Daiwa Securities Group Annual Report 2012 Q5  According to the plan, you intend to meet the second basic policy of “Achieve client based high- quality earnings growth” by channeling resources into the Retail and Asset Management businesses.  How, exactly, is this expected to work? A.  There are actually three specific strategies involved. First of all, we will  “create a unique business model with  synergies between securities and banking services.”  This strategy is really our top priority, in terms of fostering  growth for the “new” Daiwa Securities. By entering the banking sector, the Daiwa Securities Group has opened the  door to a lot of new possibilities. We can now offer retail customers a very broad and flexible lineup of products and  services, from savings-type accounts with guaranteed principal to higher-risk investment products. This gives the  Group access to many customers who are hard to reach through the sales channels used by securities companies.  Daiwa Securities can now approach customers with savings accounts as well as show them other ways to manage  their money, thus expanding the base of customers in our securities business. Meanwhile, we will broaden the product and service lineup to include foreign currency-denominated deposits,  and we will enhance our service through convenient online account service and personal service at one of the  Group’s sales offices. The Group is developing a business model to link banking and securities operations that will  offer customers a single portal to any and all financial services. For example, customers who open a savings  account will also be able to conduct stock transactions from that account, thus promoting a shift of assets from  savings to more investment-oriented products. By creating a business model that fosters synergy between securities and banking operations, the Daiwa  Securities Group can offer Japanese individuals more latitude to manage their assets effectively, raising awareness  of equity investment and international diversification of investments. I believe that it is our mission to take the lead in  this process. The second strategy is to  “strengthen earnings capacity of the asset management business.”  We  concentrated on shifting the Daiwa Securities Group’s human resources into the two companies that handle the  Return to Profitability by Pursuing Management Efficiencies (Focus of execution in the first fiscal year)  Steadily implement the plan to reduce SG&A  Realize greater organizational efficiencies by shifting personnel from the middle- and back-offices to the front division Personnel Shifts SG&A Reduction Continue to shift middle- and back-office personnel to the front division  by eliminating redundancies and reorganizing around the launch of the  “new” Daiwa Securities.  Personnel shift from 2,040 to 1,500 was executed well ahead of the  initial plan (to be completed over three years by April 2014) and was  completed by April 2012. Reduce base SG&A from the beginning of FY2011 by more than 60  billion yen.  Have already enhanced organizational efficiencies in Japan and  reduced headcount by a total of 500 overseas in line with the size  reduction / exit from unprofitable businesses / branches.  Base SG&A at under 320 billion yen for FY2014. * Base SG&A: Consolidated SG&A assuming ordinary income of 0  1,370 2,040 1,919 1,751 1,500 4/99 2/11 4/11 10/11 4/12 10/12 4/14 (Month-end/year) Changes compared  with initial plan 380 370 360 350 340 330 320 Beginning of FY2011 FY2011 FY2012 FY2013 FY2014 Cumulative total (¥ billion) –7.5 –33.5 –19.0 Group company  expenses Real estate costs Overseas SG&A System-related  costs Trends in Number of Middle- and Back-office Personnel Efforts to Reduce Base SG&A* 17