Holding - daiwa-grp.jp

1 Ho l d i ng C o m p a n y Daiwa Securities group Inc. Daiwa Securities group Inc. was established on April 26, 1999. The main composition of the new group is as illustrated below: Under the prevailing regulations, as a securi- management control exerted by the parent over ties company , the former Daiwa Securities Co. the subsidiary. These variables include, in addi- Ltd. was restricted to owning 5% or less of the tion to degree of equity ownership, loans out- equity in affiliated companies in principle in standing, the existence of management contracts Japan. As a Holding company , these regulatory giving the parent effective control, and personnel constraints no longer apply and we are able to allocation.

2 In FY1998, 55 companies were consol- increase our ownership of our major affiliates to idated. The final form of the group companies for 50% or more. FY1999 consolidation and application of the As of the financial year ending March 2000, equity method is still under consideration. In the criteria for consolidation no longer hinges on addition, it is intended that the overseas sub- equity ownership alone but also takes account of sidiaries will eventually become subsidiaries of the other variables determining the degree of effective wholesale securities company .

3 Function of the Holding company The primary role of the Holding company is to allocate both financial capital and human resources effectively to ensure that the group as a whole maximizes shareholder value. Initially the group will either consolidate or apply the equity method to the companies listed above. We plan, where necessary, to restructure these companies to ensure they provide an adequate contribution to consolidated earnings and to adjust our equity exposure to such companies based on our assess- ment of whether or not they are able to meet cen- trally defined operational and financial targets.

4 We have adopted ROE (Return on Equity) as our primary financial yardstick of corporate suc- cess. Our group business target is to raise ROE to close to 10% on a consolidated basis in FY2000. 11 . Ho l d i ng C ompan y FY 1999 Management Policy Our FY1999 management policy can be summa- related businesses with the management of the rized as follows: group companies. In addition we have, for the first time, implemented an executive officer sys- Expansion of Consolidated Income tem. Each executive officer will assume responsi- Generate synergistic benefits between the two major bility for a specific business field under assign- operating subsidiaries and other group companies.

5 Ment to the Holding , retail or wholesale compa- nies and several affiliates. Reorganization of group Businesses Continue to review group businesses in pursuit of Personnel System an efficient and effective group structure. Establishment of group Corporate Governance All employees of the former Daiwa Securities Co. Enhance the influence of the Holding company Ltd. resigned from their positions on April 25, through clear capital relationships. 1999 and were rehired by one of the new corpo- rate entities on April 26, 1999. As part of the Directors Corporate Governance transfer process, retirement allowances were paid Chairman of the Board to each employee in respect of the accumulated Tomoaki Kusuda Holding company Core Committees prior service obligation until that date.

6 President and CEO. Yoshinari Hara The role of the Holding company is to set the In Japan, retirement benefits are generally Senior Managing Director and CFO. group strategy to maximize the shareholder value paid in a combination of ways. In addition to a Shinichi Yamamura of the Daiwa Securities group . Among the main tax qualified pension plan, which pays benefits Managing Director bodies entrusted with securing effective group out of funds specifically reserved by the compa- Shuichi Komori governance are: ny over time, employees are entitled to receive Managing Director Shigeharu Suzuki lump-sum retirement allowances at the time of Director Board of Directors retirement.

7 Such benefits are taxed at rates that Kenichi Fukuda As the main decision-making organ, the Board of are extremely advantageous for the employee but Director Directors takes responsibility for the important represented a substantial (and partially off-bal- Hiroyasu Kawaguchi management issues such as efficient utilization of ance sheet) liability. By revamping this item, Executive Officers group resources. Daiwa has taken a step towards improving the Nagayoshi Miyata Board of Corporate Auditors quality of its balance sheet. Masayasu Ohi The Board of Corporate Auditors ensures sub- Jyunichiro Wakimizu stantial and adequate disclosure in financial state- The New Personnel System Kiyoshi Matsuba ments to improve accountability to shareholders Japanese corporations are currently facing a number Corporate Auditors and creditors of the Holding company .

8 Of challenges with respect to personnel management. Noboru Sugitani Legal & Compliance Committee For the last fifty years, relations between major Hideharu Takahashi Each group company bears responsibility for its corporations and individual employees have been Tetsuro Kawakami own legal and compliance function. The Legal and based on the twin principles of lifetime employ- Compliance Committee monitors the adequacy of ment and seniority-based promotion. This sys- Advisory Board compliance measures of group companies. tem has served both corporations and their Mr.

9 Kazuo Inamori Founder and Chairman Emeritus Executive Committee employees well. Implicit mutual guarantees and a Kyocera Corporation The Executive Committee has responsibility for high level of trust between the corporation and Chairman Kyoto Chamber of Commerce & Industry annual /mid-term business plans, budgets, per- its employees have allowed both to benefit. There sonnel allocation, and other important manage- were, however, drawbacks to this system, princi- Mr. Jiro Ushio Chairman and CEO ment issues. Most of its agenda is taken up by the pally in that it fostered a false sense of equality Ushio Inc.

10 Board of Directors. between high-performance employees and others Mr. Glen S. Fukushima Advisory Board whose performance fell short of expectations. President and Representative Director Arthur D. Little (Japan), Inc. The Advisory Board's members have a wide range During the rapid-growth phase of Japan's post President of management expertise and will be called upon to war development, this false equality was tolera- The American Chamber of Commerce in Japan give instructive opinions and suggestions on various ble. Now, however, Japan has become a mature issues concerning group management to the CEO.