April 24, 2007 Nikko Cordial Corporation
Announcement on the corrected presentation materials of business results for the periods from 1Q of fiscal year ended March 2005 to 1H of fiscal year ended March 2007, and the presentation material of business results for 3Q of fiscal year ended March 2007
Nikko Cordial Corporation (the “Company”), on February 27, 2007, has submitted its restated financial reports including securities reports for the past fiscal years, and restated its semi-annual and year-end financial summaries. On March 29, 2007, the Company corrected applicable first quarter and third quarter financial summaries. The Company, today, announces that the details set out under the following presentation materials of business results have been confirmed. The confirmed details are the same as those in the restated financial reports already announced, including securities reports for the past fiscal years, and corrected quarterly financial summaries. There are no additional corrections.
Attachments
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This material is an English translation of a Japanese announcement made on April 24, 2007. Although the Company intended to faithfully translate the Japanese document into English, the accuracy and correctness of this translation are not guaranteed. Business Results for Fiscal Year Ended March 2006 (Japanese GAAP)
April, 2006
All rights reserved by Nikko Cordial Corporation ContentsContents
Business Results Highlights of Consolidated Business Results 3 Summary of Business Results 11 Dividend Policy 6 Retail Business 12 Composition of Net Operating Revenue 7 Asset Management Business 17 Cost Control 8 Investment Banking Business 22 Highlights of Each Business Line 9 Merchant Banking Business 25 Ordinary Income by Business Line 10 Risk Amount and Shareholders' Equity 27
Appendix Consolidated Business Results 29 Consulting Assets, Nikko SMA 38 Net Revenue by Business Category 30 Net Inflow of Consulting Assets, Sales of Products 39 SG&A 31 Brokerage Amounts, Commissions Rate, Business Results by Business Line 32 % of Direct Channel 40 Financial Condition 33 TSE Share, Underwriting Share 41 Investment in Listed Securities 34 Value at Risk (Nikko Citigroup Limited) 42 Nikko Cordial Securities 35 Number of Accounts, Branches, Introducing Brokers 43 Nikko Asset Management 36 Number of Staff 44 Nikko Citigroup Limited 37
This material is intended to provide updated information on our business results and outlook. It is not to be construed as a solicitation for investments. The outlook and projects presented herein are based upon judgements made by the management at the time of publication. Thus, no representation or warranty has been made or is given regarding the attainability of estimates and projections. Opinions expressed herein are subject to change without notice.
2 HighlightsHighlights ofof ConsolidatedConsolidated BusinessBusiness ResultsResults
¾ Record high net operating revenue, ordinary income and net income were marked since FY ended March 2001, when Nikko Cordial Corporation formed its holding company.
9 Net operating revenue was 420.7 bn yen (+45% y/y). 9 Ordinary income was 149.7 bn yen (x2.8 y/y). 9 Net income was 87.9 bn yen (x2.4 y/y). 9 ROE rose 6.2 points to 11.4%.
¾ Annual dividend per share is also reaching a record high level to 50 yen, after three consecutive fiscal years of increased dividend. Dividend payout ratio is maintained at 55%.
3 HighlightsHighlights ofof ConsolidatedConsolidated BusinessBusiness ResultsResults
Net Revenue SG&A Ordinary Income Net Income, ROE y/y: +45% y/y: +17% y/y: x2.8 y/y: x2.4 (Billions of Yen) (Billions of Yen) (Billions of Yen) (Billions of Yen) 100 16% 500 300 282.5 200 87.9 420.7 242.3 400 149.7 150 75 12% 291.0 200 300 11.4% 100 50 8% 36.9 200 100 54.0 50 25 4% 100 5.2%
0 0 0 0 0% FY ended FY ended FY ended FY ended FY ended FY ended FY ended FY ended Mar. 2005 Mar. 2006 Mar. 2005 Mar. 2006 Mar. 2005 Mar. 2006 Mar. 2005 Mar. 2006
Shareholders' Equity 812.3 bn Yen (y/y +83.6 bn Yen) EPS91.33 Yen (y/y +51.49Yen)
Total Assets 8,591.1 bn Yen (y/y +1,864.1 bn Yen)Dividend ratio 55% (Prev. FY 60 %)
ROE11.4% (y/y +6.2 pt)
4 QuarterlyQuarterly TrendTrend
Net Revenue SG&A
(Billions of Yen) q/q: -15% y/y: +34%(Billions of Yen) q/q: +2% y/y: +19% 150 130.0 100 75.9 77.2 107.5 110.9 69.6 75 61.2 64.7 100 82.9 57.4 58.8 59.6 74.8 72.1 72.2 61.1 50 50 25
0 0 FY ended March 2005 FY ended March 2006 FY ended March 2005 FY ended March 2006 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Ordinary Income Net Income, ROE(*) q/q: -37% y/y: x2.0 q/q: -2% y/y: +81% (Billions of Yen) (Billions of Yen) 41.6 100 40 25% 20% 75 30 58.4 22.3% 18.2 17.9 15% 50 40.0 36.9 20 11.2 10% 20.5 18.4 9.8 10.1 25 11.5 14.2 8.2 7.5 3.4 10 9.4% 8.9% 5% 6.6% 4.9% 4.5% 5.7% 5.6% 0 0 0% FY ended March 2005 FY ended March 2006 FY ended March 2005 FY ended March 2006 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 5 (*) Annualized DividendDividend PolicyPolicy
¾ Increased level of dividend. Dividend payout ratio was revised to about 50% from 35% or up. The minimum annual dividend was set at 8 yen per share. ¾ Introduction of a quarterly dividend distribution. In order to enable its shareholders to benefit from the group’s business efforts as quickly as possible, Nikko Cordial Corporation decided to adopt a quarterly dividend distribution system. It is scheduled to be launched after the Corporation Law goes into force and upon completion of any necessary preparations at the General Shareholders’ Meeting.
(%) Dividend Payout Ratio (Yen) Dividend 70 60 60 55 50 Yen (E) 60 50 Minimum annual dividend 50 8 yen per share 37 38 40 40 Year-end Interim 30 (E) 30 30 20 Dividend payout ratio was 14 20 8 changed from 35% to50%. 10 10 20 10 00 2 8 Yen 10 6 6 10 0 0 4 01/3 02/3 03/3 04/3 05/3 06/3 01/3 02/3 03/3 04/3 05/3 06/3
(*) “0%” is shown in 2002/3 and 2003/3, (*) Adjusted to the number of new outstanding shares. since net income marked negative. 6 CompositionComposition ofof NetNet OperatingOperating RevenueRevenue
The percentage of revenue from asset management business increased, owning to favorable investment trust sales, as well as increased agency commissions.
100%
33% 30% 31% 80% 40% 38%
60% 18% 16% 21% 16% 24% 12% 17% 40% 13% 15% 12% 29% 24% 20% 23% 23% 20%
11% 13% 9% 6% 7% 0% FY ended FY ended FY ended FY ended FY ended Mar. 2002 Mar. 2003 Mar. 2004 Mar. 2005 Mar. 2006
Merchant Bnking, etc. Asset Management Investment Banking Bond / FX Equity 7 CostCost ControlControl
Both personnel cost and other SG&A to net operating revenue continued to decline to their lowest levels since FY ended March 2001.
(Billions of Yen) 500 60% 50% 44% 50% 400 42% 48% 40% 40% 44% 34% 300 41% 36% 33% 30% 200 20%
100 10%
0 0% FY ended FY ended FY ended FY ended FY ended Mar. 2002 Mar. 2003 Mar. 2004 Mar. 2005 Mar. 2006
Net Revenue Personnel Cost SG&A excluding Personnel Cost Ordinary Income Personnel Cost to Net Revenue SG&A excluding Personnel Cost to Net Revenue Personnel Cost to Net Revenue
8 HighlightsHighlights ofof EachEach BusinessBusiness LineLine
9 Retail Business: Revenue was 219.5 bn yen (+47% y/y), and ordinary income grew to 84.3 bn yen (x3.1 y/y).
9 Asset Management Business: Revenue was 59.9 bn yen (x2.0 y/y), and ordinary income reached 12.4 bn yen (x4.1 y/y).
9 Investment Banking Business: Revenue was 142.7 bn yen (+20% y/y), and ordinary income increased to 42.4 bn yen (+61% y/y).
9 Merchant Banking Business: Revenue was 21.0 bn yen (+33% y/y), and ordinary income marked 11.4bn yen (+73% y/y).
* Group companies under each business line based on consolidated group managerial accounting
Retail : Nikko Cordial Securities, Monex Beans Holdings Asset Management : Nikko Asset Management, Nikko antfactory, Simplex Investment Advisors, Global Wrap Consulting Group Investment Banking : Nikko Citigroup Limited, Nikko Cordial Securities, Nikko Investor Relations Merchant Banking : Nikko Principal Investments (Japan, UK, Australia), Nikko Cordial Securities, Nikko Principal Finance, Nikko Cordial Alternative Investments Partnership
9 OrdinaryOrdinary IncomeIncome byby BusinessBusiness LineLine
Asset Management Investment Banking Merchant Banking Retail Business Business Business Business
y/y: x3.1y/y: x4.1 y/y: +61% y/y: +73% (Billions of Yen) (Billions of Yen) (Billions of Yen) (Billions of Yen) 84.3 80 80 80 80
60 60 60 60 42.4 40 40 40 40 27.1 26.3
20 20 12.4 20 20 11.4 6.6 3.0 0 0 0 0 FY ended FY ended FY ended FY ended FY ended FY ended FY ended FY ended Mar. 2005 Mar. 2006 Mar. 2005 Mar. 2006 Mar. 2005 Mar. 2006 Mar. 2005 Mar. 2006
10 Summary of Business Results (Business Line, Main Group Companies)
Retail Business Nikko Cordial Securities 4Q 4Q FY y/y q/q FY y/y q/q (Jan - Mar) (Jan - Mar) Revenue 219.5 bn Yen +47% 54.6 bn Yen -20% Net Revenue 246.3 bn Yen +46% 63.7 bn Yen -14% Ordinary Income 84.3 bn Yen x3.1 19.1 bn Yen -40% Ordinary Income 95.4 bn Yen x2.7 23.4 bn Yen -33%
Asset Management Business Nikko Asset Management 4Q 4Q FY y/y q/q FY y/y q/q (Jan - Mar) (Jan - Mar) Revenue 59.9 bn Yen x2.0 24.4 bn Yen +63% Net Revenue 45.8 bn Yen +73% 15.9 bn Yen +35% Ordinary Income 12.4 bn Yen x4.1 7.1 bn Yen x2.8 Ordinary Income 5.2 bn Yen x5.6 2.5 bn Yen x3.3
Investment Banking Business Nikko Citigroup Limited 4Q 4Q FY y/y q/q FY y/y q/q (Jan - Mar) (Jan - Mar) Revenue 142.7 bn Yen +20% 33.6 bn Yen -33% Net Revenue 127.0 bn Yen +21% 30.2 bn Yen -33% Ordinary Income 42.4 bn Yen +61% 10.7 bn Yen -45% Ordinary Income 34.6 bn Yen +88% 8.5 bn Yen -51%
Merchant Banking Business Nikko Principal Investments (Japan, UK, Australia) 4Q 4Q FY y/y q/q FY y/y q/q (Jan - Mar) (Jan - Mar) Revenue 21.0 bn Yen +33% 3.9 bn Yen +30% Net Revenue 21.8 bn Yen x2.0 1.9 bn Yen -22% Ordinary Income 11.4 bn Yen +73% 0.6 bn Yen -64% Ordinary Income 7.9 bn Yen - -0.8 bn Yen -
11 RetailRetail BusinessBusiness
For the full year, revenue grew to 219.5 bn yen (+47% y/y), and ordinary income grew to 84.3 bn yen (x3.1 y/y). For the 4Q, both revenue and ordinary income decreased to 54.6 bn yen (-20% q/q) and 19.1 bn yen (-40% q/q), respectively.
Although equity brokerage commissions declined, revenue was maintained at a high level owning to favorable investment trust sales in the 4Q at Nikko Cordial Securities.
(Billions of Yen) 80 68.0
60 54.0 54.6 39.9 40.9 42.8 40 34.4 33.6 31.9 20.7 19.1 12.4 20 10.0 9.2 3.3 4.5 0 FY ended March 2005 FY ended March 2006 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenue 39.9 34.4 33.6 40.9 42.8 54.0 68.0 54.6 Ordinary Income 10.0 3.3 4.5 9.2 12.4 20.7 31.9 19.1
Retail Business : Nikko Cordial Securities, Monex Beans Holdings
12 NikkoNikko CordialCordial Securities:Securities: HighlightsHighlights
For the full year, net operating revenue grew to 246.3 bn yen (+46% y/y), and ordinary income grew to 95.4 bn yen (x2.7 y/y).
9 Both revenue and ordinary income for the full year recorded their highest levels. 9 Consulting assets increased 7.3 tn yen from the end of March 2005 to 29.5 tn yen. 9 Direct channel function was enhanced to provide better service to clients.
(Billions of Yen) 80
60
40
20
0 FY ended March 2005 FY ended March 2006 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Net Revenue 43.4 38.2 39.7 47.6 48.3 60.3 73.8 63.7 SG&A 32.9 33.9 33.5 36.6 34.8 37.8 40.9 41.4 Ordinary Income 13.5 4.7 6.2 11.2 13.6 23.1 35.2 23.4
13 ConsultingConsulting Assets,Assets, SalesSales ofof ProductsProducts
(Trillions of Yen) Consulting Assets
40.0
28.8 29.5 Sales of Products 30.0 25.4 23.2 21.7 22.2 19.6 19.8 (Billions of Yen) 20.0 2,000 Others Variable annuity / insurance 10.0 Retail target JGB Foreign bonds Investment trusts 1,500 0.0 04/6 04/9 04/12 05/3 05/6 05/9 05/12 06/3
(Billions of Yen) Net Inflow of Consulting Assets 1,000 1,600 1,356.4
1,200 978.2 500
800 537.6 505.1
400 624.1 641.6 606.0 0 217.8 FY ended March 2005 FY ended March 2006 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY ended March 2005 FY ended March 2006 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 14 Net assets & sales amounts of global asset allocation type investment trusts
GW Seven Eggs Fund (*) Asset under management at Nikko Cordial Sec. (Mar.06) Net assets & sales amounts of 278.2 bn Yen global asset allocation type investment trusts
Nikko-Pimco High Income Sovereign 2,500 Nikko Mellon Global Triple Fund 600 Nikko Real Asset Fund 249.9 bn Yen Nikko AMP Global REIT Global Wrap Seven Eggs 500 Nikko Pimco High Income Soverign Pimco Total Retern Fund 2,000 Others 400 (Billions of Yen) (Billions of Yen) 300 Nikko-Mellon Global Triple Fund 1,500 Sales of products (Right scale) 200 211.3 bn Yen
100 1,000 0 India Advantage Fund 207.7 bn Yen -100 500
-200
0 -300 04/6 04/9 04/12 05/3 05/6 05/9 05/12 06/3 Best Nine Launched in Apr. 28, 2006
15 DistributionDistribution ChannelChannel andand NetworkNetwork
9 Both the number of accounts and consulting assets grew for the introducing brokerage channel. ( Number of accounts : +24,216, Consulting assets : +102.5 bn yen y/y) 9 Owning to direct channel function enhancements such as equity advice centers, the direct channel percentage continued to rise, thereby enabling the provision of higher quality services to clients in the face-to- face channel.
Introducing Brokers (*) (Billions of Yen) (Accounts) Direct Channel (%) Number of transactions 500 Consulting Assets (*) 47,854 50,000 100% Equity Advice Center Number of cash management accounts FSC IVR 400 40,000 80% Call Center 68% ezTrade 63% 56% 58% 300 30,000 60% 52% 23,638 248.9 47% 43% 40% 200 20,000 40% 127.3
100 10,000 20%
0 0 0% 04/6 04/9 04/12 05/3 05/6 05/9 05/12 06/3 FY ended March 2005 FY ended March 2006 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q (*) Sum of IFAs & Introducing Brokers (*) The percentage of transactions via no-face-to-face channels in equity & CB (brokerage & subscription) 16 among individual clients. AssetAsset ManagementManagement BusinessBusiness
For the full year, revenue jumped to 59.9 bn yen (x2.0 y/y), and ordinary income grew to 12.4 bn yen (x4.1 y/y). Total asset under management at Nikko Asset Management exceeded 10 tn yen, as its operation base expanded. Simplex Investment Advisors marked a constant growth in fund management and administration fee.
(Billions of Yen) 30 24.4
20 14.9 11.6 8.3 8.9 10 6.5 7.2 7.3 1.6 2.6 7.1 0.7 0.4 1.2 0.6 1.0 0 FY ended March 2005 FY ended March 2006 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenue 6.5 7.2 7.3 8.3 8.9 11.6 14.9 24.4 Ordinary Income 0.7 0.4 1.2 0.6 1.0 1.6 2.6 7.1
Asset Management Business : Nikko Asset Management, Simplex Investment Advisors, Nikko antfactory, Global Wrap Consulting Group
17 NikkoNikko AssetAsset Management:Management: HighlightsHighlights
For the full year, operating revenue was 45.8 bn yen (+73% y/y), and ordinary income grew to 5.2 bn yen (x5.6 y/y).
9 Net assets under management including internationally diversified type and monthly dividend type products increased, owing to net assets of “Nikko Triple Fund (Property, Bond, Equity)” having reached 700 bn yen and net assets of “The GW Seven Eggs” exceeding 500 bn yen in April. 9 Japan Post announced its decision to add Nikko Asset Management’s products to its product line-up.
(Billions of Yen) 20
15
10
5
0 FY ended March 2005 FY ended March 2006 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Net Revenue 6.0 6.3 6.8 7.1 7.9 10.1 11.7 15.9 SG&A 5.6 6.0 6.5 7.4 7.6 9.0 11.0 14.4 Ordinary Income 0.4 0.2 0.2 -0.0 0.6 1.2 0.7 2.5
18 SimplexSimplex InvestmentInvestment Advisors:Advisors: HighlightsHighlights
For the full year, gross profit and ordinary income were 14.0 bn yen (+46% y/y) and 8.0 bn yen (+52% y/y), respectively.
9 Operating base continued to grow as assets under management exceeded 450 bn yen. 9 Capturing the recovering trend of the real estate market, an upturn in the property development and solution related business was evident.
(Billions of Yen) 10.0
7.5
5.0
2.5
0.0 FY ended March 2005 FY ended March 2006 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Gross Profit 0.0Quarterly 0.0 4.8 2.2 2.6 2.7 2.4 6.1 SG&A 0.0data was not 0.0 0.9 1.2 0.6 1.1 1.0 1.9 Ordinary Income 0.0disclosed 0.0 3.7 0.8 1.7 1.5 1.2 3.5
19 AssetsAssets underunder ManagementManagement
Nikko Asset Management Nikko Asset Management Assets under Management Assets Gathered through Financial Institutions (Trillions of Yen) (Trillions of Yen) 12.0 Equity fund Bond fund 10.3 2.0 Private fund Advisory 9.6 (Preliminary figures) 10.0 1.6 7.8 1.6 7.3 1.2 8.0 6.5 6.7 6.2 6.2 1.2 6.0 0.9 0.8 0.6 0.5 4.0 0.4 0.3 0.3 2.0 0.4
0.0 0.0 04/6 04/9 04/12 05/3 05/6 05/9 05/12 06/3 04/6 04/9 04/12 05/3 05/6 05/9 05/12 06/3
Nikko antfactory Simplex Investment Advisors Global Wrap Consulting Group Assets under Management Assets under Management Assets of Advisory (Billions of Yen) (Billions of Yen) (Billions of Yen) 100 500 1,000
80 400 800
60 300 600
40 200 400
20 100 200
0 0 0 04/6 04/904/1205/3 05/6 05/905/1206/3 04/6 04/904/12 05/3 05/6 05/905/12 06/3 04/6 04/904/1205/3 05/6 05/905/1206/3 20 NikkoNikko AssetAsset Management:Management: PeerPeer GroupGroup RelativeRelative PerformancePerformance
9 Relative performance is steadily improving. 9 Two of its funds have won Morningstar awards in “Fund of the Year 2005”. 9 Four of its funds have been selected in the “Lipper Fund Awards Japan 2006”, awarded by Lipper Japan, a subsidiary of Reuters Japan Limited. 9 “Asian Investor 2006 Achievement Award (Japanese equity category)” was awarded by Asian Investor magazine.
FY ended March 2004 FY ended March 2005 FY ended March 2006 (April – February, 2006) 4th Quarter 4th 4th 3% Quarter 3rd 5% 3rd 14% 1st Quarter 6% 1st Quarter Quarter 32% 19% 41% 2nd Quarter 1st Quarter 2nd Quarter 3rd Quarter 9% 2nd 48% 69% 39% Quarter 15% Quarters 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Source: Nikko Asset Management 25% 25% 25% 25% Analysis of the company’s products performance against products performance based on public data. LowPerformance High Net asset weighted base. 21 InvestmentInvestment BankingBanking BusinessBusiness
For the full year, revenue was 142.7 bn yen (+20% y/y), and ordinary income was 42.4 bn yen (+61% y/y). For the 4Q, both revenue and ordinary income declined to 33.6 bn yen (-33% q/q) and 10.7 bn yen (- 45% q/q), respectively. Due to fewer PO/IPO deals and weak trading gains, business results for the 4Q marked a decrease in both revenue and profit.
(Billions of Yen) 80
60 49.9 34.7 35.1 40 30.2 31.4 33.6 22.5 23.9 19.4 20 7.6 7.3 10.0 9.9 10.7 1.3 2.3 0 FY ended March 2005 FY ended March 2006 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenue 30.2 31.4 22.5 34.7 23.9 35.1 49.9 33.6 Ordinary Income 7.6 7.3 1.3 10.0 2.3 9.9 19.4 10.7
Investment Banking Business : Nikko Citigroup, Nikko Cordial Securities, Nikko Investor Relations
22 NikkoNikko Citigroup:Citigroup: HighlightsHighlights
For the full year, net operating revenue was 127.0 bn yen (+21% y/y), and ordinary income grew to 34.6 bn yen (+88% y/y).
9 Having no mega deals in underwriting business, the underwriting amount decreased 42% (q/q) to 179.8 bn yen for the 4th quarter.
(Billions of Yen) 80
60
40
20
0 FY ended March 2005 FY ended March 2006 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Net Revenue 26.5 27.8 19.7 30.5 20.6 31.2 44.9 30.2 SG&A 20.7 23.1 19.4 23.1 19.3 23.8 27.6 21.6 Ordinary Income 5.7 4.8 0.4 7.3 1.2 7.4 17.3 8.5
23 BookrunnerBookrunner LeagueLeague TableTable
Domestic Straight Bond Any Japanese Involvement Global Equity & Equity-related (Excluding affiliated company deals) Financial Advisory
(Domestic & international equity and Equity- (Domestic straight Bond related issues by Japanese issuers) issue by Japanese issuers)
1. Daiwa Securities SMBC31.6% 1. Mitsubishi UFJ Securities20.5%1. Goldman Sachs 45.3%
2. Nomura Securities27.4% 2. Nomura Securities 20.4% 2. Citigroup 44.0% 2006 3. Goldman Sachs18.2% 3. Daiwa Securities SMBC 17.4%3. Mizuho Financial Group 42.4% Jan - Mar 4. Mizuho Financial Group 6.6% 4. Mizuho Securities14.3% 4. UBS 38.1%
5. Nikko Citigroup Limited6.0% 5. Nikko Citigroup Limited 11.8% 5. Deutsche Bank AG 36.9%
1.Nomura Securities 23.8% 1. Daiwa Securities SMBC 22.8% 1. Nomura Securities 48.1%
2.Nikko Citigroup Limited 21.1% 2.Mizuho Securities 17.7% 2. Merrill Lynch 31.7%
2005 3.Daiwa Securities SMBC 13.7% 3. Nomura Securities 16.7% 3. Mitsubishi UFJ FG 29.2% Jan - Dec 4. Mizuho Financial Group 12.0% 4.Nikko Citigroup Limited 14.9% 4. Morgan Stanley 26.1%
5.UBS 6.9% 5. Mitsubishi UFJ Securities 12.7% 5.JP Morgan 24.9%
9.Citigroup 9.8%
Source : Thomson Financial, I-N INFORMATION SYSTEMS 24 MerchantMerchant BankingBanking BusinessBusiness
Balance of Investment and Loan (*) (Billions of Yen) For the full year, revenue was 21.0 bn yen (+33% y/y), 309.1 331.8 and ordinary income was 11.4 bn yen (+73% y/y). 279.8 300 269.7 270.4 Investment in Seibu group was completed in January, followed by the conclusion of the basic agreement on 200 144.2 NPI’s acquisition of Sony’s retail business group. 100
0 (Billions of Yen) 04/3 05/3 05/6 05/9 05/12 06/3 15 (*) Equity investments and loans, investment of funds 11.6 10 6.1 8.7 5.2 4.9 3.0 3.9 5 0.4 1.3 2.9 2.9 1.8 1.8 0.6 0 -0.9 -0.0 -5 FY ended March 2005 FY ended March 2006 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenue 1.3 5.2 6.1 3.0 0.4 11.6 4.9 3.9 Ordinary Income - 0.0 1.8 2.9 1.8 -0.9 8.7 2.9 0.6
(*) When SPC was sold to exit, profit/loss is included in revenue and ordinary income in the group managerial accounting base shown above, although in the financial accounting base, it is marked in the extraordinary gain/loss.
Merchant Banking Business :Nikko Principal Investments (Japan, UK, Australia), Nikko Cordial Securities, Nikko Principal Finance, 25 Nikko Cordial Alternative Investments Partnership InvestmentInvestment ActivitiesActivities
Accumulated Accumulated Major Investments Investment Performance (1998~) Investment Exits Current (B)/(A) (A) Balance (B) Nikko Principal Investments Japan Ltd. (Japan) 359.5 406.7 x1.1 Resolution Life Group Nikko Principal Investments Ltd. (UK) 203.0 270.4 x1.3 (Investment : September 2004) Total (Billions of Yen) 562.5 677.1 x1.2 Major Investments for FY ended March 2006 Napster Japan BELLSYSTEM 24, Inc. (Investment : August 2004) Joint venture between Napster and Tower Records Japan. Investment in the first Japanese fixed charge music down- loading business. Acquired 15% of shares outstanding Genesis Technology Inc. Basic agreement on the acquisition of the newly established holding (Investment : October 2005) (Investment : April 2003) company of Sony’s retail business group through MBO. Smile staff Planned acquisition is 51% stake. (Investment: scheduled in 1Q FY06) A human resource outsourcing company Acquired 80% of shares outstanding through MBO (Investment: August 2005) Cabot Financial Holdings Group TOWER RECORDS JAPAN INC. Acquired the leading debt purchasing business in the UK. AnGes MG Inc. (Investment : October 2002) (Investment: scheduled in Apr. 06) -Alliance in pharmacy and life sciences -Jointly established an investment fund which SEIBU HOLDINGS INC. invests in biotech companies HAKUHODO DY HOLDINGS (Investment : August 2005) Investment in Seibu Holdings which contains Seibu Railway, a INCORPORATED stable cash flow company, and a largest hotel network brand (Investment : March 2001) Tokyo Broadcasting System, Inc. “Prince”. Comprehensive financial advisory contract Acquired a 15.6% stake Subscribe all of TBS’s third party allotment of (investment: Apr.2006 ) the equity warrants. Established a project committee. (Investment: June 2005) Pasona Inc. (Additional Investment) * Jointly invested in the biggest Korean drama (Investment : March 2001) Menzies Hotels production in Aug.2005 A four star hotel in Glasgow (Investment: May 2005) Yellow Brick Road A hotel with a golf course in Cambridge (Investment: January 2006) Participate in investment in a leading company Powell Duffryn (Investment : December 2004) in European directories business (Investment : December 2000) (Investment : May 2005) SENSHUKAI Co., LTD 26 (Investment: April 2005) RiskRisk AmountAmount andand ShareholdersShareholders’’ EquityEquity
9 No major change in risk amount nor required capital since March 2005. 9 Required capital calculated based on risk amount is well controlled so as not to exceed the level of shareholders’ equity.
As of March 31, 2005 As of March 31, 2006 (Billions of Yen) (Billions of Yen) 1,000 1,000
750 750 331.1 275.8 500 500 812.3 728.6 281.7 298.4 250 250 125.2 128.6 143.5 171.1 161.8 182.8 0 0 Amounts of Risk Required Capital Shareholders' Amounts of Risk Required Capital Shareholders' (*1) (*2) Equity (*1) (*2) Equity (Total) (268.7) (452.8) (728.6) (290.5) (481.2) (812.3)
Business Portfolio *1 Amount of Risk is calculated based on VaR. Investment Portfolio *2 Required capital of the business portfolio is calculated based on the concept of capital adequacy.
27 Appendix
28 ConsolidatedConsolidated BusinessBusiness ResultsResults
FY ended March 2005 FY ended March 2006 (Millions of Yen) 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY
Revenue 83,697 78,820 68,865 91,231 322,615 84,254 117,002 140,548 134,406 476,211 Commissions 56,566 55,482 49,624 63,194 224,868 59,350 73,699 94,615 90,535 318,201 Trading gains 17,276 6,454 10,049 16,075 49,855 15,109 19,942 28,415 13,431 76,898 Net gains from operating activities & investments 1,002 5,941 210 3,645 10,799 751 11,010 4,118 1,590 17,470 Net gains from other products - 2 1 1 6 - - - - 1 Financial income 8,851 10,940 8,979 8,314 37,085 9,043 12,349 13,397 12,792 47,584 Other revenue ------16,056 16,056 [Net financial income] [ - 25] [ 4,294] [ 1,276] [ 13] [ 5,558] [ - 2,978] [ 2,904] [ 2,890] [ 316] [ 3,132] Interest expense 8,876 6,646 7,703 8,301 31,527 12,022 9,445 10,507 12,476 44,451 Cost of sales ------10,970 10,970 Net operating revenue 74,821 72,174 61,162 82,930 291,088 72,232 107,556 130,040 110,960 420,790 SG & A 57,498 61,210 58,893 64,742 242,343 59,698 69,648 75,999 77,229 282,576 Operating income 17,323 10,964 2,268 18,188 48,744 12,534 37,908 54,040 33,730 138,213 Ordinary income 20,509 11,541 3,499 18,486 54,036 14,244 40,083 58,457 36,931 149,716 Net income 11,299 8,234 7,514 9,899 36,947 10,158 41,642 18,289 17,904 87,994
29 NetNet RevenueRevenue byby BusinessBusiness CategoryCategory
FY ended March 2005 FY ended March 2006 (Millions of Yen) 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY
Equity 28,056 17,953 14,782 25,633 86,425 17,067 32,787 46,127 32,533 128,516 Brokerage commissions 20,816 13,093 11,995 15,328 61,234 13,863 21,194 30,066 25,970 91,095 Net gain on trading 6,495 2,690 1,469 7,947 18,604 1,769 9,608 14,349 3,641 29,368 Net financial income -351 1,141 156 1,292 2,239 566 1,132 280 2,013 3,993 Others 1,095 1,028 1,160 1,063 4,347 868 852 1,431 906 4,059 Bond / FX 15,651 10,600 14,178 12,120 52,551 15,218 16,022 21,624 13,997 66,863 Brokerage commission 173 121 144 124 564 75 138 143 201 559 Subscription &distribution 1,272 1,205 700 1,128 4,306 828 684 925 665 3,103 commissions Net gain on trading 10,780 3,764 8,579 8,127 31,251 13,339 10,333 14,066 9,789 47,530 Net financial income -282 2,684 1,835 -642 3,594 -2,712 1,587 2,609 -129 1,355 Others 3,707 2,824 2,919 3,382 12,833 3,687 3,277 3,878 3,470 14,314 Investment Banking 8,603 16,442 9,622 14,862 49,529 11,023 10,905 15,831 11,670 49,430 Underwriting & selling 5,590 13,893 7,916 9,709 37,110 8,723 8,415 13,568 9,951 40,658 commissions Subscription &distribution - - - - - 30 - - - 30 commissions Others (M&A, etc.) 3,012 2,549 1,705 5,152 12,419 2,269 2,490 2,263 1,719 8,742 Asset Management 16,368 14,920 17,396 20,875 69,561 23,732 29,914 32,109 35,872 121,629 Brokerage commissions 171 141 112 108 534 57 128 153 128 467 Subscription &distribution 6,801 5,126 7,205 9,412 28,546 11,580 14,376 15,051 13,713 54,721 commissions Management fee 7,723 7,978 8,126 9,164 32,992 9,769 12,373 14,252 19,301 55,697 Advisory fee 620 622 854 525 2,622 725 1,123 820 950 3,619 Insurance 1,051 1,052 1,097 1,664 4,865 1,599 1,913 1,831 1,779 7,123 Merchant Banking, etc. 6,141 12,257 5,182 9,438 33,020 5,191 17,926 14,347 16,885 54,350 Net Revenue 74,821 72,174 61,162 82,930 291,088 72,232 107,556 130,040 110,960 420,790
30 SG&ASG&A
FY ended March 2005 FY ended March 2006 (Millions of Yen) 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY
Cost oriented transactions 10,723 11,232 9,985 12,089 44,031 9,466 11,437 13,584 14,743 49,231 Salaries & welfare 27,858 29,693 29,429 32,298 119,280 29,675 37,206 38,589 36,278 141,750 Occupancy & equipment 5,928 6,021 5,504 5,782 23,236 5,598 5,742 6,367 7,361 25,070 Office cost 4,289 4,904 5,227 5,104 19,525 5,255 4,849 5,900 5,734 21,740 Depreciation & amortization 3,122 3,153 3,297 3,442 13,015 3,469 3,344 3,388 3,672 13,874 Taxes excluding income taxes 1,095 1,307 884 1,025 4,313 1,003 1,233 1,382 1,534 5,154 Others 4,479 4,898 4,564 4,998 18,941 5,229 5,834 6,787 7,903 25,755
Total 57,498 61,210 58,893 64,742 242,343 59,698 69,648 75,999 77,229 282,576
31 BusinessBusiness ResultsResults byby BusinessBusiness LineLine (Group managerial accounting base)
FY ended March 2005 FY ended March 2006 (Millions of Yen) 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY Retail Revenue 39,966 34,472 33,669 40,961 149,070 42,830 54,026 68,020 54,634 219,512 Ordinary Income 10,037 3,318 4,584 9,247 27,187 12,435 20,768 31,996 19,142 84,343 Asset Management Revenue 6,558 7,293 7,355 8,358 29,566 8,930 11,626 14,997 24,409 59,963 Ordinary Income 717 445 1,244 654 3,061 1,034 1,606 2,644 7,171 12,457 Investment Banking Revenue 30,281 31,421 22,567 34,727 118,997 23,971 35,122 49,950 33,690 142,734 Ordinary Income 7,612 7,340 1,340 10,063 26,357 2,381 9,904 19,409 10,725 42,420 Merchant Banking Revenue 1,336 5,277 6,159 3,044 15,817 437 11,621 4,983 3,971 21,013 Ordinary Income -10 1,841 2,934 1,858 6,623 -930 8,790 2,957 662 11,480
(*) When SPC was sold to exit, profit/loss is included in revenue and ordinary income in the group managerial accounting base shown above, although in the financial accounting base, it is marked in the extraordinary gain/loss.
Retail : Nikko Cordial Securities, Monex Beans Holdings Asset Management : Nikko Asset Management, Nikko antfactory, Simplex Investment Advisors, Global Wrap Consulting Group Investment Banking : Nikko Citigroup Limited, Nikko Cordial Securities, Nikko Investor Relations Merchant Banking : Nikko Principal Investments (Japan, UK, Australia), Nikko Cordial Securities, Nikko Principal Finance, Nikko Cordial Alternative Investments Partnership
32 FinancialFinancial ConditionCondition
(Millions of Yen) 05/3 06/3 y/y 05/3 06/3 y/y Current assets 6,369,351 8,138,683 1,769,332 Current liabilities 5,087,614 6,755,940 1,668,325 Cash on hand, Cash in banks 708,719 636,047 -72,672 Trading liabilities 1,720,824 3,486,775 1,765,951 Trading assets 2,686,597 4,141,202 1,454,605 Trading payables 25,923 40,548 14,625 Securities 3,200 50,242 47,041 Margin account payables 53,452 78,310 24,858 Operating investment securities 424,200 374,229 -49,970 Borrowings pledged by securities 1,562,629 1,280,837 -281,791 Real estates for sales - 140,691 140,691 Deposits received 175,448 263,057 87,609 Margin account receivables 136,342 231,918 95,576 Short-term borrowings 1,197,794 1,290,854 93,059 Loans secured by securities 2,057,987 2,137,977 79,990 CP 174,500 40,200 -134,300 Short-term loans 12,072 7,308 -4,764 Current portion of corporate debts 41,717 43,453 1,735 Other current assets 340,231 419,064 78,833 Income taxes payable 20,414 40,009 19,595 Non-current assets 357,679 452,455 94,775 Accrued bonuses 25,570 37,117 11,546 Tangible fixed assets 62,598 62,821 223 Other current liabilities 89,339 154,776 65,436 Buildings 22,504 20,850 -1,654 Long-term liabilities 825,826 894,068 68,241 Furnitures and fixtures 5,373 6,763 1,390 Corporate debts 343,554 364,556 21,001 Land 34,720 32,656 -2,063 Long-term borrowings 367,196 403,536 36,340 Construction in progress - 2,551 2,550 Accrued pension benefits 15,212 8,551 -6,660 Intangible fixed assets 30,130 35,646 5,515 Other long-term liabilities 99,862 117,423 17,561 Investments and others 264,950 353,987 89,037 Statutory reserves 1,114 1,954 840 Investment securities 160,550 232,251 71,700 Total liabilities 5,914,555 7,651,963 1,737,408 Long-term loans 40,539 75,899 35,360 Minority interests 83,777 126,818 43,041 Other investments 63,861 45,837 -18,023 Total shareholders' equity 728,697 812,356 83,659 Total liabilities, minority interests Total assets 6,727,030 8,591,138 1,864,108 6,727,030 8,591,138 1,864,108 and shareholders' equity
33 InvestmentInvestment inin ListedListed SecuritiesSecurities
As of March 31, 2006
(Millions of Yen) Consolidated Balance Appraisal Market Value Name Sheet Amount Profit or loss
Monex Beans Holdings, Inc. 12,698 99,860 87,162
Simplex Investment Advisors Inc. - 51,040 34,468
Pasona Inc. 18,828 18,828 12,386
T&D Holdings, Inc. 10,581 10,581 7,581
Others (106 securities) 116,190 116,190 44,452
Total 158,296 296,499 186,048
(*1) The name of individual investment securities is shown if its market value is 10 bil Yen or more. Otherwise it is combined with other securities and shown as "others." (*2) All securities' appraisal profit or loss (after tax effect) of Pasona Inc., T&D Holdings Inc. and other 106 securities are reported on the shareholders' equity section of the consolidated balance sheet. (*3) Since Monex Beans Holdings, Inc. and Simplex Investment Advisors are the group companies, differences between market value and holdings value are shown as appraisal profit or loss.
34 NikkoNikko CordialCordial SecuritiesSecurities
FY ended March 2005 FY ended March 2006 (Millions of Yen) 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY Operating revenue 44,884 39,447 40,266 48,055 172,653 48,694 60,811 74,186 64,055 247,748 Commissions 34,697 31,535 29,084 38,900 134,218 35,013 47,103 57,610 53,238 192,965 Brokerage commissions 14,855 8,252 8,859 11,469 43,436 9,270 15,125 22,698 18,100 65,195 Underwriting & selling 0 0 1 2 3 1 1 1 1 5 commissions Subscription & distribution 9,781 11,095 10,318 14,648 45,843 15,081 17,798 21,043 17,737 71,660 commissions Other commissions 10,060 12,187 9,905 12,781 44,934 10,659 14,177 13,866 17,399 56,103 Net gain on trading 8,057 6,314 9,684 7,153 31,209 11,814 11,919 14,876 9,041 47,651 Net gain on other trading 0 2 1 1 6 0 0 0 0 1 Financial income 2,128 1,595 1,496 1,998 7,219 1,866 1,788 1,699 1,775 7,129 [Net financial income] [ 673] [ 417] [ 991] [ 1,608] [ 3,691] [ 1,498] [ 1,360] [ 1,385] [ 1,495] [ 5,740] Financial expense 1,455 1,177 504 390 3,528 367 427 313 279 1,388 Net revenue 43,428 38,269 39,762 47,664 169,125 48,326 60,383 73,873 63,775 246,359 SG&A 32,934 33,988 33,510 36,657 137,090 34,888 37,807 40,901 41,463 155,060 Operating income 10,494 4,281 6,251 11,007 32,034 13,438 22,576 32,971 22,312 91,299 Ordinary income 13,565 4,736 6,231 11,293 35,826 13,604 23,153 35,258 23,464 95,480 Net income 7,796 2,765 3,315 6,124 20,001 7,807 13,289 25,352 13,542 59,992
35 NikkoNikko AssetAsset ManagementManagement
FY ended March 2005 FY ended March 2006 (Millions of Yen) 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY Operating revenue 6,082 6,323 6,807 7,199 26,411 7,944 10,193 11,759 15,911 45,809 Management fee 5,463 5,699 5,954 6,633 23,750 7,219 9,070 10,939 14,961 42,190 Equity investment trusts 4,370 4,715 4,942 5,416 19,444 6,304 7,793 9,696 11,691 35,486 Bond investment trusts 812 913 900 1,110 3,735 914 1,276 1,243 3,269 6,703
Investment advisory fee, etc. 618 624 853 566 2,660 725 1,123 820 950 3,619 [ Net management fee ](*) [ 2,437] [ 2,401] [ 2,970] [ 3,176] [ 10,985] [ 3,127] [ 4,175] [ 4,550] [ 7,645] [ 19,500] Operating expense 5,682 6,041 6,565 7,440 25,730 7,603 9,029 11,091 14,421 42,145 SG&A 5,682 6,041 6,565 7,440 25,730 7,603 9,029 11,091 14,421 42,145 (Commission paid) ( 2,525) ( 2,681) ( 2,686) ( 2,865) ( 10,756) ( 3,278) ( 3,930) ( 4,867) ( 5,818) ( 17,895) (Advisory fee paid) ( 1,119) ( 1,240) ( 1,151) ( 1,159) ( 4,669) ( 1,537) ( 2,087) ( 2,341) ( 2,447) ( 8,414) Operating income 399 281 241 -241 681 340 1,164 668 1,490 3,664 Ordinary income 459 271 214 -18 926 605 1,268 781 2,576 5,231 Net income 411 343 289 -374 671 574 1,107 764 2,056 4,502
(*) Net management fee = management fee + investment advisory fee, etc. – commission paid – advisory fee paid
36 NikkoNikko CitigroupCitigroup LimitedLimited
FY ended March 2005 FY ended March 2006 (Millions of Yen) 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY Operating revenue 32,035 31,103 24,669 35,905 123,712 29,186 36,840 51,701 38,683 156,410 Commissions 18,375 24,126 18,303 22,463 83,267 20,813 21,757 30,699 26,483 99,753 Brokerage commissions 4,356 3,644 3,440 4,114 15,554 4,732 6,342 7,680 8,255 27,008 Underwriting & selling 5,591 14,137 8,256 9,707 37,691 8,722 8,714 13,761 9,950 41,147 commissions Subscription & distribution commissions - - - - - 30 - - 33 63 Other commissions 8,428 6,345 6,607 8,642 30,022 7,329 6,701 9,259 8,245 31,534 Net gain on trading 9,254 151 284 8,915 18,604 3,283 7,937 12,735 3,629 27,584 Financial income 4,407 6,827 6,081 4,526 21,841 5,091 7,145 8,266 8,571 29,074 [Net financial income] [ - 1,087] [ 3,605] [ 1,157] [ - 800] [ 2,874] [ - 3,487] [ 1,515] [ 1,539] [ 169] [ - 262] Financial expense 5,494 3,221 4,924 5,327 18,967 8,578 5,629 6,727 8,401 29,336 Net revenue 26,541 27,882 19,745 30,578 104,745 20,608 31,210 44,973 30,282 127,074 SG&A 20,721 23,167 19,425 23,109 86,424 19,337 23,888 27,661 21,641 92,527 Operating income 5,819 4,715 319 7,468 18,321 1,271 7,323 17,312 8,641 34,547 Ordinary income 5,720 4,892 458 7,345 18,414 1,296 7,452 17,340 8,552 34,640 Net income 3,655 1,813 154 3,909 9,530 621 4,260 9,582 5,127 19,590
37 ConsultingConsulting Assets,Assets, NikkoNikko SMASMA
Consulting Assets
(Trillions of Yen) 04/6 04/9 04/12 05/3 05/6 05/9 05/12 06/3
Consulting Assets 19.6 19.8 21.7 22.2 23.2 25.4 28.8 29.5 Equity 8.3 8.0 9.3 9.5 9.7 10.8 12.8 13.1 Fixed income 6.8 7.2 7.7 7.9 8.3 8.8 9.4 9.4 Asset Management related 4.4 4.4 4.6 4.8 5.1 5.7 6.5 6.8 Others 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1
* Consulting Assets are defined as assets expected to contribute to our revenue into the future through financial consulting services at Nikko Cordial Securities. -Excludes wholesale clients’ assets only for safekeeping. -Nikko Cordial Securities rates Consulting Assets as one of the most important managerial benchmarks, and continues its efforts to expand these assets.
(Reference) Consulting Assets and Assets under Custody
(Trillions of Yen) 04/6 04/9 04/12 05/3 05/6 05/9 05/12 06/3 Consulting Assets 19.6 19.8 21.7 22.2 23.2 25.4 28.8 29.5 Nikko Citigroup Limited AuC 10.7 9.9 10.5 10.4 10.5 11.4 12.7 13.1 Total 30.3 29.7 32.2 32.6 33.7 36.8 41.5 42.5
Nikko SMA
(Billions of Yen) 04/6 04/9 04/12 05/3 05/6 05/9 05/12 06/3
Assets under Management 8 15 30 59 95 357 951 1,545 Number of Contracts (cumulative) 63 129 217 437 680 2,535 6,179 9,740
38 NetNet InflowInflow ofof ConsultingConsulting Assets,Assets, SalesSales ofof ProductsProducts
Net Inflow of Consulting Assets
FY ended March 2005 FY ended March 2006 (Billions of Yen) 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY Net inflow of consulting assets 624.1 641.6 1,356.4 217.8 2,839.9 537.6 978.2 606.0 505.1 2,626.9 Cash 319.6 188.5 311.3 200.3 1,019.8 410.2 602.0 387.8 451.7 1,851.6 Securities 304.5 453.1 1,045.1 17.4 1,820.1 127.4 376.2 218.2 53.4 775.2
Sales of Products FY ended March 2005 FY ended March 2006 (Billions of Yen) 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY
Investment trusts(Excluding MRF) 410.1 354.4 473.8 445.3 1,683.8 682.9 798.0 819.0 721.8 3,021.9 Equity funds 256.4 176.2 212.6 167.5 812.9 341.4 325.2 392.1 453.9 1,512.8 Foreign registered funds 45.7 74.6 145.9 200.6 467.1 184.2 317.6 290.8 156.0 948.7 Foreign bonds 198.7 134.0 204.5 169.5 706.8 250.1 250.1 227.6 179.7 907.8 Foreign currency bonds 113.3 71.1 103.5 80.6 368.7 139.2 106.5 100.7 60.2 406.8 Domestic yen bonds 297.0 288.8 183.3 269.2 1,038.5 237.6 182.6 260.6 171.2 852.1 Retail target JGB 254.6 240.9 140.2 225.8 861.5 165.6 136.9 185.0 131.3 618.9 Equity etc. 63.3 202.0 102.2 141.7 509.3 85.1 124.9 227.4 125.1 562.7 Annuity / insurance 16.0 21.0 18.9 27.0 83.0 28.2 35.1 31.3 28.6 123.4
*Foreign bonds consist of foreign-currency bonds, Euroyen bonds and Samurai bonds. Foreign bonds sales amount include already-issued bonds.
39 Brokerage Amounts, Commissions Rate, % of Direct Channel
Brokerage Amounts, Commissions Rate FY ended March 2005 FY ended March 2006 (Billions of Yen, bp) 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY
Equity brokerage amounts 7,998.1 4,544.5 4,842.7 6,454.3 23,839.5 5,517.1 7,709.0 10,047.3 10,133.2 33,406.6 Nikko Cordial Securities 3,259.1 1,318.5 1,254.7 1,765.1 7,597.5 1,371.1 2,219.8 3,326.4 2,623.7 9,541.0 Nikko Citigroup Limited 4,738.9 3,226.0 3,588.0 4,689.2 16,242.1 4,146.0 5,489.2 6,720.9 7,509.4 23,865.6
Equity brokerage commissions 18.5 11.3 11.9 15.2 56.8 13.7 21.0 29.8 25.7 90.3 Nikko Cordial Securities 14.7 8.1 8.7 11.3 42.9 9.2 15.0 22.5 17.9 64.6 Nikko Citigroup Limited 3.8 3.1 3.1 3.8 13.9 4.5 6.0 7.3 7.8 25.7 Equity commissions rate 23.1bp 24.8bp 24.5bp 23.5bp 23.8bp 24.9bp 27.2bp 29.7bp 25.4bp 27.0bp Nikko Cordial Securities 45.0bp 61.7bp 69.4bp 64.3bp 56.4bp 67.0bp 67.4bp 67.7bp 68.3bp 67.7bp Nikko Citigroup Limited 8.0bp 9.7bp 8.8bp 8.2bp 8.6bp 10.9bp 11.0bp 10.9bp 10.4bp 10.8bp
Direct Channel (%) (*) FY ended March 2005 FY ended March 2006 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY
Based on number of orders 42.8% 40.4% 47.3% 51.8% 45.7% 56.5% 58.0% 62.6% 68.3% 62.1% (ezTrade) ( 31.4%) ( 29.6%) ( 32.7%) ( 35.4%) ( 32.4%) ( 39.5%) ( 39.6%) ( 40.8%) ( 46.2%) ( 41.8%) (Equity Advise Center) ( 0.6%) ( 0.9%) ( 1.6%) ( 2.0%) ( 1.3%) ( 2.1%) ( 2.5%) ( 5.1%) ( 5.6%) ( 4.2%) Based on commissions 26.3% 22.8% 29.3% 34.1% 28.2% 38.5% 42.6% 45.4% 49.6% 44.9% (ezTrade) ( 16.8%) ( 14.0%) ( 15.8%) ( 17.9%) ( 16.3%) ( 20.7%) ( 21.1%) ( 20.3%) ( 23.9%) ( 21.5%) (Equity Advise Center) ( 2.6%) ( 2.8%) ( 5.4%) ( 6.9%) ( 4.3%) ( 8.2%) ( 10.7%) ( 14.5%) ( 14.5%) ( 12.7%) (*) Percentage of transactions via non-face-to-face channels in equity & CB (brokerage & subscription) among individual clients. 40 TSETSE Share,Share, UnderwritingUnderwriting ShareShare
TSE Share (Based on amount)
FY ended March 2005 FY ended March 2006 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY
Nikko Cordial Securities 1.4% 0.7% 0.7% 0.8% 0.9% 0.6% 0.7% 0.8% 0.6% 0.7% Nikko Citigroup Limited 2.0% 2.1% 2.1% 2.3% 2.1% 2.2% 2.1% 1.7% 1.8% 1.9%
Retail Market Share (*) FY ended March 2005 FY ended March 2006 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY
Nikko Cordial Securities 3.9% 2.8% 3.0% 2.8% 3.1% 2.3% 2.5% 2.5% 2.0% 2.3% (ezTrade) ( 0.7%) ( 1.0%) ( 0.6%) ( 0.6%) ( 0.7%) ( 0.6%) ( 0.6%) ( 0.6%) ( 0.6%) ( 0.6%)
(*1) Share in individual investors' trading value
Underwriting Share (Nikko Citigroup Limited)
FY ended March 2005 FY ended March 2006 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY
Equit Equity related 8.1% 16.9% 17.2% 26.7% 17.1% 39.7% 11.6% 19.2% 6.0% 14.2% IPO ( 4.3%) ( 14.3%) ( 14.1%) ( 34.0%) ( 17.4%) ( 40.3%) ( 18.1%) ( 18.3%) ( 7.3%) ( 17.6%) Bond SB 12.2% 20.5% 16.7% 10.1% 14.8% 20.8% 12.8% 16.0% 11.8% 15.2% Samurai bond 15.5% 0.0% 6.4% 0.0% 6.2% 5.5% 46.5% 0.0% 27.4% 22.4%
Source Equity : Compilied by Nikko Cordial Corporation based on Thomson Financial data. Equity : Compilied by Nikko Cordial Corporation based on I-N INFORMATION SYSTEMS data. 41 ValueValue atat RiskRisk (Nikko(Nikko CitigroupCitigroup Limited)Limited)
Assumption at VaR Maximum, Minimum and Average
Maximum Minimum Average Confidence Level 99% Jan - Dec, 2004 2,134 1,101 1,544 Holding Period 1 day Jan - Dec, 2005 1,906 1,040 1,484 Not adjusted for price correlation between products Jan - Mar, 2006 2,058 1,088 1,533
Transition of VaR
(Millions of Yen) 04/6 04/9 04/12 05/3 05/6 05/9 05/12 06/3
Equity 741 1,022 910 1,154 956 1,269 1,209 819 Insterest, Forex 748 908 399 637 410 325 318 270
VaR 1,489 1,931 1,310 1,791 1,366 1,595 1,527 1,088
42 NumberNumber ofof Accounts,Accounts, Branches,Branches, IntroducingIntroducing BrokersBrokers
Number of Accounts (Nikko Cordial Securities)
(Thousands of accounts) 02/3 03/3 04/3 05/3 05/6 05/9 05/12 06/3
Total account 2,023 1,884 1,931 2,060 2,091 2,121 2,164 2,176 Cash management account 1,033 1,236 1,355 1,531 1,562 1,591 1,638 1,667 (IFAs & introducing brokers) ( 24) ( 29) ( 30) ( 40) ( 48) Specialized account - 202 437 890 946 978 1,020 1,045 Newly opened account 138 106 138 43 43 38 55 64
Number of Branches, Introducing Brokers
02/3 03/3 04/3 05/3 05/6 05/9 05/12 06/3
Number of branches 114 110 109 109 108 108 108 108 IFA Office 5 9 10 12 12 13 15 Number of introducing brokers 227 280 306 338 365
43 NumberNumber ofof StaffStaff
Number of Staff
02/3 03/3 04/3 05/3 05/6 05/9 05/12 06/3
Nikko Cordial Corporation 206 182 185 168 176 181 180 126 Nikko Cordial Securities Total 6,444 6,288 6,365 6,158 6,518 6,434 6,450 6,446 Nikko Cordial Securities 5,599 5,388 5,093 4,998 5,248 5,154 5,141 5,111 FA 719 676 899 1,071 1,174 1,175 1,197 1,213 IFA (*) 126 224 373 89 96 105 112 122 Nikko Asset Management 403 312 306 317 328 337 339 377 Nikko Citigroup Limited 1,284 1,248 1,157 1,159 1,192 1,227 1,244 1,265 Others 1,463 1,334 1,059 1,039 1,039 1,143 1,157 1,222 Sub-total 9,800 9,364 9,072 8,841 9,253 9,322 9,370 9,436 Board members/Temporary staff 1,019 1,671 1,699 1,731 1,796 1,842 Total 10,091 10,512 10,952 11,053 11,166 11,278
* Decrease in the number of IFA during 04/3 and 05/3 is mainly due to contract change from IFA to introducing brokers.
44