Daiwa Securities Group Annual Report 2012 Corporate Summary Executive Messages Business Strategy Management Systems & CSR Financial Section Other Information 56 <Net Gains/Losses on Trading> Breakdown of SG&A Expenses and Income Revenues (Trading Gain/Loss) From Equity and Bond Divisions (Net Gain (Loss) on Trading + Net Financial Income, on a  Managerial Accounting Basis) Revenues (Trading Gain/Loss) From Equity and Bond Divisions (Net Gain (Loss) on Trading + Net Financial Income, on a  Managerial Accounting Basis) Net trading gains decreased by 14.1% year on year, to ¥79.4 billion.  Due to weak stock market conditions worldwide, trading gains and  net financial income on a managerial accounting basis in the Equity  Division declined by 41.8%, to ¥16.0 billion. Trading gains and net  financial income on a managerial accounting basis in the Bond  Division were affected by a drop in sales of foreign currency- denominated bonds to individual investors, and by increased hedge  costs due to yen appreciation. As a result, this income fell 11.7%  year on year, to ¥72.0 billion. Exiting some existing private equity  positions to take profits produced a ¥2.0 billion net gain on private  equity and other investments—a significant improvement over the  previous year. year, to ¥158.3 billion. However, investment in new systems to  support the launch of Daiwa Next Bank elevated depreciation  expenses by 1.8%, to ¥39.9 billion. After adjustment for net non- operating income/expenses, the Group posted a consolidated  ordinary loss of ¥12.2 billion. The Group posted ¥39.7 billion in extraordinary gains including  gain on negative goodwill from the consolidation of Daiwa Office  Investment Corporation, as a consolidated subsidiary. Business  restructuring costs, impaired asset write-offs and losses on the  disposal of fixed assets generated a total extraordinary loss of  ¥44.3 billion. After income taxes and minority interests, the Group  posted a consolidated net loss of ¥39.4 billion. Overall SG&A expenses were reduced by 1.2% year on year, to  ¥359.7 billion. Cost-cutting plans made progress, with trading- related expenses, and particularly advertising expenses, reduced  2.2%, to ¥68.9 billion. Personnel expenses declined 1.2% year on  <Selling, General and Administrative (SG&A) Expenses,  Ordinary Income and Net Income> Note: Quarterly figures have not been audited by an independent auditor. Note: Revenues from equity and bond trading divisions have not been audited by an  independent auditor. Billions of yen FY2010 FY2011 YoY Equity ¥ 27.5 ¥16.0 –41.8% Bond 81.5 72.0 –11.7% Total ¥109.0 ¥88.0 –19.3% Note: Revenues from equity and bond trading divisions have not been audited by an  independent auditor. Millions of yen FY2010 FY2011 YoY SG&A Expenses ¥363,920  ¥359,729  –1.2% Trading-related expenses 70,398 68,857  –2.2% Personnel expenses 160,234 158,298  –1.2% Real estate expenses 45,258  44,881  –0.8% Office cost 27,027 27,752  2.7% Depreciation 39,163 39,861  1.8% Taxes and dues 7,044 6,581  –6.6% Allowance for doubtful  accounts —  26  — Other 14,795 13,475  –8.9% Operating loss (45,355) (23,713) — Non-operating income/  expenses 12,753 11,513  –9.7% Ordinary loss (32,602) (12,200) — Extraordinary gains/losses (1,923) (4,674) — Loss before income taxes  and minority interests (34,525) (16,874) — Income taxes 9,714 24,400  151.2% Net loss ¥ (37,332) ¥ (39,435) — Cost Structure 0 20 40 60 80 100 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY2010 FY2011 (¥ billion)  Depreciation   Fixed costs (excluding depreciation)   Variable costs 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY2010 FY2011 0 10 20 30 40 (¥ billion)  Bond   Equity