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

   Against a backdrop of recent increasing market globalization and Against a backdrop of recent increasing market globalization and considered vital for making investment decisions. Daiwa Securities Group believes that earning the confidence of all stakeholders will enable it to continuously increase corporate alue. The company actively incorporates outside viewpoints, building a transparent, dynamic, and efficient corporate-governance system that meets international standards. At the same time, we are leveraging the synergy of each group company to build a unified group-management system.

Corporate governance organization chart

   Daiwa Securities Group Inc. has adopted a committee system, with the goals of greater agility in decision making, enhancing the supervisory functions of the Board of Directors, and making management more transparent. Our corporate governance system consists of the Board of Directors, which serves in a supervisory role; the Nominating, Audit, and Compensation Committees; the Executive Committee, which serves as the ecutive body, and the Internal Control, Disclosure and Group IT Strategy Committees, which are subcommittees of the Executive Committee.
   Although our Chairman of the Board, who chairs the Board of Directors, is also an executive Officer, he does not have any specific duties as an Executive Officer.

   Conflicts of interest between group companies can occur in such situations as when there is intra-Group trading. The Daiwa Securities Group applies rules regarding conflicts of interest stipulated by the Company Law to Executive Committees. Conflicts of interest within the Group are prevented by making a rule that prohibits an executive officer from voting when he or she is also the director of an interested group company.

   The Board of Directors consists of 13 directors, including four outside directors. The Board of Directors determines key management policy and supervises executive duties. In order to perform this supervisory role from multiple viewpoints in accordance with the demands of society, the policy for selecting new board members states that candidates must have a strong sense of ethics and lead by example. Additionally, external directors are experts in such fields as law and executive management.
   Our supervisory function is reinforced by the Audit Committee and the Office of the Audit Committee. The Audit Committee, which consists of a majority of outside directors*, plays a central role in the supervision of executive duties. The Audit Committee is assisted by the Office of the Audit Committee, which has no ecutive duties, and has different systems for assignment and evaluation.

* Outside directors as defined by Article 2-15 of the Company Law.

   The Executive Committee, consisting of 15 executive officers, is located at Daiwa Securities Group Inc. The Executive Committee discusses and makes decisions regarding key issues for executive management, including the business strategy of the Group as a whole and group-wide management issues. In order to ensure uniform management across the Group, some of the executive officers of Daiwa Securities Group Inc. also serve as key directors in group companies.

   We are strengthening our initiatives in anticipation of the internal-control and reporting system under the Financial Instruments and Exchange Law, which will go into effect in April 2008. We have created four working groups—company-wide control, general IT control, business processes, and verification—and in fiscal 2006 we documented the operational flow, risks, and control of a mber of business processes as a pilot project. The various divisions of Daiwa Securities Group Inc. play a leading role in each working group. They determine the responsible divisions and persons within each group company, coordinating a group-wide effort. In fiscal 2007, the working groups are promoting documentation of company-wide control, general IT control, and usiness processes across the Group, and are evaluating and verifying internal control.

   In accordance with the enactment of the new Company Law in May 2006, we have revised our management system throughout the Group.
   One of the features of the new law is a much broader range of choices regarding the company’s institutional design. In response, we have made several revisions, including revisions to the articles of incorporation of each group company. In addition to assigning appropriate directors and corporate auditors, we implemented measures to enable general shareholders meetings to be conducted on paper. We have created systems to promote faster and more appropriate business operations.

   The Daiwa Securities Group is considering methods of evaluating performance by identifying the total capital employed by each group company, and weighting the capital cost into the evaluation, in order to evaluate the performance of group companies more fairly.

   Daiwa Securities Co. Ltd. and Daiwa Securities SMBC Co. Ltd. have created a crisis management plan envisioning a system failure. Disaster-response protocols have been formulated for major subsidiaries. Daiwa Securities Group Inc. has also created protocols focused on public-relations readiness and ensuring the safety of employees. A substitute office in the outskirts of Tokyo was secured in case of disaster, and a readiness was set up to enable essential operations to be continued.