Investors, thank you very much for your patience. Thank you very much for participating for the Daiwa Securities Group for the Q1 F iscal Year 2022 Earnings Announcement. As the time has come, we'd like to start the meeting. Today, from the Daiwa Securities Group Inc., we have CFO Sato's participation. I am the moderator for today, the head of IR, Mishiba. Thank you very much. First of all, Sato will explain about the Q1 FY 2022 earnings. After the presentation, we will be receiving the Q&A questions from the investors. This meeting through the Internet is open to the general investors as well. Let's go to the presentation. I am Sato from Daiwa Securities Group. Thank you very much for joining our telephone conference despite your busy schedule. I'll explain about our Q1 of fiscal year 2022 results that we announced today based on the presentation material that is posted on our website. First, please turn to page four. Let me give you the summary of our consolidated results. The ratio change is in comparison with our Q1 fiscal year 2021. The Q1 of 2022 saw a decline both in operating revenue and profit due to market environment deterioration. In the Retail Division, equity revenue declined, but revenue for wrap account service and investment trust distribution commission increased. In the Wholesale Division, earnings and expenses of Global Markets and Global Investment Banking worsened. Profit attributable to owners of the parent was JPY 11.8 billion, a decline of 34%. Annualized ROE was 3.4%, and basis points was a record high at JPY 943.71. Please turn to page 10. I will explain about our P&L. Commissions received declined by 3.3% to JPY 67 billion. The details are explained in page 23. As trading of both Japanese and foreign equity decreased, brokerage commission was JPY 15.1 billion, declining by 14.4%. Commissions for underwriting and secondary offering was JPY 5.3 billion, increasing by 5.6%. Distribution commission increased by 6.4% to JPY 3.6 billion. M&A-related commission was JPY 7 billion, declining by 6.2%. Please turn to page 11. This is the status of SG&A. SG&A increased by 2.6% to JPY 97.2 billion. Under trading-related expenses, commissions paid and travel expenses increased. Personal expenses increased in our overseas operation due to the weaker yen. Earnings-linked bonuses increased in the Americas. Turn to page 13. Next, I would like to explain about the ordinary income of our overseas business. Total overseas ordinary income was JPY 2.8 billion, declining by 24.8% quarter-on-quarter. In Europe, although primary revenues increased, sluggish client activity continued both for equity and FICC. In Asia Oceania, both equity and primary revenues declined, leading to an overall decline in ordinary income. In the Americas, FICC and M&A revenue increased, but on the other hand, equity revenues declined. Next, I'll explain about the by-division performance. Please turn to page 14. First, about the Retail Division. Net operating revenue was JPY 40.3 billion, down 4%. Ordinary income was JPY 6.2 billion, down 6%. Equity revenue declined due to the decrease in trading volume for both Japanese and foreign equity. Distribution commission for investment trust increased as sales of stock investment trust grew. Other revenues went up due to the increase of wrap-related revenue. Asset-based revenues expanded to JPY 19.6 billion. This is 49.7% of the net operating revenue of the Retail Division. Please turn to page 15. This slide is the status of the sales and distribution amount and topics for the Q1 for the retail business. In the wrap account service, contract amount was JPY 144.6 billion, and net inflow was JPY 82.6 billion. Both saw an increase. For the stock investment trust, global high dividend stock funds sold well. Sales of value equity funds were steady as well. In the lower left of the slide, there is a graph depicting the sales and distribution amount and net growth ratio of wrap account services and stock investment trust. The net growth rate was 17.9%. Next, please go to page 16. I will explain about the Wholesale Division. Starting off with Global Markets, net operating revenues were JPY 24.4 billion, down 28.4%. Ordinary income was loss of JPY 2 billion. Equity revenues declined on the back of a decline in customer flows due to market uncertainties and the rise in volatility, which made the position management more difficult. FICC revenues declined. In Japan, credit income stayed low due to credit spread widening, although revenues from JGB stayed solid. Overseas, income opportunities increased on the back of higher interest rates and the volatility in the United States, which resulted in higher income. Please turn to page 18. This page is on the Global Investment Banking. Net operating revenues were JPY 11.4 billion, up 6.4%, and ordinary income was a loss of JPY 1.1 billion. In the equity underwriting business, revenue declined due to the shrink of the market, even though we accumulated a track record of mandates as a lead manager. In the debt underwriting business, revenues increased as we accumulated the track record of serving as a lead manager of subordinated bonds. Revenue from M&As also increased because we made a steady execution of mandates overseas. Please turn to page 19. Let me next explain Asset Management Division. Net operating revenues were JPY 18.6 billion, down 4.8%, and ordinary income was JPY 11.1 billion, which was down 0.3%. Daiwa Asset Management net revenue was flat due to decline in the market value even though capital inflows were net positive. With regards to the real estate asset management, AUM of Daiwa Real Estate Asset Management increased. Please turn to page 21. Let me explain the results in the Investment Division. Net operating revenues were JPY 3.6 billion, down 10.3%, and ordinary income was JPY 4.4 billion, up 9.3%. Revenues from investments in private equity and monetary claims increased. In addition, equity net of the investment gain in Aquila Capital, which is under Daiwa Energy & Infrastructure, increased. This completes my explanation of the results in Q1 of FY2022. Our consolidated performance in Q1 was a difficult one on the back of large headwinds of external environments with accelerated decline in the stock market, bond market, and yen at the same time. Against the backdrop of unstable markets, attitude of both investors and corporates became more wait-and-see mode, which impacted the performance of the Wholesale Division negatively. In particular, performance in Market Division declined largely, which was the result of multiple factors. First, customer flow declined a lot due to more wait-and-see attitude of investors. This reflects fast speed of yen depreciation hitting the record low in 24 years, which impacted foreign currency denominated investment overall, in addition to decline in the stock market. In addition, we had difficult time in position management in the highly volatile market environment. We posted a loss mainly from existing derivative positions due to rapid shifts in interest rates and exchange rates, in addition to dip in the stock markets, both of Japan and the United States, on the back of lower customer flows. We have already identified reasons for the deterioration of our performance and are taking various actions to improve the accuracy of position management. Therefore, we think this type of extreme deterioration in our performance is temporary. On the other hand, we did well in the Retail Division, where we made a good progress on the shift to wealth management business model and a cost restructuring, which secured a JPY 6.2 billion ordinary income, and in Asset Management Division and Investment Division, which maintained a good momentum through business portfolio diversification. Now looking at what is happening right now at this moment, markets are gradually restoring sanity. Sentiment of both retail and institutional investors is on the improvement trend, therefore, we expect customer flows to recover. Because we are in this type of market environment, what we continue to do is to establish stronger income model by differentiating ourselves from others, by providing high quality solutions to address customers' needs and challenges. I appreciate your continued support and cooperation to us. Thank you very much. This ends the presentation. Next, we would like to receive questions from the investors. This telephone conference can be participated by English through simultaneous interpretation. For both English and Japanese speakers, press the star mark on the telephone and then press one. If you're going to cancel your question after the star mark, press two. First, we will receive the Japanese questions, and after that, we will receive the English questions. If you are called upon, please ask a question. We have already started receiving questions. This is the first question from SMBC Nikko, Muraki-san. Muraki-san, please. Muraki from SMBC Nikko. Thank you for taking my questions. The first, in terms of the Market Division. Last, you have explained that the clients' trading and class actions have declined and the position management has been struggling to manage your position. In the latter part from equity and fixed income, what has been the issues both for equity and fixed income? Can you elaborate on that? In the U.S. related to the municipal securities, the equity and the fixed income, they've basically besides credit, the trading business seems to be favorable. For your company, what were the issues and what are the countermeasures that you have put in? Thank you for your question. First of all, we have the flow and position management. But the flow and the position, it's very difficult to separate these two. Just to give you the image, if you look at the Q1, that has declined quarter-on-quarter. In terms of the range of the decline, equity flow declined 60% and position declined by 40% or it was 60 versus 40. In terms of the FICC, the flow 20% and position was 80%. That was the breakdown. Most of the decline came from the decline of the position management. The reason why this happened is that in terms of equity, well, this is a repeat, flow has declined and mainly the derivative positions. Of course we hedge, but in terms of the Japanese and U.S. equities declined, there has been a drastic volatility in the exchange rate, and we have not been able to catch up with this. That has been the cause of the loss. In terms of FICC, there has been a split on the credit and the rates. It has been very difficult to take position on top of that. In terms of the forex market, the direction was different from what we have anticipated, so that was the reason why the loss has expanded. It has been extremely difficult market and a very volatile market. The Q1 showed difficult results, but from July onwards, we have seen a stabilization of the market. I think basically we think we're going to see the improvement. The U.S. securities and municipal securities, well, the difference is that I think the primary, we do not do the primary business in the U.S., I think this is a major difference. The U.S. earnings increased, but that is basically in treasury MBS. We have improved the business, but I think basically the difference between us and the other securities in the primary area. In terms of position, in terms of the risk amount, well, basically focus on flow. In overseas, if it's good, it's good based on their position, but it's not, we lose a lot. Focus on flow, I think, and that's the reason why we have seen this type of performance. Thank you for your explanation. If, in terms of fixed income, FSA, in terms of the result of the monitoring, and there are some reports issued by the FSA, and I think there has been some strict words coming from the FSA in terms of the structured bonds. In terms of the structured products, will there be some impact on trading for the structured products if you consider this? Well, in terms of the structured bonds, this it doesn't meet the needs of the customers, but it is complex having a product profile, and it has a higher risk because it utilize options, and it says that you need to be cautious in selling these type of products. This has been written in the progress report. From the Japan Securities Dealers Association, there has been a lot of reports coming out. This is a very important theme, and we understand that point. However, in terms of the structured products, it's not that everything is bad. If it is an adequate product design that meets the needs of the clients, not only the needs is out there, we will have to sell the products that match the customer's needs. I think we focus, product profile is important. From before, we have been confirming the customer needs in terms of the product attributes, so we have been explaining it in detail. We have been clarifying the customer profile that would be selling these type of structured products. What type of impact that is going to have in the future? Well, but there might be an impact, but, we will continue to conduct the disciplined sales of these structured products based on our projections. In terms of the products, we will sell the products to the customers who actually need the products. I hope I answered your question. Understood. Thank you very much. Mr. Muraki, thank you so much for your question. Next question is from Mitsubishi UFJ Morgan Stanley Securities, Nagasaka-san. Please go ahead. Hi. My name is Nagasaka from Mitsubishi UFJ Morgan Stanley Securities. Thank you so much for your presentation. I have two questions. First question is about the Retail Division. After July, would you please give us your impression on the momentum? The AUM has been increasing, but what has been the progress of that since July? And foreign equities sales trend since July, compared to Q3 on the Q-on-Q basis, the transaction volume is down by 20% or 50% depending upon the month. After Q2, what has been the progress of the business of the Retail Division, and what is your take on the business trend so far? My second question is on the cost control. Overall, you've been controlling costs, but overseas bonus, because of the foreign exchange, bonus overseas have increased. Domestic cost is down, but in particular cost overseas, would you please give us the cost control, including inflation and also labor cost increase overseas? How are you going to control costs overseas? Thank you so much. To your first question, the current trend of the Retail Division, as you have mentioned quickly, the asset-based business, such as Fund Wrap products, we feel strong needs for those types of products. Both the contract demand and AUM, we see strong momentum continuously. I think stronger momentum in this quarter compared to the last quarter. On the other hand, when I look at flow revenue, looking at TSE transaction volume in July, the volume was down by about 20% versus the previous quarter. The sentiment is on the improvement trend, but that has not been reflected yet in the flow transactions. TOPIX is doing well, but the flow has not fully recovered yet. As the market environment improves, then it should be reflected in the flow. I think on top of the assets, AUM recovery, I think flow should show an improvement. If you look at the stock performance in the Retail, which has declined, but we see the improvements from the income and cost structure reform. We are not going to be relaxed, and we are going to continue to work on the cost income structure reform in the Retail Division. To your second question about the cost control overseas, on the consolidated basis, if you look at the cost performance year-on-year, SG&A 2.5 billion, increase by JPY 2.4 billion. But FX JPY 2.8 billion. On the consolidated basis, excluding that, it's actually down JPY 2.4 billion. But it's not increasing on the local currency basis, but this increase is due to the exchange rate. Income is up also, linked to this increase in the cost due to the exchange rate. But there is a positive impact on the income as well. Also, we'd like to secure and retain high performance from the cost perspective. In terms of the headcounts overseas, to strengthen our business overseas, we'd like to increase the number of headcounts, but M&A business is going to be the main focus, overseas. We'd like to reinforce our capability in the M&A business overseas. Looking at the pipeline, differently from last year when we had the M&A boom, the pipeline is down globally in general, but, we have not seen the slowdown of the pipeline in our case. Our pipeline is actually the same level as 2021. Unless there is a sudden, shift in the market sentiment, I think we can, perform continuously well in the M&A business overseas. I hope I answered your question. Yes, I fully understood. Thank you so much. Nagasaka-san, thank you very much. Let's go to the next question. Bank of America, Sasaki-san. Sasaki-san, please. I'm Sasaki at Bank of America. In terms of the Market Division and the Retail Division, I have one question each. In your explanation, you said that the hedge has not worked. Excuse me, I'm not very. I'm not expert in this area. Can you explain briefly why the hedge didn't work? I think basically you calculate the gamma or kappa, and then you just calculate your hedge. In this market, the volatility has increased, and the theoretical sensitivity and the actual situation has changed, was different. Or what are you explaining about a different thing? Can you elaborate on that point? That's my first question. The second question is about the fixed income and the, you talked about the credit spread. My understanding is that the domestic fixed income, there has some difficult situation. Is that the case? Or if that is the case, some specific names or specific sectors? Or is it across the board? Can you elaborate on that? In terms of the Retail Division, in terms of the stable income towards the second quarter, is it going to go up, stable, or go down? If you look at the Q1, there has been a lot of market adjustments. With a lag, maybe there'll be some negative impact. What would the correlation with the market and what and about the mix? In terms of the Q2 stable income, is it going to go up, stable, or going down? Thank you. Thank you for your question. First of all, in terms of the derivative, I think mainly it's a derivative, as you have pointed out, because there are various risks. With the gamma, that is what we're looking at. In terms of dynamic hedge, we are using dynamic hedge. It is very difficult to do a complete hedge. At the same time, in the existing position, the flow has gone down dramatically, and the liquidity has dried up, and the volatility has increased. In that sense, there is a risk level, and then we have applied the dynamic risk in terms of we do calculate the sensitivity, but it did not go as the theory or in terms of calculation. In terms of credit, as CDS, we hedge, but it's not that we can have a 100% hedge. Of course, we do calculate the risk volume and conduct the dynamic hedge. In this case, there was a mismatch. Overall, in terms of credit, well, it's not the case that there it was just concentrated in a certain type of credit. Going to the Retail Division, to the Q2 stable income outlook. In terms of the stable income, as long as the AUM goes up, it will increase. If you have net inflow, for instance, June, in terms of Fund Wrap business, about JPY 30 billion of net inflow has been conducted. If this trend continues, the stable income will continue to grow. In the Q1, in terms of investment trust, the balance has not gone up. On the other hand, in terms of the FX, we have been able to go up. I think it overall gone up. The FX market, as long as it comes stable, I think basically as people are holding back and it will recover, and then it will increase. In the Q2, in terms of stable income, in terms of the income, I think it will steadily grow going into the Q2. Understood. A follow-up. I want to ask, in the Q1, in terms of hedge position, we're lagging and we're able to catch up. The equity, I think you have not been able to tap into that equity. If you look at the July market, if it has recovered, and then even if you don't do anything, you'll be able to come back to your original level. Do you think that July onwards will be difficult? From July onwards recovery, how is the outlook? How should we understand about this? Thank you. As you know, in July onwards, volatility has calmed down. In terms of the performance, when we were struggling, in terms of the reasons, we have been able to understand the reason. We will adjust the risk volume in those areas, and we have taken countermeasures. In terms of liquidity, it has come back. How much we can push back in terms of progression, but in terms of the trend, I think we will be able to go back to the recovering trend. Understood. Thank you very much. Mr. Sasaki, thank you so much for your question. Let me repeat. We are receiving questions. Please press asterisk one on your keypad. Receiving questions from the audience. Next questions are from Nomura Securities, Sakamaki-san. Sakamaki-san, please. Hi, my name is Sakamaki from Nomura Securities. I have one question. GIB, you talked about the pipeline of M&A earlier, but, other than that, equity underwriting, debt underwriting, what is your outlook and the pipeline, progress, for the equity and the debt underwriting business? Thank you so much for your question. First, ECM. As you know, if you reviewed the results in Q1, it was difficult for large IPOs, so the total funding amount was JPY 2 billion-JPY 3 billion. Mostly companies who did IPO were companies who were profitable. The number of IPOs declined quite significantly. Looking at the pipeline, in particular in the second half the year, we have a good size of the pipeline. As we saw in the second half of Q1, there are multiple numbers of companies and mandates where our companies are increasing the number of shares. In the second half onwards, I think we can make some recovery. The DCM, in Q1, we had a stronger impact from the market volatility from Q4. It turned into a positive issuance amount. Size of the issuance amount in terms of the output level was not so high. In Japan there's a ripple effect from the rate hikes and rates are increased and, due to the deterioration of the war situation in Russia and Ukraine, there were many cancellations or postponement of funding. There are fundamental needs to the funding and there are funding needs associated with M&As and the size of the mandates is becoming larger. In Q2 onwards, we expect a higher level of transactions mandates. I hope I answered your question. Understood. Thank you so much. Sakamaki-san, thank you. Let me repeat. For those who have questions, press the star mark on your telephone and press One. We are asking for questions. It seems that there are no further questions. We would like to end the Q&A session. Thank you very much for bearing with us until the very end. Going forward, the Daiwa Securities Group, in terms of accelerating the asset management business, and we'll do our best, and I hope for your full support going forward. Thank you very much for your participation.