Daiwa Securities Group Annual Report 2012 Breakdown of Net Operating Revenues Breakdown of Consolidated Income Analysis of Consolidated Income Statements <Total Operating Revenues and Net Operating Revenues> result, the yen strengthened to the point that the government was  forced to step in. In August 2011, the government and the Bank of  Japan unilaterally intervened by selling the yen and purchasing  dollars. In late October, when the yen rose to a postwar high  against the US dollar, Japan again intervened to sell yen and pur- chase dollars, though this was not enough to turn the tide. The  financial crisis in Europe began to trigger euro-selling pressure, and  yen purchases. This pressure accelerated in November 2011, and  by the end of the calendar year the yen had strengthened to  ¥100= € 1.00. In February 2012, the Bank of Japan introduced  monetary easing policies, adopting a “price stability target for the  medium to long term.” The yen began to retreat from its historically  high levels and stock prices responded as well. The Japanese  government bond market shrugged off the impact of a credit  downgrade by Japanese rating agencies in late December 2011,  from the highest rating level, in part because the ratings agencies’  intentions were announced well before the actual downgrades, and  the future outlook projections for the ratings were listed as “stable.”  The Nikkei 225 ended the fiscal year at 10,083.56 (an increase of  328.46 year on year) and ten-year JGB yields stood at 0.985% (a  decline of 27 basis points year on year), while the yen closed the  period at ¥82.17=US$1.00 (with the yen up ¥0.67 year on year). Rebuilding efforts in some of the regions affected by the East  Japan Earthquake have been delayed. This is partly a reflection of  the fact that the sheer scale of the damage is beyond any past  precedents. There is also the issue of radiation exposure, as  damage to the Fukushima nuclear plant left many areas radioactive.  With political will sapped by infighting, there were many delays to  the development of reconstruction plans. It took more than three  months following the quake—until June 2011—before a formal  reconstruction plan was passed by the government, and spending  budgets were only passed in July with the government’s second  supplementary budget. The large-scale spending projects initially  planned for inclusion in the third supplementary budget in August  fell victim to internal dissent and a cabinet reshuffle, and thus did  not get passed until November 2011. Reconstruction-related  demand finally began to pick up in early 2012, but the scale and  impact was limited. It is likely to become a significant factor, at last,  during FY2012. Furthermore, since there were relatively few major stock under- writing contracts during the period, underwriting commissions fell  25.8% year on year, to ¥19.5 billion. On the other hand distribution  commissions to support sales of the Retail Division’s investment  trusts soared by 55.6%, to ¥49.1 billion. Note: Quarterly figures have not been audited by an independent auditor. Consolidated operating revenues for the period rose 4.8% year on  year, to ¥422.4 billion, while net operating revenues increased  5.5%, to ¥336.0 billion. Income from commissions rose 1.0%, to  ¥220.8 billion. However, despite a slight pickup at the end of the  year, brokerage commissions fell 19.5% year on year, to ¥40.8  billion, reflecting a drop in equity brokerage commissions due to  weak stock market conditions over the course of the fiscal year. (¥ billion) Millions of yen FY2010 FY2011 YoY Operating revenues ¥403,042  ¥422,375 4.8% Commissions 218,630 220,845  1.0% Brokerage commission 50,665 40,783  –19.5% Underwriting commission 26,303 19,508  –25.8% Distribution commission 31,580 49,139  55.6% Other commission 110,083 111,416  1.2% Net gain on trading 92,477 79,416  –14.1% Net gain (loss) on  private equity and other  investments (17,259) 1,956  — Interest and  dividend income 71,916  79,762  10.9% Service fees and other  revenues 37,278  40,396  8.4% Interest expenses 58,062  59,691 2.8% Cost of service fees and other  revenues 26,415  26,668  1.0% Net operating revenues ¥318,565  ¥336,016  5.5% –20 0 20 40 60 80 100 120 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY2010 FY2011  Commissions   Trading gains/losses   Gains/losses on private equity and other investments  Interest and dividend income   Service fees and other revenues 55