Daiwa Securities Group Management Strategy

Autumn 2012 Daiwa Securities Group Management Strategy

Presented on November 8, 2012 at Gran Tokyo North Tower

Takashi Hibino, President and CEO 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. Autumn 2012 Daiwa Securities Group Management Strategy

IndexIndex

Ⅰ．1H FY2012 Overview ・・・ｐ３

① Consolidated Results ・・・ｐ４

② Progress of Medium Term Management Plan ・・・ｐ５

Ⅱ． Policies for 2H ～Savings to Investments～・・・ｐ12

Conclusion ・・・ｐ17

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.

2 Ⅰ．1H FY2012 Overview Ⅰ．Consolidated Results Consolidated Results of 1H FY2012

NetNet operatingoperating revenuesrevenues werewere YY 175.175.3bil,3bil, ordinaryordinary incomeincome waswas YY 116.9bil,6.9bil, netnet incomeincome waswas YY 10.0bil10.0bil

Net operating revenues Ordinary income Net income （Y mil） FY2011 FY2012 FY2011 FY2012 % change vs % change vs FY2011 FY2012 % change vs (1H) (1H) 1H FY2011 (1H) (1H) 1H FY2011 1H FY2011 Retail 81,950 78,784 -3.9% 15,416 13,192 -14.4% Asset Management 19,426 21,909 12.8% 8,208 9,096 10.8% Wholesale 48,299 49,981 3.5% -34,247 -10,301 - Global Markets 36,606 37,141 1.5% -23,498 -8,581 - Global Ｉnvestment Banking 11,693 12,840 9.8% -10,749 -1,719 - Investment 3,905 6,607 69.2% 2,159 4,910 127.4%

Consolidated Total 174,704 175,356 0.4% -7,169 16,976 - -28,787 10,067 -

NetNet operatingoperating revenuesrevenues OrdinaryOrdinary incomeincome NetNet incomeincome 120 20 20 10.9 9.6 8.5 8.4 100 91.0 90.9 7.3 83.6 87.0 88.3 2.6 80 70.3 0 0 -0.8 60 -6.3 -9.4 40 -20 -14.7 -20 -19.3 -21.5 20

0 -40 -40 1Q 2Q 3Q 4Q 1Q 2Q 1Q 2Q 3Q 4Q 1Q 2Q 1Q 2Q 3Q 4Q 1Q 2Q （（ Y bil) FY2011 FY2012 （ Y bil) FY2011 FY2012 Y bil) FY2011 FY2012

4 Ⅰ- ② Progress of Medium Term Management Plan Summary of the Medium Term Management Plan

Daiwa Securities Group Management Vision To become Asia’s leading financial services firm possessing and leveraging a solid business platform in Japan

Daiwa Securities Group Basic Management Policy Establish a robust business structure capable of securing Achieve sustainable growth by linking Japan and growth of Asia profit even under stressful economic conditions

Outline of Medium Term Management Plan“Passion for the Best”2014 Establish a robust business structure immune to the external environment and aspire to achieve sound growth based on a new growth strategy

MilestonesMilestones FY2012 Turnaround FY2013 Growth FY2014 Expansion

Basic Policy I: Return to profitability by pursuing management efficiencies (Focus of execution in the first fiscal year) Steadily implement the plan to reduce SG&A Realize greater organizational efficiencies by shifting BasicBasic PoliciesPolicies personnel from the middle-and-back offices Basic Policy II: Achieve client based high-quality earnings growth forfor to the front divisions Medium Term Drastically expand our client base in Japan by investing management resources in the Medium Term retail and asset management businesses ManagementManagement -Expand stable earnings by increasing investment trusts and deposit balances- Plan Plan Strengthen revenue capacity centered around the launch of the “New” Daiwa Securities -Step up approaches to high net worth individuals and the middle market- Rebuild our wholesale business -Re-strengthen the brokerage business and build an efficient global network-

ManagementManagement 1. Consolidated Ordinary Income ［Initial FY］Return to Profitability ［Final FY］Over 120 billion yen 2. Fixed Cost Coverage Ratio ［Final FY］Over 50% TargetsTargets

5 Ⅰ- ② Progress of Medium Term Management Plan Management Target

AchievedAchieved thisthis year’syear’s fixedfixed costcost coveragecoverage ratioratio ttargetarget aheadahead ofof scheduleschedule byby reducingreducing SG&A SG&A andand incrincreasingeasing stablestable revenuerevenue fromfrom expexpandinganding depositdeposit balancebalance ooff DaiwaDaiwa NextNext BankBank

Fixed cost coverage ratio

70% Fixed cost（right: Y bil) Objective 300 Stable revenue（right: Y bil） Fixed cost coverage ratio（left） 60% 238 250 231 235 214 50% 41% 200 40% 31% 32% 150 28% 30%

88 100 20% 74 77 66

50 10%

0% 0 FY2009 FY2010 FY2011 FY2012 FY2014 （1H annualized） 6 Ⅰ- ② Progress of Medium Term Management Plan Basic Policy I: Return to profitability by pursuing management efficiencies SG&A Reduction Plan

Achieved this year's target ahead of schedule based by 1H ⇒ aiming for additional reduction of Y 10 billion

Base SG&A(※) Y 380 bil

Y 370 bil

Y 360 bil Y 380 bil Y -57 Y 10 bil Y 350 bil bil Y -60 additional Y -70 Current FY bil bil objective reduction Y 340 bil Y 330bil level

Y 330 bil Y 338 Early Achievement bil

Y 320 bil Y 323 Y 320 bil bil Y 310 bil Y 310 bil

Beginning of FY2011 End of FY2011 FY2012 (1H) End of FY2014 End of FY2014 （Original target）（Additional target）

(※)Base SG&A: Consolidated SG&A assuming ordinary income of 0

7 Ⅰ- ② Progress of Medium Term Management Plan Basic Policy I: Return to profitability by pursuing management efficiencies Organizational Efficiency

AchievedAchieved ourour goagoall forfor shiftingshifting personnelpersonnel fromfrom middle-andmiddle-and back-oback-officeffice toto frontfront divisiondivision farfar aheadahead ofof schedulschedulee inin April,April, 20122012 ContinueContinue streamliningstreamlining organizorganizationsations toto pursuepursue efficiencyefficiency

Middle-and back-office headcount (two former securities subsidiaries + group holding company)

Medium term management plan

2,040 1,919 Ahead of schedule 1,750 1,751 Original plan 1,500 1,479 1,424 1,370

Apr 1999 Feb 2011 Oct 2012 （Immediately after (beginning of HQ Apr 2011 Oct 2011 Apr 2012 Apr 2014 (present) demerger） streamlining)

8 Ⅰ- ② Progress of Medium Term Management Plan Basic Policy II: Achieve client based high-quality earnings growth Investing Management Resource to Retail and Asset Management Business

StableStable incomeincome expandedexpanded byby increaincreasese inin thethe numbernumber ofof accountsaccounts anandd deposit deposit balancebalance ofof DaiwaDaiwa NextNext BankBank Group’sGroup’s 22 assetasset managementmanagement comcompaniespanies accountaccount forfor 30%30% ofof thethe indindustry’sustry’s netnet growth,growth, andand DaiwaDaiwa AssetAsset ManagementManagement rankedranked asas toptop

Daiwa Next Bank Net increase in mutual funds

10,0003,500 Industry (Y tri） (10 thousand） 9,709 Ordinary deposit （left） (Y 100mil） 61.3 3,000 2.0 Time deposit （left） 60 56.4 Daiwa AM 1.87 2,500 Company A Number of accounts 2,275 2,218 48.7 （right） 1.65 50 2,000

1.5 Company B 41.5 1.43 1,500 1,122 40 1.23 1,000 Daiwa SB 32.9 612 500 1.0 0.91 30

0 20 14.0 -500 0.5 Company C 0.40 - 523 -1,000 10

-1,500

0.0 0 1Q 2Q 3Q 4Q 1Q 2Q -2,000 Company D FY2011 FY2012 （Apr-Sep 2012） - 2,094 -2,500

※ As of the end of each quarter Source : Created by Daiwa Asset Management from ITAJ data

9 Ⅰ- ② Progress of Medium Term Management Plan Basic Policy II: Achieve client based high-quality earnings growth Synergy of Integration

BondBond relatedrelated revenuesrevenues iincreasedncreased inin retailretail ssegmentegment asas timelytimely offofferer ofof varietyvariety ofof productsproducts becamebecame possiblepossible RevenuesRevenues fromfrom thethe “mid“middledle markets”markets” increase increasedd byby strengtheningstrengthening clclientient coveragecoverage

Retail segment: Retail segment: Middle market revenues Corporate bonds sales revenues Private structured bond sales revenues

495 233 122 121 438

100

160

100

100 （）（）（ Index） Index Index FY2011 FY2012 FY2012 FY2011 1Q 2Q FY2011 1Q 2Q Quarterly average 1Q 2Q Quarterly average FY2012 FY2012 Quarterly average FY2012 FY2012

※Index : FY2011 Quarterly average as 100 10 Ⅰ- ② Progress of Medium Term Management Plan Basic Policy II: Achieve client based high-quality earnings growth Rebuild Wholesale Business

ImprovedImproved profitabilityprofitability inin wholeswholesaleale businessbusiness byby optimizingoptimizing operoperationsations mainlymainly inin overseasoverseas AchievedAchieved dealsdeals leveragingleveraging strengthstrength asas anan independentindependent investminvestmentent bankbank inin domesticdomestic businessbusiness

RebuildRebuild WholesaleWholesale BusinessBusiness

[Restructuring of overseas business ] OverseasOverseas SG&ASG&A Maintaining our stance leaning on Asia and our global quadruple network 100 for M&A businesses while accelerating operational efficiency 90 90 Minimizing operations and consolidating assets regarding OTC equity derivative 71 70 68 and FICC derivative businesses-exclude listed derivatives such as warrants Narrowing coverage sectors in ＩＢ divisions Continuing measures to profitability in Asian regions and European M&A division FICC revenues in Europe and US has recovered and starting to show （ Index） FY11 FY11 FY11 FY11 FY12 FY12 trends of expansion 1Q 2Q 3Q 4Q 1Q 2Q

FICCFICC revenuesrevenues inin EuropeEurope andand USUS [Domestic business] 115 105 Leveraging strength as an independent investment bank 100 100 to expand customer business Sole global coordinator for JAL IPO 61 Joint lead manager for Mizuho Corporate Bank subordinated bonds for individuals for the first time 22 First time as joint lead manager for Meiji Yasuda Life Insurance Company bonds

（ Index） Expanding business by providing corporate deposits of Daiwa NextBank FY11 FY11 FY11 FY11 FY12 FY12 1Q 2Q 3Q 4Q 1Q 2Q

※Index : FY2011 Quarterly average as 100 11 Ⅱ．Policies for 2H ～Savings to Investments～ Ⅱ．Policies for 2H ～Savings to Investments～ Leading the Era of Transition from Savings to Investments

After the lost 20 years, the time has finally come for the transition from savings to investments…

Expanding Increasing Supply of Equity investment Equity investment Internationally Return of - focused on - focused on diversified growth money Financial Assets income gain capital gain investment Financial Assets

Leading the way in diversified investing to make full use of household financial assets of Y 1,500 trillion is the mission of, and moreover the core business strategy of Daiwa Securities Group

MainMain pillarspillars toto leadlead thethe eraera ofof transitiontransition fromfrom savingssavings toto invesinvestmentstments Evolve the combined securities- EvolveEvolve thethe combinedcombined securitiessecurities-- StrengthenStrengthen thethe assetasset managementmanagement StrengthenStrengthen inheritanceinheritance banking business model bankingbanking businessbusiness modelmodel businessbusiness consultingconsulting servicesservices ～Full function within the Group to lead transition ～～Full function within the Group to lead transition ～“Daiwa for Investment Management”～ fromfrom savingssavings toto investmentsinvestments ～～～“Daiwa for Investment Management”～～“～“DaiwaDaiwa forfor InheritanceInheritance PlanningPlanning””～～

Raise the standing of the Daiwa Securities Group in the financial world and expand our customer base

13 Ⅱ．Policies for 2H ～Savings to Investments～ Evolve the Combined Securities-Banking Business Model

Form a combined securities-banking business model with Daiwa Next Bank positioned as the “gateway bank” for the transition from savings to investments

BoostBoost yieldyield byby keepingkeeping the proceeds from Securities the proceeds from & Securities securitiessecurities salessales fromfrom Save Banking Invest flowingflowing outsideoutside thethe firmfirm CultivateCultivate newnew Bank combined customerscustomers byby securities market offeringoffering cash/deposit market securities market 【：】 FullFull functionfunction withinwithin the Group "deposits""deposits" 【market size：Y 830 tri】【market size：Y 200tri】 market size Y 830 tri toto leadlead transitiontransition fromfrom PromotePromote cross-selling savingssavings toto investmentsinvestments Daiwa Next Daiwa byby offeringoffering Bank Sweep Securities productsproducts thatthat meetmeet Account Account customercustomer needsneeds ExpandExpand depositdeposit balancesbalances byby offeringoffering favorablefavorable interestinterest ratesrates andand Daiwa Securities Group will spark the “transition from convenienceconvenience savings to investments” EvolvingEvolving thethe combinedcombined securitiessecurities-banking-banking businessbusiness modelmodel

ExpandExpand andand improveimprove servicesservices toto evolveevolve thethe combinedcombined securitiessecurities-banking-banking businessbusiness modelmodel

StrongerStronger cooperationcooperation betweenbetween DaiwaDaiwa SecuritiesSecurities andand DaiwaDaiwa NextNext BanBankk toto expandexpand foreignforeign currencycurrency depositsdeposits LaunchLaunch ““PremiumPremium ServicesServices”” and and ““FamilyFamily PlusPlus”” (tentative) (tentative) asas preferredpreferred servicesservices forfor corecore clientsclients （（planplan））

14 Ⅱ．Policies for 2H ～Savings to Investments～ Strengthening Asset Management Business

Assets under management: Daiwa Securities Group 2 AM firms Maintain Daiwa Securities’ net growth-oriented sales attitude （Y tri） Boost share in bank related distribution channel by 16 20.0% strengthening support for distributors

14 19.5% SteadySteady growthgrowth inin investmentinvestment trusttrust balancebalance

MarketMarket leaderleader inin investmentinvestment trusttrust marketmarket 12 19.0%

10 18.5% Invest management resources to further strengthen 8 18.0% investment performance ⇒ “Daiwa for investment management”

6 17.5%

ImplementImplement aa programprogram toto reorganizereorganize andand strengthenstrengthen DaiwaDaiwa AssetAsset equityequity investmentinvestment performanceperformance 4 17.0% ManagementManagement EstablishEstablish aa frameworkframework thatthat makesmakes itit possiblepossible toto Co.Co. uncoveruncover andand executeexecute investmentinvestment strategiesstrategies onon aa 2 16.5% globalglobal basebase

0 16.0% StrengthenStrengthen thethe platformplatform forfor managingmanaging ““AsiaAsia ++ DaiwaDaiwa SBSB Japan” equities 9 9 2 Japan” equities /09 /0 /09 /0 /11 /11 /1 /12 Q Q Q Q Q/10 Q/10 Q Q Q Q 1 2 3 4 1 2Q/10 3 4Q/10 1Q/112 3Q/114 1 2 InvestmentsInvestments Daiwa SB Investments(Investment advisory） Ltd. StrengthenStrengthen tiesties betweenbetween Tokyo,Tokyo, HongHong Kong,Kong, andand Daiw a SB Investments（ Investment trusts） Ltd. Singapore offices Daiw a AM （ Bond funds） Singapore offices Daiw a AM （ Equity funds） Daiw a Securities Group Share* *Industry balance share totaled Daiwa AM (Bond funds+ Equity funds) + Daiwa SB Investments (Investment trusts) （Source: Created from data published by The Investment Trusts Association, Japan) 15 Ⅱ．Policies for 2H ～Savings to Investments～ Strengthen Inheritance Consulting Services

AgingAging ofof populationpopulation ：： over over thethe nexnextt 1010 years,years, approximatelyapproximately YY 5050 trilliontrillion ofof assetsassets willwill shiftshift toto heirsheirs everyevery yearyear TrendsTrends ofof taxationtaxation reformreform ：： Inherit Inheritance-taxance-tax raterate toto increaseincrease && babasicsic deductiondeduction toto decreasedecrease // InInsurance-taxsurance-tax freefree bracketbracket forfor benebeneficiaryficiary toto decreasedecrease ⇒ ⇒ heavier heavier taxtax toto hihigh-net-worthgh-net-worth iindividualsndividuals

TowardToward “Daiwa“Daiwa forfor InheritanceInheritance Planning”Planning” b byy offeringoffering aa broadbroad arrayarray ofof servicesservices

Strengthen consulting to high-net-worth individuals through estate/business inheritance planning

BreakdownBreakdown ofof inheritedinherited assetasset “Daiwa’s Inheritance Total Service” （（reportedreported basebase）） “Daiwa’s Inheritance Total Service” OfferOffer oneone-stop-stop serviceservice andand proceduresprocedures relatedrelated toto inheritanceinheritance Shares of cash and securities growing 〔overview〕 11% 9% ・inheritance tax declaration Tax accountant ・act as agent for tax matters 1995 Daiwa Securities

75% Wealth Management Department Judicial ・inheritance (real estate) Other Cash/ client ・Support inheritance procedures scrivener registration 9% deposits ・Coordinate team of specialists ・ 23% Mediate real estate selling Inheritance 2010 ・transfer titles of accounts, Securities Procedure securities, etc. 12% agent ・prepare documents Real estate 57%

16 Conclusion Foreign-Denominated Assets within Household Financial Assets

Foreign-denominated assets within personal financial assets Household financial assets Foreign (Y tri) Investment trusts including Investments in foreign-currency- 【Y 1,518 tri】（兆円）外貨預金currency 外貨建資産を組み入れた投資信託外貨建対外証券投資 foreign-currency-denominated assets denominated foreign securities deposits 50.0

2.83% 2.75% 2.73% 2.54% 40.0 2.55%

2.24% 1.93% 30.0 1.60% Yen- denominated 1.30% assets 20.0 31.0 28.4 27.4 【97.45％】 28.8 24.1 22.2 20.1 12.1 10.0 8.1

0.0 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Bank of Japan, Flow of Funds Statistics Foreign- * Investment trusts that include foreign-denominated assets is calculated by multiplying investment trusts by the foreign-denominated ratio (the ratio of foreign-denominated investment trusts among public investment trusts that is published by The Investment Trusts Association, Japan) denominated * Investments in foreign-denominated foreign securities is calculated by multiplying the amount of investment in foreign securities by the foreign-denominated assts ratio (the ratio of foreign denominated securities among all overseas assets that is published by the Ministry of Finance) 【2.55％】 18 Continuously Valuing Asia

DaiwaDaiwa SecuritiesSecurities GroupGroup BusinessBusiness InitiativesInitiatives inin MyanmarMyanmar 1 InIn 19961996 DIRDIR establishedestablished MSECMSEC (Myanmar(Myanmar SecuritiesSecurities ExchangeExchange CenterCenter 1 -- the the onlyonly partlypartly foreignforeign ownedowned financfinancialial institutioninstitution inin Myanmar)Myanmar) as as aa 50:5050:50 jointjoint ventureventure withwith MyanmarMyanmar EconomicEconomic BankBank

OverOver 1616 yearsyears wewe havehave builtbuilt aa prespresenceence inin MyanmarMyanmar andand aa networknetwork withwith thethe locallocal financialfinancial community,community, inincludingcluding thethe MyanmarMyanmar MinistryMinistry ofof FinanceFinance andand RevenueRevenue andand thethe CentralCentral BankBank ofof MyanmarMyanmar

22 InIn MayMay 20122012 DIRDIR signedsigned anan MOUMOU withwith thethe CentralCentral BankBank ofof MyanmarMyanmar andand thethe TokyoTokyo StockStock ExchangeExchange GroupGroup toto cooperatecooperate inin thethe followingfollowing areasareas

1)1) ProvidingProviding adviceadvice onon thethe ddesignesign ofof securitiessecurities exchange;exchange; 2)2) providingproviding adviceadvice onon thethe designdesign ofof systemssystems forfor securitiessecurities exchange;exchange; 3)3) providingproviding supportsupport forfor thethe developmentdevelopment ofof humanhuman resources;resources; 4)4) conductingconducting securitiessecurities andand financefinance seminars;seminars; andand 5)5) providingproviding supportsupport forfor thethe operationoperation ofof aa securitiessecurities exchangeexchange

DaiwaDaiwa SecuritiesSecurities GroupGroup Inc.Inc. establishedestablished department department dedicateddedicated toto developing developing 33 ourour businessbusiness inin MyanmarMyanmar

TheThe aimaim ofof thethe cross-groupcross-group "Myanmar"Myanmar securitiessecurities marketmarket developmentdevelopment Myanmar's Potential supportsupport project"project" isis futurefuture securities-relatedsecurities-related businessesbusinesses Population Quality labor Literacy size force rate Natural Food Democr Economic resources supply atization liberalization The private and public sectors in Japan are working Geographical Promise of rapid economic together with the aim of opening Myanmar's securities advantage development exchange in 2015

19 Daiwa Securities Group Inc. Investors Relations TEL: +81-3-5555-1300 FAX: +81-3-5555-0661 E-mail: [email protected] URL: http://www.daiwa-grp.jp/ir/english 20