Kazuo Kojima - CFO, Deputy President, Representative Executive Officer and Director Makoto Inoue - CEO, President, Representative Executive Officer and Director.

Kazuki Watanabe - Daiwa Securities Natsumu Tsujino - JPMorgan Chase & Co. Masao Muraki - Deutsche Bank AG Koichi Niwa - Citigroup.

If I may, we'd like to begin the session. First of all, I would now like to thank you for your precious time being with us. We're here now to explain the ORIX Corporation financial results for the consolidated fiscal year ended March 31, 2017. Allow me to introduce myself. I'm serving as the emcee. My name is Sahara, the Corporate Planning Department.

If I'm going to take a moment to explain what you have received, you should have the 5 different sets of documentations, starting from the top, financial results and supplemental data earnings summary; the earnings release; finally, you should have the questionnaire sheet. In the first half, we'd like to have Mr.

Kojima, the Group CFO, to explain the performance for the year ended March 2017. And following that, Group CEO, Mr. Inoue, is going to give us the highlights of FY 2017 as well as in current fiscal year as well as our ideas on working on the returns to shareholders.

After that, we'd like to have questions and answers and we'd like to end the entire session at 1630 and I'd like to ask for your cooperation. Without further ado, I would like to begin the explanation meetings..

My name is Kojima, Group CFO. I'd like to, first of all, express my appreciation to you for participating in ORIX's session on financial results by taking the time out of your busy schedule. First, I would like to briefly explain to you the results for our fiscal year ended March 31, 2017. Please turn to Page 1 of the handout.

This is a business overview of our fiscal year ended March 31, 2017. Net income stood at ¥273.2 billion, down 5% year-on-year. As with the previous year, new record high was achieved. We accomplished our growth in 8 consecutive years, up 5% year-on-year. ROE was at 11.3%, above 10% level for 4 years in a row.

In fiscal year ended March 2016, we posted gain on sales of a U.S. investment bank ,Houlihan Lokey, through IPO which greatly contributed to our income. On the other hand, in fiscal year ended March 2017, capital gain on sales of PE investment and Real Estate gain and sales gain, leveraging market opportunities contributes.

We also achieved steady growth in existing businesses. Please turn to Page 2. The left-hand side, you see the segment profits. On the right-hand side, we have the segment assets and ROA. The -- this page shows a change in segment profit and segment assets for the full fiscal year ended March 2017.

Segment profits totaled 200 -- ¥420,800,000,000, up 11% year-on-year; segment assets, ¥8,956.9 billion. Results of each segment is shown on Page 18 onwards of the handout. And let me briefly comment on each of them.

Of the 6 segments, the Real Estate and Retail and others increased profit, but the corporate financial segments, the segment profit went down 10% at ¥38 billion. This was attributable to the reduction of the finance revenue from loans.

And also, there was a reactionary drop of the series of a gain on sales of securities that was posted in the previous year, that's why it went down. When it comes to the commission income, fee income, it went up 14% or above by ¥4.9 billion. The segment profit of Maintenance Leasing came to ¥39.8 billion, down 7% year-on-year.

The main reasons for this 7% drop is the auto leasing and rental. The maintenance revenue, we're #1 the -- in the second-hand car market. And the market was rather stagnant, so leasing and rental -- the car -- the gain on sales of those cars whose rental or leasing are finished, reduced.

With respect to the segment in the first quarter, ¥37 billion securitization took place. And so to that extent, the asset was reduced. But including that, year-on-year, there was an increase by 3%. And with respect to this -- our Real Estate segment profit, it stood at ¥72.8 billion, up 70% year-on-year.

The real estate market in Japan was quite good on a continuous basis, so there was an increased gain of sales of our properties. The third is sales of rental property. The segment asset went down by 11% at ¥657.7 billion. The segment profit of our Investment and Operations stood at ¥885 billion, up 49% year-on-year.

Capital gain on sales of private equity investment increasing operations of mega-solar projects and among the environmental business increased. And also from this fiscal year, concession business made a positive contribution and so we saw an increased profit in this segment. Segment profit of Retail went up 41% year-on-year at ¥42.9 billion.

Here, both for the Bank and the Life Insurance, we were able to increase assets. And also at the Bank and the Life Insurance, the gain on sale of the bonds were quite good. Segment profit of Overseas Business came to ¥112.3 billion, down 21% year-on-year.

As I said before, in the 2 years -- 2 previous years, the about ¥40 billion one-off capital gain was seen through the IPO of Houlihan Lokey. But in this Overseas segment, we didn't see a recurrence of that, so that's why it went down 21%. The segment assets increased 7% year-on-year. In terms of value, there was an increase by ¥169.5 billion. The U.S.

operations and also aircraft business are increased. Allow me to move on to next page, please. To your right, it shows the segment assets, each trend. And the left-hand side shows the profit and the contributions to the profit. First, I'd like to expand on the profit side.

And the net income before income tax, we had in those numbers the ¥18.6 billion actually and that was increase among the existing business and operations. Up until the third quarter, it has been a negative of ¥10-plus billion, so we're somewhat behind.

But moving into the fourth quarter, we were able to catch up and we were able to actually increase the operations by ¥18.6 billion. The Retail segment and as well as in concession in our business, these 2 operations actually made positive contributions also. The mega-solar and energy and environmental business actually drove the numbers.

And also, the aircraft business in the Americas are some of the positive factors behind those numbers. Then -- and as for the gain on the sales, as shown in here, private equity, the equity stocks gave us ¥117.2 billion in proceeds; and the Real Estate, ¥51.3 billion.

So year-on-year basis, actually, Real Estate actually improved by ¥30 billion, in a nutshell. Moving on, please look at the right-hand side, on the segment assets. Looking at the segment assets, the total number on, actually, year-on-year basis actually down ¥15.6 billion. But the existing business side, ¥490 billion were around improvement.

So we have been asked for this result. And following that, actually, securitization and on Hartford, the one-off, the liquidation of the insurance and also we have sold the stocks and also the effects and impact of ¥43.5 billion, put them together and they're down 156 -- ¥15.6 billion. But again, on a year-on-year basis, almost flat.

The existing businesses and, actually, up until -- starting from September 2016, the third quarter and fourth quarter, we had about ¥200 billion assets accumulated. And so in the second half of the fiscal year, we're able to actually increase the value of the assets within the ORIX Corporation.

Being more specific, Americas and equity investment and also the non-bond investments and also here in Japan and also outside of Japan, the PE investment as well as Environment and Energy and the banks, the mortgage loan and car loan, they improved.

And also, in the second half, actually, we worked on the new automotive business and also aircraft business. I'd like to move on to the next slide here. Again, looking at the portfolio in 3 segmentations. Since 2 minutes ago and actually, we're actually explaining our performance based upon this genre.

And please refer to Page 13 in the supplementary data. Then you should have access into the detailed informations. And for the past 3 years, 3 segmentations, Finance, Operations and Investments, they are the 3 categories I'm talking -- referring to.

And also, we have subsegments in finance and in Japan as well as in our Overseas and also the operations and the environment and the financial services and maintenance and others. As for the investment and, of course, the bonds and the Real Estate and tangible assets investments. So we have those subsegments within each category.

So it shows profit as well as assets trends. So the -- what I have said and as shown in this graph and on this slide, that's what you see here. And for your information, of course, we had the Houlihan and the onetime event somewhat based on the factors, so those temporary factors were excluded.

The finance side, Y-o-Y basis, actually, it increased by ¥14.7 billion and ¥97.3 billion was the total number. And domestic, the mortgage loan as well as bank's car loans. And outside Japan and United States, on financial, the process actually made contributions behind these numbers. The operation side, on a Y-o-Y basis, up by ¥28.1 billion.

And we're happy having this net performance. As for the maintenance, I may be repeating the same point, in automotive side, actually, profit actually went down in environment and infrastructure.

Well, actually, I'm explaining this blue, the center portion, actually, this operation actually made good contributions to the profit -- sorry, yes, I was right. Environment and Energy actually made its contributions into the net profit we have achieved.

And also, financial services and, of course, Life Insurance, actually, the number of policies went up. And also, we had increased the premium from the Life Insurance and ROA actually improved to -- from 4.3% to 4.9%.

As for the investment, actually, it was up almost ¥30 billion Y-o-Y, equity and equipment investment [indiscernible] and also the investment into the tangible properties, we have gained from the sales of those items. And ROA actually has been improved to the -- in the level of 5% from the level of 3%. This concludes my explanation. Thank you again..

Thank you very much for your patronage. My name is Inoue and I'm somewhat overlapping. Fiscal year ended March 2017 was the second year after formulating our midterm plan. We posted a net income of ¥273.2 billion, achieving growth for 8 years in a row. ROE at the end of the year was 11.3%.

Regrettably, on a year-on-year basis, growth was just one digit, 5%. But toward a net income target of ¥300 billion by fiscal year ended March 2018, we believe we're continuing to demonstrate steady steps forward. For your information, rating indicating our soundness, A, is continued to be maintained as targeted.

In fiscal year ended March 2017, ROA of Operation segment was 4.9%; Investment segment, 5.1%; Finance segment, 1.8%. Our group as a whole kept 3% level. Although year-on-year growth was only 5%, in March 2017 as well, we executed new investments steadily. And we will continue to do so in the coming months as well.

In the previous year, if I were to be more specific for each segment, environment and infrastructure, ¥90 billion; financial services, ¥60 billion; fixed income investment, including shipping loans, ¥190 billion; aircraft and property purchase, ¥220 billion; other PE investment, ¥80 billion. In total, about ¥600 billion was executed.

At the same time, existing portfolio was sold off opportunistically, Real Estate related, ¥110 billion; stock sales, including PE-related ones, ¥80 billion; aircraft, ¥100 billion; service of bonds at the Life Insurance, ¥300 billion. Through these, gain on sales at ¥170 billion was posted.

With regard to Life Insurance, a sale of bonds for ¥300 billion, this value is attributable to policyholders and it was posted as cash on deposits, but this was excluded from the segment assets. In Investment, a variety of new investments were executed both at home and abroad.

We also realized, exiting from existing investments, we believe we have built a cycle that realized stable income as we change assets.

I think investors may be wondering chiefly if in fiscal year ended March 2018, net income target of ¥300 billion is achievable or not and if, with regard to the midterm plan to be put together, further growth can be maintained or not.

Relative to the midterm plan, when we announce half year result for fiscal year March 2018, we intend to disclose a 3-year midterm plan, so please wait until our announcement in October. With regard to ¥300 billion of this fiscal year, profit contribution from the existing portfolio is expected to be about ¥200 billion.

Gain on sales, including capital gain from replacement of hotels and others and exiting from PE investments is expected to be around ¥100 billion. In other words, with the existing portfolio alone, it is possible to achieve the ¥300 billion target.

Also, I hope you also understand that we have a potential of additional profit from the new investments that are planned for this fiscal year. Needless to say, there may be factors that cause fluctuations, such as unexpected events and the market situation, foreign exchange situation. We intend to aim at 9 consecutive year growth in income.

Naturally, investment activities will be continued and portfolio that should be a pillar for revenues in the 3-year plan shall be built. Core businesses, that are going to be the pillars in the next 3-year plan, excluding new fields, are as follows. In the Environment and Energy business, we have solar power generation business in Japan.

Here, we have already secured about 990 million megawatt projects. As of the end of March 2017, 570 megawatt was operational. And the remainder will come into operations step by step. Most of them are FIT 40M projects. There will be assets with a substantial unrealized gain expected to contribute to the company's revenue.

We acquired stocks of a company called [indiscernible] that runs the final disposal sites of industrial waste.

Since ORIX's the resource recycling corporation runs advanced waste processing facilities, it is now possible for us to establish a system that allows us to provide a one-stop service, from collection, transportation, processing and final disposal of wastes. We believe we can expect a further development in this field.

In addition to equity investment in wind power generation project in India, we participated in hydropower in Vietnam. And in April, also in India, roof-installed solar power generation started. We announced in May that we would invest in a leading geothermal producer ormat Technologies.

In addition to profit contribution from the company, by leveraging the company's technology, we made moves such as entry into geothermal power generation in Asia. It's been a year since our investment in the Kansai Airport. It has been quite smooth.

We're now making negotiations to incorporate Kobe Airport to establish a system that can make greater profit contribution. We have also secured many concession-related projects in the pipeline which is to be a part of our portfolio one by one. Robeco became a wholly owned subsidiary in October 2016.

Robeco's AUM at the end of March 2017 was EUR 219.5 billion which was up year-on-year, securing stable fee income. In the Americas, we acquired Boston Financial, that manages and originates rental housing-related funds for low-income earners; and RB Capital of Brazil which is an asset manager.

We expect increasing profit and contribution from asset management business. In Life Insurance business, policy in-force for personal insurance is increasing steadily. As of the end of March 2017, we had about 3,490,000, achieving 11-year consecutive double-digit growth since 2005.

We believe this will be the greatest profit contributor in the Retail segment. In aircraft business, in this fiscal year, we plan to buy 60 aircraft new, mainly narrow-body planes. Our stance is to continue to invest in aircraft with leasing contracts centering around narrow bodies.

We'll expand our assets, sell them to Japanese investors and secure management commissions after that which we believe should permit us to enjoy a high income this year as well. In PE investment in Japan as well just as before, we're convinced that we will continue to be able to achieve high IRR.

We're in firm belief that a cycle has been established to ensure stable profit as we change assets. ORIX will further leverage its unique expertise and business platforms while supporting the investors' business operations.

At the same time, we will also try to improve the corporate values through investment activities centering around revitalization and roll up. It's going to be a very unique investment only an ORIX can do.

We're having private equity investments into new assets, but it has just now started and so its contributions into the revenue is expected to take place in the next fiscal year or after. We're here not to commit ourselves into advanced and sophisticated and key investments.

I believe it should make its contributions into the next midterm business plan. ORIX is pursuing its growth strategy centering around these Operations and Investments. And I have repeatedly mentioned this again and again that the challenge for ORIX is on governance.

Our Operations cover so many different field, so ORIX needs to keep an eye on many aspects until the execution. It is also true, those operations intend to go and extend in a very fast speed, therefore, we need to tighten our belt and for our governance and the risk management as soon as possible.

And how we can achieve it has become urgent task for the company. We decided to launch enterprise risk management, ERM, independent of the company so that we can further reinforce our global compliance and internal control.

Once an issue in one business has occurred, it is not going to be limited just to that business, it may damage our brand and reputation and ultimately, it will endanger our presence itself. And I am telling myself that we can be offensive after we have a good defensive scheme. Risk management is more important.

We have already established a good know-how on the Finance and Investment, but we still have some way to go when it comes to Operations. We still have to address many things. Operational risk is the major risk for the operations. With the extended operations, new risks are increasing at the same time.

To control operational risk factors, we need to further strengthen the ERM capabilities, in particular. Next, I would like to explain our thought on the returns to our shareholders. There is no change in our philosophy that we would like to use our capital for our future and continuous growth.

As I stated this point earlier, the total new investments for the year ended March 2017 was about ¥600 billion. And I would like to ask for your understanding on our intention to use the capital for our future growth in the year ending March 2018 and future years.

Despite the fact that ORIX is having good performance in the past, but our PBR has been 1x or smaller now for a long period of time. With this point in mind, I believe we should consider now to buy those stocks with higher acquiring cost.

And even if we purchase treasury stocks, to some extent, it will not impact our growth strategy, so we set up a cap of ¥50 billion for equity buyback last year. We set up the fund for the purpose as of October 27, 2016 and we extended the period and set up the period until May 15, 2017. And it has raised the cap as of April 21.

So this operation has ended. Average in purchase price was ¥1,667 and its average stock price in the period was ¥1,739.

In the current fiscal year, we will not set up the program for any stock buyback, but and I believe, we should be flexible or dynamic this year and whenever deemed appropriate in light of stock prices, new investment opportunities and our capital situations and others.

We should be able to consider treasury stock buying as a part of our strategy going forward. In the half year earnings announcement, I stated that the payout ratios for the year ending March 2017 is 25%. Therefore, full year net dividend is ¥52.25 per stock. With the interim dividend being ¥23, the year-end dividend is going to be ¥29.25.

Our interim dividend for the year ending March 2018 is forecasted to be ¥27. It is rather difficult to anticipate external factors which may have impact on the ORIX performance for the new fiscal year. But in the meantime, I would like to stick to ¥27 as the interim dividend.

Full year payout ratio will be -- I'm sorry, I'm repeating the same point again and again -- will be announced when as -- when we announce the financial results for half year in March 2018. We will use the capital for the future and continuous growth. And at the same time, we'll make further efforts to realize stable returns to our shareholders.

Lastly, I would like to state here and again, our net profit target for the year ending March 2018 is ¥300 billion as planned. And we're going to make our best efforts. While focusing on Operations and Investments, we would like to grow at stable revenue.

And at same time, we would like to explore new areas actively so that those newly found opportunities will become our next business course. As for our own forecast for the year ending March 2019 and onwards, I will explain them in the half year earnings announcement and I will also explain its directions.

You may tell me that once we have reached net income of ¥300 billion, it is going to be so easy to be able to maintain further growth. But may I remind you that ORIX strongly believes that as long as the economic conditions are going to change continuously, we should be able to find unlimited opportunities for ORIX.

In other words orIX is going to have good potential for our continuous growth. Finance is our basic foundation in terms of customer basis and it gives us valuable information about our customers. So we will challenge ourselves in getting new finance customers, particularly in AI and IoT fields.

Furthermore, we would like to deepen our engagement in Operations which I -- which we believe that are now going to give us new field opportunities for the stable revenue. So I would like to make sure that our business portfolio is going to become much stronger. I do hope that you can understand this. And please do help us and support us.

And this concludes my explanation. Thank you again kind -- thank you for your kind attention..

I'd like to open up the floor for questions. Should you have any question, please raise your hand and please wait until a microphone is brought to you. We would like to just confine 2 questions to each and please state your name and affiliation before asking questions.

Yes, the person in front?.

Watanabe with Daiwa Securities. I have 2 questions. One, the -- with respect to profit growth, in 2018 March, a ¥300 billion target.

The external environment, if that changes, you believe you can achieve that? And after achieving ¥300 billion, what would be the driver for further growth? In the materials, you say you would like to develop new business fields. What are they specifically? Two, regarding dividend. The interim dividend is ¥27 is planned. The net income is 10% growth.

Compared with that, the growth is a bit higher.

So what is the basis for calculation of this ¥27?.

Perhaps it is impossible to achieve it. So for example, Mr. Trump, if he starts bullying Japan, if that kind of an external environment cannot be anticipated, so as we move on a cruising speed, ¥300 billion is not difficult to achieve.

However, as you have pointed out, what to do after that, now things that we need to do this year is a ¥300 billion investment, plus ROA -- low ROA assets need to be replaced with higher assets or acquisition of new assets to achieve ¥300 billion. That's one. And after that, toward the next year, new investment need to be continued.

After 2019, we should be able to enjoy a continued profit. These 2 have to be worked on in parallel. So what are the new businesses? Well, I can't tell you -- or I should say, well, frankly speaking, with respect to concession, a variety of projects are out there.

However, the existing projects, when you combine them all, the -- that's less than half of the revenue coming from Kansai Airport. So the -- there are lots of competition over possible projects. Should we continue with concession? This is one theme that we're not discussing within the company.

In aircraft and shipping, particularly shipping, it's hit the bottom, it's bottomed out. And fortunately or unfortunately, European banks, they have shipping loan portfolio and they want to sell them. And to this, we say we would like to look at our loan to value and pricing. If they can be bought, we will buy them -- we're buying them.

So ROA, 3% plus, that kind of profit will be possible. And also, well orIX's past, if you look at the past 10-year history, I think you see it, we're very, very flexible. We go to higher ROA things and we don't go toward the low ROA things, so irrespective of place or industry.

So on this point, well, after -- well, if you just see how we operated for 8 years after Lehman, we will go into new business fields. I hope you understand it this way. And also with respect to ¥27, I don't know if you remember, well, ¥23, our interim dividend last year, you were shocked. You said it was too low.

We received such criticism and so we set it a bit higher this time. There is no basis for this. However, in a nutshell, the payout ratio is 25%; and also the return rate, well, 25%.

And furthermore, should we be above that or should we use the money for new investments? Well, over the coming 6 months, in that -- at the time of the interim announcement, we'd like to set the direction and make an announcement and also with the numbers in the next 3-year plan.

Well, in this respect, the -- when we make explanation about the half year financial results, I think there's going to be lots of questions, so please wait until then..

Let us now move on to the next question. I see a hand over there, on the lady, please..

JPMorgan, my name is Tsujino. My first question, again, are having to do with dividend. Well, the payout ratio has been growing by 2% to 3% in your history and you have reached the point of 25% right now. Well, maybe you can reach around 30%, but 30% are going to be -- it's going to be quite similar to the situation some -- there with banks.

So you have some hesitations as for this particular point.

But again, going forward, again, on -- what is going to be our latest philosophy and thought concerning the improved higher payout ratio? And concerning the dividend, furthermore and ¥300 billion, again, on the exit profit, again, of ¥100 billion, exit profit is not going to be generated in a stable fashion.

But profit is rather difficult for you to produce some in stable profitability. If that's the case, the DPS target could be another idea for you to consider. So this is a question concerning the dividend. And my second question concerning pipeline, and as shown on Page 5, you emphasized that the pipeline seems to be quite thicker, so to speak.

Again, looking at the pipelines, also the Asia, particularly, the Overseas segmentations and private PE investment, again, has increased for 2 quarters in a row; and also, in Americas and the renewable energy projects and actually coming up into the surface.

So with these points in mind, I'd appreciate if you could expand on the specific areas and with a specific number on what are the results here, please..

Thank you for the questions. Well, concerning the payout ratio, we seem to be going bit by bit and, actually, improvement by now 2%, 3% in one shot. But now 25% and whether or not we're going to reach 27%; and after that, are we going to reach 30% in terms of the payout ratio. Well, actually, we have spent ¥600 billion in the previous fiscal year.

And also, we -- excluding the gains from the fixed bonds and, actually, ¥250 billion and also including one-off and others, so put them together, actually, ¥600 billion was used for the new activities, new investment. And in the previous fiscal year, actually, intentionally, we tried to slow down.

The reason for that is having to do with external factors. There are many external factors more than we had expected. For example, things that have happened was discovered in the U.K. And also, another unexpected thing took place in American as well. So effects on the forecast, rather difficult for us, luckily or unluckily.

And thanks to President Trump elected, actually, our American company is actually -- and actually, it surpassed rapidly, going beyond $21 and becoming $30. And so I think we have to pay attention to all these factors.

So what's going to happen to our payout ratio going forward? I'm sorry and I am repeating the same point and whether or not we're going to go beyond 25% in terms of payout ratio, please give us more patience. And in regard to the pipeline, well, this -- these gains on the sales is set to be temporary.

But again, for the several years actually now, we're having capital gains incurred. And being honest with you, in this -- in the current fiscal year, the -- yes, pipeline or, actually, the -- we're looking at the assets based upon the pipeline, our opportunities. Of course, we have to have good communication vis-à-vis the markets.

In other words, we have assets unrealized. That's the case. And that's -- and actually, on the -- photovoltaics is still our largest one, talking about the unrealized net profit. And going through details, actually, on price and it seems to be 2x of cost and 990 megawatts and plus costs and also we have 2x unrealized net profit.

Whether or not we're going to sell it or not, that actually, we're securing the unrealized net profit. And this has been a part of our business model. So sooner or later, probably, you can start believing us. Capital gain definitely is going to give us the permanent source of revenue going forward. I do hope you're here with me.

And talking about the pipeline, yes, we have big pipelines. And some of them have been already approved and some of them are yet to be delivered. And actually, 16 aircraft and narrow-body mainly, so the -- we're working on the acquisition of those airplanes.

And it is going to cost either $140 million, $250 million bill in narrow bodies and it is going to be 1 up to 5 year on end on the user life. And of course, every one of them is having a leasing 0.8 or around. In other words, it is going to give us some 10% per year in terms of returns. So we should be able to actually get that to cover the principal.

And also, a 7, an 8 and a 10-year lease in aircraft is another D&A space, particularly for domestic investors. And those are Japanese investors, of course, who would like to get a good depreciation on the Japanese market. And even if it is somewhat limited and small, there are many investors quite happy to have those opportunities.

So I do believe that we should be able to actually gain a good profit. And on the shipping side, actually, we have projects this fiscal year 6 billion as for the private equity. And also, value produced seems from private equity is reaching the peak, then we're going to sell it.

And the properties and also the real assets, of course and the REIT is behind. So definitely, we're going to be working on this transition and so that we can get capital gain. So this has been our -- the business model. And in regard to the pipelines again, actually, most of them are come from -- are coming from the United States.

Well, actually, most of them are private equity infrastructure on the side of the infrastructure. I think President Trump, I think he has given us the favorable conditions tailwind. And first with that, we should be going to the renewable energy. But now Mr. Trump actually is going the other way around, so we have a wait and see attitude.

Please try to understand that we're planning to have good dialogues with the markets. And actually, several hundreds, billions of yen are already in the pipeline. So this has been in negotiation so far. And I think we have quite rich pipeline and landscape.

Did I answer your questions?.

Next question, please raise your hand. Please raise your hand if you have a question. Yes, this person..

Muraki with Deutsche Securities. You explained earlier the ¥300 billion profit for this fiscal year. I would like to ask you about the basis. From existing businesses, the -- that's ¥200 billion, you said.

In the previous year, the -- what sort of internal growth do you expect from which segment which category? And the remaining ¥100 billion, hotel and changing the investments, I think that's -- it was your explanation. In Q4, the Maihama Sheraton, I think you had a profit from that. And so you still have Okinawa.

Well, in the past, whether you sell it or not, I think there was a talk about that -- a possibility about that. But now it was withdrawn. But the basis for ¥300 billion, you have to have a ¥100 billion profit. Well, if you generate a capital gain, then that's an earlier consumption of the future revenue.

What kind of conversation took place in order for you to be able to achieve ¥300 billion? So broadly speaking, income and capital, please enlighten me on those fronts..

Regarding capital gain, to some extent, well, based on the things that we ceased to some certain extent, we have come around that. So there might be upward revision, but right now, in the previous year, ¥160 billion capital gain is not expected, so the base profit needs to be increased. And so that's why we say ¥300 billion. That's our basic thought.

With respect to base profit, 2-digit growth is what we say. Naturally, our capital gain would decline from the previous year somewhat, so 2-digit growth is necessary. Now against this backdrop, the greatest contributor would be Overseas, none -- ex-Japan business.

The -- in terms of base profit, of course, this includes aircraft, so the gain on sale of aircraft is included in here, so ex-Japan. And also, the assets in the Americas in the previous year, we accumulated a great deal, so one driver would be an ex-Japan. And another thing that we expect to grow substantially is operations.

Investment and Operations, we have explained this many times about this. But Environment and Energy is an area where there's going to be an increasing renewable energy. And also, concessions in the previous year, it was negative in the first quarter; but in this fiscal year, it will be contributing fully.

And so this is another additional factor for growth of the basic profit. And also, in this fiscal year, there was a decline in maintenance. But the secondhand product, the reversal of that sale and also there has been accumulation of assets and that would contribute to increased profit. And so overall, ¥300 billion is the plan that we're considering.

Have I answered the question?.

Well and also hotels, rather than selling them now, keeping them would be better. That is a suggestion that I would like to appreciatively enjoy. Now I think it depends on the thinking. So the revenue from hotels right now, well, I think it's at the peak. But it will continue until the Olympics. And depending on the location, there might an overcapacity.

That's a possibility. For example, Kyoto, probably there is still revenue that will increase. Okinawa, Chatan, I think you were talking about Chatan in Okinawa. With respect to Chatan in Okinawa, annex is being built. And when it's complete, we'll make a forecast for the future. And if it's peak, we will sell it. If it's not, then we'll hold it.

The same for other hotels. I would like to preclude your misunderstanding. We're not selling it to -- just to get a capital gain, but the -- whether the hotel management business is peak. If it's a peak, then we will sell it. If we can expect profit contribution, we won't sell it.

So that's the decision -- the kind of decision we will make, so please feel reassured. Have I answered your question? Thank you..

Thank you. Let us now move on to the next question. If you have questions, would you please show your hand..

Citigroup Securities, my name is Niwa. Investment and ERM are the areas I would ask some questions. One, the -- for the fiscal year now ended, the ¥600 billion has been a number given to us. Again, you tried to be selective.

But again, without being selective, what will be the normal investment numbers in terms of your true capabilities of making investment based upon the current situations? And the second question, concerning the ERM. Well, the risk control is very important. That's what you said in your presentation.

At the same time, I think in ORIX, what makes ORIX like ORIX is doing something new? There seems to have a conflict.

So which one of these areas are we going to put more emphasis and focus going forward in managing your business activities?.

Well, concerning our capabilities to make investment, well, being honest with you, actually, it is going to be unlimited, so to speak. I hope you're with me. Right now, in the capital, we have right now, well, of course, if you like, we borrow money, I think we have no problems.

Actually, we have problems by many people, actually, in the prism on the rent money. So when it comes to funding, we should have no major issues and challenges. And so with this one in mind, it is going to be unlimited. But again, we're going to aim at an ROE on the 11% or the 3% on a plus.

So we're going to now look and we're going to be quite selective whenever we're going to put our money into whether or not depend on how we can expect those numbers, in other words, on the future value increase, for example, the ERM, the holding period and our earnings is going to be negative. And also, we keep losing money actually.

We have actually stopped those projects. For example, in developing the projects, ROA is now going to be a negative with 3% and a 4%. Yes, sometimes, we're going to have those in the projects. And we, I think, ourselves, that we have actually slow down those inactive change.

In other words, we're going to be quite selective in picking up on those projects which are going to give us on day 1 earnings opportunities and that is why we're enjoying a ¥600 billion. And ERM, actually, now we have history of 60 years. And actually. sales is given top priority. Back office and middle office actually are behind the sales.

In other words, those guys are going to back up the salespeople. But FCPA and world of governance, there are many scandals have taken place, so as reported in the newspaper. So if I'm not wrong, again, going forward, we would like to give priority to sales activities.

But in the sales performance and also due diligence, the process needs to be well managed by the middle side and the back-end side. And now going forward, we're hoping that we can have better analytics so that the feedback and observations can be well shared the -- between the sell side and middle aside and back-end side.

And the -- some of the negative factors are just going to be carried out. If unless we have really good control vis-à-vis the risk factors and the governance and so on, we'd like to improve the transparency to a large extent. So actually, we have investment in headquarters. And also, we have independent ERM.

So the governance and internal control are now going to be further discussed among the people concerned here. And if I remember it, 3 years ago, in Australia, there was a "little scandal" 2 years ago. And back then, SEC actually paid strong concern and attention.

And department of enforcement actually started and, actually, their investment -- investigation for 3 months vis-à-vis our entity in Australia. Actually, they were not able to find anything. But again, we had those experiences.

And that is why we're telling ourselves, including FCPA and actually, we have and actually have better on our schemes for the internal control and in governance. Otherwise, SEC, in case SEC is asking us to pay a penalty, that is going to be a serious damage on the reputation of ORIX Corporation.

And personally, actually, I made a declaration to SEC and I'm going to be put behind bar for 2 years. And the minimum penalty is going to be 2 million. And actually, I set it up personally in a paper and I commit myself and through this, the terms and conditions.

And so it's very important for us to have really a better transparency and including expertise and attorneys at law. And also on account terms, again, we need to keep an eye on the performance and activities of our sales reps. I don't think that itself is going to become a drag, I guess, in the good results.

And we do expect with the salespeople, Southeast Asian opportunities and also Latin American opportunities, going forward. And of course, FCPA, we simply cannot escape from the FCPA issues. Yes, we're fully aware of that. That is why we're now emphasizing the governance and internal control [indiscernible].

That is why we decided to launch ERM at this time.

Did I answer your question? Did I answer your question fully?.

Thank you. And now we're approaching the ending time. So with this, we would like to conclude the Q&A session. Lastly, we request to you, we have distribute to you a questionnaire survey. Please fill that in. And with this, I would like to conclude the session to explain the financial results for the fiscal year ended March 31, 2017.

Thank you very much indeed for coming. Thank you..

Thank you very much..