UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

OR

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number: 001-14856

ORIX KABUSHIKI KAISHA

(Exact name of Registrant as specified in its charter)

ORIX CORPORATION

(Translation of Registrant’s name into English)

Japan

(Jurisdiction of incorporation or organization)

Mita NN Bldg., 4-1-23 Shiba, Minato-ku Tokyo 108-0014, Japan

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

	Title of each class	Name of each exchange on which registered
(1)	Common stock without par value, or the Shares	New York Stock Exchange	*
(2)	American depository shares, or the ADSs, each of which represents one-half of one Share	New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of March 31, 2008, 92,193,067 Shares were outstanding, including Shares that were represented by 4,555,896 ADSs outstanding as of March 31, 2008.

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  x    No  ¨

If this report is an annual or transition report, indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes  ¨    No  x

Note—Checking the box above will not relieve any Registrant required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 from their obligations under those sections.

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer  x            Accelerated Filer  ¨            Non-Accelerated Filer  ¨

Indicate by check mark which financial statement item the Registrant has elected to follow.

Item 17   ¨    Item 18  x

If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No  x

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)

Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes  ¨    No  ¨

* Not for trading, but only for technical purposes in connection with the registration of the ADSs.

TABLE OF CONTENTS

		Page
Certain Defined Terms, Conventions and Presentation of Financial Information		3
Forward-Looking Statements		3
PART I		4
Item 1.	Identity of Directors, Senior Management and Advisers	4
Item 2.	Offer Statistics and Expected Timetable	4
Item 3.	Key Information	4
Item 4.	Information on the Company	19
Item 5.	Operating and Financial Review and Prospects	40
RECENT DEVELOPMENTS		102
Item 6.	Directors, Senior Management and Employees	114
Item 7.	Major Shareholders and Related Party Transactions	129
Item 8.	Financial Information	131
Item 9.	The Offer and Listing	132
Item 10.	Additional Information	134
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	143
Item 12.	Description of Securities Other than Equity Securities	145
PART II		146
Item 13.	Defaults, Dividend Arrearages and Delinquencies	146
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	146
Item 15.	Controls and Procedures	146
Item 16.	Reserved	147
Item 16A.	Audit Committee Financial Expert	147
Item 16B.	Code of Ethics	147
Item 16C.	Principal Accountant Fees and Services	147
Item 16D.	Exemptions from the Listing Standards for the Audit Committee	148
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	148
PART III		149
Item 17.	Financial Statements	149
Item 18.	Financial Statements	149
Item 19.	Exhibits	149
SIGNATURES		150
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1
EXHIBIT INDEX

2

CERTAIN DEFINED TERMS, CONVENTIONS AND

PRESENTATION OF FINANCIAL INFORMATION

As used in this annual report, unless the context otherwise requires, “Company” and “ORIX” refer to ORIX Corporation and “ORIX Group,” “we,” “us,” “our” and similar terms refer to ORIX Corporation and its subsidiaries.

In this annual report, “subsidiary” and “subsidiaries” refer to consolidated subsidiaries of ORIX, companies in which ORIX owns more than 50% of the outstanding voting stock and exercises effective control over the companies’ operations, and “affiliate” and “affiliates” refer to all of our affiliates accounted for by the equity method, companies in which ORIX has the ability to exercise significant influence over their operations by way of 20-50% ownership of the outstanding voting stock or other means.

The consolidated financial statements of ORIX have been prepared in accordance with accounting principles generally accepted in the United States of America, or US GAAP. For certain entities where we hold majority voting interests but minority shareholders have substantive participation rights to decisions that occur as part of the ordinary course of the business, the equity method is applied pursuant to EITF96-16 (Investor’s accounting for an investee when the investor has a majority of the voting interest but a minority shareholder or shareholders have certain approval or veto rights). Unless otherwise stated or the context otherwise requires, all amounts in such financial statements are expressed in Japanese yen.

References in this annual report to “yen” or “¥” are to Japanese yen and references to “US$,” “$” or “dollars” are to United States dollars.

Certain monetary amounts and percentage data included in this annual report have been subject to rounding adjustments for the convenience of the reader. Accordingly, figures shown as totals in certain tables may not be equal to the arithmetic sums of the figures which precede them.

The Company’s fiscal year ends on March 31. The fiscal year ended March 31, 2008 is referred to throughout this annual report as fiscal 2008 or the 2008 fiscal year, and other fiscal years are referred to in a corresponding manner. References to years not specified as being fiscal years are to calendar years.

FORWARD-LOOKING STATEMENTS

This annual report contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. When included in this annual report, the words, “will,” “should,” “expects,” “intends,” “anticipates,” “estimates” and similar expressions, among others, identify forward-looking statements. Such statements, which include, but are not limited to, statements contained in “Item 3. Key Information—Risk Factors,” “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk,” inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those set forth in such statements. These forward-looking statements are made only as of the filing date of this annual report. The Company expressly disclaims any obligation or undertaking to release any update or revision to any forward-looking statement contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.

3

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

SELECTED FINANCIAL DATA

The following selected consolidated financial information has been derived from our consolidated financial statements as of each of the dates and for each of the periods indicated below. This information should be read in conjunction with and is qualified in its entirety by reference to our consolidated financial statements, including the notes thereto, included in this annual report in Item 18, which have been audited by KPMG AZSA & Co.

	Year ended March 31,
	2004			2005		2006		2007		2008		2008
	(In millions of yen and millions of dollars)
Income statement data: (1)
Total revenues	¥	760,601		¥	908,872	¥	913,932	¥	1,124,960	¥	1,154,054	$	11,519
Total expenses		673,220			778,172		701,021		842,524		964,853		9,630
Operating income		87,381			130,700		212,911		282,436		189,201		1,889
Equity in net income of affiliates		17,924			19,672		32,054		31,951		48,343		482
Gains (losses) on sales of subsidiaries and affiliates and liquidation losses		(542	)		3,347		2,732		1,962		12,222		122
Income before income taxes, minority interests in earnings of subsidiaries, discontinued operations and extraordinary gain		104,763			153,719		247,697		316,349		249,766		2,493
Income from continuing operations		52,330			83,876		148,193		185,185		146,864		1,466
Net income		54,020			91,496		166,388		196,506		169,597		1,693

4

	As of March 31,
	2004			2005			2006			2007			2008			2008
	(In millions of yen and millions of dollars except number of Shares)
Balance sheet data:
Investment in direct financing leases (2)	¥	1,453,575		¥	1,451,574		¥	1,437,491		¥	1,258,404		¥	1,098,128		$	10,961
Installment loans (2)		2,234,940			2,386,597			2,926,036			3,490,326			3,766,310			37,592
Subtotal		3,688,515			3,838,171			4,363,527			4,748,730			4,864,438			48,553
Investment in operating leases		536,702			619,005			720,096			862,049			1,019,956			10,180
Investment in securities		551,928			589,271			682,798			875,581			1,121,784			11,197
Other operating assets		72,049			82,651			91,856			152,106			197,295			1,969
Operating assets (3)		4,849,194			5,129,098			5,858,277			6,638,466			7,203,473			71,899
Allowance for doubtful receivables on direct financing leases and probable loan losses		(128,020	)		(115,250	)		(97,002	)		(89,508	)		(102,007	)		(1,018	)
Other assets		903,783			1,055,105			1,481,180			1,658,229			1,893,504			18,898
Total assets	¥	5,624,957		¥	6,068,953		¥	7,242,455		¥	8,207,187		¥	8,994,970		$	89,779
Short-term debt	¥	903,916		¥	947,871		¥	1,336,414		¥	1,174,391		¥	1,330,147		$	13,276
Long-term debt		2,662,719			2,861,863			3,236,055			3,863,057			4,462,187			44,537
Common stock		52,068			73,100			88,458			98,755			102,107			1,019
Additional paid-in capital		70,015			91,045			106,729			119,402			135,159			1,349
Shareholders’ equity		564,047			727,333			953,646			1,194,234			1,267,917			12,655
Number of issued Shares		84,366,314			87,996,090			90,289,655			91,518,194			92,193,067			—
Number of outstanding Shares		83,691,007			87,388,706			89,890,579			91,233,710			90,496,863			—
				2004			2005			2006			2007			2008
Key ratios (%): (4)
Return on equity, or ROE					10.10			14.17			19.80			18.30			13.78
Return on assets, or ROA					0.93			1.56			2.50			2.54			1.97
Shareholders’ equity ratio					10.03			11.98			13.17			14.55			14.10
Allowance/investment in direct financing leases and installment loans					3.47			3.00			2.22			1.88			2.10
Per share data and employees:
Shareholders’ equity per Share				¥	6,739.64		¥	8,322.96		¥	10,608.97		¥	13,089.83		¥	14,010.62
Basic earnings from continuing operations per Share (5)					625.32			997.22			1,677.88			2,051.67			1,611.23
Basic earnings per Share					645.52			1,087.82			1,883.89			2,177.10			1,860.63
Diluted earnings per Share					601.46			1,002.18			1,790.30			2,100.93			1,817.81
Cash dividends per Share					25.00			25.00			40.00			90.00			130.00
Cash dividends per Share (6)				$	0.21		$	0.23		$	0.34		$	0.77		$	1.07
Number of employees					12,481			13,734			15,067			16,662			18,702

5

(1) As a result of the recording of income from discontinued operations based on the Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” we reclassified certain items retroactively to the prior years.

(2) The sum of assets considered more than 90 days past due and loans individually evaluated for impairment amounted to ¥173,286 million, ¥138,699 million, ¥120,607 million, ¥134,394 million and ¥203,253 million as of March 31, 2004, 2005, 2006, 2007 and 2008, respectively. These sums included: (i) investment in direct financing leases considered more than 90 days past due of ¥36,568 million, ¥25,733 million, ¥20,494 million, ¥21,149 million and ¥22,637 million as of March 31, 2004, 2005, 2006, 2007 and 2008, respectively, (ii) installment loans (excluding loans individually evaluated for impairment) considered more than 90 days past due of ¥43,176 million, ¥26,945 million, ¥16,455 million, ¥12,656 million and ¥15,333 million, as of March 31, 2004, 2005, 2006, 2007 and 2008, respectively, and (iii) installment loans individually evaluated for impairment of ¥93,542 million, ¥86,021 million, ¥83,658 million, ¥100,589 million and ¥165,283 million as of March 31, 2004, 2005, 2006, 2007 and 2008, respectively. See “Item 5. Operating and Financial Review and Prospects—Results of Operations—Fiscal year ended March 31, 2008 compared to the fiscal year ended March 31, 2007—Details of Operating Results—Revenues, New Business Volumes and Operating Assets—Direct Financing Leases,” and “—Installment Loans and Investment Securities,” “—Fiscal year ended March 31, 2007 compared to the fiscal year ended March 31, 2006—Details of Operating Results—Revenues, New Business Volumes and Operating Assets—Direct Financing Leases” and “—Installment Loans and Investment Securities.”

(3) Operating assets are defined as assets subject to regular, active sales and marketing activities including the assets shown on the balance sheet as investment in direct financing leases, installment loans, investment in operating leases, investment in securities and other operating assets. Operating assets are calculated before allowance for doubtful receivables on direct financing leases and probable loan losses.

(4) Return on equity is the ratio of net income for the period to average shareholders’ equity based on fiscal year-end balances during the period. Return on assets is the ratio of net income for the period to average total assets based on fiscal year-end balances during the period. Shareholders’ equity ratio is the ratio as of the period end of shareholders’ equity to total assets. Allowance/investment in direct financing leases and installment loans is the ratio as of the period end of the allowance for doubtful receivables on direct financing leases and probable loan losses to the sum of investment in direct financing leases and installment loans.

(5) Basic earnings from continuing operations per share is the amount derived by dividing income from continuing operations by the weighted-average number of common shares outstanding based on month-end balances during the fiscal year. The term basic earnings from continuing operations per share as used throughout this annual report has the meaning described above.

(6) The US dollar amounts represent translations of the Japanese yen amounts at the noon buying rates for Japanese yen per $1.00 in New York City for cable transfers in foreign currencies.

6

EXCHANGE RATES

In certain parts of this annual report, we have translated yen amounts into dollars for the convenience of readers. The rate that we used for translations was ¥100.19 = $1.00, which was the approximate exchange rate in Japan on March 31, 2008 using the telegraphic transfer rate of the Bank of Tokyo-Mitsubishi, Ltd. The following table provides the noon buying rates for yen expressed in yen per $1.00 in New York City for cable transfers in foreign currencies. As of July 1, 2008, the noon buying rates for Japanese yen per $1.00 in New York City for cable transfers in foreign currencies was ¥105.73 = $1.00. No representation is made that the yen or dollar amounts referred to herein could have been or could be converted into dollars or yen, as the case may be, at any particular rate or at all.

	Year Ended March 31,
	2004		2005		2006		2007		2008
	(Yen per dollar)
Yen per dollar exchange rates:
High	¥	120.55	¥	114.30	¥	120.93	¥	121.81	¥	124.09
Low		104.18		102.26		104.41		110.07		96.88
Average (of noon buying rates available on the last day of each month during the period)		112.75		107.28		113.67		116.55		113.61
At period-end		104.18		107.22		117.48		117.56		99.85

The following table provides the high and low noon buying rates for yen per $1.00 during the months indicated.

	High		Low
2008
January	¥	109.70	¥	105.42
February		108.15		104.19
March		103.99		96.88
April		104.56		100.87
May		105.52		103.01
June		108.29		104.41

7

RISK FACTORS

Investing in our securities involves risks. You should carefully consider the risks described below as well as all the other information in this annual report, including, but not limited to, our consolidated financial statements and related notes and “Item 11. Quantitative and Qualitative Disclosures about Market Risk.” Our business, operating results and financial condition could be adversely affected by any of the factors discussed below or other factors. The trading prices of our securities could also decline due to any of these factors or other factors. This annual report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, the risks faced by us described below and elsewhere in this annual report. See “Forward-Looking Statements.” Forward-looking statements in this section are made only as of the filing date of this annual report.

1. Risk Related to our Financial Affairs

(1) Our allowance for doubtful receivables on direct financing leases and probable loan losses may be insufficient and our credit-related costs might increase

We maintain an allowance for doubtful receivables on direct financing leases and probable loan losses. This allowance reflects our judgment of the loss potential of these items, after considering factors such as:

• the nature and characteristics of obligors;

• current economic conditions and trends;

• prior charge-off experience;

• current delinquencies and delinquency trends;

• future cash flows expected to be received from the direct financing leases and loans; and

• the value of underlying collateral and guarantees.

We cannot be sure that our allowance for doubtful receivables on direct financing leases and probable loan losses will be adequate to cover future credit losses. In particular, this allowance may be inadequate due to adverse changes in the Japanese and overseas economies in which we operate, or discrete events which adversely affect specific customers, industries or markets.

In order to enhance our collections from debtors, we may forbear from exercising some or all of our rights as a creditor against companies that are unable to fulfill their repayment obligations, and we may forgive loans or extend additional loans to such companies. Furthermore, if economic or the market conditions are adverse, the value of underlying collateral and guarantees may decline. As a result there is a possibility that credit-related costs might increase. If we need to increase our allowance for doubtful receivables on direct financing leases and probable loan losses to cover these changes or events, our financial results could be adversely affected.

(2) We may suffer losses on our investment portfolio

We hold investments in debt and equity securities, funds, ships, vessels and aircraft in Japan, the United States and other regions. The market values of our investments are volatile and may decline substantially in the current year or future years. Also, debt and equity securities classified as available-for-short-term-sale are measured at fair value and changes in their values have a direct influence on our income and losses. We record unrealized gains and losses on debt and equity securities classified as available-for-short-term-sale securities in shareholders’ equity, net of income taxes, and do not ordinarily charge these directly to income and losses, unless we believe that declines in fair market value on all the securities (other than investment securities), are other than temporary. As the result of the U.S. sub-prime loan problem, market uncertainty has led to less liquidity of securities, greater volatility, widening of credit spreads and a lack of price transparency. Although we attempt to minimize risks through risk management procedures, further deterioration in global financial market conditions could cause us to suffer unexpected losses because of declines in the fair market value of securities.

8

(3) Changes in market interest rates and currency exchange rates could adversely affect our assets and our financial condition and results of operations

Our business activities are subject to risks relating to changes in market interest rates and currency exchange rates in Japan and overseas. Although we conduct asset-liability monitoring and management (“ALM”), fixed and variable interest rates and terms of fixed-rate assets and liabilities are not necessarily uniform among our assets and liabilities. As such, interest rate fluctuations such as an increase or decrease in the market interest rate or a discrepant movement in long-term or short-term interest rates could adversely affect our operating results.

In addition, the value of our assets may move independently of market interest rates. In a situation where procurement costs are increasing due to a significant increase in market interest rates or the perception that an increase may occur, it may be that for new transactions, including financing leases and loans, changes in lease payments or loan interest rates will diverge from the trend in market interest rates.

Furthermore, changes in market interest rates could have an adverse effect on the credit condition of our assets and our asset structure. With respect to our floating rate loan assets, if market interest rates increase, this may increase the repayment burden our customers bear with respect to their loans. These increased burdens could adversely affect the financial condition of our customers and their ability to repay their obligations to us, possibly resulting in defaults on lease transactions and loans. Alternatively, a decline in interest rates could result in faster prepayments of loans and a decrease in the value of our assets.

Not all of our assets and liabilities are matched by currency. In addition, a significant portion of our operating assets, revenues and pre-tax income is attributable to overseas operations, in particular in the United States, and subject to foreign exchange risks. We have equity and accumulated retained earnings in our subsidiaries and affiliates in the United States and other countries outside of Japan, which is also subject to foreign exchange risk. As a result, a significant change in currency exchange rates could have an adverse impact on our financial condition and results of operations.

(4) Our funding may be adversely affected if our credit ratings are downgraded

We obtain credit ratings from rating companies. A downgrade in our credit ratings could result in an increase in our interest expenses, and could have an adverse impact on our ability to access the capital markets, thereby adversely affecting our financial position and liquidity. Although we have access to other sources of liquidity, including bank borrowings and sales of our assets, we cannot be sure that these other sources will be adequate or available on terms acceptable to us if our credit ratings are downgraded or other adverse conditions arise. As a result, our business activities, financial condition and results of operations may be adversely affected by a credit ratings downgrade.

(5) Our use of derivatives to manage risk and reduce price fluctuations in our investment portfolio may adversely affect our financial condition and results of operations

We utilize derivative instruments to reduce investment portfolio price fluctuations, to manage interest rate and foreign exchange rate risk, and as part of our trading activities. However, we may not be able to successfully manage our risks through the use of derivatives. Counterparties may fail to honor the terms of their derivatives contracts with us. We may suffer losses from trading activities. As a result, our operations and financial condition could be adversely affected. For a discussion of derivative financial instruments and hedging, see Note 26 in “Item 18. Financial Statements.”

2. Risks related to our business overall

(1) We face various operational risks

Our various businesses entail many sorts of operational risk. Operational risk is defined as the risk of loss resulting from inadequacies in, or failures by, internal processes, people and systems, or from external events. Examples of operational risk include inappropriate sales practices, disclosure of confidential information,

9

misconduct of officers or employees, errors in the settlement of our accounts, erroneous stock orders, computer system security failures and conflicts with our employees concerning labor and workplace management.

Our management attempts to control operational risk and maintain it at a level we believe is appropriate. Notwithstanding our control measures, operational risk is part of the business environment in which we operate and we may incur losses at any time due to this risk. Even if we do not incur direct pecuniary loss, our reputation may be adversely affected.

Our most important operational risks are as follows.

(i) A failure to comply with regulations to which our businesses are subject could result in sanctions or penalties, harm our reputation and adversely affect our results of operations

Our business and employees in Japan are subject to various laws and regulations, including those applicable to financial institutions such as Moneylending Business Law, Installment Selling Control Law, Insurance Business Law, Banking Law, Trust Business Law, Real Estate Trading Business Law, Building Standards Law as well as general laws applicable to our business activities such as Company Law, Financial Instruments and Exchange Law, Antimonopoly Act, the Personal Information Protection Act and we are under the regulatory oversight of the government authorities. Our businesses outside of Japan are also subject to the laws and regulations of the jurisdictions in which they operate and are subject to oversight by the regulatory authorities of those jurisdictions. Our compliance and legal risk management structures are designed to prevent violations of such laws and regulations, but they may not be effective in preventing all future violations. We engage in a wide range of businesses and may expand into new businesses through our acquisition activities. We implement various internal control measures for our businesses, however, with the expansion of our operations, these controls may be ineffective. In such cases, we may be subject to sanctions or penalties, and our reputation may be adversely affected. Future violations of laws and regulations could result in regulatory action and harm our reputation, and our business, financial condition and results of operations could be adversely affected. Even if there are no violations of laws, if we are investigated by government authorities and this information becomes public, our reputation may be harmed and our results of operations may be adversely affected.

(ii) Failures in our computer and other information systems could hinder our operations and damage our reputation and relationship with customers

We are highly reliant on computer systems and other information systems for financial transactions, personal information management, business monitoring and processing and as part of our business decision-making and risk management activities. We are also developing data center services for our customers. System shutdowns, malfunctions or failures due to unexpected contingencies, the mishandling or fraudulent acts of employees or third parties, or infection by a computer virus could have an adverse effect on our operations, such as hindered receipt and payment of monies, leak or destruction of confidential information or personal information, generation of errors in information used for business decision-making and risk management, and the suspension of other services provided to our customers. In such event, our liquidity or that of the customer who relies on us for financing or payment or who utilizes our data center services could be adversely affected, and our relationship with the customer could also be adversely affected. As a result, we could be sued or subject to administrative penalty or our reputation or credibility could be adversely affected.

Our information system equipment could suffer damage from a large-scale natural disaster or terrorism. Since information systems serve an increasingly important role in business activities, the risk of stoppage of the network or information systems due to disaster or terrorism is increasing. If networks or information systems fail, we could experience interruption of business activity, delay in payment or sales, or substantial costs for recovery of functionality.

10

(iii) We may not be able to hire or retain human resources to achieve our strategic goals

Our business requires a considerable investment in human resources and requires the retention of such resources in order to successfully compete in markets in Japan and overseas. Much of our business requires employment of talented individuals who have experience and knowledge in the financing field. If we cannot develop, hire or retain the necessary human resources, or if such personnel resign, we may not be able to achieve our strategic goals.

(2) The departure of senior management could adversely affect us

Our continued success relies significantly on the ability and skills of our senior management. The departure of the current senior management could have an adverse effect on our business activities, financial condition and results of operations.

(3) If our independent registered public accounting firm finds that our internal control over financial reporting is insufficient, investors may lose confidence in the reliability of our financial statements, resulting in a negative impact on our share price, financial condition and reputation

The U.S. Securities and Exchange Commission (the “SEC”), as directed by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring foreign private issuers to include a report of management on the company’s internal control over financial reporting in its Annual Report on Form 20-F that contains an assessment by management of the effectiveness of the company’s internal control over financial reporting. In addition, the company’s independent registered public accounting firm must attest to and report on the effectiveness of the company’s internal control over financial reporting. These requirements are reflected in our Annual Report on Form 20-F (starting with that issued for the fiscal year March 31, 2007). Although we have diligently and vigorously established and assessed our internal control over financial reporting in order to ensure compliance with Section 404 requirements, in the future periods our independent registered public accounting firm may identify material weaknesses in our internal control over our financial reporting and may issue a report that our internal control over financial reporting is ineffective. These possible outcomes could result in an adverse reaction in the financial market due to a loss of investor confidence in the reliability of our financial statements, which could have a negative impact on our share price, reputation, business activities, results of operations and financial condition.

(4) Our risk management may not be effective

We seek continuously to improve our risk management function. However because of the expansion of our business or changes in our business environment, there is a possibility that our risk management may not be effective in some cases. As a result our business, results of operations and financial condition could be adversely affected.

3. Risks related to our external environment

(1) We may lose market share or suffer reduced interest margins if our competitors compete with us on pricing and other terms

We compete primarily on the basis of pricing, terms and transaction structure. Other competitive factors include industry experience, client service and relationships. In recent years, Japanese banks, their affiliates and other finance companies have implemented strategies targeted at increasing business with small and medium-sized enterprises, which form the core of our customer base in Japan. Our competitors sometimes seek to compete aggressively on the basis of pricing and terms, without regard to profitability, and we may lose market share if we are unwilling to compete on pricing or terms because we want to maintain our income levels. Since some of our competitors are larger than us and have access to capital at a lower cost than we have, they may be better able to maintain profits at reduced prices. If we compete with our competitors on pricing or terms, we may experience lower income.

11

(2) Our access to liquidity and capital may be restricted by economic conditions or instability in the financial markets

Our primary sources of funds are borrowings from banks and other institutional lenders, funding from capital markets, such as offerings of commercial paper, medium-term notes, straight bonds, asset-backed securities and other debt securities, and deposits. Such sources include a significant amount of short-term funding such as commercial paper and borrowings from various institutional lenders. Due to turmoil in financial markets, it is possible that risks related to our liquidity could significantly increase in the event that further concerns emerge related to potential bankruptcies of financial institutions. Such developments may result in increased uncertainty regarding financial systems, increases in market interest rates, additional credit exposure or weak investor sentiment that could adversely affect our access to funding, business activities, financial condition and operating results.

We have taken what we believe are appropriate countermeasures in consideration of such liquidity risks, such as establishing committed credit facilities for the purpose of supplementing liquidity. However, no assurance can be provided that such measures will be adequate to deal with severely adverse borrowing conditions.

(3) Negative press coverage or rumors could affect our business, financial condition, results of operation or share price

Our business relies on the confidence of customers and market participants. Negative press coverage or rumors (including on the Internet) about our activities or those of our directors, executive officers and employees or regarding related industries, even if not based on fact, could harm our reputation. Even if we provide appropriate explanations to the press and other interested parties, there is no assurance that we can prevent an adverse effect on our reputation; as a result, our results of operation could deteriorate or there could be an adverse effect on our share price.

(4) Our business may be adversely affected by economic fluctuations and political disturbances

We conduct business operations in Japan as well as overseas, including in the United States, Asia, Oceania, the Middle East and Europe. Economic deterioration, volatility in financial markets, shifts in commodity market prices, political instability or religious strife in any such region could adversely affect our operations.

For example, if as a result of the U.S. sub-prime loan problem and other factors, unstable market conditions continue and global financial market conditions deteriorate further, valuation of our securities, loans and other commitments could be subject to greater uncertainty. Notwithstanding our attempt to minimize these risks through risk management procedures, our financial condition and results of operations could be adversely affected by such conditions.

(5) Changes in laws, regulations and accounting standards may affect our business, results of operations and financial condition

Changes in laws, regulations and accounting standards may affect the way we conduct our business, the products we may offer in Japan or overseas and our customers, borrowers and invested companies. Such changes are unpredictable, which may cause costs to increase, and therefore our business, results of operations and financial condition could be adversely affected as a result.

(6) Our results of operations and financial condition may be adversely affected by unpredictable events

Our business, results of operations and financial condition may be adversely affected by unpredictable events and any continuing adverse effect caused by such events. Unpredictable events include single or multiple and man-made or natural events, such as terrorism and earthquakes, that may, among other things, cause unexpectedly large market price movements or an unexpected deterioration of economic conditions of a country.

12

4. Risks related to specific businesses

(1) Our real estate-related business exposes us to various risks

The main areas of our real estate-related business operations are real estate-related loans and real estate business. Real estate-related loans are comprised of loans secured by real estate collateral, loans to domestic real estate companies or construction companies and non-recourse loans for which cash flow from real estate is the main source of repayment. Real estate business is the construction and sale of condominiums; the development and lease of office buildings, logistics warehouses; the operation of hotels, golf courses and training facilities; the development and operation of senior housing; integrated facilities management and related services; and asset management services for real estate investment trusts (REITs).

In Japan and overseas, adverse changes in the balance of supply and demand in real estate markets, or adverse changes in the funding environment for the purchase and development of real estate may cause the condition of the real estate market to deteriorate. See “Item 4. Information on the Company—Operating Environment, Real Estate.” This may adversely affect our business activities, the value of our long-lived assets and the value of the collateral underlying the loans we make. Any such events could have an adverse effect on our results of operations and financial condition.

When we commence a building construction project, we try to obtain indemnity against any breach or defect of property to the extent possible from the contractor. When we purchase a property, we try to obtain indemnity to the extent possible from the seller to cover losses and expenses caused by any defects of geological condition, structure or material in relation to such property. If the construction work is postponed or cancelled due to contractor’s circumstances, or if there is any defect in a building or facility sold or leased by us and indemnity is not provided by the contractor or seller or if the indemnities provided are insufficient due to a deterioration of their financial condition, we may be required to indemnify tenants or purchasers and thereby incur losses. Even if we do not have to indemnify tenants or purchasers, there might be an additional cost for us to maintain the construction or the project and we may need to pay higher costs than we originally budgeted. In addition, even if we do not incur financial loss, there could be an adverse affect on our reputation due to our involvement as the seller, owner or original developer of the property, depending on the breach or defect.

Before the Soil Contamination Measures Law came into effect in 2003, we did not, at the time of acquisition, investigate land (including land provided as collateral for a particular loan) that had been used as a factory site or operating facility in which hazardous materials were used or that otherwise could cause health problems due to soil contamination. If it is later determined that such land is polluted and it is necessary to take countermeasures under the Soil Contamination Measures Law, this could have an adverse effect on the sale of the land or the amounts receivable on foreclosure from land held as collateral. Although we have conducted investigations at the time of acquisition with respect to land acquired after the Soil Contamination Measures Law came into effect, a subsequent determination that such land is polluted may have the same adverse consequences.

If the Building Standards Law, the City Planning Law or any other property related laws and regulations are amended, we may suffer additional responsibility and increase of costs. For example, any amendments to the Building Standards Law and other related laws and regulations triggered by the problems of asbestos or inadequate earthquake resistance in buildings could lead to increased costs due to tightening of internal due diligence or prolonged project periods due to tightened operating processes. Changes of the initial project plans may be required for real-estate development projects, depending on the results of discussions with the neighboring residents, even though all the approvals and licenses required for such projects may have been previously obtained. Also, such conditions may result in an increased likelihood that sales will become difficult due to lowered credibility of the real estate market or shifts in market preferences. These factors could result in a decline in our revenue. Furthermore, since the real estate-related companies to which we make loans may be affected in the same way, debt collection from such companies could be difficult due to deterioration of their business condition. The liquidity of properties held by us as collateral may decline, which could also make debt collection difficult.

13

We ordinarily carry comprehensive property and casualty insurance covering our real estate investments with insured limits that we believe are adequate and appropriate against anticipated losses. There are, however, certain types of losses caused by events such as wars, acts of terrorism, willful acts or gross negligence that are uninsurable. In addition, we do not usually carry insurance for damages caused by natural disasters such as earthquakes or typhoons because insurance coverage for such damages is limited and the insurance premium is relatively expensive.

In the event that our real estate investments suffer an uninsured loss, our investment balance in and revenues from such investments could be adversely affected. In addition, we would likely remain liable for indebtedness and other financial obligations relating to the relevant property. No assurance can be given that uninsured losses will not occur in respect of our real estate investments.

(2) We may be exposed to increased risks as we expand or reduce the range of our products and services, or acquire companies or assets

As we expand the range of our products and services beyond our traditional businesses, we may be exposed to new and increasingly complex risks, some or all of which may be uncontrollable, and we may incur substantial losses. In addition, our efforts to offer new services and products may not attain the expected results if business opportunities do not increase as expected or if the profitability of opportunities is undermined by competitive pressures. Restructuring of, or withdrawal from, businesses we engage in could harm our reputation and adversely affect our results of operations and financial condition.

We cannot guarantee that the price we pay for acquisitions will be fair and appropriate. If the results of the acquired company happen to be lower than what we expected at the time we made the acquisition, our acquisitions could result in future large write-downs related to goodwill and other assets.

In recent years, the contribution from consolidated subsidiaries and equity method affiliates to our consolidated statements of income has increased and has been an important component of our income. There is no assurance that this contribution can be maintained. While we will continue to review and selectively pursue investment opportunities, there can be no assurance that we can continue to identify attractive opportunities, or that such investments will be as profitable as we originally expect. These companies have a wide range of business operations, including operations that are very different from financial services which is our core business. Failure to manage these companies effectively could result in financial losses as well as losses of future business opportunities. In addition, we may not be able to sell or otherwise dispose of the invested business or company at such time or in such period and at such price as we initially expected. We may also need to invest additional capital in certain of these companies if their financial condition deteriorates. We may lose key personnel in the companies in which we invest if such personnel are not satisfied with our management.

Even if such affiliates or subsidiaries are not performing poorly, in the event that any such affiliate or subsidiary is implicated in a problem of significant public concern and we transfer our personnel to serve as directors or officers of such affiliate or subsidiary, irrespective of whether or not such persons perform their obligations, our reputation may be adversely affected.

(3) We may suffer losses if we are unable to remarket leased equipment returned to us

We lease equipment to customers under direct financing leases and operating leases. We will suffer losses at the end of the lease if we cannot recover the residual value that we estimated at the beginning of the lease. This risk is particularly significant for operating leases. If we are unable to sell or re-lease the equipment at the end of the leasing period, we may not recover our investment in the equipment and we may suffer losses. Our estimates of the residual value of equipment are based on current market values of used equipment and assumptions about when and to what extent the equipment will become obsolete. If equipment values and product market trends differ from our expectations, we may incur impairment losses.

14

(4) Leasing equipment distributors’ inappropriate sales activity may increase the number of customer claims against us and adversely affect our reputation and business performance

Our leasing business and reputation could be affected by the behavior of individual distributors of equipment and problems specific to this industry. In 2005, inappropriate sales activity was a serious problem in the telephone equipment leasing industry. In response, the Ministry of Economy, Trade and Industry amended the “Law concerning Specified Trades” in 2005 and has provided guidance to firms in the related industries on compliance measures. Because of this guidance, our customers may make claims or inquiries to us, and as a result leasing contracts may be cancelled before maturity. Any such early lease cancellations may adversely affect our business performance. The measures we have taken to resolve and address these problems or may take in the future may cause leasing business costs to increase and leasing transactions to decline, and may result in an adverse effect on our reputation.

(5) Increased competition or regulatory changes in the entertainment industry could weaken the financial condition of entertainment companies to which we provide credit, which may adversely affect their ability to repay us

We provide credit to entertainment-related industries such as the pachinko halls, primarily through direct financing leases and installment loans. Even though we have accumulated credit know-how from past experiences and secure these transactions with collateral liens after thorough examinations of the particular risks involved with these entertainment-related industries, our business activities, financial condition and our results of operations could be adversely affected by an intensification of competition or substantial changes in the regulation of these industries, which may adversely affect their financial condition and ability to repay us.

(6) Changes in the Moneylending Business Law and the reduction of the maximum chargeable interest rate may adversely impact our results of operations or financial condition

We provide credit to the consumer and commercial loan industry through installment loan transactions and other similar transactions. The business environment that surrounds this industry is very severe due to increasing risk of claims for the “gray zone” interest refunds and the strengthening of various related legal restrictions including restrictions on the maximum amount of loans that any borrower may make and a reduction in the maximum chargeable interest rates implemented by revisions to the Moneylending Business Law in response to the “gray zone” interest and multiple debtor problems. The performance trend of the consumer loan industry as a whole may adversely affect our results of operations or financial condition.

(7) Accidents in our environment-related business could damage our reputation and cause us to incur financial losses

We began operations of an industrial waste disposal facility in June 2006 as a Private Finance Initiative, or PFI, under contract with Saitama prefecture in Yorii-machi, Saitama. In addition, we were assigned shares of Kanematsu Environmental Corporation (now Funabashi Environmental Corporation) in March 2008 to develop an industrial waste disposal business mainly in Funabashi-shi, Chiba. With respect to the PFI in Saitama, in order to minimize the risk of emitting environmental pollutants, the center there utilizes the most advanced waste disposal techniques. To run and maintain the center appropriately, we have contracted with the waste disposal specialist firm that constructed the center to serve as operator. Though environmental pollution or fire could occur due to an operational mistake or defect in the disposal facility, we are insured to protect against a variety of such accident risks. In addition, we have ensured that, under our operating agreement with the operator, the operator that bears responsibility for operation and maintenance of the facility and under the design and construction contract bears responsibility for any defect in the facility.

However, in the event that the amount of insurance is not sufficient and the financial condition of the operator has deteriorated such that it cannot perform its contractual obligations or indemnify us for losses, we will be required to bear such losses. Further, we will be responsible for any accident occurring by reason of any

15

event other than those for which the operator is responsible by contract. If loss resulting from such accident is not covered by our insurance, we will be required to bear such loss. Even if we do not incur any direct financial loss, our reputation could be adversely affected.

We provide various environment-related services such as waste management and recycle flow services, a loan program for environmentally conscious companies, energy solution and car sharing aimed at reduction of environmental burdens. In the event that a problem such as pollution or any violation of environment-related regulations or local agreements arises from any of these businesses, the reputation of our environment-related business could be adversely affected.

(8) Our medical business and nursing care business expose us to various risks

We operate the Kochi Health Sciences Center, which is a PFI business of Kochi prefecture and Kochi-city, through Kochi Medical PFI Corporation, which is one of our subsidiaries. The subsidiary is not engaged in medical services directly; however, since it contracts out for sterilization of medical materials, if an accident occurs the subsidiary could be liable for the contribution of the contracted service to the accident. Further, even if there is no pecuniary liability, our reputation could be adversely affected.

We provide rental services of medical instruments. We entrust the inspection of such medical instruments to professionals designated by the makers of the instruments. Such makers are responsible for any injuries or damages caused from the defects of such medical instruments. However, we also have potential obligations for such defects as a lessor. Further, even if there is no pecuniary liability, our reputation could be adversely affected in the event there are defaults.

We provide elderly care services to senior citizens, including the sale and operation of housing for senior citizens and at-home nursing care. If a nursing service accident occurs, we could be liable for damages and our reputation could be adversely affected. In addition, if the nursing care insurance system is modified to reduce public financial support and the economic burden on the user is thereby increased, the nursing market could shrink and our operating results could be adversely affected.

(9) If our advisory services and consulting services which we offer to our customers are insufficient, we may be obligated to compensate our customers

We provide M&A and financial advisory and consulting services to our customers at our subsidiaries such as ORIX M&A Solutions Corporation and Houlihan Lokey Howard & Zukin, or Houlihan Lokey. If such services are insufficient and our customers suffer losses as a consequence, we may be obligated to compensate our customers for those losses.

(10) Our life insurance subsidiary is subject to risks that are specific to its business

We are exposed to the risk of unpredictable increases in insurance payments for deaths and hospital benefits, in relation to the business of ORIX Life Insurance Corporation, or ORIX Life Insurance. It may incur valuation losses or losses on sales if the value of securities it purchases for asset management purposes decreases. In addition, if ORIX Life Insurance fails to conduct asset liability management, or ALM, in a prudent and foresightful manner to pursue an optimal combination of risk and expected returns on investment assets and underwriting risks on insurance policy benefits, its results of operations and financial condition may suffer.

ORIX Life Insurance is also subject to mandatory reserve contributions to the Life Insurance Policyholders Protection Corporation of Japan, or the PPC. The PPC was established in 1998 to provide financial support to insolvent life insurance companies. All life insurers in Japan, including ORIX Life Insurance, are members of the PPC and are required to make contributions to the PPC based on their respective share of insurance industry premiums and policy reserves. Because a number of life insurers have become insolvent since 1998, the PPC’s financial resources have been substantially reduced due to providing financial support to those companies. If

16

there are further bankruptcies of life insurers, other members of the PPC, including ORIX Life Insurance, may be required to contribute additional financial resources to the PPC. In such an event, our financial condition and results of operations may be adversely affected.

(11) If the reputation of our professional baseball team declines, our share price and financial condition could be adversely affected

We own and manage a professional baseball team in Japan, the ORIX Buffaloes. Management of a professional baseball team in Japan, due to its public nature, requires us to consider the various social effects it may have and the reputation of the team. If the reputation of the baseball team declines, our business activities, financial condition, results of operations and our share price could be adversely affected as a consequence.

(12) Ship brokerage business exposes us to market and credit risks

We operate a ship brokerage business in which we place orders for new ships with shipbuilders and deliver those ships to our customers that purchase them for use. If any purchasing customers’ defaults under its purchase agreement, we must purchase or hold the new ship ourselves. Because the process shipbuilding takes several years from placement of an order to delivery of the ship, a decline in the condition of the market may adversely affect our results of operation.

5. Risk related to holding or trading our shares

(1) Dispositions of the Shares may adversely affect market prices for the Shares

A few of our shareholders hold more than five percent of the total number of outstanding Shares. These shareholders may for strategic or investment reasons decide to reduce their shareholdings in ORIX. Dispositions of the Shares, particularly dispositions of large numbers of shares by such major shareholders, may adversely affect market prices of the Shares.

For information on shareholdings, see “Item 7. Major Shareholders and Related Party Transactions.” Due to changes in the global economy or political conditions, investors outside Japan may reduce their investments in Japanese stocks. A large portion of our Shares are held by investors outside Japan, and a reduction in Japanese stock investment by such investors may adversely affect market prices of our Shares.

(2) Change of listed sections and delisting of Shares could adversely affect the liquidity and price of the Shares

Each of the Tokyo Stock Exchange, Inc. and the Osaka Securities Exchange Co., Ltd, on which the Shares are listed in Japan, has certain standards for maintaining the listing of shares, including a minimum share distribution standard—a requirement for a minimum number of unaffiliated holders of units of shares. If we fail to meet the listing standards, the Shares may be subject to a change in their listed section, from the more prestigious section 1 to section 2 or, in certain cases, delisting. In general, the liquidity of shares on section 2 is lower and share price volatility is higher than on section 1. If our Shares are changed to section 2, or are delisted, the liquidity of and prices for the Shares could be adversely affected.

(3) Rights of shareholders under Japanese law may be different from those under the laws of other jurisdictions

Our Articles of Incorporation, the regulations of our board of directors and the Company Law govern our corporate affairs. Legal principles relating to such matters as the validity of corporate procedures, directors’ and officers’ fiduciary duties and shareholders’ rights are different from those that would apply if we were not a Japanese corporation. Shareholders’ rights under Japanese law are different in some respects from shareholders’ rights under the laws of jurisdictions within the United States and other countries. You may have more difficulty

17

in asserting your rights as a shareholder than you would as a shareholder of a corporation organized in a jurisdiction outside of Japan. For a detailed discussion of the relevant provisions under the Company Law and our Articles of Incorporation, see “Item 10. Additional Information Memorandum and Articles of Incorporation.”

(4) It may not be possible for investors to effect service of process within the United States upon ORIX or ORIX’s directors or executive officers, or to enforce against ORIX or those persons judgments obtained in US courts predicated upon the civil liability provisions of the federal securities laws of the United States

ORIX is a joint stock company incorporated in Japan. Most or all of ORIX’s directors and executive officers are residents of countries other than the United States. Although some of ORIX’s subsidiaries have substantial assets in the United States, substantially all of ORIX’s assets and the assets of ORIX’s directors and executive officers are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon ORIX or ORIX’s directors and executive officers or to enforce against ORIX or those persons, in US courts, judgments of US courts predicated upon the civil liability provisions of US securities laws. ORIX has been advised by its Japanese counsel that there is doubt, in original actions or in actions to enforce judgments of US courts, as to the enforceability in Japan of civil liabilities based solely on US securities laws. A Japanese court may refuse to allow an original action based on US securities laws.

The United States and Japan do not currently have a treaty providing for reciprocal recognition and enforcement of judgments, other than arbitration awards, in civil or commercial matters. Therefore, if you obtain a civil judgment by a US court, you will not necessarily be able to enforce such judgment directly in Japan.

(5) We expect to be treated as a passive foreign investment company

We expect to be treated as a passive foreign investment company under the US Internal Revenue Code because of the composition of our assets and the nature of our income. US investors in our Shares or ADSs are therefore subject to special rules of taxation in respect of certain dividends or gain on such Shares or ADSs, including re-characterization of gains realized on the disposition of, and certain dividends received on, the shares or ADSs as ordinary income earned pro rata over a US investor’s holding period for such shares or ADSs, taxed at the maximum rate applicable during the years in which such income is treated as earned, and subject to punitive interest charges for a deemed deferral benefit. Please read carefully the section in this annual report called “Item 10. Additional Information—Taxation—United States Taxation.” Investors are urged to consult their own tax advisors regarding all aspects of the income tax consequences of investing in our Shares or ADSs.

(6) If you hold fewer than 10 Shares, you will not have all the rights of shareholders with 10 or more Shares

One “unit” of the Shares is comprised of 10 Shares, equivalent to 20 ADSs. Each unit of the Shares has one vote. A holder who owns Shares or ADSs other than in multiples of 10 or 20, respectively, will own less than a whole unit (i.e., for the portion constituting fewer than 10 Shares, or ADRs evidencing fewer than 20 ADSs). The Company Law imposes significant restrictions on the rights of holders of shares constituting less than a whole unit, which include restrictions on the right to vote. Under the unit share system, holders of Shares constituting less than a unit have the right to require ORIX to purchase their Shares and the right to require ORIX to sell them additional Shares to create a whole unit of 10 Shares. However, holders of ADRs are unable to withdraw underlying Shares representing less than one unit and, as a practical matter, are unable to require ORIX to purchase those underlying Shares. The unit share system, however, does not affect the transferability of ADSs, which may be transferred in lots of any size.

(7) Foreign exchange fluctuations may affect the value of our securities and dividends

Market prices for our ADSs may decline if the value of the yen declines against the dollar. In addition, the amount of cash dividends or other cash payments made to holders of ADSs will decline if the value of the yen declines against the dollar.

18

(8) A holder of ADRs has fewer rights than a shareholder and must act through the depositary to exercise those rights

The rights of shareholders under Japanese law to take various actions, including voting their shares, receiving dividends and distributions, bringing derivative actions, examining a company’s accounting books and records and exercising dissenters’ rights are available only to holders of record on a company’s register of shareholders. The Shares represented by our ADSs are registered in the name of the depositary, through its custodian agent. Only the depositary is able to exercise those rights in connection with the deposited Shares. The depositary will make efforts to vote the Shares represented by our ADSs as instructed by the holders of the ADRs representing such ADSs and will pay to those holders the dividends and distributions collected from us. However, a holder of ADRs will not be able to directly bring a derivative action, examine our accounting books and exercise dissenters’ rights through the depositary unless the depositary specifically undertakes to exercise those rights and is indemnified to its satisfaction by the holder of ADRs for doing so.

Item 4. Information on the Company

GENERAL

ORIX is a joint stock corporation (kabushiki kaisha) formed under Japanese law. Our principal place of business is at Mita NN Bldg., 4-1-23 Shiba, Minato-ku, Tokyo 108-0014, Japan, phone: +813-5419-5000. Our general contact e-mail address is: orixir@orix.co.jp and our URL is: www.orix.co.jp/grp/index_e.htm. The information on our website is not incorporated by reference into this annual report. ORIX USA Corporation, or ORIX USA, is ORIX’s agent in the United States and its principal place of business is at 1717 Main Street, Suite 800, Dallas, Texas 75201, USA.

CORPORATE HISTORY

ORIX was established on April 17, 1964 in Osaka, Japan as Orient Leasing Co., Ltd. by three trading companies and five banks that included Nichimen Corporation, Nissho Corporation and Iwai Corporation (presently Sojitz Corporation), the Sanwa Bank and Toyo Trust & Banking (presently Mitsubishi UFJ Financial Group, Inc.), the Industrial Bank of Japan and Nippon Kangyo Bank (presently Mizuho Financial Group, Inc.), and the Bank of Kobe (presently Sumitomo Mitsui Financial Group, Inc.). While we maintain certain business relationships with these companies, they now hold only a limited number of our Shares in the aggregate.

Our initial development occurred during the period of sustained economic growth in Japan during the 1960s and lasted through to the early 1970s. During this time, strong capital spending by the corporate sector fueled demand for equipment, and led to the first wave of newly established leasing companies in Japan. Under the leadership of Tsuneo Inui, who served as President from 1967 to 1980, we capitalized on the growing demand in this period by expanding our portfolio of leasing assets.

It was also during this time that our marketing strategy shifted from a focus on using the established networks of the trading companies and other initial shareholders to one that concentrated on independent marketing as the number of our branches expanded. In April 1970, we listed our Shares on the second section of the Osaka Securities Exchange, which at the time was the fastest listing by a new company in post-World War II Japan. Since February 1973, the Shares have been listed on the first sections of the Tokyo and Nagoya Stock Exchanges and the Osaka Securities Exchange. In September 1998, ORIX listed on the New York Stock Exchange, or NYSE, with the ticker symbol “IX.” ORIX delisted from the Nagoya Stock Exchange in October 2004.

The 1970s saw the gradual maturing of the Japanese leasing industry, and the Japanese economy was adversely affected by the two oil shocks of 1973 and 1979, resulting in reduced growth in capital spending and increased volatility in foreign exchange rates. Despite these difficulties, we continued to grow rapidly by

19

expanding and diversifying our range of products and services to include ship and aircraft leasing along with real estate collateralized loans. Furthermore, in 1972, we established Orient Leasing Interior (now ORIX Alpha), which concentrated on leasing furnishings and fixtures to retailers, hotels, restaurants and other users. We subsequently set up a number of specialized leasing companies to tap promising new markets, including ORIX Auto Leasing Corporation (now ORIX Auto) in 1972, and Orient Instrument Rentals (now ORIX Rentec), in 1976. We established Family Consumer Credit (now ORIX Credit) in 1979, with the aim of entering the consumer finance sector.

During the 1970s, we expanded overseas, establishing our first overseas office in Hong Kong in 1971, followed by Singapore in 1972, Malaysia in 1973, the United States in 1974, Indonesia in 1975, South Korea in 1975, the Philippines in 1977 and Thailand in 1978.

Yoshihiko Miyauchi became President and CEO in 1980. During the 1980s, we continued to expand the range of our products and services, and placed increased emphasis on strengthening synergies among our group companies by emphasizing knowledge sharing and cooperation to make optimal use of corporate resources. This included a focus on cross-selling a variety of products and services to our customers, a focus that continues to this day.

During the 1980s, we began using mergers and acquisitions to expand operations, acquiring ORIX Securities Corporation (formerly Akane Securities K.K.), or ORIX Securities, and ORIX Estate Corporation (formerly OSAKA Ichioka Corporation) which is involved in real estate and leisure facility management, in order to expand our array of financial products and services.

In 1988, we acquired one of the twelve professional baseball teams in Japan, the ORIX Buffaloes (formerly the Hankyu Braves), which has helped raise our name recognition and promote our corporate image. In 1989, we introduced a corporate identity program and changed our name to ORIX Corporation from Orient Leasing Co., Ltd. to reflect our increasingly international profile and diversification into financial services other than leasing.

In the 1990s, the Japanese economy experienced a protracted period of industrial stagnation and, in the latter half of the decade, instability within the financial sector. Notwithstanding these adverse conditions, we continued to further develop and expand our financial activities and products and we began to focus our attention on retail operations. For example, in 1991 we entered the life insurance business by establishing ORIX Omaha Life Insurance (now ORIX Life Insurance), and from 1997, we began to offer ORIX Direct Life Insurance, a new life insurance product offered directly to individual customers. In April 1998, we acquired Yamaichi Trust & Bank, Ltd. (now ORIX Trust and Banking), in 1998, which has since concentrated primarily on housing loans. Furthermore, with the deregulation of brokerage commissions in May 1999, ORIX Securities began ORIX ONLINE, an internet-based brokerage aimed at individual investors. We also entered the loan servicing business overseas in 1997 through a joint venture with Bank One Corporation of the United States (the joint venture is presently a subsidiary of ORIX USA).

In 1999, in order to increase the efficiency of our real domestic estate-related operations, we established our Real Estate Finance Headquarters, which is primarily engaged in real estate-related finance, and ORIX Real Estate Corporation, or ORIX Real Estate, which focuses on the development, operation and management of real estate in Japan. Subsequently, we expanded our real estate-related activities to include loan servicing, real estate investment trusts, commercial mortgage-backed securities, integrated facilities management and asset management in Japan.

We established our Investment Banking Headquarters in 1999, and have since been attempting to expand our investment banking activities, which include principal investments, corporate rehabilitation and consulting.

Since 2000, we have actively expanded our automobile-related operations by acquiring companies and assets. For example, in addition to our existing companies, ORIX Auto Leasing, ORIX Rent-A-Car, and ORIX

20

Rent-A-Car Hokkaido, we added Senko Lease and IFCO Ltd. in 2001, Nittetsu Leasing Auto Co., Ltd. in 2002, and JAPAREN in 2003. We combined these seven companies into ORIX Auto in January 2005.

In February 2005, in order to expand investments based mainly in the Asia region, we transferred control of certain operations from our Investment Banking Headquarters and Real Estate Finance Headquarters to the newly established Alternative Investment & Development Headquarters located in Japan.

In December 2005, as a part of our business restructuring in the United States, we sold part of our loan servicing business, including primary and master servicing departments and entrusted servicing assets. While in January 2006, we entered the investment banking field in the US with the acquisition of Houlihan Lokey Howard and Zukin (HLHZ). HLHZ established operations in Hong Kong and Japan in 2007, and is expanding financial advisory services across a broad range of operations including advisory operations and valuation support for cross-border M&A.

In June 2007, in order to expand our real estate-related business in Asia and the Middle East where medium- to long-term growth is expected, we established an International Real Estate Business Headquarters located in Japan, which was integrated into ORIX Real Estate Corporation to take advantage of opportunities both domestically and globally in June 2008.

In January 2008, we integrated our Real Estate Finance Headquarters into our Investment Banking Headquarters.

In June 2008, to promote further diversification within ORIX’s operations throughout Asia, Oceania, the Middle East and Europe, International Business Headquarters and Alternative Investment and Development Headquarters were merged into the new International Administrative Headquarters.

STRATEGY

Target Performance Indicators

We have identified the growth rate of diluted net income per share, ROE (ratio of net income to average shareholders’ equity) and the shareholders’ equity ratio as important performance indicators. We seek to maintain a business portfolio focused on balancing growth, profitability and financial stability.

From a medium- and long-term perspective, our objectives for each performance indicator are shown below.

• Strive to achieve sustained growth in diluted net income per share.

• Maintain and improve ROE (ratio of net income to average shareholders’ equity).

• Sustain an appropriate shareholders’ equity ratio according to changes in operations and levels of risk.

The trend in the value of each of the performance indicators for the past three years is shown below.

	As of March 31,
	2006			2007			2008
Net Income per Share (Diluted)	¥	1,790.30		¥	2,100.93		¥	1,817.81
Return on Equity (%)		19.8	%		18.3	%		13.8	%
Shareholders’ Equity Ratio		13.2	%		14.6	%		14.1	%

Medium- and Long-Term Corporate Management Strategy

We are aiming to achieve sustained growth from a medium- and long-term perspective. With the continued evolution of the economy and society, market demands for innovative products and services increasingly affect the financial services sector, our principal operating domain. Accordingly, we believe that our management’s ability to promptly and flexibly respond to changing market needs will be critical to achieving medium- and long-term growth.

21

To realize this objective, we are undertaking operations based on the following policies;

• Expand our sales network developed through financial services, including leases and loans, and further strengthen our base of operations for growth through diversification and business expansion.

• Utilize our sales network to promote investment banking operations such as principal investments, including corporate rehabilitation and business succession, and advisory services related to M&A and financial restructuring.

• Utilize our strengths in the fields of both finance and real estate to further expand our real estate-related operations within a market environment in which financial products continue to grow in importance.

• Diversify our overseas operations based from our existing businesses focusing on financing for SMEs to real estate-related operations and investment banking operations, as well as expansion into new regions.

With the business year beginning from April 2008, we will change certain elements of our organization, and management structure. We will realign our business segments into the following six categories: Corporate Financial Services, Maintenance Leasing, Real Estate, Investment Banking, Retail and Overseas Business. Each segment will be authorized to make decisions regarding its strategic planning, allocation of management resources, and portfolio balancing.

In light of our rapid expansion and transformation during the past four to five years, our management believes that this consolidation into six segments will be a vital factor in developing and maintaining our strategic advantages and maximizing our corporate value.

Through the effective allocation and monitoring of equity, capital and human talent among these six segments, we seek to maximize our corporate value.

Challenges to be addressed

Based on our belief that a robust and dynamic corporate structure is integral to achieving sustained growth, we intend to implement the following four measures.

1. Engage in transactions that provide both social and economic value.

2. Further improve our financial position.

3. Establish a workplace environment that is valued by our employees.

4. Enhance our risk management.

We secure new transactions by providing quality products and services for our customers. Although our primary objective is to increase corporate profitability, we also seek to engage in transactions that comply with relevant laws and regulations and take environmental issues into consideration.

As a result of our efforts to improve our financial position and credit ratings during the past few years, we have achieved these goals to some extent. With an objective of securing new growth opportunities, we aim to further improve our financial position. In light of the present environment of increasing credit instability and uncertainty in global financial markets, we will pay particular attention to maintaining an appropriately weighted balance sheet.

We will strive to establish a rewarding and motivating workplace in which our employees can fulfill their potential irrespective of nationality, age, gender, career, education and employment type, and thereby increase the strength of our organization as a whole.

To enhance our risk management, we aim to achieve our management goals through implementing timely and comprehensive enterprise risk management programs incorporating capital management, individual business risk, procurement of funds and personnel strategies. We believe that these measures will also help us to flexibly adapt to changes in our business environment and to the further diversification of our business.

22

PROFILE OF BUSINESS BY SEGMENT

Our reportable segments are based on FASB Statement No. 131. They are mainly identified based on the nature of services for operations in Japan and on geographic area for overseas operations. For a discussion of the basis for the breakdown of segments, see Note 30 in “Item 18. Financial Statements.” The following table shows a breakdown of revenues by segment for the years ended March 31, 2006, 2007 and 2008.

	Years ended March 31,
	2006			2007			2008
	(In millions of yen)
Operations in Japan:
Corporate Financial Services	¥	97,683		¥	123,328		¥	131,139
Automobile Operations		130,775			146,966			158,093
Rental Operations		67,066			67,859			78,317
Real Estate-Related Finance		69,472			82,345			91,179
Real Estate		198,780			245,336			278,096
Life Insurance		137,468			132,060			128,742
Other		111,854			145,443			126,343
Sub-total		813,098			943,337			991,909
Overseas operations:
The Americas		70,223			119,940			101,739
Asia, Oceania and Europe		88,914			103,593			121,988
Sub-total		159,137			223,533			223,727
Total segment revenues		972,235			1,166,870			1,215,636
Difference between segment totals and consolidated amounts		(58,303	)		(41,910	)		(61,582	)
Total consolidated amounts	¥	913,932		¥	1,124,960		¥	1,154,054

Each of the segments listed in this breakdown of revenues is briefly described below. See also the descriptions in “—Reorganized Business Segments”.

OPERATIONS IN JAPAN

Our operations in Japan are conducted by ORIX and a number of our subsidiaries and affiliates. In general, our sales staff in Japan sells the full range of our products, including products of subsidiaries such as ORIX Auto, ORIX Rentec, ORIX Life Insurance and ORIX Facilities Corporation, or ORIX Facilities. However, other subsidiaries, such as our real estate subsidiary, serve more specialized functions. Products and services of these subsidiaries are handled by their dedicated sales staffs, whose specialized training and experience are required in the markets they serve.

Our main customer base is comprised of small and medium-sized enterprises. However, we have expanded our client base to include large corporations in some business segments, such as the rental of precision measuring equipment, real estate-related finance and automobile leasing. We have also targeted individual customers as a growth area in various business segments, such as consumer card loans, housing loans, automobile leasing, automobile rentals, life insurance and online securities brokerage.

Corporate Financial Services

The operations of the Corporate Financial Services segment, the core of our entire business, trace their origins back to when we were established as a leasing company in 1964. The sales and marketing network of this segment extends throughout 93 locations in Japan to service a customer base consisting primarily of SMEs. We provide direct financing leases for various kinds of equipment, in addition to corporate loans, and engage in the

23

provision of life and casualty insurance, investment products, as well as integrated facilities management services. Our sales representatives begin with the introduction of a lease or loan, after which we work to determine the needs of our customers. This allows us to provide various other products and services based upon particular customers’ operational or practical needs.

The activities in this segment are conducted primarily through our four sales headquarters—the Tokyo Sales Headquarters, the Kinki (Osaka) Sales Headquarters, the District Sales Headquarters and the OQL Headquarters. The number of employees working for headquarters and subsidiaries in this segment is 1,932.

Automobile Operations

The Automobile Operations segment consists of the automobile leasing and car rental operations. ORIX Auto is primarily responsible for activities in this segment. The number of employees working for subsidiaries in this segment is 1,969. The ORIX Group first launched its automobile leasing service for corporations in 1972. Today, this business offers a full range of vehicle management outsourcing services to meet customer needs, from passenger cars to highly specialized trucks.

Our car rental operation began in 1985, and today rents vehicles under the ORIX Rent-A-Car, JAPAREN, and X-Rent-A-Car brands. With approximately 830 rental outlets across Japan, we offer a wide range of rental vehicles, from passenger cars to trucks, for both corporate and individual customers.

Rental Operations

We entered the precision measuring equipment rental market in 1976. Today our principal operations in this market include the rental of computers and precision measuring equipment, as well as the provision of technical support, calibration, asset administration services and a variety of other services related to rental equipment use. ORIX Rentec is the principal company conducting the business operations of this segment. We offer quick deliveries, calibration, and other services to respond to customers’ management needs, and believe that we have a strong position in the market for measuring equipment rental. By maintaining a base of approximately 600,000 units of 30,000 different types of equipment, our automated warehouses provide customers with rapid response to orders. The segment had 997 employees on a consolidated basis as of March 31, 2008.

Real Estate-Related Finance

This segment provides:

• real estate finance to corporations, a business that has its origins in the real estate-collateralized loan business we began in 1971;

• real estate-related finance, including housing loans to individuals, a business we launched in 1980; non-recourse loans, started in 1999; and

• loan servicing businesses to invest in non-performing loans, started in 1999.

Moreover, we have started to securitize non-recourse loans as commercial mortgage backed securities (CMBS) since 2000. The activities in this segment are conducted primarily by our Real Estate Finance Headquarters (now a part of Investment Banking Headquarters), ORIX Trust and Banking, and ORIX Asset Management & Loan Services. The number of employees working for headquarters and subsidiaries in this segment is 932.

Real Estate

The Real Estate segment has its origins in corporate dormitory rentals, which we launched in 1986. We began developing residential condominiums in 1993. In addition to condominiums, the segment is now engaged in:

• development, marketing and leasing of office buildings and logistic facilities;

• operation of senior housing, hotels, training facilities and golf courses;

24

• integrated facilities management and related services; and

• asset management and administration on behalf of REITs.

ORIX Real Estate and ORIX Facilities are our subsidiaries that are primarily responsible for activities in this segment. The number of employees working for subsidiaries in this segment is 2,894.

Life Insurance

We began marketing life insurance to corporate customers in 1991 via sales agents. This segment now focuses on providing detailed insurance planning for customers based on their specific needs. ORIX Life Insurance is the principal company conducting the business operations of this segment. Our insurance products have been sold by sales and marketing specialists in the Corporate Financial Services segment, sales agents and direct marketing to both corporate and individual customers. The number of employees working for subsidiaries in the Life Insurance segment is 572.

Other

The Other segment encompasses a range of operations including new businesses. Principal activities include card loans (which we began in 1987), venture capital (from 1983), securities brokerage and services (commenced through capital participation in 1986, and currently a 100% subsidiary) and principal investments (from 2000). This segment includes the equity method affiliates The Fuji Fire and Marine Insurance Company Limited, in which ORIX made an investment in 2002, and DAIKYO INCORPORATED, acquired in 2005. The activities in this segment are conducted primarily by ORIX, ORIX Credit, ORIX Capital Corporation, or ORIX Capital, and ORIX Securities. The number of employees working for headquarters and subsidiaries in this segment is 4,117, and employees associated with our principal investment operations are included in this number.

OVERSEAS OPERATIONS

Since the establishment of our first overseas subsidiary in Hong Kong in 1971, we have competed in selected international markets through subsidiaries and investments in joint ventures. As of March 31, 2008, we operated in 25 countries and regions outside Japan. Our overseas operations employ 3,333 employees working for headquarters and subsidiaries. The number of offices of both subsidiaries and affiliates is 289.

The Americas

Our present operations in this segment include corporate finance, investment banking and real estate-related businesses. In corporate finance, we have been providing corporate loans since 1981, and are also investing in high yield bonds. Our real estate-related operations began in 1987 with the acquisition of a real estate development company, and since that time we have expanded into related operations, including commercial mortgages. In January 2006, we acquired the investment bank Houlihan Lokey, a leading M&A and financial advisor in the United States. The number of employees working for subsidiaries in this segment is 1,121. The activities in this segment are conducted by ORIX USA.

Asia, Oceania and Europe

We established our first overseas office in Hong Kong in 1971 and, over a 37-year period, have expanded throughout Asia, Oceania, Europe, the Middle East, and North Africa. Operations consist primarily of corporate leasing and lending, ship finance, and transportation-related operating leases. In the Asia, Oceania and Europe segment, we operate in 21 countries and regions including Hong Kong, China, Singapore, Malaysia, Indonesia, the Philippines, Thailand, Sri Lanka, Taiwan, South Korea, Pakistan, India, Oman, Egypt, Saudi Arabia, UAE, Kazakhstan, Australia, New Zealand, Ireland and Poland. The number of employees working for headquarters and subsidiaries in this segment is 2,212. In this segment, which is mainly focused on Asia, the ORIX Group is

25

committed to delivering financial products and services focusing on corporate leasing, hire purchase and lending. We are expanding our business operations by leveraging the Group’s diversified products and services as well as our sales network.

REORGANIZED BUSINESS SEGMENTS

As of April 1, 2008, ORIX implemented changes to its internal organization to reorganize its businesses into six segments to facilitate formulating strategy, allocating resources and determining portfolio balance at the segment level. These six new business segments are: Corporate Financial Services, Maintenance Leasing , Real Estate, Investment Banking, Retail and Overseas Business.

Management believes reorganizing our business into these six new segments addresses the significant changes in the ORIX Group’s operations and lines of business over the past four to five years. Each segment is organized as a large strategic unit that we believe will allow us to maximize our corporate value by identifying and building strategic advantages vis-a-vis anticipated competitors in each area and by helping ORIX obtain a competitive advantage in our Investment Banking segment and other businesses that involve capital markets.

An overview of operations, operating environment and operating strategy for each of the six new segments follows below.

Corporate Financial Services

Overview of Operation

The Corporate Financial Services segment has its origin in the leasing business developed at the time of ORIX’s establishment in 1964, and even today this segment serves as the foundation for the entire ORIX Group.

Operating through a nationwide network of 98 offices, ORIX provides capital through loans and leasing for capital investment and other needs to its core customer base of domestic SMEs. In addition, the Corporate Financial Services segment serves as a central point of contact for the entire ORIX Group in responding to needs of other segments, including business succession and overseas business development.

The activities in this segment are conducted primarily through our four sales headquarters—the Tokyo Sales Headquarters, the Kinki (Osaka) Sales Headquarters, the District Sales Headquarters and the OQL Headquarters. The number of employees working for headquarters and subsidiaries in this segment is 2,560.

Operating Environment

The segment’s operating environment has changed significantly in the past fiscal year. The trends of increasing concerns of a U.S. economic slowdown, the strengthening of the yen, and rising prices for crude oil and other raw materials have exceeded the assumptions underlying forecasts for domestic economic growth at the start of the fiscal year. As a result, the outlook for SMEs remains uncertain. The SME market is polarizing, with successful companies actively requiring funds to continue making capital investments and opening new facilities while an increasing number of unsuccessful companies are filing for bankruptcy.

Furthermore, amidst the turmoil in the financial and capital markets, the trend of decreasing long-term interest rates has continued, despite rising short-term interest rates. A majority of the assets of the Corporate Financial Services segment are installment loans and investments in direct financing leases. The interest and leasing rates for these assets are mainly tied to the long-term prime rate, but we believe that continued domestic economic uncertainty and other factors make an increase in long-term rates unlikely in the near term.

ORIX competes primarily with banks and leasing companies in the market for SME loans and leases.

26

Operating Strategy

As the foundation for the entire ORIX Group, the Corporate Financial Services segment works to help improve the competitiveness of SMEs by providing a swift, flexible and precise response to their requirements. In addition, this segment is developing new businesses related to the environment and other new sources of earnings.

For sales managers in this business segment, our fundamental approach involves developing an in-depth understanding of customers while working on their transactions and identifying specific customer needs that allows our sales managers to cooperate with other divisions as required to develop and deliver optimal solutions that enhance the customer’s competitiveness. In response to the increasingly uncertain outlook for SMEs, we will exercise prudence in taking on new business to evaluate whether expected spreads outweigh any increases in risk.

For existing contracts, sales operations and the Risk Management Headquarters cooperate closely in monitoring risk. When we think it necessary, we respond quickly and take various measures to manage risk, including increasing collateral requirements in response to a deterioration in asset quality. In the current environment, we look to improve return on assets by emphasizing profitability and security over asset expansion.

On the other hand, we work to understand and meet our customers’ needs in order to develop sales activities that expand profitability for both the Corporate Financial Services segment and the ORIX Group as a whole. ORIX’s strength is our nationwide sales network established through expanding our transactions with SMEs over many years and the personnel needed to support it. ORIX supports its ability to engage in transactions by exchanging market and product information and maintaining alliances with regional financial institutions. We utilize the broad range of information we obtain from this network to tailor ORIX’s real estate operations to meet customer’s real estate needs, to focus the expertise of ORIX’s investment banking operations on meeting the needs for business succession and mergers and acquisitions, and to deploy ORIX’s international network to meet the needs of overseas business development.

In addition, ORIX is focusing on developing environmental businesses, where needs from customers and society are expected to grow. Our principal initiative in this area, is ESCO. ESCO is an energy service company, a business that achieves energy conservation and provide a comprehensive array of services including technology, equipment and capital related to energy saving for factories and buildings. Our ESCO operations are targeted at supermarkets and wholesalers with nationwide branches. We are also making proposals that meet customer waste disposal needs, and are using our knowledge and network to develop these operations overseas.

Going forward, we aim to further improve upon our relationship of trust with our customers, and not only expand existing forms of corporate financing, but also look to provide solutions that are tailored to customer needs that utilize the ORIX Group’s expertise.

Maintenance Leasing

Overview of Operation

This segment consists of our automobile operations and rental operations. The automobile operations began by offering automobile leasing in 1972, and expanded into our car rental business in 1985. Automobile leasing operations started by offering leases that included maintenance services, and today provide a complete range of vehicle management outsourcing functions. The car rental operation has approximately 830 outlets throughout Japan serving corporate and individual customers.

ORIX entered the rental business in 1976 by leasing precision measuring equipment to corporate customers, and then added IT-related equipment rentals, technical support, calibration, asset management, and a variety of other services.

The activities in this segment are conducted primarily through ORIX Auto and ORIX Rentec. The number of employees working for headquarters and subsidiaries in this segment is 2,966.

27

Operating Environment

While new car unit sales in Japan have been trending downwards, in the automobile leasing market corporate customers use a diverse array of automobiles in their businesses. We believe that the benefits of leasing automobiles have become widely recognized, and that in the medium and long term corporate customers will gradually fill an increasing part of their transportation needs with vehicles for lease. Mergers among major companies in this market have resulted in both increased concentration and heightened competition among major participants. In addition, as of Sep. 2007, according to the JAPAN AUTOMOTIVE LEASING ASSOCIATION Japan had more than 110,000 vehicles under lease to individuals, and we feel that there is ample room for expansion in this market.

Our precision measuring equipment rental operation has comparatively high barriers to entry because of requirements including significant initial investment in distribution centers and rental assets, as well as the difficulty of finding or training personnel with knowledge of calibration. As a result, the environment in the domestic measuring equipment rental market is relatively stable. On the other hand, the entry of companies from other industries in the IT-related equipment rental market has caused competition to intensify. Information security has also become increasingly important. In addition to our existing rental markets, we are focusing on utilizing our well-developed expertise in new rental markets such as environmental analysis equipment and medical equipment. We expect each of these markets to grow as a result of increasing awareness of environmental problems and the aging of Japanese society, respectively.

Operating Strategy

The Maintenance Leasing segment will continue to deploy its unique expertise to provide high-value added services with an objective of securing the top share in the market. In addition, ORIX seeks to use economies of scale to maintain high profitability.

In the automobile business, the automobile leasing business and the car rental business will work together to expand economies of scale and provide complementary products and services. Furthermore, the Maintenance Leasing segment will utilize its sales network and the networks of the Corporate Financial Services segment and other Group operations to expand its business. As of March 31, 2008, automobiles under management by ORIX totaled 616,000 units.

The corporate automobile leasing operations provides comprehensive support including vehicle management and maintenance outsourcing services to help customers reduce vehicle-related operating expenses and increase operating efficiency. Customer needs are becoming increasingly specialized and complex. We are strengthening consulting services in areas such as risk management, environmental measures and compliance, while continuing to create systems that deliver high added value for customers. In leasing automobiles to individuals, we will continue to enhance customer awareness of products such as My Car Lease and Car Sharing. While enhancing our brand image, ORIX will work to steadily create a foundation for new businesses.

Our rental business will continue to expand the types of equipment we handle while working to enhance ancillary services such as asset administration. In addition, ORIX will take advantage of our large market share to create a strong system of cooperation with equipment manufacturers and efficient asset turnover with the aim of generating stable growth. As of March 31, 2008, the rental business owned approximately 600,000 units spanning about 30,000 varieties.

Going forward, we are aggressively expanding product and service offerings in new rental markets such as environmental analysis and medical equipment, where we project stable growth. In addition, ORIX will work to expand our business by using expertise accumulated in the Japanese market to support its existing presence in overseas markets such as China, South Korea and Singapore.

28

Real Estate

Overview of Operation

The Real Estate segment has its origins in corporate dormitory rental operations begun in 1986, and started developing residential condominiums in 1993. Real estate operations gained momentum in 1999 with the establishment of ORIX Real Estate Corporation. Today, ORIX is involved in:

• development and leasing of properties such as office buildings and logistics facilities;

• residential condominium development;

• operation of hotels, golf courses and training facilities;

• development and operation of properties such as senior housing; integrated facilities management and related services;

• asset management and administration of Japanese real estate investment trusts (J-REITs); and

• investment operations in Asia and the Middle East.

The activities in this segment are conducted primarily through ORIX Real Estate. The number of employees working for headquarters and subsidiaries in this segment is 2,924.

Operating Environment

The domestic real estate operating environment is changing significantly due to the turmoil in the international financial and capital markets and the tightening of credit markets, which are affecting domestic and overseas investors and reducing risk tolerance.

In the residential condominium development market, land and material prices have risen steeply, and the revision of the building regulations has lengthened construction periods, which resulted in sharp increase in sales price. Also, due to decline in consumer demand, data in “Condominium Market Trends,” published by the Real Estate Economic Institute Co., Ltd., show a market contraction, with approximately 130,000 residential condominium units developed during calendar year 2007, a 14 percent decrease from approximately 160,000 units in calendar year 2006.

In the development and leasing operations for office buildings and logistics facilities, although we currently anticipate solid tenant demand in the current fiscal year, we feel that temporary increases in supply and decreases in demand could result from variability in corporate performance and other volatile economic trends. On the other hand, from a medium-to-long-term perspective, we believe that returns on domestic real estate will remain attractive compared to major cities overseas, and we expect that new investments will expand on a selective basis.

Increases in land prices in recent years have attracted numerous corporations and real estate funds to ORIX’s core businesses of developing and leasing office buildings and logistics facilities and developing residential condominiums. Competition to acquire land in prime locations for development has become particularly intense among participants in these businesses. On the other hand, amidst the changing market environment, asset portfolio characteristics and the ability to procure funds have emerged as factors that differentiate the development capabilities of market participants.

Operating Strategy

The Real Estate segment will utilize our diverse business know-how acquired over the past years of expansion and promote the development of large-scale projects and the diversification of our asset portfolio. In addition, by developing an asset turnover-based real estate business model, we plan to become a developer with the characteristics of an investment bank.

29

Fundamental conditions in the real estate market are uncertain at the moment, making future performance unpredictable. Given this environment, ORIX is utilizing its ability to collect information from multiple sources and its diverse business development capabilities to differentiate itself from competitors by delivering properties with high added value.

The increasingly challenging operating environment for developing residential condominiums warrants implementation of prudent measures. ORIX will focus on delivering properties that are attractive to customers such as developments that integrate senior housing with residential condominiums.

In the business of developing and leasing properties such as office buildings and logistics facilities, ORIX is managing risk while actively undertaking large-scale development projects, including the mixed-use redevelopment of the Osaka Station North Yard, an office building project in Minato Mirai, Yokohama, and the development of a large-scale logistics facility in Sakai, Osaka. Furthermore, while we continue to emphasize development in the Tokyo Metropolitan, Kinki and Chubu regions, we will also explore individual investment opportunities in other regions as well. We are structuring a diversified portfolio of properties, including office buildings, logistics facilities, commercial facilities and rental residences as well as golf courses, Japanese inns, hotels, training facilities and nursing care facilities.

The properties in our portfolio that we are selling increasingly consist of developed properties that have already been leased prior to sale. By proceeding with sales of such properties as scheduled, we are achieving asset turnover.

ORIX plans an exit strategy in advance for every project that it handles. In addition to its accumulated knowledge from real estate information and experience, the Real Estate segment collaborates in a timely manner with our Risk Management Headquarters and other specialized departments to conduct regular monitoring of properties and to optimize risk management. ORIX also shares the risk of large-scale projects by working with business partners in joint ventures. Through such measures we believe that we are able to respond flexibly to changing market conditions.

Also, ORIX plans to develop its asset management business to respond to the fund management needs of investors, including the active deployment of external funding through the formation of private funds and the use of structured finance. With continuing globalization and evolving global investment evaluation standards of real estate-related financial products, the international real estate market is continuing to expand. Within a more globally active real estate market, foreign investors’ investment needs have also diversified in relation to the Japanese domestic market. In June of last year, ORIX established its International Real Estate Business Headquarters focusing on investment operations in China, the ASEAN nations, Australia and the Middle East. By bringing the international real estate operations under the umbrella of ORIX Real Estate Corporation, ORIX aims to offer more efficient services by being able to take full advantage of opportunities both domestically and globally, thereby further promoting the internationalization of the Group’s real estate business.

Investment Banking

Overview of Operation

This segment consists principally of the real estate-related finance business and the investment banking business that ORIX began developing fully during the late 1990s and 2000s. Operations include:

• venture capital business established in 1983;

• real estate-related finance business, including non-recourse loans, established in 1999;

• loan servicing business that invests in non-performing loans;

• principal investment business initiated in 2000;

• securitization business;

• mergers and acquisitions and financial advisory business established in 2003; and

30

The activities in this segment are conducted primarily through our Investment Banking Headquarters. The number of employees working for headquarters and subsidiaries including our principal investment operations in this segment is 3,403.

Operating Environment

Funds flowed into the domestic market for non-recourse loans through the first half of 2007 against a backdrop of ample global liquidity. However, tighter global credit market conditions caused by the U.S. subprime mortgage loan problem beginning in the second half of 2007 have reduced the risk tolerance of investors, warranting caution going forward. Furthermore, although the domestic securitization market has not undergone the same turbulence as its counterparts overseas, the yield spread on asset-backed securities and trends among investors requires close attention.

In the real estate non-recourse loans market, while we compete with domestic banks and foreign investment banks, we have seen some participants withdrawing from the market.

The investment market for non-performing loans has become intensely competitive mainly with affiliates of foreign investment banks, equity investment funds and domestic banks.

Change has become evident in the domestic M&A market, where the number of mergers and acquisitions continually increased for the three years through 2006, but contracted slightly during 2007. However, with listed companies undertaking restructuring and engaging in strategic de-listing of subsidiaries, and SMEs undergoing business succession, we believe that M&A has become an important corporate strategy for companies in Japan.

Recently, in addition to domestic investors including independent domestic funds, bank funds, securities company funds and trading companies, foreign investment funds have joined in investing in Japanese companies. Consequently, competition for attractive investment opportunities has intensified. However, amidst increasing market uncertainty from the second half of 2007, the risk tolerance of investors has declined, and changes in competitive conditions are becoming evident. These factors have made exiting investments more challenging.

Revisions of the Financial Instruments and Exchange Law and the Moneylending Business Law have made the Investment Banking segment operations directly and indirectly subject to new regulations.

Operating Strategy

The Investment Banking segment, while executing risk management in line with its investment strategies, is building a diverse investment business that offers services at each stage of the corporate life cycle, including venture capital, principal investment, and investment in non-performing loans, strengthening relationships with financial institutions and working to expand operations in securities markets.

Operations that invest in businesses consist of venture capital that make early stage investments in companies; investment and financing operations and M&A advisory services that deal with growing and mature companies; and corporate rehabilitation and investment in non-performing loans that deal with companies facing growth decline. Therefore, ORIX is structured to participate at each stage of the corporate life cycle. We are working to increase profit opportunities by strengthening cooperation between these stages.

In addition to hiring the people we need for our specialized organization, we are enhancing our range of risk asset control services for financial institutions, with an emphasis on services such as guarantees. We are also working to strengthen relationships with financial institutions by promoting partnerships in areas such as syndicated loans and jointly established funds.

We are also expanding investment in products with market liquidity and establishing a strong position in securitization markets. Through these measures, ORIX aims to achieve sustained growth over the medium- and long-term, while actively expanding its base of operations and raising efficiency in asset turnover.

31

Amidst an environment surrounding individual businesses that is increasingly unpredictable, it is necessary for us to strengthen ties with our customers and business partners and take steps to solidify our position.

Conditions in the non-recourse loan business have changed significantly, and ORIX is therefore operating more prudently. We analyze specific aspects of transactions, including interest rate spread, loan-to-value ratios, debt-service coverage ratios and cash reserves, and are endeavoring to conduct exhaustive risk pricing to enhance profitability while strengthening risk monitoring.

For our servicer business, ORIX is promoting various solutions for financial institutions as new profit opportunities. In addition to major city banks, we are expanding business with regional financial institutions by building on relationships we created through the syndication of business rehabilitation funds.

In the principal investment business, ORIX is shifting away from investments in corporate rehabilitation to a focus on investing in business succession and business realignment opportunities. By cooperating with the Corporate Financial Services segment, we are actively working to identify potential investments. Also, we plan to expand our M&A advisory service business in line with the rising interest in domestic M&A and the increasing demand for business succession advice.

Moreover, ORIX has moved to strengthen the systems required to respond to and comply with revisions of the Financial Instruments and Exchange Law and the Moneylending Business Law.

Retail

Overview of Operation

This segment consists of four businesses that primarily serve individual customers. The four businesses are:

• housing loan business, which ORIX began in 1980 and then consolidated within ORIX Trust and Banking in 1998;

• card loan business, which ORIX began in 1987 within ORIX Credit that was established in 1979;

• life insurance business, which ORIX entered in 1991 and then began sales of specialized mail-order products for individuals in 1997; and

• securities business, which ORIX entered by bringing ORIX Securities into the group in 1986 and which now centers on internet securities brokerage.

The activities in this segment are conducted primarily through ORIX Trust and Banking, ORIX Credit, ORIX Life Insurance and ORIX Securities. The number of employees working for subsidiaries in this segment is 1,421.

Operating Environment

Our housing loan business concentrates on loans for individual investors to purchase rental purpose condominiums. In this sector, competition was limited to certain banks and non-bank institutions, but today large banks and foreign non-bank institutions have entered the market. Competition has gradually intensified as a result.

The card loan market is in a period of dramatic changes due to the revision of the Moneylending Business Law in December 2006 and its ongoing enforcement in stages. Specifically, the upper limit on interest rates set by the Investment Deposit and Interest Rates Law has been lowered, and a system that places a ceiling on total debt has been created. As a result, consumer finance and credit card companies are finding it difficult to maintain their conventional business models. The industry is therefore restructuring, with large firms forming alliances with banks while mid-tier and smaller firms are consolidating or exiting the market. The presence of banks, particularly megabanks, is increasing, and competition is intensifying in ORIX’s card loan customer segment, the so-called prime segment.

32

In the life insurance market, problems in 2007, such as the failure by insurance companies to pay claims, has resulted in stronger customer support after initial policy sales. Within the overall market, new and existing policies decreased. All restrictions on insurance sales by banks were lifted in December 2007, and insurance companies are concentrating on introducing products for this promising sales channel. Japan’s falling birthrate and rising average age and the diversification of life plans have resulted in greater diversity in individual customer insurance needs. Interest in medical insurance and other products in the so-called third sector of insurance is also increasing. Companies in this sector are developing products that limit risk by covering only specified diseases, and are also creating products in alliances with agencies. These and other initiatives have resulted in greater product diversity and intensifying competition.

In the securities market, the subprime mortgage loan problem in the United States has triggered a drop in stock prices, and perceptions among individual investors have quickly become more negative. From September 2007, commission income decreased sharply compared with the previous year. Firms capitalized by large domestic securities companies have entered the internet securities brokerage market, with results including further reductions in fees and an increasingly competitive environment.

Operating Strategy

This segment will develop new markets for individuals by offering products and services aimed at achieving a high level of customer satisfaction. There is also a trend towards increasing efficiency and expertise in niche markets.

In the housing loan business, ORIX Trust and Banking is closely watching interest rate movements in order to set appropriate loan maturities and interest rates. It has introduced new products, such as loans for senior citizens and loans with special terms for nursing care insurance. Moreover, ORIX is competing vigorously to establish relationships with customers whose investment objectives provide investment management opportunities for ORIX. We are also working to minimize risk by analyzing data from housing sales, the leasing market, and investor credit data, including lending conditions at other financial institutions.

For the past 20 years, ORIX’s card loan business has concentrated on providing our VIP Loan Card at interest rates below the legal ceiling to businesspeople in their 30s and 40s. No other company has established a long-term presence in this interest rate band, and we will continue to concentrate on the VIP Loan Card in utilizing the expertise in credit evaluation, advertising and marketing it has accumulated over the past two decades to continue providing convenient card loans. In addition, we will promote cooperation with other financial institutions in providing guarantees of unsecured loans to individuals and SMEs. We will also promote alliances with securities companies to broaden use of the VIP Stock Loan Card, an unrestricted loan for trading securities that is collateralized by securities. Thus ORIX is complementing our conventional customer segments by developing new ones with an aim of expanding its customer base.

Our life insurance business that concentrates on developing and selling products for individuals, such as death benefit and medical insurance, has seem a substantial expansion in the number of its contracts. With the lifting of restrictions on bank insurance sales in December 2007, we are working to expand guaranty product sales channels. In the life insurance business, we precisely identify customer needs and then develop unique products that are simple and easy to understand. For example, we have received high appraisals from agents, financial planners and other specialists for Medical Insurance CURE, a product we launched in September 2006. During the past fiscal year, ORIX added two products to the CURE series to enhance its applicability to various life plans and to respond to diversifying medical insurance needs. ORIX looks to build a stable life insurance business through continuously expanding its customer base by developing products that are attractive to customers. At the same time, we have concentrated on cultivating high-quality sales channels to accelerate growth.

In the securities business, along with diversifying the channels through which it acquires new customers, ORIX is working to acquire customers by providing attractive fee schedules and home trading functions. ORIX has also begun providing corporate services. We continue to offer lead manager services for initial public offerings, and have started to provide asset management products.

33

Overseas Business

Overview of Operation

Since expanding to Hong Kong in 1971, ORIX has built a broad overseas network spanning the United States, Asia, the Pacific, the Middle East, North Africa and Europe. Our main operations include leasing, automobile leasing, corporate financial services, and ship and airplane-related operations. Recently, ORIX has also expanded into businesses including principal investment, investments in non-performing loans, real estate-related operations, and M&A advisory services.

Our activities in this segment are conducted primarily through ORIX USA, International Business Headquarters, Alternative Investment & Development Headquarters and our subsidiaries as well as affiliates in Hong Kong, China, Singapore, Malaysia, Indonesia, the Philippines, Thailand, Sri Lanka, Taiwan, South Korea, Pakistan, India, Oman, Egypt, Saudi Arabia, UAE, Kazakhstan, Australia, New Zealand, Ireland and Poland. The number of employees working for our headquarters and our subsidiaries in this segment is 3,356.

Operating Environment

In the U.S. economy, effects triggered by the subprime mortgage problem have not only led to reduced liquidity and declining profits in the financial sector, but are also affecting non-financial sectors. In addition, the effects of the Federal Reserve Bank’s actions of lowering interest rates and increasing the supply of liquidity to financial institutions and the U.S. government’s tax reduction and other economic measures are still uncertain. Challenging economic conditions are expected to continue.

Numerous large U.S. banks and nonbanks with extensive domestic networks of offices compete in the U.S. market for corporate financial services, and the competitive environment has been intensive for some time. At the same time, the credit crunch and market turmoil have reduced the willingness of investors to take on risk, and have resulted in the emergence of favorably priced investment opportunities. Nonetheless, market prospects remain uncertain.

Strong economic growth has continued in Asia and the Middle East, where ORIX has major business locations. However, the degree to which worsening conditions in the U.S. economy will affect these regions will require close attention. Nevertheless, medium- and long-term growth is expected in countries still undergoing economic development. GDP growth in excess of 8 percent in China, India and other countries in recent years may represent a continuing trend.

In the field of financial services, where we are providing leasing and other financial services to local SMEs in Asia, ORIX competes with local leasing and finance companies. Furthermore, in principal investment and real estate-related businesses, competition with local companies, and financial institutions from various nations has been increasing throughout the region in recent years.

Operating Strategy

We feel that there are many regions with high potential growth rates in Asia and the Middle East, and that there are many business opportunities in the financial services field. ORIX has a broad overseas network of strategic alliances with business partners and an operating base spanning 25 countries. We intend to utilize our expertise in financial services and real estate development to diversify and internationalize of our operations.

In the corporate financial services business, ORIX invests in loans and high yield bonds in the United States. Although the direction of the U.S. economy is increasingly unpredictable, we plan to continue to retain the personnel that we expect to need for the future. We are closely monitoring changes in our operating environment and expect to add our portfolio prudently, emphasizing security and profitability.

In Asia, Oceania, the Middle East and Europe, ORIX will continue to develop regionally based leasing and automobile leasing businesses, while also providing corporate financial services and fee-based services related to ships and airplanes. In the principal investment business, we will concentrate on mid-size investments of tens of

34

millions to hundreds of millions of U.S. dollars in size, primarily investing in overseas companies in Asia that are aiming to conduct initial public offerings. Utilizing experience based on successes such as ORIX’s sale of its shares in Korea Life Insurance Co., Ltd. in the year ended March 31, 2008, ORIX has proceeded to make additional investments, including acquiring an equity stake in the new Malaysian airline Air Asia X Sdn Bhd, in November 2007.

We are mainly developing our non-performing loan investment business in Asia. Building on our experience in Taiwan, in 2007 we acquired an equity stake in a financial services company that has loan servicer and corporate rehabilitation advisory operations in Thailand. Furthermore, we have begun operating in Malaysia and the Philippines, and will expand to other regions in Asia in the future.

In real estate-related businesses, we invest in CMBS and real estate development in the United States. We are paying close attention to current U.S. market conditions while searching out investment opportunities unique to these conditions.

In the fields of M&A and financial advisory services, issue of fairness opinions, and financial restructuring, Houlihan Lokey is expanding operations in the United States where it has a strong reputation built over many years in the fields of M&A and financial advisory services, and financial restructuring. After becoming a member of the ORIX Group in 2006, Houlihan Lokey added offices in Hong Kong and Japan in 2007 to its existing network of eight offices in the United States and three offices in Europe, thus creating an organization that can flexibly handle cross-border projects. Going forward, Houlihan Lokey is expected to collaborate with the Corporate Finance Departments both in Japan and overseas in introducing projects and to expand business opportunities through the synergistic exchange of information.

DIVISIONS, MAJOR SUBSIDIARIES AND AFFILIATES

A list of major subsidiaries can be found in Exhibit 8.1.

CAPITAL EXPENDITURES AND MAJOR M&A ACTIVITIES

We are a financial services company with significant leasing, lending, real estate development and other operations based on investment in tangible assets. As such, we are continually acquiring and developing such assets as part of our business. A detailed discussion of these activities is presented elsewhere in this annual report, including in other parts of “Item 4. Information on the Company” and in “Item 5. Operating and Financial Review and Prospects.”

We also have made a number of acquisitions in other companies to expand our operations. Some of our recent acquisitions are described below.

In March 2005, we acquired an additional 42% of DAIKYO and preferred shares for approximately ¥47 billion. As a result of the acquisition, our stake in the company increased to 44%. In April 2005, we also refinanced approximately ¥32 billion of DAIKYO’s debt. During fiscal 2008, the Company and its subsidiaries acquired an additional interest in DAIKYO through a share swap. As a result, the interest of the third parties increased and our ownership in DAIKYO decreased to 41%. We have also entered into an agreement with DAIKYO for them to repurchase 20% of their preferred shares issued to, and held by, ORIX on June 30, 2008 at a purchase price of ¥10.4 billion. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions.”

In January 2006, we established a new subsidiary holding company under ORIX USA in which we have a 70% common equity ownership interest on a consolidated basis that holds the Corporate Financial Group of ORIX USA and which subsequently acquired Houlihan Lokey, a US investment bank, in a transaction that valued the company at approximately $500 million, in exchange for a 30% common equity interest in the new subsidiary.

35

In general, we seek to expand and deepen our product and service offerings and enhance our financial performance by pursuing acquisition opportunities. We are continually reviewing acquisition opportunities, and selectively pursuing several such opportunities. We have in the past deployed a significant amount of capital for acquisition activities, and expect to continue to make selective investments in the future.

PROPERTY, PLANT AND EQUIPMENT

Because our main business is to provide diverse financial services to our clients, we do not own any material factories or facilities that manufacture products. We have no plans to build any factories that manufacture products.

The primary facilities we own include two office buildings, one training facility and one waste disposal facility. One office building is located in Shiba, Minato-ku, Tokyo with a book value of ¥37,662 million, and the other is located in Tachikawa, Tokyo with a book value of ¥24,360 million. Our training facility located in Funabashi, Chiba has a book value of ¥11,164 million, and our industrial waste disposal facility located in Yorii, Saitama, has a book value of ¥15,092 million. In addition to these major facilities, we have announced plans to build a new regional headquarters building in Osaka that will allow us to manage our Osaka operations from within the same building. The construction of the new building is expected to be completed by January 2011, and the current estimated investments costs for the project are ¥30 billion. Although there are presently no material plans to construct or improve facilities, we may build or acquire additional offices or make improvements to existing facilities if we believe the expansion of our business so warrants.

Our operations are generally conducted in leased office space in cities throughout Japan and in other countries in which we operate. We believe our leased office space is suitable and adequate for our needs. We utilize, or plan to utilize in the foreseeable future, substantially all of our leased office space.

We own office buildings, apartment buildings and recreational facilities for our employees with an aggregate value of ¥79,497 million as of March 31, 2008.

As of March 31, 2008, net book value of operating leases amounted to ¥1,003,408 million, which consists of ¥578,988 million of transportation equipment, ¥180,835 million of measuring equipment and personal computers, ¥594,169 million of real estate and other. Accumulated depreciation on the operating leases was ¥350,584 million as of the same date.

SEASONALITY

Our business is not materially affected by seasonality.

RAW MATERIALS

Our business does not depend on the supply of raw materials.

BUSINESS REGULATION

Japan

ORIX is incorporated under the Company Law and its corporate activities are governed by the Company Law; its group companies in Japan are also so incorporated and governed.

There is no general regulatory regime which governs the conduct of our direct financing lease and operating lease businesses in Japan, although various laws regulate certain aspects of particular lease transactions, depending on the type of leased property.

36

The major regulations that govern our businesses are as follows:

Moneylending Business

ORIX and certain of our group companies, such as ORIX Credit, engage in the business of money lending in Japan. The business of money lending is regulated by the Interest Limitation Law, the Acceptance of Contributions Law, the Deposit and the Interest Law, and the Moneylending Business Law. The Moneylending Business Law requires that all companies register with the Prime Minister and relevant prefectural governors. Registered moneylenders are regulated by the FSA, and are required to report to or notify the FSA, providing such documents as their annual business reports. Accordingly, pursuant to the Moneylending Business Law, ORIX and certain of our group companies register with the Prime Minister or prefectural governors and provide the necessary reporting and notification to the FSA. The FSA has the power to issue a business improvement order to suspend all or part of a business’s activities, or to revoke the registration of a moneylender that has violated the law. In addition, in December 2006, laws related to the money lending business were amended for the purpose of enhancing borrower protection. The amendments tighten regulations by, among other things, reducing the maximum interest rate and introducing limits on the maximum amount of money that may be loaned to individuals. These amendments are to come into effect over a period of time with full implementation by 2009.

Real Estate Business

ORIX and certain of our group companies, including ORIX Real Estate and ORIX Alpha, engage in the real estate business in Japan, including the buying and selling of land and buildings. ORIX and our relevant group companies are therefore required to be licensed by the Ministry of Land, Infrastructure and Transport, or the MoLIT, and relevant prefectural governors under the Building Lots and Building Transaction Law, and our operations are regulated by such laws, including the maintenance of registered real-estate transaction managers on staff and the provision and delivery of material information to counterparties.

Car Rental Business

ORIX Auto is registered with the MoLIT under the Road Transportation Law to engage in the car rental business in Japan and is subject to the requirements of such law and to inspection by the MoLIT.

Insurance Business

ORIX Life Insurance is engaged in the life insurance business and has a license from the Prime Minister under the Insurance Business Law. The FSA has broad regulatory powers over the life insurance business of ORIX Life Insurance, including the authority to grant or, under certain conditions, revoke its operating license, to request information regarding its business or financial condition and to conduct onsite inspections of its books and records. ORIX Life Insurance generally must also receive FSA approval for the sale of new products and to set new pricing terms. In addition, under the Insurance Business Law regulations, any party attempting to acquire voting rights of an insurance company over a specified threshold must receive permission from the Prime Minister. We have received such permission as a major shareholder in ORIX Life Insurance and The Fuji Fire and Marine Insurance Company, Limited. Insurance solicitation, which we and our group companies conduct, is also governed by the Insurance Business Law. We and certain of our group companies, such as ORIX Alpha and ORIX Auto, are registered as life insurance agents with the Prime Minister.

Financial Instruments Exchange Business

The Financial Instruments and Exchange Law enacted in September, 2007 supplants the Securities and Exchange Law and includes significant changes. The Financial Instruments and Exchange Law expands its scope of control to cover many additional subjects (product, business, etc.) for the purpose of establishing comprehensive and cross-sectional protection for investors. Certain businesses conducted by ORIX and our group companies in Japan are governed by the Financial Instruments and Exchange Law. Registered financial instruments traders are regulated by the FSA, and are required to file certain reports or notifications with the

37

FSA. The FSA has the power to order improvement of business, suspension of a part or the whole of a business, or to revoke the registration of a financial instruments trader that has violated the law. Business regulations to be applied to ORIX and our group companies are as follows:

(1) First Class Financial Instruments Exchange Business

ORIX Securities is engaged in the first class financial instruments exchange business and is registered with the Prime Minster under the Financial Instruments and Exchange Law. The first class financial instruments exchange business contains trading of high-liquid financial products such as sales and solicitation of listed securities. The Financial Instruments and Exchange Law regulates the business activities of securities companies and the conduct of securities companies related to securities transactions. In addition, under the Financial Instruments and Exchange Law, any entity possessing voting rights of a securities company (first class financial instruments trader) over a specified threshold is considered a major shareholder and must report this to the Prime Minister. ORIX has filed such a report as a major shareholder of ORIX Securities Corporation.

(2) Second Class Financial Instruments Exchange Business

ORIX and certain of our group companies are registered with the Prime Minister under the Financial Instruments and Exchange Law to conduct second class financial instruments exchange business. The second class financial instruments exchange business contains trading of low-liquid financial instruments such as sales and solicitation of trust beneficiary interest and certain equity investment in partnership.

(3) Financial Instruments Intermediary Business

The financial instruments intermediary business that we conduct is also regulated by the Financial Instruments and Exchange Law. ORIX is registered with the Prime Minister under the Financial Instruments and Exchange Law to conduct financial instruments intermediary business.

(4) Investment Management Business

ORIX Asset Management Corporation, an 80% owned subsidiary, is registered with the Prime Minister under the Financial Instruments and Exchange Law, as an investment manager. ORIX Asset Management Corporation is responsible for the asset management of a real estate investment trust, ORIX JREIT Inc., which is listed on the Tokyo Stock Exchange. In addition, ORIX Real Estate Investment Advisory Corporation, our wholly-owned subsidiary, has been approved for the registration of an investment management business with the Prime Minister. Furthermore, ORIX Investment Corporation, our wholly owned subsidiary is applying for the registration of an investment management business with the Prime Minister. Under the Financial Instruments and Exchange Law, any entity possessing voting rights of investment manager over a specified threshold is considered a major shareholder and must report this to the Prime Minister. ORIX has filed such a report as a major shareholder with regard to ORIX Asset Management Corporation.

(5) Investment Advisory and Agency Business

ORIX Investment Corporation and ORIX Real Estate Investment Advisory Corporation are registered with the Prime Minister under the Financial Instruments and Exchange Law to conduct investment advisory and agency business.

Banking and Trust Business

ORIX Trust and Banking, or OTB, is licensed by the Prime Minister to engage in the banking and trust business, and is regulated under the Banking Law, the Law concerning Trust Business Concurrently Conducted by Financial Institutions and the Trust Business Law. The Banking Law governs the general banking business and the Law concerning Trust Business Concurrently Conducted by Financial Institutions and the Trust Business Law govern the trust business. Our trust contract agency business is also governed by the Trust Business Law,

38

and we are registered with the Prime Minister to engage in such business. In addition, under the Banking Law, any entity that attempts to hold voting rights of a bank in excess of a specified threshold must receive permission from the Prime Minister. ORIX has received such permission as a major shareholder of OTB.

Debt Management and Collection Business

ORIX Asset Management & Loan Services Corporation, or OAMLS, is engaged in the loan servicing business and the business of managing and collecting certain assets. Consequently, OAMLS is regulated under the Law for Special Measures Concerning the Debt Management and Collection Business. OAMLS is licensed by the Minister of Justice under such law to engage in the loan servicing business.

Waste Management

ORIX Resource Recycling Services Corporation has permission from the governor of Saitama Prefecture under the Waste Management and Public Cleansing Law for “the installation of an industrial waste disposal facility” to act as an “industrial waste disposal contractor” and as a “specially controlled industrial waste disposal contractor” and to engage in “the installation of a municipal solid waste disposal facility”.

Also, Funabashi Environmental Corporation, under the Waste Management and Public Cleansing Law, has permission to; (i) engage in “the installation of an industrial waste disposal facility” from the governor of Chiba Prefecture, (ii) act as an “Collection and Transportation of an industrial waste disposal collector” from the mayor of Chiba City, and (iii) act as an “industrial waste disposal contractor” from mayor of Funabashi City.

ORIX Recourses Recycling Services Corporation and Funabashi Environmental Corporation are engaged in the waste management service regulated by the Waste Management and Public Cleansing Law.

Regulation on Share Acquisitions

Certain of our activities and those of certain of ORIX group companies are regulated by the Foreign Exchange and Foreign Trade Law of Japan and the cabinet orders and ministerial ordinances there under, or the Foreign Exchange Regulations.

Under the Foreign Exchange Regulations, the Company and certain ORIX group companies in Japan are regulated as “residents” conducting “capital transactions” or “foreign direct investments.” Moreover, if the ratio of foreign shareholders of the Company is more than 50%, the Company and the relevant group companies in Japan will be regulated as “foreign investors” conducting “inward direct investment”.

To conduct such activities under the Foreign Exchange Regulations, notices or reports are required to be filed with the governing agency through the Bank of Japan. In certain cases, the Minister of Finance and any other competent Ministers have the power to recommend the cancellation or modification of activities specified in such notices and can order such cancellation or modification if their recommendation is not followed.

Outside Japan

ORIX USA is incorporated under the laws of the state of Delaware and its corporate activities are governed by the Delaware General Corporation Law.

The SEC and various state agencies regulate the issuance and sale of securities and the conduct of broker-dealers, investment companies and investment advisors in the United States. ORIX USA’s majority owned subsidiaries, Houlihan Lokey Howard & Zukin Capital, Inc. and Houlihan Lokey Howard & Zukin Financial Advisors, Inc., are a registered broker-dealer and a registered investment advisor, respectively, and as such, are regulated by the SEC. ORIX USA and its subsidiaries maintain exemptions from these regulations but must comply with U.S. federal and state securities laws.

39

ORIX USA’s corporate finance, real estate finance and development, equipment finance, public finance and special servicing businesses are subject to numerous state and federal laws and regulations. Commercial and real estate loans may be governed by the USA PATRIOT Act, the Equal Credit Opportunity Act and its Regulation B, the Flood Disaster Protection Act, the National Flood Insurance Reform Act of 1994 and state usury laws. Real estate transactions are also governed by state real property and foreclosure laws. ORIX USA’s equipment finance transactions are governed by the Uniform Commercial Code, as adopted by the various states. ORIX USA is registered with or has obtained licenses from the various state agencies that regulate the activity of commercial lenders in such states.

Outside of the United States, ORIX USA’s majority owned subsidiary, Houlihan Lokey Howard & Zukin (Europe) Limited, or HLHZE, is authorized and regulated by the Financial Services Authority in the UK to arrange deals in investments and advise on investments. HLHZE has also established branches in France and Germany under the provisions of the Investment Services Directive and is regulated by the BaFin in Germany and the Autorite des Marches Financiers in France in the conduct of business from these branches. In addition, HLHZE has established a branch in Hong Kong which is authorized and regulated by the Securities and Futures Commission in Hong Kong.

In other regions outside of Japan, our businesses are also subject to regulation and supervision in the jurisdictions in which they operate.

LEGAL PROCEEDINGS

We are a plaintiff or a defendant in various lawsuits arising in the ordinary course of our business. We aggressively manage our pending litigation and assess appropriate responses to lawsuits in light of a number of factors, including potential impact of the actions on the conduct of our operations. In the opinion of management, none of the pending legal matters is expected to have a material adverse effect on our financial condition or results of operations. However, there can be no assurance that an adverse decision in one or more of these lawsuits will not have a material adverse effect.

Item 5. Operating and Financial Review and Prospects

Table of Contents for Item 5.

	Page
Overview	40
Critical Accounting Policies and Estimates	41
Results of Operations	47
Liquidity and Capital Resources	94
Cash Flows	98
Off-Balance Sheet Arrangements	100
Recent Developments	102
Risk Management	104
Governmental and Political Policies and Factors	114

OVERVIEW

The following discussion provides management’s explanation of factors and events that have significantly affected our financial condition and results of operations. Also included is management’s assessment of factors and trends which are anticipated to have a material effect on our financial condition and results of operations in the future. However, please be advised that financial conditions and results of operations in the future may also

40

be affected by factors other than those discussed here. This discussion should be read in conjunction with “Risk Factors” within “Item 3. Key Information-Risk Factors” and “Item 18. Financial Statements” included in this annual report.

Our business environment has been undergoing dramatic changes since the summer of 2007, due to turmoil in the global financial markets triggered by the U.S. sub-prime loan crisis. In the Japanese economy, the business environment facing small and medium-sized enterprises (SMEs), ORIX’s major client base, has also deteriorated substantially. Due to these circumstances profits declined 14% year on year to ¥169.6 billion, and as of the second half of fiscal 2008 we revised our original corporate strategy adopting a more cautious stance toward credit risk and curbing asset expansion. ROE and shareholders’ equity ratio declined to 13.8% and 14.1% respectively. Nevertheless, while financial institutions around the world were forced to post large losses because of the credit squeeze, ORIX maintained a high level of profitability.

The main factors underlying growth in fiscal 2008 are outlined below.

Profits decreased 14% year on year due to a decline in the Corporate Financial Services segment, the Other segment and the Americas segment, although the Real Estate segment and the Asia, Oceania and Europe segment performed well.

The Corporate Financial Services segment, the core business arena of the ORIX Group, saw a decline in profits due primarily to increases in provisions in light of the worsening environment for Japanese SMEs, our dominant client base.

The Other segment’s profits decreased due to the absence of a one-off gain on the sale of a portion of our shares in Aozora Bank Ltd. after its listing on the Tokyo Stock Exchange which had been recorded in the previous fiscal year and a decrease in revenues from the venture capital operations affected by a downturn in the domestic stock market.

In the Americas segment, write-downs on investment securities affected by deterioration in the credit market since the U.S. sub-prime loan crisis occurred led to an overall decline in profit, despite an increase in revenues from corporate loans.

Meanwhile, the Real Estate segment, engaged in the development of residential condominiums and the development, marketing and leasing of office buildings and logistics facilities, saw a large increase in profits as a result of positive investments executed during the past couple of years coming to fruition.

The Asia, Oceania and Europe segment’s profits increased due to an increase in real estate sales and ship and aircraft finance-related revenues, and also an expansion of operating leases, especially in the automobile leasing business.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Accounting estimates are an integral part of the financial statements prepared by management and are based upon management’s current judgments. Note 1 of the notes to the consolidated financial statements includes a summary of the significant accounting policies used in the preparation of our consolidated financial statements. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting the estimates may differ significantly from management’s current judgments. We consider the accounting estimates discussed in this section to be critical accounting estimates for us for two reasons. First, the estimates require us to make assumptions about matters that are highly uncertain at the time the accounting estimates are made. Second, different estimates that we reasonably could have used in the relevant period, or changes in the accounting estimates that are reasonably likely to occur from period to period, could have a material impact on the presentation of our financial condition, changes in financial condition or results of operations. We believe the following represents our critical accounting policies and estimates.

41

ALLOWANCE FOR DOUBTFUL RECEIVABLES ON DIRECT FINANCING LEASES AND PROBABLE LOAN LOSSES

The allowance for doubtful receivables on direct financing leases and probable loan losses represents management’s estimate of probable losses inherent in the portfolio. This evaluation process is subject to numerous estimates and judgments. The estimate made in determining the allowance for doubtful receivables on direct financing leases and probable loan losses is a critical accounting estimate for all of our segments.

In developing the allowance for doubtful receivables on direct financing leases and probable loan losses, we consider, among other things, the following factors:

• the nature and characteristics of obligors;

• current economic conditions and trends;

• prior charge-off experience;

• current delinquencies and delinquency trends;

• future cash flows expected to be received from the direct financing lease and loan; and

• the value of underlying collateral and guarantees.

In particular, the valuation allowance for large balance non-homogeneous loans is individually evaluated based on the present value of expected future cash flows, the loan’s observable market price or the fair value of the collateral securing the loans if the loans are collateral-dependent. The allowance for losses on smaller-balance homogeneous loans, including individual housing loans and card loans which are not restructured, and lease receivables, is collectively evaluated, considering current economic conditions and trends, the value of the collateral and guarantees underlying the loans and leases, prior charge-off experience, delinquencies and non-accruals. If actual future economic conditions and trends, actual future value of underlying collateral and guarantees, and actual future cash flows are less favorable than those projected by management or the historical data we use to calculate these estimates do not reflect future loss experience, additional provisions may be required.

The allowance is increased by provisions charged to income and is decreased by charge-offs, net of recoveries.

We review delinquencies or other transactions exceeding a specified amount as frequently as three times a month in the case of transactions in Japan. Transactions with payments more than 90 days past-due are reported to the Head of the Risk Management Headquarters. We stop accruing revenues on direct financing leases and installment loans when principal or interest is past-due more than 90 days, or earlier if management determines that it is doubtful that we can collect on direct financing leases and installment loans. The decision to suspend accruing revenues on direct financing leases and installment loans is based on factors such as the general economic environment, individual clients’ creditworthiness and historical loss experience, delinquencies and accruals. After we have set aside provisions for a non-performing asset, we carefully monitor the quality of any underlying collateral, the status of management of the obligor and other important factors. When we determine that there is little likelihood of continued repayment by the borrower or lessee, we sell the leased equipment or loan collateral, and we record a charge-off for the portion of the lease or loan that remains outstanding.

Under our charge-off policy, we charge off doubtful receivables when it is determined that prospects for further recovery from the obligor are minimal. Our policy requires the exercise of management judgment in assessing when a customer receivable has become worthless and when charge-off is appropriate. In exercising such judgment management considers criteria set forth in Japanese tax laws which focus on objective characteristics evidencing worthlessness, such as creditor-negotiated restructurings, legal extinguishment or extended suspension of transaction with the obligor beyond one year. These considerations may result in our charge-off of doubtful receivables later than might be the case for companies in other jurisdictions where

42

regulatory or tax policies may not require that a worthlessness assessment be reached prior to charge-off of the receivable. This potential difference in application of charge-off policy may result in our recognizing lower recoveries from charged-off receivables than might be experienced by reporting entities in other jurisdictions.

IMPAIRMENT OF INVESTMENT IN SECURITIES

We recognize write-downs of securities in our consolidated statements of income when the fair value of a security has declined significantly below the acquisition cost and the decline has been determined to be other than temporary. We generally charge the losses related to investments in securities other than trading securities when the following conditions are met:

• if the fair value for an available-for-sale equity security has remained significantly below our acquisition cost, or significantly below the current carrying value if the price of the security has been adjusted in the past for more than six months;

• in certain situations for an available-for-sale debt security where, if there has been a significant deterioration in a bond issuer’s credit rating, an issuer’s default or a similar event;

• in certain other situations where, even though the fair value of an equity security has not remained significantly below the carrying value for six months, the decline in fair value of an equity security is based on an issuer’s specific economic conditions and not just general declines in the related market and where it is considered unlikely that the fair value of the equity security will recover within six months, or

• in certain other situations where, it is considered that the decline in the value of an other security is other than temporary.

Determinations of whether a decline is other than temporary often involve estimating the outcome of future events that are highly uncertain at the time the estimates are made. Management judgment is required in determining whether factors exist that indicate that an impairment loss should be recognized at any balance sheet date, mainly based on objective factors. In view of the diversity and volume of our shareholdings, the highly volatile equity markets make it difficult to determine whether the declines are other than temporary.

If the financial condition of an issuer deteriorates, the forecasted performance of an investee is not met or actual market conditions are less favorable than those projected by management, we may charge to income additional losses on investment in securities.

IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS NOT SUBJECT TO AMORTIZATION

We test for impairment of goodwill and any intangible assets that are not subject to amortization at least annually. Additionally if events or changes in circumstances indicate that the asset might be impaired, we test for impairment when such events occur.

Goodwill impairment is determined using a two-step process either at the operating segment level or one level below the operating segments. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying value, including goodwill. If the carrying value of a reporting unit exceeds its fair value, the second step of the goodwill impairment test shall be performed to measure the amount of impairment loss. The second step of the goodwill impairment test compares implied fair value of reporting unit goodwill with the carrying value of that goodwill. If the carrying value of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill shall be determined in the same manner used to determine the amount of goodwill recognized in a business combination. Any intangible assets that are not subject to amortization are tested for impairment by comparing the fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

43

The fair value of a reporting unit under the first step and the second step is determined by estimating the outcome of future events and assumptions made by management. Similarly, estimates and assumptions are used in determining the fair value of any intangible asset that is not subject to amortization. When necessary, we refer to the evaluation by the third party in determining the fair value of a reporting unit, however, such determinations are often evaluated by discounted cash flows analysis performed by us. This approach uses numerous estimates and assumptions including projected future cash flows of a reporting unit, discount rates reflecting the risk inherent and growth rate. If actual cash flows or any items which affect a fair value are less favorable than those projected by management due to economic conditions or own risk of reporting unit, we may charge additional losses to income.

IMPAIRMENT OF LONG-LIVED ASSETS

We periodically perform an impairment review for long-lived assets held and used in operation, including tangible assets, intangible assets being amortized and real estate development projects. The assets are tested for recoverability, whenever events or changes in circumstances indicate that those assets might be impaired, including, but not limited to, the following:

• significant decline in the market value of an asset;

• significant deterioration in the usage range and method, and physical condition of an asset;

• significant deterioration of the legal factors and business environment, including an adverse action or assessment by a regulator;

• acquisition and construction costs substantially exceeding estimates;

• continued operating loss, loss of cash flows, or potential loss of cash flows; and

• potential loss on sale, having a plan of sale.

When we determine that assets might be impaired based upon the existence of one or more of the above factors or other factors, we estimate the future cash flows expected to be generated by those assets. Our estimates of the future cash flows are based upon historical trends adjusted to reflect our best estimate of future market and operating conditions. Also, our estimates include the expected future period in which future cash flows are expected. As a result of the recoverability test, when the sum of the estimated future undiscounted cash flows expected to be generated by those assets is less than its carrying amount, and when its fair value is less than its carrying amount, we determine the amount of impairment based on the fair value of those assets.

If the asset is considered impaired, an impairment charge is recorded for the amount by which the carrying amount of the asset exceeds fair value. We determine fair value based on appraisals prepared by independent third party appraisers or our own staff of qualified appraisers, based on recent transactions involving sales of similar assets, or other valuation techniques to estimate fair value. If actual market and operating conditions under which assets are operated are less favorable than those projected by management, resulting in lower expected future cash flows or shorter expected future periods to generate such cash flows, additional impairment charges may be required. In addition, changes in estimates resulting in lower fair values due to unanticipated changes in business or operating assumptions could adversely affect the valuations of long-lived assets.

The accounting estimates relating to impairment of long-lived assets could affect all segments.

UNGUARANTEED RESIDUAL VALUE FOR DIRECT FINANCING LEASES AND OPERATING LEASES

We estimate unguaranteed residual values of leased equipment except real estate, which is explained in “Impairment of Long-lived Assets” described above, when we calculate unearned lease income to be recognized as income over the lease term for direct financing leases and when we calculate depreciation amounts for operating leases which carry inherently higher obsolescence and resale risks. Our estimates are based upon

44

current market values of used equipment and estimates of when and how much equipment will become obsolete. If actual future demand for re-lease or actual market conditions of used equipment is less favorable than that projected by management, write-downs of unguaranteed residual value may be required.

The accounting estimates relating to unguaranteed residual value for direct financing leases and operating leases affect mainly the Corporate Financial Services, Automobile Operations and Rental Operations segments and all of our overseas segments.

INSURANCE POLICY LIABILITIES AND DEFERRED POLICY ACQUISITION COSTS

A subsidiary of ORIX writes life insurance policies to customers. Policy liabilities for future policy benefits are established by the net level premium method, based on actuarial estimates of the amount of future policyholder benefits. The policies are characterized as long-duration policies and mainly consist of whole life, term life, endowments, and medical insurance. Computation of policy liabilities and reserves necessarily includes assumptions about mortality, lapse rates and future yields on related investments and other factors applicable at the time the policies are written. The life insurance subsidiary continually evaluates the potential for changes in the estimates and assumptions applied in determining policy liabilities, both positive and negative, and uses the results of these evaluations both to adjust recorded liabilities and to adjust underwriting criteria and product offerings. If actual assumption data, such as mortality, lapse rates, investment returns and other factors, do not properly reflect future policyholder benefits, we may establish a premium deficiency reserve.

FASB Statement No. 60, “Accounting and Reporting by Insurance Enterprises,” requires insurance companies to defer certain costs associated with writing insurances, or deferred policy acquisition costs, and amortize them over the respective policy periods in proportion to anticipated premium revenue. Deferred policy acquisition costs are the costs related to the acquisition of new and renewal insurance policies and consist primarily of first-year commissions in excess of recurring policy maintenance costs and certain variable costs and expenses for underwriting policies. Periodically, deferred policy acquisition costs are reviewed for whether relevant insurance and investment income are expected to recover the unamortized balance of the deferred acquisition costs. When such costs are expected to be unrecoverable, they are charged to income in that period. If the historical data, such as lapse rates, investment returns, mortality experience, expense margins and surrender charges, which we use to calculate these assumptions do not properly reflect future profitability, additional amortization may be required.

The accounting estimates relating to insurance policy liabilities and deferred policy acquisition costs affect our Life Insurance segment.

ASSESSING HEDGE EFFECTIVENESS AND MEASURING INEFFECTIVENESS

We use foreign currency swap agreements, interest rate swap agreements and foreign exchange forward contracts for hedging purposes and apply either fair value hedge, cash flow hedge or foreign currency hedge accounting to measure and account for subsequent changes in their fair value.

To qualify for hedge accounting, details of the hedging relationship are formally documented at the inception of the arrangement, including the risk management objective, hedging strategy, hedged item, specific risks that are to be hedged, the derivative instrument and how effectiveness is being assessed. The derivative for hedge purpose must be highly effective in offsetting either changes in fair value or cash flows, as appropriate, for the risk being hedged and effectiveness needs to be assessed at the inception of the relationship.

Hedge effectiveness is assessed quarterly on a retrospective and prospective basis. Ineffectiveness is also measured quarterly, with the results recognized in earnings. If specified criteria for the assumption of effectiveness are not met at hedge inception or upon the quarterly testing, then the hedge accounting is discontinued. To assess effectiveness and measure ineffectiveness, we use techniques including regression analysis and cumulative dollar offset method.

45

PENSION PLANS

The determination of our projected benefit obligation and expense for our employee pension benefits is mainly dependent on the size of the employee population, actuarial assumptions, expected long-term rate of return on plan assets and the discount rate used in the accounting.

Pension expense is directly related to the number of employees covered by the plans. Increased employment through internal growth or acquisition would result in increased pension expense.

In estimating the projected benefit obligation, actuaries make assumptions regarding mortality rates, turnover rates, retirement rates and rates of compensation increase. In accordance with FASB Statement No. 87, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, impact expense and the recorded obligations in future periods.

We determine the expected long-term rate of return on plan assets annually based on the composition of the pension asset portfolios and the expected long-term rate of return on these portfolios. The expected long-term rate of return is designed to approximate the long-term rate of return actually earned on the plans’ assets over time to ensure that funds are available to meet the pension obligations that result from the services provided by employees. We use a number of factors to determine the reasonableness of the expected rate of return, including actual historical returns on the asset classes of the plans’ portfolios and independent projections of returns of the various asset classes.

We use March 31 as a measurement date for our pension assets and projected benefit obligation balances under the majority of our plans. If we were to assume a 1% increase or decrease in the expected long-term rate of return, holding the discount rate and other actuarial assumptions constant, pension expense would decrease or increase, respectively, by approximately ¥848 million.

Discount rates are used to determine the present value of our future pension obligations. The discount rates are reflective of rates available on long-term, high-quality fixed-income debt instruments with maturities that closely correspond to the timing of defined benefit payments. Discount rates are determined annually on the measurement date.

If we were to assume a 1% increase in the discount rate, and keep the expected long-term rate of return and other actuarial assumptions constant, pension expense would decrease by approximately ¥894 million. If we were to assume a 1% decrease in the discount rate, and keep other assumptions constant, pension expense would increase by approximately ¥1,055 million. The decrease to pension expense based on a 1% increase in discount rate differs from the increase to pension expense based on a 1% decrease in discount rate due to a 10% corridor.

While we believe the estimates and assumptions used in our pension accounting are appropriate, differences in actual results or changes in these assumptions or estimates could adversely affect our pension obligations and future expenses.

As of March 31, 2007, we adopted the recognition and disclosure provisions of FASB Statement No. 158 (“Employers’ Accounting for Defined Benefits Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106 and 132(R)”) and recognized the overfunded and/or underfunded status of defined benefit pension plans, measured as the difference between the fair value of plan assets and the benefit obligation, as an asset or liability in the consolidated balance sheet, with a corresponding adjustment to accumulated other comprehensive income (loss), net of tax.

INCOME TAXES

In preparing our consolidated financial statements we make estimates relating to income taxes of ORIX and our subsidiaries in each of the jurisdictions in which we operate. The process involves estimating our actual current income tax position together with assessing temporary differences resulting from different treatment of

46

items for income tax reporting and financial reporting purposes. Such differences result in deferred income tax assets and liabilities, which are included within our consolidated balance sheets. We must then assess the likelihood that our deferred income tax assets will be recovered from future taxable income, and to the extent we believe that recovery is not more likely than not, we must establish a valuation allowance. When we establish a valuation allowance or increase this allowance during a period, we must include an expense within the income tax provision in the consolidated statements of income.

Significant management judgments are required in determining our provision for income taxes, current income taxes, deferred income tax assets and liabilities and any valuation allowance recorded against our deferred income tax assets. We file tax returns in Japan and certain foreign tax jurisdictions and recognize the financial statement effects of a tax position taken or expected to be taken in a tax return when it is more likely than not, based on the technical merits, that the position will be sustained upon tax examination, including resolution of any related appeals or litigation processes, and measure the tax position that meets the recognition threshold at the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with the taxing authority. Management judgments, including the interpretations about the application of the complex tax laws of Japan and certain foreign tax jurisdictions, are required in the process of evaluating tax positions. Therefore these judgments may differ from the actual results. We have recorded a valuation allowance due to uncertainties about our ability to utilize certain deferred income tax assets, primarily certain net operating loss carry forwards, before they expire. Although utilization of the net operating loss carry forwards is not assured, management believes it is more likely than not that all of the deferred income tax assets, net of the valuation allowance, will be realized. The valuation allowance is based on our estimates of taxable income by jurisdiction in which we operate and the period over which our deferred income tax assets will be recoverable. In the event that actual results differ from these estimates or if we adjust these estimates in future periods, we may need to establish additional valuation allowances, which could materially impact our consolidated financial position and results of operations.

A deferred tax liability has not been recognized for undistributed earnings of certain foreign subsidiaries as it is our intention to permanently reinvest those earnings. The deferred tax liability will be recognized when we are no longer able to demonstrate that we plan to permanently reinvest undistributed earnings. Accordingly, no provision has been made for foreign withholding taxes or Japanese income taxes, which would become payable if the undistributed earnings were paid as dividends to us.

DISCUSSION WITH AND REVIEW BY THE AUDIT COMMITTEE

Our management has discussed the development and selection of each critical accounting estimate with our Audit Committee in June 2008.

RESULTS OF OPERATIONS

GUIDE TO OUR CONSOLIDATED STATEMENT OF INCOME

The following discussion and analysis provides information that management believes to be relevant to an understanding of our consolidated financial condition and results of operations. This discussion should be read in conjunction with our consolidated financial statements, including the notes thereto, included in this annual report. See “Item 18. Financial Statements.”

Our consolidated results of operations are presented in the accompanying financial statements with sub-categorization of revenues and expenses designed to enable the reader to better understand the diversified operating activities contributing to our overall operating performance.

As further described in Item 4. “Information on the Company,” since we developed the leasing market in Japan in 1964, we have extended the scope of our operations into various types of businesses which have become significant contributors to our group operating results. Our initial leasing business has expanded into the

47

provision of broader financial services including direct lending to our lessees and other customers. Initial direct lending has broadened into diversified finance such as housing loans, loans secured by real estate, unsecured loans and non-recourse loans. Through our lending experience, we have developed a loan servicing business and a loan securitization business including CMBS. Through experience gained by our focusing on real estate as collateral for loans, we have also developed our real estate leasing, development and management operations.

Furthermore, we also expanded our business by the addition of securities-related operations, aimed at capital gains and brokerage income. Thereafter, we established and acquired a number of subsidiaries and affiliates in Japan and overseas to expand our operations, such as a trust bank, a life insurance company and a real estate-related company. In recent years, we have emphasized the expansion of our principal investment business. The Investment Banking Headquarters makes selective equity investments in companies and has been working to meet the needs of companies through recently expanding management buyouts (MBOs), sales of subsidiaries by large corporations, carve-outs and business successions, in addition to investments in rehabilitation companies, which they have continued over the past few years.

This diversified nature of our operations is reflected in our presentation of operating results through the categorization of our revenues and expenses to align with operating activities. Based on those diversified operating activities, we categorize our revenues as direct financing leases, operating leases, interest on loans and investment securities, life insurance premiums and related investment income, real estate sales, gains on sales of real estate under operating leases and other operating revenues and these revenues are summarized into “Total Revenues” on the consolidated statements of income.

The following is an additional explanation for certain account captions on our consolidated statements of income to supplement the discussion above:

Interest on investment securities is combined with interest on loans because we believe that capital we deploy is fungible and, whether used to provide financing in the form of loans and leases or through investment in debt securities, the decision to deploy the capital is a banking-type operation that shares the common objective of managing earning assets to generate a positive spread over our cost of borrowings.

In addition, securities investment activities were originated by the Company and extended to group companies, such as our US operations. As a result, gains on investment securities have grown and become one of our major revenue sources. We believed that the securities company subsidiary, which was acquired in the middle of the 1980’s, would grow our securities-related operations and contribute to our revenues and earnings. Against this background, we determined to present gains on investment securities under a separate income statement caption, together with brokerage commissions, because we invest in securities as one of our core operations and both the gains on investment securities and brokerage commissions are derived from our securities operations.

In our diversified operating activities including the corporate rehabilitation business, other operating revenues consist of revenues derived from our various operations which are considered a part of our recurring operating activities, such as integrated facilities management operations, vehicle maintenance and management services, management of golf courses, training facilities and hotels, real estate-related business and commissions for the sale of insurance and other financial products.

Furthermore, our expenses include mainly selling, general and administrative expenses, costs of operating leases, life insurance costs, costs of real estate sales, interest expenses, and other operating expenses.

Expenses reported by us within other operating expenses are directly associated with the sales and revenues separately reported within other operating revenues. Interest expense is based on funds borrowed mainly to purchase equipment for leases, extend loans and invest in securities and real estate operations, which are revenue-generating assets. We also consider the principal part of selling, general and administrative expenses to be directly related to the generation of revenues. Therefore, they have been included within our subtotal of

48

operating expenses constituting our net operating income. We similarly view the provision for doubtful receivables and probable loan losses to be directly related to our finance activities and accordingly have included it within our subtotal of net operating income. As our principal operations consist of providing financial products and/or finance-related services to our customers, these expenses are directly related to the potential risks and changes in these products and services. Thus, we consider that our presentation, in which these expenses are stated in the “Expenses” section, is useful for readers to understand the profitability of our business.

We have historically reflected the write-downs of long-lived assets within our measure of operating income, as related assets, primarily real estate assets, represented significant operating assets under management or development, and accordingly the write-downs were considered to represent an appropriate component of the operating income derived from the related real estate investment activities. Similarly, as we have identified investment in securities to represent an operating component of our financing activities, write-downs of securities are also included within our measure of operating income.

We believe that our financial statement presentation as explained in the paragraphs above with the expanded presentation of revenues and expenses aids in the comprehension of our diversified operating activities in Japan and overseas and demonstrates the fair presentation of our consolidated statements of income.

YEAR ENDED MARCH 31, 2008 COMPARED TO YEAR ENDED MARCH 31, 2007

Performance Summary

Income Statement Data

	Year ended March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Income statement data:
Total revenues	¥	1,124,960	¥	1,154,054	¥	29,094		3
Total expenses		842,524		964,853		122,329		15
Operating income		282,436		189,201		(93,235	)	(33	)
Income before income taxes, minority interests in earnings of subsidiaries, discontinued operations and extraordinary gain		316,349		249,766		(66,583	)	(21	)
Net income		196,506		169,597		(26,909	)	(14	)

Total Revenues

	Year ended March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Total revenues:
Direct financing leases	¥	90,272	¥	78,592	¥	(11,680	)	(13	)
Operating leases		251,482		290,743		39,261		16
Interest on loans and investment securities		201,531		227,020		25,489		13
Brokerage commissions and net gains on investment securities		70,684		23,521		(47,163	)	(67	)
Life insurance premiums and related investment income		132,835		128,616		(4,219	)	(3	)
Real estate sales		87,178		88,445		1,267		1
Gains on sales of real estate under operating leases		22,958		16,756		(6,202	)	(27	)
Other operating revenues		268,020		300,361		32,341		12
Total	¥	1,124,960	¥	1,154,054	¥	29,094		3

49

Total revenues in fiscal 2008 increased 3% to ¥1,154,054 million compared with the previous fiscal year. Revenues from direct financing leases decreased as a result of our selective process for seeking quality operating assets (assets in which risk and return are appropriately balanced). Brokerage commissions and net gains on investment securities decreased due primarily to the absence of a one time gain on the sale of a portion of our shares in Aozora Bank Ltd. recorded in the previous fiscal year.

On the other hand, revenues from operating leases increased compared to the previous fiscal year due to an expansion in automobile, real estate, and precision measuring and other equipment rental operations. Interest on loans and investment securities were also up due to an increase in loans to corporate customers including non-recourse loans.

Total Expenses

	Year ended March 31,					Change
	2007		2008			Amount			Percent (%)
	(In millions of yen, except percentage data)
Total expenses:
Interest expense	¥	80,871	¥	106,140		¥	25,269		31
Costs of operating leases		162,014		185,278			23,264		14
Life insurance costs		115,565		112,869			(2,696	)	(2	)
Costs of real estate sales		73,999		81,056			7,057		10
Other operating expenses		140,597		170,476			29,879		21
Selling, general and administrative expenses		248,587		265,863			17,276		7
Provision for doubtful receivables and probable loan losses		13,805		33,226			19,421		141
Write-downs of long-lived assets		1,027		1,742			715		70
Write-downs of securities		5,592		8,290			2,698		48
Foreign currency transaction loss (gain), net		467		(87	)		(554	)	—
Total	¥	842,524	¥	964,853		¥	122,329		15

Total expenses in fiscal 2008 increased 15% to ¥964,853 million compared with the previous fiscal year. Interest expense increased due to higher interest rates as well as higher average debt levels. Costs of operating leases were up due primarily to the increase in the average balance of investments in operating leases. Provision for doubtful receivables and probable loan losses increased reflecting a recent slowdown in the economy, and due in addition to some reversals in the previous fiscal year and an increase in installment loans. Write-downs of securities were higher primarily in connection with a decline in the domestic securities market in Japan.

Operating Income, Income before Income Taxes, Minority Interests in Earnings of Subsidiaries, Discontinued Operations and Extraordinary Gain and Net Income

Operating income in fiscal 2008 decreased 33% to ¥189,201 million due primarily to increases in interest expense, selling, general and administrative expenses, and provision for doubtful receivables and probable loan losses and decreases in revenues from direct financing leases and brokerage commissions and net gains on investment securities. Income before income taxes, minority interests in earnings of subsidiaries, discontinued operations and extraordinary gain decreased 21% to ¥249,766 million due primarily to the decrease in operating income.

Net income in fiscal 2008 decreased 14% to ¥169,597 million as a result of the decrease in income before income taxes, minority interests in earnings of subsidiaries, discontinued operations and extraordinary gain.

Basic and diluted earnings per share in fiscal 2008 were ¥1,860.63 and ¥1,817.81, respectively, compared to ¥2,177.10 and ¥2,100.93 in fiscal 2007.

50

Operating Assets

	As of March 31,						Change
	2007			2008			Amount			Percent (%)
	(In millions of yen, except percentage data)
Operating assets:
Investment in direct financing leases	¥	1,258,404		¥	1,098,128		¥	(160,276	)	(13	)
Installment loans		3,490,326			3,766,310			275,984		8
Investment in operating leases		862,049			1,019,956			157,907		18
Investment in securities		875,581			1,121,784			246,203		28
Other operating assets		152,106			197,295			45,189		30
Total operating assets		6,638,466			7,203,473			565,007		9
Allowance for doubtful receivables on direct financing leases and probable loan losses		(89,508	)		(102,007	)		(12,499	)	14
Other assets		1,658,229			1,893,504			235,275		14
Total assets	¥	8,207,187		¥	8,994,970		¥	787,783		10

Operating assets increased 9% to ¥7,203,473 million in fiscal 2008. As a result of our continuing selective process in accumulating quality operating assets (assets with appropriate risk and return), installment loans, investment in operating leases, investment in securities and other operating assets increased in fiscal 2008, while investment in direct financing leases decreased.

Shareholders’ Equity, ROE, and ROA

Shareholders’ equity grew 6% to ¥1,267,917 million in fiscal 2008 due to an increase in retained earnings from ¥921,823 million to ¥1,081,219 million, and an increase of ¥19,109 million in common stock and additional paid-in capital from the conversion of convertible bonds and a share swap merger.

Since total assets grew 10% compared with the end of fiscal 2007, shareholders’ equity ratio declined from 14.55% to 14.10%. A decrease in net income resulted in declines of ROE and ROA, from 18.30% to 13.78%, and 2.54% to 1.97%, respectively.

51

Details of Operating Results

The following is a discussion of items in the consolidated statements of income, operating assets in the consolidated balance sheets and other selected financial information. See “Item 4. Information on the Company—Business Overview.”

Revenues, New Business Volumes and Operating Assets

Direct financing leases

	As of and for the year ended March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Direct financing leases:
Direct financing lease revenues	¥	90,272	¥	78,592	¥	(11,680	)	¥	(13	)
Japan		62,442		53,727		(8,715	)		(14	)
Overseas		27,830		24,865		(2,965	)		(11	)
New receivables added		720,840		654,987		(65,853	)		(9	)
Japan		566,863		444,401		(122,462	)		(22	)
Overseas		153,977		210,586		56,609			37
New equipment acquisitions		636,723		574,859		(61,864	)		(10	)
Japan		501,699		390,377		(111,322	)		(22	)
Overseas		135,024		184,482		49,458			37
Investment in direct financing leases		1,258,404		1,098,128		(160,276	)		(13	)
Japan		966,907		829,139		(137,768	)		(14	)
Overseas		291,497		268,989		(22,508	)		(8	)

The finance leasing business has been on a decreasing trend as a result of our selective process for seeking quality operating assets (assets in which risk and return are appropriately balanced) in an environment for the Japanese leasing industry in which competition has become more intense and new equipment acquisitions have been on the decline. Furthermore, the worsening business conditions of small- to medium-sized enterprises in this fiscal year have also contributed to this decrease, with a particular decline in small-scale leases. In the automobile leasing area, the volume of new equipment acquisitions has been shrinking in Japan due to increasing trend towards operating leases.

The overall overseas balance in direct financing leases is decreasing, due to a contraction in the leasing business in The Americas segment and to the effect of foreign exchange rates despite an expansion of the automobile leasing business in Asia.

Revenues from direct financing leases in fiscal 2008 decreased 13% to ¥78,592 million compared to the previous fiscal year. In Japan, revenues from direct financing leases were down 14% to ¥53,727 million compared to ¥62,442 million in the previous fiscal year due to a lower level of operating assets resulting from securitizations made in the latter half of the previous fiscal year and our prudent selectiveness of new projects, in addition to decreases in revenues from cancellations and revenues from sales of direct financing lease assets and a decrease in gains from securitizations. Overseas, revenues were down 11% to ¥24,865 million compared to ¥27,830 million in the previous fiscal year due to the lower level of operating assets, especially in The Americas segment.

The average return we earned on direct financing leases in Japan, calculated on the basis of monthly balances, was almost the same level at 5.12% in fiscal 2008 compared to 5.05% in fiscal 2007. The average return on overseas direct financing leases, calculated on the basis of monthly balances, decreased to 8.65% in fiscal 2008 from 9.43% in fiscal 2007 due mainly to the lower rates in the Asian region.

52

New equipment acquisitions related to direct financing leases decreased 10% to ¥574,859 million compared to the previous fiscal year. New equipment acquisitions by operations in Japan decreased 22% in fiscal 2008, as a result of our continuing selective approach to new projects. New equipment acquisitions by overseas operations increased 37% in fiscal 2008 due primarily to an increase in Asia, Oceania, and Europe segment.

Investment in direct financing leases as of March 31, 2008 decreased 13% to ¥1,098,128 million compared to the previous fiscal year. Investments in Japan decreased 14% due to declines in new equipment acquisitions while overseas decreased 8% due to a contraction in The Americas segment.

As of March 31, 2008, no single lessee represented more than 3% of our total portfolio of direct financing leases. As of March 31, 2008, 76% of our direct financing leases were to lessees in Japan, while 24% were to lessees overseas. 6% of the direct financing leases were to lessees in Malaysia and 5% were to lessees in Indonesia. No other overseas country represented more than 5% of our total portfolio of the direct financing leases.

	As of March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Investment in direct financing leases by category:
Information-related and office equipment	¥	171,389	¥	130,075	¥	(41,314	)	(24	)
Industrial equipment		189,319		169,952		(19,367	)	(10	)
Commercial services equipment		147,436		115,675		(31,761	)	(22	)
Transportation equipment		465,923		425,694		(40,229	)	(9	)
Other equipment		284,337		256,732		(27,605	)	(10	)
Total	¥	1,258,404	¥	1,098,128	¥	(160,276	)	(13	)

Investment in information-related and office equipment, industrial equipment, commercial services equipment, and transportation equipment decreased 24%, 10%, 22%, and 9%, respectively, due to declines in Japan and overseas. Investment in other equipment decreased 10% due primarily to a decline in Japan.

Balances for investment in direct financing leases in the tables above do not include lease assets sold in securitizations. However, gains from securitization are included in direct financing lease revenues. During fiscal 2007 and 2008, we sold ¥167,567 million and ¥116,445 million, respectively, of direct financing lease assets (all of which were in Japan) through securitizations that were treated as sales transactions. Gains from the securitization of these assets of ¥4,237 million and ¥1,688 million were included in direct financing lease revenues for fiscal 2007 and 2008, respectively. The balance of direct financing lease assets treated as sales transactions amounted to ¥289,694 million as of March 31, 2007 and ¥303,034 million as of March 31, 2008. If assets sold in securitizations were included, the total balance of investment in direct financing lease assets would be ¥1,548,098 million as of March 31, 2007 and ¥1,401,162 million as of March 31, 2008. For more information on securitization, see Note 9 of “Item 18. Financial Statements.”

53

Asset quality of our owned direct financing leases

	As of March 31,
	2006			2007			2008
	(In millions of yen, except percentage data)
90+ days past-due direct financing leases and allowances for direct financing leases:
90+ days past-due direct financing leases	¥	20,494		¥	21,149		¥	22,637
90+ days past-due direct financing leases as a percentage of the balance of investment in direct financing leases		1.43	%		1.68	%		2.06	%
Provisions as a percentage of average balance of investment in direct financing leases (1)		0.32	%		0.14	%		0.73	%
Allowance for direct financing leases	¥	30,723		¥	25,545		¥	25,481
Allowance for direct financing leases as a percentage of the balance of investment in direct financing leases		2.14	%		2.03	%		2.32	%

(1) Average balances are calculated on the basis of fiscal quarter-end balances.

The asset quality of investment in direct financing leases improved in fiscal 2006 through fiscal 2007 in tandem with the recovery of the economy, with the ratio of 90+ days past-due direct financing leases staying below 2%. At the same time, the ratio of provisions for doubtful receivables for the same 3-year period declined to 0.4% or less. Nevertheless, the downturn in housing investment, increase in energy and materials costs, and the effect of the strong yen in this fiscal year clearly indicate a decelerating trend in the Japanese economy, and signs of an impending adjustment have become stronger. Small- to medium-sized enterprises, which are our main customers, are feeling the effects of these factors, and there has been an overall increase in the amount of past-due direct financing leases and the provisions for doubtful receivables.

The increase to a ratio of 2.06% in 90+ days past-due direct financing leases as of March 31, 2008 occurred primarily due to an increase in new 90+ days past-due direct financing leases in Japan reflecting a recent slowdown in the economy despite a decrease in new 90+ days past-due direct financing leases overseas.

We believe that the ratio of allowance for doubtful receivables as a percentage of the balance of investment in direct financing leases is a reasonable indication that our allowance for doubtful receivables was adequate as of March 31, 2008 for the following reasons:

• lease receivables are generally diversified and the amount of realized loss on any particular contract is likely to be relatively small; and

• all lease contracts are collateralized by the underlying leased equipment, and we can expect to recover at least a portion of the outstanding lease receivables by selling the underlying equipment.

The ratio of charge-offs as a percentage of the average balance of investment in direct financing leases was, 0.75%, 0.52% and 0.66% for fiscal 2006 and 2007 and 2008, respectively.

54

Operating leases

	As of and for the year ended March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Operating leases:
Operating lease revenues	¥	251,482	¥	290,743	¥	39,261		16
Japan		189,563		214,422		24,859		13
Overseas		61,919		76,321		14,402		23
New equipment acquisitions		348,561		465,909		117,348		34
Japan		258,338		366,187		107,849		42
Overseas		90,223		99,722		9,499		11
Investment in operating leases		862,049		1,019,956		157,907		18
Japan		689,646		850,489		160,843		23
Overseas		172,403		169,467		(2,936	)	(2	)

We have made efforts to expand operating leases in the automobile and real estate businesses in recent years, which have resulted in an increase in operating lease transactions. While the number of lease vehicles handled in the automobile business is increasing, there has been a particularly strong increasing trend in operating leases. This increase is largely because the used vehicle market is fairly stable and it is easy for lessors to understand the residual value risks involved with buying versus leasing, and also due to an increase in demand for operating leases from lessees rather than direct financing leases. In the area of real estate, we have been developing and investing in rental properties, focusing on offices and distribution warehouses. We deploy a business model whereby we take profits on sales after stabilizing cash flows during a fixed period, and accumulating assets through the fiscal year. We plan to maintain the current scale of assets by maintaining this cycle of develop, invest, sell. In addition, we also have increased revenues and assets in the rental business of measuring equipment and personal computers in tandem with the resumption of rental demand. We have been making continuous efforts in the automobile leasing business overseas in recent years. We have also engaged in investment and sales in ship and aircraft leases, in response to the changing market conditions.

Revenues from operating leases increased 16% to ¥290,743 million compared to the previous fiscal year. In Japan, revenues were up 13% to ¥214,422 million compared to ¥189,563 million in the previous fiscal year due to an expansion in automobile, real estate operating leases and precision measuring and other equipment rental operations. Overseas, revenues were up 23% to ¥76,321 million compared to ¥61,919 million in the previous fiscal year due mainly to an expansion of automobile operating leases in the Asia, Oceania and Europe segment. In fiscal 2007 and 2008, gains from the disposition of operating lease assets other than real estate were ¥12,105 million and ¥15,217 million, respectively, and are included in operating lease revenues.

New equipment acquisitions of operating leases increased 34% year on year to ¥465,909 million in fiscal 2008 due primarily to an increase in the purchase of rental purpose real estate and transportation equipment, mainly including automobiles in Japan and overseas.

Investment in operating leases increased 18% year on year to ¥1,019,956 million in fiscal 2008. These investments rose 23% year on year in Japan due primarily to an increase in investments in real estate properties for rental operations and transportation equipment, despite a decrease of 2% year on year overseas influenced by changes in foreign exchange rates.

55

	As of March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Investment in operating leases by category:
Transportation equipment	¥	340,850	¥	383,298	¥	42,448		12
Measuring equipment and personal computers		61,463		67,871		6,408		10
Real estate and other		440,082		552,239		112,157		25
Rental receivables		19,654		16,548		(3,106	)	(16	)
Total	¥	862,049	¥	1,019,956	¥	157,907		18

Investment in transportation equipment rose 12% year on year to ¥383,298 million in fiscal 2008 due primarily to increases in automobile operating leases in Japan. Investment in measuring equipment and personal computers operating leases rose 10% year on year due to an increase in Japan and overseas, while real estate and other operating leases rose 25% year on year due primarily to an increase in Japan.

Installment loans and investment securities

Installment loans

	As of and for the year ended March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Installment loans:
Interest on installment loans (1)	¥	181,972	¥	204,577	¥	22,605		12
Japan		149,628		169,629		20,001		13
Overseas		32,344		34,948		2,604		8
New loans added		2,226,282		2,331,331		105,049		5
Japan		1,941,828		2,083,643		141,815		7
Overseas		284,454		247,688		(36,766	)	(13	)
Installment loans		3,490,326		3,766,310		275,984		8
Japan		3,145,424		3,407,568		262,144		8
Overseas		344,902		358,742		13,840		4

(1) All income and losses we recognize on installment loans related to our life insurance operations are reflected in our consolidated statements of income as life insurance premiums and related investment income.

In recent years we have been making efforts in the Corporate Financial Service segment, Real Estate-Related Finance segment, and The Americas segment in loans for corporate customers, but given the increased lack of clarity in forecasts for the economy beginning from the latter half of fiscal 2008, we have adopted a more cautious approach.

Interest on installment loans increased 12% compared with the previous fiscal year to ¥204,577 million in fiscal 2008. Revenues from interest on installment loans in Japan increased 13% due primarily to an expansion of loans to corporate customers including non-recourse loans. Interest on overseas installment loans increased 8% in fiscal 2008 primarily as a result of the contribution from loans to corporate customers in The Americas segment.

The average interest rate earned on loans in Japan, calculated on the basis of monthly balances, decreased to 4.69% in fiscal 2008 compared to 4.71% in fiscal 2007 due primarily to a decrease in the average interest rate from loan servicing operations. The average interest rate earned on overseas loans, calculated on the basis of monthly balances, decreased to 9.49% in fiscal 2008 from 10.50% in fiscal 2007 due primarily to a fall in market interest rates prevailing in The Americas segment.

56

New loans added increased 5% compared with the previous fiscal year to ¥2,331,331 million in fiscal 2008 due primarily to an increase in non-recourse loans and loans to corporate customers in Japan.

The balance of installment loans as of March 31, 2008 increased 8% to ¥3,766,310 million compared to the balance as of March 31, 2007. The balance of installment loans for borrowers in Japan rose by 8% due primarily to increased non-recourse loans and loans to corporate borrowers and the balance of installment loans for overseas customers increased 4% due primarily to increased loans to corporate customers in The Americas segment.

As of March 31, 2008, 90% of our installment loans were to borrowers in Japan, while 8% were to borrowers in The Americas segment.

The table below sets forth the balances as of March 31, 2007 and 2008 of our installment loans to borrowers in Japan and overseas, categorized by the type of borrower (i.e., consumer or corporate) in the case of borrowers in Japan. As of March 31, 2008, ¥121,884 million, or 4%, of our portfolio of installment loans to consumer and corporate borrowers in Japan related to our life insurance operations. We reflected income from these loans in our consolidated statements of income as life insurance premiums and related investment income.

	As of March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Installment loans:
Consumer borrowers in Japan
Housing loans	¥	627,659	¥	661,911	¥	34,252		5
Card loans		335,288		343,963		8,675		3
Other		92,666		59,638		(33,028	)	(36	)
Subtotal		1,055,613		1,065,512		9,899		1
Corporate borrowers in Japan
Real estate companies		620,946		844,985		224,039		36
Commercial, industrial and other companies		1,302,595		1,318,621		16,026		1
Subtotal		1,923,541		2,163,606		240,065		12
Total (Japan)		2,979,154		3,229,118		249,964		8
Overseas corporate, industrial and other borrowers		304,391		330,544		26,153		9
Purchased loans (1)		191,959		192,275		316		0
Loan origination costs, net		14,822		14,373		(449	)	(3	)
Total	¥	3,490,326	¥	3,766,310	¥	275,894		8

(1) Purchased loans represent loans with evidence of deterioration of credit quality since origination and for which it is probable at acquisition that collection of all contractually required payments from the debtors is unlikely in accordance with AICPA Statement of Position (SOP) No. 03-3 (“Accounting for Certain Loans or Debt Securities Acquired in a Transfer”) and consist mainly of housing loans, loans to real estate companies and commercial, industrial and other companies in Japan.

As of March 31, 2008, ¥927,678 million, or 25%, of all installment loans were outstanding to real estate companies and construction companies. Of this amount, ¥41,939 million, or 1% of all installment loans, was loans individually evaluated for impairment. We calculated an allowance of ¥6,574 million on these impaired loans. As of March 31, 2008, we had installment loans outstanding in the amount of ¥256,494 million, or 7% of all installment loans, to companies in the entertainment industry. Of this amount, ¥30,090 million, or 1% of all installment loans, was loans individually evaluated for impairment. We calculated an allowance of ¥4,782 million on these impaired loans.

57

The balance of loans to consumer borrowers in Japan as of March 31, 2008 increased by 1% to ¥1,065,512 million compared to the balance as of March 31, 2007 due to an increase in housing loans despite a decrease in margin transaction loans to customers of ORIX Securities, that such loan balances are generally subject to market volatility, and the balance of loans to corporate borrowers in Japan as of March 31, 2008 increased by 12% to ¥2,163,606 million, compared to the balance as of March 31, 2007, due primarily to increased demand from real estate companies especially in the first half of fiscal 2008.

Balances of installment loans in the tables above do not include assets sold in securitizations. However, the amount of interest on installment loans includes gains from the securitization of installment loans. We sold ¥88,150 million and ¥59,161 million of installment loans through securitizations, which were treated as sales transactions in fiscal 2007 and 2008, respectively. Gains from the securitization of loans of ¥3,146 million and ¥1,155 million were included in interest on installment loans in fiscal 2007 and 2008, respectively. The balance of installment loans treated as sales transactions amounted to ¥154,357 million and ¥152,208 million as of March 31, 2007 and 2008, respectively. If loans sold in securitizations were included, the total balance of installment loans would be ¥3,644,683 million and ¥3,918,518 million as of March 31, 2007 and 2008, respectively. For more information on securitization, see Note 6 in “Item 18. Financial Statements.”

Asset quality of our owned installment loans

We classify past-due installment loans into two categories: installment loans individually evaluated for impairment and 90+ days past-due loans not individually evaluated for impairment.

	As of March 31,
	2006		2007		2008
	(In millions of yen)
Loans individually evaluated for impairment:
Impaired loans	¥	83,658	¥	100,589	¥	165,283
Impaired loans requiring a valuation allowance		66,543		67,934		108,921
Valuation allowance (1)		31,056		29,189		38,081

(1) The valuation allowance is individually evaluated based on the present value of expected future cash flows, the loan’s observable market price or the fair value of the collateral securing the loans if the loans are collateral dependent.

New provision for probable loan losses was ¥4,942 million in fiscal 2007 and ¥13,664 million in fiscal 2008, and charge-off of impaired loans was ¥7,222 million in fiscal 2007 and ¥4,633 million in fiscal 2008. New provision for probable loan losses increased by ¥8,722 million compared to fiscal 2007 due to an increase in impaired corporate loans reflecting a recent slowdown in the economy. Despite the increase in impaired loans, charge-off of impaired loans decreased by ¥2,589 million compared in fiscal 2007 because many of the impaired loans were still expected to recover and had not deteriorated to the point of requiring charge-offs as of March 31, 2008. Accordingly, there is a possibility that our charge-offs will increase during the year ending March 31, 2009.

58

The table below sets forth the outstanding balances of impaired loans by region and type of borrower. Consumer loans in Japan primarily consist of restructured smaller-balance homogeneous loans individually evaluated for impairment. Impaired loans increased in fiscal 2008 due mainly to an increase in impaired corporate loans for real estate companies and commercial, industrial and other companies in Japan reflecting a recent slowdown in the economy.

	As of March 31,
	2006		2007		2008
	(In millions of yen)
Impaired loans:
Consumer borrowers in Japan	¥	11,474	¥	17,878	¥	20,595
Corporate borrowers in Japan
Real estate companies		13,684		12,749		37,658
Commercial, industrial and other companies		37,234		48,785		80,356
Subtotal		50,918		61,534		118,014
Overseas corporate, industrial and other borrowers		4,766		6,412		12,080
Purchased loans		16,500		14,765		14,594
Total	¥	83,658	¥	100,589	¥	165,283

The table below sets forth information as to past-due loans which are not individually significant and accordingly are evaluated for impairment as a homogeneous group.

	As of March 31,
	2006			2007			2008
	(In millions of yen, except percentage data)
90+ days past-due loans and allowance for installment loans:
90+ days past-due loans not individually evaluated for impairment	¥	16,455		¥	12,656		¥	15,333
90+ days past-due loans not individually evaluated for impairment as a percentage of the balance of installment loans not individually evaluated for impairment		0.58	%		0.37	%		0.43	%
Provisions as a percentage of average balance of installment loans (1)		0.11	%		0.22	%		0.30	%
Allowance for probable loan losses on installment loans exclusive of those loans individually evaluated for impairment	¥	35,223		¥	34,774		¥	38,445
Allowance for probable loan losses on installment loans exclusive of those loans individually evaluated for impairment as a percentage of the balance of installment loans not individually evaluated for impairment		1.24	%		1.03	%		1.07	%

(1) Average balances are calculated on the basis of fiscal quarter-end balances.

The balance of 90+ days past-due loans not individually evaluated for impairment increased by 21% in fiscal 2008, principally due to increase in 90+ days past-due loans not individually evaluated for impairment in card loans.

	As of March 31,
	2006		2007		2008
	(In millions of yen)
90+ days past-due loans not individually evaluated for impairment:
Consumer borrowers in Japan
Housing loans	¥	13,221	¥	10,177	¥	9,425
Card loans and other		2,742		2,376		5,861
Overseas corporate, industrial and other borrowers		492		103		47
Total	¥	16,455	¥	12,656	¥	15,333

59

We make provisions against losses for these homogenous loans by way of general reserves for installment loans included in the allowance for doubtful receivables. We make allowance for housing loans in Japan after careful evaluation of the value of collateral underlying the loans, past loss experience and any economic conditions that we believe may affect the default rate.

We determine the allowance for our card loans and other items on the basis of past loss experience, general economic conditions and the current portfolio composition.

We believe that the level of the allowance as of March 31, 2008 was adequate because we expect to recover a portion of the outstanding balance for 90+ days past-due loans not individually evaluated for impairment primarily because most 90+ days past-due loans are housing loans, which are ordinarily made to a diverse group of individuals who we believe generally have a higher credit rating than the population at-large.

The ratio of charge-offs as a percentage of the average balance of installment loans was 0.48%, 0.22% and 0.16% for fiscal 2006, 2007 and 2008, respectively. The ratio of charge-offs as a percentage of the average balance of installment loans went down for fiscal 2008 compared to that of fiscal 2007 due to a decrease in charge-offs including sales of housing loans and an increase in the balance of installment loans.

Investment securities

We maintain a sizeable investment in various securities. The main segment of this portfolio is investments by our life insurance operations. These constituted approximately 30% of our total investment in securities as of March 31, 2008. These are generally investments in yen-denominated corporate debt and consist primarily of fixed interest rate instruments.

	As of March 31, 2007
	Life insurance		Other		Total
	(In millions of yen)
Investment securities:
Trading securities	¥	—	¥	45,912	¥	45,912
Marketable debt securities		283,648		243,857		527,505
Marketable equity securities		9,054		113,338		122,392
Other securities (1)		47,635		132,137		179,772
Total	¥	340,337	¥	535,244	¥	875,581

	As of March 31, 2008
	Life insurance		Other		Total
	(In millions of yen)
Investment securities:
Trading securities	¥	—	¥	34,535	¥	34,535
Marketable debt securities		297,780		486,621		784,401
Marketable equity securities		12,920		87,456		100,376
Other securities (1)		31,179		171,293		202,472
Total	¥	341,879	¥	779,905	¥	1,121,784

(1) Other securities consist mainly of non-marketable equity securities, preferred capital shares and investment funds.

We present income from investments in separate lines of our consolidated statements of income, depending upon whether the security is held in connection with our life insurance operations.

60

Interest we earn on interest-earning securities held in connection with operations other than life insurance is reflected in our consolidated statements of income as interest on loans and investment securities. All other non-interest income and losses (other than foreign currency transaction gains or losses) we recognize on securities held in connection with operations other than life insurance are reflected in our consolidated statements of income as brokerage commissions and net gains on investment securities. All income and losses we recognize on securities held in connection with life insurance operations are reflected in our consolidated statements of income as life insurance premiums and related investment income.

	As of and for the year ended March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Investment securities:
Interest on investment securities	¥	19,559	¥	22,443	¥	2,884		15
Japan		4,406		12,685		8,279		188
Overseas		15,153		9,758		(5,395	)	(36	)
New securities added		331,055		688,148		357,093		108
Japan		314,678		666,296		351,618		112
Overseas		16,377		21,852		5,475		33
Investment in securities		875,581		1,121,784		246,203		28
Japan		753,078		1,021,537		268,459		36
Overseas		122,503		100,247		(22,256	)	(18	)

Interest on investment securities other than those held in connection with our life insurance operations increased 188% to ¥12,685 million in fiscal 2008 due primarily to a higher balance of securities in Japan and decreased 36% to ¥9,758 million in fiscal 2008 overseas due primarily to a decrease in contributions from interest on investment securities recorded in the previous fiscal year in The Americas segment. The average interest rate earned on investment securities in Japan, calculated on the basis of monthly balances, was 2.87% in fiscal 2008 compared to 2.43% in fiscal 2007 due primarily to increase of investments in the specified bonds issued by special purpose entities, or SPEs, which are secured by commercial mortgages. The average interest rate earned on overseas investment securities, calculated on the basis of monthly balances, was almost flat at 9.76% in fiscal 2008 compared to 9.66% in fiscal 2007.

New securities added increased 108% to ¥688,148 million in fiscal 2008. New securities added in Japan increased 112% in fiscal 2008 due primarily to increased investment in the specified bonds issued by SPEs in Japan. New securities added overseas increased 33% due primarily to increases in The Americas segment.

The balance of our investment in securities as of March 31, 2008 increased 28% to ¥1,121,784 million compared to fiscal 2007. The balance of our investment in securities in Japan increased 36% due primarily to a higher balance of the specified bonds issued by SPEs in Japan, and the balance of our investment in securities overseas decreased 18% due primarily to market valuation losses on trading securities, as well as the influence of foreign exchange rates in The Americas segment.

	As of March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Investment in securities by security type:
Trading securities	¥	45,912	¥	34,535	¥	(11,377	)	(25	)
Available-for-sale securities		649,897		884,777		234,880		36
Other securities		179,772		202,472		22,700		13
Total	¥	875,581	¥	1,121,784	¥	246,203		28

61

Investments in trading securities decreased 25% in fiscal 2008 due primarily to write-downs in high yield bond investments which was attributable to declines in market values for credit instruments, as well as the influence of foreign exchange rates in The Americas segment. Investments in available-for-sale securities increased 36% in fiscal 2008 due primarily to a higher balance of the specified bonds issued by SPEs. As of March 31, 2008, our portfolio included investments in available-for-sale securities by The Americas segment in commercial mortgage-backed securities and residential mortgage-backed securities, totaling ¥41,152 million, and in high yield debt securities, totaling ¥7,835 million. Other securities increased 13% in fiscal 2008 due primarily to a higher balance of preferred capital shares.

The above table does not include assets sold in securitizations. We sold ¥12,519 million and ¥10,851 million of investment securities through securitizations, which were treated as sales transactions in fiscal 2007 and 2008, respectively. Gains from the securitization of investment securities of ¥379 million and ¥638 million were included in net gains on investment securities in fiscal 2007 and 2008, respectively. The balance of investment securities treated as sales transactions amounted to ¥41,535 million and ¥46,707 million in fiscal 2007 and 2008, respectively. For more information on securitization, see Note 9 in “Item 18. Financial Statements.”

For further information on investment in securities, see Note 8 of “Item 18. Financial Statements.”

Brokerage commissions and net gains on investment securities

All non-interest income and losses (other than foreign currency transaction gains or losses) that we recognize on securities held in connection with operations other than life insurance are reflected in our consolidated statements of income as brokerage commissions and net gains on investment securities.

	Year ended March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Brokerage commissions and net gains on investment securities:
Brokerage commissions	¥	7,851	¥	6,879	¥	(972	)	(12	)
Net gains on investment securities		62,833		16,642		(46,191	)	(74	)
Total	¥	70,684	¥	23,521	¥	(47,163	)	(67	)

Brokerage commissions and net gains on investment securities decreased 67% to ¥23,521 million in fiscal 2008. Our brokerage commissions decreased 12% due to a decrease in revenues from the securities operations. Net gains on investment securities decreased 74% due primarily to a decrease in revenues from the venture capital operations in Japan, in addition to the absence of gains on the sale of a portion of our shares in Aozora Bank Ltd. in connection with its listing on the Tokyo Stock Exchange which were recorded in the previous fiscal year, and market valuation losses on trading securities were recorded from deterioration in the credit markets in The Americas segment.

As of March 31, 2008, gross unrealized gains on available-for-sale securities, including those held in connection with our life insurance operations, were ¥61,706 million, compared to ¥97,493 million as of March 31, 2007. As of March 31, 2008, gross unrealized losses on available-for-sale securities, including those held in connection with our life insurance operations, were ¥9,222 million, compared to ¥2,843 million as of March 31, 2007. These unrealized gains decreased due primarily to a decline in the domestic securities market in Japan and the deterioration in the credit markets in The Americas segment.

62

Life insurance premiums and related investment income

We reflect all income and losses (other than provision for doubtful receivables and probable loan losses) that we recognize on securities, installment loans and other investments held in connection with life insurance operations in our consolidated statements of income as life insurance premiums and related investment income.

	Year ended March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Life insurance premiums and related investment income:
Life insurance premiums	¥	121,373	¥	120,527	¥	(846	)	(1	)
Life insurance-related investment income		11,462		8,089		(3,373	)	(29	)
Total	¥	132,835	¥	128,616	¥	(4,219	)	(3	)

Life insurance premiums and related investment income decreased 3% to ¥128,616 million in fiscal 2008 compared to fiscal 2007. Life insurance premiums decreased 1%, and life insurance-related investment income decreased 29% in fiscal 2008.

	As of March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Investments by ORIX Life Insurance:
Marketable debt securities	¥	283,648	¥	297,780	¥	14,132		5
Marketable equity securities		9,054		12,920		3,866		43
Other securities		47,635		31,179		(16,456	)	(35	)
Total investment in securities		340,337		341,879		1,542		0
Installment loans and other investments		170,714		138,866		(31,848	)	(19	)
Total	¥	511,051	¥	480,745	¥	(30,306	)	(6	)

Marketable debt securities increased, while other securities decreased resulting from increasing investments in low-risk corporate and government bonds. Installment loans and other investments decreased 19% year on year due to an increase in principal collected on installment loans.

	Year ended March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Breakdown of life insurance-related investment income:
Net gains (losses) on investment securities	¥	3,208	¥	1,342	¥	(1,866	)	(58	)
Interest on loans and investment securities, and others		8,254		6,747		(1,507	)	(18	)
Total	¥	11,462	¥	8,089	¥	(3,373	)	(29	)

For further information on life insurance operations, see Note 21 of “Item 18. Financial Statements.”

Real estate sales

	Year ended March 31,				Change
	2007		2008		Amount		Percent (%)
	(In millions of yen, except percentage data)
Real estate sales:
Real estate sales	¥	87,178	¥	88,445	¥	1,267	1

63

Although the number of condominiums sold to buyers in Japan decreased from 2,194 units in fiscal 2007 to 1,931 units in fiscal 2008, revenues from real estate sales increased 1% year on year to ¥88,445 million due to gains from sales recorded in the Oceania region.

Gains on sales of real estate under operating leases

	Year ended March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Gains on sales of real estate under operating leases:
Gains on sales of real estate under operating leases in Japan	¥	22,958	¥	16,756	¥	(6,202	)	(27	)

Gains on sales of real estate under operating leases decreased 27% year on year to ¥16,756 million in fiscal 2008 due primarily to the decrease in real estate under operating leases that were sold but were not included in discontinued operations. Gains recognized under this item refer to gains on sales of real estate under operating leases for which properties we have a significant continuing involvement after sale. Gains on the properties for which we do not continue to provide services are included in discontinued operations. For discussion of accounting policy for discontinued operations, see Note 24 in “Item 18. Financial Statements.”

Other operations

	As of and for the year ended March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Other operations:
Other operating revenues	¥	268,020	¥	300,361	¥	32,341		12
Japan		203,823		236,341		32,518		16
Overseas		64,197		64,020		(177	)	(0	)
New assets added		215,409		152,480		(62,929	)	(29	)
Japan		214,115		152,480		(61,635	)	(29	)
Overseas		1,294		—		(1,294	)	—
Other operating assets		152,106		197,295		45,189		30
Japan		146,487		192,628		46,141		31
Overseas		5,619		4,667		(952	)	(17	)

Other operating revenues increased 12% year on year to ¥300,361 million. In Japan, revenues were up 16% to ¥236,341 million compared to ¥203,823 million in the previous fiscal year due mainly to an increase in revenues associated with real estate management operations including golf courses and training facilities, and contributions from the beginning of this fiscal year from various other companies in which we invested in the previous fiscal year. Overseas, revenues were flat at ¥64,020 million compared to the previous fiscal year.

New assets added for other operating transactions were down 29% to ¥152,480 million in fiscal 2008 due primarily to starting operation of an industrial waste disposal facility, by private finance initiative, or PFI operations in the previous fiscal year. Other operating transactions include other operating assets and real estate for sale, such as residential condominiums and commercial real estate.

Other operating assets increased 30% to ¥197,295 million mainly reflecting investments made in connection with real estate management operations in Japan.

64

Expenses

Interest expense

Interest expense was up 31% year on year to ¥106,140 million due mainly to an increase in Japan. In Japan, interest expense increased 50% year on year due to higher interest rates as well as higher average debt levels. Overseas, interest expense increased 6% year on year due mainly to higher average debt levels.

The average interest rate on our short-term and long-term debt in Japan, calculated on the basis of monthly balances, increased to 1.33% in fiscal 2008, compared to 1.09% in fiscal 2007 due to higher interest rates by the Bank of Japan. The average interest rate on our short-term and long-term overseas debt, calculated on the basis of monthly balances, decreased to 5.41% in fiscal 2008 from 5.66% in fiscal 2007 reflecting lower interest rates in The Americas segment. For information regarding the interest rate risk, see Risk Factors of “Item 3. Key Information.”

Costs of operating leases

Costs of operating leases increased 14% compared to the previous fiscal year to ¥185,278 million in fiscal 2008 due primarily to the increase in the average balance of investment in operating leases.

Life insurance costs

Life insurance costs in fiscal 2008 decreased 2% to ¥112,869 million, corresponding to a decrease in life insurance premiums, while margins decreased to 12% in fiscal 2008 compared with 13% in fiscal 2007.

Costs of real estate sales

Costs of real estate sales were up 10% year on year to ¥81,056 million due to a recognition of write-downs resulting mainly from an increase in development costs for units under development in the condominium operations. Cost of real estate sales includes upfront costs associated with advertising and creating model rooms. Margins decreased to 8% in fiscal 2008 from 15% in fiscal 2007 due mainly to a recognition of write-downs.

Other operating expenses

Other operating expenses were up 21% year on year to ¥170,476 million resulting from the recognition of expenses from the beginning of this fiscal year from companies in which we invested in the previous fiscal year and correlate with the increase in other operating revenues.

Selling, general and administrative expenses

	Year ended March 31,				Change
	2007		2008		Amount		Percent (%)
	(In millions of yen, except percentage data)
Selling, general and administrative expenses:
Personnel expenses	¥	138,794	¥	141,985	¥	3,191	2
Selling expenses		34,730		38,025		3,295	9
Administrative expenses		71,399		81,758		10,359	15
Depreciation of office facilities		3,664		4,095		431	12
Total	¥	248,587	¥	265,863	¥	17,276	7

Employee salaries and other personnel expenses account for approximately half of selling, general and administrative expenses, and the remaining half consists of general overhead expenses such as rent for office spaces, communication expenses and travel expenses. Selling, general and administrative expenses in fiscal 2008

65

increased 7% year on year, due to an increase in general and administrative expenses for write-downs of intangible assets resulting from the termination of contracts with a seller in acquisition in Japan, in addition to recorded expenses associated with companies in which we invested in the previous fiscal year from the beginning of this fiscal year, and expenses associated with the expansion of existing operations.

Provision for doubtful receivables and probable loan losses

We make provisions for doubtful receivables and probable loan losses for direct financing leases and installment loans. New provisions for doubtful receivables and probable loan losses in fiscal 2008 increased 141% as compared to the previous year. Provisions for direct financing leases increased 349% due to reversals of provision for doubtful receivables recorded by some subsidiaries in the previous fiscal year. Provisions for loans not individually evaluated for impairment increased 55% due to a growth in provision for card loans in Japan. Provisions for loans individually evaluated for impairment increased 176% due mainly to an increase in loans for real estate companies reflecting a recent slowdown in the economy.

	Year ended March 31,						Change
	2007			2008			Amount			Percent (%)
	(In millions of yen, except percentage data)
Provision for doubtful receivables on direct financing leases and probable loan losses:
Beginning balance	¥	97,002		¥	89,508		¥	(7,494	)	(8	)
Direct financing leases		30,723			25,545			(5,178	)	(17	)
Loans not individually evaluated for impairment		35,223			34,774			(449	)	(1	)
Loans individually evaluated for impairment		31,056			29,189			(1,867	)	(6	)
Provisions charged to income		13,805			33,226			19,421		141
Direct financing leases		1,974			8,868			6,894		349
Loans not individually evaluated for impairment		6,889			10,694			3,805		55
Loans individually evaluated for impairment		4,942			13,664			8,722		176
Charge-offs (net)		(21,330	)		(18,568	)		2,762		(13	)
Direct financing leases		(7,121	)		(8,085	)		(964	)	14
Loans not individually evaluated for impairment		(6,987	)		(5,850	)		1,137		(16	)
Loans individually evaluated for impairment		(7,222	)		(4,633	)		2,589		(36	)
Other (1)		31			(2,159	)		(2,190	)	—
Direct financing leases		(31	)		(847	)		(816	)	2,632
Loans not individually evaluated for impairment		(351	)		(1,173	)		(822	)	234
Loans individually evaluated for impairment		413			(139	)		(552	)	—
Ending balance		89,508			102,007			12,499		14
Direct financing leases		25,545			25,481			(64	)	(0	)
Loans not individually evaluated for impairment		34,774			38,445			3,671		11
Loans individually evaluated for impairment		29,189			38,081			8,892		30

(1) Other includes foreign currency translation adjustments and amounts reclassified to discontinued operations.

Write-downs of long-lived assets

In accordance with FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, we performed an impairment review for long-lived assets in Japan and overseas such as golf courses, corporate dormitories, office buildings, hotel properties and commercial buildings, and condominiums. Write-downs totaling ¥2,169 million were made in fiscal 2008, a decrease of 31% compared to fiscal 2007, which are reflected as write-down of long-lived assets and income from discontinued operations (¥1,742 million is the amount which is reflected as write-down of long-lived assets.). The majority of write-downs in fiscal 2008 totaled ¥1,555 million and was associated with land to be developed in the future.

66

In accordance with FASB Statement No. 144, an asset held for use is generally deemed to be impaired if the undiscounted future cash flows estimated to be generated by the asset are expected to be less than its carrying amount, and if its fair value is less than its carrying amount. If an asset is deemed to be impaired, the value of the asset is written down to estimated fair value. The requirements of FASB Statement No. 144 potentially result in large charges being recorded in a given period as a result of relatively smaller changes in estimated future cash flows. An asset is generally not considered to be impaired so long as its estimated future cash flows exceed its carrying amount. However, once the estimated future cash flows are believed to be less than the carrying amount, the asset is written down to estimated fair value (which is in general the appraised value). A write-down to estimated fair value prior to a determination of impairment is not permitted.

Our total investment in long-lived assets as of March 31, 2008 was ¥1,435,234 million. ¥1,148,027 million of long-lived assets were included in business segments in Japan, ¥197,810 million were included in overseas business segments, and the remaining assets mainly consist of office facilities that are regarded as corporate assets. Of the long-lived assets in business segments in Japan, ¥712,258 million were in the Real Estate segment. For a breakdown of long-lived assets by segment, see Note 30 of “Item 18. Financial Statements.”

Write-downs of securities

Write-downs for fiscal 2008 were primarily in connection with a decline in the domestic securities market in Japan. In fiscal 2008, write-downs increased 48% from ¥5,592 million in fiscal 2007 to ¥8,290 million in fiscal 2008. For information regarding the impairment of investment in securities, see Critical Accounting Policies and Estimates of “Item 5. Operating and Financial Review and Prospects.”

Foreign currency transaction gain, net

We recognized a foreign currency transaction net gain in the amount of ¥87 million in fiscal 2008. For information on the impact of foreign currency fluctuations, see “Item 11. Qualitative and Quantitative Disclosures about Market Risk.”

Equity in net income of affiliates

Equity in net income of affiliates in fiscal 2008 increased 51% year on year to ¥48,343 million largely due to an increase in profits from residential condominiums developed through certain joint ventures and equity method affiliates in Japan, despite lower profits from equity method affiliates overseas. The decrease in profits from equity method affiliates overseas was due to the decline in income as a result of the sale of stock in Korea Life Insurance Co., Ltd.

For discussion of investment in affiliates, see Note 11 of “Item 18. Financial Statements.”

Gains on sales of subsidiaries and affiliates and liquidation losses, net

Gains on sales of subsidiaries and affiliates and liquidation losses in fiscal 2008 were up more than six times year on year to ¥12,222 million, due to gains on sales of affiliates mainly in the Asian region and sales of affiliates in the corporate rehabilitation business in Japan

Provision for income taxes

Provision for income taxes in fiscal 2008 was ¥98,984 million, compared to the provision of ¥126,320 million, in fiscal 2007. The decrease of ¥27,336 million was due primarily to lower income before income taxes, minority interests in earnings of subsidiaries, discontinued operations and extraordinary gain. For discussion of income taxes, see Note 15 in “Item 18. Financial Statements.”

67

Minority Interests in Earnings of Subsidiaries, net

Minority interests were mainly recorded as a result of the minority interests in earnings of Houlihan Lokey, which is engaged in investment banking including M&A and financial advisory. In fiscal 2008, minority interests decreased 19% year on year to ¥3,918 million.

Discontinued operations

We base disclosure of discontinued operations on FASB Statement No. 144. Under FASB Statement No. 144, the scope of discontinued operations includes operating results of any component of an entity with its own identifiable operations and cash flow and in which operations we will not have significant continuing involvement. Income from discontinued operations, net refers to net income from the sale or disposal by sale of subsidiaries, business units, and real estate under operating leases in which we no longer have significant continuing involvement. Discontinued operations, net of applicable tax effect, increased 103% compared to the previous fiscal year to ¥21,800 million in fiscal 2008 due primarily to higher gains on sales of real estate under operating leases in Japan.

Extraordinary gain

We recorded an extraordinary gain, net of applicable tax effect, of ¥933 million in fiscal 2008, which resulted from an acquisition of interests in an affiliate company, in accordance with FASB Statement No. 141, “Business Combinations,” because our proportional share of the fair value of investee’s net assets exceeded the acquisition cost.

Segment Information

The table below presents segment financial information on the basis that is regularly used by management for evaluating segment performance and deciding how to allocate resources. The reportable segments are mainly identified based on the nature of services for operations in Japan and on the basis of geographic area for overseas operations. For a description of segments, see “Item 4. Information on the Company—Profile of Business by Segment.” See Note 30 in “Item 18. Financial Statements” for additional segment information, a discussion of how we prepare our segment information and the reconciliation of segment totals to consolidated financial statement amounts.

Operations in Japan accounted for 79% and 79% of total segment profit in fiscal 2007 and 2008, respectively. As of March 31, 2008, ¥6,827,315 million, or 87%, of total segment assets were in Japan.

Overseas Operations accounted for 21% and 21% of total segment profits in fiscal 2007 and 2008, respectively. As of March 31, 2008, ¥452,976 million, or 6%, of total segment assets were in The Americas segment, and ¥598,486 million, or 7%, were in Asia, Oceania and Europe segment.

The results of the reported segments from fiscal 2008 reflect the revised business classification of the Company, where leasing operations of the affiliates, which had been included in the Other segment, have been reclassified in the Corporate Financial Services segment from fiscal 2008. Therefore, certain related amounts that had been previously reported in fiscal 2006 and 2007 have also been reclassified to conform with the fiscal 2008 presentation.

68

	Year ended March 31,						Change
	2007			2008			Amount			Percent (%)
	(In millions of yen, except percentage data)
Segment revenues: (1)
Operations in Japan
Corporate Financial Services	¥	123,328		¥	131,139		¥	7,811		6
Automobile Operations		146,966			158,093			11,127		8
Rental Operations		67,859			78,317			10,458		15
Real Estate-Related Finance		82,345			91,179			8,834		11
Real Estate		245,336			278,096			32,760		13
Life Insurance		132,060			128,742			(3,318	)	(3	)
Other		145,443			126,343			(19,100	)	(13	)
Subtotal		943,337			991,909			48,572		5
Overseas Operations
The Americas		119,940			101,739			(18,201	)	(15	)
Asia, Oceania and Europe		103,593			121,988			18,395		18
Subtotal		223,533			223,727			194		0
Total		1,166,870			1,215,636			48,766		4
Difference between Segment Totals and Consolidated Amounts		(41,910	)		(61,582	)		(19,672	)	(47	)
Total consolidated revenues	¥	1,124,960		¥	1,154,054		¥	29,094		3

(1) Results of discontinued operations are included in segment revenues of each segment.

	Year ended March 31,						Change
	2007			2008			Amount			Percent (%)
	(In millions of yen, except percentage data)
Segment profit: (1)
Operations in Japan
Corporate Financial Services	¥	58,231		¥	35,932		¥	(22,299	)	(38	)
Automobile Operations		28,224			25,577			(2,647	)	(9	)
Rental Operations		10,869			11,658			789		7
Real Estate-Related Finance		44,682			42,089			(2,593	)	(6	)
Real Estate		51,236			80,778			29,542		58
Life Insurance		9,921			7,318			(2,603	)	(26	)
Other		60,387			24,720			(35,667	)	(59	)
Subtotal		263,550			228,072			(35,478	)	(13	)
Overseas Operations
The Americas		31,315			16,198			(15,117	)	(48	)
Asia, Oceania and Europe		37,763			45,391			7,628		20
Subtotal		69,078			61,589			(7,489	)	(11	)
Total segment profit		332,628			289,661			(42,967	)	(13	)
Difference between Segment Totals and Consolidated Amounts		(16,279	)		(39,895	)		(23,616	)	(145	)
Total consolidated income before income taxes, minority interests in earnings of subsidiaries, discontinued operations and extraordinary gain	¥	316,349		¥	249,766		¥	(66,583	)	(21	)

(1) The Company evaluates the performance of its segments based on income before income taxes as well as results of discontinued operations, minority interests in earnings of subsidiaries and extraordinary gain, before applicable tax effect. Tax expenses are not included in segment profits.

69

	As of March 31,				Change
	2007		2008		Amount			Percent (%)
	(In millions of yen, except percentage data)
Segment assets:
Operations in Japan
Corporate Financial Services	¥	1,861,403	¥	1,965,200	¥	103,797		6
Automobile Operations		510,805		519,643		8,838		2
Rental Operations		121,621		130,171		8,550		7
Real Estate-Related Finance		1,517,927		1,932,874		414,947		27
Real Estate		901,237		1,053,364		152,127		17
Life Insurance		511,051		480,745		(30,306	)	(6	)
Other		773,595		745,318		(28,277	)	(4	)
Subtotal		6,197,639		6,827,315		629,676		10
Overseas Operations
The Americas		487,900		452,976		(34,924	)	(7	)
Asia, Oceania and Europe		625,036		598,486		(26,550	)	(4	)
Subtotal		1,112,936		1,051,462		(61,474	)	(6	)
Total		7,310,575		7,878,777		568,202		8
Difference between Segment Totals and Consolidated Amounts		896,612		1,116,193		219,581		24
Total consolidated assets	¥	8,207,187	¥	8,994,970	¥	787,783		10

Operations in Japan

Corporate Financial Services

The segment’s operating environment has changed significantly in the past fiscal year. The trends of increasing concerns of a U.S. economic slowdown, the strengthening of the yen, and rising prices for crude oil and other raw materials have exceeded the assumptions underlying forecasts for domestic economic growth at the start of the fiscal year. As a result, the outlook for SMEs remains uncertain.

Segment revenues were up 6% year on year to ¥131,139 million due primarily to an expansion of loans to corporate customers, despite a decrease in gains from securitizations.

Segment profits decreased 38% to ¥35,932 million compared to ¥58,231 million in fiscal 2007, despite an increase in segment revenues, due to increases in interest expense and provision for doubtful receivables and probable loan losses reflecting a recent slowdown in the economy, where some reversals for doubtful receivables and probable loan losses were recognized in fiscal 2007, in addition to the recognition of write-downs of intangible assets.

Segment assets increased 6% on March 31, 2007 to ¥1,965,200 million due to the expansion of loans to corporate customers.

Automobile Operations

Segment revenues increased 8% year on year to ¥158,093 million due to an increase in revenues from operating leases, despite a decrease in revenues from direct financing leases in the automobile leasing operations due to lower operating assets resulting from securitizations made in fiscal 2007.

Segment profits decreased 9% to ¥25,577 million compared to ¥28,224 million in fiscal 2007 due to an increase in expenses corresponding with an increase in revenues from operating leases, in addition to an increase in interest expenses and selling, general and administrative expenses. Operating leases include operating

70

expenses that are recognized as a larger amount during initial period, so when compared with direct financing leases in the current situation in which operating leases are increasing, the departments conducting them show a temporary decrease in profitability.

Segment assets increased 2% on March 31, 2007 at ¥519,643 million due to an expansion of operating lease assets.

Rental Operations

Segment revenues were up 15% year on year to ¥78,317 million due to an increase in revenues from operating leases including precision measuring and other equipment.

Segment profits increased 7% to ¥11,658 million compared to ¥10,869 million in fiscal 2007 due to an increase in segment revenues.

Segment assets increased 7% on March 31, 2007 to ¥130,171 million due to an increase in operating lease assets, despite a decrease in investment in direct financing leases.

Real Estate-Related Finance

The domestic real estate operating environment is changing significantly due to the turmoil in the international financial and capital markets and the tightening of credit markets and liquidity, which are affecting domestic and overseas investors and reducing risk tolerance.

Segment revenues increased 11% year on year to ¥91,179 million due to an expansion of revenues associated with corporate loans, including non-recourse loans, despite decreases in revenues from real estate sales and in gains from securitizations.

Segment profits were ¥42,089 million, a 6% decrease in comparison with ¥44,682 million in fiscal 2007. The main reasons for this were the decreases in revenues from real estate sales and in gains from securitizations, an increase in interest expense, and an increase in the provision for doubtful receivables and probable loan losses, compared to fiscal 2007, when the reversal of provisions had contributed to profits.

Segment assets increased 27% on March 31, 2007 to ¥1,932,874 million due to an increase in corporate loans, including non-recourse loans.

Real Estate

The domestic real estate operating environment is changing significantly due to the turmoil in the international financial and capital markets and the tightening of credit markets and liquidity, which are affecting domestic and overseas investors and reducing risk tolerance. Fundamental conditions in the real estate market are uncertain at the moment, making future performance unpredictable. Given this environment, ORIX is utilizing its ability to collect information from multiple sources and its diverse business development capabilities to differentiate itself from competitors by delivering properties with high added value.

Segment revenues increased 13% year on year to ¥278,096 million due to an increase in revenues associated with real estate rental activities, including office buildings, and management operations including golf courses and training facilities, and an increase in gains on sales of real estate under operating leases, despite a decrease in the number of condominiums sold to buyers recognized under real estate sales.

Segment profits increased 58% to ¥80,778 million compared to ¥51,236 million in fiscal 2007 due mainly to an increase in gains on sales of real estate under operating leases, in addition to an increase in the contribution from condominiums developed through certain joint ventures which were accounted for by the equity method, despite a recognition of write-downs resulting from an increase in development costs for units under

71

development in the condominium operations. The total number of condominiums sold to buyers including those developed through certain joint ventures which were accounted for by the equity method was 3,710 units this fiscal year compared with 3,098 units in fiscal 2007.

Segment assets increased 17% on March 31, 2007 to ¥1,053,364 million due mainly to an expansion of operating assets, including operating lease assets.

Life Insurance

Segment revenues were down 3% year on year to ¥128,742 million, due to a decrease in life insurance premiums compared to fiscal 2007 and a decrease in life insurance related investment income.

Segment profits decreased 26% to ¥7,318 million compared to ¥9,921 million in fiscal 2007 due mainly to a decrease in life insurance related investment income, and an increase in provision for doubtful receivables and probable loan losses, compared to fiscal 2007, when some reversals were recognized.

Segment assets decreased 6% on March 31, 2007 to ¥480,745 million.

Other

Although contributions were recorded from the beginning of fiscal 2008 from companies in which we invested in fiscal 2007, segment revenues decreased 13% year on year to ¥126,343 million due to a decrease in revenues from venture capital operations, in addition to the absence of gains on the sale of a portion of our shares in Aozora Bank which were recorded in fiscal 2007.

Segment profits decreased 59% to ¥24,720 million compared to ¥60,387 million in fiscal 2007 due to a large decrease in segment revenues and the recognition of losses from subsidiaries in the corporate rehabilitation business in Japan despite an increase in contributions from equity method affiliates in Japan.

Segment assets decreased 4% on March 31, 2007 to ¥745,318 million.

Overseas Operations

The Americas

Although the U.S. subprime mortgage loan problem had no direct impact, market valuation losses were recognized for the high-yield bond trading securities. This is due to a drop in bond values caused by deterioration in the bond market. Furthermore, despite an increase in revenues associated with corporate loans and an increase in gains from sales of real estate under operating leases, there were one-off contributions made by gains on investment securities and interest on investment securities in fiscal 2007. As a result, segment revenues decreased 15% year on year to ¥101,739 million.

Segment profits decreased 48% to ¥16,198 million compared to ¥31,315 million in fiscal 2007 accompanying a decrease in segment revenues and an increase in provision for doubtful receivables and probable loan losses.

Segment assets decreased 7% on March 31, 2007 to ¥452,976 million due mainly to the strong yen and a decrease in investment in direct financing leases, despite an increase in corporate loans.

Asia, Oceania and Europe

Segment revenues were up 18% year on year to ¥121,988 million due to an expansion of operating leases, including automobile leasing, and the recognition of real estate sales and ship finance-related revenues in fiscal 2008, despite the absence of a recognition of gains on the sale of operations in the Oceania region in fiscal 2007.

72

Although contributions from equity method affiliates decreased due to the sale of our interest in Korea Life Insurance Co., Ltd, segment profits increased 20% to ¥45,391 million compared to ¥37,763 million in fiscal 2007 due to an increase in segment revenues, in addition to the recognition of gains on the sale of our interest in Korea Life Insurance Co., Ltd.

Segment assets were down 4% on March 31, 2007 to ¥598,486 million, due to the sales of shares in affiliates and the strong yen, despite an increase in investment in direct financing leases and operating lease assets.

YEAR ENDED MARCH 31, 2007 COMPARED TO YEAR ENDED MARCH 31, 2006

Performance Summary

Income Statement Data

	Year ended March 31,				Change
	2006		2007		Amount		Percent (%)
	(In millions of yen, except percentage data)
Income statement data:
Total revenues	¥	913,932	¥	1,124,960	¥	211,028	23
Total expenses		701,021		842,524		141,503	20
Operating income		212,911		282,436		69,525	33
Income before income taxes, minority interests in earnings of subsidiaries, discontinued operations and extraordinary gain		247,697		316,349		68,652	28
Net income		166,388		196,506		30,118	18

Total Revenues

	Year ended March 31,				Change
	2006		2007		Amount			Percent (%)
	(In millions of yen, except percentage data)
Total revenues:
Direct financing leases	¥	96,001	¥	90,272	¥	(5,729	)	(6	)
Operating leases		205,949		251,482		45,533		22
Interest on loans and investment securities		159,727		201,531		41,804		26
Brokerage commissions and net gains on investment securities		48,809		70,684		21,875		45
Life insurance premiums and related investment income		138,118		132,835		(5,283	)	(4	)
Real estate sales		74,943		87,178		12,235		16
Gains on sales of real estate under operating leases		8,970		22,958		13,988		156
Other operating revenues		181,415		268,020		86,605		48
Total	¥	913,932	¥	1,124,960	¥	211,028		23

Total revenues in fiscal 2007 increased 23% to ¥1,124,960 million compared with the previous fiscal year. Although direct financing leases, life insurance premiums and related investment income decreased year on year, revenues from operating leases, interest on loans and investment securities, brokerage commissions and net gains on investment securities, real estate sales, gains on sales of real estate under operating leases, and other operating revenues were up compared to the previous fiscal year.

73

Total Expenses

	Year ended March 31,					Change
	2006			2007		Amount			Percent (%)
	(In millions of yen, except percentage data)
Total expenses:
Interest expense	¥	58,703		¥	80,871	¥	22,168		38
Costs of operating leases		131,973			162,014		30,041		23
Life insurance costs		117,622			115,565		(2,057	)	(2	)
Costs of real estate sales		65,904			73,999		8,095		12
Other operating expenses		116,544			140,597		24,053		21
Selling, general and administrative expenses		181,279			248,587		67,308		37
Provision for doubtful receivables and probable loan losses		16,216			13,805		(2,411	)	(15	)
Write-downs of long-lived assets		8,336			1,027		(7,309	)	(88	)
Write-downs of securities		4,540			5,592		1,052		23
Foreign currency transaction loss (gain), net		(96	)		467		563		—
Total	¥	701,021		¥	842,524	¥	141,503		20

Total expenses in fiscal 2007 increased 20% to ¥842,524 million compared with the previous fiscal year. Although interest expense, costs of operating leases, costs of real estate sales, other operating expenses, selling, general and administrative expenses, and write-downs of securities increased, life insurance costs, provision for doubtful receivables and probable loan losses, and write-downs of long-lived assets were down year on year.

Operating Income, Income before Income Taxes, Minority Interests in Earnings of Subsidiaries, Discontinued Operations and Extraordinary Gain and Net Income

Operating income in fiscal 2007 increased 33% due primarily to increased net revenues from interest on loans and investment securities, brokerage commissions and net gains on investment securities, and operating leases and declines in provision for doubtful receivables and probable loan losses, and write-downs of long-lived assets. Income before income taxes, minority interests in earnings of subsidiaries, discontinued operations and extraordinary gain increased 28% due primarily to the increase in operating income.

Net income in fiscal 2007 increased 18% as a result of the increase in income before income taxes, minority interests in earnings of subsidiaries, discontinued operations and extraordinary gain.

Basic and diluted earnings per share in fiscal 2007 were ¥2,177.10 and ¥2,100.93, respectively, compared to ¥1,883.89 and ¥1,790.30 in fiscal 2006.

Operating Assets

	As of March 31,						Change
	2006			2007			Amount			Percent (%)
	(In millions of yen, except percentage data)
Operating assets:
Investment in direct financing leases	¥	1,437,491		¥	1,258,404		¥	(179,087	)	(12	)
Installment loans		2,926,036			3,490,326			564,290		19
Investment in operating leases		720,096			862,049			141,953		20
Investment in securities		682,798			875,581			192,783		28
Other operating assets		91,856			152,106			60,250		66
Total operating assets		5,858,277			6,638,466			780,189		13
Allowance for doubtful receivables on direct financing leases and probable loan losses		(97,002	)		(89,508	)		7,494		(8	)
Other assets		1,481,180			1,658,229			177,049		12
Total assets	¥	7,242,455		¥	8,207,187		¥	964,732		13

74

Operating assets increased 13% to ¥6,638,466 million in fiscal 2007. As a result of our selective process in accumulating quality operating assets (assets with appropriate risk and return), installment loans, investment in operating leases, investment in securities and other operating assets increased in fiscal 2007, while investment in direct financing leases decreased.

Shareholders’ Equity, ROE, and ROA

Shareholders’ equity grew 25% to ¥1,194,234 million in fiscal 2007 due to an increase of ¥22,970 million in common stock and additional paid-in capital from the conversion of convertible bonds, an increase in retained earnings from ¥733,386 million to ¥921,823 million, and an increase in accumulated other comprehensive income from ¥27,603 million to ¥55,253 million.

While total assets grew 13% compared with the end of fiscal 2006, the growth in shareholders’ equity contributed to an improvement in the shareholders’ equity ratio from 13.17% to 14.55%. ROE declined from 19.80% to 18.30%, while ROA rose from 2.50% to 2.54%.

Details of Operating Results

The following is a discussion of items in the consolidated statements of income, operating assets in the consolidated balance sheets and other selected financial information. See “Item 4. Information on the Company—Business Overview.”

Revenues, New Business Volumes and Operating Assets

Direct financing leases

	As of and for the year ended March 31,				Change
	2006		2007		Amount			Percent (%)
	(In millions of yen, except percentage data)
Direct financing leases:
Direct financing lease revenues	¥	96,001	¥	90,272	¥	(5,729	)	¥	(6	)
Japan		71,144		62,442		(8,702	)		(12	)
Overseas		24,857		27,830		2,973			12
New receivables added		888,912		720,840		(168,072	)		(19	)
Japan		707,427		566,863		(140,564	)		(20	)
Overseas		181,485		153,977		(27,508	)		(15	)
New equipment acquisitions		800,802		636,723		(164,079	)		(20	)
Japan		623,360		501,699		(121,661	)		(20	)
Overseas		177,442		135,024		(42,418	)		(24	)
Investment in direct financing leases