1H Financial Results FYE03/2003 1H Financial Results FYE03/2003 - - PowerPoint PPT Presentation

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FYE03/2003 FYE03/2003 1H 1H Financial Results Financial Results

October 17, 2002

Forward-looking Statements Statements made at this presentation and in this material include forward-looking statements that are based on our current expectations, assumptions, estimates and projections about our business and the industry. These forward-looking statements are subject to various risks and

• uncertainties. These statements discuss future expectations and plans, identify strategies, contain projections of results of operations and of our financial

condition, and state other “forward-looking” information. Known and unknown risks, uncertainties and other factors could cause the actual results to differ materially from expected results contained in any forward-looking statements. Potential risks and uncertainties include, without limitation, our ability to continue to attract and retain customers and their assets; our ability to make our operations profitable; changes in the demand for brokerage services in Japan; our ability to continue to expand and maintain our computers and electronic systems and to avoid failures of these systems; and our ability to maintain our relationship with our founding shareholders. This does not correspond to US GAAP.

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Ⅰ Ⅰ Ⅰ Ⅰ. Financial Results Ⅱ Ⅱ Ⅱ Ⅱ. Other Business Ⅲ Ⅲ Ⅲ Ⅲ. Newly introduced Services and

• ur Business Model

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FYE FYE FYE FYE 03/2003 1H Financial Summary 1H Financial Summary 1H Financial Summary 1H Financial Summary

• 859

468 Net loss

• 828

416 Ordinary loss

• 833

449 Operating loss 6.0% 2,285 2,156 Operating expense

• 14.9%
• 15.1%

1,452 1,425 1,707 1,679 Operating Revenue

(Commission Revenue)

change FYE 03/2003 1H (Apr-Seo) FYE 03/2002 1H (Apr-Seo) （ （ （ （unit： ： ： ：Yen million） ） ） ）

• 12.6%

2,803 3,209 Lease O/S (over ¥3mil)

• 16.0%

6,999 8,333

Cash & equiv. (incl. CP)

• 742.0%

860.5%

Capital adequacy ratio

• 8.2%

9,476 10,323

Shareholders’ equity

• 10.5%

11,741 13,124 Total assets change FYE 03/2003 1H September 2002 FYE 03/2002 March 2002

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FYE FYE FYE FYE 03/2003 2Q Financial Summary (2) 2Q Financial Summary (2) 2Q Financial Summary (2) 2Q Financial Summary (2)

（ （ （ （unit： ： ： ： Yen million） ） ） ）

Quarter to quarter

349 334 337 1,148 811 793 FYE 03/2003 1Q(Apr-Jun)

• 509

Net loss

• 493

Ordinary loss

• 495

Operating loss

• 1.0%

1,136 Operating expense

• 21.0%
• 20.5%

641 631 Operating Revenue

(Commission Revenue)

Change FYE 03/2003 2Q(Jul-Sep) 3,019 8,207 790.9% 9,976 12,979 FYE 03/2003 1Q June 2002

• 7.1%

2,803 Lease O/S (over ¥3mil)

• 14.7%

6,999

Cash & equiv. (incl. CP)

• 742.0%

Capital adequacy ratio

• 5.0%

9,476

Shareholders’ equity

• 9.5%

11,741 Total assets change FYE 03/2003 2Q September 2002

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Lease Lease Lease Lease Outstanding Outstanding Outstanding Outstanding

• The leased assets are regularly reviewed and written off if necessary; such effects are not included in the data above.

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Mar/00 Sep/00 Mar/01 Sep/01 Mar/02 Sep/02 Mar/03 Sep/03 Mar/04 Sep/04 Mar/05 Sep/05 Mar/06 Sep/06 Mar/07

Margin Trading/Stock Lending related initial investment(estimate) Existing Lease Outstanding

(￥ ￥ ￥ ￥ Million) The graph is based on existing lease and future capex related to business development and replacement are not included.

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Operating Revenue Operating Revenue Operating Revenue Operating Revenue vs. vs. vs. vs. SGA SGA SGA SGA

(Yen million） ） ） ） 647 850 748 752 942 764 779 794 811 641 848 1,015 923 891 974 1,182 1,217 1,142 1,148 1,136 FYE 03/2001 1Q 2Q 3Q 4Q FYE 03/2002 1Q 2Q 3Q 4Q FYE 03/2003 1Q 2Q Operating Revenue SGA

Operating Revenue Breakdown 100%＝ ＝ ＝ ＝641(Yen million） ） ） ） 551 48 25 16 Brokerage Investment Trusts Underwriting Others SGA Breakdown 100%＝ ＝ ＝ ＝1,136（ （ （ （Yen million） ） ） ） 307 125 116 53 36 10 6 10 19 141 310 Outsourcing expenses Equipment lease & maintenance Information Employees salaries Communication and freight Commission Paid Exchange and association fees Advertising Amortization of goodwill Directors compensation Others

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Break Break Break Break-

• Even Analysis

Even Analysis Even Analysis Even Analysis – – – – Spreadsheet Spreadsheet Spreadsheet Spreadsheet

• 1. Divide major items of SG & A into 2 categories (1) Variable (trade volume or number of accounts base) and (2) Fixed.

After excluding one-time expenses, Outsourcing Expenses are divided into three categories.

(unit: million yen）

FYE March 2001 FYE March 2002 FYE March 2003

Major Items of SG and A

Variable / Fixed 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q Commison paid Variable (based on trading volume) 146 126 32 22 34 34 42 27 44 36 Exchange and Association fees Fixed 12 17 22 19 24 22 22 20 21 19 Communication and Freight Variable (based on trading volume) 66 76 69 59 75 79 87 66 62 53 Information expenses Vairable (based on number of accounts) 57 81 67 72 78 79 122 120 123 125 Advertising Expense Fixed 23 42 23 6 16 17 17 6 6 10 Directors' compensation Fixed 2 7 7 7 7 7 7 7 6 6 Employees salaries Fixed 95 107 109 103 93 143 141 139 115 118 Equipment, Furniture and Fixture Variable (based on number of accounts) 157 200 231 250 250 285 306 327 317 307 Outsourcing Expense (1) Fixed (30%) 71 78 80 82 83 97 107 100 95 92 Outsourcing Expense (2) Variable (20%: based on trading volume) 47 52 53 54 56 64 71 67 63 61 Outsourcing Expense (3) Variable (50%: based on number of accoun 118 130 133 136 139 162 178 167 158 154 Outsourcing Expense (4) One-time Expenses 79 14 5 13 Amortization of Goodwill Fixed 10 10 10 10 10 10 10 10 10 10 Variable Cost (based on trading volume) （A) 259 254 154 135 165 179 201 160 170 151 Variable Cost (based on # of accounts) （B) 332 411 431 458 467 527 607 616 612 588 Fixed Cost (+ one-time cost) （C) 213 261 251 227 233 377 320 290 256 257 Total major items listed above 803 926 835 820 865 1,085 1,129 1,066 1,039 997 Ratio to Total SGA (total of major item of SGA / total SGA) 95% 91% 90% 92% 88% 92% 93% 94% 91% 88% ２． ２． ２． ２．Brokerage Commision takes major portion in Operating Revenue Brokerage Commision 587 607 582 671 795 664 698 688 726 551 Operating Revenue 647 850 748 752 942 764 779 794 811 641 Brokerage Commision/Operating Revenue 91% 71% 78% 89% 84% 87% 90% 87% 90% 86% ３． ３． ３． ３．Calculate Variable cost per trade and the others Quarterly Trading Volume ('000 trades) (D) 369 414 378 441 518 441 465 461 482 372 Average Commision / Trade (Yen) 1,591 1,466 1,540 1,522 1,531 1,506 1,501 1,493 1,508 1,481 Variable (based on trading volume) / Tra（A）/（D) (Yen） 702 614 407 307 317 406 432 347 354 408 Average Commission / Trade - Variable (based on trading volume) /Trade (Yen） 889 853 1,132 1,215 1,214 1,100 1,069 1,146 1,154 1,073 ４． ４． ４． ４．Calculation of estimated Break-Even point to cover both Fixed cost and Variable cost based on number of accounts Break-even Point Estimate (Quaterly) ('000 trades) 612 788 601 564 577 822 867 791 753 788 Break-even Point Estimate (Monthly) ('000 trades) 204 263 200 188 195 274 289 264 251 262

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Break Break Break Break-

• Even Analysis

Even Analysis Even Analysis Even Analysis – – – – Number of Trade Number of Trade Number of Trade Number of Trade

FYE 2003/3 2Q ■ ■ ■ ■ Costs are maintained relatively low; no material changes in break- even number of trade. ■ ■ ■ ■ Variance between “break-even” and “actual” has enlarged due to the shrink of number of trades affected by stagnant Japanese stock market

332 411 431 458 467 527 607 616 612 588 213 261 251 227 233 320 290 256 257 377 612 601 564 577 822 791 753 788 369 414 378 465 461 482 372 788 867 518 441 441 500 1,000 1,500 2,000 2,500

FYE 03/01 １ １ １ １Q 3Q FYE 03/02 １ １ １ １Q 3Q FYE 03/03 1Q

Costs (\million) 200 400 600 800 1,000 Number of trades(000) Fixed Cost (incl. One time cost) Variable Cost based on Number of Accounts Actual number of trade Break even number of trade

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Break Break Break Break-

• Even Analysis

Even Analysis Even Analysis Even Analysis – – – – Executed Deal Ratio Executed Deal Ratio Executed Deal Ratio Executed Deal Ratio

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% A p r

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a y

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u n

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u l

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u g

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c t

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e c

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a n

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F e b

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M a r

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A p r

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M a y

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J u n

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J u l

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A u g

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S e p

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D e c

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J a n

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F e b

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M a r

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A p r

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M a y

• 2

J u n

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J u l

• 2

A u g

• 2

S e p

• 2

B/E executed deal ratio Actual executed deal ratio

B/E executed deal ratio is gradually declined.

Affected by the merger of Saison Securities Co., Ltd.

（ （ （ （B/E executed deal ratio） ） ） ）=（ （ （ （B/E number of executed deal） ） ） ）/（ （ （ （Number of accounts） ） ） ） （ （ （ （Actual executed deal ratio）＝（ ）＝（ ）＝（ ）＝（Actual number of executed deal） ） ） ）/(accounts） ） ） ）

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（ （ （ （Index： ： ： ： April 2000＝ ＝ ＝ ＝100） ） ） ） 100 200 300 400 500 600

Apr/00 May/00 Jun/00 Jul/00 Aug/00 Sep/00 Oct/00 Nov/00 Dec/00 Jan/01 Feb/01 Mar/01 Apr/01 May/01 Jun/01 Jul/01 Aug/01 Sep/01 Oct/01 Nov/01 Dec/01 Jan/02 Feb/02 Mar/02 Apr/02 May/02 Jun/02 Jul/02 Aug/02 Sep/02

TradingVolume 0.0% 1.5% 3.0% 4.5% 6.0% 7.5% 9.0% Share

TSE Individual Trading Volume （ （ （ （General Participants with capital of Yen 3bil or larger） ） ） ） Monex: Trading volume at TSE Monex Share

TSE TSE TSE TSE Trading Volume Trading Volume Trading Volume Trading Volume ｖｓ ｖｓ ｖｓ ｖｓ Monex Trading Volume Monex Trading Volume Monex Trading Volume Monex Trading Volume

Source: TSE , JSDA and Monex Margin Trading Volume at Online trading increase by 280 %, while Cash Trading volume increase by 30%

Spot vs. Margin at Online trading

Apr-Sep 00 Cash 79% Margin 21% Apr-Sep 01

Cash 64% Margin 36%

Apr-Sep 02

？ ？ ？ ？ ？ ？ ？ ？

Oct 00 - Mar 01 Cash 71% Margin 29% Oct 01 - Mar02

Cash 57% Margin 43%

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Monex vs. Nikkei 225 average Index (based on August 4, 2000)

Stock Price Stock Price Stock Price Stock Price

20 40 60 80 100 120 140 160 180 200 A u g / S e p / O c t / N

• v

/ D e c / J a n / 1 F e b / 1 M a r / 1 A p r / 1 M a y / 1 J u n / 1 J u l / 1 A u g / 1 S e p / 1 O c t / 1 N

• v

/ 1 D e c / 1 J a n / 2 F e b / 2 M a r / 2 A p r / 2 M a y / 2 J u n / 2 J u l / 2 A u g / 2 S e p / 2 Monex share price (closing price of Aug. 4, 2000=100) Nikkei 225 average index （ （ （ （closing price of Aug. 4, 2000＝ ＝ ＝ ＝100） ） ） ） Monex IPO Price （ （ （ （closing price of Aug. 4, 2000＝ ＝ ＝ ＝100） ） ） ） Price movement from Aug. 4, 2000 （as of the end of September 2002） Monex (based on IPO price) -64% Nikkei 225 average index -40%

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Ⅰ Ⅰ Ⅰ Ⅰ. Financial Results Ⅱ Ⅱ Ⅱ Ⅱ. Other Business Ⅲ Ⅲ Ⅲ Ⅲ. Newly introduced Services and

• ur Business Model

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50,000 100,000 150,000 200,000 250,000

Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02

Monex DLJ Matsui E*Trade

Number of accounts

Number of customers Number of customers Number of customers Number of customers’ ’ ’ ’ accounts accounts accounts accounts

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Account acquiring costs Account acquiring costs Account acquiring costs Account acquiring costs

Account acquiring costs per account (Yen) Advertising costs (Yen 000) Newly acquired accounts

5,000 10,000 15,000 20,000 25,000 10,000 20,000 30,000 40,000 50,000 500 1,000 1,500 2,000 2,500 3,000 FYE 03/00 (Quarterly Average) FYE 03/01 1Q 2Q 3Q 4Q FYE 03/02 １Q 2Q 3Q 4Q FYE 03/03 1Q 2Q

12,891 yen 5,120 66 mil yen Matsui 3,710 yen 5,702 yen 886 yen A.A. costs 15,904 5,086 7,080 A/C 59 mil yen 29 mil yen 6.3 mil yen Ad. Costs Etrade DLJ Monex

Two major initial costs (1) System related costs (2) Account acquiring costs Higher return on equity may be materialized by maintaining (2) AACosts low FYE 03/2003 ・ ・ ・ ・AA costs have been kept low: ・ ・ ・ ・However, advertising costs are expected to rise during FYE03/2003 2H in order to promote newly introduced services.

Comparison to the peers in 1Q

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222.6 318.5 274.5 303.1 334.1 349.0 326.6 31.0 28.7 30.3 31.4 31.9 31.8 55.5 64.4 66.0 63.4 76.1 72.0 64.2 291.9 418.4 374.5 402.1 447.0 458.9 428.8 13.0 Mar/01 Jun/01 Sep/01 Dec/01 Mar/02 Jun/02 Sep/02 Domestic Stocks Investment Trust (excl. MRF) MRF Others

\9, 000 \12, 000 \15, 000

MRF Outstanding MRF Outstanding （ （ （ （ （ （ （ （Sep 30, 2002 Sep 30, 2002） ） ） ） ） ） ） ） 64.2 billion Yen 64.2 billion Yen Cash inflow from customers has always exceeded outflow since the Cash inflow from customers has always exceeded outflow since the first day of business first day of business (excluding only 5 business days.) (excluding only 5 business days.) Jun /02 to Sep/02: Nikkei 225 Jun /02 to Sep/02: Nikkei 225 -

• 11.7% Monex Clients

11.7% Monex Clients’ ’ Asset in Custody Asset in Custody – – 6.5% 6.5%

Nikkei 225 Average Index MRF and IT

Customers Customers Customers Customers’ ’ ’ ’ assets in Custody assets in Custody assets in Custody assets in Custody

(Yen billion)

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Investment Trust Business Investment Trust Business Investment Trust Business Investment Trust Business

Monthly Fixed amount Purchase(as of Jun 2002) Number of orders Monthly Purchase Amount Teigaku Tsumitate (Direct withdrawal from MRF)

3,141 63 mil yen

Card de JIDO Tsumitate (Withdrawal from bank account)

5,442 115 mil yen

Monthly Fixed amount Purchase(as of Sep 2002) Number of orders Monthly Purchase Amount Teigaku Tsumitate (Direct withdrawal from MRF)

3,154 61 mil yen

Card de JIDO Tsumitate (Withdrawal from bank account)

5,952 123 mil yen

Investment Trusts Outstanding and Number of Order/Day 7.6 8.2 8.2 11.6 11 10.3 9.5 10.3 10.7 10.6 10.3 10.6 11.1 11.4 11.8 11.0 10.7 11.0 10.9 2.7 2.9 3.2 13.4 13.2 13.1 12.5 12.6 12.6 12.3 11.5 11.3 11.2 11.3 11.3 11.2 11.2 11.0 10.9 2.6 2.8 3.2 6.2 6.5 6.6 6.6 6.8 7.3 7.8 8.3 9.0 9.1 9.7 9.6 10.0 9.9 9.9 13 13.9 14.6 30.5 30 28.7 29.7 30.2 30.3 29.7 30.4 31.4 31.6 32.9 31.9 32.0 32.0 31.8 5.9 31 421 760 792 839 773 879 833 788 949 983 969 717 794 889 405 470 646 643 307 10 20 30 40 50 60 70 80 90 100 Mar/01 Apr/01 May/01 Jun/01 Jul/01 Aug/01 Sep/01 Oct/01 Nov/01 Dec/01 Jan/02 Feb/02 Mar/02 Apr/02 May/02 Jun/02 Jul/02 Aug/02 Sep/02 Outstanding (yen billion) 200 400 600 800 1,000 Order/Day Domestic Stocks IT Domestic Fixed Income IT Foreign IT Number of Order / day Cash and IT outstanding (Yen billion) as of September 2002

83.0 177.5 64.2 31.8 96.0 about 100 Nomura Fundnet Sec Japan Net Bank Sony Bank Monex, Inc

MRF

Deposit IT

IT

Deposit

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Underw riting business Underw riting business Underw riting business Underw riting business

※excluding issues only involved in Sales, ie. Monex inc. (8626)

Comparison with the others (FYE 3/2003 1Qand 2Q)

Source:Tokyo IPO

• We underwrote the

followings (share) in 2Q: COMPUTER WAVE

• INC. (5%)

RENTRAK JAPAN CO., LTD (4%) NIPPON HERALD FILMS, INC (2%) Soft front (3%) AnGes MG, Inc. (2%) NS Solutions (0.75%)

Underwriting fee (Yen million) 28 13 28 16 67 141 33 19 167 FYE 03/01 FYE 03/02 FYE 03/03 4Q 3Q 2Q 1Q The Japanese IPO market

• f 1H/FYE 03/2003

shrunk by about 75% in terms of amount compared to that of 1H of last FY.

(source: Nikkei )

Underwriting: number of issues 5 5 15 6 7 9 36 11 16 FYE 03/01 FYE 03/02 FYE 03/03 4Q 3Q 2Q 1Q

Underwriting: Number of issues 3 3 5 6 7 7 6 1 7 10 10 11 Underwriting amont (Yen million) 104 124 312 227 411 395 473 10 237 785 520 515 Matsui DLJ E Trade Monex １ １ １ １Q ２ ２ ２ ２Q

* Underwriting: number of issues and underwriting amount includes “ over-allotment”.

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Ⅰ Ⅰ Ⅰ Ⅰ. Financial Results Ⅱ Ⅱ Ⅱ Ⅱ. Other Business Ⅲ Ⅲ Ⅲ Ⅲ. Newly introduced Services and

• ur Business Model

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【 【 【 【Real Network】 】 】 】 ・ ・ ・ ・ATM / CD ・ ・ ・ ・CMA （ （ （ （Monex 《 《 《 《Saison》 》 》 》Card） ） ） ） w/cash card+credit card function

Business Model Business Model Business Model Business Model – – – – Structural Changes w ould support our model

Re = P× × × × E1＋ ＋ ＋ ＋ P× × × × E2 – Expenses

Probability

• f shift to

direct finance Probability of no shift to direct finance Expected Return （ （ （ （Firm Value) 【 【 【 【Asset Gathering】 】 】 】 ・ ・ ・ ・Monthly fixed purchase plan ・ ・ ・ ・Account Aggregation ・ ・ ・ ・Cyber FP ・ ・ ・ ・Instant Cash settlement from banks 【 【 【 【Partnership】 】 】 】 ・ ・ ・ ・Joint Marketing with Credit Saison Our earning under the scenario 【 【 【 【Government: Structural Change】 】 】 】 ・ ・ ・ ・Democratization of capital market

• Shift to direct finance

・ ・ ・ ・New economic policy 【 【 【 【Introduction of Stock Lending】 】 】 】 Our earnings under the scenario 【 【 【 【Margin Trading】 】 】 】 【 【 【 【Cost Cut efforts】 】 】 】

Mid-and Long-term Plan： ： ： ： Grow to a new type of major financial institution We expect that the “structural changes” pursued by the Government would stimulate a “shift to direct finance”; we will obtain a large number of individual customers’ account.

Short term Plan：

： ： ： Improve profitability as early as possible by obtaining more revenue sources. The above plans are supported by enough capital and liquidity. Mid-and Long-term Plan： ： ： ： Grow to a new type of major financial institution We expect that the “structural changes” pursued by the Government would stimulate a “shift to direct finance”; we will obtain a large number of individual customers’ account.

Short term Plan：

： ： ： Improve profitability as early as possible by obtaining more revenue sources. The above plans are supported by enough capital and liquidity.

Innovation

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Monex: unique Services Monex: unique Services Monex: unique Services Monex: unique Services

【 【 【 【Cash management account】 】 】 】 Credit Card settlement through MRF account at Monex. The nation wide ATM network of 25,000 Postal Offices The instant cash settlement from banks

• n the website.

【 【 【 【The unique fund management tool】 】 】 】 Account Aggregation service and Cyber FP on the website 【 【 【 【Information Service】 】 】 】 Professional–use real time information system and various reports including JP Morgan analyst report

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Stock Lending Stock Lending Stock Lending Stock Lending－ － － － a new tool to enhance return on clients’ portfolio

・ ・ ・ ・Monex S/L clients could automatically lend their stock portfolio to Monex while retaining right to trade securities anytime.

• Yield on S/L is subject to the market situation.

・ ・ ・ ・ Legal title of the securities is temporarily transferred from a lender to a borrower. The lender could not retain the benefits of ownership such as the voting rights and shareholders’ preference program.

• Instead, the lenders could receive the additional income equivalent to the dividend amount after withholding tax.

■ ■ ■ ■Special Campaign （ （ （ （until March 2003） ） ） ） ・ ・ ・ ・ Campaign Yield on S/L 0.20％ ％ ％ ％ p.a. ・ ・ ・ ・ Clients applying by the end of October 0.40％ ％ ％ ％ p.a. ・ ・ ・ ・ 《 《 《 《Saison》 》 》 》Card Holders complying with some conditions 0.50％ ％ ％ ％ p.a.

・ ・ ・ ・Monex S/L clients could automatically lend their stock portfolio to Monex while retaining right to trade securities anytime.

• Yield on S/L is subject to the market situation.

・ ・ ・ ・ Legal title of the securities is temporarily transferred from a lender to a borrower. The lender could not retain the benefits of ownership such as the voting rights and shareholders’ preference program.

• Instead, the lenders could receive the additional income equivalent to the dividend amount after withholding tax.

■ ■ ■ ■Special Campaign （ （ （ （until March 2003） ） ） ） ・ ・ ・ ・ Campaign Yield on S/L 0.20％ ％ ％ ％ p.a. ・ ・ ・ ・ Clients applying by the end of October 0.40％ ％ ％ ％ p.a. ・ ・ ・ ・ 《 《 《 《Saison》 》 》 》Card Holders complying with some conditions 0.50％ ％ ％ ％ p.a. Securities Lending: Monex customers could enhance their portfolio return by lending their own stock portfolio to Monex and receiving income. 【 【 【 【Scheduled to start on January 15, 2003 / Application will be accepted from later October 2002】 】 】 】 Securities Lending: Monex customers could enhance their portfolio return by lending their own stock portfolio to Monex and receiving income. 【 【 【 【Scheduled to start on January 15, 2003 / Application will be accepted from later October 2002】 】 】 】 Stock lending Income Stock lending Income

S/L market

ING Securities Tokyo Partner

Client

【 【 【 【S/L Mechanism】 】 】 】

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・ ・ ・ ・Flow s of Stocks（ ） （ ） （ ） （ ）, Cash Collateral （ ） （ ） （ ） （ ）, Interest on loan（ ） （ ） （ ） （ ）, Fees on S/L （ ） （ ） （ ） （ ） ・ ・ ・ ・When there exists shortage of specific stocks at JSF, the Seller of such stocks on margin should pay the special fees on borrowing stocks to JSF, and such fees are granted to the buyer of such stocks on margin. ・ ・ ・ ・Monex would earn profit when the sum of Ｒ１ Ｒ１ Ｒ１ Ｒ１and Ｒ２ Ｒ２ Ｒ２ Ｒ２ is larger than the sum of fees on loaned stocks payable to the clients for the cases D, E and F. ・ ・ ・ ・The cash collateral received in the case D and F, could be used for loans to the clients in case A. This loan is collateralized by stocks; in addition, maintenance margin is held at margin accounts. ・ ・ ・ ・The stocks are loaned to the clients selling on margin ; which is collateralized by cash, in addition to margin maintenance. （ （ （ （In principle, when Monex loans cash or stocks to its clients and/or the S/L market, all loans are collateralized.） ） ） ） ・ ・ ・ ・Stocks and Cash are efficiently reused within the scheme.

A

Stock Lending structure Stock Lending structure Stock Lending structure Stock Lending structure

Stock lending position to be loaned to the market through ING Securities

Monex’ clients Monex ING/JSF Ａ Ａ Ａ Ａ

Ｂ Ｂ Ｂ Ｂ Ｃ Ｃ Ｃ Ｃ

Ｄ Ｄ Ｄ Ｄ

Ｅ Ｅ Ｅ Ｅ

Ｆ Ｆ Ｆ Ｆ

Loan Securities collateral １．９％ １．９％ １．９％ １．９％

Ｂ Ｂ Ｂ Ｂ

Loan Securities collateral １．９％ １．９％ １．９％ １．９％ Buyer on margin Stocks Cash Collateral １．１５％ １．１５％ １．１５％ １．１５％ Seller on margin

Ｃ Ｃ Ｃ Ｃ

Stock Cash Collateral １．１５％ １．１５％ １．１５％ １．１５％

Ｄ Ｄ Ｄ Ｄ

Stocks Cash Collateral １．１５％（Ｒ１） １．１５％（Ｒ１） １．１５％（Ｒ１） １．１５％（Ｒ１） Seller on margin Stocks Fees on S/L Stock Lender Buyer on margin Seller on margin

Ｅ Ｅ Ｅ Ｅ

Stocks Fees on S/L Stock Lender

Ｆ Ｆ Ｆ Ｆ

Stocks Fees on S/L Stock Lender Stocks Cash Collateral Fees on S/L（ （ （ （Ｒ２） Ｒ２） Ｒ２） Ｒ２）

Purchase on margin Sell on margin Stock Lending position

０ ０ ０ ０.４％ ４％ ４％ ４％

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Margin Trading

■ ■ ■ ■To be released on December 2, 2002 ■ ■ ■ ■Commission ・ ・ ・ ・Internet Margin trading commission table: Same as spot trades※

※ ※ ※

・ ・ ・ ・Stop Loss Order ¥ 750 / trade

※ ※ ※ ※ A new rate structure will be also introduced: ¥ 3,000 for unlimited number of trade up to yen 3,000,000 trade amount in total.

■ ■ ■ ■Interest charge on loan for buying securities 1.9% for selling securities 0.0% ■ ■ ■ ■Charge for borrowing stocks 1.15% ■ ■ ■ ■Minimum Margin ¥ 300,000 ■ ■ ■ ■Initial Margin 33％ ％ ％ ％ ■ ■ ■ ■Maintenance Margin 30％ ％ ％ ％ ■ ■ ■ ■ Start-up Campaign ・ ・ ・ ・ ¥ 4,000 stamp duties will be reimbursed to clients who makes a margin trade by the end

• f December 2002

・ ・ ・ ・ Internet margin trade commission: ¥ 900/trade by the end of March 2003

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Margin trading: Impact on total number of trades Margin trading: Impact on total number of trades Margin trading: Impact on total number of trades Margin trading: Impact on total number of trades

A. Margin accounts with higher activities (same as

• ther competitors’ clients)

Number of trades: Ratio of Prospective one margin account to one cash account @ Monex

16:1 (Note 1) Note 1: Data from other online brokers’ corporate data Note 2: Monex’ survey of clients during June 10 – 13, 2002. Note 3: The above calculations are made based on our current forecast and estimate; the actual results may differ materially from

• ur estimate due to various factors.

B. Margin accounts with moderate activities (margin trading beginners) 4:1

Increase in number of trades when 1% of Monex customers

• pen margin accounts A or B

15% 3% ■ ■ ■ ■Estimate of activities level ■ ■ ■ ■Estimate of number of margin a/c

Ratio of number of margin a/c to current Monex Clients

4% 19%

Assumption 50% of Monex clients with experience of margin trading (Note 2): 8% 50% of Monex clients interested in margin trading: 38%

A. Margin accounts with higher activities (same as

• ther competitors’ clients)

B. Margin accounts with moderate activities (margin trading beginners)

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Revenue increase ⇒ ⇒ ⇒ ⇒ expected from January 2003 ■ ■ ■ ■Advertising and promotion ： ： ： ： An increase in number of new accounts as well as number of trades is expected. Promotional price (Margin trading ¥900 and night trade¥470 ): a decrease in revenue per trade is projected. ■ ■ ■ ■Margin trading： ： ： ： released on 12/02/2002, application for margin account being accepted from10/01/2002 As of 10/16/2002: about 2000 application forms has been accepted. Real increase in Revenue ⇒ ⇒ ⇒ ⇒ could defer until April 2003 ■ ■ ■ ■Stock Lending ： ： ： ：To be released in January 2003 Could possibly be real revenue source after the promotional period. Could also be used as an efficient way of financing; a possible decrease in financing costs Could attract new customers and their stock assets into Monex.

Note: The above statements are based on our current estimate and assumption; the actual results may differ materially from expected results due to various known and unknown factors Margin account and expected increase in trades 1% 2% 3% 4% 5% 30% 45% 60% 75% 10% 45% 60% 75% 90% 15% 60% 75% 90% 105% 20% 75% 90% 105% 120%

A※ ※ ※ ※ B※ ※ ※ ※

※ ※ ※ ※see page 23

New services New services New services New services： ： ： ： Impact on Profitability Impact on Profitability Impact on Profitability Impact on Profitability 【Revenue】

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Introduction of new services require the following costs ⇒ ⇒ ⇒ ⇒ Costs to increase from 2H of this FY ■ ■ ■ ■Additional Personnel costs： ： ： ： for a few additional experienced employees ■ ■ ■ ■System related capital investment （ （ （ （5 year lease） ） ） ） Margin trading : ¥about 250 million Stock lending: ¥about 80 million ⇒ ⇒ ⇒ ⇒ Costs in 2H of this FY ■ ■ ■ ■Marketing costs ： ： ： ： about ¥70 million Advertising costs（ （ （ （newspaper、 、 、 、magazine、 、 、 、DM） ） ） ） about ¥30-40 million Stamp tax ¥ 4,000 cash back campaign ATM deposit : free commission campaign (at Post Office） ） ） ）

Note: The above statements are based on our current estimate and assumption; the actual results may differ materially from expected results due to various known and unknown factors

New service New service New service New service： ： ： ： Impact on Profitability Impact on Profitability Impact on Profitability Impact on Profitability 【 【 【 【Costs Costs Costs Costs】 】 】 】

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Corporate Governance and Disclosure Corporate Governance and Disclosure Corporate Governance and Disclosure Corporate Governance and Disclosure

Corporate Governance ・ ・ ・ ・Board of Directors： ： ： ： 4 external directors among 6 directors ・ ・ ・ ・Auditors： ： ： ： One standing statutory auditor and 3 statutory auditors (all four are defined as “external auditors” by Japanese Commercial Code) ・ ・ ・ ・Advisory Board ： ： ： ： Consists of respected individuals- being quarterly held ・ ・ ・ ・Orientation Committee： ： ： ： quarterly meetings consisting of about 20 customer representatives and the Company’s officers. Disclosure ・ ・ ・ ・Disclosure Policy： ： ： ： Formulated a disclosure policy to eliminate arbitrariness and avoid selective disclosures. The disclosure policy is publicly available on the Company’s website (http://www.monex.co.jp/). ・ ・ ・ ・Monthly and Weekly disclosure： ： ： ： Regularly disclose the data with the same format ・ ・ ・ ・”Monex Mail”(e-mail magazine)： ： ： ：CEO’s view is exposed to the readers every business day ⇒ ⇒ ⇒ ⇒ Monex is well aware of the current movement after the Enron and Worldcom shock in the U.S. regarding Corporate Governance and Disclosure, including Sarbanes-Oxley act of 2002 as well as the new standards of NYSE and NASDAQ; Monex continuously makes efforts to establish management and monitoring system and pursue disclosure that is acceptable to overseas investors

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http://www.monex.co.jp/ http://www.monex.co.jp/