So thank you all very much for your participation to business performance announcement meeting for FY 2020 March end for ORIX. Thank you very much indeed. I'm going to be the emcee for this meeting from Corporate Planning Department and my name is Kohei Uehara. I look forward to your cooperation in advance. As for the presentation material, you'll be able to refer to it on the screen, but also at the same time, you'll be able to download it whenever necessary. So please make sure to – that you can see the slides. As for the schedule for today, we start from the presentation from Mr. Yano, Head of Treasury and Accounting Headquarters; followed by Mr. Inoue, CEO and Representative President – Director President. And after the presentation of the two executives, we will be entertaining questions. We are scheduled to conclude the session at 16:00. So because this meeting will be conducted online, there could perhaps be a possibility of you not being able to hear us well, but please do excuse us. As for the questions, after the presentation by CEO, Mr. Inoue, on the screen please send us – write out your questions and send them on the template questionnaire form. I'm sorry for this, but in the interest of time, we would like you to limit your questions to just one question. Now, if we don't have enough time to entertain all your questions, we will be sending back the response through the secretary later on.

So, good afternoon. I am Yano, of Treasury and Accounting Headquarters. Thank you very much for your attendance in spite of the busy schedule to this business performance announcement meeting of our company. Let me share with you the actual result for FY 2020 March end period. Please open Page 2 of the handout slides. The page shows the net income and ROE for the full year. So, harsh economic environment due to COVID-19 affected us in Q4. However, our net income was at ¥302.7 billion. This is lower than the prior year, but we did manage to achieve our target of ¥300 billion. ROE was kept at double digit at 10.3%. There was a reversal of deferred tax liability associated with conversion of DAIKYO to 100% subsidiary in the third quarter. The reduction of corporate tax by ¥27 billion contributed positively to the after-tax profit. As a result, although net income declined by 6.5% year-on-year, pre-tax segment profits grew by 4.1%. Now, please turn to the next page. The page shows the breakdown by business segment. Segment profit for the year was at ¥417.7 billion. Let me explain further by breaking down the profit into base profit versus investment gains. Until the third quarter, we were referring to the dark blue part of the bar chart as segment profits that excludes gains on sales. In order to facilitate for the ease of your understanding, we started to describe this as base profits from the fourth quarter. The base profit was down 5.5% year-on-year at ¥277.9 billion. Decline in profit in corporate financial services and others, as well as a negative impact from COVID-19 of which the details will be shared later affected us, but a steady positive contributions were enjoyed from NXT Capital and Avolon investments we made in…

This is Inoue speaking. So I'll start my presentation from Slide number 6. I'm sorry to repeat what has been -- already been presented. But just as has been announced yesterday, for 2020 March end pretax net income at JPY 412.6 billion in fact was an increase by 4.3%. However our net income was down by 6.5% year-on-year at JPY 302.7 billion. That was the result. ROE was at 10.3% which is lower than 11%. However just as announced last time, we remain to be unchanged in setting our target of achieving ROE of above 11% and we will continue to exert our effort in that regard. Now due to market fluctuation, multiple numbers of credit rating agency has changed their outlook to negative of ORIX -- for ORIX. But the credit rating of A in fact is maintained. 2020 March end, dividend payment has been scheduled for the full year. Per share of JPY 76 is to be paid; first half JPY 35 second half JPY 41. So thereby the payout ratio will be 32% for the year. And just as we have announced in the last year -- with a maximum of JPY 100 billion shares repurchase program was executed. So let me report the details on the shares repurchase program. 2019 November 1, through to May the 8, 2020 was the exercising period. 34 million shares have been repurchased at the price of JPY 55.8 billion in total. The average share price was JPY 1638, 1-6-3-8. Shares outstanding of ORIX in fact compared to the treasury stock is 5.8%, so therefore 11 million shares in excess of 5% will be canceled or has been canceled. Unfortunately, from February this year there was an outbreak of COVID-19 pandemic that had resulted in the sharp decline of the share…

So we'd like to start the Q&A now start entertaining your questions. So if you have any questions, please enter on to this form. And we have received the first question from Nomura Securities, Mr. Sakamaki.

On page 5, with regard to the decline of energy price, what kind of exposures ORIX holds in the energy space?

ORIX USA in fact has an exposure to energy-related or they do own some energy-related portfolio. So there are some requests for rescheduling, but at the moment, it is not subject to impairment as of now. So with regard to the portfolio size, it is about tens of billions of yen. So we do not foresee any major negative impact.

So from Goldman Sachs securities a question from Mr. Nakamura.

And with regard to the increase of the risk for advance provision, so by applying CECL for the first quarter 2021 March onwards, how do you see the risk increasing for the cost of provision from second quarter and later?

So from the first quarter, yes, we are going to be applying this new model CECL and we are now collecting the information as of now. So as of now, so the total amount of provision as of March end is less than -- just less than JPY 60 billion. And so I suppose the amount is going to increase pretty much, but there will be no major negative impact given to P&L. And for second quarter and later on, this is going to be my personal opinion to a certain extent, but I wonder if we should be reflecting our view to this. But for the first quarter, in any case, in light of the current situation, the whole life will be reflected. So from the second quarter, we cannot foresee us increasing the subject. So that is what we foresee at the moment. And as for the second question from Mr. Nakamura again. This is in regard to aircraft leasing business. So there has been no changes in terms of the cash flow generation from the lease income from aircraft. So, therefore, the risk for impairment is I think limited.

So, well, how do you see the downside risk from ORIX Avolon in the next one to two years?

So there has been some request for deferral. Three months of deferral of the leasing fee has been received from the airline companies. So the deferral for the principal part is going to be accepted, but at the moment we are carrying out negotiations, so that we can continue to receive the leasing portion of the interest income part. Virgin Atlantic, Avianca and also there have been cases of airline filing Chapter 11. So, therefore, whether our aircraft will continue to be used by these airline companies or not is yet to be known. But in any case, we are carrying out the negotiations right now. And even in light of this possible filing of Chapter 11 and even if they are to continue to use our aircraft by leasing, in fact, it will be calculated on an hourly basis. So, therefore, we would have to closely watch over the development. And as of now AVITAS from the appraisal company, the aircraft valuation, in fact -- the devaluation in fact has not occurred as of now. But in thinking about the time line to maturity extent, maybe 20% or so, of an impairment risk may be possible. This is what we think for now. And in light of what had happened in the past, the volatility of aircraft in fact was to the maximum extent of 25%. So I think the biggest risk would be to the maximum of 25%. So if it was to continue for 2024, then there could perhaps be an impairment risk sometime in the future. This is our way of thinking right now.

So we have, from Mizuho Securities, Sato-san [ph], a question.

So as listed on page nine, MICE-IR which is a major investment for the future, the prerequisite for the investments has changed dramatically. And so, if nothing is done then, obviously, the demand -- capital cost will rise within the capital markets or the markets itself. And so, in terms of portfolio rebalancing, have you changed your policy or thinking pre-corona and post-corona?

So to be quite honest, MICE-IR project, we are in conjunction with MGM and MGM themselves have closed their facilities in Las Vegas. So we do need to carefully watch what they do and at the same time will MICE-IR investment be a good investment for ORIX? Are we visiting this concept? I cannot say anything solid at this moment but in terms of the bidding timing, nothing has been announced to date. But we can assume -- or I can assume that there will be a dramatic delay. So for the upcoming few months, we will validate the situation and, once again, we will judge whether it is a positive investment on behalf of ORIX. Now from that perspective, rebalancing the portfolio, again, to be candid, we have approximately 5,000 rooms accommodations for hotel. We do have some new projects, but again with the impact of COVID-19 for operational activities, we have to be a bit more rigid in our outlook perhaps. But at the same time, the mid to small-sized hotel accommodations, it is also possible that a round of purchasing can occur as well. So, again, another question is, when inbound will come back, when will people become more mobilized and travel. So for real estate portfolio, we will rebalance recycle, but at the same time, for new investments, the possibility of such investments is also in the horizon. Now for rebalancing the portfolio, again, the COVID-19, regardless of this issue, our sense is that the JPY 12 trillion portfolio total asset rebalancing is as usual. In other words, we will adhere to our previous policy and enhance or improve our ROA and ROE.

So from Citigroup Securities this is a question from Mr. Niwa – or Ms. Niwa.

So what will be the subject for acquisition? Will it change in terms of the criteria? If you could be so kind enough to elaborate on the menu that appears on Page 12. So I think the investment that you have been making recently has been focused around the infrastructure but what we have gathered as a result of COVID-19 is that the diversification in terms of the investment was not enough. And also the listed – the public company's stock price, share price tends to be high globally. So I think the valuation remains to be too high for you to carry out any acquisition in that regard. So just as you mentioned in your comment, do you think that the level of the target the price-wise would be – would come down to your expected level?

So let me answer to the question. So we have – you said that we have been focusing our investment activities around infrastructure. So it is more of photovoltaic solar power infrastructure here in Japan that we have been making an investment for. But fortunately or unfortunately with regard to solar power, there has not been any request for rescheduling. So therefore, with regard to the solar power investment, we do not foresee any major issues because the payment will be made by the government, the national government or the EPCOs. So therefore, I think they tend to be safer in terms of the nature of investment. And in the United States, service provision related to infrastructure, a PE are the subject for investment in the United States. And that is for the sake of the service company for the maintenance of infrastructure-related assets. So the state government and also federal government in the United States will be the subject to credit extension. So we don't foresee major issues arising from there. And as for the entry price, we did continue to rise and will be higher. So with the current conditions there will be some sectors that may start to see a decline in the entry pricing. And in the case of Japanese real estate asset, so with many people working from home on a telework basis with regard to office buildings, there could be a decline in the pricing. But in the prime location that could not be the case. And warehouses or logistics-related facilities, we foresee an uptick of the price rather than a decline. So therefore we do have more than teens in numbers of the – numbers of assets that we own. So if we start to see overheating the pricing, there could perhaps be a possibility of us disposing of some of the assets. So unless they are truly good quality we will not be making any renewed investment. But in the case of overseas, we don't – we cannot judge in a unified manner as to the valuation being too high or low. So – but of course, we would base our decision on the – whether the valuation is high or low. So – but I'm sure we would be able to start to see how things will develop from maybe September of this year. The outlook may become a little more accurate. So basically we would be putting together a plan for IRR of more than 15%. And with exit in mind and – so if we can identify any deal that falls into or that fulfills all this criteria, we would – we may be perhaps forthcoming in terms of making a new investment. If not, we will not just buy those assets. So please understand that our base expense remains to be unchanged.

So from Daiwa Securities Watanabe, we have two questions.

So just on DPS on Page 10 your estimates and your payout ratio of 50%. And when we consider this prerequisite then normality of within this year JPY 76 would be a good figure. Last year you had considered the minimum line for dividend but do you have resistance towards a decrease in dividend? And also what are the conditions for you to deem that the corona or the COVID-19 has been contained?

So JPY 35 interim and 50% payout ratio and JPY 76 are equivalent to maintain this level as we did last year. The after-tax has to be JPY 190 billion. That will be the bottom line for the full year net income. Now JPY 190 billion give or take, I do believe that we can reach that threshold. However some of our activities are interdependent on other activities. So that is why we had given you this number. Now we do have resistance towards decreasing our dividend. We do not want to do that, but again, considering the circumstances this may be a possibility. But our approach is to make sure that we uptick every effort to make sure that this does not happen and sustain the JPY 76 mark, which is on par with the previous fiscal year, which means that payout ratio of 50% is obviously quite reasonable. However, again, if the COVID-19 impact prolongs for a year or even longer then in terms of liquidity procurement, we have to prioritize liquidity. So, this will perhaps result in a lesser dividend. I know that I'm going in circles but that is our approach and intent. Now, the second question what is your definition or conditions to deem that COVID-19 has been contained? Now, here in Japan, Japan as a country is moving towards containment, but the PCR testing here in Japan is extremely limited at the moment. So, perhaps we do not have that many patients or perhaps with the BCG shots Japanese are perhaps immune to the virus. We do not know. About -- recently perhaps from China if they carry with them a proof or a passport saying that they are negative perhaps we can welcome them in. So, if we can be confident that it…

So, from SMBC Nikko Securities, this is a question from Muraki-san.

So, the net profit ¥180 billion to ¥200 billion and also a reduction of maybe a possible ¥80 billion to ¥120 billion. And in that case what will be the prerequisite for base profit as well as investment gain? And what would be the amount of losses that will be drawn from aircraft leasing business as well as concession? And also how do you foresee an investment opportunity from here down the road?

PE fund remains to be highly competitive. And also there will be some intervention from the government as well as the central bank. So, we do -- I do have an interest in this. So, with regard to ¥180 billion to ¥200 billion of simulation for the net profit is based on no investment, no divestment, no new divestment, no new investment. And so ¥20 billion to ¥30 billion in fact will be an impact to aircraft leasing business and the concession will be damaged by ¥20 billion to ¥30 billion. And in the case of kicks [ph], so there is an equity income equity method income so which means that the loss would not be reflected to P&L directly but the revenue may come down to as low as zero. So, in other words which means that ¥10 billion worth of income may perhaps go altogether. So, therefore the personnel costs and also taking into account the depreciation charge about the ¥20 billion to ¥25 billion of negative may perhaps be expected -- anticipated for. With regard to the investment the second part of your question so some of the rehabilitation restructuring investment out there in the regions may be the case. There could perhaps be a possibility by making use of ORIX services which we up and run. So, NPL, non-performing loan investment may perhaps start to increase as a result. But of course there is a relation between -- among regional banks that we have to take into consideration. But we don't intend to issue uncollateralized bond. So, therefore project or maybe some investment through the means of perhaps municipal government bond perhaps would be the way in which we will be making an investment. And also at the same time, I don't know whether there will be some possibility of an acquisition or selling of the business especially in real estate. But of course as we have said, we would stick staunchly to our direction policy and criteria. And for to the competition with PE fund up until now, we have been engaging in a battle field in the area where the competition is not that harsh with the PE funds. So, especially not SMEs, but really middle to smaller sizes, we have been making an investment. So, it was not a crowded market as such especially between and among different PE funds. And also in regards to government as well as the central bank intervention, we do not foresee any intervention or any deals that the government or the central bank may be interested. We have been avoiding those deals. So, we -- and that of course attitude of ours remains to be unchanged.

From Mitsubishi UFJ Morgan Stanley Securities, Tsujino-san we have a question.

Now you explained the payout ratio and considering the prerequisite then JPY 180 billion to JPY 200 billion net income scenario. If you go below that then can I understand the dividend will be lower than last year?

Yes, that will be the worst-case scenario, but we will do our best to not make that happen not have that happen. Now for the first quarter and second quarter round about when Q2 ends, we do believe that we can see more or less of an outlook of what will happen. And then at that point in time, we will see what the numbers will be for fiscal 2021 March. And then, 50% payout ratio do we execute that, do we fine-tune that? We will consider at that point in time. But again, unfortunately ¥35 interim and if there's zero revenue for the second half of the year, then we may be below last year's level, but we want to avoid that at all cost.

Now for real estate, the pretax profit that there was a ¥2 billion impact. And so for the real estate service profit for the operational business, the profit was quarter-on-quarter, okay quarter-on-quarter ¥5 billion year-on-year, it dropped by ¥10 billion I believe. So in terms -- you absorb a lot of this through expense reduction, correct?

So this is Yano speaking, and I will respond to the second question. And now for the operational business, Tsujino-san, I'm not sure which number you are referencing to. But we sold some of the services -- a service business. And for the operational business in nature, it is prone to seasonality. So usually, Q4 is the worst usually. So the numbers that we are relaying to you now for this quarter is an estimate that we work from and we are comparing that. So there will be a slight difference from the actual statements. Now for the operation business, hotels and the inns as well as the seminar facilities and aquariums this is what we referred to.

So the real estate service income we do have other services income?

No, we are just carving that out. So if you do have a more detailed question, if you could give us a call, we will explain this in more detail. I know we cannot have a conversation at this point. So let me stop there for this question.

So the question is from Mr. Tom Grew [ph] of Alma Capital.

Is it the case that 50% is maximum you will pay this year? So there is a possibility of no H2 dividend, if things become very bad.

Yes, that's right. That is our worst-case scenario. But as I said, I try to avoid this worst case scenario. That is my effort. So maybe I try to maintain maybe around ¥18 billion net income. But it's dependent upon coronavirus issues. Therefore, this is 50% is I declare today and then maybe half year results -- when we announce the half year result, if this is a worst-case scenario happens there is maybe a chance to revise this idea.

From JPMorgan Securities Otsuka-san we have a question.

On page 10 for net income, let's say the range was ¥200 billion then in comparison to the ¥300 billion for 2020 March period, which business is seeing a decline?

So this will be operational business and aircraft and concession. So these three.

So from SMBC Nikko Securities, Takayu-san [ph] I believe is how we pronounce this Chinese character.

So being affected by COVID-19, would you be focusing very much on the maintenance of the current credit rating?

S&P, Moody's, Fitch all those credit agencies disregarding the numbers that we have been announcing, whether it's the reflection of COVID-19 crisis or not, but automatically it was -- they have changed the outlook to negative. So they may -- we have not been receiving any negative impact to our liquidity. However, our outlook is now a negative watch. So in terms of credit rating maintenance, I may have mentioned the same back in October, but you see we would like to at the best effort maintain A. But you see we don't -- we are not adamant about this. So we may let this credit rating go a little lower. But of course, it would remain to be our target for sure.

So it is time for us to conclude this session. So I would like to close the Q&A opportunity for now. So the presentation this time in fact was conducted online. So please, do excuse us, if you had any difficulty in hearing. So I would just like to conclude the business performance announcement session for 2020 March for ORIX. Thank you all very much for your participation into this session despite of your manifold duties. Thank you very much.