– Power & Scale – Daiwa Securities Group Business Strategy Autumn 2005 Daiwa Securities Group Inc. This presentation may contain forward-looking statements about the Daiwa Securities Group. You can identify these statements by the fact that they do not relate strictly to historic or current facts. These statements discuss future expectations, identify strategies, contain projections of results of operations or of financial condition or state other “forward-looking”information. These statements are based on currently available information and represent the beliefs of the management of the Daiwa Securities Group. These statements are subject to numerous risks and uncertainties that could cause the Daiwa Securities Group’s actual results, performance, achievements or financial condition to differ materially from those described or implied in the forward-looking statements. The Daiwa Securities Group undertakes no obligation to publicly update any forward-looking statements after the date of this presentation. These potential risks and uncertainties include, but are not limited to: competition within the financial services industries in Japan and overseas, our ability to adjust our business focus and to maintain profitable strategic alliances, volatile and sudden movements in the international securities markets, foreign exchange and global economic situations affecting the Daiwa Securities Group.
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– Power & Scale –Daiwa Securities Group Business Strategy
Autumn 2005 Daiwa Securities Group Inc.
This presentation may contain forward-looking statements about the Daiwa Securities Group. You can identify these statements by the fact that they do not relate strictly to historic or current facts. These statements discuss future expectations, identify strategies, contain projections of results of operations or of financial condition or state other “forward-looking”information. These statements are based on currently available information and represent the beliefs of the management of the Daiwa Securities Group. These statements are subject to numerous risks and uncertainties that could cause the Daiwa Securities Group’s actual results, performance, achievements or financial condition to differ materially from those described or implied in the forward-looking statements. The Daiwa Securities Group undertakes no obligation to publicly update any forward-looking statements after the date of this presentation. These potential risks and uncertainties include, but are not limited to: competition within the financial services industries in Japan and overseas, our ability to adjust our business focus and to maintain profitable strategic alliances, volatile and sudden movements in the international securities markets, foreign exchange and global economic situations affecting the Daiwa Securities Group.
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Table of Contents
Achievements in 1H FY2005 ・ ・ ・ ・ 3
Wholesale business ・ ・ ・ ・ 8
Retail business ・ ・ ・ ・ 13
Corporate value enhancement ・ ・ ・ ・ 29
3
Our strategies have started to bring tangible results
Our strategies have started to bring tangible results
Significant increase in trading gainsIB issues expected to increase in latter halfLarge growth in private equity investments
Significant increase in trading gainsIB issues expected to increase in latter halfLarge growth in private equity investments
9
Wholesale Growth of Trading Gains
0
40
80
120
1H/02 2H/02 1H/03 2H/03 1H/04 2H/04 1H/05
Gains on Trading (Consolidated)(Y bil)
<Main Factors for Growth>Further collaboration with SMBC Cooperation with SMBC in securities intermediation for corporatecustomersCollaboration with IB division (ex.) SPS Increase in VWAP transactions and sales of foreign bonds at Daiwa Securities
<Main Factors for Growth>Further collaboration with SMBC Cooperation with SMBC in securities intermediation for corporatecustomersCollaboration with IB division (ex.) SPS Increase in VWAP transactions and sales of foreign bonds at Daiwa Securities
<Prospects>Equity related business to significantly expand from 2H onwardsM&A business to remain activeIncrease in SPS (Structured Principal Solutions) and other IB issues, of which revenues will be recorded on other divisions
<Prospects>Equity related business to significantly expand from 2H onwardsM&A business to remain activeIncrease in SPS (Structured Principal Solutions) and other IB issues, of which revenues will be recorded on other divisions
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WholesalePrincipal Investment Business
0
50
100
150
200
3/02 3/03 3/04 3/05 6/05 9/05
Funds
Real estate
Monetary claims
Private equity
Investment Amount(Y bil)
Increased investment limit to Y 200bilWorking towards exit of private equity investmentsIncreased investment limit to Y 200bilWorking towards exit of private equity investments
13
Retail
Advance in Daiwa Direct (online trading)Continued expansion of Daiwa SMAProgress in increasing net customer assetsGrowth of agency commissions
Advance in Daiwa Direct (online trading)Continued expansion of Daiwa SMAProgress in increasing net customer assetsGrowth of agency commissions
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Retail Higher Motivation
Increase in online tradingGrowing assets of Daiwa SMANet increase in assets under custodyBoost in agency commissions for investment trusts
Rewards based on performanceEnhanced sales support systemRewards for promoting Daiwa Global Bond Fund and SMA
※ “Online” includes call center“Others” includes revenues from VWAP transactions that are not recorded as brokerage commissions Market share for Tokyo, Osaka and Nagoya stock exchanges
Total 18,507 19,301 18,646 19,920 21,080 21,609 23,464
3/04 6/04 9/04 12/04 3/05 6/05 9/05
(Y bil)
Daiwa Securities Assets Under Custody(excluding financial institutions) Net Inflow of Assets
* “Others” includes customer assets of Daiwa Securities held under custody at Daiwa Securities SMBC.* Inflow(+) = net inflow/outflow of funds + net deposit/withdrawal of securities
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Retail Sales of Equity Investment Trusts
Sales and Net Increase of Equity Investment Trusts(Y bil)
Foreign bond type equity investment trust (left axis)
Net increase ratio (r ight axis)
Sales and Net Increase of Equity Investment Trusts
*Prior to 4Q/03, figures exclude sales to listed corporations and financial institutions.*Prior to 4Q/03, figures are the sum of foreign bond type equity investment trusts and pure equity investment trusts.
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Retail Daiwa Global Bond Fund
1,402
142100 100
0
400
800
1,200
1,600
9/04 12/04 3/05 6/05 9/050
20
40
60
80Funds outstanding: Daiw a Global Bond Fund (left)Funds outstanding: Global Sovereign Open (left)Dividend: Daiw a Global Bond Fund (right)Dividend: Global Sovereign Open (right)
(Y bil)FY2007 (2 years later)FY2007 (2 years later)
Over Y50 bil of average monthly redemption after FY2006 Over Y50 bil of average monthly redemption after FY2006
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Retail Target Figures for FY2005
Y 200 bilY 200 bil
Y 1 trilY 1 tril Y 2 bilY 2 bil
Y 100 bilY 100 bil
Contract Assets of Daiwa SMA
Contract Assets of Daiwa SMAOnline Margin PositionOnline Margin Position
Net Assets under management of
Daiwa Global Bond Fund
Net Assets under management of
Daiwa Global Bond FundMonthly Agency
CommissionMonthly Agency
Commission
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Corporate Value Enhancement
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Corporate Value EnhancementBusiness Structure
Daiwa Securities Group’s Business StructureDaiwa Securities Group’s Business Structure
Three Core Areas
Retail(Daiwa Securities)
Asset Management(Daiwa Asset Management/
Daiwa SB Investments)
Investments
(NIF SMBC Ventures)
Research, System, & Consulting
(DIR)
Group Support
(DSC/ Daiwa Property)
Holding Company(Daiwa Securities Group Inc.)
(Daiwa Securities SMBC PI)
Wholesale(Daiwa Securities
SMBC)
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Corporate Value EnhancementCorporate Value Analysis
Materialize and enhance corporate value of each Group companyMaterialize and enhance corporate value of each Group company
Total
Reflecting Group’s share holdingAssuming PER for each business based on stock price of other companies in the industryUsing net income for 1H of FY2005
OthersInvestmentsAssetManagement
Daiwa Securities
SMBC(consolidated,
excl PI)
Daiwa Securities
Corporate Value Estimate for each Group company (based on PER)
Corporate Value Estimate for each Group company (based on PER)
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Corporate Value EnhancementDividend Policy
Guideline: Payout ratio of 30% ⇒ More aggressively return benefit to shareholders when achieving strong earnings, considering capital allocation
FY2005 interim dividend: Y 12 per share *Payout ratio of 34.8%