ORIX Corporation
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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 OF
THE SECURITIES EXCHANGE Act of 1934

For the month of October, 2003.

ORIX Corporation
(Translation of Registrant’s Name into English)

3-22-8 Shiba, Minato-Ku, Tokyo, JAPAN
(Address of Principal Executive Offices)

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

Form 20-F x     Form 40-F o

     (Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

Yes o     No x

 

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SIGNATURES
Consolidated Financial Results
Summary of Consolidated Financial Results
Consolidated Financial Highlights
Condensed Consolidated Statements of Income
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Shareholders’ Equity
Condensed Consolidated Statements of Cash Flows
Segment Information

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Table of Documents Filed

Page

1.   ORIX’s Interim Consolidated Financial Results (April 1, 2003 — September 30, 2003) filed with the Tokyo Stock Exchange on Monday, October 27, 2003.

 

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SIGNATURES

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

     
    ORIX Corporation
     
Date: October 27, 2003   By /s/ Masaru Hattori
   
    Masaru Hattori
    Corporate Senior Vice President
    Head of the Accounting Department
    ORIX Corporation

 

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Consolidated Financial Results

April 1, 2003 — September 30, 2003

October 27, 2003

In preparing its consolidated financial information, ORIX Corporation and its subsidiaries have complied with accounting principles generally accepted in the United States of America, except as modified to account for stock splits in accordance with the usual practice in Japan.

U.S. Dollar amounts have been calculated at Yen 111.25 to $1.00, the approximate exchange rate prevailing at September 30, 2003.

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

The Company expects that it will be a “passive foreign investment company” under the U.S. Internal Revenue Code. A U.S. holder of the shares of the Company is therefore subject to special rules of taxation in respect of certain dividend, gain or other income on such shares. Investors should consult their tax advisors with respect to such rules, which are summarized in the Company’s annual report.

     For further information please contact:

  Corporate Communications
ORIX Corporation
3-22-8 Shiba, Minato-ku, Tokyo 105-8683
JAPAN
Tel: (03) 5419-5102 Fax: (03) 5419-5901
E-mail: leslie_hoy@orix.co.jp

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Consolidated Financial Results from April 1, 2003 to September 30, 2003
(U.S. GAAP Financial Information for ORIX Corporation and its Subsidiaries)

     
Corporate Name:   ORIX Corporation
Listed Exchanges:   Tokyo Stock Exchange (Securities No. 8591)
    Osaka Securities Exchange
    Nagoya Stock Exchange
    New York Stock Exchange (Trading Symbol: IX)
Head Office:   Tokyo JAPAN
    Tel:(03)5419-5102

Date Approved by Board of Directors: October 27, 2003

1.     Performance Highlights for the Six Months Ended September 30, 2003 and 2002, and the Year Ended March 31, 2003 (1) Performance Highlights — Operating Results (Unaudited)

                                                 
                                            (millions of JPY)*1
    Total   Year-on-Year   Operating   Year-on-Year   Income before   Year-on-Year
    Revenues   Change   Income   Change   Income Taxes*2   Change
   
 
 
 
 
 
September 30, 2003
     345,871       3.3 %     46,729       34.9 %     58,256       53.3 %
September 30, 2002
     334,728       0.7 %     34,635       (8.0 %)     37,996       2.1 %
March 31, 2003
     683,645       —       38,083       —       46,288       —  
                                 
            Year-on-Year   Basic   Diluted
    Net Income   Change   Earnings Per Share   Earnings Per Share
   
 
 
 
September 30, 2003
     31,419       38.0 %     375.42       353.65  
September 30, 2002
     22,763       13.6 %     272.12       256.34  
March 31, 2003
     30,243       —       361.44       340.95  

1.   Equity in Net Income of Affiliates was a net gain of JPY 11,923 million for the six months ended September 30, 2003, a net gain of JPY 3,359 million for the six months ended September 30, 2002 and a net gain of JPY 6,203 million for the year ended March 31, 2003.
 
2.   The average number of shares was 83,691,862 for the six months ended September 30, 2003, 83,652,980 for the six months ended September 30, 2002 and 83,672,434 for the year ended March 31, 2003.
 
3.   Changes in Accounting Principles    Yes (x)    (new accounting adoption)  No ( )
     
*Note 1:   Unless otherwise stated, all amounts shown herein are in millions of Japanese yen or millions of U.S. dollars, except for Per Share amounts which are in single yen.
     
Note 2:   “Income before Income Taxes” as used throughout the report represents “Income before Extraordinary Gain, Cumulative Effect of a Change in Accounting Principle and Income Taxes.”

(2) Performance Highlights — Financial Position (Unaudited)

                                 
            Shareholders'   Shareholders'   Shareholders'
    Total Assets   Equity   Equity Ratio   Equity Per Share
   
 
 
 
September 30, 2003
     5,684,598       541,078       9.5 %     6,456.22  
September 30, 2002
     6,050,290       499,726       8.3 %     5,973.44  
March 31, 2003
     5,931,067       505,458       8.5 %     6,039.43  

1.   The number of outstanding shares was 83,690,699 as of September 30, 2003, 83,658,128 as of September 30, 2002 and 83,693,009 as of March 31, 2003.

(3) Performance Highlights — Cash Flows (Unaudited)

                                 
    Cash Flows   Cash Flows   Cash Flows   Cash and Cash Equivalents
    From Operating Activities   From Investing Activities   From Financing Activities   At End of Period
   
 
 
 
September 30, 2003
     71,813       117,408       (225,059 )     168,347  
September 30, 2002
     83,282       119,027       (345,174 )     210,875  
March 31, 2003
     210,150       182,950       (542,040 )     204,677  

(4)   Number of Consolidated Subsidiaries and Affiliates
             
Consolidated Subsidiaries     197      
Non-consolidated Subsidiaries     0      
Affiliates     72     (Of which 72 are accounted for by the equity method)

(5)   Changes in Accounting Treatment

Additions to and deletions from consolidated subsidiaries and affiliates

     Additions: Consolidated Subsidiaries 3, Affiliates 1

     Deletions: Consolidated Subsidiaries 4, Affiliates 1

2. Forecasts for the Year Ending March 31, 2004 (Unaudited)

                         
    Total   Income before  
Fiscal Year   Revenues   Income Taxes   Net Income
 
 
 
March 31, 2004
     730,000       87,000       48,000  

Note: Basic Earnings Per Share is forecasted to be JPY 573.54.

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Group Position

The ORIX Group consists of ORIX Corporation, 197 subsidiaries and 72 affiliates, and is developing various operations.
The main contents of each operation and the positioning of ORIX Corporation and its subsidiaries are given below.
The following classification is the same as that used in the classification of information by segment.

Operations in Japan

(1)   Corporate finance
 
    This business centers on direct financing leases and installment loans, other than real estate loans, to corporate customers as well as the sale of a variety of financial products and other fee business.

      [Main related companies]
    ORIX Corporation, ORIX Alpha Corporation, ORIX Auto Leasing Corporation, IFCO Inc., Nittetsu
    Lease Co., Ltd.

(2)   Equipment operating leases
 
    This business principally comprises the rental of precision measuring equipment and personal computers to corporate customers as well as automobile rental operations.

      [Main related companies]
    ORIX Rentec Corporation, ORIX Rent-A-Car Corporation

(3)   Real estate-related finance
 
    This business encompasses real estate loans to corporate customers and housing loans to individuals. ORIX is also expanding its business involving loan servicing, commercial mortgage-backed securities (CMBS), and REITs.

      [Main related companies]
    ORIX Corporation, ORIX Trust and Banking Corporation, ORIX Asset Management & Loan Services
    Corporation

(4)   Real estate
 
    This business consists principally of condominium development and office rental activities as well as the operation of such facilities as hotels, employee dormitories, and training facilities.

      [Main related companies]
    ORIX Corporation, ORIX Estate Corporation, ORIX Real Estate Corporation

(5)   Life insurance
 
    This segment consists of direct and agency life insurance sales and related activities conducted by ORIX Life Insurance.

      [Main related companies]
    ORIX Life Insurance Corporation

(6)   Other
 
    The other segment encompasses securities transactions, venture capital operations, consumer card loan operations, and new businesses.

      [Main related companies]
    ORIX Corporation, ORIX Credit Corporation, ORIX Capital Corporation,
    ORIX Securities Corporation, ORIX Baseball Club Co., Ltd., ORIX COMMODITIES
    Corporation, ORIX Club Corporation, ORIX Investment Corporation

Overseas Operations

(1)   The Americas
 
    Principal businesses in the Americas segment are direct financing leases, corporate lending, securities investment, commercial mortgage-backed securities (CMBS) related business, and real estate development.

      [Main related companies]
    ORIX USA Corporation, ORIX Real Estate Equities, Inc., ORIX Financial Services, Inc.,
    ORIX Capital Markets, LLC, Stockton Holdings Limited

(2)   Asia and Oceania
 
    Principal businesses in Asia and Oceania involve direct financing leases, operating leases for precision measuring equipment and transportation equipment, corporate lending, and securities investment.

      [Main related companies]
    ORIX Investment and Management Private Limited, ORIX Asia Limited, ORIX Australia Corporation
    Limited,ORIX Taiwan Corporation, PT. ORIX Indonesia Finance, ORIX Leasing Malaysia Berhad, ORIX Leasing
    Pakistan Limited, ORIX Leasing Singapore Limited, INFRASTRUCTURE LEASING & FINANCIAL
     SERVICES LIMITED

(3)   Europe
 
    Principal businesses in Europe center on aircraft operating leases, corporate loans, and securities investments.

      [Main related companies]
    ORIX Europe Limited, ORIX Ireland Limited, ORIX Aviation Systems Limited

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Summary of Consolidated Financial Results

Management Policies

Objectives

     ORIX has continued to provide value-added financial products and services to meet its customers’ needs. To meet the increasingly sophisticated requirements of our customers, we have increased the number and quality of financial solutions that we provide. As a result, ORIX’s financial services have expanded from leasing, rentals and lending to include life insurance, real estate finance and investment banking activities. As new business opportunities arise in the future, we plan to build on our accumulated knowledge and experience to continue to develop creative and innovative value-added financial solutions.

     ORIX aims to achieve the optimum growth in long-term shareholder value and contribute to society by taking the lead in discovering customers’ needs in order to provide new value-added financial services. This is the basis of ORIX’s management philosophy and we will further strive to focus on areas that fully utilize the specialization of the entire ORIX Group in order to meet our customers’ needs.

     In addition, ORIX has placed the utmost importance on profitability by carefully selecting businesses and concentrating its resources to achieve maximum growth in shareholder value. However, in the Japanese financial market, it is quite difficult to achieve a level of risk-adjusted return that is comparable to global standards. In light of this reality, ORIX is striving to increase the efficiency of its asset-based business and is concentrating more of its resources on investment banking activities with the present goal of increasing profitability without increasing assets.

Dividend Policy

     We believe we should use retained earnings mainly to invest in new growth opportunities as we strive to achieve returns for shareholders by increasing our corporate value over the long run.

Unit Shares

     ORIX’s basic policy is to periodically review the number of common shares that make up one trading unit in order to promote a broad participation of investors. With regards to the number of shares that make one unit, ORIX will consider demands from the market and weigh the costs and benefits associated with any changes to the present trading unit.

Corporate Governance

     ORIX has strengthened its corporate governance structure in order to more objectively ensure that business activities are being carried out to maximize shareholder value. For example, ORIX established an

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Advisory Board in 1997, introduced a Corporate Executive Officer system in 1998, and welcomed independent directors to the Board and set up the Executive Nomination and Compensation Committee in 1999. In order to take further steps to strengthen its corporate governance structure, ORIX received approval from shareholders at the 40th Annual General Meeting of Shareholders on June 25, 2003 to adopt a “Company with Committees” board model, which became possible on April 1, 2003 as a result of revisions to the Japanese Commercial Code. In addition, ORIX believes that compliance is a foundation of strong corporate governance and continues to strengthen its compliance based on the spirit of EC21, which is our guide to continue to be an “Excellent Company” in the 21st Century. We have established a Compliance Coordination Office and we are actively promoting our Corporate Action Principles and Employee Action Principles as part of compliance.

Financial Results

1. Six Months Ended September 30, 2003

Economic Environment

The pace of recovery of the U.S. economy was boosted thanks to an increase in consumer spending, however, there were still concerns about employment. Asia experienced a general slowdown in certain economies due to the lower level of exports to the United States and sluggish consumer spending in some of the more developed countries of the region. The Japanese economy continued to suffer from deflation with still no clear signs of recovery in consumer spending, however, the rise in stock prices and improvement in corporate earnings has resulted in less pessimism about the future.

     
Financial Highlights    
Income before Income Taxes   58,256 million yen (up 53% year on year)
Net Income   31,419 million yen (up 38% year on year)
Earnings Per Share (Basic)   375.42 yen (up 38% year on year)
Earnings Per Share (Diluted)   353.65 yen (up 38% year on year)
Shareholders’ Equity Per Share   6,465.22 yen (up 7% from March 31, 2003)
ROE (annualized)   12.0% (September 30, 2002: 9.1%)
ROA (annualized)   1.08% (September 30, 2002: 0.73%)

Revenues: 345,871 million yen (up 3% year on year)

As we continued to focus on the profitability of each transaction, we carefully selected new leasing and loan transactions. As a result of a lower balance of assets and fewer gains from securitization, revenues from “direct financing leases” and “interest on loans and investment securities” were down compared to the same period of the previous fiscal year. However, revenues from “operating leases” increased compared to the same period of the previous fiscal year due primarily to the improvement of the precision measuring

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equipment rental business and gains from the sale of some office buildings. “Residential condominium sales” performed strongly due primarily to the increase in the number of condominiums sold to buyers during the period. While brokerage commissions increased due primarily to the strong performance of the Japanese stock market, net gains on investment securities declined compared to the same period of the previous fiscal year resulting in an overall year-on-year decline in “brokerage commissions and net gains on investment securities.” Total revenues were up 3% year on year to 345,871 million yen.

Expenses: 299,142 million yen (unchanged)

“Interest expense” was down 13% year on year due mainly to lower asset levels and the resulting lower level of debt overseas. “Costs of residential condominium sales” increased in line with the growth in revenues from “residential condominium sales” and “selling, general and administrative expenses” increased mainly due to the increase in the number of consolidated companies, while “write-downs of long-lived assets” and “write-downs of securities” were lower compared to the same period of the previous fiscal year. As a result, expenses were flat year on year at 299,142 million yen.

Net Income: 31,419 million yen (up 38% year on year)

“Operating income” grew 35% year on year to 46,729 million yen. “Equity in net income of affiliates” increased 255% to 11,923 million yen due mainly to the recognition of deferred tax assets at Korea Life Insurance Co., Ltd. (refer to page 8, “5. Additional Information”). As a result, “income before extraordinary gain, cumulative effect of a change in accounting principle and income taxes” increased 53% year on year to 58,256 million yen and “net income” rose 38% year on year to 31,419 million yen.

Operating Assets: 4,937,086 million yen (down 4% from March 31, 2003)

“Operating assets” were down 4% to 4,937,086 million yen compared with March 31, 2003 as a result of a careful selection of new assets, the sale of certain assets and the appreciation of the yen against the U.S. dollar.

Segment Information (“Profits” refer to income before income taxes)

Operations in Japan

Corporate Finance: While the automobile leasing operations continued to perform relatively strongly, the cautious selection of new assets and the resulting lower level of segment assets compared with the first half of the previous fiscal year in operations other than automobile leasing led to a decrease in segment profits to 21,919 million yen from the 24,500 million yen recorded in the same period of the previous fiscal year.

Equipment Operating Leases: The improvement of the precision measuring equipment rental business contributed to an increase in segment profits to 3,456 million yen compared to 2,979 million yen in the first half of the previous fiscal year.

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Real Estate-Related Finance: Segment assets decreased year on year as a portion of the housing loan portfolio was sold off. Although gains from the housing loan operations and the increase in revenues from the loan servicing operations contributed to earnings, segment profits were 9,119 million yen for the first half of this fiscal year compared to 9,910 million yen for the same period of the previous fiscal year. The figures for the last fiscal year included a gain of 3,174 million yen from the sale of shares of a J-REIT to the public in June 2002.

Real Estate: The condominium development business made a strong contribution to segment profits due primarily to an increase in the number of condominiums sold to buyers. In addition, gains from the sale of some office buildings and other real estate, and revenues from building maintenance operations contributed to segment profits of 6,329 million yen in the first half of this fiscal year, up from a loss of 8,807 million yen that resulted primarily from “write-downs of long-lived assets” of 14,665 million yen in the same period of the previous fiscal year.

Life Insurance: Revenues were lower as a result of the continued shift to insurance-only life insurance products. Segment profits for the first half of this fiscal year were 2,507 million yen compared to 2,976 million yen in the same period of the previous fiscal year, due to lower life insurance related investment income.

Other: Although the consumer card loan operations continued to perform well, fewer gains were realized at our venture capital and other operations, and segment profits were 2,828 million yen in the first half of this fiscal year down from 6,926 million yen in the same period of the previous fiscal year.

Overseas Operations

The Americas: Segment profits improved to 3,912 million yen in the first half of this fiscal year compared to a loss of 1,027 million yen in the same period of the previous fiscal year due largely to lower provisions and fewer write-downs of securities.

Asia and Oceania: Strong performance of the corporate lending and automobile leasing operations of each company in the region and the earnings contribution from Korea Life Insurance Co., Ltd. (refer to page 8, “5. Additional Information”), an equity method affiliate, resulted in a large increase in segment profits to 13,939 million yen in the first half of this fiscal year compared to 4,314 million yen in the same period of the previous fiscal year.

Europe: Segment profits experienced a loss of 1,899 million yen, compared to a loss of 610 million yen in the same period of the previous fiscal year due to the decrease in segment assets and the recording of losses on certain equity method investments.

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2.     Summary of Cash flows (Six Months Ended September 30, 2003)

“Cash and cash equivalents” decreased by 18%, or 36,330 million yen, to 168,347 million yen compared to March 31,2003.

“Cash flows from operating activities,” which included a decrease stemming from “equity in net income of and gain on sales of affiliates” of 11,527 million yen, were 71,813 million yen in the first half of this fiscal year, down from the 83,282 million yen in the first half of the previous fiscal year, which included an increase associated with the recording of 14,665 million yen of “write-downs of long-lived assets.”

“Cash flows from investing activities” were 119,027 million yen in the first half of the previous fiscal year and 117,408 million yen in the first half of this fiscal year, due to inflows associated with “proceeds from sales of available-for-sale securities” and “proceeds from sales of other securities”.

345,174 million yen was used in “cash flows from financing activities” in the first half of the previous fiscal year, while 225,059 million yen was used in the first half of this fiscal year due to the decrease of commercial paper and repayment of debt.

3.     Summary of Second Quarter (Three Months Ended September 30, 2003)

In the second quarter, revenues increased 1,183 million yen year on year. Revenues from “direct financing leases” and “interest on loans and investment securities” were down compared to the same period of the previous fiscal year owing to a lower balance of assets and fewer gains from securitization. “Life insurance premiums and related investment income” was also down as a result of the continued shift to insurance-only life insurance products. On the other hand, “residential condominium sales” continued to perform well as more condominiums were sold to buyers, and our building maintenance operations recorded under “other operating revenues” also increased. Overall expenses were down 13,074 million yen compared to the previous second quarter due to the decrease in “interest expense” and “life insurance costs” as well as a drop in “write-downs of long-lived assets,” which were 14,665 million yen in the second quarter of the previous fiscal year. This resulted in an increase in “operating income” by 14,257 million yen to 24,193 million yen compared with the previous second quarter. As a result, “income before extraordinary gain, cumulative effect of a change in accounting principle and income taxes” and “net income” for the second quarter rose by 20,662 million yen and 11,443 million yen, respectively, compared with the previous second quarter.

4.     Outlook and Forecasts for the Fiscal Year Ending March 31, 2004

For the fiscal year ending March 31, 2004, we maintain our forecasts for “revenues” of 730,000 million yen (up 7% compared with the fiscal year ended March 31, 2003), “income before income taxes” of 87,000 million yen (up 88%), and “net income” of 48,000 million yen (up 59%).

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5.     Additional Information

“Equity in net income of affiliates” for the period ended September 30, 2003 included 9,911 million yen from Korea Life Insurance Co., Ltd. (“KLI”). This amount included ORIX’s proportionate interest in the ordinary operating results of KLI and our proportionate interest in the recognition of deferred tax assets of 5,380 million yen attributable to a change in tax rules in Korea.

The change in Korean tax rules in May 2003 will enable KLI to apply certain historical losses to reduce future taxable income. As a result of this change, KLI recorded a tax benefit in earnings and a corresponding deferred tax asset in the first quarter of its current fiscal year ending March 31, 2004. ORIX recorded a proportionate interest in income reported by KLI in the second quarter of our fiscal year ending March 31, 2004 in accordance with the Company’s policy of recording its equity in the income of KLI on a one-quarter lag basis.

ORIX has plans to sell a portion of its interest in KLI in the near future. However, no definitive agreements of sale have been arranged at the time of this announcement. The corresponding increase in the carrying value of ORIX’s ownership interest as a result of the recording of the above recognition of deferred tax assets in KLI is not necessarily reflective of an increase in the fair value of our equity interest in the event of a sale to a third party. We believe that there is a possibility that we will be unable to sell our portion of KLI at or above the carrying value of our investment at the time of sale. In such an event, we will record a loss on the sale in the period in which a definitive agreement of sale is arranged.

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Consolidated Financial Highlights
(For the Six Months Ended September 30, 2003 and 2002,
and the Year Ended March 31, 2003)
(Unaudited)

                                                           
      (millions of JPY, except for per share data)
              Change   Year           Year           Year
              From   -On-           -On-           -On-
      September 30,   March 31,   Year   September 30,   Year   March 31,   Year
      2003   2003   Change   2002   Change   2003   Change
     
 
 
 
 
 
 
Operating Assets
                                                        
Investment in Direct Financing Leases
     1,542,172       98 %     92 %     1,669,623       92 %     1,572,308       95 %
Installment Loans
     2,224,486       97 %     96 %     2,326,189       117 %     2,288,039       101 %
Investment in Operating Leases
     487,613       92 %     106 %     460,103       98 %     529,044       111 %
Investment in Securities
     589,918       87 %     82 %     717,500       74 %     677,435       79 %
Other Operating Assets
     92,897       92 %     72 %     129,311       99 %     101,481       39 %
 
    
     
     
     
     
     
     
 
Total
     4,937,086       96 %     93 %     5,302,726       98 %     5,168,307       93 %
Operating Results
                                                        
Total Revenues
     345,871       —       103 %     334,728       101 %     683,645       104 %
Income before Extraordinary Gain, Cumulative Effect of a change in Accounting Principle and Income Taxes
     58,256       —       153 %     37,996       102 %     46,288       63 %
Net Income
     31,419       —       138 %     22,763       114 %     30,243       75 %
Earnings Per Share
Income before Extraordinary Gain and Cumulative Effect of a Change in Accounting Principle
                                                        
 
Basic
     372.51       —       150 %     248.97       102 %     299.88       62 %
 
Diluted
     350.91       —       150 %     234.58       100 %     283.04       61 %
Net Income
                                                        
 
Basic
     375.42       —       138 %     272.12       111 %     361.44       74 %
 
Diluted
     353.65       —       138 %     256.34       109 %     340.95       73 %
Shareholders’ Equity Per Share
     6,465.22       107 %     108 %     5,973.44       107 %     6,039.43       101 %
Financial Position
                                                        
Shareholders’ Equity
     541,078       107 %     108 %     499,726       110 %     505,458       101 %
Number of Outstanding Shares (‘000)
     83,691       100 %     100 %     83,658       102 %     83,693       100 %
Long-and Short-Term Debt and Deposits
     3,977,021       94 %     90 %     4,425,331       100 %     4,239,514       91 %
Total Assets
     5,684,598       96 %     94 %     6,050,290       101 %     5,931,067       93 %
Shareholders’ Equity Ratio
     9.5 %     —       —       8.3 %     —       8.5 %     —  
Return on Equity (annualized)
     12.0 %     —       —       9.1 %     —       6.0 %     —  
New Business Volumes
                                                        
Direct Financing Leases
New Receivables Added
     398,545       —       71 %     563,596       88 %     1,000,896       92 %
 
New Equipment Acquisitions
     354,928       —       70 %     507,941       88 %     895,848       91 %
Installment Loans
     529,423       —       78 %     675,208       125 %     1,268,170       95 %
Operating Leases
     74,532       —       121 %     61,526       72 %     173,567       119 %
Investment in Securities
     69,477       —       73 %     95,228       50 %     231,294       66 %
Other Operating Assets
     77,018       —       152 %     50,559       126 %     116,736       57 %

-9-

Table of Contents

Condensed Consolidated Statements of Income
(For the Six Months Ended September 30, 2003 and 2002,
and the Year Ended March 31, 2003)
(Unaudited)

                                                         
    (millions of JPY, millions of US$)
            Year           Year           Year        
    Six Months   -On-   Six Months   -On-           -On-        
    Ended   Year   Ended   Year   Year Ended   Year   U.S. Dollars
    September   Change   September   Change   March   Change   September
    30, 2003   (%)   30, 2002   (%)   31, 2003   (%)   30, 2003
   
 
 
 
 
 
 
Total Revenues:
     345,871       103       334,728       101       683,645       104       3,109  
 
    
     
     
     
     
     
     
 
Direct Financing Leases
     56,865       90       63,479       108       122,928       101       511  
Operating Leases
     72,241       118       61,079       104       127,608       106       649  
Interest on Loans and Investment Securities
     59,577       93       64,041       113       131,590       108       536  
Brokerage Commissions and Net Gains on Investment Securities
     7,569       95       7,927       93       10,857       59       68  
Life Insurance Premiums and Related Investment Income
     65,153       91       71,832       84       138,511       91       586  
Residential Condominium Sales
     42,535       143       29,742       90       71,165       123       382  
Interest Income on Deposits
     263       84       312       31       526       38       2  
Other Operating Revenues
     41,668       115       36,316       120       80,460       126       375  
 
    
     
     
     
     
     
     
 
Total Expenses:
     299,142       100       300,093       102       645,562       110       2,689  
 
    
     
     
     
     
     
     
 
Interest Expense
     31,865       87       36,704       73       71,990       80       286  
Depreciation - Operating Leases
     41,569       107       38,853       104       80,565       105       374  
Life Insurance Costs
     58,243       90       64,424       82       125,684       90       524  
Costs of Residential Condominium Sales
     37,673       147       25,712       93       60,769       123       339  
Other Operating Expenses
     21,746       120       18,149       127       41,359       140       195  
Selling, General and Administrative Expenses
     77,470       111       69,829       120       144,271       114       697  
Provision for Doubtful Receivables and Probable Loan Losses
     23,843       95       24,967       124       54,706       107       214  
Write-downs of Long-Lived Assets
     4,202       29       14,665       1,058       50,682       1,866       38  
Write-downs of Securities
     2,057       36       5,742       79       14,325       73       18  
Foreign Currency Transaction Loss, Net
     474       45       1,048       —       1,211       —       4  
 
    
     
     
     
     
     
     
 
Operating Income
     46,729       135       34,635       92       38,083       52       420  
 
    
     
     
     
     
     
     
 
Equity in Net Income of Affiliates
     11,923       355       3,359       —       6,203       —       107  
Gain (Loss) on Sales of Affiliates
     (396 )     —       2       4       2,002       1682       (3 )
 
    
     
     
     
     
     
     
 
Income before Extraordinary Gain, Cumulative Effect of a Change in Accounting Principle and Income Taxes
     58,256       153       37,996       102       46,288       63       524  
 
    
     
     
     
     
     
     
 
Provision for Income Taxes
     27,080       158       17,170       99       21,196       64       244  
 
    
     
     
     
     
     
     
 
Income before Extraordinary Gain and Cumulative Effect of a Change in Accounting Principle
     31,176       150       20,826       105       25,092       63       280  
 
    
     
     
     
     
     
     
 
Extraordinary Gain, Net of Applicable Tax Effect
     243       —       —       —       3,214       —       2  
Cumulative Effect of a Change in Accounting Principle, Net of Applicable Tax Effect
     —       —       1,937       1,456       1,937       1,456       —  
 
    
     
     
     
     
     
     
 
Net Income
     31,419       138       22,763       114       30,243       75       282  
 
    
     
     
     
     
     
     
 

Note:   1. The Company recognized an “Extraordinary Gain, Net of Applicable Tax Effect” in the six months ended September 30,2003 and in the previous fiscal year due to the excess of the proportionate fair value of the net assets over the purchase price of the affiliate paid by the Company (“Negative Goodwill”).
 
    2. On April 1,2002, as a result of the adoption of FASB Statement No. 141 (“Business Combinations”), the Company and its subsidiaries recorded a transition gain arising from the write-off of “Negative Goodwill” of JPY1,937 million as of March 31,2002 as the “Cumulative Effect of a Change in Accounting Principle, Net of Applicable Tax Effect.”

-10-

Table of Contents

Condensed Consolidated Statements of Income
(For the Three Months Ended September 30, 2003 and 2002)
(Unaudited)

                                 
                      (millions of JPY,
millions of US$)
            Year                
    Three Months   -on-   Three Months
    ended   year   ended   U.S. dollars
    September   Change   September   September
    30, 2003   (%)   30, 2002   30, 2003
   
 
 
 
Total Revenues:
     174,954       101       173,771       1,573  
 
    
     
     
     
 
Direct Financing Leases
     28,349       87       32,737       255  
Operating Leases
     34,363       112       30,545       309  
Interest on Loans and Investment Securities
     31,263       94       33,284       281  
Brokerage Commissions and Net Gains on Investment Securities
     4,323       154       2,800       39  
Life Insurance Premiums and Related Investment Income
     34,563       89       38,886       311  
Residential Condominium Sales
     19,359       107       18,076       174  
Interest Income on Deposits
     102       76       135       1  
Other Operating Revenues
     22,632       131       17,308       203  
 
    
     
     
     
 
Total Expenses:
     150,761       92       163,835       1,355  
 
    
     
     
     
 
Interest Expense
     15,607       88       17,730       140  
Depreciation — Operating Leases
     20,872       107       19,424       188  
Life Insurance Costs
     28,917       83       34,775       260  
Costs of Residential Condominium Sales
     17,301       110       15,727       156  
Other Operating Expenses
     11,529       118       9,770       104  
Selling, General and Administrative Expenses
     39,981       112       35,666       358  
Provision for Doubtful Receivables and Probable Loan Losses
     11,875       98       12,164       107  
Write-downs of Long-Lived Assets
     4,202       29       14,665       38  
Write-downs of Securities
     551       15       3,576       5  
Foreign Currency Transaction (Gain) Loss, Net
     (74 )     —       338       (1 )
 
    
     
     
     
 
Operating Income
     24,193       243       9,936       218  
 
    
     
     
     
 
Equity in Net Income of Affiliates
     8,539       492       1,736       77  
Gain (Loss) on Sales of Affiliates
     (396 )     —       2       (4 )
 
    
     
     
     
 
Income before Extraordinary Gain, Cumulative Effect of a Change in Accounting Principle and Income Taxes
     32,336       277       11,674       291  
 
    
     
     
     
 
Provision for Income Taxes
     15,258       263       5,796       137  
 
    
     
     
     
 
Income before Extraordinary Gain and Cumulative Effect of a Change in Accounting Principle
     17,078       291       5,878       154  
 
    
     
     
     
 
Extraordinary Gain, Net of Applicable Tax Effect
     243       —       —       2  
Cumulative Effect of a Change in Accounting Principle, Net of Applicable Tax Effect
     —       —       —       —  
 
    
     
     
     
 
Net Income
     17,321       295       5,878       156  
 
    
     
     
     
 

-11-

Table of Contents

Condensed Consolidated Balance Sheets
(As of September 30, 2003 and 2002, and March 31, 2003)
(Unaudited)

                                   
                      (millions of JPY, millions of US$)
                              U.S. dollars
      September   September   March   September
      30, 2003   30, 2002   31, 2003   30, 2003
     
 
 
 
Assets
                                
Cash and Cash Equivalents
     168,347       210,875       204,677       1,513  
Restricted Cash
     27,698       20,936       18,671       249  
Time Deposits
     534       1,229       1,184       5  
Investment in Direct Financing Leases
     1,542,172       1,669,623       1,572,308       13,862  
Installment Loans
     2,224,486       2,326,189       2,288,039       19,995  
Allowance for Doubtful Receivables on Direct Financing Leases and Probable Loan Losses
     (130,015 )     (136,961 )     (133,146 )     (1,169 )
Investment in Operating Leases
     487,613       460,103       529,044       4,383  
Investment in Securities
     589,918       717,500       677,435       5,303  
Other Operating Assets
     92,897       129,311       101,481       835  
Investment in Affiliates
     158,122       102,271       144,974       1,421  
Other Receivables
     140,399       132,047       146,650       1,262  
Advances
     122,907       175,917       119,645       1,105  
Prepaid Expenses
     44,318       42,157       41,494       398  
Office Facilities
     74,440       76,879       77,043       669  
Other Assets
     140,762       122,214       141,568       1,267  
 
    
     
     
     
 
Total
     5,684,598       6,050,290       5,931,067       51,098  
 
    
     
     
     
 
Liabilities and Shareholders’ Equity
                                
Short-Term Debt
     967,182       1,397,228       1,120,434       8,694  
Deposits
     282,116       266,446       262,467       2,536  
Trade Notes, Accounts Payable and Other Liabilities
     242,227       219,601       252,453       2,177  
Accrued Expenses
     78,995       88,785       82,012       710  
Policy Liabilities
     607,591       601,815       608,553       5,461  
Current and Deferred Income Taxes
     165,374       145,791       163,711       1,487  
Deposits from Lessees
     72,312       69,241       79,366       650  
Long-Term Debt
     2,727,723       2,761,657       2,856,613       24,519  
 
    
     
     
     
 
Total Liabilities
     5,143,520       5,550,564       5,425,609       46,234  
 
    
     
     
     
 
Common Stock
     52,067       51,908       52,067       468  
Additional Paid-in Capital
     70,002       69,877       70,002       629  
Retained Earnings:
                                
 
Legal Reserve
     2,220       2,220       2,220       20  
 
Retained Earnings
     458,490       421,684       429,163       4,121  
Accumulated Other Comprehensive Loss
     (33,438 )     (37,800 )     (39,747 )     (300 )
Treasury Stock, at cost
     (8,263 )     (8,163 )     (8,247 )     (74 )
 
    
     
     
     
 
Shareholders’ Equity
     541,078       499,726       505,458       4,864  
 
    
     
     
     
 
Total
     5,684,598       6,050,290       5,931,067       51,098  
 
    
     
     
     
 
                                   
                  U.S. dollars
      September   September   March   September
      30,2003   30,2002   31,2003   30, 2003
     
 
 
 
Note: Accumulated Other Comprehensive Loss
                                
 
Net unrealized gains on investment in securities
     15,674       4,824       1,917       141  
 
Minimum pension liability adjustments
     (3,910 )     (5,826 )     (4,182 )     (35 )
 
Foreign currency translation adjustments
     (40,033 )     (27,918 )     (29,919 )     (360 )
 
Net unrealized losses on derivative instruments
     (5,169 )     (8,880 )     (7,563 )     (46 )

-12-

Table of Contents

Condensed Consolidated Statements of Shareholders’ Equity
(For the Six Months Ended September 30, 2003 and 2002,
and the Year Ended March 31, 2003)
(Unaudited)

                                     
                        (millions of JPY, millions of US$)
        Six months   Six months                
        ended   ended   Year ended   U.S. dollars
        September   September   March   September
        30, 2003   30, 2002   31, 2003   30, 2003
       
 
 
 
Common Stock:
                                
 
Beginning balance
     52,067       51,854       51,854       468  
 
Issuance during the year
     —       54       213       —  
 
    
     
     
     
 
 
Ending balance
     52,067       51,908       52,067       468  
 
    
     
     
     
 
Additional Paid-in Capital:
                                
 
Beginning balance
     70,002       69,823       69,823       629  
 
Issuance during the year and other, net
     —       54       179       —  
 
    
     
     
     
 
 
Ending balance
     70,002       69,877       70,002       629  
 
    
     
     
     
 
Legal Reserve:
                                
 
Beginning balance
     2,220       2,220       2,220       20  
 
    
     
     
     
 
 
Ending balance
     2,220       2,220       2,220       20  
Retained Earnings:
                                
 
Beginning balance
     429,163       400,175       400,175       3,858  
 
Cash dividends
     (2,092 )     (1,254 )     (1,255 )     (19 )
 
Net income
     31,419       22,763       30,243       282  
 
    
     
     
     
 
 
Ending balance
     458,490       421,684       429,163       4,121  
 
    
     
     
     
 
Accumulated Other Comprehensive Loss:
                                
 
Beginning balance
     (39,747 )     (13,440 )     (13,440 )     (357 )
 
Net increase (decrease) in net unrealized gains on investment in securities
     13,757       (9,932 )     (12,839 )     124  
 
Net decrease in minimum pension liability adjustments
     272       1,008       2,652       2  
 
Net increase in foreign currency translation adjustments
     (10,114 )     (13,118 )     (15,119 )     (91 )
 
Net (increase) decrease in net unrealized losses on derivative instruments
     2,394       (2,318 )     (1,001 )     22  
 
    
     
     
     
 
 
Ending balance
     (33,438 )     (37,800 )     (39,747 )     (300 )
 
    
     
     
     
 
Treasury Stock:
                                
 
Beginning balance
     (8,247 )     (8,124 )     (8,124 )     (74 )
 
Increase, net
     (16 )     (39 )     (123 )     (0 )
 
    
     
     
     
 
 
Ending balance
     (8,263 )     (8,163 )     (8,247 )     (74 )
 
    
     
     
     
 
Total Shareholders’ Equity:
                                
   
Beginning balance
     505,458       502,508       502,508       4,544  
   
Increase (decrease), net
     35,620       (2,782 )     2,950       320  
 
    
     
     
     
 
   
Ending balance
     541,078       499,726       505,458       4,864  
 
 
    
     
     
     
 
Summary of Comprehensive Income (Loss):
                                
   
Net income
     31,419       22,763       30,243       282  
   
Other comprehensive income (loss)
     6,309       (24,360 )     (26,307 )     57  
 
    
     
     
     
 
   
Comprehensive income (loss)
     37,728       (1,597 )     3,936       339  
 
 
    
     
     
     
 

-13-

Table of Contents

Condensed Consolidated Statements of Cash Flows
(For the Six Months Ended September 30, 2003 and 2002, and the Year Ended March 31, 2003)
(Unaudited)

                                       
          (millions of JPY, millions of US$)
          Six months   Six months           U.S. dollars
          ended   ended   Year ended   Six months
          September   September   March   ended September
          30, 2003   30, 2002   31, 2003   30, 2003
         
 
 
 
Cash Flows from Operating Activities:
                                
 
Net income
     31,419       22,763       30,243       282  
 
Adjustments to reconcile net income to net cash provided by operating activities:
                                
   
Depreciation and amortization
     58,595       57,229       118,097       527  
   
Provision for doubtful receivables and probable loan losses
     23,843       24,967       54,706       214  
   
(Decrease) increase in policy liabilities
     (962 )     (849 )     5,889       (9 )
   
Gains from securitization transactions
     (276 )     (3,665 )     (9,649 )     (2 )
   
Equity in net income of and gain on sales of affiliates
     (11,527 )     (3,361 )     (8,205 )     (104 )
   
Gains on sales of available-for-sale securities
     (2,275 )     (4,204 )     (7,588 )     (20 )
   
Write-downs of long-lived assets
     4,202       14,665       50,682       38  
   
Write-downs of securities
     2,057       5,742       14,325       18  
   
(Increase) decrease in restricted cash
     (9,349 )     (1,034 )     1,195       (84 )
   
Increase in other operating assets, including advance payments
     (3,981 )     (13,648 )     (21,894 )     (36 )
   
Increase in prepaid expenses
     (2,773 )     (3,853 )     (2,975 )     (25 )
   
Decrease in accrued expenses
     (2,360 )     (195 )     (2,370 )     (21 )
   
(Decrease) increase in deposits from lessees
     (6,597 )     1,148       4,303       (59 )
   
Other, net
     (8,203 )     (12,423 )     (16,609 )     (73 )
 
    
     
     
     
 
     
Net cash provided by operating activities
     71,813       83,282       210,150       646  
 
    
     
     
     
 
Cash Flows from Investing Activities:
                                
   
Purchases of lease equipment, including advance payments
     (423,989 )     (465,874 )     (923,483 )     (3,811 )
   
Principal payments received under direct financing leases
     348,787       389,630       742,183       3,135  
   
Net proceeds from securitization of lease and loan receivables
     15,212       92,803       239,050       137  
   
Installment loans made to customers
     (529,363 )     (622,872 )     (1,214,672 )     (4,758 )
   
Principal collected on installment loans
     540,238       532,142       1,071,841       4,856  
   
Proceeds from sales of operating lease assets
     81,724       32,474       62,323       735  
   
Investment in and dividends received from affiliates, net
     2,297       (902 )     (23,208 )     21  
   
Purchases of available-for-sale securities
     (59,988 )     (67,406 )     (193,580 )     (539 )
   
Proceeds from sales of available-for-sale securities
     110,309       144,800       264,021       992  
   
Maturities of available-for-sale securities
     41,990       54,256       95,187       377  
   
Purchases of other securities
     (10,313 )     (20,941 )     (23,674 )     (93 )
   
Proceeds from sales of other securities
     1,118       17,759       21,413       10  
   
Purchases of other operating assets
     (5,357 )     (1,067 )     (2,847 )     (48 )
   
Proceeds from sales of other operating assets
     7,822       14,830       63,596       70  
   
Acquisitions of subsidiaries, net of cash acquired
     (7,339 )     (10,607 )     (13,669 )     (66 )
   
Sales of subsidiaries, net of cash disposed
     —       37,018       36,469       —  
   
Other, net
     4,260       (7,016 )     (18,000 )     37  
 
    
     
     
     
 
     
Net cash provided by in investing activities
     117,408       119,027       182,950       1,055  
 
    
     
     
     
 
Cash Flows from Financing Activities:
                                
   
Repayment of short-term debt, net
     (5,957 )     (41,950 )     (122,365 )     (54 )
   
Repayment of commercial paper, net
     (132,250 )     (282,590 )     (485,288 )     (1,189 )
   
Proceeds from long-term debt
     395,601       370,233       811,334       3,556  
   
Repayment of long-term debt
     (499,994 )     (425,885 )     (776,959 )     (4,494 )
   
Net increase in deposits due to customers
     19,649       41,203       37,224       177  
   
Issuance of common stock
     —       108       392       —  
   
Dividends paid
     (2,092 )     (1,254 )     (1,255 )     (19 )
   
Net decrease in call money
     —       (5,000 )     (5,000 )     —  
   
Other, net
     (16 )     (39 )     (123 )     (0 )
 
    
     
     
     
 
     
Net cash used in financing activities
     (225,059 )     (345,174 )     (542,040 )     (2,023 )
 
    
     
     
     
 
Effect of Exchange Rate Changes on Cash and Cash Equivalents
     (492 )     (1,008 )     (1,131 )     (5 )
 
    
     
     
     
 
Net Decrease in Cash and Cash Equivalents
     (36,330 )     (143,873 )     (150,071 )     (327 )
Cash and Cash Equivalents at Beginning of Period
     204,677       354,748       354,748       1,840  
 
    
     
     
     
 
Cash and Cash Equivalents at End of Period
     168,347       210,875       204,677       1,513  
 
    
     
     
     
 

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Table of Contents

Segment Information
(For the Six Months Ended September 30, 2003 and 2002,
and the Year Ended March 31, 2003)
(Unaudited)

                                                                           
      (millions of JPY)
      Six months ended September 30, 2003   Six months ended September 30, 2002   Year ended March 31, 2003
     
 
 
              Income (Loss)                   Income (Loss)                   Income (Loss)        
              before                   before                   before        
              Income   Operating           Income   Operating           Income   Operating
      Revenues   Taxes*   Assets   Revenues   Taxes*   Assets   Revenues   Taxes*   Assets
     
 
 
 
 
 
 
 
 
Operations in Japan
                                                                        
 
Corporate Finance
     64,262       21,919       1,845,251       64,544       24,500       1,981,237       125,560       44,158       1,893,422  
 
Equipment Operating Leases
     34,697       3,456       140,987       32,967       2,979       142,964       67,655       4,402       144,397  
 
Real Estate-Related Finance
     23,948       9,119       879,964       25,703       9,910       908,115       51,589       19,572       931,513  
 
Real Estate
     67,160       6,329       275,967       45,314       (8,807 )     289,919       104,454       (39,441 )     303,838  
 
Life Insurance
     64,563       2,507       570,013       71,832       2,976       570,983       138,511       4,791       579,805  
 
Other
     32,629       2,828       406,076       27,159       6,926       372,273       61,238       8,452       387,978  
 
    
     
     
     
     
     
     
     
     
 
 
Sub-Total
     287,259       46,158       4,118,258       267,519       38,484       4,265,491       549,007       41,934       4,240,953  
Overseas Operations
                                                                        
 
The Americas
     23,229       3,912       541,036       27,275       (1,027 )     713,300       57,909       1,332       618,148  
 
Asia and Oceania
     26,671       13,939       434,584       27,579       4,314       431,966       55,425       9,765       437,874  
 
Europe
     5,327       (1,899 )     64,524       5,833       (610 )     86,024       13,311       (736 )     75,207  
 
    
     
     
     
     
     
     
     
     
 
 
Sub-Total
     55,227       15,952       1,040,144       60,687       2,677       1,231,290       126,645       10,361       1,131,229  
 
    
     
     
     
     
     
     
     
     
 
Segment Total
     342,486       62,110       5,158,402       328,206       41,161       5,496,781       675,652       52,295       5,372,182  
 
    
     
     
     
     
     
     
     
     
 
Difference between Segment totals and Consolidated Amounts
     3,385       (3,854 )     (221,316 )     6,522       (3,165 )     (194,055 )     7,993       (6,007 )     (203,875 )
 
    
     
     
     
     
     
     
     
     
 
Consolidated Amounts
     345,871       58,256       4,937,086       334,728       37,996       5,302,726       683,645       46,288       5,168,307  
 
    
     
     
     
     
     
     
     
     
 
                           
      (millions of US$)
      U.S. dollars September 30, 2003
     
              Income (Loss)        
              before        
              Income   Operating
      Revenues   Taxes*   Assets
     
 
 
Operations in Japan
                        
 
Corporate Finance
     578       197       16,587  
 
Equipment Operating Leases
     312       31       1,267  
 
Real Estate-Related Finance
     215       82       7,910  
 
Real Estate
     604       57       2,481  
 
Life Insurance
     580       23       5,124  
 
Other
     293       25       3,649  
 
    
     
     
 
 
Sub-Total
     2,582       415       37,018  
Overseas Operations
                        
 
The Americas
     209       35       4,863  
 
Asia and Oceania
     239       125       3,906  
 
Europe
     48       (17 )     580  
 
    
     
     
 
 
Sub-Total
     496       143       9,349  
 
    
     
     
 
Segment Total
     3,078       558       46,367  
 
    
     
     
 
Difference between Segment totals and Consolidated Amounts
     31       (34 )     (1,989 )
 
    
     
     
 
Consolidated Amounts
     3,109       524       44,378  
 
    
     
     
 

*Note:   “Income (Loss) before Income Taxes” represents “Income before Extraordinary Gain, Cumulative Effect of a Change in Accounting Principle and Income Taxes.”

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Table of Contents

Basis of presentation and significant accounting policies

In preparing the accompanying consolidated financial statements, ORIX Corporation (the Company) and its subsidiaries have followed with accounting principles generally accepted in the United States of America, except as modified to account for stock splits in accordance with the usual practice in Japan.

The significant differences between U.S. and Japanese accounting policies and practices are as follows: Accounting for direct financing leases, accounting for the impairment of long-lived assets and long-lived assets to be disposed of, the use of the straight-line method of depreciation for operating lease equipment, deferral of life insurance policy acquisition costs and the calculation of policy liabilities, accounting for derivative instruments and hedging activities, accounting for goodwill and intangible assets resulting from business combinations, accounting for pension plans, and a reflection of the income tax effect on such adjustments. Segment information is prepared in accordance with FASB Statement No. 131. The basis of presentation and significant accounting policies are as follows.

1.     Consolidated subsidiaries

The accompanying consolidated financial statements include the accounts of the Company, 112 domestic subsidiaries and 85 foreign subsidiaries (all 197 subsidiaries). The accounts of certain variable interest entities created after January 31, 2003 are also included pursuant to FASB Interpretation No.46 (“Consolidation of Variable Interest Entities”). Major subsidiaries are ORIX Auto Leasing Corporation, ORIX USA Corporation and others.

2.     Affiliates accounted for by the equity method

Investment in 47 domestic affiliates and 25 foreign affiliates (all 72 affiliates) are accounted for by using equity method. Major affiliates are The Fuji Fire and Marine Insurance Company Limited, Stockton Holdings Limited and others.

3.     The date of subsidiaries interim closing

Subsidiaries where interim closing date differs from that of the Company close their books with necessary adjustments for consolidation purpose at the interim closing date.

4.     Accounting policies

(1)  Use of estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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.

(2)  Recognition of revenues

Direct financing leases—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 using the interest method. Certain direct lease origination costs are being deferred and amortized over the lease term as a yield adjustment.

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Operating leases—Revenues from operating leases are recognized on a straight-line basis over the contract terms. Operating lease assets are recorded at cost and are depreciated over their estimated useful lives mainly on a straight-line basis.

Insurance premium and expenses— Premium income from life insurance policies are 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 for by the net level premium method, based on actuarial estimates of the amount of future policyholder benefits. Certain costs associated with writing insurance are deferred and amortized over the respective policy periods in proportion to anticipated premium revenue.

(3)  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 through accumulated other comprehensive income (loss), net of applicable income taxes. However, the Company and its subsidiaries recognize losses related to securities for which the market price has been below the acquisition cost and not considered temporary in nature. Held-to-maturity securities are recorded at amortized cost.

(4)  Impairment of long-lived assets

Long-lived assets and certain identifiable intangibles to be held and used by the Company and its subsidiaries are reviewed for impairment, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When the sum of undiscounted future cash flows expected to be generated by the assets is less than the carrying amount of the assets, impairment losses are recognized based on the fair value of the assets.

(5)  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 adequate to provide for probable losses on lease and loan portfolios that can be reasonably anticipated.

(6)  Prepaid benefit cost (Accrued benefit liability)

The Company and its subsidiaries follow FASB Statement No.87 (“Employer’s Accounting for Pensions”).

(7)  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 foreign 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.

(8)  Hedge accounting

The Company and its subsidiaries follow FASB Statement No. 133 (“Accounting for Derivative Instruments and Hedging Activities”), as amended by FASB Statement No. 138 (“Accounting for Certain Derivative Instruments and Certain Hedging Activities—an amendment of FASB Statement No. 133”). All derivatives are recorded on the balance sheet at fair value.

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Table of Contents

(9)  Goodwill and intangible assets resulting from business combinations

Goodwill and intangible assets that have indefinite useful lives are not amortized. Impairment tests are required on an annual basis and between annual tests when events or circumstances indicate impairment.

(10)  Income taxes

The Company, in general, determines its income tax provisions for interim periods by applying the current estimate of the effective tax rate to be applicable for the full fiscal year to the actual year-to-date pre-tax income amount. The estimated effective tax rate is determined by dividing total estimated income tax expense for the full fiscal year by total estimated pre-tax income for the full fiscal year.

5.     Cash and cash equivalents in the accompanying consolidated statements of cash flows

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.

Revenues from foreign customers

Revenues from foreign customers are as follows.

                                 
    September 30, 2003
    Millions of JPY
   
    The   Asia and                
    Americas   Oceania   Europe   Total
   
 
 
 
Revenues from foreign customers
     23,620       27,809       6,035       57,464  
 
    
     
     
     
 
Total consolidated revenues
                             345,871  
 
    
     
     
     
 
Ratio of revenues from foreign customers to total consolidated revenues
     6.8 %     8.0 %     1.8 %     16.6 %
 
    
     
     
     
 
                                 
    September 30, 2002
    Millions of JPY
   
    The   Asia and                
    Americas   Oceania   Europe   Total
   
 
 
 
Revenues from foreign customers
     27,918       28,276       6,421       62,615  
 
    
     
     
     
 
Total consolidated revenues
                             334,728  
 
    
     
     
     
 
Ratio of revenues from foreign customers to total consolidated revenues
     8.3 %     8.4 %     1.9 %     18.7 %
 
    
     
     
     
 
                                 
    March 31, 2003
    Millions of JPY
   
    The   Asia and                
    Americas   Oceania   Europe   Total
   
 
 
 
Revenues from foreign customers
     58,592       57,467       14,748       130,807  
 
    
     
     
     
 
Total consolidated revenues
                             683,645  
 
                            
 
Ratio of revenues from foreign customers to total consolidated revenues
     8.5 %     8.4 %     2.2 %     19.1 %
 
    
     
     
     
 

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Table of Contents

                                 
    September 30, 2003
    Millions of U.S. dollars
   
    The   Asia and                
    Americas   Oceania   Europe   Total
   
 
 
 
Revenues from foreign customers
     212       250       55       517  
 
    
     
     
     
 
Total consolidated revenues
                             3,109  
 
    
     
     
     
 
Ratio of revenues from foreign customers to total consolidated revenues
     6.8 %     8.0 %     1.8 %     16.6 %
 
    
     
     
     
 

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Table of Contents

Investment in Securities

Investment in securities at September 30, 2003 and 2002, and March 31, 2003 consists of the following:

                                 
    Millions of JPY   Millions of
U.S. dollars
   
   
    September   September   March 31,   September
    30, 2003   30, 2002   2003   30, 2003
   
 
 
 
Trading securities
     14,256       13,820       12,154       128  
Available-for-sale securities
     445,053       561,822       537,888       4,000  
Held-to-maturity securities
     7,116       12,815       10,638       64  
Other securities
     123,493       129,043       116,755       1,111  
 
    
     
     
     
 
 
     589,918       717,500       677,435       5,303  
 
    
     
     
     
 

Other securities consist mainly of non-marketable equity securities, preferred capital shares carried at cost and investment funds accounted for under the equity method.

The amortized cost basis amounts, gross unrealized holding gains, gross unrealized holding losses and fair values of available-for-sale and held-to-maturity securities in each major security type at September 30, 2003 and 2002, and March 31, 2003 are as follows:

                                     
        September 30, 2003
        Millions of JPY
       
                Gross   Gross        
        Amortized   unrealized   unrealized        
        cost   gains   losses   Fair Value
       
 
 
 
Available-for-sale:
                                
   
Japanese and foreign government bond securities
     21,159       94       (119 )     21,134  
 
Japanese prefectural and foreign municipal bond securities
     18,621       43       (43 )     18,621  
 
Corporate debt securities
     230,468       1,724       (3,811 )     228,381  
 
Mortgage-backed and other asset-backed securities
     129,027       5,390       (3,206 )     131,211  
 
Equity securities
     21,655       25,808       (1,757 )     45,706  
 
    
     
     
     
 
 
     420,930       33,059       (8,936 )     445,053  
 
    
     
     
     
 
Held-to-maturity:
                                
 
Asset-backed securities
     7,116       329       (14 )     7,431  
 
    
     
     
     
 
 
     7,116       329       (14 )     7,431  
 
    
     
     
     
 

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Table of Contents

                                       
          September 30, 2002
          Millions of JPY
         
                  Gross   Gross        
          Amortized   unrealized   unrealized        
          cost   gains   losses   Fair Value
         
 
 
 
Available-for-sale:
                                
 
Japanese and foreign government bond securities
     25,254       225       (78 )     25,401  
 
Japanese prefectural and foreign municipal bond securities
     12,396       226       (881 )     11,741  
 
Corporate debt securities
     366,903       3,711       (8,271 )     362,343  
 
Mortgage-backed and other asset-backed securities
     114,903       4,833       (3,159 )     116,577  
 
Funds in trust
     4,731       —       (593 )     4,138  
 
Equity securities
     26,894       17,651       (2,923 )     41,622  
 
 
    
     
     
     
 
 
     551,081       26,646       (15,905 )     561,822  
 
 
    
     
     
     
 
Held-to-maturity:
                                
   
Japanese and foreign government bond securities
     207       1       —       208  
   
Asset-backed securities
     12,587       —       —       12,587  
   
Corporate debt securities
     21       —       —       21  
 
 
    
     
     
     
 
 
     12,815       1       —       12,816  
 
 
    
     
     
     
 
                                     
        March 31, 2003
        Millions of JPY
       
                Gross   Gross        
        Amortized   unrealized   unrealized
        cost   gains   losses   Fair Value
       
 
 
 
Available-for-sale:
                                
   
Japanese and foreign government bond securities
     41,466       173       (100 )     41,539  
 
Japanese prefectural and foreign municipal bond securities
     13,826       91       (51 )     13,866  
 
Corporate debt securities
     309,551       2,281       (4,633 )     307,199  
 
Mortgage-backed and other asset-backed securities
     133,812       5,344       (3,355 )     135,801  
 
Funds in trust
     4,606       —       (942 )     3,664  
 
Equity securities
     25,476       12,956       (2,613 )     35,819  
 
    
     
     
     
 
 
     528,737       20,845       (11,694 )     537,888  
   
 
    
     
     
     
 
Held-to-maturity:
                                
 
Asset-backed securities
     10,638       397       (5 )     11,030  
 
    
     
     
     
 
 
     10,638       397       (5 )     11,030  
   
 
    
     
     
     
 

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Table of Contents

                                     
        September 30, 2003
        Millions of U.S. dollars
       
                Gross   Gross        
        Amortized   unrealized   unrealized        
        cost   gains   losses   Fair Value
       
 
 
 
Available-for-sale:
                                
 
Japanese and foreign government bond securities
     190       1       (1 )     190  
   
Japanese prefectural and foreign municipal bond securities
     167       0       (0 )     167  
Corporate debt securities
     2,072       16       (35 )     2,053  
 
Mortgage-backed and other asset-backed securities
     1,160       48       (29 )     1,179  
 
Equity securities
     195       232       (16 )     411  
 
 
    
     
     
     
 
 
     3,784       297       (81 )     4,000  
 
 
    
     
     
     
 
Held-to-maturity:
                                
 
Asset-backed securities
     64       3       (0 )     67  
 
 
    
     
     
     
 
 
     64       3       (0 )     67  
 
 
    
     
     
     
 

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Table of Contents

Derivative Financial Instruments

The Company and its subsidiaries are parties to derivative financial instruments that they generally use in the normal course of business to reduce exposure to fluctuations in interest and foreign currency rates.

(a)  Cash flow hedges

The Company and its subsidiaries designate interest rate swap agreements as cash flow hedges for variability of cash flows originating from floating rate borrowings.

(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 forward contracts to minimize foreign currency exposures on operating assets including lease receivables, loan receivables and borrowings. One subsidiary hedges a portion of the interest rate exposure of the fair values of certain asset-backed securities using sales of future contracts and forward contracts on U.S. treasury securities. Certain subsidiaries, which issued medium-term notes with fixed interest rates, use interest rate swap contracts to hedge interest rate exposure of the fair values of these medium-term notes. In case where the medium-term notes were denominated in other than the subsidiaries’ local currency, foreign currency swap agreements are used to hedge foreign exchange rate exposure.

(c)  Hedges of net investment in foreign operations

The Company uses foreign exchange forward contracts, foreign currency swap agreements and borrowings denominated in the subsidiaries’ local currencies to hedge the foreign currency exposure of the net investment in foreign subsidiaries.

(d)  Trading and other derivatives

Certain subsidiaries engage in trading activities with various future contracts. The Company and certain subsidiaries entered into interest rate swap agreements, caps and collars for risk management purposes but not qualified for hedge accounting under FASB Statement No. 133. In accordance with FASB Statement No. 133, conversion options were bifurcated from the Company and certain subsidiaries’ convertible bonds and are recorded as stand-alone derivative contracts. At September 30, 2003 and 2002, March 31, 2003, the total face amount were JPY54,819 million (US$493 million), JPY110,733 million and JPY82,000 million, respectively, and the fair value of conversion option were JPY504 million (US$5 million), JPY695 million, and JPY187 million, respectively.

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Table of Contents

The following table provides notional amount, carrying amount and estimated fair value information about derivative instruments as of September 30, 2003 and 2002, March 31, 2003.

                           
      Millions of JPY
     
                      Estimated
September 30, 2003 Notional amount   Carrying amount   fair value
     
 
 
Interest rate risk management:
                        
 
Interest rate swap agreements
     447,516       (10,239 )     (10,239 )
 
Options, caps, floors and collars held
     40,725       91       91  
 
Forward contracts
     85,952       (1,144 )     (1,144 )
Foreign exchange risk management:
                        
 
Foreign exchange forward contracts
     95,265       1,425       1,425  
 
Foreign currency swap agreements
     255,798       13,576       13,576  
Trading activities:
                        
 
Futures
     147,562       440       440  
 
Options, caps, floors and collars held
     3,852       9       9  
 
Options, caps, floors and collars written
     3,878       (8 )     (8 )
 
Foreign exchange forward contracts
     1,476       24       24  
                           
      Millions of JPY
     
                      Estimated
September 30, 2002 Notional amount   Carrying amount   fair value
     
 
 
Interest rate risk management:
                        
 
Interest rate swap agreements
     513,781       (16,272 )     (16,272 )
 
Options, caps, floors and collars held
     28,187       (41 )     (41 )
 
Futures
     116,801       (949 )     (949 )
Foreign exchange risk management:
                        
 
Foreign exchange forward contracts
     59,391       (346 )     (346 )
 
Foreign currency swap agreements
     361,930       (5,050 )     (5,050 )
Trading activities:
                        
 
Futures
     78,561       283       283  
 
Interest rate swap agreements
     2,000       7       7  
 
Options, caps, floors and collars held
     10,543       3       3  
 
Options, caps, floors and collars written
     3,600       (2 )     (2 )

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Table of Contents

                           
      Millions of JPY
     
                      Estimated
March 31, 2003 Notional amount   Carrying amount   fair value
     
 
 
Interest rate risk management:
                        
 
Interest rate swap agreements
     459,208       (14,431 )     (14,431 )
 
Options, caps, floors and collars held
     30,462       (18 )     (18 )
 
Forward contracts
     75,726       (1,084 )     (1,084 )
Foreign exchange risk management:
                        
 
Foreign exchange forward contracts
     88,436       (256 )     (256 )
 
Foreign currency swap agreements
     303,051       (2,659 )     (2,659 )
Trading activities:
                        
 
Futures
     95,121       73       73  
 
Interest rate swap agreements
     2,000       1       1  
 
Options, caps, floors and collars held
     6,278       153       153  
 
Options, caps, floors and collars written
     5,361       (43 )     (43 )
 
Foreign exchange forward contracts
     1,876       2       2  
                           
      Millions of U.S. dollars
     
                      Estimated
September 30, 2003 Notional amount   Carrying amount   fair value
     
 
 
Interest rate risk management:
                        
 
Interest rate swap agreements
     4,023       (92 )     (92 )
 
Options, caps, floors and collars held
     366       1       1  
 
Forward contracts
     773       (10 )     (10 )
Foreign exchange risk management:
                        
 
Foreign exchange forward contracts
     856       13       13  
 
Foreign currency swap agreements
     2,299       122       122  
Trading activities:
                        
 
Futures
     1,326       4       4  
 
Options, caps, floors and collars held
     35       0       0  
 
Options, caps, floors and collars written
     35       (0 )     (0 )
 
Foreign exchange forward contracts
     13       0       0  

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Table of Contents

                                                     
Key Quarterly Financial Data (Unaudited)                                           (millions of JPY)
        Fiscal 2003   Fiscal 2004
       
 
Balance Sheet Data   Q1 (02/4-6)   Q2 (02/7-9)   Q3 (02/10-12)   Q4 (03/1-3)   Q1 (03/4-6)   Q2 (03/7-9)
 
    
     
     
     
     
     
 
1) Investment in Direct Financing Leases
     1,646,932       1,669,623       1,634,494       1,572,308       1,582,153       1,542,172  
   
Japan
     1,283,552       1,305,846       1,278,175       1,237,141       1,242,600       1,237,347  
   
Overseas
     363,380       363,777       356,319       335,167       339,553       304,825  
2) Installment Loans
     2,327,354       2,326,189       2,374,664       2,288,039       2,302,005       2,224,486  
   
Japan
     1,898,108       1,932,184       1,986,182       1,954,640       1,969,694       1,922,105  
   
Overseas
     429,246       394,005       388,482       333,399       332,311       302,381  
3) Investment in Operating Leases
     451,012       460,103       454,468       529,044       523,413       487,613  
   
Japan
     327,391       339,403       340,997       369,489       358,596       333,527  
   
Overseas
     123,621       120,700       113,471       159,555       164,817       154,086  
4) Investment in Securities
     759,406       717,500       695,319       677,435       697,926       589,918  
   
Japan
     565,409       520,005       505,995       497,829       528,184       440,598  
   
Overseas
     193,997       197,495       189,324       179,606       169,742       149,320  
5) Other Operating Assets
     143,064       129,311       142,856       101,481       96,479       92,897  
   
Japan
     132,217       118,558       132,847       91,851       87,217       84,695  
   
Overseas
     10,847       10,753       10,009       9,630       9,262       8,202  
 
    
     
     
     
     
     
 
Total Operating Assets
     5,327,768       5,302,726       5,301,801       5,168,307       5,201,976       4,937,086  
 
    
     
     
     
     
     
 
Allowance for Doubtful Receivables on Direct Financing Leases and Probable Loan Losses
     (150,264 )     (136,961 )     (136,833 )     (133,146 )     (134,740 )     (130,015 )
Allowance/Investment in Direct Financing Leases and Installment Loans
     3.8 %     3.4 %     3.4 %     3.4 %     3.5 %     3.5 %
 
    
     
     
     
     
     
 
Total Assets
     6,091,100       6,050,290       6,025,781       5,931,067       5,923,307       5,684,598  
 
    
     
     
     
     
     
 
Short-Term Debt, Long-Term Debt and Deposits
     4,489,605       4,425,331       4,393,599       4,239,514       4,232,175       3,977,021  
Policy Liabilities
     600,144       601,815       598,832       608,553       604,830       607,591  
 
    
     
     
     
     
     
 
Total Liabilities
     5,592,427       5,550,564       5,519,176       5,425,609       5,396,760       5,143,520  
 
    
     
     
     
     
     
 
Shareholders’ Equity
     498,673       499,726       506,605       505,458       526,547       541,078  
 
    
     
     
     
     
     
 
Total Liabilities & Shareholders’ Equity
     6,091,100       6,050,290       6,025,781       5,931,067       5,923,307       5,684,598  
 
    
     
     
     
     
     
 
 
                                                
Income Statement Data   Q1 (02/4-6)   Q2 (02/7-9)   Q3 (02/10-12)   Q4 (03/1-3)   Q1 (03/4-6)   Q2 (03/7-9)
 
    
     
     
     
     
     
 
Revenues
                                                
1) Direct Financing Leases
     30,742       32,737       29,880       29,569       28,516       28,349  
   
Japan
     21,987       24,854       22,503       22,099       21,906       21,865  
   
Overseas
     8,755       7,883       7,377       7,470       6,610       6,484  
2) Operating Leases
     30,534       30,545       30,675       35,854       37,878       34,363  
   
Japan
     22,012       21,808       21,321       22,511       28,064       23,789  
   
Overseas
     8,522       8,737       9,354       13,343       9,814       10,574  
3) Interest on Loans and Investment Securities
     30,757       33,284       31,395       36,154       28,314       31,263  
   
Interest on loans
     26,203       29,323       27,634       32,450       25,729       29,001  
   
Japan
     19,795       22,089       21,506       25,678       21,082       23,958  
   
Overseas
     6,408       7,234       6,128       6,772       4,647       5,043  
 
Interest on investment securities
     4,554       3,961       3,761       3,704       2,585       2,262  
   
Japan
     319       162       180       205       173       295  
   
Overseas
     4,235       3,799       3,581       3,499       2,412       1,967  
4) Brokerage Commissions and Net Gains on
   Investment Securities
     5,127       2,800       1,355       1,575       3,246       4,323  
   
Brokerage commissions
     774       569       536       521       691       1,167  
   
Net Gains on investment securities
     4,353       2,231       819       1,054       2,555       3,156  
5) Life Insurance Premiums and Related Investment
   Income
     32,946       38,886       28,321       38,358       30,590       34,563  
   
Life insurance premiums
     28,745       34,503       25,184       34,531       27,524       31,114  
   
Related investment income
     4,201       4,383       3,137       3,827       3,066       3,449  
6) Residential Condominium Sales
     11,666       18,076       21,982       19,441       23,176       19,359  
   
Japan
     11,666       18,076       21,982       19,441       23,176       19,359  
   
Overseas
     —       —       —       —       —       —  
7) Interest Income on Deposits
     177       135       98       116       161       102  
8) Other Operating Revenues
     19,008       17,308       19,463       24,681       19,036       22,632  
   
Japan
     17,015       14,867       16,243       22,420       16,952       19,698  
   
Overseas
     1,993       2,441       3,220       2,261       2,084       2,934  
 
    
     
     
     
     
     
 
Total Revenues
     160,957       173,771       163,169       185,748       170,917       174,954  
 
    
     
     
     
     
     
 

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Table of Contents

                                                   
                                (millions of JPY)
      Fiscal 2003   Fiscal 2004
     
 
Income Statement Data   Q1(02/4-6)   Q2(02/7-9)   Q3(02/10-12)   Q4(03/1-3)   Q1(03/4-6)   Q2(03/7-9)
 
    
     
     
     
     
     
 
Expenses
                                                
1) Interest Expense
     18,974       17,730       17,555       17,731       16,258       15,607  
2) Depreciation—Operating Leases
     19,429       19,424       19,744       21,968       20,697       20,872  
3) Life Insurance Costs
     29,649       34,775       26,792       34,468       29,326       28,917  
4) Costs of Residential Condominium Sales
     9,985       15,727       17,596       17,461       20,372       17,301  
5) Other Operating Expenses
     8,379       9,770       10,114       13,096       10,217       11,529  
6) Selling, General and Administrative Expenses
     34,163       35,666       35,270       39,172       37,489       39,981  
7) Provision for Doubtful Receivables and Probable
 Loan Losses
     12,803       12,164       12,421       17,318       11,968       11,875  
8) Write-downs of Long-Lived Assets
     —       14,665       —       36,017       —       4,202  
9) Write-downs of Securities
     2,166       3,576       2,174       6,409       1,506       551  
10) Foreign Currency Transaction (Gain) Loss, Net
     710       338       516       (353 )     548       (74 )
 
    
     
     
     
     
     
 
Total Expenses
     136,258       163,835       142,182       203,287       148,381       150,761  
 
    
     
     
     
     
     
 
Operating Income (Loss)
     24,699       9,936       20,987       (17,539 )     22,536       24,193  
Equity in Net Income of Affiliates
     1,623       1,736       2,315       529       3,384       8,539  
Gain (Loss) on Sales of Affiliates
     —       2       —       2,000       —       (396 )
Income (Loss) before Extraordinary Gain, Cumulative Effect of a Change in Accounting Principle and Income Taxes
     26,322       11,674       23,302       (15,010 )     25,920       32,336  
Income Taxes Provision (Benefit)
     11,374       5,796       10,853       (6,827 )     11,822       15,258  
Income (Loss) before Extraordinary Gain and Cumulative Effect of a Change in Accounting Principle
     14,948       5,878       12,449       (8,183 )     14,098       17,078  
Extraordinary Gain, Net of Applicable Tax Effect
     —       —       —       3,214       —       243  
Cumulative Effect of a Change in Accounting Principle, Net of Applicable Tax Effect
                                             1,937  
Net Income (Loss)
     16,885       5,878       12,449       (4,969 )     14,098       17,321  
                                                   
New Business Volumes
   Q1(02/4-6)   Q2(02/7-9)   Q3(02/10-12)   Q4(03/1-3)   Q1(03/4-6)   Q2(03/7-9)
 
  
 
 
 
 
 
Direct Financing Leases: New receivables added
     237,779       325,817       213,620       223,680       212,175       186,370  
 
Japan
     172,957       274,881       149,193       161,755       158,176       139,969  
 
Overseas
     64,822       50,936       64,427       61,925       53,999       46,401  
Direct Financing Leases: New equipment acquisitions
     210,819       297,122       187,555       200,352       188,194       166,734  
 
Japan
     151,062       251,883       128,093       144,525       138,479       121,963  
 
Overseas
     59,757       45,239       59,462       55,827       49,715       44,771  
Installment Loans: New loans added
     341,138       334,070       295,622       297,340       270,959       258,464  
 
Japan
     273,867       300,963       261,815       264,242       225,042       223,315  
 
Overseas
     67,271       33,107       33,807       33,098       45,917       35,149  
Operating Leases: New equipment acquisitions
     20,870       40,656       27,513       84,528       40,810       33,722  
 
Japan
     14,128       33,517       20,667       74,688       29,880       20,354  
 
Overseas
     6,742       7,139       6,846       9,840       10,930       13,368  
Investment in Securities: New securities added
     48,907       46,321       25,894       110,172       57,370       12,107  
 
Japan
     38,346       44,804       23,520       107,807       53,835       11,020  
 
Overseas
     10,561       1,517       2,374       2,365       3,535       1,087  
Other Operating Assets: New assets added
     20,768       29,791       28,197       37,980       28,655       48,363  
 
Japan
     15,475       29,403       23,504       30,948       28,655       48,301  
 
Overseas
     5,293       388       4,693       7,032       —       62  
                                                   
Key Ratios, Per Share Data, and Employees
   Q1(02/4-6)   Q2(02/7-9)   Q3(02/10-12)   Q4(03/1-3)   Q1(03/4-6)   Q2(03/7-9)
 
  
 
 
 
 
 
Return on Equity (ROE)*
     13.5 %     4.7 %     9.9 %     (3.9 )%     10.9 %     13.0 %
Return on Assets (ROA)*
     1.09 %     0.39 %     0.82 %     (0.33 )%     0.95 %     1.19 %
Shareholders’ Equity Ratio
     8.2 %     8.3 %     8.4 %     8.5 %     8.9 %     9.5 %
Debt-to-Equity Ratio (times)
     9.0       8.9       8.7       8.4       8.0       7.4  
Shareholders’ Equity Per Share (yen)
     5,961.30       5,973.44       6,053.07       6,039.43       6,291.50       6,465.22  
Basic EPS (yen)
     201.85       70.27       148.76       (59.38 )     168.45       206.96  
Diluted EPS (yen)
     189.95       66.32       140.18       (59.38 )     158.71       194.94  
Number of Employees
     11,820       11,859       11,977       11,833       11,621       11,723  

*   annualized

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Table of Contents

                                                       
                                                  (millions of JPY)
          Fiscal 2003   Fiscal 2004
         
 
Segment Information   Q1(02/4-6)   Q2(02/7-9)   Q3(02/10-12)   Q4(03/1-3)   Q1(03/4-6)   Q2(03/7-9)
Operations in Japan
Corporate Finance
     31,465       33,079       31,147       29,869       30,993       33,269  
 
Equipment Operating Leases
     16,233       16,734       16,899       17,789       16,980       17,717  
 
Real Estate-Related Finance
     13,995       11,708       11,252       14,634       10,937       13,011  
 
Real Estate
     18,983       26,331       30,305       28,835       37,239       29,921  
 
Life Insurance
     32,946       38,886       28,321       38,358       30,590       33,973  
 
Other
     12,773       14,386       15,000       19,079       16,231       16,398  
 
    
     
     
     
     
     
 
     
Sub-Total
     126,395       141,124       132,924       148,564       142,970       144,289  
 
    
     
     
     
     
     
 
Overseas Operations
The Americas
     14,739       12,536       13,012       17,622       11,313       11,916  
 
Asia and Oceania
     13,741       13,838       13,802       14,044       12,857       13,814  
 
Europe
     3,091       2,742       3,760       3,718       2,606       2,721  
 
    
     
     
     
     
     
 
   
Sub-Total
     31,571       29,116       30,574       35,384       26,776       28,451  
 
    
     
     
     
     
     
 
Total Segment Revenues
     157,966       170,240       163,498       183,948       169,746       172,740  
 
    
     
     
     
     
     
 
Operations in Japan
Corporate Finance
     10,411       14,089       11,562       8,096       9,345       12,574  
 
Equipment Operating Leases
     1,271       1,708       1,593       (170 )     1,520       1,936  
 
Real Estate-Related Finance
     6,106       3,804       2,754       6,908       3,018       6,101  
 
Real Estate
     2,735       (11,542 )     4,341       (34,975 )     8,160       (1,831 )
 
Life Insurance
     1,282       1,694       (27 )     1,842       (392 )     2,899  
 
Other
     2,554       4,372       3,229       (1,703 )     1,177       1,651  
 
    
     
     
     
     
     
 
   
Sub-Total
     24,359       14,125       23,452       (20,002 )     22,828       23,330  
 
    
     
     
     
     
     
 
Overseas Operations
The Americas
     1,229       (2,256 )     437       1,922       2,131       1,781  
 
Asia and Oceania
     1,673       2,641       1,545       3,906       4,204       9,735  
 
Europe
     (545 )     (65 )     (112 )     (14 )     (258 )     (1,641 )
 
    
     
     
     
     
     
 
   
Sub-Total
     2,357       320       1,870       5,814       6,077       9,875  
 
    
     
     
     
     
     
 
Total Segment Profits (Income (Loss) before Income Taxes)
   26,716       14,445       25,322       (14,188 )     28,905       33,205  
 
    
     
     
     
     
     
 
Operations in Japan
                                                
 
Corporate Finance
     2,008,152       1,981,237       1,963,548       1,893,422       1,910,425       1,845,251  
 
Equipment Operating Leases
     141,905       142,964       145,234       144,397       142,189       140,987  
 
Real Estate-Related Finance
     906,193       908,115       908,821       931,513       932,999       879,964  
 
Real Estate
     293,189       289,919       307,599       303,838       295,663       275,967  
 
Life Insurance
     497,593       570,983       578,744       579,805       592,987       570,013  
 
Other
     389,605       372,273       398,435       387,978       395,184       406,076  
 
    
     
     
     
     
     
 
   
Sub-Total
     4,236,637       4,265,491       4,302,381       4,240,953       4,269,447       4,118,258  
 
    
     
     
     
     
     
 
Overseas Operations
The Americas
     695,351       713,300       691,100       618,148       604,167       541,036  
 
Asia and Oceania
     467,456       431,966       454,123       437,874       461,345       434,584  
 
Europe
     98,200       86,024       78,376       75,207       70,657       64,524  
 
    
     
     
     
     
     
 
   
Sub-Total
     1,261,007       1,231,290       1,223,599       1,131,229       1,136,169       1,040,144  
 
    
     
     
     
     
     
 
Total Segment Assets
     5,497,644       5,496,781       5,525,980       5,372,182       5,405,616       5,158,402  
 
    
     
     
     
     
     
 

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