Daiwa Securities : Full Report, two-page spread view (for viewing)

https://www.daiwa-grp.jp/english/

2022 Report Integrated

Integrated Report 2022

Year ended March 31, 2022

Take on new challenges

From savings to SDGs

Printed in Japan

Contents

1. Editorial Policy
2. Daiwa's Value

1. History of Daiwa Securities Group as a Pioneer
2. Corporate Principles of Daiwa Securities Group
3. Corporate History

1. Daiwa Securities Group Value Creation Model

1. Daiwa Securities Group Approach to Human Capital

1. Financial Highlights/Non-financial Highlights

1. Business Portfolio and Medium-Term Management Plan

16 Vision & Strategy

1. Vision 2030-From Savings to SDGs-

1. Roadmap for Achieving Vision 2030
2. Progress of Vision 2030
3. Process of Formulating Vision 2030
4. Sustainability Promotion Structure
5. Risks and Opportunities

1. Message from the CEO

1. Message from the COO

1. Daiwa Securities Group Vision and Strategy

1. Messages from Outside Directors

1. Message from the CFO

49 Diversity & Inclusion (Human Capital)

1. Taking on the New Challenge of Creating Workplaces That Foster Innovation through Diversity
2. Message from the Head of Human Resources

62 100 years of life

62 Taking on the New Challenge of Solving Customer Issues

1. Message from the Head of Retail
2. Japan Post Bank Starts Handling Fund Wraps

72 Innovation

1. Taking on the New Challenge of Creating New Value
2. Dialogue on Innovation I:
   Outside Director (Murakami) × Deputy President (Tashiro)

76 Message from the CIO

83 Dialogue on Innovation II:

Chairman of ACA (Azuma) × Deputy President (Ogino)

86 Green & Social

86 Taking on the New Challenge of Solving Social Issues

93 Carbon Neutrality Initiatives

98 Response to Climate Change

-disclosure based on the TCFD recommendations 2022

1. Foundation of sustainable management
2. Message from the Chairperson of the Board

1. Nominating Committee Report

1. Audit Committee Report

1. Compensation Committee Report
2. Executive Compensation

1. Directors (Members of the Board)

1. Corporate Executive Officers
2. Corporate Governance

1. Risk Management

1. IT Strategy and the Management of Systems Risk
2. Compliance
3. Tax Policy
4. Messages from Corporate Executive Officers

1. Stakeholder Engagement

136 Financial Section

138 Retail Division

140 Wholesale Division

142 Asset Management Division

1. Investment Division
2. Other
3. Key Financial Data

148 Key Non-financial Data

150 Management's Discussion and Analysis

160 Consolidated Financial Statements

308 Other Information

1. Officers
2. Daiwa Securities Group Inc. Corporate Data

309 Stock Information

01

Editorial Policy

Publication of Daiwa Securities Group Integrated Report 2022

Daiwa Securities Group marked its 120th anniversary in May 2022. I would like to express my heartfelt gratitude to our shareholders and other stakeholders, recognizing that reaching this milestone was only possible because of your support.

FY2022 is the second year of Vision 2030, which shows the kind of company we are aiming to be in 2030, and of the Medium-Term Management Plan "Passion for the Best" 2023, covering the first three years of that period.

Based on the Corporate Principles, which consist of four components-"building trust," "placing importance on personnel," "contributing to society," and "maintaining healthy earnings results"-the Group is working to implement the Vision 2030 and Medium-Term Management Plan while continuously enhancing corporate value. To deepen understanding of the corporate activities the Group is undertaking and to generate value together with all of our stakeholders, we have created this Integrated Report as a tool for dialogue.

Integrated Report 2022 showcases the Group's initiatives and progress with regard to our Materiality from both financial and non-financial perspectives. In addition, in line with the Group's emphasis on human capital, rooted in the conviction that the capabilities of our employees are the source of our competitiveness, the Report discusses how initiatives such as the pursuit of job satisfaction and measures to increase engagement and productivity will lead to the enhancement of corporate value, bringing in the voices of employees.

Aside from financial information, the Group places high value on active dialogue with investors and stakeholders through the disclosure of non-financial information essential to enhancing medium- to long-term corporate value. Based on feedback regarding last year's Integrated Report 2021 and other advice received through dialogue with stakeholders, we sought to enhance the content of Integrated Report 2022 to make it an even more useful tool for investors and stakeholders.

Detailed ESG-related data and other information are available on our website. I would appreciate it if you would provide us with your opinions on this report, and would like to ask for your continued support.

Seiji Nakata

President and CEO

Daiwa Securities Group Inc.

Note: Please send your comments and questions here: https://www.daiwa-grp.jp/ir/english/inquiry.html

ESG Index Selection

Daiwa Securities Group Inc. has been selected for inclusion in the following indexes. In addition to the Dow Jones Sustainability World Index and the FTSE4Good Index, it is included in all the domestic ESG stock indexes selected by Government Pension Investment Fund (GPIF): the FTSE Blossom Japan Index, the FTSE Blossom Japan Sector Relative Index, the MSCI Japan ESG Select Leaders Index, the MSCI Japan Empowering Women Index, and the S&P/JPX Carbon Efficient Index.

Forward-Looking Statements

This Integrated Report contains forward-looking statements about the Daiwa Securities Group. You can identify these statements by the fact that they do not relate strictly to historic or current facts. These statements discuss future expectations, identify strategies, contain projections of results of operations or of financial condition, or state other "forward-looking" information. These statements are based on currently available information and represent the beliefs of the management of the Daiwa Securities Group. These statements are subject to numerous risks and uncertainties that could cause the Daiwa Securities Group's actual results, performance, achievements or financial condition to differ materially from those described or implied in the forward-looking statements. The Daiwa Securities Group undertakes no obligation to publicly update any forward-looking statements after the date of issuance of this report. These potential risks and uncertainties include, but are not limited to: competition within the financial services industries in Japan and overseas, our ability to adjust our business focus and to maintain profitable

Position of Integrated Report in Disclosure Documents

Concise

FinancialNon-financial

Business Report

Management strategy presentation materials

Notices of convocation of the general meeting and attached documents*1

Integrated Report

					SDGs site*2
Earnings announcement materials
			Corporate
					Governance
Financial summaries, Securities Reports, etc.*1
Report*1

Detailed

With the aim of communicating the history, current, and future value creation activities of Daiwa Securities Group to stakeholders in an easy-to-understand manner, we have selected information on important points and efforts over the last year. In identifying information to be presented as well as the composition of the Report, we referred to the Guidance for Integrated Corporate Disclosure and Company- Investor Dialogues for Collaborative Value Creation produced by the Ministry of Economy, Trade and Industry and the International Integrated Reporting Framework of the IFRS Foundation.

strategic alliances, volatile and sudden movements in the international securities markets, and foreign exchange and global economic situations affecting the Daiwa Securities Group. "FY2021" refers to the fiscal year ended March 31, 2022, and other fiscal years are referred to in a corresponding manner.

In the event that any material corrections are made to the content of the Integrated Report, an erratum will be posted on the Group's website.

*1 Documents systematically stipulated under the Companies Act, Financial Instruments and Exchange Law, etc. *2 Detailed ESG-related data and other information are available on our SDGs website.

https://www.daiwa-grp.jp/english/sdgs/

https://www.daiwa-grp.jp/english/ir/toolkit/annualreport/

Foundation of

Financial Section /

02

Integrated Report 2022

Daiwa's Value

Vision & Strategy

Diversity & Inclusion

100 years of life

Innovation

Green & Social

sustainable management

Other Information

03

120 years of continuing to

embracechallenge

Fujimoto Bill Broker Bank building (1912-1920)

1902

Commenced operations as Fujimoto Bill Broker

Daiwa Securities Group was established with the aim of becoming a full-fledged bill broker*. Since starting up operations, the company built up a position in the market by seeking to grow the business based on its proprietary accounts, procuring funds from the call market and buying bills. The ability to raise adequate funds directly from the call market led to Daiwa Securities' later independence from any bank.

* A buyer and seller of bills of exchange

GranTokyo North Tower (from 2007)

Former Gofukubashi Head Office building (1956-2007)

Solar farm (Ozu, Kumamoto Prefecture)

Bell pepper cultivation site

(Smart Agriculture IWATA)

2022

A financial and capital market pioneer that creates the future

Over the course of its long history, the Daiwa Securities Group has repeatedly experienced major swings and turmoil in the economic environment and in the financial markets. Nonetheless, we have maintained and grown the business by always adapting to the changing times. Today, as a comprehensive securities group with a hybrid business model, the Group continues to expand the business portfolio with a series of flourishing hybrid businesses, including the real estate asset management business, investment in renewable energy, and entry into the agricultural business.

Foundation of

Financial Section /

04

Integrated Report 2022

Daiwa's Value

Vision & Strategy

Diversity & Inclusion

100 years of life

Innovation

Green & Social

sustainable management

Other Information

05

120 years of continuing to embrace challenge

History of Daiwa Securities Group as a Pioneer

19861986

Start of Japan's first home trading with PCs

On May 9, we launched Japan's first computer-based

Corporate Principles of Daiwa Securities Group

1998Establishment of the Corporate Principles

Since the start of operations in 1902, each and every employee has been creating the history of the Group. The background to the compilation of the Corporate Principles was the Group taking another look back at its history, and its determination to reunite and rebuild the relationship of trust that had been built together with society.

Corporate Principles

home trading service. In addition to trading in stocks and buying medium-term government bond funds, users could obtain current stock price quotes and other information through their computers.

19991999

Daiwa Securities Group Inc. starts out as the first listed company in Japan to move to a holding company structure

Building trust

The trust and approval of customers form the very foundation of the Daiwa Securities Group. The Group will always place the needs of customers first, and strive to develop the advanced, specialized skills to offer them the most attractive products and services of any securities group.

Placing importance on personnel

The source of the Group's competitiveness lies in the capabilities of its employees. The Group will promote the creativity of employees by offering them a challenging and self-directed working environment that encourages their abilities and appropriately rewards their contributions.

Contributing to society

The Daiwa Securities Group will seek to benefit the economy and society through the development of healthy financial markets. In addition to scrupulously observing both regulations and internal policies, the Group will strive to maintain a high sense of morality and duty, endeavoring to continue contributing to the sustainable growth of the societies in which we operate.

Maintaining healthy earnings results

The Group will always seek to develop healthy business operations and to increase corporate value for the benefit of shareholders. By providing customers with attractive products and services, the Daiwa Securities Group will seek to generate strong profits and healthy returns for shareholders.

On April 26, Daiwa Securities Co. Ltd. changed its corporate name to Daiwa Securities Group Inc., and started operations as a holding company. To enable each independent business area to draw on its individual strengths while maintaining a cohesive organization, and to boost competitiveness and growth potential, the Group moved out ahead of other companies in the financial sector to adopt a holding company structure.

Press conference to mark the launch of Daiwa Securities Group Inc. (photograph is of then-President Yoshinari Hara)

2008Formulation of the Daiwa Spirit

We have nurtured our corporate culture since the foundation of our business. Based on our Corporate Principles, we have also taken steps to crystallize the basic philosophy and mindset of the Group inherent in our culture to be manifested as the Daiwa Spirit. The Daiwa Spirit enhances employees' sense of unity and togetherness and thus the Group's overall strength.

The Daiwa Spirit

2008

Underwriting and sale of Japan's first vaccine bonds

The Group sold South African rand-denominated vaccine bonds to finance healthcare and immunization services in developing countries. This was2008the first attempt in the world to sell vaccine bonds to individual investors, sparking interest among a wide range of investors.

1. Exercises self-discipline and complies fully with the law, recognizing that sustainable growth hinges on winning the trust of customers, finan- cial and capital markets, and society at large.
2. Secures sound profits by contributing to societal and economic development through its actions in financial and capital markets.
3. Exerts unflagging efforts to build strong, sustainable, trust-based customer relations.
4. Continues to pioneer products and services in financial and capital markets, with each employee fulfilling his/her mission with confidence and pride.

1. Cultivates unbeatable competitiveness to overcome challenges, underpinned by strong company-employee trust and solidarity between colleagues.
2. Aims to be the securities group with the highest ambitions, a positive attitude that turns hardships into opportunity, and unmatched speed.

Foundation of

Financial Section /

06

Integrated Report 2022

Daiwa's Value

Vision & Strategy

Diversity & Inclusion

100 years of life

Innovation

Green & Social

sustainable management

Other Information

07

120 years of continuing to embrace challenge

Corporate History

Since its establishment, the Group has been steadily building relationships with clients while encouraging the formation and development of Japan's financial markets. In line with our thoughts on prioritizing customer needs, Daiwa Securities Group cultivates products and schemes and works as a pioneer in the financial and capital market.

In 2021, Daiwa Securities Group formulated a vision leading up to 2030 as well as a Medium-Term Management Plan covering the first three years of that period. Seizing on changes in society as opportunities, the Group is working to transform the business model while enhancing corporate value and contributing to society.

1999Corporate split, adoption-of holding company structure

As Japan's financial Big Bang touched off industry restructuring at an unimagined pace, boosting competitiveness as quickly as possible became a matter of pressing urgency. After reassessing the characteristics of each business, we recognized the need to undertake drastic reforms and organizational improvements. In 1999, the Group moved to a holding company structure to maintain Group-wide synergies while providing the highest-level financial services by leveraging the agility and specialization unique to each business area. We also established Daiwa Securities SB Capital Markets Co. Ltd., a wholesale securities company, through a strategic

2012Birth of "new" Daiwa -Securities

We dissolved the ten-year joint venture with Sumitomo Mitsui Financial Group in the wholesale securities business in 2009, and Daiwa Securities Group became an independent securities company. In 2012, Daiwa Securities Co. Ltd. merged with Daiwa Securities Capital Markets Co. Ltd., and the Group set out on a new path as the "new" Daiwa Securities. We had put various measures in place to expand stable revenues and streamline organizational management, but the merger of the two companies made it possible to achieve even more efficient organizational management and augment our ability to respond to increasingly diverse customer needs.

1902Origin-

Amid rapid industrialization following the Sino-Japanese War (1894-1895), the number of ordinary banks skyrocketed in Japan, with numerous small banks cropping up, finally peaking in 1901. Since many of these small banks had a weak financial base and poor creditworthiness, they were often embroiled in a banking panic when a financial crisis struck. In this unsettled climate, Group founder Seibei Fujimoto resolved to go beyond mere bill broking and enter the business of mediating funds between financial institutions and the business world as a full-fledged bill broker, establishing Fujimoto Bill Broker in 1902. This was the origin of the current Daiwa Securities Group.

1902

Commenced operations as Fujimoto Bill Broker

1910

Publication of the regularly issued Kinyu-Shunpo (recent news in the financial market) publication

First edition of Kinyu-Shunpo, October 1910

1917

First import of foreign currency government bonds as a Japanese securities company

1919

Establishment of representative office in New York

1933Name changed to Fujimoto- Bill Broker Securities

In 1907, the company changed its name to Fujimoto Bill Broker Bank, and business continued to expand steadily. Subsequently, prompted by a series of bank failures, the Japanese government enacted a new banking law in 1927, significantly restricting concurrent banking and brokerage business operations, and disallowing the buying and selling of public and corporate bonds except in cases where this remained an auxiliary business of a bank. At the time, Fujimoto Bill Broker Bank was much more heavily involved in the securities trading business than in the deposit and exchange businesses. It thus opted to discontinue the banking business and set out as a pure securities company. The company changed its name to Fujimoto Bill Broker Securities Co. Ltd. in 1933.

1937

Formation of Fujimoto Securities Investment Union, the template for investment trusts

1942

Fujimoto Bill Broker Securities Co. Ltd. changed its corporate name to Fujimoto Securities Co. Ltd.

1943

Established Daiwa Securities Co. Ltd. by the merger of Fujimoto Securities Co. Ltd. and Nippon Trust Bank

1951

Registered as investment trust management company

Overseas division established to introduce Japan's industry to overseas investors

1959

Established representative office in New York Established Daiwa Asset Management Co. Ltd.

1964Expanding international- presence

In 1964, the Group established a subsidiary in New York, called Daiwa Securities America Inc. The gradual liberalization of capital markets from the 1960s into the early 1970s ushered in signs of a shift in the investing patterns of foreign investors in Japan. To meet growing overseas interest in Japanese stocks, Daiwa was first among financial companies in Japan to start holding seminars on Japanese stocks. Meanwhile, we expanded the overseas branch network as well as the scope of overseas operations. Daiwa's reputation in the overseas business took hold, and the company came to be known for its robust presence in the international sector.

1970

Listed on the First Section of the Tokyo, Osaka, and Nagoya stock exchanges

Became underwriting manager for the first yen-denominated bond issuance of Asia Development Bank

1971

Became lead manager for the world's first Asian dollar bond (Development Bank of Singapore)

1985

Became lead manager for the first yen- denominated bond issuance in the US market

1986

Start of Japan's first home trading with PCs

alliance with Sumitomo Bank.

1999

Daiwa Securities Co. Ltd. became the first listed company in Japan to move to a holding company structure and changed its corporate name to Daiwa Securities Group Inc.

2001

Daiwa Securities SB Capital Markets Co. Ltd. changed its corporate name to Daiwa Securities SMBC Co. Ltd.

2004

Shifted to a Committee System (Currently, a company with Three Committees System)

2009

Entered the real estate asset management business

Daiwa Securities Group and Sumitomo Mitsui Financial Group decided to dissolve the joint venture in wholesale business

2010

Daiwa Securities SMBC Co. Ltd. changed its corporate name to Daiwa Securities Capital Markets Co. Ltd.

2011

Commenced Daiwa Next Bank, Ltd.

The Medium-Term Management Plan (2012-2023)

2021 "Passion for the Best" 2023

Accompanied by the slogan, "The best partner for co-creating the future -Be with you-," the Basic Policies of the Plan call for the Group to achieve customer first and Quality No. 1 and create a new capital recycling system through a Hybrid Strategy, as well as pursuing the best mix of digital and real. As we build value in both financial and non-financial areas, we aim to be the best partner for all stakeholders.

2018 "Passion for the Best" 2020

Be a financial and capital market pioneer by providing both high-value- added solutions through the use of Quality No. 1 consulting capabilities and new value as a comprehensive securities group with a hybrid business model.

2015 "Passion for the Best" 2017

In response to the full-fledged start of an era of transition from savings to investment, attract customers with the industry's highest quality, and become their best partner.

2012 "Passion for the Best" 2014

Establish a robust business structure immune to the external environment and aspire to achieve sound growth based on a new growth strategy.

2012

Merger of Daiwa Securities Co. Ltd. and Daiwa Securities Capital Markets Co. Ltd. to create "new" Daiwa Securities

2016

Opening of Myanmar Securities Exchange Centre, acquisition of securities license

Saigon Securities (Currently SSI Securities) became an equity-method affiliate

2017

Acquisition of Sagent Advisors and Signal Hill (Currently DC Advisory)

2018

Established Fintertech Co. Ltd.

Established Daiwa Energy & Infrastructure Co. Ltd. Established Daiwa Food & Agriculture Co. Ltd.

Became the first Japanese securities company to introduce NPS®*

80

2019

Established CONNECT Co. Ltd.

Assets under Custody (¥ trillion)

60

40

20

1961

Listed on the Second Section of the Tokyo, Osaka, and Nagoya stock exchanges

1998

Finalized final agreement with the Sumitomo Bank Ltd. on setting up a joint venture company

2000

2005

2012

2015

2018

2021

0

• NPS®: Net Promoter Score, an indicator that quantifies customer-oriented loyalty. NPS® is a registered trademark of Bain & Company, Fred Reichheld and Satmetrix Systems Inc.