Synergies between Core Businesses ： (Example 1) Securities � Banking <1> Service for simultaneous account opening Change in numbers of accounts About 40% of SBI Accounts Initial target Achievement SECURITIES (as of Jun.27) (accounts) 400,000 Mar. 2010 Mar. 2009 depositors are via 1,146,325 SBI Sumishin Net [SBI SECURITIES] 600,000 Mar. 2012 Nov. 2009 1,200,000 Bank 1,114,339 1,000,000 Exceeded 1 million accounts on Feb.10, 2011 800,000 600,000 Synergy 400,000 About 40% of SBI Sumishin Net Bank depositors are via SBI 200,000 SECURITIES 0 Sept. Mar. Sept. Mar. Sept. Mar. May 2008 2009 2010 2011 16
Synergies between Core Businesses ： (Example 1) Securities � Banking <2> Cooperation in SBI Hybrid Deposits Change in deposits Deposit Initial target Achievement (as of Jun. 27) (bil. yen) 700 bil. yen Mar. 2010 Jul. 2009 SBI Hybrid Deposits 1,624.3 1,800 1 tril. yen Mar. 2012 Feb. 2010 Allocated as purchasing funds Synergy 1,593.2 1,600 for spot trading or such like at SBI SECURITIES Midsize local bank level 1,400 Funding cost: 0.53% (*1) � Hybrid Deposit interest rate: 0.12% Exceeded 1.6 1,200 trillion yen on (*2) Funding cost will decrease, even May. 10, 2011 after taking into account deposit 1,000 insurance rate 800 600 SBI SECURITIES will finalize new MRF purchases 400 (within Jun. 2011) Synergy 200 MRF balance (Apr. 2011) 0 379.1 bil. yen Sept. Mar. Sept. Mar. Sept. Mar. May 2008 2009 2010 2011 (*1) FY2010 (*2) as of June 27, 2011 17
SBI Sumishin Net Bank: SBI Sumishin Net Bank vs. Sony Bank <1> (Launched in Sept. 2007) (Launched in Jun. 2001) *Sony Bank refrained from monthly disclosures after Aug. 2010 Change in number of customer accounts Change in deposit amount (From the end of Sept. 2007 to May. 27, 2011) (From the end of Sept. 2007 to May. 27, 2011) (Mar. 2011) SBI Sumishin (accounts) (bil. yen) 1,647.7 SBI Sumishin 1,146,325 1,200,000 topped 1,600 bil. 1,600 (Jun. 27) yen on May 10, 2011 Exceeded Sony 1,000,000 Bank in Jun. 2010! Sony 1,200 1,624.3 800,000 859,000 (Jun. 27) Sony Sony (Mar. 2011) 600,000 800 SBI Sumishin 400,000 SBI Sumishin 400 200,000 0 0 Sep. Mar. Sep. Mar. Sep. Mar. Dec. Sep. Mar. Sep. Mar. Sep. Mar. Dec. 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 SBI Sumishin Net Bank SBI Sumishin Net Bank recorded recorded solid growth solid growth in both number of customer accounts and deposit amount in both n umber of customer accounts and deposit amount 18
SBI Sumishin Net Bank: SBI Sumishin Net Bank vs. Sony Bank <2> (Launched in Sept. 2007) (Launched in Jun. 2001) Change in balance of housing loans *1 *1 Cumulative new housing loans minus (from Jun. 2002 to May 2011) (bil. yen) amount of repayment 750 726.9 Exceeded Sony (May 2011) Fastest among Bank on Mar. 2011 656.0 (Mar. 2011) Internet banks 600 Cumulative total of housing loans exceeded 800 bil. yen *2 450 (Jun. 24, 2011) *2 Cumulative total of new loans 300 150 Sony Bank SBI Sumishin Net Bank 0 Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Apr. 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 • The housing loans outstanding has almost doubled in a year • The housing loans outstanding has almost doubled in a year • The proportion of fixed • The proportion of fixed- -rate loans in the housing loan balance has decreased due to incr rate loans in the housing loan balance has decreased due to increased sales of eased sales of variable- -rate housing loans. rate housing loans. variable 19
Synergies between Core Businesses: (Example 2) Insurance � Securities, Banking Comparison of number of contracts at SBI Insurance by channel Number of contracts at each agency channel (index) each agency channel (index) Number of contracts at (Calculated as the total number of 1H FY2009 equals 100) (Calculated as the total number of 1H FY2009 equals 100) 800 The SBI Group's share of new contracts through agencies sites 65% 50% 39% 44% Others 600 The SBI Group's share of new contracts (outside the Group) through agencies sites: 39% Others (inside the SBI SBI SECURITIES 17% Group: Autoc 400 SBI Sumishin Net Bank 17% one, SBI 338 financial agency (Oct. 2010 - Mar. 2011) included) 219 SBI 200 30 Sumishin 18 102 Net bank 5 94 87 14 42 35 SBI 54 91 SECURITIES 68 18 33 0 1H 2H 1H 2H FY2009 FY2010 Contracts via SBI SECURITIES and SBI Sumishin Net Bank have considerably contributed to an increase in “contracts through agency” 20
SBI Insurance: More than 270,000 Contracts Written Number of contracts written during FY2010 was approx. 144,000, a 58.0% year-on-year increase (As of end of May) Approx. 278 Number of auto insurance contracts (written basis*) / cumulative thousand (thousand (Excluding continuing contracts, expiring contracts, and early-withdrawals) policies) Approx. 300 270 thousand 250 Compound Annual Growth Rate Compound Annual Growth Rate 200 (Mar. 2009 – (Mar. 2009 – Mar. 2011) Mar. 2011) 156.4% % 156.4 150 100 50 0 Mar. Jun. Sept. Dec. Mar. Jun. Sept. Dec. Mar. 2009 2010 2011 * Written basis: Completion of receipt of insurance premium 21
Pentagon Management of the Financial Services Business (3): 3. Focusing on each core business, we will allocate affiliated Focusing on each core business, we will allocate affiliated companies and businesses that possess core business support companies and businesses that possess core business support functions, and aggressively pursue synergy effects with each core functions business in order to differentiate ourselves from our competitors, thereby promoting exponential growth in each core business. Securities (Example 1) (Example 2) SBI SECURITIES Sup Su pporting porting businesses businesses � Supporting businesses SBI Sumishin Net Bank � Supporting businesses SBI SECURITIES Banking Settlement Services Sup pporting porting businesses businesses Su Su Sup pporting porting businesses businesses Non-life Insurance (Example 3) Life Insurance SBI Insurance � Supporting businesses Sup pporting porting businesses businesses Sup pporting porting businesses businesses Su Su 22
(Example 1) SBI SECURITIES and Supporting companies Provision of Securities-related Services by SBI SECURITIES and Other Supporting Companies Synergy Provision of FX market Synergy Operating “Japannext PTS”, infrastructure and systems the largest PTS market in for 20 pairs of currencies SBI SECURITIES Japan The largest number of accounts in online securities Synergy Synergy Approx. 2.24 mil. accounts (as of the end of May 2011) Financial agent tailored to Provision of investment trusts Synergy Synergy evaluation and other information of financial products Synergy The largest information Providing online news website about China Synergy Synergy and articles of the world 94.3 mil. PV a month that are influential to 5.99 mil unique user a month stock markets in the * May 2011 Japanese language 23
ⅰ ) ( ⅰ ) SBI SECURITIES and SBI SECURITIES and SBI SBI Japannext Japannext ( “Inaugural Year of PTS Inaugural Year of PTS” ” 2011 2011 “ Continuing Its Strong Performance Since the Previous Year, Continuing Its Strong Performance Since the Previous Year, “Japannext PTS “ Japannext PTS” ” Steadily Increases Its Trading Value Steadily Increases Its Trading Value Change in monthly value Monthly value comparison of domestic PTS New Record! (From Apr.2010 to May.2011) (FY2010) (bil. yen) 19.9 Market Monthly avg. (bil. yen) 19.1 500 20 Monthly Japannext PTS Japannext PTS 193.6 bil 193.6 bil yen yen No.1 in No.1 in Daily avg. Chi-X Japan 139.0 bil yen Japan! ! Japan 421.4 (*1) 17.5 Avg. daily trading value on Jun. 3, (*1) The figure for Chi-X is average value for 8 months (from Aug. 400 379.5 15.0 2010 to Mar. 2011), as it started operations on Jul.29, 2010 2011 was 26.6 26.6 bil bil. yen . yen, which was 15 351.8 2.4% of TSE 1 st equivalent to 2.4% [Participating companies] (16 in total) section -3 firms have newly connected in 2011- 300 285.8 SBI SECURITIES *2 , Rakuten Securities *2 , GMO CLICK Securities *2 , Goldman Sachs Japan, 10 Credit Suisse Securities (Japan) Limited *2 , Merrill 200 Lynch Japan Finance Co., Ltd. *2 , UBS Japan, Morgan Stanley MUFG Securities, Instinet, BNP Paribas Securities (Japan) Limited, Deutsche 5 Securities, Citigroup Global Markets Japan, 100 Societe Generale Securities, JPMorgan Securities *3 , Mizuho Securities *3, Barclays Capital Japan Limited *3 0 0 [Companies expected to participate] (4 in total) Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May. 2010 2011 Daiwa Capital Markets, Nomura Securities, and two other companies (*) Trading value is based on “single count”. Figures are compiled by SBI Japannext. 24 *2 Capital participation *3 Newly connected in 2011
SBI Japannext PTS: With Increased Visibility, With Increased Visibility, PTS Has Been Widely Used in Japan PTS Has Been Widely Used in Japan Trading Value of domestic PTS time Trading Value 2009 2,992.8 bil. yen (Jan. to Dec.) +4.8% 2010 3,135.6 bil. yen (Jan. to Dec.) 2011 4,020.5 bil. yen (Jan. to May.) Newspaper article (Source) Japan Securities Dealers Association As of May, the trading As of May, the trading value already exceeded that value already exceeded that of last year of last year —A turning point came last summer when A turning point came last summer when — Japan Securities Clearing Corporation, a cross- - Japan Securities Clearing Corporation, a cross market clearing organization established by market clearing organization established by securities exchanges, began to assume securities exchanges, began to assume obligations that arise in stock trading obligations that arise in stock trading (June.23 ,2011 Mainichi Shimbun Morning Edition) transactions. This made trading more secure. transactions. This made trading more secure. 25
SBI Japannext PTS: SBI SECURITIES Started “ “Smart Order Smart Order SBI SECURITIES Started Routing” ” Service on Jun. 27, 2011 Service on Jun. 27, 2011 Routing Change in order process due to the introduction of the SOR service (image) Choose SOR Favorable a market (Order) function SOR systems Japannext PTS Order automatically choose Order SBI SECURITIES favorable market/price Stock exchange and place an order - compare the best quotes - automatically choose a favorable market and place an order PTS transaction fee comparison among 5 online brokers New fee structure was started on Jun. 27! contracted price SBI Kabu.com Monex Rakuten Matsui per order Up to 100,000 yen 138 yen - 200,000 yen 184 yen 472 yen - 500,000 yen 340 yen 1,050 yen 378 yen - 1,000,000 yen 340 yen 840 yen - 1,500,000 yen 340 yen 500 yen 1,050 yen - 10,000,000 yen 340 yen 10,500 yen - 20,000,000 yen 559 yen 798 yen 21,000 yen 1,575 yen - 30,000,000 yen 958 yen 1,218 yen 31,500 yen Over 30,000,000 yen 1,197 yen (*1) (*2) — Offers the lowest level of fee structure for PTS — (*1) For amounts in excess of 10 million yen, 42 yen per 1 million yen is added (*2) 1,050 per 1 million yen is added. Note) The above is a comparison of basic fees and does not take into consideration campaigns at each company. Fees of SBI SECURITIES are for the 26 Internet plan. (As of June15. Source: Compiled by SBI SECURITIES from Website information disclosed by each company)
( ⅱ ⅱ ) )SBI SECURITIES and Morningstar Japan / SBI Fund Bank SBI SECURITIES and Morningstar Japan / SBI Fund Bank ( Enforcement of Investment Trusts Sales Collaborating with Morningstar Japan and SBI Fund Bank <1> • Provides rating information of investment trusts SBI SECURITIES • Provides effective tools utilizing iPad for face-to-face sales Synergy Number of investment trusts* brokered by each online broker SBI 1,088 Rakuten 1,066 Monex 460 • Provides contents of investment kabu.com 460 Synergy trusts for beginners Matsui 1 • Collaborates at the sales promotion of investment trust • Provides investment trust search *As of Jun.15, 2011. Including foreign currency- tools, ”F search” denominated MMF, MMF, MRF, and initially offered investment trusts 27
SBI SECURITIES: Enforcement of Investment Trusts Sales Collaborating with Morningstar Japan and SBI Fund Bank <2> SBI SECURITIES’ sales of investment trusts steadily increase to be way ahead of others Revenues* from investment trust Balance of investment trusts business at 5 online brokers at FY-end (SBI SECURITIES) (bil. yen) (bil. yen) 4 SBI Monex Rakuten kabu.com Matsui 500 3.50 479.0 Up 23.1% Up 29.8% 400 3 YoY YoY 2.70 388.8 300 1.95 2 278.1 200 217.8 1 140.3 100 0 0 FY2008 FY2009 FY2010 FY2006 FY2007 FY2008 FY2009 FY2010 * Sum of sales commissions and trust fees (trust fees include MRF) 28
SBI SECURITIES: Expanding Sales of Investment Trusts Further strengthen the efforts to expand sales of investment trusts Started soliciting subscriptions for investment trusts dedicated to the “Asset Doubling Project,” conducted jointly by four domestic online securities companies. First in the series (launched on June 20) (100 mil. yen) Second in the series (launched on June 27) Quarterly change in daily sales of investment trusts 10.2 10.2 10 8.2 7.1 6.3 5.3 5.1 4.5 4.6 5 0 As of Jun. 27 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q latest number FY2011 FY2009 FY2010 *Including MMF and China Fund 29
(iii) SBI SECURITIES and the Global Financial Information Global Financial Information (iii) SBI SECURITIES and the Content Business Content Business - A Man with Information Wins in the Financial Business - Morningstar Japan/ Morningstar Inc. Morningstar Japan/ Searchina Morningstar Inc. Searchina Kabushiki Shimbun Distribute stock report in US, UK, Kabushiki Shimbun Overseas information such Distribute stock report in US, UK, Overseas information such Switzerland, China, India and Information about Japanese Switzerland, China, India and as that of China Information about Japanese as that of China Brazil to Morningstar Japan equities and investment trusts Brazil to Morningstar Japan equities and investment trusts Became subsidiary in Feb. 2010 Became subsidiary in Feb. 2010 Aug. Aug . 1998 1998 JV with China Securities Website Launched Website Launched JV with China Securities Journal Journal WSJ Japan Edition WSJ Japan Edition Information provision through the Information provision through the utilization of Xinhua News Agency Comprehensive financial portal site Comprehensive financial portal site Overseas economic information utilization of Xinhua News Agency Overseas economic information Network, Network, from an unique standpoint from an unique standpoint launched in Sept. 2010 launched in Sept. 2010 Establishment of JV in Jun. 201 Establishment of JV in Jun . 2011 1 Dec. Dec . 2009 2009 Service e Launched Launched Servic T To start wire report soon o start wire report soon ( (plan plan) ) To capture demand for economic and financial information on India, a, To capture demand for economic and financial information on Indi Vietnam and other regions where high growth is expected, Vietnam and other regions where high growth is expected, we will expand and enhance the financial information content we will expand and enhance the financial information content business on a worldwide scale going forward. business on a worldwide scale going forward. 30
Joint Venture Establishment with China Joint Venture Establishment with China Securities Journal Completed on June 16, 2011 Securities Journal Completed on June 16, 2011 China Securities Journal China Securities Journal a wholly owned subsidiary of a wholly owned subsidiary of Xinhua News Agency Xinhua News Agency 43% CSJ-SBI Financial Media Co., Ltd. 57% (Chinese Name: 上海新証財経信息咨詢有限公司 ) Established on June 16, 2011 � Plan to establish the Japanese Website of “China Securities Journal”, the largest economic newspaper in terms of number of copies printed in China � Plan to provide comprehensive advertising agency businesses in China by transferring shares of Xinzheng Advertising Company from CSJ to the new company � Capable of utilization of a listed company database (covering more than 1,200 companies for the last 18 years) and a fund database (covering the last 10 years), which China Securities Journal has accumulated � Scheduled to be assigned a part of the business of Chinese companies’ IR services in the U.S. offered by China Securities Journal in cooperation with Nasdaq About China Securities Journal • Business news publisher which boasts the largest distribution in China (1 million copies per day) • CSJ annually awards investment trust grading organization “Golden Bull Award,” which is well known amongst Chinese investors. (fund award: held 7 times, listed company award: held 12 times) • Information is collected from its local offices located in 14 provinces and cities directly under the central government authority, including Beijing, Shanghai and Shenzhen, and from the Xinhua News Agency’s overseas bureaus 31
Morningstar Japan, Wall Street Journal Japan: Distribution of Global Information by Utilizing Smart Phones Morningstar Japan Distribution of comprehensive financial information including foreign stocks, overseas mutual funds and global news • Equipped with a watch-list function for instantly checking registered stocks and funds of interest • Permits viewing of news, columns, reports and video for all 12 categories Also, promoting provision of information utilizing SNS such as Twitter and Facebook Wall Street Journal Japan Distribution of all articles of the Wall Street Journal Japan, known for its macroeconomic analysis and insightful commentary • Comfortable and intuitional operation by touch screen • Articles can be temporarily saved for offline viewing 32
SBI SECURITIES: Expansion of Foreign Stocks Lines Bolster Brokerage of Emerging Market Equities to Offer Opportunities to Invest in the Countries which Have High Economic Growth Potential Equities Brokered U.S. stocks: 647 stocks NYSE, NYSE Arca, NASDAQ-listed U.S. stocks, (Aug. 2003-) U.S. ETF, ADR (American Depository Receipts) Hong Kong Stock Exchange Main Board and 1,372 stocks Chinese stocks: GEM-listed Chinese stocks, China ETF, HDR (Mar. 2005-) (HK Depository Receipts) Korean stocks: 54 stocks Stocks listed on the Korea Stock Exchange (May 2005-) and over-the-counter market Russian stocks: 41 stocks MICEX stocks (Nov. 2009-) Vietnamese stocks: In principle, all stocks listed on HoChiMinh 637 stocks (Jan. 2011-) Stock Exchange and Hanoi Stock Exchange Indonesian Stocks (in preparation) 33
SBI SECURITIES: Expansion of Foreign Bond Sales Led to Large Increase in Revenues from Bond Business Change in revenues from bond business Foreign bond issues brokered by (mil. yen) each online broker 2,000 1,746 (FY2010: counted on issuance day basis) Brokerage commission 3 Underwriting and selling commissions 99 Other commissions received 44 SBI Trading gain 6 1,500 +85.3% YoY Rakuten 19 942 Monex 29 6 1,000 145 1,636 1 Not offered at kabu.com Securities and Matsui Securities 500 788 SBI SECURITIES brokered the most among the major online securities firms 0 FY2009 FY2010 *Including sale on commission 34
SBI SECURITIES: Foreign Bond Sales Remain High We started to handle yuan-denominated China Government Bonds (already-issued bonds) on May 16. As a result, we now handle foreign- currency denominated existing bonds in 11 currencies, the highest number among major online securities companies Besides this, sold Average daily foreign bond sales (by quarter) SBI Bonds worth a total of 30 billion (mil. yen) yen in 1Q 150 140.3 134.3 128.1 107.8 98.7 100 49.9 46.5 45.0 50 28.0 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q FY2011 FY2010 FY2009 As of Jun. 27 latest number 35
SBI SECURITIES: Share of Futures and Options Trading* on the Increase SBI SECURITIES’ share of futures and options trading is on the increase. In particular, its share of Nikkei 225 options trading rose to 54.0% in May SBI’s share of futures and options trading (monthly) 60.0% Nikkei 225 Futures 54.0% Nikkei 225 mini Nikkei 225 Options 50.0% 40.0% 31.2% 30.0% 28.8% 20.0% 10.0% 0.0% Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May 2010 2011 * Calculated based on the share of SBI SECURITIES to the total individual stock trading volume disclosed by the Osaka Securities Exchange. 36
(iv iv) ) SBI SECURITIES and SBI Liquidity Market SBI SECURITIES and SBI Liquidity Market ( Providing Stable Trading Opportunities for Customers of SBI SECURITIES and SBI Sumishin Net Bank by Increasing Counterparties 21 major financial institutions both inside and outside Japan have already participated as counterparties Individual Investors + Provide Provide Provide Order Order Order rates rates rates Other securities or FX companies etc. + [SBI SECURITIES] Seeking further liquidity through Seeking further liquidity through addition of new participants addition of new participants (Started on Nov. 17, 2008) (Started on Jan. 18, 2010) Covering transaction Provide rates Counterparties (21 major financial institutions in Japan and abroad) • Societe Generale *2 • Credit Agricole *1 • Mizuho Corporate Bank *1 • Deutsche Bank • Credit Suisse Bank *1 • Sumitomo Mitsui Banking • Nomura Securities *2 • Bank of Tokyo-Mitsubishi UFJ • Goldman Sachs Securities • Barclays Bank • Commerz-bank • Morgan Stanley MUFJ • Bank of America *1 • JPMorgan Chase Bank • UBS AG • BNP Paribas *2 • Citi Bank • Royal Bank of Scotland • HSBC *1 • ANZ *2 • Standard Chartered Bank *1. New participants in FY2009 (5 companies) *2. New participants in FY2010 (4 companies) 37
SBI SECURITIES ： FX Margin Trading at SBI SECURITIES Increased Sharply Using SBI Liquidity Market Already a major source of earnings in the securities business, trading value remains high even after enforcement of leverage regulation FX margin trading value of the four major online securities companies anies *1 FX margin trading value of the four major online securities comp *1 (Unit: bil. yen) Leverage regulation was applied in Aug. 2010 Nov. 2010: 7,075.4 bil. yen (record high) SBI Monex Trading Value in 7,000 May 2011: Matsui kabu.com SBI *2 6,000 5,737.0 bil. yen 5,000 In Nov. 2008 started FX 4,000 margin trading utilizing SBI Liquidity Market 3,000 Monex 2,000.9 bil. yen 2,000 kabu.com 1,000 1,047.5 bil. yen Matsui 0 405.6 bil. yen Apr. Jul. Oct. Jan. Apr. Jul. Oct. Jan. Apr. Jul. Oct. Jan. Apr. Jul. Oct. Jan. Apr. 2007 2008 2009 2010 2011 *1 Four online securities firms that disclosed the information (SBI SECURITIES, Monex, Matsui and kabu.com) *2 Trading value total of “SBI FX” and “SBI FX α ” from Nov. 2008 to Feb. 2009 Source: Complied by SBIH from disclosed information 38
SBI SECURITIES: FX Margin Trading Value Remains High FX Margin Trading has rapidly expanded by utilizing SBI Liquidity Market, and continues to be steady even after enforcement of leverage regulation in August 2010 Average daily FX margin trading value (by quarter) (bil. yen) 300.4 283.8 290.8 290.6 300 274.9 275.1 242.8 235.2 227.6 216.5 200 144.9 100 76.5 21.6 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q FY2008 FY2009 FY2010 FY2011 As of Jun. 27 latest number 39
SBI SECURITIES ： Diversify Earnings Toward a Business Structure Less Reliant on Stock Brokerage Trading by Synergies with Supporting Businesses Pursue enhancement of wholesale business to increase underwriting fees and other revenue, not only from newly listed stocks, but from publicly offered stocks and bonds as well Major Online Securities Companies' Composition of Consolidated Operating Revenues in FY2010 Trading gains/losses Commissions Financial revenues Underwriting/sales commissions (%) Others Offering/sales commissions 37.7 29.0 4.3 19.2 9.8 SBI 0 60.9 31.9 7.2 Matsui 0 1.2 47.9 37.9 12.9 kabu.com 0.1 3.6 45.7 27.9 20.9 Rakuten 1.9 40.1 28.4 2.6 18.7 10.2 Monex <Reference> 13.2 9.2 34.2 27.7 15.7 Nomura Securities Source: Company websites and earnings releases (Figures of Nomura Securities are based on Japanese standards) *Figures are as of FY2010 full year 40
(Example 2) SBI Sumishin Net Bank � Supporting Businesses Steady Growth of Auto Loans by Synergies with SBI Credit and SBI AutoSupport Auto loans outstanding expanded approx. 4.8X in the past year Auto loans outstanding expanded approx. 4.8X in the past year Cumulative auto loans outstanding * Figures in parentheses Via: (mil. yen) (Aug. 2009 – May 2011) 42,803 are ratios 45,000 (52.1%) Providing auto loans through network of approx. 4,533 30,000 participating stores including used car dealers (23.7%) 15,000 SBI Auto Support has been in the black since 4Q of FY2010. Others 0 (Credit companies etc.) Aug. Oct. Dec. Feb. Apr. Jun. Aug. Oct. Dec. Feb. Apr. (24.2%) 2009 2010 2011 41
(Example 3) SBI Insurance � Supporting Businesses SBI Insurance and SBIH InsWeb <1> InsWeb neutrally introduces the most suited products to customers; not only financial products of the SBI Group but also non-SBI products Insurance estimate and comparison Available on smart phones website, “Insurance Market Place” InsWeb An insurance portal providing cost estimates and documents quickly upon request InsWeb Automobile insurance Participation by 20 companies 参加損害保険会社等： 22 社 Other life insurance companies, non-life Life insurance personal pension, educational endowment insurance companies insurance, overseas travel insurance, fire insurance, and financial motorcycle insurance, driver insurance, golf insurance, leisure insurance, pet insurance ,etc institutions etc. Cumulative number of InsWeb estimation service users topped 5.00 million ! * Participating companies are as of Jun. 15, 2011. The number of the service users is cumulative total users from Apr. 2000, when it started its operation, to May 2011. 42
SBI Insurance: SBI Insurance and SBIH InsWeb <2> Comparison of number of contracts at SBI Insurance by channel Comparison of number of contracts at SBI Insurance by channel Breakdown of contracts through websites for Breakdown of contracts through websites for comparisons and estimates comparisons and estimates (index) (index) 300 Share of new contracts through InsWeb's share of new contracts through websites for “websites for comparisons and comparisons and estimates estimates” 58% 55% 51% 62% (Oct. 2010– Mar. 2011) Others (outside the SBI Group) 200 Others: 18.2% SBI Holdings 112 InsWeb 91 65 Through websites for 100 comparisons and estimates: 38 81.8% 113 115 87 62 *Excluding direct contracts at SBI 0 Insurance 1H 2H 1H 2H FY2009 FY2010 * The number of contracts in Apr.–Sept. 2009 =100 Over 80% of contracts are obtained from “websites for comparisons and estimates”, of which InsWeb accounts for over half 43
Pentagon Management of the Financial Services Business (4) ： 4. The face The face- -to to- -face channels, such as SBI Money Plaza, will be expanded across face channels, such as SBI Money Plaza, will be expanded across Japan to serve as an infrastructure business that will propel growth i to serve as an infrastructure business that will propel growth in the five n the five Japan core businesses and advance the fusion of the online and face- -to to- -face services. face services. core businesses and advance the fusion of the online and face This will enable the organization to provide, on a neutral basis, comparably superior products to customers whether inside or outside of the Group, so that the SBI Group may become Japan's largest financial product distributor. Securities Supporting businesses SBI SECURITIES Banking Settlement Services Supporting Supporting businesses businesses capital Common Infrastructure SBI Money Plaza Non-life System solution Insurance Business Life Insurance Supporting businesses Supporting businesses 44
Face-to-face Channels of the SBI Group Expands Nationwide SBI SECURITIES 23 branches nationwide ・ 1 sales person for 1 customer ・ Sales person provides advice and investment information for your trades SBI Money Plaza 230 shops nationwide Securities agency ： 142shops Housing loans& Insurance ： 107shops Mortgage loan, fire Opening new account insurance, life at SBI SECURITIES and insurance, and related investment consulting consulting services services * 19 shops operate both dealing of mortgage loan and insurance securities agency (*1) as of June 29, 2011 (*2) “Securities agency” here represents that of SBI SECURITIES (*3) “Housing loans& Insurance” here represents SBI Mortgage’s “SBI Money Plaza/ Housing loan Shop” (*4) Some shops do not provide some products and services 45
Pentagon Management of the Financial Services Business (5) ： 5. By introducing the systems and know By introducing the systems and know- -how of our core businesses how of our core businesses accumulated in Japan tandem with the economic development of the accumulated in Japan tandem with the economic development of the emerging countries, SBIH will be positioned to promote the emerging countries development of the financial services business in those countries. Overseas Securities Supporting businesses Overseas SBI SECURITIES Banking Settlement Services Supporting Supporting businesses businesses capital Overseas System Common Infrastructure Know-how SBI Money Plaza Expertise Non-life System solution Insurance Business Life Insurance Supporting businesses Supporting businesses Overseas Overseas 46
Securities Business ： Global Synergies on Securities Business Expand provision of foreign stocks collaborating with overseas securities firms in which SBI invests SW Kingsway 1,372 Chinese stocks (Since Mar. 2005) (shareholding: 2.79% ) Hong Kong Japan IFC METROPOL 41 Russian stocks (Jointly operates a VC fund and invested (Since Nov. 2009) in OBIBANK, a subsidiary of the group, Russia with 50% shareholding) [SBI SECURITIES] 637 Vietnamese stocks FPT Securities (Since Jan. 2011) (shareholding: 20% ) Vietnam Cambodian stock SBI Phnom Pehn Securities including IPOs of state- 2.24 mil. accounts owned companies (shareholding: 100% ) Cambodia as of May 2011 (scheduled) Indonesian stocks BNI Securities (in preparation) (scheduled for 25% investment, acquired the license on the capital investment from Indonesia financial office on Jun. 28) 47
Banking Business: Full-scale Development of Online Banking Business in Russia The know-how of online banking business, cultivated in Japan OBIBANK A commercial bank of METROPOL Group, (50% shareholding) Russia’s leading financial group • Total assets: 29.09 bil. yen • Capital fund: 2.79 bil. yen • Net income: 74 mil. yen * Year established: 1994 Equity investment completed on Jun. 14, 2011 after approval from Central Bank of Russia *FX rate: 1 RUB = 2.89 JPY (as of Jun. 7, 2011) 48
2. Advancing the Group’s “Brilliant Cut” Initiative to Increase its Profitability 49
The SBI Group Has Been in Second Growth Stage For a decade since our founding First stage: Expanded the Group Scale Placed top priority on scale expansion and Financial ecosystem establishment of business ecosystem Real estate Life-related ecosystem ecosystem System ecosystem From FY2010 Second stage: Pursuing increase in Earnings Per Share (EPS) � Strengthening group synergy and heightening profitability through advancement of “Pentagon Management” business strategy for the financial services business � Realizing transition “from Japan's SBI to the world's SBI” through the transference of our financial ecosystem Toward a management focus on higher profitability to sustain continued EPS growth 50
The SBI Group's Major Business Entities Engaged in “Brilliant Cut” The SBI Group's 51 Major Business Entities The SBI Group 's 51 Major Business Entities (Excl. 7 overseas local verseas local subsidiaries and subsidiaries and representative representative offices) offices) (Excl. 7 o FY2009 FY2010 SBI Holdings Operating Income: 0.2 billion yen Operating Income: 4.3 billion yen 28 companies and divisions 30 companies and divisions Profitable companies and Total operating profit: Total operating profit: divisions 26.0 bil. yen 26.8 bil. yen 12 companies and divisions 11 companies and divisions Unprofitable companies and Total operating loss: Total operating loss: divisions 4.7 bil. yen 7.1 bil. yen 10 companies 9 companies Group companies (7): Newly established or Wall Street Journal Japan (established in May 2009), SBI Credit (became a consolidated acquired companies: subsidiary in July), SBI Global Investment New group companies which SBI Global Investment achieved (became a consolidated subsidiary in June), started operation or were Korea Technology Investment Corporation full-year profitability acquired after April 2009 (became a group company in July), etc. Companies preparing for start of operations(3): JV with China Securities Journal, Preparation for life Insurance company, and SBI Phnom Penh Securities (Note) Consistently profitable companies in “Newly established or acquired companies” have been moved to “Profitable companies and divisions” 51
Basic Strategy Going forward for “Brilliant Cut” of the SBI Group Announced at 1Q FY2010 Results Announcement on July 29, 2010 � Profitable companies and divisions: Toward further profitability through mutual synergies (especially by advancing the “pentagon management” ) � Unprofitable companies and divisions: Targeting profitability within 3 years (3 years from establishment for new companies) by utilizing resources in the Group and pursuing Group synergies. *Companies with no prospects of profitability are to be liquidated or sold New companies will not be established except for those • Establishment currently under preparation • Acquisition Limited only to profitable companies that can be expected to bring strong synergies to the SBI Group companies 52
The SBI Group's “Brilliant Cut” Initiative Moves to 2nd Phase First Phase Monitor each company's performance situation, as well as their change in operating profits Second Phase Examine each companies' earning capacity by taking into account B/S and C/F situations as well as change in operating profits � ROE Examine earnings efficiency � ROI against invested capital � EBITDA Examine cash-flow generated � EBITDA Growth rate by invested capital 53
Company's Earning Capacity Examined with Newly Adopted Indicators Indicators calculated from major companies' * FY2010 performance (%, billion yen) EBITDA ROE ROI EBITDA Growth rate SBI SECURITIES 4.9 4.2 12.62 -14.9 SBI Mortgage 21.1 35.2 3.07 +73.6 SBI Liquidity Market 48.4 404.6 2.07 -34.0 SBI VeriTrans 24.3 77.4 1.37 +17.7 SBI Investment 10.1 6.0 1.08 +12.4 * Consolidated subsidiaries with over 1 billion yen of operating income in FY2010 54
Promote the “Brilliant Cut” Initiative, Measures to Further Enhance Profit Growth <1> Acquisition of Full Ownership - SBI Holdings acquired 100% ownership of SBI VeriTrans (schedule for Aug. 1) (Announced by SBI Holdings on Feb. 24, 2011) SBI VeriTrans to be delisted, through a share exchange with SBI Holdings. As SBI rolls out various Internet-based financial services overseas, the EC settlement services becomes a key growth sector. SBI VeriTrans Co., Ltd. is a provider of EC settlement services within the SBI Group. Having made this firm a subsidiary, SBI will work to accelerate the overseas development of the EC settlement services business. Merger and Integration - Integrated Gomez Consulting with Morningstar Japan (scheduled for Jul. 1) (Announced by Morningstar Japan on May. 20, 2011) Gomez Consulting was delisted, having become a wholly owned subsidiary through an exchange of shares. A more integrated approach to the management of the two companies will allow cost reductions and enhanced sales capabilities, since they operate in closely related business fields. (Savings of about 15 million yen annually is expected, just for the elimination of the listing-related expenses for Gomez.) - Integrated Kensho TV (operation of giveaway website) with SBI Marketing � Pursue further management efficiency 55
Promote the “Brilliant Cut” Initiative, Measures to Further Enhance Profit Growth <2> JV Establishment - Established SBI-LG Systems, the joint venture with Korea's LG CNS, targeting substantial system cost reductions Objective: 25-40% reduction of system costs (currently 15 bil. yen per annum) in 3 years. Liquidation, Business Termination, etc. - SBI HotGrinds (services based on the next-generation web technology) , the joint venture with US partner, was terminated and dissolved - Sold shares of E*GOLF Corporation - Liquidated SBI ArchiWorks on April 25 - Shares of HOMEOSTYLE (offering beauty care services products) are to be sold Others - Reorganize operations and personnel of SBI Asset Management � Achieved a single-month profit in April 56
Policies for Responding to Major Unprofitable Companies in FY2011 SBI Card (Consolidated subsidiary / The loss: approx. 3.5 bil. yen) Plan to implement a policy this year for a thorough review of the business. SBI Japannext (Equity-method company / The loss: approx. 1.1 bil. yen) There are some companies looking to obtain an equity stake in or acquire the company with an eye toward the industry reorganization. We will determine our response policy in the next one or two years. SBI ALApromo (Non-consolidated subsidiary / The loss: approx. 1.1 bil. yen) There are domestic and international companies and investors which are interested in holding share of SBI ALApromo in anticipation of its future growth. We will select companies or investors with which we have prospects for collaboration in relevant business fields or other fields. We plan to maintain an equity stake of over 50 percent and may sell the remaining stake sequentially. 57
Strengthening the Ongoing Commitment to Cost Reduction after the Lehman Shock � From Oct. 2008, each company has one in duty of cutting costs, for cost reduction � Controllable costs of FY2010 is 2,534 mil. yen less then FY2007, a year before Lehman shock � Restrain from freshman recruiting due to coming reposition of employees related to the Group reorganization FY2007 FY2010 Amount of change (before Lehman Shock) (the latest FY) 64,616 64,613 -3 Total SG&A 56,423 53,888 -2,534 Controllable costs 8,192 10,724 2,531 Amortization etc.* � Breakdown of controllable costs (unit: mil. yen, figures in parentheses are amount of change) 60,000 56,423 53,888 (-2,534) Employment cost Commission paid & others 50,000 14,667 14,950 Rent expenses A d expenses 40,000 Lease expenses 17,913 30,000 Compensations 18,189 Others 3,159 2,507 20,000 3,381 2,365 2,354 *Amortization etc. refers to 1,114 1,045 amortization of goodwill and 1,087 10,000 noncurrent assets, allowance 14,763 12,810 for bad debts, and so forth 0 58 FY2007 FY2010
EBITDA Bottoms out in FY2008 (EBITDA=operating income + allowance for depreciation + goodwill amortization) EBITDA for FY2010 improved significantly to 22,149 mil. yen, up 40.4% YoY Under IFRS, which SBI plans to voluntary Under IFRS, which SBI plans to voluntary adapt from FY2012, amortization of adapt from FY2012, amortization of Change in EBITDA goodwill will no longer be recorded as an goodwill will no longer be recorded as an (mil. yen) operating expense. operating expense. 25,000 22,149 incl. amortization of goodwill +40.4% 20,000 15,780 14,827 +6.4% 15,000 10,000 5,000 7,889 7,764 6,001 0 FY2008 FY2009 FY2010 59
II. Capturing the Growth Potential of the Asian Market with the Aim of Transforming SBI into a Global-scale Enterprise Group 1. Establishment of Overseas Business Structure Based on Establishment of JV Fund and Launch of Financial Service Businesses 2. New Phase of Global Business Development to Increase “Global Network Value” 3. Structural Enhancements for Transformation to a Global Company 60
From “ “Japan's SBI Japan's SBI” ” to the to the “ “World's SBI World's SBI” ” From -The 21 century is the “Asian century”- Deploying businesses through overseas subsidiaries, Deploying businesses through overseas subsidiaries, with a firm foundation in the emerging countries, with a firm foundation in the emerging countries, particularly in Asia, to become a global company particularly in Asia, to become a global company 61
1. Establishment of Overseas Business Structure Based on Establishment of JV Fund and Launch of Financial Service Businesses 62
The 1st Stage: Establishment of Global PE Investment Structure � Formation of JV funds with prominent local partners such as financial institutions and governmental or university investment institutions. 63
Network of the Prominent Local Partners Established global investment structure through formation of JV funds with local partners such as finanical institutions, government agencies and universities IFC Metropol SBI Investment Korea Leading Russian Financial Group South Korea South Korea Russia Russia Hungary Hungary Jefferies China China MFB Invest Ltd. Major U.S. securities company PNB Equity Resource Corp. Wholly owned subsidiary Abu Dhabi Abu Dhabi U.S. U.S. Malaysian Govt' Investment FPT Group of the Hungarian Management Company Vietnam leading Development Bank multinational IT company Vietnam Vietnam Malaysia Malaysia Brunei Brunei Subsidiary of a Abi Dhabi Brunei Darussalam Singapore Singapore Governmental ADICv Ministry of Finance Jardim Botanico Investimentos Singaporean governmental Brazil Brazil investment group 源裕投資 64
Outlines of Overseas JV Funds Investment Fund name Establishment Partners Commitment amount ratio New Horizon Fund May 2005 TEMASEK 100mil.USD 50% SBI & TH VC Fund Jan 2008 Tsinghua Holdings 34.5mil.USD 87.1% SBI & BDJB China Fund Feb. 2009 Beida Jade Bird 100mil.USD 50.1% Fudan University Fund Late 2011 (plan) Fudan University (Shanghai) 76.3 mil. USD 10-20% China Merchants Securities, Resource Offshore ： approx. 20.5mil.USD (SBIH) SBI Zhaoxin Fund Mar. 2009 Onshore ： approx. 9mil.USD (onshore) Capital China, China CITIC Bank SBI & Capital 22 JV Fund Oct. 2008 Founder of a Taiwanese IT company 22.5mil.USD 66.7% Vietnam Japan Fund FPT 76.5mil.USD 96.3% Apr. 2008 SBI SOI Fund Keio University 500mil. JPY 100% Jun. 2008 MFB Invest Ltd., a wholly owned SBI European Fund May 2009 100mil.EUR 60% subsidiary of the Hungarian Development Bank Malaysia Fund Dec. 2009 PNB Equity Resource Corporation 50mil.USD 50% SBI-METROPOL IFC METROPOL 100mil.USD 50% May. 2010 Investment Fund Brunei Darussalam, Ministry of SBI-Islamic Fund Jul. 2010 59.4mil.USD 50% Finance SBI-Jefferies Asia Fund Jefferies & Group, Inc 50mil.USD 80% Jul. 2010 Jefferies-SBI USA Fund Jefferies & Group, Inc 150mil.USD 50% Jun. 2010 Africa Fund Invest AD (Abu Dhabi) 75mil. USD 50% Jan. 2011 Turkey Fund Invest AD (Abu Dhabi) 100mil. USD 50% 2011 (plan) Brazil Fund Late 2011 (plan) Jardim Botânico Investimentos 125mil. USD 50% 65 * Conversions effected using exchange rates as of the end of March,2011
IPO and M&A Deals in the Asset Management Businesses - Successful IPOs and M&As continue in the foreign investee companies - From the start of operations in July 1999 to the end of March 2011, the Group invested in 833 companies, of which 141 companies conducted IPOs and M&As (percentage: 16.9%) 17 * Ovearseas Japan 1 15 12 11 * 10 9 10 5 8 16 9 6 8 5 0 4 1 1 0 FY2005 FY20006 FY2007 FY2008 FY2009 FY2010 *1 includes portfolio companies (FY2009: 3 companies, FY2010: 6 companies) of New Horizon Capital, the second fund, in which SBIH invested as a limited partner. 66
Achieved IPOs of Two Overseas Investee Companies in FY2011 (1) PCHOMESTORE INC. Listed on GTSM (Taiwan) on April 6 Operation of EC mall in Taiwan (SBI Group's shareholding ratio: 4.24%) (2) Renren, Inc. Listed on NYSE on May 4 (SBI Group's shareholding ratio: 1.86%) Operation of China's Largest SNS, etc. *including residual securities One of the largest daily deal China's largest real name SNS websites in China Monthly SNS Users in China (Sept. 2010) (10 thousand) As of Mar. 2011 117 mil. users Source: iResearch 67
Foreign Investment Costs have Reduced Considerably due to the Appreciation of Yen Change in foreign exchange rates after Lehman Shock (from Sept. 16, 2008 to Jun. 16, 2011) 105% Weaker yen USD/JPY CNY/JPY 100% Stronger yen 95% Change from Sept. 16, 2008 90% (as of Jun. 28, 2011) 85% CNY/JPY - 17.9% 80% USD/JPY Figures as of Sept. 16, 2008 = 100% - 22.4% 75% Sep. Nov. Jan. Mar. May. Jul. Sep. Nov. Jan. Mar. May. Jul. Sep. Nov. Jan. Mar. May. 2008 2009 2010 2011 Source: Bloomberg 68
Investment will Start on a Full-fledged Scale, as the Fund Establishments were Almost Completed Of the total commitment amount for overseas funds of 60.62 billion yen (SBI’s interest)*, 70.4% will be paid in the future. Therefore, investment cost will be reduced substantially with the progress of the yen’s appreciation. (bil. yen) (As of March, 2011) Total commitment amount of Remaining term of 70 Group’s overseas funds the fund: avg. 4 (SBI’s shareholding) (Break down) years 60 (+2 yeas for extension option) 50 Unpaid, waiting for capital call 60.62 70.4% 40 42.72 30 Total Market value of IPO’d companies is Paid, not 22.3 bil. yen invested yet 20 (+19.2 bil. yen from investment cost) � Capital collected is to be 8.32 10 Paid, invested reinvested 9.59 (Investment cost) 0 * Total amount of the funds (based on financial summery of FY2010) which SBI invested as GP, New Horizon Fund 2 and New Horizon Fund 3 (Exclude New Horizon Fund 1 which is in harvest period ). FX rate is as of March 31, 2011 69
The 2nd Stage: Development of Overseas Financial Services � Invest in financial institutions (securities firms, banks, insurers etc.) utilizing partnerships created through establishment of overseas JV funds 70
Growth Potential of Emerging Countries: Discussion based on comparison between post-war Japan and current China Nominal GDP per capita in China is approximately the same as that in Japan in the late 1950s. China is expected to enter a period of high growth on a full-scale basis going forward, like Japan in its post-war period. (yen) Comparison of change in nominal GDP per capita 1,000,000 between postwar Japan and today’s China 900,000 China Japan maintained nominal GDP 800,000 Japan per capita growth of about 17% from 1966 to 1970. 700,000 Post war 600,000 Japan The four major pollution-related 500,000 diseases arose in Japan in its high- growth period, and environmental 400,000 pollution issues came to the surface in China in the 1990s. 300,000 Started 200,000 Today’s investment in China � a period of High 100,000 2005 economic growth � 0 Today’s China 1988 1992 1996 2000 2004 2008 (year) Postwar Japan 1956 1960 1964 1968 ※ China’s GDP per capita is calculated from Source: Economic and Social Research Institute, Cabinet Office, Government of Japan RMB to JPY with FX rate in each year 71 Japan-China Economic Association
Change in Listed Share Market Cap by Industry in Japan The finance and insurance industries have grown substantially from their high-growth period of the 1960's. During the economic high growth phase, they maintained a position of leadership as the industry infrastructure that supported the economy (Counted in December in each year) 1960 1965 1970 1975 1980 1985 electric electricity and finance and finance and finance and finance and 1 insurance insurance insurance insurance equipment gas transportation transportation electric electric electric electric 2 equipment equipment equipment equipment equipment equipment electric 3 Chemical Chemical commerce Chemical Chemical equipment electricity and transportation transportation 4 primary metal iron and steel commerce gas equipment equipment transportation electricity and 5 iron and steel Chemical construction commerce equipment gas finance and electricity and transportation 6 food construction Chemical insurance gas equipment 7 Commerce commerce commerce iron and steel iron and steel construction electricity and 8 textiles food iron and steel machinery machinery gas electricity and 9 textiles machinery machinery construction food gas finance and land land 10 food food food insurance transportation transportation Source: TSE Annual Statistics The emerging market countries are also likely to experience a similar 72 transition that Japan did
The Top 10 Largest Market Value Companies in China In rapidly growing China, financial institutions already comprise most of the top 10 largest companies Market Cap. Company Industry (mil. USD) 1 329,260 PetroChina Oil, Gas 246,420 2 Industrial and Commercial Bank of China Bank 191,517 3 China Construction Bank Bank 152,290 4 Bank of China Bank 133,902 5 Sinopec Oil, Gas 122,533 6 China Life Insurance Life insurance 7 China Shenhua Energy Coal mining 84,506 8 58,930 Bank of Communications Bank 57,386 9 Ping An Insurance Life insurance 10 China Merchants Bank Bank 52,710 73 Source: FT500 companies *As of the end of May 2010
Deployment of Overseas Financial Service Businesses Looking at Growth of Emerging Countries’ Financial Institutions Invests in financial institutions, such as securities, banking and insurance depending on the economic growth of each countries . Tien Phong Bank Bank � 20% shareholding Nonlife Tianan Insurance FPT Securities Securities insurance 20% shareholding � Kingston Financial Group Securities Bank OBIBANK * 2.74% shareholding � Russia Russia form a strategic business alliance in the � China China financial sector in HK and the Chinese mainland. � Commercial bank in METROPOL Group � Entry into online banking business in Russia Securities with 50% investment. Vietnam Vietnam Hong Kong Hong Kong BNI Securities Sri Lanka Sri Lanka 25% investment � cooperation with BNI Group in � Bank Cambodia Cambodia Indonesia in diverse areas Indonesia Indonesia � 8.51% shareholding Bank Phnom Penh Commercial Bank � Largest nongovernmental commercial bank � Acquired 40% of shares at establishment � 3.00% shareholding Securities � The second largest nongovernmental commercial bank � Acquired a securities business license as the first Japanese company in Oct. 2010 74 * Including plans
Overseas Businesses Already Contribute to SBI's Profit <Asset Management Business> FY2010 Ratio of foreign companies among 94.1% the invested companies which (16 out of 17 companies) conducted IPOs and M&As: Overseas sales ratio of investment security: 91.2% Ratio of overseas companies in sales of investment security (including dividend and interest) in Asset Management Business <Financial Services Business> 32.1% Overseas ratio in ordinary income: Ratio of equity-method investment profit from the overseas financial institutions below, in ordinary profit of the Financial Services Businesses - Tien Phong Commercial Joint Stock Bank - Phnom Penh Commercial Bank 75
2. New Phase of Global Business Development to Increase “Global Network Value” 76
Latest Overseas Business Development Driving for Improvement of Global Network Value 1st stage: Establishment of an investment structure in overseas 2nd stage: Transference of financial services to overseas 3rd stage: Creating network value by organically coordinating the Group’s domestic and overseas businesses Examples: (1) Building a system for providing integrated support to venture companies by utilizing overseas investment funds, securities companies, and banks. (2) Promoting the introduction of on-line systems at the financial institutions which the SBI Group has a stake, in accordance with the degree of the Internet penetration, and recovering the investment costs by offering systems and know-how. (3) Expanding the overseas businesses of the domestic Group companies with an eye toward listing on overseas stock markets, and expanding their scale through M&As with overseas companies, etc. (4) Supporting fund procurement and other activities of Japanese companies operating businesses in Asia. (Investment through investment funds, coordination with overseas banks and securities companies in which the Group has a stake). (5) Sharing opportunities for investments and loans with financial institutions which the Group has stake in and overseas partners. (6) Founding global Underwriting system for securitization of state-owned enterprises accompanied with their Privatizations (7) Set out to be more entrusted with governmental funds etc. 77
Concentrate on Creation of Global Synergies besides Asset Management Business and Financial Service Businesses Asset Management Business Financial Service Business Global Synergy (Fund, Company) (Investee) New Horizon Fund SBI & TH VC Fund Tianan Insurance Transfer SBI Insurance’s online business China SBI & BDJB China Fund (Nonlife insurance) expertise to Tianan Insurance SBI Zhaoxin Fund Kingston Financial Group (Securities) Hong Kong Offering Chinese stocks (SBI SECURITIES) SW Kingsway (Securities) Taiwan SBI & Capital 22 JV Fund Korea SBI Investment Korea Tien Phong Bank Provision of Vietnamese stocks, IPO deals Vietnam Vietnam Japan Fund FPT Securities related to privatizations (SBI SECURITIES) Provision of Cambodian IPO deals related to Phnom Penh Commercial Bank Cambodia SBI Phnom Penh Securities privatizations (SBI SECURITIES) Commercial Bank of Ceylon Sri Lanka Hatton National Bank Provision of Indonesian stocks, IPO deals Indonesia BNI Securities related to privatizations (SBI SECURITIES) SBI-Jefferies Asia Fund Asian SBI-Islamic Fund Region PNB-SBI ASEAN Gateway Fund Provision of Indonesian stocks (SBI Russia SBI-METROPOL Investment Fund OBIBANK SECURITIES) Transfer online banking expertise to OBIBANK Hungary Hungary Fund Turkey Turkey Fund Africa Africa Fund The U.S. Jefferies-SBI USA Fund Brazil Brazil Fund 78 * Including plans
Example (1) ： Forms Integrated Support Structure for Overseas Investees Start-ups Such as Provision of Seed Money, Underwriting IPOs, and Provision of Loans (e.g.) Partner: FPT Group Vietnam JV fund Bank Securities FPT Securities Tien Phong Bank Vietnam Japan Fund Underwriting at Seed money Loans IPO and PO Overseas start-up companies Continues support of financing of investee companies through utilizing capital market after IPO 79
Example (2): Developing Online Financial Business in Oversea through Transferences of Systems and Know-how the SBI Group attained in Japan to the Investee Financial Institutions Introducing on-line systems in accordance with the degree of the Internet penetration in each country. (Precedents) Know-how of online Know-how of online nonlife insurance banking business business Tianan OBI BANK Insurance We will strive to increase the corporate value of each company by introducing on-line systems and export systems and know-how. In this way, we will receive fees and recover the system development costs which the Group has incurred so far. 80
Example (3)-<1>: Aims at Third-country Business Development through Overseas Listings as a Turning Point Rapidly growing SBI Mortgage is in preparation for listing on Korea’s KOSDAQ Market Financial result of SBI Mortgage (mil. yen,%) FY2010 YoY Operating 9,560 +52.3 Newspaper article Revenue Operating 2,905 +83.6 Income 2,940 +84.4 Ordinary income (June 6, 2011 “The Nikkei” 2,003 +151.1 Net Income newspaper morning edition) Aims to develop businesses in Korea, including cooperation with Hana Financial Group, which is the lead underwriter of the listing 81
Example (3)-<2>: To Activate Cross-border M&A Utilizing “ “China Japan M&A Club, China Japan M&A Club,” ” which was established to be which was established to be Utilizing specialized institution to support Cross- -border M&A border M&A specialized institution to support Cross Head office: Head office: ： Japan Branch ： Japan Branch China Mergers & Acquisitions Association China Japan M&A Club (SBI funded establishment capital) Members: Providing opportunities to share Providing opportunities to share More than 14,000 corporate members useful information between its useful information between its who conduct M&A related businesses members in both countries members in both countries in China (e.g.) Main activities: Operating “Mergers-China”, an Internet portal for information sharing and SBI SECURITIES publishing reports such as “China Also expecting to utilize Also expecting to utilize M&A Yearbook” and “China Industrial Map,” and holding the “China M&A domestic networks to expand domestic networks to expand Annual Conference” with the full M&A business M&A business support of the Chinese government 82
Example (3)-<3>: Aiming to Increase Corporate Value Utilizing Global Network <Strategy image> <Strategy image> China Mergers & Overseas Acquisitions Association partners (SBI Investment) China Japan Strategy Strategy Strategy Strategy M&A Club Investee Chinese Chinese JV Companies companies in companies in companies Affiliated companies of network of CMAA network of CMAA JV companies M&A etc. M&A etc. Enables overseas business development Strategy Strategy Overseas IPO Higher Corporate Value Higher Corporate Value 83
Example (4): Supporting Financing of Japanese Companies Expanding Businesses in Asia The share of the U.S. and EU to the total volume of trade has declined and that of Asian countries has increased substantially Japanese companies have shifted their focus of overseas business expansion to Asia [Share of each country (region) to the total volume of trade in Japan] 1990 2011 (Jan. – Mar.) China 6.4% China * 23.4% * Others Others The other 25.6% 27.2% Asia 23.6% The other EU EU Asia U.S. 10.5% 17.0% U.S. 27.1% 27.4% 11.8% By utilizing overseas financial institutions which the Group has a stake in and overseas investment funds, we will respond to local financing needs of Japanese companies which have expanded their businesses overseas *Including Hong Kong and Macau Source: Ministry of Finance “Trade Statistics of Japan” 84
Example (5): Mutually Providing Financing Opportunities between the SBI Group and Each Bank e.g. Co- -underwriting of foreign bonds by investee banks underwriting of foreign bonds by investee banks e.g. Co Image ： Financing Financing opportunities (equity/loan) Japan Cambodia Aims at further profit Aims at further profit Financing Financing opportunities in other opportunities in other opportunities opportunities countries, such as countries, such as loan businesses loan businesses Financing Russia Vietnam Financing opportunities (equity/loan) *Based on the premise that each bank investigates in accordance with laws and regulations in respective country 85
Example (6): Founding Global Underwriting System for Securitization of State-owned Enterprises Accompanied with their Privatizations Aiming to sell IPOs of state-owned enterprises to Japanese customers through overseas securities companies of the SBI group <e.g.> Japan SBI Phnom Penh Securities Co., Ltd. (A wholly subsidiary of SBI Holdings, Inc.) Oct. 20, 2010 [SBI SECURITIES] The only Japanese company which acquired a Offers investors in securities business license in Cambodia. Japan with IPOs of state- Feb. 21, 2011 Brokerage Appointed to lead underwriter of state-owned owned enterprises Sihanoukville Autonomous Port (“PAS”)’s IPO FPT Securities Joint Stock Company Approx. 2,240 thousand Vietnam (Shareholding: 20%) accounts (as of the end of May) BNI Securities (Scheduled to invest 25%, obtained Indonesia approval from the authority on Jun. 28) 86 For the cases above ： Based on the premise that all licenses are approved properly
Example (7): Set out to be More Entrusted with Set out to be More Entrusted with Governmental Funds Governmental Funds Korean Government’ ’s policy is to invest in private equity s policy is to invest in private equity Korean Government funds through governmental organizations in order to funds through governmental organizations in order to foster the new industries foster the new industries The Korea Finance Corporation Korean National Pension “ Japan-Korea Parts Material Fund ” “Pan-Asian Fund” (Together with 3 Selected to be the companies of the Group) Total ： Entrusted with commissioned management Total ： Entrusted with 100 bil. Korean won companies 283,5 bil. Korean won (approx. 7.4 bil. yen) (approx. 21 bil. yen) of which 189 billion Korean won are invested by the SBI PRIVATE EQUITY Co., Ltd. SBI PRIVATE EQUITY Co., Ltd. Korean National Pension SBI Investment Korea Co., Ltd. Investment Korea Co., Ltd. SBI SBI PRIVATE EQUITY Co., Ltd. PRIVATE EQUITY Co., Ltd. SBI The Group’s achievements of establishing JV funds with governmental organizations were also evaluated 87 (*Converted at 100 Korean won = 7.41 yen)
3. Structural Enhancements for Transformation to a Global Company 88
Structural Enhancements for Overseas Businesses (1) Making the Second Head Office in Hong Kong the starting point for creating global synergy Consider appointing heads of JV partners as directors of HK local subsidiary to participate in the management of SBI’s overseas business Encourage collaboration among overseas partners (Image) Increased directors by 4 in charge of overseas business at Tokyo Head Office as well � Build a human recourses structure to actively recruit people locally in countries where overseas businesses held � Reduce foreign currency risk exposure and diversify fund procurement methods by utilizing Hong Kong capital market, such as issuance of yuan-denominated bonds 89
Structural Enhancements for Overseas Businesses, an Important Component for a Transition into a Global Company (2) China Business Management Company to be Established in Dalian 思佰益（中国）投資有限公司 (SBI China Co., Ltd) � Enables SBI to conduct sales activities and swiftly respond to investment opportunities in ways that were previously impossible through a representative office. � Financial subsidies for taxes and so forth, as well as referrals to alliance partners, etc. Pursue further expansion and enhanced efficiency of asset Pursue further expansion and enhanced efficiency of asset management and financial service businesses in China management and financial service businesses in China Europe Business Management Company Established in London (Established on April 27, 2011) SBIH UK Limited � Consolidate and manage European assets � Operate and manage European regional funds, including Russia fund, Hungary fund, and others � Invest in financial institutions, and develop Internet-based financial services in the European region � Information gathering function in Europe 90
Progresses Overseas Base Expansion with Targeting Sound and Highly Profitable Overseas Operations <China> SBI China Co., Ltd 思佰益 ( 中国 ) 投資有限公司 <The U.K.> SBIH UK <China> Beijing Rep. Office <Russia> <China> Moscow Rep. Office Shanghai Rep. Office <Japan> Base in Hungary SBI Holdings Overseas Business Dept. <Vietnam> Hanoi Rep. Office <Korea> ・ SBI Investment Korea <Malaysia> (Founded in June 2011) ・ SBI Global Investment Kuala Lumpur Rep. Office <Hong Kong> <Singapore> SBI Hong Kong SBI VEN CAPITAL <Indonesia> Base in Brunei Jakarta Rep. Office (Plan) Taking measures to secure overseas human resources. Such measures include starting to accept students of FPT University in Vietnam as interns from July. 91
III. Expanding Business Foundations During Recessions will Substantially Increase Profit when the Market Recovers 1. Expanding Business Foundations to be Prepared for Future Recovery of the Business Environment 2. There are High Expectations that ALA-related Businesses will be a New Revenue Source 92
1. Expanding Business Foundations to be Prepared for Future Recovery of the Business Environment 93
Change in Major Global Stock Market Indexes after Lehman Shock (Sept. 16, 2008 - Jun. 28, 2011) Major global stock market indexes recovered to the level of numbers before Lehman Shock occurred, leaving Nikkei with its weak recovery RTS 200% Nikkei Avg (Japan) Dow Jones (U.S.) +63.8% DAX (Germany) Shanghai composite (China) The Greece shock RTS (Russia) SENSEX (India) Shanghai May. 4, 2010 180% VN (Vietnam) Hang Seng (Hong Kong) +39.0% SENSEX The Lehman shock +32.3% 160% Sept. 15, 2009 Hang Seng +20.5% 140% DAX +19.2% 120% Dow Jones +8.9% 100% VN -5.1% Nikkei Avg 80% -16.9% % change (from Sept. 16, 60% 2008 to Jun. 28, 2011) 40% Jun. Sept. Dec. Mar. Jun. Sept. Dec. Mar. Jun. Sept. Dec. Mar. 94 2008 2009 2010 2011 Source ： Bloomberg
Expanding Business Foundations During Recessions will Substantially Increase Profit When the Market Recovers [e.g. SBI SECURITIES] Period with highest FY2010 Change income (FY2005) *1 Individual brokerage trading value of 3 exchanges (1 st , 2 nd sections) and 335.8 128.5 -61.7% *2 JASDAQ (tril. yen) 1.23 mil. 2.21 mil. +0.98 mil. Number of accounts at SBI SECURITIES 23.1 33.8 +10.7 pts. SBI’s share in trading value (%) 4.7 3.7 -1.0 bps. Avg. commission rate (basis point) (Unit: bil. yen) 48.6 16.3 -66.5% Brokerage commissions 22.4 27.7 +23.7% Other revenues 36.9 9.9 -73.2% Operating income Although brokerage commissions decreased because of a decline in individual trading value and average commission rate, the share of trading value increased, and other revenues grew due to profit diversification *1 Figures of FY2005 is based on the sum of E*TRADE SECURITIES and former SBI Securities, with the exception of average commission rate, that is based on E*TRADE SECURITIES only. *2 Source: Disclosed data from TSE and OSE 95
Simulation: When Trading Value Recovers to the Past Levels *1 Assumptions: Items below won’t change from FY2010 � The share in individual brokerage trading value (33.8%) � The average commission rate (3.7 basis points) � Revenues from investment trusts, bonds and FX trading businesses If individual trading value recovered to: Level of the highest Level of pre- income period Lehman Shock (FY2005) (FY2007) Individual brokerage trading value of the 3 335.8 tril. yen 244.2 tril. yen exchanges (1st, 2nd sections) and JASDAQ SBI SECURITIES Operating revenues 74.1 bil. yen 61.6 bil. yen *2 (+68.2%) (+39.9%) 36.5 bil. yen 25.6 bil. yen Operating income *2 (+269.9%) (+159.1%) Profits expected to increase substantially when the market recovers *1 These are just simulations based on simple assumptions, and are not forecasts of future results. 96 *2 Figures in parentheses are changes from FY2010 consolidated results.
Even After the “Lehman Shock”, Continuously Carrying out Aggressive Investments SBI regard the downturn in world economy as a chance to invest at a low price Comparison of investment amount (mil. yen) 120,000 The SBI Group JAFCO 101,041 95,179 100,000 JAIC Daiwa SMBC Capital 80,000 64,436 59,532 60,000 39,094 40,000 32,546 32,172 23,950 17,647 20,000 15,420 15,046 11,543 4,002 3,204 0 FY2007 FY2008 FY2009 FY2010 Comparison of number of invested companies FY2007 FY2008 FY2009 FY2010 SBI Group 208 118 143 185 JAFCO 168 106 101 110 JAIC 219 132 68 66 Daiwa SMBC Capital 138 63 - - Source: Compiled by SBIH from information disclosed by each company * Daiwa SMBC Capital delisted in Sept. 2009 and the FY2009 performance isn’t disclosed. 97 * Includes buyout and mezzanine
New Investment Amount of Major VC Firms SBI Invested the most amongst 20 major VC firms in Japan (bil. yen) <FY2010> Invested amount 42.0 SBI Holdings 20.6 JAFCO Mitsubishi UFJ Capital 3.7 3.5 Mizuho Capital JAIC 2.5 Newspaper article <Referrence: FY2009> Invested amount 27.2 SBI Holdings JAFCO 12.4 3.7 Mizuho Capital YASUDA ENTERPRISE 3.0 DEVELOPMENT 2.9 Daiwa SMBC Capital June 22, 2010 “The Nikkei” newspaper morning edition June 28, 2011 “The Nikkei” newspaper morning edition 98 * Exclude Buyout & Mezzanine
The SBI Group's Rapidly Expanding Customer Base Breakdown of the customer base (as of the end of May 2011) At the end of May 2011, (Unit: thousand) topped 12 million! (thousand) 2,242 SBI SECURITIES (Accounts) 12,001 12,000 4,029 SBIH InsWeb (No. of customers) 11,722 E-LOAN 1,023 (No. of customers) 137 (No. of customers) Other financial websites (Total no. of customer MoneyLook 682 11,000 registrations) (New portfolio customer 10,419 73 Morningstar Japan registrations) 107 SBI Card (Valid cards issued) 10,000 1,114 SBI Sumishin Net Bank (Accounts) SBI Insurance 278 (Total no. of contracts ) 9,290 (Total no. of service 1,100 Autoc one users in 2010) 9,000 (Total no. of customer Lifestyle-related websites 720 registrations) 8,418 SBI Credit 94 (No. of customers) Others 403 8,000 Total 12,001 Mar.2008 Mar.2009 Mar.2010 Mar.2011 May 2011 * Repetition customers between group companies are counted double while it is omitting repetition in each service site when it can be recognized as a unique user. 99 * The number of total number of contract of SBI Insurance excludes continuing contracts, expiring contracts, and early-withdrawal
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