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, 2010

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 Building, 4-1-23 Shiba, Minato-ku

Tokyo 108-0014, Japan

(Address of principal executive offices)

Tatsuhito Yazaki

Mita NN Building, 4-1-23 Shiba, Minato-ku

Tokyo 108-0014, Japan

Telephone: +81-3-5419-5042

Facsimile: +81-3-5419-5901

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

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 (the “Shares”)	New York Stock Exchange	*
(2)	American depository shares (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, 2010, 110,229,948 Shares were outstanding, including Shares that were represented by 4,062,410 ADSs.

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

x  Yes     ¨  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     x  No

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.

x  Yes     ¨  No

Indicate by check mark whether the Registrant submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

x  Yes     ¨  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):

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

Indicate by check mark which basis of accounting the Registrant has used to prepare the financial statements included in this filing.

x  U.S. GAAP    ¨  International Financial Reporting Standards as issued by the International Accounting Standards Board    ¨   Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has elected to follow.

¨  Item 17    ¨  Item 18

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     x  No

(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 Sections 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		ii
Forward-Looking Statements		ii
PART I		1
Item 1.	Identity of Directors, Senior Management and Advisers	1
Item 2.	Offer Statistics and Expected Timetable	1
Item 3.	Key Information	1
Item 4.	Information on the Company	17
Item 4A.	Unresolved Staff Comments	36
Item 5.	Operating and Financial Review and Prospects	37
Item 6.	Directors, Senior Management and Employees	117
Item 7.	Major Shareholders and Related Party Transactions	132
Item 8.	Financial Information	135
Item 9.	The Offer and Listing	135
Item 10.	Additional Information	137
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	151
Item 12.	Description of Securities Other than Equity Securities	155
PART II		156
Item 13.	Defaults, Dividend Arrearages and Delinquencies	156
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	156
Item 15.	Controls and Procedures	156
Item 16A.	Audit Committee Financial Expert	157
Item 16B.	Code of Ethics	157
Item 16C.	Principal Accountant Fees and Services	157
Item 16D.	Exemptions from the Listing Standards for Audit Committees	158
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	158
Item 16F.	Change in Registrant’s Certifying Accountant	158
Item 16G.	Corporate Governance	158
PART III		160
Item 17.	Financial Statements	160
Item 18.	Financial Statements	160
Item 19.	Exhibits	160
SIGNATURES		161
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1
EXHIBIT INDEX

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CERTAIN DEFINED TERMS, CONVENTIONS AND

PRESENTATION OF FINANCIAL INFORMATION

As used in this annual report, unless the context otherwise requires, the “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, generally 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, generally 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 (“U.S. 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 FASB Accounting Standards Codification (“ASC”) 810-10-25-2 to 14 (“Consolidation—The Effect of Noncontrolling Rights on Consolidation”). 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 “¥” or “yen” 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, 2010 is referred to throughout this annual report as fiscal 2010, 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.

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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 except for “Number of employees.” 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,
	2006		2007		2008		2009			2010		2010
	(In millions of yen and millions of dollars)
Income statement data: (1)
Total revenues	¥	906,944	¥	1,115,482	¥	1,135,338	¥	1,053,521		¥	932,841	$	10,026
Total expenses		694,589		834,830		949,784		1,000,166			903,270		9,708
Operating income		212,355		280,652		185,554		53,355			29,571		318
Equity in net income (loss) of affiliates		32,054		31,951		48,343		(42,937	)		8,550		92
Gains (losses) on sales of subsidiaries and affiliates and liquidation losses, net		2,732		1,962		12,222		(1,731	)		17,487		188
Income before income taxes, discontinued operations and extraordinary gain		247,141		314,565		246,119		8,687			55,608		598
Income from continuing operations		151,071		188,772		148,448		11,362			32,255		347
Net income attributable to the noncontrolling interests		2,330		2,014		1,952		1,175			704		8
Net income attributable to the redeemable noncontrolling interests		958		3,032		1,950		698			2,476		26
Net income attributable to ORIX Corporation		166,388		196,506		169,597		21,924			37,757		406

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	As of March 31,
	2006			2007			2008			2009			2010			2010
	(In millions of yen and millions of dollars except number of Shares)
Balance sheet data: (1)
Investment in direct financing leases (2)	¥	1,437,491		¥	1,258,404		¥	1,098,128		¥	914,444		¥	756,481		$	8,131
Installment loans (2)		2,926,036			3,490,326			3,766,310			3,304,101			2,464,251			26,486
Subtotal		4,363,527			4,748,730			4,864,438			4,218,545			3,220,732			34,617
Investment in operating leases		720,096			862,049			1,019,956			1,226,624			1,213,223			13,040
Investment in securities		682,798			875,581			1,121,784			926,140			1,104,158			11,868
Other operating assets		91,856			152,106			197,295			189,560			186,396			2,003
Allowance for doubtful receivables on direct financing leases and probable loan losses		(97,002	)		(89,508	)		(102,007	)		(158,544	)		(157,523	)		(1,693	)
Others		1,481,180			1,658,229			1,893,504			1,967,411			2,172,814			23,353
Total assets	¥	7,242,455		¥	8,207,187		¥	8,994,970		¥	8,369,736		¥	7,739,800		$	83,188
Short-term debt	¥	1,336,414		¥	1,174,391		¥	1,330,147		¥	798,167		¥	573,565		$	6,165
Long-term debt		3,236,055			3,863,057			4,462,187			4,453,845			3,836,270			41,233
Common stock		88,458			98,755			102,107			102,216			143,939			1,547
Additional paid-in capital		106,729			119,402			135,159			136,313			178,661			1,920
ORIX Corporation shareholders’ equity		953,646			1,194,234			1,267,917			1,167,530			1,298,684			13,958
Number of issued Shares		90,289,655			91,518,194			92,193,067			92,217,067			110,229,948			—
Number of outstanding Shares		89,890,579			91,233,710			90,496,863			89,400,220			107,484,247			—

	As of and For the Year Ended March 31,
	2006		2007		2008		2009		2010
	(In yen and dollars, except percentage and number of employees)
Key ratios (%): (3)
Return on ORIX Corporation shareholders’ equity (“ROE”)		19.80		18.30		13.78		1.80		3.06
Return on assets (“ROA”)		2.50		2.54		1.97		0.25		0.47
ORIX Corporation shareholders’ equity ratio		13.17		14.55		14.10		13.95		16.78
Allowance/investment in direct financing leases and installment loans		2.22		1.88		2.10		3.76		4.89
Per share data and employees:
ORIX Corporation shareholders’ equity per Share	¥	10,608.97	¥	13,089.83	¥	14,010.62	¥	13,059.59	¥	12,082.56
Basic earnings per Share for income attributable to ORIX Corporation from continuing operations (4)		1,675.15		2,037.77		1,585.94		107.61		283.26
Basic earnings per Share for net income attributable to ORIX Corporation		1,883.89		2,177.10		1,860.63		246.59		370.52
Diluted earnings per Share for net income attributable to ORIX Corporation		1,790.30		2,100.93		1,817.81		233.81		315.91
Dividends applicable to fiscal year per Share		90.00		130.00		260.00		70.00		75.00
Dividends applicable to fiscal year per Share (5)	$	0.81	$	1.07	$	2.49	$	0.73	$	0.81
Number of employees		15,067		16,662		18,702		18,920		17,725

⁽¹⁾ As a result of the recording of “discontinued operations” in accordance with FASB Accounting Standards Codification (“ASC”) 205-20 (“Presentation of Financial Statements—Discontinued Operations”), results of operations that meet the criteria for discontinued operations are reported as a separate component of income, and those related amounts that had been previously reported have been reclassified. In addition, as a result of the

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adoption of ASC 810-10-65-1 (“Consolidation—Non controlling Interests in Consolidated Financial Statements”), “Income before income taxes, minority interests in earnings of subsidiaries, discontinued operations and extraordinary gain”, “Net income” and “Shareholders’ equity”, which were used before the adoption, have been reclassified as “Income before income taxes, discontinued operations and extraordinary gain”, “Net income attributable to ORIX Corporation”, and “ORIX Corporation shareholders’ equity”, respectively.

⁽²⁾ The sum of assets considered 90 days or more past due and loans individually evaluated for impairment amounted to ¥120,607 million, ¥134,394 million, ¥203,253 million, ¥495,514 million and ¥386,146 million as of March 31, 2006, 2007, 2008, 2009 and 2010, respectively. These sums included: (i) investment in direct financing leases considered 90 days or more past due of ¥20,494 million, ¥21,149 million, ¥22,637 million, ¥27,949 million and ¥25,682 million as of March 31, 2006, 2007, 2008, 2009 and 2010, respectively, (ii) installment loans (excluding loans individually evaluated for impairment) considered 90 days or more past due of ¥16,455 million, ¥12,656 million, ¥15,333 million, ¥17,860 million and ¥12,321 million, as of March 31, 2006, 2007, 2008, 2009 and 2010, respectively, and (iii) installment loans individually evaluated for impairment of ¥83,658 million, ¥100,589 million, ¥165,283 million, ¥449,705 million and ¥348,143 million as of March 31, 2006, 2007, 2008, 2009 and 2010, respectively. See “Item 5. Operating and Financial Review and Prospects—Results of Operations—Year Ended March 31, 2010 Compared to Year Ended March 31, 2009—Details of Operating Results—Revenues, New Business Volumes and Investments—Direct financing leases” and “—Installment loans and investment securities.”

⁽³⁾ Return on ORIX Corporation shareholders’ equity is the ratio of net income attributable to ORIX Corporation for the period to average ORIX Corporation shareholders’ equity based on fiscal year-end balances during the period. Return on assets is the ratio of net income attributable to ORIX Corporation for the period to average total assets based on fiscal year-end balances during the period. ORIX Corporation shareholders’ equity ratio is the ratio as of the period end of ORIX Corporation 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.

⁽⁴⁾ Basic earnings per share for income attributable to ORIX Corporation from continuing operations is the amount derived by dividing income attributable to ORIX Corporation 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 per share for income from continuing operations attributable to ORIX Corporation as used throughout this annual report has the meaning described above.

⁽⁵⁾ The U.S. dollar amounts represent translations of the Japanese yen amounts using noon buying rates for Japanese yen per $1.00 in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York in effect on the respective dividend payment dates.

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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 ¥93.04 = $1.00, which was the approximate exchange rate in Japan on March 31, 2010 using the telegraphic transfer rate of the Bank of Tokyo-Mitsubishi UFJ, Ltd. The following table provides the noon buying rates for Japanese yen, expressed in per $1.00 in New York City for cable transfers in foreign currencies. As of June 25, 2010, the noon buying rate for Japanese yen was ¥89.35 = $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,
	2006		2007		2008		2009		2010
	(Yen per dollar)
Yen per dollar exchange rates:
High	¥	120.93	¥	121.81	¥	124.09	¥	110.48	¥	100.71
Low		104.41		110.07		96.88		87.80		86.12
Average of the last days of the months		113.67		116.55		113.61		100.85		92.49
At period-end		117.48		117.56		99.85		99.15		93.40

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

	High		Low
2009
December	¥	93.08	¥	86.62
2010
January	¥	93.31	¥	89.41
February		91.94		88.84
March		93.40		88.43
April		94.51		92.03
May		94.68		89.89

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 activities, financial condition and results of operations and the trading prices of our securities could be adversely affected by any of the factors discussed below or other factors. This annual report also contains forward-looking statements that involve 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. Risks related to our external environment

(1) Our business activities, financial condition and results of operations may be adversely affected by sluggishness in the European, U.S. and Japanese economies

Although the uncertainty in the European, U.S. and Japanese economies caused by the financial meltdown is gradually subsiding due to successful fiscal measures taken by numerous governments throughout the globe, private demand is still weak, unemployment rates remain high and there are new concerns related to the financial stability of particular countries, such as Greece.

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There have been signs of economic recovery in Japan, including an improved business sentiment among large companies for four consecutive quarters as shown in the Bank of Japan’s tankan (quarterly survey of business sentiment). However, funding requirements and capital expenditures of domestic companies still remain sluggish amid concerns about Japan’s future economic growth, share price and exchange rate volatility, and high unemployment rates.

Despite our attempts to minimize our exposure to these Japanese and global economic problems through the development and implementation of risk management procedures, continuing weakness in the European, U.S. and Japanese economies could adversely affect our business activities, financial condition and results of operations.

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

Our primary sources of funds from financing activities are: borrowings from banks and other institutional lenders, funding from capital markets (such as offerings of commercial paper, or CP, medium-term notes, straight bonds, convertible bonds, asset-backed securities and other debt securities) and deposits. Such sources include a significant amount of short-term debt, such as CP and short-term borrowings from various institutional lenders, and long-term debt maturing in the current fiscal year ending March 31, 2011. Some of our committed credit lines require us to comply with financial covenants and maintain certain credit ratings. In addition, some of the nonrecourse loans under which we borrow funds to finance specific projects require early repayment in the event that the relevant projects experience declines in performance.

The turmoil in the financial and capital markets led to a reduction in liquidity in Europe, the United States and Japan. Although currently the turmoil in the financial and capital markets has calmed down and liquidity has gradually recovered, there is no guarantee that such problems will not recur in the future.

The increased risks to our financial liquidity will increase the possibility that our ability to raise new funds in the market or to renew existing funding sources may become uncertain; we may be exposed to increased funding costs; we may be more subject to volatility in the credit markets; and our securities may not be attractive to investors in the capital markets. If our access to liquidity is restricted, or if we are unable to obtain our required funding at acceptable costs, our financial condition and results of operations would be significantly and adversely affected.

We obtain credit ratings from ratings agencies. See “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources” for details of our credit ratings. A downgrade in our credit ratings could result in an increase in our interest expenses and could have an adverse effect on our fund-raising ability by increasing costs of issuing CP and corporate debt securities, decreasing investor demand for our securities, increasing our bank borrowing costs or reducing the amount of bank credit available to us. As a result, our financial condition and results of operations may be adversely affected.

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

We compete with our competitors primarily on the basis of pricing, terms, transaction structure and service quality. Other competitive factors include industry experience and client relationships. Our competitors sometimes seek to aggressively compete 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. Similarly, some of our competitors are larger than we are, have access to capital at a lower cost than we have and may be better able to maintain profits at reduced prices. If we try to compete with our competitors on pricing, terms or service quality, we may experience lower income or reduced profitability.

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(4) Negative press coverage or rumors could affect our business activities, financial condition, results of operations or share price

Our business depends upon the confidence of customers and market participants. Negative press coverage or rumors (including on the Internet) about our activities, our industry or parties with whom we do business could harm our reputation and diminish confidence in our business. If we become aware of such negative press coverage, we typically assess the situation and take action, if appropriate. However, even if we provide appropriate and timely explanations to the press and other interested parties, there is no assurance that we can prevent an adverse effect on our reputation. If we suffer reputational damage as a result of any negative publicity, there is a chance that we will lose customers or business opportunities, which could adversely affect our results of operations and cause our share price to decline.

(5) 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. Shifts in commodity market prices and consumer demands, political instability or religious strife in any such region could adversely affect our operations.

(6) Enactment of, or changes in, laws, regulations and accounting standards may affect our business activities, financial condition and results of operations

Enactment of, or changes in, laws and regulations may affect the way that we conduct our business, the products or services that we may offer in Japan or overseas as well as our customers, borrowers, invested companies and funding sources. Such enactment or changes are unpredictable and may cause our costs to increase. As a result of such enactment or changes, our business activities, financial condition and results of operations could be adversely affected.

Enactment of, or changes in, accounting standards may have a significant effect on how we record and report our financial condition and results of operations, even if our underlying business fundamentals remain the same. As a result of such enactment or changes, our business activities, financial condition and results of operations could be adversely affected.

(7) Our business activities, financial condition and results of operations may be adversely affected by unpredictable events

Our business activities, financial condition and results of operations may be adversely affected by unpredictable events or any continuing effects caused by such events. Unpredictable events include man-made events, such as accidents, war, terrorism and insurgency, and natural events, such as earthquakes, storms, tsunamis, fires and outbreaks of new strains of influenza or other infectious diseases. These events may, among other things, cause unexpectedly large market price movements or an unexpected deterioration of the economic conditions of a country or region. If such a sudden and unpredictable event occurs in an area where we operate, either as a single event or in combination with other events, we may be unable to respond to such changing economic conditions in a timely manner, and our results of operations may be adversely affected as a result.

2. Risks 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;

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• 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. This allowance may be inadequate due to adverse changes in the Japanese and overseas economies in which we operate, or discrete events that adversely affect specific customers, industries or markets.

Recently, the operating results of many companies have deteriorated due to restricted credit availability, which was caused by the meltdown of the global financial and capital markets and the ensuing economic recession. Additionally, a deterioration of the real estate market has increased the risk of delay in payments of principal and interest on loans to real estate-related companies, particularly nonrecourse loans for which cash flow from real estate is the source of repayment. Similarly, the impaired liquidity of the real estate market has caused the vacancy rate of rental properties to rise and rents to fall, resulting in a decline in real estate values. We have endeavored to reduce the amount of outstanding loans to real estate-related companies. However, depending upon future economic condition, we may be required to make additional provisions in the future and our results of operations may be adversely affected. See “Item 5—Operating and Financial Review—Results of Operations—Year Ended March 31, 2010 Compared to Year Ended March 31, 2009—Details of Operating Results—Revenues, New Business Volumes and Investments—Installment loans and investment securities—Asset quality of our owned installment loans” for details of our additional provisions for doubtful receivables and probable loan losses.

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 market conditions are adverse, the value of underlying collateral and guarantees may decline. As a result, our credit-related costs might increase. If we need to increase our allowance for doubtful receivables on direct financing leases and probable loan losses, or if our credit-related costs increase to cover these changes or events, our results of operations could be adversely affected.

(2) We may suffer losses on our investment portfolio

We hold investments in debt and equity securities, funds, ships, aircraft and real estate in Japan, the United States and other regions. The market values of our investment assets are volatile and may decline substantially in the current year or future years.

The uncertainty in the European, U.S. and Japanese financial and capital markets has led to significant reductions in the liquidity of securities, greater volatility, widening of credit spreads and a lack of price transparency. In addition, the markets for ships, aircraft and real estate have deteriorated due to economic uncertainty. Although the economic uncertainty in Europe, the United States and Japan has gradually subsided, a recurrence of adverse market conditions could cause us to suffer unexpected losses from declines in the fair market value of securities, funds, ships, aircraft and real estate. We record losses from declines in the fair market value of such assets based on the fair market value as of the fiscal year end in accordance with applicable accounting principles. Due to a decline in liquidity, or to the absence of liquidity, there is no assurance that we would be able to sell any such investments at their recorded price.

(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 management (“ALM”), fixed and variable

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interest rates and terms of fixed-rate assets and liabilities are not uniform among our assets and liabilities. As such, increases or decreases in market interest rates or changes in the yield curve could adversely affect our results of operations.

In addition, the value of our assets may move independently of market interest rates. Where funds procurement costs are increasing due to a significant increase in market interest rates or the perception that an increase may occur, financing lease terms and loan interest rates for new transactions may diverge from the trend in market interest rates.

Furthermore, changes in market interest rates could have an adverse effect on the credit quality of our assets and our asset structure. With respect to our floating-rate loan assets, if market interest rates increase, the repayment burdens of our customers may also increase, which could adversely affect the financial condition of such customers and their ability to repay their obligations to us, possibly resulting in defaults. Alternatively, a decline in interest rates could result in increased prepayments of loans and a decrease in our assets.

We have subsidiaries and affiliates in the United States and other countries outside of Japan. Although we generally attempt to hedge foreign exchange risks that arise from these business operations through matched funding, foreign exchange contracts, currency swaps and other hedging instruments, not all of our foreign exchange risks are perfectly hedged. Similarly, any retained earnings accumulated in foreign currencies at our overseas subsidiaries are also subject to exchange risks. 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 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, and to manage interest rate and foreign exchange rate risk. 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. Alternatively, our ability to enter into derivative transactions may be adversely affected if our credit ratings are downgraded.

We may also suffer losses from trading activities, a part of which includes the use of derivative instruments. As a result, our financial condition and results of operations could be adversely affected. For a discussion of derivative financial instruments and hedging, see Note 28 in “Item 18. Financial Statements.”

Our use of these derivatives may adversely affect our financial condition and results of operations.

3. Risks related to our business overall

(1) 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 have proactively expanded the range of our product sales and services in Japan and overseas beyond our traditional businesses, we are exposed to new and increasingly complex risks, some or all of which we may be unable to control, and we may incur substantial losses. In addition, our efforts to offer new products and services may not achieve the expected results if business opportunities do not increase as expected or if competitive pressures undermine the profitability of the available opportunities. Restructuring of, or withdrawal from, businesses in which we engage could harm our reputation and adversely affect our financial condition and results of operations.

We cannot guarantee that the price we pay for acquisitions will be fair and appropriate. If the results of operations of acquired companies are lower than what we expected at the times we made the acquisitions, our acquisitions could result in large future write-downs of goodwill and other assets.

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In recent years, the contribution from consolidated subsidiaries and equity method affiliates to our consolidated results of operations has increased and has been an important component of our income. There can be no assurance that this contribution will be maintained. While we will continue to review and selectively pursue investment opportunities, there can be no assurance that we will continue to identify attractive opportunities, or that investments will be as profitable as we originally expected. Our subsidiaries and affiliates have a wide range of business operations, including operations that are very different from financial services, our core business. Failure to manage investee 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 investments at times or prices we initially expected. We may also need to provide financial support, including credit support or equity investments, to some investee companies if their financial condition deteriorates. We may lose key personnel in investee companies if such personnel are not satisfied with our management.

In the event that any subsidiary or affiliate to which we transfer our personnel to serve as directors or officers is implicated in a problem of significant public concern, our reputation may be adversely affected irrespective of whether such persons perform their obligations appropriately.

(2) Changes in the legal or financial stability of, or cultural differences with, any counterparties with whom we enter into joint ventures or alliances could adversely affect our results of operations

We operate joint ventures and enter into alliances with foreign and domestic counterparties, and the success of these operations is often dependent upon the financial and legal stability of these counterparties. If one of the counterparties with whom we operate a joint venture or have a business alliance suffers a decline in its financial condition for any reason, or is subject to instability because of a change of the laws governing its operations after we have invested in the joint venture or the business alliance and begun operations, we may not be able to successfully operate the joint venture or alliance, or we may be required to pay in additional capital or close the operations altogether. Likewise, significant differences in corporate culture between us and these partners may come to light, and may result in significant changes to the assumptions that we made when we decided to begin the operations. If our alliance counterparties are unable to perform as expected, or if any unexpected events relating to the alliances shall occur, then we may not be able to continue those alliances successfully. Our inability to successfully operate joint ventures or alliances may adversely affect our reputation and results of operations.

(3) Outsourcing may adversely affect our business activities or reputation

We outsource some of our business functions including the management and development of our main information technology system, the maintenance of our leasing assets and the management and safekeeping of our contracts. If any of our outsourcing vendors are not able to conduct the entrusted business appropriately, whether due to their financial distress, the exposure of misconduct, their lack of ability, the leak or destruction of confidential or personal information owned or held by us or for any other reason, our business activities or reputation may be adversely affected.

(4) We face various operational risks

Our businesses entail many types of operational risks. Operational risk is defined as the risk of loss resulting from inadequacies in, or failures of, internal processes, people and systems, or from external events. Examples of operational risk include inappropriate sales practices, the divulging of confidential or personal information, inadequate internal communication of necessary information, misconduct of officers, employees, agents, franchisees, trading associates or third parties, errors in the settlement of accounts, computer system security failures, breaking and entering and conflicts with employees concerning labor and workplace management.

Our management attempts to control operational risk and maintain it at a level that 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.

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Our main 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 business activities, financial condition and results of operations

Our business and employees in Japan are subject to laws, as well as regulatory oversight of government authorities who implement those laws, relating to the various fields in which we operate. This includes laws and regulations applicable to financial institutions such as the Moneylending Business Act, the Installment Sales Act, the Insurance Business Act, the Banking Act, the Trust Business Act, the Building Lots and Buildings Transaction Business Act and the Building Standards Act, as well as general laws applicable to our business activities such as the Companies Act, the Financial Instruments and Exchange Act, the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade and the Act on the Protection of Personal Information.

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. For example, in addition to being subject to U.S. securities laws, we are also prohibited or otherwise restricted by U.S. law from entering into any transactions with countries listed as state sponsors of terrorism. 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 not function adequately. 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 activities, 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 the investigation becomes publicly known, our reputation may be harmed and our business activities may be adversely affected.

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

We utilize 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 also offer data center services for our customers. System shutdowns, malfunctions or failures, the mishandling of data or fraudulent acts by employees or third parties, or infection by a computer virus could have adverse effects on our operations, for example by causing delay in the receipt and payment of funds, the leak or destruction of confidential or personal information, the 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 could be adversely affected. Alternatively, the liquidity of customers who rely on us for financing or payment or who utilize our data center services could be adversely affected, and our relationships with such customers could also be adversely affected. The occurrence of any of these or any other disruptions could result in our being 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 from terrorism. Since information systems serve an increasingly important role in business activities, there is an increasing risk of stoppage of the network or information systems due to disaster or terrorism. 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.

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

Our businesses require a considerable investment in human resources and the retention of such resources in order to successfully compete in markets in Japan and overseas. Many of our businesses require employment of talented individuals who have experience and knowledge in the financial 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.

(5) 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 current senior management could have an adverse effect on our business activities, financial condition and results of operations.

(6) If our independent registered public accounting firm finds that our internal controls over financial reporting are insufficient, investors may lose confidence in the reliability of our financial statements, adversely affecting 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 each SEC-registered foreign private issuer to include in its Annual Report on Form 20-F a report containing 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 provide an attestation report on the effectiveness of the company’s internal controls over financial reporting. These requirements are reflected in our Annual Reports filed on Form 20-F for the fiscal years ended March 31, 2007 and thereafter.

Similarly, the Financial Instruments and Exchange Act was enacted in June 2006 in Japan. Article 24-4-4 thereof requires that a listed company shall submit its internal control report with an audit certificate issued by an independent registered public accounting firm together with its annual securities report. These requirements are applicable to annual securities reports issued for the fiscal year ended March 31, 2009. Pursuant to the provisions of the “Cabinet Office Ordinance on the System for Ensuring Appropriateness of Statements on Finance and Accounting and Other Information” (2007, No. 62) (the “Cabinet Office Ordinance”), our internal control reports required under the Financial Instruments and Exchange Act are prepared in conformity with the requirements under U.S. accounting standards for the terms, form and preparation method of internal control reports and by including additional information regarding significant differences between the reports prepared in accordance with Japanese accounting standards.

Although we have established and assessed our internal controls over financial reporting in a manner intended to ensure compliance with the requirements of various laws and regulations, in future periods our independent registered public accounting firm may identify material weaknesses in our internal controls over financial reporting and may issue a report that our internal controls over financial reporting are ineffective. These possible outcomes could have a negative impact on our share price, reputation, business activities, financial condition or results of operations due to a loss of investor confidence in the reliability of our financial statements.

(7) Our risk management may not be effective

We continuously seek to improve our risk management function. However, due to the rapid expansion of our business or significant changes in the business environment, our risk management may not be effective in some cases. We operate in a wide variety of businesses and geographic areas and if we are unable to effectively manage new or existing risks, our financial condition and results of operations could be adversely affected.

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4. Risks related to specific businesses

(1) Our real estate-related operations expose us to various risks

Our real estate-related operations include real estate finance and real estate business. Real estate finance is comprised of nonrecourse loans for which cash flow from real estate is the source of repayment, and underwriting specified bonds that are issued by special purpose entities (SPEs), which are secured by real estate. Our real estate business comprises the development and lease of office buildings, rental housing, commercial facilities and logistics warehouses; the construction and sale of condominiums; asset management services for real estate investment trusts (REITs); and real estate investment advisory business.

These operations are associated with the following risks:

(a) Risks relating to real estate finance

Our real estate finance business is suffering due to severe real estate market conditions. A continuation of the present circumstances or further deterioration of real estate market conditions may decrease the estimated collectable amount and the value of real estate held as collateral, which could require us to increase our provisions for doubtful receivables and probable loan losses or purchase the senior portion of debt to protect subordinated debt held by us. If the stagnation of the real estate market continues, the loss on the collection of loans through the sales of the real estate may exceed the amount that we initially estimated. As a result, our financial condition and results of operations may be adversely affected.

(b) Risks relating to development and lease of real estate

Our real estate development business is subject to various risks. For example, if we are required to amend initial real estate development plans after obtaining relevant government approvals and licenses as a result of discussions with residents neighboring the project site or otherwise, our reputation as a real estate developer may suffer. Also, if any of our peer companies are reported to have engaged in misconduct in real estate development projects, the overall creditability of the real estate market could suffer and lead to shifts in consumer preferences. Sales volumes could be adversely affected due to bankruptcy, changes in financial condition or misconduct of our counterparties to joint ventures. These factors could adversely affect our financial condition and results of operations.

As real estate market conditions have deteriorated, vacancy rates have risen and rents have dropped. If such trends continue, our financial condition and results of operations could be adversely affected.

We invest in the acquisition of real estate and real estate development projects through SPEs. If any such SPE has difficulty repaying a third party, we may contribute additional funds or loans for such repayment.

(c) Risks relating to warranty against defects

When we commence a building construction project, we try to obtain indemnity against any breach of contract or defect of property from the contractor. Also, when we purchase a property, we try to obtain indemnity from the seller to cover losses and expenses caused by any defects of geological condition, building structure or material in relation to such property. If construction work is postponed or cancelled due to the 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 indemnity provided is insufficient due to a deterioration of the indemnitor’s financial condition, we may be required to indemnify the tenant or purchaser and thereby incur losses. Even if we do not have to indemnify the tenant or purchaser, we may incur additional costs, including additional construction costs, to complete or operate property causing our expenditures to exceed our initial budget. In addition, even if we do not incur financial loss, property defects may adversely affect our reputation due to our involvement as the seller, owner or original developer.

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(d) Risks relating to amendments to or changes in real estate-related laws and regulations

We may have latent liabilities for soil contamination cleanup costs related to certain of our real estate acquisitions. Before the Soil Contamination Countermeasures Act came into effect in February 2003, we did not, at the time of acquisition, investigate land (including land provided as loan collateral) 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 the land is polluted and it is necessary to take countermeasures under the Soil Contamination Countermeasures Act, this could adversely affect the value of the land or the amounts collectable 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 Countermeasures Act came into effect, our investigations may have failed to identify risk and a subsequent determination that such land is polluted may have the same adverse consequences.

If the Building Standards Act, the City Planning Act or any other property-related laws and regulations are amended, we may incur additional responsibilities and our expenses may increase.

(e) Risks relating to casualty insurance coverage

We generally carry comprehensive property and casualty insurance covering our real estate investments acquired as part of our real estate business, with insured limits that we believe are adequate and appropriate in light of anticipated losses. However, certain types of losses, such as losses caused by wars, acts of terrorism, willful acts or gross negligence, 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 premiums are relatively expensive.

In the event that our real estate investments suffer uninsured losses, our investment balances in and revenues from such investments could be adversely affected. In addition, in the event that a building or real estate development project in which we have invested is destroyed or otherwise rendered unusable, we would likely remain liable for indebtedness and other financial obligations relating to the relevant property.

(2) 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 estimate the residual value at the time of contract and may suffer losses if we are unable to sell or re-lease the equipment at the end of the leasing period for the residual value that we estimated at the beginning of the lease. This risk is particularly significant for operating leases. 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; however, we may need to recognize additional valuation losses if our estimates differ from actual trends in equipment valuation and the secondhand market.

(3) 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. In 2005, inappropriate sales activity by equipment distributors was a serious problem in the telephone equipment leasing industry, and we received an increased number of customer claims and inquiries. In response to the industry trend, the Ministry of Economy, Trade and Industry altered its position regarding the application of the “the Order for Enforcement of the Act on Specified Commercial Transactions” in 2005 and has provided guidance to firms in the related industries on compliance measures. If the same problems recur, whether in relation to telephone equipment or other types of equipment leased by us, leasing contracts may be cancelled before maturity, adversely affecting our business performance, and our reputation may suffer. The measures that we have taken or may take in the future to resolve and address these problems may cause leasing business costs to increase and leasing transactions to decline.

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

We provide credit to companies in entertainment-related industries, such as pachinko hall operators, primarily through direct financing leases and installment loans. Even though we have accumulated credit know-how from past experience and obtain collateral that we consider adequate after thorough examination of the risks presented by these industries, our business activities, financial condition and 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 the financial condition and credit of our customers in these industries.

(5) 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 through ORIX Environmental Resources Management Corporation in June 2006 as a Private Finance Initiative, or PFI, under contract with Saitama prefecture in Yorii-machi, Saitama. In addition, we acquired Kanematsu Environmental Corporation (now Funabashi Environmental Corporation) in March 2008 to develop an industrial waste disposal business mainly in Funabashi, Chiba. In order to minimize the risk of emitting environmental pollutants, ORIX Environmental Resources Management Corporation utilizes advanced waste disposal techniques. ORIX Environmental Resources Management Corporation has contracted with the waste disposal specialist firm that constructed the facility to serve as operator of the facility. The Funabashi Environmental Corporation has established a facility that minimizes the risk of emitting environmental pollutants. Although we try to reduce the risks related to operating our industrial waste disposal business, environmental pollution could occur due to an operational error or defect in the disposal facility. To protect against a variety of such accident risks, ORIX Environmental Resources Management Corporation has ensured that the relevant operator bears responsibility for the operation and maintenance of the facility under its operating agreement and responsibility for defects in the facility under the design and construction contracts.

However, in the event that the financial condition of the operator has deteriorated to the point that it cannot perform its contractual obligations or indemnify us for losses, we will be required to bear such losses. Furthermore, we will be responsible for any accident occurring by reason of any event other than those for which the operator is responsible by contract. If such an accident occurs, we will be required to incur loss. Even if we do not incur any direct financial loss, our reputation could be adversely affected.

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

We rent medical instruments to customers. We contract for the inspection of such medical instruments with professionals designated by the manufacturers. The manufacturers are responsible for any injuries or damages caused by defects in such medical instruments. However, as a lessor, we also have potential obligations for such defects. Further, even if there is no pecuniary liability, our reputation could be adversely affected by product defects.

We provide housing and elderly care services to senior citizens, including through the operation of at-home nursing care and nursing home facilities. 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 results of operations could be adversely affected.

(7) If our services to customers are insufficient, we may be obligated to compensate our customers

We provide M&A and financial advisory and consulting services to our customers, including through our subsidiaries ORIX M&A Solutions Corporation and Houlihan Lokey Howard & Zukin (“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.

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We also provide various services such as maintenance services for leasing assets and environment-related solution services, the operation of hotels, golf courses and training facilities for which we are expected to meet our customer’s expectations and standards of value applicable to such high value-added services. Although we strive to provide high quality services, our reputation may be harmed and our business activities may be adversely affected if we fail to meet customer expectations or maintain service quality. If such services are insufficient and our customers suffer losses as a consequence, we may be obligated to compensate our customers for those losses.

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

We are exposed to the risk of unpredictable and potentially substantial increases in insurance payments for deaths and hospital benefits, in relation to the business of ORIX Life Insurance Corporation, or ORIX Life Insurance. ORIX Life Insurance may incur valuation losses or losses on sales if the value of securities or real estate that it purchases for asset management purposes decreases. It is also subject to strict regulatory oversight, which includes the maintenance of certain specified capital and liability reserve requirements. If ORIX Life Insurance suffers valuation or other losses that affect its ability to maintain its regulatory capital or liability reserve requirements, or changes in regulations in which require ORIX Life Insurance to increase its capital or liability reserves, we may be required to provide financial support through capital contributions. In addition, if ORIX Life Insurance fails to conduct reasonable asset liability management, or ALM, to appropriately manage risks and returns on investment assets and underwriting risks on insurance policy benefits, its financial condition and results of operations may suffer.

ORIX Life Insurance is required to make 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 premiums and policy reserves within the industry. Because a number of life insurers have become insolvent since 1998, the PPC’s financial resources have been depleted by financial support provided to those companies. If there are further bankruptcies of life insurers, other members of the PPC, including ORIX Life Insurance, may be required to make additional contributions to the PPC. In such an event, our financial condition and results of operations may be adversely affected.

(9) If the reputation of our professional baseball team declines, our share price, business activities, financial condition and results of operations 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 that 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.

(10) Ship brokerage exposes us to market and credit risks

We operate a ship brokerage business in which we simultaneously place orders for new ships with shipbuilders and enter into purchase agreements with our customers who purchase the ships for use upon completion. As the process of shipbuilding takes several years from the placement of an order to delivery of the ship, if a purchasing customer defaults under its purchase agreement due to a decline in market conditions or deterioration of its cash flow, we are not excused from our obligation to purchase the ship upon completion. Also, if a shipbuilder becomes unable to complete and deliver a ship for financial or other reasons, we will be obliged to repay the deposit received from the customer regardless of whether or not the advance was repaid by the shipbuilder. Any of these above events may adversely affect our results of operation.

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5. Risks related to holding or trading our Shares and ADRs

(1) Dispositions of 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 Shares, particularly dispositions of large numbers of Shares by major shareholders, may adversely affect market prices for the Shares.

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

(2) 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 Companies Act 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 incorporated elsewhere. 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 in asserting your rights as a shareholder than you would as a shareholder of a corporation organized in a jurisdiction outside Japan. For a detailed discussion of the relevant provisions of the Companies Act and our Articles of Incorporation, see “Item 10. Additional Information—Memorandum and Articles of Incorporation.”

(3) 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 U.S. 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 U.S. courts, judgments of U.S. courts predicated upon the civil liability provisions of U.S. securities laws. ORIX has been advised by its Japanese counsel that there is doubt, in original actions or in actions to enforce judgments of U.S. courts, as to the enforceability in Japan of civil liabilities based solely on U.S. securities laws. A Japanese court may refuse to allow an original action based on U.S. 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 U.S. court, you will not necessarily be able to enforce such judgment directly in Japan.

(4) We expect to be a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. investors

We expect to be a passive foreign investment company under the U.S. Internal Revenue Code because of the composition of our assets and the nature of our income. Assuming this is the case, U.S. investors in our Shares or ADSs will be subject to special rules of taxation in respect of certain dividends or gain on such Shares or ADSs, including the effective treatment of gains realized on the disposition of, and certain dividends received on, the

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Shares or ADSs as ordinary income earned pro rata over a U.S. 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 interest charges for a deemed deferral benefit. In addition, the favorable rates of tax applicable to certain dividends received by certain non-corporate U.S. investors would not be available. See “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.

(5) 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. Each unit of the Shares has one vote. A holder who owns Shares other than in multiples of 10, will own less than a whole unit (i.e., for the portion constituting fewer than 10 Shares.) The Companies Act 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, a holder of Shares constituting less than a unit has the right to require ORIX to purchase its Shares and the right to require ORIX to sell it additional Shares to create a whole unit of 10 Shares. However, a holder of ADRs is not permitted to withdraw underlying Shares representing less than one unit, which is equivalent to 20 ADSs, and, as a practical matter, is 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.

(6) 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 dollar 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.

(7) 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 a nominee 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 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 Building, 4-1-23 Shiba, Minato-ku, Tokyo 108-0014, Japan, and our phone number is: +81 3 5419 5000. Our general contact URL is https://ssl.orix-form.jp/ir/inquiry_e/ and our URL is: http://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 (“ORIX USA”) is ORIX’s agent in the United States, and its principal place of business is at 1717 Main Street, Suite 900, Dallas, Texas 75201, USA.

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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 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 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, our Shares have been listed on the first sections of the Tokyo Stock Exchange and the Osaka Securities Exchange. In September 1998, ORIX listed on the New York Stock Exchange (“NYSE”) with the ticker symbol “IX.” ORIX was also listed on the Nagoya Stock Exchange from February 1973 to 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 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 (operations were absorbed by ORIX in 2010)), which concentrated on leasing furnishings and fixtures to retailers, hotels, restaurants and other businesses. We subsequently set up a number of specialized leasing companies to tap promising new markets, including ORIX Auto Leasing Corporation (now ORIX Auto) in 1973, 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 (“ORIX Securities,” formerly Akane Securities K.K.) 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.

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In the 1990s, the Japanese economy experienced a protracted period of industrial stagnation and, in the later 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 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), 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, which former joint venture is presently a subsidiary of ORIX USA.

In 1999, in order to increase the efficiency of our domestic real estate-related operations, we established our Real Estate Finance Headquarters, which is primarily engaged in real estate-related finance, and ORIX Real Estate Corporation (“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 (“CMBS”), 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. In January 2008, for the purpose of leveraging our structured finance and investment expertise, we integrated our Real Estate Finance Headquarters into our Investment Banking Headquarters.

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 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 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. In January 2006, we entered the investment banking field in the United States with the acquisition of Houlihan Lokey. Houlihan Lokey established operations in Hong Kong and Japan in 2007 and is expanding its financial advisory services across a broad range of operations, including advisory operations and valuation support for cross-border mergers and acquisitions. In May 2010, we acquired RED Capital Group, a U.S.-based company that provides financing for multi-family, senior living and healthcare-related real estate development projects in the United States through programs of the Federal Housing Administration (FHA) and the Federal National Mortgage Association (Fannie Mae).

In June 2008, to promote further diversification within ORIX’s operations throughout Asia, Oceania, the Middle East and Europe, we consolidated our International Business Headquarters and our Alternative Investment and Development Headquarters to create the International Administrative Headquarters, which we subsequently converted into our Global Business and Alternative Investment Headquarters in January 2009. In December 2009, as part of our strategy to expand local business and investments in China, we established ORIX (China) Investment Co., Ltd. in Dalian.

In line with our strategy of pursuing business alliances with financial institutions for future corporate development, we joined forces with Sumitomo Mitsui Banking Corporation to form ORIX Credit joint venture in July 2009. As a result, our shareholding in ORIX Credit decreased from 100% to 49%. Also, in January 2010, we formed a capital alliance with the Monex Group, Inc., pursuant to which ORIX and Monex Group, Inc. concluded a share exchange in which we acquired a 22.5% stake of Monex Group, Inc. in exchange for our 100% stake of ORIX Securities. Subsequently, in May 2010, ORIX Securities and Monex, Inc. were combined to form one of Japan’s largest Internet-based securities brokers.

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STRATEGY

Target Performance Indicators

Our swift efforts to strengthen the ORIX Group’s financial base through reduction of assets and a capital increase during the global financial crisis resulted in a dramatic increase in stability with ORIX Corporation shareholders’ equity ratio of 16.8% as of March 31, 2010. We are once again shifting our momentum toward continued future growth. In this context, we will use the following performance indicators: ORIX Corporation shareholders’ equity ratio to indicate stability, ROE to indicate capital efficiency and net income attributable to ORIX Corporation to indicate profitability. For the foreseeable future, we will strive to improve profitability while maintaining our current ORIX Corporation shareholders’ equity ratio, and will aim to achieve a medium- to long-term target of around 10% ROE.

Three-year trends in performance indicators are as follows.

		As of March 31,
		2008	2009	2010
Net Income Attributable to ORIX Corporation	(millions of yen)	169,597	21,924	37,757
ROE	(%)	13.8	1.8	3.1
ORIX Corporation Shareholders’ Equity Ratio	(%)	14.1	13.9	16.8

Medium- and Long-Term Corporate Management Strategies

We believe that it is vital to respond to changes in the market environment with agility and flexibility. The ORIX Group consists of six business segments (Corporate Financial Services, Maintenance Leasing, Real Estate, Investment Banking, Retail and Overseas Business) that represent a wide range of businesses, and Group-wide risk is controlled through a diversified business portfolio. While domestic and international financial institutions were forced to record large losses due to the financial crisis, we were able to secure profits through the complimentary nature of our diversified portfolio.

From a funding standpoint, ORIX was able to weather the brunt of the financial crisis by maintaining a roughly 50:50 ratio of direct and indirect funding, through its solid relationships with over 200 domestic and international financial institutions and by actively issuing long-term bonds.

We will focus on the dual management strategy of “From ‘Finance’ to ‘Finance + Services’” and “Expanding Business in Asia” and will realize stable operations and steady growth through further enhancement of financial stability and comprehensive risk management.

Our strategies for specific areas for business expansion and promotion are as follows.

• “From ‘Finance’ to ‘Finance + Services’”: After the occurrence of structural changes in the finance business environment caused by the financial crisis, providing additional high value-added services has been deemed essential for pursuing increased profitability in the finance business. We are already providing “Finance + Services” through our automobile maintenance leasing service and loan servicing operations. We aim to further enhance and expand current operations capitalizing on our accumulated client base, knowledge and expertise.

• “Expanding Business in Asia”: As significant economic growth is observed in emerging countries, business expansion in Asia, especially China, is vital for company growth. The ORIX Group will embrace growth in Asia by expanding operations, capitalizing on local subsidiaries and partner networks and leveraging our successful investment track record.

We will also further strengthen and enhance our existing operating platform in the deployment of these strategies. In addition, we will create a new operating base by continually developing new products and services and making proposals valued by clients and society.

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Corporate Challenges to be Addressed

The operating environment we are currently facing is dramatically changing in line with structural changes in society, such as strong growth of emerging nations together with minimal or no growth of developed nations, contraction of the financial markets, new and impending financial regulations and global warming. It is vital for the ORIX Group to continue to maintain and develop a business structure that can flexibly and swiftly adapt to such a rapidly changing operating environment. Specifically, we expect to adapt to the changing operating environment by taking the following steps.

• Further advancement of risk management

• Pursuit of transactions that are both socially responsible and economically viable

• Creation of a fulfilling workplace

• Further advancement of risk management: We will seek to further enhance our monitoring and control of each business in accordance with its characteristics, with a particular focus on thoroughness and transparency, while diversifying our businesses based on “Finance + Services” and “Expanding Business in Asia” in line with the changing operating environment.

• Pursuit of transactions that are both socially responsible and economically viable: We will pursue transactions that are socially responsible from a compliance and environmental standpoint, while providing products and services that are valued by our clients and have the potential to improve our profitability.

• Creation of a fulfilling workplace: We will focus on our strength as a global organization to create a fulfilling work environment for all employees regardless of nationality, age, gender, background or type of employment.

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PROFILE OF BUSINESS BY SEGMENT

Our reportable segments are based on ASC 280-10 (“Segment Reporting”). For a discussion of the basis for the breakdown of segments, see Note 32 in “Item 18. Financial Statements.” The following table shows a breakdown of profits by segment for the years ended March 31, 2008, 2009 and 2010.

	Years ended March 31,
	2008			2009			2010
	(In millions of yen)
Corporate Financial Services	¥	35,412		¥	(10,451	)	¥	(17,581	)
Maintenance Leasing		37,235			25,621			21,742
Real Estate		83,065			50,508			9,413
Investment Banking		47,483			(63,397	)		(11,960	)
Retail		27,463			9,573			31,104
Overseas Business		57,862			20,066			37,142
Total segment profits		288,520			31,920			69,860
Difference between segment total and consolidated amounts		(42,401	)		(23,233	)		(14,252	)
Total Consolidated Amounts	¥	246,119		¥	8,687		¥	55,608

Each of our segments is briefly described below.

BUSINESS SEGMENTS

As of April 1, 2008, ORIX reorganized its businesses into six segments to facilitate strategy formulation, resource allocation and portfolio balance at the segment level. These six business segments are: Corporate Financial Services, Maintenance Leasing, Real Estate, Investment Banking, Retail and Overseas Business. Management believes that organizing our business into large strategic units allows us to maximize our corporate value by identifying and building strategic advantages vis-à-vis anticipated competitors in each area and by helping the ORIX Group achieve competitive advantages.

An overview of operations, operating environment and operating strategy for each of the six 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 still serves as the foundation for the entire ORIX Group.

Operating through a nationwide network of 82 offices, we provide capital through loans and leasing for capital investment and other needs to our core customer base of domestic small and medium enterprises (“SMEs”). In order to maximize synergies, the Corporate Financial Services segment functions as the central point of contact for the entire ORIX Group in responding to needs of other segments, including business succession and overseas business development.

During the year, we established new speciality departments within this segment to connect and promote sales throughout the ORIX Group, and these new departments have started activities that we expect to become the foundation for new revenues in the areas of development and promotion of retail facilities, domestic and overseas sales, in addition to the environment and energy business.

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The activities in this segment are conducted primarily through the Domestic Sales Administrative Headquarters. There were 2,616 employees working in this segment as of March 31, 2010.

Operating Environment

There is lingering uncertainty toward the business environment of SMEs, our core client base in this segment. Against the backdrop of a generally stagnant economy, the Japanese government implemented economic stimulus policies, including funding support for SMEs, which contributed to a decrease in the number of corporate bankruptcies in the second half of 2009. Even though large companies have seen improvement in their fund raising opportunities, the severe operating environment surrounding SMEs has continued due to a conservative approach to lending by domestic financial institutions.

Meanwhile, the Japanese government is emphasizing the environment and energy as growth areas to be driven by Japan’s strengths in its “New Growth Strategy”, with the objective of creating over 50 trillion yen in new markets and approximately 1.4 million new jobs within these growth areas by 2020. The main policies include the expansion of renewable energy and turning homes and offices into zero-emissions structures, and other measures aimed at increasing markets by concentrating investment to create an eco-friendly society.

Operating Strategy

Sales personnel in the Corporate Financial Services segment develop and deliver optimal solutions based on a deep understanding of its customers, their specific needs and their management issues, gained through day-to-day transactions, and supported where necessary by team efforts centered around ORIX Group’s high levels of expertise.

Moving forward, this segment will seek to expand and accelerate the provision of “Finance + Services” as a sales platform for the ORIX Group and to broaden our client base by strengthening cooperation among our Group companies in order to leverage our specialized expertise in areas such as the automobile and rental businesses. The automobile and rental businesses have accumulated know-how through their business diversification and are currently providing high value-added services to their customers in the areas of vehicle and IT asset management. By capitalizing on this specialized expertise, this segment will endeavor to fulfill the needs of various industries and uncover new business opportunities with a broader potential client base.

In addition, as an offshoot to this segment’s leasing business, which includes the collection and disposal of end-of-lease assets, we have been involved in the environment and energy-related business for more than ten years. The ORIX Group will focus on making propositions with regards to the usage of energy-saving measures and renewable energy in addition to proposals related to waste disposal and recycling, which we have already established.

This segment has focused on credit management and will work to maintain asset quality while aiming to build a healthy base of small and diversified assets through detailed and prompt measures and close monitoring.

Maintenance Leasing

Overview of Operation

This segment consists of our automobile and rental operations.

The automobile operations began with automobile leasing in 1973 and expanded to automobile rental in 1985. Since 2002, the ORIX Group has also operated a car sharing business. Our automobile leasing operations started by offering to corporate clients leases that included maintenance services, and today provides a complete range of specialized vehicle management outsourcing services. The segment also offers wide range of services to address the vehicle needs of both corporate and individual clients.

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We entered the rental business in 1976 with leasing of precision measuring equipment to corporate clients. Today, the rental business covers a broad range of services, including IT-related equipment rentals, technical support, calibration, and asset management.

The activities in this segment are conducted primarily through ORIX Auto and ORIX Rentec. There were 3,335 employees working in this segment as of March 31, 2010.

Operating Environment

In corporate automobile leasing operations, demand is sluggish due to decreased automobile investment and pressure to reduce costs. The secondary market is also stagnant.

On the other hand, companies have increased their needs for vehicle cost reductions and improvement of fleet operating efficiency and their interest in areas such as compliance and safety. Furthermore, we expect that heightened awareness of environmental issues will stimulate demand for leasing services for hybrid and electric vehicles. An increase is also expected in the number of car sharing participants.

The precision measuring equipment rental industry has comparatively high entry barriers because of significant initial investment requirements and the difficulty of recruiting and retaining personnel with the requisite specialist knowledge. As a result, the competitive landscape in the domestic measuring equipment rental market has been relatively stable. However, decreased capital expenditures resulting from the economic downturn has suppressed demand for rentals, particularly among the major electronics manufacturers.

With respect to the market for IT equipment rentals, going forward the cloud computing market is expected to grow due to lower running costs and system flexibility. IT investments by clients companies will shift from hardware ownership to hardware use as a part of IT service. As a result, growing demand is expected for IT rental companies to provide IT services that can lead to improvements in operating efficiency and reduction of costs by clients, particularly in the information security area.

Operating Strategy

The Maintenance Leasing segment will promote group-wide measures to further expand its high value added services and augment its fee-businesses such as “Comprehensive Auto Management Service” in the automobile operations and “IT Asset Management Service”. At the same time, the segment will capitalize on know-how acquired in Japan and enhance the provision of value-added services overseas with the aim of improved performance in the Asian market, particularly in China.

In the automobile leasing business, the segment will utilize the networks of the Corporate Financial Services segment and ORIX Group companies to promote services that combine leasing, automobile rental, and car sharing to provide optimal and low-cost vehicle solutions to current and potential clients. As of March 31, 2010, automobiles under management totaled approximately 835,000.

The corporate automobile leasing operation aims to maintain profitability and clients by addressing all aspects of outsourcing needs related to vehicle management. Also, we are responding to the increasingly specialized and complex needs of our clients by strengthening our consulting services for the needs of legal compliance, environmental services and vehicle management-related risk management (such as accidents and legal restrictions). We will also continue to create business frameworks that deliver high added value for clients, such as sophisticated vehicle management and adjustment of administrative operations, through which we expect to differentiate ourselves from our competitors.

In leasing automobiles to individual clients, we will continue to promote products such as My Car Lease and Car Sharing. Especially in the car sharing business, we will seek to create a new business platform by strengthening relationships with local authorities and public transportation systems.

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We will continue to expand the types of equipment we handle in our rental business, while working to enhance ancillary services such as IT equipment asset management. In addition, we expect to maintain our large market share and efficiently turnover assets with the aim of generating stable growth. As of March 31, 2010, the rental business owned more than 675,000 units of equipment spanning about 22,000 types.

We will also work to expand our rental operations of IT equipment to cover pre-installed information security countermeasures and further develop our fee business from technical support services such as the operation and management of IT equipment. We will also seek continued growth in our used rental equipment resale business.

Real Estate

Overview of Operation

The Real Estate segment began with corporate dormitory rental operations 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, the ORIX Group is involved in:

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

• residential condominium development;

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

• asset management and administration, including Japanese real estate investment trusts.

The activities in this segment are conducted primarily through ORIX Real Estate. There were 3,704 employees working in this segment as of March 31, 2010.

Operating Environment

Despite the dramatic downturn in the domestic real estate market in the wake of the global financial crisis, liquidity has been improving as demonstrated by a resumption of public offerings and issuances of investment corporation bonds by J-REITs. Accordingly, real estate transactions have shown green shoots of recovery, for example, stabilization of expected investor capitalization rates.

However, office vacancy continues to hover at a high rate, reflecting continuing economic stagnation. Competition to attract tenants is intensifying and rent levels continue to be adjusted. In light of these circumstances, in order to succeed, real estate companies will need to demonstrate strong leasing capabilities crucial to maintaining property value as well as the expertise and capability to develop environmentally-friendly properties.

In the residential condominium market, some positive signs have emerged, such as improvement in contract completion rates nearing the key benchmark level of 70% in the Tokyo metropolitan area in 2009. Additionally, a favorable environment for revived demand has been developing due to government policies encouraging home buying including an expansion of tax deductions on housing loans, an increased gift tax exemption for loans to certain family members that are used to purchase a residence and an “eco-point” system for energy-efficient housing and fixtures, as part of broader economic measures, as well as falling purchase prices due to lower construction costs.

The facility operation business, which includes the operation of hotels, golf courses and training facilities, faces difficult conditions due to corporate cost cutting and waning consumer confidence. However, facilities that can provide high quality service meeting the needs of end users shows strong demand from domestic and overseas clients.

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Operating Strategy

Even in a sluggish real estate market, we expect to secure stable revenue sources by managing and reducing business risks, through capitalizing on our expertise in the areas of diversified small and medium-sized property investment, cash flow focus and risk sharing with business partners through joint ventures.

The strengths of this segment are its real estate value chain functions, including leasing, asset management and property management, as well as the ORIX Group’s client base. We will aim to maintain and improve the value of our real estate assets and promote the turnover of properties in our portfolio by capitalizing on these strengths.

In the real estate development and rental business, we will strive to improve occupancy rates and rental income by leveraging the characteristics of our small and diversified rental property portfolio and our leasing capabilities. Although real estate transactions have not seen a full-scale recovery, we will pursue various exit strategies to promote asset turnover.

For our residential condominium development business, we can flexibly respond to changes in the business environment as we outsource the sales of our residential condominiums to other companies. Since the second half of 2007, we have been reducing our condominium supply ahead of our competitors; however, since late 2009 we have steadily resumed the development of suspended projects and new land purchases in response to recovery in consumer demand. After thorough market research, we will supply condominiums mainly within a price range that meets consumer needs.

In our facilities operation business, we will establish a unique position in the market by providing a wide range of services in response to diversified needs and aging customers. We have seen an increase in opportunities to invest in Japanese inns and golf courses with strong brand recognition, as achievement from investments in operating facilities have been well received. Specifically, we expect to diversify our customer base and increase profitability by setting a clear customer target and concept for each facility.

ORIX Real Estate Investment Advisors Corporation is expanding its asset management business, targeting increased fee-based revenue. In addition to managing ORIX Group assets, we will also address the asset management needs outside the ORIX Group by forming private real estate funds to win large-scale property projects.

Moreover, we will create new value by promoting large-scale projects such as the North Yard, a redevelopment project next to Osaka Station.

Investment Banking

Overview of Operation

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

• a venture capital business established in 1983;

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

• a loan servicing business that invests in non-performing loans and CMBS management and collection;

• a principal investment business initiated in 2000;

• a securitization business; and

• a mergers and acquisitions and financial advisory business established in 2003.

The activities in this segment are conducted primarily through our Investment Banking Headquarters. There were 2,011 employees working in this segment as of March 31, 2010.

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Operating Environment

The global financial crisis triggered a significant change in the operating environment surrounding the Investment Banking segment. Japan’s economic recovery has been slow and uncertainties in the financial and capital markets are expected to continue. Investments need to be stringently selected as signs of improvement in liquidity are yet to be seen.

The risk tolerance of investors decreased in the wake of the global recession precipitated by the Lehman Brothers bankruptcy in September 2008, which led to a dramatic decline in the volume of real estate transactions and a contraction in the domestic real estate related non-recourse loan market. Although liquidity provided by financial institutions is essential for market recovery, their conservative approach to lending has not changed despite improvements seen in the market.

Moreover, a large amount of CMBS loans in Japan will reach maturity in 2010 and involved parties are currently seeking possible measures upon maturity, such as refinancing or collection through the sales of collateralized properties.

Opportunities for investment in non-performing loans are limited as financial institutions continue to reduce their disposals of large-scale assets. However, investment opportunities are expected to arise as foreign corporations withdraw from Japan, funds are divested and the selection and concentration of companies accelerates.

The domestic M&A market has seen a contraction in the number of transactions, reflecting the uncertain economic outlook and the impact of the financial crisis; however, such trend is starting to subside. As listed companies are undertaking restructuring and engaging in strategic de-listing of subsidiaries and, as SMEs are undergoing business succession, the use of M&A as a corporate management strategy has become increasingly widespread in Japan. We see this as an opportunity to promote our financial advisory services and other corporate advisory services.

Operating Strategy

The Investment Banking segment is focusing on preserving and enhancing the value of existing loans and portfolio companies while taking advantage of investment opportunities presented by the changing environment.

In Japan, we believe there are business opportunities related to CMBS loans reaching maturity. In particular, we see this as a great opportunity for our Investment Banking segment, which has accumulated knowledge and expertise in arranging loan refinancing as well as loan servicing, to expand its fee-based business. ORIX Asset Management & Loan Services Corporation (OAMLS), the first Japanese servicer to simultaneously receive all three servicer ratings (master, primary and special servicer), in addition to receiving the highest rating (STRONG) from S&P, has expertise in CMBS servicing and a wide information network for CMBS through its real estate related finance business. Capitalizing on these strengths, we will expand our fee-based business by acting as an intermediary in the sales of collateralized properties and as a special servicer while seeking investment opportunities. This segment will also arrange joint investments and serve as an investment platform through its relationships with domestic and international investors. This segment is also expected to arrange co-investments and serve as an investment platform among its relations with domestic and international investors.

For investment banking business, this segment will provide management support such as business succession and corporate rehabilitation (restructuring, transfer and funding arrangement). We will also be actively involved in developing promising businesses as an investor.

For real estate finance business, in light of the significant changes in the real estate market, we will deal with each transaction individually and cautiously. We monitor the terms of individual transactions as well as the condition of underlying assets, and otherwise strive to maximize collections while continuously reducing asset balances. We believe that under the current real estate market conditions, there are cases where revenues can be

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maximized from a mid- to long-term perspective by holding acquired real estate as rental properties, in which case, revenues and risk can be controlled. Therefore, we will aim to maximize profit and focus on increasing the value of acquired real estate with capitalization of group synergies by collaborating with other segments, mainly the Real Estate segment, until the market sees a full-scale recovery.

Capitalizing on our network of our partner financial institutions, we will also seek opportunities for new fee-based businesses such as providing credit evaluation and servicing.

Retail

Overview of Operation

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

• the life insurance business, handled by ORIX Life Insurance, which was founded in 1991 and operates mainly through representatives and mail-order sales;

• the trust and banking business, handled by ORIX Trust and Banking, which is centered on the housing loan business started by ORIX in 1980 and is also engaged in corporate lending and other services;

• the card loan business, which was started with ORIX Credit in 1979 and is currently being managed as a joint venture with Sumitomo Mitsui Banking Corporation pursuant to an alliance established in July 2009; and

• the securities business, which we entered by bringing ORIX Securities into the ORIX Group in 1986 and which now centers on online securities brokerage operations. ORIX Securities merged with Monex, Inc. in May 2010 after a share exchange between ORIX and Monex Group, Inc. in January 2010.

The activities in this segment are conducted primarily through ORIX Life Insurance and ORIX Trust and Banking. There were 1,170 employees working in this segment as of March 31, 2010. Monex Group, Inc. and ORIX Credit are now our affiliates.

Operating Environment

In the life insurance market, demand for distinctive “third sector” (medical and cancer insurance) products has been increasing most likely due to Japan’s low birthrate and relatively high longevity. Introductions of “third sector” products have intensified competition. Moreover sales channels have diversified with the expansion into retail stores by major joint agencies, availability of complete clearance of insurance sales at bank counters and the arrival of pure-internet-play insurance companies.

As individual funds continue to flow into deposits instead of investment, ORIX Trust and Banking has steadily expanded its deposits. Separately, opportunities for corporate lending business have also expanded as the value of indirect corporate financing, such as increased support for SME funding, has been re-evaluated. Even in a stagnated real estate market, demand remains firm in the market for investment rental condominium units, a key engine behind the housing loan business, which continues to perform strongly.

In the card loan market, consumer finance companies are finding it difficult to maintain their conventional high-margin business models as the upper limit on interest rates has been lowered and a ceiling on total debt has been created. As a result, the industry has been undergoing restructuring, with large firms forming alliances with banks.

The securities market regained some stability due to successful financial and economic policies implemented by economic powers. Due to heightened expectations for improved company performance, Japan’s securities market has been on the recovery trend and retail investor confidence is expected to improve.

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Operating Strategy

In this segment, we expect to maintain our policy of developing new markets for individuals by offering products and services that provide a high level of customer satisfaction and by increasing our unique expertise and efficiency in niche markets.

ORIX Life Insurance, which concentrates mainly on developing and selling products for individuals, has experienced a substantial increase in the number of policies in force. We have focused on expanding products such as our medical insurance “Cure”, as well as our cancer insurance “Believe”, which were originally introduced to the individual market in September 2006 and March 2010, respectively. As other companies have entered the market with similar products, competition has grown increasingly fierce. ORIX Life Insurance will continue to develop products that meet the needs of its customers and enhance its product lineup. Moreover ORIX Life Insurance will expand its customer base by strengthening agent sales channels, and achieve stable revenue growth. The importance of insurance business to the overall ORIX group has been dramatically increasing, and we will aim to realize profit growth.

In line with this growth in individual oriented business, ORIX Trust and Banking began handling deposits via the Internet for corporate customers in May 2009. On the investment side, in addition to our housing loan business, we seek to establish a well-balanced portfolio of lending by focusing on corporate lending, cultivating a new customer base and strengthening our relationship with trusted clients. As the business grows, we will also work to strengthen risk management and internal control structure.

In the card loan business and securities brokerage business, we have recently formed alliances with trusted business partners under the policy of “Operational Realignment”.

With investment from the Sumitomo Mitsui Banking Corporation, ORIX Credit will target a stable and increased operating base by attracting different types of customers via the ORIX Group network and greater diversification in its fundraising options, based on its major product, the VIP Loan Card.

The combined Monex, Inc. and ORIX Securities became one of the largest Internet based securities companies in Japan through the joint venture between ORIX and Monex Group, Inc. The new company will further strengthen the bases of both corporate groups and continue to expand its products and services for customers.

Overseas Business

Overview of Operation

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

The activities in this segment are conducted primarily through ORIX USA, Global Business and Alternative Investment Headquarters and 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, the UAE, Kazakhstan, Australia, New Zealand, Ireland and Poland. There were 3,209 employees working in this segment as of March 31, 2010.

Operating Environment

In the United States, a succession of bankruptcies, including the collapse of the prominent investment bank Lehman Brothers and the realignment of other major financial institutions, dealt a tremendous blow to the

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world’s financial and capital markets. The ensuing deterioration in global financial liquidity triggered a sharp contraction in credit, leading to a significant decline in the operating environment. Despite a slow economic recovery in the United States, unemployment levels have remained high and recovery in consumer spending and the housing market still faces challenges. The U.S. financial market continues to de-leverage as regional financial institutions are still facing a severe operating environment with decreased lending capacity. There is also concern that the impending implementation of financial regulations may further impact the operating environment.

In Asia and the Middle East, where we have extensive business operations, the economies of emerging countries have recovered rapidly despite the effects of the global financial crisis. As a result of high economic growth in recent years, Asia’s economy has reached the stage where it consumes a wide range of business, products and services from developed countries such as Japan, which should lead to various business opportunities. China is a particularly attractive country in terms of economic scale and has garnered global attention as a promising market despite structural problems such as inflation and increasing domestic economic disparities.

Operating Strategy

In the United States, we are engaged in investment and financing operations, such as corporate finance and investments in CMBS and other marketable securities and investment banking operations, including advisory services in the areas of mergers and acquisitions, corporate financial restructuring and enterprise valuation. Although the United States was the epicenter of the financial crisis, the expertise we have been able to accumulate there has allowed us to expand our profits even under the turmoil of the current economy. Going forward, we aim to focus on cultivating opportunities to expand “Finance + Service” based on our expertise. For example, in May 2010, ORIX USA acquired RED Capital Group, a company that arranges specialty loans for real estate companies and obtains fees through loan servicing. This is a typical example of acquiring fee-based revenue without using the balance sheet.

Investment banking operations are carried out by Houlihan Lokey, which has maintained a strong reputation in the United States for decades in financial advisory services, financial opinion services and financial restructuring services. In the midst of the global recession, Houlihan Lokey has increased earnings opportunities in its corporate financial restructuring advisory operations.

In Asia, Oceania, the Middle East and Europe, we continue to focus on leasing, lending and other financial services closely tied to local communities. We believe we can expect stable growth in our existing leasing operations, particularly in Asia. We will embrace growth of the Asia region by increasing earnings through adding value to existing financial services, while capitalizing on its expertise such as maintenance leasing developed in Japan.

We will strengthen investment and financing operations in the fields of financial related, automobile, ships and aircraft especially in China. As a part of this, we established our Chinese Headquarters in Dalian in December 2009 and integrated existing business under a holding company structure. We are aiming to cultivate trusted clients in China. For other areas, we will further expand our client and business partner networks which already span numerous countries. Moreover, we are working to enhance our resources for supporting Japanese companies looking to move into overseas markets, as well as foreign companies entering Japan.

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

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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.

Prior to fiscal 2008, we held a 44% stake in DAIKYO INCORPORATED (“DAIKYO”). During fiscal 2008, DAIKYO acquired a 100% stake in Fuso Lexel Incorporated through a share swap. As we had held shares of Fuso Lexel Incorporated, we acquired an additional interest in DAIKYO through this share swap. As a result, the interest of the third parties increased and our ownership in DAIKYO decreased to 41%. In June 2008, DAIKYO repurchased 20% of its preferred shares from ORIX at a purchase price of ¥10.4 billion. In March 2009, we acquired preferred shares of DAIKYO for ¥10 billion. Also in March 2009, we transferred our wholly owned subsidiary, ORIX Facilities Corporation, to DAIKYO through a share swap. This resulted in our acquisition of an additional amount of DAIKYO preferred shares valued at ¥9.4 billion. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions.” As of February 2010, our interest in Daikyo declined to 31.7%, primarily due to a public offering and third party allocation of new shares, which was completed in February 2010.

In line with our strategy of pursuing business alliances with financial institutions aiming for future corporate development, we joined forces with Sumitomo Mitsui Banking Corporation to form ORIX Credit joint venture. As a result, ORIX sold a 51% stake of ORIX Credit to Sumitomo Mitsui Banking and realized a capital gain of approximately ¥7 billion during the fiscal year ended March 31, 2010. Also, in January 2010, ORIX formed a capital alliance with the Monex Group, pursuant to which ORIX and Monex Group, Inc. concluded a share exchange in which ORIX acquired a 22.5% stake of Monex Group, Inc. in exchange for our 100% stake of ORIX Securities, and realized capital gain of approximately ¥9 billion. Subsequently, in May 2010, ORIX Securities and Monex, Inc. were combined to form one of Japan’s largest Internet-based securities brokers.

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 will selectively pursue such opportunities. We have in the past deployed a significant amount of capital for acquisition activities, and expect to continue to make investments, on a selective basis, 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 following table shows the book values of the primary facilities we own, which includes three office buildings, one training facility and one waste disposal facility. We transferred one building with a book value of ¥11,541 million from operating lease to office building due to a change in the specified use of the building in fiscal 2010.

	As of March 31, 2010
	Book Value		Land Space (*)
	(In millions of yen)		(In thousands of m²)
Office building (Shiba, Minato-ku, Tokyo)	¥	37,362	2
Office building (Tachikawa, Tokyo)		23,098	5
Office building (Roppongi, Minato-ku, Tokyo)		11,524	1
Training facility (Funabashi, Chiba)		10,963	3
Industrial waste disposal facility (Yorii, Saitama)		13,575	—

* Land space is provided only for those facilities where we own the land.

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In addition to these major facilities, we are building a new regional headquarters in Osaka that will allow us to manage our Osaka operations from a single location. Construction is expected to be completed by February 2011, and the current estimated costs for the project are ¥30 billion. Although there are presently no other 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 expect to utilize in the near future, substantially all of our leased office space.

We own office buildings, apartment buildings and recreational facilities for our employees and others with an aggregate book value of ¥96,831 million as of March 31, 2010.

As of March 31, 2010, net book value of equipment held for operating leases amounted to ¥1,195,974 million, which consists of ¥580,009 million of transportation equipment, ¥170,047 million of measuring and information-related equipment, ¥826,398 million of real estate and ¥19,267 million for others. Accumulated depreciation on the operating leases was ¥399,747 million as of the same date.

SEASONALITY

Our business is not materially affected by seasonality.

RAW MATERIALS

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

PATENTS, LICENSES AND CONTRACTS

Our business and profitability are not materially dependent on any patents or licenses; industrial, commercial or financial contracts; or new manufacturing processes.

BUSINESS REGULATION

JAPAN

ORIX and its group companies in Japan are incorporated under and our corporate activities are governed by the Companies Act.

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.

The major regulations that govern our businesses are as follows:

Moneylending Business

ORIX and certain of our group companies are engaged in the money-lending business in Japan. The money lending business is regulated by the Interest Rate Restriction Act, the Acceptance of Contributions Law, the Deposit Interest Law and the Moneylending Business Act. The Moneylending Business Act requires that all companies engaged in moneylending business register with the Prime Minister and the relevant prefectural governors.

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Registered money-lenders are regulated by the FSA, and are required to report to or notify the FSA, providing certain documents such as their annual business reports. Accordingly, pursuant to the Moneylending Business Act, ORIX and certain of our group companies register with the Prime Minister and various prefectural governors and provide the necessary reporting and notification to the FSA. The FSA has the power to issue business improvement orders to suspend all or part of a business’s activities, or to revoke the registration of a money-lender 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 have tightened 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 have come into effect over a period or time and as of June 2010 have been fully implemented.

Real Estate Business

ORIX and certain of our group companies, including ORIX Real Estate, are engaged in the real estate business in Japan, including the buying and selling of land and buildings. Companies engaged in such operations are required to be licensed by the Ministry of Land, Infrastructure and Transport (the “MoLIT”) and relevant prefectural governors under the Building Lots and Buildings Transaction Business Act, and their 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 this 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 Act. 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 on-site 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 Act regulations, any party attempting to acquire voting rights in an insurance company at or above a specified threshold must receive approval from the Prime Minister. We have received such approval as a major shareholder in ORIX Life Insurance. Insurance solicitation, which we and our group companies conduct, is also governed by the Insurance Business Act. We and certain of our group companies, such as ORIX Auto, are registered as life insurance agents with the Prime Minister.

Financial Instruments Exchange Business

The Financial Instruments and Exchange Act which became effective in September 2007 supplants the Securities and Exchange Law and includes significant changes. The Financial Instruments and Exchange Act expands its scope 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 Act. Registered financial instruments traders are regulated by the FSA and are required to file certain reports or notifications with the FSA. The FSA has the power to order improvement of a business, or 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 Whole Sale Securities Corporation (ORIX Whole Sale) is registered with the Prime Minister under the Financial Instruments and Exchange Act. The first class financial instruments exchange business includes the trading of highly liquid financial products, such as the sale and solicitation of listed securities. The Financial

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Instruments and Exchange Act regulates the conduct and business activities of securities companies in connection with securities transactions. In addition, under the Financial Instruments and Exchange Act, any entity possessing voting rights in a securities company (first class financial instruments trader) or its parent company at or above a specified threshold is considered a major shareholder and must report its shareholding to the Prime Minister. ORIX has filed such a report as a major shareholder of ORIX Whole Sale, as well as Monex Group, Inc., which became an equity-method affiliate of ORIX as a result of a share exchange completed in January 2010 with ORIX.

(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 Act to conduct the second class financial instruments exchange business. The second class financial instruments exchange business includes trading of low-liquidity financial instruments, such as the sale and solicitation of trust beneficiary interests and certain equity investments in partnerships.

(3) Financial Instruments Intermediary Business

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

(4) Investment Management Business

ORIX Asset Management (“OAM”), a wholly owned subsidiary, is registered with the Prime Minister under the Financial Instruments and Exchange Act as an investment manager. OAM is responsible for the asset management of a real estate investment corporation, ORIX JREIT Inc., which is listed on the Tokyo Stock Exchange. In addition, ORIX Real Estate Investment Advisory and ORIX Investment are registered with the Prime Minister to engage in the investment management business. Under the Financial Instruments and Exchange Act, any entity possessing voting rights in an investment manager at or above a specified threshold is considered a major shareholder and must report its shareholding to the Prime Minister. ORIX has filed such a report as a major shareholder with regard to OAM and ORIX Investment.

(5) Investment Advisory and Agency Business

ORIX Investment and ORIX Real Estate Investment Advisory are registered with the Prime Minister under the Financial Instruments and Exchange Act to engage in the investment advisory and agency business.

Banking and Trust Business

ORIX Trust and Banking (“OTB”) is licensed by the Prime Minister to engage in the banking and trust business and is regulated under the Banking Act, the Act on Provision, etc. of Trust Business by Financial Institutions. The Banking Act governs the general banking business and the Act on Provision, etc. of Trust Business by Financial Institutions and the Trust Business Act govern the trust business. Our trust contract agency business is also governed by the Trust Business Act, and we are registered with the Prime Minister to engage in the trust contract agency business. In addition, under the Banking Act, any entity that attempts to obtain voting rights in a bank at or above 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 (“OAMLS”) is engaged in the loan servicing business and the business of managing and collecting certain assets. Consequently, OAMLS is regulated under the Act on Special Measures Concerning Business of Management and Collection of Claims. OAMLS is licensed by the Minister of Justice under such law to engage in the loan servicing business.

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Waste Management

ORIX Environmental Resources Management, under the Waste Management and Public Cleansing Act, has permission for and to (i) “the installation of an industrial waste disposal facility” acting as an “industrial waste disposal contractor” and a “specially controlled industrial waste disposal contractor” in “the installation of a municipal solid waste disposal facility” from the governor of Saitama Prefecture, and (ii) act as a “municipal solid waste disposal contractor” from the town mayor of Yorii Town.

Also, Funabashi Environmental, under the Waste Management and Public Cleansing Act, has permission to: (i) engage in “the installation of an industrial waste disposal facility” within Chiba Prefecture, (ii) act as an “Collection and Transportation of an industrial waste disposal collector” from each governor of Tokyo, Kanagawa, Chiba and Saitama Prefectures, and also from mayors of major six cities in Kanto region and (iii) engage in the business of “industrial waste disposal contractor,” by the authorization of mayor of Funabashi City.

ORIX Environmental Resources Management and Funabashi Environmental are engaged in the waste management service regulated by the Waste Management and Public Cleansing Act.

Regulation on Share Acquisitions

Certain activities of ORIX and our group companies are regulated by the Foreign Exchange and Foreign Trade Law of Japan and the cabinet orders and ministerial ordinances thereunder (the “Foreign Exchange Regulations”).

Under the Foreign Exchange Regulations, ORIX and certain of our group companies in Japan are regulated as “residents” conducting “capital transactions” or “foreign direct investments.” If the ratio of foreign shareholders of the ORIX increases to 50% or more, ORIX and these group companies 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 the activities specified in such notices and can order the cancellation or modification if the recommendations are 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 advisers 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 adviser, respectively, and as such, are regulated by the SEC. ORIX USA and its other subsidiaries are not subject to these regulations but must comply with U.S. federal and state securities laws.

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 Regulation B thereunder, 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.

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On May 8, 2010, ORIX USA acquired the RED Capital Group, a Columbus, Ohio headquartered provider of debt and equity capital, as well as advisory services, to the housing, health care and real estate industries. The RED Capital Group is registered as a broker-dealer and regulated by the SEC. In addition, the RED Capital Group and its subsidiaries must comply with rules and regulations administered by the Government National Mortgage Association (Ginnie Mae), the Federal National Mortgage Association (Fannie Mae), the Department of Housing and Urban Development and the Federal Housing Administration.

Recent disruptions in the U.S. financial markets have caused lawmakers and regulators to evaluate the effectiveness of their oversight of the financial services industry, and a variety of regulatory initiatives are likely to be proposed by the Obama administration and Congress. It is increasingly probable that the United States will implement new regulations and laws, or significant changes to existing regulations and laws, that will affect ORIX USA.

Outside of the United States, ORIX USA’s majority owned subsidiary, Houlihan Lokey (Europe) Limited (“HL Europe”), is authorized and regulated by the Financial Services Authority in the UK, inter alia, to arrange deals in investments and, to advise on investments by others. HL Europe has also established branches in France and Germany under the provisions of the Markets in Financial Instruments Directive and is regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht in Germany and the Autorité des marchés financiers in France in the conduct of the respective businesses of the branches located in those countries. Other such majority-owned subsidiaries include Houlihan Lokey (China) Limited, which is licensed to conduct regulated activities by 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 4A. Unresolved Staff Comments

None.

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Item 5. Operating and Financial Review and Prospects

Table of Contents for Item 5

	Page
Overview	37
Fair Value Measurements	38
Fair Value of Investment and Rental Property	41
Critical Accounting Policies and Estimates	41
Results of Operations	48
Liquidity and Capital Resources	95
Cash Flows	99
Commitments for Capital Expenditures	100
Off-Balance Sheet Arrangements	101
Research and Development, Patents and Licenses, Etc.	102
Trend Information	102
Tabular Disclosure of Contractual Obligations	103
Recent Developments	103
Risk Management	108
Governmental and Political Policies and Factors	116

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 condition and results of operations in the future may also be affected by factors other than those discussed here. This discussion should be read in conjunction with “Item 3. Key Information—Risk Factors” and “Item 18. Financial Statements” included in this annual report.

We recorded ¥37,757 million in net income attributable to ORIX Corporation for the fiscal year ended March 31, 2010 supported by the beneficial effects of business and fundraising diversification, despite worldwide economic stagnation triggered by the global financial crisis. At the same time, de-leveraging continued and our balance sheet decreased significantly through the implementation of the policies “Strengthening the Corporate Structure” and “Operational Realignment” resulting in 11% decrease in revenues year on year. However, due to major contributions from the Overseas Business segment, income before income taxes, discontinued operations and extraordinary gain increased more than six-fold, and net income attributable to ORIX Corporation increased 72% year on year.

The main factors underlying performance in fiscal 2010 are outlined below.

Segment profits and losses for this fiscal year were as follows. The Corporate Financial Services, Maintenance Leasing, and Real Estate segments saw a decrease in profits compared to the previous fiscal year. The Investment Banking segment saw a decrease in losses, and the Retail and Overseas Business segments recorded increases in profits.

The Corporate Financial Services segment, the core business of the ORIX Group, continued to record a loss as provisions for doubtful receivables and probable loan losses, primarily for real estate-related loans, remained at a high level.

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The Maintenance Leasing segment saw a decline in profits due to increased depreciation expenses mainly caused by conservative residual value estimates, reflecting the sluggish secondary auto market.

The Real Estate segment’s profit decreased substantially due to decline in gains on sales of real estate under operating leases.

The Investment Banking segment recorded a loss. Despite a loss being recorded due to JOINT CORPORATION’s filing for protection under the Corporate Rehabilitation Law, the amount of loss recorded for equity in net income (loss) of affiliates improved compared to the previous fiscal year when significant write-downs were recorded.

The Retail segment’s profits more than tripled due to increased profits from sales of insurance policies as well as related investment income in the life insurance business. Also, there were significant contributions from gains on the sales of ORIX Credit and ORIX Securities.

The Overseas segment’s profits increased due to the strong performance in our U.S. operations resulting from gains from investment securities, caused by improvement in the bond and equity markets, and contributions from fee-based revenue of Houlihan Lokey Howard & Zukin Inc, as well as contributions from profits recognized in the principal investment business in Asia and Oceania.

FAIR VALUE MEASUREMENTS

We have adopted ASC 820-10 (“Fair Value Measurements and Disclosures”). ASC 820-10, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

ASC 820-10 classifies and prioritizes inputs used in valuation techniques to measure fair value into the following three levels:

• Level 1 — Inputs of quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

• Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly.

• Level 3 — Unobservable inputs for the assets or liabilities.

ASC 820-10 differentiates between those assets and liabilities required to be carried at fair value at every reporting period (recurring) and those assets and liabilities that are only required to be adjusted to fair value under certain circumstances (nonrecurring). We measure mainly trading securities, available-for-sale securities, investment funds, certain investment in affiliates and derivatives at fair value on a recurring basis.

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The following table presents recorded amounts of major financial assets measured at fair value on a recurring basis as of March 31, 2010:

	March 31, 2010
	Millions of yen
	Total Carrying Value in Consolidated Balance Sheets		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Trading securities	¥	49,596	¥	1,157	¥	48,386	¥	53
Available-for-sale securities		845,234		67,224		376,206		401,804
Other securities		14,692		—		14,692		—
Derivative assets		17,074		1,015		15,531		528
	¥	926,596	¥	69,396	¥	454,815	¥	402,385
Financial Liabilities:
Derivative liabilities	¥	31,975	¥	660	¥	31,280	¥	35
	¥	31,975	¥	660	¥	31,280	¥	35

Compared to financial assets classified as Level 1 and Level 2, measurements of financial assets classified as Level 3 are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting the fair value measurements may differ significantly from management’s current measurements.

As of March 31, 2010, financial assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) and the percentages of total assets are as follows:

	March 31, 2010
	Significant Unobservable Inputs (Level 3)		Percentage of total  assets (%)
	(In millions of yen, except percentage data)
Level 3 Assets:
Trading securities	¥	53	0
Available-for-sale securities		401,804	5
Corporate debt securities		6,841	0
Specified bonds issued by SPEs in Japan		246,305	3
CMBS and RMBS in the U.S., and other asset-backed securities		148,658	2
Derivative assets		528	0
Credit derivatives held/written		528	0
Total Level 3 financial assets	¥	402,385	5
Total assets	¥	7,739,800	100

As of March 31, 2010, the amount of financial assets classified as Level 3 is ¥402,385 million, among financial assets that we measured at fair value on a recurring basis. Level 3 assets represent 5% of our total assets.

Available for sale securities classified as Level 3 are mainly mortgage-backed and other asset-backed securities, including specified bonds issued by special purpose entities (SPEs) in Japan and CMBS and RMBS in the United States. Specified bonds issued by SPEs classified as Level 3 available-for-sale securities were ¥246,305 million as of March 31, 2010, which is 61% of Level 3 available-for-sale securities. We classified the specified bonds as Level 3 because we measure their fair value using unobservable inputs. Since the specified bonds do not trade in an open market, no relevant observable market data is available. Accordingly, to measure their fair value we use a discounted cash flow model that incorporates significant unobservable inputs as further discussed below.

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When evaluating the specified bonds issued by SPEs, we estimate the fair value by discounting future cash flows using a discount rate based on market interest rates and a risk premium. The future cash flows for the specified bonds issued by the SPEs are estimated based on contractual principal and interest repayment schedules on each of the specified bond issued by the SPEs. Since the discount rate is not observable for the specified bonds, we use an internally developed model to estimate a risk premium considering the value of the real estate collateral (which also involves unobservable inputs in many cases when using valuation techniques such as a discounted cash flow methodology) and the seniority of the bonds. Under the model, we consider the loan-to-value ratio and other relevant available information to reflect both the credit risk and the liquidity risk in our own estimate of the risk premium. Generally, the higher the loan-to-value ratio, the larger the risk premium we estimate under the model. The fair value of the specified bonds issued by SPEs rises when the fair value of the collateral real estate rises and the discount rate declines. The fair value of the specified bonds issued by SPEs declines when the fair value of the collateral real estate declines and the discount rate rises.

With respect to the CMBS and RMBS in the United States, we judged that the market had become inactive during fiscal 2009 because there were few recent transactions and because brokers quotes or pricing evaluation from independent pricing service vendors for these securities were not available. As a result, we established internally developed pricing models (Level 3 inputs) using valuation techniques such as present value techniques in order to estimate fair value of these securities and classified them as Level 3. Under the models, we use anticipated cash flows of the security discounted at a risk-adjusted discount rate that incorporates our estimate of credit risk and liquidity risk that a market participant would consider. The cash flows are estimated based on a number of assumptions such as default rate and prepayment speed, as well as seniority of the security.

In determining whether a market is active or inactive, we evaluate various factors such as the lack of recent transactions, price quotations that are not based on current information or vary substantially over time or among market makers, a significant increase in implied risk premium, a wide bid-ask spread, significant decline in new issuances, little or no public information (e.g. a principal-to-principal market) and other factors.

The following table presents a reconciliation of financial assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during fiscal 2010:

	Year ended March 31, 2010
	Millions of yen
	Balance at March 31, 2009		Gains or losses (realized / unrealized)									Purchase, sales, and settlements			Transfers in and/ or out of Level 3 (net)			Balance at March 31, 2010		Change in unrealized gains or losses included in earnings for assets still held at March 31, 2010 (1)
			Included in earnings  (1)			Included in other comprehensive income			Total
Trading securities	¥	166	¥	—		¥	(170	)	¥	(170	)	¥	57		¥	—		¥	53	¥	—
Available-for-sale securities		447,859		(9,394	)		(519	)		(9,913	)		(36,997	)		855			401,804		(8,691	)
Investment in affiliates		6,954		(6,954	)		—			(6,954	)		—			—			—		—
Derivative assets		760		206			—			206			—			(438	)		528		206

⁽¹⁾ Principally, gains and losses from trading securities, available-for-sale securities, investments in affiliates and derivative assets are included in brokerage commissions and net gains (losses) on investment securities, write-downs of securities or life insurance premiums and related investment income, equity in net income (loss) of affiliates and other operating revenues/expenses, respectively.

For more information on fair value measurements, see Note 2 in “Item 18. Financial Statements.”

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FAIR VALUE OF INVESTMENT AND RENTAL PROPERTY

We own real estate such as rental office buildings, rental logistics centers, rental commercial facilities other than offices, rental condominiums and land which is utilized for development as operating leases. A large portion of our real estate holdings is located around major cities such as Tokyo. The following table sets forth the details of the carrying amount as of the beginning and end of fiscal 2010, as well as the fair value as of the end of fiscal 2010, categorized by the type of real estate under operating leases.

	March 31, 2010
	Carrying amount							Fair value for ending balance
Classification	Beginning balance		Change amount			Ending balance
	(Millions of yen)
Office buildings	¥	189,939	¥	16,179		¥	206,118	¥	196,817
Logistics centers		47,563		(10,142	)		37,421		47,152
Commercial facilities other than offices		138,057		8,278			146,335		145,948
Rental condominiums		199,414		8,304			207,718		197,791
Properties under development (including lands for development)		185,370		(19,128	)		166,242		155,541
Others		166,213		720			166,933		182,055
	¥	926,556	¥	4,211		¥	930,767	¥	925,304

Notes:	1. Carrying amounts stated as above are cost less accumulated depreciation.
	2. Fair value is obtained either by appraisal reports by external qualified appraisers, reports by internal appraisal department in accordance with “Real estate appraisal standards,” or by other reasonable internal calculation by similar method.

Revenue and expense for these real estate under operating leases in fiscal 2010 consist of the following:

Year ended March 31, 2010
Revenue (1)	Expense (1)		Operating income		Income from discontinued operations  (2)		Net
(Millions of yen)
¥ 71,960	¥	47,609	¥	24,351	¥	10,940	¥	35,291

(1)	Revenue means revenue from leases and gains on sales of real estate under operating leases (less cost of sales), and expense means relevant expense such as depreciation expense, repair cost, insurance cost, tax and duty and write-downs of long-lived assets.
(2)	Income from discontinued operations is income such as gains on sales of real estate under operating leases which we have sold or have decided to sell, without maintaining significant continuing involvement in the operations of the assets.

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 “Item 18. 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 for us for two reasons. First, the estimates require us to make assumptions about matters that are highly uncertain at the time the

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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.

FAIR VALUE MEASUREMENTS

We have adopted the applicable provisions of ASC 820-10 (“Fair Value Measurements and Disclosures“). Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, a number of significant judgments, assumptions and estimates may be required. If observable market prices are not available, we use internally-developed valuation techniques such as discounted cash flow methodology to measure fair value. These valuation techniques involve determination of assumptions that market participants would use in pricing the asset or liability. This assessment involves significant judgment and use of different assumptions and/or valuation techniques could have a material impact on our financial condition or results of operations. Significant assumptions used in measuring fair values have a pervasive effect on various estimates such as the estimation of the allowance for real estate collateral-dependent loans, measurement of impairment of investment in securities, measurement of impairment of goodwill and intangible assets not subject to amortization, measurement of impairment of long-lived assets and recurring measurements of investment in securities and derivative instruments. For more discussion, see “Item 5. Operating and Financial Review and Prospects—Fair Value Measurements” and Note 2 of “Item 18. Financial Statements.”

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 leases and loans; 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 or the loan’s observable market price. If the loans are collateral-dependent, they are evaluated based on the fair value of the collateral securing the loans, using 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 such as discount cash flow methodology. The allowance for losses on smaller-balance homogeneous loans, including individual housing 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.

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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 90 days or more 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 90 days or more, 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 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 investment in securities (except securities held for trading) as follows.

For an available-for-sale equity security, we generally recognize an impairment loss if the fair value of the equity security has remained significantly below our acquisition cost (or current carrying value if an adjustment has been made in the past) for more than six months. We also recognize an impairment loss in situations where, even though the fair value of an available-for-sale 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 the 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.

For an available-for-sale debt security, we assess whether impairment is other than temporary if the fair value of a debt security is less than its amortized cost basis at the balance sheet date. Under such circumstances, as required by ASC 320-10-65-1 (“Investments—Debt and Equity Securities—Recognition and Presentation of Other-Than-Temporary Impairments”), an other-than-temporary impairment is considered to have occurred if (1) we intend to sell the debt security; (2) it is more likely than not that we will be required to sell the debt security before recovery of its amortized cost basis; or (3) we do not expect to recover the entire amortized cost basis of the security. In measuring the impairment, if we intend to sell the security or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment is recognized in earnings equal to the entire difference between the security’s amortized cost basis and its fair value at the balance sheet date. On the other hand, if we do not intend to sell the debt security and it is more likely than not that we will not be required to sell the security prior to recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment is separated into (a) the credit loss component and (b) the non-credit loss component. We recognize the credit component of an other-than-temporary impairment of the debt security in earnings and the non-credit component in other comprehensive income (loss), net of applicable income taxes.

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In making an other-than-temporary impairment assessment, we consider all available information relevant to the collectibility of the security, including but not limited to the following factors:

• Duration and the extent to which the fair value has been less than the amortized cost basis;

• Continuing analysis of the underlying collateral, age of the collateral, business climate, economic conditions and geographical considerations;

• Historical loss rates and past performance of similar assets;

• Trends in delinquencies and charge-offs;

• Payment structure and subordination levels of the debt security;

• Changes to the rating of the security by a rating agency;

• Subsequent changes in fair value of the security after the balance sheet date.

As for other securities, we recognize an impairment loss in income if the decline in the value of the 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 investee deteriorates, its forecasted performance 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 is 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 is 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.

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 an evaluation by a 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

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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 current market values of used equipment and estimates of when and how much equipment will become obsolete, and actual recovery being experienced for similar used equipment. If actual 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.

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The accounting estimates relating to unguaranteed residual value for direct financing leases and operating leases affect mainly the Corporate Financial Services, Maintenance Leasing and Overseas Business 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 using 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, morbidity, lapse rates, future yields on related investments and other factors applicable at the time the policies are written. Our 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, morbidity, lapse rates, investment returns and other factors, do not properly reflect future policyholder benefits, we may establish a premium deficiency reserve.

ASC 944 (“Financial Services—Insurance”) 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. These 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, morbidity, 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 Retail segment.

ASSESSING HEDGE EFFECTIVENESS AND MEASURING INEFFECTIVENESS

We use foreign currency swap agreements, interest rate swap agreements and foreign exchange contracts for hedging purposes and apply either fair value hedge, cash flow hedge or net investment 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. Derivative for hedging purposes 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.

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.

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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 ASC 715 (“Compensation—Retirement Benefits”), actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, impact expense 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 all of our material 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 ¥860 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 ¥898 million. If we were to assume a 1% decrease in the discount rate, and keep other assumptions constant, pension expense would increase by approximately ¥1,015 million.

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.

INCOME TAXES

In preparing the consolidated financial statements, we make estimates relating to income taxes of ORIX and its 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 items for income tax reporting and financial reporting purposes. Such differences result in deferred tax assets and liabilities, which are included within the consolidated balance sheets. We must then assess the likelihood that our deferred 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 provision for income taxes in the consolidated statements of income.

Significant management judgments are required in determining our provision for income taxes, current income taxes, deferred tax assets and liabilities and any valuation allowance recorded against our deferred 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

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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 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 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 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 the consolidated financial position and results of operations.

DISCUSSION WITH AND REVIEW BY THE AUDIT COMMITTEE

Our management discussed the development and selection of each critical accounting estimate with our Audit Committee in June 2010.

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 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. 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. 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, 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, brokerage commissions and net gains (losses) on 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 a subtotal of “Total revenues” consisting of our “Operating Income” on the consolidated statements of income.

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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.

Securities investment activities originated by the Company were extended to group companies, such as our U.S. operations. In addition, a securities company we had acquired as a consolidated subsidiary in the mid-1980s contributed to the growth of our securities-related operations. As a result, gains on investment securities have grown and become one of our major revenue sources. With this background, we determined to present gains on investment securities under a separate income statement caption, together with brokerage commissions, because both gains on investment securities and brokerage commissions were derived from our securities operations.

In our diversified operating activities, 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.

Similar to our revenues, we categorize our expenses based on our diversified operating activities. “Total expenses” includes mainly interest expense, costs of operating leases, life insurance costs, costs of real estate sales, other operating expenses and selling, general and administrative expenses.

Expenses reported under an account caption of 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 “Total expenses” constituting “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 “Total expenses”. 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. See “Year Ended March 31, 2010 Compared to Year Ended March 31, 2009” and “Year Ended March 31, 2009 Compared to Year Ended March 31, 2008.”

We have historically reflected write-downs of long-lived assets under “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 “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 presented under “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 supports the fair presentation of our consolidated statements of income.

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YEAR ENDED MARCH 31, 2010 COMPARED TO YEAR ENDED MARCH 31, 2009

Performance Summary

Income Statement Data

	Year ended March 31,				Change
	2009		2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Income statement data:
Total revenues	¥	1,053,521	¥	932,841	¥	(120,680	)	(11	)
Total expenses		1,000,166		903,270		(96,896	)	(10	)
Operating income		53,355		29,571		(23,784	)	(45	)
Income before income taxes, discontinued operations and extraordinary gain		8,687		55,608		46,921		540
Net income attributable to ORIX Corporation		21,924		37,757		15,833		72

Total Revenues

	Year ended March 31,					Change
	2009			2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Total revenues:
Direct financing leases	¥	63,349		¥	50,115	¥	(13,234	)	(21	)
Operating leases		285,384			277,217		(8,167	)	(3	)
Interest on loans and investment securities		196,164			135,167		(60,997	)	(31	)
Brokerage commissions and net gains (losses) on investment securities		(12,330	)		23,317		35,647		—
Life insurance premiums and related investment income		117,751			115,598		(2,153	)	(2	)
Real estate sales		71,088			40,669		(30,419	)	(43	)
Gains on sales of real estate under operating leases		24,346			6,841		(17,505	)	(72	)
Other operating revenues		307,769			283,917		(23,852	)	(8	)
Total	¥	1,053,521		¥	932,841	¥	(120,680	)	(11	)

Total revenues in fiscal 2010 decreased 11% to ¥932,841 million compared to ¥1,053,521 million in fiscal 2009. Brokerage commissions and net gains (losses) on investment securities returned to profitability particularly due to improvements in the U.S. bond and equity markets in line with recovery of the domestic and international financial markets. However, revenues from direct financing leases and interest on loans and investment securities decreased compared to fiscal 2009 as a result of stringent selection of transactions. In particular, interest on loans significantly decreased due to a reduction in real estate-related finance and the change in status of ORIX Credit from a consolidated subsidiary to an equity-method affiliate. Gains on sales of real estate under operating leases declined compared to fiscal 2009 as we held back on the sales of real estate under operating leases due to stagnation in the real estate market.

50

Total Expenses

	Year ended March 31,					Change
	2009			2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Total expenses:
Interest expense	¥	102,522		¥	82,503	¥	(20,019	)	(20	)
Costs of operating leases		194,216			192,678		(1,538	)	(1	)
Life insurance costs		105,899			92,348		(13,551	)	(13	)
Costs of real estate sales		79,058			46,757		(32,301	)	(41	)
Other operating expenses		185,121			162,839		(22,282	)	(12	)
Selling, general and administrative expenses		235,328			223,061		(12,267	)	(5	)
Provision for doubtful receivables and probable loan losses		77,027			71,532		(5,495	)	(7	)
Write-downs of long-lived assets		3,673			6,977		3,304		90
Write-downs of securities		18,631			23,637		5,006		27
Foreign currency transaction loss (gain), net		(1,309	)		938		2,247		—
Total	¥	1,000,166		¥	903,270	¥	(96,896	)	(10	)

Total expenses in fiscal 2010 decreased 10% to ¥903,270 million compared to ¥1,000,166 million in fiscal 2009 due to a decline in costs of real estate sales mainly resulting from a decrease in the number of condominiums sold, a decrease in interest expense resulting from a decrease in interest-bearing liabilities, and a decrease in selling, general and administrative expenses resulting from cost reduction programs.

Operating Income, Income before Income Taxes, Discontinued Operations and Extraordinary Gain, and Net Income Attributable to ORIX Corporation

Operating income in fiscal 2010 decreased 45% to ¥29,571 million from ¥53,355 million in fiscal 2009.

Losses were recorded for equity in net income (loss) of affiliates in the third quarter of fiscal 2009 due to the write-downs caused by losses stemming from the deteriorated financial conditions and decreases in share prices of equity-method affiliates in Japan. A loss was recorded in the first quarter of fiscal 2010 in connection with an affiliate filing for protection under the Corporate Rehabilitation Law. However, equity in net income (loss) of affiliates returned to profitability due to contributions from overseas equity-method affiliates, recording a gain of ¥8,550 million, up from a loss of ¥42,937 million in fiscal 2009. Regarding gains (losses) on sales of subsidiaries and affiliates and liquidation losses, net, gains on sales of subsidiaries were recorded due to a 51% stake of ORIX Credit being transferred to Sumitomo Mitsui Banking Corporation (SMBC) in July 2009 as well as our exchange of 100% of ORIX Securities shares for a 22% stake in Monex Group, Inc. (Monex Group) in January 2010.

As a result of the foregoing, income before income taxes, discontinued operations and extraordinary gain recorded a more than six-fold increase to ¥55,608 million compared to ¥8,687 million in fiscal 2009, and net income attributable to ORIX Corporation increased 72% to ¥37,757 million from ¥21,924 million in fiscal 2009.

Basic and diluted earnings per share in fiscal 2010 were ¥370.52 and ¥315.91, respectively, compared to ¥246.59 and ¥233.81 in fiscal 2009.

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Total Assets

	As of March 31,						Change
	2009			2010			Amount			Percent (%)
	(In millions of yen, except percentage data)
Investment in direct financing leases	¥	914,444		¥	756,481		¥	(157,963	)	(17	)
Installment loans		3,304,101			2,464,251			(839,850	)	(25	)
Investment in operating leases		1,226,624			1,213,223			(13,401	)	(1	)
Investment in securities		926,140			1,104,158			178,018		19
Other operating assets		189,560			186,396			(3,164	)	(2	)
Allowance for doubtful receivables on direct financing leases and probable loan losses		(158,544	)		(157,523	)		1,021		(1	)
Others		1,967,411			2,172,814			205,403		10
Total assets	¥	8,369,736		¥	7,739,800		¥	(629,936	)	(8	)

Total assets in fiscal 2010 decreased 8% to ¥7,739,800 million from ¥8,369,736 million on March 31, 2009. Investment in securities increased mainly in the Retail segment due to the purchase of bonds, but installment loans and investment in direct financing leases decreased due to the stringent selection of new transactions. Furthermore, installment loans decreased as a result of the deconsolidation of ORIX Credit and ORIX Securities as mentioned above. In addition, investment in affiliates increased as a result of ORIX Credit and Monex Group becoming equity-method affiliates.

ORIX Corporation Shareholders’ Equity, ROE and ROA

ORIX Corporation shareholders’ equity increased 11% to ¥1,298,684 million compared to fiscal 2009, due to the issuance of common stock in fiscal 2010, resulting in an increase in common stock by ¥41,677 million and an increase in additional paid-in capital by ¥41,347 million.

As a result, ORIX Corporation shareholders’ equity ratio increased year on year from 13.95% to 16.78%, and ROE and ROA increased year on year from 1.80% to 3.06%, and from 0.25% to 0.47%, respectively.

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—Profile of Business by Segment.”

Revenues, New Business Volumes and Investments

Direct financing leases

	As of and for the year ended March 31,				Change
	2009		2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Direct financing leases:
Direct financing lease revenues	¥	63,349	¥	50,115	¥	(13,234	)	(21	)
Japan		41,682		34,984		(6,698	)	(16	)
Overseas		21,667		15,131		(6,536	)	(30	)
New equipment acquisitions		364,734		232,629		(132,105	)	(36	)
Japan		235,641		157,012		(78,629	)	(33	)
Overseas		129,093		75,617		(53,476	)	(41	)
Investment in direct financing leases		914,444		756,481		(157,963	)	(17	)
Japan		702,254		578,263		(123,991	)	(18	)
Overseas		212,190		178,218		(33,972	)	(16	)

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Direct financing lease transactions have continued to decrease as a result of our selective process for choosing only those assets where the risk and return balance is appropriate and an overall business environment in which new equipment acquisitions have been on the decline in Japan. In the automobile leasing area, the volume of new equipment acquisitions has been shrinking in Japan due to our shift towards operating leases. Overseas, new equipment acquisitions have been decreasing as a result of our selective approach to choosing transactions in Asia.

As a result, revenues from direct financing leases in fiscal 2010 decreased 21% compared to fiscal 2009 to ¥50,115 million. In Japan, revenues from direct financing leases were down 16% to ¥34,984 million compared to ¥41,682 million in fiscal 2009. Overseas, revenues were down 30% to ¥15,131 million compared to ¥21,667 million in fiscal 2009.

The average return we earned on direct financing leases in Japan, calculated on the basis of monthly balances, was up slightly at 5.36% in fiscal 2010 compared to 5.25% in fiscal 2009. The average return on overseas direct financing leases, calculated on the basis of monthly balances, decreased to 8.00% in fiscal 2010 from 8.37% in fiscal 2009 due mainly to lower rates in Asia.

New equipment acquisitions related to direct financing leases decreased 36% to ¥232,629 million compared to fiscal 2009. New equipment acquisitions for operations in Japan decreased 33% in fiscal 2010, as a result of our continuing selective approach to new projects. New equipment acquisitions for overseas operations decreased 41% in fiscal 2010.

Investment in direct financing leases as of March 31, 2010 decreased 17% to ¥756,481 million compared to fiscal 2009. Investments in Japan decreased 18% due to stringent selection of transactions, while overseas investments decreased 16% due to a decrease in new equipment acquisitions in Asia.

As of March 31, 2010, no single lessee represented more than 2% of our total portfolio of direct financing leases. As of March 31, 2010, 76% of our direct financing leases were to lessees in Japan, while 24% were overseas lessees. Approximately 5% of our direct financing leases were to lessees in Malaysia and Indonesia. No other overseas country represented more than 5% of our total portfolio of direct financing leases.

	As of March 31,				Change
	2009		2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Investment in direct financing leases by category:
Information-related and office equipment	¥	100,314	¥	74,113	¥	(26,201	)	(26	)
Industrial equipment		139,950		102,137		(37,813	)	(27	)
Commercial services equipment		80,571		54,481		(26,090	)	(32	)
Transportation equipment		363,314		311,381		(51,933	)	(14	)
Other equipment		230,295		214,369		(15,926	)	(7	)
Total	¥	914,444	¥	756,481	¥	(157,963	)	(17	)

Balances for investment in direct financing leases in the tables above do not include lease assets sold in securitizations. However, gains and losses from securitization are included in direct financing lease revenues. During fiscal 2009 and 2010, we sold ¥37,889 million and ¥27,974 million, respectively, of direct financing lease assets (all of which were in Japan) through securitizations that were treated as sales transactions. The securitization of these assets produced a loss of ¥365 million and a gain of ¥331 million for fiscal 2009 and 2010, respectively, which were included in direct financing lease revenues. The balance of direct financing lease assets treated as sales transactions amounted to ¥222,945 million as of March 31, 2009 and ¥146,337 million as of March 31, 2010. If assets sold in securitizations were included, the total balance of investment in direct financing leases would be ¥1,137,389 million as of March 31, 2009 and ¥902,818 million as of March 31, 2010. For more information on securitization, see Note 10 of “Item 18. Financial Statements.”

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Asset quality of our owned direct financing leases

	As of March 31,
	2009			2010
	(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	¥	27,949		¥	25,682
90+ days past-due direct financing leases as a percentage of the balance of investment in direct financing leases		3.06	%		3.39	%
Provisions as a percentage of average balance of investment in direct financing leases (1)		0.93	%		0.58	%
Allowance for direct financing leases	¥	27,540		¥	23,969
Allowance for direct financing leases as a percentage of the balance of investment in direct financing leases		3.01	%		3.17	%

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

The balance of 90+ days past-due direct financing leases decreased by ¥2,267 million to ¥25,682 million compared to the previous fiscal year. As a result, the ratio of 90+ days past-due direct financing leases increased by 0.33% from the previous fiscal year to 3.39%.

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, 2010 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 secured by the collateral of 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 0.70% and 1.06% for fiscal 2009 and 2010, respectively.

Operating leases

	As of and for the year ended March 31,				Change
	2009		2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Operating leases:
Operating lease revenues	¥	285,384	¥	277,217	¥	(8,167	)	(3	)
Japan		217,688		221,326		3,638		2
Overseas		67,696		55,891		(11,805	)	(17	)
New equipment acquisitions		426,715		189,915		(236,800	)	(55	)
Japan		366,336		161,391		(204,945	)	(56	)
Overseas		60,379		28,524		(31,855	)	(53	)
Investment in operating leases		1,226,624		1,213,223		(13,401	)	(1	)
Japan		1,086,967		1,083,284		(3,683	)	(0	)
Overseas		139,657		129,939		(9,718	)	(7	)

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Revenues from operating leases decreased 3% to ¥277,217 million compared to ¥285,384 million in the previous fiscal year. In Japan, despite a sluggish secondary automobile market and weakened demand for operating leases due to the economic downturn in the automobile leasing and the precision measuring and other equipment rental businesses, operating lease revenues slightly increased 2% to ¥221,326 million compared to ¥217,688 million in the previous fiscal year, in connection to an increase in real estate collateral acquired from non-recourse loans in order to maximize collections. Overseas, operating lease revenues were down 17% to ¥55,891 million compared to ¥67,696 million for the previous fiscal year due to a decline in the balance of investment of aircraft leases, as well as the foreign exchange effects of an appreciated yen. In fiscal 2009 and 2010, gains from the disposition of operating lease assets other than real estate were ¥11,426 million and ¥7,552 million, respectively, and are included in operating lease revenues.

New equipment acquisitions related to operating leases decreased 55% to ¥189,915 million compared to the previous fiscal year. New equipment acquisitions by operations in Japan were down year on year by 56% to ¥161,391 million, as the result of a decrease in the purchase of real estate properties. New equipment acquisitions by overseas operations also decreased 53% year on year to ¥28,524 million, due to a decrease in the purchase of transportation equipments.

Investment in operating leases decreased 1% to ¥1,213,223 million compared to the previous fiscal year. In Japan, these investments were flat compared to the previous fiscal year. Overseas, these investments decreased 7% year on year, due to a decline in transportation equipments such as aircrafts and automobile leases.

	As of March 31,				Change
	2009		2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Investment in operating leases by category:
Transportation equipment	¥	388,028	¥	358,227	¥	(29,801	)	(8	)
Measuring and information-related equipment		62,303		51,170		(11,133	)	(18	)
Real estate		754,345		782,272		27,927		4
Other		5,490		4,305		(1,185	)	(22	)
Accrued rental receivables		16,458		17,249		791		5
Total	¥	1,226,624	¥	1,213,223	¥	(13,401	)	(1	)

Investment in transportation equipment operating leases fell 8% year on year due to decreases in investments in aircraft and automobile leases both in Japan and overseas. Investment in measuring and information-related equipment operating leases fell 18% year on year, mainly because of a decrease in assets in Japan in connection with weakened demand for operating leases. Investment in real estate under operating leases slightly rose 4% year on year, in line with an increase in real estate collateral acquired from non-recourse loans in Japan in order to maximize collections by capitalizing on our real estate value chain as described above.

55

Installment loans and investment securities

Installment loans

	As of and for the year ended March 31,				Change
	2009		2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Installment loans:
Interest on installment loans (1)	¥	172,406	¥	114,731	¥	(57,675	)	(33	)
Japan		144,616		96,121		(48,495	)	(34	)
Overseas		27,790		18,610		(9,180	)	(33	)
New loans added		1,055,014		598,046		(456,968	)	(43	)
Japan		975,315		552,312		(423,003	)	(43	)
Overseas		79,699		45,734		(33,965	)	(43	)
Installment loans		3,304,101		2,464,251		(839,850	)	(25	)
Japan		2,967,475		2,207,943		(759,532	)	(26	)
Overseas		336,626		256,308		(80,318	)	(24	)

⁽¹⁾ The balance of installment loans related to our life insurance operations are included in installment loans in the consolidated balance sheets, however, all income and losses on these loans are recorded in life insurance premiums and related investment income in the consolidated statements of income.

In Japan, although we have been focusing on loans to corporate clients in the Corporate Financial Services and Investment Banking segments, we have maintained a cautious approach for new transactions which we adopted in the second half of fiscal 2008 due to economic uncertainty. In addition, during fiscal 2010 we reduced the loans to real estate companies and changed the status of ORIX Credit (that comprised a large portion of revenues) from a consolidated subsidiary to an equity-method affiliate. As a result, revenues decreased compared to the previous fiscal year in line with the decline in the amount of installment loans outstanding. Overseas, we have also reduced new transactions due to a more cautious approach to new transactions similar to the approach we adopted in Japan. Foreign exchange effects of an appreciated yen also contributed to the decrease in revenues compared to fiscal 2009.

Interest on installment loans decreased 33% compared with the previous fiscal year to ¥114,731 million in fiscal 2010. In Japan, interest on installment loans decreased 34% compared to the previous fiscal year as presented above, and overseas, decreased 33% in fiscal 2010, primarily due to lower market interest rates in the United States, in addition to the above.

The average interest rate earned on loans in Japan, calculated on the basis of monthly balances, decreased to 3.84% in fiscal 2010 compared to 4.36% in fiscal 2009, primarily due to the change in the status of ORIX Credit from a consolidated subsidiary to an equity-method affiliate. The average interest rate earned on overseas loans, calculated on the basis of monthly balances, decreased to 6.53% in fiscal 2010 from 7.72% in fiscal 2009, primarily due to a decline in prevailing market interest rates in the United States.

New loans added decreased 43% to ¥598,046 million in fiscal 2010 as compared to the previous fiscal year, primarily due to our cautious approach for new transactions in Japan and overseas, and the change in the status of ORIX Credit from a consolidated subsidiary to an equity-method affiliate, in addition to the foreign exchange effects of an appreciated yen.

The balance of installment loans as of March 31, 2010 decreased 25% to ¥2,464,251 million compared to the March 31, 2009. The balance of installment loans for borrowers in Japan fell by 26%, and the balance of installment loans for overseas customers decreased 24%, due to a more cautious approach to new transactions in the United States, as well as the foreign exchange effects of an appreciated yen. As of March 31, 2010, 90% of our installment loans were to borrowers in Japan, while 8% were to borrowers in the United States.

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The table below sets forth the balances as of March 31, 2009 and 2010 of our installment loans to borrowers in Japan and overseas, further categorized by the type of borrower (i.e., consumer or corporate) in the case of borrowers in Japan. As of March 31, 2010, ¥99,011 million, or 5%, of our portfolio of installment loans to consumer and corporate borrowers in Japan related to our life insurance operations. We reflect income from these loans as life insurance premiums and related investment income in our consolidated statements of income.

	As of March 31,				Change
	2009		2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Installment loans:
Consumer borrowers in Japan
Housing loans	¥	702,788	¥	731,184	¥	28,396		4
Card loans		337,403		—		(337,403	)	—
Other		45,081		13,663		(31,418	)	(70	)
Subtotal		1,085,272		744,847		(340,425	)	(31	)
Corporate borrowers in Japan
Real estate companies		651,597		447,181		(204,416	)	(31	)
Commercial, industrial and other companies		1,097,086		904,729		(192,357	)	(18	)
Subtotal		1,748,683		1,351,910		(396,773	)	(23	)
Total (Japan)		2,833,955		2,096,757		(737,198	)	(26	)
Overseas corporate, industrial and other borrowers		321,162		244,521		(76,641	)	(24	)
Purchased loans (1)		148,984		122,973		(26,011	)	(17	)
Total	¥	3,304,101	¥	2,464,251	¥	(839,850	)	(25	)

⁽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 ASC 310-30 (“Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality”) and consist mainly of housing loans, loans to real estate companies and commercial, industrial and other companies in Japan.

As of March 31, 2010, ¥463,895 million, or 19%, of all installment loans were outstanding to real estate companies in Japan and overseas. Of this amount, ¥155,114 million, or 6% of all installment loans, was loans individually evaluated for impairment. We calculated an allowance of ¥53,433 million on these impaired loans. As of March 31, 2010, we had installment loans outstanding in the amount of ¥167,359 million, or 7% of all installment loans, to companies in the entertainment industry. Of this amount, ¥29,586 million, or 1% of all installment loans, was loans individually evaluated for impairment. We calculated an allowance of ¥3,869 million on these impaired loans.

The balance of loans to consumer borrowers in Japan as of March 31, 2010 decreased by 31% to ¥744,847 million compared to the balance as of March 31, 2009, due to a decrease in card loans to customers as a result of the change in the status of ORIX Credit from a consolidated subsidiary to an equity-method affiliate, despite an increase in housing loans. The balance of loans to corporate borrowers in Japan as of March 31, 2010 decreased by 23%, to ¥1,351,910 million, compared to the balance as of March 31, 2009, primarily due to decreased loans to real estate companies.

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 ¥5,258 million of installment loans through securitizations, which were treated as sales transactions, in fiscal 2009. We did not sell installment loans through securitizations, which were treated as sales transactions, in fiscal 2010. Gains from the securitization of loans of ¥132 million were included in interest on installment loans in

57

fiscal 2009. The balance of installment loans treated as sales transactions amounted to ¥130,565 million and ¥111,317 million as of March 31, 2009 and 2010, respectively. If loans sold in securitizations were included, the total balance of installment loans would be ¥3,434,666 million and ¥2,575,568 million as of March 31, 2009 and 2010, respectively. For more information on securitization, see Note 10 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,
	2009		2010
	(In millions of yen)
Loans individually evaluated for impairment:
Impaired loans	¥	449,705	¥	348,143
Impaired loans requiring a valuation allowance		262,145		268,145
Valuation allowance (1)		89,236		100,255

⁽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 ¥55,140 million in fiscal 2009 and ¥57,615 million in fiscal 2010, and charge-off of impaired loans was ¥3,726 million in fiscal 2009 and ¥42,705 million in fiscal 2010. New provision for probable loan losses increased by ¥2,475 million compared to fiscal 2009. Charge-off of impaired loans increased by ¥38,979 million compared to fiscal 2009 due to our collection of impaired loan receivables through sales of real estate collateral and our determination that prospects for further recovery from the obligor are minimal.

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 decreased in fiscal 2010 mainly due to a decrease in impaired corporate loans for real estate companies in Japan.

	As of March 31,
	2009		2010
	(In millions of yen)
Impaired loans:
Consumer borrowers in Japan	¥	23,388	¥	8,996
Corporate borrowers in Japan
Real estate companies		215,309		152,455
Commercial, industrial and other companies		181,488		141,406
Subtotal		396,797		293,861
Overseas corporate, industrial and other borrowers		12,870		21,265
Purchased loans		16,650		24,021
Total	¥	449,705	¥	348,143

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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,
	2009			2010
	(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	¥	17,860		¥	12,321
90+ days past-due loans not individually evaluated for impairment as a percentage of the balance of installment loans not individually evaluated for impairment		0.63	%		0.58	%
Provisions as a percentage of average balance of installment loans (1)		0.38	%		0.37	%
Allowance for probable loan losses on installment loans exclusive of those loans individually evaluated for impairment	¥	41,768		¥	33,299
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		1.46	%		1.57	%

⁽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 decreased by 31% in fiscal 2010, principally due to a decrease in 90+ days past-due loans in card loans as a result of the change in the status of ORIX Credit from a consolidated subsidiary to an equity-method affiliate.

	As of March 31,
	2009		2010
	(In millions of yen)
90+ days past-due loans not individually evaluated for impairment:
Consumer borrowers in Japan
Housing loan	¥	10,641	¥	12,025
Card loans and other		7,211		279
Overseas corporate, industrial and other borrowers		8		17
Total	¥	17,860	¥	12,321

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 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, 2010 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 many of our 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 0.27% and 0.26% for fiscal 2009 and 2010, respectively.

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Investment securities

We maintain a sizeable portfolio of various investment securities. Our life insurance operations account for approximately 26% of our total investment in securities as of March 31, 2010, and those mainly consist of investments in yen-denominated, fixed-rate corporate debt securities and Japanese government bonds held as held-to-maturity securities.

	As of March 31, 2009
	Life insurance		Other		Total
	(In millions of yen)
Investment securities:
Trading securities	¥	—	¥	7,410	¥	7,410
Available-for-sale debt securities		207,703		476,039		683,742
Available-for-sale equity securities		5,505		40,026		45,531
Other securities (1)		15,974		173,483		189,457
Total	¥	229,182	¥	696,958	¥	926,140
	As of March 31, 2010
	Life insurance		Other		Total
	(In millions of yen)
Investment securities:
Trading securities	¥	—	¥	49,596	¥	49,596
Available-for-sale debt securities		245,133		515,521		760,654
Available-for-sale equity securities		495		84,085		84,580
Held-to-maturity securities		43,732		—		43,732
Other securities (1)		1,678		163,918		165,596
Total	¥	291,038	¥	813,120	¥	1,104,158

⁽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.

Interest earned 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. Non-interest income and losses (other than foreign currency transaction gains or losses) recognized 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 (losses) on investment securities. All income and losses recognized 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
	2009		2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Investment securities:
Interest on investment securities	¥	23,758	¥	20,436	¥	(3,322	)	(14	)
Japan		15,554		13,311		(2,243	)	(14	)
Overseas		8,204		7,125		(1,079	)	(13	)
New securities added		374,614		519,769		145,155		39
Japan		298,490		450,304		151,814		51
Overseas		76,124		69,465		(6,659	)	(9	)
Investment in securities		926,140		1,104,158		178,018		19
Japan		812,716		940,938		128,222		16
Overseas		113,424		163,220		49,796		44

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Interest on investment securities other than those held in connection with our life insurance operations in Japan decreased 14% to ¥13,311 million in fiscal 2010 primarily due to a lower average balance of bonds such as specified bonds issued by SPEs in Japan because of stringent selection of new transactions and enhanced collections. Overseas interest on investment securities also decreased 13% to ¥7,125 million in fiscal 2010 primarily due to the foreign exchange effects of an appreciated yen. The average interest rate earned on investment securities in Japan, calculated on a monthly basis, was 2.59% in fiscal 2010 compared to 2.83% in fiscal 2009. The average interest rate earned on overseas investment securities, calculated on a monthly basis, declined to 7.05% in fiscal 2010 compared to 8.73% in fiscal 2009.

New securities added increased 39% to ¥519,769 million in fiscal 2010 primarily due to recovery trend in financial and capital markets and rearrangement of our investment portfolios. New securities added in Japan increased 51% in fiscal 2010. On the other hand, new securities added overseas decreased 9% primarily due to a necessity of a cautious monitoring of investment even though the financial and capital markets tend to be improved in the United States.

The balance of our investment in securities as of March 31, 2010 increased 19% to ¥1,104,158 million compared to fiscal 2009. The balance of our investment in securities in Japan increased 16% primarily due to an investment in Japanese governmental bonds by life insurance business for the purpose of held-to-maturity and an investment in debt securities by trust banking, increasing fair value of investment in securities in accordance with recovery of domestic financial and capital markets. The balance of our investment in securities overseas also increased 44% mainly due to increasing fair value of investment in securities in accordance with recovery of financial and capital markets in the United States.

	As of March 31,				Change
	2009		2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Investment in securities by security type:
Trading securities	¥	7,410	¥	49,596	¥	42,186		569
Available-for-sale securities		729,273		845,234		115,961		16
Held-to-maturity securities		—		43,732		43,732		—
Other securities		189,457		165,596		(23,861	)	(13	)
Total	¥	926,140	¥	1,104,158	¥	178,018		19

Investments in trading securities increased to ¥49,596 million in fiscal 2010 primarily due to increasing balances of municipal bonds and increasing fair value of investment in securities in accordance with recovery of financial and capital markets in the United States. Investments in available-for-sale securities increased 16% in fiscal 2010 primarily due to decreased balances of debt securities containing comparatively high risk such as specified bonds issued by SPEs in Japan and increased balances of government and municipal bonds, which have relatively lower risk As of March 31, 2010, CMBS and RMBS in available-for-sale securities in the United States were ¥63,960 million as compared to ¥72,054 million as of March 31, 2009. Life insurance business started to invest in Japanese government bonds as held-to-maturity securities in fiscal 2010. Other securities decreased 13% in fiscal 2010 mainly due to an increase of new execution of fund investment in accordance with recovery of financial and capital markets overseas, an increase of redemption of preferred capital shares carried at cost in Japan and a decline in the value of non-marketable equity securities, preferred capital shares, and private equity funds.

The above table does not include assets sold in securitizations. There were no sales of investment securities through securitizations in fiscal 2009 and fiscal 2010. The balance of investment securities treated as sales transactions amounted to ¥45,145 million and ¥31,123 million in fiscal 2009 and 2010, respectively. For more information on securitization, see Note 10 in “Item 18. Financial Statements.”

For further information on investment in securities, see Note 9 of “Item 18. Financial Statements.”

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Brokerage commissions and net gains (losses) 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 (losses) on investment securities.

	Year ended March 31,					Change
	2009			2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Brokerage commissions and net gains (losses) on investment securities:
Brokerage commissions	¥	5,025		¥	3,418	¥	(1,607	)	(32	)
Net gains (losses) on investment securities		(22,088	)		14,826		36,914		—
Dividends income		4,733			5,073		340		7
Total	¥	(12,330	)	¥	23,317	¥	35,647		—

We recorded brokerage commissions and net gains (losses) on investment securities of gains of ¥23,317 million in fiscal 2010, compared to losses of ¥12,330 million in fiscal 2009. Our brokerage commissions decreased 32% primarily due to the deconsolidation of ORIX Securities in January 2010. Subsequently, income from the deconsolidated business is recorded as equity in net income (loss) of affiliates. Net gains (losses) on investment securities were gains of ¥14,826 million in fiscal 2010, compared to losses of ¥22,088 million in fiscal 2009, primarily due to revaluation gains from trading debt securities in the United States in accordance with a recovery of the domestic and international financial markets. Dividends income also increased 7% to ¥5,073 million in fiscal 2010 compared to fiscal 2009, primarily due to an increase in distributions from SPEs that invest in real estate.

As of March 31, 2010, gross unrealized gains on available-for-sale securities, including those held in connection with our life insurance operations, were ¥29,399 million, compared to ¥18,767 million as of March 31, 2009. As of March 31, 2010, gross unrealized losses on available-for-sale securities, including those held in connection with our life insurance operations, were ¥17,354 million, compared to ¥27,490 million as of March 31, 2009. Unrealized gains increased primarily due to recovery in the domestic securities market in Japan and overseas and a result of stringent selection of transactions.

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
	2009		2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Life insurance premiums and related investment income:
Life insurance premiums	¥	115,214	¥	104,133	¥	(11,081	)	(10	)
Life insurance-related investment income		2,537		11,465		8,928		352
Total.	¥	117,751	¥	115,598	¥	(2,153	)	(2	)

Life insurance premiums and related investment income decreased 2% to ¥115,598 million in fiscal 2010 compared to fiscal 2009. Life insurance premiums decreased 10%, and life insurance-related investment income increased 352% in fiscal 2010.

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The margin ratio, which subtracted life insurance costs from life insurance premiums increased to 11% in fiscal 2010 compared with 8% in fiscal 2009.

	As of March 31,				Change
	2009		2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Investments by ORIX Life Insurance:
Available-for-sale debt securities	¥	207,703	¥	245,133	¥	37,430		18
Available-for-sale equity securities		5,505		495		(5,010	)	(91	)
Held-to-maturity securities		—		43,732		43,732		—
Other securities		15,974		1,678		(14,296	)	(89	)
Total investment in securities		229,182		291,038		61,856		27
Installment loans and other investments		197,356		174,297		(23,059	)	(12	)
Total	¥	426,538	¥	465,335	¥	38,797		9

Investments in securities increased 27% to ¥291,038 million in fiscal 2010 as the result of increased acquisitions of held-to-maturity securities and an increase in the market value of the securities. On the other hand, installment loans and other investments decreased 12% year on year due to enhanced collection of principal of installment loans.

	As of March 31,					Change
	2009			2010		Amount		Percent (%)
	(In millions of yen, except percentage data)
Breakdown of life insurance-related investment income:
Net gains (losses) on investment securities	¥	(1,280	)	¥	2,228	¥	3,508	—
Interest on loans and investment securities, and others		3,817			9,237		5,420	142
Total	¥	2,537		¥	11,465	¥	8,928	352

Life insurance-related investment income was up 352% due to a decrease in investment securities-related losses recorded in the previously fiscal year in line with recovery in the real estate investment trust market in Japan.

For further information on life insurance operations, see Note 23 of “Item 18. Financial Statements.”

Real estate sales

	Year ended March 31,				Change
	2009		2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Real estate sales:
Real estate sales	¥	71,088	¥	40,669	¥	(30,419	)	(43	)

Real estate sales were down 43% year on year to ¥40,669 million and the number of condominiums sold to buyers in Japan decreased from 1,828 units in fiscal 2009 to 856 units in fiscal 2010, due to a decline in new developments since the second half of 2007 due to weak demand.

Gains on sales of real estate under operating leases

	Year ended March 31,				Change
	2009		2010		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	¥	24,346	¥	6,841	¥	(17,505	)	(72	)

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Gains on sales of real estate under operating leases decreased 72% year on year to ¥6,841 million in fiscal 2010 as sales of real estate under operating leases were held back in the still-weak real estate market, although signs of market recovery are starting to emerge.

Where we have significant continuing involvement in operations of the real estate under operating leases which have been disposed of, the gains or losses arising from such disposition are separately disclosed as gains on sales of real estate under operating leases, while if we have no significant continuing involvement of operations of such disposed real estate properties, the gains or losses are reported as income from discontinued operations. For a discussion of our accounting policy for discontinued operations, see Note 26 in “Item 18. Financial Statements.”

Other operating revenues

	As of and for the year ended March 31,				Change
	2009		2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Other operations:
Other operating revenues	¥	307,769	¥	283,917	¥	(23,852	)	(8	)
Japan		255,442		216,124		(39,318	)	(15	)
Overseas.		52,327		67,793		15,466		30
New assets added		76,269		24,186		(52,083	)	(68	)
Japan		76,269		24,186		(52,083	)	(68	)
Overseas		—		—		—		—
Other operating assets		189,560		186,396		(3,164	)	(2	)
Japan		185,872		182,022		(3,850	)	(2	)
Overseas		3,688		4,374		686		19

Other operating revenues decreased 8% year on year to ¥283,917 million. In Japan, revenues were down 15% to ¥216,124 million compared to ¥255,442 million in fiscal 2009, mainly due to the transfer of our consolidated subsidiary ORIX Facilities Corporation to an affiliate in fiscal 2009 and reductions in revenues from the vehicle maintenance and management services in fiscal 2010. Overseas, revenues were up 30% to ¥67,793 million, compared to ¥52,327 million during fiscal 2009, due to an increase in revenues from advisory services in the United States and from ship-related finance in Asia.

New assets added for other operating transactions were down 68% to ¥24,186 million in fiscal 2010 due to strict controls on the selection of new transactions. Other operating transactions include other operating assets and real estate for sale, such as residential condominiums and commercial real estate.

Other operating assets decreased 2% to ¥186,396 million in fiscal 2010.

Expenses

Interest expense

Interest expense declined 20% to ¥82,503 million compared to fiscal 2009. Our total outstanding short-term debt, long-term debt and deposits declined 11% to ¥5,263,104 million compared to fiscal 2009 as a result of continued reductions of our interest-bearing liabilities.

The average interest rate on our short-term and long-term debt in Japan, calculated on the basis of average monthly balances, decreased to 1.36% in fiscal 2010, compared to 1.40% in fiscal 2009, due to lower interest rates. The average interest rate on our short-term and long-term overseas debt, calculated on the basis of average monthly balances, decreased to 3.04% in fiscal 2010 from 4.13% in fiscal 2009 primarily reflecting lower interest rates in the United States. For information regarding interest rate risk, see “Item 3. Key Information—Risk Factors.”

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Costs of operating leases

Costs of operating leases decreased 1% to ¥192,678 million compared to the previous fiscal year. In Japan, costs of operating leases increased 3% to ¥154,476 million compared to the previous fiscal year due to increased depreciation expenses mainly caused by conservative residual value estimates, reflecting the sluggish secondary automobile market, as well as increased depreciation and other related expenses in line with an increased real estate under operating leases. Overseas, costs of operating leases decreased 14% to ¥38,202 million compared to the previous fiscal year, because of a decrease in number of new transaction and the foreign exchange effects of an appreciated yen.

Life insurance costs

Life insurance costs in fiscal 2010 decreased 13% to ¥92,348 million, corresponding to a decrease in life insurance premiums.

Costs of real estate sales

To minimize risk, new land purchases have been suspended since September 2007 and new projects have been rescheduled since the fiscal year ended March 31, 2008.

Costs of real estate sales decreased 41% to ¥46,757 million compared to the previous fiscal year due to a decrease in the number of condominiums sold to buyers in Japan, and less write-downs recorded on some projects under development in the previous year. We also recorded ¥10,911 million and ¥7,115 million of write-downs for fiscal 2009 and 2010. Costs of real estate sales include the upfront costs associated with advertising and creating model rooms. Margins recorded a loss of ¥6,088 million in fiscal 2010 up slightly from a loss of ¥7,970 million in fiscal 2009 due to aforementioned write-downs, despite decrease in the recognition of a fall in profitability.

Other operating expenses

Other operating expenses were down 12% year on year to ¥162,839 million resulting from the recognition of expenses from companies in which we transferred in the previous fiscal year and correlate with the decrease in other operating revenues.

Selling, general and administrative expenses

	Year ended March 31,				Change
	2009		2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Selling, general and administrative expenses:
Personnel expenses	¥	133,092	¥	134,451	¥	1,359		1
Selling expenses		28,096		19,240		(8,856	)	(32	)
Administrative expenses		70,421		66,218		(4,203	)	(6	)
Depreciation of office facilities		3,719		3,152		(567	)	(15	)
Total	¥	235,328	¥	223,061	¥	(12,267	)	(5	)

Employee salaries and other personnel expenses account for approximately 60% of selling, general and administrative expenses, and the remaining portion consists of selling and other general and administrative expenses, such as rent for office spaces, communication expenses and travel expenses. Selling, general and administrative expenses in fiscal 2010 decreased 5% year on year, due to internal cost reduction programs, despite an increase in personnel expenses in certain subsidiaries.

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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 2010 decreased 7% as compared to the previous year. Provisions for direct financing leases decreased 50% compared to fiscal 2009. Provisions for loans not individually evaluated for impairment decreased 26% due to a decrease in provision for card loans as a result of the change in the status of ORIX Credit from a consolidated subsidiary to an equity-method affiliate. Provisions for loans individually evaluated for impairment increased 4%.

	Year ended March 31,						Change
	2009			2010			Amount			Percent (%)
	(In millions of yen, except percentage data)
Provision for doubtful receivables on direct financing leases and probable loan losses:
Beginning balance	¥	102,007		¥	158,544		¥	56,537		55
Direct financing leases		25,481			27,540			2,059		8
Loans not individually evaluated for impairment		38,445			41,768			3,323		9
Loans individually evaluated for impairment		38,081			89,236			51,155		134
Provisions charged to income		77,027			71,532			(5,495	)	(7	)
Direct financing leases		9,524			4,807			(4,717	)	(50	)
Loans not individually evaluated for impairment		12,363			9,110			(3,253	)	(26	)
Loans individually evaluated for impairment		55,140			57,615			2,475		4
Charge-offs (net)		(19,731	)		(57,797	)		(38,066	)	193
Direct financing leases		(7,232	)		(8,744	)		(1,512	)	21
Loans not individually evaluated for impairment		(8,773	)		(6,348	)		2,425		(28	)
Loans individually evaluated for impairment		(3,726	)		(42,705	)		(38,979	)	1,046
Other (1)		(759	)		(14,756	)		(13,997	)	1,844
Direct financing leases		(233	)		366			599		(257	)
Loans not individually evaluated for impairment		(267	)		(11,231	)		(10,964	)	4,106
Loans individually evaluated for impairment		(259	)		(3,891	)		(3,632	)	1,402
Ending balance		158,544			157,523			(1,021	)	(1	)
Direct financing leases		27,540			23,969			(3,571	)	(13	)
Loans not individually evaluated for impairment		41,768			33,299			(8,469	)	(20	)
Loans individually evaluated for impairment		89,236			100,255			11,019		12

⁽¹⁾ Other includes foreign currency translation adjustments, amounts reclassified to discontinued operations and decrease in allowance related to sales of subsidiary.

Write-downs of long-lived assets

As a result of the impairment reviews we performed for long-lived assets in Japan and overseas such as golf courses, office buildings, commercial facilities, condominiums, and hotels in accordance with ASC 360-10 (“Property, Plant, and Equipment—Impairment or Disposal of Long-Lived Assets”), we recorded write-downs totaling ¥9,483 million in fiscal 2010, an increase of 148% compared to fiscal 2009, which are reflected as write-downs of long-lived assets and income from discontinued operations, net. ¥6,977 million is reflected as write-downs of long-lived assets in the accompanying consolidated statements of income. During fiscal 2010, we recorded impairment losses of ¥1,025 million on four office buildings and ¥1,461 million on four commercial facilities other than office mainly because the carrying amounts exceeded the estimated undiscounted future cash flows, and ¥2,451 million for 43 condominiums primarily in connection to a change in status of such condominiums from held and used to held for sale.

In accordance with ASC 360-10, an asset held and used 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

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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 fair value. The requirements of ASC 360-10 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).

For a breakdown of long-lived assets by segment, see Note 32 of “Item 18. Financial Statements.”

Write-downs of securities

Write-downs of securities for fiscal 2010 were mainly in connection with non-marketable equity securities and preferred capital shares carried at cost. In fiscal 2010, write-downs increased 27% from ¥18,631 million in fiscal 2009 to ¥23,637 million in fiscal 2010. For information regarding the impairment of investment in securities, see “Item 5. Operating and Financial Review and Prospects—Critical Accounting Policies and Estimates” and Note 9 of “Item 18. Financial Statements.”

Foreign currency transaction loss (gain), net

We recognized a foreign currency transaction net loss in the amount of ¥938 million in fiscal 2010. For information on the impact of foreign currency fluctuations, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”

Equity in net income (loss) of affiliates

Equity in net income (loss) of affiliates was a gain of ¥8,550 million, up from a loss of ¥42,937 million in fiscal 2009. The loss recorded in fiscal 2009 was due to the write-downs stemming from the deteriorated financial condition and decreases in share prices of equity-method affiliates in Japan. In fiscal 2010, the recorded gain was due to contributions from overseas equity method affiliates, despite an affiliate having filed for protection under the Corporate Rehabilitation Law. Net income from residential condominiums developed through certain joint ventures in Japan decreased to ¥3,567 million from ¥12,527 million for fiscal 2009.

For discussion of investment in affiliates, see Note 12 of “Item 18. Financial Statements.”

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

Gains (losses) on sales of subsidiaries and affiliates and liquidation losses, net was ¥17,487 million in fiscal 2010, up from a loss of ¥1,731 million in fiscal 2009, chiefly due to the gain on the sales of the portion of the ownership interest of ORIX Credit transferred and the remeasurement to fair value of the interest retained by us and the gain on the sale of ORIX Securities by means of a share exchange for a stake in Monex Group in fiscal 2010, as well as the absence of loss on our shareholdings in The Fuji Fire and Marine Insurance Co., Ltd (“Fuji Fire”) resulting from the dilution caused by the issuance and sale of shares to a third party which were recorded in fiscal 2009.

Provision for income taxes

Provision for income taxes in fiscal 2010 was ¥23,353 million, compared to a reversal of ¥2,675 million mainly due to the effects of the revision of the Japanese taxation system in fiscal 2009.

In March 2009, the Japanese tax code was revised to reduce the taxes on dividends of foreign subsidiaries by 95%, which resulted in a substantial reduction of our taxes in fiscal 2009. Prior to the 2009 revision, dividends received from foreign subsidiaries were taxed at a rate based on the differences between the Japanese tax rate and applicable income tax rates in the foreign countries. Consequently, deferred tax liabilities related to such

67

additional tax for undistributed earnings of foreign subsidiaries had been recognized except for those earnings designated as indefinitely reinvested. In fiscal 2009, we reversed deferred tax liabilities except for the amount which continued to be taxed under the revised tax code.

As part of our capital allocation plans going forward, we made a decision that for certain foreign subsidiaries where we had not recognized deferred tax liabilities we will no longer reinvest undistributed earnings indefinitely in fiscal 2009. Accordingly, we have recognized deferred tax liabilities for the relevant subsidiaries since fiscal 2009, according to the revised tax code.

For discussion of income taxes, see Note 16 in “Item 18. Financial Statements.”

Discontinued operations

We apply ASC 205-20 (“Presentation of Financial Statements—Discontinued Operations”). Under ASC 205-20, 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, decreased 30% compared to the previous fiscal year to ¥8,682 million in fiscal 2010 primarily due to lower gains on sales of real estate under operating leases in Japan.

Net income attributable to the noncontrolling interests

Net income attributable to the noncontrolling interests was recorded as a result of noncontrolling interests in earnings of our subsidiaries. In fiscal 2010, net income attributable to the noncontrolling interests decreased 40% year on year to ¥704 million compared to fiscal 2009.

Net income attributable to the redeemable noncontrolling interests

Net income attributable to the redeemable noncontrolling interests was recorded as a result of noncontrolling interests in the earnings of certain subsidiary that issued redeemable stock. In fiscal 2010, net income attributable to the redeemable noncontrolling interests increased 255% year on year to ¥2,476 million.

Segment Information

Our business is organized into six segments to facilitate strategy formulation, resource allocation and portfolio balance determination at the segment level. Our six business segments are: Corporate Financial Services, Maintenance Leasing, Real Estate, Investment Banking, Retail and Overseas Business.

Financial information about our operating segments reported below is information that is separately available and evaluated regularly by management in deciding how to allocate resources and in assessing performance. We evaluate the performance of segments based on income before income taxes and discontinued operations, adjusted for results of discontinued operations, net income attributable to the noncontrolling interests and net income attributable to the redeemable noncontrolling interests before applicable tax effect. Tax expenses are not included in segment profits.

For a description of segments, see “Item 4. Information on the Company—Profile of Business by Segment.” See Note 32 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.

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	Year ended March 31,						Change
	2009			2010			Amount			Percent (%)
	(In millions of yen, except percentage data)
Segment Revenues (1)
Corporate Financial Services	¥	137,712		¥	113,652		¥	(24,060	)	(17	)
Maintenance Leasing		235,953			222,952			(13,001	)	(6	)
Real Estate		270,027			189,530			(80,497	)	(30	)
Investment Banking		94,645			89,560			(5,085	)	(5	)
Retail		183,307			155,917			(27,390	)	(15	)
Overseas Business		167,635			185,906			18,271		11
Total		1,089,279			957,517			(131,762	)	(12	)
Difference between Segment Total and Consolidated Amounts		(35,758	)		(24,676	)		11,082		—
Total Consolidated Revenues	¥	1,053,521		¥	932,841		¥	(120,680	)	(11	)

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

	Year ended March 31,						Change
	2009			2010			Amount			Percent (%)
	(In millions of yen, except percentage data)
Segment Profits (1):
Corporate Financial Services	¥	(10,451	)	¥	(17,581	)	¥	(7,130	)	—
Maintenance Leasing		25,621			21,742			(3,879	)	(15	)
Real Estate		50,508			9,413			(41,095	)	(81	)
Investment Banking		(63,397	)		(11,960	)		51,437		—
Retail		9,573			31,104			21,531		225
Overseas Business		20,066			37,142			17,076		85
Total		31,920			69,860			37,940		119
Difference between Segment Total and Consolidated Amounts		(23,233	)		(14,252	)		8,981		—
Total consolidated income before income taxes and discontinued operations	¥	8,687		¥	55,608		¥	46,921		540

⁽¹⁾       We evaluate the performance of segments based on income before income taxes, discontinued operations and extraordinary gain, adjusted for results of discontinued operations, net income attributable to the noncontrolling interests and net income attributable to the redeemable noncontrolling interests before applicable tax effect. Tax expenses are not included in segment profits.

	As of March 31,				Change
	2009		2010		Amount			Percent (%)
	(In millions of yen, except percentage data)
Segment Assets:
Corporate Financial Services	¥	1,583,571	¥	1,236,905	¥	(346,666	)	(22	)
Maintenance Leasing		648,314		561,462		(86,852	)	(13	)
Real Estate		1,175,437		1,079,273		(96,164	)	(8	)
Investment Banking		1,321,491		1,166,722		(154,769	)	(12	)
Retail		1,554,006		1,578,758		24,752		2
Overseas Business		949,852		860,815		(89,037	)	(9	)
Total		7,232,671		6,483,935		(748,736	)	(10	)
Difference between Segment Total and Consolidated Amounts		1,137,065		1,255,865		118,800		10
Total consolidated assets	¥	8,369,736	¥	7,739,800	¥	(629,936	)	(8	)

69

Corporate Financial Services Segment

This segment is involved in lending, leasing, commission business for the sale of financial products, and environment-related businesses.

The economic environment surrounding SMEs, our main client base, remains severe. Although the number of corporate bankruptcies has decreased compared to the previous fiscal year, the trend has still hovered at a high rate. Given this condition, we have restricted the number of new transactions and have focused on reducing assets, particularly loans to real estate companies. As a result, the average balances of investment in direct financing leases and installment loans decreased 25% year on year, while the decrease in revenues was 17% to ¥113,652 million compared to ¥137,712 million during the previous fiscal year.

Segment expenses decreased compared to the previous fiscal year resulting from a decline in interest expense, selling, general and administrative expenses, and provision for doubtful receivables and probable loan losses. However, this reduction did not completely offset the decrease in revenues. In addition, although the level of provision for doubtful receivables and probable loan losses remained high, new occurrences of non-performing assets have declined significantly since peaking in the third quarter of the previous fiscal year. As a result, the segment recorded a loss of ¥17,581 million compared to a loss of ¥10,451 million in the previous fiscal year.

Segment assets decreased 22% to ¥1,236,905 million compared to March 31, 2009 due to a decline in the balances of investment in direct financing leases and installment loans.

Maintenance Leasing Segment

This segment consists of automobile and rental operations. The automobile operations are comprised of automobile leasing, rentals and car sharing. The rental operations are comprised of leasing and rental of precision measuring equipment and IT-related equipment.

The automobile leasing business was faced with a sluggish secondary auto market in addition to weakened demand from a continued decrease in corporate spending on vehicles and broader cost reduction efforts. In the precision measuring and other equipment rental business, demand has decreased in line with declining capital expenditure due to the economic downturn.

Despite the severe operating environment, the Maintenance Leasing segment has maintained relatively stable revenues by capitalizing on our position as the industry-leader in terms of market share and by providing high value-added services. Segment revenues decreased 6% to ¥222,952 million compared to ¥235,953 million during the previous fiscal year.

Also, selling, general and administrative expenses were down as a result of internal cost reduction programs. However, the decrease in segment expenses was minimal due to increased depreciation expenses mainly caused by conservative residual value estimates, reflecting the sluggish secondary auto market. As a result, segment profits decreased 15% to ¥21,742 million compared to ¥25,621 million during the previous fiscal year.

Segment assets were down 13% to ¥561,462 million compared to March 31, 2009 due to a decrease in new transactions from weakening demand and the sales of low performing assets.

Real Estate Segment

This segment consists of development and rental of commercial real estate and office buildings, condominium development and sales, hotel, golf course, and training facility operation, senior housing development and management, REIT asset management, and real estate investment and advisory services.

70

In the office building and commercial real estate development and rental business, the segment has focused on attracting tenants by capitalizing on its leasing expertise and maintaining yields by increasing property values as average rents have continued to decrease. Gains on sales of real estate under operating leases decreased significantly as sales of rental properties under operating leases were held back compared to the previous fiscal year in the still-weak real estate market, although signs of market recovery are starting to emerge.

There is upward momentum in the condominium market as contract rates increase while inventory adjustment continued. However, profits from the condominium development business have decreased due to a decline in the total number of condominiums delivered to 1,530 units from 3,038 units in the previous fiscal year as a result of limiting new developments since the second half of 2007 due to weak demand. Furthermore, revenues and expenses from facilities management services declined as a result of the sale of 100% of ORIX Facilities Corporation shares to DAIKYO INCORPORATED in March 2009.

As a result, segment revenues decreased 30% to ¥189,530 million compared to ¥270,027 million in the previous fiscal year. Despite decreased segment expenses, segment profits decreased 81% to ¥9,413 million compared to ¥50,508 million during the previous fiscal year due to a significant decline in equity in net income (loss) of affiliates related to condominium development joint ventures in addition to the abovementioned drastic decrease in gains on sales of real estate under operating leases.

Segment assets declined 8% to ¥1,079,273 million compared to March 31, 2009 mainly resulting from the decrease in inventories related to the condominium development business.

Investment Banking Segment

This segment consists of real estate finance, commercial real estate asset securitization, loan servicing (asset recovery), principal investment, M&A advisory, venture capital and securities brokerage.

The non-recourse loan market in Japan saw a sudden tightening of liquidity resulting from the global financial crisis. Although there have been slight improvements in liquidity, the market has yet to make a full recovery as financial institutions maintain their conservative stance toward lending.

Under this operating environment, revenues from the real estate finance business decreased as a result of asset reductions and limited new transactions. Although gains on investment securities in the principal investment business improved, segment revenues decreased 5% to ¥89,560 million compared to ¥94,645 million in the previous fiscal year.

Segment expenses increased compared to the previous fiscal year in line with an increase in provision for doubtful receivables and probable loan losses mainly from non-recourse loans and the recognition of write-downs on securities. Despite a loss being recorded due to JOINT CORPORATION’s filing for protection under the Corporate Rehabilitation Law, the amount of loss recorded for equity in net income (loss) of affiliates improved compared to the previous fiscal year when significant write-downs were recorded.

As a result, the segment recorded a loss of ¥11,960 million compared to a loss of ¥63,397 million in the previous fiscal year. Segment losses are steadily recovering from the bottom in the third quarter of the previous fiscal year.

Segment assets decreased 12% to ¥1,166,722 million compared to March 31, 2009 due to a decrease in the balances of installment loans and investment in securities.

Furthermore, real estate collateral from non-recourse loans has been acquired in some cases in order to maximize collections by capitalizing on our real estate value chain, and we have been shifting toward a scheme where revenues and risks can be controlled independently.

71

Retail Segment

This segment consists of the life insurance operations, the trust and banking business, and the card loan business and the online securities brokerage business operated by affiliates.

Deposits increased steadily in the trust and banking business as the domestic trend toward individual savings over investment continued. Even in the turbulent real estate market, there is still a strong demand for mortgages for rental condominiums for investment purposes, a main driver of the mortgage loan business. Also, trust and banking business profits increased compared to the previous fiscal year as a result of the trust and banking business steadily increasing its corporate loan balance under a strategy of strengthening its corporate finance operations.

In the life insurance business, sales performance has remained strong due to increased contracts for new products despite intensifying competition as the product lineup of high-demand “third sector” insurance (medical and cancer insurance) has diversified. In addition, life insurance related investment income has significantly improved compared to the previous fiscal year due to market recovery.

Under the policy of “Operational Realignment,” both the card loan and online securities brokerage businesses have entered into strategic alliances with influential partners. In the card loan business, a 51% stake of ORIX Credit was transferred to SMBC in July 2009 resulting in a gain on sale of a subsidiary. In the online securities brokerage business, we established a business alliance with Monex Group and concluded a share exchange with Monex Group in January 2010 pursuant to which shares of ORIX Securities were exchanged for shares of Monex Group and, as a result a gain on the sale of a subsidiary was recorded. Subsequent income for both businesses is recorded as equity in net income (loss) of affiliates.

Segment revenues decreased 15% to ¥155,917 million compared to ¥183,307 million in the previous fiscal year, due to the change in status of the card loan and online securities brokerage businesses to equity-method affiliates. Segment expenses such as life insurance costs and provision for doubtful receivables and probable loan losses have also decreased. Segment profits more than tripled to ¥31,104 million compared to ¥9,573 million in the previous fiscal year due to significant contributions from gains on sales of subsidiaries.

Segment assets increased 2% to ¥1,578,758 million compared to March 31, 2009 due to increased assets in the trust and banking and life insurance businesses, although the balance of installment loans from the card loan business decreased.

Overseas Business Segment