News Release


Notice regarding signing of share exchange agreement for making SMBC Friend Securities into a wholly-owned subsidiary of SMFG(1/1)

Sumitomo Mitsui Financial Group, Inc.

Sumitomo Mitsui Banking Corporation

SMBC Friend Securities Co., Ltd.

 

 

Notice regarding signing of share exchange agreement for making

SMBC Friend Securities into a wholly-owned subsidiary of SMFG

 

 

TOKYO, April 28, 2006 --- Sumitomo Mitsui Financial Group, Inc. (SMFG), Sumitomo Mitsui Banking Corporation (SMBC), and SMBC Friend Securities Co., Ltd. (SMBC Friend Securities), a subsidiary of SMBC, announced that SMFG and SMBC Friend Securities had signed a share exchange agreement to make SMBC Friend Securities into a wholly-owned subsidiary of SMFG, subject to regulatory approval of an application to be submitted pursuant to Article 52-23, paragraph 3 of the Banking Law, in accordance with decisions of each companyfs board of directors at meetings held today.  The signing is based on the basic agreement the three companies entered into on March 30, 2006 .

 

 

1.       Purpose of making SMBC Friend Securities a wholly-owned subsidiary of SMFG

 


In accordance with the stabilization of the Japanese financial system, Japanese householdsf portfolios have shown clear signs of a shift from savings to investment, and their investment

 

needs are expected to become further diversified.  At the same time, we believe that new types of asset management services will become popular among individual investors who improve their financial knowledge and have an increased interest in portfolio management based on asset allocation concepts. 

 

In view of these trends, SMFG will further strengthen cooperation among group companies by making SMBC Friend Securities a wholly-owned subsidiary, establishing a new business model distinct from the conventional one by combining banking and securities businesses and maximizing synergies between them.  With such initiatives, SMFG will try to make every effort to enhance the enterprise value of the whole group.

 

In particular, SMBC will provide fund wrap services through collaboration with SMBC Friend Securities.  Furthermore, SMFG will accelerate the exchange of personnel between SMBC and SMBC Friend Securities and expand the consulting services of SMBC Friend Securities to SMBCfs individual customers who are interested in investments in individual stocks.    

 

2.       Terms and conditions of share exchange

 

(1)                Schedule of share exchange

Board meetings to approve share exchange agreement

April 28, 2006

Signing of share exchange agreement

April 28, 2006

General shareholdersf meeting to approve share exchange agreement (SMBC Friend Securities)

June 29, 2006 *

 

SMBC Friend Securities to be delisted

August 28, 2006 *

Deadline of submission of SMBC Friend Securities stock certificates

August 31, 2006 *

Effective date of share exchange

September 1, 2006 *

* Planned

 

(Note)  1. The effective date of share exchange may be changed if SMFG and SMBC Friend Securities so agree.

 

             2.  SMFG will conduct the share exchange without obtaining approval at its general shareholdersf meeting, since this share exchange is deemed a gsimple share exchangeh under Article 358 of the Commercial Code of Japan.


 

(2)                Share exchange ratio

 

SMFG

(Parent company)

SMBC Friend Securities

(Wholly-owned subsidiary)

Share exchange ratio

1

0.0008

 

(Note 1) Allotment ratio

0.0008 shares of SMFG will be allotted to 1 share of SMBC Friend Securities.

 

(Note 2) Basis for determination of share exchange ratio

SMFG appointed Goldman Sachs ( Japan ) Ltd. (gGoldman Sachsh) as its financial advisor and SMBC Friend Securities appointed Merrill Lynch Japan Securities Co., Ltd. (gMerrill Lynchh) as its financial advisor in connection with the transaction.  SMFG and SMBC Friend Securities comprehensively considered numerous factors including results of the analyses provided by their respective financial advisors, and discussed and agreed to the above.   

 

(Note 3) Methods of and basis for calculation by financial advisors

Goldman Sachs analyzed the share exchange ratio based on, among other things, review of market price trends of the common stock of SMFG and SMBC Friend Securities, a discounted cash flow analysis, a selected companies analysis and a selected transactions analysis.

 

Merrill Lynchanalyzed the share exchange ratio based on a comprehensive judgment using a market stock price analysis, a discounted cash flow analysis, and a comparable companies analysis.

 

(Note 4) Number of new shares to be issued by SMFG

Common stock: 249,015 shares

 

(3)                Listing after share exchange

SMFG will hold 100% ownership of SMBC and remain listed.  On the other hand, SMBC Friend Securities will become a wholly-owned subsidiary of SMFG and be delisted on August 28, 2006 .

      

(4)                Cash to be paid upon share exchange

No cash will be paid in connection with the share exchange.

 


 

(5)                Situation after share exchange

(a)  Corporate name, business, head office, and representative

The corporate names, businesses, head offices, and representatives of SMFG and SMBC Friend Securities will remain unchanged from the description in the gOverview of SMFG and SMBC Friend Securities.h

 

 

(b)  Capital stock

SMFGfs capital stock will not increase as a result of the share exchange, while SMFGfs capital reserve will be increased by the allowed maximum amount calculated pursuant to Article 357 of the Commercial Code of Japan.

 

(c)  Impact on financial results

The share exchange will not affect SMFGfs consolidated earnings for this fiscal year since SMBC Friend Securities is already a consolidated subsidiary of SMFG.  On the other hand, SMFG believes that it can further promote cooperation among group companies by making SMBC Friend Securities a wholly-owned subsidiary and by maximizing synergies between the banking and securities businesses, thereby improving its future consolidated financial results.

 

(d)  Treatment of fractional shares

Cash, instead of fractional shares of SMFG, will be distributed to shareholders of SMBC Friend Securities who have the right to receive fractional shares of SMFG as a result of the share exchange, in accordance with Article 234 of the Japanese Commercial Code of Japan.

 


Overview of SMFG and SMBC Friend Securities

 

 

@@@@@@@@@@@@@@@@@@@@@@@iAs of September 30, 2005(*1), non-consolidated basisj

 

Parent company

Wholly-owned subsidiary

Company name

Sumitomo Mitsui Financial Group, Inc.

SMBC Friend Securities Co., Ltd.(*2)

Business description

Management of the affairs of subsidiaries and relevant ancillary functions

Securities business

Date of establishment

December 2, 2002

March 2, 1948

Head office

1-2, Yurakucho 1-chome, Chiyoda-ku, Tokyo

7-12, Nihonbashi-kabuto-cho, Chuo-ku,  Tokyo

Representative

President: Teisuke Kitayama

President & CEO: Katsuhiko Tamaki

Capital Stock

1,352,651 millions of yen(*3)

27,270 millions of yen

Shares issued and outstanding

Common stock   7,303,472.77

Preferred stock          950,101

Common stock          311,269,929

Stockholderfs equity

3,312,686 millions of yen

127,320 millions of yen

Total assets

3,653,155 millions of yen

243,482 millions of yen

Date of fiscal year end

March 31

March 31

Number of employees

122

1,844

Principal customers

Not applicable

Individuals, companies, etc

Principal shareholders

(Name and percentage of shares outstanding)(*4)

Japan Trustee Services Bank, Ltd. (Trust Account)

6.56%

Sumitomo Mitsui Banking Corporation

40.35%

The Master Trust Bank of Japan, Ltd. (Trust account)

5.99%

Sumitomo Life Insurance Company

8.71%

The Chase Manhattan Bank N.A. London (Standing agent; Mizuho Corporate Bank, Ltd.fs Kabutocho Custody & Proxy Department within the Settlement & Clearing Services Division)

2.13%

The Master Trust Bank of Japan, Ltd. (Trust account)

4.05%

Nippon Life Insurance Company

2.11%

Japan Trustee Services Bank, Ltd. (Trust Account)

2.26%

State Street Bank and Trust Company 505103 (Standing agent; Mizuho Corporate Bank, Ltd.fs Kabutocho Custody & Proxy Department within the Settlement & Clearing Services Division)

1.91%

QUOQ Inc.

1.43%

Relationship between SMFG and SMBC Friend Securities

Capital relationship

SMBC, a wholly-owned subsidiary of SMFG, holds 40.35 % of the total outstanding common shares of SMBC Friend Securities.

Personnel relationship

No one concurrently holds a position of director in SMFG and SMBC Friend Securities.

Business relationship

There is no business relationship between SMFG and SMBC Friend Securities.

Financial Results of the past 3 fiscal years

Fiscal year

FY2003

ended March 31, 2004

FY2004 ended March 31, 2005

1st half of FY 2005 ended September 30, 2005

FY2003 ended March 31, 2004

FY2004 ended March 31, 2005

1st half of FY 2005 ended September 30, 2005

Operating income (millions of yen)

55,515

258,866

16,206

48,342

52,304

27,299

Operating profit (millions of yen)

52,470

256,222

14,468

18,806

18,042

9,795

Ordinary profit (million of yen)

51,188

253,448

12,424

19,104

18,323

10,031

Net income (millions of yen)

50,505

252,228

   38,435

15,417

13,201

6,352

Net income per share (yen)

 3,704.49

38,302.88

5,646.36

52.49

42.37

20.56

Dividend per share (yen)(*4)

3,000

3,000

|

12.00

12.00

|

Stockholdersf equity per share (yen)

232,550.74

257,487.78

268,549.24

345.25

402.58

413.29

(*1)SMBC Friend Securities announced its most recent financial results, as of March 2006, today. However, in light of time constraints, SMBC Friend Securities listed its financial results as of September 2005 for purposes of the above overview.

(*2)SMBC Friend Securities is a consolidated subsidiary of SMFG.

(*3)SMFGfs capital stock is currently 1,420,877 millions of yen.

(*4)Principal shareholders and dividend per share of common stock

 




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