Good afternoon. I’m Yano of Treasury and Accounting Headquarters. Thank you very much for your attendance to this business performance announcement meeting of our company. Let me now start my presentation on our second quarter business result for FY 2020 March end period. I hope you can hear me. Now please open Page two of the handout slides. Net income for the quarter was up by 2.6% year-on-year to JPY 159.2 billion, which resulted in annualized ROE of 10.9%. Please refer to the chart on the right-hand side. Net income tends to fluctuate from quarter to quarter to some extent. However, the result for the single quarter this time was at a higher level at JPY 89.9 billion with annualized ROE of 12.3% as compared to JPY 69.2 billion and annualized ROE of 9.6% in the first quarter. So please turn to the next page. The page shows the breakdown by business segment. Segment profit for the second quarter was up by 3% at JPY 230.4 billion. The trend of the profit over the past five years are shown on the bar chart on the same page. The pale blue expresses the level of gains on sales, while the darker blue expresses the level of segment profits excluding the gains on sales. From the dark blue bar chart, I hope you can see a stable growth achieved over the past five years by the segment profits that excludes gains on sales. Now please refer to the bar chart in a small box on the right-hand side of the same page. Here we compare the result against the first half of last year. The segment profit excluding gains on sales achieved a higher level than the first half of fiscal year 2019, thanks to contributions made by NXT Capital and Avolon,…

I’m Inoue from ORIX. Thank you very much for your attendance once again. So I would like to explain in the backdrop to the reasons why we have decided to make some changes to our midterm business plan. As you may recall, back at the time of the business performance announcement in October of 2017, we made the announcement of achieving net profit growth of 4% to 8% during the three years of 2019 – FY 2019 to 2021, with ROE of more than 11% and the maintenance of credit A rating. However, for the first half of 2020 March end period, we had posted a net profit of JPY 159.2 billion, which is an increase by 2.6%. However, for the following reasons, I would like to report to you that we have – we will be only generating a net profit of JPY 300 billion for the full year of 2020 fiscal period. While the pretax net profit is forecasted to be at JPY 430 billion, which is an increase by 9% and also a record high, however, after-tax profit is expected to be down by 7.3% year-on-year. Since the beginning of this year, macroeconomic slowdown has become more apparent. In addition to that, there seems to be no end to China-U. S. trade war as well as chaotic conditions in Iran as well as Middle East countries are aggravating and also uncertainty in EU with the Brexit and geographic – geopolitical risks seems to be increasing. And despite of IPO market experiencing confusion, there’s still an abundance in terms of liquidity. So therefore, despite of the fact that we may start considering making an investment in certain deals, the valuation for each of those deals are way beyond the price of what we regard to be appropriate and…

[Operator Instructions] So the person sitting at the front row.

My name is Watanabe from Daiwa Securities. I have two questions. First of all, and that is to do with Page 8, midterm direction and also your dividend policy. So you are considering to set a minimum payment of dividend. So – which means that you’re not going to incorporate the idea of payout ratio going forward. Is that right?

So we have said JPY 300 billion of net profit is to be achieved. And if we were to set payout ratio of 30%, which means that we would be experiencing certain negativity, which is not particularly good. So this is why we have come up with this idea of paying the minimum amount of dividend. So it seems to be a trend mentioning this word of minimum payment of a dividend and we thought that we cannot take this for granted. And so we would continue to consider whether this is the best policy or not. But in our case, if you could wait a little while, for sure, we will be able to recover our businesses going forward. So this is why we did not want to, even for a single year, express any kind of negative indicators and this is why – this is, of course, a matter that is to be approved by the Board. So please do understand, this is not a decision that can be made by all my own. So – but this is something that I’d like to, for sure, consider.

And the second question is about the Page 12 and that is to do with the profit growth. And by following the best scenario, JPY 300 billion of net profit is to achieve JPY 500 billion, which means that you can be achieving a growth of 5% to 6% every year. So how much of a commitment do you have to this target? And achieving JPY 400 billion, JPY 500 billion, JPY 600 billion, what would be the base profit as well as what would be the structure that you are imagining to be generating in terms of the split?

So the new investment, as you can see, from this chart and the numbers, automotive, inclusive that is. So of course, there’s a declining trend. So in addition to this profit generation, which means that we have – so we have to be thinking a mix of the both, which means, you see, the main part is this part. So this is the divestment or the gains on sales of the existing portfolio, which means, in other words, ORIX Living, for example, in the past it belonged to this area. But in light of the profitability, we have decided to divest the business. So as to the existing portfolio of ours, there’ll be no such thing as fixing the portfolio forever. So in other words, we may perhaps decide to exit – make an exit from certain investment that we have made in the past or either we would maintain it because for the reason that it could be contributive to the overall numbers, as you can see, because it is all about hitting the right balance. I hope you understand where I come from. So I was wondering, out of this JPY 400 billion, JPY 500 billion of net profit to be generated in the future, how much of these amount is – would come from gains on sales, I wonder. But you see there are no kind of exception, please understand because we have – that has been the case in the past as well. But as I have explained last time, Rentec as well as automotive, we do regard the business to be still having more space for growth or B2B or AI-related as well as mobile revolution. If that is going to be the case, automotive profit can be growing at the same time. So these are the kind of direction that we are going to be employing going forward. Thank you very much for that.

[Operator Instructions] Gentleman in the front row, please.

SMBC Nikko, my name is Muraki. After the revision, the plan seems to be easily influenced by the decision of the management, ROE target on Page 13, for example. Can you give us more specifics about the outlook and the plan itself? For example, 11% to be achieved in the fiscal year ending March 2024. Is that how we interpret this slide? You say that you want to achieve this earlier, but is it problematic to conclude that it’s going to be March 2024? And it seems that it’s never below 10%, and earlier, you had the target of above 11%. So that was the commitment. Is there some kind of commitment, again, achieving 11% by March 2024 and keeping it above 10%?

Let’s go back a few slides. Unfortunately, this is mostly greenfield, MICE and IR, especially. This is JPY 650 billion expenses up until March 2025. So business will start, there’s depreciation. There’s no profit contribution, but 14, 15 and additional profit contribution will be made in the future. So this is JPY 1.3 trillion investment in total. And because we started this investment, it means that there’s going to be a big variance. And that is why we have decided to give this some flexibility in terms of the policy. With regard to MICE-IR, the local people wants to open this before the World Expo, but it’s extremely difficult to open this before the World Expo takes place. The coordination is not really completed. Genting, Galaxy and ourselves, there are three companies or three groups competing against each other. So we don’t know if we can win this. We will know maybe in the first half of next year and that will change the future picture very dramatically and that is why we are asking you to give us some time. Without MICE-IR, JPY 650 billion expense will not be incurred, which means that further return may be possible. So please give us one year. And once this is decided, we can give you more specific numbers. That is what we believe. But basically you want to go back to the 11%, but we are talking about 10% now. And regarding this slide and the previous slide, we will be making some adjustments, including buyback plan. So we will try to maintain 10% as much as possible and go back to 12% – 11% as soon as possible and further appreciate up to 12%, that is our policy. Thank you.

Second question. Proactive buyback from next fiscal year and onwards, what would be the trigger for proactive buyback? And how do you decide the amount? 11% ROE, if that was to be achieved, then without any exception buyback would take place. That was the plan. But are you looking at ROE or capital ratio, 23%? And is this used as a trigger?

Even with our JPY 100 billion, ROE impact and also, the capital impact is only about 0.1%. If ROE is set at 11%, JPY 1 trillion buyback would be necessary, but relatively speaking, it is not possible. Therefore, on a regular basis, about JPY 100 million buyback may take place, but it all depends on the market status. And when it comes to share buyback, it has to be approved by the Board of Directors. So I cannot really commit personally to share buyback at this venue. It has to be approved by the Board and there are 6 outside directors and we have to explain the growth strategy and provide balanced explanation in order to convince them. So to be honest, I cannot really say clearly whether we’re going to do a buyback or not. Please understand the situation.

So we’d like to entertain the next question. The person at the left.

I’m Tsujino from Mitsubishi UFJ Morgan Stanley. The first question is with regard to the dividend, setting a minimum payment level?

No. We are considering to set a minimum dividend payment.

So the level of this year for the dividend – so as compared to your expected level of the minimum payment of the dividend, how does it position? So you’re just – you have arrived at a decision so that it will be at least not lower than the prior year’s level of JPY 0.76. In considering this next year’s possible minimum payment of the dividend, is it indicative of the idea that may be applied in the next year is my first question? And the second question, oh, no, I’m going to be asking three questions, which is not allowed. And on Page 13, the blue line and the red line, in fact, is converging. And on Page 12 as well, so you are, in fact, disclosing the existing repurchase plan, but be it Investment and Operation or Real Estate, the red part, that may not be expanding dramatically, which means at the time when your net profit may expand beyond JPY 400 billion, you’re not expecting that much of a capital ratio control being very different or the management being very different because currently it is about 30% or so until last year that is. So is my understanding correct?

No, that is wrong. So the number here, so with the existing portfolio includes the ones that we may perhaps be considering to exit out from. So, of course, there are some – I’m sure the employees will not be happy, but there may be some still in the pipeline for us to be divesting in the future. So this is something that we can foresee in the nearest future perhaps. So this is only within the range of our expectations for now, which means that the unrealized gain, that could be perhaps generated from these assets, it is not included in this diagram. So far as we can foresee for now that’s what I’m saying. So if there was to be any future possible gains on, say, unrealized gain, so don’t put that too much pressure on me, please.

Yes, I understand.

But what I want to be explaining through this chart, you see 11% of ROE, may perhaps go below that level for the time being. I had told you, but then if you could give me – give us some time, I think you can start imagining by referring to this chart that we should be able to bring it back to the 11% level. I have confidence, however, of course, we will be affected. We cannot go unaffected by different conditions and environment. So this is why – based on this, this is how we are going to be managing our businesses. And at this point in time, we may be able to achieve JPY 400 billion, JPY 500 billion of net profit, if not earlier. This is how we are going to be taking the lead of our businesses as top management. And as to this appropriateness of the number JPY 0.76 of dividend, we did pay JPY 0.76 last time. And for all these reasons, I had told you that our net profit is to be at JPY 300 billion, and this is from a management perspective and it has nothing to do with the shareholders. So this is why we feel the need to still be paying JPY 0.76 at the minimum. But if we were to say at the minimum, then, in the future, you see the minimum of JPY 0.76 doesn’t sound very attractive in the future. So this is why for the time being, we would still be paying JPY 0.76. This was the expression that we had made use of because it is just a matter of changing the payout ratio to on or around 30%. So this is why I’m sure you have more interest in achieving the total shareholders' return of 65%. So this is why I would not like to set the payout ratio around 30%, but we would have to go through different processes so that we will be able to payout more on a total shareholders' return basis. That’s what we mean.

Gentlemen in the middle, please.

Sato with Mizuho Securities. First question about MICE-IR. On Page 11, specifically, you were talking about JPY 650 billion investment. What are the assumptions for this investment? You mentioned that total investment is about JPY 1 trillion and maybe 300,000 goes – JPY 300 billion goes where – so what is this JPY 650 billion for?

To the local government, we are showing the total cost of JPY 1.3 trillion and the 40% is ORIX and the 40% is MGM and 20% is 20 cooperating companies. Now the bankers, of course, are considering extending loans as we speak. Usually, this should be non-recourse loan, but this is different from Kansai Airport. Kansai Airport was already completed and the non-recourse loan could be given from day one. But for the IR, it’s corporate credit up until the completion of the project. So until 2025, JPY 650 billion will have to be on ORIX balance sheet. So JPY 650 billion up until completion and after completion, it should go down to about JPY 250 billion and debt should be about JPY 300 billion. This is non-recourse. However, according to the current accounting standards, it will be part of recourse, but there is no obligation to repay. In other words, it’s a separate line item.

So JPY 1.3 trillion, half of that is what you have just explained, is that right?

Yes. JPY 650 billion is what we have to pay and 20 cooperating companies will pay after the completion of the construction. So MGM and ORIX will have to share the burden up until the completion of the construction.

That’s very clear. Second question is on Page 12. Again, I would like to ask you about gain on sales. From existing portfolio, you’ll be maybe selling some of the assets and those are indicated here. You also have asset management below and also energy and environment. These are already included. So for these items, you are not assuming sales according to the current scenario. Is that correct?

That’s a very difficult question for me to answer. If there is a good offer for us to sell, of course, we will consider the possibility. However, as far as asset management business is concerned, at least for the time being, we can increase based on the market. There is fee pressure, though. Asset management business for a portfolio, is it really valuable or not? If there is no value, we will sell. But as of today, as we are preparing this slide, we are not planning to sell.

So the next question, please.

I’m from Citigroup Securities. My name is Niwa. And you’re revising the midterm business plan and this is my question and also the new investment. So with regard to the gross prospect, can I interpret it to be a downward revision? And if that is the case, is it due to the pressure from the market conditions or is it for any other reasons? In forecasting ahead, so the market forecast, if this was to be erroneous, then it may perhaps be repeated in the future. So I was wondering how can we kind of figure out the probability of you achieving this JPY 500 billion in the future?

So the investment that we have been making so far, after making an investment in that fiscal period, we could have enjoyed a profit generation from that year onwards from day 1 almost from the M&A deals. However, because of the complexity, the due diligence cost, in fact, is becoming – has become sizable. So for the next two to three years, many of the project that we are undertaking or we can foresee ourselves engaging may perhaps have more of an advance cost implications, such as unlike those Vision Fund who has abundance of capital. So we would have to be very careful and cautious in carrying out the due diligence process in making an investment decision. So the majority of the M&A deals are not by tender, but they are done on a one-on-one deal. So therefore, it may take us as long as two years, three years, but of course, which would allow us to pay an optimum amount of pricing – prices. So this is why, inclusive of MICE-IR, greenfield investment, the amount is quite controllable, and this is why the price is reflective of the quality, of course, which we would have to further effort in maintaining the quality. So we have a – we can be controlling the amount, whereas if it was to be a greenfield, the IRR is also under our control dependent on our management capabilities and competence and our efforts, that is the IRR could be enhanced. However, that it will put a pressure on the depreciation charges and this is why we had asked you to give us some time. And it doesn’t mean to say we have quit on the idea altogether of the brownfield investment, but this JPY 300 billion of net profit achievement, we do –…