ORIX Corporation American Depositary Shares (each representing One (1) Share of Common Stock) 2027 Q1 Earnings Call

It's time to start the meeting. Thank you for joining this conference of ORIX Corporation for first quarter consolidated financial results for the three-month period ended June 30th, 2026. I'll be the master of the ceremony. My name's Tomioka with IR. Thank you. The attendees at this conference are Masataka Yamada, Senior Managing Executive Officer, Chief Financial Officer, and Chief Strategy Officer, and Kazuki Yamamoto, Operating Officer responsible for investor relations. Both Yamada and Yamamoto will provide you with explanation, which will be followed by Q&A. The whole meeting should last approximately one hour. Now we would like to hand over to Yamada-san.

Thank you very much for taking time out of your busy schedule to attend the ORIX Group financial results briefing today. I am Masa Yamada, ORIX Group CFO and CSO. Without further ado, I'd like to explain the financial results for the first quarter of FY 2027. First, please turn to page two of the presentation deck. The points we would like to convey at today's briefings are the following three points. Net income is the first. Stronger core earnings power and robust capital recycling, and the third, first half earnings forecast and dividend policy. I will explain the first and the third points, and then Operating Officer Yamamoto, who oversees IR, will explain the second point. The first point is net income. Net income for the first quarter was JPY 280.8 billion, an increase of JPY 173.5 billion year-over-year, marking the highest quarterly profit on record.

Progress against the full-year net income forecast of JPY 530 billion was 53%. Gains related to the sales and valuation gains on Kioxia shares held by Toshiba, one of our investees, contributed significantly. The second point is ORIX stronger core earnings power and robust capital recycling. Regarding our core earnings power in first quarter of this fiscal year, ORIX Europe expanded its AUM to record high levels, primarily through Robeco. Market appreciation was the main driver of the increase, and ORIX Europe also steadily acquired new money. As a result, asset management fees increased significantly. Additionally, the transportation equipment business benefited from favorable market conditions, and all three business lines, aircraft, Avolon, and ships, achieved year-by-year profit increases. Next, regarding capital recycling, we proceeded with the exit as planned for domestic PE investee, SUGIKO, as well as multiple PE investments at ORIX USA, including Peak Utility Services Group and Nectra Connex.

Regarding ORIX Bank, the transfer of all shares to Daiwa Securities Group was completed on August 3rd. Additionally, as announced on the same day, we have signed a share transfer agreement for the 100% acquisition over AerFin, a major aircraft parts out company. We are steady advancing capital recycling while maintaining a balance between investments and divestments. The third point is our first-half earnings forecast and dividend policy. We have calculated our first-half net income forecast at JPY 840 billion. Of this, JPY 300 billion is categorized as adjusted profit and JPY 540 billion, which is non-cash profit, is categorized as Kioxia sale and valuation gains. We have changed our policy to use adjusted profits as the source of dividends. The full year net income forecast of JPY 530 billion remains unchanged. Details will be explained on the following pages. Please turn to page three.

I will explain our first-half net income forecast for FY 2027. Our net income is significantly affected by fluctuation in the price of Kioxia shares held by Toshiba. This page shows the results of a calculation of the first-half net income forecast based on Kioxia share price at the end of June. The blue bar graph on the furthest left represents the full-year net income forecast of JPY 530 billion we announced on May 11th, calculated based on the assumption that Toshiba would continue to account for Kioxia related gains and losses as equity method earnings. The box immediately to the right briefly explains our announcement of May 21st, which was the result of calculating the impact on our first quarter results following our revised assumptions, namely Toshiba's change to market valuation of Kioxia shares in its full year results for FY 2026.

The gray and red bar graph, second from the right, shows the first quarter net income of JPY 280.8 billion mentioned on the previous page, broken down into JPY 121.7 billion of Kioxia sale and valuation gains in gray and JPY 159.1 billion of adjusted profits in red. This Kioxia sale and valuation gains of JPY 121.7 billion is based on the valuation gains recorded by Toshiba using Kioxia's share price at the end of March, which was JPY 19,080, as shown at the bottom of this page. The bar graph on the far right shows our first-half net income forecast, which was also calculated based on Kioxia's share price at the end of June, which was JPY 89,680. Sorry to repeat myself, the first-half net income forecast is JPY 840 billion, which includes, 1, Kioxia sale and valuation gains, gray, of JPY 540 billion, and adjusted profits in red of JPY 300 billion.

Please turn to page four. The reason we kept the full year net income forecast unchanged at JPY 530 billion is that it is difficult to predict the impact of Kioxia sales and valuation gains on our full year net income. For every JPY 10,000 change in Kioxia share price, our after-tax Kioxia sale and valuation gains fluctuates by JPY 57 billion. This is calculated based on Toshiba's holdings of Kioxia shares. As of the end of June, Kioxia's share price was JPY 89,680 at the end of June, and the closing price yesterday, August 5th, was JPY 54,300. Depending on Kioxia's share price at the end of September, we may record Kioxia sale and valuation losses in the third quarter. With the improvement in core earnings power as a backstop, we plan to steadily grow adjusted profits in the second half as well. Please turn to page five.

This page explains the change in dividend policy for 2017 fiscal period. In the center of the page, we have, again, given a definition of Kioxia sale and valuation gains. This refers specifically to the portion of Toshiba-related investment gains and losses related to the sales and valuation gains on Kioxia shares after tax. Under our revised dividend policy, we will define adjusted profits as the portion of accounting net income excluding Kioxia sale and valuation gains and use this as a source of dividends. There is no change to our approach of policy of paying either net 39% of payout ratio or the previous year's dividend of JPY 156.10, whichever is higher. Based on the first half adjusted profits forecast of JPY 300 billion and calculated under the revised dividend policy, the interim DPS for this fiscal year will be JPY 107.27. This concludes my presentation. Operating Officer Kazuki Yamamoto will provide some additional commentary.