distinct strategies specifically designed for the retail customer seg-ment. (Please see page 21.) In each of our customer cate-gories, we will advance strategies to further cultivate our marketing capabilities and gain a more-precise under-standing of customer characteristics so we can accurately assess their needs and frame the optimal methods to offer products and services finely tuned to their needs. For Wealth segment customers, besides fortifying our asset management and other financial services, we plan to develop two types of private banking services. One focus-es on wide-ranged customer caring services encompass-ing health, leisure, and other non-financial services. The other focuses on business support provision to meet the needs of M&A and business succession. For small and medium-sized businesses and their owners, we deploy a seamless business approach covering the stages of rela-tion and contact initiation, first transaction, and new need recognition. We will also make a serious move to secure our foothold in big markets like greater Tokyo without stay-ing complacently in Chubu alone. For the Matured segment customers, we will continue to fortify our consulting capabilities for inheritance and business succession to provide constantly improving solu-tion proposals. We will also enhance the wide scope of support we provide for employees of Toyota-affiliated companies through our asset formation support program and monthly purchase of cumulative investment trust products as well as organizing seminars and private con-sultation dedicated to Toyota group employees. For younger individuals at the asset formation stage, with a view to expanding the potential customer base for our

future, we will do the following. One, we intensify the face-to-face sales activities by further spreading the newly start-ed MONEQUE brand services with a geographic emphasis on the Chubu region. Second, on the front of non-face-to-face sales activities, we raise the utilization of both FinTech and Internet capabilities that are exemplified by such prod-ucts as KALAIS, a robotic advisory service for beginning investors, and Moneyforward for MONEQUE, the service delivered through a household budgeting application. About “Productivity Revolution,” which is a theme of our new management plan and at the same time a big task to our society, we will take on the task by upgrading the usage of our tablets and other work tools and incorporate big data into our database marketing to make our market-ing activities more efficient. Also, we will review the format of sales offices and staff allocation to improve the operat-ing efficiency of our retail outlets. While the digitalization of data is enabling us to raise the sophistication of our services, we must offer services that are distinctive and have a high level of personal touch if we want to be the preferred company of customers. That is why we are seeking to develop the “heart” and “profes-sionality” of our employees, who are the true strength of our face-to-face securities business. Following our philos-ophy that the customer is always first, we are creating marketing with “humanity.” We are raising the professional-ism of our staff by training younger staff in the Market and Research Divisions to build their fundamental capabilities for making proposals to customers. We are also educating and training staff at all levels to prepare them for adminis-trative positions, as middle managers, and as leaders of the next generation. These initiatives are aimed at realizing customer-orient-ed operations and raising customer satisfaction as well as at increasing our assets under custody to enable sustain-ing growth in our revenues.

We provide comprehensive solutions for customers.

Our new MONEQUE brand shops are a new concept for offering one-stop insurance, housing loan, and securities investment consulting services for customers at each stage of their asset formation.

Retail Business Segment

58%



Corporate Sales Segment Market Sales Segment

Corporate Sales SegmentIn the fiscal year ended March 31, 2017, the Corporate Sales Segment posted total revenues of ¥4,055 million, an increase of 4.2% year on year. At the start of the year, the segment posted strong growth in new bond issues and bond portfolio transactions under Japan’s monetary policy of negative interest rates. Later in the year, we continued building revenues through aggressive programs and strategies to capitalize on the stock market rally under “Trumponomics” and generate and increase trade-related commission income. These efforts were combined to produce record-high revenues for the segment.

Hideaki YamaneSenior Managing Executive Officer Head of Global Markets Business Unit Tokai Tokyo Securities

Strengths Strengthening our wholesale business and strategically expanding our operations improved our ability to provide information and brokerage services about Japanese stocks to major institutional investors and overseas investors

through our research services and analyst meetings. This enhanced our transaction execution capabilities and raised our stature to the point that we are coming shoul-der to shoulder with the major securities houses in Japan.

Initiatives We will deepen the trust customers have in our services and strengthen our relations with customers by assessing each customer category individually to identify their specif-ic needs, such as for risk hedging, and formulate new investment products and custom-made structured prod-ucts providing appropriate solutions. We will launch a portal site for analyst reports through our alliance with the Tokai Tokyo Research Institute to

further enhance the research services we offer to core institutional investors. We will also respond to the needs of foreign investors for fuller accessibility to Japanese equity investment opportunities. In addition, we will focus on fulfilling the significant needs of institutional clients for private placement invest-ment trusts.

L Breakdown of revenues (Within Tokai Tokyo Securities)

2017.3Corporate Sales Segment

6%

L Total revenues

(Millions of yen)

2017.32016.32015.32014.3

4,0553,890

3,6723,468

Market Sales SegmentIn the fiscal year ended in March 2017, the Market Sales Segment posted total revenues of ¥19,194 million, an increase of 12.7% year on year, despite the sharp fluctuations in the stock markets following the U.K. Brexit vote in June 2016 and the U.S. election of Mr. Trump in November; we effectively anticipated yield movements in the bond market and generated a substantial increase in trading revenue that contributed significantly to our earnings. We also increased our trading volume of foreign equities during the year supported by ongoing moderate expansion of the U.S. economy and the U.S. stock markets reaching record highs fueled by expectations for President Trump’s economic policy. These conditions were coupled with our efforts to enhance our information provision capabilities by strengthening collaboration with overseas business partners, to expand our support functions for marketing promotions conducted by our affiliated joint venture securities companies and securities firms using our Platform services, and to boost our trad-ing capabilities by hiring professional staff and constantly developing our personnel. The unit performed particularly strongly in the second half when it put up record half-year revenues of ¥11.2 billion.

Strengths The Market Sales Segment has an extensive product dis-tribution network beginning with Tokai Tokyo Securities and extending to our affiliated joint venture securities com-panies and securities firms using our Platform services. The broad and deep customer base that this expansive sales network provides for our products is the Group’s biggest operating strength. The unit’s other key strength is the ability to meet cus-tomer needs for a diverse range of information and

products. We are compared no less favorably with major securities companies or megabank affiliated securities firms with respect to information and product supply resources. We obtained such strengths through the alli-ances established with solid overseas partners like Stifel in the United States from whom we widely source high -quality information and products such as derivatives of the imbedded variety.

Initiatives In the Market Sales Segment, our most-important themes are always strengthening our ability to supply products and expanding our customer flow. Our ability to respond to customer needs by formulating our own products in-house has become our greatest strength of our ability to supply products. A prime example of this is our structured bonds, of which our transactions increased immensely in the year to March 2017. We will build on this success by continuing to develop investment instruments incorporat-ing products formulated in-house in every risk category, including interest rates, foreign exchange, equities, and credit.

To expand our customer flow, we will further strengthen the “trilateral strategy” combining the Corporate Sales Unit, Corporate Finance Unit, and Market Sales Promotion Unit to broaden our customer base while continuing to cultivate new connections and deepen our business rela-tions with corporate customers. Our network of affiliated joint venture securities compa-nies and securities firms using our Platform services is a unique strength that has truly begun to flourish in recent years. Our ability to develop and supply new products as integrated solutions to the entities under affiliation and partner relations with us will be the key to the success of our future product development and provision.

L Breakdown of revenues (Within Tokai Tokyo Securities)

2017.3

L Total revenues

(Millions of yen)

2017.32016.32015.32014.3

19,194

17,01817,712

15,499

Note: Excluded fund revenue that includes fees from foreign bonds

L Number of securities companies to

which we provide Platform services

2017.32016.32015.32014.3

42

40

4546

33

27

50

47

2H1H2H1H2H1H2H1H

Market Sales Segment

30%

The Market Sales Segment conducts asset management and fund procurement services and provides pertinent information accurately and promptly to fulfill the needs of our corporate clients and broad range of customers.


Value for Tomorrow

Joint Operations with Regional Banks The Tokai Tokyo Financial Group has been developing joint venture businesses with regional banks since 2007. Connecting the Group’s expertise in the securities busi-ness with the customer bases of regional banks generated unique synergy effects from the combination of banking and securities operations. The Group began operating Hokuhoku Tokai Tokyo Securities as a joint venture with the Hokuhoku Financial Group in January 2017 and elevated our consolidated subsidiary Utsunomiya Securities into a joint venture with The Tochigi Bank in April 2017. These additions increased the Group’s number of joint venture securities companies to six and raised its amount of assets under custody to roughly ¥1,400 billion, solidly placing the Group among the ranks of Japan’s middle-tier securities companies (as of the end of September 2017).

Platform Business During the year, we applied the expertise cultivated through our joint operations with regional banks to build out the Platform into a full-fledged operation providing securities companies with the products, infrastructure, and functions necessary for securities company operations (Please see the Great Platform section on page 22.). As of the end of March 2017, the Group was supplying products, including foreign equities, foreign bonds, and structured bonds, as well as systems and employee train-ing services to some 50 securities companies.

Expanding the Platform BusinessThe Tokai Tokyo Financial Group pursues a strategy of forming alliances through the

establishment of affiliated joint venture securities companies and by supplying prod-

ucts and services to other securities companies. The Group, under this strategy, has

established subsidiary companies to provide the functions necessary for securities

company operations.

Joint Operations with Regional Banks

Products

Customer Base

Functions

Equity Stake 40%

Equity Stake 60%

Regional Banks

Affiliated Joint

Venture Securities

Companies

Providing Value

Providing Value Tokai Tokyo Financial Holdings

Products (Tokai Tokyo Securities)

Compliance

Human Resources (Expertise)

Sales Support

Research Reports

Training

System


Tokai Tokyo Wealth Consulting

Tokai Tokyo Academy

Tokai Tokyo Business Service

Tokai Tokyo Research Institute

etc.

Clerical Services


In the fiscal year ended March 31, 2017, the Corporate Finance Segment, led by active bond and equity underwriting operations, posted record-high total revenues of ¥1,201 million, an increase of 27.6% year on year. Our bond under-writing operations, including scheduled bonds, increased 19% year on year, to ¥500.6 billion, and once again substan-tiated our sixth position in the Japan Corporate Bond League Table behind only the traditional five leaders in the domestic financial industry. Our equity underwriting operations included serving as the lead manager for five major stock issues during the year and amounted to ¥30.8 billion, placing us eighth on the IPO League Table.

Strengths In the bond business, we applied our strong proposal origi-nation capabilities to public institutions, particularly local governments, and our strong marketing capabilities to investors to firmly substantiate our position in the domestic financial industry behind only the five companies that have traditionally dominated the market. We became the first lead manager in Japan to be the top issuer of joint local government bonds for nine consecutive months, beginning in November 2016. I believe this achievement was the real-ization of our constant efforts to strengthen our human resources, fortify our proposal origination capabilities, and enhance our marketing capabilities, which we realized

through collaboration between the corporate and market sales departments and the trust we have earned from issuing entities through our unique network. We also leveraged our commanding retail sales base centered on the Chubu region and our broad base of wholesale customers to be a prevalent presence in activi-ties ranging from IPOs and POs to M&A and events cater-ing to private investors. The meticulous proposals and support that we provide through our IPO underwriting sys-tems led to a large number of Chubu companies entrusting us to lead manage stock issuances, giving us experience far surpassing that of larger securities companies.

Initiatives We will continue expanding the scope of our business content to establish a solid customer base stretching out from the Chubu region, cultivate our operations overseas, and enhance our ability to provide information to issuing entities and investors. We use the expansive network and proposal sourcing abilities of our business units and integrated securities companies in all aspects of the securities business to meet

customer needs for financing proposals both in Japan and overseas. We are further enhancing our abilities by collabo-rating with leading investment banks in Europe, the United States, and across Asia to frame strategic proposals to advance the overseas M&A objectives of our customers. We also focus on M&A consulting, including cross- border activities, and on supporting the business expan-sion and succession needs of our customers.

Corporate Finance Segment

Kazuhiko TerakadoManaging Executive Officer Head of Investment Banking Unit Tokai Tokyo Securities

We provide services enabling corporate clients to keep pace with diversifying and increasingly sophisticated issues and needs.

L Tokai Tokyo Securities’ league table ranking for fiscal 2016

Bonds overall:

Underwriting value 6th

Municipal bonds:


Initial public offerings:


Value ¥247,140 million ¥150,100 million ¥6,840 million

Share 1.56% 5.17% 0.97%

Transactions 140 (excluding scheduled bonds*) 57 17

Note: Scheduled bonds are public bonds issued periodically or on a predetermined schedule.


Value for Tomorrow

Overview

YM SecuritiesYM Securities is offering customized consulting guided by close collabora-tion with customers to determine the most-efficient use of all of their import-ant assets. YM Securities provides access to financial products that banks are unable to offer and asset management consulting services specifically aimed at protecting and growing customer assets.

Began operating: October 10, 2007Branches: 17 branches and 2 booths mainly in

Yamaguchi, Hiroshima, and Fukuoka prefectures and Tokyo metropolitan area

Assets under custody: ¥384,810 millionTie-up partner: Yamaguchi Financial Group

Hamagin Tokai Tokyo SecuritiesHamagin Tokai Tokyo Securities aims to be the top securities company in its home region of Kanagawa and is using its personalized “face-to-face” consulting approach to make it an indispensable investment consultant. The company constantly integrates what it learns from meeting the needs of individual clients to provide better services to all of its customers.

Began operating: November 4, 2008Branches: 14 branches and 2 booths mainly

in Kanagawa Prefecture and Tokyo metropolitan area

Assets under custody: ¥412,694 millionTie-up partner: The Bank of Yokohama

Nishi-Nippon City Tokai Tokyo SecuritiesNishi-Nippon City Tokai Tokyo Securities was the first securities company in Kyushu created as a subsidiary of a regional bank. The company provides leading services in the region in all areas of asset management and aims to be the preferred securities company and first choice of its customers in the region.

Began operating: May 6, 2010Branches: 12 branches and 6 booths mainly in

Fukuoka, Miyazaki, Kumamoto, and Kagoshima prefectures

Assets under custody: ¥237,174 millionTie-up partner: Nishi-Nippon Financial Holdings

Overview

Senshu Ikeda Tokai Tokyo SecuritiesSenshu Ikeda Tokai Tokyo Securities was the first joint operation by a regional bank and securities company in the Kinki region, where its opera-tions center on Osaka and Hyogo prefectures. Following a “region first” and “customer first” philosophy and emphasizing the importance of maintaining wide-ranging connections and a progressive spirit, the company aims to provide services matched to the needs of its local customers and to a securities company that all people in the region like.

Began operating: September 2, 2013Branches: 4 branches and 3 offices in Osaka metro-

politan area and Hyogo PrefectureAssets under custody: ¥105,705 millionTie-up partner: Senshu Ikeda Holdings

Hokuhoku Tokai Tokyo SecuritiesHokuhoku Tokai Tokyo Securities is the first collaboration between a securi-ties company and a local bank in the Hokuriku and Hokkaido regions. The company aims to be the most-trusted local-grown securities company in the region by offering a diverse lineup of highly specialized financial products and services catered to the specific needs of a wide range of customers.

Began operating: January 4, 2017Branches: 3 branches in Hokkaido, Ishikawa, and

Toyama prefecturesAssets under custody: ¥104,310 millionTie-up partner: Hokuhoku Financial Group

Utsunomiya SecuritiesAs the only securities company headquartered in Tochigi Prefecture, Utsunomiya Securities is making the maximum use of its full lineup of prod-ucts and services in the financial instruments business to deepen its close ties with the region and local customers and become an essential securities company for local investors. (Utsunomiya Securities became an affiliated joint venture securities company in April 2017.)

Began operating: November 1910Branches: 6 branches in Tochigi PrefectureAssets under custody: ¥89,573 millionTie-up partner: Tochigi Bank

Affiliated Joint Venture Securities Companies

Investment in Asset Management Companies

All Nippon Asset Management (ANAM) was established based on a business model to provide regional banks with an independent asset management platform not affiliated with any existing financial corporate group. ANAM offers services to enhance the asset management functions of regional banks. (Asset portfolio value of ¥134.5 billion as of March 31, 2017)

(3 sales offices)

Utsunomiya Securities (6 sales offices)

Hamagin Tokai Tokyo Securities(16 sales offices)


( 7 sales offices)

YM Securities(19 sales offices)

Nishi-Nippon City Tokai Tokyo Securities

(18 sales offices)




Value for Tomorrow

L Tokai Tokyo Wealth ConsultingTokai Tokyo Wealth Consulting began operating in May 2015 to provide compre-hensive consulting services related to asset succession, real estate, and other asset-related topics to companies in the Tokai Tokyo Financial Group. The company provides consulting services to individual customers, including keeping them informed of the latest tax-related information and conducting “asset assessment service,” such as assessments of asset holdings, and offers consulting services to business owners ranging from advice on business suc-cession to support with M&A activities.

L Tokai Tokyo Research InstituteAs the Group’s financial market analysis and research institute, Tokai Tokyo Research Institute conducts analysis and research on macroeconomic and financial markets of Japan and overseas and keeps the Group’s individual, cor-porate, and institutional investor customers informed of valuable investment information through reports, seminars, and online videos. The institute is advancing a unique strategy of leveraging its global network to enhance industry and corporate research in the Chubu region.

L Tokai Tokyo AcademyThe Tokai Tokyo Academy was created in June 2011 to administer education and training to employees of Group companies. The academy promotes the human resource functions of Group companies by strengthening the professional exper-tise of individuals at all levels in the education, securities, and financial businesses and supports individuals seeking to acquire professional qualifications. The academy also applies the experience and knowledge gained from the Group’s strategic tie-ups to provide education and training for financial institu-tions and other entities outside the Group.

L Tokai Tokyo Business ServiceTokai Tokyo Business Service was founded in July 2008 to provide the back- office functions and system infrastructure shared by the Group’s integrated securities firms and other companies. The company follows a “shared service” concept for its management and sys-tem infrastructure in which it applies its accumulated expertise of Tokai Tokyo Securities to enhance the quality and efficiency of the Group operations and contribute to reducing costs throughout the Group.

Strategic Subsidiaries

The Tokai Tokyo Financial Group’s strategic subsidiaries engage in joint operations with regional banks

and support the Group’s Platform business.

Representative: Koji IidaLocation: 3-1-400, Umeda 1-chome, Kita-ku, OsakaCommon stock: ¥11,069 million (As of March 31, 2017)Established: November 21, 1918

Representative: Yoshikuni TakatsuLocation: 20-19, Minami Aoyama 4-chome, Minato-ku, TokyoCommon stock: ¥50 million (As of May 31, 2017)Established: July 5, 2005

Long-established Securities Firm Based in OsakaTakagi Securities, which became a consolidated subsidiary in April 2017, is a securities company specializing in over-the-counter sales of investment trusts. The company mar-kets these products through its Toshin no Madoguchi (Investment Trust Outlets) and is known for the fairness and neutrality of its product comparisons and recommen-dations, which cover virtually all investment trust products. Tokai Tokyo Securities and Takagi Securities have begun working to quickly realize the operational synergies of joint operations arising from our separate operating bases. We are developing strategies to link the operations in our sep-arate business regions to make strategic use of human resources to improve management efficiency and individu-al segment operations. Sharing management resources in this way will enhance the corporate value of both compa-nies.

Operates the Insurance Terrace Retail Insurance ShopsEternal operates some 70 insurance retail outlets in the Kanto and Kansai regions designed to provide a welcom-ing and comfortable café-style setting for customers seek-ing insurance products. The Tokai Tokyo Financial Group brought Eternal into the Group in March 2017 as part of our strategic development initiative to link with financial industry operators in segments outside the securities busi-ness. The addition of Eternal, which has established strong customer appeal, gives the Group contact points with young and next-generation customers that are often beyond the reach of financial product vendors.

Expanding the Group

The Group raised Eternal and Takagi Securities to wholly owned subsidiaries with

the objective of expanding the Group’s business base and integrating insurance

functions.


Corporate Governance

Systems for Enhancing Corporate Value

Board of Directors

Audit Department

Management Meetings

Comprehensive Risk Management Committee

Human Resources Committee

Nomination and Remuneration Committee

Accounting Auditor

Appointment

Collaborate

Collaborate

Appointment

Audit

Directors serving on the Audit & Supervisory Committee

Audit of Business Execution

Directors who are not Audit & Supervisory Committee Members

Appointment

Instruct ReportInquire Report

General Meeting of Shareholders

Audit & Supervisory Committee

Outside Directors (Audit & Supervisory Committee Members)

Directors (Audit & Supervisory Committee Members)

Outside Directors

Directors

Chairperson of the Board of Directors (Outside Director) President

Chief Executive Officer

Directors

(Non-executive directors) (Executive directors)

Execution of Business

InquireExecutive OfficersGeneral Planning Group

Strategic Planning Group

Comprehensive Risk Management Group

Information & Product Strategy Group

Digital Strategy Group

Management (Execution of Business)

Basic Approach

The Tokai Tokyo Financial Group considers the strengthen-ing and enhancement of corporate governance to be a top management priority, and so it maintains an operating structure facilitating swift decision making and business execution. Management seeks to attain continuous

business growth and raise corporate value over the long term by conducting fair and highly transparent manage-ment activities to earn and maintain the full trust of all stakeholders.

Corporate Governance Structure

The Company’s corporate governance clearly delineates the functions of “business execution” and “management supervision.” On June 29, 2016, the Company converted itself from being a Company with an Audit & Supervisory Board to a Company with an Audit & Supervisory Committee with the objective of strengthening the func-tions of both the Board of Directors and the Audit & Supervisory Committee. The Company adopted the Corporate Governance Framework presented below for its

management and administrative organization for manage-ment decision making, business execution, and super-vision.

WEB Guidelines for Corporate Governance (Japanese)

http://www.tokaitokyo-fh.jp/corporate/governance/pdf/cg_guideline.pdf

WEB Corporate Governance Report

http://www.tokaitokyo-fh.jp/en/corporate/governance/pdf/governance171222.pdf

The Tokai Tokyo Financial Group is working to achieve

sustainable growth and build lasting relationships

with customers and society from a long-term perspective.


ESG Initiatives

Establishment of the Tokai Tokyo Foundation for the Advancement of Local Society

The Company established the Tokai Tokyo Foundation in August 2016. The objective is to contribute to

future prosperity of local society by helping individuals to become local leaders and acquire global skill sets,

and providing opportunities so that the people in the region can deepen understanding of the international

economy and societies, as well as promoting culture and arts there.

Recognized as an “Aichi Women’s Empowerment Company”

Group company Tokai Tokyo Securities was recognized as an “Aichi Women’s

Empowerment Company” on December 21, 2016.

Chosen for “Diversity Management Selection 100”

As a company that has raised its corporate value through diversity initiatives,

we were chosen for “Fiscal 2016 Diversity Management Selection 100” by

Japan’s Ministry of Economy, Trade and Industry.


Systems for Enhancing Corporate Value L Corporate Governance

Board of Directors

The Company’s Board of Directors comprises nine individ-uals: five directors (including two outside directors) who do not serve on the Audit & Supervisory Committee and four directors (including three outside directors) who serve on the Audit & Supervisory Committee. An outside director serves as the Chairperson of the Board. The Board of Directors meets, in principle, once a month to make decisions on fundamental Company policy concerning management issues and important matters as provided for under the law and to deliberate the appropri-

ateness of each agenda item as well as for each director to conduct supervisory activities concerning the execution of their duties. Upon becoming a Company with an Audit & Supervisory Committee, the Board of Directors estab-lished a corporate environment supporting an appropriate level of risk taking by executive directors and created a structure to facilitate swift decision making and business execution by delegating decisions on important business matters to executive directors.


The Audit & Supervisory Committee comprises four indi-viduals, including three outside directors, with an outside director serving as the chairperson of the committee. The primary function of the Audit & Supervisory Committee is to conduct legal audits. The committee for-mulates and operates internal control systems and also supervises and verifies the functioning of the systems. The

committee also audits the directors’ execution of duties by attending and receiving reports from the Board of Directors Meetings and other important meetings, inspect-ing important corporate documents, receiving audit orders and reports from the Audit Department, and receiving reports from accounting auditors.

The Company has adopted the organizational framework that embraces an Audit & Supervisory Committee in accordance with the Companies Act with the objectives of strengthening the supervisory functions of the Board of Directors, facilitating swift decision making by enabling the Board of Directors to delegate the execution of important business matters to executive directors, and thus making it easier for the Board of Directors Meetings to engage in deeper discussion of strategic issues. The Company also maintains a Nomination and Remuneration Committee to ensure objectivity and transparency in decision-making processes associated with the nomination and remuneration of the Board of Directors.

The Company ensures the effectiveness of the Board of Directors while maintaining a high level of trans-parency and fairness by having outside directors represent the majority of the Board of Directors and, in principle, appointing an outside director as the Chairperson of the Board. The Board of Directors presently comprises five outside directors, including three who concurrently serve on the Audit & Supervisory Committee. By maintaining a majority of outside directors on both the Board of Directors and Audit & Supervisory Committee, the Company maintains a heightened level of internal checks and balances.

The Company’s directors each have clearly defined roles and are primarily individuals holding positions of executive directors in charge of business execution or non-executive directors in charge of overseeing business execution.

Organizational Framework

Enhancing Functions of the Board of Directors and the Audit & Supervisory Committee

Distinguish Clearly the Managerial Functions of “Business Execution” and “Management Supervision”

Nomination and Remuneration Committee

The Company maintains a Nomination and Remuneration Committee to ensure objectivity and transparency in decision- making processes associated with the nomina-tion and remuneration of the Board members. The com-mittee conducts deliberations concerning candidates for the position of director and deliberates the structure, level, and individual content of remuneration for each director with reference to remuneration data in the Company’s fields of business provided by an external database. The

committee submits the details of the deliberations to the Board of Directors. The Nomination and Remuneration Committee compris-es a minimum of four committee members, including the chief executive officer. The majority of the committee members are outside directors, and, in principle, an out-side director serves as chairperson of the committee. The committee currently comprises one internal director (the chief executive officer) and three outside directors.

Outside Directors

Name Reasons for Selection

Ichiro MizunoMr. Mizuno was selected to contribute his abundant experience and deep insight as a corporate executive to enhancing the effectiveness of the decision-making and supervisory functions of the Board of Directors.

Masato SettaMr. Setta was selected to contribute his experience and insight serving in such positions as auditor of the core operations of the General Affairs Division and auditor of a publicly listed subsidiary company to enhancing the effectiveness of the decision- making and supervisory functions of the Board of Directors.

Mitsuhiro YasudaMr. Yasuda was selected to contribute his abundant experience and deep insight as a lawyer to enhancing the effectiveness of the decision-making and supervisory functions of the Board of Directors.

Keisuke InoueMr. Inoue was selected to contribute his abundant experience and deep insight as a financial institution corporate executive to enhancing the effectiveness of the decision-making and supervisory functions of the Board of Directors.

Fumio InuiMr. Inui was selected to contribute his abundant experience and deep insight from serving in positions at governmental and nonlife insurance companies to enhancing the effectiveness of the decision-making and supervisory functions of the Board of Directors.

Analysis and Assessment of the Effectiveness of the Board of Directors in Fiscal 2016

The Company has conducted an analysis and assessment of the effectiveness of the Board of Directors with the objectives of enhancing the functioning and effectiveness of the Board of Directors and realizing continuous improvement in corporate value by deepening recognition, sharing insight, and improving approaches concerning the Board’s course of action and the issues the Board faces.

Analysis and Assessment MethodDirectors on the Board of Directors completed confidential self-evaluation questionnaires designed to determine if the Board of Directors is appropriately formulated to ensure diversity and enable the directors to fulfill their duties. The directors conducted an uninhibited discussion of aggre-gated questionnaire results, and the aggregated results along the analysis of the findings from the discussion were deliberated at a Board of Directors Meeting.

Analysis and Assessment ResultsThe Company determined from the analysis and assess-ment that the Board of Directors was generally functioning effectively. The governance of the Board of Directors was

given high marks for being formulated to emphasize the role of outside directors by continually maintaining a majority representation by outside directors and appoint-ing an outside director as Chairperson of the Board of Directors. The view was also expressed that the decrease in the number of directors, including auditors, upon becoming a Company with an Audit & Supervisory Committee accelerated decision making and led to livelier discussions at Board of Directors Meetings. Constructive feedback was also received about ways to further improve the effectiveness of the Board of Directors, including the need to explain and deliberate important issues at an earlier stage, provide more opportunities to participate in explanatory briefings and exchange views on issues, and also, when necessary, to allow additional time for deliberation and increase monitoring of director activities.

WEB Fiscal 2016 Effectiveness analysis and assessment of the Board of Directors (Japanese)

http://www.tokaitokyo-fh.jp/corporate/governance/ pdf/h28_outline.pdf

Main Characteristics of the Company’s Corporate Governance



Tateaki Ishida President & CEO (Representative Director) a

April 1968 Joined The Tokai Bank, Ltd.May 2004 Advisor of the CompanyJune 2004 Deputy President of the CompanyMarch 2005 President of the CompanyJune 2006 President & CEO (Representative Director) of the Company (current position)April 2009 Chairman & CEO (Representative Director), Tokai Tokyo Securities Co., Ltd.

(current position)

Hiroshi Maezono Deputy President (Representative Director) Aide to the CEO b

April 1984 Joined The Tokai Bank, Ltd.October 2015 Managing Executive Officer, Deputy Head of Strategic Planning Group of the

CompanyApril 2016 Senior Managing Executive Officer, Head of General Planning Group of the

CompanyApril 2017 Deputy President, Head of Information and Products Strategy Group of the

CompanyJune 2017 Deputy President (Representative Director) of the Company (current position)June 2017 Director, Tokai Tokyo Securities Co., Ltd. (current position)

Toshiyuki Hayakawa Director c

April 1978 Joined The Tokai Bank, Ltd.September 2007 Executive Officer, Tokai Tokyo Securities Co., Ltd.April 2012 Director and Deputy President, Hamagin Tokai Tokyo Securities Co., Ltd.April 2014 Senior Managing Executive Officer, Chief of Strategic Business Group of the

CompanyApril 2015 President and COO, Tokai Tokyo Securities Co., Ltd. (current position)June 2015 Director of the Company (current position)

Ichiro Mizuno Outside Director d

April 1966 Joined Mitsubishi CorporationJune 1997 General Manager, Finance Dept., Mitsubishi CorporationJune 2003 Member of the Board, Executive Vice President, and CFO, Mitsubishi

CorporationApril 2006 Member of the Board and Senior Executive Vice President, Mitsubishi

CorporationJune 2010 Director, Tokai Tokyo Securities Co., Ltd. June 2013 Director of the Company (current position)June 2016 Chairperson of the Board of Directors (current position)

Masato Setta Outside Director e

April 1983 Joined Toyota Motor CorporationJanuary 2011 General Manager, General Administration Group, Toyota Motor CorporationJune 2013 Managing Officer, Toyota Financial Services Corporation

Director of the Company (current position)April 2017 Advisor, Toyota Accounting Service Co.June 2017 President, Toyota Accounting Service Co. (current position)

Masato Okajima Director/Audit & Supervisory Committee Member f

April 1983 Joined Tokyo Securities Co., Ltd. (currently, the Company)April 2013 Managing Executive Officer and Deputy Chief of General Planning Group

of the CompanyOctober 2013 Managing Executive Officer, Head of Operation Unit, General Manager

of Funds Department, Tokai Tokyo Securities Co., Ltd.April 2015 Managing Executive Officer of the CompanyJune 2015 Full-time Audit & Supervisory Board Member of the Company;

Audit & Supervisory Board Member, Tokai Tokyo Securities Co., Ltd.June 2016 Director and Full-time Audit & Supervisory Committee Member of the

Company (current position)

Mitsuhiro Yasuda Outside Director/Audit & Supervisory Committee Member g

April 1977 Registered as Attorney at LawJanuary 1987 Partner, Mitsui & Yasuda Law FirmMay 2005 Partner, Linklaters Gaikokuho Kyodo-Jigyo (foreign law joint enterprise)

Law FirmJuly 2007 Partner, Nishimura & AsahiMarch 2015 Of Counsel, Marunouchi International Law Office (current position)June 2015 Audit & Supervisory Board Member of the CompanyJune 2016 Director and Chairman of Audit & Supervisory Committee of the Company

(current position)

Keisuke Inoue Outside Director/Audit & Supervisory Committee Member h

April 1973 Joined Sumitomo Life Insurance CompanyApril 2009 Executive Vice President, Mitsui Life Insurance Co., Ltd.June 2009 Director and Executive Vice President, Mitsui Life Insurance Co., Ltd.April 2012 Executive Advisor, Sumitomo Life Insurance CompanyJuly 2013 Head, Azabu Economic Research Institute (current position)April 2016 Part-time Advisor of the CompanyJune 2016 Director and Audit & Supervisory Committee Member of the Company

(current position)

Fumio Inui Outside Director/Audit & Supervisory Committee Member i

April 1970 Joined the Ministry of FinanceJanuary 2001 Director General, Planning and Coordination Bureau, Financial Services

AgencyJuly 2001 Director, Development Bank of Japan Inc.June 2008 Vice Chairman, The Investment Trusts Association, JapanJune 2015 Chairman, Kinzai Institute for Financial Affairs, Inc. (current position)July 2015 Advisor, Tokio Marine & Nichido Fire Insurance Co., Ltd.June 2017 Director and Audit & Supervisory Committee Member of the Company

(current position)

Leadership

(Front row, left to right) Mitsuhiro Yasuda, Ichiro Mizuno, Tateaki Ishida, Masato Setta (Back row, left to right) Hiroshi Maezono, Fumio Inui, Keisuke Inoue, Toshiyuki Hayakawa, Masato Okajima

a

bc

e

f

dg

hi



Interview with an Outside Director

The role of an outside director is to check whether business is run correctly based on the expertise and experience he or she has.

Q Could you tell me what sort of career background you have?

I joined Mitsubishi Corporation in 1966 and was assigned various duties there, for instance, in foreign exchange and finance as department head, and finally as a Chief Financial Officer. During all those years, I had gone through many experiences, and one of the exciting memories I still vividly remember is about the days of myself being a General Manager of the Corporate Information Department. I was working then with many young individ-uals coming out from overseas business schools reporting to me, and I still remember vividly the way they were nego-tiating with people from overseas. They appeared undaunted even facing tough seasoned negotiators from the world over, which to me was very impressive. I feel a sort of curious fate that ties myself with the Com-pany. When I was in London as an expat from Mitsubishi Corporation, Tokyo, Mr. Ishida was also there as a head of a Japanese bank’s hedge fund operation. Now, he runs this Company as a CEO, and this is quite a coincidence that somehow brought me here in 2010 as an out side director. When I was sounded out first whether I was inter-ested in the position of outside director, the Company awfully surprised me by stating that they would fill the half

of the Board of Directors’ quorum with outside direc tors. I think that expressing that sort of idea then would have required a firm determination. This substantiates the fact the Company even then was ahead of others being keenly aware of indispensability of corporate governance.

Q Would you define what the mission of the Company’s outside director should be?

Now, no less than two outside directors are required as the corporate governance code became effective. As a result, I often hear that human resource that may qualify as outside director is running short. I basically consider that the role of outside director should be assumed as a volun-tary social contribution by someone with ample achieve-ment in a certain field. This means that any person to be appointed as outside director should be someone with sufficient insight who understands the difficulty of the duty and importance of the responsibility that will be imposed on such a mission. In this respect, I deem it a little odd to come across an outside director who serves five or six companies. I must study the industry, read in advance the proposals of, and the material for, the Board of Directors Meeting. So, to me, assuming the duty for just one com-pany is demanding enough.

I find my mission as an outside director to be exerting effort to improve corporate value. Having said that, I may be limited on the level of my understanding of the Company as I am not engaged full time in the duty. Further, if I am a licensed practitioner of law, I would be able to give advice from a legal point of view. If I am a scholar, I may provide advice from my special field of study. But, I am neither of those two. So, outside direc-tors, in general, are expected to check to see if any given company is properly managed and to give suitable advice using their experience and knowledge.

Q How do you rate the Company as it is being currently run?

Competition is extremely intense in the securities broker-age industry, and it is more so among mid-sized players. Now is the time when we must win cutthroat battles to survive, and we will see more violent waves of unification and breakup in the Japanese banking and securities bro-kerage industries. Facing such a severe operating environ-ment, managers are expected to lead masterly their companies to secure sustainability. I guess that we can no longer survive on commission revenue alone. I think we, securities brokers, will be re- orientating toward comprehensive financial service provid-ers. We, therefore, need to acquire the services providing competence of banking, insurance, and other services. Toward this end, we are building the business model, “High-Powered Platform”, which represents our crucial strategy. Another stride we are making is to form a unique financial service group by acquiring businesses with a competitive edge, such as Takagi Securities. What matters most now to the business we operate is to identify the way we can help customers build their wealth and that underscores inevitably the need to advance higher advisory competence. In other words, we will find it impossible from now on to survive without pos-sessing comprehensive financial service capabilities. Considering this, I think we have formulated the correct strategy.

QCan you comment on the tasks to deal with from now onward for the Company to achieve sustained growth?

Making sustained growth a reality, as I understand, is the single most essential task imposed on top management. Any given securities brokerage business is viable only if the right human resource is available. Further, the leader-ship and the direction the top leader shows are gravely important to employees because they must know correctly where their company aims to go. Mr. Ishida, in that respect, is a very superb leader, and he should have been an excellent commander in whatever the area of business he might have gotten involved in. Therefore, the task now is to choose the next leader who fills his shoes, and we often discuss that as a topic in the Board of Directors Meetings. The Company must train the next leader by delegating authorities as much as rea-sonably possible to the officers responsible for day-to-day business execution. Leaders must meet the requirements like foresight, decisiveness, and personal charm. But, such aptitude may not be acquired overnight. Also, a tal-ented person with a character defect or the one with com-munication difficulty is not considered fit to become a leader. The most-damaging consequence we would run into by selecting erroneously someone lacking in appropriate resources as a leader is that he or she may take the Company into the wrong direction and fulfill no responsibil-ity just attempting self-protection. I know of such wrong leaders too many to list who had driven firms to crisis. I think that outside directors should prevent such crises from happening by monitoring the management and tak-ing actions to facilitate corporate value enhancement and sustained growth of the Company.

Ichiro MizunoOutside Director Chairperson of the Board of Directors



Compliance & Risk Management

Basic Approach

The Tokai Tokyo Financial Group considers compliance to be one of its most-important managerial tasks, and it has put in place a system for ensuring the propriety of opera-tions. The Group has established and enforces basic stan-dards such as the Basic Compliance Policy and the Ethical Code of Conduct. As a risk management framework, under the Risk Man-agement Rules, the Group has defined the departments responsible for each risk category, and it comprehensively

manages the overall risk of the Company and subsidiaries. It has also established the Comprehensive Risk Management Committee as the Company organization for deliberations and planning concerning risk management policy and matters deemed necessary for management methods formulation and risk management. The results and proposals are reported and submitted to the Board of Directors.

Compliance Framework

As a framework for securing the effectiveness of measures to enforce the strict observance of laws and regulations, the Group has set up the Comprehensive Risk Manage-ment Committee as an organization to report on the measures being taken, and it has established the Compre-hensive Risk Management Department as the department specialized in providing guidance, monitoring, and coordi-nation on compliance.

WEB Tokai Tokyo Financial Holdings

Basic Compliance Policy http://www.tokaitokyo-fh.jp/en/policy/compliance.html

Tokai Tokyo Financial Group’s Ethical Code of Conduct http://www.tokaitokyo-fh.jp/en/policy/ethics.html

Risk Management Framework

Under the “Basic Risk Management Policy” and the “Risk Management Rules,” the Group has defined the depart-ments responsible for each risk category, and it compre-hensively manages the overall risk of the Company and its Group companies. It has also established the Comprehensive Risk Management Committee as the organization for delibera-tions and planning concerning risk management policy and matters deemed necessary for management methods and risk management. The results and proposals are reported and submitted to the Board of Directors.

In addition, as a crisis management framework for disaster situations, etc., the Group has clarified responsi-bilities under the “Crisis Management Basic Policy for Disasters, Etc.” and the “Crisis Management Guidelines for Disasters, Etc.” It is also working to put in place and promote a comprehensive and systematic disaster pre-vention, emergency response, and recovery framework. The Comprehensive Risk Management Department has been established as the department specialized in provid-ing guidance, monitoring, and coordination concerning these various risks.

Three Lines of Defense for Risk Management

The Company constantly seeks to fortify its risk management system and employs a “Three Lines of

Defense” approach of risk identification, assessment, and monitoring.

First Line: Operating departmentsThese departments have before-the-fact and after-the-fact responsibilities for identifying, assessing, and managing risks. Through risk assessments and compliance study groups, they take the initiative in recognizing (identifying and assessing) various types of risks in operations.

Second Line: Comprehensive Risk Management Department/ Administrative Department of SubsidiariesThis department supports the risk management of the First Line.

Maintaining close communications with the operating departments, it ensures that risks are properly identified and managed.

Third Line: Audit DepartmentThis department verifies and assesses from an indepen-dent perspective whether the first and second lines of defense are functioning effectively. It evaluates the effectiveness of internal control process-es related to financial reporting.

Tokai Tokyo Securities’ Risk Management Framework

Tokai Tokyo Securities established a Credit & Market Risk Committee and Finance & Accounting Committee. The Company also drew up related rules and established a framework facilitating the routine practices of analyzing, managing, and reporting market risk, credit risk, and liquidity

risk. To secure the sound management and financial stand-ing of Tokai Tokyo Securities, the Board of Directors has set lower limits for capital adequacy ratios, the maintenance of which or better is designated a basic policy of risk manage-ment operations.

Risk Category Measures

Market Risk ManagementBased on the “Risk Management Rules,” the risk controlling department, which is independent from the trading execution department, performs risk control by calculating risk, positions, and profit or loss on a daily basis.

Credit Risk Management

Based on the “Risk Management Rules,” the losses that could occur as a result of nonperformance by the transac-tion counterparty are managed so that they can stay within a predetermined limit. In addition, in accordance with the “Credit Risk Rules,” credit risk allowance is determined and managed thereafter for each counterparty on the basis of their financial strength.

Liquidity Risk Management Associated with Funding

Based on the “Liquidity Risk Management Rules,” the departments responsible for financing monitor and manage suitably the cash position on a daily basis. Moreover, they prepare a contingency plan to deal with financial market volatility, and they present a monthly funding forecast periodically to the Finance & Accounting Committee.

Board of Directors

Comprehensive Risk Management Department Audit Department

Operating departments

Operating departments

Administrative Department

Tokai Tokyo Financial Holdings

Group companies

Comprehensive Risk Management Committee


Instruct

Instruct

Audit

Audit

CollaborateInstruct

Instruct

Instruct, Guidance, Risk monitoring

Instruct, Guidance, Risk monitoring

Report

Report

Report, Proposals

Report, Proposals

Report

Report

Second Line Third Line

First Line

First Line

Second Line



Initiatives Geared Toward SocietyGlobal Advisory Board

The Tokai Tokyo Financial Group seeks to fulfill its corporate social responsibility (CSR) by contributing to

society through its business activities guided by the Group Standards of Ethical Conduct.

Basic Approach to CSR

We believe earning and maintaining trust in the Group as a leader in the financial and capital markets requires that we fulfill our responsibility to constantly conduct and actively demonstrate the strictest legal compliance. We also

believe respecting and maintaining positive and smooth relations with all of our various stakeholders is fundamental to the continuous growth and long-term increase in the corporate value of the Group.

Contributing from Our Core Business to Society

Financial Education for University StudentsTokai Tokyo Financial Holdings sponsors a university course teaching the role and business profile of securi-ties companies in capital markets. Presented at four

universities in Nagoya and Tokyo, the half-year course explores the actual workings of a securities house with Group directors and employees presenting lectures based on their hands-on experiences.

Regional Social Activities

Supporting Industry Invigoration in the Chubu RegionThe need to make a move toward the Open Innovation is rising also in the Chubu region, the hub of the Japanese manufacturing industry. The concept, Open Innovation, calls for the proactive introduction of technologies devel-oped by other industries or universities. Tokai Tokyo Financial Holdings, therefore, established the Chubu Open Innovation College Program as a gathering point for cor-porate executives to discuss and exchange ideas. The Company hosted the school’s first seminar in June 2017 at the Company’s Orque d’or Hall in Nagoya, Aichi Prefecture.

Cultivating Future Leaders Who Lead Chubu for Its Global DevelopmentThe Company established the Nagoya University Tokai Tokyo Financial Holdings Global Business Program to sup-port academic and educational exchange between Nagoya University and universities in the United Kingdom with the aim of cultivating individuals who will be able to lead the region’s future global development. In fiscal 2016, the program presented a seminar open to students and the public on international affairs to increase understand-ing of international developments. The program also sent local undergraduate and graduate school students on education exchange programs to the University of Cambridge and University of Edinburgh in the United Kingdom.

Establishment of the Tokai Tokyo FoundationThe Company established the Tokai Tokyo Foundation in August 2016 in commemoration of the 15th anniversary of the creation of the Tokai Tokyo Financial Group. The objective of the foundation is to contribute to future pros-perity of local society by helping cultivate individuals to become local leaders, fostering individuals with global skill sets, providing opportunities to deepen local understand-ing of the international economy and societies, and pro-moting culture and arts. The foundation presented its first grant to the Tongali Project organized by Nagoya University to encourage entrepreneurs to spring up. The project is a collaborative initiative among the sectors including Academic Research & Industry, Academia, and Government.

WEB CSR Initiatives (Japanese)

http://www.tokaitokyo-fh.jp/csr/approach/

In 2014, to strengthen the Group’s strategy both in Japan and overseas, our company established a Global

Advisory Board (GAB), whose members are leading experts from major foreign countries, including a former

European Central Bank President.

On May 25, 2017, the fourth GAB meeting was held in Nagoya. This meeting saw the gathering of global

political and economic experts such as Mr. Jean-Claude Trichet, former President of the European Central

Bank; Mr. Robert M. Kimmitt, former United States Deputy Secretary of the Treasury; and Mr. Enrique V.

Iglesias, former President of the Inter-American Development Bank. With GAB Chairman Mr. Makoto Utsumi

(former Vice Minister of Finance) playing a central role, the discussions covered the economic trends and

geopolitical status of regions throughout the world. In addition, as public events, a special lecture by Mr.

Jean-Claude Trichet in Tokyo and a symposium titled “Global Political and Economic Scene: Current

Situation and Future Perspectives” at Nagoya University were held. Both events successfully attracted a very

large number of people.

Mr. N.K. Singh a

Former Member of Parliament of IndiaSenior Member of Bharatiya Janata Party

Mr. Tateaki Ishida* b

Tokai Tokyo Financial Holdings, Inc.President & CEO

Mr. Makoto Utsumi c

Former Vice Minister of Finance, Ministry of FinanceFormer Professor of Keio University Faculty of Business and CommerceTokai Tokyo Financial Holdings, Inc.Global Advisory Board Chairman

* Mr. Tateaki Ishida and Mr. Hiroshi Maezono are participating as observers.

Mr. Hiroshi Maezono* d

Tokai Tokyo Financial Holdings, Inc.Deputy President

Mr. Enrique V. Iglesias e

Former President of the Inter-American Development BankTrustee of the Elcano Royal Institute

Mr. Jean-Claude Trichet f

Former President of the European Central BankG30 Chairman

Mr. Robert M. Kimmitt g

Former U.S. Deputy Secretary of the TreasurySenior International Counsel of Wilmer Cutler Pickering Hale and Dorr LLP

Mr. Kevin G. Nealer h

The Scowcroft GroupPrincipal

Participating Members of the Global Advisory Board

a b c d

f ge h

Global Advisory Board Internal Meeting (May 24-25, 2017)



L Endorsement of the “Declaration on Action” of the General Meeting of Male Leaders Actively Promoting the Empowerment of Women

Tokai Tokyo Financial Holdings President & CEO Tateaki Ishida proudly gave the Company’s endorsement to the “Declaration on Action” proclaimed by the General Meeting of Male Leaders Actively Promoting the Empowerment of Women, initiated by the Government of Japan’s Cabinet Office.

Promoting Women in the WorkplaceL Numerical TargetsThe Company set a target of attaining 20% of manage-ment positions filled by women by March 31, 2017. The Company had monitored continuously the progress since the target was set in October 2014 to the target attain-ment in January 2017. As of March 31, 2017, women held 21.0% of management positions in the Company. Management has now set new, more-ambitious targets* to continue advancing the promotion of women in the workforce.

Targets for the end of fiscal 20191. Percentage of women in management positions: 25%2. Percentage of advanced professional women in the workforce:

50%3. Percentage of men taking child-care leave: over 30%

* Tokai Tokyo Financial Holdings and Tokai Tokyo Securities

Percentage of Women in Management Positions (Tokai Tokyo Financial Holdings, Tokai Tokyo Securities)

(%)

2017/4/12016/10/12016/4/12015/10/12015/4/12014/10/10

18

16

14

20

22

L Smart Return Discussion Meetings and Returnee Training

The Company distributes its “Smart Return Book” with articles providing help-ful information to support and prepare employees

who are maintaining their jobs while pregnant, on child-birth leave, or while caring for young children. The Company also facilitates discussion meetings between employees planning to take child-care leave and their superiors. The Company also provides annual career train-ing workshops for employees with children who are return-ing to work after child-care leave.

L Role Model InitiativesThe Company also conducts an ongoing program of intro-ducing women with extensive experience in positions of authority to serve as positive role models to the female students and other women outside the Company. We present clear examples of the role models who are making important contributions. We provide participants with the opportunities to learn from the role models’ experiences and personalities. Our idea is to encourage the partici-pants to envisage clear images of working at the front line on a long-term basis.

Diversity Promotion InitiativesL Diversity Training for Male Management, Career

Design Training for Female EmployeesThe Company offers a diversity training program for male management to deepen understanding of the advantages of promoting diversity and enhance management skills for a diverse workforce. Similarly, the Company offers career design training specifically for female employees providing opportunities to consider specific needs when planning their careers.

L Participation in the MHLW Workplace Environment Model for Employees Providing Nursing Care

To prevent employees leaving their jobs for nursing care, in 2014, the Company participated in a Ministry of Health, Labour and Welfare program to develop strategies for companies to accommodate the growing number of work-ers expected to take on dual duties of working and provid-ing nursing care. The Company conducts internal Company surveys of employees who were involved in caregiving situations with the aim of developing programs to make it possible for individuals to provide care without leaving their jobs.

WEB Promoting Diversity (Japanese)

http://www.tokaitokyo-fh.jp/corporate/businessplan/diversity.html

Promotion of SportsIn November 2016, the Company entered into a compre-hensive agreement for its Athlete Development Program to collaborate with the academic institutions, Umemura Gakuen and Chukyo University, to promote a full range of sports culture in the region. Through this collaboration, the Company established a scholarship program for student athletes.

Support for Disaster ReliefThe Company provides disaster-relief funds to help individ-uals in areas around the world that have been stricken by major catastrophes. The foundation donated ¥5 million to the Japanese Red Cross Society in Aichi Prefecture after the devastating Kumamoto earthquakes in April 2016. Tokai Tokyo Financial Group directors and employees also collected and donated a total of ¥7.42 million to the relief effort. While sincerely hoping for quick recoveries in the stricken areas, our directors and employees are ready to provide their unified support to others in times of need.

Customer Satisfaction Initiatives

Customer SurveysThe Company seeks to increase long-term profits by deepening customer loyalty and devotion through reliability and customer satisfaction. Tokai Tokyo Securities, the flagship of the Tokai Tokyo Financial Holdings Group, began conducting annual cus-tomer surveys in 2008 to regularly gauge customer opinions

and uses the responses as a basis for improving its prod-ucts and services to further enhance customer loyalty. The Company uses the survey responses to quantify customer satisfaction as a “CS rate,” which it uses as a key performance indicator (KPI) to evaluate how thorough it conducts customer-first operation, and applies the results to improve its service offerings.

Employee Advancement Initiatives

The Group conducts various activities aimed at promoting diversity, which it believes is a key management strategy for responding to the changes in society. In addition to its award-winning efforts to promote women in the workforce, the Group is aiming to cultivate its rich and diverse work-force, which also encompasses abundantly experienced senior employees. We respect each individual’s unique-ness and strengths and support their growth and develop-ment to realize their full potential. In addition to efforts to increase the active participation of women in our workforce, we also have established the offices designed to promote human resource initiatives.

Management LeadershipL Clear Management MessageThe Company distributes a binder entitled the “Diversity Bible” to all directors and employees. The front page of the binder clearly presents the message from the President & CEO that promoting diversity in the workplace is an important management strategy.



Performance ReviewFinancial Statements 52

Company Information 59

Share Information 60

Environmental Initiatives

Energy-Saving Initiatives

The term “intensity” refers to the volume of energy neces-sary per unit of production output; it is used as an index showing production activity efficiency. Japan’s Act on Rational Use of Energy states that “Parties using energy to engage in business should endeavor to meet the target of reducing their energy intensity by an average of at least 1% per year.” The Group has achieved this target and is working for further reductions.

Energy Usage Intensity

(Intensity) Comparison to previous fiscal year (%)

0.0000000

0.0001000

0.0002000

0.0003000 104

95

101

98

20162015201420132012

5-year average(97.4%)

Target level for year-on-year change(Under 100%)

5-year average target line for energy units (99% or less)

L Intensity Comparison to previous fiscal year (Fiscal year)

Note: Statistics for main subsidiary Tokai Tokyo Securities

Introduction of Fuel Cell Vehicles

For company vehicles, we have been moving forward with a changeover to vehicles that provide large CO2 emission reduction benefits, and, in June 2017, we introduced two fuel cell (hydrogen) vehicles because they further reduce the environmental burden. Fuel cell vehicles use hydrogen

as fuel, and they are considered “eco cars” as they pro-duce no CO2 emissions, and they also do not emit NOx or other harmful substances either that can cause air pollu-tion.

L Senior Employee Promotion ActivitiesThe Company encourages senior employees to remain active in the workforce and annually presents a second career training program for employees turning 53 years of age. The program provides opportunities to consider the future course of their careers and to deepen

understanding of the road ahead as many take on dual responsibilities as an employee and a caregiver for their parents. The Company has several options for employees desiring to continue working into their 60s and has estab-lished programs for employees to work until age 70.

External RecognitionTokai Tokyo Financial Holdings’ programs and initiatives have earned numerous certifications and awards.

• “Eruboshi (L-Star awarded)” Company for Promoting Women’s Participation in the Workplace 2017. The Company won Double L Star award from the Ministry of Health, Labour and Welfare

• Fiscal 2016 Diversity Management Selection 100 from the Ministry of Economy, Trade and Industry

• Fiscal 2015 Tokyo Award for the Promotion of Women from the Tokyo Metropolitan Government

• Recognized as an Aichi Women’s Empowerment Company (2016, Tokai Tokyo Securities) by Aichi Prefecture

• Fiscal 2014 Award of Excellence in Recognition as a Company Promoting the Empowerment of Women (Tokai Tokyo Securities) by the Nagoya Metropolitan Government

• Fiscal 2015 recognition as a Company Supporting Child Care (Tokai Tokyo Securities) by the Nagoya Metropolitan Government


Consolidated Balance Sheet Tokai Tokyo Financial Holdings, Inc. and Subsidiaries

As of March 31, 2017

Assets

Millions of yenThousands of

U.S. dollars

2017 2016 2017

Cash on hand and in banks:

Cash and deposits ¥ 72,684 ¥ 45,204 $ 647,864

Cash segregated as deposits 37,506 28,712 334,309

110,190 73,916 982,173

Collateralized short-term financing agreements:

Cash collateral pledged for securities borrowed 214,992 134,043 1,916,321

214,992 134,043 1,916,321

Trading assets:

Trading securities 289,265 255,621 2,578,348

Derivatives 3,230 3,614 28,795

292,495 259,235 2,607,143

Receivables:

Receivables from brokers, dealers, and clearing organizations 18,996 11,952 169,317

Receivables from customers 157 130 1,398

Receivables related to margin transactions 44,610 41,375 397,631

Other 4,515 3,523 40,242

68,278 56,980 608,588

Allowance for doubtful accounts (32) (32) (293)

68,246 56,948 608,295

Short-term investment securities 0 — 2

Investment securities 14,709 14,518 131,113

Investments in associated companies 19,345 10,552 172,433

Deferred tax assets 1,254 209 11,178

Other assets:

Property and equipment 16,164 18,241 144,075

Accumulated depreciation (7,603) (8,038) (67,766)

8,561 10,203 76,309

Goodwill 2,804 — 24,996

Lease deposits 2,416 2,090 21,537

Asset for retirement benefits 2,318 2,697 20,657

Other 5,011 5,474 44,667

21,110 20,464 188,166

Allowance for doubtful accounts (405) (1,336) (3,616)

20,705 19,128 184,550

Total assets ¥741,936 ¥568,549 $6,613,208

Liabilities and Equity


U.S. dollars

2017 2016 2017

Borrowings:

Short-term borrowings ¥ 80,488 ¥ 81,052 $ 717,429

Commercial paper 9,300 9,800 82,895

Current portion of long-term debt 31,045 35,856 276,715

Long-term debt 70,715 21,650 630,313

191,548 148,358 1,707,352

Collateralized short-term financing agreements:

Cash received on securities loaned 131,164 68,539 1,169,125

131,164 68,539 1,169,125

Trading liabilities:

Trading securities 185,262 129,790 1,651,324

Derivatives 7,192 7,322 64,108

192,454 137,112 1,715,432

Payables:

Payables to brokers, dealers, and clearing organizations 7,674 15,262 68,405

Payables to customers 31,397 25,131 279,855

Payables related to margin transactions 9,133 5,708 81,406

Other 11,328 5,871 100,969

59,532 51,972 530,635

Deferred tax liabilities 1,241 471 11,063

Accrued and other liabilities:

Income taxes payable 1,860 533 16,582

Provision for bonuses 2,245 1,722 20,007

Liability for retirement benefits 563 548 5,016

Other 3,649 3,650 32,528

8,317 6,453 74,133

Statutory reserves 450 440 4,009

Total liabilities 584,706 413,345 5,211,749

Equity

Common stock: Authorized: 972,730,000 shares Issued: 280,582,115 shares in 2017 and in 2016 36,000 36,000 320,884

Capital surplus 33,016 33,473 294,288

Stock acquisition rights 444 327 3,957

Retained earnings 90,693 85,537 808,389

Treasury stock, at cost: 18,877,456 shares in 2017 and 16,706,568 shares in 2016 (7,571) (6,389) (67,493)

Accumulated other comprehensive income: Unrealized gain on available-for-sale securities 1,440 2,026 12,835

Foreign currency translation adjustments (251) (11) (2,240)

Defined retirement benefit plans 1,987 2,454 17,709

Total 155,758 153,417 1,388,329

Noncontrolling interests 1,472 1,787 13,130

Total equity 157,230 155,204 1,401,459

Total liabilities and equity ¥741,936 ¥568,549 $6,613,208


Consolidated Statement of Comprehensive Income Tokai Tokyo Financial Holdings, Inc. and Subsidiaries

For the year ended March 31, 2017

Consolidated Statement of Income Tokai Tokyo Financial Holdings, Inc. and Subsidiaries



U.S. dollars

2017 2016 2017

Revenues:

Commissions ¥26,934 ¥34,267 $240,079

Net gain on trading 35,737 30,330 318,543

Interest and dividend income 2,741 2,988 24,432

Total revenues 65,412 67,585 583,054

Interest expense 1,684 1,307 15,016

Net revenues 63,728 66,278 568,038

Selling, general and administrative expenses 54,230 53,635 483,381

Operating income 9,498 12,643 84,657

Other income, net 6,698 5,282 59,702

Income before income taxes 16,196 17,925 144,359

Income taxes:

Current 3,989 4,527 35,557

Deferred 205 908 1,822

Total income taxes 4,194 5,435 37,379

Net income 12,002 12,491 106,980

Net income attributable to noncontrolling interests 12 68 105

Net income attributable to owners of the parent ¥11,990 ¥12,423 $106,875

Yen U.S. dollars

2017 2016 2017

Per share of common stock:

Basic net income ¥45.73 ¥46.92 $0.41

Diluted net income 45.72 46.87 0.41

Cash dividends applicable to the year 26.00 28.00 0.23


U.S. dollars

2017 2016 2017

Net income ¥12,002 ¥12,491 $106,980

Other comprehensive income:

Unrealized loss on available-for-sale securities (604) (1,955) (5,387)

Foreign currency translation adjustments (237) (81) (2,113)

Defined retirement benefit plans (510) (160) (4,542)

Share of other comprehensive income in associates 59 — 523

Comprehensive income ¥10,710 ¥10,295 $ 95,461

Total comprehensive income attributable to:

Owners of the parent ¥10,696 ¥10,229 $ 95,342

Noncontrolling interests 14 66 119


Consolidated Statement of Changes in Equity Tokai Tokyo Financial Holdings, Inc. and Subsidiaries


Thousands of shares Millions of yen Millions of yen

Accumulated other comprehensive income

Common stock Treasury stock Common stock Capital surplusStock acquisition

rightsRetained earnings Treasury stock

Unrealized gain on

available-for-sale securities

Foreign currency translation

adjustments

Defined retirement

benefit plans TotalNoncontrolling

interests Total equity

Balance as of April 1, 2015 280,582 13,929 ¥36,000 ¥33,470 ¥196 ¥82,140 ¥(3,639) ¥3,979 ¥ 70 ¥2,614 ¥154,830 ¥2,522 ¥157,352

Net income attributable to owners of the parent — — — — — 12,423 — — — — 12,423 — 12,423

Cash dividends, ¥34.00 per share — — — — — (9,026) — — — — (9,026) — (9,026)

Purchase of treasury stock — 3,003 — — — — (2,824) — — — (2,824) — (2,824)

Disposal of treasury stock — (226) — 3 — — 74 — — — 77 — 77

Net change in the year — — — — 131 — — (1,953) (81) (160) (2,063) (735) (2,798)

Balance as of March 31, 2016 280,582 16,706 ¥36,000 ¥33,473 ¥327 ¥85,537 ¥(6,389) ¥2,026 ¥ (11) ¥2,454 ¥153,417 ¥1,787 ¥155,204

Net income attributable to owners of the parent — — — — — 11,990 — — — — 11,990 — 11,990

Cash dividends, ¥26.00 per share — — — — — (6,834) — — — — (6,834) — (6,834)

Purchase of treasury stock — 3,478 — — — — (1,694) — — — (1,694) — (1,694)

Disposal of treasury stock — (1,307) — (477) — — 512 — — — 35 — 35

Change in the parent’s ownership interest due to transactions with noncontrolling interests — — — 20 — — — — — — 20 — 20

Net change in the year — — — — 117 — — (586) (240) (467) (1,176) (315) (1,491)

Balance as of March 31, 2017 280,582 18,877 ¥36,000 ¥33,016 ¥444 ¥90,693 ¥(7,571) ¥1,440 ¥(251) ¥1,987 ¥155,758 ¥1,472 ¥157,230

Thousands of U.S. dollars Thousands of U.S. dollars

Accumulated other comprehensive income

Common stock Capital surplusStock acquisition

rightsRetained earnings Treasury stock

Unrealized gain on

available-for-sale securities

Foreign currency translation

adjustments

Defined retirement

benefit plans TotalNoncontrolling

interests Total equity

Balance as of March 31, 2016 $320,884 $298,361 $2,917 $762,432 $(56,960) $18,060 $ (98) $21,875 $1,367,471 $15,936 $1,383,407

Net income attributable to owners of the parent — — — 106,875 — — — — 106,875 — 106,875

Cash dividends, $0.23 per share — — — (60,918) — — — — (60,918) — (60,918)

Purchase of treasury stock — — — — (15,097) — — — (15,097) — (15,097)

Disposal of treasury stock — (4,252) — — 4,564 — — — 312 — 312

Change in the parent’s ownership interest due to transactions with noncontrolling interests — 179 — — — — — — 179 — 179

Net change in the year — — 1,040 — — (5,225) (2,142) (4,166) (10,493) (2,806) (13,299)

Balance as of March 31, 2017 $320,884 $294,288 $3,957 $808,389 $(67,493) $12,835 $(2,240) $17,709 $1,388,329 $13,130 $1,401,459


Company Information Consolidated Statement of Cash Flows Tokai Tokyo Financial Holdings, Inc. and Subsidiaries



U.S. dollars2017 2016 2017

Cash flows from operating activities: Income before income taxes ¥16,196 ¥17,925 $144,359 Adjustments for: Income taxes - paid (2,785) (6,680) (24,826) Depreciation and amortization 1,771 1,849 15,785 Decrease in allowance for doubtful accounts (929) (17) (8,283) Decrease in liability for retirement benefits (298) (716) (2,654) Increase in provision for statutory reserves 9 51 83 Equity in earnings of associated companies (2,058) (949) (18,344) Gain on sales of investment securities (1,189) (2,598) (10,595) Gain on change in equity (851) (81) (7,589) Gains on sales of fixed assets (44) (1) (389) Impairment loss on investment securities — 1 — Gain on transfer of business (851) — (7,583) Decreases in receivables (11,421) (4,250) (101,801) Increase (decrease) in payables 9,227 (3,268) 82,247 Changes in trading assets and liabilities 22,082 5,805 196,826 Changes in collateralized short-term financing agreements (18,323) 9,159 (163,325) Other, net (7,592) (3,928) (67,669) Total adjustments (13,252) (5,623) (118,117) Net cash provided by operating activities 2,944 12,302 26,242Cash flows from investing activities: Purchases of property and equipment (1,355) (2,561) (12,074) Proceeds from sales of property and equipment 1,497 23 13,348 Purchases of investment securities (3,711) (1,204) (33,075) Proceeds from sales of investment securities 4,537 3,971 40,437 Purchases of a share of associates (4,948) — (44,102) Purchases of a share of a subsidiary resulting in

change in scope of consolidation (3,118) — (27,797) Other, net (1,410) (1,004) (12,570) Net cash used in investing activities (8,508) (775) (75,833)Cash flows from financing activities: Decrease in short-term borrowings - net (760) (17,176) (6,778) Proceeds from long-term debt 86,895 48,029 774,534 Repayment of long-term debt (43,061) (42,129) (383,822) Proceeds from commercial paper 48,200 49,200 429,628 Redemption of commercial paper (48,700) (47,700) (434,085) Proceeds from exercise of stock options 29 64 261 Purchases of treasury stock (1,693) (2,822) (15,087) Net increase in treasury stock (1) (2) (10) Cash dividends paid (6,834) (9,026) (60,918) Subscription money received from the noncontrolling interests 2,400 800 21,392 Repayments to noncontrolling interests (106) (782) (948) Payments of cash dividends to noncontrolling interests (32) (18) (287) Payments from changes in ownership interests in subsidiaries

that do not result in change in scope of consolidation (166) — (1,482) Other, net (307) (268) (2,726) Net cash provided by (used in) financing activities 35,864 (21,830) 319,672Effect of exchange rate change on cash and cash equivalents (396) (76) (3,535)Net increase (decrease) in cash and cash equivalents 29,904 (10,379) 266,546Decrease in cash and cash equivalents resulting from change of scope of consolidation (2,476) (1,047) (22,066)Cash and cash equivalents at the beginning of year 44,615 56,040 397,675Cash and cash equivalents at the end of year ¥72,043 ¥44,615 $642,155

Company Information (As of March 31, 2017)

Company Name Tokai Tokyo Financial Holdings, Inc.

Date of Incorporation June 19, 1929

Common Stock ¥36,000,000,000

Number of Employees(Non-Consolidated)

154 (Does not include 14 temporary employees and 3 dispatched workers)

Number of Employees(Consolidated)

2,483 (Does not include 26 investment advisors and asset advisors, 382 temporary employees, and 103 dispatched workers)

Address of Head Office 6-2, Nihonbashi 3-chome, Chuo-ku, Tokyo 103-0027

Principal Offices of Subsidiaries

Company NameNumber of

Sales OfficesLocation

Tokai Tokyo Securities Co., Ltd. 65 Aichi Prefecture, Tokyo, etc.

Utsunomiya Securities Co., Ltd. 6 Tochigi Prefecture

Tokai Tokyo Asset Management Co., Ltd. 1 Tokyo

Tokai Tokyo Wealth Consulting Co., Ltd. 2 Aichi Prefecture, Tokyo

Tokai Tokyo Investment Co., Ltd. 1 Tokyo

Tokai Tokyo Research Institute Co., Ltd. 2 Aichi Prefecture, Tokyo

Tokai Tokyo Academy Co., Ltd. 2 Tokyo, Aichi Prefecture

Tokai Tokyo Services Co., Ltd. 2 Aichi Prefecture, Tokyo

Tokai Tokyo Business Service Co., Ltd. 1 Tokyo

Eternal Co., Ltd. 70Hyogo Prefecture, Tokyo, etc.

Tokai Tokyo Securities (Asia) Limited 1 Hong Kong, China

Tokai Tokyo Securities Europe Limited 1 London, United Kingdom

Tokai Tokyo Securities (USA), Inc. 1 New York, United States

Tokai Tokyo Investment Management Singapore Pte. Ltd. 1 Singapore

Tokai Tokyo Global Investments Pte. Ltd. 1 Singapore

Notes: 1. Tokai Tokyo Global Investments Pte. Ltd. was established on May 16, 2016. 2. Eternal Co., Ltd. became a wholly owned subsidiary on March 15, 2017. 3. Tokai Tokyo Financial Holdings, Inc. reduced its stake in Utsunomiya Securities Co., Ltd. to 40% on April 3, 2017, changing the company from a subsidiary to an affiliated company. 4. Takagi Securities Co., Ltd. became a consolidated subsidiary on April 11, 2017.


Share Information

Share Information (As of March 31, 2017)

Stock Code 8616

Stock Exchange Listings First Section, Tokyo Stock Exchange and Nagoya Stock Exchange

Shareholder Registry Administrator

Sumitomo Mitsui Trust Bank, Limited 1-4-1, Marunouchi, Chiyoda-ku, Tokyo

Number of Shares Authorized 972,730,000

Number of Shares Issued 280,582,115

Number of Shares Issued (excluding treasury stock)

261,704,659

Number of Shareholders 31,333

Trading Unit of Shares 100

Major Shareholders (Top 10)

Major shareholdersNumber of shares held

(thousands)Ownership ratio (%)

Japan Trustee Services Bank, Ltd. (Trust Account) 13,987 5.34

The Bank of Tokyo-Mitsubishi UFJ, Ltd. 12,016 4.59

Mitsui Sumitomo Insurance Co., Ltd. 10,783 4.12

Toyota Financial Services Corporation 10,635 4.06

The Master Trust Bank of Japan, Ltd. (Trust Account) 9,485 3.62

The Bank of Yokohama, Ltd. 7,014 2.68

Nippon Life Insurance Company 5,611 2.14

Sumitomo Mitsui Trust Bank, Limited 4,800 1.83

Meiji Yasuda Life Insurance Company 4,406 1.68

Japan Trustee Services Bank, Ltd. (Trust Account 5) 4,158 1.59

Notes: 1. The ownership ratio is calculated based on figures generated after deducting treasury stock from the total number of shares issued. 2. In addition to the companies listed above, Tokai Tokyo Financial Holdings holds 18,877,456 shares of treasury stock.

Breakdown of Shareholders (As of March 31, 2017)

L Shareholdings by Type of ShareholderIndividuals and others 20.96% Other domestic corporations 10.88% Treasury stock 6.73%

Financial institutions 40.09% Foreign corporations, etc. 18.98% Securities firms 2.37%

L Shareholdings by Number of Shares Held1,000 to 9,999 10.13% 10,000 to 99,999 10.36%

Less than one unit to 999 100,000 to 499,999 500,000 or more

1.15% 8.92% 69.44%

INTEGRATED REPORTING 201760

Integrated Reporting

6-2, Nihonbashi 3-chome, Chuo-ku, Tokyo 103-0027

http://www.tokaitokyo-fh.jp/en/

Printed in Japan

year ended march 31, 2017p.2 p.2 p.51 p.12 p.6 contents notice concerning forward-looking statements...

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