ORIX Corporation Sponsored ADR Aktie

Ladies and gentlemen, good afternoon. We'd like to start the program punctually. My name is Paddy Hogan. I run the Investor Relations function here at ORIX. I'm delighted to welcome you here today for our inaugural IR day.

For Japanese equities and investing in Japan from outside Tokyo, London really is the global capital for international equities. Hence, our decision to host today's event here.

Some of you, and you know who you are, have traveled a long way to get here. And we, particularly the executive management team, greatly appreciate your support. Over the next 90 minutes or so, you'll meet the executives on my left and right, who are focused on improving returns.

Our first speaker, Hidetake Takahashi joined ORIX in 1993 and directly from university. He's held a variety of roles during his long tenure at ORIX, including time spent in Renewable Energy, Private Equity, Real Estate and Corporate Finance. Prior to being appointed CEO earlier this year, he served as COO and is the architect behind the current medium-term plan, which was introduced in May of last year. To my left, please join me in welcoming him and the other executives. Thank you.

Thank you, Paddy, and good afternoon, everyone, and thank you for joining -- thank you very much for joining us today. I am Hidetake Takahashi, President and Group CEO of ORIX Corporation. We are delighted to host our first Investor Day here in London.

Since becoming President last year, I have made investor engagement a top priority, conducting more than 200 meetings over the past 18 months. Through those discussions, I have received many thoughtful questions about ORIX.

The key message we would like to share with you today is simple, why ORIX and why now.

As the global economy and industry landscape continue to evolve, we believe ORIX is uniquely positioned to capture new growth opportunities and create sustainable value. By leveraging our diversified portfolio, global platform and long-standing expertise in finance, operations and investments.

This is today's agenda. Let me introduce our leadership team here. From my right, Satoru Matsuzaki, COO of Japan and APAC; and Shuji Irie, CEO of Infrastructure. On left-hand side, Terry Suzuki, COO of USA and Europe; and finally, Masa Yamada, our Group CFO and the Chief Strategy Officer.

Following my remarks, they will provide further details on our strategy and execution in their respective areas. Then we will conclude with the Q&A session and look forward to your questions. Thank you once again for being with us, and I hope you enjoy the session.

So with that, let me begin my remarks. Today, I will focus on four key questions. I'm frequently asked by investors. First, why ORIX continues to evolve. In other word, why ORIX may appear so complex?

Second, what our recent reorganization and new management structure intended to achieve. Third, how we will achieve our long-term vision. And finally, our capital allocation policy.

Through those topics, I hope to provide a clear understanding of how ORIX create value and how we intend to enhance that value going forward.

To address the first question, let me briefly walk you through our history. We introduced leasing to Japan in 1964. From early stage, we began diversifying our business and expanding internationally. Since then, we have continued to evolve our business portfolio.

There are three philosophies behind this. First, standing on our own. Second, being agile, flexible and adaptable. And third, recognizing that change is the only constant.

As all business life cycles and monoline business eventually mature, sustainable growth requires continuous evolution. This is why ORIX has expanded into adjacent domains over time. As a result, we have delivered consistent profitability throughout our 62-year history.

Importantly, we aim to go beyond financing. We provide not only capital but also operational capabilities and expertise.

Now let me address the key question, why ORIX continue to evolve? Our core strengths rise in our origination and execution capabilities, enabling us to identify high-quality investment opportunities. But origination alone is not enough. We evaluate opportunities through our disciplined risk management framework, leveraging both financial and operational expertise.

We then create value through our hands-on approach while approach monitoring performance throughout the investment cycle. Finally, we make disciplined decisions on whether to hold or exit. This allow us to optimize our portfolio and continuous recycling capital and talent into new growth area.

This value creation cycle enables us to achieve profitable and sustainable growth. In short, ORIX is a powerful origination and value creation engine. And diversification is not complexity for its own sake. It is a core strength that we manage with this discipline.

Let me turn on our new management structure. In January, we reorganized the group into five business units and five corporate functions. Following this, we introduced so-called CXO system starting in April. This reform aims to optimize resource allocation and the CEO and accelerate new business creation through both intra and cross unit collaboration.

At the same time, we have expanded the delegation of authority to individual business unit. This enables faster and more accountable decision-making closer to the front line. Our CFO ensures a strong financial discipline and CRO provides robust risk oversight's.

Each CXO is responsible for not only their own area, but also for contributing to overall group management alongside the CEO.

As CEO, my primary responsibility is to ensure that ORIX Group continues to enhance corporate value over the long term. With that in mind, last year, I had to establish our long-term vision, making impact through alternative investment and operation and business solutions.

We also set the financial targets for 2035, 15% ROE and JPY 1 trillion net income. These targets are ambitious but achievable. They reflect our commitment to sustainable growth and disciplined value creation.

To achieve that long-term vision, we will continue to advance three key initiatives: portfolio optimization, sophistication of risk management and new business creation.

In addition, we have introduced a new initiative, business model transformation. This will be driven by what we call two forms of [Foreign Language] in Japanese, one meaning deepening and the other meaning evolution. Through this, we will further deepen and evolve our two core business models.

Let me explain how we are transforming our two core business models, and alternative investment and operations. We utilize our balance sheet more efficiently and accelerate investments in alternative asset where we can directly create value and then transition assets into AUM.

We will then evolve this business model into alternative investment, operations and asset management. Under Business Solutions, we continue to deepen customer touch point through a marketing approach and expand our fee for service offerings.

At the same time, by growing our asset operations and management services across key areas, including mobility, real estate and renewables. We'll enhance stable and recurring fee income. CFO Masa will elaborate further on AUM and fee income growth strategy in his presentation.

So let me talk on capital allocation policy. Our capital allocation policy is to maximize corporate value over the long term. The key principle is balanced. We aim to maintain a balanced approach between growth investment and shareholder returns while preserving strong financial discipline. We will continue to prioritize growth investments in areas where ORIX can leverage its strength.

At the same time, we remain committed to delivering stable dividends. In addition, we will execute share buybacks in a disciplined and flexible manner, particularly when capital is returned through one-off divestments. Through this approach, we aim to enhance capital efficiency while maintaining balance sheet strength.

Finally, let me touch upon valuation. We have positioned ROE improvement as our top management priority. Through initiatives such as portfolio optimization, our price to book has improved to close to approximately 1.5x. While we continue to focus on ROE. Going forward, we placed greater emphasis on the numerator by driving sustainable EPS growth. This will be achieved through again, growth investments and business model transformation.

Through this effort, my aspiration is to evolve ORIX into a company that is increasingly valued on a price-to-earnings basis. Our goal is not just own asset, but to operate and enhance their value and continuously recycling capital into high return opportunities, compounding earnings over time.

Ultimately, it is earnings that compound. And this compounding drives our long-term corporate value. With that, this concludes my presentation. And next, Mr. Matsuzaki will present you about our Japan and APAC business. Thank you very much for your attention.

Good afternoon, everyone. I am Satoru Matsuzaki, COO of the Japan and APAC Business Unit. It is a pleasure to see you in London, and thank you for joining us today. Actually, this is my first time in London in my life. Such a wonderful historic atmosphere and very beautiful weather. I'm completely fall in love with the city.

And today, I'd like to walk you through our Japan and APAC Business, highlighting our core strengths and how we are driving strategic integration while expanding our business solutions and investment capability across the region.

First let me outline the structure and the business overview of the Japan and APAC Business Unit. This unit, our business unit consists of six businesses, Corporate Financial Service, Auto Lease, Rentec and PE Investments, Asia-Pacific and Greater China.

This business are built up on the diversified business that ORIX has developed over many years. And I believe this model itself is a source of our competitive advantage.

On the top left, Financial Service, Corporate Financial Services has established a business solution model. This model leverages ORIX's strong customer reach compared with peers to provide financing, value services, succession-related investments. And one more, there is one of the important function that is a collaboration across the group.

As mentioned in Takahashi, CEO's presentation, Business Solutions is a core business model for us, and I will refer to several times throughout my presentation. So I hope you will keep it in mind. The Auto business covers leasing, rent-a-car and mobility services. It manages approximately 1.42 million vehicles, placing its fleet among the largest in the world.

Rentec, primarily provide rental and leasing services for electric measurement instruments and ICT-related equipment. As a leading company in Japan with approximately 40,000 types of equipment. It supports a wide range of customer needs.

The private equity investment business conduct, domestic private equity investment based on our alternative investment and operations model. We have a strong track record with total of 33 investments made to date. Our private equity strategy has delivered high returns using strict investment disciplines.

Including an IRR of approximately 25% and MOIC of around 3.5x. As with Business Solutions, alternative investment and operations is another core business model that underpins our investment approach.

Overseas in Asia Pacific, we operate in a total of 12 countries through subsidiary in nine countries and equity [ master ] affiliate in three countries. We provide financial services and conduct private equity investments.

Finally, Greater China, we conduct financial services and private equity investment through local entities in Mainland China, Hong Kong and Taiwan. The next page, please.

This page shows strength in segment profit and ROE. The line graph represents ROE and the bar chart represents segment profit. Looking at the actual result, Segment profit grew significantly from JPY 131 billion in fiscal year March '23, JPY 257 billion in fiscal year March '26. ROE also improved from 7.9% to 12.2%.

While overall profit and ROE has improved steadily I would like to focus on the differences among the six business units on the right-hand-side. First, Auto and Rentec are our most profitable businesses with ROE and high teens at around 19%. These businesses have built a highly efficient and scalable models, combining stable recurring revenues with strong operational capabilities.

In particular, both businesses have evolved into Business Process Outsourcing, BPO type models, which allow them to generate stable earnings and maintain high efficiency. Corporate Financial Services and PE investments delivered mid-teen ROEs of around 15% to 16%. Corporate Financial Services delivers this level of high ROE through our business solution model, combining financing and range of services.

PE investment, on the other hand, achieved a similar level of high ROE through disciplined hands-on investment and value creation.

In Asia Pacific, ROE is currently at a single-digit level yet, but we expect it to reach double digits soon. And more importantly, we see this region as a key growth driver going forward.

By expanding our Business Solutions model and strengthening cross-line strategic integration we aim to significantly improve both scale and profitability.

Finally, Greater China currently showed a lower level. This reflects a combination of market conditions, portfolio issues and the structural challenges. We clearly position this region as an area for restructuring and portfolio optimization.

This page, our APAC operation is each country have grown steadily. However, given the remarkable economic growth in this market, we believe there is significant potential to capture more business opportunity and further accelerate diversification.

So far, each country has largely developed business independently. As a result, we have not fully utilized group-wide resources until now, and our businesses has remained largely stand-alone.

Also, overseas expansion into businesses other than out leasing and finance has been limited. Going forward, we will expand the business solution model that we have developed in Japan AgroStar APAC region. We need to find out adjacent business area and become more diversified organization.

This is a case study of our ORIX fleet business. As I mentioned earlier, the Asian Pacific unit is currently are the single-digit ROE yet. In contrast, all [ AGL ], our subsidiary in Australia has developed a service drive integrated leasing model that combined financing with recurring service revenue and this model is already delivering a mid-teen ROE. ROE is now 13.5% Australian business.

Of course, ORIX Japan also supports strongly this project. We announced scaling this business model across the APAC region, replicating problem business solution across large markets. This will allow us to deepen customer relationships, enhance returns through more service model and build a scalable region platform.

As these strategic integration progresses, we expected to drive ROE improvement across the broader Asia-Pacific business.

In Japan, as I mentioned, we have developed a wide range of business solutions, two other diverse client needs going well beyond the traditional financing. This capability have also evolved over time.

For example, what began with services such as Life Insurance Brokerage have expanded into more sophisticated such as M&A Brokerage, reflecting our deepening expertise.

What differentiates us is not only a single product that our ability to combine multiple solutions, that add to each client needs. We aim to bring this approach to the APAC region, replicating this Japan's developed business solutions.

In the following page, I will share an example for how we combine these solutions in practice. Let me share an example of how corporate finance services in Japan provide business solutions. In this case, we supported both the seller and the buyer in business succession transaction.

For the seller, we provided M&A advisory services and also transfer aircraft assets from our own balance sheet. For the buyer, we arranged the acquisition finance to support the transaction.

What is important here is there are not stand-alone services, we deliver solutions in an integrated manner centered around the client needs. This is a typical example of how we leverage our broad capability to enhance profitability while deepening client relationships.

We believe that this ability to provide a wide range of integrated business solutions alongside financing represent one of ORIX's key competitive advantage and is not easily replicated by others.

In addition to the strategic integration and business solution initiatives that I have already discussed, I would now like to turn to our alternative investments and operations.

AIO, which represents another key pillar of our business model. Together with QIA, you already know the Qatar Investment Authority. We have established a joint investment platform with approximately USD 2.5 billion in equity and have already begun deploying capital, including the first investment from the fund.

Through this platform, we combine ORIX's Japan expertise and origination capabilities with QIA large-scale long-term global capital. This enable us to source and execute investment opportunities more effectively, particularly in mid-sized company and corporate carve-outs, where our local networks and execution capabilities can be leveraged.

As an initial step, we will fully deploy the investment capacity over the QIA fund and build towards the establishment of a second fund with [indiscernible] LPs.

In Japan, we are seeing a weak yen, low interest rate compared to overseas market and easy access to bank financing. These, combined with a clear inflationary trend and capital inflows from for investors have further intensified the competition our investment opportunity in the private equity market in Japan.

As a result, valuations have risen significantly making it increasingly difficult to maintain a competitive edge using conventional investment approach alone. Under these circumstances, it is essential to further evolve our alternative investment and operations model to keep our competitive edge in the private equity industry.

Our business aim to contribute to ORIX's goal of achieving JPY 1 trillion in under asset management by also leveraging knowledge and expertise from infrastructure and the US, Europe segment and other segment.

The final page, let me conclude with the mission of the APAC COO. The Japan and APAC Business Unit will become a growth platform for the group. I have let our staff know that continue to use the same approach will not deliver the next phase of growth.

Since the 2000, we have created new business new earning peers in this area, such as Private Equity Investment Business and Energy and Environment Business. Today, both the PE and the Environment and Energy Business Segments have grown in the businesses, which generate approximately JPY 100 billion in segment profit. The Japan and APAC Business Unit will continue to be at the set of group's further future growth.

And more importantly, the key to achieving our 2030 vision is our people. Developing the next generation of leaders and building a sustainable organization is absolutely essential. We must continue to take ownership of new challenges, identify opportunities outside of and approval activity.

Bringing these elements together, we will drive strategic integration across the region with business solutions and our alternative investment operations as our two core pillars to deliver the next phase of growth in APAC. Thank you very much for listening.

Next on stage is Irie's presentation. Please welcome. The floor is yours. Thank you.

So good afternoon, everyone. I am Shuji Irie. I have been leading Infrastructure Business Unit, since as COO since this April.

First of all, I just arrived to celebrate England won the game in the World Cup yesterday. Unfortunately, Japan lose the game against Brazil on Monday. So going forward, I strongly cheer England to get the trophy.

So today, I would like to focus on one key message, how we will scale our infrastructure business and make it a core driver of ORIX's future growth. Over the years, ORIX has built strong and diversified infrastructure platform. We have developed businesses across energy, transportation, real estate and public infrastructure. However, sites or own does not create value.

The next phase is about how we originate attractive opportunities, how we will enhance the value of assets and how we will note those assets into asset management platform, in largely and speedy manner. This is the journey from the successful investor to becoming a leading alternative asset player. Let me begin with where we stand today.

Our infrastructure business has already reached meaningful scale. Today, the unit managed segment asset of JPY 3.6 trillion, and generated segment profit of JPY 280 billion, with 13.9% ROE in the last fiscal year, which is supported by JPY 1.5 trillion equity capital represents 1/3 of total ORIX capital base.

So the foundation is already in place. My mission is not to create the business from zero. My mission is to further leverage our capabilities we already have, our investment track record, operating expertise, customer relationship, financial strength and combine them into sustainable growth.

Our infrastructure platform consists of mainly five ideas, which I want to explain now. The common theme is long-term demand, tangible assets and ability to create additional value through active management.

In renewable energy, ORIX operates 3.6 gigawatts of power generation capacity. We are the leading player in Japan. We are now expanding from register solar power to new areas such as battery storage and energy aggregation.

Overseas, our subsidiary, Elawan Energy is operating renewable assets in Europe and United States. We are also expanding into future energy areas, including Green ammonia in India. We also do circular economy and newly acquired Nozoe Sangyo plastic wrapping recycling company.

In transportation, ORIX has established strong global presence in aircraft leasing through Avolon and ORIX aviation system, OS in [indiscernible]. Avolon, our 30% affiliate, it's one of the world's largest aircraft leasing company, fire OS is also well reorganized in the industry and a leading player in Japanese operating lease investments.

Today, they provide us with stronger platform covering aircraft investment, leasing, trading and asset management. In shipping, we have developed a diversified business model, covering ownership, fleet management, brokerage and finance. We are probably only one player who do those kind of covering those kind of the business with sudden scale in Japan.

India real state, ORIX has built extensive capabilities across office, residential, logistics, hospitality and mixed-use properties. We also operate asset management platform, including J-REIT and private funds.

Finally, through airports in Kansai and Osaka Integrated Resort project. We continue to expand our role in large public infrastructure.

Let me talk about why infrastructure and why ORIX. Infrastructure assets have several attractive characteristics. They provide stable cash flow. They are resilient against inflation. And they have strong institutional demand, adds from the investor as order deposit. And they are well suited with our strategy of improving capital efficiency through asset management.

ORIX's competitive advantage comes from four areas. First, what track record on scale. We have built top class positions across multiple infrastructure sectors.

Second, our asset management capability. We have decades of experience of investing in operating and selling the assets. Third, our balance sheet capabilities. Our balance sheet allows us to invest, develop, create value and then efficiently routed the assets to the third-party business. And fourth, particularly in Japan, ORIX is the trusted brand among the stakeholders and investors. These strengths are ORIX to create value beyond ownership.

I will now touch on the macro market and our strategy for segment, energy and environment. The renewable market is currently under significant transformation. Following the Russia-Ukraine situation, the market in Europe become challenging. However, the fundamental drivers remain strong, we think.

Electricity driven demand, data center growth and national energy security is creating new opportunities. At the same time, business model is changing. Market is moving from government-sponsored business model, such as FIT towards more market-oriented model, such as FYP, merchant, digitalization and aggregation.

So this change provides another opportunity for us and ORIX strategy is strengthening our capabilities in three areas. First, trading capability. Second, asset management capability. Third, O&M, Operation and Management capability. By combining these capabilities, we aim to capture differentiated opportunities throughout the energy value chain.

Looking ahead, we see four important growth areas. First, battery storage. Batteries system is increasingly important to stabilize energy demand and supply. Second, digitalization and aggregation. By managing multiple source of energy, intelligently, we can optimize value creation. Third, energy transition solutions, including ammonia.

Fourth, data centers, the growth of AI and cloud service is driving strong demand for power infrastructure. We see these areas are not as separate one, but as one integrated opportunity.

Let me move to the transportation. Aircraft leasing is already one of ORIX's strongest global business, which represents 25% of total infrastructure asset. The market benefits from attractive supply-demand dynamics. And aircraft leasing provides stable cash flow together with asset value appreciation opportunities.

ORIX has a unique position through both Avolon and OIS. However, our ambition is broader than simple aircraft leasing. We aim to expand along the broader market value chain, from aircraft bodies into engine and parts out, as well as trading and related asset management opportunities.

In shipping, we also see opportunities to expand our diversified platform. Both aviation and shipping are highly compatible with alternative asset management.

This slide shows our direction in aircraft to asset management. We are actively originating assets from various sources, including Avolon and with using our brand set strategically and together with our forthcoming platform of engine and parts out. We rotate assets to investors under management.

That investor includes institutional investors during the ventures, Japan's operating lease investors and Japanese aircraft leasing fund, which we are currently preparing and global capital providers. The key message is we are not simply managing aircraft as a result. Moreover, we aim to build structured business ecosystem around aircraft-related assets in this industry.

Let me now move to the real estate. After the global financial crisis, ORIX intentionally reduced real estate exposure, to strengthen our portfolio discipline. Between 2018 and 2020, we reduced the proportion from 25% to nearly single digit.

However, the environment has changed in today's inflational environment, real estate business still provide attractive opportunities. By managing investment development, operation and asset rotation, along with our diversified capabilities.

Going forward, we aim to increase our investment and expand our real estate platform, but remain very disciplined. We will focus on assets where we can create the value through active management, including strategic capital expenditure, revenue management and improvement of operational performance.

The property universe is broad. ORIX has plenty of experience across office residential logistics, hospitality and mixed-use assets. We will leverage our strongest origination capability in Japan. Through our local presence and local network, we can identify attractive opportunities. We will focus mainly metropolitan and major city areas where there is stronger demand, better liquidity and greater potential for value enhancement.

This slide shows our value creation model. You can see that the ORIX participates throughout the real estate value chain. As I said that we already have established asset management platform, J-REIT and private funds. So by using our balance sheet strategically, we can make active acquisition and after value enhancement loaded to investors under asset management.

This creates two sources of value, investment gain and expansion of assets under management.

Before conclusion, let me briefly touch on Osaka Integrated Resort. This project represents one of Japan's largest future tourism and entertainment development. It will include hotel, MICE facilities entertainment and other integrated facilities as well as casino service.

The project benefits from the location in Osaka Kansai. Strong tourism demand in Osaka City. Connectivity with the three airports in Kansai, which we are operating. Attractive cities to go around such as Kyoto and Kobe and enormous potential for in [indiscernible] tourism. IR facility, the construction is going on and we're progressing a schedule, which is going to be opened in 2030.

For ORIX, Osaka IR is not only a single project. It represents the opportunity to create value with our existing business, such as hospitality, entertainment and transportation.

Let me conclude. Our goal is clear, to become the #1 alternative asset player in the world. And to meaningfully contribute ORIX 15% ROE target. Our differentiation comes from four strengths, strong balance sheet, origination capability, ORIX brand and trust particularly in Japan and ability to create value through operational management.

Going forward, we will focus on four strategic actions. First, optimized asset skills. Second, take disciplined risk and pursue attractive opportunities. Third, further strengthen asset management capabilities. Fourth, development -- develop talent pool across the organization.

So the strategy is clear, opportunity is significant, and I will read infrastructure business unit to execute this transformation. Ladies and gentlemen, thank you very much for your attention.

And now let me invite Terry, COO for USA and Europe to continue the presentation.

Good afternoon, and thank you for joining us in London. I'm Terry Suzuki, COO of ORIX U.S. and Europe Business Unit.

I got 5 minutes shorter time allocation today. So unfortunately, I cannot deliver any humorous icebreaking story. But anyway, yes, I'm also supporting England team. Okay. So in my part, I'll cover three topics. First, a clear picture of our U.S. platform, how it was built, how it performs and where it goes.

Second, how we are timing our balance sheet into more capital-efficient fee-generating asset management model. And third, most relevant to this room how ORIX USA and ORIX Europe are coming together as one integrated platform.

Let me start with the foundation, more than 4 decades of building in the United States. ORIX USA is not a recent venture. We have built in the United States for over 45 years. We entered in the U.S. in 1981 and expanded across cycles. From leasing into corporate and real estate finance into capital markets and then a diversified alternatives platform.

Along the way, we built the platform, we acquired the businesses, sold them and took one of them public. We took Houlihan Lokey public, combined RED Capital, Lancaster Pollard and Hunt into today's Lument. Acquired and later sold the hedge fund, Mariner Investment.

Added NXT Capital in the private business private credit business and Boston Financial and affordable housing. And most recently, took a majority stake in Hilco Global which is #1 asset valuation liquidation company in U.S. last year.

The point is this platform has been assembled over 45 years to roughly $32 billion in third-party AUM today. In the U.S., which is the largest asset management fee pool in the world, potential is large, and we intend to keep expanding. That longevity and discipline underpinned the strategy I will describe next.

Let me address ORIX USA's performance directly for a moment. Everybody is just wondering what's happening, what's going on in the U.S., okay?

So our most recent year fiscal year ended March 2026, was weak for ORIX U.S.A with segment profits well below the prior years. On this chart. The reason is very simple. This was not a deterioration in the business. But primarily, onetime non-cash impairments of legacy assets. A reset note a trend.

We have also de-risked our book by cleaning up potential impairments. Monetizing mature investments, including four private equity exit announced last year. And recycling the capital into core strategies, Hilco is one example.

From here, net interest margin from our credit business is a stable base. And on top of that, we add growing fee income as AUM expands and recurring gains from equity investments.

By the way, ORIX USA completed another private equity acquit realizing over 4x MOIC yesterday. So while we stay cautious on the macro, we expect a brighter outlook based on a solid balance sheet, with less impairments and asset sale gains come through.

For our long-term investors, the point is simple. The franchise is intact. The balance sheet is being cleaned up, and the platform's earnings power has not changed. So what is our core business today? Three alternative asset classes, all in the middle market with growing third-party capital.

First, corporate private credit, cash flow, enterprise value and the sponsor-backed lending, through platforms, such as NXT and our growth capital business. NXT's Fund VIII has just completed the first closing with more than 1 billion equity commitment, which will give NXT more than 1.8 billion new dry powder.

Second, asset-based private credit, lending against quarter and asset value. An area which we are actively expanding with Hilco's asset valuation expertise.

Third, real estate, providing equity and debt in essential sectors such as multifamily and affordable housing through real estate investment group, Hilco, Boston Financial and Lument. With other new initiatives, including U.S. multifamily equity, U.K., Europe bridge lending and the U.S. opportunistic strategies.

A macro point across asset-based lending and especially real estate, we invest in the hard asset, which tend to hold value under an inflationary environment, a real plus for investors.

We may also leverage Hilco into corporate private equity and IP-related investment going forward. In the private asset business, our edge is origination is underwriting and discipline concentrated on the middle market where competition is lighter and risk-adjusted return more attractive and proprietary sourcing drives the pipeline. For investors seeking differentiated access to U.S. private markets, this platform is not easy to replicate.

Now to the strategic shift that matters most for returns. Historically, ORIX USA invested its own balance sheet directly, which works but the return on equity capped at the investment return alone. Since around 2020, we have shifted to a hybrid model, utilizing both balance sheet and third-party capital. This is an illustration, but please look at the slide.

In all the model, $2 billion of our balance sheet capital is invested directly remaining $2 billion of AUM. One return source and ROE around 10%. In the new model, the same $2 billion becomes a 10% GP co-investment alongside with $18 billion of third-party capital. $20 billion of AUM in total.

The same balance sheet now supports 10x the assets and earned from three sources, the investment return on our own investment, management fees and incentive fees. ROE rises to around 25% in this example.

The balance sheet does not become smaller, each dollar simply works harder. Co-investing our balance sheet alongside with the third-party capital also creates alignment with investors and let us compete for materially larger deals than a balance sheet-only model. Our balance sheet sees assets build a track record, attract investors and is recycled with the discipline.

The market rewards a fee-based asset manager with a higher valuation multiple than the balance sheet intensive finance companies. So as we shift towards the business with recurring management and incentive fees, we are lifting returns on equity and building higher quality earnings.

Next, the combination of ORIX U.S.A and ORIX Europe. Together, we manage over $500 billion of third-party assets. ORIX Europe anchored by Robeco, which was founded in 1929 and part of ORIX since 2013, a brings around $476 billion, primarily public markets such as equities and fixed income. ORIX USA adds around $32 billion in the private market, private credit, real estate, private equity.

We collectively serve over 1,000 institutional clients and around 3,700 professionals, combined AUM that would place us among the world's 30 largest asset managers. These are highly complementary franchises across public and private and across European and American distributions. With very little overlap.

For investors, that means access through one group to U.S. private market strategies alongside deep public market capabilities. One global integrated asset manager, not two regional players.

Across ORIX USA and ORIX Europe, we operate in more than 25 locations, spanning North America, Europe and Asia Pacific. This gives us local market intelligence proximity to broad institutional investor base and reach to place strategies globally.

The U.S. and European networks sit in complementary markets, the structure advantage that makes the collaboration. So how do our two platforms create value together?

Five priorities. First, distribution. We are working to increase the mutual utilization of our respective client bases and product platforms. Second, joint product development. Strategies for insurance companies are a natural example, needing both public and private capabilities. And the project is already underway.

Third, knowledge sharing. Robeco recently won a private credit mandate in Europe, opening direct dialogue with our U.S. teams. Fourth, market expansion. Over the mid- to long term, we want to extend U.S. strategies such as growth capital and GP solutions into Europe.

And expand Hilco across European real estate and Asia asset-based lending. And fifth, U.S. activity support with ORIX USA helping ORIX Europe build its U.S. presence further organically and through acquisitions.

We are already seeing early synergies in the distribution and products. The direction is clear, two parallel operations toward a single integrated business unit that shares resources and best practices while preserving the local autonomy for good execution.

Let me close on Europe. Robeco is our base to grow, generating in APAC using quant and AI to scale alpha. And commercializing innovation such as active ETFs, quant, indices and private debt alongside sustainable investing with a reformed wholesale business.

Boston Partners, a well-regarded value equity manager with a strong track record, has restructured distribution to accelerate AUM growth. For example, through advisory partners and a new private wealth platform.

Harbor Capital is targeting U.S. ETF leadership, building competitive products and growing custom model business.

Transtrend keeps delivering systematic performance through its diversified trend program growing their client and product diversification.

So the story comes full circle, a 45-year U.S. platform. A disciplined reset is now behind us. Our more capital exchange model ahead and the integrated U.S. and Europe franchise. A cleaner, trimmer ORIX USA should deliver better quality earnings. And together with ORIX Europe, we can offer investors full product suite across public and private markets. Thank you.

Now I invited Masa Yamada, our CFO and CSO, to the stage. Masa, it's yours.

Hello, and good afternoon. My name is Masa Yamada and I'm CFO and CSO, for the avoidance of doubt, CSO being Chief Strategy Officer. I'm relatively new to ORIX. I joined ORIX Feb this year after spending 30 years to be precise, 29 years and 10 months at JPMorgan. And for the recent 12 years, I run the investment banking business in Japan for JPMorgan.

And in my session, I would like to talk about the strategy shift towards the third-party asset management business model, which you have already heard about in each of the earlier sessions. So I'll be pretty quick on this page, but briefly, the key is on the back of constraints on our balance sheet model imposed by credit ratings as well as capital efficiency requirements. We are shifting towards a third-party asset management model, where we expect more fee income on top of our own asset-based income.

The model requires changes to our business -- sorry, our balance sheet usage, specifically towards the warehousing function as well as provisions of a seed capital and the expansion of AUM through attracting third-party capital is a key to the success.

Today, ORIX has a total of JPY 7 trillion, which is about USD 44 billion of the -- sorry, private asset AUM on the page left. To put this in context, as we have JPY 18 trillion of the total assets on the balance sheet today. So the ratio of private asset AUM to the total assets is so 70 divided by 18, so about 0.4x.

And to be more precise, if you exclude the total assets of the bank that we announced sell this year, that ratio becomes a bit higher. And if you compare that ratio with the global peers on the page. So by the way, company A is Apollo, company B, Macquarie and company C is ARRIS management. In the case of Apollo, the ratio is 2.2% and Macquarie is 0.8%, and ARRIS is 22.7% as based on public information.

And a few observations here, right? So first one is that we have more room to grow a private asset AUM. Compared to the size of our balance sheet, we should target the ratio to be at least that of Macquarie and over the long term to that of Apollo.

The second point is that we have the structural advantage of our balance sheet to leverage. Our model would be closer to, again, that of Macquarie and also that of Apollo with the scenes balance sheet.

So this is how we envision our private asset AUM to grow. We have two growth levers here at the U.S. and Japan. And over JPY 7 trillion of private asset AUM today JPY 2 trillion in Japan and JPY 5 trillion equivalent in the U.S.

As Terry explained the strategy earlier session, we expect ORIX USA continue to grow private asset AUM at much higher pace than we have seen in the past.

And meanwhile, Japan private asset market is at its nascent stag. According to the Bank of Japan data set, the global private asset market stands at USD 15 trillion as of 2024.

And while U.S. represents about 51% and Europe, 20% and Japan represents only 1%. And Japanese equity market has already taken on the back of regulatory reform, as you know, and also structural changes, as you know.

And improvements in interest rates and inflation are also making Japanese private asset market increasingly attractive to many of the institute investors.

And prepare and early is important. And I think we view Japan market as a huge upside over the mid- to long term.

Again, this one, this is how ORIX will operate in the Japanese private asset market. With the help of strategic consulting fund, we came up with a potential addressable wallet to be between JPY 35 trillion to JPY 50 trillion over the next 5 years.

Specific wallet at size of each asset class is on the left box of the page, and most of them, if not all, are within 17 strategic areas under Prime Minister Takaichi's growth strategy.

Over the next few pages, I will talk about how ORIX can add value in the private asset market. So we believe ORIX is uniquely positioned for the private asset market opportunities in Japan. We laid out our core capabilities on the left-hand side of the page. What really differentiates us from competition would be really the first two points.

That is origination capabilities and operational excellence, banks don't have needs of the capabilities and trading houses probably help them. But their main focus would be more on distribution side or I guess, transaction side of the business as opposed to the finance.

We also are conscious of what we need to have in order to be successful in these opportunities. And again, laid out those items on the right-hand side of the page. They are all crucial for the success and we started building foundation for each, including shift of people's mindset at every layer of the organization. We'll connect a regional distribution platform to develop a distribution platform in Japan to provide institutional investors access to attractive investment opportunities globally.

Okay. This page, global investors such as PE-backed insurance companies, infra funds as well as SWFs and pension funds have shown strong interest in the potential of Japanese private asset market for the recent years.

And for many of the global players as they don't have local platforms, they would likely need to team up with some local players. And on the right-hand side of the page, a few recent examples of such partnerships between global partners -- sorry, global players and local players, including ourselves, which Masa explained earlier sessions. And in addition, Japanese incumbent life insurance companies have been recently increasing their interest in this market as well, such as Nippon Life and Deutsche Life.

So this last page. So between base profit and capital gains, we aim to further grow base profits over the mid- to long term. And for the base profit, which is composed of asset-based income and fee income, we see that fee income will be the critical driving force here.

Today, our fee income before [ SGA ], so it's basically the gross profit concept is JPY 474 billion. On the left bar chart, right? So -- and we envision that it grows more than double towards 2035.

And if we go further detail, out of total JPY 474 billion of the fee income today, JPY 200 billion comes from traditional asset management business, mainly Robeco. And you saw it's a public equity and debt and JPY 40 billion comes from the private real assets that we have just talked about through -- or we have talked through in the sessions and the rest of JPY 230 billion comes from operations and others in the center of the bar -- I'm sorry of the page.

And we expect the fee income from both traditional asset management as well as operations and others to grow at mid-single digits. While we envision the fee income from private asset to grow at a little bit ambitious, but the mid- to high double-digit for us to get to the ROE target of 15% by 2035.

Okay. So it was relatively short to the compared to the previous sessions, but this concludes my presentation, and thank you for listening.

[Break]

[Audio Gap] which is an interactive Q&A session. I'll let the executives sit down. Before I ask for the first question, it's a very simple disclaimer. It's July 2 obvious statements. So by definition, we're in a quiet period. So please, no questions that specifically refer to the most recent quarter's financials. Now who's going to ask the first question? Carl?

Yes, useful session. Thank you. Maybe just to kick things off with an easy question, and I'll leave the tough ones to others in the room. But we've heard a lot and we've been reading a lot about this transition in the business model and the changing way that you're looking to use your balance sheet and bring in third-party funds. Obviously, we're very supportive of that.

Can you just talk us through maybe what are the barriers to execution? What are the remaining challenges, the bits of the jigsaw puzzle that you need to yet put in place to really bring that vision of the new ORIX, so to speak, to bring that to fruition?

Last year was the first year to execute our strategy, but we have already developed a clear strategy and it's only execution phase, wrong short, but and we are in the early stage, but I think we have steadily progressed well. And for example, portfolio optimization wise, good example is the sales of ORIX Banks, and we have already implementing the portfolio optimization for other asset classes.

And in terms of fundraising for asset management, QIA for private equity for the Japan and APAC business unit and variant or set force business unit. And as Terry said, that we recently made fast growth for NFC capital. So fundraising activity is progressing well.

And the challenging we have -- I have a strong leadership team to execute strategy going forward. But the challenging things going forward maybe we need to continuously keep a good talent to execute a long-term strategy because we need to execute that strategy in the next 9 years was that we continuously need to develop a good trend, and we need to continuously identify the goal might be challenging.

But we have a good internal candidate, and we have good access to the market. So securing good talent and develop good talent and compensating fairway and see the same direction on the -- to be on the same board and to get there in 2035.

Thank you. Next question. David?

Thank you very much. This may be a question more for Masa. I mean if I look at ORIX's credit rating, it's lower than that of same Macquarie and some of those other peers, but your leverage is also lower. Why do you feel that is? And how can you change that?

Well, I think are, I guess, in terms of leverage, we are really running the company very low leverage, so really running the company really on a conservative basis. But yes, the rating agency assigns BBB+ by S&P, A3 by Moody's cell split rating.

And one of the reasons I think that I think rating agency has a little bit of concern around over its probably around complexity of the business, right? And it's hard to for -- at least for them to understand ORIX's complexity of the various businesses we have might be part of the reason.

So I don't know. I haven't really talked about with the S&P and Moody's direct yet. So hoping that we can actually clarify what exactly the concerns is, given my -- how low leverage we are.

I think one issue really is the difference between the principal capital you use and the fund level leverage. So at a fund level, it's obviously ring-fenced from ORIX Central capital for us at the moment, you borrow the center and you allocate out that would probably make a big difference.

Well, for the moment, I think corporate loan borrowing is actually really cheap given that megabands really provide us really very cheap funding. So there's a leverage, but I guess, cost of debt is pretty low.

So I think from a sort of a WACC perspective it probably isn't that cheap?

That might be.

Next question [ Jake Kapo ].

Thank you so much. You made up pretty incredible investment by taking Toshiba private with JIP a couple of years ago, and it's becoming a significant part of your asset base. So it'd be interesting to know from you what the future plans are for that asset, if you plan eventually to monetize it and how you would redeploy the capital from such a massive and successful investment?

So first of all, a price of [indiscernible] up and down by 10% every day. So I'm not sure what is a fair value of them. And Second point is that we indirectly and effectively on the Toshiba JIP fund through GIP fund 60% -- I'm sorry, 40% and Toshiba owns 16% of our key of share. So we effectively directly on 2.25% of the Kioxia share and -- but we are the LP investor of our JIP funds. So we are not in a position to control and manage Kioxia asset and fourth Toshiba's management to sell.

As long as I know, Toshiba deems shares investment, that's financial investment. So if you look back the activity since Kioxia share IPO they used to own the 20% plus a [indiscernible]. But now they as long as you know, based on the public information, they own, again, 16% ownership Kioxia share. So I expect that Toshiba is deliver down is going to be triple down gradually, but I don't know the timing and speed of sell-down Kioxia share.

In the meantime, as of March of fiscal yet. 2026 because Toshiba's ownership in Kioxia share went down 20%. So Toshiba already changed the accounting treatment of Kioxia share securities from equity accounting method and recorded very big variation gain based on the closing price as of March 31 at around JPY 90,000 per share. And that million 2.25% of such a variation gain will come to our PM there at Q1 because we consolidated our portion of Toshiba's net pro 3 monthly basis.

So if you look at the Kioxia price at the end of June, the price was around JPY 90,000 per share. So we're going to consolidate contribute 2.25% over $90,000 per share basis in Q2. So it's going to be huge.

But again, if you look at the chart of chats up and down every day. So -- and I don't know whether or not JIP partner is willing to pay a dividend business. So unless we get paid by dividend or price correction. It's really a paper again.

So I continuously communicate with chip and Toshiba pushed them far as much as soon as possible. But again, unfortunately, I cannot control. But good thing is a good thing is that it's really good asset for us rather than bad asset.

And at the end was there, I think Toshiba is sitting down everything because if Toshiba go public again, the just 16% of bumping or asset, maybe the bottling goes in public. So I expect the gradually selling down at the end of the day, Toshiba pay dividend to fund and fund pay dividend to us.

Leo first and then Ed following.

I think my question is for Suzuki-san. So on the integration of U.S.A. and Europe, I guess how do you practically incentivize employees to collaborate it sounds very nice on paper, but in theory, how are you trying to incentivize like collaborating across not just other funds but also, of course, cross border?

Thank you for your question. Actually, the fundraising head, he is sitting over there. So I want to ask him to answer, but not today. Actually, we have the series of the meetings between ORIX Europe and ORIX USA in terms of the collaboration regarding fundraising or distribution.

So first of all, we need to set -- to be honest, how we're going to share the fees or how we can allocate credit. Then secondly, what kind of expertise we need to place for the people actually visiting the investors, talking the investors, the gatekeepers.

And then also, we are thinking instead of just specifically focusing on the investor who is looking at only public or only fixed income. Rather, we need to go beyond them, who manage the entire diversified the capital allocation from equity, fixed income, private credit, private equity, real estate. So we need to recreate all the in the client base.

Of course, we have already a strong relationship. But on top of that, we need to strategically build it up the further upgraded relationship with our target investors and the clients, which has been discussed, to be honest, this week, and then we had meetings this year and last year. So we have a series of meetings kind of strategy as well as sales team discussions.

So again, Yes, we need to compensate the people. So the first, how to compensate. And then secondly, what kind of resources we need to deploy? And thirdly, what is the real target investors and then title or positions?

Those understanding need to be discussed further, but we are working together already. And then as I said, the -- one of our clients, which is insurance companies, so the public side and private side, we are working together what's the best portfolio for that specific companies, specific investors.

So we keep the constant dialogue with many of the teams. Yes, from the beginning, I thought it's a public and private kind of a little bit difficult to manage all together in the totally different locations. But flip side is, there is no overlap. So it's more kind of room to corroborate and create further value going forward. Please give me maybe more time, I can show you the result.

Yes. My question is on your asset management business. And I know you've been -- you've made a number of acquisitions in building your asset management business. Do you still see any gaps in your asset management lineup? And how important is size in your asset management business? So should we expect to see more M&A in that area?

To Terry or CEOs?

Maybe the CEO...

I think CFO, Masa is a better portion to...

Best to answer.

Okay. Well, I guess, to -- you're talking about the traditional asset margin business? As opposed to private assets?

You're talking about business and you've added Boston Partners and Harbor Capital and Transtrend and all the way?

It's all 3.

But I guess it's probably -- obvious one is the U.S. fixed income.

Yes. So right now or the years, we are looking for the opportunities in the U.S. fixed income, which is not an extension for especially for Robeco.

And then -- the -- historically, we understand that for the European asset managers get into the U.S. and then becomes the winner is very challenging. However, of course, it's -- we are carefully looking at what we can do, not just simply the acquisitions, but maybe a partnership or we're going to just get some part of the expertise in the U.S. for the distributions.

But -- and then also to accomplish the one -- yes, ORIX USA has the acquisition engine. So the U.S. and then ORIX Europe can walk together and looking at the specific opportunities going forward.

Of course, the acquisition needs capital, acquisition creates a certain intangible asset going forward, which has a certain impact on our future profit globally on an accounting basis, so we need to carefully look studied and justified our investment.

However, yes, we are constantly looking at the opportunities at this moment, mainly in the U.S. for the addition on traditional asset management business.

Just to add, we have been opportunistically looking for some specific opportunity over the past few years that ORIX is basically a very price-discipline acquirer and we have never seen that that's a chance that we can acquire at a reasonable price from my perspective. So we continuously opportunistically look for the opportunity to acquire something, especially in asset management area because you're right that the size is the matter. So a bigger size should be better. So we opportunistically and continuously see the opportunity. But again, we are very price discipline buyer.

I think the goodwill is always, I guess, issue potential issue when it comes to acquisition of asset manager. So I think there may be some way to get around having all this good will, but we'll see.

Donald's on the left.

Thanks very much. It's a question probably for Takahashi san, although it's picking up on a comment made earlier by Yamada san, with regards to the credit rating that perhaps complexity of the organization contributes to that.

And I suppose my question is, is that, in your view, a fundamental misunderstanding of ORIX. And so it's really about communication that you've done very well with today that solves that? Or do you think -- do you have some agreement with the complexity argument that over the next 10 years, you have, in some ways, to resolve that?

From my perspective, we have convinced S&P and Moody's at complex diversification stabilize our earning base in specialization. So over the past -- if you look back over the past 2 years history. So it's not a penalty for us, but for example, I can give you a good example.

S&P has the key metrics called risk-adjusted capital ratio. And they basically penalize the investment amount of the equity accounting investment that we now own the JPY 1.6 trillion on our balance sheet.

But the methodology rationale of penalizing equity accounting from S&P perspective is that the company cannot control equity investment well. But when we make minority investment, we always get strong governance right and minority protection rights.

So it's not like what typical commercial a commercial bank take minority stake. So our investment is so different. But they are the cresting methodology over the banking industry. So we are part of banking restrain story.

So I think going forward, we need to not go in hard. We're already doing so but we need to more closely communicate with the rating Asia.

Sorry, if I -- my question wasn't intended to be about your credit rating. It was more meant to be about the complexity of the business because as you went through the business, I don't think one thing you weren't saying is that we're not going to be stopping doing things that we're doing today. Indeed, we'll be layering on top of that. And I just wonder if you sort of feel that is the complexity of ORIX actually its fundamental strength? Or do you see weaknesses in that?

As I said in my presentation, divestation is our strength, so we keep just diversification itself is not our objective, but we just keep changing. We just keep adjusting other thing to the changing world and transforming our business. by diversification. Sorry, I misunderstood your question. So Masa, anything to that?

No, no, no. I think the diversification is also strength, I guess. So it's part of the reason could be that -- a little bit of a lack of communication with rating agencies. So I think we need to do efforts to, I guess, have more frequent conversation with the rating agencies. So I don't think we're going to deny, guess, what we have been doing and what we will do in terms of the diversification of the businesses.

In the back on the left, can I get a microphone...

I guess this is a follow-on from Ed's question a little bit, but targeted more at the private space. You've talked a lot about private assets, and you could argue that your subscale in private asset management.

I guess it's been a bit of a bumpy ride late for private asset managers and I'm just wondering the derated is now not exactly. If you're looking to build a long-term business is now not exactly the time that you should be preparing to be brave and maybe carefully step into those waters, acquiring assets or investing heavily in that space get it?

I didn't get it.

Sorry. So the question was, given the correction in public share prices of alternative asset managers and the de-rating of alternative asset managers is now not the time to be brave in terms of M&A, buying an alternative manager. I suppose Masa that you'd be best to address that.

I think we should -- I mean sort of -- I guess, you're talking about more bottom fish, I guess fishing I guess. Sort of contrary, I guess, act move when the market is down and we actually buy it on a contributed basis. But I guess I'm not so sure whether we want to buy the companies, or rather I think we should go in individual assets of the private assets as opposed to going for the company as a whole. And given that we have now done the areas of private asset that we actually, I guess, go after, especially in ORIX USA domain.

So as long as actually the company as a whole actually fits to that guest and a growth area that we are targeting, then I think it might be the case, we actually buy it at the bottom. I don't know whether you call it distance volume just today but I think we would rather go for that as opposed to a company.

James, middle in the back.

Thank you for the presentations. The 15% ROE aspiration is an admirable target, but 9 years is a long time. What could happen to make that target come more quickly or even delay it within your control or the environment?

It's a good question. We aim to get the 15% ROE as early as possible. But two things. One is that it's really a matter of a portfolio allocation among -- by the way, we categorize our businesses into three categories: finance, investment operation.

And I mean, what I'm trying to say is that it's a real matter of portfolio allocation among finance, investment and operations, meaning average ROE of finance categories like, let's say, 10% and depending on the good way of our intangible assets, but the ROE for operation can get 20% because it's not a capital-intensive business. And investment category ROE is up and down depending on the recording capital gain, but average basis, we expect to get the, let's say, 15%.

So we intended to allocate surplus capital and release capital like ORIX Bank from finance category. We allocate such capital into finance -- I'm sorry, investment and operations. It's going to take some time, but if we can allocate how can I say the best mix of we cannot make a best mix of allocation.

Capital allocation among categories, I think we can get the 15% on things. And -- while we don't intend to shrink our balance sheet, but we aim to increase away more and we aim to increase fee for services revenue more and more. So these type of businesses we call asset right fee income business model. So an increasing proportion of fee income that must presented we can get more higher ROE.

So combining portfolio optimization amongst three categories and increasing fee income. I believe that we can get the 15% ROE by not -- but by 2035. That's our aspiration.

Great. We have time for one more question, Olivia.

Thanks so much for the presentation. What's your commitment to ORIX Life Insurance?

Well, it's can ask questions -- at least, nobody knows what's going to happen in the future. But at least -- we discussed a lot actually among top management. But at least, we do have our intention to sell ORIX Life in near term. We have mainly three reasons.

One is that if you cut the historical track record about the growth, it's great, actually. FY 2025 March, the net pro before-tax was like JPY 74 billion. Versus FY '26 March, they generated more than JPY 100 billion net tax.

If you look back 10 years ago, they only generated JPY 30 billion more or less Japanese net beat. So their growth is much, much faster as an insurance company, thanks to the strong products and thanks to the capability to make a higher return from the investment. That's number one.

And number two is that we started to utilize the insurance growth, long-term viability as much as possible, matching to the alternative asset and also public assets managed by Robeco. So we could utilize Life business as what KKR do with global Atlantic and Apollo with Athene, that's number two reason.

And lastly ORIX corporation, Japan and APAC business unit is large -- is the largest insurance broker to ORIX Life. So we have certain sale synergy between ORIX Life and ORIX corporate services business. So this is good enough to hold ORIX Life for in near future. But again, what you know is what's going to happen in the future.

I think to add a little bit on that. I think given that we have -- we have announced -- we have posed you the ROE target of 15%. And also given that current egress ROE of life fintec operation is 7.3%. So it's really a drug to the target.

But as Hidetake mentioned, business synergies, but also there's actually a few -- I guess a few things that we can actually try to pump up the ROE of life insurance operations. For example, it to potentially set up the reinsurance of vehicle -- capital is a vehicle in the Bermuda or Cayman and we try to actually be more efficient -- capital efficient for the operations.

You might be able to actually take a little bit more risk on the balance sheet of lifecare. So I think the point is -- to the extent we can actually pump up the ROE by doing all those implement all those various new measures, I think -- and I'm hoping that we can actually get to the double-digit release.

And if you actually can get to the double digit of the life is operation, I think you will have a good reason for justification to actually own it within ORIX Group, given that the system to opportunity actually really gives stability to the system, right, to the entire business portfolios.

So we'll see where we get to the ROE of life insurance operation by in a few years time horizon after as a result of adopting various measures.

So if I can go back to the previous question on how to get the 15% ROE, the -- they are two options to get 15% ROE, much earlier timing. One is just selling the lower ROE asset. And the second option is to drive more.

But we intended to grow the business. We do not intend to shrink the business. That's the reason why we aim to increase ROE to the 15%. We also set a target of net income over 1 year and that means we continuously to grow. And as I said in my presentation, we aim to grow the numerator to get the high ROE. That's quite important thing for us.

Great. Well, that concludes this part of the program. I'd like to again thank all of you for joining us. The executive team will be around through 6, and I think we have some wine and orders at the back of the room. So I hope some of you will be able to join and interact with them. But again, we sincerely appreciate you joining us today, and thank you.

Thank you.

Thank you very much for joining us. This is the financial results briefing for the fiscal year ended March 2026 of ORIX Corporation. I will be the facilitator. I am [ Uchida ], General Manager of Corporate Communications Department. So let me first introduce the speakers. Hidetake Takahashi, Member of The Board of Directors, Representative Executive Officer, President and CEO; Masataka Yamada; Senior Managing Executive Officer, CFO and CSO.

So those 2 gentlemen will be presenting. In addition, there are 4 attendees: Mr. Satoru Matsuzaki, the member of the Board of Directors, Deputy President, Executive Officer, COO of Japan and APAC; Yoshiteru Suzuki Managing Executive Officer, COO of USA and Europe; Shuji Irie, Senior managing Executive Officer, COO of Infrastructure Business Unit; Kazuki Yamamoto, Operating Officer, Corporate Strategy and Management Unit, Head of Corporate Planning, Investor Relations and Sustainability. So those 4 people will be joining. First, I will call upon Mr. Takahashi and Mr. Yamada to present, and then we take questions. We plan to spend about 90 minutes in total. Now over to you, Mr. Takahashi.

Good afternoon, ladies and gentlemen. And again, thank you very much for joining us despite a very busy schedule for our group's financial results briefing. I'm Takahashi, Group CEO. For the fiscal year ended March 2026, the uncertainty has become the norm that was a macroeconomic environment. But for us, it was the first year toward realizing our long-term vision and also an important year of management transition. And we spent 12 months so far, and we have made steady steps forward and made progress toward our goals.

And we did the earnings announcement just now, and thanks for your support, we were able to achieve record highs for both net income and market capitalization. A robust organization and management structure are essential in order to steadily execute our growth strategy going forward. To this end, we introduced organizational reform from January 1 this year and implemented a CxO system as of 1st of April. We have recruited Yamada from outside of the company as CFO/CSO.

Additionally, we reviewed guidelines and expanded the investment and financing authority delegated to each business division, enabling faster and accountable decision-making. Furthermore, with the CFO and CRO taking the lead in maintaining strong financial discipline and sophisticated risk management, we aim to take good risks speedily and proactively to achieve growth at a new level. And that's just for the opening remarks, and I would like to hand over to our CFO, Yamada, who will explain the results for the fiscal year ending March '26 and the guidance for the fiscal year ending March 2027.

Thank you for the introduction. I'm CFO and CSO, Masataka Yamada. Thank you for this opportunity. And please refer to Page 2 of results presentation on the screen in front of you. These are the points I would like to cover during today's briefing. There are 3, as you can see. Number one, FY '26 March results and FY '27 March guidance and FY '26 March in review. And the third point is initiative for FY '27 March. I would like to discuss the first topic, FY '26 March results and the 27 March guidance, and then CEO will follow and explain the second and third points. Please proceed to Page 3.

These are the slides for the fiscal year ended March 26. Please look at the graph on the left. This shows ROE and net income for full year. Net income for FY '26 March was JPY 447.3 billion, exceeding the full year forecast of JPY 440 billion that was revised upward at the first half results that was announced in November last year. This marks the third year in a row that ORIX achieved record profits. This represents an increase of JPY 95.6 billion or 27% in net income compared to the previous year. ROE was 10.4%, up 1.6 percentage points from the prior year. Q4 net income was JPY 57.6 billion.

We recorded a total impairment of JPY 97.2 billion, primarily at ORIX USA, resulting in a lower net income compared to the JPY 118.6 billion posted in the third quarter. At OCP, in the ORIX USA segment, OCP is ORIX Capital Partners, we are proceeding with a phased withdrawal from the PE business and capital recycling efforts. As a result, we recorded goodwill impairment in the fourth quarter. That's the major factor. Next, please proceed to Page 4. I would like to explain ORIX pretax profits for the fiscal year ended March '26 using 3 categories: finance, operation and investments.

The upper table compares segment profits, pretax profits and net income for the last 2 fiscal years. As shown in the second row, pretax profits for the fiscal year ending March 2026 were JPY 691.4 billion, an increase of JPY 211 billion or 44% compared to the prior fiscal year. Next, please look at the graph at the lower left. Dark blue represents finance, light blue represents operation and the deep pink bar represents investments. The upper bar graph shows segment profits for the fiscal year ended March '25 and the lower bar graph, fiscal year ended March '26. All 3 categories saw profit growth, while the investments category posted profit growth even excluding JPY 95 billion in gains from the Greenko sales and valuation gains.

In the finance category, investment income rose sharply in Insurance segment and Corporate Financial Services achieved growth in fee income. The result -- this resulted in an increase of JPY 12.9 billion or 7% year-over-year. In operation, while some businesses have recently have been affected by geopolitical risks, inbound-related businesses such as hotels ins and airport concessions as well as Rentec automobiles and ships performed strongly in the fiscal year ended March 26. In addition, the sales of some ORIX stake in Canara Robeco following the firm's IPO and gains from the sale of Zeeklite contributed to growth, resulting in an increase of -- sorry, JPY 37 billion or 18% compared to the previous fiscal year. In the investment category, ORIX saw a significant increase in segment profits of JPY 138.1 billion or 82% compared to the previous fiscal year.

This was driven primarily gains from the sale of valuation gains of Greenko as well as large gains from real estate and earnings of -- from PE investments, including Toshiba. Breakdown of each of the 10 segments are provided on Pages 40 and 41 for your reference later.

Please turn to Page 5. The bar chart on the left shows results for ROE, segment profits and allocated capital for each of the 3 categories for the fiscal year ended March 2026 as well as the changes from the prior fiscal year. The dark blue bubble, the finance category has allocated capital of JPY 1.7 trillion with ROE holding steadily at the same level of 8.2% from the prior year. Light blue bubble operation has allocated capital of JPY 1.4 trillion with ROE rising from 13.5% of the prior fiscal year to 13.9%. Dark Pink bubble investment has allocated capital of JPY 1.6 trillion with ROE significantly improving from 7.4% to 13.6% due to realized gains from the sales of Greenko stake and hotel sales.

On Page 6, we show historical trends of ROE and ROA of each of the 3 categories. In the operation category, profitability improvement has outpaced asset expansion with ROA improvement an additional 1.0 percentage points over the past 5 years. In the investment category, ROE and ROA increased by 6.2 percentage points and 3.6 percentage points, respectively, compared to the prior fiscal year. We continue to create value and rotate assets while enhancing efficiency, as mentioned before.

Next, please proceed to Page 7. For the fiscal year ending March 27, we target net income of JPY 530 billion, an increase of JPY 82.7 billion from the prior year. And the target of ROE is 11.7% ORIX Group specific initiatives will be explained by our CEO, Takahashi, later on.

But we aim to increase profit and also improve ROE by continuing to optimize our portfolio. Regarding shareholder returns, I will touch on this again after presenting breakdown of our earnings guidance.

Please turn to Page 8. I will explain the pretax profit guidance for the fiscal year ending March 2027 for each of the 3 categories. First, please look at the wrapper table. As shown in the second row, expected pretax profit for the fiscal year ending March '27 will be JPY 760 billion, an increase of JPY 68.6 billion or 10% year-over-year. Please look at the lower left graph. Overall, we expect the finance and operation categories to achieve profit growth, but the investments will see a decline. However, excluding the JPY 95 billion in gains from the sales of Greenko realized in FY '26 March, Investment segment profits are also expected to increase.

Next, I would like to explain the trend for each categories. Finance. As announced in April, we have concluded share transfer agreement with [indiscernible] Bank, a consolidated subsidiary of Daiwa Securities Group for all shares of ORIX Bank. We plan to record a gain on sales from the transaction of approximately JPY 124.2 billion at the pretax level for fiscal year ending March 27. [indiscernible] from ORIX USA is expected to contribute as well. As a result, we expect finance category segment profit of JPY 308.3 billion, an increase of JPY 119.1 billion or -- sorry, 63% compared to the prior year. Within operation, we expect the inbound-related business to see lower profits due to the impact of geopolitical tensions.

Despite this, we expect solid growth in aircraft leasing and U.S.-based Hilco Global. And we are guiding operations category segment profit of JPY 240.7 billion, an increase of JPY 3.6 billion or 2% compared to the fiscal year ending March '26. Finally, investment category, in addition to the sale of our domestic PE investment Sugiko, which was announced in March, we are proceeding with exits from multiple PE deals in the U.S. We also expect profit contributions from Toshiba, which is performing well. As a result, our guidance for the segment profit is JPY 290 billion.

Next, please turn to Page 9. Last point that I would like to explain is about the shareholder returns. For the fiscal 26 March, the full year dividend per share was a record high of JPY 156.1, up 30% year-on-year. Additionally, we fully executed the entire JPY 150 billion buyback program and canceled all shares exceeding 2% of the total shares outstanding. For the fiscal 27 March, we will maintain the dividend payout ratio of 39%. Thus, the full year dividend per share will be JPY 187.36 based on the projected net income of JPY 530 billion. We have set the share buyback program of JPY 250 billion, up JPY 100 billion year-on-year. This was decided after considering cash inflows and capital release resulting from the sale of ORIX Bank as well as the future profit levels, ROE and financial soundness. The projected total return ratio, as you can see here, is 85.9%. That concludes my presentation. I would hand it back to Mr. Takahashi, CEO -- Group CEO

Thank you, Mr. Yamada. First, I'd like to summarize the previous fiscal year from the perspective of the 3 key initiatives for realizing our long-term vision we explained at last year's financial results briefing. The first strategic initiative is portfolio optimization. We have been reviewing our portfolio considering the growth potential, capital efficiency and impact on the credit ratings of each business. Major examples are shown on the slide, the sale of our Greenko stake and new investment in AM Green convertible bonds as well as the sale of the ORIX Asset Management and loan services. As mentioned, last month, we announced that the we would sell ORIX Bank during the fiscal March '27. The second initiative is sophisticated risk management.

We have strengthened our management's decision-making platform by both integrating and visualizing risk information. And through this, we have established a system that enables quantitative risk assessment and agile reflection of this assessment in our management decisions. Starting this year, we have integrated the individual finance deal screening department with the portfolio management department, establishing a system that enables end-to-end risk management. The third initiative is new business creation. Construction on the Osaka IR project commenced in April last year and is progressing smoothly. In October, there was an application for the MICE, and it's going very smoothly. Through the acquisition of Hilco Global in the United States, we have entered the professional advisory services businesses, including asset valuation primarily in the United States. We will also build an asset-backed financing platform going forward.

Also Using the Hilco Global, we will be also building the asset-backed financing platform. Also, our investment in I-NET and conversion of Nozoe Industry into the subsidiary are part of our efforts to create new businesses in strategic investment areas. Through those priority initiatives, we steadily improved ROE, and I am pleased to report that both net income and market cap reached record high levels for the first fiscal March '26. Please turn to next page. For the fiscal 27 March, we will continue to promote the 3 key initiatives aimed at realizing our long-term vision, including portfolio optimization, sophisticated risk management and new business creation.

In addition, under the new management structure, we would add a new key initiative that is the business model transformation. We will achieve this by deepening and evolving our 2 core business models as set forth in our growth strategy, alternative investment and operations and business solutions. Let me explain the specific details later on. Now please proceed to the next page. This is ORIX Group's new management structure. In January this year, I myself, Takahashi, assumed the position of CEO, and reorganized our firm into 5 business units and 5 corporate units. Following this, we introduced the CXO system in April.

This organizational reform aims to optimize the allocation of management resources under the CEO and create new businesses through the Inter-Unit collaboration. By introducing CXO system, we are expanding the delegation of authority to individual BU to help achieve both faster and more accountable decision-making by business division COOs. CFO, CRO will be responsible for the maintenance of the strong financial discipline and risk management, respectively. Each CXO will not only be responsible for their respective areas, but will also serve a role as top management overseeing the entire group alongside the CEO.

Today's attendees, Mr. Matsuzaki, Deputy President; and Mr. Suzuki, the Senior Managing Executive Officer. There will be the COO of Japan and APAC as well as COO of U.S.A., Europe and COO of Infrastructure business for Mr. Irie. And today, Mr. Otsuka is not present. He's the Managing Executive Officer, and he will be the in charge of the risk management unit and group CRO. In Japan and APAC business unit, we have a wide range of financial businesses from debt to equity in APAC, including Japan, going forward, we will capture the growth opportunities by expanding the diverse businesses we have cultivated domestically into APAC. U.S.A. and Europe is the core of our overseas asset management business in addition to the public assets centered on Robeco and private credit at ORIX USA, we will expand asset classes into other alternative assets and pursue AUM growth through strengthening sales collaboration.

Infrastructure business unit will refine its expertise in the development management and operation of real assets such as real estate, energy and aircraft and ships while promoting the shift to asset management to expand the business scale through asset rotation. With this new structure, we believe we have established a management system that is more resilient to environmental changes and capable of making sound decision on both offensive and defensive fronts. Please turn to the next page. Now let me elaborate on our business model transformation, which has been introduced as a new key initiative. Until now, our alternative investments and operations have primarily been in our alternative assets on the balance sheet, where we can leverage our hands-on asset operation and management capabilities.

Going forward, we will continue to build up assets such as real estate and renewable energy development while efficiently utilizing our balance sheet. We would accelerate investment in assets suitable for shifting to an asset management -- asset manager type model and connect this to medium- to long-term AUM expansion. Also, our business solutions model will continue to value touch points with our customers, and we will expand the services originating in client needs. Through this, we aim to grow our asset under management and fee income. Please refer to the slide as examples of the initiatives of each business unit. Please go to the next page. Next, I would like to discuss our financial and risk management strategies.

To steadily execute our growth strategy going forward, we will continue to strengthen financial discipline and risk management. The environment surrounding us is changing daily, including the situation in the Middle East, the resulting energy crisis and highly volatile financial markets and uncertainty has become the norm. As I said earlier, in this climate, it is essential to thoroughly enforce financial discipline and risk management and to enhance resilience. We would not only respond to the changes, but also grow amid the changes. By targetly implementing management focused on the capital efficiency and optimizing capital allocation across the group, we will concentrate management resources in areas where we have a strong competitive edge.

We will pursue maximum profitability and sustainable enhancement of the corporate value under any circumstances. Please go to the next page. Finally, let me summarize the core messages today. The previous fiscal year was one of the steady progress towards realizing our long-term vision, as I said at the outset. Additionally, we recently announced the sale of ORIX Bank. Regarding portfolio optimization, we will continue to pursue this strategy without having any secret areas. Under the new management structure, we will continue to balance growth investments and shareholder returns while aiming to maximize corporate value over the medium to long term.

With a focus on improving capital efficiency and profit growth, we will steadily execute each initiative. Finally, on the July 2 of this year, we plan to hold our first ever Investor Day in London. We continue to value dialogue with our stakeholders and apply it to our management. We appreciate your continued support. Thank you very much for your attention.

Now we would like to open the floor for questions.

[Operator Instructions].

My name is [ Sukawa ], [ Nikkei Newspaper ]. I have 2 questions. Question one, ORIX Bank sales was decided. What are the reasons? What is the background? Can you please remind us of that? -- and the sales of the bank. And I know that there is a lot of cash coming in from that and other sales. So what is the purpose of this cash? How do you intend to spend this cash in the future? Do you have any plans already?

Thank you very much. I would like to respond to this question. The reason to sell the ORIX Bank, there were multiple reasons behind this. The biggest being, well, [ Daiwa Next Bank. ] and also we're here at the venue, but there's a very good affinity with ORIX Bank and also Daiwa Security Group has been really appreciating the ORIX Bank highly. Business-wise, ORIX Bank doesn't really have ordinary deposits. It's basically CDs, but the interest rate is favorable and the bank is also providing real estate collateral loans. And actually, the deposit to loan ratio is higher than 10% slightly, which is very unique. But the deposit stickiness is a little bit weaker. And therefore, in order to grow the business, the interest rate for the term deposit will have to be higher to be more attractive. And we have to basically do the investment with loans. But of course, there is competitiveness as well.

So it's very difficult to get the margin these days. And as far as I know, the Bank is going the opposite way. In other words, they have a relationship with the securities brokers business, and it's relatively easy for them to collect the deposits. But once they get the deposits, they had challenges in terms of how to invest or manage that money. So this combination, I understand that the 2 entities will be integrated. But as a new bank, we believe that they can aim for further growth, bigger growth, and that is the reason why we decided to sell the bank. With regard to your next question, -- we also do divestments and also investments.

When we gain on sale, we are not necessarily thinking about spending money for specific purpose. But we want to focus on where we are competitive when it comes to investments. And also, if you invest against the macro environment, it doesn't really work. So we need to really consider the macroeconomic environment and identify good areas for investment. To be more specific, according to the older segment, for example, PE investments within Japan is something that will still be actively investing into going forward. and real estate as well as aircraft. Those real assets, they have a strong resistance against inflation. This is what we believe and also operational capabilities of ORIX and our turnaround capacities would really help us to generate business value on our own. So investment into real assets is another area where we could allocate capital. I hope this answers your question.

Any other questions? Please raise your hand.

[ Nakahara ] from [ Yomiuri Shimbun ]. Thank you for your presentations. Related question to the first question. I would like to ask two things. About the numbers on page 8, in the finance section, March 27th, the segment profit JPY 300 billion. ORIX Bank sale is JPY 124 billion upside. So JPY 300 billion. Si in the finance segment, is this going to be the highest record? I'd like to clarify that. That's the first point. Nikkei's question, I think is the other side of her question. The benefits of a sale, you talked about that. At the same time, as a management decision in the finance segment, continue to hold ORIX Bank. I think that was one way of doing business. Could you talk about the balance? Could you explain that once again?

Yes. To your first question about the financing and investment business, we did not have that category in the past 10 or 20 years. I don't have the precise data in my head. About the JPY 300 billion segment profit, it is the record high profit in finance, I believe. That is a forecast. Why don't we maintain it, or why don't we keep it? One thing is that the ORIX Bank, compared to other banks in terms of ROA, relatively speaking, was at the higher level. But in the ORIX Group, ROA, relatively speaking, was lower. In finance sector, the ROA comparison, ORIX bank was relatively -- in the ORIX financial, finance sector was relatively low. Therefore, making significant improvement of the ROA based on the banking business is difficult.

In order to improve ROA, we need to increase the leverage. And naturally, it's a regulated business, and also there is a certain limitation to that. When you look at the overall business portfolio, we wanted to focus more on the ROA, ROE. Then the bank business for us is not a non-core business. That is the major background.

Any other questions? If you have a question, please raise your hand. Yes, the person in the fifth row.

The [ Nikko SMBC ]. My name is [ Nawi ]. I am an anchor. I have three questions. Mr. Takahashi, you said that domestic PE, real estate, and aircrafts and real assets are the areas that you see opportunities in. But in terms of macroeconomics, which areas are you more wary of? In other words, you talked about uncertainty becoming the norm. Where are you being more careful? And when the interest rate is hiked, what kind of impact will it have on your business? Well interest rate hikes so far, has it been positive for the management of ORIX Group? And if the rate hike accelerates or exceeds a certain threshold, do you need to be more wary of that? The third point is, total payout ratio was 80 some percent in last fiscal year. What is your basic policy for shareholder return? Can you please explain that once again?

With regard to the first question, are there any areas that we have cautions about? For domestic business, in Kansai we are operating 3 airports. For inbound related business, we have hotels and inns. We also operate those. And It's very unfortunate that since last autumn, relationship between Japan and China has weakened politically. And Kansai International Airport receives about the 30% of the flights from China. Out of that 30%, approximately 2/3 have been reduced. The number of flights have been reduced. And there is a 3-month lag in terms of impact or performance. So for the prior fiscal year, we are only accounting for the number of Kansai Airport up to December last year. So the impact is minimal. If the flight reduction continues, the impact will be bigger going forward. There's also a positive factor. We are receiving a few visitors from China, but we are receiving more visitors from South Korea and Taiwan.

So it is not just a simple reduction of a 2/3 of the 30%, like I said, but a certain amount of impact is expected, so we need to be careful. Similarly for hotels, we don't have many hotels that accept group tourists. And only about 10% of the visitors from China in terms of occupancy, it's fine, but in terms of room rate, maybe it was too high during some period. Generally, the numbers are softening, and therefore, revenue from the hotels can be impacted to some extent as well.

No with regard to overseas, in the U.S., fundamental measures have been implemented. We believe that we have already entered the phase of recovery. Private credit, especially SaaS company exposure, impact is of concern for many. So if there is money coming in from the individuals, there are redemptions happening. In terms of a private equity exposure and SaaS related lending, that's approximately 7%. 7% of the total. For the industry, the average is about 20%. That means that the impact for us is very much limited.

Having said that, inflation and interest rate reduction, compared to expectation from one to two years ago, inflation pace and also the interest change pace is slowing down. So we have to pay close attention to how this will impact us in the future. Just one more thing. With regard to portfolio of Chinese business, we need to control the exposure generally. And there are some parts of portfolio that will have to be turned around.

So we will strengthen our structure and continue to provide monitoring over that business. So those are the three points that we believe that we need to be careful about. Now, interest rate sensitivity. Interest rate is being hiked, and if it is slow, mostly in Japan, of course, the funding cost will increase. But we can respond to that, and we believe that it will have an overall positive impact. 1% interest rate change sensitivity is about 1% by segment or at the segment level so it's limited. However, as you asked, if there is a sudden interest hike, a very fast interest hike, it is possible that we will fail to catch up or there will be a time lag which will result in potential impact.

At the current pace, as long as the interest hike is happening slowly, we believe that the impact will be positive for us. And the third question was about dividend, I believe. Yes, the return policy. As I mentioned in my presentation, investment for future growth and the maintenance of financial soundness and return to shareholders, we need to strike the right balance between the three elements. We continue to sustain this policy. Over the last 3 fiscal years or so, we had some gains from temporary sales or divestiture, and the profit was really going up, and dividend per share has been going up as well quite a lot. So DPS growth on a continuous basis is something that we're aiming for, and also at the same time, we'll be focusing on the balance of the 3 elements. And this is how we decide our dividend policy. I hope that answers your question.

Yes, another person in the fourth row.

[ Kawasaki ] from [ Jiji Press ]. Two questions, please. About the ORIX Bank, the gain on sales of it. So JPY 370 billion is the price. And for this fiscal year, there is JPY 124.2 billion. It's a part of that gain, and the remaining will be reflected in the next fiscal year and onwards. Could you explain that? That's my first question. The second is that about the Middle East situation. Due to the situation, different industries are being affected. Maybe you have not seen the negative impact for yourself. So the disruption in Middle East What could be the negative impacts or positive impacts, if there are any? If you can summarize that?

Yes. I'd like to respond. About the bank, I would like to refrain from talking about the details, but roughly speaking, the financial net asset of the bank is about JPY 250 billion. So JPY 370 billion, the sale, the price of sale, the difference between the two will be our gains. So for this fiscal year, we plan to close this. If unless there is a postponement of the closing, it is not likely that we would book the profit from this transaction across at a different fiscal year. So that's my answer to your first question. As about the Middle East, you're right. The subsidiaries or affiliates that we have in Saudi Arabia, we have a leasing company called [ Yanal ].

In Pakistan, the [ OLP ] is a leasing and financing company. But in terms of exposure, those are the two companies. It's about JPY 15 billion. Exposure is limited. The potential impact on the businesses, aircraft business, we have a high credit level, the company. So far, no major impact is forecasted due to the Middle Eastern situation. But the jet fuel, if this current Middle Eastern situation continues, there could be a short shortage of the jet fuel. And then including LCC, it's possible that they will reduce the number of the flights.

And then the airline performance will deteriorate. And Spirit is another story that used Chapter 11, and it's possible that there could be some airlines whose credit would deteriorate. So we are not too optimistic. Si I'd like to look at the credit situation and aircraft situation. We are watching that closely. Another thing is, especially in Asia, Southeast Asia, as you all know, their energy reserve is at low level as countries. If it lingers in a different senses, the Southeast Asian macro economy could be impacted. If that happens, then the credit quality goes down. So direct impact, as you correctly said, is limited for us. But if it lingers further, then there could be some indirect impact.

In that sense, we have to enhance the risk management, as I said. We'd like to focus on that, and we would like to respond to the situation. Thank you. That's all the questions. The answers, sorry.

Any other questions? Second row on the right-hand side.

Thank you. [ Nikkei Business ]. My name is [ Umekuni ]. I have 2 questions. Insurance business positioning within your portfolio. You talked about ROE and also business model transformation. Against that background, how do you position your insurance business? That's my first question. My second question is about the three airports in the Kansai area. What is the significance of this business, and what is your outlook of this business going forward?

With regard to your first question about our insurance business, insurance, as you may know, is balance sheet heavy and also a regulated business. Therefore, we need to build a certain amount of capital. It is also a capital-intensive business, and we need to use the balance sheet in order to grow the business. And therefore, if you just apply the ROE perspective, then insurance business is a little bit different from the rest of the portfolio. However, there are 2 things we need to consider. One is if you look at other alternative asset managers, they're doing something similar. Through insurance policies, you gain liabilities. Non-insurance business usually cannot really finance this kind of long-term debt. You can do that through insurance.

This is something that we can really use for other assets within the group, including the utilization of the reinsurance. So if we can allocate it like that in terms of financing, we believe that there is good synergy. That's one point. And the second point is that when we obtain a debt and also sell insurance, well, the third category insurance targeted at individuals were advertised on TV, and we were also focusing on online sales as well. Now we live in a world where we have interest rates. So Life insurance, death coverage, and also wealthy individual insurance. We have started this several years ago. Now, corporate financial services in -- of ORIX is one of the best sales agents in Japan. We believe that there's synergy in terms of obtaining insurance policies as well.

There is actually a third point.

If you just look at ROE, it's only about 7%, so you may consider that we should be selling this business. However, as you could see from the performance of the prior year, for pre-tax segment profit, we are generating more than JPY 100 billion from this segment. Considering the nature of the insurance business, this kind of a revenue or profit is very stable. So we do not just apply the ROE perspective. This is similar to the bank business. Well, in other words, we don't really consider to sell insurance, like we did with the bank, just looking at ROE.

We have to look at the debt structure of ORIX Group as a whole, and also asset management structure as well, and how to utilize insurance business within that framework. That's what we consider. Now, with regard to the 3 airports, there are certain factors that are in our control and out of control. Relationship between Japan and China was already explained earlier. We don't just sit by and watch the situation change or improve.

As I said before, we are getting more visitors from South Korea and Taiwan, and Indonesia, Thailand, and other southeastern airlines. We are approaching them. Our sales team is approaching them because this is a great opportunity. Traditionally, we were relying on a single market for 30% of our sales or revenue, but this is a great opportunity to change that structure to reduce the dependency. And now the risks have materialized. We want to make sure that the lesson is learned and same problem will not be repeated so that we can operate this business over the long term. That's all. Thank you.

The person in the sixth row.

Thank you. [ Kawase ] from The [ Nikkei ]. About China, I'd like to ask a question. Earlier, Mr. Takahashi, in your presentation, you said that the portfolio in China and exposure needs to be controlled, and maybe turnaround is necessary in part. And in the distribution, it is the materials about the Greater China, you are saying that you will be controlling your business. so more specifically, the areas that you were not investing or you will withdraw, where are they and how do you control the exposure? When you say you'll be more restrictive, it means that you won't be not really reducing it totally, but what are the areas that you are referring to? The APAC business, Asia Pacific, I mean. So in APAC, how do you position China? The excluding China, you want to enhance the APAC. Is that the framework of APAC excluding China? Could you explain that?

Well, about China, following U.S., it's the second-largest market. So we are not going to withdraw it completely from China. That's not something that we expect. But at the same time, including the investment of the listed companies, the minority investment, I think that the horizon of the investment is becoming longer. The capital recycling will be promoted so that the assets will be rotated. So that's our investment policy.

There are no exceptions. So in comparison to others, the minority investment and the investment period will be longer. We would need to rotate our assets there. But for example, in Hong Kong market, compared to two years ago, is recovering quite a bit. Pre-IPO investment in the technology companies is the main investment that we make. So that is relatively short term.

We have experiences, so we'd like to continue working on those investments. So it doesn't mean that we will withdraw or exit our businesses from China. That is not the case. We will look at the individual assets, and if it's longer term, we would rotate the assets. As a whole, we are not going to increase the overall exposure so much. So we want to control the level of exposure as much as we can. And that's the situation in China.

So what about APAC? APAC, it's not just one market. It's multiple countries and multiple markets in APAC. So in terms of or as a region, it's a APAC region, Matsuzaki here with us is in charge. And if you look at, each country or each market. Different cultures and institutions, there are differences. If we can take advantage of our strength, then we would like to expand the businesses. So for example, in Asia Pacific, in the area of the Pacific, Australia, conventionally the auto leasing was the major business.

The real estate related financing, there are opportunities there. So already one or two are being executed. We would like to continue to form a team to promote this. And also India, there could be similar opportunities. Rather than thinking about it as one region, we like to look at each country or each market individually and do whatever we can do. Thank you.

Next question is going to be the last one from the press.

My name's [ Inagaki ], [ Asahi Shimbun ] newspaper. I have two questions. First of all, about ORIX Bank. Lending competition and getting more difficult to get the margin. Now BOJ rate hike, for example, is pushing up the deposit interest rate. And The ORIX Bank deposit interest rate, you found it difficult to increase the rate to get more money. Maybe the business model wasn't working very well. So was BOJ rate hike one of the factors behind this? That's my first question. Second question is about portfolio optimization. There is no sacred area, you said. but within your view, Mr. Takahashi, what are the specific challenges and what are the specific focuses?

With regard to the first question, I think there are pros and cons, both positive and negative. BOJ's rate hike policy or the monetary policy has changed, and the now interest rate is positive and the stickiness is weak. We are beginning to find that out. And it is more difficult to get the arbitrage or the margin. Now, for the finance sector or the bank sector as a whole, it has a positive impact on the sales. Valuation of the banks was lower than 1, but now it's beyond 1.0x. There was a question about the gain on sales earlier. Basically, we got a positive gain on sales and found a very good partner for this business as well. If PBR was below 1x, there was no incentive to probably to sell. Well, maybe not. There was not an incentive to sell by generating a loss. Anyway, we decided the sales, and I think it had both positive and negative factors. And what was your second question? Could you please repeat?

About portfolio optimization, you said you will leave no stone unturned. But what are the specific challenges you see in doing this?

We say there is no sacred area, no stone unturned, so there is no sense of challenge. We will be implementing the reform steadily, logically. And as I said in the summary of the last fiscal year, when we consider capital recycling, it's not just about getting capital gain. We look at ROE and the financial status as a snapshot. So based on the snapshot, some indices are better or worse, and we also look at whether or not they would improve or further grow in following several years. In that sense, we look at growth capacity, growth potential. And thirdly, we want to look at the impact on rating, credit rating, because when we acquire something for portfolio, we have to consider the goodwill as well.

And as I said, in the China business, minority investment does have an impact on S&P credit rating, so we have to think about that impact as well. As I said before, we will just not look at the numbers. We will also look at the qualitative aspects, whether there's synergy within the group, whether it's meaningful for the group to have it. So we will look at all of these aspects in terms of portfolio optimization.

That's all the questions we take from the press. We would like to take Now, Tomioka-san of IR will be leading.

Thank you very much. We would like to take questions from analysts and investors. There are some remote participants, but first of all, we would like to take questions from the people who are present here. Any questions? Anyone here? The person in the front.

Muraki from SMBC Nikko. I have two questions. On page 15, you talked about the ROE, so I would like to ask you a question, 11.7% Is expected for the new fiscal year, so you exceeded your target. ORIX Bank sale gain and also [indiscernible] gain, I think those are included. In the underlying capability, it's above 11%. Are you feeling that? That's my first question. Second question is on page 14 on the left-hand side. The capital usage, utilization, what is the current investment environment? If the situation continues to be the same, the share price being too high, you cannot make investments. Is it possible that this number goes down further? Is there such possibility happening? Well, thank you.

About the ROE, underlying ROE, as I explained earlier, for this fiscal year, ORIX Bank gains on sale and the major sale of others are included. In the previous fiscal year, the Toshiba was showing strong. There was a gain in relation to KIOXIA which are also included. So in terms of our feeling, in real terms, maybe we are very close to 11%, but we have to work a little bit harder. That's how we feel. So that's the very honest feeling that I can share. As for the capital utilization, relatively speaking, divestment under the current environment, the setting I think is, well, I wouldn't say easier, but easy to handle than buying. Divestment is leading, divestment are happening at the relatively high price.

Therefore, the collection is proceeding, the capital utilization comes down and the liquidity position goes up. That has been the trend. As you correctly said, in terms of the real assets, the real estate and also the aircrafts and also the PE, the valuations are rising. So under those circumstances, the projects that we'll interested in working with us, there are many of those examples. How can we increase those projects will be the key. It's not an easy environment to invest in, but unique investment opportunities are the ones that we would like to continue to pursue. Thank you.

I'm Watanabe from Daiwa Securities. Thank you presentation. I have two questions. Page 49, employed capital ratio. Since April, we had exits and the ORIX Bank and SUGIKO. Based on that pipeline, do you have the pro forma employed capital ratio? How much is that right now? On page 49 on the left-hand side, insurance debt, assessment evaluation. Compared to end of December, the amount of debt is actually bigger. Have you changed the evaluation method? What is the background for this?

With regard to employed capital ratio, for 26th March, 86%. ORIX Bank sales was mentioned before, and also SUGIKO. This is PE investment, so this is in and out. Anyway, those are not really reflected in these numbers yet. ORIX Bank sales, if this is included, roughly speaking, 86%, employed capital ratio at the end of the term will be coming down to about 80% according to our pro forma calculations. As I have explained, PE investment and the real asset-focused investments will be accelerated. With regard to your second question, the debt evaluation. Method of evaluation has been changed. That is true. I would like to ask Yamamoto to explain the details of this.

Yes. I would like to provide some additional explanation. For insurance policies acquisition, things are progressing smoothly, this is pushing up the amount of liabilities. Liabilities evaluation, especially for long-term interest. In order to be able to apply this more stably, we did something. Well, our corporate debt market was quite unstable for a while. We combined multiple indices in order to evaluate it more accurately. This is pushing up the number. In terms of net asset, this is basically a negative impact. That's all from me. Thank you.

The person in the third row.

Sakamaki from Mizuho Securities. I have two questions. The first is on page 15. The ROE 15%, FY 2035 March. I think you included your enthusiasm there. A year passed, and I think you have already made a progress. This, the feasibility of achieving 15%, is it becoming better? So could you talk about that? The second question, U.S. business restructuring is progressing. So what is the timeframe that before you see the improvement of the profitability? Thank you.

So 15%, how confident are we? I think that's your question? SO last fiscal year and this fiscal year, if you look at the numbers on page seven, there's a comparison to the FY March '25. I think it's increasing and getting close to that level. I think that's the reason why you asked this question. Frankly speaking, our feeling is that we really have to work very much harder to get to this level. How can I say this? What should we do to reach that level? With us, that we have our Chief Operating Officers and Chief Strategic Officer. We have a Chief Risk Officer. We have the top management team. We have a very frequent discussion, and we are updating the content.

So going through the PDCA, and as long as we take the steady initiatives, I think we can get close to this level. I strongly believe in that. Of course, there could be some temporal improvement of our ROE, ROA, and also there is a decline at some time. But there is still nine years to go, so we like to make sure that we make the linear growth. And if you look at the 3, 5 years timeframe, we would like to get closer to these targets. We would continue to execute what we need to do one by one.

About the ORIX USA, there are several, in March, April, in the area of the private equity portfolio, we made announcement about the sale. In addition to those, there are core and non-core, and we are rotating the portfolio. So maybe we have reached the bottom, but in order to get to the normal profit level, I think we would probably need a few more years. The size of the business could shrink, but we like to make sure that we recover the profitability. That is our priority. In charge of U.S. and Europe, the COO, Suzuki, is here with us. So Suzuki is usually in New York, but very frequently we have a discussion with him to take necessary initiative. So we'd like to spend a few more years so that we can normalize the profitability level. That's the very frank views that I shared. Thank you very much.

Any other questions? Third row from the front.

Thank you. Takemura, Morgan Stanley, MUFG. I have two questions. My first question is related to the last question. How do you view the future of the U.S.? What is your outlook? Page 8 shows that the finance category profit JPY 189.2 billion, and excluding one-time factors, JPY 175.8 billion. So this is minus JPY 13.4 billion. Now last fiscal year, I'm sorry. Correction. The U.S. are actually included in finance, I think. Anyway, debt recovery gain on sales was about JPY 8 billion or JPY 7 billion last year. So I think there's an absence of this. You now have a absence of the profit from the bank. Naturally should be about minus JPY 20 billion, but actually JPY 13.4 billion. So the difference explains the recovery in the United States. Is that the correct understanding? Can you please also talk about the background? That's my first question.

There are multiple factors, and therefore it is very difficult to do an apple-to-apple comparison, but what you said is largely correct. Gain on sales of the servicer and also for ORIX Bank sales in the first half, that is the assumption. So second half, profit will not be coming in from ORIX Bank. But last fiscal year, we had the profit coming in for the full year, contributing for the full year. So net-net for the finance category, we believe that the profit will increase slightly. As you have mentioned, ORIX USA recovery is accounted for. Credit cost allocation was done for ORIX USA in the prior fiscal year.

This was a big allocation, and the absence of this will lead to recovery, big recovery. There are many positive and negative factors. I cannot explain everything today. But that is, basically the picture. Outlook for the United States. This is a very difficult question to answer. In terms of the businesses that we have, downside protection wise, we have done everything we could in the last fiscal year already, basically. So it's just a question of how long will it take to recover. Example deal, project sales is now ongoing, and potential buyers are sometimes private equities. Private equity also has private debt business.

And the private equity, private debt within the current U.S. environment, including the major players, are basically struggling, and the PEPDs that are listed are suffering from much lower share prices as well. So when these problems start to materialize to a greater extent, then speed of asset recycling will slow down, and therefore, we don't have a extremely positive outlook for the United States. Rather than that, we need to take a very close look at what's happening in the U.S. on a day-by-day basis. Just this weekend, Suzuki has come back from the U.S., I think maybe he has a comment about his own assessment.

I'm in charge of Europe and the U.S. My name is Suzuki. Our CEO, Takahashi, has basically given you the overall picture of the U.S. already. Macroeconomic environment-wise, when you look at the non-bank business, including the fund business, private debt impact does slow things down. With regard to ORIX USA, thankfully, the impact is quite small, as was explained before. Our business partners are impacted, affected by this. So again, we are exiting some private equity business, and also there is a non-core portion.

Compared to when we were planning things last year, timing of sales and also the amount that we can get from that is something that we have to pay close attention to, and we need to follow up closely in terms of recovery of the assets. Now with regard to new projects, new deals, there are three things that we're considering, largely speaking. One is a company, Hilco, and Hilco can do asset-based leasing, asset-based financing based on their asset evaluation capabilities, and we can turn this into an asset management business, so this is alternative asset management product structure that can be done for the future. And product mix-wise, we also want to focus on real estate.

This is, of course, real assets. In the United States, agency targeted mortgage in real estate has been our focus, but we want to expand further, including multi-family residential financing and also not just financing, but also equity investments. These are the potential areas that we want to get into, and also other areas where we have real estate related opportunities. Now, asset management and alternative focus asset management, this is something that we will continue to promote. NXT is one of the cores. They do direct lending. The market recognition has improved and the first closing of a new fund launch was also successful. We want to continue to promote this. Will we see the result of this already within six months? The answer would be no. It will take a little bit longer. We will continue to run this business meticulously over the long term.

Thank you very much for a very detailed explanation. I have one more question about dividend. ORIX Bank sales expected in the first half. SUGIKO also first half. First half dividend is 39% against the profit of the first half. Is that the correct understanding? This year you'll be paying out a lot of dividend. Is this going to be the baseline for the next fiscal year's dividend?

With regard to your first question, your understanding is correct. And with regard to your second question, at the board of directors, we are debating this quite a lot, and we need some more time to debate this. We thought that this question will be asked. So let me explain about Toshiba. KIOXIA share based on the large shareholding report sold by several percentage point by March. And equity ratio is already 17.6% as far as we know. This is what we found out at the end of the fiscal year. Now Toshiba uses U.S. accounting standards. Their accounting process, well, they'll be doing the earnings call 15th of May.

We have to wait for that to see how they will do this. But Toshiba may reclassify KIOXIA to marketable securities. This is a possibility. So according to U.S. accounting standards, it will no longer be equity method. It will be market to market.Which means that, based on the share price of last fiscal year-end, it's possible that they want to capture the gain on valuation. So whether Toshiba will sell KIOXIA, even if they don't sell KIOXIA, if it's reclassified to marketable securities, then the evaluation will be different based on the share price at the end of the term.

And whatever Toshiba captures will be captured by us based on the equity method, based on the stake. And I'm sure as analysts you have already did the calculation, but we have to take that into consideration. And last year's prior's dividend, you'd been used as a full may be questionable when you consider sustainable return policy. So there is still a potential debate there, and we need some more time, and we would like to deliberate this at the board level and decide on the policy, the direction.

Thank you very much. Next, I'd like to take a question from the remote participants. JPMorgan Securities, Sato-san, go ahead.

Thank you very much for this opportunity. This is Sato speaking. Two questions, please. First, about the U.S., especially the credit business. I'd like to know more about the current situation. I think you referred to it earlier. The credit value creation expenses is included and in the supplementary information. It's about JPY 10 billion, the lending support, and this I think is mostly U.S. You mentioned that the risk is not so big. And so what is your recognition about this credit loss being included here? Could you explain that? Second is about the capital gain. On page 46, this fiscal year capital gains are mentioned. Already something which was discussed, bank and SUGIKO, JPY 180 billion, I think.

So on the now the capital gain in comparison to your plan, the normal level, something that might emerge from now on, I think that the budget for that is quite controlled. Other sales, does that mean that you're not very aggressive about that? So this is about the capital gain plan. Could you explain the capital gain plan a little bit further? Sato-san, thank you.

Sato-san, thank you. About the U.S. credit cost. If you go deeper and calculate, I think you will be able to get the numbers relatively roughly speaking, about the JPY 24 billion credit cost included in the previous fiscal year. The breakdowns include, as we mentioned in the past earnings call, one thing, as it was mentioned earlier, is the mortgage business. For the agencies, we have that business. so with the high interest rate, which is continuing, the borrower's credit quality is coming down. And so among the numbers that we mentioned, the major credit expense is for the real estate mortgage business. Another is the growth capital for the startups, the financing business. So in that portfolio, specific names, the situation is not so great. So we have some reserves for that.

So those are the 2, that is the mortgage related and the gross capital financing. It's the reserve for a specific name. Those two are the major part of this. Of course, that, we do have a debt business which is very much diversified. Even at the normal level, a certain level of the reserve becomes unnecessary, and that would continue to be the case. but when we announce the interim results, we mention this. As much as we can foresee, when we can reserve or have a provision in the first half, we would like to have a conservative approach to have that. So for this fiscal year, we expect that we can reach to that normalized level.

As for the capital gain plan, it just happens that it's not really toward the end of the fiscal year, but the beginning of the fiscal year, there are some major gains from the sale. It just happened to be happening at that timing. It doesn't mean that there will be a major time lag. We have to look at the market and we would like to try to maximize our assets when we consider the timing of the sale. So I wouldn't mention the specific name or specific number, but in the case of real estate and the renewable projects and the private equities, and we continue to do the asset rotation and the capital recycling. We apply our strategies. For this fiscal year, only one month and 11 month to go. So we would proceed with the sale from now on, and there will be some the proceeds or the gains from those sales booked in eventually. Thank you.

One point of clarification. Earlier, U.S. in the United States, what I wanted to ask was that on page 32, especially the credit business line and for the full year, reserve or provision was mentioned. But at the end of the fiscal year, credit line probably was included. That's the growth capital. This is for the startup lending. That is the debt. That is where the reserve provision happened?

Yes, that's correct. Your understanding is correct.

Thank you, Mr. Sato. We see 2 more hands up. Nomura Securities, Sasaki-san, please ask your question.

This is Sasaki, Nomura Securities. Thank you. Page 8 of the presentation material, I would like to understand how to read this slide. For FY '27 March, profit is high. And then 28 March, considering the following fiscal year, I think you have big names with latent profit. Until March '28, I expect the profit level to continue to be high or continue to increase. What about FY '29 March or 2030 March? Is there going to be some ups and downs, or do you think the profit, the growth trend will still continue? What is the management's understanding? That's my question.

Last year, Greenko gain on sales and also ORIX servicer sales are a little bit smaller. For this fiscal year, we have a latent gain for sales for ORIX Bank but these are one-offs. This is not something that we can book year after year, as you can imagine. In order to maintain the growth in profitability, we believe that there are a lot of latent profit in core business as well, we have to materialize that. We don't want to sell things just for that purpose. Real estate, energy, and aircrafts.

We will be recycling assets, we buy and sell and buy and sell. We need to continuously do that. Rather than going up and down year after year, we want to grow a recurring capital gain on a continuous basis as much as possible. But it depends on the market situation. Sometimes we can sell at a higher price or lower price against our expectations. Considering the recent environment, we are seeing some deals which are priced higher than our original expectations but can we continue this trend into the next fiscal year and the following fiscal year? Well, we have to think about the macroeconomic environment impact. We're not talking about 2035, but we're not just thinking about next fiscal year, the fourth fiscal year. We're really focused on executing what we can within this current fiscal year.

Meaning that we want to capture all the profit opportunities, and also we have the long-term vision into 2035, and there was a question about the feasibility of this. We will be focusing both on ROE and profit growth. And we have the mid to long-term plan, but we, as management, focused on what we execute within this current fiscal year in terms of resource and also time. I know that I'm not answering your question directly. I'm sorry. That is what we're thinking.

Thank you. We are getting close to the end time. I'd like to take one last question. BofA, Tsujino-san.

Thank you. Two questions. This year's forecast. Business investment and equity profit. It's difficult, I'm sure, to try to come up with the expectations, so higher than last year and relatively conservative forecast, I think, is shown. Earlier, you mentioned that there could be investment securities or the, it's possible that the shares are being sold quite a bit. In that sense, you are having the conservative view. That's how you got to JPY 530 billion. That's my first question. Should I go one by one?

Tsujino-san, hello. To your first question, you're referring to Toshiba. This, JPY 550 billion, the assumption that we have is that Toshiba has KIOXIA under the equity method, and ORIX also have that under the equity method. We are the LP. How Toshiba will announce their business results, we don't know. After checking on their business or earnings, if the classification changes, then from the equity method to the investment securities, it could change.

I'm talking about the KIOXIA. We need to look at how they announce their business results. Once again, based on that, we would like to make the evaluation. I think that there is a sale on the gain on sale of the KIOXIA. Based on a certain level of the assumption, you made this forecast number. Well, there's a three-month delay to incorporate the equity profit of innovation to Toshiba. As far as we can confirm, during the last fiscal year, there was a sale and the unit price of the sale is not known, but we base our forecast on the reasonable price and the parts that were sold are incorporated into the forecast.

As for the forecast for this fiscal year, the environment and energy, the impairment, I thought I expected a bigger impairment, but it was smaller than what I expected. That is in Q4, I think, in Q4, it's JPY 6.1 billion. This, March 27th, I think there could be some additional impairment. Is that the case?

As of now, no. Well, I was the head of the energy and environment in the past, so Tsujino-san probably thought that this is low. I was actually my impression was that this was quite high, so this is regrettable. We have no plans to incorporate any additional impairment.

Just one last point. March 28, the ROE of 11%, it's a long way in the future, and probably it's up to Toshiba. I'm sure that it was difficult for you to come up with this number, those are the very rough numbers. If no changes from Toshiba, then 11% probably is difficult to achieve. Is that right?

Well, earlier, during the press, or Q&A with the mass media, there was a similar question. Of course, it's not an easy number for us to achieve. We need to make further efforts. Naturally, when we made the plan, in the previous fiscal year, we said that our target remains the same. At 11%. We continue to make efforts, and it is an achievable number. Right now we are May '26. In March '28, there is still two years to go. I think there are many initiatives that we can take. We are not changing this. As a management team, who are here today, we will be working hard in coming 2 years in order to get to this level. Thank you very much.

Thank you very much. That concludes the earnings call. Before closing, we would like to ask our CEO Takahashi to say a few words.

Again, thank you very much for joining us today. As I said in the beginning, last year, we announced our long-term vision and also long-term financial objectives that we want to achieve over time. We're talking about long duration, and there are many things that will need to be executed. And 12 months have passed. We have nine years still to go. It's a very long duration, but we just need to focus on execution. We will be implementing action plans one by one steadily in order to achieve our goals. And to that end, the whole management team will work closely together. And we really appreciate your kind support going forward, and I would like to thank you again for joining us today. Thank you.

Thank you very much. And that concludes the earnings call. Thank you very much for your participation.

It's time to begin. Thank you for joining us despite your busy schedule today for ORIX's earnings call for 9 months ended December 31, 2025. My name is Nakane from Investor Relations, Sustainability Department. I'll be the master of ceremony. Thank you for this opportunity. Today, we have Operating Officer responsible for IR, Kazuki Yamamoto. And he will provide you with an explanation for about and it will be followed by Q&A and the whole program is scheduled to be approximately 1 hour. Yamamoto-san, the floor is yours.

Thank you for the introduction. Thank you very much for taking the time out of your busy schedule to attend the ORIX Group's earnings presentation. I am Kazuki Yamamoto, responsible for Corporate Planning, Investor Relations and Sustainability. Let me explain the financial results for the third quarter of the fiscal year ending March 2026. Page 2 of the handout contains the key points we want to convey today. The first point is net income.

Net income for the 9-month period was JPY 389.7 billion, up by JPY 117.9 billion from the same period last year. This was our highest third quarter cumulative net profit level. We achieved 89% of our revised full year forecast of JPY 440 billion announced at the time of first half results call. The second point is pretax profits. Pretax profits were JPY 567.7 billion, an increase of JPY 184.3 billion, year-over-year, and all 3 categories of finance, operation and investments saw profit growth compared to the same period last year.

Growth was particularly strong in investments, and we still achieved an increase in pretax profits year-over-year, even after excluding a large gain on the sale of Greenko shares and valuation gains on the remaining stake. The third point is shareholder returns, along with first half results. We also announced the expansion of the share buyback program from JPY 100 billion to JPY 150 billion. By the end of January, we had completed buybacks equivalent to JPY 128.1 billion with a progress rate of 85%. This is the increased program. We will continue to make steady progress on acquiring shares to complete our full share buyback program.

Please turn to Page 3. I will explain pretax profits for each of the 3 categories. This page shows our chart for each of the 3 categories, Finance. Operation and Investments with 9 months cumulative results for the previous and current fiscal year. First, at the top, the dark blue represents Finance. Segment profits increased by 8% year-over-year to JPY 145.5 billion with a progress rate of 81% against the full year forecast. ORIX Life reported growth in investment income, and we were able to increase finance revenues in the Australia and Asia, excluding Greater China.

Next, the light blue bar, second from the top represents Operation. Segment profit increased by 17% to JPY 189.5 billion compared to the same period last year with a progress rate of 79% against the full year forecast. In the third quarter, we recorded a gain on the partial sale of shares held in Canara Robeco, an asset management company in India at the time of IPO of the company. Airport concessions and real estate operations also saw improved performance in the third quarter. Moreover, the Auto segment posted strong earnings, thanks to a robust used car market.

The Ships business also boosted earnings with high asset efficiency, having leveraged synergies with Santoku Shipbuilding, which joined ORIX Group the fiscal year ending March 2024.

Finally, the pink bar from the top represent Investment segment's profit -- segment's profit in this category increased by 100% compared to the same period last year, reaching JPY 261.4 billion, marking a significant increase in earnings. As outlined earlier, we booked a large gain on the sales of Greenko in second quarter and sales of Ormat geothermal power business, which also was a contributor.

In real estate, we sold several properties, including Hotel Universal Port VITA as well as office buildings and rental condos. Furthermore, domestic PE investees mostly performed well, resulting in increased profit contributions. As a result, segment profits for the 9-month period increased by 40% year-over-year to a total of JPY 596.4 billion.

Further, pretax profits increased by 48% year-over-year to JPY 567.7 billion. The difference of JPY 28.7 billion between the total segment profits and pretax profit is due to business expenses in the administrative departments and other areas. Steady profit growth across our finance, operations and investment segment was a key feature of our performance in the third quarter.

For the fiscal year ending March 2026, while building on achievement to date, we aim to drive sustainable growth and further improve capital efficiency. In the fourth quarter, based on the business plan currently being formulated and the medium-term outlook for each segment, we will continue to take timely and appropriate actions as needed. Accordingly, there is no change to our full year net income forecast at this time.

Now please turn to Page 4. This page explains ORIX's progress in capital recycling. The upper section with a light orange background shows sales, while the lower section with a light blue background indicates new investments. Also, the blue and pink circles in the central box shows the category for each of the businesses sold or bought.

For the 9 months -- so for the 9-month period, we recorded JPY 196.6 billion in capital gains with cash inflow due to divestments amounting to JPY 790 billion and cash outflows from new investments amounting to JPY 700 billion in total.

Now new investments are being continuously pursued both domestically and overseas, focusing on operation and investments among the 3 categories. A key investment in operations is the acquisition of our Hilco Global, a world-leading company in asset valuation. Furthermore, we have expanded our investments in aircraft supported by generally strong passenger demand.

In Investments, we made a PE investment in LULUARQ, the operator of capsule toy specialty source during the first quarter. In the third quarter, a TOB for I-NET, a company listed on the Tokyo Exchange -- Stock Exchange Prime Market was executed. This initiative is part of Pathways, one of our strategic investment areas, which aims to undertake investment in AI infrastructure businesses and DX-related business fields.

Additionally, we invested in AM Green convertible bonds and logistics facilities. Although not shown on this page, we announced the formation of a PE fund with the Qatar Investment Authority, QIA, last November and although this fund specializes in domestic investment, but investment in LULUARQ and I-NET were before the fund launch. So we plan to leverage the fund for use in future deals.

Gains on asset sales, cash inflows and new investments are all progressing steadily. However, there is no change to our full year forecast from the revision announced at the second quarter.

Now next Page 5 and 6 provide a summary of segment profits and assets. On January 1, 2026, we announced organizational reforms to restructure our 10 segments into 3 business divisions: the APAC business division, Infrastructure Business Division and Europe and America business division as well as new banking and insurance units. However, for FY '26 March end, we continue to manage our business using the existing 10 segment framework. So we will explain our results using these. For detailed information on the performance of each segment, please refer to the slides from Page 10 onwards.

First, cumulative segment profit in Corporate Financial Services and Maintenance Leasing for 9 months period increased by JPY 14 billion, up 21% year-over-year, reaching JPY 80.2 billion. The Corporate Financial Services unit in the second quarter posted a profit on the sales of ORIX Asset Management and Loan Services Corporation and Nissay Leasing. The business enjoyed increased fee income from various activities, including operating lease investments. Together, these resulted in increased profits year-over-year.

The Automobile unit steadily expanded earnings by successfully passing through higher maintenance and other cost increases through pricing with customers understanding. They also sustained strong used car sales. This helped the unit achieve its highest ever profit for the third quarter.

The Rentec unit achieved growth in inventory style rentals of ICT equipment on Windows 11 related replacement demand and saw robust sales of used rental equipment resulting in profit growth. Despite Auto and Rentec posting growth in new auto lease executions and PC rentals, respectively, segment assets decreased by JPY 10.1 billion to JPY 1.8745 trillion compared to the previous period year-end due to the sales of ORIX Asset Management and Loan Services and Corporations.

Next, Real Estate segment profit was JPY 56.9 billion for the 9 months. The Investment and Operation unit posted revenue growth of the sales of -- from the sales of Hotel Universal Port VITA as well as from the operation of Inns and Hotels. However, it experienced a year-over-year decline in segment profits, owing to the absence of the large-scale gain from the sales of 100 [indiscernible] in FY '25 March. Details concerning the outlook for the facilities operations business will be explained later.

The Daikyo unit was increased profits aided by activities such as the sales of rental condos. Segment assets increased by JPY 44.3 billion compared to the end of the previous period, reaching JPY 1.2025 trillion. The main reason behind this increase was investment in the Osaka Integrated Resort project, progressing as planned. In addition, assets rose owing to the completion of several logistics facilities by the investment and operation unit. And Daikyo also increased its investment in newly built condos.

The PE Investment and Concession segment achieved profit growth of JPY 27.8 billion or 42% year-over-year to JPY 94 billion. The PE Investment unit reported higher profits year-over-year due to robust performance at current domestic PE investees such as Toshiba and DHC. On a stand-alone third quarter basis, we did not execute any individual exits from our PE investments. However, equity earnings from our investment in Toshiba made significant contributions. As a result, quarterly profit exceeded both the first quarter of the previous fiscal year, which included gains from the sales of Sasaeah Holdings and the fourth quarter when the exit of Wako Pallet was realized.

Regarding the Toshiba investment, while we recognize its earnings as equity method investment income, there is a 3-month lag in reflecting those results in our financial statements. Now the Concession unit continued to perform well as Kansai International Airport saw increased passenger numbers, especially on international flights. We will explain the impact of China later, but please note that earnings at -- the third quarter earnings at Kansai Airports will be reported together with ORIX's fourth quarter results with a 3-month lag.

While the impact for FY '26 March is likely to be minimal, we anticipate a certain downside for the next fiscal year. Data on passenger numbers and other details for the 3 Kansai Airports up to December are shown on Page 7 for your information. The Investments and Concession segment assets was up by JPY 127.7 billion from the end of the previous period to JPY 1.1506 trillion. The main reasons include new investment in LULUARQ, the successful TOB of I-NET, making it our subsidiary from this third quarter and increased balances in equity method investments.

Environment Energy segment's profit increased by JPY 109.1 billion year-over-year, reaching JPY 102.2 billion, a substantial profit increase is mainly due to gains on the sale of Greenko energy and valuation gains on the remaining stake as well as gains on the sale of Zeeklite and Ormat.

We completely divested our stake in Ormat in third quarter.

Domestic earnings show that solar power sales revenue decreased in the third quarter due to seasonal factors, but electricity retail sales volumes and prices remain strong. Regarding overseas operations, interest income from convertible bonds of AM Green, which were purchased in second quarter, contributed to positive performance. Additionally, over [indiscernible] sales are in the recovery trend, we continue to remain cautious on development and operation projects at this firm.

Segment assets decreased by JPY 11.1 billion to JPY 1.002 trillion compared to the end of the previous term due to capital recycling. Profit of the Insurance segment increased by JPY 12.4 billion, up 20% year-over-year, reaching JPY 74.1 billion. The impact from expansion in investment assets and rotation of portfolio securities has boosted revenue.

In terms of product sales, along with a single premium wholesale insurance Moonshot and income protection insurance Keep Up. Launched -- and in the first half of FY '26 March, respectively, sales of whole life insurance, RISE and Yen Can launched in December was also strong. Segment assets increased JPY 193.7 billion to JPY 3.203 trillion compared to the end of the previous term.

Profit of the Banking and Credit segment decreased by JPY 2.2 billion year-over-year, reaching JPY 19.9 billion with interest rates rising, while asset management yields have gradually improved, funding costs for deposits are rising ahead of those. The main reason for the year-over-year decrease is the booking of losses from selling long-term bonds through the third quarter aimed at improving the bond portfolio. We are responding flexibly with priority on maintaining financial soundness and enhancing future profitability.

Segment assets increased by JPY 115.3 billion to JPY 3.2599 trillion compared to the end of the previous term. New executions of investment real estate loans and lending to strategic areas have grown steadily. Additionally, we explained in the first quarter, a JPY 30 billion dividend was paid out to the parent company, ORIX in July of last year, helping to optimize capitalization.

Profit in the Aircraft and Ship segment increased by JPY 4 billion, which is 9% higher year-over-year, reaching JPY 48.6 billion. Aircraft leasing saw increased plant sales in the third quarter, resulting in profit growth during the 9-month period. Lease rates continue to improve and the business environment remains favorable. Of note also advanced aircraft sales and booked profit contributions from the Castlelake portfolio, which was acquired in January last year, resulting in similar profit growth.

Ships saw increased ship sales in the third quarter, but experienced a slight profit decrease due to the absence of the sharp rise in charter fees in some contracts seen in Q2 of FY '25 March. Segment assets increased by JPY 46.5 billion to JPY 1.2785 trillion compared to the end of the previous term.

Aircraft leasing assets increased on investment of new planes, but assets in the ships unit was lower on sales on owned ships. And overall, it was flat, excluding ForEx.

ORIX USA segment reached JPY 14 billion for the 9-month period, showing positive recovery, thanks to valuation gains on investments in PE booking in Q3. However, profits for the 9-month period decreased year-on-year due to the absence of the reversals of the credit costs booked in FY '25 March and the credit loss expenses and impairments booked in the same year. Credit losses and impairments mostly stemmed from real estate lending originated primarily during the post-COVID period of financial easing and legacy assets before those days, higher U.S. dollar interest rates and prolonged inflation and uncertain economic outlook stemming from tariffs and other factors also contributed.

To date, we have strengthened our investment and lending standards, applied more rigorous screening to new deals and enhanced risk management to existing assets. And through these efforts, we continue to improve and reshape our portfolio. Please refer to supplementary information, Page 25 and 24 for further details of OCU performance. Segment assets increased JPY 491.6 billion to JPY 2.0856 trillion compared to the end of the previous term. Excluding the impact of the Hilco Global acquisition and exchange rate fluctuations, assets are declining, and we are steadily moving forward with rebuilding our business and portfolio rotation.

Profit in ORIX Europe segment increased by JPY 9.2 billion, which is a 24% rise year-over-year, reaching JPY 47.3 billion. In the third quarter, ORIX sold a portion of its holdings in Canara Robeco in conjunction with its IPO. Additionally, Robeco Group increased net cash inflows and expanded AUM to a record JPY 500.5 billion, boosting management fees and underpinning profits. Segment assets increased by JPY 127.6 billion to JPY 796.9 billion compared to the end of the previous term, mainly due to exchange rate effects.

Profit in Asia and Australia segment increased by JPY 11.4 billion, which is 41% rise year-on-year, reaching JPY 39.3 billion. Although the increase in profit this quarter was partly driven by one-off factor and valuation gains and unlisted equities, we continue to restrict investment stance in Greater China, while in other APAC regions, we expanded earnings primarily through financial income generated by local operations, resulting in overall profit growth.

Segment assets increased by JPY 125.9 billion to JPY 1.851 trillion compared to the end of the previous term. Assets have increased in some regions such as Australia and India, mainly due to exchange rate effects. Please see Page 29 for graph showing a segment asset breakdown by country and region, where China has seen recent increase driven by exchange rate effects. That concludes the explanation by segment.

Please turn to Page 7. I would like to add some explanation about inbound tourism. Concession centered on Kansai International Airport is reflected in ORIX's consolidated results with a 3-month lag through the earnings of Kansai Airport. So for this third quarter, we incorporate Kansai Airport's July through September performance, which contributed to higher profits.

Since December, the number of Chinese passengers has declined approximately 40% year-on-year, just looking at September. And in addition, late January, major Chinese airlines announced extensions of the deadlines, allowing free cancellations for Japan-bound tickets. As a result, unfortunately, we expect downward pressure on earnings and continue for the time being.

However, the number of international passengers and inbound tourists in general, well, you can see the trend after the COVID-19 pandemic and also the impact of Mainland China. You can see that on the right-hand side graph. As for real estate operations in Kansai area, there is an impact of a discount, mainly focusing on group tourists from China. And therefore, currently, it is difficult to increase the unit price.

However, real estate operations directly operated by ORIX, we have been working to improve RevPAR focusing on hotels in Kansai region. The share of Mainland Chinese customers to total assets in both hotels and inns is small. And ORIX Hotels and Inns tend to specialize in individual Chinese travelers and earnings have remained steady. Meanwhile, some facilities have seen bookings slow during the Lunar New Year period. So we are carefully monitoring the situation.

Real estate operations like hotels and inns are affected by inflation and rising construction costs. And therefore, we will aim for sustainable growth while carefully selecting new investments.

There's basically no impact on rental cars because driving licenses issued by [indiscernible] in Mainland China are not valid in Japan. And in Aircraft and Ships segment, we continue to see steady passenger traffic, mainly from Europe and United States and solid supply and demand in aircraft. And therefore, overall ORIX's inbound tourism-related businesses appear to be well balanced.

Thanks in part to the success of the Expo held last year, global interest in the Kansai region rose significantly, both in terms of the economy and opportunities. In our integrated report 2025, we highlighted a range of value creation initiatives, including the Expo Kansai International Airport, advanced opening of [ Kita ] district and the launch of globally branded hotels. We would give a broader audience and effortless way to experience the atmosphere and momentum of this region. And to that end, we are planning to introduce a video -- short video on our website. Apologies for taking a moment during this earnings presentation, but we would like to share this video teaser preview over the next 90 seconds or so.

[Presentation]

I believe Kansai is now entering a period of significant change. Kansai refers to a region in Western Japan centered around Osaka, Kyoto and Kobe. We know that there is a great expectation. So during the World Expo, many dignitaries are participating from around the world, we were able to show the world that Tokyo isn't the only global city in Japan, Osaka is also a global city. We want to be very active in Asia as a result. And I hope that the people understand that what we're trying to do. Thank you very much for viewing the video.

Please turn to the presentation material and turn to Page 8. This is our financial strategy, consolidated balance sheet. Financial breakdown is shown on the left and key indicators on the right. Total assets increased by JPY 1.2594 trillion compared to the end of last year. Excluding the FX effect, there was an increase of JPY 800 billion. And the largest factor was the consolidation of Hilco Global. And then we have a PE investment and also assets increasing in insurance and banking. But for insurance and banking, self-funding is also possible.

Long-term debt, short-term debt and deposits increased by JPY 363.4 billion, mainly due to the growth in deposits in ORIX Bank and the new bond issuance. We will continue to diversify funding sources and increase the ratio of long-term borrowings to maintain stable and competitive funding. Insurance contract liabilities and policy reserves decreased by JPY 234.2 billion. This was mainly because of higher discount rate used to measure insurance contract liabilities, resulting in a reduction of liabilities on the balance sheet. And this more than offset an increase of new single premium policy sales.

And the total shareholders' equity was increased by JPY 495.2 billion, of which JPY 234.2 billion was attributable to the reduction in insurance contract liabilities. And the remaining increase primarily reflects the accumulation of retained earnings. Shareholders' equity ratio is 25.3%. The ratio, excluding deposit is still at 1.5x.

On the right-hand side, the graph shows the employed capital ratio, which remained at around 90% due to capital recycling. By maintaining appropriate employed capital ratio, we aim to maintain an international credit rating at the A level going forward.

Please note that the calculation model has been updated since -- from Q3. There are no changes in terms of risk tolerance or risk-taking policy, but the risk ratios are now defined at more precise business and unit levels than before. While uni-funding costs, including bank deposits are gradually rising, foreign currency funding costs, mostly in U.S. dollars continue their downward trend. We strive to reduce capital costs by leveraging our competitive A-level credit ratings and diversified funding capabilities.

Please turn to Page 9. Progress in our share buyback program is as indicated in the executive summary. Payout ratio for full year is 39% of our net income per share. We want to maintain this level. Left bottom, JPY 153 or so per share, this is based on the assumption of net income forecast of JPY 440 billion. We will give further details at the end of the fiscal year.

That concludes my presentation. Thank you very much for your kind attention.

Thank you. We are now ready for the Q&A session. [Operator Instructions]

So we have from JPMorgan [ Sato san].

Yes, I am Sato from JPMorgan. So I'd like to ask a question about ORIX USA, a little details. However, at the time of financial results announcement this time, so the closed ORIX Capital partner, I think you have closed it. So is it related to that, is what I want you to confirm?

And Hilco Global, so you have integrated the company under consolidation. And I know that you're going to be revisiting your business plan based on this acquisition. And on Page 24, earnings outlook, for example, as compared to 3 months ago or 6 months ago, it is going to be revised to downside or rather than upside. And also, if there was to be any kind of progress that is made in terms of other businesses.

So first of all, OCP evaluation -- profit within the portfolio, the investees, there was a growth of EBITDA, and that was quite significant. And as a result, that evaluation gain was -- occupies the majority. And also other closed deals, so we are aspiring to exit sooner rather than later. And at the end of the day, we are considering to exit out of those investments.

And as for Hilco Global, thank you for your question, has been shown, so we have 100 days plan, which is currently being executed. And so ORIX Group Global and Hilco and also out of the entire group, -- so what -- how can we enjoy the collaboration, in fact, is what we are foreseeing.

On Page 25, as you can see, so Hilco Global, where it is heading to, like automotive, like parts and components and also at the same time, advisory businesses. So it is quite speedy. So without losing any kind of strength of Hilco, we would like to acquire new kind of businesses that would work out to be positive. And also OCU as a whole, Hilco Global inclusive, the overall picture of the matter is in the business plan that we are formulating currently, leveraging on our balance sheet, we are, in fact, scrutinizing the details so that the OCU business can be rebuilt, and we hope to be able to explain that at the next earnings call.

So I hope this answers your question.

Well, in that case, just so that I'll be able to have a better understanding. So what was closed back in January. In the next quarter, irrespective of the size, I understand that there will be a profit that will be generated.

As to your question just now, towards the closing, so there will be an evaluation that will be conducted. And so additional kind of gains on sales is not to be expected because the valuation gain has already been incorporated.

From Morgan Stanley, MUFG Securities, Takemura-san, please.

This is Takemura, Morgan Stanley. I have a question about the overall progress and your view on the progress. Third quarter was closed. In the second quarter, you upgraded the plan, and even against that plan, the progress was quite fast. So compared against the plan, what was better or worse or was stronger or weaker? Can you please share as much as possible. And also because of the high progress rate, maybe in the fourth quarter, do you expect some downside that will offset this faster progress.

Thank you for your question. In the first 9 months, first of all what is progressing strongly. This is Page 3. I would like to use this page to explain. As I have mentioned, as for investment, this is JPY 261 billion and Greenko JPY 95 billion. And in terms of investment efficiency, this is very good. Toshiba noncore business divestiture and also Kioxia post IPO. So these are all captured with 3 months for LP earnings, and this is progressing faster than expected. But we're talking about the semiconductor share prices. So this is not something that we should be commenting on, but the share price level is quite high in our view.

As for the operations, as we have explained, Canara Robeco again, this was very smoothly launched. And with remaining share, this is equity based investment. We will continue to move to a situation. But including the emerging markets, we see this kind of business definitely growing. And the third point I would like to mention is based on the result of the election, we expect the domestic economy to grow stronger. I talked about inbound, but automotive, lease, IT and also funding requirement. We believe all of these are moving very solidly. And until we close the fiscal year, we will continue to build up the deals, and we are really hoping that we can do better than the plan in terms of finance business as well.

However, with regard to the first quarter, as I have just explained, for the full year, it seems to be good, but performance for next fiscal year or the next 3 years, we need to verify the outlook and think about the capital efficiency as well as the solidity of the earnings plan. And based on that understanding, we will continue to address the situation. So I'm not talking about specific deals or projects, but we will be evaluating things on a regular basis as appropriate. And right now, I don't have anything specific that I can mention. But we will continue to scrutinize the business plan and share information. And I hope that answers your question.

Yes. Just one point of clarification. USA, gain on valuation, was this part of the plan?

Thank you for your question. Ultimately, company's situation is always looked at in detail. So this is within our expectations, we can say. But invest in ORIX USA and ORIX Capital Partners website, when you look at website, you know who are investing and the telecom network data center service investees impacted by the AI boom in the U.S. performing very strongly. And the EBITDA growth of those companies can be incorporated at fair value, which means that this domain is growing stronger than we had expected. And this is one of the factors that was reflected in the performance in the third quarter.

So next, we have from SMBC Nikko Securities, Muraki-san.

I am Muraki from SMBC Nikko Securities. So I may repeat some questions, but towards the fourth quarter in terms of cost incurrence, is there anything that we need to be mindful of. So in posting some of the losses in the past, such as ORIX Bank, ORIX Life. There was some loss on sales of some fixed income products. And also in the United States, credit cost of JPY 4 billion was generated as well. So there was some credit loss that had incurred as well.

So in more precise manner, I wasn't able to hear you. But with regard to Elawan, with the individual kind of project, I think you said taking a cautious and careful step. I suppose there is a goodwill. Can you carry it over the goodwill for Elawan. So I know that there are a lot of technical kind of details, financial technical details, but...

Okay. I would like to answer one by one. First of all, as I have mentioned, in whatever the way the cost that may incur, so it's not that we are being careless, but such as the public AI or data center that has been remaining to be pretty robust, but also tariff related, trade related, in fact, remains to be uncertain. So therefore, it's pretty mix.and real estate although the short-term interest rate is coming down, but long term, especially super long-term interest rate is still rising. So the credit cost may be posting dollar interest rate, while it was almost 0, especially the short-term rate, especially the mortgage loan that is increasing.

So some credit loss that may incur has been incorporated and also legacy assets out of the corporate is what I have mentioned is kind of corporate risk. There are certain provisioning that may perhaps prove to be necessary. So this is why every quarter -- so some of the fixed income assets that we will be kind of listing them out for seeing some risk that may generate some losses. So as for the fourth quarter, I think the same kind of procedures will be undertaken. So from that perspective, with regard to the credit cost for this year, so we will not wait until the fourth quarter. And at the regular pace, we would continue to revisit the situation so that we'll be able to in advance incorporate the losses, if there was to be any.

So as you have mentioned about Elawan, on an individual project by project basis, we have been taking a very careful and also cautious stance. So Elawan's goodwill and also at the same time, the project that is in progress, for example, work in process, for example, and we have been incorporating some intangible assets as well. So the business progress as compared to our initial plan, especially at the reset of the economy and other factors taken into account, there has been some delay, however, in the project, but we are beginning to see some signs of improvement.

So therefore, the plan will be reviewed. And so this is what we need to do, we know. But if there was to be any kind of aggravation in terms of the P&L, then we will not wait until the very end, but rather to review the project itself. So Elawan at the center on a midterm business plan perspective by project by project, we are scrutinizing each and every project and also reflecting the result of the assessment. And in light of all the individual assets, we would like to take necessary measures so that there will be no carryover of any kind of negative legacies onto the next term.

So as has been mentioned, this year as well as the last as a result of yen's interest rate rising, if there was any loss incurring from the bond of fixed income assets, we are incorporating some of the foreseeable losses by the third quarter. In terms of the amount, it is not that sizable, to be honest. So we would not have unrealized loss, not a huge amount. And as a result of some impairment that has been conducted, there should be no further impact that we can foresee. On the other hand, life insurance, it is true that the unrealized loss is enlarging. However, basically, -- so we have -- we do kind of match it against the policy kind of asset as well.

So in terms of the switchover, order churn has not been happening very much, which means that from an operation perspective, there seems to be no kind of -- the accounting kind of loss that we may have to calculate. We are not prepared to be doing so at this point in time, so I think we still have some leeways. I will not be able to say anything in definitive terms, but that's all I can share at this point in time.

Daiwa Securities, Watanabe-san, please ask your question.

This is Watanabe, Daiwa Securities. I would like this question about Page 8. 92% at the end of September, now 89%. This is improving the employed capital ratio. And you have explained this in your presentation, but what did you change? And did the target level change. And in thinking about how to use the excess capital, do you have any updates on the capital strengthening for the insurance?

Yes, please turn to Page 8 for employed capital ratio. [indiscernible] was updated in the third quarter. So I would like to add some explanation. As was said before, year-end team looks at the risk dashboard. We have been improving the dashboard. Portfolio risk management is now more detailed. We can look at this on a project-by-project basis. We are trying to do that. And the risk volume that we were looking at as a lump sum was broken down to project level and the risk level was actually lower than we expected. So the employed capital ratio is now lower. And maximum loss based on global financial crisis. That was what was used as a parameter, but we also reviewed that. So from 91% to 81%, the ratio has come down.

Does it change our risk appetite? Well, this is just a result of calculating in great detail, so it doesn't directly impact our risk appetite. However, 10% investment capacity of buffer is present. And also in terms of PE ratio and the equity ratio, this is quite conservative. But as long as it doesn't negatively impact our rating, it is actually possible for ORIX to make flexible investments.

And your second question about liability for Life assessment. Thank you for your question. On the left-hand side, on the table, you can see the insurance contract liabilities, reduction of JPY 234 billion. I was explaining that. And this is mark-to-market based on the long-term bonds.

As you may know, toward the end of last year, 20-year or 30-year term bond issuance reduced. So there are fewer bonds that we can refer to. So what can we do now? Now the life insurance company is looking into various parameters. Financial institutions and accounting auditors, they are discussing these details in order to review the references so that we can improve the index to provide more stable evaluation of the assets. And as a result of the improvement, the life insurance company wants to introduce better indices. And if they can do that, we believe that is an improvement. And this is still in discussion.

And we're just telling you what kind of initiatives are being done. So bond issuance was smaller, spread was expanding. These factors had impacts, and we wanted to make some adjustments. I hope you understand, I'm sorry that my answer is not very clear, I know.

So after the adjustment, if you can just step evaluation, can you utilize the excess capital for shareholder return, for example, growth investment?

Well, the liability assessment evaluation, we don't need to be overly discounted. So we have to check that first. Utilization of net assets is not really the focus. We're looking at the parameter whether the parameters are accurate. We wanted to evaluate the accurateness of the parameters.

Next, we have from Mizuho Securities, Sakamaki-san.

I am Sakamaki from Mizuho Securities. I have one question. So this time, from the deck, so capital profit and base profit, I think, was not incorporated because I think there is a lot of evaluation gain or evaluation profit. So how -- what was your takeaway in accordance with the previous way you were expressing?

So capital gain -- as to the capital gain versus base profit, we did not incorporate such a page this time, but I think we had some mention of this. So capital gain, in fact, is shown in the capital recycling page. So let me make sure. So JPY 195.6 billion. And if you were to subtract that, you would end up seeing how much was generated as the best profit. So as a result of this JPY 196.6 billion, and so therefore, you see this was not to be kind of replicated. So therefore, some -- from investment community had said that it is quite misleading. So this is why, as a result of escalating this to the Board and we have decided to disclose on a fee category basis and Canara Robeco's gain on sales, for example.

So capital gain business of finance could be a possibility as well. So it's not that we have decided to refrain from disclosing what we used to. But as for the base profit, for sure, it is steadily growing. And so therefore, we just wanted to prioritize this closure based on those 3 categories. And so the base profit versus capital gain, so we do, of course, respond. Should you have any questions and should you want the precise numbers by all means. Thank you very much.

Nomura Securities, Sasaki-san, please ask your question.

This is Sasaki, Nomura Securities. Just one point of clarification. Performance up to Q3, pretty strong. Credit cost is posted. And in the fourth quarter, certain things may happen. And as a result, next fiscal year or the next 3 years, how is the plan shared with the management or how is it aligned?

With Takahashi-san as a new CEO, more emphasis were placed on ROE. The biggest point of your question, I believe, is can we invest actively into high-quality deals. And this is a focus of our discussion internally. PE investments generating new profit. As Takahashi-san mentioned, this is one of the important strategic pillars. So wants specifically, which domain do we want to promote this? This is the most imminent discussion. And once we have the results for FY '27 March and '28 March, we should be able to aim for continuous growth in profit. But divesture will also happen and as a turnover will also happen during this time period, and we may have some new capital.

So JPY 150 billion of share buyback. So we added JPY 50 billion. JPY 150 billion is not the baseline going forward. But we increased from JPY 50 billion to JPY 100 billion in the beginning of the year. So we want to be flexible in considering the shareholder return as well. So this is something that we're discussing for the short term.

For JPY 100 billion of performance as we said when we made the adjustment, this is the highest in accord, and it reflects the major sales like [indiscernible]. And for next fiscal year and beyond, we have to check again. But our own watermark has -- high watermark has also increased. But we will not just look at that. We will also think about high capital efficiency investments. I don't think I'm answering your question very directly, but I hope that's okay.

What you have just said is profit growth will continue to some extent. And we want to increase ROE and meet the 11% target for ROE. Is that the correct understanding. Because first half and second half had slightly different nuance.

Absolute amount of growth in terms of profit, I'm not saying that we are committing to that within this structure. Whatever contributes to capital efficiency, well, in terms of P&L losses, we will not be just focusing on that, we will try to do that. But the ultimate objective is increased capital efficiency. So if we do something financially and the PL profit drops from this year's high level, well, that kind of thing could happen. But business plan for next fiscal year has not been translated into financial plan just yet. But once we have a better idea, we would like to explain that perhaps at the end of the fiscal year presentation.

Bank of America, Tsujino-san.

This time I think you had some evaluation gain and also capital gain in Asia as well as in North America as well. So with regard to PE investee in U.S. as well as in China, up until now, you had -- you, in fact, shared your idea as to being stringent in terms of the scrutinization necessary for those investees. And this is why you did not revise upward your earnings.

And so why you thought that you have to remain cautious, you did manage to enjoy gain on -- enjoy capital gain or evaluation kind of gain as well. So was your outlook wrong? Or were you anticipating some loss generation from some kind of investment or investee. So this is why you have not made any kind of changes or the revision to your earnings despite the fact that you have been exceeding your expectations. So that is the first question.

And then can I expect the fourth quarter to be even on upward trend. And -- but of course, it may have to be revisited perhaps. So it's just that your outlook was slightly kind of wrong and PE investee in U.S. was pretty strong. But then of course, Elawan is emerging and that is kind of encouraging you to have the heads up.

So I hope that I will be able to answer to your question as you have in accordance with your intent. So in China as well as in United States, so the capital gain as well as evaluation gain as a result of the evaluation that we have conducted on an individual basis. So the risk appetite as well as the direction going forward, which I mentioned earlier, in terms of the P&L of that just as been pointed out by Tsujino. So the nuance may be slightly different from what we have mentioned in the past that is something that I will not be able to deny.

So especially USP investee, in the areas of technology, for example, it is expanding on a fair value basis. So therefore, it is really based on the individual P&L. And also in the United States or North America, we were proceeding with reducing down the position. So therefore, we hope that this evaluation gain should lead us in generating the actual gain on sales. So Asia, while we enjoyed some evaluation gain, but from an accounting technicality, so it's not -- but it is recovering from the bottom, in other words, in some cases.

So therefore, on an individual name-by-name basis, there were mixed situations. So therefore, in terms of the risk appetite-wise towards investment, we remain to be kind of conservative or we remain to be -- we would contain from making aggressive investment, refrain from making such investment. But at the end of the day, what is proceeding in a strategic manner -- so those, unfortunately, will start to perhaps dilute in other words, going forward.

So towards the fourth quarter in each of the business lines, so while we are scrutinizing each and every business line. With regard to Elawan, that is one category and also with regard to real estate as well, we are doing the same, so that we'll be able to take necessary actions earlier rather than later. And so dependent on the business environment changes, external factor changes against such a backdrop, if we cannot foresee an immediate recovery in some of the businesses, we do not wait until the very end, but rather take earlier actions.

So in other words, we will prioritize taking actions as opposed to wait and see. So from that perspective, we may have some further evaluation gain or losses. But Elawan, for example, is one. And also with regard to real estate, there will be some kind of preparation in terms of procurement and so on and so forth. So therefore, I mean, so far as we haven't gone as far as being able to explain one by one, to the investment community, but there is some kind of progress that we may be able to make going forward. So I just wanted to indicate the direction going forward. I hope this answers your question in some way or the other.

Well, if I could ask a question about Robeco's AUM on a Q-on-Q basis, it is increasing quite significantly. What is that the backdrop? So it is increasing by 18%. So is there anything that you can explain as an appeal?

So Page 27, yes, we have shown. So the Robeco, the asset management fee is under pressure, but the AUM is what we feel the need to kind of increase on a 2-dimensional basis, but also at the same time, we are trying to enhance the profitability as well. So relatively speaking, we did manage to win the mandate for a quite sizable fund or deal. And that, in fact, was reflected. And also equity market is remaining to be strong, and on the other hand, the fee income competition, especially advisory as well as index, it needs to be tough. And so therefore, we would like to remain to be competitive and centered around Robeco, of course, in proceeding with this business. So AUM, it is true that it is growing significantly, but we hope to be able to generate growing of profit out of this growth of AUM as well as AUA.

Okay. Well, in that case, in this there is no kind of specific strategy that worked out to be positive. You will not be able to mention that?

Well, we hope to be able to share some further details. But as to Tsujino-san knows, like index related, for example, what was build, what was not, if you were to -- you will be able to perhaps enjoy a better inflow of the fund, but the needs are quite limited. So therefore, if you were to seek for the quantity, for sure, you may be able to benefit from it. But of course, we will have to ensure, as I have said, that leads to our betterment of profitability. So this is what we need to work on. So it is not just the quantitative improvement but also we are trying to achieve qualitative improvement at the same time.

Before we run over the scheduled time, this is going to be the last question. [indiscernible], please ask your question.

This is Niwa speaking. Follow up question to what Tsujino-san asked. My question is management resource allocation and also appetite for Japan. Real estate was covered broadly. And my question is, in Japan, what is better areas that you would like to focus on? And is there a sign for improvement in terms of demand for financing? 17 strategic domains have been identified by the central government. And are there some of them in line with the business that ORIX is trying to do?

More domestic market, as I explained during the real estate mid-market private equity and manufacturing included new economy-related area is seeing increase in the interest rate. So lease and CapEx investments demand strengthening. This is our impression. For example, for auto lease cost increase. Well, we asked people to send that, and it was not really accepted, but recently negotiation is most smooth, retention is going up.

So based on the financial capacity, tangible asset-related business is looking very promising in Japan as well. In relation to the strategic focus, ship loading, well, we are not really thinking about going directly into ship loading. So there is nothing within the 17 areas that are committed. But we believe that intermediary business will grow. For example, [indiscernible], which we made a release the other day, we are getting a good sense that this is going to be a good business. And we have adjacent areas surrounding the 17 pillars mentioned by the central government, and we will discern, identify good areas for us to enter. So that's one direction.

And in addition, I'm sure that [indiscernible], but the result of the election was very clear. So looking at the governmental budget and financing, we believe that we will be able to see which private sectors will be more active and we will try to capture those. I think the budget is still yet to be discussed in detail. So we will continue to monitor that and listen to the customer needs, our customers' voices and response to their needs for financing, and we have great expectations as we try to build the business plan for next year.

Another related question. Overseas business domestic ratio compared to what you had in the midterm plan, maybe the ratio of domestic business is going to be bigger? Is that true or not?

Well, the domestic market is not expected to improve dramatically. And for overseas, when you look at aircraft, for example, in aircraft, crafts and ships, in Asia, we were controlling risk taking. So we believe that there is a good expectation there. In terms of overseas versus domestic ratio, my impression is that this is not going to change largely, but hopefully, we can provide more information in May.

We would like to close the Q&A session. And lastly, we would like to ask Yamamoto-san to close.

Thank you very much. So the third quarter remains to be strong. Thank you for your support. And just as I had explained, so we will be revisiting the business plan. And from Takahashi-san CEO, we hope to be able to share our plan going forward at the time of the earnings call at the end of the fiscal period. So after working hard at the fourth quarter businesses, so we will then continue to seek for your understanding as well as your support. So with this, would like to bring third quarter earnings call to a close. Thank you very much for your participation.

Now that is time. I would like to begin the ORIX Corporation's second quarter financial results briefing for fiscal year ending in March 2026. Thank you for joining us. I'll be the facilitator. I'm from IR, Sustainability Promotion Department. My name is Nakane.

We have 2 speakers today. We have a Director, Representative Executive Officer, President and COO, Hidetake Takahashi as well as our Operating Officer, Head of IR, Kazuki Yamamoto. First half will be presented by Takahashi. Second half by Yamamoto then we'll have a Q&A session.

We are planning to have 60 minutes for this briefing session. Takahashi-san?

Thank you very much for taking your time out of your busy schedule to attend the ORIX Group's financial results briefing today. I'm Hidetake Takahashi, ORIX Group's COO. I'll explain the key initiative as the business progress toward achieving the long-term vision announced in May this year, which is making impacts through alternative investments and operation and business solutions as well as management indicators of 15% ROE and JPY 1 trillion in net profit for the fiscal year ending March 2035. And following this, Kazuki Yamamoto, who is in charge of Management Planning and IR, will explain the second quarter financial results for the fiscal year ending March 2026.

If you could please refer to the Page 3. There are 5 points that I'd like to convey today. First, I'd like to discuss the revision to our earnings forecast. Our first half, all 3 categories, finance, operation and investment performed well and capital recycling is also progressing smoothly. As a result, we decided to raise net profit forecast from the previous JPY 380 billion to JPY 440 billion.

We also revised the full year dividend forecast per share from JPY 132.13 based on a net profit of JPY 380 billion to JPY 153.67. And in addition, as we look forward to proceed with optimizing our portfolio and capital structure and considering the completion of the sale of Greenko announced yesterday, we have decided to increase the amount of our share buyback program from JPY 1 billion to JPY 150 billion, (sic) JPY 100 billion to JPY 150 billion and Kazuki Yamamoto will explain in more details shortly.

The second point is the establishment of a PE fund together with the Qatar Investment Authority, which was announced yesterday. ORIX is strengthening our asset management function to help us achieve the long-term vision. As a milestone, we aim to achieve 11% ROE and JPY 100 trillion in AUM by the fiscal year ending in March 2028. Since the establishment of a PE Investment segment in 2012, we have executed over 30 investment in Japan and all utilizing our own balance sheet. We have reached an agreement with Qatar Investment Authority to establish a fund aiming at investing in Japanese companies.

For the first time, we will incorporate the third-party funds into this business. Through this fund, which has a total scale of USD 2.5 billion, we will expand our investment, including those in a large-scale project. ORIX will contribute 60% and QIA, Qatar Investment Authority, 40%. The main investment target will be business section type deals, privatization of listed companies and carve-outs with an expected investment size of JPY 30 billion or larger in EV project. We will intend to continue strengthening our asset management function, including our business segments.

The third point is our future business expansion with Hilco Global. In September, we acquired a U.S. company, Hilco, a subsidiary. Hilco provides services globally such as evaluation and disposal of mobile assets like inventory and equipment, intangible assets like IP and trademarks and ABL asset-backed lending. ORIX USA will position Hilco as a platform for creation of ABL investment fund, strengthening its origination capability and expand private credit business. Similar to the domestic PE fund mentioned earlier, this is a strategic investment to aid expansion of our asset management business. And further, Hilco's asset evaluation services are a countercyclical business.

In an uncertain economic environment, we believe we have acquired a fee-based business at a good time. Hilco's evaluation capability, asset disposal expertise will be utilized in assessing risk as we expand credit globally.

The fourth point, Osaka IR project, integrated resort. We aim to open the IR in Osaka City around the fall of 2030 and construction began in April of this year. In September, some changes were made in existing plan. Primarily, these involve higher costs after taking inflation into account from currently JPY 1.27 trillion to approximately JPY 1.51 trillion. After carefully reviewing business income and expenditure plan, we believe that the higher cost will not significantly impact the project profitability.

The Osaka-Kansai Expo concluded successfully in October. We were able to confirm growing inbound demand in the Osaka, Kansai area with many foreign tourists visiting -- in Osaka, which is also a birth space of ORIX. In the Kansai area, we are engaged in the development and operation of our sales office with offer financial -- which offer financial services, Kansai 3 airports and Umekita project and [indiscernible]. We also operate the business such as hotels and inns, we will maximize synergies by adding Osaka IR to these resources.

Finally, my final point is portfolio optimization. As I discussed in May, the most important measures to achieve our ROE target are disciplined portfolio management and sophisticated risk management and new business creation, those 3 points. We have begun utilizing a dashboard to visualize the status of our business portfolio in finer detail and are progressing with our portfolio optimization.

We have sold all of -- all or partial shares in Greenko Energy, ORIX Credit and Ormat and Nissay Leasing, Canara Robeco and other businesses. We will continue to review our portfolio based on our 4 criteria: growth potential, capital efficiency and impact on credit rating and group synergies. We will continue to revisit our portfolio. And furthermore, in July, ORIX Bank paid a dividend of JPY 30 billion to ORIX Group. We will also optimize the capital scale of other group companies, not just the bank.

As of the end of September 2025, the AUM became JPY 88 trillion, bringing us one step closer to the medium-term target of JPY 100 trillion. We will also continue to proceed with the transition to an asset-light portfolio. Out of the plan that we disclosed in the mid- to long-term corporate value enhancement is in ROE in order to further improve the efficiency of the capital use. And all the measures that I mentioned that we carried out in the last 6 months is a good sign that we are making the right stride toward achieving a midterm business plan. We will continue to work toward achieving a midterm business plan and to achieve the long-term vision through various tactics and measures. That's all from me.

Next, Yamamoto will explain about the most recent financial results.

Please go to the Page 5 of the presentation material. First, I would like to talk about the first half results and an upgrade -- update to our full year forecast. Net income for the first half was JPY 271.1 billion, a record high for the first half year and an increase of JPY 88.2 billion, up 48% compared to the same period last year. At first half, we achieved a healthy 71. -- initial full year net income forecast and ROE reached an annualized figure of 12.7%. This is a result of a contribution from gains of sales and valuation gains from a large exit deals such as Greenko Energy.

As explained by our President, our forecast reflects that our efforts to enhance profitability through portfolio optimization and beginning to bear results. And we raised our full year profit forecast upward -- as our COO, Takahashi explained, and full year profit forecast is JPY 440 billion, expanded the share buyback program to JPY 150 billion. Our full year ROE is forecasted at 10.3%, an increase of 1.3 percentage point compared to the same period last year.

Second point is the 3 categories: earning and capital recycling. First half, all 3 categories, finance, operation and investment booked profit growth year-on-year and ROE improved. And even excluding a gain on the sales of Greenko, first half ROE was healthy at around 10%, exceeding the previous full fiscal year ending in the March 2025 level that was 8.8%. The third point is shareholder returns. In line with the upward revision of net income forecast, should ORIX achieve a full fiscal year net income target of JPY 440 billion. DPS forecast will increase from JPY 132.13 to JPY 153.67. The share buyback program also expanded from JPY 100 billion to JPY 150 billion.

At the end of October, JPY 78 billion has already been repurchased, representing 78 progress rate toward our previous JPY 100 billion.

Page 6. Here, I'll explain the details of revision of our earnings forecast and expansion of shareholder returns mentioned earlier. Based on the stellar performance in the first half and the current business environment, we have revised our forecast and second half earnings, especially -- specifically, we raised the pretax profit forecast from JPY 540 billion to JPY 640 billion, net income forecast from JPY 380 billion to JPY 440 billion. This represents an increase of JPY 100 billion and JPY 60 billion, respectively, on increase. As a result, we forecast a full year EPS of JPY 394. ROE will improve to 10.3%.

Outlined earlier, we raised our full year dividend forecast accordingly, expanded share buyback program. Total shareholder return should reach JPY 320.7 billion. Total payout ratio expected to rise from 65% to 73%. While improving ROE and maintaining a healthy D/E ratio, ORIX also aims to expand AUM. As our COO, Takahashi mentioned, total group AUM reached JPY 88 trillion at the end of first half. Addition to growth in the traditional asset AUM such as Robeco, which has performed very well, ORIX aims to expand its AUM in an asset-light fashion and that's not overly reliant on our balance sheet.

Please go to Page 7. And also, we newly announced a joint PE fund with QIA. The page shows the first half results for the 3 categories and for both previous year and this year and segment profit, pretax profit, net income shown at the bottom. Pretax profit for the first half was JPY 391.5 billion, an increase of JPY 134.5 billion compared to the same period last year. Like the net income, it reached a record high. We implemented capital recycling, not only in the investment category, which achieved a large exit, but also in finance and operation category. All 3 categories achieved a profit growth year-on-year.

This page shows the first half results for previous current year, 3 categories: investment on top to bottom. And the dark blue represents finance. Our profit increased 8% year-on-year, JPY 99.6 billion, progress rate of 55% versus full year target. Gross investment income was strong in the Insurance segment. Asia, Australia saw steady increase in financial income from leases and loans. In addition, as a part of portfolio optimization, contribution from the sales of ORIX Asset Management and Loan Services Corporation, Nissay Lease shares also contributed to the profit gain.

Next, the light blue part represents operation. Profit increased by 9% year-on-year to JPY 114.9 billion with a progress rate of 48% versus our forecast, which we raised by JPY 10 billion. Business driven by inbound tourism demand such as Kansai Airports and real estate operation at Inns and hotels continue to perform well. Strong used car market helped auto business with Rentec capture the demand for Windows 11 replacement PCs. Both businesses saw growth increased profit.

Environment and Energy Segment, the gain on the sales of Zeeklite, which operates the waste and final disposal side also losses profit. The pink represents investment. Profit was up sharply, 117% year-on-year to JPY 194.9 billion. The sales of Hotel Universal Port VITA in the first quarter and Greenko in the second quarter as well as a gain from the sales of shares of NYSE-listed renewable energy company, Ormat contributed to this increase. In addition, performance of domestic PE investments such as Toshiba was strong, leading to higher profit contribution. As a result, segment profit, pretax profit and net income all increased by 42%, 52% and 48%, respectively.

Next, please look at Page 8. Now on this page, I explain ROE, shareholders' equity for each of the 3 categories. You see on the right, at the end of previous year, shareholders' equity was JPY 4.1 trillion, while annualized ROE was 8.8%. For first half this year, these figures were JPY 4.4 trillion and JPY 12.7 trillion, respectively.

Please look at the graph on the right. The dark blue ROE of finance improved from 8.3% at the end of the previous period to 8.5%. The allocated capital finance is JPY 1.8 trillion. Now light blue ROE in the operation category improved from 13.5% to 14% due to the sale of subsidiaries and other factors. Allocated capital here is JPY 1.3 trillion. And then pink ROE in the investment category rose significantly from 7.4% to 16.6% due to sales of Greenko and hotels, allocated capital is JPY 1.6 trillion.

The total allocated capital for 3 categories is JPY 4.7 trillion, which is slightly different from shareholders' equity amount of JPY 4.4 trillion on a consolidated BS. As explained last time, this is because of the allocated capital is a management accounting figure.

Next page shows ROA and asset for the 3 categories. With the start of portfolio optimization, total asset ROA improved by 1.03% from the end of previous period to 3.15%. The ROA for the investment category improved significantly for the reason that I just outlined. ROA for the both finance, operation category also improved in first half. This page shows the progress of capital recycling.

In the first half, we recorded a capital gains of JPY 157.1 billion. We had cash inflows from sales amounting JPY 500 billion. Major asset sales included Greenko Energy, that was a cash in of JPY 178.9 billion, capital gain JPY 95 billion. And Hotel Universal Port VITA, cash in about JPY 34 billion, capital gain JPY 21.9 billion. We also sold ORIX Asset Management and Loan Services Group and Nissay Lease in the Corporate Finance Business segment too, and Zeeklite in Environment and Energy segment too. In all 3 categories of finance, operation, investment, we flexibly recycled capital to optimize our portfolio while balancing new investment.

Cash outflows from new investments amounted to JPY 470 billion. The main new investments made in the first half were Hilco Global, JPY 776 million and convertible bonds for the next-generation energy company, AM Green. Hilco Global is a leading asset appraisal company in the United States and a platform for asset-based lending. Additionally, we made a PE investment in specialty capsule toy retailer, LULUARQ as well as new purchases of aircraft where prices are favorable and new investments in logistics.

We also made additional investments in Osaka Integrated Resort project as planned. We continue to have a promising investment pipeline for the future and will carefully select projects. For the year, fiscal year '26, we forecast realization and new investments of between JPY 600 billion to JPY 800 billion. By flexibly recycling capital in all 3 categories in a well-balanced manner, we will, as Mr. Takahashi explained, work to optimize our portfolio.

Page 11 is about our financial strategy. This shows the important balance sheet items and the breakdown on the left and the key indicators from the perspective of financial soundness on the right. In the table on the left, you can see the total assets increased by JPY 738 billion compared to the end of FY '25, with half of about JPY 600 billion amount, excluding FX effects due to the U.S.-related factors. The remainder was primarily caused by asset growth in the Insurance segment, which saw strong sales of single premium whole life insurance, JPY 131.4 billion and at ORIX Bank, which increased the new execution of the real estate investment loans, JPY 109 billion.

Next, short-term and long-term debt deposit increased by JPY 416.9 billion, mainly due to higher deposit at ORIX Bank and issuance of the corporate bond. We continue to diversify our funding methods and currencies and have realized competitive funding cost levels through this and maintaining a stable ratio of the long-term debt.

Insurance contract liabilities and policyholder reserves decreased by JPY 223.2 billion, mainly due to the lower liabilities from the higher discount rate for insurance contract liabilities. This was offset by the increase in single premium insurance policyholder accounts. Of the JPY 351.9 billion increase in shareholder equity in the row below, JPY 223.2 billion is due to the lower insurance contract liabilities and policyholder accounts explained earlier. Other factors contributed to the increase of the shareholders' equity are mainly net income. Debt-to-equity ratio was steady at 1.5x.

Looking to the graph at the right, we maintained the capital utilization rate at an appropriate level in the 90% range as a result of the capital recycling in the first half. This has helped us sustain an A-level credit ratings at global agencies. While yen funding rates are gradually increasing, including those for the bank group deposits, our overseas currency-based funding costs, mostly U.S. dollars remain in downtrend. We are working to reduce our cost of capital by keeping competitive A-level credit ratings and by utilized diversified funding source.

Pages 12 and 13 are segment summaries. Please refer to the slides from the Pages 16 and onwards for details. Links to supplementary financial materials and the integrated report are included in these slides for your reference. First, segment profits for the Corporate Financial Services and Maintenance Leasing segment increased by JPY 13.1 billion or 29% to JPY 58.6 billion. Corporate Financial Services posted significant growth, thanks to the sale of ORIX Asset Management and Loan Services Corporation and Nissay Lease in Q2.

Growth in various fee revenues was also positive. The Auto business continued to enjoy robust used car sales, achieving a record high profit for the first half. Rentec profit grew on higher rentals from ICT equipment inventories fueled by demand for Windows 11 PC replacement. Although asset for Auto and Rentec increased due to new executions in car leasing and PC rentals, the sale of ORIX Asset Management and Loan Services Corporation reduced the total segment assets by JPY 29.2 billion versus the previous year, totaling JPY 1,855.3 billion.

Second, the Real Estate segment's profit decreased by JPY 1.3 billion, 3% year-on-year to JPY 49.1 billion. The RE Investment and Facilities Operation units saw significant increase in profits from hotel and inn operations in addition to the sale of the Universal Port VITA. However, profits were down slightly year-on-year due to the previous year's gain from the sale of Hundred Circus. Meanwhile, the profits at Daikyo units increased on the sale of rental apartments, properties and other factors.

Real Estate segment assets remained flat compared to the end of previous fiscal year. In addition, in response to the expanding investor demand, we increased asset size of our first equipment -- equity commitment type real estate value-add fund established in January this year from JPY 100 billion to JPY 120 billion. Please refer to Page 18 of the Real Estate.

The third is PE Investment and Concession. Segment profit increased by JPY 9.7 billion or 21% year-on-year to JPY 56.7 billion. PE Investment unit enjoyed steady performance of the investees such as Toshiba and DHC, resulting in higher profits even after considering the previous year's gain. Regarding the domestic PE fund information with the Qatar Investment Authority mentioned by Takahashi, you'll find the details on Page 20.

The Concession unit saw a significant increase in profits, as Kansai Airports continue to perform well. Please refer to Page 45 for related data, such as passenger numbers.

The segment assets for PE Investment and Concession increased by JPY 31.9 billion versus the end of fiscal year '25, totaling JPY 1.548 trillion. The main reason was the new investment in LULUARQ and increased profit contribution from the investees, leading to an increase in equity method.

Fourth, Environment and Energy segment profit increased by JPY 117.3 billion year-on-year to JPY 119.7 billion. Profit was bolstered by sale of Greenko Energy, which resulted in gains on sale and valuation gains as well as gains from the sale of shares of Ormat. Additionally, the domestic electricity retail business enjoyed both higher sales volume and unit price. Segment asset decreased by JPY 38.8 billion from the previous year-end to JPY 977.4 billion because of the progress in capital recycling.

The fifth is Insurance segment profit increased by JPY 10 billion or 24% to JPY 50.9 billion. Continuing the recent trend, asset income rose sharply on growth in investment assets in effort to diversify portfolio management. In terms of business, both the single premium wholesale life insurance Moonshot and revamped income protection insurance Keep Up launched this June are selling well. Insurance segment assets increased by JPY 131.4 billion versus end of FY '25 to JPY 3,140.6 billion.

Sixth, the Banking and Credit segment profit decreased by JPY 600 million or 5% year-on-year to JPY 12.5 billion. Amid rising interest rates, while deposit procurement costs are increasing, the asset management yield is also improving. The main reason for the decrease versus the first half FY '25 is the recording of the losses from the sale of public and corporate bonds in Q2 to improve bond portfolio quality.

Banking and Credit segment assets increased by JPY 109 billion versus the end of FY '25 to JPY 3,253.6 billion. Both investment real estate loans and the merchant banking business saw increase in new executions. As explained in Q1, ORIX Bank paid parent group a dividend of JPY 30 billion in July to optimize in capital size.

Seventh, the Aircraft and Ships segment profit decreased by JPY 10.1 billion or 31% year-on-year to JPY 22 billion. Aircraft leasing profit for the first half was roughly in line with the previous year. But with lease rates remaining high, the number of owned aircraft increased and the business climate as a whole is positive.

Avolon profit rose year-on-year, partly due to the contributions from Castlelake, which was acquired in January this year. Profits in ships unit was lower year-on-year on the absence of higher charter fees from certain contracts last year, reflecting the impact of marine shipping prices. Segment assets increased by JPY 24.1 billion versus the end of FY '25 to JPY 1,256.1 billion, owing to aircraft purchases.

Segment number 8, is ORIX USA. ORIX USA segment profit decreased by JPY 18.1 billion year-on-year, resulting in a loss of JPY 1.8 billion. Compared to the same period last year, the main reasons for the substantial profit decline were absence of reversals of the provisions recorded in last year, a decrease in capital gains and the booking of credit cost and impairment in the first half this year. The credit losses and impairments stem from the real estate financing originated during the period of monetary easing during the pandemic and legacy assets from before that.

The extended period of the elevated interest rate inflation and uncertain economic conditions in the U.S. negatively impacted these assets. More recently, based on our disciplined investment policy, we have conservatively chosen deals, and thus have no exposure to the First Brands Group or Tricolor Holdings.

Please see Pages 30, 31 and 32 in this presentation for more details. Excluding the Hilco Global segment assets in U.S. dollars shrunk from JPY 12.2 billion at the end of March '23 to JPY 11.3 billion at the end of September 2025. With the addition of -- this is a decline of 7.4% in the past 2.5 years. With the addition of Hilco as a subsidiary, we will review the ORIX USA business portfolio and continue to responsibly manage the portfolio while controlling asset risk -- asset size. Uncertainty persists in the operating environment for ORIX USA. And we are conservatively reviewing our full fiscal year forecast for ORIX USA compared to the initial plan.

Next is ORIX Europe. Segment profit increased by JPY 1.3 billion or 6% year-on-year to JPY 22.1 billion. Net fund inflows grew, thanks to the favorable global capital markets and AUM rose to a record high of EUR 425 billion. This resulted in higher profits even after adjusting for performance fees booked in the same period last year. ORIX Europe assets were flat year-on-year, excluding the currency impacts.

Finally, Asia and Australia. Segment profit increased by JPY 600 million or 3% year-on-year to JPY 19.7 billion. In Greater China, profit contributions from investees decreased versus the same period last year. We maintained a constrained investment stance and reduced our exposure to -- in both leases and investments. Meanwhile, the financial income increased in countries such as Singapore, India and Australia, resulting in higher profits.

Segment assets increased by JPY 15.5 billion versus the end of fiscal year '25 to JPY 1,741.1 billion. The main reason was the FX impact, but the breakdown shows a decrease in assets in Greater China region, while there was an increase in Australia and India. And that concludes each segment explanation.

Next is Page 14. Finally, regarding the shareholder returns and enhancing corporate value, we added JPY 50 billion to JPY 100 billion share buyback program announced in May for the new total of JPY 150 billion. Regarding the dividends, the full year DPS forecast was raised from the previous JPY 132.13 to JPY 153.67, 39% increase over our full year net income target. Compared to FY '25 a DPS, we expect an increase of JPY 33.66 per share or 28%.

Since announcing the 3-year plan and long-term vision in May, CEO, Inoue and COO, Takahashi have been engaged in a direct dialogue with institutional investors, both in Japan and overseas. We also plan to provide access to outside directors. And we are providing opportunities to have a direct dialogue from the outside director and the investors. We continue to enhance the corporate value by increasing opportunities for direct dialogue with the market regarding our most important management KPI, ROE improvement. EPS growth, which is also important and capital cost are also key areas of discussion. This concludes my remarks. Thank you for your attention.

Now we'd like to move on to the Q&A session. [Operator Instructions] First, from SMBC Nikko Securities, Muraki Masao.

Muraki from SMBC Nikko. This is a bit off from results, content briefing material, but I would like to hear more about joint investment with QIA. What led you to this joint PE establishment because in the past, you have been covering everything on your own 100% and the asset was JPY 1 trillion. And do you think for the future, domestic PE, you're going to run off the existing one and balance sheet will reduce? And the 60% holding of this new PE that you're establishing with the QIA, it will be on the addition -- net additions on the BS, right? ROE or -- do you think this will allow you to invest more in a large project. But what kind of impact would this have to the total balance?

This is Takahashi speaking. Masao-san, let me answer, take this one. How we came about to establish a joint PE, as I explained in yesterday's announcement, almost about 2 years, we've been negotiating with QIA. We've always been in contact, having a dialogue with various sovereign fund and QIA was especially interested in investing in Japan. So in which field we can collaborate. We've been discussing that way. And we thought that the domestic PE investments is probably where we can jointly approach. So investment criteria policies, we've discussed quite a bit. And this includes a right fit to -- we have the right chemistry. That is how we came about this agreement to establish the PE.

And regarding the running off of existing portfolio and to focus on the fund with QIA, that is not the case. As we mentioned in the press release. Our fundamental approach is enterprise value in the market cap of JPY 30 billion or mid-cap larger items, we will leverage this joint fund with QIA. And this JPY 2.5 billion -- JPY 370 billion, that's unlevered base. So 1x or 2x, we will be financing.

In the newspaper, I know it says that with the borrowing, we will be able to have this JPY 1 trillion investment capacity, but we don't know whether we'll get there. But anything that is below JPY 30 billion for market cap in investment, that's something that we will continue to handle within the balance sheet. The balance on the balance sheet is -- we do have JPY 2.5 billion, 60% is what we are committing. So I don't think we will see a significant bloating of the asset balance, but we aim to maintain the balance of the current JPY 1 trillion going forward.

So far, we had a majority share. So we had a controlling share so that our target companies, we would try to keep it in consolidated accounting so that we can get benefit from profit. But for this fund, we would apply the fund accounting so then incorporate the fair market value. So the way we would incorporate the profit into our business will be different from the one that we are financing fully on our own.

I understand. Is this part of your ROE enhancement effort?

Yes, that too, plus goodwill and also recognition of intangible asset will be different, too. And also, there will be an impact on the credit rating, too. That will be eased too, I think. In the last 10 years, we've been building up a track record in the private equity area. That's one thing. And reflecting the market trend and the movement, what we are seeing more and more good quality pipeline in front of us that's building up. So incorporating that in all into our balance sheet, adding them up would impact us in various different areas. So at this timing, we wanted to leverage our third-party funds to shift to leverage third parties funds to try to capture larger, better quality deals. It would be a benefit in our long-term growth. That's our strategy.

Next from JPMorgan Securities, Sato-san.

This is Sato speaking from JPMorgan. About ROE target and your commitment to that and also net assets, the balance between the 2, I'd like to confirm one thing. Now the JPY 50 billion increase in buyback, I think there are different reasons. But the net profit increase, most of it will be used for the shareholder return, I understand. But at the same time, there is a big impact of the interest rate. So about this insurance with the change of the discount rate, about JPY 200 billion in the 6 months, I think that the profit has expanded. So in comparison to the medium-term business plan, the JPY 20 billion or higher needs to be enhanced so that you can achieve the ROE target.

And depending on the macro environment, noncash or cash in without that, there could be some higher risks. So in that sense, in achieving the ROE in order to maintain the probability of achieving that, what kind of initiatives are you thinking of taking?

Thank you for your questions. Yamamoto will respond to your question.

As you pointed out correctly, for this fiscal year, the interest rate higher and the discount rate, discount and also the insurance account, the net asset increase was a little more than JPY 200 billion. And achieving the 11% ROE, of course, that the numerator will not naturally increase. So we have to take some measures or initiatives that will be necessary. So U.S. accounting and Japanese accounting, there is some gap. So with the shareholders and ORIX, we are trying to consider the various initiatives to be taken. So in achieving the targets of the medium term in the final year, we will be taking initiatives.

As for the interest rate, I think we have come to an end of the cycle and this would stabilize. So this increase is not going to continue from now on. So in other words, if the interest rate comes down, the denominator will be less. So that is something that will be possible to -- make it possible to reach the ROE that we want to achieve. So we would like to monitor that closely and communicate to you. But that's something that we will be doing in the future, but the impact of this in achieving the ROE, yes, we do understand that possibilities.

Next Daiwa Securities, Watanabe-san.

This is Watanabe from Daiwa. This year's lending forecast and next year's profit forecast. You said that there will be a reduction -- reduced provision for the Bank and the U.S. business. If you have any trend outlook for the second half. For this fiscal year, you will be generating quite a significant profit. What's your outlook for the next year? Is it going to be challenging? Are you going to go with your current cruising speed? What's your thought on the next year?

Regarding ORIX Bank, regarding our debt portfolio, liability portfolio. And this is a reversal of what I mentioned about liability insurance. And various portfolio that we are maintaining for the better liquidity together with the interest rate hike, there will be more and more incurred losses.

And as much as we can within the profit because we have a profit momentum, we will actively reshuffle the portfolio and recorded some losses from the sale. And this year's credit loss burden in ORIX USA, as I before mentioned, so far, in the fourth quarter, we usually check -- do the checkup of all our assets. But we are doing more flexible risk management. So we have decided to book the loss to some extent in the second quarter, too. If you could go to Page 32, ORIX USA pretax profit, additional information there as well.

For portfolio, as I mentioned, because of the interest rate in the dollar would be plateaued and inflation and equity real estate business-related impact, we are recording capital gain. We are losing opportunity to record capital gain, sorry. And before COVID, we had a real estate legacy asset of the credit loss. That is now materialized. So going forward, what would happen is real estate for multifamily condominium performance. Interest rate hike and insurance premium increase will impact the rent.

And I believe that we will need to closely monitor property management and appropriate asset monitoring, too. So those potential risk, we are quite clear at ORIX USA side. So we don't foresee this kind of situation will continue. So at least by the end of this second half or at the latest in the beginning -- within the first half of next year, we will resolve. We will conclude our countermeasures. And going forward, I'd like to have Takahashi to explain.

And the second question about the next year's forecast, let me give some brief thinking about the next year. Usually, the income gains, for example, on the real estate or private equities exit, those gain from sales, we have been recording pretty much on every fiscal year, it's a recurring gain from sales. But the kind of gains from sales like divestments as Greenko that is almost like a one-off profit. So this proceeds that we received is a reason that we were able to do a share buyback in addition -- additional share buyback.

And another reason is we averaged out the EPS, and we are intending to continue to increase EPS in a linear fashion. If there is some surplus in capital, and we would use it for that. And going forward, in the next year, we'll continue to aim to realize sustainable profit growth.

So the sales from a gain, especially something in this scale of almost like a one-off would be volatile. And sometimes we do, sometimes we don't. And when we have surplus, we will leverage a buyback to continue to increase our EPS linearly. I'm not sure I'm answering your questions, but it's not that we are aiming to generate a certain amount of profit every single year. That's a bit different far from our actual business practices in reality.

Next Mizuho Securities, Sakamaki-san.

Sakamaki speaking from Mizuho. I'd like to ask some questions on the forecast for the second half. On Page 10, capital recycling forecast. So for this fiscal year, JPY 200 billion or higher for capital gain. So compared with the past range, there could be some upside. So in the second half, the segment profit is only JPY 200 billion. So how should we understand this balance between the 2? If you can explain it?

Yes. Thank you. On Page 10, this JPY 200 billion. If I may talk about this further. As you know, usually, our capital gain is about JPY 100 billion. That's the normalized level. So Greenko part, JPY 995 billion is added. So it's JPY 200 billion. So that is on track. And the real estate market is very solid and private equity portfolio, the performance, as we mentioned, is good. So if there is good opportunities, we will invest and also realize in a very flexible manner.

In the second half, if you deduct that, the pretax income or revenue level, I think that's what you are referring to. We did not specify the first half and second half, but some of them were already realized in the first half. So there could be some differences. So capital gain -- about the capital gain, this is -- this can be considered as the income or the profit in other areas. I hope that answers your question.

From Nomura Securities, Sasaki-san.

This is Sasaki from Nomura Securities. I have a question about your performance. This year's second half pretax profit forecast, the level is quite a bit declining versus the first half. So it looks like a JPY 250 billion pretax profit. This is along the line of your base profit, but you also are going to record some capital gain as well, right? I was wondering, perhaps you have some significant impairment loss or some kind of a negative factor that you're forecasting for the first half. Is my understanding correct? And regarding next year's business plan, I'm sure you're in the midst of discussion right now. If you can share as much as you can about the next year's plan, please.

So the first question will be answered by Yamamoto.

Regarding the first point, you're right, the base profit first half, I mentioned was quite brisk. Within our base profit, we have the profit from the company that we have invested. So that is contributing like Toshiba is performing quite well, that we have invested. And for the second half, we have set that to the regular cruising speed, not buoyant. So for the second half, we are expecting certain base profit plus some capital gain. It is not that we are expecting some one-off significant loss.

Let me add to that. This is a bit of details, but as Yamamoto mentioned, Toshiba's performance is quite good now. And divestment of Toshiba material is recorded in Toshiba's performance. And KIOXIA's share price is quite well. So they sold a part of KIOXIA shares. So base profit -- our size base profit and our gain from sales -- and also the income from equity method affiliate are all recorded under base profit. So what I mentioned is that there are various onetime gains that we experienced from the equity method affiliate. And those happen in the first half, and that's not necessarily a recurring income that we can continue to expect in the second half. So that's the reason.

And you asked me about the second -- next year plans. Actually, we will start this discussion from next -- beginning of next year. What we are sharing right now to the market is ROE of 11%. And by [ FY '20 ] ending in March, -- but of course, we are creating bottom-up plans up to 3 years into the future. What we'll be discussing going forward is what went well, what didn't go well for the past year and make a rolling update to what we have established in the last March and this year's March too our MTP.

We are not expecting any downward change to our initial plan. I'm sure next year will be quite positive, but the detail will be discussed from the segment leaders of each divisions. That's all.

May I add one more thing, please?

Yes.

You mentioned that next year's profit can be volatile. I got the nuance in your wording. This year, 10% ROE, you need to grow the profit at a certain level. Otherwise, I don't think ROE can go up to the 10% levels. Is that okay to say that it can be volatile?

You have a point. Needless to say, we need to continuously grow. Otherwise, we will never get to 11% ROE. We're not there yet. So of course, we need a profit growth to get there. And with the current portfolio, what can be sold at what price is something that -- some of it where we have a higher probability where we are already in the negotiation process, then we can factor in, but others are just pie in the sky.

So of course, we need to make a right decision at the right timing being considered appropriate capital recycling to maximize our gains from sales. As I mentioned, this fiscal year, the proceeds from Greenko is, I would say, a bit extraordinary. So what we've been discussing going forward internally is compared to this year, how much base profit that we can increase. And on top, how much gains from sales of asset we can expect. Ultimately, we would like to achieve the ROE target by 2025 that we have. That's our grand plan.

Next from BofA Securities, Tsujino-san.

Some detailed question about Environment and Energy. If you look at the quarterly number, JPY 117 billion segment profit. The Greenko sales, gain on sales is JPY 95 billion. So the gain on securities, Ormat sales gain on sales is included, I think. But we don't know how much that is. So that means it is said that for JPY 15 billion, but the equity method, this is JPY 83 billion. So Ormat gains on sales and also if you deduct the JPY 95 billion, you are in red in terms of segment profit. So in Environment and Energy segment, excluding the gains of sales of those 2, what is happening? Was there any kind of impairment? And if so, what was it? And what about the impairment risk of others in coming months and years?

Takahashi-san will respond.

Sorry, this is Takahashi responding. If I may talk about the details, the renewable energy in Japan, especially the mega solar that is already operating, and we operate that. So we are getting a stable profit. And also, we are in the Energy Business in the previous year, Hibikinada and Soma, there was our impairment loss, and that led to the lower depreciation and amortization and maintaining the sales volume included and this part was profitable.

And in Environment and Energy, the major one is Elawan, and Elawan concerning that, it is breakeven or just slightly in red. So a lower interest rate and also the ones that we are developing projects and also the program has started. So in terms of business, we are in the recovery phase.

Also on the Environment side, the ORIX Environment is a circular economy company, and they are generating stable profit. So ORIX [indiscernible] or resource recycling, which is engaged in the interim processing, and they are going through the rebuilding or replacement phase. So we expect some red deficit. And in actual performance, they are in red. So it's a mixed performance, but we are not seeing the signs of the major impairment loss. I do not recognize that.

Okay. So a way of thinking, if you calculate this, you are in red, as I said. So is that correct understanding?

Yes. We do not recognize this as a major deficit. It's really close to the breakeven level. It's a very small deficit.

I see. But if you calculate the [ JPY 117 billion ] minus JPY 98 billion, sorry, the loss of JPY 8.2 billion or so, you're talking about Q2?

Okay. So Q2, as you said, yes, that's a correct calculation. But Ormat, it depends on what kind of number that you would include in Ormat. But we did not recognize that in Q2 only. But I think if you look at the bigger picture, it will be almost breakeven.

Now we are reaching the closing time. So we would like to take one last question from Morgan Stanley, MUFG Securities, Takemura-san.

I'm Takemura from Morgan Stanley, MUFG. I have a question about some numbers. You have made a revision to the lending forecast. Page 7, bottom right, in financial, it's remaining 180.0 so no change. Were there any changes under -- regarding the business profit, an increase of JPY 10 billion. What's the reason for investment, GreenKo of JPY 95 billion addition plus JPY 80 billion. So I would like to know why you are postponing some of it, the reason for that, which is the best way you can, please share.

Regarding ORIX USA, I understand that you have a revised performance forecast. So how that impacts this overall segment, please?

What you explained toward the end is very much a reason for that for finance and life insurance included, we did quite well in asset management. We have management income in the bank, we also recorded a loss of our debt liabilities. And in order to improve the portfolio quality and the credit-related business, we have conservatively recorded some new losses too. And those are what's impacting this finance business.

For business, many of the operating units are quite brisk. But in ORIX USA real estate origination, the fee environment, competitors -- competitive landscape, we are having quite a difficult situation. So that's impacting our profit. Regarding investment, the third point, you are right regarding JPY 95 billion addition from Greenko's divestment, doesn't mean that we put some of the sales plan for the sales to the later date at all. We did have certain uncertainty in the fair value part about the future gain from the sales that ORIX USA is doing in the PE business. As Takahashi-san pointed out, regarding ORIX USA, we have more conservative outlook because of intransparency.

Thank you very much. We would like to conclude the Q&A session. Now we'd like to have our last remarks from Takahashi.

As I said at the outset, there are a mixture in terms of the business performance between the segment. The businesses are diversified. And also in May, we announced the strategy. We are executing that steadily in the first half. Relatively speaking, I think we kept good results. But we would like to stay focused, and we took notes of what you pointed out, and we will continue to take initiatives. And we consider those target numbers are not easy numbers and also in the medium-term plan and the long-term vision, the numbers that we are committed to, we would like to make sure to try to achieve those targets. And I hope you would continue to support us. Thank you very much.

With that, we'd like to conclude today's conference, the briefing on the second quarter results. And thank you very much for your participation.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Since it is time, we now would like to get started. Thank you for joining this telephone conference of ORIX Corporation for first quarter financial results for the 3-month period ended June 30, 2025. I am Nakane from IR. We have today as an attendee, Kazuki Yamamoto, Operating Officer in charge of Investor Relations. Yamamoto-san will explain, and this will be followed by Q&A. We plan to have a 1-hour session. So over to you, Yamamoto-san.

Thank you very much for taking the time to attend the ORIX Group's earnings call today. I'm Operating Officer in charge of Corporate Planning and IR. I am Kazuki Yamamoto. Let me quickly explain the financial results for the first quarter of fiscal year ending March 2026. On Page 2, you can see this page contains the key points I want to cover today. The first point is net income and ROE. Net income for the first quarter was JPY 107.3 billion, an increase of JPY 20.6 billion year-on-year with an annualized ROE of 10.4%. Against the annual forecast, JPY 380 billion, progress rate was 28.2%. As was announced in July, we plan to record gains from the sale of Greenko and ORIX Asset Management & Loan Services Corporation in the second quarter, and earnings are favorable.

Meanwhile, considering the increasing macroeconomic uncertainty, it is necessary to carefully review our planned H2 exits and second half performance in line with the market. While we expect earnings to be more heavily skewed to H2, we are currently undertaking a thorough review of full year net income target. Second is pretax profit and capital recycling. Pretax profit was JPY 155.5 billion, an increase of JPY 35.3 billion from last year. Finance, Operation and Investments, in all 3 categories saw profit increases year-on-year. Investments. including the Hotel Universal Port VITA and other valuation gains from listed stocks recorded total capital gain of JPY 45.1 billion from multiple gains on exits.

Number three, shareholder returns. As of the end of July, we have completed the acquisition of JPY 40.9 billion out of total JPY 100 billion share buyback program announced in May this year. We will continue to repurchase shares based on the existing program and aim to flexibly implement our shareholder return policy based on both our full year outlook and progress with new investments. As in the previous fiscal year, our current policy is to set the interim DPS at a payout ratio of 39% in first half net income.

Please go to the next page. As outlined earlier, for Q1, ORIX reported net income of JPY 107.3 billion, up 24%, ROE was 10.4% annualized. In light of the investment gains we expect to book in Q2, the outlook for first half is very strong.

Please go to Page 4. I'll explain pretax profits for each of the categories. Three categories: Finance, Operation and Investments. You can see first quarter results of the previous and current fiscal year. First, at the top, the dark blue bar is finance. Profit increased by 5% year-on-year to JPY 49 billion with a progress rate of 27% against full year forecast. Corporate Financial Services and Banking were generally solid. ORIX Life increased its investment income and finance revenues grew in Australia and Singapore.

Next, second from the top, light blue shows Operation. Profit increased by 5% year-on-year to JPY 55.8 billion with a progress rate of 24% against the full year forecast. In the Environment and Energy segment, we closed the sale of Zeeklite, which operates waste disposal plans and recorded a gain. Elawan increased its electricity sales revenue and the Kinokawa Energy Stores Plant, one of the largest in Japan, began commercial operations last December, which also was a contribution. Furthermore, Rentec saw higher equipment rental income on Windows PC placement demand and airport concessions continue to see growth in international passenger numbers.

Finally, Red bar in the third row from the top shows Investments. Profit increased significantly by 61% year-on-year to JPY 60.1 billion. In addition to the gain from the sale of Hotel Universal Port VITA, valuation gains on our remaining stake in NYSE-listed renewable energy company Ormat contributed to this result. Performance at domestic PE investees was solid, resulting in growth in profit contributions. As a result, segment profit for Q1 increased by 20% year-on-year to a total of JPY 164.9 billion. Pretax profit increased by 29% year-on-year to JPY 155.5 billion. The difference of JPY 9.4 billion between total segment profit and pretax profit is administrative expenses.

Please go to Page 5. On this page, I will explain ROE and shareholders' equity for each of the 3 categories. Towards the right, please look at the graph. In dark blue is Finance, ROE. This improved from 8.2% at the end of the previous fiscal year to 8.7%, plus 0.5%. We are disclosing the amount of allocated capital by category beginning this fiscal year. And for Finance, it is JPY 1.7 trillion. The light blue circle towards the left, with the sale of Zeeklite, ROE for Operation improved from 13.5% to 14%, likewise, up 0.5%. Allocated capital was JPY 1.2 trillion. The red category Investments rose from 7.4% to 10.3%, significant increase due to sale of hotels. The allocated capital is JPY 1.7 trillion. The total allocated capital, if you add all them up, is JPY 4.5 trillion, which is slightly different from shareholder equity amount of JPY 4.1 trillion on this consolidated [ BS ]. This is because allocated capital is based on management accounting. So that is why it's higher.

Next, on Page 6, regarding the ROA and asset size of the 3 categories. You can see that finance and operation remained stable and investment improved its ROA in the first quarter. Page 7, this is the matrix chart of 3 categories and 10 segments. As a change, we have added in business verticals, the transportation equipment row from the bottom. In the Operation column, we have added ship brokerage company, SOMEC.

Page 8 shows progress in capital recycling. In first quarter, we recorded capital gain of JPY 45.1 billion, as you can see in the center, with cash flows from sales amounting to JPY 130 billion below that and cash flows -- outflows from new investment executions amounting to JPY 150 billion. Major new investments in the first quarter include PE investment in the capsule toy specialty store operator, LULUARQ, as well as aircraft and MICE-IR. We also have announced the sale of our partial stake in Greenko, a new investment in AM Green and the sale of ORIX Asset Management & Loan Services Corporation. You can see towards the right. We aim to close the Hilco Global transaction by the end of September '25. So regarding Greenko AM Green transaction in Hilco, I will provide some additional information in the following slides.

Please go to Page 9. This is about the Greenko share transfer agreement and our new investment in AM Green. We held 20% of the shares in Greenko, a major Indian renewable energy company and sold 17.5% to AM Green Power, a company owned by the founders of Greenko. You can see the structure in the chart. The sale proceeds were USD 1,282 billion -- sorry, USD 1.282 billion with a gain on sale of JPY 93.4 billion. This amount are unchanged from previous announcement and will be finalized at the time of Q2 financial closing. We plan to continue to hold our remaining 2.5% stake in Greenko for the time being.

Meanwhile, AMG, the parent company of AM Green Power, plans to produce 5 million tons of green ammonia annually as a group and is advancing green hydrogen and green ammonia production projects. AMG has also agreed on basic terms with Germany's energy company, Uniper SE and Belgium's ammonia trading and sales company, Yara Green Ammonia, to supply green ammonia to Europe. We have invested in convertible notes issued by AM Green Luxembourg, the 100% owned parent company of AMG. The amount is $331 million. The transfer of Greenko shares and the investment in convertible notes of AMG parent company are part of our portfolio optimization strategy achieved through capital recycling in the globally evolving renewable energy industry.

Next, moving on to Page 10, our investment in Hilco Global. ORIX has agreed with stakeholders to acquire 71.4% stake in Hilco Global, a world-leading company in asset valuation, we signed in July. We are moving forward in accordance with the transfer agreement and aim to complete the acquisition by the end of September. Since its establishment in 1987, as you can see towards the right, Hilco Global has gradually expanded its businesses to include Asset Valuation services, Asset-based Lending and Inventory sales and asset liquidation within the group. The first, Asset Valuation service provides to banks and others appraisal services for collateral assets.

The second, Asset-based Lending refers to the provision of loans collateralized by various assets. And third, Inventory sales and asset liquidation involves the purchase and resell of inventory assets among other things. With Hilco Global joining the ORIX Group, ORIX USA will acquire a platform for ABL. Hilco's origination capability and value increase model can be utilized through ORIX USA. By utilizing third-party investor funds, we hope to further expand the ABL business and promote the asset management business centered on private assets and real assets.

Next, please turn to the next page. The investment pipeline outlined on this page is ample at JPY 2 trillion and heavily focused on Operation and Investments. We're aiming for sustainable growth by investing both in projects and contribute to revenue immediately after investment and those requiring longer development periods.

Please turn to Page 12. Now this is about inbound tourism. The concession business centered around Kansai International Airport is experiencing growth in international passenger numbers due to inbound tourist demand and performance is steady. The performance of Kansai Airport is reflected in ORIX consolidated results with a 3-month lag. So Q1 results reflect Kansai Airport's performance from January to March of this year. However, with the start of Expo 2025 Osaka, Kansai in April and the launch of international charter flights at Kobe Airport in April, we expect earnings growth to continue. In facility operation, RevPAR at hotels has been improving, primarily in the Kansai area. In this January, Suginoi Hotel opened a new building, Hoshi Kan.

And in April, Hilco's top luxury brand, Waldorf Astoria Osaka also opened at the Umekita area. We anticipate steady demand for facility operations such as hotels and inns in the future. But due to the impact of inflation and rising construction costs, we will carefully select new investments while aiming for sustainable growth. Well, the Aircraft and Ships segment, including aircraft leasing, is performing well and increased in passenger traffic, mainly in the -- we expect these 3 tourism-related business, including those impacted by inbound tourism to continue to drive performance this fiscal year.

Page 13 and 14 are the summary of segment information. For details, please refer to the slides from Page 18 and onwards. But first, let me give you the report about the Corporate Financial Services and Maintenance Leasing. The segment profit increased by JPY 3.8 billion or 19% year-on-year to JPY 23.6 billion. The Corporate Financial Services unit saw growth in fee revenues, resulting in higher profits. The auto unit continued to benefit from a strong used car market, achieving record profits for the first quarter. Rentec expanded its inventory-based rental of ICT equipment, thanks to Windows PC replacement demand and increased its profits. Segment assets amounted to JPY 1.87 trillion, a decrease of JPY 14.6 billion from the end of the previous fiscal year, reflecting the sale of ORIX Asset Management & Loan Services Corporation.

Next, the segment profit for the Real Estate was up by JPY 21.9 billion, an increase of 157% year-over-year to JPY 35.9 billion. So this is due to the sales of the Hotel Universal Port VITA and a sharp increase in facility operation earnings in hotels and inns has contributed. Assets in the Real Estate segment was flat versus the end of last fiscal year. For the PE Investment and Concession segment, it recorded a decrease of JPY 8 billion year-over-year or minus 25% in segment profits, reaching JPY 24 billion, out of which the PE Investment unit reported lower profits owing to the absence of a gain on the sale of Sasaeah Holdings recorded in the previous year. On the other hand, the performance of existing investees such as DHC and Toshiba was strong, resulting in profit growth when the impact from the aforementioned reason is excluded.

In the Concession unit, as mentioned earlier, enjoyed impressive performance at Kansai International Airport. A slight decrease in profit compared to the previous year is due to seasonal factors. The segment assets of PE Investment and Concession increased by JPY 31.6 billion from last fiscal year to JPY 1,054.5 billion. The main reason for the increase was a new investment in LULUARQ and increase in equity method investment incomes from investees. Segment profit for the Environment and Energy segment increased by JPY 18.4 billion year-over-year to JPY 17.9 billion. In addition to the gain on sales of shares of Zeeklite, both sales volume and unit sales price in the electricity retailing business increased. As I have mentioned, the start of operation at the Kinokawa Energy Storage Plant had a positive impact.

Additionally, recovery in electricity sales revenue from Elawan and valuation gain in Ormat shares also contributed to the increase. Segment assets were slightly lower, owing to capital recycling and the ForEx impact.

Segment profits in the insurance segment was up JPY 2.1 billion or 10% year-over-year to JPY 24 billion. Profits were higher on the growth in investment income and performance improved sharply quarter-on-quarter. So because we have booked the losses on the sales of bonds associated portfolio allocation, you can see the performance improved based on this reason. On the business side, this June, we have started the sales of revised insurance income protection insurance keep up. This has been strong. Segment assets were up JPY 38.8 billion (sic) [ JPY 38.5 billion ] to JPY 3.477 trillion -- JPY 3,047.7 billion, excuse me. For the segment profits in banking and credit were up JPY 3.5 billion or 51% year-over-year to JPY 9.9 billion.

So in terms of the environment, while the interest rates were rising and the funding cost for deposits are becoming higher, the yield on total investments is improving. For the first quarter, due to one-off factors, the profit has grown. Segment assets were up JPY 71.9 billion to JPY 3,216.5 billion. In July, ORIX Bank paid the parent company a JPY 30 billion dividend with the aim to improve the segment ROE. In the Aircraft and Ships segment, segment profit decreased by JPY 1.9 billion, a 16% decline to reach JPY 9.9 billion. Although there was a slight decrease in profits for aircraft, the business outlook remains positive as the number of owned aircraft increased amid high lease rate levels. Avolon saw an increase in profits compared to the previous fiscal year, partly due to profit contribution from Castlelake, which was acquired in January this year.

In terms of the credit rating, in May of this year, Moody's and Fitch upgraded the rating. Standard & Poor's has revised its outlook to positive. In terms of the fiscal situation, they enhanced their health. The Ships segment experienced a decrease in profits due to the reduced financial income from ship financing and the market factors, but the impact from tariffs is limited. Segment profit for the ORIX USA segment decreased by JPY 11.2 billion year-over-year, amounting to JPY 600 million. The budget for ORIX USA forecast earnings to be more heavily concentrated to the first half and earnings are generally in line with the forecast. The private credit business experienced a decrease in profit due to the absence of reversals of credit costs booked in March fiscal 2025. Real estate profits were down on the absence of gain on the sales of a fund equity stake that was booked the previous year.

The main reason for the decline in profits in the private equity business was the impairment of our investment in an equity method affiliate owing to the tariff impacts coming between the United States and China. Segment assets decreased by JPY 5.7 billion to JPY 1,588.2 billion. ForEx had a negative JPY 51.7 billion impact, but assets increased slightly in U.S. dollar terms as we made a bolt-on investment aiming to enhance the value of an existing investee in this business. The segment profit of ORIX Europe was JPY 1.2 billion lower year-over-year. This is an 11% decrease to reach JPY 9.9 billion. The decrease in profit is due to the absence of performance fees recorded in the same period of the previous year. On the other hand, ORIX Europe continues to see net inflows, expanding AUM to a record high of JPY 401.9 billion (sic) [ JPY 401.7 billion ], mainly coming from ROBECO and management fees are on the rise.

Lastly, in the Asia/Australia segment, profit increased by JPY 100 million year-on-year, reaching JPY 9 billion. Although income from investees in the Greater China region was lower, financial revenues from leasing in Australia and Singapore increased, resulting in profit growth. Segment assets decreased by JPY 13 billion from the end of the previous fiscal year to JPY 1,712.6 billion. The decline is mainly due to maintaining a conservative investment and financing stance in the Greater China region. This concludes the explanation of each segment.

Please turn to Page 15. This slide is about the shareholder returns. Regarding the acquisition of treasury stock, as the end of July, we have acquired JPY 40.9 billion of the total JPY 100 billion buyback program we announced in May. Regarding the interim dividend, as mentioned at the beginning, the current dividend policy is set at a payout ratio of 39% versus the first half net profit. As I have explained, in the second quarter, we anticipate gains from the sales of Greenko and new investments. And for our full year earnings forecast is currently under review. We will inform you any updates if there is a progress in this area.

Please turn to Page 16. This slide is about the ROE and EPS growth, enhancing corporate value. Since announcing the 3-year medium-term plan and long-term vision in May, our CEO, Inoue and COO, Takahashi, have been actively engaging in direct dialogue with institutional investors, both domestically and internationally. In this context, we will strive to enhance the corporate value by increasing opportunities for direct dialogue with the market and focusing on improving ROE, which is our most important management goal as well as EPS growth and capital cost, which we also consider as critical.

So this is the end of my remarks for the first quarter results. Thank you for your attention.

[Operator Instructions] From JPMorgan Securities, Sato-san, please.

This is Sato from JPMorgan. I have one question. Mainly in the US-related business, what are your views as to the risk arising from those businesses? The tariff was agreed with U.S. and there was evolution of incentives for renewable energy. So your existing assets or any of your renewable energy businesses, will it impact your strategy? And apart from that, regarding exposure in the U.S., what is your views? And how do you see it?

Thank you for your question. First of all, ORIX U.S., let me talk about the business outlook. If you could refer to Page 33, I would like to make additional remarks. For ORIX USA, focusing on middle market, it provides finance solution and mortgage business for the real estate and also PE investments. And right now, with inflation and Trump's tariff, the interest is now high. So especially when it comes to real estate mortgage finance and investment in operations -- businesses, the environment is against wind segment, profit is JPY 14 million for operation. So we have been rather conservative. So we're in red. And as was mentioned in a minority investment due to tariff, we have been recognizing impairment for some of them.

So we will be conservative and try to reduce the level of our assets. And for the real estate in the property, the high interest rate is continuing more so than we had expected. So we have been struggling in origination for investing in properties. So we are focusing on asset management. So for the segment profit, we are now more or less breakeven. So given this environment, whether it will improve or not, it continues to be opaque. The fundamentals in the U.S., we don't consider this to be bad, but for ORIX U.S. business, to a certain extent, we need to take into consideration the possible capital recycling. Meanwhile, the credit business has been quite solid, leverage loan structured finance and infrastructure finance in these areas, in these debt services, we have achieved a solid result.

Having said that, using balance sheet for some of the businesses, we will have to minimize the risk as much as possible. Also, we would like to drive our asset management. So we will pursue a hybrid model between our own equity and third-party fund. And for Hilco Global, this is rather countercyclical. It's very strong against the economic cycle in overall the U.S. So we will continue to invest in Hilco Global and shift to a better profitable assets. We need to recycle.

And as to your question about the tariff by Trump about renewable energy, the direct exposure in the U.S. is quite limited. However, for renewable energy as an infrastructure, one is price competitiveness and second is the power business itself, whether it has a strong connectivity with it will be critical. Also, of course, there may be tax system changes. But globally, the winning path in renewable energy, how to be in a better position, we need to be very flexible in working on our assets. So that is why we decided to sell Greenko and reinvest in AM Green. And also for Avolon, we have been driving forward. So for the policy of renewable energy business overall, we will not change because of the Trump tariff. That was all.

Next, SMBC Nikko Securities, Muraki-san, please.

I am Muraki from SMBC Nikko. This is Page 8, capital recycling and capital profit and loss outlook. I would like to ask a question about that. The first quarter, JPY 45 billion in profit and Greenko will be reflected. So even putting on that, so JPY 140 billion seems to be the number. It seems that you'll be able to reach the full year plan. It says that you will consider observations. In terms of the capital loss, what is your outlook?

So in the fourth quarter, so for instance, a long-term impairment or the goodwill impairment or the credit loss, CCL losses will be accumulated and ORIX Life in terms of the unrealized loss, it was over JPY 600 billion for the bond portfolio. So utilizing this profit and to be able to improve the profit for next fiscal year, how are your discussions going forward in terms of the portfolio realignment?

So as I mentioned on the right-hand side on Page 8, against the full year forecast, so basically, this is the same as we have announced our budget. So currently, it's under review. That's the reason we are saying this is under review. As you have pointed out, this JPY 41.5 billion in the first quarter, the Greenko gains about JPY 93 billion. If you add that, the full year capital gain budget, including the exit strategy project by project, we are reviewing the outcome. In terms of the -- if we are going to change our financial outlook, it is not only what we have conducted in the past, but in terms of our planning, is truly for this fiscal year, correct, for this fiscal year, we should be considering next fiscal year as an opportunity.

In terms of the capital gain, the optimal timing, we are taking stock and trying -- reviewing about the timing. In terms of the capital loss in the past fiscal year in the fourth quarter, so in terms of the [indiscernible] plant, there has been some partial impairment. And in the U.S., individual impairment and the credit loss impairment has occurred. As you have made a question for CCL, until the previous year, there has been some reversals, but that has stopped. But from this fiscal year and onwards, currently, we are trying to review what will be the right level of reserves. But basically, we think that the outlook is more or less conservative. So this will be some of the things that we want to reflect for the full year outlook.

In terms of the ORIX Life's bond portfolio impaired under unrealized loss, which has improved compared to last fiscal year, but this is linked to the liabilities. In terms of the actual performance against the real business, as long as there's no large surrenders and cancellations, that is the standard portfolio management conducted by life insurances. But for ORIX Life, the long-term lump sum payment type of insurance, the surrender risk having that type of risk is limited because basically offer medical protection type of insurance. So in terms of that nature of the insurance, I think they can absorb the risk. However, that said, in terms of the asset value and going forward valuation, if there is something that will have a negative impact for the next fiscal year and onwards, they will address that. But currently, in terms of the capital loss, there is no major considerations they are considering -- conducting right now. Has this answered your question?

So if that is the case, in terms of the direction on a net basis, the Greenko -- JPY 93.4 billion of Greenko's shares will come in. So for the -- delaying some of the sales or even if there's some capital loss, will they come up? But in terms of the direction, you are looking at kind of upward trajectory.

Yes. As you have mentioned, in terms of each of the exit deals of projects, more than we have assumed more high-quality investors and the interest rate environment, we have to individually review with the top management of each of the segments are considering these type of factors. And we are waiting for the review, and then we want to communicate that as quickly as possible.

Moving on, from Daiwa Securities, Watanabe-san, please.

This is Watanabe from Daiwa Securities. Regarding capital recycling, I would like to ask you regarding Ascentech TOB period did not extend and Panasonic projector business was gained in a short period of time. So what's the investment discipline? Were there any changes in your approach? And also JPY 30 billion dividend, you will be carrying out. So why at this timing are you going to carry out the dividend payout?

Well, thank you very much for your question. Regarding Panasonic Connect projector business, I would like to explain why the agreement was released. So we were supposed to sign an agreement with Panasonic Group, and we had prepared accordingly. As was announced, both parties had worked together, and that's a fact. Meanwhile, due to tariff impact and economic situation, the outlook of this business was revisited. And given the strategy on our end and between ourselves, there were gap between the 2 companies regarding the expectation on the future business, and we quickly consulted with each other. So based on agreement, we decided to release the agreement. We decided to terminate the discussion. So it's not that we were not able to reach an agreement. Rather, based on a rationale discussion, we discussed and agreed that we will not be making investment.

So within a certain risk tolerance, the initial business plan did we -- were we -- were they feasible or not? In light of that, we made a decision. And for Ascentech TOB, it did not achieve the number that we had expected. And thereafter, the price compared to R TOB price, it has been faring higher. It seems like. Meanwhile, Ascentech's management team, we had a discussion many times. So we discussed about whether there's a business synergy or is there a room for collaboration to improve corporate values. We have a relationship to continue to hold these discussions going forward as well. So this has been extend -- the period has not been extended and the price were not revisited.

And as you said, based on investment discipline, in light of the business value that we estimated, of course, we will not change our investment discipline just because we want to purchase. So because of the decision by the business side, we did not -- we decided not to extend and not revisit the price. In terms of timing, Ascentech, there was an announcement this morning and also the market situation. These are impacting factors every time there's TOB. So I'm sure certain accommodation will be necessary going forward. But every time we take time to make a final investment decision. So every time we will consider within the defined ratio of investment. And also the dividend payout, this was announced. We have been stacking up the profit and also the revenue has been growing. But in 3 categories, the finance segment, in terms of profitability, ORIX Bank compared to the peers, of course, they are not behind.

It has maintained its decent profitability and asset has grown to a certain level, and it is being distributed. So in order to grow profitability higher, we decided to return the capital to a certain extent. So in a stand-alone basis, at this point in time, the financial soundness of ORIX Bank has no issue whatsoever. And upon that, we decided to carry out the dividend. And going forward, for each group companies and the business segments, in order to contribute to a higher ROE of a group, we need to go into one by one and be mindful of ROE. So the dividend of ORIX Bank was based on the business strategy going forward. I hope this answered your question.

Mizuho Securities, Sakamaki-san, please.

This is Sakamaki from Mizuho Securities. So I have one question. In terms of the shareholder return, so in terms of the flexibility of share buybacks in the year plan, you have been talking about that. You have been good in your process in terms of the sales of Greenko, in terms of the capital, you have more room. So what type of internal discussions have been conducted in terms of this shareholder return policy?

Thank you very much for your question. So in this Board of Directors is conducted today in the Q1 financial results based on that results, in terms of the discussions that has been conducted, I think basically, the discussions will focus on the forecast going forward or the outlook going forward. I think in terms of the market environment that is solid in Japan, how much will be impact of the Trump tariff? And I think each of the corporations are trying to discern about that. The second point is that in the United States and China, we -- at ORIX as a group, what type of business outlook should we establish. In terms of the shareholder policies to be able to make a decision for these materials, we will have to look more deeply and then decide about our policy. So that is the reason why we are saying that it is under review.

But this fiscal year in May, we have said that we have a framework of JPY 100 billion and the program, this will be quite flexible. In terms of the investment pipeline, for the Panasonic Connect Company, we have terminated that agreement. And with the Greenko sales, we have invested in green. And in terms of Hilco M&A, we have reached an agreement. So for the major projects, I think basically, we have some visibility. So in terms of the -- looking at the investment and the payback, if we consider that we have the capacity and as the market condition shows that if there is a -- capital market shows that it's a good timing to conduct share buybacks, if we make that type of decision, we will make a decision under -- after conducting discussions. So maybe not an answer that may satisfy you.

Next, BofA Securities, Tsujino-san, please.

About the return to shareholders, I have a question. First of all, in the first half dividend, how are you going to decide? 39% is the annual, but the profit seems to be skewing towards first half. So what are you thinking about? And also the additional buyback, and you talked about 2 major deals as well, but Avolon's 70%, Bohai have completed the sale or it was agreed to. So maybe you will think about what to do with Avolon. Maybe you were thinking about it from about 2 years ago, and this discussion may progress or maybe you will look for a good third party and whether you will be able to demonstrate your leadership, but the investment size will be quite significant. So taking all this into consideration and also thinking about the future, perhaps you will have to think about the buyback. So the next round of big investment, there may be several options. So I was wondering if this will turn out to be one of them.

So about the interim dividend to start with, as Tsujino-san, you know very well last year against the first half result, payout ratio was 39%, and that was our return. And as I mentioned earlier, for this fiscal year, Greenko importer, looking at this, we will be skewed towards first half. Nevertheless, will it be 39%. So when we announce interim financial closings, BOD will decide eventually, but our idea towards this dividend is what is fair? It would be a commitment towards -- commitment of 39% against the result. And as long as we don't have any negative factors in the second half, it will be across the board of 39% annually. So that is how we've updated.

And for additional buyback, as you mentioned, Avolon's 70%, the Bohai shareholders of 70% and [ CECO ] -- Bohai was 70% and [ CECO ]. Among overall capital policy, of course, these are important factors. And also, apart from the current pipeline, we have some other potentials. So we are looking into this very deep. And on the market, of course, being mindful of capital cost, this is quite important as we manage our business. So with Inoue-san and Takahashi-san, we have been holding discussions with the investors in EU and U.S. instead of stepping up the capital based on uncertainties, rather, we should be solid.

And looking at the financial state of ORIX, the capacity is sufficiently maintained. So if the return becomes a bottleneck in investment, we will definitely avoid that to happen. So that is how we decided the size of buyback. And as of May, it was JPY 100 billion. And come interim financial results, there may be a certain appropriate amount. So there are moving parts and taking into consideration the Avolon, we will decide if there is an opportunity, we want to make an investment go ahead. Although this was rather vague, I hope this answered your question.

Next one, Nomura Securities, Sasaki-san, please.

So this is Sasaki from Nomura Securities. So I want to ask about the base profit. So I think it's the latter half of the presentation material, the first quarter base profit increase, where was it coming? As much as possible, can you talk about that? If possible, so from the second quarter onwards, so more than JPY 120 billion, is this sustainable? Or is it going to further increase? Can you please talk about that?

So that will be Page 42. I think you're looking at Page 42. As I said at the beginning of the presentation, in terms of talking about the segment profit, in terms of the level of base profit, this is a very solid level for the first quarter. But partially, in this, the so-called -- so aside of the recurring base profit, so from technical reasons, some has been booked in the first quarter. There is some of that type of profit that has been booked. So if you compare it year-over-year, so before tax, more than JPY 100 billion level, I think basically, we have been able to reach that level. But this first quarter, I will not be able to tell you the exact number. For the bank business, there has been some one-off profits that has been included or in terms of the Environment and Energy, the capital -- besides some capital gains, there are some technical numbers that has been included.

However, that said, up to now, in terms of the momentum from 2 years ago, the third -- from the second quarter onwards, more than JPY 100 billion of base profit has been achieved. In terms of maintaining this momentum, yes, we will continue to maintain this momentum. So in terms of other impacts, in terms of the performance of the PE investees, so it's quite dispersed and distributed. I do not think that one specific investee will have a negative impact. But each of our investees are conducting very unique businesses. So we would like to manage these companies very steadily, but they may lead to some fluctuations in the future.

Moto-san, may I ask -- so maybe I did not understand what you have explained. So let me ask again. For this fiscal year's guidance, you said that it's under review. What is the meaning of under review? So simply thinking -- so last year, you were not able to sell Greenko, you have not been able to achieve your targets. And then this year, it has been decided. So it maybe go up. So that's kind of a simple thinking that I have. So you have used the word under review. Is it that implication that the outlook has become negative? Or it's just technically, literally, you're just thinking, so it's under review. So can you please help me understand your thoughts?

So I think what you said latterly is what I was thinking. So when we disclosed our budget in terms of the gains come from the sales of Greenko, so in terms of the buyer was relying on the market conditions and it was difficult to foresee, but we have to compile a budget. So for each of the segments, we have been expecting that each of the segments will be able to do the business [ already ] and we disclosed the budget outlook of JPY 380 billion. But from our point of view, the review of our forecast, including the Greenko sale, so it's not just adding or subtracting what has changed.

Against what is our forecasted performance for this fiscal year, we do want to answer that correctly and solidly. So as far as time allows compared to initial budgeting, how things are going to transpire from July and onwards from the top management for each of the heads of the business segments, so we have closely communicated about that. So I do hope that you will allow us more time to think about this. So it's not that things got better or worse. We are thinking that -- we are really looking into the budget so that we can say that this is the revised forecast backed by solid reasons. So we do want to spend some time to be able to reach that conclusion.

So we're closing in, but this will be a final question. SBI Securities, Otsuka-san, please.

This is Otsuka from SBI. Towards the back of the presentation, on Page 46, asset management disclosure is given JPY 81 trillion at the end of June. And it doesn't say here, but in the previous document, March 2025 towards the left, AM was JPY 74 trillion. I believe it was the number. So simply, within 3 months, plus JPY 7 trillion. That's disclosure. So I would like to know the background of this increase. So third-party asset management, I think you've talked about enhancing those areas. So I am now interested.

Takahashi-san mentioned this as well. So in mid- to long-term strategy, we would like to grow AUM through asset management. That is the direction within mid- to long-term strategy. And on Page 45, one page before, that's included on this page. And also, as you recall, at the end of March, AUM outstanding amount, it's now JPY 81 trillion. So it has grown. And the major reason behind this increase, there are 2. One is Robeco and other companies. The inflow of cash, relatively speaking, towards this quarter, well, although this was within our expectation, we were able to take them in. And prior to that, over the past 1 year, Robeco's AUM was rather flat. But from previous quarter, the momentum of recovery started to be very clear.

Perhaps this is mainly due to product lineup and the investors understood that, and this led to the inflow. And also U.S. stocks, equities, the market was good. So there was inflow and AUM outstanding. There has been a higher valuation. And for first and second quarter, it has been on the rise. So that was Robeco related. And apart from that, in the U.S., CLO and securitization product arrangement business is underway. So this is a private credit-related product, which has been quite successful. So in the past, as a hybrid model, balance sheet was being used.

But once sold to investors, it will shift to AUM. So for CLOs, the outstanding amount is quite significant. So this was another contribution. Especially in case of U.S., because of the U.S. dollar, in terms of value term, compared to yen-based, the impact appears to be much bigger. So there are other fluctuating factors, but there were valuation loss, but we're able to absorb and tariff impact. So both in U.S. and Europe, I hope that I was able to explain the factors behind these numbers.

So mark-to-market is another thing. So there's JPY 21.4 billion inflow. But I think market value is not that high.

Stock base, as you say, there's an impact on the market -- of the market. So with Takahashi-san, just showing the numbers on the balance, it's difficult to understand. So in individual IR meetings, he has received a lot of questions about the product profitability. And this is a home for myself as well. I hope that we will be able to sort this out and better explain to you in our disclosures going forward.

I am looking forward to the detailed explanation going forward.

So the time has come to end this meeting. We would like to end the Q&A session. So Yamamoto will say some last words.

So thank you very much. In the first quarter, I think physically, we have seen some comfort in terms of Greenko from this fiscal and last fiscal year, I think people were concerned about the situation, but we have been able to close the deal, and I think that was quite a favorable situation. On the other hand, as Tsujino-san and other investors has asked for the second half, we cannot be too optimistic. And for this fiscal year, the capital gain is concentrated in the first half. But for the full year business in itself, we would like to carry out a business steadily. In terms of the review and looking into the business environment, we will focus on these activities. And through communicating with you, I would like to clarify any issues. So I hope that you will be able to support the ORIX Group going forward. So this -- I would like to end the first quarter presentation results. So thank you very much.

So for the March 2026 first quarter results briefing, we would like to end this meeting. Thank you very much for participating until the end.