Daiwa Securities Group Annual Report 2012 Interview With the CEO In April 2012, the Daiwa Securities Group unveiled a new Medium-Term Management Plan entitled “Passion for  the Best” 2014. The management strategies underlying this business plan have been outlined since CEO Takashi  Hibino took up his current position in 2011. Based on his experiences during his first year as CEO, Mr. Hibino  and his executives have since refined and enhanced the plans. The first and most visible step in the new strategies  involved merging the Retail and Wholesale businesses to create a “new” Daiwa Securities Co. Ltd. In this  interview, Mr. Hibino discusses the elements of the new Medium-Term Management Plan and the bright future  he envisions for the Daiwa Securities Group. Q1  In order to provide us with a clear background, would you please  explain the assumptions and underlying vision behind the new  Medium-Term Management Plan? A.  The Daiwa Securities Group’s management vision is to become a  leading financial services firm in Asia while possessing and leveraging a  solid business platform in Japan. To meet this objective, we will have to  establish a robust earnings structure capable of generating profits even in  times of economic stress. In addition, the Group must achieve sustainable  growth by linking Japan and the growth of Asia. These two objectives  form our basic management policies. The current Medium-Term  Management Plan aims to establish an efficient business foundation while  expanding “stable revenue” businesses and also lays out a roadmap for  strengthening business in Asian markets—with Japan at the core—in  order to produce steady, continuous earnings growth. Q2  What are the main objectives of the Medium-Term Management Plan and what are the ordinary  income targets? There has been some uncertainty surrounding the financial markets, what with  earnings targets likely being affected by future market trends and conditions. A. We expect to return to profitability in FY2012, and increase consolidated ordinary income to ¥120 billion  by FY2014. Our objective is to cover at least 50% of fixed costs with revenues from stable sources. In the final year of the current medium-term plan, we hope to increase ordinary income to over ¥88 billion in the  Retail business, ¥20 billion in the Wholesale business, and ¥24 billion or more in the Asset Management business.  As is often accurately pointed out, the securities industry is always going to be affected by market trends and  conditions. It is quite common for a securities company to set targets at the beginning of a three-year plan and then  revise them significantly, midway through the three-year term. For that reason, we have now adopted a “rolling  method” system. The figures selected at the start of a Medium-Term Plan serve mainly as guideposts for Group  management to refer to as the plan proceeds. Each fiscal year we summarize our progress toward the targets,  consider the impact of a changing market outlook, and if conditions so dictate we will revise the numerical targets  either up or down to reflect those changes. The underlying thrust of the management plan is what we are most  concerned about, and what guides our business strategy. In principle, these qualitative objectives will not change  regardless of revisions to the headline figures. Q3  The new plan includes, for the first time, a target for the “fixed cost coverage ratio.” Would you please  explain the purpose of this target? A.  The “fixed cost coverage ratio” tells us the extent to which reliable sources of income cover our operating costs.  It is calculated by dividing the total income derived from “stable” sources by total fixed costs. 14 Corporate Summary Executive Messages Financial Section Other Information Management Systems & CSR Business Strategy