NIS 6K Group Co., LTD. | NISGY 26 Jun 08

NIS (NISGY) Inactive 6-KNis Group Co., LTD.

Exhibit 1

Annual Financial Report

(Japanese GAAP)

This report is an English translation of “Yukashoken-Houkokusho” as of and for the year ended
March 31, 2008, filed through the Electronic Disclosure for Investors’ Network (EDINET) in Japan,
pursuant to the Japanese Financial Instruments and Exchange Law, Regulation Section 27-30 Paragraph 2.

Annual Financial Report


Document for filing:		Annual Financial Report

Pursuant to:		Japanese Financial Instruments and Exchange Law, Regulation 24-1

Administrative division for filing to:		Director of Kanto Local Finance Bureau

Filing date:		June 25, 2008

Period of Annual Financial Report for:		April 1, 2007 ~ March 31, 2008

Company name:		NIS GROUP CO., LTD.

Representative:		Kunihiko Sakioka

		President, Representative Director of the Board and CEO

Location of Matsuyama Head Office:		7-6, Chifune-machi 5-chome, Matsuyama City, Ehime

		(The address above is the registered head office; the actual principal

		executive office is the Tokyo Head Office stated below)

Telephone:		+ 81-89-943-2400

Contact:		Akihiro Nojiri

		Senior Executive Director of the Board, Executive Officer and

		Head of Strategy & Operations Control

Location of Tokyo Head Office:		6-1, Nishi-Shinjuku 1-chome, Shinjuku-ku, Tokyo

Telephone:		+81-3-3348-2424

Contact:		Akihiro Nojiri

		Senior Executive Director of the Board, Executive Officer and

		Head of Strategy & Operations Control

Locations where the filing is available to the public:		Tokyo Head Office, NIS Group Co., Ltd.

		(6-1, Nishi-Shinjuku 1-chome, Shinjuku-ku, Tokyo)

		Research Department, NIS Group Co., Ltd.

		(1-8, Hon-cho 4-chome, Kawaguchi City, Saitama)

		Nagoya Sales Section 1, Sales Control 2nd Department, NIS Group Co., Ltd.

		(20-25, Nishiki 1-chome, Naka-ku, Nagoya City)

		Osaka Sales Section 1, Sales Control 2nd Department, NIS Group Co., Ltd.

		(2-27, Shiromi 1-chome, Chuo-ku, Osaka City)

		Tokyo Stock Exchange, Inc.

		(2-1, Nihonbashi Kabuto-cho, Chuo-ku, Tokyo)

Annual Financial Report


FIRST SECTION:		CORPORATE INFORMATION


Note:		All amounts are rounded down to the nearest million yen, and all percentages are rounded to the nearest one-tenth of one percent in this annual financial report.


ITEM 1.		OVERVIEW OF THE CORPORATION


1.		KEY FINANCIAL DATA AND TRENDS


	Year Ended / As of March 31,
	2004			2005			2006			2007			2008

	(In millions except percentages, shares, per share data and number of employees)
Consolidated Financial Data:
Operating revenues	¥	45,693		¥	45,867		¥	60,991		¥	88,152		¥	83,027
Ordinary income (losses)		11,112			8,592			12,785			9,323			(17,438	)
Net income (losses)		6,186			6,525			9,033			8			(45,116	)
Net assets		53,832			65,793			79,824			86,747			58,763
Total assets		207,955			226,287			350,861			403,880			272,983
Net assets per share (in yen)		425.90			127.11			58.35			29.01			228.89
Net income (losses) per share (in yen):
Basic		49.04			12.67			6.91			0.00			(289.06	)
Diluted		45.21			11.53			6.50			0.00			-
Net worth ratio (%)		25.9			29.1			22.8			20.5			20.1
Return on equity (%)		12.5			10.9			12.4			0.0			(65.6	)
Price earnings ratio (times)		17.3			23.7			37.3			23,451.1			-
Net cash provided by (used in) operating activities		5,053			16,202			(89,882	)		(67,357	)		68,045
Net cash (used in) provided by investing activities		(2,184	)		(15,825	)		(17,144	)		(8,547	)		8,204
Net cash (used in) provided by financing activities		(6,237	)		4,765			102,574			79,728			(90,168	)
Cash and cash equivalents at end of year		20,243			25,376			21,105			27,625			11,652
Number of employees (persons)		851			818			998			1,166			708
Average number of temporary employees (persons)		94			85			100			90			65

Non-consolidated Financial Data:
Operating revenues		40,795			32,370			34,152			36,622			28,123
Ordinary income (losses)		10,596			7,989			8,109			4,947			(16,495	)
Net income (losses)		5,483			6,279			6,944			64			(45,615	)
Common stock		7,218			7,779			11,848			16,289			26,289
Issued shares (in thousand shares)		134,726			544,668			1,406,470			2,917,887			245,894
Net assets		53,150			64,861			74,752			78,820			51,148
Total assets		201,733			206,782			300,715			327,891			222,855
Net assets per share (in yen)		420.58			125.32			54.65			27.66			213.46
Dividend per share (in yen):
Full-year dividend		8.50			3.875			2.10			0.16			-
Of which half-year dividend		3.75			1.375			1.00			0.16			-
Net income (losses) per share (in yen):
Basic		43.49			12.21			5.32			0.02			(292.26	)
Diluted		40.19			11.20			5.02			0.02			-
Net worth ratio (%)		26.4			31.4			24.9			24.0			23.0
Return on equity (%)		11.2			10.6			9.9			0.1			(70.2	)
Price earnings ratio (times)		19.5			24.6			48.5			3,038.5			-
Dividend pay-out ratio (%)		19.4			31.7			39.5			694.5			-
Number of employees (persons)		785			680			720			801			485
Average number of temporary employees (persons)		86			74			90			77			54


Notes:	1.	Consumption taxes are excluded from operating revenues.
	2.	On May 20, 2004, NIS Group Co., Ltd. completed a 2-for-1 stock split.
	3.	On November 19, 2004, NIS Group Co., Ltd. completed a 2-for-1 stock split.
	4.	On May 20, 2005, NIS Group Co., Ltd. completed a 1.2-for-1 stock split.
	5.	On November 18, 2005, NIS Group Co., Ltd. completed a 2-for-1 stock split.
	6.	On April 1, 2006, NIS Group Co., Ltd. completed a 2-for-1 stock split.
	7.	On August 31, 2007, NIS Group Co., Ltd. completed a 1-for-20 reverse stock split.
	8.	Diluted net income per share for the year ended March 31, 2008 was not presented because of net losses per share.
	9.	Price earning ratio for the year ended March 31, 2008 was not presented because of net losses per share.
	10.	The half-year dividend per share for the year ended March 31, 2005, which amounted to ¥2.75, includes the ¥0.5 commemorative dividend in connection with the listing of a subsidiary’s shares on the stock exchange. In addition, the amount of half-year dividends per share presented above is adjusted retroactively to reflect the 2-for-1 stock split completed on November 19, 2004.

Annual Financial Report


	Year Ended / As of March 31,
	2004			2005			2006			2007			2008

	(In yen)
Consolidated:
Net assets per share	¥	443.65		¥	529.62		¥	583.48		¥	580.20			¥228.89
Net income (losses) per share:
Basic		51.08			52.79			69.14			0.06			(289.06	)
Diluted		47.10			48.02			64.99			0.01			-

Non-consolidated:
Net assets per share		438.11			522.18			546.53			553.21			213.46
Dividend per share:
Full-year dividend		8.85			16.15			21.00			3.20			-
Of which half-year dividend		(3.91	)		(5.73	)		(10.00	)		(3.20	)		(-	)
Net income (losses) per share:
Basic		45.31			50.86			53.16			0.46			(292.26	)
Diluted		41.86			46.67			50.22			0.46			-

Annual Financial Report


2.		CORPORATE HISTORY



	May 1960		Nissin Shoji Co., Ltd. (common stock: ¥1.85 million) established in Matsuyama City, specializing in discounting commercial bills.

	April 1967		Merged with Nissin Real Estate Co., Ltd. (common stock: ¥8 million).

	July 1967		Began offering secured loans.

	July 1972		Began offering consumer loans.

	September 1981		Began offering SME loans.

	February 1984		Registered as a moneylending company following the enactment of the Moneylending Business Law.

	April 1990		Merged with National Shinpan Co., Ltd. (common stock: ¥10 million).

	November 1990		Changed company name to Nissin Co., Ltd., and relocated the head office to the current location.

	April 1994		Obtained approval from Japan Securities Dealers Association to register shares on the OTC market.

	August 1994		Established the Tokyo Office to strengthen financing activities in the Kanto region.

	September 1996		Listed on the Second Section of the Osaka Securities Exchange.

	October 1996		Upgraded the Tokyo Office to Tokyo Branch.

	April 1998		Upgraded the Tokyo Branch to Tokyo Head Office.

	December 1998		Listed on the Second Section of the Tokyo Stock Exchange.

	September 1999		Listed on the First Section of the Tokyo Stock Exchange and Osaka Securities Exchange.

	July 2001		Established Nissin Servicer Co., Ltd., currently a consolidated subsidiary.

	August 2002		Listed on the New York Stock Exchange.

	November 2003		Established NIS Lease Co., Ltd., currently a consolidated subsidiary.

	June 2004		Sold unguaranteed consumer loans receivable to Orient Credit Co., Ltd.

	June 2004		Commenced the real estate business through NIS Property Co., Ltd., currently a consolidated subsidiary.

	July 2004		Established Matsuyama Nissin Investment Consulting (Shanghai) Co., Ltd. (now named Nissin Leasing (China) Co., Ltd.), currently an affiliate accounted for under the equity method.

	September 2004		Nissin Servicer Co., Ltd. was listed on the Mothers market of the Tokyo Stock Exchange.

	December 2004		Acquired shares of Yamagen Securities Co., Ltd. (now named NIS Securities Co., Ltd.), currently a consolidated subsidiary.

	December 2005		Acquired shares of Aprek Co., Ltd., currently an affiliate accounted for under the equity method, through a cash tender offer.

	October 2006		Changed company name to NIS Group Co., Ltd.

	December 2006		Acquired shares of Araigumi Co., Ltd., currently an affiliate accounted for under the equity method, through a subscription to a third-party allotment of new shares.

	May 2007		Established NI Strategic Partners Co., Ltd., currently a consolidated subsidiary.

	December 2007		Reached a basic agreement to form a strategic investment and business alliance with TPG, a U.S. private equity firm.

	February 2008		Increased capital through a third-party allotment of new shares to investment vehicles managed by TPG, as a part of a strategic investment and business alliance with TPG.

Annual Financial Report

3.		DESCRIPTION OF BUSINESS

		The NIS Group corporate group, comprised of NIS Group Co., Ltd., (the “Company”) and its 61 subsidiaries and 19 affiliates (collectively the “Group”), provides integrated financial services as its core business. Information about the members of the Group is given below:


Business Segment	Business Category	Company Name	Business Description	Company Description

Integrated Financial Services	SME loan business	Aprek Co., Ltd.	Provider of unsecured and secured loans	Affiliate accounted for under the equity method
		NIS Group Co., Ltd.		-
	Consumer loan business		Provider of unsecured and secured loans, and real estate finance
	Credit guarantee business		Credit guarantees in connection with unsecured and secured loans to SMEs
		NIS Lease Co., Ltd.	Guarantees of accounts receivable and credit guarantees in connection with real estate rentals	Consolidated subsidiary
	Leasing business		Provider of leases, installment loans, and rentals in Japan
		Nissin Leasing (China) Co., Ltd. 3 other affiliates accounted for under the equity method	Provider of leases, installment loans, and rentals in the People’s Republic of China	Affiliate accounted for under the equity method
	Securities business	NIS Securities Co., Ltd. 6 other consolidated subsidiaries	Investment banking	Consolidated subsidiary
		1 affiliate accounted for under the equity method		Affiliate accounted for under the equity method
Servicing Business	Loan servicing (Servicing business)	Nissin Servicer Co., Ltd.	Acquisition, collection and collection services of specific money claims	Consolidated subsidiary
		J One Investment Co., Ltd. 22 other consolidated subsidiaries	Acquisition and joint acquisition of specific money claims, etc.	Consolidated subsidiary
		8 affiliates accounted for under the equity method		Affiliate accounted for under the equity method
Real Estate Business	Real estate business	NIS Property Co., Ltd. 20 other consolidated subsidiaries	Real estate transactions, real estate development and asset management	Consolidated subsidiary
		1 affiliate accounted for under the equity method		Affiliate accounted for under the equity method
Other Businesses	Other businesses	8 consolidated subsidiaries	Construction business, SME support services and other businesses	Consolidated subsidiary
		Araigumi Co., Ltd. 3 other affiliates accounted for under the equity method		Affiliate accounted for under the equity method

Annual Financial Report

Our business flow chart is shown below:

Annual Financial Report

OVERVIEW OF SUBSIDIARIES AND AFFILIATES

Voting

Capital

Interest

(In millions of yen

Main

Owned

Company Name

Location

unless otherwise stated)

Business

(%)

Relationship

(Consolidated Subsidiaries)

Nissin Servicer Co., Ltd.
(Notes 2 and 3)

Shinjuku-ku,
Tokyo

1,736

Servicing
Business

73.6

1 shared director
Lending of funds
Management consulting services
Office leases

NIS Securities Co., Ltd.

Shinjuku-ku,
Tokyo

1,620

Integrated
Financial
Services

99.5

1 shared director
Outsourcing of investment consulting

Outsourcing of investment securities
management

Office leases

NIS Lease Co., Ltd.

Shinjuku-ku,
Tokyo

475

Integrated
Financial
Services

100.0

4 shared directors
Lending of funds
Customer referral services
Outsourcing of investment consulting Office leases

NIS Property Co., Ltd.

Shinjuku-ku,
Tokyo

Real Estate
Business

100.0

4 shared directors
Lending of funds

Guarantees of borrowings from
financial institutions

Customer referral services

Outsourcing of guarantees to
purchase real estate

Office leases

57 other companies

(Affiliates Accounted for under the Equity Method)

Nissin Leasing (China) Co., Ltd.

Shanghai,
People’s Republic
of China

US$202,500
(In thousands

)

Integrated
Financial
Services

50.0

3 shared directors

Aprek Co., Ltd.
(Note 2)

Kitakyushu City,
Fukuoka

1,126

Integrated
Financial
Services

39.8

Lending of funds

Guarantees of borrowings from
financial institutions

Management consulting services

Araigumi Co., Ltd.
(Note 2)

Nishinomiya City,
Hyogo

2,192

Other
Businesses

37.5

2 shared directors

Nippon Real Estate Rating Services Co., Ltd.

Shinjuku-ku,
Tokyo

Other
Businesses

25.0

1 shared director
Outsourcing of business operations

15 other companies

Annual Financial Report

EMPLOYEES

(1)

Employees of the Group


	March 31, 2008
	Integrated Financial
	Services			Servicing Business			Real Estate Business			Other Businesses			Total

		(Persons)
Number of Employees		561			103			14			30			708
Number of Employees		(56	)		(8	)		(-	)		(1	)		(65	)

(2)

Employees of the Company


March 31, 2008
	Number of Employees	Average Age		Average Years of Service		Average Annual Salary
	(Persons)	(Years)		(Years)		(In thousands)

	485		31.4		4.8		¥5,247
	(54)		31.4		4.8		¥5,247

	(3)		Labor Unions

			None of the Group’s employees are members of any labor union. We consider the relations between management and the employees to be excellent.

Annual Financial Report


ITEM 2.		OVERVIEW OF BUSINESS

SUMMARY OF OPERATING RESULTS

	(1)		Business Performance

			During the year ended March 31, 2008, the Company and its consolidated subsidiaries have continued in their efforts to establish a unique business model among non-bank financial companies in Japan centered on the real estate business, expansion into China, and servicing business. However, the business environment is becoming increasingly challenging reflecting circumstances surrounding the recent moneylending industry in Japan such as increased claims for excess interest repayments, and the turmoil in global financial and capital markets.

			In this business environment, the Group adopted its management reform program in order to improve operational efficiency and to significantly reorganize, while the Group further restructured its loan portfolio in the loan business as a provider of integrated financial services. In addition, the Group reached a basic agreement in December 2007 to form a strategic investment and business alliance with TPG, a U.S. private equity firm, to strengthen its financial base and creditworthiness, as well as to further enhance its business expansion. In February 2008, TPG injected ¥20,000 million of capital to the Company and approximately U.S.$102 million of capital to the Company’s foreign subsidiary as a part of the strategic investment and business alliance.

			With regard to the financial results for the year ended March 31, 2008, total operating revenues were ¥83,027 million, a decrease of ¥5,124 million, or 5.8%, compared with the previous fiscal year. This is attributable to a decrease in fees received and interest income from notes and loans receivable due to a decrease in the amount of loans originated and the balance of loans receivable, reflecting a more cautious sales strategy including stricter credit standards for new loans, as well as a decrease in revenues from purchased loans receivable and sales of real estate in the servicing business, despite revenue from sales of real estate in the real estate business of ¥13,800 million earned by a special purpose company (SPC) established by a consolidated subsidiary during the six months ended September 30, 2007.

			Operating income decreased by ¥25,862 million, compared with the previous fiscal year and, accordingly, the Group recorded operating losses of ¥15,427 million for the year ended March 31, 2008. This is attributable to an increase in operating expenses such as costs of sales of real estate, and an increase in selling, general and administrative expenses due to factors such as a revision of estimates for allowance for loan losses in a more conservative manner and total provision for excess interest repayment-related losses of ¥12,115 million. Consequently, ordinary income decreased by ¥26,761 million, compared with the previous fiscal year and, accordingly, the Group recorded ordinary losses of ¥17,438 million for the year ended March 31, 2008. This is mainly attributable to an increase of net losses on affiliates accounted for under the equity method and losses on investment funds.

			Net income decreased by ¥45,124 million, compared with the previous fiscal year and, accordingly, the Group recorded net losses of ¥45,116 million for the year ended March 31, 2008. This is attributable to impairment of investment securities of ¥9,252 million reflecting a decline in the market price of securities held, losses on sales of investment securities of ¥2,757 million due to sales of investment securities in order to improve asset efficiency as a part of the management reform program, provision for losses on group businesses of ¥2,963 million in line with guarantee of loans receivable and indemnification for claims for excess interest repayments of Aprek Co., Ltd., an affiliate accounted for under the equity method listed on the JASDAQ Securities Exchange (Code: 8489), and special retirement bonuses of ¥1,917 million incurred as special losses as a result of voluntary retirement program, in addition to a reversal of all deferred tax assets of ¥11,375 million of the Company, taking into consideration the recent adverse changes in the business environment.

Annual Financial Report

Operating Results by Business Segment are described below:

Integrated Financial Services

	(a)		Loans

			The Company engages in secured and unsecured lending to small and medium-sized enterprises (“SMEs”) in Japan. The Company attempted to accumulate high-quality operating assets through tightening credit screening standards for secured and unsecured lending and strengthening its credit management system, as well as improved the efficiency of its sales structure through integration of its loan offices.

			As a result of these efforts, the amount of loans originated for the year ended March 31, 2008 was ¥174,599 million, a decrease of ¥126,068 million, or 41.9%, compared with the previous fiscal year, and the total outstanding balance of notes and loans receivable as of March 31, 2008 was ¥124,545 million, an decrease of ¥88,966 million, or 41.7%, compared with the end of the previous fiscal year.

	(b)		Leasing

			Nissin Leasing (China) Co., Ltd., an affiliate accounted for under the equity method, promotes financial services in the People’s Republic of China, centering on direct finance leases for Chinese companies. Also, NIS Lease Co., Ltd., a consolidated subsidiary, promotes financial services such as leases and installment loans in Japan.

			As a result of these efforts, total assets held for leases and installment loans, net of unearned revenue from installment loans, as of March 31, 2008 were ¥9,124 million, a decrease of ¥4,654 million, or 33.8%, compared with the end of the previous fiscal year.

	(c)		Credit Guarantee

			The Company and NIS Lease Co., Ltd., a consolidated subsidiary, guarantee secured and unsecured SME loans receivable and unsecured consumer loans receivable of other companies. The Group utilizes its credit expertise developed through experience in the loan business and the customer base of its alliance companies as well as their brand value. The Group has focused its efforts on expansion of the credit guarantee business through providing business supports to alliance companies and other measures.

			In addition, the Company provides guarantees for loans receivable and indemnification for claims for excess interest repayments of Aprek Co., Ltd.

			As a result, the balance of guarantees for loans and accounts receivable after deduction of reserves as of March 31, 2008 was ¥16,397 million, a decrease of ¥1,000 million, or 5.8%, compared with the end of the previous fiscal year.

	(d)		Securities

			NIS Securities Co., Ltd., a consolidated subsidiary, promotes the investment banking business, including advising on initial public offerings as well as providing proposals and offers for funding techniques to listed venture companies and SMEs.

As a result of these efforts, operating assets for integrated financial services as of March 31, 2008 were ¥136,263 million, a decrease of ¥92,912 million, or 40.5%, compared with the end of the previous fiscal year, due to a decrease of ¥88,966 million, or 41.7%, in notes and loans receivable to ¥124,545 million. Operating revenues for the year ended March 31, 2008 were ¥37,215 million, a decrease of ¥8,929 million, or 19.3%, and operating income decreased by ¥22,594 million to ¥21,845 million of operating losses, due to an additional provision for excess interest repayments-related losses of ¥12,115 million, compared with the previous fiscal year, respectively.

Annual Financial Report

	2)		Servicing Business

			Nissin Servicer Co., Ltd., a consolidated subsidiary listed on the Mothers market of the Tokyo Stock Exchange (Code: 8426), promoted collection activities which take into consideration customers’ revitalization efforts and profitability, and enhancement of real estate-related revitalization businesses, while maintaining a cautious investment strategy reflecting the recent changes in market trend.

			As a result of these efforts, the total balance of purchased loans receivable and real estate for sale in the servicing business as of March 31, 2008 was ¥47,922 million, a decrease of ¥3,082 million, or 6.0%, compared with the end of the previous fiscal year. Operating revenues from the servicing business for the year ended March 31, 2008 were ¥18,860 million, a decrease of ¥12,894 million, or 40.6%, and operating income was ¥4,870 million, a decrease of ¥1,315 million, or 21.3%, compared with the previous fiscal year, respectively.

	3)		Real Estate Business

			The Group, primarily through NIS Property Co., Ltd., a consolidated subsidiary, attempted to improve the value of assets held as well as investment efficiency.

			As a result of these efforts, the total balance of real estate for sale and real estate under construction for sale in the real estate business as of March 31, 2008 was ¥25,812 million, a decrease of ¥785 million, or 3.0%, compared with the end of the previous fiscal year. Operating revenues from the real estate business for the year ended March 31, 2008 were ¥24,994 million, an increase of ¥14,986 million, or 149.7%, and operating income was ¥3,403 million, an increase of ¥322 million, or 10.5%, compared with the previous fiscal year, respectively.

	4)		Other Businesses

			The Group engages in other businesses, including SME support services. Operating revenues from other businesses for the year ended March 31, 2008 were ¥1,956 million, an increase of ¥1,711 million, or 698.1%, and operating losses were ¥250 million, a decrease of ¥154 million, or 38.1%, compared with the previous fiscal year, respectively.

Annual Financial Report

	(2)		Cash Flows

			As of March 31, 2008, cash and cash equivalents (“Cash”) were ¥11,652 million, a decrease of ¥15,972 million, compared with the end of the previous fiscal year. Overview of cash flows is as follows:

			(Cash Flows from Operating Activities)

			Net Cash provided by operating activities for the year ended March 31, 2008 was ¥68,045 million, compared with ¥67,357 million used for the previous fiscal year.

			Cash provided during the year ended March 31, 2008 mainly comprised ¥596 million provided by net collection of purchased loans receivable, compared with ¥6,707 million used in net acquisition for the previous fiscal year, and ¥58,736 million provided by net collection of loans receivable, compared with ¥51,226 million used in net origination for the previous fiscal year, while losses before income taxes and minority interest were ¥35,899 million, compared with ¥2,754 million of income before income taxes and minority interest for the previous fiscal year, and ¥14,207 million used in net acquisition of assets held for leases and installment loans, compared with ¥7,032 million used for the previous fiscal year.

(Cash Flows from Investing Activities)

			Net Cash provided by investing activities for the year ended March 31, 2008 was ¥8,204 million, compared with ¥8,547 million used for the previous fiscal year.

			Cash provided during the year ended March 31, 2008 mainly comprised ¥8,981 million provided by net sales of investment securities, compared with ¥2,490 million used in net acquisition for the previous fiscal year.

(Cash Flows from Financing Activities)

			Net Cash used in financing activities for the year ended March 31, 2008 was ¥90,168 million, compared with ¥79,728 million provided for the previous fiscal year.

			Cash used during the year ended March 31, 2008 mainly comprised ¥101,701 million used in net repayments of interest-bearing debt, compared with ¥39,985 million provided by net proceeds for the previous fiscal year, and ¥19,910 million provided by proceeds from issuance of new shares, compared with ¥7,910 million provided for the previous fiscal year.

Annual Financial Report

OPERATING RESULTS

	(1)		Operating Results of the Group

	1)		Operating Revenues by Business Segment


	Year Ended March 31,
	2007					2008
			Percentage					Percentage
	Amount		of Total			Amount		of Total

	(In millions except percentages)
Integrated Financial Services:
Interest income from notes and loans receivable:
Secured loans	¥	7,156		8.1	%	¥	6,239		7.5	%
SME loans		16,379		18.6			11,149		13.4
Discount notes		209		0.2			99		0.1
Consumer loans		7,260		8.3			4,673		5.7

Total		31,005		35.2			22,162		26.7

Fees received		4,068		4.6			1,742		2.1
Guarantee fees received		1,880		2.1			1,962		2.3
Revenue from leases and installment loans		5,897		6.7			5,867		7.1
Other		3,292		3.7			5,480		6.6

Total		15,139		17.1			15,052		18.1

Sub-total		46,144		52.3			37,215		44.8


Servicing Business:
Revenue from collections of purchased loans		18,856		21.4			12,335		14.9
Revenue from sales of real estate		10,678		12.1			4,326		5.2
Other		2,219		2.5			2,197		2.6

Sub-total		31,754		36.0			18,860		22.7


Real Estate Business:
Revenue from sales of real estate		8,691		9.9			23,317		28.1
Other		1,316		1.5			1,676		2.0

Sub-total		10,008		11.4			24,994		30.1


Other Businesses:
Other		245		0.3			1,956		2.4

Total	¥	88,152		100.0	%	¥	83,027		100.0	%


Notes:	1.	Business segments presented above are identical to the business segments presented in “Business Segment Information.”
	2.	Consumption taxes are excluded from the amounts presented above.

Annual Financial Report

Operating Assets by Business Segment


	March 31,
	2007					2008
			Percentage					Percentage
	Amount		of Total			Amount		of Total

	(In millions except percentages)
Integrated Financial Services:
Notes and loans receivable:
Secured loans	¥	102,623		33.4	%		¥63,061		30.0	%
SME loans		75,671		24.7			39,925		19.0
Discount notes		1,772		0.6			51		0.0
Consumer loans		33,444		10.9			21,507		10.3

Total		213,512		69.6			124,545		59.3

Assets held for finance leases, of which ownership is non-transferable:
Machinery		292		0.1			243		0.1
Equipment		2,685		0.8			2,113		1.0
Software		477		0.2			433		0.2
Other		41		0.0			29		0.0

Total		3,497		1.1			2,819		1.3

Assets held for operating leases		2,094		0.7			2,035		1.0
Installment loans		8,186		2.7			4,268		2.0
Other		1,884		0.6			2,593		1.3

Sub-total		229,175		74.7			136,263		64.9


Servicing Business:
Purchased loans receivable		31,565		10.3			28,777		13.7
Real estate for sale		19,439		6.3			19,145		9.1

Sub-total		51,004		16.6			47,922		22.8


Real Estate Business:
Real estate for sale and real estate under construction for sale		26,598		8.7			25,812		12.3

Sub-total		26,598		8.7			25,812		12.3

Total	¥	306,779		100.0	%	¥	209,998		100.0	%


Notes:	1.	Installment loans presented above are the amount after deduction of unearned revenue from installment loans.
	2.	In addition to those presented above, the amount of loans and accounts receivable of other companies that the Group guarantees in connection with the credit guarantee business in the integrated financial services segment is as follows:


	March 31,
	2007		2008
	Amount		Amount

	(In millions)
Guarantees for loans and accounts receivable	¥	17,398	¥	16,397


Note:		Guarantees for loans and accounts receivable presented above are the amount after the deduction of reserve for guarantee losses and reserve for losses on group businesses.

Annual Financial Report

	(2)		Operating Results of the Company

	A.		Disclosure under the “Regulation for Disclosure of Special Finance Companies”

	1)		Loans Outstanding by Category


	March 31, 2007
	Number of		Percentage					Percentage			Average
Loan Category	Accounts		of Total			Balance		of Total			Interest Rate

	(In millions except accounts, percentages and interest rates)
Consumers:
Unsecured loans (excluding housing loans)		28,385		45.9	%		¥ 33,307		14.0	%		22.03	%
Secured loans (excluding housing loans)		151		0.3			1,528		0.6			9.98
Housing loans		-		-			-		-			-

Sub-total		28,536		46.2			34,836		14.6			21.50

SMEs:
Unsecured loans		32,521		52.6			64,195		26.9			21.98
Secured loans		643		1.0			139,405		58.4			7.31
Discount notes		104		0.2			165		0.1			9.68

Sub-total		33,268		53.8			203,766		85.4			11.94

Total		61,804		100.0	%		¥238,602		100.0	%		13.33	%


	March 31, 2008
	Number of		Percentage					Percentage			Average
Loan Category	Accounts		of Total			Balance		of Total			Interest Rate

	(In millions except accounts, percentages and interest rates)
Consumers:
Unsecured loans (excluding housing loans)		18,653		43.6	%		¥ 21,412		17.3	%		20.96	%
Secured loans (excluding housing loans)		103		0.2			874		0.7			10.37
Housing loans		-		-			-		-			-

Sub-total		18,756		43.8			22,286		18.0			20.55

SMEs:
Unsecured loans		23,724		55.3			38,541		31.2			19.12
Secured loans		335		0.8			62,957		50.8			7.60
Discount notes		23		0.1			51		0.0			9.38

Sub-total		24,082		56.2			101,550		82.0			11.98

Total		42,838		100.0	%		¥123,836		100.0	%		13.52	%


Notes:	1.	Each amount represents the sum of loans receivable and notes receivable.
	2.	The above data as of March 31, 2007 includes ¥43,612 million of off-balance-sheet loans receivable, which resulted from measures such as securitization, for comparison purposes only.

Loans Outstanding by Type of Pledged Assets


	March 31,
	2007										2008
	Number of		Percentage					Percentage			Number of		Percentage					Percentage
Pledged Assets	Accounts		of Total			Balance		of Total			Accounts		of Total			Balance		of Total

	(In millions except accounts and percentages)
Investment securities		33		0.1	%		¥ 6,613		2.7	%		14		0.0	%		¥ 1,506		1.2	%
Of which equity stock		19		0.0			6,347		2.6			5		0.0			1,395		1.1
Receivables		50		0.1			940		0.4			37		0.1			1,053		0.9
Of which bank deposits		-		-			-		-			-		-			-		-
Commodities		8		0.0			238		0.1			3		0.0			159		0.1
Real estate		702		1.1			133,129		55.8			384		0.9			61,112		49.3
Foundations		-		-			-		-			-		-			-		-
Other		1		0.0			12		0.0			-		-			-		-

Sub-total		794		1.3			140,934		59.0			438		1.0			63,831		51.5

Guaranteed		38,257		61.9			71,987		30.2			25,209		58.8			41,393		33.5
Unsecured		22,649		36.6			25,514		10.7			17,168		40.1			18,560		15.0
Discount notes		104		0.2			165		0.1			23		0.1			51		0.0

Total		61,804		100.0	%		¥238,602		100.0	%		42,838		100.0	%		¥123,836		100.0	%


Notes:	1.	Each amount represents the sum of loans receivable and notes receivable.
	2.	The above data as of March 31, 2007 includes ¥43,612 million of off-balance-sheet loans receivable, which resulted from measures such as securitization, for comparison purposes only.

Annual Financial Report

Loans Outstanding by Loan Term


	March 31,
	2007										2008
	Number of		Percentage					Percentage			Number of		Percentage					Percentage
Loan Term	Accounts		of Total			Balance		of Total			Accounts		of Total			Balance		of Total

	(In millions except accounts and percentages)
Revolving loans		22,649		36.7	%		¥ 25,514		10.7	%		17,168		40.1	%		¥ 18,560		15.0	%
1 year or less		1,206		2.0			118,309		49.6			359		0.8			49,035		39.6
Over 1 year to 5 years		36,194		58.5			86,505		36.2			24,011		56.1			51,101		41.2
Over 5 years to 10 years		1,741		2.8			6,868		2.9			1,289		3.0			3,939		3.2
Over 10 years to 15 years		14		0.0			1,405		0.6			11		0.0			1,199		1.0
Over 15 years to 20 years		-		-			-		-			-		-			-		-
Over 20 years to 25 years		-		-			-		-			-		-			-		-
Over 25 years		-		-			-		-			-		-			-		-

Total		61,804		100.0	%		¥238,602		100.0	%		42,838		100.0	%		¥123,836		100.0	%

Average loan term per account	48 months										48 months

Loans Outstanding by Type of Industry


	March 31,
	2007										2008
	Number of		Percentage					Percentage			Number of		Percentage					Percentage
Type of Industry	Accounts		of Total			Balance		of Total			Accounts		of Total			Balance		of Total

	(In millions except accounts and percentages)
Manufacturing		1,742		2.8	%		¥ 4,758		2.0	%		1,231		2.9	%		¥ 2,591		2.1	%
Construction		3,686		6.0			9,882		4.1			2,416		5.6			4,007		3.2
Public utilities		-		-			-		-			-		-			-		-
Transportation / Communication		761		1.2			2,667		1.1			539		1.2			1,088		0.9
Wholesale / Retail / Restaurants		18,634		30.1			37,335		15.7			13,882		32.4			25,151		20.3
Finance / Insurance		243		0.4			5,238		2.2			159		0.4			1,896		1.5
Real estate		888		1.4			97,792		41.0			511		1.2			44,684		36.1
Services		6,593		10.7			43,968		18.4			4,880		11.4			20,478		16.6
Individuals		28,536		46.2			34,836		14.6			18,756		43.8			22,286		18.0
Other		721		1.2			2,123		0.9			464		1.1			1,651		1.3

Total		61,804		100.0	%		¥238,602		100.0	%		42,838		100.0	%		¥123,836		100.0	%


Notes:	1.	Each amount represents the sum of loans receivable and notes receivable.
	2.	The above data as of March 31, 2007 includes ¥43,612 million of off-balance-sheet loans receivable, which resulted from measures such as securitization, for comparison purposes only.

Funding Status


	March 31,
	2007					2008
			Average Borrowing					Average Borrowing
	Amount		Interest Rate			Amount		Interest Rate

	(In millions except accounts and percentages)
Borrowings from financial institutions		¥143,124		1.57	%		¥ 71,162		1.96	%
Other		95,257		1.11			80,274		2.89
Of which bonds and commercial paper		68,300		1.14			56,880		2.39

Total		¥238,382		1.40	%		¥151,437		2.38	%

Company’s capital		¥102,408		-			¥ 97,299		-
Of which common stock		16,289		-			26,289		-


Notes:	1.	The Company’s capital represents the amount of total assets plus allowances and reserves (including those under special laws), less the sum of total liabilities and the planned amount of dividends.
	2.	The average borrowing interest rate is the weighted-average interest rate of borrowings during the year.

Annual Financial Report

	B.		Overview of Operations

	1)		Number of Branches


	March 31,
	2007		2008

Manned branches and loan offices		35		14

Operating Revenues

(a)

Operating Revenue by Operating Activity


	Year Ended March 31,
	2007					2008
	Amount		Percentage of Total			Amount		Percentage of Total

	(In millions except percentages)
Interest income from notes and loans receivable:
Secured loans		¥ 6,787		18.5	%		¥ 5,937		21.1	%
SME loans		14,304		39.1			9,424		33.5
Discount notes		20		0.1			13		0.1
Consumer loans		7,260		19.8			4,673		16.6

Sub-total		28,372		77.5			20,049		71.3

Other financial income:
Interest income from deposits		2		0.0			21		0.1
Interest income from securities		681		1.9			2,693		9.6
Other		16		0.0			5		0.0

Sub-total		700		1.9			2,720		9.7

Other operating income:
Fees received		4,009		10.9			1,709		6.1
Recovery from loans previously charged-off		842		2.3			931		3.3
Guarantee fees received		1,686		4.6			1,769		6.3
Other		1,012		2.8			942		3.3

Sub-total		7,550		20.6			5,353		19.0

Total		¥36,622		100.0	%		¥28,123		100.0	%

Note: Consumption taxes are excluded from the amounts presented above.

Annual Financial Report

(b)

Interest Income from Notes and Loans Receivable by Region


	Year Ended March 31,
	2007					2008
Region	Amount		Percentage of Total			Amount		Percentage of Total

	(In millions except percentages)
Hokkaido		¥ 907		3.2	%		¥ 367		1.8	%
Tohoku		623		2.2			403		2.0
Kanto		16,448		58.0			13,735		68.5
Chubu		1,966		6.9			654		3.3
Kinki		4,256		15.0			2,934		14.6
Chugoku		1,322		4.7			589		3.0
Shikoku		612		2.1			284		1.4
Kyushu		2,235		7.9			1,078		5.4

Total		¥28,372		100.0	%		¥20,049		100.0	%


Hokkaido:		Hokkaido
Tohoku:		Iwate, Miyagi, Fukushima
Kanto:		Ibaraki, Tochigi, Gunma, Saitama, Chiba, Tokyo, Kanagawa
Chubu:		Niigata, Ishikawa, Nagano, Shizuoka, Aichi
Kinki:		Kyoto, Osaka, Hyogo, Nara
Chugoku:		Okayama, Hiroshima
Shikoku:		Tokushima, Kagawa, Ehime, Kochi
Kyushu:		Fukuoka, Kumamoto, Oita, Kagoshima, Okinawa

Originated Loan Amounts by Product


	Year Ended March 31,
	2007					2008
Loan Product	Amount		Percentage of Total			Amount		Percentage of Total

	(In millions except percentages)
Secured loans		¥223,809		80.3	%		¥154,178		87.8	%
SME loans		42,343		15.2			17,653		10.1
Discount notes		753		0.3			530		0.3
Consumer loans		11,742		4.2			3,090		1.8

Total		¥278,649		100.0	%		¥175,451		100.0	%

Annual Financial Report

Loans Outstanding

(a)

Loans Outstanding by Product


	March 31,
	2007										2008
	Number of		Percentage					Percentage			Number of		Percentage					Percentage
Loan Product	Accounts		of Total			Balance		of Total			Accounts		of Total			Balance		of Total

	(In millions except accounts and percentages)
Secured loans		670		1.1	%		¥139,277		58.4	%		348		0.8	%		¥ 62,352		50.4	%
SME Loans		32,617		52.8			65,715		27.5			23,789		55.5			39,925		32.2
Discount notes		104		0.1			165		0.1			23		0.1			51		0.0
Consumer loans		28,413		46.0			33,444		14.0			18,678		43.6			21,507		17.4

Total		61,804		100.0	%		¥238,602		100.0	%		42,838		100.0	%		¥123,836		100.0	%


Notes:	1.	Each amount represents the sum of loans receivable and notes receivable.
	2.	The above data as of March 31, 2007 includes ¥43,612 million of off-balance-sheet loans receivable, which resulted from measures such as securitization, for comparison purposes only.

(b)

Loans Outstanding by Loan Balance


	March 31,
	2007										2008
	Number of		Percentage					Percentage			Number of		Percentage					Percentage
Loan Balance	Accounts		of Total			Balance		of Total			Accounts		of Total			Balance		of Total

	(In millions except accounts and percentages)
¥500,000 or less		18,303		29.6	%		¥ 4,970		2.1	%		13,156		30.7	%		¥ 3,216		2.6	%
¥500,001 ~ ¥1,000,000		12,449		20.1			9,570		4.0			8,691		20.3			6,660		5.4
¥1,000,001 ~ ¥3,000,000		21,849		35.4			40,120		16.8			15,853		37.0			28,660		23.1
¥3,000,001 ~ ¥5,000,000		6,924		11.2			27,641		11.6			4,265		9.9			16,549		13.4
¥5,000,001 ~ ¥10,000,000		1,593		2.6			10,521		4.4			627		1.5			4,002		3.2
Over ¥10,000,000		686		1.1			145,779		61.1			246		0.6			64,746		52.3

Total		61,804		100.0	%		¥238,602		100.0	%		42,838		100.0	%		¥123,836		100.0	%

Average balance of loans outstanding per account (in thousands)				¥3,860										¥2,890


Notes:	1.	Each amount represents the sum of loans receivable and notes receivable.
	2.	The above data as of March 31, 2007 includes ¥43,612 million of off-balance-sheet loans receivable, which resulted from measures such as securitization, for comparison purposes only.

(c)

Loans Outstanding by Interest Rate


	March 31,
	2007										2008
	Number of		Percentage					Percentage			Number of		Percentage					Percentage
Interest Rate	Accounts		of Total			Balance		of Total			Accounts		of Total			Balance		of Total

	(In millions except accounts and percentages)
Less than 15%		2,223		3.6	%		¥151,128		63.3	%		1,372		3.2	%		¥ 67,789		54.8	%
From 15% to less than 20%		6,342		10.3			17,378		7.3			7,402		17.3			15,764		12.7
From 20% to less than 25%		33,759		54.6			52,079		21.8			20,746		48.4			28,515		23.0
From 25% to 29.2%		19,480		31.5			18,015		7.6			13,318		31.1			11,766		9.5

Total		61,804		100.0	%		¥238,602		100.0	%		42,838		100.0	%		¥123,836		100.0	%

Average contractual interest rate (%)				13.33%										14.59%

Annual Financial Report

(d)

Loans Outstanding by Region


	March 31,
	2007										2008
	Number of		Percentage					Percentage			Number of		Percentage					Percentage
Region	Accounts		of Total			Balance		of Total			Accounts		of Total			Balance		of Total

	(In millions except accounts and percentages)
Hokkaido		1,984		3.2	%		¥ 3,530		1.5	%		375		0.9	%		676		0.5	%
Tohoku		1,158		1.9			2,523		1.1			760		1.8			1,301		1.1
Kanto		35,640		57.7			177,593		74.4			36,261		84.6			106,037		85.6
Chubu		3,178		5.1			6,482		2.7			819		1.9			1,317		1.1
Kinki		6,662		10.8			26,108		10.9			2,350		5.5			9,617		7.8
Chugoku		2,719		4.4			4,473		1.9			1,194		2.8			2,003		1.6
Shikoku		6,455		10.4			8,054		3.4			-		-			-		-
Kyushu		4,008		6.5			9,835		4.1			1,079		2.5			2,882		2.3

Total		61,804		100.0	%		¥238,602		100.0	%		42,838		100.0	%		¥123,836		100.0	%

Loans Outstanding Per Office and Per Employee


	March 31,
	2007				2008
	Number of Accounts		Balance		Number of Accounts		Balance

	(In millions except accounts)
Loans outstanding per office		1,766		¥6,817		3,060		¥8,845
Loans outstanding per employee		128		494		252		728


Notes:	1.	Loans outstanding per office are calculated based on the total number of branches and loan offices as of the end of the fiscal year. The total numbers of branches and loan offices as of March 31, 2007 and 2008 are 35 and 14, respectively.
	2.	Loans outstanding per employee are calculated based on the number of sales persons as of the end of the fiscal year. The numbers of sales persons as of March 31, 2007 and 2008 are 483 and 170, respectively.

Annual Financial Report

CHALLENGES FOR THE GROUP

		Following the amendments to the Moneylending Business Restriction Law and substantial changes in the management environment, the Group has broken away from a business model centered on financing for domestic SMEs, and is seeking to achieve further growth and profit performance by further devoting management efforts to four business segments, namely, real estate-related business, China-related business, investment banking business and servicing business, in order to transform itself into a comprehensive non-bank financial services provider that can respond to the various needs of mid-sized SMEs developing their businesses widely in Asia as well as domestic mid-sized SMEs. In addition, the Group aspires to be the most profitable non-bank financial services provider in Japan by leveraging TPG’s best practice in the global financial market, while improving its financial position and controlling risk and return through strengthening its integrated risk management, as well as bolstering its approach to compliance.

		In order to accomplish above, the Group is undertaking the following by making the best use of TPG’s human resources which have significant knowledge in a variety of industries as well as significant experience of business management and network in the financial sector, and by combining these resources with the Group’s business expertise: (1) further enhancement of the Group’s funding base; (2) organizational reinforcement of corporate structure and personnel placement as well as human resource development by upgrading and expanding the in-house education program; (3) reform of profit structure by promoting businesses for earning fee income such as the investment banking business; (4) improving the Group’s financial base and controlling risk and return by means of risk measurement; and (5) further improvements to the internal control system.

	(1)		Further Enhancement of the Group’s Funding Base

			In order to respond to the recent turmoil in the global financial market and significant changes surrounding the moneylending industry, the Company reached a basic agreement to form a strategic investment and business alliance with TPG, a U.S. private equity firm, in December 2007, and TPG injected ¥20,000 million of capital to the Company and approximately U.S.$102 million of capital to the Company’s foreign subsidiary. The Group is currently in the progress of improving its financial base through capital reinforcement as well as strengthening relationships with correspondent financial institutions and expanding relationships with new financial institutions by making the best use of TPG’s significant experiences and business network. In addition, the Group will further strengthen its funding base, taking into consideration the financial balance, by utilizing external sources through funding programs such as securitization in connection with operating activities and cooperation with investors and financial institutions.

	(2)		Organizational Reinforcement of Corporate Structure and Personnel Placement as well as Human Resource Development by Upgrading and Expanding the In-house Education Program

			In order to respond to further specialization and diversifications of business operations going forward, the Group seeks to ensure the stability of its professional personnel as well as enhance and vitalize organizational strength through appropriate personnel placement.

			Furthermore, the Group will develop and implement employee training programs through cross-departmental project teams in order to improve its services by improving individual skills of employees.

	(3)		Reform of Profit Structure by Promoting Businesses for Earning Fee Income such as the Investment Banking Business

			Under the corporate philosophy of “Vision Support Company,” the Group has aspired to provide one-stop financial services to mid-sized SMEs and has established the solid sales network and broad information network.

			In addition, Nissin Leasing (China) Co., Ltd. has focused its efforts on establishing strong network with Chinese companies and building a leading brand as a leasing company in China.

			The Group will take full advantage of the abovementioned competitiveness in order to improve its profitability through establishment of the system to provide a variety of support for domestic mid-sized SMEs and Asian companies centered in China, as well as to promote business for earning fee income from advisory services for businesses between Japan and China.

Annual Financial Report

	(4)		Improving the Group’s Financial Base and Controlling Risk and Return by Means of Risk Measurement

			The Group recognizes that risk management is one of the highest-priority corporate strategy issues, and established the “Risk Management Division” in April 2007, aiming to control various risks arising from our operations through integrated risk management and to create a risk-control structure.

			In addition, the Group recognizes that thorough management of information assets is another highest-priority issue, and is working to enhance its information security system. As a part of the enhancement of its information security system, the Group has acquired “ISO27001,” the international practice standard for information security management systems.

			Furthermore, the “Enterprise Risk Management Department” seeks to determine portfolio risks of the Group in a comprehensive and quantitative manner. It will also seek to analyze the balance between risk and return and to make appropriate allocations of capital, as well as to improve profit-earning capacity to secure the Group’s financial soundness.

	(5)		Further Improvements to the Internal Control System

			As a listed company on the New York Stock Exchange (“NYSE”), the Group established the internal control system in accordance with the Sarbanes-Oxley Act (“SOX”). For the year ended March 31, 2007, the first year of the application of certain SOX rules regarding review of internal control over financial reporting, the Group obtained the opinion from its independent auditor, expressing that the Group maintained an effective internal control system over financial reporting.

			In addition, the Group is currently upgrading and establishing its internal control system based on the Japanese version of SOX (maintenance and reporting procedures for the “Internal Controls over Financial Reporting” set forth in the “Financial Instruments and Exchange Law” in Japan, the so-called “J-SOX”) to be effective from the year ending March 31, 2009. Specifically, segregating operations and supervision through the introduction of an executive officer system and outside director system, and enhancing the management monitoring system through the establishment of a Board of Statutory Auditors, which includes outside statutory auditors.

			Furthermore, the Group recognizes compliance as one of the highest-priority corporate strategy issues. In order to enhance its compliance function, the Group established the “Compliance Committee,” which consists primarily of external experts and as an advisory panel to the Board of Directors, as well as enacted the “NIS Code of Ethics.”

Annual Financial Report

4.		BUSINESS RISK FACTORS

		Certain risks that affect our business results, stock price and financial position are discussed below.

		In addition, these materials contain forward-looking statements about our industry, our business, our plans and objectives, our financial condition and our results of operations that are based on our current expectations, assumptions, estimates and projections as of the date of filing of this annual financial report (“Yukashoken-Houkokusho”) in Japan. These statements discuss future expectations, identify strategies, discuss market trends, contain projections of results of operations or of financial condition, or state other forward-looking information.

		Our business results and these forward-looking statements are subject to various risks and uncertainties. Known and unknown risks, uncertainties and other factors could cause our actual results to differ materially from and be worse than those contained in or suggested by any forward-looking statement. We cannot promise that our expectations, projections, anticipated results or other information expressed in or underlying these forward-looking statements will turn out to be correct.

(1)

Risks related to the Business Environment

	1)		Weak economic conditions

			Economic conditions affecting the Group are becoming increasingly uncertain reflecting a slowing down of the recovery trend in the economy, caused by factors such as turmoil in the global financial market affected by the deterioration of the subprime- mortgage market in the United States and the surge in crude oil prices. Furthermore, in the moneylending industry, the business environment has been significantly changing. The Amendment of the Moneylending Business Law and other laws related to the moneylending business were enacted in the 165th Diet session in December 2006. Accordingly, the lowering of the maximum lending rate stipulated by the Contribution Law and the restriction on the total amount of advances per customer are scheduled to become effective in approximately three years.

			If the economic situation in Japan worsens, we may be forced to further increase our provisions for loan losses or to limit our acquisition of new customers, thereby adversely affecting our financial condition and results of operations.

	2)		Misconduct by an employee or director, or negative publicity for our industry and the Group

			Any of our directors or employees could engage in misconduct, which includes conduct that exceeds authority, concealment of unauthorized or unsuccessful activities, and improper use of information assets or leakage of personal information. Any such misconduct could result in regulatory sanctions, legal liability, and serious reputational or financial harm to the Group. The precautions we take to prevent and detect such misconduct may not always deter or prevent it, even though we recognize compliance as one of the most significant challenges for management. Even if we succeed in managing the conduct of our own directors and employees, we may suffer reputationally or financially from the negative impact caused by misconduct by other lenders in the finance industry. This could lead to the introduction of additional regulations or laws favoring borrowers that might erode our profitability, and therefore could affect our financial position and results of operations.

Annual Financial Report

(2)

Risks related to Laws and Regulations

	1)		Regulations under Japanese law

			As we operate integrated financial services and the servicing business, the main laws and regulations with which we must comply are as follows:

	(a)		Regulations concerning the loan business

			Regulations concerning interest rates

	•		Law Concerning the Regulation on Acceptance of Capital Contributions, Money Deposits and Interest (the “Contribution Law”)

	•		Law Concerning the Regulation of Interest Rate (the “Interest Rate Restriction Law”)

			Regulations concerning excessive lending

			Regulations concerning loan operations

	•		Law Concerning Regulations on Moneylending Business, etc. (the “Moneylending Business Law”)

	•		Comprehensive Supervisory Guidelines for Moneylending Business (the “Supervisory Guidelines”)

	(b)		The Special Measures Law concerning the Claims Servicing Business (the “Servicer Law”)

	(c)		Installment Sales Law

	(d)		Financial Instruments and Exchange Law

	(e)		Other related regulations

	•		Law Concerning the Protection of Personal Information (the “Personal Information Protection Law”)

	•		Law for Prevention of Transfer of Criminal Proceeds (the “Anti-Money Laundering Law”)

	•		Civil Code

The overview of the laws or regulations mentioned above and the accompanying risks are as follows:

	(a)		Regulations concerning the loan business

			Regulations concerning interest rates

			Regarding interest rates, the Contribution Law defines the maximum interest rate for loans as 29.20%, and all of our products are set below the maximum interest rate.

			On the other hand, Article 1-1 of the Interest Rate Restriction Law provides that a loan with an interest rate exceeding the prescribed rate is invalid with respect to the portion exceeding the maximum rate. Prescribed rates are 20% per annum for loans of less than ¥100 thousand; 18% per annum for loans of ¥100 thousand or more but less than ¥1 million; and 15% per annum for loans of ¥1 million or more. Interest exceeding the maximum rates under the Interest Rate Restriction Law but below the maximum rate under the Contribution Law is often called “gray-zone” interest.

			In addition, the Amendment of the Moneylending Business Law, which includes amendments of the overall Moneylending Business Law such as abolishment of so-called “gray-zone” interest by reducing the maximum legal interest rate, was enacted in the 165th Diet session on December 13, 2006 and promulgated on December 20, 2006.

			The reduction of the maximum legal interest rate is scheduled to become effective within approximately three years, and the Company reduced interest rates on all newly originated financial products from October 1, 2006. However, if non-bank financial companies rapidly implement tightening of their credit screening prior to the effectiveness, resulting in a substantial shrinkage of credit, our financial position and result of operations could be adversely affected.

Annual Financial Report

			Regulations concerning excessive lending

			The aforementioned Amendment of the Moneylending Business Law also contemplates tightening restraints on excessive lending and introduced a prohibition on lending to individual customers if, in principle, the aggregate loan balance would exceed one-third of the customer’s annual salary, with certain exceptions.

			The restraints on excessive lending, as with the reduction of the maximum legal interest rate, are scheduled to become effective within approximately three years of promulgation. The Group is seeking to restructure its loan portfolio by shifting its target customers from individual customers to SMEs, and focusing on secured loans which are exempted from the restrictions on total advances. However, if the subject and scope of the restrictions on total advances become more tightened, our financial position and result of operations could be adversely affected.

			Regulations concerning loan operations

			As a registered moneylender, the Company and some of its affiliated companies are subject to the Moneylending Business Law and various regulations, such as prohibition of excessive lending, display of lending terms and conditions, advertisement of lending terms and conditions, prohibition of exaggerated advertisements, requirements of issuance of written notice and issuance of receipts, preparation of accounts and records, restrictions on the acquisition of blank power of attorney, regulations on loan collection practices, return of loan contracts, indication of registration signs, and restrictions on loan assignments.

			On January 1, 2004 (portions on September 1, 2003), amendments to the Moneylending Business Law and Contribution Law were enacted which strengthened the moneylender registration system, tightened regulation concerning marketing and loan collection practices, and increased penalties for unregistered moneylenders and violations of the statutory maximum interest rate stipulated by the Contribution Law. In addition, strict requirements regarding the issuance of written notice by moneylenders will be applied to registered moneylenders due to the amendment on April 11, 2006 of the Enforcement Order of Article No.17 (Requirements of Issuance of Written Notice) and Article No.18 (Requirements of Issuance of Receipt) of the Moneylending Business Law. Moreover, increased penalties on unregistered moneylenders and violations of the statutory maximum interest rate stipulated by the Contribution Law have been imposed by the amended Contribution Law promulgated on December 20, 2006.

			Furthermore, on December 29, 2007, the Financial Service Agency formulated the Supervisory Guidelines to maintain and strengthen the supervisory system to comprehend business conditions and approaches to compliance of moneylenders. Following the formulation of the Supervisory Guidelines, former Administrative Guidelines issued by the Financial Service Agency were abolished, except provisions concerning Article 5-7 of Contributions Law and provisions concerning supervision of daily installment moneylenders.

			Although the Group’s practices fully comply with the related laws and Supervisory Guidelines, changes in basic policies of the Financial Services Agency and any amendments to these laws and regulations, depending on the content, could materially affect our business and results of operations.

	(b)		The Servicer Law

			The Servicer Law applies to the Group’s servicing business operated by Nissin Servicer Co., Ltd. On October 25, 2001, Nissin Servicer Co., Ltd. was licensed by the Ministry of Justice pursuant to the Servicer Law to perform servicing business activities. The Servicer Law, in addition to setting forth the required authorization standards for the conduct of servicing business, also stipulates required compliance items with respect to the scope of these activities, the obligation to provide specified legal documentation and notification procedures upon repayment of specific money claims, and the obligation to return legal documents evidencing such debt. Although the Group’s practices fully comply with related laws and regulations, in the event that there is an easing of the licensing standards or establishment of new regulations, or if, despite our intention to expand into other business areas, approval to perform such operations is not granted, it could adversely affect our business strategies.

			Furthermore, as we mainly purchase specific money claims from financial institutions by invited tender, the increase in the number of companies entering this market, together with the contraction in the market for the liquidation of bad debts due to the trend towards economic recovery, has led to increasingly severe competition.

Annual Financial Report

			In response to these factors, we have revised pricing standards through a classification of specific money claims into categories, and by improving the accuracy of due diligence, we have also maintained our competitiveness in the purchase of specific money claims. This, together with the development of new areas of business such as liquidation of assets, securitization, and corporate revitalization, has allowed us to respond to the current business environment. However, if we are unable to maintain competitiveness in the purchase of specific money claims, or if there are rapid increases in purchase prices or decreases in commission fees, our servicing business may face a decrease in profitability, which could significantly affect our business strategies and results of operations.

	(c)		Installment Sales Law

			The Installment Sales Law applies to the Group’s installment sales business operated by NIS Lease Co., Ltd. Upon application of the Installment Sales Law, the Group is required to comply with regulations, among other things, such as display of selling conditions, issuance of written documentation, restrictions with respect to cancellation of a contract, restrictions with respect to maximum amount of compensated damages accompanying cancellation of a contract, cancellation of a contract application, and prevention of purchases which exceed ability to pay. Although the Group’s practices fully comply with the Installment Sales Law, any amendments to related laws and regulations, depending on the content, could affect our financial position and results of operations.

	(d)		Financial Instruments and Exchange Law

			The Financial Instruments and Exchange Law, as well as regulations imposed by each financial instruments exchange and association of financial instruments firms, apply to the Group’s securities business operated by NIS Securities Co., Ltd., and the Group’s practices fully comply with these laws and related regulations.

			However, there still remain ambiguous interpretations of the Financial Instruments and Exchange Law. Therefore, any trends in interpretations, and any amendments and administrations of this law related directly to our business activities, could adversely affect our reputation, financial position and results of operations.

	(e)		Other related regulations

	•		The Personal Information Protection Law

			On April 1, 2005, the Personal Information Protection Law as well as the guidelines concerning personal information by related ministries and agencies were publicly announced and fully implemented. Under the Personal Information Protection Law, an entrepreneur or corporation handling personal data is obliged to “specify and limit the purpose of usage for such data,” “acquire such data appropriately and notify the purpose of usage for such data,” “ensure data accuracy,” “provide for safe control of such data,” “supervise employees and third-party consignees,” “restrict the provision of such data to third-parties,” and “respond to a person who requests control over his or her personal information, including amendment, suspension of the use or deletion of his or her data.”

			An entrepreneur or corporation handling personal data is also obliged to file certain reports, when considered necessary, with to the relevant minister. Failure to comply with certain duties stipulated by the Personal Information Protection Law, when considered necessary in order to protect personal rights and interests, empowers the competent minister to recommend or order required administrative sanctions and penalties for non-compliance or negligence in reporting.

			In order to comply with the requirements of the Personal Information Protection Law and other related statutes, the Group has established a working committee, which examines countermeasures, develops a control system and continuously inspects the control system. However, events such as leakage of personal data for unforeseen reasons may occur, and this could affect our business activities and results of operations.

Annual Financial Report

	•		The Anti-Money Laundering Law

			The Group previously maintained the customer management system based on the Law on Confirmation of Customer Identification by Financial Institutions and Prevention of Unauthorized Use of Deposit Accounts (the “Customer Identification Law”) which was implemented on January 6, 2003. However, the Customer Identification Law was abolished following the implementation of the Anti-Money Laundering Law on March 1, 2008. In accordance with the Anti-Money Laundering Law, the Group is promoting establishment of customer management system by collecting the prescribed documents from customers and confirming their identities, as well as by creating customer cards to maintain identity verification records and transaction histories.

			However, in case the Group’s operations are not pursuant to the law, this could affect our reputation, financial position and results of operations by means of administrative penalties by the Commissioner of the Financial Agency Services or criminal penalties.

			In addition, any amendment to the law, or any implementation of new laws and regulations, which affects our business activities, could also affect our financial position and results of operations.

	•		Civil Code

			On April 1, 2005, the Civil Code was revised and the language and terms of the Civil Code were modernized to make it easier for people to understand the Civil Code. Simultaneously, the revised Civil Code provides for rationalization of the contents of guaranty contracts, especially revolving guaranty contracts, in which guarantors normally assume excessive responsibility with respect to the loan. The revised code includes new provisions for:

	•		revolving guaranty to be voided if the maximum or limit amount is not stated;

	•		guaranteed liability assumed by guarantors pursuant to a revolving guaranty contract only limits to the amount of the loan performed before the principal amount decision date;

	•		guaranteed liability for the amount of the loan performed thereafter will not be assumed by a guarantor pursuant to a revolving guaranty contract upon subjection to compulsory execution, or petition to commence bankruptcy proceedings, or upon the death of a primary obligor or a guarantor; and

	•		guaranty contracts, including revolving guaranty contracts, to be invalid unless executed in written documents.

In response to the revised Civil Code, the Group is taking necessary measures including verification of written contracts and operating procedures. However, any further amendments to the Civil Code in the future, which result in the need to reconstruct our operating management system, could affect our operating activities.

Annual Financial Report

	2)		Regulations under U.S. Law

			In August 2002, we listed our shares on the New York Stock Exchange. Therefore, we are required to comply with U.S. laws, including as described below.

			The U.S. Investment Company Act of 1940 was enacted to protect the public interest and investors in investment trust transactions. In general, a company which is or holds itself out as being engaged primarily in the business of investing, reinvesting, or trading in investment securities may be deemed to be an investment company under the U.S. Investment Company Act of 1940.

			If we are deemed to be an investment company under this Act, we would be prohibited from issuing our securities in the United States and may have to terminate our U.S. listing or other sponsorship promoting a U.S. trading market for our issued securities.

			On July 30, 2002, Congress passed SOX. All issuers, including foreign issuers, of securities of which are registered under Securities Exchange Act of 1934 are subject to SOX, which emphasizes the responsibility of the issuer’s management and board of directors over financial reporting, and establishment and maintenance of effective internal controls, as well as improvement of disclosure. Furthermore, violation by any person or corporation of the Securities Exchange Act of 1934 may be subject to severe penalties. Pursuant to SOX 302, the chief executive officer and chief financial officer (the “Management”) are required to certify in each annual report that the report does not contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading and that the financial statements and other financial information included in the report fairly present in all material respects the financial condition, results of operations and cash flows of the Group as of and for the periods presented in the report, and the signing officers are responsible for establishing and maintaining necessary internal controls. Our Management is making such certifications.

			In addition, the Group is subject to SOX 404 beginning from the fiscal year ended March 31, 2007. Pursuant to the U.S. Securities and Exchange Commission (the “SEC”) rules enacted under SOX 404, we must fulfill the obligation to attach Management assessments of internal controls to each annual report submitted to the SEC. In the event the Management finds any problems with respect to internal controls over financial reporting, they must identify and evaluate the materiality of the issue, and if it is a material weakness, the issue must be disclosed in the annual report. Also, if the Management submits any false reports, they could personally face criminal charges.

			We are in the midst of strengthening our corporate governance structure in order to comply with SOX while obtaining a wide range of advice from inside and outside experts regarding approaches to corporate governance and risk management, and examining them from different perspectives. We will continue to do our utmost to enhance our internal control structure in order to:

	•		ensure the reliability of our financial statements;

	•		ensure our management and corporate business activities comply with related regulations; and

	•		improve the effectiveness and efficiency of our management and corporate business activities.

			However, intentional or unintentional failure of the Management to comply with SOX, with respect to certifications regarding our financial reporting, could subject to the certifying Management to severe legal sanctions, therefore tarnishing our credibility and adversely affecting our stock price and business activities.

			Moreover, any amendments to SOX that will increase regulations that we must comply with could materially and adversely affect our business operations.

Annual Financial Report

(3)

Business Risk

	1)		Funding and Market Interest Rates

			In our business operations, we need capital and liquidity for funding loans to customers, acquisition of purchased loans, purchase of real estate, general working capital, capital expenditures for reinforcement of our operating activities and acquisition of assets held for leases, dividend payments and repurchases of our stock. We derive the funds we require to meet our capital requirements principally from cash flow provided by operations, indirect financing through borrowings from financial institutions and direct financing from the capital markets such as through issuances of bonds.

			Although contractual borrowing interest rates are subjected to fluctuation due to the market environment and other factors, the contractual lending interest rate in our loan business is restricted as stipulated by the Contribution Law. Therefore, in order to minimize our interest rate fluctuation risk, we are pursuing fixed interest rate financings with respect to borrowings from financial institutions and issuances of corporate bonds, as well as shortening loan periods or applying variable interest rates to loans to our customers.

			Furthermore, the Group is diversifying its methods of fund-raising to stabilize its financial condition, as well as upgrading and expanding its commitment lines with financial institutions to secure liquidity.

			However, the Group may be affected by a number of other factors largely beyond our control, such as shrinkage of global debt markets affected by prolonged deterioration of the subprime-mortgage market in the United States, fluctuation in interest rates, deterioration of the capital market such as declines in market prices of shares, changes in lenders’ stances toward us due to reorganizations of financial institutions and other reasons, and turmoil in financial markets, as well as negative views about the prospects for the non-bank finance industry and other various factors. Any impact from these factors that worsen our capital procurement environment significantly beyond our expectations could increase our interest expense and prevent us from obtaining sufficient funds from lenders or the capital markets, thereby adversely affecting our financial position and results of operations.

	2)		Claims for Excess Interest Repayments

			Regarding interest rates, the Contribution Law defines the maximum interest rate for loans as 29.20%, and all of our products are set below the maximum interest rate.

			On the other hand, Article 1-1 of the Interest Rate Restriction Law provides that a loan with an interest rate exceeding the prescribed rate is invalid with respect to the portion exceeding the maximum rate. Prescribed rates are 20% per annum for loans of less than ¥100 thousand; 18% per annum for loans of ¥100 thousand or more but less than ¥1 million; and 15% per annum for loans of ¥1 million or more. Portions of our contractual loan interest rates exceed the prescribed rates under the Interest Rate Restriction Law. With respect to the interest in excess of the prescribed rate, a payment is deemed valid so long as certain prerequisites under the Moneylending Business Law are satisfied (often called “deemed valid payments”). However, the Supreme Court decisions on January 13, January 19 and January 24, 2006, held that the deemed valid payments shall not be applied when an acceleration clause is in effect, except under special circumstances. In accordance with these decisions, the voluntariness of the deemed valid payments has been virtually rejected.

			Moreover, the Amendment of Moneylending Business Law, which includes amendments of the overall Moneylending Business Law such as abolishment of so-called “gray-zone” interest by reducing the maximum legal interest rate, was enacted in the 165th Diet Session on December 13, 2006 and promulgated on December 20, 2006.

			Since then, customer demands for repayment of excess interest have been rapidly increasing in the moneylending industry. As a consequence, the Group has provided its reserve for losses on excess interest repayments.

			Based on the “Audit Treatment of Reserve for Losses on Excess Interest Repayment Claims in Consumer Finance Companies” (the Industry Audit Committee Report No. 37) issued on October 13, 2006 by the Japanese Institute of Certified Public Accountants (“JICPA”), we provided reserve for losses on excess interest repayments to cover all estimated future losses on excess interest repayments derived from current loans receivable.

			In these business circumstances, if excess interest repayments to customers exceed our estimates, it could adversely affect our financial condition and results of operations.

Annual Financial Report

	3)		Reliability of our Information or Technological Systems and Networks

			The Group increasingly relies on internal and external information and technological systems and networks to generate new business, provide services to customers, and manage our operations.

			In particular, our business depends on:

	•		the reliability and security of third-party databases from which we obtain credit information about our customers;

	•		the reliability of the wire transfer service that we use to disburse loans to accounts designated by our customers;

	•		the reliability of the financial institutions that hold our customers’ accounts from which we automatically transfer their payments to us;

	•		the ability of our automated fund transfer system to handle high volumes of phone calls and to provide customers a more convenient alternative with reliable privacy protection; and

	•		the reliability of following important internal-use systems:

	•		Sales operating system;

	•		Information system;

	•		Accounting system;

	•		Financial system;

	•		Personnel and salary system; and

	•		Groupware.

In addition, we outsource the part of following hardware and software in order to manage operating transactions and accounting data, confidential customer information, and other back-office operations:

	•		our main computer housed in the data center of an affiliate of NEC Corporation (“NEC”), to which all data are backed up each business day;

	•		dedicated lines that connect our main computer and outsourcing center to our application servers and e-mail servers; and

	•		an NEC affiliate to provide maintenance and support work for our main computer.

Our systems are vulnerable to damage or interruption from human error, natural disasters, power loss, computer hackers, computer viruses and similar events or the loss of support services from third parties such as our main systems solution provider including NEC and its affiliates, telephone carriers, and Internet backbone providers. Any disruption, outages, or delays or other difficulties experienced by any of these technological and information systems and networks could affect our financial position and results of operations.

	4)		Influence on Important Decisions by TPG Capital L.P. and its Affiliated Companies (collectively, “TPG”)

			On December 10, 2007, the Company reached a basic agreement to form a strategic investment and business alliance with TPG, in order to strengthen its financial base and to maximize its corporate value. Based on this strategic investment and business alliance, TPG holds approximately 40% of shares of the Company’s common stock through investment vehicles managed by TPG, and the Company appointed a majority of its board members from TPG. Therefore, TPG is able to exercise a controlling influence over important decisions involving significant corporate transactions such as the sale of companies of the Group, corporate restructuring, investment in businesses or assets, or changes in the terms of future financing, all of which could affect our business and affairs.

			The interests of TPG in these and/or other matters may differ from those of our public shareholders.

	5)		Ability to Pursue and Maintain Successful Strategic Investment and Business Alliance with TPG

			The strategic investment and business alliance includes following: (i) issuance of new shares and equity warrants through a third-party allotment to investment vehicles managed by TPG; (ii) a capital injection to the Company’s foreign subsidiary (currently an affiliate accounted for under the equity method); (iii) an appointment of a majority of board members of the Company from TPG; and (iv) an advisory agreement with TPG to plan and execute the Company’s mid to long-term business and financial strategy. However, if we fail to achieve a successful strategic investment and business alliance, or for any reason fail to maintain this alliance, it could adversely affect our business strategies and results of operations.

Annual Financial Report

			In addition, as mentioned above in “(b) a capital injection to the Company’s foreign subsidiary (currently an affiliate accounted for under the equity method),” TPG injected U.S.$102,500,000 of capital to a limited liability company established by the Company in the State of Delaware, U.S.A. (“Delaware LLC”), through investment vehicles managed by TPG. The purpose of this capital injection was fund procurement of Nissin Leasing (China) Co., Ltd., a former specified company of the Company until the date of this capital injection, mainly providing direct finance leases in the People’s Republic of China (“China”), which is indirectly wholly owned by Delaware LLC through companies established in the Cayman Islands and Hong Kong Special Administrative Region of China. As a result of this investment, TPG obtained convertible preferred membership units of Delaware LLC equivalent to 50% stake as of the time of investment (calculated on a fully diluted basis); however, such membership units may be converted to 90% (calculate on a fully diluted basis) upon occurrence of certain trigger events. The trigger events consist of the occurrence of certain events within seven years of the capital injection that would have a substantial impact on the Company’s business or the inability of the Company to achieve certain minimum performance targets agreed by the Company and TPG within the same seven-year timeframe. More specifically, the trigger events include; (a) a situation wherein the aggregate amount of refunds of excess interest repayments in cash and loan principal charged-off by excess interest repayments of the Company from and after October 1, 2007 exceeds the reserve for such amounts recorded as of September 30, 2007 by ¥8,000 million; (b) a situation wherein, on the third anniversary of the date of TPG’s investment in the Company, the trading price per share of common stock of the Company is less than twice the per share price paid by TPG (¥200) on the date of the investment; (c) a situation wherein, on the fifth anniversary of the date of TPG’s investment in the Company, the trading price per share of common stock of the Company is less than three times the per share price paid by TPG (¥200) on the date of the investment; (d) a situation wherein the Company is in material default under its financing agreements, has entered bankruptcy proceedings, or experiences an occurrence of certain other events which would adversely impact its liquidity; or (e) a situation wherein the Company’s common stock is no longer listed on the Tokyo Stock Exchange. If any of above trigger events occurs, TPG would acquire 90% of interest in Delaware LLC and, accordingly, the Company’s interest would decrease. Therefore, this could adversely affect our business strategy in China and our results of operations.

	6)		Influence on Important Decisions by the President and Representative Director of the Board and His Family

			Kunihiko Sakioka, the President and Representative Director of the Board of the Company, and his family members can exercise a certain controlling influence over important decisions involving significant corporate transactions such as the sale of companies of the Group, corporate restructuring, investment in businesses or assets, or changes in the terms of future financing, all of which could affect our business and affairs.

			The interests of such shareholders in these and/or other matters may differ from those of our public shareholders.

	7)		Risks in Our Operating Assets Portfolio

			In order to move away from our previous business model centered on the loan business for domestic SMEs and to transform into a comprehensive non-bank financial services company responding to the diverse needs of mid-size SMEs, we are seeking to expand our operating assets. As of March 31, 2008, operating assets amounted to ¥209,998 million, of which 64.9% was attributable to the integrated financial services segment.

			With respect to operating assets in the integrated financial services segment, 91.4% consist of loans receivable. We aim to accumulate prime assets with lower charge-off risk through acquisition of prime customers through promotion of our alliance strategy. However, deterioration in the quality of our operating assets due to worsening of the financial condition of SMEs caused by rapid changes in the economic environment, consumers’ moral hazard regarding borrowings, and various other factors could adversely affect our financial position and results of operations.

	8)		Condition and Liquidity in Stock Markets

			We are entering into capital tie-ups with various companies in order to increase our network of enterprises that can provide synergies with our integrated financial services. However, in the future, if the stock prices of investees decline significantly, or the financial condition of our investments worsens due to deterioration of the economic environment, we could suffer impairment losses on these securities, or our net worth ratio could decline due to fluctuations in unrealized profits in investment securities, which could adversely affect our financial position and results of operations.

Annual Financial Report

	9)		Ability to Pursue and Maintain Successful Strategic Alliances

			We are pursuing strategic alliances with various companies, in particular financial institutions with respect to our guarantee business, in order to maximize synergies with alliance companies and to take advantage of the customer bases and brands of alliance companies. However, if we fail to establish successful alliances, or for any reason fail to maintain alliances, it could adversely affect our business strategies and results of operations.

	10)		Economic Trends and Liquidity in Real Estate Markets

			With respect to the Group’s real estate businesses, we have been actively developing our businesses in the context of Japan’s brisk real estate market in recent years, mainly focusing on aggressive real estate acquisitions through the expansion of our information network, as well as investments in special purpose companies related to the real estate business (“Real Estate SPCs”). However, as the real estate business has a strong tendency to reflect economic trends, if land and lease values decline due to a downturn in the Japanese economy, or if sales activities of real estate held by Real Estate SPCs extend for a long term due to a shrinking of market, we may incur substantial amounts of impairment losses which could adversely affect our results of operations and business strategies.

			In addition, in the event of changes to taxation affecting the real estate business, including property taxes, costs for the acquisition and sale of real estate may increase, which in turn could adversely affect our business.

Annual Financial Report

5.		SIGNIFICANT CONTRACTS

		Contract of Capital Injection to an Affiliate

		The Company has entered into an agreement with TPG concerning the ownership of Delaware LLC such as conversion of preferred membership units of Delaware LLC.

		As stated in “ITEM 2. OVERVIEW OF BUSINESS – 4. BUSINESS RISK FACTORS – (3) Business Risk – 5) Ability to Pursue and Maintain Successful Strategic Investment and Business Alliance with TPG,” TPG injected capital to Delaware LLC as a part of the strategic investment and business alliance, and obtained convertible preferred membership units of Delaware LLC equivalent to 50% stake (calculated on a fully diluted basis) which may be converted to 90% (calculated on a fully diluted basis) upon occurrence of certain trigger events, based on the abovementioned agreement.

6.		RESEARCH AND DEVELOPMENT

		None

Annual Financial Report

MANAGEMENT’S DISCUSSION AND ANALYSIS

	(1)		Significant Accounting Policies and Estimates

			The following describes our significant accounting policies that affect our significant judgments and estimates used in the preparation of our consolidated financial statements. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities. These estimates are based on, but not limited to, historical results, industry standards and current economic conditions, giving due consideration to materiality. Our estimates are based on information that is currently available to us and on various other assumptions that we believe are reasonable under the circumstances. Actual results may vary from those estimates, and those estimates could differ under different assumptions or conditions.

	1)		Interest Income from Loans Receivable

			Interest income from loans receivable is recognized on an accrual basis. Article 1-1 of the Interest Rate Restriction Law provides that interest on a loan with an interest rate exceeding a prescribed rate is invalid with respect to the portion exceeding the maximum rate. On the other hand, Article 43 of the Moneylending Business Law provides that a payment by a borrower or guarantor of interest in excess of the prescribed rate is valid (and non-refundable), provided that excess interest is paid voluntarily, we have complied with the specified legal documentation procedures, and certain other requirements are satisfied (often called “deemed valid payments”).

			However, the Supreme Court of Japan recently ruled on January 13, January 19 and January 24, 2006 that “the voluntary nature of excess interest payments under the provision of Article 1-1 of the Interest Rate Restriction Law shall not be recognized when an acceleration clause is in effect, since a borrower may be coerced into payment of interest in excess of the prescribed interest rate in order to prevent disadvantage such as acceleration of loans,” and the voluntary requirement for deemed valid payments should be interpreted strictly. As a result, we have experienced a number of claims for repayments of interest received previously as deemed valid payments.

			Accordingly, we maintain reserves for estimated losses from the abovementioned excess interest payments at a level that is adequate to provide for estimated probable refund claims of excess interest previously paid by borrowers.

			We recognize accrued interest income on loans receivable outstanding as of the balance sheet date at the lower of the restricted rate and the contractual interest rate. Contractual interest in excess of the restricted rate is recognized as interest income when collected.

			Interest accrual is terminated when loan principal is charged-off or is wholly or partially reserved due to delay in contractual interest payments.

	2)		Loans Receivable and Allowance for Loan Losses

			Allowance for loan losses is maintained at a level that is adequate to provide for the estimated amount of loan losses. It is calculated by applying a percentage derived from past collection experience to general loans, and by individually estimating uncollectible amounts with respect to certain doubtful loans.

			In evaluating the adequacy of the allowance, management considers various factors, including current economic conditions, such as unemployment rates, corporate insolvencies and personal bankruptcy cases, and historical loss experience. Allowance for loan losses is increased by provision for loan losses. Recoveries from loans previously charged-off are recognized as income.

			Restructured loans include any loans for which interest, principal or term is restructured. Allowances for restructured loans are based on the collection history or legal classification of the borrowers.

Annual Financial Report

Our policy is generally to charge off loan balances and cease accrual of interest as follows:

	(a)		Revolving Loans:Loan balances are charged-off and interest accrual is terminated when a loan’s contractual interest payment becomes 67 days delinquent or upon the occurrence of other events such as the bankruptcy of the borrower.

	(b)		Unsecured Loan on Deeds:Loan balances are charged-off when we believe the likelihood of any future collection is minimal. Events triggering charge-offs include bankruptcy of both the borrower and guarantor. Interest accrual is terminated at the earlier of the date when contractual interest payments are 97 days delinquent or the date when all or a part of loan principal is deemed uncollectible.

	(c)		Secured loans:Loan balances are charged-off when we believe the likelihood of any future collection is minimal. We consider the availability and value of collateral in determining the level of charge-off. Interest accrual is terminated when contractual interest payments are 97 days delinquent or when loan principal is charged-off or is wholly or partially reserved due to delay in contractual interest payments.

			Other than above, in the case that loans are restructured, we charge off the amount of the recorded loan balance less the restructured loan balance.

	3)		Purchased Loans Receivable and Revenue Recognition

			Revenue from collections of purchased loans is recognized using the collection amount at the time of collection of such loans. With respect to the costs of collections of purchased loans, for those purchased loans for which the Group can reasonably estimate the expected timing and amount of cash flows, the principal portion of the collection amount is recognized as cost and, for those purchased loans for which the Group cannot reasonably estimate the expected timing and amount of cash flows, the collection amount is first recognized as cost until it is fully recovered.

			Most of purchased loans are distressed loans purchased from third party originators such as banks, and all of purchased loans are reported at purchased cost.

			Purchased loans for which the Group can reasonably estimate the expected timing and amount of cash flows due to installment repayment contracts with borrower, the Group uses those expected future cash flows, based on future yields, to recognize the principal portion of the collection as costs of collections of purchased loans. As of March 31, 2008, approximately ¥821 million in book value of loans was accounted for under this method.

			In addition, since the Group cannot reasonably estimate the expected timing and amount of cash flows from collections such as lump-sum repayment and legal enforcement, we recognize revenue from these collections of loans using the cost recovery method. Under this method, payments from a borrower are first applied to loan principal and the entire amount is recognized as revenue from collections of purchased loans and costs of collections of purchased loans. Once the purchased cost is fully recovered, subsequent receipts are recognized as revenue.

			If the Group determines that the Group cannot recover a portion of the cost of the purchased loans, an allowance for the expected uncollectible portion is established. The loan is written off once we deem the entire loan uncollectible.

Annual Financial Report

	(2)		Results of Operations

			Total operating revenues for the year ended March 31, 2008 were ¥83,027 million, a decrease of ¥5,124 million, or 5.8%, compared with the previous fiscal year. This is attributable to a decrease in fees received and interest income from notes and loans receivable due to a decrease in the amount of loans originated and the balance of loans receivable, reflecting a more cautious sales strategy including stricter credit standards for new loans, as well as a decrease in revenues from purchased loans receivable and sales of real estate in the servicing business, despite revenue from sales of real estate in the real estate business of ¥13,800 million earned by a special purpose company (SPC) established by a consolidated subsidiary during the six months ended September 30, 2007.

			Operating income decreased by ¥25,862 million, compared with the previous fiscal year and, accordingly, the Group recorded operating losses of ¥15,427 million for the year ended March 31, 2008. This is attributable to an increase in operating expenses such as costs of sales of real estate, and an increase in selling, general and administrative expenses due to factors such as a revision of estimates for allowance for loan losses in a more conservative manner and total provision for excess interest repayment-related losses of ¥12,115 million. Consequently, ordinary income decreased by ¥26,761 million, compared with the previous fiscal year and, accordingly, the Group recorded ordinary losses of ¥17,438 million for the year ended March 31, 2008. This is mainly attributable to an increase of net losses on affiliates accounted for under the equity method and losses on investment funds.

			Net income decreased by ¥45,124 million, compared with the previous fiscal year and, accordingly, the Group recorded net losses of ¥45,116 million for the year ended March 31, 2008. This is attributable to impairment of investment securities of ¥9,252 million reflecting a decline in the market price of securities held, losses on sales of investment securities of ¥2,757 million due to sales of investment securities in order to improve asset efficiency as a part of the management reform program, provision for losses on group businesses of ¥2,963 million in line with guarantee of loans receivable and indemnification for claims for excess interest repayments of Aprek Co., Ltd., an affiliate accounted for under the equity method listed on the JASDAQ Securities Exchange (Code: 8489), and special retirement bonuses of ¥1,917 million incurred as special losses as a result of voluntary retirement program, in addition to a reversal of all deferred tax assets of ¥11,375 million of the Company, taking into consideration the recent adverse changes in the business environment.

	1)		Operating Revenues

			Interest income from notes and loans receivable for the year ended March 31, 2008 was ¥22,162 million, a decrease of ¥8,842 million, or 28.5%, compared with the previous fiscal year, due to a decrease of ¥88,966 million, or 41.7%, in notes and loans receivable to ¥124,545 million, reflecting a more cautious sales strategy including stricter credit standards for new loans.

			Revenue from purchased loans receivable for the year ended March 31, 2008 was ¥12,335 million, a decrease of ¥6,521 million, or 34.6%, compared with the previous fiscal year, due to collection activities which take into consideration customers’ revitalization efforts and profitability, and enhancement of real estate-related revitalization businesses, while maintaining a cautious investment strategy reflecting the recent changes in market trend.

			Revenue from sales of real estate in the real estate business for the year ended March 31, 2008 was ¥23,317 million, an increase of ¥14,625 million, or 168.3%, compared with the previous fiscal year, due to improvement of the value of assets held as well as investment efficiency.

			With respect to other operating revenues, loan origination fees received in the integrated financial services for the year ended March 31, 2008 were ¥1,742 million, compared with the pervious fiscal year, due to a decrease of notes and loans receivable. Revenues from leases and installment loans for the year ended March 31, 2008 were ¥5,867 million, due to promotion of financial services such as leases and installment loans to mid-sized SMEs in Japan as well as promotion of financial services in the People’s Republic of China, centering on direct finance leases for Chinese companies. Revenue from sales of real estate in the servicing business for the year ended March 31, 2008 was ¥4,326 million.

			As a result, operating revenues for the year ended March 31, 2008 were ¥83,027 million, a decrease of ¥5,124 million, or 5.8%, compared with the previous fiscal year.

	2)		Operating Expenses

			Financial costs for the year ended March 31, 2008 were ¥4,962 million, an increase of ¥1,428 million, or 40.4%, due to an increase in borrowing interest rates affected by the turmoil in global financial and capital markets, despite a decrease of ¥109,529 million, or 37.3%, in the aggregate amount of interest-bearing debt to ¥184,484 million, compared with the end of the previous fiscal year.

Annual Financial Report

			Cost of collections of purchased loans for the year ended March 31, 2008 was ¥7,474 million, a decrease of ¥5,393 million, or 41.9%, due to a decrease in revenue from collections of purchased loans.

			Cost of sales of real estate in the real estate business for the year ended March 31, 2008 was ¥17,139 million, an increase of ¥11,670 million, or 213.4%, due to an increase in revenue from sales of real estate in the real estate business.

			With respect to other operating expenses, cost of sales of real estate in the servicing business for the year ended March 31, 2008 was ¥4,784 million.

			As a result, operating expenses for the year ended March 31, 2008 were ¥43,183 million, an increase of ¥6,321 million, or 17.1%, compared with the previous fiscal year.

	3)		Selling, General and Administrative Expenses

			Selling, general and administrative expenses for the year ended March 31, 2008 were ¥55,271 million, an increase of ¥14,416 million, or 35.3%, compared with the previous fiscal year, due to factors such as an increase in loan loss-related costs in the loan business, including ¥12,115 million of additional provision for losses on excess interest repayments in cash and additional provision for loan losses provided for loan principal charged-off by excess interest repayments, taking into account the recent status on occurrence of excess interest repayments.

	4)		Operating Income

			Operating income decreased by ¥25,862 million and accordingly, the Group recorded operating losses of ¥15,427 million for the year ended March 31, 2008, as a result of operating revenues of ¥83,027 million, operating expenses of ¥43,183 million, and selling, general and administrative expenses of ¥55,271 million.

	5)		Other Income and Expenses

			Other income for the year ended March 31, 2008 was ¥300 million, a decrease of ¥425 million, or 58.6%, compared with the previous fiscal year. This is attributable to income from investment funds of ¥507 million and interest and dividends received of ¥123 million, both of which were incurred in the previous fiscal year, despite the interest and dividends received of ¥138 million for the year ended March 31, 2008.

			Other expenses for the year ended March 31, 2008 were ¥2,312 million, an increase of ¥473 million, or 25.8%, compared with the previous fiscal year. This is attributable to loan borrowing costs of ¥430 million in addition to an increase of ¥241 million, or 26.7%, in other interest expenses on borrowings to ¥1,142 million, compared with the previous fiscal year.

	6)		Ordinary Income

			Ordinary income decreased by ¥26,761 million and accordingly, the Group recorded ordinary losses of ¥17,438 million for the year ended March 31, 2008, as a result of operating losses of ¥15,427 million, other income of ¥300 million, and other expenses of ¥2,312 million.

	7)		Special Gains and Losses

			Special gains for the year ended March 31, 2008 were ¥740 million, a decrease of ¥1,254 million, or 62.9%, compared with the previous fiscal year. This is attributable to gains on sales of investment securities of ¥1,246 million and gains on sales of investment in affiliated companies of ¥457 million, both of which were incurred in the previous fiscal year, despite gains on change in equity interest of ¥437 million for the year ended March 31, 2008.

			Special losses for the year ended March 31, 2008 were ¥19,201 million, an increase of ¥10,637 million, or 124.2%, compared with the previous fiscal year. This is attributable to losses on sales of investment securities of ¥2,757 million, provision for losses on group businesses of ¥2,963 million, expenses for management reform program of ¥2,019 million as a result of implementation of voluntary retirement program and others, and impairment of investment securities of ¥9,252 million reflecting a decline in the market price of securities held.

	8)		Net Income

			As a result of the above, income before income taxes and minority interest decreased by ¥38,653 million and accordingly, the Group recorded net losses of ¥35,899 million, compared with the previous fiscal year. Income taxes for the year ended March 31, 2008 were ¥9,095 million, an increase of ¥6,571 million, or 260.4%, compared with the previous fiscal year, due to a reversal of all deferred tax assets of ¥11,375 million of the Company. Consequently, net income decreased by ¥45,124 million and accordingly, the Group recorded net losses of ¥45,116 million for the year ended March 31, 2008.

Annual Financial Report

	(3)		Liquidity and Capital Resources

	1)		Cash Flows

			Information on the detail of cash flows for the year ended March 31, 2008 is stated in “ITEM 2. OVERVIEW OF BUSINESS –1. SUMMARY OF OPERATING RESULTS – (2) Cash Flows.”

	2)		Liquidity and Capital Requirements

			In our business operations, our principal capital and liquidity needs are for funding loans to customers, purchase of loans, general working capital, capital expenditures for enhancement of our operating activities and acquisition of assets held for leases, dividend payments and acquisition of treasury stock.

	(a)		Loan Origination

			We provide integrated financial services as our principle business, and our most critical capital requirement is for loan origination.

	(b)		Purchased Loans

			We mainly purchase distressed loans from third-party originators including financial institutions in our servicing business operations.

	(c)		Working Capital

			Our working capital needs are primarily for financial costs such as interest expenses, and operating expenses including salaries and employee benefits, commission fees and rental expenses.

	(d)		Capital Expenditures

			Our capital expenditure needs are for installment of equipments to further strengthen operational activities and to improve operational efficiency, as well as the acquisition of assets held for leases in NIS Lease Co., Ltd.

	(e)		Dividend Payments

			The amount of dividend payments depends on various factors, including the Group’s future earnings and economic trends. In addition, we need sufficient liquidity to provide for the planned amount.

	(f)		Acquisition of Treasury Stock

			At the Annual Shareholders’ Meeting held on June 24, 2006, a resolution was approved concerning a partial amendment of the Company’s Articles of Incorporation in response to the implementation of the Corporate Law, which continues to permit the repurchase of stock by approval of the Board of Directors. We plan to repurchase our stock after carefully considering the trends in our results of operations, financial position and share price as well as the market trends.

	3)		Financial Position

			As of March 31, 2008, total assets were ¥272,983 million, a decrease of ¥130,896 million, or 32.4%, compared with the end of the previous fiscal year. This is mainly attributable to a decrease of ¥88,966 million, or 41.7%, in notes and loans receivable to ¥124,545 million, caused by tightening of credit screening standards, and a decrease of ¥4,651 million, or 12.9%, in investment securities to ¥31,358 million due to sales and impairment, compared with the end of the previous fiscal year, respectively.

			As of March 31, 2008, total liabilities were ¥214,219 million, a decrease of ¥102,912 million, or 32.5%, compared with the end of the previous fiscal year. This is mainly attributable to a decrease of ¥109,529 million, or 37.3%, in total interest-bearing debt to ¥184,484 million due to a decrease in operating assets, despite an increase of ¥5,814 million, or 117.4%, in reserve for losses on excess interest repayments to ¥10,766 million, compared with the end of the previous fiscal year, respectively.

			As of March 31, 2008, net assets were ¥58,763 million, a decrease of ¥27,984 million, or 32.3%, compared with the end of the previous fiscal year. This is attributable to net losses of ¥45,116 million, in addition to an increase of ¥2,327 million in treasury stock to ¥3,892 million, despite an increase of ¥20,098 million, or 55.3%, to ¥56,469 million in the total of common stock and additional paid-in capital due to an issuance of new shares to investment vehicles managed by TPG through a third-party allotment.

			As a result, net worth ratio as of March 31, 2008 was 20.1%, a decrease of 0.4 points, compared with the end of the previous fiscal year, due to a decrease in net assets, despite a decrease in interest-bearing debt.

Annual Financial Report

	4)		Capital Resources

			We manage our capital resources and liquidity to provide adequate funds for current and future operating activities and financial obligations. In addition, in order to respond to the turmoil in global financial markets and significant changes in the business environment surrounding the recent moneylending industry, the Company and its foreign subsidiary procured ¥20,000 million and approximately U.S.$102 million, respectively, through a third-party allotment of new shares to TPG, a U.S. private equity firm.

	5)		Commitments

	(a)		Long-term Borrowings

			We require a significant amount of funds for the purpose of extending loans to our customers and other operating activities. Our borrowings are mainly denominated in yen. As of March 31, 2008, we had long-term borrowings including asset backed securities, as well as current portion of long-term borrowings, totaling ¥159,540 million.

			Of our total long-term borrowings as of March 31, 2008, ¥91,595 million were from loans, principally from banks and other financial institutions. Our long-term borrowings will mature within five years from March 31, 2008 and accrue interest on a fixed rate basis or on a floating rate basis. The weighted-average interest rate of our long-term borrowings as of March 31, 2008 was 2.6%.

			In addition, ¥57,760 million of our total long-term borrowings as of March 31, 2008 were from the issuance of long-term bonds. Our long-term bonds will mature within five years from March 31, 2008. The weighted-average interest rate of our long-term bonds as of March 31, 2008 was 2.7%.

	(b)		Short-term Borrowings

			Our short-term borrowings comprised bank loans. Our short-term borrowings accrue interest on a fixed rate basis or on a floating rate basis. The weighted-average interest rate of our short-term loans as of March 31, 2008 was 3.4%.

	(c)		Collateral for Borrowings

			Information on the details of our assets pledged as collateral and corresponding borrowings secured by the collateral is stated in “ITEM 5. FINANCIAL STATEMENTS – 1. CONSOLIDATED FINANCIAL STATEMENTS – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Consolidated Balance Sheets.”

Contingencies

	(a)		Loan Commitments

			Information on the details of our loan commitments is stated in “ITEM 5. FINANCIAL STATEMENTS – 1. CONSOLIDATED FINANCIAL STATEMENTS – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Consolidated Balance Sheets.”

	(b)		Guarantees

			We provide guarantees for borrowings of SMEs, lease receivable, accounts receivable in connection with the complementation of customers’ credibility in corporate transactions, and are required to perform as a guarantor for the borrowings for which payments are delinquent for a certain period of time. In order to provide for estimated probable losses from these guarantee transactions, we maintain a reserve for estimated guarantee losses.

			From the year ended March 31, 2008, the Company has to indemnify Aprek Co., Ltd. until February 28, 2013, for losses that Aprek incurs due to claims for excess interest repayments raised by customers to whom Aprek lent money on or before March 3, 2008. In addition, the Company is to provide guarantees for the borrowings of customers to whom Aprek lent money on or before February 29, 2008 of which payments are delinquent for a certain period of time. In order to provide for probable losses from these indemnification and guarantee transactions, the Company estimated the probable losses as of March 31, 2008, and included in “Reserve for losses on group businesses.”

Annual Financial Report

Pursuant to each agreement, we receive guarantee fees and indemnification fees. The amount of loans and accounts receivable that we guarantee in connection with the credit guarantee business is ¥16,397 million (after the reduction of reserve for guarantee losses and reserve for losses on group businesses). This amount does not include the amount of indemnification for losses that Aprek incurs due to claims for excess interest repayments since it is difficult to estimate the amount of such liabilities.

Annual Financial Report


ITEM 3.		OVERVIEW OF PROPERTY AND EQUIPMENT

1.		OVERVIEW OF CAPITAL EXPENDITURES

		The total amount of investment in property and equipment of the Group was ¥2,584 million during the year ended March 31, 2008. Main expenditures were for integrated financial services in connection with function additions to the operating systems of the Company of ¥144 million and acquisition of assets held for leases of ¥1,623 million mainly by NIS Lease Co., Ltd., and for the real estate business in connection with acquisition of tangible fixed assets of ¥115 million by Seizanso C.C. Management Co., Ltd.

		In addition, all capital expenditures were made with cash on hand.

Annual Financial Report

MAJOR PROPERTY AND EQUIPMENT

(1) The Company


		Book Value
		(In millions except square meters)
		Buildings										Number of
Name of Office	Description	and				Land						Employees
(Location)	(Business Segment)	Structures		Equipment		(m²)		Software		Total		(Persons)

Tokyo Head Office	Offices (Integrated Financial Services)	¥	103	¥	157	¥	-	¥	1,209	¥	1,470		226
(Shinjuku-ku, Tokyo)		¥	103	¥	157	¥	-	¥	1,209	¥	1,470		226
Matsuyama Head Office (Matsuyama City, Ehime)			33		11		-		17		61		10

Research Department (Kawaguchi City, Saitama)	Sales support office
	(Integrated Financial		2		2		-		-		5		90
	Services)

Hokkaido region	Branches (Integrated Financial Services)		0		0		-		-		0		7
(Sapporo Branch Office)			0		0		-		-		0		7
Tohoku region (Sendai Branch Office)			1		0		-		-		2		5
Kanto region (Tokyo Sales Department and 6 others)			1		2		-		-		3		88
Chubu region (Nagoya Sales Section 1)			2		0		-		-		3		10
Kinki region (Osaka Sales Section 1)			12		2		-		-		15		23
Chugoku region (Hiroshima Branch Office)			1		0		-		-		2		9
Kyushu region (Naha Branch Office and 1 other)			0		0		-		-		0		17

Total	-	¥	160	¥	178	¥	-	¥	1,226	¥	1,565		485


					Lease Term		Annual Lease Payment		Balance of Lease Contracts
Business Segment	Description		Units		(Years)		(In millions)		(In millions)

Integrated Financial Services	Operating system			1		4 ~ 6	¥	412	¥	325
Integrated Financial Services	Vehicles			25		5		11		21

Total		-		-		-	¥	423	¥	346


				Note: Consumption taxes are excluded from the amounts presented above.

Annual Financial Report

(2) Domestic Subsidiaries


				Book Value
				(In millions except square meters)
				Buildings													Number of
	Office	Description		and						Land							Employees
Name of Subsidiary	(Location)	(Business Segment)		Structures		Machinery		Equipment		(m²)			Other		Total		(Persons)

Nissin Servicer Co., Ltd.	Head Office	Office (Servicing Business)
Nissin Servicer Co., Ltd.	(Shinjuku-ku, Tokyo)	Office (Servicing Business)		¥	20	¥	-	¥	7		¥ -		¥	12	¥	40		103

NIS Lease Co., Ltd.	Head Office	Office (Integrated Financial Services)
	(Shinjuku-ku, Tokyo)	Office (Integrated Financial Services)			4		-		2		-			12		19		47

	-	Assets held for leases (Integrated Financial Services)			873		287		2,659		-			492		4,312		-



	Head office		Office
NIS Securities Co., Ltd.	(Shinjuku-ku,	(Integrated Financial			15		-		7		-			30		53		29
	Tokyo)	Services)

Seizanso C.C. Management Co., Ltd.	Country Club	Golf courses (Real Estate Business)									1,247 (1,173,102.40	)
	(Hitachi-Ota				376		-		16					-		1,640		-
	City, Ibaraki)



Name of Subsidiary				Lease Term		Annual Lease Payment		Balance of Lease Contracts
(Business Segment)	Description	Units		(Years)		(In millions)		(In millions)

Nissin Servicer Co., Ltd. (Servicing Business)	Operating system		1		4 ~ 5	¥	24	¥	32
NIS Lease Co., Ltd. (Integrated Financial Services)	Operating system		1		4 ~ 5		42		159
NIS Securities Co., Ltd. (Integrated Financial Services)	Operating system		1		5 ~ 7		14		16

Total	-		-		-	¥	89	¥	231


				Note: Consumption taxes are excluded from the amounts presented above.

Annual Financial Report

PLANS FOR ACQUISITIONS AND DISPOSALS OF PROPERTY AND EQUIPMENT

	(1)		Acquisitions of Major Property and Equipment

	1)		Assets for Internal Use

The following major property and equipment is expected to be acquired during the year ending March 31, 2009:

Expenditure Plan

(In millions)

Description

Amount Estimated

Expected Date

Company Name

(Business Segment)

Total Amount

Amount Paid

to Pay

Date Started

of Completion

NIS Group Co., Ltd.

Installation of equipment at
Tokyo Head Office
(Integrated Financial Services)

¥329

¥-

¥329

May 2008

March 2009

Relocation and renovation of branches and loan offices (Integrated Financial Services)

July 2008

September 2008

Assets Held for Leases

The following major property and equipment is expected to be acquired during the year ending March 31, 2009:

Expenditure Plan

Description

(In millions)

Company Name

(Business Segment)

Total Amount

Amount Paid

Amount Estimated to Pay

NIS Lease Co., Ltd.

Assets held for leases
(Integrated Financial Services)

¥2,273

¥-

¥2,273


Notes:	1.	All future capital expenditures above are expected to be made with cash on hand.
	2.	Consumption taxes are excluded from the amounts presented above.

(2)

Disposals of Major Property and Equipment

No major dispositions of property and equipment are planned for the year ending March 31, 2009, except for disposals in the course of the Group’s routine renewal of its property and equipment.

Annual Financial Report


ITEM 4.		OVERVIEW OF THE COMPANY

INFORMATION ON CAPITAL STOCK

	(1)		Total Number of Shares

	1)		Total Number of Authorized Shares


	Number of Shares
Type of Shares	(Shares)

Common stock		384,000,000

Total		384,000,000

Total Number of Issued Shares

June 25, 2008

March 31, 2008

(Filing Date)

Type of Shares

(Shares)

Stock Exchange

Details

Common stock

245,894,350

Tokyo Stock Exchange
(First Section)
New York Stock Exchange

Total

245,894,350


Note:		The number of issued shares of common stock as of the filing date does not include the number of shares newly issued upon exercises of stock acquisition rights during the period from June 1, 2008 to the filing date of this annual financial report.

Annual Financial Report

	(2)		Information on Stock Acquisition Rights and Convertible Bonds

			Stock Acquisition Rights Issued under the Former Amended Commercial Code of Japan

			(Special Resolution at the Annual Shareholders’ Meeting on June 22, 2004)


	March 31, 2008	May 31, 2008

Number of stock acquisition rights:	2,444 units	-
Number of stock acquisition rights for share repurchases:	-	-
Type of shares:	Common stock	-
Number of shares of common stock issuable upon exercise:	117,312 shares (Note 1)	-
Amount to be paid in upon exercise:	¥1,340 per share (Note 2)	-
Exercise period:	From May 1, 2005 to April 30, 2008	-
Exercise price:	¥1,340 per share	-
Amount to be credited to common stock:	¥670 per share	-
Requirement for exercise of stock acquisition rights:	Grantee must be a director, statutory auditor, corporate advisor, contract employee or regular employee (including employees of the Group seconded to other companies and employees of other companies seconded to the Group), or temporary employees with tenure of over one year of the Group, or director, statutory auditor or employees of a business counterparty of the Company approved by the Board of Directors at the time of the exercise of such stock acquisition rights. However, stock acquisition rights may be exercised upon the retirement of a director, retirement due to age or under certain other reasonable circumstances. Other requirements for the exercise of stock acquisition rights are defined in the Contract on Granting New Share Subscription Rights executed pursuant to the resolution approved by the Annual Shareholders’ Meeting and the Board of Directors.	-
Transfer restriction item:	Upon approval by the Board of Directors	-
Substitution item for cash payment:	-	-
Restriction on issuance in connection with organizational restructuring:	-	-


Paid-in amount as adjusted = Paid-in amount before adjustment×		1

		Split or consolidation ratio

In the event that the Company issues new shares or distributes shares of treasury stock of the Company at a price lower than the current market price after the issuance of the stock acquisition right, the paid-in amount shall be adjusted in accordance with the following formula, with any fraction of ¥1 occurring upon such adjustment rounded upward to the nearest yen:

Paid-in amount
as adjusted

Paid-in amount
before adjustment

Number of
already issued
shares

Number of newly issued
(distributed) shares

Paid-in price per share

Current market price per share

Number of already issued shares + Number of newly issued (distributed) shares

Annual Financial Report

(Special Resolution at the Annual Shareholders’ Meeting on June 22, 2005)


	March 31, 2008	May 31, 2008

Number of stock acquisition rights:	13,000 units	12,600units
Number of stock acquisition rights for share repurchases:	-	-
Type of shares:	Common stock	Common stock
Number of shares of common stock issuable upon exercise:	260,000 shares (Note 1)	252,000 shares (Note 1)
Amount to be paid in upon exercise:	¥1,160 per share (Note 2)	¥1,160 per share (Note 2)
Exercise period:	From August 1, 2005 to July 31, 2008	From August 1, 2005 to July 31, 2008
Exercise price:	¥1,160 per share	¥1,160 per share
Amount to be credited to common stock:	¥580 per share	¥580 per share
Requirement for exercise of stock acquisition rights:	Grantee must be a director, statutory auditor, corporate advisor, contract employee or regular employee (including employees of the Group seconded to other companies and employees of other companies seconded to the Group), or director, statutory auditor or employee of a business counterparty of the Company approved by the Board of Directors at the time of the exercise of such stock acquisition rights. Business counterparties approved by the Board of Directors are bound by the Contract on Granting New Share Subscription Rights (the “Contract”) entered into between the Company and each grantee. However, stock acquisition rights may be exercised upon the retirement of a director, retirement due to age or under certain other reasonable circumstances. Other requirements for the exercise of stock acquisition rights are defined in the Contract executed upon the approval by the Annual Shareholders’ Meeting and the Board of Directors.
Transfer restriction item:	Upon approval by the Board of Directors
Substitution item for cash payment:	-
Restriction on issuance in connection with organizational restructuring:	-


Paid-in amount as adjusted = Paid-in amount before adjustment×		1

		Split or consolidation ratio

Paid-in amount
as adjusted

Paid-in amount
before adjustment

Number of
already issued
shares

Number of newly issued
(distributed) shares

Paid-in price per share

Current market price per share

Number of already issued shares + Number of newly issued (distributed) shares

Annual Financial Report

(Approved at the Annual Shareholders’ Meeting on June 22, 2005)


	March 31, 2008	May 31, 2008

Number of stock acquisition rights:	3,050 units	3,050 units
Number of stock acquisition rights for share repurchases:	-	-
Type of shares:	Common stock	Common stock
Number of shares of common stock issuable upon exercise:	61,000 shares (Note 1)	61,000 shares (Note 1)
Amount to be paid in upon exercise:	¥2,620 per share (Note 2)	¥2,620 per share (Note 2)
Exercise period:	From April 1, 2006 to March 31, 2009	From April 1, 2006 to March 31, 2009
Exercise price:	¥2,620 per share	¥2,620 per share
Amount to be credited to common stock:	¥1,310 per share	¥1,310 per share
Requirement for exercise of stock acquisition rights:	Grantee must be a director, statutory auditor, corporate advisor, contract employee or regular employee (including employees of the Group seconded to other companies and employees of other companies seconded to the Group), or director, statutory auditor or employee of a business counterparty of the Company approved by the Board of Directors at the time of the exercise of such stock acquisition rights. Business counterparties approved by the Board of Directors are bound by the Contract on Granting New Share Subscription Rights (the “Contract”) entered into between the Company and each grantee. However, stock acquisition rights may be exercised upon the retirement of a director, retirement due to age or under certain other reasonable circumstances. Other requirements for the exercise of stock acquisition rights are defined in the Contract executed upon the approval by the Annual Shareholders’ Meeting and the Board of Directors.
Transfer restriction item:	Upon approval by the Board of Directors
Substitution item for cash payment:	-
Restriction on issuance in connection with organizational restructuring:	-


Paid-in amount as adjusted = Paid-in amount before adjustment×		1

		Split or consolidation ratio

Paid-in amount
as adjusted

Paid-in amount
before adjustment

Number of
already issued
shares

Number of newly issued
(distributed) shares

Paid-in price per share

Current market price per share

Number of already issued shares + Number of newly issued (distributed) shares

Annual Financial Report

(Special Resolution at the Extraordinary Shareholders’ Meeting on February 18, 2008)


	March 31, 2008	May 31, 2008

Number of stock acquisition rights:	87,500 units	87,500 units
Number of stock acquisition rights for share repurchases:	-	-
Type of shares:	Common stock	Common stock
Number of shares of common stock issuable upon exercise:	8,750,000 shares
	(1) NIS Group Co., Ltd. 10th Equity Warrant (the “Equity Warrant”) is exercisable for shares of the Company’s common stock. The number of shares to be issued upon exercise of one equity warrant (the “Allotted Shares”) shall be 100 shares.
	(2) However, upon any adjustment in the Exercise Price (as defined below) pursuant to “Amount to be paid in upon exercise” below, for each Equity Warrant, the number of Allotted Shares shall be adjusted to equal the number of shares obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Allotted Shares deliverable upon exercise of one Equity Warrant immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment.
	(3) If, in accordance with the paragraph (2) above, an adjustment to the number of shares would result in the fraction of the integral number of one share, such situation will be dealt with in the manner set forth in Article 283 of the Corporate Law.
Amount to be paid in upon exercise:	1. The value of property that will be contributed upon exercise of the Equity Warrants:
	(1) The value of property that will be contributed upon exercise of one Equity Warrant is calculated by multiplying the number of Allotted Shares by the Exercise Price (as adjusted pursuant to “3. Adjustment of Exercise Price” below). Values below one yen will be rounded down to the nearest integral number.
	(2) The amount to be paid per share for the shares issued by the Company upon exercise of Equity Warrants (the “Exercise Price”) shall, initially, be ¥200 per share (the “Initial Exercise Price”). However, if the average closing price of the Company’s common stock in ordinary trading on the Tokyo Stock Exchange, Inc. (including the average of the bid prices (uri-kehaine) and ask prices (kai-kehaine) or, if more than one in either case, the average of the average bid prices and average ask prices) for the five consecutive trading days ending the day (inclusive) before the exercise date falls below the Initial Exercise Price (or the Exercise Price after adjustment, if adjusted pursuant to “3. Adjustment of Exercise Price”), the Exercise Price shall be obtained by multiplying 0.9 to the Initial Exercise Price (or the Exercise Price after adjustment, if adjusted pursuant to “3. Adjustment of Exercise Price”) (rounded down to the nearest first decimal place) (if any event requiring adjustment of the Exercise Price pursuant to “3. Adjustment of Exercise Price” should arise during such five consecutive trading days, the value calculated by multiplying 0.9 to the Exercise Price shall be subject to further adjustments considered appropriate by the Company pursuant to this terms and conditions). In addition, the Exercise Price is subject to adjustment as noted in “3. Adjustment of Exercise Price.”

	2. Amendment of Exercise Price No amendment will be made to the Exercise Price of the Equity Warrants.

	3. Adjustment of Exercise Price
	(1) In case the Company shall, while any of the Equity Warrants are outstanding, conduct a stock split or a reverse stock split of the shares of Common Stock of the Company, the Exercise Price shall be adjusted in accordance with the following formula:


Adjusted Exercise Price	=	Exercise Price in effect at the opening of business on the day following the day upon which such stock split or consolidation becomes effective	x	The number of shares of Common Stock Outstanding immediately before such split or consolidation The number of shares of Common Stock Outstanding immediately after such split or consolidation

Annual Financial Report


			March 31, 2008		May 31, 2008

			Such adjustment of the Exercise Price shall become effective immediately after the opening of business in Japan on the day following the day on which such stock split or consolidation becomes effective.

			In this section, “Common Stock” means the common stock of the Company and shares of common stock of the Restructuring Company (as defined in “Restructuring on issuance in connection with organizational restructuring” below) as at the relevant time. In this section, “Common Stock Outstanding” means the number of issued and outstanding shares of Common Stock of the Company (which under Japanese law includes common stock of the Company held as treasury stock) minus the number of the shares of Common Stock of the Company held by the Company as treasury stock.

			(2) In case the Company shall, while any of the Equity Warrants are outstanding, offer to all holders of shares of Common Stock Outstanding (x) new shares of Common Stock of the Company, or (y) shares of Common Stock of the Company held by the Company as treasury stock, in either case as a gratis allotment of shares of Common Stock (excluding any case of conversion, exchange or exercise of the securities, rights, or warrants set forth in the paragraph (3) below), then the Exercise Price shall be adjusted as follows:


Adjusted Exercise Price	=	Exercise Price in effect at the opening of business on the day when such adjustment becomes effective	x
				Number of shares of Common Stock Outstanding
				Number of shares of Common Stock Outstanding	+	Total number of shares of Common Stock so allotted


			Number of shares of Common Stock Outstanding used in the formula set forth in this paragraph shall be the number of shares of Common Stock Outstanding as of the record date fixed for determination of shareholders entitled to such gratis allotment in case the Company fixed such date (in all other cases, as of the day one month prior to the day upon which the Exercise Price after adjustment becomes effective). Such adjustment of the Exercise Price shall become effective immediately after the opening of business in Japan on the day following the record date fixed for the determination of stockholders entitled to receive such gratis allotment (if the record date is not fixed, the effective date thereof).

			If any allotment of the type described in this paragraph is determined but not so made, the Exercise Price shall again be adjusted to the Exercise Price that would have been in effect if such gratis allotment had not been determined.

			(3) In case the Company shall, while any of the Equity Warrants are outstanding, confer to all holders of shares of Common Stock Outstanding, any securities, rights, or warrants (including any warrants attached to bonds with warrants (the same applies hereinafter)) (such conferment includes any gratis allotment of shares and warrants, which entitle the holders thereof to acquire from the Company shares of Common Stock (other than any gratis allotment of share of Common Stock to which the paragraph (2) above applies) or any securities, rights or warrants convertible into or exchangeable for or exercisable for shares of Common Stock, at a Price Per Share less than the Current Market Price on the day on which the adjusted Exercise Price becomes effective, the Exercise Price shall be adjusted as follows:

Annual Financial Report


			March 31, 2008		May 31, 2008


		Adjusted Exercise Price		=		Exercise Price at the opening of business on the day on which the adjusted Exercise Price becomes effective		x


Number of shares of Common Stock Outstanding	+	Number of shares of Common Stock which are issued or disposed	×	Price Per Share
		Current Market Price on the day on which the adjusted Exercise Price becomes effective


	Number of shares of Common Stock Outstanding	+	Number of shares of Common Stock which are issued or disposed


			Such adjustment of the Exercise Price shall become effective immediately after the opening of business in Japan on the day following the record date fixed for the determination of stockholders entitled to such conferment; provided, that if the record date for such conferment is not fixed, such adjustment shall become effective immediately after the opening of business in Japan on the day following (i) the payment date or the last day of the payment period of the relevant shares or (ii) the effective date in the case of a gratis allotment of shares and warrants. The Exercise Price after adjustment shall be calculated in accordance with the above formula, assuming that all the securities, rights, or warrants to be issued or disposed of have been (i) converted at the initial conversion price, (ii) exchanged at the initial exchange price or (iii) exercised at the initial exercise price, as the case may be (in case of the securities, rights, or warrants which entitle the holders thereof to acquire from the Company any securities, rights, or warrants convertible into or exchangeable for or exercisable for shares of Common Stock, further assuming that all such securities, rights, or warrants have been (i) converted at the initial conversion price, (ii) exchanged at the initial exchange price or (iii) exercised at the initial exercise price, as the case may be).

			Notwithstanding the above, in case that the consideration for the shares of Common Stock of the Company to be delivered upon conversion, exchange or exercise cannot be determined as of the day when such adjustment becomes effective as provided for the preceding paragraph, the Exercise Price after adjustment shall be calculated in accordance with the above formula, assuming that all the outstanding securities, rights, or warrants then issued and outstanding are converted, exchanged or exercised in accordance with terms and conditions thereof as of the date of determination of such consideration (in case of the securities, rights, or warrants which entitle the holders thereof to acquire from the Company any securities, rights, or warrants convertible into or exchangeable for or exercisable for shares of Common Stock, further assuming that all such securities, rights, or warrants have been (i) converted at the initial conversion price, (ii) exchanged at the initial exchange price or (iii) exercised at the initial exercise price, as the case may be) (in which case adjustment of the Exercise Price shall become effective immediately after the opening of business on the day following the determination of such consideration).

			Number of shares of Common Stock Outstanding used in the formula set forth in this paragraph shall be the number of shares of Common Stock Outstanding as of the record date fixed for determination of shareholders entitled to rights to receive allotment upon the relevant offering, issuance or disposal in case the Company fixed such date (in all other cases, as of the day one month prior to the day upon which the Exercise Price after adjustment becomes effective).

Annual Financial Report


			March 31, 2008		May 31, 2008

			In the event that conferment of such securities, rights, or warrants is determined but not so issued or delivered upon the issuance date or effective date, the Exercise Price shall again be adjusted to be the Exercise Price that would have been in effect if such conferment had not been determined.

			For the purposes of this paragraph only, the capitalized term “Price Per Share” means the amount calculated by (A-B)÷C, where:

			“A” means the amount paid to the Company by the recipients of such conferred securities, rights, or warrants to acquire the relevant securities, rights, or warrants (in the case of warrants, the amount to be contributed upon the exercise should be added; and in case of the securities, rights, or warrants which entitle the holders thereof to acquire from the Company any securities, rights, or warrants exercisable for shares of Common Stock, the amount to be contributed upon the exercise of such securities, rights or warrants should be added);

			“B” means the amount of cash and the value of the other assets (which should be reasonably determined in good faith by the Board of Directors of the Company) (excluding the shares of Common Stock) to be delivered to the holder of such securities, rights, or warrant upon the conversion, exchange or exercise thereof (in case of the securities, rights, or warrants which entitle the holders thereof to acquire from the Company any securities, rights, or warrants convertible into or exchangeable for or exercisable for shares of Common Stock, the amount of such cash and the value of such other assets to be delivered upon the conversion, exchange or exercise thereof should be added); and

			“C” means the number of shares of Common Stock to be acquired upon conversion at the initial conversion price, exchange at the initial exchange price, or exercise at the initial exercise price of such conferred securities, rights, or warrants (in case of the securities, rights, or warrants which entitle the holders thereof to acquire from the Company any securities, rights, or warrants convertible into or exchangeable for or exercisable for shares of Common Stock, the number of shares of Common Stock to be acquired upon conversion at the initial conversion price, exchange at the initial exchange price, or exercise at the initial exercise price of such securities, rights, or warrants should be added).

			In this section, “Current Market Price” means, on any date, the average of the Sale Price per share of Common Stock for the 30 consecutive Trading Days commencing 45 Trading Days prior to such date. In such case, the average shall be rounded to the nearest tenth of a yen.

			In this section, “Trading Day” for the Common Stock means a day on which the Tokyo Stock Exchange, Inc. is open for business.

			In this section, “Sale Price” of the Common Stock on any date means the last reported per share sale price (or, if no last sale price is reported, the average of the bid prices and ask prices or, if more than one in either case, the average of the average bid prices and average ask prices) on such date as reported in ordinary transactions for the Tokyo Stock Exchange, Inc., or if the Common Stock is not listed on the Tokyo Stock Exchange, Inc. at the relevant time, any other principal financial instruments exchange in Japan on which the Common Stock is then listed. In the absence of such quotations, the Board of Directors of the Company shall make a good faith determination of the Sale Price.

Annual Financial Report


			March 31, 2008		May 31, 2008

			(4) In case the Company shall, while the Equity Warrants are outstanding, distribute or allot to all holders of its Common Stock Outstanding shares of any class of Capital Stock of the Company (other than any dividends, distributions, or allotments of Common Stock to which the paragraph (2) above applies) or evidences of its indebtedness or assets (including securities, but excluding any securities, rights, or warrants referred to in the paragraph (3) above, and excluding any dividend, distribution or allotment (x) paid exclusively in cash or (y) referred to in the paragraph (2) above) (any of the foregoing, in this section, the “Distributed Securities”), then, in each such case, the Exercise Price shall be reduced as follows:

Adjusted
Exercise
Price

Exercise Price in
effect on the
record date with
respect to such
dividend,
distribution or
allotment

Current Market
Price on such
record date

–

Aggregate fair market
value of the Distributed
Securities

Number of shares of
Common Stock
Outstanding on such
record date

Current Market Price on such record date


			Such reduction in the Exercise Price shall become effective immediately after the opening of business on the day following the record date for such dividend, distribution or allotment.

			If any dividend, distribution or allotment of the type described in this paragraph is determined but not so made, the Exercise Price shall again be adjusted to the Exercise Price that would have been in effect if such dividend, distribution or allotment had not been determined.

			“Capital Stock” means, with respect to any corporation, any and all shares, warrants and rights convertible into or exchangeable for or exercisable for any class of shares issued by that corporation.

			(5) In case the Company shall, while any of the Equity Warrants are outstanding, distribute to all holders of its shares of Common Stock Outstanding, cash (excluding any cash distributed as part of a distribution referred to in the paragraph (4) above or upon a Restructuring Transaction (as defined in “Restriction on issuance in connection with organizational restructuring” below)), and the total sum of (i) the amount of such distributions of such cash, (ii) the amount of the distributions paid to all holders of shares of Common Stock of the Company made exclusively in cash within the 12 months preceding the effective date of such distributions (and in respect of which no adjustment pursuant to this paragraph has been made); and (iii) the aggregate amount of any cash, plus the fair market value (which shall be determined in good faith by the Board of Directors of the Company, and which shall be set forth in accordance with the resolution of such Board of Directors) of other consideration for acquisition of shares of treasury stock of Common Stock of the Company by way of a tender offer concluded within the 12 months preceding the effective date of such distribution (and in respect of which no adjustment pursuant to the paragraph (6) below has been made) exceeds 10% of the product of (1) the Current Market Price on the record date with respect to such distribution, times (2) the number of shares of Common Stock Outstanding on such record date (such excess over 10%, in this section, the “Excess Amount”), then the Exercise Price shall be adjusted in accordance with the following formula:

Annual Financial Report


			March 31, 2008		May 31, 2008

Adjusted Exercise Price

Exercise Price in
effect immediately
prior to the close
of business in
Japan on such
record date

Current
Market Price
on such record
date

–

Excess Amount

Number of shares of
Common Stock
Outstanding on such
record date

Current Market Price on such record date


			Such adjustment of the Exercise Price shall become effective immediately after the close of business in Japan on the record date with respect to such distribution.

			(6) In case the Company, while the Equity Warrants are outstanding, conducts a tender offer to acquire its shares of Common Stock, and the sum of (i) the fair market value (which shall be determined in good faith by the Board of Directors of the Company, and which shall be set forth in accordance with the resolution of such Board of Directors) of the consideration for acquisition of such shares (in this section, the “Purchased Shares”) payable pursuant to such tender offer; (ii) the aggregate of the cash plus the fair market value (which shall be determined in good faith by the Board of Directors of the Company, and which shall be set forth in accordance with the resolution of such Board of Directors) of any other consideration payable by the Company for acquisition of shares of Common Stock of the Company in response to a tender offer concluded within the 12 months preceding the Expiration Time (as defined below) (and in respect of which no adjustment pursuant to this paragraph has been made); and (iii) the aggregate amount of the dividends to all holders of Common Stock Outstanding made exclusively in cash within the 12 months preceding the Expiration Time (and in respect of which no adjustment pursuant to the paragraph (5) above has been made), exceeds 10% of the product of (1) the Current Market Price as of the last time (in this section, the “Expiration Time”) tenders could have been made pursuant to such tender offer (as it may be amended), multiplied by (2) the number of shares of Common Stock Outstanding (including any Purchased Shares) at the Expiration Time, then, and in each such case, the Exercise Price shall be adjusted as follows:


	Adjusted Exercise Price		=		Exercise Price in effect immediately prior to close of business in Japan on the date of the Expiration Time		x


	Number of shares of Common Stock Outstanding (including any Purchased Shares) at the Expiration Time		x		Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time



Fair market value of the aggregate consideration payable to stockholders based on the acceptance of the Purchased Shares	+	Number of shares of Common Stock Outstanding (less any Purchased Shares) at the Expiration Time	x	Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time


			Such reduction (if any) shall become effective immediately after the opening of business on the business day following the Expiration Time.

			In the event that the Company is obligated to purchase shares pursuant to any such tender offer, but the Company is permanently prevented by applicable law from effecting any such purchases or all such purchases are rescinded, the Exercise Price shall again be adjusted to be the Exercise Price that would have been in effect if such tender offer had not been made.

Annual Financial Report


			March 31, 2008		May 31, 2008

			If the application of this paragraph to any tender offer would result in an increase in the Exercise Price, no adjustment shall be made for such tender offer under this paragraph.

			(7) With respect to the formulas set forth in paragraph (1), (2), (3), (4), (5), (6) or this paragraph, each such calculation shall be rounded to the nearest tenth of a yen.

			If, in the case of any transaction set forth in paragraph (1), (2), (3), (4) or (5), (x) the record date for determining the holders of shares of Common Stock of the Company for the purpose of such transaction is fixed and (y) the effectiveness of each such transaction is made subject to an approval of the general meeting of shareholders, the board of directors or any other organ of the Company on or after such record date, notwithstanding the provisions of paragraph (1), (2), (3), (4) or (5) the Exercise Price shall be adjusted on and after the date immediately following the date of such approval (the “Retroactive Adjustment”).

			In this case, additional shares of Common Stock of the Company shall be delivered to any person who exercised Equity Warrants during the period (i) beginning on the record date fixed for determining the holders of shares of Common Stock of the Company for the purpose of such transaction and (ii) ending on the date of the approval of such transaction, in a number equal to the excess of (x) the number of shares of Common Stock which would have been acquired upon exercise of such Equity Warrant if the relevant Retroactive Adjustment had been given effect as at the said exercise date, over (y) the number of shares of Common Stock previously acquired pursuant to such exercise. In this case, any fraction of one share shall be treated by the method provided for in Article 283 of the Corporate Law.


Exercise period:	From February 20, 2008 to February 20, 2015, 5.00 p.m.	From February 20, 2008 to February 20, 2015, 5.00 p.m.
Exercise price:	¥200 per share	¥200 per share
Amount to be credited to common stock:	¥100 per share	¥100 per share
Requirement for exercise of stock acquisition rights:	Each Equity Warrant shall be exercisable only in whole and not in part.	Each Equity Warrant shall be exercisable only in whole and not in part.
Transfer restriction item:	The acquisition of the Equity Warrants through assignment shall not require approval by resolution of the Company’s board of directors.
Substitution item for cash payment:	-	-
Restriction on issuance in connection with organizational restructuring:	In the event the Company restructures by consolidation or merger (provided that the Company is the dissolving company in the transaction), demerger or company split (provided that in each case the Company is the de-merged company in the transaction), share exchange or share transfer (but only where the Company becomes a wholly-owned subsidiary of another corporation) (collectively, “Restructuring Transaction”), new equity warrants (“New Equity Warrants”) of the joint stock corporation as specified in Article 236, Section 1, Item 8, i through ho of the Corporate Law (“Restructuring Company”), as set forth in (1) to (8) below, shall be delivered to the holders of any remaining Equity Warrants outstanding immediately prior to the relevant effective dates (for the purpose of this section, “effective dates” mean, as the case may be: (a) in case of merger, the effective date of such merger; (b) in case of consolidation, the date of establishment of a new joint stock corporation which is formed by the relevant consolidation; (c) in case of demerger, the effective date of such demerger; (d) in case of company split, the date of establishment of a new joint stock corporation which is formed by the relevant company split; (e) in case of share exchange, the effective date of such share exchange; and (f) in case of share transfer, the date of establishment of a new corporation which is formed by the relevant share transfer and has all of outstanding shares of common stock of the Company immediately after such share transfer) of the Restructuring Transaction (“Outstanding Warrants”). In such case, Outstanding Warrants shall expire and the Restructuring Company shall issue New Equity Warrants.

Annual Financial Report


			March 31, 2008		May 31, 2008

			(1) Number of New Equity Warrants of the Restructuring Company to be delivered: Number of warrants equal to the Outstanding Warrants held by warrant holders shall be issued.

			(2) Type of shares of the Restructuring Company subject to New Equity Warrants: Common stock of the Restructuring Company

			(3) Number of shares of the Restructuring Company subject to New Equity Warrants: To be decided in the manner described in paragraph (1) through (3) of “Number of shares of common stock issuable upon exercise” above, taking into account the terms and conditions of the Restructuring Transaction.

			(4) The value of property that will be contributed upon exercise of New Equity Warrants: The amount to be contributed upon exercise of New Equity Warrants shall be calculated by multiplying (x) the Exercise Price as determined pursuant to “Amount to be paid in upon exercise” above as adjusted to take into account of the terms and conditions of the Restructuring Transaction by (y) the number of shares of the Restructuring Company subject to relevant New Equity Warrants determined pursuant to paragraph (3) above.

			(5) The period New Equity Warrants can be exercised: From the later of the commencement date of Exercise Period for New Equity Warrants pursuant to “Exercise period” above and the effective date of the Restructuring Transaction, until the last date of the Exercise Period pursuant to “Exercise period.”

			(6) Matters relating to increase in stated capital and additional paid-in capital from issuance of shares through exercise of New Equity Warrant: To be decided pursuant to “Exercise price” and “Amount to be credited to common stock.”

			(7) Limitations on acquisition of New Equity Warrants by assignment: The acquisition of New Equity Warrants through assignment shall not require an approval by resolution of the Restructuring Company’s Board of Directors.

			(8) Terms for acquiring New Equity Warrants: No terms for acquisition of New Equity Warrants will be set.

	(3)		Summary of Rights Plan

			Not Applicable

Annual Financial Report

(4)

Changes in the Number of Issued Shares and Balance of Paid-in Capital


	Increase (decrease) in			Balance of		Change in		Balance of		Change in		Balance of
	Issued Shares of			Issued Shares of		Common		Common		Additional		Additional
Date	Common Stock			Common Stock		Stock		Stock		Paid-in Capital		Paid-in Capital

	(In millions except shares)
May 20, 2003		66,312,028			132,624,056	¥	-	¥	6,610	¥	-	¥	8,933
April 1, 2003 ~ March 31, 2004		2,102,136			134,726,192		607		7,218		713		9,647
May 20, 2004		134,726,192			269,452,384		-		7,218		-		9,647
April 1, 2004 ~ September 30, 2004		189,526			269,641,910		27		7,245		32		9,679
November 19, 2004		269,641,910			539,283,820		-		7,245		-		9,679
October 1, 2004 ~ March 31, 2005		5,384,611			544,668,431		533		7,779		523		10,203
May 20, 2005		108,933,686			653,602,117		-		7,779		-		10,203
April 1, 2005 ~ September 30, 2005		12,475,533			666,077,650		1,022		8,802		1,018		11,221
November 18, 2005		666,077,650			1,332,155,300		-		8,802		-		11,221
October 1, 2005 ~ March 31, 2006		74,315,344			1,406,470,644		3,046		11,848		3,032		14,253
April 1, 2006		1,406,470,644			2,812,941,288		-		11,848		-		14,253
June 12, 2006		86,021,600			2,898,962,888		4,043		15,891		3,956		18,210
April 1, 2006 ~ March 31, 2007		18,924,124			2,917,887,012		397		16,289		376		18,586
August 31, 2007		(2,771,992,662	)		145,894,350		-		16,289		-		18,586
February 20, 2008		100,000,000			245,894,350		10,000		26,289		10,000		28,586


Notes:	1.	The increase in the number of issued shares of common stock on May 20, 2003 was due to a 2-for-1 stock split.
	2.	The increase in the number of issued shares of common stock, the balance of common stock and additional paid-in capital for the year ended March 31, 2004 was due to the exercises of stock acquisition rights (warrants).
	3.	The increase in the number of issued shares of common stock on May 20, 2004 was due to a 2-for-1 stock split.
	4.	The increase in the number of issued shares of common stock, the balance of common stock and additional paid-in capital for the six months ended September 30, 2004 was due to the exercises of stock acquisition rights (warrants).
	5.	The increase in the number of issued shares of common stock on November 19, 2004 was due to a 2-for-1 stock split.
	6.	The increase in the number of issued shares of common stock, the balance of common stock and additional paid-in capital for the six months ended March 31, 2005 was due to the exercise of stock acquisition rights (warrants) (hereafter including the conversion of former convertible bonds, etc.).
	7.	The increase in the number of issued shares of common stock on May 20, 2005 was due to a 1.2-for-1 stock split.
	8.	The increase in the number of issued shares of common stock, the balance of common stock and additional paid-in capital for the six months ended September 30, 2005, was due to the exercise of stock acquisition rights (warrants).
	9.	The increase in the number of issued shares of common stock on November 18, 2005 was due to a 2-for-1 stock split.
	10.	The increase in the number of issued shares of common stock, the balance of common stock and additional paid-in capital for the six months ended March 31, 2006, was due to the exercise of stock acquisition rights (warrants).
	11.	The increase in the number of issued shares of common stock on April 1, 2006 was due to a 2-for-1 stock split.
	12.	The increase in the number of issued shares of common stock, the balance of common stock and additional paid-in capital on June 12, 2006 was due to a third-party allotment of new shares as follows:
		Issue price of new share:	¥93
		Amount to be credited to common stock:	¥47
		Subscriber:	Sumitomo Mitsui Banking Corporation
	13.	The increase in the number of issued shares of common stock, the balance of common stock and additional paid-in capital for the year ended March 31, 2007 was due to the exercise of stock acquisition rights (warrants).
	14.	The decrease in the number of issued shares of common stock on August 31, 2007 was due to a 1-for-20 reverse stock split.
	15.	The increase in the number of issued shares of common stock, the balance of common stock and additional paid-in capital on February 20, 2008 was due to a third-party allotment of new shares as follows:
		Issue price of new share:	¥200
		Amount to be credited to common stock:	¥100
		Subscriber:	TPG Izumi, L.P.
			TPG Izumi AIV 6, L.P.
			TPG Izumi AIV 1, L.P.

Annual Financial Report

	(5)		Details of Shareholdings

			The following table shows the details of shareholdings in units under the Japanese Unit Share System. Each unit equals 100 shares of common stock. In addition, the total number of shares below one unit under the Japanese Unit Share System is 1,343,650 shares.


	March 31, 2008
			Number of Shares Owned
Category	Number of Shareholders		(Units)		Percentage of Total


Governmental organizations		-		-		-	%
Financial institutions		27		121,465		5.0
Financial instruments firms		42		27,491		1.1
Other corporations		298		358,369		14.7
Foreign shareholders:
Other than individuals		125		1,146,081		46.9
Individuals		40		1,033		0.0
Individuals and other		48,410		791,068		32.3

Total		48,942		2,445,507		100.0	%


Notes:	1.	With respect to 6,276,613 shares of treasury stock held by the Company, 62,766 units are included in “Individuals and other” and 13 shares are included in shares below one unit under the Japanese Unit Share System.
	2.	353 units nominally owned by Japan Securities Depositary Center, Inc. are included in “Other corporations.”

(6)

Major Shareholders


		March 31, 2008
		Number of		Percentage of
		Shares Owned		Total Issued
Name	Address	(Thousand shares)		Shares

TPG Izumi, L.P.	Maples Corporate Services Limited
(Standing agent: Merrill Lynch Japan	P.O. Box 309, Ugland House, Grand Cayman
Securities Co., Ltd.)	KY1-1104 Cayman Islands		73,880		30.05	%
	(Nihonbashi 1-chome Building, 4-1, Nihonbashi
	1-chome, Chuo-ku, Tokyo )
TPG Izumi AIV 6, L.P.	Corporation Trust Center
(Standing agent: Merrill Lynch Japan	1209 Orange Street, Wilmington
Securities Co., Ltd.)	County of New Castle, Delaware 19801 U.S.A.		20,480		8.33
	(Nihonbashi 1-chome Building, 4-1, Nihonbashi
	1-chome, Chuo-ku, Tokyo )
Nissin Building Co., Ltd.	7-6, Chifune-machi 5-chome, Matsuyama City, Ehime		16,785		6.83
Shuho, Ltd.	3-1, Nishi-Shinjuku 7-chome, Shinjuku-ku, Tokyo		16,314		6.63
TPG Izumi AIV 1, L.P.	Corporation Trust Center
(Standing agent: Merrill Lynch Japan	1209 Orange Street, Wilmington
Securities Co., Ltd.)	County of New Castle, Delaware 19801 U.S.A.		5,640		2.29
	(Nihonbashi 1-chome Building, 4-1, Nihonbashi
	1-chome, Chuo-ku, Tokyo )
Kunihiko Sakioka	Setagaya-ku, Tokyo		4,484		1.82
Sumitomo Mitsui Banking Corporation	1-2, Yuraku-cho 1-chome, Chiyoda-ku, Tokyo		4,301		1.75
Hideo Sakioka	Matsuyama City, Ehime		3,970		1.61
STATE STREET BANK AND TRUST COMPANY (Standing agent: Mizuho Corporate Bank, Ltd. Kabutocho Corporate Banking and Securities Business Division)	P.O. Box 351, Boston, Massachusetts 02101 U.S.A. (6-7, Nihonbashi Kabutocho, Chuo-ku, Tokyo)		3,790		1.54
Midori Moriyama	Matsuyama City, Ehime		2,046		0.83

Total	-		151,692		61.69	%


Notes:	1.	6,276 thousand shares of treasury stock, comprising 2.55% of total number of issued shares as of March 31, 2008, are excluded from the above list of major shareholders.
	2.	TPG Izumi, L.P. became a principal shareholder of the Company as a result of a third-party allotment on February 20, 2008. Consequently, Nissin Building Co., Ltd. and Shuho, Ltd. are no longer principal shareholders.

Annual Financial Report


		September 14, 2007
		Number of		Percentage of
		Shares Owned		Total Issued
Name	Address	(Thousand Shares)		Shares

Nomura Securities Co., Ltd.	9-1, Nihonbashi 1-chome, Chuo-ku, Tokyo		-		-	%
Nomura International Plc.	Nomura House 1, St. Martin’s-le Grand, London, EC1A 4NP, England		152		0.10
Nomura Asset Management Co., Ltd.	12-1, Nihonbashi 1-chome Chuo-ku, Tokyo		3,838		2.63

	(7)		Voting Rights of Capital Stock

	1)		Issued Shares


Type	Number of Shares		Number of Voting Rights		Details

Non-voting capital stock		-		-		-
Capital stock with restricted voting rights (Treasury stock)		-		-		-
Capital stock with restricted voting rights (Others)		-		-		-
Capital stock with voting rights	(Treasury stock)
(Treasury stock)	Common stock:	6,276,600		-		-
Capital stock with voting rights (Others)	Common stock:	238,274,100		2,382,741		-
Capital stock below one unit under the Japanese Unit Share System	Common stock:	1,343,650		-		-
Total number of issued shares		245,894,350		-		-
Total number of voting rights		-		2,382,741		-


Notes:	1.	35,300 shares (equivalent to 353 voting rights) nominally owned by Japan Securities Depositary Center, Inc., are included in the “Capital stock with voting rights (Others).”
	2.	13 shares of treasury stock are included in “Capital stock below one unit under the Japanese Unit Share System.”

Treasury Stock


		Shares of Common Stock Owned As of March 31, 2008
		Under the				Total Number of		Percentage of Total
Owner	Address	Company’s Name		Under Other Names		Shares		Issued Shares
				(Shares except percentages)
(Treasury stock)	7-6, Chifune-machi 5-chome,
NIS Group Co., Ltd.	Matsuyama City, Ehime		6,276,600		-		6,276,600		2.55	%

Total	-		6,276,600		-		6,276,600		2.55	%

Annual Financial Report

(8)

Information on Stock Option Plans

(Stock Options in the Form of Stock Acquisition Rights)

	1)		Pursuant to Articles 280-20 and 280-21 of the former Amended Commercial Code of Japan (the “Code”), the 45th Annual Shareholders’ Meeting held on June 22, 2004 approved a special resolution on issuance of stock acquisition rights, as designated by the Board of Directors, to the Company’s, its subsidiaries’ and its equity-method affiliates’ directors, statutory auditors, corporate advisors, contract employees and regular employees (including employees of the Group seconded to other companies and employees of other companies seconded to the Group), and temporary employees with tenure of over one year, and the Company’s business counterparties’ directors, statutory auditors or certain employees that are approved by the Board of Directors.

			Details of the abovementioned stock acquisition right plan are as follows:



	Resolution date:		June 22, 2004
	Grant for:		The Group’s directors, statutory auditors, contracts employees and regular employees (including employees of the Group seconded to other companies and employees of other companies seconded to the Group), and temporary employees with tenure of over one year, and directors, statutory auditors and certain employees of business counterparties of the Company that are approved by the Board of Directors; 1,278 persons (Note 1) as designated by the Board of Directors
	Type of shares:		Common stock
	Number of shares of common stock issuable upon exercise:		Up to a total of 400,000 shares (Note 2)
	Amount to be paid in upon exercise:		As presented in “(2) Information on Stock Acquisition Rights and Convertible Bonds”
	Exercise period:		Same as above
	Requirement for exercise:		Same as above
	Transfer restriction item:		Same as above
	Substitution item for cash payment:		-
	Restriction on issuance in connection with organizational restructuring:		-


Notes:	1.	The number of grantees approved by the Board of Directors was 1,149 persons on July 6, 2004, 9 persons on January 11, 2005 and 120 persons on April 12, 2005.
	2.	The maximum number of stock acquisition rights is 80,000 units. The number of shares per one unit of stock acquisition rights is 5 shares of common stock. In addition, the number of shares per one unit of stock acquisition rights has been adjusted retroactively to reflect 2-for-1 stock splits completed on November 19, 2004, November 18, 2005 and April 1, 2006, 1.2-for-1 stock split completed on May 20, 2005, and 1-for-20 reverse stock split completed on August 31, 2007.

Annual Financial Report

	2)		Pursuant to Articles 280-20 and 280-21 of the Code, the 46th Annual Shareholders’ Meeting held on June 22, 2005 approved a special resolution on issuance of stock acquisition rights, as designated by the Board of Directors, to the Company’s, its subsidiaries’ and its equity-method affiliates’ directors, statutory auditors, corporate advisors, contract employees and regular employees (including employees of the Group seconded to other companies and employees of other companies seconded to the Group), and the Company’s business counterparties’ directors, statutory auditors and certain employees which are approved by the Board of Directors.

			Details of the abovementioned stock acquisition right plan are as follows:



	Resolution date:		June 22, 2005
	Granted to:		The Group’s directors, statutory auditors, corporate advisors, contract employees and regular employees (including employees of the Group seconded to other companies and employees of other companies seconded to the Group), and directors, statutory auditors and certain employees of business counterparties of the Company that are approved by the Board of Directors; 279 persons (Note 1) as designated by the Board of Directors.
	Type of shares:		Common stock
	Number of shares of common stock issuable upon exercise:		Up to a total of 250,000 share (Note 2)
	Amount to be paid in upon exercise:		As presented in “(2) Information on Stock Acquisition Rights and Convertible Bonds”
	Exercise period:		Same as above
	Requirement for exercise:		Same as above
	Transfer restriction item:		Same as above
	Substitution item for cash payment:		-
	Restriction on issuance in connection with organizational restructuring:		-


Notes:	1.	The number of grantees approved by the Board of Directors was 251 persons on July 6, 2005, and 28 persons on March 14, 2006.
	2.	The maximum number of stock acquisition rights is 50,000 units. The number of shares per one unit of stock acquisition rights is 5 shares of common stock. In addition, the number of shares per one unit of stock acquisition rights has been adjusted retroactively to reflect 2-for-1 stock splits completed on November 18, 2005 and April 1, 2006, and 1-for20 reverse stock split completed on August 31, 2007.

Annual Financial Report

	3)		Pursuant to Article 361 of the Corporate Law, the 47th Annual Shareholders’ Meeting held on June 24, 2006 approved a resolution on issuance of stock acquisition rights to directors of the Company as a part of directors’ remuneration.

			Details of the abovementioned stock acquisition right plan are as follows:



	Resolution date:		June 24, 2006
	Granted to:		The Company’s directors (Note 1)
	Type of shares:		Common stock
	Number of shares of common stock issuable upon exercise:		Up to 2,500,000 shares per annum (Notes 2, 3 and 5)
	Amount to be paid in upon exercise:		(Note 4)
	Exercise period:		The Board of Directors, by resolution of issuance of stock acquisition rights, shall define an exercise period within the range of five years from the first day of the month following the month of the approval date.
	Requirement for exercise:		Grantee must be, in principle, a director of the Company at the time of the exercise of such new share subscription rights. However, stock acquisition rights may be exercised upon the retirement of a director or under certain other reasonable circumstances approved by the Board of Directors. Other requirements for the exercise of stock acquisition rights shall be defined by the Board of Directors, which will determine offering terms and conditions of issuance of stock acquisition rights.
	Transfer restriction item:		Upon approval by the Board of Directors.
	Substitution item for cash payment:		-
	Restriction on issuance in connection with organizational restructuring:		-


Notes:	1.	The details regarding the number of grantees are to be determined by the Board of Directors.
	2.	The maximum number of stock acquisition rights per annum is 500,000 units. The number of shares per one unit of stock acquisition rights is 5 shares of common stock. In addition, the number of shares per one unit of stock acquisition rights has been adjusted retroactively to reflect 1-for-20 reverse stock split completed on August 31, 2007.
	3.	In the event of a split or consolidation on the Company’s stock, the number of shares issuable upon exercise per stock acquisition right unit will be adjusted by the following formula, except that the number of shares issuable upon exercise will be rounded down to the nearest share:

		Number of shares as adjusted = Number of shares before adjustment × Split or consolidation ratio

	4.	The exercise price would be the average daily closing price on the Tokyo Stock Exchange for the month immediately before the month of the issuance date of the stock acquisition right (or the closing price of the day immediately prior to such date if the transaction has not been completed), multiplied by a certain numeric value, which ranges from 1.1 to 2.0, determined by the Board of Directors’ resolution of offering terms and conditions of issuance of stock acquisition rights, with any fraction below ¥1 rounded upward to the nearest yen, and multiplied by the number of shares per unit of stock acquisition rights.
		In addition, in the event of a split or consolidation on the Company’s stock, the paid-in amount of exercised shares per stock acquisition right unit will be adjusted by the following formula, with any fraction of ¥1 occurring upon such adjustment rounded upward to the nearest yen.


Paid-in amount as adjusted = Paid-in amount before adjustment ×	1
	Split or consolidation ratio


						Moreover, in the event that the Company issues new shares or distributes shares of treasury stock of the Company at a price lower than the current market price after the issuance of the stock acquisition right, the paid-in amount shall be adjusted in accordance with the following formula, with any fraction of ¥1 occurring upon such adjustment rounded upward to the nearest yen:

Number of
already issued
shares

Number of newly issued
(distributed) shares

Paid-in price per share

Paid-in amount

Current market price per share

As adjusted

before adjustment

Number of already issued shares + Number of newly issued (distributed) shares


			5.			In accordance with a resolution at the 48th Annual Shareholders’ Meeting held on June 23, 2007, the maximum “Number of shares of common stock issuable upon exercise” and the maximum number of new share subscription right units (Note 2) have been amended from 1,500,000 shares to 2,500,000 shares, and from 300,000 units to 500,000 units, respectively.

Annual Financial Report

ACQUISITION OF TREASURY STOCK

Type of Shares:Common stock acquired under Articles 155-3 and 155-7 of the Corporate Law

(1)

Acquisition of Treasury Stock under Resolution of Shareholders’ Meeting

None

(2)

Acquisition of Treasury Stock under Resolution of the Board of Directors’ Meeting

Treasury stock acquired under Article 155-3 of the Corporate Law is as follows:


	Number of Shares			Total Amount

	(In millions except shares and percentages)
Acquisition of treasury stock:
Resolution of the Board of Directors’ Meeting held on June 23, 2007
(Period of acquisition: June 25, 2007 ~ June 24, 2008)		3,000,000			¥3,000
Year ended March 31, 2007 or before		-			-
Year ended March 31, 2008		3,000,000			2,393
Remaining treasury stock to be acquired under the resolution		-			606
Unexercised as of March 31, 2008 (%)		-	%		20.2	%
Year ending March 31, 2009		-			-
Unexercised as of the filing date (%)		-	%		20.2	%

Note: The number of shares has been adjusted retroactively to reflect 1-for-20 reverse stock split completed on August 31, 2007.

(3)

Acquisition of Treasury Stock Not under Resolution of Annual Shareholders’ or Board of Directors’ Meeting

Treasury stock acquired under Article 155-7 of the Corporate Law is as follows:

Year ended March 31, 2008

Year ending March 31, 2009

Number of Shares

Total Amount

Number of Shares

Total Amount

(In millions except shares)

Treasury stock acquired

22,701

¥8

2,501

¥0


Note:	1.	The number of shares of treasury stock acquired during the year ending March 31, 2009 does not include the number of fractional shares purchased during the period from June 1, 2008 to the filing date of this annual financial report.
	2.	The number of shares has been adjusted retroactively to reflect 1-for-20 reverse stock split completed on August 31, 2007.

(4)

Disposal and Holding of Treasury Stock Acquired


	Year Ended March 31, 2008				Year Ending March 31, 2009
	Number of Shares		Total Amount		Number of Shares		Total Amount

	(In millions except shares)
Disposal of treasury stock acquired:
Allotment to subscriber		-	¥	-		-		¥ -
Retirement		-		-		-		-
Transfer due to merger, share exchange, or corporate split		-		-		-		-
Exercise of stock acquisition rights		163,536		74		-		-


Note:	1.	The number of shares of treasury stock as of March 31, 2008 and May 31, 2008 is 6,276,613 shares and 6,279,114 shares, respectively. In addition, the number of shares of treasury stock for the year ending March 31, 2009 does not include the number of fractional shares purchased and the number of shares of treasury stocks sold due to the exercise of stock acquisition rights during the period from June 1, 2008 to the filing date of this annual financial report.
	2.	The number of shares has been adjusted retroactively to reflect 1-for-20 reverse stock split completed on August 31, 2007.

Annual Financial Report

DIVIDEND POLICY

		The Group has focused on returns to shareholders as one of a top-priority issue. As our dividend policy, we strive to maintain stable dividend payments at a target dividend payout ratio of 30% on a consolidated earning basis, taking into consideration economic and financial circumstances, industry trends, and our consolidated financial position and business performance.

		As its basic dividend policy, the Company intends to distribute its earnings twice a year, as a half-year dividend and a year-end dividend, and according to the provision of Article 459 of the Corporate Law, the Company has the right to approve distributions of earnings through a resolution of the Board of Directors.

		Based on the abovementioned policy, the Group has decided to make no annual dividend payment for the year ended March 31, 2008.

		With regards to the use of internal reserve, we utilize this fund to establish new business models and make strategic investments for further growth in order to contribute to improved corporate value.

MARKET PRICE INFORMATION

(1)

The Yearly Highest and Lowest Share Prices of the Company’s Common Stock for the Last Five Years


	Year Ended March 31,
		2004			2005			2006			2007		2008
		(In yen)
Highest			¥ 860			¥ 509			¥ 308			¥ 131		¥ 70
			[464	]		[274	]		[135	]				[714	]

Lowest			377			210			140			48		31
			[410	]		[240	]		[106	]				[133	]

Note:

These prices are those quoted on the First Section of the Tokyo Stock Exchange, and the prices in brackets are the ex-right prices following completion of stock splits or reverse stock split.

(2)

The Monthly Highest and Lowest Share Prices of the Company’s Common Stock for the Last Six Months


	October 2007		November 2007		December 2007		January 2008		February 2008		March 2008

	(In yen)
Highest	¥	458	¥	424	¥	371	¥	231	¥	227	¥	180

Lowest		342		262		220		157		153		133

Notes: These prices are those quoted on the First Section of the Tokyo Stock Exchange.

Annual Financial Report


5.		MEMBERS OF THE BOARD OF DIRECTORS AND STATUTORY AUDITORS

Number of

Owned

Directors

Name

(Thousand

Position

Title

(Date of Birth)

Business Career

Term

shares)

President and Representative Director of the Board

CEO

Kunihiko Sakioka (January 10, 1962)

April 1986

Joined the Company

(Note 5)

4,484

September 1988

Manager of Hiroshima Branch Office of the

Company

March 1989

Director of the Board of the Company

December 1989

Director of the Board and General Manager of Finance Department of the Company

February 1991

Executive Director of the Board, Advice to Finance and Information System of the Company

December 1992

Senior Executive Director of the Board and Head of Sales & Marketing Control of the Company

October 1996

Representative Senior Executive Director of the Board and Head of Tokyo Branch, Advice to Sales Department of the Company

April 1998

Representative Senior Executive Director of the Board and Head of Sales & Marketing Control of the Company

June 2000

President, Representative Director of the Board and Head of Sales & Marketing Control of the Company

March 2004

Representative Director of the Board of Shuho, Ltd.

July 2005

President, Representative Director of the Board and Executive Officer of the Company

June 2006

Chairman, Representative Director of the Board and Co-CEO of the Company

October 2006

Chairman, Representative Director of the Board of Shuho, Ltd. (current position)

October 2007

Chairman, Representative Director of the Board, President, CEO and Head of Investment Banking, Sales & Marketing of the Company

April 2008

Chairman, Representative Director of the Board, President and CEO of the Company

May 2008

President, Representative Director of the Board and CEO of the Company (current position)

Chairman of the Board

Masayuki Yasuoka (May 7, 1945)

April 1970

Joined The Industrial Bank of Japan, Ltd.

(Note 5)

December 1983

Joined Salomon Brothers, Inc.

February 1985

Joined Bankers Trust Co.

October 1995

Representative in Japan of Bankers Trust Co.

June 1998

Managing Director of the Board of The Industrial Bank of Japan, Ltd.

June 2001

Senior Executive Officer of Mizuho Securities Co., Ltd.

June 2003

Senior Vice President of General Electric Japan, Ltd.

November 2004

Executive Vice President of the Board of General Electric Japan, Ltd.

February 2005

Managing Director of TPG

February 2008

Director of the Board of the Company

May 2008

Chairman of the Board of the Company (current position)

Annual Financial Report

Number of

Owned

Directors

Name

(Thousand

Position

Title

(Date of Birth)

Business Career

Term

shares)

Senior Executive Director of
the Board

Executive Officer;
Head of
Investment Banking, Sales & Marketing

Toshioki Otani (December 22, 1970)

April 1994

Joined the Company

September 1995

Manager of Kumamoto Branch Office of the Company

July 2000

General Manager of Finance Department of the Company

January 2001

General Manager of Finance Department and Strategic Business Development Department of the Company

April 2002

General Manager of Eastern Japan Sales & Marketing Control Department of the Company

June 2002

Director of the Board of the Company

April 2003

Director of the Board and General Manager of Strategic Business Development Department of the Company

November 2003

President and Representative Director of the Board of NIS Lease Co., Ltd. (current position)

July 2004

Director of the Board, Deputy Head of Sales & Marketing Control and General Manager of Strategic Business Development Department of the Company

(Note 5)

186

July 2005

Executive Director of the Board, Executive Officer, Head of Sales & Marketing Control and General Manager of Sales Department of the Company

November 2005

Concurrently Head of Osaka Branch of the Company

June 2006

Executive Director of the Board, Executive Officer and Head of Sales & Marketing of the Company

April 2007

Executive Director of the Board, Executive Officer and Head of Investment Banking, Sales & Marketing and Investment Banking Division of the Company

June 2007

Senior Executive Director of the Board, Executive Officer and Head of Investment Banking, Sales & Marketing and Investment Banking Division of the Company

October 2007

Senior Executive Director of the Board and Executive Officer of the Company

April 2008

Senior Executive Director of the Board, Executive Officer and Head of Investment Banking, Sales & Marketing of the Company (current position)

Senior Executive Director of
the Board

Executive Officer;
Head of
Strategy & Operations Control

Akihiro Nojiri (November 15, 1968)

April 1991

Joined Ministry of Finance

(Note 5)

August 2003

Joined the Company
General Manager, Assistant to President of the Company

June 2004

Director of the Board of the Company

July 2004

Director of the Board and General Manager of Finance Department of the Company

July 2005

Executive Director of the Board, Executive Officer, Head of Operations Control and General Manager of Finance Department of the Company

February 2006

Executive Director of the Board, Executive Officer and Head of Operations Control of the Company

April 2007

Executive Director of the Board, Executive Officer and Head of Strategy & Operations Control of the Company

June 2007

Senior Executive Director of the Board, Executive Officer and Head of Strategy & Operations Control of the Company (current position)

Annual Financial Report

Number of

Owned

Directors

Name

(Thousand

Position

Title

(Date of Birth)

Business Career

Term

shares)

Senior Executive Director of the Board

Executive Officer; Officer-in- Charge East Asia Region

Yunwei Chen
(January 16, 1969)

April 1998

Joined the Company

(Note 5)

170

April 2001

Manager of Corporate Planning Department

2nd Section of the Company

September 2002

Concurrently Senior Manager of

Corporate Planning Department of the Company

April 2003

General Manager of Investor Relations Department of the Company

June 2003

Director of the Board of the Company

July 2004

Chairman and President of the Board of Matsuyama Nissin Investment & Consulting (Shanghai) Co., Ltd. (currently Nissin Leasing (China) Co., Ltd.) (current position)

July 2005

Executive Director of the Board, Executive Officer, General Manager of Investor Relations Department and Officer-in-Charge East Asia Region of the Company

April 2007

Executive Director of the Board, Executive Officer and Officer-in-Charge East Asia Region of the Company

June 2007

Senior Executive Director of the Board, Executive Officer and Officer-in-Charge East Asia Region of the Company (current position)

Executive Director of the Board

Executive Officer; Deputy Head of Investment Banking, Sales & Marketing and Head of Real Estate Group Division

Katsutoshi Shimizu
(April 9, 1954)

April 1999

Joined RISA Partners, Inc.
Director of the Board of RISA Partners, Inc.

(Note 5)

October 2002

Joined A-MAX Co., Ltd.

Director of the Board of A-MAX Co., Ltd.

June 2003

Joined Nissin Servicer Co., Ltd.

January 2004

Director of the Board and General Manager of Credit Screening Department of Nissin Servicer Co., Ltd.

March 2004

Director of the Board and General Manager of Asset Management Department of Nissin Servicer Co., Ltd.

September 2005

Director of the Board, Advice to Asset Management Department of Nissin Servicer Co., Ltd.
Joined the Company
General Manager of Real Estate Business Control Department of the Company

February 2006

Executive Officer of the Company

June 2006

Director of the Board, Executive Officer, Deputy Head of Sales & Marketing, Head of Real Estate Group Division and General Manager of Real Estate Business Control Department of the Company

August 2006

Director of the Board of Nissin Servicer Co., Ltd. (current position)

April 2007

Director of the Board, Executive Officer, Deputy Head of Investment Banking, Sales & Marketing, and Head of Real Estate Group Division of the Company

June 2007

Executive Director of the Board, Executive Officer, Deputy Head of Investment Banking, Sales & Marketing, and Head of Real Estate Group Division of the Company (current position)

Director of the Board

Steven Schneider (December 17, 1959)

August 1999

President and CEO of GE Plastics Japan Ltd.

(Note 5)

August 2001 January 2005 November 2005

Chairman and CEO of GE (China) Co., Ltd. President and CEO of GE Asia Pacific Managing Director of TPG (current position)

February 2008

Director of the Board of the Company (current position)

Director of the Board

Jun Tsusaka (March 25, 1961)

June 1983

Joined Merrill Lynch & Co.

(Note 5)

September 1988

Joined Goldman Sachs & Co.

January 1995 April 2004 June 2006

Joined Millicom International Cellular S.A. Chairman and CEO of GAB Robins, Inc. Managing Director of TPG (current position)

February 2008

Director of the Board of the Company (current position)

Annual Financial Report

Number of

Owned

Directors

Name

(Thousand

Position

Title

(Date of Birth)

Business Career

Term

shares)

Director
of the Board

Akio Ishida
(February 26, 1942)

July 1966

Joined The Bank of Tokyo California

(Note 5)

November 1971

Joined Daiwa Securities Co., Ltd.

November 1973

Joined Merrill Lynch Japan Securities Co., Ltd.

March 2001

June 2006

Vice Chairman of Merrill Lynch Japan Securities Co., Ltd
Vice Chairman in Japan of TPG (current position)

February 2008

Director of the Board of the Company (current position)

Director
of the Board

Nobuhiko Ito (February 5, 1947)

April 1971

Joined Exxon Chemical Japan, Ltd.

(Note 5)

��

July 1989

Joined General Electric Japan, Ltd.

February 1993

Director of GE Yokogawa Medical System, Ltd.

February 1997

Managing Director of the Board of GE Yokogawa Medical System, Ltd.

January 1999

President and Representative Director of the Board of GE Yokogawa Medical System, Ltd.

September 2002

January 2004

President, Representative Director of the Board and CEO of GE Edison Life Insurance Company
President, Representative Director of the Board and CEO of GE Capital Leasing Corporation

February 2005

President, Representative Director of the Board and CEO of General Electric Japan, Ltd.

October 2007

Senior Advisor of General Electric Japan, Ltd.

January 2008

Advisor of TPG (current position)

February 2008

Director of the Board of the Company (current position)

Director
of the Board

Carlos Aquino (January 13, 1962)

May 1992

Joined McDonnell Douglas Corp.

(Note 5)

February 1993

Joined Booz• Allen & Hamilton Inc.

November 1997

Joined General Electric Co.

November 1998 December 2000 February 2002

Joined GE Medical Systems
Joined 3Com Corporation, Asia Pacific
Founded CMA Pacific Partners,
Managing Director

June 2006

Director of TPG (current position)

June 2008

Director of the Board of the Company (current position)

Standing
Statutory Auditor

Hitoshi Higaki (December 14, 1959)

November 1983

Joined the Company

(Note 7)

395

March 1994

General Manager of Accounting Department and Finance Department of the Company

June 1994

Director of the Board and General Manager of General Affairs Department of the Company

May 1995

Director of the Board and General Manager of Corporate Planning Department and Accounting Department of the Company

June 1996

Director of the Board, Advice to Accounting Department and General Manager of Corporate Planning Department of the Company

June 2000

Executive Director of the Board and General Manager of Corporate Planning Department of the Company

April 2003

July 2004

Executive Director of the Board and Head of Operations Control of the Company
Concurrently General Manager of Corporate Planning Department of the Company

August 2004

Statutory Auditor of Venture Link Co., Ltd. (current position)

July 2005

Senior Executive Director of the Board and Executive Officer of the Company

June 2006

Concurrently Head of Group Strategy of the Company

April 2007

Senior Executive Director of the Board and Executive Officer of the Company

June 2007

Standing Statutory Auditor of the Company (current position)

Annual Financial Report

Number of
Shares

Directors

Name

Owned
(Thousand

Position

Title

(Date of Birth)

Business Career

Term

shares)

Standing Statutory Auditor

Akio Sakioka
(September 22,1950)

April 1971

Joined the Company

(Note 6)

739

January 1976

Manager of Takamatsu Branch Office of

the Company

April 1984

Director of the Board of the Company

July 1994

Executive Director of the Board and

General Manager of Tokyo Office of the

Company

October 1996

Executive Director of the Board and

General Manager of Finance Department

of the Company

October 2000

Executive Director of the Board, Advice

to Business Audit Department of the

Company

June 2002

Standing Statutory Auditor

of the Company (current position)

Statutory Auditor

Masaaki Uchino
(April 1, 1945)

April 1968

Joined Ministry of Finance

(Note 7)

July 1996

Deputy Director of National Tax Tribunal

July 1997

Senior Executive Director of Japan

Finance Corporation for Municipal

Enterprises

June 2001

Chairman and Representative Director of the Board of Promise Co., Ltd.

June 2007

Statutory Auditor of the Company

(current position)

Statutory Auditor

October 1979

Joined Arthur Andersen Co., Tokyo

Office (currently KPMG AZSA & Co.)

September 1985

Opened Katsuhiko Asada Certified Public

Katsuhiko Asada
(February 10, 1955)

Accountant Firm

December 2001

Opened Konishi Asada Certified Public

(Note 8)

Accountant Firm

June 2004

Statutory Auditor of the Company

(current position)

Total

6,071


Notes:	1.	Steven Schneider, Jun Tsusaka, Akio Ishida, Nobuhiko Ito and Carlos Aquino are “Outside Directors” pursuant to Article 2-15 of the Corporate Law.
	2.	Masaaki Uchino and Katsuhiko Asada are “Outside Statutory Auditors” pursuant to Article 2-16 of the Corporate Law.
	3.	The Annual Shareholders’ Meeting held on June 22, 2004 approved an amendment to the Company’s Articles of Incorporation concerning the establishment of substitute statutory auditors system pursuant to Article 1079 of the Mercantile Law issued by the Civil Affairs Bureau of the Ministry of Justice effective April 9, 2003. However, the substitute statutory auditor is not elected.
	4.	The Company has introduced an executive officer system in order to enhance management efficiency by further vitalizing the Board of Directors and to clarify the responsibilities and authorities of management decision making and monitoring functions of the Board of Directors from operational execution functions of each business department.
		Executive officers consist of four directors listed above and the following six persons, totaling 10 persons: Keishi Ishigaki, the Deputy Head of Investment Banking, Sales & Marketing, and Head of Sales & Marketing Division; Akira Imaki, the Deputy Head of Strategy & Operations Control, and General Manager of Strategic Planning Department and General Affairs Department; Hidetoshi Sawamura, the Head of Risk Management; Hirofumi Mihara, the Deputy Head of Risk Management, and General Manager of Credit Screening Department; Shigeharu Nakashima, the Deputy Head of Strategy & Operations Control, and General Manager of Finance Department; and Yoichi Hirata, the Head of Investment Banking Division, and General Manager of Strategic Business Development Department.
	5.	The term is one year from the conclusion of the Annual Shareholders’ Meeting held on June 24, 2008.
	6.	The term is four years from the conclusion of the Annual Shareholders’ Meeting held on June 22, 2005.
	7.	The term is four years from the conclusion of the Annual Shareholders’ Meeting held on June 23, 2007.
	8.	The term is four years from the conclusion of the Annual Shareholders’ Meeting held on June 24, 2008.

Annual Financial Report

INFORMATION ON CORPORATE GOVERNANCE

	(1)		The Basic View of Corporate Governance

			In order to respond to the ever changing management environment, pursuant to our medium to long-term growth strategy, the Company is seeking to develop more efficient business operations through swift management decisions. The Company’s core philosophy is “honest business” and “sincere management” based on the “spirit of human dignity,” and further to that, we are strengthening our corporate governance in order to obtain the trust of each of our stakeholders, including our shareholders, customers, directors and employees. Specifically, the Company is focusing on a number of areas, including speeding-up decision making by revamping the Board of Directors as a result of segregating operations and supervision through the introduction of an executive officer system, enhancing the management monitoring system through the establishment of a Board of Statutory Auditors, which includes outside statutory auditors, improving, evaluating, and constructing internal controls, and also by strengthening the internal control functions. Additionally, since June 24, 2006, the Company has established the “Compliance Committee,” which consists primarily of external experts as an advisory panel to the Board of Directors. Under the guidance of this committee, the Company has implemented a variety of measures in relation to compliance and risk management related policies.

			As part of an ongoing effort, the Company intends to further strengthen and substantiate the effectiveness of its corporate governance.

	(2)		Organizational Structure of the Company

	1)		The Board of Directors and its members

			As of June 25, 2008, the Board of Directors consists of 11 directors (including five outside directors). In order that managerial decision-making is carried out in a reasonable and an effective manner, the Board of Directors holds regular meetings, in principle on a monthly basis, and has extraordinary meetings whenever necessary. With respect to the execution of operations, the Company introduced an executive officer system in July 2005. There are currently 10 executive officers (four of whom are concurrently serving as directors) running the Executive Officer Committee and putting into effect operations based on decisions made by the Board of Directors. The performance of each company in the Group is reported to the Board of Directors at the Group interchange conference in which the executives from the member companies of the Group participate.

	2)		The Board of Statutory Auditors and its members

			The Company has adopted a statutory auditor system. As of June 25, 2008, the Board of Statutory Auditors consists of four statutory auditors including two outside auditors. The role of the board is to conduct financial auditing in compliance with the Corporate Law and other related laws and regulations, as well as to conduct legal compliance audits of the managerial performance of directors in order to supervise whether they are performing their business responsibilities in accordance with relevant laws and Articles of Incorporation.

			The board’s auditing procedures are based on the Auditing Standards of Statutory Auditors and carried out in accordance with the annual auditing schedule. Statutory auditors are obliged to attend the Board of Directors’ meetings (auditors who are unable to attend receive reports at the auditors’ meeting). Statutory auditors are also expected to attend any important meetings and hold a Board of Statutory Auditors’ meeting every two months (six times per year, in principle).

	3)		Compliance Committee

			The Company established the “Risk Management Committee” on September 1, 2004, so that it could maintain a sound business operating structure. In order to further strengthen the corporate compliance framework, the “Compliance Committee,” consisting primarily of external experts, was also established on June 24, 2006. The role of this committee is not only to deliberate on how to prevent the occurrence of corporate compliance violations and develop after-the-fact procedures for when such violations occur, but also to report and make recommendations to the Board of Directors on measures to be implemented in connection with corporate compliance. Therefore, the traditional functions of the “Risk Management Committee” have been taken over by the “Compliance Committee.”

Annual Financial Report

The Corporate Governance structure of the Company is as follows:

(3)

Internal Control System and Risk Management System

	(a)		Basic Plan for the Internal Control System and Risk Management System

			It is essential for the Company, through its internal control system and risk management system, to promptly identify the issues which need to be addressed, including enhanced compliance, and to take appropriate action in response to such issues in order for us to grow with our stakeholders including our customers. Fully recognizing the importance of these systems, the Board of Directors enacted the “Basic Plan for an Internal Control System Infrastructure” in order to develop and enhance these systems, and has administered and maintained the systems in accordance with the plan.

	(b)		Development of the Internal Control System and Risk Management System

Arrangements for ensuring the performance of the duties of directors and employees is in conformity with laws, regulations and the Articles of Incorporation:

	•		The Board of Directors has set up the “NIS Code of Ethics,” and as such will ensure that this ethical code is fully understood by all directors and employees of the Group (including executive officers; hereinafter, the same applies) while taking the initiative in observing the code.

	•		The “Internal Control Department” is the division in charge of corporate compliance, and as such will prepare and review compliance-related regulations and manuals, and ensure that these are fully understood by all directors and employees.

	•		The “Group Audit Department” will identify and prevent improper conduct within the Company by auditing the business processes of each department and carry out improvement of procedures in relation to such matters.

Annual Financial Report

	•		The Company has established the “Compliance Committee” consisting primarily of external experts that will deliberate on how to prevent the occurrence of corporate compliance violations and develop after-the-fact procedures for when such violations occur, and the committee will report and make recommendations to the Board of Directors on measures to be implemented in connection with corporate compliance. The Board of Directors shall endeavor to implement any necessary measures, paying utmost respect to the reports and recommendations provided by the committee.

	•		Through its whistleblower system, as set forth in the Company’s “Internal Regulations for Whistleblower System,” the Company will minimize the compliance risk that can arise from illegal acts and the like and will promote further effective utilization of this system by routinely reviewing such regulations.

	•		The “Human Resources Development Department,” in cooperation with the “Internal Control Department,” will conduct periodic training to ensure that the Company’s corporate compliance policies are fully understood and practiced by all directors and employees.

	•		The Company has introduced an outside director system as a supervisory function to further reinforce legality of execution of its directors’ duties, subject to shareholders’ approval of appointment.

	•		The Company has kept away from any antisocial forces in order to ensure sound corporate management. The “General Affairs Department” has set up a manual to deal with such antisocial forces and built partnerships with external specialized agencies such as the police.

ii)

Arrangements for the preservation and control of information relating to the execution of duties by directors

	•		The Board of Directors enacted the “Information Security Policy” in order to retain confidentiality, integrity and availability of its information assets and to promote establishment of management structure for securing the appropriate information security, and as such will ensure that the policy is fully understood by all directors and employees while taking the initiative in practicing the policy.

	•		In accordance with the “Information Security Policy,” “Document Control Rules,” “Document Control Manual” and other internal rules, the Company will preserve and control in an appropriate manner all information and documents relating to the execution of duties by directors, including any information and documents the preparation and retention of which are required by law, and any information and documents relating to important decisions and the execution of significant company matters.

	•		The Company will make such information accessible by its directors and statutory auditors at any time in accordance with the “Document Control Manual” and “Statutory Auditors’ Auditing Standards.”

	•		The Company will revise these regulations as necessary and adjust them in line with other relevant regulations as appropriate.

iii)

Regulations and other arrangements relating to the management of the risk of loss

	•		The “Risk Management” division is in charge of risk management, and as such it will manage the entire Group’s overall risk in a comprehensive manner in cooperation with all relevant departments.

	•		Upon being notified of important risk-related information from relevant departments through the “Risk Management” division, the Board of Directors will implement such measures as necessary to respond to such risk. The Compliance Committee will provide the Board of Directors recommendations of measures for suitably dealing with such risk from the perspective of an independent organization comprised primarily of external experts.

	•		The Company will clarify the types and definitions of risks that affect the Company’s management and, in addition to maintaining regulations and a management framework for each type of risk, it will make arrangements for the swift and appropriate communication of information and handling of risks in the event of their occurrence. The classification of risks shall be periodically reviewed.

	•		The “Human Resources Development Department” will promote an awareness of risk management among individuals by conducting training for all directors and employees.

	•		The Company will establish internal regulations including the Basic Regulations for Risk Management to handle serious risk of loss when it arises and requires an urgent response. In accordance with these regulations, the President and Representative Director of the Board will form a task force under the direct jurisdiction of his office to deal with such risk.

Annual Financial Report

iv)

Framework for ensuring efficient execution of directors’ duties

The Company will make arrangements to enable the efficient execution of duties based on the management strategy decisions of the Board of Directors and will clearly define responsibility and authority in relation to the management, supervision, and execution of business operations.

	•		Through the introduction and management of an “Executive Officer Committee,” which will be responsible for agile decision-making and execution of business operations, the Company will perform efficient and swift decision-making and business operations, and will also make clear the duties and scope of responsibility of each executive officer, in each case, in accordance with the “Executive Officer System.”

	•		The Board of Directors will oversee the execution of business operations by making decisions on important matters concerning the execution of management policies, matters required by law, and other important management-related matters.

	•		The Board of Directors will formulate business plans based on its management policies which take into consideration trends in the business environment, and each division or department will draw up its own specific action plan for achieving such business plans.

	•		The Company will promote the efficient execution of business operations by clarifying the authority and responsibilities of each executive in the execution of their ordinary duties in accordance with the “Job Authority Rules” and the “Work Allocation Rules.”

Framework for ensuring optimum performance of operations across the Group

To ensure that operations are performed at optimum levels across the Group, the Company will put in place the following arrangements:

	•		The Company will make efforts to ensure the optimum performance of operations within the Group by formulating and revising the shared Group mottos, management principles, action guidelines and the “NIS Code of Ethics” as needed, and by ensuring that such shared mottos, management principles, action guidelines and the “NIS Code of Ethics” are fully understood throughout the Group.

	•		In cooperation with the “Internal Control Department,” the “Strategic Planning Department” will ensure the smooth execution of Group operations and put in place a Group management framework in line with various regulations of the Company relating to the Group management including the “Control Rules for Affiliated Companies.”

	•		The “Group Audit Department” will undertake regular audits of the Group (including business operations, internal controls, etc.) and promote the optimization of business operations.

	•		The Company will promote the sharing of information within the Group and unification of Group management policies by holding the Group Interchange Conferences on a regular basis.

	•		The Company will promote thorough compliance in the Group by ensuring that all directors and employees are fully aware of the existence of the Group-wide whistleblower system, and that it is used effectively.

(4)

Internal Audit, Statutory Auditor and Independent Auditors

	(a)		Organization, Personnel and Procedures for Internal Audits

			The “Group Audit Department” is responsible for the internal auditing function, and is comprised of nine persons, including one general manager. The purpose of this department is to establish an internal audit structure pursuant to which internal control audits and financial statement audits are carried out so that periodic improvements can be made in operating efficiency. The Group Audit Department is also responsible not only for the detection of improper business conduct and mistakes, but also for the prevention of unexpected corporate loss due to any misconduct.

			The Group Audit Department plans the yearly audit schedule, which is then approved by the President and Representative Director of the Board, and implements such audits under the internal audit-related regulations.

			Each branch or loan office is audited once a year, and two subsidiaries from the Group are audited per year. The findings from these audits are presented in a review session. Improvement is directed for the required area, and the results must be reported. Internal audit reports are submitted to the President and Representative Director of the Board and Statutory Auditors, and the activity status of the Group Audit Department is reported on a monthly basis.

Annual Financial Report

(b)

Cooperation between the Group Audit Department, the Board of Statutory Auditors and Accounting Auditors

	i)		Cooperation between the statutory auditors and the Group Audit Department

			Cooperation with the Board of Statutory Auditors has been strengthened by having the general manager of the Group Audit Department, which takes responsibility for the internal audit function, make a monthly internal audit report and a progress report on internal control audits to the statutory auditors, and also by having him participate as an observer at meetings of the Board of Statutory Auditors.

	ii)		Cooperation between the statutory auditors and the independent accounting firm

			In the year ended March 2008, in addition to the submission of an audit report to the Board of Statutory Auditors by the independent accounting firm as required under the Corporate Law, the independent accounting firm reported and explained the results of audits in the Board of Statutory Auditors’ meeting held following the announcement of semi-annual and annual financial results to the statutory auditors and the Group Audit Department, and discussed audit plans. Through these procedures, the statutory auditors continue to cooperate with the independent accounting firm and are undertaking the oversight and supervision of audit performances of the independent accounting firm.

	(c)		Information regarding Independent Accounting Firm

			Information regarding the independent accounting firm is as follows:


	Name of Accountant		Independent Accounting Firm

	Engagement Partner: Mr. Kazuyuki Togo		Sanyu & Co.
	Engagement Partner: Mr. Tomohiro Koto		Sanyu & Co.

Assistants involved in audit services are as follows:


Certified Public Accountants:		2 persons
Other:		21 persons

Annual Financial Report

	(5)		Compensation to Directors and Statutory Auditors, and Audit Fees for the Independent Accounting Firm

			The compensation to directors and statutory auditors, and audit fees for the independent accounting firm for the year ended March 31, 2008 is as follows:


	Year Ended March 31, 2008
	Amount
	(In millions)
Directors		¥237
Outside directors		8
Statutory auditors		45
Outside statutory auditors		10

Compensation to directors and statutory auditors		¥302


	Year Ended March 31, 2008
	Amount
	(In millions)
Audit opinion under Article 2-1 of the Certified Public Accountants Law		¥90
Other		-

Compensation to independent accounting firm		¥90

(6)

Personnel Relationships, Capital or Business Relationships and Other Interests Between the Company and the Company’s Outside Directors and Outside Statutory Auditors

	(a)		The Company has six outside directors as of March 31, 2008

			Mr. Steven Schneider was elected to the post in February 2008. Mr. Jun Tsusaka was elected to the post in February 2008. Mr. Masayuki Yasuoka was elected to the post in February 2008. Mr. Akio Ishida was elected to the post in February 2008. Mr. Nobuhiko Ito was elected to the post in February 2008. Mr. Daniel Carroll was elected to the post in February 2008.

			Abovementioned six outside directors are seconded from TPG, with which the Company has formed a strategic investment and business alliance. In addition, Mr. Masayuki Yasuoka is no longer an outside director since he was elected to the Chairman of the Board of the Company on May 1, 2008. Mr. Daniel Carroll retired from the post as his term expired as of the conclusion of the Annual Shareholders’ Meeting held on June 24, 2008. Other four directors were elected to outside directors as they were reappointed at the Annual Shareholders’ Meeting held on June 24, 2008. Furthermore, Mr. Carlos Aquino, newly appointed as an outside director at the Annual Shareholders’ Meeting held on June 24, 2008, is also seconded from TPG.

	(b)		The Company has two outside statutory auditors

			Mr. Katsuhiko Asada was elected to the post in June 2004. Mr. Masaaki Uchino was elected to the post in June 2007.

			Mr. Katsuhiko Asada owns 7,200 shares of the Company’s common stock. There are no special interests such as personnel and capital relationships between Mr. Masaaki Uchino and the Group.

Annual Financial Report

	(7)		Agreement on Limitation of Liability

			The Company revised its Articles of Incorporation at the 43rd Annual Shareholders’ Meeting held on June 22, 2002, to limit the liability of outside directors, and revised the Articles of Incorporation again at the 47th Annual Shareholders’ Meeting held on June 24, 2006 to limit the liability of outside statutory auditors.

	(a)		Agreement limiting the liability of outside directors

			In relation to the liability set forth in Article 423-1 of the Corporate Law, an outside director must bear responsibility to the extent of ¥20 million, or the minimum amount as defined by Article 425-1 of the Corporate Law, whichever is greater, in the event such director acts in good faith without gross negligence.

	(b)		Agreement limiting the liability of outside statutory auditors

			In relation to the liability set forth in Article 423-1 of the Corporate Law, an outside statutory auditor must bear responsibility to the extent of ¥20 million, or the minimum amount as defined by Article 425-1 of the Corporate Law, whichever is greater, in the event such auditor acts in good faith without gross negligence.

	(8)		Number of Directors and Requirements for Election of Directors

			The Articles of Incorporation of the Company state that the Company shall have not more than 12 directors. As also stated in the Articles of Incorporation, any resolution for the election of a director shall be carried by a majority of the voting rights of shareholders in attendance who hold at least one-third of the voting rights of the shareholders who can exercise their voting rights, and shall not be by cumulative voting.

	(9)		Requirements for Special Resolutions at the Shareholders’ Meeting

			In order to ensure smooth operation of the Shareholders’ Meeting, the Articles of Incorporation of the Company state that resolutions as stipulated in Article 309-2 of the Corporate Law shall be carried by a vote of at least two-thirds of the voting rights of shareholders in attendance who hold at least one-third of the voting rights of the shareholders who can exercise their voting rights.

	(10)		Resolution Matters of the Shareholders’ Meeting which can be Resolved at the Board of Directors’ Meeting

			In order to maintain the agile implementation of capital policies as well as the stable return of profits to shareholders, the Articles of Incorporation of the Company state that certain resolution matters of the Shareholders’ Meeting, as stipulated in Article 459-1 of the Corporate Law such as distribution of dividends, shall be carried by a resolution of the Board of Directors, unless otherwise stipulated by laws.

	(11)		Support System for Outside Directors and Outside Statutory Auditors

			The Company has appointed five outside directors, and the Secretariat of the Board of Directors provides appropriate and necessary support to them.

			In addition, in order to assist outside statutory auditors, appropriate and necessary support is provided by the Group Audit Department and other related departments upon request by the outside statutory auditors. Also, the Company has introduced a teleconferencing system for meetings of the Board of Directors and Board of Statutory Auditors to increase attendance of outside statutory auditors at conferences even from a distance.

	(12)		Other Matters Relating to Corporate Governance

			Based on the Board of Directors’ resolution in relation to the “Basic Plan for an Internal Control System Infrastructure,” we believe that our corporate governance system will be further strengthened by swiftly implementing each resolution item, by improving the internal control system through constant revision, and by putting in place an efficient and legally compliant corporate system.

Annual Financial Report

ITEM 5. FINANCIAL STATEMENTS

In respect of the requirements for the preparation of the consolidated and non-consolidated financial statements:

	(1)		The preparation of the consolidated financial statements conforms to Regulations concerning Terminology, Format and Preparation Method of the Consolidated Financial Statements (the “CFS Regulations”), issued by the Ministry of Finance (MOF Ordinance No. 28, 1976).

			The consolidated financial statements as of and for the year ended March 31, 2007 were prepared in conformity with the CFS Regulations before it was amended, and the consolidated financial statements as of and for the year ended March 31, 2008 were prepared in conformity with the CFS Regulations as amended.

			In addition, the amended CFS Regulations was early adopted for the consolidated financial statements as of and for the year ended March 31, 2008, pursuant to supplementary provision No. 3 of Cabinet Office Ordinance regarding the Amendment of the Regulations concerning Terminology, Format and Preparation Method of Financial Statements (Cabinet Ordinance No. 88, December 26, 2006).

	(2)		The preparation of the non-consolidated financial statements conforms to Regulations concerning Terminology, Format and Preparation Method of the Financial Statements (the “FS Regulations”), issued by the Ministry of Finance (MOF Ordinance No. 59, 1963).

			The non-consolidated financial statements as of and for the year ended March 31, 2007 were prepared in conformity with the FS Regulations before it was amended, and the non-consolidated financial statements as of and for the year ended March 31, 2008 were prepared in conformity with the FS Regulations as amended.

			In addition, the amended FS Regulations was early adopted for the non-consolidated financial statements as of and for the year ended March 31, 2008, pursuant to supplementary provision No. 3 of Cabinet Office Ordinance regarding the Amendment of the Regulations concerning Terminology, Format and Preparation Method of Financial Statements (Cabinet Ordinance No. 88, December 26, 2006).

	2.		In respect of the report of independent certified public accountants:

			The consolidated financial statements and non-consolidated financial statements as of and for the year ended March 31, 2007 and 2008 were audited by Sanyu & Co. pursuant to the Japanese Securities and Exchange Law, Regulation 193-2, and the Japanese Financial Instruments and Exchange Law, Regulation 193-2-1, respectively.

Annual Financial Report

1.		CONSOLIDATED FINANCIAL STATEMENTS

(1)		Consolidated Financial Statements

	1)	Consolidated Balance Sheets


	March 31,
	2007						2008
				Percentage of						Percentage of
	Amount			Total Assets			Amount			Total Assets

	(In millions except percentages)
ASSETS:
Current Assets:
Cash and deposits (Note 1)	¥	28,321					¥	11,652
Notes and loans receivable (Notes 1, 2, 5, 6, 7, 8 and 10)		213,512						124,545
Purchased loans receivable (Note 1)		31,565						28,777
Real estate for sale in the servicing business (Note 1)		19,439						19,145
Real estate for sale and real estate under construction for sale in the real estate business (Note 1)		26,598						25,812
Deferred tax assets		2,446						2,252
Other		37,178						23,140
Allowance for loan losses		(14,729	)					(18,901	)

Total Current Assets		344,332			85.3	%		216,425			79.3	%

Fixed Assets:
Tangible fixed assets:
Buildings and structures (Note 1)		1,977						735
Accumulated depreciation		895						150

		1,082						585

Equipment		699						483
Accumulated depreciation		318						242

		381						240

Assets held for leases		7,537						7,739
Accumulated depreciation		2,450						3,346

		5,086						4,392

Land (Note 1)		1,919						1,247

Total tangible fixed assets		8,469			2.1			6,466			2.4

Intangible fixed assets		2,390			0.6			1,933			0.7

Investment and other assets:
Investment securities (Notes 1, 3 and 9)		36,009						31,358
Bankrupt and delinquent loans receivable (Note 6)		8,496						16,689
Deferred tax assets		3,565						-
Other (Note 3)		7,964						10,184
Allowance for loan losses		(7,347	)					(10,440	)

Total investment and other assets		48,688			12.0			47,791			17.5

Total Fixed Assets		59,548			14.7			56,191			20.6

Deferred Assets:
Deferred bond issuance costs		-						367

Total Deferred Assets		-			-			367			0.1

Total Assets	¥	403,880			100.0	%	¥	272,983			100.0	%

Annual Financial Report


	March 31,
	2007						2008
				Percentage of						Percentage of
				Total Liabilities						Total Liabilities
	Amount			and Net Assets			Amount			and Net Assets

	(In millions except percentages)
LIABILITIES:
Current Liabilities:
Accounts payable	¥	771					¥	284
Short-term borrowings (Notes 1 and 7)		55,396						24,944
Current portion of long-term borrowings (Notes 1 and 7)		83,192						63,168
Current portion of bonds		8,460						27,530
Commercial paper		27,100						-
Accrued income taxes		3,714						2,529
Accrued bonuses for employees		686						580
Accrued bonuses for directors		81						16
Reserve for guarantee losses		1,065						801
Reserve for losses on relocation of offices		-						154
Other (Notes 5, 8 and 9)		10,784						8,202

Total Current Liabilities		191,251			47.4	%		128,213			47.0	%

Long-term Liabilities:
Bonds		33,280						30,230
Long-term borrowings (Notes 1 and 7)		59,628						28,426
Asset-backed securities (Note 1)		26,957						10,185
Deferred tax liabilities		254						-
Accrued retirement benefits for directors		379						324
Reserve for losses on excess interest repayments		4,952						10,766
Reserve for losses on group businesses		-						5,850
Other		360						154

Total Long-term Liabilities		125,812			31.1			85,938			31.5

Statutory Reserve:
Reserve for securities transactions		68						68

Total Statutory Reserve		68			0.0			68			0.0

Total Liabilities		317,132			78.5			214,219			78.5

NET ASSETS:
Shareholders’ Equity:
Common stock		16,289			4.0			26,289			9.6
Additional paid-in capital		20,081			5.0			30,180			11.1
Retained earnings		47,196			11.7			2,080			0.7
Treasury stock		(1,565	)		(0.4	)		(3,892	)		(1.4	)

Total Shareholders’ Equity		82,002			20.3			54,658			20.0

Valuation and Translation Adjustments:
Unrealized gains on investment securities		302			0.1			73			0.0
Deferred losses on hedging instruments		(0	)		(0.0	)		(0	)		(0.0	)
Foreign currency translation adjustments		360			0.1			116			0.1

Total Valuation and Translation Adjustments		662			0.2			189			0.1
Issuance of Stock Acquisition Rights		114			0.0			102			0.0
Minority Interest		3,968			1.0			3,814			1.4

Total Net Assets		86,747			21.5			58,763			21.5

Total Liabilities and Net Assets	¥	403,880			100.0	%	¥	272,983			100.0	%

Annual Financial Report

Consolidated Statements of Operations


	Year Ended March 31,
	2007					2008
			Percentage of						Percentage of
			Total Operating						Total Operating
	Amount		Revenues			Amount			Revenues

	(In millions except percentages)
Operating Revenues	¥	88,152		100.0	%	¥	83,027			100.0	%
Operating Expenses (Note 1)		36,861		41.8			43,183			52.0

Net Operating Revenues		51,290		58.2			39,844			48.0
Selling, General and Administrative Expenses (Note 2)		40,855		46.4			55,271			66.6

Operating Income (Losses)		10,435		11.8			(15,427	)		(18.6	)

Other Income:
Interest income from securities		7					5
Interest and dividends received		123					138
Guarantee fees received		44					-
Income from investment funds		507					-
Cancellation fees received		-					69
Other		43					86

Total Other Income		726		0.8			300			0.4

Other Expenses:
Interest expenses		901					1,142
Stock issuance-related costs		166					129
Bond issuance costs		89					-
Securitization facility costs		471					-
Equity losses on affiliates accounted for under the equity method, net		7					134
Losses on investment funds		-					270
Provision for loan losses		22					-
Loan borrowing costs		-					430
Other		179					203

Total Other Expenses		1,838		2.0			2,312			2.8

Ordinary Income (Losses)		9,323		10.6			(17,438	)		(21.0	)

(Continued)

Annual Financial Report


		Year Ended March 31,
		2007						2008
					Percentage of						Percentage of
					Total Operating						Total Operating
		Amount			Revenues			Amount			Revenues

	(In millions except percentages)
(Continued)
Special Gains:
Gains on sales of fixed assets			2						9
Gains on sales of investment securities			1,246						200
Gains on sales of investment in affiliated companies			457						-
Gains on change in equity interest, net			220						437
Gains on retirement of bonds repurchased			-						75
Other			68						17

Total Special Gains			1,994			2.2			740			0.9

SpecialLosses:
Losses on sales of fixed assets (Note 3)			-						269
Losses on disposal of fixed assets (Note 4)			54						42
Losses on impairment (Note 5)			143						252
Losses on sales of investment securities			105						2,757
Impairment of investment securities			1,128						9,252
Impairment of investment in affiliated companies			-						1,015
Losses on change in equity interest, net			-						465
Provision for losses on group businesses (Note 6)			-						2,963
Expenses for management reform program			-						2,019
Provision for losses on relocation of offices			-						154
Provision for loan losses			44						5
Adjustment to estimated excess interest repayment-related costs			7,077						-
Expenses for relocation of offices			6						-
Other			4						1

Total Special Losses			8,563			9.7			19,201			23.1

Income (Losses) before Income Taxes and Minority Interest			2,754			3.1			(35,899	)		(43.2	)

Income Taxes:
Current			5,776						4,129
Prior years			-						1,300
Deferred			(3,252	)					3,666

Total Income Taxes			2,523			2.9			9,095			11.0

Minority Interest			221			0.2			121			0.1

Net Income (Losses)		¥	8			0.0	%	¥	(45,116	)		(54.3	)%

Annual Financial Report

Consolidated Statements of Changes in Net Assets

(April 1, 2006 ~ March 31, 2007)


	Shareholders' Equity
			Additional					Treasury			Total Shareholders'
	Common stock		paid-in capital		Retained earnings			stock			Equity

	(In millions)
Balance as of March 31, 2006	¥	11,848	¥	15,519	¥	49,040		¥	(1,833	)	¥	74,576

Changes in items for the year ended March 31, 2007:
Stock issuance		4,440		4,333		-			-			8,774
Cash dividends (Note)		-		-		(1,503	)		-			(1,503	)
Cash dividends		-		-		(455	)		-			(455	)
Directors’ bonuses (Note)		-		-		(98	)		-			(98	)
Net income		-		-		8			-			8
Purchases of treasury stock		-		-		-			(0	)		(0	)
Sales of treasury stock		-		228		-			268			496
Decrease in affiliates accounted for under the equity method		-		-		228			-			228
Increase in consolidated subsidiaries		-		-		(24	)		-			(24	)
Net changes in items other than shareholders’ equity		-		-		-			-			-

Total changes for the year ended March 31, 2007		4,440		4,561		(1,844	)		268			7,426

Balance as of March 31, 2007	¥	16,289	¥	20,081	¥	47,196		¥	(1,565	)	¥	82,002


	Valuation and Translation Adjustments
	Unrealized			Deferred			Foreign		Total			Issuance of
	gains (losses)			losses on			currency		Valuation and			Stock
	on investment			hedging			translation		Translation			Acquisition		Minority		Total Net
	securities			instruments			adjustments		Adjustments			Rights		Interest		Assets

	(In millions)
Balance as of March 31, 2006	¥	5,097		¥	-		¥	150	¥	5,248		¥	-	¥	2,407	¥	82,232

Changes in items for the year ended March 31, 2007:
Stock issuance		-			-			-		-			-		-		8,774
Cash dividends (Note)		-			-			-		-			-		-		(1,503	)
Cash dividends		-			-			-		-			-		-		(455	)
Directors’ bonuses (Note)		-			-			-		-			-		-		(98	)
Net income		-			-			-		-			-		-		8
Purchases of treasury stock		-			-			-		-			-		-		(0	)
Sales of treasury stock		-			-			-		-			-		-		496
Decrease in affiliates accounted for under the equity method		-			-			-		-			-		-		228
Increase in consolidated subsidiaries		-			-			-		-			-		-		(24	)
Net changes in items other than shareholders’ equity		(4,795	)		(0	)		210		(4,586	)		114		1,561		(2,910	)

Total changes for the year ended March 31, 2007		(4,795	)		(0	)		210		(4,586	)		114		1,561		4,515

Balance as of March 31, 2007	¥	302		¥	(0	)	¥	360	¥	662		¥	114	¥	3,968	¥	86,747


Note:		These are items of appropriation of earnings resolved at the Annual Shareholders’ Meeting held in June 2006.

Annual Financial Report

(April 1, 2007 ~ March 31, 2008)


	Shareholders’ Equity
			Additional					Treasury			Total Shareholders'
	Common stock		paid-in capital		Retained earnings			stock			Equity

	(In millions)
Balance as of March 31, 2007	¥	16,289	¥	20,081	¥	47,196		¥	(1,565	)	¥	82,002

Changes in items for the year ended March 31, 2008:
Stock issuance		10,000		10,000		-			-			20,000
Net losses		-		-		(45,116	)		-			(45,116	)
Purchases of treasury stock		-		-		-			(2,401	)		(2,401	)
Sales of treasury stock		-		98		-			74			173
Net changes in items other than shareholders’ equity		-		-		-			-			-

Total changes for the year ended March 31, 2008		10,000		10,098		(45,166	)		(2,327	)		(27,344	)

Balance as of March 31, 2008	¥	26,289	¥	30,180	¥	2,080		¥	(3,892	)	¥	54,658


	Valuation and Translation Adjustments
	Unrealized			Deferred			Foreign			Total			Issuance of
	gains (losses)			(losses) gains			currency			Valuation and			Stock
	on investment			on hedging			translation			Translation			Acquisition			Minority			Total Net
	securities			instruments			adjustments			Adjustments			Rights			Interest			Assets

	(In millions)
Balance as of March 31, 2007	¥	302		¥	(0	)	¥	360		¥	662		¥	114		¥	3,968		¥	86,747

Changes in items for the year ended March 31, 2008:
Stock issuance		-			-			-			-			-			-			20,000
Net losses		-			-			-			-			-			-			(45,116	)
Purchases of treasury stock		-			-			-			-			-			-			(2,401	)
Sales of treasury stock		-			-			-			-			-			-			173
Net changes in items other than shareholders’ equity		(229	)		0			(244	)		(473	)		(12	)		(154	)		(639	)

Total changes for the year ended March 31, 2008		(229	)		0			(244	)		(473	)		(12	)		(154	)		(27,984	)

Balance as of March 31, 2008	¥	73		¥	(0	)	¥	116		¥	189		¥	102		¥	3,814		¥	58,763

Annual Financial Report

Consolidated Statements of Cash Flows


	Year Ended March 31,
	2007			2008
	Amount			Amount

	(In millions)
Operating Activities:
Income (losses) before income taxes and minority interest		¥ 2,754			¥ (35,899	)
Depreciation and amortization		1,954			2,255
Losses on impairment		143			252
Increase in allowance for loan losses		8,638			7,890
Increase in reserve for losses on excess interest repayments		4,362			5,833
Decrease in accrued retirement benefits for employees		(265	)		-
Decrease in accrued bonuses for employees		(64	)		(92	)
Increase (decrease) in accrued bonuses for directors		81			(64	)
Increase in reserve for losses on group businesses		-			5,850
Interest and dividends received		(881	)		(2,627	)
Interest expenses		4,435			6,105
Gains on sales of fixed assets		(2	)		(9	)
Losses on sales of fixed assets		-			269
Losses on disposal of fixed assets		54			42
Gains on sales of investment securities		(1,246	)		(200	)
Losses on sales of investment securities		105			2,757
Impairment of investment securities		1,128			9,252
Impairment of investment in affiliated companies		-			1,015
Charge-offs of loans receivable		11,365			13,553
(Gains) losses on change in equity interest		(220	)		28
(Increase) decrease in interest receivable		(116	)		502
Decrease in advanced interest received		(43	)		(111	)
Decrease in beneficial interest in trust		-			14,830
Directors’ bonuses paid		(105	)		-
Other		(2,534	)		4,961

Sub-total		29,541			36,397

Proceeds from interest and dividends received		881			2,617
Interest paid		(4,184	)		(5,936	)
Income taxes paid		(8,118	)		(6,529	)

Sub-total		18,120			26,549

Loan origination		(300,667	)		(174,599	)
Proceeds from collections of loans receivable		249,441			233,336
Loans purchased		(19,579	)		(12,334	)
Proceeds from collections of purchased loans		12,871			12,930
Increase in real estate for sale in the servicing business, net		(11,845	)		(220	)
Purchases of assets held for leases		(2,929	)		(1,623	)
Increase in installment loans, net		(4,102	)		(12,584	)
Increase in real estate for sale and real estate under construction for sale in the real estate business, net		(8,667	)		(1,017	)
Purchases of operational investment securities		-			(2,390	)

Net cash (used in) provided by operating activities		(67,357	)		68,045

(Continued)

Annual Financial Report


	Year Ended March 31,
	2007			2008
	Amount			Amount

	(In millions)
(Continued)
Investing Activities:
Time deposits		(470	)		(334	)
Proceeds from withdrawal of time deposits		20			467
Purchases of tangible fixed assets		(1,997	)		(657	)
Proceeds from sales of tangible fixed assets		12			530
Purchases of intangible fixed assets		(342	)		(303	)
Purchases of investment securities		(7,798	)		(2,702	)
Proceeds from sales of investment securities		1,713			8,060
Proceeds from redemption of investment securities		3,595			3,623
Purchases of investment in affiliated companies		(2,730	)		(8	)
Proceeds from sales of investment in affiliated companies		740			-
Purchases of other investment in affiliated companies		(1,000	)		(2,313	)
Proceeds from redemption of other investment in affiliated companies		20			1,540
Proceeds from changes in capital contributions		844			-
Other		(1,155	)		301

Net cash (used in) provided by investing activities		(8,547	)		8,204

Financing Activities:
Deposits of restricted cash in banks		(3,482	)		(4,300	)
Proceeds from withdrawal of restricted cash in banks		4,784			4,038
Proceeds from short-term borrowings		271,975			89,869
Repayments of short-term borrowings		(242,367	)		(114,061	)
Proceeds from issuance of commercial paper		123,600			63,300
Payments for redemption of commercial paper		(126,500	)		(90,400	)
Proceeds from long-term borrowings		65,169			56,485
Repayments of long-term borrowings		(70,631	)		(105,740	)
Proceeds from issuance of bonds		15,410			24,502
Payments for redemption of bonds		(1,958	)		(8,885	)
Payments for cash collateral for bond issuance		-			(4,533	)
Increase in asset-backed securities		19,440			4,150
Decrease in asset-backed securities		(14,152	)		(20,921	)
Increase in long-term deposits		(385	)		(565	)
Decrease in long-term deposits		491			636
Proceeds from cash collateral from share lending agreements		5,100			-
Redemption of cash collateral from share lending agreements		(7,960	)		(1,640	)
Proceeds from securitization of loans receivable		33,402			-
Proceeds from sales of bonds		-			9,500
Payments for repurchase of bonds		-			(9,500	)
Proceeds from issuance of new shares		7,910			19,910
Proceeds from issuance of new shares by subsidiaries		1,543			705
Dividends paid		(1,939	)		(8	)
Dividends paid to minority interest		(211	)		(283	)
Purchases of treasury stock		(0	)		(2,407	)
Proceeds from sales of treasury stock		496			173
Other		(7	)		(191	)

Net cash provided by (used in) financing activities		79,728			(90,168	)

Effect of exchange rate changes on cash and cash equivalents		212			(102	)
Net increase (decrease) in cash and cash equivalents		4,035			(14,020	)
Cash and cash equivalents at beginning of year		21,105			27,625
Net increase in cash and cash equivalents from newly-consolidated subsidiaries		2,484			-
Net decrease in cash and cash equivalents due to exclusion of subsidiaries from the scope of consolidation (Note 2)		-			(1,952	)

Cash and cash equivalents at end of year (Note 1)		¥ 27,625			¥ 11,652

Annual Financial Report

SIGNIFICANT ITEMS RELATING TO THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

1.		Scope of Consolidation

		All subsidiaries are consolidated.

		(April 1, 2006 ~ March 31, 2007)


Number of consolidated subsidiaries:		54 companies

Names of consolidated subsidiaries:		Nissin Servicer Co., Ltd., NIS Securities Co., Ltd., Nissin Leasing (China) Co., Ltd., NIS Lease Co., Ltd., NIS Property Co., Ltd., NIS Real Estate Co., Ltd., Nissin Insurance Co., Ltd., Bird’s Eye Technological Investment Corporation, Woodnote Corporation, Aprek Co., Ltd., NIS Construction Co., Ltd. and 43 other companies

			CN Investments Co., Ltd., previously a consolidated subsidiary, became an affiliate accounted for under the equity method since the Group sold a part of its equity interest.

			15 companies, including NIS Construction Co., Ltd., were newly established and became consolidated subsidiaries during the year ended March 31, 2007. In addition, according to Practical Issues Task Force (“PITF”) No. 20 “Practical Solution on Application of Control Criteria and Influence Criteria to Investment Associations,” issued by the ASBJ on September 8, 2006, the Group changed its accounting policy regarding the scope of consolidation in order to apply the effective control method more strictly to its investment associations. As a result of adoption of PITF No. 20, 20 investment associations, including Nishi-Shinjuku Investments Co., Ltd., were consolidated into the Group during the year ended March 31, 2007.

(Changes in accounting treatment)

The Group adopted PITF No. 20 “Practical Solutions in the Application of Control Criteria and Influence Criteria to Investment Associations,” issued by the ASBJ on September 8, 2006, beginning from the year ended March 31, 2007. As a result of this change in accounting treatment, compared with the previous treatment, the amounts of “Total Assets,” “Total Liabilities,” and “Minority Interest” increased by ¥6,386 million, ¥6,639 million, and ¥995 million, respectively, and “Total Shareholders’ Equity” decreased by ¥1,247 million. In addition, the amounts of “Operating Revenues,” “Operating Income,” “Ordinary Income,” “Income before Income Taxes and Minority Interest,” and “Minority Interest” increased by ¥5,733 million, ¥1,396 million, ¥440 million, ¥440 million and ¥447 million, respectively, and “Net Income” for the year ended March 31, 2007 decreased by ¥7 million.

(April 1, 2007 ~ March 31, 2008)


Number of consolidated subsidiaries:		61 companies

Names of consolidated subsidiaries:		Nissin Servicer Co., Ltd., NIS Securities Co., Ltd., NIS Lease Co., Ltd., NIS Property Co., Ltd., NIS Real Estate Co., Ltd., Bird’s Eye Technological Investment Corporation, Woodnote Corporation, NIS Construction Co., Ltd. and 53 other companies

			13 companies, including NI Strategic Partners Co., Ltd., became consolidated subsidiaries through new establishment and other reasons, and four companies, including ASA CH29 Co., Ltd., became consolidated subsidiaries through acquisition of shares and other reasons, during the year ended March 31, 2008.

			Four companies, including Aprek Co., Ltd. and Nissin Leasing (China) Co., Ltd., were excluded from the scope of consolidation and became affiliates accounted for under the equity method, due to a decrease in the Group’s voting rights as a result of a third-party allotment and other reasons. Nissin Insurance Co., Ltd. was excluded from the scope of consolidation because it was dissolved as a result of the absorption merger with NIS Real Estate Co., Ltd., which was the surviving company. Another company was excluded from the scope of consolidation as a result of the redemption of the Group’s investment in the Tokumei-Kumiai, and four other companies were excluded as a result of completion of liquidation.

Annual Financial Report

2.		Application of the Equity Method

		The equity method is applied to all affiliates.

		(April 1, 2006 ~ March 31, 2007)


Number of affiliates accounted for under the equity method:		10 companies

Names of affiliates accounted for under the equity method:		Nippon Real Estate Rating Services Co., Ltd., STRATEC K.K. (former company name: Sanyo Pacific Investment Advisors Co., Ltd.), SN Co., Ltd., CN Capital Co., Ltd., CN Two Co., Ltd., Araigumi Co., Ltd., and four other companies

			The equity method is no longer applied to Shinsei Business Finance Co., Ltd., Chuo Mitsui Finance Service Co., Ltd., Nissin Medical Partners Co., Ltd., and Webcashing.com Co., Ltd. since the Group’s equity interests in Shinsei Business Finance and Chuo Mitsui Finance Service decreased to less than 20%, Nissin Medical Partners completed its liquidation, and all ownership interests in Webcashing.com Co., Ltd. owned by the Group were sold to outside investors, respectively.

			Araigumi Co., Ltd. and CN Investments Co., Ltd. became affiliates accounted for under the equity method during the year ended March 31, 2007 since the Group acquired shares of Araigumi and the Group’s interests in CN Investments decreased to less than 50%, respectively. In addition, two other companies became affiliates accounted for under the equity method during the year ended March 31, 2007 due to capital contribution by the Group to one company and the new establishment by the Group of the other.

			If the balance sheet date of an affiliate accounted for under the equity method is different from that of the consolidated financial statements, the consolidated financial statements are prepared by using such affiliate’s financial statements for the relevant accounting period with the exception of CN Two Co., Ltd.

			In addition, the consolidated financial statements as of and for the year ended March 31, 2007 were prepared by using CN Two Co., Ltd.’s provisional settlement of accounts on February 28, 2007.

(April 1, 2007 ~ March 31, 2008)


Number of affiliates accounted for under the equity method:		19 companies

Names of affiliates accounted for under the equity method:		Aprek Co., Ltd., Nissin Leasing (China) Co., Ltd., Nippon Real Estate Rating Services Co., Ltd., STRATEC K.K, SN Co., Ltd., CN Capital Co., Ltd., CN Two Co., Ltd., Araigumi Co., Ltd., and 11 other companies

			Four former consolidated subsidiaries, including Aprek Co., Ltd. and Nissin Leasing (China) Co., Ltd., became affiliates accounted for under the equity method, due to a decrease in the Group’s voting rights as a result of a third-party allotment and other reasons. Another company became an affiliate accounted for under the equity method through new capital contribution by the Group, and four other companies became affiliates accounted for under the equity method through new establishment.

			If the balance sheet date of an affiliate accounted for under the equity method is different from that of the consolidated financial statements, the consolidated financial statements are prepared by using such affiliate’s financial statements for the relevant accounting period with the exception of three companies, including CN Two Co., Ltd.

			For three companies, including CN Two, Co., Ltd., the consolidated financial statements as of and for the year ended March 31, 2008 were prepared by using their provisional settlement of accounts on February 29, 2008.

			Nanotex Corporation is a company of which the Group recognizes voting rights of more than 20% to less than 50%. However, it is not recognized as an affiliate, because the Group owns it in order to grow and nurture the company through investment and does not intend to place the company under the control of the Group as an affiliate.

Annual Financial Report

3.		Balance Sheet Dates of Consolidated Subsidiaries

		The balance sheet dates of consolidated subsidiaries which are different from the date of the Group’s consolidated balance sheet date are as follows:

		(April 1, 2006 ~ March 31, 2007)


Balance Sheet Date		Number of companies	Balance Sheet Date		Number of companies

	December 31	23 companies		September 30	1 company
	February 28	4 companies		October 31	1 company
	June 30	2 companies		November 30	1 company

		For the consolidated subsidiaries with fiscal year end of June 30, September 30, October 31 and November 30, the consolidated financial statements are prepared by using their provisional settlement of accounts on December 31, December 31, January 31 and February 28, respectively.

		However, significant transactions that occurred between the dates described above and the consolidated balance sheet date are adjusted.

		(April 1, 2007 ~ March 31, 2008)


Balance Sheet Date		Number of companies	Balance Sheet Date		Number of companies

	December 31	25 companies		September 30	1 company
	February 29	4 companies		October 31	1 company
	May 31	1 company		November 30	1 company

	June 30	2 companies

		For six consolidated subsidiaries listed above with balance sheet dates which are different from the consolidated balance sheet date for more than three months, the consolidated financial statements are prepared by using their provisional settlement of accounts within three months from the consolidated balance sheet date.

		However, significant transactions that occurred between the dates described above and the consolidated balance sheet date are adjusted.

4.		Significant Accounting Policies

(1)

Valuation Standards and Methods for Computation of Assets

	1)		Investment securities

			Trading securities Market value method (Cost of securities sold is computed using the moving average method.)

			Other securities:

			Marketable securities
			Market value is determined by the market price at year-end. (Marketable securities are carried at market value with unrealized gains and losses. The unrealized gains and losses, net of taxes, are reported as a separate component of “NET ASSETS.” Cost of securities sold is computed using the moving average method.)

			Non-marketable securities
			Cost method, cost being determined by the moving average method. In addition, with respect to capital contributions to limited partnerships which operate as investment funds or similar organizations, the Group determines the valuation based on the Group’s interests in their asset value.

	2)		Derivatives

			Market value method

Annual Financial Report

	3)		Inventories

			Real estate for sale in the servicing business (not applicable as of March 31, 2007) and real estate for sale and real estate under construction for sale in the real estate business

			Specific identification method (write-downs due to decreased profitability of assets (not applicable as of March 31, 2007))

			(Changes in accounting policy) (not applicable as of March 31, 2007)

			The Group adopted ASB Statement No. 9 “Accounting Standards for Measurement of Inventories” issued by the ASBJ on July 5, 2006, because the preparations for market value assessment of real estate for sale in the servicing business and real estate for sale and real estate under construction for sale in the real estate business were completed, beginning from the year ended March 31, 2008.

			As a result of this change in accounting policy, compared with the results under the previous treatment, “Operating Expenses” increased by ¥1,762 million, and “Net Operating Revenues” decreased by the same amount, while “Operating Losses,” “Ordinary Losses” and “Losses before Income Taxes and Minority Interest” increased by the same amount, respectively.

			The effect on segment information is described in the corresponding section.

			The Group was using the previous treatment for the six months ended September 30, 2007. Compared with the results under the new treatment, “Operating Income” and “Ordinary Income” increased by ¥986 million, respectively, while “Losses before Income Taxes and Minority Interest” decreased by the same amount for the six months ended September 30, 2007.

(2)

Depreciation and Amortization of Fixed Assets

	1)		Tangible fixed assets

			Tangible fixed assets are amortized using the declining balance method.
			However, depreciation of buildings newly acquired on or after April 1, 1998, excluding building improvements, is computed using the straight-line method.

			Depreciation of assets held for leases is computed using the straight-line method over the lease term with the estimated fair value of the leased property at the end of the lease term as residual value.

			In addition, additional depreciation expense is charged to provide for disposal losses on assets held for leases that could occur due to uncollectible lease payments.

			(Changes in accounting policy) (not applicable for the year ended March 31, 2007)

			Following the amendment of the Japanese Corporation Tax Law, the Company and its domestic consolidated subsidiaries changed the depreciation method for tangible fixed assets acquired on or after April 1, 2007 in accordance with the amended Japanese Corporation Tax Law. The effect on the financial results is not significant.

			The effect on segment information is not significant.

(Additional information) (not applicable for the year ended March 31, 2007)

			Following the amendment of the Japanese Corporation Tax Law, with respect to tangible fixed assets acquired on or before March 31, 2007, the Company and its domestic consolidated subsidiaries now amortize the difference between the amount equivalent to 5% of the acquisition cost and memorandum price using the straight-line method over five years starting from the fiscal year after the residual value reaches 5% of acquisition cost, due to the adoption of the depreciation method prescribed in the amended Japanese Corporation Tax Law, and the amortized amount is included in depreciation expense. The effect on the financial results is not significant.

			The effect on segment information is not significant.

Annual Financial Report

	2)		Intangible fixed assets

			Internal-use software costs are amortized using the straight-line method over five years, which is the estimated useful life.

	3)		Long-term prepaid expenses

			Long-term prepaid expenses are amortized using the straight-line method.

(3)

Allowance and Reserves for Losses, and Accrued Expenses

	1)		Allowance for loan losses

			Allowance for loan losses is maintained at a level that is adequate to provide for the estimated amount of loan losses. It is calculated by applying a percentage derived from past collection experience with respect to general loans, and by individually estimating uncollectible amounts with respect to certain doubtful loans.

	2)		Accrued bonuses for employees

			Accrued bonuses for employees are provided for the payment of employees’ bonuses based on estimated amounts of future payments attributable to the corresponding year.

	3)		Accrued bonuses for directors

			Accrued bonuses for directors are provided for the payment of director’s bonuses based on estimated amounts of future payments attributable to the corresponding year.

			(Changes in accounting policy) (not applicable as of March 31, 2008)

			Regarding directors’ bonuses, the Group heretofore recognized these amounts as a decrease of unappropriated retained earnings through the approval by the Annual Shareholders’ Meeting. However, the Group changed the previous method so that directors’ bonuses would be recognized as expenses as incurred in accordance with ASB Statement No.4 “Accounting Standard for Directors’ Bonuses” issued on November 29, 2005.

			As a result of this change in accounting policy, the amount of “Provision for bonuses for directors” included in “Selling, General and Administrative Expenses” for the year ended March 31, 2007 increased by ¥81 million, compared with the previous method. Consequently, “Operating Income,” “Ordinary Income” and “Income before Income Taxes and Minority Interest” decreased by the same amount for the year ended March 31, 2007, respectively.

			The effect on segment information is described in corresponding section.

	4)		Reserve for guarantee losses

			Reserve for guarantee losses is maintained at a level that is adequate to provide for estimated probable guarantee losses as of the end of the corresponding year.

	5)		Reserve for losses on relocation of offices (not applicable as of March 31, 2007)

			Reserve for losses on relocation of offices is provided at an amount based on a reasonable estimation for losses on disposal of fixed assets, restoration costs, and other related expenses which are expected to be incurred for scheduled office relocations.

	6)		Reserve for losses on excess interest repayments

			Reserve for losses on excess interest repayments is provided, in order to prepare for refund claims from borrowers for repayments of interest in excess of the prescribed rate stipulated by the Interest Rate Restriction Law, at an amount based on a reasonable estimation taking into account past experience and current condition.

			In addition, ¥5,212 million and ¥3,859 million were included in “Allowance for loan losses” as of March 31, 2007 and 2008, respectively, in order to prepare for refund claims from borrowers for repayments of interest in excess of the prescribed rate stipulated by the Interest Rate Restriction Law.

Annual Financial Report

(Additional information) (not applicable as of March 31, 2008)

			For the year ended March 31, 2007, in connection with the announcement of “Audit Treatment of Reserve for Losses on Excess Interest Repayment Claims in Consumer Finance Companies” (the Industry Audit Committee Report No. 37 issued by the Japanese Institute of Certified Public Accountants (“JICPA”) on October 13, 2006), the Group reviewed the previous method for estimation of “Reserve for losses on excess interest repayments” and “Allowance for loan losses” taking into account the recent status of excess interest repayment-related costs. As a result, the Group recorded an adjustment to estimated excess interest repayment-related costs of ¥7,077 million as “Special Losses,” representing the difference between the amount estimated under the previous method and the amount newly estimated as a result of the Group’s review.

			The amount of adjustment to estimated excess interest repayment-related costs consists of ¥3,499 million for “Provision for losses on excess interest repayments” and ¥3,577 million for “Provision for loan losses.”

			In addition, regarding “Reserve for losses on excess interest repayments,” the entire amount is recorded as “Long-term liabilities” since the Group cannot accurately calculate the amount that will be used within one year.

	7)		Accrued retirement benefits for directors

			Accrued retirement benefits of the Group’s directors are provided at an amount which would have been required if all directors had terminated their services as of the balance sheet date. These amounts are determined in accordance with the Group’s internal rules.

	8)		Reserve for losses on group businesses (not applicable as of March 31, 2007)

			Reserve for losses on group businesses is provided at an amount based on a reasonable estimation in order to prepare for losses on guarantees of loans receivable and indemnification for losses on excess interest repayments of affiliated companies.

	9)		Reserve for securities transactions

			According to the supplementary provision No.40 of the Financial Instruments and Exchange Law, the amount of “Reserve for securities transactions” is computed as required by the former “Cabinet Office Ordinance Concerning Securities Companies,” Ordinance No.35, pursuant to the former Japanese Securities and Exchange Law, Regulation 51, in order to provide for losses on securities transactions in a consolidated subsidiary’s business operations.

	(4)		Foreign Currency Translations

			Receivables and payables denominated in foreign currencies are translated into yen at the spot exchange rate in effect as of the balance sheet date, and differences arising from the translation are included in the statements of operations.

			The assets and liabilities of foreign consolidated subsidiaries are translated into yen at the spot exchange rate in effect as of the balance sheet date of each subsidiary. Revenue and expense accounts are translated at the average exchange rate in effect during the fiscal year. Translation adjustments are included in “Valuation and Translation Adjustment” of “NET ASSETS.”

	(5)		Accounting for Lease Transactions

			Finance leases, except leases for which the ownership of the leased assets is considered to be transferred to the lessee, are accounted for in the same manner as operating leases.

Annual Financial Report

(6)

Hedging Activities

	1)		Accounting for hedging activities

			Deferred hedge accounting has been adopted. With respect to interest rate currency swaps for the year ended March 31, 2008, special treatment is adopted if they meet the requirements for such treatment.

	2)		Hedge instruments and hedge items

			Hedge instruments Derivative transactions (interest rate swaps) for the year ended March 31, 2007 and interest rate swaps and interest rate currency swaps for the year ended March 31, 2008.

			Hedge items Cash flow hedge for interest on borrowing with variable rates for the year ended March 31, 2007 and interest on borrowings and foreign currency-denominated bonds for the year ended March 31, 2008.

	3)		Hedging policy

			The Group utilizes derivative financial instruments in order to reduce its exposure to fluctuations in interest rates and exchange rates (for the year ended March 31, 2008) on borrowings.

	4)		Evaluation of hedge effectiveness

			The Group determines the effectiveness of its hedging transactions based on the correlation between indicated rates of the hedge instruments and those of the hedge items. However, evaluation of hedge effectiveness for interest rate currency swap is omitted due to adoption of the special treatment for the year ended March 31, 2008.

(7)

Other Significant Items Relating to the Preparation of Consolidated Financial Statements

	1)		Interest income from notes and loans receivable

			Interest income from notes and loans receivable is recognized on an accrual basis.

			In addition, accrued interest income is recognized at the lower of the contractual interest rate or the restricted rate stipulated by the Interest Rate Restriction Law in Japan.

	2)		Revenue from collections of purchased loans and cost of collections purchased loans

			Revenue from collections of purchased loans is recognized using the collection amount at the time of collection of such loans.

			With respect to the cost of collections of purchased loans, for those purchased loans for which the Group can reasonably estimate the expected timing and amount of cash flows, the principal portion of the collection amount is recognized as cost, and for those purchased loans for which the Group cannot reasonably estimate the expected timing and amount of cash flows, the whole collection amount is first recognized as cost until it is fully recovered.

	3)		Accounting treatment of consumption taxes

			Consumption taxes are excluded from transaction amounts.

			In addition, consumption taxes not subject to the exclusion are treated as expense for the corresponding year.

Annual Financial Report

5.		Evaluation of Assets and Liabilities of Consolidated Subsidiaries

		The fair market value method is used to reflect the acquisitions of consolidated subsidiaries.

6.		Amortization of Goodwill

		There is no goodwill amortized for the year ended March 31, 2007, while goodwill is amortized using the straight-line method over five years for the year ended March 31, 2008.

7.		Cash and Cash Equivalents Stated in Consolidated Statements of Cash Flows

		Cash and cash equivalents in consolidated statements of cash flows include cash on hand, demand deposits in banks and highly liquid short-term investments with negligible risk of fluctuation in value and maturities of three months or less.

Annual Financial Report

CHANGES IN SIGNIFICANT ITEMS RELATING TO THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

(April 1, 2006 ~ March 31, 2007)

(Presentation of Net Assets in the Consolidated Balance Sheet)

Beginning from the year ended March 31, 2007, the Group adopted ASB Statement No. 5 “Accounting Standards for Presentation of Net Assets in the Balance Sheet” and ASB Guidance No. 8 “Guidance on Accounting Standards for Presentation of Net Assets in the Balance Sheet,” both of which were issued on December 9, 2005.

This adoption had no effect on profit and loss for the year ended March 31, 2007.

The total amount of “SHAREHOLDERS’ EQUITY” in the previous presentation method is ¥82,664 million.

Following revisions to the CFS Regulations, the Group prepared its financial statements as of and for the year ended March 31, 2007 based on the revised CFS Regulations.

(Accounting Standard for Share-based Payments)

Beginning from the year ended March 31, 2007, the Group adopted ASB Statement No. 8 “Accounting Standard for Share-based Payments” issued on December 27, 2005 and ASB Guidance No. 11 “Guidance on Accounting Standard for Share-based Payments” issued on May 31, 2006.

As a result of this adoption, the amounts of “Operating Income” and “Ordinary Income” each decreased by ¥120 million, and “Income before Income Taxes and Minority Interest” decreased by ¥114 million for the year ended March 31, 2007, respectively.

The effect on segment information is described in the corresponding section.

(Accounting Treatment for Deferred Assets)

Beginning from the year ended March 31, 2007, the Group adopted PITF No. 19 “Accounting Treatments for Deferred Assets” issued by the ASBJ on August 11, 2006.

As a result of this adoption, the Group presented all direct expenses incurred related to the issuance of stock as “Stock issuance-related costs” in “Other Expenses” for the year ended March 31, 2007, instead of as “Stock issuance costs” in “Other Expenses” for the year ended March 31, 2006.

This adoption had no impact on profit and loss for the year ended March 31, 2007.

(April 1, 2007 ~ March 31, 2008)

(Accounting Treatment for Bond Issuance Costs)

With respect to bond issuance costs, the entire amount had been previously treated as “Other Expenses” as incurred. However, beginning from the year ended March 31, 2008, the Group changed its treatment so that such costs are amortized using the straight-line method over the redemption period, in order to present appropriate periodic profits and losses by taking into consideration an expected increase in the size of future fund procurement through bond issuances and the related increase in the significance of bond issuance costs in connection with the issuance of U.S. dollar-denominated unsecured straight bonds during the year ended March 31, 2008. In addition, the Group recorded the amortized amount as financial costs in “Operating Expenses” in order to ensure consistency with the treatment of interest expense on bonds.

As a result of this change, compared with the results under the previous treatment, “Operating Expenses” increased by ¥73 million, “Net Operating Revenues” decreased by the same amount, and “Operating Losses” increased by the same amount, while “Ordinary Losses” and “Losses before Income Taxes and Minority Interest” decreased by ¥367 million, respectively.

The effect on segment information is described in the corresponding section.

Annual Financial Report

CHANGES IN PRESENTATION

(April 1, 2006 ~ March 31, 2007)

(Consolidated Balance Sheet)

“Real estate for sale in the servicing business” and “Real estate for sale and real estate under construction for sale in the real estate business,” both of which had been included in “Other” in “Current Assets” for the year ended March 31, 2006, were presented separately beginning from the year ended March 31, 2007, as these amounts became significant for financial reporting purposes. The amounts of “Real estate for sale in the servicing business” and “Real estate for sale and real estate under construction for sale in the real estate business” for the year ended March 31, 2006 were ¥6,126 million and ¥9,107 million, respectively.

(Consolidated Statement of Income)

The consolidated statements of income were previously presented in accordance with the revised “Form of Standard Financial Statements of Income in the Consumer Finance Business” issued by the Federation of Moneylenders Association of Japan on May 10, 2001; however, the Group has determined that such presentation no longer properly reflects the Group’s operating results, as the Group has been diversifying its business and the proportion of interest income from consumer loans to total operating revenues has decreased.

As a result, the Group has changed the presentation of its consolidated statements of income to be conformity with the standard format of consolidated statements of income in order to reflect its current business operations.

The presentation based on the previous standard is as follows:


	Year Ended March 31,
	2006					2007
			Percentage of					Percentage of
			Total Operating					Total Operating
	Amount		Revenues			Amount		Revenues

	(In millions except percentages)
Operating Revenues:
Interest income from notes and loans receivable	¥	28,846				¥	31,005
Revenue from collections of purchased loans		11,921					18,856
Other financial income		13					761
Other operating income		20,209					37,528

Total operating revenues		60,991		100.0	%		88,152		100.0	%
Operating Expenses:							��
Financial costs		2,424					3,534
Cost of collections of purchased loans		6,962					12,867
Other operating expenses (Note 1)		38,820					61,315

Total operating expenses		48,207		79.0			77,717		88.2

Operating Income		12,784		21.0			10,435		11.8

Annual Financial Report

Note to consolidated statements of income:


Year Ended March 31,
2006			2007

(In millions)
Other operating expenses:				Other operating expenses:
Costs of leases and installment loans	¥	3,722		Costs of leases and installment loans	¥ 4,909
Cost of real estate sold in the servicing business		2,953		Cost of real estate sold in the servicing business	8,521
Cost of real estate sold in the real estate business		2,504		Cost of real estate sold in the real estate business	5,468
Other costs		689		Other costs	1,520
Advertising expenses		628		Advertising expenses	257
Loan losses		252		Loan losses	377
Excess interest repayments		387		Provision for loan losses	15,349
Provision for loan losses		9,717		Provision for guarantee losses	1,045
Provision for guarantee losses		629		Provision for losses on excess interest repayments	2,636
Provision for losses on excess interest repayments		590		Salaries for directors	549
Depreciation and amortization		586		Depreciation and amortization	670
Salaries for directors		391		Salaries for employees	6,776
Salaries for employees		5,774		Stock compensation costs	120
Bonuses for employees		476		Bonuses for employees	559
Provision for bonuses for employees		712		Provision for bonuses for employees	684
Taxes and duties		624		Provision for bonuses for directors	81
Lease and rental expenses		1,948		Taxes and duties	922
Commission fees		1,044		Lease and rental expenses	2,162
				Commission fees	1,798

(Consolidated Statement of Cash Flows)

With respect to cash flows from operating activities, “Increase in real estate for sale in the servicing business, net” and “Increase in real estate for sale and real estate under construction for sale in the real estate business, net,” both of which had been included in “Other” for the year ended March 31, 2006, were presented separately beginning from the year ended March 31, 2007, as these amounts became significant for financial reporting purposes. The amounts of “Increase in real estate for sale in the servicing business, net” and “Increase in real estate for sale and real estate under construction for sale in the real estate business, net” for the year ended March 31, 2006 were ¥5,093 million and ¥8,638 million, respectively.

(April 1, 2007 ~ March 31, 2008)

(Consolidated Balance Sheet)

“Deferred tax assets” and “Deferred tax liabilities,” both of which had been presented as separate items in “Investment and other assets” and “Long-term Liabilities,” respectively, for the year ended March 31, 2007, were included in “Other” in “Investment and other assets” and “Long-term Liabilities,” respectively, beginning from the year ended March 31, 2008, as the amounts became insignificant for financial reporting purposes. The amounts of “Deferred tax assets” and “Deferred tax liabilities” for the year ended March 31, 2008 were ¥49 million and ¥0 million, respectively.

(Consolidated Statement of Operations)

“Loan borrowing costs,” which had been included in “Other” in “Other Expenses” for the year ended March 31, 2007, was presented as a separate item beginning from the year ended March 31, 2008, as the amount became more than 10% of the total of “Other Expenses.” The amount of “Loan borrowing costs” for the year ended March 31, 2007 was ¥23 million.

Annual Financial Report

(Consolidated Statement of Cash Flows)

	1.		With respect to cash flows from operating activities, “Decrease in beneficial interest in trusts” and “Purchases of operational investment securities” which had been included in “Other” for the year ended March 31, 2007, were presented as a separate item beginning from the year ended March 31, 2008, as the amount became significant for financial reporting purposes. The amount of “Increase in beneficial interest in trusts” and “Purchases of operational investment securities” for the year ended March 31, 2007 were ¥14,830 million and ¥1,000 million, respectively.

	2.		With respect to cash flows from investing activities, “Proceeds from changes in capital contributions,” which had been presented as a separate item for the year ended March 31, 2007, was included in “Other” beginning from the year ended March 31, 2008, as the amount became insignificant for financial reporting purposes. The amount of “Payments for changes in capital contributions” for the year ended March 31, 2008 was ¥1 million.

Annual Financial Report

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets

Note 1.

Assets pledged as collateral for short and long-term borrowings as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007		2008

	(In millions)
Cash and deposits	¥	360	¥	-
Notes and loans receivable		50,716		40,408
Purchased loans receivable		-		8,229
Real estate for sale in the servicing business		8,778		15,213
Real estate for sale and real estate under construction for sale in the real estate business		2,913		12,750
Buildings and Structures		-		376
Land		-		1,247
Investment securities		-		2,619

Total	¥	62,769	¥	80,843

Corresponding borrowings secured by the above collateral as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007		2008

	(In millions)
Short-term borrowings	¥	31,691	¥	11,024
Current portion of long-term borrowings		7,815		32,868
Long-term borrowings		11,724		9,470

Total	¥	51,231	¥	53,363

Other than the above, notes and loans receivable that will be transferred pursuant to forward contracts, and the corresponding current portion of long-term borrowings as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007		2008

	(In millions)
Notes and loans receivable	¥	7,060		¥-
Current portion of long-term borrowings		7,020		-

In addition, the Group entrusted certain loans outstanding to a trust bank. In order to raise funds, the Group sold its senior beneficiary interest in these loans outstanding in trust to a third party. These transactions constitute a legal sale under Japanese law. However, since the Group reserves an option to repurchase the senior beneficiary interest, the Group does not recognize the extinguishment of the aforementioned interest in the consolidated financial statements herein, and the corresponding funds are recognized as long-term liability. There is no control over the interest by the Group except through the above option. Entrusted loans outstanding included in “Notes and loans receivable” and the related long-term liability recorded as “Asset-backed securities” as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007		2008

	(In millions)
Notes and loans receivable	¥	36,778	¥	23,709
Asset-backed securities		26,957		10,185

Note 2.

Unsecured consumer loans included in loans receivable as of March 31, 2007 and 2008 were ¥2,211 million and ¥1,227 million, respectively.

Annual Financial Report

Note 3.

Investments in affiliated companies as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007		2008

	(In millions)
Investment securities	¥	3,810	¥	18,578
Investment and other assets (capital contributions)		2		-


Note:	Investment securities as of March 31, 2007 presented above include only equity securities.

Note 4.

Commitments and contingencies as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007		2008

	(In millions)
Guarantees for receivables in the credit guarantee business	¥	17,398	¥	13,095
Guarantees for loans receivable held by affiliated companies		-		3,302
Guarantees for borrowings of affiliated companies		-		3,170

In addition to above, the Group has to indemnify Aprek Co., Ltd. until February 28, 2013, for losses that Aprek incurs due to claims for excess interest repayments raised by customers to whom Aprek lent money on or before March 3, 2008. Although it is difficult to estimate the amount of this liability, the Group estimates the amount of such losses as being ¥1,266 million, which has been included in “Reserve for losses on group businesses” as of March 31, 2008.

	Note 5.	Rediscounted notes as of March 31, 2007 and 2008 were ¥121 million and ¥49 million, respectively.

	Note 6.	As required by the Non-bank Bond Issuing Law, bankrupt and delinquent loans receivable as of March 31, 2007 and 2008 are classified as follows:


	March 31,
	2007		2008

	(In millions)
Bankrupt loans receivable	¥	2,270	¥	1,819
Delinquent loans receivable		6,225		14,870
Delinquent loans receivable (three months or more)		-		-
Restructured loans receivable		18,785		17,267

Total	¥	27,282	¥	33,956


Notes:	1. “Bankrupt loans receivable,” for which unreceived interest is not accrued, are loans delinquent for a considerable period of time and for which the principal or interest on such loans is unlikely to be recovered due to the occurrence of events defined in the Japanese Corporation Tax Law (Government Ordinance No. 97, 1965), Regulation 96-1(3) and Regulation 96-1(4).
	2. “Delinquent loans receivable” are loans receivable for which unreceived interest is not accrued due to customers’ delinquency, excluding loans receivable mentioned in “Bankrupt loans receivable” and “Restructured loans receivable.”
	3. “Delinquent loans receivable (three months or more)” are loans receivable for which the payments of principal and interest have been delayed for three months or more, excluding loans receivable mentioned in “Bankrupt loans receivable” and “Delinquent loans receivable.”
	4. “Restructured loans receivable” are loans receivable for which the Group reached agreement with the debtors on favorable treatment for the debtors such as reduction and exemption of interest, grace of principal and interest payments, relinquishment of loans receivable, among others, in order to reorganize the borrowers and support their financial conditions, excluding loans receivable mentioned in “Bankrupt loans receivable,” “Delinquent loans receivable” and “Delinquent loans receivable (three months or more).”

Annual Financial Report

Note 7. (1)

In order to raise funds efficiently, the Group entered into syndicated loan agreements, overdraft agreements, and loan commitment agreements with several banks. The unused balance of these prescribed limit agreements as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007			2008

	(In millions)
Total overdraft facilities, loan commitment limits and syndicated loan credit lines	¥	16,200		¥	5,200
Outstanding borrowings within the limits		(15,150	)		(5,200	)

Unused balance	¥	1,050		¥	-

(2)

In providing its core business, integrated financial services, the Group contracts credit line agreements with certain customers, and these customers are able to borrow as needed within set credit lines. The unfunded credit lines as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007			2008

	(In millions)
Total amount of credit line agreements	¥	82,774		¥	19,499
Loans outstanding under credit line agreements		(29,265	)		(18,710	)

Total unfunded credit lines	¥	53,508		¥	788
Of which unfunded credit lines without loans outstanding		46,110			698

Certain portions of these agreements lapse without ever being used. Therefore, the amount of unfunded credit lines will not necessarily affect future cash flows of the Group.

Under these agreements, the Group also may discontinue or reduce the credit lines of customers based on the deterioration of their credit status and other substantial reasons. In addition, the Group examines the agreements regularly in order to take measures for credit preservation.

	Note 8.	Notes maturing on March 31, 2007 were settled on the business day for financial institutions.

		Since it was a non-business day for financial institutions on March 31, 2007, “Notes receivable” and “Rediscounted notes” as of March 31, 2007 include notes with the settlement date falling on March 31, 2007 in the amount of ¥12 million, respectively.

	Note 9.	As of March 31, 2007, “Investment Securities” included securities in the amount of ¥2,123 million loaned under a share lending agreement, and “Other” in “Current Liabilities” included the amount of ¥1,640 million received as collateral, respectively.

	Note 10.	Total principal balance of loans receivable transferred under loan participation agreements, which were accounted for as sales in accordance with Accounting Committee Report No. 3, issued by the JICPA on June 1, 1995, was ¥3,000 million as of March 31, 2007.

100

Annual Financial Report

Consolidated Statements of Operations

Note 1.	The amount of the write-down of “Real estate for sale in the servicing business” and “Real estate for sale and real estate under construction for sale in the real estate business” due to decreased profitability of assets, which was included in “Operating Expenses,” was ¥1,762 million for the year ended March 31, 2008.

Note 2.	Significant components of “Selling, General and Administrative Expenses” for the year ended March 31, 2007 and 2008 are as follows:


Year Ended March 31,
2007				2008
(In millions)
	Selling, General and Administrative Expenses:				Selling, General and Administrative Expenses:
	Advertising expenses	¥	257		Advertising expenses	¥	101
	Loan losses		377		Loan losses		163
	Provision for loan losses		15,349		Provision for loan losses		22,968
	Provision for guarantee losses		1,045		Provision for guarantee losses		705
	Provision for losses on excess interest repayments		2,636		Provision for losses on excess interest repayments		9,811
	Depreciation and amortization		670		Depreciation and amortization		762
	Salaries for directors		549		Salaries for directors		633
	Salaries for employees		6,656		Salaries for employees		6,233
	Stock compensation costs		120		Bonuses for employees		520
	Bonuses for employees		559		Provision for bonuses for employees		585
	Provision for bonuses for employees		684		Provision for bonuses for directors		15
	Provision for bonuses for directors		81		Taxes and duties		894
	Taxes and duties		922		Lease and rental expenses		2,051
	Lease and rental expenses		2,162		Commission fees		2,191
	Commission fees		1,798

Note 3.

Details of losses on sales of fixed assets for the year ended March 31, 2008 are as follows:


	Year Ended March 31,
	2008
	(In millions)
Losses on sales of fixed assets:
Buildings and structures	¥	194
Equipment		3
Land		71

Total	¥	269

Note 4.

Details of losses on disposal of fixed assets for the years ended March 31, 2007 and 2008 are as follows:


	Year Ended March 31,
	2007		2008

	(In millions)
Losses on disposal of fixed assets:
Buildings and structures	¥	49	¥	34
Equipment		3		6
Intangible fixed assets		1		1

Total	¥	54	¥	42

101

Annual Financial Report

Note 5.	Details of losses on impairment of fixed assets are as follows:

	(April 1, 2006 ~ March 31, 2007)



Location	Aprek Co., Ltd.
Use of fixed assets	Operational assets
Type of fixed assets and amount (in millions):	Buildings and structures	¥	0
	Equipment		6
	Land		108
	Software		8
	Telephone rights		8
	Leased assets		11

The Group classifies its operational assets into the business units used in management accounting.

Due to continuous operating losses from the abovementioned consolidated subsidiary, the Group reduced the book value of operational assets corresponding to this business unit to the estimated recoverable amount. As a result, impairment losses, which were included in “Special Losses,” amounted to ¥143 million for the year ended March 31, 2007.

The recoverable amount of these assets was measured at net realizable value, using appraised value for real estate, market value for telephone rights, and zero value for other fixed assets.

(April 1, 2007 ~ March 31, 2008)

Location

Matsuyama Branch Office

Tokyo Head Office

Kyushu Sales Department

Use of fixed assets

Sales facilities

Idle assets

Assets scheduled to be sold

Type of fixed assets and amount (in millions):

Buildings and structures

Telephone
rights

Artworks
(Equipment)

105

Equipment

Location

Bird’s Eye Technological

Aprek Co., Ltd.

NIS Property Co., Ltd.

Investment Corporation

Use of fixed assets

Sales facilities

Parking business

Type of fixed assets and amount (in millions):

Buildings and

structures

Equipment

Land

The Group classifies its operational assets into the business units used in management accounting. Idle assets and assets scheduled to be sold are classified into units on an individual basis.

Due to continuous operating losses from sales facilities, idle state of telephone rights with no plan for future use, decision on sales of artworks, and decision on withdrawal from the parking business, the Group reduced the book value of abovementioned assets to the estimated recoverable amount. As a result, impairment losses, which were included in “Special Losses,” amounted to ¥252 million for the year ended March 31, 2008.

The recoverable amount of sales facilities was measured at use value, which was equivalent to zero value, and the recoverable amount of artworks and telephone rights were measured at net realizable value, using the price estimated by third parties.

In addition, the recoverable amount of assets for the parking business was measured at net realizable value, using the price bid for such assets by a third party.

Note 6.

Provision for losses on group businesses is provided in order to prepare for losses on guarantees of loans receivable and indemnification for losses on excess interest repayments of an affiliated company, which was offset by ¥3,271 million of reversal of allowance for loan losses and reserve for losses on excess interest repayments in the affiliated company for the year ended March 31, 2008.

102

Annual Financial Report

Consolidated Statements of Changes in Net Assets

(April 1, 2006 ~ March 31, 2007)

Note 1.

Changes in the number of outstanding shares for the year ended March 31, 2007 are as follows:


	Year Ended March 31, 2007

	(Thousand shares except type)
Type of share	Common stock
As of the end of the previous fiscal year		1,406,470
Increase		1,511,416
Decrease		-
As of the end of the fiscal year		2,917,887

The following table shows primary reasons for the above changes:


	Year Ended March 31, 2007

	(Thousand shares)
Increase due to:
2-for-1 stock split completed on April 1, 2006		1,406,470
Conversion of convertible bonds		18,924
Issuance of new shares for third-party allotment		86,021

Note 2.

Changes in the number of shares of treasury stock for the year ended March 31, 2007 are as follows:


	Year Ended March 31, 2007

	(Thousand shares except type)
Type of share	Common stock
As of the end of the previous fiscal year		40,051
Increase		40,055
Decrease		11,757
As of the end of the fiscal year		68,348

The following table shows primary reasons for the above changes:


	Year Ended March 31, 2007

	(Thousand shares)
Increase due to:
2-for-1 stock split completed on April 1, 2006		40,051
Purchase of fractional shares		4
Decrease due to:
Exercise of stock acquisition rights		11,757

Note 3.

The changes in issuance of stock acquisition rights for the year ended March 31, 2007 are as follows:


					Number of Shares Attributable to Stock Acquisition Rights
			Type of		As of						As of		Outstanding as of
Company Name	Description		Share		March 31, 2006		Increase		Decrease		March 31, 2007		March 31, 2007

							(Thousand shares)						(In millions)
NIS Group Co., Ltd.		-		-		-		-		-		-	¥	-
Consolidated subsidiaries		-		-		-		-		-		-		114

Total						-		-		-		-	¥	114

103

Annual Financial Report

Note 4.

Dividends

Dividends paid during the year ended March 31, 2007 are as follows:


	Year Ended March 31, 2007

Date of approval	Annual Shareholders’ Meeting on June 24, 2006	Board of Directors’ meeting on November 6, 2006
Type of share:	Common stock	Common stock
Total amount of dividends (in millions)	¥1,503	¥455
Dividend per share (in yen)	¥1.10	¥0.16
Dividend record date	March 31, 2006	September 30, 2006
Date of payment	From June 27, 2006	From December 11, 2006


Note:	On April 1, 2006, the Company completed a 2-for-1 stock split.

(April 1, 2007 ~ March 31, 2008)

Note 1.

Changes in the number of outstanding shares for the year ended March 31, 2008 are as follows:


	Year Ended March 31, 2008

	(Thousand shares except type)
Type of share	Common stock
As of the end of the previous fiscal year		2,917,887
Increase		100,000
Decrease		2,771,992
As of the end of the fiscal year		245,894

The following table shows primary reasons for the above changes:


	Year Ended March 31, 2008

	(Thousand shares)
Increase due to:
Third-party allotment		100,000
Decrease due to:
1-for-20 reverse stock split completed on August 31, 2007		2,771,992

Note 2.

Changes in the number of shares of treasury stock for the year ended March 31, 2008 are as follows:


	Year Ended March 31, 2008

	(Thousand shares except type)
Type of share	Common stock
As of the end of the previous fiscal year		68,348
Increase		60,023
Decrease		122,096
As of the end of the fiscal year		6,276

The following table shows primary reasons for the above changes:


	Year Ended March 31, 2008

	(Thousand shares)
Increase due to:
Purchase of treasury stock upon approval by the Board of Directors		60,000
Purchase of fractional shares		23
Decrease due to:
Exercise of stock acquisition rights		3,270
1-for-20 reverse stock split completed on August 31, 2007		118,825

104

Annual Financial Report

Note 3.

Changes in issuance of stock acquisition rights for the year ended March 31, 2007 are as follows:


					Number of Shares Attributable to Stock Acquisition Rights
			Type of		As of						As of		Outstanding as of
Company Name	Description		Share		March 31, 2007		Increase		Decrease		March 31, 2008		March 31, 2008

							(Thousand shares)						(In millions)
NIS Group Co., Ltd.		10th		Common Stock		-		8,750,000		-		8,750,000		-
		Equity Warrant
Consolidated subsidiaries		-		-		-		-		-		-		¥102

Total						-		8,750,000		-		8,750,000		¥102


Notes:		1. “Number of Shares Attributable to Stock Acquisition Rights” presented above is the number of exercisable shares of stock acquisition rights.
		2. Primary reason of changes in the “Number of Shares Attributable to Stock Acquisition Rights” “NIS Group Co., Ltd. 10th Equity Warrant” increased due to its issuance.

Note 4.	Dividends

	None

Consolidated Statements of Cash Flows

Note 1.

Cash and cash equivalents as of March 31, 2007 and 2008 are reconciled to the accounts reported in the consolidated balance sheets as follows:


	March 31,
	2007			2008

	(In millions)
Cash and deposits	¥	28,321		¥	11,652
Time deposits with maturities of over three months		(335	)		-
Restricted cash in banks pledged as collateral		(360	)		-

Cash and cash equivalents	¥	27,625		¥	11,652

Note 2.

Details of assets and liabilities of Aprek Co., Ltd. and Nissin Leasing (China) Co., Ltd. and two other companies as of the date of exclusion from the scope of consolidation due to a decrease in the Group’s voting rights as a result of a third-party allotment and other reasons are as follows:


	March 31, 2008

	(In millions)
Aprek Co., Ltd.:
Current Assets	¥	7,545
Fixed Assets		2,774

Total Assets		10,319

Current Liabilities		6,846
Fixed Liabilities		2,932

Total Liabilities	¥	9,779


	March 31, 2008

	(In millions)
Nissin Leasing (China) Co., Ltd. and two other companies:
Current Assets	¥	23,837
Fixed Assets		198

Total Assets		24,035

Current Liabilities		11,827
Fixed Liabilities		-

Total Liabilities	¥	11,827

Note 3.

Significant non-cash transactions for the years ended March 31, 2007 is as follows:


	Year Ended March 31,
	2007

	(In millions)
Conversion of convertible bonds:
Increase in common stock	¥	397
Increase in additional paid-in capital		376

Decrease in convertible bonds due to conversion	¥	773

105

Annual Financial Report

Lease

Finance leases, except leases for which the ownership of the leased assets is transferred to the lessee, are as follows:

(Lessee)

Equivalents of acquisition costs, accumulated amortization, accumulated losses on impairment and book value as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007			2008

	(In millions)
Equipment:
Acquisition costs equivalent	¥	2,288		¥	1,349
Accumulated amortization equivalent		(1,702	)		(1,031	)
Accumulated losses-on-impairment equivalent		(4	)		-

Book value equivalent		581			318
Software:
Acquisition costs equivalent		521			428
Accumulated amortization equivalent		(333	)		(250	)

Book value equivalent		187			178
Other:
Acquisition costs equivalent		4			-
Accumulated amortization equivalent		(4	)		-

Book value equivalent		0			-

Total:
Acquisition costs equivalent		2,814			1,778
Accumulated amortization equivalent		(2,040	)		(1,281	)
Accumulated losses-on-impairment equivalent		(4	)		-

Book value equivalent	¥	769		¥	496

The amounts of outstanding future minimum lease payments and reserve for losses on impairment of leased assets as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007		2008

	(In millions)
Due within one year	¥	427	¥	259
Due after one year		363		248

Total	¥	791	¥	507


	March 31,
	2007		2008

	(In millions)
Reserve for losses on impairment of leased assets	¥	4	¥	-

Lease payments, decrease in reserve for losses on impairment of leased assets, amortization expense equivalent, interest expense equivalent, and losses on impairment of leased assets for the years ended March 31, 2007 and 2008 are as follows:


	Year Ended March 31,
	2007		2008

	(In millions)
Lease payments	¥	628	¥	468
Decrease in reserve for losses on impairment of leased assets		-		1
Amortization expense equivalent		602		446
Interest expense equivalent		19		14
Losses on impairment of leased assets		4		-

The method used to calculate amortization expense equivalent and interest expense equivalent of leased property is as follows:

	•		Amortization expense equivalent is calculated by using the straight-line method over the respective lease terms with no residual value.

	•		Interest expense equivalent of a lease obligation is calculated as the difference between the total lease payments and the acquisition cost equivalent of the leased property, with the amount allocated to each relevant accounting period using the interest method.

106

Annual Financial Report

(Lessor)

Acquisition costs, accumulated depreciation and amortization, accumulated losses on impairment and book value of leased assets included in “Assets held for leases” as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007			2008

	(In millions)
Machinery:
Acquisition costs	¥	462		¥	461
Accumulated depreciation		(170	)		(218	)

Book value		292			243
Equipment:
Acquisition costs		3,977			3,921
Accumulated depreciation		(1,291	)		(1,808	)

Book value		2,685			2,113
Software:
Acquisition costs		688			740
Accumulated amortization		(211	)		(306	)

Book value		477			433
Other:
Acquisition costs		62			62
Accumulated amortization		(20	)		(32	)

Book value		41			29

Total:
Acquisition costs		5,191			5,185
Accumulated depreciation and amortization		(1,694	)		(2,365	)

Book value	¥	3,497		¥	2,819

The amounts of outstanding future lease payments to be received as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007		2008

	(In millions)
Due within one year	¥	1,049	¥	1,107
Due after one year		2,706		1,965

Total	¥	3,755	¥	3,072

Lease revenue, depreciation and amortization expense, interest income equivalent for the years ended March 31, 2007 and 2008 are as follows:


	Year Ended March 31,
	2007		2008

	(In millions)
Lease revenue	¥	1,320	¥	1,521
Depreciation and amortization expense		951		1,104
Interest income equivalent		482		473

The method used to calculate interest income equivalent of leased assets is as follows:

Interest income equivalent of leased assets is calculated as the amount of total lease payments plus estimated residual value less acquisition costs of the leased assets, with the amount allocated to each relevant accounting period using the interest method.

(Impairment of Fixed Assets)

There is no impairment loss allocated to leased assets.

107

Annual Financial Report

Investment Securities

Trading securities as of and for the years ended March 31, 2007 and 2008 are as follows:


	March 31,
	2007			2008

	(In millions)
Trading securities:
Carrying value	¥	182		¥	57
Losses on valuation, net		(50	)		(120	)

Marketable securities included in other securities as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007							2008
	Cost		Carrying Value		Difference			Cost		Carrying Value		Difference

	(In millions)
Other securities:
Carrying value exceeding cost:
Equity securities	¥	10,283	¥	12,505	¥	2,221		¥	48	¥	149	¥	100
Other		-		-		-			1,016		1,138		121

Sub-total		10,283		12,505		2,221			1,065		1,287		222

Carrying value not exceeding cost:
Equity securities		6,147		4,433		(1,714	)		2,755		2,707		(48	)
Other		4		4		(0	)		-		-		-

Sub-total		6,152		4,437		(1,714	)		2,755		2,707		(48	)

Total	¥	16,435	¥	16,942	¥	507		¥	3,821	¥	3,995	¥	174

Other securities sold during the years ended March 31, 2007 and 2008 are as follows:


	March 31,
	2007						2008
	Sales Proceeds		Gains on Sales		Losses on Sales		Sales Proceeds		Gains on Sales		Losses on Sales

	(In millions)
Other securities	¥	1,713	¥	1,246	¥	105	¥	8,060	¥	217	¥	2,757

Non-marketable securities included in other securities as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007		2008
	Carrying Value		Carrying Value

	(In millions)
Other securities:
Non-listed equity securities	¥	6,563	¥	4,479
Bonds		1,133		2,204
Contributions to investment funds		8,574		4,310
Other		83		83

Total	¥	16,355	¥	11,077

108

Annual Financial Report

Investment securities impaired during the years ended March 31, 2007 and 2008 are as follows:


	Year Ended March 31,
	2007		2008
	Impairment Amount		Impairment Amount

	(In millions)
Other securities	¥	1,128	¥	9,252

Note:

For marketable securities, impairment losses were recognized if the fair market value declined by 50% or more compared with their acquisition costs. In addition, if the fair market value declined by 30% or more but less than 50% compared with their acquisition costs, impairment losses were recognized for certain securities which were expected to be non-recoverable taking into consideration the average fair value for the past one year. For non-marketable securities, if the net assets per share declined by 50% or more compared with acquisition costs per share, impairment losses were recognized following a test for recoverability based on the Group’s rational internal rules.

The redemption schedule of other securities with maturity is as follows:

(April 1, 2006 ~ March 31, 2007)


	Year Ending March 31,
	2008		2009 ~ 2012		2013 ~ 2017		2018 and thereafter

	(In millions)
Bonds (other securities):
Bonds	¥	0	¥	1,034		¥-		¥-
Commercial paper		99		-		-		-

Total	¥	99	¥	1,034		¥-		¥-

(April 1, 2007~ March 31, 2008)


	Year Ending March 31,
	2009		2010 ~ 2013		2014 ~ 2018		2019 and thereafter

	(In millions)
Bonds (other securities):
Bonds	¥	700	¥	1,504		¥-		¥-

Total	¥	700	¥	1,504		¥-		¥-

109

Annual Financial Report

Derivative Transactions

Details of derivatives

	(1)		Details of transactions
			In order to effectively manage and reduce its exposure to fluctuations in interest rates and exchange rates while conducting regular operations, the Group utilizes derivative instruments such as interest rate swap contracts, interest rate currency swap contracts, and currency swap contracts.

	(2)		Derivative transactions policies
			The Group does not enter into derivative contracts for trading or speculative purposes.

	(3)		The purpose of derivative transactions
			In order to avoid adverse influences in the Group’s funding costs (interest payments) caused by fluctuations in market interest rates, the Group utilizes interest rate swap contracts to set up a fixed interest on variable rate borrowings.
			In addition, in order to avoid adverse influences in the Group’s funding cost in yen caused by fluctuation in market exchange rates, the Group utilizes interest rate currency swap contracts and currency swap contracts to set up a fixed exchange rate on funds procured in foreign currency.

	(4)		Details of risks on derivative transactions

	1)		Market risks
			Market risks are risks caused by changes in the market condition that expose a transaction’s position to gains and losses, and interest rate derivative transactions are exposed to interest rate risks.
			However, these risks are inconsequential as the Group only utilizes derivative transactions in the range of its debts and credits.

	2)		Credit risks
			Credit risks are risks caused by non-performing counterparties that jeopardize the Group’s future benefits from the transactions, had they been closed.
			The Group’s counterparties to these transactions are limited to major financial institutions such as banks or securities firms with favorable credit ratings. Therefore, the management of the Group does not anticipate realization of any credit risk from its derivative transactions. In addition, there is no credit risk concentration as the Group diversifies its counter-parties.

	(5)		Risk management of derivative transactions
			Derivative transactions are executed and managed by the Group’s principal department in accordance with the Group’s internal rules approved by the Board of Directors.
			In addition, the Group’s internal rules on derivative transactions consist of criteria and policies with respect to derivative transactions to be implemented, appropriate risk management stipulated by its Regulation of Derivative Operations, and management and supervision of derivative transactions stipulated by its Regulation of Derivative Transactions.
			Furthermore, the principal departments of the Company and its consolidated subsidiaries report monthly at Board of Directors meetings about the positions of the transactions for the purpose of risk management, so that in the case of any large scale fluctuation in a market that could cause the Group to suffer significant losses, a management system to execute prompt action is readily available.
			Significant transactions made by consolidated subsidiaries are given notice in advance to the Company’s management.

Market value of derivative transactions

Contract amount, market value and unrealized gains and losses of derivative transactions


	Year ended March 31, 2007								Year Ended March 31, 2008
	Contract		Due after				Unrealized		Contract		Due after					Unrealized
	amount		one year		Market value		losses		amount		one year		Market value			losses

	(In millions)
Currency swaps:
Received in U.S. Dollars / Paid in Japanese Yen	¥	-	¥	-	¥	-	¥	-	¥	2,512	¥	-	¥	(74	)	¥	(74	)

Total	¥	-	¥	-	¥	-	¥	-	¥	2,512	¥	-	¥	(74	)	¥	(74	)


Notes:	1. Calculation method of the market value
	Market value was calculated based on the amount presented by financial institutions with which the Group entered into the abovementioned currency swap contracts.
	2. Derivative transactions which were accounted for by hedge accounting were excluded.

110

Annual Financial Report

Retirement Benefits

(April 1, 2006 ~ March 31, 2007)

Overview of retirement benefit plans

Although a defined benefit plan had been adopted in certain consolidated subsidiaries, the Group terminated its retirement benefit plan at the end of May 2006 and executed lump-sum distribution of retirement benefits on termination of plans in June 2006.

The component of funded status of the defined benefit plan as of March 31, 2007 is as follows:


	March 31,
	2007

	(In millions)
Retirement benefits obligation	¥	-

The components of retirement benefit expenses for the year ended March 31, 2007 are as follows:


	Year Ended March 31,
	2007

	(In millions)
Service cost	¥	4
Interest cost		0
Amortization of unrecognized actuarial difference		0

Retirement benefit expenses	¥	5

Assumptions used in accounting for the retirement benefit obligation for the year ended March 31, 2007 are as follows:



	Discount rate:		2.0%
	Attribution of retirement benefit obligation:		The straight-line method over the estimated years of service of the eligible employees
	Amortization period of actuarial difference:		10 years

(April 1, 2007 ~ March 31, 2008)

The Group does not adopt any retirement benefit plans.

However, the Company and certain consolidated subsidiaries paid ¥1,917 million of special retirement bonuses to employees applied for the voluntary retirement program as a part of the management reform program, and included this amount in “Expenses for management reform program” in “Special Losses” for the year ended March 31, 2008.

111

Annual Financial Report

Issuance of Stock Acquisition Rights

(April 1, 2006 ~ March 31, 2007)

Amount and items of accounts related to stock acquisition rights for the year ended March 31, 2007 are as follows:


	Year Ended March 31,
	2007

	(In millions)
Stock compensation costs (“Selling, General and Administrative Expenses”)	¥	120
Reversal of stock acquisition rights (“Special Gains”)		5

Details, size, and changes in stock acquisition rights for the year ended March 31, 2007 are as follows:

(1)

Details of stock acquisition rights



Company		NIS Group Co., Ltd.
Date of approval		June 22, 2004
Number of grantees		10 directors, 4 statutory auditors, 1,027 employees and 4 corporate advisors of the Company;
		14 directors, 3 statutory auditors and 86 employees of affiliated companies; and
		1 director of business counterparty
Date of issuance		July 15, 2004
Type of shares		Common stock
Number of shares issuable upon exercise of stock acquisition rights		63,936,000 shares (Note 1)
Vesting condition		Grantee must be a director, statutory auditor, corporate advisor, person with a short-term contract or employee, etc. of the Group, or a director, statutory auditor or employee of business counterparty of the Company approved by the Board of Directors, at the time of the vesting of such stock acquisition rights.
Service period		From July 15, 2004 to July 31, 2004
Exercise period		From August 1, 2004 to July 31, 2007



Company		NIS Group Co., Ltd.
Date of approval		June 22, 2004
Number of grantees		9 employees of the Company
Date of issuance		January 20, 2005
Type of shares		Common stock
Number of shares issuable upon exercise of stock acquisition rights		768,000 shares (Note 1)
Vesting condition		Grantee must be a director, statutory auditor, corporate advisor, person with a short-term contract or employee, etc. of the Group, or a director, statutory auditor or employee of business counterparty of the Company approved by the Board of Directors, at the time of the vesting of such stock acquisition rights.
Service period		From January 20, 2005 to January 31, 2005
Exercise period		From February 1, 2005 to January 31, 2008



Company		NIS Group Co., Ltd.
Date of approval		June 22, 2004
Number of grantees		83 employees and 1 corporate advisor of the Company; and 4 directors and 32 employees of affiliated companies
Date of issuance		April 21, 2005
Type of shares		Common stock
Number of shares issuable upon exercise of stock acquisition rights		7,142,400 shares (Note 1)
Vesting condition		Grantee must be a director, statutory auditor, corporate advisor, person with a short-term contract or employee, etc. of the Group, or a director, statutory auditor or employee of business counterparty of the Company approved by the Board of Directors, at the time of the vesting of such stock acquisition rights.
Service period		From April 21, 2005 to April 30, 2005
Exercise period		From May 1, 2005 to April 30, 2008

112

Annual Financial Report



Company		NIS Group Co., Ltd.
Date of approval		June 22, 2005
Number of grantees		9 directors, 4 statutory auditors, 154 employees and 8 corporate advisors of the Company;
		19 directors, 5 statutory auditors, 42 employees and 9 corporate advisors of affiliated companies; and
		1 director of business counterparty
Date of issuance		July 15, 2005
Type of shares		Common stock
Number of shares issuable upon exercise of stock acquisition rights		14,400,000 shares (Note 1)
Vesting condition		Grantee must be a director, statutory auditor, corporate advisor, person with a short-term contract or employee of the Group, or a director, statutory auditor or employee of business counterparty of the Company approved by the Board of Directors at the time of the vesting of such stock acquisition rights.
Service period		From July 15, 2005 to July 31, 2005
Exercise period		From August 1, 2005 to July 31, 2008



Company		NIS Group Co., Ltd.
Date of approval		June 22, 2005
Number of grantees		8 employees and 2 corporate advisors of the Company; and
		1 director, 12 employees and 5 corporate advisors of affiliated companies
Date of issuance		March 23, 2006
Type of shares		Common stock
Number of shares issuable upon exercise of stock acquisition rights		1,920,000 shares (Note 1)
Vesting condition		Grantee must be a director, statutory auditor, corporate advisor, person with a short-term contract or employee of the Group, or a director, statutory auditor or employee of business counterparty of the Company approved by the Board of Directors at the time of the vesting of such stock acquisition rights.
Service period		From March 23, 2006 to March 31, 2006
Exercise period		From April 1, 2006 to March 31, 2009



Company		Nissin Servicer Co., Ltd.
Date of approval		September 9, 2002
Number of grantees		4 directors, 3 statutory auditors and 12 employees of Nissin Servicer
Date of issuance		September 26, 2002
Type of shares		Common stock of Nissin Servicer
Number of shares issuable upon exercise of stock acquisition rights		80,000 shares (Note 2)
Vesting condition		Grantee must be a director, statutory auditor, employee or corporate advisor of Nissin Servicer, at the time of the vesting of such stock acquisition rights.
Service period		From September 26, 2002 to September 30, 2004
Exercise period		From October 1, 2004 to September 30, 2007



Company		Nissin Servicer Co., Ltd.
Date of approval		March 30, 2004
Number of grantees		1 statutory auditor and 20 employees of Nissin Servicer
Date of issuance		March 30, 2004
Type of shares		Common stock of Nissin Servicer
Number of shares issuable upon exercise of stock acquisition rights		14,960 shares (Note 2)
Vesting condition		Grantee must be a director, statutory auditor, employee or corporate advisor of Nissin Servicer, or a director, statutory auditor or employee of its affiliated companies, at the time of the vesting of such stock acquisition rights.
Service period		From March 30, 2004 to March 31, 2006
Exercise period		From April 1, 2006 to March 31, 2009

113

Annual Financial Report



Company		Nissin Servicer Co., Ltd.
Date of approval		June 21, 2005
Number of grantees		1 director, 33 employees and 6 corporate advisors of Nissin Servicer; and
		1 director and 2 employees of affiliated companies of Nissin Servicer
Date of issuance		August 9, 2005
Type of shares		Common stock of Nissin Servicer
Number of shares issuable upon exercise of stock acquisition rights		2,620 shares (Note 2)
Vesting condition		Grantee must be a director, statutory auditor, employee or corporate advisor of Nissin Servicer, or a director, statutory auditor or employee of its affiliated companies, at the time of the vesting of such stock acquisition rights.
Service period		From August 9, 2005 to June 30, 2007
Exercise period		From July 1, 2007 to June 30, 2010



Company		Nissin Servicer Co., Ltd.
Date of approval		August 7, 2006
Number of grantees		4 directors and 2 executive officers of Nissin Servicer
Date of issuance		August 23, 2006
Type of shares		Common stock of Nissin Servicer
Number of shares issuable upon exercise of stock acquisition rights		1,400 shares (Note 2)
Vesting condition		Grantee must be a director, executive officer, statutory auditor, corporate advisor or employee of Nissin Servicer or its subsidiaries, at the time of the vesting of such stock acquisition rights.
Service period		From August 23, 2006 to August 31, 2006
Exercise period		From September 1, 2006 to August 6, 2011



Company		Nissin Servicer Co., Ltd.
Date of approval		August 7, 2006
Number of grantees		80 employees and 6 corporate advisors of Nissin Servicer; and
		1 director and 5 employees of affiliated companies of Nissin Servicer
Date of issuance		August 23, 2006
Type of shares		Common stock of Nissin Servicer
Number of shares issuable upon exercise of stock acquisition rights		4,530 shares (Note 2)
Vesting condition		Grantee must be a director, executive officer, statutory auditor, corporate advisor or employee of Nissin Servicer or its subsidiaries, at the time of the vesting of such stock acquisition rights.
Service period		From August 23, 2006 to August 31, 2006
Exercise period		From September 1, 2006 to August 6, 2011



Company		Aprek Co., Ltd.
Date of approval		January 26, 2006
Number of grantees		4 directors, 1 statutory auditor and 102 employees of Aprek
Date of issuance		April 28, 2006
Type of shares		Common stock of Aprek
Number of shares issuable upon exercise of stock acquisition rights		175,000 shares
Vesting condition		Not applicable
Service period		Not applicable
Exercise period		From May 1, 2006 to April 30, 2009

114

Annual Financial Report



Company		NIS Securities Co., Ltd.
Date of approval		August 25, 2005
Number of grantees		4 directors, 3 statutory auditors and 15 employees of NIS Securities
Date of issuance		August 31, 2005
Type of shares		Common stock of NIS Securities
Number of shares issuable upon exercise of stock acquisition rights		329 shares
Vesting condition		Grantee must be a director, statutory auditor, executive officer or employee of NIS Securities or its affiliated companies, at the time of the vesting of such stock acquisition rights.
Service period		From August 31, 2005 to August 31, 2007
Exercise period		From September 1, 2007 to August 31, 2010



Company		NIS Securities Co., Ltd.
Date of approval		February 27, 2007
Number of grantees		2 directors and 31 employees of NIS Securities
Date of issuance		March 1, 2007
Type of shares		Common stock of NIS Securities
Number of shares issuable upon exercise of stock acquisition rights		464 shares
Vesting condition		Grantee must be a director, statutory auditor, executive officer or employee of NIS Securities or its affiliated companies, at the time of the vesting of such stock acquisition rights.
Service period		From March 1, 2007 to February 28, 2009
Exercise period		From March 1, 2009 to February 28, 2014



Company		NIS Lease Co., Ltd.
Date of approval		March 7, 2005
Number of grantees		7 directors, 1 statutory auditor and 41 employees of NIS Lease
Date of issuance		March 31, 2005
Type of shares		Common stock of NIS Lease
Number of shares issuable upon exercise of stock acquisition rights		1,010 shares
Vesting condition		Grantee must be a director, statutory auditor or employee of NIS Lease at the time of the vesting of such stock acquisition rights.
Service period		From March 31, 2005 to March 31, 2007
Exercise period		From April 1, 2007 to March 31, 2010



Company		Woodnote Corporation
Date of approval		November 18, 2005
Number of grantees		1 director and 2 statutory auditors of Woodnote; and
		2 business counterparties, etc.
Date of issuance		December 1, 2005
Type of shares		Common stock of Woodnote
Number of shares issuable upon exercise of stock acquisition rights		3,100 shares
Vesting condition		Grantee must be a director, statutory auditor or employee of Woodnote or its subsidiaries, or a business counterparty, etc. approved by the Board of Directors of Woodnote, at the time of the vesting of such stock acquisition rights.
Service period		From December 1, 2005 to March 31, 2006
Exercise period		From April 1, 2006 to March 31, 2009


Notes:		1. These figures have been retroactively adjusted to reflect a 2-for-1 stock split on November 19, 2004, a 1.2-for-1 stock split on May 20, 2005, a 2-for-1 stock split on November 18, 2005 and a 2-for-1 stock split on April 1, 2006, respectively.
		2. These figures have been retroactively adjusted to reflect a 2-for-1 stock split on June 1, 2004, a 5-for-1 stock split on December 20, 2004, a 2-for-1 stock split on May 20, 2005, a 2-for-1 stock split on November 21, 2005 and a 2-for-1 stock split on April 1, 2006, respectively.

115

Annual Financial Report

(2)

Size and changes in stock acquisition rights

Number of stock acquisition rights



Company	NIS Group			NIS Group			NIS Group			NIS Group			NIS Group
Date of approval	June 22, 2004			June 22, 2004			June 22, 2004			June 22, 2005			June 22, 2005

	(Shares)
Shares before vested:
Non-vested as of March 31, 2006		-			-			-			-			-
Granted		-			-			-			-			-
Forfeited, including expiration		-			-			-			-			-
Vested		-			-			-			-			-

Non-vested as of March 31, 2007		-			-			-			-			-

Shares after vested:
Outstanding as of March 31, 2006		28,790,400			460,800			3,740,160			9,460,000			1,920,000
Vested		-			-			-			-			-
Exercised		(5,521,920	)		-			(103,680	)		(844,000	)		-
Forfeited, including expiration		(875,520	)		-			(172,800	)		(360,000	)		(340,000	)

Exercisable as of March 31, 2007		22,392,960			460,800			3,463,680			8,256,000			1,580,000



Company	Nissin Servicer			Nissin Servicer			Nissin Servicer			Nissin Servicer			Nissin Servicer
Date of approval	September 9, 2002			March 30, 2004			June 21, 2005			August 7, 2006			August 7, 2006

	(Shares)
Shares before vested:
Non-vested as of March 31, 2006		-			-			2,420			-			-
Granted		-			-			-			1,400			4,530
Forfeited, including expiration		-			-			-			-			-
Vested		-			-			(80	)		(1,400	)		(4,530	)

Non-vested as of March 31, 2007		-			-			2,340			-			-

Shares after vested:
Outstanding as of March 31, 2006		1,600			13,600			-			-			-
Vested		-			-			-			1,400			4,530
Exercised		-			(11,520	)		-			-			-
Forfeited, including expiration		-			(80	)		-			-			(280	)

Exercisable as of March 31, 2007		1,600			2,000			-			1,400			4,250



Company	Aprek			NIS Securities			NIS Securities			NIS Lease			Woodnote
Date of approval	January 26, 2006			August 25, 2005			February 27, 2007			March 7, 2005			November 18, 2005

	(Shares)
Shares before vested:
Non-vested as of March 31, 2006		-			329			-			1,010			-
Granted		175,000			-			464			-			-
Forfeited, including expiration		-			(94	)		-			(20	)		-
Vested		(175,000	)		-			-			(990	)		-

Non-vested as of March 31, 2007		-			235			464			-			-

Shares after vested:
Outstanding as of March 31, 2006		-			-			-			-			3,100
Vested		175,000			-			-			990			-
Exercised		-			-			-			-			-
Forfeited, including expiration		(9,000	)		-			-			-			(600	)

Exercisable as of March 31, 2007		166,000			-			-			990			2,500


Note:	The number of stock acquisition rights above is stated based on the number of shares for each stock acquisition right.

116

Annual Financial Report

Share price information



Company	NIS Group		NIS Group		NIS Group		NIS Group		NIS Group
Date of approval	June 22, 2004		June 22, 2004		June 22, 2004		June 22, 2005		June 22, 2005

	(In yen)
Exercise price		¥53		¥55		¥67		¥58		¥131
Weighted-average exercise price		83		-		88		83		-
Fair value at date of issuance		-		-		-		-		-



Company	Nissin Servicer		Nissin Servicer		Nissin Servicer		Nissin Servicer		Nissin Servicer
Date of approval	September 9, 2002		March 30, 2004		June 21, 2005		August 7, 2006		August 7, 2006

	(In yen)
Exercise price	¥	625	¥	6,250		¥51,549	¥	67,362	¥	58,380
Weighted-average exercise price		-		66,760		-		-		-
Fair value at date of issuance		-		-		-		18,737		20,729



Company	Aprek		NIS Securities		NIS Securities		NIS Lease		Woodnote
Date of approval	January 26, 2006		August 25, 2005		February 27, 2007		March 7, 2005		November 18, 2005

	(In yen)
Exercise price	¥	740	¥	424,000	¥	445,768	¥	50,000	¥	50,000
Weighted-average exercise price		-		-		-		-		-
Fair value at date of issuance		-		-		-		-		-

3.		Option-pricing model and assumptions to estimate the fair value, and method to estimate the number of vested rights for the year ended March 31, 2007 are as follows:

		(Nissin Servicer Co., Ltd.)

(1)

Option-pricing model

Black-Scholes Model

(2)

Basic variables and estimation

	1)		Share price volatility: 74.3% Calculated based on the actual stock price in the period between September 16, 2004 and August 23, 2006.

	2)		Expected lives: two years and six months Calculated using 50% of exercise period since there are not enough data for reasonable estimation.

	3)		Dividend yield: 1.0% Calculated based on the actual dividends for the year ended March 31, 2006 and the average stock price for the past one year.

	4)		Risk-free interest rate: 0.806% Yield of government bond, corresponding to the expected lives above.

(3)

Method for estimating the number of vested rights

No estimation is made for the stock acquisition rights to be forfeited in future because of the short service period.

(NIS Securities Co., Ltd.)

As for the stock acquisition rights granted on February 27, 2007, since NIS Securities Co., Ltd. is a non-listed company, their fair value on the grant date is estimated using the intrinsic values as follows:

	1)		Estimation method and price per share Price per share estimated using net assets: ¥445,768
	2)		Exercise price of stock acquisition rights per share: ¥445,768

As a result of the calculation, the estimated price is equal to the exercise price and, accordingly, the intrinsic value per share is zero and the fair value of stock acquisition right is also zero.
In addition, the total amount of the intrinsic value of stock acquisition right at year-end is zero.

117

Annual Financial Report

(April 1, 2007 ~ March 31, 2008)

Amount incurred as profits due to forfeiture as a result of unexercised stock acquisition rights for the year ended March 31, 2008 is as follows:


	Year Ended March 31,
	2008

	(In millions)
Reversal of stock acquisition rights (“Special Gains”)	¥	12

Details, size, and changes in stock acquisition rights for the year ended March 31, 2008 are as follows:

(1)

Details of stock acquisition rights



Company		NIS Group Co., Ltd.
Date of approval		June 22, 2004
Number of grantees		10 directors, 4 statutory auditors, 1,027 employees and 4 corporate advisors of the Company;
		14 directors, 3 statutory auditors and 86 employees of affiliated companies; and
		1 director of business counterparty
Date of issuance		July 15, 2004
Type of shares		Common stock
Number of shares issuable upon exercise of stock acquisition rights		3,196,800 shares (Note 1)
Vesting condition		Grantee must be a director, statutory auditor, corporate advisor, person with a short-term contract or employee, etc. of the Group, or a director, statutory auditor or employee of business counterparty of the Company approved by the Board of Directors, at the time of the vesting of such stock acquisition rights.
Service period		From July 15, 2004 to July 31, 2004
Exercise period		From August 1, 2004 to July 31, 2007



Company		NIS Group Co., Ltd.
Date of approval		June 22, 2004
Number of grantees		9 employees of the Company
Date of issuance		January 20, 2005
Type of shares		Common stock
Number of shares issuable upon exercise of stock acquisition rights		38,400 shares (Note 1)
Vesting condition		Grantee must be a director, statutory auditor, corporate advisor, person with a short-term contract or employee, etc. of the Group, or a director, statutory auditor or employee of business counterparty of the Company approved by the Board of Directors, at the time of the vesting of such stock acquisition rights.
Service period		From January 20, 2005 to January 31, 2005
Exercise period		From February 1, 2005 to January 31, 2008



Company		NIS Group Co., Ltd.
Date of approval		June 22, 2004
Number of grantees		83 employees and 1 corporate advisor of the Company; and 4 directors and 32 employees of affiliated companies
Date of issuance		April 21, 2005
Type of shares		Common stock
Number of shares issuable upon exercise of stock acquisition rights		357,120 shares (Note 1)
Vesting condition		Grantee must be a director, statutory auditor, corporate advisor, person with a short-term contract or employee, etc. of the Group, or a director, statutory auditor or employee of business counterparty of the Company approved by the Board of Directors, at the time of the vesting of such stock acquisition rights.
Service period		From April 21, 2005 to April 30, 2005
Exercise period		From May 1, 2005 to April 30, 2008

118

Annual Financial Report



Company		NIS Group Co., Ltd.
Date of approval		June 22, 2005
Number of grantees		9 directors, 4 statutory auditors, 154 employees and 8 corporate advisors of the Company; 19 directors, 5 statutory auditors, 42 employees and 9 corporate advisors of affiliated companies; and 1 director of business counterparty
Date of issuance		July 15, 2005
Type of shares		Common stock
Number of shares issuable upon exercise of stock acquisition rights		720,000 shares (Note 1)
Vesting condition		Grantee must be a director, statutory auditor, corporate advisor, person with a short-term contract or employee of the Group, or a director, statutory auditor or employee of business counterparty of the Company approved by the Board of Directors at the time of the vesting of such stock acquisition rights.
Service period		From July 15, 2005 to July 31, 2005
Exercise period		From August 1, 2005 to July 31, 2008



Company		NIS Group Co., Ltd.
Date of approval		June 22, 2005
Number of grantees		8 employees and 2 corporate advisors of the Company; and
		1 director, 12 employees and 5 corporate advisors of affiliated companies
Date of issuance		March 23, 2006
Type of shares		Common stock
Number of shares issuable upon exercise of stock acquisition rights		96,000 shares (Note 1)
Vesting condition		Grantee must be a director, statutory auditor, corporate advisor, person with a short-term contract or employee of the Group, or a director, statutory auditor or employee of business counterparty of the Company approved by the Board of Directors at the time of the vesting of such stock acquisition rights.
Service period		From March 23, 2006 to March 31, 2006
Exercise period		From April 1, 2006 to March 31, 2009



Company		Nissin Servicer Co., Ltd.
Date of approval		September 9, 2002
Number of grantees		4 directors, 3 statutory auditors and 12 employees of Nissin Servicer
Date of issuance		September 26, 2002
Type of shares		Common stock of Nissin Servicer
Number of shares issuable upon exercise of stock acquisition rights		80,000 shares (Note 2)
Vesting condition		Grantee must be a director, statutory auditor, employee or corporate advisor of Nissin Servicer, at the time of the vesting of such stock acquisition rights.
Service period		From September 26, 2002 to September 30, 2004
Exercise period		From October 1, 2004 to September 30, 2007



Company		Nissin Servicer Co., Ltd.
Date of approval		March 30, 2004
Number of grantees		1 statutory auditor and 20 employees of Nissin Servicer
Date of issuance		March 30, 2004
Type of shares		Common stock of Nissin Servicer
Number of shares issuable upon exercise of stock acquisition rights		14,960 shares (Note 2)
Vesting condition		Grantee must be a director, statutory auditor, employee or corporate advisor of Nissin Servicer, or a director, statutory auditor or employee of its affiliated companies, at the time of the vesting of such stock acquisition rights.
Service period		From March 30, 2004 to March 31, 2006
Exercise period		From April 1, 2006 to March 31, 2009

119

Annual Financial Report



Company		Nissin Servicer Co., Ltd.
Date of approval		June 21, 2005
Number of grantees		1 director, 33 employees and 6 corporate advisors of Nissin Servicer; and 1 director and 2 employees of affiliated companies of Nissin Servicer
Date of issuance		August 9, 2005
Type of shares		Common stock of Nissin Servicer
Number of shares issuable upon exercise of stock acquisition rights		2,620 shares (Note 2)
Vesting condition		Grantee must be a director, statutory auditor, employee or corporate advisor of Nissin Servicer, or a director, statutory auditor or employee of its affiliated companies, at the time of the vesting of such stock acquisition rights.
Service period		From August 9, 2005 to June 30, 2007
Exercise period		From July 1, 2007 to June 30, 2010



Company		Nissin Servicer Co., Ltd.
Date of approval		August 7, 2006
Number of grantees		4 directors and 2 executive officers of Nissin Servicer
Date of issuance		August 23, 2006
Type of shares		Common stock of Nissin Servicer
Number of shares issuable upon exercise of stock acquisition rights		1,400 shares (Note 2)
Vesting condition		Grantee must be a director, executive officer, statutory auditor, corporate advisor or employee of Nissin Servicer or its subsidiaries, at the time of the vesting of such stock acquisition rights.
Service period		From August 23, 2006 to August 31, 2006
Exercise period		From September 1, 2006 to August 6, 2011



Company		Nissin Servicer Co., Ltd.
Date of approval		August 7, 2006
Number of grantees		80 employees and 6 corporate advisors of Nissin Servicer; and
		1 director and 5 employees of affiliated companies of Nissin Servicer
Date of issuance		August 23, 2006
Type of shares		Common stock of Nissin Servicer
Number of shares issuable upon exercise of stock acquisition rights		4,530 shares (Note 2)
Vesting condition		Grantee must be a director, executive officer, statutory auditor, corporate advisor or employee of Nissin Servicer or its subsidiaries, at the time of the vesting of such stock acquisition rights.
Service period		From August 23, 2006 to August 31, 2006
Exercise period		From September 1, 2006 to August 6, 2011



Company		NIS Securities Co., Ltd.
Date of approval		August 25, 2005
Number of grantees		4 directors, 3 statutory auditors and 15 employees of NIS Securities
Date of issuance		August 31, 2005
Type of shares		Common stock of NIS Securities
Number of shares issuable upon exercise of stock acquisition rights		329 shares
Vesting condition		Grantee must be a director, statutory auditor, executive officer or employee of NIS Securities or its affiliated companies, at the time of the vesting of such stock acquisition rights.
Service period		From August 31, 2005 to August 31, 2007
Exercise period		From September 1, 2007 to August 31, 2010



Company		NIS Securities Co., Ltd.
Date of approval		February 27, 2007
Number of grantees		2 directors and 31 employees of NIS Securities
Date of issuance		March 1, 2007
Type of shares		Common stock of NIS Securities
Number of shares issuable upon exercise of stock acquisition rights		464 shares
Vesting condition		Grantee must be a director, statutory auditor, executive officer or employee of NIS Securities or its affiliated companies, at the time of the vesting of such stock acquisition rights.
Service period		From March 1, 2007 to February 28, 2009
Exercise period		From March 1, 2009 to February 28, 2014

120

Annual Financial Report



Company		NIS Lease Co., Ltd.
Date of approval		March 7, 2005
Number of grantees		7 directors, 1 statutory auditor and 41 employees of NIS Lease
Date of issuance		March 31, 2005
Type of shares		Common stock of NIS Lease
Number of shares issuable upon exercise of stock acquisition rights		1,010 shares
Vesting condition		Grantee must be a director, statutory auditor or employee of NIS Lease at the time of the vesting of such stock acquisition rights.
Service period		From March 31, 2005 to March 31, 2007
Exercise period		From April 1, 2007 to March 31, 2010



Company		Woodnote Corporation
Date of approval		November 18, 2005
Number of grantees		1 director and 2 statutory auditors of Woodnote; and 2 business counterparties, etc.
Date of issuance		December 1, 2005
Type of shares		Common stock of Woodnote
Number of shares issuable upon exercise of stock acquisition rights		3,100 shares
Vesting condition		Grantee must be a director, statutory auditor or employee of Woodnote or its subsidiaries, or a business counterparty, etc. approved by the Board of Directors of Woodnote, at the time of the vesting of such stock acquisition rights.
Service period		From December 1, 2005 to March 31, 2006
Exercise period		From April 1, 2006 to March 31, 2009


Notes:	1. These figures have been retroactively adjusted to reflect a 2-for-1 stock split on November 19, 2004, a 1.2-for-1 stock split on May 20, 2005, a 2-for-1 stock split on November 18, 2005, a 2-for-1 stock split on April 1, 2006, and a 1-for-20 reverse stock split on August 31, 2007, respectively.
	2. These figures have been retroactively adjusted to reflect a 2-for-1 stock split on June 1, 2004, a 5-for-1 stock split on December 20, 2004, a 2-for-1 stock split on May 20, 2005, a 2-for-1 stock split on November 21, 2005 and a 2-for-1 stock split on April 1, 2006, respectively.
	3. Aprek Co., Ltd. was omitted since it was excluded from the scope of consolidation during the year ended March 31, 2008.

121

Annual Financial Report

	(2)		Size and changes in stock acquisition rights

	1)		Number of stock acquisition rights



Company	NIS Group			NIS Group			NIS Group			NIS Group			NIS Group
Date of approval	June 22, 2004			June 22, 2004			June 22, 2004			June 22, 2005			June 22, 2005

	(Shares)
Shares before vested:
Non-vested as of March 31, 2007		-			-			-			-			-
Granted		-			-			-			-			-
Forfeited, including expiration		-			-			-			-			-
Vested		-			-			-			-			-

Non-vested as of March 31, 2008		-			-			-			-			-

Shares after vested:
Outstanding as of March 31, 2007		1,119,648			23,040			173,184			412,800			79,000
Vested		-			-			-			-			-
Exercised		(163,536	)		-			-			-			-
Forfeited, including expiration		(956,112	)		(23,040	)		(55,872	)		(152,800	)		(18,000	)

Exercisable as of March 31, 2008		-			-			117,312			260,000			61,000



Company	Nissin Servicer			Nissin Servicer			Nissin Servicer			Nissin Servicer			Nissin Servicer
Date of approval	September 9, 2002			March 30, 2004			June 21, 2005			August 7, 2006			August 7, 2006

	(Shares)
Shares before vested:
Non-vested as of March 31, 2007		-			-			2,340			-			-
Granted		-			-			-			-			-
Forfeited, including expiration		-			-			(40	)		-			-
Vested		-			-			(2,300	)		-			-

Non-vested as of March 31, 2008		-			-			-			-			-

Shares after vested:
Outstanding as of March 31, 2007		1,600			2,000			-			1,400			4,250
Vested		-			-			2,300			-			-
Exercised		(1,600	)		(1,440	)		-			-			-
Forfeited, including expiration		-			-			(120	)		-			(580	)

Exercisable as of March 31, 2008		-			560			2,180			1,400			3,670



Company	NIS Securities			NIS Securities			NIS Lease			Woodnote
Date of approval	August 25, 2005			February 27, 2007			March 7, 2005			November 18, 2005

	(Shares)
Shares before vested:
Non-vested as of March 31, 2007		235			464			-			-
Granted		-			-			-			-
Forfeited, including expiration		(8	)		(168	)		-			-
Vested		(227	)		-			-			-

Non-vested as of March 31, 2008		-			296			-			-

Shares after vested:
Outstanding as of March 31, 2007		-			-			990			2,500
Vested		227			-			-			-
Exercised		-			-			-			-
Forfeited, including expiration		(13	)		-			(255	)		-

Exercisable as of March 31, 2008		214			-			735			2,500


Notes:	1. The number of stock acquisition rights above is stated based on the number of shares for each stock acquisition right.
	2. Aprek Co., Ltd. was omitted since it was excluded from the scope of consolidation during the year ended March 31, 2008.

122

Annual Financial Report

Share price information



Company	NIS Group		NIS Group		NIS Group		NIS Group		NIS Group
Date of approval	June 22, 2004		June 22, 2004		June 22, 2004		June 22, 2005		June 22, 2005

	(In yen)
Exercise price		¥1,060		¥1,100		¥1,340		¥1,160		¥2,620
Weighted-average exercise price		1,024		-		-		-		-
Fair value at date of issuance		-		-		-		-		-



Company	Nissin Servicer		Nissin Servicer		Nissin Servicer		Nissin Servicer		Nissin Servicer
Date of approval	September 9, 2002		March 30, 2004		June 21, 2005		August 7, 2006		August 7, 2006

	(In yen)
Exercise price		¥ 625		¥ 6,250	¥	51,549	¥	67,362	¥	58,380
Weighted-average exercise price		32,164		26,085		-		-		-
Fair value at date of issuance		-		-		-		18,737		20,729



Company	NIS Securities		NIS Securities		NIS Lease		Woodnote
Date of approval	August 25, 2005		February 27, 2007		March 7, 2005		November 18, 2005

	(In yen)
Exercise price	¥	424,000	¥	445,768	¥	50,000	¥	50,000
Weighted-average exercise price		-		-		-		-
Fair value at date of issuance		-		-		-		-


Note:	Aprek Co., Ltd. was omitted since it was excluded from the scope of consolidation during the year ended March 31, 2008.

3.		Option-pricing model and assumptions to estimate the fair value, and method to estimate the number of vested rights for the year ended March 31, 2008 are as follows:

		Not applicable

4.		Total amounts of intrinsic value of stock acquisition rights calculated using per-share intrinsic value are as follows:

		(NIS Securities Co., Ltd.)

	(1)		Total amount of intrinsic value as of March 31, 2008

			¥ -

	(2)		Total amount of intrinsic value, as of exercise date, of stock acquisition rights exercised during the year ended March 31, 2008

			Not applicable

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Annual Financial Report

Deferred Income Taxes

Significant components of deferred tax assets and liabilities as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007			2008

	(In millions)
Deferred tax assets:
Loan losses	¥	37		¥	304
Allowance for loan losses		2,907			9,188
Reserve for guarantee losses		441			337
Accrued business tax		471			314
Accrued retirement benefits for directors		153			131
Accrued bonuses for employees		278			237
Reserve for losses on excess interest repayments		2,005			4,360
Impairment of fixed assets		325			80
Impairment of investment securities		-			1,393
Losses carried forward		-			5,162
Losses carried forward of subsidiaries		274			-
Interest receivable		-			238
Reserve for losses on group businesses		-			2,369
Allowance for investment losses		-			364
Write-down of inventories		-			789
Other		605			1,008
Valuation allowance		(1,488	)		(23,930	)

Total deferred tax assets		6,011			2,352
Deferred tax liabilities:
Business tax refundable		-			(31	)
Unrealized gains on investment securities		(254	)		-
Other		-			(19	)

Total deferred tax liabilities		(254	)		(50	)

Net deferred tax assets	¥	5,756		¥	2,302

Significant components of differences between the statutory tax rate and the effective tax rate for the year ended March 31, 2007 are as follows:


	Year Ended March 31, 2007

Statutory tax rate		40.5	%
Adjustments:
Non deductible expenses for tax purposes		3.4
Per capita residence tax levy		2.1
Increase in valuation allowance		44.8
Gains on change in equity interests, net		(3.2	)
Difference in the statutory tax rate of subsidiaries		2.8
Other		1.2

Effective income tax rate		91.6	%

The reconciliation of differences for the year ended March 31, 2008 is omitted because of losses before income taxes and minority interest.

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Annual Financial Report

Business Combinations

(April 1, 2006~March 31, 2007)

None

(April 1, 2007~March 31, 2008)

Transactions under Common Control by the Group

Names of the companies concerned and descriptions of their businesses, legal form of the business combination, name of the company after the business combination, and summary and the purpose of the transaction are as follows:

(1)

Names of the companies concerned and descriptions of their businesses


1)	Surviving Company
	Name:	NIS Real Estate Co., Ltd.
	Business Description:	Agent for company housing management

2)	Dissolved Company
	Name:	Nissin Insurance Co., Ltd.
	Business Description:	Agent for life or non-life insurance companies

	(2)		Legal form of the business combination

			Transactions under Common Control by the Group

	(3)		Name of the company after the business combination

			NIS Real Estate Co., Ltd.

	(4)		Summary and the purpose of the transaction

			NIS Real Estate Co., Ltd. absorbed Nissin Insurance Co., Ltd. through a merger effective on July 1, 2007, in order to further improve management efficiency of the Group.

	2.		Summary of Accounting Treatments

			There is no effect on the consolidated financial statements since both companies were wholly-owned subsidiaries of the Company.

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Segment Information

The segment information for the years ended March 31, 2007 and 2008 is as follows:

1.		Business Segment Information

		(April 1, 2006 ~ March 31, 2007)

		Business segment information for the year ended March 31, 2007 is as follows:


	Year Ended March 31, 2007
	Integrated
	Financial		Servicing		Real Estate		Other
	Services		Business		Business		Businesses			Total		Eliminations			Consolidated

	(In millions)
I. Operating revenues and operating income (losses):
Operating revenues:
(1) Operating revenues from third parties	¥	46,144	¥	31,754	¥	10,008	¥	245		¥	88,152	¥	-		¥	88,152
(2) Operating revenues from inter-segment sales or transfers		195		72		30		62			360		(360	)		-

Total operating revenues		46,340		31,827		10,038		307			88,513		(360	)		88,152
Operating expenses		45,590		25,641		6,957		712			78,901		(1,184	)		77,717

Operating income (losses)	¥	749	¥	6,185	¥	3,081	¥	(404	)	¥	9,611	¥	823		¥	10,435

II. Assets, depreciation and amortization, losses on impairment and capital expenditures:
Assets	¥	342,497	¥	62,470	¥	34,084	¥	3,565		¥	442,618	¥	(38,737	)	¥	403,880
Depreciation and amortization		1,929		7		6		9			1,954		-			1,954
Losses on impairment		131		-		-		-			131		-			131
Capital expenditures		3,631		15		1,619		3			5,269		-			5,269


Notes:	1. Classification of business segments
	Business segments are classified by taking into consideration similarities in the type and nature of businesses and operating transactions.
	2. Main descriptions of each business segment


		(1) Integrated Financial Services:		Provider of loan products to individuals, including consumers, SMEs and their owners
				Provider of leases, etc.
				Provider of guarantee services
				Securities business
		(2) Servicing Business:		Management, collection, acquisition, and investment in specific money claims
		(3) Real Estate Business:		Real estate transaction
				Real estate development
				Asset management
		(4) Other Businesses:		SME support services
				Agent for life or non-life insurance companies, etc.


	3. As discussed in “SIGNIFICANT ITEMS RELATING TO THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS – 4. Significant Accounting Policies – (3) Allowance for Loan Losses and Accrued Expenses – 3) Accrued bonuses for directors,” the Group adopted “Accounting Standard for Directors’ Bonuses” beginning from the year ended March 31, 2007.
	As a result of this change, compared with the results under the previous treatment, “Operating expenses” increased by ¥53 million, ¥19 million and ¥8 million, and “Operating income” decreased by the same amount, in “Integrated Financial Services,” “Servicing Business” and “Real Estate Business,” respectively.
	4. As discussed in “CHANGES IN SIGNIFICANT ITEMS RELATING TO THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS,” the Group adopted “Guidance on Accounting Standard for Share-based Payments” beginning from the year ended March 31, 2007.
	As a result of this change, compared with the results under the previous treatment, “Operating expenses” increased by ¥120 million and “Operating income” decreased by the same amount, respectively, in “Servicing Business.”

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	5. Changes in business segment
	“Real Estate Business,” which was previously included in “Other Businesses,” is disclosed as a separate segment for financial reporting purposes, beginning from the year ended March 31, 2007, due to an increase in its significance. Segment information for the year ended March 31, 2006, when presented in accordance with the classification for the year ended March 31, 2007 is as follows:


	Year Ended March 31, 2006
	Integrated
	Financial		Servicing		Real Estate		Other
	Services		Business		Business		Businesses			Total		Eliminations			Consolidated

	(In millions)
I. Operating revenues and operating income (losses):
Operating revenues:
(1) Operating revenues from third parties	¥	40,127	¥	17,644	¥	2,976	¥	243		¥	60,991	¥	-		¥	60,991
(2) Operating revenues from inter-segment sales or transfers		155		97		62		163			478		(478	)		-

Total operating revenues		40,282		17,741		3,038		406			61,470		(478	)		60,991
Operating expenses		33,113		12,746		2,848		468			49,177		(970	)		48,207

Operating income (losses)	¥	7,169	¥	4,994	¥	189	¥	(61	)	¥	12,292	¥	491		¥	12,784

II. Assets, depreciation and amortization, losses on impairment and capital expenditures:
Assets	¥	312,967	¥	40,903	¥	15,358	¥	243		¥	369,471	¥	(18,610	)	¥	350,861
Depreciation and amortization		1,405		6		2		2			1,417		-			1,417
Capital expenditures		3,310		12		13		38			3,373		-			3,373


	6. All operating expenses are apportionable.


(April 1, 2007 ~ March 31, 2008)


	Business segment information for the year ended March 31, 2008 is as follows:


	Year Ended March 31, 2008
	Integrated
	Financial			Servicing		Real Estate		Other
	Services			Business		Business		Businesses		Total			Eliminations			Consolidated

	(In millions)
I. Operating revenues and operating income (losses):
Operating revenues:
(1) Operating revenues from third parties	¥	37,215		¥	18,860	¥	24,994	¥	1,956	¥	83,027		¥	-		¥	83,027
(2) Operating revenues from inter-segment sales or transfers		1,242			8,993		0		52		10,288			(10,288	)		-

Total operating revenues		38,458			27,853		24,995		2,009		93,316			(10,288	)		83,027
Operating expenses		60,303			22,983		21,591		2,260		107,138			(8,683	)		98,454

Operating (losses) income	¥	(21,845	)	¥	4,870	¥	3,403	¥	(250)		(13,822	)		(1,605	)		(15,427	)

II. Assets, depreciation and amortization, losses on impairment and capital expenditures:
Assets	¥	223,905		¥	55,917	¥	30,547	¥	391	¥	310,762		¥	(37,778	)	¥	272,983
Depreciation and amortization		2,171			8		64		10		2,255			-			2,255
Losses on impairment		208			-		41		1		252			-			252
Capital expenditures		2,429			9		139		6		2,584			-			2,584

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Annual Financial Report


Notes:	1. Classification of business segments
	Business segments are classified by taking into consideration similarities in the type and nature of businesses and operating transactions.
	2. Main descriptions of each business segment
		(1) Integrated Financial Services:	Provider of loan products to individuals, including consumers, SMEs and their owners
			Provider of leases, etc.
			Provider of guarantee services
			Securities business
		(2) Servicing Business:	Management, collection, acquisition, and investment in specific money claims
		(3) Real Estate Business:	Real estate transaction
			Real estate development
			Asset management
		(4) Other Businesses:	SME support services
			Agent for life or non-life insurance companies, etc.
	3. As discussed in “SIGNIFICANT ITEMS RELATING TO THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS – 4. Significant Accounting Policies – (1) Valuation Standards and Methods for Computation of Assets – 3) Inventories,” the Group adopted ASB Statement No. 9 “Accounting Standards for Measurement of Inventories” issued by the ASBJ on July 5, 2006, beginning from the year ended March 31, 2008.
	As a result of this change, compared with the results under the previous treatment, “Operating expenses” increased by ¥947 million, and “Operating income” and “Assets” decreased by the same amount, respectively, in “Servicing Business,” while “Operating expenses” increased by ¥814 million, and “Operating income” and “Assets” decreased by the same amount, respectively, in “Real Estate Business.”
	4. As discussed in “CHANGES IN SIGNIFICANT ITEMS RELATING TO THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS,” with respect to bond issuance costs, the entire amount had been previously treated as “Other Expenses” as incurred. However, the Group changed its treatment to amortize such costs using the straight-line method over the redemption period beginning from the year ended March 31, 2008. In addition, the Group recorded the amortized amount as financial costs in “Operating expenses” in order to ensure consistency with the treatment of interest expenses on bonds.
	As a result of this change, compared with the results under the previous treatment, “Operating expenses” and “Operating losses” increased by ¥73 million, respectively, in “Integrated Financial Services.”
	5. All operating expenses are apportionable.

Geographical Segment Information

Geographical segment information is omitted for the years ended March 31, 2007 and 2008, as domestic operating revenues accounted for more than 90% of the total operating revenues and the total assets, respectively, for all segments during the corresponding years.

Overseas Operating Revenues

Overseas operating revenues information is omitted for the years ended March 31, 2007 and 2008, as overseas operating revenues accounted for less than 10% of the total operating revenues during the corresponding years.

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Annual Financial Report

Related Party Transactions

(April 1, 2006 ~ March 31, 2007)

Directors and principal individual shareholders



Attribution	Entities of which majority interests are owned by directors and their close relatives, including subsidiaries of such entities
Entity name	Shuho, Ltd.	Nissin Building Co., Ltd.
Address	Shinjuku-ku, Tokyo	Matsuyama, Ehime
Capital or investment in capital (in millions)	¥100	¥30
Description of business	Real estate rental and agency	Real estate rental and agency
Entity’s interest in the Company	11.5% directly owned	11.8% directly owned
Description of relationship:
Shared director	2 directors	2 directors
Business relationship	Office leases	Office and parking space leases
Transaction and amount (in millions)	Office leases: ¥1 (Note 2)	Office and parking space leases: ¥1 (Note 2)
Account and balance at year-end (in millions)	-	Current liabilities (other): ¥0


Notes:	1. Consumption taxes are excluded from the amounts presented above.
	2. Business terms and related decision-making policies
	Contract terms related to office and parking space leases are set in reference to those in lease agreements with unrelated parties and contain prices that are equivalent to those for such lease agreements.

Subsidiaries and other



	Attribution		An affiliate
	Entity name		Shinsei Business Finance Co., Ltd.
	Address		Chuo-ku, Tokyo
	Capital or investment in capital (in millions)		¥1,484
	Description of business		Provider of financial services to SMEs
	The Company’s interest in entity		12.5% directly owned
	Description of relationship:
	Shared director		2 directors
	(1)Business relationship		Referral of customers
	Transaction and amount (in millions)		Commission payments: ¥0 (Note 2)
	Account and balance at year-end (in millions)		-
	(2)Business relationship		Guarantees for loans to customers
	Transaction and amount (in millions)		Guarantee fees received: ¥36 (Note 2)
	Account and balance at year-end (in millions)		-



	Attribution		An affiliate
	Entity name		Chuo Mitsui Finance Service Co., Ltd.
	Address		Chuo-ku, Tokyo
	Capital or investment in capital (in millions)		¥750
	Description of business		Provider of financial services to SMEs
	The Company’s interest in entity		15.0% directly owned
	Description of relationship:
	Shared director		2 directors
	(1)Business relationship		Referral of customers
	Transaction and amount (in millions)		Commission payments: ¥11 (Note 2)
	Account and balance at year-end (in millions)		-
	(2)Business relationship		Guarantees for loans to customers
	Transaction and amount (in millions)		Guarantee fees received: ¥88 (Note 2)
	Account and balance at year-end (in millions)		-
	(3)Business relationship		Guarantees for borrowings from banks
	Transaction and amount (in millions)		Guarantee fees received: ¥41 (Note 2)
	Account and balance at year-end (in millions)		-

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Annual Financial Report


Notes:	1. Consumption taxes are excluded from the amounts presented above.
	2. Business terms and related decision-making policies

	(1)	Contract terms related to commission payments are set in reference to those in referral agreements with unrelated parties and contain prices that are equivalent to those for such referral agreements.

	(2)	Contract terms related to loan guarantee commissions are set in reference to those available to unrelated parties and are decided upon agreements of both companies. Despite Shinsei Business Finance Co., Ltd. and Chuo Mitsui Finance Service Co., Ltd. becoming unrelated parties during the year ended March 31, 2007, because the transactions between the Group and these companies are continuous in nature, the transactions during the period when these companies had been related are included above.

(April 1, 2007 ~ March 31, 2008)

Parent company and principal corporate shareholders



Attribution	Principal shareholders (entities)
Entity name	TPG Izumi, L.P.	TPG Izumi AIV 6, L.P.	TPG Izumi AIV 1, L.P.
Address	Cayman Islands, British West Indies	United States of America	United States of America
Capital or investment in capital (in millions)	¥-
Description of business	Investment Business
Entities’ interest in the Company	41.7% directly owned (Note 3)
Description of relationship:
Shared director	6 directors (Note 2)
Business relationship	None
Transaction and amount (in millions)	Payment of advisory fee (Note 4): ¥22
Account and balance at year-end (in millions)	Current liabilities (other): ¥22


Notes:		1. Consumption taxes are excluded from the amounts presented above.
		2. These directors concurrently serve as directors of TPG which manages investment vehicles, TPG Izumi, L.P., TPG Izumi AIV 6, L.P., and TPG Izumi AIV 1, L.P.
		3. TPG Izumi, L.P., TPG Izumi AIV 6, L.P., and TPG Izumi AIV 1, L.P. are investment vehicles of TPG, and percentages of voting rights of the Company held by these entities are 30.8%, 8.5% and 2.4%, respectively.
		4. Business terms and related decision-making policies
		Advisory fee is paid based on the advisory contract agreed between the Company and TPG which manages investment vehicles, TPG Izumi, L.P., TPG Izumi AIV 6, L.P., and TPG Izumi AIV 1, L.P.

Directors and principal individual shareholders



Attribution	Directors and their close relatives
Name	Hideo Sakioka	Mikihiro Moriyama
Address	-	-
Capital or investment in capital (in millions)	-	-
Occupation	Special Advisor of the Company and	Doctor
	director of companies
Person’s interest in the Company	1.7% directly owned	0.0% directly owned
Relationship with related person	Father of a director of the Company	Brother-in-law of a director of the Company
Transaction and amount (in millions)	Sale of land and building of Matsuyama Head office (Note 2): ¥369	Sale of land of Matsuyama Head office (Note 2): ¥20
Account and balance at year-end (in millions)	Current liabilities (other): ¥2	Current liabilities (other): ¥0


Notes:		1. Consumption taxes are excluded from the amounts presented above.
		2. Business terms and related decision-making policies
		The sale price of land and building of Matsuyama Head Office was determined based on the appraisal value provided by a real-estate appraiser.

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Annual Financial Report

Subsidiaries and other



	Attribution		An affiliate
	Entity name		Aprek Co., Ltd.
	Address		Kita-kyushu City, Fukuoka
	Capital or investment in capital (in millions)		¥1,126
	Description of business		Provider of financial services for SMEs.
	The Company’s interest in the entity		38.9% directly owned
	Relation ship with related entity		Lending of operating funds and guarantees for borrowings
	(1) Transaction and amount (in millions)		Lending of operating funds (Note 1): ¥-
	Account and balance at year-end (in millions)		Current assets (Other): ¥3,600
	(2) Transaction and amount (in millions)		Guarantees for loans receivable (Notes 2 and 4): ¥7,886
	Account and balance at year-end (in millions)		-
	(3) Transaction and amount (in millions)		Guarantee fees received and indemnification fees received (Notes 3 and 4): ¥-
	Account and balance at year-end (in millions)		Investment and other assets (Other): ¥2,648
	(4) Transaction and amount (in millions)		Guarantees for borrowings (Note 5): ¥3,170
	Account and balance at year-end (in millions)		-


Notes:		1. Contract terms related to lending of funds to affiliated companies is decided by taking into consideration the market interest rate and borrowing interest rate of the Company, and other business terms are decided upon agreement by both companies. In addition, the Company does not secure any collateral.
		2. Guarantees for loans to customers. The amount presented above is the outstanding balance of loans receivables that the Company guaranteed as of March 31, 2008. In addition, the Company has to indemnify Aprek Co., Ltd. until February 28, 2013, for losses that Aprek Co., Ltd. incurs due to claims for excess interest repayments raised by customers to whom Aprek Co., Ltd. lent money on or before March 3, 2008. Although it is difficult to estimate the amount of this liability, the Company estimates the amount of such losses, which has been included in “Reserve for losses on group businesses” as of March 31, 2008.
		3. The Company receives guarantee fees and indemnification fees based on the agreement between both companies.
		4. The Company recorded ¥5,850 million of “Reserve for losses on group businesses” for guarantee of loans receivable and indemnification for claims for excess interest repayments of Aprek Co., Ltd. The Company also recorded ¥6,234 million of “Provision for losses on group businesses” for the year ended March 31, 2008, which was offset by ¥3,271 million of guarantee fees received and indemnification fees received in the statements of operations.
		5. Guarantees for borrowings from banks. The guarantee fee rate is 0.2%, and the amount presented above is the outstanding balance of borrowings from banks that the Company guaranteed as of March 31, 2008.
		6. Consumption taxes are excluded from the amounts of transactions presented above. Balances at year-end include consumption taxes.
		7. Transactions between Aprek Co., Ltd. and the Company were offset in the consolidated financial statements, since Aprek, a former consolidated subsidiary, was excluded from the scope of consolidation on March 31, 2008 as deemed disposal date of equity interest.

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Annual Financial Report

Per Share Data


	Year Ended March 31,
	2007		2008

	(In yen)
Consolidated:
Net assets per share	¥	29.01		¥228.89
Net income (losses) per share:
Basic		0.00		(289.06	)
Diluted		0.00		-


Notes:	1. Figure for diluted net income per share for the year ended March 31, 2008 was not presented because of net losses per share.
	2. The basis for the calculation of the amounts presented above is as follows:

(1) Net assets per share


	March 31,
	2007		2008

	(In millions)
Total net assets on the consolidated balance sheets		¥86,747		¥58,763
Net assets attributable to common stock		82,664		54,847
Differences between net assets and net assets attributable to common stock:
Stock acquisition rights		114		102
Minority interest		3,968		3,814


	March 31,
	2007		2008

	(Thousand shares)
Number of issued shares		2,917,887		245,894
Number of shares of treasury stock		68,348		6,276
Number of shares for the calculation of net assets per share		2,849,538		239,617

(2) Basic and diluted net income (losses) per share


	Year Ended March 31,
	2007			2008

	(In millions)
Net income (losses) on the consolidated statements of operations		¥8		¥	(45,116	)
Net income (losses) attributable to common stock		8			(45,116	)
Amounts not attributable to common shareholders		-			-
Adjustments to net income for the calculation of diluted net income per share:
Losses on change in equity interest due to exercise of stock acquisition rights of subsidiaries		(6	)		-


	Year Ended March 31,
	2007			2008

	(Thousand shares)
Weighted-average number of outstanding shares		2,818,487			156,077
Shares with dilutive effect:
Stock acquisition rights		11,451			-

Total number of shares with dilutive effect		11,451			-

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Annual Financial Report

In addition, shares without dilutive effect which were not reflected in the calculation of diluted net income per share for the years ended March 31, 2007 and 2008 are as follows:

(April 1, 2006 ~ March 31, 2007)


			Year Ended March 31,
			2007

	Type		Stock acquisition rights
	Special resolution date		June 22, 2005
	Number of stock acquisition rights		3,950 units

The details of shares mentioned above are stated in “ITEM 4. OVERVIEW OF THE COMPANY – (2) Information on Stock Acquisition Rights and Convertible Bonds.”

(April 1, 2007 ~ March 31, 2008)


	Year Ended March 31,
	2008

Type	Stock acquisition rights	Stock acquisition rights	Stock acquisition rights	Stock acquisition rights
Special resolution date	June 22, 2004	June 22, 2005	June 22, 2005	February 18, 2008
Number of stock acquisition rights	2,444 units	13,000 units	3,050 units	87,500 units

The details of shares mentioned above are stated in “ITEM 4. OVERVIEW OF THE COMPANY – 1. INFORMATION ON CAPITAL STOCK – (2) Information on Stock Acquisition Rights and Convertible Bonds.”

Stock split and reverse stock split

(April 1, 2006 ~ March 31, 2007)

On April 1, 2006 the Company completed a 2-for-1 stock split. If the stock split were deemed to have occurred on April 1, 2005, the retroactively adjusted per share data for the year ended March 31, 2006 would have been as follows:


			Year Ended March 31, 2006

			(In yen)
	Net assets per share		¥29.18
	Net income per share:
	Basic		3.46
	Diluted		3.25

(April 1, 2007 ~ March 31, 2008)

On August 31, 2007, the Company completed a 1-for-20 reverse stock split. If the reverse stock split were deemed to have occurred on April 1, 2006, the retroactively adjusted per share data for the year ended March 31, 2007 would have been as follows:


			Year Ended March 31, 2007

			(In yen)
	Net assets per share		¥580.20
	Net income per share:
	Basic		0.06
	Diluted		0.01

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Annual Financial Report

Significant Subsequent Events

(April 1, 2006 ~ March 31, 2007)

On May 29, 2007, the Board of Directors approved an issuance of “NIS GROUP CO., LTD., U.S. Dollar-denominated Unsecured Straight Bonds,” which were issued on June 20, 2007 as follows:



	(1) Total amount of issue		US$200 million
	(2) Issue price		100% of par value
	(3) Stock payment date		June 20, 2007
	(4) Maturity		June 20, 2012
	(5) Interest rate		8.06% per annum
	(6) Use of proceeds		General corporate purposes and refinancing

On June 23, 2007, the Annual Shareholders’ Meeting approved a reverse stock split as follows:



	(1) Reverse stock split method		1-for-20 reverse stock split, and the number of outstanding shares of the Company’s common stock is to be reduced from 2,917,887,012 shares to 145,894,350 shares.
	(2) Reverse stock split schedule:
	1) Last date for submission of share certificate		August 31, 2007
	Share certificates submission period		From July 31, 2007 to August 31, 2007
	2) Effective date		August 31, 2007

If the reverse stock split were deemed to have occurred on April 1, 2005, the retroactively adjusted per share data for the years ended March 31, 2006 and 2007 would have been as follows:


	Year Ended March 31,
	2006		2007

	(In yen)
Net assets per share	¥	583.48	¥	580.20
Net income per share:
Basic		69.14		0.06
Diluted		64.99		0.01

On June 23, 2007, the Board of Directors approved repurchases of shares of the Company’s common stock pursuant to the Corporate Law as follows:



(1) Reason for Repurchases		The Company decided to repurchase shares of its common stock in order to improve its capital efficiency and to expeditiously implement its capital policies in the future.
(2) Outline of Repurchases:
1) Class of shares to be repurchased		Common stock
2) Total number of shares to be repurchased		Up to 60,000,000 shares
3) Aggregate amount of repurchases		Up to 3 billion yen
4) Period for repurchases		1 year from June 25, 2007
5) Acquisition method		Ordinary market transactions on the Tokyo Stock Exchange

134

Annual Financial Report

(April 1, 2007 ~ March 31, 2008)

On May 23, 2008, the Board of Directors approved a merger to absorb NIS Property Co., Ltd., a consolidated subsidiary, effective on July 1, 2008, and the Company entered into the merger agreement on the same day.

Name of the companies concerned and descriptions of their businesses, legal form of the business combination, name of the company after the business combination, and summary and the purpose of the transaction are as follows:

(1)

Name of the companies concerned and descriptions of their businesses


1)	Surviving Company
	Name:	NIS Group Co., Ltd.
	Business Description:	Provider of SME loans, consumer loans and credit guarantee services

2)	Dissolved Company
	Name:	NIS Property Co., Ltd.
	Business Description:	Real estate transaction, real estate development and asset management

	(2)		Legal form of the business combination

			An absorption merger with the Company as the surviving company and NIS property as the dissolved company.

	(3)		Name of the company after the business combination

			NIS Group Co., Ltd.

	(4)		Summary and the purpose of the transaction

			The Group focuses on the real estate-related businesses primarily through NIS property, which engages in the principal investment business investing in Japanese real estate market. The aim of this merger is the further increase of operational efficiency through group reorganization.

	2.		Summary of Accounting Treatments

			A transaction under a common control by the Group in accordance with “Accounting Standard for Business Combination” issued by the Business Accounting Council on October 31, 2003 and ASB Guidance No. 10 “Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures” issued by the ASBJ as last amended on November 15, 2007.

135

Annual Financial Report

Consolidated Supplementary Statements

Details of Bonds and Convertible Bonds


			Balance
			March 31,
Company	Descriptions	Issued	2007		2008			Rate			Collateral	Maturity

			(In millions)					(Per annum)
NIS Group Co., Ltd.	6th unsecured straight bonds	February 25, 2005	¥	7,500	¥	-			1.18	%	None	February 25, 2008

NIS Group Co., Ltd.	7th unsecured straight bonds	June 20, 2005		7,500		7,500 (7,500	)		1.17		None	June 20, 2008

NIS Group Co., Ltd.	8th unsecured straight bonds	September 16, 2005		10,000		9,800 (9,800	)		1.08		None	September 16, 2008

NIS Group Co., Ltd.	9th unsecured straight bonds	February 28, 2007		5,000		5,000			2.73		None	February 26, 2010

NIS Group Co., Ltd.	10th unsecured straight bonds	March 23, 2007		10,000		9,700 (9,700	)		2.29		None	March 23, 2009

NIS Group Co., Ltd.	U.S. dollar-denominated unsecured straight bonds (Note 3)	June 20, 2007		-	24,480 [U.S.$200,000 thousand]				3.96		None	June 20, 2012

NIS Group Co., Ltd.	4th unsecured private placement bonds	September 27, 2004		500		-			0.67		None	September 27, 2007

NIS Group Co., Ltd.	5th unsecured private placement bonds	March 28, 2006		700		400 (400	)		1.45		None	March 27, 2009 (Note 4)

Nissin Servicer Co., Ltd.	1st unsecured private placement bonds	September 19, 2003		90		30 (30	)		1.55		None	September 19, 2008

Nissin Servicer Co., Ltd.	2nd unsecured private placement bonds	September 21, 2006		450		350 (100	)		1.21		None	September 18, 2009

Nissin Servicer Co., Ltd.	3rd unsecured private placement bonds	July 27, 2007		-		500			1.69		None	July 30, 2010

Total	-	-	¥	41,740	¥	57,760 (27,530	)		-	%	-	-


Notes:	1. The amounts in parentheses represent the amounts scheduled to be redeemed within one year.
	2. The redemption schedule of bonds for five-year period subsequent to March 31, 2008 is summarized as follows:

		March 31, 2008
		Amount

		(In millions)
	Redemption Date:
	Year Ending March 31, 2009	¥	27,530
	Year Ending March 31, 2010		5,250
	Year Ending March 31, 2011		500
	Year Ending March 31, 2012	-
	Year Ending March 31, 2013		24,480


	3. Figure in brackets above represents the balance in U.S. dollars as the U.S. dollar-denominated unsecured straight bonds were issued in a foreign market.
	4. ¥150 million and ¥250 million are scheduled to be redeemed on September 27, 2008 and March 27, 2009, respectively.

136

Annual Financial Report

2) Details of Borrowings


	March 31,
	2007		2008		Average Interest Rate			Maturity

	(In millions)
Short-term borrowings	¥	55,396	¥	24,944		3.40	%	-
Current portion of long-term borrowings		83,192		63,168		2.37		-
Current portion of lease obligation		-		-		-		-
Long-term borrowings (excluding current portion)		59,628		28,426		3.09		From April 15, 2009
								to October 22, 2012
Lease obligation (excluding current portion)		-		-		-		-
Other interest-bearing debt:
Commercial paper (current portion)		27,100		-		-		-
Asset-backed securities		26,957		10,185		2.76		-

Total	¥	252,274	¥	126,724		-	%	-


Notes:	1. The average interest rate represents the weighted-average interest rate as of March 31, 2008.
	2. The amount of repayment schedule of asset-backed securities for five-year period subsequent to March 31, 2008 is not presented since the amount of repayment schedule is indefinite.
	In addition, the scheduled final repayment date under the trust agreement is March 15, 2014.
	3. The repayment schedule of long-term borrowings, excluding current portion, for five-year period subsequent to March 31, 2008 is summarized as follows:


	March 31, 2008
	Amount

	(In millions)
Repayment Date:
Year Ending March 31, 2010	¥	23,696
Year Ending March 31, 2011		4,444
Year Ending March 31, 2012		210
Year Ending March 31, 2013		75

(2)		Other

		None

137

Annual Financial Report

2.		NON-CONSOLIDATED FINANCIAL STATEMENTS

(1)		Non-consolidated Financial Statements

	1)	Non-consolidated Balance Sheets


	March 31,
	2007						2008
				Percentage of						Percentage of
	Amount			Total Assets			Amount			Total Assets

	(In millions except percentages)
ASSETS:
Current Assets:
Cash and deposits	¥	12,465					¥	6,986
Notes receivable (Notes 6 and 10)		165						51
Loans receivable (Notes 2, 3, 7, 8 and 11)		194,824						123,785
Compensation of loans receivable		1,040						1,934
Operational investment securities (Note 1)		1,099						11,300
Beneficial interest in trust		14,830						-
Interest receivable		1,055						606
Prepaid expenses		349						232
Deferred tax assets		1,341						-
Accrued income		582						352
Loans to affiliated companies		17,900						14,150
Other		1,494						3,118
Allowance for loan losses		(10,168	)					(14,869	)

Total Current Assets		236,982			72.3	%		147,648			66.2	%

(Continued)

138

Annual Financial Report


		March 31,
		2007						2008
					Percentage of						Percentage of
		Amount			Total Assets			Amount			Total Assets

	(In millions except percentages)
(Continued)
Fixed Assets:
Tangible fixed assets:
Buildings			1,129						264
Accumulated depreciation			615						103

			514						160

Structures			37						-
Accumulated depreciation			32						-

			5						-

Equipment			516						358
Accumulated depreciation			241						180

			275						178

Land			355						-

Total tangible fixed assets			1,150			0.4			339			0.2

Intangible fixed assets:
Software			1,564						1,226
Software development in progress			78						109
Telephone rights			130						43

Total intangible fixed assets			1,774			0.5			1,379			0.6

Investments and other assets:
Investment securities (Notes 2 and 9)			24,353						8,879
Investment in affiliated companies			9,734						7,278
Other investment in affiliated companies			1,199						19,981
Capital contributions			2,004						4
Capital contribution to affiliated companies			6,878						-
Loans to affiliated companies			37,833						24,206
Loans to employees			253						173
Bankrupt and delinquent loans receivable (Notes 4 and 7)			7,624						16,509
Long-term prepaid expenses			60						45
Deferred tax assets			3,499						-
Security deposit			-						5,331
Long-term deposit			492						-
Long-term accrued income (Note 1)			-						2,648
Other			1,000						1,045
Allowance for loan losses			(6,949	)					(12,085	)
Allowance for investment losses			-						(900	)

Total investments and other assets			87,984			26.8			73,120			32.8

Total Fixed Assets			90,909			27.7			74,839			33.6

Deferred Assets:
Deferred bond issuance costs			-						367

Total Deferred Assets			-			-			367			0.2

Total Assets		¥	327,891			100.0	%	¥	222,855			100.0	%

139

Annual Financial Report


	March 31,
	2007						2008
				Percentage of						Percentage of
				Total Liabilities						Total Liabilities
	Amount			and Net Assets			Amount			and Net Assets

	(In millions except percentages)
LIABILITIES:
Current Liabilities:
Short-term borrowings (Notes 2 and 8)	¥	47,984					¥	16,979
Current portion of long-term borrowings (Notes 2 and 8)		62,984						45,072
Current portion of bonds		8,300						27,400
Commercial paper		27,100						-
Other payable		922						882
Accrued expenses		430						522
Accrued income taxes		715						215
Deposits received (Note 9)		1,808						108
Unearned income		39						18
Accrued bonuses for employees		520						452
Accrued bonuses for directors		53						-
Reserve for guarantee losses		970						749
Reserve for losses on relocation of offices		-						154
Other (Notes 6 and 10)		237						220

Total Current Liabilities		152,064			46.4	%		92,775			41.6	%

Long-term Liabilities:
Bonds		32,900						29,480
Long-term borrowings (Notes 2 and 8)		32,156						9,110
Asset-backed securities (Note 2)		26,957						10,185
Obligation under receivable buy-back agreement (Note 2)		-						13,208
Accrued retirement benefits for directors		328						324
Reserve for losses on excess interest repayments		4,600						10,766
Reserve for losses on group businesses		-						5,850
Other		65						5

Total Long-term Liabilities		97,007			29.6			78,931			35.4

Total Liabilities		249,071			76.0			171,707			77.0

NET ASSETS:
Shareholders’ Equity:
Common stock		16,289			5.0			26,289			11.8
Additional paid-in capital:
General		18,586						28,586
Other		1,494						1,593

Total additional paid-in capital		20,081			6.1			30,180			13.5
Retained earnings (deficits):
Legal reserve		400						400
Other:
Dividend reserves		1,000						1,000
Special reserve		41,300						41,300
Unappropriated retained earnings (deficits)		1,375						(44,240	)

Total retained earnings (deficits)		44,075			13.4			(1,539	)		(0.7	)
Treasury stock		(1,565	)		(0.5	)		(3,892	)		(1.7	)

Total Shareholders’ Equity		78,881			24.0			51,038			22.9

Valuation and Translation Adjustments:
Unrealized (losses) gains on investment securities		(61	)					109

Total Valuation and Translation Adjustments		(61	)		(0.0	)		109			0.1

Total Net Assets		78,820			24.0			51,148			23.0

Total Liabilities and Net Assets	¥	327,891			100.0	%	¥	222,855			100.0	%

140

Annual Financial Report

Non-consolidated Statements of Operations


	Year Ended March 31,
	2007					2008
			Percentage of						Percentage of
			Total Operating						Total Operating
	Amount		Revenues			Amount			Revenues

	(In millions except percentages)
Operating Revenues:
Interest income from notes and loans receivable	¥	28,372				¥	20,049
Other financial income (Note 1)		700					2,720
Other operating income (Note 2)		7,550					5,353

Total Operating Revenues		36,622		100.0	%		28,123			100.0	%
Operating Expenses:
Financial costs (Note 3)		3,360					4,897
Other operating expenses		635					424

Total Operating Expenses		3,996		10.9			5,321			18.9

Net Operating Revenues		32,626		89.1			22,801			81.1

Selling, General and Administrative Expenses:
Advertising expenses		215					35
Loan losses		363					155
Provision for loan losses		11,978					18,690
Provision for guarantee losses		970					749
Provision for losses on excess interest repayments		2,317					9,369
Salaries for directors		285					302
Salaries for employees		4,716					4,198
Bonuses for employees		398					335
Provision for bonuses for directors		53					-
Provision for bonuses for employees		520					452
Depreciation and amortization		596					653
Taxes and duties		630					488
Lease and rental expenses		1,668					1,477
Commission fees		1,208					762
Other		4,806					5,803

Total Selling, General and Administrative Expenses		30,729		83.9			43,472			154.6

Operating Income (Losses)		1,896		5.2			(20,670	)		(73.5	)

Other Income (Note 4):
Interest income from loans to affiliated companies		1,376					1,724
Interest income from securities		7					4
Dividends received		64					97
Dividends received from affiliated companies		2,270					2,813
Guarantee fees received from affiliated companies		59					9
Rental revenues from affiliated companies		-					199
Consignment fees received		43					37
Other		32					37

Total Other Income		3,853		10.5			4,924			17.5

Other Expenses:
Stock issuance-related costs		159					123
Bond issuance costs		76					-
Securitization facility costs		471					-
Losses on investment funds		-					357
Rental costs for affiliated companies		-					197
Provision for loan losses		24					-
Other		69					70

Total Other Expenses		802		2.2			749			2.7

Ordinary Income (Losses)		4,947		13.5			(16,495	)		(58.7	)

(Continued)

141

Annual Financial Report


		Year Ended March 31,
		2007						2008
					Percentage of						Percentage of
					Total Operating						Total Operating
		Amount			Revenues			Amount			Revenues

	(In millions except percentages)
(Continued)
Special Gains:
Gains on sales of investment securities			1,245						200
Gains on sales of investment in affiliated companies			399						-
Special dividends received from affiliated companies			220						-
Gains on retirement of bonds repurchased			-						75
Other			79						-

Total Special Gains			1,943			5.3			275			1.0

Special Losses:
Losses on sales of fixed assets (Note 5)			-						264
Losses on disposal of fixed assets (Note 6)			38						41
Losses on impairment (Note 7)			-						196
Losses on sales of investment securities			105						2,757
Impairment of investment securities			1,081						7,880
Losses on sales of investment in affiliated companies			3						-
Impairment of investment in affiliated companies			-						3,035
Impairment of other investment in affiliated companies			-						1,565
Provision for losses on investment			-						900
Provision for losses on affiliated companies			-						1,558
Provision for losses on affiliated businesses (Note 8)			-						2,963
Expenses for management reform program			-						1,955
Provision for losses on relocation of offices			-						154
Adjustment to estimated excess interest repayment-related costs			6,919						-

Total Special Losses			8,148			22.2			23,274			82.7

Losses before Income Taxes			(1,257	)		(3.4	)		(39,495	)		(140.4	)

Income Taxes:
Current			1,736						20
Prior years			-						1,300
Deferred			(3,059	)					4,798

Total Income Taxes			(1,322	)		(3.6	)		6,119			21.8

Net Income (Losses)		¥	64			0.2	%	¥	(45,615	)		(162.2	)%

142

Annual Financial Report

3)		Non-consolidated Statements of Changes in Net Assets

		(April 1, 2006 ~ March 31, 2007)


	Shareholders’ Equity
			Additional paid-in capital
							Total additional
	Common stock		General		Other		paid-in capital

	(In millions)
Balance as of March 31, 2006	¥	11,848	¥	14,253	¥	1,266	¥	15,519

Changes in items for the year ended March 31, 2007:
Stock issuance		4,440		4,333		-		4,333
Cash dividends (Note)		-		-		-		-
Cash dividends		-		-		-		-
Directors’ bonuses (Note)		-		-		-		-
Funding special reserve (Note)		-		-		-		-
Net income		-		-		-		-
Purchases of treasury stock		-		-		-		-
Sales of treasury stock		-		-		228		228
Net changes in items other than shareholders’ equity		-		-		-		-

Total changes for the year ended March 31, 2007		4,440		4,333		228		4,561

Balance as of March 31, 2007	¥	16,289	¥	18,586	¥	1,494	¥	20,081


	Shareholders’ Equity
	Retained Earnings
			Other
							Unappropriated			Total						Total
	Legal		Dividend		Special		retained			retained			Treasury			Shareholders’
	reserve		reserves		reserve		earnings			earnings			stock			Equity

	(In millions)
Balance as of March 31, 2006	¥	400	¥	1,000	¥	37,900	¥	6,742		¥	46,043		¥	(1,833	)	¥	71,579

Changes in items for the year ended March 31, 2007:
Stock issuance		-		-		-		-			-			-			8,774
Cash dividends (Note)		-		-		-		(1,503	)		(1,503	)		-			(1,503	)
Cash dividends		-		-		-		(455	)		(455	)		-			(455	)
Directors’ bonuses (Note)		-		-		-		(74	)		(74	)		-			(74	)
Funding special reserve (Note)		-		-		3,400		(3,400	)		-			-			-
Net income		-		-		-		64			64			-			64
Purchases of treasury stock		-		-		-		-			-			(0	)		(0	)
Sales of treasury stock		-		-		-		-			-			268			496
Net changes in items other than shareholders’ equity		-		-		-		-			-			-			-

Total changes for the year ended March 31, 2007		-		-		3,400		(5,367	)		(1,967	)		268			7,302

Balance as of March 31, 2007	¥	400	¥	1,000	¥	41,300	¥	1,375		¥	44,075		¥	(1,565	)	¥	78,881


Note:		These are items of appropriation of earnings resolved at the Annual Shareholders’ Meeting held in June 2006.

143

Annual Financial Report


	Valuation and Translation Adjustments
	Unrealized gains (losses)			Total Valuation and
	on investment securities			Translation Adjustments			Total Net Assets

	(In millions)
Balance as of March 31, 2006	¥	3,173		¥	3,173		¥	74,752

Changes in items for the year ended March 31, 2007:
Stock issuance		-			-			8,774
Cash dividends (Note)		-			-			(1,503	)
Cash dividends		-			-			(455	)
Directors’ bonuses (Note)		-			-			(74	)
Funding special reserve (Note)		-			-			-
Net income		-			-			64
Purchases of treasury stock		-			-			(0	)
Sales of treasury stock		-			-			496
Net changes in items other than shareholders’ equity		(3,235	)		(3,235	)		(3,235	)

Total changes for the year ended March 31, 2007		(3,235	)		(3,235	)		4,067

Balance as of March 31, 2007	¥	(61	)	¥	(61	)	¥	78,820



Note:		These are items of appropriation of earnings resolved at the Annual Shareholders’ Meeting held in June 2006.

144

Annual Financial Report

(April 1, 2007 ~ March 31, 2008)


	Shareholders’ Equity
			Additional paid-in capital
							Total additional
	Common stock		General		Other		paid-in capital

	(In millions)
Balance as of March 31, 2007	¥	16,289	¥	18,586	¥	1,494	¥	20,081

Changes in items for the year ended March 31, 2008:
Stock issuance		10,000		10,000		-		10,000
Net losses		-		-		-		-
Purchases of treasury stock		-		-		-		-
Sales of treasury stock		-		-		98		98
Net changes in items other than shareholders’ equity		-		-		-		-

Total changes for the year ended March 31, 2008		10,000		10,000		98		10,098

Balance as of March 31, 2008	¥	26,289	¥	28,586	¥	1,593	¥	30,180


	Shareholders’ Equity
	Retained earnings (deficits)
			Other							Total
							Unappropriated			retained						Total
	Legal		Dividend		Special		retained earnings			earnings			Treasury			Shareholders’
	reserve		reserves		reserve		(deficits)			(deficits)			stock			Equity

	(In millions)
Balance as of March 31, 2007	¥	400	¥	1,000	¥	41,300	¥	1,375		¥	44,075		¥	(1,565	)	¥	78,881

Changes in items for the year ended March 31, 2008:
Stock issuance		-		-		-		-			-			-			20,000
Net losses		-		-		-		(45,615	)		(45,615	)		-			(45,615	)
Purchases of treasury stock		-		-		-		-			-			(2,401	)		(2,401	)
Sales of treasury stock		-		-		-		-			-			74			173
Net changes in items other than shareholders’ equity		-		-		-		-			-			-			-

Total changes for the year ended March 31, 2008		-		-		-		(45,615	)		(45,615	)		(2,327	)		(27,843	)

Balance as of March 31, 2008	¥	400	¥	1,000	¥	41,300	¥	(44,240	)	¥	(1,539)		¥	(3,892	)	¥	51,038


	Valuation and Translation Adjustments
	Unrealized (losses) gains on			Total Valuation and
	investment securities			Translation Adjustments			Total Net Assets

	(In millions)
Balance as of March 31, 2007	¥	(61	)	¥	(61	)	¥	78,820

Changes in items for the year ended March 31, 2008:
Stock issuance		-			-			20,000
Net losses		-			-			(45,615	)
Purchases of treasury stock		-			-			(2,401	)
Sales of treasury stock		-			-			173
Net changes in items other than shareholders’ equity		171			171			171

Total changes for the year ended March 31, 2008		171			171			(27,671	)

Balance as of March 31, 2008	¥	109		¥	109		¥	51,148

145

Annual Financial Report

SIGNIFICANT ACCOUNTING POLICIES

Valuation Standards and Methods for Computation of Investment Securities

	(1)		Investment in affiliated companies

			Cost method, cost being determined by the moving average method

	(2)		Other securities

			Marketable securities Market value is determined by the market price at year-end. (Marketable securities are carried at market value with unrealized gains and losses. The unrealized gains and losses, net of taxes, are reported as a separate component of “NET ASSETS.” Cost of securities sold is computed using the moving average method.)

			Non-marketable securities Cost method, cost being determined by the moving average method. In addition, with respect to capital contributions to limited partnerships which operate as investment funds or similar organizations, the Company determines the valuation based on the Company’s interest in asset value.

2.		Derivatives (not applicable for the year ended March 31, 2007)

		Market value method

3.		Depreciation and Amortization of Fixed Assets

	(1)		Tangible fixed assets

			Tangible fixed assets are amortized using the declining balance method. However, depreciation of buildings newly acquired on or after April 1, 1998, excluding building improvements, is computed using the straight-line method.

			(Changes in accounting policy) (not applicable for the year ended March 31, 2007)

Following the amendment of the Japanese Corporation Tax Law, the Company changed the depreciation method for tangible fixed assets acquired on or after April 1, 2007 in accordance with the amended Japanese Corporation Tax Law. The effect on the financial results is not significant.

(Additional information) (not applicable for the year ended March 31, 2007)

Following the amendment of the Japanese Corporation Tax Law, with respect to tangible fixed assets acquired on or before March 31, 2007, the Company now amortizes the difference between the amount equivalent to 5% of the acquisition cost and memorandum price using the straight-line method over five years starting from the fiscal year after the residual value reaches 5% of acquisition cost, due to the adoption of the depreciation method prescribed in the amended Japanese Corporation Tax Law, and the amortized amount is included in depreciation expense. The effect on the financial results is not significant.

	(2)		Intangible fixed assets

			Internal-use software costs are amortized using the straight-line method over five years, which is the estimated useful life.

	(3)		Long-term prepaid expenses

			Long-term prepaid expenses are amortized using the straight-line method.

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Annual Financial Report

Deferred Assets

	(1)		The entire amounts of stock issuance-related costs and bonds issuance costs are treated as expenses for the year ended March 31, 2007.

			(Accounting Treatment for Deferred Assets) (not applicable for the year ended March 31, 2008)

			Beginning from the year ended March 31, 2007, the Company adopted PITF No. 19 “Accounting Treatments for Deferred Assets” issued by the ASBJ on August 11, 2006.

			As a result of this adoption, the Company presented all direct expenses incurred related to the issuance of stock as “Stock issuance-related costs” in “Other Expenses” for the year ended March 31, 2007, instead of as “Stock issuance costs” in “Other Expenses” for the year ended March 31, 2006.

			This adoption had no impact on profits and losses for the year ended March 31, 2007.

	(2)		Stock issuance-related costs (not applicable for the year ended March 31, 2007)

			The amount of stock issuance-related costs is treated as expenses as incurred for the fiscal year.

	(3)		Bond issuance costs (not applicable for the year ended March 31, 2007)

			The amount of bond issuance costs is amortized using the straight-line method over the redemption period.

			(Changes in accounting policy)

			With respect to bond issuance costs, the entire amount had been previously treated as “Other Expenses” as incurred. However, beginning from the year ended March 31, 2008, the Company changed its treatment so that such costs are amortized using the straight-line method over the redemption period, in order to present appropriate periodic profits and losses by taking into consideration an expected increase in the size of future fund procurement through bond issuances and the related increase in the significance of bond issuance costs in connection with the issuance of U.S. dollar-denominated unsecured straight bonds during the year ended March 31, 2008. In addition, the Company recorded the amortized amount as financial costs in “Operating Expenses” in order to ensure consistency with the treatment of interest expense on bonds.

			As a result of this change, compared with the results under the previous treatment, “Operating Expenses” increased by ¥73 million, and “Net Operating Revenues” decreased by the same amount, and “Operating Losses” increased by the same amount, while “Ordinary Losses” and “Losses before Income Taxes” decreased by ¥367 million, respectively.

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Annual Financial Report

Allowance and Reserves for Losses, and Accrued Expenses

	(1)		Allowance for loan losses

			Allowance for loan losses is maintained at a level that is adequate to provide for the estimated amount of loan losses. It is calculated by applying a percentage derived from past collection experience with respect to general loans, and by individually estimating uncollectible amounts with respect to certain doubtful loans.

	(2)		Accrued bonuses for employees

			Accrued bonuses for employees are provided for the payment of employees’ bonuses based on estimated amounts of future payments attributable to the corresponding year.

	(3)		Accrued bonuses for directors (not applicable for the year ended March 31, 2008)

			Accrued bonuses for directors are provided for the payment of directors’ bonuses based on estimated amounts of future payments attributable to the corresponding year.

			(Change in accounting policy)

			Regarding directors’ bonuses, the Company heretofore recognized these amounts as a decrease of unappropriated retained earnings through the approval by the Annual Shareholders’ Meeting. However, the Company changed the previous method so that directors’ bonuses would be recognized as expenses as incurred in accordance with ASBJ Statement No.4 “Accounting Standard for Directors’ Bonuses” issued on November 29, 2005.

			As a result of this change in accounting policy, the amount of “Provision for bonuses for directors” included in “Selling, General and Administrative Expenses” for the year ended March 31, 2007 increased by ¥53 million compared with the previous method. Consequently, “Operating Income” and “Ordinary Income” decreased by the same amount, and “Losses before Income Taxes” for the year ended March 31, 2007 increased by the same amount, respectively.

	(4)		Reserve for guarantee losses

			Reserve for guarantee losses is maintained at a level that is adequate to provide for estimated probable guarantee losses as of the end of the corresponding year.

	(5)		Reserve for losses on relocation of offices (not applicable for the year ended March 31, 2007)

			Reserve for losses on relocation of offices is provided at an amount based on a reasonable estimation for losses on disposal of fixed assets, restoration costs, and other related expenses which are expected to be incurred for scheduled office relocations.

	(6)		Reserve for losses on excess interest repayments

			Reserve for losses on excess interest repayments is provided, in order to prepare for refund claims from borrowers for repayments of interest in excess of the prescribed rate stipulated by the Interest Rate Restriction Law, at an amount based on a reasonable estimation taking into account past experience and current condition.

			In addition, ¥4,800 million and ¥3,859 million were included in “Allowance for loan losses” as of March 31, 2007 and 2008, respectively, in order to prepare for refund claims from borrowers for repayments of interest in excess of the prescribed rate stipulated by the Interest Rate Restriction Law.

			(Additional information) (not applicable for the year ended March 31, 2008)

For the year ended March 31, 2007, in connection with the announcement of “Audit Treatment of Reserve for Losses on Excess Interest Repayment Claims in Consumer Finance Companies” (the Industry Audit Committee Report No. 37 issued by the JICPA on October 13, 2006), the Company reviewed the previous method for estimation of “Reserve for losses on excess interest repayments” and “Allowance for loan losses” taking into account the recent status of excess interest repayment-related costs. As a result, the Company recorded an adjustment to estimated excess interest repayment-related costs of ¥6,919 million as “Special Losses,” representing the difference between the amounts estimated under the previous method and the amount newly estimated as a result of the Company’s review.

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			The amount of adjustment to estimated excess interest repayment-related costs consists of ¥3,460 million for “Provision for losses on excess interest repayments” and ¥3,459 million for “Provision for loan losses.”

			In addition, regarding “Reserve for losses on excess interest repayments,” the entire amount is recorded as “Long-term liabilities” since the Company cannot accurately calculate the amount that will be used within one year.

	(7)		Accrued retirement benefits for directors

			Accrued retirement benefits of the Company’s directors are provided at an amount which would have been required if all directors had terminated their services as of the balance sheet date. These amounts are determined in accordance with the Company’s internal rules.

	(8)		Allowance for investment losses (not applicable for the year ended March 31, 2007)

			Allowance for investment losses is provided for the estimated losses on investments in affiliated companies, taking into consideration the financial and operational conditions of each affiliated company.

			(Additional information)

			The Company recorded “Allowance for investment losses” beginning from the year ended March 31, 2008, in order to improve the Company’s balance sheet by reflecting the financial conditions of affiliated companies on a timely basis.

			As a result, the Company recorded “Provision for losses on investment” of ¥900 million as “Special Losses” and “Losses before Income Taxes” increased by the same amount for the year ended March 31, 2008.

	(9)		Reserve for losses on group businesses (not applicable for the year ended March 31, 2007)

			Reserve for losses on group businesses is provided at an amount based on a reasonable estimation in order to prepare for losses on guarantees of loans receivable and indemnification for losses on excess interest repayments of affiliated companies.

6.		Basis for Revenue Recognition

		Interest income from notes and loans receivable

			Interest income from notes and loans receivable is recognized on an accrual basis.

			In addition, accrued interest income is recognized at the lower of the contractual interest rate or the restricted rate stipulated by the Interest Rate Restriction Law in Japan.

7.		Accounting for Lease Transactions

		Finance leases, except leases for which the ownership of the leased assets is considered to be transferred to the lessee, are accounted for in the same manner as operating leases.

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Annual Financial Report

Hedging Activities (not applicable for the year ended March 31, 2007)

	(1)		Accounting for hedging activities

			Special treatment is adopted.

	(2)		Hedge instruments and hedge items

	1)		Hedge instruments Interest rate currency swaps

	2)		Hedge items Foreign currency-denominated bonds

	(3)		Hedging policy

			The Company utilizes derivative financial instruments in order to reduce its exposure to fluctuations in exchange rates on borrowings.

	(4)		Evaluation of hedge effectiveness

			Evaluation of hedge effectiveness is omitted due to adoption of the special treatment.

9.		Other Significant Items Relating to the Preparation of Non-consolidated Financial Statements

		Accounting treatment of consumption taxes

			Consumption taxes are excluded from transaction amounts.

			In addition, consumption taxes not subject to the exclusion are treated as expense for the corresponding year.

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Annual Financial Report

CHANGES IN ACCOUNTING TREATMENTS

(April 1, 2006 ~ March 31, 2007)

(Presentation of Net Assets in the Non-consolidated Balance Sheet)

			Beginning from the year ended March 31, 2007, the Company adopted ASB Statement No. 5 “Accounting Standards for Presentation of Net Assets in the Balance Sheet” and ASB Guidance No. 8 “Guidance on Accounting Standards for Presentation of Net Assets in the Balance Sheet,” both of which were issued on December 9, 2005.

			This adoption had no impact on profits and losses for the year ended March 31, 2007.

			The total amount of “SHAREHOLDERS’ EQUITY” in the previous presentation method is ¥78,820 million.

			Following revisions to the FS Regulations, issued by the Ministry of Finance (MOF Ordinance No.59, 1963), the Company prepared its financial statements as of and for the year ended March 31, 2007 based on the revised FS Regulations.

(April 1, 2007 ~ March 31, 2008)

(Changes in Classification of Rental Revenues from Affiliated Companies and Rental Costs for Affiliated Companies)

			With respect to rental revenues from affiliated companies and rental costs for affiliated companies, these amounts had been previously included in rental revenues from real estate and rental costs for real estate, respectively, and classified as “Other operating income” in “Operating Revenues” and “Other operating expenses” in “Operating Expenses,” respectively. However, beginning from the year ended March 31, 2008, the Company changed its accounting treatment so that “Rental revenues from affiliated companies” and “Rental cost for affiliated companies” were classified as “Other Income” and “Other Expenses,” respectively.

			Following the review of the real estate rental business, this change was made in order to present multiple-step statement of operations more appropriately by separating these amounts from operating transactions in the real estate rental business, taking into consideration an increase in the proportion of rental revenues from affiliated companies and rental costs for affiliated companies represented by rental revenues from real estate and rental costs for real estate, reflecting an increase in the number of affiliated companies.

			As a result of this change, compared with the results under the previous treatment, “Operating Revenues,” “Operating Expenses” and “Net Operating Revenues” decreased by ¥199 million, ¥197 million and ¥2 million, respectively, and “Operating Losses,” “Other Income” and “Other Expenses” increased by ¥2 million, ¥199 million and ¥197 million, respectively, for the year ended March 31, 2008. However, this change had no effect on “Ordinary Losses” and “Losses before Income Taxes” for the year ended March 31, 2008.

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Annual Financial Report

CHANGES IN PRESENTATION

(April 1, 2006 ~ March 31, 2007)

(Non-consolidated Statement of Operations)

			The non-consolidated statements of operations were previously presented in accordance with the revised “Form of Standard Financial Statements of Income in the Consumer Finance Business” issued by the Federation of Moneylenders Association of Japan on May 10, 2001; however, the Company has determined that such presentation no longer properly reflects the Company’s operating results, as the Company has been diversifying its business and the proportion of interest income from consumer loans to total operating revenues has decreased.

			As a result, the Company has changed the presentation of its non-consolidated statements of operations to conform to the standard format of non-consolidated statements of operations in order to reflect its current business operations.

			The presentation based on the previous standard is as follows:


	Year Ended March 31,
	2006					2007
			Percentage of					Percentage of
			Total Operating					Total Operating
	Amount		Revenues			Amount		Revenues

	(In millions except percentages)
Operating Revenues:
Interest income from notes and loans receivable	¥	28,472				¥	28,372
Other financial income (Note 1)		5					700
Other operating income (Note 2)		5,674					7,550

Total operating revenues		34,152		100.0	%		36,622		100.0	%
Operating Expenses:
Financial costs (Note 3)		2,382					3,360
Other operating expenses:
Costs of real estate leases and other		485					635
Advertising expenses		612					215
Loan losses		234					363
Provision for loan losses		8,304					11,978
Provision for guarantee losses		609					970
Provision for losses on excess interest repayments		540					2,317
Salaries for directors		221					285
Salaries for employees		4,587					4,716
Bonuses for employees		360					398
Provision for bonuses for directors		-					53
Provision for bonuses for employees		640					520
Depreciation and amortization		555					596
Taxes and duties		568					630
Lease and rental expenses		1,649					1,668
Commission fees		1,010					1,208
Other		4,333					4,806

Total operating expenses		27,095		79.3			34,726		94.8

Operating Income		7,056		20.7			1,896		5.2

(April 1, 2007 ~ March 31, 2008)

(Non-consolidated Balance Sheet)

			“Securities deposit,” which had been included in “Other” in “Investments and other assets” was presented separately beginning from the year ended March 31, 2008, as the amount became more than 1% of the total assets. The amount of “Securities deposit” as of March 31, 2007 was ¥998 million.

			“Long-term deposit,” which had been presented as a separate item, was included in “Other” in “Investments and other assets” beginning from the year ended March 31, 2008, as the amount became insignificant for financial purposes. The amount of “Long-term deposit” as of March 31, 2008 was ¥421 million.

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Annual Financial Report

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

Non-consolidated Balance Sheets

Note 1.

Assets and liabilities to affiliated companies which were not presented separately and included in corresponding items as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007		2008

	(In millions)
Operational investment securities (TMK Bonds)	¥	-	¥	9,200
Long-term accrued income		-		2,648

Note 2.

Assets pledged as collateral for short and long-term borrowings as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007		2008

	(In millions)
Loans receivable	¥	50,716	¥	40,408
Investment securities		-		1,366

Total	¥	50,716	¥	41,774

Corresponding borrowings secured by the above collateral as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007		2008

	(In millions)
Short-term borrowings	¥	30,000	¥	4,489
Current portion of long-term borrowings		6,690		22,519
Long-term borrowings		2,421		3,193

Total	¥	39,111	¥	30,201

Other than the above, loans receivable, that will be transferred pursuant to forward contracts, and the corresponding long-term borrowings, including its current portion as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007		2008

	(In millions)
Loans receivable	¥	7,060	¥	-
Current portion of long-term borrowings		7,020		-

In addition, the Company entrusted certain loans outstanding to a trust bank. In order to raise funds, the Company sold its senior beneficiary interest in these loans outstanding in trust to a third party. These transactions constitute a legal sale under Japanese law. However, since the Company reserves an option to repurchase the senior beneficiary interest, the Company does not recognize the extinguishment of the aforementioned interest in the financial statements herein, and the corresponding funds are recognized as long-term liability. There is no control over the interest by the Company except through the above option. Entrusted loans outstanding included in “Loans receivable” and the related long-term liability recorded as “Asset-backed securities” as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007		2008

	(In millions)
Loans receivable	¥	36,778	¥	23,709
Asset- backed securities		26,957		10,185

Moreover, the Company sold ¥13,208 million of loans outstanding to a company during the year ended March 31, 2008. The transaction constitutes a legal sale under Japanese law. However, since the company is under the control of the Company as a consolidated subsidiary, the Company does not recognize the extinguishment of the aforementioned loans receivable in the financial statements herein, and the corresponding funds are recognized as “Obligation under receivable buy-back agreement” as of March 31, 2008.

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Annual Financial Report

Note 3.		Unsecured consumer loans included in loans receivable as of March 31, 2007 and 2008 were ¥2,211 million and ¥1,227 million, respectively.

Note 4.		Loans receivable, with respect to which it is doubtful that all or a portion of principal can be collected, are recognized as bankrupt and delinquent loans receivable. Bankrupt loans receivable included in “Bankrupt and delinquent loans receivable” as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007		2008

	(In millions)
Bankrupt loans receivable	¥	1,714	¥	1,745

Note 5.

Commitments and contingencies as of March 31, 2007 is as follows:


	March 31,
	2007

	(In millions)
Guarantees for receivables in the credit guarantee business	¥	16,963
Guarantees for borrowings of affiliated companies:
Aprek Co., Ltd.		5,315
NIS Property Co., Ltd.		1,191

Commitments and contingencies as of March 31, 2008 is as follows:


	March 31,
	2008

	(In millions)
Guarantees for receivables in the credit guarantee business	¥	11,176
Guarantees for loans receivable held by affiliated companies		3,302
Guarantees for borrowings of affiliated companies		3,970

In addition to above, the Company has to indemnify Aprek Co., Ltd. until February 28, 2013, for losses that Aprek incurs due to claims for excess interest repayments raised by customers to whom Aprek lent money on or before March 3, 2008. Although it is difficult to estimate the amount of this liability, the Company estimates the amount of such losses as being ¥1,266 million, which has been included in “Reserve for losses on group businesses” as of March 31, 2008.

Note 6.		Rediscounted notes as of March 31, 2007 and 2008 are ¥121 million and ¥49 million, respectively.

Note 7.		As required by the Non-bank Bond Issuing Law, bankrupt and delinquent loans receivable as of March 31, 2007 and 2008 are classified as follows:


	March 31,
	2007		2008

	(In millions)
Bankrupt loans receivable	¥	1,811	¥	1,745
Delinquent loans receivable		5,813		14,764
Delinquent loans receivable (three months or more)		-		-
Restructured loans receivable		18,615		17,267

Total	¥	26,240	¥	33,776


Notes:		1. “Bankrupt loans receivable,” for which unreceived interest is not accrued, are loans delinquent for a considerable period of time and for which the principal or interest on such loans is unlikely to be recovered due to the occurrence of events defined in the Japanese Corporation Tax Law (Government Ordinance No. 97, 1965), Regulation 96-1(3), and Regulation 96-1(4).
		2. “Delinquent loans receivable” are loans receivable for which unreceived interest is not accrued due to customers’ delinquency, excluding loans receivable mentioned in “Bankrupt loans receivable” and “Restructured loans receivable.”
		3. “Delinquent loans receivable (three months or more)” are loans receivable for which the payments of principal and interest have been delayed for three months or more, excluding loans receivable mentioned in “Bankrupt loans receivable” and “Delinquent loans receivable.”
		4. “Restructured loans receivable” are loans receivable for which the Company reached agreement with the debtors on favorable treatment for the debtors such as reduction and exemption of interest, grace of principal and interest payments, relinquishment of loans receivable, among others, in order to reorganize the borrowers and support their financial conditions, excluding loans receivable mentioned in “Bankrupt loans receivable,” “Delinquent loans receivable” and “Delinquent loans receivable (three months or more).”

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Annual Financial Report

Note 8. (1)

In order to raise funds efficiently, the Company entered into syndicated loan agreements, overdraft agreements and loan commitment agreements with several banks. The limits and unused balance of these prescribed limit agreements as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007			2008

	(In millions)
Total overdraft facilities, loan commitment limits and syndicated loan credit lines	¥	14,000		¥	5,200
Outstanding borrowings within the limits		(13,000	)		(5,200	)

Unused balance	¥	1,000		¥	-

(2)	In providing its core business, integrated financial services, the Company contracts credit line agreements with certain customers, and these customers are able to borrow as needed within set credit lines. The unfunded credit lines as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007			2008

	(In millions)
Total amount of credit line agreements	¥	82,774		¥	19,499
Loans outstanding under credit line agreements		(29,265	)		(18,710	)

Total unfunded credit lines	¥	53,508		¥	788
Of which unfunded credit lines without loans outstanding		46,110			698

Certain portions of these agreements lapse without ever being used. Therefore, the amount of unfunded credit lines will not necessarily affect future cash flows of the Company.

Under these agreements, the Company also may discontinue or reduce the credit lines of customers based on the deterioration of their credit status or other substantial reasons. In addition, the Company examines the agreements regularly in order to take measures for credit preservation.

Note 9.	As of March 31, 2007, “Investment securities” included securities in the amount of ¥2,123 million loaned under share lending agreement, and “Deposits received” in “Current Liabilities” includes the amount of ¥1,640 million received as collateral.

Note 10.	Notes maturing on March 31, 2007 were settled on the business day for financial institutions.

	Since it was a non-business day for financial institutions on March 31, 2007, “Notes receivable” and “Rediscounted notes” as of March 31, 2007 include notes with the settlement date falling on March 31, 2007 in the amount of ¥12 million, respectively.

Note 11.	Total principal balance of loans receivable transferred under loan participation agreements, which were accounted for as a sale in accordance with the Accounting Committee Report No. 3, issued by the JICPA on June 1, 1995, was ¥3,000 million as of March 31, 2007.

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Annual Financial Report

Non-consolidated Statements of Operations

Note 1.

Details of other financial income for the years ended March 31, 2007 and 2008 are as follows:


	Year Ended March 31,
	2007		2008

	(In millions)
Other financial income:
Interest from deposits	¥	2	¥	21
Dividends on beneficial interest in trust		681		1,881
Interest income from securities		16		817

Total	¥	700	¥	2,720

Note 2.

Details of other operating income for the years ended March 31, 2007 and 2008 are as follows:


	Year Ended March 31,
	2007		2008

	(In millions)
Other operating income:
Fees received	¥	4,009	¥	1,709
Recovery from loans previously charged-off		842		931
Guarantee fees received		1,686		1,769
Rent revenue from real estate		217		23
Revenue from leases and installment loans		519		434
Other		275		483

Total	¥	7,550	¥	5,353

Note 3.

Details of financial costs for the years ended March 31, 2007 and 2008 are as follows:


	Year Ended March 31,
	2007		2008

	(In millions)
Financial costs:
Interest expense on borrowings	¥	3,032	¥	3,358
Interest expense on bonds		328		1,465
Amortization of bond issuance costs		-		73

Total	¥	3,360	¥	4,897

Note 4.	“Interest income from securities” and “Dividend income” in “Other Income” for the years ended March 31, 2007 and 2008 comprised interest and dividends received from investment securities.

Note 5.	Details of losses on sales of fixed assets for the year ended March 31, 2008 are as follows:


	Year Ended March 31,
	2008

	(In millions)
Losses on sales of fixed assets:
Buildings	¥	190
Structures		3
Land		70

Total	¥	264

Note 6.

Details of losses on disposal of fixed assets for the years ended March 31, 2007 and 2008 are as follows:


	Year Ended March 31,
	2007		2008

	(In millions)
Losses on disposal of fixed assets:
Buildings	¥	26	¥	17
Equipment		3		6
Restoration costs for real estate leases		8		17

Total	¥	38	¥	41

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Annual Financial Report

Note 7.

Details of losses on impairment of fixed assets for the year ended March 31, 2008 are as follows:

Location

Matsuyama Branch Office
Kyushu Sales Department

Tokyo Head Office

Use of fixed assets

Sales facilities

Idle assets

Assets scheduled to be sold

Type of fixed assets and amount (in millions):

Buildings
Equipment

¥2
¥1

Telephone
rights

¥87

Artworks
(Equipment)

¥105

	The Company classifies its operational assets into the business units used in management accounting. Idle assets and assets scheduled to be sold are classified into units on an individual basis.

	Due to continuous operating losses from sales facilities, idle state of telephone rights with no plan for future use, and decision on sales of artworks, the Company reduced the book value of abovementioned assets to the estimated recoverable amount. As a result, impairment losses, which were included in “Special Losses,” amounted to ¥196 million for the year ended March 31, 2008.

	The recoverable amount of sales facilities was measured at use value, which was equivalent to zero value, and the recoverable amount of artworks and telephone rights were measured at net realizable value using the price estimated by third parties.

Note 8.	Provision for losses on group businesses is provided in order to prepare for losses on guarantees of loans receivable and indemnification for losses on excess interest repayments of an affiliated company, which was offset by ¥3,271 million of guarantee fees received and indemnification fees received from the affiliated company for the year ended March 31, 2008.

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Annual Financial Report

Non-consolidated Statements of Changes in Net Assets

(April 1, 2006 ~ March 31, 2007)

Changes in the number of shares of treasury stock for the year ended March 31, 2007 are as follows:


	Year Ended March 31, 2007

	(Thousand shares except type)
Type of share	Common stock
As of the end of the previous fiscal year		40,051
Increase		40,055
Decrease		11,757
As of the end of the fiscal year		68,348

The following table shows primary reasons for the above changes:


	Year Ended March 31, 2007

	(Thousand shares)
Increase due to:
2-for-1 stock split completed on April 1, 2006		40,051
Purchase of fractional shares		4
Decrease due to:
Exercise of stock acquisition rights		11,757

(April 1, 2007 ~ March 31, 2008)

Changes in the number of shares of treasury stock for the year ended March 31, 2008 are as follows:


	Year Ended March 31, 2008

	(Thousand shares except type)
Type of share	Common stock
As of the end of the previous fiscal year		68,348
Increase		60,023
Decrease		122,096
As of the end of the fiscal year		6,276

The following table shows primary reasons for the above changes:


	Year Ended March 31, 2008

	(Thousand shares)
Increase due to:
Purchase of treasury stock upon approval by the Board of Directors		60,000
Purchase of fractional shares		23
Decrease due to:
Exercise of stock acquisition rights		3,270
1-for-20 reverse stock split completed on August 31, 2007		118,825

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Annual Financial Report

Lease

Finance leases, except leases for which the ownership of the leased assets is transferred to the lessee, are as follows:

(Lessee)

Equivalents of acquisition costs, accumulated amortization and book value as of March 31, 2007 and 2008 are as follows:


	March 31,
		2007			2008

	(In millions)
Equipment:
Acquisition costs equivalent		¥	2,255		¥	1,311
Accumulated amortization equivalent			(1,693	)		(1,015	)

Book value equivalent			561			295
Software:
Acquisition costs equivalent			267			84
Accumulated amortization equivalent			(213	)		(64	)

Book value equivalent			54			19
Other:
Acquisition costs equivalent			4			-
Accumulated amortization equivalent			(4	)		-

Book value equivalent			0			-

Total:
Acquisition costs equivalent			2,527			1,395
Accumulated amortization equivalent			(1,910	)		(1,080	)

Book value equivalent		¥	616		¥	315

The amounts of outstanding future minimum lease payments as of March 31, 2007 and 2008 are as follows:


	March 31,
		2007		2008

	(In millions)
Due within one year		¥	367	¥	191
Due after one year			263		131

Total		¥	630	¥	323

Lease payments, amortization expense equivalent and interest expense equivalent for the years ended March 31, 2007 and 2008 are as follows:


	Year Ended March 31,
		2007		2008

	(In millions)
Lease payments		¥	569	¥	389
Amortization expense equivalent			546		373
Interest expense equivalent			16		10

The method used to calculate amortization expense equivalent and interest expense equivalent of leased property is as follows:

	•		Amortization expense equivalent is calculated by using the straight-line method over the respective lease terms with no residual value.

	•		Interest expense equivalent of a lease obligation is calculated as the difference between the total lease payments and the acquisition cost equivalent of the leased property, with the amount allocated to each relevant accounting period using the interest method.

(Impairment of Fixed Assets)

There is no impairment loss allocated to leased assets.

159

Annual Financial Report

Investment Securities

Information regarding marketable investments in affiliated companies as of March 31, 2007 and 2008 is as follows:


	March 31,
	2007							2008
	Carrying Value		Market Value		Difference			Carrying Value		Market Value		Difference

	(In millions)
Investment in subsidiaries	¥	1,946	¥	34,452	¥	32,506		¥	500	¥	10,688	¥	10,188
Investment in affiliates		2,720		2,201		(519	)		1,835		1,835		-

Total	¥	4,667	¥	36,654	¥	31,987		¥	2,335	¥	12,523	¥	10,188

Deferred Income Taxes

Significant components of deferred tax assets and liabilities as of March 31, 2007 and 2008 are as follows:


	March 31,
	2007		2008

	(In millions)
Deferred tax assets:
Loan losses	¥	22	¥	293
Allowance for loan losses		1,534		8,236
Reserve for guarantee losses		392		303
Accrued business tax		95		120
Accrued retirement benefits for directors		132		131
Accrued bonuses for employees		210		183
Reserve for losses on excess interest repayments		1,863		4,360
Impairment of fixed assets		239		79
Allowance for investment losses		-		364
Reserve for losses on group businesses		-		2,369
Impairment of investment securities		-		1,319
Unrealized losses on investment securities		42		-
Losses carryforwards		-		3,421
Other		308		808
Valuation allowance		-		(21,991	)

Total deferred tax assets	¥	4,841	¥	-

The reconciliation of differences between the statutory tax rate and the effective income tax rate is omitted due to losses before income taxes for the years ended March 31, 2007 and 2008.

Business Combinations

	(April 1, 2006 ~ March 31, 2007)

			Not applicable

	(April 1, 2007 ~ March 31, 2008)

			Not applicable

160

Annual Financial Report

Per Share Data


	Year Ended March 31,
	2007		2008

	(In yen)
Non-consolidated:
Net assets per share	¥	27.66	¥	213.46
Net income (losses) per share:
Basic		0.02		(292.26	)
Diluted		0.02		-


Notes:	1. Figure for diluted net income per share for the year ended March 31, 2008 was not presented because of net losses per share.
	2. The basis for the calculation of basic and diluted net income (losses) per share presented above is as follows:


	Year Ended March 31,
	2007		2008

	(In millions)
Net income (losses) on the non-consolidated statements of operations	¥	64	¥	(45,615	)
Net income (losses) attributable to common stock		64		(45,615	)
Amounts not attributable to common shareholders		-		-
Adjustment to net income for the calculation of diluted net income per share		-		-


	Year Ended March 31,
	2007		2008

	(Thousand shares)
Average number of outstanding shares		2,818,487		156,077
Shares with dilutive effect:
Stock acquisition rights		11,451		-

Total number of shares with dilutive effect		11,451		-

In addition, shares without dilutive effect which are not reflected in the calculation of diluted net income per share for the years ended March 31, 2007 and 2008 are as follows:

(April 1, 2006 ~ March 31, 2007)


			Year Ended March 31,
			2007

	Type		Stock acquisition rights
	Special resolution date		June 22, 2005
	Number of stock acquisition rights		3,950 units

The details of shares mentioned above are stated in “ITEM 4. OVERVIEW OF THE COMPANY – (2) Information on Stock Acquisition Rights and Convertible Bonds.”

(April 1, 2007 ~ March 31, 2008)


	Year Ended March 31,
	2008

Type	Stock acquisition rights	Stock acquisition rights	Stock acquisition rights	Stock acquisition rights
Special resolution date	June 22, 2004	June 22, 2005	June 22, 2005	February 18, 2008
Number of stock acquisition rights	2,444 units	13,000 units	3,050 units	87,500 units

The details of shares mentioned above are stated in “ITEM 4. OVERVIEW OF THE COMPANY – 1. INFORMATION ON CAPITAL STOCK – (2) Information on Stock Acquisition Rights and Convertible Bonds.”

161

Annual Financial Report

Stock split and reverse stock split

(April 1, 2006 ~ March 31, 2007)


On April 1, 2006 the Company completed a 2-for-1 stock split. If the stock split were deemed to have occurred on April 1, 2005, the retroactively adjusted per share data for the year ended March 31, 2006 would have been as follows:

		Year Ended March 31, 2006

		(In yen)
	Net assets per share	¥	27.33
	Net income per share:
	Basic		2.66
	Diluted		2.51

(April 1, 2007 ~ March 31, 2008)


On August 31, 2007, the Company completed a 1-for-20 reverse stock split. If the reverse stock split were deemed to have occurred on April 1, 2006, the retroactively adjusted per share data for the year ended March 31, 2007 would have been as follows:

		Year Ended March 31, 2007

		(In yen)
	Net assets per share	¥	553.21
	Net income per share:
	Basic		0.46
	Diluted		0.46

162

Annual Financial Report

Significant Subsequent Events

(April 1, 2006 ~ March 31, 2007)


1.	On May 29, 2007, the Board of Directors approved an issuance of “NIS GROUP CO., LTD., U.S. Dollar-denominated Unsecured Straight Bonds,” which were issued on June 20, 2007 as follows:


			(1)	Total amount of issue		US$200 million
			(2)	Issue price		100% of par value
			(3)	Stock payment date		June 20, 2007
			(4)	Maturity		June 20, 2012
			(5)	Interest rate		8.06% per annum
			(6)	Use of proceeds		General corporate purposes and refinancing


2.	On June 23, 2007, the Annual Shareholders’ Meeting approved a reverse stock split as follows:


			(1)	Reverse stock split method		1-for-20 reverse stock split, and the number of outstanding shares of the Company’s common stock is to be reduced from 2,917,887,012 shares to 145,894,350 shares.
			(2)	Reverse stock split schedule:
				1)	Last date for submission of share certificate	August 31, 2007
					Share certificates submission period	From July 31, 2007 to August 31, 2007
				2)	Effective date	August 31, 2007


		If the reverse stock split were deemed to have occurred on April 1, 2005, the retroactively adjusted per share data for the years ended March 31, 2006 and 2007 would have been as follows:


	Year Ended March 31,
	2006		2007

	(In yen)
Net assets per share	¥	546.53	¥	553.21
Net income per share:
Basic		53.16		0.46
Diluted		50.22		0.46

On June 23, 2007, the Board of Directors approved repurchases of shares of the Company’s common stock pursuant to the Corporate Law as follows:

(1)

Reason for Repurchases

The Company decided to repurchase shares of its common stock in order to improve its capital efficiency and to expeditiously implement its capital policies in the future.

(2)

Outline of Repurchases:

Class of shares to be repurchased

Common stock

Total number of shares to be repurchased

Up to 60,000,000 shares

Aggregate amount of repurchases

Up to 3 billion yen

Period for repurchases

1 year from June 25, 2007

Acquisition method

Ordinary market transactions on the Tokyo Stock Exchange

163

Annual Financial Report

(April 1, 2007 ~ March 31, 2008)

(1)

Name of the companies concerned and descriptions of their businesses


1)	Surviving Company
	Name:	NIS Group Co., Ltd.
	Business Description:	Provider of SME loans, consumer loans and credit guarantee services

2)	Dissolved Company
	Name:	NIS Property Co., Ltd.
	Business Description:	Real estate transactions, real estate development and asset management

	(2)		Legal form of the business combination

			An absorption merger with the Company as the surviving company and NIS property as the dissolved company.

	(3)		Name of the company after the business combination

			NIS Group Co., Ltd.

	(4)		Summary and the purpose of the transaction

			The Group focuses on the real estate-related business primarily though NIS Property, which engages in the principal investment business investing in Japanese real estate market. The aim of this merger is the further increase of operational efficiency through group reorganization.

	2.		Summary of Accounting Treatments

			A transaction under a common control in accordance with “Accounting Standard for Business Combination” issued by the Business Accounting Council on October 31, 2003 and ASB Guidance No. 10 “Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures” issued by the ASBJ as last amended on November 15, 2007.

164

Annual Financial Report

Non-consolidated Supplementary Statements

Details of Investment Securities

(Equity Stocks)


	March 31, 2008
	Number of Shares		Book Value

	(In millions except shares)
Investment securities:
Other securities:
Xinhua Finance Limited		114,717	¥	893
Yume Corporation Co., Ltd.		280,000		350
ArtMasters Co., Ltd.		600		270
Masterpiece Group Inc.		3,000		240
Capital Partners Securities Co., Ltd.		6,700		201
Sea Capital Co., Ltd.		7,000		168
DC CREATE Co., Ltd.		540		135
C&C PRO Co., Ltd.		1,000		130
I Pet Co., Ltd.		5,000		120
IPLocks, Inc.		500,000		110
148 other companies		10,353,785		2,899

Total		11,272,342	¥	5,517

(Bonds)


	March 31, 2008
		Face Value		Book Value

		(In millions)
Operational investment securities:
Other securities:
1st Tokutei Mokuteki Kaisha (“TMK”) Bonds issued by Stella Hills TMK		¥	9,200	¥	9,200
1st General Secured TMK Bonds Series B issued by Residential Property Investment TMK			1,100		1,100
1st General Secured TMK Bonds Series B issued by TMK Gold			700		700
1st TMK Bonds Series B issued by Blue Hole TMK			300		300

Subtotal			11,300		11,300
Investment securities:
Other securities:
Bonds with warrants (9 companies)			285		104

Subtotal			285		104

Total		¥	11,585	¥	11,404

(Other)


	March 31, 2008
		Number of Units		Book Value

		(In millions except units)
Investment securities:
Other securities:
Warrant securities (6 companies)			3,508	¥	83
Investment funds:
Alfex Japan Long Short			101,645		1,138
NVCC Chinese New Star 1st Investment Fund			5		459
WP 1st Investment Fund			4		410
NH Global Incubation Investment Fund			6		393
Fewtram 1st Investment Fund			2		200
Tokyo Hybrid Venture Investment Fund			200		122
Japan Spread Partners III Investment Fund			1		90
8 other portfolios			59		359

Subtotal			101,922		3,173

Total			105,431	¥	3,257

165

Annual Financial Report

Details of Fixed Assets


													Accumulated
	Balance as of									Balance as of			Depreciation and		Depreciation
	March 31,									March 31,			Amortization as of		and
	2007			Increase			Decrease			2008			March 31, 2008		Amortization		Net Balance

	(In millions)
Tangible fixed assets:
Buildings	¥	-		¥	-		¥	-		¥	264		¥	103	¥	49	¥	160
Structures		-			-			-			-			-		0		-
Equipment		-			-			-			358			180		37		178
Land		-			-			-			-			-		-		-

Total tangible fixed assets		-			-			-			622			283		87		339

Intangible fixed assets:
Software		-			-			-			2,898			1,671		556		1,226
Software development in progress		-			-			-			109			-		-		109
Telephone rights		-			-			-			43			-		-		43

Total intangible fixed assets		-			-			-			3,051			1,671		556		1,379

Long-term prepaid expenses		89			20			36			73			28		19		45
		(1	)		(-	)		(1	)		(-	)
Deferred assets:
Deferred bond issuance costs		-			440			-			440			73		73		367

Total deferred assets		-			440			-			440			73		73		367


Notes:	1.	The amounts of tangible fixed assets and intangible fixed assets are omitted in “Balance as of March 31, 2007,” “Increase” and “Decrease,” as these amounts are less than 1% of total assets.
	2.	The amounts presented in parentheses are the amounts of amortization for insurance expense and deferred interest expense. These amounts are not included in the amounts of “Accumulated Depreciation and Amortization” and “Depreciation and Amortization” because aforementioned expenses are different from depreciation and amortization in substance.

Details of Allowance and Reserves for Losses, and Accrued Expenses


	Balance as of				Decrease		Decrease		Balance as of
	March 31, 2007		Increase		(Purpose Usage)		(Other)		March 31, 2008

	(In millions)
Allowance for loan losses	¥	17,117	¥	22,905	¥	11,457	¥	1,610	¥	26,955
Allowance for investment losses		-		900		-		-		900
Accrued bonuses for employees		520		452		520		-		452
Accrued bonuses for directors		53		-		52		0		-
Reserve for guarantee losses		970		749		970		-		749
Reserve for losses on relocation of offices		-		154		-		-		154
Accrued retirement benefits for directors		328		-		3		-		324
Reserve for losses on excess interest repayments		4,600		9,369		3,203		-		10,766
Reserve for losses on group businesses		-		6,234		384		-		5,850


Notes:	1.	The amount of “Decrease (Other)” of “Allowance for loan losses” represents the total of the amount recovered by collection of ¥483 million and total amount of ¥1,127 million due to adjustment to allowance of loan losses based on the actual charged-off ratio of general loans as well as review of status of specific loans.
	2.	The amount of “Decrease (Other)”of “Accrued bonuses for directors” represents the amount charged on and refunded from companies to which such directors were seconded.
	3.	The amount of “Provision for losses on group businesses” in “Special Losses” in the statements of operations was the amount after offsetting ¥3,271 million of guarantee fees and indemnification fees received from an affiliated company.

166

Annual Financial Report

(2)

Details of Major Assets and Liabilities

Cash and Deposits


	March 31, 2008

	(In millions)
Cash	¥	22
Deposits:
Checking account		13
Ordinary deposit		3,181
Notice deposit		700
Time deposit		3,041
Foreign currency deposit		27

Total deposits		6,964

Total	¥	6,986

	2)		Notes Receivable

			The summary of promissory notes receivable originated from commercial bills discounting is presented below:

(a) By industry


	March 31, 2008

	(In millions)
Manufacturing	¥	24
Construction		2
Transport / Communication		0
Wholesale / Retail / Restaurants		20
Services		3

Total	¥	51

(b) By maturity


	March 31, 2008

	(In millions)
April 2008	¥	23
May 2008		2
June 2008		14
July 2008		10
August 2008 and thereafter		-

Total	¥	51

	3)		Loans Receivable

			The amounts of loan originations and collections for the year ended March 31, 2008 are as follows:

Amount

Turnover Ratio (times)

Balance as of

Amount of

Transferred to

Balance as of

Collection Ratio (%)

(B)

March 31, 2007

Origination

Collection

Other

Loans

March 31, 2008

(C)

× 100

(A)+(D)

(A)

(B)

(C)

Accounts

Charged-off

(D)

(A)+(B)

(In millions except percentage and times)

194,824

174,921

225,508

13,112

7,339

123,785

60.99

1.10

Note: “Amount Transferred to Other Accounts” refers to the amount transferred to “Bankrupt and delinquent loans receivable.”

167

Annual Financial Report

Loans to Affiliated Companies (Current Assets)


	March 31, 2008

	(In millions)
Nissin Servicer Co., Ltd.	¥	10,550
Aprek Co., Ltd.		3,600

Total	¥	14,150

Other Investment in Affiliated Companies


	March 31, 2008

	(In millions)
Nissin China Holdings., LLC	¥	11,754
NISF 1 LLC		6,176
Future 21st LLC		929
Stella Hills TMK		390
Aries Ltd.		220
7 other companies		509

Total	¥	19,981

Loans to Affiliated Companies (Investments and other assets)


	March 31, 2008

	(In millions)
NIS Property Co., Ltd.	¥	13,464
NIS Lease Co., Ltd.		10,157
NIS Trading Co., Ltd.		300
3 other companies		285

Total	¥	24,206

Bankrupt and Delinquent Loans Receivable


	March 31, 2008

	(In millions)
Secured loans	¥	8,956
SME loans		5,577
Discount notes		35
Consumer loans		1,940

Total	¥	16,509

Short-term Borrowings


	March 31, 2008

	(In millions)
Regional banks	¥	3,784
Long-term credit banks		3,489
Foreign banks		8,005
Non-life insurance companies		1,000
Business corporations		700

Total	¥	16,979

168

Annual Financial Report

Current Portion of Long-term Borrowings


	March 31, 2008

	(In millions)
Commercial banks	¥	1,670
Regional banks		13,349
Trust banks		870
Long-term credit banks		334
Foreign banks		1,086
Cooperative banks / Credit unions		1,802
Non-life insurance companies		884
Securities firm		20,364
Business corporations		4,713

Total	¥	45,072

10)

Current Portion of Bonds


	March 31, 2008

	(In millions)
7th unsecured straight bonds	¥	7,500
8th unsecured straight bonds		9,800
10th unsecured straight bonds		9,700
5th unsecured private placement bonds		400

Total	¥	27,400


Note:		The information of issuance dates and interest rates is described in “ITEM 5. FINANCIAL STATEMENTS – 1. CONSOLIDATED FINANCIAL STATEMENTS – (1) Consolidated Financial Statements – 5) Consolidated Supplementary Statements – 1) Details of Bonds and Convertible Bonds.”

11)

Obligation under receivable buy-back agreement


	March 31, 2008

	(In millions)
Transaction date:
November 2007	¥	13,208

Total	¥	13,208

12)

Bonds (Long-term Liabilities)


	March 31, 2008

	(In millions)
9th unsecured straight bonds	¥	5,000
U.S. dollar-denominated unsecured straight bonds		24,480

Total	¥	29,480


Note:		The information of issuance dates and interest rates is described in “ITEM 5. FINANCIAL STATEMENTS – 1. CONSOLIDATED FINANCIAL STATEMENTS – (1) Consolidated Financial Statements – 5) Consolidated Supplementary Statements – 1) Details of Bonds and Convertible Bonds.”

(3)		Other

		None

169

Annual Financial Report

ITEM 6. ADMINISTRATIVE MATTERS REGARDING THE COMPANY’S STOCK



Fiscal year		From April 1 to March 31

Annual Shareholders’ Meeting		During June in each year

Record date		March 31

The type of shares certificate		100 shares, 1,000 shares, and 10,000 shares

Record date for dividends		September 30 and March 31

Number of shares to constitute one unit of share		100 shares

Stock transfer:
Place of business handling		Head Office, The Chuo Mitsui Trust Banking Co., Ltd. 33-1, Shiba 3-chome, Minato-ku, Tokyo
Agent		The Chuo Mitsui Trust and Banking Co., Ltd. 33-1, Shiba 3-chome, Minato-ku, Tokyo
Intermediary offices		Branches of The Chuo Mitsui Trust and Banking Co., Ltd. Head office and branches of Japan Securities Agents, Ltd.
Fee for stock transferring		Free of charge
Fee for issuing share certificate		Free of charge

Purchase of shares below one unit (under the Japanese Unit Share System):
Place of business handling		Head Office, The Chuo Mitsui Trust Banking Co., Ltd. 33-1, Shiba 3-chome, Minato-ku, Tokyo
Agent		The Chuo Mitsui Trust and Banking Co., Ltd. 33-1, Shiba 3-chome, Minato-ku, Tokyo
Intermediary offices		Branches of The Chuo Mitsui Trust and Banking Co., Ltd. Head office and branches of Japan Securities Agents, Ltd.
Purchase commission		Handling charges as stipulated by the securities companies designated by the Company for the repurchase.

Method of public notice		Public notice by electronic means. However, a public notice will be inserted in the Nihon Keizai Shimbun in case where public notice by electronic means is impossible. URL for public notification: http://www.nisgroup.jp/Japanese/ir/hk.cfm URL for balance sheet and statement of income: http://www.nisgroup.jp/Japanese/ir/kk.cfm

Special privileges for the shareholders		None


Note:		Shareholders holding shares of less than one unit shall not be able to exercise rights other than the following for shares less than one unit:

Rights set forth in each item of Article 189-2 of the Corporate Law.

Rights to make a claim under provisions set forth in Article 166-1 of the Corporate Law.

Rights to subscribe allotment of shares and warrant shares corresponding to the number of shares held by each shareholder.

170

Annual Financial Report

ITEM 7. REFERENCE INFORMATION FOR THE COMPANY

1.		Information on a Parent Company

		The Company does not have any parent company.

2.		Other Information

		The following documents were submitted to Director of Kanto Local Finance Bureau from April 1, 2007 to the filing date of the current annual financial report.

	(1)		Annual Financial Report and Attachment for the year ended March 31, 2007 was submitted on June 25, 2007.
	(2)		Correction Report for the abovementioned Annual Financial Report was submitted on October 29, 2007.
	(3)		Semi-annual Financial Report for the six months ended September 30, 2007 was submitted on December 13, 2007.
	(4)		Securities Registration Statement for Third-Party Allotment of New Shares and Attachment, and Securities Registration Statement for Equity Warrants and Attachment were submitted on January 11, 2008.
	(5)		Correction Reports for the abovementioned Securities Registration Statement for Third-Party Allotment of New Shares and Securities Registration Statement for Equity Warrants were submitted on January 30, 2008, February 4, 2008, February 15, 2008, and February 18, 2008.
	(6)		Extraordinary Report related to changes of Representative Directors in accordance with Cabinet Office Ordinance 19-2(9) on Disclosure of Corporate Information, etc. was submitted on September 27, 2007.
			Extraordinary Report related to changes of Principal Shareholders in accordance with Cabinet Office Ordinance 19-2(4) on Disclosure of Corporate Information, etc. was submitted on February 20, 2008.
			Extraordinary Report related to changes of the Specified Subsidiary in accordance with Cabinet Office Ordinance 19-2(3) on Disclosure of Corporate Information, etc. was submitted on February 21, 2008.
			Extraordinary Report related to the Absorption Merger of a Subsidiary in accordance with Cabinet Office Ordinance 19-2(7)-3 on Disclosure of Corporate Information, etc. was submitted on May 23, 2008.
	(7)		Securities Issuance Registration Statement for Bonds was submitted on November 22, 2007.
	(8)		Amendments to Security Issuance Registration Statement for Bonds and Attachment were submitted on November 26, 2007, December 14, 2007, and February 25, 2008.
	(9)		Purchase Report of Treasury Stock for the period from June 25, 2007 to June 30, 2007 was submitted on July 10, 2007.
			Purchase Report of Treasury Stock for the period from July 1, 2007 to July 31, 2007 was submitted on August 10, 2007.
			Purchase Report of Treasury Stock for the period from August 1, 2007 to August 31, 2007 was submitted on September 12, 2007.
			Purchase Report of Treasury Stock for the period from September 1, 2007 to September 30, 2007 was submitted on October 11, 2007.
			Purchase Report of Treasury Stock for the period from October 1, 2007 to October 31, 2007 was submitted on November 12, 2007.
			Purchase Report of Treasury Stock for the period from November 1, 2007 to November 30, 2007 was submitted on December 14, 2007.
			Purchase Report of Treasury Stock for the period from December 1, 2007 to December 31, 2007 was submitted on January 15, 2008.
			Purchase Report of Treasury Stock for the period from January 1, 2008 to January 31, 2008 was submitted on February 12, 2008.
			Purchase Report of Treasury Stock for the period from February 1, 2008 to February 29, 2008 was submitted on March 14, 2008.
			Purchase Report of Treasury Stock for the period from March 1, 2008 to March 31, 2008 was submitted on April 14, 2008.
			Purchase Report of Treasury Stock for the period from April 1, 2008 to April 30, 2008 was submitted on May 14, 2008.
			Purchase Report of Treasury Stock for the period from May 1, 2008 to May 31, 2008 was submitted on June 10, 2008.
	(10)		Amendment to Purchase Report of Treasury Stock for the abovementioned Purchase Report of Treasury Stock submitted on January 15, 2008 was submitted on February 8, 2008.

171

Annual Financial Report

SECOND SECTION: GUARANTOR COMPANY OF THE COMPANY

None

172

Annual Financial Report

Report of Independent Certified Public Accountants

June 23, 2007

Board of Directors of
NIS GROUP CO., LTD.

Sanyu & Co.

Representative Partner, Engagement Partner: Kazuyuki Togo
Engagement Partner: Tomohiro Koto

Pursuant to Article 193-2 of “Securities and Exchange Law,” we have audited the consolidated balance sheet, the consolidated statement of income, the consolidated statement of changes in net assets, the consolidated statement of cash flows and the consolidated supplementary statements of NIS GROUP CO., LTD. included in “FINANCIAL STATEMENTS” as of and for the year ended March 31, 2007. These financial statements are the responsibility of the management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the accompanying consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2007, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in Japan.

Additional information:

1.		As discussed in “SIGNIFICANT ITEMS RELATING TO THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS – 1. Scope of Consolidation,” the Company has prepared the financial statements under “Practical Solution on Application of Control Criteria and Influence Criteria to Investment Associations” adopted in the fiscal year ended March 31, 2007.
2.		As discussed in “SIGNIFICANT ITEMS RELATING TO THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS – 4. Significant Accounting Policies – (3) Allowance for Loan Losses and Accrued Expenses – 3) Accrued bonuses for directors,” the Company has prepared the financial statements under “Accounting Standard for Directors’ Bonuses” adopted in the fiscal year ended March 31, 2007.
3.		As discussed in “SIGNIFICANT ITEMS RELATING TO THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS – 4. Significant Accounting Policies – (3) Allowance for Loan Losses and Accrued Expenses – 6) Reserve for losses on excess interest repayments,” reserve for losses on excess interest repayments is recorded based on the “Audit Treatment of Reserve for Losses on Excess Interest Repayment Claims in Consumer Finance Companies” beginning from the fiscal year ended March 31, 2007.
4.		As discussed in “SIGNIFICANT ITEMS RELATING TO THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS,” the Company has prepared the financial statements under “Guidance on Accounting Standard for Share-based Payments” adopted in the fiscal year ended March 31, 2007.
5.		As discussed in “Segment Information – 1. Business Segment Information – Note 5. Changes in business segment,” real estate business, which was included in other businesses heretofore, is disclosed as a separate segment for financial reporting purposes, beginning from the year ended March 31, 2007.
6.		As discussed in “Significant Subsequent Events,” the Company issued “NIS GROUP CO., LTD., U.S. Dollar-denominated Unsecured Straight Bonds” on June 20, 2007, in accordance with the resolution approved at the Board of Directors’ Meeting held on May 29, 2007.

We have no interest in NIS GROUP CO., LTD. and its consolidated subsidiaries, which should be disclosed pursuant to the provision of the Certified Public Accountants Law.

173

Annual Financial Report

Report of Independent Certified Public Accountants

June 20, 2008

Board of Directors of
NIS GROUP CO., LTD.

Sanyu & Co.

Representative Partner, Engagement Partner: Kazuyuki Togo
Engagement Partner: Tomohiro Koto

Pursuant to Article 193-2-1 of “Financial Instruments and Exchange Law,” we have audited the consolidated balance sheet, the consolidated statement of operations, the consolidated statement of changes in net assets, the consolidated statement of cash flows and the consolidated supplementary statements of NIS GROUP CO., LTD. included in “FINANCIAL STATEMENTS” as of and for the year ended March 31, 2008. These financial statements are the responsibility of the management. Our responsibility is to express an opinion on these financial statements based on our audit.

In our opinion, the accompanying consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2008, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in Japan.

Additional information:

1.		As discussed in “SIGNIFICANT ITEMS RELATING TO THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS – 1. Scope of Consolidation,” the Company has prepared the financial statements under “Practical Solution on Application of Control Criteria and Influence Criteria to Investment Associations” adopted in the fiscal year ended March 31, 2007.
2.		As discussed in “SIGNIFICANT ITEMS RELATING TO THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS – 4. Significant Accounting Policies – (3) Allowance for Loan Losses and Accrued Expenses – 3) Accrued bonuses for directors,” the Company has prepared the financial statements under “Accounting Standard for Directors’ Bonuses” adopted in the fiscal year ended March 31, 2007.
3.		As discussed in “SIGNIFICANT ITEMS RELATING TO THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS – 4. Significant Accounting Policies – (3) Allowance for Loan Losses and Accrued Expenses – 6) Reserve for losses on excess interest repayments,” reserve for losses on excess interest repayments are recorded based on the “Audit Treatment of Reserve for Losses on Excess Interest Repayment Claims in Consumer Finance Companies” beginning from the fiscal year ended March 31, 2007.
4.		As discussed in “SIGNIFICANT ITEMS RELATING TO THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS,” the Company has prepared the financial statements under “Guidance on Accounting Standard for Share-based Payments” adopted in the fiscal year ended March 31, 2007.
5.		As discussed in “Segment Information – 1. Business Segment Information – Note 5. Changes in business segment,” real estate business, which was included in other businesses heretofore, is disclosed as a separate segment for financial reporting purposes, beginning from the year ended March 31, 2007.
6.		As discussed in “Significant Subsequent Events,” the Company issued “NIS GROUP CO., LTD., U.S. Dollar-denominated Unsecured Straight Bonds” on June 20, 2007, in accordance with the resolution approved at the Board of Directors’ Meeting held on May 29, 2007.

We have no interest in NIS GROUP CO., LTD. and its consolidated subsidiaries, which should be disclosed pursuant to the provision of the Certified Public Accountants Law.

174

Annual Financial Report

Report of Independent Certified Public Accountants

June 23, 2007

Board of Directors of
NIS GROUP CO., LTD.

Sanyu & Co.

Representative Partner, Engagement Partner: Kazuyuki Togo
Engagement Partner: Tomohiro Koto

Pursuant to Article 193-2 of “Securities and Exchange Law,” we have audited the balance sheet, the statement of income, the statement of changes in net assets, and the supplementary statements of NIS GROUP CO., LTD. included in “FINANCIAL STATEMENTS” as of and for the year ended March 31, 2007. These financial statements are the responsibility of the management. Our responsibility is to express an opinion on these financial statements based on our audit.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of NIS GROUP CO., LTD. as of March 31, 2007, and the results of its operations for the year then ended, in conformity with accounting principles generally accepted in Japan.

Additional information:

1.		As discussed in “SIGNIFICANT ACCOUNTING POLICIES – 5. Allowance for Loan Losses and Accrued Expenses – (3) Accrued bonuses for directors,” NIS GROUP CO., LTD. has prepared the financial statements under “Accounting Standard for Directors’ Bonuses” adopted in the fiscal year ended March 31, 2007.
2.		As discussed in “SIGNIFICANT ACCOUNTING POLICIES – 5. Allowance for Loan Losses and Accrued Expenses – (5) Reserves for losses on excess interest repayments,” reserves for losses on excess interest repayments are recorded based on the “Treatment in Audits concerning Reserves for Losses on Excess Interest Repayment Claims in Consumer Finance Companies” adopted in the fiscal year ended March 31, 2007.
3.		As discussed in “Significant Subsequent Events,” NIS GROUP CO., LTD. issued “NIS GROUP CO., LTD., U.S. Dollar-denominated Unsecured Straight Bonds” on June 20, 2007, in accordance with the resolution approved at the Board of Directors’ Meeting held on May 29, 2007.

We have no interest in NIS GROUP CO., LTD., which should be disclosed pursuant to the provision of the Certified Public Accountants Law.

175

Annual Financial Report

Report of Independent Certified Public Accountants

June 20, 2008

Board of Directors of
NIS GROUP CO., LTD.

Sanyu & Co.

Representative Partner, Engagement Partner: Kazuyuki Togo
Engagement Partner: Tomohiro Koto

Pursuant to Article 193-2 -1 of “Financial Instruments and Exchange Law,” we have audited the balance sheet, the statement of operations, the statement of changes in net assets, and the supplementary statements of NIS GROUP CO., LTD. included in “FINANCIAL STATEMENTS” as of and for the year ended March 31, 2008. These financial statements are the responsibility of the management. Our responsibility is to express an opinion on these financial statements based on our audit.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of NIS GROUP CO., LTD. as of March 31, 2008, and the results of its operations for the year then ended, in conformity with accounting principles generally accepted in Japan.

Additional information:

1.		As discussed in “SIGNIFICANT ACCOUNTING POLICIES – 5. Allowance for Loan Losses and Accrued Expenses – (3) Accrued bonuses for directors,” NIS GROUP CO., LTD. has prepared the financial statements under “Accounting Standard for Directors’ Bonuses” adopted in the fiscal year ended March 31, 2007.
2.		As discussed in “SIGNIFICANT ACCOUNTING POLICIES – 5. Allowance for Loan Losses and Accrued Expenses – (5) Reserves for losses on excess interest repayments,” reserves for losses on excess interest repayments are recorded based on the “Treatment in Audits concerning Reserves for Losses on Excess Interest Repayment Claims in Consumer Finance Companies” adopted in the fiscal year ended March 31, 2007.
3.		As discussed in “Significant Subsequent Events,” NIS GROUP CO., LTD. issued “NIS GROUP CO., LTD., U.S. Dollar-denominated Unsecured Straight Bonds” on June 20, 2007, in accordance with the resolution approved at the Board of Directors’ Meeting held on May 29, 2007.

We have no interest in NIS GROUP CO., LTD., which should be disclosed pursuant to the provision of the Certified Public Accountants Law.

176

The half-year dividend per share for the year ended March 31, 2006 amounted to ¥2.00. In addition, the amount of half-year dividend per share presented above is adjusted retroactively to reflect the 2-for-1 stock split completed on November 18, 2005.

The Accounting Standard Board Statement (“ASB Statement”) No.5 “Accounting Standards for Presentation on Net Assets in the Balance Sheet” and the Accounting Standard Board Guidance (“ASB Guidance”) No. 8 “Guidance on Accounting Standards for Presentation of Net Assets in the Balance Sheets” issued by the Accounting Standard Board of Japan (“ASBJ”) were adopted beginning from the year ended March 31, 2007.

ASB Statement No. 2 “Accounting Standard Concerning Net Income Per Share” and ASB Guidance No. 4 “Guidance for Accounting Standard Concerning Net Income Per Share,” issued by the ASBJ on September 25, 2002, were adopted.

In addition, per share data is adjusted retroactively as follows, reflecting stock splits in accordance with the abovementioned standard and guidance: