Daiwa Investment Conference Tokyo 2016 Presented on Tuesday, March - - PowerPoint PPT Presentation

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

• bligation 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.

Daiwa Securities Group Inc.

Daiwa Investment Conference Tokyo 2016

Presented on Tuesday, March 1, 2016 at “The Prince Park Tower Tokyo”

Takashi Hibino, President and CEO Daiwa Securities Group Inc.

2

Ⅰ - Business Environment ・・・・ 3 Ⅱ - Achievements in the Medium Term Management Plan ・・・・ 7 Ⅲ - Progress of Individual Strategies for Basic Policies ・・・・ 13 Ⅳ - Basic Group Strategies ・・・・ 23 Appendix ・・・・ 28

Contents

Daiwa Investment Conference Tokyo 2016

3

Ⅰ- Business Environment

Changes to the Economic Environment

4 Ⅰ- Business Environment Real GDP (Jan. 2007 - Dec. 2015)

Note: Adjustment of consumption tax conducted by the Bank of Japan. Source: Cabinet Office; compiled by DIR based on the Bank of Japan statistics (YoY, %) (QoQ, %)

Consumer Price Index (Jan. 2007 - Dec. 2015) 2015

• 4.5
• 3.0
• 1.5

0.0 1.5 3.0 4.5 2007 2008 2009 2010 2011 2012 2013 2014 2015

• 3.0
• 2.0
• 1.0

0.0 1.0 2.0 3.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 CPI (less fresh food) CPI (less fresh food and energy)

• 2.0
• 1.0

0.0 1.0 2.0 Jan.-Mar. Apr.-Jun. Jul.-Sep. Oct-Dec.

Imports Exports

• Publ. Demand

Priv. Inventories

• Priv. Non-Resi.

Invt.

• Priv. Resi. Invt.

Priv. Consumption Real GDP

Start of the second Abe administration

• Jan. 2016:

Introduction of negative interest rates

Introduction of QQE

Consumption tax increase

Expansion of QQE

110 115 120 125 130 14,000 15,000 16,000 17,000 18,000 19,000 20,000 21,000

Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16

Nikkei 225 (left) JPY/USD Rate (right)

70 80 90 100 110 120 130 6,000 10,000 14,000 18,000 22,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Nikkei 225 (left) JPY/USD Rate (right)

Changes to the Market Environment

5 Nikkei 225 and JPY/USD Rate (Jan. 2007 – Feb. 2016)

Pre-Lehman Crisis

From Post-Lehman Crisis to Start of the Second Abe Administration

Second Abe Administration

(JPY/USD)

Peak in 2015: 20,952yen Global stocks fall

• n China worries

Fed raises interest rate BOJ introduces negative interest rates

(Yen)

Ⅰ- Business Environment

(Yen) (JPY/USD)

Recent PBR 1.07X (Feb. 24, 2016) Post-Lehman low PBR 0.81X (Oct. 27, 2008) Start of the second Abe administration PBR 1.02X (Dec. 26, 2012)

122.4 130.1 140.2 139.3 154.6 123.5 124.7 40 80 120 160 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2014 FY2015 39.7 44.2 51.0 49.5 63.1 35.4 37.9 20 40 60 80 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2014 FY2015 14 16 17 5 10 15 20 Interim FY end Interim FY2014 FY2015 34.3 37.0 38.5 38.5 44.8 24.3 26.3 20 40 60 80 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2014 FY2015

Net Operating Revenues (Y bil) Ordinary Income (Y bil)

Profit Attributable to Owners of Parent Company (Y bil)

Dividend (Y)

6



Consolidated net operating revenues: Y403 bil; Ordinary income: Y136.5 bil; Profit attributable to owners of parent company: Y95.5 bil for 1Q-3Q FY2015.



Consolidated net operating revenues: Y403 bil; Ordinary income: Y136.5 bil; Profit attributable to owners of parent company: Y95.5 bil for 1Q-3Q FY2015. Ⅰ- Business Environment

Consolidated Results of 3Q FY2015

FY2014 FY2015 1Q 2Q 3Q 1Q-3Q 1Q-3Q 154,663 123,579 124,799 1.0% 392,903 403,042 2.6% 532,220 95,574 91,281 89,331

• 2.1%

268,462 276,187 2.9% 361,380 63,113 35,456 37,950 7.0% 135,000 136,519 1.1% 184,578 44,836 24,347 26,354 8.2% 109,968 95,537

• 13.1%

148,490 1,272,263 1,258,269 1,261,870 1,196,309 1,261,870 1,238,657 744.30 732.15 734.13 700.85 734.13 725.27 SG&A Ordinary Income

Profit (loss) attributable to owners of parent

Shareholders' Equity BPS (Y) FY2015

% Change vs 2Q/15 % Change vs 1Q-3Q/14

FY2014 Net Operating Revenues (Y mil)

7

Ⅱ- Achievements in the Medium Term Management Plan

8

Medium Term Management Plan (“Passion for the Best” 2017)

In response to the full-fledged start of an era of transition from savings to investment, attract customers with the industry’s top quality, and become their best partner Provide investment services to lead the era of transition from savings to investment

Basic Policy 1: Pursue best quality



Establish product and service platforms in response to the needs of a wide range of investors



Strengthen asset management abilities



Expand the pool of talented personnel with advanced expertise

Basic Policy 2: Dramatically expand the customer base and revenue



Strengthen approach to a wide range of investors by leveraging product and service platforms



Dramatically expand the customer base and revenue by responding to growing investment needs

Basic Policy 3: Support the sustainable growth of companies and the development of new industries

 Identify and develop next-generation growth companies and help them to raise capital for growth  Provide solutions in response to corporate globalization and M&A needs

Numerical targets FY 2017 FY 2016 FY 2015

Provide solutions that contribute to the improvement in corporate value

• 1. ROE: 10% or more
• 2. Fixed cost coverage ratio :

75% or more in the final fiscal year Positive cycle of “transition from savings to investment” and “improvement of corporate value”

Ⅱ- Achievements in the Medium Term Management Plan

6.3% 12.8% 9.7% 10.2% 8.6% 17.0% 12.8%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 200 400 600 800 1,000 1,200 1,400 1,600 1,800 FY2012 FY2013 FY2014 3Q FY2015

45% 56% 62% 68%

0% 10% 20% 30% 40% 50% 60% 70% 80% 50 100 150 200 250 FY2012 FY2013 FY2014 3Q FY2015 (Annualized)

Fixed Cost Coverage Ratio: 75% or more in the final fiscal year (FY2017) ROE: 10% or more Ⅱ- Achievements in the Medium Term Management Plan

Progress of Medium Term Management Plan (Numerical Targets)

Fixed cost （Y bil） Stable revenues （Y bil） Fixed cost coverage ratio

Shareholders’ equity （Y bil）

ROE

ROE（excl. effect of losses carried forward belonging to Daiwa Securities） Profit attributable to

• wners of parent

company （Y 100mil）

*Stable revenues consist of : AM Management fees（including investment advisory fees）, agency fees, Daiwa Next Bank profit margins, Daiwa Office Investment net operating revenues, Daiwa Real Estate AM management fees, management fees on SMA/Fund Wrap, interest fees on margin, interest fees on LMS etc.

9

（Annualized）

0% 10% 20% 30% 40% 50% 60% 70% 80% 10 20 30 40 50 60 70 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 Fixed Cost (left) Stable Revenues (left) Fixed Cost Coverage Ratio (right)

Trend of Fixed Cost Coverage Ratio

10 Ⅱ- Achievements in the Medium Term Management Plan

Trend of Stable Revenues, Fixed Cost, and Fixed Cost Coverage Ratio

(Y bil)



The Group will aim to further strengthen its robust business structure through disciplinary cost control and steady expansion of stable revenues.



The Group will aim to further strengthen its robust business structure through disciplinary cost control and steady expansion of stable revenues.

Passion for the Best “2014” （FY2012-FY2014） Passion for the Best “2017” （FY2015-FY2017）

Expansion of Stable Revenues

11 Factors for Changes in 3Q FY2015 Stable Revenues (Annualized)

（Y bil）

+10%

Stable Revenues

Wrap-related fees Agency fees for investment trusts Daiwa AM/Daiwa SB management fees Daiwa Next Bank profit margins Others

(including real estate AM, interest fees on margin, etc.) 

The Group’s stable revenues for 3Q FY2015 (annualized) have increased approximately 10% from FY2014, mainly due to expansion

• f AUM for wrap accounts.



The Group will continue to focus on expanding stable revenues centered on wrap accounts and asset management business, while also enhancing the foreign currency deposit business at Daiwa Next Bank.



The Group’s stable revenues for 3Q FY2015 (annualized) have increased approximately 10% from FY2014, mainly due to expansion

• f AUM for wrap accounts.



The Group will continue to focus on expanding stable revenues centered on wrap accounts and asset management business, while also enhancing the foreign currency deposit business at Daiwa Next Bank.

Ⅱ- Achievements in the Medium Term Management Plan

12

Business Opportunities and Basic Policies

Business opportunities expected over the medium term: full-fledged start of an era of transition from savings to investment

Expected demand

Increase in securities investment needs among all citizens and households

Increase in funding demand among growing companies Increase in corporate activities including M&As aimed at improving ROE

Basic policies aimed at achieving the positive cycle of “the transition from savings to investment” and “the improvement in corporate value”

Provide investment services that lead the era of transition from savings to investment Provide solutions that contribute to the improvement in corporate value

Move away from deflation Spread of successful investment experiences Government support on policies and systems Enhancement of companies’ earnings power Dramatically expand the customer base and revenue

Identify and develop next generation growth companies and help them raise capital to grow

Pursue best quality

Basic Group Strategies

Finance and Risk management Finance and Risk management Human resources Human resources IT IT

Establish product and service platforms in response to the needs

• f a wide range of investors

Strengthen asset management abilities

Identify and develop next generation growth companies and help them raise capital to grow

Provide solutions in response to corporate globalization and M&A needs Promote alliance strategy actively, mainly in Asia Basic policies Key Themes

Ⅱ- Achievements in the Medium Term Management Plan

13

Ⅲ- Progress of Individual Strategies for Basic Policies

20 40 60 80 100 120 140 200 400 600 800 1,000 1,200 1,400 1,600 1,800 1H 2H 1H 2H 1H 2H 3Q FY2012 FY2013 FY2014 FY2015 Contract AUM (left) Number of Contract (right)

Expansion of Fee-based Products and Services (Wrap Account Services)

14 Future of Daiwa’s Wrap Account Services Change in AUM of Wrap Accounts



AUM for wrap account services (SMA and fund wraps) at Daiwa Securities were Y1.5 tri. (as at the end of Dec. 2015).



Respond to a wide range of customer needs through various product line-up and by expanding sales channels.



AUM for wrap account services (SMA and fund wraps) at Daiwa Securities were Y1.5 tri. (as at the end of Dec. 2015).



Respond to a wide range of customer needs through various product line-up and by expanding sales channels.

Value Added Minimum investment

Advanced fund wraps

Wrap services for asset forming generation Large Small Low High Existing service New service

Low-cost wrap services using the Internet

SMA Fund wraps

Wrap account market U.S. ≈ Y581 tri. Individual financial assets Japan Y5.1 tri.

※ U.S. figures are calculated at $1＝119.88 yen (end of Sept. 2015) * Japan and U.S. assets are as of the end of Sept. 2015

93x

U.S. ≈ Y8,260 tri.

4.9x

Ⅲ- Progress of Individual Strategies

Y1.5 tri.

Wrap services for the wealthy

Wrap services for wealthy individuals, with wealth planning services added

Increase value of existing fund wraps

Establish product and service platforms in response to the needs of a wide range of investors

(Y bil) （thousands）

Highly customizable fund wraps for wealthy individuals and corporate clients

Japan Y1,684 tri.

Respond to the Expanding Inheritance Business

15

Responding to the Shift of Assets through Inheritance



By placing inheritance consultants and increasing the number of application for “Inheritance Total Service”, we prepare to respond to the shift of assets through inheritance.



By placing inheritance consultants and increasing the number of application for “Inheritance Total Service”, we prepare to respond to the shift of assets through inheritance.

Placement of Inheritance Consultants (Dec. 2014 - ) Inheritance Total Service* (Jan. 2012 - ）

Expansion of inheritance market (Approx. Y50 tri./yr., increasing trend)

Increase in inheritance tax rate (Jan. 2015 - )

Shift of assets through inheritance

Enhance capability to tailor to the needs of customers Prevent cash out (Bring in new assets)

Ⅲ- Progress of Individual Strategies

Establish product and service platforms in response to the needs of a wide range of investors

Number of Staff Involved in Inheritance Business* Application for Inheritance Total Service*

* Mar. 2013 is indexed as 100

※Placed at 40 branches (Dec. 2015)

* Mar. 2013 is indexed as 100

* Provide one-stop service from before to after inheritance (including connecting customers to outside specialists).

100 198

• Mar. 2013
• Dec. 2015

Number of Staff at Wealth Management Dept. Number of Inheritance Consultants

100 303

• Mar. 2013
• Dec. 2015

Total Number of Application for Inheritance Total Service

16



Further develop the securities-banking business model to serve as a gateway from savings to investments and as a platform for comprehensive financial services.



Further develop the securities-banking business model to serve as a gateway from savings to investments and as a platform for comprehensive financial services. Daiwa Next Bank: Deposit Balance and Number of Accounts

Y3.3 tri.

(Y bil） （thousands）

Cross-selling Ratio and Purchased Products (Total)

Fund wraps Stock investment trusts Equity Foreign bonds Domestic bonds

Overseas ATM Shopping

Expansion of Foreign Currency Deposits ～Introduction of Tie-up Prepaid Card～

Daiwa Next Bank Money Partners

【Card holder account】

Foreign currency deposits

Top up

(foreign currency)

Repayment

(foreign currency)

Overseas prepaid card Launch event to be held on

• Mar. 23, 2016

【Foreign currency deposit account】

Ⅲ- Progress of Individual Strategies

Establish product and service platforms in response to the needs of a wide range of investors

Further Develop the Combined Securities-Banking Business Model

200 400 600 800 1,000 1,200 500 1,000 1,500 2,000 2,500 3,000 3,500

• Mar. 2013
• Mar. 2014
• Mar. 2015
• Dec. 2015

Foreign Currency Deposit (left) Yen Deposit (left) Number of Accounts (right)

Newly-opened time deposits: yen denominated time deposits that have been placed within three months of opening time deposit accounts * Cross-selling ratio: accumulated total accounts of cross-selling / accumulated total accounts of newly-opened time deposits

Improve Consulting Services in Quality and Quantity

• Increase Interaction with Clients -

17 Ⅲ- Progress of Individual Strategies

Establish product and service platforms in response to the needs of a wide range of investors  Aim to enhance the quality and quantity of proposals to customers by continuing to expand our domestic branch network, and increasing

capacity and staff at Contact Centers.

 Aim to enhance the quality and quantity of proposals to customers by continuing to expand our domestic branch network, and increasing

capacity and staff at Contact Centers.

Monthly Average of Proposals Made by Sales Reps

※ Monthly average proposals for FY2013 are indexed as 100.

Domestic Branch Network Number of Seats at Contact Centers 100 106 110

FY2013 Monthly Average FY2014 Monthly Average

• Apr. 2015 - Jan. 2016

Monthly Average

480 510 620

• Mar. 2013
• Mar. 2014
• Mar. 2015
• Mar. 2016

5 14 22 26 123 132 140 144

2013.3 2014.3 2015.3 2016.1 Sales Office Branch

25 100 40 80 120 2Q FY2014 3Q FY2015

• No. of Registered NISA Incremental Account

Acquired 9.6%

Expand New Client Base Centered on Inbound-Type Clients

18



Continue making multidimensional efforts in order to expand new client base.



Continue making multidimensional efforts in order to expand new client base.

Number of NISA Accounts with Accumulative Services Business Collaboration with GMO Click Holdings

 Number of NISA accounts with accumulative services was 100,000,

total amount purchased was Y16.1 bil, expanding significantly compared to 2Q FY2014

 Currently discussing the specifics for business collaboration agreement.

Daiwa Securities Group GMO Click HD Group

Capability to provide products and information globally System development capability Young customer base

（thousand）

≈ 16x ≈ 4x

Ⅲ- Progress of Individual Strategies

Establish product and service platforms in response to the needs of a wide range of investors

（Y bil）

Funds Dedicated to Direct Course Service

 Set up no-load index funds, which are popular with a wide range of

investors, including those with modest experience in investing.

 Dec. 2015: Started sale of “Daiwa No-Load Nikkei 225 Fund” and

“Daiwa No-Load J-REIT Fund”

 Mar. 2016: Plan to expand product line-up

1 16.1 5 10 15 20 2Q FY2014 3Q FY2015

Amount Purchased through NISA Incremental Account

19



Total AUM of stock investment trusts (excluding ETFs) for the two asset management companies (Daiwa Asset Management and Daiwa SB Investments) have maintained the largest share in the industry.



Daiwa Asset Management, together with Mirae Asset Global Investments in Korea, has launched a new equity fund. Fund with the same scheme is also being distributed in Korea (distributed by Mirae Asset Securities, etc.).



Total AUM of stock investment trusts (excluding ETFs) for the two asset management companies (Daiwa Asset Management and Daiwa SB Investments) have maintained the largest share in the industry.



Daiwa Asset Management, together with Mirae Asset Global Investments in Korea, has launched a new equity fund. Fund with the same scheme is also being distributed in Korea (distributed by Mirae Asset Securities, etc.).

Daiwa AM + Daiwa SB Company A Daiwa AM Company B Company C Daiwa SB

• Apr. 2005 to Jan. 2016

AUM of Investment Trusts (excluding ETF)

（Y tri） Strengthen asset management abilities

New Fund Launched by Mirae Asset* and Daiwa Asset Management

～Diversifying Asset Management and Distribution Channels～

Daiwa ／Mirae Asset Asia Equity Fund

At monthly fund committee which consists of 「Mirae Asset Global Investments」 and 「Daiwa Asset Management」, the allocation between Asia/Oceania and Japan equity is discussed and determined through both quantitative and qualitative analysis (launched on Jan. 21, 2016). Candidate stocks

Potential stocks

Quantitative analysis Qualitative Analysis

Asia / Oceania equity ≈ 40 stocks

Candidate stocks

Potential stocks

Quantitative analysis Qualitative Analysis

Japan equity ≈ 40 stocks

Image of model portfolio

* Established in 1997, Mirae Asset Global Investments Group is one of the largest asset management companies in Korea. It manages an AUM of 77.6 billion USD (approx. Y9.4 tri.) globally and is strong in emerging markets.

Ⅲ- Progress of Individual Strategies

Strengthen Asset Management Abilities（Investment Trusts）

2 4 6 8 10 12 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H Jan. FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

Expansion of Asset Management Business

• Real Estate and Infrastructure -

20



Since the asset management company of Japan Rental Housing Investments, Mi-Casa Asset Management, has been made a consolidated subsidiary, assets under management for the 4 real estate investment trusts have exceeded Y760 bil.



In light of negative interest rates, demand for products with stable returns, such as J-REITs and infrastructure funds, is expected to increase.



Made IDI infrastructures Inc., a fund management company specializing in infrastructure, a subsidiary.



Since the asset management company of Japan Rental Housing Investments, Mi-Casa Asset Management, has been made a consolidated subsidiary, assets under management for the 4 real estate investment trusts have exceeded Y760 bil.



In light of negative interest rates, demand for products with stable returns, such as J-REITs and infrastructure funds, is expected to increase.



Made IDI infrastructures Inc., a fund management company specializing in infrastructure, a subsidiary.

（Y bil）

AUM of Real Estate Asset Management J-REIT Market Size

Current （Jan. 2016） Market Cap Y10.7 tri. （3.7x） Asset Size Y14.1 tri. （1.8x）

Daiwa’s entry into real estate AM business （Jul 2009） Market Cap Y2.9 tri. Asset Size Y7.7 tri. （Source）Association for Real Estate Securitization, Bloomberg

Ⅲ- Progress of Individual Strategies Increasing Business Opportunities

Introduction of negative interest rates Introduction of negative interest rates

Expansion of investor base for J-REITs

Infrastructure Fund Management Company as a Subsidiary

Increased difficulties in money management More need for investment into products with stable returns Increased difficulties in money management More need for investment into products with stable returns

Infrastructure funds, as they are less susceptible to economic fluctuations become more appealing Power retailers

Infrastructure Funds

Environment, etc.

Management Investment Subsidiary

Thermal power plants Renewable energy plants

Strengthen asset management abilities

355 418 477 761

100 200 300 400 500 600 700 800 900

• Mar. 2013
• Mar. 2014
• Mar. 2015
• Dec. 2015

Japan Rental Housing Inv (residential) Nippon Healthcare Investment Corp (healthcare facilities) Daiwa Residential Private Investment Corp (residential) Daiwa Office Investment Corp (offices)

21

Selected Cross-border Deals (FY2015 1Q-3Q） Global M&A Quadri-Polar Structure

Amount/Number of M&As Involved by Japanese Companies

Europe (DCA) Japan U.S. (Sagent Advisors) Asia / Oceania （DCM & alliance partners）

 Share acquisition of DeLclima (Italy) by Mitsubishi Electric Corporation  Acquisition of TGE Marine AG （Germany） by Mitsui Engineering & Shipbuilding Co. Ltd.  Acquisition of MIMS Group （Singapore） by SMS Co.,

• Ltd. and Mitsui & Co., Ltd.

 Acquisition of VTN Beteiligungsgesellschaft mbH (Germany) by IHI Corporation

（Y tri）

 Promote support for providing cross border M&A solutions utilizing a quadri-polar structure spanning Japan, Asia, Europe (Daiwa Corporate Advisory) and the U.S. (Sagent Advisors).  Promote support for providing cross border M&A solutions utilizing a quadri-polar structure spanning Japan, Asia, Europe (Daiwa Corporate Advisory) and the U.S. (Sagent Advisors).

（Source）Compiled by Daiwa Securities based on Recof M&A database. Amount is calculated based on available figures. Provide solutions in response to corporate globalization and M&A needs

Ⅲ- Progress of Individual Strategies

Provide Solutions to M&A Needs with Quadri-Polar Structure

500 1,000 1,500 2,000 2,500 3,000 2 4 6 8 10 12 14 16 18 2009 2010 2011 2012 2013 2014 2015 OUT-IN IN-OUT IN-IN Number of Deals (right)



Enhance business network in Asia through expanding alliance network with leading Asian financial institutions.



Enhance business network in Asia through expanding alliance network with leading Asian financial institutions. Bahana Securities

• Sept. 2013, business alliance

(Indonesian equity research / IB)

Proactive Promotion of Alliance Strategy with a Focus on Asia

22 Ⅲ- Progress of Individual Strategies Australia New Zealand

Indonesia Malaysia Thailand Vietnam Philippines

Australia and New Zealand Banking Group

• Feb. 2014, business alliance

(M&A covering Australia, NZ) China Securities

• Nov. 2014, business alliance

(IB/GM covering China) Saigon Securities

• Jun. 2008, business alliance

(comprehensive business covering Vietnam)

Thanachart Securities

• Feb. 2013, business alliance

(Thai equity research) Affin Hwang Investment Bank

• Dec. 2013, business alliance

(Malaysia equity research)

Development Bank of Philippines

• Mar. 1995, joint venture

China

Proactive promotion of alliance with a focus on Asia

• Nov. 2015 business alliance

(IB covering the Philippines) Increase stake in 2016 Plans to become equity method affiliate

• Feb. 2016: Application for minority stake

Plans to become equity method affiliate

* Application already submitted to Bank Negara Malaysia

23

Ⅳ- Basic Group Strategies

24

Capital Policy Aimed at the Sustainable Improvement of Corporate Value

 Secure capital and liquidity

capable of responding to tighter international financial regulations

 Establish a financial base for

maintaining and improving credit rating

 Secure financial flexibility that

enables agile investments for growth under any environment

 Continue strict risk control

Maintenance of Financial Soundness

Strengthen Shareholder Returns

Improvement of Capital Efficiency

 Invest management resources

appropriately in business areas with high growth and profit potential in Japan and overseas with a focus on capital efficiency (ROE)

 Aim to reduce capital cost by

diversifying risks through expansion of the business portfolio

 Aim for stable dividend growth by

continuously improving earning power

 Feasibility of share buyback will be

reviewed by taking a comprehensive look at factors including the business environment, financial conditions, regulatory requirements, and level of stock price

Accumulate profits FY2014 FY2015

• nwards

Improve Daiwa’s sustainable corporate value

Image of Capital

Strengthen shareholder returns Invest in growth areas

Ⅳ - Basic Group Strategies



Strive for an optimum balance between “maintenance of financial soundness”, “improvement of capital efficiency” and “strengthening

• f shareholder returns”, and ultimately aim for sustainable corporate value.

25 Raised dividend pay-out ratio Raised dividend pay-out ratio



In order to strengthen shareholder returns, we raised our dividend pay-out ratio from 30% to 40% beginning this fiscal year.



Aim to maintain an upward trend of dividends by continuously improving our earnings power.



In order to strengthen shareholder returns, we raised our dividend pay-out ratio from 30% to 40% beginning this fiscal year.



Aim to maintain an upward trend of dividends by continuously improving our earnings power.

Share repurchase program Share repurchase program



Aim to strengthen shareholder returns through increased capital efficiency.



Date of resolution： Jan. 28, 2016



Total numbers of shares to be repurchased：up to 27 mil shares, 1.57% of total shares

• utstanding (excluding treasury stock).



Total amount to be paid for repurchase： up to Y20 bil



Aim to strengthen shareholder returns through increased capital efficiency.



Date of resolution： Jan. 28, 2016



Total numbers of shares to be repurchased：up to 27 mil shares, 1.57% of total shares

• utstanding (excluding treasury stock).



Total amount to be paid for repurchase： up to Y20 bil

Ⅳ- Basic Group Strategies 12 17 17 14 16

50.5% 32.4% 31.1% 37.8% 33.4% 35.5%

42.1%

3 17

FY2012 FY2013 FY2014 Interim Year-end FY2015 Interim Interim Year-end Interim Year-end

Passion for the Best “2014” （FY2012-FY2014） Passion for the Best “2017” Passion for the Best “2017” （FY2015-FY2017）

Dividend per share（JPY） Pay-out ratio （Actual）（％） Pay-out ratio （％） 40% 30%

Strengthen Shareholder Returns

Maintenance of Financial Soundness

26

Financial Soundness Financial Soundness



Consolidated total capital ratio was 21.8% (provisional) at the end of December 2015, but we aim to secure sufficient level of capital and liquidity to give leeway in case of extreme market downturn and to respond to the tightening global financial regulations.



Consolidated total capital ratio was 21.8% (provisional) at the end of December 2015, but we aim to secure sufficient level of capital and liquidity to give leeway in case of extreme market downturn and to respond to the tightening global financial regulations.

Consolidated Total Capital Ratio Consolidated Total Capital Ratio

Capital Risk Asset

D-SIBs buffer Capital conservation buffer

＋0.5％ ＋2.5％

Countercyclical buffer

Up to ＋2.5％

Review of the CVA risk framework Fundamental review of the trading book Upward factor Upward factor Increase of risk asset at times of stress Upward factor Required level

• f capital

8.0％

Damage to capital at times of stress

Downward factor

≪Factors to Increase Qualifying Capital ≫ ≪Factors to Decrease Capital Adequacy Ratio≫

Ⅳ- Basic Group Strategies

3 21 20 40 2005.03 2015.12

HR Strategy

27



In order to become the “customers’ first choice” securities group, employees are the most valuable asset for the Group. By strategic placement of human resources and planned training, we aim to strengthen organizational capabilities. Supporting the Success of “Young Employees”

Improve internal education system to nurture professionals with high loyalty and to retain young employees. Improve “Daiwa Basic Program” (Basic education for the first two years)

Supporting the Engagement of “Veteran Employees”

『Advanced Skill-building Program（ASP）』

Expanded programs for improving skills to continue succeeding as professionals.

Establish “License Certification System”

Established an incentive system to create a corporate culture in which employees are eager to continue developing as professionals regardless of age.

Promoting Health Management Supporting the Success of “Female Employees”

Selected as “Health and Productivity Companies”, “Nadeshiko Brand”

40 companies selected 25 companies selected Increase in number of female branch managers and managers (Daiwa Securities)

Appointment of CHO （Chief Health Officer)

Branch managers Managers （14 companies have been selected for two consecutive years）

60 239 100 200 300 2005.03 2015.12 Organizational structure to carry out health management

“Health Management Promotion Meetings” are being held regularly, and “Health Management Promotion Section” was established within HR Dept.

Establish an incentive system for employees

Points will be given to employees that participate in health promotion related events and training programs.

Ⅳ- Basic Group Strategies

Expand Education and Training Program

Significantly expanded our education and training program by implementing new e-learning programs including

• nline universities, sending

employees to overseas business schools, and providing support to

• btain certifications.

28

Appendix

0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 07/1 07/7 08/1 08/7 09/1 09/7 10/1 10/7 11/1 11/7 12/1 12/7 13/1 13/7 14/1 14/7 15/1 15/7 16/1

年/月

PBR（東証1部上場企業） 10 20 30 40 50 60 70 80 90 100 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 % PBR1倍割れ企業比率（東証1部上場企業）

PBR and % of Companies with PBR Below 1x for TSE 1st Listed Companies

29

Total no. of TSE 1 listed companies： 1,935 Of which no. of companies with PBR below 1x： 1,079

pre-Lehman high 2.04 （2007/2/26） Peak after start of Abenomics 1.44 （2015/6/24） post-Lehman low 0.81 （2008/10/27） start of the second Abe administration 1.02 （2012/12/26） Recent 1.07 （2016/2/24）

日次データ 月次データ

start of the second Abe administration 64.8% （2012/12） post-Lehman high 77.6%（2009/2） Lowest ratio after start of Abenomics 40.7% （2015/5） pre-Lehman low 24.5% （2007/1）

PBR level of 1.0x 50%

Most recent 55.8% （2016/2/24）

Appendix

PBR (TSE1 Listed Companies) daily data % of Companies with PBR Below 1x (TSE1 Listed Companies) monthly data (Source) Compiled by Daiwa Securities based on Factset and Quick data

30 Appendix Corporate Earnings (Daiwa 200*) Estimated FY2015 Dividend Yield for TSE 1 Listed Companies and 10-year JGB Yield

Corporate Earnings, Estimated Dividend Yield for TSE 1st Listed Companies and 10-year JGB Yield

2.19%

• 0.055%

※As of Feb. 24, 2016 (Source) Compiled by Daiwa Securities based on Factset data * Earnings estimation by Daiwa Securities consists of 199 major listed companies, excluding financials institutions.

• 80%
• 60%
• 40%
• 20%

0% 20% 40% 60% 80% 5 10 15 20 25 30 35 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015E FY2016E FY2017E Ordinary Income of Daiwa 200 Companies (left) % Change in Ordinary Income (right) （Y tri）

• 1.0
• 0.5

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Dividend Yield－10-year JGB Yield Dividend Yield 10-year JGB Yield 2.14%

31

Management Vision for 2020

“Be the First Choice”

Lead the development of capital markets in Japan and Asia, and be the customer’s first choice securities group

Management Vision

Basic Management Policy

Achieve sustainable growth by linking Japan to the growth of Asia

Leverage the industry's top quality and dramatically expand our customer base

Contribute to the development of society and economy through financial and capital markets

Appendix

32 Daiwa Securities Group Inc. Investors Relations TEL: +81-3-5555-1300 FAX: +81-3-5555-0661 E-mail: ir-section@daiwa.co.jp URL: http://www.daiwa-grp.jp/ir/english