ORIX Corporation American Depositary Shares

It's time to start. Good evening, and thank you for joining us for this telephone conference of our ex-corporation for the third quarter consolidated financial results for the nine-month period ended December 31st, 2022. I'm from Aris Sustainability. My name is Nakane. I'll be the master of ceremony for today. Thank you for this opportunity. Today's conference is attended by Hitomaru Yano, Executive Officer, Responsible for Accounting, and Aya. And we would like to ask the participants to kindly either turn off your mobile phone or other communication devices, or move them away from the telephone in order to prevent feedback. Mr. Yano will give you a presentation, followed by a Q&A. And we accept this meeting to take about an hour. Mr. Yano, the floor is yours.

Good afternoon. This is a executive officer responsible for accounting and IR. Thank you for joining us in this financial results briefing today, despite your busy schedule. I will begin by explaining the results for the third quarter of fiscal year ending March 2023. Please refer to page two of the materials on hand. I will first review the executive summary. First, please note that net income for the first nine months of the fiscal year was 211.4 billion yen, although it was only several millions of yen, but we did manage to record year-over-year growth. The annualized ROE was 8.6%. Net income for the third quarter increased by 50% from the second quarter. This was Oryx's second highest quarterly net income since the pandemic started following the fourth quarter of the previous fiscal year in which we recorded an investment gain on the sale of Yayoi. Second, thanks to progress in reopening, businesses that have been strongly impacted by COVID-19 are continuing to recover towards higher profits. The insurance segment also experienced a significant decrease in COVID-19-related payout expenses compared to the first half of the year. Third, I would like to highlight on capital recycling. In the second half of the fiscal year, we've continued to both make new investment and realize exit mainly in our focused businesses of overseas renewable energy and domestic PE. Through this, we are increasing profitability by replacing assets, the fourth. The key point is shareholders' return. Last May, we approved a share buyback program of 50 billion yen and have already completed the acquisition and cancellation of 23.43 million shares, which is approximately 2% of our signing shares. We plan to pay dividends for the full year, as previously indicated. So please refer to page 3. For third quarter FY2023 March end OREC's recorded sharp increase of 50% versus second quarter sold at quarterly net income. The aforementioned recovery in the insurance segment played a part while strong performance trends in Oryx Europe led to booking of a performance fee. The partial sell of our stake in leading geothermal energy producer OMAD in the environment energy segment also contributed. Now please turn to page 4. The page shows breakdown of segment profit. Nine-month segment profit was at 290.7 billion yen. Please see the bar chart on the right. The breakdown of quarterly segment profit for the past two years is shown. Net income for the third quarter increased 15% year-on-year and 44% quarter-on-quarter to 120.7 billion yen. Please look at the left-hand side bar chart where you can see that investment gains for the fiscal year have returned to a usual level. I'll explain the details on individual segment pages later. Now please turn to page 5. This page describes the earnings improvement due to progress in reopening of the economy. The bar chart on the left shows the trend in segment profit for the three COVID-impacted businesses of aircraft and ships, facilities, operations, and concessions. In the fourth quarter of the previous fiscal year, we posted losses of 11.2 billion yen, but a steady recovery in profits Thereafter, resulted in a positive 5.6 billion yen in segment profits for the third quarter. In aircraft and ships, the passenger markets in North America and Europe remain strong, and aircraft leasing profits are in an uptrend. Hotel things and other facility operations have recently achieved an occupancy rate of about 80%, thanks in part to the government's nationwide travel support program, and ADR has mostly recovered to FY20 March levels. In the concession business, the number of progress on international routes has increased rapidly following the Japanese government's easing of border measures in October 2022. Kansai Airport's results are reflected in Oryx's group's earnings with a three-month lag, so we expect a full-fledged recovery in profits to take place in the next fiscal year. However, based on the current number of passengers, we believe that we are within striking range of returning to black. We expect further improvement in performance in all our COVID-impacted businesses as travelers from China return. Please refer to the following page for a summary of the trends in recovery indicators for each businesses. Now, the bar chart on the right shows the trend in segment profit for insurance. Payouts to policyholders with COVID increase and segment profit fell to 2.1 billion yen in the second quarter, particularly in the wake of the seventh wave peak of infections. However, the eligibility criteria for receiving benefits were changed from late September 2022. Only policyholders meeting certain conditions are now eligible for payouts for quarantining at home. As a result, payout expenses have declined from the third quarter and profits have recovered. Please turn to page 7. Next, I will comment about capital recycling, which supports a sustainable growth. Capital recycling involves constant monitoring of capital efficiency, making exits in assets and businesses as needed while continually making new investments. This will increase earnings growth rate and that lead to improved ROE and in turn ROE. The box on the left shows exits and new investments in the overseas renewable energy business. As I mentioned earlier, in the third quarter, we saw 7.8% of 19.7% stake in Ormond shares. in the marketplace, resulting in a gain of about 15 billion yen. In addition to retaining 10% or more of OMA shares, we will continue to dispatch outside directors to support further growth of the business. Furthermore, we plan to acquire the remaining 20% of Erawan, where we acquired an 80% stake in July 2021, and make it a wholly owned subsidiary in the fourth quarter of 2023. In addition to So as we are, we will be able to make more, as a result, we will be able to make more flexible and swift decisions regarding business and financial strategies such as the new business development. Now, the box on the right shows a new investment in a domestic PE business. In 2014, we acquired a major metal recycling company called NetJapan, which we sold in a trade sale in the third quarter. We achieved a high return on the deal. of MOIC of three times and the 16.4% of IRR. In addition, as recently announced, we acquired a majority stake in DHC, a leading Japanese manufacturer of cosmetics and health foods. By promoting the smooth succession of DHC's businesses, further strengthening its compliance system, corporate governance, and implementing a new growth strategy, we aim to increase its corporate value while enhancing profitability and achieve an IRR of at least 20%. Page 8 and page 9 are a summary of segment information but today I will explain it by using the specific price for each segment. So please go all the way to page 12. The first segment is the corporate financial services and maintenance leasing segment. Segment profit decreased 9 percent year over year to 56.4 billion yen but excluding the sale of Yayoi in FY 2022 and investment and valuation gains on an investee recorded in the previous fiscal year segment profit increased in corporate financial services service revenues increased from the previous fiscal year due to strong performance in various businesses the auto unit posted a year over a year increase in segment profit versus the previous year when it achieved a record high this was thanks to the continued higher market high market price for used car and the recovery in car rentals for the pandemic from the financial slump. Rentex posted record high profits as well. Now please see page 14. The page shows real estate segment. The investment and operation unit saw an increase in profits due to improved earnings at hotels and inns thanks to progress in reopening, as I explained earlier. In Daikyo, profits declined versus the previous year as the number of condominiums units delivered in FY2022 skewed to the first half of the fiscal year. earnings in line with the full year forecast. In real estate, too, we operate a capital recycling type business model whereby we procure and develop land by ourselves, lease up property, and then sell it at the right time in the market. Please see page 16.

The investment unit posted a loss in the previous fiscal year due to losses at Kobachikako. but the investment portfolio has been solid for this fiscal year. Even excluding losses related to Kovash Kako, segment profits increased. In the concession unit, the number of passengers of international routes continued to increase in addition to those on domestic routes, and this shrunk the loss. Again, I expect earnings to grow at an accelerating pace, as earnings are already on recovery track, and inbound tourists from China begin to arrive in the earnest. Please see page 18. This is environment and energy segment. Profit increased 86% year-on-year to 34.1 billion yen. As I explained, in addition to the partial sale of stake in a third company, we also benefited from high electricity spot prices in some overseas regions, which led to higher electricity sales revenues. In the domestic market, sales increased in the solar power generation business due to the continued fine weather. We expect the global shift towards renewable energy to accelerate partly due to the prolonged war in Russia and Ukraine. We are already operating 3.4 gigawatt energy production facilities in Japan and abroad, and we plan to grow this to 10 gigawatt by the fiscal year ending March 2030. In addition to Elevon, we will have Greenco, a major Indian renewable energy company, where we hold a 20% stake to develop its pipeline. Please turn to page 20, insurance segment. As I mentioned, profit decreased compared to the previous year. due to an increase in COVID-19 related payout expenses for patients operating at home. Meanwhile, since last September of last year, eligibility for benefits has been limited to those with high risk of severe symptoms. So we expect the COVID-19 related expenses picked out in the first half of this year. The number of policies in force has continued to increase and the premium income has risen. In addition, asset management has steadily have seen steady results, and investment incomes have been increasing. Segment assets decreased. This is marked the market and the rise in both Japanese and US dollar interest rates, resulting in a lower valuation. However, the market value of debt has also declined since the duration of policy reserves or exchange liabilities is longer than that of assets. The rise of interest rates, particularly in yen, has been a positive for embedded value. So, in other words, interest rates rise and carry revenues faster than increasing insurance expenses and profits increase, based on page 22. Banking and credit banking unit. Revenue from real estate loans for investment continue to be firm, despite the absence of a one-time profit booked for the previous year. In the credit business, we actively invest in advertising to develop a new OLYX money product, which resulted in decline in profits. However, performance is in line with the expectations, and loan balance is increasing. Please turn to page 24. Aircraft and ship segment. Profit increased 14.2 billion yen year-on-year to 17 billion yen. As mentioned, the aircraft leasing business has benefits from rebound from passenger markets, particularly in North America and Europe. In addition to leasing revenue, service revenue from aircraft asset management is a strength and it grew. Avalon earnings are also on the upward trend, reducing its losses. Please note that the financing costs from investing in Avalon are included in the profit report. The ship unit boosted earnings, partly reflecting the sale on ships in response to February market prices. as well as financial income from SHIB financing deals. Please turn to page 26, Oryx USA. Affiliate profit fell sharply from the previous year when it achieved a record high to 33 billion yen. The decline was primarily due to fewer PE exits caused by changes in the macroclimate and the origination fees in the real estate lending from Lumet. And the capital gains improved in the second and third quarter compared to the first quarter of this phase 27. We're currently in the process of adjusting the risk controls, OCU, in light of the uncertain economic outlook in the U.S. We have strengthened our governance framework in order to achieve additional growth in our asset management business, utilizing investor capital, such as establishing asset management, investment, and website committee, in addition to the investment committee. The asset quality of RXUSA is sound, It appears that the yen-denominated assets have increased due to the FX effect, but the yen to keep the asset size to a certain level, and the dollar-denominated asset has actually declined, based on the page 29. This is our exube. Segment profit fell 36% year-on-year to 35.9 billion yen as a result of decline in the yen, which hit a record high in the previous fiscal year due to impact of a weaker financial market. Meanwhile, In the third quarter, Transtrend, a CDA asset management firm, recorded performance fees, which resulted in a significant increase in profits in the second quarter. And the asset management business, we have diversified, and each company has a distinct management style. In addition to Transtrend, Boston Partners, which is strong value investment, is also performing well. Please turn to page 32. Asia and Australia segment. Profit decreased 3% compared to the previous year to $34.1 billion amid ongoing reopening in Asian countries. We expected new deals in India and Indonesia in addition to Australia and South Korea. And the decline in profit is due to absence of gain on sale of the previous year. This completes the segment. Please turn to page 10. With regard to shareholder return, our basic policy is to distribute one-third of net income to dividends, one-third to investments, and the remainder to retained earnings and share buybacks. Dividend for the country's core year is 85.6 yen, or dividend payout ratio of 33%, whichever is higher. However, the dividend payout ratio will be 40%, assuming the net income forecast announced November last year of 250 billion can be achieved. including the share buyback of 50 billion. The total payout ratio is a 60 percent for the fiscal year. Now I would like to talk about the credit ratings. Last week S&P reduced the outlook from stable to negative to reflect our execution of investment in DHC. Although the downgrade itself is an undesired change from our perspective we undertake thorough risk management of a portfolio and plan to proceed with a capital recycling strategy while both maintaining and strengthening the financials. By providing appropriate information disclosure to rating agencies, we hope to improve mutual understanding. Meanwhile, please note that the rating action will not affect the basic policy of our shareholder returns. Lastly, we understand that the economic environment continues to be uncertain worldwide, and strengthening the risk management system is important. Nonetheless, we do see some bright news on the horizon, such as the progress of reopening around the world in Japan. In the domestic PE and other fields, we are seeing numerous inquiries for potential investments, including large projects. While maintaining a cautious and selective stance, we intend to actively seek investment opportunities towards achieving the mid-term goal of which we announced last May, which is net income of $440 billion and the 11.7% ROE in the fiscal year ending March 2025. Thank you very much for your kind attention. Now the floor is open for questions.

Thank you. We are now ready for the Q&A session. If you wish to ask a question, please press the star key, then press 1 on your telephone keypad. After your name is announced, please ask your question. If you wish to cancel the question, please press the star key, Then press 2. If you wish to ask a question, you may ask up to one question, please. Thank you. So the first person is from Nomura Securities. Sakamaki-san, please. Thank you very much. My name is Sakamaki from Namiya Securities. Thank you for the opportunity. Now, I would like to ask you a question. And this time, we all met the holding that are remaining. I think you're going to be holding on to 10% or more stake. Is your strategy, or I believe that it is the expression of your intent in retaining the rest of the 10% or more. And also with regard to geothermal energy, I read an article saying that there has been some changes in the earnings. So if you could be so kind enough to tell us your involvement and also your intent in the geothermal businesses. As to OMET, so this time we've sold about 80% of the stake. And I think we would like to maintain the rest of the stake for the time being. And the capital recycling, in fact, is the strategy that we're pursuing, as we have been explaining. I don't know how long we will be retaining the shares, but for the time being, we'd like to hold on to it. And the reason why we have decided to sell 8% of the stake is because for the reason of this capital recycling. In the areas of geothermal, yes, we are trying to engage ourselves in the geothermal businesses here in Japan. But getting consent, the approval, is not that easy because you need to, of course, excavate. And there seems to be not very many deals that you can engage yourself in. On the other hand, renewable energy, of course, is remaining to be strong. with the share price being steady as well. So therefore, we have decided to set off some stake of OMAD and post some capital gain. And we use the capital that we have gained from the sales of OMAD and dedicate the capital to renewable energy elsewhere. So this is the decision that we have made. And talking about renewable energy businesses, for sure, we have every intent in wanting to expand our businesses in the renewable energy. But it doesn't mean to say that we quit our idea on the geothermal, but it's just that we have decided to make a selection and a concentration. And Erawan, of course, is 100% green coal. The new development is going to be preceded for the time being, and there could perhaps be a possibility of M&A of new renewable energy-related businesses. I hope this answers your question. Yes, thank you very much. That was very helpful.

Thank you. Suzuki-san from B of A Securities, please. Yes, this is Sasaki from Bank of America. Just one question. Thank you for this opportunity. We're now in February, and next fiscal year's business plan must be probably formulated within your organization. And at this point in time, how do you see the fiscal year ending March 2024 in terms of business as well as performance, as much as you can share with us? Thank you. Yes, with regard to next fiscal year's numbers, we were hoping to talk about that in May when we conduct our next earnings call. $250 billion for the fiscal year is the number that we have announced. and we want to achieve $440 billion in two years' time. Compared to two years ago when we formulated this plan, of course the environment is different now. And last May, how much profit in two to three years, I think we showed you our outlook. But we may have to revisit these assumptions, and that's exactly what we're doing right now. So looking into the next two years, we would like to share some of the information about next fiscal year in coming May. Well, recovery from COVID-19 is in sight, which is positive news. According to the original plan, we were not really expecting a big number for next fiscal year. We may be able to expect a little bit more than before. That is one thing that I can say. Insurance revenue or income. maybe one of those potential positive factors. But including those, we will have to take another look at the fiscal year. And please wait. Be patient with us. Wait until May. Thank you. I understand that at the four-year earnings announcement, you can give us more specifics. But what about the confidence for the 440 billion? Have you changed the confidence level? Level of confidence is very difficult to talk about, but we will do our best to achieve the objective, and we are discussing exactly how we can do that. So that is unchanged. Thank you very much for your answer.

Thank you very much. So from SMPC Nikko Securities, Muraki-san, please. So going away from the financial earnings DHC, I know that you had completed your acquisition, as you had explained. If you could be so kind enough to give us a little more color. So IRR of 10% as compared to that last year's profit level was still lower than your expectation. So any kind of wasteful waste that you can see and you foresee making improvements? And how would you be able to realize the turnaround of the profit generation going forward? So 300 billion yen or so, that is. And one thing that I can say for sure at this point in time, they do have a current asset, which is pretty ample. So we would very much like to make use of that as well. So we don't think this 300 billion yen is a higher price that we have paid. And talking about this company, DSCC, from the prior owner of the business, the chairperson, we have succeeded the businesses. So they have not been making use of advertisement and promotional costs very much. So we would very much like to concentrate our effort in that as well. And we can foresee ourselves rolling out the businesses in the overseas location as well. So these are in our plan. And also, on the other hand, we need to, of course, reinforce governance. So therefore, our making use of our, of course, manpower as well, that is, in, of course, improving the businesses. So that's our plan. Which means in the next fiscal period, the cost tends to increase, which means that the profit level is not something that we can expect to improve in the next year, and also financially speaking. So 300 billion yen was appropriated for the acquisition, but the cash, in fact, is held at the company, so that could be paid out as a dividend to Oryx in the short run, do you think? Yes, yes. And the And the first point that you have made is true as well. Yes, we would very much like to incur some costs in order to improve the businesses. So I don't know how much of a profit that we will be able to generate in the first year after our acquisition. But of course, we would have to pay for the due diligence costs as well. So there would be some negative or other costs that we would have to incur. in the first year, but we would like to, of course, take a little more time in turning around the businesses for the better. Thank you very much.

Thank you. Daira Securities, Watanabe-san, please ask your question. Yes, this is Watanabe, Daira Securities. Progressing at high level, what would be the impact and also the confidences? I think every year for the fourth quarter you were doing some measures and you talked about risk management. Are there any things that we should be careful about going into the fourth quarter? And do you think the current situation would impact the capital allocation in any way except for exceeding the $332.1 billion? I'm sorry, can you please repeat the last part of the question once again? So the dividend policy, if you are going to upgrade the dividend, you have to basically exceed the previous year's profit. But is there going to be something good if you overshoot or do much better than the profit from last year or against the target? I'm sorry, what was the first question? About the fourth quarter. Oh, I'm sorry. Well, we will just continue to account for impairment as we usually do in a steady manner. It's not as if we will do something special for the fourth quarter, but in the second quarter and fourth quarter, generally speaking, we tend to see these numbers come up. But it's not as if there is no impairment, no write-off right now, of course. We are doing so many different things, and we will continue to see some level of a write-off. But we have not really identified any big potential issues so far. That is the current situation. But there will be some here and there. That is the current situation. So that's the first question's answer. Now, as far as dividend is concerned, 33% or previous year's number, whichever is higher, That is what we communicated for this fiscal year, and this will stay the same. This will be unchanged. That's all I can say to you.

Would that be okay? Yes, thank you. Thank you for your answer. Thank you very much. Mitsubishi, UFC, Morgan Stanley. Sujino-san, please. Well, first of all, with regard to the U.S., If you could be so kind enough to give me some idea as to your approach right now. So I think there are some losses of 10.5 billion yen from the securities that was held. And on the other hand, there's 4.2 billion yen of profit. So I was looking into these perhaps noises and the segment of profit is about 5.1 billion yen. And it was lower than the first quarter, but then higher than April to June. So this sales, the impairment loss that was supposed to, where did it come from? And also, in actual fact, how's the business like right now? And how is it like? towards 2023 March end, how would it perform going forward? Well, on page 27, if you could refer to page 27 then. So just as you have mentioned, the PE investment, the capital gain has been generated from some PE investment. I would like to refrain from mentioning the actual specific names. There are bits and pieces of PE investment that we have made and the and generated some capital gain from. And as you have said, the appropriation that was made, so there are two. So a specific appropriation of reserves and also see-through. So when we change some outlook of the future, we may have to add some more reserves. And referring to page 27, the credit, the base profit had declined as a result of the reserves that we had to increase, and the others that affected our performance. So we are a state in Newman, and also we call it as BFIM, in other words, Boston Financial, for low-income bracket people. So we develop housing, and we securitize it. So these deals... in fact will create some ups and downs. And so therefore there has been some as I say ups and downs in earnings as a result. But the first quarter was the bottom and we did manage to recover from the bottom somewhat. So the real estate movement in fact has not fully recovered yet and that is because of the interest rate being pretty kind of volatile, so we have to see it settling down. But we're not worried about credit very much, though. Of course, we would have to have a conservative outlook so far as the reserve appropriation is concerned, but there is nothing major that concerns us. And as for PEE investment, there are some, I think, actions that will be taken, whether these actions will be taken in the fourth quarter or in the next fiscal period, but there will be certain amount of exits as well. So towards the next fiscal period, how much more can we improve the earnings is yet to be known, but for sure we are aiming to increase the profit. On the other hand, as to the U.S. businesses, as I had shared, A little earlier, we don't particularly intend to increase the asset in a dramatic way. So just like OCE, the public asset, not in the public asset management businesses, but the fund formation and all that. So more than before, we would very much like to increase the businesses, not in a dramatic manner, but thereby, of course, recover the business of OXUSA. And that is our idea. I hope this answers your question. Yes, yes. Well, talking about the vehicles, the transportation equipment, you, in fact, shared that you did manage to pose some profit from selling ships, the vessels, but you have not shared very many kind of details. Avalon, yes, that is held on equity method. That is okay. But other... like gain on sales for those assets, I think it would be helpful if you could be so kind enough to share us a little more details. Well, from that perspective, with regard to ships, at this point in time, there are some extraordinary factors that need to be taken into account because ships, after all, Every year, on a continued basis, we would be able to generate profit on a constant basis, but rather we would kind of approach it in a conservative manner, and if it were ever possible, we would try to generate profit. So for SHIBs, I don't know how to explain, but for this fiscal period, maybe several billions of yen, several billions of yen, I would say, for SHIBs. This fiscal period, you mean by for three months of this fiscal period, for this quarter? No, no, for the full year, I mean, for full year, several billions of yen. So several billions of yen for the full year, meaning that I think you're talking about the little more sizable business, right? Well, It's not a big size, somewhere in the middle, if you could be so kind enough to understand where we're coming from. So this fiscal period, as compared to the first half, it will be smaller than the first half in any case. Is that what you're saying? Yes. So for the transportation equipment, the recovery of the business, so it is not affected by the primary reasons, may I take it? What do you mean by one-time reasons, one-time reasons? In other words, you know, sales, in other words, you are recovering in the businesses as opposed to the gain on sales. I don't know how to express this. Like Daikyo's condominium, sales of condominium, whether you would regard that to be a gain on investment. Because after all, you know, like aircraft, like in the case of Joel, you know, we do sell to Japanese investors as well as funds. And we regard that to be our ordinary businesses. And that is recovering for sure. In the case of aircraft, these things, of course, rates are recovering. And also we are selling some of the aircraft as well. And the fees are increasing as well. So those are improving. On the other hand, ships. Gain on sales of ships may perhaps, you know, may perhaps be generated bit by bit in this year as well as in the next. So Joe sales. So sales. You would not like to describe it to be gain on sales, but those are included as well. May I take it? Yes. Okay. Thank you very much.

Thank you very much. J.P. Morgan. Stanley. Securities? Otsuka-san, please. Yes, thank you. JP Morgan, Otsuka speaking. Page 5, reopening update until recently is shown. For the midterm information previously, the segment profit For the full year was $60 billion for the fiscal year ending March 25. So what is the confidence? Do you think is the progress steady and as expected? Even if it's a qualitative assessment, if you could share that with us, that would be great. Yes. We want to recover to this level by fiscal year ending March 25. And we did have our concerns, but in this fiscal year, the recovery started at a faster pace than we expected, although it's not sufficient yet. And for next year, we believe that the number will be a bit better than what we announced last May. And hopefully in two years' time, we can achieve $60 billion or even higher, if possible. So the Speed of recovery is a little bit faster than we had originally anticipated. Concession and the aircraft and ships, both. Yes, that's correct. And the hotels and inns as well. Oh, I see. Hotels and inns, unfortunately, the ratio against the total profit is relatively small. So that recovery will not contribute to a great extent, but this is domestic, and this is something that we can feel firsthand that there is a recovery happening. I understand. Thank you.

Thank you. So the next is from Morgan Stanley, MEFC Securities, Nagasaka-san, please. Hello, this is Morgan Stanley, MEFC Securities, Nagasaka is my name. Thank you very much for this opportunity. On page 32, Asia as well as Australia, I'd like to ask some questions. And as a result of reopening, I know that the new execution is underway in Asia. And in the first half, considering risk, I thought that you are not executing new investment. But in which area of Asia are you engaging yourself in new businesses and also the outlook going forward? And also... If you were to exclude gain on investment, if you could be so kind enough to share us your outlook as well in Asia. Asia, Korea, in fact, has been pretty steady. So we have been increasing our asset in Korea. On the asset base, rather, we did reduce it dramatically because, you see, unless you carry through new investment, it would continue to decline in any case. So we were refraining from making new investment, like Indonesia and other areas. But we are now back in scene. In other words, we are increasing the new investment. So in which area? More specifically, those kinds of countries that I have just mentioned. So as for ourselves, in Asian region, we want to make sure that we would continue to base ourselves on leasing and increase our profit thereby. But, of course, we are making investment as well in China, greater China, I mean, not just mainland China, but we are making some investment. So we would, of course, foresee ourselves exiting from those businesses on the other hand as well. And whether we would be happy to be making a new investment in China, I think we would remain to be pretty cautious. But in Asia, as well as in Australia, we would – we are – very much looking forward to making new investments. So that's about it. I hope this answers your question. Yes, thank you very much.

Thank you. City Group Securities, Miwa-san, please. Thank you. This is Miwa from the city. I have a question about M&A pipeline. According to the material used in the midterm announcement, For the second half of next year, you had 400 billion planned and 300 billion, I think, maybe invested. But should we consider this pipeline still being built? Well, thankfully, we are getting more and more new deals, which means, well, it's maybe lower than 300 billion, but it's rebuilding once again. We don't do everything and anything. We apply a cautious view, but also, at the same time, we are adding more and more new deals into the pipeline while applying a cautious view. As far as DHC is concerned, since it is a sizable investment and a certain number of people will be allocated and the management will be done also, That's the current situation. If you could comment. DHC, I think this is a little bit different from your traditional investments. And using DHC as a trigger, do you think that will make a difference in terms of sourcing of deals and expanse of the deals? Or do you think it is basically the same as a traditional project? Can you maybe talk about the difference before and after GHC, if you can share some comments? Depending on the size, of course, the players differ in any market. And the several tens of billion was the size that we have been doing, and now We are doing one that is a little bit bigger. So it's not necessarily a question of whether there's a change. But anyway, we do this. And if we're successful, maybe we'll do more of those. And we want to continuously expand our business. And this is the first step towards that. That's how we see it. That was very informative.

Thank you.

Thank you very much.

UBS Securities, Okada-san, please. I am Okada from UBS Securities. I have one question. As you have mentioned earlier, the outlook for USA, I would like you to follow up a bit. So I know that you are becoming a little more stringent in the control of businesses, but the segment, the profit of $105 billion is expected as well. So this profit outlook and also the risk management, How do you strike the right balance between the two? So going forward, like PE, credit, real estate, what is your idea in the effort that you'll be exerting in those areas? Please give us some more color. Yes, as you have mentioned, as of today, so the profits that are declined, We don't think, you know, the question, of course, you had asked is only, I think, justifiable because I think in two years, whether we'll be able to recover back to $105 billion or not is to be questioned. We would not like to change the split, but if at all possible, we'd like to, of course, grow the businesses and And whether we are going to give up on the businesses in the U.S., the answer to the question would be no, although we would become a little more stringent in terms of risk management. But we are continuing in the asset management businesses and the P.E. as well as credit and real estate businesses. So, of course, making use of other people's capital and using the leverage, we would very much like to continue to generate profits. And we would remain, we would, of course, continue to uphold such strategy and the risk management on one hand. But even if you were to talk about asset management, we mean by broader sense of asset management. So making use of other people's capital, in other words, or incorporating other people's capital, we would very much like to continue pursuing our strategy. So at this point in time, there is nothing that we will be able to kind of show as the evidence of the success of this strategy, but we would very much like to continue to pursue this way. Thank you very much.

Thank you. The floor is open for questions. Again. If you have a question, please press asterisk and one. Asset Management 1, Nomura-san, please ask your question. Again. Asset management one, Nomura-san, please ask your question if you're ready. The floor is open for questions. If you wish to ask a question, please press asterisk and one. My apologies. . Yes, thank you. In the beginning of the year, there was an optimistic comment. And then in August, it was basically reversed. And in the second half, the sentiment was similar once again. And I know that you have seen some exits after a lot of efforts having been made from summer until now. With regard to exits, has there been any change in terms of your sense for these exits? Maybe you're not too optimistic yet, but you may be able to exit from some of the projects. Can you give me a sense of how you feel about the general direction of these exits? In this fiscal year, yes, there was a slowdown in the United States, as you know. And we had some investments. And last year, we didn't really have to do anything. And they basically sold one after the other. But unfortunately, within this fiscal year, the situation is very different. And other than that, for domestic real estate, the situation continues to be positive. Domestic PE investments about how to increase the value and also who would be the potential buyers, we try to figure those things out and we spend a certain amount of time on those. And I don't think that these situations have deteriorated that much. And also, aviation is coming back. It's recovering. So the general sense is quite positive, quite good. I understand that there may have been some concerns, but we will continue to work on our exits, and we believe that we can do them. And in the next fiscal year as well, we can expect a certain number of exits happening. And I would like to emphasize once again that capital recycling is what we do, what we promote. So it's not just increasing the number of investments randomly. We continue to recycle to make ourselves stronger and more profitable. So we will continue to work on our exits. plan, and we do not have any specific concerns about that right now. I hope that answers your question. And in the United States and also in Asia, you have some gain on valuation of the funds. And Asia is small, but I understand that the situation is improving. So in terms of gain on valuation, is there anything that we can hear from you today. Well, we're not doing the evaluation of the funds ourselves, so we cannot really talk about the gain or positive aspects of that. But we do have some funds, mostly overseas, and we just receive that assessment or evaluation, and we just reflect that into numbers. But I don't think that would have a huge impact on our general performance. But looking at those numbers, maybe it's possible to talk about a certain trend. But it's not extremely positive. Negative, excuse me. Thank you. Thank you very much for your answer.

Thank you very much. So we are still waiting for more questions. So please put your questions forward if you have any. So there seems to be no more questions. We would like to end the Q&A session. So Yano is going to provide closing remarks. So once again, I would like to thank all of you to have joined us in this briefing session. So we did manage to generate some profit, a pretty good profit in the third quarter. And going forward, we would like to continue to further our effort in building profit more So please continue to watch our other development of our businesses. And as of today, if there was to be any further questions, by all means, please contact our IR department. We're happy to, of course, answer to your questions on an individual basis. With this, I would like to close, conclude today's conference. Thank you for your participation. Thank you for your participation right to the end.