Orix Corp Ads (IX)

Overview

We require capital resources at all times for maintaining working capital and for the expansion of our business. We have put our main emphasis on ensuring stable funding and reducing our funding costs by diversifying our funding methods and procuring capital from a variety of sources.

The fiscal year ended March 31, 2009 was marked by the rapid contraction of capital markets after the Lehman Brothers bankruptcy filing, and the resulting rapid contraction of the credit markets due to the sudden deterioration in the financial condition of financial institutions has continued. In response to this environment we have been implementing various measures to strengthen our financial condition and to stabilize liquidity, including:

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Our funding consists mainly of borrowings from financial institutions and funding from capital markets. We maintain a flexible funding strategy by adjusting the ratio of funding obtained from the capital markets by taking into account domestic and foreign financial market conditions. The ratio of funding from capital markets to total debt was 39% as of March 31, 2008 and 34% as of March 31, 2009 (not including off-balance sheet funding, such as the securitization of assets). In the fiscal year ended March 31, 2009, in response to the rapid contraction of the capital markets after the Lehman bankruptcy filing, we decreased the amount of CP outstanding and decreased our ratio of debt from the capital markets.

Our ratio of long-term debt to total debt as of March 31, 2008 was 77% while at March 31, 2009 the ratio was 85%, which is our historical high. In preparation for expected further declines in the funding environment, in December 2008 we issued unsecured convertible bonds with stock acquisition rights due 2014 to decrease stress on funding and to increase the ratio of long-term debt to total debt. Floating rate funding and fixed rate funding amounted to 51% and 49%, respectively of long-term debt as of March 31, 2008 and 48% and 52%, respectively, of long-term debt as of March 31, 2009.

Although we primarily obtain our capital resources from financial institutions and capital markets in Japan, we also procure funds from overseas markets in accordance with the location of our assets as part of our strategy to reduce exchange rate risk. The ratio of domestic (Japanese) funding to total debt was 89% and 90% as of March 31, 2008 and March 31, 2009, respectively. The ratio of domestic segments’ assets to the total assets for all segments was 87% both as of March 31, 2008 and March 31, 2009. (We calculate the ratio of domestic funding using the amount borrowed by companies that are located in Japan even though some or all of the funding may be used outside Japan, for example, for acquiring assets in overseas operations).

Our main domestic and foreign subsidiaries produce annual financial plans in consultation with us, and we monitor the management of funds as necessary. We employ a cash management system for supplying and absorbing capital efficiently from our domestic subsidiaries, concentrating the management of domestic cash flow for the group at ORIX. Our overseas subsidiaries conduct local funding activities corresponding to market and business conditions where each subsidiary is located. The procured funds provide the resources for increasing assets and repaying debt and other notes and accounts payable for the relevant subsidiary.

The ability to secure capital resources readily is of the utmost importance in making possible the prompt handling of customer needs and various transaction demands. We strive for timely and flexible capital resource procurement by monitoring the funding requirements from our sales and investment operations, and by monitoring the balance between funding supply and our funding needs.

We have also been seeking to prevent funding shortages by conserving our cash on hand. As a result of this liquidity management strategy, our cash and cash equivalents as of March 31, 2009 increased to ¥459,969 million from ¥320,655 million as of March 31, 2008.

OVERVIEW

We require capital resources at all times for maintaining working capital and for the expansion of our business. We have sought to ensure stable funding and a reduction of funding costs by diversifying our funding methods and procuring capital from a variety of sources. Our funding consists mainly of borrowings from financial institutions and funding from capital markets. The ratio of funding from capital markets to total debt was 46% as of March 31, 2007, and 47% as of March 31, 2008 (not including off-balance sheet funding, such as the securitization of assets). We employ a strategy of flexibility by adjusting the ratio of funding from capital markets by taking into account the domestic and foreign financial market conditions, among other factors.

The ratio of long-term debt to total debt as of March 31, 2007 and March 31, 2008 was 77% and we have sought to gradually increase the ratio of long-term debt to total debt. Floating rate funding and fixed rate funding amounted to 52% and 48% of funding by long-term debt, as of March 31, 2007 and amounted to 51% and 49% as of March 31, 2008, respectively.

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Although we obtain our capital resources from financial institutions and from capital markets primarily in Japan, we also procure necessary funds from overseas markets as a means of geographically diversifying our funding sources. The ratio of domestic (Japanese) funding to total debt as of March 31, 2007 and March 31, 2008 was 88% and 89%, respectively. The ratio of domestic segments’ assets to the total assets for all segments as of March 31, 2007 and March 31, 2008 was 85% and 87%, respectively. (We calculate the ratio of domestic funding using the amount borrowed by companies that are located in Japan. A part of the funding is used outside Japan, for example, for acquiring assets in overseas operations).

Our main domestic and foreign subsidiaries produce annual financial plans in consultation with us, and we monitor the management of funds as necessary. In order to achieve efficient funding, we employ a cash management system for our domestic subsidiaries with centralized management of capital supply and capital absorption at ORIX. Our overseas subsidiaries conduct local funding activities corresponding to the situation where each subsidiary is located. The procured funds provide the resources for increasing assets and repaying debt and other notes and accounts payable for the relevant subsidiary. The ability to secure capital resources readily is of the utmost importance in making possible the prompt handling of customer needs and various transaction demands. We strive for timely and flexible capital resource procurement by monitoring the funding requirements from our sales and investment operations, and by monitoring the balance between the supply and demands of our funding needs.

Although the effects of the credit crunch caused by the US sub-prime residential loan problem were seen in the global economy during this fiscal year, our funds procurement ability remains stable.

OVERVIEW

We consider management of a variety of risks essential to the effective allocation of management resources and to increasing our corporate value in light of the diversification of our business model and the consequent changes in our risk profile. Accordingly, through the development of a credible information network we have designed our risk management system in a manner that permits us to identify, measure, analyze and evaluate our risks, and to set appropriate policies and limits to manage and hedge such risks.

In order to measure risk, we have adopted different methods in accordance with the characteristics of the assets and operations associated with each business. We alter the methods used to measure risk as a result of changes in our business model or the business environment.

Risk is monitored for each business and for each type of risk. Our monitoring includes details of where capital is used, analysis of changes over time and deviation from initial plans, and evaluation of profitability with respect to risk capital (the maximum magnitude of potential losses). Based on individual risks, monitoring also

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includes progress reports on particular projects and investments, including the status of exit strategies, comprehensive comparative analyses of projections and actual performance, and analyses of changes over time in important targets.

We continuously refine and strengthen our risk monitoring processes. We use the results of our monitoring by making changes to implement more sophisticated risk measurement methods and improve our risk management system.

The results of our monitoring are reported to senior management though the Investment and Credit Committee, and Group Executive Officer Meetings on a quarterly basis and are part of the fundamental data used to reevaluate risk capital and management strategies.

OVERVIEW

We consider management of a variety of risks essential to the effective allocation of management resources and to increasing our corporate value in light of the diversification of our business model and the consequent changes in our risk profile. Accordingly, through the development of a credible information network we have designed our risk management system in a manner that permits us to identify, measure, analyze and evaluate our risks, and to set appropriate policies and limits to manage and hedge such risks. In order to measure risk, we have adopted different methods in accordance with the characteristics of the assets and operations associated with each business. We alter the methods used to measure risk as a result of changes in our business model or the business environment.

Risk is monitored for each business and for each type of risk. Our monitoring includes details of where capital is used, analysis of changes over time and deviation from initial plans, and evaluation of profitability with respect to risk capital. Based on individual risks, monitoring also includes progress reports on particular projects and investments, including the status of exit strategies, comprehensive comparative analyses of projections and actual performance, and analyses of changes over time in important targets.

We continuously refine and strengthen our risk monitoring processes. We use the results of our monitoring by making changes to implement more sophisticated risk measurement methods and improve our risk management system.

The results of our monitoring are reported to senior management though the Investment and Credit Committee, and Group Executive Officer Meetings on a quarterly basis and are part of the fundamental data used to make strategic decisions and allocate capital to various businesses.

OVERVIEW

We consider management of a variety of risks essential to conducting our businesses and to increasing our corporate value. Accordingly, through the development of a credible information network we have designed our risk management system in a manner that permits us to identify, measure, analyze and evaluate our risks, and to set appropriate policies and limits to manage and hedge such risks. We attempt to control these risks by utilizing a risk management system that manages both overall risk as well as specific risks associated with individual transactions, businesses and overseas geographical regions.