Daiwa Securities Group

Sustainability Report
Building a Sustainable Society

What we can do
What will the world be like when these 53 babies become adults?
The precious faces of these infants—all children of Daiwa Securities Group employees—
express our hopes for the future. At the Daiwa Securities Group,
we are determined to take responsibility as individuals and to do our part as a company
to create a sustainable society living in happiness and in harmony with an unspoiled Earth.

Table of Contents

Editorial Policy

Table of Contents/Editorial Policy

1

The Daiwa Securities Group2

Description of the Daiwa Securities Group’s Business3

Message from the President

5

Material Issues Report
Daiwa Securities Group CSR and Material Issues

7

Material Issue 1: Adding a Social Perspective to
Investment

11

Material Issue 2: Commitment to the Development of
a Sound Securities Market

17

Material Issue 3: Contribution to Global Environment

19

Material Issue 4: Communicating Information fora Sustainable Society

21Management Report∗Global Reporting Initiative (GRI): An organization founded in 1997 to draw up

and disseminate international guidelines for sustainability reporting. Participants
include a variety of stakeholders, such as businesses, non-governmentalorganizations (NGOs), consultants, accounting groups and trade associations.

CSR Issues: Performance and Targets

25

Corporate Governance

27

CSR Management29

Scope of ReportCompliance

31

Information Disclosure

33

Intended ReadershipThis report is intended for the Daiwa Securities Group’s
diverse stakeholders, which primarily include customers,
shareholders and investors, executives and employees, as well as business partners, non-profits (NPOs,
NGOs), local communities where Daiwa Securities has
offices, educational institutions, and the families ofexecutives and employees.

Social Report
Customer Satisfaction

35

Respect for People and Human Resource Utilization

37

Corporate Citizenship

43

Environmental Report
Environmental Impact of the Daiwa Securities Group47

Economic Report

1

The Daiwa Securities Group has published this report yearly since 2002 with the aim of disclosing,clearly and in good faith, our activities to create asustainable society. We also view the process of preparing
this report as an important opportunity for us to affirm the outcome of our efforts and single out issues
requiring further attention.
The Daiwa Securities Group identifies four material
issues related to corporate social responsibility (CSR)
that are likely to have a major impact on stakeholders’ decision-making and on society. This report focuses on describing our progress in dealing with thoseissues and also explains our management policy ofbuilding a company worth working for and our initiatives for putting this policy into practice.
This report was compiled in accordance with the2006 Sustainability Reporting Guidelines, international guidelines published by the Global Reporting Initiative (GRI). ∗ Two particular objectives in preparing thispublication were to raise CSR awareness among
executives and employees and promote dialogue withvarious stakeholders.

Distribution of Economic Value to Stakeholders

49

Third-party Opinions

51

The Daiwa Securities Group’s CSR Activities/Inquiries

53

Third-party Evaluations/Daiwa Securities Group
Sustainability Report 2008 Booklet and Web Edition

54

Scope of Reporting
This report basically covers our nine main group companies, ∗ which account for approximately 90 percentof the Group’s employees. The report does not, however, include data from all nine companies on all items
reported; the information included is proportional to
the respective companies’ size and type of businesshandled. Environmental load data changed due tohead office relocation in fiscal 2007. The scope ofnumerical data is noted along with the data.
Period Covered by Report
Fiscal 2007 (April 2007–March 2008). The report also
includes some information on activities carried out infiscal 2008 and on activities that occurred prior to
fiscal 2006.
Publication Date
August 2008 (the previous report was published in
September 2007; the next report is planned for June2009).
∗See “Description of the Daiwa Securities Group’s Business” on p. 4 for theGroup’s nine main companies.

Daiwa Securities Group Sustainability Report 2008 Booklet and Web Edition
Sustainability Report 2008 is available in booklet and Web editions. See p. 54 of this booklet for more details concerning the
Web edition.
The Web edition of Sustainability Report 2008
can be found at the following URL:

http://www.daiwa-grp.jp/ir/engl is h/corporate/re p o r t /The Daiwa Securities Group
Principal Management Indicators (consolidated)
FY2003

FY2004

FY2005

FY2006

FY2007

Operating revenues (¥ million)

453,813519,337

845,659

917,307825,422

Net operating revenues (¥ million)

352,434

390,432

579,358

526,764

447,491

Ordinary income (¥ million)

96,130120,433

260,651

195,415

90,143

Net income (loss) (¥ million)

42,63752,665

139,948

92,724

46,411

Net assets (¥ million)

604,170648,332

792,281

1,223,225

1,082,923

Total assets (¥ million)

17,307,119

10,765,665

12,378,961

14,898,890

14,411,265

Return on equity (ROE) (%)

7.4

8.4

19.4

10.8

5.3

Net income (loss) per share (¥)

31.66

39.03

103.90

67.90

33.69

Net assets per share (¥)

453.60486.70598.27665.98607.64

Annual dividends per share (¥)

10.00

13.00

34.00

28.00

22.00

Corporate Profile (as of March 31, 2008)
Company nameDaiwa Securities Group Inc.
Headquarters
GranTokyo North Tower, 9-1,
Marunouchi 1-chome, Chiyoda-ku,
Tokyo 100-6751, Japan

Number of Employees (Consolidated)∗(persons)
15,00012,00012,459 12,243 12,561

13,264

14,456

Established
December 27, 1943 (Founded 1902)
President and CEO
Shigeharu Suzuki
Common stock¥178.3 billion
Number of employees (consolidated)
14,456

9,000

Other groupcompanies in
Japan
25%

0

FY2003 FY2004 FY2005 FY2006 FY2007
Fiscal year end

Number of equity-method affiliates
6
Shares issued and outstanding
1,404,664,000

Number of employees: 14,456
By region

Daiwa Securities Europe
Group Inc.
5%
2%
Americas2%

Daiwa Securities
Co. Ltd.
49%

Asia/Oceania
4%

Japan
90%

3,000

Daiwa Securities
SMBC Co. Ltd.
14%

As of March 31, 2008

∗ No. of employees includes Financial Advisors (FA).
Operating Revenues and
Net Operating Revenues (Consolidated)
Operatingrevenues

Net operating
revenues(¥ billion)
1,000
800

Number of consolidated subsidiaries
46

By company

Group companies
outside Japan
10%

6,000

Telephone+81-3-5555-1111

Employee Composition

825

400 453

0

352

519
390

579

526
447

FY2003 FY2004 FY2005 FY2006 FY2007(¥ million)

Service fees andother sales
50,052

917
845

600

200

Breakdown of Operating Revenues(Consolidated)

Interest anddividend income
358,422

Commissions
294,424

Breakdown of Net Operating Revenues by Region(Consolidated)(¥ million)

Europe13,448Americas10,195

Asia/
Oceania
17,327

Total

447,491
Net gain on trading
103,361

Net gain on private equity
and other securities 19,160

FY2007

Japan
406,519

FY2007D A I WA S U S TA I N A BILIT Y R E POR T 20082

Description of the Daiwa Securities Group’s Business

The Role of the Securities Business
The securities business, which forms the core of the Daiwa
Securities Group, plays a social role in bringing together
parties seeking to finance corporate capital investment or
public projects and investors wishing to invest efficiently.
With regard to corporate and public finance, securities
companies help to raise funds for corporate capital investment or R&D or for public projects by governments, international organizations or public bodies by providing advisory
services, or by assisting them to issue stocks, bonds or financial instruments.
In the area of asset management, securities companies
provide appropriate investment information or advice in ac-

Investors
Individual
investors

Institutional
investors

Investment
Returns

Equities
Bonds

Investments

Investment
trustsAsset management
needs

3

cordance with customers’ investment goals and offer a fullrange of financial products and services to meet the needsof individual or institutional investors, pension funds and others with investment requirements.
In this way, the securities business, connecting capitaldemand and supply mainly through the finance and capital
markets, creates a smooth flow of capital. By stimulating theflow of capital, our business contributes to the growth of industry and helps address issues confronting society.

Securities
marketIssuers

Finance

Equities
Bonds

Issuance

Funds

Corporations

Capitalinvestment
R&D
M&A, etc.

Central and local
governments,
international
bodies, etc.
Public corporations

Publicprojects,
etc.

Securitized
products

Derivatives
Securitized
products

Securities
companies

Finance needs

Description of the Daiwa Securities Group’s Business
The Daiwa Securities Group is composed of Daiwa Securities Group Inc., the holding company controlling the groupcompanies, and two securities companies, Daiwa Securities
Co. Ltd. and Daiwa Securities SMBC Co. Ltd., along withvarious companies providing securities-related services tooffer a comprehensive range of investment and financial services.

Group Core Operations
1. Retail Securities Business
Through its domestic network of 117 branches, a call centerand the Internet, Daiwa Securities Co. Ltd. offers two retailservices, Daiwa Consulting and Daiwa Direct, which provide
a wide range of financial products and services and support
customer asset management, mainly for individuals and unlisted companies.
2. Wholesale Securities Business
Daiwa Securities SMBC Co. Ltd. provides fund management
and investment banking services to institutional investors,
corporate clients and financial institutions in and outside ofJapan.
Asset management services: brokerage and trading ofequities, bonds, derivatives and other financial products
mainly for institutional investors.
Investment banking services: support for corporate oper-

ations ranging from business expansion to finance and capital strategies by assisting corporate clients and financial institutions to raise capital, issue bonds and manage assets.
3. Asset Management Business
The Group provides development and management ofstock, bond and private investment trusts, as well as otherinvestment management services.
4. Investment Business
Using its own funds, the Daiwa Securities Group invests inprivate equity, monetary receivables, real estate, venture
capital opportunities, and business regeneration. It also
forms and manages investment funds.

Group Support Operations
5. Research and Systems Business
The Group engages in various forms of consulting and research reporting in fields such as management, finance, andinformation technology, for institutional investors, corporateclients, financial institutions, and public organizations in andoutside Japan.
6. Support Services
Services are supplied in areas such as administrative outsourcing relating to securities, as well as consulting forbranch management, real estate and building management.

Daiwa Securities Group Inc.
Holdingcompany

Individual
investors

Daiwa
Securities
Co. Ltd.

Trading

Trading

Mainlyretail securities
business

Brokerage and trading

Institutional
investors
Assetmanagers
Insurancecompanies
Trust banks
OthersDaiwa Securities
SMBC Co. Ltd.

Daiwa
Asset
Management
Co. Ltd.

Daiwa
SB
Investments
Ltd.

Asset
management

Wholesalesecurities
business

Corporations/issuers
Securities issuanceand underwriting

NIF
SMBC
VenturesCo., Ltd.∗1

Daiwa
Institute of
Research
Ltd.∗2

Daiwa
Securities
Business Center Co., Ltd.

Daiwa
PropertyCo., Ltd.

Daiwa Securities SMBC
Principal
Investments
Co. Ltd.

Investment

Researchand systems
consulting

Administrative
outsourcing for
securities

Branchmanagement,etc.

Investment∗1 Effective October 1, 2008, NIF SMBC Ventures Co., Ltd. will change its name to Daiwa SMBC Capital Co., Ltd.
∗2 Effective October 1, 2008, Daiwa Institute of Research Ltd. will divide into two companies, Daiwa Institute of Research Ltd. and Daiwa Institute of Research Business Innovation Ltd.

D A I WA S U S TA I N A BILIT Y R E POR T 20084

Message from the President

Encouraging Commitment Is the Key
President and CEO Shigeharu Suzuki discussed the four CSR-related material issues∗1 identified
by the Daiwa Securities Group.

Shigeharu Suzuki
President and CEO
Daiwa Securities Group Inc.

�Selling Socially Conscious Investment
Products Motivates Employees
Corporations are public entities that exist because they
have a social purpose. Those that do not serve society will
not survive. I want our executives and employees to always be conscious of the important role that the Daiwa
Securities Group plays in supporting the foundations of theeconomy, and at the same time I continue giving them themessage that because of this they are performing workthat truly benefits society. I can also say with confidence
that out of all Japanese securities firms, Daiwa is the mostcommitted to SRI funds.
From that viewpoint, vaccine bonds ∗2 are clear andsimple, as they can help save the lives of tens of thousands of children, and everyone at Daiwa can certainly feelthat they are making a difference and helping society
through such products.
Today, it is common for companies bring up environmental or social issues. But Daiwa is different because of
our level of commitment, and I believe that the sentiment

5of all executives and employees is the most important reason for this. I know that if everyone understands that thecompany’s management is committed, projects helpful tosociety will evolve naturally from that stance. To me, theDaiwa Securities Group is an organization with the necessary flexibility to accomplish this.

�Pride in One’s Work Helps Builda Sound Securities Market
Corporate growth depends on investors putting up capitaleven if risk is entailed. In other words, companies cannot
expand operations without risk money. Given that this is
how the economy grows, this highlights the importance ofthe role played by securities companies as an intermediary
between risk money and corporations. Therefore, employees who truly understand this and take pride in their work
are unlikely to resort to unethical practices. As head of the
Daiwa Securities Group, I pay close attention to creating asystem to prevent ethical lapses by the organization and to
spread this awareness to management executives and em-

ployees through training and other means.
Profits and losses are inherent to the nature of the securities business, and it’s natural for clients taking losses
to want to complain. But sales staff can remain unruffled ifthey are confident that they have done their best. Clients
will not trust our staff if they feel they are just chasing fees,
and neither can staff feel pride in their work.
We must work in a principled manner that is a level
above simply observing the law and maintaining compliance. Even if what we do is fully within the law, we must
operate in a socially acceptable manner, and it is importantfor everyone to perform their work with this awareness.

�A Clean, Green Earth for
the Next Generation
It is our responsibility to pass on a clean, green earth toour children and grandchildren.
Japan is resource-poor but is fortunate to possessmany excellent environmental technologies. At Daiwa, wewant to support implementation of these technologies byacting as a bridge between companies both in Japan andoverseas.
Since April 2008, the Daiwa Securities Group has been
selling the Russell Global Environmental Technology Fund,part of which is managed by Generation Investment Management LLP, a company established by former U.S. vicepresident Al Gore. Generation had initially intended not to
accept further subscriptions to this fund, but after we described our success with vaccine bonds, Generation
chose us as its sales partner. This, I believe, is an exampleof how our commitment to social issues can be useful invarious ways.
Emissions trading is a difficult issue in some respects,
given the differing positions of governments and enterprises, but we need to approach this concept with imagination and creativity to help conserve the global environment.

�Multi-channel Communication
on Economics and FinanceTo communicate the knowledge and expertise acquired
through the securities business to the public, Daiwa is engaged in business-academia collaboration, for example
dispatching management executives to lecture at universities and other activities, and is also active in economic
and financial education.
We also broadcast through Daiwa Securities Information TV, with a lineup that includes programs on securities
for beginners, to communicate information on economics
and finance. And while we believe that schools should bedoing more to teach children about how economics and fi-nance work, the first step is to interest their teachers. To
that end, we are planning to work in partnership with a
non-profit organization to develop an economics and finance education program targeting school teachers.

�The Importance of Work-life Balance
Employees can work most productively if they enjoy fulfilling lives both at work and at home. Many people of mygeneration gave their lives over to their companies, but I
do not expect executives and employees of the Daiwa Securities Group to do the same. Life is not a success if aperson had a brilliant work career but neglected family inorder to succeed in business. From now on, it is workplaces where employees can have satisfying private and professional lives that will attract talent.
I believe that employees will only be motivated or beproud of their company and their work if they can feel thatthey have something worth living and working for. I sincerely hope that everyone will approach life at home and atwork with zest and vitality.

∗1 The Daiwa Securities Group’s Four CSR-related Material Issues: “Adding a
Social Perspective to Investment,” “Commitment to the Development of aSound Securities Market,” “Contribution to Global Environment,” and“Communicating Information for a Sustainable Society.” (See p. 10)∗2 Vaccine bonds: Bonds that provide funds for health care and inoculation
programs in developing countries. (See p. 12)

D A I WA S U S TA I N A BILIT Y R E POR T 20086

Material
IssuesReportDaiwa Securities Group CSR
and Material Issues

Daiwa Securities Group Corporate Principles (adopted March 1998)
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 premier securities group at home andabroad.

Human resources
Our competence is built on our human resources. We
value the creativity of each individual, we will nurture a
corporate culture where people are not afraid ofchallenges, and we will evaluate their capabilities andcontributions fairly.

Total compliance
We can be proud and prosper only when we achieve
total compliance and gain the trust of our customers,
markets and the whole of society. We will contribute tosociety by maintaining high standards of professional
ethics and a fair code of conduct.

Sound profit
Our fundamental objective is to enhance shareholder
value through sound business operations. We will offer
valuable services to our customers and earnappropriate profits for distribution to our shareholders.

The Daiwa Securities Group and Sustainability
Modern society faces many issues having an impact on sus-

we believe that in addition to contributing to the develop-

tainability. These include, on a global scale, global warming

ment and growth of fair and sound financial markets, ourand other environmental problems that threaten humankind’srole is to promote the flow of capital to create a sustainablesurvival, growing disparities in prosperity, and in Japan, asociety by incorporating a social perspective into finance.

rapidly aging population and a declining birthrate. There is

In accordance with this belief, we have joined the United

no way to solve these problems without responsible action

Nations Environment Programme Finance Initiative (UNEP FI)∗1on the part of every sector of society—government, the pri-and signed the Principles for Responsible Investment (PRI)∗2

vate sector, and citizens.

and the Carbon Disclosure Project (CDP), ∗3 to do our partEnterprises are key players because they have the pow-

as a member of the international community.

er to influence the creation of a sustainable society, and financial institutions can fulfill their social missions throughtheir main business of finance. At the Daiwa Securities Group,

7

Web Terms∗1 United Nations Environment Programme Finance Initiative(UNEP FI)
∗2 Principles for Responsible Investment (PRI)∗3 Carbon Disclosure Project (CDP)Approaches for Creating a Sustainable Society
1. Serving society through our business4. Carrying out corporate citizenship

Securities companies provide a public benefit by acting as
intermediaries between parties needing financing and investors
looking to invest, thus supporting Japan’s transition from asavings-oriented society to one more attuned to investing.
The Daiwa Securities Group carries out its operations infull legal compliance and meets social expectations in dayto-day operations to ensure the sound functioning of the securities market.

The Group is active in nurturing the next generation of economics and finance professionals, encouraging education inthese fields as part of our Medium-term Management Plan.
We will also continue providing long-term support for local
communities and international society through financial
mechanisms relating to our core business via the grant activities of foundations and NPOs/NGOs.

2. Implementing a business strategy that takes society
and the environment into account

The Group will continue doing business with awareness of
its social and environmental impact. Along with instituting
stronger corporate governance, achieving full compliance,
attaining consumer satisfaction, and improving the workplaceenvironment, we will strive to build an environmental management system and raise environmental awareness among
employees. We are currently endeavoring to reduce the useof paper, a major environmental load generated by our business.

By incorporating a social perspective into finance, the Group
strives to practice the corporate social responsibility expected of a financial institution. We do this through SRI funds,
World CO2L bonds ∗1 and vaccine bonds, ∗2 which give ordinary investors an opportunity to participate in tackling socialand environmental issues through investing.

3. Promoting CSR outside the company
Through the UNEP FI, PRI and CDP, the Group lends support to various stakeholders, including the financial industry,
to encourage CSR activities.

5. Managing CSR∗1 World CO2L (Cool) Bonds: See p. 14 for more details.
∗2 Vaccine bonds: See p. 12 for more details.

Daiwa Securities Group: Approaches for Creating a Sustainable Society

CSR activities (measures)

Changing the awarenessand behavior of stakeholders

3. Promoting CSR outside
the company

Sustainable society (objective)

5. Managing CSR

2. Implementing a business strategy that takessociety and the environment into accountSustainable company (objective)

1. Serving society throughour business4. Carrying out corporate citizenship

D A I WA S U S TA I N A BILIT Y R E POR T 20088

Material
IssuesReportDaiwa Securities Group CSR and Material Issues

Daiwa Securities Group Stakeholders

Securities Market
We collaborate with all parties involved in the securities
market and aim for the development of a sound andreliable securities market.

Investors
We are committed to offering
products and services thatmeet the needs of individual
investors, institutional investors, and potential investors
who are considering investing in the future, and to improving customer satisfaction.

Private-sector enterprises,
public corporations, and otherentities that need funds by issuing stocks and bonds arevaluable customers of the
Daiwa Securities Group.

Securities
MarketInvestors

Shareholders

Issuers

Issuers

To earn the confidence of ourshareholders, we aim to provide fully transparent information disclosure, and meettheir expectations by continually creating value.

We maintain fair relationships
with all our business partners
and work together to create asustainable society.

Shareholders

Business
Partners

Daiwa
Securities
Group

Em
Employeesoye

We are endeavoring to create a workplace where our
employees, who create added value for all other stakeholders, are fully motivatedand can find satisfaction in
their work and lives. Our employees’ families are also important stakeholders.

9

Government

es

EmployeesplBusiness Partners

e s’ F a mili

Government

Local
Communities

NPOs/NGOs

Local Communities

NPOs/NGOs

As members of their local
communities, our branches
and overseas offices promote community-based efforts.

We collaborate with NPOs
and NGOs in such fields asfinancial and economic education and disaster relief. We
reflect social values in ourmanagement through active
dialogue.

We fulfill our tax obligations
and offer policy suggestions
to create a better society.

Material Issues for the Daiwa Securities GroupThe Daiwa Securities Group has identified certain issues asmaterial issues having a major impact on decision-making
by stakeholders. After a selection process on the basis of
input from stakeholders, for example, executive and employee surveys, customer satisfaction surveys, shareholder surveys, opinions from outside experts, and requests from NPOs
and other organizations in and outside Japan, four material
issues were examined in depth from four viewpoints shownon the right.

Definition of material issues¡Issues with significant impact on society and on
decision-making by stakeholders¡Issues with which many Daiwa Securities Group
executives and employees are involved in through theGroup’s business¡Issues related to contributing to the sustainability offinancial institutions expected by society¡Issues related to fulfilling corporate citizenshipresponsibilities and which contribute Group
executives and employees to find satisfaction in theirwork and lives.

Material Issue 1

Material Issue 3

To contribute to creating a sustainable society
through its core securities business, the Daiwa
Securities Group incorporates a social perspective into investment. Through SRI funds, development and sale of financial products supportingsocially meaningful activities, procuring funds forenterprises with environmental technologies or othersocial value, providing CSR-related investment
information, and through emissions trading, we
promote the flow of financial resources towardfinding solutions for social issues and creating asustainable society.

We will try to reduce the environmental impactof our business as much as possible by using
information technology to streamline operations,cut down on the volume of paper we use, andother measures. We also remain committed tocollaborating in and promoting efforts to solve
environmental problems, including conservationof biodiversity.

Adding a Social
Perspective to Investment

Contribution to
Global Environment

Material Issue 4

Material Issue 2

Commitment to theDevelopment of a Sound
Securities Market
As companies in the securities industry, we will
fulfill our responsibility to ensure the developmentof a sound, reliable securities market throughcompliance that lives up to our customers’ andsociety’s expectations and that does not stop atmere statutory compliance; strong ethical principles; and rejection of unlawful transactions andinfluence by criminal elements.

Communicating Information
for a Sustainable Society
We will continue our communication activities,building on our expertise in handling information
through education about finance and economics
and industry-academia collaboration in researchand development, and by offering the most upto-date information on sustainability.
As one of our key management policies, we also focus on
initiatives to create a company that affords executives andemployees satisfaction in their work and lives, and a chance
to use their talents to the full. More information on this
topic can be found in the “Message from the President”(pp. 5–6) and in the “Respect for People and Human Resource Utilization” section (pp. 37–42)

D A I WA S U S TA I N A BILIT Y R E POR T 200810

Material Issue

1

Adding a Social Perspective to Investment
By providing financial products to remedy social problems, raising awareness of socially responsible investment (SRI), ∗1 offering CSR-related investment information, and conducting
emissions trading, we want to create a better society through the securities industry.

Adding a Social Perspective to Investment
Development and Sale of SRI Financial
Products

Masaaki Goto

Corporate Executive Officer
Daiwa Securities Group Inc.

The Daiwa Securities Group, through its core securities business,helps promote solutions to global problems such as povertyor the environment by adding a social perspective to investment.
We have taken the initiative to add a social perspective
to investment. As set out in the United Nations undertakings
UNEP FI ∗2 and PRI, ∗3 this is also the role that the international community expects financial institutions to play toward
creating a sustainable society. Specific examples of the Group’s
activities in this area are described on the right.
Raising awareness of socially responsible investment is
one contribution that the Group can make to create a sustainable society. The Group considers promoting socially responsible investment a material CSR issue.

The Daiwa Securities Group develops and sells financial
products to support projects addressing international issues, such as vaccine bonds, and other financial products to support enterprises actively engaged in CSR throughthe securities market, such as SRI funds.

Financing for Enterprises with Environmental
Technologies or Other Social Value
We support financing for companies with environmental
technologies or companies engaged in socially significant activities.

SRI Education, CSR-related Information
We will encourage investors to make investment decisions taking into consideration CSR activities, and provide useful information for investors wishing to invest incompanies operating responsibly toward society.

Involvement in Emissions Trading
We will contribute to activating market mechanisms togive depth to the emissions trading market and by doing
so indirectly support the operation of mechanisms to offset global warming.

∗1 Socially Responsible Investment (SRI) is an approach to investing in enterprisesthat considers not only financial performance and profit levels but also CSR performance such as environmental or social undertakings, ethical practices and so on.
In addition to investment in SRI funds, SRI includes stock investment taking into
account the target company’s CSR performance, and investments that evaluate
the social utility of capital use.

Web Terms

Issues and Targets for Fiscal 200711

∗2 United Nations Environment Programme FinanceInitiative (UNEP FI)∗3 Principles for Responsible Investment (PRI)

Performance/Progress Achieved in Fiscal 2007

¡Promote the widespread practice of SRI.

¡Sold vaccine bonds, the Russell Global Environmental Technology
Fund, and the Daiwa Eco Fund; conducted SRI education
at symposiums such as the Eco-Products Exhibition.

----------------------------------------------------------------------------------------------------------¡Provide more information on socially responsible investment.

¡Issued Environment, Emerging Economies, New Technologies, an investment information report on the environment, emerging markets and new technologies;
expanded the research capabilities of the Daiwa Institute of Research Ltd.; communicated information onemissions trading, and arranged IR seminars focusing
on the CSR activities of listed companies.

Retail and Wholesale Business Initiatives
Sales of Vaccine Bonds

Thank You for Your Support of
Vaccine Bonds
IFFIm’s goal is to accelerate the availability of funds for
the GAVI Alliance’s immunisation programs in 70 of thepoorest countries around the world. From 2006 to 2015,
we expect that the funds raised by IFFIm bonds could immunise an additional 500 million people, and strengthen
the health and immunization services in these countries.
IFFIm’s first Uridashi bond was a great success, and we
thank Daiwa Securities for their
hard work and Japanese investors for their investment in
the first “Vaccine Bonds”. We
look forward to working together
with Japanese investors again
in future.

Alan Gillespie
Chairman of the Board of Directors
International Finance Facility for Immunisation

Adding a Social Perspective to Investment

Stakeholder Comment

In April 2008, the Daiwa Securities Group began selling theRussell Global Environment Technology Fund, which invests
in companies providing environmental technologies and services.
This fund, following Russell Global Environment Technology Fund standards, invests in shares in companies in andoutside Japan whose main business, such as clean energy
or waste disposal, contributes to improving the global environment. Companies in which this fund invests include Vestas Wind Systems A/S (Denmark), which develops, sells andoperates wind power generation systems, Veolia Water (France),
which is involved in water purification and other water services, and other companies with superior technologies.
This fund is jointly managed byseveral fund management companies carefully selected by Russell
Investments, the world’s largest
management rating company. The
managers of the fund include Generation Investment Management LLP,
a company founded by former U.S.
vice president Al Gore.
Russell Global Environment

Material Issue 1

In March 2008, the Daiwa Securities Group sold approximately 22 billion yen worth of vaccine bonds (South Africa
rand denominated).
Every year, between two and three million children in developing countries around the world die from preventable infectious diseases. To address this problem, the Global Alliance for Vaccines and Immunisation (GAVI), a global private
sector partnership carrying out vaccination programs, wasformed, and vaccine bonds were issued by the International
Finance Facility for Immunisation (IFFIm), the financial facility
for GAVI. Using funds raised by vaccine bonds, GAVI provides free health care and vaccinations in 70 developing
countries. The vaccine bonds are redeemed using funds
donated by the governments of eight (as of May 2008) donor countries. The sale of vaccine bonds helped investors
learn about the activities of these international bodies andraised funds to support their activities. The Daiwa Securities
Group will continue playing an active role in developing andselling financial products that can help remedy other problems in the world.

The Russell Global Environment
Technology Fund

Technology Fund prospectus

Support for Listing China Boqion the First Section of theTokyo Stock Exchange
In July 2007, the Daiwa Securities Group acted as the leadmanager for listing China Boqi Environmental Solutions
Technology (Holding) Co., Ltd. (China Boqi) on the first section of the Tokyo Stock Exchange. China Boqi is the leading
company in flue gas desulfurization projects and is making amajor contribution to reducing sulfur oxide (SOx), nitrogenoxide (NOx) and other emissions from the continually growing number of coal-fired power generation plants in China.
Thanks to the strong support of numerous investors in
China Boqi, we were able to participate in raising capital tohelp the company expand its environmental protection solutions business. Through our investment banking business,
we will continue to act as an intermediary to finance projects
that contribute to the global environment.

D A I WA S U S TA I N A BILIT Y R E POR T 200812

Material Issue

1 Adding a Social Perspective to Investment
In Our Asset Management Business
Management of SRI Funds
The most representative SRI fund ∗ managed by the Daiwa
Asset Management Co. Ltd. is the Daiwa SRI Fund (set up
May 2004), which invests with a focus on CSR, and the
Daiwa Eco Fund (set up March 2006), which takes into consideration environment-related activities and how shareholder capital is used. As of March 31, 2008, the Daiwa SRI
Fund and the Daiwa Eco Fund had assets of 6.2 billion yen
and 38.8 billion yen, respectively.

In fiscal 2007, we began managing two environment-oriented SRI funds—the Global Environment Foreign Bond Balance Fund and the Global Environment Equity Fund, which
are sold mainly through Japanese regional banks. We willcontinue to provide timely information to and actively communicate with investors and financial institution staff sellinginvestment trusts, to promote SRI funds as an accessible financial product.
∗ SRI funds: investment trusts designed for socially responsible investment.

In Our Research and Systems Business
Environment Seminars
for Corporate Clients
In February 2008, Daiwa Institute of Research Ltd. andDaiwa Securities SMBC Co. Ltd. were joint sponsors of the
5th Strategic Management Laboratory seminar on the themeof creating a low-carbon society. The seminar, attended by
240 participants, was titled “Eco-innovation: What Industry
Needs to Do on Global Warming Issues and Creating a Lowcarbon Society.”At the seminar, Professor Ryoichi Yamamoto, the University of Tokyo’s Institute of Industrial Science, lectured onwhat can be done to alleviate global warming. The lecture
was followed by a panel discussion on the effects of climatechange issues and what enterprises are doing for the environment. Participants found the seminar thought-provoking,with one person saying that “the discussions helped renew
my awareness of global warming issues and made clear theneed for a long-term approach to solving the problems.”

Strategic Management SeminarCommunicating CSR-related
Investment Information
The Daiwa Securities Group employs various formats tocommunicate information allowing investors to make investment decisions from different viewpoints, such as environmental, social or governance considerations, as well as fromthe CSR perspective.
At Daiwa Institute of Research Ltd., the Management
Strategy Research Department conducts research andcommunicates information concerning CSR and management.
The Investment Strategy Department has analysts specializing in the environment, who draw up investment strategies
centering mainly in this field and disseminate information
through reports or seminars.
In April 2008, the Investment Strategy & Research Department of Daiwa Securities Co. Ltd. published an investment report titled Environment, Emerging Economies, New
Technologies which many investors found very useful.
Meanwhile, Daiwa Investor Relations Co. Ltd. arranges
seminars on CSR by listed companies for individual investors. In December 2007, two listed companies held CSR
briefings. In March 2008, thecompany arranged a joint
briefing by five listed companies whose heads took partin a discussion on CSR; thisbriefing attracted 810 individual
investor participants.
We will continue actively
approaching companies inthese ways, to enable us toprovide data on market trends
and information meeting inEnvironment, Emerging Economies,
vestors’ needs.
New Technologies investment report13

In Our Emissions Trading Business
What the Daiwa Securities Group is Doing
Material Issue 1

Toshihiko Onishi

Deputy President
Daiwa Securities SMBC Principal
Investments Co. Ltd.

See pp. 15–16 for more details on the Daiwa Securities Group’s emissions trading business.

Sale of World CO2L Bond Developed
Jointly with the World Bank
In June 2008, we launched sales of the Certified Emission
Reduction (CER) Linked USD Denominated Uridashi Bond(World CO2L [Cool] Bond).
The World CO2L Bond is a US dollar-denominated bondthat pays interest to investors calculated according to emissions-reduction performance of specific greenhouse gas
reduction projects and emissions credit prices. Emissions

Adding a Social Perspective to Investment

Because we want to help take measures against global warming through ourbusiness, we are involved in the emissions trading business through selfinvestment.
Trading in emissions credits is a useful means for preventing global warming.
The emissions credit market encourages the global economy to shift to a sustainable economy that takes environmental worth into consideration. A price isassigned to greenhouse gas emissions costs, and incentives to reduce thosecosts lead to reducing global warming. Our role is to create and nurture an emissions credit market and make the market mechanism work, and also to help
raise financing for business ventures that reduces greenhouse gas emissions.
Investing in emissions trading is a business that starts with identifying projects that reduce greenhouse gases. The business takes a long time to develop and does not yield immediate profits, but I believe that involvement in projects to preserve the environment for future generations is very worthwhile.
Another consideration is that using our financial know-how to stop global warming
helps us meet our social responsibility as a financial institution. With the cooperation of companies in the Daiwa Securities Group, we are making steady progress in creating finance for the future.

credits are bought from hydro power generating businesses
in China, which are then sold on the market before paymentof bond interest. Transparency regarding the interest paid toinvestors is ensured as the interest is calculated according
to a disclosed formula. This bond has the advantage of offering individual investors, who cannot usually participate directly in emissions trading, a chance to do so indirectly. It isalso expected to provide a steady source of profits forgreenhouse gas reduction projects.

Fiscal 2008 Targets and Action Plans
The Daiwa Securities Group will continue to develop financial

business. We will also further expand communication of cor-

products with a social perspective, help finance companies

porate environment and CSR information to investors and en-with social value, and actively pursue the emissions trading

deavor to promote SRI.

D A I WA S U S TA I N A BILIT Y R E POR T 200814

Material Issue

1 Adding a Social Perspective to Investment
The Daiwa Securities Group’s Emissions Credit Trading Business
Daiwa Securities SMBC Principal Investments Co. Ltd. has been investing in emissions credits since August 2004.
Further, following the September 30, 2007 implementation of the Financial Instruments and Exchange Law codifying
handling of emissions trading by financial products dealers, Daiwa Securities SMBC Co. Ltd. also began handling thisbusiness in earnest in October of the same year. Ahead of other companies in the industry in Japan, three Daiwa Securities Group companies are currently involved in emissions trading. The following is an excerpt of a discussion on
April 22, 2008 among employees of those companies about the significance of the emissions trading business.

Yuko Manabe

Consultant
Business Advisory Group
Daiwa Institute of Research Ltd.

Shizuka Jinno

GHG Business Team
Daiwa Securities SMBC
Principal Investments Co. Ltd. (“PI”)

Group-wide Involvementin CDM ∗ Projects
Manabe: At Daiwa Institute of Research, my job is to handle the initial stage of drawing up CDM projects (steps 1
and 2 in the diagram on p. 16). I also research various projects throughout the world to evaluate those that can beregistered as CDM projects with the United Nations (UN)and draw up business plans.
Jinno: PI identifies and evaluates various projects. Working
together with Daiwa Institute of Research, we participate inprojects and obtain emissions credits (steps 3–8) after carefully researching what the projects actually involve. In ourrole as a project participant, we also keep track of the various steps in the process of issuing emissions credits—obtaining
approval from the national governments and certification organizations involved, applying to the UN for registration, andMisa Yuki

Specialised Finance Section
Structured Finance Department
Daiwa Securities SMBC Co. Ltd.

monitoring and verifying emissions reduction.
Yuki: Daiwa Securities SMBC provides services that matchcustomer needs, handing over emissions credits as is to Japanese companies, or using our expertise to create financial
products with higher added value. As a financial products
dealer, our role is to create an emissions trading market andto generate ideas for meeting Japan’s emissions credit needs.
∗ CDM: Clean Development Mechanism

Focusing on Environment-related
Issues and Social Value, Not Just
on Reducing Greenhouse Gases
Manabe: CDM projects need to meet various criteria to beregistered with the UN. But the most important criterion isthat the project contribute to sustainable development in thedeveloping country implementing it. Paying attention to social aspects—does the project risk destroying the surround-

The Kyoto Mechanism and Emissions Credits Mechanism includes the Clean Development Mechanism(CDM), ∗1 Joint Implementation (JI) ∗2 and Emissions Trading. ∗3

When countries ratifying the Kyoto Protocol are unable tomeet reduction targets for CO 2 and other greenhouse gases
compared to 1990 levels on their own, they can make useof the Kyoto Mechanism, a market-based mechanism for
acquiring the reduction volumes of other countries. The Kyoto

15∗1, ∗2 Clean Development Mechanism (CDM), Joint Implementation (JI): mechanisms
whereby an industrialized country and a developing country (in the case ofCDM), or industrialized countries (in the case of JI) implement an emissions-reduction program certified by the UN and through which the investing countries
acquire the reduced emissions volume in the form of emissions credits.
∗3 Emissions trading: emissions credit transactions between countries or enterprises through the carbon market.

ing natural environment; are human rights being protected—isalso essential. In evaluating projects, we need to consider
many environment-related issues, as well as social value.
Other aspects to be considered include profitability as abusiness and the availability of local technicians to carry out
the project. We select projects after carrying out field studies to evaluate all these issues.
Jinno: When projects are registered as CDM, close attention is paid to meeting the requisite criteria and also to adverse effects the project could have on the local environment or society. Meanwhile, going ahead with a project meansthat we need to deal with the developing country party handling the project, so we proceed after evaluating and taking
steps to mitigate risk.

particular about the quality of the project (emissions credit)
and if we can market this properly, I think the business has
the potential of growing beyond simply buying and selling. I
also feel that input from businesses can help improve thequality of CDM projects.

Explaining the Quality of
the Emissions Reduction ProductYuki: In Japan, enterprises and other entities are not legallyrequired to reduce greenhouse gas emissions yet, and there
are also no clear guidelines for doing so. Many companies
are starting by doing what they can on their own, and only ahandful have clear guidelines for buying emissions credits.
When we call on companies, they often tell us that they want
to start by taking their own measures to reduce emissions
and that buying emissions credits is the next step. That’s nota bad approach, but I feel that enterprises in this country
view emissions credits as something to buy in order to meettheir reduction targets. To companies thinking of trading emissions
credits, we explain all the steps in the process leading tocreation of emissions credits and let them know that throughtheir indirect participation in greenhouse gas projects throughthe purchase of emissions credits, they can help stimulate
the growth of the emissions credits market and contribute tomeeting Japan’s Kyoto Protocol targets.
Manabe: I believe that the Kyoto Mechanism is an excellent
system. For emissions credits generated by emissions reduction projects, each ton of emissions is assigned a serial
number which makes it possible to identify where the emissions credit was generated. Enterprises are becoming more

Adding a Social Perspective to Investment

Jinno: To expand the emissions trading business, it is important for us to be fully aware of the impact that generationof emissions credits has locally, the risks attached to emissions credits and other issues, and to communicate this information to customers and society in general. I believe thisis an area where the Daiwa Securities Group can play a role.
Manabe: We also need to be aware that it’s important forcompanies within the Group to work well with each other fromupstream to downstream in the emissions trading business.
Yuki: The emissions trading business has inherent risks,naturally. Therefore, we need to develop and provide financial products and transaction schemes that reduce the risks
of price volatility and ensure stable volume, all the while sharing with our customers understanding of how the market forthis business works and how it can help prevent global warming.
Jinno: The original aim of the emissions trading business isto prevent global warming. It’s a business so it needs tomake profits, but I feel that it is our role, through business,to help accelerate the movement to prevent global warming.

Material Issue 1

Speeding Up Prevention of
Global Warming

CDM Project, from Inception to Generation of Emissions Credits

3. Counterpart Countries
1.
CDM Project
Proposal

2.
Business Plan
Drawn Up

Approval by the governmentsof both countries

4.
Examinationof Validity

5.
CDM
Registration

Certifying Body

UN

UN-approved body examines appropriatenessof CDM project basedon project plan

When examination isapproved, the UN registers the project as a
CDM project

Project implementer draws up a CDM project plan

6.
Monitoring
Project participants
monitor emissions
reductions during theCDM project7.
Reduction
Volume Check

8.
EmissionsCredit Issued

Certifying Body

UN

Certifying body checks
reduction volume regularly

The UN issues an emissions credit equivalent
to the volume of emissions reduction

D A I WA S U S TA I N A BILIT Y R E POR T 200816

Material Issue

2

Commitment to the Development of a Sound Securities Market
Maintaining and developing a sound securities market is a key responsibility of the Daiwa Securities
Group. To live up to the confidence placed in us by society, we are working to create a compliancesystem based on principles and to implement it at a higher level than merely statutory observance.

Ensuring Better Compliance, Not through More Rules but
by Explaining Their Intent

Masaki Shimazu
Senior Managing Director
Chief Compliance Officer
Member of the Board
Daiwa Securities Co. Ltd.

Change in Policy Regarding Method forStrengthening Internal Control Management
In fiscal 2007, we reviewed our policies regarding compliance activities to improve our internal control system. Following activities that successfully raised compliance awareness among our salespeople, we have gradually shifted thefocus of our activities from uncovering problems to providing guidance and support for establishing internal control
best practices in day-to-day sales operations in our aim to
improve our compliance system. To prepare for implementa-tion of this policy, we also simplified rules and procedures.
Our previous practice had been to set down rules covering
even the minutest points and control salespeople’s actions
based on those rules. But we found that not only does having a multitude of rules obscure what those rules are intended for, salespeople were having difficulty remembering themand sometimes found themselves in violation because they
were not aware of a particular rule. Simplifying rules andprocedures has reduced such occurrences and helped
salespeople develop better knowledge of the intent behind
the rules. This, I believe, has fulfilled our original aim and improved our compliance system.
Reviewing our policy in this area was also a conscious
message on our part that the sales department and thecompliance department are working together to improve internal control. The two departments should always think andact together—it’s not a question of the former going fullspeed ahead and the latter acting as the brake. I feel thatthese measures have helped bridge the distance, in a positive way, between the sales branches and the compliancedepartment.

Compliance Structure

Customers

Head Office Compliance Division
Head of Internal Administration Supervisors
Head of Compliance Division

Education and support

Compliance Department (compliance officer)
Information Security Department

Sales branches
Sales supervisor

Internal administration
supervisor

Reports

Trade Surveillance Department
Verification

Internal Audit Department

17

AuditsSales branch employeesImproving the Internal Control System
in Accordance with Government Policy

Business Continuity Plan
To ensure the safety of customers and Group executives
and employees and protect assets, and in view of the public-interest aspect of our business as a securities company,
Daiwa Securities has drawn up a business continuity plan
(BCP) prioritizing important operations to be restored or continued in the event of a natural disaster, in order to keep thesecurities market functioning and protect customers’ economic activities.
By putting our data in electronic form, we believe that
we have the most advanced BCP in the financial industry. In
addition to a backup center following best practice in Japan, we have created a structure allowing us to continue vital operations through an entirely separate system than the
one we use for normal operations, should head office functions be impaired.

Expected Disasters and Damages
Our BCP will go into effect in the event that our sales branches are damaged or our head office/head office functions
and/or our data center are affected and become inoperative
due to earthquakes, fires, wind and water damage, abnormal weather, outbreaks of contagious disease, acts of terrorism, or major power failures or other breakdowns in essential services.

Commitment to the Development of a Sound Securities Market

Our operations are highly regulated, but we need to understand the reasons for the rules and regulations so that insales we can put the customer first. In fiscal 2008, we intend to continue our initiatives carried out in 2007, concentrating on activities to help understand why rules and regulations exist.
Another important topic that must be addressed is improving the system for monitoring unlawful transactions. Insider trading and other unlawful transactions are a major social problem. Given that a public-interest role of securities
companies is their market intermediation function, we devote many resources to employee training relating to unfair
trading practices. Measures to eliminate unfair trading practices, including shutting out criminal elements, will become
even more important in the future.

Material Issue 2

We have basically acted in accordance with our own policies, although some of them are based on the views of the
Financial Services Agency (FSA).
Today, the FSA says that a combination of rule- and principle-based supervision is the best solution for internal control. In other words, the FSA believes that rules and regulations should be kept to a minimum and that fundamentally,
the securities business should be principle-based. In April
2008, the FSA released a document titled “The Principles in
the Financial Services Industry,” whose content is basicallycommon-sense information. Naturally, this does not imply
that our sales operations should simply remain within thelaw; we must ensure that we act according to principles andsocially accepted norms. I believe that we should aim for a
simple, clear and effective internal control system rather than
one that is rule-bound, and I agree with the FSA’s principlebased approach.

Issues for Fiscal 2008

Priority Operations to be Restored or Continued
1. Market settlement of securities transactions contracted
but not delivered
2. Payment operations
3. New orders from customers to sell or to liquidate longpositions on margin transactions for the products below:¡ Domestic listed equities¡ MRF (money reserve funds), MMF (money market funds),
medium-term government bond funds¡ Japanese government bonds for individual investors

D A I WA S U S TA I N A BILIT Y R E POR T 200818

Material Issue

3

Contribution to Global Environment
The Daiwa Securities Group takes measures to reduce the environmental load generated byits business activities and continues to implement a wide range of initiatives aimed at helping resolve environmental issues.

Reducing Environmental Impact through IT —A New Paperless Business Model

Takashi Fukai

Senior Managing Director
Head of Administration Division
Investment Program Officer
Daiwa Securities Co. Ltd.

In the past, paper was the medium for communicating information between sales branches and customers, and between head office departments and our data center. We used tremendous amounts of paper fortransaction order slips and customer transaction reports, as well as forclerical processing. In fiscal 2005, Daiwa adopted an electronic statement system, and we have been shifting clerical operations from paper
to electronic data since then. This has not only helped us considerably
reduce the amount of paper we use but has had the added benefit ofeliminating the need to transport statements to sales branches and forlabor involved in storing statements. Further, while putting into electronic
form order slips and internal clerical statements sent to our sales branches, we also set up a clerical processing system using electronic data
by working together with the front-line departments to digitize clerical
processing.
As a result, the volume of internal statements generated, whichstood at 40,800,000 pages in fiscal 2005, declined 97 percent to830,000 pages in the two-year period to fiscal 2007. The benefits ofadopting IT do not stop at reducing the environmental load. We have also
been able to reap management-related benefits such as cutting costs by
2.8 billion yen by streamlining internal clerical processes, logistics andshipping; eliminating clerical errors; and devising a business continuation
plan that will allow us to continue operating in an emergency.

19

In fiscal 2008, we will introduce a paperless management systemfor over 700,000 accounts of listed companies’ employee stock ownership plans for which we have been managing the paperwork. We arealso working toward “green IT” that is both efficient and environmentfriendly, by setting up an efficient system infrastructure base through the
adoption of blade server∗1 and thin client∗2 virtualization technologies.
In the December 2007 issue of Nikkei Computer, the Daiwa Securities Group was ranked in third place for overall use of IT in business. We
intend to continue taking advantage of the benefits of IT to improve management efficiency and reduce environmental impact, and we hope that
our activities will be a model for reducing the environmental load in office
operations.

Number of Internal Statement Pages
Printed at Daiwa Securities
10,000pages

40,800,000 pages
4,000

3,000

2,000

11,170,000 pages
1,000

830,000 pages
0
FY2005

FY2006

FY2007∗1 Blade server∗2 Thin client

Server system consisting of multiple server blades arranged on a chassis, witheach blade having the necessary components (memory, hard disk, microprocessors) to carry out server functions.
Server blades share a power cable, cooling equipment, external interface,etc., making it possible to have a large number of CPUs in a restricted space anduse power efficiently. This arrangement also cuts down on energy used for coolingthe server room.

New type of personal computer consisting of a terminal without a hard disk, andwith applications such as Word or Excel and all data stored and administered on acentral server. Compared to individual users having personal computers with harddisks at their own desks, thin client computing substantially reduces power consumption. Among other benefits are greatly enhanced security, since no data stays
on the terminal, and access to data from anywhere within the company, making it
possible to plan for business continuation in the event of a disaster.

Customer Statements

Transmitted electronically to e-members

Internal Statements

BranchBranchDelivered to 117
branches around Japan
BranchContribution to Global Environment¡ Transaction forms¡ Adjustment andsettlement forms¡ Tax and accounting forms¡ Ledger management
statements, etc.

Material Issue 3

Delivered to customers

Reductions in Paper and Energy Use Thanks to Electronic Statements¡ Transaction reports¡ Account statements

BranchDaiwa CI Biodiversity Conservation Fund
In partnership with global environmental NGO Conservation
International (CI), the Daiwa CI Biodiversity Conservation Fundoperates a program to carry out biodiversity conservation
activities in biodiversity hotspots. ∗ This program, funded bya part of profits earned from the sale and management of
the Daiwa Eco Fund, operates in eight areas in the vicinity ofWorld Natural Heritage sites in seven countries. Contributions from the Daiwa CI Biodiversity Conservation Fund havebeen used to help environment-friendly businesses take rootin local communities, which previously had to rely on illegal
logging for income. For example, contributions have beenused to pay for business training and accounting or financial
administration training to set up eco-tourism businesses oragroforestry for cacao or coffee. Started in November 2007,
the fund is currently involved in pilot projects in Belize, Dominica and Mexico.
∗ Places where biodiversity is rich but highly threatened. Worldwide, 34 areas are designated as biodiversity hotspots.

World Natural Heritage Site Sian Ka’an (Mexico), where a pilot project is underway.

Web Activities ¡ Project Areas

D A I WA S U S TA I N A BILIT Y R E POR T 200820

Material Issue

4

Communicating Information for a Sustainable Society
The Daiwa Securities Group communicates information with the goal of establishing a sustainable society. We work toward the creation of a harmonious society by communicating information through sustainability education and economic and financial education, and by making policy recommendations.

Economic and Financial Education
The Daiwa Securities Group hopes that young people will
have the proper knowledge and wisdom to make their way
in the world. To enable them to live independently, young
people need to know not only about economics but also
learn how finance and society work. To help them do so,

we want to pass on our knowledge and expertise to themat all stages of their education, teaching them in age-appropriate ways.

Issues and Targets for Fiscal 2007

Performance/Progress Achieved in Fiscal 2007

¡Enhance activities to raise awareness of sustainability.

¡The Daiwa-JFS Sustainability College was held. CSR
Promotion Department staff lectured at universities.

----------------------------------------------------------------------------------------------------------¡Promote economic and financial education initiatives
for junior and senior high-school students.

Web Activities ¡ Economic and Financial Education¡Supported economic and financial education for juniorand senior high school teachers. Created and distributed finance and economics text materials and hosted
student visits to our offices. Supported education programs, working in collaboration with an NPO.

Principal Daiwa Securities Group Business-academia Collaboration
Fiscal 2007 course endowments and collaboration
Name of university

Topic (title)

Graduate School of International Corporate Strategy (ICS),
Hitotsubashi University

Corporate Strategy

Faculty of Policy Management, Keio University

Corporate Governance Theory

Faculty of Policy Management, Keio University

Social FinanceOpen Education Center, Waseda University (general lectures)

Basic Course in Venture Entrepreneurship and Business Planning

Graduate School of Economics, Kyoto University

Securities System Theory (spring session), Securities Investment Methodology (fall session)

Kyoto University (general education course)

Modern Business Administration B

Graduate School of Medicine, Kyoto University

Entrepreneurship

Meiji University (Surugadai Campus)

Coming up with Venture Business Ideas and Building a Business Plan (new from fiscal 2007)

Faculty of Law, Chuo University

International Venture Business and the Law (new from fiscal 2007)

College of Commerce, Nihon University

Creating a Venture Company (new from fiscal 2007)
Conferences, symposiums, internships and other programs

Name of university

21

Topic (title)

Graduate School of Economics, Kyoto University

2007 Daiwa International Workshop on Financial Engineering

Graduate School of Economics, Kyoto University

Internships (for students attending Daiwa visiting lectures)

Graduate School of International Corporate Strategy (ICS),
Hitotsubashi University

7th Porter Prize (Daiwa has supported this prize for the seventh time since its creation in 2001 and plans to also support
the fiscal 2008 8th Porter Prize [to be held December 4].)

As part of business-academia collaboration with universities
and graduate schools, the Daiwa Securities Group sponsors various lectures and gives visiting lectures by experts
in various fields at several universities.
In the Basic Course in Entrepreneurship and Business
Planning we give at Waseda University, venture businesses
created by former course students are beginning to find afirm footing, and lecturers offer them advice as necessary
even today. In fiscal 2007, Meiji University, Nihon University
and Chuo University added a training course for venture entrepreneurs to the curriculum that is very popular among
students. In May 2008, we also agreed to support commercialization of Kyoto University’s iPS cell ∗ research in order topromote appropriate distribution of the fruits of this research
to society.
We also promote business-academia collaboration in Asia.
To train people who can contribute to the development ofChina’s economy and society, we endowed a course titled“High-tech Venture Value Creation” at the School of Intellectual Property, Peking University, in May 2008 and have been
dispatching employees as lecturers.
Another of our activities is the creation of the (provisionally-named) Daiwa Securities Group Asian Student Scholarship Fund jointly with the University of Tokyo, to offer financial support to international students from Asia and encourage
personal and academic exchanges between Japan and Asia.
We will provide 200 million yen to fund this scholarship,
which will support a total of 100 international students from
India and other Asian countries over a five-year period. We
will also hold various symposiums on the topic of Asia.

The Student Company Program (SCP) is a hands-on economics education program for junior high and high school students
that originated in the United States and that is offered by Junior Achievement Japan, an NPO involved in economics education for young people. The students set up a company andoperate it through all phases from raising capital to manufacturing, sales and financial management. The Daiwa Securities
Group began collaborating with the SCP at Ritsumeikan Senior High School in Kyoto in 2003 when the program first started. Group employees participate in the classes every week,advising students in their role as outside directors.
In 2007, the 24 students in the class set up SHIN Co. Ltd.
to manufacture and sell handmade bracelets and pouches.
They learned first-hand about running a company—sourcing
materials, making innovations to their products, manufacturing
and finding sales outlets, selling the products and handling
bookkeeping. They also ran into difficulties such as productdefects, slumping sales and accounting errors, but they
worked together to run the company and ended with a profitof 33,000 yen.
SCP offers students a chance to learn and grow as they
communicate to manage the organization smoothly and solve
problems while working to achieve theirgoals. The Daiwa Securities Group willcontinue extending
its cooperation to theprogram.

∗ iPS cells: also called induced pluripotent stem cells, these cells can develop into various human tissues and organs. iPS cells are created by introducing several typesof genes into somatic cells collected from the skin.

Communicating Information for a Sustainable Society

Economic and Financial Educationfor High School Students

Material Issue 4

Business-academia Collaboration
and Presence in Asia

Students selling their products

Web Activities ¡ Finance Park Economic and Financial Educationfor
Junior High School Students

Web Terms¡ Junior Achievement Japan

SCP was a wonderful, unforgettable experience. Everything—product development, production, sales—was so new that it was a continual challenge forme. I was the president of the company, so I needed to act like a leader andworried about how I could do that effectively. But having customers buy our
products made me really happy and motivated us. Having to deal with employees, external directors, teachers and customers was invaluable experiencethat I could never have acquired from simply studying at my desk. It taught me
the difficulties and the satisfaction of operating a company and the importanceof establishing relationships with others. I’m really grateful to everyone who
made the SCP possible at my school.

Kazue Ueda

Stakeholder Comment

My Experience with SCP

SeniorRitsumeikan High School

D A I WA S U S TA I N A BILIT Y R E POR T 200822

Material Issue

4 Communicating Information for a Sustainable Society
Economic and Financial Education
for the General Public
The Daiwa Securities Group is the only company in the industry tooperate a television channel in Japan, Daiwa Securities Information
TV, which is devoted exclusively to providing the public with simple, clear information about securities. Beginning in fiscal 2007,
our programs are broadcast on 101 cable TV stations throughout
Japan, reaching an estimated 13 million households (as of March

31, 2008). In June 2008, we
opened a new studio equipped for high-definition
broadcasting on the firstfloor of the new Daiwa Securities Group head officebuilding, which we hope will
help us communicate information more accessibly.

Daiwa Securities Information TV open studio on
the ground floor of our new head office building

Policy Recommendations
Communicating at
International Conferences
In November 2007, Akira Kiyota, Chairman of the Board,
Daiwa Securities Group Inc., attended the 21st International Conference of Private Business Organizations held inAustralia on the topic of business organizations and climate change. Prior to the conference, he met with Australian government officials in Canberra to discuss Australia’s
global warming measures and explore cooperation between
Australia and Japan in this area.
Kiyota also attended the annual meeting of the World
Economic Forum in January 2008, and the International
Monetary Conference held in Barcelona in June 2008, where
he actively exchanged views with foreign political and corporate leaders.

Initiatives on the Declining
Birthrate Problem
Shigeharu Suzuki, President and CEO, Daiwa Securities Group Inc., hasbeen serving as co-chairman of Nippon Keidanren (Japan Business
Federation)’s Committee on Population Issues since May 2007. In his
capacity as a representative of business and industry, he makes recommendations concerning measures that corporations should adopt tohelp boost the birthrate and what the central and local governments
should do to improve the child-rearing environment. To reverse thedownward trend in births, the Committee works to form a consensus
and urge action on the framework for comprehensive measures to nurture future generations, so that effective measures can be implemented
by government, business and the public. The Committee is also callingon member companies of Nippon Keidanren to take voluntary measures
to promote work-life balance.
Measures taken by corporations to promote support for balancing
work and family responsibilities and achieve work-life balance are alsosteady steps to help raise Japan’s declining birthrate and deal with rapid
population aging; these measures are
essential for the sustained growth ofJapanese society. To broaden our activities as a company contributing tomeasures regarding the declining birthrate, the Daiwa Securities Group presents examples of our activities andmakes recommendations in this area.

Akira Kiyota

Shigeharu Suzuki

Chairman of the Board
Daiwa Securities Group Inc.

President and CEO
Daiwa Securities Group Inc.

Communicating Information for Sustainability
CSR Website/Sustainability andAsset Management
In addition to information relating to its CSR activities, theDaiwa Securities Group Inc. website communicates general

23

CSR information and information about creating a sustainable society, in order to spread knowledge of sustainability
and CSR among the general public. This website provides
the latest information about CSR, along with clear descriptions of CSR, SRI and environmental issues, reports by researchers at Daiwa Institute of Research Ltd. and dialogues

with leading figures in the CSR field, to satisfy public interest in this topic.
The Daiwa Asset Management Co. Ltd. website includes
a special section on sustainability and asset management
and provides the most up-to-date news about SRI.

“Fairness and Sustainability,” with various experts’ monthly
lectures attended by about 40 students each time.
This course has motivated the students to arrange
various activities on their own. For example, a group of
students especially interested in food miles and traceability made a field trip to visit food manufacturers, andothers arranged a meeting to exchange views with students from Singapore.

1. Environment Ethics and the Creation of a Fair and Just Society
2. Bring Out Community Power, Bridge to City
3. Leaving Healthy Ecosystems for Future Generations
4. Thinking of Japan and the World through Food and Agriculture
5. Expanding Fair Trade for Poverty-free World

Daiwa-JFS
Sustainability College
The Daiwa Securities Group has been sponsoring the
Daiwa-JFS Sustainability College since October 2006,
given in partnership with NPO Japan for Sustainability(JFS), using part of our profits earned from the sale andmanagement of the Daiwa Eco Fund. Approximately 190
students, mainly from universities, have registered forthe course. The course’s theme for fiscal 2007 was

6. Local Money Enriches Regions
7. Sustainability, and Local Climates of Areas Becoming Uniform,
Like Fast Food
8. Poverty and Sustainability—Haves and Have-nots in Japanese Society
9. The “Famine Problem” in Developed Countries
10. Using Social Capital to Overcome Negative Legacies
11. The Power of Tradition in Breathing Life into the Old
12. Social Awareness and Ecology: Innovation Created by Business

Stakeholder Comment

The Value of Daiwa-JFS Sustainability College
I have been a participant in Daiwa-JFS Sustainability College since the course’s
first year. I am learning about sustainability at university too, but the great value of this course to me is that I can learn about sustainability in a systematicway. Another great advantage is that lecturers include not only researchers
but people active in the field, so we can learn about sustainability from amulti-dimensional perspective. The fact that the Daiwa Securities is Group
offering this course with an NPO sends a clear message that the Groupwants to pass something on to young people like me. To meet those expectations, I intend to continue actively participating in this course, and I hope tobecome someone who can make a contribution to society in the future. I also
look forward to the two remaining years of the course.

Communicating Information for a Sustainable Society

Daiwa Securities Group Inc.
CSR website
http://www.daiwa-grp.jp/branding/Daiwa Asset Management Co. Ltd.
sustainability website
http://www.daiwa-am.co.jp/
guide/jfs/jfs_index.html

Material Issue 4

Classes to Date (October 2007 to September 2008)

Masayuki Ichikawa
1st year master’s degree course student
Graduate School of Environmental andInformation Studies
Musashi Institute of Technology

Fiscal 2008 Targets and Action Plans
In the field of economics and financial education, we will continue expanding our business-academia collaboration programswith universities and graduate schools. We will also continue
activities to help junior and senior high school students un-derstand more clearly how economics and society work, creating clear text materials and so forth. Additionally, we willcommunicate more information about sustainability on our CSR
website.

D A I WA S U S TA I N A BILIT Y R E POR T 200824

CSR Issues: Performance and Targets
Management
ReportThis section reports the fiscal 2007 results and fiscal 2008 targets for the wide range of initiatives conducted by the Daiwa Securities Group for the creation of a sustainable society.

Issues and Targets for Fiscal 2007
Material Issue 1
Adding a Social Perspective to Investment
Material Issue 2
Commitment to the Development of
a Sound Securities Market

Material Issue 3
Contribution to Global Environment

Material Issue 4
Communicating Information
for a Sustainable Society

Corporate Governance

CSR Management

Entire Group

Compliance

Daiwa Securities

Daiwa Securities
SMBC

Rating of Pages in
Initiatives Report

Promote the widespread practice of SRI (continued).

G

Provide more information on socially responsible investment.

G

See “Compliance.”

17–18

Consider the development of financial products that enable investors to help resolve environmental issues.

G

Expand environmental management systems to major overseas offices.

F

Reduce environmental impact by such means as appropriately adjusting air conditioning and using electronic statements.

VG

Achieve zero waste in relocation from former headquarters building.

–

Enhance activities to raise awareness of sustainability.

G

Promote economic and financial education initiatives for junior and senior high-school students.

G

Perform documentation and verification in anticipation of fiscal 2008
(first year that internal control system goes into effect).

G

Create systems for new businesses.

G

Further promote BCP (Business Continuity Plan).

VG

See “Material Issues.”

Raise awareness of corporate ethics and compliance at Group companies (continued).

Respect for People andHuman Resource Utilization

Corporate Citizenship
Environmental Impact of
the Daiwa Securities Group

25

19–20
∗
21–24

27–28

29–30

VG

Strengthen measures against criminal elements (continued).

G

Enhance systems compliant with such revised laws as the Financial Instruments and Exchange Law and the Financial Products Sales Law.

VG

Revise internal rules, including simplification and streamlining.

VG

Enhance customer and sales-force management systems.

G

Enhance systems compliant with such revised laws as the Financial Instruments and Exchange Law and the Financial Products Sales Law.

VG

Manage information more stringently, and in particular establish systems to prevent leaks of personal information.

VG

Enhance compliance regimes relating to laws and regulations concerning foreign exchange.

VG

Support greater sophistication in risk-management systems.

G

Enhance disclosure of non-financial information.

G

Further expand and enhance investor relations (IR) targeting individual investors.

VG

Actively pursue post-sales follow up (continued).

G

Improve skills of junior salespeople.

G

Improve customer-interface skills of branch counter staff who interact with customers.

G

Further promote company-invigoration measures.

VG

Enhance education and training programs to increase number of certified analysts and CFPs (continued).

VG

Develop workplace environments where women can fully use their abilities (continued).

VG

Contribute to social welfare through grant programs and the like.

G

Promote volunteer programs to enable more executives and employees to participate (continued).

G

Information Disclosure

Customer Satisfaction

11–16

31–32

33–34

See Material Issue 3 “Contribution to Global Environment.”

35–36

37–42

43–46

47–48

Continue to develop and spread financial products with a social perspective and SRI.
Provide more information on investment from a social perspective (continued).
See “Compliance.”
Raise awareness of environmental issues among executives and employees.
Reduce the environmental burden by setting temperatures appropriately, reducing use of paper and other means.

Communicate more information about sustainability on our CSR website.
Expand and promote economic and financial education initiatives.
Establish a system for evaluating internal control.

bFiscal 2007 Performance
The results of initiatives in fiscal 2007, and issues and targets for fiscal 2008, are listed as the issues and targets ofeach division. The Daiwa Securities Group’s own rating foraccomplishment of each initiative is shown.
bFiscal 2008 Targets
Fiscal 2008 targets for the Daiwa Securities Group arebased on performance and evaluation of fiscal 2007 targets. Coordination among Group companies and divisions
with the aim of implementing and achieving these targets
leads to maximizing value for all stakeholder groups.

Organize and expand the Group’s management system, including systems for new businesses.
Promote BCP.
Promote dialogue with stakeholders.
Raise awareness of CSR among executives and employees.
Improve coordination among related internal departments.

CSR Issues: Performance and Targets

Promote reuse and recycling of fixtures when moving to headquarters building.

Fiscal 2007 Issues and Performance/
Fiscal 2008 Targets

Management Report

Issues and Targets for fiscal 2008

Carry out thorough compliance training at all companies.
Strengthen system to eliminate criminal elements.
Strengthen the internal control system.
Create an enhanced internal control structure for systems and IT.
Enhance the monitoring system for unfair transactions.
Improve the system for handling the Guidelines for Supervision of the Financial Instruments Business.
Implement new risk management for the Financial Instruments and Exchange Law.
Enhance the information management system.

Expand and make good use of IR channels.
Implement effective IR directed to individual investors.
Enhance disclosure of non-financial information (continued).
Actively pursue post-sales follow up (continued).
Improve employees’ skills (continued).
Improve customer-interface skills of branch counter staff interacting with customers (continued).
Reassess all employees’ working hours/time management (encourage employees to take yearly paid leave, etc.).
Change employee attitudes through child-rearing (encourage male employees to take child care leave, etc.).
Continue hiring persons with disabilities as regular employees.

Rating of initiatives

Promote an environment encouraging executives and employees to participate in volunteer work.

VG: Very good results toward achieving the target

Communicate information about volunteering and volunteer activities in-house.

G : Good results toward achieving the target

See Material Issue 3 “Contribution to Global Environment.”

NI : Not implemented

F : Fair; further implementation and results needed∗Since compilation of figures has not been completed at this time,details will be provided in the next Sustainability Report.
D A I WA S U S TA I N A BILIT Y R E POR T 200826

Corporate GovernanceManagement
Report

The Daiwa Securities Group is united in its efforts to build a highly transparent and objective
corporate governance system, in order to earn the confidence of all our stakeholders and continually improve our corporate value.

Initiatives and Targets
Against a backdrop of recent increasing market globalization and institutionalization, corporate governance hascome to be considered vital for making investment decisions. The Daiwa Securities Group believes that earning theconfidence of all stakeholders will enable us to continuously
increase corporate value. We actively incorporate outside
viewpoints, building a transparent, dynamic and efficient
corporate governance system that meets international standards. At the same time, we are leveraging the synergy ofeach Group company to build a unified Group management
system.

Issues and Targets for Fiscal 2007

Performance/Progress Achieved in Fiscal 2007

¡Perform documentation and verification in anticipationof fiscal 2008 (first year that internal control system
goes into effect).
----------------------------------------------------¡Create systems for new businesses.
----------------------------------------------------¡Further promote BCP (Business Continuity Plan).

¡Completed documentation and established related
standards.
----------------------------------------------------¡Prepared for compliance with changes in related laws,
to promote new businesses such as loans secured by
securities and others.
----------------------------------------------------¡Prepared a BCP manual for Daiwa Securities Group Inc.
¡Set up an alternate office for business continuity at ourTama training center.

b Corporate Governance System

Shareholders’ Meeting
Nominating Committee, 5 members∗2
Board of Directors, 13 members(including 4 outside directors ∗1 )(including 3 outside directors)

Proposes selections anddismissals of directors

Audits execution ofduties by directors andexecutive officers

Sets policies on director
and executive officer
compensation, amount of
individuals’ compensation

Internal Control
Committee

Disclosure
Committee

Group IT Strategy
Committee

Performs internal control andprepares risk control andinternal audit system

Determines scope of consolidated
financial reports, scope of evaluation of internal control reports, disclosure of important information

Writes original
IT investment budget,
evaluates and monitors
IT investments

Executive Committee, 14 members

Representative executive officer∗1 Outside directors

Tetsuro KawakamiCounselSumitomo Electric Industries, Ltd.

Ryuji Yasuda
Professor
Hitotsubashi University Graduate School

Koichi Uno
Certified public accountant

Nobuko Matsubara
Chair, Japan Institute of Workers’ Evolution

27

Compensation Committee, 5 members∗4(including 2 outside directors)

Basic management policyGroup-wide business strategy and management
issues, important financial matters

Audit Committee, 3 members∗3(including 3 outside directors)∗2 Nominating Committee∗3 Audit Committee∗4 Compensation Committee

Internal

Internal

Internal

Akira Kiyota (Committee Chair)

Saburo Jifuku (Committee Chair)

Chairman of the Board and Executive Officer
Daiwa Securities Group Inc.

Director, Daiwa Securities Group Inc.

Akira Kiyota (Committee Chair)
Shigeharu Suzuki

Shigeharu Suzuki
Director and President (CEO)Daiwa Securities Group Inc.
External

Tetsuro Kawakami
Ryuji Yasuda
Nobuko Matsubara

External

External

Koichi Uno
Nobuko Matsubara

Tetsuro Kawakami
Ryuji Yasuda
Koichi Uno

Corporate Governance System

bSupervisory Function
The Board of Directors consists of 13 directors, including
four outside directors. The Board of Directors determines
key management policy and supervises executive duties. In
order to perform this supervisory role from multiple viewpoints in accordance with the demands of society, the policy for selecting new board members states that candidates
must have a strong sense of ethics and lead by example.
Additionally, external directors are experts in such fields as
executive management and accounting.
Our supervisory function is reinforced by the Audit
Committee and the Office of the Audit Committee. The Audit Committee, which consists of a majority of outside directors, ∗ plays a central role in the supervision of executive
duties. The Audit Committee is assisted by the Office of the
Audit Committee, which is an independent department.
∗ O u t s i d e d i r e c t o r s a s d e f i n e d b y A r t i c l e 2 – 1 5 o f t h e C o m p a n y L a w.

bExecutive Body
The Executive Committee, consisting of 14 executive officers, is operates from Daiwa Securities Group Inc. The
Executive Committee discusses and makes decisions regarding executive management, including the businessstrategy of the Group as a whole and group-wide management issues. In order to ensure uniform management
across the Group, some of the executive officers of Daiwa
Securities Group Inc. also serve as key directors in Group
companies.

Internal Control
In anticipation of the internal control and reporting system
for financial reports effective from April 2008, all Daiwa Securities Group companies completed documentation ofstandards in three areas: company-wide control, businessprocess control, and general IT control. Regulations for theinternal control and reporting system were newly formulated
and related regulations were amended accordingly.

The Daiwa Securities Group is aware of its responsibility toward society to protect the company’s information assets,
including customers’ personal information, from various
threats and to handle information appropriately, and endeavors to maintain a high level of information security management.
Toward this end, the Group has formulated a basic information security policy and a privacy policy for protecting
personal information. Minimum standards for measures tobe adopted have also been set out, which have been implemented by all Group companies. Security training regarding these policies and measures is also carried out for
all executives and employees in accordance with the responsibilities of their posts.
In terms of organizational response, each Group company assigns a person with overall responsibility for information security. The Group IT Strategy Committee of Daiwa
Securities Group Inc. discusses Group information security
measures and reports information security risks to the Internal Control Committee.
Additionally, to raise the level of information security
within the Group, we operate in conformity with the Information Security Management System (ISMS). A number ofGroup companies have already obtained ISMS and privacy
mark certification in accordance with the evaluation certification system.

Corporate Governance

Web Activities ¡ Preventing Conflicts of Interest among Group Companies

Information Security Management

Management Report

Daiwa Securities Group Inc. adopted a committee system
in 2004, with the goal of achieving greater managementtransparency and agility. The corporate governance systemof the Daiwa Securities Group consists of a Board of Directors, which serves in a supervisory role; the Nominating,
Audit and Compensation Committees; the Executive Committee, which serves as the executive body; and the Internal Control Committee, the Disclosure Committee and theGroup IT Strategy Committee, which are subcommittees of
the Executive Committee.
Although our chairman of the board, who chairs theBoard of Directors, is also an executive officer, he does nothave any specific duties as an executive officer.

In accordance with these regulations, from April 2008,
the internal audit department evaluates the effectiveness ofeach Group company’s internal control and reporting system, and each company’s council confirms evaluation results, which are then reported to Daiwa Securities Inc. Afterthese reports are received, the Internal Control Committee
discusses them and presents resolutions, and based on
those resolutions the Disclosure Committee determines theeffectiveness of the internal control and reporting system.
Following this, the chief executive officer and the chief financial officer draw up an internal control and reporting system report and only then declare to investors and other stakeholders that financial reporting is accurate.

Fiscal 2008 Targets and Action Plans
We will verify the effectiveness of the Group’s internal control
system in accordance with documentation for evaluating thesaid system. Fiscal 2008 being the first year of implementation of the internal control and reporting system, we will establish a system for evaluating internal control at each Group
company and ensure that it is put into practice.
With regard to the business continuity plan we have beendeveloping, we will encourage sharing of scenarios among
Group companies and further improve our BCP manual.

D A I WA S U S TA I N A BILIT Y R E POR T 2008

28

CSR Management
Management
ReportWe promote CSR activities through stronger awareness among executives and employees andthrough communication with our stakeholders, actively disseminating information related to
CSR both inside and outside the company.

Initiatives and Targets

CSR Promotion Activities

The Daiwa Securities Group has a wide range of CSR initiatives aimed at sustainable growth together with society. By
carrying out CSR activities, we also aim to improve our
executives’ and employees’ confidence in the company,
their pride in their work, and their sense of solidarity, and to
be a reputable company in the eyes of society and of all
our stakeholders.

CSR Promotion System
We have established a CSR Promotion Department at Daiwa
Securities Group Inc. which promotes CSR activities. This
department participates regularly in department head meetings and departmental liaison meetings at Group headquarters and throughout the Group, where it reports on theGroup’s CSR activities and raises CSR-related issues. The
department is also in charge of organizing CSR study
groups both inside and outside the company to increaseawareness of CSR.
We are also establishing a scheme to share information
on CSR-related activities with our 43 major overseas facilities (which include foreign subsidiaries, branches and overseas offices).

bActivities at Our Overseas Facilities
The Charity Committee at the London head office of Daiwa
Securities SMBC Europe Limited actively carries out social
contribution activities. In September 2007, staff from theLondon, Europe and Middle East branches contributed recipes and produced the “Daiwa Cookbook.” A total of 460
copies were sold, raising proceeds of 1,200 pounds whichwere donated to an NGO addressing poverty and children’s
health care issues in developing countries.
In February 2008, the London head office organized a
24-hour tea and coffee party. Proceeds of 140 pounds
raised by selling tea, coffee and cookies to employees,
plus a matching donation from the company, were again
channeled to the NGO named above.
At Daiwa Securities SMBC Hong Kong Limited, Japanese-language classes are held weekly on Mondays, Tuesdays and Wednesdays. Sixty-nine local employees participate in the classes, which are given by Japanese staff.
Daiwa Securities SMBC Australia Limited supports theSydney Harbour Yacht Challenge yacht race. Customers
and staff also participate in the race, which is a good opportunity for deepening relationships.

b CSR Promotion System

Foundations

Daiwa Securities Group

Daiwa Securities Health Foundation
Daiwa Securities Foundation
Daiwa Anglo-Japanese Foundation

President and CEO
Executive officers

Dialogue
Sustainability Report
CSR website

Stakeholders
Local communities
NPOs and NGOs
Shareholders
Customers
Business partners
Securities market
Government

29

Dialogue

ReportCSR Promotion
Department

Participates in department
head meetings held atgroup headquarters

Dialogue
Participates in liaison
meetings across Group

Dialogue CSR employee survey

Executives and employees

Departments within
Daiwa Securities
Group Inc.
Departments withinGroup companies

The Daiwa Securities Group’s Basic CSR Strategy(Excerpted from “Passion for the Best 2008,” the Daiwa Securities Group’s
medium-term management plan.)

To carry out more active communication with stakeholders and improve
our standing in society, the Group contributes to the development of asound economy and society.

We will reflect the expectations of society toward enterprises in our management and begin stakeholder dialogues between theGroup’s management executives and outside
experts in fiscal 2008.
We will take measures to heighten awareness of CSR among employees so as tospeed up our undertakings in CSR activities.
We will improve information-sharing
among the departments concerned, to boost
our social and environment-related businessactivities.

The Daiwa Securities Group regularly conducts CSR surveys of all its executives and employees, in order togauge current attitudes toward CSR and raise awareness of CSR through such surveys. In fiscal 2008, we conducted a survey in May targeting all 18,278 Group executives and employees (including temporary employees)
and received 11,882 responses (65.01%). Some of the survey results are reported below. We treat these resultsvery seriously and are committed to expanding CSR activities.

What aspects of CSR at the Daiwa Securities
Group do you think are particularly important?
(Multiple answers)
The most common responses (in descending order)
were “Earning trust that goes beyond observance oflaws and regulations” (70%), “Encouraging SRI” (40%,vs. 35% in 2007) and “Commitment to environmental issues” (39% vs. 22% in 2007), both mentioned by more
respondents than last year.

Why do you think the Daiwa Securities Group
promotes CSR?
Continuity of data with the 2007 survey for comparison
purposes has been affected by the addition of the answer “Because it allows us to better meet our responsibilities toward stakeholders,” but the most common responses were “Because it leads to job satisfaction,
pride and confidence in the company, and solidarity”(30%), “Because it helps raise the value of our brandand improve our recognition” (23%) and “Because society expects it” (21%).

What do you think would help spread SRI more
widely in Japan?
The top-ranking answers were “Develop SRI products”(28%) and “Communicate information relating to investment target companies’ environment and society-related
activities” (25%). Compared to “Advertise through themedia” (23%) and “Provide more training for employees”(17%), more respondents chose answers directly related
to our day-to-day operations.

Earning trust that goes beyond observance of laws and regulations
40%
Encouraging SRI
39%
Commitment to environmental issues
37%
Commitment to respecting work-life balance
26%
Economic and financial education
21%
Corporate governance
21%
Returning profits to shareholders
9%
Corporate citizenship activities through donations and foundations
7%
Volunteer activities by executives and employees
Other 1%

CSR Management

Results of CSR Employee Survey

Management Report

Economics and finance education
To work with educational institutions and NPOs, in order to support education and research through business-academia collaboration and promoteeconomics education.
Socially responsible investment (SRI)
To promote the widespread practice of SRI.
Environment conservation
To build an environmental management system, including the establishmentof environmental policies, within Group companies, starting first with the principal Group companies in Japan, then the consolidated subsidiaries in Japanand later the overseas subsidiaries.

Fiscal 2008 Targets and Action Plans

70%

Because it avoids various risks
associated with business activities
5%
Because it is a selling
point with customers
8%
Because it allows us to better
meet our responsibilities toward
stakeholders
13%
Because society expects it
21%

Hold more customer seminars
6%
Provide more training for employees
17%

Advertise through the media
23%

Because it leads to job satisfaction,
pride and confidence in the company,
and solidarity
30%

Because it helps raise the value ofour brand and improve our recognition
23%

Other
1%

Develop SRI products
28%

Communicate information relating toinvestment target companies’ environmentand society-related activities
25%

D A I WA S U S TA I N A BILIT Y R E POR T 200830

ComplianceManagement
ReportWe believe that compliance does not stop with the letter of law but that it includes all actions forwinning the confidence of our customers and society. We are committed to enhancing bothGroup-wide initiatives and independent initiatives by our Group companies.

Initiatives and Targets
To meet the expectations of society relating to compliance,
all Daiwa Securities Group executives and employees must
maintain a strong sense of ethics and contribute to theIssues and Targets for Fiscal 2007

Entire Group
Daiwa Securities
Daiwa Securities SMBC

31

sound development of the securities market, in the light ofthe public-interest aspect of the securities industry.
Through strong compliance awareness on the part of all
our executives and employees, we will maintain a systemwith a self-cleansing function enabling us to independently
identify and correct business-related risks.

Performance/Progress Achieved in Fiscal 2007

¡Raise awareness of corporate ethics and compliance at Group companies.

¡Corporate ethics training officers conducted corporate
ethics training at four Group companies.

-------------------------------------------------------------------------------------------------------¡Strengthen measures against criminal elements(continued).

¡We continued to collect and accumulate data on criminal elements.

¡Enhance systems compliant with such revised laws
as the Financial Instruments and Exchange Law
and the Financial Products Sales Law.

¡The departments concerned worked together to set
rules for practical application, communicated the information to sales branch employees and tested understanding of procedures through e-learning, etc.

-------------------------------------------------------------------------------------------------------¡Revise internal rules, including simplification andstreamlining.

¡To improve effectiveness, internal rules were streamlined, simplified and systematized.

-------------------------------------------------------------------------------------------------------¡Enhance customer and sales-force management
systems.

¡The system of supervisors verifying customer suitability and sales staff’s transaction records was reviewed
and the control system was strengthened by establishing guidelines.

¡Enhance systems compliant with such revised laws
as the Financial Instruments and Exchange Law
and the Financial Products Sales Law.
-------------------------------------------------¡Manage information more stringently, and in particular establish systems to prevent leaks of personal
information.
--------------------------------------------------¡Created a customer management system, an investment
solicitation system, an examination system for sales literature, a contact record management system and others, to meet the requirements of the new laws.
----------------------------------------------------¡Conducted a check of the existence of personal information managed by each department.
¡Created stricter rules concerning transfers of personal
information using external memory devices.
-------------------------------------------------------------------------------------------------------¡Implemented a system to speed up checking the accounts of parties whose assets have been frozen orthat are subject to economic sanctions.
-----------------------------------------------------¡Support greater sophistication in risk-management
systems.

¡Created a framework to implement internal examination of new latent risks.

¡Enhance compliance regimes relating to laws andregulations concerning foreign exchange.

Compliance Regime

In fiscal 2007, the most important compliance-related issue for Daiwa Securities Group Inc. was to implement
stronger measures against criminal elements. Beginningin fiscal 2006, we also broadened our activities to nurture awareness of compliance, by conducting corporate
ethics training at four Group companies and other initiatives.
In addition to measures related to enactment of the
Financial Instruments and Exchange Law and the Financial Products Sales Law in September 2007, Daiwa Securities Co. Ltd. also made stronger efforts to spread understanding of the intent of the rules by simplifying
internal rules, providing training for executives and employees and other measures (see pp. 17–18).
Daiwa Securities SMBC Co. Ltd. established a framework to conform with the Financial Products Sales Law,taking steps to prevent leaks of personal information andenhancing its system to check for conflicts of interest
and money laundering.
bMeasures against Criminal Elements
Reflecting stronger social pressure to eliminate the influence of criminal elements, the government has drawn up
guidelines for corporations to prevent damage by suchelements. The Daiwa Securities Group, firmly believingthat its role in the securities industry is to stoutly standup to criminal elements and enhance trust by creating asound securities market, has taken various measures toward this end.

Our stance
To ensure fairness and the sound development of
the securities market and protect the safety of ourcustomers and staff, the Daiwa Securities Group iscreating a framework to eliminate the influence oforganized crime groups, gang members, corporate
extortionists and other criminal elements and taking
systematic measures to cut all ties with such elements.

Compliance

Important Issues and Initiatives
Related to Compliance

Basic Policy against Criminal Elements

Management Report

Daiwa Securities Group Inc. plays a central role in setting
compliance policy for the entire Group. Meanwhile, individual Group companies must comply with different setsof rules and regulations, due to differences in the types
and details of their businesses. For this reason, eachGroup company’s compliance department plays a leadingrole in setting out detailed compliance regulations and response.
In response to the Financial Instruments and Exchange Law and other laws that came into force in fiscal
2007, each Group company reviewed items affected bythese laws and implemented systems to ensure more effective compliance. The compliance regime of the Group
as a whole is maintained and promoted by having Daiwa
Securities Group Inc. and Group companies fulfill theirrespective roles and by enhancing collaboration in theirinitiatives.

In fiscal 2007, Daiwa Securities Group Inc. took thelead in accumulating more data, in order to shut out
criminal elements.
Based on these initiatives, we also formulated the basic policy against criminal elements outlined below.

1. The Daiwa Securities Group will carry out no transactions of any type with criminal elements.
2. If it is determined that parties already having transactions with the Daiwa Securities Group are criminal
elements, we will swiftly take appropriate measures
to terminate dealings with them.
3. The Daiwa Securities Group will provide no funds tocriminal elements.
4. The Daiwa Securities Group will accept no unfair demands from criminal elements. If it is determinedthat an unfair demand has been made by criminal
elements, we will take legal action in the civil or
criminal courts against the party making the demand.
5. The Daiwa Securities Group will establish close cooperative relationships with outside parties such as
the police force, the National Center for the Elimination of Boryokudan [organized crime groups], legal
experts and others.
Web Activities ¡ Calls Received at Our Customer Call Center¡ Structure and Performance of the Corporate Ethics Hotline

Fiscal 2008 Targets and Action Plans
To further strengthen our actions toward eliminating ties
with criminal elements, we will stress, both inside and outside the company, the importance of adhering to our basic
policy against criminal elements and ensure that this policy
is known and put into practice at Group companies.
We will endeavor to instill a stronger sense of ethics
and compliance awareness by enhancing compliance training and further improving the Corporate Ethics Hotline. We
will establish a system conforming to the Guidelines for Supervision of the Financial Instruments Business and willcontinue to improve our risk management and information
management systems to meet the provisions of the newly
enacted Financial Instruments and Exchange Law.

D A I WA S U S TA I N A BILIT Y R E POR T 200832

Information DisclosureManagement
Report

The Daiwa Securities Group actively communicates with all its stakeholders, disclosing financial,social and environmental performance fairly, appropriately and in a timely manner.

Initiatives and Targets
As a member of the securities industry, the Daiwa Securities Group is committed to, in accordance with its Disclosure Policy, disclosing information appropriately and in a

Issues and Targets for Fiscal 2007

¡Enhance disclosure of non-financial information.

----------------------------------------------------¡Further expand and enhance investor relations (IR) targeting individual investors.

timely manner that can serve as a model for other listedcompanies. We also strive to communicate fully with all
our stakeholders, including shareholders and investors,
providing a wide range of information from the social orenvironmental perspectives in addition to financial information.

Performance/Progress Achieved in Fiscal 2007
¡Held IR meetings for institutional investors and analysts on specific topics¡Held CSR seminars for institutional investors and analysts¡Enhanced disclosure of intangible assets----------------------------------------------------¡Held more IR information meetings for individual investors, participated in events¡Expanded our shareholder reward program and improved program content¡Created a fact sheet providing a clear outline of theGroup

b Information Disclosure Flow at the Daiwa Securities Group

Information Disclosure System

Flow of management-related information(excluding financial information)
Flow of financial information

Daiwa Securities Group Inc.
Disclosure Committee

Determination of information to bedisclosed and methods

Disclosure Committee Secretariat
Corporate Planning
Department∗1 Reports
importantdecisions

Finance
Department
Subsidiaries

Departments responsible for processing information ∗2(Corporate Planning Department, etc.)
Departments ∗2 or directors
originating information

33∗1

ReportingExecutive
Committee

Daiwa Securities Group Inc. has created Disclosure Regulations in order to achieve its Disclosure Policy. Our Disclosure Committee is responsible for final decisions regarding disclosure, in accordance with these regulations.
Group companies also create rules for controlling therelease of management-related information. We have created a uniform disclosure system for the entire Group.
Group companies collect and report information to Daiwa
Securities Inc. without fail, including posting management-related information contact lists on our in-housenetwork.

Information
disclosure∗2 Including
subsidiaries ofsubsidiaryconcerned

Disclosure Policy

Information Disclosure

Spring IR information meeting

Communication with
Shareholders and Investors
bIndividual Investor Initiatives
To communicate with a broader range of individual investors, in fiscal 2007 we held IR seminar for individual investors in Tokyo and Osaka, and also in Sapporo and Fukuoka for the first time. With other securities firms weparticipated in a joint IR seminar for women investors andin large-scale IR seminars for individual investors, where
we described our business and strategies, and disclosure of non-financial information.
We also created a Daiwa Securities Group Fact Sheet
outlining the Group’s structure, business and performance, to facilitate understanding of our operations.

Management Report¡We will observe fair and timely disclosure of important financial, social and environmental information (“Management-related Information”) regarding the Daiwa Securities Group sothat our stakeholders (including shareholders, investors andthe communities we operate in) may understand and maintain realistic expectations of the Daiwa Securities Group.
¡We will comply with the Securities Exchange Law and otherlaws and ordinances related to securities transactions andthe various rules of the stock exchanges where on which
our stock is listed.
¡ We will endeavor to achieve fair disclosure both in terms ofcontent and timing.
¡We will utilize various communication channels including
presentations, telephone conferences, the Internet and printed materials to disclose information in an easy to comprehend manner for investors.
¡We will consciously act as a leader of the securities markets
in terms of disclosure and set the standards for all other listed corporations.
¡We have established the Daiwa Securities Group Inc. Disclosure Regulations, that define guidelines such as setting up a
disclosure committee and the methods of disclosing management-related information to fulfill the spirit of this Policy.

bInstitutional Investor Initiatives
For institutional investors, we hold IR information meetings twice a year given by senior management executives
and also have individual meetings with them. To further
enhance information disclosure and deepen interest in
and understanding of the Daiwa Securities Group, beginning in fiscal 2007 we held IR meetings focusing on specific topics, selected from among topics frequently requested by institutional investors during individual
meetings or on other occasions.

bShareholder Initiatives
The general meeting of shareholders is an opportunity fordirect communication with our shareholders. To encourage higher attendance, in 2006 we began holding thesemeetings on Saturdays. A total of 1,838 shareholders attended our 71st regular general meeting of shareholders,
held on June 21, 2008. After the meeting, there was a
break for light refreshments, followed by a lecture. The
meeting was also broadcast live via satellite to halls inOsaka and Nagoya where 999 people gathered to observe the meeting.
We carry out shareholder surveys regularly in order toobtain direct feedback from shareholders which we canthen reflect in our management or IR activities. We also
intend to use the information obtained from these surveys to improve our future business activities and enhance satisfaction with our shareholder reward program.
Web Activities ¡ Shareholder Survey Results

Fiscal 2008 Targets and Action Plans

IR seminar for individual investors

Daiwa Securities Group
Fact Sheet

We will continue to enhance information disclosureof non-financial information, including CSR, and actively communicate with various stakeholders throughvarious channels such as our annual report and otherpublications and our IR website. We will also expand
our shareholder reward program to improve shareholders’ satisfaction and refine the administrative system
to ensure that the program operates smoothly.

D A I WA S U S TA I N A BILIT Y R E POR T 2008

34

Customer Satisfaction
SocialReport

The Daiwa Securities Group will create a strong, lasting relationship of trust with its customers
by offering high value-added services.

As the shift from saving to investing accelerates, customer
needs are also diversifying. Our vision for the Daiwa Securities Group is to create a team of professionals who grasp

customers’needs appropriately and offer new services.
Above all, we wish to respond to the trust our customers
place in us by fielding staff who are sincere about putting
customers first and who have acquired the specialized
knowledge enabling them to do so. In this way, we aim to
make customers feel truly welcome and pleased that theychose Daiwa Securities.

Issues and Targets for Fiscal 2007

Performance/Progress Achieved in Fiscal 2007

Initiatives and Targets¡Actively pursue post-sales follow up (continued).
-----------------------------------------------------¡Improve skills of junior salespeople.

----------------------------------------------------¡Improve customer-interface skills of branch counter
staff who interact with customers.

Initiatives for Building
a Better Relationship with Customers¡Carried out post-sales follow up through investment
seminars and Internet seminars at each branch, held
seminars focusing on emerging markets.
¡Improved customer convenience by revising our website.
----------------------------------------------------¡Created an Education and Training Department overseeing employee training.
¡Trained new employees in product knowledge duringgroup training stage.
¡Adopted more practical role-playing training.
----------------------------------------------------¡Held role-playing hospitality training.

branches a worry-free experience for all our customers,
including seniors and persons with disabilities.

bActively Following Up on Customers after Sales
After-sales follow up is important for building trust amongcustomers. At Daiwa Securities we stress the importanceof this point during sales staff and branch staff training.
We follow up with customers through monthly investment
seminars and other activities at our branches. Additionally, in response to numerous customer inquiries, we havebeen holding seminars focusing on emerging markets
since February 2008. To improve customer convenience,
we also revised our website in April and September
2007.
bImproving Employees’ Customer Service Skills
In addition to their specialized knowledge of markets andproducts, employees who deal directly with customers at
our branches must continually upgrade their customer
service skills with emphasis on attentiveness and consideration. To reinforce their awareness, we remind employees at all stages of training of the importance of hospitality. In fiscal 2007, new employee training incorporated
more practical training focusing on role-playing in specific customer interaction scenarios. We value warmth andhospitality and are committed to making a visit to our

35

Hospitality training

bEmployee Education
As part of our activities to enhance employee education, we
created a new Education and Training Department by amalgamating the Personnel Department’s Training Section and
the Branch Education Support Department’s Education Promotion Section. This enables us to oversee employee training in a consistent manner. We have also actively adopted
training involving role-playing, to add an element of morepractical training to our usual training program for young
sales staff. We now provide more opportunities for new em-

ployees to acquire specialized product knowledge during
the three month-long group training stage for new employees, by assigning specialist instructors and also trainers
from the departments in charge of our various products.

Web Activities ¡ How Customer Feedback Is Utilizedb Customer Satisfaction Survey (Excerpts) ∗FY2006

FY2007

Greetings by employees

4.26

4.43

Employees’ speaking style

4.27

4.40

Interaction with customers

4.19

4.31

Amount of information/quality of website

3.37

3.72

Quality of information provided after purchase

3.20

3.24

Customer Satisfaction∗TSR (telephone service representatives): telephone operators with specialized
knowledge.

We carry out a customer satisfaction survey every year to
track how our customers rate us. In fiscal 2007, responses
indicated increased satisfaction with hospitality and our
website, indicating that our hospitality training and revisionof our website have been effective. Notwithstanding morepositive responses on some items compared to fiscal
2006, post-sales follow up continues to be an issue that
we must focus on.

Social ReportbCall Center Initiatives
Our Call Center is one of the main channels supporting ourbusiness model which centers on the Daiwa Consulting andDaiwa Direct transaction channels. Staffed by 450 telephone service representatives (TSR ∗), it is the largest in thedomestic industry. TSR at the Call Center take orders, describe products and handle queries about clerical procedures or requests for sales literature, playing an importantrole as a transaction channel in customer support and formarketing as they provide customer feedback to help improve our operations. TSR training and regular checks ofcustomer service skills help ensure consistently high levelsof service to our customers. When problems occur, we
make sure to analyze data for the cause in each case andcommunicate the results and provide feedback to the related departments and sales branches, in order to further improve our service and customer handling.

Fiscal 2007 Customer Satisfaction Survey∗Rated on a five-point scale

Fiscal 2008 Targets and Action Plans
We will continue focusing on after-sales follow up, improving employees’ skills and enhancing branch employees’
customer service skills to establish genuine communication
with our customers. We are taking steps to institute consolidated management of customer feedback and will improve coordination to use customer feedback effectively.

b Results from the Customer Satisfaction Survey (Fiscal 2007)
Level ofsatisfaction

5

Employees’ speaking style
Interaction with customer by staff
Employee grooming
other than employee assigned to customer
Interaction with customer

4.5

Fairly satisfied

3.5

3

Accuracy of service

Brand/peace ofmindSoundness of finances
Expert knowledge
Expert knowledge of investment trustsof foreign bonds
Expert knowledge
Amount of information/
Allowing sufficient time for customer notificationof stocks
quality of website
Expert knowledge of taxation and tax system
Frequency of seminars
Product range (compared to other companies)
Expert knowledge ofDemonstrated
Impressions ofEase of understanding of reports
diversified investment
customer focus
TV commercials and advertising
Quality of investment information
Ease of understandingof pamphlets, etc.
Types of seminars offered
Satisfaction with investment performance
Information provided
After-sales follow upprior to product purchase
After-sales follow up (quality of information provided)(best timing for providing information)
Cost performance
After-sales follow up(how often information is provided)
Speed of service

4

Polite greetings

Average

2.5
30

40

50

60

70

80
Degree ofimportance

The level of customer satisfaction for each item is the average score for ratings (e.g. very satisfied: 5 points; fairly satisfied: 4 points; can’t say either way: 3 points; fairly
dissatisfied: 2 points; very dissatisfied: 1 point). Importance is measured by plotting the deviation score calculated according to the correlation coefficient between each
item and the overall level of satisfaction.

D A I WA S U S TA I N A BILIT Y R E POR T 200836

Respect for People and Human Resource Utilization
SocialReport

The Daiwa Securities Group is committed to establishing sound work-life balance by creating aworkplace where executives and employees feel that their work is fulfilling and that sustains
their high motivation.

Initiatives and Targets
In its company invigoration program of July 2006 andMarch 2007, the Daiwa Securities Group set the target of
becoming the leading securities group in Japan, where employees are enthusiastic and consider their work worthwhile. We have implemented various measures to give

Issues and Targets for Fiscal 2007

Performance/Progress Achieved in Fiscal 2007-----------------------------------------------------¡Implemented initiatives to create a workplace environment supportive of work-life balance (e.g. directed employees to leave the office before 7 p.m., etc.).
-----------------------------------------------------¡Enhance education and training programs to increase
number of certified analysts and CFPs (continued).

¡Greatly expanded the list of available training programs.

---------------------------------------------------------------------------------------------------------¡Promoted creation of an atmosphere conducive to useof in-house systems for work-life balance, such as
having superiors actively encourage subordinates tomake use of the systems.

¡Further promote company-invigoration measures.

¡Develop workplace environments where women canfully use their abilities (continued).

Hiring Initiatives
The Daiwa Securities Group believes that long-term employment is essential for fostering confidence, pride in thecompany and a sense of solidarity. Toward this end, we arefocusing on establishing a system, predicated on long-term
employment, for expanding the number of employees who
can share these ideas.
b Number of New Graduates Hired by
the Daiwa Securities Group (Consolidated)(persons)

April
2006

April
2007

April
2008

Career-trackMale
employees/
Regional career-track
Femaleemployees∗1

401

570

563

326

610

477

Male

0

0

1

Female

101

243

241

Male

33

0

0

Female

17

0

0

878

1,423

1,282

Generalemployees

Financialadvisors∗2
Total∗1 Regional career-track employees are a class of career-track employees who stay in one region and are not subject to transfers that require a change of residence. Full-scale hiring of
new graduates in this class began in April 2002.
∗2 Financial advisors are employees who work in sales at Daiwa Securities Co. Ltd., under
one-year contracts.

37

executives and employees confidence in the company; help
them understand the role and significance of the company
and give them pride in their work; and help them share asense of solidarity with the company and their colleagues.
In April 2008, we also created the Work-life Balance Promotion Committee and the Work-life Balance Promotion Department, to support our initiatives for making Daiwa a company that is fulfilling to working for.

In April 2007, we hired 1,282 new graduates. We believe it is vital for prospective employees to understand ourideas, and therefore we expanded communication in our
hiring process by holding seminars and small meetings
throughout Japan for student job-seekers. In fiscal 2007,
we communicated with 33,400 students. These activities
helped many students understand our message, and ourefforts also improved our ranking on the list of companies
that students most want to work for.
bFull-time Employment Career Path for Temporary Employees
In fiscal 2006 we inaugurated a new program that offers
temporary employees who have worked for three years ormore the opportunity to become full-time employees, to increase the number of employees sharing the company’s
ideas and foster solidarity. In fiscal 2006, more than 100
employees became full-time employees, and over 70 did so
in fiscal 2007.
bProfessional Return Plan
We implemented our Professional Return Plan (rehiring ofsales staff) in fiscal 2005. Under this system, sales staff who
retired from the Daiwa Securities Group due to marriage, having children or other reasons and who wish to return to work,
can be re-hired as full-time employees. In fiscal 2007, threepeople were re-hired as full-time employees under this plan.

bRehiring of Veteran Employees
We actively employ veteran employees under the Daiwa
Elder System, which re-hires employees who left thecompany after reaching mandatory retirement age, andthe Daiwa Master System, which offers extended employment to age 65 to employees reaching the mandatory retirement age of 60 who meet certain criteria and wish tocontinue working. We are taking steps to employ highly
motivated and experienced older people.

Human Resources Development andSkill Upgradingb Reemployment under the Daiwa Elder System andthe Daiwa Master System (Daiwa Securities Group Inc.,
Daiwa Securities Co. Ltd. and Daiwa Securities SMBC Co. Ltd.) (persons)
FY2006

FY200780

83

86

No. of employees hired under
the Daiwa Master System

–

6

14

bEmploying Persons with Disabilities
As of March 31, 2008, persons with disabilities accounted for 1.87 percent of our workforce, averaged acrossnine Group companies. To improve retention of employees with disabilities, in fiscal 2007 we implemented asystem enabling contract employees to acquire full-time
employee status, and 10 persons became full-time employees. In fiscal 2008, we began hiring new graduateswith disabilities as full-time sales staff; seven persons
were hired by Group companies in April 2008.
b Employment Rate for Persons with Disabilities (Average acrossthe Nine Principal Group Companies, as of Each Fiscal Year-end)

Web Activities ¡Internal (Intra-Group) Job Postings and New Career Path Examinations¡Persons Earning Credentials (Nine Principal Group Companies)b Basic Employee Statistics (Daiwa Securities Group Inc.)

% 2.0
1.8

FY2005

FY2006

FY2007

10.22 million

11.87 million

10.32 million

Average age

37.8

37.9

37.7

Average number ofyears of service

11.0

11.4

11.2

Average annual salary∗

1.0

1.85

0.0

FY20051.95

1.87

FY2006

FY2007

Respect for People and Human Resource Utilization

FY2005
No. of employees hired under
the Daiwa Elder System

Social Report

With the goal of making Daiwa the number one professionalteam in the industry, we focus on human resources development. In particular, we see the first three years of employment as the optimum period for acquiring knowledge
and skills and we offer a broad range of training programs
to employees at this stage of their careers. We created a
new Education and Training Department in 2007. Reflecting
the increase in the number of new graduates we havehired, we have expanded our training system for young
sales staff. In fiscal 2007 we also introduced coaching
training and other initiatives aimed at improving the abilities
of intermediate-level staff to direct younger employees in
the field. For employees in their fourth year of employment,
we conduct group training aimed at reinforcing awarenessthat they are working for the Daiwa Securities Group andfostering solidarity among colleagues.
To strengthen employees’ motivation to study, we adopted a system requiring a certain number of points, based on
qualifications obtained, for promotions and advancement. In
2007, we revised the point system in order to expand thestaff resources suitable for contributing to our globalization
strategy and reinforcement of our internal control system.

∗Average annual salary includes bonuses and other forms of additional remuneration.

b Employees at the Daiwa Securities Group (Consolidated)
As of March 31, 2006
Employees

Financialadvisors
357

As of March 31, 2007

Temporaryemployees∗1Financialadvisors

7,341

324

Temporaryemployees∗1
–

Japan

Employees

Financialadvisors

7,821

256

–

465

–

Male

6,971

(Career track∗2)

6,280(Managers)

3,465

Female3,300(Career track∗2)

1,411

1,515

1,970

97

110

119

(Managers)–

Employees

As of March 31, 2008

6,613

7,083

3,641
698

–

3,666

Temporaryemployees∗1

3,740
593

–

4,401

Japan total

10,271

1,055

1,752

11,007917

1,914

12,222721

1,882

Overseas

1,235

–

46

1,340

–

37

1,513

–

34

Total

11,506

1,055

1,798

12,347917

1,951

13,735721

1,916∗1 Temporary employees are part-time hires; the figure shown here is the average number of such employees over the year. This class of employees is made up mostly of women but includes some men.
∗2 Includes regional career-track employees and specialist positions.

D A I WA S U S TA I N A BILIT Y R E POR T 200838

SocialReportRespect for People and Human Resource Utilization

Evaluation System
To make its evaluation system fair and acceptable to employees, the Daiwa Securities Groups implements a twoway evaluation system in which superiors and subordinates
evaluate each other, and a multi-directional evaluation system in which evaluations are received from collaborating
departments. Multi-faceted evaluations are carried out that
also take compliance-related performance into account.

Creating a Workplace Supportiveof Work-life BalancebEncouraging Work-life Balance
The Daiwa Securities Group believes that companies in the
future will need to enable everyone working for them to havesatisfying private and professional lives. In April 2008, we established a Work-life Balance Promotion Committee, with
Daiwa Securities Group Inc. President and CEO Shigeharu
Suzuki as chief work-life balance officer (CWO) and executives from the principal Daiwa Group companies in charge ofhuman resources as members. A Work-life Balance Promotion Department was also created at Daiwa Securities Group
Inc. This is a Group-wide undertaking aimed at balancing
work and private life in order to improve motivation among all
executives and employees.
One specific initiative is Daiwa Securities Group Inc.’s participation in a model work-life balance project promoted by the
Ministry of Health, Labour and Welfare. We contribute to society through this project by implementing enhanced measures
for work-life balance and by also communicating information
outside the company about the measures we are taking.
Our practice of encouraging employees to leave work before 7 p.m. begun in July 2007 has become well-establishedat all Daiwa securities sales branches and has greatlychanged how employees work. We also amended our childcare leave system in 2008 to make it easier for male executives and employees to take childcare leave. To help establish
practical systems, we will be monitoring and analyzing the extent to which various leave programs are being used and how
this relates to productivity.
bHelping Women Use Their Abilities in the Workplace
The Daiwa Securities Group actively supports its female employees, introducing a wide range of opportunities and programs to enable women to make the most of their capabilities
in the workplace. For example, we were the first in the industry
to promote women to sales branch manager positions. As of
April 30, 2008, nine out of Daiwa Securities’ 117 sales branches throughout Japan are headed by women. In February
2005, Daiwa Securities Group Inc. started up a Women’s
Support Action Team, which has introduced programs inGroup companies to help women balance work and family life,
such as leave of absence for childbirth or child care, exemp39

tion from overtime work and so on. In fiscal 2007, materials
describing the various programs were distributed to executives and managers of Group companies. We also establisheda system whereby when a staff member is eligible for theabove programs, the Personnel Department notifies the individual’s superior, who encourages her to make use of the programs. These measures have helped executives and employees understand the programs better and created a workplaceatmosphere more supportive of those using the programs.
The Women’s Career Design Seminar and Career Design
Training programs are also offered at Group companies to enable female employees to take the initiative to map out theircareers. In addition, mainly the members of the Women’s Support Action Team seek out female employees to discuss various issues.
b Main Initiatives of the Female Employee Support Plan (as of March 2008)
Program name

Program description

Professional Return Plan(rehiring of sales staff)

Offers opportunities for re-employment toformer full-time employees who left their jobs
due to marriage or childbirth

Job Location
Change System

Offers a position in a new location when an
employee must relocate due to marriage or
spouse’s job transfer

Childcare leave,
shortened work hours

Employees can take childcare leave or opt for
shortened work hours until their child’s 3rdbirthday

Exemption from or
restricted overtime work

Employees can apply for an exemption from overtime work
until their child completes the 3rd grade of elementary school.
Employees can also apply for restricted overtime work until
their child completes the 6th grade of elementary school.

Day care subsidy

The company offers a subsidy for day careexpenses until the employee’s child begins
elementary school (age 6).

Expanded leave system

The company encourages employees to take paidvacation and has introduced leave for marriage
preparations or “family day” leave to give employees
a chance to spend time with their families.

Follow-up on program use

The Personnel Department keeps track ofindividual employees’ childcare-related schedules
and notifies them of programs available at theappropriate time.

Support after returning
to work

The Daiwa Family Net website provides
information for employees on childcare leaveand provides support to facilitate their smooth
return to the workplace.

bMental health
In August 2006, Daiwa Securities Group Inc. created a new
Mental Health Support Promotion Department to ensurethat personnel can work in the best of physical and mental
health. This department provides counseling for Group
executives and employees and their families. In April 2008,
the support system was expanded by increasing the number of certified clinical psychologists on call from one totwo, who were also made available for consultations daily,
up from three times weekly. We also have arrangementswith outside specialists so that Group personnel and theirfamilies can receive prompt attention anywhere in Japan.
Further, to spread awareness of mental health and promote pre-vention and early detection of mental health issues, the Mental
Health Support Promotion Department’s certified clinical psychologists give lectures at our departments and branches.

b Working Hours and Paid Vacation Usage Rate
(Daiwa Securities Group Inc., Daiwa Securities Co. Ltd., Daiwa Securities SMBC Co. Ltd.)FY2005

FY2006

FY20071845.01845.01837.5

27.0

26.2

25.2

Paid vacation usage rate

34.3%

35.6%

37.4%

Paid vacation usage
rate (including special
summer vacation)∗2

42.8%

44.5%

46.5%

Annual regular
working hours(hours)Average monthly
overtime hours(hours)∗1∗1 Figures indicate employees at the three companies who are members of the Daiwa Securities Group Employees’ Union.
∗2 In addition to annual paid vacation, the Daiwa Securities Group offers three days of special
summer vacation. These figures show the usage rate for annual paid vacation when special
summer vacation is included.

b Daiwa Securities Group’s Female Employee and Manager∗ Ratios in Japan
March 31, 2006 March 31, 2007 March 31, 2008
Ratio of female employees to all employees

32.1%

33.3%

36.0%

Ratio of female managers to all managers

2.7%

2.9%

3.1%

∗ Deputy general manager or higherb Employee Welfare System Usage (Nine Principal Group Companies∗1) (persons)
Number of
Femaleemployees
taking childcare
Maleleave∗2
Number of
Femaleemployees
taking nursing
Male
care leave

FY2005

FY2006

FY2007

138

150

209

0

2

4

2

3

6

0

0

3

b Number of Employees’ Union Members(Seven Principal Group Companies,∗ as of the End of Each Fiscal Year) (persons)

Employees’ Union membership

FY2005

FY2006

FY2007

5,747

6,078

6,969

∗ Does not include Daiwa Asset Management Co. Ltd., which has its own employees’ union,
and Daiwa Property Co. Ltd., which has no employee union.

bInitiatives for Families
The Daiwa Securities Group undertakes various activities tohelp executives’ and employees’ families become more familiar with the company. In November 2007, the company organized a festival open to the families of all Group personnel.
We invite the families of prizewinners to the Daiwa Securities
President’s Awards ceremonies held twice a year, and all families receive flowers for Christmas. We have introduced a“family days off” holiday to make it easier to take yearly vacation time, and our mental health support program also makes
care available to families.
In December 2007, we introduced a system providing a
two million yen benefit for employees’ third or subsequent
children, to offset the financial burden of child-rearing. In fiscal 2008, we are planning to designate a day when employees can invite family members to their workplaces.

Respect for People and Human Resource Utilization

bWorkplace Environment
In December 2007, Daiwa Securities Group Inc. and thehead offices of Daiwa Securities and Daiwa Securities SMBC
relocated to Gran Tokyo North Tower. Prior to this, all Daiwa
Securities sales branches were renovated to provide more
spacious surroundings for customers and make the workplace more pleasant for employees.

The Daiwa Securities Group believes that communication withexecutives and employees is vital. Communication takes
place through interviews with the Personnel Department anda semi-annual self-assessment questionnaire giving personnel an opportunity to voice comments or wishes. We endeavor to reflect spring labor negotiations with the Employees’
Union and findings from union member questionnaires conducted by the union in a variety of policies and initiatives.
Other communication activities include our “Salon de Woman,” a forum for communicating with young female sales staff
and female sales staff with children, and Personnel Department staff participation in events organized by the Employees’
Union. These activities give us opportunities to hear directlyfrom executives and employees and reflect what we learn
through such contacts in various policies and programs.

Social ReportbHuman Rights Awareness
The Daiwa Securities Group has been a member of the Industrial Federation for Human Rights, Tokyo since 1998. Daiwa
Securities Group Inc. established a Human Rights AwarenessPromotion Committee which is headed by the Daiwa Securities Group Inc. director in charge of personnel management.
All heads of Group departments and branches are membersof the committee, which meets regularly and conducts activities to enhance awareness of human rights, such as training
for executives and employees and canvassing for slogans.
The Daiwa Securities Group will continue its human rights
awareness initiatives to ensure fair, discrimination-free hiringand create a gender-equal society.

Communication

Fiscal 2008 Targets and Action Plans
We will continue focusing on work-life balance in order tokeep executive and employee motivation strong. We will
therefore encourage male employees to take childcare
leave and try to improve the paid vacation usage rate. We
will continue hiring persons with disabilities as full-time employees.

∗1 Figures for FY2004 and FY2005 were for Daiwa Securities Group Inc., Daiwa Securities Co.
Ltd., and Daiwa Securities SMBC Co. Ltd. only.
∗2 Employees eligible for childcare leave include non-regular employees (contract workers,
part-timers, etc.).
D A I WA S U S TA I N A BILIT Y R E POR T 200840

SocialReportRespect for People and Human Resource Utilization

Stakeholder Comments
We are expanding and improving our systems and initiatives intended to make the workplace fulfilling, but ongoing checks are needed to find out what executives
and employees think of them and to verify their effectiveness in order to make improvements. Comments from users of the main systems are presented here.

Opting to take a leave of absence
for child care

Taking advantage of
the Professional Return Plan

I decided to take a leave of absence to care for myson, partly because my parents live far away andcan’t help out, but also because I wanted to raise
him myself until he turns three. I thought of quitting
my job when I discovered I was expecting, but mybranch manager encouraged me to take childcare
leave when I consulted him. I learned that his wife
is also on childcare leave, so he was very supportive. Right now, I go to the Daiwa Family Net website occasionally so that I can keep up to speed in
preparation for goingback to work. As formyself, now that I am
on leave, I realized thatgoing out to work is awonderful thing.

Ever since I started working for Daiwa, I had
worked in a sales position at the Akita Branch, butthen I got married and my husband was transferredto Tokyo so I left my job. But I had always wanted
to keep on working even though I was married, sowhen I approached the company I learned about
the Professional Return Plan. I started working
again in 2007 after things had settled down at
home. I’ll be going on maternity leave soon, but I’m
grateful for the understanding of my colleagues andalso the encouragement
offered by customers.
I’m happy that the company was there for me,
in a situation where it
would have been difficult for me to get something done on my own.

Yukiko Takahashi, withson Kantaro (8 months)
Manager, Senior Consultant Section
Kichijoji Branch

Thanks to the job location change system,
I was able to continue working
My husband was transferred, so I moved from Daiwa
Securities’ Miyazaki Branch in Kyushu to its Ueno
Branch in Tokyo. I thought of various alternatives, including quitting my job, but I felt there was no reason
to leave so I took advantage of the job location
change system. My parents or in-laws don’t live
close by and I sometimes worry as to how I would
manage if I had a family, but I’m encouraged because
I know there are other women at my branch who are
working and raising children. It took me a while to getused to working in a newcity but I enjoy dealing
with customers in myjob. I feel pride in mywork and I think I will also
be able to lead a fulfilling
private life.

Mika Sato
Team Leader, Manager,
Investment Service Section
Ueno Branch, Daiwa Securities Co. Ltd.

41

Ai Murakami
Asset Consultant Section III
Yokohama Station West Exit Branch

Combining work and motherhood
During work hours I concentrate on my job, and in
the evenings and on weekends I prize the time I
spend with my three-year old daughter. People
tend to think that combining work and child-rearing
is a tough job, but now that pregnancy and thebirth are behind me I often feel that I’m not that different from male colleagues who have children. I
can feel that way thanks to the company’s various
support systems and the warm encouragement of
everyone at the branch where I work. Those systems make it easier for
women to picture working life after they havechildren.

Makiko Mitani
Manager, Asset Consultant Section I
Kochi Branch, Daiwa Securities Co. Ltd.

Leaving work before 7 p.m.

Comment from wife Chiaki

Deputy General Manager, Section II, Senior Consultant Department
Shibuya Branch, Daiwa Securities Co. Ltd.

Third-party Opinion on Respect for People and Human Resource Utilization
In order to obtain an objective evaluation of our human resources initiatives, the Daiwa Securities Group invited
Kimiko Horii, president of GEWEL (Global Enhancement of Women’s Executive Leadership), an NPO promoting
diversity and inclusion in Japanese society and corporations for revitalizing corporate organizations, to contribute a third-party opinion on the Respect for People and Human Resource Utilization section of this report. Ms. Horii
spent a total of 23 hours between February and May 2008 interviewing over 30 Daiwa Securities Group executives and employees and their families.

I believe that the sustainability of securities companies depends on developing
the talents of employeeswith diverse values, experience and lifestyles and increasing employee satisfaction, which in turn enhances
customer satisfaction.
The measures adopted
by the Daiwa Securities
Kimiko Horii
Group making it possible for
President
women to continue working
GEWEL
even after major milestones
such as childbirth and child-rearing are excellent, as
they can put these experiences to use in their jobs andcontribute to the company’s growth. Collaboration between the departments concerned and the employees’labor union helps create a workplace environment supportive of women, and women using the various systems rated them positively. Families also appreciatedthe work-life balance measures such as leaving the office before 7 p.m., and the employees I met while preparing this report reported being very satisfied.
However, although I learned of the company’s extensive measures for supporting child-rearing, my impression was that they are offered only to women rearing children. Women have diverse values and lifestyles

too. I am sorry that I did not have a chance to attend
the Women’s Career Design Seminar or Career Design
Training mentioned in this report while I was interviewing employees or their families. Similarly, men have diverse values and lifestyles.
Like many other Japanese companies, the Daiwa
Securities Group works hard to create systems andtake measures to make it easier for women rearing children to continue working at Daiwa. Forward-looking
companies, meanwhile, have realized that there arelimits to what systems and measures can accomplish:
they have started working on creating a corporate culture where people respect each others’ values and lifestyles. I know that Daiwa has begun encouraging men
to take childcare leave too, but before actually introducing the system I think it’s necessary to be aware ofwhether the workplace atmosphere and culture make iteasy for men to do so.
I also believe that Daiwa should clearly state why it
has been promoting work-life balance and support forchild-rearing in this Sustainability Report. The company
devotes management resources to these activities because they are necessary for its business. I believethat the role of this report is to clearly communicate thestance of the top levels of management to all stakeholders regarding what effects they expect from thesemeasures to boost the company’s bottom line and ensure its sustainability.

D A I WA S U S TA I N A BILIT Y R E POR T 2008

Respect for People and Human Resource Utilization

Tsunesato Yamashita and wife Chiaki,
daughter Mao (3) and son Shogo (6 weeks)

The best thing about this system is that the children are so happy to
see their father, and it’s comforting to me because he comes home early. I’m grateful for the company’s consideration for employees’ families.

Social Report

I really worried whether I could get my work done quickly enough at
first, but now that I’m actually leaving before 7 p.m. it feels surprisingly
natural. Everyone concentrates on working even more productively than
before with this new system, so work gets done speedily and efficiently.
Our children are still young, so now that I’m getting home early I
have more time for household chores or playing with the children and I
enjoy life. In the future, I’d like to get involved in a hobby like the arts.

42

Corporate CitizenshipSocialReportAs part of its corporate citizenship activities, the Daiwa Securities Group supports social welfare projects
and participation in volunteer work by executives and employees, provides support for cultural and artistic activities, and offers grants through foundations and NPOs for the benefit of international society.

a

Initiatives and Targets
We believe it is important to tackle the various issues thattoday’s society faces and offer continuous support for solving problems in order to create a sustainable society. To
accomplish this, we carry out various activities in the four
fields on the right.

Issues and Targets for Fiscal 2007

1. Education and research activities in the fields of economics and finance
2. Encouraging volunteerism among executives and employees
3. Support for culture and the arts
4. Assistance to communities both on the local and the international level through foundations and NPOs

Performance/Progress Achieved in Fiscal 2007

¡Promote volunteer programs to enable more executives and employees to participate (continued).

¡Improved feedback from recycling activities, leading toincreased participation.

----------------------------------------------------------------------------------------------------------¡Contribute to social welfare through grant programsand the like.

¡Created the Daiwa CI Biodiversity Conservation Fund(see p. 20).

Corporate Citizenship Activities
1. Education and research activities in the fields of economics and financeTaking advantage of the knowledge and expertise built up in
our main businesses of economics and finance, we are actively engaged in business-academia collaboration and we
also support economic education programs in junior and senior high schools, in order to teach young people knowledge
and wisdom about life through economics. These activities
are described in more detail on pages 21 through 24.
2. Encouraging volunteerism among executives and employees¡Volunteer Awards
We implement the President’s Awards system to recognize
various achievements by executives and employees. Daiwa
Securities Co. Ltd. created the Volunteer Awards in 2007, to
acknowledge both private and professional activities. Fromthe second half of fiscal 2007, we enhanced coordination between the Daiwa Securities Group Inc.’s CSR Promotion Department and Daiwa Securities Co. Ltd.’s Sales Planning Department in the volunteer award evaluation process. In orderto broaden the scope of volunteer activities, award eligibility
was expanded from individuals to groups and departments.
The award ceremonies feature slides or other materials to describe the volunteer activities of the award recipients, which isalso useful for educating other executives and employees.

Daiwa Securities Co. Ltd. Volunteer Award ceremony¡Hands-on environment experience on Mount Takao
In April 2008, 29 employees participated in a hands-on environment conservation experience on Tokyo’s Mount Takao
that we organized. This is the sixth year this event has been
held, and this year the group repaired damaged walkways
and signs and created footholds in a stream, using crosspieces and stakes made from trees that had been thinned
in 2007.

Hands-on environment experience on Mount Takao

43

b The Daiwa Securities Group’s Initiatives as a Corporate Citizen
Type of activity
1. Education andresearch activities
in the fields of economics and financeInitiatives for elementary, and juniorand senior high school students
Academia-business cooperationand initiatives for universities,
graduate schools and the public

Self-planned programs
2. Encouraging
volunteerism
among executives Joint programsand employees

3. Support for
culture and thearts

Support for culture andthe arts
Foundations Assistance programs

4. Assistance tocommunities
both on the local
and the international level
through foundations and NPOs

Expenditure (unit: ¥1,000)
FY2005 FY2006 FY2007
164,921 249,518 225,524

6,208

6,765

6,471

358,000 517,000 560,000

Daiwa Securities Foundation
Daiwa Securities Health Foundation

Performance of the Dresden Opera in JapanWe also focus on supporting traditional Japanese culture
such as shogi and go. In addition to sponsoring the top title
matches in shogi and go, the Meijin Title Match (shogi) andthe Honinbo Tournament (go) since 2005, we are also thespecial sponsor of the Daiwa Securities Cup shogi and gotitle matches via the Internet. We support the Saikyo Tournament and the Women’s Saikyo Tournament, which were
the first official shogi matches to take place on the Internet,
in 2007. In go, the Open, Ladies and Grand Champion Internet title matches, as well as the Amateur Championship,
take place on the Internet year-round, and viewers canwatch the matches in real time on the Internet. The matches, which begin at 8 p.m. on weekend evenings, attract
a strong following not only among Japanese fans but also
shogi and go devotees living abroad. For playoff games inthe various tournaments, we organize commentary sessions
by professional players who use large boards to describe
the game’s moves, which take place at the Daiwa Conference Hall on the 18th floor of the Daiwa Securities Headquarters Building in Tokyo. We also hold award ceremonies
for winning players and provide opportunities for exchanges
between amateurs and players.

Corporate Citizenship

Web Activities ¡Results of Recycling Activities by Executives and Employees (Fiscal 2007)

hibit took the novel approach of focusing on two giants of theart world, Pierre Renoir and his paintings, and the films of his
son Jean Renoir, and was a great success.

Social Report¡Volunteer and recycling activities by executives and employees
Group executives and employees organized sign language
classes, helped clean up after community events and participated in various recycling activities. One recycling activity involves collecting used and unused stamps and prepaid
cards, partially used postcards and similar items for donating
to NPOs. When we provided more feedback to volunteers
about the activities of the groups supported by volunteer activities, reports on yearly donation activities and so on, donations raised in fiscal 2007 totaled 665,585 yen, a 61 percent
increase compared to fiscal 2006. Volunteers also started a
new recycling activity of collecting used books and CDs.
We have been using a new tabulation method for calculating the cumulative number of volunteer activity participants(a total of 2,771 people, including the general public) since
fiscal 2006. Excluding those who participated in collecting
calendars and partially used postcards, the number of people
voluntarily taking part in activities on weekends or after business hours in fiscal 2006 was amended from a cumulative total of 624 people to 569 people.

Daiwa Anglo-Japanese Foundation
Tsunami Reconstruction Fund
Daiwa SRI Fund
Assistance Program

75,440 136,097 141,806

Daiwa Eco Fund
Assistance Program

Disaster relief, sponsorship feesfor NPOs/NGOs, etc.

Total

604,569 909,380 933,801

Web Activities ¡The Daiwa Securities Group’s Initiatives as a Corporate Citizen (Details)

3. Support for culture and the arts
The Daiwa Securities Group supports a wide range of culturaland artistic activities. As part of our support for the arts, wewere the special sponsor of the Dresden Opera from Germany in November 2007. Additionally, we were the special
sponsor of the “Renoir + Renoir” exhibit at the Bunkamura
Museum of Art in Shibuya, Tokyo, from February to May
2008. This exhibit was also presented at the National Museum of Modern Art, Kyoto from May to July 2008. The ex-

Move-by-move commentary of the 1st Daiwa Securities
Internet shogi Women’s Saikyo Tournament

Fiscal 2008 Targets and Action Plans
Our goal is to communicate information on 50 volunteer activities per year and further encourage volunteerism among
executives and employees. We will introduce the winners of
Volunteer Awards and describe their activities at award ceremonies and also through other channels such as internalbulletins and the company intranet.

D A I WA S U S TA I N A BILIT Y R E POR T 200844

SocialReportCorporate Citizenship
4. Assistance to communities both on the local and theinternational level through foundations and NPOs
¡Daiwa Securities Health Foundation
Since 1973, the Daiwa Securities Health Foundation has
been supporting outstanding research focusing on the improved health, medical care and welfare of middle-aged
and older people, disbursing 30 million yen in grants of 1
million yen each every year. Fiscal 2007 marked the 34th
year of this program, with a cumulative total of 922 recipients receiving 907 million yen in total. Since September
2006, the foundation has been offering health seminars forthe public given by grant recipients. As of the end of March
2008, health seminars had been given at 71 Daiwa Securities branches throughout Japan.

The Daiwa Securities Group Tsunami
The Daiwa Securities Group Tsunami Reconstruction Fund wasestablished to assist survivors of the Sumatra Earthquake andIndian Ocean Tsunami of December 26, 2004. This fund provides long-term support for recovery over a 10-year period
which began in fiscal 2005, disbursing 10 million yen annuallyfor a total of 100 million yen over the period to help survivors
become self-sufficient and establish occupational training facilities for orphans and persons with disabilities.
b Aid-recipient Organizations
Country¡Daiwa Securities Foundation
The Daiwa Securities Foundation was established in 1994
in commemoration of the 50th anniversary of the foundingof the Daiwa Securities Group for the benefit of society. The
foundation provides yearly research grants in the fields ofvolunteerism and welfare; in fiscal 2007, the foundation
provided 199 grants worth a total of 45.23 million yen tovarious applicants, and a one million yen grant for one research project. A new “disaster volunteer activities grant”
was also created in fiscal 2004 to support the expenses ofvolunteers involved in disaster recovery work. Under thisnew grant, the foundation donated the sums of 1 million
yen and 500,000 yen, respectively, to the municipalities ofKashiwazaki and Kariwa affected by the Niigata Chuetsu
Offshore Earthquake of July 16, 2007. The foundation willcontinue activities contributing to improving social welfare.

Support for Disaster Survivors
The Daiwa Securities Group made a donation of 2
million yen to Japan Platform ∗1 through the Daiwa Securities Foundation to support local recover y activities by volunteers following the May 2008 cyclone in
Myanmar.
Daiwa Securities Group Inc. also provided emergency support through the Japanese Red Cross after
the Sichuan Earthquake in May 2008. Furthermore,
we extended aid for recovery in Gansu Province, which
was as severely affected as Sichuan but which, on
the basis of information obtained locally, we learned
had received less aid, by donating 1.52 million yuan
(approx. 24 million yen) to the China Children and
Teenagers’ Fund ∗2 to build two permanent elementar yschool facilities.
In Japan, we donated 6 million yen to the Central
Community Chest of Japan to help the areas affectedby the Iwate-Miyagi Nairiku Earthquake of June 2008.
We hope that the affected areas will recover assoon as possible.
∗1 Japan Platform: An international emergency humanitarian aid organization offering prompt and effective aid in times of natural disasters.
∗2 China Children and Teenagers’ Fund: Chinese government organization that coordinates donations for school construction and requests for school buildings
from disaster-affected areas.

45

Activity

Organization

Number of
beneficiaries

Aid amount

Sri Lanka

Women’s
Independence andDevelopment
Program

Women’s
Savings Effort“Wilpotha”

200
women

¥3.5 million

Indonesia

Education supportand mental healthcare for childsurvivors

Indonesia
Planned Parenthood Association (IPPA),
Aceh branch

135
children¥2.4 million

India

Occupational training
and self-sufficiency
support for young
people with disabilities and orphans

TRUE

75 young
people¥3 million(projected)

Daiwa SRI Fund Assistance Program
The Daiwa SRI Assistance Program provides grants for Japanese NGOs that help people whose lives are in danger for various reasons.
Working together with NPO Civil Society Initiative Fund, thisprogram supports personnel and education costs to train staff
and nurture organizations working on the front lines in outreach activities.
b Aid-recipient Organizations
Project name (new grant)

Organization

Grant
amountProviding stable staff training tohelp create a support framework
for a youth support center andstrengthen the organization

NPO
Tohoku Youth Support Center¥2 million

Training staff for outreach activities
directed to seniors on social assistance living alone

NPO COCOROOM¥2 million

Training staff for home visit program to prevent youth suicides andsocial isolation

NPO Student Support Faith¥1.87 million

Project name (continuing grant)

Organization

Grant
amountTraining generalists who plan andimplement programs to develop supporters for victims of sexual violence

NPO Center for Education andSupport for Women, Japan¥1.66 million

Training coordinators to develop, expand
and propagate a health care support
system for non-Japanese living in JapanNPO Center for Multicultural
Information and Assistance
Kyoto¥1.93 million

Reconstruction Fund
Stakeholder Comment

input by psychiatrists, and help the children
with their schooling. In Sri Lanka, a microfinance organization for women operating small
businesses was set up. The women actively
share their experience with the management ofa revolving fund, and in the second year, members made larger contributions to shore up thefund’s finances. This women’s organization can
now negotiate with the government and outsideorganizations and ask for support, and is expanding its activities. The way that people havechanged from passively receiving aid to actively
carving out their own futures coincides with theidea of supporting self-help for becoming independent that is ACT’s philosophy.

Mari Suzuki
Secretary General
Asian Community Center 21
The Asian Community Trust(ACT) Secretariat

Corporate CitizenshipThree and a half years have gone by since thetsunami disaster that took so many precious
lives. Many support organizations that poured in
to rebuild infrastructure, provide materials andbuild homes in the affected areas have left, andnow the major issue is how to help residents
become independent once more.
In projects in Sri Lanka, Indonesia and India, affected residents are actively participating
in self-sufficiency. In Indonesia, mental healthcare and support for the education of 135 children are provided with the help of 20 local volunteer teachers. These volunteers, who havebecome the mainstay of the program, provide
one-on-one psychological support, with regularSocial Report

Supporting Self-help for Becoming Independent

Stakeholder Comment

Daiwa SRI Fund Assistance Program in Its Third Year
Many NPO groups have weak organizations; staff
training is an urgent issue for them but they cannot
easily afford to spend money on training. In particular, it is important to improve the quality of staff inorganizations involved in ordinary outreach activities
having to do with the fundamentals of life or ensuring that people are treated with respect. We received a donation from the Daiwa Securities Groupto address these issues and started the Daiwa SRI
Fund Assistance Program three years ago. It is very
gratifying to see numerous aid-recipient groups becoming stronger and better organized thanks to this
support.
For example, one aid-recipient organization
supporting refugees in Japan was able to becomea registered special non-profit organization, donations to which are tax-deductible, by strengthening
its fund-raising and accounting staff. This attracted
more donations and permitted the group to operate
more stably. Another group involved in preventing
bullying and child suicides organized its secretariat
to operate more effectively and won a reputation for
reliability and quick response by setting up a consultation service especially for schools, which inturn boosted the number of its supporters.
A grant program for staff training that focuseson personnel expenses is a new approach welcomed by many NPOs. People are at the heart of
NPO activities and training takes time, but I am
eager to see the long-term results of this program.

Kuniko Kamiyama
Program Officer
NPO Civil Society Initiative FundD A I WA S U S TA I N A BILIT Y R E POR T 2008

46

Environmental Impact of the Daiwa Securities Group
Environmental
ReportRecognizing that the impact of the operations of the Daiwa Securities Group on the global environment is not inconsequential, we continue striving to reduce our environmental impact and raise employee awareness.

Initiatives and Targets
We believe that all executives and employees should beaware of global environmental issues and conduct themselves as set out below.
¡Everyone should think of environmental problems as theirIssues and Targets for Fiscal 2007
¡Consider the development of financial products thatenable investors to help resolve environmental issues.
-------------------------------------------------------------¡Expand environmental management systems to major
overseas offices.
--------------------------------------------------------------¡Reduce environmental impact by such means as appropriately adjusting air conditioning and using electronic statements.

-------------------------------------------------------------¡Achieve zero waste in relocation from former headquarters building.

Progress/Performance Achieved in Fiscal 2007
¡Sold the World CO2L (Cool) Bond and the Russell Global
Environmental Technology Fund.
-------------------------------------------------------------------¡Monitored undertakings at our main overseas branches andexpanded scope of data tabulation regarding use of electricity and paper.
-------------------------------------------------------------------¡Implemented the “Cool Biz” policy (open collars and shirtsleeves in the office) throughout the Group and adjusted office temperatures appropriately.
¡Promoted paperless meetings, reduced paper use by monitoring copying paper usage per day, reduced the use of paper for statements by converting to electronic format.
-------------------------------------------------------------------¡Disposal of waste from the former head office building wasincomplete as of June 30; we plan to report on status ofdisposal in the next Sustainability Report.

sponsible for higher electricity consumption and more environmental impact.

Environmental Impact of
the Daiwa Securities Group
Energy consumption at the Daiwa Securities Group’s domestic offices (on a CO 2 emissions basis) rose 3.4 percent
in fiscal 2007 compared to fiscal 2006. The main factors
responsible for the increase are analyzed below.

b Offices Relocated to the New Head Office Building (Gran Tokyo North Tower)
Building nameFactor

%1. Duplicated use of buildings due to relocation of the head office building+ 1.9%

2. Higher volume of entrusted data processing work, etc.

+ 3.0%

3. Effects of energy-saving measures- 1.5%

Total+ 3.4%

1. Duplicated use of buildings due to relocation of thehead office building
Between December 2007 and March 2008, the Daiwa Securities Group moved its main offices, including Daiwa Securities Group Inc., to Gran Tokyo North Tower (9-1, Marunouchi 1-chome, Chiyoda, Tokyo). Use of both our former
and our new offices during the relocation period was re-Main companies relocating

Daiwa Securitiesformer head office building Daiwa Securities Group Inc., Daiwa Securities Co. Ltd.
Kabutocho Bldg.

Daiwa Securities Co. Ltd., other Group companies

Daiwa Securities SMBC Headquarters Bldg. Daiwa Securities SMBC Co. Ltd., other Group companies
Eitai Daiya Bldg.

b Analysis of Higher Energy Consumption Breakdown47

own problems and act voluntarily and proactively to conserve energy and improve administrative flow.
¡Everyone should strive to promote and raise awarenessof socially responsible investment (SRI) and through the securities market, support companies that are environmentallyaware.
Through these efforts, we are committed to contributing
to economic growth and environment conservation.

Daiwa Securities SMBC Co. Ltd.

In addition to the above, relocation of the Daiwa SB Investments Ltd. head office also occasioned duplicated use ofbuildings.
We estimate that the higher environmental impact generated by duplicated use due to office relocation was 1,868 MWhfor electricity consumption, equivalent to 1,603 tons of CO 2
emissions.
2. Higher volume of entrusted data processing work, etc.
Due to the higher volume of data processing work entrusted to
the Daiwa Institute of Research Ltd., use of servers and otherIT equipment increased, which led to more electricity consumption for the equipment itself and the cooling it requires.

3. Effects of energy-saving measures
Thanks to appropriate control of office temperatures at Daiwa Securities Group domestic offices other than those listed above, energy consumption at those offices fell by 1.5
percent compared to fiscal 2006.

FY2004

FY2005FY 2006

FY200789,546,672

86,320,394

88,732,751

92,659,304

Domestic offices
Electricity (kWh)904,255

727,485

691,395

643,908

Gasoline (liters)

1,151,487

1,036,609

1,035,700

942,319

Heavy oil (liters)

61,73930,14634,087

23,677

Diesel fuel (liters)

11,048

1,267

73

0

–

–

–

7,717,773

Overseas offices
Electricity (kWh)¡At overseas offices, only figures for electricity consumption were tabulated.
¡For scope of data, see the “Scope of Environmental Impact Data” table on our Web Activities .

b Daiwa Securities Group’s CO2 Emissions (Table 2)(Unit: kg-CO2)

FY2004

FY2005

FY2006

FY2007

Domestic offices

54,465,324

51,920,594

53,190,910

55,023,361

Overseas offices

–

–

–

4,283,364

Total for domestic
and overseas

–

–

–

59,306,725¡Shows data for consumption of electricity, gas, gasoline, heavy oil and diesel fuel at our domestic offices and electricity consumption at our overseas offices converted to CO2 emissions (kg).
¡For all fiscal years and regions, the emissions coefficient used for converting to CO2 emissions is based on the ministerial ordinance related to the calculation of greenhouse gas
emissions arising from the business activities of specified emitters (Ministry of Economy,
Trade and Industry and Ministry of the Environment, Ordinance No. 3, March 2006).
¡For scope of data, see the “Scope of Environmental Impact Data” table on our Web Activities .

Web Activities ¡Daiwa Securities Group’s CO2 Emissions (Details of Table 2)b CO2 Emissions per Employee (Domestic) (Table 3)
Per employee(Unit: kg-CO2)

FY2003

FY2004

FY2005

FY2006

FY2007

5,556

5,393

5,055

4,832

4,502

¡For scope of data, see the “Scope of Environmental Impact Data” table on our Web Activities .

Initiatives to Reduce
Environmental Impact
bAdoption of “Cool Biz”
In July 2007, the Daiwa Securities Group adopted the“Cool Biz” policy group-wide and began setting office temperatures at appropriate levels. All employees wore badges promoting the “Cool Biz” style. Additionally, posters
were displayed in all our departments and branches, andwe used in-house broadcasting to promote “Cool Biz.”
Through these efforts, we have ensured that all Group employees are acquainted with and understand our commitment to contributing to solving global environment problems.

bReduction of Environmental Impact Related to Relocation to New Head Office Building
The Daiwa Securities Group’s new head office building in
the Gran Tokyo North Tower uses energy-saving technologies such as an automatic lighting control system and highefficiency air flow windows. ∗ Among other environment conservation measures unique to the Daiwa Securities Groupare the use of recyclable carpeting over 15,000 square meters of space on 14 floors, a paper recycling system thatcan dissolve discarded documents, and halon gas-free firefighting equipment.
During the move to our new quarters, we used re-usable packing boxes and tried to re-use and recycle unneeded items as much as possible, aiming to achieve a “zerowaste” move. As of June 2008, disposal of fixtures andequipment from our former head office building has notbeen completed. We plan to report on status of disposal in
the next Sustainability Report.

Environmental Impact of the Daiwa Securities Group

City gas (m )3bPromoting Reductions in Paper Use
In addition to converting statements, etc. into electronic format (see pp. 19–20), we are promoting measures to reduce
the amount of copying paper we use.
In January 2008, all Daiwa Securities Group Inc. departments appointed staff members in charge of reducing paperuse. The duties of these individuals include gathering information about why it is necessary to use paper to produce
documents for business operations and the amount of paper
used, and promoting awareness of reducing paper use within their respective departments. These individuals are also
responsible for tabulating the amount of paper used at regular meetings held by their departments and encouraging theuse of projectors to reduce paper use during meetings.

Environmental Reportb Energy Consumption by the Daiwa Securities Group (Table 1)

bShortening Business Hours by Encouraging Personnel
to Leave before 7 P.M.
Encouraging personnel to leave the office before 7 p.m. in
the interest of work-life balance means that lights and heating/cooling are used for shorter periods, thus contributing
to reducing environmental impact.

∗ Air flow windows: double-glazed windows equipped with an air intake slit in the interior
panes that allows indoor air to circulate between the glass panes, thus reducing the external
temperature load from windows.

Web Activities ¡New Head Office Building Environmental Impact Data

¡Volume of Copying Paper/Forms Purchased by the Daiwa Securities Group¡Changes in Waste Generated and Recycling Volume (Table 4)¡Changes in Electricity Consumption at the Daiwa Securities Group (Graph 1)¡Changes in Water Consumption at the Daiwa Securities Group (Graph 2)¡Scope of Environmental Impact Data

Fiscal 2008 Targets and Action Plans
We will heighten awareness of global environment issues
among executives and employees and continue our efforts to
reduce the Group’s environmental impact.

D A I WA S U S TA I N A BILIT Y R E POR T 2008

48

Distribution of Economic Value to Stakeholders
Economic
ReportThis section describes the revenue structure, economic value and distribution of economic value toall stakeholders of the Daiwa Securities Group.

Revenues in the Economic Report
Revenues for the purpose of this Economic Report is thetotal for all revenues received by the Daiwa Securities
Group (consolidated) in fiscal 2007—operating revenues,
non-operating income and extraordinary gains. In fiscal
2007, operating revenues accounted for 98.4 percent ofrevenues.

Web Activities ¡Classification of Revenue Types in the Economic Report (Fiscal 2007)b Revenue Structure in the Economic Report (Fiscal 2007)
Service fees and other sales 7.6%

Equity 10.1%

bNet Gain on Trading
These are profits that arise from the sale of securities theGroup has in its own account, or when the Group buys
from or sells to its clients to meet their transactionneeds.
bNet Gain on Private Equity and Other Securities
Net gain on private equity and other securities describes
gains resulting from the purchase or sale, or unrealized
gains or losses, on securities acquired for investment,
and from the sale of investment limited partnerships, etc.
bInterest and Dividend Income
Interest and dividend income describes income earned
from interest on securities held, dividends, and fromtransactions of lending or borrowing securities.

Fixed income 0.3%
Investment banking
5.7%
Commissions 35.1%
Interest anddividend income
42.7%

Asset management
16.3%
Other 2.8%
Net gain on trading 12.3%

Net gain on private equity and other securities 2.3%

Outline of Operating Revenues
bCommissions
The three main categories of commissions, which accountfor 35.1 percent of revenues in the Economic Report, aredescribed below.
1. Equity and fixed income commissions
Commissions earned on the purchase or sale of stocks, bonds
and other securities by individual or institutional investors.
2. Asset management
Commissions earned on sales of investment trusts and fees
charged for placing and managing individual or corporate
customers’ assets held in trust.
3. Investment banking
Underwriting commissions charged when corporate customers issue stocks or bonds to raise funds, and fees
charged for M&A, etc.

49

Distribution of Economic Valueto Stakeholders
Economic value for the purpose of this Economic Reportis calculated as revenues as previously defined, minus
interest expenses (less interest paid), the cost of sales,
selling, general and administrative expenses (less personnel costs, taxes, and expenditure for corporate citizenship activities), non-operating expenses (less interestpaid), and extraordinary losses.
bExecutives and Employees
The distribution of economic value to executives and employees is calculated as personnel expenses (including
reserves for salaries and bonuses, as well as welfare
program costs and social insurance contributions). We
have built a fair compensation system that is highly acceptable to all, in order to improve employee motivationand maximize the value provided to all stakeholders. In
fiscal 2007, the Group distributed 156.7 billion yen to its
executives and employees; this was 52.1 percent of its
economic value.
bSociety
Regardless of business cycle fluctuations, the Group aims
to provide stable funding for its corporate citizenship activities which represent its economic contribution to society.
See page 44 for a breakdown of these expenditures.
bShareholders
The Group determines its dividend policy with an eye toduties including consumption tax. In fiscal 2007, the total
tax amount paid was 48.1 billion yen.

maintaining a stable dividend, and with the goal of providing a dividend payout ratio of 30 percent.
In fiscal 2007, the Group paid an interim dividend of
12 yen per share and a year-end dividend of 10 yen per
share, for a total annual dividend of 22 yen per share.
This amounted to a total of 29.9 billion yen in dividend
payouts.
bCreditors
The Group paid 53.6 billion yen in interest to creditors.

b Changes in Distribution of Economic Value to Stakeholders
Stakeholders(Unit: ¥ million)

FY2003

FY2004

FY2005

FY2006

FY2007

137,511

143,469

172,923

163,379

156,661

332

708

604

909

933

Dividends to shareholders

13,307

17,29745,031

39,072

29,919Interim and year-end dividends for the fiscal year

Creditors

15,292

22,42818,47847,02453,630Interest expense and interest paid on non-operating expenses

Government

26,42346,921

86,137

77,895

48,102

Income taxes, resident and business taxes, deferred income taxes, other taxes and duties

Minority shareholders

13,48019,77040,33923,746(5,233)

Minority shareholder profit/loss

Internal reserves

28,782

34,65093,05553,652

16,492

Balance after deducting dividends for the term from net income for the fiscal year

Total economic value

235,127

285,243456,567

405,677

300,504

Total of the above

Executives and employees
Society

Tabulation method
Selling expenses and personnel costs within general administrative expenses
Expenditure for corporate citizenship activities (see p. 44)

b Comparison of Economic Report and Consolidated Financial Statements

Distribution of Economic Value to Stakeholders

bGovernment
According to the Daiwa Securities Group’s financial accounting, the tax amount paid is the sum of current income taxes, deferred income taxes, and other taxes andEconomic ReportbMinority Shareholders
This is the profit and loss returned to the minority shareholders of the Daiwa Securities Group companies. The
principal minority shareholders are Sumitomo Mitsui Financial Group with a 40 percent share in Daiwa Securities SMBC Co. Ltd., and the shareholders of NIF SMBC
Ventures, a JASDAQ-listed company in which Daiwa Securities Group Inc. holds a majority stake (46.2 percent).
Since Daiwa Securities SMBC and NIF SMBC Venturesposted losses in fiscal 2007, the loss to minority shareholders was 5.2 billion yen.

(Unit: ¥ million)

FY2003

FY2004

FY2005

FY2006

FY2007

Economic Report revenues

468,788536,798

869,181

931,845838,703

Economic value

235,127

285,243456,567

405,677

300,504

Operating revenues

453,813519,337

845,659

917,307825,422

Net income

42,63752,665

139,948

92,724

46,411

Economic Report

Consolidated financial statementsb Distribution of Economic Value to Stakeholders (Fiscal 2007)

Economic value
300,504
Economic Reportrevenues
838,703

Cost of sales
Costs related to38,147
interest expenses
286,232
Costs related tosales and generaladministrative expenses
198,935
Revenues

Other expenses
14,885
Expenditures

Internal reserves/
Minority shareholders
3.7%
Government
16.0%
Creditors
17.8%

Executives andemployees
52.1%

Shareholder dividends
10.0%
Society 0.3%
¡Due to rounding, the totals may not always equal the sums of the amounts shown.

D A I WA S U S TA I N A BILIT Y R E POR T 200850

Third-party Opinions

Takeshi Mizuguchi
Professor, Takasaki City Universityof Economics

1. Introduction
I wrote this third-party opinion at the request of the Daiwa Securities Group after observing the report-production process.
This time, I focused on “adding a social perspective to investing,” which was identified as Material Issue 1 in this report,
and starting from April 8, 2008 I spent more than 11 hours attending meetings with the departments concerned and participating in question-and-answer sessions. Together with thewriter of the third-party opinion on “respect for people andhuman resource utilization” (see p. 42), the fact that the company offered access to outsiders for considerable lengths oftime and allowed us to be involved in reviewing CSR activities
themselves is an important initiative for heightening transparency. Another sign of progress over 2007 is that the company solicited the opinions of several third parties in different
areas of specialization.
2. Reliability of Information
Ensuring the reliability of information through the third-party
opinions of certified public accountants or auditing firms generally refers to assurance of the accuracy of numerical data;
my opinion is not an assurance in the same sense. I believethat progress in “adding a social perspective to investment”
should be measured by the degree of commitment of theGroup’s employees, as President and CEO Shigeharu Suzuki
touches upon in his message at the beginning of this report,
rather than by dry facts and figures about the sale of bonds
and funds. This is certainly the element that is the most difficult to verify, but as far as I can tell from the people I met, I
believe that they were truly committed. In that sense, this report accurately details the attitude of those working on thefront lines.
3. CSR Activities(a) Appropriateness of goal-setting
As the starting point for CSR activities, it is important to correctly identify the issues that matter most to the company inquestion. In the case of the Daiwa Securities Group, focusing
on “adding a social perspective to investment” as a material
issue is very appropriate. There cannot be any solutions to
global problems such as climate change or poverty unlessthere is a fundamental change in the market economy sys-

51tem. The dual system where the markets pursue efficiency
and governments ensure fairness is no longer effective forsolving problems, and a shared global awareness is beginning to emerge among market players that their behavior
must take society and the environment into consideration. In
conjunction with this, the social role of securities companies
will certainly change, and the present time is probably a transition period. In terms of being forward-looking in dealing withthese changes, I believe that Daiwa has identified the issue
appropriately.
(b) CSR promotion system
I am very impressed by the leadership shown by the key persons promoting investment from a social perspective. The
Group’s enhanced research structure also deserves praise. It
is also clear that the departments concerned are in the process of establishing good coordination. The points and lines
have been drawn, but has the “big picture” been filled in? Inother words, I believe that the PDCA cycle is working to acertain extent in individual departments, but it’s hard to seeGroup-wide PDCA in action beyond individual undertakings. If
that were made clear, it would be possible to evaluate progress made and what still needs to be done.
(c) Implementation activities
In addition to the offering of the Daiwa Eco Fund and the Daiwa
SRI Fund, the Daiwa Securities Group meets expectations by
coming up with new ideas and offering a range of choices,such as the Russell Global Environmental Technology Fund,vaccine bonds, the World CO2L (Cool) Bond and others. I
think that the idea planted by the UN’s Principles for Responsible Investment (PRI) was that all investment behavior should
show concern for society and the environment. I hope that together with developing leading-edge financial products with asocial perspective, Daiwa will also create a methodology forincorporating some consideration of society and the environment into all investment.
(d) Conclusion
No securities company can add a social perspective to investment working by itself. The parties providing the funds,
especially institutional investors with large amounts of money,
should act responsibly, and I think it’s also necessary for thegovernment to establish a certain framework. If that is thecase, I believe that securities companies, as specialists intheir field, have an important role to play in lobbying institutional investors and governments to make this system a reality. This report mentions that Daiwa’s communication activities
include policy recommendations. Adding a social perspective
to investing is an issue that certainly needs policy recommendations made on its behalf, and I hope that Daiwa will demonstrate the required leadership.

Sanae Hara
Representative
Kinyu Ombudsnet

If a corporation’s financial statements are its skeleton, its sustainability report is its flesh and blood, the face it presents tothe world. The Daiwa Securities Group’s report, with its photosof sweetly smiling infants on the cover, draws the eye. The future of these children, after all, depends on sustainability.
Daiwa’s 2008 sustainability report begins with a very personalmessage from President and CEO Shigeharu Suzuki.
The major focus of my third-party opinion is whether Daiwa
has met its goals in the four areas it has identified as material
issues.
1. Adding a Social Perspective to Investment
One major initiative in this direction this year is the start of salesof vaccine bonds, through which Daiwa contributes to raisingfunds for vaccinations through the International Finance Facility
for Immunization (IFFIm) public-private partnership. Even thoughdenominated in South African rands, these bonds are sellingwell. Daiwa also sells the Russell Global Environmental Technology Fund. Daiwa deserves credit for these clear first steps on
the road to investment with a social perspective.
This initiative is also held in positive regard by society. But
although I can identify with the importance of investing from asocial perspective, the question of whether the SRI productsthat Daiwa sells are good products from a financial viewpoint isa different issue. It is also essential to train people within thecompany in the necessary expertise. I would like to see more
information on these background factors in Daiwa’s sustainability report. My impression is that only a minimum of such information has been provided to describe emissions trading.
The Daiwa SRI Fund Assistance Program, while small inscale, is an interesting experiment. This program provides funding for training staff in NPOs involved in activities relating to lifeand human dignity.
2. Commitment to the Development of a Sound Securities Market
This issue relates to the health of the core business of securities companies. This report describes the measures implemented by Daiwa to meet the requirements of the Financial Instruments and Exchange Law which went into effect in September
2007. It further communicates the message that the Sales Department and the Compliance Department are working together

to enhance internal control, but few concrete details are provided as to what they have actually done.
I also noted that consumers were not included among stakeholders, and I hope that Daiwa will give this point further
thought. I would like to know how Daiwa positions its Call Center and its handling of consumer complaints or requests for advice within the context of commitment to the development of asound securities market.
3. Contributing to the Global Environment
Daiwa has made eye-opening progress with the shift in its business model to IT and paperless systems. The company said it
wants to demonstrate a model case in solving resources issues, and I hope it will do so.
The information about the Daiwa CI Biodiversity Conservation Fund, funded by a part of Daiwa’s profit earned from thesale and management of the Daiwa Eco Fund, should be highlighted much more prominently in this report. Contributing to
the global environment is also connected with adding a social
perspective to investment.
4. Communicating Information for a Sustainable Society
This report describes Daiwa’s economics and finance education
initiatives, its policy recommendations and other communication
activities, but information on this topic should be expanded overall.
The core of this type of communication of information for a sustainable society should be initiatives regarding disclosure, such as
in the Management Report, and Daiwa should communicate thisinformation to society through its website and sustainability report.
Further improvements are needed concerning CSR issues/performance and targets, which are evaluated solely from the company’s perspective. The second half of this report carries management, social, environmental and economic reports; thisinformation overlaps with that in the report’s first half. I hope that
Daiwa will focus more closely on respect for people and utilization of human resources from now on. The Daiwa Group has
begun taking active initiatives regarding temporary workers,
work-life balance and other issues, and its actions in theseareas should be emphasized more prominently.
I hope that Daiwa will improve its ability to communicate information to society in the future.

D A I WA S U S TA I N A BILIT Y R E POR T 2008

52

The Daiwa Securities Group’s CSR Activities
2004
January

CSR/brand management website goes online.

March

Establishes Disclosure Policy.

May

Begins sales of the Daiwa SRI Fund, an SRI investment trust that invests in Japanese corporations.

June

Changes to committee system.

July

Daiwa Securities Group Inc. establishes the CSR Promotion Department.

October SRI fund included in defined-contribution pension fund for Daiwa Securities Group employees.
November Becomes a member in the United Nations Environmental Programme Finance Initiative (UNEP FI).

2005
Decides to offer long-term support for areas devastated by the Sumatra earthquake
February and South Asian tsunami (Daiwa Securities Group Tsunami Reconstruction Fund).

Daiwa Securities Group Sustainability Report 2008
Reader Questionnaire
Thank you for taking the time to read the Daiwa
Securities Group Sustainability Report 2008.
We are conducting a survey on this report on theJapanese website below. Please let us know youropinions or comments about this report.

http://www.daiwa-grp.jp/branding/report/

Daiwa Securities Co. Ltd. begins Electronic Statement Promotion Project
June

Provides support to Finance Park, a hands-on economics education program
offered by Junior Achievement.
Begins support project for women entrepreneurs.

July

Daiwa Asset Management Co. Ltd. participates in a GRI G3 project working group to study
the usefulness of sustainability reporting from the perspective of finance and investors.

October Daiwa Securities Co. Ltd. begins the Daiwa e-members service, through which customers can ask to receive electronic transaction reports.
November Begins the Daiwa SRI Fund Assistance Program to support NPO staff.

2006
January

February

The Daiwa Securities Group Sustainability Report 2005 wins the Sustainability Report First
Prize (Minister of the Environment Award) awarded by the Global Environmental Forum.
Develops Euro-dollar Bonds with Emissions Credit Value Referenced Coupons (CO2L [Cool] Bonds).
Begins sales of the Daiwa Eco Fund.

April

Announces new medium-term management plan “Passion for the Best 2008,”
which includes the Group’s basic CSR strategy.
The Daiwa Securities Group Sustainability Report 2005 wins the Excellence Prize inthe sustainability report category awarded by Toyo Keizai Inc.

May

Daiwa Asset Management Co. Ltd. signs the Principles for Responsible Investment (PRI), jointly createdby the United Nations Environment Programme Finance Initiative (UNEP FI) and the UN Global Compact.

October

Opens Daiwa-JFS Youth Sustainability College with environmental NPO Japan for
Sustainability (JFS) as a grant program of the Daiwa Eco Fund.

November

The Daiwa Securities Group Sustainability Report 2005 ranked 34th (first in rankings forJapanese companies) in the Global Reporters 2006, an international comparative survey.

GRI Application Level
This report was created with reference to the
GRI ∗1 Sustainability Reporting Guidelines 2006.
These guidelines recommend that sustainability
reports declare their GRI Application Level, ∗2which is an indicator of the level of compliancewith the GRI defined by the guidelines. The
Daiwa Securities Group believes that the Daiwa
Securities Group Sustainability Report 2008
meets the criteria of GRI Application Level B.
∗1 Global Reporting Initiative (GRI): An organization founded in 1997 to
draw up and disseminate international guidelines for sustainability
reporting. Participants include a variety of stakeholders, such as
businesses, non-governmental organizations (NGOs), consultants,
accounting groups, and trade associations from different parts of theworld.
http://www.globalreporting.org/Home∗2 See the following URL for details concerning GRI Application Levels.
http://www.globalreporting.org/GRIReports/ApplicationLevels/

2007
January

The Daiwa Securities Group makes it into the Global 100 (the world’s 100 most sustainable companies).

Web Activities ¡ GRI Guidelines Content Index

Attendance at World Economic Forum (WEF) in Davos, Switzerland.

February

The Daiwa Securities Group Sustainability Report 2005 wins the Sustainability Report
Excellence Prize (the President’s Award) awarded by the Global Environmental Forum.

April

The Daiwa Securities Group Sustainability Report 2006 wins the Excellence Prize inthe sustainability report category awarded by Toyo Keizai Inc.
Holds CSR seminar for individual investors titled “New Trends in Investing:
The Search for Sustainable Growth Companies.”

May

Holds environmental seminar for customers titled “Daiwa Environmental Forum
2007: What Is Happening to the Earth Now?”

July

Implements “Cool Biz” policy (open collars and shirtsleeves in the office) group-wide as an initiative to combat global warming.

AugustEstablishes the Global Environment Foreign Bond Balance Fund and the Global
Environment Equity Fund.

This report has been printed using a waterless printing process that employs
no organic solvents. The printing ink is made from soybean oil, which has avolatile organic compound (VOC) level of less than one percent.

September Receives Japanese government approval for four greenhouse gas reduction projects in China.

2008
February

March

Daiwa Securities Group Inc. participates as a special sponsor in a global environment symposium held jointly by the Tokyo officeof the United Nations Development Programme (UNDP), the World Bank and Conservation International Japan (CI Japan).
Daiwa Securities SMBC and the Daiwa Institute of Research, Inc. hold the “Eco-innovation: What
Industry Needs to Do on Global Warming Issues and Creating a Low-carbon Society” seminar.

Begins sales of the Russell Global Environmental Technology Fund.

Address Gran Tokyo North Tower, 9-1, Marunouchi
1-chome, Chiyoda-ku, Tokyo 100-8101, Japan

Establishes the Work-life Balance Promotion Committee and the Work-life Balance Promotion Department.

TEL+81-3-5555-1111

E-mailbrand@dsgi.daiwa.co.jp

URL

http://www.daiwa-grp.jp/

Creates the Daiwa Securities Group Asian Student Scholarship Fund (provisional name) with the University of Tokyo.
April

Participates in the Ministry of Health, Labour and Welfare’s model project promoting work-life balance.
May

June

53

Please direct inquiries to:

Sells vaccine bonds.

Inaugurates a sponsored course at Peking University.
Agrees to support commercialization of iPS cell research at Kyoto University.
Begins sales of the Certified Emission Reduction (CER) Linked USD Denominated Uridashi Bond (World CO2L [Cool] Bond).
Obtains the Certified Family-friendly Employer designation.

Design and production assistance Cre-en Inc.

Third-party Evaluations
FTSE4Good Index

FTSE is a subsidiary of the UK’s Financial
Times and the London Stock Exchange. It
develops global indexes and provides datafor investment.
Daiwa Securities Group Inc. has been
included in the FTSE4Good, an index ofsocially responsible companies compiled
by FTSE, since September 2006.

Dow Jones Sustainability
World Indexes

Certified Family-friendly
Employer

The Dow Jones Sustainability World Index(DJSI World) is a stock index of companies
with sustainable practices selected by
Dow Jones & Company, Inc. of the UnitedStates and Sustainable Asset Management(SAM) of Switzerland.
Daiwa Securities Group Inc. has been
included in DJSI World for ten consecutive
years.

Certification symbol for family-friendly
employers based on the Ministry of Health,Labour and Welfare’s Law for Measures to
Support the Development of the Next
Generation. Daiwa Securities Group Inc.
obtained certification as a family-friendly
employer on June 9, 2008.

Daiwa Securities Group Sustainability Report 2008 Booklet and Web Edition
Daiwa Securities Group Sustainability Report 2008 discloses
information in a booklet and on a website in accordance withthe policies below.
¡BookletIncludes mainly information likely to have a strong influence on
stakeholder decision-making.
¡Website
Reports on a broader range of Daiwa Securities Group
activities. Also includes supplementary information, such as
description of terms, etc.
The two types of information described on the right are carriedon the website only.

Web Activities

Activities report carried on thewebsite. Items identified bythis symbol may be found on
the corresponding page of thewebsite.

Web Terms

Terms are explained on the website. Items identified by this symbol may be found on the website’s
terminology page at this URL:
http://www.daiwa-grp.jp/ir/english/
corporate/report/terms/index.html

Click on this icon for a table of contents of information carried exclusively on the website andselect the desired page.

D A I WA S U S TA I N A BILIT Y R E POR T 200854

Daiwa Securities Group

This report is printed on paper made from responsibly thinned timber.
At the Daiwa Securities Group, our business is finance. As such, we do not immediately face theenvironmental problems that some other industries do. Nevertheless, we use huge amounts ofpaper to print various documents—including this one—as well as prospectuses, sheets and forms.
Becoming aware of our use of paper is a step toward protecting forests both in Japan and indeveloping countries, and therefore we have printed this report on paper made from responsibly
thinned timber.