INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Reports of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of March 31, 2012 and 2013	F-4
Consolidated Statements of Income For the Years Ended March 31, 2011, 2012 and 2013	F-6
Consolidated Statements of Comprehensive Income For the Years Ended March 31, 2011, 2012 and 2013	F-8
Consolidated Statements of Changes in Equity For the Years Ended March 31, 2011, 2012 and 2013	F-9
Consolidated Statements of Cash Flows For the Years Ended March 31, 2011, 2012 and 2013	F-11
Notes to Consolidated Financial Statements	F-12
Schedule II.—Valuation and Qualifying Accounts and Reserves	F-120

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of ORIX Corporation:

We have audited the accompanying consolidated balance sheets of ORIX Corporation (a Japanese corporation) and its subsidiaries as of March 31, 2012 and 2013, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the years in the three-year period ended March 31, 2013. In connection with our audits of the consolidated financial statements, we also have audited financial statement Schedule II. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ORIX Corporation and its subsidiaries as of March 31, 2012 and 2013, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2013, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 1 (af) to the consolidated financial statements, ORIX Corporation has changed its method of accounting for deferred policy acquisition costs retrospectively in the year ended March 31, 2013 due to the adoption of Accounting Standards Update 2010-26 ("Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts"—ASC 944 ("Financial Services—Insurance")).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), ORIX Corporation's internal control over financial reporting as of March 31, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated June 27, 2013 expressed an unqualified opinion on the effectiveness of ORIX Corporation's internal control over financial reporting.

KPMG AZSA LLC Tokyo, Japan June 27, 2013

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of ORIX Corporation:

We have audited ORIX Corporation's (a Japanese corporation) internal control over financial reporting as of March 31, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting, included in Item 15 "Controls and Procedures" of the accompanying Form 20-F. Our responsibility is to express an opinion on ORIX Corporation's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, ORIX Corporation maintained, in all material respects, effective internal control over financial reporting as of March 31, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of ORIX Corporation and its subsidiaries as of March 31, 2012 and 2013, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the years in the three-year period ended March 31, 2013, expressed in Japanese yen, and our report dated June 27, 2013 expressed an unqualified opinion on those consolidated financial statements.

KPMG AZSA LLC Tokyo, Japan June 27, 2013

CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2012 AND 2013

ORIX Corporation and Subsidiaries

	Millions of yen
	2012	2013
ASSETS
Cash and Cash Equivalents	¥ 786,892	¥ 826,296
Restricted Cash	123,295	106,919
Time Deposits	24,070	8,356
Investment in Direct Financing Leases	900,886	989,380
Installment Loans	2,769,898	2,691,171
(The amounts of ¥19,397 million of installment loans as of March 31, 2012 and ¥16,026 million of installment loans as of March 31, 2013 are measured at fair value by electing the fair value option under FASB Accounting Standards
Codification 825-10.)
Allowance for Doubtful Receivables on Direct Financing Leases and Probable Loan Losses	(136,588)	(104,264)
Investment in Operating Leases	1,309,998	1,395,533
Investment in Securities	1,147,390	1,093,668
(The amount of ¥5,800 million of investment in securities as of March 31, 2013 is measured at fair value by electing the fair value option under FASB Accounting Standards Codification 825-10.)
Other Operating Assets	206,109	233,258
Investment in Affiliates	331,717	326,732
Other Receivables	188,108	196,626
Inventories	79,654	41,489
Prepaid Expenses	39,547	50,323
Office Facilities	123,338	108,757
Other Assets	438,516	475,466
Total Assets	¥8,332,830	¥8,439,710

Note 1: Fiscal 2012 amounts have been adjusted for the retrospective adoption of Accounting Standards Update 2010-26 ("Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts"—ASC 944 ("Financial Services—Insurance")) on April 1, 2012.

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

	Millions of yen
		2012		2013
Cash and Cash Equivalents	¥	11,836	¥	9,439
Investment in Direct Financing Leases (Net of Allowance for Doubtful Receivables on
Direct Financing Leases and Probable Loan Losses)		232,575		205,989
Installment Loans (Net of Allowance for Doubtful Receivables on Direct Financing Leases
and Probable Loan Losses)		709,863		528,976
Investment in Operating Leases		269,267		199,190
Investment in Securities		50,059		37,641
Investment in Affiliates		13,899		13,820
Others		91,240		98,885
		¥1,378,739		¥1,093,940

CONSOLIDATED BALANCE SHEETS—(Continued) AS OF MARCH 31, 2012 AND 2013

ORIX Corporation and Subsidiaries

	Millions of yen
	2012	2013
LIABILITIES AND EQUITY
Liabilities:
Short-Term Debt	¥ 457,973	¥ 420,726
Deposits	1,103,514	1,078,587
Trade Notes, Accounts Payable and Other Liabilities	290,466	312,922
Accrued Expenses	110,057	121,281
Policy Liabilities	405,017	426,007
Income Taxes:
Current	7,849	11,651
Deferred	90,278	131,406
Security Deposits	142,092	146,402
Long-Term Debt	4,267,480	4,061,534
Total Liabilities	6,874,726	6,710,516
Redeemable Noncontrolling Interests	37,633	41,621
Commitments and Contingent Liabilities
Equity:
Common stock:
Authorized 2,590,000,000 shares
Issued 1,102,544,220 shares as of March 31, 2012 and 1,248,714,760 shares as
of March 31, 2013	144,026	194,039
Additional paid-in capital	179,223	229,600
Retained earnings	1,202,450	1,305,044
Accumulated other comprehensive income (loss)	(96,056)	(36,263)
Treasury stock, at cost:
27,327,010 shares as of March 31, 2012 and 27,281,710 shares as of March 31,
2013	(48,907)	(48,824)
ORIX Corporation Shareholders' Equity	1,380,736	1,643,596
Noncontrolling interests	39,735	43,977
Total Equity	1,420,471	1,687,573
Total Liabilities and Equity	¥8,332,830	¥8,439,710

2: On April 1, 2013, the Company implemented a 10-for-1 stock split of common stock held by shareholders registered on the Company's register of shareholders as of March 31, 2013. The number of shares has been adjusted retrospectively to reflect the stock split for all periods presented.

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

	Millions of yen
	2012	2013
Short-Term Debt	¥ 1,233	¥ 1,710
Trade Notes, Accounts Payable and Other Liabilities	8,120	3,503
Security Deposits	8,333	5,679
Long-Term Debt	1,039,927	806,857
Others	5,829	5,649
	¥1,063,442	¥823,398

The accompanying notes to consolidated financial statements are an integral part of these statements.

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED MARCH 31, 2011, 2012 AND 2013

ORIX Corporation and Subsidiaries

	2011	2012	2013
Revenues:
Direct financing leases	¥ 51,211	¥ 50,934	¥ 54,356
Operating leases	269,793	287,202	300,665
Interest on loans and investment securities	169,932	147,888	155,963
Brokerage commissions and net gains on investment securities	19,579	29,337	34,814
Life insurance premiums and related investment income	118,203	128,211	138,726
Real estate sales	54,741	61,029	38,804
Gains on sales of real estate under operating leases	5,103	2,215	5,800
Other operating revenues	252,444	264,005	336,510
Total revenues	941,006	970,821	1,065,638
Expenses:
Interest expense	122,128	110,334	101,275
Costs of operating leases	179,792	184,156	197,484
Life insurance costs	89,382	93,421	98,599
Costs of real estate sales	58,930	59,534	39,430
Other operating expenses	147,049	152,827	200,146
Selling, general and administrative expenses	202,046	195,477	225,647
Provision for doubtful receivables and probable loan losses	31,065	19,186	10,016
Write-downs of long-lived assets	17,400	15,167	19,117
Write-downs of securities	21,747	16,470	22,838
Foreign currency transaction loss (gain), net	(160)	(218)	488
Total expenses	869,379	846,354	915,040
Operating Income	71,627	124,467	150,598
Equity in Net Income of Affiliates	16,806	1,972	14,037
Gains on Sales of Subsidiaries and Affiliates and Liquidation Losses, net	1,199	3,317	7,883
Income before Income Taxes and Discontinued Operations	89,632	129,756	172,518
Provision for Income Taxes	24,673	45,475	53,656
Income from Continuing Operations	¥ 64,959	¥ 84,281	¥ 118,862
Discontinued Operations:
Income (Loss) from discontinued operations, net	¥ 13,924	¥ (466)	¥ (125)
Provision for income taxes	(7,530)	2,086	321
Discontinued operations, net of applicable tax effect	6,394	1,620	196
Net Income	71,353	85,901	119,058
Net Income (Loss) Attributable to the Noncontrolling Interests	2,373	(332)	3,164
Net Income Attributable to the Redeemable Noncontrolling Interests	2,959	2,724	3,985
Net Income Attributable to ORIX Corporation Shareholders	¥ 66,021	¥ 83,509	¥ 111,909

Note 1: Pursuant to FASB Accounting Standards Codification 205-20 ("Presentation of Financial Statements— Discontinued Operations"), the results of operations which meet the criteria for discontinued operations are reported as a separate component of income, and those related amounts that had been previously reported are reclassified.

2: Fiscal 2011 and 2012 amounts have been adjusted for the retrospective adoption of Accounting Standards Update 2010-26 ("Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts"—ASC 944 ("Financial Services—Insurance")) on April 1, 2012.

Millions of yen

CONSOLIDATED STATEMENTS OF INCOME—(Continued) FOR THE YEARS ENDED MARCH 31, 2011, 2012 AND 2013 ORIX Corporation and Subsidiaries

	2011	2012	2013
Income attributable to ORIX Corporation shareholders:
Income from continuing operations	¥59,567	¥81,154	¥112,116
Discontinued operations	6,454	2,355	(207)
Net income attributable to ORIX Corporation shareholders	¥66,021	¥83,509	¥111,909
		Yen
	2011	2012	2013
Amounts per Share of Common Stock for Income attributable to ORIX
Corporation shareholders:
Basic:
Income from continuing operations	¥55.42	¥75.49	¥103.06
Discontinued operations	6.00	2.19	(0.19)
Net income attributable to ORIX Corporation shareholders	¥61.42	¥77.68	¥102.87
Diluted:
Income from continuing operations	¥46.94	¥63.25	¥ 87.53
Discontinued operations	4.89	1.78	(0.16)
Net income attributable to ORIX Corporation shareholders	¥51.83	¥65.03	¥ 87.37
Cash Dividends	7.50	8.00	9.00

Note 1: The accompanying notes to consolidated financial statements are an integral part of these statements.

2: On April 1, 2013, the Company implemented a 10-for-1 stock split of common stock held by shareholders registered on the Company's register of shareholders as of March 31, 2013. The amounts per share of common stock for income attributable to ORIX Corporation shareholders and cash dividends have been adjusted retrospectively to reflect the stock split for all periods presented.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED MARCH 31, 2011, 2012 AND 2013

ORIX Corporation and Subsidiaries

		Millions of yen
	2011	2012	2013
Net Income	¥ 71,353	¥85,901	¥119,058
Other comprehensive income (loss), net of tax:
Net change of unrealized gains (losses) on investment in securities	7,663	5,121	13,330
Net change of defined benefit pension plans	(2,006)	(3,247)	4,759
Net change of foreign currency translation adjustments	(21,186)	(1,392)	50,979
Net change of unrealized gains (losses) on derivative instruments	(782)	(1,170)	268
Total other comprehensive income (loss)	(16,311)	(688)	69,336
Comprehensive Income	55,042	85,213	188,394
Comprehensive Income (Loss) Attributable to the Noncontrolling Interests	1,734	(849)	7,394
Comprehensive Income Attributable to the Redeemable Noncontrolling Interests	606	2,409	9,209
Comprehensive Income Attributable to ORIX Corporation Shareholders	¥ 52,702	¥83,653	¥171,791

The accompanying notes to consolidated financial statements are an integral part of these statements.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED MARCH 31, 2011, 2012 AND 2013

ORIX Corporation and Subsidiaries

	Millions of yen
				ORIX Corporation Shareholders' Equity
				Accumulated		Total ORIX
		Additional		Other		Corporation
	Common	Paid-in	Retained	Comprehensive	Treasury	Shareholders'	Noncontrolling	Total
	Stock	Capital	Earnings	Income (Loss)	Stock	Equity	Interests	Equity
Balance at March 31, 2010	¥ 143,939	¥ 178,661	¥1,104,779	¥ (79,459)	¥ (49,236)	¥ 1,298,684	¥ 17,777	¥1,316,461
Cumulative effect of applying new accounting standards for the consolidation of variable interest entities			(22,495)	(3,406)		(25,901)	4,233	(21,668)
Cumulative effect of change in
accounting principle*2			(11,505)			(11,505)	0	(11,505)
Balance at April 1, 2010	143,939	178,661	1,070,779	(82,865)	(49,236)	1,261,278	22,010	1,283,288

Contribution to subsidiaries Transaction with noncontrolling interests		200		4		0 204	3,864 (2,450)	3,864 (2,246)
Comprehensive income (loss), net of
tax:
Net income			66,021			66,021	2,373	68,394
Other comprehensive income (loss)
Net change of
unrealized
gains on
investment in
securities				7,605		7,605	58	7,663
Net change of defined
benefit
pension plans				(2,006)		(2,006)	0	(2,006)
Net change of
foreign
currency
translation
adjustments				(18,118)		(18,118)	(715)	(18,833)
Net change of
unrealized
gains (losses) on derivative
instruments				(800)		(800)	18	(782)
Total other
comprehensive
income (loss)						(13,319)	(639)	(13,958)
Total comprehensive income (loss)						52,702	1,734	54,436
Cash dividends			(8,061)			(8,061)	(3,471)	(11,532)
Conversion of convertible bond	7	7				14	0	14
Exercise of stock options	49	49				98	0	98
Compensation cost of stock options		142				142	0	142
Acquisition of treasury stock					(70)	(70)	0	(70)
Other, net		78	61		136	275	0	275
Balance at March 31, 2011	143,995	179,137	1,128,800	(96,180)	(49,170)	1,306,582	21,687	1,328,269

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued) FOR THE YEARS ENDED MARCH 31, 2011, 2012 AND 2013

ORIX Corporation and Subsidiaries

					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
Contribution to subsidiaries						0	21,503	21,503
Transaction with noncontrolling interests Comprehensive income (loss), net of tax:		52		(20)		32	(502)	(470)
Net income Other comprehensive income (loss) Net change of unrealized			83,509			83,509	(332)	83,177
gains on investment in securities Net change of defined				4,642		4,642	479	5,121
benefit pension plans Net change of foreign currency				(3,245)		(3,245)	(2)	(3,247)
translation adjustments Net change of unrealized gains (losses)				(98)		(98)	(979)	(1,077)
on derivative instruments Total other				(1,155)		(1,155)	(15)	(1,170)
comprehensive income (loss)						144	(517)	(373)
Total comprehensive income (loss)						83,653	(849)	82,804
Cash dividends Conversion of convertible bond	3	3	(8,599)			(8,599) 6	(2,104) 0	(10,703) 6
Exercise of stock options	28	27				55	0	55
Acquisition of treasury stock Other, net		4	(1,260)		(1) 264	(1) (992)	0 0	(1) (992)
Balance at March 31, 2012 Contribution to subsidiaries Transaction with noncontrolling	144,026	179,223	1,202,450	(96,056)	(48,907)	1,380,736 0	39,735 2,229	1,420,471 2,229
interests Comprehensive income (loss), net of tax:		98		(89)		9	(143)	(134)
Net income Other comprehensive income (loss) Net change of unrealized gain on			111,909			111,909	3,164	115,073
investment in securities Net change of defined				12,829		12,829	501	13,330
benefit pension plans Net change of foreign currency				4,758		4,758	1	4,759
translation adjustments Net change of unrealized gains (losses)				42,020		42,020	3,735	45,755
on derivative instruments Total other				275		275	(7)	268
comprehensive income (loss)						59,882	4,230	64,112
Total comprehensive income (loss)						171,791	7,394	179,185
Cash dividends Conversion of convertible bond	49,840	49,933	(9,676)			(9,676) 99,773	(5,238) 0	(14,914) 99,773

http://www.sec.gov/Archives/edgar/data/1070304/000119312513273666/d506168d20... 30/07/2013

ANNUAL REPORT Page 167 of 280

Exercise of stock options	173	172						345		0	345
Acquisition of treasury stock						(3)		(3)		0	(3)
Other, net		174	361			86		621		0	621
Balance at March 31, 2013	¥ 194,039	¥ 229,600	¥1,305,044	¥	(36,263)	¥ (48,824)	¥	1,643,596	¥	43,977	¥1,687,573

Changes in the redeemable noncontrolling interests are not included in the table. For further information, see Note 18 ("Redeemable Noncontrolling Interests").
Cumulative effect of change in accounting principle represents the cumulative effect of the retrospective adoption of Accounting Standards Update 2010-26

("Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts"—ASC 944 ("Financial Services—Insurance")).

The accompanying notes to consolidated financial statements are an integral part of these statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 31, 2011, 2012 AND 2013

ORIX Corporation and Subsidiaries

		Millions of yen
	2011	2012	2013
Cash Flows from Operating Activities:
Net income	¥ 71,353	¥ 85,901	¥ 119,058
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	163,546	165,193	178,840
Provision for doubtful receivables and probable loan losses	31,065	19,186	10,016
Increase (Decrease) in policy liabilities	(11,615)	6,421	20,990
Deferred tax provision (benefit)	(19,624)	16,362	32,655
Equity in net income of affiliates (excluding interest on loans)	(14,337)	(889)	(12,874)
Gains on sales of subsidiaries and affiliates and liquidation losses, net	(1,199)	(3,317)	(7,883)
Gains on sales of available-for-sale securities Gains on sales of real estate under operating leases	(4,867) (5,103)	(8,918) (2,215)	(17,252) (5,800)
Gains on sales of operating lease assets other than real estate	(9,968)	(14,721)	(14,032)
Write-downs of long-lived assets	17,400	15,167	19,117
Write-downs of securities	21,747	16,470	22,838
Decrease (Increase) in restricted cash	(6,659)	(5,188)	33,852
Decrease (Increase) in trading securities	(28,372)	55,173	(16,264)
Decrease in inventories	27,596	26,830	37,918
Decrease (Increase) in other receivables	16,006	(7,893)	20,782
Increase (Decrease) in trade notes, accounts payable and other liabilities	(22,042)	22,760	(8,715)
Other, net	(12,547)	(53,328)	(21,942)
Net cash provided by operating activities	212,380	332,994	391,304

Cash Flows from Investing Activities:
Purchases of lease equipment	¥ (561,919)	¥ (603,060)	¥ (736,373)
Principal payments received under direct financing leases Installment loans made to customers	384,288 (719,190)	348,549 (741,570)	381,080 (918,777)
Principal collected on installment loans	1,130,718	918,565	1,193,884
Proceeds from sales of operating lease assets	159,369	174,139	173,890
Investment in affiliates, net	36,945	17,808	(19,206)
Proceeds from sales of investment in affiliates	4,622	2,864	3,280
Purchases of available-for-sale securities	(742,816)	(654,873)	(684,870)
Proceeds from sales of available-for-sale securities	340,634	279,367	417,534
Proceeds from redemption of available-for-sale securities	310,594	361,881	373,729
Purchases of held-to-maturity securities	0	(182)	(46,567)
Purchases of other securities	(48,538)	(44,654)	(26,855)
Proceeds from sales of other securities	25,614	24,832	40,568
Purchases of other operating assets	(14,219)	(17,282)	(15,152)
Acquisitions of subsidiaries, net of cash acquired	(46,554)	(9,252)	(43,223)
Sales of subsidiaries, net of cash disposed	12,685	7,554	(171)
Other, net	(20,635)	(22,929)	12,886
Net cash provided by investing activities	251,598	41,757	105,657
Cash Flows from Financing Activities:
Net decrease in debt with maturities of three months or less	¥ (72,584)	¥ (59,769)	¥ (20,507)
Proceeds from debt with maturities longer than three months	1,488,199	1,488,111	1,365,827
Repayment of debt with maturities longer than three months	(1,918,774)	(1,782,081)	(1,790,616)
Net increase in deposits due to customers	166,012	40,288	6,623
Cash dividends paid to ORIX Corporation shareholders	(8,061)	(8,599)	(9,676)
Contribution from noncontrolling interests	0	20,258	1,133
Cash dividends paid to redeemable noncontrolling interests	(6,008)	(1,079)	(5,763)
Net decrease in call money	(8,000)	(10,000)	0
Other, net	(4,374)	(5,606)	(14,214)
Net cash used in financing activities	(363,590)	(318,477)	(467,193)

Effect of Exchange Rate Changes on Cash and Cash Equivalents	(7,348)	(1,509)	9,636
Net Increase in Cash and Cash Equivalents	93,040	54,765	39,404
Cash and Cash Equivalents at Beginning of Year	639,087	732,127	786,892
Cash and Cash Equivalents at End of Year	¥ 732,127	¥ 786,892	¥ 826,296

The accompanying notes to consolidated financial statements are an integral part of these statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ORIX Corporation and Subsidiaries

1. Significant Accounting and Reporting Policies

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"), modified for the accounting for stock splits (see (o)). Significant accounting and reporting policies are summarized as follows:

(a) Basis of presenting financial statements

The Company and its subsidiaries in Japan maintain their books in conformity with Japanese accounting practices, which differ in certain respects from U.S. GAAP.

The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP and, therefore, reflect certain adjustments to the books and records of the Company and its subsidiaries. The principal adjustments relate to initial direct costs to originate leases and loans, use of the straight-line method of depreciation for operating lease equipment, deferral of life insurance policy acquisition costs, calculation of insurance policy liabilities, accounting for goodwill and intangible assets resulting from business combinations, accounting for pension plans, accounting for changes in a parent's ownership interest in its subsidiary, accounting for securitization of financial assets, reflection of the income tax effect on such adjustments and reclassification of discontinued operations, and the presentation of the noncontrolling interests.

(b) 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 pursuant to FASB Accounting Standards Codification ("ASC") 810-10-25-2 to 14 ("Consolidation—The Effect of Noncontrolling Rights on Consolidation"). In addition, the consolidated financial statements also include variable interest entities to which the Company and its subsidiaries are primary beneficiaries pursuant to ASC 810-10 ("Consolidation—Variable Interest Entities").

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.

(c) Use of estimates

The preparation of the 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. These are the selection of valuation techniques and determination of assumptions used in fair value measurements (see Note 2), the determination and periodic reassessment of the unguaranteed residual value for direct financing leases and operating leases (see (e)), the determination and reassessment of insurance policy liabilities and deferred policy acquisition costs (see (f)), the determination of the allowance for doubtful receivables on direct financing leases and probable loan losses (see (g)), the determination of impairment of long-lived assets (see (h)), the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

determination of impairment of investment in securities (see (i)), the determination of the valuation allowance for deferred tax assets and the evaluation of tax positions (see (j)), assessment and measurement of effectiveness in hedging relationship using derivative financial instruments (see (l)), the determination of benefit obligation and net periodic pension cost (see (m)) and the determination of impairment of goodwill and intangible assets not subject to amortization (see (w)).

(d) 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 accumulated other comprehensive income (loss) arise from the translation of foreign currency financial statements into Japanese yen.

(e) Recognition of revenues

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 collectibility 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.

Leases—The Company and its subsidiaries lease various assets to customers under direct financing or operating lease arrangements. Classification of a lease arrangement into either a direct financing lease or an operating lease is dependent upon the specific conditions of the arrangement. Revenue recognition policies applied for direct financing leases and operating leases are specifically described in sections following this paragraph. 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. In some cases, automobile maintenance services are also provided 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 taken into income over the contract period in proportion to the estimated service costs to be incurred and are recorded in other operating revenues in the accompanying consolidated statements of income.

(1) Recognition of revenues for direct financing leases

Direct financing leases consist of full-payout leases for various equipment types, including office equipment, industrial machinery and transportation equipment. 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 residual values

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

represent estimated proceeds from the disposition of equipment at the time the lease is terminated. Estimates of unguaranteed residual values are based on current market values 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 related lease by using the interest method. The unamortized balance of initial direct costs is reflected as a component of investment in direct financing leases.

(2) Recognition of revenues for 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 and is depreciated over their estimated useful lives mainly on a straight-line basis. The estimated average useful lives of principal operating lease assets classified as transportation equipment is 9 years, measuring and information-related equipment is 4 years, real estate (other than land) is 32 years and other is 7 years. Depreciation expenses are included in costs of operating leases. Gains or losses arising from dispositions of operating lease assets, except real estate under operating leases, are included in operating lease revenues. With respect to some sales of real estate under operating leases such as commercial buildings, the Company or its subsidiaries may retain an interest in some cash flows of the real estate in the form of management or operation of the real estate. Where the Company or its subsidiaries have significant continuing involvement in the operations from the real estate under operating leases which have been disposed of, the gains or losses arising from such disposition are separately disclosed as gains on sales of real estate under operating leases, whereas if the Company or its subsidiaries have no significant continuing involvement in the operations from such disposed real estate, the gains or losses are reported as income from discontinued operations, net.

Estimates of residual values are based on current market values of used equipment, estimates of when and how much equipment will become obsolete and actual recovery being experienced for similar used equipment.

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 collateralrealization 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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

are applied to principal in view of the conditions of the contract and obligors. The Company and its subsidiaries return to accrual status non-accrual loans and lease receivables 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.

Brokerage commissions and net gains on investment securities—Brokerage commissions and net gains on investment securities are recorded on a trade date basis.

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.

(f) Insurance premiums and expenses

Premium income from life insurance policies is recognized as earned premiums when due.

Life insurance benefits are recorded as expenses when they are incurred. Policy liabilities for future policy benefits are established using the net level premium method, based on actuarial estimates of the amount of future policyholder benefits. The policies are characterized as long-duration policies and mainly consist of whole life, term life, endowments, and medical insurance. Computation of policy liabilities necessarily includes assumptions about mortality, morbidity, lapse rates, future yields on related investments and other factors applicable at the time the policies are written. The Company's life insurance subsidiary continually evaluates the potential for changes in the estimates and assumptions applied in determining policy liabilities, both positive and negative, and uses the results of these evaluations both to adjust recorded liabilities and to adjust underwriting criteria and product offerings.

ASC 944 ("Financial Services—Insurance") requires insurance companies to defer certain costs related directly to the successful acquisition of new or renewal insurance contracts, or deferred policy acquisition costs, and amortize them over the respective policy periods in proportion to anticipated premium revenue. These deferred policy acquisition costs consist primarily of first-year commissions in excess of recurring policy maintenance costs and certain variable costs and expenses for underwriting policies (see (ag) regarding the retrospective adoption of Accounting Standards Update 2010-26 for deferred policy acquisition costs).

(g) 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

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.

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.

(h) Impairment of long-lived assets

The Company and its subsidiaries have followed ASC 360-10 ("Property, Plant, and Equipment—Impairment or Disposal of Long-Lived Assets"). Under ASC 360-10, long-lived assets to be held and used in operations, including tangible assets and intangible assets being amortized, consisting primarily of office building, condominiums, golf courses and other operating assets, shall be tested for recoverability whenever events or changes in circumstances indicate that the assets might be impaired. When the undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of those assets, the net 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.

(i) 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.

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 under ASC 825-10 ("Financial Instruments—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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

about the collectibility of debt securities. The Company and its subsidiaries do not consider that an other-than-temporary impairment for a debt security has occurred 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 that an other-than-temporary impairment has occurred if any of the above mentioned three conditions are not met. For the debt security for which an other-than-temporary impairment is considered to have occurred, the Company and its subsidiaries recognize the entire difference between the amortized cost and the fair value 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 subsidiary will be required to sell the debt security before recovery of its amortized cost basis less any current-period credit loss. On the other hand, 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 noncredit 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, the Company and its subsidiaries reduce the carrying value of other security to the fair value and charge against income losses related to other securities in situations where it is considered that the decline in the value of other security is other than temporary.

(j) Income taxes

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 Company and its subsidiaries have followed ASC 740 ("Income Taxes"). According to ASC 740, the Company and its subsidiaries recognize the financial statement effects of a tax position taken or expected to be taken in a tax return when it is more likely than not, based on the technical merits, that the position will be sustained upon tax examination, including resolution of any related appeals or litigation processes, and measure the tax position that meets the recognition threshold at the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with the taxing authority. 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.

Effective for the fiscal year ended March 31, 2012, the Company and certain consolidated subsidiaries have elected to file a consolidated tax return for National Corporation tax purposes.

(k) Securitized assets

The Company and its subsidiaries have securitized and sold to investors certain lease receivables, loan receivables and investment in securities. In the securitization process, the assets to be securitized ("the assets") are sold to trusts and specialpurpose entities that issue asset-backed beneficial interests and securities to the investors.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Until March 31, 2010, certain trusts and special-purpose entities that met the conditions of qualifying special-purpose entities ("QSPEs") were not consolidated under the previous consolidation guidance for variable interest entities ("VIEs") and the Company and its subsidiaries had accounted for those securitization transactions in which the financial assets were transferred to QSPEs as a sale when control over the transferred assets was surrendered.

From April 1, 2010, the Company and its subsidiaries have adopted Accounting Standards Update 2009-16 (ASC 860 ("Transfers and Servicing")), which removed the exemption from consolidation previously given to QSPEs and any SPEs for securitizing financial assets have become subject to the consolidation rule for VIEs. As a result, trusts or SPEs used in securitization transactions including those that were previously considered to be QSPEs have been 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 direct financing lease receivables, loan receivable and investment securities, 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 which 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.

(l) Derivative financial instruments

The Company and its subsidiaries apply ASC 815 ("Derivatives and Hedging"), and all derivatives held by the Company and its subsidiaries are recognized 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 that are not hedges must be 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

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).

Changes in the fair value of derivatives that are not held as a hedge, such as those held for trading use, or the ineffective portion of the change in fair value of derivatives that qualify as a hedge, are recorded in earnings.

For all hedging relationships, 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.

(m) Pension plans

The Company and certain subsidiaries have contributory and non-contributory pension plans covering substantially all of their employees. The Company and its subsidiaries apply ASC 715 ("Compensation—Retirement Benefits"), and 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.

(n) Stock-based compensation

The Company and its subsidiaries apply ASC 718 ("Compensation—Stock Compensation"). ASC 718 requires, with limited exception, that the cost of employee services received in exchange for an award of equity instruments be measured based on the grant-date fair value. The costs are recognized over the requisite employee service period.

(o) 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 has become unnecessary.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

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 March 31, 2013 would have increased by approximately ¥24,674 million, with a corresponding decrease in retained earnings. Total ORIX Corporation shareholders' equity would remain unchanged. A stock split on May 19, 2000 was excluded from the above amounts because the stock split was not considered to be a stock dividend under U.S. GAAP.

On April 1, 2013, the Company implemented a 10-for-1 stock split of common stock held by shareholders registered on the Company's register of shareholders as of March 31, 2013. The number of shares and per share data have been adjusted retrospectively to reflect the stock split for all periods presented. This stock split on April 1, 2013 was not considered to be a stock dividend under U.S. GAAP.

(p) 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.

(q) Restricted cash

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

(r) Other operating assets

Other operating assets consist primarily of operating facilities (including golf courses, hotels and training facilities and senior housing), which are stated at cost less accumulated depreciation, and depreciation is calculated mainly on a straightline basis over the estimated useful lives of the assets. Depreciation expenses in fiscal 2011, 2012 and 2013 are ¥6,857 million, ¥6,606 million and ¥8,274 million, respectively. Accumulated depreciation was ¥37,765 million and ¥48,313 million as of March 31, 2012 and 2013, respectively. Estimated useful lives range up to 50 years for buildings, up to 60 years for land improvement and up to 20 years for others.

(s) Other receivables

Other receivables primarily include payments made on behalf of lessees for property tax, maintenance fees and insurance premiums in relation to direct financing lease contracts, accounts receivables in relation to sales of assets to be leased, residential condominiums and other assets, and derivative assets.

(t) Inventories

Inventories primarily consist of advance and/or progress payments for development of residential condominiums for sale and completed residential condominiums (including completed residential condominiums waiting to be delivered to buyers under the contracts for sale). Advance and/or progress payments for development of residential condominiums for sale are carried at cost less any impairment losses and finished goods (including completed residential condominiums) are stated at the lower of cost or market. As of March 31, 2012 and 2013, advance and/or progress payments were ¥69,816 million and ¥34,556 million, respectively, and finished goods were ¥9,838 million and ¥6,933 million, respectively.

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F-20
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Certain subsidiaries recorded ¥9,844 million, ¥4,039 million and ¥3,377 million of write-downs principally for advance and/or progress payments for development of residential condominiums for sale for fiscal 2011, 2012 and 2013, respectively, resulting from an increase in development costs and/or a decrease in expected sales price. These write-downs were recorded in costs of real estate sales and included in the Real Estate segment.

(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. Depreciation expenses in fiscal 2011, 2012 and 2013 are ¥2,857 million, ¥3,228 million and ¥2,994 million, respectively. Accumulated depreciation was ¥39,492 million and ¥41,698 million as of March 31, 2012 and 2013, respectively. Estimated useful lives range up to 62 years for buildings and fixtures and up to 20 years for machinery and equipment.

(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 (see (w)), 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 to construction of real estate for operating lease, and deferred tax assets.

(w) Goodwill and other intangible assets

The Company and its subsidiaries have followed ASC 805 ("Business Combinations") and ASC 350 ("Intangibles— Goodwill and Other"). ASC 805 requires that all business combinations be accounted for using the acquisition method. It also requires that intangible assets acquired in a business combination be recognized apart from goodwill if the intangible assets meet one of two criteria—either the contractual-legal criterion or the separability criterion. In a business combination achieved in stages, the Company and its subsidiaries remeasure their previously held equity interest at the acquisition-date fair value and recognize the resulting gain or loss, if any, in earnings.

ASC 350 establishes how intangible assets (other than those acquired in a business combination) should be accounted for upon acquisition. It also addresses how goodwill and other intangible assets should be accounted for subsequent to their acquisition. Goodwill and intangible assets that have indefinite useful lives are not amortized but tested at least annually for impairment. Additionally, if events or changes in circumstances indicate that the asset might be impaired, we test for impairment when such events or changes occur. The Company and its subsidiaries adopted Accounting Standards Update 2011-08 ("Testing Goodwill for Impairment"—ASC 350 ("Intangibles—Goodwill and Other")) during the fiscal year ended March 31, 2012. According to ASU 2011-08, the Company and its subsidiaries may 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. If, after assessing the totality of events or circumstances, it is determined 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, the Company and/or subsidiaries perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. If the fair value of the reporting unit falls below its carrying amount, then the Company and/or subsidiaries perform the second step of the goodwill impairment test by comparing the fair value of goodwill with its carrying amount. If the carrying amount of goodwill exceeds its 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 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The Company and its subsidiaries adopted Accounting Standards Update 2012-02 ("Testing Indefinite-Lived Intangible Assets for Impairment"—ASC 350 ("Intangibles—Goodwill and Other")) during the fiscal year ended March 31, 2013. According to ASU 2012-02, the Company and its subsidiaries may perform a qualitative assessment to determine whether it is more likely than not that the indefinite-lived intangible asset is impaired. 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, 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. 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

Intangible assets with finite lives are amortized over their useful lives and tested for impairment in accordance with ASC 360-10 ("Property, Plant, and Equipment—Impairment or Disposal of Long-Lived Assets").

(x) Trade notes, accounts payable and other liabilities

Trade notes, accounts payable and other liabilities include accounts payables, guarantee liabilities, and derivative liabilities.

(y) Capitalization of interest costs

The Company and its subsidiaries capitalized interest costs of ¥3,646 million, ¥2,395 million and ¥1,707 million in fiscal 2011, 2012 and 2013, respectively, related to specific long-term development projects.

(z) Advertising

The costs of advertising are expensed as incurred. The total amounts charged to advertising expense in fiscal 2011, 2012 and 2013 are ¥6,165 million, ¥5,888 million and ¥11,579 million, respectively.

(aa) Discontinued operations

The Company and its subsidiaries have followed ASC 205-20 ("Presentation of Financial Statements—Discontinued Operations"). Under ASC 205-20, the scope of discontinued operations includes the operating results of any component of an entity with its own identifiable operations and cash flows and in which operations the Company and its subsidiaries will not have significant continuing involvement. Included in reported discontinued operations are the operating results of operations for the subsidiaries, the business units and certain properties sold or to be disposed of by sale without significant continuing involvements, which results of operations for prior periods presented have also been reclassified as discontinued operations in the accompanying consolidated statements of income.

(ab) Earnings per share

Basic earnings per share is computed by dividing income attributable to ORIX Corporation shareholders from continuing operations and net income attributable to ORIX Corporation shareholders by the weighted average number of shares of common stock outstanding in each period and diluted earnings per share reflects the

$$
F-22
$$

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Earnings per share is adjusted for any stock splits and stock dividends retroactively. For discussion of stock splits, see Note 27 ("Per Share Data").

Furthermore, the Company and its subsidiaries apply ASC to 44 ("Earnings Per Share—Contingently Convertible Instruments") to Liquid Yield Option Notes™. 260-10-45-43

(ac) Partial sale and additional acquisition of the parent's ownership interest in subsidiaries

A partial sale and an additional acquisition of the parent's ownership interest in subsidiaries where the parent continues to retain control of that 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 certain subsidiaries 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 in accordance with provisions including EITF Topic No. D-98 (ASC 480-10-s99-3A) ("Classification and Measurement of Redeemable Securities").

(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 June 2009, FASB Statement No. 166 ("Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140"), which was codified by Accounting Standards Update 2009-16 (ASC 860 ("Transfers and Servicing")), was issued. This Update removes the concept of a qualifying special-purpose entity and removes the exception from applying ASC 810-10 ("Consolidation-Variable Interest Entities") to variable interest entities that are qualifying specialpurpose entities. This Update also modifies the financial-components approach used in ASC 860 and limits the circumstances in which a transferor derecognizes a portion or component of a financial asset.

Furthermore, in June 2009, FASB Statement No. 167 ("Amendment of FASB Interpretation No. 46(R)" ("FIN 46(R)")), which was codified by Accounting Standards Update 2009-17 (ASC 810 ("Consolidation")), was issued. This Update requires an enterprise to perform qualitative analysis to identify the primary beneficiary. An enterprise that has both of the following characteristics is considered to be the primary beneficiary who shall consolidate a variable interest entity:

• The power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

• The obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity.

Additionally, this Update requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity.

These Updates are effective as of the beginning of the fiscal year that begins after November 15, 2009, for interim periods within that fiscal year, and for fiscal years and interim periods thereafter. The Company and its subsidiaries adopted these Updates on April 1, 2010. The effects of adopting these Updates on the Company and its subsidiaries' financial conditions at the initial adoption date was an increase of ¥1,147 billion on total assets, an increase of ¥1,169 billion on total liabilities and a decrease of ¥22 billion on retained earnings, net of tax, respectively, in the consolidated balance sheets. These are mainly related to consolidation of VIEs used for securitization.

In January 2010, Accounting Standards Update 2010-06 ("Improving Disclosures about Fair Value Measurements"— ASC 820 ("Fair Value Measurements and Disclosures")) was issued. This Update improves existing disclosures and adds new disclosures. The Company and its subsidiaries adopted certain disclosure requirements in the roll forward of activity in Level 3 fair value measurements on April 1, 2011. The Company and its subsidiaries already adopted the other disclosure requirements in the period ended March 31, 2010. The adoption did not have a material effect on the Company and its subsidiaries' results of operation or financial position.

In July 2010, Accounting Standards Update 2010-20 ("Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses"—ASC 310 ("Receivables")) was issued. This Update enhances disclosures about the credit quality of financing receivables and the allowance for credit losses, by requiring an entity to provide disaggregated information by portfolio segment or class of financing receivables, credit quality indicators, past due information, and information about modifications of its financing receivables, and other information. This Update requires the disclosures as of the end of a reporting period, and the disclosures about activity that occurs during a reporting period. The Company and its subsidiaries adopted the period-end disclosure requirements for the period ended December 31, 2010, and the activity disclosure requirements for the period beginning on April 1, 2011, respectively. This Update only relates to certain disclosure requirements and its adoption had no effect on the Company and its subsidiaries' results of operations or financial position. In April 2011, Accounting Standards Update 2011-02 ("A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring"—ASC 310 ("Receivables")) was issued. This Update clarifies the guidance on a creditor's evaluation of whether a restructuring constitutes a troubled debt restructuring. Additionally, this Update requires entities to disclose certain information about troubled debt restructuring, which was deferred by the adoption of Accounting Standards Update 2011-01 ("Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010- 20"—ASC 310 ("Receivables")). The Company and its subsidiaries adopted this Update on July 1, 2011 and applied the amendments in this Update retrospectively to restructurings that occurred on or after April 1, 2011. The adoption did not have a material effect on the Company and its subsidiaries' results of operations or financial position.

In October 2010, Accounting Standards Update 2010-26 ("Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts"—ASC 944 ("Financial Services—Insurance")) was issued. This Update modifies the definition of the types of costs relating to the acquisition of new and renewal insurance contracts that can be deferred as deferred policy acquisition costs, and specifies that only certain costs related directly to the successful acquisition of new or renewal insurance contracts should be deferred. In accordance with the amendment in this Update, the advertising cost which does not meet certain capitalization criteria, and the cost

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

relating to unsuccessful contract acquisition should be charged to expense as incurred. The Company and its subsidiaries adopted this Update retrospectively to prior period financial statements on April 1, 2012. The effect of the retrospective adoption on the financial position at the initial adoption date was a decrease of approximately ¥22 billion in other assets and a decrease of approximately ¥15.4 billion in retained earnings, net of tax, in the consolidated balance sheets. In addition, the effect of the retrospective adoption on financial results for the fiscal year ended March 31, 2011 was a decrease of ¥1,254 million in income from continuing operations and net income attributable to ORIX Corporation Shareholders, respectively. The effect of the retrospective adoption on financial results for the fiscal year ended March 31, 2012 was a decrease of ¥2,641 million in income from continuing operations and net income attributable to ORIX Corporation Shareholders, respectively. The basic and diluted earnings per share for net income attributable to ORIX Corporation Shareholders for the fiscal year ended March 31, 2011 decreased by ¥1.17* and ¥0.95*, respectively. The basic and diluted earnings per share for net income attributable to ORIX Corporation Shareholders for the fiscal year ended March 31, 2012 decreased by ¥2.46* and ¥2.00*, respectively. (* On April 1, 2013, the Company implemented a 10-for-1 stock split of common stock held by shareholders registered on the Company's register of shareholders as of March 31, 2013. The per share data has been adjusted retrospectively to reflect the stock split for all periods presented.)

In December 2010, Accounting Standards Update 2010-28 ("When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts"—ASC 350 ("Goodwill and Other")) was issued. This Update modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For these reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. Any resulting goodwill impairment should be recorded as a cumulative effect adjustment to beginning retained earnings in the period of adoption. Any goodwill impairments occurring after the initial adoption of the Update should be included in earnings. The Company and its subsidiaries adopted this Update on April 1, 2011. The adoption did not have a material effect on the Company and its subsidiaries' results of operations or financial position.

In December 2010, Accounting Standards Update 2010-29 ("Disclosure of Supplementary Pro Forma Information for Business Combinations"—ASC 805 ("Business Combinations")) was issued. This Update specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The Company and its subsidiaries adopted this Update on April 1, 2011. This Update only relates to certain disclosure requirements and its adoption had no effect on the Company and its subsidiaries' results of operations or financial position.

In May 2011, Accounting Standards Update 2011-04 ("Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs"—ASC 820 ("Fair Value Measurement")) was issued. This Update is intended to result in a consistent definition of fair value and common requirements for measuring fair value and for disclosures about fair value between U.S. GAAP and IFRSs. Consequently, this Update changes some fair value measurement principles and enhances the disclosure requirements. The Company and its subsidiaries adopted this Update on January 1, 2012. The adoption did not have a material effect on the Company and its subsidiaries' results of operations or financial position.

In June 2011, Accounting Standards Update 2011-05 ("Presentation of Comprehensive Income"—ASC 220 ("Comprehensive Income")) was issued. Under this Update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The Update does not change the items that must be reported in other

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

comprehensive income or when an item of other comprehensive income must be reclassified to net income. The Update does not change the option for an entity to present components of other comprehensive income either net of related tax effects or before related tax effects. The Update does not affect how earnings per share is calculated or presented. In December 2011, Accounting Standards Update 2011-12 (Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05) was issued. This Update defers the effective date for certain amendments in Accounting Standards Update 2011-05 which require an entity to present on the face of the financial statements reclassification adjustments for items that are reclassified from accumulated other comprehensive income to net income. The Company and its subsidiaries adopted these Updates on April 1, 2012. These Updates only relate to certain disclosure requirements and the adoption had no effect on the Company and its subsidiaries' results of operations or financial position. In February 2013, Accounting Standards Update 2013-02 ("Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income"—ASC 220 ("Comprehensive Income")) was issued. This Update supersedes the reporting requirement for reclassifications out of accumulated other comprehensive income, originally required under Accounting Standards Update 2011-05, for which the effective date was deferred by Accounting Standards Update 2011-12. This Update requires an entity to present information about amounts reclassified out of accumulated other comprehensive income, their corresponding effect on line items of net income and other information by component. An entity shall provide the information together, in one location, either on the face of the statement where net income is presented or as a separate disclosure in the notes to the financial statement. The Update is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2012 with early adoption permitted. The Update only relates to certain disclosure requirements and the adoption will have no effect on the Company and its subsidiaries' results of operations or financial position.

In September 2011, Accounting Standards Update 2011-08 ("Testing Goodwill for Impairment"—ASC 350 ("Intangibles—Goodwill and Other")) was issued. This Update permits an entity to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount including goodwill before performing the two-step goodwill impairment test. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is not required. The Company and its subsidiaries adopted this Update in the period ended March 31, 2012. The adoption of this Update did not have a material effect on the Company and its subsidiaries' results of operations or financial position.

In December 2011, Accounting Standards Update 2011-10 ("Derecognition of in Substance Real Estate—a Scope Clarification"—ASC 360 ("Property, Plant, and Equipment")) was issued. This Update is intended to resolve the diversity in practice and clarifies that when a parent (reporting entity) ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary's non-recourse debt, the reporting entity should apply the guidance in ASC 360-20 ("Property, Plant, and Equipment—Real Estate Sales") to determine whether it should derecognize the in substance real estate. The Update is effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. Generally, the effect of adopting this Update on the Company and its subsidiaries' results of operations or financial position will depend on future transactions.

In December 2011, Accounting Standards Update 2011-11 ("Disclosures about Offsetting Assets and Liabilities"— ASC 210 ("Balance Sheet")) was issued. This Update requires all entities that have financial instruments and derivative instruments that are either offset in the balance sheet or subject to an enforceable master netting arrangement or similar agreement to disclose information about offsetting and related arrangements. In January 2013, Accounting Standards Update 2013-01 ("Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities"—ASC 210 ("Balance Sheet")) was issued. This Update clarifies that the scope of Update 2011-11 applies to derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with Section 210-20-45 or Section 815-10-45 or

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

subject to an enforceable master netting arrangement or similar agreement. These Updates are effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. These Updates only relate to certain disclosure requirements and the adoption will have no effect on the Company and its subsidiaries' results of operations or financial position.

In July 2012, Accounting Standards Update 2012-02 ("Testing Indefinite-Lived Intangible Assets for Impairment"— ASC 350 ("Intangibles—Goodwill and Other")) was issued. This Update permits an entity first to assess qualitative factors to determine whether it is more likely than not that the indefinite-lived intangible asset is impaired. If after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived asset is impaired, then the entity is not required to calculate the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test. The Company and its subsidiaries adopted this Update in the period ended March 31, 2013. The adoption of this Update did not have a material effect on the Company and its subsidiaries' results of operations or financial position.

In February 2013, Accounting Standards Update 2013-04 ("Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date"—ASC 405 ("Liabilities")) was issued. This Update requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The Update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The adoption is not expected to have a material effect on the Company and its subsidiaries' results of operations or financial position.

In March 2013, Accounting Standards Update 2013-05 ("Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity"—ASC 830 ("Foreign Currency Matters")) was issued. This Update requires that when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity, the parent release any related cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. This Update continues to require an entity to release a pro rata portion of the cumulative translation adjustment into net income upon a partial sale of an equity method investment that is a foreign entity. This Update requires an acquirer to release any related cumulative translation adjustment into net income when the acquirer obtains a controlling financial interest in a foreign entity that was previously an equity method affiliate in a business combination achieved in stages. The Update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. Generally, the effect of adopting this Update on the Company and its subsidiaries' results of operations or financial position will depend on future transactions.

In April 2013, Accounting Standards Update 2013-07 ("Liquidation Basis of Accounting"—ASC 205 ("Presentation of Financial Statements")) was issued. This Update requires an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent and provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The Update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. Generally, the effect of adopting this Update on the Company and its subsidiaries' results of operations or financial position will depend on future transactions.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

In June 2013, Accounting Standards Update 2013-08 ("Amendments to the Scope, Measurement, and Disclosure Requirements"—ASC 946 ("Financial Services—Investment Companies")) was issued. This Update changes the approach to the investment company assessment, clarifies the characteristics of an investment company, and provides comprehensive guidance for assessing whether an entity is an investment company. This Update requires an investment company to measure noncontrolling ownership interests in other investment companies at fair value rather than using the equity method of accounting. This Update requires an investment company to disclose the additional information about an entity's status as an investment company and financial support provided or contractually required to be provided by an investment company to its investees. The Update is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. Early adoption is prohibited. 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 and financial position.

(ag) Reclassifications

Certain amounts in fiscal 2011 and 2012 consolidated financial statements have been reclassified to conform to fiscal 2013 presentation.

2. Fair Value Measurements

The Company and its subsidiaries adopted ASC 820-10 ("Fair Value Measurement"). This Codification Section defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

This Codification Section classifies and prioritizes inputs used in valuation techniques to measure fair value into the following three levels:

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

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

Level 3—Unobservable inputs for the assets or liabilities.

This Codification Section differentiates between those assets and liabilities required to be carried at fair value at every reporting period ("recurring") and those assets and liabilities that are only required to be adjusted to fair value under certain circumstances ("nonrecurring"). The Company and its subsidiaries mainly measure certain loans held for sale, trading securities, available-for-sale securities, certain investment funds and derivatives at fair value on a recurring basis.

The Company and its subsidiaries adopted Accounting Standards Update 2011-04 ("Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS"—ASC 820 ("Fair Value Measurement")) on January 1, 2012. This Update is intended to result in a consistent definition of fair value and common requirements for measuring fair value and for disclosures about fair value between U.S. GAAP and IFRS. Consequently, this Update changes some fair value measurement principles and enhances the disclosure requirements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The following table presents recorded amounts of major financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2012 and March 31, 2013:

	March 31, 2012 Millions of yen
Total Carrying Value in Consolidated Balance Sheets	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Financial Assets:
Loans held for sale*1 ¥ 19,397 ¥	0	¥ 19,397	¥ 0
Trading securities 12,817	384	12,433	0
Available-for-sale securities 886,487	173,056	469,776	243,655
Japanese and foreign government bond securities 220,915	105,353	115,562	0
Japanese prefectural and foreign municipal bond
securities 57,359	33	57,326	0
Corporate debt securities 280,222	0	277,310	2,912
Specified bonds issued by SPEs in Japan 139,152	0	0	139,152
CMBS and RMBS in the U.S., and other asset
backed securities 95,328	0	2,147	93,181
Other debt securities 8,410	0	0	8,410
Equity securities 85,101	67,670	17,431	0
Other securities 5,178	0	5,178	0
Investment funds 5,178	0	5,178	0
Derivative assets 17,212	649	11,270	5,293
Interest rate swap agreements 4,624	0	4,624	0
Options held, caps held and other 5,924	0	631	5,293
Futures, foreign exchange contracts 1,027	649	378	0
Foreign currency swap agreements 5,540	0	5,540	0
Credit derivatives held 97	0	97	0
¥ 941,091 ¥	174,089	¥518,054	¥ 248,948
Financial Liabilities:
Derivative liabilities ¥ 16,659 ¥	412	¥ 16,247	¥ 0
Interest rate swap agreements 1,277	0	1,277	0
Options written and other 4,430	0	4,430	0
Futures, foreign exchange contracts 5,497	412	5,085	0
Foreign currency swap agreements 5,432	0	5,432	0
Credit derivatives held 23	0	23	0
¥ 16,659 ¥	412	¥ 16,247	¥ 0

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

				March 31, 2013 Millions of yen
		Total Carrying Value in Consolidated Balance Sheets		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Loans held for sale*1	¥	16,026	¥	0	¥ 16,026	¥	0
Trading securities		33,041		2,184	30,857		0
Available-for-sale securities		757,299		166,398	453,923		136,978
Japanese and foreign government bond securities		278,717		98,990	179,727		0
Japanese prefectural and foreign municipal bond
securities		61,090		0	61,090		0
Corporate debt securities		196,835		0	190,311		6,524
Specified bonds issued by SPEs in Japan		63,244		0	0		63,244
CMBS and RMBS in the U.S., and other asset
backed securities		60,691		0	1,792		58,899
Other debt securities		8,311		0	0		8,311
Equity securities		88,411		67,408	21,003		0
Other securities		5,800		0	0		5,800
Investment funds*2		5,800		0	0		5,800
Derivative assets		14,598		147	12,352		2,099
Interest rate swap agreements		4,654		0	4,654		0
Options held/written and other		5,654		0	3,555		2,099
Futures, foreign exchange contracts		1,030		147	883		0
Foreign currency swap agreements		2,890		0	2,890		0
Credit derivatives held/written		370		0	370		0
	¥	826,764	¥	168,729	¥513,158	¥	144,877
Financial Liabilities:
Derivative liabilities	¥	18,037	¥	0	¥ 18,037	¥	0
Interest rate swap agreements		1,459		0	1,459		0
Options held/written and other		3,530		0	3,530		0
Futures, foreign exchange contracts		4,685		0	4,685		0
Foreign currency swap agreements		8,263		0	8,263		0
Credit derivatives held/written		100		0	100		0
	¥	18,037	¥	0	¥ 18,037	¥	0

*1 A subsidiary elected the fair value option under ASC 825-10 ("Financial Instruments—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 operating revenues in the consolidated statements of income are gains from the change in the fair value of the loans of ¥1,024 million for the fiscal year ended March 31, 2012 and losses from the change in the fair value of the loans of ¥628 million for the fiscal year ended March 31, 2013. No gains or losses were recognized in earnings during the fiscal year ended March 31, 2012 and the fiscal year ended March 31, 2013, attributable to changes in instrument-specific credit risk. The amounts of aggregate unpaid principal balance and aggregate fair value at March 31, 2012, are ¥18,326 million and

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

¥19,397 million, respectively, and the amount of the aggregate fair value exceeds the amount of aggregate unpaid principal balance by ¥1,071 million. The amounts of aggregate unpaid principal balance and aggregate fair value at March 31, 2013, are ¥15,535 million and ¥16,026 million, respectively, and the amount of the aggregate fair value exceeds the amount of aggregate unpaid principal balance by ¥491 million. As of March 31, 2012 and 2013, there are no loans that are 90 days or more past due, in non-accrual status, or both.

*2 A subsidiary elected the fair value option under ASC 825-10 ("Financial Instruments—Fair Value Option") for certain funds purchased at a discount on the secondary market and an investment in a drug royalty trust, which were made on or after April 1, 2012. Included in brokerage commissions and net gains on investment securities in the consolidated statements of income are gains from the change in the fair value of those investments of ¥670 million for the year ended March 31, 2013.

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 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 year ended March 31, 2011 and for the nine months ended December 31, 2011, there were no significant transfers between Level 1 and Level 2. For the three months ended March 31,2012 and for the year ended March 31, 2013, there were no transfers between Level 1 and Level 2.

The following table presents the reconciliation of financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during fiscal year 2011, 2012 and 2013:

					2011 Millions of yen
	Balance at April 1, 2010	Included in earnings*1	Gains or losses (realized/ unrealized) Included in other comprehensive income*2	Total	Purchase, sales, and settlements (net)	Transfers in and/or out of Level 3 (net)*3	Balance at March 31, 2011	Change in unrealized gains or losses included in earnings for assets and liabilities still held at March 31, 2011*1
Trading securities	¥ 53	¥ (26)	¥ (2)	¥ (28)	¥ (25)	¥ 0	¥ 0	¥ 0
Available-for-sale securities Corporate debt	401,804	(6,242)	(3,248)	(9,490)	(33,102)	(43,536)	315,676	(5,848)
securities Specified bonds issued by SPEs in	6,841	(34)	(83)	(117)	(2,094)	(2,057)	2,573	(72)
Japan CMBS and RMBS in the U.S., and other asset backed	246,305	(5,195)	351	(4,844)	(27,076)	7,929	222,314	(5,275)
securities	143,176	(1,013)	(3,540)	(4,553)	(3,932)	(49,408)	85,283	(501)
Other debt securities Derivative assets	5,482	0	24	24	0	0	5,506	0
and liabilities (net) Options	493	(206)	0	(206)	0	2,659	2,946	(206)
held/written, caps held and other Credit derivatives	0	475	0	475	0	2,659	3,134	475

held/written	493	(681)	0	(681)	0	0	(188)	(681)
			F-31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

		2012 Millions of yen
			Gains or losses (realized/unrealized) Included in					Transfers in and/		Change in unrealized gains or losses included in earnings for assets and liabilities still
	Balance at April 1, 2011	Included in earnings*1	other comprehensive Income*2	Total	Purchases	Sales	Settlements	or out of Level 3 (net)*3	Balance at March 31, 2012	held at March 31, 2012*1
Available-for-sale securities ¥ 315,676		¥ (1,262) ¥	1,443	¥ 181	¥	63,980 ¥(18,054) ¥	(118,596) ¥		468 ¥ 243,655 ¥	(2,429)
Corporate debt securities Specified bonds issued by SPEs	2,573	(18)	108	90	2,549	(431)	(2,337)	468	2,912	(35)
in Japan CMBS and RMBS in the U.S., and other asset	222,314	(3,066)	2,178	(888)	6,668	(9,625)	(79,317)	0	139,152	(3,397)
backed securities	85,283	1,822	(1,056)	766	49,072	(7,998)	(33,942)	0	93,181	1,003
Other debt securities	5,506	0	213	213	5,691	0	(3,000)	0	8,410	0
Derivative assets and liabilities (net) Options held/written, caps held and	2,946	2,159	0	2,159	0	0	188	0	5,293	2,159
other	3,134	2,159	0	2,159	0	0	0	0	5,293	2,159
Credit derivatives held/written	(188)	0	0	0	0	0	188	0	0	0

F-32

http://www.sec.gov/Archives/edgar/data/1070304/000119312513273666/d506168d20... 30/07/2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

		2013 Millions of yen
	Balance at April 1, 2012	Included in earnings*1	Gains or losses (realized/unrealized) Included in other comprehensive Income*2	Total	Purchases	Sales	Settlements	Transfers in and/ or out of Level 3 (net)*3	Balance at March 31, 2013	Change in unrealized gains or losses included in earnings for assets and liabilities still held at March 31, 2013*1
Available-for-sale securities ¥ 243,655 ¥		(9,225) ¥	7,693	¥(1,532) ¥		19,294 ¥(10,564) ¥	(113,875) ¥		0 ¥ 136,978 ¥	(9,783)
Corporate debt
securities	2,912	(508)	908	400	3,942	(432)	(298)	0	6,524	(456)
Specified bonds issued by SPEs
in Japan CMBS and RMBS in the U.S., and	139,152	(9,228)	(15)	(9,243)	5,419	(9)	(72,075)	0	63,244	(8,095)
other asset
backed securities	93,181	(369)	5,381	5,012	9,933	(7,725)	(41,502)	0	58,899	(1,232)
Other debt securities	8,410	880	1,419	2,299	0	(2,398)	0	0	8,311	0
Other securities	0	670	825	1,495	5,018	(713)	0	0	5,800	670
Investment funds	0	670	825	1,495	5,018	(713)	0	0	5,800	670
Derivative assets and liabilities (net) Options held/written,	5,293	(3,194)	0	(3,194)	0	0	0	0	2,099	(3,194)
caps held and other	5,293	(3,194)	0	(3,194)	0	0	0	0	2,099	(3,194)

*1 Principally, gains and losses from trading securities are included in "brokerage commissions and net gains on investment securities"; available-for-sale securities are included in "write-downs of securities" or "life insurance premiums and related investment income"; other securities are included in "brokerage commissions and net gains on investment securities" and derivative assets and liabilities (net) are included in "other operating revenues/expenses," respectively. Also, for available-for-sale securities, amortization of interest recognized in interest on loans and investment securities 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."

*3 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.

From April 1, 2010, the Company and its subsidiaries adopted Accounting Standards Update 2009-16 (ASC 860 ("Transfers and Servicing")) and Accounting Standards Update 2009-17 (ASC 810 ("Consolidation")). As a result, there was an increase of ¥9,225 million in the Level 3 specified bonds issued by SPEs in Japan because these bonds are held by variable interest entities that had become subject to consolidation. On the other hand, there were decreases of ¥49,408 million in the Level 3 CMBS and RMBS in the United States and other asset-backed securities, and decreases of ¥1,296 million in the Level 3 specified bonds issued by SPEs in Japan, respectively, that are held by the Company and its subsidiaries, because these securities were issued by newly consolidated variable interest entities and accordingly had been eliminated in consolidation for the fiscal year ended March 31, 2011.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

In fiscal 2012, ¥468 million of Corporate debt securities was transferred from Level 2 to Level 3 due to a certain market becoming inactive. There were no transfers from Level 3 in fiscal 2012.

There were no transfers in or out of Level 3 in fiscal 2013.

The following table presents recorded amounts of major assets measured at fair value on a nonrecurring basis as of March 31, 2012 and March 31, 2013. These assets are measured at fair value on a nonrecurring basis mainly to recognize impairment:

				March 31, 2012
				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:
Unlisted securities	¥	9,715	¥	0	¥	0	¥	9,715
Real estate collateral-dependent loans (net of
allowance for probable loan losses)		73,319		0		0		73,319
Investment in operating leases and other operating
assets		16,159		0		0		16,159
Land and buildings undeveloped or under
construction		20,445		0		0		20,445
Certain investment in affiliates		15,660		10,775		0		4,885
	¥	135,298	¥	10,775	¥	0	¥	124,523

				March 31, 2013
				Millions of yen
	Total Carrying		Quoted Prices in Active		Significant Other			Significant
		Value in Consolidated Balance Sheets		Markets for Identical Assets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Real estate collateral-dependent loans (net of
allowance for probable loan losses)	¥	60,564	¥	0	¥	0	¥	60,564
Investment in operating leases and other operating
assets		21,960		0		0		21,960
Land and buildings undeveloped or under
construction		11,845		0		0		11,845
Certain investment in affiliates		3,704		0		0		3,704
	¥	98,073	¥	0	¥	0	¥	98,073

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

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 United States 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 820-10 ("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, we 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 other operating assets 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 other operating assets 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

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 other operating assets and Land and buildings undeveloped or under construction.

Trading securities, Available-for-sale securities, Unlisted 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, commonly used option-pricing models 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 United States as level 3 due to a certain market being inactive. In determining whether a market is active or inactive, 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 the CMBS and RMBS in the United States, the Company and its subsidiaries judged that there has been increased overall trading activity but due to the lack of observable trades for older vintage and below investment grade securities we continue to limit the reliance on independent pricing service vendors and brokers. As a result, the Company and its subsidiaries established internally developed pricing models (Level 3 inputs) using valuation techniques such as discounted cash flow methodologies 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 United States.

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 do not trade in an open market, no relevant observable market data is available. Accordingly the Company and its subsidiaries use 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

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

The fair value is based on the net asset value if the investments meet certain requirements that the investees have all of the attributes specified in ASC 946-10 ("Financial Services—Investment Companies") and the investees calculate the net asset value. These investments are classified as Level 2, because they are not redeemable at the net asset value per share at the measurement date but they are redeemable at the net asset value per share in the near term after the measurement date. Certain investment funds in the United States for which the fair value option is elected are classified as Level 3, because a subsidiary measures their fair value using discounted cash flow methodologies based on inputs that are unobservable in the market.

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.

$$
F-37
$$

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Information about Level 3 Fair Value Measurements

The following table provides information about the valuation techniques and significant unobservable inputs used in the valuation of Level 3 assets measured at fair value on a recurring basis as of March 31, 2012 and March 31, 2013.

	March 31, 2012
	Millions of yen Fair Value	Valuation Technique(s)	Significant Unobservable Inputs	Range (Weighted Average)
Financial Assets:
Available-for-sale securities
Corporate debt securities	¥ 1,088	Discounted cash flows	Discount rate	2.9% – 7.5% (4.9%)
	1,824	Appraisals/Broker quotes	—	—
Specified bonds issued by
SPEs in Japan	118,624	Discounted cash flows	Discount rate	1.0% – 13.0% (4.0%)
	20,528	Appraisals/Broker quotes	—	—
CMBS and RMBS in the U.S., and other asset-backed
securities	63,436	Discounted cash flows	Discount rate	2.7% – 44.1% (11.2%)
			Probability of default	0.0% – 6.1% (0.9%)
	29,745	Appraisals/Broker quotes	—	—
Other debt securities	8,410	Discounted cash flows	Discount rate	12.5%
				(12.5%)
Derivative assets
Options held, caps held and				10.0% –
other	5,293	Discounted cash flows	Discount rate	15.0%
	¥248,948			(12.0%)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

			March 31, 2013
	Millions of yen Fair Value	Valuation Technique(s)	Significant Unobservable Inputs	Range (Weighted Average)
Financial Assets:
Available-for-sale securities
Corporate debt securities	¥ 974	Discounted cash flows	Discount rate	5.4% (5.4%)
	5,550	Appraisals/Broker quotes	—	—
Specified bonds issued by
SPEs in Japan	60,013	Discounted cash flows	Discount rate	1.0% – 12.0% (4.9%)
	3,231	Appraisals/Broker quotes	—	—
CMBS and RMBS in the U.S., and other asset-backed
securities	30,804	Discounted cash flows	Discount rate	2.9% – 42.6% (9.3%)
			Probability of default	0.0% – 12.8% (1.7%)
	28,095	Appraisals/Broker quotes	—	—
Other debt securities	8,311	Discounted cash flows	Discount rate	11.7% (11.7%)
Other securities
Investment funds	5,800	Discounted cash flows	Discount rate	13.0% – 20.0% (18.6%)
Derivative assets
Options held/written and other	2,099	Discounted cash flows	Discount rate	10.0% – 15.0% (12.3%)
	¥144,877

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The following table provides information about the valuation techniques and significant unobservable inputs used in the valuation of Level 3 assets measured at fair value on a nonrecurring basis during the three months ended March 31, 2012 and during the year ended March 31,2013.

			March 31, 2012
	Millions of yen Fair Value	Valuation Technique(s)	Significant Unobservable Inputs	Range (Weighted Average)
Assets: Unlisted securities	¥ 8,814	Discounted cash flows	Discount rate	4.2% – 12.5% (6.5%)
Real estate collateral-dependent loans (net of allowance for probable loan losses)	73,319	Discounted cash flows	Discount rate	3.3% – 18.9% (7.9%)
		Direct capitalization	Capitalization rate	5.2% – 29.0% (10.9%)
Investment in operating leases and other operating assets	11,561	Discounted cash flows	Discount rate	7.0% – 10.0% (8.2%)
Land and buildings undeveloped or under construction	8,638	Discounted cash flows	Discount rate	6.0% (6.0%)
Certain investment in affiliates	4,596	Discounted cash flows	Discount rate	5.0% – 8.0% (6.5%)
	¥106,928
			March 31, 2013
	Millions of yen Fair Value	Valuation Technique(s)	Significant Unobservable Inputs	Range (Weighted Average)
Assets: Real estate collateral-dependent loans (net of
allowance for probable loan losses)	¥ 60,564	Discounted cash flows	Discount rate	5.4% – 19.0% (8.4%)
		Direct capitalization	Capitalization rate	5.0% – 21.0% (10.7%)
Investment in operating leases and other operating assets	21,960	Discounted cash flows	Discount rate	4.4% – 12.7% (6.9%)
Land and buildings undeveloped or under construction	11,845	Discounted cash flows	Discount rate	4.7% – 9.6% (6.6%)
Certain investment in affiliates	3,704	Discounted cash flows	Discount rate	5.0% – 9.2% (8.8%)
	¥ 98,073

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The Company and its subsidiaries generally use discounted cash flow methodologies or similar internally developed models to determine the fair value of Level 3 assets and liabilities. Use of these techniques requires determination of relevant inputs and assumptions, some of which represent significant unobservable inputs as indicated in the preceding table. Accordingly, changes in these unobservable inputs may have a significant impact on the fair value.

Certain of these unobservable inputs will (in isolation) have a directionally consistent impact on the fair value of the asset or liability for a given change in that input. Alternatively, the fair value of the asset or liability may move in an opposite direction for a given change in another input. Where multiple inputs are used within the valuation technique of an asset or liability, a change in one input in a certain direction may be offset by an opposite change in another input having a potentially muted impact to the overall fair value of that particular asset or liability. Additionally, a change in one unobservable input may result in a change to another unobservable input (that is, changes in certain inputs are interrelated to one another), which may counteract or magnify the fair value impact.

For more analysis of the sensitivity of each input, see the description of the valuation process and the main valuation methodologies used for assets and liabilities measured at fair value.

3. Acquisitions

During fiscal 2011, the Company and its subsidiaries acquired entities for a total cost of ¥64,875 million, which was paid in cash. In accordance with the finalization of purchase price allocation during fiscal 2012, the amount of goodwill was adjusted from ¥29,247 million to ¥28,674 million, which is not deductible for income tax calculation purposes and the amount of acquired intangible assets other than goodwill recognized in these transactions was adjusted from ¥0 to ¥998 million. The acquisitions were mainly included in the Overseas Business segment.

During fiscal 2012, the Company and its subsidiaries acquired entities for a total cost of ¥11,964 million, which was paid in cash. In accordance with the finalization of purchase price allocation during fiscal 2013, the amount of goodwill was adjusted from ¥4,024 million to ¥3,478 million, which is not deductible for income tax calculation purposes and the amount of acquired intangible assets other than goodwill recognized in these transactions was adjusted from ¥0 to ¥2,476 million. The acquisitions were mainly included in the Corporate Financial Services segment and the Overseas Business segment.

During fiscal 2013, the Company and its subsidiaries acquired entities for a total cost of ¥70,537 million, which was paid in cash. Goodwill initially recognized in these transactions amounted to ¥34,429 million and ¥6,964 million of the goodwill is deductible for income tax calculation purposes. The amount of acquired intangible assets other than goodwill recognized was ¥14,491 million. The Company reflected certain preliminary estimates with respect to the value of the underlying net assets of these entities in determining amounts of the goodwill. The amount of the goodwill and intangible assets other than goodwill could possibly be adjusted because the acquisition was made near the fiscal year-end and the purchase price allocation has not completed yet. The acquisitions were mainly included in the Retail segment and the Investment and Operation segment.

The segment in which goodwill is allocated is disclosed in Note 13 ("Goodwill and Other Intangible Assets").

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

4. Cash Flow Information

Cash payments during fiscal 2011, 2012 and 2013 are as follows:

		Millions of yen
	2011	2012	2013
Cash payments:
Interest	¥121,253	¥116,271	¥105,308
Income taxes	50,153	49,190	11,955

As non-cash investing activities, the Company and its subsidiaries assumed ¥142,906 million, ¥38,437 million and ¥235,255 million of liabilities in connection with acquisitions in fiscal 2011, 2012 and 2013, respectively.

Moreover, real estate under operating leases of ¥59,783 million, ¥90,398 million and ¥49,396 million were transferred from installment loans and investment in securities in fiscal 2011, 2012 and 2013, respectively, as a result of acquiring real estate collateral.

As non-cash financing activities, ¥99,773 million of convertible bonds were converted to common stocks in fiscal 2013, respectively.

For VIEs that were consolidated as a result of the application of the accounting standards starting from fiscal 2011, see Note 1(af).

5. Investment in Direct Financing Leases

Investment in direct financing leases at March 31, 2012 and 2013 consists of the following:

	Millions of yen
	2012	2013
Total Minimum lease payments to be received	¥1,072,091	¥1,167,170
Less: Estimated executory costs	(63,371)	(60,802)
Minimum lease payments receivable	1,008,720	1,106,368
Estimated residual value	34,240	27,141
Initial direct costs	5,847	5,212
Unearned lease income	(147,921)	(149,341)
	¥ 900,886	¥ 989,380

Minimum lease payments receivable are due in periodic installments through fiscal 2035. At March 31, 2013, the amounts due in each of the next five years and thereafter are as follows:

Years ending March 31,	Millions of yen
2014	¥ 377,514
2015	255,587
2016	184,964
2017	103,938
2018	58,303
Thereafter	126,062
Total	¥ 1,106,368

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Gains and losses from the disposition of direct financing lease assets, which were included in direct financing leases revenues, were not significant for fiscal 2011, 2012 and 2013.

6. Investment in Operating Leases

Investment in operating leases at March 31, 2012 and 2013 consists of the following:

	Millions of yen
	2012	2013
Transportation equipment	¥ 624,567	¥ 752,020
Measuring and information-related equipment	191,313	216,026
Real estate	858,413	817,330
Other	18,569	18,020
	1,692,862	1,803,396
Accumulated depreciation	(404,818)	(431,329)
Net	1,288,044	1,372,067
Accrued rental receivables	21,954	23,466
	¥1,309,998	¥1,395,533

Gains and losses from the disposition of real estate under operating leases are disclosed separately as gains on sales of real estate under operating leases or income from discontinued operations, net in the accompanying consolidated statements of income.

For fiscal 2011, 2012 and 2013, gains on sales of operating lease assets other than real estate are ¥9,968 million, ¥14,721 million and ¥14,032 million, respectively, and are included in operating lease revenues.

Costs of operating leases include depreciation and various expenses (insurance, property tax and other). Depreciation and various expenses for fiscal 2011, 2012 and 2013 are as follows:

		Millions of yen
	2011	2012	2013
Depreciation expenses	¥134,213	¥136,146	¥147,286
Various expenses	45,579	48,010	50,198
	¥179,792	¥184,156	¥197,484

The operating lease contracts include non-cancelable lease terms that range up to 24 years. The minimum future rentals on non-cancelable operating leases are as follows:

Years ending March 31,	Millions of yen
2014	¥ 161,107
2015	104,535
2016	73,155
2017	48,220
2018	28,474
Thereafter	51,218
Total	¥ 466,709

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

7. Installment Loans

The composition of installment loans by domicile and type of borrower at March 31, 2012 and 2013 is as follows:

		Millions of yen
	2012	2013
Borrowers in Japan:
Consumer—
Housing loans	¥ 864,764	¥ 912,651
Card loans	236	225,707
Other	13,590	26,967
	878,590	1,165,325
Corporate—
Real estate companies	297,562	245,465
Non-recourse loans	226,887	134,440
Commercial, industrial and other companies	503,454	442,146
	1,027,903	822,051
Overseas:
Non-recourse loans	549,326	434,517
Other	216,520	198,477
	765,846	632,994
Purchased loans*	97,559	70,801
	¥2,769,898	¥2,691,171

* Purchased loans represent loans with evidence of deterioration of credit quality since origination and for which it is probable at acquisition that collection of all contractually required payments from the debtors is unlikely in accordance with ASC 310-30 ("Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality").

Generally, installment loans are made under agreements that require the borrower to provide collateral or guarantors.

At March 31, 2013, the contractual maturities of installment loans (except purchased loans) for each of the next five years and thereafter are as follows:

Years ending March 31,	Millions of yen
2014	¥ 778,558
2015	314,605
2016	328,183
2017	166,195
2018	154,304
Thereafter	878,525
Total	¥ 2,620,370

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Included in interest on loans and investment securities in the consolidated statements of income is interest income on loans of ¥152,242 million, ¥132,719 million and ¥144,458 million fiscal 2011, 2012 and 2013, respectively.

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 under ASC 825-10 ("Financial Instruments—Fair Value Option") was elected. A subsidiary elected the fair value option under ASC 825-10 ("Financial Instruments—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, 2012 and March 31, 2013 were ¥20,145 million and ¥17,939 million, respectively. There were ¥19,397 million and ¥16,026 million of loans held for sale as of March 31, 2012 and 2013, respectively, measured at fair value by electing the fair value option.

For loans with evidence of deterioration of credit quality since origination and for which it is probable at acquisition that collection of all contractually required payments from the debtors is unlikely, ASC 310-30 (Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality) requires that the investor recognize the excess of the loan's cash flows expected at acquisition over the investor's initial investment as interest income on the level-yield basis over the remaining life of the purchased loan ("accretable yield"). ASC 310-30, however, does not prohibit placing loans on nonaccrual status subsequent to acquisition, including use of the cost recovery or cash basis methods of income recognition when it is not appropriate to recognize the accretable yield, such as when the investor does not have sufficient information to reasonably estimate cash flows expected to be collected to compute the accretable yield.

Purchased loans acquired by the Company and its subsidiaries are generally characterized by extended period of nonperformance by the borrower, and it is difficult to reliably estimate the amount, timing, or nature of collections. Because such loans are commonly collateralized by real estate, the Company and its subsidiaries may pursue various approaches to maximizing the return from the collateral, including arrangement of borrower's negotiated transaction of such collateral before foreclosure, the renovation, refurbishment or the sale of such loans to third parties. Accordingly, 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. The total carrying amounts of these purchased loans were ¥97,559 million and ¥70,801 million as of March 31, 2012 and 2013, respectively, and the fair value at the acquisition date of purchased loans acquired during fiscal 2012 and 2013 were ¥11,428 million and ¥5,672 million, respectively.

When it is probable that the Company and its subsidiaries will be unable to collect all book value, the Company and its subsidiaries consider purchased loans impaired, and a valuation allowance for the excess amount of the book value over the estimated recoverable amount of the loans is provided. For most cases, the recoverable amount is estimated based on the collateral value. Purchased loans for which valuation allowances were provided amounted to ¥34,907 million and ¥29,107 million as of March 31, 2012 and 2013, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Changes in the allowance for uncollectible accounts relating to the purchased loans for fiscal 2011, 2012 and 2013 are as follows:

	Millions of yen
	2011	2012	2013
Beginning balance	¥12,421	¥17,455	¥19,825
Provision charged to income	5,261	3,188	4,649
Charge-offs	(230)	(793)	(9,412)
Other*	3	(25)	254
Ending balance	¥17,455	¥19,825	¥15,316

* Other includes foreign currency translation adjustments.

The above-mentioned amounts are included in the allowance for doubtful receivables on direct financing leases and probable loan losses (see Note 8).

8. Credit Quality of Financing Receivables and the Allowance for Credit Losses

Changes in the allowance for doubtful receivables on direct financing leases and probable loan losses for fiscal 2011, 2012 and 2013 are as follows:

	Millions of yen
	2011	2012	2013
Beginning balance	¥157,523	¥154,150	¥136,588
Effect of the application of the accounting standards for consolidation of
VIEs*1	32,181	0	0
Beginning balance after the application of the accounting standards for
consolidation of VIEs	¥189,704	¥154,150	¥136,588
Provision charged to income	31,065	19,186	10,016
Charge-offs	(61,829)	(38,610)	(44,821)
Recoveries	175	2,351	1,633
Other*2	(4,965)	(489)	848
Ending balance	¥154,150	¥136,588	¥104,264

*1 This effect results from our application of the accounting standards for consolidation of VIEs under ASU 2009-16 and ASU 2009-17, effective April 1, 2010.

*2 Other includes mainly foreign currency translation adjustments, amounts reclassified to discontinued operations and decrease in allowance related to newly consolidated subsidiaries and sales of subsidiaries.

The Company and its subsidiaries adopted Accounting Standards Update 2010-20 ("Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses"—ASC 310 ("Receivables")). This Update enhances disclosures about the credit quality of financing receivables and the allowance for credit losses, and requires an entity to provide the following information disaggregated by portfolio segment and class of financing receivable.

Allowance for credit losses—by portfolio segment

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Credit quality of financing receivables—by class

Impaired loans
Credit quality indicators
Non-accrual and past-due financing receivables

Information about troubled debt restructurings—by class

A portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. The Company and its subsidiaries classify our portfolio segments by instruments of loans and direct financing leases. Classes of financing receivables are determined based on the initial measurement attribute, risk characteristics of the financing receivables and the method for monitoring and assessing obligors' credit risk, and are defined as the level of detail necessary for a financial statement user to understand the risks inherent in the financing receivables. Classes of financing receivables generally are a disaggregation of a portfolio segment, and the Company and its subsidiaries disaggregate our portfolio segments into classes by regions, instruments or industries of debtors.

The following table provides information about the allowance for credit losses for fiscal 2012 and 2013:

				March 31, 2012
		Millions of yen
			Loans Corporate
			Non-recourse		Purchased	Direct financing
	Consumer		loans	Other	loans*1	leases		Total
Allowance for Credit Losses:
Beginning balance	¥ 17,096	¥	27,426	¥ 70,972	¥ 17,455	¥ 21,201	¥	154,150
Provision charged to income	947		6,509	5,974	3,188	2,568		19,186
Charge-offs	(1,943)		(10,083)	(18,928)	(793)	(6,863)		(38,610)
Recoveries	43		16	2,212	0	80		2,351
Other*2	(3)		(363)	36	(25)	(134)		(489)
Ending balance	¥ 16,140	¥	23,505	¥ 60,266	¥ 19,825	¥ 16,852	¥	136,588
Individually evaluated for impairment	3,002		20,657	49,853	17,895	0		91,407
Not individually evaluated for impairment	13,138		2,848	10,413	1,930	16,852		45,181
Financing receivables:
Ending balance	¥881,483	¥	775,465	¥995,246	¥ 97,559	¥900,886		¥3,650,639
Individually evaluated for impairment	9,021		82,957	166,889	34,907	0		293,774
Not individually evaluated for impairment	872,462		692,508	828,357	62,652	900,886		3,356,865

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

					March 31, 2013
					Millions of yen
				Loans
				Corporate			Direct
		Consumer		Non-recourse loans	Other	Purchased loans*1	financing leases		Total
Allowance for Credit Losses:
Beginning balance	¥	16,140	¥	23,505	¥ 60,266	¥ 19,825	¥ 16,852	¥	136,588
Provision charged to income		809		(200)	2,335	4,649	2,423		10,016
Charge-offs		(3,050)		(7,384)	(20,566)	(9,412)	(4,409)		(44,821)
Recoveries		281		1	988	0	363		1,633
Other*3		346		795	(1,148)	254	601		848
Ending balance	¥	14,526	¥	16,717	¥ 41,875	¥ 15,316	¥ 15,830	¥	104,264
Individually evaluated for impairment		3,190		14,620	34,206	13,135	0		65,151
Not individually evaluated for impairment		11,336		2,097	7,669	2,181	15,830		39,113
Financing receivables:
Ending balance		¥1,171,142	¥	568,957	¥862,332	¥ 70,801	¥989,380		¥3,662,612
Individually evaluated for impairment		10,861		61,050	111,722	29,107	0		212,740
Not individually evaluated for impairment		1,160,281		507,907	750,610	41,694	989,380		3,449,872

*1 Purchased loans represent loans with evidence of deterioration of credit quality since origination and for which it is probable at acquisition that collection of all contractually required payments from the debtors is unlikely in accordance with ASC 310-30 ("Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality").

*2 Other mainly includes foreign currency translation adjustments, amounts reclassified to discontinued operations and decrease in allowance related to sales of a subsidiary.

*3 Other mainly includes foreign currency translation adjustments and decrease in allowance related to newly consolidated subsidiaries and sales of a subsidiary.

In developing the allowance for credit losses, the Company and its subsidiaries consider, among other things, the following factors:

business characteristics and financial conditions of obligors;
current economic conditions and trends;
prior charge-off experience;
current delinquencies and delinquency trends; and
value of underlying collateral and guarantees.

The Company and its subsidiaries individually develop the allowance for credit losses for impaired loans. For nonimpaired loans, including loans that are not individually evaluated for impairment, and direct financing leases, the Company and its subsidiaries evaluate prior charge-off experience as segmented by debtor's industry and the purpose of the loans and develop the allowance for credit losses based on such prior charge-off experience as well as current economic conditions.

In common with all portfolio segments, a deterioration of a debtor's condition may increase the risk of delay in payments of principal and interest. For loans to consumer borrowers, the amount of the allowance for credit

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

losses is changed by the variation of an individual debtor's creditworthiness and value of underlying collateral and guarantees, and the prior charge-off experience. For loans to corporate other borrowers and direct financing leases, the amount of the allowance for credit losses is changed by current economic conditions and trends, the value of underlying collateral and guarantees, and the prior charge-off experience in addition to the debtor's creditworthiness.

The decline of the value of underlying collateral and guarantees may increase the risk of inability to collect from the loans and direct financing leases. Particularly for non-recourse loans for which cash flow from real estate is the source of repayment, their collection depends on the real estate collateral value, which may decline as a result of decrease in liquidity of the real estate market, rise in vacancy rate of rental properties, fall in rents and other factors. These risks may change the amount of the allowance for credit losses. For purchased loans, their collection may decrease due to a decline in the real estate collateral value and debtor's creditworthiness. Thus, these risks may change the amount of the allowance for credit losses.

In common with all portfolio segments, the Company and its subsidiaries charge off doubtful receivables when the likelihood of any future collection is believed to be minimal, mainly based upon an evaluation of the relevant debtor's creditworthiness and the liquidation status of collateral.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The following table provides information about the impaired loans as of March 31, 2012 and 2013:

	March 31, 2012
	Millions of Yen
Portfolio segment	Class	Loans Individually Evaluated for Impairment	Unpaid Principal Balance	Related Allowance
With no related allowance recorded*1:		¥ 74,836	¥ 74,581	¥ 0
Consumer borrowers	Housing loans	1,438	1,421	0
	Other	0	0	0
Corporate borrowers		73,398	73,160	0
Non-recourse loans	Japan	29,471	29,455	0
	U.S.	4,565	4,565	0
Other	Real estate companies	8,120	8,102	0
	Entertainment companies	11,893	11,718	0
	Other	19,349	19,320	0
Purchased loans		0	0	0
With an allowance recorded*2:		218,938	217,560	91,407
Consumer borrowers	Housing loans	7,583	7,566	3,002
	Other	0	0	0
Corporate borrowers Non-recourse loans	Japan	176,448 14,677	175,087 14,661	70,510 5,602
	U.S.	34,244	34,150	15,055
Other	Real estate companies	65,888	65,412	26,108
	Entertainment companies	9,867	9,667	3,181
	Other	51,772	51,197	20,564
Purchased loans		34,907	34,907	17,895
Total:		¥ 293,774	¥ 292,141	¥ 91,407
Consumer borrowers	Housing loans	9,021	8,987	3,002
	Other	0	0	0
Corporate borrowers		249,846	248,247	70,510
Non-recourse loans	Japan	44,148	44,116	5,602
	U.S.	38,809	38,715	15,055
Other	Real estate companies	74,008	73,514	26,108
	Entertainment companies	21,760	21,385	3,181
	Other	71,121	70,517	20,564
Purchased loans		34,907	34,907	17,895

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

		March 31, 2013
			Millions of Yen
Portfolio segment	Class	Loans Individually Evaluated for Impairment	Unpaid Principal Balance	Related Allowance
With no related allowance recorded*1:		¥ 52,798	¥ 52,768	¥ 0
Consumer borrowers	Housing loans	1,003	989	0
	Card loans	0	0	0
	Other	0	0	0
Corporate borrowers		51,795	51,779	0
Non-recourse loans	Japan	21,409	21,407	0
	U.S.	5,825	5,825	0
Other	Real estate companies	7,063	7,060	0
	Entertainment companies	6,148	6,147	0
	Other	11,350	11,340	0
Purchased loans		0	0	0
With an allowance recorded*2:		159,942	158,798	65,151
Consumer borrowers	Housing loans	7,496	7,471	2,565
	Card loans	1,858	1,854	547
	Other	504	503	78
Corporate borrowers		120,977	119,863	48,826
Non-recourse loans	Japan	2,006	2,004	1,021
	U.S.	31,810	31,706	13,599
Other	Real estate companies	40,063	39,896	15,862
	Entertainment companies	5,889	5,843	2,118
	Other	41,209	40,414	16,226
Purchased loans		29,107	29,107	13,135
Total:		¥ 212,740	¥ 211,566	¥ 65,151
Consumer borrowers	Housing loans	8,499	8,460	2,565
	Card loans	1,858	1,854	547
	Other	504	503	78
Corporate borrowers		172,772	171,642	48,826
Non-recourse loans	Japan	23,415	23,411	1,021
	U.S.	37,635	37,531	13,599
Other	Real estate companies	47,126	46,956	15,862
	Entertainment companies	12,037	11,990	2,118
	Other	52,559	51,754	16,226
Purchased loans		29,107	29,107	13,135

*1 "With no related allowance recorded" represents impaired loans with no allowance for credit losses as all amounts are considered to be collectible.

*2 "With an allowance recorded" represents impaired loans with the allowance for credit losses as all or a part of the amounts are not considered to be collectible.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The Company and its subsidiaries recognize installment loans other than purchased loans and loans to consumer borrowers as impaired loans when principal or interest is past-due 90 days or more, or it is probable that the Company and its subsidiaries will be unable to collect all amounts due according to the contractual terms of the loan agreements due to various debtor conditions, including insolvency filings, suspension of bank transactions, dishonored bills and deterioration of businesses. For non-recourse loans, in addition to these conditions, the Company and its subsidiaries perform an impairment review using financial covenants, acceleration clauses, loan-to-value ratios, and other relevant available information.

For purchased loans, the Company and its subsidiaries recognize them as impaired loans when it is probable that the Company and its subsidiaries will be unable to collect book values of the remaining investment due to factors such as a decline in the real estate collateral value and debtors' creditworthiness since the acquisition of these loans.

The Company and its subsidiaries consider that loans to consumer borrowers, including housing loans, card loans and other, are impaired when terms of these loans are modified as troubled debt restructurings.

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 collateralrealization 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.

In common with all classes, 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-recourse loans, in principle, the estimated collectible amount is determined based on the fair value of the collateral securing the loans as they are collateral-dependent. Further for certain non-recourse loans, the estimated collectible amount is determined based on the present value of expected future cash flows. The fair value of the real estate collateral securing the loans is determined 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. We generally obtain a new appraisal once a fiscal year. In addition, we 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 its fair value. Nonrecourse loans in the U.S. consist mainly of commercial mortgage loans held by the newly consolidated VIEs resulting from the application of the accounting standards in the fiscal year ended March 31, 2011 relating to the consolidation of VIEs (see Note 1 (af)). For impaired purchased loans, the Company and its subsidiaries develop the allowance for credit losses based on the difference between the book value and the estimated collectible amount of such loans.

The average recorded investments in impaired loans for fiscal 2011 was ¥368,539 million. The Company and its subsidiaries recognized interest income on impaired loans of ¥4,225 million, and collected in cash interest on impaired loans of ¥3,592 million in fiscal 2011.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The following table provides information about the average recorded investments in impaired loans and interest income on impaired loans for fiscal 2012 and 2013:

			March 31, 2012
					Millions of yen
			Average Recorded				Interest on
Portfolio segment	Class		Investments in Impaired Loans*1		Interest Income on Impaired Loans		Impaired Loans Collected in Cash
Consumer borrowers	Housing loans	¥	8,933	¥	226	¥	204
	Other		0		0		0
Corporate borrowers			252,683		4,506		3,976
Non-recourse loans	Japan		30,021		367		311
	U.S.		41,399		794		695
Other	Real estate companies Entertainment		84,121		1,243		1,102
	companies		25,796		724		711
	Other		71,346		1,378		1,157
Purchased loans			34,063		0		0
Total		¥	295,679	¥	4,732	¥	4,180
			March 31, 2013
					Millions of yen
			Average Recorded				Interest on
Portfolio segment	Class		Investments in Impaired Loans*1		Interest Income on Impaired Loans		Impaired Loans Collected in Cash
Consumer borrowers	Housing loans	¥	8,635	¥	188	¥	152
	Card loans		771		16		12
	Other		180		5		4
Corporate borrowers			221,136		4,259		3,968
Non-recourse loans	Japan		37,282		216		211
	U.S.		41,903		1,726		1,726
Other	Real estate companies Entertainment		62,265		889		804
	companies		16,443		364		322
	Other		63,243		1,064		905
Purchased loans			29,217		0		0
Total		¥	259,939	¥	4,468	¥	4,136

*1 Average balances are calculated on the basis of fiscal beginning and quarter-end balances.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The following table provides information about the credit quality indicators as of March 31, 2012 and 2013:

			March 31, 2012
				Millions of yen
				Non-performing
Portfolio segment	Class	Performing	Loans individually evaluated for impairment	90+ days past-due loans not individually evaluated for impairment	Subtotal	Total
Consumer borrowers	Housing loans	¥ 849,303	¥ 9,021	¥ 8,603	¥ 17,624	¥ 866,927
	Card loans	236	0	0	0	236
	Other	14,319	0	1	1	14,320
Corporate borrowers		1,520,865	249,846	0	249,846	1,770,711
Non-recourse loans	Japan	181,991	44,148	0	44,148	226,139
	U.S.	510,517	38,809	0	38,809	549,326
Other	Real estate
	companies	267,294	74,008	0	74,008	341,302
	Entertainment
	companies	115,484	21,760	0	21,760	137,244
	Other	445,579	71,121	0	71,121	516,700
Purchased loans		62,652	34,907	0	34,907	97,559
Direct financing
leases	Japan	658,277	0	14,406	14,406	672,683
	Overseas	225,168	0	3,035	3,035	228,203
Total		¥3,330,820	¥ 293,774	¥ 26,045	¥319,819	¥3,650,639

			March 31, 2013
				Millions of yen
				Non-performing
Portfolio segment	Class	Performing	Loans individually evaluated for impairment	90+ days past-due loans not individually evaluated for impairment	Subtotal	Total
Consumer borrowers	Housing loans	¥ 901,895	¥ 8,499	¥ 6,397	¥ 14,896	¥ 916,791
	Card loans	223,130	1,858	719	2,577	225,707
	Other	27,511	504	629	1,133	28,644
Corporate borrowers		1,258,517	172,772	0	172,772	1,431,289
Non-recourse loans	Japan	111,025	23,415	0	23,415	134,440
	U.S	396,882	37,635	0	37,635	434,517
Other	Real estate
	companies	229,555	47,126	0	47,126	276,681
	Entertainment
	companies	109,222	12,037	0	12,037	121,259
	Other	411,833	52,559	0	52,559	464,392
Purchased loans		41,694	29,107	0	29,107	70,801
Direct financing
leases	Japan	680,351	0	12,234	12,234	692,585
	Overseas	293,223	0	3,572	3,572	296,795
Total		¥3,426,321	¥ 212,740	¥ 23,551	¥236,291	¥3,662,612

Note: Loans held for sale are not included in the table above.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

In common with all classes, the Company and its subsidiaries monitor the credit quality indicators as performing and non-performing assets. The category of non-performing assets includes financing receivables for debtors who have filed for insolvency proceedings, whose bank transactions are suspended, whose bills are dishonored, whose businesses have deteriorated, or whose repayment is past-due 90 days or more, and financing receivables modified as troubled debt restructurings, and performing assets include all other financing receivables. Regarding purchased loans, they are classified as non-performing assets when considered impaired, while all the other loans are included in the category of performing assets.

Out of non-performing assets presented above, the Company and its subsidiaries consider smaller balance homogeneous loans, including housing loans and card loans which are not restructured and direct financing leases, as 90 days or more pastdue financing receivables not individually evaluated for impairment, and consider the others as loans individually evaluated for impairment. After the Company and its subsidiaries have set aside provision for those non-performing assets, the Company and its subsidiaries continue to monitor at least on a quarterly basis the quality of any underlying collateral, the status of management of the debtors and other important factors in order to report to management and develop additional provision as necessary.

The following table provides information about the non-accrual and past-due financing receivables as of March 31, 2012 and 2013:

	March 31, 2012
				Millions of yen
			Past-Due Financing Receivables
Portfolio segment	Class	30-89 Days Past-Due	90 Days or More Past-Due	Total Past-Due	Total Financing Receivables	Non-Accrual
Consumer borrowers	Housing loans	¥ 3,518	¥ 12,942	¥ 16,460	¥ 866,927	¥ 12,942
	Card loans	0	0	0	236	0
	Other	33	1	34	14,320	1
Corporate borrowers		83,316	112,537	195,853	1,770,711	112,537
Non-recourse loans	Japan	10,306	14,134	24,440	226,139	14,134
	U.S.	71,042	14,689	85,731	549,326	14,689
Other	Real estate companies	809	42,831	43,640	341,302	42,831
	Entertainment
	companies	2	2,362	2,364	137,244	2,362
	Other	1,157	38,521	39,678	516,700	38,521
Direct financing leases	Japan	2,724	14,406	17,130	672,683	14,406
	Overseas	2,007	3,035	5,042	228,203	3,035
Total		¥ 91,598	¥142,921	¥234,519	¥3,553,080	¥ 142,921

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

	March 31, 2013
				Millions of yen
			Past-Due Financing Receivables
			90 Days		Total
Portfolio segment		30-89 Days	or More	Total	Financing
Consumer borrowers	Class	Past-Due	Past-Due	Past-Due	Receivables	Non-Accrual
	Housing loans	¥ 3,650	¥ 10,422	¥ 14,072	¥ 916,791	¥ 10,422
	Card loans	738	1,078	1,816	225,707	1,078
	Other	311	670	981	28,644	670
Corporate borrowers		64,539	73,876	138,415	1,431,289	73,876
Non-recourse loans	Japan	0	15,211	15,211	134,440	15,211
	U.S	59,532	7,516	67,048	434,517	7,516
Other	Real estate companies	1,324	23,921	25,245	276,681	23,921
	Entertainment
	companies	437	1,542	1,979	121,259	1,542
	Other	3,246	25,686	28,932	464,392	25,686
Direct financing leases	Japan	1,467	12,234	13,701	692,585	12,234
	Overseas	4,013	3,572	7,585	296,795	3,572
Total		¥ 74,718	¥101,852	¥176,570	¥3,591,811	¥ 101,852

Note: Loans held for sale and purchases loans are not included in the table above.

In common with all classes, the Company and its subsidiaries consider financing receivables as past-due financing receivables when 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 the individual debtor's creditworthiness, historical loss experience, current delinquencies and delinquency trends. 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 to accrual status non-accrual loans and lease receivables 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 lease 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The following table provides information about troubled debt restructurings of financing receivables that occurred during fiscal 2012 and 2013:

			March 31, 2012
				Millions of yen
			Pre-modification		Post-modification
			Outstanding		Outstanding
Portfolio segment	Class		Recorded Investment		Recorded Investment
Consumer borrowers	Housing loans	¥	1,867	¥	1,690
Corporate borrowers			27,471		26,112
Non-recourse loans	Japan		943		943
	U.S.		7,783		7,518
Other	Real estate
	companies		6,436		5,636
	Other		12,309		12,015
Total		¥	29,338	¥	27,802
			March 31, 2013
				Millions of yen
			Pre-modification		Post-modification
			Outstanding		Outstanding
Portfolio segment	Class		Recorded Investment		Recorded Investment
Consumer borrowers	Housing loans	¥	1,290	¥	894
	Card loans		1,649		1,081
	Other		641		421
Corporate borrowers			17,970		17,544
Non-recourse loans	Japan		5,180		5,180
	U.S.		10,036		10,036
Other	Real estate
	companies		967		861
	Other		1,787		1,467
Total		¥	21,550	¥	19,940

A troubled debt restructuring is defined as a restructuring of a financing receivable in which the creditor grants a concession to the debtor for economic or other reasons related to the debtor's financial difficulties.

The Company and its subsidiaries offer various types of concessions to our debtors to protect as much of our investment as possible in troubled debt restructurings. For the debtors of non-recourse loans, the Company and its subsidiaries offer concessions including an extension of the maturity date at an interest rate lower than the current market rate for a debt with similar risk characteristics. For the debtors of all financing receivables other than non-recourse loans, the Company and its subsidiaries offer concessions such as a reduction of the loan principal, a temporary reduction in the interest payments, or an extension of the maturity date at an interest rate lower than the current market rate for a debt with similar risk characteristics. In addition, the Company and its subsidiaries may acquire collateral assets from the debtors in troubled debt restructurings to satisfy fully or partially the loan principal or past due interest.

In common with all portfolio segments, financing receivables modified as troubled debt restructurings are recognized as impaired and are individually evaluated for a valuation allowance. In most cases, these financing receivables have already been considered impaired and individually evaluated for allowance for credit losses prior to the restructurings. However, as a result of the restructuring, the Company and its subsidiaries may recognize additional provision for the restructured receivables.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The following table provides information about financing receivables modified as troubled debt restructurings within the previous 12 months from March 31, 2012 and for which there was a payment default during the fiscal 2012:

	March 31, 2012
			Millions of yen
Portfolio segment	Class		Recorded Investment
Consumer borrowers	Housing loans	¥	392
Corporate borrowers			2,331
Non-recourse loans	U.S.		409
Other	Other		1,922
Total		¥	2,723

The following table provides information about financing receivables modified as troubled debt restructurings within the previous 12 months from March 31, 2013 and for which there was a payment default during the fiscal 2013:

	March 31, 2013
			Millions of yen
Portfolio segment	Class		Recorded Investment
Consumer borrowers	Housing loans	¥	369
	Card loans		12
	Other		2
Corporate borrowers			92
Other	Other		92
Total		¥	475

The Company and its subsidiaries consider financing receivables whose terms have been modified in a restructuring as defaulted receivables when principal or interest is past-due 90 days or more in accordance with the modified terms.

In common with all portfolio segments, the Company and its subsidiaries suspend accruing revenues and may recognize additional provision as necessary for the defaulted financing receivables.

9. Investment in Securities

Investment in securities at March 31, 2012 and 2013 consists of the following:

	Millions of yen
	2012	2013
Trading securities	¥ 12,817	¥ 33,041
Available-for-sale securities	886,487	757,299
Held-to-maturity securities	43,830	89,451
Other securities	204,256	213,877
Total	¥1,147,390	¥1,093,668

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Gains and losses realized from the sale of trading securities and net unrealized holding gains (losses) on trading securities are included in net gains on investment securities. For further information, see Note 22 "Brokerage Commissions and Net Gains on Investment Securities".

For fiscal 2011, 2012 and 2013, net unrealized holding gains and losses on trading securities were gains of ¥2,065 million, gains of ¥4,730 million and gains of ¥1,662 million, respectively.

During fiscal 2011 and 2012, the Company and its subsidiaries sold available-for-sale securities for aggregate proceeds of ¥340,634 million and ¥279,367 million, respectively, resulting in gross realized gains of ¥5,579 million and ¥9,882 million, respectively, and gross realized losses of ¥712 million and ¥963 million, respectively. During fiscal 2013, the Company and its subsidiaries sold available-for-sale securities for aggregate proceeds of ¥417,534 million, resulting in gross realized gains of ¥17,830 million and gross realized losses of ¥577 million. The cost of the securities sold was based on the average cost of each such security held at the time of the sale.

During fiscal 2011, 2012 and 2013, respectively, the Company and its subsidiaries charged losses on securities of ¥21,747 million, ¥16,470 million and ¥22,838 million, respectively, to the accompanying consolidated statements of income for declines in market value of securities where the decline was considered as other than temporary.

Other securities consist mainly of non-marketable equity securities, preferred capital shares carried at cost and investment funds carried at an amount that reflects equity income and loss based on the investor's share.

The aggregate carrying amount of other securities accounted for under the cost method totaled ¥84,431 million and ¥86,406 million at March 31, 2012 and 2013, respectively. Investments with an aggregate cost of ¥74,716 million and ¥83,591 million, respectively, were not evaluated for impairment because the Company and its subsidiaries did not identify any events or changes in circumstances that might have had significant adverse effect on the fair value of those investments and it was not practicable to estimate the fair value of the investments.

Since April 1, 2012, a subsidiary elected the fair value option under ASC 825-10 ("Financial Instruments—Fair Value Option") for certain funds purchased at a discount on the secondary market and an investment in a drug royalty trust. Due to the illiquid nature of these investments, the net asset value from the funds/royalty trust does not appear to be indicative of the fair value. The election of the fair value option enables the subsidiary to use more appropriate assumptions for internal cash flow modeling and reflect the fair value of these investments more properly on the financial statements. As of March 31, 2013, there were ¥5,800 million of investments measured at fair value by electing the fair value option included in other securities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The amortized cost basis amounts, gross unrealized holding gains, gross unrealized holding losses and fair values of available-for-sale securities and held-to-maturity securities in each major security type at March 31, 2012 and 2013 are as follows:

March 31, 2012

			Millions of yen
	Amortized cost	Gross unrealized gains	Gross unrealized losses	Fair value
Available-for-sale:
Japanese and foreign government bond securities	¥219,729	¥ 1,191	¥ (5)	¥220,915
Japanese prefectural and foreign municipal bond securities	56,108	1,358	(107)	57,359
Corporate debt securities	280,540	2,325	(2,643)	280,222
Specified bonds issued by SPEs in Japan	140,054	192	(1,094)	139,152
CMBS and RMBS in the U.S., and other asset-backed
securities	95,788	3,078	(3,538)	95,328
Other debt securities	7,961	449	0	8,410
Equity securities	61,773	26,853	(3,525)	85,101
	861,953	35,446	(10,912)	886,487
Held-to-maturity:
Japanese government bond securities and other	43,830	2,819	0	46,649
	¥905,783	¥ 38,265	¥(10,912)	¥933,136

March 31, 2013

			Millions of yen
	Amortized cost	Gross unrealized gains	Gross unrealized losses	Fair value
Available-for-sale:
Japanese and foreign government bond securities	¥276,832	¥ 1,906	¥ (21)	¥278,717
Japanese prefectural and foreign municipal bond securities	58,571	2,519	0	61,090
Corporate debt securities	193,973	3,809	(947)	196,835
Specified bonds issued by SPEs in Japan	64,159	116	(1,031)	63,244
CMBS and RMBS in the U.S., and other asset-backed
securities	59,419	3,480	(2,208)	60,691
Other debt securities	7,367	944	0	8,311
Equity securities	53,869	34,703	(161)	88,411
	714,190	47,477	(4,368)	757,299
Held-to-maturity:
Japanese government bond securities and other	89,451	9,020	0	98,471
	¥803,641	¥ 56,497	¥ (4,368)	¥855,770

The unrealized losses of ¥857 million and ¥435 million of debt securities for which an other-than-temporary impairment related to the credit loss had been recognized in earnings according to ASC 320-10-35-34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

("Investments—Debt and Equity Securities—Recognition of Other-Than-Temporary Impairments") were included in the gross unrealized losses of CMBS and RMBS in the U.S., and other asset-backed securities (before taxes) at March 31, 2012 and March 31, 2013, respectively. The unrealized losses are other-than-temporary impairment related to the non-credit losses and recorded as accumulated other comprehensive income.

The following table provides information about available-for-sale securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2012 and 2013, respectively:

March 31, 2012

				Millions of yen
	Less than 12 months			12 months or more	Total
	Fair value		Fair value	Gross unrealized losses	Fair value	Gross unrealized losses
Available-for-sale:
Japanese and foreign government bond
securities	¥ 74,978	¥ (5)	¥ 0	¥ 0	¥ 74,978	¥ (5)
Japanese prefectural and foreign municipal
bond securities	11,316	(107)	0	0	11,316	(107)
Corporate debt securities	23,568	(208)	24,982	(2,435)	48,550	(2,643)
Specified bonds issued by SPEs in Japan	32,139	(499)	29,826	(595)	61,965	(1,094)
CMBS and RMBS in the U.S., and other
asset-backed securities	29,586	(198)	11,316	(3,340)	40,902	(3,538)
Equity securities	14,097	(2,092)	11,239	(1,433)	25,336	(3,525)
	¥185,684	¥ (3,109)	¥77,363	¥ (7,803)	¥263,047	¥(10,912)

March 31, 2013

					Total
Gross Fair unrealized		Fair value	Gross unrealized losses	Fair value	Gross unrealized losses


						¥ (21)

						0
						(947)
						(1,031)

						(2,208)
						(161)
¥107,836	¥	(382)	¥59,014	¥ (3,986)	¥166,850	¥ (4,368)
	value ¥ 85,842 10,118 4,490 3,929 2,142 1,315	¥	Less than 12 months losses (21) 0 (69) (106) (44) (142)	¥ 0 0 16,329 34,226 8,141 318	Millions of yen 12 months or more ¥ 0 0 (878) (925) (2,164) (19)	¥ 85,842 10,118 20,819 38,155 10,283 1,633

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Approximately 225 and 132 investment securities were in an unrealized loss position as of March 31, 2012 and 2013, respectively. The gross unrealized losses on these securities are attributable to a number of factors including changes in interest rates, credit spreads and market trends.

For debt securities, in the case of the fair value being below the amortized cost, the Company and its subsidiaries consider whether those securities are other-than-temporarily impaired using all available information about the collectibility. The Company and its subsidiaries consider that an other-than-temporary impairment has occurred if (1) the Company and its subsidiaries intend to sell the debt security; (2) 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, or (3) the Company and its subsidiaries do not expect to recover the entire amortized cost of the security (that is, a credit loss exists). In assessing whether a credit loss exists, the Company and its subsidiaries compare the present value of the expected cash flows to the security's amortized cost basis at the balance sheet date.

Debt securities with unrealized loss position mainly include corporate debt securities in Japan, specified bonds issued by special purpose entities in Japan and CMBS and RMBS.

The unrealized loss associated with corporate debt securities is primarily due to changes in the market interest rate and risk premium. Considering all available information to assess the collectibility of those investments (such as the financial condition of and business prospects for the issuers), the Company and its subsidiaries believe that the Company and its subsidiaries are able to recover the entire amortized cost basis of those investments. Because the Company and its subsidiaries do not intend to sell the investments and it is not more likely than not that the Company and its subsidiaries will be required to sell the investments before recovery of their amortized cost basis, the Company and its subsidiaries do not consider these investments to be other-than-temporarily impaired at March 31, 2013.

The unrealized loss associated with specified bonds is primarily due to changes in the market interest rate and risk premium because of deterioration in the real estate market in Japan and the credit crunch in the capital and financial markets. Considering all available information to assess the collectibility of those investments (such as performance and value of the underlying real estate, and seniority of the bonds), the Company and its subsidiaries believe that the Company and its subsidiaries are able to recover the entire amortized cost basis of those investments. Because the Company and its subsidiaries do not intend to sell the investments and it is not more likely than not that the Company and its subsidiaries will be required to sell the investments before recovery of their amortized cost basis, the Company and its subsidiaries do not consider these investments to be other-than-temporarily impaired at March 31, 2013.

The unrealized loss associated with CMBS and RMBS is primarily caused by changes in credit spreads and interest rates. In order to determine whether a credit loss exists, the Company and its subsidiaries estimate the present value of anticipated cash flows, discounted at the current yield to accrete the security. 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. Then, a credit loss is assessed by comparing the present value of the expected cash flows to the security's amortized cost basis. Based on that assessment, the Company and its subsidiaries expect to recover the entire amortized cost basis. Because the Company and its subsidiaries do not intend to sell the investments and it is not more likely than not that the Company and its subsidiaries will be required to sell the investments before recovery of their amortized cost basis, the Company and its subsidiaries do not consider these investments to be other-than-temporarily impaired at March 31, 2013.

For equity securities with unrealized losses, the Company and its subsidiaries consider various factors to determine whether the decline is other-than-temporary, including the length of time and the extent to which the fair value has been less than the carrying value and the issuer's specific economic conditions as well as the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

ability and intent to hold these securities for a period of time sufficient to recover the securities' carrying amounts. Based on our ongoing monitoring process, the Company and its subsidiaries do not consider these investments to be other-thantemporarily impaired at March 31, 2013.

The total other-than-temporary impairment with an offset for the amount of the total other-than-temporary impairment recognized in other comprehensive income (loss) for fiscal 2011, 2012 and 2013 are as follows:

	Millions of yen
	2011	2012	2013
Total other-than-temporary impairment losses	¥22,210	¥17,100	¥23,180
Portion of loss recognized in other comprehensive income (before taxes)	(463)	(630)	(342)
Net impairment losses recognized in earnings	¥21,747	¥16,470	¥22,838

Other-than-temporary impairment losses related to debt securities are recognized mainly on certain specified bonds, which have experienced credit losses due to significant decline in the value of the underlying assets, as well as on certain mortgage-backed and other asset-backed securities, which have experienced credit losses due to a decrease in cash flows attributable to significant default and bankruptcies on the underlying loans. Because the Company and its subsidiaries do not intend to sell these securities and it is not more likely than not that the Company and its subsidiaries will be required to sell these securities before recovery of their amortized cost basis, the Company and its subsidiaries charged only the credit loss component of the total impairment to earnings with the remaining non-credit component recognized in other comprehensive income (loss). The credit loss assessment was made by comparing the securities' amortized cost basis with the portion of the estimated fair value of the underlying assets available to repay the specified bonds, or with the present value of the expected cash flows from the mortgage-backed and other asset- backed securities, that were estimated based on a number of assumptions such as default rate and prepayment speed, as well as seniority of the security.

Roll-forwards of the amount related to credit losses on other-than-temporarily impaired debt securities recognized in earnings for fiscal 2011, 2012 and 2013 are as follows:

	Millions of yen
	2011	2012	2013
Beginning	¥ 5,016	¥ 9,022	¥ 8,199
Reduction to the beginning balance*	(1,810)	0	0
Beginning after reduction	3,206	9,022	8,199
Addition during the period:
Credit loss for which an other-than-temporary impairment was not previously
recognized	7,292	3,524	110
Credit loss for which an other-than-temporary impairment was previously
recognized	736	320	1,171
Reduction during the period:
For securities sold or redeemed	(307)	(3,530)	(1,049)
Due to change in intent to sell or requirement to sell	(1,905)	(1,137)	(622)
Ending	¥ 9,022	¥ 8,199	¥ 7,809

* Cumulative effects of adopting Accounting Standards Update 2009-16 (ASC 860 ("Transfers and Servicing")), and Accounting Standards Update 2009-17 (ASC 810 ("Consolidation")) have been deducted from the beginning balance.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The Company and its subsidiaries adopted Accounting Standards Update 2009-12 ("Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)—ASC 820 ("Fair Value Measurements and Disclosures")"). Under ASC 820, the information about the fund investments the Company and its subsidiaries hold at March 31, 2012 is as follows, and there were no such fund investments at March 31, 2013.

March 31, 2012

Type of Fund Investment	Millions of yen	Redemption Frequency (If Currently Eligible)	Redemption Notice Period
Hedge Fund*	¥ 5,178	Monthly – Quarterly	5 days – 60 days
Total	¥ 5,178	—	—

* This category includes several hedge funds that seek short-term profits using investment strategies such as managed futures, global macro and relative value. The fair value of the investments in this category is calculated based on the net asset value of the investees.

The following is a summary of the contractual maturities of debt securities classified as available-for-sale securities and held-to-maturity securities held at March 31, 2013:

Available-for-sale securities held at March 31, 2013:

		Millions of yen
	Amortized cost	Fair value
Due within one year	¥198,549	¥198,202
Due after one to five years	253,017	256,084
Due after five to ten years	114,823	116,388
Due after ten years	93,932	98,214
	¥660,321	¥668,888

Held-to-maturity securities held at March 31, 2013:

	Millions of yen
	Amortized
	cost	Fair value
Due within one year	¥ 620	¥ 620
Due after one to five years	7	7
Due after ten years	88,824	97,844
	¥ 89,451	¥98,471

Securities not due at a single maturity date, such as mortgage-backed securities, are included in the above table based on their final maturities.

Certain borrowers may have the right to call or prepay obligations. This right may cause actual maturities to differ from the contractual maturities summarized above.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Included in interest on loans and investment securities in the consolidated statements of income is interest income on investment securities of ¥17,690 million, ¥15,169 million and ¥11,505 million for fiscal 2011, 2012 and 2013, respectively.

The Company and a certain foreign subsidiary acquired debt securities with evidence of deterioration of credit quality at the time of acquisition, and it was not probable those debt securities were able to recover all contractual amounts. In accordance with the provision of ASC 310-30 (Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality), the Company and the subsidiary determined the expected future cash flows taking into account historical cash collections for debt securities with similar characteristics as well as expected prepayments and the amount and the timing of undiscounted expected principal, interest and other cash flows for each pool of debt securities. Accretable yield represents the excess of expected future cash flows over carrying value of the debt securities, which is recognized as interest income over the remaining life of the debt securities. For a debt security for which the fair value is less than the amortized cost basis, the subsidiary estimates the present value of cash flows expected to be collected from the security and compares it with the amortized cost basis of the security to determine whether a credit loss exists. If, based on current information and events, the Company and the subsidiary determines a credit loss exists for that security, an other-than-temporary impairment is considered to have occurred. The Company and the subsidiary writes down that security to fair value with the credit loss component of the impairment recognized in earnings and the noncredit component recorded in other comprehensive income (loss), unless the Company and the subsidiary intends to sell that security or more likely than not will be required to sell that security before recovery, in which case the entire impairment loss would be charged to earnings. As of March 31, 2012 and 2013, the carrying amount and the nominal value of debt securities acquired with evidence of deterioration of credit quality were ¥5,906 million and ¥5,556 million, and ¥13,125 million and ¥14,951 million, and the outstanding balance of accretable yield was ¥4,057 million and ¥4,994 million, respectively.

10. Securitization Transactions

The Company and its subsidiaries have securitized various financial assets such as direct financing lease receivables, installment loans (commercial mortgage loans, housing loans and other) and investment in securities.

In the securitization process, these financial assets are transferred to various vehicles (the "SPEs"), such as trusts and special-purpose companies that issue beneficial interests of the securitization trusts and securities backed by the financial assets to investors. The cash flows collected from these assets transferred to the SPEs are then used to repay these assetbacked beneficial interests and securities. As the transferred assets are isolated from the Company and its subsidiaries, the investors and the SPEs have no recourse to other assets of the Company and its subsidiaries in cases where the debtors or the issuers of the transferred financial assets fail to perform under the original terms of those financial assets. The Company and its subsidiaries often retain interests in the SPEs in the form of the beneficial interest of the securitization trusts. Those interests that continue to be held include interests in the transferred assets and are often subordinate to other tranche(s) of the securitization. Those beneficial interests that continue to be held by the Company and its subsidiaries are subject to credit risk, interest rate risk and prepayment risk on the securitized financial assets. With regards to these subordinated interests that the Company and its subsidiaries retain, they are subordinated to the senior investments and are exposed to different credit and prepayment risks, since they first absorb the risk of the decline in the cash flows from the financial assets transferred to the SPEs for defaults and prepayment of the transferred assets. If there is any excess cash remaining in the SPEs after payment to investors in the securitization of the contractual rate of returns, most of such excess cash is distributed to the Company and its subsidiaries for payments of the subordinated interests.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Until March 31, 2010, the Company and its subsidiaries did not consolidate qualified special-purpose entities ("QSPEs") meeting certain requirements and the Company and its subsidiaries accounted for the transfer of financial assets to QSPEs as a sale when control over the financial assets was surrendered.

From April 1, 2010, the Company and its subsidiaries apply Accounting Standards Update 2009-16 (ASC 860 ("Transfers and Servicing")). This Update removes the concept of a QSPE and removes the exception from applying ASC 810-10 ("Consolidation—Variable Interest Entities") to variable interest entities that are QSPEs. This Update also modifies the financial-components approach used in former ASC 860 ("Transfers and Servicing") and limits the circumstances in which a transferor derecognizes a portion or component of a financial asset. As a result, many SPEs for securitization which had not been consolidated because they met QSPE criteria have been consolidated in accordance with Accounting Standards Update 2009-17 (ASC 810 ("Consolidation")).

During fiscal 2011, 2012 and 2013, there was no securitization transaction accounted for as a sale.

Quantitative information about delinquencies, impaired loans and components of financial assets sold on securitization and other assets managed together as of March 31, 2012 and 2013, and quantitative information about net credit loss for the fiscal years ended March 31, 2011, 2012 and 2013 are as follows:

	Total principal amount of receivables Millions of yen

	March 31, 2012	March 31, 2013
Direct financing leases	¥ 900,886	¥ 989,380
Installment loans	2,769,898	2,691,171
Assets recorded on the balance sheet	3,670,784	3,680,551
Direct financing leases sold on securitization	3,969	1,698
Total assets managed together or sold on securitization	¥ 3,674,753	¥ 3,682,249

	Principal amount of receivables more than 90 days past-due and impaired loans
			Millions of yen
		March 31, 2012		March 31, 2013
Direct financing leases	¥	17,441	¥	15,806
Installment loans		302,378		220,485
Assets recorded on the balance sheet		319,819		236,291
Direct financing leases sold on securitization		0		0
Total assets managed together or sold on securitization	¥	319,819	¥	236,291

		Credit loss
	Millions of yen
	2011	2012	2013
Direct financing leases	¥ 7,505	¥ 6,783	¥ 4,046
Installment loans	54,149	29,476	39,142
Assets recorded on the balance sheet	61,654	36,259	43,188
Direct financing leases sold on securitization	0	0	0
Total assets managed together or sold on securitization	¥61,654	¥36,259	¥43,188

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

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 servicing assets related to those servicing activities are included in other operating assets and the balances of these servicing assets as of March 31, 2012 and March 31, 2013 were ¥11,533 million and ¥14,562 million, respectively. During the fiscal year ended March 31, 2012 and March 31, 2013, the servicing assets were increased by ¥2,505 million and ¥4,224 million, respectively, mainly from loans sold with servicing retained and decreased by ¥2,416 million and ¥3,045 million, respectively, mainly from amortization and decreased by ¥133 million and increased by ¥1,850 million, respectively, from the effects of changes in foreign exchange rates. The fair value of the servicing assets as of March 31, 2012 and 2013 were ¥13,826 million and ¥19,376 million, respectively.

11. Variable Interest Entities

The Company and its subsidiaries use special purpose companies, partnerships and trusts (hereinafter referred to as SPEs) in the ordinary course of business.

These SPEs are not always controlled by voting rights, and there are cases where voting rights do not exist for those SPEs. ASC 810-10 ("Consolidation—Variable Interest Entities") addresses consolidation by business enterprises of SPEs within the scope of ASC 810-10. Generally these SPEs are entities where (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by any parties, including the equity holders or (b) as a group, the holders of the equity investment at risk do not have (1) the ability to make decisions about an entity's activities that most significantly impact the entity's economic performance through voting rights or similar rights, (2) the obligation to absorb the expected losses of the entity or (3) the right to receive the expected residual returns of the entity. Entities within the scope of ASC 810-10 are called variable interest entities ("VIEs").

According to ASC 810-10, the Company and its subsidiaries are required to perform a qualitative analysis to identify the primary beneficiary of VIEs. An enterprise that has both of the following characteristics is considered to be the primary beneficiary and therefore shall consolidate a VIE:

The power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance
The obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE

All facts and circumstances are taken into consideration when determining whether the Company and its subsidiaries have variable interests that would deem it the primary beneficiary and therefore require consolidation of the VIE. The Company and its subsidiaries make ongoing reassessment of whether they are the primary beneficiaries of a VIE.

The following are the items that the Company and its subsidiaries are considering in a qualitative assessment:

Which activities most significantly impact the economic performance of the VIE and who has the power to direct such activities
Characteristics of the Company and its subsidiaries' variable interest or interests and other involvements (including involvement of related parties and de facto agents)
Involvement of other variable interest holders

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

• The entity's purpose and design, including the risks that the entity was designed to create and pass through to its variable interest holders

The Company and its subsidiaries generally consider the following types of involvement to be significant when determining the primary beneficiary:

Designing the structuring of a transaction
Providing an equity investment and debt financing
Being the investment manager, asset manager or servicer and receiving variable fees
Providing liquidity and other financial support

The Company and its subsidiaries do not have the power to direct activities of the VIEs that most significantly impact the VIEs' economic performance if that power is shared among multiple unrelated parties, and accordingly do not consolidate such VIEs.

Information about VIEs (consolidated and non-consolidated) for the Company and its subsidiaries are as follows:

1. Consolidated VIEs

March 31, 2012

		Millions of yen
Types of VIEs		Total assets*1			Total liabilities*1		Assets which are pledged as collateral*2		Commitments*3
(a)	VIEs for liquidating customer assets	¥	5,094	¥	3,719	¥	5,094	¥	0
(b)	VIEs for acquisition of real estate and real estate development projects for customers		49,781		28,848		35,486		0
(c)	VIEs for acquisition of real estate for the Company and its subsidiaries' real estate
	related business		341,421		124,227		245,994		0
(d)	VIEs for corporate rehabilitation support
	business		14,302		205		0		0
(e)	VIEs for investment in securities		61,713		7,050		18,365		15
(f)	VIEs for securitizing financial assets such as direct financing lease receivable and loan
	receivable		465,376		303,784		465,376		0
(g)	VIEs for securitization of commercial
	mortgage loans originated by third parties		569,272		575,712		569,263		0
(h)	Other VIEs		145,958		62,640		128,950		5,687
Total		¥1,652,917			¥1,106,185		¥1,468,528	¥	5,702

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

March 31, 2013

		Millions of yen
Types of VIEs		Total assets*1			Total liabilities*1		Assets which are pledged as collateral*2		Commitments*3
(a)	VIEs for liquidating customer assets	¥	6,191	¥	3,880	¥	6,191	¥	0
(b)	VIEs for acquisition of real estate and real estate
	development projects for customers		20,081		2,112		0		0
(c)	VIEs for acquisition of real estate for the
	Company and its subsidiaries' real estate-related
business			334,179		96,758		197,143		0
(d)	VIEs for corporate rehabilitation support
business			10,205		192		0		0
(e)	VIEs for investment in securities		34,091		8,075		19,133		0
(f)	VIEs for securitizing financial assets such as direct financing lease receivable and loan
receivable			467,348		250,374		391,664		0
(g)	VIEs for securitization of commercial mortgage
	loans originated by third parties		425,017		434,273		425,017		0
(h) Other VIEs			103,345		49,604		85,763		0
Total		¥1,400,457			¥845,268		¥1,124,911	¥	0

*1 The assets of most VIEs are used only to repay the liabilities of the VIEs, and the creditors of the liabilities of the VIEs have no recourse to other assets of the Company and its subsidiaries.

*2 The assets are pledged as collateral by VIE for financing of the VIE.

*3 This item represents remaining balance of commitments that could require the Company and its subsidiaries to provide investments or loans to the VIE.

Non-consolidated VIEs

March 31, 2012

				Millions of yen
				Carrying amount of the variable interests in the VIEs held by the Company and its subsidiaries Specified
Types of VIEs		Total assets		bonds and non-recourse loans		Investments	Maximum exposure to loss*
(a) VIEs for liquidating customer asset	¥	53,300	¥	8,542	¥	4,326	¥ 12,868
(b) VIEs for acquisition of real estate and real estate
development projects for customers		958,965		125,746		59,144	224,707
(c) VIEs for acquisition of real estate for the Company and its
subsidiaries' real estate-related business		0		0		0	0
(d) VIEs for corporate rehabilitation support business		0		0		0	0
(e) VIEs for investment in securities		1,290,243		0		24,371	37,960
(f) VIEs for securitizing financial assets such as direct
financing lease receivable and loan receivable		0		0		0	0
(g) VIEs for securitization of commercial mortgage loans
originated by third parties		2,277,844		0		43,792	44,427
(h) Other VIEs		42,283		4,380		3,304	7,684
Total		¥4,622,635		¥ 138,668		¥ 134,937	¥327,646

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

March 31, 2013

					Millions of yen
				Carrying amount of the variable interests in the VIEs held by the Company and its subsidiaries
	Types of VIEs		Total assets		Specified bonds and non-recourse loans		Investments		Maximum exposure to loss*
(a)	VIEs for liquidating customer assets	¥	41,929	¥	3,428	¥	4,119	¥	7,547
(b)	VIEs for acquisition of real estate and real estate
	development projects for customers		872,189		106,861		51,345		201,145
(c)	VIEs for acquisition of real estate for the Company and
	its subsidiaries' real estate-related business		0		0		0		0
(d)	VIEs for corporate rehabilitation support business		0		0		0		0
(e)	VIEs for investment in securities		1,327,751		0		24,822		40,501
(f)	VIEs for securitizing financial assets such as direct
	financing lease receivable and loan receivable		0		0		0		0
(g)	VIEs for securitization of commercial mortgage loans
	originated by third parties		2,236,389		0		23,257		23,798
(h)	Other VIEs		40,806		97		4,079		4,176
Total			¥4,519,064		¥ 110,386		¥ 107,622		¥277,167

* Maximum exposure to loss includes remaining balance of commitments that could require the Company and its subsidiaries to provide investments or loans to the VIE.

(a) VIEs for liquidating customer assets

The Company and its subsidiaries may use VIEs in structuring financing for customers to liquidate specific customer assets. The VIEs are typically used to provide a structure that is bankruptcy remote with respect to the customer and the use of VIE structure is requested by such customer. Such VIEs typically acquire assets to be liquidated from the customer, borrow non-recourse loans from financial institutions and have an equity investment made by the customer. By using cash flows from the liquidated assets, these VIEs repay the loan and pay dividends to equity investors if sufficient funds exist.

The Company and its subsidiaries provide non-recourse loans to such VIEs and occasionally make investments in them. The Company and its subsidiaries have consolidated certain VIEs because the Company or a subsidiary effectively controls the VIEs by acting as the asset manager of the VIEs. In the Company's consolidated balance sheets, assets of the consolidated VIEs are mainly included in investment in operating leases, and liabilities of the consolidated VIEs are mainly included in long-term debt.

With respect to the variable interests of non-consolidated VIEs, non-recourse loans are included in installment loans, and investments are mainly included in other operating assets in the Company's consolidated balance sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

(b) VIEs for acquisition of real estate and real estate development projects for customers

Customers and the Company and its subsidiaries are involved with VIEs formed to acquire real estate and/or develop real estate projects. In each case, a customer establishes and makes an equity investment in a VIE that is designed to be bankruptcy remote from the customer. The VIEs acquire real estate and/or develop real estate projects.

The Company and its subsidiaries provide non-recourse loans to such VIEs and hold specified bonds issued by them and/or make investments in them. The Company and its subsidiaries have consolidated certain VIEs because the Company or its subsidiary effectively controls the VIEs by acting as the asset manager of the VIEs.

The Company and its subsidiaries contributed additional funding to certain non-consolidated VIEs to support their repayment obligations, since those VIEs had difficulty repaying debt and accounts payable. The amount of those additional fundings for fiscal 2013 was ¥2,000 million. As a result, the Company and its subsidiaries performed a reassessment and consolidated those VIEs.

In the Company's consolidated balance sheets, assets of consolidated VIEs are mainly included in cash and cash equivalents, investment in operating leases and other operating assets, and liabilities of those consolidated VIEs are mainly included in long-term debt as of March 31, 2012, and in short-term debt, trade notes, accounts payable and other liabilities as of March 31, 2013.

With respect to the variable interests of non-consolidated VIEs, specified bonds are included in investment in securities, non-recourse loans are included in installment loans, and investments are mainly included in other operating assets and investment in securities in the Company's consolidated balance sheets. The Company and its subsidiaries have commitment agreements by which the Company and its subsidiaries may be required to provide additional investment in certain nonconsolidated VIEs as long as the agreed-upon terms are met. Under these agreements, the Company and its subsidiaries are committed to invest in these VIEs with the other investors based on their respective ownership percentages. The Company and its subsidiaries concluded that the VIEs are not consolidated because the power to direct these VIEs is held by unrelated parties. In some cases, the Company and its subsidiaries concluded that the VIEs are not consolidated because the power to direct these VIEs is shared among multiple unrelated parties.

(c) VIEs for acquisition of real estate for the Company and its subsidiaries' real estate-related business

The Company and its subsidiaries establish VIEs and acquire real estate to borrow non-recourse loans from financial institutions and simplify the administration activities necessary for the real estate. The Company and its subsidiaries consolidate such VIEs even though the Company and its subsidiaries may not have voting rights if substantially all of such VIEs' subordinated interests are issued to the Company and its subsidiaries, and therefore the VIEs are controlled by and for the benefit of the Company and its subsidiaries.

The Company and its subsidiaries contributed additional funding to certain non-consolidated VIEs and acquired subordinated interests to support their repayment obligations, since those VIEs had difficulty repaying debt and accounts payable. The amount of those additional fundings for fiscal 2012 was ¥497 million. As a result, the Company and its subsidiaries performed a reassessment and consolidated those VIEs. There was no additional funding or acquisition of subordinated interests during fiscal 2013.

The Company and its subsidiaries contributed additional funding to certain consolidated VIEs, since those VIEs had difficulty repaying debt and accounts payable. The amount of those additional fundings for fiscal 2013 was ¥646 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

In the Company's consolidated balance sheets, assets of the consolidated VIEs are mainly included in investment in operating leases, office facilities, cash and cash equivalents and other assets, and liabilities of those consolidated VIEs are mainly included in long-term debts.

(d) VIEs for corporate rehabilitation support business

Financial institutions, the Company and its subsidiary are involved with VIEs established for the corporate rehabilitation support business. VIEs receive the funds from investors including the financial institutions, the Company and the subsidiary, and purchase loan receivables due from borrowers which have financial problems, but are deemed to have the potential to recover in the future. The servicing operations for the VIEs are conducted by the subsidiary.

The Company and its subsidiary consolidated such VIEs since the Company and the subsidiary have the majority of the investment share of such VIEs, and have the power to direct the activities of the VIEs that most significantly impact the entities' economic performance through the servicing operations.

In the Company's consolidated balance sheets, assets of the consolidated VIEs are mainly included in installment loans, and liabilities of those consolidated VIEs are mainly included in trade notes, accounts payable and other liabilities.

(e) VIEs for investment in securities

The Company and its subsidiaries have interests in VIEs that are investment funds and mainly invest in equity and debt securities. Such VIEs are mainly managed by fund management companies that are independent of the Company and its subsidiaries.

The Company's consolidated certain such VIEs since the Company has the majority of the investment share of them, and has the power to direct the activities of those VIEs that most significantly impact the entities' economic performance through involvement with the design of the VIEs or other means.

In the Company's consolidated balance sheets, assets of the consolidated VIEs are mainly included in investment in securities, investment in affiliates, installment loans, cash and cash equivalents, and liabilities of those consolidated VIEs are mainly included in short-term debt and long-term debt. The Company has commitment agreements by which the Company may be required to make additional investments in certain such consolidated VIEs.

Variable interests of non-consolidated VIEs, which the Company and its subsidiaries have, are included in investment in securities. The Company and its subsidiaries have a commitment agreement by which the Company may be required to make additional investments in certain such non-consolidated VIEs.

(f) VIEs for securitizing financial assets such as direct financing lease receivable and loan receivable

The Company and its subsidiaries use VIEs to securitize financial assets such as direct financing lease receivables and loan receivables. In the securitization process, these financial assets are transferred to SPEs, and the SPEs issue beneficial interests or securities backed by the transferred financial assets to investors. After the securitization, the Company and its subsidiaries continue to hold a subordinated part of the securities and act as a servicer.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The Company and its subsidiaries consolidated such VIEs since the Company and its subsidiaries have the power to direct the activities that most significantly impact the entity's economic performance by designing the securitization scheme and conducting servicing activities and have a responsibility to absorb losses of the VIEs that could potentially be significant to the entities by retaining the subordinated part of the securities.

In the Company's consolidated balance sheets, assets of the consolidated VIEs are mainly included in investment in direct financing leases and installment loans, and liabilities of those consolidated VIEs are mainly included in long-term debt.

(g) VIEs for securitization of commercial mortgage loans originated by third parties

The Company and its subsidiaries invest in CMBS and RMBS originated by third parties. In some cases of such securitization, the Company's subsidiaries hold the subordinated portion of CMBS and the subsidiaries act as a specialservicer of the securitization transaction. As the special servicer, the Company's subsidiaries have rights to dispose of real estate collateral related to the securitized commercial mortgage loans.

The subsidiaries consolidate certain of these VIEs when the subsidiaries have the power to direct the activities of the VIEs that most significantly impact the entities' economic performance through its role as special-servicer, including the right to dispose of the collateral, and have responsibility to absorb losses of the VIEs that could potentially be significant to the entities by holding the subordinated part of the securities.

In the Company's consolidated balance sheets, assets of the consolidated VIEs are mainly included in installment loans and investment in securities, and liabilities of those consolidated VIEs are mainly included in long-term debt.

Variable interests of non-consolidated VIEs are included in investment in securities.

(h) Other VIEs

The Company and its subsidiaries are involved with other types of VIEs for various purposes. Consolidated and nonconsolidated VIEs of this category are mainly kumiai structures. In addition, a subsidiary has consolidated a VIE that is not included in the categories (a) through (g) above, because the subsidiary holds the subordinated portion of the VIE and the VIE is effectively controlled by the subsidiary.

In Japan, certain subsidiaries provide investment products to their customers that employ a contractual mechanism known as a kumiai, which in part result in the subsidiaries forming a type of SPE. As a means to finance the purchase of aircraft or other large-ticket items to be leased to third parties, the Company and its subsidiaries arrange and market kumiai products to investors, who invest a portion of the funds necessary into the kumiai structure. The remainder of the purchase funds is borrowed by the kumiai structure in the form of a non-recourse loan from one or more financial institutions. The kumiai investors (and any lenders to the kumiai structure) retain all of the economic risks and rewards in connection with purchasing and leasing activities of the kumiai structure, and all related gains or losses are recorded on the financial statements of the investors in the kumiai. The Company and its subsidiaries are responsible for the arrangement and marketing of these products and may act as servicer or administrator in kumiai transactions. The fee income for the arrangement and administration of these transactions is recognized in the Company's consolidated statements of income. In some cases, the Company and its subsidiaries make investments in the kumiai or its related SPE, and these VIEs are consolidated because the Company and its subsidiaries have a responsibility to absorb any significant potential loss through the investments and have the power to direct the activities that most significantly impact their economic performance. In other cases, the Company and its subsidiaries are not considered to be the primary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

beneficiary of the VIEs or kumiais because the Company and its subsidiaries did not make significant investments or guarantee or otherwise undertake any significant financial commitments or have exposure with respect to the kumiai or its related SPE.

The Company and its subsidiaries may use VIEs to finance. The Company and its subsidiaries transfer their own held assets to SPEs, which borrow non-recourse loan from financial institutions and effectively pledge such assets as collateral. The Company guarantees the performance of obligation of the SPEs. The Company and its subsidiaries continually hold subordinated interests in the SPEs and perform administrative work of such assets. The Company and its subsidiaries consolidate such SPEs because the Company and its subsidiaries have a right to direct the activities of them that most significantly impact their economic performance by setting up the scheme and performing administrative work of the assets and have the obligation to absorb losses expected of them by holding the subordinated interests.

Assets of the consolidated SPEs are mainly included in investment in operating leases, installment loans and other assets, and liabilities are mainly included in long-term debt in the Company's consolidated balance sheets.

12. Investment in Affiliates

Investment in affiliates at March 31, 2012 and 2013 consists of the following:

	Millions of yen
	2012	2013
Shares	¥296,228	¥316,790
Loans	35,489	9,942
	¥331,717	¥326,732

Certain affiliates are listed on stock exchanges. The aggregate investment in and quoted market value of those affiliates amounted to ¥48,569 million and ¥58,213 million, respectively, as of March 31, 2012 and ¥67,835 million and ¥99,758 million, respectively, as of March 31, 2013.

In fiscal 2011, 2012 and 2013, the Company and its subsidiaries received dividends from affiliates of ¥2,875 million, ¥8,653 million and ¥10,221 million, respectively.

The balance of excess of cost over the underlying equity at acquisition dates of investment in affiliates amounted to ¥16,884 million and ¥25,556 million as of March 31, 2012 and 2013, respectively.

ORIX JREIT Inc. ("ORIX JREIT"), an equity method affiliate, entered into an asset management agreement with one of the Company's subsidiaries and paid management fees of ¥1,555 million, ¥1,691 million and ¥1,743 million for fiscal 2011, 2012 and 2013, respectively.

In fiscal 2011, 2012 and 2013, certain subsidiaries sold to ORIX JREIT, office buildings and condominiums mainly under operating leases. As a result of the sales, the subsidiaries recognized gains of ¥3,905 million in earnings as gains on sales of real estate under operating leases for fiscal 2011. In fiscal 2012, the subsidiaries recognized gains of ¥989 million in earnings as gains on sales of real estate under operating leases and gains of ¥1,995 million as life insurance premiums and related investment income. In fiscal 2013, the subsidiaries recognized gains of ¥3,119 million in earnings as gains on sales of real estate under operating leases. The related intercompany profits have been eliminated based on the Company's proportionate share.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

During fiscal 2011, Monex Group issued 140,000 shares to a third party at ¥22,765 per share, amounting to ¥3,187 million. Monex Group also issued 65,685 shares for the purpose of the acquisition of Boom Group. As a result of these issuances, the ownership interest of the Company in Monex Group decreased from 22% to 21%. Because the issuance price per share issued by Monex Group was less than the average carrying amount per share of the Company, the Company was required to adjust the carrying amount of its investment by ¥710 million and recognized the loss in earnings as gains (losses) on sales of subsidiaries and affiliates and liquidation losses, net.

During fiscal 2012, Monex Group acquired its shares from the market and canceled its own shares. As a result, the ownership interest of the Company in Monex Group increased from 21% to 22%. Additionally, the Company recognized ¥12,713 million of impairment losses because it was judged that the downward stock price movement of the Monex Group was other than temporary.

During fiscal 2013, the Company acquired 51% of the total number of outstanding shares of ORIX Credit, an equity method affiliate that operates a card loan business, from Sumitomo Mitsui Banking Corporation ("SMBC"), and ORIX Credit became a wholly-owned domestic subsidiary. As a result of this step acquisition of the interest in ORIX Credit, the Company remeasured its previously held equity interest to fair value, and recognized gains of ¥3,132 million in earnings as gains on sales of subsidiaries and affiliates and liquidation losses, net, based on ASC 805-10 (Business Combinations) for fiscal 2013. The remeasured fair value was calculated by reflecting the premium in the valuation that was based on the acquisition price paid to SMBC.

Companies comprising a significant portion of investment in affiliates were DAIKYO (31% of equity share), ORIX Credit (49% of equity share) and Monex Group (21% of equity share) as of March 31, 2011, DAIKYO (31% of equity share), ORIX Credit (49% of equity share) and Monex Group (22% of equity share) as of March 31, 2012 and DAIKYO (31% of equity share) as of March 31, 2013.

Combined and condensed information relating to the affiliates for fiscal 2011, 2012 and 2013 are as follows (some operation data for entities reflect only the period since the Company and its subsidiaries made the investment and on a lag basis):

	Millions of yen
	2011	2012	2013
Operations:
Total revenues	¥ 850,947	¥ 945,635	¥ 827,740
Income before income taxes	108,175	74,223	97,301
Net income	92,763	51,940	64,699
Financial position:
Total assets	¥4,237,580	¥4,561,537	¥5,237,184
Total liabilities	3,174,222	3,508,038	4,031,673
Total equity	1,063,358	1,053,499	1,205,511

The Company and its subsidiaries had no significant transactions with these companies except as described above.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

13. Goodwill and Other Intangible Assets

Changes in goodwill by reportable segment for fiscal 2011, 2012 and 2013 are as follows:

				Millions of yen
	Corporate Financial	Maintenance		Investment and
	Services	Leasing	Real Estate	Operation	Retail	Overseas	Total
Balance at March 31, 2010
Goodwill	¥1,202	¥282	¥18,536	¥7,329	¥4,452	¥44,683	¥76,484
Accumulated impairment
losses	(912)	0	0	(4,498)	0	0	(5,410)
	290	282	18,536	2,831	4,452	44,683	71,074
Acquired	0	0	148	0	0	29,099	29,247
Impairment	(173)	0	0	0	0	0	(173)
Other (net)*	0	0	363	(1,334)	0	(4,387)	(5,358)
Balance at March 31, 2011
Goodwill	547	282	19,047	3,674	4,452	69,395	97,397
Accumulated impairment
losses	(430)	0	0	(2,177)	0	0	(2,607)
	117	282	19,047	1,497	4,452	69,395	94,790
Acquired	380	0	44	14	0	3,586	4,024
Impairment	0	0	0	0	0	0	0
Other (net)*	0	0	(28)	(1,238)	0	(1,737)	(3,003)
Balance at March 31, 2012
Goodwill	754	282	19,063	312	4,452	71,244	96,107
Accumulated impairment
losses	(257)	0	0	(39)	0	0	(296)
	497	282	19,063	273	4,452	71,244	95,811
Acquired	0	0	199	21,754	10,972	1,504	34,429
Impairment	0	0	0	0	0	0	0
Other (net)*	0	0	67	0	0	6,337	6,404
Balance at March 31, 2013
Goodwill	754	282	19,329	22,066	15,424	79,085	136,940
Accumulated impairment
losses	(257)	0	0	(39)	0	0	(296)
	¥497	¥282	¥19,329	¥22,027	¥15,424	¥79,085	¥136,644

* Other includes foreign currency translation adjustments and certain other reclassifications.

As a result of the impairment test, the Company and its subsidiaries recognized impairment loss on goodwill of ¥173 million on the Corporate Financial Services segment during fiscal 2011 and the Company and its subsidiaries recognized no impairment losses on goodwill during fiscal 2012 and 2013.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Other intangible assets at March 31, 2012 and 2013 consist of the following:

		Millions of yen
	2012	2013
Intangible assets not subject to amortization:
Trade names	¥ 18,062	¥ 21,714
Others	521	605
	18,583	22,319
Intangible assets subject to amortization:
Software	69,261	82,425
Customer relationships	5,552	17,054
Others	7,981	12,304
	82,794	111,783
Accumulated amortization	(49,017)	(58,384)
Net	33,777	53,399
	¥ 52,360	¥ 75,718

The aggregate amortization expenses for intangible assets are ¥7,244 million, ¥7,066 million and ¥9,680 million in fiscal 2011, 2012 and 2013, respectively.

The estimated amortization expenses for each of five succeeding fiscal years are ¥10,206 million in fiscal 2014, ¥8,759 million in fiscal 2015, ¥7,962 million in fiscal 2016, ¥5,814 million in fiscal 2017 and ¥3,599 million in fiscal 2018, respectively.

Intangible assets subject to amortization acquired during fiscal 2013 are ¥27,997 million. They mainly consist of software (¥12,291 million) and customer relationships due to acquisitions (¥12,107 million). The weighted average amortization period for the software and the customer relationships due to acquisitions are seven years and eight years, respectively.

As a result of the impairment test, the Company and its subsidiaries recognized no impairment losses on intangible assets during fiscal 2011, 2012 and 2013.

14. Short-Term and Long-Term Debt

Short-term debt consists of notes payable to banks, bank overdrafts, commercial paper and notes.

The composition of short-term debt and the weighted average contract interest rate on short-term debt at March 31, 2012 and 2013 are as follows:

March 31, 2012

		Weighted
	Millions of yen	average rate
Short-term debt in Japan, mainly from banks	¥ 168,012	0.7%
Short-term debt outside Japan, mainly from banks	107,568	4.2
Commercial paper in Japan	176,415	0.2
Commercial paper outside Japan	4,023	4.0
Notes outside Japan	1,955	5.3
	¥ 457,973	1.4

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

March 31, 2013

	Millions of yen	Weighted average rate
Short-term debt in Japan, mainly from banks	¥ 164,046	0.4%
Short-term debt outside Japan, mainly from banks	104,542	3.3
Commercial paper in Japan	146,944	0.2
Commercial paper outside Japan	4,560	3.8
Notes in Japan	40	0.9
Notes outside Japan	594	4.3
	¥ 420,726	1.1

The composition of long-term debt, the weighted average contract interest rate on long-term debt and the repayment due dates at March 31, 2012 and 2013 are as follows:

March 31, 2012

	Due		Weighted
	(Fiscal Year)	Millions of yen	average rate
Banks:
Fixed rate	2013~2025	¥ 248,452	2.7%
Floating rate	2013~2027	1,223,127	1.3
Insurance companies and others:
Fixed rate	2013~2020	289,871	1.8
Floating rate	2013~2028	240,277	1.1
Unsecured bonds	2013~2021	1,144,539	2.1
Unsecured convertible bonds with stock acquisition rights	2014	149,968	1.0
Unsecured bond with stock acquisition rights	2023	35,630	0.0
Unsecured notes under medium-term note program	2013~2018	60,911	2.0
Payables under securitized lease receivables	2013~2018	172,917	1.1
Payables under securitized loan receivables and investment in
securities	2013~2039	701,788	4.5
		¥ 4,267,480	2.1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

March 31, 2013

	Due		Weighted
	(Fiscal Year)	Millions of yen	average rate
Banks:
Fixed rate	2014~2025	¥ 339,565	2.6%
Floating rate	2014~2027	1,233,059	1.1
Insurance companies and others:
Fixed rate	2014~2023	280,729	1.6
Floating rate	2014~2028	246,055	0.9
Unsecured bonds	2014~2021	1,173,902	1.8
Unsecured convertible bonds with stock acquisition rights	2014	50,289	1.0
Unsecured notes under medium-term note program	2014~2018	58,169	2.9
Payables under securitized lease receivables	2014~2019	160,163	0.9
Payables under securitized loan receivables and investment in
securities	2014~2039	519,603	4.9
		¥ 4,061,534	2.0

The repayment schedule for the next five years and thereafter for long-term debt at March 31, 2013 is as follows:

Millions of yen
¥ 1,110,847
621,174
783,508
614,374
576,471
355,160
¥ 4,061,534

For borrowings from banks, insurance companies and other financial institutions, and for bonds, interest payments are usually paid semi-annually and principal repayments are made upon maturity of the loan contracts or bonds. For mediumterm notes, interest payments are mainly made semi-annually and principal is repaid upon maturity of the notes.

For unsecured convertible bond with stock acquisition rights, the Company issued series three unsecured convertible bond with stock acquisition rights of ¥150,000 million in December 2008. As of March 31, 2013, the bond had stock acquisition rights that were convertible into 73,492,910 shares of common stock at a conversion price of ¥684.27 per share. The conversion price shall be adjusted mainly in a situation where the Company issues new shares at less than the current market price of the shares.

On April 1, 2013, the Company implemented a 10-for-1 stock split of common stock held by shareholders registered on the Company's register of shareholders as of March 31, 2013. The number of shares and the conversion price have been adjusted retrospectively to reflect the stock split.

For unsecured bond with stock acquisition rights, the Company issued Liquid Yield Option Notes of \$400 million, net of unamortized discount of \$622 million, in June 2002. Liquid Yield Option Notes, which have the original maturity date on June 14, 2022, was completely redeemed during fiscal 2013. ™

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

During fiscal 2011, 2012 and 2013, the Company and certain subsidiaries recognized net amortization expenses of bond premiums and discounts, and deferred issuance costs of bonds and medium-term notes in the amount of ¥3,996 million, ¥3,999 million and ¥1,002 million, respectively.

Total committed credit lines for the Company and its subsidiaries were ¥463,969 million and ¥481,096 million at March 31, 2012 and 2013, respectively, and, of these lines, ¥427,435 million and ¥439,530 million were available at March 31, 2012 and 2013, respectively. Of the available committed credit lines, ¥210,139 million and ¥230,586 million were long-term committed credit lines at March 31, 2012 and 2013, respectively.

Some of the debt and commitment contracts contain covenant clauses, and some of these include financial restrictions, such as maintenance of certain ORIX Corporation shareholders' equity ratios. As of March 31, 2013, the Company and its subsidiaries were in compliance with such objective covenant requirements.

The agreements related to debt payable to banks provide that the banks under certain circumstances may request additional security for loans and have the right to offset cash deposited against any short-term or long-term debt that becomes due and, in case of default and certain other specified events, against all other debt payable to the banks.

Other than the assets of the consolidated VIEs pledged as collateral for financing described in Note 11 ("Variable Interest Entities"), the Company and certain subsidiaries provide the following assets as collateral for the short-term and long-term debt payables to financial institutions as of March 31, 2013:

	Millions of yen
	88,956
	110,492
	8,736
	9,916
¥	218,100
	¥

As of March 31, 2013, investment in securities of ¥24,079 million was pledged for primarily collateral deposits.

Under loan agreements relating to short-term and long-term debt from commercial banks and certain insurance companies, the Company and certain subsidiaries are required to provide collateral against these debts at any time if requested by the lenders. The Company and the subsidiaries did not receive any such requests from the lenders as of March 31, 2013.

15. Deposits

Deposits at March 31, 2012 and 2013 consist of the following:

		Millions of yen
	2012	2013
Time deposits	¥ 894,169	¥ 885,482
Other deposits	209,345	193,105
Total	¥1,103,514	¥1,078,587

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The balances of time deposits and certificates of deposit issued in amounts of ¥10 million or more were ¥588,550 million and ¥561,449 million at March 31, 2012 and 2013, respectively.

The maturity schedule of time deposits at March 31, 2013 is as follows:

Years ending March 31,	Millions of yen
2014	¥ 515,347
2015	177,935
2016	104,776
2017	57,090
2018	30,334
Total	¥ 885,482

16. Income Taxes

Income before income taxes and discontinued operations, and the provision for income taxes in fiscal 2011, 2012 and 2013 are as follows:

	Millions of yen
	2011	2012	2013
Income before income taxes and discontinued operations:
Japan	¥ 35,027	¥ 73,564	¥109,166
Overseas	54,605	56,192	63,352
	¥ 89,632	¥129,756	¥172,518
Provision for income taxes:
Current—
Japan	¥ 25,950	¥ 12,688	¥ 7,326
Overseas	18,347	16,425	13,675
	44,297	29,113	21,001
Deferred—
Japan	(16,004)	18,216	27,400
Overseas	(3,620)	(1,854)	5,255
	(19,624)	16,362	32,655
Provision for income taxes	¥ 24,673	¥ 45,475	¥ 53,656

In fiscal 2011 and 2012, the Company and its subsidiaries in Japan are subject to a National Corporate tax of 30%, an Inhabitant tax of approximately 6% and a deductible Enterprise tax of approximately 8%, which in the aggregate result in a statutory income tax rate of approximately 40.9%. In fiscal 2013, as a result of the tax reforms, the National Corporation tax was reduced from 30% to approximately 28% and accordingly, the statutory income tax rate was reduced to approximately 38.3%.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Reconciliation of the differences between the tax provision computed at the statutory rate and the consolidated provision for income taxes in fiscal 2011, 2012 and 2013 are as follows:

	Millions of yen
	2011	2012	2013
Income before income taxes and discontinued operations	¥89,632	¥129,756	¥172,518
Tax provision computed at statutory rate	¥36,660	¥ 53,070	¥ 66,074
Increases (reductions) in taxes due to:
Change in valuation allowance	(5,647)	3,921	(3,371)
Non-deductible expenses for tax purposes	1,023	1,335	1,538
Non-taxable income for tax purposes	(2,697)	(2,852)	(2,128)
Effect of lower tax rates on foreign subsidiaries and a domestic life insurance
subsidiary	(4,206)	(6,871)	(4,720)
Effect of the new Japanese tax law	0	(7,137)	0
Other, net	(460)	4,009	(3,737)
Provision for income taxes	¥24,673	¥ 45,475	¥ 53,656

The effective income tax rate is different from the statutory tax rate primarily because of certain non-deductible expenses for tax purposes, non-taxable income for tax purposes, a change in valuation allowance, the effect of lower income tax rates on foreign subsidiaries and a domestic life insurance subsidiary and the effect of the tax reforms as discussed in the following paragraph.

On November 30, 2011, the bill for reconstruction funding after the March 11, 2011 Great East Japan Earthquake and the bill for the 2011 tax reform were approved by the National Diet of Japan. From fiscal years beginning on or after April 1, 2012, the Japanese corporation tax rate is reduced, and as a result, the statutory income tax rate for fiscal years beginning between April 1, 2012 and March 31, 2015 is reduced to approximately 38.3%. The rate for fiscal years beginning on or after April 1, 2015 will be reduced to approximately 35.9%. In addition, tax loss carry-forward rules are amended. The carryforward period is extended to nine years, compared to seven years under the pre-amendment rules. Further, the deductible amount is limited to 80% of taxable income for the year, while total amount of taxable income for the year was available for the deduction under the pre-amendment rules. The amendment to the carry-forward period is applicable for tax losses incurred in fiscal years ending on or after April 1, 2008 and the amendment to the deductible amount is applicable for fiscal years beginning on or after April 1, 2012. Increase and decrease of the deferred tax assets and liabilities due to these tax reforms resulted in a decrease of provision for income taxes by ¥6,641 million in the accompanying consolidated statements of income in fiscal 2012.

Total income taxes recognized in fiscal 2011, 2012 and 2013 are as follows:

Millions of yen
2011	2012	2013
¥24,673	¥45,475	¥53,656
7,530	(2,086)	(321)

3,403	1,357	5,936
(1,427)	(1,774)	2,727
(214)	335	7,225
(338)	(648)	42
¥33,627	¥42,659	¥69,265

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The tax effects of temporary differences giving rise to the deferred tax assets and liabilities at March 31, 2012 and 2013 are as follows:

	Millions of yen
	2012	2013
Assets:
Net operating loss carryforwards	¥ 41,288	¥ 39,762
Allowance for doubtful receivables on direct financing leases and probable loan losses	50,016	25,891
Investment in securities	5,325	7,129
Other operating assets	7,049	11,369
Accrued expenses	7,294	10,456
Installment loans	22,970	16,432
Other	37,328	50,913
	171,270	161,952
Less: valuation allowance	(24,138)	(18,831)
	147,132	143,121
Liabilities:
Investment in direct financing leases	12,535	14,617
Investment in operating leases	63,372	72,925
Deferred insurance policy acquisition costs	15,370	19,311
Policy liabilities	31,437	38,831
Undistributed earnings	19,792	32,723
Prepaid benefit cost	8,860	13,475
Other	60,271	63,840
	211,637	255,722
Net deferred tax liability	¥ 64,505	¥112,601

The valuation allowance is mainly recognized for deferred tax assets of consolidated subsidiaries with net operating loss carryforwards for tax purposes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and tax loss carryforwards are utilizable. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company and its subsidiaries will realize the benefits of these deductible temporary differences and tax loss carryforwards, net of the existing valuation allowances at March 31, 2013. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. The net changes in the total valuation allowance were decreases of ¥16,052 million in fiscal 2011 and decreases of ¥2,656 million in fiscal 2012, and decreases of ¥5,307 million in fiscal 2013, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The Company and certain subsidiaries have net operating loss carryforwards of ¥199,092 million at March 31, 2013, which expire as follows:

Year ending March 31,	Millions of yen
2014	¥ 2,103
2015	6,236
2018	28,185
Thereafter	162,568
Total	¥ 199,092

Note: No net operating loss carryforwards are scheduled to expire in fiscal 2016 and 2017.

Net deferred tax assets and liabilities at March 31, 2012 and 2013 are reflected in the accompanying consolidated balance sheets under the following captions:

		Millions of yen
	2012	2013
Other assets	¥25,773	¥ 18,805
Income taxes: Deferred	90,278	131,406
Net deferred tax liability	¥64,505	¥112,601

The unrecognized tax benefits as of March 31, 2012 and March 31, 2013 were not material. The Company and its subsidiaries believe that it is not reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of March 31, 2013.

The total amounts of penalties and interest expense related to income taxes recognized in the consolidated balance sheets as of March 31, 2012 and March 31, 2013, and in the consolidated statements of income for the years ended March 31, 2011, 2012 and 2013 were not material.

The Company and its subsidiaries file tax returns in Japan and certain foreign tax jurisdictions. The Company is no longer subject to ordinary tax examination for the tax years prior to fiscal 2011, and its major domestic subsidiaries are no longer subject to ordinary tax examination for the tax years prior to fiscal 2009, respectively.

Subsidiaries in the United States remain subject to a tax examination for the tax years after fiscal 2003.

17. Pension Plans

The Company and certain subsidiaries have contributory and non-contributory pension plans covering substantially all of their employees. Those contributory funded pension plans include defined benefit pension plans and defined contribution pension plans. Under the plans, employees are entitled to lump-sum payments at the time of termination of their employment or pension payments. Defined benefit pension plans consist of a plan of which the amounts of such payments are determined on the basis of length of service and remuneration at the time of termination and a cash balance plan.

The Company and its subsidiaries' funding policy is to contribute annually the amounts actuarially determined. Assets of the plans are invested primarily in interest-bearing securities and marketable equity securities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The funded status of the defined benefit pension plans, a substantial portion of which consists of domestic pension plans, as of March 31, 2012 and 2013 is as follows:

	Millions of yen
	2012	2013
Change in benefit obligation:
Benefit obligation at beginning of year	¥58,589	¥63,719
Service cost	3,049	3,214
Interest cost	1,339	1,252
Actuarial loss	3,170	15
Foreign currency exchange rate change	(35)	656
Benefits paid	(2,195)	(2,493)
Business combinations	0	3,117
Other	(198)	0
Benefit obligation at end of year	63,719	69,480
Change in plan assets:
Fair value of plan assets at beginning of year	85,396	85,945
Actual return on plan assets	108	9,289
Employer contribution	2,542	2,591
Benefits paid	(2,090)	(2,337)
Business combinations	0	1,005
Foreign currency exchange rate change	(11)	476
Fair value of plan assets at end of year	85,945	96,969
The funded status of the plans	¥22,226	¥27,489
Amount recognized in the consolidated balance sheets consists of:
Prepaid benefit cost included in prepaid expenses	¥24,459	¥32,005
Accrued benefit liability included in accrued expenses	(2,233)	(4,516)
Net amount recognized	¥22,226	¥27,489

Amount recognized in accumulated other comprehensive income (loss), pre-tax, at March 31, 2012 and 2013 consisted of:

	Millions of yen
	2012	2013
Net prior service credit	¥ 7,697	¥ 6,530
Net actuarial loss	(31,120)	(22,523)
Net transition obligation	(325)	(272)
Total recognized in accumulated other comprehensive income (loss), pre-tax	¥(23,748)	¥(16,265)

The estimated portions of the net prior service credit, net actuarial loss and net transition obligation above that will be recognized as a component of net pension cost (gain) in 2014 are ¥(1,131) million, ¥831 million and ¥54 million, respectively.

The accumulated benefit obligations for all defined benefit pension plans were ¥56,766 million and ¥61,992 million, respectively, at March 31, 2012 and 2013.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The aggregate projected benefit obligations, aggregate accumulated benefit obligations and aggregate fair values of plan assets for the plans with the accumulated benefit obligations in excess of plan assets were ¥5,210 million, ¥4,898 million and ¥3,019 million, respectively, at March 31, 2012 and ¥9,341 million, ¥8,844 million and ¥4,833 million, respectively, at March 31, 2013.

Net pension cost of the plans for fiscal 2011, 2012 and 2013 consists of the following:

	Millions of yen
	2011	2012	2013
Service cost	¥ 3,104	¥ 3,049	¥ 3,214
Interest cost	1,355	1,339	1,252
Expected return on plan assets	(2,025)	(2,019)	(2,049)
Amortization of transition obligation	(4)	56	56
Amortization of net actuarial loss	1,036	1,218	1,496
Amortization of prior service credit	(1,193)	(1,193)	(1,168)
Net periodic pension cost	¥ 2,273	¥ 2,450	¥ 2,801

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) for fiscal 2011, 2012 and 2013 are summarized as follows:

	Millions of yen
	2011	2012	2013
Current year actuarial gain (loss)	¥(3,446)	¥(5,144)	¥ 7,312
Amortization of net actuarial loss	1,036	1,218	1,496
Prior service credit due to amendments	8	7	0
Amortization of prior service credit	(1,193)	(1,193)	(1,168)
Amortization of transition obligation	(4)	56	56
Plan curtailments and settlements	0	18	0
Foreign currency exchange rate change	166	19	(213)
Total recognized in other comprehensive income (loss), pre-tax	¥(3,433)	¥(5,019)	¥ 7,483

The Company and certain subsidiaries use March 31 as a measurement date for all of our material plans.

Significant assumptions of domestic and overseas pension plans used to determine these amounts are as follows:

Domestic	2011	2012	2013
Weighted-average assumptions used to determine benefit obligations at
March 31:
Discount rate	2.1%	1.8%	1.8%
Rate of increase in compensation levels	6.1%	6.1%	6.0%
Weighted-average assumptions used to determine net periodic pension
cost for years ended March 31:
Discount rate	2.1%	2.1%	1.8%
Rate of increase in compensation levels	5.9%	6.1%	6.1%
Expected long-term rate of return on plan assets	2.2%	2.2%	2.2%

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Overseas	2011	2012	2013
Weighted-average assumptions used to determine benefit obligations at March 31:
Discount rate	5.5%	4.5%	4.3%
Rate of increase in compensation levels	0.8%	0.7%	0.6%
Weighted-average assumptions used to determine net periodic pension cost for
years ended March 31:
Discount rate	6.0%	5.5%	4.5%
Rate of increase in compensation levels	0.8%	0.8%	0.7%
Expected long-term rate of return on plan assets	8.1%	7.2%	7.2%

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

The Company and certain subsidiaries' investment policies are designed to ensure adequate plan assets are available to provide future payments of pension benefits to eligible participants. The Company and certain subsidiaries formulate a policy portfolio appropriate to produce the expected long-term rate of return on plan assets and to ensure that plan assets are allocated under this policy portfolio. The Company and certain subsidiaries periodically have an external consulting firm monitor the results of actual return and revise the policy portfolio if necessary.

The three levels of input used to measure fair value are described in Note 2.

F-87

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The fair value of pension plan assets at March 31, 2012 and 2013, by asset category, are as follows:

	Millions of yen
	Total Carrying Value in Consolidated Balance Sheets		March 31, 2012 Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Equity securities:
Japan
Pooled funds*1	¥	9,360	¥	0	¥ 9,360	¥	0
Other than Japan
Pooled funds*2		11,826		0	11,826		0
Debt securities:
Japan
Pooled funds*3		25,182		0	25,182		0
Other than Japan
Municipal bonds		2,791		0	2,791		0
Pooled funds*4		12,894		0	12,894		0
Other assets:
Life insurance company general
accounts*5		17,280		0	17,280		0
Others*6		6,612		0	6,612		0
	¥	85,945	¥	0	¥ 85,945	¥	0

*1 Equity securities of Japanese companies in which the Company and certain subsidiaries invest as pension plan assets include units of ORIX JREIT Inc. in the amounts of ¥89 million at March 31, 2012.

*2 These funds invest in listing shares.

*3 These funds invest approximately 70% in Japanese government bonds, approximately 10% in Japanese municipal bonds, and approximately 20% in Japanese corporate bonds.

*4 These funds invest approximately 80% in foreign government bonds, and approximately 20% in foreign municipal bonds.

*5 Life insurance company general accounts are accounts with guaranteed capital and minimum interest rate, in which life insurance companies manage funds on several contracts.

*6 Others include derivative instruments held for hedging change in the fair value of equity securities, and short-term instruments.

At March 31, 2012, our policy for the portfolio of plans consists of three major components: approximately 20% is invested in equity securities, approximately 50% is invested in debt securities and approximately 30% is invested in other investment vehicles, primarily consisting of investments in life insurance company general accounts.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

	Millions of yen March 31, 2013
		Total Quoted Prices Carrying in Active Value in Markets for Consolidated Identical Assets Balance Sheets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity securities:
Japan
Pooled funds*1	¥	12,458	¥	0	¥ 12,458	¥	0
Other than Japan
Pooled funds*2		14,670		0	14,670		0
Debt securities:
Japan
Pooled funds*3		26,208		0	26,208		0
Other than Japan
Municipal bonds		3,332		0	3,332		0
Pooled funds*4		14,641		0	14,641		0
Other assets:
Life insurance company general
accounts*5		17,880		0	17,880		0
Others*6		7,780		0	7,780		0
	¥	96,969	¥	0	¥ 96,969	¥	0

*1 These funds invest in listing shares include shares of ORIX Corporation in the amounts of ¥12 million and units of ORIX JREIT Inc. in the amounts of ¥179 million at March 31, 2013.

*2 These funds invest in listing shares.

*3 These funds invest approximately 70% in Japanese government bonds, approximately 10% in Japanese municipal bonds, and approximately 20% in Japanese corporate bonds. These funds include corporate bonds of ORIX Corporation in the amounts of ¥107 million and investment corporation bonds of ORIX JREIT Inc. in the amounts of ¥41 million at March 31, 2013.

*4 These funds invest approximately 90% in foreign government bonds and approximately 10% in foreign corporate bonds.
*5 Life insurance company general accounts are accounts with guaranteed capital and minimum interest rate, in which life insurance companies manage funds on several contracts.
*6 Others include derivative instruments held for hedging change in the fair value of equity securities, and short-term instruments.

At March 31, 2013, our policy for the portfolio of plans consists of three major components: approximately 30% is invested in equity securities, approximately 50% is invested in debt securities and approximately 20% is invested in other investment vehicles, primarily consisting of investments in life insurance company general accounts.

Each level into which assets are categorized is based on inputs used to measure the fair value of the assets.

Level 2 assets are comprised principally of pooled funds that invest in equity, debt securities and hedge funds and investments in life insurance company general accounts. Pooled funds are valued at the net asset value per share at the measurement date. They are not redeemable at the net asset value per share at the measurement date but they are redeemable at the net asset value per share in the near term after the measurement date. Investments in life insurance company general accounts are valued at conversion value.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The Company and certain subsidiaries expect to contribute ¥3,008 million to pension plans during the year ending March 31, 2014.

At March 31, 2013, the benefits expected to be paid in each of the next five fiscal years, and in the aggregate for the five years thereafter are as follows:

Years ending March 31,	Millions of yen
2014	¥ 2,013
2015	1,715
2016	1,871
2017	2,042
2018	2,236
2019-2023	13,464
Total	¥ 23,341

The cost recognized for the defined contribution pension plans of the Company and certain of its subsidiaries for the years ended March 31, 2011, 2012 and 2013 were ¥1,578 million, ¥1,409 million and ¥1,500 million, respectively.

18. Redeemable Noncontrolling Interests

Changes in redeemable noncontrolling interests in fiscal 2011, 2012 and 2013 are as follows:

2011	2012	2013
¥28,095	¥33,902	¥37,633
10,219	0	0
(73)	1,188	(400)
1,063	1,213	942

2,959	2,724	3,985

(2,353)	(315)	5,224
(2,353)	(315)	5,224
606	2,409	9,209
(6,008)	(1,079)	(5,763)
¥33,902	¥37,633	¥41,621
		Millions of yen

19. Stock-Based Compensation

The Company has a number of stock-based compensation plans as incentive plans for directors, executive officers, corporate auditors and selected employees.

Stock-option program

Since fiscal 2003, the Company has granted stock acquisition rights with a vesting period between 1.67 and 1.92 years and an exercise period between 9.67 and 9.92 years. The acquisition rights were to purchase the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Company's common stock at a specified exercise price and were distributed to directors, executive officers, corporate auditors and certain employees of the Company, subsidiaries and capital tie-up companies such as affiliated companies. The Company did not grant stock options in fiscal 2011, 2012 or 2013.

A summary of the Company's stock acquisition rights is as follows:

		Number of shares	Exercise price*
Years ended March 31,	Exercise period	granted*		Yen
2003	From June 27, 2004 to June 26,
	2012	4,533,000	¥	721
2004	From June 26, 2005 to June 25,
	2013	5,160,000		700
2005	From June 24, 2006 to June 23,
	2014	5,289,000		1,172
2006	From June 22, 2007 to June 21,
	2015	4,774,000		1,891
2007	From June 21, 2008 to June 20,
	2016	1,942,000		2,962
2008	From July 5, 2009 to June 22,
	2017	1,449,800		3,101
2009	From July 18, 2010 to June 24,
	2018	1,479,000		1,689

* The number of shares and exercise price of the granted options were adjusted for the 10-for-1 stock split implemented on April 1, 2013.

For the stock-option programs, the exercise prices, which are determined by a formula linked to the price of the Company's common stock on the Tokyo Stock Exchange, are equal or greater than the fair market value of the Company's common stock at the grant dates.

The following table summarizes information about the activity of these stock options for the year ended 2013:

Number of shares*2		Yen	Weighted average remaining contractual life Years		Aggregate intrinsic value Millions of yen



(928,200)		1,465
9,051,000		2,011	2.78	¥	187
9,051,000	¥	2,011	2.78	¥	187
	10,478,200 (499,000)	¥	Weighted average exercise price12 1,901 700

*1 The exercise prices of the granted options were adjusted in July 2009 for the issuance of new 18 million shares.

*2 The number of shares and exercise price of the granted options were adjusted for the 10-for-1 stock split implemented on April 1, 2013.

The Company received ¥98 million, ¥55 million and ¥345 million in cash from the exercise of stock options during fiscal 2011, 2012 and 2013, respectively.

The total intrinsic value of options exercised during fiscal 2011, 2012 and 2013 was ¥19 million, ¥5 million and ¥136 million, respectively.

The Company recognized incremental stock-based compensation costs of its stock-option program in the amount of ¥142 million for fiscal 2011. In fiscal 2012 and 2013, the Company did not recognize any incremental stock-based compensation costs of its stock-option program. As of March 31, 2013, the Company had no unrecognized compensation costs.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Stock compensation program

The Company maintains a stock compensation program, under which points are granted annually to directors, executive officers and group executives of the Company based upon the prescribed standards of the Company. Upon retirement, eligible directors, executive officers and group executives receive a certain number of the Company's common shares calculated by translating each point earned by that retiree to one common share adjusted for applicable withholding tax effect. The Company's common shares are provided either from the Company's treasury stock or by issuing new shares as necessary. In fiscal 2013, the Company granted 383,250 points, and 72,250 points were settled for individuals who retired during fiscal 2013. Total points outstanding under the stock compensation program as of March 31, 2013 were 1,737,792 points. The points were adjusted for the 10-for-1 stock split implemented on April 1, 2013.

During fiscal 2011, 2012 and 2013, the Company recognized incremental stock-based compensation costs of its stock compensation program in the amount of ¥255 million, ¥288 million and ¥410 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

20. Accumulated Other Comprehensive Income (Loss)

Changes in each component of accumulated other comprehensive income (loss) attributable to ORIX Corporation Shareholders in fiscal 2011, 2012 and 2013 are as follows:

			Millions of yen
	Net unrealized gains (losses) on investment in securities	Defined benefit pension plans	Foreign currency translation adjustments	Net unrealized gains (losses) on derivative instruments	Accumulated other comprehensive income (loss)
Balance at March 31, 2010	¥ 7,495	¥ (9,092)	¥ (77,651)	¥ (211)	¥ (79,459)
Cumulative effect of applying new accounting standards for the consolidation of variable interest entities, net of tax of ¥2,265 million	(3,597)		191		(3,406)
Balance at April 1, 2010	3,898	(9,092)	(77,460)	(211)	(82,865)
Net unrealized gains on investment in securities, net of tax of ¥(2,379) million	3,292				3,292
Reclassification adjustment included in net income, net of tax of
¥(3,289) million	4,313				4,313
Defined benefit pension plans, net of tax of ¥1,339 million		(1,934)			(1,934)
Reclassification adjustment included in
net income, net of tax of ¥88 million Foreign currency translation adjustments,		(72)			(72)
net of tax of ¥245 million			(18,158)		(18,158)
Reclassification adjustment included in net income, net of tax of ¥(31) million Net unrealized losses on derivative			44		44
instruments, net of tax of ¥488 million Reclassification adjustment included in				(1,011)	(1,011)
net income, net of tax of ¥(150) million				211	211
Change during year	7,605	(2,006)	(18,114)	(800)	(13,315)
Balance at March 31, 2011	11,503	(11,098)	(95,574)	(1,011)	(96,180)
Net unrealized gains on investment in securities, net of tax of ¥(2,820) million	6,963				6,963
Reclassification adjustment included in
net income, net of tax of ¥1,463 million Defined benefit pension plans, net of tax	(2,321)				(2,321)
of ¥1,807 million		(3,292)			(3,292)
Reclassification adjustment included in net income, net of tax of ¥(33) million		47			47
Foreign currency translation adjustments, net of tax of ¥(335) million			(118)		(118)
Reclassification adjustment included in net income, net of tax of ¥0 million			0		0
Net unrealized losses on derivative instruments, net of tax of ¥450 million				(974)	(974)
Reclassification adjustment included in net income, net of tax of ¥198 million				(181)	(181)
Change during year	4,642	(3,245)	(118)	(1,155)	124

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

	Millions of yen
		Net unrealized gains (losses) on investment in securities	Defined benefit pension plans	Foreign currency translation adjustments		Net unrealized gains (losses) on derivative instruments		Accumulated other comprehensive income (loss)
Balance at March 31, 2012	¥	16,145	¥(14,343)	¥ (95,692)	¥	(2,166)	¥	(96,056)
Net unrealized gains on investment in
securities, net of tax of ¥(7,933) million		17,454						17,454
Reclassification adjustment included in net
income, net of tax of ¥1,997 million		(4,625)						(4,625)
Defined benefit pension plans, net of tax of
¥(2,589) million			4,508					4,508
Reclassification adjustment included in net
income, net of tax of ¥(138) million			248					248
Foreign currency translation adjustments, net
of tax of ¥(5,254) million				38,382				38,382
Reclassification adjustment included in net
income, net of tax of ¥(1,971) million				3,551				3,551
Net unrealized losses on derivative
instruments, net of tax of ¥286 million						(549)		(549)
Reclassification adjustment included in net
income, net of tax of ¥(328) million						824		824
Change during year		12,829	4,756	41,933		275		59,793
Balance at March 31, 2013	¥	28,974	¥ (9,587)	¥ (53,759)	¥	(1,891)	¥	(36,263)

Comprehensive income (loss) and its components attributable to ORIX Corporation and noncontrolling interests have been reported, net of tax, in the consolidated statements of changes in equity, and information about comprehensive income (loss) and its components attributable to redeemable noncontrolling interests is provided in Note 18 ("Redeemable Noncontrolling Interests"). Total comprehensive income (loss) and its components have been reported, net of tax, in the consolidated statements of comprehensive income.

21. ORIX Corporation Shareholders' Equity

Changes in the number of shares issued in fiscal 2011, 2012 and 2013 are as follows:

	Number of shares
	2011	2012	2013
Beginning balance	1,102,299,480	1,102,458,460	1,102,544,220
Exercise of stock options	140,000	77,000	499,000
Conversion of convertible bonds	18,980	8,760	145,671,540
Ending balance	1,102,458,460	1,102,544,220	1,248,714,760

On April 1, 2013, the Company implemented a 10-for-1 stock split of common stock held by shareholders registered on the Company's register of shareholders as of March 31, 2013. Changes in the number of shares issued have been adjusted retrospectively to reflect the stock split for all periods presented.

The Japanese Companies Act (the "Act"), which became effective on May 1, 2006, provides that an amount equivalent to 10% of any dividends resulting from appropriation of retained earnings be appropriated to the legal

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

reserve until the aggregate amount of the additional paid-in capital and the legal reserve equals 25% of the issued capital. The Act also provides that both additional paid-in capital and the legal reserve are not available for dividends but may be capitalized or may be reduced by resolution of the general meeting of shareholders. However, if specified in the Company's articles of incorporation, dividends can be declared by the Board of Directors instead of the general meeting of shareholders. In accordance with this, the Board of Directors of the Company resolved in May 2013 that a total of ¥15,878 million dividends shall be distributed to the shareholders of record as of March 31, 2013. The liability for declared dividends and related impact on total equity is accounted for in the period of such Board of Directors' resolution.

The Act provides that at least one-half of amounts paid for new shares are included in common stock when they are issued. In conformity therewith, the Company has divided the principal amount of bonds converted into common stock and proceeds received from the issuance of common stock, including the exercise of warrants and stock acquisition rights, equally between common stock and additional paid-in capital, and set off expenses related to the issuance from the additional paid-in capital.

The amount available for dividends under the Act is calculated based on the amount recorded in the Company's nonconsolidated financial statements prepared in accordance with accounting principles generally accepted in Japan. As a result, the amount available for dividends is ¥258,000 million as of March 31, 2013.

Retained earnings at March 31, 2013 include ¥40,063 million relating to equity in undistributed earnings of the companies accounted for by the equity method.

As of March 31, 2013, the restricted net assets of certain subsidiaries, which include regulatory capital requirements mainly for banking operations and life insurance of ¥40,738 million, do not exceed 25% of consolidated net assets.

22. Brokerage Commissions and Net Gains on Investment Securities

Brokerage commissions and net gains on investment securities in fiscal 2011, 2012 and 2013 consist of the following:

		Millions of yen
	2011	2012	2013
Brokerage commissions	¥ 119	¥ 24	¥ 122
Net gains on investment securities	15,116	24,894	28,805
Dividends income	4,344	4,419	5,887
	¥19,579	¥29,337	¥34,814

Trading activities—Net gains on investment securities include net trading gains of ¥4,607 million, net trading gains of ¥9,324 million and net trading gains of ¥3,435 million for fiscal 2011, 2012 and 2013, respectively. Gains on derivative trading instruments are included in income from discontinued operations. For further information, see Note 26 "Discontinued Operations."

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

23. Life Insurance Operations

Life insurance premiums and related investment income in fiscal 2011, 2012 and 2013 consist of the following:

		Millions of yen 2011 2012 ¥116,836 11,375
			2013
Life insurance premiums	¥107,860		¥130,187
Life insurance related investment income	10,343		8,539
	¥118,203	¥128,211	¥138,726

The benefits and expenses of life insurance operations included in life insurance costs in the consolidated statements of income are recognized so as to associate with earned premiums over the life of contracts. This association is accomplished by means of the provision for future policy benefits and the deferral and subsequent amortization of policy acquisition costs (principally commissions and certain other expenses relating to policy issuance and underwriting). These policy acquisition costs are amortized over the respective policy periods in proportion to premium revenue recognized. Amortization charged to income for fiscal 2011, 2012 and 2013 amounted to ¥7,541 million, ¥7,307 million and ¥7,196 million, respectively. The amounts for fiscal 2011 and 2012 are adjusted retrospectively due to the adoption of Accounting Standards Update 2010-26.

24. Other Operations

Other operating revenues and other operating expenses in fiscal 2011, 2012 and 2013 consist of the following:

		Millions of yen
Other operating revenues:	2011	2012	2013
Revenues from the vehicle maintenance and management services	¥ 40,760	¥ 40,168	¥ 40,472
Revenues from commissions for M&A advisory services, financing advice, financial
restructuring advisory services and related services	50,319	46,165	54,374
Revenues from private equity investment	—	—	37,970
Revenues from environment and energy related business	19,563	21,202	29,812
Revenues from facilities management of golf courses	23,163	23,061	23,479
Revenues from facilities management of hotels and Japanese inns	27,966	29,355	31,093
Other	90,673	104,054	119,310
	¥252,444	¥264,005	¥336,510
		Millions of yen
Other operating expenses:	2011	2012	2013
Expenses from the vehicle maintenance and management services	¥ 33,790	¥ 31,752	¥ 29,669
Expenses from private equity investment	—	—	33,714
Expenses from environment and energy related business	17,254	18,056	23,142
Expenses from facilities management of golf courses	21,012	20,418	21,130
Expenses from facilities management of hotels and Japanese inns	26,690	26,038	26,959
Other	48,303	56,563	65,532
	¥147,049	¥152,827	¥200,146

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Other items consist of revenues and expenses from training facilities and senior housing, operating results from real estate related and aquarium businesses, commissions for the sale of insurance and other financial products, and revenues and expenses from other operations, of which there were no items exceeding 10% of total other operating revenues and expenses in fiscal 2011, 2012 and 2013, respectively.

Gains and losses from the disposition of operating facilities included in other operating assets are not significant for fiscal 2011, 2012 and 2013.

25. Write-downs of Long-Lived Assets

In accordance with ASC 360-10 ("Property, Plant, and Equipment—Impairment or Disposal of Long-Lived Assets"), the Company and its subsidiaries perform tests for recoverability on assets for which events or changes in circumstances indicated that the assets might be impaired. The Company and its subsidiaries consider an asset's carrying amount as not recoverable when such carrying amount exceeds the undiscounted future cash flows estimated to result from the use and eventual disposition of the asset. The net carrying amount of assets not recoverable is reduced to fair value if lower than the carrying amount. We 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 flow methodologies using future cash flows estimated to be generated from operation of existing assets or completion of development projects, as appropriate.

During fiscal 2011, 2012 and 2013, the Company and certain subsidiaries recognized impairment losses for the difference between carrying amounts and fair values in the amount of ¥20,310 million, ¥20,246 million and ¥21,053 million, respectively, which are reflected as write-downs of long-lived assets and income from discontinued operations. Of these amounts, ¥17,400 million, ¥15,167 million and ¥19,117 million are reflected as write-downs of long-lived assets in the accompanying consolidated statements of income for fiscal 2011, 2012 and 2013, respectively. Breakdowns of these amounts by segment are provided in Note 32 ("Segment Information").

The details of significant write-downs are as follows.

Office Buildings—During fiscal 2011, write-downs of ¥2,464 million were recorded in relation to seven office buildings mainly due to a decline in estimated cash flows of each unit. During fiscal 2012, write-downs of ¥1,055 million were recorded for 17 office buildings held for sale, and write-downs of ¥605 million were recorded in relation to three office buildings due to a decline in estimated cash flows of each unit. During fiscal 2013, write-downs of ¥1,055 million were recorded for 14 office buildings held for sale, and write-downs of ¥923 million were recorded in relation to two office buildings due to a decline in estimated cash flows of each unit.

Condominiums—During fiscal 2011, write-downs of ¥1,353 million were recorded for 26 condominiums held for sale, and write-downs of ¥2,758 million were recorded in relation to 18 condominiums due to a decline in estimated cash flows of each unit. During fiscal 2012, write-downs of ¥1,108 million were recorded for 25 condominiums held for sale, and writedowns of ¥269 million were recorded in relation to five condominiums due to a decline in estimated cash flows of each unit. During fiscal 2013, write-downs of ¥1,142 million were recorded for 13 condominiums held for sale, and write-downs of ¥3,853 million were recorded in relation to four condominiums due to a decline in estimated cash flows of each unit or property.

Commercial Facilities Other Than Office Buildings—During fiscal 2011, write-downs of ¥5,284 million were recorded in relation to 12 buildings mainly due to a decline in estimated cash flows of each unit. During

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

fiscal 2012, write-downs of ¥385 million were recorded for seven buildings held for sale. During fiscal 2013, write-downs of ¥442 million were recorded for four buildings held for sale, and write-downs of ¥1,582 million were recorded in relation to two buildings due to a decline in estimated cash flows of each unit.

Land undeveloped or under construction—During fiscal 2011, there was no impairment. During fiscal 2012, writedowns of ¥2,220 million were recorded for land undeveloped or under construction held for sale, and write-downs of ¥6,983 million were recorded in relation to land undeveloped or under construction due to a decline in estimated cash flows of each unit. During fiscal 2013, write-downs of ¥608 million were recorded for land undeveloped or under construction held for sale, and write-downs of ¥6,818 million were recorded in relation to land undeveloped or under construction due to a decline in estimated cash flows of each unit.

Others—During fiscal 2011, 2012 and 2013, write-downs of ¥8,451 million, ¥7,621 million and ¥4,630 million, respectively, for long-lived assets other than the above were recorded, mainly because the carrying amounts exceeded the estimated undiscounted future cash flows, which decreased due to deterioration in operating performance.

26. Discontinued Operations

ASC 205-20 ("Presentation of Financial Statements—Discontinued Operations") requires that the Company and its subsidiaries reclassify the operations sold or to be disposed of by sale without significant continuing involvement in the operations to discontinued operations. Under this Codification Section, the Company and its subsidiaries report the gains on sales and the results of these operations of subsidiaries, business units, and certain properties, which have been sold or are to be disposed of by sale, as income from discontinued operations in the accompanying consolidated statements of income. Revenues and expenses generated by the operations of such subsidiaries, business units and properties recognized in fiscal 2011 and 2012 have also been reclassified as income from discontinued operations in the accompanying consolidated statements of income.

During fiscal 2011, the Company and its subsidiary completed the liquidation procedure for a subsidiary in Japan which operated PFI ("Private Finance Initiative") business for hospital management, and the Company wound up a subsidiary in Japan that was established in order to enter into derivative business. The Company sold a subsidiary which operated hairdressing business, and also sold a subsidiary which operated internet related business. In addition, a subsidiary sold its subsidiary in Japan, which operated consulting business in medical and nursing care field. As a result, ¥6,895 million of aggregated gain was recognized during fiscal 2011. Furthermore, the Company has determined to wind up a subsidiary in Japan, which operated asbestos removal business during fiscal 2011 and completed the liquidation procedure for the subsidiary in fiscal 2012.

During fiscal 2012, the Company and its subsidiaries sold a subsidiary which operated real-estate rental business, a subsidiary that operated a Japanese inn and hotel, a subsidiary that operated a golf course, a subsidiary that operated ski resorts, a subsidiary that operated a property management business and a subsidiary that operated a spa facility. In addition, the Company liquidated a kumiai, which was effectively a type of SPE, seeking for rent revenue. As a result of the sales and the liquidation, a loss of ¥361 million was recognized during fiscal 2012.

During fiscal 2013, the Company and its subsidiaries completed the liquidation procedure for a kumiai in Japan which was effectively a type of SPE, operating private-equity investment and management, and the Company wound up a subsidiary overseas which operated reinsurance business. As a result, a loss of ¥13 million was recognized during fiscal 2013. Furthermore, the Company has determined to wind up a subsidiary that operates M&A advisory services business in Japan and a subsidiary that operates alternative investment business in Japan during fiscal 2013. There were no significant assets or liabilities of the subsidiaries in the accompanying

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

consolidated balance sheets at March 31, 2013. Net gains of ¥1,977 million, net losses of ¥1,188 million and net losses of ¥370 million on derivative trading instruments are included in income from discontinued operations for the subsidiary that operates alternative investment business in Japan for fiscal 2011, 2012 and 2013, respectively.

The Company and its subsidiaries own various real estate properties, including commercial and office buildings, for rental operations. In fiscal 2011, 2012 and 2013, the Company and its subsidiaries recognized ¥7,498 million, ¥4,531 million and ¥6,818 million of aggregated gains on sales of such real estate properties, respectively. In addition, the Company and its subsidiaries determined to dispose by sale of rental properties of ¥33,933 million and ¥39,459 million which are mainly included in investment in operating leases at March 31, 2012 and 2013, respectively.

Discontinued operations in fiscal 2011, 2012 and 2013 consist of the following:

		Millions of yen
	2011	2012	2013
Revenues	¥52,144	¥24,211	¥10,825
Income from discontinued operations, net*	13,924	(466)	(125)
Provision for income taxes	(7,530)	2,086	321
Discontinued operations, net of applicable tax effect	¥ 6,394	¥ 1,620	¥ 196

* Income from discontinued operations, net includes aggregate gains on sales of subsidiaries, business units, and rental properties in the amount of ¥14,393 million, ¥4,170 million and ¥6,805 million in fiscal 2011, 2012 and 2013, respectively.

27. Per Share Data

Reconciliation of the differences between basic and diluted earnings per share (EPS) in fiscal 2011, 2012 and 2013 is as follows:

In fiscal 2011, the diluted EPS calculation excludes stock options for 11,391 thousand shares, as they were antidilutive. In fiscal 2012, the diluted EPS calculation excludes stock options for 9,820 thousand shares, as they were antidilutive. In fiscal 2013, the diluted EPS calculation excludes stock options for 9,010 thousand shares, as they were antidilutive.

		Millions of yen
	2011	2012	2013
Income attributable to ORIX Corporation shareholders from continuing
operations	¥59,567	¥81,154	¥112,116
Effect of dilutive securities
Expense related to convertible bond	2,392	2,364	1,329
Income from continuing operations for diluted EPS computation	¥61,959	¥83,518	¥113,445

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

		Thousands of shares
	2011	2012	2013
Weighted-average shares	1,074,890	1,075,095	1,087,883
Effect of dilutive securities
Conversion of convertible bond	244,119	244,104	206,635
Exercise of stock options	1,068	1,228	1,546
Weighted-average shares for diluted EPS computation	1,320,077	1,320,427	1,296,064
		Yen
	2011	2012	2013
Earnings per share for income attributable to ORIX Corporation shareholders from continuing operations:
Basic	¥55.42	¥75.49	¥103.06
Diluted	46.94	63.25	87.53

28. Derivative Financial Instruments and Hedging

Risk management policy

The Company and its subsidiaries manage interest rate risk through asset and liability management systems. The Company and its subsidiaries use derivative financial instruments to hedge interest rate risk and avoid changes in interest rates that could have a significant adverse effect on the Company's results of operations. As a result of interest rate changes, the fair value and/or cash flow of interest sensitive assets and liabilities will fluctuate. However, such fluctuation will generally be offset by using derivative financial instruments as hedging instruments. Derivative financial instruments that the Company and its subsidiaries use as part of the interest risk management include interest rate swaps.

The Company and its subsidiaries utilize foreign currency borrowings, foreign exchange contracts and foreign currency swap agreements to hedge exchange rate risk associated with certain transactions and investments denominated in foreign currencies. Similarly, overseas subsidiaries generally structure their liabilities to match the currency-denomination of assets in each region.

By using derivative instruments, the Company and its subsidiaries are exposed to credit risk in the event of nonperformance by counterparties. The Company and its subsidiaries attempt to manage the credit risk by carefully evaluating the content of transactions and the quality of counterparties in advance and regularly monitoring the amount of notional principal, fair value, type of transaction and other factors pertaining to each counterparty.

(a) Cash flow hedges

The Company and its subsidiaries designate interest rate swap agreements, foreign currency swap agreements and foreign exchange contracts as cash flow hedges for variability of cash flows originating from floating rate borrowings and forecasted transactions and for exchange fluctuations. Net gains (losses) before deducting applicable taxes on derivative contracts were reclassified from accumulated other comprehensive income (loss) into earnings when earnings were affected by the variability in cash flows of the designated hedged

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

item. The amounts of these net gains (losses) after deducting applicable taxes were net losses of ¥211 million, net gains of ¥181 million and net losses of ¥824 million during fiscal 2011, 2012 and 2013, respectively. No amount of net gains (losses), which represent the ineffectiveness of cash flow hedges, was recorded in earnings for fiscal 2011 and 2012, and ¥69 million of loss was recorded in earnings for fiscal 2013. Approximately ¥936 million of net derivative losses included in accumulated other comprehensive income (loss), net of applicable income taxes at March 31, 2013 will be reclassified into earnings within fiscal 2014.

(b) Fair value hedges

The Company and its subsidiaries use financial instruments designated as fair value hedges to hedge their exposure to interest rate risk and foreign currency exchange risk. The Company and its subsidiaries designate foreign currency swap agreements and foreign exchange contracts to minimize foreign currency exposures on lease receivables, loan receivables and borrowings, denominated in foreign currency. The Company and its subsidiaries designate interest rate swap to hedge interest rate exposure of the fair values of loan receivables. The Company and certain overseas subsidiaries, which issued medium-term notes or bonds with fixed interest rates, use interest rate swap contracts to hedge interest rate exposure of the fair values of these medium-term notes. In cases where the medium-term notes were denominated in other than the subsidiaries' local currencies, foreign currency swap agreements are used to hedge foreign exchange rate exposure. A certain overseas subsidiary uses foreign currency long-term-debt to hedge foreign exchange rate exposure from unrecognized firm commitment. For fiscal 2011, 2012 and 2013, net losses of ¥231 million, ¥265 million and ¥47 million of hedge ineffectiveness associated with instruments designated as fair value hedges were recorded in earnings.

(c) Hedges of net investment in foreign operations

The Company uses foreign exchange contracts, borrowings and bonds denominated in the subsidiaries' local currencies to hedge the foreign currency exposure of the net investment in overseas subsidiaries. The gains and losses of these hedging instruments were recorded in foreign currency translation adjustments, which is a part of other comprehensive income (loss).

(d) Trading derivatives or derivatives not designated as hedging instruments

The Company and its subsidiaries engage in trading activities involving various future contracts. Therefore the Company and the subsidiaries are at various risks such as share price fluctuation risk, interest rate risk and foreign currency exchange risk. The Company and the subsidiaries check that these risks are below a certain level by using internal indicators and determine whether such contracts should be continued or not. The Company and certain subsidiaries entered into certain interest rate swap agreements, foreign currency swap agreements and foreign exchange contracts for risk management purposes which are not qualified for hedge accounting under ASC 815 ("Derivatives and Hedging").

ASC 815-10-50 ("Derivatives and Hedging—Disclosures") requires companies to disclose the fair value of derivative instruments and their gains (losses) in tabular format, as well as information about credit-risk-related contingent features in derivative agreements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The effect of derivative instruments on the consolidated statements of income, pre-tax, for fiscal 2011 is as follows.

(1) Cash flow hedges

	Gains (losses) recognized in other comprehensive income on derivative (effective portion)		Gains (losses) reclassified from accumulated other comprehensive income (loss) into income	(effective portion)	Gains (losses) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
	Millions of yen		Consolidated statements of income location		Millions of yen	Consolidated statements of income location	Millions of yen
Interest rate swap agreements	¥	598	Interest on loans and investment securities/Interest expense	¥	313	—	¥ 0
Foreign exchange contracts		526	Foreign currency transaction loss		(291)	—	0
Foreign currency swap agreements		(2,623)	Interest on loans and investment securities/Interest expense/Foreign currency transaction		(383)	—	0

(2) Fair value hedges

			Gains (losses) recognized in income on derivative and other		Gains (losses) recognized in income on hedged item
	Millions of yen		Consolidated statements of income location	Millions of yen	Consolidated statements of income location
Interest rate swap agreements	¥	1,986	Interest on loans and investment securities/Interest expense	¥ (2,217)	Interest on loans and investment securities/Interest expense
Foreign exchange contracts		8,765	Foreign currency transaction loss	(8,765)	Foreign currency transaction loss
Foreign currency swap agreements		4,297	Foreign currency transaction loss	(4,297)	Foreign currency transaction loss
Foreign currency long-term debt		1,193	Foreign currency transaction loss	(1,193)	Foreign currency transaction loss

loss

(3) Hedges of net investment in foreign operations

		Gains (losses) recognized in other comprehensive income on derivative and others (effective portion)	Gains (losses) reclassified from accumulated other comprehensive income (loss) into income	(effective portion)	Gains (losses) recognized in income on derivative and others (ineffective portion and amount excluded from effectiveness testing)
	Millions		Consolidated statements of		Millions		Consolidated statements of	Millions
		of yen	income location	of yen		income location	of yen
Foreign exchange contracts	¥	4,468	Gains on sales of subsidiaries and affiliates and liquidation losses, net	¥		39	—	¥ 0
Borrowings and bonds in local currency		3,711	—			0	—	0

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

(4) Trading derivatives or derivatives not designated as hedging instruments

		Gains (losses) recognized in income on derivative
	Millions
	of yen	Consolidated statements of income location
Interest rate swap agreements	¥ 34	Other operating revenues/expenses
Foreign currency swap agreements	(10)	Other operating revenues/expenses
Futures	1,897	Brokerage commissions and net gains on investment securities
Foreign exchange contracts	(245)	Brokerage commissions and net gains on investment securities
Credit derivatives held/written	(675)	Other operating revenues/expenses
Options held/written, Caps held and other	660	Other operating revenues/expenses

The effect of derivative instruments on the consolidated statements of income, pre-tax, for fiscal 2012 is as follows.

(1) Cash flow hedges

	Gains (losses) recognized in other comprehensive income on derivative (effective portion) Millions of yen		Gains (losses) reclassified from accumulated other comprehensive	income (loss) into income (effective portion)	Gains (losses) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
			Consolidated statements of income location	Millions of yen		Consolidated statements of income location	Millions of yen
Interest rate swap agreements	¥	(489)	Interest on loans and investment securities/Interest expense	¥	44	—	¥ 0
Foreign exchange contracts		(526)	Foreign currency transaction loss		(696)	—	0
Foreign currency swap agreements		(409)	Interest on loans and investment securities/Interest expense/Foreign currency transaction		1,031	—	0

(2) Fair value hedges

		Gains (losses) recognized in income on derivative and other		Gains (losses) recognized in income on hedged item
	Consolidated Millions statements of of yen income location		Millions of yen	Consolidated statements of income location
Interest rate swap agreements	¥ 4,072	Interest on loans and investment securities/Interest expense	¥ (4,337)	Interest on loans and investment securities/Interest expense
Foreign exchange contracts	972	Foreign currency transaction loss	(972)	Foreign currency transaction loss
Foreign currency swap agreements Foreign currency long-term-debt	227 69	Foreign currency transaction loss Foreign currency transaction loss	(227) (69)	Foreign currency transaction loss Foreign currency transaction loss

loss

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

(3) Hedges of net investment in foreign operations

	Gains (losses) recognized in other comprehensive income on derivative and others		Gains (losses) reclassified from accumulated other comprehensive income (loss) into income (effective (effective portion) portion)					Gains (losses) recognized in income on derivative and others (ineffective portion and amount excluded from effectiveness testing)
		Millions of yen	Consolidated statements of income location		Millions of yen		Consolidated statements of income location		Millions of yen
Foreign exchange contracts	¥	(1,198)	—	¥		0	—	¥		0
Borrowings and bonds in local currency		1,348	—			0	—			0

(4) Trading derivatives or derivatives not designated as hedging instruments

		Gains (losses) recognized in income on derivative
	Millions
	of yen	Consolidated statements of income location
Interest rate swap agreements	¥ 23	Other operating revenues/expenses
Foreign currency swap agreements	24	Other operating revenues/expenses
Futures	(1,056)	Brokerage commissions and net gains on investment securities
Foreign exchange contracts	615	Brokerage commissions and net gains on investment securities
Credit derivatives held/written	(92)	Other operating revenues/expenses
Options held/written, Caps held and other	137	Other operating revenues/expenses

The effect of derivative instruments on the consolidated statements of income, pre-tax, for fiscal 2013 is as follows.

(1) Cash flow hedges

	in other comprehensive derivative	Gains (losses) recognized income on (effective portion)	Gains (losses) reclassified from accumulated other comprehensive income (loss) into income (effective portion)		Gains (losses) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
		Millions of yen	Consolidated statements of income location	Millions of yen	Consolidated statements of income location	Millions of yen
Interest rate swap agreements	¥	(249)	Interest on loans and investment securities/Interest expense	¥ 6	—	¥ 0
Foreign exchange contracts		(1,546)	Foreign currency transaction loss	73	—	0
Foreign currency swap agreements		960	Interest on loans and investment securities/Interest expense/Foreign currency transaction loss	(1,231)	Foreign currency transaction loss	(69)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

(2) Fair value hedges

		Gains (losses) recognized in income on derivative and other		Gains (losses) recognized in income on hedged item
	Millions of yen	Consolidated statements of income location	Millions of yen	Consolidated statements of income location
Interest rate swap agreements	¥ 76	Interest on loans and investment securities/Interest expense	(120) ¥	Interest on loans and investment securities/Interest expense
Foreign exchange contracts	(8,828)	Foreign currency transaction loss	8,828	Foreign currency transaction loss
Foreign currency swap agreements	(2,352)	Foreign currency transaction loss	2,349	Foreign currency transaction loss
Foreign currency long-term-debt	172	Foreign currency transaction loss	(172)	Foreign currency transaction loss

(3) Hedges of net investment in foreign operations

		Gains (losses) recognized in other comprehensive income on derivative and others (effective portion)	Gains (losses) reclassified from accumulated other comprehensive income (loss) into income (effective portion)		Gains (losses) recognized in income on derivative and others (ineffective portion and amount excluded from effectiveness testing)
		Millions of yen	Consolidated statements of income location	Millions of yen	Consolidated statements of income location	Millions of yen
Foreign exchange contracts	¥	(11,524)	Gains on sales of subsidiaries and affiliates and liquidation losses, net	¥ 1,425	—	¥ 0
Borrowings and bonds in local currency		(19,637)	Gains on sales of subsidiaries and affiliates and liquidation losses, net	3,464	—	0

(4) Trading derivatives or derivatives not designated as hedging instruments

			Gains (losses) recognized in income on derivative
	Millions of yen		Consolidated statements of income location
Interest rate swap agreements	¥	8	Other operating revenues/expenses
Futures		(504)	Brokerage commissions and net gains on investment securities
Foreign exchange contracts		(236)	Brokerage commissions and net gains on investment securities
Credit derivatives held/written		344	Other operating revenues/expenses
Options held/written, Caps held and other		992	Other operating revenues/expenses

Notional amounts of derivative instruments and other, fair values of derivative instruments and other in consolidated balance sheets at March 31, 2012 and 2013 are as follows.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

March 31, 2012

		Asset derivatives					Liability derivatives
		Notional amount Millions of yen		Fair value Millions of yen	Consolidated balance sheets location		Fair value Millions of yen	Consolidated balance sheets location
Derivatives designated as hedging instruments and other:
Interest rate swap agreements	¥	234,523	¥	4,624	Other receivables	¥	1,253	Trade notes, accounts payable and other liabilities
Futures, Foreign exchange contracts		90,813		325	Other receivables		4,985	Trade notes, accounts payable and other liabilities
Foreign currency swap agreements		87,480		5,540	Other receivables		5,432	Trade notes, accounts payable and other liabilities
Foreign currency long-term-debt Trading derivatives or derivatives not designated as hedging instruments:		152,508		0	—		0	—
Interest rate swap agreements	¥	1,329	¥	0	—	¥	24	Trade notes, accounts payable and other liabilities
Options held/written, Caps held and other		157,134		5,924	Other receivables		4,430	Trade notes, accounts payable and other liabilities
Futures, Foreign exchange contracts		188,446		702	Other receivables		512	Trade notes, accounts payable and other liabilities
Credit derivatives held		9,913		97	Other receivables		23	Trade notes, accounts payable and other liabilities

March 31, 2013

			Asset derivatives				Liability derivatives
		Notional amount Millions of yen		Fair value Millions of yen	Consolidated balance sheets location		Fair value Millions of yen	Consolidated balance sheets location
Derivatives designated as hedging instruments and other:
Interest rate swap agreements	¥	264,434	¥	4,654	Other receivables	¥	1,451	Trade notes, accounts payable and other liabilities
Futures, Foreign exchange contracts		191,980		838	Other receivables		4,624	Trade notes, accounts payable and other liabilities
Foreign currency swap agreements		83,000		2,890	Other receivables		8,263	Trade notes, accounts payable and other liabilities
Foreign currency long- term-debt Trading derivatives or derivatives not designated as hedging instruments:		161,379		0	—		0	—
Interest rate swap agreements	¥	1,294	¥	0	—	¥	8	Trade notes, accounts payable and other liabilities
Options held/written and other		217,999		5,654	Other receivables		3,530	Trade notes, accounts payable and other liabilities
Futures, Foreign exchange contracts		41,363		192	Other receivables		61	Trade notes, accounts payable and other liabilities
Credit derivatives held/written		20,161		370	Other receivables		100	Trade notes, accounts payable and other liabilities

Certain of the Company's derivative instruments contain provisions that require the Company to maintain an investment grade credit rating from each of the major credit rating agencies. If the Company's credit rating were to fall below investment grade, it would be in violation of these provisions, and the counterparties to the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

derivative instruments could request immediate payment on derivative instruments that are in net liability positions. There are no derivative instruments with credit-risk-related contingent features that are in a liability position on March 31, 2012 and 2013.

ASC 815-10-50 ("Derivatives and Hedging—Disclosures") requires sellers of credit derivatives to disclose additional information about credit- risk-related potential payment risk.

The Company and its subsidiaries have contracted credit derivatives for the purpose of trading. Details of credit derivatives written are as follows as of March 31, 2013 and there are no credit derivatives written as of March 31, 2012.

March 31, 2013

Types of derivatives	The events or circumstances that would require the seller to perform under the credit derivative	Maximum potential amount of future payment under the credit derivative Millions of yen		Approximate remaining term of the credit derivative		Fair value of the credit derivative Millions of yen
Credit default swap	In case of credit event (bankruptcy, failure to pay, restructuring) occurring in underlying reference company*	¥	832	Less than five years	¥	(29)

* Underlying reference company's credit ratings are Caa1 or better rated by rating agencies as of March 31, 2013.

29. Significant Concentrations of Credit Risk

The Company and its subsidiaries have established various policies and procedures to manage credit exposure, including initial credit approval, credit limits, collateral and guarantee requirements, obtaining rights of offset and continuous oversight. The Company and its subsidiaries' principal financial instrument portfolio consists of investment in direct financing leases which are secured by title to the leased assets and installment loans which are secured by assets specifically collateralized in relation to loan agreements. When deemed necessary, guarantees are also obtained. The value and adequacy of the collateral are continually monitored. Consequently, the risk of credit loss from counterparties' failure to perform in connection with collateralized financing activities is believed to be minimal. The Company and its subsidiaries have access to collateral in case of bankruptcy and other losses. However, a significant decline in real estate markets could result in a decline in fair value of the collateral real estate below the mortgage setting amount, which would expose the Company and certain subsidiaries to unsecured credit risk.

The Company and its subsidiaries make investments in securities for various purposes. The risk of incurring significant losses during a certain period is believed to be minimal due to the diversification in the investment portfolio. However, various factors, including the issuer's credit risk and market trends, could expose the Company and its subsidiaries to a risk of unexpected loss.

At March 31, 2012 and 2013, no concentration with a single obligor exceeded 1% of the Company's consolidated total assets. With respect to the Company and its subsidiaries' credit exposures on a geographic basis, ¥4,733 billion, or 77%, at March 31, 2012 and ¥4,723 billion, or 77%, at March 31, 2013 of the credit risks

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

arising from all financial instruments are attributable to customers located in Japan. The largest concentration of credit risk outside of Japan is exposure attributable to obligors located in the United States of America. The gross amount of such exposure is ¥858 billion and ¥777 billion as of March 31, 2012 and 2013, respectively. Since the Company and its subsidiaries adopted ASU 2009-16 and ASU 2009-17 on April 1, 2010, which changed the circumstances under which we are required to consolidate certain VIEs, the amounts above in relation to our exposure in the U.S. mainly include the effect of such consolidated VIEs.

The Company and its subsidiaries run businesses such as development and rental of commercial real estate and office buildings, condominium development and sales, hotel, golf course, and training facility operation. Real estate in development and rental business is mainly recorded in investment in direct financing leases and operating leases. In connection with investment in direct financing leases and operating leases, the percentage of investment in real estate to consolidated total assets is 12.6% and 11.7% as of March 31, 2012 and 2013, respectively.

The Company and its subsidiaries have transportation equipment such as automobile operations and aircraft. Transportation equipment is mainly recorded in investment in direct financing leases and operating leases. In connection with investment in direct financing leases and operating leases, the percentage of investment in transportation equipment to consolidated total assets is 8.8% and 10.4% as of March 31, 2012 and 2013, respectively.

The Company and its subsidiaries provide consumers with housing loans. In connection with installment loans, the percentage of housing loans to consolidated total assets is 10.4% and 10.9% as of March 31, 2012 and 2013, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

30. Estimated Fair Value of Financial Instruments

The following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying consolidated financial statements and the related market or fair value.

The disclosures include financial instruments and derivative financial instruments, other than investment in direct financing leases, investment in subsidiaries and affiliates, pension obligations and insurance contracts.

March 31, 2012

	Millions of yen
	Carrying amount			Estimated fair value	Level 1		Level 2		Level 3
Trading instruments
Trading securities	¥ 12,817		¥	12,817	¥	384	¥	12,433	¥	0
Futures, Foreign exchange contracts:
Assets		692		692		649		43		0
Liabilities		482		482		412		70		0
Credit derivatives held:
Assets		97		97		0		97		0
Liabilities		23		23		0		23		0
Options held/written, Caps held and
other:
Assets	5,924			5,924		0		631		5,293
Liabilities	4,430			4,430		0		4,430		0
Non-trading instruments
Assets:
Cash and cash equivalents	¥ 786,892		¥	786,892		¥786,892	¥	0	¥	0
Restricted cash	123,295			123,295		123,295		0		0
Time deposits	24,070			24,070		0		24,070		0
Installment loans (net of allowance
for probable loan losses)	2,650,162			2,669,196		0		78,934		2,590,262
Investment in securities:
Practicable to estimate fair
value	935,495			938,314		173,056		521,603		243,655
Not practicable to estimate
fair value*	199,078			199,078		0		0		0
Liabilities:
Short-term debt	¥ 457,973		¥	457,973	¥	0	¥	457,973	¥	0
Deposits	1,103,514			1,107,440		0		1,107,440		0
Long-term debt	4,267,480			4,262,612		0		1,491,620		2,770,992
Futures, Foreign exchange contracts:
Assets		335		335		0		335		0
Liabilities	5,015			5,015		0		5,015		0
Foreign currency swap agreements:
Assets	5,540			5,540		0		5,540		0
Liabilities	5,432			5,432		0		5,432		0
Interest rate swap agreements:
Assets	4,624			4,624		0		4,624		0
Liabilities	1,277			1,277		0		1,277		0

* The fair value of investment securities of ¥199,078 million was not estimated, as it was not practical.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

March 31, 2013

	Millions of yen




































Liabilities	1,459	1,459	0	1,459	0

* The fair value of investment securities of ¥208,077 million was not estimated, as it was not practical.

Input level of fair value measurement

If active market prices are available, fair value measurement is based on quoted active market prices and 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 and 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

discounted cash flow methodologies, commonly used option-pricing models and broker quotes and classified as Level 3, as the valuation models and broker quotes are based on inputs that are unobservable in the market.

Estimation of fair value

The following methods and significant assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate a value:

Cash and cash equivalents, restricted cash, time deposits and short-term debt—The carrying amounts recognized in the balance sheets were determined to be reasonable estimates of their fair values due to their short maturity.

Installment loans—The carrying amounts of floating-rate installment loans with no significant changes in credit risk and which could be repriced within a short-term period were determined to be reasonable estimates of their fair values. The carrying amounts of purchased loans were determined to be reasonable estimates of their fair values because the carrying amounts (net of allowance) are considered to properly reflect the recoverability and value of these loans. For certain homogeneous categories of medium- and long-term fixed-rate loans, such as housing loans, the estimated fair values were calculated by discounting the future cash flows using the current interest rates charged by the Company and its subsidiaries for new loans made to borrowers with similar credit ratings and remaining maturities. Concerning above, if available, estimated fair values were based on quoted market prices or quotations provided by dealers.

Investment in securities—For trading securities and available-for-sale securities other than specified bonds issued by SPEs and certain other mortgage-backed and asset-backed securities, the estimated fair values, which are also the carrying amounts recorded in the balance sheets, were generally based on quoted market prices or quotations provided by dealers. As for the specified bonds issued by the SPEs and certain other mortgage-backed and asset-backed securities included in available-for-sale securities, the Company and its subsidiaries estimated the fair value by using valuation models including discounted cash flow methodologies and broker quotes (see Note 2). For held-to-maturity securities, the estimated fair values were based on quoted market prices. For certain investment funds included in other securities, the fair values are estimated based on net asset value per share or discounted cash flow methodologies. With regard to other securities other than the investment funds described above, the Company and its subsidiaries have not estimated the fair value, as it is not practicable to do so. Those other securities mainly consist of non-marketable equity securities and preferred capital shares. Because there were no quoted market prices for such other securities and each security has a different nature and characteristics, reasonable estimates of fair values could not be made without incurring excessive costs.

Deposits—The carrying amounts of demand deposits recognized in the consolidated balance sheets were determined to be reasonable estimates of their fair values. The estimated fair values of time deposits were calculated by discounting the future cash flows. The current interest rates offered for the deposits with similar terms and remaining average maturities were used as the discount rates.

Long-term debt—The carrying amounts of long-term debt with floating rates which could be repriced within short-term periods were determined to be reasonable estimates of their fair values. For medium-and long-term fixed-rate debt, the estimated fair values were calculated by discounting the future cash flows. The borrowing interest rates that were currently available to the Company and its subsidiaries offered by financial institutions for debt with similar terms and remaining average maturities were used as the discount rates. Concerning above, if available, estimated fair values were based on quoted market prices or quotations provided by dealers.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Derivatives—For exchange-traded derivatives, fair value is based on quoted market prices. Fair value estimates for other derivatives generally reflect the estimated amounts that the Company and its subsidiaries would receive or pay to terminate the contracts at the reporting date, thereby taking into account the current unrealized gains or losses of open contracts. Discounted amounts of future cash flows using the current interest rate are used when estimating the fair values for most of the Company's and its subsidiaries' derivatives.

31. Commitments, Guarantees and Contingent Liabilities

Commitments—As of March 31, 2013, the Company and its subsidiaries have commitments for the purchase of equipment to be leased, having a cost of ¥12,117 million.

The minimum future rentals on non-cancelable operating leases are as follows:

Years ending March 31,	Millions of yen
2014	¥ 4,036
2015	3,576
2016	3,300
2017	3,199
2018	2,866
Thereafter	19,283
Total	¥ 36,260

The Company and its subsidiaries lease office space under operating lease agreements, which are primarily cancelable, and made rental payments totaling ¥8,131million, ¥7,681million and ¥7,848 million in fiscal 2011, 2012 and 2013, respectively.

Certain computer systems of the Company and its subsidiaries have been operated and maintained under non-cancelable contracts with third-party service providers. For such services, the Company and its subsidiaries made payments totaling ¥759 million, ¥442 million and ¥487 million in fiscal 2011, 2012 and 2013, respectively. The longest contract of them will mature in fiscal 2016. As of March 31, 2013, the amounts due are as follows:

Years ending March 31,	Millions of yen
2014	¥ 179
2015	97
2016	36
Total	¥ 312

The Company and its subsidiaries have commitments to fund estimated construction costs to complete ongoing real estate development projects and other commitments, totaling ¥59,830 million as of March 31, 2013.

The Company and its subsidiaries have agreements to commit to execute loans for consumers, and to invest in funds, as long as the agreed-upon terms are met. As of March 31, 2013, the total unused credit and capital amount available is ¥284,090 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Guarantees—The Company and its subsidiaries apply ASC 460-10 ("Guarantees"), and at the inception of a guarantee recognize a liability in the consolidated balance sheets at fair value for the guarantee within the scope of ASC 460-10. The following table represents the summary of potential future payments, book value recorded as guarantee liabilities of the guarantee contracts outstanding and maturity of the longest guarantee contracts as of March 31, 2012 and 2013:

		2013
	Millions of yen		Fiscal year	Millions of yen	Fiscal year
Guarantees	Potential future payment	Book value of guarantee liabilities	Maturity of the longest contract	Potential future payment	Book value of guarantee liabilities	Maturity of the longest contract
Corporate loans	¥360,436	¥ 1,577	2026	¥316,650	¥ 2,587	2026
Transferred loans	162,554	3,869	2043	196,162	4,246	2044
Consumer loans	0	0	—	77,034	8,085	2018
Housing loans	19,511	4,536	2051	29,510	7,437	2051
Other	1,991	7	2024	2,936	126	2024
Total	¥544,492	¥ 9,989	—	¥622,292	¥22,481	—

Guarantee of corporate loans: The Company and certain subsidiaries mainly guarantee corporate loans issued by financial institutions for customers. The Company and its subsidiaries are obliged to pay the outstanding loans when the guaranteed customers fail to pay principal and/or interest in accordance with the contract terms. In some cases, the corporate loans are secured by the guaranteed customers' assets. Once the Company and its subsidiaries assume the guaranteed customers' obligation, the Company and its subsidiaries obtain a right to claim the collateral assets. In other cases, certain contracts that guarantee corporate loans issued by financial institutions for customers include contracts that the amounts of performance guarantee are limited to a range of guarantee commissions. As of March 31, 2012 and March 31, 2013, total notional amount of the loans subject to such guarantees are ¥1,234,000 million and ¥1,239,000 million respectively, and book value of guarantee liabilities which amount is included in the table above are ¥666 million and ¥734 million, respectively. The potential future payment amounts included in the table above for these guarantees are limited to the agreed range of the guarantee commissions, which are less than the total notional amounts of the loans subject to these guarantees.

Payment or performance risk of the guarantees is considered based on the historical experience of credit events. There have been no significant changes in the payment or performance risk of the guarantees in fiscal 2013.

Guarantee of transferred loans: A subsidiary in the United States is authorized to underwrite, originate, fund, and service multi-family and seniors housing loans without prior approval from Federal National Mortgage Association ("Fannie Mae") under Fannie Mae's Delegated Underwriting and Servicing program. As part of this program, Fannie Mae provides a commitment to purchase the loans.

In return for the delegated authority, the subsidiary guarantees the performance of certain housing loans transferred to Fannie Mae and has the payment or performance risk of the guarantees to absorb some of the losses when losses arise from the transferred loans.

There were no significant changes in the payment or performance risk of these guarantees in fiscal 2013.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Guarantee of consumer loans: A subsidiary guarantees consumer loans, typically card loans, issued by Japanese financial institutions. The subsidiary is obligated to pay the outstanding obligations when these loans become delinquent generally for more than a month.

Payment or performance risk of the guarantees is considered based on the historical experience of credit events.

There were no significant changes in the payment or performance risk of the guarantees in fiscal 2013.

Guarantee of housing loans: The Company and certain subsidiaries guarantee housing loans issued by Japanese financial institutions to third party individuals. The Company and its subsidiaries are typically obliged to pay the outstanding loans when these loans become delinquent more than three months. The housing loans are usually secured by the real properties. Once the Company and its subsidiaries assume the guaranteed parties' obligation, the Company and its subsidiaries obtain a right to claim the collateral assets.

Payment or performance risk of the guarantees is considered based on the historical experience of credit events.

There were no significant changes in the payment or performance risk of the guarantees in fiscal 2013.

Other guarantees: Other guarantees include the guarantees to financial institutions and the guarantees derived from collection agency agreements. Pursuant to the contracts of the guarantees to financial institutions, a subsidiary pays to the financial institutions when customers of the financial institutions become debtors and default on the debts. Pursuant to the agreements of the guarantees derived from collection agency agreements, the Company and certain subsidiaries collect third parties' debt and pay the uncovered amounts.

Litigation—The Company and its subsidiaries are involved in legal proceedings and claims in the ordinary course of business. In the opinion of management, none of such proceedings and claims will have a significant impact on the Company's financial position or results of operations.

32. Segment Information

Financial information about the operating segments reported below is that which is available by segment and evaluated regularly by the management in deciding how to allocate resources and in assessing performance.

From April 1, 2012, Accounting Standards Update 2010-26 ("Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts"—ASC 944 ("Financial Services—Insurance")) is retrospectively applied to prior periods' financial statements.

Due to this change, the reclassified figures are shown for the years ended March 31, 2011 and 2012.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

An overview of operations for each of the six segments follows below.

Corporate Financial Services	:	Lending, leasing, commission business such as the sale of financial products
Maintenance Leasing	:	Automobile leasing and rentals, car sharing, and precision measuring and IT-related equipment rentals and leasing
Real Estate	:	Real estate development, rental and financing, facility operation, REIT asset management, real estate investment and advisory services
Investment and Operation	:	Environment and energy business, loan servicing (asset recovery) and principal investment
Retail	:	Life insurance, banking, and card loan business
Overseas Business	:	Leasing, lending, investment in bonds, investment banking, and ship- and aircraft related operations

Financial information of the segments for the years ended March 31, 2011, 2012 and 2013 is as follows:

	Millions of yen
	Corporate			Investment
Year ended March 31, 2011	Financial	Maintenance		and		Overseas
Revenues	Services	Leasing	Real Estate	Operation	Retail	Business	Total
	¥ 79,305	¥ 225,830	¥ 217,590	¥ 89,595	¥ 148,768	¥176,875	¥ 937,963
Interest revenue	23,830	189	13,181	24,083	28,171	34,839	124,293
Interest expense	12,877	4,998	18,098	6,639	8,980	16,931	68,523
Depreciation and amortization	5,605	98,577	16,587	1,743	8,769	27,662	158,943
Other significant non-cash
items:
Provision for doubtful receivables and
probable loan losses	12,718	1,955	1,131	6,734	1,409	3,226	27,173
Write-downs of long-lived
assets	104	0	13,278	996	0	1,770	16,148
Increase (Decrease) in
policy liabilities	0	0	0	0	(11,615)	0	(11,615)
Equity in net income (loss) of
affiliates and gains (losses)
on sales of subsidiaries and
affiliates and liquidation
losses, net	487	157	2,585	1,333	52	13,382	17,996
Discontinued operations	121	0	7,845	6,849	199	76	15,090
Segment profits	10,035	26,203	54	13,212	21,811	45,639	116,954
Segment assets	968,327	502,738	1,539,814	506,011	1,653,704	972,224	6,142,818
Long-lived assets	37,919	312,261	1,016,039	45,139	42,686	193,724	1,647,768
Expenditures for long-lived
assets	3,744	118,283	40,270	6,168	86	58,156	226,707
Investment in affiliates	15,993	710	84,325	55,151	110,375	106,813	373,367

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

	Millions of yen
	Corporate	Investment
Year ended March 31, 2012	Financial		Maintenance				and				Overseas
Revenues	Services		Leasing		Real Estate		Operation		Retail		Business		Total
	¥ 72,449	¥	231,951	¥	222,631		¥ 73,293	¥	160,071		¥187,240	¥	947,635
Interest revenue	19,901		343		10,729		21,716		29,041		32,210		113,940
Interest expense	9,759		4,186		15,677		5,757		7,195		19,212		61,786
Depreciation and amortization	3,420		98,810		18,570		1,797		8,916		28,194		159,707
Other significant non-cash
items:
Provision for doubtful
receivables and probable
loan losses	2,278		10		2,988		7,442		1,128		3,811		17,657
Write-downs of long-lived
assets	793		0		11,311		713		0		798		13,615
Increase (Decrease) in policy
liabilities	0		0		0		0		6,421		0		6,421
Equity in net income (loss) of
affiliates and gains (losses)
on sales of subsidiaries and
affiliates and liquidation
losses, net	687		146		1,310		7,033		(9,996)		6,299		5,479
Discontinued operations	475		0		444		(3,331)		688		667		(1,057)
Segment profits	21,532		34,710		1,349		15,983		19,352		49,768		142,694
Segment assets	898,776		537,782		1,369,220		471,145		1,738,454		986,762		6,002,139
Long-lived assets	27,029		327,489		977,102		33,964		44,986		195,207		1,605,777
Expenditures for long-lived
assets	909		126,779		22,945		507		14		63,506		214,660
Investment in affiliates	16,842		880		84,697		61,469		79,255		88,564		331,707
	Millions of yen
	Corporate					Investment
Year ended March 31, 2013	Financial Services		Maintenance Leasing		Real Estate	and Operation			Retail		Overseas Business		Total
Revenues	¥ 72,463	¥	238,316	¥	215,212	¥121,933		¥	188,695	¥	202,516		¥1,039,135
Interest revenue	17,535		426		9,062		22,573		45,854		35,830		131,280
Interest expense	9,547		4,258		12,352		4,509		6,674		18,249		55,589

Interest revenue	17,535	426	9,062	22,573	45,854	35,830	131,280
Interest expense	9,547	4,258	12,352	4,509	6,674	18,249	55,589
Depreciation and
amortization	2,380	106,485	19,741	2,297	10,631	31,695	173,229
Other significant non-cash
items:
Provision for doubtful
receivables and
probable loan losses	131	123	(449)	5,532	2,611	2,438	10,386
Write-downs of long-lived
assets	0	0	13,296	1,723	0	328	15,347
Increase (Decrease) in
policy liabilities	0	0	0	0	20,990	0	20,990
Equity in net income (loss) of
affiliates and gains (losses)
on sales of subsidiaries
and affiliates and
liquidation losses, net	1,145	176	(430)	7,251	4,680	9,521	22,343
Discontinued operations	0	0	4,063	(1,045)	632	432	4,082
Segment profits	24,754	36,091	5,582	34,937	43,209	52,756	197,329
Segment assets	892,738	599,075	1,111,810	416,569	1,970,972	1,211,500	6,202,664
Long-lived assets	27,415	381,816	864,754	49,441	92,817	280,218	1,696,461
Expenditures for long-lived
assets	1,943	160,420	22,276	1,200	206	109,426	295,471
Investment in affiliates	18,020	1,459	73,141	65,713	25,205	143,019	326,557

Segment figures reported in these tables include operations classified as discontinued operations in the accompanying

consolidated statements of income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The accounting policies of the segments are almost the same as those described in Note 1 ("Significant Accounting and Reporting Policies") except for the treatment of income tax expenses, net income attributable to the noncontrolling interests, net income attributable to the redeemable noncontrolling interests, income from discontinued operations and the consolidation of certain variable interest entities (VIEs). Income taxes are not included in segment profits or losses because the management evaluates segments' performance on a pre-tax basis. Also, net income attributable to noncontrolling interests and redeemable noncontrolling interests are not included in segment profits or losses because the management evaluates segments' performance based on profits or losses (per-tax) attributable to ORIX Corporation Shareholders. On the other hand, income from discontinued operations is included in segment profits or losses because the management considers such disposal activities as part of the ordinary course of business. Net income attributable to the noncontrolling interests, net income attributable to the redeemable noncontrolling interests and income from discontinued operations, which are recognized net of tax in the accompanying consolidated statements of income, are adjusted to profit or loss before income taxes, when calculating segment profits or losses. Most of selling, general and administrative expenses, including compensation costs that are directly related to the revenue generating activities of each segment, have been accumulated by and charged to each segment. Gains and losses that management does not consider for evaluating the performance of the segments, such as write-downs of certain securities, write-downs of certain long-lived assets and certain foreign exchange gains or losses are excluded from the segment profits or losses, and are regarded as corporate items.

Assets attributed to each segment are investment in direct financing leases, installment loans, investment in operating leases, investment in securities, other operating assets, inventories, advances for investment in operating leases (included in other assets), advances for investment in other operating assets (included in other assets), and investment in affiliates. This has resulted in the depreciation of office facilities being included in each segment's profit or loss while the carrying amounts of corresponding assets are not allocated to each segment's assets. However, the effect resulting from this allocation is not significant.

For those VIEs that are used for securitization and are consolidated in accordance with ASC 810-10 ("Consolidations"), for which the VIE's assets can be used only to settle related obligations of those VIEs and the creditors (or beneficial interest holders) do not have recourse to other assets of the Company or its subsidiaries, segment assets are measured based on the amount of the Company and its subsidiaries' net investments in the VIEs, which is different from the amount of total assets of the VIEs, and accordingly, segment revenues are also measured at a net amount representing the revenues earned on the net investments in the VIEs.

Certain gains or losses related to assets and liabilities of consolidated VIEs, which are not ultimately attributable to the Company and its subsidiaries, are excluded from segment profits.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The reconciliation of segment totals to consolidated financial statement amounts is as follows. Significant items to be reconciled are segment revenues, segment profits and segment assets. Other items do not have a significant difference between segment amounts and consolidated amounts.

	2011	2012	2013
Segment revenues:
Total revenues for segments	¥ 937,963	¥ 947,635	¥1,039,135
Revenues related to corporate assets	3,440	5,564	4,118
Revenues related to assets of certain VIEs	51,747	41,833	33,210
Revenues from discontinued operations	(52,144)	(24,211)	(10,825)
Total consolidated revenues	¥ 941,006	¥ 970,821	¥1,065,638
Segment profits:
Total profits for segments	¥ 116,954	¥ 142,694	¥ 197,329
Corporate interest expenses, general and administrative expenses	(11,852)	(14,690)	(23,133)
Corporate write-downs of securities	(615)	0	0
Corporate net gains (losses) on investment securities	203	0	0
Corporate other gains (losses)	(4,875)	(3,689)	(11,784)
Gains (losses) related to assets or liabilities of certain VIEs	(1,591)	2,583	2,832
Discontinued operations, pre-tax	(13,924)	466	125
Net income attributable to the noncontrolling interests and net income attributable to the redeemable noncontrolling interests, net of
applicable tax effect	5,332	2,392	7,149
Total consolidated income before income taxes and discontinued
operations	¥ 89,632	¥ 129,756	¥ 172,518
Segment assets:
Total assets for segments	¥6,142,818	¥6,002,139	¥6,202,664
Cash and cash equivalents, restricted cash and time deposits	855,340	934,257	941,571
Allowance for doubtful receivables on direct financing leases and
probable loan losses	(154,150)	(136,588)	(104,264)
Other receivables	182,013	188,108	196,626
Other corporate assets	524,056	478,979	534,423
Assets of certain VIEs	1,011,833	865,935	668,690
Total consolidated assets	¥8,561,910	¥8,332,830	¥8,439,710

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

The following information represents geographical revenues and income before income taxes, which are attributed to geographic areas, based on the country location of the Company and its subsidiaries.

	Millions of yen Year Ended March 31, 2011
		Japan	America*2	Other*3		Difference between Geographic Total and Consolidated Amounts	Consolidated Amounts
Total Revenues	¥	771,403	¥138,975	¥ 82,772	¥	(52,144)	¥ 941,006
Income before Income Taxes*1		60,512	18,411	24,633		(13,924)	89,632
		Millions of yen
		Year Ended March 31, 2012
		Japan	America*2	Other*3		Difference between Geographic Total and Consolidated Amounts	Consolidated Amounts
Total Revenues	¥	768,955	¥130,717	¥ 95,360	¥	(24,211)	¥ 970,821
Income before Income Taxes*1		74,966	26,894	27,430		466	129,756
	Millions of yen
		Year Ended March 31, 2013
		Japan	America*2	Other*3		Difference between Geographic Total and Consolidated Amounts	Consolidated Amounts
Total Revenues	¥	843,625	¥130,561	¥102,277	¥	(10,825)	¥1,065,638
Income before Income Taxes*1		116,235	27,458	28,700		125	172,518

*Note: 1. Results of discontinued operations (pre-tax) are included in each amount attributed to each geographic area.

Mainly United States
Mainly Asia, Europe, Oceania and Middle East

ASC 280-10 ("Segment Reporting") requires disclosure of revenues from external customers for each product and service as enterprise-wide information. The consolidated statements of income in which the revenues are categorized based on the nature of the types of business conducted include the required information.

No single customer accounted for 10% or more of the Company's total revenues for the years ended March 31, 2011, 2012 and 2013.

33. Subsequent Events

There are no material subsequent events.

Schedule II.—Valuation and Qualifying Accounts and Reserves

ORIX Corporation and Subsidiaries

	Millions of yen Year Ended March 31, 2011
Description		Balance at beginning of period	Acquisitions				Addition: Charged to costs and expenses		Deduction		Translation adjustment		Balance at end of period
Restructuring cost: Closed office lease
obligations	¥	97	¥		0	¥	42	¥	(59)	¥	(2)	¥	78
Severance and other benefits
to terminated employees		16			0		0		(16)		0		0
Total	¥	113	¥		0	¥	42	¥	(75)	¥	(2)	¥	78
							Millions of yen
		Year Ended March 31, 2012 Addition:
Description		Balance at beginning of period		Acquisitions		Charged to costs and expenses			Deduction		Translation adjustment		Balance at end of period
Restructuring cost:
Closed office lease obligations	¥	78	¥		0	¥	0	¥	(38)	¥	(1)	¥	39
Severance and other benefits
to terminated employees		0			0		15		(15)		0		0
Total	¥	78	¥		0	¥	15	¥	(53)	¥	(1)	¥	39
	Millions of yen
		Year Ended March 31, 2013 Addition:
		Balance at		Charged to costs and
Description		beginning of period		Acquisitions		expenses			Deduction		Translation adjustment		Balance at end of period
Restructuring cost:
Closed office lease obligations Severance and other benefits to	¥	39	¥		0	¥	0	¥	(31)	¥	1	¥	9
terminated employees		0			0		3		(3)		0		0
Total	¥	39	¥		0	¥	3	¥	(34)	¥	1	¥	9
Description								Millions of yen
			Balance at beginning of period		Acquisitions		Addition: Charged to costs and expenses		Deduction*1	Other*2		Balance at end of period
Deferred tax assets: Valuation allowance
Year ended March 31, 2011		¥ 42,846		¥	669	¥	6,220		¥ (22,778)	¥	(163)	¥	26,794
Year ended March 31, 2012		¥ 26,794		¥	875	¥	6,339	¥	(6,836)		¥(3,034)	¥	24,138
Year ended March 31, 2013		¥ 24,138		¥	1,085	¥	4,973		¥ (12,116)	¥	751	¥	18,831

*Note: 1. The amount of deduction includes benefits recognized in earnings, expiry of loss carryforwards and sales of subsidiaries.

The amount of other includes translation adjustment and the effect of changes in statutory tax rate.

AI assistant

ORIX CORP — Annual Report 2013

30155_er_2013-03-31_f4422b4e-94e9-4068-b79d-58a851b1a21c.pdf

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2012 AND 2013

CONSOLIDATED BALANCE SHEETS—(Continued) AS OF MARCH 31, 2012 AND 2013

ORIX Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED MARCH 31, 2011, 2012 AND 2013

Table of Contents

CONSOLIDATED STATEMENTS OF INCOME—(Continued) FOR THE YEARS ENDED MARCH 31, 2011, 2012 AND 2013 ORIX Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED MARCH 31, 2011, 2012 AND 2013

ORIX Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED MARCH 31, 2011, 2012 AND 2013

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued) FOR THE YEARS ENDED MARCH 31, 2011, 2012 AND 2013

ANNUAL REPORT Page 167 of 280

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 31, 2011, 2012 AND 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ORIX Corporation and Subsidiaries

1. Significant Accounting and Reporting Policies

(a) Basis of presenting financial statements

(b) Principles of consolidation

(c) Use of estimates

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

(d) Foreign currencies translation

(e) Recognition of revenues

(1) Recognition of revenues for direct financing leases

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

(2) Recognition of revenues for operating leases

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

(f) Insurance premiums and expenses

(g) Allowance for doubtful receivables on direct financing leases and probable loan losses

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

(h) Impairment of long-lived assets

(i) Investment in securities

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

(j) Income taxes

(k) Securitized assets

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

(l) Derivative financial instruments

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

(m) Pension plans

(n) Stock-based compensation

(o) Stock splits

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

(p) Cash and cash equivalents

(q) Restricted cash

(r) Other operating assets

(s) Other receivables

(t) Inventories

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

(u) Office facilities

(v) Other assets

(w) Goodwill and other intangible assets

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

(x) Trade notes, accounts payable and other liabilities

(y) Capitalization of interest costs

(z) Advertising

(aa) Discontinued operations

(ab) Earnings per share

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

(ac) Partial sale and additional acquisition of the parent's ownership interest in subsidiaries

(ad) Redeemable noncontrolling interests

(ae) Issuance of stock by an affiliate

(af) New accounting pronouncements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

(ag) Reclassifications

2. Fair Value Measurements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

Valuation process

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ORIX Corporation and Subsidiaries

ORIX CORP Annual Report 2013