(Shinko Securities) April 27, 2001 Brief Announcement of Consolidated Settlement of Accounts (for the year ended March 2001)

Transcription

1 April 27, 2001 Brief Announcement of Consolidated Settlement of Accounts (for the year ended March 2001) Listed company's name: Shinko Securities Co., Ltd. Listing stock exchanges: Tokyo, Osaka, and Nagoya Code No.: 8606 Location of head office: Tokyo Contact: Shozo Kuwada, Executive Officer & Manager of Treasury Dept. at (03) Date of board of directors: April 27, 2001 Adoption of FAS: Not adopted Date of annual meeting of stockholders: June 28, 2001 Specified transaction account: Available Business performance for the year ended March 2001 (April 1, 2000 through March 31, 2001) (1) Operating results (Note) Any fraction of less than 1 million in each indicated amount is rounded off. Operating revenues Operating profit Ordinary profit % % % March ,362 15,959 27,678 March , ,165 42,043 Net profit Net profit per Net profit per stock after Net profit ratio on Ratio of current income stock dilutive securities adjustment shareholders' equity to current expenses yen yen March ,846 ( ) March ,369 ( ) (Note) 1. Investment profit or loss on equity method: during the year ended March 2001 : 6,609 during the term ended March 2000: 129 mil yen 2. Average number of stocks (consolidated) during the term ended March 2001 : 796,915,527 shares during the term ended March 2000: 431,388,150 shares 3. Change in accounting method: No change 4. Ratio of current income to current expenses = (Received commissions + Financial profits)/(selling expense and general and administrative expenses + financial expenses) 5. The percentages of operating revenues, operating profit, ordinary profit, and the net profit indicate percent changes from the previous term levels. (2) Consolidated financial status Total assets Shareholders' equity Shareholders' equity ratio Shareholders' equity per share March 2001 March ,414,912 1,166, , , yen (Note) 1. Number of issued stocks: during the term ended March 2001 : 804,180,246 shares during the term ended March 2000 : 432,352,850 shares 2. Shareholders' equity ratio = Total shareholders' equity / liabilities * + total shareholders' equity * 100 (* Except for substitute securities for received margins and borrowed securities) (3) Consolidated cash flows Cash flow by operating activities March 2001 March ,733 16,899 Cash flow by investing activities 23,893 15,694 Cash flow by financing activities 40,841 58,613 Cash & equivalent balance at term end 121,485 98,535 (4) Scope of consolidation and application of equity method 18 consolidated subsidiaries nonconsolidated subsidiaries to which the equity method applies 5 affiliates to which the equity method applies (5) Changes in scope of consolidation and application of equity method Consolidation: 4 companies added and 3 companies eliminated, Equity method: 4 companies added and 2 company eliminated

2 April 27, 2001 Brief Announcement of Consolidated Settlement of Accounts (for the year ended March 2001) Listed company's name: Shinko Securities Co., Ltd. Listing stock exchanges: Tokyo, Osaka, and Nagoya Code No.: 8606 Location of head office: Tokyo Contact: Shozo Kuwada, Executive Officer & Manager of Treasury Dept. at (03) Business performance for the year ended March 2001 (April 1, 2000 through March 31, 2001) (1) Operating results (Note) Any fraction of less than 1 million in each indicated amount is rounded off. Operating revenues Operating profit Ordinary profit March 2001 March 2000 % 103, % 46, % 48, Net profit Net profit per Net profit per stock after Net profit ratio on Ratio of current income stock dilutive securities adjustment shareholders' equity to current expenses yen yen March 2001 ( ) March ,790 ( ) (Note) 1. Investment profit or loss on equity method: during the year ended March 2001 : during the term ended March 2000: 162 mil yen 2. Average number of stocks (consolidated) during the term ended March 2001 : shares during the term ended March 2000: shares 3. Change in accounting method: No change 4. Ratio of current income to current expenses = (Received commissions + Financial profits)/(selling expense and general and administrative expenses + financial expenses) 5. The percentages of operating revenues, operating profit, ordinary profit, and the net profit indicate percent changes from the previous term levels. (2) Consolidated financial status Total assets Shareholders' equity Shareholders' equity ratio Shareholders' equity per share yen March 2001 March ,575 76, (Note) 1. Number of issued stocks: during the term ended March 2001 : shares during the term ended March 2000 : shares 2. Shareholders' equity ratio = Total shareholders' equity / liabilities * + total shareholders' equity * 100 (* Except for substitute securities for received margins and borrowed securities) (3) Consolidated cash flows Cash flow by operating activities March 2001 March ,374 Cash flow by investing activities 6,664 Cash flow by financing activities 33,434 Cash & equivalent balance at term end 32,280 (4) Scope of consolidation and application of equity method consolidated subsidiaries nonconsolidated subsidiaries to which the equity method applies affiliates to which the equity method applies (5) Changes in scope of consolidation and application of equity method Consolidation: companies added and companies eliminated, Equity method: companies added and company eliminated

3 [Our Corporate Group] (Shinko Securities) Our corporate group is composed of 18 subsidiaries and 5 affiliates. The business activities of our company and of eight of the subsidiaries and three of the affiliates consist mainly of trading securities, the commissioning of securities trading, the underwriting and secondary offering of securities, placing securities for subscription, handling secondary offerings and private offerings, and other securities- and finance-related activities, as well as a wide range of services in the areas of raising and operating funds for customers. The other companies provide services related to and supportive of our company's activities, conduct market surveys and research, manage real estate, and more. In addition, all of the subsidiaries are consolidated affiliates, and all of the affiliates are companies to which the equity method applies. Below is an organizational diagram of our corporate group; I. Organizational Diagram of Corporate Group (Investment and finance services) (Japan) (Other affiliates) The Industrial Bank of Japan, Ltd.(MHFG) ( Europe) (Asia) (Subsidiaries) New Japan Investment (Schweiz) AG Shinko Securities Co., Ltd. (Subsidiaries) Shinko Capital Co., Ltd. Shinko Finance Co., Ltd. Mitsui Securities Co., Ltd. Shinwa Securities Co., Ltd. Shinko Investment Trust. Management Co., Ltd. (Affiliates) Hiraoka Securities Co., Ltd. Mitoyo Securities Co., Ltd. Eiwa Securities Co., Ltd. (Subsidiaries) New Japan Securities International (H.K.) Ltd New Japan Securities International (H.K.) Nominees Ltd (Japan) (Subsidiaries) Shinko Computer Systems Co., Ltd. Shinko Securities Business Services Co., Ltd. New Japan System Service Co., Ltd. Shinko Research Institute Co., Ltd. Kiikogen Co., Ltd. Shinko Card Service Co., Ltd. Shinko commerce Co., Ltd. (Affiliates) Kyodo Computer Service Co., Ltd. Alternative Investment Research Institute, Inc. (Japan) (Subsidiaries) Shinko Building Co., Ltd. Shinko Real Estate Co., Ltd. Shinwa Enterprise Co., Ltd. (Real estate lease service) (Information service, etc.) - 3 -

4 2. Affiliate Companies' Statuses (Shinko Securities) Company Location Capital Main area of business Owning ratio or owned ratio of voting Content of business right (Consolidated subsidiary) (%) New Japan Securities International HK.$ Securities Hong Kong (H.K.) Ltd 200,000, Securities trading New Japan Securities International HK.$ Hong Kong Services (H.K.) Nominees Ltd 100,000 (100.0) New Japan Investment (Schweiz) AG Zurich, S.FR. Switzerland 1,000,000 Investments Securities trading Shinko Computer Systems Co., Ltd. Chuo-ku, Tokyo 80 Information services Computational services Shinko Securities Business Service, Edogawa-ku, Business services 100 Co., Ltd. Tokyo Employment agency Business services Shinko Capital Co., Ltd. Chuo-ku, Tokyo 7,000 Finance Venture capital business Shinko Finance Co., Ltd. Chuo-ku, Tokyo 1,200 Finance 98.0 ( 93.0) Venture capital business Shinko Real Estate Co., Ltd. Chuo-ku, Tokyo 30 Real estate leasing (100.0) Leasing of stores, etc. Shinko Card Service Co., Ltd. Chuo-ku, Tokyo 300 Credit card services 93.3 ( 88.3) Business computation services New Japan System Service Co., Ltd. Fukushima-ku, Information services Osaka ( 95.0) Computer computation services Shinko Building Co., Ltd. Chuo-ku, Tokyo 40 Real estate leasing ( 95.0) Leasing of stores, etc. Simple printing; sale, Shinko Bussan Co., Ltd. Chuo-ku, Tokyo 100 provision of office Simple printing; purchasing of equipment, etc.; ( 98.4) office supplies, etc. insurance agency Shinko Research Institute of Economics, Inc. Mitsui Securities Co., Ltd. Shinwa Securities Co., Ltd. Kii Kogen Co., Ltd. Shinwa Enterprise Co., Ltd. Shinko Investment Trust Management Co., Ltd. Chuo-ku, Tokyo Fukui-city, Fukui Niigata-city, Niigata Itsu-gun, Wakayama Niigata-city, Niigata Chuo-ku, Tokyo 259 Survey, research services 558 Securities 780 Securities 400 Golf course management 10 Real estate leasing 4,524 Securities investment trusts 96.6 ( 91.6) 68.1 ( 30.3) 82.3 ( 77.3) (100.0) ( 95.0) 76.4 ( 16.6) Surveys, research on domestic, foreign economies, etc. Securities trading Securities trading Management, operation of golf courses Leasing of real estate Operation, management of investment trusts (Equity-method-applied affiliates) Chuo-ku, Osaka 3,779 Securities 42.0 Hiraoka Securities Co., Ltd. ( 37.0) Securities trading Mitoyo Securities Co., Ltd. Kannonji-city, Kagawa 300 Securities 22.8 ( 5.4) Securities trading Eiwa Securities Co., Ltd. Chuo-ku, Osaka 306 Securities 23.5 Securities trading Kyodo Computer Service Co., Ltd. Chuo-ku, Tokyo 400 Information services 40.0 (35.0) Computational services Alternative Investment Research Chuo-ku, Tokyo 100 Consulting services 50.0 Surveys, research on non-public Institute, Inc. ( 45.0) companies (Other affiliates) The Industrial Bank of Japan, Ltd. Chiyoda-ku, Tokyo 673,605 mil. yen Banking (Owned by IBJ) 25.0 (5.0) Securities trading Note: The numbers enclosed with ( ) in "Owning ratio or owned ratio of voting right" column mean the ratios of share indirectly held by our company

5 [Business Policy] (Shinko Securities) 1. Basic Business Policy Our corporate group's main field of business is the securities industry and related areas. In this field we provide a full line of services for a wide range of customers, from retail to wholesale. Towards that end we have multiple, integrated departments (sales department, corporate department, product department). As the core securities company in the Mizuho Financial Group, we aim to maximize the synergy between group members and their departments, thereby increasing customer satisfaction. 2. Basic Policy Regarding Profit Distribution Our corporate group's main goal is to maximize corporate value. Our basic policy with regard to profit distribution is to provide a variable dividend, based on the results in the period in question. In accordance with this policy, we intend to submit a proposal to increase this period's dividend to 6 yen, from the 3 yen of the previous period, for discussion at the regular general meeting of stockholders. 3. Medium- and Long-Term Business Strategy In our corporate group, all of the companies are united in trying to realize our medium-term business plan, which will culminate in the year The guiding aims of our business strategy include the following. - To establish competitive superiority by maximizing the synergy between groups and between departments. To strengthen the ties within the Mizuho Financial Group and further strengthen its full range of operations. - To build an effective sales system in the retail and middle fields. To strengthen marketing and promote Customer Relationship Management (CRM) as well as business office operations. - To build a cost-competitive corporate structure. To shrink fixed assets, reduce costs, and turn fixed costs into variable costs. - Implement a personnel policy aimed at raising the level of personnel. To evaluate and treat personnel in a manner that is fair, transparent and respected. - To increase investments in information technology (IT). To provide a "T+1" settlement system and strengthen our presence on the internet. - To carry out shareholder-oriented management that stresses capital efficiency. A variable dividend policy. 4. The Period's Business Goals and Their State of Achievement This period was the first year of business for Shinko Securities, which was formed from a merger of New Japan Securities and Wako Securities. So as to realize the benefits of the merger at an early date, we established a coordinating committee and proceeded on various other fronts as well. For example, we consolidated 28 redundant business offices on April 3, establishing a nationwide network of 99 offices evenly distributed between the eastern and western parts of the country. In a matter of primary concern following the merger, we also integrated the merger partners' operating systems, completing this goal, ahead of schedule, in November. In July we established a medium-term business plan that will continue through fiscal This plan will enable us to further delineate the direction that the company intends to take. Our administrators are working together to achieve it. In January we set up a call center with a 100-seat capacity. In addition, we renovated the Shinko Net Club, which conducts Internet trading. By putting these channels into full operation, we greatly expanded and strengthened our non-face-to-face operations, and were also able to establish Shinko 3 Support, a system that provides customers with total support through three channels: face-to-face (the business offices and their personnel), the call center (Shinko Thank You Dial), and the Internet (Shinko Net Club). In the area of finance, in May 2000 we increased our capital through an allocation of new shares to third parties - The Industrial Bank of Japan and IBJ Securities (currently Mizuho Securities) - raising approximately 64 billion yen in the process. Through this increase in capital, we were able to strengthen our capital position and greatly expand our capital reserves for strategic investments. At the same time, through application of the equity method, we became a consolidated company of The Industrial Bank of Japan, clarifying our position inside the Mizuho Financial Group. In June, having obtained the consent of the stockholders, we provided our directors and executive officers with the right to acquire stock options. In December, moreover, a system of remuneration linked to stock prices was introduced for managers. 5. Our tasks to be solved In Japan, reforming the economic system has become an urgent task. As can be seen in the recent emergency economic measures, a wave of reform aimed at resuscitating financing and reinvigorating the stock market has advanced upon the financial system itself. In the future, it is believed, there will be a further building up of the - 5 -

6 foundations necessary for strengthening the functions of direct financing that directly invests the risk money of individuals in the stock market. Moreover, it is assumed that, in advance of this development, competition in the securities industry will intensify due to a variety of factors, such as progress in diversifying the channels for dealing with customers (e.g., the Internet) and in the liberalization of commissions, and the entry, into the securities market, of foreign securities companies, bank-affiliated securities companies, and companies from other industries. In this environment, we have positioned the achievement of our medium-term plan as a matter of utmost importance. Based on this plan, we intend to diversify our earnings, increase our productivity by improving our sales efficiency, and reform our cost structure by promoting a conversion of fixed costs to variable costs, thus solidifying our foundations and strengthening the overall power of the Shinko Securities Group. Furthermore, in the area of developing and supplying products that answer the diversifying needs of customers, we are looking into forming tie-ups with companies outside both our group and the Mizuho Financial Group. As part of diversifying our earnings, we have positioned IPOs (initial public offerings) as a core part of our business, and are working to further strengthen our operations in this area. With regard to increasing our productivity by improving our sales efficiency, we are working to establish CRM (more customer-oriented management) in conjunction with Shinko 3 Support, devoting greater energy to training and educating employees, and making the observance of laws and ordinances even more thoroughgoing. Moreover, since it is becoming increasingly important for us to build up our IT infrastructure - so that, for example, we can provide a "T+1 (next day)" settlement system - and to deal with systems promptly, we will restructure our group's IT-related affiliates so as to strengthen our position and capabilities in the IT field. 6. Numerical Goals As previously mentioned, we have established a medium-term plan that will culminate in Its numerical goals include: (1) ROE: 10-15%; (2) assets entrusted to all of the companies: 20 trillion yen; (3) a ranking of A or higher at an early date; (4) to increase current profit to 100 billion yen. We are currently working to realize these goals. [ Business Results] - Business Conditions During the Year Ended March 2001 In the first half of this period, the Japanese economy, buoyed by a recovery in facilities investment that resulted from a strong performance in exports, especially to Asia, and an overall improvement in corporate results, traced a course of gradual recovery. In the second half of the year, however, there was an economic slowdown overseas, especially in the United States, and foreign stock prices also slumped, as a result of which the Japanese economy again began to lose steam. In the stock market, the Nikkei Average went above the 20,000-yen mark for the first time in three years, but then turned bearish due to a disorder in supply and demand brought about by the sudden drop in U.S. stock prices and the switching of the stocks used in the Nikkei Average. Near the end of the period, the Nikkei Average fluctuated wildly, at one point reaching its lowest level since the collapse of the bubble economy. The bond market, against the background of a continuing "money surplus," remained solid overall. Thanks to a succession of financial deregulation measures taken by the Bank of Japan, market activity stayed brisk through the end of the period. Overseas, in the U.S. economy, especially in the corporate sector, there was, beginning in the second half of the period, a rapidly spreading sense of deceleration occasioned by such factors as the money tightening that began in mid-1999 and the decline in stock prices. There was also a similar sense in the European economies, resulting from, among other things, a falling off in the rate of increase in exports. In both Europe and the United States, stock markets remained bearish throughout the period as they continued to adjust to the collapse of the Internet bubble; despite intermittent interest rate reductions in the United States, market conditions remained unstable throughout the year. Beginning in autumn, bond markets in both the United States and Europe firmly advanced due to rate cut expectations occasioned by the decelerating economic activity and slumping stock prices. Under these conditions, the consolidated operating revenues of our corporate group in this period was billion yen; ordinary profit was billion yen; and net profit was 9.846billion yen. An outline of these results is given below. 1. Received commissions The received commissions for this term were billion yen. The breakdown of these commissions is given below. (1) Brokerage commissions The average daily turnover in Sections 1 and 2 of the Tokyo Stock Exchange was billion yen (91.2% compared to the previous year). Our company brokered the sale of billion shares of stock worth trillion - 6 -

7 yen, while our commissions on the same totaled billion yen. In addition, our bond commissions totaled billion yen. (2) Underwriting and offering commissions Regarding stocks, we had large businesses related to the sales of the government's holdings of NTT stocks, and public offerings for capital increase of NTT and NTT DoCoMo. With the dull trend in the stock market, however, the underwriting and offering commissions declined from the previous year's level. There was much activity in new listings and new public offerings, thanks to the open of the NASDAQ Japan market and successive large businesses. In this environment, our company served as the managing underwriter for sixteen companies in the area of new listings and new public offerings, and for six companies in the area of existing listings and existing public offerings. In addition, we participated in the underwriting for 140 of the 198 companies that carried out new listings or new public offerings. As a result, our commissions on stock underwriting and secondary offerings were billion yen. With regard to bonds, the issuing of convertible bonds remained at a low level. The issuing of straight bonds decreased for business companies but increased for banks, and was thus roughly the same as in the previous year. In this environment, our company served as the managing underwriter for 14 straight bonds, including two of electric power companies. As a result, our commissions on bond underwriting and secondary offerings totaled billion yen. (3) Handling commissions for acquisition and offering, and other received commissions The above commissions mainly consists of handling commissions for offering and underwriting investment trust, and service commissions. In the current term, we developed and offered products mainly aiming at Japanese stocks as the main investment target, anticipating a gentle recovery in the Japanese economy. In the 1st half we newly a total of 10 open type investment trust including "Brand Equity". In the 2nd half, we tried to increase the balance mainly through the existing open type investment trust including foreign investment trusts. In addition, we started to offer "Japanese Technology Evaluation Open" (nicknamed "Super Technology"). On the other hand, low interest rates continued, and given this situation, we put much effort into selling bond investment trusts, especially medium term government bond funds. As a result, our commissions on subscriptions and secondary offerings totaled billion yen, while other brokerage commissions amounted to billion yen. 2. Trading profits and losses In the area of trading profit/loss, stock trading profit amounted to billion yen, while bond, exchange and other trading profit totaled billion yen. Total trading profit was thus billion yen. 3. Financial balance The financial balance amounted minus billion yen by deducting financial expenses (7.788 billion yen) from the financial profits (6.076 billion yen). 4. Selling, general, and administrative expenses Due to the merger, we consolidated offices, thereby reducing real estate expenses, and worked to reduce other costs as well. As a result, our selling, general, and administrative expenses totaled billion yen. 5. Extraordinary profits and losses As extraordinary profits, we posted an investment securities sales profit of billion yen, and a return on bad debt reserve of 426 million yen. As extraordinary losses, we posted merger-related expenses of billion yen, and an investment securities devaluation of billion yen. As a result, there was an overall loss of billion yen in the area of extraordinary profits and losses. 6. Cash flows The cash flow situation for this period was described below: "Cash flow from operating activities" increased by billion yen. The main reasons for this were a decrease in loans for margin trading and an increase resulting from repurchasing transactions. Moreover, "Cash flow from investing activities" increased by billion yen, as a result of, among other things, sales of investment securities. On the other hand, despite an increase in new stock issues, "Cash flow from financing activities" decreased by billion yen; this was due to, among other things, the repayment of long- and short-term loans. As a result of the above, the balance of cash and cash equivalents remaining at the end of this period was billion yen

8 Consolidated Balance Sheets (for the year ended March 2001) (Unit: Million yen) Title Year ended March 31, 2001 Year ended March 31, 2000 Former New Japan Former Wako (Assets) Current assets 2,248,588 1,031, ,071 Cash and due from banks 164, ,504 64,280 Deposits 2,102 2,035 1,203 Advances 10,277 2,806 2,760 Agreed per contra account 10,312 Cash paid for offering, etc. 10, ,844 Short-term loans receivable 40,839 1,743 7,711 Accrued revenue 8,980 3,392 3,443 Trading assets 842, , ,961 Trading securities, etc. 840, , ,706 Option transactions 1, Derivative product valuation account Investment securities for sale 5,345 Other products 33 2,126 Margin transactions 87, ,530 95,742 Customers' loans receivable 75, ,165 85,729 Borrowed securities collateral for margin transactions 12,162 5,364 10,012 Repurchasing transactions 81,975 Collaterals for borrowed securities 359, , ,110 Securities deposited from others 614, , ,270 Short-term deposits 8,475 3,180 1,806 Deferred income tax assets Other current assets 11,186 10,345 3,451 Allowance for bad debts Fixed assets 166, ,454 51,503 Tangible fixed assets 60,657 59,169 5,557 Intangible fixed assets 8,088 4,122 2,997 Investment, etc. 97,577 71,163 42,948 Investment securities 64,125 37,524 24,108 Long-term loans receivable 2,845 4,276 2,190 Long-term deposits 20,517 21,762 10,733 Deferred income tax assets 1,315 1,054 Other investment, etc. 16,039 15,170 7,762 Allowance for bad debts 7,264 8,624 1,847 Total assets 2,414,912 1,166, ,

9 Title Year ended March 31, 2001 (Shinko Securities) (Unit: Million yen) Year ended March 31, 2000 Former New Japan Former Wako (Liabilities) Current liabilities 2,046, , ,287 Short-term loans payable 176, ,513 43,214 Deposit received 36,511 29,172 26,818 Agreed per contra account 41,656 43,441 Cash received for offering, etc. 1,934 5,206 1,458 Trading assets 348,814 90,491 97,390 Trading securities, etc. 348,354 90,327 97,288 Option transactions Derivative product valuation accounts Margin transactions 62,583 65,446 66,958 Loans payable in debit-loan transactions 49,202 57,812 54,643 Loans payable in credit-loan transactions 1,425 Money received on lending securities for credit 11,955 7,634 12,315 Repurchasing transactions 430,985 48,165 74,278 Money received on lending securities 299,103 88,062 78,730 Short-term borrowed securities 369, , ,800 Received margins 19,575 33,084 20,850 Substitute securities for received margins 245, , ,470 Income taxes payable 1, Deferred income tax liabilities Other current liabilities 12,403 9,701 6,790 Fixed liabilities 91,617 83,342 46,984 Long-term loans payable 67,683 66,052 38,500 Deferred income tax liabilities 3, Reserves for retirement benefits 13,761 Reserves for retirement allowances 3,928 Other fixed liabilities 6,752 13,334 8,484 Statutory reserves 1, Transaction adjustment 143 Total liabilities 2,139,778 1,053, ,705 Minority interest 9,665 1,779 1,076 (Shareholders' equity) Capital stock 125,167 58,991 42,001 Capital reserve 118,805 47,338 31,627 Retained surplus 18,266 4,516 3,175 Transaction adjustment 299 Valuation difference 4,707 Treasury stock 1, Total shareholders' equity 265, ,735 76,793 Total liabilities, minority interest, and total shareholders' equity 2,414,912 1,166, ,

10 Title Consolidated Statement of Income (for the year ended March 2001) Current term (Apr. 1, Mar. 31, 2001) (Shinko Securities) (Unit: Million yen) Previous term (Apr. 1, Mar. 31, 2000) Former New Japan Former Wako Operating revenues 135, , ,133 Received commissions 97,387 84,928 77,623 Trading profit or loss 31,964 25,851 22,996 Trading profit or loss on investment securities 65 Other product transaction profit or loss Financial profit 6,076 4,870 2,504 Operating expenses 119,403 75,486 56,785 Selling, general, and administrative expenses 111,614 71,570 53,429 Trading-related expenses 16,460 11,143 8,524 Personnel expenses 59,737 35,978 28,150 Real estate expenses 21,024 12,212 10,047 Office expenses 7,828 6,863 2,228 Depreciation 3,015 1,148 1,813 Taxes and dues Others 2,721 3,807 2,183 Financial expenses 7,788 3,916 3,356 Operating profit 15,959 40,165 46,348 Non-operating revenues 15,804 2,739 2,960 Investment profit from equity method 6, Others 9,195 2,609 2,798 Non-operating expenses 4, ,300 Ordinary profit 27,678 42,043 48,008 Extraordinary profit 3,026 4,402 6,993 Extraordinary loss 20,877 41,789 35,146 Income before taxes, etc. 9,826 4,655 19,855 Income taxes Adjustment amount for income taxes Minority interest Net profit 9,846 4,369 18,

11 Consolidated Earned Surplus Statement (for the year ended March 2001) (Shinko Securities) Title Current term (Apr. 1, Mar. 31, 2001) (Unit: Million yen) Previous term (Apr. 1, Mar. 31, 2000) Former New Japan Former Wako Balance of consolidated surplus at the beginning of the term Increase in other surplus (or decrease in loss) Adjustment amount for tax effect accounting in past years 4, ,357 1,193 4,351 4, Increase in consolidated surplus Appropriation from capital reserve Increase in retained earnings due to expanding scope of equity method Increase in retained earnings due to scaling scope of consolidation Increase in retained earnings resulting from merger 5,219 2,068 3,150 2,345 2,345 3,762 3,762 Decrease in consolidated surplus Dividends Officer's bonus Decrease in consolidated surplus due to expanding scope of consolidation Decrease in consolidated surplus due to scaling scope of consolidation and equity method Merger grant Net profit 1,315 1, ,014 2, ,142 4,369 15,027 13, ,790 Balance of consolidated surplus at the end of the term 16,434 4,516 3,

12 I II III Consolidated Cash Flow Statement (Shinko Securities) (Unit: Million yen) Current term (Apr. 1, Previous term (Apr. 1, Mar. 31, 2000) Mar. 31, 2001) Former New Japan Former Wako Cash flow from operating activities Net profit before taxes, etc. 9,826 4,655 19,855 Depreciation 3,015 1,148 1,813 Adjustment for special profit and loss items Additions to allowance for bad debt 752 3, Profit from sale on fixed assets 296 Loss from sales on/disposition of fixed assets 1,639 5, Loss from devaluation of golf club memberships 639 Profit from sale on investment securities 2,302 2,194 1,942 Profit from sale on subsidiary securities 3,727 Loss from investment securities revaluation/sale 5,282 16,455 1,072 Loss from adding-back of investment securities 113 Loss from liquidation of subsidiary 9,980 Loss from support for affiliated 713 Merger-related expenses 8,090 Amortization of difference at time of change in accounting for retirement benefits 1,655 Depreciation of past service expenses in approved retirement pensions 8,214 Additions to responsible reserve 169 Depreciation of allowance for bad debts 10,858 Loss from assignment of claim 2,220 13,467 Others 36 Interest income and dividends earned 6,076 4,870 2,504 Interest cost 7,788 3,916 3,356 Investment profit and loss by equity method 6, Decrease/increase in loans receivable 27,757 60,479 1,754 Increase/decrease in money held as customer's trust 25,570 7,800 3,179 Advance money and deposits received 25,069 3,087 Trading products 278,978 7,493 Increase in trading products (assets) 21,696 Decrease in trading products (liabilities) 25,553 Margin account 77,476 99,422 Margin account (assets) 63,631 Margin account (liabilities) 37,989 Collateral money for lend securities and that for borrowed securities 20,331 19,589 Repurchasing account 226,566 97,737 Repurchasing account (assets)/decrease in collaterals for lending securities 259,100 Repurchasing account (liabilities)/increase in collaterals for lending securities 273,807 Others 31, ,592 Others (assets) 5,071 Others (liabilities) 63,174 Subtotal 12,375 17,353 31,107 Received amount of interest and dividends 5,066 4,962 3,084 Paid amount of interest 7,654 4,184 3,031 Paid amount of income tax, etc. 1, Cash flow from operating activities 8,733 16,899 31,374 Cash flow from investing activities Expenditure for acquiring investment securities 2,134 8,832 1,796 Revenue by sale on investment securities 6,977 23,113 8,175 Revenue by sales/disposition of tangible fixed assets 3,751 8, Expenditure for acquiring intangible fixed assets 6,680 9,868 1,361 Revenue by sale on intangible fixed assets 3, Revenue by acquiring subsidiary stocks involving change in the scope of consolidation 5,485 Expenditure for acquiring subsidiary stocks involving change in the scope of consolidation Revenue by sale on subsidiary stocks 147 Revenue by return on long-term deposits 10,604 Others 3, Cash flow from investing activities 23,893 15,694 6,664 Cash flow from financing activities Revenue by short-term loans payable 66,547 Expenditure by payment of short-term loans payable 84,822 31,334 Revenue by long-term loans payable 12,736 7,000 Expenditure by payment of long-term loans payable 29,699 14,934 2,100 Income involved in the issue of stocks 63,783 Expenditure for acquiring treasury stocks 2, Revenue by sale on treasury stocks Paid amount of dividends 1,297 Dividend paid to minority shareholders 8 Cash flow from financing activities 40,841 58,613 33,434 IV Increase in cash and cash equivalents 8,214 57,408 4,604 V Balance of cash and cash equivalents at the beginning of the term 98,535 44,756 30,742 Increase in cash and cash equivalents involved in merger 19,622 Increase in cash and cash equivalents involved in change in the scope of consolidation 12,658 1,828 1,643 Decrease in cash and cash equivalents involved in change in the scope of consolidation 1,115 5,458 4,709 Closing balance of cash and cash equivalents 121,485 98,535 32,

13 (Shinko Securities) [Consolidated Financial Statements] Our consolidated financial statements are prepared under "The Rules for Terms, Formats, and Preparation Method of Consolidated Financial Statements" (the Ministry of Finance's ordinance No. 28 of 1999, hereafter called "Rules for Consolidated Financial Statements") and the provisions of Articles 48 and 68 of those Rules in accordance with "The Orders for Securities Companies" (1998 ordinance No. 32 of the Prime Minister's Office and the Ministry of Finance) and "The Unification of Securities Business Accounting" (resolution at the board of directors for the Japan Securities Business Association held on November 14, 1974). [Basic Matters for Preparation of Consolidated Financial Statements] 1. Matters regarding the scope of consolidation Consolidated subsidiaries (18 subsidiaries) Main company names New Japan Securities International (H.K.) Ltd New Japan Investment (Schweiz) AG ( *1 ) Shinko Computer Systems Co., Ltd. ( *2 ) Shinko Building Co., Ltd. Shinko Real Estate Co., Ltd. Shinko Investment Trust Management Co., Ltd. ( *3 ) *1 New Japan Investment (Schweiz) AG was renamed as Shinko Investment Corp. (Switzerland) on April 24, *2 New Japan Computer System Co., Ltd. and Wako Computer System Co., Ltd. were merged into Shinko Computer System Co., Ltd. on October 1, *3 We acquired stocks controlling Shinko Investment Trust Management Co., Ltd. at the end of the period and therefore only the balance sheet was consolidated at the end of the period. Starting with this consolidated accounting period, new 4 companies have been added to the scope of consolidation due to the merger of parent companies, and 3 companies have been eliminated from that scope due to liquidation or the like. (Added) Wako Computer System Co., Ltd. The Shinko Research Institute Co., Ltd. Shinko Finance, Ltd., Shinko Investment Trust Management Co., Ltd. (Eliminated) Wako Computer System Co., Ltd., New Japan Securities International Inc., New Japan Capital Management (Hong Kong) Co., Ltd. 2. Matters concerning the application of equity method Equity-method-applied affiliates (5 companies) Main company names Hiraoka Securities Co., Ltd., Mitoyo Securities Co., Ltd., Eiwa Securities Co., Ltd. Starting with this accounting period, new 4 companies have been added to the scope to which the equity method applied, and 1 company have been eliminated from that scope due to the merger of parent companies. (Added) Shinko Investment Trust Management Co., Ltd., Hiraoka Securities Co., Ltd., Kyodo Computer Service Co., Ltd., Alternative Investment Research Institute, Inc. (Eliminated) Taiyo Investment Trust Management Co., Ltd., Shinko Investment Trust Management Co., Ltd. 3. Matters concerning the fiscal years of consolidated subsidiaries For 1 company of which closing date were different from the date for the consolidated settlement of accounts, we used their financial statements which were preliminarily prepared in accordance with the requirements for the formal settlement of accounts as of the consolidated closing date. 4. Matters concerning the accounting standard (1) Valuation standard and method for securities and others which belong to specified transaction account The market method is applied to the securities, assets, derivative product transactions, and others which belong to the specified transaction account, in accordance with the provisions of Articles 42 and 44 of the applicable cabinet ordinance concerning securities companies. Moreover, the contract-day basis is used to post those accounts. The market method is applied to the securities related to trading (securities for sale) and derivative product transactions for consolidated subsidiaries. In the balance sheets, the specified transaction account is paraphrased as "trading assets"; and in the statement of income, the special transaction profit and loss as "trading profit and loss."

14 (2) Valuation standard for securities and other products which do not belong to the specified transaction account The securities and the like other than those related to trading, the following valuation standard and method are applied starting with this period., in accordance with "Rules for Consolidated Financial Statements." 1) Market values, etc. of bonds that are to be retained until maturity The straight-line method is used. 2) Other securities a) Securities that have market values Market values are used as appraised values in the balance sheets, and all the valuation differences from the acquisition costs are directly included in the capital. The sales cost is calculated with the moving-average method. b) Securities that have no market value The cost method by the moving-average method is used. 3) Stocks of subsidiaries and affiliates The cost method by the moving-average method is used. 4) For other products, the cost method by the moving-average method is used. (3) Depreciation method for depreciable assets 1) Tangible fixed assets For the parent company and the consolidated domestic subsidiaries, the declining balance method is used. However, the straight-line method is used for the buildings (excluding equipment attached to them) which were acquired on or after April 1, The consolidated overseas subsidiaries mainly use the straight-line method. 2) Intangible fixed assets For Intangible fixed assets, etc. the straight-line method is used. For the software (used by our company), however, the straight-line method based on the period that it can be used by our company is used. (4) Handling deferred assets All the stock issue costs are posted as expenses when they are paid. (5) Handling of lease transactions For finance lease transactions other than those in which the ownership of the leased property is deemed as transferred to the borrower, the method for typical lease transactions is mainly used for accounting. (6) Accounting for consumption tax, etc. The consumption taxes and local consumption taxes are accounted by the tax exclusion method. (7) Criteria for addition of allowance 1) Allowance for bad debts In preparation for loss from bad debt in loans receivables, etc., the recoverable possibilities of general bonds are reviewed based on inclusion ratios in past records and those of specific bonds including the ones that are likely to become bad debts are individually reviewed, so that the irrecoverable amount can be estimated. 2) Reserve for bonus In preparation for the payment of bonuses to employees, the estimated amount of payment is calculated by our specific calculation method. 3) Reserves for retirement benefits In preparation for the payment of retirement benefits, the amounts that are recognized at the end of this period as having been incurred for the lump sum payment of retirement benefit and the payment of the qualified retirement pension are calculated based on the estimated amounts of liabilities for retirement benefit obligation and pension assets at the end of this period. The difference at the change in the accounting method (8,277 million yen) will be amortized in straight-line method over 5 years, and the amount appropriated to this period is included in the special loss

15 (8) Calculation standard for foreign-currency assets and liabilities Our company and domestic consolidated subsidiaries calculate foreign-currency assets and liabilities in accordance with the report from the Corporate Accounting Deliberation Council, "Accounting Standard for Foreign Currency Transactions and the Like", and the overseas consolidated subsidiaries mainly use the exchange rate on the closing date for such calculations, except for the transactions that have any exchange contract. 5. For the appraisal of consolidated subsidiaries' assets and liabilities, the market value appraisal method is used entirely. 6. Matter concerning the amortization of consolidation goodwill The consolidation goodwill is amortized in the lump for the year when it occurred. 7. Matter concerning the handling of profit appropriation and the like The statement of consolidated retained earnings is prepared based on the profit appropriation established during the consolidated fiscal year. 8. Scope of capital in the consolidated cash flow statement The capital (cash and cash equivalents) in the consolidated cash flow statement consists of cash in hand and deposits that can be withdrawn at any time like checking deposits and ordinary deposits. [Additional information] (Accounting for financial instruments) 1. Repurchasing transactions, securities lending and borrowing transactions, and the like The Accounting Standard for Financial Instruments ("Opinion concerning the Establishment of Accounting Standard for Financial Instrument" prepared by the Corporate Accounting Council on January 22, 1998) is applied starting with this term. However, the accounting method for repurchasing transactions, securities lending and borrowing transactions, and the like, conforms, as in the past, to the provisions in the Unification of Securities Business Accounting (resolved at the Board of Directors in the Japan Securities Business Association, which was held on November 14, 1974), in accordance with "Temporary Handling for Accounting and Auditing in Applying the Accounting Standard for Financial Instruments in Securities Business" (report No. 17 of July 6, 2000 by the Auditing Committee for Each Business Category in the Japan CPA Association). The differences from the Accounting Standard for Financial Instruments are summarized below: (1) Repurchasing transactions No securities for repurchase agreement transactions are transferred from trading instruments or securities deposited from others. No securities for reverse repurchase agreement transactions are stated in the balance sheets. (2) Securities lending and borrowing transactions For borrowed securities, stocks shall be stated at values applicable to the time of transactions and bonds at face values. For lent securities, there shall be no transfer from trading instruments or securities deposited from others. When securities deposited from others are appropriated to the delivery of short-position securities, no trading instruments (liabilities) shall be offset against any of those securities deposited. There is no effect on the profit and loss for this term. 2. Addition of "Valuation difference" to Stockholders' equity Starting with this term, other securities are appraised at market values in accordance with the Accounting Standard for Financial Instruments. Based on the "Rules on Financial Statements", the amount obtained by deducting the tax effect amount from the valuation difference in other securities is stated as "valuation difference" in Shareholders' equity

16 3. Application of accounting for impairment losses The accounting for impairment losses is applied to the golf course membership. As a result, the special loss of billion yen was posted for this term. Accordingly, the income before taxes decreases by that amount. (Accounting for retirement benefits) 1. Retirement benefit plan Our company and its consolidated subsidiaries provide a welfare pension plan, a qualified retirement pension plan, and a retirement lump-sum grant plan as the vested benefit plans. 2. Among the retirement benefit obligations, the following matters are stated in the consolidated financial statements: (1) Matter concerning retirement benefit obligations (at the end of the period) Accrued employees retirement benefit 13,761 million yen (2) Matter concerning retirement benefit expenses Retirement benefit expenses 2,357 million yen 3. Matters concerning the basis of calculation for retirement benefit obligations and others (1) Period allocation method for expected amounts of retirement benefits Periodic fixed amount standard (2) Discount rate 3.0% (3) Expected performance earning ratio 3.0% (4) Number of years for processing of differences resulting 5 years from the change in the accounting standard Accounting standard for foreign currency transactions and the like The revised Accounting Standard for Foreign Currency Transactions and the like ("Opinion concerning the Revision of Accounting Standard for Foreign Currency Transactions and the Like" prepared by the Corporate Accounting Council on October 22, 1998) is applied starting with this term. There is no effect on the profit and loss for this term. Transaction adjustment, which was formerly included in "Liabilities", is now posted in "Assets" due to the change in "Rules on Financial Statements."

17 [Notes on consolidated balance sheets] (Shinko Securities) (Year ended Mar. 31, 2001) (Year ended Mar. 31, 2000) Former New Japan Former Wako 1. Liabilities for guarantee 5,851 3,726 8,125 (Guarantee reservation of the above) (4,787 ) (3,726 ) (2,353 ) The accounts which are deemed as involving the practical obligation for guarantee of liabilities in accordance with report No. 61 by the Japan CPA Association's audit committee, "Accounting and Audit Handling Concerning the Representation of Guarantee of Liabilities and Acts Similar to Guarantee" are covered by the notes. 2. Subordinated borrowings The long-term loans payable (including those scheduled to be paid within 1 year) are those with subordinated clause as defined in Article 2 of "The Orders Concerning the Capital Requirement of Securities Companies" (2001 ordinance No. 23 of the Prime Minister's Office and the Ministry of Finance). 62,800 31,000 39, The title "Investment securities for sale" is newly created due to application of the "Accounting Standard for Financial Instruments." 4. Securities related to affiliates are indicated below. Investment securities (stocks) 5,272 million yen [Notes on consolidated statement of income] 1. Breakdown of extraordinary loss (Year ended (Year ended Mar. 31, 2000) Mar. 31, 2001) Former New Japan Former Wako Extraordinary profits Profit from sale on fixed assets 296 1, Profit from sale on investment securities 2,302 2,194 1,942 Profit from sale on subsidiary stocks 3,727 Profit from sale on stock exchange membership 571 Profit from securities revaluation 1,190 Reversal of futures trading loss reserve 0 0 Reversal of allowance for bad debts 426 Extraordinary loss Trading securities devaluation 0 Investment securities devaluation 4, Loss from devaluation of golf club memberships 639 Loss from sale on fixed assets 1,186 5, Loss from removal of fixed assets Loss from sale on investment securities ,434 1,072 Loss from investment securities revaluation 113 Loss from support for affiliate 713 Loss from liquidation of subsidiary 9,980 Special retirement benefits 4, Depreciation of past service expenses in approved retirement 8,214 pensions Amortization of difference at the time of the change in accounting 1,655 for retirement benefits Merger-related expenses 8, Depreciation of allowance for bad debts 10,858 Loss from assignment of claim 2,220 13,467 Additions to responsible reserve Additions to allowance for bad debts 1,179 3,

18 2. The title "Investment securities for sale" is newly created due to application of the "Accounting Standard for Financial Instruments." [Note on consolidated cash flow statement] Relation between the balance of cash and equivalent at the end of the term and the amounts in the accounts listed in the consolidated balance sheets. (Year ended Mar. 31, 2001) (Year ended Mar. 31, 2000) Former New Japan Former Wako (Unit: Million yen) Cash and due from bank 164, ,504 64,280 Fixed deposits for periods exceeding 3 months 1, Money held as customer's trust 42,229 35,800 32,000 Cash and cash equivalents 121,485 98,535 32,

19 Segment Information (Shinko Securities) 1. Business segment information This corporate group is carrying out global sales activities mainly for securities, which include (1) selling and buying securities, (2) brokerage of the entrustment of selling and buying securities, etc., (3) underwriting and offering securities, (4) handling the acquisition and offering of securities, and (5) handling the private offering of securities. These sales activities involve providing financial and other services. We earn profit based on these sales activities combined with such services. This business segment called "investment and finance service business" accounts for more than 90% of each of the total sales volume, operating revenue, and assets in all the segments. Therefore, the segment information on business types is omitted. 2. Geographical segment information For this period of consolidation and previous fiscal year of consolidation, the segment information on locations is omitted because each of the total operating revenue and assets of consolidated companies in Japan exceeds 90% of those in all segments. 3. Overseas gross sales (operating revenue) For this period of consolidation and previous fiscal year of consolidation, the overseas operating revenue is omitted because it is less than 10% of the consolidated operating revenue

20 Data on Consolidated Settlement of Accounts for the Year Ended March Commission Income (1) Breakdown for each account Unit: Million yen Year ended Year ended March 31, 2000 March 31, 2001 Former New Japan Former Wako Brokerage commissions 46,772 51,637 48,579 Stocks ( 45,692 ) ( 50,193 ) ( 47,740 ) Bonds ( 1,079 ) ( 1,439 ) ( 837 ) Commissions for underwriting and offering 7,224 6,719 4,308 Stocks ( 5,881 ) ( 5,897 ) ( 2,770 ) Bonds ( 1,342 ) ( 822 ) ( 1,537 ) Handling commissions for acquisition and offering 23,153 15,090 17,677 Other received commissions 20,235 11,481 7,058 Total 97,387 84,928 77,623 (2) Breakdown for each product Unit: Million yen Year ended Year ended March 31, 2000 March 31, 2001 Former New Japan Former Wako Stocks Bonds Beneficiary securities Others 52,312 3,719 38,457 2,897 57,248 3,443 23, ,914 2,837 23, Total 97,387 84,928 77, Trading profit/loss Unit: Million yen Year ended March 31, Year ended March 31, Former New Japan Former Wako Stocks, etc. Bonds, exchange, etc. (Bonds, etc.) (Exchange, etc.) 8,229 23,734 26,143 2,408 11,035 14,816 13,753 1,063 12,547 10,449 10, Total 31,964 25,851 22,