toyo securities co., ltd. and subsidiaries · toyo securities toyo securities co., ltd. and...

TOYO SECURITIES

TOYO SECURITIES CO., LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AS OFMARCH 31, 2009 AND 2008

TOGETHER WITH INDEPENDENT AUDITORS’ REPORT

010_0514001372109.indd 2 2009/08/26 10:06:36

ContentsMESSAGE FROM THE PRESIDENT .......................................................................... 1

BUSINESS RESULTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009 .................. 2

RATIO OF PRIMARY CAPITAL (NOT CONSOLIDATED) ........................................ 4

CONSOLIDATED BALANCE SHEETS ...................................................................... 6

CONSOLIDATED STATEMENTS OF INCOME ......................................................... 7

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS ............................. 8

CONSOLIDATED STATEMENTS OF CASH FLOWS ................................................. 10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ........................................ 11

INDEPENDENT AUDITORS’ REPORT ..................................................................... 25

BUSINESS RISK ....................................................................................................... 26

ANALYSIS OF FINANCIAL CONDITION AND OPERATING RESULTS ................... 28

CORPORATE GOVERNANCE .................................................................................. 31

HISTORY OF TOYO SECURITIES CO., LTD. ............................................................ 37

STRUCTURE OF TOYO SECURITIES CO., LTD. ...................................................... 38

BOARD OF DIRECTORS, CORPORATE DATA ........................................................ 39

TOYO SECURITIES GROUP .................................................................................... 40

COMPANY PROFILE

Boldly advancing in the atmosphere of deregulation and inter nationalization.

A corporate structure responsive to the needs of the new information-based society.

Further development based on a track record of success

The various transformations occurring in financial and capital markets are being felt in the securities industry as well. Toyo Securities has been keenly perceptive of the changes and was quick to aggressively develop services to meet specific requirements, namely new listings and trading of mainland Chinese shares. Moreover, in its management of clients’ financial assets, the Company has been selecting comparatively high-performance products from among investment trust funds, and strives to put together portfolios that best suit the needs of each client.

Creating an integrated financial services company by leveraging the collective strength of Toyo Securities Group

The Company’s sales network stretches from Sendai to Fukuoka, consisting of 32 branch offices in major cities. These outlets serve as the direct links with our customers. Through these offices, the various companies within Toyo Securities Group are able to provide professional services in many fields of expertise, thus meeting the diverse needs of all clients.

Toyo Capital Co., Ltd. is a provider of integrated financial services, including services for venture capital businesses.

Toyo Securities Asia Ltd., from its base in Hong Kong, is striving to meet the needs of clients in the fast-growing Asian economies. It is well known as a brokerage that handles China B shares as it has established an agency and obtained a license for trading of Shanghai B shares. Toyo Supply Co., Ltd. holds and trades marketable securities.Yosho Trading Co, Ltd. offers professional services in such areas as casualty insurance and merchandise sales.

Contributing to society by offering comprehensive financial services

To ensure that Toyo Securities is an enterprise that customers can rely on and trust, all our employees are striving to improve their abilities. We help our employees gain advanced skills and achieve personal growth by actively promoting study sessions and online training programs, and through other means.

010_0514001372109.indd 4 2009/08/26 10:06:36

1

MESSAGE FROM THE PRESIDENT

During fiscal 2008, the year ended March 31, 2009, the Japanese economy exhibited clear signs of a setback such as a sharp drop in corporate performance, a reduction of capital investment, a worsened employment environment and sluggish consumer spending, affected by the contraction of the global economy against the backdrop of the international financial crisis.

The Japanese stock markets remained steady until early June 2008 on expectations of a global economic expansion especially in the emerging countries. However, stock prices entered an adjustment phase thereafter, affected by the increased sentiment of the financial crisis and the concern of worldwide recession. As a consequence, the main stock indices reached their lowest points since the collapse of the bubble economy.

On the other hand, in the Hong Kong market, which is a distinctive area of strength for us, stock prices entered an adjustment phase due to the adverse effects of the global financial concerns and other factors. However, stock prices bounced back slightly near the end of the fiscal year under review thanks to appropriate governmental measures such as a reduction in interest rates, the relaxation of regulations on loans, the implementation of preferential tax incentives and approximately 4 trillion yuan in diverse stimulation measures.

In this fluctuating market environment, commission income from stock transactions, which is our mainstay earnings source, decreased considerably and

revenue from stock dealings was flat year over year. In the investment trust business, a priority in the Step Plan II medium-term management plan, sales and balances declined significantly. Although we made concerted efforts to ensure gains and rationalize management operations for higher efficiency, the Company recorded a net loss for the year. As a result, management decided to suspend the payment of dividends for the year. We deeply apologize for this regrettable result.

Meanwhile, the Company formulated “Vision C,” a new medium-term management plan, for the year ending March 31, 2010, and subsequent years. The “C” represents our strategic initiatives: Challenge, Chance and Change in terms of offensive aspects; Control, Confidence and Compliance in terms of defensive aspects; and China, our area of strength in overseas business operations.

The business environment is expected to remain difficult as it will likely take considerable time for the Japanese economy to make a full-scale recovery. As a “retail-focused securities group,” we intend to establish business models based on our original strategies and tactics by fully taking advantage of our accumulated experience in handling Japanese stocks, Chinese stocks and investment trust products in both face-to-face and Internet-based transactions.

The Company is determined to establish solid management foundations by increasing the number of customer accounts and assets in custody while promoting future operations under the slogan “Asia, China and Japan by fully addressing Asia.”

The Company aims to be a trustworthy securities company with value-added and high-quality financial services, and to provide solidified internal control and enhanced compliance while pursuing higher effectiveness and efficiency in business operations, based on a management philosophy of “trust, added value and strength.”

In all our endeavors, we look forward to the continued support and encouragement of our shareholders.

June 2009

Tetsushi ShinodaPresident

Toyo Securities Co., Ltd.

Tetsushi ShinodaPresident

010_0514001372109.indd 1 2009/08/26 10:06:37

2

BUSINESS RESULTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009

Operating Circumstances and Results of the Corporate Group

During fiscal 2008, the year ended March 31, 2009, the Japanese economy increasingly exhibited signs of setback such as negative growth in GDP during the first quarter (April–June) and subsequent months, worsening in the third quarter (October–December) to an annualized real GDP growth rate of -14.4%. The stock markets in major countries plunged into a drastic adjustment phase in the wake of the bankruptcy of a leading U.S. financial institution in mid-September 2008. In addition, in the foreign exchange markets, the yen rapidly appreciated against the U.S. dollar, which led to a decline in corporate performance, a reduction in capital investment, deteriorated employment conditions and sluggish consumer spending.Amid such a business climate, although the Japanese stock markets remained steady from April through early June 2008 on expectations of a global economic expansion especially with the emerging countries as the driver, the Nikkei Stock Average dropped considerably against the backdrop of the pervasive financial uncertainty worldwide and concerns of a recession, recording ¥7,162 on October 27, 2008, and ¥7,054 on March 10, 2009, on a closing price basis, which were record lows since the collapse of the bubble economy. Moreover, in the foreign exchange markets, the yen appreciated rapidly and peaked at around ¥87 = US$1 in December and January.However, toward the end of March 2009, the Nikkei Stock Average rallied somewhat, reflecting some calming in the U.S. stock markets and the yen-dollar foreign exchange rates, and the final closing price of the Nikkei Stock Average was ¥8,109 at the fiscal year-end. Trading turnover on the First Section of the Tokyo Stock Exchange stood at ¥491 trillion, mainly due to selling on balance by foreign investors.Meanwhile, the yield of the 10-year JGB rose to 1.895% in June 2008 in the domestic bond market in fear of inflation worries due to the hike of prices in the commodity markets. However, the yield temporarily dropped to 1.155%, reflecting increased concerns of financial uncertainty after September 2008 and the Bank of Japan’s reduction of interest rates in November and December 2008. Subsequently, the yield moved to around the 1.3% level, reflecting purchases related to “fly to quality” process and concerns of a worsening supply-demand relationship due to the increased issuance of government bonds.Meanwhile, in the Hong Kong market, which is a distinct area of strength for us, the Hang Seng Index, one of the leading indices, reached a high of 26,387 points in early May 2008, reflecting high expectations for corporate performance given the high growth rate of the Chinese economy. The market, however, subsequently turned downward due to the adverse effects of the financial crisis triggered by the U.S. subprime housing loan issue and the setback of the Chinese economy, and the index dropped sharply to 10,676 points in late October 2008 amid the surging global downturn in stocks. Nevertheless, as a result of pump-priming measures successively released by the Chinese government including a reduction in interest rates, the relaxation of financing regulations and various tax benefits, the index rallied to 15,763 points in January 2009. Subsequently, given the increased concerns on corporate performance in the market after receiving news of the closings of many manufacturing plants, the Hang Seng Index again dipped to 11,344 points before rallying slightly to 13,576 points as of March 31, 2009, in view of the favorable effects of several administrative measures including support for the purchase of home electronic appliance products and automobiles, in addition to a general economic stimulus package amounting to approximately 4 trillion yuan.In this economic setting, the Toyo Securities Group’s business performance was as follows:

1. Commission Income

Commission income totaled ¥8,434 million, a decrease of 54.2% from the previous year. The details are described below:(Commission from stock transactions)The volume of transactions decreased and the average daily turnover on the First and Second sections of the Tokyo Stock Exchange dropped 30.4% year over year to ¥2,013.5 billion. The value of securities

010_0514001372109.indd 2 2009/08/26 10:06:37

3

traded by the Group declined 39.3% to ¥1,979.6 billion. As a result, the Group’s commission income from stock transactions fell 43.0% to ¥4,759 million.

(Underwriting fees)Fees from underwriting and IPOs plummeted 97.9% year over year to only ¥3 million for stock underwriting, and the underwriting of local government bonds and corporate bonds edged down 0.8% to ¥14 million.

(Sales commissions received)Sales commissions received, principally consisting of sales commissions from investment trust instruments, decreased 65.9% year over year to ¥932 million.

(Other fees)Other fees, mainly consisting of agency commissions for investment trust instruments, decreased 62.2% to ¥2,695 million.

2. Trading Profits

Profits from stock trading increased 33.3% from the previous year to ¥525 million, profits from bond trading decreased 37.1% to ¥874 million and other trading profits declined 31.1% to ¥998 million. As a consequence, total trading profits fell 25.8% to ¥2,398 million.

3. Financial Balance

Financial income was ¥803 million, down 42.4% from the previous year, and financial expenses were ¥386 million, down 34.0%, resulting in a net balance of ¥417 million, a decrease of 48.4% from the previous year.

4. Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased 11.4% from the previous year to ¥14,395 million.

5. Non-operating Profits and Losses

Non-operating profits were ¥410 million, down 16.0% from the previous year, and non-operating losses were ¥61 million, up 19.0%, resulting in a net balance of ¥349 million, a decrease of 20.1% from the previous year.

6. Extraordinary Profits and Losses

Extraordinary profits were ¥834 million, mainly consisting of ¥815 million in the reversal of liability reserve for financial instrument transactions. (There were no extraordinary profits recorded for the previous fiscal year.)Extraordinary losses expanded 15.9% year over year to ¥559 million, including a ¥430 million write-off of investment securities and a ¥103 million loss on sale of investment securities. As a result, a net extraordinary profit of ¥275 million was recorded compared with a net extraordinary loss of ¥482 million for the previous fiscal year.

010_0514001372109.indd 3 2009/08/26 10:06:37

4

RATIO OF PRIMARY CAPITAL (NOT CONSOLIDATED)

Millions of yen2009 2008

Basic items:Total capitals (A) ¥32,251 ¥35,989

Subsidiary items:Available-for-sale securities appraisal profit or loss 29 829

Trading loss reserves 334 1,149Allowance for bad debts 30 65Total (B) 394 2,044

Deduction assets (C) 10,733 10,103

Primary capital assets afterdeductions (A)+(B)-(C) (D) 21,912 27,931

Risk capital:Market risk capital 711 878Counterparty risk capital 408 824Basic risk capital 3,513 3,621Total (E) ¥ 4,634 ¥ 5,323

Ratio of primary capital (D)/(E)x100 472.8% 524.6%

010_0514001372109.indd 4 2009/08/26 10:06:37

5

Capital adequacy requirements

Under the Financial Instruments and Exchange Law, securities companies are responsible for various risks and are legally obligated to maintain sufficient liquid capital to cover exigencies when such risks arise.

Securities companies are required to maintain liquid capital in the form of internal assets exceeding the total of potential market risks (posed by fluctuations in prices of securities held), counterparty risk (in the event the counterparty to a transaction fails to honor the contract), and basic risk (arising from errors committed in the course of normal business operations).

Note:Average month-end market risk amounts for the fiscal years to March 2008 and March 2009 were ¥1,470 million and ¥1,191, respectively, with maximum month-end amounts of ¥2,149 million, and ¥1,567 million, respectively. For the same periods, average monthly counterparty risks were ¥1,241 million, and ¥594 million, respectively, with maximum month-end exposures of ¥1,626 million, and ¥845 million.

Securities companies are required to prevent their capital adequacy ratio from falling below 120% (Article 46-6 of the Financial Instruments and Exchange Law).

With respect to violation of the regulatory capital adequacy requirements, the penalty takes the form of a forced change to business operations, or order to suspend all or part of operations (limited to when the ratio falls below 100%). The law also stipulates severe punishment, including revocation of listed status (Article 53-2 of the Financial Instruments and Exchange Law).

010_0514001372109.indd 5 2009/08/26 10:06:37

6

TOYO SECURITIES CO., LTD. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSMarch 31, 2009 and 2008

Millions of yenThousands of

U.S. dollars (Note 1)ASSETS 2009 2008 2009 2008Cash and deposits:

Cash and time deposits (Note 4) ¥ 20,205 ¥ 22,784 $ 205,691 $ 231,945 20,205 22,784 205,691 231,945

Deposited money:Customers 13,824 20,125 140,731 204,876 Others 176 176 1,792 1,792

14,000 20,301 142,523 206,668 Trading assets (Note 6) 2,085 1,533 21,226 15,606 Receivables:

Customers (Note 5) 10,758 28,677 109,518 291,937 Call loans and short-term loans 33 48 336 489 Others 6,124 3,644 62,343 37,097 Allowance for doubtful accounts (30) (65) (305) (662)

16,885 32,304 171,892 328,861 Property and equipment, at cost 4,015 3,708 40,873 37,748

Less accumulated depreciation (2,089) (1,818) (21,266) (18,507)1,926 1,890 19,607 19,241

Other assets:Long-term guarantee deposits 2,331 1,928 23,730 19,627 Investment securities 5,753 7,626 58,567 77,634 Investment in non-consolidated subsidiaries and affiliates 250 219 2,545 2,229 Long-term loans 1 2 10 20 Others 4,540 4,399 46,218 44,783 Allowance for doubtful accounts (393) (662) (4,001) (6,739)

12,482 13,512 127,069 137,554 Deferred tax assets (Note 12) 3 503 30 5,121

¥ 67,586 ¥ 92,827 $ 688,038 $ 944,996

LIABILITIES AND NET ASSETSBorrowings (Note 9):

Short-term borrowings ¥ 8,530 ¥ 11,550 $ 86,837 $ 117,581 Loans from securities finance companies for margin transactions 4,213 10,597 42,889 107,879

12,743 22,147 129,726 225,460 Payables:

Customers (Note 10) 17,992 23,457 183,162 238,797 Others 927 1,588 9,437 16,166

18,919 25,045 192,599 254,963 Accrued liabilities and expenses:

Income taxes payable 39 2,176 397 22,152 Accrued employees’ bonuses 243 738 2,474 7,513 Liabilities for severance and retirement benefits (Note 13) — 2 — 20 Reserve for directors’ retirement benefits 247 268 2,514 2,728 Others 844 1,078 8,592 10,975

1,373 4,262 13,977 43,388 Deferred tax liabilities (Note 12) 132 716 1,344 7,289 Special reserves (Note 14) 335 1,150 3,410 11,707

Net assets:Common stock 13,495 13,495 137,382 137,382

Authorized——316,000,000 sharesIssued————91,355,253 shares in 2008 and 2009

Capital surplus 9,650 9,650 98,239 98,239 Retained earnings 12,275 16,233 124,962 165,255 Less treasury stock, at cost — 852,958 shares in 2008 (1,144) (628) (11,646) (6,393)

4,004,266 shares in 2009Net unrealized holding gains on securities 233 1,136 2,372 11,565 Foreign currency translation adjustments (582) (537) (5,925) (5,467)Minority interests 157 158 1,598 1,608 Total net assets 34,084 39,507 346,982 402,189

¥ 67,586 ¥ 92,827 $ 688,038 $ 944,996

See accompanying notes.

010_0514001372109.indd 6 2009/08/26 10:06:37

7

TOYO SECURITIES CO., LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEYears ended March 31, 2009 and 2008

Millions of yen Thousands of

U.S. dollars (Note 1)Revenues: 2009 2008 2009 2008

Commissions ¥ 8,434 ¥ 18,405 $ 85,860 $187,366 Interest and dividend income 803 1,394 8,175 14,191 Net gain on trading 2,398 3,233 24,412 32,913 Gain on sale of investment securities 14 — 142 —Rent income 156 146 1,588 1,486 Dividend received of investment securities 189 209 1,924 2,128 Reversal of special reserves 815 — 8,297 —Other 130 85 1,323 865

12,939 23,472 131,721 238,949

Expenses:Selling, general and administrative expenses 14,395 16,242 146,544 165,347 Interest expense 386 584 3,929 5,945 Loss on sale of investment securities 103 — 1,049 —Write-off of investment securities 430 7 4,377 71 Loss on disposal of property and equipment 26 71 265 723 Write-off of golf membership — 4 — 41 Provision for special reserves of securities transaction liabilities — 208 — 2,117

Provision for directors retirement benefits — 191 — 1,944 Other 61 52 621 530

15,401 17,359 156,785 176,718 Income (loss) before income taxes (2,462) 6,113 (25,064) 62,231

Income taxes (Note 12):Current 52 2,945 530 29,981 Deferred 507 (70) 5,161 (713)

Minority interests in income 1 1 10 10 Net Income (loss) ¥ (3,022) ¥ 3,237 $ (30,765) $ 32,953

Amounts per share of common stock: Yen U.S. dollars (Note 1)Net income (loss) ¥ (33.74) ¥ 35.76 $ (0.34) $ 0.36 Diluted net income — 35.70 — 0.36 Cash dividends applicable to the year — 10.00 — 0.10


010_0514001372109.indd 7 2009/08/26 10:06:37

8

Millions of yen

Number of Shares of

common stockCommon

stockCapitalsurplus

Retained earnings

Treasurystock

Net unrealizedgains

on securities

Foreigncurrency

translationadjustments

Minorityinterests

Balance at March 31, 2008 91,355,253 ¥ 13,495 ¥ 9,650 ¥ 16,233 ¥ (628) ¥ 1,136 ¥ (537) ¥ 158 Net income (loss) — — — (3,022) — — — —Cash dividends paid (¥10.00 per share) — — — (905) — — — —Treasury stock — — — (31) (516) — — —Net change during the year — — — — — (903) (45) (1)

Balance at March 31, 2009 91,355,253 ¥ 13,495 ¥ 9,650 ¥ 12,275 ¥ (1,144) ¥ 233 ¥ (582) ¥ 157

Thousands of U.S. dollars (Note 1)

Commonstock

Capitalsurplus

Retained earnings

Treasurystock

Net unrealizedgains

on securities

Foreigncurrency


Minorityinterests

Balance at March 31, 2008 $137,382 $98,239 $165,255 $ (6,393) $11,565 $(5,467) $1,608 Net income (loss) — — (30,765) — — — —Cash dividends paid (¥10.00 per share) — — (9,213) — — — —Treasury stock — — (315) (5,253) — — —Net change during the year — — — — (9,193) (458) (10)

Balance at March 31, 2009 $137,382 $98,239 $124,962 $(11,646) $ 2,372 $(5,925) $1,598


TOYO SECURITIES CO., LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSYears ended March 31, 2009 and 2008

010_0514001372109.indd 8 2009/08/26 10:06:37

9

TOYO SECURITIES CO., LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSYears ended March 31, 2009 and 2008

Millions of yen

Number of Shares of

common stockCommon

stockCapitalsurplus

Retained earnings

Treasurystock

Net unrealizedgains

on securities

Foreigncurrency


Minorityinterests

Balance at March 31, 2007 91,355,253 ¥ 13,495 ¥ 9,650 ¥ 14,275 ¥ (633) ¥ 3,168 ¥ (78) ¥ 157 Net income (loss) — — — 3,237 — — — —Cash dividends paid (¥14.00 per share) — — — (1,268) — — — —Treasury stock — — — (11) 5 — — —Net change during the year — — — — — (2,032) (459) 1

Balance at March 31, 2008 91,355,253 ¥ 13,495 ¥ 9,650 ¥ 16,233 ¥ (628) ¥ 1,136 ¥ (537) ¥ 158

Thousands of U.S. dollars (Note 1)

Commonstock

Capitalsurplus

Retained earnings

Treasurystock

Net unrealizedgains

on securities

Foreigncurrency


Minorityinterests

Balance at March 31, 2007 $137,382 $98,239 $145,322 $(6,444) $32,251 $ (794) $1,598 Net income (loss) — — 32,953 — — — —Cash dividends paid (¥14.00 per share) — — (12,908) — — — —Treasury stock — — (112) 51 — — —Net change during the year — — — — (20,686) (4,673) 10

Balance at March 31, 2008 $137,382 $98,239 $165,255 $(6,393) $11,565 $(5,467) $1,608


010_0514001372109.indd 9 2009/08/26 10:06:37

10

TOYO SECURITIES CO., LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSYears ended March 31, 2009 and 2008

Millions of yen Thousands of

U.S. dollars (Note 1)2009 2008 2009 2008

Cash flows from operating activities:Income before income taxes ¥ (2,462) ¥ 6,113 $ (25,064) $ 62,231 Adjustments to reconcile income before income taxes to net cash provided by operating actives:

Depreciation and amortization 873 691 8,887 7,035 Amortization of good will 1 — 10 —Reversal of doubtful accounts—net (303) 567 (3,085) 5,772 Reversal of employee’s bonuses—net (494) 3 (5,029) 31 Reversal of severance and retirement benefits—net (2) 2 (20) 20 Provision for directors’ retirement benefits—net 74 268 753 2,728 Provision for special reserves—net (815) 208 (8,297) 2,117 Write-off of investment securities 430 7 4,378 71 Write-down of uncollectable deposits in golf membership — 4 — 41 Loss on sales of property and equipment — 1 — 10 Loss on disposal of property and equipment 32 77 326 784 Gain on sales of investment securities 89 — 906 —Interest and dividend income (449) (504) (4,571) (5,131)Interest expense 165 219 1,680 2,229 Exchange gain (991) (1,449) (10,089) (14,751)Increase in deposits segregated for customers 6,296 1,650 64,095 16,797 Decrease in short-term loans for operating purpose 15 11 153 112 Changes in advances and deposits received (4,484) (474) (45,648) (4,825)Decrease in trading assets (551) 235 (5,609) 2,392 Decrease in securities owned for non-trading purpose (128) 115 (1,303) 1,171 Change in assets related to margin transactions 16,256 31,379 165,489 319,444 Change in liabilities related to margin transactions (5,453) (24,765) (55,513) (252,112)Other—net (3,886) (4,103) (39,560) (41,769)

4,213 10,255 42,889 104,397 Interest and dividends received 476 486 4,846 4,948 Cash paid for interest (165) (218) (1,680) (2,219)Cash paid for income taxes (2,237) (2,489) (22,773) (25,338)

Net cash provided by operating activities 2,287 8,034 23,282 81,788

Cash flows from investing activities:Payments for time deposits (8,436) (325) (85,880) (3,309)Withdrawal from time deposits 4,339 189 44,172 1,924 Purchases of investment securities (84) (559) (855) (5,690)Proceeds from sale of investment securities 28 196 285 1,995 Purchase of investment in affiliated company (85) (1) (865) (10)Purchases of property, equipment and intangible fixed assets (1,214) (1,300) (12,359) (13,234)Proceeds from sale of property, equipment and intangible fixed assets — 9 — 92 Receipt of repayments of non-operating loans 1 1 10 10 Other proceeds 14 39 142 397 Net cash used in investing activities (5,437) (1,751) (55,350) (17,825)

Cash flows from financing activities:Decrease in short-term borrowings—net (3,020) (2,306) (30,744) (23,476)Repurchase and disposal of treasury stock—net (547) (6) (5,569) (61)Payment for dividend (905) (1,267) (9,213) (12,898)Other—net (4) — (41) —Net cash used in financing activities (4,476) (3,579) (45,567) (36,435)

Effect of exchange rate changes on cash and cash equivalents 1,397 990 14,222 10,078 Net increase (decrease) in cash and cash equivalents (6,229) 3,694 (63,413) 37,606 Cash and cash equivalents at beginning of year 21,698 18,004 220,890 183,284 Cash and cash equivalents at end of year (Note 4) ¥15,469 ¥21,698 $157,477 $220,890


010_0514001372109.indd 10 2009/08/26 10:06:38

11

TOYO SECURITIES CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSMarch 31, 2009 and 2008

1. Basis of Presenting Consolidated Financial Statements The accompanying consolidated financial statements of Toyo Securities Co., Ltd. (the “Company”) and its

consolidated subsidiaries have been prepared in accordance with the provisions set forth in the Japanese

Financial Instruments and Exchange Law and its related accounting regulations, and in conformity with

accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as

to application and disclosure requirements from International Financial Reporting Standards.

The accounts of the Company’s overseas subsidiaries are based on their accounting records maintained in

conformity with generally accepted accounting principles prevailing in the respective countries of domicile. The

accompanying consolidated financial statements have been restructured and translated into English from the

consolidated financial statements of the Company prepared in accordance with Japanese GAAP and filed with

the appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments and

Financial Law. Certain supplementary information included in the statutory Japanese language consolidated

financial statements, but not required for fair presentation, is not presented in the accompanying consolidated

financial statements.

The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of readers

outside Japan, using the prevailing exchange rate at March 31, 2009, which was ¥98.23 to U.S. $1. The

convenience translation should not be construed as representation that the Japanese yen amounts have been,

could have been, or could in the future be, converted into U.S. dollars at this or any other rate of exchange.

2. Summary of Significant Accounting Policies Consolidation — Consolidated financial statements of the Company include the accounts of the Company, six

domestic subsidiaries and a foreign subsidiary in 2009 and 2008. All significant intercompany balances and

transactions have been eliminated.

Equity method — Equity method for non-consolidated subsidiaries and affiliates is not applied because of its

immateriality to the consolidated financial statements.

Consolidated Statements of Cash Flows — In preparing the consolidated statements of cash flows, cash on hand,

readily-available deposits and fixed deposits with the initial maturities of not exceeding three months at the time

of purchase are considered to be cash and cash equivalents.

Purpose and range of trading — The purposes of trading business are to meet our customers’ investment

requirements as their counterpart, and to have our proprietary trading position and its hedging position. Financial

instruments used for our trading business are securities, exchange traded derivatives such as futures and options

of stock index and Japanese government bond, and non exchange traded derivatives such as forward foreign

exchange contracts.

Trading assets and trading liabilities — Trading assets and trading liabilities are recorded on a trade date basis at

fair value. Gains or losses related to trading securities transactions are recorded on a trade date basis.

010_0514001372109.indd 11 2009/08/26 10:06:38

12

Unrealized gains or losses from financial derivatives such as futures and option transactions are reflected as net

gain on trading in the accompanying consolidated statements of operations. Securities owned for non-trading

purposes, shown in the accompanying consolidated balance sheets as “Investment securities”, are discussed

below.

Derivative financial instruments are stated at fair market value. Gains and losses realized on disposal and

unrealized gains and losses from market value fluctuations are recognized as gains or losses in the period of the

change.

Securities owned for non-trading purpose — Held-to-maturity securities are stated at amortized cost. Other

securities with available fair market values are stated at fair market value. Unrealized gains and losses on these

securities are reported, net of applicable income taxes, as a separate component of net assets. Gains and losses

of such securities are computed using moving-average cost.

Other securities with no available fair market value are stated at moving-average cost.

Investments in investment partnerships are reported under the proportionate consolidation method, i.e. the

profits and losses of the investment partnerships are recorded in the Company’s financial statements in

proportion to the Company’s share of the investment partnerships.

Property and equipment — Buildings, land, equipment and fixtures are stated at cost. Depreciation is computed

primarily using the declining–balance method. Buildings acquired by the Company and domestic subsidiaries

after April 1, 1998 are depreciated using the straight-line method.

Depreciation of foreign consolidated subsidiaries is computed using the straight-line method.

Intangible assets — Amortization is computed using the straight-line method.

Amortization of software is computed using the straight-line method over the estimated effective useful lives (five

years).

Lease assets — Depreciation of leased property pertaining to finance lease transactions not involving the transfer

of ownership is computed using the straight-line method over the lease period as the useful period and assuming

the residual value is zero.

The accounting treatment for finance lease transactions deemed not involving the transfer of ownership whose

transaction commenced on or before March 31, 2008, follows the same method as for operating lease

transaction.

Stock issuance costs — Costs incurred for issuing stocks are charged to income when incurred.

Allowance for doubtful accounts — The Company and domestic consolidated subsidiaries provide allowance based on the estimated uncollectible amount with respect to certain identified doubtful receivables and using the

010_0514001372109.indd 12 2009/08/26 10:06:38

13

actual percentage of the Company’s collection losses in the past with respect to general account receivables. Foreign consolidated subsidiaries provide allowance based on specifically assessed amounts with respect to certain identified doubtful receivables.

Bonuses — The Company and consolidated subsidiaries follow the Japanese practice of paying bonuses to employees in June and December. The estimated amount of employees’ bonuses is accrued.

Directors’ bonus — To prepare for the payment of bonuses to directors, the company and domestic consolidated subsidiaries calculated the estimated value of future payments and charged an appropriate portion of this obligation to the period.

Directors’ retirement benefits — To prepare for the payment of retirement benefits to directors and executive officers, the Company and domestic consolidated subsidiaries calculated the necessary amount for the end of this period in accordance with the in-house rules.

Employees’ severance and retirement benefits — The Company and consolidated subsidiaries provide liabilities for employees’ severance and retirement benefits based on the estimated amounts of projected benefit obligation and the fair value of the plan assets. A handy method for the estimation is adopted by certain consolidated subsidiaries.

Actuarial gains and losses are recognized in expenses using the straight-line method over the average of the estimated remaining service lives (five years).

Employees of Japanese companies are compulsorily included in the Welfare Pension Insurance Scheme operated by the government. Employers are legally required to deduct employees’ welfare pension insurance contributions from their payroll and to pay them to the government together with employers’ own contributions.

Foreign currency translation — Receivables and payables denominated in foreign currencies are translated into Japanese yen at the year-end rates.

Balance sheets of consolidated overseas subsidiary are translated into Japanese yen at the year-end rate except for stockholders’ equity accounts, which are translated at the historical rates. Income statements of consolidated overseas subsidiaries are translated at average rates during the period.

Amounts per share of common stock — Net income per share of common stock has been computed based on the weighted-average number of shares outstanding during each year.

3. Changes in Method of Accounting

Changes concerning the settlement date of consolidated subsidiaries — For three consolidated subsidiaries with different closing dates to the consolidated closing date, financial statements as of each subsidiary’s closing date had been used. However, Quarterly Reporting System was implemented and effective from the fiscal year, for three consolidated subsidiaries, financial statements were prepared based on the provisional settlement of

010_0514001372109.indd 13 2009/08/26 10:06:38

14

accounts as of the consolidated closing date.The effect of this change on loss before income taxes is not significant.

Adoption of Accounting standard for lease transaction — Before the change, the accounting treatment for finance lease transactions not involving the transfer of ownership followed the method for operating lease transactions, however, the Company, effective from the fiscal year under review, adopted the “Accounting Standard for lease Transactions” (ASBJ Statement No. 13 [Business Accounting Council Committee No.1 , June 17, 1993; revised March 30, 2007]) and the “Guidance on the Accounting Standard for Lease Transactions” (ASBJ Guidance No. 16 [the Japanese Institute of Certified Public Accountants, Accounting Committee, January 18, 1994; revised March 30, 2007]) to account for such transactions in a manner similar to the accounting treatment for ordinary sale and purchase transactions. Meanwhile, depreciation of leased property pertaining to finance lease transactions not involving the transfer of ownership is computed on a straight-line method over the lease period as durable period, assuming the residual value is zero.Also, the accounting treatment for finance lease transactions not involving the transfer of ownership whose transaction commenced on or before March 31, 2008, continues to follow the ordinary method for operating lease transactions.The effect of this change on loss before income taxes in none.

Practical solution on unification of accounting policies applied to foreign subsidiaries for consolidated financial statements — From the fiscal year under review, the” Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements” (ASBJ PITF Practical Solution No.18, May 17, 2006) is applied, and necessary amendments for consolidated financial statements are made.The effect of this change on loss before income taxes is none.

4. Cash and cash equivalentsDifference between “cash and cash equivalents” and “cash and time deposits” as of March 31, 2009 and 2008 is

reconciled as follow:

Millions of yen Thousands of U.S. dollars2009 2008 2009 2008

Cash and time deposits ¥ 20,205 ¥ 22,784 $ 205,691 $ 231,945Time deposits over three months (4,736) (1,086) (48,214) (11,055)Cash and cash equivalents ¥ 15,469 ¥ 21,698 $ 157,477 $ 220,890

5. Receivables — customersReceivables — customers at March 31, 2009 and 2008 consisted of the following:


Loans to customers for margin transactions ¥ 10,750 ¥ 28,630 $ 109,437 $ 291,459Advance payments for customers 8 47 81 478

¥ 10,758 ¥ 28,677 $ 109,518 $ 291,937

010_0514001372109.indd 14 2009/08/26 10:06:38

15

6. Trading assets and liabilitiesTrading assets and liabilities at March 31, 2009 and 2008 consisted of the following:

2009Millions of yen Thousands of U.S. dollars

Book value Recognizedgains (losses)


(1) SecuritiesAssets:

Equity securities ¥ 25 ¥ (38) $ 255 $ (387)Bonds 2,055 34 20,920 346Beneficiary certificates and shares of investments trusts 1 0 10 0

2,081 (4) 21,185 (41)

(2) Derivatives

Foreign exchange contracts 4 — 41 —¥ 2,085 ¥ (4) $ 21,226 $ (41)




(1) SecuritiesAssets:

Equity securities ¥ 35 ¥ (27) $ 356 $ (275)Bonds 1,492 20 15,189 204Beneficiary certificates and shares of investments trusts 2 0 20 0

1,529 (7) 15,565 (71)

(2) Derivatives

Foreign exchange contracts 4 — 41 —¥ 1,533 ¥ (7) $ 5,606 $ (71)

010_0514001372109.indd 15 2009/08/26 10:06:38

16

7. Fair value information for quoted securities owned for non-trading purposeThe following tables summarize acquisition costs and balance sheet amount (fair values) of other securities with

available fair values as of March 31, 2009 and 2008:

Securities with book values exceeding acquisition costs:


Acquisition cost

Book value

Difference Acquisition cost

Book value

Difference

Equity securities ¥ 1,349 ¥ 2,691 ¥ 1,342 $ 13,733 $ 27,395 $ 13,662


Acquisition cost

Book value


Book value

Difference

Equity securities ¥ 2,739 ¥ 5,250 ¥ 2,511 $ 27,884 $ 53,446 $ 25,562

Securities with book values less than acquisition costs:


Acquisition cost

Book value


Book value

Difference

Equity securities ¥ 3,703 ¥ 2,731 ¥ (972) $ 37,697 $ 27,802 $ (9,895)


Acquisition cost

Book value


Book value

Difference

Equity securities ¥ 2,695 ¥ 2,045 ¥ (650) $ 27,435 $ 20,818 $ (6,617)

010_0514001372109.indd 16 2009/08/26 10:06:38

17

The following tables summarize book values of other securities with no available fair values as of March 31, 2009 and 2008:

(1) Other securities with no available fair values


Non-listed equity securities ¥ 1,347 ¥ 1,344 $ 13,713 $ 13,682Non-listed bonds 40 40 407 407Other 465 427 4,734 4,347

(2) Other securities sold during the year


Proceeds from sales ¥ 109 ¥ 113 $ 1,110 $ 1,150Gains 74 57 753 580Losses 134 13 1,364 132

8. Derivative transactions The Company utilizes derivative transactions such as equity index futures and options, Japanese government

bonds futures and options to hedge trading securities and to take arbitrage opportunities in accordance with the

Company’s trading policies and guideline. The Company also enters into forward exchange contracts to meet

customers’ needs related to foreign securities transactions.

At March 31, 2009 and 2008, the Company did not have any outstanding balance of derivative transactions,

except for forward exchange contracts which are stated at fair value in the accompanying consolidated balance

sheets and the related gains or losses are reflected in the accompanying consolidated statements of operations.

9. Borrowings and pledged assetsShort-term borrowings at March 31, 2009 and 2008 consisted of the following:


Short-term bank loans ¥ 8,530 ¥ 6,550 $ 86,837 $ 66,680Short-term loans from securities

finance companies 4,213 10,597 42,889 107,879Call money — 5,000 — 50,901

¥ 12,743 ¥ 22,147 $ 129,726 $ 225,460

010_0514001372109.indd 17 2009/08/26 10:06:38

18

At March 31, 2009 and 2008 short-term borrowings and loans from securities finance companies for margin

transactions in the amount of ¥9,643 million ($98,167 thousand) and ¥16,026 million ($163,148 thousand),

respectively, were secured by the following assets:


Cash and time deposits ¥ 2,310 ¥ — $ 23,516 $ —Trading assets 11 — 112 —Property and equipment 690 697 7,024 7,096Investment in securities 4,518 5,014 45,994 51,043

¥ 7,529 ¥ 5,711 $ 76,646 $ 58,139

In addition to the above, securities are deposited as collateral, that is based on market price at March 31, 2009

and 2008:

Total fair value of the securities deposited as collateral at March 31, 2009 and 2008 consisted of the following.


For debt of margin trading ¥ 12,685 ¥ 24,960 $ 129,136 $ 254,098Margin of collateral securities 74 429 753 4,367Other 5 39 51 397

¥ 12,764 ¥ 25,428 $ 129,940 $ 258,862

Total fair value of the securities received as collateral at March 31, 2009 and 2008 consisted of the following.


For credit of margin trading ¥ 11,633 ¥ 24,243 $ 118,426 $ 246,798Margin of collateral securities 16,055 30,427 163,443 309,753

¥ 27,688 ¥ 54,670 $ 281,869 $ 556,551

10. Payables — CustomersPayables — Customers at March 31, 2009 and 2008 consisted of the following:


Deposits received for customers’ accounts on dealing transactions ¥ 10,166 ¥ 14,758 $ 103,491 $ 150,239Proceeds from securities sold for customers’ accounts for margin transactions 3,522 2,591 35,855 26,377Cash deposits received from customers for margin and futures transactions 4,304 6,108 43,816 62,181

¥ 17,992 ¥ 23,457 $ 183,162 $ 238,797

010_0514001372109.indd 18 2009/08/26 10:06:38

19

11. Net assetsThe Japanese Corporate Law (the “Law”) became effective on May 1, 2006, replacing the Japanese Commercial

Code (the “Code”). The Law is generally applicable to events and transactions occurring after April 30, 2006 and

for fiscal years ending after that date.

Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated as

common stock. However, a company may, by a resolution of the Board of Directors, designate an amount not

exceeding one-half of the price of the new shares as additional paid-in capital, which is included in capital

surplus.

Under the Law, in cases where a dividend distribution of surplus is made, the smaller of an amount equal to 10%

of the dividend or the excess, if any, of 25% of common stock over the total of additional paid-in-capital and

legal earnings reserve must be set aside as additional paid-in-capital or legal earnings reserve. Legal earnings

reserve is included in retained earnings in the accompanying consolidated balance sheets.

Under the Code, companies were required to set aside an amount equal to at least 10% of the aggregate amount

of cash dividends and other cash appropriations as legal earnings reserve until the total of legal earnings reserve

and additional paid-in capital equaled 25% of common stock.

Under the Code, legal earnings reserve and additional paid-in capital could be used to eliminate or reduce a

deficit by a resolution of the shareholders’ meeting or could be capitalized by a resolution of the Board of

Directors. Under the Law, both of these appropriations generally require a resolution of the shareholders’

meeting.

Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Code,

however, on condition that the total amount of legal earnings reserve and additional paid-in capital remained

equal to or exceeded 25% of common stock, they were available for distribution by resolution of the

shareholders’ meeting. Under the Law, all additional paid-in-capital and all legal earnings reserve may be

transferred to other capital surplus and retained earnings, respectively, which are potentially available for

dividends.

The maximum amount that the Company can distribute as dividends is calculated based on the non-

consolidated financial statements of the Company in accordance with Japanese laws and regulations.

At the board of directors’ meeting held on May 15, 2009, since the Company recorded net loss of approximately

3.2 billion yen for fiscal 2008 (the fiscal year ended March 31, 2009), the board of directors have resolved not to

pay dividends for fiscal 2008.

010_0514001372109.indd 19 2009/08/26 10:06:38

20

12. Income taxesThe Company is subjected to a number of taxes based on income, which, in the aggregate, indicate statutory

rates in Japan of approximately 40.6% for the years ended March 31, 2009 and 2008.

The following table summarizes the significant differences between the statutory tax rate and the Company’s

effective tax rate for financial statement purposes for the years ended March 31, 2009 and 2008:

2009 2008Statutory tax rate 40.6% 40.6%Changes in valuation allowance (65.1) 6.7Permanently non-deductible expenses for tax purposes such as

entertainment expenses (0.7) 1.2Permanently non-taxable income such as dividend income 1.7 (0.6)Per capita inhabitant tax (1.4) 0.5Other 2.2 (1.4)Effective tax rate (22.7)% 47.0%

Significant components of the deferred tax assets and liabilities as of March 31, 2009 and 2008 are as follows:


Deferred tax assets:Loss carried forward ¥ 1,733 ¥ 171 $ 17,642 $ 1,741Excess provision for accrued employees’ bonuses 99 278 1,008 2,830Excess allowance for doubtful accounts 157 261 1,598 2,657Reserve for financial products transactions liabilities 136 468 1,385 4,764Write-off of investment securities 142 127 1,446 1,293Business tax 8 172 81 1,751Retained earnings for specified foreign subsidiary 715 438 7,279 4,459Reserve for directors’ retirement benefits 101 109 1,028 1,110Other 102 192 1,038 1,954

Total deferred tax assets 3,193 2,216 32,505 22,559Valuation allowance (3,190) (1,706) (32,474) (17,367)Net deferred tax assets 3 510 31 5,192

Deferred tax liabilitiesNet unrealized holding gains (132) (723) (1,344) (7,360)

Total deferred tax liabilities (132) (723) (1,344) (7,360)Net deferred tax liabilities ¥ (129) ¥ (213) $ (1,313) $ (2,168)

The Company recorded a valuation allowance to reflect the estimated amount of deferred tax assets which will

not be realized.

010_0514001372109.indd 20 2009/08/26 10:06:38

21

The net deferred tax liabilities as of March 31, 2009 consisted of deferred income tax assets included in current

assets amounting to ¥3 million ($ 31 thousand) and deferred income tax liabilities included in other current

liabilities and long-term debt amounting to ¥112 million ($ 1,140 thousand) and ¥20 million ($ 204 thousand),

respectively.

The net deferred tax liabilities as of March 31, 2008 consisted of deferred income tax assets included in current

assets amounting to ¥503 million ($ 5,121 thousand) and deferred income tax liabilities included in other

current liabilities and long-term debt amounting to ¥138 million ($ 1,405 thousand) and ¥578 million ($ 5,884

thousand), respectively.

(Additional Information)

New legislation was enacted in April 30, 2008, which changes the aggregate effective tax rate.

The effect of this change on deferred tax assets and liabilities is not significant.

13. Employees’ severance and pension benefitsThe Company and domestic subsidiaries provide two types of post-employment benefit plans, unfunded lump-

sum payment plans and funded non-contributory pension plans, under which all eligible employees are entitled

to benefits based on the level of wages and salaries at the time of retirement or termination, length of service and

certain other factors.

The liabilities for severance and retirement benefits included in the liability section of the consolidated balance

sheets as of March 31, 2009 and 2008 consist of the following:


Projected benefit obligation ¥ 4,144 ¥ 3,860 $ 42,187 $ 39,295Unrecognized actuarial differences (1,556) (727) (15,841) (7,401)Less fair value of pension assets (2,749) (3,370) (27,985) (34,307)Prepaid pension cost 161 239 1,639 2,433Liability for severance and retirement benefits ¥ — ¥ 2 $ — $ 20

Severance and retirement benefit expenses included in the consolidated statements of operations for the years

ended March 31, 2009 and 2008 comprised of the following:


Service costs—benefits earned during the year ¥ 247 ¥ 216 $ 2,515 $ 2,199Interest cost on projected benefit obligation 58 52 590 529Expected return on plan assets (67) (196) (682) (1,995)Amortization of actuarial differences 46 (65) 468 (662)Severance and retirement benefit expenses ¥ 284 ¥ 7 $ 2,891 $ 71

010_0514001372109.indd 21 2009/08/26 10:06:38

22

The discount rate and the rate of expected return on plan assets used by the Company for 2009 are 1.5% and

2.0%, respectively. The discount rate and the rate of expected return on plan assets used by the Company for

2008 are 1.5% and 5.0%, respectively. The estimated amount of all retirement benefits to be paid at the future

retirement date is allocated equally to each service year using the estimated number of total service years.

Actuarial gains or losses are recognized in the consolidated statements of operations using the straight-line

method over 5 years commencing with the succeeding year.

14. Special reserveThe special reserves at March 31, 2009 and 2008 consisted of the following:


Reserve for securities transactions liabilities ¥ 335 ¥ 1,150 $ 3,410 $ 11,707

The Financial Instruments and Exchange Law of Japan requires securities companies to provide for reserve for

possible customer losses incurred by default of the securities company on securities transactions at a fixed

percentage on net trading gains, although such reserves are not required under the Japanese GAAP. Provision for

securities transaction liabilities is partly deductible for the determination of taxable income in accordance with

tax regulations.

Until March 31,2008, reserve for securities transaction liabilities was posted to provide for losses from problems

with securities at the amount calculated pursuant to provisions in Article 51 of the former Securities and

Exchange Law. However following the enforcement of the Financial Instruments and Exchange Law, reserve for

financial products transaction liabilities is posted at the amount calculated pursuant to the provisions in Article

46-5 of the Financial Instruments and Exchange Law from the fiscal year under review.

With this change, loss before income taxes decreased by 559 million yen in comparison with the previous

method.

15. Stock optionBy special resolution at the 78th general stockholders’ meeting held on June 29, 2000, the Company introduced

a stock option plan in accordance with Article 280-19 of the Commercial Code in Japan, and granted stock

purchase rights at advantageous terms to directors at the closing of the 78th general stockholders’ meeting.

The stock purchase rights can be exercised at a price of ¥394 per share in the period from June 29, 2002 to June

28, 2010, and a total of 2,775,000 shares of common stock could be issued by the exercise of these rights. The

exercise price of stock purchase rights would be adjusted, if the Company issues new shares at a price below the

market price.

010_0514001372109.indd 22 2009/08/26 10:06:39

23

16. Lease transactionsFinance leases not involving the transfer of ownership whose transaction commenced on or before March 31,

2008 are not capitalized and are accounted for in the same manner as operating leases (“non-capitalized finance

leases”). Certain related information at March 31, 2009 and 2008 are summarized as follows:

(1) Equivalent amounts of acquisition cost of leased assets, accumulated depreciation and net book value


Equivalent amount of acquisition cost of leased assets ¥ 268 ¥ 378 $ 2,728 $ 3,848Equivalent amount of accumulated depreciation 187 236 1,903 2,402Equivalent amount of net book value ¥ 81 ¥ 142 $ 825 $ 1,446

(2) Future lease payments of non-capitalized finance leases


Amount due within one year ¥ 50 ¥ 65 $ 509 $ 662Amount due after one year 32 82 326 835Total ¥ 82 ¥ 147 $ 835 $ 1,497

(3) Lease payments under non-capitalized finance leases for the year, equivalent of depreciation expense and

equivalent of interest expense


Lease payments under non-capitalized finance leases for the year ¥ 82 ¥ 80 $ 835 $ 814

Equivalent of depreciation expense 67 74 682 753Equivalent of interest expense 2 6 20 61

(4) Calculation of equivalent of depreciation expense

Equivalents of depreciation expense are computed using the straight-line method over the lease terms assuming

no residual value.

(5) Calculation of equivalent of interest expense

The difference between the total lease payments and equivalent amount of acquisition cost were regarded as

amounts representing equivalent amount of interest payable and were allocated to each period using the interest

method.

010_0514001372109.indd 23 2009/08/26 10:06:39

24

(6) Operating leasesMillions of yen Thousands of U.S. dollars

2009 2008 2009 2008Amount due within one year ¥ 1 ¥ 1 $ 10 $ 10Amount due after one year 1 1 10 10Total ¥ 2 ¥ 2 $ 20 $ 20

17. Contingent liabilitiesNothing for the year ended March 31, 2009 and 2008.

18. Segment informationThe Company operates predominantly in a single industry segment. The Company’s primary business activities

include (1) trading in securities, (2) brokerage of securities, (3) underwriting and distribution of securities and (4)

other business related to securities transactions.

Information by location and overseas sales was not disclosed due to domestic operating revenues and assets of

the Company and its domestic consolidated subsidiaries being in excess of 90% of consolidated operating

revenues and assets, respectively, for the years ended March 31, 2009 and 2008.

19. Subsequent eventsAbolishment of the Retirement Allowances Program for Directors and Officers and Introduction of Stock

Compensation-type Stock Options – On April 28, 2009, Board of directors decided to abolish the retirement

allowances program for Directors and Officers and introduce the Stock Compensation-type Stock Options with

respect to the Directors, Corporate Auditors and Executive Officers of the Company. And, at the general meeting

held on June 26, 2009, the stockholders approved that a payment of lump-sum retirement allowance would be

made at the time of retirement of each retiring Director or Officer with respect to the amount of retirement

allowances corresponding to the years of service up through the close of such ordinary general meeting of

shareholders.

The stock acquisition rights can be exercised at a price of ¥1 per share in the period from July 30, 2009 to July

29, 2039, and a total of 371,000 shares of common stock could be issued by the exercise of these rights. The

number of stock acquisition rights would be adjusted, if the Company carries out a stock split or reverse stock

split of the Company’s common stock after the date of issuing of stock acquisition rights.

010_0514001372109.indd 24 2009/08/26 10:06:39

25

010_0514001372109.indd 25 2009/08/26 10:06:39

26

Business Risk

Listed below are certain risk factors associated with the business overview and the financial information in the securities report that have a significant influence on investor decisions.

The forward-looking statements addressed below were judged appropriate by the Group as of March 31, 2009.

1. Significant change in financial condition or operating results

Because the Toyo Securities Group’s core business is the securities business, operating revenue is greatly influenced by changes in the securities markets in Japan and overseas. For this reason, the Group’s financial condition or operating results might change significantly according to the environment in secondary stock markets.

2. High reliance on transactions of unstable continuity

Commission income accounts for the highest proportion of the Group’s operating revenue. Because the greater part of commission income is generated by customers’ discontinuous and uncertain securities trading, the possibility of stable continuity is low. For this reason, commission income might vary significantly, mainly depending on stock market conditions.

3. Own-account trading activities

Toyo Securities, the core company of the Toyo Securities Group, engages in own-account trading in securities markets as an everyday business activity. Although the Company has established a dedicated department that monitors the operational risks associated with own-account trading, not all risks can be eliminated in this way. Accordingly, changes in stock prices, bond prices, interest rates, foreign exchange and other market prices might affect the Group’s financial condition or operating results. 4. Statutory regulations

Toyo Securities, the core company of the Toyo Securities Group, is subject to legal regulations, such as laws, ordinances and regulations relating to business. Although the Company has established internal mechanisms to maintain its internal control systems and enforces compliance with relevant laws, ordinances and regulations, future changes to the laws, ordinances and regulations relating to the Company’s activities or changes in its business practices or interpretation might affect the Group’s financial condition or operating results.

5. The regulatory capital adequacy ratio

Toyo Securities, the core company of the Toyo Securities Group, is subject to regulatory capital adequacy ratio restrictions under the Financial Instruments and Exchange Law and the Cabinet Office Ordinance on Financial Instruments Corporation. The regulatory capital adequacy ratio is the ratio of the amount of

010_0514001372109.indd 26 2009/08/26 10:06:39

27

non-fixed equity capital (the total of capital stock, capital surplus and other items designated by the relevant Cabinet Office ordinances less fixed assets and other items designated for exclusion by the relevant Cabinet Office ordinances) to an amount determined by the relevant Cabinet Office ordinance as the value corresponding to the potential risks inherent from fluctuations in prices of securities held and other reasons.

The Company’s regulatory capital adequacy ratio as of March 31, 2009, was 472.8%. When the ratio falls below 120%, the Prime Minister can order changes in the securities company’s business practices. When the ratio falls below 100%, the Prime Minister can order a suspension of operations for a period of up to three months. If the ratio continuously remains below 100% three months after an order to suspend operations and there is no prospect for recovery in its business, the Prime Minister can revoke the securities company’s registration.

6. Civil action

Illegal acts on the part of the Company in its business practices with customers in day-to-day sales activities, such as customer solicitation, could result in liability for damages under the civil code. Although no legal suit that might significantly affect any of the Group’s businesses was filed as of March 31, 2009, such a suit might affect the Group’s financial condition or operating results should an important action be filed against the Group.

7. Systems-related risk

The Group uses several computer systems in the course of its normal business operations, including Internet trading associated with securities transactions. As computer systems evolve, the Group endeavors to invest in new systems in view of their cost-effectiveness. Accordingly, incorrectly projecting cost-effectiveness, or the failure of Internet securities trading or the computer systems the Group uses for other business for reasons including defects, unauthorized access or a natural disaster might, depending on the magnitude, have a material adverse affect on the Group’s business and thus affect the Group’s financial condition or operating results.

8. Risk associated with information security

The Company has implemented internal regulations concerning information management covering all companies belonging to the Group. Nevertheless, a future unauthorized leak of important internal information, including customer information, due to unforeseen circumstances might affect the Group’s financial condition or operating results.

010_0514001372109.indd 27 2009/08/26 10:06:39

28

Analysis of Financial Condition and Operating Results

The future-related matters in the sentences below were judged appropriate by the Group as of March 31,2009.

1. Significant Accounting Policies and Estimates

The Group’s consolidated financial statements are prepared in accordance with accounting standards generally accepted as fair and appropriate in Japan. The Company believes the following significant accounting policies, among others, affect its more significant judgments and estimates used in the preparation of the consolidated financial statements.

(1) Allowance for doubtful accounts

The Group provides an allowance for doubtful accounts for the estimated amount of losses resulting from the inability to collect debts that arise through transactions with customers. If the financial condition of our customers was to deteriorate, resulting in an impairment of their ability to pay, an additional provision might be required. The allowance for doubtful accounts for the year under review amounted to ¥423 million.

(2)Impairment of investments

For the purpose of maintaining long-term trading relationships or of investing in venture companies to obtain future capital gains, the Group owns stocks issued by other companies, some of which are in publicly traded companies for which the share prices are highly volatile and some of which are in nonpublicly traded companies for which the value is difficult to determine. When the Group judges that a decrease in the value of an investment is not temporary, it records an impairment charge in accordance with the predetermined rules. During the year under review, the Company recorded a consolidated impairment loss on investments of ¥479 million, principally due to the deteriorated financial condition of issuing companies for which we own stock.

(3) Deferred tax assets

The Group estimates and records the amount of deferred tax assets that is determined to be collectible by taking into account future taxable income and highly feasible tax planning. In the event that the Group determines that the expected future reduction in taxable income cannot be recognized in all or part of the taxable income in relation to the recorded deferred tax assets, it records income taxes-deferred after reversing the deferred tax assets.The deferred tax assets as of March 31, 2009, were ¥3 million.

(4) Severance and pension benefit expenses

Employees’ severance and pension benefit expenses and liabilities are calculated based on assumptions determined in the actuarial calculations. These assumptions include discount rates, future compensation levels, retirement rates and mortality rates calculated based on the latest statistical data, as well as the

010_0514001372109.indd 28 2009/08/26 10:06:39

29

long-term return on plan assets. For the Company’s pension plans, the discount rates are calculated by reference to the market yield on Japanese government bonds, which is similar to the remaining service period for current employees. The expected rate of return on assets is calculated based on the expected rate of return on the assets in which the plan assets are invested. In the event that actual results differ from assumptions or the assumptions change, the resulting effects are accumulated and systematically recognized over future periods and, therefore, generally affect recognized expenses and the recorded obligations in future periods.The Group recorded severance and pension benefit expenses of ¥284 million and a prepaid pension expense of ¥161 million.

2. Analysis of Consolidated Operating Results for the Year Ended March 31, 2009

During the year under review, commission income of the Group decreased ¥9,971 million from the previous year to ¥8,434 million. Trading profits were ¥2,398 million, a decrease of ¥836 million from the previous year. Accordingly, consolidated operating revenue decreased ¥11,289 million to ¥11,695 million from the previous year. Selling, general and administrative expenses amounted to ¥14,395 million, down ¥1,846 million from the previous year. As a result, consolidated ordinary loss was ¥2,737 million (compared with ordinary income of ¥6,595 million for the previous fiscal year).Factors including an ¥815 million reversal of special reserves of financial instruments transaction liabilities led to ¥834 million extraordinary profits (compared with no extraordinary profits for the previous fiscal year). Factors including a ¥430 million write-off of investment securities and a ¥103 million loss on sale of investment securities led to a year-over-year increase of ¥77 million in extraordinary losses to ¥559 million. As a result, consolidated net loss for the year under review was ¥3,022 million (compared with consolidated net income of ¥3,237 million for the previous fiscal year).

3. Factors with a Significant Effect on Operating Results

Because the Toyo Securities Group’s core business is the financial instruments business, operating revenue is greatly influenced by changes in financial instruments markets in Japan and overseas. For this reason, the Group’s financial condition or operating results might change significantly according to the environment in secondary financial instruments markets.

4. Analysis of the Source of Capital and Liquidity

Net cash provided by operating activities decreased ¥5,747 million from the previous fiscal year to ¥2,287 million. This reflects a decrease in cash flows principally with loss before income taxes of ¥2,462 million.Net cash used in investing activities increased ¥3,685 million from the previous fiscal year to ¥5,436 million. This reflects an increase in cash flows mainly due to payments for time deposits of ¥8,111 million.Net cash used in financing activities decreased ¥896 million from the previous fiscal year to ¥4,476 million. This mainly reflects a decrease in cash flows due to a decline in net short-term borrowings of ¥3,020 million (compared with payments of ¥2,306 million for the previous fiscal year).

010_0514001372109.indd 29 2009/08/26 10:06:39

30

5. Future Management Policies

The Group management considers strengthening the earnings-gaining capacity and establishing the compliance and internal control systems to be priority tasks. Specifically, management will reinforce subscription sales especially for securities investment trust products to increase assets in custody and aggressively address expanding Internet transactions to strengthen earnings capacity. In addition, the Company intends to take initiatives to enhance employee education and reinforce the compliance system by simplifying back-office flows and reviewing the clerical work manuals. Meanwhile, we will clarify the authority and responsibilities of management executives and strengthen the internal check function to establish desirable internal controls.

010_0514001372109.indd 30 2009/08/26 10:06:39

31

Corporate Governance

The Company always recognizes its social responsibility as a securities company and an intermediary between investors and the financial instruments markets, and is building an organizational structure effectively adapted to its circumstances while enhancing corporate governance to increase transparency in management and ensure compliance.

(1) Descriptions of Corporate Bodies and the Improvement of Internal Control Systems

1 Basic descriptions of the corporate bodiesThe Company has established the Board of Directors, the Board of Corporate Auditors and an independent accounting auditor. In addition, the Company has established the Management Committee and various committees to serve as advisory or reporting bodies by assisting in swift and smooth discussions on business and affairs in the pursuit of improving the systems for more effective corporate governance.

2 Descriptions of respective corporate bodies and their internal control relationships The Company has the following corporate bodies: · Board of Directors

The Board of Directors meets once monthly, in principle, and the directors and corporate auditors attend thereat. As a managerial decision-making body, the Board of Directors adopts necessary resolutions regarding matters as stipulated by relevant laws, regulations or the Articles of Incorporation as the Company’s final decision-making body. In addition, the Board determines important matters on basic management guidelines and business operations, and supervises the execution of duties by directors and executive officers.

· Management CommitteeThe Management Committee meets twice monthly, in principle, and consists of the President, the Directors and other personnel designated by the President. The Committee discusses and determines specific policies with regard to the execution of the subjects to be deliberated by the Board of Directors, decision-making matters and other important subjects.

· Board of Corporate AuditorsThe Board of Corporate Auditors meets once monthly, in principle, and Board members attend thereat. The Board receives reports from relevant personnel with regard to important audit-related matters such as the business operations audit, the accounting audit and other audits, and discusses and adopts resolutions thereon.

· Compliance CommitteeThe Compliance Committee meets at various times, as required, and consists of the committee members designated by the President. The Committee deliberates matters regarding how to ensure the propriety of business operations and improve internal compliance systems, as well as compliance-related matters as an advisory organ of the Management Committee.

010_0514001372109.indd 31 2009/08/26 10:06:39

32

· Fairness CommitteeThe Fairness Committee meets at various times, as required, and consists of the committee members designated by the President. The Committee discusses and reports on the recognition and punishment, or fair treatment, of employees as an advisory organ of the Management Committee.

· Information Disclosure CommitteeThe Information Disclosure Committee meets at various times, as required, and consists of the committee members designated by the President. The Committee is mainly engaged in examining documents to be disclosed such as the securities report and the business report to ensure their propriety as an advisory organ of the Management Committee.

· OthersIn addition to the above, the Executive Council has been established. The Council meets every three months, in principle. The directors, standing corporate auditors and executive officers attend thereat. The relevant officers and executive officers deliver business progress reports of the business departments under their charge on a quarterly basis to understand the status of operations and make concerted decisions at the management level.

3 Improvement of internal control systems

1) Systems to ensure the compliance of the execution of duties by the directors with laws, regulations and the Articles of Incorporation

The Company regards compliance with laws and regulations as one of the most important priorities in its management. Accordingly, the Company endeavors to improve internal rules regarding its compliance system and has established the Code of Conduct as a guideline for corporate officers to conduct behavior and take action in compliance with laws, regulations and the Articles of Incorporation, as well as social ethics and conventional wisdom.

2) Systems to store and manage information pertaining to the execution of duties by directors The Company has set a storage deadline by the Document Management Rules for important

documents such as the minutes of corporate bodies including those of the general stockholders’ meetings, statutory ledgers such as accounting books and others, Ringi documents and contractual documents, and maintains the viewable status for them, as required.

3) Rules and other systems regarding loss risk management The Company regards risk management as one of the most important priorities in its management, and

has therefore established the General Risk Management Rules, which stipulate risk-management-related matters systematically. In addition, the Company established Risk Management Div. as a department in charge of enterprise risk management. The Risk Management Div. estimates and classifies specific risks in accordance with the General Risk Management Rules; identifies, controls and monitors respective risks; streamlines the BCP Manual; formulates emergency systems for swift and appropriate communications of information in case of emergency status; and regularly reports on

010_0514001372109.indd 32 2009/08/26 10:06:39

33

risk-management-related matters to the Board of Directors and the Board of Corporate Auditors. Meanwhile, the Auditing Div. regularly audits and reports on the conditions of the Risk Management Div. to the Board of Directors and the Board of Corporate Auditors, whereas the Risk Management Div., in alliance with the Auditing Div., endeavors to reinforce risk management operations at the respective departments.

4) Systems to ensure efficient execution of directors’ duties With the implementation of the Executive Officer System, where business-executing authority is

empowered to executive officers to make executive responsibilities clearer, directors has promoted business structural reform through efficient execution of business duties and an enhanced supervision function. The Board of Directors determines the business-executing policies, determines matters set forth by laws and regulations and other important management-related matters, and supervises the business-executing conditions. Meanwhile, the Management Committee was established to allow the Committee to flexibly consult and provide opinions on specific subjects on business operations based on the basic guidelines stipulated by the Board of Directors.

5) Systems to ensure the compliance of the execution of duties by employees with laws, regulations and the Articles of Incorporation

The Company has established its management philosophy, mission statement, ethical guidelines, code of conduct and guidelines on conflict of interest to clarify the fundamental philosophy of its corporate activities, and has improved various rules regarding employees’ operations. In addition, the Company has established the Compliance Committee as an advisory organ regarding compliance and formulated a compliance program, which is an annual action plan regarding compliance activities. Further, the Company conducts compliance training for employees to ensure they remain in compliance with laws, regulations and the Articles of Incorporation. The Company has also improved the compliance-related internal consulting and whistleblowing systems to allow its employers to freely communicate any unlawful acts and/or other wrongdoing.

Moreover, the Company’s ethical guidelines have declared that the Group shall take a resolute position against antisocial forces.

6) Systems to ensure the propriety of business operations conducted by the corporate group consisting of the Company and its subsidiaries

The Toyo Securities Group has established its mission statement and ethical guidelines as a corporate group to unify the groupwide philosophies with regard to compliance and information security. The Corporate Planning Div. generally manages diverse businesses conducted by the subsidiaries. Meanwhile, the Company’s Accounting Dept. dispatches a director or a corporate auditor to each subsidiary to constantly check and supervise the accounting circumstances of each subsidiary.

7) Systems regarding employees in cases where a corporate auditor requests that the Company dispatch several employees as assistants to support his/her duties

The employees who should assist a corporate auditor to execute his/her duties shall be those who belong to the Auditing Div. The directors shall pay careful attention to the actual working

010_0514001372109.indd 33 2009/08/26 10:06:39

34

circumstances of such assistants under the Auditing Div. so that they are not unduly handled in their execution of operations for any corporate auditor. In addition, to ensure the independence of such assistants for corporate auditors from any director, any personnel shift, personnel evaluation and/or disciplinary action must have the approval of the Board of Corporate Auditors.

8) Systems to help directors and employees report to the corporate auditors and other systems relating to reporting to the corporate auditors

The directors and employees attend regularly or appropriately, as required, meetings of the Board of Corporate Auditors, and report on matters so requested by any corporate auditor.

9) Systems to ensure effective audits by the corporate auditors The directors endeavor to improve systems that are necessary to allow corporate auditors to execute

their duties. Meanwhile, the Board of Corporate Auditors regularly holds meetings to exchange views and ideas with the President and the auditing firm.

10) Systems to ensure the propriety of financial reports The Company clarifies the split of work and responsible departments and prepares its financial

statements and other financial documents, based on accounting policies and rules that are in accordance with generally accepted accounting principles. The Information Disclosure Committee examines whether the financial statements are fairly and properly prepared in compliance with the relevant respective manuals, and the results are reported to the Board of Directors through discussions at the Management Committee. Moreover, the directors and the corporate auditors check and confirm the issues pointed out by the auditing firm on the financial statements, etc.

4 Status of the internal audit and the audit by corporate auditors The Company has two internal organizations for internal audits: the Auditing Div., which mainly

supervises the execution of business operations regarding internal controls and those at the head office, and the Examination Div., which mainly supervises the execution of business operations at the branches. Both departments evaluate and verify the propriety and effectiveness of the Company’s internal management systems and report the results of their internal audits to the respective directors and corporate auditors. The Auditing Div. had nine staff and the Examination Div. had 10 staff as of the date of submission of this securities report. The corporate auditors also participate in the Board of Directors meetings and other conferences to collect a broad range of information and maximally ensure the effectiveness of auditors’ audits in collaboration with the independent accounting auditor and other internal auditing departments.

5 Status of accounting audit The Certified Public Accountants of the independent accounting auditor, who have executed the

accounting audit of the Company, were Koji Iida and Motofumi Okumura, both of whom are employed by KPMG AZSA & Co. The Company strives to streamline its auditing environment so that KPMG AZSA & Co. can conduct audits from a fair and impartial viewpoint, through mutual collaboration such as the provision of precise and appropriate management information and an exchange of views with the Auditing Div. and the corporate auditors, as required. The assistant staff for the Company’s accounting audit included five Certified Public Accountants and 15 others.

010_0514001372109.indd 34 2009/08/26 10:06:39

35

6 Relationship of the Company with external directors and external corporate auditors Three of the four corporate auditors are external ones as stipulated by Article 2, Item 16, of the

Corporate Law. Although each external corporate auditor was once an officer, an executive or a staff member of a corporate shareholder of the Company, none currently has any special relationship with the Company. The Company has not yet elected any external director.

(2) Improvement of the risk management system

The Company has the Auditing Div. and the Examination Div. as internal auditing departments to ensure the propriety of business operations. The two divisions work to improve the systems to evaluate and verify the Company’s internal management systems so that compliance with the Financial Instruments Exchange Law and other applicable laws and regulations, sales activities such as the solicitation of investments, customer management and other business operations can be appropriately conducted. In addition, the Risk Management Div. is established as a risk-management-related control department to monitor market-related and/or credit risk and report to the Board of Directors and the Board of Corporate Auditors with regard to risk management.

(3) Remuneration for corporate officers

The remuneration to the directors and corporate auditors is based on a resolution of the general stockholders’ meeting. The amount of remuneration for directors during the year under review was ¥154 million for eight internal directors, ¥19 million for one internal corporate auditor and ¥26 million for four external corporate auditors. As of the date of submission of the securities report, the Company had six directors and four corporate auditors (including two standing ones).

(4) Agreement on limitation of liability for damage with external corporate auditors

The Company and each external corporate auditor have entered into an agreement on limitation of liability for damage to the effect that his/her liability for reparation shall be the statutory minimum liability amount with regard to the damages outlined under Article 423, Paragraph 1, of the Corporate Law.

(5) Status of the supervision of affiliated companies

For the purpose of strengthening the management oversight system for affiliated companies, a director or any other personnel of the Company concurrently serves as a director or a corporate auditor of each affiliated company. In this way, the Company has cultivated an environment conducive to rapid decisionmaking throughout the Group while taking into consideration factors such as the independence of affiliated companies and conflicts of interest.

010_0514001372109.indd 35 2009/08/26 10:06:39

36

(6) Other items stipulated in the Articles of Incorporation

1 Acquisition of shares of treasury stockThe Company has determined that it may, under Article 165, Paragraph 2, of the Corporate Law, purchase its shares through market transactions and other means, with a resolution adopted by the Board of Directors, to allow for the flexible execution of management measures such as financial policies, etc., in response to changes in economic circumstances.

2 Fixed number of directorsThe Company has determined that it shall have not more than seven directors.

3 Election of directorsThe Company has determined that the election of its directors shall be made by a majority of the voting rights of the shareholders present at the meeting where the shareholders representing not less than one-third (1/3) of the total number of the voting rights of shareholders who are entitled to exercise voting rights are present. The Company has also determined that resolutions for the election shall not be by cumulative voting.

4 Dividends from surplus The Company has determined that it may, except as otherwise provided by laws and regulations,

decide matters such as dividends from surplus, which are stipulated in Article 459, Paragraph 1, of the Corporate Law, with a resolution adopted by the Board of Directors, to allow for the flexible return of profit to shareholders in general view of the profit-making environment and the circumstances of its shareholders’ equity.

5 Requirement for special resolutions by the general stockholders’ meetingThe Company has determined that the requirement for special resolutions at the general stockholders’ meeting, which is stipulated in Article 309, Paragraph 2, of the Corporate Law, shall be not less than two-thirds (2/3) of the voting rights of the shareholders present at the meeting where the shareholders representing not less than one-third (1/3) of the total number of the voting rights of shareholders who are entitled to exercise voting rights are present, for the purpose of smoothly conducting stockholders’ meetings through the mitigation of a quorum.

6 Agreement on exemption from liability for damage with directors and corporate auditorsThe Company has stipulated in its Articles of Incorporation that the Company may exempt any directors (inclusive of ex-directors) and corporate auditors (inclusive of ex-corporate auditors) from indemnifying their liability for damage, up to the amount after subtracting the statutory minimum liability amount from the amount subject to the liability for damage for the purpose of making them fully exert the expected roles in executing their duties, in case their liability falls under the requirements set forth in Article 423, Paragraph 1, of the Corporate Law.

010_0514001372109.indd 36 2009/08/26 10:06:39

37

HISTORY OF TOYO SECURITIES CO., LTD.

April 1934 Inception of Hiroshima Securities Trading Co., Ltd, capitalized at ¥125 thousand with its principal offices in Hiroshima, by separate incorporation of spot trading operations of Saito Masao Shoten, a member of Hiroshima Securities Exchange

July 1947 Change of registered trade name to Hiroshima Securities Co., Ltd.July 1951 Founding of Yosho Trading Co., Ltd. (currently a consolidated subsidiary)January 1964 Absorption of Koryo Securities Co., Ltd., Fukuyama, Hiroshima prefectureMarch 1967 Merger with Takai Securities Co., Ltd. Subsequent change of registered trade name

to Hiroshima Takai Securities Co., Ltd. and transfer of head office from Hiroshima to Chuo-ku, Tokyo

December 1967 Assumption of business rights of Imabari Securities Co., Ltd., Imabari, Ehime prefecture

April 1968 Acquisition of securities broker license according to revised Securities and Exchange Law

February 1971 Change of registered trade name to Toyo Securities Co., Ltd.October 1979 Merger with Maruju Securities Co., Ltd.

Gains full membership of Osaka Securities Exchange.October 1983 Founding of Toyo Finance Co., Ltd. (currently a consolidated subsidiary)April 1984 Increase in paid-in capital to ¥3,105 million. Gains status of General Securities

Broker. June 1986 Increase in paid-in capital to ¥5,925 million. Listing of shares on 2nd sections of

Tokyo Stock Exchange and Osaka Securities Exchange. Listing of shares on Hiroshima Stock Exchange.

October 1986 Founding of Toyo Securities Europe Ltd. in London December 1987 Founding of Toyo Securities Asia Ltd. in Hong Kong (currently a consolidated

subsidiary)March 1988 Change of share designation from 2nd-section listing to 1st-section listing on Tokyo

Stock Exchange and Osaka Securities ExchangeDecember 1988 Establishment of Toyo Supply Co., Ltd. (currently a consolidated subsidiary)June 1998 Assumption of entire operations of Fuji Securities Co., Ltd.December 1998 Registration according to the revised Securities and Exchange LawJanuary 2000 Change of trade name of Toyo Finance Co., Ltd. to Toyo Capital Co., Ltd. (currently

a consolidated subsidiary)November 2002 Termination of operations of Toyo Securities Europe Ltd. October 2004 Liquidation of Toyo Securities Europe Ltd.May 2005 Acquisition of full membership in the Hong Kong Exchanges and Clearing by Toyo

Securities Asia Ltd.August 2005 Moving of head office from Nihonbashi, Chuo-ku, to Hatchobori, Chuo-ku, TokyoSeptember 2007 Registration as a financial instrument trader in accordance with the Financial

Instruments Exchange Law.May 2008 Opening of the Shanghai Representative Office in Shanghai, China.

010_0514001372109.indd 37 2009/08/26 10:06:40

38

STRUCTURE OF TOYO SECURITIES CO., LTD.(As of June 26, 2009)

GeneralMeeting of Shareholders

Board of Directors

Chairman

Vice-chairman

Corporate Auditor

President

Board of Corporate Auditors

ManagementCommittee

Compliance Committee

Fairness Committee

Information Disclosure Committee

Business Administration Group

Compliance Group

Market Information & Research Group

Securities Market Administration Group

Yotsuya branchYokohama branchMatsudogoko branchKiryu branchHitachi branch

Fujieda branchKyoto branchOsaka branch

Nakamura branchMihara branchHiroshima branchIzumo branch

Tokuyama branchUbe branchFukuoka branch

SalesGroup

Secretariat

Planning Sec.Accounting Sec.Financing Sec.

Sales Planning Sec.Asset Management Support Sec.Insurance Sales Support Sec.

Derivative Dealing OfficeBond Dealing OfficeOsaka Dealing Office

Internal Audit Div.

Risk Management Div.

Corporate Planning Div.

Sales Planning Div.

Human Resources Div.

General Affairs Div.

Underwriting Div.

System Administration Div.Business Administration Div.

Sales Screening Div.Operating Audit Div.Trading Supervisory Div.Business Operations Div.Underwriting Investigation Div.

Market Information & Research Div.Asian Market Research Div.Shanghai Representative Office

Trading Div.

Dealing Div.Securities Market Administration Div.

Corporate Business Div.

Higashi Nihon Area

Tokai/Kinki Area

Chugoku/Shikoku Area

Seibu Area

China Stock Sales Div.

Mail - order sales Div. Mail - order sales Sec.

Internet Trading Div.

Headquarters’ business dept.Musashifuchu branchOmiya branchTateyama branchTsukuba branchSendai branch

Shimizu branchNagoya branchSaidaiji branchKobe branch

Imabari branchFukuyama branchKure branchHamada branch

Iwakuni branchYamaguchi branchShimonoseki branch

Asian Planning Sec.Asian Market Research Sec.

System Planning Sec.System Administration Sec.

Trading Office

Customer Relations Office

010_0514001372109.indd 38 2009/08/26 10:06:40

39

BOARD OF DIRECTORS(As of June 26, 2009) CORPORATE DATA

Headquarters address: 7-1 Hacchobori, 4-chome, Chuo-ku, Tokyo, 104-8678

Capital: ¥ 13,494,687,500The number of branches: 31 domestic branchesThe number of employees: 762 (as of March 31,

2009)The number of stockholders: 10,705 (as of March

31, 2009)Fiscal year: April 1-March 31Listing on: Tokyo Stock Exchange

and Osaka Securities Exchange

Code: 8614

Trends of capital

(Millions of yen)

0

5,000

10,000

15,000

20051986

5,926

1984

3,1051,020 1,530

19791971 1999

11,33013,495

Chairman Katsuo Kumagai

President Tetsushi Shinoda

ManagingDirectors

Itsuki TaniguchiMasaaki Oohata

Directors Mitsuhiro HamakawaHiroaki Hanba

Standing Corporate Auditors

Yasuo ShimizuJuichi Nishimura

Corporate Auditors Hiroshi UrakamiAtsuo Kanbayashi

Managing ExecutiveOfficer

Yoshihiko Ishihara

Executive Officers Masao HashizumeTakayuki KatayamaAkio DoiManabu IshiokaYoshiaki KuwaharaYasushi HosoiYukei HayashidaMahito Suzuki

010_0514001372109.indd 39 2009/08/26 10:06:40

40

Toyo Securities Asia Ltd.Unit 502, 5/Fl., Henley, Building, 5 Queen’s Road Central, Hong KongTel: 852-2235-5567Establishment: 1987Capitalization: H.K.$110,000,000President: Masatoshi NakaoMain business: Securities

Yosho Trading Co., Ltd.

4-7-1 Hacchobori, Chuo-ku, Tokyo

Tel: 03-5117-1130

Establishment: 1951

Capitalization: ¥30,000,000

President: Masao Nagatsugu

Main business: Sales of insurance products and other products

Toyo Supply Co., Ltd.

4-7-1 Hacchobori, Chuo-ku, Tokyo

Tel: 03-5117-1040

Established: 1988


President: Masao Nagatsugu

Main business: Purchase and holding of marketable securities

Toyo Capital Co., Ltd.

2-8-5 Kyobashi, Chuo-ku, Tokyo

Tel: 03-5524-1040

Establishment: 1983


President: Shiro Hashimoto

Main business: Venture capital

Toyo Securities Co., Ltd.

TOYO SECURITIES GROUP(As of June 26, 2009)

010_0514001372109.indd 40 2009/08/26 10:06:40

TOYO SECURITIES7-1 Hacchobori, 4-chome, Chuo-ku, Tokyo, 104-8678

http://www.toyo-sec.co.jp/

010_0514001372109.indd 1 2009/08/26 10:06:36

toyo securities co., ltd. and subsidiaries · toyo securities toyo securities co., ltd. and...

Documents