IB Daiwa conducts natural resources asset trading business, as part of which IB Daiwa invests in and develops natural resources companies and assets.

1. Natural Resources Development Business

IB Daiwa’s subsidiary and affiliate engage in oil and gas exploration, development and production business in the US where there is a huge domestic market and where the presence of well established physical infrastructure and a robust legal, regulatory and tax system allows producers to start having positive cash flow within a short period of time.

Exploration business is to take on the challenge of finding oil and/or gas. Finding natural resources underground or in the sea is almost a challenge against nature: there is always uncertainty, and drilling might or might not result in discovery. If one can luckily make a discovery, however, the return may be tremendous.

Development business is to turn the discovered reserves to commercial production. Development business has an upside potential as well, as one may find that the production exceeds the initial expectation, in the process of development. In the US where IB Daiwa’s subsidiary and affiliate operate, development is substantially shorter in time and cheaper in cost, as there are established pipelines and other infrastructures.

Production business is to produce what has been already discovered, and generates a steady flow of revenues and cash flow.

Through a subsidiary and an affiliate, IB Daiwa has a balanced portfolio that contains exploration, development and production assets.

2. Natural Resources Investment Business

IB Daiwa’s strategy is to generate value for IB Daiwa by trading assets and companies in the natural resources area.

The investment in Leed Petroleum in December 2005 (which was at the time called Darcy Energy; http://www.leedpetroleum.com/) delivered IB Daiwa a meaningful gain when Leed listed its shares on the AIM market of the London Stock Exchange.

IB Daiwa will continue to pursue opportunities to invest in undervalued assets and to divest at higher valuation.