Daiwa Investment Conference Tokyo 2017 Presented on Tuesday, - - PowerPoint PPT Presentation

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• 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 2017

Presented on Tuesday, February 28, 2017 at “The Prince Park Tower Tokyo”

Takashi Hibino, President and CEO Daiwa Securities Group Inc.

2

Daiwa Investment Conference Tokyo 2017

Ⅰ - Business Environment ・・・・ 3 Ⅱ - Consolidated Earnings Results ・・・・ 7 Ⅲ - Strategic Themes and Business Updates ・・・・ 11 Ⅳ - Approaches to ESG ・・・・ 24 Closing Remarks – Introduction of New CEO ・・・・ 28 Appendix ・・・・ 30

Contents

3

Ⅰ- Business Environment

80 90 100 110 120 130 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 2016/1 2016/3 2016/5 2016/7 2016/9 2016/11 2017/1 Long-term interest rates gap between U.S. and Japan (U.S.-Japan, left) USD/JPY (right)

Expectations for U.S. Growth under the Trump Administration

4 Ⅰ- Business Environment



Implementation of aggressive economic policies by the Trump administration should have positive impact on the Japanese stock market even though there is a mixture of optimism and pessimism.



Implementation of aggressive economic policies by the Trump administration should have positive impact on the Japanese stock market even though there is a mixture of optimism and pessimism. Long-term Interest Rates Gap between U.S. and Japan (U.S.-Japan) and JPY/USD Rate

Economic deceleration from policy failure Downward pressure on strong USD

Positive Negative

Increase in U.S. growth rate through aggressive economic policies Trump wins US presidential election

(Source) Bloomberg, International Monetary Fund (JPY) (%)

Stable oil prices Increase in geopolitical risk Interest rate hike ⇒ stronger USD

Impact on Japanese Stock Market

IMF World Economic Outlook

(Reported on January 17, 2017)

2016 2017 2018

World

3.1 3.4 3.6

U.S.

1.6 2.3 2.5

Recovery of U.S. economy seems to continue

Domestic Investment Environment and Stock Market Outlook

5 Improvement of Corporate Earnings Results Valuation Comparison of Listed Companies Net Share Transaction by Investor Group*

(JPY) (Y bil)

Nikkei 225 Outlook*

FY2017 Nikkei 225 Outlook (JPY)

PER 13x PER 14x PER 15x PER 16x PER 17x JPY100/USD JPY110/EUR 15,800 17,000 18,200 19,400 20,600 JPY105/USD JPY115/EUR 16,300 17,500 18,800 20,000 21,300 JPY110/USD JPY120/EUR 16,800 18,000 19,300 20,600 21,900 JPY115/USD JPY125/EUR 17,300 18,600 19,900 21,200 22,600 JPY120/USD JPY130/EUR 17,700 19,100 20,500 21,800 23,200

(Source) Japan Exchange Group, Bloomberg, Thomson Reuters

2016 2015 2014 2013 2012

※Based on IBES earnings estimates. Country/region is based on MSCI (Japan: TOPIX based). *Earnings outlook is based on Daiwa 210

*Cash stock trading on 1st and 2nd sections of Tokyo and Nagoya stock exchanges for selected investor groups

Ⅰ- Business Environment

8,000 13,000 18,000 23,000 ▲ 3,000 ▲ 2,000 ▲ 1,000 1,000 2,000 3,000 4,000 Overseas investors (left) Corporate institutions (left) Purchase of ETFs by BOJ (left) Nikkei 225 (monthly, right)

As of

• Feb. 23, 2017

PER PBR Japan 14.4 1.23 U.S. 18.2 2.85 U.K. 14.5 1.79 Germany 13.9 1.66 China 12.2 1.47 Hong Kong 15.7 1.14 World 16.1 2.05 5 10 15 20 25 30 35 40 5,000 10,000 15,000 20,000 25,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*2017* Ordinary income (based on Nikkei 225, right) Nikkei 225 (left)

(Y tri) (Yen) (FY) Exchange rate estimated as JPY 110/USD, JPY 120/EUR after October (*Estimate)

Schedule of Major Political and Economic Events

6 Ⅰ- Business Environment Risk and Unclear Factors in the U.S. FY2016 (March 2017) FY2017 (March 2018) FY2018 (March 2019) FY2019 (March 2020) FY2020 (March 2021) Japan

Overseas Presidential election (Nov.) Italy Referendum (Dec.) Presidential inauguration (Jan.) French presidential election (Apr.-May) German general election (Sept.) Term ends for FRB chair (Feb.) Midterm elections (Nov.) ECB president’s terms of office (Oct.) Presidential election (Nov.) UK House of Commons term limit (Jun.) Italian Parliament term (May) Demand preceding the consumption tax hike Rebound after consumption tax hike Economic growth before Tokyo Olympics Economic slowdown after Tokyo Olympics South Korean presidential election (Apr.) Trump rally Strong yen ⇒ Weak yen Low interest rate policy

Effect of President Trump’s economic policies Continuity of additional interest rate hike

Chinese economy downturn risk Continuance of weak yen? Continuance of low interest rate ? Normalization of interest rate?

Protectionism Downward pressure on strong USD

National Congress of the Communist Party of China (Autumn) Political risk in Europe

US

Europe

Asia

LDP Presidential term limit (Sept.) The house of representative’s terms of office (Dec.) Consumption tax hike (Oct.) Upper house election (July) Nationwide local elections (Apr.) Tokyo Olympics (July) BOJ governor tenure (Apr.) Russian presidential election (Mar.)

7

Ⅱ - Consolidated Earnings Results

80 90 100 110 120 130 140 150 10,000 12,000 14,000 16,000 18,000 20,000 22,000 日経平均（左軸） ドル/円レート（右軸）

Achieved to Maintain Stable Level of Profits

8

China worries Introduction of negative interest rate policy Brexit Trump wins US presidential election Introduction of QQE with yield curve control Introduction of QQE Wholesale Division (FICC) lifted consolidated revenues

• ffsetting Retail Division’s

slowdown.

(USD/JPY) (JPY) (Y bil)

Secured stable profit level from a well-balanced revenue structure even under rapidly changing business environment

Nikkei 225, USD/JPY (upper chart), Ordinary Income by Business Segments (lower chart) Ⅱ - Consolidated Earnings Results

(Y bil)

Nikkei225 (left)

10 20 30 40 50 60 70 10 20 30 40 50 60 70 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2014 FY2015 FY2016 Retail Division Wholesale Division Asset Management Division Investment Division Consolidated Total

USD/JPY (right)

(Source) Bloomberg

Improvement of Overseas Operation

9

Americas Americas Europe Europe Asia/Oceania Asia/Oceania



FICC business continued to be a main revenue driver since last fiscal year.



Expansion of US equity trading by Japanese individual investors pushed up U.S. equity revenues.



FICC business continued to be a main revenue driver since last fiscal year.



Expansion of US equity trading by Japanese individual investors pushed up U.S. equity revenues.



Increase in client activity and efficient position management contributed to FICC revenue growth.



DC Advisory, an M&A subsidiary, continued to perform strongly, and pipeline has been building up at a high level.



Increase in client activity and efficient position management contributed to FICC revenue growth.



DC Advisory, an M&A subsidiary, continued to perform strongly, and pipeline has been building up at a high level.



Achieved profits for three consecutive quarters owing to revenues from private banking business in Asia and a large size M&A deal.



Continued to see revenue contribution from Saigon Securities (Vietnam), which became an equity method affiliated company.



Achieved profits for three consecutive quarters owing to revenues from private banking business in Asia and a large size M&A deal.



Continued to see revenue contribution from Saigon Securities (Vietnam), which became an equity method affiliated company.

(Y mil)

Overseas operations turned into the black and contributed to consolidated results

Overseas Ordinary income Ⅱ - Consolidated Earnings Results

▲ 10,000 ▲ 8,000 ▲ 6,000 ▲ 4,000 ▲ 2,000 2,000 4,000 6,000 ▲ 10,000 ▲ 8,000 ▲ 6,000 ▲ 4,000 ▲ 2,000 2,000 4,000 6,000 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 Europe Asia/Oceania Americas Overseas total

(Y mil)

46% 57% 64% 69% 66%

0% 10% 20% 30% 40% 50% 60% 70% 80% 50 100 150 200 250 FY2012 FY2013 FY2014 FY2015 FY2016 3Q (Annualized)

6.3% 12.8% 9.7% 9.5% 8.6% 17.0% 12.8% 8.8%

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 FY2015 FY2016 3Q (Annualized)

Numerical Targets for Medium-Term Management Plan

Shareholders’ equity （Y bil） ROE ROE (excl. effect of losses carried forward belonging to Daiwa Securities) Profit attributable to

• wners of parent

company （Y bil)

10 Fixed Cost Coverage Ratio: 75% or more in the final fiscal year (FY2017) ROE：10% or more Ⅱ - Consolidated Earnings Results

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

11

Ⅲ- Strategic Themes and Business Updates

24.1

• 30

30 60 90

(Y tri)

63.8

• 7.4

18.3

• 30

30 60 90

(Y tri)

852 916 33 26 479 521

1,562 1,752

200 400 600 800 1,000 1,200 1,400 1,600 2012/9 2016/9 (Y tri)

Stocks/Equity Interests Investment Trusts Cash/Deposits Bonds Insurance/Pension Others

The Shift of Household Financial Assets through Abenomics

Household Financial Assets (Sept. 2012 vs Sept. 2016)

(Source) Compiled by Daiwa Securities Group Inc. Based on the Bank of Japan’s Flow of Funds Account

Factor Analysis

Transaction Factor Y76.4 tri (40.2％) Market Factor Y113.6 tri (59.8％)

95

56

150

88

Stocks/ Equity Interests +Y54.6 tri (+57.2％)

Investment Trusts +Y31.6 tri (+56.2％) Cash/ Deposits +Y63.6 tri (+7.5％) Bonds ▲Y6.8 tri (▲20.5％) Insurance/ Pension +Y42.4 tri (+8.9％) Total Assets

+Y190.0tri

(+12.2％)

• 19.8

19.8

74.3

Stocks Equity Interests Investment Trusts Cash Deposits Insurance Pension Insurance Pension Investment Trusts Stocks Equity Interests Bonds

11.8

Market Factor (Market Value Adjustment) Transaction Factor (In/Outflow of Assets) 12

Net Inflow Net Outflow Value Profit Value Loss

Ⅲ- Strategic Themes and Business Updates

Leading the Shift from “Savings to Investment”

13

Competitive Advantages of Daiwa Securities Group

Strategic themes in order to lead the shift from “savings to investment” Respond to the investment needs of a wide range of investors at various life stages Securities Products for Asset Building Fund Wrap Inheritance Related Service

 Secure income necessary for post-

retirement through long-term asset building as public pension is not enough to live on.

Asset Building Age Groups

 Needs for designing investment portfolio

based on risk tolerance (from conservative to aggressive).

The Affluent / Retirees

 Needs for wealth transfer between

generations through inheritance

 Needs for support relating to inheritance

procedures

Seniors

NISA/Junior NISA/ Accumulative NISA Defined Contribution (DC) Daiwa Fund Wrap Premium Daiwa Fund Wrap Online Inheritance Total Service Inheritance Consultant

 Proposals based on high expertise  Thorough follow-up service

Quality of Consulting

 Product line-up to meet the needs of

wide range of customers

Product Offering Abilities

 Approaching clients by face-to-face and

utilizing multi device

Client Reach

Daiwa Fund Wrap

Ⅲ- Strategic Themes and Business Updates

Expansion of Stable Revenue Base by Wrap Account Service

14 Contribution of Wrap-Related Revenues Contract Assets of Wrap Account Service

(Y bil) 

Total contract assets reached a record high of JPY 1.6 tri at the end of Dec. 2016.



Contribution by wrap-related revenues (investment advisory & account management fees) to the net operating revenues of Retail Division was 10.5%.



Total contract assets for Daiwa Fund Wrap Premium which was introduced last October, is steadily increasing, partly owing to customers increasing contract amount when shifting to this new service from the existing Daiwa Fund Wrap.



Total contract assets reached a record high of JPY 1.6 tri at the end of Dec. 2016.



Contribution by wrap-related revenues (investment advisory & account management fees) to the net operating revenues of Retail Division was 10.5%.



Total contract assets for Daiwa Fund Wrap Premium which was introduced last October, is steadily increasing, partly owing to customers increasing contract amount when shifting to this new service from the existing Daiwa Fund Wrap.

(Y bil)

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

Ⅲ- Strategic Themes and Business Updates

1,604 1,000 2,000 3,000 4,000 5,000 6,000 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 3Q FY11 FY12 FY13 FY14 FY15 FY16 Others (Total) Daiwa

Wealth Management Business

Fund Wrap Goes to the 2nd Stage

15



As customer needs continue to diversify and become more advanced with the expansion of the domestic wrap account market, Daiwa Fund Wrap Premium was introduced last October, which is a function/service added product.



In January, we introduced Daiwa Fund Wrap Online which is an internet-based fund wrap service utilizing robo-advisors, enabling customers to begin investment with smaller amount.



As customer needs continue to diversify and become more advanced with the expansion of the domestic wrap account market, Daiwa Fund Wrap Premium was introduced last October, which is a function/service added product.



In January, we introduced Daiwa Fund Wrap Online which is an internet-based fund wrap service utilizing robo-advisors, enabling customers to begin investment with smaller amount.

Lineup of Fund Warp Services

More than JPY3 mil Sales office Up to 1.4% Up to 1.4% (tax excluded) Amount of Amount of contract Sales Channel Annual Fee More than JPY0.5 mil Internet (PC, smartphone, tablet) 1.0% (tax excluded) Amount of Amount of contract Sales Channel Annual Fee More than JPY30 mil Sales office Depends on contract value and risk profile Amount of Amount of contract Sales Channel Annual Fee Up to 5 Investment Investment portfolio 38 various funds Investing Investing assets 1 Investment Investment portfolio Funds dedicated to Funds dedicated to fund wrap service Investing Investing assets 1 Investment Investment portfolio Index funds dedicated to fund wrap service Investing assets

Targeted Clients

Details of Service

Main Features

Highly customizable service that tailors to individual needs Inheritance beneficiary designation service Standard wrap account service Utilization of robo-advsior technology Lower cost and smaller investment amount

Asset Building Age Groups Mass Affluent Affluent / Seniors

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

Ⅲ- Strategic Themes and Business Updates

Daiwa Fund Wrap Online Daiwa Fund Wrap Daiwa Fund Wrap Premium

Launched in

• Jan. 2017

Launched in

• Oct. 2016

47% 15% 38%

Increased Needs for Inheritance Related Consulting

16



The ratio of financial asset held by individuals of age 60 and older has significantly increased in the last 20 years as a result of further aging of population.



Demand for wealth management consulting is increasing, as many of these individuals lack experience in investing or

• pportunities to gain financial knowledge.



The ratio of financial asset held by individuals of age 60 and older has significantly increased in the last 20 years as a result of further aging of population.



Demand for wealth management consulting is increasing, as many of these individuals lack experience in investing or

• pportunities to gain financial knowledge.

(Source ) Compiled by Daiwa Securities Group Inc. based on Family Income and Expenditure Survey (Ministry of Internal Affairs and Communication) and Flow of Funds Account (Bank of Japan)

Distribution of Financial Assets by Age Group (Estimate) Components of Inherited Assets (Estimate)  As with household financial assets, cash/deposits make up around half of inherited assets. The remaining 38% is real assets and 15% is securities.

≈37％ ≈65％

Cash/Deposits Real Assets (e.g. real estate) Securities

(Note1) CY2014 (Note2) Life insurance is included in cash/deposits (Source) Compiled by Daiwa Securities Group Inc. based on Family Income and Expenditure Survey (Ministry of Internal Affairs and Communication), Flow of Funds Account (Bank of Japan), System of National Accounts (Cabinet Office), and Vital Statistics (Ministry of Health, Labour and Welfare)

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

Ⅲ- Strategic Themes and Business Updates

2013.3 2016.12

Number of applications after inheritance Number of applications before inheritance

FY2015.2Q FY2016.3Q New Services Added through Daiwa Fund Wrap Premium (in red)

Strengthening Inheritance Related Business

17



As we work on enhancing solution providing abilities through increasing number of branches with inheritance consultants and introduction of new services, the cumulative number of Inheritance Total Service continues to grow.



Asia Private Banking Service, which was launched in July 2015 as a part of expansion of the wealth management business, contributed to profits in the Overseas Division.



As we work on enhancing solution providing abilities through increasing number of branches with inheritance consultants and introduction of new services, the cumulative number of Inheritance Total Service continues to grow.



Asia Private Banking Service, which was launched in July 2015 as a part of expansion of the wealth management business, contributed to profits in the Overseas Division.

Enhancement of Solution Capabilities Utilizing Fund Wrap Premium Cumulative Number of Use of Inheritance Total Service Revenues from Private Banking Business in Asia

Percentage of new contracts which derived from inheritance-related services of Fund Wrap Premium * As of Dec. 2016

31%

Inheritance beneficiary designation service Multiple investment portfolios More conservative risk profile Liquidation at inheritance

≈ 2.7x

Inheritance Business Related Personnel

≈ 2.7x

July 2015 Introduction of Asia Private Banking Service

* Wealth and Corporate Client Solutions. Based in Singapore, Hong Kong, Thailand.

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

Ⅲ- Strategic Themes and Business Updates

2013.3 2016.12

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

≈ 4.3x

Penetration of “Investment for Savings”

18

Ⅲ- Strategic Themes and Business Updates

Receive tax benefits and ensure liquidity for life events by combining DC and NISA

※ From Jan. 2017, any individual under the age of 60 is eligible to participate in the DC plan.

Capital and Business Alliance Agreement with SBI Group on DC Pension Plan Business

 Combination of DC and NISA allows investors to build assets through advantageous investments and to prepare funds for life

events at the same time.

 We have made a decision to acquire a part of shares in SBI Benefit Systems Co., Ltd. for DC (iDeCo) business where market

growth can be expected. New iDeCo plan is scheduled to be launched from April 2017.

SBI Benefit Systems

Record keeper

SBI Group

Daiwa Securities Group Inc. Daiwa Securities Co. Ltd.

Operation manager

Share purchase agreement Share purchase agreement

Outsourcing contract

Scheduled to acquire 33.4%

New iDeCo plan scheduled to be launched from April 2017 Attractive prices Simple product lineups Utilize video streaming platforms

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

Various deduction + tax free for gain on investment Restricts withdrawal before the age of 60 Y144 thousand to Y816 thousand※ per year

Defined Contribution (DC)

Tax Benefit Tax Benefit

◎

Liquidity

△

Limit

△

Tax free for gain on investment Can be liquidated at anytime Y1.2 mil per year

Nippon Individual Savings Account (NISA)

Tax Tax Benefit

○

Liquidity

◎

Limit

○

＋

Tax Benefits

15.2% 23.6% 37.4% 46.1% 50.6% 55.0%

0% 25% 50% 75% 100% 200 400 600 800 1,000

2012.3 2013.3 2014.3 2015.3 2016.3 2016.12 Equity Stock Investment Trusts Fund Wraps Domestic Bonds Foreign Bonds Others クロスセル比率（右軸）

Combined Securities-Banking Business Model

19 Ordinary Deposit Balance at Daiwa Next Bank



Cross-selling ratio rose to 55% and the total purchased amounts increased to Y980bil.



Against the backdrop of a sudden stock market surge towards the end of the year, cash from liquidating investments are building up in Daiwa Next Bank accounts waiting for investment opportunities. We will promote cross-selling by offering products that meet customer needs.



Cross-selling ratio rose to 55% and the total purchased amounts increased to Y980bil.



Against the backdrop of a sudden stock market surge towards the end of the year, cash from liquidating investments are building up in Daiwa Next Bank accounts waiting for investment opportunities. We will promote cross-selling by offering products that meet customer needs.

(Y bil)

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

Cross-Selling Ratio and Purchased Products (Cumulative)

Ⅲ- Strategic Themes and Business Updates

(Y bil) Cross-selling ratio (right)

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2012.3 2013.3 2014.3 2015.3 2016.3 2016.12 Ordinary Deposit Balance

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

Improvement of Asset Management Capabilities (Investment Trusts / Real Estate AM)

20

(Y tri) 

Total AUM of publicly offered stock investment trusts (excluding ETFs) for the two asset management companies (Daiwa Asset Management and Daiwa SB Investments) have maintained the largest shares in the industry amid difficult market conditions.



AUM of real estate asset management business exceeded Y810bil as of the end of December through expansion of investment into offices, residences, healthcare facilities, and logistics facilities.



Total AUM of publicly offered stock investment trusts (excluding ETFs) for the two asset management companies (Daiwa Asset Management and Daiwa SB Investments) have maintained the largest shares in the industry amid difficult market conditions.



AUM of real estate asset management business exceeded Y810bil as of the end of December through expansion of investment into offices, residences, healthcare facilities, and logistics facilities.

(Y bil)

20 AUM of Publicly Offered Stock Investment Trusts (excluding ETFs) AUM of Real Estate AM Business

Ⅲ- Strategic Themes and Business Updates

Strengthen asset management abilities

Daiwa AM + Daiwa SB Company A Daiwa AM Company C Company D Daiwa SB ※ As of end of the term 100 200 300 400 500 600 700 800 900 2012.3 2013.3 2014.3 2015.3 2016.3 2016.12 Other Japan Rental Housing Investments Inc. (residential) Nippon Healthcare Investment Corp. (healthcare facilities) Daiwa Residential Private Investment

• Corp. (residential)

Daiwa Office Investment Corp. (offices) Company B 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 2H 1H 2H 1H 2H 1H Dec. FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

Focus on M&A Business

21

2 4 6 8 10 12 14 16 18

IN-OUT OUT-IN IN-IN (Y tri )

Deal Value of M&As Involving Japanese Corporations Retained Earnings of Japanese Corporations



Earned surplus of Japanese corporations reached 377 trillion yen at the end of FY2015, reaching a record high.



In order to leverage such surplus and to expand earnings, Japanese corporations are increasing investments especially through mergers and acquisitions abroad.



Earned surplus of Japanese corporations reached 377 trillion yen at the end of FY2015, reaching a record high.



In order to leverage such surplus and to expand earnings, Japanese corporations are increasing investments especially through mergers and acquisitions abroad.

(Source) Financial Statements Statistics of Corporations by Industry (Ministry of Finance), RECOF Corporation (ex. financial and insurance industry)

*Retained earnings = legal retained earnings + general reserve + retained earnings brought forward

(Y tri) (FY)

Providing solutions to expanding M&A needs

Ⅲ- Strategic Themes and Business Updates

(CY)

100 200 300 400

Retained Earnings

Global M&A Network and Selected Deals (FY2016)

Promote Support for M&A Deals Utilizing Global Networks



Given the increasing needs for M&A deals, we have promoted support for providing M&A solutions utilizing a global network and alliance partners, and steadily increased M&A commissions.



Given the increasing needs for M&A deals, we have promoted support for providing M&A solutions utilizing a global network and alliance partners, and steadily increased M&A commissions.

Consolidated M&A Commissions

（Y bil）

DC Advisory Daiwa Capital Markets （Overseas offices） and Alliance Partners Sagent Advisors

Europe Asia Americas

Daiwa Securities

Tokyo

 Cross-border M&A deals involving Japanese companies and overseas deals

※★：Joint deals with alliance partners ※Our clients are underlined.

IDEC’s（JP） purchase of APEM Group （FR）

Nagatanienholdings Co.,Ltd. and Innovation Network Corporation of Japan’s（JP） purchase

• f Chaucer Food

Group（GB）

JX Nippon Mining & Metals Co., Ltd.’s （JP） sale of Changzhou Jinyuan Copper Co., Ltd. （CN） Sale of Micheldever （UK） to Sumitomo Rubber Industries,

• Ltd. (JP)

★Taisho Pharmaceutical Co., Ltd.’s（JP） purchase of DHG Pharma （VN） Daikin Industries, Ltd.’s（JP） purchase of Zanotti （IT） Kyoei Steel ,Ltd.'s(JP） purchase of BD Vinton（US） Baring PE and Glenwood’s purchase of Lafarge Halla Cement Corp（KR） ★TOPPAN PRINTING CO., LTD.’s（JP） purchased of Max Speciality Films(IN) Sale of Clivet (IT) to Midea (CN) Sale of NetNames （GB） to CSC（US） Daily-Tech’s （CN）purchase

• f Global

Switch （GB）

Provide solutions in response to corporate globalization and M&A needs

2 4 6 8 10 12 14 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 1-3Q

(Annualized)

Ⅲ- Strategic Themes and Business Updates

22

23

Bahana Securities

• Sept. 2013, business alliance

(Indonesian equity research / IB)

Indonesia

Thanachart Securities

• Feb. 2013, business alliance

(Thai equity research)

Thailand

中信建投証券

• Nov. 2014, business alliance

(IB/GM covering China)

China

Saigon Securities

• Jun. 2008, business alliance

(comprehensive business covering Vietnam) Increased stake in Apr. 2016 Became equity method affiliate

Vietnam

Affin Hwang Investment Bank

• Dec. 2013, business alliance

(Malaysia equity research)

Malaysia

Myanmar Securities Exchange Centre（MSEC） （JV with Myanma Economic Bank）

• Feb. 2016: grant of securities license
• Mar. 2016: began stock trading/

became equity method affiliate

Myanmar Philippines

Development Bank of Philippines

• Mar. 1995, established joint venture
• Nov. 2015 business alliance

(IB covering the Philippines)

Ambit Private Limited

India

Australia and New Zealand Banking Group

• Feb. 2014, business alliance

(M&A covering Australia, NZ)

Australia New Zealand

Promotion of Alliance Strategy with a Focus on Asia

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

• Dec. 2016

Acquisition of share

• Dec. 2016 business alliance

(M&A covering India)

• Dec. 2016 business alliance for

wealth management business (Opened Japan Desk)

Taiwan

大和國泰證券 股份有限公司

• Oct. 2001, established joint venture

Ⅲ- Strategic Themes and Business Updates

24

Ⅳ- Approaches to ESG

HR-related Initiatives

Ⅳ- Approaches to ESG 25

Began efforts to leave work by 7pm Established WLB Promotion team within HR Dept. Established WLB Promotion team within HR Dept. Began promotion to take paid holidays Began open house for families of employees Introduced Kids Ceremony Leave Introduced “Celebration of Parents’ Longevity” leave Expanded support for balancing work and long-term care Implemented shorter working hours system Implemented Childcare Support leave

Launched female employee career support training initiatives

Implemented a nanny introduction system

Created the position of CHO (Chief Health Officer) Created the position of CHO (Chief Health Officer) Established Health Management Promotion team within HR Dept. Established Health Management Promotion team within HR Dept.

Maintain efforts to create an environment in which all employees are able to continue working with high motivation

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2016 2015

Established Women Promotion team Established Women Promotion team

• No. of Female Employees in
• No. of Female Employees in

Managerial Positions

• No. of Employees who Utilized
• No. of Employees who Utilized

Maternity/Paternity Leave Percentage of Female Percentage of Female Branch Managers

17.8％ 17.8％

Eased requirements to encourage male employees to take child care leave Implemented Long-term Care leave Implemented Women Promotion plan

352 890 200 400 600 800 1,000 2011.3 2016.3 Set up Daiwa Child Care/Long-term Care Support Desk

Updated guidelines for returning to work after leave Began WLB Advisory Committee meetings Began Health Management Promotion meetings

75 389

50 100 150 200 250 300 350 400 2005.3 2016.6

≈5x ≈2.5x

97 male branch managers

21 female branch managers

As of Oct. 2016

Third-Party Recognitions on ESG Practices

Ⅳ- Approaches to ESG DJSI Asia Pacific Selected 7 consecutive years FTSE4Good Index Series Selected 11 consecutive years

Nadeshiko Brand (Companies with excellent track records in empowering women)

Selected 2 consecutive years Health and Productivity Stock Selection

Ministry of Economy, Trade and Industry Tokyo Stock Exchange Dow Jones・RobecoSAM FTSE

Certified as Family-Friendly Employer (“Platinum Kurumin”)

Certified as Promoting Working Environment Favorable for Balancing Work with Long-Term Care

GRESB 2015 “Green Star” Ranked in Top Companies to Work For (New Graduates)

Ministry of Health, Labour and Welfare

Awarded the high recognition 4 consecutive years

(Daiwa Office Investment Corporation) GRESB Survey

Life Balance Minister Prize in Equal Employment/Work-Life Balance Advanced Corporation Award for Promotion of Women

Received the Excellence Award in the “Family Friendly Enterprise” category. We were recognized for proactively supporting employees to balance work and child care or long-term care. Received the Minister of State for Special Missions Award for proactively promoting women in the workplace, for efforts to curb long working hours, and for supporting employees with their work-life balance.

Gender Equality Bureau, Cabinet Office Weekly Toyo Keizai’s Top Companies to Work For Ranking

2016 Overall Ranking：7th

(2006 Overall Ranking: 27th)

BEST 100 Companies where Women Play an Active Part

26

Ranked No.1 in “Promotion of Women” Category

Nikkei WOMAN Nikkei Womenomics Project

Highly recognized for implementing a wide range of initiatives that help female employees succeed by reaching their full potential.

Bloomberg Financial Services Gender Equality Index Selected for the first time in 2017

Bloomberg

Selected 3 consecutive years

Ministry of Economy, Trade and Industry Tokyo Stock Exchange Ministry of Health, Labour and Welfare Ministry of Health, Labour and Welfare

Record high

27

Contributing to Society through the Securities Business

Impact Investment Bonds

56%

Domestic Share Daiwa Securities Cumulative Sales

Y653.9 bil

• Mar. 2008 – Mar. 2016

SRI Funds

Daiwa Securities Group Net Assets of SRI Funds

Y42.0 bil

16%

Domestic Share

As of Mar. 2016

Investment Companies and Other Investment Companies and Other Initiatives to Resolve Social Issues Developing Capital Markets in Myanmar

Established Yangon Securities Exchange in joint efforts with Japan Exchange Group and Myanmar Economic Bank. A fourth company was listed in Jan. 2017.

Developing Socially Responsible ETFs

Developed an ETF which tracks the “MSCI Japan Human and Physical Investment Index” which was listed on TSE on May 19, 2016.

Renewable Energy Power Generation Projects Iwamizawa Photovoltaic Power Station (completed Nov. 2015) Output: 9MW Amount of electricity generated: Equivalent to the amount for 2,800 households Photovoltaic power stations developed/invested in by PIP (5 total) Output: 34MW in total Amount of electricity generated: Equivalent to the amount for 10,400 households Nippon Healthcare Investment Corporation Total assets acquired: Y19.3 bil Photovoltaic power station Balance of assets under management: Y14.8 bil Distribution facilities Balance of assets under management: Y11.0 bil Daiwa Real Estate Asset Management Daiwa PI Partners Daiwa Asset Management Daiwa Securities DIR

Ⅳ- Approaches to ESG

As of Dec. 2016

(Source) Japan Exchange Group, Daiwa Securities Group CSR Report

No Name of Fund AUM （2017/1/31） 1 Daiwa ETF MSCI Japan Human and Physical Investment Index Y77.6 bil 2 DIAM ETF JPX/S&P CAPEX & Human Capital Index Y66.0 bil 3 iShares JPX/S&P CAPEX & Human Capital ETF Y12.1 bil 4 NEXT FUNDS Nomura Enterprise Value Allocation Index Exchange Traded Fund Y8.0 bil 5 MAXIS JAPAN Proactive Investment in Physical and Human Capital 200 Index ETF Y4.0 bil

28

Closing Remarks

29

Introduction of New CEO Seiji Nakata

• Apr. 1983

Joined Daiwa Securities Co. Ltd.

• Jul. 2002

Managing Director of Corporate Clients Marketing Dept. Daiwa Securities SMBC Co. Ltd. May 2004 Managing Director of Equity Dept.

• Apr. 2005

Managing Director of Product Strategy Dept.

• Apr. 2006

Senior Managing Director and Head of Planning

• Apr. 2007

Corporate Executive Officer, Deputy Head of Planning and HR, and Managing Director of Corporate Planning Dept. Daiwa Securities Group Inc.

• Jun. 2009

Member of the Board and Executive Managing Director, Deputy Head of Planning and HR, Daiwa Securities Group Inc.

• Apr. 2010

Member of the Board, Daiwa Securities Group Inc. Member of the Board and Executive Managing Director, Daiwa Securities Capital Markets Co. Ltd.

• Jun. 2010

Member of the Board and Executive Managing Director, and Superior Head of Corporate Clients Marketing, Corporate Clients Banking, Corporate Business Planning, Daiwa Securities Capital Markets Co. Ltd.

• Apr. 2012

Member of the Board, Senior Executive Managing Director, and Head of Corporate Business, Daiwa Securities Co. Ltd.

• Apr. 2015

Senior Executive Managing Director, and Deputy Head of Retail, Daiwa Securities Group Inc. Member of the Board and Senior Executive Managing Director, Daiwa Securities Co. Ltd.

• Apr. 2016

Deputy President, COO, and Head of Retail, Daiwa Securities Group Inc. Deputy President, Daiwa Securities Co. Ltd.

• Jun. 2016

Member of the Board and Deputy President, COO, and Head of Retail, Daiwa Securities Group Inc. Deputy President, Daiwa Securities Co. Ltd.

Background

Hometown: Tokyo Graduated from: Waseda University Motto: “Justice”, “Sincerity”

30

Appendix

3Q FY2016 Consolidated Results

31

Net Operating Revenues Ordinary Income

Profit Attributable to Owners of Parent Company

Dividend



Consolidated net operating revenues: Y351.1 bil, Ordinary income: Y101.2 bil, Profit attributable to owners of parent company: Y81.7 bil for 1-3Q FY2016.



Consolidated net operating revenues: Y351.1 bil, Ordinary income: Y101.2 bil, Profit attributable to owners of parent company: Y81.7 bil for 1-3Q FY2016.

63.1 35.4 37.9 28.6 32.5 33.2 35.4 20 40 60 80 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2015 FY2016 44.8 24.3 26.3 21.3 24.5 30.4 26.6 20 40 60 80 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2015 FY2016

(Y bil)

Appendix

FY2015 1Q-3Q FY2016 1Q-3Q

% Change vs 1Q-3Q/FY15

FY2015 1Q-3Q FY2016 1Q-3Q

% Change vs 1Q-3Q/FY15

FY2015 1Q-3Q FY2016 1Q-3Q

% Change vs 1Q-3Q/FY15

173,551 138,397

• 20.3%

55,752 20,675

• 62.9%

134,305 135,761 1.1% 36,046 49,008 36.0% Global Markets 106,886 109,214 2.2% 32,517 42,836 31.7% Global Investment Banking 27,419 26,547

• 3.2%

3,528 5,761 63.3% 39,488 34,639

• 12.3%

23,998 19,944

• 16.9%

18,573 13,252

• 28.7%

16,818 11,488

• 31.7%

403,042 351,131

• 12.9%

136,519 101,229

• 25.9%

95,537 81,708

• 14.5%

Asset Management Investments

Consolidated total

(Y mil) Net Operating Revenues Ordinary Income Profit Attributable to Owners of Parent Company Retail Wholesale

(Y bil) (Y bil) (Yen)

17 12 13 5 10 15 20

Interim Year-end Interim FY2015 ＦＹ2016

154.6 123.5 124.7 111.7 114.0 115.0 121.9 40 80 120 160 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2015 FY2016

32

Shareholder Returns

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

Dividend per share (Yen) Actual dividend payout ratio (%) FY2011 Interim Year-end FY2012 Interim Year-end FY2013 Interim Year-end FY2014 Interim Year-end FY2015 Interim Year-end FY2016 Interim

Share repurchase

Purchased period:

• Feb. – Mar. 2016

Total amount purchased:

• Approx. Y18.5 bil

Interim Dividend Interim Dividend



FY2016 interim dividend: 13 yen, dividend payout ratio: 40%



FY2016 interim dividend: 13 yen, dividend payout ratio: 40%

Share Repurchase Program Share Repurchase Program



Date of resolution: January 30th, 2017



Total numbers of shares to be purchased: Up to 27 mil, 1.59% of total shares outstanding (excluding treasury stocks)



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



Period of share repurchase: February 10th, 2017 to April 25th, 2017



Date of resolution: January 30th, 2017



Total numbers of shares to be purchased: Up to 27 mil, 1.59% of total shares outstanding (excluding treasury stocks)



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



Period of share repurchase: February 10th, 2017 to April 25th, 2017

Share repurchase program

Total amount to be: purchased: Up to 27 mil shares Paid for purchase: Up to Y20 bil

3 3 3 12 17 17 14 16 17 12 13

50.5% 32.4% 31.1% 37.8% 33.4% 35.5% 42.1% 43.1% 40.0%

Appendix

Daiwa Securities Group Inc. Daiwa Securities A A A- A- BBB+ BBB+ BBB BBB BBB- BBB- 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

Establish a Further Robust Business Structure

33 Established a business structure that can avoid drastic revenue fall even under deteriorated market conditions. Credit rating by S&P was upgraded to the A zone for the first time since moving to holding company structure.

Credit Ratings of Daiwa Securities Group Inc. and Daiwa Securities

S&P Moody’s

Appendix

Daiwa Securities Group Inc. Daiwa Securities A2 A2 A3 A3 Baa1 Baa1 Baa2 Baa2 Baa3 Baa3 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

34 Daiwa Securities Group Inc. Investor 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