ORIX Corporation

Good evening, ladies and gentlemen, and thank you for joining us for this telephone conference of Oryx Corporation for the Third Quarter Consolidated Financial Results for the ninth month period ended December 31, 2020. Today's attendee of this conference is Executive Officer, Head of Treasury and Accounting Headquarters, Mr. Yano. As we begin this conference, we would like to ask the participants to make sure that that you would turn off your mobile phone or put it away from the telephone in order to avoid acoustic feedback. If we experience severe acoustic feedback during the meeting, we may have to discontinue the meeting for a while and ask the participant to help us. Please understand, and we would like to I have a presentation by Mr. Yano first, and then it will be followed by Q&A session. The whole meeting will take approximately one hour. At this time, I'd like to turn the call over to Mr. Yano. Please begin.

So I am Yano, Head of Treasury and Accounting Headquarters. Thank you for joining us today for the FI 2021 March 30 Business Performance Announcement of OREX. Further ado, I'd like to begin. Please refer to page 2. I believe that you do have our handout. I'd like to begin by sharing the executive summary of the quarter. First, the performance. The year-to-date net income at the third quarter of FY2021 was down year-over-year by 42%, or 142 billion Japanese yen. with the annualized ROE at 6.4%. The net income for the third quarter was 48.2 billion Japanese yen, which is an increase of 10% as compared to the second quarter. This indicates a progress of 75% vis-à-vis the target of 190 billion Japanese yen for the whole year, which we shared at the time of the interim result announcement. The guidance of 190 billion Japanese yen for the whole year remains unchanged. The second point is shareholders' return. On November 2nd of last year, we announced the share buyback program of 44.2 billion Japanese yen. As of January 8th of this year, we have completed the execution of the program by 100%. Repurchase shares were cancelled as planned on January 29th. While we would like to use some proportion of retained earnings for new investments, our policy of not retaining any unnecessary capital remains unchanged. As to the surplus capital, we intend to return them to our shareholders through stable dividend and flexible and agile share buyback program. The third point is new investment. Despite of COVID-19 pandemic, Oryx will remain active in making new investment while being very selective in choosing the target. At the time of the second quarter announcement, we shared our expectation of 200 billion Japanese yen worth of new investment However, the new deals continue to increase and have so far made an announcement of approximately 400 billion Japanese yen worth of new investment. We will continue to deploy our investment capability YB with focus on renewable energy and asset management. Last point is financial health. We would like to continue managing the businesses while maintaining the health of our financial standing. Liquidity at hand, excluding OREX Bank and life insurance, is secured at a high level of 1.1 trillion Japanese yen as at the end of December last year. As for credit rating, we maintain single A or higher with Fitch keeping their rating as at this third quarter. Now, please refer to the next page. From here, I'd like to explain further details of the result. First, as for the net income and ROE, I have shared the numbers a little earlier. If you could refer to the chart on the right-hand side of the page, you can see that the trend is on the recovery from the second quarter. Now, please refer to the next page. I'd like to share the breakdown of segment profit by splitting the profit into base profit and investment gains. Segment profit for the nine months was down by 37.6% year over year at 231.4 billion Japanese yen. Base profit trended firmly with the expectation of stock segments that received a significant impact from exception, sorry, of some segments that received a significant impact from COVID-19 outbreak that are explained in more detail on the following pages. As a matter of fact, the segments such as environment and energy, life insurance, bank and credit, and Oryx Europe have trended steadily, proving the strength of our diversified portfolio. Investment gains were down year over year, but we managed to secure a certain level of gains despite of COVID-19 by realizing gains on sale of real estate assets and others in the U.S. and Asia. Please turn to the next page.

Next page shows the impact of COVID-19, and this is shown by business unit impact on profit in the third quarter following the second quarter, starting with real estate and facility operations. Due to the impact of a go-to-travel campaign, the hotel and inn occupation, which was in single digit in the first quarter, improved dramatically in the third quarter. In aircraft leasing business, the impact of COVID-19 still remains, But I will go and explain this in the segment performance later on. But compared to the second quarter, we have seen some improvements. Concessions, we saw 80% recovery compared to the previous in terms of domestic flights as of December. But since the state of emergency declaration was extended, we need to... they cautioned to this industrial climate, together with aircraft leasing. In these three business units, we still have the impact of COVID-19, but the level of impact reduced from the second to the third quarter. Corporate Finance Services and Maintenance Leasing and Oryx USA have made solid recovery in the third quarter. No major impact of COVID-19. Moving on to the segment performance on the next page. For all of the 10 segments, we are showing comparison against the prior quarter and prior year in terms of segment profit. I mentioned the advantage of having a diversified business portfolio. And in comparison to the second quarter, in six out of the 10 segments, we saw positive growth in profit versus prior quarter, and four segments were profitable as compared to the prior year. And the segment details are shown on page 11 and beyond. We would like to refer to those pages now for brief explanation of each segment. Please turn to page 11. Starting with our corporate financial services and maintenance leasing segment. In automotive, thanks to the tailwind of go to travel campaign, rental car demand has recovered. And for rent tech, because the operation of the engineering center has recovered, we have seen increased in profit. compared to the prior quarter. The segment asset was down by $99.1 billion compared to the previous year-end, but because of the low interest rate, we will continue to maintain the spread and that we are not forcing ourselves to build asset balance. Please turn to page 13 for real estate segment. Investment and facility operations unit. In the third quarter, profit was down due to lack of investment gain on sales of major deals, but the hotel occupancy improved, pushing up the base profit. And considering the seasonal factor, Daikyo is doing pretty well. Please turn to page 15, PE investment and concession segment. Private equity investment in Japan. We had one in the first quarter and three in the third quarter. We are implementing new investments on a constant basis, and now we have 17 investees. Investors' business in general are doing well, and the earnings are solid. In January 2020, we newly invested into Kobayashi Kako, which is a company that develops, manufactures, and sells generic medicine. And out of the end of the triangle for trichophyton, there was contamination of hypnotics. and we would like to provide a sincere response to the victims, and we will fully collaborate with the investigation by Sugri Prefecture, MHLW, as well as the expert outside panel in order to understand the full extent of this incident and implement measures to prevent recurrence. In order to execute our social responsibility as quickly as possible, we would like to extend our maximum support as investors. Moving on to the concession business. Kansai Airport is operating three airports, and in those airports, in terms of flights, recovery is still slow. But since August, we have seen a recovery trend in the domestic passenger traffic, and we have made some recovery compared to the previous quarter.