ORIX Corporation American Depositary Shares

Good evening, ladies and gentlemen. Thank you very much for joining this telephone conference for Oris Corporation for first quarter consolidated financial results for the three-month period ending June 30th, 2020. The attendees at today's conference are Executive Officer, Head of Treasury and Accounting Headquarters, Mr. Yano. And as we begin the meeting, we would like to ask the participants to kindly turn off your mobile phone or other communication devices nearby or move them away from the phone. If during the meeting we find the howling or the noise feedback, we may have to disrupt the meeting and may ask the participant to deal with this issue. We hope that you kindly understand Mr. Yano will give you a presentation of the first quarter financial results and will move to a Q&A session. The whole conference will take about an hour. At this time, I would like to turn the call over to Mr. Yano. Please go ahead.

This is Yano speaking from the Treasury and Accounting Department. Thank you all very much for your participation in this call despite of your busy schedule. So without further ado, I'd like to get started with the business performance announcement of 2021 March and first quarter. So I hope you have received the PowerPoint slide in front of you and I'd like to make use of this deck. And please stand to the second page to begin with. So to begin this explanation session, I'd like to give you the procedure of this meeting. First of all, I'd like to explain the summary of business performances. Net income was 50 billion yen, annualized ROE of 6.8%. Oryx is pretty well diversified in terms of its businesses, and as a result, although some businesses are affected negatively by COVID-19, but we did manage to generate some profit. First off, dividend is scheduled at 35 yen, and the full year payout ratio of 50% remains unchanged. Second, the segment performance. So for the first quarter, we increased the number of segments from 6 to 10. The remarkably growing overseas businesses, in fact, is growing its significance. So we have decided to split the overseas businesses into four segments and also domestic business that shares the same sales network as well as reporting line are expected to enjoy synergy and thereby we have decided to integrate into one, the segment. And also at the same time, we have made environment and energy segment as an independent segment. Our business model is often described to be too complicated and not easy to understand. But we would like to enhance our disclosure continuously so to facilitate for a better understanding on the part of investment community. And the third, I will be explaining about the financial soundness of our company. Back in July, S&P had announced the maintenance of the current rating, and we have managed to maintain A rating and above with all the credit agencies. And as at the end of June, liquidity on hand, excluding bank and life insurance, will remain high at 1.13 Japanese yen back in June. At the coupon of 0.03%, a very low coupon rate, we managed to issue a straight bond of 70 billion yen in total. So funding environment remains to be favorable. And finally, we'd like to talk about investment pipeline. Despite the current environment, our investment pipeline remains to be rich, and examination is continuing with a view to execute within this fiscal period. So let us move on to the next page. Now, first of all, I'd like to elaborate on the business performance summary. I'm sorry to be redundant, but the first quarter net income declined by 27.7% year-on-year at 50 billion yen. Annualized ROE had become 6.8%. So let me move on to the next page. The next is breakdown of segment profit. Segment profit was 75.4 billion Japanese yen. And I'd like to explain, just like before, by separating the profits into two, base profit versus investment gain. The navy color indicates base profit, year-on-year decline of 23% at 60.5 billion Japanese yen, and mostly affected by COVID-19, that is, the decline. And the As for the pale blue color, in fact, this investment gain, as compared to the prior year of 27.2 billion yen, the generation of investment gain was 15 billion yen this quarter. So this is a reactionary fall due to a large investment gain generated from PE investment in the United States in the last fiscal period. However, we managed to post a certain amount of investment gain this year.

On this page, you can see the impact of COVID-19 in the first quarter on various segments' profit. In May, during the earnings announcement, we identified real estate, aircraft lease and concession, three businesses that would suffer the biggest impact. In addition, Orton Business and Oryx US also had some impact and the segment profits was down by 24 billion yen. On the other hand, environment and energy and retail related businesses such as life insurance and banking and credit were not impacted that much by COVID-19 and the performance was solid. Please turn to the next page. Now I would like to turn to the second point which is change of segments and the segment performance. This is the comparison chart of the increased or improved disclosure of the segment as was explained in the beginning. Last year we started using 6 segments and 16 units to do the presentation, and we changed the segments, but the 16 units remain the same as before, more or less. So this is an easy way of comparing the changes. On the next page, you can see our performance by segment. Starting with our segment profits, Centering on the businesses impacted by COVID-19, as explained before, seven segments were down in profit, but three segments with relatively small impact increased in profit. Your change and the factors are summarized on this table. And also, page 13 and onwards will explain the details. We don't have enough time to go through all the details of page 13 and beyond, but I would like to use the chart on page 7 to explain. Starting with three segments with the biggest impact of COVID-19. At the four-year earnings announcement, we explain the impact of COVID-19 on these three businesses for this fiscal year. For real estate, profit reduction of 25 to 30 billion for aircraft lease 20 to 30 billion decrease and for concessions we mentioned that the net income may be zero or even in the negative territory now looking at the current environment facilities operation which is in the real estate segment let us look at this business first we operate more than 5,000 rooms in hotels and inns throughout Japan. In order to stop the spread of COVID-19, we closed most of these facilities until the end of May, which meant 4 billion yen reduction in profit in the real estate segment. Since the state of emergency was lifted from July, we started operating with maximum of a 50% operation level, and the After August, we'll be removing this upper limit of 50% of operation and review the way these facilities are operated and how the expenses are spent. And therefore, the outlook for this fiscal year's performance is better than initially expected. Moving on to concession business. We own 40% of Kansai Airport, which operates three airports, including Kansai International Airport. And their performance is reflected in our numbers three months later, which means for this first quarter result, we are looking at the performance of Kansai Airport from January through March of 2020. Due to global travel ban, many international flights were cancelled, reduced or cancelled and the number of travellers reduced and in the p-investment acquisition segment we saw a reduction in profit of 5.8 billion yen although there are some recoveries in the domestic airlines since there is a lot of uncertainties we have not really changed the pessimistic scenario that we explained to you last time moving on to the aircraft lease business again Demand for air transport is reducing, mostly around international airlines, and the proceeds for the aircrafts reduced. Some impairments have to be recognized, and the transport segment suffered a 3.3 billion yen reduction in profit.

Now, Avalon, our affiliated company, with our stake being about 30%, announced their second quarter earnings on July 30th. They accounted impairment of some of their fleet, and as a result generated a loss of 162 million U.S. dollars. However, their accounting standard is IFRS, whereas ours is US GAAP. And this is why the differences in recognition standard for impairment lies between the two companies, or accounting standard. So according to US GAAP, we did not recognize any impairment, and as a result, in the first quarter, we've accounted an equity gain in a positive manner from Avalon. So as of now, with the international flights, we remain to be sluggish. However, we are beginning to see some signs of recovery in China for the domestic airlines. On the other hand, I think we may remain to be quite vigilant and cautious as to the future perspectives of these businesses. And as of now, the three major businesses, the business performances of the three businesses are pretty mixed. However, if we were to put the three businesses together, so the performance remains to be unchanged for the fiscal year. On the other hand, environment and energy, life, bank, and credit are not greatly affected by COVID-19, and the business remains to be solid with profit increasing. And at the moment, we can continue to generate profit as we stand right now. So they are not only affected greatly by COVID-19, but they manage to benefit from the change in the lifestyle due to COVID-19 outbreak. Life increased the number of policies enforced by leveraging their online and mail order capability, and the same can be said, too, with the bank businesses of ours. They leverage on their known face-to-face online capabilities in growing their real estate investment loan asset, and the Rentec unit is preparing for PC rental demand increase due to growing needs to telework or work from home. In the second quarter, the impact from COVID-19 outbreak may expand further, but we intend to utilize our strength of having a well-diversified business portfolio in generating a profit led by businesses that will correspond nicely to the changing society. Let us move on to the next page. Now, as for segment assets, I would like to just focus on the major changes from last fiscal year end First of all, corporate financial services and maintenance leasing, so the financial asset continues to decrease slowly at the 3% decline year-on-year at 1.7439 trillion Japanese yen. ORIX, unlike commercial banks, we do not extend loans for working capital. but we extend loans for facilities and also capacities. So therefore, we haven't been receiving much request for payment deferrals. But of course, if we do receive such a request, we are dealing with those requests in a very careful manner. As for the insurance segment, we increased the management of investment securities, and we managed to increase the asset thereby by 5% at 1.664 trillion Japanese yen. Bank and credit segment, utilizing their known face-to-face capabilities in capturing real estate investment low and demand, and as a result, the asset increased by 1% to 2.6295 Japanese trillion yen. Now, finally, Oryx USA, their earnings were impacted by FX of minus 13.7 billion yen, as well as a decrease in installment loans, reduced down the asset by 4% at 1.3168 trillion Japanese yen. Let us move on to the third point, and that is to do with the financial soundness. As I have mentioned right at the beginning of this session, the rating maintained at A and above, with liquidity on hand, excluding bank and life, remained high at 1.1 trillion Japanese yen. Although at the time of year-end performance announcement in May, we explained the possibility of decline in operating cash in collection rate to as low as 70%. But the request for payment deferral as well as payment delay has been remaining at a very low level company-wide or group-wide, allowing us to enjoy a high collection rate of about 95%. even including aircraft, V-sync businesses. So therefore, as I have said, the collection rate has been maintained at the highest 95%. Let us move on to the next page.

Based on our strong financial health, the financing status for our company is very favorable, with a sufficient additional capacity for funding both from banks as well as capital markets. and the funding is over long-term, long-term debt ratio continues to stay above 90%. As you can see to the right, employed capital ratio is 87% at the end of June 2020. No major investments, new investments were made in the first quarter. And beginning of the impact of a CISO, which is a new accounting standard, has already been reflected in our capital. Whether we make a new investment or provide a shareholder return, we have sufficient on-hand liquidity as well as shareholders' equity. Turning on to the next page and the fourth point, investment pipeline. In the past, we have executed many new investments and captured a high return through timely exits. On the back of strong track records, We now have a very rich pipeline at 2 trillion yen approximately, and we're examining these investment opportunities. By field and by size, these are some of the examples. Renewable business companies in Japan and overseas, about 300 billion yen. Roll-up of an existing asset management company, approximately 200 billion yen. And the private equity investment deals in Japan, US and Asia, 250 billion yen. And the domestic real estate development projects, 250 billion yen. Osaka Maesai R, 650 billion yen. And other new potential investments, 350 billion yen. In total, 2 trillion. As you may know, Osaka Maesai R, as of last November, we indicated that the highest number, which is 650 billion yen. We are still using the same number here, but the actual amount may differ from this number noted on this slide. Please be mindful of that. Global monetary easing brought excess liquidity, which meant that asset prices, including stock prices, did not drop as much as had been anticipated. Despite this environment, We have strength in exclusive dealing, and we are carefully examining various opportunities which meet our investment criteria. In some cases, the discussion and examination may have been discontinued due to COVID-19, but the prices may have come down recently. In the first quarter, for example, there was a PE investment into Doujin Yakukako. This was a new investment that was made. we have sufficient level of on-hand liquidity for additional new investments. We will look at a rich pipeline and identify the deals that would satisfy our investment criteria and try to close some of them before the end of this fiscal year. Moving on to that last page. Net income for first quarter of fiscal year ending March 2021 was 50 billion yen. Annualized ROE was 6.8%. In May, during the earnings announcement, we presented two different scenarios. If COVID-19's impact continues one year, net income may drop to 80 to 120 billion yen. Or if it recovers and normalizes by the end of the third quarter, Net income may stay around 180 to 200 billion yen. State of emergency was lifted on the 25th of May, but future is still very uncertain. But we are now operating with the assumption that COVID-19 is here to stay, at least for the time being. It really depends on the environment going forward, but at this point in time, we do not believe that we would go for the worst scenario of the two. On the 22nd of May, during the four-year earnings announcement, we communicated to you that the payout ratio for this fiscal year was 50%, and as Mr. Inoue, our CEO, explained to you, in order to make it possible for us to maintain the 76 yen of our four-year dividend, we will continue to make efforts to achieve 180 to 200 billion yen of net income for this fiscal year. Starting from this first quarter, we increased the number of segments from 6 to 10 in order to improve the disclosure. We are hoping to provide more useful information to the investors, mostly centering around business outside of Japan. We will continue to maintain the A rating or higher. We have high level of owner liquidity. We have sufficient cash and capital to support our rich pipeline. So we will continue to execute projects with a high return and also take care of stakeholders, including our shareholders and ratings. And we will continue to use our capital in the most appropriate manner. That's all from me. Thank you.

Mr. Yanov, thank you very much for your explanation and presentation. So we'd like to move on to Q&A session. So if you have any questions, please press 01 on your telephone keypad. After your name has been called out, please start asking your questions. If you wish to cancel the question, please press 02 on your keypad. So let us move on to the Q&A session. As to your question, I would like you to limit your question to just one question. So let us get started with the Daiwa Securities, Mr. Watanabe. Please start asking your question. My name is Watanabe from Daira Securities. So I have to limit my question to just one. So let me ask you the question with regard to base profit. 60.5 billion yen of profit seems to be pretty high. So in your presentation, you had told us that there is a very small possibility of turning to a negative scenario. So do you think that you are higher or lower at this point in time? And as for the second quarter and onwards, if there was to be any overshoot or undershoot, what would be the negative factor or positive factor that would affect the base profit? So... Thank you for your question. So what would happen from the worst scenario? If I were to answer to the question, I would like to give the disclaimer that it is very much dependent on how things would unfold from here down the road. Because you see, the worst scenario is, of course, assuming all the worst that could happen. But of course, we have been responding to COVID-19 outbreak as much as possible. So we're pretty confident that we can avoid this worst scenario from happening as a result of this response that we have been taking so far. Well then, so $180 to $200 billion, whether we will be able to achieve this upside result, I think was your question in a nutshell. So we are going to be furthering our effort in achieving a better result, of course. But in the businesses that we operate in, We have hotel operations, accommodation operations, as well as airport operations as well. And it will be affected greatly by whatever that happens from here down the road. So we have no certainty for the future. So how we can make up for any possible losses that could be generated from these businesses by other companies lines of businesses, of course, we would be happy if we can enjoy a better, of course, development of the COVID-19 and all other situations. But this is how we foresee ourselves, I think, performing from here down the road. I don't know whether I managed to answer to your question, but... So base profit, I think you have asked me the question with regard to base profit. So with regard to the base profit from second quarter onwards, is there a possibility of undershoot or overshoot as compared to the first quarter base profit result was my question. As a matter of fact, so by unit, it differs very much. So just as I had told you, corporate financial services and maintenance leasing, I think we have managed to adapt to COVID-19 outbreak, and there could perhaps be a possibility of an overshoot, whereas concession businesses, in fact, have been delaying by three months, perhaps, and the first quarter, in fact, have managed to only capture January to March of this calendar year. because you see airport has started to suffer from February or mid-February, to be precise. So the concession businesses, I think we are yet to experience the negative impact from COVID-19 from here down the road as opposed to the first quarter result. So if I were to just name some of the negatives, So there was a hard-fought life insurance, for example, the lost generation, for example, in the first quarter. We did manage to recover, so we did manage to enjoy the positive uplift. So I cannot draw a kind of an outright conclusion. So if we were to, there are negatives as well as positives in the second quarter, as I foresee. Thank you very much indeed for your answer.

Thank you very much. SMBC and Eco Securities. Muraki-san, please ask a question. Yes, this is Muraki, SMBC. Aircraft lease. This is where I want to ask a question. Page 27 and 28. You were showing us some tables there. From second quarter and onwards, what is the outlook for the aircraft list? That's my general question. For the first quarter, except for Avalon, there is no profit. Profit is down by 75 or so. And this can be explained by the reduction in the proceeds only. And IFRS News Gap, you said there was a difference between the two, including the end-of-the-year situation. What is the possibility of incurring impairment and what is the full-year outlook for aircraft lease as a whole? Aircraft lease, let me try to explain this. At this point in time, we cannot really be complacent. In other words, we cannot really definitely say that the outlook is positive, but Of course, I have to say it depends on the market development. For Avalon, there is a one-month delay in reflecting the numbers. And also, impairment was not really posted. And Avalon brought back some of the bonds in order to generate a profit. And that is why the profit looks a little bit higher. Whereas OAS... there was not a lot of profit from sales. And the Chapter 11 impairment was partially included as well, which meant lower level of profit. Going forward, payment deferral requests, how long will that linger? That's one of the questions. And also during... that kind of situation, what would happen to the price of the aircraft themselves? And do we need to recognize impairment or not? So all of these factors will influence the situation. And at this point in time, I cannot say anything bullish about the aircraft lease business. But we have to pay close attention to the possibility of impairment. According to USGAP, Impairment. What is the trigger to include impairment in the consolidated statement? What kind of things should we look for? Well, Avalon themselves say it's an impairment according to IFRS, but not according to US GAAP. Now, according to US GAAP, if the price is low, In the case of IFRS, impairment does happen. But US GAAP looks at the signs of impairment, and they say, yes, there is a sign of impairment. And it looks at the future cash flow, how the lease payments would come in, and the assumption of the cash flow will take place, and also residual value several years down the line, the actual selling price, will be included in the test. in order to decide whether the actual impairment is needed. And currently, the appraisal price is not dramatically dropping. So if you look at the fair value presently, it's slightly negative, which would be impairment according to IFRS. But this impairment can be recovered in the future. With the impairment test based on US GAAP, once it's determined it's permanent impairment It's a big drop, and it will never be recovered in the future. So the concept behind each of these accounting standards are different. So Avalon, well, we've received the impairment test data based on IFAS from them, and we did our own evaluation. We showed it to the accounting auditor. We had some discussions with the auditor. And finally, we've decided that there is no need to recognize impairment according to the U.S. GAAP. That is why we have not recognized the impairment this time around. I understand. Thank you very much.

Thank you very much for the question. Let us move on to the next question from J.P. Morgan. We have Mr. Otsuka asking the question. This is Otsuka from J.P. Morgan. Thank you for the opportunity. So this is going to be a very simple question. So on once we proceed to the second quarter I suppose much to the extent you see we would be left with the second half for the year so I think things will be clearer as to how the performance would be for the whole year so would you be making your focus announcement for the whole year just as been explained by Yano-san of course it is very much dependent on how COVID-19 outbreak would unfold but what do you think So from that perspective, of course, whether we will be making a full year forecast or not, I would find it difficult to answer to your question in a precise manner. But once we would be in the second quarter, I think things will be clearer in actual fact. and I suppose the third quarter performance, the forecast would be clearer. So I think it would be better for us to make a certain announcement as to how we foresee the whole year unfolding. Of course, I was kind of wondering whether you would be asking the question with regard to shareholders' return as well. So at the time of the second quarter and also for your result announcement, we will be providing you with the further information with regard to shareholders' return as well. So from that perspective, I think the business performance forecast would have to be announced in combination with how we foresee us paying out to the shareholders. So therefore, in the second quarter, as of today – Whether we would for sure be making an announcement for the full year forecast or not is not to be concluded, but we would like to, of course, continue to watch over the development in a vigilant manner. So thank you very much in answering to my question, inclusive of shareholders' return. Well then, unless the second wave or third wave of COVID-19 outbreak is going to be quite significant, that does not allow you to foresee the full year forecast you're going to be making some kind of indication as to how your business performance would unfold from here down the road I don't want you to push me into making a commitment but of course it would be dependent on how things would unfold I am sorry to repeat myself but that's what I think as of now Thank you Thank you very much

Mitsubishi, USJ, Morgan Stanley, Securities, Tsujino-san, please ask your question. Thank you. I have a question about the situation in the United States. The disclosure has changed. I don't really see it very clearly, but signal profit is close to zero. And the level is about the same as January through March. Marketable security is the same. And the service revenues are coming down. There are different factors. It is difficult to see what's happening. Can you please explain what is happening? What is the loss due to the marketable securities? and other factors. Yes, I'm sorry I didn't provide you with enough explanation about what's happening in the United States. Please turn to page 29. So, FY 2019, first quarter, you can see high profit. Fulihamboki Bank, the legislature was a big impact. This was just under 10 billion or so in the last quarter, so it did not happen in this first quarter. And then there is impairment and provision. One big segment I have to explain, as I explained in the fourth quarter, in fact, is the energy-related portfolio. We call this legacy asset internally. 20 billion yen or so we used to have traditionally, but we had to increase the allowance for this in the fourth quarter and the first quarter as well because the situation is getting harder for us. And there are many other factors too. Also, some of the funds had to be marked to market, which means that the impairment had to be recognized. Now, we had to apply certain type of evaluation rules and the discussion had to be had with the accounting auditors because we could not really apply our own rules. And this is something that had to be reflected. Three months later, in the first quarter closing, we had to look at the market status at the month of March, which means that there was a big negative impact on our calculation. But looking back, I would say this is probably the bottom, and in the next quarter we have expectation that we will see some recovery. So there are many factors, different factors involved. Looking at the earnings results from the United States, you may have many questions in your mind. But from the second quarter, we believe that we will begin to see some recovery. I have the expectation that we will see some recovery in this area. Does that answer your question? Service revenue is declining, but we don't have to worry about that. Is that your stance? In the third quarter and fourth quarter, expenses were increasing. It's increasing, but it's now decreasing. Do you think you can maintain this level going forward? With regard to the service revenue, companies that were consolidated were removed from the list of consolidation, and I think that is why you see a big gap. Well, service revenue decline is just noise. I understand. So it's not really a profit contribution. That's correct. There was a capital gain. posted last year. So expense reduction is also because of the removal of that consolidated subsidiary? Yes, among others. That's the reason. And similar to Europe, if the performance is poor, then performance-based bonuses will be decreased as well. That could be another factor behind all these numbers. Thank you. I understand.

Thank you very much for the question. So the next person is from Merrill Lynch, Japan. Sasaki-san, please. So thank you for the opportunity. This is Sasaki from Merrill Lynch, Japan. So I want you to tell me this 2 trillion yen worth of investment pipeline. So you had given us some idea of this pipeline pipeline. But there is a lot of uncertainty in this fiscal period. So no one knows, well, you have been explaining to us that no one knows exactly how things will develop from here down the road. But do you think that you'll be able to execute some of these deals within this fiscal period? What is the probability like, the likelihood? So if you could be so kind enough to perhaps elaborate on this investment pipeline. So at the time of fiscal year-end announcement, Mr. Inoue, CEO, had said that we are going to put a stop on all the investment because we have no idea how COVID-19 outbreak is going to unfold, and we would have to prioritize liquidity and nothing else. So, in other words, but we remain by just the major investment, and we have been, of course, continuing to execute small bits and pieces of deals. But now, with Corona days continuing, and as for OREC's part, so with regard to the sizable deals, we think that the time is right for us to continue to consider and consider the possibility of execution of some of these sizable deals. And so with the current environment and conditions, it doesn't mean to say that the price is going to decline quite sharply. So therefore, we are not going to stretch ourselves or push ourselves hard in executing these deals So this is why we have put a suspend or stop at the time of March end, but we have started to reconsider some of these sizable deals, whether to restart the consideration of execution or not. So overall, we have been decreasing the number of investment, especially the sizable deals, But it is very much dependent on the conditions of this investment, terms and conditions. But we would like to, of course, continue to make a certain amount of investment, of course, which means that as compared to three months ago, may I take it that your, I think, attitude has changed? Yes. On page 11, the table that you have shown us, it didn't quite ring a bell yet. But like asset management companies, for example, are you thinking of putting a capital into these kind of businesses? So, of course, environment and energy, I think, is easy to understand. But regard asset management businesses, as we have been telling you from a long time back, we mean by, you know, by broader definition, asset management businesses. So... In the case of the United States, for example, we are a state service-related business. We are taking those kinds of businesses into consideration. So it is not just limited to a general understanding of asset management businesses. Of course, it is very much dependent on the terms and conditions from here down the road. if the price is right and if there is a normalization of the pricing, we would like to take into consideration the possibility of acquisition or the expansion of asset management businesses. And there are some offers as well, I must admit. And the private equity, domestically, that is, we would like to seek for non-auction deals. It doesn't mean to say that the price is right or the price, in fact, At least I think some inflated portion has been eliminated, and we are beginning to see some signs of normalization of the pricing. So if the price is right, we would like to proceed with the execution. And if you could be so kind enough to explain about the hotels as well, the possibility of investment into hotels. Well, at the moment, rather than hotels or ryokan inns, the deals that are underway is to be preceded. just like before. It doesn't mean to say that we are going to turn pretty aggressively making a new investment into hotels and ryokan in. So this, perhaps, description, perhaps, may be a bit misleading. Thank you very much for that.

Thank you very much. From Alma Capital, we have Mr. Kluh.

Just wondering, in the maintenance leasing segment, I think you were sort of quite clear about the fact that the auto leasing business would come under pressure. And I was wondering, obviously the Q1 results there were down quite heavily. How much you can read into that as being coronavirus related and how much is just the tough environment that you've been experiencing the last couple of years? And also in that segment, rent tech, specialist equipment leasing, I was not expecting that to be sort of as heavily impacted as perhaps it has been in Q1. So could you just comment on that as well? Thank you.

Thank you very much, and I'm sorry that I'm speaking in Japanese. With regard to automotive lease, the biggest impact comes from rental cars and car shareings. In the automotive business, we have lease for corporations and also lease for individuals, which is smaller in size, and rental cars as well as car-sharing services. Rental car and car-sharing suffer the biggest impacts, and that's the biggest driver behind this number. Of course, it's suffering from the tough environment over the last couple of years, but this time around, that impact is not that great. Second-hand car price has come down, so it really depends on how you interpret that. You could say it's due to COVID-19 or it's not. But anyway, it's quite interesting. Unfortunately, new cars are not really selling very much, and automotive OEMs are really struggling right now. But that means that the second-hand vehicles' prices are going up, which means that this business is making a recovery more recently. So we are expecting... slightly positive situation. That's the automotive status. Moving on to Rentech. Rentech may be causing some noise or issues as you can see from this slide. So the question is how can we quickly in a good status deliver the equipment to the end customers? And due to COVID-19, what is happening is that including our work style, things have changed, things were disrupted. And unfortunately, for the first quarter, the performance went down. However, we are rebuilding what we're doing. In the second quarter and beyond, we are expecting a big recovery. So I don't think this should be a big cause for concern for you. That's all from me. Thank you very much for your question.

Thank you for the question. I'd like to move on to the next question from Mizuho Securities. We have Sato-san asking the question. This is Sato from Mizuho Securities. I'm referring to page 5. So the first quarter impact from COVID-19 outbreak has been explained. For the first three, at the time of full year announcement, I think... you are indicating some progress that has been made from the time of full year announcement back in May. Automotive and also domestic as well as overseas, some loan losses as well as impairment. And so as compared to the initial anticipation, the forecast, if there was to be any kind of changes that you have been observing in the mix of these businesses, we'd be very grateful. So as compared to the initial anticipation, if there was to be any major changes, I would have to conclude that it was almost in line with our initial expectations. But the United States, as far as OTO, I don't think we have taken much time in explaining about those businesses at the time of the announcement. I'm sorry about that. And with regard to the domestic businesses, such as financial, of course, assets, Are they okay? At the time of the announcement, we were slightly concerned about this financial asset. We were anticipating perhaps due in payment and as well as requests for deferral as well, quite a number of them. But as compared to our initial anticipation, we did not receive much of those requests, and the credit loss was not as great as we had initially anticipated. This is my impression so far. And as to the impairment, just as I have been explaining so far, such as aircraft, I think we have to remain to be pretty cautious in watching over the development from here down the road. Thank you very much for that. If you could perhaps follow up in terms of United States businesses, thank you for explaining. But how about Asia in terms of credit loss? if there was to be any kind of further explanation that you can provide in Asian region. Well, as compared to domestic market in Asian region, the payment deferral request, in fact, was more than that of here in Japan. So the deferral payment has been received, the request, and if there was to be any possibility of a referral in actual fact, We don't have to, of course, stop the recognition of the numbers, but we would have to take every care in dealing with these requests. And just because the central bank or the government, in fact, has made an announcement, we would have to, of course, discern as to, of course, appropriating the provision. But the size of the businesses from Asian region is not that large anyway. So therefore, even if we were in the position to be appropriating certain loss provision, I don't think it would be as sizable as one may perhaps think. So about 2 billion yen of provision was accounted in the first quarter. And so if you could refer to the appendix, we had given you further details of this. So, of course, it varies from one country to the other. Even if we were to talk about the Asia region as a whole, Korea, for example, or China, Taiwan, we didn't have much concern. But India, for example, it really varies from one to the other, dependent on the impact that comes from COVID-19 outbreak. Thank you very much for that.

Thank you very much. City Group Securities, Niwa San, please. Thank you. This is Niwa from City speaking. Thank you. First quarter investment execution. I want to ask some questions about that. I may have missed your explanation, but what is the amount of investment that was executed in the first quarter? 500 billion per year. That's the plan. So how far did you progress and what was the content? And as far as M&A is concerned, I think there was a comment in the first quarter. It's difficult to do because you cannot really visit outside of Japan. Do you think the initiative has changed due to COVID-19? Thank you. We didn't make a lot of investments in the first quarter. It's less than 100 billion yen in the first quarter. As I mentioned, there is a pharmaceutical company that we invested into, and nothing major, because everything was on hold by the strong message by CEO. Mr. Inoue mentioned this in the four-year announcement last time. We don't want to be involved or execute investment projects where we cannot do physical due diligence. But we restarted a project on renewable energy recently, and we did the due diligence once, and also we had local staff nearby. So, although the borders are closed, we can restart due diligence in some of these countries, which means that outside of Japan, we can still do physical due diligence and continue to push these projects forward. Not for every project, of course, but we do what we can so that we can continue to reopen and work on these overseas deals as well. One additional question, if I may. You spoke about two trillion yen worth of investment pipelines. Compared to three months ago, is this an increase or decrease or flat? Maybe flat on net, but maybe increased or decreased on a gross basis. Can you explain? Well, I would say it's flat. we usually have a list of potential investments and then we make selections and decide which ones to go forward with or not and among the list of deals some new ones actually were brought to us more recently and some of them of course were flatly rejected from the beginning and not even worth considering but We always have a list of deals like this. Compared to three months ago, was there a big change? The answer is no. In other words, we have not really seen a lot of movements, big movements in the last three months. But anyway, we have always about this much in our pipeline. Thank you very much for your answer.

Thank you for the question. So I think that the scheduled time is almost up. So this is going to be the final question that we're going to be entertaining. From Nomura Securities, we have Sakamaki-san asking the question. This is Sakamaki from Nomura Securities. So this is going to be a quick question. With regard to shareholders' return, so you haven't adopted the worst scenario for the business performances. Of course, you have indicated quite strongly with regard to the dividend payout, but was there any kind of changes that you have made in the shareholders' return policy? Although I have not touched upon this topic in terms of shares repurchase, it doesn't mean to say that we have given up the whole idea of shares repurchase, but it's just that we have put a suspend. We have stopped proceeding with the shares repurchase program But now, until we can foresee how COVID-19 outbreak is going to be developing, we have decided to stop the execution of the program. But it doesn't mean to say that we have given up on the idea altogether. We would, of course, start reconsidering the execution of the program once the time is right as to whether we are going to go ahead and proceed with the execution of the program or not. it would be dependent very much on the situation. But as of now, nothing has been concluded or decided as to the result of the program or not, but as to the buyback of the shares. But it doesn't mean to say that we have given up or we have forgotten about the program altogether. Thank you very much for that. Thank you for the question. So it is almost, we have come to the end of the scheduled time. So I'd like to invite Mr. Yana to make a final remark. So thank you all very much for your participation in this conference, despite the manifold duties of your work. I'm sure that you may have further questions, so please do put them forward to us on an individual basis, and we would like to continue to provide further information as we enter into the second quarter. Thank you very much indeed. So we'd like to conclude the Oryx business performance announcement for the first quarter of 2021 March end. Thank you very much for your participation. You may now disconnect. Thank you.