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

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

  Daiwa Securities Group Inc. adopted a committee system in 2004, with the goal of achieving greater management transparency and agility. The corporate governance system of the Daiwa Securities Group consists of a Board of Directors, which serves in a supervisory role; the Nominating, Audit and Compensation Committees; the Executive Committee, which serves as the executive body; and the Internal Control Committee, the Disclosure Committee and the Group IT Strategy Committee, 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 situations such as 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 through a rule prohibiting 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 executive management and accounting.
  Our supervisory function is reinforced by the Audit Committee and the Office of the Audit Committee. The Audit Committee, which consists of a majority of outside directors,* plays a central role in the supervision of executive duties. The Audit Committee is assisted by the Office of the Audit Committee, which is an independent department.

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

  The Executive Committee, consisting of 14 executive officers, is operates from Daiwa Securities Group Inc. The Executive Committee discusses and makes decisions regarding executive management, including the 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.

■Corporate Governance System

  In anticipation of the internal control and reporting system for financial reports effective from April 2008, all Daiwa Securities Group companies completed documentation of standards in three areas: company-wide control, business process control, and general IT control. Regulations for the internal control and reporting system were newly formulated and related regulations were amended accordingly.
  In accordance with these regulations, from April 2008, the internal audit department evaluates the effectiveness of each Group company's internal control and reporting system, and each company's council confirms evaluation results, which are then reported to Daiwa Securities Inc. After these reports are received, the Internal Control Committee discusses them and presents resolutions, and based on those resolutions the Disclosure Committee determines the effectiveness of the internal control and reporting system. Following this, the chief executive officer and the chief financial officer draw up an internal control and reporting system report and only then declare to investors and other stakeholders that financial reporting is accurate.

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