Spring 2008 Daiwa Securities Group Business Strategy
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. Contents
FY07 Financial Summary ････ 3
FY08 Business Strategies
Retail ････ 8
Wholesale / Investment ････ 20
Asset Management ････ 29
Topics ････ 32
Dividend Policy ････ 35
2 FY07 Financial Summary
3 Consolidated Financial Summary
%Change FY07 %Change (Y mil) FY07 FY06 vs vs FY06 4Q 3Q 3Q FY07
Operating revenues 825,422 917,307 -10.0% 144,268 215,457 -33.0% Net operating revenues 447,491 526,764 -15.0% 70,431 121,427 -42.0% SG&A 363,858 340,372 6.9% 86,290 92,288 -6.5% Ordinary income 90,143 195,415 -53.9% -15,664 30,511 - Net income 46,411 92,724 -49.9% -12,928 17,264 - Total assets 17,307,119 14,411,265 17,307,119 17,786,335 Net assets 1,082,923 1,223,225 1,082,923 1,178,456 Shareholders' equity* 818,089 929,525 818,089 893,223 EPS (Y) 33.69 67.90 -9.52 12.59 BPS (Y) 607.64 665.98 607.64 651.36 ROE (Annualized) 5.3% 10.8% ---- 7.7% * Shareholders’ equity = owners’ equity + valuation and translation adjustments FY07 Dividend RROOEE (A(Annuannualizelizedd)) FY07FY07 4Q4Q FY07 Dividend
FY07 Dividend per Share: 22 yen Daiwa Securities Daiwa Securities 16.2 % 11.2 % (including 12 yen interim dividend)
DaiwDaiwaa SecuritiesSecurities SMBCSMBC ------Dividend Payout Ratio: 65.3 % (conso(consolliiddated)ated) 4 Consolidated P/L Summary
FY07 % Cha nge FY07 FY06 % Cha nge (Y mil) vs FY07 FY06 vs 3Q FY07 4Q 3Q 2Q 1Q 4Q FY06
Operating revenues 144,268 215,457 -33.0% 211,712 253,982 255,138 825,422 917,307 -10.0% Commissions 67,383 72,602 -7.2% 74,562 79,875 81,489 294,424 306,736 -4.0% Net gain on trading -9,479 41,650 - 24,440 46,749 47,044 103,361 157,332 -34.3% Net gain on private equity 4,131 723 471.3% 6,309 7,996 7,997 19,160 32,818 -41.6% and other securities Interest and dividend income 69,377 87,242 -20.5% 95,909 105,893 103,258 358,422 373,452 -4.0% Other revenues 12,855 13,239 -2.9% 10,489 13,468 15,348 50,052 46,967 6.6% Interest expenses 64,169 83,894 -23.5% 92,357 99,362 99,373 339,783 354,245 -4.1% Cost of sales 9,668 10,136 -4.6% 7,791 10,551 12,263 38,147 36,298 5.1% Net operating revenues 70,431 121,427 -42.0% 111,563 144,068 143,501 447,491 526,764 -15.0% SG&A 86,290 92,288 -6.5% 91,660 93,619 90,882 363,858 340,372 6.9% Operating income -15,858 29,138 - 19,902 50,449 52,618 83,632 186,391 -55.1% Non-operating income 1,419 2,274 -37.6% 1,823 4,129 999 9,647 10,937 -11.8% Non-operating expenses 1,225 902 35.8% 521 486 583 3,135 1,913 63.9% Ordinary income -15,664 30,511 - 21,204 54,092 53,034 90,143 195,415 -53.9% Extraordinary gains 1,481 219 576.5% 1,140 793 1,204 3,634 3,601 0.9% Extraordinary losses 9,663 -65 - 2,015 213 10,377 11,826 13,093 -9.7% Net income -12,928 17,264 - 14,739 27,335 25,842 46,411 92,724 -49.9%
5 Medium-term Management Plan
“Passion for the Best” 2008
Consolidated ordinary income : JPY 350bil or higher Consolidated ROE : 15% or higher
* Consolidated ordinary income record high JPY339.1bil (3/1990)
Retail Wholesale Asset Management
Ordinary income: Consolidated ordinary income: Ordinary income: JPY 130bil or higher JPY 190bil or higher JPY 30bil or higher
Equity investment trusts: Daiwa Securities JPY 14tri or higher Customer assets under custody: No.1 position in major league tables Investment advisory assets: JPY 45tri or higher JPY 5tri or higher
6 Assumptions for the Plan
*DIR Forecasts (as of 11/2005) *As of 3/2008
Economy : FY06-FY08 (Average) Economy : FY07-FY08 GDP growth rate : Nominal 3.7% Real 2.8% GDP growth rate : Nominal 0.8％ Real 1.7％ CPI : 0.8% per annum CPI : 0.3％ per annum Markets : FY08 (Average) *FY07 DIR forecast Call rate : 0.30% Yield of 10-year JGB: 2.4% Markets : FY07 (Average) JPY / US$ rate : JPY 99.5 / US$ Call rate : 0.474％ * Company’s estimation Yield of 10-year JGB: 1.577％ TOPIX: 1,870 points （3/2009) JPY / US$ rate : JPY113.62 / US$ Trading value at TSE 1st section : JPY 2.0-2.5 tri per day TOPIX: 1,212 points (3/2008) Individuals Trading value at TSE 1st section : Retail trading value: JPY 1.1-1.5 tri per day JPY 3.0 tri per day (FY08 average, company’s estimation) Retirement bonus of baby boomers Individuals (including retirement pension): approx. JPY 40 tri Baby boomers = born in 1946-1951 Individual financial assets: JPY 1,545 tri (12/2007) Individual financial assets: JPY 1,714 tri (3/2009) Corporations Topics 9 9 Diversification of investment and funding approach Turbulence in financial market due to sub-prime issue 9 Active capital investments and M&A by healthy corporations 9 Decreasing corporations’ appetite for straight equity finance 9 Active restructuring and spin-out by ailing corporations 9 Higher presence of private equity and real estate funds 7 Retail
8 Retail Financial Summary
FY07 % Cha nge FY07 FY06 % Cha nge (Y mil) vs FY07 FY06 vs 4Q 3Q 3Q FY07 2Q 1Q 4Q FY06
Operating revenues 46,072 57,330 -19.6% 58,413 64,456 63,042 226,273 230,649 -1.9% Com m issions 34,325 42,995 -20.2% 44,337 50,381 50,681 172,040 185,751 -7.4% Brokerage 9,028 11,864 -23.9% 13,767 15,190 18,697 49,851 65,947 -24.4% Stock and others 8,918 11,752 -24.1% 13,685 15,144 18,634 49,500 65,739 -24.7% Distribution 8,757 13,257 -33.9% 12,413 17,862 15,399 52,292 60,531 -13.6% Stock and others 1,058 865 22.3% 1,368 1,616 2,229 4,908 16,006 -69.3% Bond and others 1,956 1,687 16.0% 2,436 3,050 2,140 9,131 8,449 8.1% Investment trust 5,742 10,704 -46.4% 8,609 13,195 11,028 38,252 36,075 6.0% Other commissions 16,538 17,874 -7.5% 18,155 17,328 16,584 69,897 59,272 17.9% Investment trust 10,911 12,058 -9.5% 11,634 10,935 9,652 45,539 34,001 33.9% Net gain on trading securities 9,826 12,036 -18.4% 11,597 11,818 10,318 45,279 37,324 21.3% Stock and others 686 1,896 -63.8% 1,741 2,184 1,542 6,509 5,761 13.0% Bond, forex and others 9,140 10,139 -9.9% 9,855 9,633 8,775 38,769 31,562 22.8% Interest and dividend income 1,920 2,298 -16.4% 2,478 2,256 2,042 8,953 7,573 18.2% Interest expenses 505 575 -12.1% 589 593 511 2,263 1,478 53.1% Net operating revenues 45,567 56,755 -19.7% 57,823 63,863 62,530 224,010 229,171 -2.3% SG&A 32,987 38,924 -15.3% 39,363 41,981 40,644 153,256 154,670 -0.9% Ordinary income 12,649 17,922 -29.4% 18,456 21,999 21,800 71,026 74,477 -4.6% Net income 7,180 10,418 -31.1% 10,606 12,803 12,163 41,009 43,468 -5.7% Capital adequacy ratio 319.7% 382.2% 362.5% 350.9% 319.3% 319.7% 319.3%
9 Retail Change of Earnings Structure (1) As source of revenue has become diversified, dependence on equity revenue decreased
(Y bil) Revenues by product category (quarterly)
40
30
Equities (excl. underwriting)
20
Investment trusts (sales comm)
10 Bonds
Investment trust (agency comm) Pension insurance
0 1Q/04 2Q/04 3Q/04 4Q/04 1Q/05 2Q/05 3Q/05 4Q/05 1Q/06 2Q/06 3Q/06 4Q/06 1Q/07 2Q/07 3Q/07 4Q/07 10 Retail Change of Earnings Structure (2)
Increasing Stable Revenues
Stable revenues (quarterly) Cost cover ratio (quarterly)
(Y bil) (Y bil)
SG&A (left) Investment trust agency commissionMargin transaction interest income 50 25 Stable revenues (left) 60% Daiwa SMA advisory fee Daiwa Fund W rap advisory fee Cost cover ratio (right) Daiwa LMS interest income Diawa Direct total commission
50% 20 40
40% 15 30
30%
10 20
20%
5 10 10%
0 0 0% 1Q/05 2Q/05 3Q/05 4Q/05 1Q/06 2Q/06 3Q/06 4Q/06 1Q/07 2Q/07 3Q/07 4Q/07 1Q/05 2Q/05 3Q/05 4Q/05 1Q/06 2Q/06 3Q/06 4Q/06 1Q/07 2Q/07 3Q/07 4Q/07
11 Retail Sales of Equity Investment Trusts
Sales and net increase ratio of equity investment trusts
(Y bil) 800 100%
Net increse ratio (right)
600 75%
400 50%
200 25%
0 0% 1Q/05 2Q/05 3Q/05 4Q/05 1Q/06 2Q/06 3Q/06 4Q/06 1Q/07 2Q/07 3Q/07 4Q/07
Equity type investment trust (left) 153.3 241.8 441.7 405.2 350.0 187.3 238.8 320.1 431.4 237.4 316.6 90.7 Bond type investment trust (left) 186.2 173.9 199.5 227.5 148.4 164.7 196.2 237.2 198.9 197.6 218.9 209.8 Total (left) 339.5 415.7 641.3 632.7 498.4 352.1 435.0 557.4 630.3 435.0 535.5 300.6 Net increse ratio (right) 49% 50% 53% 61% 51% 61% 57% 63% 60% 41% 43% 23% purchase - （sell-off + redemption） Note: Net increase ratio（%）＝ ×100 purchase
12 Retail Sales of Bonds
Sales of foreign currency denominated bonds Sales of JGB for individual investors
(Y bil) (Y bil)
200 350 10yr JGB (floater)
5yr JGB (fixed) 300
150 250
200
100
150
100 50
50
0 0 1Q/05 2Q/05 3Q/05 4Q/05 1Q/06 2Q/06 3Q/06 4Q/06 1Q/07 2Q/07 3Q/07 4Q/07 1Q/06 2Q/06 3Q/06 4Q/06 1Q/07 2Q/07 3Q/07 4Q/07 268.3 246.4 206.9 266.2 220.0 264.4 277.5 298.7 313.6 303.5 266.3 277.7 Note: Sales of publicly offered structured bonds are included from 4Q/07 13 Retail Achievement of Daiwa Direct (1)
Revenue by Daiwa Direct division prop up total revenues Japan Post’s stock ownership program contributed to the increase of “Daiwa Direct” accounts
Increasing revenue sources at Daiwa Direct Accounts and assets of online and Daiwa Direct
(Y bil) (Y bil) (# of accounts: 000)
42% 15,000 41% Online clients’ asset under custody (left) 12 Total revenue of Daiwa Direct division 40% “Daiwa Direct” course asset under custody (left) 2,400 Non equity brokerage commission Non equity brokerage comm. / “Daiwa Direct” course accounts (right) Daiwa Direct total revenue Online trading accounts (right) 34% 39%
8.4 1,800 27% 10,000 8 7.8 7.6 29% 7.6 7.6 7.1
6.1 6.0 1,200 22%
5,000 4
600 2.8 2.9 3.0 2.3 2.3 2.4 1.6 1.6
0 0 1Q/06 2Q/06 3Q/06 4Q/06 1Q/07 2Q/07 3Q/07 4Q/07 3/06 6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/080
7.6 6.0 7.1 8.4 7.8 7.6 7.6 6.1 11,359 10,734 10,994 11,658 12,206 12,824 12,697 12,525 11,141 1.6 1.6 2.3 2.3 2.8 2.9 3.0 2.4 2,069 1,971 2,046 2,185 2,424 2,606 2,563 2,534 2,334 0.21744 0.27413 0.34194 0.28829 0.3859 0.40054 0.42068 0.4141 586 613 634 661 700 734 762 788 876 1,487 1,521 1,551 1,579 1,616 1,656 1,699 1,729 1,818 14 Retail Achievement of Daiwa Direct (2)
Accounts and trading value of Sales of equity investment trusts “Daiwa FX (FX margin trading)”
(Y bil) (Y bil) (# of accounts: 000)
60 Sales through Daiwa Direct 2,100 Sales through Daiwa Direct / Total sales at Daiwa Securities Daiwa FX Trading value (left) 12% # of Daiwa FX accounts (right) 25
50 1,800
20 1,500 40 10% 10%
1,200 15 30 7% 900 6% 20 10 5% 600 4% 4% 10 300 5
0 0 3/06 6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/08 0 9.2 49.8 56.3 61.8 139.5 152.9 252.9 1,118.7 1,782.6 1Q/06 2Q/06 3Q/06 4Q/06 1Q/07 2Q/07 3Q/07 4Q/07 2.3 3.8 4.6 6.0 8.0 9.4 11.9 15.8 20.2 Note: Trading value is a total for quarterly period. 15 Retail Daiwa SMA and Daiwa Fund Wrap
Aiming to increase investment advisory fee by expanding AUM
Daiwa SMA： Improve custom-made services and performance Daiwa SMA and Daiwa Fund Wrap Contract asset under management & Number of customers Plan to start new and more customized service 9 Discretionary asset allocation SMA (Y bil) (# of customers) 9 Larger minimum contract amount Daiwa Fund W rap Contract AUM (left) Increase large-size contracts and corporate customer 300 Daiwa SMA Contract AUM (left) contracts 7,500 Daiwa Fund Wrap # of customers (right) Daiwa SMA # of customers (right) 250 Daiwa Fund Wrap： Improve service contents and utility
200
Decrease minimum contract amount from Y 5mil 5,000
to Y 3mil in April 2008 150 Expand fund line up
More customized investment portfolio 100 2,500 Increase contracts corporate customers
50
0 0 12/05 3/06 6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/08 16 Retail Targeting Retail Corporations & Company Owners
Current situation of Educational institutions Strengthen relationship with retail corporations and public service corporations
FalFallingling birthr birthratatee IncomIncomee ＜ ＜ExpExpeensense Targets： Educational institutions, Religious corporations, Foundations, Public service corporations NeNecceessssityity of of non-cor non-coree Environment： Decreasing revenues due to falling birthrate DDecreasinecreasingg a apppplicanlicantsts businbusineessss r reevveenunueess and subsidy reduction
Measures： Increase in revenues from non-core businesses, including active asset management More active asset management Products ： Foreign bonds, Structured bonds, JGB・Corporate bonds → Foreign bonds, Structured bonds, Investment trusts, Daiwa SMA, etc. Investment trusts
Current situation of Expand business through providing solutions Business Succession for business succession issues
Targets： Corporations, Company owners AgingAging m maannaagemgemeentnt ProvProvididee solu solutionstions Environment： Aging management, Lack of successors, Change in law and tax system
Measures： Going private, Spin-out, Asset management LLackack o off s suuccccessoessorsrs TimelyTimely infor informmationation of proceeds from own share disposal
Services： MBO, M&A, Pension insurance, SMA etc. ChangeChange in in l alaww RReesearchsearch and and A Annalyalyssisis andand ta taxx sy systemstem
17 Retail Expansion of Customer Assets under Custody
Challenge towards the final stage of computerization of share certificates Daiwa Securities customer assets
Differentiation by utilizing Daiwa LMS (Y bil)
35,000
Continuing asset gathering sales-style 30,000
Introduce new investment trusts to meet client needs 25,000 Provide follow-up service for existing customers 20,000 holding investment trusts
15,000 Promote sales of JGB for individual investors
Expand foreign bond lineup 10,000
Expand product lineup of life insurances and 5,000 improve sales skills of insurance products 0 3/06 6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/08 Equities 16,005 14,551 14,516 14,905 15,386 15,341 14,255 13,326 11,541 Domestic bonds 3,615 3,644 3,660 3,886 4,356 4,465 4,724 4,794 4,694 Foreign currency bonds 2,420 2,429 2,557 2,742 2,756 2,973 2,890 2,959 2,614 Equity investment trusts 3,642 3,642 4,001 4,484 4,791 5,524 5,579 5,649 4,865 Bond investment trusts 2,155 2,068 2,075 2,169 2,154 2,338 2,161 2,196 2,089 Pension insurance 335 337 377 415 443 482 494 492 451 Others 1,955 2,003 1,986 2,076 2,443 2,593 2,741 2,582 2,549 Assets under custody 30,129 28,677 29,174 30,680 32,332 33,719 32,848 32,001 28,806 18 Retail FY08 Target Figures
FY08FY08 Target Target Figures Figures CurCurrrentent Situations Situations (3/08) (3/08)
InvestmentInvestment TrustTrust Mar.09Mar.09 Mar.08Mar.08 Agency Commission Agency Commission JPYJPY 5.2bil/month5.2bil/month JPYJPY 3.5bil/month3.5bil/month
ForeignForeign CurrencyCurrency Mar.09Mar.09 Mar.08Mar.08 BondBond AssetsAssets JPYJPY 3.0tri3.0tri JPYJPY 2.6tri2.6tri
WrapWrap AccountAccount Mar.09Mar.09 Mar.08Mar.08 ContractContract AssetsAssets JPYJPY 1.0tri1.0tri JPYJPY 0.24tri0.24tri
DaiwaDaiwa DirectDirect Mar.09Mar.09 Mar.08Mar.08 NumberNumber ofof AccountsAccounts 1.1mil1.1mil 0.87mil0.87mil
19 Wholesale & Investment
20 Wholesale Financial Summary
FY07 % Cha nge FY07 FY06 % Cha nge (Y mil) vs FY07 FY06 vs 4Q 3Q3Q FY07 2Q 1Q 4Q FY06
Operating revenues 34,130 69,075 -50.6% 56,563 82,499 85,786 242,269 317,118 -23.6%
Commissions 22,876 17,022 34.4% 18,630 18,932 23,412 77,461 106,530 -27.3%
Brokerage commission 5,677 6,838 -17.0% 7,187 7,130 7,615 26,833 26,158 2.6%
Stock and others 5,579 6,718 -17.0% 7,070 6,992 7,458 26,360 25,601 3.0%
Underwriting commission 6,614 5,022 31.7% 6,484 7,323 9,673 25,445 53,905 -52.8%
Stock and others 3,886 2,290 69.7% 4,136 4,160 6,650 14,474 43,416 -66.7%
Bond and others 2,576 2,572 0.2% 2,255 3,046 2,801 10,452 9,336 11.9%
Distribution commission 684 241 183.1% 281 541 393 1,748 1,248 40.0%
Other commissions (M&A and others) 9,900 4,919 101.2% 4,677 3,936 5,730 23,435 25,216 -7.1%
Net gain/loss on trading securities -19,314 29,061 - 11,439 33,434 36,138 54,620 116,629 -53.2%
Stock and others -10,081 2,655 - -5,999 16,239 6,155 2,814 24,146 -88.3%
Bond, forex and others -9,232 26,405 - 17,438 17,194 29,982 51,806 92,482 -44.0% Net gain/loss on private equity 942 7,063 7,609 7,269 27,699 and other securities 8,105 760.0% 23,720 -14.4%
Interest and dividend income 22,462 22,049 1.9% 19,431 22,523 18,966 86,466 66,258 30.5%
Interest expenses 21,423 21,601 -0.8% 19,022 18,268 17,926 80,315 56,417 42.4% Net operating revenues 12,707 47,474 -73.2% 37,541 64,231 67,859 161,954 260,700 -37.9%
SG&A 39,967 40,571 -1.5% 40,781 40,859 43,013 162,179 169,793 -4.5%
Ordinary income -27,302 6,904 - -2,578 24,408 24,887 1,431 92,866 -98.5%
Net income -22,506 3,607 - -2,067 15,130 15,956 -5,836 51,945 -
21 Wholesale Challenges for FY2008
Challenges in FY2008
【Theme 1: Main focus in products division】
StabilizationStabilization ofof corecore operationoperation
DiversificationDiversification ofof thethe revenuerevenue sourcessources
【Theme 2】
Cross-Function Cross-Function BusinessBusiness promotionpromotion inin emergingemerging Promoting businesses under cross-functional cooperation countries,countries, mainlymainly inin AsiaAsia
Cross-ProductCross-Product 【Theme 3】
Cross-product strategies for gaining market share in new StrengtheningStrengthening ofof globalglobal frameworkframework andand investment field riskrisk managementmanagement structurestructure Cross-BorderCross-Border
Strengthening of overseas (cross-border) business, particularly in Asia 22 Wholesale Challenges for the Products Division
Utilizing our broad range of customer base, we aim for sales expansion of various products including Asian equities
Top priority: Stabilization of core businesses
Rebuilding stable revenue sources (enhancement of sales force) 9 Expansion of market share and revenues of Asian equities by utilizing our global customer base for Japanese equities 9 Expansion of the products offered to our retail customer base 9 Enhancement of approach to SWFs 9 Enrichment of structured product line-up
Diversification of revenue resources
Building a global equity finance team (Tokyo, U.K., Hong Kong and U.S.) 9 Funding support for hedge funds, higher value-added services utilizing derivatives Launching the derivative division in London 9 Expand our structured product line up for both our domestic and overseas clients
23 Wholesale Challenges for the Investment Baking Division
Enhancing deal origination function, we aim for gaining large and cross-boarder deals
Top priority: Stabilization of core businesses
Enhancement of the deal origination function and structure to grasp client needs 9 Focusing on large deals, industry reorganization deals, etc Strengthening of M&A function
9 Reinforcement of staffs, well-experienced in investment banking business
9 Strengthening of cooperation with Sagent Advisors, SMBC and overseas branches
M&A market in Japan (# of deals) Diversification of revenue sources 3,000
IN-IN IN-OUT OUT-IN Strengthening efforts to expand Asia-related businesses 2,500 9 Recruitment of experienced local staffs 2,000 9 Improvement of the global sector coverage system 1,500
1,000
500
0 9 0 1 1 87 88 95 06 07 992 993 994 1985 1986 19 19 198 199 199 1 1 1 19 1996 1997 1998 1999 2000 200 2002 2003 2004 2005 20 20 Source: RECOF24 Investment - Daiwa Securities SMBC Principal Investments - Challenges for the Investment Division
Promoting overseas investments, while making constant strategic exits
Daiwa Securities SMBC PI Top priority: Stabilization of core businesses ordinary income (Y bil) Promoting strategic exits from existing investments 30 (private equity, monetary claims and real estate) 9 Enhancement of effective collaboration with the Investment 20 Banking Division Expanding the deal sourcing pipelines 10
0
FY0 2 FY0 3 FY0 4 FY0 5 FY0 6 FY0 7
Diversification of revenue sources Daiwa Securities SMBC PI investment amount (Y bil)
Expanding opportunities for overseas investments 500 Private equity & PIPEs 9 Launched “Private Equity Asia Pacific Dept”, consisting of 18 Monetary claims staffs in Tokyo, Hong Kong and Singapore, to promote marketing 400 Real estate Grrenhouse gas emission credits 300
200
100
0
3/03 3/04 3/05 3/06 3/07 9/07 12/07 3/0825 Wholesale Business Promotion in Asia and Other Emerging Markets
Actively promoting businesses in Asia in collaboration with existing business partners
GroupGroup NetworkNetwork andand Investment/cooperationInvestment/cooperation MapMap
AnAn electronicelectronic tradingtrading Beijing Representative Office networknetwork companycompany Tokyo Head Quarter (U.S.)(U.S.) Seoul Branch PEPE・・PEPE fundsfunds Daiwa Securities America Inc. (China)(China) (Subsidiary of Daiwa Securities Group Inc.) Daiwa SMBC-SSC Securities
PEPE fundsfunds EMP-DaiwaEMP-Daiwa Taiwan overseas subsidiary (India)(India) (Hong(Hong Kong)Kong) Hong Kong overseas subsidiary Building a global (mainly Asia) Mumbai overseas subsidiary Hanoi Representative Office Saigon electronic trading network through Saigon The Philippines (Subsidiary) SecuritiesSecurities collaboration with a US electronic (Vietnam)(Vietnam) Bangkok Representative Office trading company
PEPE fundsfunds Building a business network by (Singapore)(Singapore) sending our staff to the advisory committee of existing business Singapore (Subsidiary) partners (private equity funds) ⇒ Seeking joint investment opportunities and synergy with investment banking businesses 26 Wholesale Business Promotion in Asia and Other Emerging Markets
Keywords in Asian business
Aiming for three numerical targets by FY2011 Changes in organization
1.1. Asia-relatedAsia-related revenuesrevenues Asia-related revenues of Y100 bil per annum Established a division head in Asia/Oceania region and promoted business operations in the region 2.2. InvestmentInvestment inin AsiaAsia Execution of Asia-related investments of Y100 bil (including private equity investments, PE fund investments, capital investment to related companies, capital alliances, etc.) Head of Equity (Asia) Head of FICC (Asia) Head of IB (Asia) 3.3. HeadcountHeadcount inin AsiaAsia Construct a 1,000-employee contingent in the region
Initiatives intended for other emerging markets
Promotion of businesses for the purpose of generating revenues at an early stage in the emerging markets of our Group’s focus regions including Middle East, Russia as well.
27 Wholesale Development of a Global Management / Risk Management Structure
Reinforcement of risk management framework, utilizing newly- developed global management structure
Changes in organization
Clarification of the authority and role of all business lines, by enhancing the existing matrix-type management structure Middle &back officeline Middle &back officeline Front line
Front line Global product line (equity division) Global support line (system/administration division) Global product line (FICC division) Global support line (finance/risk management division) Global product line (IB division) Global support line (compliance division) Global product line (global products division)
Reinforcement of risk management framework
Strengthening a cooperation with overseas branches over risk management through reinforcement of a global
management structure in middle and back office division
Development of the risk management framework that is responsive to changes in the market environment
Strengthening the risk management framework in complex derivatives and proprietary fund management 28 Asset Management
The best asset management company for total and mix-asset category in “Lipper Fund Awards Japan 2008”
29 Asset Management Equity Investment Trust Assets under Management
Market share and assets under management of equity investment trust ( Y bil)
120,000 Equity investment trusts (industry total) (left)
Bond investment trusts (industry total) (left) 30.0%
Share of Daiwa Asset Management and Daiwa SB Investments (right) 100,000 Share of Nikko Asset Management (right)
Share of Nomura Asset Management (right) 25.0% 80,000
60,000 20.0%
40,000
15.0% 20,000
0 3/06 6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/08 10.0% 44,956 46,082 49,754 55,657 59,422 67,912 67,509 66,784 57,749 13,522 12,732 12,547 13,269 13,165 14,064 12,926 12,976 12,067 14.4% 14.5% 14.6% 14.9% 15.2% 15.6% 15.5% 15.3% 15.9% 11.3% 11.3% 11.0% 11.2% 10.6% 11.4% 10.6% 10.4% 10.4% 21.4% 21.4% 20.9% 22.0% 22.9% 23.8% 22.7% 22.0% 21.7% Source: The Investment and Trust Association 30 Asset Management - Daiwa Asset Management - Strong Performance in Japanese Equity Funds
Domestic active equity funds Domestic active equity funds (1-year management period) (3-year management period) ( 3/08) (3/08)
12 13 A A
19 5 B B Quartile Quartile (Return) (Return)
8 5 C C
Stronger performance ：73% Stronger performance ：66% D 3 (Placed in A or B) (31/42funds) D 4 (Placed in A or B) (18/27funds)
* Whole universe: 500 funds * Whole universe: 374 funds * Classification: Domestic-equity-blended (182 funds), Growth (58 funds), * Classification: Domestic-equity-blended (144 funds), Growth (49 funds), Value (86 funds), Large-cap (6 funds), Mid-and-small-cap (78 funds), Value (52 funds), Large-cap (4 funds), Mid-and-small-cap (55 funds), Varying-allocation-ratio-type (20 funds), Theme-type (70 funds, Varying-allocation-ratio-type (17 funds), Theme-type (53 funds, excluding 5 regional funds managed by Daiwa Asset Management) excluding 5 regional funds managed by Daiwa Asset Management)
* Using fund classification by Daiwa Fund Consulting; domestic-equity-blended, growth, value, large-cap, mid-and-small-cap, varying-allocation-ratio-type and theme-type (excluding regional funds managed by Daiwa Asset Management from theme-type) * Number of funds managed by Daiwa Asset Management, ranked to quartile from A to D for each classification 31 Topics
32 Topics Work-Life Balance
Pursuit of the best working place for all employees, regardless of gender and age
Establishment of “Work-Life Balance Promoting Committee” and CWO as the chairman of the committee ¾ Work-Life Balance Promoting Committee Organization for decision making and consulting on several measures to achieve “Work-Life Balance” of employees ¾ CWO (Chief Work-Life-balance Officer) Chairman of the “Work-Life Balance Promoting Committee”, CEO of Daiwa Securities Group Inc. is appointed as CWO Participation in “Work-Life Balance Promoting Model Program,” implemented by the Ministry of Health, Labor and Welfare (Selected as one of the 10 model companies) 1010 modelmodel companicompanieses
KAJIMA CORPORATION Takashimaya Canon DENTSU Expansion of “Support Plan for Working Mothers” Sumitomo Corporation Nissan Motor 9 Days-off for preparing for wedding and for family event All Nippon Airways Hitachi 9 Reinstatement support plan 9 Selection of working place considering marriage and Daiwa Securities Group Inc. Mitsui Chemicals partner’s working place Maximization of employees’ motivation 9 Encouraging to leave office by 19:00 9 Implementation of “Cool-biz” Daiwa Securities Group Inc., Daiwa Securities, 9 Promotion of contract-based employees and Daiwa Securities SMBC were awarded as (working for over 3 years) to permanent employees “the Director of Tokyo Labor Bureau Award” at “Corporation Award for Enhancement of child-care support the Promotion of Gender Equality” 9 Maternity / paternity leave Awarded for 7th for total ranking and 9 Exemption of overtime work top for utilization of female workforce at 9 Limitation of overtime work “100 best companies for women” 9 Subsidy for using child-care facility by Nikkei WOMAN (May 08) 9 Cash contribution of JPY 2 mil for having a third child 33 Topics Popularity Rankings
Popularity rankings among college students seeking a job ¾ “Weekly Diamond”: Highest position ever in both male and female students ¾ “NIKKEI” Ranking : Significant jump to record high 20th position, top in the securities industry
Weekly Diamond （Feb.09, 2008) NIKKEI Ranking （Feb.08, 2008)
NO.1 in NO.1 in <
The Bank of Tokyo Mitsubishi UFJ 2 The Bank of Tokyo Mitsubishi UFJ 2
Tokio Marine & Nichido Fire Insurance 5 Tokio Marine & Nichido Fire Insurance 7 SMBC 7 Mizuho Financial Group 8 Daiwa Securities Group 9 (19) SMBC 12 Mitsubishi UFJ Trust and Banking 11 Daiwa Securities Group 20 (34) <
＊( ) indicates the position last year 34 Dividend Policy
Guideline for dividend payout ratio: 30%
→ Adopting more proactive stance towards dividend payout depending on circumstances, according to capital allocation strategy
Daiwa Securities Group Inc. Repurchase of Own Shares Dividend per share
FY07 Dividend Payout Ratio: Total number of shares repurchased： 25 million shares 65.3% Total value of shares repurchased: JPY23.4bil 34 Year-end dividend/share(JPY) Repurchase period: From Jan. 31 to Mar. 11, 2008 Purpose of repurchase: Interim dividen/share(JPY) 28 ● Flexible capital allocation considering management environment ● Return to shareholders in line with the dividend policy 22 22 16 10 <
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07
* Interim dividend has been paid since FY04 35 Investor Relations Daiwa Securities Group Inc. TEL: +81-3-5555-1300 FAX: +81-3-5555-0661 E-mail: [email protected] URL: http://www.daiwa-grp.jp/ir/english/