We will now begin the financial results briefing of KDDI Corporation for the Third Quarter of Fiscal Year Ending March 2024. I am Nakoji of the Public Relations Department and will serve as the moderator today. This briefing will be held in this venue and also broadcast live on YouTube and other media. Three financial results related materials are posted on our KDDI IR website. For the attendees in the venue, please check your handout. Let me introduce the four participants today, Makoto Takahashi, President, Representative Director and CEO; Nanae Saishoji, Managing Executive Officer, CFO and Executive Director of Corporate Sector; Kenji Aketa, Executive Officer and Executive Director of Corporate Management Division; Shigeru Ezoe, General Manager of Accounting Department. President Takahashi, please.

It's time to start the meeting. Thank you for joining us for this conference of ORIX Corporation's for the Third Quarter Consolidated Financial Results for the nine months ended December 31, 2023. I'm the MC. My name is Nakane from IR Sustainability Department. Thank you for this opportunity. The attendee at this conference is Kazuki Yamamoto, Operating Officer responsible for Investor Relations. As we begin, we have a request for the participants. In order to avoid feedback, if you have a communication device such as a mobile phone nearby, please make sure that it's turned off or it is away from the telephone. Yamamoto will provide the explanation followed by a Q&A session and we will spend approximately one hour for this meeting. Mr. Yamamoto, please start.

Thank you for the introduction. Good afternoon and thank you for joining us for ORIX Group’s earnings despite your busy schedule today. Thank you very much indeed. My name is Kazuki Yamamoto, Head of Corporate Planning and Investor Relations at ORIX. I have taken over this role from my predecessor, Mr. Hitomaro Yano. Let me start with a brief explanation of Q3 FY24 March results. Please turn to page two for the executive summary. So there are three points that I would like to explain. The first is the third quarter net income. Net income came in at 91.1 billion yen, base profits rose in inbound tourism-related businesses, real estate, domestic PE investments and insurance, allowing ORIX to post the second highest levels of those base profits and segment profits in the four years since the start of the pandemic. Quarterly profits were the second highest after the year in which gains on the Yayoi exit were booked. The second is year-to-date net income for the nine months ending December 2023. Net income rose 3% year-over-year to 219.2 billion yen. As we discussed in the first half results briefing, we expected that most of the realization of capital gains would come in the latter half of FY24 March end. We're continuing to make steady progress in realizing these investment gains in numbers of deals which are currently under negotiation, which would allow us to attain a full-year net income target of 330 billion yen, which was left unchanged. So the third point is shareholders return. In May of last year, ORIX approved a share buyback program of 50 billion yen. We have executed the full amount of the program and retired a total of 19.89 million shares. There are no changes to our dividend policy, which was announced back in May. Now please turn to the next page. Net income for the nine months ended December 2023 rose 3% year-over-year to 219.2 billion yen, with annualized ROE for the same period coming in at 8%. The right-hand chart shows trends in quarterly net income and ROE for the past four years. ORIX achieved its second highest ever quarterly net income since the start of the pandemic in the third quarter of 91.9 billion yen, an increase of 40% quarter-on-quarter. The ROE in that chart in annualized net income for each quarter, which improved to 9.7% in the third quarter. So we should be able to achieve the full-year target so that we'll be able to achieve our target for the ROE for the year. Please turn to page four. Here I will discuss the breakdown of segment profits. Segment profits for the nine months ended December 2023 rose 9% year-over-year to 319.2 billion yen. The chart on the bottom of the slide shows historical trends in segment profits on a full-year, quarterly, and nine months basis from left to right. The dark blue is base profits, while the light blue is investment gains. Please refer to the far right chart of third quarter year-to-date nine months performance. Base profits in dark blue rose 16% year-over-year to 268.8 billion yen. In addition to a recovery in businesses related to inbound tourism, expansion in investment income in the insurance segment and higher domestic PE earnings contributed to the strong number. The light blue investment gains for the nine month period indicate an 18% year-over-year decline to 50.4 billion yen, but ORIX posted investment gains from real estate and PE exit in the third quarter of 26.9 billion yen; multiplying this figure by four equals more than 100 billion yen in investment gains. In fact, as shown in the chart, the amount consistently averaged more than 100 billion yen for the first five years. As I mentioned earlier, we are aggressively moving forward with exits during the second half. Now, please turn to page five and page six. These pages outline profits and assets by segment. ORIX domestic businesses were strong and are on track to meet their full-year targets. Overseas businesses saw profits fall owing to the impact of elevated interest rates and outstanding limiting risks considering economic uncertainty. That said, we think it is necessary to continue to carefully watch for the timing where interest rates and economic climate will improve. Now, as shown on page six, some segments posted growth in assets due to forex impacts, new PE investment, and insurance, reflecting higher securities investment and greater investment across and leases in Asia and Australia. A detailed overview of trends in each segment will be shared later. Now, the base - what has contributed to the base profit, airport concession and the facilities operations; please turn to page seven. The chart shows segment profit trends for at least three COVID impacted businesses of concession, facilities operations, aircraft, and ships. The left shows a full-year segment profits, while the right shows quarter trends. Total segment profits for the three businesses for the nine-month period were net 26.6 billion yen, up by 17.7 billion yen year-over-year. Even though there is still one quarter left in the fiscal year, these businesses have recovered by about 50 billion yen from the worst period or losses marked during the pandemic. Although there are some seasonal fluctuations, steady growth should allow us to achieve additional expansion on the way to recovery to the 70 billion yen in annual segment profit. Now, inbound traffic from all countries and regions, excluding China, continues in an upward trend. Airport concessions returned to profitability in the second quarter, and profits continued to expand in the third quarter. In December last year, Kansai International Airport opened its new international terminal departures area, which it had been working on during COVID closures. This leads to a large-scale renovation of the airports scheduled for completion in spring 2025. The airport is taking measures such as increasing smart lane baggage inspection facilities in an effort to combat labor shortages and ongoing expansion in inbound tourism should lead to further growth in ORIX Group’s earnings. Now, by the way, Kansai Airport earnings are included in ORIX Group’s consolidated earnings, with a three-month lag, so the third quarter figures represent numbers from July to September 2023. Now please turn to page eight. In aircraft leasing, lease fees are continuing to rise, as passenger demand in the US and Europe is at record high levels, airline earnings recovery, and tight supply-demand for aircraft. Although dollar-based interest rates are pushing capital costs higher, there is strong demand in the secondary market for aircraft purchases, and the three types of fee income - these direct revenue gains on the sales of aircraft management fees are all rising. In the facilities operations segment, we have endeavored to raise RevPAR by delivering superior services to our customers and maintaining high post-COVID occupancy rates. As a result, in December 2023, RevPAR stood at 138% of the 2019 level for directly operated hotels and at 128% for in-house hotels. As shown in the slide, segment profits for the nine months ending December 2023 in the facilities operation business were 7.7 billion, already higher than the 5.6 billion yen for the full year of 2023. We believe further profit growth remains possible, as we see room for additional hikes in RevPAR and should benefit from the second block of our new luxury Karaku brand, which opened at the end of 2023. Next I will share the progress we made with the result for the third quarter versus the full-year target using the four categories we started to employ last fiscal year. Within Japan, segment profits in both the financial and non-financial category businesses were up year-over-year making strong progress vs. a full-year target in particular. Domestic non-financial businesses were helped by inbound-related demand, and the real estate segment was strong thanks to demand for properties from overseas investors fueled by the Yen weakness. For this reason, it could overshoot our full-year target for the category. Now, the overseas segments saw profits decline owing to an absence of investment gains booked on the sale of a specific asset in the environment and energy segments in the previous fiscal year, and higher Euro interest rates. While we have some distance from meeting our full-year targets, we will focus on building up earnings while continuing to control costs. Moreover, assets in these regions remain healthy. Please note that ORIX USA has very little exposure, either direct or indirect to commercial real estate. International markets in aircraft and ships remain strong, and we aim to continue to grow our earnings through capital recycling. As for the baseball club, the posting fee from pitcher Yoshinobu Yamamoto’s transfer was booked as pre-tax earnings in the other non-fin segment area. Please refer to page 10. Our exclusive net income of 219.2 billion yen for the nine months ended December 2023, representing progress of 66% towards our target of 330 billion yen. In order to achieve this target, ORIX will need to book net income of 110.8 billion yen on pre-tax profits of 165 billion yen in the fourth quarter. In addition to growth in base profits, we are moving steadily forward with several deals that are in the negotiation phases with buyers, and aim to achieve our full-year earnings targets. Regarding shareholder returns, our DPS plans remain unchanged at either 85.6 yen per share or a payout ratio of 33%, whichever is higher. This translates to DPS of 94 yen if we achieve our FY24 margin net income target of 330 billion yen. As mentioned earlier, we completed our entire share buyback program of 50 billion yen, of which some have already been canceled. Regarding our FY25 margin net income target of 400 billion yen, the global macroeconomic climate has changed significantly since our initial outlook. So we will discuss the path towards achieving this target and specific measures, as part of our FY25 margin business planning processes. Regarding our view on monetary policy and its impact, we think there is - I’d like to take this opportunity to share. We think there is a possibility that negative interest rates could end in Japan around spring, which will push interest rates upward. Higher yen interest rates should positively impact ORIX Group earnings, particularly at ORIX Bank and in the insurance segment. However, we expect only a gradual pace of interest rate hikes, and therefore, please note we have no plans to change our current portfolio strategy or policies. We expect cuts in US dollar interest rates to start around summer. Lower US dollar interest rates should provide support to expansion in earnings, particularly ORIX USA’s real estate and PE businesses. Lower Euro interest rates would help reduce housing costs for ORIX Europe and would be positive for recycling activities for renewable energy projects at Elawan. So dollar and yen's interest rates decline would support the strategy of ORIX in many ways. I would like to continue with the status of each segment. First, corporate financial services and maintenance leasing, please turn to page 12. For the nine months ended December 2023, the segment profit was up 2% year-on-year at 59.2 billion yen. Profits were higher in corporate financial services, thanks to solid earnings in fee-related businesses and profit contributions from M&A and services. In the auto segment, rental car demand remained strong, and the prices of used autos continue to trend at high levels. In addition, for this year, prioritizing more profitable business during sales activities has yielded results, pushing the auto business to its third year in a row of record profits by the end of Q3, and the segment is poised to post record profits for the full year again. Assets are flat overall with assets in corporate financial services slightly lower and rental car fleet in the auto division being renewed. This is the real estate segment. Segment profits were up 110% year-on-year to 51.4 billion yen for the first nine months. Investment in facilities segment realized a large investment gain in Q3, resulting in a substantial increase in profits year-on-year. Daikyo profits have grown year-on-year for three consecutive quarters, contributing to the segment's sharp increase in profits. We are proactively setting properties in the asset recycling business like logistics centers and also initiating new development projects in carefully selected areas and Daikyo continues to acquire sites in favorable areas. Overall, the segment assets increased by 70.6 billion yen versus the end of the prior year. We will continue this business model to invest in high potential projects and turn them profitable. Please turn to page 16 for the investment and concession. Segment profits rose 235% year-on-year to 23 billion yen. The PE investment achieved strong profit gains on the back of exits during Q3 and also thanks to profit contributions from DHC, in which we invested in the prior fiscal year. And the profit from concession is increasing as well with real estate. Our first aim is rapid return to pre-COVID profit levels, and our approach is working, which is investment made during the pandemic. Segment assets were up 195.4 billion versus the prior year end, pulling out the investment and mezzanine financing to Toshiba. Please turn to page 18. Segment profit was down by 38% year-on-year to 19.8 billion yen. Excluding the impact of last year's gain on the sale of our partial Ormat stake, profits were up year-on-year. The bottom left graph shows the segment profits. In the domestic business, profits for the nine months were steady year-on-year. Although output caps for solar power generation in some regions impacted earnings in the first quarter, a high number of sunny days from Q2 offset this negative impact. And the profits from the overseas energy business were year-on-year owing to the absence of earlier gains and the higher hedging costs of overseas investments as a result of elevated Euro interest rates. Meanwhile, ORIX power sales volume increased, thanks to higher generating capacity. Last year, a major renewable energy company decided to withdraw from an offshore wind project, however, we still see strong demand for renewable energy worldwide. This business is positioned as a growth driver, and we will utilize experience both overseas and in Japan to originate new opportunities. Moving on to the insurance segment on page 20. Segment profits were up 101% to 53.4 billion. COVID related insurance payouts from last year fell, and high investment income held the segment posting sharply higher profits. Premium income, mostly from whole life insurance was also healthy. Segment assets rose by 155.3 billion yen owing to an increase in investment securities and the impact of FX. Please turn to page 22, banking and credit segment. Segment profits were up 8%, reaching 26.9 billion yen. In banking, profits are up year-on-year; earnings from real estate investment loans grew on the back of higher long-term interest rates, while the increase in deposit interest was kept at a certain level. In addition, ORIX Bank continues to grow its trust assets, and the higher earnings from trust banking also contributed. Earnings in the credit unit were flat year-on-year. Segment assets were up 51.8 billion yen, reflecting the increase in lending as a bank that focuses on merchant banking. As part of this business, ORIX Bank originates loans for corporate clients in priority areas such as renewable energy and logistics centers, and then securitizes the assets into debt products, using the trust banking license and selling these products to investors. Please turn to page 24, aircraft and ships. Segment profit fell 5% year-on-year to 16.1 billion yen. In the ship segment, profits were down year-on-year as the business aggressively sold ship holdings last year, taking advantage of favorable pricing, but this is lining with projections, and the ship prices remain high, in the segment we sold four vessels this fiscal year. Aircraft leasing, as I mentioned earlier, is enjoying healthy progress. At Avolon, the highest total interest rates have been a drag, and the business was loss-making on a cumulative basis in the nine months. However, the operating environment is improving, and it has been profitable for the two consecutive quarters in Q2 and Q3, even after the hedging costs. Segment assets were up 123.2 billion yen versus the prior year-end reflecting the impact of FX and the aircraft purchases. Next is ORIX USA on page 26. Segment profits were down 16% year-on-year to 27.8 billion, and the primary reason for this was fewer capital gains booked in the PE business. Meanwhile, the credit business saw earnings rise. We have strengthened risk management from the early stage and become very selective with new deals, and have been running in credit cost despite elevated interest rates, while still enjoying higher financial earnings. Breakdown of profits by this line can be found on page 27 of your handout for your reference later. Segment assets are down by 10.8 billion versus the prior year end, even after considering the impact of a weaker yen because we have been selective. While we cannot be overly optimistic due to the lack of visibility concerning this market, we continue to operate the business with an awareness that it might bottom out quite soon. Please turn to page 28. This is ORIX Europe. Segment profits fell 42% year-on-year to 20.8 billion yen compared to the previous period. The year before, OCE booked performance fees of higher than 10 billion but due to the market situation, this has shrunk, and the increase in hedging costs stemming from higher interest rates led to lower profits. OCE has developed and launched some active ETFs. This is clear and OCE is promoting efforts to cross-sell financial products across different group companies. Lastly, I would like to talk about the Asia and Australia segment. Segment profits were down 40% year-on-year to 20.7 billion yen. Although leasing and loans were growing in South Korea, Australia, and Asia, profits were lower year-on-year due to the absence of gains on the sale of a station affiliate. Segment assets were up 163.4 billion yen versus prior year end reflecting the impact of FX and new lease executions. Segment assets and an overview of Asia is shown on page 31 for your reference. As the footnote notes, ORIX’s exposure to Taiwan through leasing and investments amounts to 70 billion yen, accounting for just 4.4% of assets in this segment. In fiscal year 2024, overall interest rates have remained higher and longer than anticipated in Europe and America, and earnings growth overseas has suffered. Meanwhile, benefits from a weaker yen and strong inbound travel demand have helped our domestic business profit trend above plan. We will concentrate on achieving our net income target of 330 billion yen for fiscal year 2024, and then lay the foundation to reach the fiscal year 2025 net profit target of 400 billion yen. That concludes my explanation about Q3. Thank you for your kind attention.

I am Sakamaki from Mizuho Securities. I have one question to ask. So achieving the target for this year and also planning for the increase of profit in the next year, and also your plan to have capital recycling, could you mind updating by referring to page eight of your slide? And there have not been any updates from November, I believe. So any kind of outlook for the exit, the size? Any kind of changes that you have been experiencing from the time of the second quarter results, if you could give us a flavor?

Thank you very much for asking the question. So please refer to page 38, as I've mentioned, there has been no update, as you have mentioned, but currently we are considering in the second half for us, in the first half of next year. There have been no major changes. For this year, the capital recycling will allow us to exit some of the projects, the deals, so we are going to proceed with the deal by taking much of the time so that it will be tail-heavy this fiscal year. So therefore, with the deals that we are proceeding with, it is progressing just as scheduled. However, by end of March, at the closing of the fiscal period, achieving the target doesn't mean that we'll relax some terms and conditions in order to achieve the target. So we are proceeding with negotiations in a very cautious manner with buyers now, to continue to build profits steadily. As for the third quarter, in real estate, we did manage to exit some of the deals, but in the fourth quarter as well, we hope to proceed with the same.

Yes. Thank you so much.

This is Muraki. I have a question. 400 billion for next year, I understand this is still being discussed. And for this fiscal year, high interest rates are continuing and you're trying to offset the negative overseas with domestic performance. The next year is that direction. Maybe your assumption is that the direction will not change, but 400 billion yen was already very high to begin with. As you are discussing, what is the level of the base plan or the range or direction? Can you please share more information about these things because I don't want to see a big surprise three months down the line? At this point in time, can you please suggest the direction that the company is going to?

Thank you. As you mentioned, for this fiscal year, high interest rates mean we're struggling with overseas business and we tried to offset that negative with strong performance in Japan; that is true. And for next year, we do not believe that interest rates would come down easily outside of Japan, and we cannot really be that optimistic. However, if you consider US credit, for example, as we gain more visibility into how the risk is changing, we will try to assess the situation carefully and try to be active where we can. We are actually discussing specific strategies as we plan for next year right now. On page 10 of the handout, this is something that was already disclosed last time, and this is basically the launchpad for next fiscal year. The 400 billion yen target is what we are trying to aim for, and this is the assumption of the plan. Then we will try to assess where we can see more room for growth or where we should not try too hard. For each segment, management and segment heads are discussing these details. Mr. Inoue has already spoken about the mid-term direction; 300 billion yen should be a stable level for ORIX and that we should aim for 400 billion as well, but we want to do that without overly expanding the balance sheet. This is why we want to utilize a combination of capital recycling approaches. So, this basic direction remains unchanged, and hopefully in spring we will not share any negative surprises with you.

Thank you. As you have said, bottoming out or maybe the change in the interest rate direction. In the United States, you are trying to shrink your credit portfolio; they are talking about that as well as investment in real estate, is that correct?

Yes, especially credit. In the current interest environment, the real estate and mortgage business cannot be done very actively, but there is potential strength in these markets in the United States. So, once the interest rate hikes ease and start to come down, for example, housing development or bond issuance may show some positive signs. In terms of private equity or equity investment, mid-cap corporates will continue to struggle regarding performance. Therefore, we believe the flow is kind of frozen, and we do not expect a sudden improvement, but we will continue to work strongly within our current business portfolio right now.

That's very clear. Thank you very much.

Thank you. I am Watanabe from Daiwa Securities. I would like to ask one question, and I can refer to page 44 regarding the capital policy. So the expression has changed to sustainable growth, but also at the same time growing ROE by efficient usage of capital. Was there anything at the backdrop at the time of calculation regarding the buyback and also the DPS? Any kind of idea about this based on this page?

Thank you. As you mentioned, we made a slight change in that expression. As I mentioned at the very beginning, inbound traveling has been driving our growth, so therefore the base profit has been growing and the segment profit. We are beginning to feel the positivity from those growth implications. So it is not that we will be dependent on capital gain, but we'd like to continue to invest in base profit generation businesses that should be improving our ROE. Regarding the capital policy that you asked about, at the time the benefit was kind of eliminated or dropped, we thought that there was some positivity in expanding the DPS going forward. Just as was asked by Muraki-san earlier, the business plan and discussion of business plan, inclusive of the BOD discussion, we would like to, of course, continue to discuss this topic. However, P/D of one time and going beyond one time, in fact, is something that has to be endorsed by a solid equity story, but if you could give us a little more time to arrive at a final idea.

Yes, I have a question. With regard to Asian business, are there any specific risks that you are aware of or focused on? Maybe it is not very serious, but from the first quarter, I think there has been some impact; I want to know which line and which region this is happening. On page 31, which shows a more detailed breakdown of each country, especially in China and also greater China for equity investment, are you seeing some risks there? In order to welcome the new fiscal year in a clean way, earlier you were talking about possible impairments in Q4, but should we account for that or not?

As you mentioned, the Asia and Australia area has, excluding China, different opportunities. In Asia and Australia, South Korea and India, these are where we have our strengths like leasing and finance related to real estate, and that is where we see business opportunities. We will continue to maintain businesses there. Possible challenges include, as you can see on page 31, the situation with Hong Kong finance and banking. In terms of credit, the market is not improving; it is actually worsening. We are evaluating our assets and this is resulting in the correct credit allowance. We are trying to be strict with risk definition and are being extremely cautious. As you can see, in section two, at least for general business, especially in the Chinese domestic market, customer credit statuses have to be assessed very carefully, but we do have assets, so we believe we can continue this business. The third point is, as you mentioned, regarding equity investments, we need to be very risk sensitive and we are. China-related investment demand is actually decreasing overseas. Additionally, Chinese domestic investors are becoming more selective about what investments are attractive to them. We have no belief that the situation will improve quickly, just this year and next year, so equity investments will not be added newly in defense. We will maintain the current investees and if there are additional inquiries, we may pursue opportunities to sell more actively. For each quarter, we are reviewing the assets of course on a regular basis, but the policy of holding these assets and also future business policy will need revision for correct judgment.

Thank you very much. I am Niwa from Citi. Can you hear me? I'd like to ask a question about ORIX Europe. The assets under management are growing in ORIX Europe; however, the inflow of money has not been strong. While you are generating profits, it seems that the situation is quite tough. What is your actual perspective on the business? Although there appears to be stability and profitability may be high, I lack confidence in ORIX Europe's future, particularly in the next year and the mid-term as it surpasses 40 billion yen and becomes a growth driver. I understand you are focusing on capital recycling, but what is your assessment of this segment? That is my question.

Thank you for the question. As I mentioned in my previous remarks, there are difficulties in achieving our full-year target at this point in time for ORIX Europe. The biggest dragger is the hedge costs; Euro-denominated funding costs unfortunately remain negative. Our goal for ALM is in fact our policy for fully hedging using Forex, making use of corporate bond issuance, ensuring a little more accurate financing management. While Robeco’s performance is slightly away, the asset management businesses as a whole are expanding, and fee-level competition is intensifying. Thus, we need to introduce new products, and shift from mutual funds to ETFs, similar to what has been occurring in the United States. We will indeed have to apply some ingenuity to business operations. Overall, if it weren't for the hedge costs, investment returns have positively contributed to the overall business performance; hence we will need to foresee how the trend is going to be going forward to determine our strategy. Thank you. I wasn't ready for this, but as I said before, for this fiscal year, we are struggling overseas but it's being offset by performance in Japan, and we will continue to complete the projects we are working on. By doing so, we want to achieve the targets that we disclosed, and we will have deep discussions about what to do for the next fiscal year. At the year-end earnings announcement, we hope to share our future direction.

Thank you, and that concludes the third-quarter consolidated financial results for the nine months ended December 31, 2023. Thank you for staying until the end of the program.