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## 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. 

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## 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. 

