ORIX(US:IX)2025-06-24 11:02PART I This section provides an overview of ORIX's key financial data, risk factors, corporate information, and operational review Key Information This section presents ORIX's selected consolidated financial data for the past five fiscal years and details a comprehensive list of risk factors Selected Financial Data ORIX Corporation's net income attributable to shareholders increased to ¥351.6 billion in fiscal 2025 from ¥346.1 billion in fiscal 2024, with total assets growing to ¥16,866 billion and an ROE of 8.8% Selected Consolidated Financial Data (FY2021-FY2025) | Indicator | 2021 | 2022 | 2023 | 2024 | 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenues (¥M) | 2,292,357 | 2,508,043 | 2,663,659 | 2,814,361 | 2,874,821 | | Net Income Attributable to ORIX Shareholders (¥M) | 192,384 | 317,376 | 290,340 | 346,132 | 351,630 | | Total Assets (¥M) | 13,563,082 | 14,280,684 | 15,289,385 | 16,322,100 | 16,866,251 | | ORIX Corporation Shareholders' Equity (¥M) | 3,028,456 | 3,304,196 | 3,543,607 | 3,941,466 | 4,089,782 | | Basic EPS (¥) | 155.54 | 263.72 | 245.98 | 298.55 | 307.74 | | Dividends per Share (¥) | 78.00 | 85.60 | 85.60 | 98.60 | 120.01 | | ROE (%) | 6.4 | 10.0 | 8.5 | 9.2 | 8.8 | | ROA (%) | 1.44 | 2.28 | 1.96 | 2.19 | 2.12 | - Non-performing net investment in leases and installment loans increased to ¥163,322 million as of March 31, 2025, up from ¥109,381 million a year prior30 Risk Factors The company identifies numerous risks that could adversely affect its business, categorized by external environment, credit, business, market, liquidity, compliance, legal, information/cybersecurity, operational, and risks related to holding the company's shares and ADRs - The company's business is exposed to global economic weakness, political turmoil (including the second Trump presidency and ongoing conflicts), and competition, which could adversely affect financial results3537 - Climate change presents both physical risks (e.g., damage to facilities from weather events) and transition risks (e.g., stricter environmental regulations, stranded assets), with ORIX supporting the TCFD framework and setting goals to reduce GHG emissions404142 - Business risks include those from expansion, acquisitions, and joint ventures, which may expose the company to new, complex risks and potential write-downs of goodwill, alongside volatility of asset values including real estate, aircraft, and ships4953 - Market risks stem from changes in interest rates and currency exchange rates, which can affect funding costs, asset credit quality, and overseas investment values, despite the company's use of derivatives for hedging5963 - Liquidity risk is a key concern, as a downgrade in credit ratings could increase interest expenses and limit access to funding from banks and capital markets70 - The company faces significant information and cybersecurity risks, including data leakage from cyber-attacks and business interruptions from system failures, with geopolitical tensions increasing the risk of state-sponsored attacks788182 - U.S. investors face the risk that ORIX may be classified as a Passive Foreign Investment Company (PFIC), which could result in adverse U.S. federal income tax consequences, such as gains being treated as ordinary income and subject to interest charges96 Information on the Company This section details ORIX's corporate history, strategic direction, sustainability initiatives, a breakdown of its ten business segments, and the extensive business regulations governing its diverse activities Corporate History ORIX was established in 1964 as Orient Leasing Co., Ltd. and has since evolved into a diversified financial services group through strategic expansions and acquisitions into various sectors globally - Established in April 1964 as Orient Leasing Co., Ltd. and changed its name to ORIX Corporation in 1989 to reflect its diversification beyond leasing103108 - Expanded into various sectors through key acquisitions, including entering the life insurance business (1991), banking (1998), global asset management with Robeco (2013, now ORIX Corporation Europe), and renewable energy with Elawan (2021)109113116 - In March 2024, ORIX sold a 66% stake in ORIX Credit to NTT DoCoMo, Inc., after which ORIX Credit was renamed DOCOMO Finance, Inc. in April 2025116 Strategy ORIX's strategy is guided by its purpose, "Finding Paths. Making Impact," focusing on "Alternative Investment & Operations" and "Business Solutions" to achieve growth, with a dividend policy aiming for the higher of a 39% payout ratio or the previous year's dividend - The company's purpose is "Finding Paths. Making Impact," executed through a culture that values diversity, challenge, and change119130 Target Performance Indicators (FY2023-FY2025) | Indicator | 2023 | 2024 | 2025 | | :--- | :--- | :--- | :--- | | Net income attributable to ORIX Corporation shareholders (¥M) | 290,340 | 346,132 | 351,630 | | ROE (%) | 8.5 | 9.2 | 8.8 | - Shareholder return policy is based on a dividend distribution of "the higher value of a payout ratio of 39% or the result for the previous fiscal year," supplemented by flexible stock buybacks126 - Major corporate agendas include promoting sustainability, enhancing risk management, strengthening information security, and promoting digital transformation134135136 Sustainability at ORIX and Our Initiatives ORIX's sustainability efforts are managed at both corporate and business unit levels, overseen by a Sustainability Committee, with ESG goals linked to executive compensation and key targets for GHG emissions reduction and board diversity - Sustainability governance is structured at two levels: corporate (Group-wide) led by the Sustainability Committee and business unit level led by unit heads140141 - Executive compensation is linked to ESG initiatives, with progress on key ESG goals added as a quantitative evaluation item for senior executive officers starting in fiscal 2024142 - The Investment and Credit Committee (ICC) uses a proprietary 'Sustainable Investing and Lending Checklist' to screen potential transactions from an ESG perspective143 - Key sustainability goals established in November 2021 include reducing GHG emissions, increasing the ratio of outside and female directors, and increasing the ratio of female management positions156 Profile of Business by Segment ORIX organizes its business into ten segments, with total segment profits of ¥544.7 billion in fiscal year 2025, driven by a significant profit increase in PE Investment and Concession, while Environment and Energy and Banking and Credit experienced declines Segment Profits (FY2023-FY2025) | Segment | 2023 (¥M) | 2024 (¥M) | 2025 (¥M) | | :--- | :--- | :--- | :--- | | Corporate Financial Services and Maintenance Leasing | 76,739 | 83,244 | 90,329 | | Real Estate | 52,532 | 67,055 | 70,541 | | PE Investment and Concession | 3,159 | 43,967 | 98,872 | | Environment and Energy | 37,173 | 38,072 | (4,923) | | Insurance | 63,344 | 70,826 | 74,399 | | Banking and Credit | 38,127 | 97,353 | 29,291 | | Aircraft and Ships | 30,486 | 44,366 | 67,420 | | ORIX USA | 58,608 | 27,931 | 39,915 | | ORIX Europe | 44,486 | 41,638 | 44,373 | | Asia and Australia | 43,856 | 47,069 | 34,451 | | Total segment profits | 448,510 | 561,521 | 544,668 | - The ten business segments are: Corporate Financial Services and Maintenance Leasing, Real Estate, PE Investment and Concession, Environment and Energy, Insurance, Banking and Credit, Aircraft and Ships, ORIX USA, ORIX Europe, and Asia and Australia189 Business Regulation ORIX Group's diverse operations are subject to a wide range of laws and regulatory oversight in Japan and internationally, including financial, real estate, and banking regulations from agencies like the FSA, SEC, FINRA, AFM, and DNB - In Japan, ORIX is subject to regulations including the Moneylending Business Act, Financial Instruments and Exchange Act, Insurance Business Act, and Banking Act, with oversight from the Financial Services Agency (FSA)233235243 - The ORIX USA segment is extensively regulated in the United States, with subsidiaries registered as investment advisers with the SEC, a broker-dealer with FINRA, and compliance requirements from housing agencies like Fannie Mae and Freddie Mac249250251 - The ORIX Europe segment is subject to European financial regulations such as AIFMD, UCITS, and MiFID, with oversight from authorities like the Dutch AFM and DNB, while its U.S. subsidiaries are regulated by the SEC and CFTC, and other entities are regulated in Switzerland, the UK, and Asia256257 Operating and Financial Review and Prospects This section provides a detailed analysis of ORIX's financial performance and condition, covering year-over-year results, liquidity, capital resources, cash flows, critical accounting policies, and risk management across its ten business segments Overview ORIX's financial strategy focuses on maintaining a high ratio of long-term, diversified funding and appropriate liquidity, aiming to preserve its A-level credit ratings, with fiscal 2025 net income attributable to shareholders increasing 2% to ¥351.6 billion and an ROE of 8.8% - The company's funding strategy prioritizes a high ratio of long-term funds, diversified sources, and staggered repayment periods to ensure stability and manage liquidity risk270 - ORIX holds investment-grade credit ratings from major agencies, including "A3" from Moody's and "A-" from Fitch, which are crucial for its funding activities272 Fiscal 2025 Performance Highlights | Metric | Value | | :--- | :--- | | Net Income Attributable to ORIX Shareholders | ¥351.6 billion (+2% YoY) | | ROE | 8.8% | Results of Operations This sub-section provides a detailed comparative analysis of ORIX's financial performance for fiscal years 2025 vs. 2024 and 2024 vs. 2023, detailing revenues, profits, and assets across its ten operating segments, and reviewing asset quality and credit loss allowances FY2025 vs FY2024 Performance Summary | Metric (Millions of yen) | FY 2024 | FY 2025 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | 2,814,361 | 2,874,821 | 2% | | Total Expenses | 2,453,648 | 2,542,995 | 4% | | Income before Income Taxes | 469,975 | 480,463 | 2% | | Net Income Attributable to ORIX Shareholders | 346,132 | 351,630 | 2% | FY2024 vs FY2023 Performance Summary | Metric (Millions of yen) | FY 2023 | FY 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | 2,663,659 | 2,814,361 | 6% | | Total Expenses | 2,327,736 | 2,453,648 | 5% | | Income before Income Taxes | 392,178 | 469,975 | 20% | | Net Income Attributable to ORIX Shareholders | 290,340 | 346,132 | 19% | - In FY2025, total segment profits decreased 3% to ¥544.7 billion, driven by lower profits in Environment and Energy, Banking and Credit, and Asia and Australia, despite gains in other segments like PE Investment and Concession276305 - In FY2024, total segment profits increased 25% to ¥561.5 billion, largely due to a significant profit increase in the Banking and Credit segment from the partial sale of ORIX Credit, and strong performance in the PE Investment and Concession segment416433 Liquidity and Capital Resources ORIX manages liquidity by diversifying funding sources, extending debt maturities, and maintaining adequate cash reserves and committed credit lines, with total debt at ¥6,282.8 billion and deposits at ¥2,449.8 billion as of March 31, 2025 - The company's funding policy emphasizes procurement stability through diversified methods (borrowings, capital markets, securitization) and reducing liquidity risk by extending borrowing terms and staggering repayment periods519 Key Liquidity and Debt Figures (as of March 31, 2025) | Item | Amount (¥M) | | :--- | :--- | | Short-term Debt | 549,680 | | Long-term Debt | 5,733,118 | | Deposits | 2,449,812 | | Total Committed Credit Facilities | 795,634 | | Unused Committed Credit Facilities | 598,079 | - ORIX utilizes Special Purpose Entities (SPEs) for asset securitization and provides investment products like 'kumiai' to finance large-ticket items such as aircraft and ships544545 Contractual Cash Obligations (as of March 31, 2025) | Obligation | Total (¥M) | Within 1 year (¥M) | 1-3 years (¥M) | 3-5 years (¥M) | After 5 years (¥M) | | :--- | :--- | :--- | :--- | :--- | :--- | | Deposits | 2,449,812 | 1,819,970 | 294,006 | 259,532 | 76,304 | | Long-term debt | 5,733,118 | 867,767 | 1,658,147 | 1,583,032 | 1,624,172 | | Lease liabilities | 296,151 | 53,118 | 69,127 | 50,464 | 123,442 | | Total | 9,182,209 | 2,839,116 | 2,197,690 | 2,020,173 | 2,125,230 | Critical Accounting Policies and Estimates This section details the significant judgments and estimates management makes in preparing financial statements, including fair value measurements, allowance for credit losses, impairment assessments, residual values for leases, insurance policy liabilities, hedge effectiveness, and pension and income tax accounting - Fair value measurement is a critical policy, particularly for Level 3 assets (¥459.1 billion as of March 31, 2025), which use unobservable inputs and require significant management judgment, primarily in valuing asset-backed securities and investment funds571576577 - The allowance for credit losses is a critical estimate, determined through collective and individual evaluations considering factors like obligor financial condition, collateral value, and future economic forecasts585589590 - Impairment testing for goodwill and other intangible assets is performed at least annually, using qualitative assessments or quantitative tests (like discounted cash flow analysis) that involve significant estimates of future performance605606 - Insurance policy liabilities are calculated using complex assumptions for mortality, morbidity, lapse rates, and discount rates, which are reviewed and updated annually, with changes in discount rates affecting other comprehensive income619620622 Directors, Senior Management and Employees This section details ORIX's corporate governance structure, compensation policies for directors and executive officers, and employee data including headcount and diversity metrics Corporate Governance System ORIX employs a "Company with Nominating Committee, etc." board model to ensure separation between management execution and board supervision, with independent Nominating, Audit, and Compensation Committees composed entirely of outside directors - ORIX utilizes a "Company with Nominating Committee, etc." board model to separate the oversight function of the Board of Directors from the execution of operations748 - The Nominating, Audit, and Compensation Committees are composed entirely of outside directors to avoid conflicts of interest and enhance management transparency748761 - The Board of Directors delegates certain decision-making authority to the representative executive officer (Group CEO) to promote efficiency, while retaining oversight and control over fundamental policies757 Compensation Director and executive officer compensation, determined by the Compensation Committee, aims to incentivize medium- to long-term value creation, with executive officer pay generally a 1:1:1 mix of fixed, performance-linked, and share-based compensation, totaling ¥2,403 million for fiscal 2025 Compensation for Directors and Executive Officers (FY2025) | Category | Fixed Compensation (¥M) | Performance-linked (¥M) | Share-based (¥M) | Total (¥M) | | :--- | :--- | :--- | :--- | :--- | | Non-Executive/Outside Director (6 people) | 110 | — | 26 | 137 | | Executive Officer (27 people) | 676 | 653 | 935 | 2,265 | | Total (33 people) | 787 | 653 | 962 | 2,403 | - Executive officer compensation structure is, in principle, a 1:1:1 mix of fixed compensation, performance-linked compensation, and share-based compensation894 - Performance-linked compensation is based on consolidated net income growth and divisional performance, with an additional adjustment for senior executives based on progress toward ESG-related goals895 - The company has a Compensation Clawback Policy for executive officers in the event of an accounting restatement due to material noncompliance898 Employees As of March 31, 2025, ORIX Group had 33,982 full-time employees, with diversity metrics including a 28.8% ratio of female managers across 9 major group companies in Japan and a 100% childcare leave take-up rate for male employees - Total full-time employees stood at 33,982 as of March 31, 2025, compared to 33,807 in the prior year867 Diversity Indicators for 9 Group Companies in Japan (as of March 31, 2025) | Indicator | Value | | :--- | :--- | | Percentage of female managers | 28.8% | | Percentage of male employees taking childcare leave | 100.0% | | Pay gap (female to male) | 65.3% | - The mandatory retirement age is 65, and the company offers an early voluntary retirement program for employees aged 45 and over868 Major Shareholders and Related Party Transactions This section identifies ORIX's major shareholders, primarily trust banks, and details its policy of conducting transactions with related parties on arm's-length terms, including a significant undrawn commitment for the Osaka IR project Major Shareholders as of March 31, 2025 | Shareholder | Number of Shares (Thousands) | Percentage of Issued Shares (%) | | :--- | :--- | :--- | | The Master Trust Bank of Japan, Ltd. (Trust Account) | 216,027 | 18.95 | | Custody Bank of Japan, Ltd. (Trust Account) | 95,409 | 8.37 | | STATE STREET BANK AND TRUST COMPANY 505001 | 34,640 | 3.03 | - As of March 31, 2025, overseas corporations and individuals held 44.39% of issued shares909 - The company has an undrawn commitment of ¥270,168 million to an equity method investee, MGM Osaka Corporation, for the development of an integrated resort as of March 31, 2025916 - Outstanding loans to all affiliates totaled ¥271,766 million as of March 31, 2025, with all transactions conducted in the ordinary course of business918 Financial Information This section confirms that all relevant financial statements are attached to the report and states that management does not expect any pending legal matters to have a material adverse effect on the company's financial condition or results of operations - The company is a plaintiff or defendant in various lawsuits arising in the ordinary course of business but does not expect any to have a material adverse effect on its financial condition924 The Offer and Listing ORIX's common stock is primarily traded on the Prime Market of the Tokyo Stock Exchange, and its American Depositary Shares (ADSs) are listed on the New York Stock Exchange (NYSE) under the symbol "IX", with the ADS to Share ratio changed from 1:5 to 1:1 effective February 27, 2025 - The primary market for ORIX shares is the Prime Market of the Tokyo Stock Exchange930 - ADSs are listed on the NYSE under the symbol "IX", and the ADS to Share ratio was changed from one ADS representing five shares to one ADS representing one share, effective February 27, 2025932 Additional Information This section covers supplementary details including the company's Articles of Incorporation, dividend policy, and taxation matters for foreign investors, highlighting the potential classification of ORIX as a Passive Foreign Investment Company (PFIC) under U.S. tax law Memorandum and Articles of Incorporation ORIX's Articles of Incorporation outline its broad business purposes, board structure, and the unit share system where one unit consists of 100 shares, with distributions of surplus (dividends) declared by Board resolution - The company's Articles of Incorporation permit a wide range of business activities, reflecting its diversified nature934936 - The company has a unit share system where 100 shares constitute one voting unit, with holders of fewer than 100 shares having restricted rights but options to adjust their holdings960963 - Distributions of surplus, including dividends, are declared by a resolution of the Board of Directors, with record dates of March 31 for year-end dividends and September 30 for interim dividends947948 Dividend Policy and Dividends ORIX aims to provide stable and sustainable dividends in line with business performance, setting the annual dividend for fiscal 2025 at ¥120.01 per share (a 39.0% payout ratio) and forecasting the higher of a 39% payout ratio or the prior year's dividend for fiscal 2026 Dividends Applicable to Fiscal Year Per Share | Year Ended March 31 | Per Share (¥) | | :--- | :--- | | 2021 | 78.00 | | 2022 | 85.60 | | 2023 | 85.60 | | 2024 | 98.60 | | 2025 | 120.01 | - The dividend payout ratio for fiscal 2025 was 39.0%996 - The dividend policy for fiscal 2026 is to pay the higher of a 39% payout ratio or the prior year's dividend per share (¥120.01)996 Taxation This sub-section outlines the principal Japanese and U.S. tax consequences for non-resident holders of ORIX shares or ADSs, noting a general 15.315% Japanese withholding tax on dividends and the potential for ORIX to be classified as a Passive Foreign Investment Company (PFIC) under U.S. tax law - Dividends paid to non-resident holders are generally subject to a Japanese withholding tax of 15.315%, which can be reduced by applicable tax treaties, typically to 10% for eligible U.S. residents10011002 - Gains from the sale of shares or ADSs outside Japan by a non-resident holder are generally not subject to Japanese income tax1003 - ORIX believes it may have been a Passive Foreign Investment Company (PFIC) for the reported fiscal year and may be in the future, which could result in adverse U.S. tax consequences for U.S. Holders, including treatment of gains and excess distributions as ordinary income subject to interest charges10121020 - If ORIX is a PFIC, U.S. Holders may be eligible to make a mark-to-market election for the ADSs, but the company does not intend to provide information for a Qualified Electing Fund (QEF) election10231026 Quantitative and Qualitative Disclosures about Market Risk ORIX's primary market risk exposures are to interest rates, foreign exchange rates, and stock market prices, with sensitivity analyses showing a hypothetical 10% U.S. dollar appreciation against the yen would result in an estimated ¥928 million exchange loss, and a 10% downward movement in stock prices would decrease equity securities fair value by ¥12,416 million - The company's primary market risks are interest rate risk, exchange rate risk, and stock market price risk1041 - As of March 31, 2025, a hypothetical 10% appreciation of the U.S. dollar against the Japanese yen was estimated to result in a ¥928 million loss in future earnings1054 - A hypothetical 10% uniform downward movement in stock prices as of March 31, 2025, was estimated to decrease the fair value of the company's equity securities by ¥12,416 million1056 Interest Rate Sensitivity of Financial Instruments (as of March 31, 2025) | Instrument Type | Total Expected Maturity (¥M) | Estimated Fair Value (¥M) | | :--- | :--- | :--- | | Assets: | | | | Installment loans (fixed rate) | 1,102,803 | 1,076,584 | | Installment loans (floating rate) | 2,956,827 | 2,921,998 | | Investment in securities (fixed rate) | 2,917,138 | 2,349,843 | | Investment in securities (floating rate) | 256,898 | 257,794 | | Liabilities: | | | | Short-term debt | 549,680 | 549,680 | | Deposits | 2,449,812 | 2,448,422 | | Long-term debt (fixed rate) | 2,808,049 | 2,755,922 | | Long-term debt (floating rate) | 2,925,069 | 2,922,906 | Description of Securities Other than Equity Securities This section details the fees and charges associated with ORIX's American Depositary Shares (ADSs), for which Citibank N.A. serves as the depositary, and notes that the depositary reimbursed ORIX $80,000 for ADR program-related expenses in fiscal 2025 - Citibank N.A. is the depositary for ORIX's ADSs1057 - ADS holders are charged fees up to 5¢ per ADS for services like issuance, cancellation, and cash distributions1057 - The depositary reimbursed ORIX $80,000 for ADR program-related expenses in fiscal 20251059 PART II This section covers ORIX's internal controls, procedures, and other governance-related information Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of March 31, 2025, with an unqualified opinion from KPMG AZSA LLC - Management concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level1063 - Based on the COSO 2013 framework, management concluded that the company's internal control over financial reporting was effective as of March 31, 20251067 - KPMG AZSA LLC audited the internal control over financial reporting and issued an unqualified opinion on its effectiveness1068 Other Information This section covers various governance and compliance topics, including the audit committee financial expert, fees paid to KPMG (¥5,187 million in FY2025), share repurchase programs (a ¥50 billion program completed, a new ¥100 billion program approved), and cybersecurity risk management - The board has determined that Aiko Sekine is an "audit committee financial expert" and is independent1069 Fees Paid to Principal Accountant (KPMG) in FY2025 | Fee Type | Amount (¥M) | | :--- | :--- | | Audit Fees | 4,706 | | Audit-Related Fees | 172 | | Tax Fees | 263 | | All Other Fees | 46 | - A share repurchase program of up to ¥50 billion was completed between May and December 2024, acquiring 14,649,500 shares, and a new program of up to ¥100 billion was approved for the period from May 2025 to March 202610851090 - The company's cybersecurity risk management is overseen by the Information Security Control Department, which reports to the Information Technology Management Committee, with no material incidents identified in the current fiscal year1096109711011102 PART III This section contains ORIX's consolidated financial statements and a list of exhibits Financial Statements This section contains the consolidated financial statements of ORIX Corporation and its subsidiaries, prepared in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) and audited by KPMG AZSA LLC - The report includes the consolidated financial statements of ORIX Corporation, prepared in accordance with U.S. GAAP1109 - The financial statements have been audited by KPMG AZSA LLC, an independent registered public accounting firm1109 Exhibits This section lists all documents filed as exhibits to the Form 20-F report, including foundational corporate documents, policies, and required certifications - A comprehensive list of exhibits filed with the annual report is provided, including foundational corporate documents, policies, and required certifications1111