ORIX Corporation American Depositary Shares

Good afternoon. I am Yano of Treasury and Accounting Headquarters. Thank you very much for your attendance to this business performance announcement meeting of our company. Well, 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 159.2 billion Japanese yen, 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 89.9 billion Japanese yen with annualized ROE of 12.3% as compared to 69.2 billion Japanese yen 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 230.4 billion Japanese yen. 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 compared 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 Avalon, both of which was a new investment in the prior fiscal year. It is our intent and will to continue to steadily grow the segment profit excluding gains on sales going forward. Now, gains on sales for the first half was 74.5%. billion Japanese yen. This is an increase by 2.5 billion Japanese yen from the first half of last fiscal period of 72 billion Japanese yen. We divested some assets in the real estate segment and overseas segment including Oryx Living the largest contributor to the gains on sales which we concluded the deal in August of this year. As you may know, we have been proceeding with the sales of our own shares of Houdini and Loki in the United States since its IPO in 2015. But I would report to you that we have completed the sales of our entire holding as of July of this year. We will continue to exert our effort to build the portfolio asset and continue to enhance its values so that we can generate steady and constant gains on sales. Although fluctuation may not be avoided from quarter to quarter or from year to year due to the nature of the profit that can be enjoyed from the gains on sales, we at Oryx regards the profit to be a profit that are generated from our day-to-day businesses. Please turn to the next page. The page shows the trend of segment profits as well as segment assets. Segment profits was up by 3% at 230.4 billion Japanese yen. Profits of real estate segment, investment and operations segment as well as overseas segment were up while the profits of other segments were down. Segment assets increased by 435 billion Japanese yen. This includes the impact from leasing accounting standards changed by about 200 billion Japanese yen as well as a negative impact from foreign exchange at about 120 billion Japanese yen. So if it was not for these impacts, the assets increased by about 360 billion Japanese yen. Details of the performance by each and every segment are shown from page 15 onwards, so allow me to make a few comments about each and every segment, although it may be very brief. So while, of course, projecting the page of each and every segment, but it will be only a few words to each and every segment. So this is going to be page 17. Corporate financial services segment profit was down by 7.6 billion Japanese yen year on year at 9.2 billion Japanese yen. The main reason was attributable to a decline in agency fee income from life insurance business for corporate customers. Accounting software and its support business, Yayoi, on the other hand, enjoyed profit increase as a result of increasing the numbers of fee-based support membership as well as the sales of packaged product. Now, maintenance leasing segments profit was down by 4 billion Japanese yen year on year at 16.6 billion Japanese yen. Despite of the persisting harsh competitive environment in the auto related businesses, we managed the domain domain. to maintain the level of revenue in both leasing and maintenance businesses as the prior year. However, in order to further expand the client base, service level improvement was indispensable, which translated in an increase in SG&A, and for this reason, the profit was down. Now, the negative impact from the change in the accounting standard were 1.3 billion Japanese yen for maintenance segment, and as I had explained, 900 million Japanese yen for corporate financial service segment in the first half. Now, let me move on to the next page. Real estate segment profit was up by 2 billion Japanese yen at the 46.2 billion Japanese yen. Large amount of contributions are continuing in this segment that includes the sales of Oryx Living Shares in the second quarter. Daikyo enjoyed profit growth of 5 billion Japanese yen due to a large number of condominium units being delivered in the second quarter. Now, the next is page 23, investment and operation segment profit, which was up by 3.5 billion Japanese yen at 28.4 billion Japanese yen. Although there was some negative impact from the decrease in the assets for servicer businesses in the investment and operation unit of the segment, Korn's AG, the new investment in the last year, started to make profit contributions, allowing the unit to trend flat YOY. Concession business increased its profit by 3.9, includes, of course, Kansai International Airport. This concession business increased its profit by 3.9 billion Japanese yen, thanks to a rise in the number of tourist visitors to Japan, as well as sales of goods. Now, the next segment is retail segment. The segment profits was down by 6 billion Japanese yen at 432 billion Japanese yen. profits declined due to the large gains on sales in the last fiscal year, as well as a decrease in profit generated from former Hartford life insurance. And also, banking continued to expand mortgage loans for condos for investment, resulting in an increase of financial revenue and income. So this is going to be the sixth and the last segment, overseas segment. The profit of the segment was up by 19.1 billion Japanese yen at 866.9 billion Japanese yen. OCU in the United States increased its profit as a result of growth enjoyed by the asset management business, including NXT Capital. And the next is OCE, which is Oryx Corporation Europe, again an asset management business. Although AUM did expand, the fee pressure continued due to a shift in trend from active to passive that resulted in declining profit. And the Nexus aircraft and ship business benefited from incorporating profit from Abalon, new investment in the prior year, while Asia and Australia increased their profit former from gains on sales on investment from the first quarter and latter from a positive turnaround from a loss incurred from IL and FS in India in the prior quarter. Now, this concludes the performance explanation by TechMed. And please go back to page five of the slide deck. And this is going to be the last page that I'm going to be covering. The page shows the trend of employed capital and breakdown of funding over the same period. Funding environment remains to be favorable, allowing us to enjoy sustained substantial capacity to either borrow from financial institutions or procure from capital market. We will further effort in diversifying our fund method as well as funding method as well as the market to tap on, while continuing to extend the duration, as well as diversifying the timing of maturity. As shown on the chart to the left, long-term debt ratio is now about 90%. We will remain to be flexible in maintaining stability of our fund management. And moreover, employed capital ratio, as at the end of September, was 85%. An improvement from the end of prior years, a result of build-up of... internal reserve. We intend to carefully control the employed capital ratio as well. With regard to the financial soundness, Inoue, our CEO, will elaborate a little more in his presentation on the midterm direction later. This concludes my presentation of the second quarter business performance for FY20 March end. Thank you for your attention. Thank you very much for your attendance once again. So I would like to explain the backdrop to the reasons why we have decided to make some changes to a 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 to 2021 with ROE of more than 11% and the maintenance of credit rating. However, for the first half of 2020 March end period, we had posted a net profit of 159.2 billion yen, 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 300 billion yen for the full year of 2020 fiscal period. While the pre-tax net profit is scheduled is focused to be at 430 billion yen, which is an increase by 9 percent and also a record high. However, after tax profit is expected to be down by 7.3 percent 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 Brexit and geopolitical risk seems to be increasing. And despite of IPO market experiencing confusion there is 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 adequate and which in fact propels us to remain to be cautious. So as to the portfolio of Oryx in United States, Europe, as well as in China, it is well diversified and it is centered around infrastructure related. And we do not have any investment in trade related nor the manufacturing related, which means we're not going to be we cannot expect us to be negatively affected by all these geopolitical risks that are aggravating. But we feel the need to recognize our our attitude towards investment in light of this macro economic conditions of the world while despite of all this we are securing quite a rich pipeline but in order to for us to maintain an appropriate and adequate level of valuation we feel the need to specialize and focus on the development deals in other words a green field rather than a green brown field although however Although Greenfield has a benefit of allowing us to have a better control over the investment amount, but it tends to incur costs before taking much time in making a positive contribution to the business performances. So therefore, we would like to continue to give ways and or rather prioritize real estate investment deals such as MICE IR. But as I have said, there will be a cost increase in advance for the greenfield investment. With regard to MICE IR, despite of the fact that we have not been approved of our project, but we are expecting to generate as much as 5 billion yen of expenses in this year for RFC as well as RFP. And we are expecting to generate more expenses going forward as well. But it is something which we cannot avoid in order to win the deal. So for the in a short run, we would have to be incurring cost in advance of the profit generation or the revenue generation, which would put a pressure upon our P&L. In light of all this, for this year, as well as in the next year, we feel the need to revise our midterm business plan. So although we have come up with a target of achieving 48 percent of profit growth starting from 2019 for the three years. But we would like to take this back and start all over again. Now that we have come up with a renewed target of achieving 300 billion yen of net profit in March end of 2020. While the net profit target for 2021 March end, we would like to continue to monitor our business performances and continue our vigorous analysis of our business performances and would like to come up with an announcement at the end of this fiscal period. As to the target of maintaining a credit rating of A, we would like to change it to an expression of continued maintenance of financial health while maximizing our effort to maintain credit or keep credit A rating. So the reason for this is because we do not want this maintenance of credit rating to become the factor in making any investment decisions. But please do understand that this change is not going to be a change which is not a mere change in the maintenance of the credit rating.

We are aiming to increase the net income level from the current 300 billion level to 400 to 500 billion yen. However, for new investments, we have to prioritize a project with an upfront cost, which means that for the short term, ROE may drop below 11%. We will still maintain the objective of ROE of 11%, which speaks to the capital efficiency. However, we would like to change it slightly to say that we want to achieve ROE of 11% over the mid to long term. In other words, we would like you to understand that for the short term, it may fall below 11%. The capital ratio against the total assets for the fiscal year ending March 2019 was at 23.8%. And we believe it is time for us to rediscuss the proper capital ratio for Oryx Group as a whole. Oryx Group implements various businesses. And for such a group, the lower limit of capital adequacy ratio should be set at around 23%. And this is the basic assumption which will be used for us to figure out the shareholder returns. Of course, future financial turmoil and recession potentials should be included in this discussion as factors. So this policy is not an absolute. However, we believe that it is important for us to return the surplus capital to our shareholders. For fiscal year ending March 2020, we will employ whichever is higher, payout ratio of 30% or 76 yen per share for full year, 35 yen for the first half and 41 yen for second half. Whichever is higher will be paid to our shareholders. We will also implement share buyback. with a maximum ceiling of 100 billion yen, which will be executed between the dates 1st of November 2019 to 8th of May 2020. Through the share buyback, we expect the total shareholder return to be at about 65%. We will also set up a limit to the Treasury stock ratio of five percent against the total issued shares and anything exceeding this ratio would be retired or canceled. Since the global financial crisis as you can see on this chart key financial indices have improved greatly. And as far as this chart will tell you, we do not believe there is anything that should interfere with the A rating. However, unfortunately, some rating agencies have pointed out that there are certain issues, which is not specific to Oryx Group, but general concern about ability to obtain foreign exchange for Oryx, as well as Japanese financial institutions in general. And therefore, this concern may impact the rating of Oryx, according to the ratings agencies. Either way, there is no change in our policy to further improve our financial indices. We intend to manage this company by achieving the right balance between growth and financial health. 1.5 trillion yen of liquidity consists of first of all 500 billion yen of liquidity which is based on the current assets of Oryx bank as well as a life insurance company and the remaining 1 trillion yen is the current assets for maintaining the single A rating. We believe that the validity or appropriateness of a 23.8% of shareholder equity ratio should be done and this is why we have decided to buy back the shares as the first step towards this end. On this slide you can see the projects or assets that have been invested into or sold since April 2018, although not shown on this list. If you include the sales of real estates as well as purchase and sales of aircrafts, the total amount is approximately 1.3 trillion yen each after implementing the new deals as well as the sales. And the total capital gain of these five assets shown here, which have been sold, is approximately 100 billion yen. On this slide, you can see the list of pipelines of new deals, including developments, as well as timing of profit contribution of these different deals. Out of this list, my IRA project is not a confirmed asset yet because we are still preparing for the licensure. RFC and RFP for Osaka Prefecture and Osaka City will have to be prepared. And we are collaborating with approximately 20 different companies, including MGM Resorts. This project requires upfront expenses And until we obtain the license, we expect about 10 billion in worth of upfront investment. We believe that this project will put Oryx on a completely new stage. And the promotion of the Greenfield deals, including this deal, is one of the major reasons why we want to make corrections to the midterm plan in addition to the external factors. Continue to execute the deals on the pipeline and launch digital related business. Implement new M&A without fail. And continue to sell projects from the existing portfolio. And this is how we intend to increase the net income from 300 billion to 400 and then 500 billion yen. And success or failure of MICE IR will determine whether or not we will make this announcement and also how to formulate the mid-term plan for the term beyond March 2021. We appreciate your kind understanding and patience. It all depends on the market and macro environment, but if everything goes smoothly, we believe that we can achieve the level of 400 billion yen by 2025 or 2026. And if we add the sales of assets from existing portfolio, we may be able to achieve this earlier. So market profitability of existing portfolio, progress of development projects, pipeline and financial health, all of these different aspects need to be carefully monitored as we continue to move forward. On this graph, you can see the trend of ROE. If we maintain the current speed, ROE will not be pushed up until around March 2025 when the development projects will start to contribute in terms of profit. We should never buy something at an expensive price. We need to carefully examine the purchase price of the new initiatives and develop green fields and continue to promote new M&A which can contribute to the profit and short term. We also need to promote timely sales of items in the existing portfolio and contribute and return to our shareholders including proactive buyback. And we need to use the surplus capital in an effective manner so that we can achieve the red line level rather than the blue line level. But for the short term, the ROE may drop below 11%. This is a summary. For the first half of fiscal year ending March 2020, net income went up by 2.6% at 159.2 billion. ROE was 10.9%. Single A rating is still maintained. But in preparation for the future growth, ensuring flexibility is our biggest focus, considering the current macro environment and other uncertain external factors. This is why we would like to revise and change our mid-term strategic direction for the period up until the end of March 2021. ROE may fall below 11% for the short term, but as I mentioned before, we believe that early recovery is possible. And therefore, for the mid to long term, we want to keep the ROE 11% as our management objective. Oryx's financial health is very sound, and we will make further efforts to work on this. But if we try to maintain single A rating, it may interfere with the growth potential. It is not appropriate for us to be constantly aware of the rating every time we want to execute a new deal. Of course, maintaining a single A rating is something that we will strive towards. And we believe that it is our obligation to return the surplus capital to our shareholders. We would like to use our capital for new investments to sustain growth. So this policy has not really changed. But return of surplus capital is a different matter. And this time around, We have decided to apply whichever is higher, 30% of payout ratio or 76 yen per share. And in addition, we have also announced the share buyback of 100 billion yen, which puts the total return at about 65%. We will continue to discuss the lower limit of dividend as well as proactive buyback for next fiscal year and beyond. That concludes my explanation about our mid-term strategic direction for Oryx Group. There is some additional explanation regarding ESG activities at Oryx. Oryx Group sustainability report will be published on the website on the 31st of this month. We operate in 37 different countries and therefore we should be a global group which can achieve high global standard in addition to achieving growth objective of the whole group. We have a specific policy and objective for the group regarding sustainability and this is reflected in the business activities on a day to day basis at each segment. We have formulated policies for sustainability human rights and sustainable investments and loans and important challenges related to sustainability have been analyzed and evaluated for each of these different businesses. In order to enable diverse business at Oryx, we need to distribute sustainability risk. By diversifying or removing sustainability risks, we are able to respond to new business opportunities in a flexible and timely manner. We will continue to promote our own sustainability initiatives going forward. And on the 31st of this month, report will be released. I hope that you can refer to this report. And if you have any questions at all, please contact our secretariat. And we would very much appreciate your inquiry. Thank you very much for your attention. That's all from me. And now we would like to open the floor for questions. Regarding numbers, please ask Mr. Ayano. But for other matters, I myself will attempt to answer your questions. Thank you very much.

So the person sitting at the front row, please. My name is Watanabe from Daiwa Securities. I have two questions. First of all, and that is to do with page eight, midterm direction and also your dividend policy. So you are considering to set a minimum payment of a dividend, which means that you're not going to incorporate the idea of a payout ratio going forward. Is that right? So we have set 300 billion yen of net properties to be achieved. And if we were to set payout ratio of 30%, which means that we would be experiencing some 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 would 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 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 we'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, 300 billion yen of a net profit is to achieve 500 billion yen, 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 400 billion yen, 500 billion yen, 600 billion yen? What would be the base profit as well as what would be the structure that you're 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 is a declining trend so in addition to this profit generation which means that we have so you we have to be thinking in mix of the both which means you see the main part is this part so this is the the divestment of the gains on sales of the existing portfolio which means, in other words, Oryx Living, for example, in the past, you know, 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 will 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 contributed to the overall numbers as you can see because it all it is all about the. hitting the right balance. I hope you understand where I come from. So I was wondering, you know, out of this 400, 500 billion yen of net profit to be generated in the future, how much of which 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, Rantech 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.

We would like to receive questions from as many people as possible. So we would like to ask you to kindly keep the number of questions to maximum of two. Gentlemen in the front row, please. SMBC Nico, my name is Muraki. After the revision, the plan seems to be easily influenced by the decision of the management. RE 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 percent. And earlier you had the target of above 11 percent. So that was a commitment. Is there some kind of commitment again achieving 11 percent by March 2024 and keeping it above 10 percent? Let's go back a few slides. Unfortunately this is mostly greenfield mice and I especially this is a 650 million yen expenses up until March 2025. So business will start this depreciation. There is no perfect contribution but 14 15 and additional profit contribution will be made in the future. So this is 1.3 trillion yen 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 export 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, ¥250 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, we want to go back to the 11%, but we're 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 11% as soon as possible and further push it 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 not 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 without 100 billion yen ROE impact and also the capital impact is only about 0.1 percent. If ROE is set at 11 percent one trillion yen buyback would be necessary. But realistically speaking it is not possible. Therefore on a regular basis about 100 million yen 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 six 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 buyback or not. Please understand the situation.

So I would like to entertain the next question. The person at the left. I am 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 the 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 76 yen. in considering this next year's possible minimum payment of the dividend. Is it indicative of the idea for that may be applied in the next year is my first question. And the second question I know 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 the 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 400 billion yen 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 percent 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 future. 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. You see, 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 the unwellness gain, so, you know, don't put too much pressure on me, please. Thank you. Yes, I understand. But what I want to be explaining through this chart, you see 11% of ROE may perhaps increase 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 percent level. I have confidence, however, of course, we'll be affected. We cannot go unaffected by different factors. 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 400 billion, 500 billion yen 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, 76 yen of a dividend, we did pay 76 yen last time. And for all these reasons, I had told you that our net profit is to... be at 300 billion yen. And this is from a management perspective, and it is nothing to do with the shareholders. So this is why we feel the need to still be paying 76 yen at the minimum. But if we were to say at the minimum, then in the future, you see the minimum of 76 yen doesn't sound very attractive in the future. So this is why, for the time being, we would still be paying 76 yen. This was the expression that we had made use of, because it is just a matter of, you know, changing the payout ratio to around 30%. So this is why I'm sure you have more interest in achieving the total shareholder's 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'd be able to pay out more on a total shareholder's return basis. That's what we mean. Okay, thank you.

please. Sato with Mizuho Securities. First question about MICE IR. On page 11, specifically, you are talking about the 650 billion yen investment. What are the assumptions for this investment? You mentioned that total investment is about one trillion and maybe 300,000 goes 300 billion goes where. So what is this a 650 billion for the 40 percent is Oryx and 40 percent is MGM and 20 percent 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 until the completion of the project. So until 2025, 650 billion will have to be on OREC's balance sheet. So $250 billion up until completion and after completion it should go down to about $250 billion and debt should be about $300 billion. This is non-recourse. However, according to the current accounting standards, it would be part of recourse, but there is no obligation to repay. In other words, it's a separate line item. So 1.3 trillion yen. Half of that is what we have just explained. Is that right? Yes. 650 billion is what we have to pay. And 20 cooperating companies... will pay after the completion of the construction. So MGM and Oryx will have to share the burden up until the completion of the construction. That's very clear. Thank you very much. Second question is on page 12. Again, I would like to ask you about gain on sales. From existing portfolio, you will 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 a fee pressure though asset management business for our 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 I see. Thank you very much.

So the next question, please. Thank you. I am from Citi Group Securities. My name is Niwa. And you're revising the mid-term 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 500 billion yen 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 one almost from the M&A deals. However, because of the complexity, the due diligence cost, in fact, has become sizable. So for the next two to three years, many of the projects that we are undertaking or we can foresee ourselves engaging may perhaps have more of an advanced cost implications. 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 and not by tender, but that they are done on a one-on-one deal. So, therefore, it may take as long as two years, three years, but, of course, which would allow us to pay an... an optimal amount of pricing prices. So this is why inclusive of mice IR greenfield investment the amount is quite controllable and that 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 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, it would put the 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 brown feed investment. But that is 300 billion yen of a net profit achievement. We are pretty confident in achieving the target. But this 300 billion, even if we can be achieving 300 billion yen, but not carry out the repurchase program at all, then we would have the ROE dipping below perhaps 11%. And so therefore, the payout ratio and the deals that we are currently considering. They will be like 1 trillion, 2 trillion in some years' time. So which means, but they will not be profit generators for the time being, which means that the ROE may perhaps start to decelerate. So this is why in taking all this into account, we wanted to strike the right balance. So please understand that we have not revised the target for the reason that we have become less confident. But please understand that we have taken everything into consideration. As to the second question, referring to page 12, this gray area of... Investment. New M&A and others. So the investment seems to be taking place at a later stage. And mice are our contribution is much later. And I was wondering, you have quite a number of deals that you are imagining. So can I take it that you will be able to start generating some a revenue profit from my IR from 2030 March. I have to, I have, of course, would be engaging in discussion with all the top management and we have arrived at a consensus. So this is not my, it is not a reflection of my personal idea. Please do understand that. But as for this gray area that you had asked the question for, We have quite a number of these, as a matter of fact, projects in the pipeline. However, at this point in time, with the current conditions, there are about 20-plus deals, half of which exists outside of Japan. So, of course, concluding the M&A deal outside of Japan and making sure that there will be a corporate governance in place and, of course, integration, management, and so on and so forth. If we think that we are successful in doing so, then this would be contributive. However, the price could be higher. But whether as a result of a tough negotiation, we can lower the pricing or not, of course, it remains to be ascertained. So this, in fact, is reflected onto this great area. So with the current management level, the commitment that we have, or rather, this is a picture that we are imagining ourselves achieving or we feel the need to be achieving. In 30 years' time, I'm sure I'll not be around, but in a chronological manner, how would it appear, at what point in time, what kind of magnitude still remains to be unknown.