Daiwa Securities Group

Sustainability Report

2004
Wh at w e c an d oWhat kind of society will be waiting 20 years from now,
when the 18 infants pictured on the cover become adults?
The roles that enterprise plays and the roles that adults
play are so important for achieving a sustainable society,where people are happy and living in harmony
with a rich unspoiled planet.
This year's cover, showing the joyous faces of children

BUILDINGS U S TA I N A B L E
SOCIETY

of Daiwa Securities Group employees,
represents our wish for a hopeful future.

What business must do for the future

CSR is a business's code of conduct.
Society expects businesses to practice CSR.
Since last year the term CSR, or corporate social responsibility, has commanded theattention in and beyond the business world. The idea that enterprise must play a role as
an organ of society and that it must fulfill its social responsibilities is not new. However,
the market economy has gone through vigorous development in recent years, witheconomic activities going global, the IT revolution expanding information applications,and consumer consciousness changing as society matures. Along with the economicchanges, society's expectations of enterprise have become more multi-faceted.
The CSR we hear about so much today is an expanded version of social
responsibility in the general sense. It is a crucial element in a business's sustainablecoexistence with society, and as such should be considered essentially the same as abusiness's code of conduct. In this age, the sustainability of businesses facing
international competition depends on two things: how it conducts itself withstakeholders (customers, shareholders, employees and so on) and how, as a result, it
can win the trust of those stakeholders and society as a whole. I am convinced thatbusinesses that eagerly perform their CSR duties will earn the praise of all theirstakeholders and the trust of society, which will lead to business success without
exception.

A new role for financial institutions:
Proving that CSR leads to business success
Whenever one considers CSR, one has to ask, "What should our business be doing forthe sake of the future?" The economic education of the young generation that the Daiwa
Securities Group actively supports is based on this theme. Society is an instrument forthe common good. Unless we think in terms of each other's benefit, we can gain no
lasting benefit for ourselves. In that sense, economic education leads to moral andethical education. We believe that an understanding of economic principles gives
people vitality and eagerness for their lives. The moral and ethical view that young
people acquire through economic education will motivate them and vitalize theeconomy and society of the future.
The Daiwa Securities Group, moreover, conducts socially responsible investment(SRI) as part of the CSR activities of its core business. Our SRI funds are a good
example. Customers and our sales staff get a sense of satisfaction from funds that
directly invest in businesses that benefit society. Along with a sense of satisfaction, thefunds encourage better performance, and this mutually beneficial effect enlarges thescale of the SRI funds. Additionally, when inclusion in an SRI fund becomes a measureof a company, it raises awareness of CSR within the company and further leads to thesustainable development of Japan's economy.
I believe that one of the essential future roles for the Daiwa Securities Group iscreating frameworks in which companies that eagerly embrace CSR enjoy better results
and win the praise of the market.

Yoshinari Hara

02

DAIWA SUSTAINABILITY REPORT 2004

Chairman of the Board,
Daiwa Securities Group Inc.

The Daiwa Securities Group works for trust

Aiming for true professionalism
In June of this year Daiwa Securities Group Inc. evolved into a company based on acommittee system, and at the same time I accepted the post of President and CEO.
My management ideal is to run the Daiwa Securities Group so that it is trusted bycustomers and society and indispensable to its stakeholders. Our employees are thecontact point customers see when they deal with us, so the behavior of each and every
employee is a vital concern for us. For our customers, the sense of trust they feeltoward the individual employee is the sense of trust they have in the Group as a whole.
Therefore, each employee must always be thinking about and acting on what he or she
can do in order to be trusted and needed by the customer and society.
This means, of course, that the employee takes the customer's point of view,
anticipating customer needs in order to offer products and services and serving as anadvisor indispensable to the customer. In the securities industry, where we deal withrisk-bearing products whose values change day to day, another critical requirement forbuilding trusting relationships is adequate communication. To achieve this, I hope tooversee a company where all employees exhibit true professionalism based on theirimpeccable on-the-job ethics and a fair code of conduct in all aspects of the job, notjust knowledge and technical aspects.

The Daiwa Securities Group: Aiming to win trustfrom customers and society through CSRWith this as my fundamental understanding, I intend to bring Daiwa Securities Groupfurther down the road I inherited from former-President and CEO Hara, namely
management with a heavy emphasis on corporate branding and CSR. CSR has somany aspects, including offering superior products and services to customers, dealing
with customers sincerely, bringing a reasonable profit to shareholders and disclosing
information to them, taking steps to improve the work environment for employees andevaluate personnel, as well as assuring legal compliance, corporate ethics,
environmental management and social contributions. The Group's approach to each ofthese is to ask, "Will this action win the trust of society?"
The Daiwa Securities Group sells SRI funds as part of its CSR activities in its corebusiness, and sales of these funds have exceeded expectations. Continuing to offer
such products meeting the needs of customers and society is the Daiwa Securities
Group's social mission and a forward step in the sustainable development of the Group.
We will exhibit the high standard of professional competence and the challenging spirit
called for in our Corporate Principles, and continue to develop and introduce new
products and services for our customers.
In July of this year, the Group set up its CSR Promotion Department with the aim offurther developing our existing measures and expanding the use of CSR in ourmanagement systems. I have faith in the idea that "CSR-based management willenergize our employees and benefit society," and I intend to continue this effort
proactively.
We in the Daiwa Securities Group will take new steps to earn greater and greater
trust from customers and society.

Shigeharu Suzuki
President and CEO,
Daiwa Securities Group Inc.

DAIWA SUSTAINABILITY REPORT 200403

Contents

Key points of Daiwa Sustainability Report 2004

Message from Top Management

02

CSR-Based Management at the Daiwa Securities Group05

The Role of Finance and the Businessof the Daiwa Securities Group06

Special Feature: Initiatives in the
Daiwa Securities Group's Core BusinessInitiatives for Socially Responsible Investment

08

Initiatives for Economic and Financial Education

12

Initiatives in the Daiwa
Securities Group's Core Business→ P.08→ P.18The Group performs CSR through its core business bypromoting socially responsible investment (SRI), supporting the economic and financial education ofyoung people and forming industry/academic partnerships with universities and graduate schools.

The Group is tying executive compensation moreclosely to performance and, to give management
more transparency and mobility, has transitioned to acommittee system.

16

Corporate Governance18

Compliance

22

Information Disclosure

26

Stakeholder Dialogue

Economic Reporting→ P.28→ P.42This year's report provides more information on economic relations with stakeholders than the last reportdid.

Daiwa Securities Group managers met with outside
parties on June 14, 2004 to discuss the topic "HowCSR should be done in the Daiwa Securities Group."Management
Results and Issues/Targets

Corporate Governance

Editorial Policy
The Daiwa Securities Group issues this year's report with a goal of disclosing, clearly and withcomplete sincerity, information relating to the Group's sustainability initiatives and social re-

Economic Reporting

sponsibility.
Another purpose that is served by creating this report is to enable the Group to self-check

Economic Relations with Stakeholders

28This report has two distinctive features. First, its primary focus is on management reporting

Social Reportingand social reporting, a feature of every Group report since the first issue in 2002. This is be-

Customer Satisfaction

30

Daiwa People

32

Philanthropy and Community Involvement

36

Second, we have heavily emphasized reporting on activities undertaken in the course of
our securities business, such as socially responsible investment and economic and financial education. As for environmental reporting, the Group has endeavored to disclose the state of its
environmental management and its environmental burden data, even though our efforts are notnational guidelines for sustainability reporting published by the Global Reporting Initiative (GRI)1.

¡ Coverage of this report

Stakeholder Dialogue

42

Group Management Training

46

CSR Seminars

47

CSR Website

47

Third-Party Opinion

48

GRI Content Index

50

Milestones toward Sustainability

51

How to Reach Us

51

DAIWA SUSTAINABILITY REPORT 2004

stakeholders in our management system.

This report was produced following the 2002 Sustainability Reporting Guidelines, the inter-

38

Communication04

cause, working as we do in the securities industry, it is essential to us to have the trust of ouryet satisfactory.

Environmental Reporting
Working for the Environment

the state of our efforts and issues to be addressed.

Target readers:Daiwa Securities Group's diverse stakeholders, primarily customers, shareholders, investors
and employees as well as business partners, non-profit organizations, persons living near
Daiwa Securities head and branch offices nationwide, and educational organizations.
Scope of reporting:This report basically covers our nine main Group companies2. However, it does not provide
data from all nine companies on all items. Rather, the information is provided in proportion to
the size and business area of each company. The scope of each category of numerical data is
noted along with the data.
Period covered in report:
FY 2003 (April 2003 – March 2004). Some information is provided that became available close
to the publication date and some activities are covered that occurred prior to FY 2003.
1 Global Reporting Initiative (GRI): An organization founded to propose and promote international guidelines
for sustainability reporting. Participants include a variety of stakeholders such as businesses,
non-governmental organizations, consultants, accounting groups and business groups from different partsof the world. Operations began in the autumn of 1997.
2 Nine main Group companies: See The Business of the Daiwa Securities Group, page 07.

CSR-Based Management at the Daiwa Securities Group

Efforts to bring our Corporate Principles to reality are the starting point

stems, in essence, from sustainability and CSR. Even this Sustainability

for CSR-based management at the Daiwa Securities Group. The first

Report which we began issuing in 2002 was created with the idea ofpillar of our Corporate Principles, "Customer trust," recognizes ourchecking up on the state of the Daiwa Securities Group in terms of thecustomers, the second, "Human values," recognizes employees, thecorporate brand.

third, "Total compliance," recognizes society as a whole, and the last,"Sound profit," recognizes shareholders. The Daiwa Securities Group

The term "CSR" is rather abstruse and comprehends aunderstands that support from all these stakeholders is vital to its

wide-ranging concept. To put it into practice, it is essential to make itsustained growth. The Group therefore continues to communicate with

relevant to one's business. What can the Daiwa Securities Group do toits stakeholders and use their comments and wishes to improve

achievemanagement.

environmental concerns are in harmony with each other? At this time,asustainable

societywhere

economic,socialandthe Group is promoting socially responsible investment (SRI)1 as step 1
In 2000 the Daiwa Securities Group began a campaign to build aof CSR in our core business. This is in part because the Daiwa

corporate brand based on these Corporate Principles. Trust is the most

Securities Group itself strives to be a company in which persons

essential element of a corporate brand in the financial services industry

practicing SRI will invest. Step 2 is economic and financial educationand is another word for the ability to respond to customers and otherand training2. This effort requires the cooperation of many employees,

stakeholders. Through a process of repeated trial and error to determine

so we believe our employees get a stronger sense and understanding

how to increase trust, the Group came to realize that a corporate brandof CSR.

1 For details see Initiatives for Socially Responsible Investment, pages 08 - 11.

Daiwa Securities Group Corporate Principles (established March 1998)

2 For details see Initiatives for Economic and Financial Education, pages 12 - 15.

Daiwa Securities Group Brand Statement (established March 2001)

Customer trust
We stand on the trust of our customers. Prudently putting
customer interests first and achieving a high standard ofprofessional competence, we intend to become Japan's
most appealing securities group at home and abroad.

大和証券グループ
ブランド・ステーント（2001年3月制定）
We the Daiwa Securities
Groupトメ
arecommitted
to acting as
our clients' best partner and promoting their financial
wellbeing. In order to achieve this, we shall redefine
currently accepted best practice drawing on the following
three core values.

Human values
People are the source of our competence. We highly value
creative initiative by the individual, we cherish thechallenging spirit and appreciate the capability andcontributions of the individual.

We Shall Provide Products and Services that Exceed
Expectations
It is important that we apply detailed knowledge ofcustomer needs, innovation in our internal processes and astrong customer focus to provide solutions that routinely
exceed customer expectations.

Total compliance
We can be proud and prosper only when we achieve total
compliance and gain the trust of our customers, ourmarket and of our world society. We will maintain highstandards of professional ethics and a fair code of
conduct, thereby contributing to the development of oursociety.

We Shall Bring the Full Strength of the Group to Bear
Cooperation among Group companies sweeping aside
traditional corporate barriers, a flexible approach tobusiness and swift decision making will enable us to offer
comprehensive financial services precisely geared tomeeting our customers' financial goals.

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

We Shall Continually Challenge the Limits of Financial
Best Practice
Exploitation of our substantial store of professional
knowledge and a pro-active approach to team building will
enable us to remain pioneers in our marketplace.

DAIWA SUSTAINABILITY REPORT 200405

The Role of Finance and the Business of the Daiwa Securities Groupto businesses. In return for the money it lends, the bank collects interest

The role of financefrom borrowing companies. In turn, individuals keeping their money atthe bank earn interest from the bank.

Banks, securities companies, insurance companies: although the financial industry is all around us, it is not always easy to understand just

Now let's consider the securities company. Like a bank, the securi-

what these companies do. Following is a brief explanation of the role ofties company serves as a bridge between individuals and businesses.

finance and the business conducted by the Daiwa Securities Group,

The difference is that when the bank is acting as a bridge, the bank itself

which is a part of the financial world.

selects the businesses it lends to, whereas when the securities company is the bridge, the individual chooses the businesses that receive the

Finance is the act of providing funds. But specifically, where does

money. "Investment" is the act in which the individual buys shares in a

the money come from and where does it go? Who provides funds tocompany, which is expressed as the individual's choice of company inwhom?

which to invest. In this act, the role of the securities company is to serveas an agent when the individual purchases shares on the market. When

Most people keep some money in a bank account. The bank lends

an individual lends money directly to a business, the return he or she

this money to different businesses, as they need it, in the form of every-

gets is dividends. The securities company gets a commission called a

day loans.

brokerage fee from the individual making the transaction.

In other words, individuals' money is lent to businesses. In thisThis summarizes the financing roles played respectively by banks

transaction, the bank acts as a bridge supplying money from individuals

and securities companies.

The role of finance

Financial institution
Savings

Loan

Bank

Interest

Interest

Securities market

IndividualBusiness

Investment

Securities
company
Capital gains, capital losses, dividends/shareholder returns

06

DAIWA SUSTAINABILITY REPORT 2004

stitutional investors to manage their funds. From the investor's point ofThe business of the Daiwa Securities Groupview, finance is essentially funds management, but in the eyes of thecompany invested in, finance is funds procurement. In the field of in-

The Daiwa Securities Group consists of a number of companies per-vestment banking activities, Daiwa Securities SMBC also helps compa-

forming securities-related tasks and working together to provide cus-

nies with funds procurement.

tomers with comprehensive financial services. Following is a summaryof the roles played by the nine major Group companies.

The major Group companies listed below support these two securities companies as they play their differing roles.

Daiwa Securities Group Inc., first of all, functions to oversee and direct the overall Group by holding shares in each Group company. Spe-

Daiwa Institute of Research Ltd. is engaged in research, consulting

cifically, it writes business strategy and sets targets for the Group as aand system development. Daiwa Asset Management Co. Ltd. andwhole and oversees the execution of the strategies.

Daiwa SB Investments Ltd. work in asset management, overseeing investment trusts and pension funds. Daiwa Securities Business Center

Daiwa Securities Co. Ltd. and Daiwa Securities SMBC Co. Ltd. playlarge roles as the heart of the Daiwa Securities Group.

Co., Ltd. is an agent for performing securities-related work, Daiwa Property Co., Ltd. manages Group shop and administrative offices, and NIF
Ventures Co., Ltd. performs venture capital work.

In the financial industry, the role of the securities company is toserve as a bridge between investors and businesses; Daiwa Securities

Group companies join their strengths so that the Daiwa Securities

primarily assists individual investors to invest in securities. Daiwa Secur-

Group can provide a smooth flow of funds supporting economic activi-

ities SMBC, on the other hand, mainly helps corporations and other in-ties day after day.

The business of the Daiwa Securities Group
Daiwa Securities Group Inc.

Securities market

Individual
investors

Daiwa Securities
Co. Ltd.
Securities-related
work mainly
for individual customers

Transaction

Business
Daiwa Securities
SMBC Co. Ltd.

Insurance company
Pension funds

Institutional
investors

Management ofcorporate customers'
fundsTransaction

Trust bankSecurities issuance and underwriting, etc.

Daiwa Securities
SMBC Co. Ltd.

Investment banking
activities

Daiwa AssetManagement
Co. Ltd.

Daiwa Securities
Business Center
Co., Ltd.

Daiwa
PropertyCo., Ltd.

NIF Ventures
Co., Ltd.

Securities-related
work Agency work

Shop and officemanagement

Venturecapital work

Other
Daiwa
Institute of
Research Ltd.
ResearchDaiwa SB
Investments
Ltd.

Asset
management* For details about individual companies in the Daiwa Securities Group, visit the Group's website at http://www.daiwa.jp/ir/english/.

DAIWA SUSTAINABILITY REPORT 200407

Special
FeatureInitiatives in the Daiwa Securities Group's Core BusinessInitiatives for Socially Responsible Investment
What is SRI?
In the broad sense, socially responsible investment, or SRI, refers to the flow of money (including
savings and financing) in ways conscious of the needs of society. Usually, however, it refers to a wayof investing money that appraises not only a business's financial data (sales, return on equity, etc.)
but also its corporate social responsibility (CSR), which includes its ethics and its actions for society
and the environment. In the past, SRI has been considered a special way of investing in Japan, buthereafter, investment with an SRI perspective will be the primary approach taken by the Daiwa
Securities Group.

Q&A: SRI at the Daiwa Securities GroupSRI awareness survey (taken at Daiwa SRI Investor Seminar)
Q1 How much impact does the SRI concept have on theinvestment behavior of investors at the present time?

Don't know: 3.8%

It has no impact: 2.5%

It has a strong impact: 2.1%
"The SRI concept has
an impact on present
investor behavior:"
36.6%

It has an impact:
34.5%
It does not havemuch impact: 57.1%

Q2 Do you think that SRI will spread in Japan?

It may appeal toindividual investors,
but it is not suitablefor institutional
investors:
8.6%
It will remain aniche wayof investing:
12.1%

It will spread
rapidly: 10.9%

Other: 3.1%
It will spread
after several years:
65.2%"SRI will spread inJapan hereafter:"
76.1%(Valid responses: 240)08

DAIWA SUSTAINABILITY REPORT 2004

Q1. Why is the Daiwa Securities Group working so hard to implement SRI?
A1. Issues touched off by the 20th century capitalist economy, such as harm to
the global environment and the growing gap between rich and poor, havecaused many to fear for the sustainability of society. SRI can support thesustainability of society by actively investing in businesses working to solvethese issues and deal sincerely with their stakeholders. Another important
aspect is that, since it is likely that businesses practicing CSR will grow invalue over the long term, SRI can be an attractive way for investors to invest
their money for long periods of time. Because that is the core business of the
securities industry, the Daiwa Securities Group believes that it is our social
mission to lead in promoting SRI.
Q2. What initiatives is the Group taking presently?
A2. Between June 2001 and May 2004, the Daiwa Securities Group began
managing and selling three SRI funds1. Aside from investment trusts, theGroup also supports SRI by offering Kamakura Midori Sai, or "Kamakura Green
Bonds," and investing in a World Bank carbon fund. It further releases
CSR/SRI information and supports NGOs and non-profits working to promote
CSR/SRI.
1 For details, see page 09.

Q3. What is your outlook for the future of the SRI market in Japan?
A3. As of June 2004, the scale of the SRI market in Japan is estimated atabout 150 billion yen. For comparison, the market is about 230 trillion yen in
the US and 50 trillion yen in Europe, so Japan's SRI market has plenty ofpotential for growth.
At the Daiwa SRI Investor Seminar held by the Group in June 2004, we
asked primarily institutional investors and corporate CSR managers to fill out aquestionnaire. According to the results, only 37% of respondents thought that"the SRI concept has an impact on present investor behavior," but 76%
expected that "SRI will spread in Japan hereafter." As of 2004, SRI is still in thenascent stage in Japan.

Fund managers and experts talk about the SRI fund concept
Investors have a wide range of investment trusts to choose from, but SRI funds have a number of uniquefeatures. This section introduces our readers to the characteristics of the three SRI funds the Daiwa
Securities Group offers its customers and the ideas of fund managers and experts.

Ryoji Takaoka
Senior Fund Manager,
Japanese Equity
Management Department 1,
Daiwa Asset Management
Co. Ltd.

The Daiwa Securities Groupis working to put "brandmanagement" into effect toearn the trust of its stakeholders. Therefore putting
CSR into practice in our corebusiness was a great mission for us. This fund is theresult.
Hereafter, we will be putting more time into fundmanager reports and othertools to help our investors
understand CSR and SRI,
and I hope to help the fundgrow over time as a result.

This fund was created because
Daiwa Securities Group wishedto have a unique global equity
SRI fund easy for Japanese investors to understand and because UBS had a good trackrecord. The issues making up
the portfolio are primarily frompremium, well known compaHideo Ueki, CFA, CMA nies outside of Japan with exExecutive Director, Chief Investmentcellent CSR performance. SRI,
Officer and Head of JapaneseEquities, UBS Global Asset
which has just begun to draw
Management (Japan) Ltd.
attention in Japan, is most definitely not charity. Our role in SRI is to manage this fundso that investors will feel confident that they will get ahigh return on investment over the medium- to long-term.

Daiwa SRI Fund2 :Japanese stocks only, with a focus on transparency and sincerity
The Daiwa SRI Fund, which invests in Japanese stocks, was created in partnership with Integrex Inc., a firm that quantitatively assesses CSR. Using the comprehensive R-bec001
framework as based on Japan's original CSR standard ECS2000, this fund screens businesses' CSR by focusing on organizational systems, information disclosure attitude and"business sincerity and transparency" as revealed in its measures for
dealing with emergencies. It then narrows down its investment targets byexamining the future potential of company products and services, competitiveness, business strategy and so on. In the first two months since
its launch in May 2004, it has grown to become Japan's largest SRI fund.
2 Established May 2004. As of June 30, 2004, net assets totaled 29.4 billion yen.

Daiwa SRI FundUBS Global Equity 40 SRI+3 :SRI fund consisting primarily of premium non-Japanese stocks
With sales beginning in October 2003, UBS Global Equity 40 SRI+ focuses on companies'
CSR performance by referring to issues listed in the Dow Jones Sustainability World Index(DJSI World) and SRI survey results of UBS AG. The fund invests primarily in large, premium company shares in major industrialized countries, selecting specific investment targets
by assessing medium- to long-term company growth potential, productcompetitiveness, financial strength including profitability, and stock
prices.
3 Established November 2003. As of June 30, 2004, net assets totaled 8.5 billion
yen.
UBS Global Equity 40 SRI+

"Mrs. GREEN" is an investment
trust originated by a woman andbrought to reality by female staff
members. The portfolio consistsof global stocks with a CSR perspective, primarily focusing on
environmental aspects as basedon environmental assessments
by Innovest Strategic Value AdviMasayuki Yoshida sors. Achieving social growth
Deputy General Manager,
while protecting the environment
Investment Trust Support,
Daiwa SB Investments Ltd.
is possible and these are notcontradictory goals. Achieving
this, however, will require that each business's stakeholders
change together. As people become more interested in "Mrs.
GREEN," I think we will see society's consciousness change.

Global Eco Growth Fund (nickname: Mrs. GREEN)4 :A CSR perspective with an environmental focus"The stock market assesses companies according to how they act toward the environment." Based on this concept, the fund, which invests in Japanese and global stocks, first
selects issues from a growth (performance) perspective then further narrows down its
choices based on environmental assessments by Innovest Strategic Value Advisors Inc.5
4 Established June 2001. The fund offers two options: Course A with foreignexchange hedging and Course B without foreign exchange hedging. As ofJune 30, 2004, combined net assets for Courses A and B totaled 4.8 billion
yen.
5 Innovest Strategic Value Advisors Inc. is an investment research company
that analyzes and assesses businesses in terms of environmental efficiency
and sustainability and assigns an environmental ranking based on these.
Mrs. GREENDAIWA SUSTAINABILITY REPORT 200409

Special
FeatureInitiatives in the Daiwa Securities Group's Core Business

Revitalizing regional economies:
Establishment of regional index funds

List of regional index funds
Fund name

The Daiwa Securities Group sells "regional index
funds"6 whose portfolios consist of issues from businesses with deep ties to a certain region. The goal of

Ibaraki FundNet assets

Region(As of June 30, 2004)

Ibaraki Prefecture

3.98 billion yen

Kanagawa Support Fund Kanagawa Prefecture 1.36 billion yen

these funds is to inject vitality into regional econoSainokuni Support Fund

Saitama Prefecture

geting businesses in four prefectures: Ibaraki,

Shizuoka Benchmark Fund

Shizuoka Prefecture 7.39 billion yen

Kanagawa, Saitama and Shizuoka.

Total

mies. As of June 30, 2004, the Group has funds tar-5.01 billion yen

17.74 billion yen

Local bond enables citizens to care for their natural environment: Kamakura Midori Sai
Kamakura Midori Sai, or "Kamakura Green Bonds," were issued in
December 2003 as Kamakura City's first local "mini bonds" (leadmanager: Daiwa Securities; amount issued: two billion yen). The
goal was to procure funds from area citizens and use the funds toprotect the environment of the forested, hilly western section of thecity. Branch Manager Emi Fukuhara says that "The theme, which isappropriate for an age of direct financing, is 'Community building
through the hands of Kamakura's citizens.' By getting deeply involved, Daiwa Securities also has the opportunity to make more

Emi Fukuhara,

people aware of the social role of a securities company." Branches

Branch Manager, Kamakura
Branch, Daiwa Securities

worked together to promote the fund, so that the entire issue soldout just after 10:00 AM on the opening day of sales.

Staff members from
Kamakura Branchamount from others that are under the limit. This sys-

Investment in World Bank carbon fundtem is drawing attention as a means for meeting
emissions reduction targets promised under the Kyo-

In July 2003, Daiwa Securities SMBC Principal Invest-

to Protocol (emissions reductions from 2008 to 2012

ments Co. Ltd. became the only securities company

are to be at least 5% vs. 1990 levels).

in the world to invest in a World Bank carbon fund(the Community Development Carbon Fund), pur-World Bank carbon fund scheme

chasing a share worth US$2.5 million. This carbon
fund invests in emissions rights arising from development projects to reduce greenhouse gases, for example the use of wind power in industrializing countries,
thus contributing to the reduction of greenhouse gas-

Industrialized country
Industrializing country
Funds and humanresource development
World Bank
Community Development
Greenhouse gas
Carbon Fund

reduction projects

es in industrializing countries and regions while supporting social development there. Daiwa Securities
SMBC Principal Investments also participated in the
Carbon Expo, held in Cologne, Germany in June 2004
to promote the active trading of emissions rights.
Greenhouse gas emissions trading is a system

Reforestation
Hydropower, windGreenhouse gas power, biomass power
emissions rights New transportation
systems using
electricity

Investment
Daiwa Securities
SMBC Principal
Investments
Other investors

under which, for example, each nation (or business) isallowed to emit a certain amount of greenhouse gas6
Daiwa Asset Management hasestablished and is operating thefour regional index funds.

10

DAIWA SUSTAINABILITY REPORT 2004

es, and those nations (or businesses) that exceed thelimit can purchase rights to release the excess

Able to meet greenhousegas reductions frameworkat low costSocial development
while reducing greenhousegas emissions

Activities to promote SRI

Daiwa SRI Investor Seminar

Signatory to Carbon Disclosure Project (CDP)11

The Daiwa SRI Investor Seminar took place on June

Daiwa Securities Group Inc. became a signatory to

18, 2004. The 420 attendees consisted mainly of

the Carbon Disclosure Project (CDP) in March 2004.

company CSR managers and institutional investors.

The CDP is the secretariat for an alliance of institu-

Exploring the theme "SRI and Its Possibilities," thetional investors interested in climate change who ask

seminar brought together company pension manag-

global businesses to disclose information on their ac-

ers, SRI supervisors, CSR assessors and quantitative

tions and positions on global environmental prob-

analysts, who discussed the question, "Does SRI lead

lems. As of May 2004, the CDP has 95 participating

to good investment performance?" Foreshadowing

financial institutions with combined working assets ofan age of wide-scale SRI investment in Japan, theapproximately US$10 trillion, demonstrating that insti-

seminar gave the participants a clear sense that SRI

tutional investors are highly concerned about climate

will soon no longer be a specialized way of investing.

change.

▲7

A panel discussion at the seminar.

7
For details about the Daiwa SRI
Investor Seminar, see
http://www.daiwa.jp/branding/sri/seminar040723.html(Japanese only)
8
Social Investment Forum Japan:
http://www.sifjapan.org/(Japanese only)

Publication of SRI/CSR report
SRI/CSR reports produced by the Daiwa Institute of
Research are published on the Group's "CSR Website12." In addition, a compilation of multiple reports,"Daiwa Securities Group SRI Reports 200413," has9
Association for Sustainable &Responsible Investment
in Asia (ASrIA):
http://www.asria.org/

been produced.
10
ASrIA Annual Conference:
http://www.asria.org/events/
singapore/july04/home▲

Lecture by Mariko Kawaguchi,
Senior Analyst
at Daiwa Institute of Research

SRI awareness survey
Daiwa Investor Relations Co. Ltd. has performed aseries of surveys for analysts and fund managers in

Support for NGOs and non-profits advancing SRI

Japan on the topic of "The impact of SRI on Japa-

Taking part as a corporate member, the Daiwa Securi-nese businesses" since December 2002. In the mostties Group supports non-profits which advance therecent such survey, performed in March - April 2004,

SRI cause. Social Investment Forum Japan8,

only 21.0% of respondents said that "SRI has an im-

launched in November 2003, pursues its mission ofpact on report writing and stocks chosen for invest-

helping to establish social systems wherein funds

ment," but 60.5% of respondents believed that "SRI

flow to companies with strong pro-social characteris-

will become widespread in Japan."

11
Carbon Disclosure Project (CDP):
http://www.cdproject.net/
12
http://www.daiwa.jp/branding/(Japanese only)13
http://www.daiwa.jp/branding/
sri/report.html (Japanese only)

tics. Additionally, the Association for Sustainable &Responsible Investment in Asia (ASrIA)9 held its Annual Conference10 in July 2004 in Singapore, at which
Director and Executive Vice President Masayasu Oi of
Daiwa Asset Management gave a speech on the status of SRI in Japan.

SRI awareness survey by Daiwa Investor Relations (March - April 2004)
Respondents: total of 81 Japanese analysts and fund managers

Items

Speech by Masayasu Oi, Directorand Executive Vice President of
Daiwa Asset Management

I know about SRI

92.6%

I know about CSR

90.1%

SRI will become widespread in Japan

60.5%

SRI has an impact on report writing and stocks chosen for investment

21.0%

DAIWA SUSTAINABILITY REPORT 200411

Special
FeatureInitiatives in the Daiwa Securities Group's Core BusinessInitiatives for Economic and Financial Education
All of us from children to adults are getting along, using the medium of money in our day-to-day lives.
Therefore we are all quite familiar with money, but the Daiwa Securities Group believes that, in Japan, we
have not had sufficient education in money flows, economic systems or even social systems.
The Daiwa Securities Group works with a variety of educational institutions and non-profits to provide
people with opportunities for economic and financial education and research. Specifically, we support 1)
basic education for elementary, middle and high school students and 2) education and research throughindustry/academic partnerships with universities and graduate schools. We consider such activities to be away for us to use our professional knowledge and skills to make a contribution to society in our core areaof business.

Initiatives for Economic and Financial Education
Sustained development of Japan's economy in the 21st century
Understanding the basic
principles of society andthe economy

Raising level of
economic andfinancial education

Nurturing offinancial specialists

Announcement ofresearch results
Application on the job

Application/businessstartup using
research results

Elementary, middle
and high school
students

University students

Graduate students

ResearchersIntellectual property
and patents

Educational
institutions

Research
institutes
Cooperation of Group employees

Participation in courses
Support for teachers

Courses offered orsponsored
Lecturers sent

Courses offered orsponsored
Lecturers sent

Joint research
Research support

Support for venture businesses
from universities and forintellectual property departments

Main industry/academic partnerships with universities and graduate schools in FY 2003
Main objectives

Major industry/academic partnerships Major efforts in FY 2003
Courses sponsored

Educational support Courses offered

Offered course on "Theory of Corporate Governance" at Keio University
Shonan Fujisawa Campus. This introductory course teaching the importanceof market-type finance gets many students every year. Announced partnership with Waseda Graduate School of Finance, Accounting and Law.

Lecturers sent

Lecturers sent to 12 courses at as many universities in Japan, including
Aoyama Gakuin University Graduate School of International Management.

Joint research

Performed joint research on company valuation with Hitotsubashi University Graduate School of International Corporate Strategy. Presented research
results in Securities Analyst Journal. Research results also posted on our
website.

Award system support

Provided comprehensive support for Porter Prize 2003 (given to Japanesebusinesses using excellent strategy to achieve high profitability).

Research support

Exchange support

Scholarship system

Support for holding conferences

12

DAIWA SUSTAINABILITY REPORT 2004

Offered two courses at Hitotsubashi University Graduate School of International Corporate Strategy and one course at Kyoto University Graduate School of Economics

Operated Daiwa Securities Group's scholarships for international students
at Hitotsubashi University Graduate School of International Corporate Strategy (eight individuals received scholarships in FY 2003).
Supported Kyoto University's symposium on Chinese economic development and capital markets to mark the opening of the university's Shanghai
Center for Economic Research.

Acquiring life skills: Economic education for elementary, middle and high school students
The Group's hope is to help children understand that the basic premise of the economy is to create a common goodfor society. The phenomena of day to day life exactly parallel the basic principles of the economy. Even the smallest
actions that an individual takes can create value for society. We believe that when the child becomes keenly awareof this, it empowers the child to live. It is out of a desire for doing this that the Daiwa Securities Group supports economic education in elementary, middle and high schools.

Cooperative partnership with Junior Achievement1 JapanThe Daiwa Securities Group endorses the economic education efforts of Junior Achievement Japan and supports
the promotion of its programs and their implementation in places of education.

Activities for spreading economic education
The Daiwa Securities Group provided support to Junior Achievement Japan's third

1
Junior Achievement:
A non-profit organization founded in the US in 1919. The
world's largest organization
dedicated to economic education, it provides materials andprograms to schools free ofcharge in various countries.
With the support of member
businesses, Junior Achievement
strives to educate young people
about business management,
economics and finance. Junior
Achievement Japan was established in 1995, with the Daiwa
Securities Group becoming amember in 2000.

Global Leadership Forum for Elementary, Middle and High School Teachers, held in
August 2003. This forum, which drew participation from nearly 800 teachers at the elementary to high school level from all over Japan, provided a venue to consider the
hoped-for state of education in the 21st century. From the Daiwa Securities Group,
Eiji Azuma, Managing Director at Daiwa Institute of Research, gave a lecture on the
topic of "Conditions for Revitalizing Japan's Economy."

At the Global Leadership Forum

2
The Student Company Program, or SCP, is Junior Achievement Japan's hands-on economic education program. For
details, see http://www.ja-japan.org/ (Japanese only).

Student Company Program (SCP)2: Working with JUGO Inc. at Ritsumeikan Senior High School
The Daiwa Securities Group has supported the "Student Company Program," or SCP, which has been given as
part of the regular curriculum at Ritsumeikan Senior High School in Kyoto since October 2003. Under this program, 15 students started a company called JUGO Inc. with a capital of 10,000 yen. The students ran the business for a period of 16 weeks, in the meantime learning about social and economic systems. Three employees
and one retiree from the Daiwa Securities Group took part in weekly classes and advised the students as outside
directors.

Outline of the SCP
October 9, 2003:
A President is selected andthe company established.
JUGO Inc. starts activities.
November 22, 2003:
Company begins selling ornamental
plant
products"PLANCOAL" and "Kaguyahime."
February 1, 2004:
Street sales at Kyoto's Nishiki Market. JUGO sells out its
stock of 27 PLANCOAL and
19 Kaguyahime products.

A JUGO Inc. board meeting

Company members
making products

Selling to PTA members

General meeting of shareholders

March 12, 2004:
Students visit Daiwa Securities Group Inc. and report
activity results to President(now Chairman) Hara.

SCP: A 16-week struggle and maturing experience
For the 15 students who took part, SCP was a 16-week of struggle, anguish, joy
and maturing. As the supervising teacher who spent time with the group during
these 16 weeks, I came away feeling that children will show their unlimited
potential, if just given a place and opportunity to do so. I appreciate the personnel
from Junior Achievement who offered and supported the program and themembers from the Daiwa Securities Group who gave such good advice to thestudents every week as outside directors.

February 19, 2004:
Activities end

Tetsuji Jinno, Teacher, Ritsumeikan
Senior High School

March 13, 2004:
Business performance announced at joint SCP general meeting of shareholders
held at IBM Japan.

DAIWA SUSTAINABILITY REPORT 2004

13

Special
FeatureInitiatives in the Daiwa Securities Group's Core BusinessIndustry/academic partnerships with universities and graduate schools
Industry/academic partnerships are an important way to contribute to the sustained development of the Japanese
economy.
The heart of the Daiwa Securities Group's industry/academic partnerships is the sending of lecturers and offering and sponsorship of courses at universities around Japan, and joint research with graduate schools. Additionally,
the Group sends employees to such organizations as university-originated ventures and university intellectual property departments to act as coordinators between the seeds of the academic world and the needs of the industrial
world.

Offering courses and sending lecturers: Industry/academic partnerships taking advantage of regional characteristics
The Daiwa Securities Group sends lecturers to lead courses it provides of varying size and content. These include
courses to which personnel from Daiwa Securities branch offices are sent as lecturers according to the needs of local universities. The Takamatsu Branch of Daiwa Securities, for example, has given spot lectures a total of nine times
through FY 2002 at Kagawa University and an associated middle school and started its second series at a national
university in FY 2003. Continuing in FY 2004, the manager of the Takamatsu Branch and directors from group companies have lectured on the theory of securities markets. We believe that, through local efforts like these, we cancontribute to regional economies.

Nurturing economy-savvy citizens: Initiatives of the Takamatsu Branch
How can we make ourselves the most trusted compa-

Moreover, we got a strong impression of how im-

ny? That is the question that prompted the Takamatsu

portant it is that activities taking place within a local

Branch of Daiwa Securities to form an industry/aca-

community be planned by people who truly understanddemic partnership with Kagawa University. Duringlocal characteristics. It is so critical that action comebranch meetings, we staff members narrowed the dis-from the place that best understands the local people,

cussion to ways of vitalizing Takamatsu's economy, af-

economic conditions and problems of the area.

ter which we interviewed people from the prefecturaland city governments as well as university and financial

Tatsuru Asano,world personnel. This ended in a decision to try to help

Branch Manager
Takamatsu Branch, Daiwa Securities

nurture human resources with practical skills. Twelvesite managers from three companies in the Daiwa
Securities Group came together to give a lecture exposing students to practical knowledge based on onsite experience.
In our lectures we talked about what we were doing on the job, what we were struggling with, what theworkplace was really like, and so on. This is what we
consider "practical knowledge." The students listenedwith great interest, since these were real-life stories
from the business place.
Working in these industry/academic partnerships,
we come to be better known within the community andto understand that our customers have developed asense of trust in us in many ways.

14

DAIWA SUSTAINABILITY REPORT 2004

Main points of Theory of Securities Market special lectures at Kagawa University in FY 2003.
Lecture topic

Lecturer

No. 1 Special Lecture and Orientation
Eiji Azuma
Managing Director
Daiwa Institute of Research
No. 2 The Securities Market: Its Effect on the Actual Economy Sachiko Hanaoka Deputy General Manager Investment Strategy & Research Department, Daiwa Securities
No. 3 The Role of the Securities Market as Seen in the Changes in Japan's Economy Hiroshi Asano
Deputy General Manager Takamatsu Branch, Daiwa Securities
No. 4 The Stock Market I: The Market System
Toyofumi Oga
General Manager
Equity Department, Daiwa Securities
No. 5 The Stock Market II: How are Stock Prices Determined? Toyofumi Oga
General Manager
Equity Department, Daiwa Securities
No. 6 The Bond Market I: What are Bonds? What is Rating? Kouichi Ninomiya General Manager
Fixed Income Department, Daiwa Securities
No. 7 The Bond Market II: From Yield to Fiscal Problems Kouichi Ninomiya General Manager
Fixed Income Department, Daiwa Securities
No. 8 Investment Trusts and Practical Asset Management Tatsui Yanagisawa Deputy General Manager Pension & Annuity Department, Daiwa Securities
No. 9 What are Derivatives?
Shizuka Osawa Deputy General Manager Daiwa Institute of ResearchNo. 10 Investment and Securities Companies
Kinya Kuramoto General Manager
Corporate Planning Department, Daiwa Securities
No. 11 Securitized Products: New Finance Techniques
Yuichi Sato
Deputy General Manager Daiwa Institute of ResearchNo. 12 Information Disclosure and Investor Relations: From Black Boxes to Glass Windows Makoto Yada
Deputy General Manager Takamatsu Branch, Daiwa Securities
No. 13 Case Studies in the Importance of Compliance
Yoshinori Shikada Deputy General Manager Personnel Department, Daiwa Securities Group Inc.
No. 14 Overview and Role of Securities Markets Hereafter Nobuyuki Sano Branch Manager
Takamatsu Branch, Daiwa Securities(Titles given were valid as of FY 2003)

Joint research with graduate schools

Other industry/academic partnerships

Joint research between companies and graduate

Japan at this time needs to find ways to take universi-

schools has a number of advantages both for thety and graduate school research and apply it prompt-

companies, who can apply graduate school research

ly to the economy. The Daiwa Securities Group is en-

results to their business, and for the graduate

deavoring to support university-originated venture

schools, who can absorb company know-how. One

businesses and university intellectual property offices

example is the Group's joint research with the Hitot-

which seek to apply research results to private enter-subashi University Graduate School of International

prise in a process of technical transfer. Moreover, it is

Corporate Strategy on the theme "Valuation of Diver-

helping to hold international conferences to whichsified Corporations in Japan: Analysis by Fundamen-

noted researchers from abroad are invited. The Grouptals and Investment Strategies." Specifically, the re-will continue to offer ongoing, multifaceted support

search examined whether the concept of theand create ways to apply university and graduate"diversification discount," widely accepted in theschool research directly to Japan's economy.

West, can be applied to Japanese businesses, andthis led to the development of a "diversified company
evaluation tool." Published in the Security Analysts
Journal®, the study has captured attention from many3
For details on joint researchwith Hitotsubashi University's
Graduate School, see
http://www.daiwa.jp/branding/action/acd.html(Japanese only)

quarters.3

Joint research using the respective strong points of graduate schools and businesses
Naoya Kubo (right), Deputy General Manager, Quantitative
Research Department, Daiwa Securities SMBC
The joint research made me feel that my theoretical knowledge of the
field was lacking. That motivated me actually to become a student of
Hitotsubashi University's Graduate School. The chance to mingle
with people from the academic world is one of the great things aboutindustry/academic partnerships.

Makoto Nakano (center), Associate Professor, Graduate School

Yukimitsu Yoshimura (left), Assistant Manager, Quantitativeof International Corporate Strategy, Hitotsubashi University

Research Department, Daiwa Securities SMBC

As academic disciplines, corporate finance and finance in general

The Daiwa Securities Group has so many staff members, it's like a

are strongly characterized by practical knowledge, but within thetreasure house of human resources. Through the research process

university framework, the sense of being in the workplace is miss-

we were able to take the knowledge and experience of many em-

ing. We have done joint research with private enterprise because itployees and use it to produce results. As competition among busi-

gives one that sense of being in the actual workplace and one feels

nesses heats up, it is the ability to create new areas of business thatthat the research can really be put to practical use. We have been

will enable companies to grow. That is one way in which this type ofable to accomplish some highly original research by working withindustry/academic partnership is such a great opportunity.

people from the Daiwa Securities Group, who have real experiencein quantitative analysis.

DAIWA SUSTAINABILITY REPORT 200415

Results and Issues/Targets

Management

Issues and targets for FY 2003 (the symbol • indicates results forwhich neither issues nor targets had been listed)

Corporate Governance

Relative achievementof targets

Page(s)in report

Move to a "committee system."

pp.20-21

Perform results evaluation in accordance with new medium-term management plan.

p.18

Establish a Corporate Governance Principle (FY 2004 target).

p.21

Prepare Group-wide risk assessment, control and monitoring systems.

p.19•Perform survey with questionnaire on "Corporate Ethics Hotline."

p.25

Provide systematic compliance training.

p.23

Perform internal process-check inspections.

pp.22-23

Prepare compliance manual.

p.23

Establish voluntary action standards.

p.22

Systemize compliance training.

p.24

Review examination items and frequency based on periodic self-assessments in each office.

p.24

Establish a Disclosure Policy to provide standards and methods for information disclosure.

p.26

Enhance information on and improve user-friendliness of IR website.

p.27

Support economic/financial education for young people (elementary school through high school students).

pp.12-13

Support socially responsible investing.

pp.08-11

Hold third customer satisfaction survey.

p.31•Give customer questionnaire to approximately 410,000 customers of Daiwa Securities.

p.31

Consider degree of customer satisfaction in assessments of retail branches and employees.

p.31

Raise average employment rate of persons with disabilities at nine companies to 1.8%.

p.34

Promote women to managerial positions.

p.33

Make 20% of Deputy General Managers graduates of Daiwa Leadership Program.

p.35

Enrich programs designed for enhancing ability of consulting and asset management.

p.35

Reform personnel compensation ("compensation system based on work classification,""more graduated salary levels," "senior work system," etc.), greatly expand intra-Groupjob postings and develop multi-directional evaluation system.

pp.32-33

Prepare to move to a "committee system" and study Nominating Committee operations system and director selection standards.

pp.20-21•Corporate citizen activities with emphasis on ties to community.

p.36

Support economics/investment education more actively.

pp.12-15

Provide more volunteer opportunities to interested employees.

p.37•Begin including "Dr. Sustaina's Environmental Course" (with environmental awareness raising content) in internal publication.

p.39

Establish a basic green purchasing policy and develop green purchasing.

pp.40-41

Introduce an Environmental Management System, study setting up a department of environmental management.

pp.40-41

FY 2004 greenhouse gas reduction targets: Daiwa Securities Headquarters Building 2.0%;
Eitai Daiya Building 0.1% and Daiwa Eitai Building 1.9%.

pp.38-41

Entire Group

Daiwa Securities

Compliance

Daiwa Securities
SMBC

Information DisclosureCore Business

Customer Satisfaction

Daiwa People

Philanthropy and Community Involvement

Working for the Environment

16

DAIWA SUSTAINABILITY REPORT 2004

*Dates are provided for items already performed as of August 2004.

Issues and targets for FY 2004 and beyond

Learning the issues and setting targets
The Daiwa Securities Group pursues numerous activi-

Establish highly persuasive evaluation standards in keeping with Group strategy.

ties for the sustained development of society and theEstablish a Corporate Governance Principle.

Group itself. We also believe that disclosing the

Further enhance internal control system.

Group's issues and targets for these activities is an

Raise level of internal understanding of Corporate Ethics Hotline and periodically survey for awareness.
Examine establishment of "voluntary action standards."

important part of fulfilling our responsibility to explain
ourselves to stakeholders.
In its core business as a securities firm, the"More thorough legal compliance and elimination of improper conduct," "achieve higher level of investor protection."Group has focused its initiatives on creating

Established "Compliance Officers" (April 2004).

society-friendly money flows (particularly through SRI)

Create "Work Manual for Internal Administration Supervisor."
Re-examine from perspective of cross-Group voluntary action standards.

and on economic and investment education foryoung people in order to promote the healthy growthof Japan's economy. Improving customer satisfaction

Strengthen compliance training and online training in departmental units.

has become the core of our corporate branding initia-

Revise "Handbook for Legal Compliance."

tives and the Group has made greater efforts than ev-

Establish an electronic bulletin board for internal administration supervisors.

er to use customer input in its products and services.
This input came from comments made to our Cus-

"Strengthen functions of internal administration supervisors and internal administrators," "enhance training,""enhance intra-departmental inspections" and "prepare environment to assure thorough legal compliance."

tomer Support Hotline and results of our customer

Create a booklet of Compliance Newsletters.

reforms in our personnel system, introducing a com-

Increase percentage of ownership by individual shareholders.

pensation system based on work classification and

Actively pursue two-way communication with stakeholders.

satisfaction surveys. We have also implemented two

more graduated salary levels.
In FY 2004 it is the Daiwa Securities Group's
goal to create even greater customer satisfaction

Established Daiwa SRI Fund (May 2004) and held Daiwa SRI Investor Seminar (June 2004).

through improvements to our management and serv-

Partnership with Waseda Graduate School of Finance, Accounting and Law (April 2004).

ice systems and to enhance management speed,

Continuous effort for "post-sales follow up:" Increase frequency of customer contact, learn customer needs and improve quality of suggestions for customers.

transparency and accountability by our conversion to
a committee system, thus building trust with not just"Checking basic actions:" Be thorough in basic actions and fundamental services.

customers but with society as a whole. Further, wePursue "understandability as seen from the customer's point of view:" Use simpler language in documents, forms, etc. intended for customers.

seek to build an environmental management system

Increase customer satisfaction by improving sales and service systems.

such as we were unable to achieve in FY 2003 andAim to stabilize employment of persons with disabilities, review nature of work and make workplace environment improvements.
Improve "evaluator training" to raise persuasiveness of evaluations.

are examining such measures as implementation ofan environmental management system whose significance is more readily understandable to employees.

Aim for 20% enrollment in Daiwa Leadership Program from Group overall.
Enhance personnel system with goal of fostering professional human resources.

Partner with parties subsidized by foundations and perform corporate citizenship activities closely tied to the community through branch offices.

Promote understanding of volunteerism among Group employees with social welfare experiences.
Strengthen environmental communication with goal of raising Group employee environmental awareness.

Study effectiveness of implementing ISO 14001, taking into account characteristics of business area.
Achieve greenhouse gas (CO2 equivalent) reduction target (1.9% less than FY 2001) in Daiwa Eitai Building.

DAIWA SUSTAINABILITY REPORT 2004

17

Management

Corporate Governance

The Daiwa Securities Group in FY 2003 established performance evaluation standards following its
medium-term management plan, and set up systems to link executive compensation with results measured in terms of financial results, work processes, business environment and stakeholder concerns. In
June 2004 the Group made the change to a committee system in order to increase management transparency and mobility.

customer's point of view.

Preparation of Group company performance evaluation
standards linked to the Group's medium-term management plan

The Daiwa Securities Group intends to be flexible in setting highly persuasive evaluation standards

The first and foremost concern of corporate gover-in keeping with Group strategy.

nance is to create systems where one's words match
one's actions and to achieve highly transparent andPreparation of executive compensation
framework

mobile management systems. In FY 2003, the Daiwa
Securities Group prepared performance evaluation

1
Compensation of Outside Directors is a set amount and not
linked to business performance.

standards in each Group company, as based on the

The Daiwa Securities Group determines the monthly

Group's medium-term management plan (FY 2003 –salaries and its bonus funds (a combined total for

FY 2005).

each Group company) to pay each Group company's
1

Performance evaluation standards look not only

Directors and Corporate Executive Officers (and Ex-

at financial results but also at work processes, relative

ecutive Officers) based on performance evaluationcompetitiveness of the Group, compliance and thestandards of each Group company. Moreover, theperspective of an important set of stakeholders, ourmonthly salaries and bonuses that individual Direc-

customers. For example, evaluations reflect client as-

tors and Corporate Executive Officers actually receive

sets under custody and results of customer satisfac-

goes up and down depending on their individual eval-tion surveys in order to make an assessment from theuations at Group companies.

Major performance criteria of the Daiwa Securities Group
Stakeholders
Financial
perspective

Index

Shareholders
ROE (return on equity)
Assets received for holding
Customers

Customer satisfaction

18

DAIWA SUSTAINABILITY REPORT 2004

Increase of customer assets held at Daiwa Securities

Investment bank business ranking League table (bonds, equities, new offerings, mergers and acquisitions, etc.)

Process
perspective

Relative
evaluation

Measuring standard
Ordinary income

Individual customer satisfaction survey results, customer retention rate
Securities popularity ranking, corporate brand score

Employees

Productivity

Productivity per employee-

Stability

Fixed cost cover ratio-

Compliance system

Qualitative judgement-

Evaluation of aspects of market environment and competitive environment

Abolishment of Retirement Gratuities System
for Retiring Directors (Daiwa Securities Group Inc.)

2
Specifically, a corresponding
portion of monthly salaries isdeposited as company stock
purchasing funds in the Executive Shareholding Association.

Control Committee works to improve internal control
systems.

The Board of Directors in May 2004 resolved to abol-

Through this series of steps, the Daiwa Securi-

ish the Retirement Gratuities System for Retiring Di-

ties Group is further enhancing its internal control

rectors at Daiwa Securities Group Inc. Therefore, be-systems in terms of work effectiveness and efficiency,

ginning in July 2004, executive compensation isfinancial reporting reliability and compliance with laws

adjusted for each year of service based on annual

and regulations.

performance, thus creating an executive compensation framework that is more transparent and closely
linked to performance.

Requirement to take part of executive compensationin company shares
Since July 2003, Directors and Corporate Executive
Officers (and Executive Officers) of eight major Group
companies have been required to accept approximately 10% of their monthly salaries in Daiwa Securities Group Inc. stock.2 This is meant to tie executives'interests to those of shareholders and increase exec-

Total compensation paid to Daiwa Securities Group Inc. Directors and Corporate Auditors (FY 2003)

utives' long-term incentive to maximize share price as
Monthly salaries

shareholders. Further, as a way of increasing motivation for improving consolidated performance, the Executive Committee determined in August 2004 to issue stock options.

Preparing Group-wide risk assessment,
control and monitoring systems
An Internal Audit Department, under the direct super-

Bonuses

Retirement gratuities

Amount paid in year

Recipients

Amount paid

Directors

9 245,050,730 yen

0

0 yen

Corporate
Auditors

4 60,000,000 yen--

Recipients

Recipients

Amount paid
2 41,499,200 yen
0

0 yen

*Recipients of monthly salaries include two Directors who retired in midterm.
*For employee-Directors, no salary is paid for the employee portion.
*Bonus payments were based on profit distribution as determined at the ordinary general meeting ofshareholders in June 2003. Bonuses are not paid to Corporate Auditors regardless of results.

vision of the CEO, has been established at Daiwa Securities Group Inc. The Internal Audit Department has
authority over the preparation of Daiwa Securities
Group Inc.'s internal control systems and internal audits. It has the additional objectives of preparing internal control and improving internal audit systems

Management audit organizational system
Internal Control Committee

Group-wide by working with corporate planning departments and internal audit departments of Group

Reporting

Audit Committee

Approval of
audit plan

Reportingcompanies in Japan and abroad.
In April 2003, the Group established the "InternalInternal Audit Department, Daiwa Securities Group Inc.

Audit Rule" to clarify basic internal auditing mattersand assure that auditing proceeds smoothly and effi-

Inspection

ciently. Additionally, the Internal Control Committee,
headed up by the CEO, was established in July 2003
as a subcommittee of the Management Committee (itis currently a subcommittee of the Executive Com-

Inspection
Internal audit systemverification interviews

Group company(without internal
audit department)Internal auditing departments of Group companies
Inspection

Daiwa Securities
Group Inc.
Departments

mittee). The Internal Control Committee deliberates
and makes decisions on matters relating to internal

Departments and branches

control and preparation of risk control and internal
auditing systems in the Daiwa Securities Group.
Meeting as a rule every three months, the InternalGroup company(with internal audit department)

DAIWA SUSTAINABILITY REPORT 200419

Corporate GovernanceManagement

The number of Outside Directors has risen fromTransition to a "committee system"

two to four, and Nominating, Audit and Compensation
Committees have been established to strengthen the3
A company based on a committee system:
A company whose articles of incorporation, in keeping with the
Audit Special Exceptions Law,
stipulate that the company establish three committees (Nominating, Audit and Compensation) of which a majority ofmembers are Outside Directors
and also establish Corporate
Executive Officers to perform
company work functions.

The June 23, 2004 general meeting of shareholders of

directorship function. To coincide with these changes,

Daiwa Securities Group Inc. featured a vote to revise

the Group has eliminated the position of Corporate

the articles of incorporation and transition to a com-

Auditor. Further, the Group has transferred broad au-pany based on a committee system.3

thorities from the Board of Directors to the Executive

The Daiwa Securities Group changed to a pure

Officers, a change expected to increase mobility dur-holding company system in April 1999 and since thening decision-making. Also, we are working to makehas worked to build a governance system character-

Group management more thoroughgoing with the ap-

ized by high transparency and mobility. By adopting apointment of Corporate Executive Officers who also

committee system, the Group seeks to separate theserve as top management at Group companies.

directorship and executive functions, reinforce the directorship function of the Board of Directors andspeed up the decision-making process for executing
work.

Corporate governance organization
Nominating Committee2, five members (including three Outside Directors)
Proposes selections and dismissals of Directors

General meeting of shareholders
Board of Directors, 13 members (including four Outside Directors1 )Audit Committee3, three members (including two Outside Directors)

Basic management policy

Audits execution of duties by Directors and Corporate Executive Officers

Compensation Committee4, five members (including three Outside Directors)
Sets policies on Director and Corporate Executive Officer compensation, content of individuals' compensation

Internal Control Committee
Performs internal control and prepares risk control and internal audit systems

Executive Committee, 16 members

Disclosure Committee

Group-wide business strategy and management issues,

Monitors key information and determines what to disclose

important financial matters

Group IT Strategy Committee
Representative Corporate Executive Officer

1 Outside Directors

2 Nominating Committee

3 Audit Committee

4 Compensation Committee

Tetsuro Kawakami

Yoshinari Hara (Committee Chair)

Kenji Hayashibe (Committee Chair)Counsel of Sumitomo Electric Industries, Ltd.

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

Director, Daiwa Securities Group Inc.

Yoshinari Hara (Committee Chair)
Shigeharu Suzuki

Ryuji Yasuda
Chaired Visiting Professor,
Hitotsubashi University Graduate School

Keisuke Kitajima
Attorney

Koichi Uno
Certified Public Accountant

20

Writes original IT investment budget, evaluates and monitors IT investment

DAIWA SUSTAINABILITY REPORT 2004

Shigeharu Suzuki
Director and President (CEO), Daiwa Securities Group Inc.
(internal)(internal)(internal)(external)(external)(external)

Tetsuro Kawakami
Ryuji Yasuda
Keisuke Kitajima

Keisuke Kitajima
Koichi Uno

Tetsuro Kawakami
Ryuji Yasuda
Koichi Uno

Appointing of Nominating, Audit andCompensation Committees

decision-making. Daiwa Securities Group Inc. seeks

As the Group made the change to a committee sys-

executive decision-making authority as possible.

to entrust Corporate Executive Officers with as muchtem, in June 2004 it established a Nominating Committee, Audit Committee and Compensation Committee as internal organizations of the Board of Directors.

Preparation of executive system• Nominating Committee

Coinciding with the establishment of the Disclosure

The Nominating Committee mainly determines the

Policy4 in March 2004, the Daiwa Securities Group

content of proposals to appoint and dismiss Direc-

Inc. has appointed a new Disclosure Committee. With

tors, submitted to the general meeting of sharehold-its change to a committee system, the Group has

ers for their approval.

prepared its executive system by re-organizing the In-• Audit Committee

ternal Control Committee, Group IT Strategic Meeting

The Audit Committee performs such functions as au-

and Disclosure Committee as subcommittees of thediting the execution of duties by Directors and Corpo-

Executive Committee.

rate Executive Officers, determining the content of• Internal Control Committee

proposals to appoint, dismiss, etc. accounting audi-

Deliberates and rules on the arrangement of internal

tors (submitted to the general meeting of sharehold-control and of risk control and internal audit systems

ers for their approval), demanding a stop to any im-

for the work of the Group.

proper conduct by Corporate Executive Officers,• Disclosure Committee

auditing accounts and writing accounting reports. Ad-

Monitors important information, determines what in-ditionally, the committee works with internal audit de-formation to disclose and so on to assure disclosure

partments and other offices as needed to carry out its

that is fair, timely and appropriate.

duties.

• Group IT Strategy Committee• Compensation Committee

Proposes the IT investment budget, appoints system

The Compensation Committee sets policies for deter-

personnel as appropriate, reorganizes Group systemmining the compensation of individual Directors anddepartments, evaluates and monitors IT investment

Corporate Executive Officers and determines com-

implementation at Group companies, deliberates is-pensation content for each individual.

sues concerning cross-Group system development,
and so on.

Transfer of authority from Board of Directors
to Executive Officers
As the Group has changed to a committee system, it
has transferred broad authorities from the Board of

Establishment of Corporate
Governance Principle

Directors to the Corporate Executive Officers.

The Daiwa Securities Group is working to establish its• Board of Directors

Corporate Governance Principle in order to state its

Chaired by the Chairman of the Board, it consists ofstance on corporate governance to the outside world

13 Directors. It sets basic management policy, rules

and to make this stance better known among its em-

on matters essential to executing the duties of theployees. Preparation continues today with a goal of

Audit Committee and on such matters as the separa-establishing the principle in FY 2004.

4
For details, see Information Disclosure on page 26.

tion of Corporate Executive Officer duties and command relationships, and mainly directs management
through three committees.
• Executive Committee

Composed of all 16 Corporate Executive Officers, itdeliberates and rules on cross-Group business strategy and management issues and on important financial matters. The transfer of authority from the Boardof Directors means that Corporate Executive Officers
make work decisions individually or as a committee,
an arrangement which is expected to accelerate

DAIWA SUSTAINABILITY REPORT 200421

Management

Compliance

Daiwa Securities is raising the ratio of internally detected cases of improper conduct in sales and improving the effectiveness of internal restraints. Daiwa Securities SMBC is systemizing its compliance training.
And the Corporate Ethics Hotline, the cross-Group system for internal reporting, is expected to have aself-purifying effect and has brought issues to light regarding effective use of such systems.

In January 2004, the Group declared in"Think for yourself, act for yourself"
compliance initiatives

its Daiwa Securities General Business Agree-

Having enshrined "Total compliance" in its

signed with customers found to be involved

Corporate Principles1, the Daiwa Securities

with criminal groups, corporate racketeering,Group is developing a systematic organiza-

and so on.

Daiwa Securities

ment that it would dissolve any contract

Penetration of compliance consciousness
Following the principle of "think for yourself,tion that sets internal rules to assure thor-

act for yourself," Daiwa Securities branch of-ough legal compliance, provides awarenessraising activities and leadership to employees

Cross-Group initiatives

fices hold Compliance Meetings once aand monitors employee work. For this organ-

The Corporate Ethics Department at Daiwa

month to discuss specific themes of theirization to function effectively, the Group

Securities Group Inc. holds monthly Corpo-

own choosing. Also, the Compliance Depart-

strives to firmly implant a consciousness inrate Ethics Promotion Liaison Meetings withment continues to issue the "Complianceemployees that "compliance is the wellspring

ethics officers from Group companies so that

Letter" for employees, but in FY 2003 it be-of a business's income, and even one legal

we can come to a common understanding of

gan also to publish "Compliance One-Point

violation will damage the corporate brandcorporate ethics Group-wide, for example re-Lesson" and "Compliance Weekly." Throughand lead directly to a decline in income." Forgarding the effort to eliminate anti-social in-dissemination of information and throughthat reason, we believe it essential to create

fluences. During these liaison meetings, par-training (described below), Daiwa Securities

a culture of "think for yourself, act for your-ticipants study materials for information

has worked continuously to raise complianceself" compliance, in which each employee

gathering and training and otherwise make aawareness and improve the internal restraint

aims for compliance in his or her day to day

cross-Group effort to advance ethics.

and monitoring functions. This has resulted,
for example, in more frequent internal detec-

work.

tion of improper conduct2 in sales activity. In1 For details, see CSR-Based Management at the
Daiwa Securities Group on page 05.

Total complianceternal detection, which stood at 26% in FY

The Daiwa Securities Group has "the Code of2001, rose to 50% in FY 2002 and 73% in FY

Ethics" and "the Code of Conduct and Eth-2003. For the future, Daiwa Securities hopes

ics," both established in 1998. Because bothto step up internal restraints to eliminate therules expressly forbid certain actions, theoccurrence of improper conduct in the firstGroup felt it would be better to change toplace.
Moreover, Daiwa Securities began an-

No one can deny the possibility that persons

rules emphasizing voluntary conduct. The

with anti-social intentions could lurk behindGroup has now begun examining whether tonouncing

an everyday business transaction. The lesson

adopt "voluntary action standards," a set of"Sanction and Penalty Guidelines" andlearned from a 1997 incident in which thepromises conceived based on an ideal of"Content of Sanctions Imposed" in October

Daiwa Securities Group made a payment to a

conduct. Daiwa Securities had set "Establish

2003.

corporate racketeer has not faded, andvoluntary action standards" as a goal for FY

therefore the Group is working to stamp out

2003, but it now plans to re-examine the is-anti-social influences. This can be difficult,sue with the aim of achieving voluntary ac-

since such interests usually try to appear astion standards for the whole Group, not justordinary business partners. Group depart-

individual companies.

ments and branch offices have a system inwhich internal administration supervisors orinternal administrators check the backgroundof new business partners, and if unable to
make a satisfactory decision, these officers
consult with the Compliance Department.

22

Voluntary action standards

DAIWA SUSTAINABILITY REPORT 2004

toDirectors

andemployees

2 Improper conduct might include making transactions without a customer's consent, failingto sufficiently confirm the content of transactions, erroneous solicitation, administrative
negligence, or other acts. At Daiwa Securities, approximately 70% of cases of improper
conduct fell under the categories of "failure toprovide prospectuses" and "sales staff use ofsales materials not internally approved" (FY2003).

Thoroughgoing compliance training

Preparation of manuals

FY 2004 goals

One of Daiwa Securities' chief goals for FY

Daiwa Securities is preparing the compliance

In FY 2004, Daiwa Securities seeks to be No.

2003 was to "provide systematic compliancemanuals needed as tools to help knowledge

1 in quality as seen from the customer's

training." The company had already been of-of laws and rules penetrate the workplace.

point of view by pursuing these goals: "morefering level-specific group training for staff

An "Advertising Inspection Manual," for ex-

thorough legal compliance and elimination ofmembers from new hires to Directors as wellample, was distributed in June 2003 as a

improper conduct," "achieve higher level ofas intranet-based online learning and training

handbook for internal administration supervi-

investor protection" and "enhance internal

by company satellite broadcasts, but in FY

sors inspecting advertising and sales promo-

administration system."2003 for the first time we also gavetion materials created by branch offices.

"extended training sessions for internalWork has also begun on a "Work Manual for

administration

Internal Administration Supervisors," which issupervisors"twotimes,"compliance inspection training" four times

to be completed during FY 2004.

and "trainings for mid-career sales people"
five times. All together, group trainings took
place 45 times in FY 2003 with about 3,400
trainees participating.

Stepping up internal administration system
Since FY 2002, in a program known as theCompliance Caravan, staff members from

Daiwa Securities compliance system

the Compliance Department have visited
branch offices and given onsite instruction as
based on the branch office's internal administration report. In FY 2003, staff members
visited about 40 offices, chiefly focusing on
legal compliance systems and verifying that

Branch offices

Sales
staff

Compliance Meetings
Report(held once a month to discuss themes of their choosing)Internal administration
supervisorsLinemanager

Auditing, monitoring
Leadership, direction

the offices were working to build customer
trust. For example, members checked tomake sure offices were providing customers

Sales supervisors(department and branch managers)

Leadership, direction

with prospectuses in proper manner.
As a way of bolstering internal adminis-

Making rounds,
being stationed

tration systems, five "Deputy Compliance

Leadership,
direction

Supervisors" handling different geographic
areas were appointed in July 2003 to serve
under the Director for compliance. On top ofTraining and support
for auditing,monitoring

Compliance Officers(Appointed April 1, 2004)

this, in April 2004 Daiwa Securities appointed"Compliance Officers" to all 27 branch offi-

Affiliation

ces operating as "mother branches" for the
123 branch offices nationwide. Compliance

Leadership and training

Training and support forleadership and direction(Compliance Caravan)

Leadership, direction

Officers belong to the Compliance Department and provide leadership and direction tointernal administration supervisors and sales

Area/Group Sales Department Deputy Officer

Compliance Department

supervisors belonging to each branch office .
Daiwa Securities runs a customer interview system in which supervisors such as

Deputy Legal Compliance Officer

branch managers interview customers direct-

Partnership

Area/Group Department Officer

ly to check up on transactions. In FY 2003,
supervisors interviewed an average of about

Legal Compliance Officer

Sales Department Oversight Officer

2,000 customers every month.

DAIWA SUSTAINABILITY REPORT 2004

23

ComplianceManagement

Daiwa Securities SMBC

Providing systematic compliance training"Restrictions on insider trading," "Rules onment and outside attorneys and explanations

sale of stock by directors and employees,"of legal changes and new laws, among other"Responding to complaints" and "Case stud-information. The Legal & Compliance Depart-ies of administrative disposition (forbidden

ment also gets numerous inquiries, and it

conduct)." After each course, participants

provides legal counseling with department

must score at least 70% on a test in order toattorneys as needed.

Training has a critical role to play in helping

pass, and must repeat the course until they

compliance awareness penetrate. Throughget a passing grade.

Stepping up internal control

FY 2002, Daiwa Securities SMBC had given

In addition to these level-specificcompliance training to compliance supervi-

trainings, Daiwa Securities SMBC gave

The affiliation of each office's internal admin-sors (internal administration supervisors), line

department-specifictheme-specificistration supervisors, who are so pivotal tomanagers (who supervise individual depart-trainings tailored to the work performed.

internal control, was changed in FY 2003

ments), and new hires, including those com-

Training for newly appointed Directors isfrom that office alone to both the office anding in from other Daiwa Securities Grouppartially designed for the individual based on

the Legal & Compliance Department, which

companies or Sumitomo Mitsui Banking Cor-

career experience.

reinforces the internal control function. Eachandporation. In FY 2003, however, the range of

office and the Legal & Compliance Depart-

persons subject to compliance training ex-

ment conduct evaluations of internal admin-

pointed Directors and general managers andRaising of legal compliance awareness andunderstanding

for persons newly promoted were added,

The "Compliance Newsletter," which the Le-

Once a year, internal administration su-

and Daiwa Securities SMBC also began on-

gal & Compliance Department began issuingpervisors identify latent risks in the officesline trainings for all workers. Starting inin 1999, released its 100th edition in June

they supervise, and a self-assessment tool

March 2004, all employees are obligated to

2004. The newsletter includes case studies,for evaluating risk mitigation measures hastake a program of courses on these themes:

opinions of the Legal & Compliance Depart-

become part of the routine. Based on thesepanded greatly. Group trainings for newly ap-

istration supervisors with a respective weightof 6:4.

risk evaluations, intra-departmental checkprocedures are improved, such as by estab-

Daiwa Securities SMBC compliance systemlishing specific inspection items and inspecBoard of Directors

Auditing

In addition very strict information control
・President(Members)
・Deputy President
・Directors
・Each department's officers, etc.
・Corporate auditors
・Attorneys affiliated with
Legal & Compliance Department

Legal Auditing Committee

Management Committeetion frequencies appropriate to risks.

Corporate Auditors(Chair)Subcommittee

President

Reporting of duty performance

The Legal & Compliance Department perReporting major events

forms internal audits to verify the validity of
intra-departmental inspections in each office.

Chief Compliance Officer
General Manager of Legal & Compliance Department

Planning Section

Legal andCompliance Section

Compliance leadership
Pre-consulting

Monitoring

Auditing Section 1
and 2

Internal auditing

Overseas Legal andCompliance Section

Prevention of unfair trades by Directors
and employees
To assure that Directors and employees do

ReportingInstructions

Department/
Branchpartments. Starting in FY 2004, information
among intra-departmental inspection items.

Internal administration/oversight supervisors

Transaction Inspecting
Sectionformation barriers within and between decontrol system operating status is included

Reporting major events

Legal & Compliance Department

is put into effect, for example by building in-

not make unfair securities transactions, Directors and employees, their spouses anddependents are required to report to theSales supervisors, internal administration supervisors

company if they open an account with a se-

General managers, internal administrators

curities company, and they are also subject
to requests for information. In the past, when

Pre-consulting

Intra-departmental inspection

Performers of sales and work

Content checkone of these persons actually made a securities transaction, the approving party was different for each department, with the rules requiring

24

DAIWA SUSTAINABILITY REPORT 2004

that

the

personmakingthetransaction get the permission of either the

took nine reports in FY 2003. Among othertem operations are still not well understood,

general manager of the Legal & Compliance

topics, the reports concerned service over-with 79% saying they had never seen the

Department or the general manager of thetime work, a worker's feelings about volun-

hotline page, 55% saying that they did not

department of affiliation. An internal ruleteer activities on days off, and appropriation

know that the outside attorneys who take re-change of January 2004, however, now

of company supplies for personal use. Whenports that include the reporter's name pro-makes the control system stricter, requiring

reporters provide their names, the Grouptect the anonymity of the reporter and 53%

the approval of the General Manager of thecontacts the reporter to tell him or her aboutsaying they did not think that the reporterLegal

the response taken, and cases that are

and his/her anonymity would be protected.

deemed good candidates for inspiring the

To make the system work more effectively,

rest of the Group to take more care are post-

the Group will endeavor to increase recogni-

ed on the intranet. To make the hotline bettertion of the fact that the system adequately

known in the Group, the slogan "Your cour-

protects the reporter and his/her anonymity,

age saves the company!" has been printed in

and we will strive to respond more immedi-&

ComplianceDepartmentinall cases.3
3 Members of the Investment Banking Division
have all been required to get the approval of theGeneral Manager of the Legal & Compliance Department since FY 2002.

internal

newsletters.

ately to reports.

Hereafter, the Group

Daiwa Securities Group will continue to

FY 2004 goals

plans to include exam-

perform this survey periodically in the future.

In FY 2004 Daiwa Securities SMBC is work-

ples of hotline contacts

ing on its goals to "strengthen functions ofin our internal newslet-

internal administration supervisors and inter-ters to show employ-

nal administrators," "enhance training,"

ees how effective the"enhance intra-departmental inspections"hotline is for solving

and "prepare environment to assure thorough legal compliance." The company plans

Internal announcement ofCorporate Ethics Hotline

problems.

en compliance training and online training in

Corporate Ethics Hotline Employee
Awareness Survey

departmental units, revise the Handbook for

In February 2004 the Corporate Ethics De-

Legal Compliance (a compliance manual)

partment gave a "Corporate Ethics Hotline

and put out a booklet of the Compliance

Questionnaire" to approximately 12,000 em-

Newsletters issued up to now. The company
considers information leaks to be a serious
issue.

1. Did you know about the Daiwa Securities Group internal reporting system?

Yes 70%Yes

No 79%

ployees, of whom about 6,000 responded.
The responses indicated that an aware-

Yes 76%

with 70% saying that they knew about the in-

By email or similar 63%
I would give my name.

the system is effective for making the organi-

porting system established in January 2003,

zation's self-purifying function work. At the

I would remain anonymous. 65%

6. Did you know that even if a reporter gives his/her name with the report to
an attorney, the attorney will not tell the name of the reporter to the
Daiwa Securities Group?

Yes

No 55%

7. Do you think this system protects the reporter and his/her anonymity?

Yes

No 53%

8. Do you think the system deals with reported incidents appropriately?

Yes 64%ported when they saw it and 80% saying that
The Corporate Ethics Hotline, an internal re-

By postal mail or similar

5. If you were to file a report, would you give your name or remain anonymous?

ternal reporting system, 76% saying thatthey would report conduct that should be re-No

4. If you were to file a report, how would you do so?

ness of the system had begun to penetrate,

Reports to Corporate Ethics Hotline

No

2. Have you ever seen the Corporate Ethics Hotline page?

3. If you discovered conduct that should be reported to the hotline, would you report it?

to establish an electronic bulletin board forinternal administration supervisors, strength-

Results of Corporate Ethics Hotline Employee Awareness Survey

No

9. Do you think that this system is effective for helping the organization's
self-purification function to work?

Yes 80%same time, the responses indicated that sys-

No

Internal report examples and responses
Report content

Total reports taken in FY 2003: 9
Response

My opinion of Daiwa Securities Group initiatives

There is too much
unpaid overtime work.

Notices were sent from the Personnel Department togeneral managers cautioning them to manage overtime and in particular prohibiting unpaid overtime.

Compliance awareness has certainly improved in the compa-

I was forced to performvolunteer activities
on a day off.

Notices were sent from the Corporate Community
Affairs Department to line managers stating that
employees are free to choose whether or not toparticipate in volunteer activities on days off andthat neither tangible nor intangible force shall be
used to make them participate.

A certain employee isappropriating supplies.

The issue was studied, but no case of appropriation was confirmed.

I've been subjected tosexual harassment.

Report was anonymous, so no individual response
could be made. A letter in the name of the Corporate Ethics Officer encouraging personnel to becareful of this situation was posted on the intranet.

Deputy General Manager, Head Office Sales Department, Daiwa Securities

Kensuke Yanony these last few years. The rules have gotten stricter andthere is a stronger awareness of legal compliance, but this isjust a matter of course. At the same time, our initiatives haveto be understandable as well as highly convincing to the customer. The practice of "think for yourself, act for yourself" iscritical to make sure our compliance rules are meaningful inmore than name only.

DAIWA SUSTAINABILITY REPORT 2004

25

Management

Information Disclosure

The Daiwa Securities Group in March 2004 established its Disclosure Policy, laying out its basic position
on information disclosure, and further adopted Disclosure Regulations to heighten the effectiveness of thepolicy. It additionally set up the new CSR Website and updated the main Daiwa Securities Group Inc. site
to provide more information and greater convenience.

Committee meets periodically between the closing

Disclosure Policy established

day of each business quarter until the day quarterly
results are revealed and otherwise convenes whenev-

To the Daiwa Securities Group, fair, timely and appro-er the committee chairman thinks it necessary.

priate disclosure is fundamental to promoting understanding of the Group and realistic expectations of it
1
Similar regulations, etc. havebeen established at major subsidiaries to unify information
disclosure policies for theGroup as a whole.

among shareholders, investors and other stakeholders. In March 2004 the Daiwa Securities Group estab-

Disclosure Policy

lished and publicized its new Disclosure Policy clari-• We will observe fair and timely disclosure of importantfinancial, social and environmental information("Management-Related Information") regarding the Daiwa Securities Group so that our stakeholders (including
shareholders, investors and the communities we operate in) may understand and maintain realistic expectations of the Daiwa Securities Group.

fying this stance on information disclosure. Daiwa
Securities Group Inc. simultaneously established Dis-

2
Members of the Disclosure
Committee are the Corporate
Executive Officer overseeing the
IR Office (this officer chairs thecommittee), the Chief Financial
Officer, the Corporate Executive
Officer for planning, the Corporate Executive Officer for legal
affairs, the Corporate Executive
Officer overseeing the Public
Relations Department, and the
Corporate Executive Officer
with jurisdiction over corporate
ethics and CSR Promotion
Department.
3
For details, see Corporate Governance, pages 20 - 21.

closure Regulations to enhance policy effectiveness,thereby specifying categories of management-related
information,
matters.

disclosure

proceduresand• We will comply with the Securities Exchange Law andother laws and ordinances related to securities transactions and the various rules of the stock exchanges
where on which our stock is listed.

other

1

As key information relating to the Group's finan-• We will endeavor to achieve fair disclosure both in termsof content and timing.

cial, environmental and social dimensions, the typesof management-related information stipulated in the• 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.

regulations include not only law- and rule-related information but also compliance and corporate gover-• We will consciously act as a leader of the securities
markets in terms of disclosure and set the standards forother listed corporations.

nance information needed to fulfill social responsibilities plus information relevant to local communities
and the environment.

• 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 thespirit of this Policy.

Additionally, Group regulations require that a Disclosure Committee2 be established as a subcommittee of the Executive Committee3. The Disclosure

Daiwa Securities Group information disclosure framework
Economic
Business activities
Financial information
Disclosure Policy

Corporate Governance
Information disclosure
Compliance

SocialEnvironment

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

Working for
the Environment

Disclosures primarily
through Sustainability Report

Disclosures primarily
through Annual Report,press releases, securities
reports and financialsummaries

http://www.daiwa.jp/ir/english/

IR site26

DAIWA SUSTAINABILITY REPORT 2004

CSR Website

Ongoing shareholder survey

Disclosure through many media

Daiwa Securities Group's ongoing Shareholder Sur-The Daiwa Securities Group provides information to

vey enables the Group to use shareholder input. Re-

the mass media and makes active use of its websites

sults of a questionnaire given in November 2003 indi-and publications like the Annual Report and Sustaina-

cate that 52% of shareholders purchase shares in thebility Report to make information disclosure as com-

Group as long-term holdings and that 74% have held

plete as possible.

shares at least three years (39% for at least a dec-

Among its publications, the 2003 Annual Reportade). Additionally, 62% of shareholders have ac-

earned an excellence award at the 2003 NIKKEI An-

counts with Daiwa Securities. Through active infor-

nual Report Awards. In addition, our 2003 Sustaina-

mation disclosure we are working to promotebility Report placed No. 1 on the "CSR Report Rank-

understanding of the Group to encourage moreings" by Nikkei Business Publications, Inc. in Juneshareholders to do business with Daiwa Securities.

2004.

Results suggest a fairly low degree of Internet

On our main website, the Group's CSR Website4

use among shareholders, as 70% indicated that they

started up in January 2004 as a way to enrich CSR

had not seen the Group's IR site. To provide informa-and SRI information presentation. Subsequently, thetion to such shareholders, the Group must makeDaiwa Securities Group Inc. main website and IR site

more use of the mass media and postal mailings. Of

were updated in June 2004 to help increase knowl-

all shareholders, 54% had exercised their right toedge of the information offered there and make it eas-

vote at the general meeting of shareholders, but theier to access the needed information. The Group will

Group feels this percentage needs to rise as the per-continue to promote two-way communication withcentage of ownership by individual shareholders

stakeholders by making content more understandable

increases.

and disclosures timely, appropriate and fair.

4
For details, see CSR Website,
page 47.
5
For details on "net gain on trading securities," see Economic
Relations with Stakeholders,page 28.

Shareholders breakdown
End of March 2004 (by number of shares)
Number of shareholders: 114,687

Other
2.1%

Individuals
20.7%

Non-Japanese
31.2%

Annual Report (2004)

Sustainability Report (2003)

Financial
institutions
39.8%

Other
corporations
6.2%

Banks
6.4%
Trust
accounts
25.1%
Other financial institutions
8.3%

My opinion of Daiwa Securities Group initiatives

Senior Analyst, UBS Securities Japan Ltd.

Ayako Sato

One of the biggest difficulties in analyzing a securities company is
the category "net gain on trading securities5." Because trading is amajor source of income for a securities company, the risks must
be examined. For that reason, securities companies are going tohave to disclose more information than they do now. At the sametime, if information disclosure leaks too much know-how about
putting together products, this could work to the disadvantage ofshareholders, so striking a balance is a concern. The Daiwa
Securities Group discloses a relatively rich amount of information,
and within the industry, they are considered to have excellent IR.

DAIWA SUSTAINABILITY REPORT 2004

27

Economic Reporting

Economic Relations with Stakeholders

In this section, the Daiwa Securities Group explains its economic relations with its various stakeholders in
keeping with GRI guidelines. First, we explain the Group's revenue structure from its core business providing products and services to customers. Following this, we explain how we then distribute those profits toour different stakeholders.1

gain that the Group itself realizes from the buying andDaiwa Securities Group revenue structure

selling of securities.
Geographically, on an ordinary income basis,2
Mergersandacquisitions(M&A): The merging of companies into one, or the acquiring of
one company by another. The
term actually refers not only tobusiness tie-ups such as mergers and acquisitions but also
generally to transfers of operations or shares, capital tie-ups
and so on.
3
The figure used is found by
subtracting interest expenses(exclusive of interest unrelated
to securities transactions) included under "Cost of service
fees and other sales" from interest and dividend income in the
Breakdown of Net Operating
Revenues.

88.8% of the Group's revenue comes from Japan.

commissions, which made up 48.7% of the total rev-Thus, the Daiwa Securities Group earns its revenue

enue structure. Commissions fall under three catego-

by managing funds and assisting in funds procure-ries as below.

ment for individual and corporate customers mainly in

1. Equity commissions, bond commissions

Japan.

These are the commissions received for acting as

The "Revenue in economic report" shown in the

an intermediary when individual or business cus-pie chart below is the total of operating revenues3,

tomers buy or sell securities such as shares or

non-operating income and extraordinary gains.

bonds.
2. Investment banking commissions
Commissions received, for example, as underwriting commissions when corporate customers issue

Revenue categories (FY 2003)(Units: Millions of yen)shares or bonds with the intent of procuring new

Commissions

194,162

funds, and commissions from mergers and acquisi-

Equity80,060

tions (M&A) 2, etc.

Bonds

5,219

Investment banking

55,805

Asset management

43,045

3. Asset management commissions
Investment trust sales commissions and commissions received for holding, using and managing assets of individual and corporate customers.
The Group's second largest revenue source at

Operating revenues3

1
The numerical data uses figures
shown in the consolidated financial statements of our securities reports. For financial information, also see our 2003
Annual Report.

The Group's largest revenue source in FY 2003 was

10,032

Other

120,195

Net gain on trading securities

30.2% of total revenue is net gain on trading securities. This is the net gain that the Group realizes in

Net gain on operational investment securities

1,817

Other sales
Net financial revenue3

34,413(interest and dividend income minus interest expenses)

32,807cases where it takes part in a transaction as buyer orOther revenue (non-operating income and extraordinary gains)

14,975seller in order to meet the needs of customers to

Revenue in economic report398,372transact securities like shares and bonds and the net
Other revenue
3.8%(Units: Millions of yen)
Net financial
revenue
8.2%

Net gain on operational
investment securities
0.5%

Other sales
8.6%

Commissions
48.7%
Equity
20.1%
Bonds
1.3%

Operatingrevenues
383,396

Investment banking
14.0%
Net gain on trading securities
30.2%

Asset
management
10.8%
Other
2.5%

28

DAIWA SUSTAINABILITY REPORT 2004

Other revenue
14,975

tivities4, which are the distributions we make to soci-Distribution of economic
value to stakeholders

ety, the Group intends to make these distributions at
a steady rate regardless of performance. In FY 2003

The Daiwa Securities Group is working constantly tothese expenditures came to 300 million yen.

monitor the state of distributions of economic value

The Group pays ongoing, annual dividends as a

derived from business activities to our various stake-way of distributing economic value to shareholders.

holders. The economic value described in our eco-

The basic policy of the Group when distributing prof-

nomic reports is the value found by subtracting cost

its as dividends is to consider trends in consolidatedof sales, SG&A expenses, non-operating expenses,

performance and pay an amount that ensures stabili-

extraordinary losses and minority interest income

ty. Total dividends paid in FY 2003 were 7.9 billion

from revenues.

yen.

Employees' compensation and benefits, which

We also distributed 7.8 billion yen to creditors as

are the distribution of value to employees, haveinterest on loans, etc.

ranged in recent years between about 120 billion and

The Daiwa Securities Group's financial account-

140 billion yen, fluctuating with net revenues. In FY

ing in FY 2003 showed a tax total of 26.4 billion yen.

2003 employees' compensation and benefits totaled

Earning a profit and paying taxes are also part of a136.9 billion yen, representing an increase of 13.0 bil-business's social responsibility. Taxes accounted forlion yen from the previous year and 63.9% of the eco-

12.3% of the economic value generated by the Daiwa

nomic value created by the Group.

Securities Group.

As for expenditures for corporate citizenship ac-

Distribution of economic value to stakeholders
Stakeholders
Employees(Units: Millions of yen)

FY 2000

FY 2001

FY 2002

FY 2003

140,426

129,972

123,904

136,963

Society

N/A

N/A

320

332

Shareholders

17,246

17,265

7,971

7,969

Creditors

14,890

11,134

8,388

7,821

Governments

77,403

10,93020,026

26,424

Within company

47,303-147,812-14,293

34,667(Units: Millions of yen)

Within company
16.2%

Economic value
214,178

Governments
12.3%

Creditors
3.7%
Other expenses, etc.
43,143

SG&A expenses
117,002
Cost of sales
24,047

Employees
63.9%

4
For details, see Philanthropy
and Community Involvement,
page 36.

Procedures for totaling distributions of economic value(1) Distributions to employees:
Employees' compensation
and benefits as a categoryof SG&A expenses(2) Distributions to society:
Expenditures for corporate
citizenship activities.
(3) Distributions to shareholders: Dividends. Our procedures for totaling dividends
in the 2004 report areslightly different from thoseof the 2003 report.
(4) Distributions to creditors:
Interest paid, excludingthat arising from securities
transactions(5) Distributions to governments: The total of income
taxes, deferred income
taxes and taxes other thanincome taxes (consumption tax, etc.)(6) Distribution within company: The total held in reserves internally.

Shareholders
3.7%
Society
0.2%*Numbers shown may not add up exactly because of rounding.

DAIWA SUSTAINABILITY REPORT 200429

Social Reporting

Customer Satisfaction

Increasing customer satisfaction is one on the most important issues management must address. The results of the customer satisfaction survey taken by Daiwa Securities in FY 2003 showed an overall rising
trend in the level of satisfaction. In addition to the surveys taken in ordinary years, in FY 2003 the Groupgave a "Customer Questionnaire" to 410,000 customers.

A stronger system for increasing
customer satisfaction

Customer Support Hotline calls
and response

Responding to customer complaints head-on is indis-

Inquiries and comments received by the Customer

pensable for promoting customer satisfaction. At theSupport Hotline are used without exception as feed-same time, the Daiwa Securities Group believes in theback for the branch office working with that customer

importance not of "dealing" with complaints, but

and the results of the response are reported to the CS"responding" to them.

Promotion Department. The CS Promotion Depart-To further strengthen our system for rapidly using

ment checks the log of calls to the Customer Support

customer input forwarded from the Customer Support

Hotline every day, studies the best response and the

Hotline1 and branch offices to improve products andpoints in need of improvement and works to build

services, the Customer Satisfaction (CS) Promotion

systems to educate employees and give feedback to

Department was moved from the Compliance Depart-the management process.

ment to the Marketing Department in June 2003. A

The most common comment to the Customer

new sales system was also begun in April 2004 to im-

Support Hotline in FY 2003 was that account state-

prove service quality further. The Investment Services

ments were hard to understand. Reflecting this cus-

Section, which encounters customers directly intomer opinion, the Group made improvements in its

branches of Daiwa Securities, has become a stronger

statements, such as noting market prices of foreignorganization, and a "Professional Certification Sys-

bonds.

tem"2 has been introduced for career-track employees
and regional career-track employees.
In these ways Daiwa Securities listens directly to1
Set up in the Customer Satisfaction Promotion Department
in November 2001.
Tel: 81-(0)3-3665-5111
Hours: 9:00 AM - 5:00 PM
2
Conditions for certification include completing consulting
skill training within a certain period of time and earning the credentials. For details, see Daiwa
People, page 35.

customer input and strives to prepare systems for improving service with the idea of being empathetic withour customers.

The biggest issue of all:
"Post-sales follow up"3
Since FY 2002, Daiwa Securities has ranked postsales follow up as the biggest issue in increasing cusup into practice in FY 2003, 123 branch offices
throughout Japan wrote "post-sales follow up plans"

3"Post-sales follow up" at Daiwa
Securities refers to following up
with the customer after the salehas been made.
4
See Results of third customer
satisfaction survey, page 31.

30

DAIWA SUSTAINABILITY REPORT 2004

Number and breakdown of calls taken at Customer Support Hotline

tomer satisfaction.4 In order to put post-sales follow

and submitted them to the CS Promotion Department(calls)
0

FY
2002

1,000

2,000

1,295

3,000

4,000

3,355

down requests for the head office, such as making

4,691

FY
2003

1,622

4,130

initiatives were undertaken to make improvements.

5,798
46

more materials available to customers, and also noted problems, such as quality control of products, and

6,000

41

twice, once each in the first and second halves of the
fiscal year. In these plans, the branch offices wrote

5,000Complaints

Inquiries

Opinions

7,000

2003 customer satisfaction survey

Results of third customer satisfaction survey (branding questionnaire)
10

Items to maintain

Daiwa Securities has tracked customer opinion of ourservice by giving questionnaire-based customer sat-

Critical items to maintain

9.5

isfaction surveys once a year since FY 2001. In FY
2003, customer opinion went up on items relating to9sales staff and the quality of products and services
low up," which is a critical item to improve, customer
satisfaction rose by 0.4 points. Results of this customer satisfaction survey were incorporated in FY
2003 into the performance evaluation standards in
the Group's medium-term management plan.5

Office cleanliness (-0.1)
Appearance of employees at office (+0.3)

8.5
8
7.5

Further, in October - November 2003, about
410,000 customers of Daiwa Securities received Cus-

Response at branch office(no change)

Degree of satisfaction(blue lettering in figure at right). With "post-sales fol-

7Work knowledge

Prompt response torequests (no change)
Company reliability(+0.3)
Management
Understandability of explanations (no change)
stability(+0.4)
Attitude toward customers
Correlation of advice with customer wishes (+0.1)(+0.1)
Product selection (-0.5)
ATM ease of use (+0.3)

tomer Questionnaires, the objective of which was totake the customer's perspective in evaluating branch

6.5

Understandability of transaction procedure

offices and employees. However, we have put off using the resulting responses as an evaluation indicator

6of sales staff to provide consulting and informationand the level of post-sales follow up6.

Three major issues for FY 2004

Accuracy of informationin general (no change)
Overall satisfaction with
post-sales follow up(+0.4)

5.5

competition with other firms. This questionnaire, however, did bring some issues to light, such as the ability

Understandability of transaction report

Quantity of information in general (-0.4)

for branch offices and employees because of significant regional differences, such as varying levels of

Product knowledge

Degree of importanceItems to watch

Critical items to improve

5
5

5.5

6

6.5

7

7.5

8

8.5

9

9.5

10

*Daiwa Securities sent surveys by post to 5,000 customers in November 2003, getting responses from 1,807.
*The above graph shows results for just some of the 49 items on the survey. Respondents ranked their "degree of satisfaction"with each item in five grades from high to low and the "degree of importance" in three grades. In each case, the middle ranking("Neither high nor low") was assigned a point value of 5.0. Average customer satisfaction exceeded 5.0 points in all categories.
*Numbers in parentheses show the relative change in degree of satisfaction since the previous survey in September 2002. Items
without this number are new or revised items and did not exist in the previous survey.

In FY 2004 the Group faces the following three major

5
For details see Corporate Governance, page 18.

issues.
1. Continuous effort for "post-sales follow up"
The Group seeks to increase the frequency of

6
Questionnaire results are posted on the Group intranet for all
employees to view.

contact with the customer to better understandcustomer needs and improve the quality of its
suggestions.
2. "Checking basic actions"
The Group is performing basic actions diligently
not only to improve customer satisfaction but tomake sure customer complaints and dissatisfactions do not occur in the first place.
3. Pursue "understandability as seenfrom the customer's point of view"
We are endeavoring to use simpler language indocuments, forms, etc. intended for customers.

The hotline operator's first job: Listening

Customer Support Hotline, CS Promotion Department, Daiwa Securities

Manabu Koike

When we are responding to customer calls at theCustomer Support Hotline, the first thing we aremindful to do is to really listen to what the customer
is saying. The call may sound like a simple inquiry,
but as you listen, you realize that the customer has
some dissatisfaction or problem to talk about. That's
not as easy to do as it sounds, but the staff members
approach the task very sincerely.

DAIWA SUSTAINABILITY REPORT 200431

Daiwa People

Social Reporting

The Daiwa Securities Group has introduced a compensation system based on work classification andmore graduated salary levels as it has promoted fair compensation and a performance-based evaluation
system. Further, the Group has sought to give its staff members more work choices and create an environment making it easier to work by addressing such themes as "promoting women to managerial positions,""support for post-retirement careers" and "expanding opportunities for personnel mobility through intraGroup job postings." We also continue to enrich our training system.
has shortened the time between periodic pay increas-

Working for fair compensationand performance-based evaluation

es and made performance-based evaluation morethorough.

People are the source of the Daiwa Securities

The Group will use employee awareness surveys

Group's competence. To help each individual bringand other tools to make the system work better andout his or her creativity and desire to take on new

also take into account employee satisfaction.

challenges, we believe it essential to compensate our
employees based on individual evaluations and work

Comprehensive evaluations with multi-directional
evaluation system

results.

Fair evaluation is a basic element of personnel man-

Personnel system reform

agement. The Daiwa Securities Group practices a

The Group announced two important personnel sys-

"two-way evaluation system" and a "multi-directionaltem reforms in March 2003. These are "introducing aevaluation system." Under the two-way evaluationcompensation system based on work classification"system, superiors and their subordinates evaluatethat varies the individual's basic pay according to theeach other. The multi-directional evaluation system,

role he or she plays and "more graduated salary lev-on the other hand, uses a wider range of people toels" wherein personnel evaluations are done in great-

make evaluations, involving members from other offi-

er detail. The reforms took effect in April 2004. First,

ces with positions closely connected to the work ofcareer-track employees of Rank 2 or higher were div-

the person evaluated. We believe that this allows theided into three classes (sales, office and other) andperson to be evaluated more fairly. Currently, Daiwa

different occupation-specific pay rates were assigned

Securities Group Inc. and Daiwa Securities SMBC

to each. Personnel evaluations increased the number

alone practice the multi-directional evaluation system,of grades from 11 to 16 so that evaluations could be

but the system will expand to other Group companies

more appropriately reflected in salaries. As a result,in the future. Results from the two-way evaluation

whereas three-fourths of career-track employees had

system and multi-directional evaluation system arebeen concentrated in just two evaluation grades, now

used in making personnel movement and promotion

the same proportion of employees is spread acrossdecisions. To raise the persuasiveness of evaluations,seven different grades. At the same time, the Group

we are also taking steps to improve evaluator training.

Outline of personnel system reform

Outline of multi-directional evaluation system

Career-track employees Rank 2 and up

Personnel compensation
system reform

Evaluation-based
adjustments

Evaluation pay

Previously
11-grade evaluation

Evaluation pay
Occupation-basedpay

Occupation-basedpay

Occupation-basedpayBase pay

Base pay

Base pay

Sales

Other
Office16-grade evaluation

Three-fourths of career-track
employees concentrated in two grades

32

DAIWA SUSTAINABILITY REPORT 2004

16 grades

Evaluation Self-evaluation

Evaluation pay

Base payThree-fourths of career-track
employees spread across seven grades

Group companies(three - 10
departments)

Own company(Own department) (Other department)

Department

Department

Department

Generalmanager

Generalmanager

Generalmanager

Department
member

Department
memberreersFair and open employment(three-month

breaksforfinding

newemployment or working independently) and the use ofoutplacement firms (with no time limit on use until the

The Daiwa Securities Group adopted its Fair Employ-

employee finds new work).

ment Guidelines1 in 1999 to assure fair employment.

Additionally, the Group offers career manage-

To make these guidelines better known, it posted ament training for career-track employees of age 45

summary on the Group's career information website

and up. This training helps the participant create a2

in January 2004.

1
For details, see page 26 of
Sustainability Report 2003.

career vision for the future by recognizing his or her

The Group hosts small-group "employment sem-own experience and aptitudes as well as the social

inars" for new graduates to make sure they fully un-environment. Group-wide, 329 persons took thisderstand the Group's Corporate Principles and thetraining in FY 2003.

2
Career information website(Japanese only):
http://www.daiwa.jp/recruit/

nature of the work in advance. Employees engaged in
the actual work give presentations at these seminars
so that participants can see how things really are. The
Group is also actively recruiting to fill internships.
Daiwa Securities SMBC for example holds "InternCollege" twice a year, with 72 students participatingin FY 2003.

Number of new graduates employed in entire Daiwa Securities Group(persons)
0

Jump in number of womenin management positions
The number of women in management positions has

100

200

300

500

20

344

2001

400

600

700

27 43 950

361

351

2002

274

326

2003

employees or regional career-track employees are
women, it appears certain that the number of female

405
16(fiscal year)

reached the time in their careers when they are readyof newly graduated persons employed as career-track

12

28

147

203

Japan's Equal Employment Opportunity Law havefor promotion to management. Since more than 40%

12
672

54

11
2004

821

81
6

great increase include the Group's proactive promoas career-track employees since the enforcement of

1,000

16

agers and branch managers. The reasons for thetional policy as well as the fact that women entering

900

516

risen sharply, from 39 at the end of March 2003 to 55
a year later. Female managers include general man-

800

Career-track employees and regional
career-track employees1 (male)

Career-track employees and regional
career-track employees1 (female)Financial advisors3 (male)Financial advisors3 (female)

General employees2(female)1 Regional career-track employees make up a class of career-track employees established at Daiwa Securities in 1998. These
employees stay in one region and are not subject to transfers that require changing residence. Hiring of new graduates into thisclass began in earnest in April 2002.
2 General employees make up a class that resulted in April 2003 by blending the old general employee class with the old area
general employee class.
3 Financial advisors are employees who work in sales at Daiwa Securities under one-year contracts.

managerial candidates will rise.

Employees in entire Daiwa Securities Group

Supporting diverse post-retirementcareer choices

As of end of March 2002

As of end of March 2003

Employees

Financialadvisors

Financialadvisors

Men

6,656

116

(career-track2)(6,073)(-)(manager)(2,951)

(-)

Women

3,559

988

and up. The policy of this program is to allow, as far(career-track2)

(973)

(-)

as possible, senior workers to be appointed to what-(manager)

(36)

(-)

(39)

(-)

(55)

(-)

ever geographic area they wish to live in after their

Japan total

10,215

1,104

1,367

10,372924

1,242

10,383894

regular retirement age. This has made it easier forOverseas

1,268

-

25

1,187

-

23

1,182

-

36

employees to plan their post-retirement lives. Other

Total

11,483

1,104

1,392

11,559924

1,265

11,565894

1,415

As the average age of our employees rises, the Daiwa
Securities Group is offering support to employees
duced a senior work system for employees age 55

programs have been put in place to give these employees a greater number of choices, including volun-Japanseeking a post-retirement career. In FY 2003 it intro-

Temporary
Employees
employees1
-

-

6,799

123

(6,151)(-)(3,055)

(-)

3,573

801

(1,372)(-)

As of end of March 2004

Temporary
Employees
employees1--

Financialadvisors

6,920

166

(6,197)(-)(3,180)

(-)

3,463

728

(1,377)(-)

Temporaryemployees1
-

-

1,379

1 Temporary employees are part-time employees; the figure shown here is the average number of such employees over the year.
The temporary employee class is made up mostly of women.
2 Includes regional career-track employees and specialist positions.

tary retirement, sabbaticals to support second ca-

DAIWA SUSTAINABILITY REPORT 200433

Social Reporting

Daiwa People

Securities Group is working to make improvements,

Employment rate of persons withdisabilities up to 1.9%

for example, by reviewing job content and by appealing to department and branch managers.3

At the end of March 2004, the average employment
rate of persons with disabilities at the nine majorGroup companies had risen to 1.9%, meeting our target for FY 2003. This success is related to participa-

Training new employees to fulfill
their social mission

tion in employment advisory circles, workplace experiences held for students of schools for persons withdisabilities and job postings at websites recruiting

Focus on principles, ethics and social responsibility

persons with disabilities, among other measures. To

In the financial business it is the ability of individuals

stabilize employment of persons with disabilities, theand their combined strength that give a company its

Group will periodically interview these employees, re-competence. At Daiwa Securities Group, new em-

view the nature of their work and try to improve theployee training starts by fostering people who are ea-

workplace environment.

ger to learn and, reaching beyond their own capability, are ready to take new challenges.
After joining a Group company, new employees

A workplace that facilitates the job

take a Group-wide one-week program. The objectiveof the week's training is to promote cross-GroupThe Daiwa Securities Group offers an environment fa-

communication as we focus less on work skills thancilitating work for women, for example, by offering

on learning the Daiwa Securities Group's Corporatematernity leave for two years after childbirth and ex-

Principles, corporate ethics and social responsibility.

cusing parents from overtime work for three years af-

The curriculum allows one day to learn about social

ter childbirth, in both cases allowing more time thancontribution and human rights. Events may include

the legal minimum. As a result, the number of em-

offering nursing careployees taking maternity leave in FY 2003 rose to 81.

support at a senior

On the other hand, the number of overtime hours
3
For information about other initiatives to improve the workplace environment, see page 27
of Sustainability Report 2003.

citizen's

home,worked by employees all together increased in FY

studying sign lan-2003 and the rate of paid vacation time actually taken

guage or spending

was poorer than the previous year. This stems fromtime wearing a blind-the fact that economic recovery has increased thefold to experienceamount of work, among other factors, but the Daiwa

loss of eyesight.

Employee trying to walk
wearing a blindfold

Workplace environment data at Daiwa Securities Group
Presentation by new employees
FY 2000

FY 2001

FY 2002

FY 2003

The new-employee welcoming ceremony that precedes the training has included a presentation on the

Average employment rate of persons with disabilities (end of March)

1.52%

1.54%

1.69%

1.90%

Daiwa Elder System employees (end of March)

N/A

46

57

68

Employees on prenatal/postnatal leave3

76

74

88

96

senting the new employees (for example, new em-

Employees on maternity leave3

57

69

80

81

ployees submitting exceptional essays in a contest).

12

1,845 hours 1,837.5 hours 1,845 hours 1,860 hours

Annual regular work hours

22.8 hours

Monthly average of overtime hours worked4

34.8%

Paid leave usage rate2
Employees that are union members (end of March)

5

6,371

DAIWA SUSTAINABILITY REPORT 2004

trust." This presentation is given by a group repre-

Thispresentation

has

given

us

a

21.8 hours 22.2 hours

25.6 hours

34.1%

33.0%

Securities

6,220

that these new hires

34.6%
6,419

6,388

1 The Daiwa Elder System re-employs Group employees who have reached the standard retirement age.
2 Figures cover three companies: Daiwa Securities Group Inc., Daiwa Securities and Daiwa Securities SMBC.
3 Employees covered under the prenatal/postnatal leave and maternity leave programs include non-regular employees (i.e. contract
and part-time employees).
4 Figures show the number of union members among employees of three companies: Daiwa Securities Group Inc., Daiwa Securities
and Daiwa Securities SMBC.
5 Figures exclude Daiwa Asset Management, which has its own employees' union, and Daiwa Property, which has no union.

34

theme "Building the brand: Seeking to be number 1 inglimpse at the Daiwa
Group

envision, taking into
account the conditions of the market
and the times.

A representative of new
employees gives a presentation

Fostering human resources
and building skills

ployees had used it as of March 31, 2004. In FY 2003
Daiwa Securities SMBC also adopted the system, offering four courses.

Increase in select leadership training graduates

Increasing successful recruitment within GroupAs of June 30, 2004, there have been 110 graduates

An increasing number of employees have successful-of the Daiwa Management Academy, begun in 2000

ly applied for jobs through intra-Group job postings,

for General Managers. The graduates include 22 ofintended to facilitate the movement of people acrossthe 102 Directors and Executive officers from the nine

the Group and achieve the potential of eager and tal-major Group companies. Of the 31 Directors and Ex-

ented employees.44For details about intra-Groupjob postings, see page 29 of
Sustainability Report 2003.

ecutive officers newly appointed within the last threefiscal years, 19 are graduates.
Meanwhile, the Daiwa Leadership Program,achieved its target of making program graduates out

Comments by successful intra-Groupjob posting applicant

of 20% of Deputy General Managers at Daiwa

A strong desire to get some mergers and acquisitions experience

Securities. For the entire Group, the percentage is 15%.

in my career motivated me to apply. There is so much work instarted in 2001 for Deputy General Managers, has

which I have no experience, so every day is an education. I thinkthat by setting goals with the idea of using my own skills to make

Building consulting and asset management skills

history and then acting on those goals will enable me to do work

Developing professional human resources is of thethat leaves something tangible behind.

Masakazu Kawai,
who transferred from the Daiwa
Securities Ueno Branch to theStrategic Advisory Departmentof Daiwa Securities SMBC

utmost importance to the entire Group. Daiwa
Securities in FY 2004 started its Professional Certifi-

Employees qualifying under intra-Group job posting

cation System with the goal of building consulting
and asset management skills among its staff. Thissystem gives professional certification to persons ful-Time of posting

Applicants Successful
applicants

Jobs offered

Summer FY 2000 Fund manager, analyst, venture capitalist

122Winter71

6

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

587tification candidates were selected.

Fund manager, mergers and acquisitions, derivaSummer FY 2002 tives, work abroad, internal wholesaler, satellite
broadcaster, etc.

60

8

81

19

Independent study and online training

Individual and corporate sales, analyst, derivaSummer FY 2003 tives, venture capitalist, internal wholesaler,dealer, trader

60

16filling certain conditions such as completing advanced training in areas like asset management or tax
affairs and acquiring certain credentials. Under theSummer FY 2001

present schedule, the first certifications will be awarded in April 2006. In February 2004 a total of 170 cer-

Daiwa Securities offers eight training courses throughits online learning system "@DESK," which employ-

FY 2000 Work abroad

WinterAnalyst, money manager, SMA consultant, sales,
FY 2003 consultative planning, dealer, trader, derivatives,
management consultant, pension consultant

ees can access at any time or place. The system isaccessed about 400 times a day, and 90% of em-

A word from the employees' union
Persons earning credentials (end of March 2004, nine Group companies)
Credentials
Earned by 3/2004
Chartered Member of the Security Analyst Association of Japan
1,124
Chartered Financial Analysts (USA credential)
35
Financial Planners (AFP)
2,448
Financial Planners (CFP)
167
Licensed Tax Accountant
12
Variable insurance sales credentials
5,557
System Analysts
21
Overseas MBA program graduates, etc.*
123* Persons sent by the Group to earn degree. Other degrees include
master's degrees in law and international affairs.

Chairman, Daiwa Securities Group Employees' Union

Takashi Koshimizu

If the Daiwa Securities Group doesn't grow over the longterm, that's of no benefit to union members. That is why
our union believes that management and labor ultimately
should be reaching for the same thing. The union is engaged in many activities, among them an effort to createa space where union members can transcend company
borders and share a sense of enthusiasm. This is part ofour goal of reforming communication within the Groupand creating a workplace environment in which each employee can work with pride, eagerness and a dream.

DAIWA SUSTAINABILITY REPORT 2004

35

Philanthropy and Community Involvement

Social Reporting

Acting as a corporate citizen is a necessary investment for the sustainability of society as well as that of
the Daiwa Securities Group. In FY 2003 the Group created a system allowing requests from the community
to go to branch offices of Daiwa Securities. It also engaged in efforts to make activities more connected
and wider in scope.

Approach to activities asa corporate citizen

zenship activities that are closely tied to the community through branch offices.

The Daiwa Securities Group practices citizenship infour major ways: finance and securities education andresearch, support for employees doing volunteer
work, support for local and international society
through foundations, and patronizing arts and culture.
In FY 2003 the Daiwa Securities Group provided 330

Daiwa Securities Foundation
grant presentation ceremony

A grant ceremony led
to cooperation in a group's bazaar.

million yen for corporate citizenship activities, anamount equivalent to about 0.2% of the economic
value derived from business activities.1 The Daiwa
1
For details see Economic Relations with Stakeholders, page
29.

Securities Group intends to continue its corporate cit-

Ongoing funding activities

izenship activities steadily on the same scale and withthe same level of funding, regardless of changes in

The Daiwa Securities Group has established two

the business environment and in Group performance.

foundations in Japan and one abroad. The Daiwa Securities Health Foundation gives grants to universities

2
Reorganized in July 2004 as the
CSR Promotion Department
from the Corporate Community
Affairs Department.

Nationwide branches become
community interface

and hospitals performing studies and research on insurance, health care, welfare and other concerns of
middle-aged and older people.3 In FY 2003 it provid-

Since 1999, ceremonies to present grants from theed 30 grants worth a total of 30 million yen. The Dai-3
It also studies the prevention
and treatment of lifestyle diseases and works to raiseawareness to maintain and promote health.

Daiwa Securities Foundation and Daiwa Securities

wa Securities Foundation provides grants to support

Health Foundation have taken place at foundation of-causes including volunteer efforts. It funded 220 vol-fices as well as branch offices of Daiwa Securities.

unteer activities in FY 2003 and one study/research

Branch managers and foundation and CSR Promo-

project with total funds of 50 million yen.

tion Department2 staff members take part in the pre-The Daiwa Anglo-Japanese Foundation4 efforts

4
For details on activities of the
Daiwa Anglo-JapaneseFoundation, visit
http://www.dajf.org.uk/.

sentation ceremonies at branch offices, with theto promote mutual understanding between the United

branch manager presenting the grant money. In FY

Kingdom and Japan. Each year it invites scholarship2004, the Group also partnered with parties subsi-

recipients (Daiwa Scholars) to Japan. The thirteenth

dized by the foundations to perform corporate citi-

set of Daiwa Scholars, a total of five students, cameto Japan in September 2003.

Corporate citizen activities with emphasis on ties to community
Community
development
Contribution
Contribution

Foundation

Daiwa
Anglo-JapaneseFoundation

Contribution
Daiwa
Daiwa
Securities Health Securities
Foundation Foundation

GrantsGrant Branch
ceremony offices

Cooperation

Partnerships
Daiwa Securities Group
Formeremployees
Families

36

Independent
activities
NGOs,
non-profits
CitizensgroupsCooperation,
meeting places
Requests

Requests
AppealCSR
Promotion
Employees
Department
Cooperation

DAIWA SUSTAINABILITY REPORT 2004

Sponsorship of arts and culture
The Group sponsored the first performances in Japanever by the Fondazione Teatro Lirico "Giuseppe Verdi" Trieste opera company, which put on events in Tokyo and Shiga in May and June 2003. Following this,the Group is sponsoring November 2004 performances in Japan by the Berlin Philharmonic Orchestra,

Understanding andsupport from local community

conducted by Sir Simon Rattle.

Volunteer activities show
signs of expanding5
As part of new employee training
and Management Program (for career-track employees of Rank 3).

Economic and financial
education and research7
The Daiwa Securities Group undertakes to leverage

Activity continuation and expansion

Japan's financial strength through industry/academic

Volunteer activities give employees a wider world

partnerships that include sponsored courses at uni-view, instill a number of values and consequently

versities and graduate schools and joint research withmake an organization more flexible. Volunteer activi-these institutions. The Group last year additionally be-ties must, however, be truly voluntary, and the Groupgan supporting economic education through hands-

is very careful not to turn them into mandatory

on programs at high schools.

6
Created by the family of aGroup employee, Daisuke the
Guide Dog is assembled personally as a volunteer effort bya number of employees.
7
For details see Initiatives for
Economic and Financial Education, pages 12-15.

events. The Group gives training that includes"welfare experience courses," a chance to experience
life with certain challenges5 and deepen understand-

Major social contribution activities in FY 2003

ing of volunteerism.
Typical ongoing events are sign language cours-

May•Seventeen employees from Daiwa Securities branch offices in Yamagata, Tsu, Kanazawa and Okayama
take part in the 24th "Ashinaga P-walk 10," walking 10km over courses in their local area to help
publicize the Ashinaga Fund, which helps orphans to continue their educations.
•Six employees assisted participants, handed out water and otherwise helped at Tokyo City Road Race
2003, a road run in which persons with physical and mental disabilities take part along with other runners.

June•A total of 238 employees, including 225 new employees, helped in a cleanup of Kujukurihama Beach in
Shirako Town, Chiba Prefecture. The effort brought in 300kg of flammable garbage and 100kg of
nonflammable garbage.

August•At the Azabu Juban Festival in Tokyo, 70 employees and family members helped out by cleaning, raisingcharity funds and making announcements in English, among other tasks.
•The Group invited 89 children from centers for disadvantaged children and mother/child support centers to
the musical production Chikyu no Inochi: Mori to Mizu, about protecting the environment.

September•A total of 107 employees and family members from five branches in the North Osaka area (Umeda,
Toyonaka, Ibaraki, Nishinomiya and Amagasaki) took part in a hike/cleanup of Mt. Rokko sponsored by
Hyogo Prefecture cities Ashiya, Takarazuka and Nishinomiya. Participants helped to clean up on Mt. Rokko.

November•The Group took part in an event to gather PET bottle caps to purchase vaccines for children around theworld, sponsored by MinatoNet of Minato Ward, Tokyo. Employees collected and donated 34,880 used PET
bottle caps, which were exchanged for enough polio vaccine for 21.8 people.

es and experience with service dogs. The handmade
picture book Daisuke the Guide Dog6 is distributed aspart of the service dog experience and has been
handed out to 98 elementaryand middle schools to support the general curriculum(as of August 2004). The
Group plans to continue putting these books together byhand at branch offices nationwide

anddistributing

them to area schools desirHandmade bookDaisuke the Guide Dog

ing them.

•A cooking seminar was held to give Daiwa Scholars (recipients of Daiwa Anglo-Japanese Foundation scholarships)
an experience of Japan's food culture. Ten employees participated in this introduction to Japanese home cooking.

Participation by many Group parties
The CSR Promotion Department uses the Group in-

February •Current and former employees donated 1,448,352 yen to the Japanese Red Cross Society for relief ofIranian earthquake victims.

tranet to provide volunteer information enabling employees to get more involved in activities. Additionally,
the Group's former employees’ club (the Daiwa Fujikai, with 2,000 members) also shares the information
to widen the circle of volunteers. A project to thin for-

March

•The Group held a hands-on event to think about environmental protection by being in the forest at Mt.
Takao, Tokyo. Twenty-eight current and former employees and Daiwa Scholars helped to thin the forest.
•Employees donated 666 pencils, 15 sets of crayons, 132 erasers, 95 ballpoint pens, 54 notebooks and four sets ofcolored pens to children in Samawa, Iraq, the base of rebuilding support efforts by Japan's Self-Defense Forces.

*For more information about the Daiwa Securities Group's social contribution activities,
visit http://www.daiwa.jp/branding/kouken/ (Japanese only).

ested areas of Mt. Takao in March 2004 drew participation from many groups including current and former employees and Daiwa Scholars. We plan to keep
widening the circle of volunteers by offering optional
programs that can be expanded to the entire Group.

My hope for the Daiwa Securities Group

Representative of Japanese sign language club Kunitachi Hands Mate (Kunitachi City, Tokyo)

Misa Wada

The grant we received from the Daiwa Securities
Foundation sparked my interest in the social contributions of the Daiwa Securities Group. My hope isthat the understanding and awareness of philanthropic activities that employees get through the "welfare
experience courses" don't stop with individual volunteer activities but help to make improvements in theGroup's level of customer satisfaction.

Thinning out forest on Mt. Takao

DAIWA SUSTAINABILITY REPORT 2004

37

Environmental Reporting

Working for the Environment

The Daiwa Securities Group recognizes that the environmental impact of its business is not trivial and istherefore working to reduce it. In FY 2003 it took initiatives in environment-related business areas and facilitated environmental communication for employees.

Reducing CO2 emissions

Reducing electric power and water usage

In FY 2003 the Daiwa Securities Group accounted for

FY 2003 electric power consumption totaled 95.24

39,118 tons of CO2 emissions1. This represents a de-million kWh, a decrease of 4.16 million kWh since FY

cline of 1,590 tons, or 3.9%, from FY 2002. CO2 emis-

2002. We believe that much of the credit goes to thesions per employee in Japan2 came to 3.09 tons, a re-practice of energy patrols, air conditioning equipment

duction of 0.16 tons since FY 2002.

inspection and maintenance management and the

The Group submitted Global Warming Actionuse of energy conserving equipment, although the1This figure is a calculated equivalent found using the Ministry of
the Environment's greenhousegas emissions conversion formula. It is the CO2 equivalent of
the fuel, electric power and water usage of the Daiwa Securities Group in its 18 major officebuildings and branch offices nationwide.

Programs to the government of Tokyo Prefecture incool summer of 2003 was an external contributing

June 2002 for its relatively large buildings (Daiwa

factor. An energy shortage during the summer ofSecurities Headquarters Building, Eitai Daiya Building

2003 gave the "Group Administrative Council," con-and Daiwa Eitai Building). Under these plans thesisting of members of Group company general affairs

Group set goals of reducing greenhouse gas emis-

departments, a common awareness of the issue, in-sions derived from these buildings by 2%, 0.1% andspiring the Group as a whole to work to reduce power

1.9% respectively vs. FY 2001 levels. The results in

consumption.

2
Total employees, financial advisors and temporary employees
in Japan: 12,656. For details,
see Daiwa People, page 33.

FY 2003 showed that the target was partially reachedIn FY 2003 the Group used 438,430,000 liters of

with, respectively, 12% and 3% reductions in the firstwater, which is 34,620,000 less than in FY 2002, a

two buildings but a 1% gain in the last.

7.3% savings. We believe that the cool summer of2003 and the September 2003 closing of the cafeteria
in the Daiwa Securities Headquarters Building wereprinciple factors in the decrease.

Electric power usage (Graph 1)
14 buildings
18 buildings plus Daiwa
Securities branch offices

Units: 10,000 kWh
12,000

Units: 10,000 liters
50,0009,940

10,0008,000

Water usage (Graph 2)

9,524

12 buildings
16 buildings plus Daiwa
Securities branch offices
47,30543,84340,000
6,834

6,854

6,667

30,00028,27027,232

27,3276,000
20,0004,000

10,000

2,000
0

2001

2002

2003

(FY)

*Scope of data collection was expanded in FY 2002. For details see table
Scope of environmental impact data, page 39.
*Revisions have been made to correct errors in part of the data of the 2003
report.

38

DAIWA SUSTAINABILITY REPORT 2004

0

2001

2002

2003

(FY)

*Scope of data collection was expanded in FY 2002. For details see table
Scope of environmental impact data, page 39.
*Revisions have been made to correct errors in part of the data of the 2003
report.

Additionally, the rate of recycling of paper waste

Conserving resources, recycling
and reducing waste

was just under 90% overall.

The FY 2003 data in the Waste produced and recycled table below does not include data for Daiwa

Environmental business initiatives

Securities SMBC Headquarters Building, since thisbuilding changed in November 2003.

The Daiwa Securities Group is directly engaged in en-

Efforts to put information in electronic form, usevironmental businesses through its three SRI funds

both sides of each sheet of paper and so on have re-(Daiwa SRI Fund, UBS Global Equity 40 SRI+, Global

sulted in total emissions of paper waste (exclusive of

Eco Growth Fund), the Kamakura Midori Sai

Daiwa Securities SMBC Headquarters Building) de-("Kamakura Green Bonds") and its engagement withclining 5.8%, from 1,328.1 tons in FY 2002 to 1,250.6

the World Bank's carbon fund program.3

tons in FY 2003.

Dr. Sustaina's Environmental Course
Waste produced and recycled (Table 1)(Units: tons)

In May 2003 the Group ran its "Do Something GoodFY 2001

FY 2002

FY 2003for the Environment" campaign as a way of raising

Waste produced
Recycled
Disposed
Recycling rate

1,617.9

1,564.2

1,250.6

employee awareness about the environment. Some

1,438.3

1,357.0

1,105.2

179.6

207.3

145.4

89%

87%

88%

Waste produced
Non-paper Recycled
Disposed
Recycling rate

297.1

352.6

260.1

sues and that some form of environmental communi-

88.7

101.0

84.7

cation was necessary. Comments like these resulted

208.5

251.6

175.4

in the "Dr. Sustaina's Environmental Course."

30%

29%

33%

Paper

*See Scope of environmental impact data below for data coverage.
Data for Daiwa Securities SMBC Headquarters Building is not included in the
FY 2003 figures since the headquarters for this company has moved. Paper
waste from Daiwa Securities SMBC Headquarters Building equaled 236.1
tons, and non-paper waste, 86.3 tons in FY 2002.

employees who took part in the campaign said thatthey did not adequately understand environmental is-"Dr. Sustaina's Environmental Course" beganrunning in Fuji, a seasonal publication for Group employees, in the summer 2003 issue. The feature takes
the broad theme of the relationship between the Daiwa Securities Group and the environment and explains global environmental problems in simple terms.

Scope of environmental impact data

The feature is also posted on our website for persons(

outside the Group.4: Facilities added to scope of data collection in FY 2002

Site name
Graph 1 Graph 2 Table 1
Daiwa Securities Headquarters Building
Daiwa Securities Kabutocho Building
Daiwa Securities SMBC Headquarters Building1
Eitai Daiya Building
Daiwa Securities Osaka Branch Building
Daiwa Securities Nagoya Branch
DAM Headquarters
DIR Headquarters Building
DIR Annex
Daiwa Eitai Building
DIR Kiyosumi Park Building
DIR Izumi Eitai Building
Daiwa Osaka Center Building
Toyocho Center Building
Daiwa Securities branch offices2
Daiwa SB Investments Headquarters
NIF Ventures Headquarters
Daiwa Training Center
Daiwa Sanko Building (Main and Annex)
1In November 2003, Daiwa Securities SMBC moved its headquarters to
Marunouchi Trust Tower North Building.
2This applies to 123 office locations and does not include headquarters,
Osaka Branch and Nagoya Branch (end of March 2004).

3
For details, see Initiatives forSocially Responsible Investment, pages 08 - 11.
4
For details, see CSR Website,
page 47.

Dr. Sustaina's Environmental Course (portion covering November 2003 - August 2004)

No. 1 (November 2003):
Global Warming and the Environmental
Impact of the Daiwa Securities Group
No. 2 (January 2004):
The Daiwa Securities Group andEnvironmental Management
Dr. Sustaina

Kouta Jinen

No. 3 (May 2004):
Garbage Processing and Recycling at
the Daiwa Securities Group
No. 4 (August 2004):
The Business of the Daiwa
Securities Group and the Environment

Shigeko Hayashimori

DAIWA SUSTAINABILITY REPORT 2004

39

Environmental Reporting

Working for the Environment

Status of environmental management initiatives
Item
Scope of environmental performance data

Content
Nine major companies of Daiwa Securities Group

Major environmental impacts

1. CO2 emissions from workplace energy usage
2. Paper waste from the workplace

Environmental philosophy, environmental policy

The Daiwa Securities Group has established the following environmental policies within the Code of Conduct and Ethics.
1. The Daiwa Securities Group shall be mindful to practice business management that protects the environment and,
when deciding whether or not to conduct a transaction with another business, shall takethat business's attitude toward environmental protection into account.
2. In their day to day work, Group Directors and employees shall be mindful of conserving resources (electricity, water, gas, paper, etc.) and shall actively work to protect the environment.

"The Daiwa Securities Group recognizes that the environmental impact of its business is not trivial and it is making efforts to reduce it."
Signatory of Carbon Disclosure Project in March 2004.
None. Studying necessity of certifications.
Established position of Director to oversee CSR Promotion Department.
Board of Directors, Executive Committee and subcommittees of these (no decision-making organizations specifically for environment)
General Affairs Department, Daiwa Securities Group Inc.
Providing environmental information in Sustainability Report (first issued October 2002).
Not conducted.
Set numerical targets for greenhouse gas reductions for three major buildings in Global Warming Action Programs submitted to Tokyo Prefecture.
Set numerical targets for waste reduction and recycling rates for each major building in "large commercial building waste recycling plans" submitted to local governments.
Have run a campaign to prevent water waste since 2000. No reduction targets set.
The Group has a fleet of 750 autos. An effort has been underway since FY 2003 to switch its 600 sales autos from compact to sub-compact(as of August 2004, the change has been made with about 200 autos). The Group is learning fuel consumption of its autos Group-wide.
Logistics environmental impact and response
Internal mail and use of transportation systems streamlined internal mail and installed teleconferencing system.
Paper resource usage reduction
Set numerical targets and taking paper usage reduction measures.
Green purchasing
Joined Green Purchasing Network in June 2003. Through use of Sanko Net*, FY 2003 green purchasing rate reached about 40% of goods purchased.
Targets and plans for making products and services eco-friendly Expanded product lineup of SRI funds, etc.
Making eco-friendly financial products and services better known Made pamphlets for SRI funds available at branch offices. Information distribution via Internet. Issue periodic documents (Sustainability Report ).
Cases of environmental violations
None.
Signing of/with charters, declarations, foundations
Acquisition of third-party certifications (ISO14001, etc.)
Directors with environmental responsibility
Decision-making organizations in which management participates
Environmental management departments
Production of environmental report
Environmental accounting
Energy usage reduction
Waste reduction, recycling
Water usage reduction
Environmental measures for company vehicles*An intranet site run by Group company Daiwa Sanko Co., Ltd. and used by 14 Group companies.

Environmental targets and results
Issue
Global warming prevention measures

Efforts considered essential
Greenhouse gas emissions reductions(CO2 equivalent)

Status of usage, etc. monitoring (March 2004)
Measured for 18 buildings + Daiwa Securities
branch offices. Reduction targets set
for three buildings on the right.

Resource recycling

Paper resource usage reduction

Measured for nine buildings

Waste recycling (paper waste)

Measured for nine buildings

Waste recycling (non-paper waste)
Water usage reduction
Green purchasing

Measured for nine buildings
Measured for 16 buildings + Daiwa Securities branch offices
Purchasing through Sanko Net

Other*FY 2004 targets were achieved at two buildings in FY 2003. Targets for next period are now under review.

40

DAIWA SUSTAINABILITY REPORT 2004

Scope
Daiwa Securities Headquarters Building
Eitai Daiya Building
Daiwa Eitai Building
Daiwa Securities Headquarters Building
Daiwa Securities Kabutocho Building
Eitai Daiya Building
DAM Headquarters
DIR Headquarters Building
Daiwa Osaka Center Building
Daiwa Securities Osaka Branch Building
NIF Ventures Headquarters
Toyocho Center Building
Daiwa Securities Headquarters Building
Daiwa Securities Kabutocho Building
Eitai Daiya Building
DAM Headquarters
DIR Headquarters Building
Daiwa Osaka Center Building
Daiwa Securities Osaka Branch Building
NIF Ventures Headquarters
Toyocho Center Building
Above nine buildings
See Scope of environmental impact data, page 39.
14 Group companies

Building an environmental
management system

Where addressed
Sustainability Report 2003, 2004

The table to the left summarizes the Daiwa Securities

Sustainability Report 2003

Group's environmental initiatives at this time.
Summary of the Code of Ethics printed in Sustainability Report 2002

In the process of building our environmental
management system, the Daiwa Securities Group in
FY 2001 gathered environmental performance dataand set greenhouse gas (CO2 equivalent) reduction

Sustainability Report 2002, 2003, 2004
Sustainability Report 2004
Sustainability Report 2003, 2004
Sustainability Report 2004
Sustainability Report 2004

targets for the three major Group buildings, and in FY
2002 expanded the scope of data collection.
The Group has also examined acquiring
ISO14001 certification but has not acquired it as ofJune 2004. Although we believe that such environ-

Included in CSR Website, Sustainability Reportmental certifications are effective for building environmental management systems, the Group has not yet

See table below.
See table below.
Sustainability Report 2003, 2004

concluded whether acquiring certification would becost-effective for a business like ours, that creates a
relatively small environmental impact compared toother industries.
Beginning in FY 2003, the Group has run internal

Sustainability Report 2002
See table below.
Sustainability Report 2003
Sustainability Report 2004

environmental campaigns and included awarenessraising environmental features1 in the internal publication Fuji to teach employees about environmental
problems. The Group is now planning ways to expand
environmental communication with a focus on the relationship between environmental issues and theGroup.
Additionally, although the Group has not imple-

Base year
FY 2001

FY 2003 results
2,689.8 tons (11.9% reduction)*
3,011.9 tons (3.3% reduction)*
10,329.0 tons (1.1% increase)397.0 tons
100.7 tons
214.0 tons
100.2 tons
126.3 tons
48.7 tons
140.8 tons
86.0 tons
43.2 tons
92.1%
100.0%
100.0%
100.0%
54.0%
95.7%
74.0%
79.0%
100.0%
40%

FY 2004 targets
2,991.2 tons (2.0% reduction)
3,110.0 tons (0.1% reduction)
10,025.1 tons (1.9% reduction)
382.0 tons (3.8% reduction)
94.0 tons (6.7% reduction)
212.0 tons (1.0% reduction)
95.5 tons (4.7% reduction)
115.5 tons (8.6% reduction)
43.7 tons (10.3% reduction)
140.0 tons (0.6% reduction)
80.0 tons (7.0% reduction)
38.2 tons (11.6% reduction)
92.1%
100.0%
100.0%
100.0%
54.1%
95.2%
74.0%
81.3%
100.0%
Described in recycling plans
None
None

mented environmental accounting, as the table at theleft indicates, it is studying the effectiveness of doing
so, taking into account the business characteristics ofthe Group.

My opinion of Daiwa Securities Group initiatives

1
For details, see Dr. Sustaina's
Environmental
Courseonpage 39 of Working for theEnvironment.

Director, The CSR Institute, Inc.

Dr. Naoki Adachi

First of all, the Daiwa Securities Group has been very respectful of theidea of steadily pushing forward in its initiatives. However, I believe
there is still much effort to be made in terms of the Group's scope ofdata collection and degree of achievement. Moreover, efforts to reduce
the Group's environmental impact internally, as measured in paper andelectric power use and waste output, are still in the beginning stages. It
also needs to set environmental targets for its core business in order toanswer, for example, how much the Group has helped protect the environment through SRI. I expect that the Group's initiatives will change
the way money flows and move us closer to an eco-friendly society.

DAIWA SUSTAINABILITY REPORT 2004

41

Communication

Stakeholder Dialogue

Following up on the first Stakeholder Dialogue, the second suchmeeting brought together five outside stakeholders with different
areas of expertise, such as environmental issues, social contribution and consumer issues. As a new experiment, five departmental
managers from the Daiwa Securities Group also took part. The dialogue featured a lively exchange on the topic "How CSR should bedone in the Daiwa Securities Group."(Date: June 14, 2004)

The wide-ranging practice of CSR
has to sink into an enterprise’s activities

Kogure: The Daiwa Securities Group very clearly wants to have a correct
corporate attitude and they're making great efforts. My job is to evaluate
companies, but to speak frankly, I really don't understand CSR very well.
One really has to think hard about some difficult things for something
like this to appeal to the public. This is a big task for businesses.

Sachiko Kishimoto

Takatoshi Wakabayashi

Executive Director, Center for
Public Resources Development

General Manager of Corporate
Planning Department,
Daiwa Securities Group Inc.

Daiwa Securities ought to
do more to display its
attitude of wanting tocontribute to society
through SRI by
incorporating the SRI
perspective in its own
company pension plan.

Takahashi: CSR is something that is never completed, but I think CSR is
the process by which a corporation changes itself.
Furuya: Businesses have to state clearly, "This is how we understand
CSR, so this is the way in which we're going to deal with it." I think that

Whenever a corporation
innovates from within, themost important thing istransparency.

will win praise from society.
As for myself, I would like to see more CSR efforts in the core business of the enterprise. If you ask whether the "core business" means
simply making a profit, I say no, these days the question in particular is

Masaaki Kogure

Kenji Wada

Senior Researcher, Instituteof Prosocial Research

Head of Corporate Ethics
Department, Daiwa Securities
Group Inc.

how that profit is made. I hope that CSR will become a vital part of the

If a business goes too far in
making a profit, it's easy tosay, "I take full
responsibility," but even sobusinesses lose credibility
this way.

In our trainings, we tellemployees that "the basisof compliance is asking
whether you would want
the most important people
in your life to see what you
are doing."

CSR take root at the point of making the sale.

Yoko Takahashi

Hideyuki Taniguchi

Chief Director, Japan
Philanthropic Association

Head of CS Promotion
Department, Daiwa Securities

I believe there are many
who want to do more thanmake a profit with theirinvestments; they want
their investments to be
useful to society.

It's never easy to makesomething abstract
penetrate into theconsciousness of
employees on the job, so
CSR initiatives can't be
pursued in the usual way.

Yukiko Furuya

Tetsuya Kawaguchi

be further expanding the SRI products market.

East Japan ComplianceManagement Research Group,
Nippon Associationof Consumer Specialists (NACS)

General Manager of Personnel
Department, Daiwa Securities
Group Inc.

Kogure: Another way that Daiwa Securities can take initiatives in its coreconcrete activities of the Daiwa Securities Group. It's so important that

The greatest challenge: Growing the SRI market
to promote CSR in the Group’s core business

Takahashi: We live in a time of low interest rates, and many people are
wondering where to invest their money. If you look at what the typicalperson is doing, he or she is investing in prefectural bonds. I think thatmany people don't just want to make a profit, they want to do somethingthat benefits society. To address these needs, Daiwa Securities should

People are reallyquestioning how enterprise
makes a profit, so it's
important that CSR become
a vital part of doing
business.

To reform the culture of acompany, you have to use asystem that "matches thetemperature" of thecompany. We're quite
aware of how important our
initiatives hereafter will be.

Yoshiki Midorikawa

Toshihiko Onishi

Director, Green Consumer
Research Group

General Manager of Corporate
Planning Department,
Daiwa Securities Group Inc.

To practice CSR, you haveto show how things reallyare. I commend Daiwa
Securities for the ways inwhich it is sincerely
disclosing information.

DAIWA SUSTAINABILITY REPORT 2004

ings of stock from those companies ranking high.
Right now you have an opportunity to develop a clear image as aleader in SRI. The difficulty is figuring out how to help consumers understand SRI. Even if we suppose that people recognize SRI as something
good, many are still a long way from acting on it with their wallets. I thinkthat you still need to do a little more to deal with that fact.
Onishi: I think that SRI products have to be sold with a different approach than securities companies have used in the past. I think they

For SRI we really need sales
techniques unlike anything
in the past. I also hope to
use SRI to benefit the Daiwa
brand.
(Titles given were valid as of June 2004)

42

business is to assess companies on CSR principles and promote offer-could really benefit the Daiwa brand as well.
Kishimoto: I find it particularly compelling that Daiwa Securities has taken up SRI as an example of an initiative in its core business. To bring thisact to the next step, the Daiwa Securities Group ought to do more todisplay its determination to contribute to society through SRI, for example by incorporating the SRI perspective in its own company pension
plan.
Wakabayashi: Yes, it is just as you say. The Daiwa Securities Group has
defined-contribution pension schemes, a Japanese version of the 401k.
The Group has already decided to offer SRI funds as an option for
employees.

The brand and the CSR idea only mean something
if employees understand them
We may issue SRI funds, but it's important to be sure whether our
Onishi: Customers have a certain image of the Daiwa Securities Group,

employees have the same passion to sell those products. If our employ-and questionnaire results show that many customers describe the Groupees don't understand our social mission, our customers will not either.

with the word "kind." But communicating kindness is exceptionally diffi-

And because customers will neither understand nor buy SRI prod-cult. And there is some debate as to whether being "kind" is really aucts unless employees understand them, we will be working continuous-

good thing in the first place. The reality is that we still don't have a clear

ly to raise employee awareness.

answer to the question of what kind of Daiwa brand we want to have.

Midorikawa: Speaking of employees, I notice your 2003 report has aMidorikawa: Recently the Journal of Research on Social Economic Lifesection about personnel. This section states the case very well with theran an essay entitled "Investment-type financial products and investor

title Respect for People. [Editor's note: This section is entitled Daiwa

information." The essay compared information availability in the UK, US

People in the English version]. What kinds of management are you prac-and Japan and made a very detailed argument that Japan is behind on

ticing in respect to labor? I think it important to state clearly your policies

this point. Doing a better job of offering information, I believe, is a key

on your wage system, labor and work styles.

way in which the Group can demonstrate "kindness".

Kawaguchi: Establishing a system does change the culture of a compa-

Taniguchi: It's very difficult to convey something like CSR or a brandny, but that takes time. To change a culture, it is essential to consider thewhen it's so hard to grasp what those things really are, so I'm really con-"temperature" of the company. A system that is significantly different incerned about employee awareness. To what extent do our employees

temperature will only create greater confusion and is not likely to bringunderstand these things? We may be sending out messages about theabout any improvements. In the Group's case, the performance-based

brand, sustainability and CSR, but getting these ideas to penetrate into

evaluation system penetrated long ago, but it is only relatively recently

the understanding of the employees doing the job is not so easy. A busi-

that we have begun to be aware of ideas like "how we work" or "ease ofness can't use the usual method when it practices CSR.

working," so we're quite aware that efforts must still be made.

DAIWA SUSTAINABILITY REPORT 2004

43

Communication

Stakeholder Dialogue

Takahashi: If one looks at compliance alone, the focus gets very narrow.

Substituting "reliability" for "responsibility"
and aiming to be a trusted company

We look at things in so much detail and think, "Don't do this! Don't dothat!" So I don't think addressing compliance alone is the way to go.
Rather, one should think of CSR as part of total corporate management.

Kogure: An enterprise is really a system for creating a profit. As a result,when an enterprise finds itself in violation of the law, there is a tendency
to say, "I take full responsibility." Even so, claiming to take responsibility

The basis of compliance:
Would you tell your child?

is not the same as actually taking responsibility.
Takahashi: The tendency is for that person to quit and be done with it,

44which doesn't mean anyone has taken responsibility.

Wada: In my role as the Head of the Corporate Ethics Department, I ask

Kogure: I'm actually opposed to interpreting the R in CSR as

my trainees, "As long as you aren't violating the law, is it OK to do what-"responsibility." If we interpret it instead as "reliability," that is far moreever you want?" Of course the answer is no. I tell the trainees that cor-

understandable. The reason is that responsibility is something that hap-porate ethics means acting in a way that a fair third party would have nopens completely within the confines of a business. If a superior tells hiscause to criticize in the slightest way. To put it more simply, you ask, "Ifsubordinates, "Just do it, I'll take responsibility," they have little choice

the people most important to you saw you acting this way, would they

but to obey, even if it means doing something the superior cannot possi-

say things behind your back? Would you be willing to have your parents,

bly take responsibility for. Even a very small part of an enterprise's ac-

for example, or your children, see what you are trying to do? As I see it,tions can cause the entire organization to lose its credibility. Business

it is my role to keep saying these things all the time.

needs to reconsider its management by asking the question, "Will soci-Kishimoto: When you give these trainings, do you talk about any specificety trust us?"cases? Do you tell them that at times like these they do not need to

Taniguchi: Our Chairman Yoshinari Hara has actually been using the termobey their superiors?

"social reliability" for a long time. We've been engaged in a branding

Wada: Yes, I do. I'm especially sure to do so when we are training new

campaign since 2000, and the starting point of this is the recognition

employees. I also tell them about our internal reporting system, the Cor-

that we won't be able to do business unless we earn the trust of society.

porate Ethics Hotline.

Furuya: But whenever there is a choice between profits and compliance,

Kishimoto: Is it an outside organization that runs the hotline?

it seems to me that profits always win. There's a strong tendency, isn't

Wada: The role of contact point for the hotline is shared between us andthere, to think of profits and compliance separately. In the future wean outside attorney's office. Of the more than 10 reports we have gotten

need to take a new view and ask how to make a profit while safeguard-

so far, all went to the attorney's office. Maybe many people think that if

ing fairness and reliability. Why not reform corporate activities by getting

they report internally, we would not protect their confidentiality. However,stakeholders more involved in them? Disclosing your processes wouldthat is not the case at all.

promote reliability. Of course, I understand this is not a simple thing.

Midorikawa: Systems like hotlines are still in the formative stage, so it's

DAIWA SUSTAINABILITY REPORT 2004

crucial to decide what kind of system you are going to make it. To makeTakahashi: It may be that the typical customer is more interested in infor-

another point, I believe it's important that when something happens, itmation protection than information disclosure. Information protection isshould always be reported both internally and externally.

another great responsibility, so even with company information, I think

Furuya: I've heard that in the past fiscal year there were nine reports tocustomers will understand if you explain why you are not releasing somethe hotline, which seems like a small number to me. Does this number

information.

include requests for advice?
Wada: Requests for advice are not included in the number of reports tothe hotline. But nine reports is certainly a small number. I think there is aproblem in the level of recognition and a sense that calling a hotline

The next step: Defining stakeholders
and creating opportunities to talkblows the issue out of proportion, and these are limiting use of the system. However, the Personnel Department has long gotten various inquiries, as do the counselors of the Health Development Center, and branch

Kishimoto: The next issue is how a business defines its stakeholders.

offices give input to our CS Promotion Department.

What's your definition at the Daiwa Securities Group?
Wakabayashi: Shareholders, customers and employees are clearlystakeholders. It's a constant debate which of the stakeholders to place

Nothing to hide: The most important partof corporate innovation is transparency

first; we haven't set any rank on them. The three are really one group.
When thinking about CSR, how our internal stakeholders—our employees—feel about things and how they are acting is an importantconsideration.

Midorikawa: To practice CSR, one first of all has to show how things

Takahashi: From the CSR standpoint, I believe the internal stakeholders

really are. I commend the Daiwa Securities Group for the ways in whichhave to come first. It's important that employees take pride in their com-

it is sincerely disclosing information.

pany and their jobs and be able to talk to their children about them. If

Kogure: Specialized organizations have different lists of items they check

you have more employees like that, it will naturally have a good impact

to evaluate CSR at businesses, but I think it is enough just to assesson your external stakeholders and create a positive cycle. That cycle will

how a company fulfills its responsibility to explain. Once that is done, so-assure that you have a good company, don't you think?

ciety can make its own assessment. We are trying to see whether it is

Kishimoto: There are groups capable of giving constructive opinions on

possible to evaluate how visible a company is to society, how "naked" it

how securities companies offer product information; don't you think youis, if you will.

should find out who these groups are and meet with them regularly?

Wakabayashi: I understand exactly what you are saying. Whenever a

Onishi: Lately I really feel that we need to have close communication as

corporation like us innovates from within, the most important thing is

you suggest. I thank you all for taking time from your schedules to offertransparency.

us this valuable input.

In response to stakeholder dialogue
CSR does not have a strict definition, and I often hear people say they
do not really understand what CSR means in the financial industry. In
this year's stakeholder dialogue there was a clear belief that the SRI
initiatives taken in our securities business are an important step. I also
got a new awareness of the importance of reconsidering managementby asking whether an act will encourage society to trust us or not.
For the Daiwa Securities Group, 2004 is Year 1 of SRI in Japan,
and in this year we are endeavoring to raise investor consciousness
by establishing SRI funds, offering SRI seminars and so on. We have a
new sense of the need to accelerate activities through our core busi-

Head of CSR Promotion Department, Daiwa Securities Group Inc.

Yasuaki Takakuwa

ness this way, including economic and financial education. This publication is our third Sustainability Report, but in the future we intend to
do more to incorporate third-party opinions into the creation of this report so that these opinions will serve as a tool to diagnose the current
state of our management and issues therein.
In July 2004 we created the CSR Promotion Department by joining the staff of our Corporate Communication Department, which previously provided CSR communication services, with members of the
Corporate Community Affairs Department. The Daiwa Securities
Group looks forward to the pursuit of greater CSR in the future.

DAIWA SUSTAINABILITY REPORT 200445

Communication

Group Management Training

Communication to strengthen ties across Group

Group Management Training given
and employees completing(End of June 2004)

The Group Management Training given since FY 2001 are internal trainings that cut across theGroup and seek to use communication so that Group directors and employees have a shared

Directors: four times (taken by total of 114 persons)sense of values and ultimately develop the brand. In FY 2001 all Directors/Executive Officers and all

Executive Officers: three times (95 persons)department and branch leaders became subject to training, and starting the following year the

Department and branch leaders: 13 times (397 persons)training was extended to Deputy General Managers. Each session features a vigorous discussion

Deputy General Managers: nine times (313 persons)on the progress and problems of branding initiatives and ways to address these issues.
General discussion and lecture, June 5, 2004
With Professor Kunio Ito of the Hitotsubashi University Graduate School serving as lecturer, thistraining examined issues in the Group's branding initiatives as based on short papers students had
submitted in advance. All members discussed case studies on the themes "Strengths and weaknesses of the Daiwa Securities Group" and "How well branding initiatives have sunk into day to day
work" as perceived by the students. Professor Ito gave a lecture entitled "Corporate branding" andthe CS Promotion Department of Daiwa Securities reported results of analysis of its customer
questionnaire.
Group discussions and presentations
After the general discussion in the morning, the 30 attendees broke into five small groups to continue the discussion there. They summed up their roughly three hours of group discussions in presentations given in front of President (now Chairman) Hara.

Group AGroup B

Putting branding into practice at the level of theworkplace is not simple. Management has topersistently put out the message and we haveto be leaders in spreading the practice.

If our employees believe strongly that they are acting in
the interest of the customers, customers will sense thevirtues of Daiwa Securities. In our post-sales follow up,
there should be a shift in emphasis from "follow up" to"care." And we should have a spirit of caring for thecustomer all the time, not just after the sale.

Group CGroup DGroup E

We would like to create more opportunities todiscuss brand management in the workplace.
We in the middle levels would like to get
together and create an action plan for brandestablishment.

Traits we want to associate with the Daiwa brand arekindness, strength, speed, progressiveness and soon. It's critical that we match products and services
to customer needs and raise the level of customer
satisfaction. We feel that at present the abilities of
Daiwa Securities are not yet adequately appreciated.

We have to create a system where we can share not
only our successes but more importantly our failures,and we need a management style that values employee
autonomy. By being able to show the customer what heneeds, we should be able to achieve "products andservices that exceeds customer expectations."

Summary comments by Professor Ito and President (now Chairman) Hara
After the small group presentations, Professor Ito remarked, "It's taken three years, but I think we're
now seeing the buds of a Daiwa brand. Branding is a forward-looking activity that you take for yourown benefit. When a company's brand value rises, each individual employee's brand value rises aswell." To this President Hara added, "The people taking this training today are the generation that is
at the core of the Daiwa Securities Group. I want you to be sure that Daiwa's business style is firmly rooted in how to satisfy customers. Our combined power is certainly on the rise. As each of us
talks to people inside and outside the Group and shows confidence when we do so, we build thebrand. You are Daiwa's greatest strength."

46

DAIWA SUSTAINABILITY REPORT 2004

Communication

CSR Seminars CSR Website

The Daiwa Securities Groupholds CSR Seminars.

No. 1: Reading the Sustainability Report
Persons informally offered employment at the Group to start in April 2004 were invited to tell us
their opinions after reading Sustainability Report 2003 and to give their ideas on a vision of CSR. In
group discussions, they gave lively opinions from their unique perspective as informal hires. They

Since November 2003 the Group has held CSR
Seminars to reconsider the Daiwa Securities Group
from the viewpoint of social responsibility. At these

expressed their hopes for SRI, fostering pro-social business and giving economic and financial
training to nurture a wide range of investors, among other topics closely connected to the Group's
core business. Their views will be of great value to the Group over the long term.

sessions, we work with one of our most important

No. 2: Future economic and financial education for young people

groups of stakeholders—our employees—toThis session brought together employees with a deep interest in economic and financial education

envision the ideal Daiwa CSR.

for young people. The guest speaker was Yoshihiro Nakamoto, COO of the non-profit Junior Achievement Japan, who discussed efforts to bring economic education to young people. Nakamoto

No. 1: 18 participants, November 26, 2003

stressed that the objective of Junior Achievement is to nurture children's ability to make decisions

No. 2: 40 participants, February 3, 2004

for themselves, a statement that drew many questions from the participants.

No. 3: 21 participants, February 4, 2004
No. 4: 20 participants, March 4, 2004
No. 5: 24 participants, April 15, 2004

Nos. 3 – 5: The "What Can We Do?" Club of Daiwa Securities Group
Each of the three sessions featured two guest speakers, including NGO or non-profit representatives and other experts. These gave presentations on the environment and social affairs, after
which participants split into groups and held roundtable seminars. The themes explored were conducive to a deep examination of CSR and addressed the real value of the forest, the economic
mechanisms of hunger and poverty, and the reasons why globalization has come under such criticism. These themes made the participants aware of the connection between the economy on the
one hand and the environment and social problems on the other, providing a stimulus for asking
what we as a securities company can do for global-scale problems.
Guest speakers
Naoki Adachi and Ichiro Kobayashi, The CSR Institute, Inc.
Takehiko Uemura, Coordinator, Japan Self-Reliance Project/Coordinator for East Asia, World Civil
Society Forum

Information disclosureand transmission via CSR Website

The CSR Website opened in January 2003 within the Daiwa Securities Group Inc. main website.
Following the key concept "CSR and brand management," the site introduces readers to our SRI
initiatives, economic and financial education, philanthropic activities and the Sustainability Report,
among others.
Special editions include articles on CSR. The first special edition, entitled "Chairman Hara discusses his vision," included CSR specialist Toshihiko Goto as a guest. He and Daiwa Securities
Group Inc. Chairman Hara talked about a vision of "socially responsible management through corporate branding."
The second special edition, "What is CSR?" introduced readers to recent trends in CSR and
explained the CSR concept in simple terms.
The third special edition, actually a series of editions beginning in August 2004, took up thetheme, "A dialogue on CSR." In it, Mariko Kawaguchi, Senior Analyst at Daiwa Institute of ResearchLtd., explored many aspects of CSR in a succession of dialogues with persons from NGOs, nonprofits and enterprise. The first feature in this series concerned the relation between CSR and human rights.
SRI is a way in which the Daiwa Securities Group takes initiatives within its core business. The
site includes content from the Daiwa SRI Investors Seminar of June 2004 and interviews with staff
members working with the Group's SRI funds.
The Daiwa Securities Group is using this site to offer more information on its social and envi-

http://www.daiwa.jp/branding/ronmental activities and to deepen communication with stakeholders.

DAIWA SUSTAINABILITY REPORT 2004

47

Communication

Third-Party Opinion

Dr. Iwao Taka
Professor, International School of Economics
and Business Administration,
Reitaku University

I had the opportunity to give a third-party opinion two years ago in thecontinuing to create systems and make improvements to do so. These

Sustainability Report of the Daiwa Securities Group. Now, after having

things can be reported honestly because of the Daiwa Securities

read the report for 2004, I come away with the impression that theGroup's persistent efforts to establish practical and effective gover-Group's corporate social responsibility (CSR) initiatives have madenance systems and internal controls. We readers have to understandsteady progress over these last two years. Chairman Hara has long

this point and commend the Group for it.

talked about the Group's passion for CSR, but now I feel that this attitude has spread and taken root throughout the Group.
Another way we might define CSR is "the ways a business contrib-on page 29 showing the distribution of economic value to stakeholders

utes to the building of a sustainable society," and I think that SRI as pro-is especially easy for readers to understand. Initiative details appear on

moted by the Daiwa Securities Group is a perfect example of that. In

the pages following this. For example, the introduction of theparticular I think that the Daiwa SRI Fund described on pages 08 – 09 of

multi-directional evaluation system for employees (page 32) and the pro-this report is an experiment in supporting "sincere Japanese compa-

gram to support post-retirement careers (page 33) are unique challeng-nies" in a clear way that has never been tried before and by so doing it

es the Group has undertaken.

is transforming Japanese society into a sustainable community. I truly

There are improvements I would like to see made, however. First ofadmire the fact that the Daiwa Securities Group recognizes the social

all, the Group should try to convey the correct significance and possibili-need for such financial products and is therefore putting them together

ties of SRI to more citizens. To that end, perhaps the Group should more

and selling them.

systematically give SRI training for people in the community and the

I particularly praise this report for the following three points. First,

persons selling products in the office. Second, I'd like to see the Groupthe Daiwa Securities Group is taking medium- and long-term CSR initia-

go further in promoting women to managerial positions. Certainly thetives, not just a one-time program. On pages 16 – 17, this report lists is-number of such women is increasing, but as a percentage of the entire

sues and targets from the past year and shows how much progress has

female work force, women in managerial positions are still relatively few

been made on them. I would particularly point out that the Group has re-as compared to men.

set targets for those issues where it did not sufficiently achieve its goals.

Listing these desired improvements does not by any means deny

At a time when many businesses are paying lip service to CSR, the ini-

the value and progressive nature of the current Sustainability Report.

tiatives of the Daiwa Securities Group are clearly different and more pro-This report boasts a degree of completeness rarely seen; I am merely

gressive.

stating my hope that the Group will not be satisfied with that and will in-

Second, this report does not just give the positive information suchas the contributions the Group is making to society; it also actively reveals compliance risks and other negative information. On page 22, forexample, the report states straightforwardly that "Daiwa Securities israising the ratio of internally detected cases" of problem conduct happening in the company. Many CSR reports try not to touch on problems
like this, but this report admits latent problems, that the Group is detecting these problems in advance and nipping them in the bud and that it is48

Third, this report states the contributions being made to eachgroup of stakeholders, and it makes this easy to understand. The chart

DAIWA SUSTAINABILITY REPORT 2004

stead push further. I hope that citizens and society will likewise thinkhighly of the sincere and steady efforts of the Daiwa Securities Group.

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

I have come to see that the Daiwa Securities Group has basically a top-

index funds to invest in the communities. Awareness of CSR and SRI isdown system of CSR. In the sense that CSR is a policy of top manage-

still relatively low in the financial industry as a whole in Japan as com-ment, the message will quickly spread that this is not just "omikoshi

pared to the US and Europe, but the initiatives of the Daiwa Securities

management," that pattern so often seen in Japanese business in whichGroup are highly commendable. However, this report indicates the

top management is aloof from on-the-ground issues. However, I had

Group's perception that investing with an SRI perspective will be main-some concerns about the consistency of the Group's extremely varied

stream in the future, and if this is so, issues that the Group will have to

CSR initiatives and whether they were being managed in a unified way,

face are how to incorporate SRI-like ideas into all functions and not justbut in July of this year the Group set up a CSR Promotion Department,

its SRI funds, and how to quantitatively measure the extent to which itwhich I think will serve as the center for these functions. In top-down or-

has achieved its goals. In its core business, I would like to see theganizations where departments are divided vertically and operate withGroup do such things as using the Clean Development Mechanism* on

little contact with each other, there tends to be a disconnect between

problems of the environment and poverty in industrializing countries

society's expectations and the organization's actions, but having differ-through such means as carbon funds.

ent types of communication within and beyond the company can bridge

It was delightful to read about the Daiwa Securities Group's finan-

the gap. The GRI Content Index found at the back of this report is usefulcial education initiatives, although this was included as part of its initia-

not only for checking the items in the report but also the comprehen-tives in its core business. That would be correct as long as the Group issiveness of initiatives and activities to be given priority.

referring to activities that are effective in terms of employee training and

The Daiwa Securities Group has made compliance the foundation

compliance, but its financial education initiative seems to be halfway be-of its CSR initiatives and is addressing SRI as a strategic and challeng-

tween core business and philanthropic activities. Globally, the focus ofing target. Compliance is given relatively great weight, but I think that as

CSR at this time is purely on core business initiatives, so in that sensea matter of course compliance is the most important element of man-this description may confuse readers.

agement in an industry that handles money. The Daiwa Securities GroupAs for the report itself, the 2003 report won high praise from parties

has taken up the slogan "think for yourself, act for yourself," so I think it

outside the Group, and I feel this year's is even better. There is more nu-

would be a wise idea to adopt voluntary action standards that apply

merical data, and I hope the Group will expand its use of such data inacross the Group and turn employees into participants. The Group iscomparing targets and results and setting new targets. It is widely ac-

thinking beyond merely obeying the law, the usual concept of compli-

cepted that it is often difficult to quantify social goals, but I hope theance. It would be even better if this led the top management to makeDaiwa Securities Group will be a pioneer in developing creative ways todefinite commitments, including some quantitative statements about

express these things quantitatively as far as possible.

what it will do and how far it will go beyond merely obeying the law. The

Naturally, the Daiwa Securities Group ought to be monitoring all its

most desirable outcome of taking compliance initiatives would be an in-goals on a Group-wide basis, but beyond that it also needs to look at its

crease in customer satisfaction, so it would be interesting if the Grouprelationship with suppliers and subcontractors.

could think of some system for measuring the connection between thetwo.
In its promotion of SRI, the Daiwa Securities Group is not justscreening funds for appropriateness; it is using such means as regional*Clean Development Mechanism: One of the Kyoto Mechanisms, or strategicmeans for the prevention of global warming, established under the Kyoto Protocol. Under the mechanism, industrialized countries conduct projects in industrializing countries to reduce emissions of greenhouse gases and the resulting emissions reductions are apportioned to the countries involved.

DAIWA SUSTAINABILITY REPORT 2004

49

GRI Content Index/Milestones toward Sustainability

GRI Content Index
SectionIndicator

1 Vision and strategy
1.1
1.2

Statement of the organisation's vision and strategy regarding its contribution
to sustainable development.

Pages inthis report

Section

2-3,5

3.12

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

3.13

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

22-25

3.14

Externally developed, voluntary economic, environmental and social charters,
sets of principles, or other initiatives to which the organisation subscribes or
which it endorses.

11

3.15

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

10-11,13

3.17

Reporting organisation's approach to managing indirect economic, environmental and social impacts resulting from its activities.

3

3.18

Major decisions during the reporting period regarding the location of, orchanges in, operations.

39

3.19

Programmes and procedures pertaining to economic, environmental and social performance.
16-17,31,40-41

3.20

Status of certification pertaining to economic, environmental and social management systems.

Organisational Profile
2.1

Name of reporting organisation.

2.2

Major products and/or services, including brands if appropriate.

2.3

Operational structure of the organisation.

2.4

Description of major divisions, operating companies, subsidiaries, and joint
ventures.

2.5

Countries in which the organisation's operations are located.

2.6

Nature of ownership; legal form.

2.7

Nature of markets served.

2.8

Scale of the reporting organisation.

2.9

List of stakeholders, key attributes of each, and relationship to the reportingorganisation.
4,5,18,27,29,33

7,51
7,9-10,28,39
7,19,20-21
7,28
51
51
6,28
28-29,33

Report Scope
2.10

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

51

2.11

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

4

2.12

Date of most recent previous report (if any).

27

2.13

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

4,7

2.15

2.16

Significant changes in size, structure, ownership, or products/services thathave occurred since the previous report.
Basis for reporting on joint ventures, partially owned subsidiaries,
leased facilities, outsourced operations, and other situations that cansignificantly affect comparability from period to period and/or between
reporting organisations.
Explanation of the nature and effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement (e.g., mergers /acquisitions, changes of base years/periods, nature of business, measurement
methods).

20

2.20

2.21
2.22

4.1

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

50-51

5 Performance Indicators
Economic Performance Indicators
Core Indicators
Customers
EC1

Net sales.

28

EC2

Geographic breakdown of markets.

28

Cost of all goods, materials and services purchased.

28

Suppliers
EC3
Employees

39

EC5

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

19,29

Providers of Capital
38

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

29

Policies and internal practices to enhance and provide assurance about theaccuracy, completeness, and reliability that can be placed on the sustainability
report.

4,26-27

Policy and current practice with regard to providing independent assurance forthe full report.

48-49

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

26-27,47

EC6Distributions to providers of capital broken down by interest on debt and borrowings, and dividends on all classes of shares, with any arrears of preferred
dividends to be disclosed.

EC7

Increase/decrease in retained earnings at end of period.

29

EC8

Total sum of taxes of all types paid broken down by country.

29

EC10

Donations to community, civil society, and other groups broken down in termsof cash and in-kind donations per type of group.

28-29

Public Sector

29,36

Environmental Performance Indicators
Core Indicators

3 Governance structure and management systems

EnergyEN3

Direct energy use segmented by primary source.

38,40-41

Total water use.

38,40-41

Water

Structure and Governance

EN5

3.1

Governance structure of the organisation, including major committees underthe board of directors that are responsible for setting strategy and for oversight of the organisation.
18-19,20-21

Emissions, Effluents and Waste
EN8

Greenhouse gas emissions (CO2,CH4,N2O,HFCS,PFCS,SF6).

38,40-41

3.2

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

EN11

Total amount of waste by type and destination.

39,40-41

20-21

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

19,20-21

3.4

18-19

3.6

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

19,20-21

3.7

Mission and value statements, internally developed codes of conduct or principles, and policies relevant to economic, environmental and social performance and the status of implementation.

5,26,40-41

3.8

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

[Labor Practices and Decent Work]
Employment
LA1

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

33

LA2

Net employment creation and average turnover segmented by region/country.

33

Training and Education
20-21,27

Stakeholder engagement

LA9

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

34-35

Diversity and Opportunity

3.9

Basis for identification and selection of major stakeholders

4,5,29,42

3.11

Type of information generated by stakeholder consultations.

42-45

DAIWA SUSTAINABILITY REPORT 2004

Social Performance Indicators
Core Indicators

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

3.5

50

40-41

4 GRI Content Index

Report Profile
2.18

25,27,30-31,42-45

Overarching policies and management systems
2-3

2 Profile

2.14

Pages inthis report

Indicator
Use of information resulting from stakeholder engagements.

LA10

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

32-35

Milestones toward Sustainability
SectionIndicator

LA11

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

Pages inthis report

20,33,34

Year
2003

Month

Daiwa Securities Group Milestones toward Sustainability

1Group-wide Corporate Ethics Hotline internal reporting system
set up2

Internal Audit Department established at Daiwa Securities
Group Inc.

3

New medium-term management plan (for FY 2003 - 2005)
established4

New rewards program for shareholders inaugurated

6

Total Daiwa Securities Group Inc. director and corporate auditor compensation disclosed

7

Daiwa Securities SMBC Principal Investments invests in Community Development Carbon Fund, a World Bank carbon fund10

Began supporting Junior Achievement's Student Company Program, a hands-on economic education program

10

Began selling UBS Global Equity 40 SRI+, an SRI investment
trust that invests in global companies

11

Joined Social Investment Forum Japan (SIF-Japan)

1Opened CSR Website

3

Established Disclosure Policy

4Partnership with Waseda Graduate School of Finance, Accounting and Law

5Began selling Daiwa SRI Fund, an SRI investment trust that invests in Japanese companies

6

Began new management system under the leadership ofShigeharu Suzuki and transitioned to a company based on acommittee system

7

Established CSR Promotion Department within Daiwa Securities Group Inc.

Additional Indicators
Employment
LA12

Employee benefits beyond those legally mandated.

33,34

Training and Education
LA16
LA17

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

33,34-35

Specific policies and programmes for skills management or for lifelong
learning.

33,34-35[Human Rights]
Core Indicators
Disciplinary Practices
HR10

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

22-25[Society]
Core Indicators
Community
SO1

Description of policies to manage impacts on communities in areas affectedby activities, as well as description of procedures/programmes to address thisissue, including monitoring systems and results of monitoring.

10,36-37

Bribery and Corruption
SO2

Description of the policy, procedures/management systems, and compliancemechanisms for organisations and employees addressing bribery andcorruption.

22-25

Additional Indicators

2004

Competition and Pricing
SO7

Description of policy, procedures/management systems, and compliancemechanisms for preventing anti-competitive behaviour.
22-25,30-31[Product Responsibility]
Core Indicators
Customer Health and Safety
PR1

Description of policy for preserving customer health and safety during use of
products and services, and extent to which this policy is visibly stated and applied, as well as description of procedures/programmes to address this issue,
including monitoring systems and results of monitoring.

22-25

Products and Services
PR2

Description of policy, procedures/management systems, and compliancemechanisms related to product information and labelling.
22-25,30-31

Respect for Privacy
PR3

Description of policy, procedures/management systems, and compliancemechanisms for consumer privacy.

22-25*For information on milestones through 2002, see Sustainability Report 2003, page 40.

Additional Indicators
Customer Health and Safety
PR6

Voluntary code of compliance, product labels or awards with respect to social
and/or environmental responsibility that the reporter is qualified to use or hasreceived.

Sustainability Report 2004 reader questionnaire
Back cover

Products and Services
PR8

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

30-31

http://www.daiwa.jp/branding/report/form_e.html

Advertising
PR9

Thank you for reading the Daiwa Securities Group’s Sustainability Report 2004. We are conducting a survey on this report with a questionnaire available at the website below. Please
use this questionnaire to give us your comments. Readers may also find questionnaire results for the 2003 report at this site.

Description of policies, procedures/management systems, and compliancemechanisms for adherence to standards and voluntary codes related toadvertising.

23

For further information, please contact:

CSR Promotion Department, Daiwa Securities Group Inc.
6-4, Otemachi 2-chome, Chiyoda-ku, Tokyo
Tel: 81-(0)3-3243-5992
E-mail: brand@dsgi.daiwa.co.jp
URL: http://www.daiwa.jp/
Issued: November 2004 (next issue October 2005)
Design and production: Cre-en Inc.

DAIWA SUSTAINABILITY REPORT 200451

www.daiwa.jp

Printed in Japan