[Disclosure Booklet]

Explanatory Documents on the Status of Business and Property for the fiscal year ended Dec 31, 2018

This disclosure booklet is prepared by the Company for publication on the Internet under Article 46-4 of the Financial Instruments and Exchange Law. Contents

I Outline and Organization 1. Corporate Name ………………………………………………………………………………………………………… 1 2. Registration Date （ Registration Number ） …………………………………………………………………………… 1 3. History and Organization ………………………………………………………………………………………………… 1 4. Shareholders in the Top 10, Number of Shares Held and Percentage of Voting Rights ………………………… 3 5. Names of and Statutory Auditor ………………………………………………………………… 3 6. Names of Employees Specified by Cabinet Order …………………………………………………………………… 3 7. Business Operation ……………………………………………………………………………………………………… 4 8. Addresses of Head Office and Other Branches ……………………………………………………………………… 5 9. Other Business Operation ……………………………………………………………………………………………… 5 10. Engaged Businesses included in the Matters Set Forth in Article 7(3)(a), (3)-2, (3)-3(a) and from (4) to (9) of the Cabinet Office Ordinance on Concerning Financial Instruments Business …………………………………… 6 11. Complaint Processing and Dispute Resolution ……………………………………………………………………. 6 12. Financial Instruments Firms Associations and Certified Investor Protection Organization Memberships………… 7 13. Financial Instruments Exchange Memberships………………………………………………………………………… 7 14. Investor Protection Fund Membership …………………………………………………………………………… 7

II Business Overview 1. Business Outline for the Current Period ……………………………………………………………………………… 8 2. Key Financial Data ……………………………………………………………………………………………………… 10

III Financial Matters 1. Financial Information ………………………………………………………………………………………………………12 2. Major Lenders and Borrowings ………………………………………………………………………………………… 18 3. Securities Held (Non-Trading) ……………………………………………………………………………………………18 4. Derivative Transactions (Non-Trading) …………………………………………………………………………………18 5. External Audit ………………………………………………………………………………………………………………19 6. Others ……………………………………………………………………………………………………………………… 19

IV Internal Control Structure 1. Overview of Internal Control …………………………………………………………………………………………… 20 2. Condition of Customers' Assets Segregation ………………………………………………………………………… 22

V Status of Consolidated Subsidiaries, etc. …………………………………………………………………………………26 I Outline and Organization

1. Corporate Name Global Markets Japan Inc. (the Company)

2. Registration Date September 30, 2007 ( Registration Number ) (The Director-General of the Kanto Finance Bureau (Kinsho) No.130)

3. History and Organization

(1) History Year History

1972 ･ Smith Barney Tokyo Representative Office established 1977 ･ Asia Limited established in Hong Kong 1980 ･ Salomon Brothers Asia International Tokyo Representative Office established ･ Smith Barney Tokyo Branch opened

1982 ･ Salomon Brothers Asia Limited Tokyo Branch opened 1987 ･ Becomes Remote Member of Osaka Securities Exchange 1988 ･ Becomes Official Member of Tokyo Exchange 1989 ･ Becomes Standing Underwriting Manager for JGB syndication ･ Becomes Clearing Member of Tokyo International Financial Futures Exchange ･ Becomes Special Participant of Nagoya Stock Exchange

1991 ･ Becomes Official Member of Osaka Securities Exchange 1998 ･ Salomon Smith Barney (Japan) Limited formed upon Salomon Brothers Asia Limited's acquisition of all operations of Smith Barney Tokyo Branch

1999 ･ Name changed to Nikko Salomon Smith Barney Limited upon acquisition of Nikko Securities' institutional businesses ･ Becomes Official Member of Nagoya Stock Exchange

2004 ･ Begins operation as Nikko Citigroup Limited 2008 ･ Nikko Citi Holdings Inc. established 2009 ･ Name changed to Citigroup Global Markets Japan Inc. 2017 ･ Japan headquarters moved to Otemachi Park Building

1 (2) Organization Chart As of December 31, 2018

Division Department Unit

Administration G10 Rates Trading G10 Rates CVA Trading Rates Quantitative Analysis Finance Desk G10 Rates Sales Spread Pr oducts Spread Products Equity Markets Equity Trading Chairman Equity Execution Services Equity Derivative Sales Equity Sales Corpo rate Ac cess Prime, Futures and Sec urities Serv ices Prime Finance Futures, Clearing and Collateral Sales and Client Executive Cus tod y and Fund Services Markets and Securities Services Foreign Exchang e & Local Ma rke ts FXLM Trading FXLM Sales FX Prime Brokerage FXLM Structuring & Solutions Investor Sales Spread Products Sales Multi‐Product Sales Private Client Solutions Client Managemen t Group Multi‐Asset Sales Group Soluti ons Sales Corporate So lution s Group Strategic Risk Solutions MAG Solutions Multi‐Asset Gr oup Structured Products Financial Institution Relationship Management Financial Institution Relationship Managers

Capital Markets Origination Securitized Products Equity Capital Ma r k ets Debt Capital Markets Debt Syndicate

Investment Banking Corporate Clients Financial Inst itutions

Board Chief Operating Officer M&A

Shareholders' Global As set Managers Group Transaction St r uc tur ing Group President

of Management

Directors' Citi Research Fundamental An alysis Strategy & Macro An aly sis Research Administration & Operations

&

Legal Meeting

Legal CEO Derivatives Documentation Group

Meeting Independent Compliance Risk ICRM Compliance Assurance Management AML Compliance Central Compliance Markets Compliance Surveillance Banking & Research Compliance/ Control Group Sanctions Compliance Risk Management Credit Risk Management Market Risk Management UDCS‐NPAC Underwriting Review Quantitative Ris k and Stress Te st in g Operational Risk Management Risk Governance Human Resources HR Advisors Unit Employee Relatio ns & Con trol Reward & Mobility

Management Recruiting Talent, Learning & Perfo rmance Finance Financial Planning & Analysis Controllers Tax

Country Treasurer Treasury

Committee Operations and Technology Markets Operations Cash Management Information Serv ice Group Risk & Con trol Foreign Securities Operation s Statutory Domestic Securities Operation s KYC Utility OTC Derivatives Operations Okinawa Op erations

Auditor FX&KYC Treasuryユーティリティ部 Op erations Middle Office

Technology Production Su pport Technology Corporate Planning Pr im e, Futures and Securities Services Te chnology FX & Risk Treasury Technology Equity Technology Corporate Affairs Operations Technology Global Fu nctions Technology Services IT Governance and Ad ministration Government Affairs O&T Planning

Internal Audit

2 4． Shareholders in the Top 10, Number of Shares Held and Percentage of Voting Rights As of December 31, 2018 Number of shares Percentage of Name of shareholders held voting rights Citigroup Japan Holdings G.K. 3,842,000 100.00% Total 1 party

5． Names of Board of Directors and Statutory Auditor As of December 31, 2018 PositionName Representation Full-time/Non-Full-time

Representative Director, President and CEO Lee Robert Waite Yes Full-time

Director, Deputy President Kuniyoshi Hayashi No Full-time

Director, Deputy President Yusuke Asai No Full-time

Director, Chairman Tatsuo Tanaka No Full-time

Statutory Auditor Mamoru Sato Full-time ( Note ) Muneyuki Kuzushima assumed the office of Director on Jan.1, 2019. ( Note ) Yusuke Asai resigned the office of Director, Deputy President on Feb. 4, 2019. ( Note ) Matt van Weezel assumed the office of Director on Apr. 1, 2019.

6． Names of Employees Specified by Cabinet Order (1) Persons overseeing the operations concerning the guidance for compliance with the laws and regulations, etc. with respect to the financial instruments business As of December 31, 2018 Name Title

Matt van Weezel Head of Compliance Division, Chief Internal Control Officer

Hiroko Tanaka General Counsel

(2) Persons overseeing the division to make an advice or conducting management with respect to the investment advisory business and investment management business

Not applicable

3 7．Business Operation

(1) Type I Financial Instruments Business ① Businesses under Article 28(1) (i) of Financial Instruments and Exchange Law (hereinafter referred to as the "FIEL") (i) Sale and purchase of Securities (excluding those falling under the category of Derivative Transactions; the same shall apply hereinafter), Exchange traded Derivatives (excluding Financial Instruments (limited to those in Article 2(24) (iii-2)) or Financial Indices (limited to the value of the Financial Instruments or figures calculated based thereon) related Exchange traded Derivatives (the same shall apply "Commodities related Exchange traded Derivatives" hereinafter ) or Foreign Exchange traded Derivative Transactions (excluding sale and purchase of Securities falling under Article 2(8) (x) of FIEL) (ii) Intermediary ("Baikai"), brokerage ("Toritsugi") (excluding Brokerage for Clearing of Securities,etc.) or agency service ("Dairi") for sale and purchase of Securities, Exchange traded Derivatives or Foreign Exchange traded Derivatives Transactions (excluding intermediary ("Baikai"), brokerage ("Toritsugi") or agency service ("Dairi") for sale and purchase of Securities falling under Article 2(8) (x) of FIEL) (iii) Intermediary ("Baikai"), brokerage ("Toritsugi") or agency service ("Dairi") for agency ("Itaku") of the following transactions; (a) Sale and purchase of Securities conducted in a Financial Instruments Exchange Market or Exchange traded Derivatives; or (b) Sale and purchase of Securities conducted in a Foreign Financial Instruments Market (meaning a market in a Foreign State similar to Financial Instruments Exchange Market; the same shall apply hereinafter) or Foreign Exchange traded Derivatives Transactions (iv) Brokerage for Clearing of Securities, etc.; or (v) Secondary Distribution of Securities or exclusive Offer to Sell, etc. to Professional Investors (vi) The handling of a Public Offering or Secondary Distribution of Securities, or the handling of a Private Placement of Securities or exclusive Offer to Sell, etc. to Professional Investors ② Business under Article 28(1) (ii) of FIEL Over-the-Counter Transactions of Derivatives or intermediary ("Baikai"), brokerage ("Toritsugi") ( excluding Brokerage for Clearing of Securities,etc.) or agency service ("Dairi") therefor; or, Brokerage for Clearing of Securities, etc. in relation to Over-the-Counter Transactions ③ Business under Article 28(1) (iii) (a) of FIEL Wholesale Underwriting of Securities that are specified by a Cabinet Order as those for which management of risks of loss is highly necessary ④ Business under Article 28(1) (iii) (b) of FIEL Wholesale Underwriting of Securities other than those listed in Article 28(1) (iii) (a) of FIEL ⑤ Business under Article 28(1) (iii) (c) of FIEL Acts listed in Article 2(8) (vi) that are other than Wholesale Underwriting of Securities ⑥ Securities, etc. Management Business

(2) Type II Financial Instruments Business

(3) Investment Advisory and Agency Business ① Business under Article 28(3) (ii) of FIEL. Agency or intermediation for the conclusion of an Investment Advisory Contract or a Discretionary Investment Contract

4 (4) Supplemental Business Operation to Financial Instruments Business (i.e. the business conducted by the Company listed in Article 35(1) of FIEL） ① Lending and borrowing of Securities, or intermediary ("Baikai") or agency service ("Dairi") thereof ② Money loan incidental to a margin transaction ③ Money loan secured by Securities that are deposited for safe custody from customers ④ Agency service ("Dairi") for customers concerning Securities ⑤ Agency service ("Dairi") of the business pertaining to payment of earnings, redemption money or cancellation money with regard to beneficiary securities of Investment Trusts or foreign investment trusts, or the business pertaining to delivery of the Securities or any other assets belonging to the trust property pertaining to the Securities ⑥ Agency service ("Dairi") of the business pertaining to distribution of money, distribution of refunds or residual assets or payment of interest or redemption money with regard to Investment Securities, Investment Equity Subscription Rights Certificates or Investment Bonds, or Foreign Investment Securities ⑦ Conclusion of a Contract for Cumulative Investment ⑧ Provision of information or advice in relation to Securities ⑨ Agency service ("Dairi") of the business of any Counterparty Financial Business Operator, etc. ⑩ Retention of assets of a registered investment corporation ⑪ Consultation to any other business operator with regard to a business assignment, merger, company split, share exchange or share transfer, or intermediation for these matters ⑫ Consultation to any other business operator with regard to management ⑬ Sale and purchase of currencies and other assets designated by a Cabinet Order as being related to Derivative Transactions (excluding Transactions of Securities-Related Derivatives) or intermediary ("Baikai"), brokerage ("Toritsugi") or agency service ("Dairi") thereof ⑭ Sale and purchase of negotiable deposits and other monetary claims (excluding those that fall under the category of Securities), or intermediary ("Baikai"), brokerage ("Toritsugi") or agency service ("Dairi") thereof

8．Addresses of Head Office and Other Branches As of December 31, 2018 Category Address Head Office 1-1, Otemachi 1-Chome, Chiyoda-ku, Tokyo 100－8132

9．Other Business Operation (1) Registered businesses conducted by the Company listed in Article 35(2) of FIEL ① Business pertaining to transactions conducted by using fluctuations in commodity prices and other indicators, market gaps, etc. as specified by a Cabinet Office Ordinance (excluding business pertaining to transactions on a , etc. defined in Article 2(21) of the Commodity Futures Act) ② Business pertaining to money lending business defined in Article 2(1) of the Act on Controls, etc. on Money Lending or other money loan, or intermediary service of lending and borrowing of money ③ Business pertaining to conclusion of a Loan Participation Contract, or an intermediary, brokerage or agency service ④ Goods leasing business ⑤ Business pertaining to creation and sale of computer programs for the business of any other business operator, and a business to accept the entrustment of computing service ⑥ Business of a conclusion of a contract on the acquisition or transfer of Carbon Dioxide Equivalent Quotas, or an intermediary, brokerage or agency service ⑦ Derivertives transactions pertaining to Carbon Dioxide Equivalent Quaotas, or an intermediary, brokerage or agency service

5 ⑧ Business of concluding a contract for a guarantee or assumption of an obligation, or an intermediary, brokerage or agency service ⑨ Business of making an arrangement with or introducing another business operator, to customers of its Business

(2) Approved Businesses conducted by the Company listed in Article 35(4) of FIEL ① Business for intermediary, etc. of custody business, business for intermediary, etc. of fund service business and business for intermediary, etc. of foreign depositary receipt business ② Business for intermediary business related to LNG physical trading ③ Business for maritime freight index derivative transactions including intermediary and agency thereof

10．Engaged Businesses included in the Matters Set Forth in Article 7(3)(a), (3)-2, (3)-3 (a) and from (4) to (9) of the Cabinet Office Ordinance on Concerning Financial Instruments Business

① Securities-related business ② Sale and purchase of real estate trust beneficiary interests

11．Complaint Processing and Dispute Resolution

(1) Type I Financial Instruments Business Measures to conclude a Basic Contract for Implementation of Dispute Resolution Procedure with Financial Instruments Mediation Assistance Center (hereinafter referred to as the "FINMAC")

(2) Type II Financial Instruments Business Measures to utilize the Financial Futures Association of Japan (outsourcing to FINMAC) or measures to utilize Type II Financial Instruments Firms(outsourcing to FINMAC); otherwise, measures to utilize FINMAC directly as grievance procedure and dispute resolution prescribed in article 37-7(1) (ii) (b) of FIEL.

(3) Investment Advisory and Agency Business Measures to utilize the Center of Tokyo Bar Association, Daiichi Tokyo Bar Association, and Diani Tokyo Bar Association as the measures for dispute resolution prescribed in article 37-7(1)(iii)(b) of FIEA Measures to publicize the business operation system and internal policy on public website of the Company.

(4) Investment Management Business Not applicable

(5) Money Lending Business Measures to conclude a Basic Contract for Implementation of Dispute Resolution Procedure with Japan Association

6 12．Financial Instruments Firms Associations and Certified Investor Protection Organization Memberships

・ Financial Instruments Firms Association : Japan Securities Dealers Association The Financial Futures Association of Japan Type II Financial Instruments Firms Association

13．Financial Instruments Exchange Memberships

Tokyo Stock Exchange Osaka Exchange Nagoya Stock Exchange Tokyo Financial Exchange

14． Investor Protection Fund Membership

Japan Investor Protection Fund

7 II Business Overview

1. Business Outline for the Current Period

During the fiscal year under review, Japanese stock prices were high in the beginning driven by the upward trend from the prior year. In January, the Nikkei Stock Index (“Nikkei225”) has reached 26-year highs to 24,000 range. However, in March U.S. stock price dropped reflecting market participants' concern on rise in U.S. interest rate and the US-China trade war. Nikkei225 also fell below 21,000 range. Subsequently, the market turned to an upward trend. Nikkei225 recovered to 23,000 range in May as yen depreciated against the dollar and market participants became less concerned about North Korea situation. In summer, stock prices followed a rising trend accompanied with small fluctuations. Nikkei225 temporarily marked 24,448 in October, which was the highest in 2018. However, it declined soon and fell below 21,000 range again in response to the sudden fall of U.S. stock market amid rise in U.S. interest rate, and heightened uncertainties in the world economy. Same as U.S. stock market, Japanese stock price continued a downward trend afterward, driven by Britain's Brexit and market participants' heightened vigilance against the US-China trade war. Nikkei225 fell to 18,948 in December, which was the lowest in 2018. At the end of this fiscal year, the Nikkei stood at 20,014 and the Tokyo Stock Price Index (TOPIX) stood at 1,494, which was 2,750 and 323 lower, respectively from the fiscal year end of 2017. On a year-over-year basis, Japanese stock prices declined for the first time after rising for six consecutive years. In the Japanese market, 10-year JGBs yields started the year with an upward (prices decreased) trend reflecting the rise in U.S. interest rates. However, driven by a drop in Japanese stock market as well as the "limit price operation" by the Bank of Japan (“BOJ”), 10-year JGBs yields declined (prices increased) and moved generally within the range of 0.02% - 0.1% towards July. Subsequently amid speculation that the BOJ will further lower the negative interest rate and a rise in U.S., 10-year JGBs yield also temporarily rose (prices decreased) and marked 0.16% in October. However, it declined (prices increased) to negative range again in December impacted by significant fall in Japanese stock market and market participants' concern on the US-China trade war. 10-year JGBs yield marked at 0.002% at the end of 2018. In foreign exchange markets, although the yen started the year around 112 range, yen buying resumed, as a safe-haven currency and temporarily appreciated to 104 in March against dollar, following heightened concerns on the US-China trade frictions and strained North Korea situation. Subsequently, the dollar strengthened again under normalization of U.S. monetary policy and the yen temporarily depreciated to 114 in October. On back of revival of the US-China trade frictions, the yen appreciated against the dollar again towards the year-end and closed at the 109 level against the dollar at the end of 2018. The yen depreciated against the euro from the beginning of 2018 reflecting a reduction in monetary accommodation by the European Central Bank (“ECB”) and temporarily reached 137 against the euro in February. Subsequently uncertainties regarding political situations in Europe has caused an appreciation of the yen and it reached 125 against the euro in May. Towards the year-end, the yen fluctuated within a relatively narrow range reflecting several factors such as normalization of ECB monetary policy and uncertainties regarding Britain's Brexit and closed at the 125 level against the euro at the end of 2018.

Operating revenue totaled 70.0 billion yen, and Operating revenue, net of interest expense, amounted to 49.4 billion yen. Selling, general and administrative expenses totaled 39.8 billion yen, the operating income amounted to 9.6 billion yen and the ordinary income including non-operating income and expenses amounted to 9.7 billion yen. The net income before income tax amounted to 8.4 billion yen and the net income amounted to 5.5 billion yen with extraordinary income and loss and income taxes. Summaries by accounts are as follows.

8 (1) Commission received Commission received was 40.6 billion yen. The following is the breakdown by category.

① Brokerage commissions Brokerage commissions were 13.9 billion yen. Equity trading volume was 34,431.7 billion yen. Brokerage commissions on equities were 13.7 billion yen and brokerage commissions on JGB futures and ETFs totaled 0.2 billion yen.

② Underwriting and selling commissions Underwriting and selling commissions were 0.9 billion yen.

③ Subscription and distribution commissions There was no subscription and distribution commissions in the current fiscal year.

④ Other commissions Other commissions were 25.6 billion yen.

(2) Net trading income Net trading income recorded 3.6 billion yen. Trading loss related to equities was 3.2 billion yen. Trading gain related to bonds was 7.4 billion yen and trading loss related to foreign exchange and other were 0.4 billion yen.

(3) Interest revenue and expenses Net interest revenue and expenses were 5.1 billion yen income.

(4) Selling, general and administrative expenses Selling, general and administrative expenses were 39.8 billion yen.

(5) Non-operating income and expenses Net non-operating income was 0.1 billion yen, mainly due to dividend income of life insurance and revaluation gain generated from assets and liabilities in foreign currencies.

(6) Extraordinary income and loss Extraordinary income included 0.2 billion yen of gain on early redemption of loan. Extraordinary loss was 1.6 billion yen mainly comprised of 1.0 billion yen from restructuring loss and 0.5 billion yen provision for reserve for financial products transaction liabilities.

(7) Income taxes Net income before income taxes amounted to 8.4 billion yen. Income taxes-current amounted to 2.3 billion yen and income taxes-deferred amounted to 0.5 billion yen.

(8) Net income Net income amounted to 5.5 billion yen and net income per share was 1,436 yen.

9 2．Key Financial Data

(1) Overall Operating Results （Millions of Yen）

FY 2016( 9 months ) FY 2017 FY 2018

Capital stock 96,307 96,307 96,307

Total number of issued shares 3,842 3,842 3,842 (thousands)

Operating revenue 36,818 56,268 70,083

（Commission received） 30,539 43,834 40,605

((Brokerage commissions)) 9,766 12,823 13,944

((Underwriting & selling 384 426 970 commissions))

((Other commissions)) 20,388 30,584 25,690

(Net trading income) 4,327 1,786 3,679

((Equities and other)) 324 312 (3,290)

((Bonds)) 515 (144) 7,434

((Foreign exchange and other)) 3,488 1,619 (463)

（Financial revenue） 1,951 10,647 25,798

Financial expenses 1,834 9,132 20,622 Operating revenue, net of interest 34,984 47,135 49,461 expense

Ordinary income 5,052 6,924 9,744

Net income 12,092 4,404 5,517

(Note) Based on the resolution of the general meeting of shareholders on June 27, 2016, the Company changed the fiscal year-end from March 31 to December 31. As a transitional period, the accounting period of the fiscal year ended December 31, 2016 is the 9 months from April 1, 2016 to December 31, 2016.

(2) Trading and underwriting volume in securities

① Equity Trading Activity （Millions of Yen）

FY 2016( 9 months ) FY 2017 FY 2018

Brokerage 17,231,237 27,228,312 34,431,776

Proprietary 6,774,643 9,949,256 13,233,918

Total 24,005,880 37,177,569 47,665,695

10 ② Underwriting, offering and solicitation for selling and others for professional investors, and subscription placement, offering placement, private placement and solicitation for placement for professional investors （Millions of Yen）

Total sales Placement solicitation to Subscription Offering Private solicitation to Type Underwriting Offering professional Placement Placement Placement professional investors investors

Stocks 889 40 － 1,029 －－－ JGBs － －－－ Municipal bonds 22,604 22,604 －－ FY 2016 Special bonds 216,400 － － 216,400 －－－ ( 9 months) Corporate bonds 30,100 －－29,100 －－－ Bonds Total 269,104 －－268,104 －－－ Beneficiary certificate －－519,954 － Other －－－－－－－ 1,708 －－845 －－－ JGBs －－－－ Municipal bonds 18,082 18,082 －－ Special bonds 124,300 －－124,300 －－－ FY 2017 Corporate bonds 42,900 －－29,900 －－－ Bonds Total 185,282 －－172,282 －－－ Beneficiary certificate －－192,416 － Other －－－－－－－ Stocks 5,749 2,022 － 4,118 － 1,301 － JGBs －－－－ Municipal bonds 13,708 13,708 －－ Special bonds 206,000 －－206,000 －－ － FY 2018 Corporate bonds 53,060 －－68,900 － －－ Bonds Total 272,768 －－288,608 － －－ Beneficiary certificate －－53,306 － Other －－ －－－－－

(3) Other business activities The Businesses listed in Article 35(2) and (4) of FIEL have been omitted in consideration of financial statements impact.

(4) Regulatory capital adequacy ratio （Millions of Yen） FY 2016 FY 2017 FY 2018 Net capital ratio ( A / B X 100 ) 411.1% 398.0% 344.6% Net capital ( A ) 190,409 194,840 192,980 Risk total ( B ) 46,313 48,948 55,992 Market risk 19,749 22,904 25,759 Counterparty risk 15,890 15,085 18,823 Basic risk 10,673 10,958 11,409

(5) Number of employees and registered sales representatives FY 2016 FY 2017 FY 2018 Employees 610 833 774 （ Registered sales representatives ） （ 266 ） （ 263 ） （ 252 ）

11 III Financial Matters

1. Financial Information (1) Statement of financial condition （Millions of Yen） Previous fiscal year Current fiscal year Account （ As of December 31, 2017 ）（ As of December 31, 2018 ）

（ ASSETS ） Current assets 1,858,226 3,194,630 Cash and deposits 186,733 195,693 Cash segregated as deposits 10,196 5,293 Trading products 361,228 742,995 Trading securities and other 229,800 540,753 Derivatives 131,428 202,241 Trade date accrual 1,130 - Margin transaction assets 9,395 6,126 Cash collateral pledged for securities 9,395 6,126 borrowing on margin transactions Loans secured by securities 1,132,644 2,043,797 Cash collateral pledged for securities borrowed 884,259 1,768,637 Loans on Gensaki transactions 248,384 275,159 Advance paid 290 7,151 Short-term guarantee deposits 147,364 181,812 Accounts receivable 563 1,132 Accrued income 5,216 7,820 Deferred tax assets 3,279 2,597 Others 184 208

Noncurrent assets 3,651 3,714 Property, plant and equipment 43 Furniture & fixtures 4 3 Intangible assets 164 269 Software 22 114 Others 141 154 Investments and other assets 3,483 3,441 Investment securities 742 742 Long-term loans receivable 767 701 Long-term guarantee deposits 1,359 1,269 Long-term prepaid expenses 41 68 Deferred tax assets 325 479 Others 246 180

Total Assets 1,861,878 3,198,344

12 （Millions of Yen） Previous fiscal year Current fiscal year Account （ As of December 31, 2017 ）（ As of December 31, 2018 ） （ LIABILITIES ） Current liabilities 1,646,534 2,879,072 Trading products 275,456 424,840 Trading securities and other 150,843 230,534 Derivatives 124,613 194,305 Trade date accrual - 7,692 Margin transaction liabilities 9,223 7,558 Cash collateral received for securities 9,223 7,558 lending on margin transactions Loans payable secured by securities 1,142,894 2,218,936 Cash received on debt credit transaction of securities 140,460 662,690 Borrowings on Gensaki transactions 1,002,433 1,556,246 Deposits received 5,969 1,986 Guarantee deposits received 110,635 170,874 Variation margin received 13,231 14,532 Short-term loans payable 74,000 13,000 Accounts payable 64 2,056 Accrued expenses 5,704 8,345 Income taxes payable 934 554 Reserve for bonuses 4,970 4,493 Others 3,449 4,201 Noncurrent liabilities 40,672 138,379 Bonds payable 2,600 2,600 Long-term loans payable 28,000 126,000 Reserve for retirement benefits 9,409 9,198 Others 662 580

Reserves under the special laws 2,585 3,119 Reserve for financial products transaction liabilities 2,585 3,119

Total Liabilities 1,689,791 3,020,571

（ NET ASSETS ） Shareholders' equity 176,773 182,291 Capital stock 96,307 96,307 Capital surplus 55,660 55,660 Legal capital surplus 55,660 55,660 Retained earnings/ (deficits) 24,805 30,323 Other retained earnings/ (deficits) 24,805 30,323 Retained earnings brought forward 24,805 30,323 Valuation and translation adjustments (4,687) (4,518) Deferred net gain/ (loss) on hedges (4,687) (4,518) Total Net Assets 172,086 177,772

Total Liabilities and Net Assets 1,861,878 3,198,344

13 (2) Statement of operations （Millions of Yen）

Previous fiscal year Current fiscal year Account from January 1, 2017 from January 1, 2018 ()()to December 31, 2017 to December 31, 2018

Operating revenue 56,268 70,083 Commission received 43,834 40,605 Net trading income 1,786 3,679 Financial revenue 10,647 25,798

Financial expenses 9,132 20,622

Operating revenue, net of interest expense 47,135 49,461

Selling, general and administrative expenses 40,382 39,837

Trade-related expenses 7,915 9,131 Compensation 17,928 16,087 Occupancy 6,220 5,016 Administrative expenses 6,064 7,197 Depreciation 541 Taxes 1,397 1,541 Others 851 821

Operating income 6,752 9,623

Non-operating income 171 140 Non-operating expenses 019

Ordinary income 6,924 9,744

Extraordinary income 3,093 292 Gain on forgiveness of debts on consolidated 3,093 - tax payable Gain on early redemption of loan - 292

Extraordinary loss 1,838 1,626 Restructuring loss 1,168 1,090 Loss on early redemption of loan 533 - Reserve for financial products transaction 121 534 liabilities Loss on disposal of fixed assets 15 1

Net income before income taxes 8,178 8,410

Income taxes - current 3,855 2,357 Income taxes - deferred (81) 535

Net income 4,404 5,517

14 (3) Statement of changes in net assets

FY 2017 (from January 1, 2017 to December 31, 2017) （Millions of Yen） Valuation and Shareholders' equity translation adjustments Capital Retained surplus earnings

Other Total Deferred retained Total net assets Capital net gain earnings shareholder's stock / (loss) Legal capital equity on hedges surplus Retained earnings brought forward

Beginning balance 96,307 55,660 20,401 172,369 (5,197) 167,172 Changes of items during the fiscal year Net income - - 4,404 4,404 - 4,404 Net changes of net assets other than shareholders' - - - - 510 510 equity Total changes of items during the - - 4,404 4,404 510 4,914 fiscal year Closing balance 96,307 55,660 24,805 176,773 (4,687) 172,086

FY 2018 (from January 1, 2018 to December 31, 2018) （Millions of Yen） Valuation and Shareholders' equity translation adjustments Capital Retained surplus earnings

Other Total Deferred retained Total net assets Capital net gain earnings shareholder's stock / (loss) Legal capital equity on hedges surplus Retained earnings brought forward

Beginning balance 96,307 55,660 24,805 176,773 (4,687) 172,086 Changes of items during the fiscal year Net income - - 5,517 5,517 - 5,517 Net changes of net assets other than shareholders' - - - - 168 168 equity Total changes of items during the - - 5,517 5,517 168 5,685 fiscal year Closing balance 96,307 55,660 30,323 182,291 (4,518) 177,772

15 (4) Notes to the financial statements

① Notes to statement of financial condition

1) Assets pledged as collateral and collateralized liabilities （Millions of Yen）（Millions of Yen） ・ Assets pledged as collateral FY2017 FY2018 Trading products 4,000 5,456

(Note) In addition to the above, following assets are pledged as collateral. FY2017 Securities borrowed of 1,466 million yen were used as collateral for short-term loans payable. Trading products of 1,239 million yen were used as collateral for short-term borrowed securities. Trading products of 8,390 million yen and securities borrowed of 6,743 million yen were pledged as collateral with Japan Securities Clearing Corporation, Tokyo Financial Exchange, etc.

FY2018 Securities borrowed of 3,596 million yen were used as collateral for short-term loans payable.

（Millions of Yen）（Millions of Yen） ・ Collateralized liabilities FY2017 FY2018 Short-term loans payable 5,000 8,000

2) Collateralized securities （Millions of Yen）（Millions of Yen） ・ Securities pledged out FY2017 FY2018 Securities loaned to customers for margin transactions 9,496 6,605 Securities loaned as collateral under financing agreements 262,304 787,189 Securities pledged related to securities sold under Gensaki 1,032,474 1,631,919 transactions Securities pledged as margin 12,890 30,587 Securities pledged as collateral for other transactions 8,950 86,485

（Millions of Yen）（Millions of Yen） ・ Securities received in FY2017 FY2018 Securities borrowed on margin transactions 9,496 6,605 Securities borrowed under financing agreements 1,065,714 2,029,258 Securities received related to securities purchased under 247,956 260,398 Gensaki transactions

（Millions of Yen）（Millions of Yen） 3) Accumulated depreciation of property, plant and equipment FY2017 FY2018 22

16 （Millions of Yen） （Millions of Yen） 4) Monetary claims from the affiliates and monetary debts to the affiliates FY2017 FY2018y ・ Short-term monetary claims from the affiliates 223 191 ・ Short-term monetary debts to the affiliates 56,182 2,317 ・ Long-term monetary debts to the affiliates 12,570 109,305

② Notes to statement of operations （Millions of Yen） （Millions of Yen） 1) Volume of transactions with the affiliates FY2017 FY2018y Operating transactions ・ Operating revenue from the affiliates 1,584 1,084 ・ Operating expenses to the affiliates 232 521 Other than Operating transactions 3,093 273

2) Extraordinary income FY2017 3,093 million yen is recorded in Extraordinary income, as the individually attributed amount of consolidated corporation tax payable and consolidated local corporate tax payable of the Company were forgiven by the parent company of consolidated tax group.

FY2018 Not applicable

③ Notes to statement of changes in net assets

1) Outstanding shares

（FY2017） （Unit: shares） Number Number Number Number Types of shares at the beginning of at the end of increased decreased the fiscal year the fiscal year

Common stock 3,842,000 - - 3,842,000

（FY2018） （Unit: shares） Number Number Number Number Types of shares at the beginning of at the end of increased decreased the fiscal year the fiscal year

Common stock 3,842,000 - - 3,842,000

17 2. Major Lenders and Borrowings （Millions of Yen） FY2017 FY2018 Balance Balance at the at the Lender end of Lender end of the fiscal the fiscal year year Citicorp LLC 55,000 Bank of Japan 8,000

Short-term Citigroup Financial Products Inc. 8,000

Bank of Japan 5,000

Citigroup Financial Products Inc. 16,000 Citicorp LLC 97,000

Long-term Citigroup Japan Holdings G.K. 12,000 Citigroup Financial Products Inc. 16,000

Citigroup Japan Holdings G.K. 12,000

3. Securities Held (Non-Trading) （Millions of Yen） FY2017 FY2018 Unrealized Unrealized Book Value Fair Value Book Value Fair Value gain/ (loss) gain/ (loss) Current ------assets Equities ------

Bonds ------

Others ------Noncurrent 742 - - 742 - - assets Equities 742 - - 742 - -

Bonds ------

Others ------

4. Derivative Transactions (Non-Trading) （Millions of Yen）

FY2017 FY2018 Transaction type Fair value Fair value Notional Unrealized Notional Unrealized Asset Asset amount gain/ (loss) amount gain/ (loss) (Liability) (Liability) Interest rate swap on long-term cash collateral pledged for bonds 36,000 (4,718) (4,718) 20,000 (4,518) (4,518) borrowed

18 5. External Audit

Pursuant to the Article 436(2) (i) of the Companies Act, the Company’s financial report and its supplementary schedules were audited by KPMG AZSA LLC. And the Company received audit report with unqualified opinion from KPMG AZSA LLC.

19 IV Internal Control Structure

1． Overview of Internal Control The Company has the following divisions and departments which are responsible for internal control of the Company. ・ Legal Division Legal Division consists of Legal Department and Derivatives Documentation Group and has, in connection with general legal affairs and various laws and regulations and miscellaneous rules relating to financial instruments transactions, the duty to have the officers and employees of the Company abide by the foregoing or give advice to them on such matters, as the case may be. ・ Independent Compliance Risk Management Division Independent Compliance Risk Management Division consists of Markets Compliance, Surveillance, Central Compliance, AML Compliance, Banking & Research Compliance / Control Group and ICRM Compliance Assurance and Sanctions Compliance Units. The Division is seen as a key advocate within Citi of "Responsible Finance". This is accomplished by the following: ・ Setting standards through the creation and maintenance of Compliance policies and embedding the required standards into the business and operation of the company ・ Managing the regulatory environment by tracking Japanese and overseas regulatory developments and active participation in industry organizations ・ Providing advisory and support to other divisions to promote appropriate business behavior and activity that is consistent with the required standards ・ Conducting testing and surveillance to evaluate compliance with policies and regulations ・ Promoting appropriate risk management and governance through the development of procedures and systems to comply with applicable laws and regulations ・ Providing live and on-line trainings to increase understanding of employees regarding key laws, regulations and policies ・ Risk Management Division Risk Management Division consists of Credit Risk Management, Market Risk Management, UDCS-NPAC, Underwriting Review, Quantitative Risk and Stress Testing, Operational Risk Management and Risk Governance Units. The Division is responsible for tracking credit status, management of markets risks, oversight of new products, underwriting review, development and management of risk models, management of risk operational risks and preparations / management of risk related reports. ・ Finance Division Finance Division consists of Controllers, Treasury, Financial Planning & Analysis and Tax Units. The Division is responsible for production, maintenance, and management of ledgers / reports, etc. of the Company's finance, accounting and tax, risk management based on the Company's Capital Adequacy Ratio, liquidity analysis, fund raising, fund management and planning of management accounting and budget of the Company. ・ Corporate Planning Division The Corporate Planning Division is responsible for the matters related to corporate planning of the Company, the matters related to assistance to President of the Company and the matters related to handling orders, etc. from authorities, etc.

20 ・ Corporate Affairs Division The Corporate Affairs Division is responsible for the planning and execution of communications and public affairs programs designed to strengthen the Company's recognition, enhance its brand and protect its reputation and also responsible for the promotion of the Company's CSR activities. ・ Government Affairs The office of Government Affairs is responsible for information gathering, research and analysis for the Company on government policies/activities as well as consultancy and advisory regarding relationship management with government agencies. It is also responsible for engagement in activities of business associations which the Company is involved in. ・ Operations and Technology Division Operations and Technology Division consists of Markets Operations Department, Technology Department and O&T Planning Unit. The Division is responsible for matters concerning settlement of financial products trades, etc. with Japanese and foreign customers, development of Company’s information technology strategies, systems development, systems operations and maintenance and risk management around Operations & Technology of the franchise, specifically, Information Security, Personal Information Protection, JIMU risk, Continuity of Business, Information Technology, Record Management and outsourcing management.

The Company also has established the below division which directly report to Board of Directors. ・ Internal Audit Division The Division conducts internal audits on the business of the Company and reports their results and evaluations to the Board of Directors.

21 2． Condition of Customers' Assets Segregation We have managed deposited cash and securities to secure and orderly stored them separately from our own property. Thus, even in the event of bankruptcy, deposited money and securities are refunded to customers under certainty. Asset segregation balance of cash and securities, and type of storage condition of the securities or the amount or quantity of securities at the end of December 2017 and December 2018 are as follows.

(1) Asset segregation based on article 43-2 of FIEL ① Condition of trust funds （Millions of Yen） Type As of December 31, 2017 As of December 31, 2018

Required segregation of customers’cash 9,141 4,239 deposits at the latest calculation date

Funds entrusted for segregated customers' cash deposits at the end of 10,147 5,247 the fiscal year

Required segregation of cash deposits 8,734 3,788 at the end of the fiscal year

② Condition of securities segregation A. Securities for safe keeping As of December 31, 2017 As of December 31, 2018 Security Type Domestic securities Foreign securities Domestic securities Foreign securities thousand thousand thousand thousand Equities (shares) 785,142 9,019,961 682,393 9,028,572 shares shares shares shares millions of millions of millions millions Bonds (face amount) 252,646 998,885 196,021 1,134,337 yen yen of yen of yen Beneficiary certificates million million million million 146,106 153,344 115,810 144,463 (number of accounts) accounts accounts accounts accounts Stock purchase warrants - units - units - units- units (number of units)

B. Securities received as collateral B. Not applicable

22 C. Condition of securities segregation Security Type Depositary agent and segregation method ① With respect to CB-type corporate bonds with stock acquisition rights (including CB certificates, the same shall apply hereinafter), equity securities of investment , beneficiary certificates and investment securities that are listed on Financial Instruments Exchange Markets (the hereinafter referred to as the “Domestically Listed Securities”), those securities that are the assets of the Company and the other securities that are not Customer-owned Securities (hereinafter referred to as "Company-owned Securities"), in principle, shall be managed separately from Customer-owned Securities by means of a ledger, etc., but stored together at Japan Securities Depository Center (hereinafter referred to as the "Depository", including the organization that is entrusted by the Depositary, the same shall apply hereinafter). 1. Convertible bond-type corporate ② Customer-owned Securities shall be managed in a manner whereby the holdings bonds with stock acquisition rights, of each customer can be immediately identified by means of the Company’s ledger, equity securities of investment etc.; provided, however, that Domestically Listed Securities that are not re- corporations, beneficiary securities deposited in the Depository at the customer’s request shall be stored in Japan and investment securities that are Information Processing, Ltd. or any other outside place of custody clearly segregated from Company-owned Securities and managed in a manner whereby listed on financial instruments the customer to whom the particular securities belong can be immediately exchange markets identified. Customer-owned Securities that have been delivered to the issuing company (including the transfer agent; the same shall apply hereinafter) for the exercise of stock acquisition rights of CB-type corporate bonds with stock acquisition rights etc. at the request of a customer shall be managed appropriately by means of the Company’s ledger, etc., in a manner whereby the issue, the amount and the issuing party of the particular securities can be immediately identified for each commissioning customer. With respect to domestically listed foreign securities, Company-owned Securities and Customer-owned Securities, in principle, shall be managed separately by 2. Domestically listed foreign securities means of a ledger, etc. but stored together at Depository. Customer-owned Securities shall be managed in a manner whereby the holdings of each customer can be immediately identified by means of the Company’s ledger, etc. ① The Japanese Government Bonds shall be managed at the Bank of Japan pursuant to the Transfer Law in a manner whereby Company-owned Securities etc. and Customer-owned Securities are clearly segregated and, with respect to Customer-owned Securities, the holdings of each customer can be immediately 3. Corporate debt securities, stocks etc. identified by means of the Company’s ledger of the book-entry accounts. handled at book-entry system under ② The corporate debt securities stocks etc.(excluding JGBs described in ① above) the transfer law shall be managed at the Depository pursuant to the Transfer Law in a manner whereby Company-owned Securities etc. and Customer-owned Securities are clearly segregated and, with respect to Customer-owned Securities, the holdings of each customer can be immediately identified by means of the Company’s ledger of book-entry accounts.

In principle, these securities shall be stored in Japan Information Processing, Ltd. or any other outside place of custody where Company-owned Securities, etc., and Customer-owned Securities are clearly segregated and managed in a manner whereby the holdings of each customer can be immediately identified by means of 4. Domestic bonds other than CB-type the Company’s ledger, etc. However, in the case of securities of large corporate bonds with stock denomination, etc., where a single certificate is held in common by the Company acquisition rights and securities set and the customer, and it is not possible to clearly segregate the place of custody of forth in section 3 above, and stock Company-owned portion etc. and Customer-owned portion, the place of custody acquisition rights securities, etc. shall be made clear and Company-owned portion etc. and Customer-owned portion shall be segregated by means of the Company’s ledger, etc. and Customer-owned Securities shall be managed in a manner whereby the holdings of each customer can be immediately identified.

23 Security Type Depositary agent and segregation method

With respect to domestic Beneficiary certificates of investment trust, in principle, these certificates shall be stored together at the Depository. In such a case, the place of custody of Company-owned Securities, etc. and Customer-owned Securities shall be clearly segregated at said trustee trust bank and Customer- owned Securities shall be managed in a manner whereby the holdings of each customer can be immediately identified by means of the Company’s ledger, etc. However, in the case where a single certificate is held in common by the Company and the customer, and it is not possible to clearly segregate the place of custody of Company-owned portion etc. and Customer-owned portion, the place of custody 5. Beneficiary certificates of investment shall be made clear and Company-owned portion etc. and Customer-owned portion trust shall be segregated by means of the Company’s ledger etc. and Customer-owned Securities shall be managed in a manner whereby the holdings of each customer can be immediately identified. With respect to foreign Beneficiary certificates of investment trust, in principle, these certificates shall be managed clearly as Customer-owned Securities at an overseas Agency's facility and Customer-owned Securities shall be managed in a manner whereby the state of such management of Customer-owned Securities at the Agency can be immediately available and identified by means of the Company’s ledger.

With respect to the securities stored or managed at an overseas Custodial Facility, Company-owned Securities and Customer-owned Securities shall be segregated by establishing separate accounts, etc. as shown in the chart below, and Customer- owned Securities shall be managed in a manner whereby the holdings of each customer can be immediately identified by means of the Company’s ledger, etc.; 6. Securities stored or managed at provided, however, that in the case it is not possible to store or manage Customer- overseas custodial facilities owned Securities at the Custodial Facility in a manner whereby the holdings of each customer can be immediately identified, the Company shall manage these securities by means of the Company’s ledger in such a way that the Company-owned portion and the Customer-owned portion is segregated and the holdings of each customer can be immediately identified.

[Overview of overseas custody] Country of Type of securities Existence of segregated accounts Name of custodial facility establishment deposited and method of segregation

Euro denominated bonds, Separate accounts have been Euroclear Belgium Australian bonds, established for Company-owned Euro Yen bonds, Securities and customer-owned UK bonds, UK stocks Securities at each custodial facility, and the securities for the customers’ Turkish bonds, account is on a commingle basis. (Hong Kong) Ltd. Hong Kong Hong Kong stocks, Thailand stocks

Separate accounts have been US stocks, established for Company-owned Canadian stocks, Securities and customer-owned Citigroup Global Markets Inc. USA US bonds, Securities at each custodial facility, Canadian bonds, etc. and the securities for the customers’ account is on a separate basis.

③ Condition of asset segregation for Over-the-Counter Transactions of subject Securities-Related Derivatives Not applicable

24 (2) Asset segregation based on article 43-2-2 of FIEL

Not applicable

(3) Asset segregation based on article 43-3 of FIEL

Not applicable

25 V Status of Consolidated Subsidiaries, etc.

The Company has no subsidiary and affiliate provided by the “Regulation for Terminology, Forms and Preparation of Consolidated Financial Statements” (Ordinance of the Finance Ministry No. 28 of 1976), article 2(3) and (7), respectively.

End

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