Segment Topics

Growing while Constantly Creating New Value and Evolving

Guided by a medium-term management strategy that entails increasing the pace of “Finance + Services” and embracing growth in emerging markets such as Asia, is progressing to the next growth stage by creating new value.

Increasing the Pace of Embracing Growth in “Finance + Services” Emerging Markets such as Asia In light of structural changes to the finance-sector busi- Taking into consideration the remarkable paces of expan- ness environment, the ability to provide high value-added sion enjoyed by emerging countries, ongoing efforts to services is becoming an increasingly vital requirement to develop business in such countries including Asia are boost profitability in the existing finance market. ORIX essential to corporate growth. Since opening its first over- already maintains a proven track record in such high val- seas office in Hong Kong in 1971, ORIX has continued to ue-added businesses as maintenance leasing and loan build a network of local subsidiaries as well as relationships servicing. Moving forward, the Company will strive to with leading local partners in emerging markets focusing enter new area of business activity and provide services mainly on Asia. Leveraging its investment track record and that meet the diverse needs of customers by capitalizing established client base, the Company will strive to further its broad client base in and overseas and its expand its overseas business and capture a substantial knowledge and expertise. share of this regional growth.

[Corporate Financial Services Segment] Introducing Kyuko-Lease Inc. into the Group and building a partnership with Kyudenko Corporation —Expanding Business Centered on Environment and Energy Fields— In November 2011, ORIX reached an agreement to promote an alli- Japan) where the company has built a stable customer base. Kyuko- ance with Kyudenko Corporation as a strategic partner and subscribe Lease also maintains strong business ties with the Kyudenko Group, to the shares issued by Kyuko-Lease Inc., a wholly owned subsidiary the Kyushu Electric Power Group and governmental bodies in the of Kyudenko. In January 2012, ORIX acquired 90% of Kyuko-Lease’s Kyushu region. outstanding shares and is continuing to deepen its relationship with Since its establishment in 1944, Kyudenko has diversified its busi- Kyudenko, who retained a 10% share in Kyuko-Lease. ness from electric and equipment construction to include environment Since its establishment in 1988 as a Kyudenko Group company, and energy-related and information and communication-related in addi- Kyuko-Lease has been providing services centered on equipment and tion to disaster prevention systems, wind and solar power generation. automobile leasing mainly in Kyushu region (the third largest island of

Kazuo Goto Kyuko-Lease is working to provide solutions that take full advantage of ORIX’s high value-added financial services to Representative Director address the diverse needs of our customers as well as Kyudenko’s. At the same time, the company is delivering val- and President Kyuko-Lease Inc. ue-added products such as automobile maintenance leasing, telematics services, precision measuring equipment and PC rental to further upgrade, expand and strengthen its services. Through these means, Kyuko-Lease is deep- ening its already robust ties with customers. In addition, ORIX and Kyuko-Lease are placing considerable emphasis on creating new business opportunities particularly in environment and energy fields by combining the financial service know-how of ORIX with the business base and technological capabilities of Kyudenko. In specific terms, efforts are being channeled toward mega solar, solar and wind power generation, ESCO*, water, waste processing and recycling. Moreover, greater weight will also be placed in the future on expanding business activities beyond the Kyushu region in cooperation with Kyudenko. * ESCO (Energy Service Company) business provides comprehensive services pertaining to energy efficiency.

18 ORIX Corporation Annual Report 2012 Growing while Constantly Creating New Value and Evolving

[Retail Segment] Aiming to combine the collective Group strength and expand the Bank’s card loan activities

Akio Ushio President ORIX Bank Corporation

ORIX Bank began as ORIX Group’s trust bank in 1998. In the ensuing Expanding the card loan business through integrated manage- period, the bank has continued to develop its business by providing ment with ORIX Credit Corporation appealing financial products and services while ensuring that infra- ORIX Corporation, ORIX Bank’s parent company, fully consolidated structure costs are held to an absolute minimum. As a bank that does ORIX Credit Corporation in June 2012. ORIX Credit maintains an edge not maintain an office network, ORIX Bank has focused on fields in over other companies based on its 25 years of experience managing which it excels as opposed to the provision of comprehensive services. the ORIX VIP Loan Card. ORIX is confident that by integrating the In recent years, mail-order and Internet-based time deposit, housing efforts of ORIX Bank and ORIX Credit, the Group as a whole is better loans and corporate lending transactions have taken up a growing pro- positioned to capture new demand in the consumer finance market portion of overall banking activities. With the balance of deposits hitting and to expand its card loan business. ¥1 trillion in March 2011, the decision was made to change the com- pany’s name to bring it more in line with the actual nature of activities Endeavoring to become a more profitable bank and to build greater affinity with its wide range of customers. As a Breaking free from the traditional mindset of the banking industry, ORIX result, ORIX Trust and Banking Corporation changed its name to ORIX Bank aspires to address customer needs with a growing spirit of inno- Bank Corporation. vation. In addition to providing tailor-made housing loans that match the life plans of individual borrowers as well as corporate loans that Entering the card loan business in March 2012 deliver solutions to key management issues, ORIX Bank will channel its ORIX Bank believes that along with housing loans, unsecured loans to energies toward building a third pillar by offering the card loan business individual customers are important sources of funds supporting the that match individual customer needs in terms of interest rates and daily lives of consumers. As a result, the Bank began offering “ORIX lending limits. Through these endeavors, ORIX Bank will strive to Bank Card Loans” in March 2012. Moving forward, the Bank will strive become a unique and highly profitable bank. to expand this business as one of its core businesses alongside hous- ing loans and corporate loans. The introduction of regulations placing limits on aggregate lending amounts, caused the consumer finance market to contract. However, the reimbursement claims for overpaid interest are calming and the decrease in outstanding loan balances are bottoming out, and ORIX Bank believes there to be significant room for recovery given the substantial contraction of the market.

ORIX Corporation Annual Report 2012 19 Segment Topics

[Real Estate Segment] Leveraging expertise to expand the facilities operation business In its Real Estate segment, ORIX maintains considerable specialist to intangible assets (facilities operation business by capitalizing its spe- expertise in real estate development, rental, and finance. Drawing on cialist expertise and know-how). In specific terms, ORIX Real Estate these specialist skills, the Company is expanding its business into the Corporation is active in the operation of a variety of facilities. Making high value-added asset management and facilities operation fields. In the most of this accumulated operating know-how, steps are being this context, ORIX is looking to rebuild its earnings base from its tangi- taken to open new facilities. On this basis, the business is expected to ble assets (real estate business linked closely with market conditions) expand, providing a stable earnings base.

Japanese Inns: Operation and Business Rehabilitation Know-How Beginning with the Suginoi Hotel in Oita Prefecture in September 2002, ORIX has to date provided support activities in the reorganization and rehabilitation of five well-established and renowned Japanese inns across the country. In addi- tion to putting forward wide-ranging operating and marketing initiatives, ORIX has provided management advice while overseeing new capital investment. In each case, the inn has been transformed into a facility with increased customer appeal. ORIX began providing support to the Naruko Hotel in Miyagi Prefecture from November 2006. On completing its support activities in October 2011, the hotel was re-acquired by its former management team. More recently, and Tateshina Grand Hotel after providing support from September 2011, the Tateshina Grand Hotel Taki-no-yu reopened in April 2012. While Taki-no-yu retaining its ambiance as a traditional hot-spring inn, new initiatives including a lobby fireplace, large spa facility with views of the local waterfall, and a buffet restaurant featuring local delights, all provide additional guest appeal.

Dome and Theater: Hall Operation Know-How ORIX commenced operating management of the Dome in from September 2006. This facility not only serves as the home ground for the professional baseball team, but also as a venue for concerts, exhibitions, fairs as well as sporting and other events. In April 2012, the old Osaka Welfare Pension Great Hall was completely renewed and opened as ORIX Theater. Employing the latest in audio and lighting equipment, ORIX Theater is used for a myriad of purposes including popular, rock and classical concerts as well as musicals, operas and theatrical shows.

ORIX Theater

Aquariums: Exhibition and Attraction Know-How ORIX has operated the Enoshima Aquarium, a PFI*1 with the Kanagawa Prefectural Government, since April 2004. The aquarium features a large tank that reproduces the environment of the Sagami Bay for an 8,000-strong school of sar- dines. A popular feature of the aquarium is its night tours, which allow visitors to view marine life at night. In March 2012, the Kyoto Aquarium in Kyoto Prefecture opened as Japan’s first*2 large-scale inland aquarium. The aquarium is made up of nine zones that recreate the connection of life from the source of Kyoto’s rivers to the sea. Kyoto Aquarium is designed to cater to the interest of a wide range of customers and aspires to be an “edutainment” *3 oriented facility where visitors can learn about nature and the local ecosystem while having fun in Kyoto. Kyoto Aquarium In May 2012, the Sumida Aquarium opened in Tokyo. Located in an urban area, the facility is open until 9:00 in the evening to cater to office workers who wish to visit after work.

*1 PFI: Private Finance Initiative—a funding method for major public-sector capital investments where private firms are contracted to complete and manage the project utilizing private-sector management skills and technological capabilities. *2 Source: ORIX Real Estate. A large-scale inland aquarium is defined as an aquarium that is 50km from the coast with a total floor space of more than 10,000 m2. *3 Edutainment is a word that combines “education” and “entertainment.” It has become a popular expression in recent years for learn- ing while having fun at museums, art galleries and similar facilities.

Located inside TOKYO SKY TREE TOWN®, the Sumida Aquarium is home to Japan’s largest indoor open pool tank. Masahiko Taumi Director This tank allows visitors to view up close penguins and fur seals. The Tokyo Main Tank reproduces the seas sur- Sumida Aquarium rounding the Ogasawara Islands, a World Natural Heritage Site, letting visitors experience the beauty of the islands 1,000km away from Tokyo. The aquarium employs an artificial seawater production system developed by TAISEI CORPORATION. Following in the footsteps of the Kyoto Aquarium, also operated by ORIX, this is the second facility in Japan to apply this system for all tank water (excluding freshwater tanks). In addition to reducing inland operating

costs, this system eliminates the need for seawater which in turn helps to reduce CO2 emissions associated with transportation.

20 ORIX Corporation Annual Report 2012 [Overseas Business Segment] Striving to provide new products and services in a growing world Based on the principle of “Localization and Partnership,” ORIX’s Overseas Business segment has expanded its leasing-based business globally through partnerships with leading local business partners, and has created a diverse client base. Through this platform, ORIX strives to provide new products and services that meet the diverse needs of its customers, especially those in emerging markets with a rapidly changing business environ- ment.

Malaysia Supporting capital investment nationwide and actively seeking new businesses Lim Beng Chor Managing Director & CEO, ORIX Leasing Malaysia Berhad (OLM) Joined OLM in 1979. Managing Director of OLM since 2003.

ORIX Leasing Malaysia Berhad (OLM) OLM was established in 1973 and is a pioneer in the asset financing and leasing industry in Malaysia. Beginning with finance leasing and a focus on the small and medium-sized enterprise (SME) sector, OLM offers a range of corporate financial services centered on hire-purchase and finance leasing of a multitude of equipment, as well as automobile and IT equipment maintenance leasing to a wide range of customers from local SMEs to large corporations and multi-national corporations (MNC) in industries and businesses spanning almost the entire spectrum of the Malaysian economy. Presently, OLM operates the largest leasing network in the country, with 15 branches nationwide and a staff force of over 650 employees.

OLM’s strategy in pursuing new businesses is principally predicated equipment. As such companies, in an extension of this trend, pursue upon leveraging and tapping synergies from the business platform we an asset-light strategy of maintaining only core assets such as produc- have established over the years through the provision of various prod- tion plants and machinery while seeking to divest non-core assets, ucts and services. As the needs of our customers progressively change principally land and buildings, we see an opportunity to venture into in line with and/or in response to business maturation, new business the new, but in a way related, business area of industrial real estate trends, and the country’s economic development, we will look to the investment. further evolution of our existing suite of products and services as well as Additionally, as OLM has long experience and knowledge of palm oil the development of new ones to meet these changing needs. The sector accumulated through years of supporting capital investments development of new product and service offerings are underpinned by therein, we see a good platform for venturing into oil palm cultivation our long experience and familiarity with our customers’ businesses and ourselves as a new business activity. And with the Malaysian govern- industries in addition to our knowledge of the local markets. ment’s strong promotion of biomass principally palm, green technology As an example, our MNC and large corporation clients have, as a and renewable energy, there are also new business opportunities for result of the outsourcing business trend, increasingly embraced the financing capital investments as well as investing in projects like green maintenance leasing of movable assets such as automobiles and IT palm oil milling and solar photovoltaic electricity generation.

Singapore Embrace regional growth as a finance hub in the ASEAN region Joanne Liau Managing Director, ORIX Leasing Singapore Limited (OLS) Joined OLS in 2004. Managing Director of OLS since 2007.

ORIX Leasing Singapore Limited (OLS) OLS was established in 1972. Today, OLS’s activities include leasing, hire-purchase, lending, and a vendor financing program. OLS has been able to operate successfully, by focusing on its niche activities while offering financial solutions to SMEs. It is one of the leading non-bank provid- ers of financing for SMEs in Singapore and our customers are involved in such varied and diverse industries as construction, logistics, manufac- turing, services and retail, among others.

ORIX Corporation Annual Report 2012 21 Segment Topics

Singapore is a small but open, competitive and mature market. The market both in finance and non-finance related areas. Opportunities exist in for financing activities is dominated by banks. In order to thrive and grow in the ORIX’s existing markets in ASEAN as well as new markets such as this extremely competitive market, constant and radical changes are need- Vietnam and Myanmar. ed to restructure and transform existing OLS businesses. We believe that with the ORIX’s core competence, vast network, and The ASEAN region with its relatively young markets, large population strong knowledge of its customers’ businesses, OLS can be the cata- and economic potential presents tremendous business opportunities lyst to tap the numerous business opportunities and growth potential and potential for growth. It is a generally accepted fact that with the that ASEAN has to offer. This business transformation will place OLS in economic problems in the United States and Europe, Asia and ASEAN good stead as a preferred partner for SMEs in ASEAN in providing will increasingly play a major role and contribute more significantly solutions for financing and equity investment, in addition to offering a towards global trade and economic growth. As ORIX’s finance hub in platform for business alliances, investments and joint ventures in the ASEAN region, OLS is in an ideal position to capture new opportu- ASEAN. nities including the development of new products and ­investments

Taiwan Creating a “J-T-C”* platform to support Algol Lee President, customers’ entrance into Taiwan ORIX Taiwan Asset Management Company (OAMC) and Mainland China Joined OTC in 2001. (*J-T-C: Japan-Taiwan-China) Appointed Head of the Corporate Finance Department and NPL Department in 2003. President of OAMC since 2004.

Algol Lee (center), Ryoji Nishimura (left, OAMC), Alex Chen (right, OAMC)

ORIX Taiwan Asset Management Company (OAMC) ORIX Taiwan Asset Management Company (OAMC) was established in 2004 and focuses on corporate finance, non-performing loans (“NPL”), real estate, and other investment banking businesses. ORIX began operations in Taiwan in 1982, and currently has three companies. In addition to OAMC, ORIX Taiwan Corporation (OTC) provides equipment leasing and ORIX Auto Leasing Taiwan Corporation (OALT) provides the auto leasing.

With an eye toward expanding ORIX’s operations in Taiwan, OTC In order to differentiate itself from other local and overseas asset established its Corporate Finance Department in 2001 as a means for management companies in Taiwan, OAMC also looks beyond the NPL proactive involvement in project finance to help listed Taiwanese com- business to new and attractive business opportunities. panies expand into mainland China. Since then, OTC entered into the OAMC is now constructing a “J-T-C” platform, integrating ORIX’s NPL business through a joint venture with an investment bank in expertise and networks in Taiwan, providing Taiwanese companies October 2002 in response to government policy aimed at decreasing with financial support and services to enter into the prosperous main- the banking sector’s NPL ratio, culminating in 2004 with the establish- land China market. In addition, OAMC continues to focus on its advi- ment of OAMC as a separate entity to handle this business. Today, sory business to help Japanese companies enter the Taiwanese OAMC is a top-tier asset management company in Taiwan, having market. Going forward, OAMC will begin exploring private equity invested a total of USD 3 billion in NPL. investments and ways to expand its fee income.

22 ORIX Corporation Annual Report 2012 Saudi Arabia

Expand as a financial solution provider Shaheen Amin General Manager, Saudi ORIX in the Middle East rooted in Leasing Company (SOLC) Joined ORIX Leasing Pakistan (OLP) in the Islamic Region 1986, transferred to Oman in 1993. Involved in the establishment of SOLC in 1999. General Manager of SOLC since 2001.

Saudi ORIX Leasing Company (SOLC) SOLC was incorporated in 2001 as the first leasing company in Kingdom of Saudi Arabia with investment from the IFC (International Finance Corporation, a member of the World Bank Group) and licensing by the Saudi Arabian Monetary Agency (SAMA). The Saudi Investment Bank (SAIB) and Trade Development & Investment Group, Ltd. (a Saudi private investment group) also participated in our establishment. In 2009, IFC sold their stake to SAIB after seeing SOLC’s growth as a leasing company after a period of eight years. ORIX Group currently has 29% share- holding in SOLC. SOLC is focusing on direct financing leases including factory machinery, automobiles, transportation equipment, construction equipment, office equipment, and real estate. In Saudi Arabia, there are only two licensed companies including SOLC, however there are many captives and finance companies not licensed by SAMA.

The Saudi Arabian financial market is gradually opening, but it takes Arabia, and SOLC arranged a syndicate with a local financial institution time to fully understand the market. One characteristic is the difficulty to break into a market segment that was previously not available. We in processing non-performing loans. At SOLC we have accumulated want to continue this type of cooperation with ORIX Tokyo in the future. credit screening know-how, allowing us to minimize non-performing Our funding is primarily borrowings from financial institutions. Going loans, giving us a competitive advantage. forward, we are engaged in the process of issuing our first SUKUK Saudi Arabia has been relatively unscathed by the financial crisis and (Islamic bonds) which will be listed on Saudi stock market and will help its economy has grown strongly in 2011 with a real GDP growth of 7% to diversify our funding sources. with a projected growth rate of 5% for the next few years. The Saudi Arabia is the largest market in the Middle East and we believe Kingdom is actively investing in infrastructure such as universities and that it holds opportunities for new businesses. Our strategy is to take hospitals, increasing construction-related leasing demand. The govern- full advantage of the growing economy by increasing SOLC’s footprint ment is promoting the creation of employment in sectors other than by leveraging its market knowledge and strong shareholder relation- the oil industry and the creation of SMEs, increasing the expectations ships. Currently we are looking beyond equipment leasing to attractive of leasing companies as financiers. areas such as aircraft and ship finance, and truck operating leases. Last year, ORIX introduced a Chinese heavy equipment manufacturer Looking ahead, our aim is to become a “mini ORIX”, by further evolving to SOLC and we successfully structured and executed our first syndi- our position as a financial solution provider of ORIX Group in the cate lease. Chinese companies are increasing their presence in Saudi Middle East.

ORIX’s History in the MENA* and Central Asia *Middle East and North Africa ORIX established ORIX Leasing Pakistan Limited (OLP) in 1986 with the view to establishing a foothold in the Islamic region. Thereafter, OLP established Oman ORIX Leasing Company SAOG in 1994 with IFC, a lending partner of OLP. This was followed by the joint establishment of ORIX Leasing Egypt SAE in 1997 and Saudi ORIX Leasing Company in 2001. In 2002, ORIX and OLP joined forces with a leading local firm to establish MAF ORIX Finance PJSC in the United Arab Emirates. In 2005 ORIX invested in SK Leasing JSC, a leasing company in Kazakhstan. Currently, ORIX is operating in six countries of the MENA and Central Asia.

ORIX Corporation Annual Report 2012 23