Daiwa Securities Group Inc
29 July 2005
+813-3243-2100
2-6-4 Otemachi, Chiyoda-ku
Tokyo 100-8101, Japan
(URL http://www.daiwa.jp/ir/english/)
July 29, 2005
Consolidated financial summary
(For the first quarter ended June 30, 2005)
1. (1) Change in accounting policy: None
(2) Change in scope of consolidation and equity method: None
Scope of consolidation and equity method
Consolidated subsidiaries: 46 companies
Affiliates applicable of equity method: 5 companies
2. Consolidated financial results (from April 1, 2005 to June 30, 2005)
(Note) All figures in the financial statements are rounded down to the nearest
millionth.
'-' indicates a loss or negative figure.
(1) Operating results (from April 1, 2005 to June 30, 2005)
(Millions of yen except for per share data and yr/yr % change)
Operating revenues Net operating revenues Operating income Ordinary income
First quarter (2005/6) 135,435 (8.6)% 91,282 (-9.7)% 21,404 (-34.6)% 23,800 (-30.4)%
First quarter (2004/6) 124,660 (11.3)% 101,058 (19.5)% 32,738 (49.4)% 34,193 (44.4)%
Fiscal 2004 (2005/3) 519,337 390,432 114,887 120,433
Net income Earnings/share Fully diluted Return on
earnings/share shareholders' equity
(annual basis)
First quarter (2005/6) 11,636 (-18.5)% 8.74 Yen 8.33 Yen 7.2 %
First quarter (2004/6) 14,284 (29.5)% 10.73 Yen 10.22 Yen 9.4 %
Fiscal 2004 (2005/3) 52,665 39.03 Yen 37.36 Yen 8.4 %
(Note)
1. Equity in earnings
First quarter (2005/6): 158 million yen First quarter (2004/6): 115 million yen
Fiscal 2004 (2005/3): 1,893 million yen
2. Average number of shares outstanding (shares)
First quarter (2005/6): 1,330,593,553 First quarter (2004/6):1,330,720,666
Fiscal 2004 (2005/3): 1,330,674,648
(2) Financial conditions
(Millions of yen except for per share data and percentage)
Total assets Shareholders' equity Shareholders' Shareholders' equity
/share
equity ratio
As of Jun. 30, 2005 12,453,733 650,923 5.2 % 489.20 Yen
As of Jun. 30, 2004 10,871,681 610,102 5.6 % 458.47 Yen
As of Mar. 31, 2005 12,378,961 648,332 5.2 % 486.70 Yen
(Note)
Number of shares outstanding (shares)
As of Jun. 30, 2005 : 1,330,584,470 As of Jun. 30, 2004 : 1,330,715,469 As of
Mar. 31, 2005 : 1,330,602,933
(Note) The Group's principal business is securities business, and the
performance is influenced by the economic and market environment. Therefore,
the Group doesn't disclose the estimated operating result, considering the
difficulty to forecast the performance.
Representative: Shigeharu Suzuki, President
Contact: Hironaka Takada, General Manager, Finance Department
Phone: +813-3243-2100
Information on Group Companies
Daiwa Securities Group Inc. (the 'Company') and its related companies, 46
consolidated subsidiaries and 5 affiliates applicable of equity method
(collectively the 'Group'), predominantly operate in the investment and
financial segment, focusing on securities businesses such as trading and
brokerage of securities and derivatives, underwriting of securities,
distribution of securities, private offering of securities and other business
related to the securities and financial fields. The Group provides wide range
of services, to meet the worldwide customer needs for raising and investing of
funds through its global networks linking major financial markets in Japan,
America, Europe and Asia and Oceania.
Investing and financial services business (Parent, 46 consolidated subsidiaries
and 5 affiliates applicable of equity method)
(Parent company) Daiwa Securities Group Inc.
(Securities related and financial business)
Japan: 5 firms Daiwa Securities Co. Ltd.
Daiwa Securities SMBC Co. Ltd.
Daiwa Securities SMBC Principal Investments Co. Ltd.
Daiwa Asset Management Co. Ltd.
Daiwa SB Investments Ltd.
Europe: 9 firms Daiwa Securities SMBC Europe Limited
Daiwa Securities Trust and Banking (Europe) plc,
etc.
Asia and Oceania: 15 firms Daiwa Securities SMBC Asia Holding B.V.
Daiwa Securities SMBC H.K. Limited
Daiwa Securities SMBC Singapore Limited, etc.
America: 11 firms Daiwa America Corporation
Daiwa Securities America Inc., etc.
(Other related business): 11 firms
Venture capital NIF Ventures Co., Ltd.
Other related business: 10 firms Daiwa Institute of Research Ltd.
Daiwa Securities Business Center Co., Ltd.
Daiwa Property Co., Ltd., etc
Results of Operation and Financial Conditions
a. Consolidated operating results for the first quarter of fiscal 2005
1. Summary of operating results for 3 months (comparison with the first quarter
of fiscal 2004)
Net operating revenues decreased 9.7% to 91,282 million yen mainly because
commissions and net gains on trading decreased. Selling, general and
administrative expenses increased 2.3% to 69,878 million yen. As a result,
ordinary income decreased 30.4% to 23,800 million yen and net income decreased
18.5% to 11,636 million yen.
(1) Commissions
(i) Brokerage commission
Brokerage commission decreased 35.5% to 17,756 million yen, because brokerage
commission in equity declined 35.7% to 17,467 million yen in line with a
decrease of 15.3% to 1,403.3 billion yen in daily average trading value on the
Tokyo Stock Exchange.
(ii) Underwriting commission
Underwriting commission derived from equity declined 68.1% to 2,501 million yen
because public offerings of listed companies diminished. Underwriting
commission derived from fixed income increased 7.9% to 2,410 million yen. As a
result, underwriting commission dropped 48.0% to 5,320 million yen.
(iii) Distribution commission
Distribution commission grew 28.4% to 7,515 million yen because distribution
commissions in investment trust increased 35.2% to 6,949 million yen, due to an
increase in commission arising from sale of beneficiary certificate.
(iv) Other commission
Other commission in investment trust increased 27.4% to 7,702 million yen
primarily due to an increase in trust fee in line with expanded outstanding
balance of equity-related beneficiary certificate, and other commission in
investment banking increased due to contribution of M&A fee. As a result, total
other commission increased 35.5% to 14,447 million yen.
(2) Net gains on trading
Net gains on trading in stock and other decreased 61.4% to 7,435 million yen.
Net gains on trading in bond, forex and other increased 22.5% to 28,369 million
yen. As a result, total net gains on trading decreased 15.6% to 35,804 million
yen.
(3) Financial income
Interest and dividend income increased 120.4% to 42,965 million yen and interest
expenses increased 114.9% to 38,531 million yen. Net financial income increased
182.2% to 4,434 million yen due to an increase in interests received on bonds.
(4) Selling, general and administrative expenses
Employees' compensation and benefits decreased 5.6% to 34,961 million yen due to
a decrease in accrued bonuses in line with operating result. Commission and
other expenses, however, increased 30.2% to 13,748 million yen due to an
increase in advertisement expenses and bond commission paid. As a result,
selling, general and administrative expenses increased 2.3% to 69,878 million
yen.
2. Operating results of overseas subsidiaries for the first quarter of fiscal
2005 (3 months)
Ordinary income by geographic area (millions of yen)
America Europe Asia & Oceania Total
-72 365 394 687
b. Financial conditions (comparison with March 31, 2005)
Total assets increased by 74,771 million yen to 12,453,733 million yen, because
trading assets and collateralized short-term financing agreements increased by
16,196 million yen and 130,725 million yen, respectively, while cash and
deposits decreased by 73,446 million yen. Total liabilities increased by 74,561
million yen to 11,615,997 million yen, because collateralized short-term
financing agreements increased by 373,801 million yen, and trading receivable
(payables), net posted on the asset side as of March 31, 2005 was recorded on
the liabilities side in 211,429 million yen, while short-term borrowings
decreased by 475,392 million yen.
Consolidated balance sheets
(millions of yen) First quarter First quarter Increase/ Fiscal 2004
Jun. 30, 2005 Jun. 30, 2004 Decrease Mar. 31, 2005
Assets
Current assets: 12,013,642 10,325,304 1,688,337 11,936,024
Cash and deposits 325,242 473,373 -148,131 398,688
Cash segregated as deposits for regulatory purposes 140,734 115,643 25,091 153,516
Notes receivable and trade accounts receivable 6,694 6,767 -72 8,635
Securities 18,904 27,133 -8,229 15,037
Trading assets: 5,258,515 4,239,080 1,019,435 5,242,319
Trading securities and others 4,562,301 3,683,002 879,299 4,690,548
Derivative assets 696,214 556,078 140,136 551,771
Trading receivables, net - - - 9,419
Private equity and other securities 159,255 41,151 118,104 149,598
Less: Allowance for possible investment losses -6,803 -5,357 -1,446 -7,051
Other inventories 1,982 1,097 885 816
Receivables related to margin transactions: 338,545 261,205 77,339 312,144
Customer margin loans 145,577 122,041 23,536 126,686
Cash deposits as collateral for securities borrowed 192,967 139,164 53,803 185,457
Collateralized short-term financing agreements: 5,479,641 4,797,418 682,223 5,348,915
Cash deposits as collateral for securities borrowed 5,479,641 4,793,418 686,223 5,348,915
Receivables related to gensaki transactions - 4,000 -4,000 -
Receivables 23,997 16,339 7,657 11,458
Securities failed to deliver 101,862 138,213 -36,350 130,176
Short-term loans receivable 77,019 100,383 -23,364 75,781
Accrued income 21,166 16,284 4,881 17,463
Deferred tax assets-current 4,727 11,655 -6,928 9,076
Other current assets 62,525 85,287 -22,761 60,354
Less: Allowance for doubtful accounts-current -369 -372 3 -328
Non-current assets: 440,090 546,376 -106,286 442,937
Tangible fixed assets 137,209 141,664 -4,455 137,619
Intangible fixed assets 61,837 59,207 2,630 62,052
Investments and others: 241,043 345,504 -104,461 243,265
Investment securities 176,619 186,600 -9,980 178,163
Long-term loans receivable 11,716 11,401 314 11,681
Long-term guarantee deposits 23,060 25,386 -2,326 23,410
Deferred tax assets-non-current 12,050 32,689 -20,638 12,839
Other investments 25,403 101,323 -75,920 25,715
Less: Allowance for doubtful accounts-non-current -7,807 -11,896 4,089 -8,546
Total assets 12,453,733 10,871,681 1,582,051 12,378,961
First quarter First Increase/ Fiscal 2004
quarter
Jun. 30, 2005 Decrease Mar. 31,
(millions of yen) Jun. 30, 2005
2004
Liabilities
Current liabilities: 10,619,683 9,314,554 1,305,129 10,685,604
Notes payable and trade accounts payable 2,814 2,407 406 3,369
Trading liabilities: 3,686,215 3,213,745 472,470 3,658,544
Trading securities and others 3,077,863 2,721,424 356,438 3,196,633
Derivative liabilities 608,352 492,320 116,031 461,911
Trading payables, net 211,429 149,109 62,320 -
Payables related to margin transactions: 156,341 100,701 55,640 141,972
Payable to securities finance companies 1,757 3,292 -1,535 2,981
Proceeds of securities sold for customers' accounts 154,584 97,408 57,175 138,991
Collateralized short-term financing agreements: 4,251,532 3,686,929 564,602 3,877,730
Cash deposits as collateral for securities loaned 4,005,214 3,220,607 784,606 3,687,840
Payables related to gensaki transactions 246,318 466,322 -220,003 189,890
Deposits received 118,433 179,304 -60,870 110,415
Cash deposits received as guarantee 56,007 64,016 -8,009 53,302
Securities failed to receive 84,276 134,695 -50,419 138,288
Short-term borrowings 1,820,536 1,441,802 378,734 2,295,928
Commercial paper 128,918 159,722 -30,803 200,220
Bonds and notes due within one year 33,098 128,312 -95,214 129,401
Income taxes payable 9,437 2,486 6,951 10,596
Deferred tax liabilities-current 5,130 124 5,005 951
Accrued bonuses 8,839 10,658 -1,818 22,811
Other current liabilities 46,670 40,537 6,132 42,071
Non-current liabilities: 990,663 769,644 221,019 850,180
Bonds and notes 727,708 590,184 137,524 666,136
Convertible bonds 79,985 79,986 -1 79,985
Long-term debt 154,074 67,409 86,664 74,195
Deferred tax liabilities-non-current 5,891 8,947 -3,055 6,225
Retirement benefits 19,280 17,283 1,996 19,173
Other non-current liabilities 3,723 5,834 -2,110 4,465
Statutory reserves 5,649 5,220 429 5,650
Total liabilities 11,615,997 10,089,419 1,526,577 11,541,435
Minority interests 186,812 172,159 14,653 189,193
Shareholders' equity
Common stock 138,432 138,431 0 138,432
Capital surplus 117,940 117,940 0 117,941
Retained earnings 363,261 331,221 32,040 362,948
Net unrealized gain (loss) on securities, net of tax effect 37,571 30,964 6,606 35,674
Translation adjustments -5,483 -7,749 2,265 -5,877
Treasury stock -799 -705 -94 -786
Total shareholders' equity 650,923 610,102 40,820 648,332
Total liabilities, minority interests and shareholders' 12,453,733 10,871,681 1,582,051 12,378,961
equity
Consolidated statements of operations
(millions of yen) First First quarter Yr/yr Fiscal 2004
quarter
Apr. 1, 2004 % Apr. 1, 2004-
Apr. 1, -
2005 - change Mar. 31, 2005
Jun. 30, 2004
Jun. 30,
2005
Operating revenues: 135,435 124,660 8.6 519,337
Commissions 45,039 54,299 -17.1 216,386
Net gain (loss) on trading 35,804 42,437 -15.6 151,117
Net gain (loss) on private equity and other securities (*1) 4,009 - - -
Net gain (loss) on private equity and other securities (*2) - 950 - 171
Interest and dividend income 42,965 19,498 120.4 118,019
Other sales revenues 7,616 7,475 1.9 33,641
Interest expenses 38,531 17,926 114.9 103,676
Cost of sales 5,621 5,675 -1.0 25,228
Net operating revenues 91,282 101,058 -9.7 390,432
Selling, general and administrative expenses: 69,878 68,319 2.3 275,544
Commission and other expenses 13,748 10,559 30.2 46,720
Employees' compensation and benefits 34,961 37,043 -5.6 142,751
Occupancy and rental 7,746 7,901 -2.0 32,697
Data processing and office supplies 4,309 3,784 13.9 16,804
Depreciation expenses 5,551 5,458 1.7 22,129
Taxes other than income taxes 1,594 1,829 -12.9 6,755
Others 1,966 1,743 12.8 7,685
Operating income 21,404 32,738 -34.6 114,887
Non-operating income: 2,705 2,439 10.9 7,909
Equity in earnings 158 115 36.4 1,893
Others 2,546 2,323 9.6 6,015
Non-operating expenses 308 984 -68.7 2,363
Ordinary income 23,800 34,193 -30.4 120,433
Extraordinary gains 321 319 0.8 9,552
Extraordinary losses - 777 - 17,383
Income before income taxes and minority interests 24,122 33,734 -28.5 112,603
Income taxes-current 2,698 890 202.9 11,933
Income taxes-deferred 6,690 12,625 -47.0 28,233
Minority interest -3,096 -5,933 - -19,770
Net income 11,636 14,284 -18.5 52,665
Net financial income included in net operating revenues 4,434 1,571 182.2 14,342
Note:
*1. Includes share of net income raised by the investments in limited
partnerships and similar partnerships.
*2. Excludes share of net income raised by the investments in limited
partnerships and similar partnerships.
The details are mentioned in 'Change in presentation'.
Consolidated statements of capital surplus and retained earnings
(millions of yen) First quarter First quarter Fiscal 2004
Apr. 1, 2005- Apr. 1, 2004- Apr. 1, 2004-
Jun. 30, 2005 Jun. 30, 2004 Mar. 31, 2005
Capital surplus
Beginning balance of capital surplus 117,941 117,939 117,939
Increase in capital surplus - 0 1
Conversion of convertible bonds - - 0
Net gains on sales of treasury stock - 0 1
Decrease in capital surplus 0 - -
Net losses on sales of treasury stock 0 - -
Ending balance of capital surplus 117,940 117,940 117,941
Retained earnings
Beginning balance of retained earnings 362,948 330,780 330,780
Increase in retained earnings: 11,636 14,284 52,665
Net income 11,636 14,284 52,665
Decrease in retained earnings: 11,323 13,843 20,497
Cash dividends paid 10,644 13,307 19,960
Bonuses to directors 678 536 536
Ending balance of retained earnings 363,261 331,221 362,948
Notes to consolidated financial statements
The consolidated financial statements of the Company for the first quarter ended
June 30, 2005 are prepared in accordance with the 'Cabinet Office Ordinance
Concerning Securities Companies' (Prime Minister's Office Ordinance and Ministry
of Finance Ordinance No. 32, 1998), and the 'Uniform Accounting Standards of
Securities Companies' (set by the board of directors of the Japan Securities
Dealers' Association, November 14, 1974), based on the 'Regulations of
Consolidated Financial Statements' (Ministry of Finance Ordinance No. 24, 1998)
and its Article 48 and 69.
Basis of consolidated financial statements
1. Scope of consolidation
Consolidated subsidiaries: 46 companies
Major companies:
Daiwa Securities Co. Ltd.
Daiwa Securities SMBC Co. Ltd.
Daiwa Asset Management Co. Ltd.
Daiwa Institute of Research Ltd.
NIF Ventures Co., Ltd.
Daiwa Securities Business Center Co. Ltd.
Daiwa Property Co., Ltd.
Daiwa Securities SMBC Europe Limited
Daiwa Securities Trust and Banking (Europe) plc
Daiwa America Corporation
Daiwa Securities America Inc.
Daiwa Securities SMBC Asia Holding B.V.
Daiwa Securities SMBC H.K. Limited
Daiwa Securities SMBC Singapore Limited
Each amount of total assets, operating revenues (or sales), net income
corresponding to equity holdings and retained earnings corresponding to equity
holdings of non-consolidated subsidiaries has little influence on the
consolidated financial statements and has little materiality as a whole.
2. Application of equity method
Affiliates applicable of equity method: 5 companies
Major companies:
Daiwa SB Investments Ltd.
Totan Holdings Co., Ltd.
The Tokyo Tanshi Co., Ltd.
Daiwa SMBC-SSC Securities Co. Ltd.
Each amount of net income corresponding to equity holdings and retained earnings
corresponding to equity holdings of both non-consolidated subsidiaries and
affiliates inapplicable of equity method has little influence on the
consolidated financial statements and has little materiality as a whole.
For affiliates applicable of equity method whose first quarter other than June
30, 2005, the financial statements for the relevant first quarter are reflected.
3. Fiscal period of subsidiaries
For subsidiaries with the first quarter ending other than June 30, 2005, the
financial statements for the relevant first quarter are employed and important
transactions occurred by discrepancies with closing account date are adjusted
for this consolidated financial statements.
4. Accounting policies
(1) Valuation of financial instruments and inventories
(i) Valuation of trading assets and liabilities
Trading assets and liabilities, including securities and financial derivatives
for trading purposes held by a securities company are recorded mainly on a trade
date basis in the consolidated balance sheet at either market or fair value.
(ii) Valuation of non-trading securities
The Group examines the intent of holding each securities and classifies those
securities as (a) debt securities intended to be held to maturity ('
held-to-maturity debt securities'), (b) equity securities issued by subsidiaries
and affiliated companies, or (c) all other securities not classified in any of
the above categories ('available-for-sale securities').
Held-to-maturity debt securities are stated at amortized cost. Equity
securities issued by subsidiaries and affiliated companies are stated at
moving-average cost. Available-for-sale securities with market value are stated
at market value, based on quoted market prices. Realized gains and losses on
sale of such securities are computed using the moving-average cost. Unrealized
gains and losses on these securities are reported, net of applicable income
taxes, as a separate component of the shareholders' equity.
Debt in available-for-sale securities for which a market value is not available,
are stated at the amortized cost, net of the amount considered not collectible.
Equity in available-for-sale securities for which a market value is not
available, are stated at the moving-average cost.
Of those securities with no fair value, investments in limited partnerships and
similar partnerships which are regarded as equivalent to securities by the
Article2 (2) of Securities Exchange Act in 2004, share of net income raised by
the partnership has been reflected on consolidated statements of operations of
last fiscal year and share of net unrealized profits and losses held by the
partnerships directly into stockholders' equity.
(iii) Valuation of other inventories
Cost method determined by the specific identification method is mainly applied.
(2) Depreciation of depreciable assets
(i) Tangible fixed assets
Property and equipment are stated at cost. The Company and domestic
consolidated subsidiaries compute depreciation principally by the
declining-balance method over estimated useful lives as stipulated by
Corporation Tax Law of Japan. Depreciation for buildings purchased in Japan
after April 1, 1998 is computed by the straight-line method. In overseas
consolidated subsidiaries, depreciation is mainly computed by the straight-line
method.
(ii) Intangible fixed assets
Intangible fixed assets are generally amortized under the straight-line method.
The Company and domestic consolidated subsidiaries compute amortization over
estimated useful lives as stipulated by Corporation Tax Law of Japan, and over
internally estimated useful lives (5 years) for software of in-house use.
(3) Accounting policies for various provisions
(i) Provision for doubtful accounts
Provisions for doubtful accounts are provided based on the estimated historical
default rate for normal loans, and based on individually assessed amounts for
doubtful accounts.
(ii) Allowance for possible investment losses
Some consolidated subsidiaries provide the allowances based on estimated losses
on private equity and other securities held at the first quarter end, assessing
the financial conditions of investee companies.
(iii) Accrued bonuses
The Company and domestic consolidated subsidiaries follow the Japanese practice
of paying bonuses to employees in June and December. Accrued employees' bonuses
represent liabilities estimated as of the balance sheet date. Bonuses to
directors and corporate executive officers of the Company, which are subject to
approval at the Compensation Committee, represent liabilities as of the balance
sheet date. Compensation Committee sets policies for deciding compensation of
individual directors and corporate executive officers and determines
compensation content for each individual. The Chairman of the Board chairs the
committee, while three out of five committee members are outside directors.
Bonuses to directors of consolidated subsidiaries, which are subject to approval
at the shareholders' meeting, are accounted for as an appropriation of retained
earnings.
(iv) Retirement benefits
The Company and most of domestic consolidated subsidiaries provide an unfunded
defined contribution plan to their employees in return for services rendered
each year, where the amount to be contributed to the individual employee's
account is defined by the plan. Contributions by the Company and most of
domestic consolidated subsidiaries under the unfunded defined contribution plan
are accumulated on an annual basis and earn a guaranteed hypothetical return at
a rate predetermined by the Company and most of domestic consolidated
subsidiaries each year.
(4) Accounting for certain lease transactions
Financial leases, whose ownership does not transfer to the lessee at the end of
the lease term (non-capitalized finance leases) are not capitalized and are
accounted for in the same manner as operating leases.
(5) Hedging transaction
The Group states derivative financial instruments at fair value and recognizes
changes in the fair value as gains or losses unless the derivative financial
instruments are used for hedging purposes. Valuation gains or losses on hedging
instruments are mainly deferred as assets or liabilities until the gains or
losses on the underlying hedged instruments are realized. Interest received or
paid on interest swaps for hedging purposes is accrued without being
marked-to-market. The premium or discount on forward foreign exchange for
hedging purpose is allocated to each fiscal term without being marked-to-market.
(6) Other material items
(i) Accounting for consumption taxes
Consumption taxes are separately recorded.
(ii) Deferred assets
Stock issue costs and bond issue costs are amortized in a lump sum when
incurred.
(iii) Consolidated tax payments system
Starting from fiscal 2004 ended March 31, 2005, the consolidated tax payments
system was applied, designating the Company and NIF Ventures as parent companies
of the consolidated tax payments. Daiwa Securities SMBC has applied the
consolidated tax payments system as parent company since the year ended March
31, 2003.
Change in presentation
Regarding the investments in limited partnerships and a sort of partnerships
which are regarded as equivalent to securities by the Article2 (2) of Securities
Exchange Act, the profits and losses related to these investments had been
included in 'Interest and dividend income' until fiscal 2004, but those are
included in 'Net gain (loss) on private equity and other securities' since the
beginning of this fiscal year. 'Interest and dividend income' decreased by
2,567 million yen, due to this change in presentation.
Notes to consolidated balance sheets
1. Accumulated depreciation of tangible fixed assets
As of Jun. 30, 2005 As of Jun. 30, 2004 As of Mar. 31, 2005
98,352 million yen 101,282 million yen 97,300 million yen
2. Guarantee
As of Jun. 30, 2005 As of Jun. 30, 2004 As of Mar. 31, 2005
3,321 million yen 4,269 million yen 3,513 million yen
3. Short-term and long-term borrowings include the subordinated
borrowings stipulated by Article 2 of the 'Cabinet Office Ordinance on the
Capital Adequacy Rule for Securities Companies' (Cabinet Office Ordinance No.
23, 2001).
Short-term borrowings
As of Jun. 30, 2005 As of Jun. 30, 2004 As of Mar. 31, 2005
- 40,000 million yen 40,000 million yen
Long-term borrowings
As of Jun. 30, 2005 As of Jun. 30, 2004 As of Mar. 31, 2005
102,000 million yen - 20,000 million yen
Notes to consolidated statements of operations
Details of extraordinary gains/losses
(million of yen) First quarter First quarter Fiscal 2004
Apr. 1, 2005- Apr. 1, 2004- Apr. 1, 2004-
Jun. 30, 2005 Jun. 30, 2004 Mar. 31, 2005
Extraordinary gains:
Gain on sale of fixed assets - 7 2,000
Gain on liquidation of related companies - - 599
Gain on sale of investment securities 321 311 6,451
Reversal of reserve for securities transaction liabilities 0 - -
Reversal of reserve for financial futures transaction - 0 -
liabilities
Reversal of stock purchase warrant - - 501
Extraordinary losses:
Write-down of related companies stocks - - 40
Write-down of investment securities - - 3,430
Valuation loss of fixed assets - - 114
Loss on sale or disposal of fixed assets - 93 1,535
Loss on liquidation of related companies - - 650
Loss on sale of investment securities - 257 892
Loss on sale of loans receivable - - 7,595
Provision for doubtful accounts - - 1,638
Reorganization costs for overseas banking subsidiary - 338 779
Multiemployer pension plan settlement cost in consolidated - - 188
subsidiaries
Provision for securities transaction liabilities - 87 517
Supplemental information for the first quarter of fiscal 2005
1. Breakdown of commissions
First quarter ended June 30, 2005 (A)
(millions of yen) Equity Fixed income Investment Investment Others Total
banking
(Bond) trust
Brokerage commission 17,467 251 38 - - 17,756
Underwriting commission - - - 5,320 - 5,320
(Stock and other) (-) (-) (-) (2,501) (-) (2,501)
(Bond and other) (-) (-) (-) (2,410) (-) (2,410)
Distribution commission - - 6,949 566 - 7,515
Other commission 497 466 7,702 2,345 3,436 14,447
(Agency commission) (-) (453) (4,284) (-) (-) (4,737)
Total 17,964 717 14,689 8,231 3,436 45,039
First quarter ended June 30, 2004 (B)
(millions of yen) Equity Fixed income Investment Investment Others Total
banking
(Bond) trust
Brokerage commission 27,171 312 60 - - 27,544
Underwriting commission - - - 10,236 - 10,236
(Stock and other) (-) (-) (-) (7,843) (-) (7,843)
(Bond and other) (-) (-) (-) (2,232) (-) (2,232)
Distribution commission - - 5,141 711 - 5,852
Other commission 551 510 6,046 1,152 2,405 10,665
(Agency commission) (-) (509) (3,233) (-) (-) (3,743)
Total 27,723 822 11,248 12,100 2,405 54,299
Yr/yr percentage change (First quarter ended Jun. 30, 2005 (A) / First quarter
ended Jun. 30, 2004 (B) - 1)
(percentage) Equity Fixed income Investment Investment Others Total
banking
(Bond) Trust
Brokerage commission -35.7 -19.5 -37.3 - - -35.5
Underwriting commission - - - -48.0 - -48.0
(Stock and other) (-) (-) (-) (-68.1) (-) (-68.1)
(Bond and other) (-) (-) (-) (7.9) (-) (7.9)
Distribution commission - - 35.2 -20.4 - 28.4
Other commission -9.7 -8.6 27.4 103.4 42.9 35.5
(Agency commission) (-) (-11.1) (32.5) (-) (-) (26.6)
Total -35.2 -12.8 30.6 -32.0 42.9 -17.1
Fiscal 2004 ended March 31, 2005
(millions of yen) Equity Fixed income Investment Investment Others Total
banking
(Bond) trust
Brokerage commission 81,919 1,463 159 - - 83,542
Underwriting commission - - - 54,743 - 54,743
(Stock and other) (-) (-) (-) (44,659) (-) (44,659)
(Bond and other) (-) (-) (-) (8,573) (-) (8,573)
Distribution commission - - 19,687 3,597 - 23,285
Other commission 1,967 2,800 25,793 12,828 11,425 54,815
(Agency commission) (-) (2,748) (14,014) (-) (-) (16,763)
Total 83,887 4,263 45,640 71,170 11,425 216,386
2. Breakdown of net gains on trading
(millions of yen) First quarter First quarter Yr/yr % change Fiscal 2004 (2005/
3)
(2005/6) (2004/6)
Stock and other 7,435 19,285 -61.4 56,104
Bond, forex and other 28,369 23,151 22.5 95,012
(Bond and other) (20,566) (17,228) (19.4) (62,407)
(Forex and other) (7,802) (5,922) (31.7) (32,605)
Total 35,804 42,437 -15.6 151,117
Quarterly consolidated statements of operations
(millions of yen) 1st quarter 2nd quarter 3rd quarter 4th quarter 1st quarter
Apr. 1, Jul. 1, Oct. 1, Jan. 1, Apr.1, 2005-
2004- 2004- 2004- 2005-
Mar. 31,
Jun. 30, Sep. 30, Dec. 31, Mar. 31, 2005
2004 2004 2004 2005
Operating revenues 124,660 118,519 118,067 158,088 135,435
Commissions 54,299 53,116 46,702 62,268 45,039
Brokerage commission 27,544 16,831 16,757 22,408 17,756
(Stock and other) 27,171 16,485 16,322 21,939 17,467
(Bond and other) 312 307 404 439 251
Underwriting commission 10,236 17,299 11,801 15,405 5,320
(Stock and other) 7,843 15,001 9,822 11,991 2,501
(Bond and other) 2,232 1,751 1,764 2,824 2,410
Distribution commission 5,852 4,155 5,617 7,659 7,515
(Beneficiary certificates) 5,141 3,434 4,691 6,420 6,949
Other commission 10,665 14,829 12,524 16,795 14,447
(Beneficiary certificates) 6,016 6,169 6,491 7,006 7,663
Net gain (loss) on trading 42,437 33,831 30,452 44,397 35,804
(Stock and other) 19,285 9,606 5,635 21,577 7,435
(Bond and other) 17,228 18,431 18,216 8,531 20,566
(Forex and other) 5,922 5,794 6,600 14,288 7,802
Net gain (loss) on private equity - - - - 4,009
and other securities (*1)
Net gain (loss) on private equity 950 583 201 -1,563 -
and other securities (*2)
Interest and dividend income 19,498 23,761 33,385 41,374 42,965
Other sales revenues 7,475 7,226 7,326 11,612 7,616
Interest expenses 17,926 23,145 30,466 32,137 38,531
Cost of sales 5,675 5,410 5,420 8,720 5,621
Net operating revenues 101,058 89,963 82,180 117,230 91,282
Selling, general and administrative expenses: 68,319 67,640 66,002 73,581 69,878
Commission and other expenses 10,559 11,779 11,295 13,086 13,748
Employees' compensation and benefits 37,043 34,199 33,472 38,036 34,961
Occupancy and rental 7,901 8,359 7,992 8,443 7,746
Data processing and office supplies 3,784 4,223 4,225 4,571 4,309
Depreciation expenses 5,458 5,426 5,486 5,758 5,551
Taxes other than income taxes 1,829 1,751 1,617 1,556 1,594
Others 1,743 1,900 1,911 2,129 1,966
Operating income 32,738 22,322 16,177 43,649 21,404
Non-operating income 2,439 1,141 2,436 1,891 2,705
Non-operating expenses 984 397 591 389 308
Ordinary income 34,193 23,066 18,022 45,151 23,800
Extraordinary gains 319 1,883 2,043 5,307 321
Extraordinary losses 777 1,607 1,388 13,608 -
Income before income taxes and minority 33,734 23,341 18,676 36,850 24,122
interests
Income taxes-current 890 939 307 9,795 2,698
Income taxes-deferred 12,625 7,384 6,683 1,539 6,690
Minority interests -5,933 -5,136 -2,221 -6,479 -3,096
Net income 14,284 9,881 9,464 19,035 11,636
Net financial income included in net 1,571 615 2,918 9,236 4,434
operating revenues
Note:
*1. Includes share of net income raised by the investments in limited
partnerships and similar partnerships.
*2. Excludes share of net income raised by the investments in limited
partnerships and similar partnerships.
Non-consolidated financial summary
(For the first quarter ended June 30, 2005)
(1) Operating results (from April 1, 2005 to June 30, 2005)
(Note) All figures in the financial statements are rounded down to the nearest
millionth.
'-' indicates a loss or negative figure.
(Millions of yen except for per share data and yr/yr % change)
Operating revenues Operating income Ordinary income
First quarter (2005/6) 22,842 (8.0)% 19,848 (11.7)% 20,877 (8.8)%
First quarter (2004/6) 21,148 (132.7)% 17,766 (221.7)% 19,186 (230.2)%
Fiscal 2004 (2005/3) 26,236 13,884 16,302
Net income Earnings/share
First quarter (2005/6) 20,942 (13.7)% 15.73 Yen
First quarter (2004/6) 18,419 (220.4)% 13.84 Yen
Fiscal 2004 (2005/3) 32,228 24.21 Yen
(Note)
1. Average number of shares outstanding (shares)
First quarter (2005/6): First quarter (2004/6): 1,330,730,164 Fiscal 2004 (2005/3):
1,330,603,051 1,330,684,146
2. Change in accounting policies: None
(2) Financial conditions
(Millions of yen except for per share data and percentage)
Total assets Shareholders' equity Shareholders' Shareholders' equity/
share
equity ratio
As of Jun. 30, 2005 976,315 582,418 59.7 % 437.71 Yen
As of Jun. 30, 2004 1,113,965 565,494 50.8 424.95
As of Mar. 31, 2005 1,088,665 573,115 52.6 430.71
(Note)
1. Number of shares outstanding (shares)
As of Jun. 30, 2005: 1,330,593,968 As of Jun. 30, 2004: 1,330,724,967 As of Mar. 31, 2005: 1,330,612,431
2. Treasury stock (shares)
As of Jun. 30, 2005: 1,142,204 As of Jun. 30, 2004: 1,010,291 As of Mar. 31, 2005: 1,123,741
(Note)
The Company, the holding company for the Daiwa Securities Group, is influenced
by the performance of subsidiaries.
The subsidiaries' principal business is securities business, and the economic
and market environment affects their performance. Therefore, the Company
doesn't disclose the estimated operating result, considering the difficulty to
forecast the performance.
Balance sheets
(millions of yen) First quarter First quarter Increase/ Fiscal 2004
Jun. 30, 2005 Jun. 30, 2004 Decrease Mar. 31, 2005
Assets
Current assets: 99,583 263,917 -164,334 227,816
Cash and deposits 45,453 179,047 -133,593 117,897
Short-term loans receivable 16,931 67,533 -50,602 87,369
Accounts receivable 23,420 7,720 15,700 17,728
Accrued income 11,239 1,531 9,707 1,845
Deferred tax assets-current 1,396 6,870 -5,474 1,886
Other current assets 1,140 1,214 -73 1,088
Non-current assets: 876,731 850,047 26,684 860,849
Tangible fixed assets 10,130 10,358 -227 10,187
Intangible fixed assets 698 819 -120 717
Investments and others: 865,902 838,869 27,033 849,944
Investment securities 656,954 656,297 656 658,209
Long-term loans receivable 188,426 144,183 44,242 171,406
Long-term guarantee deposits 12,474 27,808 -15,334 12,471
Others 8,537 11,015 -2,478 8,351
Less: Allowance for doubtful accounts -489 -436 -52 -494
Total assets 976,315 1,113,965 -137,650 1,088,665
(millions of yen) First quarter First quarter Increase/ Fiscal 2004
Jun. 30, 2005 Jun. 30, 2004 Decrease Mar. 31, 2005
Liabilities
Current liabilities: 142,384 277,076 -134,692 263,444
Short-term borrowings 70,710 94,410 -23,700 67,710
Commercial paper - - - 25,000
Bonds and notes due within one year - 108,400 -108,400 100,000
Collateralized short-term financing agreements 67,435 68,966 -1,530 66,855
Income taxes payable 28 79 -50 138
Accrued bonuses 246 315 -68 769
Stock purchase warrant - 501 -501 -
Other current liabilities 3,962 4,405 -442 2,970
Non-current liabilities: 251,512 271,393 -19,881 252,105
Bonds and notes 126,900 120,000 6,900 124,900
Convertible bonds 79,985 79,986 -1 79,985
Long-term debt 35,000 38,000 -3,000 37,000
Long-term cash deposits received as guarantee 4,118 18,746 -14,628 4,100
Deferred tax liabilities-non-current 1,244 10,347 -9,103 1,916
Retirement benefits 3,484 3,105 378 3,408
Other non-current liabilities 780 1,208 -427 793
Total liabilities 393,896 548,470 -154,574 515,549
Shareholders' equity
Common stock 138,432 138,431 0 138,432
Capital surplus 117,940 117,940 0 117,941
Additional paid-in capital 117,786 117,786 0 117,786
Other capital surplus reserve 153 153 0 154
Net gains on sales of treasury stock 153 153 0 154
Retained earnings 299,707 282,254 17,453 289,409
Earned surplus reserve 45,335 45,335 - 45,335
General-purpose reserve 218,000 218,000 - 218,000
Unappropriated retained earnings 36,372 18,918 17,453 26,074
(Net income for the current term) (20,942) (18,419) (2,523) (32,228)
Net unrealized gain (loss) on securities, net of tax 27,136 27,573 -437 28,119
effect
Treasury stock -799 -704 -94 -786
Total shareholders' equity 582,418 565,494 16,923 573,115
Total liabilities and shareholders' equity 976,315 1,113,965 -137,650 1,088,665
Statements of operations
First quarter First quarter Yr/yr Fiscal 2004
(millions of yen) Apr. 1, 2005 - Apr. 1, 2004 - % Apr. 1, 2004 -
Jun. 30, 2005 Jun. 30, 2004 change Mar. 31, 2005
Operating revenues: 22,842 21,148 8.0 26,236
Dividends from related companies 22,120 19,127 15.6 19,136
Interest on loans to related companies 694 1,109 -37.4 3,704
Other interest and dividend income - 27 - 100
Royalty on trademark - 884 - 3,295
Other 28 - - -
Operating expenses: 2,994 3,382 -11.5 12,352
Selling, general and administrative expenses: 2,068 1,980 4.5 7,731
Commission and other expenses 485 179 171.0 917
Employees' compensation and benefits 747 971 -23.0 3,650
Occupancy and rental 149 197 -24.4 681
Data processing and office supplies 285 248 14.8 870
Depreciation expenses 87 107 -19.2 428
Others 312 274 13.8 1,182
Interest expenses 925 1,401 -34.0 4,620
Operating income 19,848 17,766 11.7 13,884
Non-operating income 1,064 1,443 -26.2 2,669
Non-operating expenses 35 23 52.1 251
Ordinary income 20,877 19,186 8.8 16,302
Extraordinary gains 53 160 -66.7 9,149
Extraordinary losses - 85 - 3,396
Income before income taxes 20,931 19,261 8.7 22,055
Income taxes-current -504 -870 - -8,064
Income taxes-deferred 492 1,712 -71.2 -2,109
Net income 20,942 18,419 13.7 32,228
Unappropriated retained earnings-carryforward 15,429 498 - 498
Interim dividends - - - 6,653
Unappropriated retained earnings 36,372 18,918 92.3 26,074
Notes to financial statements
The financial statements of the Company for the first quarter ended June 30,
2005 are prepared in accordance with 'Regulations of Interim Financial
Statements' (MOF Ordinance No. 38, 1977).
Basis of financial statements
1. Valuation of securities
(1) Subsidiary stocks and affiliated company stocks are valued at moving average
cost method.
(2) Other securities than subsidiary stocks and affiliated company stocks are
valued at fair value on the closing date with posting net unrealized gains net
of tax effect directly in shareholders' equity, if their fair value is
available. The cost of those securities is based on moving average method.
Other securities are valued at moving average cost method if their fair value is
not available. Of those securities with no fair value, investment limited
partnership and similar partnership which are regarded as equivalent to
securities by the Article2 (2) of Securities and Exchange Act, share of net
income raised by the partnership is reflected on statements of operations and
share of net unrealized profits and losses on securities held by the
partnerships are directly posted into shareholders' equity.
2. Depreciation of depreciable assets
(1) Tangible fixed assets
The Company computes depreciation by the declining-balance method over estimated
useful lives as stipulated by Corporation Tax Law of Japan. Depreciation for
buildings purchased in Japan after April 1, 1998 is computed by the
straight-line method.
(2) Intangible fixed assets, and investments and others
Intangible fixed assets are amortized under the straight-line method. The
Company computes amortization over estimated useful lives as stipulated by
Corporation Tax Law of Japan, and over internally estimated useful lives (5
years) for software of in-house use.
3. Accounting for various provisions
(1) Provision for doubtful accounts
Provisions for doubtful accounts are provided based on the estimated historical
default rate for normal loans, and based on individually assessed amounts for
doubtful accounts.
(2) Accrued bonus
Accrued employees' bonuses represent liabilities estimated as of the balance
sheet date. Bonuses to directors and corporate executive officers, which are
subject to approval at the Compensation Committee, represent liabilities as of
the balance sheet date.
(3) Retirement benefits
The Company provides an unfunded defined contribution plan to its employees in
return for services rendered each year, where the amount to be contributed to
the individual employee's account is defined by the plan. Contributions by the
Company under the unfunded defined contribution plan are accumulated on an
annual basis and earn a guaranteed hypothetical return at a rate predetermined
by the Company each year. As for the closed pension fund, accrued retirement
benefits for the portion of 3 months are provided based on the difference
between projected benefit obligation and fund fair value expected on March 31,
2006.
4. Accounting for certain lease transactions
Financial leases, whose ownership does not transfer to the lessee at the end of
the lease term (non-capitalized finance leases) are not capitalized and are
accounted for in the same manner as operating leases.
5. Hedging transaction
Interest received or paid on interest swaps for hedging purposes is accrued
without being marked-to-market. The premium or discount on forward foreign
exchange for hedging purpose is allocated to each fiscal term without being
marked-to-market.
6. Other material items
(1) Accounting for consumption taxes
Consumption taxes are separately recorded.
(2) Deferred assets
Stock issue costs and bond issue costs are amortized in a lump sum when
incurred.
(3) Consolidated tax payments system
The consolidated tax payments system is applied.
Change in presentation
'Other interest and dividend income' and 'Royalty on trademark' which had been
separately presented until fiscal 2004 are included in 'Other' of Operating
revenues from the beginning of this fiscal year, due to lessened materiality in
amount. 'Other interest and dividend income' and 'Royalty on trademark' for the
first quarter of fiscal 2005 are 25 million yen and 3 million yen, respectively.
Notes to balance sheets
1. Accumulated depreciation of tangible fixed assets
As of Jun. 30, 2005 As of Jun. 30, 2004 As of Mar. 31, 2005
2,969 million yen 3,356 million yen 3,218 million yen
2. Guarantee
As of Jun. 30, 2005 As of Jun. 30, 2004 As of Mar. 31, 2005
8,803 million yen 14,844 million yen 8,969 million yen
3. Fair value of subsidiary and affiliated company stocks as of Jun. 30, 2005
(millions of yen)
Carrying value Fair value Difference
Subsidiary 16,121 39,667 23,545
Affiliated company 274 546 272
Notes to statements of operations
Details of extraordinary gains/losses
(millions of yen)
First quarter First quarter Fiscal 2004
Apr. 1, 2005- Apr. 1, 2004- Apr. 1, 2004-
Jun. 30, 2005 Jun. 30, 2004 Mar. 31, 2005
Extraordinary gains:
Gain on sale of fixed assets - - 20
Gain on liquidation of related companies - - 5,529
Gain on sale of investment securities 53 160 3,098
Reversal of stock purchase warrant - - 501
Extraordinary losses:
Write-down of related companies' stocks - - 42
Write-down of investment securities - - 3,035
Valuation loss of fixed assets - - 52
Loss on sale or disposal of fixed assets - 85 116
Provision for doubtful accounts - - 150
This information is provided by RNS
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