Daiwa Securities Group
Sustainability Report 2003

BUILDINGSUSTAINABLE
SUCCESSDialogue

Fulfilling the Mission of the Securities Industry

On May 29, 2003, Daiwa Securities Group Inc. President andCEO sat down with Corporate Social Responsibility expert
Toshihiko Goto to talk about the Group’s mission.
Goto: President Hara, you have been putting a great deal of effort
into corporate branding. What is your objective for that?
Hara: The objective of corporate branding is to build trust. In the
securities industry, we do business in an ever-changing market. The
prices of stocks and bonds are constantly fluctuating, so our products
bear a certain amount of risk. That is why trust from our customers ismore important than anything. I think, however, that the philosophy of
pursuing trustworthiness as one of the prime objectives has yet to be
fully accepted in the securities sector. At the same time, customers
and society in general are keeping a sharper eye on companies. These
were my motivations in establishing “customer trust” as a cornerstoneof our Corporate Principles as soon as I took the post of President. I
was convinced of a need to change our employees' consciousness
and to provide services that would give customers something they felt
they could not get elsewhere. I felt it was critical to build up a trusted
brand to get customers to choose us as their securities company. The
branding activities for bringing this idea to reality have been underway for two and a half years, and we are starting to see the spread ofa brand consciousness and sense of direction among our employees,
ways of thinking that are critical to customer trust.
Goto: If this employee consciousness is weak and something goes
wrong, many companies try to cover it up. But if employee consciousness is elevated, the organization goes to work to review the problem
and make changes. That raises the value of the company.
Hara: In the last fiscal year, there was a problem at one of our Groupsecurities companies that had a huge impact on our brand. This
caused inconveniences to our customers and other stakeholders, but
it also provided an incentive for system reform. The happiest benefitof the branding activities is the fact that if some irregularity happens,
we do not try to hide it, we support our employees who are out there
doing their jobs. This is because we have clearly stated the ideas I
was just telling you. Of course our ultimate goal is to eliminate any
problem of this sort, which is crucial if we are to establish the brand.
Raising employee awareness is essential to making this happen, so
we are making employee education a priority. Through training andYoshinari Hara
President and CEO, Daiwa Securities Group Inc.

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DAIWA SUSTAINABILITY REPORT 2003

email, I have a dialogue going with our employees on the subject of
the brand. The effort will take perseverance, but it is one of top management's most important jobs.
Goto: Lately I hear the word “commitment” quite frequently. Whatcommitments are you making personally to people within and beyond
your company?
Hara: The commitment I am talking about is a “promise to fulfill ourduties,” which is not a typical Japanese motto. Overseas investors
expect a commitment primarily in terms of profitability, which is notalways an easy task. My personal commitment is to implement the“Best Brand Daiwa 2005”, a new medium-term management plan toguide us through FY 2005, and to be No. 1 in quality and productivity.
In addition, although it is difficult to quantify the results of thebranding activities, I hope to create a system that will give us a senseof how much we have achieved. An example of this commitment isour ongoing award program for employees, called the Best Brand
Daiwa award, which is a way to keep communication open with our
employees and continue to detail my stance on these matters tothem.
Goto: Commitment itself is an important quality overseas and an
important element of a brand. In terms of social and environmental
sustainability, I hope that corporations like yours will make stronger
concrete commitments, like stating how you will set targets for hiring
female employees. Incidentally, when your products are financial
instruments, your products and office operations have a smaller direct
impact on the environment than manufacturing or distribution. But
even so, the financial acts of lending and investing do have a very significant impact. How does the Daiwa Securities Group plan to deal
with environmental issues in its core business of dealing insecurities?
Hara: One way of dealing with the environment within our core business is the Mrs. Green eco fund we have set up. Presently we are
studying the incorporation of socially responsible investing, or SRI, in
our business. Moreover, I have always thought that securities work is
well suited to women. Unfortunately we don't have many female
employees who are management candidates at this time, but we areworking to promote more women.
Goto: SRI has risen to the level of a national strategy in Europe; is it
possible that a Japanese-style SRI practice will arise, different fromthat in Europe?
Hara: If you ask me what the key is to real development of Japan's
financial market, it is corporate governance. From this perspective, it
is fine to have investment trusts based on the ideas and efforts of thecompanies’ top managements. But presently we at Daiwa Securities
Group are struggling to come up with appropriate criteria to measurecorporate governance.
Goto: In Europe and North America, corporate social responsibility
and corporate governance in the broad sense are used interchangeably. As a result, investment trusts that look at each company's corporate governance in the broad sense are a perfect example of SRI.
Moreover, in the corporate social responsibility approach, theyemphasize assessing the final profit or loss, weighted by economic,
social and environmental performance. When I say economic, I do notmean just the fiscal health and profitability of a company, but its economic effect on society as well, such as its ability to create jobs forcommunities. The trend is to examine companies from these aspects
as well.
Hara: The more information corporations disclose, the more trust
society will put in those firms in terms of investing. Our mission in the
securities industry is to create healthy direct finance markets in cooperation with the most progressive corporations. The dawning era is
one of direct finance. In Japan, however, in spite of our large economy, we have a small financial market, and individuals are not using
their own financial resources in ways that have any risk. That is thebiggest problem with Japan's economy. Our responsibility and mission is to aid the social transition from indirect to direct finance,
which is to say, helping individuals become risk-assuming investors.
Goto: Now that you have explained your vision and mission, I lookforward to seeing them in action at the Daiwa Securities Group.

Toshihiko Goto
Chair, Environmental Auditing Research Group (EARG)
Member, Board of Directors, Global Reporting Initiative (GRI)DAIWA SUSTAINABILITY REPORT 2003

03

Contents

Editorial Policy

Dialogue: Fulfilling the Mission of the02
Securities Industry

The Daiwa Securities Group released its first Sustainability Report 1 in 2002. This

Contents, Editorial Policy

04

responsibility, and was written to be as readable and as sincere as possible. This
year we offer our second Sustainability Report.

Profile of Daiwa Securities Group
Companies

05

Each of its major sections (Compliance, Corporate Governance, Information
Disclosure, Initiatives in Our Core Business, Working for Customer Satisfaction,

report provided information on Group pro-sustainability activities and social

Daiwa People, As a Corporate Citizen and a Member of the Community andManagement

Working for the Environment ) addresses Group activities taken to promote economic, social or environmental sustainability.

Brand Management and Sustainability

06

Results, Issues and Targets

08Compliance10

member of the Board of Directors of the Global Reporting Initiative (GRI), andCorporate Governance

16

Professor Iwao Taka of Reitaku University, a specialist in corporate ethics andcompliance, provided third-party opinions in the 2002 Sustainability Report. As far

Information Disclosure

18

Toshihiko Goto, Chair of the Environmental Auditing Research Group (EARG) andEconomic Reporting
Financial Performance

performance data, provided more quantitative social information, and revealed
20

Social Reporting

specific targets and issues and progress made on them. Additionally, theStakeholder Dialogue section, new with this year‘s report incorporates commentsthat have been made to us whenever possible.

Initiatives in Our Core Business

22

Working for Customer Satisfaction

24

Daiwa People

26

As a Corporate Citizen
and a Member of the Community

30

This report was prepared referring to GRI‘s 2 international guidelines for sustainability reports. We seek to offer information transparently and promote two-way
communication with our stakeholders.

Scope of this report

Environmental Reporting
Working for the Environment

as possible, the issues pointed out by these authorities have been addressed inthis year‘s report. Specifically, we have expanded the scope of our environmental

32

Target readers: All of Daiwa Securities Group‘s diverse stakeholders, primarily customers,
shareholders, investors and employees as well as business partners, non-profit organizations, persons living near Daiwa Securities branch offices nationwide, and educationalorganizations.

Communicating with Society
Stakeholder Dialogue

36

Third-Party Opinion

38

Milestones toward Sustainability

40

GRI Content Index

41

Scope of reporting: This report basically covers our nine main Group companies 3.
However, it does not provide data from all nine companies on all items. Rather, the information is provided in proportion to the size and business area of each company. The scopeof each category of numerical data is noted along with the data.
Period covered in report: FY 2002 (April 2002 – March 2003). Some information is provided
that became available close to the publication date and some activities are covered that
occurred prior to FY 2002.
1 Sustainability report: Defined as a report on a company‘s efforts and systems for addressing three interdependent aspects of corporate activity–economic, social and environmental–as well as the results of these
efforts.
2 Global Reporting Initiative (GRI): An organization founded to propose and promote international guidelines
for sustainability reporting. Participants include a variety of stakeholders such as businesses, non-governmental organizations, consultants, accounting groups and business groups from different parts of theworld. Operations began in the autumn of 1997. For details see About the Global Reporting Initiative, page39.
3 Nine main Group companies: see Profile of Daiwa Securities Group Companies, page 05.

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DAIWA SUSTAINABILITY REPORT 2003

Profile of Daiwa Securities Group Companies
Daiwa Securities Group Inc.*

Daiwa Securities Co. Ltd.

Daiwa Securities SMBC Co. Ltd.

6-4, Otemachi 2-chome, Chiyoda-ku,
Tokyo 100-8101, Japan

6-4, Otemachi 2-chome, Chiyoda-ku,
Tokyo 100-8101, Japan

8-1, Marunouchi 1-chome, Chiyoda-ku,
Tokyo 100-8289, Japan

Daiwa Asset Management Co. Ltd.

Daiwa Institute of Research Ltd.

Daiwa SB Investments Ltd.

10-5, Nihonbashi, Kayabacho 2-chome, Chuo-ku,
Tokyo 103-0025, Japan

Daiwa-Soken Building, 15-6, Fuyuki, Koto-ku,
Tokyo 135-8460, Japan

7-9, Nihonbashi 2-chome, Chuo-ku,
Tokyo 103-0027, Japan

Daiwa Securities Business Center
Co., Ltd.

Daiwa Property Co., Ltd.

NIF Ventures Co., Ltd.

1-9, Nihonbashi, Kayabacho 1-chome, Chuo-ku,
Tokyo 103-8219, Japan

2-1, Kyobashi 1-chome, Chuo-ku,
Tokyo 104-0031, Japan

3-2, Toyo 2-chome, Koto-ku,
Tokyo 135-0016, Japan* This company issues the Sustainability Report.

Sustainable development of economy and society
Vitalization of securities markets
Healthy company growth

Securities services primarily for individual customers

Securities services for corporate customers

Daiwa Securities Co. Ltd.

Daiwa Securities SMBC Co. Ltd.

Providing services through a nationwide network of branch offices, a call center and the Internet

Providing service for corporate customers in Japan and abroad

Asset management
Daiwa Asset Management Co. Ltd.

Daiwa SB Investments Ltd.

Managing investment trusts

Managing pension funds and investment trusts

Research, consulting and system development
Daiwa Institute of Research Ltd.

Securities back-office support, Management of business premises
Daiwa Securities Business Center Co., Ltd.

Daiwa Property Co., Ltd.

Providing securities back-office support and temporary staff

Holding and renting Daiwa Securities Group‘s office premises

Venture capital
NIF Ventures Co., Ltd.

Holding company

Daiwa Securities Group Inc.
Exercising general control over Group business by acting as Group holding company

DAIWA SUSTAINABILITY REPORT 200305

Management

Key Points

Brand Management and Sustainability

The Daiwa Securities Group puts moreemphasis on customer trust than anything else. We believe that once we havetrust, the Daiwa Securities Group brandstarts to build itself. Moreover, we areworking to win the trust not only of customers but also from society as a whole;this effort is contained in our pro-sustainability activities.

Establishing new Corporate
Principles
The Daiwa Securities Group’s pro-sustainability
activities date back to March 1998, when we
established our new Corporate Principles. The previous year, the former Daiwa Securities1 and someof its officers and employees had been accused ofviolating the Securities and Exchange Law and theCommercial Code after payments had been made• Customer trust comes first in our Corporate Principles.
• Our holding company structure and spun off functions have made us more customeroriented.
• Trust from customers and society builds the Group‘s brand.
• Brand management and sustainability are one and the same.

Corporate Principles

Brand Statement

Customer trust
We stand on the trust of our customers. Prudently
putting customer interests first and achieving a highstandard of professional competence, we intend to
become Japan's most appealing securities group at
home and abroad.
Human values
People are the source of our competence. We highly
value creative initiative by the individual, we cherish
the challenging spirit and appreciate the capability
and contributions of the individual.
Total compliance
We can be proud and prosper only when we achieve
total compliance and gain the trust of our customers,
our market and of our world society. We will maintain high standards of professional ethics and a faircode of conduct, thereby contributing to the development of our society.
Sound profit
Our fundamental objective is to enhance shareholder
value through sound business operations. We willoffer valuable services to our customers and earnadequate rewards for distribution to our shareholders.

We the Daiwa Securities Group are committed toacting as our clients' best partner and promoting
their financial wellbeing. In order to achieve this, weshall redefine currently accepted best practice drawing on the following three core values.
We Shall Provide Products
and Services that Exceed Expectations
It is important that we apply detailed knowledge ofcustomer needs, innovation in our internal processes
and a strong customer focus to provide solutions thatroutinely exceed customer expectations.
We Shall Bring the Full Strengthof the Group to Bear
Cooperation among Group companies sweeping
aside traditional corporate barriers, a flexible
approach to business and swift decision making will
enable us to offer comprehensive financial services
precisely geared to meeting our customers‘ financial
goals.
We Shall Continually Challenge
the Limits of Financial Best Practice
Exploitation of our substantial store of professional
knowledge and a pro-active approach to team building will enable us to remain pioneers in ourmarketplace.

to corporate racketeers. In the immediate wake of
this incident, newly appointed President Yoshinari
Hara announced his firm belief that “Society will
never accept the securities industry if it continues

Chart of corporate brand management and sustainability

to do business the old way. The thing Daiwa
needs above all is trust from customers and society.” The company established the Corporate
Principles as its spiritual pillar, and the first itemin the principles was and is the principle of cus-

Customers

Shareholders/investors

Society

Employees

tomer trust.
1 Now Daiwa Securities Group Inc.

Pro-sustainability activities
Brand management
Brand Statement

Corporate Principles

06

DAIWA SUSTAINABILITY REPORT 2003

Customer trust

Human values

Total complianceSound profit

Strengthening Corporate Governance:
Adopting a Holding Company System

trust in an industry dealing in risk-bearing financial instruments, we started the cross-company
Corporate Branding Project to fix the image of ourBrand management=Sustainability management

As regulations over the financial industry havebrand as worthy of trust. We followed up by issu-

Everything that the Daiwa Securities Group does

been loosened and it has become more global, it
has also become more competitive. The changing

ing our Brand Statement, clearly expressing our
promises to our customers, in March 2001.

in the name of brand management is completely
consistent with our economic, social and environ-environment led us to seek a new business modelin April 1999 by splitting the former Daiwa

One does not build a corporate brand in a day.
Securities companies find it especially challenging

mental sustainability management.
As part of our branding activities, since FY 2001,

Securities into Daiwa Securities Co. Ltd. andto follow one management strategy consistently

the Group has given the Best Brand Daiwa award

Daiwa Securities SB Capital Markets Co. Ltd. (nowDaiwa Securities SMBC Co. Ltd.) and moving to aover the long term when market trends are affecting their short-term results. Such companies haveto departments and offices helping to build the
Daiwa brand. Our efforts on behalf of sustainabili-

holding company structure, the first such example
among listed companies in Japan. The objective

to make persistent efforts to build a corporate
organization that deserves trust, both as a long-ty–contributing to communities and society,increasing employee motivation–have won highfor this move was to adopt a group management
system such as only a holding company could pro-term asset management partner and as a corporate citizen. What this means to the management

praise (see below). We believe these activities
lead to deeper stakeholder trust and are crucial tovide, and through this, enable strong corporate

team is that they must conduct business in adher-

elevating the Group‘s brand.

governance that would engender trust among ourvaried stakeholders. Additionally, by separatingence to a long-term vision; for employees, itmeans doing their day to day jobs in ways that

Thus, for the Daiwa Securities Group, brandmanagement is one and the same with pro-sus-

operations specifically for individual and corporate
customers, we would be better able to serve thesemeet the needs of stakeholders, including customers, shareholders, investors and local

tainability management. With this understanding,in 2002 we celebrated 100 years of doing businesscustomers. Finally, we had determined that acommunities.

and began looking ahead to the next 100 years. It

group management system was the best for managing risk and enhancing the corporate value of

was at this historic time that the Group released
its first Sustainability Report and publicly

the Daiwa Securities Group as a whole.

expressed its commitment to sustainability.

Earning trust, building the
Daiwa brandAs the Daiwa Securities Group sees it, the missionof the securities industry is to provide both capitalprocurement and asset management for our customers in a partnership based on trust. As wetransition from an economy of indirect financing to
one of direct financing, the securities market willplay an increasingly important role. However, inJapanese society, indirect financing has had theBest Brand Daiwa 2002, award for contributing to brand profile in FY 2002
Grand Prize

more dominant role; individuals have generally
avoided investing in risk-bearing securities, delaying growth of the securities market in proportion
to the economy. We believe that part of the reason is, the securities industry in Japan has nottried hard enough to build trust in the securities
market among investors or society.
In October 2000, having come to the conclusionthat our most important task was to earn customer

Efforts on Behalf of Brand Penetration Regionally– Submission of “Securities Market Theory,” special lecture at Kagawa University–(Daiwa Securities)

Excellence Award

Details of updating of “Shareholder Rewards Catalog” and Materialization of Brand(Daiwa Securities)
Working to create highly service-oriented sales outlets with local roots(Daiwa Securities)
Start of distribution of Bloomberg Yen Bond Fixing Price(Daiwa Securities SMBC)
Corporate investment in Ogihara Corporation(Daiwa Securities SMBC)DAIWA SUSTAINABILITY REPORT 2003

07

Management

Results, Issues and Targets

Major results from FY 2002
Entire Group
Daiwa Securities
Compliance
Daiwa Securities
SMBC

Corporate Governance

Information DisclosureCore Business

Customer Satisfaction

Daiwa People

Philanthropy and Community
Involvement

Environment

08

DAIWA SUSTAINABILITY REPORT 2003

Group-wide Corporate Ethics Hotline internal reporting system set up.
Compliance Department staff members develop “Compliance Caravan.” Compliance committees held at each branch office.
Customer interview system substantially improved.
Compliance Department increases staff for branch office checking and advising from four to 14 members.
Strengthened information risk management. Stricter control over employee ID cards, implementation of information security self-checks, etc.
Established stricter control over information, including data in computers and servers.
Strengthened system of monitoring securities trading by employees and their families.
Gave centralized compliance training.
Implemented internal auditing system based on self-assessments.
Appointment of first Outside Director and reduction of director terms from two years to one.
Establishment of new medium-term management plan–Best Brand Daiwa 2005.
Decision to implement payment in shares of our stock system as part of executive compensation following advice of Compensation Committee.
Establishment of Internal Audit Department at holding company to promote internal control in Group
Establishment of Internal Control Project and Internal Audit Rule
Webcast of teleconference with institutional investors and analysts on day business results announced.
Shareholders allowed to cast votes by Internet on general shareholder meeting decisions.
First Sustainability Report of the Daiwa Securities Group issued.
Individual shareholders surveyed
Mrs. Green eco fund begun in June 2001.
Four regional index funds begun.
Supported Tokyo international conference of the Association for Sustainable & Responsible Investment in Asia (ASrIA).
Organized Japan's first company visits by investors committed to sustainable and responsible investment.
Surveyed institutional investors interested in SRI.
Established industrial-academic ties with more than 20 universities and graduate schools.
Expanded support for establishment of investment clubs to 174 clubs.
Began publishing “Tento (Shop) Weekly”, an employee newsletter for improving service quality at sales offices.
Gave second customer satisfaction survey and determined areas to emphasize.
Daiwa Securities places second among securities companies in Nikkei Financial Daily study of financial institution branch service.
Average employment rate of persons with disabilities at nine Group companies rose 0.15 points over previous year (1.69% as of end of March 2003).
Percentage of women in career-track and regional career-track employment programs among employees in Japan rose, and female managers rose by three (as of end of March 2003).
Period during which parents exempted from overtime work extended from first two to first three years of child's life.
Began joint training for new employees at nine companies. Strengthened programs in corporate principles, ethics and social responsibility.
Cumulative graduates of Daiwa Leadership Program rose to about 150. About 10% of Deputy General Managers were graduates.
Added eight courses to Daiwa Securities' online training system @DESK.
Established system linking employee bonuses to company performance.
Decided to reform personnel compensation based on work classification, and more detailed personnel evaluations (to be fully implemented from FY 2004).
Provided 320 million yen for corporate citizen activities (about 1.1% of ordinary income).
Continued community affairs programs as part of new employee training and wheelchair experience in managers' training.
Continued sign language courses and guide dog experience courses in Tokyo, Osaka and Nagoya.
Daiwa Securities Health Foundation provided 30 grants worth 30 million yen. Daiwa Securities Foundation gave 202 grants worth 52 million yen.
Daiwa Anglo-Japanese Foundation has sent 81 British students to Japan for study through the Daiwa Scholarships.
Sponsored Marc Chagall exhibition to honor Group centennial.
Expanded scope of our environmental performance data. Added branch offices of Daiwa Securities and four buildings to collection locations.
Submitted Global Warming Action Program for three buildings to Tokyo Metropolitan Government.
Continued to support “Saving Forest Giants,” a giant tree preservation program.
Took part in cleanups at Kujukurihama Beach, Mt. Rokko, etc.

*Dates are provided for items already performed as of July 2003.

Issues and targets for FY 2003 and beyond*Page inreportAddressing Issues
and Setting Targets
The Daiwa Securities Group is working in many
ways to enhance the sustainability of both society
and the Group itself. We see disclosure of theProvide systematic compliance training.
Perform internal process-check inspections.
Revise a compliance manual.
Establish voluntary action standards.
Changed affiliation of internal administration supervisors and methods of their personnel evaluation (April 2003).
Systemize compliance training. Give division and theme–specific training, offer online training, etc.
Revise inspection items and frequency based on regular self-assessments by each unit.
Increase Outside Directors from one to two (out of total of seven directors) (June 2003).
Disclose total director and corporate auditor compensation (June 2003).
Move to a “committee system” and establish Nominating, Compensation and Audit Committees.
Perform results evaluation in accordance with new medium-term management plan.
Establish a Corporate Governance Principle.
Prepare Group-wide risk assessment, control and monitoring systems.
Held Experts' Roundtable with outside experts on environmental issues, social contributions, consumer issues and so on (April 2003).
Start a new rewards program for shareholders (beginning FY 2003).
Took first place in Gómez Japan's first securities company IR site ranking (May 2003).
Establish a Disclosure Policy to provide standards and methods for information disclosure.
Enhanced information on and improved user-friendliness of IR website.
Proposed elimination of double taxation on dividends, introduction of investment trust sales through post offices, etc. (April-June 2003).
Signed agreement with Fukuoka Prefecture on support to attract system-on-chip companies (May 2003).
Invested US$2.5 million in World Bank carbon fund (July 2003).
Support economics/financial education for young people (elementary school through high school students).
Support socially responsible investing.

10

15

Group's issues and targets as a key part of our
responsibility to explain ourselves to ourstakeholders.
In FY 2002 our efforts focused primarily on
strengthening our systems of corporate governance and legal compliance. For example, weestablished a new medium-term management

16

17plan (for FY 2003-2005), implemented an internalreporting system (the Corporate Ethics Hotline)
and set up an Internal Audit Department.

18

19

Additionally, we have established regional index
funds and supported the diffusion of socially
responsible investing in Japan as part of ourefforts to fulfill the mission of the securities industry but also to revitalize the Japanese economy.

22

23

In FY 2003 and beyond, we will conduct our prosustainability efforts within our core business byenriching our economics and investing education
programs. Moreover, in keeping with our corporate branding action plan, we will continue to pro-

Established “customer retention rate” as an indicator of retail branch performance (April 2003).
Transferred Customer Satisfaction (CS) Promotion Department from Compliance Division to Marketing Division (June 2003).
Hold third customer satisfaction survey.
Consider degree of customer satisfaction in assessments of retail branches and employees.
Raise average employment rate of persons with disabilities at nine companies to 1.8%.
Promote women, by naming them as management candidates, etc.
Graduated 20% of Deputy General Managers through Daiwa Leadership Program.
Enrich programs designed for enhancing ability of consulting and asset management.
Implement reform of personnel compensation (on left), and develop multi-directional assessment system.
Greatly expand intra-Group job posting
Study Nominating Committee operations system and director selection standards.

24

25

mote customer satisfaction, create workplace conditions that encourage employee pride andmorale, and reduce environmental burdens causedby corporate activities.

26

29

Sponsored performances by opera company Fondazione Teatro Lirico “Giuseppe Verdi” Trieste (May-June 2003).
Support economics/investment education more actively.
Provide more volunteer opportunities to interested employees.

Conduct company environmental campaign “Do Something Good for the Environment” (May 2003).
Joined the Green Purchasing Network(June 2003). Establish a basic green purchasing policy and develop green purchasing.
Introduce an Environmental Management System, study setting up a department of environmental management.
FY 2004 greenhouse gas reduction targets at Group's three buildings:0.1%, 1.9%, 2.0% respectively

30 31

32 35

DAIWA SUSTAINABILITY REPORT 2003

09

Management

Compliance

Key Points• The Group discovered incidents of deviation from the principles of brand management.
• A Group-wide Corporate Ethics Hotline internal reporting system was set up.
• We have adopted stronger control over undisclosed corporate information to prevent
insider trading.
• We have substantially improved our customer interview system by branch managers
and other sales supervisors.

meant to be practiced in the Daiwa Securities
In FY 2002 Daiwa Securities SMBC andDaiwa Securities were found to haveGroup means that all employees respect the law
and regulations in their day to day work, and thatdeviated significantly from the Group‘sthey do so with a strong sense of ethics.

goal of brand management. To foster a
corporate culture that will not allow such

At Daiwa Securities Group, we consider a strong
system of compliance to be the key issue in our

In May 2003 Daiwa Securities SMBC‘s former

a thing to happen again, we are working
to step up the Group‘s overall compliancequest for brand management. Therefore, we haveestablished a Group ethics code, built compliance

General Manager of the Institutions
Department and the former Deputy Generalsystem.

systems suited to the business characteristics ofManager of the Strategic Advisory (M&A)

each Group company, trained management andemployees, and incorporated compliance into per-Department were indicted on charges of using
undisclosed corporate information 2 to violate

formance evaluations1. Regrettably, in spite of allthese efforts, Daiwa Securities SMBC and Daiwa

restrictions against insider trading. In June, theFinancial Services Agency of Japan ruled on

Securities were found to have deviated significantly from the Group’s sought-after ideal of brandthis case, saying that Daiwa Securities SMBC‘s
control over such information was insufficient

One of the pillars of the Daiwa Securities Group’s

management. We humbly apologize to our stake-to prevent the unfair trades. Actions taken

Corporate Principles is “total compliance,” underwhich the Group promises that “it will maintainholders for the problems this has caused.
Below we report on these incidents and on spe-against Daiwa Securities SMBC were the suspension of business for one day in thehigh standards of professional ethics and a faircode of conduct, thereby contributing to the devel-cific efforts the Group is making to strengthen its
compliance system, including how we deal with

Institutions Department (Section 1-7) and theStrategic Advisory (M&A) Department and an

opment of our society.” Creating the internal stan-such incidents internally and measures for pre-order to improve business practices. In

dards and rules needed to comply with the law,
guiding and raising the consciousness of employ-venting them in the future.

response, Daiwa Securities SMBC halted operations in the above departments and submitted

Branding requires anestablished compliance systemees and monitoring their work are major preconditions of corporate activity. Compliance as it is

1 For details see pages 18-21 of Daiwa Securities Group
Sustainability Report 2002.

Administrative sanctions against
Daiwa Securities SMBCa Business Improvement Report to the Financial
Services Agency detailing prevention measures
and what it would do internally in response to
the incidents.
Internally, the former General Manager was
given the equivalent of a disciplinary dismissal(since he was “on-loan” from another company),
but no action could be taken against the Deputy
General Manager, because he had resigned
before his case was discovered. Internal
actions were also taken against Daiwa

10

DAIWA SUSTAINABILITY REPORT 2003

Fraud by Daiwa Securities contract
employee

Embezzlement by former Daiwa
Securities Deputy General Manager

Securities SMBC, especially the officers

A former contract employee at the Daiwa

In January 2003 a former Deputy General

responsible for overseeing the related divisions
at the time the incident occurred. Directors at

Securities branch at Nagoya Station wasarrested in January 2003 on suspicion of invest-

Manager for Daiwa Securities‘ call center was
reported to be under suspicion for embezzling

Daiwa Securities Group Inc. also forfeited ament fraud. According to authorities, starting inapproximately 80 million yen from the company.

portion of their compensation since they too
had an oversight role as directors of the parent

about 1987 the employee began telling customers about fictitious investments and had

The former employee is accused of using anoth-company.
A measure already in place to prevent insider

them deposit funds in her own bank accountrather than Daiwa Securities customer

ment system computers and transfer funds fromcompany accounts to his own. Because Daiwa

trading at Daiwa Securities SMBC was to forbid employees from opening accounts at any

accounts. In July 2002, after the employee had
resigned, customers began to contact us about

Securities checks account activity daily, the situation was discovered the next day. The former

securities company other than Daiwa

the situation, and Daiwa Securities responded

Deputy General Manager was immediately dis-Securities. Further internal rules that were inplace included requiring employees to get per-by contacting the police and performing aninternal investigation. In January 2003 themissed and the company filed with the police acomplaint of fraud by computer. The suspectmission from their superiors before buying or
selling securities and a restriction on selling

Nagoya District Public Prosecutor's Officeindicted the former employee in Nagoya District

was arrested in May 2003.

any stock within three months of purchase.

Court on suspicion of fraud.

Even so, the former General Manager and
Deputy General Manager in this case both vio-

Although Daiwa Securities has in place a system whereby managers other than the sales

lated internal rules, failed to submit an application for approval of transaction and furthermore

person checks on customer accounts and all
suspicious deposits and withdrawals can bemade these transactions through accounts atchecked, the system was unable to detect anyother securities firms, using names of family
members. Internal monitoring failed to pick up

irregularities because the money was not passing through Daiwa Securities accounts but

these activities.

straight into the employee’s bank account.

er employee‘s ID card to access company pay-

2 Undisclosed corporate information: Information concerning aclient company that is not publicly available but is learned in
the course of doing business; this information, relating tomergers and acquisitions, corporate partnerships and so on,
has the potential to greatly impact share prices.

The Daiwa Securities Group profoundly regrets this series of incidents
and is endeavoring to further strengthen its compliance system.

DAIWA SUSTAINABILITY REPORT 2003

11

Management

Compliancecorrection and deterrence of activities that are
illegal or damaging to the Group brand. This system encourages the self-purifying function of ourFurther strengthening ourcompliance system

Establishment of Internal Audit
Department
A new Internal Audit Department was establishedorganizations.

at Daiwa Securities Group Inc. in February 2003. It

In light of the above incidents, the Daiwa

Users can report information anonymously, andreported information is treated with the utmost

responds directly to the Board of Directors. An
Internal Control Project began in March 2003, andSecurities Group has become acutely aware thatsuch incidents stem from employee problems andconfidentiality so that the informant does not suffer. The system is set up so that informants canpresently, the Group is setting up an internal control and auditing system3.

is taking concrete steps to buttress internal

use our intranet, email, post, telephone, or face to

3 For details about the Internal Audit Department and Internal

controls.

face interviews to contact either the Corporate
Ethics Officer at Daiwa Securities Group Inc. or an

Daiwa Securities Group Inc.:
New systems and organizations

Control Project, see Corporate Governance, page 17.

outside law office. After receiving a report, theCorporate Ethics Officer at Daiwa Securities Group

Implementation of a Group-wide
Corporate Ethics Hotline

Inc. and compliance officers at Group companies
work with each other to resolve the problem

The Daiwa Securities Group introduced a Group-

quickly. As of this writing (June 2003), in the firstwide Corporate Ethics Hotline in January 2003.
The hotline is intended to boost early detection,

half year of operation, several reports had been
fielded and handled appropriately.

Activation of The Corporate Ethics Hotline

Presidents of Group companies

Daiwa Securities Group Inc. CEO

The Corporate Ethics Hotline Reporting Meeting

Report content
categorized and sent torelevant offices
Illegal actions by
Directors are promptly
reported to Corporate
Auditors

Personnel
Department

Legal
Department

Labor problems
Sexualharassment,
discriminatory
language

Violations ofSecurities andExchange Law,
Commercial
Code, etc.

Corporate Ethics
Department
Violence,
stalking,
non-sexual
harassment

Other departments

Law officeInternal informant

12

ReportGroup
companies

Daiwa Securities
Group Inc.
Corporate Ethics
Officer

Investigation
orderedFast response to critical information

Secretariat: Corporate Ethics Department

DAIWA SUSTAINABILITY REPORT 2003

Posted letters: sent to law office or Corporate Ethics Officer
Intranet: message sent to law office
Email: message sent to Corporate Ethics Officer

Officers overseeing internal
control of Group companies
Communication
to study truthof claim
Legal and complianceofficers of Group companies

Daiwa Securities SMBC: Information
management and employee consciousness

Assuring legal compliance withadequate training

Development from voluntary checks to risk
assessment-based internal check system

All employees transferring from Group companies,

A new system begun in October 2002 uses inter-

Daiwa Securities SMBC took the concrete steps

the Sumitomo Mitsui Financial Group and so on

nal checks based on the results of departmental

below in FY 2002 to prevent problems from recurring. In addition to these, it issued theare given intensive compliance training. All marketing staff members are tested for training effec-

self-assessments. This program contrasts with thepast practice in which each department performed“Compliance Newsletter” to all employees toencourage a common awareness of problems

tiveness after completing sales retraining toassure that this course is having the intended

its own voluntary checks. The new system takes
each department’s working characteristics into

company-wide.

effect.

account, identifies inherent risks, and analyzes

In FY 2003 Daiwa Securities SMBC is giving
training tailored to specific departments andhow well risk mitigation measures are working.
The objective is to make effective checks of risk in

Up to this time, Daiwa Securities SMBC had man-themes and offering online training as part of thegreater systemization of compliance training.

proportion to type, extent of damage and frequency of occurrence. As the business environment

aged undisclosed corporate information by
restricting it to the smallest possible number ofStarting in FY 2003, moreover, all officers andemployees are required to sign promises of com-changes, the inherent risks will also vary, so
departments perform annual self-assessments.

people on a need-to-know basis. In addition, thepliance once a year.

Check categories and frequency of checks are

Strict control of undisclosed corporate
informationcompany’s Legal and Compliance Department had
kept track of all individuals knowing this information. However, there had not been sufficiently
strict control over employee access to information

revised as needed.

Boosting restraint with internal
administration supervisors
Internal administration supervisors earlier hadon our computer servers; this was a factor in the

been appointed to departments to create vital

recent incidents. Therefore, the company has
reviewed the scope of access rights and applied

links in our internal restraint systems, but in April
2003, the affiliations and personnel assessment

more stringent information control all the way
down to the departmental LAN level.

methods for these officers were modified. Rather
than belonging solely to individual departments,

In the past, when employees wished to makeinternal administration supervisors are also now

securities transactions, they had to get written
permission in advance from their departmental

affiliated with the Legal and ComplianceDepartment as well, and they receive their evalua-heads. We have effected a change in which ourinvestment banking employees must submit theirtions both from their own departmental head andfrom the General Manager of the Legalapplications for such transactions to the Legal andCompliance Department. These changes are mak-Compliance Department. This has strengthened
early monitoring over transactions suspected ofing our restraint system with internal administration supervisors more effective.

involving undisclosed corporate information. Other
new requirements are that officers and employees

Further, starting in April 2003, we have used theLegal and Compliance Officer to evaluate depart-

must report to the company if their spouses ordependent children are opening accounts at secu-

mental heads on the issue of compliance.
Standards during these appraisals include

rities companies, that transactions on these

progress of the compliance program in the head’s

accounts are subject to monitoring, and that officers and employees must promise to cooperate

department, usage of internal administration
supervisors and response to results of internal andwhen the company decides to investigate activity.

external audits. These evaluation standards areannounced within the company.

DAIWA SUSTAINABILITY REPORT 2003

13

Management

Compliance

Daiwa Securities: Steps tobuild trust among customers

Strengthening voluntary efforts at
branch offices
Daiwa Securities has established compliancetransactions and giving training to employees. In
FY 2002 the Compliance Caravan visited 33
branches.

Daiwa Securities believes that earning customer

committees at each branch office with the objec-

In order to increase understanding about compli-

trust is our most important task and has based its
marketing efforts on the company‘s Solicitation

tive of enabling them to deal with issues independently. The Compliance Department provides lead-ance and give employees common experience in
the issues, Compliance Letters and Compliance

Policy 4 . In order to prevent the recurrence ofrecent incidents, the company is working to bol-ership as needed.

Seminar (another publication) are regularly issued.

ster compliance management by engaging all

Improved face-to-face interviews withcustomers

employees. The key priorities of this effort arechanging the consciousness and increasing the

6 The rules for investor protection spelled out in Article 43 of theUnder Daiwa Securities‘ customer interview sys-

Securities and Exchange Law. Securities companies are required
to solicit investments in ways that are appropriate to the customer’s understanding, experience, financial means and so on.

understanding of every employee and the early
detection and prevention of improper actions.

tem, branch managers or others in a supervisory
capacity interview customers directly to check on

Daiwa Securities has advanced a company-wide
compliance program since December 2002 con-the solicitation styles of sales staff members andto look for any irregular transactions. Previously

forming to the Financial Services Agency‘s securi-

this system was directed only at certain cus-ment to prevent anyone from making illicit money

ties inspection manual. With a goal of eliminating
actions that break laws or rules or are otherwise

tomers, selected by such factors as transaction
amount, but we have adopted a more flexible sys-transfers via a computer terminal. The company ismaking sure everyone is aware of strict manage-

inappropriate, in FY 2003 we are systematicallygiving compliance training, conducting internal

tem where the supervisor can decide whom tointerview at his or her own discretion5. During

ment of employee ID cards and some departments
are checked at random. In February 2003, manage-

inspections based on process checks and prepar-

these interviews supervisors also show the cus-ment put all branch offices through “Information

ing our own compliance manual, among otheractions. Under review is a plan to establish andtomer recent values of the financial instruments
they purchased and ask whether anything is

Security Self-Checks” to increase awareness of
the information management system company-

announce voluntary action standards, an idea also
under discussion by the Quality-of-Life Policy

unclear to them. The Compliance Department thoroughly checks records of these interviews. In addi-

wide. Measures have been established to prevent
incident recurrence by limiting the hours of theCouncil.

tion to face-to-face interviews, supervisors some-day during which money transfers can be entered

4 For more information about our Solicitation Policy in Japanese,times check in with customers over the phone.

and restricting the terminals used to transfer
money at the head office to the Accounting &please visit

5 The FY 2002 implementation of our Customer Relationship

http://www.daiwa.co.jp/ja/access/onlinetrade/before_use/inde

Management (CRM) System for all sales staff members has

x-s.html.

made it possible for supervisors to learn more efficiently abouttransactions between sales staff and customers.

Stronger checks and leadership forbranch offices
Daiwa Securities‘ Compliance Department has
previously had a staff of four regional compliance

Encouraging compliance awarenessand increasing understanding
The keywords for changing compliance awarenessofficers (Deputy General Manager class) to inspectand give directions to branch offices, as well as

are “optimizing our sales attitude” and “respecting
the basic rules of conformity6.” In addition tointernal administration supervisors at each office.

group training, online learning and training by

In March 2003 the number of regional complianceofficers was raised to 14. Because the persons

company satellite broadcasts, in October 2002,
Daiwa Securities instituted the “Complianceadded to staff had experience as branch officemanagers, they are better able to perform theCaravan,” in which staff members of theCompliance Department visit sales branches tocheck and leadership functions for branches bothgive training and advice. Two days are spent at

qualitatively and quantitatively.

each branch, checking the status of customer

14

DAIWA SUSTAINABILITY REPORT 2003

Stronger information security risk
management
Daiwa Securities has stepped up its risk manage-

Finance Department.

Other Group companies
Daiwa Institute of Research: Stronger
compliance in research
In March 2003 Daiwa Institute of Research transferred its Research Compliance Management
Department from the Investment Research
Division to the direct control of the representative

Compliance at asset managementcompanies
To learn more about compliance systems at Daiwa
Asset Management7 and Daiwa SB Investments8,
see those companies‘ respective web pages.
7 http://www.daiwa-am.co.jp/
8 http://www.daiwasbi.co.jp/

directors. This lets our organization, including consulting staff, better handle internal and criticalinformation throughout the research process.

Excerpt from a “Compliance Newsletter” circulated to Daiwa Securities SMBC employees*
The Securities and Exchange Surveillanceod. Securities companies respond with details

it transactions that netted them over two mil-Commission, Financial Services Agency,of purchases and sales. Daiwa Securities

lion yen and over three million yen respective-

Japan Securities Dealers Association andstock exchanges, among others, are actively

SMBC receives these requests nearly every
day; in fact it is not unusual to receive 10 orly. These amounts are not much in comparison to the penalties they are paying for theirmonitoring market activity for illicit transactions. When an event of some significancemore requests in a single day. Thus there are
multiple layers of monitoring for illicit activity.

actions.

happens to a particular corporation, these

Even if a transaction goes undetected withinorganizations ask securities companies toanswer questions about transactions of the

a company, it is sure to be found out.
According to newspaper accounts, two for-corporation‘s stocks for the designated peri-

mer employees are alleged to have made illic-*From “Compliance Newsletter” No. 89, June 16, 2003

“Compliance Newsletter”

DAIWA SUSTAINABILITY REPORT 2003

15

Management

Key Points

Corporate Governance• Our governance system based on business transparency and objectivity, emphasizes
prompt decision-making.
• Executive compensation linked to performance and “payment in shares of our stock system” introduced.
• Internal Audit Department established to strengthen internal controls.
• Committee system to be adopted in FY 2004.

Group management systemand the Board

Executive compensationtransparent and objective corporate gov-

In 1999 the Daiwa Securities Group became theFollowing the advice of the Compensation

ernance system and using it to fulfill thesocial mission of the securities company

Japan‘s first listed company to adopt a holding
company system. Under this system, Daiwa

Committee2, the Daiwa Securities Group opted tolink the compensation of Directors and Executive

and to increase corporate value.

Securities Group Inc. oversees Group operations
as a whole while allowing each Group company

Officers to performance, beginning in June 2001.
The total that these executives receive, in theautonomy to concentrate on its appointed task.

form of monthly salaries, bonuses and retirement

The number of Outside Directors was increased at
the ordinary general meeting of shareholders inpayments, goes up or down along with assessments of company and personal performance.

The establishment of our corporate brand and the
pursuit of sustainability are of the greatest con-June 2003. The Board consists of seven Directors,
two of whom are Outside Directors. Exceptionally

Retirement payment is considered to be a deferredpayment of part of each executive‘s annual com-cern for the Daiwa Securities Group. We believethat corporate governance can help us to achievesmall for a listed company, this board is the hub ofa governance system based on business trans-

pensation as based on performance during theperiod, so it no longer has the quality of being aboth of these goals through the processes of set-parency and objectivity and emphasizing prompt“bonus for special services” typically given on

ting management policies and directing andassessing the way management do their jobs, asdecision-making. Under the Board‘s leadership,
Group Executive Officers also take responsibility

retirement. The second feature of this system isthat the Compensation Committee in FY 2002

well as by giving extra motivation to management.
That is why the Group has taken the following

for operations at Group companies1.

implemented payment in shares of our stock, bywhich executives receive about 10% of their

The Daiwa Securities Group understands
the importance of preparing a highly

Our vision on corporate
governancestance: “People and companies are imperfect, and1 Refer to page 42 of the 2003 Annual Report for a listing of Daiwa

monthly pay not in cash but in company stock

Securities Group Inc. officers as of July 1, 2003.

merely creating systems is not enough to perfectthem. What is important and indispensable is the(beginning in July 2003)3. The purpose of this system is to tie executives‘ interests more closely toprocess of trying to be perfect and working ceaselessly toward that goal.”

those of the shareholders and provide greater
long-term incentive for maximizing shareholder
value. The system prohibits executives from selling shares earned this way until they leave office.
2 The Compensation Committee was established at Daiwa
Securities Group Inc. in June 2000. See the page at the right fora list of Compensation Committee members as of July 1, 2003.
3 Specifically, the corresponding amount of monthly salary is
directed into a fund for purchasing shares of our stock throughthe Executive Shareholding Association.

Total compensation paid to Daiwa Securities Group Inc. Directors and Corporate Auditors (FY 2002)
Monthly salaries

Bonuses

Recipients Amount paid in year Recipients

Retirement payments

Amount paid

Recipients

Amount paid

Directors

10

205,080,000 yen

0

0

3

212,295,200 yen

Corporate
Auditors

5

63,000,000 yen

–

–

1

14,400,000 yen* Recipients of monthly salaries include three directors and one corporate auditor who retired in midterm.
* For employee-directors, no salary is paid for the employee portion.
* Bonus payments were based on profit distribution as determined at the ordinary general meeting of shareholders in June 2002. Bonuses are
not paid to Corporate Auditors.

16

DAIWA SUSTAINABILITY REPORT 2003

Strengthening internal control

audits to be as smooth and effective as possible.

Preparing a system of corporate governance is a

Additionally, an Internal Control Comittee, headed
up by the Daiwa Securities Group Inc. CEO, was

key issue in the new medium-term management
plan – “Best Brand Daiwa 2005.”
As a first step, the Group will be transitioning to

The new Internal Audit Department was estab-founded in July 2003.

lished within Daiwa Securities Group Inc. in
February 2003 and answers directly to the Board

The Daiwa Securities Group will continue tostep up its systems for assuring that 1) work is

a committee system in June 2004. The goal is toincrease management speed, transparency andof Directors. The role of this department is to coordinate with business planning and internal audit-

efficient and effective, 2) financial reporting isreliable and 3) laws and regulations are obeyed.

accountability. The second step is to adopt a“Corporate Governance Principle.” The Group willing departments within Group companies to plan

With stronger control systems in place, we believe

establish this charter in FY 2004 in order to makeand conduct internal audits.
Also, an Internal Control Project was begun at

we will be able to meet the internal control
requirements of the Commercial Code and the US

our corporate governance ideas and systems
clearer to outside parties and to help the same

Daiwa Securities Group Inc. in March 2003 to create a system for getting a picture of and analyzing

Sarbanes-Oxley Act without difficulty.

ideas and systems become better known to all
Group employees. FY 2003 is a time of doing prep

Towards greater corporate
governancethe Group‘s overall risk and applying appropriate
control over it. Then in April the Group adopted its
Internal Audit Rule, stating clearly the basic points

The Daiwa Securities Group is working to prepare

to cover in internal audits. The goal is for these

the way for corporate governance and improve it.

work for this charter.

Corporate governance system (July 2003)
General meeting of shareholders

Four Corporate Auditors(including one Outside Corporate Auditor2)
Audit how Directors perform their duties

Seven Directors(including two Outside Directors1)
Establish and direct basic Group policy

Advisory Board (four members external
to Daiwa Securities Group3)

Representative Directors

Internal Control Committee

Management Committee

Compensation Committee (four members4)(CEO, one Outside Director, two members
external to Daiwa Securities Group)

Prepares internal control, risk management andinternal auditing systems

Basic management planning, budget-setting
and review of other key management issues

Gives advice on procedures for determining executive
compensation and on compensation amountHolding company

Give advice on drafting management strategy

Executive Committee

Cooperation
Participation as Group Executive Officers at holding company

Group company planning and internal
auditing departments

1 Outside Directors

Main Directors of Group companies

3 Advisory Board

Group companies

Members deliberate overall Group strategy
and coordinate issues that affect multiple
Group companies

Internal Audit Department

4 Compensation Committee

Tetsuro Kawakami

Kazuo Inamori

Ichiro KawamotoCounsel of Sumitomo Electric Industries, Ltd.

Founder and Chairman Emeritus, Kyocera Corporation

Attorney-at-Law, Senior Partner, Kawamoto & Miura

Ryuji Yasuda

Jiro Ushio

Yukio Yanagida

Chaired Visiting Professor, Hitotsubashi University
Graduate School

Chairman and CEO, USHIO INC.

Attorney-at-Law, Senior Partner, Yanagida & Nomura

Glen S. Fukushima

Ryuji Yasuda

Chairman, Cadence Design Systems, (Japan) B.V.

Chaired Visiting Professor, Hitotsubashi University Graduate
School and Outside Director, Daiwa Securities Group Inc.

2 Outside Corporate Auditor

Masahiro Yoshiike

Hirotaka Takeuchi

President, Taiyo Life Insurance Co.

Dean, Hitotsubashi University Graduate School of International
Corporate Strategy

Yoshinari Hara
President and CEO, Daiwa Securities Group Inc.

DAIWA SUSTAINABILITY REPORT 2003

17

Management

Information Disclosure

The Daiwa Securities Group is endeavoring to improve communication with its

Key Points• In October 2002 we issued our first Sustainability Report.
• Gómez Japan ranked our IR website no. 1 among securities companies.
• We are starting a new rewards program for shareholders in FY 2003.
• We will establish our Disclosure Policy in FY 2003.

Information disclosure withfocus on triple bottom line1

stakeholders. In FY 2002 we issued our

The Daiwa Securities Group issued its first

first Sustainability Report, thus beginning
full-fledged efforts to offer social andSustainability Report in October 2002. Up until thistime, we had reported on our efforts on behalf ofenvironmental sustainability information.
In April, 2002 we merged our former

corporate governance, our personnel system andour social contributions within our Annual Report.

investor relations and public affairs

In FY 2002, with sustainability identified as a key

departments to form the new Corporate
Communication Department and thus

business strategy, we decided that a moredetailed report on social and environmental activi-

assure a unified message.

ties was needed. We wrote the Sustainability
Report for our wide array of stakeholders, issuing

Our vision on information
disclosure
The Daiwa Securities Group believes that information disclosure should be made in a fair, appropri-

sumer issues and so on in an Experts‘ Roundtable2.
See below for the Group‘s information disclosure framework.
1 Triple bottom line: An evaluation of a company not just from theeconomic perspective but also the social and environmental.
John Elkington of the British environmental firm Sustain Ability
first promoted this idea.
2 For details see Stakeholder Dialogue, page 36.

25,000 copies in Japanese and 3,000 in English.
All employees received a copy, and an electronic
version was loaded onto our IR website. In April
2003, we met with outside experts to discuss
environmental issues, social contribution, con-ate and timely fashion. The Daiwa Securities
Group Inc.‘s IR website includes Our Commitment
to Disclosure, although in FY 2003 the Group isestablishing a more detailed Disclosure Policy.
The Disclosure Policy will state that Group companies will have a common policy on information disclosure. It will prescribe the roles of information
disclosure officers, standards and methods for
information disclosure, and response to marketplace rumors. Thus, it will set up a more responsi-

Our Commitment to Disclosure
1. We will abide by all laws and regulations suchas the Securities and Exchange Laws andother regulations set by the Stock Exchanges
on which the company is listed, and endeavor
to achieve accurate and timely disclosure.

Annual Report

Disclosures primarily throughAnnual Report, Business Report,
securities report and financialsummary

DAIWA SUSTAINABILITY REPORT 2003

Economic
Corporate governance
Information disclosure
ComplianceBusiness activities
Financial information

Management
Social

3. We will endeavor to utilize various forms of
media such as the Internet, conferences andprinted material to provide easy to accesscompany information.

18

Business Report

Daiwa Securities Group information disclosure framework

2. We will endeavor to understand the needs of
our investors and provide fair disclosure interms of both time and in content.

4. We will be conscious of its role as a leader inthe securities market and endeavor to
become a role model for other listedcompanies.

Sustainability Report

Environment

Customer response
Efforts for the environment
Employment, work environment, human rights
Acting as a corporate citizen

Daiwa Securities Group IR website

www.ir.daiwa.co.jp

Disclosures primarily through Sustainability Report

ble information disclosure system.

Therefore, the Group will work on making this site

Strengthening information disclosure

In FY 2003 as a new shareholder rewards ser-

3 IR website: The Internet page in Japanese and English where wevice we began offering exchangeable points in the“Daiwa Comprehensive Account Service (CashFor the Daiwa Securities Group, the objective of

post earnings, information and audio/video of teleconferences,

Management Program) Port One” program.

information disclosure is not simply to release
quarterly performance statements and importantcompany information sessions, press releases and so on.

Customer rewards include a waiver of the accountmanagement fee. In these ways Daiwa Securities

occasional business notices, but also to makeGroup strategy and trends easier to understandand to increase management transparency.

easier.

4 Responses were received from approximately 8,300 individuals.
For details refer to FY 2002 (66th Year) Business Report, page 16.

Communicating with individual
shareholders and investors

Immediately after such information is released,
it is also posted to our IR website3 so that it is

At the end of March 2003 individual shareholders

available to all stakeholders, individuals and organizations, with hardly any time lag, thus eliminat-of Daiwa Securities Group Inc. numbered 99,374,
a gain of more than 5,000 from the previous year.

ing differences in the information provided to different stakeholders. In the evening of the day our(The number of all shareholders is 102,006.) The
results of the individual shareholder survey given

performance results are announced, we hold ain November 2002 indicate that 67.9% had

teleconference for institutional investors, analysts
and the media, but starting with our April 2002

become shareholders in the company more than
three years earlier, and 38.3% had done so morerelease of results for FY 2001, we have also held asimulcast from our IR website for individual

than 10 years earlier. Therefore, our shareholders
have had their shares for a relatively long time.

investors. We are constantly performing IR for

When asked the objective for acquiring theirstakeholders overseas as well, by keeping an
English-language IR website, holding a teleconfer-shares, 50.6% said they intended to hold theirshares for the long term, while 28.3% were look-ence in English the night (Tokyo time) after results
are announced, and other measures. In FY 2002

ing to make a profit by selling in the short term.
Regarding the general meeting of shareholders,

we began to expand beyond Europe and America

which is an opportunity for shareholders to com-

to offer IR in more regions of the world; in Asia wehave made our first individual visits to investors inmunicate with management, 89.6% of respondents said they had never attended a meeting andSingapore and Hong Kong.
In addition to teleconferences and strategy

43.2% had never exercised their voting rights. In
FY 2002 we began to allow voting by Internet andmeetings, Daiwa Securities Group is committed to

to broadcast our general meeting of shareholders

using the Internet to provide easy-to-understandinformation to more stakeholders in Japan andby satellite to locations in Osaka and Nagoya as
ways to increase opportunities for communicating

abroad. The Group‘s IR website took first place inGómez Japan‘s first securities company IR sitewith individual shareholders. Besides these, we
enlarged our Business Report, sent to investors

ranking in May 2003, while Daiwa Investor
Relations Co., Ltd. honored the Group with its

twice a year, to a more readable A4 size.

Group hopes to build long-term relationship withindividuals not just as shareholders but ascustomers.

Shareholders breakdown
End of March 2002 (by number of shares)
0.8% Others

15.9% Individuals

29.3%
Non-Japaneseindividuals

47.0%
Financial
institutions

6.9% Banks
7.0%
Other corporations

28.8% Trust accounts
11.3% Other financial institutions

End of March 2003 (by number of shares)
1.2% Others

18.0% Individuals

29.1%
Non-Japaneseindividuals
45.2%
Financial
institutions
7.8% Banks
6.5%
Other corporations

27.7% Trust accounts
9.6% Other financial institutions

Internet IR Best Company Award for 2003. While
the site received high praise for stability, fairness
and volume of information, improving user-friendliness is still a concern. A survey given to individual shareholders in November 20024 found that
50.1% of respondents thought it was hard to findthe information they required at the site.

DAIWA SUSTAINABILITY REPORT 2003

19

Economic Reporting

Key Points

Financial Performance• FY 2002 was marked with smaller losses. Retail client assets under custody were 12.15
trillion yen.
• Depressed stock markets and low interest rates have greatly altered our revenue structure over the last three years.
• Personnel costs made up just under half of net operating revenues. Dividends stayed at
six yen per share.
• Our share price over the past 10 years has fluctuated greatly, from about 280 to about
2,100 yen.

Daiwa Securities Group Inc.
Accounting
periodOperating revenues(Units: 1,000,000 yen)

Outstanding shares: 1,331,735,000
Net operating revenues(Units: 1,000,000 yen)

Ordinary income

Net income(Units: 1,000,000 yen)

(Units: 1,000,000 yen)

Net income/
share
(Yen)

Dividend/
Shareholders'shareequity/share(Yen)(Yen) <Share price>
487 yen (end of March 2003)
13.0
502.1
<PBR>
13.0
539.7
1.19
Dividend yield
6.0
429.7
1.23%

79.4

FY 1999

651,298

512,276

224,122

105,376

FY 2000

714,909464,057

177,796

64,54948.6

FY 2001

488,044284,932

25,849-130,547–98.3

FY 2002387,659

270,810

29,200-6,323

–4.8

6.0

407.8

*For detailed financial information, see the Daiwa Securities Group 2003 Annual Report.

Market share in major
business areas

FY 2002 results
Consolidated operating revenues totaled 387.7 billion yen in FY 2002, a year-on-year decline ofManagement of customer assets

21%, while consolidated net operating revenues(operating revenues minus financing costs) were

had 12.15 trillion yen in retail client assets undercustody. This accounts for a little less than 1% of

270.8 billion yen, down 5%. Selling, general andthe 1.378 quadrillion yen in individuals' financial

administrative expenses declined 6% to 246.7 billion yen, which is one factor boosting consolidated

assets in Japan1.

As of the end of March 2003, Daiwa Securities

1 Because retail client assets under custody at Daiwa Securities

ordinary income 13% to 29.2 billion yen.
Consolidated net income, on the other hand, wasinclude assets from corporate customers, it is slightly misleading

assets under management. This significant decline
is due to the last few years' extended period ofstock market malaise, low interest rates and thenegative effects of the collapse of Enron in the US.

Retail client assets under custody (FY end)
(Units: Billions of yen)
15,000 14,718
12,716

13,156

2000

2001

12,15410,000comparing this to total individuals' financial assets in Japan, but
this value is calculated as an indicator of the scale of the compa-

a negative 6.3 billion yen, dragged down by a

5,000

ny's business.

write-down in investment securities among otherfactors.

0
1999

Lead manager league table share(underwriting)

Changing in revenue
structure

Over the past three years our lead manager league

With the stock market and interest rates staying
low for long periods of time, investors' asset man-table share has risen in the categories of corporate straight bonds, initial public offerings, equity

agement needs are changing. Responding to thesechanges has led to big changes in the Daiwa

offerings and samurai bonds.

Securities Group's revenue structure. The graph

Assets under management

below shows our revenue structure in FY 2000 and
FY 2002.

As of March 2003, Daiwa Asset Management andDaiwa SB Investments had 8.8 trillion yen in

2002

Lead manager league table share (FY)Corporate straight bonds
IPOs
Equity offerings%
60

Samurai bonds
Domestic ABS

50
40
30
20
10
0
1999

2000

2001

2002

Source: Daiwa Securities SMBC, Thomson Deal Watch fordomestic ABS (book runner)

Assets under management (FY end)
Changing in net operating revenues structure

FY 2000(Units: Billions of yen)
20,000FY 2002

17,699Bonds (commissions + net gain on trading)

11.6% 8.4%

Equity (commissions + net gain on trading)

16.4%

10.4%

35.7%
46.4%
15.1%

Commissions relating to investment trusts
Investment banking commissions(underwriting, M&A, etc.)

14.6%
23.3%

15,32615,000Net financial revenue, etc.

18.2%

11,166

10,00014,577

12,014

6,326

5,000
0

8,830

8,270

3,122

3,312

2,896

2,504

1999

2000

2001

2002

Daiwa Asset Management
Daiwa SB Investments

20

DAIWA SUSTAINABILITY REPORT 2003

income taxes and other taxes such as the con-

FY 2002, we determined to again pay six yen per

sumption tax.
Dividends are direct distributions of profit toshare, a decision that was approved at the ordinary general meeting of shareholders in June

The Daiwa Securities Group thinks of its economic

shareholders. It is the Group's basic policy to2003. Total dividends paid in FY 2002 were 7.9 bil-

performance prepared under GRI guidelines as amonetary return to stakeholders. As Group net

make dividends as stable as possible given Group
performance. Following this policy, in spite of alion yen.

operating revenues have fluctuated, personnel
costs (including wages, bonuses, welfare expens-

negative 6.3 billion yen consolidated net income ines and insurance), which are really returns to our

Monetary returns to stakeholders

Monetary returns
to stakeholders(Units: 1,000,000 yen)

Stakeholders

FY 1999

FY 2000

FY 2001

FY 2002140,648

140,426

129,972

123,904

employees, have varied between 120 billion and140 billion yen. The FY 2002 personnel costs of

Personnel costs

Employees

123.9 billion yen represented a six billion yen
decline from the previous year and were equiva-(ratio to revenue1)

(%)

27

30

46

46

Payments as corporate citizen2Society

N.A

N.A

N.A

320

lent to 46% of net operating revenues.
The Daiwa Securities Group strives to contributea steady amount of financial support in our role ascorporate citizen regardless of earnings
performance.
The amount of tax shown in the Group's financial accounting is the sum of current and deferred

Share prices(ratio to profits1)
Taxes3(ratio to profits1)

(%)

N.A

N.A

N.A

1.1

Government

69,682

77,403

10,93020,027(%)
Shareholders

Dividends(ratio to profits1)

(%)

31

44

42

69

17,247

17,265

7,971

7,970

8

10

31

27

1 To make the weights of these amounts more tangible, we have calculated the ratio of personnel costs to revenue (net operating revenue)
and that of other figures to ordinary income.
2 For details about activities as a corporate citizen, see As a Corporate Citizen and a Member of the Community, page 30.
3 “Deferred income taxes” refers to an adjusted amount of tax paid as found by tax effect accounting and is different from the amount of tax
actually paid.

Daiwa Securities Group Inc. share price (left scale) and TOPIX (right scale)
Yen

Daiwa Securities Group Inc. share price
TOPIX

2,000

2,000

As the chart on the right shows, the share price ofDaiwa Securities Group Inc. is very closely tied

1,500

1,500

with the general stock market. Share prices overthe past decade have fluctuated widely from a low

1,000

1,000

500

500

of 281 yen in October 1998 to over 2,100 in
February 2000.
Price/book value ratio (PBR) is one indicator of astock's value. It is found by dividing share price byshareholders' equity per share. Our PBR based on
our shares' closing price of March 31, 2003 wasabout 1.2, meaning that the market values the
Daiwa Securities Group at 20% more than ourshareholders' equity.

0
3/19930
3/1994

3/1995

3/1996

3/1997

3/1998

3/19993/20003/20013/20023/2003

3/1994

3/1995

3/1996

3/1997

3/1998

3/19993/20003/20013/20023/2003

PBR
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
3/1993DAIWA SUSTAINABILITY REPORT 2003

21

Social Reporting

Key Points

Initiatives in Our Core Business• Using the unique characteristics of its business, the Group has contributed to sustainability in the following three ways.
• The Group is building a system in which funds work for the benefit of the environmentand society.
• We are proposing and fostering socially responsible businesses.
• We are providing education to develop a wide range of investors and promoting financeand securities research.

Europe and 6.2% in Asia.
The Daiwa Securities Group is contributing to social sustainability in its core

Supporting socially responsible investing (SRI)

1 An investment fund that invests in companies chosen for envi-

Tokyo Conference of the ASrIA

ronmental friendliness

The Daiwa Securities Group in October 2002 spon-

securities business.

sored the international conference of the
Association for Sustainable & Responsible

Sustainable investing

Investment in Asia3, which brought to Tokyo acrowd of 260 institutional investors and corporate

The Daiwa Securities Group hopes to contribute torepresentatives from Japan and abroad. Kenjisocial sustainability by taking advantage of theunique features of its core business in securities.
Three themes guide these efforts. First, we arebuilding a system in which funds work for the benefit of the environment and society (socially
responsible investing, for example). Second, we

Hayashibe, a Director from Daiwa Securities
Group Inc., gave an address on sustainability

Mrs. Greenefforts in our Group and the status of institutional
investors in Japan. The day after the conference

Regional index funds: Investing tosupport regional economies
Daiwa Asset Management established theended, Daiwa Securities Group led Japan‘s first
SRI tour of companies for social responsible

are offering our prescription for revitalizing the

Shizuoka Benchmark Fund in April 2002, thus cre-investors from abroad who had come to theJapanese economy and fostering socially beneficial businesses, including environmental business-ating the first regional index fund2 in Japan. This
fund gave a new-concept opportunity to investors;

conference.

es. Third, we are giving training to nurtureinvestors from all walks of life and to develop cap-

namely, to build up assets while supporting
Shizuoka Prefecture companies and the regional

ital markets and we are promoting finance andeconomy. In FY 2002 the company followed up

securities education and research.

with regional funds Ibaraki Fund (Ibaraki
Prefecture), Kanagawa Support Fund (Kanagawa

Creating a society–friendly
flow of capital
Financial products
Eco funds: Investing in companies
with high environmental performance
In June 2001 Daiwa SB Investments introduced an

3 For information about the ASrIA conference in Tokyo, visit
http://www.asria.org/events/japan/oct02/postconf/28fspeakerspanel.

Prefecture) and Sainokuni Support Fund (Saitama
Prefecture). Total assets in these funds has grown

ASrIA Tokyo
conference

to nearly 14.5 billion yen by the end of March
2003.
2 An investment fund targeting companies headquartered in a specific region, expanding into that region or creating employment
there.

eco fund1, the Global Eco Growth Fund, commonly
known as Mrs. Green. This fund buys shares incompanies around the world with strong growthpotential and comparatively good environmental
performance (indirect environmental companies)

Performance and net assets of Mrs. Green, from June 15, 2001 inception through June 2003

and in companies providing excellent environmental services or in possession of advanced environ-

11,000mental technologies (direct environmental compa-

9,000nies). By selectively investing in such companies,
it seeks to promote good environmental services
and technologies while boosting environmental
consideration at corporations. Net fund assets asof the end of March 2003 amounted to 6.30 billion
yen, of which 57% was invested in the US, 33% in

22

DAIWA SUSTAINABILITY REPORT 2003

Billions of yen

Yen
12,000Net assets (both A and B) (right scale)
B: Fund without exchange rate hedge (left scale)
A: Fund with exchange rate hedge (left scale)

10,000

8,000
7,000

30

6,000

20

5,000

10

4,000
June 2001

Sept. 2001

Dec. 2001

Mar. 2002

June 2002

Sept. 2002

Dec. 2002

Mar. 2003

0June 2003

Survey of institutional investors on SRIWorld Bank carbon fundties education and research. The range of these

Daiwa Investor Relations, the IR consulting company of the Daiwa Securities Group, conducted aWith an investment of US$2.5 million in July
2003, Daiwa Securities SMBC Principal

partnerships includes lectures on the latest financial technology, joint research and investment

SRI survey in December 2002, which was the first

Investments became the only Japanese securities

training for students of all types. Additionally, theSRI survey of analysts and fund managers inJapan. The survey received responses from 127

company to participate in the World Bank’s
Community Development Carbon Fund. This fundGroup supports ventures such as technology
licensing organizations (TLOs) originating in theparties, with the result that 76% of analysts andfund managers in Japan were aware of SRI, whileseeks to contribute to the social development ofdeveloping nations and regions while reducing

academic sector and promotes industry-academia
collaboration6.

50% of fund managers believed that the SRI prin-emissions of greenhouse gases at the regional

6 For details about industry-academia collaboration, see As aciples affected the way they selected investment
instruments4.

level. It does this by investing in emissions rightsthat arise from the use of wind power, biomass

4 “Survey on Effect of Socially Responsible Investing (SRI) on

power generation, new electricity-based transportation systems and reforestation projects in theInvestment clubs

developing world.

Daiwa Securities began supporting the firstinvestment clubs in Japan in 1996, having so far

Daiwa Institute of Researchsoil pollution study groupassisted in the launch of 174 such clubs. This cor-

Japanese Companies.” For details visit
http://www.daiwair.co.jp/pdf/pr030116.pdf.

Fostering socially beneficial
businesses

Corporate Citizen and a Member of the Community, page 31.

Seeking to aid and foster individual investors,

In March 2003 Daiwa Institute of Research

responds to about 70% of all currently active
clubs. Daiwa Securities branches nationwide offer

In January 2002 the Daiwa Securities Group part-

became a partner in starting up a study group on
cleaning and redeveloping areas of polluted soils.

guidebooks for starting up investment clubs, andthe company sends employees to speak to clubs.

nered with the City of Kobe in an effort to attract

The study group is investigating the feasibility ofbusinesses, especially in the biosciences, to thecity. Following up on this, we joined Fukuoka

such projects.

Helping to revitalize regional
economies

Prefecture in a partnership to attract system-onchip companies to that prefecture. By supporting
Fukuoka Prefecture in its bid to build its profile as

To help fostering a wide
range of investorsa system-on-chip design and development centerin Asia, the Group seeks to vitalize the area and

Education and research in financeand securities

help foster venture companies5.

Vitalizing the financial and stock markets and fostering individual investors are nothing less than

5 For details on the partnerships with Kobe City and Fukuoka
Prefecture, see the press release atnational issues for revitalizing the Japanese econ-

http://www.ir.daiwa.co.jp/japanese/index_press.asp.

omy. The Daiwa Securities Group is collaboratingwith more than 20 universities, graduate schools

Policy proposals to revitalize Japan‘seconomyand so on in partnerships in financial and securi-

As an urgent measure to stimulate the stock market and to foster individual investors, Daiwa
Institute of Research in April 2003 proposed eliminating double taxation of dividends in Japan. It
has also made other timely policy proposals,
including pointing out the need in June 2003 touse post offices as sales outlets for equity mutual
funds.
A lecturer from Daiwa Securities Group gives a talk.

DAIWA SUSTAINABILITY REPORT 200323

Social Reporting

Key Points

Working for Customer Satisfaction• Working to enhance customer satisfaction is the centerpiece of our branding campaign.
• The Group is periodically conducting surveys of customer satisfaction.
• Post-sales follow up is the greatest issue in increasing customer satisfaction.
• Comments received on our Customer Support Hotline are used to improve products andservices.

had a shared understanding of its importance andEach employee has a part in“post-sales follow up”1

At the Daiwa Securities Group, promoting
customer satisfaction is closely tied withthat the company had not taken sufficient concrete steps to address it. The CS Promotion

our corporate branding campaign.

Customer satisfaction surveys

Department therefore started a semimonthly pub-Customer feedback comes to us directly,
and day by day we are working to

The second customer satisfaction survey, taken in
September 2002, showed that customer satisfac-

lication on this theme in April 2003. This newsletter advises employees on specific ways toimprove our sales and service systems.

tion with branch office and telephone response
was slightly higher than in the previous survey.

approach post-sales follow up. In addition, staff
members of the CS Promotion Department areThis was confirmed by a February 2003 survey ofworking to communicate with branch offices byfinancial institution branch offices by the Nikkei
Financial Daily which ranked Daiwa Securities

visiting them directly and talking about conscientious customer response. The department further

The Daiwa Securities Group has undertaken its
corporate branding campaign in the full aware-second among securities companies. The resultsof the second customer satisfaction survey alsobegan producing posters for in-company use as
another communication tool to raise employee

ness that trust from our stakeholders is critical if
we are to fulfill our social mission. At the core ofindicated, however, that after the first survey in2001, the level of customer satisfaction was rela-awareness about post-sales follow up.

our branding activities is our effort to improve cus-

tively low in the categories of post-sales follow

to maximizing our customers‘ satisfaction by following up after

tomer satisfaction. This means listening to whatcustomers say, understanding their needs, andup, quality of service in general and sales staff
advice, and that these were high-priority items forthe sales of a product.

promptly using this feedback to improve products
and services.

customers. In response, Daiwa Securities decided
to make post-sales follow up a central theme ofCustomer satisfaction at thecore of corporate branding

As part of this activity, Daiwa Securities in April

1 “Post-sales follow up” expresses Daiwa Securities‘ commitment

its branding activities.

2001 established the Customer Satisfaction (CS)
Promotion Department within its Compliance

Although Daiwa Securities was certainly awareof the importance of post-sales follow up before,

Division. In November of the same year, the CS
Promotion Department launched its Customer

the low score that customers gave the company inthis category suggested that not all employees

Support Hotline. The CS Promotion Department
compiles and analyzes the comments it hears from
customers through the Customer Support Hotline

Results of second customer satisfaction survey (branding survey)

and branch offices, organizes the issues it willaddress and then takes steps to resolve the issues,

10.0
9.5

Daiwa Securities began studying the effectiveness of these activities in 2001 when it gave its

9.0

first independent survey of customer satisfaction,or “branding survey.” To bolster its system forusing customer opinions to improve products andservices, the CS Promotion Department moved
from the Compliance Division to the Marketing
Division in June 2003. Additionally, in the belief
that improved customer satisfaction should
increase employee satisfaction by raising themorale of those actually providing the service, theCS Promotion Department started performing
employee satisfaction surveys in September 2002.

24

DAIWA SUSTAINABILITY REPORT 2003

Degree of satisfaction

thus endeavoring to increase customer satisfaction.

Office cleanlinessResponse by telephone

8.5
8.0

Response at branch office

Shop appearance inviting

Sales staff knowledge

7.5
Product selection

7.0

Company reliability

6.5

Sales staff advice

Quality of service in general

6.0
5.5

Sales staff post-sales follow up

5.0
5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

Degree of importance* Survey was sent by post in September 2002 to 5,000 Daiwa Securities customers, of whom 1,631 responded.
* The above graph shows results for just some of the 49 items on the survey. Respondents ranked their “degree of satisfaction” with each item
in five grades from high to low and the “degree of importance” in three grades. In each case, the middle ranking (“Neither high nor low”) was
assigned a point total of 5.0. Average customer satisfaction exceeded 5.0 points in all categories.

Customer Support Hotline 2

writing about both successes and shortcomings at

Start of point earning service

The graph below shows a breakdown of thenature of the telephone calls taken by thethe retail level since May 2002.
2 Daiwa Securities Customer Support Hotline

Under the “Daiwa Comprehensive Account Service(Cash Management Program) Port One” program,

Customer Support Hotline in FY 2002. Of the total,

Tel : 81-(0) 3-3665-5111 (Japanese only)

begun in December 2002, customers earn points

71.5% were inquiries about services and procedures, while 27.6% were complaints. The com-

Sales and service systems to
improve customer satisfaction

plaints were mainly related to sales (insincere
response, dissatisfaction with post-sales follow

Daiwa Securities is working to improve its salesup) or company rules and systems (dissatisfaction

and service systems in order to offer high quality

with work procedures).
To make sure that customer comments and com-

service reflecting customer opinion and further
raise customer satisfaction.

for doing business. Points are awarded every timecustomers entrust assets to us or make a tradethrough us. These points entitle customers to avariety of services.

Future efforts
Daiwa Securities will endeavor to use customer

plaints are used to improve products and services,
Daiwa Securities gives instructions and advice to

New Satellite Branch Systemopinion to improve its services more quickly in the
future. That is why the company is currently

its branch offices and immediately posts information on its intranet for employees under such titles

Daiwa Securities implemented its new Satellite
Branch System in FY 2002 to revise its sales oper-

putting in place new systems to assess branch
offices and employees from the customer‘s point

as CS News or CS Message. This way, employees

ations. Under the Satellite Branch System, multi-

of view. As a first step, we added the item “cus-have a common awareness of customer opinions
and become more motivated to enhance customer

ple branches in the same region are organizedaround a core (mother) branch. This arrangement

tomer retention rate” to our branch office performance evaluation in April 2003. Hereafter we plansatisfaction. In addition, the publication “Tento(Shop) Weekly,” aimed primarily at branch officesmeans that Daiwa Securities can learn the characteristics and needs of customers in each area andto reflect the level of customer satisfaction, as
determined by survey data, in evaluations ofto help them improve service quality, has been

respond promptly and appropriately. The Satellite

branch offices and employees.

Branch System was inaugurated in the Tokyo metropolitan and Osaka areas in July 2002 and to
Nagoya in February 2003.

Reforming sales channels
Until this year Daiwa Securities offered services
through three channels: Daiwa Consulting (overCustomer Support Hotline

Number of calls taken at Customer Support Hotline
FY 2002

Calls taken:
4,691
Average calls daily: 17.5

Opinions

Complaints

41
0.9%

1,295
27.6%

the-counter service), Daiwa Call (a call center) andDaiwa Net (the Internet). Each offered different
services and different fee structures. In May 2003
Daiwa Call and Daiwa Net merged into Daiwa
Direct. Together Daiwa Direct and Daiwa
Consulting are the two transaction service options
we have available. Until this time there were limits on the products available to customers in eachchannel, but now customers can make transactions for the same product lineup in each service,
the only difference being whether customers areprovided investment consulting.

Inquiries
3,355
71.5%

DAIWA SUSTAINABILITY REPORT 200325

Social Reporting

Key Points

Daiwa People• The Group increased employment of persons with disabilities in FY 2002 and expects tomeet the legally mandated rate of such employment in FY 2003.
• In FY 2002 we improved our system to better accommodate employees with small children, decrease overtime and improve health considerations.
• We are fostering human resources through leadership training, online training and so on.
• The Group has adopted new compensation practices to be fully implemented by FY 2004.

example, the guidelines expressly forbid hiring

up by the Daiwa Securities Group Inc. Director for

The Daiwa Securities Group is enriching
its human resource management systemmanagers to ask applicants or otherwise inquire
about their family records, details of upbringing,

Personnel Management, as a way to addresshuman rights problems. The Group raises aware-

as a key issue of its new medium-termfamily member employment and income, family

ness about the issue of human rights and gives

management plan for FY 2003-05.

makeup or home environment.
Staff members are classified as employees,

training in it; the subject is included in new
employee training and manager training among

securities advisors and temporary employees
based on the length of contract.

others. Also, the Daiwa Securities Group participates in the Industrial Federation for HumanGroup human resources platform

Rights, Tokyo1.

Human rights

The Daiwa Securities Group Corporate Principles
affirm that “People are the source of our compe-

1 The Industrial Federation for Human Rights, Tokyo is a voluntaryorganization formed to solve discrimination and human rights

tence.” The Group has determined to foster its
human resources by appropriately assessing each

The Group’s guidelines for ethical behavior prohibit discrimination against persons based on sex,

employee’s skills and contribution. Assessmentsemphasize employee creativity. Raising the profile

age, nationality, race or other factors irrelevant tobusiness and also forbid harassment, sexual orof the Group’s brand and achieving continuous

otherwise. The Group is establishing a Human

growth will require preparing an environment andsystems in which employees take satisfaction andRights Awareness Promotion Committee, headedpride in their work and are eager to do it. Since
1999 the Daiwa Securities Group has endeavoredto create a human resources platform reflecting
our basic principles and sense of values, and touse this platform to construct a variety of humanresource systems at Group companies, reflecting
the nature of their business.

Equal opportunity
Any company desiring to fulfill its social responsibilities has to select its personnel fairly. Thus the
Daiwa Securities Group created its “Fair
Employment Guidelines” in 1999, based on the following three basic principles.

Number of new graduates hired in entire Daiwa Securities Group
April 2001

April 2002

April 2003

Career-track employees and regional career-track employees 1(Female)

364
(20)

712
(361)

600
(274)

General employees 2(Female)

516
(516)

81
(81)

54
(54)

Securities advisors 3(Female)

70
(43)

28
(16)

18
(6)

1 Regional career-track employees make up a class of career-track employees established at Daiwa Securities in 1998. These employees stayin one region and are not subject to transfers that require changing residence. Hiring of new graduates into this class began in earnest in
April 2002.
2 General employees make up a class that resulted in April 2003 by blending the old general employee class with the old area generalemployee class.
3 Securities advisors are employees who work in sales at Daiwa Securities under one-year contracts.

Employees in entire Daiwa Securities GroupAs of end of March 2002

3. We shall be fair and objective when we evaluate each applicant’s appropriateness, skills anddesire and make the hiring decision.
The guidelines stipulate that staff members incharge of the hiring process shall follow theseprinciples in their application paperwork, recruitment notices, job vacancy ads and interviews. For

26

DAIWA SUSTAINABILITY REPORT 2003

Japan

1. We shall give utmost respect to the humanrights of applicants.
2. Any person meeting the hiring requirements isable to apply for employment.

problems from industry’s perspective.

As of end of March 2003

Employees

Securities
advisors

Temporaryemployees1

Men

6,656

116

—

(career-track)(6,073)(—)(manager)(2,951)

(—)

Women

3,559

988

(career-track)(937)(manager)

Employees

Securities
advisors

Temporaryemployees1

6,799

123

—

(6,151)(—)(3,055)

(—)

3,573

801

(—)

(1,372)

(—)

(36)

(—)

(39)

(—)

—

—

10,215

1,104

1,367

10,372924

Overseas

1,268

—

25

1,187

—

23

Total

11,483

1,104

1,392

11,559924

1,265Japan total

1,242

1 Temporary employees are part-time employees; the figure shown here is the average number of such employees over the year. The temporary
employee class is made up mostly of women but includes some men.

overwork and stress. The Personnel Department

An increase in employmentof the disabled in FY 2002

Better working conditions

began listing individuals at Daiwa Securities
Group Inc., Daiwa Securities and Daiwa Securities

Since January 2001 the Daiwa Securities GroupThe Group negotiates with the employees’ union

SMBC working more overtime than the estab-has participated in websites and seminars on theemployment of people with disabilities. Average

to set limits on holiday and overtime work, but
occasionally these limits are exceeded. In FY 2002

lished limit (80 hours/month). The staff physician
now checks these workers very closely.

employment of persons with disabilities at thenine main Group companies was 1.69% of all

we made certain to provide make-up holidays for
Saturdays when Daiwa Securities branch offices

Finally, we stepped up smoking restrictions in
the workplace in FY 2002. Daiwa Securities Group

employees as of the end of March 2003, a jump of

were open and also reduce the number of such

Inc., Daiwa Securities, Daiwa Securities SMBC

0.15 points from the 1.54% of the previous year.
The new medium-term management plan sets a

Saturdays. In April 2003 Daiwa Securities Group
Inc. launched an Intranet-based overtime control

and Daiwa Institute of Research have formulated
rules on smoking areas, so now all nine main

goal of meeting the legally mandated rate of
1.8%, which we intend to reach in FY 2003. The

system, which allows the Personnel Department
to see overtime requests and approvals in realGroup companies have smoke-free offices withthe exception of designated smoking areas.

Group for example hosted interns with mental disabilities from a special school in 2002 and hired

time and receive notice if the set number of hours
is exceeded.

them in April 2003.

A workplace empowering
women to excel

In addition to normal periodic health checkups,
all Group employees (except temporary employees
working short hours) get an in-depth physicalAt the end of March 2003, 1,372 women wereexam at no cost to themselves. The Health
Development Center at Daiwa Securities Groupworking throughout the Group as career-track andInc. provides physical and mental health support

regional career-track employees. Women in these
programs make up 13.2% of all employees infor employees, with a full-time staff physician

Japan, a gain over the 9.2% of the year before.
There are also 39 female managers, an increase of

selors and mental health specialists also offering
consultation. In FY 2002, the Group decided tothree. Women make up 1.3% of managers infocus on the increasing problems of employee

managing employee health and full-time coun-

Japan, a slight rise over the previous 1.2%. One
reason this rate is so low is because the Grouphas few female career-track employees with thenecessary experience to be promoted to the man-

Workplace environment data at Daiwa Securities GroupFY 2000

FY 2001

FY 2002

Average employment of persons with disabilities (end of March)

1.52 %

1.54 %

1.69 %

Daiwa Elder System1 employees (end of March)2

N.A.

46

57

76
57

74
69

88
80

1,837.5
21.8

1,845
22.2

ager class, but the Group is strongly aware of theneed for actively employing female workers at thislevel. Incidentally, among recent new graduate
hires, about half of all career-track and regional
career-track employees are women.

Employees on prenatal/postnatal leave
Employees on maternity leave

Since 1992 the Daiwa Securities Group has let
women take maternity leave for two years after

Annual regular work hours
Monthly average of overtime hours worked3

1,845 hours
22.8 hours

childbirth so that they can better balance theircareers with parenting. This was an improvement
over the legally mandated one year. To help parents of young children even more, in 2002 theGroup extended the period during which parents
are excused from overtime work from two years to
three after childbirth.

Paid leave usage rate2

34.8 %

34.6 %

34.1 %

Employees that are union members (end of March)4

6,371

6,419

6,388

1 The Daiwa Elder System re-employs Group employees who have reached the standard retirement age.
2 Figures cover three companies: Daiwa Securities Group Inc., Daiwa Securities and Daiwa Securities SMBC.
3 Figures show the number of union members among employees of three companies: Daiwa Securities Group Inc., Daiwa Securities and Daiwa
Securities SMBC.
4 Figures exclude Daiwa Asset Management, which has its own employees’ union, and Daiwa Property, which has no union.

DAIWA SUSTAINABILITY REPORT 200327

Social Reporting

Daiwa People

sional human resources is an issue for the Group

Diverse training opportunities

Leadership training

How we foster our human resources will affect

The Daiwa Management Academy, begun in 2000

the Daiwa Securities Group’s future competitiveness. The Group provides cross-Group training forfor select General Managers, and the Daiwa
Leadership Program, started in 2001 for selectnew employees as well as leadership training anda system for studying in Japan or abroad, while

Deputy General Managers, have steadily produced
more graduates. Presently there are 90 graduates

individual companies give training primarily toof the Daiwa Management Academy. Of the 104

help their employees gather the knowledge andskills they need on the job. Employees can takeofficers4 at the nine main Group companies at theend of June 2003, 13 are graduates of the pro-training in a number of ways: at the training center in groups, within their own companies via

gram. Of the Deputy General Manager class, 149,or about 10%, are graduates of the Daiwa

satellite broadcast, or online over the Intranet. The
Group also supports employees working toward

Leadership Program. By the end of FY 2003, we
expect to reach our goal of having 20% of theformal credentials2.

class consist of graduates of this course.

2 For more information about the Group training system, see

4 Directors (other than Outside Directors) and Executive Officers

Sustainability Report 2002, page 28.

sulting and asset management.

Persons earning credentials(end of March 2003, nine Group companies)

Credentials
Chartered Member of The Security
Analyst Association of Japan
Chartered Financial Analysts(USA credential)

Skill-building training

The nine main Group companies began giving joint
training for new career-track employees in FY

Daiwa Securities started its online learning system “@DESK” in March 2002. During FY 2002 the2002. This five-day training is less about increasing work skills than it is about the Daiwa

company added eight new courses and now operates a total of 10, preparing employees to take

Securities Group’s Corporate Principles, corporate

credentials exams, teaching them about products

ethics and social responsibility. One day of the
training is devoted to learning about social contri-

like pension insurance and bonds, and examining
them on skills learned in group trainings and satel-

bution and human rights and includes volunteer
experiences, such as providing assistance atlite courses. Because employees can take @DESK
courses at any time or place, as of the end ofhomes for the elderly 3.

March 2003, about 60% had done so. About 200

3 For more information about volunteer experiences within theemployees access the system every day. @DESK
further enables training managers to checktraining for new employees, see As a Corporate Citizen and a
Member of the Community, page 30.

employees’ progress and understanding by the net
and thus provide more responsive support. Thereis also a cost advantage: unlike group courses, notime or money is lost in traveling to class. The
company plans to bolster skill-building and specialized knowledge acquisition among employees
by giving broader support for earning external credentials and introducing an internal credential system. Additionally, Daiwa Securities SMBC is starting up its own online learning system in FY 2003.
Because the systematic development of profesNew employee training

DAIWA SUSTAINABILITY REPORT 2003

Earned by
3/2003
1,122
32

Financial Planners (AFP)

2,487

Financial Planners (CFP)

144

Licensed Tax Accountant

12

Variable insurance sales credentials

Cross-Group training28

as a whole in the future, the Group is expanding
programs intended to enhance the ability of con-

5,584

System Analysts

18

Overseas MBA program graduates,
etc.*

121

* Persons sent by the Group to earn degree. Other degrees include
master’s degrees in law and international affairs.

Performance based
compensation and career paths

and how many were successful in the last four

future. Moreover, the Group is enhancing its train-

intra-Group job postings.
The Group is simultaneously setting up process-ing of evaluation interviewers.
7 Daiwa Securities, Daiwa Securities SMBC and Daiwa Asset

The Daiwa Securities Group began linking employ-es for the selection and promotion of officers. As

Management used a two-way evaluation system under which

ee bonuses to company performance in 1999
when it adopted the holding company system. This

we shift to a committee system6, scheduled for FY
2004, we are studying operations systems andGeneral Managers are assessed by their subordinates.

practice was nearly completely established by FY
2002. The great themes of the Group’s medium-

officer selection standards that will assure that
our new nominating committee can adequately

Customer satisfaction perspective

term management plan in effect from FY 2003 arefunction.

uate branch offices and employees from the point

to emphasize professional performance, give
employees more choices, establish a fair evalua-

5 Under the senior work system, during their working years up toof view of customer satisfaction. To start, thecompany added the factor “customer retention

tion system and improve the quality of our humanresources.

the regular retirement age, employees do not have to transferfrom the area from which they originate.
6 See Corporate Governance, page 16, for more details about thetransition to the committee system.

Personnel compensation reforms announced in
March 2003 called for job-specific compensation,rate” to its branch office performance evaluationsin April 2003. It plans to send out its third customer satisfaction survey in the autumn of 2003
and will use the resulting data to reflect customer

A multi-directional,
evaluation system

performance reviews with more graduated salary

Daiwa Securities has begun creating ways to eval-satisfaction in its evaluations of branch offices
and employees.

levels (16 instead of 11), and a senior work systemwith reduced salary for basically all career-track

Multi-directional evaluation

employees age 55 and up5. All of these reforms
come into full effect in FY 2004.

Fair personnel evaluations by the appropriate evaluator are a critical part of human resource man-Compliance perspective

Furthermore, we will be greatly expanding intra-

agement. The Daiwa Securities Group is working

ance component to its evaluation of all employees

Group job postings. This is intended to encourage
movement of personnel within the Group and toto implement a more plausible evaluation system,
focusing heavily on quality and productivity.

except temporary employees. In April 2003 Daiwa
Securities SMBC modified its evaluation systems

help skilled, eager employees reach their potential. Employees with the required qualifications

Daiwa Securities Group Inc. did this in a very concrete way in January 2002 by introducing its own

for internal administration supervisors andGeneral Managers. For details see Compliance,

and able to pass examinations (in the form of writ-

multi-directional evaluation system7. Personnel

page 13.

ten essays, live interviews and so on) are able totransfer to other posts in other departments they

are evaluated once a year by superiors, subordinates and others closely connected to their jobs,

Employees’ union

hope to join within the Group. The table at thebottom of the page lists numbers of applicants

and this is fed back to the evaluee. This type ofsystem will be expanded to the entire Group in the

The Daiwa Securities Group Employees’ Union has
offices on the premises of Group companies and is

The Daiwa Securities Group is adding a compli-

helping to maintain good relations between laborand management through the efforts of members
to improve the working environment and increase

Employees qualifying under intra-Group job posting
Time of posting

Jobs offered

Applicants

Successful
applicants

employee satisfaction. Membership stood at 6,388
at the end of March 20038.
8 This figure excludes Daiwa Asset Management, which has its

Summer 2000

Fund manager, analyst, venture capitalist

122Winter 2000

Work abroad

71

6

Summer 2001

Fund manager, analyst, venture capitalist,
principal finance, etc.

58

7Summer 2002

Fund manager, mergers and acquisitions,derivatives, work abroad, satellite broadcaster, etc.

60

8own employees’ union, and Daiwa Property, which has no union.

DAIWA SUSTAINABILITY REPORT 2003

29

Social Reporting

Key Points

As a Corporate Citizen• The Group provided 320 million yen for corporate citizen activities in FY 2002 (about 1.1%of ordinary income).
• We provided education in direct finance through partnerships with academia.
• We continued the sign language courses and guide dog experience course.
• Through our foundations we supported awareness-raising, volunteer activities andinternational exchange.

and a Member of the Community

Acting in our capacity as a corporate citizen is a key form of “our investment inGroup intends to continue a steady level of finan-and hands-on experience like cleanups around ourcial support, regardless of earnings performance.

training center and assistance at homes for theelderly. Our Management Program of training andSupport for employees
performing volunteer work

society.” The Daiwa Securities Group

education for managers includes experience-

makes this investment toward its own
sustainability as well as that of society as

The Daiwa Securities Group established its

based courses that let these managers experience
life in a wheelchair or as an elderly person. Thisa whole. The Group forms partnerships
with universities and other academic

Corporate Community Affairs Department in 1999
and actively supports employee interest in volun-

program seeks to inspire understanding and thepractice of volunteerism on the part of managers,

institutes, conducts volunteer activities

teer work. The department sponsors programs that

who can take the lead in such efforts. As a result,

through its Corporate Community Affairs
Department, offers financial support

employees can participate in and additionally uses
the Group intranet to publicize programs of foun-volunteerism becomes a habit in the offices where
the training is given.

through three foundations, and patronizes arts and culture.

dations, non-profits and other companies among
Daiwa employees. Thus, employees have plenty of

Sign language courses and guide dog experience
are two ongoing activities. Offered twice a month,chances to participate in activities of interest in
their spare time. The department further serves assign language courses began in 2000 in Tokyo andthe following year in Osaka and Nagoya. Besides

the Group’s contact for donations to the communi-

employees, family members and even customers

ty and supports the activities of the foundations
detailed below.

have taken part. Branch office managers and othermanagement members have occasionally joined toApproach to activities as acorporate citizen
Actions taken in our role as corporate citizens canbe broadly divided into four types: finance andsecurities education and research, support for

better their communication with employees thathave hearing impairments. Meanwhile, the guide

employees doing volunteer work, support for local

Volunteerism grounded
in local communities

and international society through foundations, andpatronizing arts and culture. In FY 2002 the Daiwa

In April 2001 community affairs programs wereincorporated into our training for new employees

once or twice a year. A handmade picture bookentitled “Daisuke the Guide Dog1” is distributed as

Securities Group provided 320 million yen throughsuch activities, an amount equivalent to about

as a way of promoting employee volunteerism andgenerating interest in community work. The pro-part of this course and has been used to support
the general curriculum in 67 elementary schools.

1.1% of ordinary income. The Daiwa Securities

grams include sign language courses, lectures,

1 Created by the family of a Group employee, “Daisuke the Guide

dog experience course began in 2000 and is held

Dog” is assembled personally as a volunteer effort by a numberof employees.

Group actions as a corporate citizen

Basic stance: Acting as a corporate citizen is our investment in society
Guide dog experience course
Education and researchin finance and securities

Support for employees
doing volunteer work

Partnerships withacademia

Corporate Community
Affairs Department

Support for local andinternational society

Art and culture

Activities by foundations

Patronizing events

Cooperation

Overseas
Daiwa Anglo-JapaneseFoundation

Daiwa Securities
Foundation

Daiwa Securities
Health Foundation

Education andawareness-raising

Various volunteer
opportunities

Elementary tohigh schools

Universities andgraduate schools

Japan

Sign language lesson

30

DAIWA SUSTAINABILITY REPORT 2003

Foundation, founded in 1994, supports volunteer

Education and researchin finance and securities

efforts in the areas of social welfare and medicalcare and gave out 202 grants worth 52 million yen

Patronizing art and culture

Believing that societal awareness of the impor-

in FY 2002. The Foundation maximizes the expo-

In commemoration of the 100th anniversary of its

tance of direct finance is needed to revitalize
Japanese society, the Daiwa Securities Group issure of these grants within and beyond the Groupby handing out grant notices and certificates atfounding, the Daiwa Securities Group sponsoredan exhibition of the works of Marc Chagall fromputting its efforts into finance and securities education, particularly in universities and graduate

branch offices of Daiwa Securities.
Finally, the Daiwa Anglo-Japanese Foundation2,

April to December 2002 in Tokyo, Niigata andHiroshima. In May and June 2003 it sponsoredschools. It also takes part in industry-academia

founded in London in 1988, seeks to enhance

Tokyo and Shiga performances by the Fondazione

partnerships by supporting university-based ventures in such forms as technology licensing

mutual understanding between the United
Kingdom and Japan through its main program, theTeatro Lirico “Giuseppe Verdi” Trieste opera company from Northern Italy.

organizations (TLO).
Additionally, officers and employees from Group

Daiwa Scholarship. Under this program, 81 young
British people have studied in Japan to deepen

companies lecture at several graduate schools,
universities and junior colleges, including Okinawa

their knowledge of Japan and the Japanese language as of the end of March 2003. In September

University, Kagawa University and Tohoku Fukushi

2002, five British students came to Japan, theUniversity.

twelfth set of students to do so; they are currently
in the middle of a 20-month program. In addition

Support for local and internationalsociety through foundations

to the existing Daiwa Adrian Prizes, two moreaward programs began in January 2003: theTwo Group foundations in Japan and another

Daiwa Foundation Small Grants and Daiwa

overseas actively support worthy goals. The
Daiwa Securities Health Foundation, founded in

Foundation Awards.

1972, performs surveys and research on the prevention and treatment of lifestyle diseases and

2 For more information about the Daiwa Anglo-Japanese

Poster for “Giuseppe Verdi”
Trieste opera performance

Foundation, visit www.dajf.org.uk.

Issues to be addressed

increases understanding about maintaining andimproving health. In FY 2002 it handed out 30
grants worth 30 million yen. The Daiwa Securities

The Daiwa Securities Group believes that its
social mission is to expand activities primarily inits main field of business: finance and securities.

Key industry-academia partnerships in FY 2002
University/graduate school

Activities

Aoyama Gakuin University Graduate School of International Management Sent instructor to course on management analysis
Kyoto University Graduate School of Economics

Sponsored lectures on theory of finance and securities systems

Kyoto University International Innovation Center

Supported industry-academia project

Keio University Faculty of Policy Management

Omnibus lectures primarily involving employees as lecturer

University of Cambridge Entrepreneurship Centre

Support of investment fostering project

University of Tokyo

Activity support for University of Tokyo Office of University Corporate Relations

Nihon University Business Incubation Center (NUBIC)

Consultation on Nihon University TLO operations

Specifically, we will actively support the education of young people in the areas of economics
and investment.

Sponsored course on Daiwa Securities investment strategy theory
Hitotsubashi University Graduate School ofInternational Corporate Strategy (ICS)

Sponsored course on Daiwa Securities corporate strategy building
Group scholarship system for non-Japanese to study in Japan (nine students in FY 2002)

Waseda University

Waseda/Daiwa TLO Pilot Fund
Joint research with Waseda University Institute of Financial Studies

DAIWA SUSTAINABILITY REPORT 2003

31

Environmental Reporting

Key Points

Working for the Environment

The Daiwa Securities Group recognizes
that the environmental impact of its business is not trivial and it is making efforts
to reduce it.

Our vision on environmental
issues• The Group is expanding the scope of environmental performance data it collects (adding
Daiwa Securities branch offices nationwide, etc.).
• Average rate of paper recycled is just under 90%.
• The Group became a member of the Green Purchasing Network.
• Conducted company environmental campaign “Do Something Good for theEnvironment.”

are updated. Specifically, we turn on lights only

and 1.9% respectively from FY 2001 levels. The

where needed, cut office equipment standby
times, and run energy patrols to encourage staff toGroup is now pursuing these goals.
1 This figure is a calculated equivalent found by using the Ministry

turn off unnecessary lights. We perform inspec-of the Environment’s greenhouse gas emissions conversion for-tions and maintenance control to assure that air
conditioning and other equipment is running effi-

water usage of the Daiwa Securities Group in its 18 major officeciently. Windows are coated with light-blocking
film and we use energy-saving air conditioning,

2 Total of employees, securities advisors and temporary employ-mula. It is the CO2 equivalent of the fuel, electric power andbuildings and branch offices nationwide.

ees in Japan. Refer to Daiwa People, page 26.

lighting and elevators. Further, some Daiwa

The direct impact that the business activities of
Daiwa Securities Group have on the environment

Institute of Research office buildings use “EcoIce” technology: hot water is derived from the

may be less than that of the manufacturing industry, but we still create a burden by consuming

process of keeping computers cool and some energy loads are supplied at night.

energy, water and paper and thus releasing carbon dioxide and waste. As environmental issues

Daiwa Securities Group CO2
emissionsworsen, people today understand that businesses

Reducing water usage
Water usage at the Daiwa Securities Group has
been on a gradual declining trend since FY 2000.
This is the result of a campaign to reduce water
waste and the equipping of company cafeteria andhave an obligation to work continuously to mitigate environmental burden, no matter what theIn FY 2002 CO2 emissions by the Daiwa Securities
Group totaled 40,708 tons1. This figure divided bylavatories with water-saving fixtures. Steps underconsideration for further savings include using

industry sector or form of business. Therefore theGroup in FY 2001 began collecting data on its use

total Group employment in Japan (12,538 employees2) yields per-capita emissions of about 3.25

recycled water.

of electric power, water and fuels (city gas, gaso-

tons.

line and so on) and its amount of waste and materials recycled at its major office buildings.

The Group submitted its Global Warming Action
Program for the Daiwa Securities Headquarters

We are focusing to analyze now on trends in thedata over the years and taking measures to reduce

Building, Eitai Daiya Building and DIR Eitai
Building, three of the Group’s relatively large

these burden. Further, we have begun to study

office buildings, to the Tokyo Metropolitan

about the possibility of acquiring certification
under ISO14001, the international environmental

Government in June 2002. Our goals for reducing
emissions of greenhouse gases (CO2 equivalent)standard, in order to implement environmental
management. At the same time, we are puttingfrom these buildings by FY 2004 are 2.0%, 0.1%

highly effective systems in place to raise Group
employee awareness through, for example, theenvironmental campaign described below.

Energy conservation

Electric power usage (Graph 1)
Units: 10,000 kWh
12,00010,0008,000

The data on energy consumption of major Group
office buildings since FY 2000 show that electric
power consumption has been flat, while there has
been a slight decline in usage of natural gas andother fuels. The effort to conserve energy has
included reducing electricity and fuel consumptionthat we deem excessive or low-priority and incorporating energy-conserving design when facilities

32

DAIWA SUSTAINABILITY REPORT 2003

Water usage (Graph 2)
Units: 10,000 liters
45,000

14 buildings
18 buildings plus Daiwa Securities
branch offices

6,729

6,801

9,861

40,00035,000

12 buildings
15 buildings plus Daiwa Securities
branch offices

42,69330,000

6,775

25,0006,000

24,73024,07323,510

2000

2001

22,621

20,00015,0004,000

10,000
2,000
0

5,000
2000

2001

2002

(FY)

* Scope of data collection was expanded over that in FY 2002.
For details see table Scope of environmental performancedata, page 33.

0

2002

(FY)

* Scope of data collection was expanded over that in FY 2002.
For details see table Scope of environmental performancedata, page 33.

Resource conservation

Recycling and waste reduction

Digitizing information is a very effective way of
reducing paper use. E-mail and the Group intranet

The Group thoroughly sorts its paper waste andsends it to recyclers. We separate the paper into

The product that Daiwa Securities Group sells ishave greatly diminished the number of paper doc-high quality paper, newspaper, magazines andinformation. Therefore, the question of what to doabout paper usage is the key to our efforts to con-uments circulated internally. We encourage making copies on the back of earlier documents where

pamphlets, cardboard and mixed paper. We checkup on our collection and hauling contractors, inter-

serve resources, recycle and reduce waste. Our
future success at reducing environmental impact

confidentiality is not a concern. Daiwa Securities’
investment fund prospectuses have been available

mediate processors and recycling companies toconfirm that the material is ultimately recycled aswill hinge on how we digitize information.

electronically since May 2003 so that customers

it should be. The rate of paper recycling varies by

can view them at their PCs instead of in paper
form.

building, but the average is just under 90%.
Other waste includes kitchen waste, bottles,

Resource conservation, recycling
and waste reduction

cans, PET bottles, plastic and old PCs. We encourage the reuse of PCs in other departments, and ifthat is not possible, we engage the services of arecycling company that makes sure each material
Recycling volume and rates (Table 1)(Units: tons)
FY 2002

FY 2001
Disposed

Recycling
rate

Waste
produced

Recycled

Disposed

Recyclingrate

1,438.3

179.6

89%

1,564.2

1,357.0

207.3

87%

88.7

208.5

30%

352.6

101.0

251.6

29%

Waste
produced

Recycled

1,617.9
297.1

Paper
Non-paperis recycled.

* See Scope of environmental performance data below for data coverage.

Scope of environmental performance data
: Facilities added to scope of data collection in FY 2002

Paper recycling flow (in this example, Daiwa Securities Headquarters Building)Graph 1 Graph 2 Table 1

High-quality
paper

Daiwa Securities SMBC Headquarters Building
Eitai Daiya Building

Newspaper, etc.

Osaka Branch
Nagoya Branch
DAM Headquarters Building
DIR Head Office

Magazines/
pamphlets

High-quality
paper

Newspapers
CompanyE
Magazines

DIR Annex
DIR Eitai Building

Cardboard

Cardboard

Company C, D

Kabutocho Building

Company A, B

Daiwa Securities Headquarters Building

Cleaning company

Building nameThree-part recycling box*

CompanyF

DIR Kiyosumi Building

CompanyG

DIR Izumi Building
DIR Osaka Center
DSC Headquarters Building

Crushed by
employees ineach department

Documents
processed in bulk

Daiwa Securities branch offices*
Daiwa SB Investments Headquarters

Mixed paper

Individualbox

Cleaning
company

Mixed paper

Category

Container
locationTransportation

Marking on
storage area

NIF Ventures Headquarters
Daiwa Training Center
Daiwa Sanko Headquarters/Annex* This applies to 125 office locations excepting headquarters,
Osaka branch and Nagoya branch (end of March 2003).

Collection
andtransportation

Intermediate
processor andfinal recycler

DAIWA SUSTAINABILITY REPORT 2003

33

Environmental Reporting

Working for the Environment

Green purchasing

Community activities ofenvironmental issues

The Daiwa Securities Group encourages its

The Group’s Corporate Community Affairs

employees to use the Sanko Net, run by Group
company Daiwa Sanko, when they purchase office

Department is the hub of Group action on behalfof the environmental social contributions. We

supplies. Sanko Net directs buyers to certified
products from the Green Purchasing Network

have supported “Saving Forest Giants,” a giant
tree preservation program, since December 2000,(GPN) database. Presently we purchase about

encouraging customer support by putting up

40% of our supplies with the GPN mark throughSanko Net.

posters and setting out donation boxes at Daiwa
Securities branch offices nationwide.

Major pro-environment activities that current
and former employees and their families volunteered for in FY 2002 are shown below.

Major environmental initiatives in FY 2002

June

Volunteers removed vines and underbrushfrom the forest at Mt. Takao, Tokyo. Volunteers included about 100 employees andfamily members mostly from Daiwa Securities branch offices in Tama, Tachikawa,
Kunitachi, Machida and Hachioji.
About 540 current and former employees
and their family members helped clean up
Kujukurihama Beach in Chiba Prefecture.

Daiwa Securities Group Inc. joined the GPN in
June 2003. The Group has just begun green purchasing, but is planning to establish a basic policyon this and will actively encourage it hereafter.

July

July
September

Parents and children took a hands-on
course in environmental work, cutting
grass weeds and pruning trees.
Campaign to recycle used tennis rackets.
Rackets were given to a non-profit organization, which restrung and reconditioned
them and donated them to schools.

November

A total of 124 Daiwa Securities employees
and family members from the North Osaka
area (Umeda, Toyonaka, Nishinomiya,
Amagasaki and Ibaraki) took part in effort
to keep Mt. Rokko clean, sponsored by Hyogo Prefecture cities Ashiya, Takarazuka
and Nishinomiya.

December

Employees donated 606 unneeded 2003
calendars and gave them to a secondhand market.

Poster for giant tree preservation program

Kujukurihama Beach cleanup

Donation of surplus calendars to second-hand market

34

DAIWA SUSTAINABILITY REPORT 2003

ment. This was our first time to run the campaign(Home/Private) and Eco-Idea Prize (Company). The

and so we received just 22 entries, but they
offered a variety of good ideas.

Himeji Branch Office earned the Environment
Grand Prize for its conservation efforts, which the

In May 2003 the Group as a whole conducted its

A committee looked through the entries andemployees have adopted as part of their routine“Do Something Good for the Environment” campaign to raise employee awareness. This cam-judged them on environmental awareness, day to
day effort and extent of activity, finally selecting

paign asked employees to enter activities they
were undertaking or ideas to benefit the environ-

entries to receive the Eco-Grand Prize, Eco-Life
Prize, Eco-Office Prize, Eco-Idea PrizeGroup environmental
campaign(see feature below).

Conservation is part of the job
Yasuhiro Noguchi, Manager, Himeji Branch Office, Daiwa Securities

It was mostly young staff members at Himeji
Branch Office who so eagerly accepted thebeing scolded by their superiors and accounts
for why these habits have become estab-Group’s environmental campaign challenge. I
think what the prize committee waslished. And I hear that employees are separating waste and saving energy in theirimpressed by was our habit of reusing paper,

homes and dormitories, not just the office. It

separating waste and saving electricity,
things we have done for the past decade.

is gratifying to hear that we have createdsuch a persuasive environment. This took 10

Separating waste has encouraged us to keepa more orderly workplace and to work more

years to happen, so I am grateful for all those
employees who have been so persistent.

Himeji branch staff members

efficiently. No matter how much a company

At the same time our members havesupports tree plantings and outside efforts
like that, it means nothing if employees areengaged in community activities. The branch
office has never failed to attend the cleanupval, hosting a booth selling grilled yakisoba
noodles and joining in the parade.

wasting paper. Our employees remind eachother to use paper wisely, separate waste forheld the second Thursday every month of theboulevard that leads to Himeji Castle, theWhen these employees take part in environmental and community activities as Daiwa

recycling, turn out the unnecessary lights andcity’s great landmark which is designated a

Securities staff members, and when they deal

keep a reasonable room temperature. For new
employees this is far more effective thannational treasure. Employees get into thecommunity by taking part in the castle festi-

warmly with the people they meet, they do
not brag about this; for them it is just part ofthe everyday life. As these deeds accumulate,they are reflected in the attitude these
employees take when working with customers. Our day to day work may deal largely
with numbers, but it is our attitude thatmakes us sustainable and should be the focusof all corporate activity.

Reminders to save energy

Controlling air conditioner temperature

DAIWA SUSTAINABILITY REPORT 2003

35

Communicating with Society

Stakeholder Dialogue

The Group hosted an Experts’ Roundtable on April 18, 2003 to try

Looking back on 2002 Sustainability Reportto answer the question, “What can the Daiwa Securities Groupdo to build a sustainable society?” We invited outside experts onsuch diverse topics as environmental issues, social contributions and consumer affairs to offer their unreserved opinions.

Participants
Dr.Naoki Adachi
Member of Rating Committee, Sustainability Management Rating InstituteYukiko Furuya
East Japan Compliance Management Research Group, Nippon Association of Consumer
Specialists (NACS)

Tadashi Hayami
Senior Fund Manager, Asahi Life Asset Management Co., Ltd.

Sachiko Kishimoto
Executive Director, Center for Public Resources Development

Masaaki Kogure
Senior Researcher, Institute of Prosocial Research

Yoshiki Midorikawa
Director, Green Consumer Research Group

Hiroaki Sugiyama
Graduate student at Tsukuba University and Secretariat, Global Reporting Initiative
Forum Japan

Yoko Takahashi
Chief Director, Japan Philanthropic Association

36

DAIWA SUSTAINABILITY REPORT 2003

We started the discussion by asking participants for their impressionsof the 2002 Sustainability Report. Midorikawa said, “I felt the report
was written very sincerely.” Takahashi and Kishimoto agreed that theforthright matter in which the report addressed Group problems
showed that Daiwa Securities Group has resolved to restore theGroup. Furuya added, “The report is commendable in that it examinedGroup problems, which will help build trust with customers.” In general, there were many positive comments and the participants praised
the Group’s attitude on information disclosure.
Opinions were split, however, on the issue of the target reader thereport should have been written for. By writing the report broadly forstakeholders outside the Group (customers, shareholders, investors
and society at large) as well as employees, Kogure wondered if theGroup had not lost track of who their target audience was.
Midorikawa was more positive, saying that the report’s multi-stakeholder approach was good enough without worrying about how tofocus the content. Furuya suggested that “The report should make it
clearer, from the consumer’s point of view, whether you are reallyacting in compliance.” She added, “If you fail to do that, it’s hard toincrease consumer trust, no matter how much you talk about law andethics.” Based on these responses, the Group realized it had to put
greater emphasis on deciding what it wanted to say, and to whom.
As for employment, Midorikawa said that “Employment-related
information disclosure is a weak point for Japanese firms, but this isof great importance to stakeholders, both directly and indirectly.”
This comment pointed out an issue that needed a closer look. Many
students look at corporate environmental or sustainability reports
when they are seeking employment; Sugiyama pointed out that “Howyou use your personnel and what your employment system is like arewhat students most want to know about.” Thus we learned that weneeded to describe employment practices in more detail.
Regarding issues and activities mentioned in the report, meeting
participants expressed their belief that offering more concrete numbers and targets would make the report more effective. Kishimoto
expressed the desire for more information about targets to beachieved rather than unconnected bits of data, while Takahashi
added, “Even if there is little likelihood of reaching them, it’s still
important to have goals and then to work toward them.”

What does society expect
of us as an enterprise?
The second thing we wanted to ask was what the participants
thought society expects of the Daiwa Securities Group as a business.
Adachi largely spoke for the invitees when he said that in an age
when share prices are not simply going up and up, “The purpose of asecurities company is not just to make more money for clients.”
Explaining, he said, “The role of the finance industry is to make surethat the world’s flow of financial assets moves efficiently. A company
has to act according to its own principles and vision rather than try to
fulfill every wish the customer may have.”
Asked where we as a company should put our focus, Hayami pointed to “Those issues that all modern companies have in common, notjust the securities industry. These include determining how to addresssocial problems through its core business, and thinking about what
one’s own company is capable of doing. Takahashi proposed that“Social contribution is fine, but what’s more important is how thecompany fulfills its social commitments in its core business.”
Thinking in these terms, Kogure said, “Makes it seems as if the2002 Sustainability Report was expressing the Group’s corporate principles in a rather inward-looking way.” As he said, “When there isinteraction between stakeholders and companies, the outcome basedon company principles will occur.”

Kogure commented further that individuals are better able to decide
where to invest their money when they know how it is being used.
Hayami also made a reference to the basic principles of socially
responsible investing when he said that as more companies describe
their attitude toward the future, “It won’t even be necessary to refer
specifically to socially responsible investing, because investors will
be able to find for themselves those companies with an outlook liketheir own.”
Several participants, including Kishimoto and Furuya, pointed outthat Daiwa Securities Group needs not only to disclose information toinvestors but also educate them. This conversation gave us the opportunity to see how many issues the securities industry faces.
The Daiwa Securities Group looks forward to hosting more of thesemeetings and using the comments they generate in our corporate
activity.

Response to dialogue with stakeholders
In 2002 the Daiwa Securities Group put out its first

were glad to hear praise for our disclosure attitude

socially responsible investing and investor education

Sustainability Report. Our Corporate Communicationfrom participants in the Experts’ Roundtable.

are two of the most important duties of the securities

Department, which puts out both the Sustainability

In this second report, the Group has endeavored toReport and the more financially oriented Annual

offer greater information on human resources andReport for the Group, works hard to convey consis-

compliance, as our invitees suggested. Whereas intent messages to readers in these two reports. In

the first report, we focused on defining our current

2002 we were for the first time releasing so muchsituation, in the second, we have followed theirinformation in the form of the Sustainability Report

advice by setting targets and discussing our progress

and the process was completely new to us, but weon them. Through this dialogue, we have learned thatindustry, and we look forward to carrying these out inour future work.

Toshihiko Onishi
General Manager, Corporate Communication Department,
Daiwa Securities Group Inc.

DAIWA SUSTAINABILITY REPORT 2003

37

Communicating with Society

Third-Party Opinion

Yukiko Furuya
East Japan Compliance Management
Research Group, Nippon Association ofConsumer Specialists (NACS)

The Daiwa Securities Group has now released its second
Sustainability Report. The Group and its corporate stance won praise
for the first edition in 2002, which took an honest look at its management problems. That attitude is even stronger in the 2003 edition.
Included here are objective discussions about the reality the Daiwa
Securities Group finds itself in, including judicial and administrative
penalties for violations of restriction on insider trading. Six pages are
devoted to a detailed discussion of such topics as how the Group is
stepping up its compliance efforts (particularly through the prevention
and early detection of unfair practices) and the internal communication, training and personnel evaluation the company is undertaking toeffect this stronger compliance. This report shows the reader directlythat the Daiwa Securities Group intends to be a leader in corporatesocial responsibility.
Also praiseworthy is the fact that this report is written to be easy
for the reader to read, as well as the fact that Daiwa Securities Grouphas made a sincere effort to incorporate the third-party opinions it
included in the 2002 report. I attended the Group’s Experts’Roundtable in April of this year and made the comment that the report
should delve a little further into the nature of customer complaints
and include some of their feedback. The Group acted right away andincluded that information in this report as well as details about specific strategies in response.
In these ways the attitude of the Daiwa Securities Group is in linewith the objective of sustainability reporting, which is to provide
information on pro-sustainability activities and social responsibility.
Moreover, the GRI Content Index provided at the end gives readers aneasy way to cross-reference guideline requirements with pages in the

38

DAIWA SUSTAINABILITY REPORT 2003

report where the required content may be found. That helps make thereport more objective. Finally, this report has a table balancing FY
2002 results on one side with future issues on the other, which is agood experiment in writing from the reader’s point of view and clarifying company responsibility.
I do have a few suggestions for future reports and for the Daiwa
Securities Group as viewed through these reports. First, while thestructure of the report itself makes the content very easy to view, insome places, the lettering is so small that reading is difficult. Of
course there are space limitations, but I hope future reports will find a
way around this.
Second, I notice that the expression “accountability” and similar
expressions occurred occasionally in the 2002 report, but for somereason there is little reference to this in the second report. It seems
there should be a greater emphasis on the accountability, that possibly the Group should be more proactive on this point.
Third, as for the ways Daiwa Securities Group plans to be a leader
in corporate social responsibility, the sections about corporate governance and compliance systems do an adequate job of conveying thisinformation, but I believe the Group could enhance its corporate social
responsibility efforts by applying definite standards. In the section
Information Disclosure, for example, although efforts on behalf of corporate social responsibility are proceeding, the only policy mentioned
in regards to information disclosure is that it shall be “timely, appropriate and fair.” What is needed is some standard to guide the Groupin assuring that information disclosures are timely, appropriate andfair, and even a standard that leads the Group to disclose informationeven when that disclosure is disadvantageous to it. The Group has
now decided to adopt a disclosure policy, something which gives mehigh hopes.
Finally, while the Solicitation Policy was included in the Compliancesection of the 2002 report, this year’s report does not include it andonly refers to it. To the extent it is possible, I would like to see thebasic rules and laws affecting customer response quoted in their
entirety. Additionally, I cannot tell how the Group’s specific efforts toobey the Solicitation Policy and so on are linked to its sales and othersystems, but they should be because this is one way that its efforts
on behalf of corporate social responsibility are developed in concreteterms. I hope that Daiwa Securities Group will clarify this issue by
establishing policies like the voluntary action standards it says are
now under review.

Toshihiko Goto
Chair, Environmental Auditing ResearchGroup (EARG)
Member, Board of Directors, Global
Reporting Initiative (GRI)

Addressing the issue of corporate social responsibility in the ThirdParty Opinion section of the Daiwa Securities Group’s 2002
Sustainability Report, I wrote that there was “a broad-based movement to reexamine the role of corporations in the current structure ofsociety.” This issue has come to flower in Japanese society in the current year. I would suggest that these sustainability reports play a bigrole in the way officers and employees of the Daiwa Securities Group
think through corporate social responsibility in Japan and the world.
The 2002 Sustainability Report mentioned issues still to beaddressed, such as quantifying Group targets as much as possible,
plus the Group has had to take on some serious incidents since therelease of the 2002 report and face harsh opinion about that.
Although these problems have not all been resolved, it seems to me
that in the 2003 Sustainability Report the Daiwa Securities Group has
made a sincere effort to improve and explain the issues. In particular,
the Group has honestly addressed the indiscretions of some of its
executives in its core business, and they talk about this in a way thatmakes it very clear they intend to learn from these cases. My hope isthat Group officers and employees will act in solidarity and use thisas a stepping stone to building trust.
Because society is built on trust, it goes without saying that trust
should be the first item mentioned in the principles that express thesoul of a corporation. The real issue, though, is how to achieve thistrust. Here and there in this report I see the understanding that persistent, day to day effort is fundamental to this. The report mentions, forexample, that the important and indispensable thing is the processitself of unceasing effort in the quest for perfection. But ideas thisabstract are hard to make sink in throughout a large organization. The

2003 report says that the Group has begun taking a variety of steps tomake this happen. For example, it is establishing a more detailed disclosure policy in FY 2003 and will establish a corporate governanceprinciple the following year. Some may say the pace of writing thesepolicies is too slow, but I believe this slow pace is good. If it were justa question of getting some words on paper, that could be done withina day. But engaging the input of many employees and officers andactually spending time will increase awareness of the process andinspire the members to think about the system they are putting into
effect. I am convinced this is the type of effort the Group is making,not just coming up with a slogan.
As for what I would like to see in these reports in the future, I think
there should be more emphasis on the Group’s core business.
Specifically, I would like to see the Group come up with more proactive basic policies on SRI, which also focuses on environmental issues
for this, and create a system and means of support for regional andcommunity investment. I’d like to see the Daiwa Securities Group
anticipate the corporate social responsibility and SRI fundamentals
that Europe is building into its economic and social policies.

About the Global Reporting Initiative
The Global Reporting Initiative, or GRI, is an international nongovernmental organization established in 1997 and consists of diverse
stakeholders including corporations, other non-governmentalorganizations, consultants, accounting organizations and business groups
from around the world. The GRI authors the Sustainability Reporting
Guidelines as a worldwide standard for reports issued for the purpose ofachieving sustainable societies.
The guidelines do not provide models of good behavior or policies for it
but rather appeal to corporations and organizations to report on theireconomic, social and environmental performance with the objective of
increasing report quality, strictness and convenience.
As of August 2003, at least 309 corporations and organizations in 30
countries are using the GRI guidelines to create reports; 60 suchcompanies are in Japan.
For more details, visit http://www.globalreporting.org/.

DAIWA SUSTAINABILITY REPORT 2003

39

Milestones toward Sustainability

40

Year

Month

Daiwa Securities Group milestones toward sustainability

1997

Oct.

New management team led by Yoshinari Hara begins work

1998

Jan.
Jan.
Feb.
Mar.
Jun.

Business Improvement Report submitted regarding previous year’s racketeer payoff
Suggestion Box System introduced to encourage direct suggestions to President
Personnel system reforms include specialist positions, regional career-track employees
Corporate Principles establishedFirst Outside Corporate Auditor appointed

1999

Apr.
Apr.
Apr.
Apr.
July-Sept.
Sept.

Daiwa Securities Group Inc. (the “Company”), first holding company listed in Japan, established, and Daiwa Securities Co., Ltd., Daiwa Securities SB CapitalMarkets Co. Ltd. (now Daiwa Securities SMBC Co. Ltd.) spun off
Executive Officer System implemented at the Company and Group companies
Advisory Board established at the Company
As part of reforms to personnel system, seniority-based salary increases and promotions abolished.
Corporate Community Affairs Department and Corporate Ethics Department established at the Company
Company’s shares selected to be included in the Dow Jones Sustainability World Indexes

2000

Apr.
May
June
June
Aug.
Oct.
Nov.
Nov.
Dec.
Dec.

Group Executive Officer System introduced at the Company
Daiwa Management Academy established with the aim to develop management personnel for the future
Compensation Committee established at the Company
Daiwa Elder System, allowing the reemployment of experienced persons up to age 65, introducedFirst company information session aimed at individual investors held
Corporate Branding Project launched
Daiwa Securities Business Center acquired ISO9001 certification for quality system
Fundraising for relief to victims of Miyakejima volcanic eruption, heavy rains in Tokai region and earthquake in western Tottori PrefectureGroup’s annual report receives highest award in “Nikkei Annual Report Awards”
Support begins for “Saving Forest Giants,” a giant tree preservation program

2001

Jan.-Mar.

2002

Jan.
Mar.
Mar.
Mar.-Sept.
Apr.
Apr.-Dec.
June
June
June
Oct.

Multi-directional evaluation system involving superiors, subordinates and relevant departments introduced at the Company
Joint industry/academia lecture with Tohoku Fukushi University
Comprehensive alliance to conduct joint research on areas relating to financial technology formed with Kyoto University’s graduate division
Regional index funds, such as the “Shizuoka Benchmark Fund,” launched by Daiwa Asset Management
Daiwa Securities introduces online training system @DESK
Exhibition of Marc Chagall artwork sponsored to commemorate Group centennial
Online voting system introduced for the general meeting of shareholders by the Company
First Outside Director appointed, Director terms reduced from two years to one
Five hundred forty employees, family members and former staff members participate in Kujukurihama Beach cleanup in Chiba Prefecture
Daiwa Securities Group publishes its first Sustainability Report

2003

Jan.
Feb.
Mar.
Apr.
June

Group-wide Corporate Ethics Hotline internal reporting system set up
Internal Audit Department established at Company
New medium-term management plan (for FY 2003-2005) establishedNew rewards program for shareholders inaugurated
Total Company director and corporate auditor compensation disclosed

Daiwa Institute of Research publishes two reports called “Urgent Proposals for the Revitalization of the Japanese Economy” and “Urgent Proposals Concerning
the Share Purchase Organization Plan”
Mar.
“Brand Statement,” which defines the Group's core values, released to publicMar.
Daiwa Securities, Daiwa Securities SMBC and Daiwa Asset Management publicly announce their Solicitation Policy
Apr.
CS Promotion Department established at Daiwa Securities
May
Comprehensive alliance formed with Hitotsubashi University's graduate school to form cooperative industrial-academic relationship in finance and management
June
Mrs. Green eco fund established by Daiwa SB Investments
June-July Sponsorship of Japan staging of Gran Teatro La Fenice
July-Mar.’02 Group Management Training Program that shares Group’s sense of values with all officers and general managers implemented
Aug.
Internship program for college students begun
Sept.
“Letter from Yoshinari Hara,” an e-mail newsletter from President Hara to officers and employees, begins distribution.
Sept.
Lecture series “Corporate Governance in the Securities Market” held at Keio UniversityOct.
As part of relief efforts, Group executives and Group companies donate $100,000 to families of victims of September 11.
Nov.
Customer Support Hotline established at Daiwa Securities
Nov.
Daiwa Leadership Program begun as screening and development training program for mid-level employees

DAIWA SUSTAINABILITY REPORT 2003

GRI Content Index

SectionPage(s) in thisreportIndicator

1 Vision and Strategy

SectionIndicator

Page(s) in thisreportEconomic Performance Indicators

1.1

Statement of the organisation's vision and strategy regarding its contribution tosustainable development

2-3,6-7

1.2

Statement from the CEO (or equivalent senior manager) describing key elements of
the report

2-3Core Indicators
Customers
EC1

20

Net sales

Employees

2 Profile

EC5

Organisational Profile
2.1

Name of reporting organisation

2.2

Major products and/or services, including brands if appropriate

520,22-23,24-25

2.3

Operational structure of the organisation

2.4

Description of major divisions, operating companies, subsidiaries, and joint
ventures5,16-175,20

2.5Countries in which the organisation's operations are located5

2.6

Nature of ownership; legal form

5

2.8

Scale of the reporting organisation

2.9

List of stakeholders, key attributes of each, and relationship to the reportingorganisation

5,19,20-21,26
4,6,19,21,26

Report Scope
2.10

Contact person(s) for the report, including e-mail and web addresses

41

2.11

Reporting period (e.g., fiscal/calendar year) for information provided

4

2.12

Date of most recent previous report (if any)

18

2.13

Boundaries of report (countries/regions, products/services, divisions/facilities/joint
ventures/subsidiaries) and any specific limitations on the scope

Total payroll and benefits (including wages, pension, other benefits, andredundancy payments) broken down by country or region

16,21

Providers of Capital
EC6

Distributions to providers of capital broken down by interest on debt andborrowings, and dividends on all classes of shares, with any arrears of preferred
dividends to be disclosed

20-21

Public Sector
EC10Donations to community, civil society, and other groups broken down in terms ofcash and in-kind donations per type of group

21,30

Environmental Performance Indicators
Core Indicators
EnergyEN3

Direct energy use segmented by primary source

32

Total water use

32

Water
EN5

Emissions, Effluents, and Waste
4-5

Report Profile

EN8

Greenhouse gas emissions (CO2, CH4, N2O, HFCs, PFCs, SF6)

32

EN11

Total amount of waste by type and destination

33

2.18

Criteria/definitions used in any accounting for economic, environmental, and social
costs and benefits

2.20

Policies and internal practices to enhance and provide assurance about theaccuracy, completeness, and reliability that can be placed on the sustainability
report4,18-19

Policy and current practice with regard to providing independent assurance for thefull report

Employment

38-39

LA1

Means by which report users can obtain additional information and reports about
economic, environmental, and social aspects of the organisation's activities,
including facility-specific information (if available)

18-19

Breakdown of workforce, where possible, by region/country, status(employee/non-employee), employment type (full time/part time), and by
employment contract (indefinite or permanent/fixed term or temporary). Also
identify workforce retained in conjunction with other employers (temporary agency
workers or workers in co-employment relationships), segmented by region/country

26

LA2

Net employment creation and average turnover segmented by region/country

26

2.21
2.22

21,31

[Labour Practices and Decent Work]
Core Indicators

3 Governance Structure and Management Systems
Structure and Governance
3.1

Social Performance Indicators

Training and Education

Governance structure of the organisation, including major committees under theboard of directors that are responsible for setting strategy and for oversight of theorganisation

16-17

Diversity and Opportunity

3.2

Percentage of the board of directors that are independent, non-executive directors

16-17

LA10

3.4

Board-level processes for overseeing the organisation's identification andmanagement of economic, environmental, and social risks and opportunities

Description of equal opportunity policies or programmes, as well as monitoring
systems to ensure compliance and results of monitoring

26-27

16-17

LA11

Linkage between executive compensation and achievement of the organisation's
financial and non-financial goals (e.g., environmental performance, labour
practices)

Composition of senior management and corporate governance bodies (including
the board of directors), including female/male ratio and other indicators ofdiversity as culturally appropriate

17,26-27

16

3.6

Organisational structure and key individuals responsible for oversight,
implementation, and audit of economic, environmental, social, and related policies

12,16-17

3.7

Mission and values statements, internally developed codes of conduct orprinciples, and polices relevant to economic, environmental, and social
performance and the status of implementation

6-7

Mechanisms for shareholders to provide recommendations or direction to theboard of directors

17,19

3.5

3.8

LA9

28

Additional Indicators
Employment
LA12

Employee benefits beyond those legally mandated

27,30

Training and Education

Stakeholder Engagement
3.9

Basis for identification and selection of major stakeholders

4,6-7

3.11

Type of information generated by stakeholder consultations

36-37

3.12

Use of information resulting from stakeholder engagements

4,19,24-25,36-37,
Questionnaire

Overarching Policies and Management Systems

LA16

Description of programmes to support the continued employability of employees
and to manage career endings

28-29[Human Rights]
Core Indicators
Strategy and Management
HR1

Description of policies, guidelines, corporate structure, and procedures to deal
with all aspects of human rights relevant to operations, including monitoringmechanisms and results

26-27

Additional Indicators

3.13

Explanation of whether and how the precautionary approach or principle isaddressed by the organisation

12-15

3.15

Principal memberships in industry and business associations, and/or
national/international advocacy organisations

22-23,31

3.19

Programmes and procedures pertaining to economic, environmental, and social
performance

Strategy and Management
HR8

Employee training on policies and practices concerning all aspects of human rights
relevant to operations

26

Disciplinary Practices
24,33-35

HR10

4 GRI Content Index
4.1

Average hours of training per year per employee by category of employee

A table identifying location of each element of the GRI Report Content, by section
and indicator

Description of non-retaliation policy and effective, confidential employee
grievance system (including, but not limited to, its impact on human rights)

12[Society]
41

Core Indicators
Community
SO1

For further information, please contact:
Corporate Communication Department Daiwa Securities Group Inc.
Tel: 81-(0)3-3243-3841
Fax: 81-(0)3-3242-0955
E-mail: brand@dsgi.daiwa.co.jp
URL: http://www.ir.daiwa.co.jp/
Issued: October 2003 (next issue October 2004)
Design and production: Cre-en

Description of policies to manage impacts on communities in areas affected by
activities, as well as description of procedures/programmes to address this issue,
including monitoring systems and results of monitoring

22-23,30-31[Product Responsibility]
Additional Indicators
Customer Health and Safety
PR6

Voluntary code compliance, product labels or awards with respect to social and/or
environmental responsibility that the reporter is qualified to use or has received
22-23,Back cover

Products and Services
PR8

Description of policy, procedures/management systems, and compliancemechanisms related to customer satisfaction, including results of surveys
measuring customer satisfaction. Identify geographic areas covered by policy

24-25

DAIWA SUSTAINABILITY REPORT 200341

www.ir.daiwa.co.jp

Cover Message
When the 21 youngsters shown on the cover grow up, what kind of society will they
live in? It is our role as a company and our responsibility as adults to do whatever
we have to, so that these children can live happily in a society attuned to thenatural world. The Daiwa Securities Group chose these photos of our employees’
children to illustrate our commitment to the future.

Printed in Japan