ORIX Corporation

Thank you for joining this telephone conference of our Oryx Corporation for annual results for the consolidated Cisco year ended March 31st, 2021. The attendees at today's conference are member of the Board of Directors, Representative Executive Officer, President and CEO, Mr. Inoue, member of the Board of Directors, Senior Managing Executive Director, Mr. Taniguchi, and Executive Officer, Head of Treasury and Accounting Headquarters, Mr. Yano. As we begin the conference, we have some ask. In order to avoid feedback, if you have communication devices such as mobile phone nearby, please turn them off or move them away from the telephone. And if we experience severe feedback during the meeting, with the consent of the organizer, we may discontinue the meeting for a while and speak to the participant who is causing the feedback. We hope that you understand and we will hear from Mr. Yano during the first half and from Mr. Inoue during the second half, followed by Q&A. We expect the whole meeting to take about one hour. We would like to begin the meeting without further ado. Mr. Yano, the floor is yours.

Thank you. Good afternoon. I am Yano, Head of Treasury and Accounting Headquarters. Thank you for joining us today for the FI 2021 March and Business Performance Announcement of OREC. So let me explain. Please refer to page two of the handout. First, the net income and ROE. The net income of FY 2021 was at 192.4 billion Japanese yen with ROE of 6.4%. The result was lower than the prior year, but we managed to achieve net income in excess of 190 billion Japanese yen, which is provided as the guidance at the time of interim. Despite of the further spread of the COVID-19 virus and the state of emergency enforced by the government twice over, the profit bottomed in the second quarter and started to improve from the third quarter. Please refer to the chart on the right. At Oryx, there are business results of some subsidiaries and affiliated companies that are recognized with a three-month lag, which means that we have hit the bottom in first quarter in actual fact and continue to recover steadily since then. Please refer to the next slide. Breakdown of FI21. Segment profit. Total amount of segment profit was 318.9 billion Japanese yen. Please refer to the chart on the left. That shows the trend of segment profit over the past five years. Pale blue is investment gains, while dark blue is the base profit. The base profit was 229.6 billion Japanese yen. This is a decline of 70.7 billion Japanese yen on year over year. However, if we exclude the three areas of business, That was severely affected by the pandemic, which I am going to be explaining in a little more detail later. The profit was up by 7.6 billion Japanese yen year over year. This was thanks to the robustness enjoyed by environmental energy, life insurance, and bank and credit. We believe that the result proved the strength of our diverse business portfolio. On the other hand, the investment gain was 89.3 billion Japanese yen. timely exit to ensure high return on investment allowed us to maintain a certain level of profit generation. In Japan, investment gains were recognized through the disposition of logistic facilities, environment and energy businesses, while some gains were realized in the United States and in Asia. Please turn to the next page. I would now like to explain the impact of COVID-19 pandemic to our business. On this page, we share the impact to our business segments in each quarter, In some businesses, the impact is still persisting. However, the impacted amount is following a declining trend from the second quarter. Here again, we can confirm the recovery trend of our profit. Now, a little more into the details of the impact. First, the three areas of businesses that were affected severely by the pandemic. Real estate operation business has followed an uneasy trend affected by the fluctuation of the occupancy rate of hotels and inns. While the occupancy rate fell to as low a single-digit percentage in the first quarter, it made a significant recovery in November of the last year thanks to the GoToTravel campaign. Due to a rise in the number of COVID-positive cases over the festive season, the occupancy rate fell again in January of this year but started to recover slowly in February and March. Aircraft leasing business is still going through tough times. However, the demand for domestic flights is picking up in some countries where vaccination has progressed faster, which gives us confidence in the need to long-term, or even within this fiscal period, we can expect the recovery trend to get started. Airport concession business books the result with three-month lag, so the earnings of Kansai Airport in October to December was booked in the fourth quarter result. So, number of Japanese domestic flights improved in December and mitigated the negative impact in the fourth quarter. On the other hand, there are some businesses that were negatively affected by the pandemic in the first half but started to recover in the second half, like Corporate Financial Services and Maintenance Leasing, as well as Oryx USA, that had steadily recovered in the third quarter with no further negative impact experienced in the fourth quarter. Please refer to both page 5 and 6. The slides show the segment performance The breakdowns are shown in both profits and assets. In the fourth quarter, six segments posted growth from the third quarter. Another evidence of a broad recovery. As to the details of the segment performance, please refer to page 16 and onwards. I would like to make one brief remark about the result at this point in time. First, the corporate financial services and maintenance leasing segment. Segment profit was down by 3.8 billion Japanese yen at 59.1 billion Japanese yen. The segment was affected by COVID-19 in the first quarter, however, started to follow a recovery trend toward the fourth quarter with auto trending well, boosted by a recovery in rental car demand with profit up year over year. Segment asset decreased by 131.1 billion Japanese yen year over year due to decline in finance leasing and installment loans. But with excessive liquidity at the backdrop, we avoided extending new loans at lower spread and did not increase the asset balance just for the sake of it. Now the real estate segment. Segment profit was down by 55.5 billion Japanese yen at 24.7 billion Japanese yen. In the investment and operation unit, the base profit of hotels and inns decreased. The total amount of investment gains were down due to a large disposition gains being posted in the prior year.

With the Daikyo condominium business, the condominium management business translated into an increased profit of 1.4 billion yen compared to the previous year. New investments into those facilities are ongoing and segment assets increased by 50.9 billion yen year-on-year. And the asset management business, AUM, has been increasing steadily. At the end of March 2021, our AUM stood at 1.3 trillion yen. Moving on to PE investment and concession. Segment profit was 3.4 billion, down by 40.7 billion year-on-year. Domestic private equity investment We have invested into new projects, one in the first quarter and three in the third quarter, and the number of investees increased to 17. Businesses in general are solid, and we are booking more profits. I have already covered the concession business before. Moving on to energy and environment. Profit for this segment was $28.6 billion, up by $16.9 billion a year, a major improvement in the profit. Megasolar business increased in profit in Japan, and also we had gain on sales for the wind power in India, which contributed. And we announced two major investment projects for renewable energies overseas, one of which was Greenco Energy in India, and we have acquired 20% equity March this year. And the other project is Aron Energy in Spain. We now have a basic agreement to acquire 80% of the equity and we expect to close in the first quarter for this fiscal year. Moving on to the insurance segment. Segment profit was 55.1 billion yen, up by 10.3 billion compared to the previous year. New policies through online and face-to-face recruitment increased, contributing to stable profit. Profit in the fourth quarter is down compared to the third quarter, but this is due to active investment into advertising for new policy and also expanded sales of foreign currency-denominated investment candles. This means that we have US dollar-denominated liabilities and hold US dollar-denominated assets. And finally, the currencies are matched. However, accounting-wise, the impact of Forex is different from assets to liability, and we had a negative impact in the fourth quarter but we have already implemented countermeasures to minimize this impact. Segment assets was increased by 24% due to higher-level VUM, thanks to the increase of new policies. Moving on to banking and credit segment. Segment profit was 48 billion yen, up by 8.9 billion year-on-year. Similar to Oryx Life, non-face-to-face online activities were leveraged in order to capture the demand for real estate investment loans and that we have seen stable growth in both profit and assets. Moving on to aircraft and ship segment. Segment profit was down by 40.5 billion, but we secured 30.8 billion yen profit and profit increased compared to the third quarter. As I explained in the impact of COVID-19 as for aircraft leasing business, we are cautious. However, Well, depending on when the international flights recover, we can have some expectations for recovery for the future. Moving on to OECD USA. Segment profit was 43.6 billion yen, down by 13.1 billion yen a year. And in the beginning of the term, we had some reserve and impact for energy-related assets, translating into negative profit. But we have seen some recovery from the second quarter, and the profit level remains high. In the third quarter, we acquired a major arranger targeting low-income housing called Boston Capital. And the OCU in this field has become top player with this acquisition. And at the end of March 2021, AUM stood at $78.1 billion. Moving on to OX Europe. Segment profit was 37.9 billion yen, which was done by 5.9 billion yen year-on-year. But last year, we booked profit from the sales of part of the business of Robeco Sam. So if we exclude this impact, actually the profit has increased. Globally, this segment has done well, and the market is seeing a rapid recovery. And the AUM at the end of March 2021 was 307.4 billion euros. which was a major increase compared to the previous fiscal year's end. And we have seen a very steady increase of AUM balance as well in this fiscal year. In the fourth quarter, we have acquired 70% equity of asset management company in the infrastructure alternative investment called Gravis Capital Management. We will continue to invest into investees where we can leverage our strengths in the area of asset management as well. Moving on to Asia. and Oceania at the end. Segment profit was 14.7 billion yen. And although some impairment was booked with some PE investees, we have seen solid profit coming from local operations in China, Taiwan, and Australia. We have also booked gain on sales and evaluation with some investees. And that's all from me about the performance at the end of March 2021. Now we would like to ask our CEO, Mr. Inoue, to explain the business.