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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

|                                         |  |                                                                                                 
|---------------------------------------- |  | ------------------------------------------------------------------------------------------------
|o                                        |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
|OR                                      
|x                                        |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934            
|For the fiscal year ended March 31, 2003
|OR                                      
|o                                        |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934        

For the transition period from                      to

Commission file number: 1-31416

Kabushiki Kaisha Nissin(Exact name of Registrant as specified in its charter)

NISSIN CO., LTD.(Translation of Registrants name into English)

|                                                      |  |                                                                                                                            
|----------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------
|Japan
(Jurisdiction of incorporation or organization) |  | Shinjuku L-Tower 25F
6-1, Nishi Shinjuku 1-chome
Shinjuku-ku, Tokyo 163-1525
Japan
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

|                    |  |                                           |  | 
|------------------- |  | ----------------------------------------- |  | 
|Title of Each Class |  | Name of Each Exchange On Which Registered
|                    |  |                                          
|Common Stock*       |  | New York Stock Exchange                  

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None
(Title of Class)

Indicate the number of outstanding shares of each of the issuers classes
of capital or common stock as of the close of the period covered by the annual
report. As adjusted for our two-for-one stock split in May 2003, 126,459,540
shares of our common stock outstanding at March 31, 2003, including 138,800
shares represented by 69,400 American Depositary Shares.

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes x No o

Indicate by check mark which financial statement item the registrant has
elected to follow:

Item 17 o Item 18 x



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|* |  | Not for trading, but only in connection with the listing of American
Depositary Shares, each representing two shares of our common stock.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------





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TABLE OF CONTENTS



|                                               |                                                                                       |                                                                                                                                     |  |  |  |  |  | 
|---------------------------------------------- | ------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I                                        
|                                               | Item 1. Identity of Directors, Senior Management and Advisors                        
|                                               | Item 2. Offer Statistics and Expected Timetable                                      
|                                               | Item 3. Key Information                                                              
|                                               | Item 4. Information on the Company                                                   
|                                               | Item 5. Operating and Financial Review and Prospects                                 
|                                               | Item 6. Directors, Senior Management and Employees                                   
|                                               | Item 7. Major Shareholders and Related Party Transactions                            
|                                               | Item 8. Financial Information                                                        
|                                               | Item 9. The Offer and Listing                                                        
|                                               | Item 10. Additional Information                                                      
|                                               | Item 11. Quantitative and Qualitative Disclosures about Market Risk                  
|                                               | Item 12. Description of Securities Other Than Equity Securities                      
|PART II                                       
|                                               | Item 13. Defaults, Dividend Arrearages and Delinquencies                             
|                                               | Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
|                                               | Item 15. Controls and Procedures                                                     
|                                               | Item 16A. Audit Committee Financial Expert                                           
|                                               | Item 16B. Code of Ethics                                                             
|                                               | Item 16C. Principal Accountant Fees and Services                                     
|PART III                                      
|                                               | Item 17. Financial Statements                                                        
|                                               | Item 18. Financial Statements                                                        
|                                               | Item 19. Exhibits                                                                    
|                                               | INDEX TO FINANCIAL STATEMENTS                                                        
|                                               |                                                                                       | REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                                                                                 
|                                               |                                                                                       | CONSOLIDATED BALANCE SHEETS NISSIN CO., LTD. AND SUBSIDIARIES March 31, 2002 and 2003                                              
|                                               |                                                                                       | CONSOLIDATED STATEMENTS OF INCOME NISSIN CO., LTD. AND SUBSIDIARIES For the Years Ended March 31, 2001, 2002 and 2003              
|                                               |                                                                                       | CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY NISSIN CO., LTD. AND SUBSIDIARIES For the Years Ended March 31, 2001, 2002 and 2003
|                                               |                                                                                       | CONSOLIDATED STATEMENTS OF CASH FLOWS NISSAN CO., LTD. AND SUBSIDIARIES For the Years Ended March 31, 2001, 2002 and 2003          
|                                               |                                                                                       | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                                                                     
|                                               | SIGNATURES                                                                           
|                                               | CERTIFICATIONS                                                                       
|                                               | CERTIFICATIONS                                                                       
|                                               | INDEX OF EXHIBITS                                                                    
|Our Articles of Incorporation                 
|Our Share Handling Regulations                
|Our Regulations of the Board of Directors     
|Our Regulations of Board of Statutory Auditors
|List of Our Subsidiary                        



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##### Table of Contents



TABLE OF CONTENTS

|                                           |  |                                                                              |     |  |    |      |  | 
|------------------------------------------ |  | ---------------------------------------------------------------------------- | --- |  | -- | ---- |  | 
|                                           |  |                                                                              |     |  |    | Page
|                                           |  |                                                                              |     |  |    |     
|PART I                                    
|Item 1.                                    |  | Identity of Directors, Senior Management and Advisors                        |     |  | 3  |     
|Item 2.                                    |  | Offer Statistics and Expected Timetable                                      |     |  | 3  |     
|Item 3.                                    |  | Key Information                                                              |     |  | 3  |     
|Item 4.                                    |  | Information on the Company                                                   |     |  | 14 |     
|Item 5.                                    |  | Operating and Financial Review and Prospects                                 |     |  | 29 |     
|Item 6.                                    |  | Directors, Senior Management and Employees                                   |     |  | 51 |     
|Item 7.                                    |  | Major Shareholders and Related Party Transactions                            |     |  | 58 |     
|Item 8.                                    |  | Financial Information                                                        |     |  | 60 |     
|Item 9.                                    |  | The Offer and Listing                                                        |     |  | 61 |     
|Item 10.                                   |  | Additional Information                                                       |     |  | 63 |     
|Item 11.                                   |  | Quantitative and Qualitative Disclosures about Market Risk                   |     |  | 79 |     
|Item 12.                                   |  | Description of Securities Other Than Equity Securities                       |     |  | 81 |     
|PART II                                   
|Item 13.                                   |  | Defaults, Dividend Arrearages and Delinquencies                              |     |  | 81 |     
|Item 14.                                   |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |     |  | 81 |     
|Item 15.                                   |  | Controls and Procedures                                                      |     |  | 81 |     
|Item 16A.                                  |  | Audit Committee Financial Expert                                             |     |  | 81 |     
|Item 16B.                                  |  | Code of Ethics                                                               |     |  | 81 |     
|Item 16C.                                  |  | Principal Accountant Fees and Services                                       |     |  | 81 |     
|PART III                                  
|Item 17.                                   |  | Financial Statements                                                         |     |  | 82 |     
|Item 18.                                   |  | Financial Statements                                                         |     |  | 82 |     
|Item 19.                                   |  | Exhibits                                                                     |     |  | 82 |     
|Index to Consolidated Financial Statements |  |                                                                              | F-1 | 

2



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##### Table of Contents






PART I




Item 1. Identity of Directors, Senior Management and Advisors

Not required.




Item 2. Offer Statistics and Expected Timetable

Not applicable.




Item 3. Key Information

A. Selected Financial Data.

You should read the following selected financial information together with
Item 5 of this annual report on Form 20-F and our financial statements included
in this annual report on Form 20-F.

The income statement data for the years ended March 31, 2000, 2001, 2002
and 2003 and the balance sheet data as of March 31, 2001, 2002 and 2003 that
are identified as being in accordance with accounting principles generally
accepted in the United States of America, or U.S. GAAP, are derived from our
consolidated financial statements prepared in accordance with U.S. GAAP, which
have been audited by BDO Sanyu & Co., independent accountants. We have
included in this annual report on Form 20-F our consolidated financial
statements for the years ended March 31, 2001, 2002 and 2003.

U.S. GAAP Selected Financial Information

|                                    |                                                     |  |                                                                     |        |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |           | 
|----------------------------------- | --------------------------------------------------- |  | ------------------------------------------------------------------- | ------ | ---- |  | ------- | -------- | ---- |  | ------- | -------- |  |  | ------- | -------- |  | - | --------- | --------- | 
|                                    |                                                     |  | Year ended/As of March 31,                                         
|                                    |                                                     |  |                                                                    
|                                    |                                                     |  | 2000                                                                |        | 2001 |  | 2002    |          | 2003 |  | 2003   
|                                    |                                                     |  |                                                                     |        |      |  |         |          |      |  |        
|                                    |                                                     |  | (in millions of yen and thousands of dollars except per share data)
|Consolidated Income Statement Data: |                                                     |  |                                                                     |        |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          
|Total interest income               |                                                     |  | ¥26,899                                                             |        |      |  | ¥29,886 |          |      |  | ¥33,976 |          |  |  | ¥39,234 |          |  | $ | 326,406   |          
|Total income expense                |                                                     |  | 3,873                                                               |        |      |  | 4,166   |          |      |  | 3,884   |          |  |  | 3,984   |          |  |   | 33,145    |          
|                                    |                                                     |  |                                                                     |        |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          
|                                    | Net interest income                                 |  |                                                                     | 23,026 |      |  |         | 25,720   |      |  |         | 30,092   |  |  |         | 35,250   |  |   |           | 293,261   | 
|Provision for loan losses           |                                                     |  | 4,393                                                               |        |      |  | 4,566   |          |      |  | 7,433   |          |  |  | 12,688  |          |  |   | 105,557   |          
|                                    |                                                     |  |                                                                     |        |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          
|                                    | Net interest income after provision for
loan losses |  |                                                                     | 18,633 |      |  |         | 21,154   |      |  |         | 22,659   |  |  |         | 22,562   |  |   |           | 187,704   | 
|Total non-interest income (loss)    |                                                     |  | 232                                                                 |        |      |  | (409    | )        |      |  | (428    | )        |  |  | 846     |          |  |   | 7,038     |          
|Total non-interest expense          |                                                     |  | 10,473                                                              |        |      |  | 12,030  |          |      |  | 13,629  |          |  |  | 14,308  |          |  |   | 119,034   |          
|                                    |                                                     |  |                                                                     |        |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          
|                                    | Income before income taxes                          |  |                                                                     | 8,392  |      |  |         | 8,715    |      |  |         | 8,602    |  |  |         | 9,100    |  |   |           | 75,708    | 
|Income taxes                        |                                                     |  | 3,937                                                               |        |      |  | 3,763   |          |      |  | 3,801   |          |  |  | 3,924   |          |  |   | 32,646    |          
|                                    |                                                     |  |                                                                     |        |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          
|                                    | Net income                                          |  |                                                                     | ¥4,455 |      |  |         | ¥4,952   |      |  |         | ¥4,801   |  |  |         | ¥5,176   |  |   | $         | 43,062    | 
|                                    |                                                     |  |                                                                     |        |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          
|Per Share Data                      |                                                     |  |                                                                     |        |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          
|Net income                          |                                                     |  |                                                                     |        |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          
|                                    | Basic                                               |  |                                                                     | ¥34.59 |      |  |         | ¥38.25   |      |  |         | ¥36.41   |  |  |         | ¥40.15   |  |   | $         | 0.33      | 
|                                    | Diluted                                             |  |                                                                     | 34.47  |      |  |         | 38.18    |      |  |         | 34.85    |  |  |         | 37.24    |  |   |           | 0.31      | 
|Cash dividends paid                 |                                                     |  | 4.17                                                                |        |      |  | 5.84    |          |      |  | 6.04    |          |  |  | 6.38    |          |  |   | 0.05      |          
|                                    |                                                    
|Consolidated Balance Sheet Data:    |                                                     |  |                                                                     |        |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          
|Cash and cash equivalents           |                                                     |  |                                                                     |        |      |  | ¥25,841 |          |      |  | ¥17,116 |          |  |  | ¥23,612 |          |  | $ | 196,439   |          
|Loans receivable, net               |                                                     |  |                                                                     |        |      |  | 122,522 |          |      |  | 148,235 |          |  |  | 166,977 |          |  |   | 1,389,160 |          
|Other                               |                                                     |  |                                                                     |        |      |  | 15,359  |          |      |  | 14,946  |          |  |  | 15,985  |          |  |   | 132,987   |          
|                                    |                                                     |  |                                                                     |        |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          
|                                    | Total assets                                        |  |                                                                     |        |      |  |         | ¥163,722 |      |  |         | ¥180,297 |  |  |         | ¥206,574 |  |   | $         | 1,718,586 | 
|                                    |                                                     |  |                                                                     |        |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          

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|                      |                                            |  |                                                                     |  |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |           | 
|--------------------- | ------------------------------------------ |  | ------------------------------------------------------------------- |  | ---- |  | ------- | -------- | ---- |  | ------- | -------- |  |  | ------- | -------- |  | - | --------- | --------- | 
|                      |                                            |  | Year ended/As of March 31,                                         
|                      |                                            |  |                                                                    
|                      |                                            |  | 2000                                                                |  | 2001 |  | 2002    |          | 2003 |  | 2003   
|                      |                                            |  |                                                                     |  |      |  |         |          |      |  |        
|                      |                                            |  | (in millions of yen and thousands of dollars except per share data)
|Short-term borrowings |                                            |  |                                                                     |  |      |  | ¥1,740  |          |      |  | ¥1,400  |          |  |  | ¥5,600  |          |  | $ | 46,589    |          
|Long-term borrowings  |                                            |  |                                                                     |  |      |  | 116,520 |          |      |  | 128,659 |          |  |  | 148,595 |          |  |   | 1,236,231 |          
|Other                 |                                            |  |                                                                     |  |      |  | 6,155   |          |      |  | 6,315   |          |  |  | 6,782   |          |  |   | 56,423    |          
|                      |                                            |  |                                                                     |  |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          
|                      | Total liabilities                          |  |                                                                     |  |      |  |         | 124,415  |      |  |         | 136,374  |  |  |         | 160,977  |  |   |           | 1,339,243 | 
|                      | Minority interests                         |  |                                                                     |  |      |  |         | 9        |      |  |         | 148      |  |  |         |         |  |   |           |          | 
|                      | Total shareholders equity                 |  |                                                                     |  |      |  |         | 39,298   |      |  |         | 43,775   |  |  |         | 45,597   |  |   |           | 379,343   | 
|                      |                                            |  |                                                                     |  |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          
|                      | Total liabilities and shareholders equity |  |                                                                     |  |      |  |         | ¥163,722 |      |  |         | ¥180,297 |  |  |         | ¥206,574 |  |   | $         | 1,718,586 | 
|                      |                                            |  |                                                                     |  |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          

As we did not prepare U.S. GAAP financial information prior to the year
ended March 31, 2000, we have also included Japanese GAAP financial information
below. The income statement data for the years ended March 31, 1999, 2000,
2001, 2002 and 2003 and the balance sheet data as of March 31, 1999, 2000,
2001, 2002 and 2003 that are identified as being in accordance with Japanese
GAAP are derived from our consolidated financial statements prepared in
accordance with Japanese GAAP, which have been audited by BDO Sanyu & Co. and
are not included in this annual report on Form 20-F.

There are significant differences between U.S. GAAP and Japanese GAAP. As
applicable to us, primary differences include differences in loan origination
costs, impairment of assets, capital leases, debt, derivatives and stock
issuance costs and treasury stock.

Japanese GAAP Selected Financial Information

|                                      |                                          |  |                                                                     |        |      |  |         |        |      |  |         |        |      |  |         |        |  |  |         |        |  |   |           |         | 
|------------------------------------- | ---------------------------------------- |  | ------------------------------------------------------------------- | ------ | ---- |  | ------- | ------ | ---- |  | ------- | ------ | ---- |  | ------- | ------ |  |  | ------- | ------ |  | - | --------- | ------- | 
|                                      |                                          |  | Year ended/As of March 31,                                         
|                                      |                                          |  |                                                                    
|                                      |                                          |  | 1999                                                                |        | 2000 |  | 2001    |        | 2002 |  | 2003    |        | 2003
|                                      |                                          |  |                                                                     |        |      |  |         |        |      |  |         |        |     
|                                      |                                          |  | (in millions of yen and thousands of dollars except per share data)
|Consolidated Income Statement
Data:   |                                          |  |                                                                     |        |      |  |         |        |      |  |         |        |      |  |         |        |  |  |         |        |  |   |           |        
|Operating income:                     |                                          |  |                                                                     |        |      |  |         |        |      |  |         |        |      |  |         |        |  |  |         |        |  |   |           |        
|Interest income from loans
receivable |                                          |  | ¥24,890                                                             |        |      |  | ¥27,119 |        |      |  | ¥30,190 |        |      |  | ¥34,344 |        |  |  | ¥39,073 |        |  | $ | 325,067   |        
|Other financial income                |                                          |  | 17                                                                  |        |      |  | 14      |        |      |  | 22      |        |      |  | 5       |        |  |  | 1       |        |  |   | 8         |        
|Other operating income                |                                          |  | 1,622                                                               |        |      |  | 1,943   |        |      |  | 1,895   |        |      |  | 2,167   |        |  |  | 6,528   |        |  |   | 54,309    |        
|                                      |                                          |  |                                                                     |        |      |  |         |        |      |  |         |        |      |  |         |        |  |  |         |        |  |   |           |        
|Total operating income                |                                          |  | 26,529                                                              |        |      |  | 29,076  |        |      |  | 32,107  |        |      |  | 36,516  |        |  |  | 45,602  |        |  |   | 379,384   |        
|                                      | Interest expenses for
financial services |  |                                                                     | 3,035  |      |  |         | 3,669  |      |  |         | 3,894  |      |  |         | 3,642  |  |  |         | 3,675  |  |   |           | 30,574  | 
|General and administrative
expenses   |                                          |  | 10,415                                                              |        |      |  | 11,480  |        |      |  | 13,330  |        |      |  | 14,928  |        |  |  | 17,327  |        |  |   | 144,151   |        
|Loans losses                          |                                          |  | 5,618                                                               |        |      |  | 5,328   |        |      |  | 5,507   |        |      |  | 8,332   |        |  |  | 13,559  |        |  |   | 112,804   |        
|                                      |                                          |  |                                                                     |        |      |  |         |        |      |  |         |        |      |  |         |        |  |  |         |        |  |   |           |        
|                                      | Total operating expenses                 |  |                                                                     | 19,068 |      |  |         | 20,477 |      |  |         | 22,731 |      |  |         | 26,902 |  |  |         | 34,561 |  |   |           | 287,529 | 
|                                      |                                          |  |                                                                     |        |      |  |         |        |      |  |         |        |      |  |         |        |  |  |         |        |  |   |           |        
|Operating profit                      |                                          |  | 7,461                                                               |        |      |  | 8,599   |        |      |  | 9,376   |        |      |  | 9,614   |        |  |  | 11,041  |        |  |   | 91,855    |        
|Other income (expense), net           |                                          |  | (197                                                                | )      |      |  | (578    | )      |      |  | (351    | )      |      |  | (1,057  | )      |  |  | (1,868  | )      |  |   | (15,541   | )      
|                                      |                                          |  |                                                                     |        |      |  |         |        |      |  |         |        |      |  |         |        |  |  |         |        |  |   |           |        
|                                      | Income before taxes                      |  |                                                                     | 7,264  |      |  |         | 8,021  |      |  |         | 9,025  |      |  |         | 8,557  |  |  |         | 9,173  |  |   |           | 76,314  | 
|Income taxes                          |                                          |  | 3,995                                                               |        |      |  | 3,600   |        |      |  | 3,872   |        |      |  | 3,739   |        |  |  | 3,948   |        |  |   | 32,845    |        
|Minority interest                     |                                          |  |                                                                    |        |      |  |        |        |      |  | 0       |        |      |  | 0       |        |  |  | 15      |        |  |   | 125       |        
|                                      |                                          |  |                                                                     |        |      |  |         |        |      |  |         |        |      |  |         |        |  |  |         |        |  |   |           |        
|Net income                            |                                          |  | ¥3,269                                                              |        |      |  | ¥4,421  |        |      |  | ¥5,153  |        |      |  | ¥4,818  |        |  |  | ¥5,210  |        |  | $ | 43,344    |        
|                                      |                                          |  |                                                                     |        |      |  |         |        |      |  |         |        |      |  |         |        |  |  |         |        |  |   |           |        
|Per Share Data:                       |                                          |  |                                                                     |        |      |  |         |        |      |  |         |        |      |  |         |        |  |  |         |        |  |   |           |        
|Net income  Primary                  |                                          |  | ¥25.65                                                              |        |      |  | ¥34.33  |        |      |  | ¥39.80  |        |      |  | ¥36.54  |        |  |  | ¥39.82  |        |  | $ | 0.33      |        
|Cash dividends paid                   |                                          |  | 3.96                                                                |        |      |  | 4.17    |        |      |  | 5.84    |        |      |  | 6.04    |        |  |  | 6.38    |        |  |   | 0.05      |        
|Consolidated Balance Sheet
Data:      |                                          |  |                                                                     |        |      |  |         |        |      |  |         |        |      |  |         |        |  |  |         |        |  |   |           |        
|                                      |                                         
|Cash and cash equivalents             |                                          |  | ¥9,974                                                              |        |      |  | ¥17,149 |        |      |  | ¥25,841 |        |      |  | ¥17,116 |        |  |  | ¥23,612 |        |  | $ | 196,439   |        
|Loans receivable, net                 |                                          |  | 93,880                                                              |        |      |  | 106,852 |        |      |  | 121,775 |        |      |  | 147,241 |        |  |  | 165,945 |        |  |   | 1,380,574 |        
|Purchased loans receivable, net       |                                          |  |                                                                    |        |      |  |        |        |      |  |        |        |      |  | 382     |        |  |  | 2,946   |        |  |   | 24,509    |        
|Property and equipment                |                                          |  | 3,764                                                               |        |      |  | 3,706   |        |      |  | 3,281   |        |      |  | 2,309   |        |  |  | 1,964   |        |  |   | 16,339    |        

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|                      |                                            |  |                                                                     |          |      |  |        |          |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |           | 
|--------------------- | ------------------------------------------ |  | ------------------------------------------------------------------- | -------- | ---- |  | ------ | -------- | ---- |  | ------- | -------- | ---- |  | ------- | -------- |  |  | ------- | -------- |  | - | --------- | --------- | 
|                      |                                            |  | Year ended/As of March 31,                                         
|                      |                                            |  |                                                                    
|                      |                                            |  | 1999                                                                |          | 2000 |  | 2001   |          | 2002 |  | 2003    |          | 2003
|                      |                                            |  |                                                                     |          |      |  |        |          |      |  |         |          |     
|                      |                                            |  | (in millions of yen and thousands of dollars except per share data)
|Investment securities |                                            |  | 3,911                                                               |          |      |  | 4,478  |          |      |  | 4,793   |          |      |  | 4,217   |          |  |  | 3,083   |          |  |   | 25,649    |          
|Other assets          |                                            |  | 2,827                                                               |          |      |  | 5,519  |          |      |  | 5,799   |          |      |  | 6,569   |          |  |  | 6,165   |          |  |   | 51,290    |          
|                      |                                            |  |                                                                     |          |      |  |        |          |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          
|                      | Total assets                               |  |                                                                     | ¥114,356 |      |  |        | ¥137,704 |      |  |         | ¥161,489 |      |  |         | ¥177,834 |  |  |         | ¥203,715 |  |   | $         | 1,694,800 | 
|Short-term borrowings |                                            |  | ¥8,318                                                              |          |      |  | ¥1,872 |          |      |  | ¥1,740  |          |      |  | ¥1,400  |          |  |  | ¥5,600  |          |  | $ | 46,589    |          
|Long-term borrowings  |                                            |  | 73,674                                                              |          |      |  | 98,360 |          |      |  | 116,520 |          |      |  | 128,659 |          |  |  | 148,595 |          |  |   | 1,236,231 |          
|Other liabilities     |                                            |  | 3,679                                                               |          |      |  | 3,551  |          |      |  | 4,239   |          |      |  | 4,435   |          |  |  | 4,614   |          |  |   | 38,386    |          
|                      |                                            |  |                                                                     |          |      |  |        |          |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          
|                      | Total liabilities                          |  |                                                                     | 85,671   |      |  |        | 103,783  |      |  |         | 122,499  |      |  |         | 134,494  |  |  |         | 158,809  |  |   |           | 1,321,206 | 
|Minority interest     |                                            |  |                                                                    |          |      |  |       |          |      |  | 9       |          |      |  | 148     |          |  |  |        |          |  |   |          |          
|                      | Total shareholders equity                 |  |                                                                     | 28,685   |      |  |        | 33,921   |      |  |         | 38,981   |      |  |         | 43,192   |  |  |         | 44,906   |  |   |           | 373,594   | 
|                      |                                            |  |                                                                     |          |      |  |        |          |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          
|                      | Total liabilities and
shareholders equity |  |                                                                     | ¥114,356 |      |  |        | ¥137,704 |      |  |         | ¥161,489 |      |  |         | ¥177,834 |  |  |         | ¥203,715 |  |   | $         | 1,694,800 | 
|                      |                                            |  |                                                                     |          |      |  |        |          |      |  |         |          |      |  |         |          |  |  |         |          |  |   |           |          

Exchange Rate Information

For convenience, we have translated certain yen amounts in this annual
report on Form 20-F into dollars at the rate of ¥120.20 = $1.00, the mean of
the exchange rate quotations by The Bank of Tokyo-Mitsubishi, Ltd. for buying
and selling spot dollars by telegraphic transfer against yen as of March 31,
2003, the date of our most recent balance sheet included in this annual report
on Form 20-F. However, you should not construe such translations as
representations that the yen amounts have been, could have been or could be
converted into dollars at that or any other rate.

The following table presents the noon buying rates for Japanese yen per
$1.00 in New York City for cable transfers in foreign currencies as certified
for customs purposes by the Federal Reserve Bank of New York.

|                     |  |      |         |     |  |             |         |            |  |  |         |  |  |  |         | 
|-------------------- |  | ---- | ------- | --- |  | ----------- | ------- | ---------- |  |  | ------- |  |  |  | ------- | 
|Year ended March 31, |  | High |         | Low |  | Average (1) |         | Period-end
|                     |  |      |         |     |  |             |         |           
|1999                 |  |      | ¥147.14 |     |  |             | ¥108.83 |            |  |  | ¥128.10 |  |  |  | ¥118.43 | 
|2000                 |  |      | 124.45  |     |  |             | 101.53  |            |  |  | 110.02  |  |  |  | 102.73  | 
|2001                 |  |      | 125.54  |     |  |             | 104.19  |            |  |  | 111.65  |  |  |  | 125.54  | 
|2002                 |  |      | 134.77  |     |  |             | 115.89  |            |  |  | 125.64  |  |  |  | 132.70  | 
|2003                 |  |      | 133.40  |     |  |             | 115.71  |            |  |  | 121.10  |  |  |  | 118.07  | 
|Calendar month       |  |      |         |     |  |             |         |            |  |  |         |  |  |  |         | 
|January 2003         |  |      | 120.18  |     |  |             | 117.80  |            |  |  | 118.81  |  |  |  | 119.96  | 
|February 2003        |  |      | 121.30  |     |  |             | 117.14  |            |  |  | 119.34  |  |  |  | 118.22  | 
|March 2003           |  |      | 121.42  |     |  |             | 116.47  |            |  |  | 118.69  |  |  |  | 118.07  | 
|April 2003           |  |      | 120.55  |     |  |             | 118.25  |            |  |  | 119.90  |  |  |  | 119.07  | 
|May 2003             |  |      | 119.50  |     |  |             | 115.94  |            |  |  | 117.37  |  |  |  | 119.50  | 
|June 2003            |  |      | 119.87  |     |  |             | 117.46  |            |  |  | 118.33  |  |  |  | 119.87  | 



---

|(1) |  | Fiscal year information calculated from the average of the exchange rates
on the last days of all the months during the fiscal year.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------

The noon
buying rate for yen on July 18, 2003 was ¥118.40 per $1.00.

B. Capitalization and Indebtedness.

Not required.

5



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##### Table of Contents



C. Reasons for the Offer and Use of Proceeds.

Not applicable.

D. Risk Factors.

Special Note Regarding Forward-looking Statements

This annual report on Form 20-F contains 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. These forward-looking statements are
subject to various risks and uncertainties. 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. Known and unknown risks, uncertainties and other
factors could cause our actual results to differ materially from and worse than
those contained in or suggested by any forward-looking statement. We cannot
promise that our expectations, projections, anticipated results, estimates or
other information expressed in or underlying these forward-looking statements
will turn out to be correct.

Important risks and factors that could cause our actual results to differ
materially from the forward-looking statements are set forth in this Item 3.D
and elsewhere in this annual report on Form 20-F and include, without
limitation:



| |  |  | the effect of weak domestic economic conditions, including
changes in personal bankruptcy rates;                                                                                     
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | competition from large consumer finance companies and other
financial institutions;                                                                                                  
|
| |  |  | uncertain liquidity of Japans capital markets and
availability of funding from lenders on favorable terms;                                                                          
|
| |  |  | potential changes to legislation, including restrictions on
interest rates, to regulations for the moneylending business and to
government policy, including Japans monetary policy;
|
| |  |  | our exposure to negative publicity for the consumer or
business finance industries generally or us specifically;                                                                     
|
| |  |  | our ability to pursue and maintain profitable joint ventures and strategic alliances; and                                                                                            
|
| |  |  | reliability of information or technological systems and networks.                                                                                                                    

We may suffer larger loan losses if defaults on loans by our customers continue to increase as a result of weak economic conditions in Japan

Weak economic conditions in Japan may lead to increased defaults on loans,
which in turn would cause us to increase our charge-offs of loans and our
provisions for loan losses, thereby adversely affecting our results of
operations and financial condition. While the Japanese loan market has grown
rapidly in recent years, the continued sluggishness of the Japanese economy has
resulted in increases in personal bankruptcies and defaults on loans.
According to the latest preliminary figures from the Supreme Court of Japan,
personal bankruptcies in Japan reached an all time high of 214,633
cases for calendar year 2002, representing an increase of 33.8% over the previous
year.

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An increase in defaults on loans by our customers due to these
conditions along with growth in our total loans outstanding has contributed to
the rise in our provision for loan losses, from ¥4,566 million for the year
ended March 31, 2001 to ¥7,433 million for the year ended March 31, 2002 to
¥12,545 million for the year ended March 31, 2003. If the economic situation
in Japan does not improve or worsens, we may be forced to charge off loans in
excess of our existing provisions for loan losses, and we may need to increase
our provisions for loan losses.

Increasing competition in Japans consumer finance industry may adversely
affect our ability to increase or maintain the size of our loan portfolio, the
average credit quality of our customers or the interest rates we charge on our
loans.

Japans consumer finance industry, in which we specialize as a lender to
consumers and individual small business owners, is becoming increasingly
competitive. Our current and potential competitors include:



| |  |  | foreign financial institutions, a number of which have been
entering the Japanese consumer finance industry, such as GE Capital
through its acquisition of Lake;                                                                                                                                                                                                                                                                        
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | large Japanese consumer finance companies, including
Takefuji, Acom, Promise and Aiful, which continue to seek greater
shares of the consumer finance market through extensive marketing,
and medium-sized consumer finance companies, such as Shinki and
Credia;                                                                                                                                                                       
|
| |  |  | Japanese banks and other financial institutions expanding out
of their traditional markets, particularly by forming joint ventures
with consumer finance companies, including Sumitomo Mitsui Banking
Corporation through its establishment of At-Loan, UFJ Bank through
its establishment of Mobit, The Bank of Tokyo Mitsubishi through
Tokyo-Mitsubishi Cash One and The Sumitomo Trust and Banking Co.
through Businext Corporation;
|
| |  |  | credit card companies, particularly overseas companies such
as MasterCard, which have formed distribution relationships with
Acom and Aic, and increasingly offer credit cards in Japan as
revolving loans, rather than simply to finance consumption by
individuals; and                                                                                                                                                               
|
| |  |  | non-financial institutions, an increasing number of which are
entering the consumer finance industry through acquisitions,
including Hankyu Corporation, a railway company, that provides
consumer credit services through Station Finance Inc.                                                                                                                                                                                         

Many of these competitors have substantially greater financial, technical
and marketing resources, larger customer bases, longer histories, greater name
recognition, more extensive physical infrastructure and networks of loan
offices and more established relationships in the finance industry than we do.
Our competitors may seek to compete aggressively on the basis of interest
rates, lending terms and the coverage and scale of their network of
distribution and marketing channels. Due to this competitive pressure, as well
as a shift in our loan portfolio toward products that bear a lower interest
rate, the weighted period-end average contractual interest rate on our
outstanding loans has been decreasing gradually over the recent years, from
26.3% at March 31, 2001, to 25.9% at March 31, 2002 and to 25.3% at March 31,
2003. If we are unwilling or unable to match our competitors terms, we may
fail to increase or maintain the number and average balance of our customer
accounts and thus our revenues. As a result, increasing competition could
adversely affect our results of operations or financial condition. To the
extent that we reduce interest rates on our products in response to
competitive pressures, our interest margins will decline.

7



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Furthermore, the average
credit quality of our customers may decrease if higher quality customers take
their business to our competitors.

Any future inability to obtain funds from lenders or access the debt capital
markets on favorable terms could impair our ability to extend loans to
borrowers, reduce our competitiveness and the profitability of our lending and
adversely affect our financial condition

Ready access to funds on favorable terms is essential to our business.
The differential between the interest rates we charge our customers and the
interest rate our financing sources charge us is the key factor impacting our
profitability. As of March 31, 2003, our weighted period-end average
contractual interest rate on outstanding loans in our loan portfolio was 25.3%,
while our weighted period-end average contractual interest rate was 1.7% for
our short-term borrowings and 2.4% for our long-term borrowings. We raise
funds through loans from financial institutions, primarily regional Japanese
banks and non-bank financial institutions, and the capital markets by issuing
debt securities. As of March 31, 2003, the aggregate amount of our borrowings
was ¥154,195 million, which represented approximately 90% of our loans
outstanding as of the same date.

As of March 31, 2003, 69.2% of our borrowings, or ¥107 billion, came from
loans from banks, non-banks, insurance companies and other financial
institutions, and 30.8% of our borrowings, or ¥47 billion, came from issuances
of corporate bonds, including convertible bonds, and commercial paper. Based
on their evaluations of our long-term or short-term financial prospects, any of
these lenders could cease to finance our business or to offer funds on
favorable terms. A downgrade in our credit ratings or those of similar
companies or Japanese companies generally, for instance, could result in an
increase in the interest rates that lenders charge us. For example, the
downgrade of our debt rating by the Japan Credit Rating Agency in April 2003,
together with recent downgrades of the debt ratings of other consumer finance
companies, has forced us to curtail our debt issuances and increase our
reliance on bank loans with typically higher interest rates. Negative
publicity about small business or consumer finance lenders such as that seen in
1999 about the practices of small business lenders could also make lenders
reluctant to extend credit to the consumer finance industry, including us. As
a result of the ongoing restructuring of the Japanese financial sector, and
regional banks in particular, our lenders may fail or adopt lending policies
unfavorable to us. A number of other factors largely beyond our control could
impair our ability to borrow, including severe disruptions of the financial
markets, negative views about the prospects for the finance industry generally
or further downgrades of Japans sovereign debt ratings.

An inability to obtain sufficient funds from lenders or capital markets on
favorable terms or at all could impair our ability to extend loans to
borrowers, reduce our competitiveness and the profitability of our lending and
adversely affect our financial condition.

An increase in prevailing market interest rates would increase our interest
expense and thus could reduce the margins we receive on our loans to our
borrowers

Interest rates in Japan have been extremely low for several years,
reflecting government monetary policy including the zero interest rate policy
of the Bank of Japan, which has been in place for most of the period since
February 1999. The official discount rate offered by the Bank of Japan has
remained at 0.1% since September 2001. Partly as a result of this policy, our
weighted period-end average contractual interest rates on our own borrowings
have been extremely low in recent years: 2.9% as of March 31, 2001, 2.2% as of
March 31, 2002 and 1.7% as of March 31, 2003 for our short-term borrowings and
3.3% as of March 31, 2001, 2.8% as of March 31, 2002 and 2.4% as of March 31,
2003 for our long-term borrowings.

8



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Although the Bank of Japan has signaled that it plans to maintain the
current interest rate policy to address deflation concerns, the Bank of Japan
may reverse its policy and increase interest rates. In that case, lenders may
increase interest rates on their loans to us and we may not be able to pass our
increased interest expenses to our customers in the form of higher rates on our
loans due to competitive considerations and to the legal limits on interest
rates that we may charge. Any increase in the interest rates our lenders
charge us could thus have an adverse effect on our operating margins and
profitability.

Because we expect our shares and ADSs will be treated as stock of a passive
foreign investment company, or PFIC, for U.S. federal income tax purposes, you
may be subject to materially adverse tax consequences

As we expect that 50% or more of our gross asset value constitutes
passive assets, meaning assets not constituting part of an active trade or
business under U.S. federal tax rules, we expect that our shares and ADSs will
be treated as stock of a passive foreign investment company, or PFIC, for U.S.
federal income tax purposes. U.S. persons who hold our shares or ADSs, either
directly or indirectly, may be subject to materially adverse U.S. federal
income tax consequences upon the sale or disposition of the shares or ADSs and
upon distributions with respect to the shares or ADSs to the extent the
distributions are excess distributions, distributions in excess of a normal
rate of distribution as calculated for passive foreign investment companies.
Gain realized on the sale or other disposition of shares or ADSs would in
general not be treated as capital gain. Instead, if you are a U.S. holder, you
would be treated as if you had realized such gain and certain excess
distributions ratably over your holding period for the shares or ADSs and
would be taxed at the highest tax rate in effect for each such year to which
the gain was allocated, together with an interest charge in respect of the tax
attributable to each such year. In addition, dividends that you receive from
us will not be eligible for the 15% tax rate applicable to qualified dividend
income if we are a PFIC either in the taxable year of the distribution or the
preceding taxable year. See United States Tax Considerations  Passive
Foreign Investment Company Rules in Item 10.E of this annual report on Form
20-F.

Negative publicity beyond our control could lead to legislative or regulatory
changes that adversely affect our business

The Japanese government first responded to criticism of small business
loan collection practices of several prominent lenders in 1999 by introducing
new legislation and regulations that imposed significant burdens on our
business, even though we did not engage in the criticized collection practices.
Any future negative publicity about consumer and small business moneylending
and collection practices could lead to introduction of additional regulations
or laws favoring borrowers that might erode our profitability. For instance,
in response to the growing criticism of unregistered money lenders loan
businesses, the Japanese Diet is expected to consider soon proposed amendments
to the Moneylending Business Restriction Law and the Contributions Law. These
proposed amendments, if passed, would primarily constrain unregistered money
lenders ability to engage in harmful marketing and loan collection practices
and increase penalties on violations of the statutory maximum interest rate.
The proposed amendments would also require the Japanese government, which last
reduced the statutory maximum interest rate in June 2000, to review the
interest rate again around year 2006. As a result, the Japanese government may
further reduce the statutory maximum interest rate at the time of the next
review, particularly if political pressure against the moneylending business is
strong. Any such reduction could adversely affect our business and results of
operations.

9



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The growing variety of legal means with which our customers can seek protection
from creditors could increase our provisions for loan losses

In recent years, the number of legal means with which retail borrowers can
seek protection from creditors has increased. Under Japans Special
Conciliation Law, a borrower in financial difficulty may, under the supervision
of a committee consisting of a judge and court-appointed arbitrators having
specialized knowledge of law, finance and other relevant matters, negotiate
with some or all of their lenders to reschedule or revise payment obligations.
The borrower may also petition a court to order suspension of enforcement
procedures against the borrowers assets during the negotiation procedures.
The Civil Rehabilitation Law provides several alternative procedures for
restructuring loan repayments with the courts approval by individual borrowers
in financial difficulty without declaring personal bankruptcy under the
Bankruptcy Law. A repayment plan established pursuant to one of these
procedures does not require lender approval. Furthermore, the accessibility of
lawyers who advise retail borrowers in financial difficulties has increased due
to various recent deregulatory measures, including that of advertisements by
lawyers. Also, the Japanese government may amend the Bankruptcy Law to
simplify the procedure for, and improve the debtors protection
under, personal
bankruptcy.

With a growing number of individuals in Japan experiencing financial
difficulties, the number of customers seeking protection from creditors by
taking advantage of these legal means has increased. For the year ended March
31, 2003, 1,062 customers applied for procedures under the Special Conciliation
Law and Civil Rehabilitation Law with respect to which we charged off ¥240
million of loans outstanding. These laws may discourage borrowers who would
otherwise make an effort to repay the entirety of their loans from doing so
because of the relative ease of restructuring their loan payments. If this
trend continues, our provisions for loan losses may increase and our
profitability could be adversely affected. Any amendment to the Bankruptcy Law
that would lessen the burden of declaring personal bankruptcy would also would
have a materially adverse impact on our results of operations. While we are
generally able to collect a small portion of payments owed to us pursuant to
the Special Conciliation Law and Civil Rehabilitation Law, we generally recover
nothing under personal bankruptcy proceedings.

If we are unable or unwilling to comply with revised guidelines to the
Moneylending Business Restriction Law, we may be suspended from the
moneylending business and our registration as a moneylender may be revoked

The Moneylending Business Restriction Law and the guidelines under the law
require us to provide each borrower and any guarantor with a written notice
detailing the terms and conditions of the loan and guarantee at the time the
loan agreement or any guarantee agreement is signed as well as at the time of
disbursement if multiple disbursements may be provided under the same
agreement. See Regulation in Item 4.B of this annual report on Form 20-F.
Currently, we ask users of our automated telephone service at the time of each
disbursement to their accounts whether or not they want a written notice as
contemplated in the guidelines to the Moneylending Business Restriction Law.
We mail a written notice to them only upon their request. The ATMs we use, all
of which are owned by third parties, are not equipped to print out these
notices. Based on recent discussions with the FSA, we may need to modify our
loan disbursement practices to include mailing of a written notice even to
borrowers who do not request a notice, and we are considering measures to
comply with the guidelines, as most recently amended. If we mail notices to
every borrower, we may lose potential customers who prefer not to receive
mailed notices in the interest of privacy. However, failure to comply with FSA
guidelines empowers the FSA to impose administrative sanctions for
non-compliance, including suspension of a part or the whole of our business, or
cancellation of our registration as a moneylender. While the FSA has not taken
any adverse action, these guidelines create substantial uncertainty for us.

10



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Our strategic alliances and joint ventures to acquire new customers may not
yield attractive returns and could produce losses

We have been pursuing various strategic alliances and joint ventures,
including referral relationships with consumer finance companies and other
financial institutions. We expect to continue seeking strategic alliances and
joint ventures to build our customer base, but may not be able to successfully
grow new ventures or maintain alliances with third parties. These strategic
alliances and joint ventures may not achieve profitability and we may fail to
recover any investments or expenditures made. Moreover, the strategic
alliances and joint ventures that aim at specific markets may attract a number
of our existing customers, rather than expand our customer base, and reduce the
profitability of our core business.

Any disruption, outages, delays or other difficulties experienced by our
information or technological systems and networks could adversely affect our
business

We increasingly rely 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 ability of our automated telephone system to handle high
volumes of phone calls and to provide customers a more convenient
and private alternative to loan office visits;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the reliability and security of third-party databases from
which we obtain credit information about our customers;                                                           
|
| |  |  | the reliability of Sanyo Electric Credits wire transfer
service that we use to disburse loans to accounts designated by our
customers; and                                  
|
| |  |  | the reliability of the financial institutions that hold our
customers accounts from which we automatically deduct their
payments to us.                                     

In addition, we depend on the following hardware and software and third
parties to manage transaction and accounting data, confidential customer
information and other back-office operations:



| |  |  | our main computer housed in the Matsuyama data center of an
NEC affiliate to which all data are backed up on each business day
and which does not have a back-up system that can replace it;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | our ISDN-based NTT frame relay networks to support our daily
backup from our database servers to the main computer;                                                                         
|
| |  |  | an NEC affiliate to provide maintenance and support work for
our main computer; and                                                                                                         
|
| |  |  | dedicated lines that connect our main computer to the
application servers and e-mail servers in our Tokyo head office and
the Matsuyama outsourcing center.                                 

Our hardware and software are vulnerable to damage or interruption from
human error, natural disasters, power loss, sabotage, computer hackers,
computer viruses and similar events or the loss of support services from third
parties such as NEC and its affiliates, our main systems solution provider,
telephone carriers and Internet backbone providers. Each of our branch offices
has a server to route incoming phone calls.

11



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We do not have redundant servers at these
locations. Any disruption, outages, or delays or other difficulties
experienced by any of these technological and information systems and networks
could result in a decrease in new accounts, loss or exposure of confidential
information, delay in repayment of outstanding borrowings or decreased consumer
confidence in our business, or otherwise adversely affect our results of
operations.

If we lose key management, our business may be adversely affected

The services of Kunihiko Sakioka, our president, and other members of our
senior management are of material importance to the success of our business.
We do not have any employment agreements with our senior management. The loss
of any key management, including Kunihiko Sakioka, could have a material
adverse impact on our business.

Misconduct by an employee or director could harm us and is difficult to detect
and deter

Misconduct by an employee or director could bind us to transactions that
exceed authorized limits or present unacceptable risks, or hide from us
unauthorized or unsuccessful activities with unknown and unmanaged risks or
losses. Misconduct by an employee or director could also involve the improper
use or disclosure of confidential information, which could result in regulatory
sanctions, legal liability and serious reputational or financial harm to us.
The precautions we take to prevent and detect such misconduct may not always
deter or prevent it, even though we have not in the past suffered materially
from misconduct by an employee or director. Even if we succeed in managing the
conduct of our own employees and directors, we may suffer reputationally or
financially from misconduct by other lenders in the finance industry to the
extent it negatively impacts the consumer finance and small business industries
generally.

Our president and his family may exercise influence over important business
decisions in a way that conflicts with your interest

As a result of the direct and indirect ownership or control of
approximately 41.9% of our outstanding shares by Sakioka family members, our
president and his family members, including our chairman, can exercise a
controlling influence over important decisions affecting our business and
affairs. These decisions may involve significant corporate transactions such
as the sale of our company, corporate restructuring, investment in other
businesses or assets, or the terms of future financings. The interests of
these shareholders in these and other matters may differ from yours.

Subsequent purchases of shares by large shareholder groups may subject us to a
special tax on undistributed income

Japanese tax law, as recently amended, assesses a special tax on
undistributed income applicable to any company with respect to which the three
largest groups of related shareholders collectively own more than 50% the
companys outstanding shares, which exclude treasury shares. The tax rate
varies between 10 and 20% of undistributed income. Related shareholders are
classified into groups for this purpose by Japanese tax law, and the group
holding the largest number of our outstanding shares includes members of the
Sakioka family and corporations it directly or indirectly controls. As of
March 31, 2003, the group headed by the Sakioka family for this purpose by
Japanese tax law owned 41.9% of our outstanding shares and, together with the
two other largest groups of related shareholders, owned 43.4%.

In the past, we incurred a special tax on undistributed income under the
Japanese tax law prior to the recent amendment, which differed from the current
law in that it assessed the special tax based on the percentage of ownership of issued shares, counting treasury shares as
shares of one shareholder group, and for ownership of 50% or more, rather than
more than 50%.

12



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Based on the current Japanese tax law, as under the previous
Japanese tax law, we could become subject to the special tax on undistributed
income again, for example as a result of acquisitions of shares by one or more
groups, changes in the membership of groups or reductions in our outstanding
shares.

A sale of our shares held by our major shareholders, including our chairman,
president or members of their family, may adversely affect our share price

As of March 21, 2003, our chairman, our president, members of their
immediate family and corporations controlled by them together owned 41.9% of
our outstanding shares. A disposal of any portion of their holdings on the
Tokyo Stock Exchange or otherwise will increase the supply of our shares in the
marketplace and may adversely affect our share and American Depositary Receipt,
or ADR, price.

We may have to constrain our business activities to avoid being deemed an
investment company under the U.S. Investment Company Act of 1940

In general, a company which is or holds itself out as being engaged
primarily in the business of investing, reinvesting or trading in securities,
may be deemed to be an investment company under the U.S. Investment Company Act
of 1940. We do not believe that we are an investment company as defined under
the U.S. Investment Company Act of 1940. However, if we were to be deemed an
investment company, 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. In order to avoid
these prohibitions, we may be forced to forego otherwise attractive business
opportunities, potentially limiting our growth and our profitability.

Holders of ADSs have fewer rights than shareholders and have to act through the
depositary to exercise those rights

The rights of shareholders under Japanese law to take actions including
voting their shares, receiving dividends and distributions, bringing derivative
actions, examining our accounting books and records and exercising appraisal
rights are available only to holders of record on our register of shareholders
or our register of beneficial shareholders. Because the depositary, through
its custodian agents, is the registered holder of the shares underlying the
ADSs, an ADR holder cannot take these actions except through and to the extent
permitted by the depositary. If we instruct the depository to provide ADS
holders with the opportunity to vote in a timely manner, the depositary will
make efforts to vote the shares underlying your ADSs as instructed by you. ADS
holders, however, may not be provided with such rights on a timely basis or at
all.

If you hold fewer than 100 shares, you do not have the right to vote the shares
or transfer them and if you have ADSs representing fewer than 100 shares, you
cannot withdraw the shares underlying the ADSs and cannot require us to
purchase the underlying shares

One hundred of our shares constitute one unit. A holder who owns fewer
than 100 shares owns less than a whole unit. The Japanese Commercial Code
restricts the rights of a shareholder who holds shares of less than a whole
unit. In general, holders of shares constituting less than a unit do not have
the right to vote under the new unit share system. Our articles of
incorporation also provide that no share certificates will be issued with
respect to any number of shares constituting less than one unit. As the
transfer of shares normally requires delivery of share certificates, any
fraction of a unit for which no share certificates are issued is
non-transferable. Furthermore, under the unit share system, holders
of shares constituting less than a unit have the right to require us to purchase
their shares.

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However, holders of ADSs that represent other than multiples of
whole units cannot withdraw the underlying shares representing less than one
unit and, therefore, they will be unable to exercise the right to require us to
purchase the underlying shares. As a result, holders of ADSs representing
shares in lots of less than one unit will not have access to the Japanese
markets to sell their shares through the withdrawal mechanism. See Japanese
Unit Share System in Item 10.B of this annual report on Form 20-F.




Item 4. Information on the Company

A. History and Development of the Company.

We were established as a joint stock corporation in 1960 in Matsuyama in
Shikoku, the fourth largest island of Japan. Our primary business was dealing
in commercial bills. In 1967, we started providing real estate-secured loans.
We have gradually moved away from these two business areas and are in the
process of phasing them out entirely.

In 1972, we began offering consumer loans and opened offices throughout
Shikoku and became a registered moneylender in 1984. We started offering small
business owner loans in 1981, Wide loans in 1990 and Business Timely loans in
2000. We steadily expanded beyond our original base in Shikoku by opening
offices in Hiroshima in 1988, Osaka in 1990, Kyushu in 1992, Tokyo in 1994,
Nagoya in 1995 and Sendai, Hokkaido and Shizuoka in 1996. As of March 31,
2003, we had 72 loan offices throughout Japan. In recent years, we have also
expanded our customer base through strategic alliances with consumer finance,
leasing and other financial services companies.

In 1990, we changed our name from Nissin Shoji Co., Ltd. to Nissin Co.,
Ltd. In 1998, we adopted a dual head-office system, with one head office in
Tokyo through which our operations are primarily managed and the other in
Matsuyama.

We established Nissin Servicer Co., Ltd. in July 2001 to acquire and
service non-performing assets of banks and other financial institutions.

Our
principal executive office is located at Shinjuku L-Tower 25F, 6-1,
Nishi Shinjuku 1-chome, Shinjuku-ku, Tokyo 163-1525, Japan, and its phone
number is 81-3-3348-2424. Our principal Internet website is
www.nissin-f.co.jp. Information on this website does not form part of this
annual report on Form 20-F.

Information about our principal capital expenditures and divestitures is
provided in Item 5.B of this annual report on Form 20-F.

B. Business Overview.

Overview

We are a finance company that specializes in unsecured lending to
individuals in Japan, both consumers and small business owners. We also
increasingly provide credit screening and credit management services through
strategic alliances and joint ventures. We derive the funding necessary to
provide loans to our customers through borrowings from financial institutions,
long-term debt issuances and interest income. For the year ended March 31,
2003, our net interest income after provision for loan losses was ¥22,562
million and our net income was ¥5,176 million.

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Japanese Consumer Finance Industry

We compete primarily in the Japanese consumer finance industry, generally
defined as the industry that provides credit and loans without restrictions on
the use of the loans to Japanese individuals. The loan business segment of the
consumer finance industry, in which we operate, primarily comprises unsecured
and secured lending that provides cash advances to individuals. The loan
business segment features three main categories of participants  consumer
finance companies, banks and credit companies. We usually compete most
directly with consumer finance companies, but believe our focus on consumers,
in particular consumers seeking to consolidate debts to multiple lenders, and
small business owners distinguishes us from most consumer finance companies.

The consumer finance industry is distinct from the small business finance
industry, which provides loans to small business entities, rather than
individuals. Our loans are extended to individuals on the basis of individual
creditworthiness, rather than to entities based upon business creditworthiness,
which is the focus of the business finance companies. To the extent that we
provide loans to individual small business owners, however, we compete with
lenders in the small business finance industry.

Our Products

We provide loans to individuals, primarily consumers and small business
owners, in niche markets of the consumer finance industry. Our core products
are consumer loans, Wide loans, small business owner loans and Business Timely
loans. Also, in October 2001, we began servicing distressed loans purchased
from financial institutions.

The following table provides information on the average amount of loans
outstanding for each category of our loan business based on the average daily
outstanding balance.

|                           |                                 |  |                      |         |      |  |         |          |      |  |         |          |  |  |         |          |  |  |         |          | 
|-------------------------- | ------------------------------- |  | -------------------- | ------- | ---- |  | ------- | -------- | ---- |  | ------- | -------- |  |  | ------- | -------- |  |  | ------- | -------- | 
|                           |                                 |  | Year ended March 31,
|                           |                                 |  |                     
|                           |                                 |  | 1999                 |         | 2000 |  | 2001    |          | 2002 |  | 2003   
|                           |                                 |  |                      |         |      |  |         |          |      |  |        
|                           |                                 |  | (in millions)       
|Consumer loans             |                                 |  | ¥44,878              |         |      |  | ¥43,663 |          |      |  | ¥43,016 |          |  |  | ¥45,784 |          |  |  | ¥45,093 |         
|Wide loans                 |                                 |  | 34,591               |         |      |  | 40,951  |          |      |  | 46,543  |          |  |  | 50,940  |          |  |  | 59,743  |         
|Small business owner loans |                                 |  | 16,556               |         |      |  | 20,892  |          |      |  | 27,293  |          |  |  | 32,195  |          |  |  | 45,311  |         
|Business Timely loans      |                                 |  |                     |         |      |  | 4       |          |      |  | 3,250   |          |  |  | 12,238  |          |  |  | 17,256  |         
|Secured and other loans    |                                 |  | 708                  |         |      |  | 1,310   |          |      |  | 1,969   |          |  |  | 1,613   |          |  |  | 1,265   |         
|                           |                                 |  |                      |         |      |  |         |          |      |  |         |          |  |  |         |          |  |  |         |         
|                           | Total average loans outstanding |  |                      | ¥96,733 |      |  |         | ¥106,820 |      |  |         | ¥122,071 |  |  |         | ¥142,770 |  |  |         | ¥168,668 | 
|                           |                                 |  |                      |         |      |  |         |          |      |  |         |          |  |  |         |          |  |  |         |         

Consumer Loans

Consumer loans comprised 26.7% of our total average loans outstanding for
the year ended March 31, 2003. We extend these revolving loans to individuals
in amounts of up to ¥500,000 or, for more creditworthy customers who qualify
for our VIP consumer loans, up to ¥2 million. We do not restrict use of
proceeds from the loan.

These loans currently bear interest at a fixed rate of up to 27.01% per
year or, for VIP loans, up to 25.55%. Payments are due monthly, but customers
may prepay their loans at any time without penalty. These loans function
effectively as a personal revolving loan facility. A consumer loan contract is
automatically renewed after three years, provided that the borrower is not in
default for 16 days or more and has maintained a satisfactory credit standing
for at least six months. After a successful application, funds are remitted
directly into a bank account designated by the customer on the same or
following business day, depending on the time of application. We then send the
customer a contract for completion.

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Our consumer loan customers represent a broad range of the Japanese
population, but our borrowers are primarily salaried employees, self-employed
persons and housewives. As of March 31, 2003, approximately 51.5% were female,
while 87.2% earned not more than ¥5 million annually.

In recent years, we have increasingly shifted our resources away from our
consumer loan business, because of competition from the major consumer finance
companies, which enjoy significantly larger economies of scale for their
consumer loan operations. As a result, the number of consumer loan accounts
has gradually declined in line with our shifting resources. Our total consumer
loans outstanding also began to decline in 2001.

The following table provides information on our total number of consumer
loan accounts and the average loan balance per account:

|                                           |  |                 |         |      |  |      |         |      |  |      |         |  |  |  |         |  |  |  |         | 
|------------------------------------------ |  | --------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  |  | ------- |  |  |  | ------- | 
|                                           |  | As of March 31,
|                                           |  |                
|                                           |  | 1999            |         | 2000 |  | 2001 |         | 2002 |  | 2003
|                                           |  |                 |         |      |  |      |         |      |  |     
|Number of consumer loan accounts           |  |                 | 138,492 |      |  |      | 129,646 |      |  |      | 123,200 |  |  |  | 125,393 |  |  |  | 106,731 | 
|Balance of loans per account (in millions) |  |                 | ¥312    |      |  |      | ¥327    |      |  |      | ¥351    |  |  |  | ¥368    |  |  |  | ¥384    | 

Our extension of new credit for consumer loans comprises additional or
repeat lending and advances to new customers. The following table shows
additional advances to existing customers, including repeat customers, and
advances to new customers (all advances are recognized as of the date of
disbursement):

|                                                            |       |  |                      |         |      |  |         |         |      |  |         |         |  |  |         |         |  |  |         |         | 
|----------------------------------------------------------- | ----- |  | -------------------- | ------- | ---- |  | ------- | ------- | ---- |  | ------- | ------- |  |  | ------- | ------- |  |  | ------- | ------- | 
|                                                            |       |  | Year ended March 31,
|                                                            |       |  |                     
|                                                            |       |  | 1999                 |         | 2000 |  | 2001    |         | 2002 |  | 2003   
|                                                            |       |  |                      |         |      |  |         |         |      |  |        
|                                                            |       |  | (in millions)       
|Advances to existing
customers (including
repeat customers) |       |  | ¥15,060              |         |      |  | ¥15,920 |         |      |  | ¥16,733 |         |  |  | ¥18,410 |         |  |  | ¥15,581 |        
|Advances to new customers                                   |       |  | 9,551                |         |      |  | 9,528   |         |      |  | 11,477  |         |  |  | 13,834  |         |  |  | 7,010   |        
|                                                            |       |  |                      |         |      |  |         |         |      |  |         |         |  |  |         |         |  |  |         |        
|                                                            | Total |  |                      | ¥24,611 |      |  |         | ¥25,502 |      |  |         | ¥28,210 |  |  |         | ¥32,244 |  |  |         | ¥22,591 | 
|                                                            |       |  |                      |         |      |  |         |         |      |  |         |         |  |  |         |         |  |  |         |        

Wide Loans  Debt Consolidation Loans

We also provide debt-consolidation loans to individuals in Japan indebted
to multiple lenders. We believe this product to be innovative and brand these
loans as Wide loans. Major consumer finance companies in Japan currently do
not offer debt-consolidation loans. These loans comprised 35.4% of our total
average loans outstanding for the year ended March 31, 2003.

We extend Wide loans of up to ¥3 million at a fixed interest rate of no
greater than 24.09%. In addition, we charge an up-front 2% origination fee
payable at the time of disbursement. The loans are repaid in equal monthly
payments, comprising both interest and principal, over a period of up to five
years and two months. The average maturity of Wide loans at March 31, 2003 was
4.9 years. The borrower must supply one or more guarantors with an income
source separate from that of the borrower. As we require the proceeds from
these loans to be applied to the consolidation of loans from consumer finance
companies, we ask customers to provide evidence of this use after receiving
their loan disbursement but do not control the actual use of proceeds. Under
normal circumstances, we do not extend additional credit to Wide customers
until they pay off their existing Wide loan contracts. Thus, any Wide loan
customer seeking a new Wide loan contract must pay off his or her existing loan
and be subject to the same loan approval process as any new customer.

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Our Wide loans usually cater to customers who already have a high level of
outstanding debt with several consumer finance lenders. While these borrowers
have above-average levels of credit risk, a large number of these loans belongs
to customers who have the capacity and will to pay down outstanding debt over
time. These borrowers are mainly looking for lower-cost and more convenient
ways to achieve this goal. Wide loan customers typically enjoy lower monthly
repayments than required by their existing debts. They also need to arrange
for only one fixed payment each month through an ordinary bank transfer from
their bank account rather than visit outlets of multiple consumer finance
companies. As of March 31, 2003, 51.0% of the borrowers were male, and 51.1%
earned less than ¥3 million a year. A substantial number of our Wide loan
customers are former customers for our consumer loans. As of March 31, 2003,
56.8% of our Wide loan customers, accounting for 55.8% of the outstanding
balance of Wide loans, were former consumer loan customers.

We believe that we can succeed in this niche by combining our experience
and skills in credit management of guaranteed small business owner loans with
our access to and experience in managing the credit risks of borrowers of
consumer loans. Most finance companies do not have this combination of
experience, skills and access because they tend to focus on one of the two
business segments. Those companies that target consumers typically lack the
experience and skills in the provision of guarantees, while those that provide
guaranteed loans often do not have sufficient expertise in the management of
credit risks of small borrowers or lack access to these borrowers.

The following table provides information on the total number of Wide loan
accounts and the balance of Wide loans per account.

|                                           |  |                 |        |      |  |      |        |      |  |      |        |  |  |  |        |  |  |  |        | 
|------------------------------------------ |  | --------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ |  |  |  | ------ | 
|                                           |  | As of March 31,
|                                           |  |                
|                                           |  | 1999            |        | 2000 |  | 2001 |        | 2002 |  | 2003
|                                           |  |                 |        |      |  |      |        |      |  |     
|Number of Wide loan accounts               |  |                 | 21,104 |      |  |      | 25,626 |      |  |      | 28,607 |  |  |  | 32,075 |  |  |  | 36,482 | 
|Balance of loans per account (in millions) |  |                 | ¥1,797 |      |  |      | ¥1,728 |      |  |      | ¥1,670 |  |  |  | ¥1,716 |  |  |  | ¥1,754 | 

The following table provides information on advances, recognized on the
disbursement date, to our customers of Wide loans:

|         |  |                      |         |      |  |      |         |      |  |               |         |  |  |  |         |  |  |  |         | 
|-------- |  | -------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ------------- | ------- |  |  |  | ------- |  |  |  | ------- | 
|         |  | Year ended March 31,
|         |  |                     
|         |  | 1999                 |         | 2000 |  | 2001 |         | 2002 |  | 2003         
|         |  |                      |         |      |  |      |         |      |  |              
|         |  |                      |         |      |  |      |         |      |  | (in millions) |         |  |  |  |         |  |  | 
|Advances |  |                      | ¥19,284 |      |  |      | ¥22,860 |      |  |               | ¥22,106 |  |  |  | ¥28,321 |  |  |  | ¥34,294 | 

As we do not generally make additional advances under existing Wide loan
contracts, almost all advances are to new Wide loan customers, including
current customers for our consumer loans, with the balance being made to
existing Wide loan customers under new contracts.

Small Business Owner Loans

Our small business owner loans comprised 26.9% of our total average loans
outstanding for the year ended March 31, 2003. These small business owner
loans are guaranteed, unsecured loans of up to ¥5 million that require one or
more guarantors from individuals with an income source separate from the
borrowers. We do not restrict the use of proceeds from the loan.

Small business owner loans currently bear interest at a fixed rate of up
to 24.09% per year, payable monthly. In addition, we charge an up-front
origination fee of 2% for each loan at the time of cash disbursement. These
loans have initial repayment terms of up to five years and two months. The
average maturity of small business owner loans at March 31, 2003 was 4.8 years.
Customers may prepay their small business owner loans at any time without penalty.

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Although we
do not restrict the use of proceeds from small business owner loans, we believe
that customers generally use the proceeds to repay existing loans or to obtain
working capital for their businesses. Under normal circumstances, we do not
extend additional credit to small business owner loan customers until they pay
off their existing small business owner loan contracts. As a result, any small
business owner loan customer seeking a new small business owner loan contract
must pay off his or her existing loan and be subject to the same loan approval
process as any new customer.

In contrast to other lenders that target corporations and other business
entities, we serve almost entirely self-employed individuals, primarily
individual small business owners in a wide range of industries. As of March
31, 2003, approximately 66.2% of the borrowers were male, and 50.0% were
self-employed individuals in small-scale distribution and restaurant
businesses, while the remaining borrowers were self-employed individuals in
such industries as manufacturing, transportation, communication, agriculture
and fishery. We telemarket to small business owners and pay sales visits to
prospective customers. The loan process might begin when staff at our general
branches or small business owner loan branches call a prospective client to
determine interest, followed by a credit check. Our staff then hold a
face-to-face meeting with the client and the guarantor to ensure that all
parties understand the content and implications of the loan agreement.

The following table shows the total number of small business owner loan
accounts and the balance of small business owner loans per account.

|                                             |  |                 |        |      |  |      |        |      |  |      |        |  |  |  |        |  |  |  |        | 
|-------------------------------------------- |  | --------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ |  |  |  | ------ | 
|                                             |  | As of March 31,
|                                             |  |                
|                                             |  | 1999            |        | 2000 |  | 2001 |        | 2002 |  | 2003
|                                             |  |                 |        |      |  |      |        |      |  |     
|Number of small business owner loan accounts |  |                 | 9,187  |      |  |      | 12,404 |      |  |      | 13,995 |  |  |  | 17,472 |  |  |  | 23,439 | 
|Balance of loans per account (in millions)   |  |                 | ¥1,933 |      |  |      | ¥2,034 |      |  |      | ¥2,049 |  |  |  | ¥2,140 |  |  |  | ¥2,300 | 

The following table shows advances, recognized on the date of
disbursement, to our customers of small business owner loans:

|         |  |                      |        |      |  |      |         |      |  |               |         |  |  |  |         |  |  |  |         | 
|-------- |  | -------------------- | ------ | ---- |  | ---- | ------- | ---- |  | ------------- | ------- |  |  |  | ------- |  |  |  | ------- | 
|         |  | Year ended March 31,
|         |  |                     
|         |  | 1999                 |        | 2000 |  | 2001 |         | 2002 |  | 2003         
|         |  |                      |        |      |  |      |         |      |  |              
|         |  |                      |        |      |  |      |         |      |  | (in millions) |         |  |  |  |         |  |  | 
|Advances |  |                      | ¥9,857 |      |  |      | ¥17,203 |      |  |               | ¥14,706 |  |  |  | ¥22,328 |  |  |  | ¥36,560 | 

As we do not make additional advances under existing small business owner
loan contracts, the majority of the advances are to new customers, with the
balance being made to existing customers under new contracts.

Business Timely Loans

We extend Business Timely loans, our unguaranteed, unsecured loans made
under pre-approved revolving credit lines, to more creditworthy small business
owners. Holders of our Business Timely Card may borrow unguaranteed and
unsecured Business Timely loans of up to ¥2 million. These loans accounted for
10.2% of our total average loans outstanding for the year ended March 31, 2003.

Business Timely loans currently bear interest at a fixed rate of no
greater than 27.01% per year, payable monthly. Customers may prepay their
small business owner loans at any time without penalty. A Business Timely loan
contract is automatically renewed after three years, provided that the borrower
is not in default for 16 days or more and has maintained a satisfactory credit
standing for at least one year. Furthermore, we conduct a credit assessment of
an account holder with four credit lines or more every three months and of an account holder with fewer than four credit lines
every year.

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We may terminate the account for a number of reasons. For
example, we may terminate the account if the holder is found to have increased
his or her borrowings from other institutions. Although we do not restrict use
of Business Timely loans, we believe customers generally use the proceeds to
repay existing loans or to obtain working capital. As a general rule, a
customer seeking a Business Timely card may have loans outstanding from only up
to two consumer finance companies at the time of application. Customers
granted a Business Timely card can request transfer of funds to their account
using our automated telephone service on the same or following business day
after our decision to grant the Card.

We market Business Timely loans along with our small business owner loans.
The March 2000 introduction of Business Timely loans allowed us to tap into a
segment of the consumer finance industry that we believe has been underserved.
We market this product to more creditworthy small business owners from whom we
do not require a guarantor. As of March 31, 2003, approximately 51.6% of the
borrowers earned ¥9 million or more, and 68.4% engaged in wholesale, retail and
restaurant businesses. These potential borrowers often do not have an
immediate need for a loan, but value the security of access to a pre-approved
revolving credit line. Of the Business Timely cards issued, 56.7% had
outstanding balances as of March 31, 2003.

The following table shows the total number of Business Timely loan
accounts and the average loan balance per Business Timely loan account.

|                                                                  |  |                 |      |      |  |      |        |      |  |  |        |  |  |  |        | 
|----------------------------------------------------------------- |  | --------------- | ---- | ---- |  | ---- | ------ | ---- |  |  | ------ |  |  |  | ------ | 
|                                                                  |  | As of March 31,
|                                                                  |  |                
|                                                                  |  | 2000            |      | 2001 |  | 2002 |        | 2003
|                                                                  |  |                 |      |      |  |      |        |     
|Total number of Business Timely loan accounts                     |  |                 | 185  |      |  |      | 10,673 |      |  |  | 22,867 |  |  |  | 25,580 | 
|Number of Business Timely loan accounts with
outstanding balances |  |                 | 123  |      |  |      | 6,479  |      |  |  | 13,239 |  |  |  | 14,511 | 
|Balance of loans per account (in millions)                        |  |                 | ¥798 |      |  |      | ¥1,183 |      |  |  | ¥1,211 |  |  |  | ¥1,192 | 

The following table provides information on advances, recognized on the
disbursement date, to our customers of Business Timely loans.

|                                                            |  |                      |      |      |  |      |         |      |  |  |         |  |  |  |         | 
|----------------------------------------------------------- |  | -------------------- | ---- | ---- |  | ---- | ------- | ---- |  |  | ------- |  |  |  | ------- | 
|                                                            |  | Year ended March 31,
|                                                            |  |                     
|                                                            |  | 2000                 |      | 2001 |  | 2002 |         | 2003
|                                                            |  |                      |      |      |  |      |         |     
|                                                            |  | (in millions)       
|Advances to existing
customers (including repeat
customers) |  |                      | ¥5   |      |  |      | ¥5,819  |      |  |  | ¥9,686  |  |  |  | ¥10,030 | 
|Advances to new customers                                   |  |                      | 95   |      |  |      | 5,384   |      |  |  | 6,847   |  |  |  | 4,300   | 
|                                                            |  |                      |      |      |  |      |         |      |  |  |         |  |  |  |         | 
|Total                                                       |  |                      | ¥100 |      |  |      | ¥11,203 |      |  |  | ¥16,533 |  |  |  | ¥14,330 | 

Purchased Loans

Through our subsidiary Nissin Servicer, we service distressed loans that
we have purchased from financial institutions. We do not service loans owned
by third parties. We seek to renegotiate the terms of these loans with the
borrowers and carry and service the loans through their maturities. These
loans are normally collateralized or carry personal guarantees. For the year
ended March 31, 2003, we purchased distressed loans in the notional amount of
¥4,854 million and collected ¥2,145 million. As of March 31, 2003, we had
purchased loans with a carrying value of ¥2,946 million. For a discussion of
accounting treatment of these purchased loans, see Allowance for Loan Losses,
Loan Change-offs and Provisions for Loan Losses and Critical Accounting
Policies in Item 5.A of this annual report on Form 20-F.

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Customer Acquisition and Loan Application Channels

We conduct our business through our own customer acquisition and loan
application channels as well as those of our affiliates and third parties.

Our Own Customer Acquisition and Loan Application Channels

Our customer acquisition and loan application channels consist primarily
of our automated telephone service and loan offices. For the year ended March
31, 2003, we received 112,815 applications for our loans through our own
application channels. For the year ended March 31, 2003, the total amount of
loans outstanding derived from our own loan application channels was ¥51,279
million.

We have sought to improve our operating efficiency by relying less on
costly physical infrastructure. Most of our competitors rapidly spread their
physical presence throughout Japan, particularly in the 1990s, with the
establishment of networks of automated loan machines and proprietary ATMs.
Instead we have shifted our focus to eliminate unnecessary physical
infrastructure, relying on telephone, loan office and Internet interaction with
our customers.

Automated Telephone Service

We primarily serve customers through our automated telephone service,
which we call the telephone cashing system. Loan applications through the
telephone currently comprise a majority of all applications. After opening an
account, customers place a toll-free call and follow pre-recorded instructions
on our computer system to receive computerized services such as those for
balance inquiries and withdrawal of funds up to their authorized limit. These
services enhance convenience for our customers by eliminating the need, and for
some customers embarrassment, of visiting a loan office or ATM of a consumer
finance company. They also greatly reduce the need and costs of personal
service from our staff.

Loan Offices

|                    |  |                 |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     | 
|------------------- |  | --------------- | --- | ---- |  | ---- | --- | ---- |  | ---- | --- |  |  |  | --- |  |  |  | --- | 
|                    |  | As of March 31,
|                    |  |                
|                    |  | 1999            |     | 2000 |  | 2001 |     | 2002 |  | 2003
|                    |  |                 |     |      |  |      |     |      |  |     
|Loan offices        |  |                 | 49  |      |  |      | 59  |      |  |      | 67  |  |  |  | 72  |  |  |  | 72  | 
|Full-time employees |  |                 | 555 |      |  |      | 604 |      |  |      | 695 |  |  |  | 859 |  |  |  | 832 | 

Our 72 loan offices, 22 of which specialize in small business owner loans
and Business Timely loans, enable loan applicants and current borrowers to meet
with our employees, who provide a full range of services, including
disbursement of cash, collection of payments and responses to balance
inquiries. Loan offices are generally located near train stations and city
centers in buildings owned or used by banks and insurance companies.

In recent years, we have been increasing the number of our loan offices
specializing in small business owner loans and Business Timely loans throughout
Japan in order to target these customers. In our experience, maintenance of
local physical office presence is important for successful marketing to small
business owners. Some of these new loan offices specialize in providing loans
to referred customers through our strategic alliances. Because we believe this
area offers significant growth opportunities, we increased the number of staff
employed in branches dedicated to small business owner loans from 158 at March
31, 2001, to 193 at March 31, 2002 and to 202 at March 31, 2003 and the number
of small business owner loan offices from 20 at March 31, 2001, to 22 at March
31, 2002, which remained the same at March 31, 2003.

20



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Customer Acquisition and Loan Application Through Affiliates and Third
Parties

Affiliates

For the year ended March 31, 2003, we received 28,464 applications for our
loans through the application channels of our affiliates, including
Webcashing.com, and approved 19.2% of them. For the year ended March 31, 2003,
the total amount of loans we acquired through the application channels of our
affiliates was ¥11,028 million.

Webcashing.com. We also accept applications for all loans through
Webcashing.com, an online operation owned by i-cf, Inc., our affiliate in which
we own a 17.7% interest. Most applications through Webcashing.com are for
consumer loans. Although Webcashing.com was formerly our subsidiary, in
November 2002, we exchanged 100% of our ownership of Webcashing.com, our online
operations, for 17.7% of the equity of i-cf, Inc. As a result, Webcashing.com
became a wholly owned subsidiary of i-cf.

Ascot. We have a 25% stake in Ascot, an Internet operation owned by
leading consumer finance specialists Acom and Softbank Finance. Ascot operates
a website, through which consumers can apply for an ascotcard allowing them
access to a variety of loan products. Since May 2001, Ascot has served as a
loan application channel primarily for our Business Timely loans and, to a
limited extent, small business owner loans, receiving commissions for serving
as our agent for the loans.

Shinsei Business Finance. In November 2002, we established Shinsei
Business Finance, jointly with Shinsei Bank, to expand our provision of loans
to small business owners. We own a 25% interest in the joint venture. We use
our credit assessment and credit management expertise to provide guarantees to
the loan customers of the joint venture. As of March 31, 2003, our outstanding
guarantees amounted to ¥177 million.

Swan Credit. In December 2001, we invested ¥20 million for a 20% interest
in Swan Credit Co., Ltd., a private Japanese corporation, for the purpose of
providing loans to small business owners.

BB Net. In October 2002, we made an investment of ¥410 million in BB Net
Corp., a Japanese corporation for the purpose of providing raw materials and
other support services for small business owners.

Referral Relationships with Third Parties

For the year ended March 31, 2003, we received 59,561 applications for our
loans through the application channels of third parties, and approved 9.4% of
them. For the year ended March 31, 2003, the total amount of loans we acquired
through the application channels of third parties was ¥9,823 million.

We maintain numerous referral relationships with other consumer finance
companies and financial institutions. These relationships provide an
opportunity to our partners to generate fees, in the form of commissions we pay
based on acquired loan balances, from borrowers that these companies would
otherwise reject because of their indebtedness. We benefit from these
relationships because we believe our credit assessment expertise gives us an
advantage in evaluating the creditworthiness of such borrowers. We continue to
negotiate actively with potential partners.

21



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Loan Distribution Channel

We wire loan funds either to accounts designated by borrowers or to ATMs
operated by third parties such as local and regional banks with whom we have
entered into access agreements. Unlike many of our competitors, we do not use
automated loan machines to disburse loans in order to minimize physical
infrastructure. These ATMs allow our customers to withdraw, but not deposit,
their funds in return for a small fee paid by us on each transaction. Our
customers currently have access to 1,108 of these ATMs located in Shikoku only,
but we phased out all of our proprietary ATMs by March 31, 2003. We are
considering whether or not to cease our arrangements to use third-party ATMs
and may in the future rely entirely on disbursements to bank accounts
designated by customers.

Marketing

We have increasingly de-emphasized extensive general marketing campaigns,
the typical marketing strategy of the major finance companies, in favor of
direct telemarketing through our offices specialized in small business owner
and Business Timely loans. In our experience, local physical presence is
important for successful marketing to prospective customers of these loan
products.

While we have engaged in more traditional sales promotion techniques to
increase our customer base, such as nationwide broadcast advertisements on
television, advertisements in weekly magazines, telephone directories and
newspapers, circulars in newspapers, leaflets and board advertisements in
subways and trains, we continue to de-emphasize these traditional sales
promotion techniques. After the establishment of Webcashing.com, we have
increasingly devoted marketing resources to less-costly online advertisements,
primarily to push the Internet presence of Webcashing.com. We believe the
recent sale of Webcashing.com to i-cf has given Webcashing.com greater
independence to build its brand and business independent from Nissin.

In addition to serving as another means of customer acquisition, our
strategic alliances and joint ventures provide new opportunities to tailor our
brand building to different customer segments. For example, through
third-party websites, we promote our offerings next to those of our partners,
such as Business Timely loans beside ascotcards. In addition, we recently
entered into an agency agreement with Shinsei Business Finance pursuant to
which our branch offices market the joint ventures products.

Opening of Loan Accounts

Effective screening and approval of loan applicants and guarantors are
critical factors in the success of our business. We strive to make the credit
application process quick, convenient and simple.

The application procedure focuses principally on confirmation through an
interview of the identity and credit capacity of the customer and, if relevant,
the guarantor. A new customer or guarantor must first provide proof of
identity, date of birth, address, place of work, length and nature of
employment, family situation, existing borrowing from other companies and other
details. To establish their credit standing, we check the customer information
and, if relevant, guarantor information against our proprietary database and
also check the customer information against other databases. One such database
is maintained by numerous credit information centers solely for use by
consumer and small business finance companies, sales finance companies and
credit sales companies. These credit information centers for consumer and
small business finance companies record all transactions on a real-time basis,
as participating companies are required to provide customer credit information
on an ongoing basis. Another database with information on delinquent loans is
shared by moneylenders, banks and installment sales finance companies.

22



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Consumer Loans

Previously, all loan applications involved face-to-face interviews, but we
now rely almost entirely on telephone interviews for consumer lending. Our
computerized credit scoring system weighs and analyzes the information provided
by the applicant and, if the loan is approved, produces a credit line
recommendation through the use of statistical data including the state of the
customers transactions with other loan providers and regional factors. This
automated scoring system sets our consumer loans limits with a final review by
the local loan office manager.

Each loan office has authority to establish a credit limit of up to
¥500,000 per customer, subject to the credit limit established by our credit
scoring system, although the actual amount initially available may be lower
than the authorized limit until a record of punctual payments is established.
Any questions relating to granting the loan or the appropriate limit are
referred by the loan office to our credit screening department based at our
Tokyo head office. We make our credit decision at the end of each telephone
interview, which generally lasts approximately 30 minutes. Following the
decision, the loan amount is remitted to the customers bank account on the
same or following business day.

We approved approximately 29.1% of loan applicants for consumer loans for
the year ended March 31, 2003. Our approval rate reflects our strict credit
standards, the smaller size of our borrowers, whose credit risk tends to be
greater, and the fact that many applicants for our loans have unsuccessfully
sought loans from larger consumer finance companies before they apply for our
loans. Any history of substantial outstanding borrowings or past defaults,
shown in our database or databases maintained by credit information centers,
provides grounds for rejection. In particular, we do not accept any applicant
with five or more loans outstanding from consumer loan companies, and no
applicant who already holds an account with us may borrow more consumer loans.
Unsuccessful applicants for our consumer loans may apply for our Wide loans and
small business owner loans, which require a guarantor independent of the
borrower.

Our system can adjust the credit line for any customer who regularly
repays and borrows loans under the same agreement. We conduct a credit
assessment of an account holder with four credit lines or more every three
months and of an account holder with fewer than four credit lines every year.
This credit assessment is conducted based on a credit reference on each
customer from a credit information enter for consumer finance companies. This
credit reference, together with our own data, helps us to maintain the
customers credit level at the most appropriate level.

Wide Loans, Small Business Owner Loans and Business Timely Loans

Loan approvals for small business owner loans and Wide loans continue to
depend on both telephone and face-to-face interviews. The staff in the local
loan office, a loan office manager and our credit screening department review
the information provided by applicants for Wide loans, small business owner
loans and Business Timely loans. The credit screening department reviews and
makes a decision based on the information relating to the customer and, if
applicable, the guarantor forwarded by the loan office after it completes its
check. The information we examine may include information about the
applicants employer or business, including its registration and financial
information.

Unlike our consumer loan lending policies, the policies of these loans do
not follow a fixed set of standards to determine the creditworthiness of
potential borrowers. We examine a combination of factors including their
history of borrowings, employment, and outstanding loans, particularly those
that are secured.

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For Wide loans and small business owner loans, within two or three days
from a successful initial application, the staff at the local loan office visit
the applicant and the guarantor to execute the loan and guarantee agreements
and to discuss the consequences of the guarantee provision to ensure that both
the applicant and the guarantor know the purpose of the loan and the
obligations they separately incur. We have never used blanket guarantees, a
practice for which some small business lenders have come under widespread
social criticism in recent years. A blanket guarantee holds the guarantors
liable for all current and future loans of the borrower, even those of which
the guarantor is not aware.

For Business Timely loans, disbursement of the Business Timely Card, valid
for three years, immediately follows a successful application. We conduct a
credit assessment of an account holder with four credit lines or more every
three months and of an account holder with fewer than four credit lines every
year. We may terminate the account for a number of reasons.

Collection

If a borrower fails to make a timely payment, the loan office that
extended the loan has initial responsibility for collection of any overdue
installment. Overdue balances on all loans accrue interest at a penalty rate
of 29.2%. We have the right in case of non-payment of a loan installment or
any other specified event of default to accelerate the maturity of the loan.
From the first day of delinquency, our computer system produces automatic daily
reports on overdue installments. Loan office personnel attempt to contact by
telephone the customer and, if applicable, the guarantor. Most delinquent
customers pay their overdue balances shortly after this notice. When initial
collection efforts fail, loan office personnel continue their collection
efforts by reaching the borrower and, if applicable, the guarantor by telephone
or mail. If necessary, we transfer the loan collection responsibility to our
legal department.

Each loan office is in charge of collection efforts for a loan account
until it is deemed to be a bad loan account. A loan account becomes bad when
the borrower has decreased or become bankrupt or a legal proceeding has begun
to recover the loan or in the following cases:



| |  |  | In the case of a consumer loan, when interest payments are
delinquent for 67 days;                             
| | - |  | ---------------------------------------------------------------------------------------------------------------
|
| |  |  | In the case of a Wide loan or small business owner loan, when
interest payments are delinquent for 44 days; and
|
| |  |  | In the case of a Business Timely loan, when payments are past
due for 7 days.                                  

We transfer all bad loan accounts to our investigation department, which
then takes on the collection responsibility. When we choose to provide an
allowance, the investigation section continues to examine the possibility of
collection and compile information with which to determine whether or not to
charge off the debts. See Allowance for Loan Losses, Loan Charge-offs and
Provisions for Loan Losses in Item 5.A of this annual report on Form 20-F for
discussion of the determination of our allowance for loan losses.

Strategic Investments

We purchase equity stakes in enterprises that have the potential to
complement our business strategically and expect to continue to make these
investments, if suitable opportunities arise. Some of these enterprises are
our affiliates, in which we have invested ¥1,258 million. As of March 31,
2003, these affiliates had a book carrying value of ¥742 million. The
remainder of these enterprises are small enterprises that we view as potential
strategic partners, rather than sources of potential capital gains,
and in which we have invested an aggregate of ¥920 million.

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As of March 31,
2003, these small enterprises had a book carrying value of ¥673 million, which
we include in the amount of investment securities in our consolidated balance
sheet.

Technology

Branch and Office Network

The application and e-mail servers in our branches and offices are
connected through ISDN-based NTT frame relay networks. We outsource our
maintenance and operation work on the networks to an NEC affiliate.

Customer Information

An outsourcing center in Matsuyama houses our main computer, which stores
all customer information. Our main computer stores information for
approximately 2 million customers and can store information for up to
approximately 3 million customers. At the end of each business day, we send
the accumulated transaction data from our database servers in our branches and
offices to our main computer. We outsource our maintenance and operation work
on the main computer to another NEC affiliate. Although we have back-up
systems for our data, we do not maintain a back-up system that can replace our
main computer in the event our main computer becomes inoperative.

Loan Disbursements

For customers who seek loans through ATMs, we use Credit and Finance
Information System, or CAFIS, developed by NTT. CAFIS establishes our
connections to ATMs, all of which are owned by third-party banks and other
financial institutions. All other customers use our automated telephone
system, managed by Sanyo Electric Credit Co., Ltd., to seek loans. Our
automated telephone system currently handles transactions with approximately
160,000 customers These customers must direct funds to accounts maintained by
banks or financial institutions of their choice also through Sanyo Electric
Credit, which provides wire transfer service.

Competition

Japans consumer finance industry, in which we specialize as a lender to
consumers and individual small business owners, is becoming increasingly
competitive. In the past, the countrys financial system was more strictly
regulated. In recent years, however, the Financial Services Agency, or FSA,
and other government bodies have taken steps to deregulate the financial system
and allow increased competition. For instance, the barriers that once
prevented banks from entering the consumer finance industry, including
provisions of the Banking Law of Japan and other related legislation and
guidelines, have been gradually reduced in recent years. While banks
themselves continue to lack access to a database on credit information
available to consumer finance companies and credit card companies, they may now
own consumer finance subsidiaries that can access the database, an invaluable
resource for success in the industry. As a result, we expect to face
additional competition not only from existing competitors but also from banks
and new market entrants in the future. Our current and potential competitors
include:



| |  |  | foreign financial institutions, a number of which have been
entering the Japanese consumer finance industry, such as GE Capital
through its acquisition of Lake;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | large Japanese consumer finance companies, including
Takefuji, Acom, Promise, and Aiful, which continue to seek greater
market shares of the consumer finance market through extensive
marketing, and medium-sized consumer finance companies, such as
Shinki and Credia;                                                                                                                                                               
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Japanese banks and other financial institutions expanding out
of their traditional markets, particularly by forming joint ventures
with consumer finance companies, including Sumitomo Mitsui Banking
Corporation through its establishment of At-Loan, UFJ Bank through
its establishment of Mobit, The Bank of Tokyo Mitsubishi through
Tokyo-Mitsubishi Cash One and The Sumitomo Trust and Banking Co.
through Businext Corporation;
|
| |  |  | credit card companies, particularly overseas companies such
as MasterCard, which have formed distribution relationships with
Acom and Aic and increasingly offer credit cards in Japan as
revolving loans, rather than simply to finance consumption by
individuals; and                                                                                                                                                                
|
| |  |  | non-financial institutions, an increasing number of which are
entering the consumer finance industry through acquisitions,
including Hankyu Corporation, a railway company, that provides
consumer credit services through Station Finance Inc.                                                                                                                                                                                         

We believe that we can compete with these competitors because of our
specialization in the market of loans to individuals, where we have built deep
experience and knowledge in credit analysis and an ability to meet our
customers diverse needs. We compete in our market on the basis of interest
rates, speed and effectiveness of credit assessment and credit risk management,
convenience and privacy of loan application and fund disbursement, business
hours, product mix, brand recognition, marketing, and location and network of
offices.

Regulation

We are subject to an extensive regulatory scheme under Japanese law,
including:



| |  |  | the Law Concerning the Regulation, Etc. of the Money Lending
Business, together with a cabinet order and a ministerial ordinance,
collectively referred to as the Moneylending Business Restriction
Law;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the Law for Control of Acceptance of Contributions, Money
Deposits and Interest, Etc., more commonly known as the
Contributions Law; and                                                                
|
| |  |  | the Interest Rate Restriction Law.                                                                                                                                                                      

The Financial Services Agency of Japan, or the FSA, has also released
administrative guidelines to clarify the administrative application of the
Moneylending Business Restriction Law.

Registration Requirements

Under the Moneylending Business Restriction Law, any company wishing to
engage in moneylending is required to register with the chief officer of the
FSA if it lends through offices in more than one prefecture. The registration
is renewed every three years. The FSA must reject a registration or renewal
application if it contains any untrue statement or omission of a material fact
or the applicant is disqualified under the Moneylending Business Restriction
Law. A disqualified person is any person:

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| |  |  | who has had its registration revoked because of specified
misconduct or other reasons under the Moneylending Business
Restriction Law within three years prior to the application,                                     
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | who was fined for violating the Moneylending Business
Restriction Law or other specified statues and three years have not
passed since the person completed the payment of the fine (or became
excused from paying it),
|
| |  |  | who was sentenced to imprisonment for any reason and three
years have not yet passed since person completed the term of
imprisonment (or became excused from serving it), or                                           
|
| |  |  | in respect of which any of the directors, statutory auditors
or specified senior employees is a disqualified person.                                                                                                   

We registered under the Moneylending Business Restriction Law in 1984, and
have since renewed our registration periodically as required. Our registration
permits us to engage in the moneylending business in all prefectures in which
we presently conduct the business.

Government Supervision

The FSA has general authority to supervise and discipline registered
moneylenders under the Moneylending Business Restriction Law. A registered
moneylender with an outstanding loan balance of more than ¥50 billion at the
end of its fiscal year is required to submit an operational report to the FSA
concerning its operations during the fiscal year, including information on
officers, employees, loan offices, sources of funding and status of loans,
together with its financial statements for the fiscal year, within two months
of the end of such fiscal year. The FSA may request that a registered
moneylender make further reports under the Moneylending Business Restriction
Law. A representative of the FSA may also enter a registered moneylenders
offices, inspect its books, documents and other materials or interview its
officers, employees and other related persons as may be necessary to protect
the interest of its customers. The FSA may suspend all or part of a registered
moneylenders business for up to one year under specified circumstances,
including violation of the Moneylending Business Restriction Law. The FSA must
revoke the registration of a registered moneylender under specified
circumstances, including when it becomes a disqualified person for the purpose
of registration or renewal or when it is in significant violation of the
Moneylending Business Restriction Law.

Restrictions on Usury

The Contributions Law and the Interest Rate Restriction Law primarily
regulate the interest rates we charge.

Under the Contributions Law, no person in the moneylending business may
charge interest at a rate exceeding 29.2% per year. Charging or receiving
interest at a rate exceeding 29.2% per year is subject to criminal penalty.
Pursuant to the proposed amendments to the Contributions Law
currently being discussed at the Japanese Diet, the Japanese government is expected to
review the maximum interest rate legally chargeable around year 2006, in
consideration of funding circumstances, economic and financial conditions and
business practices of moneylenders.

The Interest Rate Restriction Law provides that a loan with an interest
rate exceeding a prescribed rate is invalid with respect to the portion
exceeding the maximum rate. Prescribed rates are:



| |  |  | 20% per year for loans of less than ¥100,000,
| | - |  | ---------------------------------------------

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| |  |  | 18% per year for loans of ¥100,000 or more but less than ¥1,000,000, and
| | - |  | ------------------------------------------------------------------------
|
| |  |  | 15% per year for loans of ¥1,000,000 or more.                           

The Moneylending Business Restriction Law provides, however, that a
payment by a borrower or guarantor of interest in excess of the rate prescribed
by the Interest Rate Restriction Law to a registered moneylender is valid and
non-refundable so long as the excess interest is paid without coercion, mistake
or threat and additional requirements are satisfied.

These additional requirements include:



| |  |  | delivery to the borrower or the guarantor, as the case may
be, upon execution of the relevant loan or guarantee agreement, of a
prescribed written instrument setting forth the principal terms of
the loan or the guarantee, and                                       
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | delivery to the borrower or guarantor, upon the payment of
the excess interest, of a written receipt for the payment, unless
the payment is transferred to the bank account of the moneylender,
in which case a written receipt is required upon the borrowers
request.

In addition, the FSA guidelines require us to provide the borrower with
written notice of the terms of any loans extended under a loan agreement at the
time of each disbursement, if multiple loans may be provided under the same
loan agreement.

As is typical for most other lenders in the Japanese consumer finance and
business finance industries, the interest rates of most of our current loans
exceed the relevant maximum rates permitted under the Interest Rate Restriction
Law. Consequently, collection of unpaid excess interest is legally
unenforceable by lenders. These rates, however, are below the levels that
would subject us to criminal penalty under the Contributions Law. When paid by
the borrower, the excess interest portion of loans subject to such rates is
non-refundable so long as we have met the requirements stated above.

Previously virtually no borrowers refused to pay interest in excess of the
Interest Rate Restriction Law. More recently, the number of borrowers who
refuse to pay or request refunds, though still very small, has increased,
largely due to increases in the number of individuals in Japan experiencing
financial difficulties as a result of ongoing economic difficulties in Japan.
When a borrower exercises its legal right to refuse to pay interest in excess
of the Interest Rate Restriction Law, the entire unpaid balance of the loan,
and any unpaid interest excluding the unpaid excess interest, becomes
immediately due and payable in accordance with the terms of our contractual
loan agreements. Borrowers who fail to repay the unpaid balance of the loan,
including any unpaid interest due, excluding the unpaid excess interest
portion, are subject to the general collection procedures applicable to all
borrowers discussed in Business  Collection. We do not extend additional
credit to borrowers who have refused to make interest rate payments. On
occasion, we negotiate refunds of previously paid excess interest in certain
situations primarily involving threatened customer bankruptcy or threatened
litigation. For the year ended March 31, 2003, we agreed to return the excess
interest payments totaling approximately ¥72 million with respect to 244
borrowers, compared with returned payments totaling approximately ¥28 million
with respect to 107 borrowers for the year ended March 31, 2002. The effect of
the returned payments has been immaterial to our results of operations.

The Interest Rate Restriction Law also applies to discounted loans. A
discounted loan results when an interest amount is deemed to have been deducted
in advance because the stated value of the loan exceeds the actual cash
disbursement in respect of the loan. This deemed interest amount is subject to
the general restrictions on interest under the Interest Rate Restriction Law.
We do not make any discounted loans.

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Properties

Our head office in Tokyo, Japan occupies 936.63 square meters of office
space, and our head office in Matsuyama, Ehime, occupies 1,986.38 square meters
of office space on 642.78 square meters of land. We lease the Tokyo head
office space and own the Matsuyama head office space. We lease most of our 72
loan offices, located throughout Japan. More than half of our loan offices
operate in the metropolitan regions surrounding Tokyo and Osaka.

Legal Proceedings

We are not a party to any material legal proceedings.

C. Organizational Structure.

The table below shows our principal subsidiaries, all of which were
incorporated under the laws of Japan.

|                                      |  |                    |       |                    |  |                           |  | 
|------------------------------------- |  | ------------------ | ----- | ------------------ |  | ------------------------- |  | 
|                                      |  | Shares held by us, |       |                    |  |                          
|                                      |  | directly or        |       |                    |  |                          
|Name                                  |  | indirectly         |       | Principal business
|                                      |  |                    |       |                   
|Nissin Servicer Co., Ltd.             |  |                    | 100.0 | %                  |  | Servicing business       
|Big Apple Co., Ltd.                   |  |                    | 100.0 |                    |  | Bridal service business  
|Nissin Credit Guarantee Co., Ltd. (1) |  |                    | 100.0 |                    |  | Credit guarantee business
|Nissin Insurance Co., Ltd. (2)        |  |                    | 100.0 |                    |  | Insurance agency business



---

|(1) |  | Prior to April 2003, Nissin Credit Guarantee Co., Ltd., was named Shiq
Consulting Co., Ltd., whose principal business was consulting services for
financial affairs.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Established on April 25, 2003.                                                                                                                                      

D. Property, Plants and Equipment.

The information required by this item is set forth in Item 4.B of this
annual report on Form 20-F.




Item 5. Operating and Financial Review and Prospects

A. Operating Results.

You should read the following discussion and analysis of our financial
condition and results of operations together with Item 3.A of this annual
report on Form 20-F and our audited U.S. GAAP financial statements, including
the notes to these statements, appearing beginning on page F-1 of this annual
report on Form 20-F. This discussion and analysis is based on U.S. GAAP
financial information except as noted otherwise. This discussion and analysis
contains forward-looking statements that involve risks, uncertainties and
assumptions. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of factors including but not
limited to those set forth in Item 3.D of this annual report on Form 20-F.

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Overview

We are engaged in the business of providing small unsecured loans to
consumers and small business owners in Japan. Substantially all of our income
comes from interest income on loans receivable, including the amortization of
origination fees charged in connection with some of our loan products.

We categorize our loans into four primary categories: consumer loans, Wide
loans, small business owner loans and Business Timely loans. Consumer loans
are unguaranteed, unsecured loans to individuals. Wide loans are unsecured
loans used to consolidate individual debts and guaranteed by one or more
guarantors. Small business owner loans are primarily unsecured loans to
self-employed individuals guaranteed by one or more guarantors. Business
Timely loans are unguaranteed, unsecured loans to individual small business
owners pursuant to revolving lines of credit.

Net interest income after provision for loan losses was ¥21,154 million
for the year ended March 31, 2001, ¥22,659 million for the year ended March 31,
2002 and ¥22,562 million for the year ended March 31, 2003. Net income was
¥4,952 million for the year ended March 31, 2001, ¥4,801 million for the year
ended March 31, 2002 and ¥5,176 million for the year ended March 31, 2003.

In recent periods, the percentage of interest income derived from consumer
loans has been decreasing while the percentage derived from small business
owner loans and Business Timely loans has been increasing, reflecting our
strategic shift away from consumer loans and the March 2000 introduction of
Business Timely loans. The percentage of interest income derived from Wide
loans has remained relatively stable. The following table shows the interest
income from loans and the percentage of our total interest income from loans
derived from each major category of loans for the years ended March 31, 2001,
2002 and 2003.

|                                             |  |                                  |         |      |  |      |       |   |  |  |         |   |  |  |       |   |  |  |         |   |  |  |       |  
|-------------------------------------------- |  | -------------------------------- | ------- | ---- |  | ---- | ----- | - |  |  | ------- | - |  |  | ----- | - |  |  | ------- | - |  |  | ----- | -
|                                             |  | Year ended March 31,            
|                                             |  |                                 
|                                             |  | 2001                             |         | 2002 |  | 2003
|                                             |  |                                  |         |      |  |     
|                                             |  | (in millions except percentages)
|Consumer loans                               |  |                                  | ¥11,703 |      |  |      | 39.2  | % |  |  | ¥12,188 |   |  |  | 35.9  | % |  |  | ¥11,677 |   |  |  | 30.3  | %
|Wide loans                                   |  |                                  | 11,081  |      |  |      | 37.1  |   |  |  | 11,740  |   |  |  | 34.6  |   |  |  | 13,150  |   |  |  | 34.2  |  
|Small business owner loans                   |  |                                  | 6,333   |      |  |      | 21.2  |   |  |  | 7,119   |   |  |  | 21.0  |   |  |  | 9,719   |   |  |  | 25.2  |  
|Business timely loans                        |  |                                  | 846     |      |  |      | 2.8   |   |  |  | 3,232   |   |  |  | 9.6   |   |  |  | 4,515   |   |  |  | 11.7  |  
|Secured and other loans                      |  |                                  | 381     |      |  |      | 1.3   |   |  |  | 285     |   |  |  | 0.8   |   |  |  | 205     |   |  |  | 0.5   |  
|                                             |  |                                  |         |      |  |      |       |   |  |  |         |   |  |  |       |   |  |  |         |   |  |  |       |  
|Total interest revenue from loans receivable |  |                                  | 30,344  |      |  |      | 101.6 |   |  |  | 34,564  |   |  |  | 101.9 |   |  |  | 39,266  |   |  |  | 101.9 |  
|Less amortization of loan origination costs  |  |                                  | (480    | )    |  |      | (1.6  | ) |  |  | (633    | ) |  |  | (1.9  | ) |  |  | (747    | ) |  |  | (1.9  | )
|                                             |  |                                  |         |      |  |      |       |   |  |  |         |   |  |  |       |   |  |  |         |   |  |  |       |  
|Interest income from loans receivable        |  |                                  | ¥29,864 |      |  |      | 100.0 | % |  |  | ¥33,931 |   |  |  | 100.0 | % |  |  | ¥38,519 |   |  |  | 100.0 | %
|                                             |  |                                  |         |      |  |      |       |   |  |  |         |   |  |  |       |   |  |  |         |   |  |  |       |  

In recent years, our four principal loan products have developed as
follows:



| |  |  | Consumer Loans. As a result of a recent strategic shift
toward promotion of our Wide loans, small business owner loans and
Business Timely loans, the number of consumer loan accounts has
gradually declined. We also expect our total consumer loans
outstanding to continue gradually declining.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Wide Loans. The amount of total Wide loans outstanding and
interest income from Wide loans have increased, primarily as a
result of increases in the number of customer accounts and our
marketing of these loans to the customers of our referral partners.                                       

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| |  |  | Small Business Owner Loans. The amount of total small
business owner loans outstanding and number of customer accounts
have increased, primarily as a result of our active promotion of
these loans through the direct telemarketing efforts of our offices
specializing in small business owner loans and Business Timely
loans, as well as through referrals from our strategic alliance
partners.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Business Timely Loans. Business Timely loans have continued
to grow, reflecting increases in the number of customer accounts due
to active direct telemarketing efforts since the introduction of
this loan product in March 2000.                                                                                                                                                                  

The following table provides information on the average balance of loans
outstanding during the periods indicated for each of our main product
categories and the percentage of total average loans outstanding represented by
each loan category:

|                                           |  |                                  |          |      |  |      |       |   |  |  |          |  |  |  |       |   |  |  |          |  |  |  |       |  
|------------------------------------------ |  | -------------------------------- | -------- | ---- |  | ---- | ----- | - |  |  | -------- |  |  |  | ----- | - |  |  | -------- |  |  |  | ----- | -
|                                           |  | Year ended March 31,            
|                                           |  |                                 
|                                           |  | 2001                             |          | 2002 |  | 2003
|                                           |  |                                  |          |      |  |     
|                                           |  | (in millions except percentages)
|Consumer loans                             |  |                                  | ¥43,016  |      |  |      | 35.2  | % |  |  | ¥45,784  |  |  |  | 32.1  | % |  |  | ¥45,093  |  |  |  | 26.7  | %
|Wide loans                                 |  |                                  | 46,543   |      |  |      | 38.1  |   |  |  | 50,940   |  |  |  | 35.7  |   |  |  | 59,743   |  |  |  | 35.4  |  
|Small business owner loans                 |  |                                  | 27,293   |      |  |      | 22.4  |   |  |  | 32,195   |  |  |  | 22.5  |   |  |  | 45,311   |  |  |  | 26.9  |  
|Business Timely loans                      |  |                                  | 3,250    |      |  |      | 2.7   |   |  |  | 12,238   |  |  |  | 8.6   |   |  |  | 17,256   |  |  |  | 10.2  |  
|Secured and other loans                    |  |                                  | 1,969    |      |  |      | 1.6   |   |  |  | 1,613    |  |  |  | 1.1   |   |  |  | 1,265    |  |  |  | 0.8   |  
|                                           |  |                                  |          |      |  |      |       |   |  |  |          |  |  |  |       |   |  |  |          |  |  |  |       |  
|Total average balance of loans outstanding |  |                                  | ¥122,071 |      |  |      | 100.0 | % |  |  | ¥142,770 |  |  |  | 100.0 | % |  |  | ¥168,668 |  |  |  | 100.0 | %
|                                           |  |                                  |          |      |  |      |       |   |  |  |          |  |  |  |       |   |  |  |          |  |  |  |       |  

Factors Affecting Our Financial Results

The principal determinants of our profitability have been our net interest
income, the levels of provisions for loan losses and the amount of non-interest
expenses that we incur.

Net Interest Income

Net interest income is the total interest income from loans receivable
minus total interest expense. The principal determinants of total interest
income are our loan portfolio size, which is a product of the number of loan
customer accounts and the average outstanding balance per account, and the
average interest rate we charge on our loans. Our interest expense reflects
the funding cost to us of making loans to our customers. The difference
between the interest rates we charge our customers and the interest rates we
pay to finance our loans to customers largely determines our margins and
profitability. Because the average interest rate per account and average
outstanding balance per account vary by loan product, changes in the relative
composition of loan products in our total portfolio also affect net interest
income.

Loan Portfolio Size

Our loan portfolio has grown steadily in recent years. Growth in our loan
portfolio has been driven principally by growth in the number of customers, for
our Wide loans, small business owner loans and Business Timely loans. Over
recent periods, balances per account for our consumer loans have gradually but
slightly increased while the number of total borrowers has decreased. Balances
per account for small business owner loans and Wide loans have fluctuated but
increased. For additional information on account numbers and balances per
account, see Our Products in Item 4.B of this annual report on Form 20-F. We
believe that the number of customers and our loan portfolio size will continue
to increase as a result of expanded customer acquisition channels for our
loans, including our expanded network of loan offices and our referral arrangements with other financial service
providers, and the overall demand for personal financing in Japan.

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Interest Rates

We determine the interest rates we charge on our loans based on factors
including competition from other lenders, legal restrictions on interest rates
as discussed under Regulation in Item 4.B of this annual report on Form 20-F
and the willingness of our customers to borrow at the interest rates we charge.
The weighted period-end average contractual interest rate on outstanding loans
in our loan portfolio has been decreasing gradually, to 26.6% for the year
ended March 31, 2000, to 26.3% for the year ended March 31, 2001, to 25.9% for
the year ended March 31, 2002 and to 25.3% for the year ended March 31, 2003.
The weighted period-end average is determined by calculating the average
interest rate for each of our loan products on the period-end date, weighting
these rates by the proportion of total loans outstanding represented by the
loan category on this date, and averaging these weighted interest rates. The
gradual decrease mainly reflects interest rate-based competition in the
consumer finance industry as well as the growth of our Wide loans, small
business owner loans and Business Timely loans, which carry lower interest
rates than our consumer loans. We lowered the contractual interest rate on
each of our major loan products by 0.73% for each of the years ended March 31,
2001 and 2002, but did not reduce the rate further for the year ended March 31,
2003. If competition for our target borrowers increases, legal or regulatory
changes reduce maximum interest rates, or borrowers became less willing to pay
the interest rates we charge, the interest we charge on our loans may be
reduced.

Interest Expense

Interest expense fluctuates with changes in market interest rates, market
conditions, our mix of funding sources, the amounts of our borrowings and our
credit ratings. In recent periods, we have benefited from the extremely low
interest rate environment in Japan created by government policies intended to
combat ongoing economic weakness. The weighted average rate of long-term
borrowings was 3.2% as of March 31, 2001, 2.7% as of March 31, 2002 and 2.4% as
of March 31, 2003. The weighted average rate of short-term borrowings was 2.9%
as of March 31, 2001, 2.2% as of March 31, 2002 and 1.7% as of March 31, 2003.
Beginning in the year ended March 31, 2000, when legal restrictions on debt
issuances to fund our lending business were eliminated, we have increased our
borrowings through debt issuances relative to bank loans, which had previously
accounted for substantially all of our borrowings. To the extent that debt
issuances have been available to us, we have benefited from their typically
lower funding costs than those of bank loans. At March 31, 2000, debt
issuances represented approximately 13.9% of our total borrowings. This
percentage was 33.0% at March 31, 2001, 38.1% at March 31, 2002 and 30.8% at
March 31, 2003. The significant decline in the amount of debt issuances as a
percentage of our total borrowings between March 31, 2002 and 2003 is
principally attributable to the increased difficulty we experienced in seeking
funding from the debt markets following the recent downgrades of the credit
ratings of consumer finance companies, including us, by rating agencies.
Nonetheless, the effect of a decrease in the percentage of our debt issuances
as of March 31, 2003 as compared to that of March 31, 2002 has been partly
offset by the gradual decline in the interest rates that banks charge us in
recent years. While the downgrades have harmed our ability to tap the debt
markets, our current intention, subject to market conditions and other
uncertainties, is to increase our proportion of direct financing to around 40%.
We have used interest rate swap and cap hedge agreements in order to reduce
the risk of fluctuations in interest rates on our borrowings. See Item 11 of
this annual report on Form 20-F. All of our derivative contracts expired
during the year ended March 31, 2003, and as of March 31, 2003, we did not have
any outstanding derivative contracts.

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Provisions for Loan Losses

Provisions for loan losses are allocations made each period to our
existing allowance for loan losses. Allowances for possible loan losses are
based upon our estimates of probable uncollectable loan losses from known and
inherent risks in our loan portfolio. We determine this allowance based upon
various factors including the status and risk profile of the borrower and, if
applicable, guarantor, economic conditions, unemployment and bankruptcy rates
and our historical loss experience. Each period we deduct charge-offs for
probable uncollectable loan losses, net of recoveries of any previously
charged-off amounts, from the amount provided for our allowance for loan
losses. Based upon our estimated allowance needs, we then supplement the
remaining balance through provisions for loan losses. Our provisions for loan
losses have been increasing in recent periods. These increases generally
reflect growth in the amount of our total loans outstanding and the amount of
charge-offs as a result of increases in the number of defaults, reflecting the
difficult economic environment in Japan. Also, our provision for loan losses
in any given fiscal year depends partly on the adequacy of our allowance for
loan losses for the previous fiscal year, as we must make up for any such
inadequacy, if any, with increased provision for loan losses in the following
fiscal year. To the extent that provisions for loan losses have been
increasing, and may continue to increase, due to current economic conditions in Japan, it signifies the
increasing risk that our loan portfolio carries. Additional detail on
provisions for loan losses for our various loan products is included below
under Allowance for Loan Losses, Charge-offs and Provisions for Loan Losses.

Non-interest Expense

The most significant components of non-interest expense are salaries and
employee benefits, occupancy, furniture and equipment, and other general and
administrative expenses.



| |  |  | Salaries and Employee Benefits. Salaries and employee
benefits depend on the number of our employees and the compensation
and benefits we provide to each employee. The number of employees
increased from 695 at March 31, 2001 to 859 at March 31, 2002, but
it decreased to 832 at March 31, 2003. While the number of
employees as of March 31, 2003 decreased as compared to the number
as of March 31, 2002, the total number of employees on our payroll
for the year ended March 31, 2003, as compared to the number for the
previous fiscal year, increased. Thus, salaries and employee
benefits have increased largely in line with the growth in the
annual average number of our employees. Also, as of April 1, 2002,
we increased the amount of cash compensation to each employee to
make up for the reduction in the rent subsidy we provide to the
employees who live in the housing units we lease. As we continue to
increase the scale of our operations and to the extent that the
compensation per employee increases because of the recent change in
our housing policy, we expect salaries and employee benefits to
continue to increase.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Occupancy, Furniture and Equipment. Our expense in
connection with our occupancy, furniture and equipment depends
largely on the number of our loan and other offices and branches and
the associated rents. The number of loan offices increased from 67
at March 31, 2001 to 72 at March 31, 2002 and remained at 72 at
March 31, 2003. We expect increases in offices rents to slow as we
have largely completed our current plans to expand the number of offices.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | Other General and Administrative Expense. The major items in
our other general and administrative expense include communication
expenses, expense of Future Create, taxes and duties, travel and
transportation expenses and recruit expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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Non-interest expense also includes impairment of investment in affiliates,
advertising expenses, loss on sale and impairment of long-lived assets,
minority interests and other expenses. For the year ended March 31, 2003, we
recognized an impairment of investment in affiliates for the first time in the
past three fiscal years. Our advertising expense declined for each of the past
three fiscal years in line with the increasing importance of referrals. We
plan to continue to decrease our advertising expenditure.

Results of Operations

The following table shows selected income statement data in yen amounts
and as percentages of total interest income for the years ended March 31, 2001,
2002 and 2003.

|                                                    |                                                       |                             |         |                                  |        |      |       |      |      |  |         |        |        |  |       |      |      |  |         |        |        |  |       |      |      | 
|--------------------------------------------------- | ----------------------------------------------------- | --------------------------- | ------- | -------------------------------- | ------ | ---- | ----- | ---- | ---- |  | ------- | ------ | ------ |  | ----- | ---- | ---- |  | ------- | ------ | ------ |  | ----- | ---- | ---- | 
|                                                    |                                                       |                             |         | Year ended March 31,            
|                                                    |                                                       |                             |         |                                 
|                                                    |                                                       |                             |         | 2001                             |        | 2002 |       | 2003
|                                                    |                                                       |                             |         |                                  |        |      |       |     
|                                                    |                                                       |                             |         | (in millions except percentages)
|Total interest income                               |                                                       |                             | ¥29,886 |                                  |        |      | 100.0 | %    |      |  | ¥33,976 |        |        |  | 100.0 | %    |      |  | ¥39,234 |        |        |  | 100.0 | %   
|Total interest expense                              |                                                       |                             | 4,166   |                                  |        |      | 13.9  |      |      |  | 3,884   |        |        |  | 11.4  |      |      |  | 3,984   |        |        |  | 10.2  |     
|                                                    |                                                       |                             |         |                                  |        |      |       |      |      |  |         |        |        |  |       |      |      |  |         |        |        |  |       |     
|                                                    | Net interest income                                   |                             |         | 25,720                           |        |      |       | 86.1 |      |  |         | 30,092 |        |  |       | 88.6 |      |  |         | 35,250 |        |  |       | 89.8 |     
|Provision for loan losses                           |                                                       |                             | 4,566   |                                  |        |      | 15.3  |      |      |  | 7,433   |        |        |  | 21.9  |      |      |  | 12,688  |        |        |  | 32.3  |     
|                                                    |                                                       |                             |         |                                  |        |      |       |      |      |  |         |        |        |  |       |      |      |  |         |        |        |  |       |     
|Net interest income after provision for
loan losses |                                                       |                             | 21,154  |                                  |        |      | 70.8  |      |      |  | 22,659  |        |        |  | 66.7  |      |      |  | 22,562  |        |        |  | 57.5  |     
|                                                    |                                                       |                             |         |                                  |        |      |       |      |      |  |         |        |        |  |       |      |      |  |         |        |        |  |       |     
|Total non-interest (loss) income                    |                                                       |                             | (409    | )                                |        |      | (1.4  | )    |      |  | (428    | )      |        |  | (1.3  | )    |      |  | 846     |        |        |  | 2.2   |     
|                                                    |                                                       |                             |         |                                  |        |      |       |      |      |  |         |        |        |  |       |      |      |  |         |        |        |  |       |     
|Non-interest expenses:                              |                                                       |                             |         |                                  |        |      |       |      |      |  |         |        |        |  |       |      |      |  |         |        |        |  |       |     
|                                                    | Salaries and employee benefits                        |                             |         | 4,437                            |        |      |       | 14.8 |      |  |         | 5,067  |        |  |       | 14.9 |      |  |         | 6,233  |        |  |       | 15.9 |     
|                                                    | Occupancy, furniture and equipment                    |                             |         | 2,085                            |        |      |       | 7.0  |      |  |         | 2,201  |        |  |       | 6.5  |      |  |         | 2,190  |        |  |       | 5.6  |     
|                                                    | Advertising                                           |                             |         | 2,173                            |        |      |       | 7.3  |      |  |         | 1,838  |        |  |       | 5.4  |      |  |         | 449    |        |  |       | 1.1  |     
|                                                    | Other general and administrative
expenses             |                             |         | 3,258                            |        |      |       | 10.9 |      |  |         | 4,253  |        |  |       | 12.5 |      |  |         | 4,389  |        |  |       | 11.2 |     
|                                                    | Loss on sale and impairment of
long-lived assets, net |                             |         | 45                               |        |      |       | 0.1  |      |  |         | 145    |        |  |       | 0.4  |      |  |         | 225    |        |  |       | 0.6  |     
|                                                    | Impairment of investment in affiliates                |                             |         |                                 |        |      |       |     |      |  |         |       |        |  |       |     |      |  |         | 683    |        |  |       | 1.7  |     
|                                                    | Other                                                 |                             |         | 31                               |        |      |       | 0.1  |      |  |         | 124    |        |  |       | 0.4  |      |  |         | 124    |        |  |       | 0.3  |     
|                                                    | Minority interest                                     |                             |         | 1                                |        |      |       | 0.0  |      |  |         | 1      |        |  |       | 0.0  |      |  |         | 15     |        |  |       | 0.1  |     
|                                                    |                                                       |                             |         |                                  |        |      |       |      |      |  |         |        |        |  |       |      |      |  |         |        |        |  |       |     
|                                                    |                                                       | Total non-interest expenses |         |                                  | 12,030 |      |       |      | 40.2 |  |         |        | 13,629 |  |       |      | 40.1 |  |         |        | 14,308 |  |       |      | 36.5 | 
|                                                    |                                                       |                             |         |                                  |        |      |       |      |      |  |         |        |        |  |       |      |      |  |         |        |        |  |       |     
|Income before income taxes                          |                                                       |                             | 8,715   |                                  |        |      | 29.2  |      |      |  | 8,602   |        |        |  | 25.3  |      |      |  | 9,100   |        |        |  | 23.2  |     
|                                                    |                                                       |                             |         |                                  |        |      |       |      |      |  |         |        |        |  |       |      |      |  |         |        |        |  |       |     
|Income taxes                                        |                                                       |                             | 3,763   |                                  |        |      | 12.6  |      |      |  | 3,801   |        |        |  | 11.2  |      |      |  | 3,924   |        |        |  | 10.0  |     
|                                                    |                                                       |                             |         |                                  |        |      |       |      |      |  |         |        |        |  |       |      |      |  |         |        |        |  |       |     
|Net income                                          |                                                       |                             | ¥4,952  |                                  |        |      | 16.6  | %    |      |  | ¥4,801  |        |        |  | 14.1  | %    |      |  | ¥5,176  |        |        |  | 13.2  | %   
|                                                    |                                                       |                             |         |                                  |        |      |       |      |      |  |         |        |        |  |       |      |      |  |         |        |        |  |       |     

Year Ended March 31, 2003, Compared to Year Ended March 31, 2002

Total Interest Income

Total interest income for the year ended March 31, 2003 was ¥39,234
million, an increase of ¥5,258 million, or 15.5%, from ¥33,976 million for the
previous fiscal year. The increase was due to an increase in the average
balance of loans outstanding, which amounted to ¥168,668 million for the year
ended March 31, 2003 as compared to ¥142,770 million for the previous fiscal
year. We believe that the balance outstanding has increased primarily as a
result of increased customer acquisition efforts and customer acquisition
channels mainly through referral relationships with financial service
providers. The balance of loans outstanding derived from referral
relationships, including with our affiliates, as of March 31, 2003 was ¥21,820
million, or 8.1%, of our balance of loans outstanding as of the same date, but
we expect that percentage to increase in future periods due to our plan to seek
additional referral relationships.

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The increase in the average balance of loans outstanding was led by an
increase in our average balance of small business owner loans of ¥13,116
million, or 40.7 %, to ¥45,311 million for the year ended March 31, 2003
compared to ¥32,195 million for the year ended March 31, 2002, an increase in
our average balance of Wide loans of ¥8,803 million, or 17.3%, to ¥59,743
million for the year ended March 31, 2003 compared to ¥50,940 million for the
year ended March 31, 2002, and an increase in our average balance of Business
Timely loans of ¥5,018 million, or 41.0%, to ¥17,256 million for the year ended
March 31, 2003 compared to ¥12,238 million for the year ended March 31, 2002.
For the year ended March 31, 2003, the average balance of consumer loans,
however, decreased by ¥691 million, or 1.5%, to ¥45,093 million from ¥45,784
million for the previous fiscal year. The increase in the average balance of
loans outstanding was a reflected of the increase in the number of accounts.

The weighted period-end average contractual interest rate on loans
outstanding decreased slightly from 25.9% at March 31, 2002 to 25.3 % at March
31, 2003, reflecting the increasing importance of Wide loans, small business
owner loans and Business Timely loans, which carry slightly lower interest
rates than consumer loans, and competitive pressures on interest rates.

Total Interest Expense

Interest expense for year ended March 31, 2003 increased by ¥100 million,
or 2.6%, to ¥3,984 million from ¥3,884 million for the previous fiscal year.
The increase reflected the 20.5% increase in our balance of borrowings between
March 31, 2002 and 2003. However, due to our efforts to negotiate improved
borrowing terms and diversify our capital financing methods, with an increased
emphasis on issuance of commercial paper, total interest expense as a
percentage of total interest income decreased slightly from 11.4% for the
previous year to 10.2% for the year ended March 31, 2003.

Net Interest Income

As a result of the increase in total interest income exceeding the
increase in total interest expense, net interest income for the year ended
March 31, 2003 rose by ¥5,158 million, or 17.1%, to ¥35,250 million from
¥30,092 million for the previous fiscal year.

Net Interest Income After Provision for Loan Losses

Net interest income after provision for loan losses decreased by ¥97
million, or 0.4%, to ¥22,562 million for the year ended March 31, 2003 from
¥22,659 million for the previous fiscal year. Provision for loan losses
increased by ¥5,255 million to ¥12,688 million for the year ended March 31,
2003, or by 70.7%, compared to ¥7,433 million for the previous fiscal year.
Provision for loan losses as a percentage of total interest income increased
from 21.9% for the previous fiscal year to 32.3% for the year ended March 31,
2003. The increase in provision for loan losses reflects growth in the number
of our customers and outstanding balance of loans receivable as well as an
increase in loan defaults, reflecting the difficult economic environment in
Japan. Approximately ¥1,769 million of the provision for loan losses
represents increased allowance for loan losses on loans outstanding as of March
31, 2003, resulting from the deterioration of the Japanese economy. We expect
the number of loan defaults to continue to increase given current economic
conditions in Japan.

Total Non-Interest Income (Loss)

Total non-interest income (loss) consists of gains and losses on
investment securities, gains on sales of subsidiaries, commission income, rents
and dividends. Non-interest income increased to ¥846 million for the year
ended March 31, 2003 from a loss recorded for non-interest income of ¥428
million for the previous fiscal year.

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The increase principally reflected
commission income of ¥1,267 million from our lease arrangement business through
Future Create, formerly our 51.2% subsidiary until March 2003 when we sold a
significant portion of our interest in it, and gains on the sales of
subsidiaries Future Create and Webcashing.com in the amount of ¥324 million.

Total Non-interest Expense

Total non-interest expense is primarily salaries and employee benefits,
occupancy, furniture and equipment and other general and administrative
expenses. Total non-interest expense increased by ¥679 million, or 5.0%, to
¥14,308 million for the year ended March 31, 2003 from ¥13,629 million for the
previous fiscal year. The increase resulted primarily from increased expenses
for salaries and employee benefits and impairment of investment in affiliates.
The increase was offset in part by decreased advertising expenses.

Income Before Income Taxes

Income before income taxes for the year ended March 31, 2003 increased by
¥498 million, or 5.8%, to ¥9,100 million from ¥8,602 million for the previous
fiscal year. The increase resulted from the recognition of total non-interest
income, as compared with a loss for the previous year. Total non-interest
income turned positive as a result of commission income from Future Create.
The increase in income before income taxes was partially offset by an increase
in total non-interest expense.

Income Taxes

Income taxes for the year ended March 31, 2003 were ¥3,924 million as
compared to ¥3,801 million for the previous fiscal year. The effective tax
rate applicable to us decreased slightly from 44.2% for the previous fiscal
year to 43.1% for the year ended March 31, 2003.

Net Income

As a result of these factors, net income for the year ended March 31, 2003
increased by ¥375 million, or 7.8%, to ¥5,176 million from ¥4,801 million for
the previous fiscal year.

Year Ended March 31, 2002, Compared to Year Ended March 31, 2001

Total Interest Income

Total interest income for the year ended March 31, 2002 was ¥33,976
million, an increase of ¥4,090 million, or 13.7%, from ¥29,886 million for the
previous fiscal year. The increase was due to an increase in the average
balance of loans outstanding, which amounted to ¥142,770 million for the year
ended March 31, 2002 as compared to ¥122,071 million for the year ended March
31, 2001. We believe that the average balance outstanding has increased
primarily as a result of increased customer acquisition efforts and channels,
such as increasing the number of sales persons and loan offices and
establishing referral relationships with financial service providers. The
balance of loans outstanding derived from referral relationships as of March
31, 2002 was ¥11,631 million, or 7.5%, of our balance of loans outstanding as
of March 31, 2002, but we expect that percentage to increase in future periods
due to our plan to seek additional referral relationships.

Although the average balance of loans outstanding increased for all of our
major loan products, the increase in the average balance of loans outstanding
was led by an increase in our average balance of small business owner loans of ¥4,902 million, or 18.0%, to ¥32,195 million
for the year ended March 31, 2002 compared to ¥27,293 million for the previous
fiscal year and an increase in our average balance of Business Timely loans of
¥8,988 million, or 276.6%, to ¥12,238 million for the year ended March 31, 2002
compared to ¥3,250 million for the year ended March 31, 2001.

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During the year
ended March 31, 2002, the average balance of consumer loans increased by ¥2,768
million, or 6.4%, to ¥45,784 million from ¥43,016 million for the year ended
March 31, 2001 and the average balance of Wide loans increased by ¥4,397
million, or 9.4%, to ¥50,940 million compared to ¥46,543 million for the
previous fiscal year. The increase in the average balance of loans outstanding
was a result of the increase in the number of accounts.

The weighted period-end average contractual interest rate on loans
outstanding decreased slightly from 26.3% at March 31, 2001 to 25.9% at March
31, 2002, reflecting the increasing importance of Wide loans and small business
owner loans, which carry slightly lower interest rates than consumer loans, and
competitive pressures on interest rates.

Total Interest Expense

Interest expense for year ended March 31, 2002 decreased by ¥282 million,
or 6.8%, to ¥3,884 million from ¥4,166 million for the previous fiscal year.
Although our average balance of borrowings during the period increased by 10.0%
compared to the previous fiscal year, the effect of this increase was more than
offset by a lower funding cost made possible by increased use of direct debt
issuances and a low interest rate environment in Japan. Total interest expense
as a percentage of total interest income decreased from 13.9% for the previous
year to 11.4% for the year ended March 31, 2002.

Net Interest Income

As a result of the increase in total interest income and decrease in total
interest expense, net interest income for the year ended March 31, 2002 rose by
¥4,372 million, or 17.0%, to ¥30,092 million from ¥25,720 million for the
previous fiscal year.

Net Interest Income After Provision for Loan Losses

Net interest income after provision for loan losses increased by ¥1,505
million, or 7.1%, to ¥22,659 million for the year ended March 31, 2002 from
¥21,154 million for the previous fiscal year. Provision for loan losses
increased by ¥2,867 million to ¥7,433 million for the year ended March 31,
2002, or by 62.8%, compared to ¥4,566 million for the previous fiscal year.
The increase in provision for loan losses reflects growth in the number of our
customers and outstanding balance of loans receivable as well as an increase in
loan defaults, reflecting the difficult economic environment in Japan. The
number of loan defaults was 13,945 for the previous fiscal year and 16,649 for
the year ended March 31, 2002. We expect the number of loan defaults to
continue to increase given current economic conditions in Japan. Provision for
loan losses as a percentage of total interest income increased from 15.3% for
the previous fiscal year to 21.9% for the year ended March 31, 2002, reflecting
increases in our allowance as a result of a higher expected charge-off ratio.

Total Non-interest Income (Loss)

Loss recorded for non-interest income increased to ¥428 million for the
year ended March 31, 2002 from ¥409 million for the previous fiscal year, as a
result of an increase in loss for impairment recognized on investment
securities.

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Total Non-interest Expense

Total non-interest expense increased by ¥1,599 million, or 13.3%, to
¥13,629 million for the year ended March 31, 2002 from ¥12,030 million for the
previous fiscal year. The increase resulted from increased other general and
administrative expenses, primarily commission expenses paid to our referral
partners for customer referrals, and growth in expenses for salaries and
employee benefits from increases in our number of employees.

Income Before Income Taxes

Income before income taxes for the year ended March 31, 2002 decreased by
¥113 million, or 1.3%, to ¥8,602 million from ¥8,715 million for the previous
fiscal year. The decrease resulted from an increase in total non-interest
expense, which exceeded the increase in net interest income after provision for
loan losses.

Income Taxes

Income taxes for the year ended March 31, 2002 were ¥3,801 million as
compared to ¥3,763 million for the previous fiscal year. The effective tax
rate applicable to us increased slightly from 43.2% for the previous fiscal
year to 44.2% for the year ended March 31, 2002.

Net Income

As a result of these factors, net income for the year ended March 31, 2002
decreased by ¥151 million, or 3.0%, to ¥4,801 million from ¥4,952 million for
the previous fiscal year.

Financial Condition

|                          |  |                 |          |      |  |  |          | 
|------------------------- |  | --------------- | -------- | ---- |  |  | -------- | 
|                          |  | As of March 31,
|                          |  |                
|                          |  | 2002            |          | 2003
|                          |  |                 |          |     
|                          |  | (in millions)  
|Total assets              |  |                 | ¥180,297 |      |  |  | ¥206,574 | 
|Cash and cash equivalents |  |                 | 17,116   |      |  |  | 23,612   | 
|Loans receivable, net     |  |                 | 148,235  |      |  |  | 166,977  | 
|Total liabilities         |  |                 | 136,374  |      |  |  | 160,977  | 
|Long-term borrowings      |  |                 | 128,659  |      |  |  | 148,595  | 

Total assets increased to ¥206,574 million at March 31, 2003 from ¥180,297
million at March 31, 2002. The increase primarily reflected increases in loans
receivable, net, cash and cash equivalents and purchased loans receivable, net,
offset partly by a decrease in investment securities.

Total liabilities increased to ¥160,977 million at March 31, 2003 from
¥136,374 million at March 31, 2002. The increase primarily reflected an
increase in long-term borrowings, and an increase in short-term borrowings, due
to new short-term bank loans and new issuances of commercial paper.

Allowance for Loan Losses, Loan Charge-offs and Provisions for Loan Losses

We make allowances for loan losses to provide for estimated probable
uncollectable loan losses from known and inherent risks in our loan portfolio.
For all of our loan products, we generally determine our allowance for loan
losses based on various factors including the risk profile and status of the
borrower and, if any applicable, guarantor, economic conditions, unemployment
and bankruptcy rates and historical

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loss experience. We have not made any significant changes in estimation
methods or assumptions in calculating the allowance for loan losses in recent
years.

Each period we deduct charge-offs, net of recoveries of any previously
charged-off amounts, from the allowances for loan losses. Based on the amount
of loans outstanding and our allowance ratio, we then supplement the remaining
balance through provisions for loan losses. The following table provides
information on our allowance for loan losses along with amounts provided for
loan losses and charge-offs, net of recoveries:

|                               |  |                      |        |      |  |      |        |      |  |      |        |   |  |  |        |   |  |  |         |  
|------------------------------ |  | -------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | - |  |  | ------- | -
|                               |  | Year ended March 31,
|                               |  |                     
|                               |  | 1999                 |        | 2000 |  | 2001 |        | 2002 |  | 2003
|                               |  |                      |        |      |  |      |        |      |  |     
|                               |  | (in millions)       
|Balance at beginning of period |  |                      | ¥4,892 |      |  |      | ¥6,158 |      |  |      | ¥7,032 |   |  |  | ¥7,482 |   |  |  | ¥8,831  |  
|Provision for loan losses      |  |                      | 4,765  |      |  |      | 4,393  |      |  |      | 4,566  |   |  |  | 7,433  |   |  |  | 12,545  |  
|Charge-offs, net of recoveries |  |                      | (3,499 | )    |  |      | (3,519 | )    |  |      | (4,116 | ) |  |  | (6,084 | ) |  |  | (9,549  | )
|                               |  |                      |        |      |  |      |        |      |  |      |        |   |  |  |        |   |  |  |         |  
|Balance at end of period       |  |                      | ¥6,158 |      |  |      | ¥7,032 |      |  |      | ¥7,482 |   |  |  | ¥8,831 |   |  |  | ¥11,827 |  
|                               |  |                      |        |      |  |      |        |      |  |      |        |   |  |  |        |   |  |  |         |  

An increase in defaults on loans by our customers due to economic
conditions and increased bankruptcies along with growth in our total loans
outstanding has contributed to the rise in our provision for loan losses from
¥4,566 million for the year ended March 31, 2001, to ¥7,433 million for the
year ended March 31, 2002 and to ¥12,545 million for the year ended March 31,
2003.

Upon closing each reporting period, we charge off our loans in the
following manner:



| |  |  | Unguaranteed Loans. With respect to consumer and Business
Timely loans for which interest payments have been delinquent for 67
days. We charge off consumer and Business Timely loans to customers
who have declared bankruptcy immediately after we become aware of
the bankruptcy filing. Because of our short charge-off period, we
do not place consumer loans or Business Timely loans that have
become delinquent loans, which we define as loans on which interest
payments are delinquent, on non-accrual status before they are
charged off.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Guaranteed Loans. We generally charge off Wide loans and
small business owner loans in default at the end of the semi-annual
period in which the default occurs but, alternatively, may provide
an allowance for loan losses without charging them off. We charge
off guaranteed loans to customers who have declared bankruptcy at
the end of the semi-annual period in which we become aware of the
bankruptcy filing.                                                                                                                             

Charge-off Ratios and Allowance Ratios

The following table provides information on our loans outstanding,
allowance for loan losses, the ratio of allowance for loan losses to total
loans outstanding, as well as average balance of loans outstanding, loans
charged off and the ratio of loans charged-off to the average balance loans
outstanding.

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|                           |                                                                    |  |                                  |          |      |  |      |          |   |  |  |          |  
|-------------------------- | ------------------------------------------------------------------ |  | -------------------------------- | -------- | ---- |  | ---- | -------- | - |  |  | -------- | -
|                           |                                                                    |  | Year ended/as of March 31,      
|                           |                                                                    |  |                                 
|                           |                                                                    |  | 2001                             |          | 2002 |  | 2003
|                           |                                                                    |  |                                  |          |      |  |     
|                           |                                                                    |  | (in millions except percentages)
|Consumer loans             |                                                                    |  |                                  |          |      |  |      |          |   |  |  |         
|                           | Loans outstanding                                                  |  |                                  | ¥43,279  |      |  |      | ¥46,180  |   |  |  | ¥40,938  |  
|                           | Allowance for loan losses                                          |  |                                  | 3,497    |      |  |      | 4,142    |   |  |  | 4,315    |  
|                           | Ratio of allowance for loan losses to loans outstanding            |  |                                  | 8.1      | %    |  |      | 9.0      | % |  |  | 10.5     | %
|                           | Average balance of loans outstanding                               |  |                                  | 43,016   |      |  |      | 45,784   |   |  |  | 45,093   |  
|                           | Loans charged-off                                                  |  |                                  | 3,378    |      |  |      | 3,884    |   |  |  | 4,868    |  
|                           | Ratio of loans charged-off to average balance of loans
outstanding |  |                                  | 7.9      | %    |  |      | 8.5      | % |  |  | 10.8     | %
|Wide loans                 |                                                                    |  |                                  |          |      |  |      |          |   |  |  |         
|                           | Loans outstanding                                                  |  |                                  | ¥47,766  |      |  |      | ¥55,033  |   |  |  | ¥63,993  |  
|                           | Allowance for loan losses                                          |  |                                  | 1,814    |      |  |      | 1,786    |   |  |  | 3,009    |  
|                           | Ratio of allowance for loan losses to loans outstanding            |  |                                  | 3.8      | %    |  |      | 3.2      | % |  |  | 4.7      | %
|                           | Average balance of loans outstanding                               |  |                                  | 46,543   |      |  |      | 50,940   |   |  |  | 59,743   |  
|                           | Loans charged-off                                                  |  |                                  | 805      |      |  |      | 1,229    |   |  |  | 2,226    |  
|                           | Ratio of loans charged-off to average balance of loans
outstanding |  |                                  | 1.7      | %    |  |      | 2.4      | % |  |  | 3.7      | %
|Small business owner loans |                                                                    |  |                                  |          |      |  |      |          |   |  |  |         
|                           | Loans outstanding                                                  |  |                                  | ¥28,682  |      |  |      | ¥37,386  |   |  |  | ¥53,915  |  
|                           | Allowance for loan losses                                          |  |                                  | 1,348    |      |  |      | 1,552    |   |  |  | 2,648    |  
|                           | Ratio of allowance for loan losses to loans outstanding            |  |                                  | 4.7      | %    |  |      | 4.2      | % |  |  | 4.9      | %
|                           | Average balance of loans outstanding                               |  |                                  | 27,293   |      |  |      | 32,195   |   |  |  | 45,311   |  
|                           | Loans charged-off                                                  |  |                                  | 757      |      |  |      | 991      |   |  |  | 1,641    |  
|                           | Ratio of loans charged-off to average balance of loans
outstanding |  |                                  | 2.8      | %    |  |      | 3.1      | % |  |  | 3.6      | %
|Business Timely loans      |                                                                    |  |                                  |          |      |  |      |          |   |  |  |         
|                           | Loans outstanding                                                  |  |                                  | ¥7,672   |      |  |      | ¥16,035  |   |  |  | ¥17,303  |  
|                           | Allowance for loan losses                                          |  |                                  | 728      |      |  |      | 1,228    |   |  |  | 1,703    |  
|                           | Ratio of allowance for loan losses to loans outstanding            |  |                                  | 9.5      | %    |  |      | 7.7      | % |  |  | 9.8      | %
|                           | Average balance of loans outstanding                               |  |                                  | 3,250    |      |  |      | 12,238   |   |  |  | 17,256   |  
|                           | Loans charged-off                                                  |  |                                  | 110      |      |  |      | 830      |   |  |  | 1,579    |  
|                           | Ratio of loans charged-off to average balance of loans
outstanding |  |                                  | 3.4      | %    |  |      | 6.8      | % |  |  | 9.2      | %
|Secured and other loans    |                                                                    |  |                                  |          |      |  |      |          |   |  |  |         
|                           | Loans outstanding                                                  |  |                                  | ¥1,858   |      |  |      | ¥1,444   |   |  |  | ¥1,623   |  
|                           | Allowance for loan losses                                          |  |                                  | 95       |      |  |      | 123      |   |  |  | 152      |  
|                           | Ratio of allowance for loan losses to loans outstanding            |  |                                  | 5.1      | %    |  |      | 8.5      | % |  |  | 9.4      | %
|                           | Average balance of loans outstanding                               |  |                                  | 1,969    |      |  |      | 1,613    |   |  |  | 1,265    |  
|                           | Loans charged-off                                                  |  |                                  | 7        |      |  |      | 48       |   |  |  | 24       |  
|                           | Ratio of loans charged-off to average balance of loans
outstanding |  |                                  | 0.4      | %    |  |      | 3.0      | % |  |  | 1.9      | %
|Total                      |                                                                    |  |                                  |          |      |  |      |          |   |  |  |         
|                           | Loans outstanding                                                  |  |                                  | ¥129,257 |      |  |      | ¥156,078 |   |  |  | ¥177,772 |  
|                           | Allowance for loan losses                                          |  |                                  | 7,482    |      |  |      | 8,831    |   |  |  | 11,827   |  
|                           | Ratio of allowance for loan losses to loans outstanding            |  |                                  | 5.8      | %    |  |      | 5.7      | % |  |  | 6.7      | %
|                           | Average balance of loans outstanding                               |  |                                  | 122,071  |      |  |      | 142,770  |   |  |  | 168,668  |  
|                           | Loans charged-off                                                  |  |                                  | 5,057    |      |  |      | 6,982    |   |  |  | 10,338   |  
|                           | Ratio of loans charged-off to average balance of loans
outstanding |  |                                  | 4.1      | %    |  |      | 4.9      | % |  |  | 6.1      | %

Charge-off Ratios

Our consumer loans and Business Timely loans have higher charge-off ratios
than our Wide loans and small business owner loans primarily because consumer
loans and Business Timely loans do not require guarantors and have less
rigorous screening requirements than Wide loans and small business owner loans.
While the change in loan mix has had some positive impact on our charge-off
ratios, the poor state of the economy has negatively impacted us and our
overall charge-off ratio increased from 4.1% for the year ended March 31, 2001, to 4.9% for the year ended March
31, 2002 to 6.1% for the year ended March 31, 2003.

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The charge-off ratios for
Business Timely loans and Wide loans, in particular, deteriorated
significantly.

Allowance Ratios

The ratio of allowances for loan losses to total loans outstanding
attributable to all loans except for secured and other loans increased between
March 31, 2002 and March 31, 2003. This increase was attributable to the
continuing deterioration of the Japanese economy, which led to increases in the
unemployment rate, personal bankruptcies and use of procedures under the Civil
Rehabilitation Law by borrowers who sought protection from creditors. While we
have continued to improve the quality of our loan monitoring processes to make
loans only to creditworthy customers, the weakness in the Japanese economy has
negatively affected the ability of many of our long-standing customers.

Delinquent Loans and Non-accrual Loans

The following table provides information on our delinquent loans still
accruing interest and our non-accrual loans, which comprises restructured loans
(including impaired loans) and loans with specific allowance provided.

|                           |                                          |                                        |                                               |        |                 |     |      |        |       |     |  |        |       |       | 
|-------------------------- | ---------------------------------------- | -------------------------------------- | --------------------------------------------- | ------ | --------------- | --- | ---- | ------ | ----- | --- |  | ------ | ----- | ----- | 
|                           |                                          |                                        |                                               |        | As of March 31,
|                           |                                          |                                        |                                               |        |                
|                           |                                          |                                        |                                               |        | 2001            |     | 2002 |        | 2003 
|                           |                                          |                                        |                                               |        |                 |     |      |        |      
|                           |                                          |                                        |                                               |        | (in millions)  
|Consumer loans             |                                          |                                        |                                               |        |                 |     |      |        |       |     |  |       
|                           | Delinquent loans still accruing interest |                                        |                                               | ¥1,267 |                 |     |      | ¥1,392 |       |     |  | ¥1,535 |      
|                           | Non-accrual loans (1)                    |                                        |                                               | 827    |                 |     |      | 784    |       |     |  | 1,055  |      
|                           |                                          | Restructured loans                     |                                               |        | 827             |     |      |        | 784   |     |  |        | 1,055 |      
|                           |                                          |                                        | Impaired loans included in restructured loans |        |                 | 200 |      |        |       | 310 |  |        |       | 449   | 
|                           |                                          | Loans with specific allowance provided |                                               |        |                |     |      |        |      |     |  |        |      |      
|Wide loan                  |                                          |                                        |                                               |        |                 |     |      |        |       |     |  |       
|                           | Delinquent loans still accruing interest |                                        |                                               | ¥700   |                 |     |      | ¥932   |       |     |  | ¥1,524 |      
|                           | Non-accrual loans (1)                    |                                        |                                               | 3,772  |                 |     |      | 5,080  |       |     |  | 7,039  |      
|                           |                                          | Restructured loans                     |                                               |        | 2,432           |     |      |        | 3,695 |     |  |        | 5,231 |      
|                           |                                          |                                        | Impaired loans included in restructured loans |        |                 | 401 |      |        |       | 962 |  |        |       | 1,364 | 
|                           |                                          | Loans with specific allowance provided |                                               |        | 1,340           |     |      |        | 1,385 |     |  |        | 1,808 |      
|Small business owner loans |                                          |                                        |                                               |        |                 |     |      |        |       |     |  |       
|                           | Delinquent loans still accruing interest |                                        |                                               | ¥527   |                 |     |      | ¥770   |       |     |  | ¥1,724 |      
|                           | Non-accrual loans (1)                    |                                        |                                               | 3,053  |                 |     |      | 4,164  |       |     |  | 5,969  |      
|                           |                                          | Restructured loans                     |                                               |        | 1,761           |     |      |        | 2,890 |     |  |        | 4,204 |      
|                           |                                          |                                        | Impaired loans included in restructured loans |        |                 | 221 |      |        |       | 618 |  |        |       | 894   | 
|                           |                                          | Loans with specific allowance provided |                                               |        | 1,292           |     |      |        | 1,274 |     |  |        | 1,765 |      
|Business timely loans      |                                          |                                        |                                               |        |                 |     |      |        |       |     |  |       
|                           | Delinquent loans still accruing interest |                                        |                                               | ¥121   |                 |     |      | ¥293   |       |     |  | ¥367   |      
|                           | Non-accrual loans (1)                    |                                        |                                               | 10     |                 |     |      | 123    |       |     |  | 344    |      
|                           |                                          | Restructured loans                     |                                               |        | 10              |     |      |        | 123   |     |  |        | 344   |      
|                           |                                          |                                        | Impaired loans included in restructured loans |        |                 |    |      |        |       | 35  |  |        |       | 81    | 
|                           |                                          | Loans with specific allowance provided |                                               |        |                |     |      |        |      |     |  |        |      |      
|Secured and other loans    |                                          |                                        |                                               |        |                 |     |      |        |       |     |  |       
|                           | Delinquent loans still accruing interest |                                        |                                               | ¥61    |                 |     |      | ¥51    |       |     |  | ¥149   |      
|                           | Non-accrual loans (1)                    |                                        |                                               | 163    |                 |     |      | 203    |       |     |  | 241    |      
|                           |                                          | Restructured loans                     |                                               |        | 52              |     |      |        | 78    |     |  |        | 96    |      
|                           |                                          |                                        | Impaired loans included in restructured loans |        |                 |    |      |        |       |    |  |        |       | 3     | 
|                           |                                          | Loans with specific allowance provided |                                               |        | 111             |     |      |        | 125   |     |  |        | 145   |      

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|      |                                          |                                        |                                               |        |                 |     |      |        |       |       |  |        |        |       | 
|----- | ---------------------------------------- | -------------------------------------- | --------------------------------------------- | ------ | --------------- | --- | ---- | ------ | ----- | ----- |  | ------ | ------ | ----- | 
|      |                                          |                                        |                                               |        | As of March 31,
|      |                                          |                                        |                                               |        |                
|      |                                          |                                        |                                               |        | 2001            |     | 2002 |        | 2003 
|      |                                          |                                        |                                               |        |                 |     |      |        |      
|      |                                          |                                        |                                               |        | (in millions)  
|Total |                                          |                                        |                                               |        |                 |     |      |        |       |       |  |       
|      | Delinquent loans still accruing interest |                                        |                                               | ¥2,676 |                 |     |      | ¥3,438 |       |       |  | ¥5,299 |       
|      | Non-accrual loans (1)                    |                                        |                                               | 7,825  |                 |     |      | 10,354 |       |       |  | 14,648 |       
|      |                                          | Restructured loans                     |                                               |        | 5,082           |     |      |        | 7,570 |       |  |        | 10,930 |      
|      |                                          |                                        | Impaired loans included in restructured loans |        |                 | 822 |      |        |       | 1,925 |  |        |        | 2,791 | 
|      |                                          | Loans with specific allowance provided |                                               |        | 2,743           |     |      |        | 2,784 |       |  |        | 3,718  |      



---

|(1) |  | The amounts of non-accrual loans represent the balance of non-accrual
loans outstanding before allowances of loan losses.
|--- |  | -------------------------------------------------------------------------------------------------------------------------

Delinquent Loans

Delinquent loans still accruing interest are loans with respect to which
interest payments are delinquent, but which have not been put on non-accrual
status or charged-off.

Non-accrual Loans

Non-accrual loans are loans that no longer accrue interest, as collection
of all of the principal is deemed unlikely. We place loans on non-accrual
status when they are either partially or fully reserved for or are charged off
due to our assessment that full or partial collection is unlikely.

Our non-accrual loans comprise restructured loans and loans with specific
allowance provided.



| |  |  | Restructured Loans. Restructured loans comprise loans with
respect to which terms have been revised (such as waiver,
postponement or partial forgiveness of interest or principal
payments) for the benefit of the borrower in order to secure some
return on the loan. Impaired loans are included in restructured
loans and represent loans we have specifically identified as
partially or wholly uncollectable due to the bankruptcy of the
borrower, lack of collateral or other various reasons. We reserve
for the amounts of impaired loans and related accrued interest
deemed uncollectable in our allowance for loan losses. The
increases in impaired loans at March 31, 2001, March 31, 2002 and
March 31, 2003 are attributable to increases in the number of
defaults as a result of difficult economic conditions in Japan.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Loans with Specific Allowances Provided. Loans with specific
allowances provided are delinquent loans for which we increase
allowances beyond the general allowance. We provide specific
allowances only for Wide loans and small business owner loans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

Critical Accounting Policies

The following describes our critical accounting policies that affect our
more significant judgments and estimates used in the preparation of our
financial statements. The preparation of our financial statements in
conformity with U.S. GAAP 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.

42



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On an ongoing basis, we evaluate our critical accounting policies,
including those related to interest income from loans receivable and loan
origination costs and loans receivable and allowance for loan losses. We state
these accounting policies in the notes to our financial statements or at
relevant sections in this discussion and analysis.

Interest Income from Loans Receivable and Loan Origination Costs

Interest income from loans except for the purchased loans is recognized on
an accrual basis based on the principal amount outstanding. In Japan, the
maximum interest rates are set by law at two general levels: an absolute
maximum rate (legal limit) and a lower interest rate based on the principal
amount of the loan (restricted rate). We may charge interest rates in excess
of the restricted rate as long as it meets the specified requirements. Our
contractual loan interest rates do not exceed the legal limit. However, Our
contractual loan interest rates, as is customary in the consumer finance
industry in Japan, normally exceed the restricted rate. Borrowers have a right
to refuse to pay interest in excess of the restricted rate, and we cannot
legally require borrowers to pay the excess interest. However, once a borrower
has paid interest in excess of the restricted rate, and provided that we have
complied with the specified legal documentation and notification procedures, we
have no legal or contractual obligation to refund or otherwise reimburse the
excess interest payments.

We recognize accrued interest income on loans receivable outstanding as of
the balance sheet date at the lower of the restricted rate or the contractual
interest rate. Contractual interest in excess of the restricted rate is
recognized as interest income when collected, provided there are no remaining
legal obligations to refund this excess portion. Accrual of interest income is
suspended when loan principal is charged-off or is wholly or partially
reserved. The accrued interest portion of a charged-off loan balance is
deducted from the current period interest income and the principal amount is
charged-off against the allowance for loan losses.

We capitalize direct origination costs and defer fees on successful loan
originations. Loan origination costs, net of loan origination fees, are
deferred and amortized over the contractual life of loans, which averages
approximately forty-two months.

Loans Receivable and Allowance for Loan Losses

Loans receivable are reported at the principal amount less an allowance
for loan losses. The allowance for loan losses is maintained at a level that,
in our managements judgment, is adequate to provide for estimated probable
uncollectible loan losses from known and inherent risks in our loan portfolios.
Increases to the allowance are made by charges to the provision for loans
receivable. Recoveries of previously charged-off amounts are credited to the
allowance. Allowances are reviewed both on an individual loan and portfolio
basis. In evaluating the adequacy of the allowance, management considers
various factors, including current economic conditions, such as unemployment
and bankruptcy rates, and historical loss experience. Restructured loans
include any loans which are restructured for interest, principal or term.
Allowances for restructured loans are based on collection history or legal
classification of the borrowers.

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



| |  |  | Unguaranteed Consumer Loans and Business Timely Loans. When
a loans contractual payment becomes 67 days delinquent or upon
other events such as bankruptcy of the borrower.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | Guaranteed Small Business Owner Loans and Wide Loans. When
we believe the likelihood of any future collection is minimal.
Events triggering charge-offs include bankruptcy of both the
borrower and guarantor. In the case that loans are restructured, we
charge off the amount of the recorded loan balance less the
restructured loan balance. Interest accrual is terminated at the
earlier of the date when contractual payments are 97 days delinquent
or the date when all or a part of loan principal is deemed
uncollectible.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest accrual is terminated at the earlier of the date when contractual
payments are 97 days delinquent or the date when all or a part of loan
principal is deemed uncollectible.

Purchased Loans and Revenue Recognition

Purchased loans represent loans purchased from third party originators and
are reported at purchased cost less an allowance for estimated loan losses.
Due to the non-performing status of these loans when initially purchased and
lack of history with the borrowers, we initially recognize revenue from these
loans using the cost recovery method. Under this method, payments from a
borrower are first applied to loan principal. Once the purchased cost is fully
recovered, subsequent receipts are recognized as interest income. If we
determine that we cannot recover our cost, an allowance for the expected
uncollectible portion is established. The loan is written-off once we deem the
loan uncollectible.

However, for the loans with respect to which we reasonably estimate the
expected timing and amount of cash flows, we use those expected future cash
flows to record the loan receivable and amortize the implied interest into
revenue using the level yield method. If the carrying amounts of those loans
are greater than the present value of expected future cash flows from those
loans, the difference is recorded as an allowance for the uncollectible
portion. As of March 31, 2002, we used the cost method on all purchased
distressed loans. As of March 31, 2002, ¥257 million in book value of loans
was accounted for under the implied interest rate.

Accounting Developments

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.
FIN 46 provides guidance on how to identify a variable interest entity and
determine when the assets, liabilities, non-controlling interests and results
of operations of a variable interest entity must be included in a companys
consolidated financial statements. A company that holds variable interests in
an entity is required to consolidate the entity if the companys interest in
the variable interest entity is such that the company will absorb a majority of
the variable interest entitys expected losses and/or receive a majority of the
entitys expected residual returns, if any. FIN 46 became effective upon its
issuance for interests in a variable interest entity acquired after January 31,
2003, and became effective beginning in the first quarter of 2004 for variable
interest entities acquired on or before February 1, 2003. The Company had no
investments in unconsolidated entities which are considered a variable interest
entity and, therefore, does not expect FIN 46 to have a material impact on its
consolidated financial statements.

B. Liquidity and Capital Resources.

Capital Requirements

Our principal capital and liquidity needs are for funding loans to
customers, general working capital and capital expenditures to finance the
growth of our business.

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Loans

As we are principally in the business of providing loans to individuals,
our most critical capital requirement is loan provision.

Working Capital

Our working capital needs are primarily for operating expenses including
employee expenses, advertising, rent, property, buildings and equipment
maintenance.

Capital Expenditure

The following table provides a breakdown of our capital expenditure
calculated on a cash basis.

|                    |  |                              |      |      |  |      |      |  |  |  |      | 
|------------------- |  | ---------------------------- | ---- | ---- |  | ---- | ---- |  |  |  | ---- | 
|                    |  | For the year ended March 31,
|                    |  |                             
|                    |  | 2001                         |      | 2002 |  | 2003
|                    |  |                              |      |      |  |     
|                    |  | (in millions)               
|Capital expenditure |  |                              | ¥192 |      |  |      | ¥127 |  |  |  | ¥983 | 

Our capital expenditures for the above stated periods were mainly used in
the establishment and relocation of loan and other offices and branches
throughout Japan, as well as opening of head offices for our subsidiaries. We
have budgeted capital expenditure in the amount of approximately ¥183 million
for the six months ending September 30, 2004, primarily for the establishment
and relocation of offices and branches.

Capital Resources

We seek to manage our capital resources and liquidity to provide adequate
funds for current and future financial obligations. We derive the funds we
require to meet our capital requirements principally from cash flow provided by
operations, borrowings from financial institutions and issuances of bonds and
commercial paper.

We derive the funding necessary to provide loans to our customers through
borrowings from financial institutions, long-term debt issuances and interest
income. We seek to enhance our ability to tap a diverse range of funding
sources and to lower our funding costs. In support of this strategy, in the
past few years, we have reduced the proportion of our borrowings from banks,
insurance companies and other financial institutions, and increased funding
from capital markets through issuances of commercial paper and medium-term and
long-term bonds. While the recent downgrades of the credit ratings of consumer
finance companies, including us, by rating agencies have harmed our ability to
tap the debt markets, our current intention, subject to market conditions and
other uncertainties, is to increase our proportion of direct financing to
around 40%.

We believe that our existing cash and cash equivalents and the amount of
cash that we anticipate will be generated from our business operations,
together with our existing access to borrowings and capital markets, will be
sufficient for us to continue to operate our business at current levels through
the year ending March 31, 2004. We do not have current plans for any equity
offerings, and we do not currently expect to significantly increase our
indebtedness through the year ending March 31, 2004.

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Dividend Policy

Cash Dividends

Historically we have paid cash dividends twice per year. The board of
directors presently intends to continue to pay cash dividends on a semi-annual
basis and to provide a stable level of dividends to our shareholders. The
declaration and payment of dividends, however, depend on our future earnings,
financial condition and other factors, including statutory and other
restrictions on the payment of dividends. For a further discussion of cash
dividends, see Dividend Policy  Cash Dividends under Item 8.A of this annual
report on Form 20-F.

Stock Repurchases

For the year ended March 31, 2003, we repurchased, net of sales of shares,
5,361,572 shares for an aggregate price of ¥2,473 million and have purchased an
additional 252 shares between April 1, 2003 and June 23, 2003 for an aggregate
price of ¥129,028. Since April 1, 2003, we also used 20,000 shares of our
treasury stock for an aggregate price of ¥10 million in response to exercises
of stock options by one of our statutory auditors. At our general
shareholders meeting in June 24, 2003, our shareholders authorized us to
repurchase up to an additional 3 million shares for up to ¥2 billion in the
period up to our next shareholders meeting in June 2004.

Commitments

Long-term Borrowings

We require a significant amount of funds for payment of principal and
interest on our borrowings, most of which are used for extending loans to our
customers. One hundred percent of our borrowings are denominated in yen. As
of March 31, 2003, we had long-term borrowings, including convertible bonds,
and asset backed commercial paper, totaling ¥148,595 million.

Of our total long-term borrowings at March 31, 2003, ¥107,095 million were
from loans, principally from banks and other financial institutions.
Generally, our long-term loans have a maturity of two to seven years, and
accrue interest on a fixed rate basis or on a floating rate basis. At March
31, 2003, the weighted average rate of our long-term loans from banks and other
financial institutions was 2.4%. As is customary in Japan, bank loans are made
under general agreements which provided that under certain circumstances,
security and guarantees for present and future indebtedness will be given upon
request of the bank, and that the bank shall have the right, as the obligations
become due, or in the event of their default, to offset cash deposits against
such obligations due to the bank.

In addition, ¥41,500 million of our total long-term borrowings at March
31, 2003 were from the issuance of long-term bonds. We have a limited history
of debt issuances because consumer finance companies and small business lenders
were barred from using direct financing to fund lending operations until May
1999. Long-term bonds outstanding as of March 31, 2002 and 2003 comprised the
following:

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|                                                          |  |                 |         |      |  |  |         | 
|--------------------------------------------------------- |  | --------------- | ------- | ---- |  |  | ------- | 
|                                                          |  | As of March 31,
|                                                          |  |                
|                                                          |  | 2002            |         | 2003
|                                                          |  |                 |         |     
|                                                          |  | (in millions)  
|3.80% unsecured bonds, due June 13, 2002                  |  |                 | ¥3,000  |      |  |  | ¥      | 
|3.00% unsecured bonds, due September 27, 2002             |  |                 | 10,000  |      |  |  |        | 
|3.00% unsecured bonds, due April 20, 2004                 |  |                 | 10,000  |      |  |  | 10,000  | 
|3.32% unsecured bonds, due April 11, 2003                 |  |                 | 5,000   |      |  |  | 5,000   | 
|2.45% unsecured bonds, due March 28, 2005                 |  |                 | 10,000  |      |  |  | 10,000  | 
|2.30% unsecured bonds with warrants, due April 20, 2004   |  |                 | 1,500   |      |  |  | 1,500   | 
|2.35% unsecured bonds, due November 1, 2005               |  |                 |        |      |  |  | 5,000   | 
|1.70% unsecured convertible bonds, due September 29, 2006 |  |                 | 10,000  |      |  |  | 10,000  | 
|                                                          |  |                 |         |      |  |  |         | 
|Total bonds                                               |  |                 | ¥49,500 |      |  |  | ¥41,500 | 
|                                                          |  |                 |         |      |  |  |         | 

The aggregate future annual principal and interest commitments of bonds,
long-term loans from banks and other financial institutions as of March 31,
2003 are as follows:

|                                               |  |               |          | 
|---------------------------------------------- |  | ------------- | -------- | 
|Year ending March 31,                          |  | (in millions)
|                                               |  |              
|2004                                           |  |               | ¥61,435  | 
|2005                                           |  |               | 57,817   | 
|2006                                           |  |               | 20,818   | 
|2007                                           |  |               | 10,997   | 
|2008 and thereafter                            |  |               | 2,588    | 
|                                               |  |               |          | 
|Total future payments for long-term borrowings |  |               | ¥153,655 | 
|                                               |  |               |          | 

Short-term borrowings

Our short-term borrowings comprise bank loans and commercial paper. Our
short-term borrowings were ¥1,400 million as of March 31, 2002, comprised
entirely of bank loans, and ¥5,600 million as of March 31, 2003, of which
¥3,200 million were bank loans and the remainder was commercial paper.
Interest rates on bank loans were fixed contractual interest rates ranging from
2.0% to 2.4% as of March 31, 2002 and from 2.0% to 2.5% as of March 31, 2003.
The weighted average contractual rates at period end were 2.2% at March 31,
2002 and 2.0% at March 31, 2003. Interest rates on commercial paper ranged
from 1.1% to 1.3% as of March 31, 2003. The weighted average contractual rate
was 1.2% at March 31, 2003. All short-term borrowings have terms ranging from
3 months to 12 months and are usually renewed at maturity subject to
renegotiation of interest rates and other factors. We pledge some of our loans
receivable, cash and certain other assets as collateral for these loans.

Collateral for Borrowings

As of March 31, 2003, we had pledged as collateral for short-term and
long-term borrowings with banks and other financial institutions the following
assets: ¥38,859 million in loans outstanding, ¥728 million in property and
equipment, ¥34 million in investment securities and ¥31 million in insurance
policies. The lender may obtain this collateral in the event of financial
default, including missed or delinquent payments as provided for in the loan
agreements.

Unfunded Credit Lines

Under the terms and conditions of our revolving credit line agreements, we
may, but are not committed to, lend funds to our consumer loan and Business
Timely loan customers. We review credit lines and our related funding needs
based on account usage and customer creditworthiness. We had unfunded credit
lines of ¥35,927 million as of March 31, 2003.

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Operating and Capital Leases

We lease office space under operating lease agreement that generally
allows us to cancel them with six months advance notice. We have paid under
our office lease agreements amounts totaling approximately ¥881 million for the
year ended March 31, 2003. In addition, we lease computer and other capital
equipment under capital lease obligations. Total lease payments under these
operating lease and capital lease agreements total approximately ¥2 billion.

Contingencies

Guarantees

Sanyo Club

As of March 31, 2003, we had outstanding guarantees for borrowings in the
total amount of ¥1,327 million by customers of Sanyo Club Co., Ltd. Pursuant
to an agreement with Sanyo Club, we receive 40% of the total interest income
from the borrowings from Sanyo Club and pay 40% of the related expenses
incurred by Sanyo Club. We are required to pay out on our guarantees for 40%
of the outstanding loan balance of specified borrowings for which payments are
120 days or more delinquent. For the year ended March 31, 2003, we received
guarantee fees in the amount of ¥31 million, net of operating expenses of ¥58
million, from Sanyo Club. For the year ended March 31, 2003, as a result of
our guarantees, we paid Sanyo Club ¥3 million. As of March 31, 2003, we had
reserved ¥8 million for estimated guarantee losses. Borrowers are not required
to have an additional guarantor or to provide collateral.

Shinsei Business Finance

In return for a fee, we guarantee borrowings by customers of Shinsei
Business Finance, Ltd., an affiliate in which we own a 25% interest:



| |  |  | 3S Loans. For a guarantee fee of the contractual interest
rate minus 4%, we guarantee 100% of loans outstanding by borrowers
of 3S loans. We are required to pay out on our guarantees of loans
for which payments are 14 days or more delinquent. We guaranteed
borrowings in the amount of ¥144 million as of March 31, 2003 and
received guarantee fees in the amount of ¥3 million for the year
ended March 31, 2003. Borrowers of 3S loans are required to have
two guarantors, but not collateral.                
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Business Loans. We guarantee 10% of loans outstanding by
borrowers of the loans and earn 10% of the interest received from
these loans. We are required to pay out on our guarantees of loans
for which payment are 90 days or more delinquent. We had
outstanding guarantees in the amount of ¥33 million as of March 31,
2003 and received guarantee fees in the amount of ¥485 thousand for
the year ended March 31, 2003. Borrowers of business loans are not
required to have a guarantor or to provide collateral.

For the year ended March 31, 2003, as there were no delinquent Shinsei
Business Finance customer payments, we were not required to make any payments
for 3S loans and business loans as a guarantor. As of March 31, 2003, we had
reserved ¥1 million for estimated guarantee losses.

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Legal Proceedings

We are not a party to any material legal proceedings.

Cash flows

We had cash and cash equivalents totaling ¥23,612 million at March 31,
2003, an increase of ¥6,496 million, or 38.0%, from ¥17,116 million at March
31, 2002. We had cash and cash equivalents totaling ¥17,116 million at March
31, 2002, a decrease of ¥8,725 million, or 33.8%, from ¥25,841 million at March
31, 2001.

The following table shows information about our cash flows during the
years ended March 31, 2001, 2002 and 2003:

|                                                     |  |                      |         |      |  |      |         |   |  |  |         |  
|---------------------------------------------------- |  | -------------------- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | -
|                                                     |  | Year ended March 31,
|                                                     |  |                     
|                                                     |  | 2001                 |         | 2002 |  | 2003
|                                                     |  |                      |         |      |  |     
|                                                     |  | (in millions)       
|Net cash provided by operating activities            |  |                      | ¥12,283 |      |  |      | ¥14,786 |   |  |  | ¥21,315 |  
|Net cash used in investing activities                |  |                      | (20,313 | )    |  |      | (33,871 | ) |  |  | (36,658 | )
|Net cash provided by financing activities            |  |                      | 16,724  |      |  |      | 10,360  |   |  |  | 21,839  |  
|Net increase (decrease) in cash and cash equivalents |  |                      | 8,694   |      |  |      | (8,725  | ) |  |  | 6,496   |  

Year Ended March 31, 2003, Compared to Year Ended March 31, 2002

Operating Activities

In the year ended March 31, 2003, net cash provided by operating
activities was ¥21,315 million, an increase of ¥6,529 million, or 44.2%, or
compared to ¥14,786 million for the previous fiscal year. This increase was
primarily attributable to an increase in interest income due to a greater total
amount of loans receivable and an increase in our provision for loan losses.

Investing Activities

In the year ended March 31, 2003, net cash used in investing activities
was ¥36,658 million, an increase of ¥2,787 million , or 8.2%, compared with
¥33,871 million for the previous fiscal year. This increase was due to an
increase in our purchases of distressed loans, net of proceeds from our
principal collections of distressed loans, which offset a decrease in cash used
for loan originations, net of principal collections.

Financing Activities

Net cash provided by financing activities was ¥21,839 million in the year
ended March 31, 2003, an increase of ¥11,479 million, or 110.8%, compared to
¥10,360 million for the previous fiscal year. This increase was primarily
attributable to an increase in our total borrowings, net of repayments, which
offset the cash we used to purchase treasury stock.

49



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##### Table of Contents



Year Ended March 31, 2002, Compared to Year Ended March 31, 2001

Operating Activities

In the year ended March 31, 2002, net cash provided by operating
activities was ¥14,786 million, an increase of 20.4% compared to ¥12,283
million for the previous fiscal year. This increase was primarily attributable
to an increase in interest income due to a greater total amount of loans
receivable and an increase in our provision for loan losses.

Investing Activities

In the year ended March 31, 2002, net cash used in investing activities
was ¥33,871 million, an increase of 66.7% compared with ¥20,3l3 million for the
previous fiscal year. The increase was due to a faster rate of net increase in
loans receivable than in the year ended March 31, 2001. This increase in cash
used in investing activities was the reason for the decrease in our cash and
cash equivalents over the year ended March 31, 2002, as net cash provided by
operating activities increased at a slower rate and net cash provided by
financing activities decreased when compared with the previous year.

Financing Activities

Net cash provided by financing activities was ¥10,360 million in the year
ended March 31, 2002, compared to ¥16,724 million for the previous fiscal year
which primarily reflected a lower amount of bond issuances in the year ended
March 31, 2002. Conditions in the Japanese corporate bond market were less
favorable in the year ended March 31, 2002 in part due to the September 2001
corporate reorganization and bond default of Mycal Corporation, a major
Japanese operator of supermarket chains and other businesses, which occurred
when Mycal still had an investment grade credit rating. Recent downgrades of
Japans sovereign rating during the year ended March 31, 2002 also may have had
negative influence on the Japanese corporate bond market, and we chose to
reduce the higher level of cash and cash equivalents that had been built up.

C. Research and Development, Patents and Licenses, etc.

We have not implemented any material research and development policy and
have not conducted any material research and development activities since April
1, 2000.

D. Trend Information.

The information required by this item is set forth in Item 5.B of this
annual report on Form 20-F.

E. Off-balance Sheet Arrangements.

Not applicable.

F. Tabular Disclosure of Contractual Obligations.

Not applicable.

G. Safe Harbor.

Not applicable.

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Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management.

Directors, Executive Officers and Statutory Auditors

The following table provides information about our directors, executive
officers and statutory auditors.

|                     |  |                                                                |  |                    |  |                    |  |                  
|-------------------- |  | -------------------------------------------------------------- |  | ------------------ |  | ------------------ |  | -----------------
|                     |  |                                                                |  |                    |  |                    |  | Percentage of    
|                     |  |                                                                |  |                    |  | Number of Shares   |  | Common Stock     
|                     |  |                                                                |  |                    |  | Beneficially Owned |  | Outstanding as of
|                     |  |                                                                |  |                    |  | as of March 31,    |  | March 31,        
|Name                 |  | Position                                                       |  | Date of Birth      |  | 2003 (1)           |  | 2003 (2)         
|                     |  |                                                                |  |                    |  |                    |  |                  
|Directors:           |  |                                                                |  |                    |  |                    |  |                  
|Hideo Sakioka        |  | Chairman and
Representative
Director                           |  | May 14, 1928       |  | 38,598,840(3)      |  | 30.5%(3)         
|Kunihiko Sakioka     |  | President, Chief
Executive Officer
and Representative
Director |  | January 10, 1962   |  | 39,118,900(4)      |  | 30.9%(4)         
|Hitoshi Higaki       |  | Managing Director                                              |  | December 14, 1959  |  | 235,180            |  | *                
|Yoshio Tanida        |  | Director                                                       |  | August 5, 1953     |  | 147,900            |  | *                
|Hiroshi Akuta        |  | Director                                                       |  | January 3, 1962    |  | 139,400            |  | *                
|Hidenobu Sasaki      |  | Director                                                       |  | June 29, 1972      |  | 36,144             |  | *                
|Toshioki Otani       |  | Director                                                       |  | December 12, 1970  |  | 66,380             |  | *                
|Keishi Ishigaki      |  | Director                                                       |  | April 3, 1971      |  | 52,180             |  | *                
|Masami Obara         |  | Director                                                       |  | November 5, 1959   |  | 1,800              |  | *                
|Yunwei Chen          |  | Director                                                       |  | January 16, 1969   |  | 27,144             |  | *                
|Statutory Auditors:  |  |                                                                |  |                    |  |                    |  |                  
|Akio Sakioka         |  | Statutory Auditor                                              |  | September 22, 1950 |  | 1,166,000          |  | *                
|Yoshiki Kishimura    |  | Statutory Auditor                                              |  | August 25, 1944    |  | 21,800             |  | *                
|Yoshimitsu Nishijima |  | Statutory Auditor                                              |  | July 8, 1944       |  |                   |  |                 
|Isao Narimatsu       |  | Statutory Auditor                                              |  | July 6, 1949       |  |                   |  |                 



---

|(1) |  | As adjusted for our May 2003 stock split.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Asterisks indicate beneficial ownership of less than 1%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(3) |  | Comprised of 3,995,856 shares over which Hideo Sakioka has sole voting
and dispositive power; 17,484,480 shares held by Nissin Building Co., Ltd.
over which Hideo Sakioka may be deemed to share voting or dispositive
power with Kunihiko Sakioka, Michimasa Sakioka and Midori Moriyama; and
17,118,504 shares held by Shuho Ltd. over which Hideo Sakioka may be
deemed to share voting or dispositive power with Kunihiko Sakioka.
Excludes shareholdings of other Sakioka family members. Members of the
Sakioka family, including the ones listed above, directly and indirectly
held an aggregate of 53,011,164 shares, or 41.9% of our outstanding shares
of common stock, as of March 31, 2003.
|   
|(4) |  | Comprised of 4,515,916 shares over which Kunihiko Sakioka has sole voting
and dispositive power; 17,484,480 shares held by Nissin Building Co. Ltd.,
over which Kunihiko Sakioka may be deemed to share beneficial ownership
with Hideo Sakioka, Michimasa Sakioka and Midori Moriyama; 17,118,504
shares held by Shuho, Ltd. over which Mr. Sakioka may be deemed to share
voting or dispositive power with Hideo Sakioka. Excludes shareholding of
other Sakioka family members. Members of the Sakioka family, including
the ones listed above, directly and indirectly held an aggregate of
53,011,164 shares, or 41.9% of our outstanding shares of common stock, as
of March 31, 2003.             

As of March 31, 2003, our directors and statutory auditors, as a group,
owned 45,008,684 shares of common stock, if the shares of Nissin Buildings Co.,
Ltd. and Shuho, Ltd. are included, representing 35.6% of our outstanding common stock.

51



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Other than Hideo Sakioka and
Kunihiko Sakioka, whose holdings are disclosed above, no director owned 1% or
more of our shares.

All of our directors are engaged in our business on a full-time basis.
The business address of Hideo Sakioka is 7-6, Chifunemachi 5-chome, Matsuyama
City, Ehime 790-8584, Japan. The business address of our remaining directors
is Shinjuku L-Tower 25F, 6-1, Nishi-Shinjuku l-chome, Shinjuku-ku, Tokyo
163-1525, Japan.

Except as described below with respect to Hideo Sakioka, Kunihiko Sakioka
and Akio Sakioka, none of our directors are related to one another.

Hideo Sakiokahas been our chairman and representative director since June
2000. Previously he was our president since May 1960. He also has served as
the president and representative director of Nissin Building Co., Ltd. since
January 1980. He is the father of our president, Kunihiko Sakioka.

Kunihiko Sakiokahas been our president, chief executive officer and
representative director since June 2000. Previously, he served in our numerous
executive positions. He is the son of our chairman, Hideo Sakioka.

Hitoshi Higakihas served as managing director and general manager of our
Operations Control Division since April 2003. Previously, he served as
director and general manager of our Corporate Planning Department, Accounting
Department and General Affairs Department.

Yoshio Tanidahas served as director and general manager of our Business
Development Department since April 2003. Previously, he was general manager of
our Business Audit Department, Sales Support Department, Credit Screening
Department and Corporate Planning Department.

Hiroshi Akutahas served as director and general manager of our Credit
Screening Department since April 2003. Previously, he served as general
manager of our Corporate Planning Department, Investigation Department, Western
Japan Sales Department, Customer Service Department and Business Audit
Department.

Hidenobu Sasakihas served as director and general manager of Western
Japan Sales Department and manager of our Osaka branch office since April 2003.
Previously, he served as general manager of our Finance Department and Sales
Department.

Toshioki Otanihas served as director and general manager of our Business
Development Department since April 2003. Previously, he served as general
manager of our Eastern Japan Sales Department, Finance Department and Business
Development Department.

Keishi Ishigakihas served as director and general manager of our Finance
Department since April 2003. Previously, he also served as general manager of
our Western Japan Sales Department, manager of Osaka branch office and general
manager of Finance Department.

Masami Obarahas served as director since June 2002 and general manager of
our System Planning Department since October 2000. Previously, he was with
Fujitsu Limited until August 2000.

Yunwei Chenhas served as director since June 2003 and general manager of
our Investors Relations Department since April 2003. Previously, she also
served as assistant general manager of our Corporate Planning Department.

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Akio Sakiokahas served as a statutory auditor since June 2002.
Previously, he also served as managing director as well as general manager of
our Finance Department and manager of Tokyo office. He is the nephew of our
chairman, Hideo Sakioka.

Yoshiki Kishimurahas served as a statutory auditor since June 2003. He
has also served as an adviser of our Finance Department.

Yoshimitsu Nishijimahas served as a statutory auditor since June 1991.
He has been practicing law since April 1973.

Isao Narimatsuhas served as a statutory auditor since June 2001. He
joined the Miyata Certified Public Tax Accountant Office in April 1979. He
opened his own Narimatsu Certified Public Tax Accountant Office in July 1981.

B. Compensation.

The aggregate compensation, including bonuses, paid by us to our directors
and statutory auditors as a group during the year ended March 31, 2003 was ¥305
million. In accordance with customary Japanese business practices, a retiring
director or statutory auditor receives a lump-sum retirement payment, subject
to the approval of the general meeting of shareholders. For the year ended
March 31, 2003, we made retirement payments in the aggregate amount of ¥26
million to retiring directors. We did not make any retirement payments to
statutory auditors for the year ended March 31, 2003.

For the year ended March 31, 2003, we issued stock options for 266,000
shares to directors and statutory auditors in connection with our September
2002 stock option plan. During the same year, our directors and statutory
auditors exercised as a group stock options for 20,000 shares at a total price
of ¥10 million. For the same fiscal year, we did not issue any warrants to our
directors and statutory auditors in connection with our fourth series incentive
warrant plan, and none of our directors and statutory auditors exercised their
warrants for the year ended March 31, 2003. For a description of our stock
option and fourth series incentive warrant plans, see Item 6.E of this annual
report on Form 20-F.

C. Board Practices.

The following table shows the terms of office of our directors and
statutory auditors and certain other information.

|                 |  |                     |  |              |  |              
|---------------- |  | ------------------- |  | ------------ |  | -------------
|                 |  |                     |  | Start of     |  | Expiration of
|Name             |  | Start of first term |  | current term |  | current term 
|                 |  |                     |  |              |  |              
|Directors:       |  |                     |  |              |  |              
|Hideo Sakioka    |  | May 1960            |  | June 2003    |  | June 2004    
|Kunihiko Sakioka |  | March 1989          |  | June 2003    |  | June 2004    
|Hitoshi Higaki   |  | June 1994           |  | June 2003    |  | June 2004    
|Yoshio Tanida    |  | June 1996           |  | June 2003    |  | June 2004    
|Hiroshi Akuta    |  | June 1996           |  | June 2003    |  | June 2004    
|Hidenobu Sasaki  |  | June 2002           |  | June 2003    |  | June 2004    
|Toshioki Otani   |  | June 2002           |  | June 2003    |  | June 2004    
|Keishi Ishigaki  |  | June 2002           |  | June 2003    |  | June 2004    
|Masami Obara     |  | June 2002           |  | June 2003    |  | June 2004    
|Yunwei Chen      |  | June 2003           |  | June 2003    |  | June 2004    

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|                      |  |                     |  |              |  |              
|--------------------- |  | ------------------- |  | ------------ |  | -------------
|                      |  |                     |  | Start of     |  | Expiration of
|Name                  |  | Start of first term |  | current term |  | current term 
|                      |  |                     |  |              |  |              
|Statutory Auditors:   |  |                     |  |              |  |              
|Akiko Sakioka (1)     |  | June 2002           |  | June 2002    |  | June 2005    
|Yoshiki Kishimura (1) |  | June 2003           |  | June 2003    |  | June 2007    
|Yoshimitsu Nishijima  |  | June 1991           |  | June 2002    |  | June 2005    
|Isao Narimatsu        |  | June 2001           |  | June 2001    |  | June 2004    



---

|(1) |  | Full-time statutory auditors.
|--- |  | -----------------------------

Board of Directors

Our board of directors has the ultimate responsibility for the
administration of our affairs. Our articles of incorporation provide for not
more than twelve directors. Directors are elected at a general meeting of
shareholders, and the normal term of office of directors is one year, although
they may serve any number of consecutive terms. The board of directors elects
one or more representative directors, who have the authority individually to
represent us. The board of directors elects one president and may also elect
from among its members a chairman of the board of directors, one or more
executive vice presidents, senior managing directors and managing directors.
Our executive officers serve at the discretion of the board of directors.

None of our directors have service contracts with us or any of our
subsidiaries providing for benefits upon termination of employment.

Board of Statutory Auditors

Our articles of incorporation provide for not more than four statutory
auditors, and the Japanese Commercial Code and Law for Special Exceptions to
the Commercial Code concerning Audit, etc. of Kabushiki Kaisha set the minimum
at three. Statutory auditors, of whom at least one (effective May 1, 2005, at
least half) must be from outside our company, are elected at a general meeting
of shareholders, and the normal term of office of a statutory auditor is four
years (three years in case of statutory auditors appointed before the general
shareholders meeting in June 2003), although they may serve any number of
consecutive terms. Statutory auditors are under a statutory duty to review the
administration of our affairs by the directors and to examine our financial
statements and business reports to be submitted by the board of directors to
the general meetings of shareholders. Statutory auditors also have a statutory
duty to provide their report to the board of statutory auditors, which must
submit its auditing reports to the board of directors. They have the duties to
attend meetings of the board of directors and to express their opinions, but
they are not entitled to vote. The statutory auditors elect from among
themselves one or more standing auditors who serve on a full-time basis.

Independent Public Accountants

In addition to statutory auditors, we must appoint independent certified
public accountants, who have the statutory duties of examining the financial
statements to be submitted by the board of directors to the general meetings of
shareholders, reporting to the board of statutory auditors and directors, and
examining the financial statements to be filed with the relevant local finance
bureau of the Ministry of Finance. Since the beginning of the year ended March
31, 1992, we have appointed BDO Sanyu & Co., a member of the Japanese Institute
of Certified Public Accountants, as our independent certified public
accountants. Its address is Aqua Dojima Nishi-kan 14F, 4-16,
Dojimahama 1-chome, Kita-ku, Osaka 530-0004, Japan.

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Summary of the Principal Differences Between Our Home-Country Corporate
Governance Standards and Those Required of U.S. Companies Listed on the New
York Stock Exchange

Exemption from Certain New York Stock Exchange Corporate Governance Rules

Japanese laws and Japanese stock exchange rules differ from those followed
by U.S. domestic companies under current New York Stock Exchange listing
standards. The New York Stock Exchange permits non-U.S. companies to follow
corporate governance practices in compliance with relevant local laws and local
stock exchange rules. The principal differences under the current listing
standards are as follows:

Audit Committee

The New York Stock Exchange requires that a U.S. domestic listed company
have an audit committee that consists of at least three independent directors
and is charged with the responsibility of selecting, monitoring and
communicating with the outside auditor of the company to ensure the outside
auditors independence.

Consistent with Japanese law and Japanese stock exchange rules, we do not
have an audit committee and our board of statutory auditors does not have all
of the same functions called for by the New York Stock Exchange rules.

Shareholder Approval Policy

Issuance of Stock Options. Pursuant to the amendment to the corporate
governance standards that was approved by the Securities and Exchange
Commission on June 30, 2003, the New York Stock Exchange requires, with limited
exceptions, that shareholder approval be obtained with respect to any
equity-compensation plan, which is generally defined as a plan or other
arrangement that provides for the delivery of equity securities (either newly
issued or treasury shares) of the listed company to any employee, director or
other service provider as compensation for services.

We follow relevant Japanese laws which, as discussed in Rights of Our
Shareholders  Voting Rights under Item 10.B of this annual report on Form
20-F, generally require us to obtain shareholder approval if stock options are
to be issued with specially favorable conditions.

Issuance of Common Stock. The New York Stock Exchange also requires that,
with certain exceptions specified in its rules, shareholder approval be
obtained prior to the following types of issuance by a U.S. listed company of
common stock or securities convertible into or exercisable for common stock:



| |  |  | issuance to a director, an officer, a substantial security
holder or a party related to any of them if the number of shares of
common stock to be issued or are issuable upon conversion exceeds 1%
of the number of common stock or voting power outstanding before the
issuance;                                  
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | issuance in any transaction or series of transactions, if the
voting power of the common stock is equal to or exceeds 20% of the
voting power outstanding before the issuance or if the number of
shares of the common stock is equal to or exceeds 20% of the number
of shares outstanding before the issuance, and
|
| |  |  | issuance that will result in a change of control of the
issuer.                                                                                                                                                                                                                                                     

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We follow relevant Japanese laws which, as discussed in Rights of Our
Shareholders  Voting Rights under Item 10.B of this annual report on Form
20-F, generally require us to obtain shareholder approval with respect to the
issuance of common stock or securities convertible into or exercisable for
common stock if common stock is to be issued at a specially favorable price
or convertible securities are to be issued with specially favorable
conditions.

Proposed New York Stock Exchange Corporate Governance Listing Standards

On August 16, 2002, the New York Stock Exchange filed with the Securities
and Exchange Commission proposed changes to its corporate governance standards.
The areas of corporate governance covered by the proposed changes include the
definition and role of independent directors, committees under the board of
directors, corporate governance guidelines, codes of business conduct and
ethics, shareholder approval of equity-compensation plans and annual
certifications by chief executive officers. On June 30, 2003, the Securities
and Exchange Commission approved the portion of the proposed corporate
governance standards relating to shareholder approval of equity-compensation
plans, which is described under Exemption from Certain New York Stock Exchange
Corporate Governance Rules  Shareholder Approval Policy above. Meanwhile, in
light of the promulgation by the Securities and Exchange Commission of Rule
10A-3 pursuant to Section 301 of the Sarbanes-Oxley Act, on April 4, 2003, the
New York Stock Exchange filed with the Securities and Exchange Commission an
amendment to the remainder of its proposed rule changes in order to reflect the
requirements of Rule 10A-3. That portion of the proposed rule changes, as
amended, will become effective upon the Securities and Exchange Commissions
approval.

The proposed rule changes, as amended, will generally continue to grant
home country practices exemptions to non-U.S. companies listed on the New York
Stock Exchange, including us, but, pursuant to the requirements of Rule 10A-3,
those provisions of the amended corporate governance standards that implement
the requirements of Rule 10A-3 will apply to listed non-U.S. companies. Among
the requirements, a foreign private issuer listed on the New York Stock
Exchange will be required to have an audit committee consisting of at least
three directors all of whom must be independent under the standards set forth
in paragraph (b) of Rule 10A-3, and the audit committee will be required to be
directly responsible for the appointment, compensation, retention and oversight
of the work of the accounting firm engaged (including resolution of
disagreements between management and the auditor regarding financial reporting)
for the purpose of preparing or issuing an audit report or performing other
audit, review or attest services for the issuer, unless one or more of the
exemptions set forth in Rule 10A-3 apply. Pursuant to paragraph (a)(5) of Rule
10A-3, the amended corporate governance standards of the New York Stock
Exchange implementing the requirements of the rule will become applicable to
foreign private issuers listed on the New York Stock Exchange on July 31, 2005.

D. Employees.

All of our employees are located in Japan. The following table shows the
number of our full-time, temporary and part-time employees on a consolidated
basis:

|          |       |  |                 |       |      |  |      |       |  |  |     |     | 
|--------- | ----- |  | --------------- | ----- | ---- |  | ---- | ----- |  |  | --- | --- | 
|          |       |  | As of March 31,
|          |       |  |                
|          |       |  | 2003            |       | 2002 |  | 2001
|          |       |  |                 |       |      |  |     
|Full-time |       |  | 832             |       |      |  | 859  |       |  |  | 695 |    
|Temporary |       |  | 255             |       |      |  | 217  |       |  |  | 188 |    
|Part-time |       |  | 78              |       |      |  | 74   |       |  |  | 66  |    
|          |       |  |                 |       |      |  |      |       |  |  |     |    
|          | Total |  |                 | 1,165 |      |  |      | 1,150 |  |  |     | 949 | 
|          |       |  |                 |       |      |  |      |       |  |  |     |    

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We have never experienced any labor disputes and consider our labor
relations to be excellent. None of our employees are members of a trade union
or participate in any collective bargaining organizations.

We consider our levels of remuneration, fringe benefits, working
conditions and other allowances, which include lump-sum payments, to be
generally competitive with those offered in Japan by other enterprises in our
industry. Our employees normally must retire when they reach 60 years of age.
We terminated our sponsored pension and retirement plans on March 31, 2002 and
now only participate in the mandatory fully-funded contributory funded plan
under the Japanese Welfare Pension Insurance Law.

E. Share Ownership.

Share Ownership by Directors, and Statutory Auditors

Other than as disclosed in Item 6.A, none of our directors and statutory
auditors beneficially own more than one percent of our shares of common stock.

Stock Option Plans

We have the following stock option and incentive warrant plans, where upon
exercise of stock options or warrants we grant to directors and key employees a
specified number of shares:



| |  |  | September 2002 Stock Option Plan. We granted stock options
exercisable for a total of 2,990,000 shares at a purchase price per
share of ¥498 to 1,086 of our directors and employees on September
10, 2002. These are exercisable until September 30, 2005. As of
March 31, 2003, stock options exercisable for a total of 2,710,000
shares remained outstanding.            
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Fourth Series Incentive Warrant Plan. We granted warrants
exercisable for a total of approximately 2,598,000 shares at a
purchase price per share of ¥577.5 to 175 of our directors and
employees on July 2, 2001. These are exercisable until April 19,
2004. As of March 31, 2003, warrants exercisable for a total of
approximately 2,342,854 shares remained outstanding.

On June 24, 2003, a resolution was adopted at our annual shareholders
meeting to issue stock options for 1.5 million shares to our directors,
statutory auditors and selected employees or those of any of our wholly owned

subsidiaries.

Employee Stock Purchase Plan

Our full-time employees are eligible to participate in our employee
shareholders association, which purchases our shares with contributions from
our employees deducted from their salaries. As of March 31, 2003, the
association owned 713,042 shares of common stock. We provide a 10% subsidy on
top of the contribution of any employee who has participated in the association
for less than a year and 13% subsidy for those who have participated for one
year or longer.

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##### Table of Contents






Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders.

To our knowledge, the persons in the following table are the only owners
or beneficial owners or holders of 5% or more of our outstanding common stock
as of March 31, 2003. We are not required by Japanese law to disclose
beneficial ownership of our common stock. As explained in Reporting
Requirements of Shareholders  Report of Substantial Shareholdings  in Item
10.B of this annual report on Form 20-F, any person who becomes, beneficially
and solely or jointly, a holder of more than 5% of our outstanding common stock
must file a report with the relevant local finance bureau of the Ministry of
Finance. The information in these tables is based upon our shareholders of
record and reports filed with the Financial Services Agency and U.S. Securities
and Exchange Commission.

|                                     |  |                     |            |              |  |               |      |  
|------------------------------------ |  | ------------------- | ---------- | ------------ |  | ------------- | ---- | -
|                                     |  |                     |            |              |  | Percentage of
|                                     |  | Number of Shares of |            | Common Stock
|Shareholders                         |  | Common Stock Owned  |            | Outstanding 
|                                     |  |                     |            |             
|Kunihiko Sakioka (1)(2)              |  |                     | 39,118,900 |              |  |               | 30.9 | %
|Hideo Sakioka (2)(3)                 |  |                     | 38,598,840 |              |  |               | 30.5 |  
|Midori Moriyama (2)(4)               |  |                     | 19,496,048 |              |  |               | 15.4 |  
|Michimasa Sakioka (2)(5)             |  |                     | 19,332,752 |              |  |               | 15.3 |  
|Japan Trusty Services Bank Co., Ltd. |  |                     | 9,138,400  |              |  |               | 7.2  |  
|Master Trust Bank of Japan, Ltd.     |  |                     | 7,897,200  |              |  |               | 6.2  |  



---

|(1) |  | Comprises 4,515,496 shares over which Kunihiko Sakioka had sole voting
and dispositive power; 17,484,480 shares held by Nissin Building Co., Ltd.
over which Kunihiko Sakioka may be deemed to share voting and dispositive
power with Hideo Sakioka, Michimasa Sakioka and Midori Moriyama; and
17,118,504 shares held by Shuho Ltd. over which Kunihiko Sakioka and Hideo
Sakioka may be deemed to share voting and dispositive power.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Excludes shareholdings of other Sakioka family members. Members of the
Sakioka family, including the ones listed above, directly and indirectly
held an aggregate of 53,011,164 shares, or 43.2% of our outstanding shares
of common stock, as of March 31, 2003.                                                                                                                                                                       
|   
|(3) |  | Comprises 3,995,856 shares over which Hideo Sakioka had sole voting and
dispositive power; 17,484,480 shares held by Nissin Building Co., Ltd.
over which Hideo Sakioka may be deemed to share voting and dispositive
power with Kunihiko Sakioka, Michimasa Sakioka and Midori Moriyama; and
17,118,504 shares held by Shuho Ltd. over which Hideo Sakioka and Kunihiko
Sakioka may be deemed to share voting and dispositive power.   
|   
|(4) |  | Comprises 2,011,568 shares over which Midori Moriyama had sole voting and
dispositive power; and 17,484,480 shares held by Nissin Building Co., Ltd.
over which Midori Moriyama may be deemed to share voting and dispositive
power with Hideo Sakioka, Kunihiko Sakioka and Michimasa Sakioka.                                                                                                                                         
|   
|(5) |  | Comprises 1,848,272 shares over which Michimasa Sakioka had sole voting
and dispositive power; and 17,484,480 shares held by Nissin Building Co.,
Ltd. over which Michimasa Sakioka may be deemed to share voting and
dispositive power with Hideo Sakioka, Kunihiko Sakioka and Midori
Moriyama.                                                                                                                                       

According to our register of shareholders, as of March 31, 2003, 24
shareholders of record with addresses in the United States held 4.43% of our
outstanding common stock.

To our knowledge, we are not directly or indirectly owned or controlled by
any government. We know of no arrangements the operation of which may at a
later time result in a change of control of us. Our major shareholders have
the same voting rights as other holders of our common stock.

B. Related Party Transactions.

Since April 1, 2002, we have not entered into any material related-party
transactions other than those discussed below.

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##### Table of Contents



Transactions with Any of Our Directors, Corporate Officers, Statutory Auditors
or Companies with Whom They Have a Relationship

Transactions with Shuho

As of March 31, 2003, members of the Sakioka family owned 100% of Shuho.
Since April 1, 2002, we have paid ¥45 million to Shuho for insurance policies,
and have received ¥1 million in rent for office space we rent to Shuho. In the
opinion of our management, the terms of these transactions were as favorable to
us as those that could have been extended to unaffiliated parties.

Transactions with Nissin Buildings

As of March 31, 2003, members of the Sakioka family owned 93.3% of Nissin
Buildings. Since April 1, 2002, we have received ¥4 million in rent for office
space and parking lots we rent to Nissin Buildings. In the opinion of our
management, the terms of these transactions were as favorable to us as those
that could have been extended to unaffiliated parties.

Transactions with Michimasa Sakioka

Michimasa Sakioka is the elder brother of Kunihiko Sakioka, our president,
chief executive officer and representative director. On March 31, 2003, we
received an advance from Michimasa Sakioka in the amount of ¥9 million in
connection with his purchase of real estate property from us. The purchase
price was determined based on a third-party real estate appraisal.

Transactions with Any of Our Principle Shareholders or Affiliates

Transactions with Ascot

As of March 31, 2003, we owned 25% of Ascot. Since April 1, 2002, we have
paid commissions on customer referrals of ¥33 million to Ascot. In the opinion
of our management, the terms of these transactions were as favorable to us as
those that could have been extended to unaffiliated parties.

Transactions with Shinsei Business Finance

As of March 31, 2003, we owned 25% of Shinsei Business Finance. Since
April 1, 2002, we have paid commissions on customer referrals of ¥1 million to,
and received guarantee fees of ¥4 million from, Shinsei Business Finance. In
the opinion of our management, the terms of these transactions were as
favorable to us as those that could have been extended to unaffiliated parties.

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C. Interests of Experts and Counsel.

Not applicable.




Item 8. Financial Information

A. Consolidated Statements and Other Financial Information.

Financial Statements

The consolidated financial statements required by this item are set forth
in this annual report on Form 20-F beginning on page F-1 in this annual report
on Form 20-F.

Legal or Arbitration Proceedings

The information on legal or arbitration proceedings required by this item
is set forth in Item 4.B. of this annual report on Form 20-F.

Dividend Policy

Cash Dividends

Historically we have paid cash dividends twice per year. Our board of
directors recommends the year-end dividend to be paid following the end of each
fiscal year. This recommended dividend is subject to approval by shareholders
at the general meeting of shareholders required held in June of each year.
Following approval of a year-end dividend at our annual shareholders meeting,
we pay the approved year-end dividend to shareholders of record as of March 31.
In addition to these year-end dividends, historically we have paid interim
dividends in the form of cash distributions from our retained earnings to our
shareholders of record as of September 30 in each year. These are approved by
resolution of our board of directors and without shareholder approval. We
normally pay these interim dividends in December.

The following table shows the year-end and interim dividends paid to
shareholders of record of our common stock. Dividends per share (As
adjusted) presents each dividend payments as adjusted to reflect the
three-for-one stock split that took effect on May 21, 2001, the two-for-one
stock split that took effect on May 21, 2002 and the two-for-one stock split
that took effect on May 20, 2003.

|                             |  |                     |        |                     |  |  |       | 
|---------------------------- |  | ------------------- | ------ | ------------------- |  |  | ----- | 
|                             |  | Dividends per share |        | Dividends per share
|Record Date                  |  | (Actual)            |        | (As adjusted)      
|                             |  |                     |        |                    
|September 30, 1997 (interim) |  |                     | ¥17.50 |                     |  |  | ¥1.46 | 
|March 31, 1998               |  |                     | 22.50  |                     |  |  | 1.88  | 
|September 30, 1998 (interim) |  |                     | 25.00  |                     |  |  | 2.08  | 
|March 31, 1999               |  |                     | 25.00  |                     |  |  | 2.08  | 
|September 30, 1999 (interim) |  |                     | 25.00  |                     |  |  | 2.08  | 
|March 31, 2000               |  |                     | 35.00  |                     |  |  | 2.92  | 
|September 30, 2000 (interim) |  |                     | 35.00  |                     |  |  | 2.92  | 
|March 31, 2001               |  |                     | 35.00  |                     |  |  | 2.92  | 
|September 30, 2001 (interim) |  |                     | 12.50  |                     |  |  | 3.13  | 
|March 31, 2002               |  |                     | 12.50  |                     |  |  | 3.13  | 
|September 30, 2002 (interim) |  |                     | 6.50   |                     |  |  | 3.25  | 
|March 31, 2003               |  |                     | 8.50   |                     |  |  | 4.25  | 

60



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We presently intend to continue to pay cash dividends on a semi-annual
basis and to provide a stable level of dividends to our shareholders. The
declaration and payment of dividends, however, depend on our future earnings,
financial condition and other factors, including statutory and other
restrictions on the payment of dividends.

Dividends paid to shareholders outside Japan on shares of our common
stock, including shares represented by ADSs, are generally subject to a
Japanese withholding tax at the maximum rate of 20%. Reduced rates for
withholding apply to shareholders in some countries that have income tax
treaties with Japan. The withholding rate for U.S. holders is generally 15%.

There are generally no U.S. or Japanese governmental restrictions on the
distribution of dividends to our shareholders.

Stock Repurchases

For the year ended March 31, 2003, we repurchased, net of sales of shares,
5,361,572 shares for an aggregate price of ¥2,473 million and purchased an
additional 252 shares between April 1, 2003 and June 24, 2003 for an aggregate
price of ¥123,028. For the year ended March 31, 2003, we also sold 40,000
shares of our treasury stock to satisfy our obligations in respect of exercises
of stock option and sold an additional 29,000 shares between April 1, 2003 and
June 24, 2003 for an aggregate of ¥13 million in response to the exercise of a
stock option. The aggregate exercise price for the option was ¥134 million.
At our general shareholders meeting in June 2003, our shareholders authorized
us to repurchase up to an additional 3 million shares for up to ¥2 billion in
the period up to our next shareholders meeting in June 2004.

B. Significant Changes.

Except as otherwise disclosed in this annual report on Form 20-F, there
has been no significant change in our financial condition since March 31, 2003,
the date of our last audited financial statements.




Item 9. The Offer and Listing

A. Offer and Listing Details.

Tokyo Stock Exchange

The following table shows the reported high and low sale prices (as
adjusted to reflect stock splits already effected) and the average daily
trading volume of our common stock on the Tokyo Stock Exchange:

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|                            |                |      |                 |     |                |             |      |     |  |  |               |         | 
|--------------------------- | -------------- | ---- | --------------- | --- | -------------- | ----------- | ---- | --- |  |  | ------------- | ------- | 
|                            |                |      |                 |     |                |             |      |     |  |  | Average Daily
|                            |                |      | Price Per Share |     | Trading Volume
|                            |                |      |                 |     |               
|Year ended/ending March 31, |                | High |                 | Low |                | (in shares)
|                            |                |      |                 |     |                |            
|1999                        |                |      | ¥310            |     |                |             | ¥133 |     |  |  | 83,966        |        
|2000                        |                |      | 745             |     |                |             | 266  |     |  |  | 356,292       |        
|2001                        |                |      | 542             |     |                |             | 252  |     |  |  | 159,832       |        
|2002                        |                |      | 725             |     |                |             | 356  |     |  |  | 263,229       |        
|                            | First Quarter  |      |                 | 725 |                |             |      | 475 |  |  |               | 257,806 | 
|                            | Second Quarter |      |                 | 701 |                |             |      | 518 |  |  |               | 240,952 | 
|                            | Third Quarter  |      |                 | 637 |                |             |      | 430 |  |  |               | 253,677 | 
|                            | Fourth Quarter |      |                 | 543 |                |             |      | 356 |  |  |               | 303,434 | 
|2003                        |                |      | 570             |     |                |             | 360  |     |  |  | 252,019       |        
|                            | First Quarter  |      |                 | 570 |                |             |      | 412 |  |  |               | 265,310 | 
|                            | Second Quarter |      |                 | 490 |                |             |      | 372 |  |  |               | 272,091 | 
|                            | Third Quarter  |      |                 | 464 |                |             |      | 385 |  |  |               | 198,289 | 
|                            | Fourth Quarter |      |                 | 515 |                |             |      | 360 |  |  |               | 267,469 | 
|2004                        |                |      | 548             |     |                |             | 451  |     |  |  | 159,113       |        
|                            | First Quarter  |      |                 | 548 |                |             |      | 451 |  |  |               | 159,113 | 
|Month                       |                |      |                 |     |                |             |      |     |  |  |               |        
|January 2003                |                |      | 438             |     |                |             | 360  |     |  |  | 161,178       |        
|February 2003               |                |      | 428             |     |                |             | 367  |     |  |  | 251,157       |        
|March 2003                  |                |      | 515             |     |                |             | 397  |     |  |  | 394,565       |        
|April 2003                  |                |      | 526             |     |                |             | 461  |     |  |  | 139,710       |        
|May 2003                    |                |      | 548             |     |                |             | 472  |     |  |  | 147,762       |        
|June 2003                   |                |      | 508             |     |                |             | 451  |     |  |  | 189,867       |        

New York Stock Exchange

The current ADS/share ratio is one ADS per two shares of our common stock.
The following table indicates the trading price of our American Depositary
Shares on the New York Stock Exchange:

|                            |                                       |      |                |      |                |   |      |      |  |  |       |       | 
|--------------------------- | ------------------------------------- | ---- | -------------- | ---- | -------------- | - | ---- | ---- |  |  | ----- | ----- | 
|                            |                                       |      | New York       |      | Average daily 
|                            |                                       |      | Stock Exchange |      | trading volume
|                            |                                       |      | price per ADS  |      | of ADSs       
|                            |                                       |      |                |      |               
|Year ended/ending March 31, |                                       | High |                | Low  |                |   |      |     
|                            |                                       |      |                |      |                |   |      |     
|2003                        |                                       | $    | 7.23           |      |                | $ | 6.00 |      |  |  | 3,669 |      
|                            | Second Quarter (since August 2, 2002) |      |                | 7.91 |                |   |      | 6.20 |  |  |       | 8,671 | 
|                            | Third Quarter                         |      |                | 7.53 |                |   |      | 6.45 |  |  |       | 1,546 | 
|                            | Fourth Quarter                        |      |                | 8.13 |                |   |      | 6.00 |  |  |       | 2,452 | 
|2004                        |                                       |      | 9.06           |      |                |   | 7.85 |      |  |  | 1,521 |      
|                            | First Quarter                         |      |                | 9.06 |                |   |      | 7.85 |  |  |       | 1,521 | 
|Month                       |                                       |      |                |      |                |   |      |      |  |  |       |      
|January 2003                |                                       |      | 7.20           |      |                |   | 6.00 |      |  |  | 1,770 |      
|February 2003               |                                       |      | 7.24           |      |                |   | 6.24 |      |  |  | 3,862 |      
|March 2003                  |                                       |      | 8.13           |      |                |   | 6.95 |      |  |  | 1,857 |      
|April 2003                  |                                       |      | 8.62           |      |                |   | 7.85 |      |  |  | 1,256 |      
|May 2003                    |                                       |      | 8.22           |      |                |   | 8.22 |      |  |  | 1,035 |      
|June 2003                   |                                       |      | 8.39           |      |                |   | 7.95 |      |  |  | 921   |      

The table above has been adjusted to reflect the two-for-one stock split
that took effect on May 20, 2003.

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B. Plan of Distribution.

Not applicable.

C. Markets.

In Japan, our common stock has been listed on the First Section of the
Tokyo Stock Exchange since September 1999. In September 2002, we delisted our
shares from the Osaka Securities Exchange, where our shares had been traded
since September 1999. Our common stock began trading on the Japan Securities
Dealers Associations over-the-counter market in April 1994.

In August 2002, we listed our common stock on the New York Stock Exchange
in the form of ADSs evidenced by ADRs. For further information regarding our
American Depositary Receipt program, see our registration statement filed with
the Securities and Exchange Commission on Form F-1 (File No. 333-97229)
declared effective on August 1, 2002.

D. Selling Shareholders.

Not applicable.

E. Dilution.

Not applicable.

F. Expenses of the Issue.

Not applicable.




Item 10. Additional Information

A. Share Capital.

Not required.

B. Memorandum and Articles of Association.

Purposes in Our Article of Incorporation

Article 2 of our articles of incorporation states our purposes as follows:



| |  |  | Consumer financing, commercial financing and the business of
mediation, guarantee and agency for these financings;                                                    
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Lease, rent, sale, purchase and intermediation of real estate;                                                                                                        
|
| |  |  | Sale and purchase of securities;                                                                                                                                      
|
| |  |  | Non-life insurance agency business, activities relating to
the offering of life insurance agency business pursuant to the
Automobile Liability Indemnity Law of Japan;

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| |  |  | Investment and managements consulting services for business organizations;                                                                    
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Collection agency;                                                                                                                            
|
| |  |  | Computation surrogate business;                                                                                                               
|
| |  |  | Contract for advertising and general publicity;                                                                                               
|
| |  |  | Factoring;                                                                                                                                    
|
| |  |  | Development and sale of computer software;                                                                                                    
|
| |  |  | Sale of computers and their peripherals;                                                                                                      
|
| |  |  | Operation and lease of sport peripherals;                                                                                                     
|
| |  |  | Corporate accounting and labor management surrogate business;                                                                                 
|
| |  |  | Internet service provider business;                                                                                                           
|
| |  |  | Advertising and general publicity business on the Internet;                                                                                   
|
| |  |  | Intermediation of money loans by utilizing the Internet                                                                                       
|
| |  |  | Business concerning acceptance of planning, development and
production of software relating to the Internet, and consulting
services therefor;
|
| |  |  | Business relating to general bridal services;                                                                                                 
|
| |  |  | Business of planning, managing and coordinating various kinds of events;                                                                      
|
| |  |  | Business relating to the giving of various kinds of culture
classes and classes for acquiring various kinds of licenses;                      
|
| |  |  | Planning and production of advertisements and general publicity, and advertising agency;                                                      
|
| |  |  | Business of offering compulsory automobile inspection services; and                                                                           
|
| |  |  | All activities incidental to any of the foregoing items.                                                                                      

Provisions Regarding Our Directors

There is no provision in our articles of incorporation as to our
directors power to vote on a proposal, arrangement or contract in which a
director is materially interested. The Commercial Code of Japan, however,
requires a director to refrain from voting on such matters at meetings of the
board of directors.

The Commercial Code provides that compensation for directors be determined
at a general meeting of shareholders. Our board of directors will determine
the compensation for each director based on the upper limit on the aggregate amount of directors compensation
approved by the shareholders meeting. Our board of directors may, by its
resolution, leave this decision to the discretion of our president.

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The Commercial Code provides that the board of directors must approve
significant loans from any third party to the company. Our regulations of the
board of directors have adopted this policy.

Neither the Commercial Code nor our articles of incorporation set a
mandatory retirement age for our directors.

There is no requirement concerning the number of shares an individual must
hold to qualify as a director under the Commercial Code or our articles of
incorporation.

Rights of Our Shareholders

On June 24, 2003, our general shareholders meeting amended our articles
of incorporation to increase our authorized share capital from 240 million
shares to 480 million shares. As of March 31, 2003, 126,459,540 shares were
issued and outstanding, adjusted to reflect the two-for-one stock split that
took effect on May 20, 2003.

Rights with Respect to Dividends, Stock Repurchases and Stock Splits

Dividends

Under our articles of incorporation, our financial accounts are closed on
March 31 of each year, and we pay annual dividends, if any, to shareholders,
beneficial shareholders and pledgees of record as of that date. The Japanese
Commercial Code permits a joint stock corporation to distribute profits by
interim dividends as cash distributions if its articles of incorporation so
provide. Our articles of incorporation permit us to make interim dividends and
we pay these interim dividends, if any, to shareholders, beneficial
shareholders and pledgees of record as of September 30 of each year by
resolution of the board of directors. Under our articles of incorporation, we
are not obligated to pay any dividends left unclaimed for a period of three
years after the date on which they first became payable. For information as to
Japanese taxes on dividends, see Japanese Tax Considerations in Item 10.E of
this annual report on Form 20-F.

The Commercial Code provides that, until the aggregate of our legal
reserve and additional paid-in capital is at least one-quarter of our stated
capital, we may not make any distribution of profits by way of annual cash
dividends or interim dividends unless we set aside in our legal reserve an
amount equal to at least one-tenth of any amount paid out by us as an
appropriation of retained earnings, including any payment by way of annual
dividends and bonuses to directors and statutory auditors, or equal to
one-tenth of any interim dividend.

We may distribute profits by annual dividends out of the excess of our net
assets, on a non-consolidated basis, over the aggregate of:



| |  |  | our stated capital;            
| | - |  | -------------------------------
|
| |  |  | our additional paid-in capital;
|
| |  |  | our accumulated legal reserve; 

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| |  |  | the legal reserve to be set aside for the fiscal year;                                                                                                                                                                            
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the excess, if any, of unamortized expenses incurred in
preparation for commencement of business and in connection with
research and development over the aggregate of the amounts listed
above other than our stated capital; and
|
| |  |  | the excess, if any, of the aggregate market value of assets
stated at market value pursuant to the Commercial Code over their
aggregate acquisition cost.                                                                         

In the case of interim dividends, we calculate our net assets by reference
to the balance sheet at the last closing of our accounts. The assets, however,
are adjusted to reflect:



| |  |  | any subsequent payment made by appropriation of retained
earnings and transfer to legal reserve following the payment;                                                                                                                                    
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | any subsequent transfer of retained earnings to stated
capital; and                                                                                                                                                                                       
|
| |  |  | if a resolution of an ordinary general shareholders meeting
has authorized us to acquire our shares, the total purchase price of
those shares by us, so long as the resolution has not expired and
regardless of whether or not the shares are purchased.

We may not pay any interim dividends where the amount of our net assets
does not exceed at the end of the fiscal year the aggregate of our stated
capital, our additional paid-in capital, our accumulated legal reserve, the
legal reserve for the fiscal year and other items listed above.

In Japan, the ex-dividend date and record date for dividends precede the
date of determination of the amount of the dividend. The price of our shares
generally goes ex-dividend on the third business day prior to the record date.

Repurchase of Our Shares

Following the amendments effective as of October 1, 2001, we may acquire
our shares for any purpose subject to the authorization of shareholders at an
ordinary general shareholders meeting except as otherwise permitted by the
Commercial Code. Shares on a Japanese stock exchange or traded in the
over-the-counter market may be acquired (i) through the public stock market,
(ii) by tender offer or (iii) with purchase from specific shareholders
(authorized by a special resolution at the ordinary shareholders meeting)
during the period up to the close of the following ordinary general
shareholders meeting. Any acquisition of shares must satisfy the requirement
that the total purchase price not exceed the aggregate of:



| |  |  | the retained earnings available for year-end dividend payment
(after taking into account any reduction of the stated capital,
additional paid-in capital or legal reserve, if the reduction of the
stated capital, additional paid-in capital or legal reserve is
authorized at the same ordinary general meeting of shareholders),
less
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the sum to be paid by appropriation of retained earnings for
the fiscal year and any transfer of retained earnings to stated
capital.                                                                                                                                                                                                   

We may hold our own shares acquired in compliance with the Commercial Code
and may generally cancel or dispose of those shares by a resolution of our
board of directors.

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In addition, we may acquire our shares by:



| |  |  | repurchasing those that constitute less than one unit upon the request of their holder,
| | - |  | ---------------------------------------------------------------------------------------
|
| |  |  | repurchasing those from our subsidiary company,                                        
|
| |  |  | redeeming redeemable shares or                                                         
|
| |  |  | a business transfer, merger or corporate split.                                        

Stock Splits

We may at any time split our shares in issue by resolution of our board of
directors. When our board of directors approves a stock split, we may amend
our articles of incorporation without shareholder approval to increase the
number of our authorized shares in proportion to the stock split if we have
only one class of outstanding shares.

Generally, shareholders do not need to exchange share certificates for new
ones following a stock split, but certificates representing the additional
shares resulting from the stock split will be issued to shareholders. Before a
stock split, we must give public notice of the stock split, specifying the
record date for the stock split, not less than two weeks prior to the record
date. In addition, promptly after the stock split takes effect, we must send
notice to each shareholder specifying the number of entitled shares.

Voting Rights

A shareholder is generally entitled to one vote per one unit of our
shares. In general, under the Japanese Commercial Code, a general meeting of
shareholders may adopt a resolution by a majority of the voting rights
represented at the meeting. The Japanese Commercial Code and our articles of
incorporation require a quorum for the election of directors and statutory
auditors of not less than one-third of the total number of voting rights held
by all shareholders. Our shareholders are not entitled to cumulative voting in
the election of directors. A corporate shareholder, having more than
one-quarter of its voting rights directly or indirectly held by us, does not
have voting rights. We have no voting rights with respect to our own common
stock. Shareholders may exercise their voting rights through proxies, provided
that those proxies are also shareholders who have voting rights. Our
shareholders also may cast their votes in writing. Our board of directors may
entitle our shareholders to cast their votes by electrical devices.

Following the April 1, 2003 amendments of the Japanese Commercial Code, at
our general shareholders meeting on June 24, 2003, we amended our articles of
incorporation to provide for a quorum of one-third of voting rights and
approval of two-thirds of the voting rights presented at the meeting of any
material corporate actions such as:



| |  |  | a reduction of the stated capital,                                                                                                                                                                                                                                              
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | amendment of the articles of incorporation (except amendments
that the board of directors are authorized to make under the
Commercial Code as described in Rights with Respect to Dividends,
Stock Repurchases and Stock Splits above and Japanese Unit Share
System below),
|
| |  |  | the removal of a director or statutory auditor,                                                                                                                                                                                                                                 

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| |  |  | establishment of a 100% parent-subsidiary relationship
through a share exchange or share transfer requiring shareholders
approval,                                                                                                            
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a dissolution, merger or consolidation requiring shareholders approval,                                                                                                                                                                       
|
| |  |  | a company split requiring shareholders approval,                                                                                                                                                                                              
|
| |  |  | a transfer of the whole or an important part of our business,                                                                                                                                                                                  
|
| |  |  | the taking over of the whole of the business of any other
corporation requiring shareholders approval, and                                                                                                                                    
|
| |  |  | issuance of new shares at a specially favorable price (or any
issuance of share subscription options or bonds with share
subscription options with specially favorable conditions) other than
a subscription right offer to whole shareholders.

The depositary will endeavor to vote deposited shares based in accordance
with instructions from ADR holders. With respect to voting by holders of ADRs,
see Description of American Depositary Receipts  Voting Rights.

Subscription Rights

Holders of our shares have no preemptive rights under our articles of
incorporation. Under the Japanese Commercial Code, the board of directors may
determine that shareholders receive subscription rights in connection with a
particular issue of new shares. In this case, we must give the rights on
uniform terms to all of our shareholders as of a specified record date by at
least two weeks prior public notice to shareholders of the record date. Each
of these shareholders must receive an individual notice at least two weeks
prior to the date of expiration of the subscription rights.

The board of directors may make rights to subscribe for new shares at or
substantially below the market price of shares. Accordingly, rights offerings
can result in substantial dilution or prevent rights holders from realizing the
economic value of those rights.

Liquidation Rights

In the event of liquidation, our assets remaining after payment of all
debts, liquidation expenses and taxes will be distributed among our
shareholders in proportion to the number of shares they own.

Liability to Further Calls or Assessments

All of our currently outstanding shares are fully paid and nonassessable.

Shareholders Rights to Bring Actions Against Directors

The Japanese Commercial Code contains provisions that allow shareholders
who have held our shares for six months to demand our board of directors to
observe its duties to protect the company. Derivative actions may be brought
in situations including where the company lends money to directors, engages in
self-interested transactions or violates any law, ordinance or the articles of
incorporation. If our board of directors has not instituted an action within
thirty days of the shareholders demand, the shareholder may initiate a lawsuit
as a derivative action. The Commercial Code also provides an exception to the thirty day waiting period, when a wait of thirty days
might cause the company irreparable damage.

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In these cases, the shareholder
may institute the action immediately, but must notify the company without
delay. For example, if we could suffer irreparable damage from an illegal act
of our director, a shareholder who has owned a share continuously for the
previous six months may seek a provisional injunction prohibiting the director
from performing the illegal act. In addition, pursuant to the Commercial Code,
shareholders have a right to institute a direct lawsuit for recovery of
monetary damages against a director, statutory auditor or accountant if any
such officer causes damage to a shareholder by his or her gross negligence or
willful conduct.

Limitations Affecting Security Holders

Japanese Unit Share System

Recent amendments to the Japanese Commercial Code abolished the unit share
system called tan-i-kabu as of October 1, 2001, and introduced a new unit
share system called tan-gen-kabu. These legal changes deem us to have amended
our articles of incorporation as of October 1, 2001, so that 100 shares now
constitute one new unit of our shares. The Commercial Code currently permits
our board of directors by itself to reduce, but not to increase, the number of
shares that will constitute a new unit or abolish the new unit share system
entirely by a board resolution. An increase in the number of shares that
constitute a unit requires a general shareholders meeting. In any case, the
number of shares constituting a new unit may not exceed the fewer of 1,000
shares and one-two hundredths (1/200) of the number of all issued shares.

Under the new unit share system, shareholders have one voting right for
each unit of shares they hold. Any number of shares less than a full unit
carries all shareholders rights except for those relating to voting rights.

Our articles of incorporation provide that no share certificates will be
issued with respect to any number of shares constituting less than one unit.
As the transfer of shares normally requires delivery of share certificates, any
fraction of a unit for which no share certificates are issued is
non-transferable.

Right of a Holder of Shares Representing Less Than One Unit to Require Us
to Purchase Its Shares

A holder of our shares representing less than one unit may at any time
require us (through a participating institution in the case of a beneficial
shareholder under the central clearing system) to purchase them at their last
selling price as reported by the Tokyo Stock Exchange on the day of the
request. Alternatively, if the stock exchange does not report any sale of our
shares on the day of the request, the holder of these shares may require us to
purchase them at their first subsequent trading price on the stock exchange,
less any applicable brokerage commission. Because holders of our ADRs
representing less than one unit cannot withdraw the underlying shares from
deposit, however, these holders will not be able to exercise this right as a
practical matter.

Other Rights of a Holder of Shares Representing Less Than One Unit

A holder of our shares representing less than one unit has the following rights:



| |  |  | to receive distribution of dividends of profit or interest,
| | - |  | -----------------------------------------------------------

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| |  |  | to acquire shares and/or cash by way of retirement,
consolidation, division, conversion, exchange or transfer of shares,
company split or merger,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | to be allotted rights to subscribe for new shares and other
securities when we grant the rights to shareholders;                                 
|
| |  |  | to participate in any distribution of surplus assets upon
liquidation; and                                                                       
|
| |  |  | to bring a derivative action and a lawsuit seeking to enjoin
directors illegal activities that may cause irreparable damage to
the company.     

Voting Rights of a Holder of Shares Representing Less Than One Unit

A holder of our shares representing less than one unit cannot exercise any
voting rights pertaining to those shares. For calculation of the quorum for
various voting purposes, we will exclude the aggregate number of shares
representing less than one unit from the number of voting rights. A holder of
shares representing one or more whole units will have one vote for each one
unit of shares except as stated in Voting Rights above.

Rights of Foreign Investors

Other than the Japanese unit share system described above, the laws of
Japan, our articles of incorporation and our other constituent documents do not
limit the rights of non-residents or foreign shareholders to hold or exercise
voting rights on our shares.

Daily Price Fluctuation Limits under Japanese Stock Exchange Rules

Share prices on Japanese stock exchanges are determined on a real-time
basis by the equilibrium between bids and offers. These exchanges set daily
price limits, which limit the maximum range of fluctuation within a single
trading day. Daily price limits are set according to the previous days
closing price or special quote. Although transactions may continue at the
upward or downward limit price if the limit price is reached on a particular
trading day, no transactions may take place outside these limits.
Consequently, an investor wishing to sell at a price above or below the
relevant daily limit may not be able to sell his shares at such price on a
particular trading day, or at all.

On July 18, 2003, the closing price of our shares on the Tokyo Stock
Exchange was ¥473 per share. The following table shows selected daily price
limits for a stock on the Tokyo Stock Exchange.

|                                              |  |                |  |           |  |       |  |              
|--------------------------------------------- |  | -------------- |  | --------- |  | ----- |  | -------------
|                                              |  |                |  |           |  |       |  | Maximum daily
|Previous
days closing price or special quote |  | price movement
|                                              |  |               
|Over                                          |  | ¥200           |  | Less than |  | ¥500  |  | ¥80          
|Over                                          |  | 500            |  | Less than |  | 1,000 |  | 100          
|Over                                          |  | 1,000          |  | Less than |  | 1,500 |  | 200          

For a history of the trading price of our shares on the Tokyo Stock
Exchange, see Item 9.A.

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Reporting Requirements of Shareholders

Report of Substantial Shareholdings

The Securities and Exchange Law of Japan requires any holder of shares,
including in the form of ADRs, who has become a holder of more than 5% of the
total issued shares of a company listed on any Japanese stock exchange or whose
shares are traded on the over-the-counter market to file with the relevant
local finance bureau of the Ministry of Finance, within five business days, a
report concerning those shareholdings. A holder must file a similar report to
reflect any change of 1% or more in any shareholding. Copies of any reports
must also be furnished to us and to all Japanese stock exchanges on which our
shares are listed or, in the case of shares traded on the over-the-counter
market, the Securities Dealers Association of Japan. For this purpose, shares
issuable upon exercise of share subscription options are taken into account in
determining both the number of shares held by that holder and our total issued
share capital. As a result, the above reporting requirements will apply to
holders of more than 5% of our total issued shares including such subscription
options and bonds with share subscription options.

Acquisition or Disposition of Shares or ADSs

In general, non-residents of Japan and corporations whose principal
offices are located outside Japan may acquire shares of stock of a Japanese
company listed on any Japanese stock exchange or traded in any over-the-counter
market in Japan from resident of Japan without any restriction but subject to
the requirement under the foreign exchange regulations and securities law as
described below. Under the Foreign Exchange and Foreign Trade Law, foreign
exchange and foreign trade transactions are, with minor exceptions relating to
inward direct investments generally inapplicable to our shares, only subject to
post transaction reporting requirements. Non-residents of Japan, including
foreign corporations not resident in Japan, who acquire or dispose of shares of
common stock or ADSs, are generally not required to submit post transaction
reports. The Minister of Finance, however, has the power to impose a licensing
requirement for transactions in limited circumstances.

If a foreign investor:



| |  |  | acquires shares of a Japanese company listed on a Japanese
stock exchange or traded on an over-the-counter market in Japan and                    
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | as a result of this acquisition, directly or indirectly
holds, aggregated with existing holdings, 10% or more of the issued
shares of the company,

the foreign investor is, in general, required to report the acquisition to the
Minister of Finance and any other competent ministers within 15 days from and
including the date of acquisition. In exceptional cases, a prior notification
is required in respect of the acquisition.

Ordinary General Meeting of Shareholders

We normally hold our ordinary general meeting of shareholders in June of
each year in Matsuyama, or in a neighboring area, or Shinjuku, Tokyo. In
addition, we may hold an extraordinary general meeting of shareholders whenever
necessary by giving at least two weeks advance notice stating the place, time,
and purpose of the meeting. Under the Japanese Commercial Code, notice of any
shareholders meeting must be given to each shareholder having voting rights
or, in the case of a non-resident shareholder, to its resident proxy or mailing
address in Japan in accordance with our share handling regulations, at least
two weeks prior to the date of the meeting.

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Clearing System for Our Shares

A holder of our shares may choose to participate, directly or indirectly,
in the central clearing system for share certificates under the Law Concerning
Central Clearing of Share Certificates and Other Securities of Japan.
Participating shareholders must deposit certificates representing all of their
shares with the Japan Securities Depository Center, or JASDEC, the depositary
under the clearing system. If a holder is not a participating institution such
as a securities company or bank having a clearing account with the clearing
system, it must participate through a participating institution. All shares
deposited with the clearing system will be registered in the name of the
clearing system on our register of shareholders. Each participating
shareholder will in turn be registered on our register of beneficial
shareholders and be treated in the same way as shareholders registered on our
register of shareholders. Delivery of share certificates is not necessary for
transfer of deposited shares. Entry of the share transfer in the books
maintained by the clearing system for participating institutions, or in the
book maintained by a participating institution for its customers, has the same
effect as delivery of share certificates. The registered beneficial owners may
exercise the rights attached to their shares, such as voting rights, and will
receive dividends (if any) and notices to shareholders directly from us. The
shares held by a person as a registered shareholder and those held by the same
person as a registered beneficial owner are aggregated for these purposes.
Beneficial owners may at any time withdraw their deposited shares and receive
share certificates.

Settlement for Our Shares

Settlement of a transaction concerning shares listed on any of the stock
exchanges in Japan will normally occur on the fourth dealing day after the
transaction. Settlement in Japan is made by physical delivery of share
certificates or through JASDEC as described above.

As described above, shareholders not resident in Japan are required to
provide a mailing address within Japan or to appoint a standing proxy in Japan.
A local standing proxy can usually handle the transfer of shares and
registration of purchases and the application for reduced withholding tax. See
Japanese Tax Considerations in Item 10.E of this annual report on Form 20-F.

Transfer Agent for Our Shares

The Mitsubishi Trust and Banking Corporation is the transfer agent for our
shares. Its office is located at 4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo
100-8212, Japan. The Mitsubishi Trust and Banking Corporation maintains our
register of shareholders and records transfers of record ownership upon
presentation of share certificates.

Record Date for Our Shares

The close of business on March 31 is the record date for our year-end
dividends, if paid, and the close of business on September 30 is the same for
our interim dividends, if paid. We set March 31 as the record date for
determining shareholders entitled to vote at the ordinary general meeting of
shareholders. In addition, we may set a record date, or close our register of
shareholders, for a period not in excess of three months at any one time, for
determining the shareholders entitled to other rights and for other purposes by
giving at least two weeks prior public notice. The trading of our shares and
the delivery of certificates therefore may continue while the register of
shareholders is closed.

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Our shares are generally traded ex-dividend or ex-rights in the Japanese
stock exchanges on the third business day before a record date (or if the
record date is not a business day, the fourth business day prior thereto), for
the purpose of dividends or rights offerings.

C. Material Contracts.

We have not been a party to any material contract other than contracts
entered into in the ordinary course of business, since April 1, 2001.

D. Exchange Controls.

There are no laws, decrees, regulations or other legislation that affect
our ability to import or export capital for our use or our ability to pay
dividends to nonresident holders of our shares.

E. Taxation.

United States Tax Considerations

This section, United States Tax Considerations, describes the material
U.S. federal income tax consequences of owning shares or ADSs. This section
applies to you only if you hold your shares or ADSs as capital assets for tax
purposes. This section does not apply to you if you are a member of a special
class of holders subject to special rules, including:



| |  |  | a dealer in securities,                                                                                      
| | - |  | -------------------------------------------------------------------------------------------------------------
|
| |  |  | a trader in securities that elects to use a mark-to-market
method of accounting for your securities holdings,
|
| |  |  | a tax-exempt organization,                                                                                   
|
| |  |  | a life insurance company,                                                                                    
|
| |  |  | a person liable for alternative minimum tax,                                                                 
|
| |  |  | a person that actually or constructively owns 10% or more of our voting stock,                               
|
| |  |  | a person that holds shares or ADSs as part of a straddle or a
hedging or conversion transaction, or          
|
| |  |  | a person whose functional currency is not the dollar.                                                        

This section is based on the U.S. Internal Revenue Code of 1986, as
amended, its legislative history, existing and proposed regulations, published
rulings and court decisions, all as currently in effect, as well as on the
Convention Between the United States of America and Japan. These laws are
subject to change, possibly on a retroactive basis. In addition, this section
is based in part upon the representations of the depositary and the assumption
that each obligation in the deposit agreement and any related agreement will be
performed in accordance with its terms.

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You are a U.S. holder if you are a beneficial owner of shares or ADSs and you are:



| |  |  | a citizen or resident of the United States,                                                                                                                                            
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a corporation created or organized under the laws of the
United States or any of its political subdivisions,                                                                           
|
| |  |  | an estate whose income is subject to U.S. federal income tax
regardless of its source, or                                                                                              
|
| |  |  | a trust if a U.S. court can exercise primary supervision over
the trusts administration and one or more U.S. persons are
authorized to control all substantial decisions of the trust.



| |  |  | You should consult your own tax advisor regarding the United States
federal, state and local and other tax consequences of owning and
disposing of shares and ADSs in your particular circumstances.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In general, and taking into account the earlier assumptions, for U.S.
federal income tax purposes, if you hold ADRs evidencing ADSs, you will be
treated as the owner of the shares represented by those ADRs. Exchanges of
shares for ADRs, and ADRs for shares, generally will not be subject to U.S.
federal income tax.

Passive Foreign Investment Company Rules

As we expect 50% or more of our gross asset value will constitute passive
assets, meaning assets not constituting part of a trade or business, as
determined for passive foreign investment company purposes, we expect that our
shares and ADSs will be treated as stock of a passive foreign investment
company, or PFIC, every year for U.S. federal income tax purposes and the
remainder of this discussion so assumes. The conclusion is a factual
determination made annually, which we will update in our future reports on Form
20-F. In addition, we expect that our subsidiaries will be treated as PFICs
for U.S. federal income tax purposes. You will be treated as an indirect
shareholder of your proportionate interest in the shares of such subsidiaries.

U.S. holders of shares or ADSs of a PFIC must file U.S. Internal Revenue
Service Form 8621 every year in which they continue to hold such shares.

If you are a U.S. holder you will be subject to the special PFIC tax rules
or, if you make a mark-to-market election, the mark-to-market rules.

Special PFIC Tax Rules

This subsection applies to you if you are a U.S. holder and do not make a
mark-to-market election. You will be subject to special PFIC tax rules with
respect to:



| |  |  | any gain you realize on the sale or other disposition of your
shares or ADSs (including the pledging of your shares or ADSs as
security for a loan) and                                                                                                                                                                                                                                                                        
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | any excess distribution, a distribution in excess of a normal
rate of distribution as calculated for PFIC purposes, that we make
to you (generally, any distributions to you during a single taxable
year that are greater than 125% of the average annual distributions
received by you in respect of the shares or ADSs during the three preceding taxable years
or, if shorter, your holding period for the shares or ADSs).

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In addition, if any of our subsidiaries are deemed a PFIC, a distribution
from that subsidiary to us, a disposition of that subsidiary by us, or a
transaction through which your indirect ownership of such subsidiary is
decreased (including additional offerings of our shares or ADSs) will be
treated as a distribution or disposition subject to the special PFIC tax rules.
You will be entitled, however, to increase your basis in the shares or ADSs
you directly own to reflect the gain realized upon such distributions, or
dispositions. Moreover, you will not be taxed when we distribute to you the
income that you already included in income for tax purposes.

Under these special PFIC tax rules:



| |  |  | the gain or excess distribution will be allocated ratably
over your holding period for the shares or ADSs,                                  
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the amount allocated to the taxable year in which you
realized the gain or excess distribution will be taxed as ordinary
income,            
|
| |  |  | the amount allocated to each prior year, with certain
exceptions, will be taxed at the highest tax rate in effect for that
year and         
|
| |  |  | the interest charge generally applicable to underpayments of
tax will be imposed in respect of the tax attributable to each such
prior year.

Amounts subject to these special PFIC tax rules will not be eligible for the
dividends-received deduction generally allowed to U.S. corporations in respect
of dividends received from other U.S. corporations. In addition, dividends
that you receive from us will not constitute qualified dividend income to you
if we are a PFIC either in the taxable year of the distribution or the
preceding taxable year. Dividends that you receive that do not constitute
qualified dividend income are not eligible for taxation at the 15% maximum rate
applicable to qualified dividend income. Instead, you must include the gross
amount of any such dividend paid by us out of our accumulated earnings and
profits (as determined for United States federal income tax purposes) in your
gross income, and it will be subject to tax at rates applicable to ordinary
income.

If you receive distributions that are not subject to the special PFIC tax
rules, you must include in your gross income the gross amount of any dividend
paid by us out of our current or accumulated earnings and profits (as
determined for U.S. federal income tax purposes). You must include any
Japanese tax withheld from the dividend payment in this gross amount even
though you do not in fact receive it. The dividend is ordinary income that you
must include in income at the ordinary income tax rate when you, in the case of
shares, or the depositary, in the case of ADSs, receive the dividend, actually
or constructively. The dividend will not be eligible for the
dividends-received deduction generally allowed to U.S. corporations in respect
of dividends received from other U.S. corporations. The amount of any
distribution that you must include in your income as a U.S. holder will be the
dollar value of the yen payments made, determined at the spot yen/dollar rate
on the date the distribution is includible in your income, regardless of
whether the payment is in fact converted into dollars. Generally, any gain or
loss resulting from currency exchange fluctuations during the period from the
date you include the dividend payment in income to the date you convert the
payment into dollars will be treated as ordinary income or loss and will not be
eligible for the special tax rate applicable to qualified dividend income. The
gain or loss generally will be income or loss from sources within the United
States for foreign tax credit limitation purposes.

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If you receive distributions that are not
subject to the special PFIC tax rules and that are in excess of current and
accumulated earnings and profits, as determined for U.S. federal income tax
purposes, you will be treated as having received a non-taxable return of
capital to the extent of your basis in the shares or ADSs and thereafter you
will recognize capital gain, which will be taxed in accordance with the special
PFIC tax rules described above.

Mark-to-market Rules

The special PFIC tax rules described above will not apply to you if you
make an effective mark-to-market election, that is, you elect to mark-to-market
annually the gains and losses in our shares or ADSs and our shares or ADSs are
treated as marketable stock. Under the mark-to-market rules, you will include
as ordinary income each year the excess, if any, of the fair market value of
your shares or ADSs at the end of the taxable year over your adjusted basis in
your shares or ADSs. These amounts of ordinary income will not be eligible for
the favorable tax rates applicable to qualified dividend income or long-term
capital gains. You may also take an ordinary loss in respect of the excess, if
any, of the adjusted basis of your shares or ADSs over their fair market value
at the end of the taxable year (but only to the extent of the net amount of
previously included income as a result of the mark-to-market election). Your
basis in the shares or ADSs will be adjusted to reflect any such income or loss
amounts. In addition, notwithstanding any election you make with regard to the
shares or ADSs, dividends that you receive from us will not constitute
qualified dividend income to you if we are a PFIC either in the taxable year of
the distribution or the preceding taxable year and such dividends will
therefore not be eligible for taxation at the 15% maximum rate applicable to
qualified dividend income. It is unclear how the mark-to-market rules apply to
a PFIC whose shares are marketable stock, but owns subsidiary PFICs whose
shares are not marketable stock.

Please consult your tax advisor as to the availability and tax
consequences of a mark-to-market election.

Foreign Tax Credit

Subject to the general limitations that apply to the creditability of
foreign income taxes, the Japanese tax withheld in accordance with the
Convention Between the United States of America and Japan for the Avoidance of
Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on
Income (the Treaty) and paid over to Japan will be creditable against your
U.S. federal income tax liability. To the extent a refund of the tax withheld
is available to you under Japanese law or under the Treaty, the amount of tax
withheld that is refundable will not be eligible for credit against your U.S.
federal income tax liability.

Special rules apply for calculating the amount of the foreign tax credit
with respect to excess distributions if you are governed by the special PFIC
tax rules described above. For example, if you did not make a mark-to-market
election, the section 904 tax credit limitation would be applied separately
with respect to the amount of excess distribution allocable to each such
taxable year and carryovers, if any, are not allowed.

Dividends will be income from sources outside the United States, but
generally will be passive income, which is treated separately from other
types of income for purposes of computing the foreign tax credit allowable to
you. Special rules apply in determining the foreign tax credit limitation with
respect to dividends that are subject to the maximum 15% tax rate.

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A transfer of retained earnings of legal reserve to stated capital, or in
certain situations as described under  Japanese Tax Considerations, the
purchase in a tender offer and cancellation of shares by us is treated as a
dividend payment for Japanese tax purposes subject to withholding tax. For
U.S. federal income tax purposes, such transactions generally would not be a
taxable event and would not give rise to foreign source income. You would not
be able to use the foreign tax credit arising from the Japanese withholding tax
unless you had additional foreign source income.

Japanese Tax Considerations

This section, Japanese Tax Considerations, is a summary of the principal
Japanese tax consequences to owners of our shares or ADSs who are non-resident
individuals or non-Japanese corporations without a permanent establishment in
Japan to which the relevant income is attributable. As tax laws are frequently
revised, the statements regarding Japanese tax laws below are subject to
changes in the applicable Japanese laws or tax treaties, conventions or
agreements, or in their interpretation, occurring after the date of this
prospectus. This summary is not exhaustive of all possible tax considerations
that may apply to specific investors under particular circumstances. Potential
investors should satisfy themselves as to:



| |  |  | the overall tax consequences of the acquisition, ownership
and disposition of our shares or ADSs, including specifically the
tax consequences under Japanese law,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the laws of the jurisdiction of which they are resident, and                                                                                                     
|
| |  |  | any tax treaty between Japan and their country of residence,
by consulting with their own tax advisers.                                                          

Generally, a non-resident shareholder is subject to Japanese withholding
tax on dividends paid on our shares. Stock splits are generally not subject to
Japanese income or corporation tax, as it is characterized merely as an
increase of number of shares, as opposed to an increase of value of shares,
from Japanese tax perspectives. Due to the 2001 Japanese tax legislation
effective from April 1, 2001, a conversion of retained earnings or legal
reserve (but, in general, other than additional paid-in capital) into stated
capital on a non-consolidated basis is not characterized as a deemed dividend
for Japanese tax purposes, and therefore such a conversion does not trigger
Japanese withholding taxation.

Under the 2001 tax legislation, if we purchase our listed shares (i) by a
tender offer or (ii) from a specific shareholder other than through a market
purchase for the purpose of cancellation with retained earnings, the selling
shareholders, whether individuals or corporations, are in general required to
recognize:



| |  |  | the deemed dividend corresponding to a distribution of
retained earnings proportionally computed by a statutory formula on
a pro rata basis allocating the selling price into the repayment of
share capital portion, including additional paid-in capital, and
retained earnings portion on a non-consolidated basis, and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | capital gain or loss computed as a difference between the
basis of shares subject to the tender offer at the shareholders
level and the amount of the consideration for the tender offer,
deducting the amount corresponding to the deemed dividend computed
as (i) above.                                                

On the other hand, in the case of individual shareholders, no deemed
dividend is required to be recognized until March 31, 2005 due to the operation
of a temporary measurement. Therefore, they are only required to recognize capital gain or loss of the shares subject to
the tender offer.

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In the meantime, when shares are acquired by us, whether by
way of a tender offer or otherwise, for the purpose of cancellation with
retained earnings, the shareholders, whether individuals or corporations, whose
shares are not acquired by us were previously deemed to have received a
dividend corresponding to the notional increase of share value by the share
cancellation under the old tax law before the 2001 tax legislation. However,
under the 2001 tax legislation, no deemed dividend taxation occurs for the
remaining shareholders, whether individuals or corporations, whose shares are
not cancelled.

Unless a tax treaty, convention or agreement reduces the maximum rate of
withholding tax, the rate of Japanese withholding tax applicable to dividends
on the shares paid by us to non-resident shareholders is 20%. Japan has income
tax treaties, conventions or agreements that generally reduce the
above-mentioned withholding tax rate to 15% for portfolio investors with, among
others, Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland,
Italy, Luxembourg, The Netherlands, New Zealand, Norway, Singapore, Spain,
Sweden, Switzerland, the United Kingdom and the United States. Non-resident
shareholders entitled to a reduced Japanese withholding tax rate on our
dividends are required to submit an Application Form for Income Tax Convention
regarding Relief from Japanese Income Tax on Dividends through us to the
relevant tax authority before payment of dividends. A standing proxy for
non-resident shareholders may provide this application service. See
Settlement for Our the Shares in Item 10.B of this annual report on Form
20-F. With respect to ADSs, this reduced rate is applicable if the depositary
or its agent submits two Application Forms for Income Tax Conventionone before
payment of dividends and the other within eight months of our fiscal year end.
To claim this reduced rate, a non-resident holder of ADSs will be required to
file proof of taxpayer status, residence and beneficial ownership, as
applicable, and to provide other information or documents as may be required by
the depositary. Non-resident holders who do not submit an application in
advance will be entitled to claim the refund of taxes withheld in excess of the
rate of an applicable tax treaty from the relevant Japanese tax authority.

Gains derived from the sale of our shares or ADSs outside Japan, or from
the sale of our shares within Japan by a non-resident shareholder as a
portfolio investor, are generally not subject to Japanese income or corporation
taxes.

Japanese inheritance and gift taxes may be assessed against an individual
who has acquired our shares or ADSs as a legatee, heir or donee, even if the
individual is not a Japanese resident.

F. Dividends and Paying Agents.

Not required.

G. Statement by Experts.

Not applicable.

H. Documents on Display.

We file periodic reports and other information with the Securities and
Exchange Commission. The Securities and Exchange Commission maintains an
Internet site (www.sec.gov) that contains reports and other information
regarding issuers that file electronically with the SEC. You may read and copy
any document that we file with the Securities and Exchange Commission at the
Securities and Exchange Commissions public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the operation
of its public reference room.

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You may also inspect our reports filed with the
Securities and Exchange Commission and other information at the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005. Some of this
information may also be found on our website at www.nissin-f.co.jp/index.html.
This information is not incorporated by reference into this annual report on
Form 20-F.

I. Subsidiary Information.

Not applicable.




Item 11. Quantitative and Qualitative Disclosures about Market Risk

Market Risks

We are exposed to the market risks of interest rate changes and changes in
the market values of our investments. We do not have any significant exposures
to fluctuations in foreign exchange rates since we conduct substantially all of
our business activities in Japan yen.

Interest Rate Risk

Our exposure to changes in interest rates arises primarily from our
long-term borrowings that bear interest at floating rates and our cash and cash
equivalents. As discussed in Capital Requirements in Item 5.B of this annual
report on Form 20-F, we require a significant amount of borrowings to fund our
lending activities. Our cash is predominately invested in consumer and other
loans.

The following table indicates the average maturity and average interest
rate of each of our loan categories at March 31, 2003.

|                           |  |                  |     |               |  |  |      |  
|-------------------------- |  | ---------------- | --- | ------------- |  |  | ---- | -
|                           |  | Average          |     | Average      
|                           |  | Maturity (years) |     | Interest rate
|                           |  |                  |     |              
|Consumer loans             |  |                  | 3.0 | (1)           |  |  | 25.8 | %
|Wide loans                 |  |                  | 4.9 |               |  |  | 21.8 |  
|Small business owner loans |  |                  | 4.8 |               |  |  | 21.4 |  
|Business Timely loans      |  |                  | 3.0 | (1)           |  |  | 26.2 |  
|Secured and other loans    |  |                  | 6.8 |               |  |  | 15.8 |  



---

|(1) |  | The average maturity of 3.0 years for consumer loans and Business Timely
loans is based on the three-year term of the loan contract, which is
automatically renewable.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table shows the repayment schedule for our outstanding long-term
borrowings and the average interest rates.

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|                      |  |                                 |        |      |  |      |         |      |  |      |        |            |  |       |         |            |  |  |       |   |  |  |      |   |  |  |         |   |  |           |         | 
|--------------------- |  | ------------------------------- | ------ | ---- |  | ---- | ------- | ---- |  | ---- | ------ | ---------- |  | ----- | ------- | ---------- |  |  | ----- | - |  |  | ---- | - |  |  | ------- | - |  | --------- | ------- | 
|                      |  |                                 |        |      |  |      |         |      |  |      |        |            |  |       |         |            |  |  |       |   |  |  |      |   |  |  |         |   |  | As of    
|                      |  |                                 |        |      |  |      |         |      |  |      |        |            |  |       |         |            |  |  |       |   |  |  |      |   |  |  |         |   |  | March 31,
|                      |  | Year ended March 31,            |        | 2003
|                      |  |                                 |        |     
|                      |  | 2004                            |        | 2005 |  | 2006 |         | 2007 |  | 2008 |        | Thereafter |  | Total |         | Fair value
|                      |  |                                 |        |      |  |      |         |      |  |      |        |            |  |       |         |           
|                      |  | (in millions except percentage)
|Bonds                 |  |                                 | ¥5,000 |      |  |      | ¥21,500 |      |  |      | ¥5,000 |            |  |       | ¥10,000 |            |  |  |      |   |  |  |     |   |  |  | ¥41,500 |   |  |           | ¥41,394 | 
|Average interest rate |  |                                 | 3.32   | %    |  |      | 2.70    | %    |  |      | 2.35   | %          |  |       | 1.70    | %          |  |  |       |   |  |  |      |   |  |  | 2.49    | % |  |           |         | 
|Floating (1)          |  |                                 | 35,293 |      |  |      | 20,153  |      |  |      | 7,599  |            |  |       | 786     |            |  |  | 467   |   |  |  |      |   |  |  | 64,298  |   |  |           | 64,298  | 
|Average interest rate |  |                                 | 2.41   | %    |  |      | 2.37    | %    |  |      | 2.40   | %          |  |       | 2.39    | %          |  |  | 2.33  | % |  |  |      |   |  |  | 2.36    | % |  |           |         | 
|Fixed                 |  |                                 | 18,266 |      |  |      | 14,644  |      |  |      | 7,725  |            |  |       | 50      |            |  |  | 2,050 |   |  |  | 62   |   |  |  | 42,797  |   |  |           | 42,420  | 
|Average interest rate |  |                                 | 2.47   | %    |  |      | 2.43    | %    |  |      | 2.51   | %          |  |       | 5.20    | %          |  |  | 2.66  | % |  |  | 5.20 | % |  |  | 2.49    | % |  |           |         | 



---

|(1) |  | Floating interest rate borrowings include asset-backed commercial paper.
|--- |  | ------------------------------------------------------------------------

As we lend at fixed rates, interest rates on our currently outstanding
balances are not typically subject to fluctuation other than for regulatory
reasons. However, the interest rates we charge to new customers or existing
customers who pay off their outstanding loans and enter into new contracts with
us are subject to any downward pressure caused by competitive, regulatory or
other reasons. For the year ended March 31, 2003, the average outstanding
balance of loans of such customers was approximately ¥43 billion, which
constituted about 25% of our total average outstanding balance of loans for the
year. If the contractual interest rate for each of our loan products for the
year ended March 31, 2003 were lowered by 1%, our net income would have been
reduced by ¥247 million for the fiscal year. We assumed for the purpose of
this estimate that the impact of lower contractual interest rates would be
principally through the new accounts acquired during the year, but not through
new contracts with existing customers who paid off their outstanding loans. We
believe that this assumption is reasonable, as we assess fees at the time when
our existing customers enter into new contracts.

Our debt obligations mature at various times through June 2009 and carry
interest rates of change between 1.1% and 5.2%. Our borrowings bear either a
fixed rate or a floating rate indexed to LIBOR or the long-term prime rate in
Japan. Although we used derivative instruments to hedge our floating rate debt
obligations until January 2003, we currently do not use any derivative
instrument to hedge our floating rate debt obligations.

Our weighted average long-term borrowing rate on floating-rate borrowings
was 3.4% at March 31, 2001, 2.9% at March 31, 2002 and 2.4% at March 31, 2003.
The following table illustrates the after tax impact of a hypothetical increase
in our average borrowing rates on our short-term borrowings and floating-rate
long-term borrowings.

|                                                                   |  |                                        |        |    |  |    |        |  |  |  |        | 
|------------------------------------------------------------------ |  | -------------------------------------- | ------ | -- |  | -- | ------ |  |  |  | ------ | 
|                                                                   |  | Assumed weighted average interest rate
|                                                                   |  |                                       
|                                                                   |  | 3%                                     |        | 4% |  | 5%
|                                                                   |  |                                        |        |    |  |   
|                                                                   |  | (in millions)                         
|Net income as reported                                             |  |                                        | ¥5,176 |    |  |    | ¥5,176 |  |  |  | ¥5,176 | 
|Net income as adjusted for hypothetical increase in interest rates |  |                                        | 4,938  |    |  |    | 4,572  |  |  |  | 4,206  | 

Investment Risk

We invest in equity instruments of both public and privately held
companies for business and strategic purposes. We are exposed to changes in
the market value of our investments. We have realized gains and losses from
both the sale of investments, as well as from impairments as a result of other
than temporary declines in market value. We experienced realized losses of
¥566 million on impairment of investment securities, for the year ended March 31, 2001, ¥599 million for
the year ended March 31, 2002 and ¥1,005 million for the year ended March 31,
2003.

80



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Credit Risk

We invest excess cash in time deposits and money management funds invested
in bonds of Japanese based companies and, by policy, limit the amount of credit
exposure to any one issuer. We protect and preserve invested funds by limiting
default, market and reinvestment risk.




Item 12. Description of Securities Other Than Equity Securities

Not required.




PART II




Item 13. Defaults, Dividend Arrearages and Delinquencies

None.




Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None.




Item 15. Controls and Procedures

Within 90 days prior to the filing date of this annual report on Form
20-F, we, under the supervision and the participation of our management,
including our chief executive officer and chief financial officer, performed an
evaluation of our disclosure controls and procedures, as the term is defined in
Rule 13a14(c) under the Securities Exchange Act of 1934.

Based on that evaluation, our management concluded that, as of the date of
the evaluation, our disclosure controls and procedures were effective to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported, within the time periods specified in the Securities
and Exchange Commissions rules and forms.

No significant changes were made in our internal controls or in other
factors that could significantly affect these controls subsequent to the date
of the evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.




Item 16A. Audit Committee Financial Expert

Not applicable.




Item 16B. Code of Ethics

Not applicable.




Item 16C. Principal Accountant Fees and Services

Not applicable.

81



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PART III




Item 17. Financial Statements

Not applicable.




Item 18. Financial Statements

The information required by this item is set forth beginning on page F-1
of this annual report on Form 20-F.




Item 19. Exhibits

|        |  |                                                                                                                                                                                                                                                                                                                                           
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                           
|Number  |  | Description                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                           
|1.1     |  |  Our Articles of Incorporation (English Translation)                                                                                                                                                                                                                                                                                     
|1.2     |  |  Our Share Handling Regulations (English Translation)                                                                                                                                                                                                                                                                                    
|1.3     |  |  Our Regulations of the Board of Directors (English Translation)                                                                                                                                                                                                                                                                         
|1.4     |  |  Our Regulations of the Board of Statutory Auditors (English Translation)                                                                                                                                                                                                                                                                
|2.1     |  |  Our Specimen Common Stock Certificate (English Translation) *                                                                                                                                                                                                                                                                           
|2.2     |  |  Form of Deposit Agreement Among Nissin Co., Ltd., The Bank of New York
as Depositary and All Owners and Holders from Time to Time of American
Depositary Receipts, Including the Form of American Depositary Receipt
(Incorporated by Reference to the Registration Statement on Form F-6
(File No. 333-97133) filed on July 24, 2002) *
|8.1     |  |  List of Our Subsidiaries                                                                                                                                                                                                                                                                                                                

* Incorporated by reference to the corresponding exhibit to our Form F-1
Registration Statement (File No. 333-97229) declared effective on August 1,
2002.

We have not included as exhibits certain instruments with respect to our
long-term debt, the amount of debt authorized under each of which does not
exceed 10% of our total assets, and we agree to furnish a copy of any such
instrument to the Commission upon request.

82



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NISSIN CO., LTD.




INDEX TO FINANCIAL STATEMENTS

|                                                                                                             |  |      |     | 
|------------------------------------------------------------------------------------------------------------ |  | ---- | --- | 
|                                                                                                             |  | Page
|                                                                                                             |  |     
|Report of Independent Certified Public Accountants                                                           |  |      | F-2 | 
|Consolidated Balance Sheets as of March 31, 2002 and 2003                                                    |  |      | F-3 | 
|Consolidated Statements of Income for the Years Ended March 31, 2001,
2002 and 2003                          |  |      | F-5 | 
|Consolidated Statements of Changes in Stockholders Equity for the
Years Ended March 31, 2001, 2002 and 2003 |  |      | F-6 | 
|Consolidated Statements of Cash Flows for the Years Ended March 31,
2001, 2002 and 2003                      |  |      | F-8 | 
|Notes to Consolidated Financial Statements                                                                   |  |      | F-9 | 

F-1



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##### Table of Contents






REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of
NISSIN CO., LTD.:

We have audited the accompanying consolidated balance sheets of NISSIN CO.,
LTD. and subsidiaries as of March 31, 2002 and 2003, and the related
consolidated statements of income, shareholders equity and cash flows for each
of the three years in the period ended March 31, 2003. These financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the accompanying consolidated financial statements referred to
above present fairly, in all material respects, the financial position of the
Company as of March 31, 2002 and 2003, and the results of its operations and
its cash flows for each of the three years in the period ended March 31, 2003,
in conformity with accounting principles generally accepted in the United
States of America.

Also, in our opinion, the U.S. dollar amounts in the accompanying consolidated
financial statements have been translated from Japanese yen on the basis set
forth in Note 1 to the consolidated financial statements.

BDO Sanyu & Co.
Osaka, Japan
June 24, 2003 and July 16, 2003

F-2



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CONSOLIDATED BALANCE SHEETS
NISSIN CO., LTD. AND SUBSIDIARIES
March 31, 2002 and 2003

|                                   |                                           |  |                 |          |                       |  |         |          |   |   |              |           |  
|---------------------------------- | ----------------------------------------- |  | --------------- | -------- | --------------------- |  | ------- | -------- | - | - | ------------ | --------- | -
|                                   |                                           |  |                 |          |                       |  |         |          |   |   | Thousands of
|                                   |                                           |  | Millions of Yen |          | U.S. Dollars (Note 1)
|                                   |                                           |  |                 |          |                      
|                                   |                                           |  | 2002            |          | 2003                  |  | 2003   
|                                   |                                           |  |                 |          |                       |  |        
|ASSETS                             |                                           |  |                 |          |                       |  |         |          |   |   |              |          
|Cash and cash equivalents          |                                           |  | ¥17,116         |          |                       |  | ¥23,612 |          |   | $ | 196,439      |          
|Deposit of restricted cash in bank |                                           |  | 1,500           |          |                       |  | 223     |          |   |   | 1,855        |          
|Loans receivable, net              |                                           |  | 148,235         |          |                       |  | 166,977 |          |   |   | 1,389,160    |          
|Purchased loans receivable, net    |                                           |  | 380             |          |                       |  | 2,946   |          |   |   | 24,509       |          
|Interest receivable                |                                           |  | 1,133           |          |                       |  | 1,177   |          |   |   | 9,792        |          
|Investment securities              |                                           |  | 3,958           |          |                       |  | 2,234   |          |   |   | 18,586       |          
|Property and equipment:            |                                           |  |                 |          |                       |  |         |          |   |   |              |          
|                                   | Land                                      |  |                 | 947      |                       |  |         | 947      |   |   |              | 7,879     |  
|                                   | Buildings and structures                  |  |                 | 1,229    |                       |  |         | 1,074    |   |   |              | 8,935     |  
|                                   | Equipment and software                    |  |                 | 4,245    |                       |  |         | 4,318    |   |   |              | 35,923    |  
|                                   |                                           |  |                 |          |                       |  |         |          |   |   |              |          
|                                   |                                           |  | 6,421           |          |                       |  | 6,339   |          |   |   | 52,737       |          
|                                   | Accumulated depreciation and amortization |  |                 | (2,867   | )                     |  |         | (2,223   | ) |   |              | (18,494   | )
|                                   |                                           |  |                 |          |                       |  |         |          |   |   |              |          
|                                   |                                           |  | 3,554           |          |                       |  | 4,116   |          |   |   | 34,243       |          
|Investment in affiliates           |                                           |  | 259             |          |                       |  | 742     |          |   |   | 6,173        |          
|Deferred income taxes              |                                           |  | 1,143           |          |                       |  | 2,184   |          |   |   | 18,170       |          
|Other assets                       |                                           |  | 3,019           |          |                       |  | 2,363   |          |   |   | 19,659       |          
|                                   |                                           |  |                 |          |                       |  |         |          |   |   |              |          
|                                   | Total assets                              |  |                 | ¥180,297 |                       |  |         | ¥206,574 |   |   | $            | 1,718,586 |  
|                                   |                                           |  |                 |          |                       |  |         |          |   |   |              |          

See accompanying summary of significant accounting policies and notes to consolidated financial statements.

F-3



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CONSOLIDATED BALANCE SHEETS (CONTINUED)
NISSIN CO., LTD. AND SUBSIDIARIES
March 31, 2002 and 2003

|                                                    |                                           |                                            |                                                         |                                       |          |                 |         |                       |          |      |           |         |           |              |         |  
|--------------------------------------------------- | ----------------------------------------- | ------------------------------------------ | ------------------------------------------------------- | ------------------------------------- | -------- | --------------- | ------- | --------------------- | -------- | ---- | --------- | ------- | --------- | ------------ | ------- | -
|                                                    |                                           |                                            |                                                         |                                       |          |                 |         |                       |          |      |           |         |           | Thousands of
|                                                    |                                           |                                            |                                                         |                                       |          | Millions of Yen |         | U.S. Dollars (Note 1)
|                                                    |                                           |                                            |                                                         |                                       |          |                 |         |                      
|                                                    |                                           |                                            |                                                         |                                       |          | 2002            |         | 2003                  |          | 2003
|                                                    |                                           |                                            |                                                         |                                       |          |                 |         |                       |          |     
|LIABILITIES AND SHAREHOLDERS EQUITY                |                                           |                                            |                                                         |                                       |          |                 |         |                       |          |      |           |        
|Short-term borrowings                               |                                           |                                            | ¥1,400                                                  |                                       |          |                 | ¥5,600  |                       |          | $    | 46,589    |        
|Accrued income taxes                                |                                           |                                            | 2,104                                                   |                                       |          |                 | 2,925   |                       |          |      | 24,334    |        
|Accrued expenses                                    |                                           |                                            | 766                                                     |                                       |          |                 | 521     |                       |          |      | 4,334     |        
|Long-term borrowings                                |                                           |                                            | 128,659                                                 |                                       |          |                 | 148,595 |                       |          |      | 1,236,231 |        
|Capital lease obligations                           |                                           |                                            | 1,663                                                   |                                       |          |                 | 1,914   |                       |          |      | 15,923    |        
|Accrued retirement benefits                         |                                           |                                            | 417                                                     |                                       |          |                 | 336     |                       |          |      | 2,795     |        
|Other liabilities                                   |                                           |                                            | 1,365                                                   |                                       |          |                 | 1,086   |                       |          |      | 9,037     |        
|                                                    |                                           |                                            |                                                         |                                       |          |                 |         |                       |          |      |           |        
|                                                    |                                           | Total liabilities                          |                                                         |                                       | 136,374  |                 |         |                       | 160,977  |      |           |         | 1,339,243 |             
|                                                   
|Minority interests                                  |                                           |                                            | 148                                                     |                                       |          |                 |        |                       |          |      |          |        
|                                                   
|Commitments and contingencies (Notes 10, 11 and 17) |                                           |                                            |                                                         |                                       |          |                 |         |                       |          |      |           |        
|                                                   
|Shareholders equity:                               |                                           |                                            |                                                         |                                       |          |                 |         |                       |          |      |           |        
|                                                    | Common
stock:  designated value (Note 18) |                                            |                                                         |                                       |          |                 |         |                       |          |      |           |         |          
|                                                    |                                           |                                            | Authorized:
  120,000,000 and 240,000,000 shares at     |                                       |          |                 |         |                       |          |      |           |         |           |              |        
|                                                    |                                           |                                            |                                                         | March 31, 2002 and 2003, respectively |          |                 |         |                       |          |      |           |         |           |              |         |  
|                                                    |                                           |                                            | Issued:
          132,624,056 and 132,624,056 shares at |                                       |          |                 |         |                       |          |      |           |         |           |              |        
|                                                    |                                           |                                            |                                                         | March 31, 2002 and 2003, respectively |          |                 | 6,611   |                       |          |      | 6,611     |         |           |              | 55,000  |  
|                                                    | Additional paid-in capital                |                                            |                                                         | 8,467                                 |          |                 |         | 8,462                 |          |      |           | 70,399  |          
|                                                    | Retained earnings                         |                                            |                                                         | 28,932                                |          |                 |         | 33,275                |          |      |           | 276,831 |          
|                                                    | Cumulative other comprehensive income     |                                            |                                                         | 113                                   |          |                 |         | 70                    |          |      |           | 582     |          
|                                                    | Less treasury stock:                      |                                            |                                                         |                                       |          |                 |         |                       |          |      |           |         |          
|                                                    |                                           |                                            | 802,944 shares and 6,164,516 shares at                  |                                       |          |                 |         |                       |          |      |           |         |           |              |        
|                                                    |                                           |                                            |                                                         | March 31, 2002 and 2003, respectively |          |                 | (348    | )                     |          |      | (2,821    | )       |           |              | (23,469 | )
|                                                    |                                           |                                            |                                                         |                                       |          |                 |         |                       |          |      |           |        
|                                                    |                                           | Total shareholders equity                 |                                                         |                                       | 43,775   |                 |         |                       | 45,597   |      |           |         | 379,343   |             
|                                                    |                                           |                                            |                                                         |                                       |          |                 |         |                       |          |      |           |        
|                                                    |                                           | Total liabilities and shareholders equity |                                                         |                                       | ¥180,297 |                 |         |                       | ¥206,574 |      |           | $       | 1,718,586 |             
|                                                    |                                           |                                            |                                                         |                                       |          |                 |         |                       |          |      |           |        

See accompanying summary of significant accounting policies and notes to consolidated financial statements.

F-4



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CONSOLIDATED STATEMENTS OF INCOME
NISSIN CO., LTD. AND SUBSIDIARIES
For the Years Ended March 31, 2001, 2002 and 2003

|                            |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         |              |         | 
|--------------------------- | ------------------------------------------------------- | --------------------------------------------------- | ------ | --------------- | ------ | -------- | ------ | ------- | ------ | ---- | ------ | ------- | ------ | - | ------- | ------------ | ------- | 
|                            |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         | Thousands of
|                            |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         | U.S. Dollars
|                            |                                                         |                                                     |        | Millions of Yen |        | (Note 1)
|                            |                                                         |                                                     |        |                 |        |         
|                            |                                                         |                                                     |        | 2001            |        | 2002     |        | 2003    |        | 2003
|                            |                                                         |                                                     |        |                 |        |          |        |         |        |     
|Interest income:            |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         |             
|                            | Loans                                                   |                                                     |        | ¥29,864         |        |          |        | ¥33,931 |        |      |        | ¥38,519 |        |   | $       | 320,458      |        
|                            | Other                                                   |                                                     |        | 22              |        |          |        | 45      |        |      |        | 715     |        |   |         | 5,948        |        
|                            |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         |              |        
|                            |                                                         | Total interest income                               |        |                 | 29,886 |          |        |         | 33,976 |      |        |         | 39,234 |   |         |              | 326,406 | 
|Interest expense:           |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         |             
|                            | Borrowings                                              |                                                     |        | 4,061           |        |          |        | 3,818   |        |      |        | 3,920   |        |   |         | 32,612       |        
|                            | Other                                                   |                                                     |        | 105             |        |          |        | 66      |        |      |        | 64      |        |   |         | 533          |        
|                            |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         |              |        
|                            |                                                         | Total interest expense                              |        |                 | 4,166  |          |        |         | 3,884  |      |        |         | 3,984  |   |         |              | 33,145  | 
|                            |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         |              |        
|                            |                                                         | Net interest income                                 |        |                 | 25,720 |          |        |         | 30,092 |      |        |         | 35,250 |   |         |              | 293,261 | 
|Provision for loan losses   |                                                         |                                                     | 4,566  |                 |        |          | 7,433  |         |        |      | 12,688 |         |        |   | 105,557 |             
|                            |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         |              |        
|                            |                                                         | Net interest income after provision for loan
losses |        |                 | 21,154 |          |        |         | 22,659 |      |        |         | 22,562 |   |         |              | 187,704 | 
|Non-interest income (loss): |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         |             
|                            | Losses on investment securities, net                    |                                                     |        | (602            | )      |          |        | (606    | )      |      |        | (973    | )      |   |         | (8,095       | )      
|                            | Gain on sale of subsidiaries                            |                                                     |        |                |        |          |        |        |        |      |        | 324     |        |   |         | 2,696        |        
|                            | Commission income                                       |                                                     |        |                |        |          |        |        |        |      |        | 1,267   |        |   |         | 10,541       |        
|                            | Rents, dividends and other                              |                                                     |        | 193             |        |          |        | 178     |        |      |        | 228     |        |   |         | 1,896        |        
|                            |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         |              |        
|                            |                                                         | Total non-interest (loss) income                    |        |                 | (409   | )        |        |         | (428   | )    |        |         | 846    |   |         |              | 7,038   | 
|Non-interest expense:       |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         |             
|                            | Salaries and employee benefits                          |                                                     |        | 4,437           |        |          |        | 5,067   |        |      |        | 6,233   |        |   |         | 51,855       |        
|                            | Occupancy, furniture and equipment                      |                                                     |        | 2,085           |        |          |        | 2,201   |        |      |        | 2,190   |        |   |         | 18,220       |        
|                            | Advertising                                             |                                                     |        | 2,173           |        |          |        | 1,838   |        |      |        | 449     |        |   |         | 3,735        |        
|                            | Other general and administrative expense                |                                                     |        | 3,258           |        |          |        | 4,253   |        |      |        | 4,389   |        |   |         | 36,514       |        
|                            | Losses on sale and impairment of long-lived assets, net |                                                     |        | 45              |        |          |        | 145     |        |      |        | 225     |        |   |         | 1,872        |        
|                            | Impairment of investment in affiliates                  |                                                     |        |                |        |          |        |        |        |      |        | 683     |        |   |         | 5,682        |        
|                            | Other                                                   |                                                     |        | 31              |        |          |        | 124     |        |      |        | 124     |        |   |         | 1,031        |        
|                            | Minority interest                                       |                                                     |        | 1               |        |          |        | 1       |        |      |        | 15      |        |   |         | 125          |        
|                            |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         |              |        
|                            |                                                         | Total non-interest expense                          |        |                 | 12,030 |          |        |         | 13,629 |      |        |         | 14,308 |   |         |              | 119,034 | 
|                            |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         |              |        
|Income before income taxes  |                                                         |                                                     | 8,715  |                 |        |          | 8,602  |         |        |      | 9,100  |         |        |   | 75,708  |             
|                            |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         |              |        
|Income taxes                |                                                         |                                                     | 3,763  |                 |        |          | 3,801  |         |        |      | 3,924  |         |        |   | 32,646  |             
|                            |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         |              |        
|Net income                  |                                                         |                                                     | ¥4,952 |                 |        |          | ¥4,801 |         |        |      | ¥5,176 |         |        | $ | 43,062  |             
|                            |                                                         |                                                     |        |                 |        |          |        |         |        |      |        |         |        |   |         |              |        

|                     |  |      |        |      |          |      |         |      |  |  |        |  |  |  |              |  | 
|-------------------- |  | ---- | ------ | ---- | -------- | ---- | ------- | ---- |  |  | ------ |  |  |  | ------------ |  | 
|                     |  |      |        |      |          |      |         |      |  |  |        |  |  |  | U.S. Dollars
|                     |  |      | Yen    |      | (Note 1)
|                     |  |      |        |      |         
|Per share data:      |  | 2001 |        | 2002 |          | 2003 |         | 2003
|                     |  |      |        |      |          |      |         |     
|Net income  basic   |  |      | ¥38.25 |      |          |      | ¥ 36.41 |      |  |  | ¥40.15 |  |  |  | $0.33        | 
|Net income  diluted |  |      | 38.18  |      |          |      | 34.85   |      |  |  | 37.24  |  |  |  | 0.31         | 
|Cash dividends paid  |  |      | 5.84   |      |          |      | 6.04    |      |  |  | 6.38   |  |  |  | 0.05         | 

|                                     |  |      |         |      |  |      |         |      |  |  |         |  |  |  |         | 
|------------------------------------ |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  |  | ------- |  |  |  | ------- | 
|Weighted average shares outstanding: |  | 2001 |         | 2002 |  | 2003 |         | 2003
|                                     |  |      |         |      |  |      |         |     
|Basic (000s)                        |  |      | 129,488 |      |  |      | 131,868 |      |  |  | 128,920 |  |  |  | 128,920 | 
|Diluted (000s)                      |  |      | 129,724 |      |  |      | 139,436 |      |  |  | 141,658 |  |  |  | 141,658 | 

See accompanying summary of significant accounting policies and notes to consolidated financial statements.

F-5



---



##### Table of Contents






CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
NISSIN CO., LTD. AND SUBSIDIARIES
For the Years Ended March 31, 2001, 2002 and 2003

|                             |                                                                                     |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         |        |       |        |  
|---------------------------- | ----------------------------------------------------------------------------------- | ------------------------------------ | --------------------------------------------------------- | ----- | ------------------- |  | ------ | --- | --------------- |  | -------- | --- | ------------- |  | --------------- | ---- | ------------- |  | ---------------- |  |  | ------ | ------- | ------ | ----- |  | ------- | ------ | ----- | ------ | -
|                             |                                                                                     |                                      |                                                           |       |                     |  |        |     | Millions of Yen
|                             |                                                                                     |                                      |                                                           |       |                     |  |        |     |                
|                             |                                                                                     |                                      |                                                           |       | Number of Shares of |  |        |     |                 |  |          |     |               |  |                 |      |               |  | Cumulative Other |  |  |        |         |        | Total
|                             |                                                                                     |                                      |                                                           |       | Common Stock Issued |  | Common |     | Additional      |  | Retained |     | Comprehensive |  | Treasury Stock, |      | Shareholders'
|                             |                                                                                     |                                      |                                                           |       | (Thousand)          |  | Stock  |     | Paid-in Capital |  | Earnings |     | Income        |  | at Cost         |      | Equity       
|                             |                                                                                     |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |              
|Balance as of March 31, 2000 |                                                                                     |                                      | 129,368                                                   |       |                     |  | ¥5,912 |     |                 |  | ¥7,655   |     |               |  | ¥20,729         |      |               |  | ¥1,664           |  |  |        | ¥       | (0)    |       |  | ¥35,960 |       
|                             | Exercise of stock warrants                                                          |                                      |                                                           | 1,544 |                     |  |        | 255 |                 |  |          | 254 |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         | 509    |      
|                             | Comprehensive income:                                                               |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         |        |      
|                             |                                                                                     | Net income                           |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      | 4,952         |  |                  |  |  |        |         |        |       |  |         |        | 4,952 |       
|                             |                                                                                     | Other comprehensive loss,
net of tax |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         |        |       |       
|                             |                                                                                     |                                      | Change in net unrealized
gain on investment
securities    |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  | (1,368 | )       |        |       |  |         |        |       | (1,368 | )
|                             |                                                                                     |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         |       
|                             | Total comprehensive income                                                          |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         | 3,584  |      
|                             | Cash dividends paid                                                                 |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 | (755 | )             |  |                  |  |  |        |         |        |       |  |         | (755   | )    
|                             | Purchase of treasury stock, net                                                     |                                      |                                                           |       |                     |  |        |     |                 |  |          | (0  | )             |  |                 |      |               |  |                  |  |  |        |         | (0     | )     |  |         | (0     | )    
|                             |                                                                                     |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         |       
|Balance as of March 31, 2001 |                                                                                     |                                      | 130,912                                                   |       |                     |  | 6,167  |     |                 |  | 7,909    |     |               |  | 24,926          |      |               |  | 296              |  |  |        | (0      | )      |       |  | 39,298  |       
|                             | Exercise of stock options                                                           |                                      |                                                           | 1,712 |                     |  |        | 444 |                 |  |          | 434 |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         | 878    |      
|                             | Common stock warrants issued
to directors, statutory
auditors and certain employees |                                      |                                                           |       |                     |  |        |     |                 |  |          | 124 |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         | 124    |      
|                             | Comprehensive income:                                                               |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         |        |      
|                             |                                                                                     | Net income                           |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      | 4,801         |  |                  |  |  |        |         |        |       |  |         |        | 4,801 |       
|                             |                                                                                     | Other comprehensive loss,
net of tax |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         |        |       |       
|                             |                                                                                     |                                      | Change in net unrealized
gain on investment
securities    |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  | (137   | )       |        |       |  |         |        |       | (137   | )
|                             |                                                                                     |                                      | Change in net unrealized
losses on derivative
instruments |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  | (46    | )       |        |       |  |         |        |       | (46    | )
|                             |                                                                                     |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         |       
|                             | Total comprehensive income                                                          |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         | 4,618  |      
|                             | Cash dividends paid                                                                 |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 | (795 | )             |  |                  |  |  |        |         |        |       |  |         | (795   | )    
|                             | Purchase of treasury stock, net                                                     |                                      |                                                           |       |                     |  |        |     |                 |  |          | (0  | )             |  |                 |      |               |  |                  |  |  |        |         | (348   | )     |  |         | (348   | )    
|                             |                                                                                     |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         |       
|Balance as of March 31, 2002 |                                                                                     |                                      | 132,624                                                   |       |                     |  | 6,611  |     |                 |  | 8,467    |     |               |  | 28,932          |      |               |  | 113              |  |  |        | (348    | )      |       |  | 43,775  |       
|                             | Comprehensive income:                                                               |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         |        |      
|                             |                                                                                     | Net income                           |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      | 5,176         |  |                  |  |  |        |         |        |       |  |         |        | 5,176 |       
|                             |                                                                                     | Other comprehensive loss,
net of tax |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         |        |       |       
|                             |                                                                                     |                                      | Change in net unrealized
gain on investment
securities    |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  | (88    | )       |        |       |  |         |        |       | (88    | )
|                             |                                                                                     |                                      | Change in net unrealized
losses on derivative
instruments |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  | 45     |         |        |       |  |         |        |       | 45     |  
|                             |                                                                                     |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         |       
|                             | Total comprehensive income                                                          |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         | 5,133  |      
|                             | Cash dividends paid                                                                 |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 | (833 | )             |  |                  |  |  |        |         |        |       |  |         | (833   | )    
|                             | Repurchase of warrants                                                              |                                      |                                                           |       |                     |  |        |     |                 |  |          | (5  | )             |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         | (5     | )    
|                             | Purchase of treasury stock, net                                                     |                                      |                                                           |       |                     |  |        |     |                 |  |          | 0   |               |  |                 |      |               |  |                  |  |  |        |         | (2,473 | )     |  |         | (2,473 | )    
|                             |                                                                                     |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         |       
|Balance as of March 31, 2003 |                                                                                     |                                      | 132,624                                                   |       |                     |  | ¥6,611 |     |                 |  | ¥8,462   |     |               |  | ¥33,275         |      |               |  | ¥70              |  |  |        | ¥(2,821 | )      |       |  | ¥45,597 |       
|                             |                                                                                     |                                      |                                                           |       |                     |  |        |     |                 |  |          |     |               |  |                 |      |               |  |                  |  |  |        |         |        |       |  |         |       

See accompanying summary of significant accounting policies and notes to
consolidated financial statements.

F-6



---



##### Table of Contents



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
NISSIN CO., LTD. AND SUBSIDIARIES
For the Years Ended March 31, 2001, 2002 and 2003

|                             |                                 |                                      |                                                        |  |                     |   |        |  |                                    |   |          |     |               |   |                 |        |               |   |                  |  |  |      |         |         |       |   |         |         |        |      |  
|---------------------------- | ------------------------------- | ------------------------------------ | ------------------------------------------------------ |  | ------------------- | - | ------ |  | ---------------------------------- | - | -------- | --- | ------------- | - | --------------- | ------ | ------------- | - | ---------------- |  |  | ---- | ------- | ------- | ----- | - | ------- | ------- | ------ | ---- | -
|                             |                                 |                                      |                                                        |  |                     |   |        |  | Thousands of U.S. Dollars (Note 1)
|                             |                                 |                                      |                                                        |  |                     |   |        |  |                                   
|                             |                                 |                                      |                                                        |  | Number of Shares of |   |        |  |                                    |   |          |     |               |   |                 |        |               |   | Cumulative Other |  |  |      |         |         | Total
|                             |                                 |                                      |                                                        |  | Common Stock Issued |   | Common |  | Additional                         |   | Retained |     | Comprehensive |   | Treasury Stock, |        | Shareholders'
|                             |                                 |                                      |                                                        |  | (Thousand)          |   | Stock  |  | Paid-in Capital                    |   | Earnings |     | Income        |   | at Cost         |        | Equity       
|                             |                                 |                                      |                                                        |  |                     |   |        |  |                                    |   |          |     |               |   |                 |        |              
|Balance as of March 31, 2002 |                                 |                                      | 132,624                                                |  |                     | $ | 55,000 |  |                                    | $ | 70,441   |     |               | $ | 240,699         |        |               | $ | 940              |  |  | $    | (2,895  | )       |       | $ | 364,185 |        
|                             | Comprehensive income:           |                                      |                                                        |  |                     |   |        |  |                                    |   |          |     |               |   |                 |        |               |   |                  |  |  |      |         |         |       |   |         |         |       
|                             |                                 | Net income                           |                                                        |  |                     |   |        |  |                                    |   |          |     |               |   |                 |        | 43,062        |   |                  |  |  |      |         |         |       |   |         |         | 43,062 |     
|                             |                                 | Other comprehensive loss,
net of tax |                                                        |  |                     |   |        |  |                                    |   |          |     |               |   |                 |        |               |   |                  |  |  |      |         |         |       |   |         |         |        |     
|                             |                                 |                                      | Change in net unrealized
gain on investment
securities |  |                     |   |        |  |                                    |   |          |     |               |   |                 |        |               |   |                  |  |  | (732 | )       |         |       |   |         |         |        | (732 | )
|                             |                                 |                                      | Net unrealized losses on
derivative instruments        |  |                     |   |        |  |                                    |   |          |     |               |   |                 |        |               |   |                  |  |  | 374  |         |         |       |   |         |         |        | 374  |  
|                             |                                 |                                      |                                                        |  |                     |   |        |  |                                    |   |          |     |               |   |                 |        |               |   |                  |  |  |      |         |         |       |   |         |        
|                             | Total comprehensive income      |                                      |                                                        |  |                     |   |        |  |                                    |   |          |     |               |   |                 |        |               |   |                  |  |  |      |         |         |       |   |         | 42,704  |       
|                             | Cash dividends paid             |                                      |                                                        |  |                     |   |        |  |                                    |   |          |     |               |   |                 | (6,930 | )             |   |                  |  |  |      |         |         |       |   |         | (6,930  | )     
|                             | Repurchase of warrants          |                                      |                                                        |  |                     |   |        |  |                                    |   |          | (42 | )             |   |                 |        |               |   |                  |  |  |      |         |         |       |   |         | (42     | )     
|                             | Purchase of treasury stock, net |                                      |                                                        |  |                     |   |        |  |                                    |   |          | 0   |               |   |                 |        |               |   |                  |  |  |      |         | (20,574 | )     |   |         | (20,574 | )     
|                             |                                 |                                      |                                                        |  |                     |   |        |  |                                    |   |          |     |               |   |                 |        |               |   |                  |  |  |      |         |         |       |   |         |        
|Balance as of March 31, 2003 |                                 |                                      | 132,624                                                |  |                     | $ | 55,000 |  |                                    | $ | 70,399   |     |               | $ | 276,831         |        |               | $ | 582              |  |  | $    | (23,469 | )       |       | $ | 379,343 |        
|                             |                                 |                                      |                                                        |  |                     |   |        |  |                                    |   |          |     |               |   |                 |        |               |   |                  |  |  |      |         |         |       |   |         |        

See accompanying summary of significant accounting policies and notes to
consolidated financial statements.

F-7



---



##### Table of Contents






CONSOLIDATED STATEMENTS OF CASH FLOWS
NISSAN CO., LTD. AND SUBSIDIARIES
For the Years Ended March 31, 2001, 2002 and 2003

|                                                     |                                                                                   |                                   |         |                 |      |          |         |         |      |      |         |         |     |   |          |              |       |  
|---------------------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------- | ------- | --------------- | ---- | -------- | ------- | ------- | ---- | ---- | ------- | ------- | --- | - | -------- | ------------ | ----- | -
|                                                     |                                                                                   |                                   |         |                 |      |          |         |         |      |      |         |         |     |   |          | Thousands of
|                                                     |                                                                                   |                                   |         |                 |      |          |         |         |      |      |         |         |     |   |          | U.S. Dollars
|                                                     |                                                                                   |                                   |         | Millions of Yen |      | (Note 1)
|                                                     |                                                                                   |                                   |         |                 |      |         
|                                                     |                                                                                   |                                   |         | 2001            |      | 2002     |         | 2003    |      | 2003
|                                                     |                                                                                   |                                   |         |                 |      |          |         |         |      |     
|Operating Activities                                 |                                                                                   |                                   |         |                 |      |          |         |         |      |      |         |         |     |   |          |             
|                                                     | Net income                                                                        |                                   |         | ¥4,952          |      |          |         | ¥4,801  |      |      |         | ¥5,176  |     |   | $        | 43,062       |      
|                                                     | Adjustments to reconcile net income to net cash
provided by operating activities: |                                   |         |                 |      |          |         |         |      |      |         |         |     |   |          |              |      
|                                                     | Depreciation and amortization                                                     |                                   |         | 928             |      |          |         | 946     |      |      |         | 1,027   |     |   |          | 8,544        |      
|                                                     | Amortization of debt issuance costs                                               |                                   |         | 166             |      |          |         | 227     |      |      |         | 265     |     |   |          | 2,205        |      
|                                                     | Amortization of loan origination costs                                            |                                   |         | 481             |      |          |         | 633     |      |      |         | 747     |     |   |          | 6,214        |      
|                                                     | Amortization of cap option premium                                                |                                   |         | 161             |      |          |         | 133     |      |      |         | 51      |     |   |          | 424          |      
|                                                     | Losses on sale and impairment of long-lived assets, net                           |                                   |         | 45              |      |          |         | 145     |      |      |         | 225     |     |   |          | 1,872        |      
|                                                     | Provision for loan losses                                                         |                                   |         | 4,566           |      |          |         | 7,433   |      |      |         | 12,688  |     |   |          | 105,557      |      
|                                                     | Losses on investment securities, net                                              |                                   |         | 602             |      |          |         | 606     |      |      |         | 973     |     |   |          | 8,095        |      
|                                                     | Deferred income taxes                                                             |                                   |         | (188            | )    |          |         | (230    | )    |      |         | (1,166  | )   |   |          | (9,700       | )    
|                                                     | Equity in losses of affiliates                                                    |                                   |         |                |      |          |         | 61      |      |      |         | 17      |     |   |          | 141          |      
|                                                     | Impairment of investment in affiliates                                            |                                   |         |                |      |          |         |        |      |      |         | 683     |     |   |          | 5,682        |      
|                                                     | Gain on sale of subsidiaries, net                                                 |                                   |         |                |      |          |         |        |      |      |         | (324    | )   |   |          | (2,696       | )    
|                                                     | Changes in assets and liabilities:                                                |                                   |         |                 |      |          |         |         |      |      |         |         |     |   |          |              |      
|                                                     |                                                                                   | Interest receivable               |         |                 | (151 | )        |         |         | (237 | )    |         |         | (44 | ) |          |              | (366  | )
|                                                     |                                                                                   | Accrued expenses and income taxes |         |                 | 536  |          |         |         | 178  |      |         |         | 688 |   |          |              | 5,724 |  
|                                                     |                                                                                   | Other liabilities and other       |         |                 | 185  |          |         |         | 90   |      |         |         | 309 |   |          |              | 2,571 |  
|                                                     |                                                                                   |                                   |         |                 |      |          |         |         |      |      |         |         |     |   |          |              |      
|Net cash provided by operating activities            |                                                                                   |                                   | 12,283  |                 |      |          | 14,786  |         |      |      | 21,315  |         |     |   | 177,329  |             
|                                                     |                                                                                   |                                   |         |                 |      |          |         |         |      |      |         |         |     |   |          |              |      
|Investing Activities                                 |                                                                                   |                                   |         |                 |      |          |         |         |      |      |         |         |     |   |          |             
|                                                     | Time deposit sale                                                                 |                                   |         | 100             |      |          |         |        |      |      |         |        |     |   |          |             |      
|                                                     | Cash used for loan originations, net of principal
collections                     |                                   |         | (20,247         | )    |          |         | (33,779 | )    |      |         | (32,033 | )   |   |          | (266,498     | )    
|                                                     | Purchases of distressed loans                                                     |                                   |         |                |      |          |         | (403    | )    |      |         | (4,854  | )   |   |          | (40,383      | )    
|                                                     | Proceeds from principal collections of distressed loans                           |                                   |         |                |      |          |         | 23      |      |      |         | 2,145   |     |   |          | 17,845       |      
|                                                     | Purchases of investment securities                                                |                                   |         | (574            | )    |          |         | (1,029  | )    |      |         | (588    | )   |   |          | (4,892       | )    
|                                                     | Proceeds from sale of investment securities                                       |                                   |         | 650             |      |          |         | 752     |      |      |         | 1,057   |     |   |          | 8,794        |      
|                                                     | Investment in affiliated company                                                  |                                   |         | (300            | )    |          |         | (20     | )    |      |         | (535    | )   |   |          | (4,451       | )    
|                                                     | Purchases of property and equipment                                               |                                   |         | (192            | )    |          |         | (127    | )    |      |         | (983    | )   |   |          | (8,178       | )    
|                                                     | Proceeds from sales of property and equipment                                     |                                   |         | 465             |      |          |         | 719     |      |      |         | 43      |     |   |          | 358          |      
|                                                     | Cash decrease upon sale of previously consolidated
subsidiary                     |                                   |         |                |      |          |         |        |      |      |         | (144    | )   |   |          | (1,198       | )    
|                                                     | Cash obtained upon acquisition of a consolidated
subsidiary, net                  |                                   |         | 9               |      |          |         | 67      |      |      |         |        |     |   |          |             |      
|                                                     | Changes in other assets                                                           |                                   |         | (224            | )    |          |         | (74     | )    |      |         | (766    | )   |   |          | (6,372       | )    
|                                                     |                                                                                   |                                   |         |                 |      |          |         |         |      |      |         |         |     |   |          |              |      
|Net cash used in investing activities                |                                                                                   |                                   | (20,313 | )               |      |          | (33,871 | )       |      |      | (36,658 | )       |     |   | (304,975 | )           
|                                                     |                                                                                   |                                   |         |                 |      |          |         |         |      |      |         |         |     |   |          |              |      
|Financing Activities                                 |                                                                                   |                                   |         |                 |      |          |         |         |      |      |         |         |     |   |          |             
|                                                     | Issuance of commercial paper                                                      |                                   |         |                |      |          |         |        |      |      |         | 8,600   |     |   |          | 71,547       |      
|                                                     | Repayment of commercial paper                                                     |                                   |         |                |      |          |         |        |      |      |         | (6,200  | )   |   |          | (51,580      | )    
|                                                     | Proceeds from short-term borrowings                                               |                                   |         | 2,400           |      |          |         | 1,500   |      |      |         | 8,095   |     |   |          | 67,346       |      
|                                                     | Repayment of short-term borrowings                                                |                                   |         | (2,532          | )    |          |         | (1,840  | )    |      |         | (6,270  | )   |   |          | (52,163      | )    
|                                                     | Proceeds from long-term borrowings                                                |                                   |         | 66,580          |      |          |         | 53,814  |      |      |         | 82,436  |     |   |          | 685,824      |      
|                                                     | Repayment of long-term borrowings                                                 |                                   |         | (48,420         | )    |          |         | (41,675 | )    |      |         | (62,131 | )   |   |          | (516,897     | )    
|                                                     | Restricted deposit                                                                |                                   |         |                |      |          |         |        |      |      |         | 1,277   |     |   |          | 10,624       |      
|                                                     | Deferred debt issuance costs                                                      |                                   |         | (255            | )    |          |         | (283    | )    |      |         | 188     |     |   |          | 1,564        |      
|                                                     | Payment of capital lease obligations                                              |                                   |         | (803            | )    |          |         | (891    | )    |      |         | (845    | )   |   |          | (7,030       | )    
|                                                     | Proceeds (repurchases) of stock options and warrants                              |                                   |         | 509             |      |          |         | 878     |      |      |         | (5      | )   |   |          | (42          | )    
|                                                     | Purchases of treasury stock, net                                                  |                                   |         | 0               |      |          |         | (348    | )    |      |         | (2,473  | )   |   |          | (20,574      | )    
|                                                     | Dividends paid                                                                    |                                   |         | (755            | )    |          |         | (795    | )    |      |         | (833    | )   |   |          | (6,930       | )    
|                                                     |                                                                                   |                                   |         |                 |      |          |         |         |      |      |         |         |     |   |          |              |      
|Net cash provided by financing activities            |                                                                                   |                                   | 16,724  |                 |      |          | 10,360  |         |      |      | 21,839  |         |     |   | 181,689  |             
|                                                     |                                                                                   |                                   |         |                 |      |          |         |         |      |      |         |         |     |   |          |              |      
|Net increase (decrease) in cash and cash equivalents |                                                                                   |                                   | 8,694   |                 |      |          | (8,725  | )       |      |      | 6,496   |         |     |   | 54,043   |             
|Cash and cash equivalents at beginning of year       |                                                                                   |                                   | 17,147  |                 |      |          | 25,841  |         |      |      | 17,116  |         |     |   | 142,396  |             
|                                                     |                                                                                   |                                   |         |                 |      |          |         |         |      |      |         |         |     |   |          |              |      
|Cash and cash equivalents at end of year             |                                                                                   |                                   | ¥25,841 |                 |      |          | ¥17,116 |         |      |      | ¥23,612 |         |     | $ | 196,439  |             
|                                                     |                                                                                   |                                   |         |                 |      |          |         |         |      |      |         |         |     |   |          |              |      

See accompanying summary of significant accounting policies and notes to
consolidated financial statements.

F-8



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##### Table of Contents






NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Business Organization and Basis of Presentation

NISSIN CO., LTD. (NISSIN) was incorporated in 1960 in Ehime Prefecture,
western Japan, and has expanded nationwide. NISSIN and its subsidiaries
operate only throughout Japan. The Company currently maintains head offices in
Tokyo and in the City of Matsuyama, Ehime Prefecture, Japan. Because of its
concentration in lending in Japan, the Company is exposed to negative changes
in the economy or stability of its borrowing base.

NISSIN is a non-bank financial institution specializing in providing loan
products to individuals including consumers, small business owners and sole
proprietors. NISSIN distributes the following products by using a variety of
distribution channels:



| |  | Consumer loans: Unsecured revolving loans to consumers at fixed interest
rates, payable monthly in arrears.                                                                                                                                                                                                                                                                                             
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Wide loans: Debt-consolidation loans for consumers who already have a
high level of outstanding debt with several consumer finance lenders. The
borrower must supply one or more guarantors with a separate income source.
These loans are payable monthly in arrears at fixed interest rates.                                                                                                          
|
| |  | Small business owner loans: Designed for small business owners, the small
business owner loan is an unsecured loan that requires one or more
guarantors from third party individuals with an income source separate
from the customer. It can be used without any restrictions to repay
existing loans or to obtain working capital. These loans are payable
monthly in arrears at fixed interest rates.
|
| |  | Business Timely loans: An unsecured revolving loan designed for small
business owners. Business Timely loans are marketed to more creditworthy
owners of businesses and sole proprietors and do not require a guarantor.
These loans are payable monthly in arrears at fixed interest rates.                                                                                                            

On July 11, 2001, NISSIN invested ¥500 million to establish
Nissin Servicer Co., Ltd., a wholly-owned subsidiary. Nissin Servicer Co., Ltd.
was established to acquire and service non-performing loans from banks or other
financial institutions in Japan.

The consolidated financial statements include the accounts of NISSIN and its
majority-owned subsidiaries, Nissin Servicer Co., Ltd., Big Apple Co., Ltd. and
Shiq Consulting Co., Ltd (collectively the Company). All significant
intercompany accounts, transactions and profits and losses have been eliminated
in consolidation.

The Company maintains its records in accordance with accounting principles
generally accepted in Japan (Japanese GAAP). Certain adjustments and
reclassifications have been made in the accompanying consolidated financial
statements to conform with accounting principles generally accepted in the
United States of America (U.S. GAAP). These adjustments were not recorded in
the statutory Japanese GAAP books of account.

The preparation of the consolidated financial statements in conformity with
U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Significant
estimates are made regarding the Companys allowance for loan losses. Actual
results could differ from those estimates, resulting in material charges to
income.

The consolidated financial statements are stated in Japanese yen. The
translations of the Japanese yen amounts into U.S. dollars are

F-9



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

included solely for the convenience of the readers, using the prevailing
exchange rate on March 31, 2003, which was ¥120.20 to $1.00. The convenience
translations should not be construed as representations that the Japanese yen
amounts have been, could have been, or could in the future be, converted into
U.S. dollars at this or any other rate of exchange.

2. Summary of Significant Accounting Policies

(a) Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity
of three months or less at the time of purchase to be cash equivalents. These
investments, which consist of time deposits and money management funds invested
in bonds, are recorded at cost, which approximates market value.

(b) Interest Income from Loans Receivable and Loan Origination Costs

Interest income from loans except for the purchased loans is recognized on an
accrual basis based on the principal amount outstanding. In Japan, the maximum
interest rates are set by law at two general levels: an absolute maximum rate
(legal limit) and a lower interest rate based on the principal amount of the
loan (restricted rate). The Company may charge interest rates in excess of the
restricted rate as long as it meets the specified requirements. The Companys
contractual loan interest rates do not exceed the legal limit. However, the
Companys contractual loan interest rates, as is customary in the consumer
finance industry in Japan, normally exceed the restricted rate. Borrowers have
a right to refuse to pay interest in excess of the restricted rate, and the
Company cannot legally require borrowers to pay the excess interest. However,
once a borrower has paid interest in excess of the restricted rate, and
provided the Company has complied with the specified legal documentation and
notification procedures, the Company has no legal or contractual obligation to
refund or otherwise reimburse the excess interest payments.

The Company recognizes accrued interest income on loans receivable outstanding
as of the balance sheet date at the lower of the restricted rate or the
contractual interest rate. Contractual interest in excess of the restricted
rate is recognized as interest income when collected, provided there are no
remaining legal obligations to refund this excess portion. Accrual of interest
income is suspended when loan principal is charged-off or is wholly or
partially reserved. The accrued interest portion of a charged-off loan balance
is deducted from the current period interest income and the principal amount is
charged-off against the allowance for loan losses.

The Company capitalizes direct origination costs and defers fees on successful
loan originations. Loan origination costs, net of loan origination fees, are
deferred and amortized over the contractual life of loans, which averages
approximately forty-two months.

(c) Loans Receivable and Allowance for Loan Losses

Loans receivable are reported at the principal amount less an allowance for
loan losses. The allowance for loan losses is maintained at a level that, in
managements judgment, is adequate to provide for estimated probable
uncollectible loan losses from known and inherent risks in the Companys loan
portfolios. Increases to the allowance are made by charges to the provision
for loans receivable. Recoveries of previously charged-off amounts are
credited to the allowance. Allowances are reviewed both on an individual loan
and portfolio basis. In evaluating the adequacy of the allowance, management
considers various factors, including current economic conditions, such as
unemployment and bankruptcy rates, and historical loss experience.
Restructured loans include any loans which are restructured for interest,
principal or term. Allowances for restructured loans are based on collection
history or legal classification of the borrowers.



| |  | The Companys policy is generally to charge-off loan balances and cease
accrual of interest as follows:
| |  | -------------------------------------------------------------------------------------------------------

F-10



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



| |  | Consumer Loans and Business Timely Loans:When a loans contractual payment
becomes 67 days delinquent or upon other events such as bankruptcy of the
borrower.                                                                                                                                                                                                                                                                                                                                                                                           
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Guaranteed Small Business Owner Loans and Wide Loans:When the Company
believes the likelihood of any future collection is minimal. Events
triggering charge-offs include bankruptcy of both the borrower and guarantor.
In the case that loans are restructured, the Company charges-off the amount
of the recorded loan balance less the restructured loan balance. Interest
accrual is terminated at the earlier of the date when contractual payments
are 97 days delinquent or the date when all or a part of loan principal is
deemed uncollectible.
|
| |  | Secured Loans:When the Company believes the likelihood of any future
collection is minimal. The Company considers the availability and value of
collateral in determining the level of charge-off. Interest accrual is
terminated at the earlier of the date when contractual payments are 97 days
delinquent or the date when all or a part of loan principal is deemed
uncollectible.                                                                                                                                                                  

(d) Purchased Loans Receivable and Revenue Recognition

Purchased loans represent loans purchased from third party originators and are
reported at purchased cost less an allowance for estimated loan losses. Due to
the non-performing status of these loans when initially purchased and lack of
history with the borrowers, the Company initially recognizes revenue from these
loans using the cost recovery method. Under this method, payments from a
borrower are first applied to loan principal. Once the purchased cost is fully
recovered, subsequent receipts are recognized as interest income. If the
Company determines that it cannot recover its cost, an allowance for the
expected uncollectible portion is established. The loan is written-off once
the Company deems the loan uncollectible.

However, for the loans that the Company reasonably estimates the expected
timing and amount of cash flows, the Company uses those expected future cash
flows to record the loan receivable and amortize the implied interest into
revenue using the level yield method. If the carrying amounts of those loans
are greater than the present value of expected future cash flows from those
loans, the difference is recorded as an allowance for the uncollectible
portion. As of March 31, 2002, the Company used the cost method on all
purchased loans. As of March 31, 2003, approximately ¥257 million ($2,138
thousand) in book value of loans was accounted for under the implied interest
rate.

(e) Guarantees

In November 2002, Financial Accounting Standards board (FASB) issued FASB
Interpretation (FIN) No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of the Indebtedness
of Others, which clarifies the requirements of SFAS No. 5, Accounting for
Contingencies, relating to guarantors accounting for and disclosure of
certain guarantees issued. FIN No.45 requires enhanced disclosures for certain
guarantees. It also requires certain guarantees that are issued or modified
after December 31, 2002, including certain third-party guarantees, to be
initially recorded on the balance sheet at fair value. For guarantees issued
on or before December 31, 2002, liabilities are recorded when and if payments
become probable and estimable. In the normal course of business, the Company
may guarantee or indemnify directors and service providers against litigation
or claims. These claims are expected to be fully covered by company insurance
policies. The adoption of FIN No. 45 did not have a material impact on the
result of operations or financial position of the Company (see also Note 17).

(f) Long-lived Assets

Property and equipment excluding software are stated at cost and, except for
land, are depreciated on a straight-line basis over their estimated useful
lives, approximately 39 to 50 years (weighted average life of 47 years) for
concrete buildings, 7 to 22 years (weighted average life of 15 years) for
buildings other than concrete buildings, 3 to 18 years (weighted average life
of 14 years) for building improvements, 7 to 20 years

F-11



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(weighted average life of 14 years) for structures
and 2 to 20 years (weighted average life of 7 years) for equipment. Software
is amortized straight-line over approximately 5 years. Leased property and
equipment including software is amortized over the period of the lease or the
life of the property and equipment, whichever is shorter. Repairs and
maintenance are charged to expense when incurred.

Real property acquired upon foreclosure is carried at the lower of cost or fair
value less estimated costs to sell. Amounts owned at March 31, 2002 and 2003
were ¥405 million and ¥252 million ($2,097 thousand) and are included in other
assets on the balance sheets.

The Company reviews its long-lived assets for impairment when changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Long-lived assets under certain circumstances are reported at the
lower of carrying amount or fair value. Assets to be disposed of and assets
not expected to provide any future service potential to the Company are
recorded at the lower of carrying amount or fair value less costs to sell.
During the years ended March 31, 2001, 2002 and 2003, the Company wrote-down
investments in rental real property expected to be sold in the near term to
market value, recording approximately ¥98 million, ¥4 million and ¥169 million
($1,406 thousand) in losses for each of the years, respectively. These losses
are included in Loss on sale and impairment of long-lived assets, net in the
consolidated statements of income.

(g) Investment Securities

Investment securities consist of marketable and private securities. All
marketable investment securities are classified as available-for-sale in
accordance with Statement of Financial Accounting Standards (SFAS) No. 115
Accounting for Certain Investments in Debt and Equity Securities.

Marketable equity securities are carried at fair value with unrealized gains
and losses, net of tax, reported as a separate component of shareholders
equity. In accordance with SFAS No. 115, an other than temporary decline in
fair value below the amortized cost basis is recorded as a loss in the
statement of income in the period the decline was determined to be other than
temporary. The Company reviews investment securities that have declined in
market value by approximately 10% or more from their cost bases each period to
determine whether an impairment has occurred. For these securities, an other
than temporary  decline in market value is presumed to have occurred unless
there is sufficient evidence indicating that the decline is temporary. Such
evidence is considered only when there has been a subsequent recovery in market
value and the evidence includes a recent improvement in financial condition, a
positive prevailing business and industry outlook, and other factors that are
deemed to be relevant indicators.

Private equity securities, which consist of investments in which the Company
has a less than 20% interest and for which the Company does not have the
ability to exercise significant influence, are accounted for on a cost basis,
and adjusted only for other-than-temporary declines in fair value resulting
from company-specific events, industry developments, general economic
condition, or other reasons.

Private debt securities are accounted for on a cost basis, and adjusted only
for other-than-temporary declines in fair value resulting from company-specific
events, industry developments, general economic condition, or other reasons.

Realized gains and losses are determined using the weighted average cost method
based on the trade date of the transaction.

(h) Investments in Affiliates

Investments in affiliates are investments in which the Company has a 20 percent
to 50 percent interest or otherwise exercises significant influence but not
control. These investments are accounted for under the equity method.

F-12



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(i) Derivative Financial Instruments

The Company accounts for derivatives instruments in accordance with SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, which
requires that all derivative instruments be recorded on the balance sheet at
fair value. Changes in the fair value of derivatives are recorded each period
either in current results of operations or other comprehensive income (loss).
For a derivative designated as part of a hedge transaction, where it is
recorded is dependent on whether it is a fair value hedge or a cash flow hedge.
For a derivative designated as a fair value hedge, the gain or loss of the
derivative in the period of change and the offsetting loss or gain of the
hedged item attributed to the hedged risk are recognized in results of
operations. For a derivative designated as a cash flow hedge, the effective
portion of the derivatives gain or loss is initially reported as a component
of other comprehensive income (loss) and subsequently reclassified into results
of operations when the hedged exposure affects results of operations. The
ineffective portion of the gain or loss of a cash flow hedge is recognized
currently in results of operations. For a derivative not designated as a
hedging instrument, the gain or loss is recognized currently in results of
operations.

The Company uses both variable and fixed rate debt to finance its operations.
The variable rate debt obligations expose the Company to variability in
interest payments due to changes in interest rates. The Company continuously
monitors changes in interest rate exposures and evaluates hedging
opportunities.

The Companys objective is to limit the impact of interest rate changes on
earnings and cash flows. The Company achieves this by entering into interest
rate swap agreements to convert a portion of its debt from variable to fixed
rates, and interest rate cap agreements, which limit the impact of increases in
interest rates. Under the interest rate swap contracts, the Company agrees to
pay an amount equal to a specified fixed-rate of interest times a notional
principal amount, and to receive in return an amount equal to a specified
variable-rate of interest times a notional amount. The notional amounts are
not exchanged. No other cash payments are made unless the contract is
terminated prior to maturity, in which case the amount paid or received in
settlement is established by agreement at the time of the termination and
usually represents the net present value, at current rates of interest, of the
remaining obligations to exchange payments under the term of the contract. The
Company accounts for its interest rate swap and cap agreements as cash flow
hedges. Interest rate swap and cap agreements are entered into with major
international financial institutions with favorable credit ratings. The
Company is exposed to credit losses in the event of counter-party
non-performance to these interest rate swap agreements. The Company believes
counter-party credit risk is minimal. The Company does not issue or hold
derivative contracts for speculative purposes.

The Company formally documents all relationships between hedging instruments
and hedged items, as well as its risk-management objective and strategy for
undertaking various hedge transactions. This process includes linking all
derivatives that are designated as cash flow hedges to (1) specific assets and
liabilities on the balance sheet or (2) specific firm commitments or forecasted
transactions. The Company also formally assesses (both at the hedges
inception and on an ongoing basis) whether the derivatives that are used in
hedging transactions have been highly effective in offsetting changes in the
cash flows of hedged items and whether those derivatives may be expected to
remain highly effective in the future periods. When it is determined that a
derivative is not (or has ceased to be) highly effective as a hedge, the
Company discontinues hedge accounting prospectively, as discussed below.

The underlying debt instruments being hedged bear interest based on the
Long-term Prime Rate in Japan (LTPR), while the hedge instruments are based
on either the LTPR or on the London Inter-bank Offer Rate (LIBOR). When the
hedge instrument is based on LIBOR, ineffectiveness results from differences in
the movements of these interest rates. The Company records the ineffective
portion as
a component of interest expense in current earnings.

The Company discontinues hedge accounting prospectively when (1) it determines
that the derivative is no longer effective in offsetting changes in the cash
flows of a hedged item; (2) the derivative expires or is sold, terminated, or
exercised; (3) it is no longer probable that the forecasted transaction will
occur; or (4) management determines that designating the derivative as a
hedging instrument is no longer

F-13



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

appropriate. In the event hedge accounting is discontinued and the derivative
remains outstanding, the Company will carry the derivative at its fair value on
the balance sheet, recognizing changes in the fair value in current-period
earnings.

For purposes of the cash flow statement, cash flows from derivative instruments
are classified with the cash flows from the hedged item.

During the year ended March 31, 2003, all derivative agreements were expired.

(j) Treasury Stock

Treasury stock is recorded at cost. Pursuant to the Commercial Code of Japan
(the Code), a company may purchase treasury stock with the appropriate
shareholder approval, and can retire treasury stock by reducing retained
earnings or paid-in capital.

Prior to the Annual Shareholders Meeting on June 22, 2002, NISSIN repurchased
2,400 thousand shares of its common stock for ¥1,230 million ($10,233
thousand). On June 22, 2002, the shareholders of NISSIN approved the purchase
of up to 3 million shares (not effected by two-for-one stock split) of treasury
stock, not to exceed ¥4,500 million ($37,438 thousand) in cost. Subsequent to
the approval, NISSIN repurchased 3 million shares (adjusted by two-for-one
stock split, the actual number of repurchased treasury stock is 1,500 thousand
shares) of its common stock for ¥1,263 million ($10,507 thousand) and
distributed 40 thousand shares of its common stock for ¥20 million ($166
thousand).

(k) Income Taxes

The Company uses the asset and liability method to account for income taxes.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities from a
change in tax rates is recognized in income in the period the change is
enacted. A valuation allowance is established when it is determined that
deferred tax assets are no longer more likely than not to be realized.

(l) Earnings Per Share (EPS)

Basic EPS is computed based on the average number of shares of common stock
outstanding during each period and diluted EPS assumes the dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock.

No accounting recognition is made for stock splits when common stock already
includes a portion of the proceeds from shares issued at a price in excess of
par value. This method of accounting is in conformity with Japanese GAAP. On
May 21, 2001, NISSIN completed a three-for-one stock split. On May 21, 2002,
NISSIN completed a two-for-one stock split. On May 20, 2003, NISSIN completed
a two-for-one stock split, which was approved by the directors on March 10,
2003. All share amounts disclosed have been reflected such stock splits.

(m) Advertising Costs

Advertising costs are expensed as incurred, except for costs for advertising
requiring upfront payment for a series of advertisements, which are deferred
and expensed as the individual communications occur. Advertising expenses
recognized for the years ended March 31, 2001, 2002 and 2003 were ¥2,173
million, ¥1,838 million and ¥449 million ($3,735 thousand), respectively.

F-14



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(n) Stock-based Compensation

As permitted by SFAS No. 123 Accounting for Stock-based Compensation, the
Company has reflected to account for its stock-based compensation arrangements
in accordance with Accounting Principles Board Opinion (APB) No. 25,
Accounting for Stock Issued to Employees. Under this method, the excess, if
any, of the quoted market price of the stock at the grant date of the award or
other measurement date over the stated exercise price of the award is
recognized as deferred stock-based compensation cost which is amortized over
the period in which the employee performs the service.

The following table reflects stock-based employee compensation cost arising out
of the grants for the years ended March 31, 2001, 2002 and 2003. In addition,
the following table also reflects on a pro forma basis the Companys net income
and earnings per common share with and without dilution, as if compensation
costs for stock options had been recorded based on the fair value at the date
of grant under the Companys stock-based compensation plans, consistent with
the provisions of SFAS No. 123. The pro forma compensation expense reflects
compensation expense over the vesting period of the grant, which is generally
two or three years. The stock-based compensation plan disclosure requirements
required by SFAS No. 123 are provided in Note 14 to Consolidated Financial
Statements.

|                                                                                      |  |  |                |  |         |  |         |  |      |  |         |  |  |   |                   |  | 
|------------------------------------------------------------------------------------- |  |  | -------------- |  | ------- |  | ------- |  | ---- |  | ------- |  |  | - | ----------------- |  | 
|                                                                                      |  |  |                |  |         |  |         |  |      |  |         |  |  |   | Thousands of U.S.
|                                                                                      |  |  | Million of Yen |  | Dollars
|                                                                                      |  |  |                |  |        
|                                                                                      |  |  | 2001           |  | 2002    |  | 2003    |  | 2003
|                                                                                      |  |  |                |  |         |  |         |  |     
|Stock amortization included in net income, as reported                                |  |  | ¥             |  |         |  | ¥      |  |      |  | ¥      |  |  | $ |                  | 
|Net income, as reported                                                               |  |  | 4,952          |  |         |  | 4,801   |  |      |  | 5,176   |  |  |   | 43,062            | 
|Deduct: Pro forma stock-based compensation expense
determined under fair value method |  |  | 252            |  |         |  | 445     |  |      |  | 122     |  |  |   | 1,015             | 
|                                                                                      |  |  |                |  |         |  |         |  |      |  |         |  |  |   |                   |  | 
|Pro forma net income                                                                  |  |  | ¥4,700         |  |         |  | ¥4,356  |  |      |  | ¥5,054  |  |  | $ | 42,047            | 
|                                                                                      |  |  |                |  |         |  |         |  |      |  |         |  |  |   |                   |  | 

|                             |                               |  |      |        |              |  |      |        |      |  |  |        |  |  |   |      | 
|---------------------------- | ----------------------------- |  | ---- | ------ | ------------ |  | ---- | ------ | ---- |  |  | ------ |  |  | - | ---- | 
|                             |                               |  | Yen  |        | U.S. Dollars
|                             |                               |  |      |        |             
|                             |                               |  | 2001 |        | 2002         |  | 2003 |        | 2003
|                             |                               |  |      |        |              |  |      |        |     
|Net income per common share: |                               |  |      |        |              |  |      |        |      |  |  |        |  |  |   |     
|                             | As reportedbasic             |  |      | ¥38.25 |              |  |      | ¥36.41 |      |  |  | ¥40.15 |  |  | $ | 0.33 | 
|                             | As reportedassuming dilution |  |      | 38.18  |              |  |      | 34.85  |      |  |  | 37.24  |  |  |   | 0.31 | 

|                             |                             |  |      |        |              |  |      |        |      |  |  |        |  |  |   |      | 
|---------------------------- | --------------------------- |  | ---- | ------ | ------------ |  | ---- | ------ | ---- |  |  | ------ |  |  | - | ---- | 
|                             |                             |  | Yen  |        | U.S. Dollars
|                             |                             |  |      |        |             
|                             |                             |  | 2001 |        | 2002         |  | 2003 |        | 2003
|                             |                             |  |      |        |              |  |      |        |     
|Net income per common share: |                             |  |      |        |              |  |      |        |      |  |  |        |  |  |   |     
|                             | Pro formabasic             |  |      | ¥36.30 |              |  |      | ¥33.03 |      |  |  | ¥39.20 |  |  | $ | 0.33 | 
|                             | Pro formaassuming dilution |  |      | 36.23  |              |  |      | 31.66  |      |  |  | 36.38  |  |  |   | 0.30 | 

F-15



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The fair value of stock options and warrants granted is estimated using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:

|                                                     |  |         |        |         |  |         |        |   |  |  |        |  
|---------------------------------------------------- |  | ------- | ------ | ------- |  | ------- | ------ | - |  |  | ------ | -
|                                                     |  | 2001    |        | 2002    |  | 2003   
|                                                     |  |         |        |         |  |        
|Risk-free interest rate                              |  |         | 0.5    | %       |  |         | 0.5    | % |  |  | 0.5    | %
|Expected lives                                       |  | 2 years |        | 2 years |  | 3 years
|Expected volatility                                  |  |         | 55     | %       |  |         | 50     | % |  |  | 40     | %
|Dividend yield                                       |  |         | 1.5    | %       |  |         | 1.5    | % |  |  | 1.5    | %
|Weighted-average fair value of grant per share (Yen) |  |         | ¥121.7 |         |  |         | ¥171.4 |   |  |  | ¥66.67 |  

(o) Comprehensive Income

The Company accounts for comprehensive income in accordance with SFAS No. 130
Reporting Comprehensive Income. SFAS No. 130 establishes standards for the
reporting and presentation of comprehensive income and its components
(revenues, expenses, gains, and losses) in the financial statements. The
Company presents comprehensive income in its consolidated statements of
shareholders equity, net of related income taxes.

3. Recently Issued Accounting Pronouncements

In June 2002, FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities. SFAS No. 146 requires recording costs associated
with exit or disposal activities at their fair values when a liability has been
incurred. Under previous guidance, certain exit costs were accrued upon
managements commitment to an exit plan, which is generally before an actual
liability has been incurred. The requirements of SFAS No. 146 are effective
prospectively for exit or disposal activities initiated after December 31,
2002; however, early application is encouraged. Management does not expect the
adoption of SFAS No. 146 to have a material effect on the Companys financial
position, results of operations, or cash flows.

4. Loans Receivable and Allowance for Loan Losses

The following is a summary of loans outstanding as of March 31, 2002 and 2003:

|                           |  |                 |          |              |  |      |          |   |  |              |           |  
|-------------------------- |  | --------------- | -------- | ------------ |  | ---- | -------- | - |  | ------------ | --------- | -
|                           |  |                 |          |              |  |      |          |   |  | Thousands of
|                           |  | Millions of Yen |          | U.S. Dollars
|                           |  |                 |          |             
|                           |  | 2002            |          | 2003         |  | 2003
|                           |  |                 |          |              |  |     
|Consumer loans             |  |                 | ¥46,180  |              |  |      | ¥40,938  |   |  | $            | 340,582   |  
|Wide loans                 |  |                 | 55,033   |              |  |      | 63,993   |   |  |              | 532,388   |  
|Small business owner loans |  |                 | 37,386   |              |  |      | 53,915   |   |  |              | 448,544   |  
|Business Timely loans      |  |                 | 16,035   |              |  |      | 17,303   |   |  |              | 143,952   |  
|Secured and other loans    |  |                 | 1,444    |              |  |      | 1,623    |   |  |              | 13,502    |  
|                           |  |                 |          |              |  |      |          |   |  |              |           |  
|Total loans outstanding    |  |                 | 156,078  |              |  |      | 177,772  |   |  |              | 1,478,968 |  
|Allowance for loan losses  |  |                 | (8,831   | )            |  |      | (11,827  | ) |  |              | (98,394   | )
|Deferred origination costs |  |                 | 988      |              |  |      | 1,032    |   |  |              | 8,586     |  
|                           |  |                 |          |              |  |      |          |   |  |              |           |  
|Balance at end of year     |  |                 | ¥148,235 |              |  |      | ¥166,977 |   |  | $            | 1,389,160 |  
|                           |  |                 |          |              |  |      |          |   |  |              |           |  

F-16



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

A summary of changes in the allowance for loan losses is as follows:

|                               |  |                 |        |              |  |      |        |      |  |  |         |   |  |              |         |  
|------------------------------ |  | --------------- | ------ | ------------ |  | ---- | ------ | ---- |  |  | ------- | - |  | ------------ | ------- | -
|                               |  |                 |        |              |  |      |        |      |  |  |         |   |  | Thousands of
|                               |  | Millions of Yen |        | U.S. Dollars
|                               |  |                 |        |             
|                               |  | 2001            |        | 2002         |  | 2003 |        | 2003
|                               |  |                 |        |              |  |      |        |     
|Balance at beginning of year   |  |                 | ¥7,032 |              |  |      | ¥7,482 |      |  |  | ¥8,831  |   |  | $            | 73,469  |  
|Provision for loan losses      |  |                 | 4,566  |              |  |      | 7,433  |      |  |  | 12,545  |   |  |              | 104,367 |  
|Charge-offs, net of recoveries |  |                 | (4,116 | )            |  |      | (6,084 | )    |  |  | (9,549  | ) |  |              | (79,442 | )
|Balance at end of year         |  |                 | ¥7,482 |              |  |      | ¥8,831 |      |  |  | ¥11,827 |   |  | $            | 98,394  |  

The components of the allowance for loan losses as of March 31, 2002 and 2003
are as follows:

|                           |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |         |          | 
|-------------------------- | --------------------------- | ----------------- | ----------------------- |  | --------------- | ------- | ---------- |  | ----------- | ------- | ----- |  | -------------- | ------- | --------------- |  | ----------------- | ------- |  |  | ----- | ------ |  |  | ------- | -------- | 
|                           |                             |                   |                         |  | Millions of Yen
|                           |                             |                   |                         |  |                
|                           |                             |                   |                         |  | 2002           
|                           |                             |                   |                         |  |                
|                           |                             |                   |                         |  |                 |         |            |  |             |         |       |  | Small Business |         | Business Timely |  | Secured and Other |         |  |  |      
|                           |                             |                   |                         |  | Consumer Loans  |         | Wide Loans |  | Owner Loans |         | Loans |  | Loans          |         | Total          
|                           |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                
|Historical Loss Components |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  | 
|                           | -Current                    |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |        
|                           |                             |                   | Current                 |  |                 | ¥45,396 |            |  |             | ¥50,525 |       |  |                | ¥33,739 |                 |  |                   | ¥15,912 |  |  |       | ¥1,246 |  |  |         | ¥146,818 | 
|                           |                             |                   | Restructured            |  |                 | 784     |            |  |             | 3,695   |       |  |                | 2,890   |                 |  |                   | 123     |  |  |       | 78     |  |  |         | 7,570    | 
|                           |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |         |          | 
|                           |                             |                   | Loans outstanding       |  |                 | 46,180  |            |  |             | 54,220  |       |  |                | 36,629  |                 |  |                   | 16,035  |  |  |       | 1,324  |  |  |         | 154,388  | 
|                           |                             |                   | Allowance               |  |                 | 4,142   |            |  |             | 1,094   |       |  |                | 913     |                 |  |                   | 1,228   |  |  |       | 25     |  |  |         | 7,402    | 
|                           | - 67 to 96 days             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |        
|                           |                             |                   | Loans outstanding       |  |                 |        |            |  |             | 97      |       |  |                | 98      |                 |  |                   |        |  |  |       |       |  |  |         | 195      | 
|                           |                             |                   | Allowance               |  |                 |        |            |  |             | 68      |       |  |                | 69      |                 |  |                   |        |  |  |       |       |  |  |         | 137      | 
|                           | - 97 to 120 days            |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |        
|                           |                             |                   | Loans outstanding       |  |                 |        |            |  |             | 36      |       |  |                | 38      |                 |  |                   |        |  |  |       | 4      |  |  |         | 78       | 
|                           |                             |                   | Allowance               |  |                 |        |            |  |             | 36      |       |  |                | 38      |                 |  |                   |        |  |  |       | 4      |  |  |         | 78       | 
|                           | - Over 120 days             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |        
|                           |                             |                   | Loans outstanding       |  |                 |        |            |  |             | 228     |       |  |                | 248     |                 |  |                   |        |  |  |       | 50     |  |  |         | 526      | 
|                           |                             |                   | Allowance               |  |                 |        |            |  |             | 228     |       |  |                | 248     |                 |  |                   |        |  |  |       | 50     |  |  |         | 526      | 
|                           |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |         |          | 
|                           |                             | Loans outstanding |                         |  | 46,180          |         |            |  | 54,581      |         |       |  | 37,013         |         |                 |  | 16,035            |         |  |  | 1,378 |        |  |  | 155,187 |         
|                           |                             | Allowance         |                         |  | 4,142           |         |            |  | 1,426       |         |       |  | 1,268          |         |                 |  | 1,228             |         |  |  | 79    |        |  |  | 8,143   |         
|Other Components:          |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  | 
|                           | - Bankrupt loans            |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |        
|                           |                             |                   | Loans outstanding       |  |                 |        |            |  |             | 297     |       |  |                | 208     |                 |  |                   |        |  |  |       | 24     |  |  |         | 529      | 
|                           |                             |                   | Allowance               |  |                 |        |            |  |             | 282     |       |  |                | 201     |                 |  |                   |        |  |  |       | 22     |  |  |         | 505      | 
|                           | - Loans under legal process |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |        
|                           |                             |                   | Loans outstanding       |  |                 |        |            |  |             | 155     |       |  |                | 165     |                 |  |                   |        |  |  |       | 42     |  |  |         | 362      | 
|                           |                             |                   | Allowance               |  |                 |        |            |  |             | 78      |       |  |                | 83      |                 |  |                   |        |  |  |       | 22     |  |  |         | 183      | 
|                           |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |         |          | 
|                           |                             | Loans outstanding |                         |  |                |         |            |  | 452         |         |       |  | 373            |         |                 |  |                  |         |  |  | 66    |        |  |  | 891     |         
|                           |                             | Allowance         |                         |  |                |         |            |  | 360         |         |       |  | 284            |         |                 |  |                  |         |  |  | 44    |        |  |  | 688     |         
|                           |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |         |          | 
|                           |                             |                   | Total loans outstanding |  |                 | ¥46,180 |            |  |             | ¥55,033 |       |  |                | ¥37,386 |                 |  |                   | ¥16,035 |  |  |       | ¥1,444 |  |  |         | ¥156,078 | 
|                           |                             |                   | Total allowance         |  |                 | 4,142   |            |  |             | 1,786   |       |  |                | 1,552   |                 |  |                   | 1,228   |  |  |       | 123    |  |  |         | 8,831    | 
|                           |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |         |          | 

F-17



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

|                           |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |         |          | 
|-------------------------- | --------------------------- | ----------------- | ----------------------- |  | --------------- | ------- | ---------- |  | ----------- | ------- | ----- |  | -------------- | ------- | --------------- |  | ----------------- | ------- |  |  | ----- | ------ |  |  | ------- | -------- | 
|                           |                             |                   |                         |  | Millions of Yen
|                           |                             |                   |                         |  |                
|                           |                             |                   |                         |  | 2003           
|                           |                             |                   |                         |  |                
|                           |                             |                   |                         |  |                 |         |            |  |             |         |       |  | Small Business |         | Business Timely |  | Secured and Other |         |  |  |      
|                           |                             |                   |                         |  | Consumer Loans  |         | Wide Loans |  | Owner Loans |         | Loans |  | Loans          |         | Total          
|                           |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                
|Historical Loss Components |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  | 
|                           | -Current                    |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |        
|                           |                             |                   | Current                 |  |                 | ¥39,883 |            |  |             | ¥57,771 |       |  |                | ¥48,691 |                 |  |                   | ¥16,959 |  |  |       | ¥1,403 |  |  |         | ¥164,707 | 
|                           |                             |                   | Restructured            |  |                 | 1,055   |            |  |             | 5,231   |       |  |                | 4,204   |                 |  |                   | 344     |  |  |       | 96     |  |  |         | 10,930   | 
|                           |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |         |          | 
|                           |                             |                   | Loans outstanding       |  |                 | 40,938  |            |  |             | 63,002  |       |  |                | 52,895  |                 |  |                   | 17,303  |  |  |       | 1,499  |  |  |         | 175,637  | 
|                           |                             |                   | Allowance               |  |                 | 4,315   |            |  |             | 2,142   |       |  |                | 1,751   |                 |  |                   | 1,703   |  |  |       | 52     |  |  |         | 9,963    | 
|                           | - 67 to 96 days             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |        
|                           |                             |                   | Loans outstanding       |  |                 |        |            |  |             | 153     |       |  |                | 182     |                 |  |                   |        |  |  |       |       |  |  |         | 335      | 
|                           |                             |                   | Allowance               |  |                 |        |            |  |             | 107     |       |  |                | 127     |                 |  |                   |        |  |  |       |       |  |  |         | 234      | 
|                           | - 97 to 120 days            |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |        
|                           |                             |                   | Loans outstanding       |  |                 |        |            |  |             | 63      |       |  |                | 109     |                 |  |                   |        |  |  |       |       |  |  |         | 172      | 
|                           |                             |                   | Allowance               |  |                 |        |            |  |             | 63      |       |  |                | 109     |                 |  |                   |        |  |  |       |       |  |  |         | 172      | 
|                           | - Over 120 days             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |        
|                           |                             |                   | Loans outstanding       |  |                 |        |            |  |             | 268     |       |  |                | 374     |                 |  |                   |        |  |  |       | 64     |  |  |         | 706      | 
|                           |                             |                   | Allowance               |  |                 |        |            |  |             | 268     |       |  |                | 374     |                 |  |                   |        |  |  |       | 64     |  |  |         | 706      | 
|                           |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |         |          | 
|                           |                             | Loans outstanding |                         |  | 40,938          |         |            |  | 63,486      |         |       |  | 53,560         |         |                 |  | 17,303            |         |  |  | 1,563 |        |  |  | 176,850 |         
|                           |                             | Allowance         |                         |  | 4,315           |         |            |  | 2,580       |         |       |  | 2,361          |         |                 |  | 1,703             |         |  |  | 116   |        |  |  | 11,075  |         
|Other Components:          |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  | 
|                           | - Bankrupt loans            |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |        
|                           |                             |                   | Loans outstanding       |  |                 |        |            |  |             | 378     |       |  |                | 228     |                 |  |                   |        |  |  |       | 13     |  |  |         | 619      | 
|                           |                             |                   | Allowance               |  |                 |        |            |  |             | 365     |       |  |                | 223     |                 |  |                   |        |  |  |       | 12     |  |  |         | 600      | 
|                           | - Loans under legal process |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |        
|                           |                             |                   | Loans outstanding       |  |                 |        |            |  |             | 129     |       |  |                | 127     |                 |  |                   |        |  |  |       | 47     |  |  |         | 303      | 
|                           |                             |                   | Allowance               |  |                 |        |            |  |             | 64      |       |  |                | 64      |                 |  |                   |        |  |  |       | 24     |  |  |         | 152      | 
|                           |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |         |          | 
|                           |                             | Loans outstanding |                         |  |                |         |            |  | 507         |         |       |  | 355            |         |                 |  |                  |         |  |  | 60    |        |  |  | 922     |         
|                           |                             | Allowance         |                         |  |                |         |            |  | 429         |         |       |  | 287            |         |                 |  |                  |         |  |  | 36    |        |  |  | 752     |         
|                           |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |         |          | 
|                           |                             |                   | Total loans outstanding |  |                 | ¥40,938 |            |  |             | ¥63,993 |       |  |                | ¥53,915 |                 |  |                   | ¥17,303 |  |  |       | ¥1,623 |  |  |         | ¥177,772 | 
|                           |                             |                   | Total allowance         |  |                 | 4,315   |            |  |             | 3,009   |       |  |                | 2,648   |                 |  |                   | 1,703   |  |  |       | 152    |  |  |         | 11,827   | 
|                           |                             |                   |                         |  |                 |         |            |  |             |         |       |  |                |         |                 |  |                   |         |  |  |       |        |  |  |         |          | 

F-18



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

|                            |                             |                   |                         |  |                           |         |            |  |             |         |         |  |                |         |                 |  |                   |         |        |  |     |        |           |  |       |           | 
|--------------------------- | --------------------------- | ----------------- | ----------------------- |  | ------------------------- | ------- | ---------- |  | ----------- | ------- | ------- |  | -------------- | ------- | --------------- |  | ----------------- | ------- | ------ |  | --- | ------ | --------- |  | ----- | --------- | 
|                            |                             |                   |                         |  | Thousands of U.S. Dollars
|                            |                             |                   |                         |  |                          
|                            |                             |                   |                         |  | 2003                     
|                            |                             |                   |                         |  |                          
|                            |                             |                   |                         |  |                           |         |            |  |             |         |         |  | Small Business |         | Business Timely |  | Secured and Other |         |        |  |    
|                            |                             |                   |                         |  | Consumer Loans            |         | Wide Loans |  | Owner Loans |         | Loans   |  | Loans          |         | Total          
|                            |                             |                   |                         |  |                           |         |            |  |             |         |         |  |                |         |                
|Historical Loss Components: |                             |                   |                         |  |                           |         |            |  |             |         |         |  |                |         |                 |  |                   |         |        |  |     |        |           | 
|                            | -Current                    |                   |                         |  |                           |         |            |  |             |         |         |  |                |         |                 |  |                   |         |        |  |     |        |           |  |      
|                            |                             |                   | Current                 |  | $                         | 331,805 |            |  | $           | 480,624 |         |  | $              | 405,083 |                 |  | $                 | 141,090 |        |  | $   | 11,672 |           |  | $     | 1,370,274 | 
|                            |                             |                   | Restructured            |  |                           | 8,777   |            |  |             | 43,519  |         |  |                | 34,975  |                 |  |                   | 2,862   |        |  |     | 799    |           |  |       | 90,932    | 
|                            |                             |                   |                         |  |                           |         |            |  |             |         |         |  |                |         |                 |  |                   |         |        |  |     |        |           |  |       |           | 
|                            |                             |                   | Loans outstanding       |  |                           | 340,582 |            |  |             | 524,143 |         |  |                | 440,058 |                 |  |                   | 143,952 |        |  |     | 12,471 |           |  |       | 1,461,206 | 
|                            |                             |                   | Allowance               |  |                           | 35,899  |            |  |             | 17,820  |         |  |                | 14,567  |                 |  |                   | 14,168  |        |  |     | 433    |           |  |       | 82,887    | 
|                            | - 67 to 96 days             |                   |                         |  |                           |         |            |  |             |         |         |  |                |         |                 |  |                   |         |        |  |     |        |           |  |      
|                            |                             |                   | Loans outstanding       |  |                           |        |            |  |             | 1,273   |         |  |                | 1,514   |                 |  |                   |        |        |  |     |       |           |  |       | 2,787     | 
|                            |                             |                   | Allowance               |  |                           |        |            |  |             | 890     |         |  |                | 1,057   |                 |  |                   |        |        |  |     |       |           |  |       | 1,947     | 
|                            | - 97 to 120 days            |                   |                         |  |                           |         |            |  |             |         |         |  |                |         |                 |  |                   |         |        |  |     |        |           |  |      
|                            |                             |                   | Loans outstanding       |  |                           |        |            |  |             | 524     |         |  |                | 907     |                 |  |                   |        |        |  |     |       |           |  |       | 1,431     | 
|                            |                             |                   | Allowance               |  |                           |        |            |  |             | 524     |         |  |                | 907     |                 |  |                   |        |        |  |     |       |           |  |       | 1,431     | 
|                            | - Over 120 days             |                   |                         |  |                           |         |            |  |             |         |         |  |                |         |                 |  |                   |         |        |  |     |        |           |  |      
|                            |                             |                   | Loans outstanding       |  |                           |        |            |  |             | 2,230   |         |  |                | 3,111   |                 |  |                   |        |        |  |     | 532    |           |  |       | 5,873     | 
|                            |                             |                   | Allowance               |  |                           |        |            |  |             | 2,230   |         |  |                | 3,111   |                 |  |                   |        |        |  |     | 532    |           |  |       | 5,873     | 
|                            |                             |                   |                         |  |                           |         |            |  |             |         |         |  |                |         |                 |  |                   |         |        |  |     |        |           |  |       |           | 
|Loans outstanding           |                             |                   | 340,582                 |  |                           |         | 528,170    |  |             |         | 445,590 |  |                |         | 143,952         |  |                   |         | 13,003 |  |     |        | 1,471,297 | 
|Allowance                   |                             |                   | 35,899                  |  |                           |         | 21,464     |  |             |         | 19,642  |  |                |         | 14,168          |  |                   |         | 965    |  |     |        | 92,138    | 
|Other Components:           |                             |                   |                         |  |                           |         |            |  |             |         |         |  |                |         |                 |  |                   |         |        |  |     |        |           | 
|                            | - Bankrupt loans            |                   |                         |  |                           |         |            |  |             |         |         |  |                |         |                 |  |                   |         |        |  |     |        |           |  |      
|                            |                             |                   | Loans outstanding       |  |                           |        |            |  |             | 3,145   |         |  |                | 1,897   |                 |  |                   |        |        |  |     | 108    |           |  |       | 5,150     | 
|                            |                             |                   | Allowance               |  |                           |        |            |  |             | 3,037   |         |  |                | 1,855   |                 |  |                   |        |        |  |     | 100    |           |  |       | 4,992     | 
|                            | - Loans under legal process |                   |                         |  |                           |         |            |  |             |         |         |  |                |         |                 |  |                   |         |        |  |     |        |           |  |      
|                            |                             |                   | Loans outstanding       |  |                           |        |            |  |             | 1,073   |         |  |                | 1,057   |                 |  |                   |        |        |  |     | 391    |           |  |       | 2,521     | 
|                            |                             |                   | Allowance               |  |                           |        |            |  |             | 532     |         |  |                | 532     |                 |  |                   |        |        |  |     | 200    |           |  |       | 1,264     | 
|                            |                             |                   |                         |  |                           |         |            |  |             |         |         |  |                |         |                 |  |                   |         |        |  |     |        |           |  |       |           | 
|                            |                             | Loans outstanding |                         |  |                          |         |            |  | 4,218       |         |         |  | 2,954          |         |                 |  |                  |         |        |  | 499 |        |           |  | 7,671 |          
|                            |                             | Allowance         |                         |  |                          |         |            |  | 3,569       |         |         |  | 2,387          |         |                 |  |                  |         |        |  | 300 |        |           |  | 6,256 |          
|                            |                             |                   |                         |  |                           |         |            |  |             |         |         |  |                |         |                 |  |                   |         |        |  |     |        |           |  |       |           | 
|                            |                             |                   | Total loans outstanding |  | $                         | 340,582 |            |  | $           | 532,388 |         |  | $              | 448,544 |                 |  | $                 | 143,952 |        |  | $   | 13,502 |           |  | $     | 1,478,968 | 
|                            |                             |                   | Total allowance         |  |                           | 35,899  |            |  |             | 25,033  |         |  |                | 22,029  |                 |  |                   | 14,168  |        |  |     | 1,265  |           |  |       | 98,394    | 
|                            |                             |                   |                         |  |                           |         |            |  |             |         |         |  |                |         |                 |  |                   |         |        |  |     |        |           |  |       |           | 

The Companys allowance for loan losses is the sum of specific reserves under
SFAS No.114, Accounting by Creditors for Impairment of a Loan, and a general
reserve of groups of loans with similar risk characteristics under SFAS No. 5,
Accounting for Contingencies. The components used in determining the
allowance level include (a) a component estimated based on historical loss by
payment status, (b) components based on legal status including bankruptcy or
death and (c) other components based on loan attributes. Historical loss
experience is adjusted for observable data on bankruptcies and unemployment.

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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5. Purchased Loans Receivable

Nissin Servicer Co., Ltd., a wholly owned subsidiary, was incorporated on July
11, 2001, and started its business on October 25, 2001. Nissin Servicer
purchases distressed loans from financial institutions and services these
loans. Nissin Servicer does not service loans owned by third parties. Nissin
Servicers intention is to renegotiate the terms of the loan with the borrower,
carry and service the loan through maturity. These loans are normally
collateralized or carry personal guarantees. A summary of purchased loans at
March 31, 2002 and 2003 is as follows:

2002:

|                |  |                 |         |           |  |           |      |          |  |             |     |           |  |                |     |  |  |  |       |  |  |  |       |  |  |  |      | 
|--------------- |  | --------------- | ------- | --------- |  | --------- | ---- | -------- |  | ----------- | --- | --------- |  | -------------- | --- |  |  |  | ----- |  |  |  | ----- |  |  |  | ---- | 
|                |  | Millions of Yen
|                |  |                
|                |  |                 |         |           |  |           |      |          |  | Collections |     |           |  |                |     |  |  |  |       |  |  | 
|                |  |                 |         |           |  |           |      |          |  |             |     |           |  |                |     |  |  |  |       |  |  | 
|                |  | Contract        |         | Purchased |  |           |      |          |  |             |     |           |  |                |     |  |  |  |       |  |  |  |       | 
|                |  | Amount          |         | Amount    |  | Principal |      | Interest |  | Charge-offs |     | Allowance |  | Carrying Value
|                |  |                 |         |           |  |           |      |          |  |             |     |           |  |               
|Purchased loans |  |                 | ¥84,079 |           |  |           | ¥403 |          |  |             | ¥23 |           |  |                | ¥10 |  |  |  | ¥    |  |  |  | ¥    |  |  |  | ¥380 | 

2003:

|                |  |                 |          |           |  |           |        |          |  |             |        |           |  |                |      |  |  |  |     |  |  |  |      |  |  |  |        | 
|--------------- |  | --------------- | -------- | --------- |  | --------- | ------ | -------- |  | ----------- | ------ | --------- |  | -------------- | ---- |  |  |  | --- |  |  |  | ---- |  |  |  | ------ | 
|                |  | Millions of Yen
|                |  |                
|                |  |                 |          |           |  |           |        |          |  | Collections |        |           |  |                |      |  |  |  |     |  |  | 
|                |  |                 |          |           |  |           |        |          |  |             |        |           |  |                |      |  |  |  |     |  |  | 
|                |  | Contract        |          | Purchased |  |           |        |          |  |             |        |           |  |                |      |  |  |  |     |  |  |  |      | 
|                |  | Amount          |          | Amount    |  | Principal |        | Interest |  | Charge-offs |        | Allowance |  | Carrying Value
|                |  |                 |          |           |  |           |        |          |  |             |        |           |  |               
|Purchased loans |  |                 | ¥411,966 |           |  |           | ¥5,234 |          |  |             | ¥2,145 |           |  |                | ¥712 |  |  |  | ¥12 |  |  |  | ¥131 |  |  |  | ¥2,946 | 

|                |  |                           |           |           |  |           |        |          |  |             |        |           |  |                |       |  |  |   |     |  |  |   |       |  |  |   |        | 
|--------------- |  | ------------------------- | --------- | --------- |  | --------- | ------ | -------- |  | ----------- | ------ | --------- |  | -------------- | ----- |  |  | - | --- |  |  | - | ----- |  |  | - | ------ | 
|                |  | Thousands of U.S. Dollars
|                |  |                          
|                |  |                           |           |           |  |           |        |          |  | Collections |        |           |  |                |       |  |  |   |     |  |  |  
|                |  |                           |           |           |  |           |        |          |  |             |        |           |  |                |       |  |  |   |     |  |  |  
|                |  | Contract                  |           | Purchased |  |           |        |          |  |             |        |           |  |                |       |  |  |   |     |  |  |   |       | 
|                |  | Amount                    |           | Amount    |  | Principal |        | Interest |  | Charge-offs |        | Allowance |  | Carrying Value
|                |  |                           |           |           |  |           |        |          |  |             |        |           |  |               
|Purchased loans |  | $                         | 3,427,338 |           |  | $         | 43,544 |          |  | $           | 17,845 |           |  | $              | 5,923 |  |  | $ | 100 |  |  | $ | 1,090 |  |  | $ | 24,509 | 

6. Investment Securities

Investment securities as of March 31, 2002 and 2003 consist of marketable and
private securities. All marketable investment securities are classified as
available-for-sale in accordance with SFAS No. 115. During the years ended
March 31, 2001, 2002 and 2003, the proceeds from sales of available-for-sale
securities were ¥650 million, ¥760 million and ¥1,057 million ($8,794
thousand), respectively. On those sales, gross realized gains computed on the
average cost basis were ¥162 million, ¥33 million and ¥114 million ($948
thousand) and gross realized losses were ¥198 million, ¥40 million and ¥82
million ($682 thousand), respectively. The aggregate cost and fair value of
available-for-sale securities as of March 31, 2002 and 2003 is as follows:

2002:

|                  |  |                 |         |       |  |            |       |            |  |  |       |  |  |  |         | 
|----------------- |  | --------------- | ------- | ----- |  | ---------- | ----- | ---------- |  |  | ----- |  |  |  | ------- | 
|                  |  | Millions of Yen |        
|                  |  |                 |        
|                  |  |                 |         |       |  | Gross      |       | Gross      |  |  |       |  | 
|                  |  |                 |         |       |  | Unrealized |       | Unrealized |  |  |       |  | 
|                  |  | Cost            |         | Gains |  | Losses     |       | Fair Value | 
|                  |  |                 |         |       |  |            |       |            | 
|Equity securities |  |                 | ¥ 2,779 |       |  |            | ¥ 412 |            |  |  | ¥ 139 |  |  |  | ¥ 3,052 | 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2003:

|                  |  |                 |         |                           |  |            |       |            |  |      |      |       |  |        |         |            |  |            |        |            |  |   |       |  |  |   |     |  |  |   |        | 
|----------------- |  | --------------- | ------- | ------------------------- |  | ---------- | ----- | ---------- |  | ---- | ---- | ----- |  | ------ | ------- | ---------- |  | ---------- | ------ | ---------- |  | - | ----- |  |  | - | --- |  |  | - | ------ | 
|                  |  | Millions of Yen |         | Thousands of U.S. Dollars
|                  |  |                 |         |                          
|                  |  |                 |         |                           |  | Gross      |       | Gross      |  |      |      |       |  |        |         |            |  | Gross      |        | Gross      |  |   |       | 
|                  |  |                 |         |                           |  | Unrealized |       | Unrealized |  |      |      |       |  |        |         |            |  | Unrealized |        | Unrealized |  |   |       | 
|                  |  | Cost            |         | Gains                     |  | Losses     |       | Fair Value |  | Cost |      | Gains |  | Losses |         | Fair Value
|                  |  |                 |         |                           |  |            |       |            |  |      |      |       |  |        |         |           
|Equity securities |  |                 | ¥ 1,388 |                           |  |            | ¥ 133 |            |  |      | ¥ 14 |       |  |        | ¥ 1,507 |            |  | $          | 11,548 |            |  | $ | 1,106 |  |  | $ | 116 |  |  | $ | 12,538 | 

As of March 31, 2002 and 2003, private equity securities of ¥906 million and
¥720 million ($5,990 thousand) are included in investment securities at cost
which approximates fair value, respectively.

In addition, as of March 31, 2003, private debt securities of ¥7 million ($58
thousand) are included in investment securities at cost which approximates fair
value.

Management believes that there was a permanent impairment in value of the
marketable securities and private securities on March 31, 2001, 2002 and 2003
of approximately ¥566 million, ¥599 million and ¥1,005 million ($8,361
thousand), respectively. The impairments are included in Losses on investment
securities, net in the consolidated statements of income.

7. Investment in Affiliates

In March 2001, the Company acquired a 25% interest in E*Netcard Co., Ltd., a
Japanese Internet-based developer, for ¥300 million.
E*Netcard Co., Ltd. subsequently changed its name to Ascot Co., Ltd.

On December 20, 2001, NISSIN invested ¥20 million for a 20%
interest in Swan Credit Co., Ltd., a private Japanese corporation incorporated
on August 24, 2001 for the purpose of providing loans to small business owners
and sole proprietors.

On May 27, 2002, NISSIN made an additional investment of ¥410 million ($3,411
thousand) to BB Net Corp. As a result, NISSIN has 20.6% interest for ¥513
million ($4,268 thousand). BB Net Corp., a Japanese corporation listed on
Hercules Market (a market focused on high-growth and emerging stocks) of the
Osaka Securities Exchange, is incorporated on March 27, 2000 for the purpose of
providing raw materials and other support services for small business owners.

On October 18, 2002, NISSIN invested ¥125 million ($1,040 thousand) for a 25%
interest in Shinsei Business Finance, Co., Ltd., a private Japanese corporation
launch on November 1, 2002 for the purpose of providing loans to small
corporations.

On July 22, 2002, NISSIN entered into an equity exchange agreement with i-cf,
Inc. under which Webcashing.com Co., Ltd., a wholly-owned subsidiary of NISSIN,
was sold to i-cf, Inc. in exchange for a 17.7% interest or 2,476 shares of
i-cf, Inc. The sale was completed on November 1, 2002 resulting in i-cf, Inc.
becoming an affiliate. i-cf, Inc. is a Japanese corporation providing
Internet-related services and is listed on the Mothers Market (a market focused
on high-growth and emerging stocks) of the Tokyo Stock Exchange. Since
Webcashing.com Co., Ltd., which became a significant subsidiary wholly-owned by
i-cf, Inc., has significant revenue from NISSIN, NISSIN believes that it has an
ability to exercise significant influence over i-cf, Inc.

As of March 31, 2002 and 2003, the aggregate net assets of affiliates owned by
NISSIN is approximately ¥259 million and ¥742 million ($6,173 thousand),
respectively.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

8. Sale of subsidiaries

As discussed in note 7, NISSIN sold its interest in Webcashing.com Co., Ltd.
through an equity exchange agreement with i-cf, Inc. The sale was completed on
November 1, 2002 resulting in the receipt of stock valued at ¥545 million
($4,534 thousand) and a gain of ¥334 million ($2,779 thousand).

On March 11, 2003, NISSIN sold a portion of its shares of Future Create Inc., a
51.22% previously owned subsidiary of NISSIN, for ¥105 million ($874 thousand)
and recognized a loss of ¥10 million ($83 thousand). As a result, NISSIN owns
only 17.07% of Future Create Inc. and accounts for it as its investment under
the cost method.

9. Valuation of Goodwill

During the year ended March 31, 2003, the Company determined that goodwill
associated with Ascot Co., Ltd., a 25% owned equity-method investment, BB Net
Corp., a 20.6% owned equity-method investment, and Swan Credit Co., Ltd., a 20%
owned equity-method investment, was impaired based on recent operating results
and activity of those companies. Accordingly, the Company wrote-off the
balance of ¥179 million ($1,489 thousand), ¥282 million ($2,346 thousand) and
¥4 million ($33 thousand), respectively.

In addition, during the year ended March 31, 2003, the Company determined that
goodwill associated with i-cf, Inc., a 17.7% owned equity-method investment,
was impaired based on the significant stock price decrease and expected
reduction of future operating activity of i-cf, Inc. Accordingly, the Company
wrote-off the balance of goodwill totaling ¥218 million ($1,814 thousand).

As of March 31, 2003, the Company had no remaining goodwill.

10. Short-Term and Long-Term Borrowings

Short-term borrowing as of March 31, 2002 and 2003 comprise the following:

|                            |  |                 |        |              |  |      |        |  |  |              |        | 
|--------------------------- |  | --------------- | ------ | ------------ |  | ---- | ------ |  |  | ------------ | ------ | 
|                            |  |                 |        |              |  |      |        |  |  | Thousands of
|                            |  | Millions of Yen |        | U.S. Dollars
|                            |  |                 |        |             
|                            |  | 2002            |        | 2003         |  | 2003
|                            |  |                 |        |              |  |     
|Bank loans                  |  |                 | ¥1,400 |              |  |      | ¥3,200 |  |  | $            | 26,622 | 
|Commercial paper            |  |                 |       |              |  |      | 2,400  |  |  |              | 19,967 | 
|                            |  |                 |        |              |  |      |        |  |  |              |        | 
|Total short-term borrowings |  |                 | ¥1,400 |              |  |      | ¥5,600 |  |  | $            | 46,589 | 
|                            |  |                 |        |              |  |      |        |  |  |              |        | 

Interest rates on bank loans as of March 31, 2002 and 2003 are fixed under
contract ranging from 2.012% to 2.400% and from 1.998% to 2.500%, with weighted
average interest rate of these bank loans on the fiscal year end balances are
2.233% and 2.039%, respectively. Interest rate on commercial paper as of March
31, 2003 range from 1.100% to 1.330% and weighted average interest rate of the
commercial paper on the fiscal year end balances is 1.227%. All short-term
borrowings have terms ranging from 3 months to 12 months and are usually
renewed at maturity subject to renegotiation of interest rates and other
factors.

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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Long-term borrowing as of March 31, 2002 and 2003 comprise the following:

|                                                                                                                                                                        |          |  |                 |  |              |  |          |  |  |   |              |  | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- |  | --------------- |  | ------------ |  | -------- |  |  | - | ------------ |  | 
|                                                                                                                                                                        |          |  |                 |  |              |  |          |  |  |   | Thousands of
|                                                                                                                                                                        |          |  | Millions of Yen |  | U.S. Dollars
|                                                                                                                                                                        |          |  |                 |  |             
|                                                                                                                                                                        |          |  | 2002            |  | 2003         |  | 2003    
|                                                                                                                                                                        |          |  |                 |  |              |  |         
|3.80% unsecured bonds, due June 13, 2002                                                                                                                                |          |  | ¥3,000          |  |              |  | ¥       |  |  | $ |             | 
|3.00% unsecured bonds, due September 27, 2002                                                                                                                           |          |  | 10,000          |  |              |  |         |  |  |   |             | 
|3.00% unsecured bonds, due April 20, 2004                                                                                                                               |          |  | 10,000          |  |              |  | 10,000   |  |  |   | 83,195       | 
|3.32% unsecured bonds, due April 11, 2003                                                                                                                               |          |  | 5,000           |  |              |  | 5,000    |  |  |   | 41,597       | 
|2.45% unsecured bonds, due March 28, 2005                                                                                                                               |          |  | 10,000          |  |              |  | 10,000   |  |  |   | 83,195       | 
|2.30% unsecured bonds with warrants, due April 20, 2004 (A)                                                                                                             |          |  | 1,500           |  |              |  | 1,500    |  |  |   | 12,479       | 
|2.35% unsecured bonds, due November 1, 2005                                                                                                                             |          |  |                |  |              |  | 5,000    |  |  |   | 41,597       | 
|1.70% unsecured convertible bonds, due September 29, 2006 (B)                                                                                                           |          |  | 10,000          |  |              |  | 10,000   |  |  |   | 83,195       | 
|                                                                                                                                                                        |          |  |                 |  |              |  |          |  |  |   |              | 
|Total bonds                                                                                                                                                             |          |  | 49,500          |  |              |  | 41,500   |  |  |   | 345,258      | 
|                                                                                                                                                                        |          |  |                 |  |              |  |          |  |  |   |              | 
|Loans from banks and other financial institutions                                                                                                                       |          |  |                 |  |              |  |          |  |  |   |              | 
|                                                                                                                                                                        | Secured: |  |                 |  |              |  |          |  |  |   |              |  | 
|Due 2002 to 2009 with fixed interest rates ranging from
2.175% to 5.500% per annum, weighted average actual rate is
2.642%                                              |          |  | 14,896          |  |              |  |         |  |  |   |             | 
|Due 2003 to 2009 with fixed interest rates ranging from
1.800% to 5.200% per annum, weighted average actual rate is
2.459%                                              |          |  |                |  |              |  | 20,743   |  |  |   | 172,571      | 
|Due 2002 to 2006 with floating interest rates principally
based on Long-term Prime Rate (LTPR) plus -0.100% to 2.700%
per annum, weighted average actual rate is 3.063% |          |  | 34,502          |  |              |  |         |  |  |   |             | 
|Due 2003 to 2007 with floating interest rates principally
based on LTPR plus 0.000% to 2.750% per annum, weighted
average actual rate is 2.328%                         |          |  |                |  |              |  | 30,920   |  |  |   | 257,238      | 
|Unsecured:                                                                                                                                                              |          |  |                 |  |              |  |          |  |  |   |              | 
|Due 2002 to 2005 with fixed interest rates ranging from
2.25% to 4.000% per annum, weighted average actual rate is
2.603%                                               |          |  | 10,536          |  |              |  |         |  |  |   |             | 
|Due 2003 to 2006 with fixed interest rates ranging from
1.650% to 2.850% per annum, weighted average actual rate is
2.527%                                              |          |  |                |  |              |  | 22,053   |  |  |   | 183,469      | 
|Due 2002 to 2005 with floating interest rates based on LTPR
plus 0.000% to 1.500% per annum, weighted average actual
rate is 2.510%                                     |          |  | 19,225          |  |              |  |         |  |  |   |             | 
|Due 2004 to 2006 with floating interest rates based on LTPR
plus 0.500% to 1.575% per annum, weighted average actual
rate is 2.395%                                     |          |  |                |  |              |  | 33,379   |  |  |   | 277,695      | 
|                                                                                                                                                                        |          |  |                 |  |              |  |          |  |  |   |              | 
|Total loans from banks and other financial institutions                                                                                                                 |          |  | 79,159          |  |              |  | 107,095  |  |  |   | 890,973      | 
|                                                                                                                                                                        |          |  |                 |  |              |  |          |  |  |   |              | 
|Total long-term borrowings                                                                                                                                              |          |  | ¥128,659        |  |              |  | ¥148,595 |  |  | $ | 1,236,231    | 
|                                                                                                                                                                        |          |  |                 |  |              |  |          |  |  |   |              | 



---

|(A) |  | Under NISSINs incentive warrant plan and as a part of NISSINs normal
funding activity, on April 20, 2001, NISSIN issued ¥1.5 billion ($12.48
million) of 2.3% unsecured bonds with detachable warrants to purchase
2,598 thousand shares of common stock at an exercise price of ¥577.50
($4.80) per share. These warrants were immediately repurchased at their
deemed fair value in order to be granted as compensation to directors and
selected employees of NISSIN. The issuance price of the bond was
¥1,088,000 ($9,051.58) per ¥1,000,000 ($8,319.47), of which ¥88,000 ($732.11) was attributable to the fair value of warrants. The exercise
period of the warrant is from July 2, 2001 through April 19, 2004. The bond
will mature on April 20, 2004.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



|(B) |  | On September 13, 2001, NISSIN issued ¥10 billion ($83.19 million) of 1.7%
unsecured convertible bonds issued at par and redeemable on September 29,
2006. The conversion price is ¥785.00 ($6.53) per share of common stock.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of March 31, 2002 and 2003, the weighted average rates of loans from banks
and other financial institutions were 2.788% and 2.415%, respectively.

The Company has ¥6,429 million in long-term notes included in the table above
as of March 31, 2002 which require the Company to deposit ¥1,500 million in a
bank as restricted cash and maintain certain coverage ratios, such as
maintaining at least a 20% ratio of net worth to liabilities, as to underlying
collateral. During the year ended March 31, 2003, those long-term notes were
repaid. Remaining restricted cash relates to loans discussed below.

During the year ended March 31, 2003, NISSIN entrusted loans outstanding to a
trust bank. In order to raise funds, the Company sold its senior beneficiary
interest in loans outstanding in trust to a third party. These transactions
are a legal sale under Japanese law. 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 funds are recognized as a long-term liability related interest.
As of March 31, 2003, entrusted loans outstanding of ¥4,573 million ($38,045
thousand) were included in loans receivable, and the related long-term
liability of ¥3,574 million ($29,734 thousand) were recorded in loans from
banks and other financial institutions.

The aggregate future annual maturities of bonds, long-term loans from banks and
other financial institutions as of March 31, 2003 are as follows:

|                            |  |                 |            |              |  |              |           | 
|--------------------------- |  | --------------- | ---------- | ------------ |  | ------------ | --------- | 
|                            |  |                 |            |              |  | Thousands of
|                            |  | Millions of Yen |            | U.S. Dollars
|                            |  |                 |            |             
|Year ending March 31:       |  |                 |            |              |  |              |           | 
|2004                        |  |                 | ¥   58,559 |              |  | $            | 487,180   | 
|2005                        |  |                 | 56,297     |              |  |              | 468,361   | 
|2006                        |  |                 | 20,324     |              |  |              | 169,085   | 
|2007                        |  |                 | 10,836     |              |  |              | 90,150    | 
|2008 and thereafter         |  |                 | 2,579      |              |  |              | 21,455    | 
|                            |  |                 |            |              |  |              |           | 
|Total long-term borrowings: |  |                 | ¥148,595   |              |  | $            | 1,236,231 | 
|                            |  |                 |            |              |  |              |           | 

Under some of its borrowing arrangements, the Company has pledged certain
assets as collateral. The bank may obtain this collateral in the event of
financial default. Financial default includes missed or delinquent payments as
provided for in the loan agreements.
The following assets were pledged for short and long-term borrowings as
collateral, as of March 31, 2003.

|                                   |  |                 |         |              |  |              |         | 
|---------------------------------- |  | --------------- | ------- | ------------ |  | ------------ | ------- | 
|                                   |  |                 |         |              |  | Thousands of
|                                   |  | Millions of Yen |         | U.S. Dollars
|                                   |  |                 |         |             
|Loans receivable                   |  |                 | ¥38,859 |              |  | $            | 323,286 | 
|Long-lived assets                  |  |                 | 728     |              |  |              | 6,057   | 
|Investment in securities           |  |                 | 34      |              |  |              | 283     | 
|Insurance policy                   |  |                 | 31      |              |  |              | 258     | 
|                                   |  |                 |         |              |  |              |         | 
|Total assets pledged as collateral |  |                 | ¥39,652 |              |  | $            | 329,884 | 
|                                   |  |                 |         |              |  |              |         | 

F-24



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

11. Lease Obligations

The Company leases office space under operating lease agreements. These
agreements are all cancelable by the Company with six months advance notice.
Total rent under operating lease agreements was approximately ¥853 million, ¥878 million and ¥881 million ($7,329 thousand) for the years ended March 31,
2001, 2002 and 2003, respectively.

The minimum rental assuming no cancellation on operating lease payments that
have initial lease terms in excess of one year as of March 31, 2003 are as
follows:

|                             |  |                 |         |              |  |              |       | 
|---------------------------- |  | --------------- | ------- | ------------ |  | ------------ | ----- | 
|                             |  |                 |         |              |  | Thousands of
|                             |  | Millions of Yen |         | U.S. Dollars
|                             |  |                 |         |             
|Year ending March 31:        |  |                 |         |              |  |              |       | 
|2004                         |  |                 | ¥   732 |              |  | $            | 6,090 | 
|2005                         |  |                 | 304     |              |  |              | 2,529 | 
|2006                         |  |                 | 2       |              |  |              | 17    | 
|                             |  |                 |         |              |  |              |       | 
|Total minimum future rentals |  |                 | ¥1,038  |              |  | $            | 8,636 | 
|                             |  |                 |         |              |  |              |       | 

The Company leases certain equipment,
software and vehicles under capital leases.

Acquisition costs and accumulated amortization of leased assets as of March 31,
2002 and 2003 are as follows:

|                         |  |                 |        |              |  |      |        |   |  |             |         |  
|------------------------ |  | --------------- | ------ | ------------ |  | ---- | ------ | - |  | ----------- | ------- | -
|                         |  |                 |        |              |  |      |        |   |  | Thousand of
|                         |  | Millions of Yen |        | U.S. Dollars
|                         |  |                 |        |             
|                         |  | 2002            |        | 2003         |  | 2003
|                         |  |                 |        |              |  |     
|Acquisition costs        |  |                 | ¥3,709 |              |  |      | ¥3,374 |   |  | $           | 28,070  |  
|Accumulated amortization |  |                 | (2,088 | )            |  |      | (1,487 | ) |  |             | (12,371 | )
|                         |  |                 |        |              |  |      |        |   |  |             |         |  
|Net leased property      |  |                 | ¥1,621 |              |  |      | ¥1,887 |   |  | $           | 15,699  |  
|                         |  |                 |        |              |  |      |        |   |  |             |         |  

Future minimum lease payments for the above assets under capital leases as of
March 31, 2003 are as follows:

|                                        |      |  |                 |      |              |   |              |       | 
|--------------------------------------- | ---- |  | --------------- | ---- | ------------ | - | ------------ | ----- | 
|                                        |      |  |                 |      |              |   | Thousands of
|                                        |      |  | Millions of Yen |      | U.S. Dollars
|                                        |      |  |                 |      |             
|Year ending March 31:                   |      |  |                 |      |              |   |              |      
|                                        | 2004 |  |                 | ¥690 |              |   | $            | 5,740 | 
|                                        | 2005 |  |                 | 527  |              |   |              | 4,384 | 
|                                        | 2006 |  |                 | 413  |              |   |              | 3,436 | 
|                                        | 2007 |  |                 | 297  |              |   |              | 2,471 | 
|                                        | 2008 |  |                 | 51   |              |   |              | 424   | 
|                                        |      |  |                 |      |              |   |              |       | 
|Total minimum lease payments            |      |  | 1,978           |      |              |   | 16,455       |      
|Less: Amount representing interest      |      |  | (64             | )    |              |   | (532         | )    
|                                        |      |  |                 |      |              |   |              |       | 
|Present value of minimum lease payments |      |  | 1,914           |      |              |   | 15,923       |      
|Less: Current portion                   |      |  | (659            | )    |              |   | (5,482       | )    
|                                        |      |  |                 |      |              |   |              |       | 
|Long-term capital lease obligations     |      |  | ¥1,255          |      |              | $ | 10,441       |      
|                                        |      |  |                 |      |              |   |              |       | 

F-25



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. Retirement Plans  Employee, Director and Statutory Auditor

The Company sponsored pension and retirement plans for the Companys employees,
which the Company terminated on March 31, 2002. Benefits under these plans
were generally determined based on amounts of compensation, years of service
and voluntary or involuntary termination. Involuntary terminations include
retirement at the normal retirement age of 60.
The Company had the following types of plans:

| |                     |                                               
| | ------------------- | ----------------------------------------------
| | Unfunded Plans:    
| |                     | Employee severance plan                       
| |                     | Director and statutory auditor retirement plan
| | Fully-funded Plans:
| |                     | Non-contributory funded pension plan          

Under the unfunded plans, employees were entitled to either lump-sum payments
at the time of termination of their employment or to annuity payments.
Directors and statutory auditors were not covered by the employee plan but were
covered by a director and statutory auditor plan. Accrued retirement benefits
are unpaid retirement benefits for both employees and directors and statutory
auditors at March 31, 2002 and for directors and statutory auditors only at
March 31,2003.

Under the non-contributory funded pension plan, the Company contributes based
on participating employees. Amounts paid by the Company for the
non-contributory plan totaled ¥11 million and ¥11 million for the years ended
March 31, 2001 and 2002, respectively. Due to the termination of the
non-contributory plan, there are no payments for the year ended March 31, 2003.

The employee severance plan, director and statutory auditor retirement plan and
the non-contributory funded plan were terminated as follows:

Directors and Statutory Auditors:This retirement plan was terminated
effective April 1, 1999 and the retirement liability as of March 31, 1999 will
be paid at the time of retirement from the Company.

Employees:The Company announced the termination in November 2001 and was
effective March 31, 2002. Total retirement benefits as of March 31, 2002 were
 ¥210 million, ¥165 million of which would be provided by the retirement plan.
The remainder of ¥45 million was included in accrued benefit liabilities in the
balance sheet together with the portion for directors and statutory auditors.
All liabilities were paid on April 25, 2002.

The components of net pension and severance costs for the unfunded plans and
non-contributory funded pension plan for the years ended March 31, 2001, 2002
and 2003 were as follows:

|                               |  |                 |     |              |  |      |     |      |  |  |     |  |  |              |   | 
|------------------------------ |  | --------------- | --- | ------------ |  | ---- | --- | ---- |  |  | --- |  |  | ------------ | - | 
|                               |  |                 |     |              |  |      |     |      |  |  |     |  |  | Thousands of
|                               |  | Millions of Yen |     | U.S. Dollars
|                               |  |                 |     |             
|                               |  | 2001            |     | 2002         |  | 2003 |     | 2003
|                               |  |                 |     |              |  |      |     |     
|Service cost                   |  |                 | ¥66 |              |  |      | ¥54 |      |  |  | ¥  |  |  | $            |  | 
|Interest cost                  |  |                 | 6   |              |  |      | 6   |      |  |  |    |  |  |              |  | 
|Expected return on plan
assets |  |                 | (3  | )            |  |      | (3  | )    |  |  |    |  |  |              |  | 
|                               |  |                 |     |              |  |      |     |      |  |  |     |  |  |              |   | 
|Net periodic cost              |  |                 | ¥69 |              |  |      | ¥57 |      |  |  | ¥  |  |  | $            |  | 
|                               |  |                 |     |              |  |      |     |      |  |  |     |  |  |              |   | 

F-26



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The status of benefit obligations and plan assets as of March 31, 2002 and 2003
are as follows:

Change in benefit obligation:

|                                        |  |                 |      |              |  |      |      |   |  |              |        |  
|--------------------------------------- |  | --------------- | ---- | ------------ |  | ---- | ---- | - |  | ------------ | ------ | -
|                                        |  |                 |      |              |  |      |      |   |  | Thousands of
|                                        |  | Millions of Yen |      | U.S. Dollars
|                                        |  |                 |      |             
|                                        |  | 2002            |      | 2003         |  | 2003
|                                        |  |                 |      |              |  |     
|Benefit obligation at beginning of year |  |                 | ¥559 |              |  |      | ¥582 |   |  | $            | 4,842  |  
|Service cost                            |  |                 | 54   |              |  |      |     |   |  |              |       |  
|Interest cost                           |  |                 | 6    |              |  |      |     |   |  |              |       |  
|Actuarial loss                          |  |                 | (3   | )            |  |      |     |   |  |              |       |  
|Benefit paid                            |  |                 | (34  | )            |  |      | (246 | ) |  |              | (2,047 | )
|                                        |  |                 |      |              |  |      |      |   |  |              |        |  
|Benefit obligation at end of year       |  |                 | ¥582 |              |  |      | ¥336 |   |  | $            | 2,795  |  
|                                        |  |                 |      |              |  |      |      |   |  |              |        |  

Assumptions used for benefit obligations above as of March 31, 2001, 2002 and
2003 are as follows:

|                               |  |             |     |      |  |      |     |   |  |  |   |  
|------------------------------ |  | ----------- | --- | ---- |  | ---- | --- | - |  |  | - | -
|                               |  | Percentages
|                               |  |            
|                               |  | 2001        |     | 2002 |  | 2003
|                               |  |             |     |      |  |     
|Discount rate                  |  |             | 3.0 | %    |  |      | 3.0 | % |  |  |  | %
|Rate of compensation increase  |  |             | 4.0 |      |  |      | 4.0 |   |  |  |  |  
|Expected return on plan assets |  |             | 2.0 |      |  |      | 2.0 |   |  |  |  |  

Change in plan assets:

|                                               |  |                 |      |              |  |      |      |   |  |              |        |  
|---------------------------------------------- |  | --------------- | ---- | ------------ |  | ---- | ---- | - |  | ------------ | ------ | -
|                                               |  |                 |      |              |  |      |      |   |  | Thousands of
|                                               |  | Millions of Yen |      | U.S. Dollars
|                                               |  |                 |      |             
|                                               |  | 2002            |      | 2003         |  | 2003
|                                               |  |                 |      |              |  |     
|Fair value of plan assets at beginning of year |  |                 | ¥167 |              |  |      | ¥165 |   |  | $            | 1,373  |  
|Actual return on plan assets                   |  |                 | 3    |              |  |      |     |   |  |              |       |  
|Actuarial loss                                 |  |                 | (15  | )            |  |      |     |   |  |              |       |  
|Contribution                                   |  |                 | 10   |              |  |      |     |   |  |              |       |  
|Assets paid                                    |  |                 |     |              |  |      | (165 | ) |  |              | (1,373 | )
|                                               |  |                 |      |              |  |      |      |   |  |              |        |  
|Fair value of plan assets at end of year       |  |                 | ¥165 |              |  |      | ¥   |   |  | $            |       |  
|                                               |  |                 |      |              |  |      |      |   |  |              |        |  

Total recognized liabilities in the balance sheets:

|                                     |  |                 |      |              |  |      |      |  |  |              |       | 
|------------------------------------ |  | --------------- | ---- | ------------ |  | ---- | ---- |  |  | ------------ | ----- | 
|                                     |  |                 |      |              |  |      |      |  |  | Thousands of
|                                     |  | Millions of Yen |      | U.S. Dollars
|                                     |  |                 |      |             
|                                     |  | 2002            |      | 2003         |  | 2003
|                                     |  |                 |      |              |  |     
|Employees                            |  |                 | ¥45  |              |  |      | ¥   |  |  | $            |      | 
|Directors and statutory auditors     |  |                 | 372  |              |  |      | 336  |  |  |              | 2,795 | 
|Obligations in excess of plan assets |  |                 | ¥417 |              |  |      | ¥336 |  |  | $            | 2,795 | 

In addition, the Company participates in the mandatory fully-funded
contributory funded plan under the Japanese Welfare Pension Insurance Law.
Under this plan, contributions are made by both the Company and its employees.
Amounts paid by the Company under this plan totaled ¥262 million, ¥308 million
and ¥331 million ($2,754 thousand) for the years ended March 31, 2001, 2002 and
2003, respectively.

F-27



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13. Derivative Financial Instruments and Risk Management

In order to reduce its exposure to fluctuations in interest rates on variable
rate borrowings, the Company utilizes derivative financial instruments such as
interest rate swap and interest rate cap contracts. The counter-parties to
these instruments are major international financial institutions with favorable
credit ratings, thereby reducing credit risk exposure for non-performance.

Effective April 1, 2001, the Company adopted SFAS No. 133. As of April 1,
2001, outstanding interest rate swap and cap agreements were considered to be
at least 80% effective in achieving offsetting changes in the cash flows of the
liabilities being hedged. The ineffective portion of the hedge instruments is
not considered significant and will be reflected as a direct charge to income
before income taxes of ¥71 million. The fair value of the effective portion of
the hedge instruments will be reflected as an unrealized loss in comprehensive
income and totaled approximately ¥165 million, net of income taxes. This
amount was amortized and recognized as interest expense over the remaining
contract terms through January 2003.

Derivative financial instruments outstanding as of March 31, 2002 are
summarized as follows:

Interest rate swap:

|           |  |                    |        |               |  |                 |  |          |  |                 |  |                 |     |          |  |  |     |   |      |   |  |  |      |  
|---------- |  | ------------------ | ------ | ------------- |  | --------------- |  | -------- |  | --------------- |  | --------------- | --- | -------- |  |  | --- | - | ---- | - |  |  | ---- | -
|           |  | Millions of Yen    |        | Interest Rate |  |                 |  |          |  | Millions of Yen
|           |  |                    |        |               |  |                 |  |          |  |                
|Number of  |  |                    |        |               |  |                 |  |          |  |                 |  |                 |     | Ultimate |  |  |     |   |      |   |  | 
|Agreements |  | Notional Principal |        | Pay           |  | Receive         |  | Maturity |  | Fair Value      |  | Deferred Amount
|           |  |                    |        |               |  |                 |  |          |  |                 |  |                
|1          |  |                    | ¥1,000 |               |  | Fixed at 3.870% |  | LTPR     |  | June 2002       |  |                 | ¥(4 | )        |  |  | ¥(3 | )
|3          |  |                    | 5,000  |               |  | Fixed at        |  | ¥LIBOR   |  | August 2002     |  |                 | (43 | )        |  |  | (35 | )
|           |  |                    |        |               |  | 1.775 to 1.995% |  |          |  |                 |  |                 |     |          |  |  |     |   |      |   |  | 
|4          |  |                    | ¥6,000 |               |  |                 |  |          |  |                 |  |                 |     |          |  |  |     |   | ¥(47 | ) |  |  | ¥(38 | )
|           |  |                    |        |               |  |                 |  |          |  |                 |  |                 |     |          |  |  |     |   |      |   |  |  |      |  

Interest rate cap:

|           |  |                    |         |               |  |      |  |          |  |              |       |             |      |            |  |                 |    |                 |      |  |    |  |     |  |     |   |    |  |  |  |      |  
|---------- |  | ------------------ | ------- | ------------- |  | ---- |  | -------- |  | ------------ | ----- | ----------- | ---- | ---------- |  | --------------- | -- | --------------- | ---- |  | -- |  | --- |  | --- | - | -- |  |  |  | ---- | -
|           |  |                    |         |               |  |      |  |          |  |              |       |             |      |            |  |                 |    | Millions of Yen
|           |  |                    |         |               |  |      |  |          |  |              |       |             |      |            |  |                 |    |                
|           |  | Millions of Yen    |         | Interest Rate |  |      |  |          |  | Cost         |       |             |      |            |  |                 |    |                
|           |  |                    |         |               |  |      |  |          |  |              |       |             |      |            |  |                 |    |                
|Number of  |  |                    |         |               |  |      |  |          |  |              |       |             |      | Ultimate   |  |                 |    |                 |      |  |    |  |     |  |     |   |    |  |  | 
|Agreements |  | Notional Principal |         | Base          |  | Cap  |  | Maturity |  | Paid         |       | Unamortized |      | Fair Value |  | Deferred Amount
|           |  |                    |         |               |  |      |  |          |  |              |       |             |      |            |  |                
|5          |  |                    | ¥5,000  |               |  | LTPR |  | 4.000 to |  | June 2002    |       |             | ¥130 |            |  |                 | ¥4 |                 |      |  | ¥0 |  |     |  | ¥(3 | )
|           |  |                    |         |               |  |      |  |          |  |              | 4.500 | %           |      |            |  |                 |    |                 |      |  |    |  |     |  |     |   |    |  |  |  |      |  
|8          |  |                    | 21,000  |               |  | 5YSR |  | 2.500 to |  | January 2003 |       |             | 452  |            |  |                 | 46 |                 |      |  | 0  |  |     |  | (37 | )
|           |  |                    |         |               |  |      |  |          |  |              | 3.000 | %           |      |            |  |                 |    |                 |      |  |    |  |     |  |     |   |    |  |  |  |      |  
|13         |  |                    | ¥26,000 |               |  |      |  |          |  |              |       |             |      |            |  |                 |    |                 | ¥582 |  |    |  | ¥50 |  |     |   | ¥0 |  |  |  | ¥(40 | )
|           |  |                    |         |               |  |      |  |          |  |              |       |             |      |            |  |                 |    |                 |      |  |    |  |     |  |     |   |    |  |  |  |      |  

|                                                               |  |  |        |  
|-------------------------------------------------------------- |  |  | ------ | -
|Applicable interest rates as of March 31, 2002 are as follows: |  |  |        |  
|                                                               |  |  |        |  
|LTPR                                                           |  |  | 2.3000 | %
|¥LIBOR (LIBOR Yen Rate for 3 Months)                           |  |  | 0.0875 | %
|5YSR (5-Year Swap Rate)                                        |  |  | 0.5610 | %

The notional amounts above are the underlying principal amounts used in
determining the interest swapped over the period of the swap

F-28



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

agreements or the interest to be received during the period of the cap
agreements and, therefore, they are not measures of the Companys exposure to
loss through its use of derivatives. The unamortized cost of interest rate cap
agreements above is included in other assets on the balance sheet. The fair
value is estimated based on quotes from market makers of these instruments and
represents the estimated amounts that the Company would expect to receive and
pay if the Company terminated the agreements as of March 31, 2002. These
instruments were considered to be at least 80% effective in achieving
offsetting changes in the cash flows of the liabilities being hedged.

During the year ended March 31, 2003, all derivative contracts were expired.
As of March 31, 2003 the Company does not have any outstanding derivative
contracts.

14. Stock-based Compensation

NISSIN has two types of stock-based compensation plans as incentive plans for
directors and selected employees.

Warrant Plan:

Under NISSINs incentive warrant plans, on April 23, 1999, NISSIN issued
unsecured bonds with detachable warrants. These warrants were immediately
repurchased at their fair market value and granted as compensation to directors
and selected employees in NISSIN. The warrants were convertible into
approximately 2,968 thousand shares of common stock at an exercise price of
¥330.00 per share. The exercise period of the warrants was from June
1, 1999 through April 20, 2001. The warrants were immediately exercisable at
the time of grant, but expired at the time of termination of employment with
NISSIN.

Under NISSINs incentive warrant plans, on April 20, 2001, NISSIN issued
unsecured bonds with detachable warrants. These warrants were immediately
repurchased at their fair market value and granted as compensation to directors
and selected employees in NISSIN. The warrants are convertible into
approximately 2,598 thousand shares of common stock at an exercise price of
¥577.50 ($4.80) per share. The exercise period of the warrant is from July 2,
2001 through April 19, 2004. The warrants are immediately exercisable at the
time of grant, but expire at the time of termination of employment with the
Company.

Stock Option Plan:

Following approval of the shareholders at NISSINs Annual Shareholders Meeting
on June 27, 2000, NISSIN granted share subscription rights to directors and
selected employees on July 11, 2000. Under this stock option plan, options to
purchase common stock of 2,070 thousand shares were granted at the exercise
price of ¥518.00 per share, which was priced at 110% of the closing
price of the day before the approval of grant, and were exercisable from November
1, 2000 and expired on October 31, 2002 or upon termination of
employment with NISSIN.

Following approval of the shareholders at NISSINs Annual Shareholders Meeting
on June 22, 2002, NISSIN granted share subscription rights to directors,
employees and temporary staff with tenure of over one year on September 10,
2002. Under this stock option plan, options to purchase common stock of 2,990
thousand shares were granted at the exercise price of ¥498.00 ($4.14) per
share, which was priced at 110% of the closing price of the day before the
approval of grant, and are exercisable from October 1, 2002 and
expire on September 30, 2005 or termination of employment with NISSIN.

Under APB 25, NISSIN recognized no compensation expense related to these grants
as no options were granted at a price below the market price on the day of
grant. The options automatically vest upon exercise.

A summary of NISSINs options and warrants changes during the years ended March
31, 2001, 2002 and 2003 is as follows:

F-29



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

|                              |                      |  |                  |        |                |  |                  |     |                           |  |      |     |  |   |      |      | 
|----------------------------- | -------------------- |  | ---------------- | ------ | -------------- |  | ---------------- | --- | ------------------------- |  | ---- | --- |  | - | ---- | ---- | 
|                              |                      |  |                  |        |                |  | Weighted-average |     | Weighted-average Exercise
|                              |                      |  | Number of Shares |        | Remaining Life |  | Price Per Shares
|                              |                      |  |                  |        |                |  |                 
|                              |                      |  | (Thousands)      |        | (Years)        |  | Yen              |     | U.S. Dollars             
|                              |                      |  |                  |        |                |  |                  |     |                          
|Outstanding at March 31, 2000 |                      |  | 1,608            |        |                |  | 1.1              |     |                           |  | ¥330 |     |  | $ | 2.75 |     
|                              | Granted              |  |                  | 2,070  |                |  |                  | 2.3 |                           |  |      | 518 |  |   |      | 4.31 | 
|                              | Exercised            |  |                  | (1,544 | )              |  |                  |    |                           |  |      | 330 |  |   |      | 2.75 | 
|                              | Expired or forfeited |  |                  | (138   | )              |  |                  |    |                           |  |      | 475 |  |   |      | 3.95 | 
|                              |                      |  |                  |        |                |  |                  |     |                           |  |      |     |  |   |      |     
|Outstanding at March 31, 2001 |                      |  | 1,996            |        |                |  | 1.6              |     |                           |  | 515  |     |  |   | 4.28 |     
|                              | Granted              |  |                  | 2,598  |                |  |                  | 2.1 |                           |  |      | 578 |  |   |      | 4.81 | 
|                              | Exercised            |  |                  | (1,712 | )              |  |                  |    |                           |  |      | 518 |  |   |      | 4.31 | 
|                              | Expired or forfeited |  |                  | (256   | )              |  |                  |    |                           |  |      | 528 |  |   |      | 4.39 | 
|                              |                      |  |                  |        |                |  |                  |     |                           |  |      |     |  |   |      |     
|Outstanding at March 31, 2002 |                      |  | 2,626            |        |                |  | 2.0              |     |                           |  | 574  |     |  |   | 4.78 |     
|                              | Granted              |  |                  | 2,990  |                |  |                  | 3.1 |                           |  |      | 498 |  |   |      | 4.14 | 
|                              | Exercised            |  |                  | (40    | )              |  |                  |    |                           |  |      | 498 |  |   |      | 4.14 | 
|                              | Expired or forfeited |  |                  | (523   | )              |  |                  |    |                           |  |      | 521 |  |   |      | 4.33 | 
|                              |                      |  |                  |        |                |  |                  |     |                           |  |      |     |  |   |      |     
|Outstanding at March 31, 2003 |                      |  | 5,053            |        |                |  | 1.8              |     |                           |  | ¥535 |     |  | $ | 4.45 |     
|                              |                      |  |                  |        |                |  |                  |     |                           |  |      |     |  |   |      |     

15. Related Party Transactions

The Company receives insurance agency services from an entity 100% owned by
NISSINs chairman and his relatives. Further the Company leases office space
to the same entity.

These transactions for the years ended March 31, 2001, 2002 and 2003 are
summarized as follows:

|                                |  |                 |     |              |  |      |     |      |  |  |     |  |  |              |     | 
|------------------------------- |  | --------------- | --- | ------------ |  | ---- | --- | ---- |  |  | --- |  |  | ------------ | --- | 
|                                |  |                 |     |              |  |      |     |      |  |  |     |  |  | Thousands of
|                                |  | Millions of Yen |     | U.S. Dollars
|                                |  |                 |     |             
|                                |  | 2001            |     | 2002         |  | 2003 |     | 2003
|                                |  |                 |     |              |  |      |     |     
|Insurance paid to related party |  |                 | ¥40 |              |  |      | ¥13 |      |  |  | ¥45 |  |  | $            | 374 | 
|Rent income from related party  |  |                 | 3   |              |  |      | 2   |      |  |  | 1   |  |  |              | 8   | 
|                                |  |                 |     |              |  |      |     |      |  |  |     |  |  |              |     | 

The Company leases office and parking space to an entity 93.3% owned by
NISSINs president and his relatives. Total rent received was  ¥2 million,  ¥6
million and  ¥4 million ($33 thousand) for the years ended March 31, 2001, 2002
and 2003, respectively.

On March 31, 2003, the Company received an advance of  ¥9 million ($75 thousand)
from relative of NISSINs chairman and president in connection with his
purchase of real estate property from the Company.

During the years ended March 31, 2002 and 2003, the Company paid commissions on
business introductions of  ¥21 million and  ¥ 33 million ($275 thousand) to Ascot
Co., Ltd., a 25% owned affiliate.

During the year ended March 31, 2003, the Company paid commissions on business
introductions of  ¥1 million ($8 thousand) to and received guarantee fees of  ¥4
million ($33 thousand) from Shinsei Business Finance, Co., Ltd., 25% owned
affiliate.

During the year ended March 31, 2003, the Company paid commissions for
successful referrals of  ¥424 million ($3,527 thousand) to Webcashing.com Co.,
Ltd. Webcashing.com Co., Ltd. is a significant wholly-owned subsidiary of
i-cf, Inc., a 17.7% owned affiliate.

F-30



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

16. Income Taxes

The components of income tax expense for the years ended March 31, 2001, 2002
and 2003 are as follows:

|             |          |  |                 |        |              |  |        |        |      |  |        |        |   |   |              |        |  
|------------ | -------- |  | --------------- | ------ | ------------ |  | ------ | ------ | ---- |  | ------ | ------ | - | - | ------------ | ------ | -
|             |          |  |                 |        |              |  |        |        |      |  |        |        |   |   | Thousands of
|             |          |  | Millions of Yen |        | U.S. Dollars
|             |          |  |                 |        |             
|             |          |  | 2001            |        | 2002         |  | 2003   |        | 2003
|             |          |  |                 |        |              |  |        |        |     
|Current:     |          |  |                 |        |              |  |        |        |      |  |        |        |   |   |              |       
|             | National |  |                 | ¥2,531 |              |  |        | ¥2,594 |      |  |        | ¥3,286 |   |   | $            | 27,338 |  
|             | Local    |  |                 | 1,420  |              |  |        | 1,436  |      |  |        | 1,804  |   |   |              | 15,008 |  
|             |          |  |                 |        |              |  |        |        |      |  |        |        |   |   |              |        |  
|             |          |  | 3,951           |        |              |  | 4,030  |        |      |  | 5,090  |        |   |   | 42,346       |       
|Deferred:    |          |  |                 |        |              |  |        |        |      |  |        |        |   |   |              |       
|             | National |  |                 | (121   | )            |  |        | (147   | )    |  |        | (753   | ) |   |              | (6,265 | )
|             | Local    |  |                 | (67    | )            |  |        | (82    | )    |  |        | (413   | ) |   |              | (3,435 | )
|             |          |  |                 |        |              |  |        |        |      |  |        |        |   |   |              |        |  
|             |          |  | (188            | )      |              |  | (229   | )      |      |  | (1,166 | )      |   |   | (9,700       | )     
|             |          |  |                 |        |              |  |        |        |      |  |        |        |   |   |              |        |  
|Income taxes |          |  | ¥3,763          |        |              |  | ¥3,801 |        |      |  | ¥3,924 |        |   | $ | 32,646       |       
|             |          |  |                 |        |              |  |        |        |      |  |        |        |   |   |              |        |  

The significant components of deferred tax assets as of March 31, 2002 and 2003
are as follows:

|                               |                                 |  |        |     |  |  |                 |       |              |   |        |        |  |  |              |  | 
|------------------------------ | ------------------------------- |  | ------ | --- |  |  | --------------- | ----- | ------------ | - | ------ | ------ |  |  | ------------ |  | 
|                               |                                 |  |        |     |  |  |                 |       |              |   |        |        |  |  | Thousands of
|                               |                                 |  |        |     |  |  | Millions of Yen |       | U.S. Dollars
|                               |                                 |  |        |     |  |  |                 |       |             
|                               |                                 |  |        |     |  |  | 2002            |       | 2003         |   | 2003  
|                               |                                 |  |        |     |  |  |                 |       |              |   |       
|Deferred tax assets:           |                                 |  |        |     |  |  |                 |       |              |   |        |       
|                               | Loans receivable charge-off     |  |        | ¥64 |  |  |                 | ¥70   |              |   | $      | 582    | 
|                               | Allowance for loan losses       |  |        | 867 |  |  |                 | 1,728 |              |   |        | 14,376 | 
|                               | Accrued local taxes             |  |        | 188 |  |  |                 | 261   |              |   |        | 2,171  | 
|                               | Accrued retirement benefit      |  |        | 155 |  |  |                 | 135   |              |   |        | 1,123  | 
|                               | Accrual salary expenses         |  |        | 174 |  |  |                 | 148   |              |   |        | 1,231  | 
|                               | Impairment of long-lived assets |  |        | 93  |  |  |                 | 164   |              |   |        | 1,364  | 
|                               | Investment securities           |  |        | 71  |  |  |                 | 206   |              |   |        | 1,714  | 
|                               | Other                           |  |        | 216 |  |  |                 | 117   |              |   |        | 975    | 
|                               |                                 |  |        |     |  |  |                 |       |              |   |        |        | 
|Total deferred tax assets      |                                 |  | 1,828  |     |  |  | 2,829           |       |              |   | 23,536 |       
|Deferred tax liabilities:      |                                 |  |        |     |  |  |                 |       |              |   |        |       
|                               | Bond issuance costs             |  |        | 206 |  |  |                 | 169   |              |   |        | 1,406  | 
|                               | Loan origination costs          |  |        | 413 |  |  |                 | 417   |              |   |        | 3,469  | 
|                               | Accumulated depreciation        |  |        | 65  |  |  |                 | 59    |              |   |        | 491    | 
|                               | Other                           |  |        | 1   |  |  |                 |      |              |   |        |       | 
|                               |                                 |  |        |     |  |  |                 |       |              |   |        |        | 
|Total deferred tax liabilities |                                 |  | 685    |     |  |  | 645             |       |              |   | 5,366  |       
|                               |                                 |  |        |     |  |  |                 |       |              |   |        |        | 
|Deferred tax assets, net       |                                 |  | ¥1,143 |     |  |  | ¥2,184          |       |              | $ | 18,170 |       
|                               |                                 |  |        |     |  |  |                 |       |              |   |        |        | 

The Company believes that it will fully realize its total deferred tax assets
as of March 31, 2003 based on the Companys history of taxable income.

F-31



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company is subject to national and local income taxes, which in the
aggregate result in a statutory tax rate of 41.8% for the years ended March 31,
2001, 2002 and 2003. Due to the change in Japanese tax regulations, the
statutory tax rate will be reduced from 41.8% to 40.4% effective April 1, 2004.
The respective newly enacted rate is used in calculating the future expected
tax effects of temporary differences as of March 31, 2003. The effect of the
change in the tax rate on deferred income tax assets and liabilities as of
March 31, 2003 is insignificant.

Reconciliation of the differences between the statutory tax rate and the
effective income tax rate for the years ended March 31, 2001, 2002 and 2003 are
as follows:

|                                              |                                         |  |      |     |      |  |      |     |  |  |      |      |  
|--------------------------------------------- | --------------------------------------- |  | ---- | --- | ---- |  | ---- | --- |  |  | ---- | ---- | -
|                                              |                                         |  | 2001 |     | 2002 |  | 2003
|                                              |                                         |  |      |     |      |  |     
|Statutory tax rate                            |                                         |  | 41.8 | %   |      |  | 41.8 | %   |  |  | 41.8 | %   
|Increase (reduction) in taxes resulting from: |                                         |  |      |     |      |  |      |     |  |  |      |     
|                                              | Expenses not deductible for tax purpose |  |      | 0.3 |      |  |      | 0.9 |  |  |      | 0.6  |  
|                                              | Per capita levy                         |  |      | 0.7 |      |  |      | 0.8 |  |  |      | 0.7  |  
|                                              | Effect of tax rate change               |  |      |    |      |  |      |    |  |  |      | (0.2 | )
|                                              | Other                                   |  |      | 0.4 |      |  |      | 0.7 |  |  |      | 0.2  |  
|                                              |                                         |  |      |     |      |  |      |     |  |  |      |     
|Effective income tax rate                     |                                         |  | 43.2 | %   |      |  | 44.2 | %   |  |  | 43.1 | %   
|                                              |                                         |  |      |     |      |  |      |     |  |  |      |     

17. Commitment and Contingencies

Under the terms and conditions of the Companys revolving credit line
agreements, the Company may, but is not committed to, lend funds to Consumer
loan and Business Timely loan customers. The Company reviews credit lines and
related funding needs based on account usage and customer creditworthiness.

The Companys unfunded credit lines on March 31, 2002 and 2003 are as follows:

|                            |                                                |  |                 |        |              |  |         |        |  |   |              |         | 
|--------------------------- | ---------------------------------------------- |  | --------------- | ------ | ------------ |  | ------- | ------ |  | - | ------------ | ------- | 
|                            |                                                |  |                 |        |              |  |         |        |  |   | Thousands of
|                            |                                                |  | Millions of Yen |        | U.S. Dollars
|                            |                                                |  |                 |        |             
|                            |                                                |  | 2002            |        | 2003         |  | 2003   
|                            |                                                |  |                 |        |              |  |        
|Consumer loans:             |                                                |  |                 |        |              |  |         |        |  |   |              |        
|                            | Unfunded credit lines with loan outstanding    |  |                 | ¥5,119 |              |  |         | 4,254  |  |   | $            | 35,391  | 
|                            | Unfunded credit lines without loan
outstanding |  |                 | 15,452 |              |  |         | 14,640 |  |   |              | 121,797 | 
|Business Timely loans:      |                                                |  |                 |        |              |  |         |        |  |   |              |        
|                            | Unfunded credit lines with loan outstanding    |  |                 | 3,343  |              |  |         | 2,967  |  |   |              | 24,684  | 
|                            | Unfunded credit lines without loan
outstanding |  |                 | 13,590 |              |  |         | 14,066 |  |   |              | 117,022 | 
|                            |                                                |  |                 |        |              |  |         |        |  |   |              |         | 
|Total unfunded credit lines |                                                |  | ¥37,504         |        |              |  | ¥35,927 |        |  | $ | 298,894      |        
|                            |                                                |  |                 |        |              |  |         |        |  |   |              |         | 

The Company is involved in legal proceedings and claims in the ordinary course
of its business. In the opinion of management, none of these proceedings and
claims is expected to materially impact the Companys financial position or
results of operations.

As discussed in the summary of significant accounting policies, the Company, as
is customary in the consumer finance industry in Japan, normally charges
interest rates in excess of the restricted rate. In most cases, where the
contractual interest rate exceeds the restricted rate, borrowers have a right
to refuse to pay the excess interest. Accordingly, the Company does not accrue
unpaid excess interest. Once a borrower has paid the excess interest, the
borrower does not have legal rights to obtain a refund of the amounts paid,
provided the appropriate documentation and notification requirements have been
met. Borrowers, however, still do occasionally dispute payments of excess interest.

F-32



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company has negotiated refunds of previously paid
excess interest in certain situations primarily involving threatened customer
bankruptcy or threatened litigation. During the years ended March 31, 2001,
2002 and 2003, approximately ¥36 million, ¥28 million and ¥72 million ($599
thousand) of interest income were refunded to borrowers, respectively.

As of March 31, 2003, NISSIN was liable as a guarantor for borrowings of ¥1,327
million ($11,040 thousand) by customers of Sanyo Club Co., Ltd. Pursuant to an
agreement with Sanyo Club Co., Ltd., in exchange for guaranteeing 40% of the
outstanding balance of specified borrowings, NISSIN receives 40% of the
interest income from the total borrowings and pays 40% of the related expenses
incurred by Sanyo Club Co., Ltd. For the year ended March 31, 2003, NISSIN
received guarantee fees of ¥31 million ($258 thousand), net of operating
expenses of ¥58 million ($483 thousand), from Sanyo Club Co., Ltd. NISSIN is
required to perform as a guarantor for the loans which payments are 120 days or
more delinquent. The Company maintains a reserve for estimated guarantee
losses. As of March 31, 2003, ¥8 million ($67 thousand) was reserved for
estimated guarantee losses. During the year ended March 31, 2003, as a result
of contractual commitments under this arrangement, NISSIN paid Sanyo Club Co.,
Ltd. ¥3 million ($25 thousand). Under the loan agreement, borrowers are not
required to have a guarantor nor provide collateral.

NISSIN guarantees borrowings by customers of Shinsei Business Finance, Co.,
Ltd. (SBF), an affiliate 25% owned by NISSIN, and receives guarantee fees.
NISSIN receives guarantee fees from the following loan products that SBF sells:



| |  | 3S loan:NISSIN guarantees 100% of borrowings by customers for 3S loan and
receives a guarantee fee at the borrowing contract rate less 4%. NISSIN is
required to perform as a guarantor for the loans which payments are 14 days or
more delinquent. NISSIN guaranteed borrowings of ¥144 million ($1,198
thousand) as of March 31, 2003 and received guarantee fees of ¥3 million ($25
thousand) for the year ended March 31, 2003. Under the agreement of 3S loan,
borrowers are required to have two guarantors.                                                               
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Business loan:NISSIN guarantees 10% of borrowings by customers for Business
loan and earns 10% of the interest received from the total borrowings. NISSIN
is required to perform as a guarantor for the loans which payments are 90 days
or more delinquent. NISSIN has outstanding guarantees under this agreement of
¥33 million ($275 thousand) as of March 31, 2003 and received guarantee fees
of ¥485 thousand ($4 thousand) for the year ended March 31, 2003. Under the
agreement of Business loan, borrowers are not required to have a guarantor nor
provide collateral.

During the year ended March 31, 2003, as there were no delinquent SBF customer
payments, NISSIN did not make any payments for 3S loans and Business loans as a
guarantor. As of March 31, 2003, ¥1 million ($8 thousand) was reserved for
estimated guarantee losses.

18. Shareholders Equity

Effective October 1, 2001, to comply with a change in the Code, the Companys
common stock was changed from ¥50 par value to no par stock. The change had no
impact to common stock outstanding or additional paid-in capital. However,
under the Code, at least one-half of the issue price of a new share is required
to be designated as common stock, and proceeds in excess of the amount
designated as common stock are to be credited to additional paid-in capital.
The portion to be designated as common stock is determined by resolution of the
Board of Directors in advance of the issue. Additional paid-in capital may be
used to reduce a deficit or retire treasury stock by resolution of the
Shareholders Meeting or may be transferred to common stock by resolution of
the Board of Directors.

The amended Code also provides that an amount equal to at least 10% of certain
cash disbursements with respect to each fiscal year be appropriated to a legal
reserve until the sum of the legal reserve and additional paid-in capital
equals 25% of stated capital. The legal reserve may be used to reduce a
deficit or retire treasury stock by resolution of the Shareholders Meeting or
may be transferred to common stock by resolution of the Board of Directors.

The Code also provides that if the total amount of additional paid-in capital
and the legal reserve exceeds 25% of the amount of common

F-33



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

stock, the excess may be distributed to the shareholders either as a return of
capital or as dividends subject to resolution of the Shareholders Meeting and
procedures for the protections of creditors.

As of March 31, 2002 and 2003, legal reserves included in retained earnings
were ¥401 million ($3,336 thousand).

The maximum amount that a company can distribute as dividends is calculated
based on the unconsolidated retained earnings excluding legal reserves of a
company in accordance with the Code.

On March 10, 2003, the Board of the Directors approved a two-for-one split of
the common stock for shareholders of record as of March 31, 2003. The stock
split was effective May 20, 2003. As a result of the split, the number of
outstanding shares of common stock increased by 66,312,028. All share and per
share amounts in these financial statements have been adjusted to reflect
post-split amounts.

On June 22, 2002, at the Annual Shareholders Meeting, the shareholders
authorized an increase in authorized shares from 120 million shares to 240
million shares.

19. Reconciliation of the
Differences Between Basic and Diluted Net Income Per Share

Basic and diluted EPS as well as the number of shares in the following table
have been adjusted to reflect the two-for-one stock splits that were completed
on May 21, 2002 and May 20, 2003. Reconciliation of the differences between
basic and diluted EPS for the years ended March 31, 2001, 2002 and 2003 is as
follows:

|                                                                  |  |                 |        |              |  |      |        |      |  |  |        |  |  |              |        | 
|----------------------------------------------------------------- |  | --------------- | ------ | ------------ |  | ---- | ------ | ---- |  |  | ------ |  |  | ------------ | ------ | 
|                                                                  |  |                 |        |              |  |      |        |      |  |  |        |  |  | Thousands of
|                                                                  |  | Millions of Yen |        | U.S. Dollars
|                                                                  |  |                 |        |             
|                                                                  |  | 2001            |        | 2002         |  | 2003 |        | 2003
|                                                                  |  |                 |        |              |  |      |        |     
|Net income                                                        |  |                 | ¥4,952 |              |  |      | ¥4,801 |      |  |  | ¥5,176 |  |  | $            | 43,062 | 
|Aftertax equivalent of interest expense on 1.7%
convertible bond |  |                 |       |              |  |      | 58     |      |  |  | 99     |  |  |              | 823    | 
|                                                                  |  |                 |        |              |  |      |        |      |  |  |        |  |  |              |        | 
|Income for purpose of computing diluted net income
per share      |  |                 | ¥4,952 |              |  |      | ¥4,859 |      |  |  | ¥5,275 |  |  | $            | 43,885 | 
|                                                                  |  |                 |        |              |  |      |        |      |  |  |        |  |  |              |        | 

|                                                    |                      |  |                     |     |      |  |         |       |  |  |         |        | 
|--------------------------------------------------- | -------------------- |  | ------------------- | --- | ---- |  | ------- | ----- |  |  | ------- | ------ | 
|                                                    |                      |  | Thousands of Shares
|                                                    |                      |  |                    
|                                                    |                      |  | 2001                |     | 2002 |  | 2003   
|                                                    |                      |  |                     |     |      |  |        
|Weighted-average shares  basic                     |                      |  | 129,488             |     |      |  | 131,868 |       |  |  | 128,920 |       
|Effect of dilutive securities:                      |                      |  |                     |     |      |  |         |       |  |  |         |       
|                                                    | Warrants and options |  |                     | 236 |      |  |         | 138   |  |  |         |       | 
|                                                    | Convertible bond     |  |                     |    |      |  |         | 7,430 |  |  |         | 12,738 | 
|                                                    |                      |  |                     |     |      |  |         |       |  |  |         |       
|Weighted-average shares for diluted EPS computation |                      |  | 129,724             |     |      |  | 139,436 |       |  |  | 141,658 |       
|                                                    |                      |  |                     |     |      |  |         |       |  |  |         |       

|            |  |      |        |              |  |      |        |      |  |  |        |  |  |   |      | 
|----------- |  | ---- | ------ | ------------ |  | ---- | ------ | ---- |  |  | ------ |  |  | - | ---- | 
|            |  | Yen  |        | U.S. Dollars
|            |  |      |        |             
|            |  | 2001 |        | 2002         |  | 2003 |        | 2003
|            |  |      |        |              |  |      |        |     
|Basic EPS   |  |      | ¥38.25 |              |  |      | ¥36.41 |      |  |  | ¥40.15 |  |  | $ | 0.33 | 
|Diluted EPS |  |      | 38.18  |              |  |      | 34.85  |      |  |  | 37.24  |  |  |   | 0.31 | 
|            |  |      |        |              |  |      |        |      |  |  |        |  |  |   |      | 

Diluted EPS computation for the year ended March 31, 2001 excluded stock
options issued in 2001 because their effect would have been antidilutive.

F-34



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

20. Cash Flow Information

Cash payments for interest and income taxes during the years ended March 31,
2001, 2002 and 2003 are as follows:

|             |  |                 |        |              |  |      |        |      |  |  |        |  |  |              |        | 
|------------ |  | --------------- | ------ | ------------ |  | ---- | ------ | ---- |  |  | ------ |  |  | ------------ | ------ | 
|             |  |                 |        |              |  |      |        |      |  |  |        |  |  | Thousands of
|             |  | Millions of Yen |        | U.S. Dollars
|             |  |                 |        |             
|             |  | 2001            |        | 2002         |  | 2003 |        | 2003
|             |  |                 |        |              |  |      |        |     
|Interest     |  |                 | ¥3,537 |              |  |      | ¥3,524 |      |  |  | ¥3,795 |  |  | $            | 31,572 | 
|Income taxes |  |                 | 3,791  |              |  |      | 3,989  |      |  |  | 4,169  |  |  |              | 34,684 | 
|             |  |                 |        |              |  |      |        |      |  |  |        |  |  |              |        | 

Non-cash investing and financing activities during the years ended March 31,
2001, 2002 and 2003 are as follows:

|                                                    |  |                 |      |              |  |      |      |      |  |  |        |  |  |              |       | 
|--------------------------------------------------- |  | --------------- | ---- | ------------ |  | ---- | ---- | ---- |  |  | ------ |  |  | ------------ | ----- | 
|                                                    |  |                 |      |              |  |      |      |      |  |  |        |  |  | Thousands of
|                                                    |  | Millions of Yen |      | U.S. Dollars
|                                                    |  |                 |      |             
|                                                    |  | 2001            |      | 2002         |  | 2003 |      | 2003
|                                                    |  |                 |      |              |  |      |      |     
|Equipment and software
obtained under capital
lease |  |                 | ¥387 |              |  |      | ¥745 |      |  |  | ¥1,198 |  |  | $            | 9,967 | 
|                                                    |  |                 |      |              |  |      |      |      |  |  |        |  |  |              |       | 

21. Disclosures About Fair Value of Financial Instruments

SFAS No. 107, Disclosures about Fair Value of Financial Instruments requires
disclosures of the fair value of financial instruments, both assets and
liabilities recognized and not recognized in the Companys balance sheet. The
estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies. The use
of deferent market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts. Considerable judgment is
required in estimating fair values and the estimates presented are not
necessarily indicative of the amounts the Company could realize in a current
market exchange.

F-35



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The estimated fair values of the Companys financial instruments as of March
31, 2002 and 2003 are as follows:

|                                         |                                 |  |                 |         |                           |  |                 |         |            |  |                 |         |            |  |  |         |   |  |   |           |  |  |   |           |  
|---------------------------------------- | ------------------------------- |  | --------------- | ------- | ------------------------- |  | --------------- | ------- | ---------- |  | --------------- | ------- | ---------- |  |  | ------- | - |  | - | --------- |  |  | - | --------- | -
|                                         |                                 |  | Millions of Yen |         | Thousands of U.S. Dollars
|                                         |                                 |  |                 |         |                          
|                                         |                                 |  | 2002            |         | 2003                      |  | 2003           
|                                         |                                 |  |                 |         |                           |  |                
|                                         |                                 |  | Carrying Amount |         | Fair Value                |  | Carrying Amount |         | Fair Value |  | Carrying Amount |         | Fair Value
|                                         |                                 |  |                 |         |                           |  |                 |         |            |  |                 |         |           
|Financial assets:                        |                                 |  |                 |         |                           |  |                 |         |            |  |                 |         |            |  |  |         |   |  |   |           |  |  |   |          
|                                         | Cash and cash equivalents       |  |                 | ¥17,116 |                           |  |                 | ¥17,116 |            |  |                 | ¥23,612 |            |  |  | ¥23,612 |   |  | $ | 196,439   |  |  | $ | 196,439   |  
|                                         | Loans receivable, net           |  |                 | 148,235 |                           |  |                 | 148,235 |            |  |                 | 166,977 |            |  |  | 166,977 |   |  |   | 1,389,160 |  |  |   | 1,389,160 |  
|                                         | Purchased loans receivable, net |  |                 | 380     |                           |  |                 | 380     |            |  |                 | 2,946   |            |  |  | 2,946   |   |  |   | 24,509    |  |  |   | 24,509    |  
|                                         | Investment securities           |  |                 | 3,958   |                           |  |                 | 3,958   |            |  |                 | 2,234   |            |  |  | 2,234   |   |  |   | 18,586    |  |  |   | 18,586    |  
|Financial liabilities:                   |                                 |  |                 |         |                           |  |                 |         |            |  |                 |         |            |  |  |         |   |  |   |           |  |  |   |          
|                                         | Short-term borrowings           |  |                 | 1,400   |                           |  |                 | 1,400   |            |  |                 | 5,600   |            |  |  | 5,600   |   |  |   | 46,589    |  |  |   | 46,589    |  
|                                         | Long-term borrowings            |  |                 | 128,659 |                           |  |                 | 128,178 |            |  |                 | 148,595 |            |  |  | 148,112 |   |  |   | 1,236,231 |  |  |   | 1,232,213 |  
|Off-balance-sheet financial
instruments: |                                 |  |                 |         |                           |  |                 |         |            |  |                 |         |            |  |  |         |   |  |   |           |  |  |   |          
|                                         | Interest rate swaps             |  |                 |        |                           |  |                 | (47     | )          |  |                 |        |            |  |  |        |   |  |   |          |  |  |   |          |  
|                                         | Interest rate caps              |  |                 | 101     |                           |  |                 | 0       |            |  |                 |        |            |  |  |        |   |  |   |          |  |  |   |          |  
|                                         | Borrowings with guarantees      |  |                 |        |                           |  |                 |        |            |  |                 |        |            |  |  | (9      | ) |  |   |          |  |  |   | (75       | )
|                                         | Loan commitments                |  |                 |        |                           |  |                 |        |            |  |                 |        |            |  |  |        |   |  |   |          |  |  |   |          |  
|                                         |                                 |  |                 |         |                           |  |                 |         |            |  |                 |         |            |  |  |         |   |  |   |           |  |  |   |           |  

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



|a) |  | Cash and Cash Equivalents:Cash and cash equivalents are carried at an
amount that approximates fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|b) |  | Loans receivable:The market rate of interest for the Companys loan
products has not changed significantly during the lapsed term of the
Companys loan portfolio. Accordingly, the Company believes the carrying
value of its loan portfolio approximates fair value.                                                                                                                                                                                                                                                                          
|  
|c) |  | Investment Securities:The fair value of available-for-sale securities
is based on quoted market prices. The company also holds approximately
¥906 million and ¥727 million ($6,048 thousand) in private securities as
of March 31, 2002 and 2003, respectively. The fair value of private
securities is assumed to estimate cost until such time as new equity or
financing or significant changes operations demonstrate a new fair value.                                                                                                     
|  
|d) |  | Short-term Borrowings:Short-term borrowings are carried at an amount
that approximates fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|e) |  | Long-term Borrowings:Long-term borrowings, including current portion,
are estimated based on either the market value or the discounted amounts
of future cash flows. The borrowing interest rates which were currently
available to the Company offered by financial institutions for debt with
similar terms and remaining average maturities are used as the discount
rates. The fair value of syndicated bonds is estimated using a discounted
cash-flow calculation that applies interests rates at an assumed marginal
market-funding rate.
|  
|f) |  | Off-balance-sheet Financial Instruments:The fair value of derivatives
generally reflects the estimated amounts that the Company would receive or
pay to terminate the contracts at the reporting date, thereby taking into
account the current unrealized gains or losses of open contracts.
Discounted amounts of future cash flows using the current interest rate
and dealer quotes are available for most of the Companys derivatives.                                                                                                     

F-36



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



|g) |  | Borrowings with guarantees:The fair value of guaranteed borrowings
generally reflects the probable and estimable amounts that the Company
would pay for the delinquent payments of borrowing under guarantee.                                                                                                                                                                          
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|h) |  | Loan Commitments:The fair value of commitments to originate loans is
estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and
the present credit worthiness of the counterparties. The Company has no
fixed rate loan commitments. The estimated fair value of all such
commitments is insignificant.

22. Cumulative Other Comprehensive Income

Cumulative other comprehensive income and related taxes effect for the years
ended March 31, 2001, 2002 and 2003, is as follows:

|               |                                              |                                                                                       |        |                     |        |                    |         |               |       |                  |        |  |        |  
|-------------- | -------------------------------------------- | ------------------------------------------------------------------------------------- | ------ | ------------------- | ------ | ------------------ | ------- | ------------- | ----- | ---------------- | ------ |  | ------ | -
|               |                                              |                                                                                       |        | Millions of Yen    
|               |                                              |                                                                                       |        |                    
|               |                                              |                                                                                       |        | Other Comprehensive |        |                    |         |               |       | Cumulative Other
|               |                                              |                                                                                       |        | Income before       |        | Income Tax Expense |         | Comprehensive
|               |                                              |                                                                                       |        | Income Tax          |        | (Benefit)          |         | Income       
|               |                                              |                                                                                       |        |                     |        |                    |         |              
|March 31, 2000 |                                              |                                                                                       | ¥2,860 |                     |        |                    | ¥(1,196 | )             |       |                  | ¥1,664 | 
|               | Unrealized gains on investment securities:   |                                                                                       |        |                     |        |                    |         |               |       |                  |        |  |       
|               |                                              | Unrealized holding gains or losses during the period                                  |        |                     | (2,954 | )                  |         |               | 1,235 |                  |        |  | (1,719 | )
|               |                                              | Less: Reclassification adjustment for realized
gains or losses included in net income |        |                     | 602    |                    |         |               | (251  | )                |        |  | 351    |  
|               |                                              |                                                                                       |        |                     |        |                    |         |               |       |                  |        | 
|March 31, 2001 |                                              |                                                                                       | 508    |                     |        |                    | (212    | )             |       |                  | 296    | 
|               | Unrealized gains on investment securities:   |                                                                                       |        |                     |        |                    |         |               |       |                  |        |  |       
|               |                                              | Unrealized holding gains or losses during the period                                  |        |                     | (842   | )                  |         |               | 352   |                  |        |  | (490   | )
|               |                                              | Less: Reclassification adjustment for realized
gains included in net income           |        |                     | 606    |                    |         |               | (253  | )                |        |  | 353    |  
|               | Unrealized losses on derivative instruments: |                                                                                       |        |                     |        |                    |         |               |       |                  |        |  |       
|               |                                              | Unrealized holding losses arising during the period                                   |        |                     | (97    | )                  |         |               | 40    |                  |        |  | (57    | )
|               |                                              | Less: Reclassification adjustment for realized
losses included in net income          |        |                     | 19     |                    |         |               | (8    | )                |        |  | 11     |  
|               |                                              |                                                                                       |        |                     |        |                    |         |               |       |                  |        | 
|March 31, 2002 |                                              |                                                                                       | 194    |                     |        |                    | (81     | )             |       |                  | 113    | 
|               | Unrealized gains on investment securities:   |                                                                                       |        |                     |        |                    |         |               |       |                  |        |  |       
|               |                                              | Unrealized holding gains or losses during the period                                  |        |                     | (1,127 | )                  |         |               | 459   |                  |        |  | (668   | )
|               |                                              | Less: Reclassification adjustment for realized
gains included in net income           |        |                     | 973    |                    |         |               | (393  | )                |        |  | 580    |  
|               | Unrealized losses on derivative instruments: |                                                                                       |        |                     |        |                    |         |               |       |                  |        |  |       
|               |                                              | Unrealized holding losses arising during the period                                   |        |                     |       |                    |         |               |      |                  |        |  |       |  
|               |                                              | Less: Reclassification adjustment for realized
losses included in net income          |        |                     | 78     |                    |         |               | (33   | )                |        |  | 45     |  
|               |                                              |                                                                                       |        |                     |        |                    |         |               |       |                  |        | 
|March 31, 2003 |                                              |                                                                                       | ¥118   |                     |        |                    | ¥(48    | )             |       |                  | ¥70    | 
|               |                                              |                                                                                       |        |                     |        |                    |         |               |       |                  |        | 

F-37



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

|               |                                              |                                                                              |       |                           |        |                    |      |               |        |                  |     |  |        |  
|-------------- | -------------------------------------------- | ---------------------------------------------------------------------------- | ----- | ------------------------- | ------ | ------------------ | ---- | ------------- | ------ | ---------------- | --- |  | ------ | -
|               |                                              |                                                                              |       | Thousands of U.S. Dollars
|               |                                              |                                                                              |       |                          
|               |                                              |                                                                              |       | Other Comprehensive       |        |                    |      |               |        | Cumulative Other
|               |                                              |                                                                              |       | Income before             |        | Income Tax Expense |      | Comprehensive
|               |                                              |                                                                              |       | Income Tax                |        | (Benefit)          |      | Income       
|               |                                              |                                                                              |       |                           |        |                    |      |              
|March 31, 2002 |                                              | $                                                                            | 1,614 |                           |        | $                  | (674 | )             |        | $                | 940 | 
|               | Unrealized gains on investment securities:   |                                                                              |       |                           |        |                    |      |               |        |                  |     |  |       
|               |                                              | Unrealized holding gains or losses during the period                         |       |                           | (9,376 | )                  |      |               | 3,819  |                  |     |  | (5,557 | )
|               |                                              | Less: Reclassification adjustment for realized
gains included in net income  |       |                           | 8,095  |                    |      |               | (3,270 | )                |     |  | 4,825  |  
|               | Unrealized losses on derivative instruments: |                                                                              |       |                           |        |                    |      |               |        |                  |     |  |       
|               |                                              | Unrealized holding losses arising during the period                          |       |                           |       |                    |      |               |       |                  |     |  |       |  
|               |                                              | Less: Reclassification adjustment for realized
losses included in net income |       |                           | 649    |                    |      |               | (275   | )                |     |  | 374    |  
|               |                                              |                                                                              |       |                           |        |                    |      |               |        |                  |     | 
|March 31, 2003 |                                              | $                                                                            | 982   |                           |        | $                  | (400 | )             |        | $                | 582 | 
|               |                                              |                                                                              |       |                           |        |                    |      |               |        |                  |     | 

23. Segment Information

The Company has historically operated as a single segment, consisting of
consumer and related other loans to individuals. Included in this segment are
consumer, Wide, Business Timely, small business owner, secured and other loans.
On July 11, 2001, the Company established Nissin Servicer Co., Ltd., to acquire
and service non-performing debts from banks or other financial institutions in
Japan. As discussed in Note 8, NISSIN sold a portion of its shares of a former
subsidiary, Future Create Inc. Future Create Inc. is a private Japanese
corporation providing consulting services to individuals and companies
interested in leasing. Nissin Servicer Co., Ltd. and Future Create Inc. are
being operated as separate segments but do not qualify as separate reportable
segments under SFAS No. 131. All operating activities are currently
exclusively in Japan. Selected information for our segments is as follows:

F-38



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

|                          |  |                       |         |       |  |       |       |  |  |  |         | 
|------------------------- |  | --------------------- | ------- | ----- |  | ----- | ----- |  |  |  | ------- | 
|                          |  | Millions of Yen      
|                          |  |                      
|                          |  | Consumer and Ordinary |         |       |  |       |       |  |  | 
|                          |  | Loans                 |         | Other |  | Total
|                          |  |                       |         |       |  |      
|2001                      |  |                       |         |       |  |       |       |  |  |  |         | 
|Interest income           |  |                       | ¥29,886 |       |  |       | ¥-    |  |  |  | ¥29,886 | 
|Interest expense          |  |                       | 4,166   |       |  |       |      |  |  |  | 4,166   | 
|Provision for loan losses |  |                       | 4,566   |       |  |       |      |  |  |  | 4,566   | 
|Net income                |  |                       | 4,952   |       |  |       |      |  |  |  | 4,952   | 
|Assets carrying value     |  |                       | 163,722 |       |  |       |      |  |  |  | 163,722 | 
|                          |  |                       |         |       |  |       |       |  |  |  |         | 
|2002
Interest income      |  |                       | ¥33,966 |       |  |       | ¥10   |  |  |  | ¥33,976 | 
|Interest expense          |  |                       | 3,884   |       |  |       |      |  |  |  | 3,884   | 
|Provision for loan losses |  |                       | 7,433   |       |  |       |      |  |  |  | 7,433   | 
|Net income                |  |                       | 4,791   |       |  |       | 10    |  |  |  | 4,801   | 
|Assets carrying value     |  |                       | 179,495 |       |  |       | 802   |  |  |  | 180,297 | 
|                          |  |                       |         |       |  |       |       |  |  |  |         | 
|2003                      |  |                       |         |       |  |       |       |  |  |  |         | 
|Interest income           |  |                       | ¥38,520 |       |  |       | ¥714  |  |  |  | ¥39,234 | 
|Interest expense          |  |                       | 3,951   |       |  |       | 33    |  |  |  | 3,984   | 
|Provision for loan losses |  |                       | 12,545  |       |  |       | 143   |  |  |  | 12,688  | 
|Net income                |  |                       | 4,968   |       |  |       | 208   |  |  |  | 5,176   | 
|Assets carrying value     |  |                       | 203,236 |       |  |       | 3,338 |  |  |  | 206,574 | 
|                          |  |                       |         |       |  |       |       |  |  |  |         | 

|                          |  |                           |           |       |  |       |        |  |  |   |           | 
|------------------------- |  | ------------------------- | --------- | ----- |  | ----- | ------ |  |  | - | --------- | 
|                          |  | Thousands of U.S. Dollars
|                          |  |                          
|                          |  | Consumer and Ordinary     |           |       |  |      
|                          |  | Loans                     |           | Other |  | Total
|                          |  |                           |           |       |  |      
|2003                      |  |                           |           |       |  |       |        |  |  |   |           | 
|Interest income           |  | $                         | 320,466   |       |  | $     | 5,940  |  |  | $ | 326,406   | 
|Interest expense          |  |                           | 32,870    |       |  |       | 275    |  |  |   | 33,145    | 
|Provision for loan losses |  |                           | 104,367   |       |  |       | 1,190  |  |  |   | 105,557   | 
|Net income                |  |                           | 41,331    |       |  |       | 1,731  |  |  |   | 43,062    | 
|Assets carrying value     |  |                           | 1,690,816 |       |  |       | 27,770 |  |  |   | 1,718,586 | 
|                          |  |                           |           |       |  |       |        |  |  |   |           | 

F-39



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

24. Subsequent Events



|1. |  | On June 24, 2003, at the NISSINs Annual Shareholders Meeting, the
shareholders authorized the following:
|-- |  | ----------------------------------------------------------------------------------------------------------



| | (1) |  | Payment of a year-end cash dividend of ¥3.75 ($0.031) and memorial
cash dividend of ¥0.5 ($0.004) per share to shareholders of record as
of March 31, 2003 or a total of ¥537 million ($4,468 thousand)                      
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Payment of bonuses to directors and statutory auditors of ¥56
million ($466 thousand)                                                                                                                                        
|
| | (3) |  | The issuance of up to 1.5 million shares stock options to
directors, statutory auditors and other certain employees. The exercise
price per stock option will be based on a formula and be exercisable
over a three year term
|
| | (4) |  | A plan to repurchase outstanding shares of NISSIN stock:                                                                                                                                                                     
|
| |     |  | . At an aggregate purchase price totaling ¥2,000 million ($16,639 thousand), or                                                                                                                                              
|
| |     |  | . Up to 3 million shares                                                                                                                                                                                                     
|
| | (5) |  | An increase in authorized shares from 240 million shares to 480
million shares                                                                                                                                               



|2. |  | Upon the approval at the above Annual Shareholders Meeting, NISSIN granted
share subscription rights to directors and certain employees on July 16,
2003. Under this stock option plan, options to purchase common stock of
1,350 thousand shares were granted at the exercise price of
¥532.00 ($4.43) per share, which was priced at 110% of the monthly averaged closing price
of June 2003, and are exercisable from August 1, 2003 and expire on the July
31, 2006 or upon termination of employment with NISSIN. On
July 16, 2003, the closing price of NISSIN's stock on the Tokyo
Stock Exchange is ¥492 ($4.09) per share.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-40



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##### Table of Contents






SIGNATURES

The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

| |  |                  |  |                                                                      
| |  | ---------------- |  | ---------------------------------------------------------------------
| |  | NISSIN CO., LTD.
| |  |                  |  |                                                                      
| |  | By               |  | /s/ Kunihiko Sakioka                                                 
| |  |                  |  | Name: Kunihiko Sakioka                                               
| |  |                  |  | Title: President, Chief Executive Officer and
Representative Director

July 22, 2003

S-1



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##### Table of Contents






CERTIFICATIONS

I, Kunihiko Sakioka, certify that:

1.     I have reviewed this annual report on Form 20-F of Nissin Co., Ltd.;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

b) Evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and

c) Presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a)     Any significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b)     Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

| |  |                  |  |                                                                      
| |  | ---------------- |  | ---------------------------------------------------------------------
| |  | NISSIN CO., LTD.
| |  |                  |  |                                                                      
| |  | By               |  | /s/ Kunihiko Sakioka                                                 
| |  |                  |  | Name: Kunihiko Sakioka                                               
| |  |                  |  | Title: President, Chief Executive Officer and
Representative Director

July 22, 2003

C-1



---



##### Table of Contents






CERTIFICATIONS

I, Hitoshi Higaki, certify that:

1.     I have reviewed this annual report on Form 20-F of Nissin Co., Ltd.;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

b) Evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and

c) Presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a)     Any significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b)     Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

| |  |                  |  |                         
| |  | ---------------- |  | ------------------------
| |  | NISSIN CO., LTD.
| |  |                  |  |                         
| |  | By               |  | /s/ Hitoshi Higaki      
| |  |                  |  | Name: Hitoshi Higaki    
| |  |                  |  | Title: Managing Director

July 22, 2003

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INDEX OF EXHIBITS

|        |  |                                                                                                                                                                                                                                                                                                                                           
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                           
|Number  |  | Description                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                           
|1.1     |  | - Our Articles of Incorporation (English Translation)                                                                                                                                                                                                                                                                                     
|1.2     |  | - Our Share Handling Regulations (English Translation)                                                                                                                                                                                                                                                                                    
|1.3     |  | - Our Regulations of the Board of Directors (English Translation)                                                                                                                                                                                                                                                                         
|1.4     |  | - Our Regulations of the Board of Statutory Auditors (English Translation)                                                                                                                                                                                                                                                                
|2.1     |  | - Our Specimen Common Stock Certificate (English Translation) *                                                                                                                                                                                                                                                                           
|2.2     |  | - Form of Deposit Agreement Among Nissin Co., Ltd., The Bank of New York
as Depositary and All Owners and Holders from Time to Time of American
Depositary Receipts, Including the Form of American Depositary Receipt
(Incorporated by Reference to the Registration Statement on Form F-6
(File No. 333-97133) filed on July 24, 2002) *
|8.1     |  | - List of Our Subsidiaries                                                                                                                                                                                                                                                                                                                

* Incorporated by reference to the corresponding exhibit to our Form F-1
Registration Statement (File No. 333-97229) declared effective on August 1,
2002.