SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE Act of 1934

For the month of November 2017.

Commission File Number: 001-14856

ORIX Corporation

(Translation of Registrant’s Name into English)

World Trade Center Bldg., 2-4-1 Hamamatsu-cho, Minato-ku,

Tokyo, JAPAN

(Address of Principal Executive Offices)

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

Form 20-F  ☒        Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Table of Document(s) Submitted

1. This is an English translation of ORIX Corporation’s quarterly financial report (shihanki houkokusho) as filed with the Kanto Financial Bureau in Japan on November 13, 2017, which includes unaudited consolidated financial information prepared in accordance with generally accepted accounting principles in the United States as of March 31, 2017 and September 30, 2017 and for the three and six months ended September 30, 2016 and 2017.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ORIX Corporation
Date: November 13, 2017	By	/s/ Kazuo Kojima
		Kazuo Kojima
		Director
		Deputy President and Chief Financial Officer
		ORIX Corporation

CONSOLIDATED FINANCIAL INFORMATION

Notes to Translation

1. The following is an English translation of ORIX Corporation’s quarterly financial report (shihanki houkokusho) as filed with the Kanto Financial Bureau in Japan on November 13, 2017, which includes unaudited consolidated financial information prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) as of March 31, 2017 and September 30, 2017 and for the three and six months ended September 30, 2016 and 2017.

2. Significant differences between U.S. GAAP and generally accepted accounting principles in Japan (“Japanese GAAP”) are stated in Note 1 “Overview of Accounting Principles Utilized” of the notes to Consolidated Financial Statements.

In preparing its consolidated financial information, ORIX Corporation (the “Company”) and its subsidiaries have complied with U.S. GAAP.

This document may contain forward-looking statements about expected future events and financial results that involve risks and uncertainties. Such statements are based on the Company’s current expectations and are subject to uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause such a difference include, but are not limited to, those described under “Risk Factors” in the Company’s most recent annual report on Form 20-F filed with the U.S. Securities and Exchange Commission.

The Company believes that it may have been a “passive foreign investment company” for U.S. federal income tax purposes in the year to which these consolidated financial results relate by reason of the composition of its assets and the nature of its income. In addition, the Company may be a PFIC for the foreseeable future. Assuming that the Company is a PFIC, a U.S. holder of the shares or ADSs of the Company will be subject to special rules generally intended to eliminate any benefits from the deferral of U.S. federal income tax that a holder could derive from investing in a foreign corporation that does not distribute all of its earnings on a current basis. Investors should consult their tax advisors with respect to such rules, which are summarized in the Company’s annual report.

– 1 –

1. Information on the Company and its Subsidiaries

(1) Consolidated Financial Highlights

	Millions of yen (except for per share amounts and ratios)
	Six months ended September 30, 2016			Six months ended September 30, 2017			Fiscal year ended March 31, 2017
Total revenues	¥	1,221,125		¥	1,517,796		¥	2,678,659
Income before income taxes		219,235			252,612			424,965
Net income attributable to ORIX Corporation shareholders		142,150			165,970			273,239
Comprehensive Income attributable to ORIX Corporation shareholders		86,686			180,526			263,378
ORIX Corporation shareholders’ equity		2,364,960			2,610,740			2,507,698
Total assets		10,782,692			11,426,036			11,231,895
Earnings per share for net income attributable to ORIX Corporation shareholders
Basic (yen)		108.57			129.40			208.88
Diluted (yen)		108.47			129.29			208.68
ORIX Corporation shareholders’ equity ratio (%)		21.9			22.8			22.3
Cash flows from operating activities		330,969			197,630			583,955
Cash flows from investing activities		20,168			(177,003	)		(237,608	)
Cash flows from financing activities		(101,729	)		116,364			(33,459	)
Cash and cash equivalents at end of period		961,830			1,185,961			1,039,870
	Millions of yen (except for per share amounts)
	Three months ended September 30, 2016			Three months ended September 30, 2017
Total revenues	¥	633,180		¥	725,499
Net income attributable to ORIX Corporation shareholders		65,381			76,258
Earnings per share for net income attributable to ORIX Corporation shareholders
Basic (yen)		49.94			59.61

Note: Consumption tax is excluded from the stated amount of total revenues.

(2) Overview of Activities

During the six months ended September 30, 2017, no significant changes were made in the Company and its subsidiaries’ operations. Additionally, there were no changes of principal subsidiaries and affiliates.

2. Risk Factors

Investing in the Company’s securities involves risks. You should carefully consider the information described herein as well as the risks described under “Risk Factors” in our Form 20-F for the fiscal year ended March 31, 2017 and the other information in that annual report, including, but not limited to, the Company’s consolidated financial statements and related notes and “Item 11. Quantitative and Qualitative Disclosures about Market Risk.” The Company’s business activities, financial condition and results of operations and the trading prices of the Company’s securities could be adversely affected by any of those factors or other factors.

3. Material Contracts

Not applicable.

– 2 –

4. Analysis of Financial Results and Condition

The following discussion provides management’s explanation of factors and events that have significantly affected the Company’s financial condition and results of operations. Also included is management’s assessment of factors and trends that could have a material effect on the Company’s financial condition and results of operations in the future. However, please be advised that financial conditions and results of operations in the future may also be affected by factors other than those discussed herein. These factors and trends regarding the future were assessed as of the issue date of this quarterly financial report (shihanki houkokusho).

(1) Qualitative Information Regarding Consolidated Financial Results

Financial Highlights

Financial Results for the Six Months Ended September 30, 2017

Total revenues	¥1,517,796 million (Up 24% year on year)
Total expenses	¥1,328,769 million (Up 26% year on year)
Income before income taxes	¥252,612 million (Up 15% year on year)
Net income attributable to ORIX Corporation Shareholders	¥165,970 million (Up 17% year on year)
Earnings per share for net income attributable to ORIX Corporation Shareholders
(Basic)	¥129.40 (Up 19% year on year)
(Diluted)	¥129.29 (Up 19% year on year)
ROE (Annualized) *1	13.0% (12.2% during the same period in the previous fiscal year)
ROA (Annualized) *2	2.93% (2.61% during the same period in the previous fiscal year)

*1 ROE is the ratio of Net income attributable to ORIX Corporation Shareholders for the period to average ORIX Corporation Shareholders’ Equity.

*2 ROA is the ratio of Net income attributable to ORIX Corporation Shareholders for the period to average Total Assets.

Total revenues for the six months ended September 30, 2017 (hereinafter, ”the second consolidated period”) increased 24% to ¥1,517,796 million compared to ¥1,221,125 million during the same period of the previous fiscal year. Life insurance premiums and related investment income in the life insurance business increased due to an increase in life insurance premiums in line with an increase in new insurance contracts, and an increase in investment income from assets under variable annuity and variable life insurance contracts following the market’s recovery. In addition, sales of goods and real estate increased due primarily to revenues generated by subsidiaries in the principal investment business, and services income increased due primarily to service expansion in the environment and energy business.

Total expenses increased 26% to ¥1,328,769 million compared to ¥1,054,776 million during the same period of the previous fiscal year. Life insurance costs increased due to an increase in a provision of liability reserve in line with the aforementioned increase in new insurance contracts and an increase in investment income. In addition, costs of goods and real estate sold and services expense increased in line with the aforementioned increased revenues.

Equity in net income of affiliates increased due mainly to the recognition of significant gains on sales of investments in real estate joint ventures. Gains on sales of subsidiaries and affiliates and liquidation losses, net decreased compared to the same period of the previous fiscal year during which significant gains on sales of shares of an affiliate were recorded in the Investment and Operation segment.

As a result of the foregoing, income before income taxes for the second consolidated period increased 15% to ¥252,612 million compared to ¥219,235 million during the same period of the previous fiscal year, and net income attributable to ORIX Corporation shareholders increased 17% to ¥165,970 million compared to ¥142,150 million during the same period of the previous fiscal year.

– 3 –

Segment Information

Total revenues and profits by segment for the six months ended September 30, 2016 and 2017 are as follows:

	Millions of yen
	Six months ended September 30, 2016					Six months ended September 30, 2017					Change (revenues)						Change (profits)
	Segment Revenues			Segment Profits		Segment Revenues			Segment Profits		Amount			Percent (%)			Amount			Percent (%)
Corporate Financial Services	¥	51,995		¥	19,874	¥	53,983		¥	22,049	¥	1,988			4		¥	2,175			11
Maintenance Leasing		134,820			19,655		137,048			20,438		2,228			2			783			4
Real Estate		104,084			35,447		95,755			43,991		(8,329	)		(8	)		8,544			24
Investment and Operation		539,042			52,041		774,421			38,927		235,379			44			(13,114	)		(25	)
Retail		151,095			35,507		219,505			42,950		68,410			45			7,443			21
Overseas Business		240,643			51,510		238,641			81,397		(2,002	)		(1	)		29,887			58
Total		1,221,679			214,034		1,519,353			249,752		297,674			24			35,718			17
Difference between Segment Total and Consolidated Amounts		(554	)		5,201		(1,557	)		2,860		(1,003	)		—			(2,341	)		(45	)
Total Consolidated Amounts	¥	1,221,125		¥	219,235	¥	1,517,796		¥	252,612	¥	296,671			24		¥	33,377			15

Total assets by segment as of March 31, 2017 and September 30, 2017 are as follows:

	Millions of yen
	March 31, 2017				September 30, 2017				Change
	Segment Assets		Composition ratio (%)		Segment Assets		Composition ratio (%)		Amount			Percent (%)
Corporate Financial Services	¥	1,032,152		9.1	¥	1,001,476		8.8	¥	(30,676	)		(3	)
Maintenance Leasing		752,513		6.7		782,512		6.8		29,999			4
Real Estate		657,701		5.9		628,885		5.5		(28,816	)		(4	)
Investment and Operation		768,675		6.8		863,640		7.6		94,965			12
Retail		3,291,631		29.3		3,209,131		28.1		(82,500	)		(3	)
Overseas Business		2,454,200		21.9		2,630,516		23.0		176,316			7
Total		8,956,872		79.7		9,116,160		79.8		159,288			2
Difference between Segment Total and Consolidated Amounts		2,275,023		20.3		2,309,876		20.2		34,853			2
Total Consolidated Amounts	¥	11,231,895		100.0	¥	11,426,036		100.0	¥	194,141			2

– 4 –

Segment information for the six months ended September 30, 2017 is as follows:

Corporate Financial Services Segment: Loan, leasing and fee business

The Japanese economy on the whole entered a moderate recovery phase despite some areas of weakness. The balance of outstanding loans at financial institutions continues to increase while interest rates on loans remain at low levels.

Segment revenues increased 4% to ¥53,983 million compared to ¥51,995 million during the same period of the previous fiscal year due to an increase in gains on sales of securities, and an increase in services income resulting from our stable fee businesses to domestic small-and medium-sized enterprise customers and from revenue generated by Yayoi Co. Ltd, despite a decrease in finance revenues in line with a decrease in investment in direct financing leases and installment loans.

Segment expenses increased due to an increase in expenses in line with the aforementioned revenues expansion, notwithstanding a decrease in interest expenses.

As a result of the foregoing and the recognition of gains on sales of shares of affiliates, segment profits increased 11% to ¥22,049 million compared to ¥19,874 million during the same period of the previous fiscal year.

Segment assets decreased 3% to ¥1,001,476 million compared to the balance as of March 31, 2017, due to decreases in investment in direct financing leases and installment loans.

	Six months ended September 30, 2016		Six months ended September 30, 2017		Change
					Amount			Percent (%)
	(Millions of yen, except percentage data)
Segment Revenues:
Finance revenues	¥	15,538	¥	14,928	¥	(610	)		(4	)
Operating leases		12,210		11,525		(685	)		(6	)
Services income		20,070		20,933		863			4
Sales of goods and real estate, and other		4,177		6,597		2,420			58
Total Segment Revenues		51,995		53,983		1,988			4
Segment Expenses:
Interest expense		3,125		2,552		(573	)		(18	)
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities		353		682		329			93
Other		30,406		30,883		477			2
Total Segment Expenses		33,884		34,117		233			1
Segment Operating Income		18,111		19,866		1,755			10
Equity in Net income (Loss) of Affiliates, and others		1,763		2,183		420			24
Segment Profits	¥	19,874	¥	22,049	¥	2,175			11
	As of March 31, 2017		As of September 30, 2017		Change
					Amount			Percent (%)
	(Millions of yen, except percentage data)
Investment in direct financing leases	¥	433,929	¥	423,870	¥	(10,059	)		(2	)
Installment loans		398,558		387,427		(11,131	)		(3	)
Investment in operating leases		30,114		25,118		(4,996	)		(17	)
Investment in securities		34,773		31,652		(3,121	)		(9	)
Property under facility operations		13,034		12,661		(373	)		(3	)
Inventories		51		56		5			10
Advances for investment in operating leases		80		94		14			18
Investment in affiliates		18,392		15,500		(2,892	)		(16	)
Advances for property under facility operations		139		839		700			504
Goodwill and other intangible assets acquired in business combinations		103,082		104,259		1,177			1
Total Segment Assets	¥	1,032,152	¥	1,001,476	¥	(30,676	)		(3	)

– 5 –

Maintenance Leasing Segment: Automobile leasing and rentals, car-sharing, and test and measurement instruments and IT-related equipment rentals and leasing

While demand in corporate capital investment has been gradually increasing, uncertainty in the domestic and overseas economic outlook has deterred new investment. The volume of new auto-leases is gradually increasing due to moderate economic recovery in Japan.

Segment revenues increased 2% to ¥137,048 million compared to ¥134,820 million during the same period of the previous fiscal year due to increases in finance revenues and operating leases revenues in line with an increased average segment asset balance in the automobile leasing business.

Segment expenses increased in line with the aforementioned revenue increase.

As a result, segment profits increased 4% to ¥20,438 million compared to ¥19,655 million during the same period of the previous fiscal year.

Segment assets increased 4% to ¥782,512 million compared to the balance as of March 31, 2017, due primarily to an increase in new auto-leases in the automobile leasing business.

	Six months ended September 30, 2016		Six months ended September 30, 2017			Change
						Amount			Percent (%)
	(Millions of yen, except percentage data)
Segment Revenues:
Finance revenues	¥	6,378	¥	7,003		¥	625			10
Operating leases		93,312		94,474			1,162			1
Services income		33,250		33,734			484			1
Sales of goods and real estate, and other		1,880		1,837			(43	)		(2	)
Total Segment Revenues		134,820		137,048			2,228			2
Segment Expenses:
Interest expense		1,710		1,579			(131	)		(8	)
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities		169		104			(65	)		(38	)
Other		113,311		114,719			1,408			1
Total Segment Expenses		115,190		116,402			1,212			1
Segment Operating Income		19,630		20,646			1,016			5
Equity in Net income (Loss) of Affiliates, and others		25		(208	)		(233	)		—
Segment Profits	¥	19,655	¥	20,438		¥	783			4
	As of March 31, 2017		As of September 30, 2017			Change
						Amount			Percent (%)
	(Millions of yen, except percentage data)
Investment in direct financing leases	¥	277,480	¥	290,948		¥	13,468			5
Investment in operating leases		469,824		486,716			16,892			4
Investment in securities		1,322		1,217			(105	)		(8	)
Property under facility operations		803		803			0			—
Inventories		445		374			(71	)		(16	)
Advances for investment in operating leases		335		167			(168	)		(50	)
Investment in affiliates		1,880		1,863			(17	)		(1	)
Goodwill and other intangible assets acquired in business combinations		424		424			0			—
Total Segment Assets	¥	752,513	¥	782,512		¥	29,999			4

– 6 –

Real Estate Segment: Real estate development and rental, facility operation, REIT asset management, and real estate investment and advisory services

Land prices remain high and vacancy rates in the Japanese office building market remain at low levels, especially in the Greater Tokyo Area due primarily to the quantitative easing policies implemented by the Bank of Japan, including the low interest rate environment. However, we are also seeing a trend where sales prices of condominiums are no longer increasing. Changes in tourism preferences such as increased availability and usage of vacation rentals are affecting hotels and Japanese inns’ operation.

Segment revenues decreased 8% to ¥95,755 million compared to ¥104,084 million during the same period of the previous fiscal year due primarily to a decrease in operating leases revenues in line with a decrease in gains on sales of rental property in Japan and decreased asset balance in operating leases, partially offset by an increase in services income from facilities operations.

Segment expenses increased compared to the same period of the previous fiscal year due primarily to an increase in services expense from facilities operations.

As a result of the foregoing and due to an increase in equity in net income of affiliates in line with the recognition of significant gains on sales of investments in real estate joint ventures, segment profits increased 24% to ¥43,991 million compared to ¥35,447 million during the same period of the previous fiscal year.

Segment assets decreased 4% to ¥628,885 million compared to the balance as of March 31, 2017, due primarily to a decrease in investment in operating leases, which resulted from sales of rental properties.

	Six months ended September 30, 2016		Six months ended September 30, 2017		Change
					Amount			Percent (%)
	(Millions of yen, except percentage data)
Segment Revenues:
Finance revenues	¥	830	¥	986	¥	156			19
Operating leases		43,294		30,112		(13,182	)		(30	)
Services income		55,889		60,882		4,993			9
Sales of goods and real estate, and other		4,071		3,775		(296	)		(7	)
Total Segment Revenues		104,084		95,755		(8,329	)		(8	)
Segment Expenses:
Interest expense		1,676		1,214		(462	)		(28	)
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities		630		1,472		842			134
Other		67,767		70,156		2,389			4
Total Segment Expenses		70,073		72,842		2,769			4
Segment Operating Income		34,011		22,913		(11,098	)		(33	)
Equity in Net income (Loss) of Affiliates, and others		1,436		21,078		19,642			—
Segment Profits	¥	35,447	¥	43,991	¥	8,544			24
	As of March 31, 2017		As of September 30, 2017		Change
					Amount			Percent (%)
	(Millions of yen, except percentage data)
Investment in direct financing leases	¥	27,523	¥	29,944	¥	2,421			9
Installment loans		0		310		310			—
Investment in operating leases		298,184		268,312		(29,872	)		(10	)
Investment in securities		3,552		3,630		78			2
Property under facility operations		185,023		190,656		5,633			3
Inventories		2,567		2,329		(238	)		(9	)
Advances for investment in operating leases		18,634		17,150		(1,484	)		(8	)
Investment in affiliates		99,347		93,242		(6,105	)		(6	)
Advances for property under facility operations		11,196		11,728		532			5
Goodwill and other intangible assets acquired in business combinations		11,675		11,584		(91	)		(1	)
Total Segment Assets	¥	657,701	¥	628,885	¥	(28,816	)		(4	)

– 7 –

Investment and Operation Segment: Environment and energy, principal investment, loan servicing (asset recovery), and concession

Investment in infrastructure, especially energy infrastructure, is diversifying in Japan. In the energy business, among renewable energy, investment is expanding beyond solar power to wind and geothermal power. In addition, business structures are also diversifying. In infrastructure investment markets, the use of private funds is expanding in public facilities management. In emerging countries, infrastructure demand is growing rapidly with economic growth, and Japanese companies are expected to increase infrastructure investment.

Segment revenues increased 44% to ¥774,421 million compared to ¥539,042 million during the same period of the previous fiscal year due to increases in sales of goods from subsidiaries in the principal investment business and services income from the environment and energy business.

Segment expenses increased compared to the same period of the previous fiscal year in line with the aforementioned revenues expansion.

On the other hand, due to the recognition of significant gains on sales of shares of an affiliate during the same period of the previous fiscal year, segment profits decreased 25% to ¥38,927 million compared to ¥52,041 million during the same period of the previous fiscal year.

Segment assets increased 12% to ¥863,640 million compared to the balance as of March 31, 2017, due primarily to a new large-scale investment in affiliates in the environment and energy business.

	Six months		Six months			Change
	ended September 30, 2016		ended September 30, 2017			Amount			Percent (%)
	(Millions of yen, except percentage data)
Segment Revenues:
Finance revenues	¥	5,304	¥	4,562		¥	(742	)		(14	)
Gains on investment securities and dividends		6,216		4,356			(1,860	)		(30	)
Sales of goods and real estate		377,408		601,760			224,352			59
Services income		145,581		158,069			12,488			9
Operating leases, and other		4,533		5,674			1,141			25
Total Segment Revenues		539,042		774,421			235,379			44
Segment Expenses:
Interest expense		2,481		2,624			143			6
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities		5,478		(536	)		(6,014	)		—
Other		514,137		746,458			232,321			45
Total Segment Expenses		522,096		748,546			226,450			43
Segment Operating Income		16,946		25,875			8,929			53
Equity in Net income (Loss) of Affiliates, and others		35,095		13,052			(22,043	)		(63	)
Segment Profits	¥	52,041	¥	38,927		¥	(13,114	)		(25	)

– 8 –

	As of		As of		Change
	March 31, 2017		September 30, 2017		Amount			Percent (%)
	(Millions of yen, except percentage data)
Investment in direct financing leases	¥	26,016	¥	23,740	¥	(2,276	)		(9	)
Installment loans		56,435		54,707		(1,728	)		(3	)
Investment in operating leases		25,434		27,723		2,289			9
Investment in securities		51,474		39,170		(12,304	)		(24	)
Property under facility operations		187,674		185,025		(2,649	)		(1	)
Inventories		112,798		125,384		12,586			11
Advances for investment in operating leases		1,237		1,432		195			16
Investment in affiliates		71,481		144,267		72,786			102
Advances for property under facility operations		55,180		70,485		15,305			28
Goodwill and other intangible assets acquired in business combinations		180,946		191,707		10,761			6
Total Segment Assets	¥	768,675	¥	863,640	¥	94,965			12

Retail Segment: Life insurance, banking and card loan

While the life insurance business in Japan is currently affected by macroeconomic factors such as domestic population decline, we are seeing a rise in demand for medical insurance. Companies are developing new products and revising insurance premiums which reflect the performance of related products. In the card loan business for individuals, banks and other lenders are refraining from expanding their assets due to an overheating business environment.

Segment revenues increased 45% to ¥219,505 million compared to ¥151,095 million during the same period of the previous fiscal year due mainly to an increase in life insurance premiums in line with an increase in new insurance contracts, and an increase in investment income from assets under variable annuity and variable life insurance contracts in the life insurance business following the market’s recovery.

Segment expenses increased compared to the same period of the previous fiscal year due to an increase in a provision of liability reserve in line with the aforementioned increase in new insurance contracts and an increase in investment income.

As a result of the foregoing, segment profits increased 21% to ¥42,950 million compared to ¥35,507 million during the same period of the previous fiscal year.

Segment assets decreased 3% to ¥3,209,131 million compared to the balance as of March 31, 2017, due primarily to sales of investment in securities as well as the surrender of variable annuity and variable life insurance contracts in the life insurance business, offsetting an increase in installment loans in the banking business.

– 9 –

	Six months ended September 30, 2016		Six months ended September 30, 2017		Change
					Amount			Percent (%)
	(Millions of yen, except percentage data)
Segment Revenues:
Finance revenues	¥	28,900	¥	30,867	¥	1,967			7
Life insurance premiums and related investment income		116,430		181,908		65,478			56
Services income, and other		5,765		6,730		965			17
Total Segment Revenues		151,095		219,505		68,410			45
Segment Expenses:
Interest expense		2,105		1,986		(119	)		(6	)
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities		4,953		5,679		726			15
Other		108,531		168,890		60,359			56
Total Segment Expenses		115,589		176,555		60,966			53
Segment Operating Income		35,506		42,950		7,444			21
Equity in Net income (Loss) of Affiliates, and others		1		0		(1	)		—
Segment Profits	¥	35,507	¥	42,950	¥	7,443			21
	As of March 31, 2017		As of September 30, 2017		Change
					Amount			Percent (%)
	(Millions of yen, except percentage data)
Investment in direct financing leases	¥	518	¥	336	¥	(182	)		(35	)
Installment loans		1,718,655		1,796,220		77,565			5
Investment in operating leases		46,243		45,434		(809	)		(2	)
Investment in securities		1,509,180		1,350,270		(158,910	)		(11	)
Investment in affiliates		810		647		(163	)		(20	)
Goodwill and other intangible assets acquired in business combinations		16,225		16,224		(1	)		(0	)
Total Segment Assets	¥	3,291,631	¥	3,209,131	¥	(82,500	)		(3	)

Overseas Business Segment: Leasing, loan, bond investment, asset management and aircraft and ship-related operations

The U.S. economy has continued to recover with improvements in employment and income environment; other regions have also experienced moderate recovery. Although interest rates remain low worldwide, reduction of quantitative easing policies are likely in advanced nations. The asset management industry is expected to increase assets under management due to the increase in pension assets and the high-income class population over the mid- and long-term. And, the aviation industry is expected to continue to expand its market size against the backdrop of increasing passenger demand mainly in emerging countries. In addition, there are political and geopolitical tensions in certain regions that need to be monitored carefully.

Segment revenues decreased 1% to ¥238,641 million compared to ¥240,643 million during the same period of the previous fiscal year due to a decrease in sales of goods resulting from the sale of a subsidiary during the previous fiscal year, despite increases in finance revenues mainly from the Americas and operating leases revenues of aircraft-related operations in line with an increase in gains on sales of aircraft.

– 10 –

Segment expenses decreased compared to the same period of the previous fiscal year due primarily to a decrease in costs of goods sold resulting from the aforementioned sale of a subsidiary.

As a result of the foregoing and due to the recognition of gains on sales of affiliates in the Americas and Asia, segment profits increased 58% to ¥81,397 million compared to ¥51,510 million in the same period of the previous fiscal year.

Segment assets increased 7% to ¥2,630,516 million compared to the balance as of March 31, 2017, due to increases in investment in operating leases of aircraft-related operations, installment loans in the Americas and Asia, and the recognition of goodwill and other intangible assets in line with investment in a new subsidiary, offsetting a decrease in investment in securities in the Americas.

	Six months		Six months		Change
	ended September 30, 2016		ended September 30, 2017		Amount			Percent (%)
	(Millions of yen, except percentage data)
Segment Revenues:
Finance revenues	¥	37,926	¥	46,550	¥	8,624			23
Gains on investment securities and dividends		5,595		11,315		5,720			102
Operating leases		43,528		57,279		13,751			32
Services income		105,872		117,021		11,149			11
Sales of goods and real estate, and other		47,722		6,476		(41,246	)		(86	)
Total Segment Revenues		240,643		238,641		(2,002	)		(1	)
Segment Expenses:
Interest expense		17,217		23,477		6,260			36
Provision for doubtful receivables and probable loan losses and write-downs of long-lived assets and securities		2,947		2,572		(375	)		(13	)
Other		176,972		154,480		(22,492	)		(13	)
Total Segment Expenses		197,136		180,529		(16,607	)		(8	)
Segment Operating Income		43,507		58,112		14,605			34
Equity in Net income (Loss) of Affiliates, and others		8,003		23,285		15,282			191
Segment Profits	¥	51,510	¥	81,397	¥	29,887			58
					Change
	As of March 31, 2017		As of September 30, 2017		Amount			Percent (%)
	(Millions of yen, except percentage data)
Investment in direct financing leases	¥	357,732	¥	374,663	¥	16,931			5
Installment loans		457,393		539,595		82,202			18
Investment in operating leases		420,207		457,788		37,581			9
Investment in securities		465,899		423,723		(42,176	)		(9	)
Property under facility operations and servicing assets		29,705		45,108		15,403			52
Inventories		1,811		1,559		(252	)		(14	)
Advances for investment in operating leases		9,024		9,754		730			8
Investment in affiliates		332,154		338,757		6,603			2
Advances for property under facility operations		39		0		(39	)		—
Goodwill and other intangible assets acquired in business combinations		380,236		439,569		59,333			16
Total Segment Assets	¥	2,454,200	¥	2,630,516	¥	176,316			7

– 11 –

(2) Financial Condition

	As of March 31, 2017			As of September 30, 2017			Change
							Amount		Percent (%)
	(Millions of yen except per share, ratios and percentages)
Total assets	¥	11,231,895		¥	11,426,036		¥	194,141		2
(Segment assets)		8,956,872			9,116,160			159,288		2
Total liabilities		8,577,722			8,671,464			93,742		1
(Short- and long-term debt)		4,138,451			4,203,216			64,765		2
(Deposits)		1,614,608			1,698,428			83,820		5
ORIX Corporation shareholders’ equity		2,507,698			2,610,740			103,042		4
ORIX Corporation shareholders’ equity per share (yen)*1		1,925.17			2,040.70			115.53		6
ORIX Corporation shareholders’ equity ratio*2		22.3	%		22.8	%		—		—
D/E ratio (Debt-to-equity ratio) (Short-and long-term debt (excluding deposits) / ORIX Corporation shareholders’ equity)		1.7	x		1.6	x		—		—

*1 ORIX Corporation shareholders’ equity per share is calculated using total ORIX Corporation shareholders’ equity.

*2 ORIX Corporation shareholders’ equity ratio is the ratio as of the period end of ORIX Corporation shareholders’ equity to total assets.

Total assets increased 2% to ¥11,426,036 million compared to ¥11,231,895 million as of March 31, 2017. Investment in securities decreased due primarily to sales of investment in securities as well as the surrender of variable annuity and variable life insurance contracts in the life insurance business. On the other hand, investment in affiliates increased due primarily to a new large-scale investment in the environment and energy business. Segment assets increased 2% to ¥9,116,160 million compared to the balance as of March 31, 2017.

We manage the balance of interest-bearing liabilities at an appropriate level taking into account the condition of assets and liquidity on-hand as well as the domestic and overseas financial environment. As a result, long- and short-term debt and deposits increased compared to the balance as of March 31, 2017. In addition, policy liabilities and policy account balances decreased due to the surrender of variable annuity and variable life insurance contracts.

Shareholders’ equity increased 4% to ¥2,610,740 million compared to the balance as of March 31, 2017 due primarily to an increase in retained earnings, despite a decrease due to share repurchases.

– 12 –

(3) Liquidity and Capital Resources

We require capital resources for working capital, investment and loan in our businesses. We accordingly prioritize funding stability, maintaining adequate liquidity, and reducing capital costs. We formulate and execute on funding policies that are resistant to sudden negative events in financial markets, and then conduct funding activities in accordance with actual transitions in our assets and changes in financial markets. In preparing our management plan, we project funding activities to maintain a balanced capital structure in light of projected cash flows, asset liquidity and our own liquidity situation. When implementing our management plan, we adjust our funding based on changes in the external environment and our needs in light of our business activities, and endeavor to maintain flexibility in our funding activities. We endeavor to diversify our funding sources, promote longer liability maturities, disperse interest and principal repayment dates, maintain sufficient liquidity, optimize the balance of liabilities and equity and reinforce our funding stability.

Our funding is comprised of borrowings from financial institutions, direct fund procurement from capital markets and deposits. ORIX Group’s total funding including that from short- and long-term debt and deposits on a consolidated basis was ¥5,901,644 million as of September 30, 2017. Borrowings are procured from a diverse range of financial institutions including major banks, regional banks, foreign banks and life and casualty insurance companies. The number of financial institutions from which we procured borrowings exceeded 200 as of September 30, 2017. Procurement from the capital markets is composed of bonds, medium-term notes, commercial paper, payables under securitized leases, loan receivables and other assets (including asset backed securities). The majority of deposits are attributable to ORIX Bank Corporation.

In an effort to promote longer liability maturities and diversify our funding sources, during the six months ended September 30, 2017, we issued ¥70,000 million bonds in Japan, amount equal to ¥157,147 million of bonds and medium-term notes outside Japan. We intend to continue to strengthen our financial condition, while maintaining appropriately diverse funding.

Short-term and long-term debt and deposits

(a) Short-term debt

	Millions of yen
	March 31, 2017		September 30, 2017
Borrowings from financial institutions	¥	233,371	¥	264,512
Commercial paper		50,096		71,153
Total short-term debt	¥	283,467	¥	335,665

Short-term debt as of September 30, 2017 was ¥335,665 million, which accounted for 8% of the total amount of short and long-term debt (excluding deposits) as compared to 7% as of March 31, 2017.

While the amount of short-term debt as of September 30, 2017 was ¥335,665 million, the sum of cash and cash equivalents and the unused amount of committed credit facilities as of September 30, 2017 was ¥1,562,364 million.

(b) Long-term debt

	Millions of yen
	March 31, 2017		September 30, 2017
Borrowings from financial institutions	¥	2,724,856	¥	2,779,851
Bonds		688,488		775,081
Medium-term notes		196,570		197,011
Payables under securitized lease, loan receivables and other assets		245,070		115,608
Total long-term debt	¥	3,854,984	¥	3,867,551

– 13 –

The balance of long-term debt as of September 30, 2017 was ¥3,867,551 million, which accounted for 92% of the total amount of short and long-term debt (excluding deposits) as compared to 93% as of March 31, 2017.

(c) Deposits

	Millions of yen
	March 31, 2017		September 30, 2017
Deposits	¥	1,614,608	¥	1,698,428

Apart from the short-term and long-term debt noted above, ORIX Bank Corporation and ORIX Asia Limited accept deposits. These deposit-taking subsidiaries are regulated institutions, and loans from these subsidiaries to ORIX Group entities are subject to maximum regulatory limits.

(4) Summary of Cash Flows

Cash and cash equivalents as of September 30, 2017 increased by ¥146,091 million to ¥1,185,961 million compared to March 31, 2017.

Cash flows provided by operating activities were ¥197,630 million in the six months ended September 30, 2017, down from ¥330,969 million during the same period of the previous fiscal year, primarily resulting from an increase in payment of income taxes.

Cash flows used in investing activities were ¥177,003 million in the six months ended September 30, 2017 compared to the inflow of ¥20,168 million during the same period of the previous fiscal year. This change was primarily resulting from increases in purchases of lease equipment and investment in affiliates.

Cash flows provided by financing activities were ¥116,364 million in the six months ended September 30, 2017 compared to the outflow of ¥101,729 million during the same period of the previous fiscal year. This change was primarily resulting from an increase in proceeds from debt with maturities longer than three months and a change from a decrease to an increase in debt with maturities of three months or less.

(5) Challenges to be addressed

There were no significant changes for the six months ended September 30, 2017.

(6) Research and Development Activity

There were no significant changes in research and development activities for the six months ended September 30, 2017.

(7) Major facilities

There were no significant changes in major facilities for the six months ended September 30, 2017.

– 14 –

5. Company Stock Information

(The following disclosure is provided for ORIX Corporation on a stand-alone basis and has been prepared based on Japanese GAAP.)

(1) Issued Shares, Common Stock and Capital Reserve

The number of issued shares, the amount of common stock and capital reserve for the three months ended September 30, 2017 is as follows:

In thousands		Millions of yen
Number of issued shares		Common stock		Capital reserve
Increase, net	September 30, 2017	Increase, net	September 30, 2017	Increase, net	September 30, 2017
35	1,324,142	¥39	¥220,563	¥39	¥247,742

(2) List of Major Shareholders

The following is a list of major shareholders based on our share registry as of September 30, 2017:

Name	Number of shares held (in thousands)		Percentage of total shares issued
Address
Japan Trustee Services Bank, Ltd. (Trust Account)		115,599		8.73	%
1-8-11, Harumi, Chuo-ku, Tokyo
The Master Trust Bank of Japan, Ltd. (Trust Account)		76,972		5.81
2-11-3, Hamamatsu-cho, Minato-ku, Tokyo
Japan Trustee Services Bank, Ltd. (Trust Account 9)		39,513		2.98
1-8-11, Harumi, Chuo-ku, Tokyo
The Chase Manhattan Bank 385036		25,355		1.91
360 N. Crescent Drive Beverly Hills, CA 90210 U.S.A.
Citibank, N.A.-NY, As Depositary Bank For Depositary Share Holders		25,034		1.89
388 Greenwich Street New York, NY 10013 USA
Japan Trustee Services Bank, Ltd. (Trust Account 5)		24,837		1.87
1-8-11, Harumi, Chuo-Ku, Tokyo
State Street Bank And Trust Company		23,300		1.75
One Lincoln Street, Boston MA USA 02111
State Street Bank West Client-Treaty 505234		22,177		1.67
1776 Heritage Drive, North Quincy, MA 02171, U.S.A.
Japan Trustee Services Bank, Ltd. (Trust Account 7)		19,557		1.47
1-8-11, Harumi, Chuo-ku, Tokyo
Japan Trustee Services Bank, Ltd. (Trust Account 1)		19,189		1.44
1-8-11, Harumi, Chuo-ku, Tokyo
		391,537		29.56	%

Notes 1:	The number of shares held in relation to a trust business may not be all inclusive and therefore is reported with reference to the names listed as shareholders.
2:	In addition to the above, the Company has treasury stock shares of 42,843 thousand shares. The Company’s shares held through the Board Incentive Plan Trust (1,962 thousand shares) are not included in the number of treasury stock shares.

6. Directors and Executive Officers

Between the filing date of Form 20-F for the fiscal year ended March 31, 2017 and September 30, 2017, there were no changes of directors and executive officers.

– 15 –

7. Financial Information

(1) Condensed Consolidated Balance Sheets (Unaudited)

		Millions of yen
Assets		March 31, 2017			September 30, 2017
Cash and Cash Equivalents		¥	1,039,870		¥	1,185,961
Restricted Cash			93,342			88,242
Investment in Direct Financing Leases			1,204,024			1,214,698
Installment Loans			2,815,706			2,825,895
The amounts which are measured at fair value by electing the fair value option are as follows:
March 31, 2017	¥19,232 million
September 30, 2017	¥14,735 million
Allowance for Doubtful Receivables on Direct Financing Leases and Probable Loan Losses			(59,227	)		(57,976	)
Investment in Operating Leases			1,313,164			1,334,675
Investment in Securities			2,026,512			1,849,333
The amounts which are measured at fair value by electing the fair value option are as follows:
March 31, 2017	¥24,894 million
September 30, 2017	¥34,031 million
Property under Facility Operations			398,936			404,967
Investment in Affiliates			524,234			594,430
Trade Notes, Accounts and Other Receivable			283,427			276,278
Inventories			117,863			129,882
Office Facilities			110,781			109,975
Other Assets			1,363,263			1,469,676
The amounts which are measured at fair value by electing the fair value option are as follows:
March 31, 2017	¥22,116 million
September 30, 2017	¥15,242 million
Total Assets		¥	11,231,895		¥	11,426,036

Note: The assets of consolidated variable interest entities (VIEs) that can be used only to settle obligations of those VIEs are below:

	Millions of yen
	March 31, 2017		September 30, 2017
Cash and Cash Equivalents	¥	5,674	¥	4,511
Investment in Direct Financing Leases (Net of Allowance for Doubtful Receivables on Direct Financing Leases and Probable Loan Losses)		90,822		65,358
Installment Loans (Net of Allowance for Doubtful Receivables on Direct Financing Leases and Probable Loan Losses)		186,818		44,049
Investment in Operating Leases		151,686		131,578
Property under Facility Operations		109,656		110,234
Investment in Affiliates		53,046		52,887
Other		105,591		70,191
	¥	703,293	¥	478,808

– 16 –

	Millions of yen
Liabilities and Equity	March 31, 2017			September 30, 2017
Liabilities:
Short-Term Debt	¥	283,467		¥	335,665
Deposits		1,614,608			1,698,428
Trade Notes, Accounts and Other Payable		251,800			211,910
Policy Liabilities and Policy Account Balances		1,564,758			1,542,450
The amounts which are measured at fair value by electing the fair value option are as follows:
March 31, 2017            ¥605,520 million
September 30, 2017     ¥517,019 million
Current and Deferred Income Taxes		445,712			408,298
Long-Term Debt		3,854,984			3,867,551
Other Liabilities		562,393			607,162
Total Liabilities		8,577,722			8,671,464
Redeemable Noncontrolling Interests		6,548			6,730
Commitments and Contingent Liabilities
Equity:
Common Stock		220,524			220,563
Additional Paid-in Capital		268,138			267,634
Retained Earnings		2,077,474			2,205,281
Accumulated Other Comprehensive Income (Loss)		(21,270	)		(6,714	)
Treasury Stock, at Cost		(37,168	)		(76,024	)
ORIX Corporation Shareholders’ Equity		2,507,698			2,610,740
Noncontrolling Interests		139,927			137,102
Total Equity		2,647,625			2,747,842
Total Liabilities and Equity	¥	11,231,895		¥	11,426,036

Note: The liabilities of consolidated VIEs for which creditors (or beneficial interest holders) do not have recourse to the general credit of the Company and its subsidiaries are below:

	Millions of yen
	March 31, 2017		September 30, 2017
Trade Notes, Accounts and Other Payable	¥	2,998	¥	1,117
Long-Term Debt		438,473		298,357
Other		10,391		6,599
	¥	451,862	¥	306,073

– 17 –

(2) Condensed Consolidated Statements of Income (Unaudited)

	Millions of yen
	Six months ended September 30, 2016			Six months ended September 30, 2017
Revenues:
Finance revenues	¥	96,582		¥	106,477
Gains on investment securities and dividends		15,207			20,477
Operating leases		196,072			197,958
Life insurance premiums and related investment income		115,736			181,210
Sales of goods and real estate		433,526			616,568
Services income		364,002			395,106
Total revenues		1,221,125			1,517,796
Expenses:
Interest expense		35,348			37,921
Costs of operating leases		121,266			125,225
Life insurance costs		71,423			131,715
Costs of goods and real estate sold		390,364			579,565
Services expense		218,993			236,615
Other (income) and expense, net		(681	)		(1,464	)
Selling, general and administrative expenses		203,699			209,299
Provision for doubtful receivables and probable loan losses		6,743			7,998
Write-downs of long-lived assets		1,409			1,472
Write-downs of securities		6,212			423
Total expenses		1,054,776			1,328,769
Operating Income		166,349			189,027
Equity in Net Income of Affiliates		15,765			38,613
Gains on Sales of Subsidiaries and Affiliates and Liquidation Losses, net		32,834			24,972
Bargain Purchase Gain		4,287			0
Income before Income Taxes		219,235			252,612
Provision for Income Taxes		72,296			83,211
Net Income		146,939			169,401
Net Income Attributable to the Noncontrolling Interests		4,641			3,283
Net Income Attributable to the Redeemable Noncontrolling Interests		148			148
Net Income Attributable to ORIX Corporation Shareholders	¥	142,150		¥	165,970
	Yen
	Six months ended September 30, 2016			Six months ended September 30, 2017
Amounts per Share of Common Stock for Net Income attributable to ORIX Corporation shareholders:
Basic:	¥	108.57		¥	129.40
Diluted:	¥	108.47		¥	129.29

– 18 –

	Millions of yen
	Three months ended September 30, 2016		Three months ended September 30, 2017
Revenues:
Finance revenues	¥	48,526	¥	52,487
Gains on investment securities and dividends		11,201		10,196
Operating leases		91,182		101,279
Life insurance premiums and related investment income		78,964		87,556
Sales of goods and real estate		217,640		269,453
Services income		185,667		204,528
Total revenues		633,180		725,499
Expenses:
Interest expense		17,286		18,822
Costs of operating leases		61,194		63,487
Life insurance costs		51,185		63,942
Costs of goods and real estate sold		197,998		252,520
Services expense		113,675		124,146
Other (income) and expense, net		718		(1,791	)
Selling, general and administrative expenses		101,097		103,337
Provision for doubtful receivables and probable loan losses		4,049		3,359
Write-downs of long-lived assets		845		387
Write-downs of securities		6,207		243
Total expenses		554,254		628,452
Operating Income		78,926		97,047
Equity in Net Income of Affiliates		9,529		9,480
Gains on Sales of Subsidiaries and Affiliates and Liquidation Losses, net		12,346		10,474
Income before Income Taxes		100,801		117,001
Provision for Income Taxes		33,274		38,541
Net Income		67,527		78,460
Net Income Attributable to the Noncontrolling Interests		2,063		2,104
Net Income Attributable to the Redeemable Noncontrolling Interests		83		98
Net Income Attributable to ORIX Corporation Shareholders	¥	65,381	¥	76,258
	Yen
	Three months ended September 30, 2016		Three months ended September 30, 2017
Amounts per Share of Common Stock for Net Income attributable to ORIX Corporation shareholders:
Basic:	¥	49.94	¥	59.61
Diluted:	¥	49.89	¥	59.55

– 19 –

(3) Condensed Consolidated Statements of Comprehensive Income (Unaudited)

	Millions of yen
	Six months ended September 30, 2016			Six months ended September 30, 2017
Net Income	¥	146,939		¥	169,401
Other comprehensive income (loss), net of tax:
Net change of unrealized gains (losses) on investment in securities		(2,853	)		(3,027	)
Net change of defined benefit pension plans		1,499			(447	)
Net change of foreign currency translation adjustments		(59,512	)		18,655
Net change of unrealized gains (losses) on derivative instruments		(1,800	)		76
Total other comprehensive income (loss)		(62,666	)		15,257
Comprehensive Income		84,273			184,658
Comprehensive Income (Loss) Attributable to the Noncontrolling Interests		(1,789	)		3,950
Comprehensive Income (Loss) Attributable to the Redeemable Noncontrolling Interests		(624	)		182
Comprehensive Income Attributable to ORIX Corporation Shareholders	¥	86,686		¥	180,526
	Millions of yen
	Three months ended September 30, 2016			Three months ended September 30, 2017
Net Income	¥	67,527		¥	78,460
Other comprehensive income (loss), net of tax:
Net change of unrealized gains (losses) on investment in securities		(9,625	)		(1,071	)
Net change of defined benefit pension plans		202			(190	)
Net change of foreign currency translation adjustments		(18,308	)		13,041
Net change of unrealized gains (losses) on derivative instruments		132			(69	)
Total other comprehensive income (loss)		(27,599	)		11,711
Comprehensive Income		39,928			90,171
Comprehensive Income Attributable to the Noncontrolling Interests		837			3,800
Comprehensive Income (Loss) Attributable to the Redeemable Noncontrolling Interests		(38	)		143
Comprehensive Income Attributable to ORIX Corporation Shareholders	¥	39,129		¥	86,228

– 20 –

(4) Condensed Consolidated Statements of Changes in Equity (Unaudited)

Six months ended September 30, 2016

	Millions of yen
	ORIX Corporation Shareholders’ Equity
	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total ORIX Corporation Shareholders’ Equity			Noncontrolling Interests			Total Equity
Beginning Balance	¥	220,469	¥	257,629		¥	1,864,241		¥	(6,222	)	¥	(25,686	)	¥	2,310,431		¥	162,388		¥	2,472,819
Contribution to subsidiaries																0			1,447			1,447
Transaction with noncontrolling interests				(5	)											(5	)		(53	)		(58	)
Comprehensive income, net of tax:
Net income							142,150									142,150			4,641			146,791
Other comprehensive income (loss)
Net change of unrealized gains (losses) on investment in securities										(2,798	)					(2,798	)		(55	)		(2,853	)
Net change of defined benefit pension plans										1,361						1,361			138			1,499
Net change of foreign currency translation adjustments										(52,314	)					(52,314	)		(6,426	)		(58,740	)
Net change of unrealized gains (losses) on derivative instruments										(1,713	)					(1,713	)		(87	)		(1,800	)
Total other comprehensive income (loss)																(55,464	)		(6,430	)		(61,894	)
Total comprehensive income (loss)																86,686			(1,789	)		84,897
Cash dividends							(31,141	)								(31,141	)		(2,557	)		(33,698	)
Acquisition of treasury stock													(1,235	)		(1,235	)		0			(1,235	)
Disposal of treasury stock				(56	)								84			28			0			28
Other, net				197			(1	)								196			0			196
Ending Balance	¥	220,469	¥	257,765		¥	1,975,249		¥	(61,686	)	¥	(26,837	)	¥	2,364,960		¥	159,436		¥	2,524,396
Six months ended September 30, 2017
	Millions of yen
	ORIX Corporation Shareholders’ Equity
	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total ORIX Corporation Shareholders’ Equity			Noncontrolling Interests			Total Equity
Beginning Balance	¥	220,524	¥	268,138		¥	2,077,474		¥	(21,270	)	¥	(37,168	)	¥	2,507,698		¥	139,927		¥	2,647,625
Contribution to subsidiaries																0			8,078			8,078
Transaction with noncontrolling interests				(560	)											(560	)		(7,626	)		(8,186	)
Comprehensive income, net of tax:
Net income							165,970									165,970			3,283			169,253
Other comprehensive income (loss)
Net change of unrealized gains (losses) on investment in securities										(2,962	)					(2,962	)		(65	)		(3,027	)
Net change of defined benefit pension plans										(447	)					(447	)		0			(447	)
Net change of foreign currency translation adjustments										17,893						17,893			728			18,621
Net change of unrealized gains (losses) on derivative instruments										72						72			4			76
Total other comprehensive income																14,556			667			15,223
Total comprehensive income																180,526			3,950			184,476
Cash dividends							(38,162	)								(38,162	)		(7,227	)		(45,389	)
Exercise of stock options		39		20												59			0			59
Acquisition of treasury stock													(39,109	)		(39,109	)		0			(39,109	)
Disposal of treasury stock				(180	)								253			73			0			73
Other, net				216			(1	)								215			0			215
Ending Balance	¥	220,563	¥	267,634		¥	2,205,281		¥	(6,714	)	¥	(76,024	)	¥	2,610,740		¥	137,102		¥	2,747,842

Note: Changes in the redeemable noncontrolling interests are not included in this table. For further information, see Note 10 “Redeemable Noncontrolling Interests.”

– 21 –

(5) Condensed Consolidated Statements of Cash Flows (Unaudited)

	Millions of yen
	Six months ended September 30, 2016			Six months ended September 30, 2017
Cash Flows from Operating Activities:
Net income	¥	146,939		¥	169,401
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		124,542			133,555
Provision for doubtful receivables and probable loan losses		6,743			7,998
Equity in net income of affiliates (excluding interest on loans)		(14,747	)		(36,829	)
Gains on sales of subsidiaries and affiliates and liquidation losses, net		(32,834	)		(24,972	)
Bargain purchase gain		(4,287	)		0
Gains on sales of available-for-sale securities		(20,924	)		(14,646	)
Gains on sales of operating lease assets		(32,707	)		(27,793	)
Write-downs of long-lived assets		1,409			1,472
Write-downs of securities		6,212			423
Decrease (Increase) in restricted cash		(438	)		1,293
Decrease in trading securities		80,346			80,972
Increase in inventories		(11,298	)		(9,321	)
Decrease (Increase) in trade notes, accounts and other receivable		2,024			(4,444	)
Decrease in trade notes, accounts and other payable		(26,689	)		(23,984	)
Decrease in policy liabilities and policy account balances		(49,785	)		(22,308	)
Other, net		156,463			(33,187	)
Net cash provided by operating activities		330,969			197,630
Cash Flows from Investing Activities:
Purchases of lease equipment		(406,310	)		(518,695	)
Principal payments received under direct financing leases		231,169			239,842
Installment loans made to customers		(607,396	)		(705,027	)
Principal collected on installment loans		489,402			570,867
Proceeds from sales of operating lease assets		150,938			191,643
Investment in affiliates, net		1,746			(91,715	)
Proceeds from sales of investment in affiliates		64,031			54,455
Purchases of available-for-sale securities		(241,535	)		(191,021	)
Proceeds from sales of available-for-sale securities		341,160			270,199
Proceeds from redemption of available-for-sale securities		73,199			61,107
Purchases of held-to-maturity securities		(306	)		0
Purchases of other securities		(3,328	)		(14,182	)
Proceeds from sales of other securities		15,955			17,390
Purchases of property under facility operations		(43,331	)		(41,001	)
Acquisitions of subsidiaries, net of cash acquired		(38,809	)		(55,058	)
Sales of subsidiaries, net of cash disposed		11,796			29,433
Other, net		(18,213	)		4,760
Net cash provided by (used in) investing activities		20,168			(177,003	)
Cash Flows from Financing Activities:
Net increase (decrease) in debt with maturities of three months or less		(73,944	)		46,200
Proceeds from debt with maturities longer than three months		602,130			781,685
Repayment of debt with maturities longer than three months		(676,080	)		(690,949	)
Net increase in deposits due to customers		91,991			83,772
Cash dividends paid to ORIX Corporation shareholders		(31,141	)		(38,162	)
Acquisition of treasury stock		(1,235	)		(39,109	)
Contribution from noncontrolling interests		1,616			3,225
Purchases of shares of subsidiaries from noncontrolling interests		0			(4,466	)
Net decrease in call money		(10,500	)		(18,000	)
Other, net		(4,566	)		(7,832	)
Net cash provided by (used in) financing activities		(101,729	)		116,364
Effect of Exchange Rate Changes on Cash and Cash Equivalents		(17,998	)		9,100
Net increase in Cash and Cash Equivalents		231,410			146,091
Cash and Cash Equivalents at Beginning of Period		730,420			1,039,870
Cash and Cash Equivalents at End of Period	¥	961,830		¥	1,185,961

– 22 –

Notes to Consolidated Financial Statements

1. Overview of Accounting Principles Utilized

In preparing the accompanying consolidated financial statements, ORIX Corporation (the “Company”) and its subsidiaries have complied with accounting principles generally accepted in the United States of America (“U.S. GAAP”), except for the accounting for stock splits (see Note 2 (n)).

These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our March 31, 2017 consolidated financial statements on Form 20-F.

Since the Company listed on the New York Stock Exchange in September 1998, the Company has filed the annual report (Form 20-F) including the consolidated financial statements with the Securities and Exchange Commission.

Significant differences between U.S. GAAP and generally accepted accounting principles in Japan (“Japanese GAAP”) are as follows:

(a) Initial direct costs

Under U.S. GAAP, certain initial direct costs to originate leases or loans are being deferred and amortized as yield adjustments over the life of related direct financing leases or loans by using interest method.

Under Japanese GAAP, those initial direct costs are recognized as expenses when they are incurred.

(b) Operating leases

Under U.S. GAAP, revenues from operating leases are recognized on a straight-line basis over the contract terms. Operating lease assets are depreciated over their estimated useful lives mainly on a straight-line basis.

Japanese GAAP allows for operating lease assets to be depreciated using mainly either a declining-balance basis or a straight-line basis.

(c) Accounting for life insurance operations

Under U.S. GAAP, certain costs related directly to the successful acquisition of new (or renewal of) insurance contracts are deferred and amortized over the respective policy periods in proportion to anticipated premium revenue.

Under Japanese GAAP, such costs are recorded as expenses currently in earnings in each accounting period.

In addition, under U.S. GAAP, although 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, under Japanese GAAP, these are calculated by the methodology which relevant authorities accept.

(d) Accounting for goodwill and other intangible assets in business combination

Under U.S. GAAP, goodwill and intangible assets that have indefinite useful lives are not amortized, but assessed for impairment at least annually. Additionally, if events or changes in circumstances indicate that the asset might be impaired, the Company and its subsidiaries test for impairment when such events or changes occur.

Under Japanese GAAP, goodwill is amortized over an appropriate period up to 20 years.

– 23 –

(e) Accounting for pension plans

Under U.S. GAAP, the net actuarial gain (loss) is amortized using a corridor test.

Under Japanese GAAP, the net actuarial gain (loss) is fully amortized over a certain term within the average remaining service period of employees.

(f) Sale of the parent’s ownership interest in subsidiaries

Under U.S. GAAP, in a transaction that results in the loss of control, the gain or loss recognized in income includes the realized gain or loss related to the portion of ownership interest sold and the gain or loss on the remeasurement to fair value of the interest retained.

Under Japanese GAAP, in a transaction that results in the loss of control, only the realized gain or loss related to the portion of ownership interest sold is recognized in income and the gain or loss on the remeasurement to fair value of the interest retained is not recognized.

(g) Classification in consolidated statements of cash flows

Classification in the statements of cash flows under U.S. GAAP differs from Japanese GAAP. As significant differences, purchase of lease equipment and principal payments received under direct financing leases, proceeds from sales of operating lease assets, installment loans made to customers and principal collected on installment loans (excluding issues and collections of loans held for sale) are included in “Cash Flows from Investing Activities” under U.S. GAAP while they are classified as “Cash Flows from Operating Activities” under Japanese GAAP.

(h) Securitization of financial assets

Under U.S. GAAP, an entity is required to perform analysis to determine whether or not to consolidate special-purpose entities (“SPEs”) for securitization under the VIE’s consolidation rules. As a result of the analysis, if it is determined that the enterprise transferred financial assets in a securitization transaction to an SPE that needs to be consolidated, the transaction is not accounted for as a sale but accounted for as a secured borrowing.

Under Japanese GAAP, an SPE that meets certain conditions may be considered not to be a subsidiary of the transferor. Therefore, if an enterprise transfers financial assets to this type of SPE in a securitization transaction, the transferee SPE is not required to be consolidated, and the enterprise accounts for the transaction as a sale and recognizes a gain or loss on the sale into earnings when control over the transferred assets is surrendered.

(i) Fair value option

Under U.S. GAAP, an entity is permitted to carry certain eligible financial assets and liabilities at fair value and to recognize changes in that item’s fair value in earnings through the election of the fair value option.

Under Japanese GAAP, there are no accounting standard for fair value option.

– 24 –

2. Significant Accounting and Reporting Policies

(a) Principles of consolidation

The consolidated financial statements include the accounts of the Company and all of its subsidiaries. Investments in affiliates, where the Company has the ability to exercise significant influence by way of 20% – 50% ownership or other means, are accounted for by using the equity method. Where the Company holds majority voting interests but noncontrolling shareholders have substantive participating rights to decisions that occur as part of the ordinary course of their business, the equity method is applied. In addition, the consolidated financial statements also include variable interest entities to which the Company and its subsidiaries are primary beneficiaries.

A lag period of up to three months is used on a consistent basis for recognizing the results of certain subsidiaries and affiliates.

All significant intercompany accounts and transactions have been eliminated in consolidation.

(b) Use of estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company has identified ten areas where it believes assumptions and estimates are particularly critical to the financial statements. The Company makes estimates and assumptions to the selection of valuation techniques and determination of assumptions used in fair value measurements, the determination and periodic reassessment of the unguaranteed residual value for direct financing leases and operating leases, the determination and reassessment of insurance policy liabilities and deferred policy acquisition costs, the determination of the allowance for doubtful receivables on direct financing leases and probable loan losses, the recognition and measurement of impairment of long-lived assets, the recognition and measurement of impairment of investment in securities, the determination of the valuation allowance for deferred tax assets and the evaluation of tax positions, the assessment and measurement of effectiveness in hedging relationship using derivative financial instruments, the determination of benefit obligation and net periodic pension cost and the recognition and measurement of impairment of goodwill and intangible assets that have indefinite useful lives.

(c) Foreign currencies translation

The Company and its subsidiaries maintain their accounting records in their functional currency. Transactions in foreign currencies are recorded in the entity’s functional currency based on the prevailing exchange rates on the transaction date.

The financial statements of overseas subsidiaries and affiliates are translated into Japanese yen by applying the exchange rates in effect at the end of each fiscal year to all assets and liabilities. Income and expenses are translated at the average rates of exchange prevailing during the fiscal year. The currencies in which the operations of the overseas subsidiaries and affiliates are conducted are regarded as the functional currencies of these companies. Foreign currency translation adjustments reflected in other comprehensive income (loss) arise from the translation of foreign currency financial statements into Japanese yen.

(d) Revenue recognition

Revenues are recognized when persuasive evidence of an arrangement exists, the service has been rendered or the goods have been delivered to the customer, the transaction price is fixed or determinable and collectability is reasonably assured.

In addition to the aforementioned general policy, the policies as specifically described hereinafter are applied for each of the major revenue items.

– 25 –

Finance Revenues—Finance revenues mainly include revenues for direct financing leases and installment loans. The policies applied to direct financing leases and installment loans are described hereinafter.

(1) Revenues from direct financing leases

Direct financing leases consist of full-payout leases for various equipment types, including office equipment, industrial machinery and transportation equipment. In providing leasing services, the Company and its subsidiaries execute supplemental services, such as paying insurance and handling taxes on leased assets on behalf of lessees. The excess of aggregate lease rentals plus the estimated unguaranteed residual value over the cost of the leased equipment constitutes the unearned lease income to be taken into income over the lease term by using the interest method. The estimated unguaranteed residual value represents estimated proceeds from the disposition of equipment at the time the lease is terminated. The estimated unguaranteed residual value is based on market value of used equipment, estimates of when and how much equipment will become obsolete, and actual recovery being experienced for similar used equipment. Initial direct costs are being deferred and amortized as a yield adjustment over the life of the related lease by using interest method. The unamortized balance of initial direct costs is reflected as a component of investment in direct financing leases.

(2) Revenues from installment loans

Interest income on installment loans is recognized on an accrual basis. Certain direct loan origination costs, net of origination fees, are being deferred and amortized over the contractual term of the loan as an adjustment of the related loan’s yield using the interest method.

Interest payments received on impaired loans other than purchased loans are recorded as interest income unless the collection of the remaining investment is doubtful at which time payments received are recorded as reductions of principal. For purchased loans, although the acquired assets may remain loans in legal form, collections on these loans often do not reflect the normal historical experience of collecting delinquent accounts, and the need to tailor individual collateral-realization strategies often makes it difficult to reliably estimate the amount, timing, or nature of collections. Accordingly, the Company and its subsidiaries use the cost recovery method of income recognition for such purchased loans regardless of whether impairment is recognized or not.

(3) Non-accrual policy

In common with all classes, past-due financing receivables are receivables for which principal or interest is past-due 30 days or more. Loans whose terms have been modified are not classified as past-due financing receivables if the principals and interests are not past-due 30 days or more in accordance with the modified terms. The Company and its subsidiaries suspend accruing revenues on past-due installment loans and direct financing leases when principal or interest is past-due 90 days or more, or earlier, if management determines that their collections are doubtful based on factors such as individual debtors’ creditworthiness, historical loss experience, current delinquencies and delinquency trends. Accrued but uncollected interest is reclassified to investment in direct financing leases or installment loans in the accompanying consolidated balance sheets and becomes subject to the allowance for doubtful receivables and probable loan loss process. Cash repayments received on non-accrual loans are applied first against past due interest and then any surpluses are applied to principal in view of the conditions of the contract and obligors. The Company and its subsidiaries return non-accrual loans and lease receivables to accrual status when it becomes probable that the Company and its subsidiaries will be able to collect all amounts due according to the contractual terms of these loans and receivables, as evidenced by continual payments from the debtors. The period of such continual payments before returning to accrual status varies depending on factors that we consider are relevant in assessing the debtor’s creditworthiness, such as the debtor’s business characteristics and financial conditions as well as relevant economic conditions and trends.

Gains on investment securities and dividends—Gains on investment securities are recorded on a trade date basis. Dividends are recorded when right to receive dividends is established.

– 26 –

Operating leases—Revenues from operating leases are recognized on a straight-line basis over the contract terms. Investment in operating leases is recorded at cost less accumulated depreciation, which was ¥566,946 million and ¥584,821 million as of March 31, 2017 and September 30, 2017, respectively. Operating lease assets are depreciated over their estimated useful lives mainly on a straight-line basis. Depreciation expenses are included in costs of operating leases. Gains or losses arising from dispositions of operating lease assets are included in operating lease revenues.

Estimates of residual values are based on market values of used equipment, estimates of when and the extent to which equipment will become obsolete and actual recovery being experienced for similar used equipment.

Sales of goods and real estate—

(1) Sales of goods

The Company and its subsidiaries sell to their customers various types of goods, including precious metals and jewels. Revenues from such sales of goods are recognized when persuasive evidence of an arrangement exists, delivery has occurred, and collectability is reasonably assured. Delivery is considered to have occurred when the customer has taken title to the goods and assumed the risks and rewards of ownership. Revenues are recognized net of estimated sales returns and incentives.

(2) Real estate sales

Revenues from the sales of real estate are recognized when a contract is in place, a closing has taken place, the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property and the Company and its subsidiaries do not have a substantial continuing involvement in the property.

Services income—Revenues are recognized when persuasive evidence of an arrangement exists, the service has been rendered to the customer, the transaction price is fixed or determinable and collectability is reasonably assured. The policies applied to asset management, servicing and automobile maintenance services are described hereinafter.

(1) Revenues from asset management and servicing

The Company and its subsidiaries provide to our customers investment management services for investments in financial assets, and asset management as well as maintenance and administrative services for investments in real estate properties. The Company and its subsidiaries also perform servicing on behalf of our customers. The Company and its subsidiaries receive fees for those services from our customers.

Revenues from asset management and servicing primarily include management fees, servicing fees, and performance fees. Management and servicing fees are recognized when transactions occur or services are rendered and the amounts are fixed or determinable and collectability of which is reasonably assured. Management fees are calculated based on the predetermined percentages of the market value of the assets under management or net assets of the investment funds in accordance with contracts. Certain subsidiaries recognize revenues from performance fees when earned based on the performance of the asset under management while other subsidiaries recognize revenues from performance fees on an accrual basis over the period in which services are performed. Performance fees are calculated based on the predetermined percentages on the performance of the assets under management in accordance with the contracts.

(2) Revenues from automobile maintenance services

The Company and its subsidiaries provide automobile maintenance services to lessees. Where under terms of the lease or related maintenance agreements the Company and its subsidiaries bear the favorable or unfavorable variability of cost, revenues and expenses are recorded on a gross basis. For those arrangements in which the Company and its subsidiaries do not have substantial risks and rewards of ownership, but instead serve as an agent in collecting from lessees and remitting payments to third parties, the Company and its subsidiaries record revenues net of third-party services costs. Revenues from automobile maintenance services are recognized over the contract period in proportion to the estimated service costs to be incurred.

– 27 –

(e) Insurance and reinsurance transactions

Premium income from life insurance policies, net of premiums on reinsurance ceded, is recognized as earned premiums when due.

Life insurance benefits are recorded as expenses when they are incurred. Policy liabilities and policy account balances for future policy benefits are measured 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, medical insurance and individual annuity insurance contracts. For policies other than individual annuity insurance contracts, computation of policy liabilities necessarily includes assumptions about mortality, morbidity, lapse rates, future yields on related investments and other factors applicable at the time the policies are written. A certain 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.

The insurance contracts sold by the subsidiary also include variable annuity, variable life and fixed annuity insurance contracts. The subsidiary manages investment assets on behalf of variable annuity and variable life policyholders, which consist of equity securities and are included in investments in securities in the consolidated balance sheets. These investment assets are measured at fair value with realized and unrealized gains or losses recognized in life insurance premiums and related investment income in the consolidated statements of income. The subsidiary elected the fair value option for the entire variable annuity and variable life insurance contracts with changes in the fair value recognized in life insurance costs.

The subsidiary provides minimum guarantees to variable annuity and variable life policyholders under which it is exposed to the risk of compensating losses incurred by the policyholders to the extent contractually required. To mitigate the risk, a portion of the minimum guarantee risk related to variable annuity and variable life insurance contracts is ceded to reinsurance companies and the remaining risk is economically hedged by entering into derivative contracts. The reinsurance contracts do not relieve the subsidiary from the obligation as the primary obligor to compensate certain losses incurred by the policyholders, and the default of the reinsurance companies may impose additional losses on the subsidiary. Certain subsidiaries have elected the fair value option for certain reinsurance contracts relating to variable annuity and variable life insurance contracts, which is included in other assets in the consolidated balance sheets.

Policy liabilities and policy account balances for fixed annuity insurance contracts are measured based on the single-premiums plus interest based on expected rate and fair value adjustments relating to the acquisition of a subsidiary, less withdrawals, expenses and other charges. The credited interest is recorded in life insurance costs in the consolidated statements of income.

Certain costs related directly to the successful acquisition of new or renewal insurance contracts, or deferred policy acquisition costs, are deferred and amortized over the respective policy periods in proportion to anticipated premium revenue. These deferred policy acquisition costs consist primarily of first-year commissions, except for recurring policy maintenance costs and certain variable costs and expenses for underwriting policies.

(f) 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 is maintained at a level which, in the judgment of management, is appropriate to provide for probable losses inherent in lease and loan portfolios. The allowance is increased by provision charged to income and is decreased by charge-offs, net of recoveries.

Developing the allowance for doubtful receivables on direct financing leases and probable loan losses is subject to numerous estimates and judgments. In evaluating the appropriateness of the allowance, management considers various factors, including the business characteristics and financial conditions of the 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 value of underlying collateral and guarantees. Impaired loans are individually evaluated for a valuation allowance 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. For non-impaired loans, including loans that are not individually evaluated for impairment, and direct financing leases, the Company and its subsidiaries evaluate prior charge-off experience segmented by the debtors’ industries and the purpose of the loans, and then develop the allowance for doubtful receivables on direct financing leases and probable loan losses considering the prior charge-off experience and current economic conditions.

– 28 –

The Company and its subsidiaries charge off doubtful receivables when the likelihood of any future collection is believed to be minimal considering debtors’ creditworthiness and the liquidation status of collateral.

(g) Impairment of long-lived assets

The Company and its subsidiaries perform a recoverability test for long-lived assets to be held and used in operations, including tangible assets and intangible assets being amortized, consisting primarily of office buildings, condominiums, golf courses and other properties under facility operations, whenever events or changes in circumstances indicated that the assets might be impaired. The assets are considered not recoverable when the undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The carrying amount of assets not recoverable is reduced to fair value if lower than the carrying amount. The Company and its subsidiaries determine the fair value 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 discounted cash flows methodologies using future cash flows estimated to be generated from operation of the existing assets or completion of development projects, as appropriate.

(h) Investment in securities

Trading securities are reported at fair value with unrealized gains and losses included in income.

Available-for-sale securities are reported at fair value, and unrealized gains or losses are recorded in accumulated other comprehensive income (loss), net of applicable income taxes, except investments which are recorded at fair value with unrealized gains and losses included in income by electing the fair value option.

Held-to-maturity securities are recorded at amortized cost.

Other securities are recorded at cost or carrying value that reflects equity income and loss based on the Company’s share, except investments which are recorded at fair value with unrealized gains and losses included in income by electing the fair value option.

For available-for-sale securities, the Company and its subsidiaries generally recognize losses related to equity securities for which the fair value has been significantly below the acquisition cost (or current carrying value if an adjustment has been made in the past) for more than six months. Also, the Company and its subsidiaries charge against income losses related to equity securities in situations where, even though the fair value has not remained significantly below the carrying value for six months, the decline in the 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 debt securities, where the fair value is less than the amortized cost, the Company and its subsidiaries consider whether those securities are other-than-temporarily impaired using all available information about their collectability. The Company and its subsidiaries do not consider a debt security to be other-than-temporarily impaired if (1) the Company and its subsidiaries do not intend to sell the debt security, (2) it is not more likely than not that the Company and its subsidiaries will be required to sell the debt security before recovery of its amortized cost basis and (3) the present value of estimated cash flows will fully cover the amortized cost of the security. On the other hand, the Company and its subsidiaries consider a debt security to be other-than-temporarily impaired if any of the above mentioned three conditions are not met. When the Company and its subsidiaries deem a debt security to be other-than-temporarily impaired, the Company and its subsidiaries recognize the entire difference between the amortized cost and the fair value of the debt securities in earnings if the Company and its subsidiaries intend to sell the debt security or it is more likely than not that the Company and its subsidiaries will be required to sell the debt security before recovery of its amortized cost basis less any current-period credit loss. However, if the Company and its subsidiaries do not intend to sell the debt security and it is not more likely than not that the Company and its subsidiaries will be required to sell the debt security before recovery of its amortized cost basis less any current-period credit loss, the Company and its subsidiaries separate the difference between the amortized cost and the fair value of the debt securities into the credit loss component and the non-credit loss component. The credit loss component is recognized in earnings, and the non-credit loss component is recognized in other comprehensive income (loss), net of applicable income taxes.

For other securities, when the Company and its subsidiaries determine the decline in value is other than temporary, the Company and its subsidiaries reduce the carrying value of the security to the fair value and charge against income losses related to these other securities.

– 29 –

(i) Income taxes

The Company, in general, determines its provision for income taxes for quarterly periods by applying the current estimate of the effective tax rate for the full fiscal year to the actual year-to-date income before income taxes. The estimated effective tax rate is determined by dividing the estimated provision for income taxes for the full fiscal year by the estimated income before income taxes for the full fiscal year.

At the fiscal year end, income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if, based on the weight of available evidence, it is “more likely than not” that some portion or all of the deferred tax asset will not be realized.

The effective income tax rates for the six months ended September 30, 2016 and 2017 were 33.0% and 32.9%, respectively. These rates are 33.0% and 32.9% for the three months ended September 30, 2016 and 2017, respectively. For the six and three months ended September 30, 2016 and 2017, the Company and its subsidiaries in Japan were subject to a National Corporate tax of approximately 24%, an Inhabitant tax of approximately 4% and a deductible Enterprise tax of approximately 4%, which in the aggregate result in a statutory income tax rate of approximately 31.7%. The effective income tax rate is different from the statutory tax rate primarily because of certain nondeductible expenses for tax purposes, non-taxable income for tax purposes, changes in valuation allowance, the effect of lower income tax rates on foreign subsidiaries and a domestic life insurance subsidiary.

The Company and its subsidiaries 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 tax positions that meet the recognition threshold at the largest amount of tax benefit that is greater than 50 percent likely to be realized upon settlement with the taxing authority. The Company and its subsidiaries present an unrecognized tax benefit as either a reduction of a deferred tax asset, a reduction of an amount refundable or a liability, based on the intended method of settlement. The Company and its subsidiaries classify penalties and interest expense related to income taxes as part of provision for income taxes in the consolidated statements of income.

The Company and certain subsidiaries have elected to file a consolidated tax return for National Corporation tax purposes.

(j) Securitized assets

The Company and its subsidiaries have securitized and sold to investors various financial assets such as lease receivables and loan receivables. In the securitization process, the assets to be securitized are sold to trusts or SPEs that issue asset-backed beneficial interests and securities to the investors.

Trusts or SPEs used in securitization transactions are consolidated if the Company and its subsidiaries are the primary beneficiary of the trusts or SPEs, and the transfers of the financial assets to those consolidated trusts and SPEs are not accounted for as sales. Assets held by consolidated trusts or consolidated SPEs continue to be accounted for as lease receivables or loan receivables, as they were before the transfer, and asset-backed beneficial interests and securities issued to the investors are accounted for as debt. When the Company and its subsidiaries have transferred financial assets to a transferee that is not subject to consolidation, the Company and its subsidiaries account for the transfer as a sale if control over the transferred assets is surrendered.

A certain subsidiary originates and sells loans into the secondary market, while retaining the obligation to service those loans. In addition, it undertakes obligations to service loans originated by others. The subsidiary recognizes servicing assets if it expects the benefit of servicing to more than adequately compensate it for performing the servicing or recognizes servicing liabilities if it expects the benefit of servicing to less than adequately compensate it. These servicing assets and liabilities are initially recognized at fair value and subsequently accounted for using the amortization method whereby the assets and liabilities are amortized in proportion to and over the period of estimated net servicing income or net servicing loss. On a quarterly basis, servicing assets and liabilities are evaluated for impairment or increased obligations. The fair value of servicing assets and liabilities is estimated using an internal valuation model, or by obtaining an opinion of value from an independent third-party vendor. Both methods are based on calculating the present value of estimated future net servicing cash flows, taking into consideration discount rates, prepayments and servicing costs. The internal valuation model is validated at least semiannually through third-party valuations.

– 30 –

(k) Derivative financial instruments

The Company and its subsidiaries recognize all derivatives on the consolidated balance sheets at fair value. The accounting treatment of subsequent changes in the fair value depends on their use, and whether they qualify as effective “hedges” for accounting purposes. Derivatives for the purpose of economic hedge that are not qualified for hedge accounting are adjusted to fair value through the consolidated statements of income. If a derivative is a hedge, then depending on its nature, changes in its fair value will be either offset against change in the fair value of hedged assets or liabilities through the consolidated statements of income, or recorded in other comprehensive income (loss).

If a derivative is held as a hedge of the variability of fair value related to a recognized asset or liability or an unrecognized firm commitment (“fair value” hedge), changes in the fair value of the derivative are recorded in earnings along with the changes in the fair value of the hedged item.

If a derivative is held as a hedge of the variability of cash flows related to a forecasted transaction or a recognized asset or liability (“cash flow” hedge), changes in the fair value of the derivative are recorded in other comprehensive income (loss) to the extent that the derivative is effective as a hedge, until earnings are affected by the variability in cash flows of the designated hedged item.

If a derivative is held as a hedge of a foreign-currency fair-value or cash-flow hedge (“foreign currency” hedge), changes in the fair value of the derivative are recorded in either earnings or other comprehensive income (loss), depending on whether the hedged transaction is a fair-value hedge or a cash-flow hedge. However, if a derivative is used as a hedge of a net investment in a foreign operation, changes in its fair value, to the extent effective as a hedge, are recorded in the foreign currency translation adjustments account within other comprehensive income (loss).

The ineffective portion of changes in fair value of derivatives that qualify as a hedge are recorded in earnings.

For all hedging relationships that are designated and qualify as hedging, at inception the Company and its subsidiaries formally document the details of the hedging relationship and the hedged activity. The Company and its subsidiaries also formally assess, both at the hedge’s inception and on an ongoing basis, the effectiveness of the hedge relationship. The Company and its subsidiaries cease hedge accounting prospectively when the derivative no longer qualifies for hedge accounting.

(l) Pension plans

The Company and certain subsidiaries have contributory and non-contributory pension plans covering substantially all of their employees. The costs of pension plans are accrued based on amounts determined using actuarial methods, with assumptions of discount rate, rate of increase in compensation level, expected long-term rate of return on plan assets and others.

The Company and its subsidiaries also recognize the funded status of pension plans, measured as the difference between the fair value of plan assets and the benefit obligation, on the consolidated balance sheets. Changes in that funded status are recognized in the year in which the changes occur through other comprehensive income (loss), net of applicable income taxes.

(m) Stock-based compensation

The Company and its subsidiaries measure stock-based compensation expense as consideration for services provided by employees based on the fair value of the grant date. The costs are recognized over the requisite service period.

(n) Stock splits

Stock splits implemented prior to October 1, 2001 had been accounted for by transferring an amount equivalent to the par value of the shares from additional paid-in capital to common stock as required by the Japanese Commercial Code (the “Code”) before amendment. However, no such reclassification was made for stock splits when common stock already included a portion of the proceeds from shares issued at a price in excess of par value. This method of accounting was in conformity with accounting principles generally accepted in Japan.

As a result of a revision to the Code before amendment effective on October 1, 2001 and the Companies Act implemented on May 1, 2006, the above-mentioned method of accounting required by the Code became unnecessary.

– 31 –

In the United States, stock splits in comparable circumstances are considered to be stock dividends and are accounted for by transferring from retained earnings to common stock and additional paid-in capital amounts equal to the fair market value of the shares issued. Common stock is increased by the par value of the shares and additional paid-in capital is increased by the excess of the market value over par value of the shares issued. Had such stock splits made prior to October 1, 2001 been accounted for in this manner, additional paid-in capital as of September 30, 2017 would have increased by approximately ¥24,674 million, with a corresponding decrease in retained earnings. Total ORIX Corporation shareholders’ equity would remain unchanged. Stock splits on May 19, 2000 were excluded from the above amounts because the stock splits were not considered to be stock dividends under U.S. GAAP.

(o) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits placed with banks and short-term highly liquid investments with original maturities of three months or less.

(p) Restricted cash

Restricted cash consists of trust accounts under securitization programs and real estate, deposits related to servicing agreements, deposits collected on the underlying assets and applied to non-recourse loans and others.

(q) Installment loans

Certain loans, for which the Company and its subsidiaries have the intent and ability to sell to outside parties in the foreseeable future, are considered held for sale and are carried at the lower of cost or market value determined on an individual basis, except loans held for sale for which the fair value option was elected. A subsidiary elected the fair value option on its loans held for sale originated on or after October 1, 2011. The subsidiary enters into forward sale agreements to offset the change in the fair value of loans held for sale, and the election of the fair value option allows the subsidiary to recognize both the change in the fair value of the loans and the change in the fair value of the forward sale agreements due to changes in interest rates in the same accounting period.

Loans held for sale are included in installment loans, and the outstanding balances of these loans as of March 31, 2017 and September 30, 2017 were ¥22,548 million and ¥55,481 million, respectively. There were ¥19,232 million and ¥14,735 million of loans held for sale as of March 31, 2017 and September 30, 2017, respectively, measured at fair value by electing the fair value option.

(r) Property under facility operations

Property under facility operations consist primarily of operating facilities (including golf courses, hotels, training facilities and senior housings) and environmental assets (including mega solar), which are stated at cost less accumulated depreciation, and depreciation is calculated mainly on a straight-line basis over the estimated useful lives of the assets. Accumulated depreciation was ¥85,255 million and ¥96,531 million as of March 31, 2017 and September 30, 2017, respectively.

(s) Trade notes, accounts and other receivable

Trade notes, accounts and other receivable primarily include accounts receivables in relation to sales of assets to be leased, inventories and other assets and payment made on behalf of lessees for property tax, maintenance fees and insurance premiums in relation to direct financing lease contracts.

(t) Inventories

Inventories consist primarily of residential condominiums under development, completed residential condominiums (including those waiting to be delivered to buyers under the contract for sale), and merchandise for sale. Residential condominiums under development are carried at cost less any impairment losses, and completed residential condominiums and merchandises for sale are stated at the lower of cost or fair value less cost to sell. The cost of inventories that are unique and not interchangeable is determined on the specific identification method and the cost of other inventories is principally determined on the average method. As of March 31, 2017 and September 30, 2017, residential condominiums under development were ¥60,920 million and ¥75,270 million, respectively, and completed residential condominiums and merchandises for sale were ¥56,943 million and ¥54,612 million, respectively.

The company and its subsidiaries recorded ¥636 million and ¥88 million of write-downs principally on completed residential condominiums and merchandise for sale for the six months ended September 30, 2016 and 2017, respectively, primarily resulting from a decrease in expected sales price. The amounts of such write-downs for the three months ended September 30, 2016 and 2017 were ¥587 million and ¥64 million, respectively. These write-downs were recorded in costs of goods and real estate sold and principally included in the Investment and Operation segment.

– 32 –

(u) Office facilities

Office facilities are stated at cost less accumulated depreciation. Depreciation is calculated on a declining-balance basis or straight-line basis over the estimated useful lives of the assets. Accumulated depreciation was ¥47,534 million and ¥50,630 million as of March 31, 2017 and September 30, 2017, respectively.

(v) Other assets

Other assets consist primarily of the excess of purchase prices over the net assets acquired in acquisitions (goodwill) and other intangible assets, reinsurance recoverables in relation to reinsurance contracts, deferred insurance policy acquisition costs which are amortized over the contract periods, leasehold deposits, advance payments made in relation to purchases of assets to be leased and construction of real estate for operating lease, prepaid benefit cost, derivative assets and deferred tax assets.

(w) Goodwill and other intangible assets

The Company and its subsidiaries account for all business combinations using the acquisition method. The Company and its subsidiaries recognize intangible assets acquired in a business combination apart from goodwill if the intangible assets meet one of two criteria—either the contractual-legal criterion or the separately identifiable criterion. Goodwill is measured as an excess of the aggregate of consideration transferred and the fair value of noncontrolling interests over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed in the business combination measured at fair value. The Company and its subsidiaries would recognize a bargain purchase gain when the amount of recognized net assets exceeds the sum of consideration transferred and the fair value of noncontrolling interests. In a business combination achieved in stages, the Company and its subsidiaries remeasure their previously held equity interest at their acquisition-date fair value and recognize the resulting gain or loss, if any, in earnings.

The Company and its subsidiaries perform an impairment test for goodwill and any intangible assets that have indefinite useful lives at least annually. Additionally, if events or changes in circumstances indicate that the asset might be impaired, the Company and its subsidiaries test for impairment when such events or changes occur.

The Company and its subsidiaries have the option to perform a qualitative assessment to determine whether to calculate the fair value of a reporting unit under the first step of the two-step goodwill impairment test. The Company and its subsidiaries perform the qualitative assessment for some goodwill but bypass the qualitative assessment and proceed directly to the first step of the two-step impairment test for other goodwill. For the goodwill for which the qualitative assessment is performed, if, after assessing the totality of events or circumstances, the Company and/or subsidiaries determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company and/or subsidiaries do not perform the two-step impairment test. However, if the Company and/or subsidiaries conclude otherwise or determine to bypass the qualitative assessment, the Company and/or subsidiaries proceed to perform the first step of the two-step impairment test. The first step of goodwill impairment test, used to identify potential impairment, calculates the fair value of the reporting unit and compares the fair value with the carrying amount of the reporting unit. If the fair value of the reporting unit falls below its carrying amount, 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 goodwill with its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized in an amount equal to that excess. The Company and its subsidiaries test the goodwill either at the operating segment level or one level below the operating segments.

The Company and its subsidiaries have the option to perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. The Company and its subsidiaries perform the qualitative assessment for some indefinite-lived intangible assets but bypass the qualitative assessment and perform the quantitative assessment for other indefinite-lived intangible assets. For those indefinite-lived assets for which the qualitative assessment is performed, if, after assessing the totality of events and circumstances, the Company and/or subsidiaries conclude that it is not more likely than not that the indefinite-lived asset is impaired, then the Company and/or subsidiaries do not perform the quantitative impairment test. However, if the Company and/or subsidiaries conclude otherwise or determine to bypass the qualitative assessment, the Company and/or subsidiaries calculate the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Intangible assets with finite lives are amortized over their useful lives and tested for impairment. The Company and its subsidiaries perform a recoverability test for the intangible assets whenever events or changes in circumstances indicate that the assets might be impaired. The intangible assets are considered not recoverable when the undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of those assets, and the net carrying amount of assets not recoverable is reduced to fair value if lower than the carrying amount.

– 33 –

The amount of goodwill was ¥341,178 million and ¥390,736 million as of March 31, 2017 and September 30, 2017, respectively.

The amount of other intangible assets was ¥396,051 million and ¥419,806 million as of March 31, 2017 and September 30, 2017, respectively.

(x) Trade notes, accounts and other payable

Trade notes, accounts and other payable include primarily accounts payable in relation to purchase of assets to be leased, merchandise for sale and other assets, accounts payable in relation to construction work of residential condominiums and deposits received mainly for withholding income tax.

(y) Other Liabilities

Other liabilities include primarily interest, bonus accrued expense and accrued benefit liability, advances received from lessees in relation to lease contracts, deposit received from real estate transaction and derivative liabilities.

(z) Capitalization of interest costs

The Company and its subsidiaries capitalized interest costs related to specific long-term development projects.

(aa) Advertising

The costs of advertising are expensed as incurred.

(ab) Earnings per share

Basic earnings per share is computed by dividing net income attributable to ORIX Corporation shareholders by the weighted average number of shares of outstanding common stock in each period. Diluted earnings per share is calculated by reflecting the potential dilution that could occur if securities or other contracts issuing common stock were exercised or converted into common stock.

(ac) Additional acquisition and partial sale of the parent’s ownership interest in subsidiaries

Additional acquisition of the parent’s ownership interest in subsidiaries and partial sale of such interest where the parent continues to retain control of the subsidiary are accounted for as equity transactions. On the other hand, in a transaction that results in the loss of control, the gain or loss recognized in income includes the realized gain or loss related to the portion of ownership interest sold and the gain or loss on the remeasurement to fair value of the interest retained.

(ad) Redeemable noncontrolling interests

Noncontrolling interests in a certain subsidiary are redeemable preferred shares which are subject to call and put rights upon certain shareholder events. As redemption of the noncontrolling interest is not solely in the control of the subsidiary, it is recorded between liabilities and equity on the consolidated balance sheets at its estimated redemption value.

(ae) Issuance of stock by an affiliate

When an affiliate issues stocks to unrelated third parties, the Company and its subsidiaries’ ownership interest in the affiliate decreases. In the event that the price per share is more or less than the Company and its subsidiaries’ average carrying amount per share, the Company and its subsidiaries adjust the carrying amount of its investment in the affiliate and recognize gain or loss in the consolidated statements of income in the year in which the change in ownership interest occurs.

(af) New accounting pronouncements

In May 2014, Accounting Standards Update 2014-09 (“Revenue from Contracts with Customers”—ASC 606 (“Revenue from Contracts with Customers”)) was issued. The core principle of this Update is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply a five-step model to determine when to recognize revenue, and in what amount. The five steps to apply the model are:

• Identify the contract(s) with a customer

• Identify the performance obligations in the contract

• Determine the transaction price

• Allocate the transaction price to the performance obligations in the contract

• Recognize revenue when (or as) the entity satisfies a performance obligation

This Update requires an entity to disclose more information about contracts with customers than under the current disclosure requirements.

– 34 –

In April 2016, Accounting Standards Update 2016-10 (“Identifying Performance Obligations and Licensing”—ASC 606 (“Revenue from Contracts with Customers”)) was issued as an amendment of the new revenue standard. This Update adds further guidance on identifying performance obligations and also improves the operability and understandability of the licensing implementation guidance. The amendments do not change the core principle of the guidance in ASC 606.

In May 2016, Accounting Standards Update 2016-12 (“Narrow-Scope Improvements and Practical Expedients”—ASC 606 (“Revenue from Contracts with Customers”)) was issued as an amendment of the new revenue standard. This Update (1) clarifies the objective of the collectibility criterion for applying paragraph 606-10-25-7; (2) permits an entity to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price; (3) specifies that the measurement date for non-cash consideration is contract inception; (4) provides a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations; (5) clarifies that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application, and (6) clarifies that an entity that retrospectively applies ASC 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption.

These Updates are effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2017. Early adoption is permitted only for the fiscal year beginning after December 15, 2016, and interim periods within the fiscal year. An entity should apply the amendments in these Updates using either a retrospective method or a cumulative-effect method. The entity may elect some optional practical expedients when applying these Updates. The entity using the cumulative-effect method would recognize the cumulative effect of initially applying these Updates as an adjustment to the opening balance of retained earnings or net assets at the date of initial application. Currently, the Company and its subsidiaries plan to adopt these Updates on April 1, 2018, using the cumulative-effect method. These Updates require a number of new disclosures to enable users of the financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The scope of these Updates excludes lease contracts, financial instruments and other contractual rights and obligations within the scope of other ASC Topics including loans, investments in securities and derivatives and also excludes contracts within the scope of ASC Topic 944 (“Financial Services—Insurance”). Therefore, the Company and its subsidiaries’ such revenues will not be affected by these Updates. However, the Company and its subsidiaries have been in process of evaluating the impact of these Updates on our consolidated financial statements around other revenue streams. Based on the Company and its subsidiaries’ assessment and best estimates to date, the impact of the application of these Updates will likely result in a change in the timing of revenue recognition and accounting policy for performance fees received from customers regarding asset management business. Currently, certain subsidiaries recognize such fees when earned based on the performance of the asset under management, while other subsidiaries recognize the fees on accrual basis over the period in which services are performed. New guidance requires recognizing such fees as revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Additionally, there will be changes in the timing of revenue recognition and accounting policy for the certain project-based orders in real estate business for which the Company and its subsidiaries currently apply the percentage-of-completion or completed contract method. Under the new guidance, there are specific criteria to determine if a performance obligation should be recognized over time or at a point in time. The Company and its subsidiaries expect that in some cases the revenue recognition timing will change from current practice based on applying the specific criteria under the new guidance. Further, the Company and its subsidiaries will expand its disclosures regarding these revenue streams, as applicable, to discuss contract balances, performance obligations, significant judgments made, and contract costs. Other than the impact that have been currently identified, the Company and its subsidiaries continue to evaluate the effect that the adoption of these Updates will have on the Company and its subsidiaries’ results of operations or financial position, as well as changes in disclosures required by these Updates.

In July 2015, Accounting Standards Update 2015-11 (“Simplifying the Measurement of Inventory”—ASC 330 (“Inventory”)) was issued. This Update applies to all inventory except for which is measured using last-in, first-out (LIFO) or the retail inventory method, and requires an entity to measure inventory at the lower of cost and net realizable value. Additionally, this Update defines net realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company and its subsidiaries adopted this Update on April 1, 2017. The adoption had no effect on the Company and its subsidiaries’ results of operations or financial position.

– 35 –

In January 2016, Accounting Standards Update 2016-01 (“Recognition and Measurement of Financial Assets and Financial Liabilities”—ASC 825-10 (“Financial Instruments—Overall”)) was issued. This Update revises accounting related to the classification and measurement of equity investments. This Update also revises the presentation of certain fair value changes for financial liabilities measured at fair value. Additionally, this Update amends certain disclosure requirements associated with the fair value of financial instruments. This Update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early application to financial statements of fiscal years or interim periods that have not yet been issued is permitted as of the beginning of the fiscal year of adoption. The amendments in this Update should be applied by means of cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. And the amendments relate to equity investments without readily determinable fair value are to be applied prospectively. The Company and its subsidiaries will adopt this Update on April 1, 2018. Based on the Company and its subsidiaries’ initial assessment and best estimates to date, the impact of the application of this Update will likely result in recognizing unrealized changes in fair value of equity investments through earnings rather than other comprehensive income. Additionally, cumulative unrealized changes in fair value of equity investments as of the beginning of fiscal year of adoption of this Update will be reclassified to retained earnings from accumulated other comprehensive income. Equity investments currently accounted for under the cost method of accounting will be accounted for either at fair value with unrealized changes in fair value recognized in earnings or using alternative method that requires carrying value to be adjusted by using subsequent observable transactions. Other than the impact that have been currently identified, the Company and its subsidiaries continue to evaluate the effect that the adoption of this Update will have on the Company and its subsidiaries’ results of operations or financial position, as well as changes in disclosures required by this Update.

In February 2016, Accounting Standards Update 2016-02 (ASC 842 (“Leases”)) was issued. This Update requires a lessee to recognize most leases on the balance sheet. Lessor accounting remains substantially similar to current U.S. GAAP but with some important changes. This Update is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early application is permitted. The amendments in this Update should be applied at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. The Company and its subsidiaries will adopt this Update on April 1, 2019. Based on the Company and its subsidiaries’ initial assessment and best estimates to date, the impact of the application of the Update will likely result in gross up of right -of-use assets and corresponding lease liabilities principally for operating leases where it is the lessee, such as ground leases and office and equipment leases. Other than the impact that have been currently identified, the Company and its subsidiaries continue to evaluate the effect that the adoption of this Update will have on the Company and its subsidiaries’ results of operations or financial position, as well as changes in disclosures required by this Update.

In March 2016, Accounting Standards Update 2016-07 (“Simplifying the Transition to the Equity Method Accounting”—ASC 323 (“Investments—Equity Method and Joint Ventures”)) was issued. This Update eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. This Update also requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and requires that an entity that has an available-for sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The Company and its subsidiaries adopted this Update on April 1, 2017. The adoption had no effect on the Company and its subsidiaries’ results of operations or financial position.

In June 2016, Accounting Standards Update 2016-13 (“Measurement of Credit Losses on Financial Instruments”—ASC 326 (“Financial Instruments—Credit Losses”)) was issued. This Update significantly changes how companies measure and recognize credit impairment for many financial assets. The new current expected credit loss model requires companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets that are within the scope of this Update. This Update also makes targeted amendments to the current impairment model for available-for-sale debt securities. This Update is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments in this Update should be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Early application is permitted for fiscal year beginning after December 15, 2018, including interim periods within the fiscal year. The Company and its subsidiaries continue to evaluate the effect that the adoption of this Update will have on the Company and its subsidiaries’ results of operations or financial position, as well as changes in disclosures required by this Update.

– 36 –

In August 2016, Accounting Standards Update 2016-15 (“Classification of Certain Cash Receipts and Cash Payments”—ASC 230 (“Statement of Cash Flows”)) was issued. This Update amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and cash payments in the statement of cash flows. This Update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. This Update should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company and its subsidiaries are currently evaluating the effect that the adoption of this Update will have on the Company and its subsidiaries’ statement of cash flows.

In October 2016, Accounting Standards Update 2016-16 (“Intra-Entity Transfers of Assets Other Than Inventory”—ASC 740 (“Income Taxes”)) was issued. This Update eliminates the exception to defer the income tax consequences of intra-entity transfers of assets other than inventory until the assets are ultimately sold to an outside party and requires the recognition of the current and deferred tax consequences when those transfers occur. This Update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. This Update should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company and its subsidiaries are currently evaluating the effect that the adoption of this Update will have on the Company and its subsidiaries’ results of operations or financial position.

In October 2016, Accounting Standards Update 2016-17 (“Interests Held through Related Parties That Are under Common Control”—ASC 810 (“Consolidation”)) was issued. This Update amends the consolidation guidance on how a reporting entity that is the single decision maker of a VIE should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The Company and its subsidiaries adopted this Update on April 1, 2017. The adoption had no effect on the Company and its subsidiaries’ results of operations or financial position.

In November 2016, Accounting Standards Update 2016-18 (“Restricted Cash”—ASC230 (“Statement of Cash Flows”)) was issued. This Update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This Update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company and its subsidiaries are currently evaluating the effect that the adoption of this Update will have on the Company and its subsidiaries’ statement of cash flows.

In January 2017, Accounting Standards Update 2017-04 (“Simplifying the Test for Goodwill Impairment”—ASC 350 (“Intangible—Goodwill and Other”)) was issued. This Update eliminates Step 2 from the current goodwill impairment test. Instead, goodwill impairments would be measured by the amount by which the carrying amount exceeds the reporting unit’s fair value. This Update also eliminates the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it is more likely than not that the goodwill is impaired, to perform Step 2 of the goodwill impairment test. This Update is effective for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates on or after January 1, 2017. Generally, the effect of adopting this Update on the Company and its subsidiaries’ results of operation or financial position will depend on the outcomes of future goodwill impairment tests.

In August 2017, Accounting Standards Update 2017-12 (“Targeted Improvements to Accounting for Hedging Activities”—ASC 815 (“Derivatives and Hedging”)) was issued. This Update changes the recognition and presentation requirements of hedge accounting including eliminating the requirement to separately measure and report hedge ineffectiveness and presenting all items that affect earnings in the same income statement line as the hedged item. This Update is effective for fiscal years beginning after December 15, 2018, and interim period within those fiscal years. Early adoption is permitted, including in an interim period. For cash flow hedges and net investment hedges existing at the date of adoption, an entity should apply a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of fiscal year that an entity adopts the amendment in this Update. The amended presentation and disclosure guidance is required only prospectively. The Company and its subsidiaries are currently evaluating the effect that the adoption of this Update will have on the Company and its subsidiaries’ results of operations or financial position.

– 37 –

3. Fair Value Measurements

The Company and its subsidiaries classify and prioritize 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.

The Company and its subsidiaries differentiate 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”). The Company and its subsidiaries mainly measure certain loans held for sale, trading securities, available-for-sale securities, certain investment funds, derivatives, certain reinsurance recoverables, and variable annuity and variable life insurance contracts at fair value on a recurring basis.

– 38 –

The following tables present recorded amounts of major financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2017 and September 30, 2017:

March 31, 2017

	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)
Assets:
Loans held for sale*1	¥	19,232		¥	0	¥	19,232	¥	0
Trading securities		569,074			37,500		531,574		0
Available-for-sale securities		1,165,417			93,995		946,906		124,516
Japanese and foreign government bond securities		345,612			2,748		342,864		0
Japanese prefectural and foreign municipal bond securities*2		168,822			0		168,822		0
Corporate debt securities*3		393,644			11,464		380,562		1,618
Specified bonds issued by SPEs in Japan		1,087			0		0		1,087
CMBS and RMBS in the Americas		98,501			0		40,643		57,858
Other asset- backed securities and debt securities		64,717			0		764		63,953
Equity securities*4		93,034			79,783		13,251		0
Other securities		27,801			0		0		27,801
Investment funds*5		27,801			0		0		27,801
Derivative assets		22,999			734		17,032		5,233
Interest rate swap agreements		304			0		304		0
Options held/written and other		5,804			0		571		5,233
Futures, foreign exchange contracts		12,346			734		11,612		0
Foreign currency swap agreements		4,545			0		4,545		0
Netting*6		(4,019	)		0		0		0
Net derivative assets		18,980			0		0		0
Other assets		22,116			0		0		22,116
Reinsurance recoverables*7		22,116			0		0		22,116
Total	¥	1,826,639		¥	132,229	¥	1,514,744	¥	179,666
Liabilities:
Derivative liabilities	¥	16,295		¥	165	¥	16,130	¥	0
Interest rate swap agreements		4,567			0		4,567		0
Options held/written and other		1,071			0		1,071		0
Futures, foreign exchange contracts		8,821			165		8,656		0
Foreign currency swap agreements		1,677			0		1,677		0
Credit derivatives held		159			0		159		0
Netting*6		(4,019	)		0		0		0
Net derivative Liabilities		12,276			0		0		0
Policy Liabilities and Policy Account Balances		605,520			0		0		605,520
Variable annuity and variable life insurance contracts*8		605,520			0		0		605,520
Total	¥	621,815		¥	165	¥	16,130	¥	605,520

– 39 –

September 30, 2017

	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)
Assets:
Loans held for sale*1	¥	14,735		¥	0	¥	14,735	¥	0
Trading securities		487,839			40,177		447,662		0
Available-for-sale securities		1,062,105			75,834		854,481		131,790
Japanese and foreign government bond securities		280,085			4,897		275,188		0
Japanese prefectural and foreign municipal bond securities*2		160,391			0		160,391		0
Corporate debt securities*3		379,539			2,648		374,106		2,785
Specified bonds issued by SPEs in Japan		963			0		0		963
CMBS and RMBS in the Americas		82,456			0		32,876		49,580
Other asset- backed securities and debt securities		79,225			0		763		78,462
Equity securities*4		79,446			68,289		11,157		0
Other securities		35,651			0		0		35,651
Investment funds*5		35,651			0		0		35,651
Derivative assets		11,898			75		6,553		5,270
Interest rate swap agreements		224			0		224		0
Options held/written and other		6,743			0		1,473		5,270
Futures, foreign exchange contracts		1,194			75		1,119		0
Foreign currency swap agreements		3,737			0		3,737		0
Netting*6		(1,109	)		0		0		0
Net derivative assets		10,789			0		0		0
Other assets		15,242			0		0		15,242
Reinsurance recoverables*7		15,242			0		0		15,242
Total	¥	1,627,470		¥	116,086	¥	1,323,431	¥	187,953
Liabilities:
Derivative liabilities	¥	33,594		¥	2,121	¥	31,473	¥	0
Interest rate swap agreements		4,551			0		4,551		0
Options held/written and other		1,833			0		1,833		0
Futures, foreign exchange contracts		26,060			2,121		23,939		0
Foreign currency swap agreements		1,020			0		1,020		0
Credit derivatives held		130			0		130		0
Netting*6		(1,109	)		0		0		0
Net derivative Liabilities		32,485			0		0		0
Policy Liabilities and Policy Account Balances		517,019			0		0		517,019
Variable annuity and variable life insurance contracts*8		517,019			0		0		517,019
Total	¥	550,613		¥	2,121	¥	31,473	¥	517,019

*1 A certain subsidiary elected the fair value option on the loans held for sale originated on or after October 1, 2011. These loans are multi-family and seniors housing loans and are sold to Federal National Mortgage Association (“Fannie Mae”) or institutional investors. Included in “Other (income) and expense, net” in the consolidated statements of income were a gain of ¥681 million and a loss of ¥577 million from the change in the fair value of the loans for the six months ended September 30, 2016 and 2017. Included in “Other (income) and expense, net” in the consolidated statements of income were gains of ¥783 million and ¥5 million from the change in the fair value of the loans for the three months ended September 30, 2016 and 2017. No gains or losses were recognized in earnings during the six months ended September 30, 2016 and 2017 attributable to changes in instrument-specific credit risk. The amounts of aggregate unpaid principal balance and aggregate fair value of the loans held for sale as of March 31, 2017, were ¥18,362 million and ¥19,232 million, respectively, and the amount of aggregate fair value exceeded the amount of aggregate unpaid principal balance by ¥870 million. The amounts of aggregate unpaid principal balance and aggregate fair value of the loans held for sale as of September 30, 2017, were ¥14,199 million and ¥14,735 million, respectively, and the amount of the aggregate fair value exceeded the amount of aggregate unpaid principal balance by ¥536 million. As of March 31, 2017 and September 30, 2017, there were no loans that are 90 days or more past due, in non-accrual status, or both.

– 40 –

*2 A certain subsidiary elected the fair value option for investments in foreign government bond securities included in available-for-sale securities. Included in “Gains on investment securities and dividends” in the consolidated statements of income were a loss of ¥13 million and a gain of ¥3 million from the change in the fair value of those investments for the six months ended September 30, 2016 and 2017. Included in “Gains on investment securities and dividends” in the consolidated statements of income were a loss of ¥7 million and a gain of ¥12 million from the change in the fair value of those investments for the three months ended September 30, 2016 and 2017. The amounts of aggregate fair value elected the fair value option were ¥1,015 million and ¥2,021 million as of March 31, 2017 and September 30, 2017, respectively.

*3 A certain subsidiary elected the fair value option for investments in foreign corporate debt securities included in available-for-sale securities. Included in “Gains on investment securities and dividends” in the consolidated statements of income were losses of ¥63 million and ¥24 million from the change in the fair value of those investments for the six and three months ended September 30, 2017. The amounts of aggregate fair value elected the fair value option were ¥1,026 million and ¥2,648 million as of March 31, 2017 and September 30, 2017, respectively.

*4 A certain subsidiary elected the fair value option for certain investments in equity securities included in available-for-sale securities. Included in “Gains on investment securities and dividends” in the consolidated statements of income were gains of ¥345 million and ¥881 million from the change in the fair value of those investments for the six months ended September 30, 2016 and 2017. Included in “Gains on investment securities and dividends” in the consolidated statements of income were gains of ¥448 million and ¥574 million from the change in the fair value of those investments for the three months ended September 30, 2016 and 2017. The amounts of aggregate fair value elected the fair value option were ¥15,400 million and ¥22,442 million as of March 31, 2017 and September 30, 2017, respectively.

*5 Certain subsidiaries elected the fair value option for certain investments in investment funds included in other securities. Included in “Gains on investment securities and dividends” in the consolidated statements of income were gains of ¥615 million and ¥665 million from the change in the fair value of those investments for the six months ended September 30, 2016 and 2017. Included in “Gains on investment securities and dividends” in the consolidated statements of income were gains of ¥289 million and ¥342 million from the change in the fair value of those investments for the three months ended September 30, 2016 and 2017. The amounts of aggregate fair value were ¥7,453 million and ¥6,920 million as of March 31, 2017 and September 30, 2017, respectively.

*6 It represents the amount offset under counterparty netting of derivative assets and liabilities.

*7 Certain subsidiaries elected the fair value option for certain reinsurance contracts held. The fair value of the reinsurance contracts elected for the fair value option in other assets were ¥22,116 million and ¥15,242 million as of March 31, 2017 and September 30, 2017, respectively. For the effect of changes in the fair value of those reinsurance recoverables on earnings during the six and three months ended September 30, 2016 and 2017, see Note 15 “Life Insurance Operations.”

*8 Certain subsidiaries elected the fair value option for the entire variable annuity and variable life insurance contracts held in order to match the earnings recognized for the changes in the fair value of policy liabilities and policy account balances with earnings recognized for gains or losses from the investment assets managed on behalf of variable annuity and variable life policyholders, derivative contracts and the changes in the fair value of reinsurance contracts. The fair value of the variable annuity and variable life insurance contracts elected for the fair value option in policy liabilities and policy account balances were ¥605,520 million and ¥517,019 million as of March 31, 2017 and September 30, 2017, respectively. For the effect of changes in the fair value of the variable annuity and variable life insurance contracts on earnings during the six and three months ended September 30, 2016 and 2017, see Note 15 “Life Insurance Operations.”

– 41 –

Changes in economic conditions or valuation methodologies may require the transfer of assets and liabilities from one fair value level to another. In such instances, the Company and its subsidiaries recognize the transfer at the beginning of the quarter during which the transfers occur. The Company and its subsidiaries evaluate the significance of transfers between levels based upon size of the transfer relative to total assets, total liabilities or total earnings. For the six months ended September 30, 2016 and 2017, there were no transfers between Level 1 and Level 2.

The following tables present the reconciliation of financial assets and liabilities (net) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended September 30, 2016 and 2017:

Six months ended September 30, 2016

	Millions of yen
	Balance at April 1, 2016		Gains or losses (realized/unrealized)									Purchases *3		Sales			Settlements *4			Transfers in and/ or out of Level 3 (net) *5		Balance at September 30, 2016		Change in unrealized gains or losses included in earnings  for assets and liabilities still held at September 30, 2016 *1
			Included in earnings *1			Included in other comprehensive income *2			Total
Available-for-sale securities	¥	99,522	¥	223		¥	(3,320	)	¥	(3,097	)	¥	21,082	¥	(1,666	)	¥	(10,154	)	¥	0	¥	105,687	¥	59
Corporate debt securities		5		0			2			2			1,500		0			0			0		1,507		0
Specified bonds issued by SPEs in Japan		3,461		1			(18	)		(17	)		0		(1,200	)		(983	)		0		1,261		1
CMBS and RMBS in the Americas		38,493		178			(3,990	)		(3,812	)		16,913		(466	)		(2,340	)		0		48,788		14
Other asset- backed securities and debt securities		57,563		44			686			730			2,669		0			(6,831	)		0		54,131		44
Other securities		17,751		851			(1,876	)		(1,025	)		288		(1,693	)		0			0		15,321		839
Investment funds		17,751		851			(1,876	)		(1,025	)		288		(1,693	)		0			0		15,321		839
Derivative assets and liabilities (net)		8,208		133			0			133			2,493		0			(961	)		0		9,873		133
Options held/written and other		8,208		133			0			133			2,493		0			(961	)		0		9,873		133
Other asset		37,855		(4,270	)		0			(4,270	)		4,453		0			(484	)		0		37,554		(4,271	)
Reinsurance recoverables *6		37,855		(4,270	)		0			(4,270	)		4,453		0			(484	)		0		37,554		(4,271	)
Policy Liabilities and Policy Account Balances		795,001		16,545			0			16,545			0		0			(63,022	)		0		715,434		16,545
Variable annuity and variable life insurance contracts *7		795,001		16,545			0			16,545			0		0			(63,022	)		0		715,434		16,545

– 42 –

Six months ended September 30, 2017

	Millions of yen
	Balance at April 1, 2017		Gains or losses (realized/unrealized)									Purchases *3		Sales			Settlements *4			Transfers in and/ or out of Level 3 (net) *5		Balance at September 30, 2017		Change in unrealized gains or losses included in earnings  for assets and liabilities still held at September 30, 2017 *1
			Included in earnings *1			Included in other comprehensive income *2			Total
Available-for-sale securities	¥	124,516	¥	1,696		¥	895		¥	2,591		¥	44,545	¥	(25,114	)	¥	(14,748	)	¥	0	¥	131,790	¥	120
Corporate debt securities		1,618		0			5			5			1,400		0			(238	)		0		2,785		0
Specified bonds issued by SPEs in Japan		1,087		5			(2	)		3			0		0			(127	)		0		963		5
CMBS and RMBS in the Americas		57,858		1,630			(213	)		1,417			2,023		(3,468	)		(8,250	)		0		49,580		60
Other asset- backed securities and debt securities		63,953		61			1,105			1,166			41,122		(21,646	)		(6,133	)		0		78,462		55
Other securities		27,801		1,881			368			2,249			13,796		(8,195	)		0			0		35,651		1,881
Investment funds		27,801		1,881			368			2,249			13,796		(8,195	)		0			0		35,651		1,881
Derivative assets and liabilities (net)		5,233		(1,920	)		0			(1,920	)		3,372		0			(1,415	)		0		5,270		(1,920	)
Options held/written and other		5,233		(1,920	)		0			(1,920	)		3,372		0			(1,415	)		0		5,270		(1,920	)
Other asset		22,116		(8,908	)		0			(8,908	)		3,016		0			(982	)		0		15,242		(8,908	)
Reinsurance recoverables *6		22,116		(8,908	)		0			(8,908	)		3,016		0			(982	)		0		15,242		(8,908	)
Policy Liabilities and Policy Account Balances		605,520		(15,898	)		0			(15,898	)		0		0			(104,399	)		0		517,019		(15,898	)
Variable annuity and variable life insurance contracts *7		605,520		(15,898	)		0			(15,898	)		0		0			(104,399	)		0		517,019		(15,898	)

*1 Principally, gains and losses from available-for-sale securities are included in “Gains on investment securities and dividends”, “Write-downs of securities” or “Life insurance premiums and related investment income”; other securities are included in “Gains on investment securities and dividends” and derivative assets and liabilities (net) are included in “Other (income) and expense, net,” respectively. Additionally, for available-for-sale securities, amortization of interest recognized in finance revenues is included in these columns.

*2 Unrealized gains and losses from available-for-sale securities are included in “Net change of unrealized gains (losses) on investment in securities” and “Net change of foreign currency translation adjustments.” Additionally, unrealized gains and losses from other securities are included mainly in “Net change of foreign currency translation adjustments.”

*3 Increases resulting from an acquisition of a subsidiary and insurance contracts ceded to reinsurance companies are included.

*4 Decreases resulting from the receipts of reimbursements for benefits, and decreases resulting from insurance payouts to variable annuity and variable life policyholders due to death, surrender and maturity of the investment period are included.

*5 The amount reported in “Transfers in and/or out of Level 3 (net)” is the fair value at the beginning of quarter during which the transfers occur.

*6 “Included in earnings” in the above table includes changes in the fair value of reinsurance contracts recorded in “Life insurance costs” and reinsurance premiums, net of reinsurance benefits received, recorded in “Life insurance premiums and related investment income.”

*7 “Included in earnings” in the above table is recorded in “Life insurance costs” and includes changes in the fair value of policy liabilities and policy account balances resulting from gains or losses on the underlying investment assets managed on behalf of variable annuity and variable life policyholders, and the changes in the minimum guarantee risks relating to variable annuity and variable life insurance contracts as well as insurance costs recognized for insurance and annuity payouts as a result of insured events.

There were no transfers in or out of Level 3 in the six months ended September 30, 2016 and 2017.

– 43 –

Changes in economic conditions or valuation methodologies may require the transfer of assets and liabilities from one fair value level to another. In such instances, the Company and its subsidiaries recognize the transfer at the beginning of the quarter during which the transfers occur. The Company and its subsidiaries evaluate the significance of transfers between levels based upon size of the transfer relative to total assets, total liabilities or total earnings. For the three months ended September 30, 2016 and 2017, there were no transfers between Level 1 and Level 2.

The following table presents the reconciliation for financial assets and liabilities (net) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended September 30, 2016 and 2017:

Three months ended September 30, 2016

	Millions of yen
	Balance at June 30, 2016		Gains or losses (realized/unrealized)									Purchases *3		Sales			Settlements *4			Transfers in and/ or out of Level 3 (net) *5		Balance at September 30, 2016		Change in unrealized gains or losses included in earnings  for assets and liabilities still held at September 30, 2016 *1
			Included in earnings *1			Included in other comprehensive income *2			Total
Available-for-sale securities	¥	96,760	¥	36		¥	2,518		¥	2,554		¥	11,700	¥	0		¥	(5,327	)	¥	0	¥	105,687	¥	43
Corporate debt securities		505		0			2			2			1,000		0			0			0		1,507		0
Specified bonds issued by SPEs in Japan		2,178		0			(11	)		(11	)		0		0			(906	)		0		1,261		1
CMBS and RMBS in the Americas		41,537		19			(304	)		(285	)		9,523		0			(1,987	)		0		48,788		18
Other asset- backed securities and debt securities		52,540		17			2,831			2,848			1,177		0			(2,434	)		0		54,131		24
Other securities		16,296		523			(338	)		185			209		(1,369	)		0			0		15,321		511
Investment funds		16,296		523			(338	)		185			209		(1,369	)		0			0		15,321		511
Derivative assets and liabilities (net)		9,687		(458	)		0			(458	)		848		0			(204	)		0		9,873		(458	)
Options held/written and other		9,687		(458	)		0			(458	)		848		0			(204	)		0		9,873		(458	)
Other asset		45,217		(9,633	)		0			(9,633	)		2,135		0			(165	)		0		37,554		(9,634	)
Reinsurance recoverables *6		45,217		(9,633	)		0			(9,633	)		2,135		0			(165	)		0		37,554		(9,634	)
Policy Liabilities and Policy Account Balances		750,915		1,908			0			1,908			0		0			(33,573	)		0		715,434		1,908
Variable annuity and variable life insurance contracts *7		750,915		1,908			0			1,908			0		0			(33,573	)		0		715,434		1,908

– 44 –

Three months ended September 30, 2017

	Millions of yen
	Balance at June 30, 2017		Gains or losses (realized/unrealized)									Purchases *3		Sales			Settlements *4			Transfers in and/ or out of Level 3 (net) *5		Balance at September 30, 2017		Change in unrealized gains or losses included in earnings  for assets and liabilities still held at September 30, 2017 *1
			Included in earnings *1			Included in other comprehensive income *2			Total
Available-for-sale securities	¥	117,169	¥	1,668		¥	(133	)	¥	1,535		¥	37,399	¥	(16,347	)	¥	(7,966	)	¥	0	¥	131,790	¥	124
Corporate debt securities		2,069		0			4			4			900		0			(188	)		0		2,785		0
Specified bonds issued by SPEs in Japan		1,016		5			(1	)		4			0		0			(57	)		0		963		5
CMBS and RMBS in the Americas		56,456		1,630			(888	)		742			615		(2,121	)		(6,112	)		0		49,580		60
Other asset- backed securities and debt securities		57,628		33			752			785			35,884		(14,226	)		(1,609	)		0		78,462		59
Other securities		26,457		1,886			(21	)		1,865			12,423		(5,094	)		0			0		35,651		1,886
Investment funds		26,457		1,886			(21	)		1,865			12,423		(5,094	)		0			0		35,651		1,886
Derivative assets and liabilities (net)		3,961		(790	)		0			(790	)		2,108		0			(9	)		0		5,270		(790	)
Options held/written and other		3,961		(790	)		0			(790	)		2,108		0			(9	)		0		5,270		(790	)
Other asset		18,070		(3,802	)		0			(3,802	)		1,405		0			(431	)		0		15,242		(3,802	)
Reinsurance recoverables *6		18,070		(3,802	)		0			(3,802	)		1,405		0			(431	)		0		15,242		(3,802	)
Policy Liabilities and Policy Account Balances		557,914		(7,060	)		0			(7,060	)		0		0			(47,955	)		0		517,019		(7,060	)
Variable annuity and variable life insurance contracts *7		557,914		(7,060	)		0			(7,060	)		0		0			(47,955	)		0		517,019		(7,060	)

*1 Principally, gains and losses from available-for-sale securities are included in “Gains on investment securities and dividends”, “Write-downs of securities” or “Life insurance premiums and related investment income”; other securities are included in “Gains on investment securities and dividends” and derivative assets and liabilities (net) are included in “Other (income) and expense, net,” respectively. Additionally, for available-for-sale securities, amortization of interest recognized in finance revenues is included in these columns.

*2 Unrealized gains and losses from available-for-sale securities are included in “Net change of unrealized gains (losses) on investment in securities” and “Net change of foreign currency translation adjustments.” Additionally, unrealized gains and losses from other securities are included mainly in “Net change of foreign currency translation adjustments.”

*3 Increases resulting from an acquisition of a subsidiary and insurance contracts ceded to reinsurance companies are included.

*4 Decreases resulting from the receipts of reimbursements for benefits, and decreases resulting from insurance payouts to variable annuity and variable life policyholders due to death, surrender and maturity of the investment period are included.

*5 The amount reported in “Transfers in and/or out of Level 3 (net)” is the fair value at the beginning of quarter during which the transfers occur.

*6 “Included in earnings” in the above table includes changes in the fair value of reinsurance contracts recorded in “Life insurance costs” and reinsurance premiums, net of reinsurance benefits received, recorded in “Life insurance premiums and related investment income.”

*7 “Included in earnings” in the above table is recorded in “Life insurance costs” and includes changes in the fair value of policy liabilities and policy account balances resulting from gains or losses on the underlying investment assets managed on behalf of variable annuity and variable life policyholders, and the changes in the minimum guarantee risks relating to variable annuity and variable life insurance contracts as well as insurance costs recognized for insurance and annuity payouts as a result of insured events.

There were no transfers in or out of Level 3 in the three months ended September 30, 2016 and 2017.

– 45 –

The following tables present recorded amounts of assets measured at fair value on a nonrecurring basis as of March 31, 2017 and September 30, 2017. These assets are measured at fair value on a nonrecurring basis mainly to recognize impairment:

March 31, 2017

	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)
Assets:
Real estate collateral-dependent loans (net of allowance for probable loan losses)	¥	12,472	¥	0	¥	0	¥	12,472
Investment in operating leases and property under facility operations		22,525		0		0		22,525
Certain investment in affiliates		15,726		0		0		15,726
	¥	50,723	¥	0	¥	0	¥	50,723
September 30, 2017
	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)
Assets:
Real estate collateral-dependent loans (net of allowance for probable loan losses)	¥	6,748	¥	0	¥	0	¥	6,748
Investment in operating leases and property under facility operations		1,657		0		0		1,657
	¥	8,405	¥	0	¥	0	¥	8,405

– 46 –

The following is a description of the valuation process and the main valuation methodologies used for assets and liabilities measured at fair value.

Valuation process

The Company and its subsidiaries determine fair value of Level 3 assets and liabilities by using valuation techniques, such as internally developed models, or using third-party pricing information. Internally developed models include the discounted cash flow methodologies and direct capitalization methodologies. To measure the fair value of the assets and liabilities, the Company and its subsidiaries select the valuation technique which best reflects the nature, characteristics and risks of each asset and liability. The appropriateness of valuation methods and unobservable inputs is verified when measuring fair values of the assets and liabilities by using internally developed models. The Company and its subsidiaries also use third-party pricing information to measure the fair value of certain assets and liabilities. In that case, the Company and its subsidiaries verify the appropriateness of the prices by monitoring available information about the assets and liabilities, such as current conditions of the assets or liabilities, as well as surrounding market information. When these prices are determined to be able to reflect the nature, characteristics and risks of assets and liabilities reasonably, the Company and its subsidiaries use these prices as fair value of the assets and liabilities.

Loans held for sale

Certain loans, which the Company and its subsidiaries have the intent and ability to sell to outside parties in the foreseeable future, are considered held-for-sale. The loans held for sale in the Americas are classified as Level 2, because the Company and its subsidiaries measure their fair value based on a market approach using inputs other than quoted prices that are observable for the assets such as treasury rate, swap rate and market spread.

Real estate collateral-dependent loans

The valuation allowance for large balance non-homogeneous loans is individually evaluated based on the present value of expected future cash flows, the loan’s observable market price or the fair value of the collateral securing the loans if the loans are collateral-dependent. According to ASC 820 (“Fair Value Measurement”), measurement for impaired loans determined using a present value technique is not considered a fair value measurement. However, measurement for impaired loans determined using the loan’s observable market price or the fair value of the collateral securing the collateral-dependent loans are fair value measurements and are subject to the disclosure requirements for nonrecurring fair value measurements.

The Company and its subsidiaries determine the fair value of the real estate collateral of real estate collateral-dependent 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 discounted cash flows methodologies using future cash flows estimated to be generated from operation of the existing assets or completion of development projects, as appropriate. The Company and its subsidiaries generally obtain a new appraisal once a fiscal year. In addition, the Company and its subsidiaries periodically monitor circumstances of the real estate collateral and then obtain a new appraisal in situations involving a significant change in economic and/or physical conditions, which may materially affect the fair value of the collateral. Real estate collateral-dependent loans whose fair values are estimated using appraisals of the underlying collateral based on these valuation techniques are classified as Level 3 because such appraisals involve unobservable inputs. These unobservable inputs contain discount rates and cap rates as well as future cash flows estimated to be generated from real estate collateral. An increase (decrease) in the discount rate or cap rate and a decrease (increase) in the estimated future cash flows would result in a decrease (increase) in the fair value of real estate collateral-dependent loans.

Investment in operating leases and property under facility operations and land and buildings undeveloped or under construction

Investment in operating leases measured at fair value is mostly real estate. The Company and its subsidiaries determine the fair value of investment in operating leases and property under facility operations and land and buildings undeveloped or under construction using appraisals prepared by independent third party appraisers or the Company’s own staff of qualified appraisers based on recent transactions involving sales of similar assets or other valuation techniques such as discounted cash flow methodologies using future cash flows estimated to be generated from operation of the existing assets or completion of development projects, as appropriate. The Company and its subsidiaries classified the assets as Level 3 because such appraisals involve unobservable inputs. These unobservable inputs contain discount rates as well as future cash flows estimated to be generated from the assets or projects. An increase (decrease) in the discount rate and a decrease (increase) in the estimated future cash flows would result in a decrease (increase) in the fair value of investment in operating leases and property under facility operations and land and buildings undeveloped or under construction.

– 47 –

Trading securities, Available-for-sale securities and Investment in affiliates

If active market prices are available, fair value measurement is based on quoted active market prices and, accordingly, these securities are classified as Level 1. If active market prices are not available, fair value measurement is based on observable inputs other than quoted prices included within Level 1, such as prices for similar assets and accordingly these securities are classified as Level 2. If market prices are not available and there are no observable inputs, then fair value is estimated by using valuation models including discounted cash flow methodologies and broker quotes. Such securities are classified as Level 3, as the valuation models and broker quotes are based on inputs that are unobservable in the market. If fair value is based on broker quotes, the Company and its subsidiaries check the validity of received prices based on comparison to prices of other similar assets and market data such as relevant bench mark indices.

The Company and its subsidiaries classified CMBS and RMBS in the Americas and other asset-backed securities as Level 2 if the inputs such as trading price and/or bid price are observable. The Company and its subsidiaries classified CMBS and RMBS in the Americas and other asset-backed securities as Level 3 if the company and subsidiaries evaluate the fair value based on the unobservable inputs. In determining whether the inputs are observable or unobservable, the Company and its subsidiaries 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. With respect to certain CMBS and RMBS in the Americas and other asset-backed securities, the Company and its subsidiaries judged that there has been increased overall trading activity, and the Company and its subsidiaries classified these securities as Level 2 for those securities that were measured at fair value based on the observable inputs such as trading price and/or bit price. But for those securities that lacked observable trades because they are older vintage or below investment grade securities, the Company and its subsidiaries limit the reliance on independent pricing service vendors and brokers. As a result, the Company and its subsidiaries established internally developed pricing models using valuation techniques such as discounted cash flow model using Level 3 inputs in order to estimate fair value of these securities and classified them as Level 3. Under the models, the Company and its subsidiaries 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. An increase (decrease) in the discount rate or default rate would result in a decrease (increase) in the fair value of CMBS and RMBS in the Americas and other asset-backed securities.

The Company and its subsidiaries classified the specified bonds as Level 3 because the Company and its subsidiaries measure their fair value using unobservable inputs. Since the specified bonds are not traded in an open market, no relevant observable market data is available. Accordingly the Company and its subsidiaries use the discounted cash flow methodologies that incorporates significant unobservable inputs to measure their fair value. When evaluating the specified bonds issued by SPEs in Japan, the Company and its subsidiaries 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 in Japan are estimated based on contractual principal and interest repayment schedules on each of the specified bonds issued by the SPEs in Japan. Since the discount rate is not observable for the specified bonds, the Company and its subsidiaries 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 discounted cash flow methodologies) and the seniority of the bonds. Under the model, the Company and its subsidiaries 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 the Company and its subsidiaries estimate under the model. The fair value of the specified bonds issued by SPEs in Japan 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 in Japan declines when the fair value of the collateral real estate declines and the discount rate rises.

Investment funds

Certain subsidiaries elected the fair value option for investments in some funds. These investment funds for which the fair value option is elected are classified as Level 3, because the subsidiaries measure their fair value using discounting to net asset value based on inputs that are unobservable in the market. A certain subsidiary measures its investment held by the investment company which is owned by the subsidiary at fair value.

– 48 –

Derivatives

For exchange-traded derivatives, fair value is based on quoted market prices, and accordingly, classified as Level 1. For non-exchange traded derivatives, fair value is based on commonly used models and discounted cash flow methodologies. If the inputs used for these measurements including yield curves and volatilities, are observable, the Company and its subsidiaries classify it as Level 2. If the inputs are not observable, the Company and its subsidiaries classify it as Level 3. These unobservable inputs contain discount rates. An increase (decrease) in the discount rate would result in a decrease (increase) in the fair value of derivatives.

Reinsurance recoverables

Certain subsidiaries have elected the fair value option for certain reinsurance contracts related to variable annuity and variable life insurance contracts to partially offset the changes in fair value recognized in earnings of the policy liabilities and policy account balances attributable to the changes in the minimum guarantee risks of the variable annuity and variable life insurance contracts. These reinsurance contracts for which the fair value option is elected are classified as Level 3 because the subsidiaries measure their fair value using discounted cash flow methodologies based on inputs that are unobservable in the market.

Variable annuity and variable life insurance contracts

A certain subsidiary has elected the fair value option for the entire variable annuity and variable life insurance contracts held in order to match earnings recognized for changes in fair value of policy liabilities and policy account balances with the earnings recognized for gains or losses from the investment assets managed on behalf of variable annuity and variable life policyholders, derivative contracts and changes in fair value of reinsurance contracts. The changes in fair value of the variable annuity and variable life insurance contracts are linked to the fair value of the investment in securities managed on behalf of variable annuity and variable life policyholders. These securities consist mainly of equity securities traded in the market and are categorized as trading securities. In addition, variable annuity and variable life insurance contracts are exposed to the minimum guarantee risk, and the subsidiary adjusts the fair value of the underlying investments by incorporating changes in fair value of the minimum guarantee risk in the evaluation of the fair value of the entire variable annuity and variable life insurance contracts. The variable annuity and variable life insurance contracts for which the fair value option is elected are classified as Level 3 because the subsidiary measures the fair value using discounted cash flow methodologies based on inputs that are unobservable in the market.

– 49 –

Information about Level 3 Fair Value Measurements

The following tables provide information about the valuation techniques and significant unobservable inputs used in the valuation of Level 3 assets and liabilities measured at fair value on a recurring basis as of March 31, 2017 and September 30, 2017.

	March 31, 2017
	Millions of yen
	Fair value		Valuation technique(s)	Significant unobservable inputs	Range (Weighted average)
Assets:
Available-for-sale securities
Corporate debt securities	¥	1,613	Discounted cash flows	Discount rate	0.5% – 1.6%
					(1.1%)
		5	Appraisals/Broker quotes	—	—
Specified bonds issued by SPEs in Japan		1,087	Appraisals/Broker quotes	—	—
CMBS and RMBS in the Americas		57,858	Discounted cash flows	Discount rate	6.4% – 22.6%
					(18.0%)
				Probability of default	0.0% – 26.4%
					(3.6%)
Other asset-backed securities and debt securities		13,890	Discounted cash flows	Discount rate	1.0% – 51.2%
					(8.9%)
				Probability of default	0.6% – 11.0%
					(0.8%)
		50,063	Appraisals/Broker quotes	—	—
Other securities
Investment funds		11,202	Internal cash flows	Discount rate	0.0% – 40.0%
					(10.0%)
		894	Discounted cash flows	Discount rate	5.4% – 10.0%
					(8.6%)
		15,705	Appraisals/Broker quotes	—	—
Derivative assets
Options held/written and other		3,525	Discounted cash flows	Discount rate	10.0% – 15.0%
					(11.7%)
		1,708	Appraisals/Broker quotes	—	—
Other assets
Reinsurance recoverables		22,116	Discounted cash flows	Discount rate	(0.1)% – 0.5%
					(0.1%)
				Mortality rate	0.0% – 100.0%
					(1.0%)
				Lapse rate	1.5% – 54.0%
					(14.9%)
				Annuitization rate (guaranteed minimum annuity benefit)	0.0% – 100.0% (99.2%)
Total	¥	179,666

– 50 –

	March 31, 2017
	Millions of yen
	Fair value		Valuation technique(s)	Significant unobservable inputs	Range (Weighted average)
Liabilities:
Policy liabilities and Policy Account Balances
Valuable annuity and variable life insurance contracts	¥	605,520	Discounted cash flows	Discount rate	(0.1)% – 0.5%
					(0.1%)
				Mortality rate	0.0% – 100.0%
					(1.0%)
				Lapse rate	1.5% – 54.0%
					(14.7%)
				Annuitization rate (guaranteed minimum annuity benefit)	0.0% – 100.0% (82.7%)
Total	¥	605,520

	September 30, 2017
	Millions of yen
	Fair value		Valuation technique(s)	Significant unobservable inputs	Range (Weighted average)
Assets:
Available-for-sale securities
Corporate debt securities	¥	2,785	Discounted cash flows	Discount rate	0.4% – 1.7%
					(0.9%)
Specified bonds issued by SPEs in Japan		963	Appraisals/Broker quotes	—	—