Welcome to today's Nomura Holdings first quarter operating results for fiscal year ending March 2016 conference call. [Operator Instructions]. Please note that this telephone conference contains certain forward-looking statements and other the projected results which involved known and unknown risks, beliefs, uncertainties and other factors not under the company's control which may cause actual results, performance or achievements of the company to be materially different from the results, performance or expectations implied by these projections. Such factors include economic and market conditions, political events and investor sentiments, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, number an timing of transactions. With that, we'd like to begin the conference. Mr. Shigesuke Kashiwagi, please go ahead.

This is Shigesuke Kashiwagi, CFO. I will now give you an overview of our financial results for first quarter of the year ending March 2016 using the document titled Consolidated Results of Operations. Please turn to page two. In the first quarter, all business divisions reported higher net revenue and income before income taxes year on year. Firm-wide income before income taxes totaled ¥106 billion exceeding ¥100 billion for the third straight quarter. Net income was ¥68.7 billion, the highest first quarter net income in eight years and annualized ROE was 10% and EPS was ¥18.65, representing a good start to the fiscal year. The graph on the bottom right shows solid income before income taxes from our three business segments of ¥82.3 billion, an increase of 80% year on year. Retail and asset management saw their investment trust businesses grow and reported strong gains in income before income taxes both quarter on quarter and year on year. In wholesale, income before income taxes declined 63% compared to last quarter as fixed income slowed. But equities and investment banking revenues increased, leading to year-on-year growth in wholesale income before income taxes. Segment other results improved significantly as a gain on changes to our own credit spread and provisions for past legal issues booked last quarter were not repeated this quarter. Please turn to page five for an overview of results by business, starting with retail. Net revenue in retail was ¥130.7 billion, the highest since the three months to June 2013 and up 6% quarter on quarter. Robust sales of thematic funds targeting corporate value improvement and an increase in sales of discretionary investments and insurance helped to drive growth in net revenue. One-off factors such as a charge on decommissioning of IT systems that drove up expenses last quarter…

[Operator Instructions]. The first question is from Mr. Muraki from Deutsche Securities. Mr. Muraki, please go ahead.

My first question is about global markets. Page 10 of the presentation shows the fixed income and equity revenues on a quarterly basis. Compared with the fourth quarter last year, fixed income is declining by 30%. The Americas and five companies have about 30% decline in revenue. So, overseas, an investment bank, just like any -- so, universal bank and Nomura are declining at that same pace. Within the comment, the client and transaction decline and decline in liquidity affected the fixed income result, according to the explanation. First of all, the revenue from fixed income, within the fixed income revenue, sales related to revenue and position trading related sales, what's the breakdown? And also within the fixed income revenue, what's the regional breakdown? So, could you give me those numbers? And then the Greece crisis that impacted this second quarter was postponed, but after July, fixed income revenue might be affected one-off. How do you see the progress after July in fixed income? And then lastly, the second part of my question is related to regulation and liquidity ratio and regulation related numbers have been updated. On page 13, I'm looking at page 13 of the presentation, in the fully loaded basis of Basel III, CT1 is 13% which is very high. On the other hand, Basel Commission is conducting the fundamental review of trading book and they're having ongoing discussions. And then based upon that proposal that comes from Basel Committee, is there any impact expected on the calculation of risk assets? Consolidated leverage ratio is 3.91% now. In the U.S.A, through stress testing, this ratio may be in reality raised to 6% to 7% through instruction from the regulator. But do you believe the current level is comfortable? After the second quarter, when you consider share buyback, is there any concern in terms of regulation? If so, please comment on regulation. Thank you.

Let me first go over the figures for fixed income, the client flow revenue and the trading revenue breakdown. Flow revenue was more than 90%. Trading revenue was less than 10%. And as for the geographical breakdown, fixed income Japan a little bit less than 40%, EMEA a little bit less than 20%, Americas a little bit less than 30% and AEJ was around 10%. So, compared to Q4 of last year, there has been quite a big change in the breakdown or in the figures. And the latter half of your first question which was about the recent situation. As you pointed out, yes, there was the Greek issue. And that issue met a certain level of resolution. So that helps improve the flow in trading in the market, especially in Europe, compared to April to June. But overall and this is partly because it's summer, but the market conditions, there's the FYMC [ph] rate hike, so things are somewhat slow at the moment. And your second question about regulations, the 13% you mentioned, that's the fully loaded basis, I think. And the 13% is, as you pointed out, the FRTB, the Fundamental Review of Trading Book or the credit risk assessment, credit risk review, is ongoing and I don't think it's meaningful to discuss today whether it's high or low on a fully loaded basis. Of course we can compare our current level with our peers, but I don't think the figure itself is a meaningful benchmark. So we will continue our dialogue with the authorities as well as monitor the lobbying activities by the industry which we're participating and cooperating with. And we're continuing to monitor the outlook. As for the leverage regulations, so, 3.91%, this is, again, you're correct. The minimum level was decided to be three, but right now the discussion is ongoing about whether that's going to be raised or lowered. So in terms of whether we're comfortable with 3.91%, no, we're not completely comfortable with that level. So in terms of regulation rate issue, there has been a lot of discussions ongoing this year which we have to continue to monitor and what's the outcome, I think.

This year you've conducted share buyback. At that timing, the regulatory uncertainty was about the same as it is now. When you consider share buyback in the future compared with now, the uncertainty of regulatory environment stays the same, then you have the capability of keeping -- continuing with the share buyback?

Yes, the consultation paper for regulations have been issued, no change there. But the Western peers are reducing their risk-weighted assets and they are also increasing their capital. So on a relative basis, our capital level, the capital level of Nomura, there is a risk that the relative strength of our capital will be lost if we don't do anything. And in terms of the market environment, in April and June things were quite tough or difficult and there is also the situation in China and also the other emerging countries. We have to remain cautious, I think. And in relation to the share buyback, we will decide after we decide the interim dividend in October, I think. But as long as we have sufficient capital and if we think our share price is relatively cheap, then, yes, I think we will continue doing share buybacks.

The next question is from Mr. Tsujino of JPMorgan. Mr. Tsujino, please go ahead.

This Tsujino. When you were talking about fixed income, the geographical breakdown. And in Japan, on a Q-on-Q basis, I'm looking at the figures on a Q-on-Q basis, in Japan, April-June was quite good, the environment and structured bonds did well, I think. So I think there should have been an increase in the June quarter, but meanwhile there has been a quite decline. So I'd like to ask why and how did structured bonds do? And how did the business related to retail do? How much revenues were generated there? Meanwhile, what was the flow from institutional investors? Could you address that please? My second point is, moving into July, the investment trust sales in July, especially with the decline in Chinese share prices and there are some funds which cannot be reimbursed or dissolved, so, could you address what's going on there? And then my third question is and this -- you may not be able to answer this, but the standard, like method, what would the figures be if you use that method please?

I didn't quite understand your first question. Maybe I misunderstood your point. The revenue share within FIG, Japan was about 30% in Q4 and this time it was close to 40%, the revenue from Japan. And in our presentation, we showed the heat map arrow for Japan going down. And your question about the structured bonds in retail. Well, Nomura is a bit different from our peers because we're not pushing -- or we're not focusing that much on structured bonds compared to our peers. So it's not like we made a change in our strategy.

So my question was, even though you maintained your staff from the past, I think now could be a time when you make an adjustment of some kind. So, although you are not that focused on structured bonds, there was a natural increase in the amount, that's how I took it. But under these circumstances, the Q-on-Q trend was not positive. So I wanted to know how structured bonds did. Meanwhile, I also want to know how the institutional investment flow was. Did you understand my question?

I understood, but I'm at a loss in answering it. So I don't have a good answer for you right now. But what I can say is that, in our Japan related business, within fixed income, what did not do that well is related to the FX trading. Compared to Q4 or Q3 of last year, it was not that good. This is probably because the U.S. dollar trends, we were able to capture the trends in U.S. dollar in Q3, Q4, but that did not happen in Q1 of this year. And I think that's, in terms of products, that's the decline that I can see. But I think that's the main reason for the decline, I think About your second question, investment trust sales in July, I think. Frankly speaking, our sales or operations in July in all our branches were focused a lot on the Toyota class shares and we spent a lot of time on that. And the other businesses had been hit or impacted by that. So it's not necessarily because of market conditions or some other products that we sold; it was mostly because of the new products, the Toyota class shares ¥500 billion which was a big burden for us and we spent a lot of time on that. And meanwhile, there were some openings of new accounts as well which was quite troublesome or burdensome as well. So that took a lot of time. Your third point, third question. We have not disclosed this so far and I don't think we will be disclosing it in the near future. Tsujino-san, did that answer your question? So, for the standardized method, we will not be disclosing in the near future. Thank you.

The next question is from Sasaki of Merrill Lynch Securities. Mr. Sasaki, please go ahead.

This is Sasaki of Merrill Lynch. Two things. First, I would like to ask about the Toyota class shares which you mentioned. According to the press release by Toyota, your revenues is -- should be or about ¥20 billion. So, is that the correct way to understand it? Is it going to be about ¥20 billion of revenue? And if that's correct, what will be the breakdown between retail and wholesale? How will you do the revenue sharing within Nomura and how will you allocate the revenues to each segment? And also, Toyota issued these A shares or AA shares, but are you expecting other Japanese companies to follow suit? Do you see Japanese companies interested in similar issuances of these types of new products? How do you see the pipeline for this type of new product? That's my first question. Also, for investment banking, the strategic shareholding or cross-shareholding, you said that your solutions business in relation to the sale of cross-shareholdings has been growing. But what exactly do you do? And what kind of pipeline do you have for the future? Thank you.

First question about Toyota's class shares, the amount in excess of ¥20 billion. That's correct. Having said that, the breakdown was split between retail and wholesale. You can see -- you can have some sense when you receive that result announcement of Q2. And as for the pipeline, regarding the similar scheme, issuance. What I want you to understand is, regarding Toyota shares, this is a general answer by the way, but as you can tell by looking at the product, it is clients who have to be trustworthy -- clients have to be trustworthy and also they have to go through the resolution at shareholders' meeting. So the management members have to have a strong commitment and resolution. Without such conditions, these special shares will not be issued. We met the needs of clients and moving forward we will be providing products by meeting needs from clients. And then the third point about sale of cross-held shares and solution, there are various deals which we cannot comment, but with share prices going up, recap CBs and share buyback and sale of cross-held shares and those deals are in our pipeline. The quantity or number is a multiple number of deals are in the pipeline.

As for the first point, in relation to the recap CBs, for which you are acting as lead manager for regional banks, So, for the future product issuances, are they going to be different from what you have been working on so far?

This is general answer again. Toyota's class shares, it cannot be applied to the recap CB for the regional banks.

The next question will be asked by Mr. Yamanaka from Credit Suisse. Mr. Yamanaka, please go ahead.

I have only one question. This is a very vague question. You have stepped on in the presentation, as you did previously and domestic market businesses pretty solid and ECM market is expected to make further contribution. But overseas, about ¥2.7 billion in income before tax is being generated, but compared with target, it's lower. Moving forward, in the second quarter onward, when you think about overseas business, how are you tackling overseas business? Could you comment on your views toward overseas business? Thank you.

For our overseas business, yes, ¥2.7 billion was insufficient, I think. But the April to June quarter, things were quite tough overseas. I think Japan was very good, so the market was very strong, but in April we had the elections in UK, there was the Greek issue which led to clients not moving and then the German bonds declined and then the Chinese shares which used to go up, started falling. So there were all these issues overseas. But I think we did well considering all these things that went on or took place in the June quarter. And the reason for that relatively good performance is because of the restructuring that we conducted over the past two years and our ongoing efforts of reducing costs. And I think these are the results of our efforts. The costs in Q1, if you roughly calculate it to U.S. dollar and annualize it, it's about $6b -- $6.1b. So I think it's going to be -- it's trending between $6b to $6.2b. In the past we started off the cost reduction from $8b. So you'll see how much the breakeven point has come down. And we will continue to improve the collaboration between our divisions and geographies that is core to our business. And we're able to do that within the country and also on a cross-border basis. So we will continue to work cross-regionally and cross -- on a cross-border basis. And in order to promote this, we appointed a director in Asia, London, New York. We changed the allocation and repositioned our management in the locations to improve collaboration. As for the overseas funding cost, it will decline from two reasons. First is because the high-cost, high-spread bonds will be repaid or redeemed and that will be replaced with…

The next question is from Mr. Niwa of SMBC Nikko Securities. Mr. Niwa, please go ahead.

Two questions, on the retail business and the wholesale global markets equities business. First, for retail. I'd like to ask about the recurring revenue. With the new issuance of new products, that takes away a lot of the capacity you have in retail, as you mentioned. So when you think about the future, if you look at page six of the presentation, your estimate for this fiscal year for recurring revenue which is a bit close to ¥70 billion, the target, when you think about a lot of deals that are coming up, I think -- or is this figure going to decline or are you being -- are you going to be able to achieve this close to ¥70 billion of recurring revenue? So my question is, do you expect your business to continue to expand? Or with a lot of new product issuances, is the recurring revenue going to decline? My second question is about the equity side of the business in markets -- global markets. China, robust; EMEA was strong. I think that's what we saw in Q1, as you mentioned. But how is the situation in July? And how do you expect things to turn out in Q2? Thank you.

The first question you asked. Earlier, in July, the status of investment trust and Toyota had been talked about, but discretionary investment services are selling well continuously. So, overall, recurring revenue is on a rising trend. As a company, toward March 2020, ¥150 billion in recurring revenue is what we're aiming for. Having said that, the current state pace is exceeding the necessary pace. And recently, for discretionary investment, the faster-than-necessary pace is continuing. As for equity, please give me some time. As for equity, looking at different regions, there is no particularly good region. Regions are -- any region is not particularly good but not particularly bad. Fixed income division seems a bit slow, but equity business is solid.

Could you give me the feel of the recent situation for equities in Q1? Was revenue quite strong? And are you gaining strength in your equities business?

For the first quarter, equity business has some [indiscernible] of good April and May in Asia. So this may be extraordinarily good. The sales side and trading side were performing well. But on the trading side, probably results were too good. But for the second quarter, equity has primary deals so there'll be a very large-size revenue that supports the performance.

[Operator Instructions].

Well, thank you very much for participating late in the evening. And we announced our results on the same day as Daiwa Securities which I think kept you very busy, I'm sure. But the results were good in retail, asset management and wholesale also did well in Japan and Toyota class shares helped us. So I think the overall trend has been very positive. Meanwhile, the overseas side remains challenging. So the management at Nomura, we're bracing ourselves and we're continuing to control our costs and rebuild our revenues. And we look forward to your continued support. Thank you very much.

Thank you for your taking time. And that concludes today's conference call. You may now disconnect your lines.