Daiwa Securities Group Inc.

Thank you very much for waiting. Thank you very much for participating in the telephone conference for the fiscal year 2026 of the first quarter earnings announcement of Taiwan Securities Group, despite your busy schedule. I would like to start the meeting. From Taiwan Securities Group, we have Managing Executive Officer and CFO, Yoshida. I am the Head of IR, Nakamura. First, Yoshida will explain about the first quarter results of fiscal year 2026. We will receive your questions after the presentation. Today, this is streamed live on the internet and investors can view this start. Hello, this is Yoshida from the Securities Group Headquarters. Thank you very much for taking the time out of your busy schedule to join our conference call today. I will now explain the financial results for the first quarter of the fiscal year 2026, which we announced today based on the presentation materials posted on our website. Please turn to page four. First, I will provide a summary of our consolidated financial results. The percentage changes in figures when compared to the fourth quarter of fiscal year 2025. In the first quarter of fiscal year 2026, we achieved profit growth across all divisions with ROE reaching 12.7%. Net operating revenue was 220.3 billion yen, up 11.4%. Ordinary income was 88 billion yen, up 31.4%. and profit attributable to owners of the parent was 56.4 billion yen, up 13.2%. The Wealth Management Division, in addition to risk client activity, saw its portfolio-based proposals gain traction, resulting in record-high asset-based revenue of 35.8 billion yen. The trend of net asset inflows continues. Furthermore, not only asset-based revenue, but also flow-based revenue expanded. In the asset management division, against the backdrop of continued net inflows and favorable market conditions, ordinary income and securities asset management reached a record high of 15.7 billion yen. In global markets, client flows expanded against the backdrop of a strong market environment and equity revenues increased significantly. Global Investment Banking saw an increase in earnings driven by contributions from several large-scale deals. Please turn to page 8. Pays income and the KPI for stable earnings set forth in the mid-term management plan reached 62.8 billion, an increase of 83.8% compared to the same period last year. We are progressing at a pace that significantly exceeds the final year target of 150,000 yen set in the medium-term management plan, and we are making steady progress in building an earning space that is less susceptible to external conditions. Please turn to page 11. I will now explain the income statement. Commission received totaled 143.4 billion yen, an increase of 9.3%. Breakdown of commission received can be found on page 24. Purpose commission was 34.9 billion yen, up 9.4%. Underwriting and secondary offering commissions were 17 billion yen, up 86.4%. Distribution commission was 9.2 billion yen, up 20%. And M&A-related commissions were 12.5 billion yen, down 27.9%. Page 12. SG&A totaled ¥142.8 billion, up 3.3%. Trading-related expenses increased due to higher commission payments. Personal expenses rose due to wage increases, and primarily in Japan, an increase in performance-based bonuses. Page 14. Total ordinary income from overseas operations reached 13.1 billion, up 90%, setting a new record high. By region. In Europe, the M&A business was sluggish due to geopolitical risks. In Asia and North America, ordinary increased revenue by equity revenue, reaching a record high level. In the Americas, ordinary income rose significantly due to an expansion in equity revenues. Next, I will explain the results by segment. Please turn to page 15. First, the Wealth Management Division. Net operating revenue was 88.2 billion yen, up 8.8%. Ordinary income was 37.2 billion yen, up 12.4%. In addition to favorable market conditions, the widespread adoption of total asset consulting allowed us to capture a broad range of a client's asset management needs and translate them into results. Looking at results by product, trading volume in equities expanded. Driven particularly by foreign stocks, revenue increased by 900 million yen. In the fixed income segment as well, by capturing investment needs in the mid-rising interest rates, revenue increased by 800 million yen. Furthermore, the use of rep account services continued to grow as a solution for inflation hedging and medium to long-term asset management needs, resulting in a 1.1 billion yen increase in rep-related revenue, which reached a new all-time high. Asset-based revenue also reached a record high of 35.5 billion yen, driven by increases in trust agency fees and rep-related revenues. The fixed cost coverage ratio based on asset-based revenue rose to 126%. under 25.7%, while the total expense coverage ratio improves to 77.3%. Detailed data is provided on page 28, so please refer to it later. Please turn to page 16. This page shows the status of product offerings and sales amounts for the Domestic Wealth Management Division. The rep account service performed steadily, with contract value reaching 357.7 billion yen and a net increase of 237.6 billion yen, bringing the total contracted AUM to a record high of 6,765 billion yen. Next, please, to Interpay 17. This is Rafaela Sousa, Daiwa Next Bank. Next, interest payments.

Income was 13 billion yen, up 16.2%, and ordinary income was 7.2 billion, up 15.8%. Deposit acquisition progressed through collaboration with Daiwa Securities, and the deposit balance expanded to 5.3 trillion yen. Daiwan Expand continues to stiffly fulfill its gateway function for the shift from savings to investment. In addition, the increase in the policy rate widened the interest margin, resulting in higher revenues and income. Please turn to page 18, the asset management division. First, securities asset management. Net operating revenues were 21.2 billion yen, up 7.8%, and the ordinary income was 15.7 billion yen, up 37.6%. AUM, or publicly offered investment trust, managed by Daiwa Asset Management, surpassed 43 trillion yen, a record high. Assets under investment advisory contracts, including those related to the alliance with Japan Post Insurance, continue to expand steadily, further strengthening the revenue base. Please turn to page 19 for real estate asset management. Net operating revenues were 13.3 billion yen, up 47.2%, and ordinary income was 9.8 billion yen, up 2.2%. AUM and real estate asset management surpassed 1.8 trillion yen, achieving the FY2030 target ahead of schedule. Gains on property sales at diverse securities realty and income from managed REITs contributed to the increase in both revenues and income. Listen to page 20 for alternative asset management. Net operating revenues were 6.3 billion yen and the ordinary income was 4.8 billion yen. Capital gains were recorded through TDX from certain portfolio investments, among other factors. On page 21, finally, I will explain global markets and investment banking division. In global markets, net operating revenues were 53.8 billion yen, up 4.9%, and ordinary income was 18.1 billion yen, up 2.3%. In equities, client order flows from both institutional industries and wealth management clients remained solid in both Japanese and foreign equities. Despite elevated market volatility, we captured order flows effectively and combined with successful positioning of the position management secured a high level of revenues. In FICC, order flows in both domestic and foreign bonds declined from the previous quarter's high level but remained solid overall. And turning to page 22, lower investment banking recorded net operating revenues of 22.6 billion yen, down 6.1%, and the ordinary income of 3.2 billion yen, up 52.5%. This concludes my explanation of the financial results for the Q1 of FY2026. Just to add some comments. The first quarter's revenue and income both reached historically high levels. That said, we do not view this result as simply the product of a favorable market environment. Against the backdrop of rising inflation and the growing asset building needs, we continue to see a strong structural shift of funds into the financial and capital markets, including some needs to meet the response to the corporate governance. so that we believe our ability to strictly translate these shifts to tangible outcomes, reflecting the group's steadfast effort and disciplined application of these strategies. The total asset consulting in the wealth management division is not only a method of selling investment products, but rather to identify the customer's pain points and the needs, and broadening the range of resolution across investment management, asset succession, real estate, and corporate transactions. Continuing these efforts has, as a result, led to growth in both balance-based revenues and flow revenues. In the asset management division, the accumulated AUM has contributed to higher profitability, further demonstrating the strength of a stock-type business model. In global markets and investment banking as well, we have accurately captured structural changes such as progress in capital market reforms and shifting client needs and have strictly captured revenue opportunities. This fiscal year, the final year of our mid-term management plan is positioned as a year to further drive these achievements. This first quarter marks a good start towards that goal. Regarding the current market environment, uncertainty continues to linger. Even so, The wealth management is tracking at roughly the same pace as the first quarter average. In the meantime, global markets is off to a start below the high first quarter average, though we continue to see solid client worth. In addition, today we completed the process of making OREX Bank a 100 subsidiary. We believe this represents an important step forward in advancing a growth strategy centered on wealth management. Going forward, we will continue to respond to our clients' diverse needs, contribute to the development of the financial and the capital markets, and pursue sustainable growth in corporate value. We thank you for your continued support. Let's go from myself. Now let us open for Q&A session. Today's session is available in English line as well. If you wish to ask a question in either Japanese or English, press the star key followed by 1 on your telephone keypad. To withdraw your question, press the star key followed by 2. For today's Q&A session, we will first take questions in Japanese line. Followed by questions in English. We are now ready to receive your questions and we will call your name.

So, let's go to the first question from SMBC Neco Securities. Muraki-san, please. Please ask your question. Thank you. I have two questions. First, on page 21, the equity revenue, I would like to ask you a bit in more detail. In terms of position management, you said that you were good in doing that. So April, May, June, and July. So I think the GM has slowed down. But up until July, what has been the and how has the earnings been improving? So that's my first question. The second question is that besides the earnings report, the old bank, in terms of acquisition, said that they have completed the process. In the previous meeting, we had some updates that you can give us. So in terms of the capital advocacy ratio, they will have an impact of about 5%. So how about this? And from the second quarter onwards, it says that if the contribution is coming in terms of profit after the group will amortization, how much would this contribution be? And I think the next step will be the merger. So do you have any timeline? What type of cost will entail? So until the merger, there are two bank subsidiaries. How are we going to manage these subsidiaries? If you have any update about this issue, please, I would like to ask about that.