Financial Flash Report(Unconsolidated) <Under Japanese GAAP> for Fiscal Year Ended March 31, 2016

Transcription

1 Financial Flash Report(Unconsolidated) <Under Japanese GAAP> for Fiscal Year Ended March 31, 2016 Citibank Japan Ltd.( CJL ) Citibank Japan Ltd. 5/13/2016 Company name: URL: Representative: (Title) Representative Director, President and CEO (Name) Anthony P. Della Pietra, Jr. For Inquiry: (Title) Finance Representative (Name) Hiroshi Kanamaru TEL (03) Trading account: Established 1. Financial Highlights for fiscal year ended March 31, 2016 (Amounts less than one million yen have been omitted.) (1) Results of Operations ( % represents the change from the previous fiscal year) Ordinary Income Ordinary Profit Net Income Fiscal year ended March 31, 2016 Fiscal year ended March 31, 2015 Million Yen % Million Yen % Million Yen % 53,298 (19.6) (2,424) - 25,655-66,302 (2.9) (3,478) - (4,454) - Net Income per Share Net Income per Share (Diluted) Return on Equity Ratio of Ordinary Expense to Ordinary Income Total Deposits Yen % % Million Yen Fiscal year ended March 31, ,985,244 Fiscal year ended March 31, 2015 (0.01) - (1.7) ,924,867 (Reference) Income from investment in affiliates (Equity method) : Fiscal year ended March 31, 2016 : NA Fiscal year ended March 31, 2015 : NA (2) Financial Condition Total Assets Total Net Assets Net Assets Ratio Total Net Assets per Share Million Yen Million Yen % Yen Fiscal year ended March 31, ,404, , Fiscal year ended March 31, ,057, , Notes: 1. Equity Capital: As of March 31, 2016: 276,317 million yen As of March 31, 2015: 252,315 million yen 2. Net assets ratio = (Net assets Subscription rights) / Total assets at the end of period (3) Conditions of Cash Flow Cash Flows from Operating Activities Cash Flows from Investing Activities Cash Flows from Financing Activities Cash and Cash Equivalents at year end Million Yen Million Yen Million Yen Million Yen Fiscal year ended March 31, ,647 (1,851,030) - 1,519,427 Fiscal year ended March 31, , ,826-2,376,810 1

2 2. Status of Dividends Fiscal year ended March 31, 2015 Fiscal year ended March 31, st Quarter 2 nd Quarter Dividend for the year 3 rd Quarter 4 th Quarter Total Total amount of dividend for the year Citibank Japan Ltd. Ratio of dividend Ratio of dividend to net assets Yen Yen Yen Yen Yen Million Yen % % , Others (1) Change in Accounting principles, Accounting estimates and Retrospective restatement. 1 Changes in Accounting policies pursuant to the amendment of accounting standards, etc.: No 2 Changes in Accounting policies other than 1: No 3 Changes in Accounting estimates: No 4 Retrospective restatement: No (2) Number of Outstanding shares (common stocks) 1 Number of Outstanding shares (including Treasury stocks) As of March 31, ,200,000,001 shares As of March 31, ,200,000,001 shares 2 Number of Treasury stocks As of March 31, shares As of March 31, shares 3 Number of Average Outstanding shares As of March 31, ,200,000,001 shares As of March 31, ,200,000,001 shares 2

3 [Qualitative information and Financial statements] Ⅰ. Results of Operations (1) Results of Operations (Fiscal Year ended March 31, 2016) We had a net income of 25.6 billion yen for the year ended March 31, 2016 compared to net loss of 4.4 billion yen for the prior fiscal year. Ordinary income totaled 53.2 billion yen, down by 13.0 billion yen from the prior fiscal year. Interest income totaled 20.0 billion yen, down by 7.8 billion yen from the prior fiscal year. Fees and commissions totaled 17.2 billion yen, down by 3.7 billion yen from the prior fiscal year. Trading income totaled 0.4 billion yen, up by 0.2 billion yen from the prior fiscal year. Other ordinary income totaled 14.5 billion yen, down by 2.1 billion yen from the prior fiscal year. Other income totaled 1.0 billion yen, up by 0.4 billion yen from the prior fiscal year. Ordinary expenses totaled 55.7 billion yen, down by 14.0 billion yen from the prior fiscal year. Interest expense totaled 7.7 billion yen, up by 3.1 billion yen from the prior fiscal year. Fees and commissions paid totaled 2.5 billion yen, mostly unchanged from the prior fiscal year. General and administrative expenses totaled 45.2 billion yen, down by 16.2 billion yen from the prior fiscal year. Other expenses totaled 0.1 billion yen, down by 0.7 billion yen from the prior fiscal year. Ordinary loss was 2.4 billion yen compared to ordinary loss of 3.4 billion yen in the prior fiscal year. Extraordinary income of 42.1 billion yen is from the Retail Banking Business divestiture. Income before income taxes (including extraordinary income and loss) was 39.3 billion yen compared to loss before income taxes of 6.0 billion yen in the prior fiscal year. 3

4 (2) Financial Condition (Assets, Liabilities, Net Assets, Cash Flow, and Capital adequacy ratio) 1 Assets, liabilities, and net assets As of March 31, 2016, total assets were 3,404.3 billion yen, down by 1,652.8 billion yen compared to March 31, Cash and deposits to other banks (due from banks) totaled 1,942.5 billion yen, down by 1,151.0 billion yen from the prior fiscal year end. Receivables under resale agreements were billion yen, down by 30.1 billion yen from the prior fiscal year end. Trading assets were 22.1 billion yen, down by 13.9 billion yen from the prior fiscal year end. Available for sales securities ( AFS securities ) were billion yen, down by billion yen from the prior fiscal year end. Loans and bills discounted totaled billion yen, down by billion yen from the prior fiscal year end. As of March 31, 2016, total liabilities were 3,128.0 billion yen, down by 1,676.9 billion yen compared to March 31, Deposits totaled 1,985.2 billion yen, down by 1,939.6 billion yen from the prior fiscal year end. Foreign exchanges totaled billion yen, up by 61.0 billion yen from the prior fiscal year end. As of March 31, 2016, total net assets were billion yen, up by 24.0 billion yen from the prior fiscal year end. 2 3 Cash flow Cash flows from operating activities in the year totaled billion yen (Inflow). Cash from investing activities was 1,851.0 billion yen (Outflow). As a result, cash and cash equivalents as of the end of the period totaled 1,519.4 billion yen. Capital adequacy ratio The capital adequacy ratio (Basel3 National standards) at the end of the period was 38.29% (flash number). (Basel3 National standards as of March 31, %) 26,000 million yen (0.10 yen per share) based on resolution of the Annual General Meeting to be held on June 28, 2016 was deducted from Capital. (Capital Adequacy Ratio ex-payment of dividend in June was 42.26%) 4

5 Ⅱ. Status of Corporate Group Citigroup is engaged in a broad range of corporate and investment banking, securities businesses and etc., in Japan through various affiliated companies. Citigroup s main affiliates in Japan are as below. - Citibank Japan Ltd. - Citigroup Global Markets Japan Inc. - Citigroup Japan Holdings G.K. - Citigroup Services Japan Ltd. - Citilease Company Ltd. - CFJ G.K. Ⅲ. Management Policy Citibank Japan has a long and distinguished history serving institutional clients in Japan. We have a proud legacy of developing innovative relationship-driven solutions for our clients and delivering the power of Citi s global network to meet their needs. Citibank Japan aims to be the leading global bank for a select set of Japan s leading multi-national companies and institutions, as well as the leading global bank serving Citi s non-japanese multinational and institutional clients with operations or investments in Japan. Citibank Japan focuses on providing comprehensive global relationship management services to a targeted set of Japan s largest multi-national companies and institutions. We coordinate and leverage Citi s broad range of products and services, together with Citi s unrivaled global network, in order to support the growth ambitions of our clients in Japan and around the globe. Our core set of product and services at Citibank Japan is offered by three product groups that work closely with one another and with our relationship managers to serve our clients: Transaction Services Division (Cash Management, Trade Finance, Export Agency Finance and Securities Fund Services), Markets Division (Foreign Exchange and Markets Treasury), and Corporate Finance Department (Structured Finance, Real Estate and Acquisition Finance & Syndicated Lending). Widely recognized as an industry leader, Citibank Japan has been consistently ranked at the top of major industry surveys, in particular for transaction services and foreign exchange. We have further strengthened our capability to support our Japanese clients around the globe through Japan Desks offering exclusive relationship management efforts by experienced Japanese bankers. We have recently expanded the network to 10 countries. Many of these Japan Desks provide coverage to neighboring countries and jurisdictions. Our client support structure has become increasingly more available pan-regionally around the globe, covering North and South America, Europe, Middle East, Africa, and Asia. Citi s Japan Desk Network is an unrivaled and unique service to our clients. CJL is committed to providing a working environment where its employees can thrive and achieve their full potential. By attracting and training the best people, and providing them broad career development opportunities at every level, we aim to foster an environment where employees are able to provide our clients with outstanding financial products, services and advice that fit their needs over the long term. CJL is proud of its contributions to a broad range of diversity and community initiatives. Our community activities focus broadly on improving access to financial education, assisting those with disabilities, and promoting environmental and social sustainability, as well as development of the communities in which we operate. 5

6 Ⅳ. Financial Statements (1) Balance Sheet (Millions of Yen) Account Name As of March 31,2015 As of March 31,2016 Amount Amount Assets Cash and due from banks 3,093,519 1,942,504 Call loans 3,365 - Receivables under resale agreements 468, ,648 Monetary claims bought 4,675 5,382 Trading assets 36,121 22,139 Securities 500, ,874 Loans and bills discounted 485, ,834 Foreign exchanges 127,098 70,499 Other assets 194, ,894 Income taxes receivable Others 194, ,894 Tangible fixed assets 2,090 5 Intangible fixed assets Deferred tax assets 3,435 3,406 Customers liabilities for acceptances and guarantees 139, ,109 Allow ance for loan losses (2,290) (981) Total assets 5,057,241 3,404,342 Liabilities Deposits 3,924,867 1,985,244 Call money 1,803 2,811 Trading liabilities 14,865 13,130 Borrow ed money 7 - Foreign exchanges 523, ,093 Other liabilities 197, ,969 Income taxes payable ,575 Asset retirement obligations Others 196, ,386 Provision for bonuses Provision for directors' bonuses Provision for retirement benefits 2,481 3,354 Provision for directors' retirement benefits 50 7 Other provision Acceptances and guarantees 139, ,109 Total liabilities 4,804,926 3,128,025 Net Assets Capital stock 123, ,100 Capital surplus 121, ,100 Legal capital surplus 121, ,100 Retained earnings 5,503 31,159 Legal retained earnings 2,000 2,000 Other retained earnings 3,503 29,159 Retained earnings brought forw ard 3,503 29,159 Total shareholders' equity 249, ,359 Valuation difference on AFS securities 2, Total valuation and translation adjustments 2, Total net assets 252, ,317 Total liabilities and net assets 5,057,241 3,404,342 6

7 (2) Income Statement Account Name From April 1, 2014 to March 31, 2015 (Millions of Yen) From April 1, 2015 to March 31, 2016 Ordinary income 66,302 53,298 Interest income 27,909 20,056 Interest on loans and bills discounted 7,423 6,956 Interest and dividends on securities 2, Interest on call loans Interest on receivables under resale agreements 5,654 6,275 Interest on deposits w ith banks 11,490 5,474 Other interest income Fees and commissions 20,968 17,265 Fees and commissions on fund transfer 5,448 5,270 Other fees and commissions 15,520 11,994 Trading income Gains on securities and derivatives related to trading transactions Gains on trading-related derivatives transactions - 22 Other ordinary income 16,699 14,537 Gains on foreign exchange transactions 14,092 8,645 Gains on sales of bonds 725 3,073 Others 1,881 2,818 Other income 542 1,016 Reversal of allow ance for loan losses Recoveries of w ritten-off claims 4 2 Others Ordinary expenses 69,780 55,723 Interest expenses 4,588 7,715 Interest on deposits 4,552 7,689 Interest on negotiable certificates of deposit 0 - Interest on call money 1 5 Interest on borrow ings and rediscounts 0 1 Other interest expenses Fees and commissions paid 2,598 2,597 Fees and commissions on fund transfer Other fees and commissions 1,826 1,863 Trading Losses Losses on trading-related derivatives transactions Other ordinary expenses Losses on sales of bonds 2 - Others General and administrative expenses 61,437 45,206 Other expenses Provision of allow ance for loan losses Others Ordinary profit (loss) (3,478) (2,424) Extraordinary income - 42,159 Gain from demerger - 42,159 Extraordinary loss 2, Losses on disposal of fixed assets 1, Others 1, Income (Loss) before income taxes (6,036) 39,345 Income taxes - current 54 12,832 Income taxes - deferred (1,636) 857 Total income taxes (1,582) 13,689 Net income (loss) (4,454) 25,655 7

8 (3) Statement of Changes in Net Assets From April 1, 2014 to March 31, 2015 Shareholders' equity Capital stock Capital surplus Retained earnings Total Legal capital surplus Total Capital surplus Other retained earnings Total retained earnings Legal retained earnings Retained earnings brought forward shareholders' equity (Millions of Yen) Valuation and translation Total net assets Valuation difference on AFS securities Total valuation and translation adjustments Balance at beginning of the period 123, , ,100 2,000 7,396 9, ,596 2,753 2, ,350 Cumulative effects of changes in accounting policies Restated balance 123, , ,100 2,000 7,957 9, ,157 2,753 2, ,911 Changes in amounts during the period Net loss (4,454) (4,454) (4,454) (4,454) Net changes in amounts other than shareholders' equity Total changes in amounts during the period (141) (141) (141) (4,454) (4,454) (4,454) (141) (141) (4,595) Balance at the end of the current period 123, , ,100 2,000 3,503 5, ,703 2,612 2, ,315 From April 1, 2015 to March 31, 2016 Shareholders' equity Capital stock Capital surplus Retained earnings Total Legal capital surplus Total Capital surplus Other retained earnings Total retained earnings Legal retained earnings Retained earnings brought forward shareholders' equity (Millions of Yen) Valuation and translation Total net assets Valuation difference on AFS securities Total valuation and translation adjustments Balance at beginning of the period 123, , ,100 2,000 3,503 5, ,703 2,612 2, ,315 Changes in amounts during the period Net income 25,655 25,655 25,655 25,655 Net changes in amounts other than shareholders' equity Total changes in amounts during the period (1,654) (1,654) (1,654) 25,655 25,655 25,655 (1,654) (1,654) 24,001 Balance at the end of the current period 123, , ,100 2,000 29,159 31, , ,317 8

9 (4) Statement of Cash Flows (Millions of Yen) Account Name From April 1, 2014 to March 31, 2015 From April 1, 2015 to March 31, 2016 Cash flows from operating activities Income (loss) before income taxes (6,036) 39,345 Depreciation 1, Increase (decrease) in allowance for loan losses 361 (465) Increase (decrease) in provision for bonuses Increase (decrease) in provision for retirement benefits 1,437 2,068 Interest income (27,909) (20,056) Interest expenses 4,588 7,715 Losses (gains) on sales of AFS securities (723) (3,073) Losses (gains) on foreign exchanges (33) (9) Losses (gains) on dispositions of fixed assets 1, Gains on transfer of business - (42,159) Net decrease (increase) in trading assets 145,331 13,981 Net increase (decrease) in trading liabilities (11,289) (1,735) Net decrease (increase) in loans and bills discounted (128,867) 66,535 Net increase (decrease) in deposits 288, ,284 Net increase (decrease) in negotiable certificates of deposit (6,000) - Net decrease (increase) in due from banks (excluding cash equivalents) (155,269) 291,473 Net decrease (increase) in call loans 236,838 3,365 Net increase (decrease) in call money 1,803 1,008 Net increase (decrease) in borrowed money 2 (7) Net decrease (increase) in foreign exchanges - assets (15,513) 56,598 Net increase (decrease) in foreign exchanges - liabilities 176,799 61,082 Interest received - cash basis 30,124 22,254 Interest paid - cash basis (3,842) (7,232) Net increase (decrease) in reserve for others 77 (52) Net decrease (increase) in receivables under resale agreements 262,831 30,176 Net decrease (increase) in monetary claims bought (393) (707) Net decrease (increase) in other assets (36,797) (138,309) Net increase (decrease) in other liabilities 57, ,019 Others, net (10) (131) Sub-total 816, ,003 Income taxes paid - cash basis (1,855) 0 Income taxes refunded - cash basis Net cash provided by (used in) operating activities 814, ,647 Cash flows from investing activities Purchases of AFS securities (102,755) (73,399) Proceeds from sales of AFS securities 348, ,285 Proceeds from redemption of AFS securities 36,299 7,742 Net increase (decrease) from transfer of business - (2,251,778) Purchases of tangible fixed assets (346) (27) Proceeds from sales of tangible fixed assets 0 0 Purchases of intangible fixed assets (158) 0 Proceeds from sales of intangible fixed assets Others, net (39) - Net cash provided by (used in) investing activities 281,826 (1,851,030) Cash flows from financing activities Net cash provided by (used in) financing activities - - Effect of foreign exchange rate changes on cash and cash equivalents 33 - Net increase (decrease) in cash and cash equivalents 1,096,371 (857,382) Cash and cash equivalents at the beginning of the fiscal year 1,280,438 2,376,810 Cash and cash equivalents at the end of the fiscal year 2,376,810 1,519,427 9

10 Amounts less than one million yen have been omitted. Accounting Policies 1. Standard for valuation of trading assets and trading liabilities / booking of income and losses for trading purposes transaction Transactions for trading purposes, such as seeking gains arising from short-term changes in interest rates, foreign exchange rates, or securities prices and other market related indices or from variation among markets (hereinafter referred to as Trading Purposes ), are included in Trading assets or Trading liabilities on the balance sheet on a trade date basis. Income and Expenses on trading-purpose transactions are recognized on a trading date basis, and recorded as Trading income and Trading losses. Securities and monetary claims purchased for trading purposes are stated at the fiscal year-end market value, and financial derivatives such as swaps, futures and options are stated at amounts that would be settled if the transactions were terminated at the fiscal year-end. Trading income and Trading losses include interest received or paid during the fiscal year. The year-onyear valuation differences of securities and money claims are also recorded in the above-mentioned accounts. As for the derivatives, assuming that the settlement will be made in cash, the year-on-year valuation differences are also recorded in the above-mentioned accounts. 2. Standard and method for valuation of AFS securities AFS securities that have market prices are carried at their balance sheet date market prices (cost of securities sold is calculated using primarily the moving-average method). Net unrealized gains/losses on AFS securities, net of income taxes, are included in Net assets. 3. Standard and method for valuation of derivative transaction Derivative transactions (excluding those for trading purposes) are carried at fair value. 4. Depreciation method for fixed assets (1) Tangible fixed assets Tangible fixed assets are depreciated using the declining-balance method. The estimated useful lives are as follows: Buildings: 10 to 15 years Others: 4 to 20 years (2) Intangible fixed assets Intangible fixed assets are depreciated using the straight-line method. Capitalized software for internal use is depreciated over its estimated useful life (mainly 5 years). 5. Standard for the translation into Japanese yen Assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rate prevailing at the balance sheet date. 6. Standard for Allowance (1) Allowance for loan losses Allowance for loan losses is provided as detailed below in accordance with the internal standards for write-offs and provisioning. For claims on borrowers that have entered into bankruptcy, special liquidation proceedings or similar legal proceedings ( bankrupt borrowers ) or borrowers that are not legally or formally insolvent but are regarded as substantially in the same situation ( effectively bankrupt borrowers ), an allowance is provided based on the amount of claims, after the write-off stated in the additional paragraph below, net of the expected amount of recoveries from collateral and guarantees. For claims on borrowers that are not currently bankrupt but are perceived to have a high risk of falling into bankruptcy, an allowance is provided in the amount deemed necessary based on an overall solvency assessment of the claims, net of the expected amount of recoveries from collateral and guarantees. For other claims, an allowance is provided based on the expected loan-loss ratio assigned to each risk rating. Responsible divisions for Self-Assessment and Front office mutually conduct assessment of all claims in accordance with the internal rules for self-assessment of assets, and the Internal Audit Division, independently audits their assessment. The allowance is provided based on the results of these assessments. 10

11 (2) Provision for bonuses Provision for bonuses is reported in preparation for the payment of bonuses to the employees at the amount estimated for the payment of bonuses to the employees during the fiscal year. (3) Provision for directors bonuses Provision for directors bonuses is reported in preparation for the payment of bonuses to the directors at the amount estimated for the payment of bonuses to the directors during the fiscal year. (4) Provision for retirement benefits Provision for retirement benefits is reported in preparation for the payment of employee retirement allowance in the amount deemed accrued at the period, based on the projected retirement benefit obligation and the fair value of plan assets at the fiscal year-end. The basis for period recognition for the estimated retirement benefits adopts the benefit formula prorates approach. The unrecognized prior service cost and actuarial differences are recognized as profit and loss as follows; Unrecognized prior service cost: Amortized using the straight-line method for a period, primarily over 7 years, within the employees average remaining service period, commencing on the fiscal year in which the services are provided. Actuarial differences: Amortized using the straight-line method, primarily over 7 years, within the employees average remaining service period, commencing from the next fiscal year of incurrence. (5) Provision for directors retirement benefits Provision for directors retirement benefits is reported in preparation for the payment of director retirement allowance out of directors estimated allowance for the amount allocable to the period. 7. Method for hedge accounting The exceptional method is applied to certain interest rate swaps that meet the criteria for the exceptional treatments. No assessment is performed for hedge effectiveness of qualifying interest rate swaps accounted for by the exceptional treatments, as it is ascertained that the criteria for the exceptional treatments are continually met. 8. Accounting for consumption taxes National and Local Consumption Taxes are excluded from transaction amounts. 11

12 Notes to Balance Sheet 1. For securities held as collateral under receivables under resale agreements and derivative transactions which can be sold or pledged without restrictions, 42,997 million yen were pledged and 430,641 million yen were held by CJL as of March 31, There was no Bankrupt loans. Past due loans/non-accrual loans were 3,374 million yen. Bankrupt loans are loans on which accrued interest income is not recognized as there is substantial doubt about the ultimate collectability of either principal or interest because they are past due for a considerable period of time or for other reasons (excluding write-offs, hereinafter non-accrual loans ), and as defined in Article and of the Enforcement Ordinance of the Japanese Corporate Tax Law. Past due loans/non-accrual loans are loans on which accrued interest income is not recognized, excluding Bankrupt loans and loans on which interest payments are deferred in order to support the borrowers recovery from financial difficulties. 3. There was no Past due loans (3 months or more). Past due loans (3 months or more) are loans on which the principal or interest is past due for three months or more, excluding Bankrupt loans and Past due loans/non-accrual loans. 4. There was no Restructured loans. Restructured loans are loans on which terms and conditions have been amended in favor of the borrowers (e.g. reduction of the original interest rate, deferral of interest payments, extension of principal repayments or debt forgiveness) in order to support the borrowers recovery from financial difficulties, excluding Bankrupt loans, Past due loans/non-accrual loans and Past due loans (3 months or more). 5. The total amount of Bankrupt loans, Past due loans/non-accrual loans, Past due loans (3 months or more) and Restructured loans were 3,374 million yen. Claims shown from 2 to 5 are the amounts before the appropriate allowance. 6. Bills discounted are treated as financial transactions in accordance with JICPA Industry Audit Committee Report No.24. CJL has rights to sell or pledge bank acceptance bought, commercial bills discounted, documentary bills and foreign bills bought without restrictions. The total face value was 47,950 million yen. 7. AFS securities of 89,261 million yen were pledged as collateral for settlements of FX transactions. In addition, Other assets include cash collateral paid for financial instruments of 31,500 million yen and other guarantee deposits of 2,260 million yen. 8. Overdraft facilities and commitment line contracts on loans are agreements to lend to customers up to a prescribed amount, as long as there is no violation of any condition established in the contracts. The amount of unused commitments was 305,126 million yen and the amount of those with remaining period within one year was 192,285 million yen. Since many of these commitments are expected to expire without being drawn upon, the total amount of unused commitments does not necessarily represent actual future cash flow requirements. Many of these commitments include clauses under which we can reject an application from customers or reduce the contract amounts in the event that economic conditions change, we need to secure claims, or other events occur. In addition, we may request the customers to pledge collateral such as premises and securities at the time of the contracts, and take necessary measures such as monitoring customers financial positions, revising contracts when need arises and securing claims after contracts are made on a periodic basis. 9. Accumulated depreciation on tangible fixed assets: 216 million yen. 10. Monetary assets to affiliates amounted to 640,550 million yen. 11. Monetary liabilities to affiliates amounted to 1,266,450 million yen. 12. Dividend is subject to the limitation of article 18 of the Banking law. Under the Banking law of Japan, 20% of the retained earnings decreased by dividends shall be appropriated as a Legal retained earnings until the aggregate amount of Legal capital surplus and Legal retained earnings equals the amount of Capital stock. 12

13 Notes to Statement of Income 1. The amount of the pending settlement payment is recorded in Others shown in Extraordinary loss, reflecting the fact that CJL reached settlement with the plaintiffs in the US class action lawsuit with regard to the Yen LIBOR/TIBOR case. 2. Income from transactions with affiliates Total income of funding transaction Total income of fees and commissions Total income of other ordinary transactions Total income of other transactions Expenses from transactions with affiliates Total expenses of funding transaction Total expenses of fees and commissions Total expenses of other ordinary transactions Total expenses of other transactions 3,308 million yen 2,014 million yen 105,896 million yen 77 million yen 5,848 million yen 272 million yen 56 million yen 6,537 million yen 3. Information with respect to related party transaction is as follows. Relation Name Address Capital Business Percentage of stocks owned Content of relations Directors Business Description of transaction Amount (million yen) Name of account Balance at Year end (million yen) Business transaction & interest 709,182 (*2) 3,151 Due from banks Accrued income 421, Fx & Derivative 197,487 (*3) Other Assets 197,487 Business transaction & interest 760,190 (*2) 5,838 Deposit Accrued expenses 561,519 1,692 Parent Citibank, N.A. South Dakota, United States of America USD 751 Million Banking 100% (indirect) Funding / Lending Settlement of foreign exchange 421,287 (*2) Due to foreign banks (their accounts) 512,953 Fx & Derivative 98,262 (*3) Other liabilities FX / Derivative Margin Liability 98,262 85,847 Guarantees & fee 4 Customers liabilities for acceptances and guarantees Unearned revenue 7, Subsidiary of parent Citibank Taiwan Limited Taiwan, Taipei TWD 66,033 Million Banking Funding / Lending Settlement of foreign exchange 35,667 (*2) Due to foreign banks (their accounts) 28,617 *1 Condition of transactions and its policy are decided as same as third party transactions. *2 Average balance for amount of transaction *3 Valuation difference based on year end market rate. 13

14 Notes to Statement of Changes in Net Assets 1. The types and number of our outstanding shares. (Thousands of Shares) Number of shares at beginning of the period Number of shares increased during the period Number of shares decreased during the period Number of shares at end of the period Common stock 244,200, ,200,000 Total 244,200, ,200,000 Memo 2. Detailed Information regarding Cash Dividends. Dividends with Record Dates on or before March 31, 2016 and Effective Dates after March 31, The following matters relating to dividends are planned to be brought up at the Annual General Meeting of Shareholders scheduled to be held on June 28, Date of approval (scheduled) Type of stock Total Dividends Million Yen Source of dividends Dividend per share Yen Dividend record date Effective date Annual General Meeting of Shareholders on June 28, 2016 (tentative) Common stock 26,000 Retained earnings 0.10 March 31, 2016 June 28, 2016 Notes to Statement of Cash flow 1. Cash and Cash Equivalents consist of cash and due from Bank of Japan included in Cash and Due from Banks on the balance sheet. As of March 31, 2016 (Millions of Yen) Cash and Due from Banks 1,942,504 Due from Banks excluding Bank of Japan (423,076) Cash and Cash Equivalents 1,519, Book value of assets and liabilities associated with divestiture of CJL's Retail Banking business in exchange for Cash and Cash Equivalents, transfer value, and Net decrease (increase) from transfer of business are as follows: (Millions of Yen) Cash and due from banks 2,296,106 Other 74,171 Total assets 2,370,277 Deposits (2,361,907) Other (8,370) Total liabilities (2,370,277) Gains on transfer of business 42,159 Transfer value 42,159 Cash and Cash Equivalents (2,293,938) Net decrease (increase) from transfer of business (2,251,778) 14

15 Notes related to Financial Instruments 1.Disclosure on Financial Instruments (1) Policy on Financial Instruments CJL is engaged in banking operations such as deposit taking business, credit extension business including loans, fund transfer and clearing business both in Yen and foreign currencies and investment business including marketable securities. The ALM, Asset and Liability Management, in CJL has related across these listed businesses. CJL has conducted integrated management of the Banking Portfolio, as ALM, for the purpose of managing interest rate and FX risk associated with market movement and liquidity risk from mismatch of future cash flows. Also it aims to minimize funding cost and maximize investment returns. As part of this effort, CJL enters into certain derivative transactions. As the banking portfolio in CJL, liabilities are sourced mainly from corporate customer deposits. And in asset, it has invested into securities, mainly in Japanese Government Bond (JGB), customer loans and Reverse Repo. (2) Types of and Risks associated with Financial Instruments A majority of financial assets that CJL holds are loans to corporate customers in Japan and overseas, the securities and placements to the bank subsidiaries of Citigroup Inc. to which CJL belongs. Loans to corporate customers in Japan and overseas, for which CJL is exposed to credit risks potentially arising from the obligors' default and also there are risks on material adverse changes in economics, politics, and social environments. Securities are mainly low credit risk Japanese government bonds. These are exposed to interest rate risk and market price risks. A majority of financing source of CJL is a stable source of deposits from corporate customers, and group companies. They are exposed to liquidity risk where we may not be able to be repaid timely on maturities. Interest rate exposure is managed by establishing risk limits, etc. Derivative contracts include interest rate swaps, currency swaps, and forward FX for ALM purpose. In addition, we have trading bonds as well as trading positions that include interest rate related derivatives and currency related derivatives. These financial products are exposed to interest rate risk, foreign exchange rate risk, price risk and credit risk, etc. (3) Risk Management System relating to Financial Instruments 1 Credit Risk Management CJL establishes consistent risk management framework and controls credit risks related to loans, trade finance and other financial products by undertaking credit analysis, controlling credit limits, assigning internal obligor risk ratings, obtaining parent support, guarantee or collateral and managing classified or delinquent accounts in accordance with Credit Risk Management Policy and related rules and procedures. The key highlights of Credit Risk management aforementioned conducted by Risk Management Division are reported to Credit Risk Management Committee ( CRMC, as a sub-committee of the Management Committee) and Board of Directors meeting ( BOD ), which takes place regularly. Moreover, the credit risk control process is assessed by internal auditor periodically. Credit risk of issuers and counterparty risk of derivatives are controlled and monitored by Credit Risk Management Services Unit and Portfolio Management Unit in Risk Management Division by obtaining related credit information and marked-to market periodically. 2 Market Risk Management (A) Risk Management of Banking Book CJL manages interest-rate risks on banking book through ALM. The risk management methods and procedures are clearly described in the "Market Risk Management for Accrual Portfolios Policy and Standards". CJL monitors and reviews its activity implementation status, also discusses action plans in the monthly Asset Liability Committee ( ALCO ) meeting as per the ALCO Regulation which has been approved by the Management Committee. On a day to day basis, Market Risk Management Unit captures consolidated profiles of interest rates and durations of the financial assets and liabilities, performs risk monitoring process using the gap analysis and interest rate factor sensitivity analysis, and reports the results to the ALCO meeting on a monthly basis. For the purpose of hedging interest rate risks, CJL transacts some derivative trades such as interest rate swaps. 15

16 (B) Risk Management of Trading Book CJL mainly manages interest-rate risks and foreign exchange price risks on trading book following the Market Risk Management Policy and ALCO Regulation approved by Management Committee. CJL's market risk amount is measured by Value-at-Risk ( VaR ) method and its regulated compliance status is monitored and reported to ALCO meeting on a monthly basis. (C) Quantitative information on Market Risks a) Trading purpose financial instruments CJL adopted the Monte Carlo Method that simulates variance and covariance estimated from the historical times series data for VaR calculation (holding period of one day, with the confidence level of 99%) for trading securities and derivative products. CJL market risk amount for trading activities (probable loss amount) as of March 31, 2016 was 9 million yen. CJL also conducts VaR back testing which is a comparative analysis of the VaR result calculated by the validated model against the actual profit and loss (P&L). As per the VaR back testing result for the period of April 2015 through March 2016, no exception was observed. However, VaR still may not pick up all probability of event under unpredictable market conditions so long as it is based on the certain probability calculated by statistical method using historical market movement. b) Non-trading purpose financial instruments In CJL, the main financial instruments which to be influenced by interest rates as one of the key risk variables are, Placements, "Loans and bills discounted", "AFS securities", "Deposits", Negotiable certificate of deposits, "Borrowings" and "Reverse Repo". On the financial Assets and Liabilities, CJL calculates the effect amounts on profits and losses in the next one year when simulating reasonably expected moving range in the quantitative analysis for the purpose of managing interest rate risks. With respect to the revenue effect amount calculation, CJL splits respective financial asset and liability balances into groups of fixed or floating rate groups by tenor buckets responding to holding maturities and applies the interest rate moves by tenors. CJL has exercised results that the net income before taxes would increase by 4,526 million yen on the scenario that interest rate to increase by 100 basis points (1%) for total portfolio, by 4,112 million yen on the scenario that benchmark JPY interest rate to increase by 100 basis points (1%) as of March 31, On the same basis, CJL's net income before taxes would increase by 691 million yen on the scenario that benchmark USD interest rate to increase by 100 basis points (1%). These results are based on the stable risk variables excluding interest rates, and no correlation between interest rates and other risk variables are considered in the calculation. In case of any unexpected moves over the 100 basis points (1%) moving range, there can be larger effect than the reported effect amounts on P&L. 3 Management of Liquidity Risk associated with Funding Activities Liquidity risk management has been regulated by related policies and procedures. ALCO, which is subject to supervision of the Management Committee, has been constituted to ensure that CJL maintains adequate liquidity, has sufficient capital to meet regulatory and business needs, has appropriate funding for business growth. ALCO's monitoring and reviewing of capital, liquidity, balance sheet and the banking account management is an integral part of the overall risk management framework of CJL. (4) Supplement Explanation for Fair Value of Financial Instruments Fair value of financial instruments includes market prices as well as reasonably calculated prices in cases where there are no market prices available. Since the calculations of such prices are implemented under certain conditions and assumptions, the result of calculations may vary if different assumptions are used. 16

17 2.Fair Value of Financial Instruments Fair value and balance sheet amount of financial instruments as of March 31, 2016 are shown below. Balance sheet amount Fair value (Millions of Yen) Difference (1) Cash and due from banks 1,942,504 1,942,504 - (2) Receivables under resale agreements 438, , (3) Monetary claims bought (*1) 5,377 5,377 - (4) Trading assets Trading securities 8,994 8,994 - (5) Securities (*1) Other securities 100, ,872 - (6) Loans and bills discounted 349,834 Allowance for loan losses (*1) (627) 349, ,407 10,200 (7) Foreign exchange (*1) 70,471 70,471 - Total Assets 2,916,076 2,927,009 10,933 (1) Deposits 1,985,244 1,988,467 3,223 (2) Call money 2,811 2,811 - (3) Foreign exchange 584, ,093 - Total Liabilities 2,572,150 2,575,373 3,223 Derivative transactions (*2) Trading 11,622 11,622 - Total derivative transactions 11,622 11,622 - Others Contract amount Fair value Overdraft facilities and commitment line(*3) 305,126 3,908 (*1) General allowance for loan losses and specific allowance for loan losses provided to Loans and bills discounted are separately shown in the above table. Allowance for loan losses provided to Monetary claims bought, Securities and Foreign exchange are directly deducted from the book value due to immateriality. (*2) Derivatives included in Trading assets, Trading liabilities, Other assets and Other liabilities are shown together. Negative amount indicates in case of liabilities exceeding the assets. (*3) Contract amount of Overdraft facilities and commitment line are unused amount. (Notes) Valuation method of financial instruments (Assets) (1) Cash and due from banks For due from banks without maturity, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount. For due from banks with maturity, fair value is determined as present value of total future cash flows, discounted by interest rate that would be applied to new acceptances. Total future cash flows are contractual payment of principal and interest. For due from banks with short remaining period (within 1 year), the carrying amount is presented as the fair value, as the fair value approximates such carrying amount. (2) Receivables under resale agreements For Receivables under resale agreements with remaining period exceeding 1 year, fair value is determined as present future cash flows, discounted by interest rate that would be applied to new acceptance. Total future cash flows are contractual payment of principal and interest. For Receivables under resale agreements with short remaining period (within 1 year), the carrying amount is presented as the fair value, as the fair value approximates such carrying amount. 17

18 (3) Monetary claims bought For monetary claims bought, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount because they have short remaining period (within 1 year). (4) Trading assets For securities such as bonds that are held for trading, the fair value is calculated based on their market prices. (5) Securities For securities such as bonds that are available for sale, the fair value is calculated based on their market prices. (6) Loans and bills discounted For loans without maturity, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount because of their estimated maturity length and the interest rate conditions. For loans with short remaining period (within 1 year), the carrying amount is presented as the fair value, as the fair value approximates such carrying amount. For loan with remaining period exceeding 1 year, fair value is determined as present value of total future cash flows, discounted by interest rate that would be applied to newly accepted loans. Total future cash flows are contractual payment of principal and interest. As for the loans to bankrupt, de facto bankrupt, and potentially bankrupt borrowers, credit loss is estimated based on factors such as the present value of expected future cash flow or the expected amount to be collected from collaterals and guarantees. Since the fair value of these items approximates the carrying amount net of the currently expected credit loss amount, such carrying amount is presented as the fair value. (7) Foreign exchange Foreign exchanges consist of foreign currency deposits with other banks (due from other foreign banks), short-term loans involving foreign currencies (due from other foreign banks), export bills etc. (purchased foreign bills), and loans on notes using import bills (foreign bills receivables). For these items, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount because most of these items are deposits without maturity or have short contract term (within 1 year). (Liabilities) (1) Deposits For demand deposits, the amount payable on demand as of balance sheet date is considered to be the fair value. Time deposits are grouped by certain maturity lengths. The fair value of such deposits is the present value discounted by expected future cash flow. The discount rate is the risk free rates adjusted with funding spread of CJL as of balance sheet date. For deposits with short remaining period (within 6 months), the carrying amount is presented as the fair value as the fair value approximates such carrying amount. (2) Call money For Call money, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount because they have short remaining period (within 1 year). (3) Foreign exchange Among foreign exchange contracts, foreign currency deposits accepted from other banks and non-resident yen deposits are deposits without maturity. Furthermore, foreign currency short-term borrowing have no maturity. Thus, for the foreign exchanges, the carrying amount is presented as the fair value as the fair value approximates such carrying amount. 18

19 (Derivative transactions) Citibank Japan Ltd. Derivatives include interest rate related instruments (interest rate futures, interest rate options, interest rate swaps, etc.), currency related instruments (forward foreign exchange, currency options, currency swaps, etc.) and bond related instruments (bond futures, bonds future options, etc.). Fair value of these derivatives are based on market prices at exchanges, discounted present values, or amount calculated under the option pricing model. Derivative for hedge accounting is interest rate swap with exceptional treatment and the fair value of this hedging swap is included in the hedged loan. (Others) For overdraft facilities and commitment line, fair value is the present value discounted by the difference between the expected future cash flow calculated by contractual rate and fee rate that would be applied to newly acceptance at the balance sheet date for the contract with remaining period exceeding 1 year. 19

20 Notes related to Securities These include Securities and Trading securities in Trading assets on Balance sheet. 1. Securities classified as trading purposes: (as of March 31, 2016) (Unit: Millions of Yen) Valuations gains/(losses) included in the earnings for the fiscal year Securities classified as trading 3 purposes 2. AFS securities with market value are as follows: (as of March 31, 2016) Balance sheet amount exceeding acquisition cost Type Balance sheet amount Acquisition cost (Unit: Millions of Yen) Valuations gains/(losses) Bonds 95,323 93,992 1,330 Japanese Government 89,261 88, Bonds Corporate Bonds 6,061 5, Others 5,550 5, Sub Total 100,874 99,492 1,381 Balance sheet amount equal or less than acquisition cost Bonds Japanese Government Bonds Sub total Total 100,874 99,492 1, AFS securities sold during the fiscal year are as follows: (from April 1, 2015 to March 31, 2016) (Unit: Millions of Yen) Sold amount Gains on sales Losses on sales Bonds 466,285 3,073 - Japanese Government Bond 466,285 3,073 - Total 466,285 3,073-20

21 Notes related to Deferred tax accounting 1. The main causes for the deferred tax assets and deferred tax liabilities are as follows: Citibank Japan Ltd. Deferred tax assets (Millions of Yen) Provision for retirement benefits 1,031 Accrued Enterprise Tax 922 Accrued expense 556 Allowance for loan losses 302 Unearned Commission 290 Fixed Assets 276 Other 426 Deferred assets sub total 3,807 Valuation reserve 8 Deferred tax assets total 3,798 Deferred tax liabilities Valuation difference on AFS securities 392 Deferred tax liabilities total 392 Net deferred tax assets 3, A reconciliation of the actual ratio of income taxes reflected in income statement to the effective statutory tax rate is omitted due to no material significance to the financial statement 3. According to the promulgation of the Law for Partial Amendment of the Income Tax Law, etc. (Law No. 15, 2016) and the Law for Partial Amendment of the Local Tax Law, etc. (Law No. 13, 2016) on March 29, 2016, the corporate income tax rate will be lowered from the fiscal years beginning on and after April 1, In conjunction with this change, the effective statutory tax rate used to measure deferred tax assets and deferred tax liabilities have changed for the timing differences expected to be resolved on the fiscal year beginning on April 1, 2016 and on April 1, 2017, and for the timing differences expected to be resolved on and after the fiscal years beginning on April 1, 2018, from the former 33.06% to 30.86% and 30.62%, respectively. As a result of this change, the amount of deferred tax assets has decreased by 249 million yen and the amount of valuation difference on AFS securities has increased by 33 million yen and the amount of income taxesdeferred has increased by 282million yen. 4. According to the issuance of Guidance No.26 Implementation Guidance on Recoverability of Deferred Tax Assets (Accounting Standards Board of Japan, December 28, 2015), this guidance is adopted from this fiscal year. Indicators by Share 1. Net assets per share: 1.13 yen 2. Net income per share: 0.10 yen 21