– Power & Scale –Daiwa Securities Group Business Strategy

Autumn 2005 Daiwa Securities Group Inc.

This presentation may contain forward-looking statements about the Daiwa Securities Group. You can identify these statements by the fact that they do not relate strictly to historic or current facts. These statements discuss future expectations, identify strategies, contain projections of results of operations or of financial condition or state other “forward-looking”information. These statements are based on currently available information and represent the beliefs of the management of the Daiwa Securities Group. These statements are subject to numerous risks and uncertainties that could cause the Daiwa Securities Group’s actual results, performance, achievements or financial condition to differ materially from those described or implied in the forward-looking statements. The Daiwa Securities Group undertakes no obligation to publicly update any forward-looking statements after the date of this presentation. These potential risks and uncertainties include, but are not limited to: competition within the financial services industries in Japan and overseas, our ability to adjust our business focus and to maintain profitable strategic alliances, volatile and sudden movements in the international securities markets, foreign exchange and global economic situations affecting the Daiwa Securities Group.

2

Table of Contents

Achievements in 1H FY2005 ･ ･ ･ ･　　3

Wholesale business 　　　　 ･ ･ ･ ･　　8

Retail business 　　　　 ・ ･ ･ ･　 13

Corporate value enhancement ・ ･ ･ ･　 29

3

Our strategies have started to bring tangible results

Our strategies have started to bring tangible results

Our Achievements in 1H FY2005

4

Consolidated Financial Summary

Operating revenues 330,812 243,180 36.0% 195,376 135,435 44.3% 519,337

Net operating revenues 229,972 191,021 20.4% 138,689 91,282 51.9% 390,432

SG&A 149,985 135,960 10.3% 80,106 69,878 14.6% 275,544

Ordinary income 83,956 57,259 46.6% 60,155 23,800 152.7% 120,433

Net income 45,822 24,165 89.6% 34,185 11,636 193.8% 52,665

Total asset 14,753,923 12,430,836 14,753,923 12,453,733 12,378,961

Shareholders' equity 701,733 615,303 701,733 650,923 648,332

EPS (Y) 34.43 18.16 25.69 8.74 39.03

BPS (Y) 527.40 462.39 527.40 489.20 486.70

ROE (Annualized) 13.6% 7.9% 20.2% 7.2% 8.4%

(Y mil) FY20041H

FY20051H FY2004FY2005

2QFY2005

1Q

% Changevs

1Q FY05

% Change vs

1H FY04

22.0%Daiwa Securities

20.6%Daiwa Securities SMBC (consolidated)

2Q

16.0%

13.2%

1H

20.2%Consolidated 13.6%

FY05 Interim DividendFY05 Interim DividendROE (Annualized)

FY05 Interim dividend per share: 12 yenDividend Payout Ratio 34.8%Dividend Yield (Sep-end share price) 2.7%Dividend Yield (Average share price during Apr-Sep 2005) 3.4%

5

Highlights of Consolidated EarningsResults achieved by building a strong business foundation ROE above 10％

Results achieved by building a strong business foundation ROE above 10％

0

50

100

150

200

250

1H/02 2H/02 1H/03 2H/03 1H/04 2H/04 1H/050

3

6

9

12

15

Net operating revenues Ordinary income ROE (right)

(Y bil) (%)

ROE 13.6%

Consolidated Revenues and Ordinary Income

6

Main Domestic Group CompaniesApr.-Sep. FY2005(Y mil, y/y % Chg)

Operating revenues 33,671 48.4% 101,283 26.0% 142,137 16.9% 12,897 39.8% 32,328 9.4%

SG&A 4,301 10.4% 72,902 4.6% 73,561 8.1% 11,383 32.0% 4,921 3.8%

Operating income 27,821 72.8% 27,957 167.2% 49,139 16.9% 1,514 150.8% 2,268 32.4%

Ordinary income 29,333 65.7% 28,002 171.6% 50,219 17.3% 1,648 126.4% 2,336 31.3%

Group holdings(as of Sep. 30, 2005)

Apr.-Sep. FY2005(Y mil, y/y % Chg)

Operating revenues 7,152 28.1% 4,114 -1.8% 8,520 1.5% 1,712 -42.3%

SG&A 2,637 11.4% 4,011 2.1% 391 1.2% 1,829 -5.7%

Operating income 1,706 67.7% 102 -60.9% 2,200 -9.4% -306 -

Ordinary income 1,720 68.6% 107 -59.8% 1,740 15.2% -113 -

Group holdings(as of Sep. 30, 2005) 44.0% 100.0% 99.6% 45.3%

100.0% 60.0% 100.0% 100.0%

Daiwa SecuritiesSMBC

Daiwa AssetManagement

Daiwa Instituteof Research

Daiwa SBInvestments

Daiwa Securities Business Center

DaiwaProperty

NIFVentures*

Daiwa SecuritiesGroup Inc.

DaiwaSecurities

---

*Merged with SMBC Capital as of Oct 1, 2005. NIF SMBC Ventures was established.

7

Highlights of Main Domestic Group Companies

Daiwa Asset Management’s Nikkei 225 Index Fund was selected by Japan Post for its OTC sales products

Large expansion of assets under management at Daiwa SB Investments

Daiwa Asset Management’s Nikkei 225 Index Fund was selected by Japan Post for its OTC sales products

Large expansion of assets under management at Daiwa SB Investments

Mainichi Economist magazine’sanalyst & economist ranking

　Ranked No.1 for 3 years in a row

Mainichi Economist magazine’sanalyst & economist ranking

　Ranked No.1 for 3 years in a row

Daiwa Asset Management, Daiwa SB InvestmentsDaiwa Asset Management, Daiwa SB Investments Daiwa Institute of ResearchDaiwa Institute of Research

Funds under Management (Daiwa AM, Daiwa SB Investments)Funds under Management (Daiwa AM, Daiwa SB Investments)

Merged with SMBC Capital (Oct. 1) NIF SMBC Ventures was established

　Became one of the top venture capital firms

Merged with SMBC Capital (Oct. 1) NIF SMBC Ventures was established

　Became one of the top venture capital firms

NIF SMBC VenturesNIF SMBC Ventures

0

5,000

10,000

15,000

0.0%

10.0%

20.0%

30.0%

40.0%

Daiwa SB Investment 2,505 2,687 3,303 3,664 3,599 3,907 3,901 3,948 4,590

Daiwa AM (MMF+MTGBF) 3,453 2,917 2,541 2,380 2,181 2,029 1,859 1,765 1,656

Daiwa AM (Bonds) 1,644 1,784 1,793 1,728 1,661 1,695 1,697 1,643 1,898

Daiwa AM (Equities) 1,228 1,438 1,612 1,895 1,901 2,064 2,118 2,452 2,879

Total 8,830 8,826 9,249 9,667 9,342 9,695 9,575 9,808 11,023

Daiwa AM share (right) 18.3% 16.5% 15.2% 15.2% 14.6% 14.1% 13.4% 13.0% 13.2%

3/03 9/03 3/04 6/04 9/04 12/04 3/05 6/05 9/05

(Y bil)

s

8

Wholesale

Significant increase in trading gainsIB issues expected to increase in latter halfLarge growth in private equity investments

Significant increase in trading gainsIB issues expected to increase in latter halfLarge growth in private equity investments

9

Wholesale Growth of Trading Gains

0

40

80

120

1H/02 2H/02 1H/03 2H/03 1H/04 2H/04 1H/05

Gains on Trading (Consolidated)(Y bil)

<Main Factors for Growth>Further collaboration with SMBC Cooperation with SMBC in securities intermediation for corporatecustomersCollaboration with IB division (ex.) SPS Increase in VWAP transactions and sales of foreign bonds at Daiwa Securities

<Main Factors for Growth>Further collaboration with SMBC Cooperation with SMBC in securities intermediation for corporatecustomersCollaboration with IB division (ex.) SPS Increase in VWAP transactions and sales of foreign bonds at Daiwa Securities

10

WholesaleRevenues from Collaboration with SMBC

Revenues from Collaboration with SMBC

(Y bil)

0

10

20

30

40

1H/03 2H/03 1H/04 2H/04 1H/05

Brokerage (incl. securities intermediation) Investment banking Others

11

WholesaleProspect in Investment Banking Business

0

5,000

10,000

15,000

20,000

25,000

Underwriting commission (Equity) 8,963 13,447 13,437 7,843 15,001 9,822 11,991 2,501 6,661

Underwriting commission (Bond) 1,230 2,166 2,106 2,232 1,751 1,764 2,824 2,410 2,011

Distribution commission 241 605 687 711 720 926 1,238 566 404

Others (M&A commission etc.) 2,312 1,802 3,004 1,152 4,778 2,546 4,351 2,345 4,294

Total 12,796 18,064 19,813 12,100 22,798 15,274 20,996 8,231 13,830

2Q/03 3Q/03 4Q/03 1Q/04 2Q/04 3Q/04 4Q/04 1Q/05 2Q/05

(Y mil)Investment Banking CommissionInvestment Banking Commission

<Prospects>Equity related business to significantly expand from 2H onwardsM&A business to remain activeIncrease in SPS (Structured Principal Solutions) and other IB issues, of which revenues will be recorded on other divisions

<Prospects>Equity related business to significantly expand from 2H onwardsM&A business to remain activeIncrease in SPS (Structured Principal Solutions) and other IB issues, of which revenues will be recorded on other divisions

12

WholesalePrincipal Investment Business

0

50

100

150

200

3/02 3/03 3/04 3/05 6/05 9/05

Funds

Real estate

Monetary claims

Private equity

Investment Amount(Y bil)

Increased investment limit to Y 200bilWorking towards exit of private equity investmentsIncreased investment limit to Y 200bilWorking towards exit of private equity investments

13

Retail

Advance in Daiwa Direct (online trading)Continued expansion of Daiwa SMAProgress in increasing net customer assetsGrowth of agency commissions

Advance in Daiwa Direct (online trading)Continued expansion of Daiwa SMAProgress in increasing net customer assetsGrowth of agency commissions

14

Retail Higher Motivation

Increase in online tradingGrowing assets of Daiwa SMANet increase in assets under custodyBoost in agency commissions for investment trusts

Rewards based on performanceEnhanced sales support systemRewards for promoting Daiwa Global Bond Fund and SMA

Synergy

ResultsResults Higher IncentivesHigher Incentives

Further increase in assets and revenues

15

Retail Equity Brokerage Commissions

0

5,000

10,000

15,000

20,000

25,000

0%

2%

4%

6%

8%

10%

Online 2,010 3,789 3,745 4,527 5,700 3,517 3,151 4,545 3,309 5,157

Equity commissions excl. online 6,313 12,012 11,546 12,070 14,660 8,028 8,237 12,176 8,864 13,537

Total 8,323 15,801 15,291 16,597 20,360 11,545 11,388 16,721 12,173 18,694

Daiwa's retail market share 5.7% 6.3% 5.9% 5.8% 5.2% 4.1% 4.1% 4.1% 3.7% 4.4%

1Q/03 2Q/03 3Q/03 4Q/03 1Q/04 2Q/04 3Q/04 4Q/04 1Q/05 2Q/05

(Y mil) Retail Equity Brokerage CommissionsRetail Equity Brokerage Commissions

※ “Online” includes call center“Others” includes revenues from VWAP transactions that are not recorded as brokerage commissions Market share for Tokyo, Osaka and Nagoya stock exchanges

16

Retail Online Margin Transactions (1)

0

50

100

150

200

250

0

4,000

8,000

12,000

16,000

20,000

Online margin position 23.2 25.6 29.2 30.1 36.4 44.2 55.1 68.6 81.2 200.0

# of Online margin accounts 4,137 4,364 4,640 5,151 7,029 8,694 10,972 12,831 14,349

1/05 2/05 3/05 4/05 5/05 6/05 7/05 8/05 9/05 3/06

(accounts)(Y bil)

FY05-end targetY 200bil

Started flat-fee system

Accounts and Outstanding Position of “Online Margin Transaction Services”Accounts and Outstanding Position of “Online Margin Transaction Services”

17

Retail Online Margin Transactions (2)

14.2

38.2 43.1

80.0

52.034.7

0

30

60

90(Y bi)

Daiw

a (Direct)

Matsui

E*TRA

DE

Rakuten

kabu.com

Monex B

eans

Margin Position OutstandingMargin Position Outstanding (Y bil)

Increase in Margin Positions ofOnline Brokers (1H/05)

Increase in Margin Positions ofOnline Brokers (1H/05)

Increase in Margin Accounts of Online Brokers (1H/05)

Increase in Margin Accounts of Online Brokers (1H/05)

6,6818,855

10,644

20,551

9,7095,628

0

6,000

12,000

18,000

24,000(# of accounts)

Daiw

a (Direct)

Matsui

E*TRA

DE

Rakuten

kabu.com

Monex B

eans

Margin AccountsMargin Accounts (# of accounts)

143.4112.9149.5307.9421.5

29.2Mar

157.3118.2174.1358.7442.9

68.6Aug

151.8111.6147.8306.5422.4

30.2Apr

140.8109.3149.3306.1407.4

36.4May

147.0110.9153.9321.5410.8

44.3Jun

154.3114.6166.1345.0422.9

55.2Jul

178.1127.1192.6387.9459.7

81.2Sep

Rakuten

Monex Beans

Daiwa (Direct)

kabu.com

E*TRADEMatsui

23,88024,18524,94860,64451,316

4,640Mar

24,60225,05927,05364,17452,554

5,151Apr

25,99725,94128,55267,39853,548

7,029May

27,15526,65630,04870,57255,880

8,694Jun

28,24827,61431,32473,52557,36710,972Jul

29,57928,77432,94077,25058,50512,831Aug

30,56129,81335,59281,19560,17114,349Sep

Rakuten

Monex Beans

Daiwa (Direct)

kabu.com

E*TRADEMatsui

※Disclosed figures ※Disclosed figures

18

Retail Online Trading

Daiwa Securities Online TradingDaiwa Securities Online Trading

71.6%

49.2%

28.8%

0%

20%

40%

60%

80%

Online ratio (# of contracts) 50.6% 53.0% 46.1% 57.7% 56.0% 56.7% 56.8% 59.8% 59.8% 62.3% 60.9% 61.4% 65.6% 71.6%

Online ratio (trading value) 15.3% 14.7% 9.8% 30.6% 30.2% 29.7% 30.1% 33.9% 34.8% 38.3% 35.5% 35.8% 40.8% 49.2%

Online ratio (commission) 18.2% 20.1% 15.4% 25.6% 24.3% 24.1% 24.6% 27.5% 28.4% 31.2% 28.7% 28.3% 28.2% 28.8%

Total # of online contracts (thousand) 612 477 475 442 706 1,105 1,029 1,221 1,407 947 877 1,236 1,123 2,038

Total online trading value (Y bil) 270 189 191 168 298 587 585 713 908 554 496 723 683 1,579

Total online equity commission (Y mil) 1,832 1,315 1,313 1,164 2,010 3,789 3,745 4,527 5,700 3,517 3,151 4,545 3,309 5,157

1Q/02 2Q 3Q 4Q 1Q/03 2Q 3Q 4Q 1Q/04 2Q 3Q 4Q 1Q/05 2Q

Note: Online ratio is calculated based on trading activities made by individuals at Daiwa Securities.

19

Retail “Daiwa Direct” Sales of Equity Investment Trusts

Sales of Equity Investment Trusts in “Daiwa Direct” Course Sales of Equity Investment Trusts in “Daiwa Direct” Course

100

1,540

0

300

600

900

1,200

1,500

1,800

9/04 10/04 11/04 12/04 1/05 2/05 3/05 4/05 5/05 6/05 7/05 8/05 9/05

※　index as 9/04=100

20

Retail Inflow/Outflow of Securities vs Online Brokers

Daiwa Securities Inflow/Outflow of Securities (Daily Average)Daiwa Securities Inflow/Outflow of Securities (Daily Average)

0

10

20

30

40

50

1/05 2/05 3/05 4/05 5/05 6/05 7/05 8/05 9/05

OutflowInflow

0

30

60

90

120

150

1/05 2/05 3/05 4/05 5/05 6/05 7/05 8/05 9/05

OutflowInflow

0

5

10

15

20

25

30

1/05 2/05 3/05 4/05 5/05 6/05 7/05 8/05 9/05

OutflowInflow

0

40

80

120

160

1/05 2/05 3/05 4/05 5/05 6/05 7/05 8/05 9/05

OutflowInflow

Daiwa ⇔Broker ADaiwa ⇔Broker A

Daiwa ⇔Broker CDaiwa ⇔Broker C

Daiwa ⇔Broker BDaiwa ⇔Broker B

Daiwa ⇔Broker DDaiwa ⇔Broker D

(Y mil /day)

(Y mil /day) (Y mil /day)

(Y mil /day)

＊　Transferred via Japan Securities Depository Center

21

Retail Daiwa SMA

# of Contracts and Assets Under Management of Daiwa SMA (total)# of Contracts and Assets Under Management of Daiwa SMA (total)

0

20

40

60

80

100

120

9/04 10/04 11/04 12/04 1/05 2/05 3/05 4/05 5/05 6/05 7/05 8/05 9/05 3/060

200

400

600

800

1,000

1,200Assets under management (left)

# of contracts (right)

(Y bil) (# of contracts)

FY05-end targetY 100bil

FY07-end targetY 500bil

* Based on contract date

　Additional contracts by existing SMA customers increased from Aug　Additional contracts by existing SMA customers increased from Aug

22

Retail Assets Under Custody and Net Inflow

Daiwa Securities Assets Under Custody(excluding financial institutions)

0

300

600

900

1,200

1,500

1,800

Unlistedcorporations etc

14.2 86.8 53.3 95.7

Retail 457.2 580.6 1,589.2 485.7

Total 471.4 667.4 1,642.5 581.4

Registered bonds 76.5 78.3 65.3 75.4

2H/03 1H/04 2H/04 1H/05

(Y bil)

0

5,000

10,000

15,000

20,000

25,000

Others 301 438 352 331 330 347 361

Pension insurance 124 131 125 136 151 169 220

Bond investment trusts 2,503 2,383 2,309 2,273 2,211 2,118 2,209

Equity investment trusts 1,491 1,505 1,550 1,657 1,812 2,006 2,390

Bonds 4,184 4,482 4,755 4,878 5,203 5,459 5,661

Equities 9,904 10,362 9,555 10,645 11,373 11,510 12,623

Total 18,507 19,301 18,646 19,920 21,080 21,609 23,464

3/04 6/04 9/04 12/04 3/05 6/05 9/05

(Y bil)

Daiwa Securities Assets Under Custody(excluding financial institutions) Net Inflow of Assets

* “Others” includes customer assets of Daiwa Securities held under custody at Daiwa Securities SMBC.* Inflow(+) = net inflow/outflow of funds + net deposit/withdrawal of securities

23

Retail Sales of Equity Investment Trusts

Sales and Net Increase of Equity Investment Trusts(Y bil)

186.1 157.2205.4

33.0 25.7116.1

173.7 186.2 173.994.7

81.1

142.2

144.4 153.3 241.8

0

100

200

300

400

500

2Q/03 3Q/03 4Q/03 1Q/04 2Q/04 3Q/04 4Q/04 1Q/05 2Q/050%

20%

40%

60%

80%

100%

Pure equity investment trust (left axis)

Foreign bond type equity investment trust (left axis)

Net increase ratio (r ight axis)

Sales and Net Increase of Equity Investment Trusts

*Prior to 4Q/03, figures exclude sales to listed corporations and financial institutions.*Prior to 4Q/03, figures are the sum of foreign bond type equity investment trusts and pure equity investment trusts.

24

Retail Daiwa Global Bond Fund

1,402

142100 100

0

400

800

1,200

1,600

9/04 12/04 3/05 6/05 9/050

20

40

60

80Funds outstanding: Daiw a Global Bond Fund (left)Funds outstanding: Global Sovereign Open (left)Dividend: Daiw a Global Bond Fund (right)Dividend: Global Sovereign Open (right)

0

300

600

900

1,200

10/03 12/03 3/04 6/04 9/04 12/04 3/05 6/05 9/05 3/069,000

10,000

11,000

12,000

13,000Funds under management (left)Fund Price (right)

Basic value after adjusting dividend (right)

Daiwa Global Bond FundFund Price and Assets Under Management

(Y bil) (Y)

Daiwa Global Bond Fund vs Global Sovereign OpenAssets Under Management

(Y)

※Left: index as 9/04=100 for each fund under management

FY05-end target Y 1 tri

Y 40Y 60→70 （Oct）Dividend168 companies*1 companyDistribution

Global Sovereign Open (monthly payment type)

Daiwa Global Bond Fund

*　According to website

25

Retail Daiwa Securities: Increase in Agency Commission

1,005 1,033 1,0851,194

1,331

1,584

500

1,000

1,500

2,000

2,500

1Q/04 2Q/04 3Q/04 4Q/04 1Q/05 2Q/05 Mar/06

(Y mil)Agency Commission (monthly average)Agency Commission (monthly average)

FY05-end targetY 2bil

26

Retail Foreign Currency-denominated Bonds (1)

Sales and Net IncreaseSales and Net Increase Assets Under Custody(excluding financial institutions)

Assets Under Custody(excluding financial institutions)

225.5

141.7

258.7235.7

183.0219.1

196.9

267.3244.7

0

100

200

300

400

2Q/03 3Q/03 4Q/03 1Q/04 2Q/04 3Q/04 4Q/04 1Q/05 2Q/050%

20%

40%

60%

80%

Total foreign bonds (left) Net increase ratio (right)

(Y bil)

1,395

1,5461,631

1,747

1,966

2,116

2,227

2,331

1,920

1,000

1,500

2,000

2,500

2Q/03 3Q/03 4Q/03 1Q/04 2Q/04 3Q/04 4Q/04 1Q/05 2Q/05

(Y bil)

27

Retail Foreign Currency-denominated Bonds (2)

Redemption ScheduleRedemption ScheduleFY2006 (1 year later)

0

30

60

90

120

4/06 5/06 6/06 7/06 8/06 9/06 10/06 11/06 12/06 1/07 2/07 3/07

(Y bil)

FY2006 (1 year later)

0

30

60

90

120

4/07 5/07 6/07 7/07 8/07 9/07 10/07 11/07 12/07 1/08 2/08 3/08

(Y bil)FY2007 (2 years later)FY2007 (2 years later)

　Over Y50 bil of average monthly redemption after FY2006　Over Y50 bil of average monthly redemption after FY2006

28

Retail Target Figures for FY2005

Y 200 bilY 200 bil

Y 1 trilY 1 tril Y 2 bilY 2 bil

Y 100 bilY 100 bil

Contract Assets of Daiwa SMA

Contract Assets of Daiwa SMAOnline Margin PositionOnline Margin Position

Net Assets under management of

Daiwa Global Bond Fund

Net Assets under management of

Daiwa Global Bond FundMonthly Agency

CommissionMonthly Agency

Commission

29

Corporate Value Enhancement

30

Corporate Value EnhancementBusiness Structure

Daiwa Securities Group’s Business StructureDaiwa Securities Group’s Business Structure

Three Core Areas

Retail(Daiwa Securities)

Asset Management(Daiwa Asset Management/

Daiwa SB Investments)

Investments

(NIF SMBC Ventures)

Research, System, & Consulting

(DIR)

Group Support

(DSC/ Daiwa Property)

Holding Company(Daiwa Securities Group Inc.)

(Daiwa Securities SMBC PI)

Wholesale(Daiwa Securities

SMBC)

31

Corporate Value EnhancementCorporate Value Analysis

Materialize and enhance corporate value of each Group companyMaterialize and enhance corporate value of each Group company

Total

Reflecting Group’s share holdingAssuming PER for each business based on stock price of other companies in the industryUsing net income for 1H of FY2005

OthersInvestmentsAssetManagement

Daiwa Securities

SMBC(consolidated,

excl PI)

Daiwa Securities

Corporate Value Estimate for each Group company (based on PER)

Corporate Value Estimate for each Group company (based on PER)

32

Corporate Value EnhancementDividend Policy

Guideline: Payout ratio of 30%　⇒ More aggressively return benefit to shareholders when achieving strong earnings, considering capital allocation

FY2005 interim dividend: Y 12 per share　　　　　　　　　　　　*Payout ratio of 34.8%

Daiwa Securities Group Inc.Investor RelationsTEL: +81-3-3243-3841 FAX: +81-3-3242-0955E-mail: ir-section@dsgi.daiwa.co.jpURL: http://www.daiwa.jp/ir/