ORIX Corporation American Depositary Shares

Good evening, ladies and gentlemen. Thank you for joining this telephone conference of OX Corporation for first quarter consolidated financial results for the three-month period ended June 30, 2019. The attendee today is Executive Officer, Head of Treasury and Accounting Headquarters, Mr. Yano. Mr. Yano will give you a presentation on the first quarter financial results for about 20 minutes and we will move to your Q&A session. The whole conference will take about an hour. At this time, I'd like to turn the call over to Mr. Yano. Please go ahead.

So this is Yano from Treasury and Accounting Headquarters. Thank you very much for your participation to this teleconference despite the busy schedule. So let us get started without further ado. On the first quarter results of fiscal period of 2020 March 1st, although the explanation was to be 20 minutes as being explained by the operator, but we'll be spending a little more than 20 minutes. Please refer to the second page of the deck that we have handed out to you, overview one, net income and ROE. As you can see, fiscal year 2020 March end, the first quarter net income was down by 13% YOY and at 69.2 billion yen. Annualized ROE was 9.6%. which was below the mid-term management target of 11%. However, as seen on the chart on the right-hand side of the same page, ROE tends to fluctuate from quarter to quarter, affected by the tightening of capital gain generation and for other reasons. Please turn to the next page. The page shows the breakdown of pre-tax net profit. In order to facilitate for the better understanding of the growth of ORIX, especially from a long-term perspective, we have applied a new way of showing the trend of our performance. The left-hand side chart shows the trend of pre-tax net profit for the past five years. The dark blue part of the bar chart shows the segment profit excluding gains on sales. By referring to this bar chart, you can see that the segment profit excluding gains on sales have been growing steadily over the past five years. Moreover, for the first quarter from the new investment, we made in NXT capital, in the prior year, that is, as well as Avalon, We managed to generate profit, which contributed to the growth of our profit. Segment profit excluding gains on sales includes some impairment, and thereby there may be some fluctuation anticipated over time. However, we think the fair level of stability can be expected. Now on gains on sales. Please look at the bar chart on the right. Gains on sales in the first quarter was 1%. Moreover, mile-wide, both in real estate as well as in other investments, the gains on sale for the quarter was 27.8 billion yen, which was lower than 41.1 billion yen of the same quarter last year. For Oryx, gains on sale is not a special profit, but a profit that is generated from our usual business activities. We construct a business portfolio that allows us to generate gains on sales constantly while we continue to exert efforts to enhance the value of our assets at all times. However, a single shot of gains on sales could be quite sizable. And for this reason, as you can see from the trend, it may result in a certain level of fluctuation on a quarterly basis. We said that 27.8 billion yen was so-so. So this 27.8 billion yen for this first quarter was about one quarter of the total amount on an annual basis. Now, please turn on the next page. Although details of segment profit will be explained later, just as a summary, let me share with you the trend for the profit by segment. Profit wore up for investment and operations and overseas business, and while the trend was flagged for retail and the profits were down in corporate financial services, maintenance leasing, and real estate. Segment assets increased by 276.7 billion yen as compared to the end of the last fiscal period. Out of this 276.7 billion yen of an increase, 207.1 billion yen comes from an impact caused by a change in accounting standard for operating leases. And therefore, if we were to exclude this impact, the segment asset grew by 69.6 billion yen. Now the next page. And this page shows the health of a financial structure. Employee capital ratio was at 88% with no major change from the prior fiscal year end. We intend to continue to pursue growth while controlling the total risk and making new investments. However, we will continue to operate our businesses by remaining to be vigilant in allocation of our capital in light of a rising trend in cautious outlook for the macroeconomic conditions. As for funding, as for funding, We will not just diversify the method of funding, but we will try to diversify the market for funding as well as geographical area of the funding itself. We will also further effort not just in diversification, but to proceed with the extension of the time period. And with this, we'd like to conclude the business performance summary. And please move on to the next page. Now, we would like to explain about the segmental performances. As at the end of 2019 March, we have been disclosing our segment performance by multiple numbers of units. So corporate financial services, the segment profit, was down by 3.8 billion yen, YOY, at the 4.1 billion yen. As to the life insurance sales to the corporates, we have changed our direction for the proposed products to the businesses, resulting in the decline of agency fee income. In so many loans, against the backdrop of a negative interest rate environment, acquisition for new deals, in fact, is becoming harsher. But as you can see from the right-hand side chart, we have been selective, and as a result, the loan has been trending at 2% plus. The business and succession support that we have started back in 2018, we have managed to conclude the deal by two so far, and there has been a number of inquiries that have been forwarded to us. So we would like to, of course, grow the business by making use of our nationwide network. As a matter of fact, for Yayoi, the members who are paying the charges, we have managed to increase the profit. Next page, please. Maintenance lease segment. In this segment, the segment Profit, was 7.9 billion yen down 1.8 billion yen year-on-year. In the presentation material on page 26, you can find the year-on-year comparison of each accounting item, but the main reason for the decline in profit was an increase in SG&A. However, in this segment, part of this segment profit decline was due to the change in the accounting standards. And excluding that impact, the ROA would have been around 3%, which is a high level. Next page, please. Real estate segment. The segment profit was affected by the large gains on sale of assets recorded last year and fell by 16 billion yen to 4.5 billion yen. On the right-hand side graph, you can see the unrealized gains on rental properties chronologically, and this is the information we disclose every year in the part of report or securities report. You can see continuously higher unrealized gains of ORECs despite the shrinkage of the or the promotion of the sale of assets in this real estate segment. Next, regarding Daikyo, which was made a holding order subsidiary in the last fiscal year, We are promoting the integrated management of all real estate related businesses under the same umbrella of ORIX, and we are sharing know-how and resources for development and distribution and construction management. Next page, please. Investment operations. Segment profit was up 4% to 14.2%. In the environmental energy sector, the profit is down because of the power retailing going down due to weaker prices. However, the solar power generation was solid with 840 MW operating at the end of June. For the concession business, we had a strong business with the inbound tourists and the merchandise sales. Investment operations Profit is up 1.3 billion yen year-on-year to 7.8 billion yen. Next page, please. This is the retail segment. The profit is down 1% year-on-year to 21.6 billion yen. In the life insurance business, in view of the increasing... insurance policies, we need to enhance the administration function of policies and the premiums received from customers. And as part of that, we have expanded the call center located in Nagasaki in April this year. Because of those expenses, there was some increase in STMA. However, we believe that this was a necessary investment for the future. And in the same time last year, we recorded a gain from sale of assets. And that was another factor pushing down the year-on-year profit growth. And in the banking business, we have a high loan-to-deposit ratio of 90%, and spread is 2%, which is quite high, which makes our bank one of the highest profitable banks in Japan, which is still growing. Next page, please. This is the last segment, overseas segment. The segment profit is up 20% year-on-year to 48.1 billion yen. Last year, we had profits from new investments such as NXT Capital and Abolon. We also had a gain from sale of investees in Asia. And because of this, the profit increased. In OCU, or Oryx Corporation USA, we suffered from a decline in asset sales profits. And segment profit went down year on year. However, the asset management business is too strong. In OCE, this is a former Robeco asset management company. Because of the fee pressure compared with the last year, the profit declined. In terms of the business environment, there still is a trend of investors shifting from active to passive investments. But because of the favorable market condition in the last six months, AUM has slightly gone up to 298.4 billion euros. and we would like to continue to secure high top line and at the same time we would like to drive cost reduction going forward. Lastly, I would like to summarize. For FY20 March Q1, net income was 69.2 billion JPY and annualized ROE was 9.6%. Gains on sales of assets decreased year-on-year, however, It was kept at a reasonably high level, and the profits other than gains on sales grew as new investments continued. And lastly, I'd like to mention the KPIs defined as part of the medium-term strategy direction. In the financial results meeting held in May 2019, as Mr. Inoue, CEO, said, in late October, we planned to hold the interim results meeting and where we would like to announce an updated medium-term strategic direction, including shareholder returns. The current KPIs of profit growth of 48%, ROE of 11% or higher, credit rating of single A, can be the KPIs which can be sometimes mutually contradicting to each other. And also, despite the high pipeline for new investments, The uncertainty still is there for the business outlook and the economic outlook, so we are internally discussing how exactly we should update the midterm direction. This concludes my explanation. Thank you for your kind attention.

Thank you, Mr. Yano. We are now ready for the Q&A session. If you wish to ask a question, please press 01 on your telephone keypad. After you are announced, please ask your question. If you wish to cancel the question, please press 02. If you wish to ask a question, you may ask up to two questions. If you wish to ask a question, please press 01 on your telephone keypad. If you wish to cancel the question, please press 02.

Mr. Muraki from Deutsche Securities. I have two questions. Thank you. So on page three, the summary for business performance, the slide, so the gains on sales of 27.8 billion yen was a so-so level, I think was expressed by Mr. Yano, but the The tax rate, in fact, is going to be stable this year, so I don't think you'll be able to achieve what you have been able to in the prior year. So it is not a so-so level, but the gain on sales can be expected from here down the road. So this is what I want to confirm with you as at the end of the first quarter. And as to the second question, the overseas business, especially a dollar-denominated asset, as well as liabilities. So the overseas businesses, the installment loans, in fact, have increased this time around, I believe. And according to the slide, page 31 to the right-hand side, so the foreign currency procurement has been indicated through the price chart, and I think there seems to be an increase in the total amount. So would you mind helping us better understand this? Thank you for your question. As to the gains on sales, as you have pointed out this time, if it was not for the deferred tax asset, we would not be able to grow if it was not for the large amount of gains on sales. So far, so this is why, that is our awareness. And as to the real estate disposition, and also at the same time, living, I mean by Oryx living, and these are elderly, the home care home for elderly people. And we were considering to dispose those kind of assets. And I think we can be sure of a certain amount of gains on sales that could be generated this year as well. So we hope to grow the amount of gains on sales, but whether it is, I don't know whether I can go as far as explaining it to be something that is ample and quite substantial, but for sure we'll be able to generate more than we have done so in the first quarter. As for the dollar denominated assets and liabilities, The U.S. businesses, in fact, is growing pretty much, and this is why it is expanding this part. But in Asia, there was a large amount of loan that we had extended, and this is why we have a rise in the outstanding amount of loans. And so dollar denominated, or rather foreign currency denominated cost or denomination cost, In fact, it is only increased still. However, I think it should kind of settle down from here down the road. The LADA interest rate on a dollar-denominated basis, if it is to be hiked or if it is to shift towards upward, what kind of implication would it be for Oryx, has been asked. So there are about 2,000 units in terms of the mismatch. So, you see, we are, of course, keeping the mismatch to the minimum as much as possible, they said. That has been the explanation. So there are about 200 billion yen worth of mismatch. So, therefore, if the interest rate starts to fall in the United States, this would be positive for us. This is our interpretation. Thank you very much for that. As to the final point, in terms of the mismatch, this is not a duration mismatch. but you mean by mismatch between the floating interest rate versus the fixed? Is that what you mean? Yes, exactly. And, of course, if you were to go into the details of duration, of course, it is pretty much mixed. But on a P&L basis, I think that's how I just wanted to express. And, yes, that is a correct understanding between floating versus fixed. You see, in the United States, there seems to be a direction to lower the interest rate And if that is going to be the case, up until now, the floating rate, I think you have been building up the loan portfolio to that end. But from here down the road, are you going to stick to the skew towards this floating? Or would you be perhaps shifting or making a change or rebalancing your portfolio towards a fixed, like corporate bonds, for example? So is there any kind of... changes to your policy due to an interest rate lowering environment. It is not that we, in fact, bet on the interest rate trend, but rather municipal bond or corporate bond, you see it is very much dependent on how it goes well with the project, different projects. So it's not that the interest rate, just because the interest rate is going to be lowered, We are not going to be changing the large portion of our portfolio. So if we were to talk about municipal bonds, we do have some long-term municipal bonds. So it is, in fact, pushing up the long-term end. However, from an interest rate perspective, we do not intend to change our management policy, that is. Thank you very much for that. Next question is from Mr. Watanabe, Daira Securities. Thank you. I am Watanabe. I have two questions. The first question is about the asset sale proceeds. This is overlapping with the previous question. For the first quarter, it was low. At the beginning of the fiscal year, you had a certain assumption on the pipeline. Has there been any changes to your assumption? From the second quarter, suppose that you have a major large asset sale you're planning to do. Were you intentionally reducing the amount of asset sale in the first quarter? in the medium term strategic direction update in the Q2 analysis meeting, are you saying that you are changing the KPI itself, or are you going to revise the targets for different KPIs, which is the case? And also on page five, there was some equity ratio. The end of June figure is disclosed. What do you think is the intention behind the disclosure of this figure? Thank you very much. Regarding the asset sales proceeds, to be honest with you, for the major items, so far, it is difficult for us to make any comments on our plans at this time because there are different possibilities. Of course, in real assets, there are certain expectations already, but for other areas as well, we are thinking about some projects, but so far, whether they are materialized or not is not something we can comment on at this point in time. So now for the regular items, we have some items in real estate and real estate-related living items as well, and also PE exits. We are thinking about them, so we would like to just execute them one by one. So that's all the comments I can give. For the second quarter question, because of the nature of the question, we just have to tell you that we can answer to your question only in Q2. But including those possibilities, as for the future direction, we are internally discussing them. Of course, in Q1, we thought that that would be the question that you might ask. But sorry to tell you this, but you have to wait for another three months when we can give you more specific direction and we can talk more specifically about our plans on shareholder returns. So, sorry, I like to ask for your little patience. There is some other question you asked related to this. Yes, on page five, there was equities employment. Employed a capital ratio, you will disclose on page 5. Yes, to a certain extent. Risks are important factors for us, therefore. Well, sometimes you ask us a lot about DE ratio, but we are not simply looking at the DE ratio. we are looking at different aspects because of the changes in business nature, and we have to tightly control the risks in the transition stage. That's why we are giving focus on this number. It's not only for the end of the year or the interim period we have to show this figure. We thought that we should show these figures every time. That's why for the first quarter on the B.S., the dividend has declined dramatically, and the interest rates are changing, so the equity has not grown so much. That's why this was kept flat. It was very clear. Thank you very much. Mitsubishi, UFJ, Hogan, Stanley, Sujino-san, please. Thank you for the opportunity. This time, So the profit excluding capital gain, in fact, is up with your explanation. However, like maintenance leasing. I think, sorry, we are finding it difficult to hear you. How about this? Yes, that is better. Thank you. So profit excluding capital gain. in fact, is increasing, which we can understand on a longer trend, but the maintenances or corporate financial services I think is on the decline. And also environment and energy is also on a downward trend, I believe. So for by capital gain, you would have to make up for the shortcomings. Is that what you're thinking? So the first question is with regard to what your expectation is. And referring to the material this time around, information, it is not just the service income that you, in fact, indicate. the level of expectations for the capital gain. In the next year, I suppose it's the same for this year, but would it be the case for the next year as well? Because you see ETL, the new rule will be introduced in the next year. So would there be some negative implications which means that you may have to build up more capital again. I think this kind of trend is likely to persist. So you said that you have updated this time, but you see a decline in dividend, in fact, is something that the investors are particularly sensitive about nowadays. So including that, May I take it that would you be incorporating it in the calculation of ROE as well? So I think my answer to the second part of the question is yes, I think I would say that. But starting from the first question, for sure, if you were to refer to the information, the corporate, the financial services, the profit is down, maintenance is down, also the profit is down. That is the case, and also environmental energy as well. But from the full year business performance, by separating or breaking it down into 16 different units, I think you can have a better understanding of our overall picture of the matter. But, you know, after all, it's a business portfolio, so therefore some businesses are up while the others are down. And so we try to capture... the harvest and we try to enjoy the harvest and of course you see there may be some other time when there will be certain seasonality from harvesting of certain businesses so in the corporate financial services would we be able to recover the business in the future or not if that is your question unfortunately we will not be able to give you a specific timing as to the recovery that can be expected So, of course, for sure we would continue to remain to be active in the business operations and thereby increasing the profit wherever possible. So excluding the gains on sales. So this is the reason why that excluding gains on sales, we have been able to enjoy a steady growth that comes from segment profit. But, of course, there will be ups and downs over time. But overall, we would like to have a good control over the total businesses. And for this reason, overall, so you may ask the question, so is it really okay, the overall trend-wise, and what would happen to the dividend payout? You may wonder, of course, as has been asked by your question. So at this point in time, I will not be able to share with you the precise intent on our part, But in the second quarter, we would like to address your question in a more precise manner. I'm sorry whether I have answered your question or not. Well, after all, I'm sorry to have asked so many negative factors about any overseas businesses. I know that you have managed to decrease the SG&A in Asia, Hong Kong. the disposition of the asset may amount to somewhere around 7 billion yen as well, I suppose. So as a result of reducing the expenses, is it something that is sustainable? If you could help me understand. So after the HCMA in the overseas, There are some positives that is enjoyed in some of the markets, whereas some negatives in some of the markets. But overall, we are trying to revisit the expense incurrence. But Oryx Europe, for example, Robico's AUM, the personnel cost, HR cost, dependent on the profit generation, that would, of course, fluctuate the level of bonus payout. So that would affect the overall business performance as well, and the ICNA more specifically. So the asset management side of our business and the other, of course, administration cost. We would like to change many of the fixed costs to that of the variable costs. But overall, overseas, Asia business is recovering, and in Asia, we have been able to generate quite a sizable amount of gains on sales. So I think it is trending, I think, okay in general. Next. This is Sakamaki from Nomura Securities. I have two questions. The first is about the overview, too. So excluding segment profit. For Avalon and NXT, what was the exact contribution from those two entities, Innovative, Avalon, and NXT? The total is trying to be $5.2 billion. And what is the breakdown? Excluding the segment profit and capital gain, how much was the contribution from them? Second is the corporate finance. The... Agent premium for life insurance business has gone down. Is this trend going to continue going forward? Agent fee is down. Regarding NXT and Avalon, please look at page 12. For overseas business, the numbers are shown. For NXT, it is $2.3 billion, and Avalon is $3.2 billion. So this was exact contribution profit from them, and this is included in the non-capital gains. So the total is 5 billion yen, 5.5 billion yen. That's the contribution profit from NXT and Oberon. Regarding the corporate finance, financial services business, as I mentioned earlier, the benefit of Oryx is that we can look at the timing and quickly come up with the products that is needed by the market. Several years ago, we have started selling the solar panels. which contributed a lot to the profits. And last year, we sold the life insurance business, which was quite significant, but now this is being put on hold. So how long is it going to continue? And can we come up with a new product to cover up for the loss? I can't comment on the exact timeline yet. However, for the life insurance as well, Sooner or later, we can figure out what is needed and what is not needed in the market. Then we can go aggressive once again. We can't just leave it as it is. So we have to come up with new products as well. There are other products as well, like a brokerage business of real estate, which is growing as well. Of course, we have to make a recovery in this business. We are aware of that. And if I could say once again, Depending on the timing, we have the capability to find exactly what is needed by the market. So that is something that we like to do this time again. Thank you very much. From Mel Lynch. Sasaki-san, please. So this is Sasaki from Mel Lynch. On page 13, the curved box, I have two questions. So at the time of the full year business performance explanation, Mr. Inoue has said about the repurchase of your shares. I thought that he was going to share with us your policy. So in the midterm business plan, I think you're going to be incorporating this idea as at the time of interim results announcement. So is it that you're going to be revisiting the midterm business plan and you're not going to be sharing this at the time of the full year business performance information session? Let me then answer to that question then, that part of the question. From that perspective, so at the time of, yes, for sure, Mr. Inoue had said he shared his policy about the shares we purchased at the time of full year business performance information provision and he what so as a conclusion so inclusive of the repurchase program the total shareholder's returns policy is going to be shared at the time of the second quarter result announcement And we are discussing vigorously as to the updating of the policy. So we're going to be updating on the policy. It's not that we're going to be making changes right now, but the discussion is ongoing. The second question. So whenever you come up with the business plan, inclusive of midterm management plan, you may start from year end, and then you would – share the new plan in the new year but in revisiting the plan I think you're spending more time than usual it seems does that mean that there's going to be a major decision to be made why are you taking more time than usual in putting together the plan this time well as to the revision of the plan Of course, we are constantly discussing over the topic of the business plan management plan. And so we're just sharing with you where we are at. So this is something business as usual for us. So it's just that we wanted to be quite transparent as to where we are at to invest the system around. So to be honest with you, for the first quarter, so, you know, we could have, So we thought that it was not a good idea for us not to share any of our idea as to the shareholders' policy. But just so that you know that we are going to be making an announcement at the time of the second quarter end. So does that make any sense? Well, you see, just because Mr. Inoue had mentioned about the shareholders' shares repurchase, so you felt the need as IR, the head of IR, to – to feel the obligation to be disclosing the current work in progress. Yes, that's what it is exactly. And some other things. So we are constantly revisiting the whole thing in any case. And if you could update from a shareholder's perspective, I think that would be very helpful because, you see, anything that you make an announcement for doesn't necessarily bring about positive results so far to the share price. Okay. Next question is from Citi Group, Niwasan. Regarding expenses and investments, could you give us some more details? Regarding the expenses, in the presentation material, page 23, there were SD and A information. Compared with the last year, there was an increase of about 6%. What is the background behind this increase? By segment, it seems that the investment, future investment, you have mentioned some of the specific reasons but despite the slow growth in profits, how much are you expecting? Wherever you can reduce, S and A, is there any item you can reduce for the rest of this fiscal year? That's my first question. The second question is about the execution of investments. In the first quarter, how much was spent on what kind of investees in the first quarter? And regarding the three-year pipeline, How much progress have you made so far vis-à-vis the three-year pipeline? Thank you very much for your question. Regarding SG&A, overall numbers are quite complex and some are misleading. For example, NSPT capital investment may go up, and that means SG&A will go up. and coins AG goes up, and then SG&A goes up. So there are some differences depending on the item. So I can't make you a general comment. In Oryx Europe, as I said, the bonus payment is declining, and this is another item. So I can't give you a general comment, but for SG&A, this is something that we are carefully monitoring, especially in Japan. As was pointed out earlier, sales-related and maintenance-related business in Japan, we like to have a close monitoring going forward. But for SG&A expenses, I don't want to go into the details here, but there were some changes in lease accounting standards. There were two. One is operating lease accounting standard changed. We are a lessee, and we are borrowing some property and building and lease. And also sometimes we lease the land and set up the solar panels to do the power generation business. So for those land lease on a long term, we have put this onto the balance. So this is more than 200 billion yen increase in on-balance sheet investment. And also regarding SDNAs, In the past, we were calling this item initial direct cost. When it comes to the lease acquisition, there are some expenses incurred, and this could be deferred during the lease period, but this is no longer the case. It's not accessible anymore. It's not a big amount, but in Japan, there is an impact of more than 1 billion yen. This represents an increase in SGMA. So because of this, For the domestic financial services and the maintenance lease, there was a negative impact from this. So that was some of the detailed items. But anyways, we would like to have a close monitoring over SG&A expenses going forward. I hope I answered your question. Thank you. How about the investment execution? Okay. For investments, to be frank, for the first quarter, there was not a major item. course on a data basis we are looking at different items for example reshuffling of securities investments and this is included in investments so the amounts go up and down but nothing major that we have to tell investors about but investments of a certain size like a PE investment in Japan and so forth. There are several in our pipeline. And also in overseas, there are medium-sized investments up and coming in our pipeline. Therefore, the question is how much we are including in this fiscal year is the question. We can't give any specific comments on those, so we wait to make a press release whenever they are materialized. But as we did last year, we would like to proactively promote investments this year. But we are keenly aware of the pricing because of the environment. So wherever the pricing is too high, we will not invest. So we are trying to keep the discipline. That's why we aggressively invest. Regarding what you said last, You said that there are uncertainties about the economic outlook. In terms of the business investment execution, last year the amount exceeded 1 trillion yen. Are you thinking in line with this amount, or are you trying to reduce compared with last year? Well, the pricing of those assets are still very high. Therefore, whatever is available on market are the ones which are very difficult for us to buy, although there are a lot of offerings to us. But our stance is to keep a cautious stance. Thank you very much. From J.P. Morgan. Please start the question. Otsuka is my name, from J.P. Morgan. Thank you. So I'm sorry to repeat the questions that were addressed to you already, but just to avoid the confusion, on page 3 in the summary in bracket 2, the dark blue segment profit excluding gains on sale for the first quarter as compared to the prior year, I think you only managed to grow by 300 million yen. But in the second quarter, third quarter, it starts to build up, so that as being shown on this page you'll be able to enjoy a steady growth this is the first question so if you could answer to the first question yes that is our expectation but how far can we grow this amount of profit by the end of the year we are yet to know but for sure we would like to increase so it is only about 300 million yen as being mentioned by yourself So it is not enough to spokenly say that it was quite high. So of course there was NXT capital investment. I understand that there was some impairment included, incorporated for the domestic sales or maintenance, for example, as compared to the prior year, it was on the decline. So the new investment versus the existing businesses or the existing businesses were covered up, the shortcoming was covered up by the new investment. And on page 14, the midterm direction, I think you have given us the update on page 13, that is. So as a result of discussion on page 15, would it There could be a case whereby you have not made any changes to the KPI that are shown on page 15. I'm not asking you whether you're going to be changing it or not. The reason why you're making the mention of this, can you kindly tell us the reason why? Because it's been a year since this major management plan had been launched. So like the growth on an annual basis of the profit or ROE, is there any major changes to do it? business environment that propels you to make changes to these KPIs, I wonder, you know, why at this point in time you're mentioning the fact that you're revisiting the midterm management plan as of now. I'm sorry that I have to say that this is all I can say for now. It's just that we are revisiting the midterm management plans. which may result in changing this KPI or not changing this KPI. So it could be one or the other. So at the time of the FI end result announcement from Mr. Inouye, that was, there are some, of course, conflicts between the achievement of these different sets of KPI, of course. and how much of an investment activity is to be pursued, of course, we are for sure going to continue on with our investment activities in order to continue to grow our business. But to what extent, how much, at what point in time is, of course, yet to be known. So as of now, as we stand, it's just that we want to share our way of thinking and the direction as at the second quarter. So as you have said, From the time of putting together this midterm management plan, I thought that it was all known, that changes in environment and so on and so forth, right? So this contradiction, the conflict between different KPIs, I think was known already. Of course, we want to, of course, keep the health conditions of our businesses while, of course, growing our businesses. And, of course, we knew that there were certain conflicts between different KPIs, for sure. at the time when we did put together this plan, that, of course, knowing that, we want to continue to revisit the whole thing. Why do you knew about the conflict and you have started to go and to operate your businesses under this plan? But it looks as if you feel the need to bring about changes? Well, in a sense, yes. Thank you. Next question. I'm Sato from Mizuho Securities. I have two questions. The first one is related to maintenance lease. This time SG&A has gone up. After Q2, is this trend going to continue or is it going to go back to the normal trend? For the gain from the sale of used cars, you said there was an increase year on year. Despite a very difficult environment which is going on, are you hitting the bottom at the moment? Second question is a global theme. Are you going to stick to your target of increased earnings for the net income, I mean? How important is it? For the maintenance fees, as I said, there was a change in the accounting standards and also in the maintenance fees. there were different burdens from the service fees. Because of those, the SG&A is on an uptrend. Of course, we like to take actions towards that, but this fiscal year, please consider that the SG&A will be going up year on year. And regarding the sale of used cars, yes, we are hitting bottom to a certain extent, to be honest with you. it is very difficult market to foresee the future trend because it can be affected by many different reasons and factors. Overall, we are not living in a world where the cars are selling like pancakes. And therefore, I can't tell you when exactly we can recover the gain from sale of used cars. But for RV, we have a cautious stance so we can adjust the gain from sale of assets to that level. So that's my answer to the first question. And regarding the second question, if I answer your question, I would be predicting the future, so it's very difficult to answer your question. But to your question, I can say that There are several different assets with the unrealized profits. So if we are to make profits for a single year, it is quite easy for us to do so. For such a company, what is the direction for this fiscal year is the question, I think. And this is the important point that we have to make a decision on. Did I answer your question? Well, yes, thank you. Sorry for the difficult questions.

If you would like to ask a question, please press 01 on your telephone keypad. There are no more questions. Mr. Ayano, please go ahead.

So final remarks from Mr. Yano. This is Yano again. Thank you very much for your participation despite of your busy schedule. And so I have been answering to your questions so far, and that's where we are at. And we will just have to continue to exert our efforts so that we'll be able to present a good result in the second quarter.

Thank you. That concludes today's conference. Thank you for your participation, and you may now disconnect.