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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Nis Grp. CO Ltd | NYSE:NIS | NYSE | Ordinary Share |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.00 | - |
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Japan |
Shinjuku L-Tower 25F
6-1, Nishi Shinjuku 1-chome Shinjuku-ku, Tokyo 163-1525 Japan |
|
(Jurisdiction of incorporation or organization) | (Address of principal executive offices) |
Title of each class | Name of each exchange on which registered | |
Common Stock* | New York Stock Exchange |
* | Not for trading, but only in connection with the listing of American Depositary Shares, each of two American Depositary Shares representing one share of our common stock. |
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| increasing competition among Japans finance companies and other financial institutions in the business owner and consumer loan industries; | ||
| significant changes to the business environment for moneylending companies in Japan, including as a result of recent court decisions by the Supreme Court of Japan, and any future changes to laws and regulations; |
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| the effect of weak domestic economic conditions, including changes in corporate and personal bankruptcy and unemployment rates in Japan; | ||
| the growing variety of legal means with which debtors can seek protection from creditors; | ||
| changes to our portfolio of products and services and expansion into new business areas that do not achieve intended results; | ||
| the effect of fluctuations in the value of real estate held or securing loans, which is highly dependent on the health of the Japanese economy and susceptible to regulatory and legal changes; | ||
| fluctuation in market environments regarding our investments; | ||
| our ability to pursue and maintain profitable strategic alliances, joint ventures and strategic investments; | ||
| increasing competition in the loan servicing market in which Nissin Servicer Co., Ltd., a consolidated subsidiary, operates; | ||
| risks associated with doing business in China, including extensive regulation and legal and market uncertainty; | ||
| any future inability to obtain funds from lenders or access the debt capital markets on favorable terms; | ||
| an increase in prevailing market interest rates; | ||
| any failure to implement our business strategies successfully; | ||
| the failure of our risk management systems to effectively evaluate and manage risks; | ||
| our ability to adequately evaluate or control risks associated with loans or guarantees we make or related collateral; | ||
| any disruption, outages, delays or other difficulties experienced by our information or technological systems and networks; | ||
| misconduct by an employee or director and our exposure to negative publicity of the consumer or business finance industries generally or us specifically; | ||
| any failure to maintain the confidentiality of personal information of our customers; and | ||
| the influence of our chairman and his family over important decisions. |
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Year Ended/As of March 31,
2003
2004
2005
(2)
2006
2007
2007
(In millions of yen and thousands of U.S. dollars except number of shares and per share data)
¥
38,591
¥
38,171
¥
29,488
¥
29,826
¥
33,706
$
285,523
1,074
1,411
2,132
3,331
12,664
107,276
37,517
36,760
27,356
26,495
21,042
178,247
3,920
3,605
2,971
2,602
3,870
32,783
33,597
33,155
24,385
23,893
17,172
145,464
11,543
11,547
5,817
5,923
10,853
91,936
22,054
21,608
18,568
17,970
6,319
53,528
818
2,573
5,003
11,445
17,585
148,962
13,365
13,207
15,438
17,732
22,583
191,300
9,507
10,974
8,133
11,683
1,321
11,190
21
219
4,061
3,604
(881
)
(7,463
)
428
534
286
618
453
3,837
9,100
10,659
11,908
14,669
(13
)
(110
)
3,924
4,582
4,646
6,214
1,597
13,528
¥
5,176
¥
6,077
¥
7,262
¥
8,455
¥
(1,610
)
$
(13,638
)
¥
23,612
¥
20,243
¥
25,709
¥
22,860
¥
28,344
$
240,102
166,977
166,890
146,119
225,947
250,780
2,124,354
2,946
4,342
13,581
24,155
28,910
244,896
13,039
18,793
42,992
86,981
146,043
1,237,129
¥
206,574
¥
210,268
¥
228,401
¥
359,943
¥
454,077
$
3,846,481
¥
5,600
¥
5,563
¥
12,600
¥
60,411
¥
84,258
$
713,748
148,595
142,577
136,844
198,924
260,817
2,209,377
6,782
7,670
10,840
17,671
22,247
188,455
160,977
155,810
160,284
277,006
367,322
3,111,580
161
1,146
2,433
4,192
35,510
6,611
7,218
7,779
11,849
16,289
137,984
8,462
9,092
9,836
14,808
19,490
165,100
30,524
37,987
49,356
53,847
46,784
396,307
45,597
54,297
66,971
80,504
82,563
699,391
¥
206,574
¥
210,268
¥
228,401
¥
359,943
¥
454,077
$
3,846,481
127,319
129,337
130,720
140,647
145,894
145,894
¥
41.80
¥
50.80
¥
59.60
¥
65.40
¥
(11.42
)
$
(0.097
)
38.80
46.80
54.00
61.60
(11.42
)
(0.097
)
7.80
9.00
16.20
21.00
3.20
0.027
6.60
8.40
10.60
20.40
14.20
0.120
(1)
The Company completed a 2-for-1 stock split on each of May 21, 2002, May 20, 2003, May
20, 2004, November 19, 2004, November 18, 2005, and April 1, 2006, respectively, a 1.2-for-1
stock split on May 20, 2005 and 1-for-20 reverse stock split on August 31, 2007. All share
information presented above has been retroactively adjusted to reflect such stock splits and
reverse stock split.
(2)
The Company sold ¥32,697 million of unguaranteed consumer loans receivable on June 1, 2004 to
NETCARD, Inc. (formerly known as Orient Credit Co., Ltd.) resulting in a gain of ¥3,327
million.
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Year Ended March 31,
High
Low
Average
(1)
Period-end
¥133.40
¥115.71
¥121.10
¥118.07
120.55
104.18
112.75
104.18
114.30
102.26
107.28
107.22
120.93
104.41
113.67
117.48
121.81
110.07
116.55
117.56
121.81
118.49
120.45
121.02
121.77
118.33
120.50
118.33
118.15
116.01
117.26
117.56
119.84
117.69
118.93
119.44
121.79
119.77
120.77
121.76
124.09
121.08
122.69
123.39
123.34
118.41
121.41
119.13
119.76
113.81
116.73
115.83
(1)
The average yen exchange rates for the fiscal year represent the average noon buying rates on
the last business day of each month during the respective period.
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abolish the concept of deemed valid payments under the Moneylending Business Law;
reduce the maximum interest rate under the Contributions Law from 29.2% per year
to 20% per year;
introduce administrative sanctions on charging interest in excess of the maximum
interest rate under the Interest Rate Restriction Law;
obligate registered moneylenders to investigate customers ability to repay and
prohibit excessive lending in respect of loans to individual customers; and
introduce further documentation requirements.
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the ability of our automated funds transfer system to handle high volumes of phone
calls and to provide customers with a convenient system which offers reliable privacy
protection;
the reliability and security of third-party databases from which we obtain credit
information about our customers;
the reliability of third-party wire transfer services which 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 transfer their payments to us.
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a statement of managements responsibility for establishing and maintaining adequate
internal control over financial reporting for the Group;
a statement identifying the framework used by management to conduct the required
evaluation of the effectiveness of the Groups internal control over financial
reporting;
managements assessment of the effectiveness of the Groups internal control over
financial reporting as of the end of the Groups most recent fiscal year, including a
statement as to whether or not the Groups internal control over financial reporting is
effective; and
a statement that the registered public accounting firm that audited the financial
statements included in the annual report has issued an attestation report on
managements assessment of the registrants internal control over financial reporting.
conduct that exceeds the authority given to the employee or director, such as
approval of a transaction for which he or she does not have proper authorization;
concealment of such unauthorized conduct or authorized but unsuccessful activities
that cause material harm to us; and
improper use or disclosure of confidential information or leakage of personal
information.
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Broad Range of Services to SMEs
. We provide a variety of financial services to
SMEs, depending on their growth stage, in an effort to be our customers primary source
for financial services. In addition to SME loans, we provide leasing and other
services, including secured loans.
Services to SME Owners.
For SME owners, we provide SME loans (described in Our
Operations below), as well as installment credit. We seek to customize our products
to the needs of SME owners. For example, we may extend loans to the owners business
directly, with a guarantee from the owner or a third-party, or secure such loans if
appropriate collateral is available.
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Providing real estate secured loans to property companies for working capital.
This
is currently our fastest growing business line, and we focus primarily on small to
medium-sized property companies, which develop small commercial and residential
properties or resell such properties that they purchase. In addition, we established
the Real Estate Structured Finance Department in September 2006, and started providing
non-recourse loans, which generally carried larger loan principal, mainly to special
purpose companies for real estate-related projects.
Investing in real property with a view to resale.
We
seek to purchase real estate,
particularly commercial as well as residential rental properties, that we believe can
be operated for profit or resold at a higher price following renovations of the
property or improvements in property management. We conduct this business primarily
through NIS Property.
Acquisition of distressed real estate.
Taking advantage of our network of financial
institutions selling distressed loans collateralized by real estate and our experience
in servicing such loans, we seek to acquire distressed real estate assets that we
believe can be restructured and resold at a higher price. We conduct this business
through Nissin Servicer.
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integrated financial services;
servicing business;
real estate business; and
other businesses.
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March 31,
2003
2004
2005
2006
2007
(In millions)
¥
1,587
¥
10,003
¥
18,812
¥
91,610
¥
139,691
71,218
75,827
79,823
90,729
81,688
104,931
93,064
50,431
44,158
34,959
36
573
6,296
10,681
14,605
¥
177,772
¥
179,467
¥
155,362
¥
237,178
¥
270,943
Year Ended March 31,
2003
2004
2005
2006
2007
(In millions)
¥
1,252
¥
2,235
¥
9,976
¥
39,496
¥
115,779
62,567
73,556
76,651
86,976
88,159
104,836
100,192
58,018
47,250
39,621
13
261
4,166
10,243
12,236
¥
168,668
¥
176,244
¥
148,811
¥
183,965
¥
255,795
(1)
Secured loans comprise secured loans to property companies and secured loans to individuals
and SMEs.
(2)
SME loans comprise Business Assist loans (formerly Small Business Owner loans) and Business
Timely loans.
(3)
Consumer loans comprise Smart Assist loans (formerly Wide loans) and First Plan loans
(formerly consumer loans). In addition, we sold most of the outstanding balance of our
unguaranteed consumer loans to NETCARD, Inc. (formerly known as Orient Credit Co., Ltd.) for
¥32,697 million on June 1, 2004.
(4)
Other loans comprise investment in direct finance leases, installment loans, discount notes and
others.
(5)
Names of loan products were changed from October 1, 2006.
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As of March 31,
2003
2004
2005
2006
2007
(In millions except number of accounts)
20
99
204
339
¥
¥
7,433
¥
11,890
¥
52,330
¥
97,260
372
120
257
287
Year Ended March 31,
2003
2004
2005
2006
2007
(In millions)
¥
¥
10,397
¥
18,716
¥
72,587
¥
167,895
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As of March 31,
2003
2004
2005
2006
2007
23,439
24,739
24,414
25,797
21,398
14,511
16,163
17,493
17,228
15,225
37,950
40,902
41,907
43,025
36,623
¥2,300
¥2,311
¥2,415
¥2,537
¥2,729
1,192
1,154
1,193
1,467
1,531
Year Ended March 31,
2003
2004
2005
2006
2007
(In millions)
¥
36,560
¥
35,061
¥
45,834
¥
53,134
¥
37,129
14,330
13,936
17,408
22,249
14,573
¥
50,890
¥
48,997
¥
63,242
¥
75,383
¥
51,702
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As of March 31,
2003
2004
2005
2006
2007
36,482
35,126
31,440
27,701
22,259
¥
1,754
¥
1,636
¥
1,514
¥
1,486
¥
1,471
Year Ended March 31,
2003
2004
2005
2006
2007
(In millions)
¥
34,294
¥
20,709
¥
15,897
¥
14,977
¥
10,494
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In the case of a secured loan, Business Assist loan or Smart Assist loan, when
interest payments are delinquent for 44 days;
In the case of a Business Timely loan, when contractual payments are past due for 7 days; and
In the case of a consumer loan, when interest payments are delinquent for 67 days.
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March 31,
2003
2004
2005
2006
2007
(In millions)
¥
3,078
¥
5,059
¥
14,863
¥
25,947
¥
31,565
20
668
6,126
19,439
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Year Ended March 31,
2003
2004
2005
2006
2007
(In millions)
¥
4,854
¥
4,502
¥
16,896
¥
19,779
¥
19,565
2,859
4,538
10,095
11,923
18,856
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As of March 31, 2007
Number of
Asset Book
Properties
Value
(In millions)
13
¥
15,595
4
3,190
5
2,669
1
142
2
863
8
4,140
33
¥
26,599
As of March 31, 2007
Number of
Asset Book
Properties
Value
(In millions)
24
¥
20,987
3
1,985
4
2,747
2
880
33
¥
26,599
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Year Ended March 31,
2005
2006
2007
(In millions)
¥
59,363
¥
109,524
¥
192,762
18,822
16,125
10,228
¥
78,185
¥
125,649
¥
202,990
March 31,
2005
2006
2007
(In millions)
¥
318
¥
482
¥
489
7,383
12,368
17,974
¥
7,701
¥
12,850
¥
18,463
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Loan Offices
. Our loan offices enable loan applicants and current borrowers to meet
with our employees, who provide a full range of services, including disbursement of
cash, collection of repayments 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. The total number of loan offices as of March 31, 2005
decreased significantly compared to that as of March 31, 2004, because we eliminated a
substantial number of our general branches following the sale of most of the
outstanding balance of our consumer loans to NETCARD, Inc. (formerly known as Orient
Credit Co., Ltd.) in June 2004 and concentrated our resources in providing loans to SME
owners. The total number of loan offices, however, increased from March 31, 2005 to
March 31, 2006, because of the acquisition of APREK, which also originates loans to SME
owners. We have recently integrated a number of our loan offices, while at the same
time expanding loan offices, and shifted our managerial resources into major
metropolitan areas in Japan to promote real estate financing, investment banking and
venture capital businesses, as well as other businesses. We established the Real
Estate Finance Department in February 2004, the Tokyo Sales Department in July 2004,
the Osaka Sales Department in February 2005, the Kyushu Sales Department in June 2006,
and the Nagoya Sales Department in March 2007. As a net result of this expansion in
major metropolitan areas and integration of offices, our total loan offices decreased
to 44 offices as of March 31, 2007.
The following table shows selected information regarding our loan offices:
As of March 31,
2003
2004
2005
2006
2007
72
70
50
60
44
832
851
818
998
1,166
615
571
487
571
543
The number of full-time employees at loan offices decreased from March 31, 2003 to
March 31, 2005, because we increased the number of seconded employees to affiliates and
alliance partners in connection with our alliance strategy. Also, the sale of our
unguaranteed consumer loans in June 2004 contributed to the decrease in the number of
employees at loan offices. Subsequently, as of March 31, 2006 the number of full-time
employees and employees dedicated to loan origination increased because of our
acquisition of APREK for the development of the SME financing market in Japans Kyushu
region. The number of employees dedicated to loan origination as of March 31, 2007
subsequently decreased as a result of our integration of loan offices in line with our
strategic shift of managerial resources as described above, despite a steady increase
in the number of full-time employees from March 31, 2005 mainly due to recruitment of
new and mid-career employees for our real estate financing operations and leasing
business in the Peoples Republic of China.
Automated Telephone Service
. We primarily serve our Business Timely and
unguaranteed consumer loan 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 and all loans extended. 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 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.
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Year Ended March 31,
March 31,
Alliance
2006
2007
2006
2007
Commencement
Alliance Company
Alliance Details
Loans Originated
Loans Guaranteed
(In millions
)
Sanyo Electric Credit
Co., Ltd. and Sanyo
Club Co., Ltd.
Provide funds to
users of Sanyo
Electric Credit
Co., Ltd.s leasing
finance, which we
partially
guarantee.
¥
409
¥
209
¥
6,806
¥
7,611
Shinsei Bank, Ltd.
Provide business
loans to SMEs
through a joint
venture with the
bank.
866
840
3,178
1,913
USEN Corp.
USEN Partner Services
Provide financial,
credit and
collection know-how
to USEN Corp. with
respect to USEN
service users
(mostly SMEs).
3,445
1,433
Venture Link Co., Ltd.
Provide finance
support, leasing
and credit tools to
Venture Link
franchise members.
Also, provide funds
to customers of
subsidiary of
Venture Link.
57
71
Chuo Mitsui Trust &
Banking Co., Ltd.
Provide flexible
financial services
according to
business owners
needs by using our
credit expertise
and Chuo Mitsui
Trust & Banking
Co., Ltd.s network
of real estate
agents and SMEs.
570
698
591
2,041
ShinGinko Tokyo, Ltd.
Guarantee start-up
loans provided by
ShinGinko Tokyo,
Ltd. which target
owners of start-up
companies with
business history of
less than two years
and provide
financial and other
services.
205
670
USS Support Service
Co., Ltd.
Guarantee credit
payment by users of
fund support
services provided
by USS Support
Service Co., Ltd.
in relation to the
purchase of used
cars.
221
The Bank of Fukuoka,
Ltd.
Guarantee new loans
provided by the
Bank of Fukuoka,
Ltd. to mainly
start-up companies
with business
history of less
than two years.
292
The Hokkaido Bank,
Ltd.
Guarantee new loans
provided by the
Hokkaido Bank, Ltd.
to mainly
companies, sole
proprietors and
potential
proprietors.
14
Kumamoto Family Bank,
Ltd.
Guarantee new loans
provided by
Kumamoto Family
Bank, Ltd. to
mainly companies,
sole proprietors
and potential
proprietors.
9
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large Japanese non-bank finance and leasing companies that provide financing,
leasing and related services to SMEs, including Lopro Corporation, SFCG Co., Ltd., Orix
Corporation, Sumisho Lease Co., Ltd. and Mitsubishi UFJ Lease & Finance Co., Ltd.;
Japanese banks and other financial institutions expanding out of their traditional
markets, particularly by forming joint ventures and alliances with finance companies,
to the extent that they provide loans or other financial services to SMEs and
individual business owners;
foreign financial institutions, a number of which have been entering the Japanese
finance industry;
credit card companies, particularly overseas companies such as MasterCard
Incorporated, which have formed distribution relationships with major Japanese consumer
finance companies; and
non-financial institutions, including East Japan Railway Company, a railway company
that provides consumer credit services through in-house cards with electronic money
functions, and information technology companies including Yahoo Japan Corporation and
Rakuten, Inc., that provide consumer credit services through the Internet.
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The Law Concerning Regulations on Moneylending Business, etc., which will be renamed
the Moneylending Business Law by mid-December 2007 as explained in
Recent
Developments
below (the Moneylending Business Law);
The Law Concerning the Regulation on Acceptance of Contributions, Money Deposits and
Interest (the Contributions Law); and
The Law Concerning the Regulation of Interest Rates (the Interest Rate Restriction
Law).
any person who has had his/her registration revoked as a result of misconduct or
other reasons specified under the Moneylending Business Law within five years of the
application;
any person who has been fined for violating the Moneylending Business Law or the
Contributions Law or other specified statues and five years have not passed since the
person completed the payment of the fine (or became excused from paying it);
any person who was sentenced to imprisonment for any reason and five years have not yet
passed since person completed the term of imprisonment (or became excused from serving
it);
any person in respect of which any of the Directors, Statutory Auditors or specified
senior employees thereof is a disqualified person;
any person who is identified as a member of a crime syndicate; and
any person who does not meet the minimum net asset requirement of ¥3 million, in the
case of an individual, or ¥5 million, in the case of a corporation.
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20% per year for loans of less than ¥100,000;
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.
delivery by the registered moneylender 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 by the registered moneylender to the borrower or guarantor, upon the
payment of the excess interest, of a written receipt for the payment.
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abolish the concept of deemed valid payments under the Moneylending Business Law;
reduce the maximum interest rate under the Contributions Law from 29.2% per year to
20% per year;
introduce administrative sanctions on charging interest in excess of the maximum
interest rate under the Interest Rate Restriction Law, even if the rate charged is
below the maximum interest under the Contributions Law;
obligate a registered moneylender to investigate customers ability to repay and
prohibit excessive lending in respect of loans to individual customers, based on the
aggregate amount which a customer owes to moneylenders; and
introduce further documentation requirements such as deliver of a prescribed written
instrument prior to entering into a loan agreement.
loans receivable held by financial institutions (including banks, insurance
companies and finance companies licensed under the Moneylending Business Law and other
miscellaneous financial entities), money claims prescribed by the Law Concerning the
Securitization of Assets, and other claims provided for in cabinet orders; and
loans receivable under bankruptcy or rehabilitation proceedings and loans receivable
which are securitized through special purpose vehicles.
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the purpose of the use of information must be specified as much as possible;
personal information may not be obtained through fraud or by other illegal means;
upon acquiring the personal information, the use of information must be notified to
the relevant individual or published;
personal information collected should be relevant to the purposes for which it is to
be used and, to the extent necessary for those purposes, should be accurate and kept up
to date;
to prevent loss, unauthorized access, destruction, use, modification or disclosure
of personal information, security safeguards must be implemented;
personal data may not be disclosed or made available to third-parties without the
prior consent of the individual to whom the personal information relates;
the purpose of use of all personal data and the procedures of amendment,
suspensions, etc., of the use or deletion of personal data must be made available to
the individual to whom the personal information relates; and
use must correspond to a persons requests to control his or her personal
information, including amendment, suspension of the use or deletion of his or her
personal data.
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Shares and voting
rights held by us,
Name
directly or indirectly
Principal business
73.8%
Servicing business
100.0
Leasing business
100.0
Real estate-related businesses
100.0
Leasing business
99.5
Securities business
69.3
Loan business
(1)
Prior to June 22, 2004, NIS Property Co., Ltd. was named Nissin Credit Guarantee Co., Ltd.
and its principal business was providing credit guarantees. On June 15, 2004, Nissin Credit
Guarantee Co., Ltd. transferred its credit guarantee business operations to NIS Lease Co.,
Ltd.
(2)
Established on July 9, 2004, obtained leasing license from Chinese government on September
14, 2005, and changed its name from Matsuyama Nissin Leasing (Shanghai) Co., Ltd. on March 13,
2006.
(3)
Acquired on December 3, 2004 and changed its name from Yamagen Securities Co., Ltd. on May 1,
2005.
(4)
Acquired on December 2, 2005 through a cash tender offer.
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integrated financial services;
servicing business;
real estate business; and
other businesses.
Secured Loans
. Secured loans are conventional loans secured by real property or
securities to SMEs or individuals. Recently, our secured loan portfolio has grown
significantly, reflecting our strategic shift toward promotion of financial services to
property companies, SMEs and their owners centering on real estate financing, through
active sales and marketing efforts by our Real Estate Finance Department, which was
established in February 2004. In order to strengthen these operations, we established
the Real Estate Group in June 2006, which supervises all real estate-related
businesses, and the Real Estate Structured Finance Department under the Real Estate
Group in September 2006, to provide real estate-related services particularly for
securitization, including non-recourse loans, loan arrangement, and other services. As
a result of these efforts, the percentage of interest income derived from secured loans
has been increasing.
SME Loans
. SME loans are primarily unsecured loans to SMEs and their owners
guaranteed by, in general, one or more guarantors. SME loans also include
unguaranteed, unsecured loans made under pre-approved revolving credit lines to more
creditworthy SME owners. As of March 31, 2007, the amount of total SME loans
outstanding and number of customer accounts decreased compared to the end of the
previous fiscal year, primarily as a result of our strategic shift in focus to real
estate financing. SME loans are generally originated through the direct telemarketing
efforts of our loan offices and our newly established sales departments in metropolitan
areas in Japan, such as Tokyo, Osaka, Kyushu and Nagoya. SME loans are also originated
through referrals from companies with whom we have strategic alliances. Interest
income derived from SME loans has contributed significantly to our total interest
income.
Consumer Loans
. Consumer loans are unguaranteed, unsecured loans to individuals.
In line with a strategic shift over the last several years toward promotion of
financial services to SMEs and their owners, on June 1, 2004, we sold most of the
outstanding balance of our unguaranteed consumer loans to NETCARD, Inc. (formerly known
as Orient Credit Co., Ltd.) for ¥32,697 million. See Factors Affecting Our Financial
Results
Sale of Consumer Loans
below for a further discussion.
Other Loans.
Other loans mainly consist of investment in direct financing leases
and installment loans to SMEs through our wholly-owned subsidiary, NIS Lease. Such
loans are generally designed to meet the capital needs of SMEs in Japan for expansion
of their businesses.
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Year Ended March 31,
2005
2006
2007
(In millions except percentages)
¥
960
3.5
%
¥
2,886
10.9
%
¥
7,818
37.2
%
16,113
58.9
16,951
64.0
16,566
78.7
12,453
45.5
9,325
35.2
7,525
35.8
502
1.9
1,095
4.1
1,517
7.2
30,028
109.8
30,257
114.2
33,426
158.9
(540
)
(2.0
)
(431
)
(1.6
)
280
1.3
29,488
107.8
29,826
112.6
33,706
160.2
2,132
7.8
3,331
12.6
12,664
60.2
¥
27,356
100.0
%
¥
26,495
100.0
%
¥
21,042
100.0
%
Year Ended March 31,
2005
2006
2007
(In millions)
¥16,896
¥19,779
¥19,565
10,095
11,923
18,856
Year Ended March 31,
2005
2006
2007
(In millions)
¥1,642
¥8,069
¥20,503
1,404
4,210
10,678
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Year Ended March 31,
2005
2006
2007
(In millions)
¥ 2
¥ 119
¥1,575
2,832
8,692
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Market Interest Rates and Market Conditions
. Interest
rates in Japan have been
extremely low for several years, reflecting the Bank of Japans monetary policy to
combat economic weakness, including the zero interest rate policy, which was in place
for most of the period from February 1999 until it was ended in July 2006. The
weighted period-end average interest rate of our long-term borrowings was 1.9%, 1.4%
and 1.9% at March 31, 2005, 2006 and 2007, respectively. The weighted period-end
average interest rate of our short-term borrowings was 1.2%, 1.0% and 1.9% as of March
31, 2005, 2006 and 2007, respectively. Our average borrowing rate gradually increased
primarily due to current market interest rates reflecting the Bank of Japan lifting its
quantitative easing policy, thereby ending its zero interest rate policy, as well as
the current adverse conditions for moneylenders in Japan. We expect that interest
rates on our borrowings will continue to rise.
Mix of Our Funding Sources and Credit Ratings
. 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 the debt capital markets have been available to us, we have benefited from
typically lower funding costs in the debt capital markets than we can achieve from bank
loans. The percentage of our debt issuances to our total borrowings was 22.6%, 31.1%
and 37.6% at March 31, 2005, 2006 and 2007, respectively, reflecting our issuance of
bonds and asset-backed securities, including asset-backed commercial paper. The
percentage of our debt issuance slightly decreased as of March 31, 2007, compared with
the end of the previous fiscal year, because we procured a significant amount of funds
by the issuance of new shares through a third-party allotment. The increasing trend in
capital needs for our real estate-related businesses continued for the year ended
March 31, 2007. In addition, while any downgrades of our credit ratings by rating
agencies could harm our ability to tap the debt markets, our current intention, subject
to market conditions and other uncertainties, is to balance our proportion of direct
and indirect financing.
Amount of Our Borrowings
. To the extent that the size of our loan portfolio grows,
we rely primarily on borrowings to finance the growth of our loan portfolio. We expect
the amount of borrowings to increase in the near term, reflecting the expected growth
of our loan portfolio centering on real estate financing.
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Year Ended March 31,
2005
2006
2007
(In millions)
¥
29,488
¥
29,826
¥
33,706
2,132
3,331
12,664
27,356
26,495
21,042
2,971
2,602
3,870
24,385
23,893
17,172
5,817
5,923
10,853
18,568
17,970
6,319
5,003
11,445
17,585
188
503
1,037
6,521
7,181
8,534
2,395
2,654
3,196
333
629
264
6,001
6,765
9,552
15,438
17,732
22,583
8,133
11,683
1,321
4,061
3,604
(881
)
286
618
453
11,908
14,669
(13
)
4,646
6,214
1,597
¥
7,262
¥
8,455
¥
(1,610
)
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Millions
of Yen
Integrated
Servicing
Real Estate
Other
Financial Services
Business
Business
Businesses
Eliminations
Consolidated
¥
27,356
¥
¥
¥
¥
¥
27,356
1,107
3,893
18
210
(225
)
5,003
3,012
153
90
9
(105
)
3,159
5,817
5,817
123
821
40
984
12,969
1,181
58
180
(122
)
14,266
6,542
1,738
(130
)
(19
)
2
8,133
208,493
21,818
2,643
572
(5,125
)
228,401
Millions of Yen
Integrated
Servicing
Real Estate
Other
Financial Services
Business
Business
Businesses
Eliminations
Consolidated
¥
26,495
¥
¥
¥
¥
¥
26,495
3,251
7,918
901
279
(904
)
11,445
2,656
408
311
11
(281
)
3,105
5,923
5,923
122
1,186
26
1,334
13,619
1,676
340
577
(317
)
15,895
7,426
4,648
250
(335
)
(306
)
11,683
313,127
43,000
25,074
244
(21,502
)
359,943
Millions of Yen
Integrated
Servicing
Real Estate
Other
Financial Services
Business
Business
Businesses
Eliminations
Consolidated
¥
21,215
¥
¥
¥
¥
(173
)
¥
21,042
5,610
10,375
5,307
319
(4,026
)
17,585
3,892
933
981
116
(1,015
)
4,907
10,853
10,853
530
1,696
3
2,229
15,658
2,548
824
626
(339
)
19,317
(4,108
)
5,198
3,499
(423
)
(2,845
)
1,321
370,481
62,649
56,466
8,599
(44,118
)
454,077
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As of March 31,
2006
2007
(In millions)
¥
359,943
¥
454,077
22,860
28,344
225,947
250,780
24,155
28,910
20,792
67,327
42,071
38,384
11,169
8,448
721
6,488
7,173
11,115
277,006
367,322
60,411
84,258
198,924
260,817
1,382
256
7,514
16,123
¥
80,504
¥
82,563
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Year Ended March 31,
2005
2006
2007
(In millions)
¥
13,528
¥
10,034
¥
11,003
(3,327
)
5,817
5,923
10,853
1,942
2,354
6,528
(7,926
)
(7,308
)
(9,847
)
¥
10,034
¥
11,003
¥
18,537
As of March 31,
2005
2006
2007
(In millions)
¥
8,102
¥
8,862
¥
13,324
1,932
2,141
5,213
¥
10,034
¥
11,003
¥
18,537
Secured Loans
. We generally charge-off or provide an allowance for loan losses on
secured loans in default at the end of the semi-annual period in which the default
occurs after considering the availability and value of collateral.
Unsecured Loans on Deeds
. We generally charge-off or provide an allowance for loan
losses on Business Assist and Smart Assist loans in default at the end of the
semi-annual period in which the default occurs for which we believe the likelihood of
any future collection from the borrower as well as the guarantor is
minimal. 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.
Revolving Loans
. We generally charge-off Business Timely and First Plan loans for
which interest payments have been delinquent for 67 days. We
charge-off revolving
loans to customers who have declared bankruptcy immediately after we become aware of
the bankruptcy filing. Because of our rapid charge-off, we do not place these 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.
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Year Ended March 31,
2005
2006
2007
(In millions)
¥
¥
¥
590
190
977
6,136
(190
)
(387
)
(1,774
)
¥
¥
590
¥
4,952
Year Ended/As of March 31,
2005
2006
2007
(In millions except percentages)
¥
18,812
¥
91,610
¥
139,691
761
558
624
4.0
%
0.6
%
0.4
%
9,976
39,496
115,779
22
22
20
0.2
%
0.1
%
%
¥
79,823
¥
90,729
¥
81,688
5,837
7,405
13,250
7.3
%
8.2
%
16.2
%
76,651
86,976
88,159
4,808
5,302
6,954
6.3
%
6.1
%
7.9
%
¥
50,431
¥
44,158
¥
34,959
3,205
2,585
3,750
6.4
%
5.9
%
10.7
%
58,018
47,250
39,621
3,594
2,687
2,872
6.2
%
5.7
%
7.2
%
¥
6,296
¥
10,681
¥
14,605
231
455
913
3.7
%
4.3
%
6.3
%
4,166
10,243
12,236
83
108
29
2.0
%
1.1
%
0.2
%
¥
155,362
¥
237,178
¥
270,943
10,034
11,003
18,537
6.5
%
4.6
%
6.8
%
148,811
183,965
255,795
8,507
8,119
9,875
5.7
%
4.4
%
3.9
%
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Restructured Loans
. Restructured loans are comprised of 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 uncollectible 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 uncollectible in our
allowance for loan losses. The decrease in impaired loans between March 31, 2005 and
2006 reflected the decrease in impaired consumer loans as we strategically have shifted
toward promotion of financial services to SMEs and their owners. However, the amount
of impaired loans increased between March 31, 2006 and 2007 due to an increase of loans
partially charged-off by excess interest repayments. (See Critical Accounting
Policies
Reserve and Provision for Losses on Excess Interest Repayments
below.) In addition, the amount of
restructured secured loans increased significantly due to an increase in the average
balance of secured loans per account, despite the fact that the ratio of the number of
restructured secured loan accounts to the number of entire secured loan accounts
decreased from 4.9% as of March 31, 2006 to 3.6% as of March 31, 2007.
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 secured loans, guaranteed SME and consumer loans,
and other loans.
As of March 31,
2005
2006
2007
(In millions)
¥
186
¥
77
¥
870
1,836
963
5,903
71
665
5,108
1,765
298
795
¥
1,070
¥
1,537
¥
2,606
9,631
11,496
15,583
6,938
7,696
8,528
1,546
1,438
1,788
2,693
3,800
7,055
¥
594
¥
817
¥
997
8,762
7,486
7,211
6,866
6,037
5,138
1,776
1,432
1,340
1,896
1,449
2,073
¥
¥
10
¥
21
29
68
107
12
12
3
29
56
95
¥
1,850
¥
2,441
¥
4,494
20,258
20,013
28,804
13,875
14,410
18,786
3,322
2,870
3,131
6,383
5,603
10,018
(1)
The amounts of non-accrual loans represent the balance of non-accrual loans outstanding
before netting of allowances for loan losses.
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Year Ended March 31,
2005
2006
2007
(In millions)
¥
717
¥
1,282
¥
1,792
817
1,186
1,696
(252
)
(676
)
(833
)
¥
1,282
¥
1,792
¥
2,655
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Secured Loans
. Loan balances are charged-off when we believe the likelihood of any
future collection is minimal. We consider the availability and value of collateral in
determining the level of charge-off. Interest accrual is terminated 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.
Unsecured Loans on Deeds.
Loan balances are charged-off when we believe the
likelihood of any future collection from the borrower as well as the guarantor is
minimal. Events triggering charge-offs include bankruptcy of both the borrower and
guarantor. Interest accrual is terminated at the earlier of the date when contractual
interest payments are 97 days delinquent or the date when all or a part of loan
principal is deemed uncollectible.
Revolving Loans.
Loan balances are charged-off and interest accrual is terminated
when a loans contractual interest payment becomes 67 days delinquent or upon the
occurrence of other events such as the bankruptcy of the borrower.
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Year Ended March 31,
2005
2006
2007
(In millions)
¥
14,686
¥
24,270
¥
23,676
(12,546
)
(135,976
)
(99,843
)
3,335
108,675
81,438
(9
)
182
213
5,466
(2,849
)
5,484
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Year Ended March 31,
2005
2006
2007
(In millions)
¥
1,754
¥
6,368
¥
5,270
Affiliates
. Some of these enterprises are our affiliates. Our total initial
investments in these affiliates amounted to ¥792 million as
of March 31, 2006 and ¥2,787 million
as of March 31, 2007. These affiliates had a book carrying value of
¥617 million as of March 31, 2006 and ¥2,826 million as of March 31, 2007.
Non-affiliates
. These are investments in enterprises that we view as potential
strategic alliance parties, rather than sources of potential capital gains. Our total
initial investments in these enterprises amounted to ¥19,490 million as of March 31,
2006 and ¥21,677 million as of March 31, 2007. These enterprises had a book carrying
value of ¥28,057 million as of March 31, 2006 and ¥20,542 million as of March 31, 2007.
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As of March 31,
2006
2007
(In millions)
¥
500
¥
500
500
500
500
7,500
7,500
150
90
7,500
7,500
10,000
10,000
450
1,000
700
5,000
10,000
822
¥
28,972
¥
41,740
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Year Ending March 31,
(In millions)
¥
108,475
80,552
34,110
36,777
903
¥
260,817
As of March 31,
2006
2007
1.0
%
1.1
%
5.0
2.5
1.4
2.0
0.3
1.3
1.0
2.2
0.7
1.9
2.4
2.6
2.4
2.9
2.4
2.7
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3S Loans
. We guarantee 100% of loans and corresponding interest receivable from
customers for 3S loans and receive a guarantee fee at the loan contract rate less 4%.
We are required to pay out on our guarantees on loans for which contractual payments
are overdue by 14 days or more as of the end of each month. 3S loans are unsecured
loans that require one or more guarantees from third-party individuals with an income
source separate from the customer, and are designed for SMEs.
Business Loans
. We guarantee 10% of loans and corresponding interest receivable
from customers for Business loans and receive 10% of the interest received from these
loans. We are required to pay out on our guarantees on loans for which
contractual payments are overdue by 90 days or more as of the end of each month.
Business loans are unsecured loans designed for SMEs.
Business Card loans
. We guarantee 10% of loans and corresponding interest
receivable from customers for Business Card loans and receive 10% of the interest
received from these loans. We are required to pay out on our guarantees on loans
for which contractual payments are overdue by 90 days or more. Business Card loans are
unsecured loans designed for SMEs.
Real Estate Finance loans
. We guarantee 10% of loans and corresponding interest
receivable from customers for Real Estate Finance loans and receive 10% of the interest
received from these loans. We are required to pay out on our guarantees on loans
for which contractual payments are overdue by 30 days or more.
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As of March 31,
2006
2007
(In millions)
¥
11,886
¥
17,555
964
908
1,920
629
1,066
Year Ended March 31,
2005
2006
2007
(In millions)
¥
845
¥
1,386
¥
1,880
34
20
45
879
1,406
1,925
(562
)
(898
)
(1,337
)
¥
317
¥
508
¥
588
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Payments Due by Period
April 1, 2007
April 1, 2008
April 1, 2010
to March 31,
to March 31,
to March 31,
After
Contractual obligations
Total
2008
2010
2012
April 1, 2012
(In millions)
¥
260,817
¥
108,475
¥
114,662
¥
37,680
¥
882
468
354
60
1,361
961
400
¥
263,060
¥
109,904
¥
115,416
¥
37,740
¥
(1)
Includes only principal payment obligations.
(2)
These are obligations pursuant to agreements to purchase goods or services that are
enforceable and legally binding on us and that specify all significant terms.
1.
The safe harbor provided in Section 27A of the Securities Act and Section 21E of the
Exchange Act (statutory safe harbors) shall apply to forward-looking information
provided pursuant to Item 5.E and F of this annual report on Form 20-F, provided that
the disclosure is made by: an issuer; a person acting on behalf of the issuer; an outside
reviewer retained by the issuer making a statement on behalf of the issuer; or an
underwriter, with respect to information provided by the issuer or information derived
from information provided by the issuer.
2.
For purposes of Item 5.G.1 of this Item only, all information required by Item 5.E
of this Item is deemed to be a forward-looking statement as that term is defined in the
statutory safe harbors, except for historical facts.
3.
With respect to Item 5.E of this annual report on Form 20-F, the meaningful
cautionary statements element of the statutory safe harbors will be satisfied if a company
satisfies all requirements of that same Item 5.E of this annual report on Form 20-F.
Table of Contents
Name
Position
(Date of Birth)
(Executive Officer Position)
Business Career
Chairman,
Representative
Director of the
Board and
Co-CEO
April 1986
Joined the Company
September 1988
Manager of Hiroshima Branch Office
March 1989
Director of the Board
December 1989
Director of the Board and General Manager of
Finance Department
February 1991
Executive Director of the Board, Advice to
Finance and System Information
December 1992
Senior Executive Director of the Board and Head
of Sales & Marketing Control
October 1996
Representative Senior Executive Director of the
Board and Head of Tokyo Branch, Advice to Sales
Department
April 1998
Representative Senior Executive Director of the
Board and Head of Sales & Marketing Control
June 2000
President, Representative Director of the Board
and Head of Sales & Marketing Control
March 2004
Representative Director of the Board of Shuho,
Ltd. (current position)
July 2005
President, Representative Director of the Board
and Executive Officer
June 2006
Chairman, Representative Director of the Board
and Co-CEO (current position)
(October 3, 1957)
President,
Representative
Director of the
Board and
Co-CEO
June 1994
Joined Merrill Lynch Securities Inc. (currently
Merrill Lynch Japan Securities Co., Ltd.)
June 2003
Director and Head of Investment Banking Group
March 2005
Vice-Chairman and Head of Investment Banking Group
May 2006
Joined the Company
Special Advisor
June 2006
President, Representative Director of the Board
and Co-CEO (current position)
Table of Contents
Name
Position
(Date of Birth)
(Executive Officer Position)
Business
Career
Director of the
Board and Advisor
August 1953
Started moneylending business
May 1960
Founded Nissin Shoji Co., Ltd. (currently NIS Group
Co., Ltd.)
President and Representative Director of the Board
January 1980
Founded Nissin Building Co.,
Ltd.
President and Representative Director of the Board
March 1989
Representative Director of the Board of Shuho, Ltd.
June 2000
Chairman and Representative Director of the Board
May 2001
President and Representative Director of the Board
of Nissin Building Co., Ltd. (current position)
January 2004
Director of the Board of Nissin Servicer Co., Ltd.
(current position)
June 2006
Director of the Board and Advisor (current position)
Senior Executive
Director of the
Board and Executive
Officer
(Head of Investment
Banking, Sales &
Marketing, and
Investment Banking
Group Manager)
April 1994
Joined the Company
September 1995
Manager of Kumamoto Branch Office
July 2000
General Manager of Finance Department
January 2001
General Manager of Finance Department and Strategic
Business Development Department
April 2002
General Manager of Eastern Japan Sales & Marketing
Control Department
June 2002
Director of the Board
April 2003
Director of the Board and General Manager of
Strategic Business Development Department
November 2003
President and Representative Director of the Board
of NIS Lease Co., Ltd. (current position)
July 2004
Director of the Board, Deputy Head of Sales &
Marketing Control and General Manager of Strategic
Business Development Department
July 2005
Executive Director of the Board, Executive Officer,
Head of Sales & Marketing Control and General
Manger of Sales Department
November 2005
Concurrently Head of Osaka Branch
June 2006
Executive Director of the Board, Executive Officer
and Head of Sales & Marketing
June 2007
Senior Executive Director of the Board, Executive
Officer, Head of Investment Banking, Sales &
Marketing and Investment Banking Group Manager
(current position)
Senior Executive
Director of the
Board and Executive
Officer
(Head of Strategy &
Operations Control)
April 1991
Joined Ministry of Finance
August 2003
Joined the Company
General Manager, Assistant to President
June 2004
Director of the Board
July 2004
Director of the Board and General Manager of
Finance Department
July 2005
Executive Director of the Board, Executive Officer,
Head of Operations Control, and General Manager of
Finance Department
February 2006
Executive Director of the Board, Executive Officer
and Head of Operations Control
June 2007
Senior Executive Director of the Board, Executive
Officer and Head of Strategy & Operations Control
(current position)
Table of Contents
Name
Position
(Date of Birth)
(Executive Officer Position)
Business
Career
Senior Executive
Director of the
Board and Executive
Officer
(Officer-in-Charge
East Asia Region)
April 1998
Joined the Company
April 2001
Manager of Corporate Planning Department 2nd Section
September 2002
Concurrently Assistant General Manager of Corporate
Planning Department
April 2003
General Manager of Investor Relations Department
June 2003
Director of the Board
July 2004
Chairman of Matsuyama Nissin Investment Consulting
(Shanghai) Co., Ltd. (currently Nissin Leasing
(China) Co., Ltd.) (current position)
July 2005
Executive Director of the Board, Executive Officer,
General Manager of Investor Relations Department
and Officer-in-Charge East Asia Region
June 2007
Executive Director of the Board, Executive Officer
and Officer-in-Charge East Asia Region (current
position)
(April 9, 1954)
Executive Director
of the Board and
Executive Officer
(Deputy Head of
Investment Banking,
Sales & Marketing
and Real Estate
Group Manager)
April 1999
Joined RISA Partners, Inc.
Director of the Board
October 2002
Joined A-MAX Co., Ltd.
Director of the Board
June 2003
Joined Nissin Servicer Co., Ltd.
January 2004
Director of the Board and General Manager of Credit
Screening Department
March 2004
Director of the Board and General Manager of Asset
Management Department
September 2005
Director of the Board, Advice to Asset Management
Department (current position)
Joined the Company
General Manager of Real Estate Business Control
Department
February 2006
Concurrently Executive Officer
June 2006
Director of the Board, Executive Officer, Deputy
Head of Sales & Marketing, Real Estate Group
Manager and General Manager of Real Estate Business
Control Department
June 2007
Executive Director of the Board, Executive Officer,
Deputy Head of Investment Banking, Sales &
Marketing and Real Estate Group Manager (current
position)
Director of the
Board and Executive
Officer
(Deputy Head of
Investment Banking,
Sales & Marketing)
April 1995
Joined the Company
April 1996
Manager of Koriyama Branch Office
April 2001
General Manager of Finance Department
April 2002
Head of Osaka Branch and General Manager of Western
Japan Sales & Marketing Control Department
June 2002
Director of the Board
July 2004
Director of the Board and General Manager,
Assistant to Head of Sales & Marketing Control
August 2004
Director of the Board of Venture Link Co., Ltd.
(current position)
July 2005
Concurrently Executive Officer
June 2006
Director of the Board, Executive Officer, Deputy
Head of Sales & Marketing and Sales & Marketing
Group Manager
March 2007
Director of the Board of Araigumi Co., Ltd.
(current position)
April 2007
Director of the Board, Executive Officer and Deputy
Head of Investment Banking, Sales & Marketing
(current position)
Table of Contents
Name
Position
(Date of Birth)
(Executive Officer Position)
Business
Career
(February 15, 1949)
Director of the
Board and Executive
Officer
(Deputy Head of
Strategy &
Operations Control,
and General Manager
of Strategic
Planning
Department)
April 1973
Joined Long-term Credit Bank of Japan Co., Ltd.
(currently Shinsei Bank, Ltd.)
September 2004
Joined Mercer Human Resource Consulting LLC.
Director of the Board
November 2005
Joined the Company
General Manager, Assistant to Head of Sales &
Marketing Control
April 2006
Concurrently Executive Officer
June 2006
Director of the Board, Executive Officer, Deputy Head
of Sales & Marketing and Strategic Business
Development Group Manager
March 2007
Director of the Board of Araigumi Co., Ltd. (current
position)
April 2007
Director of the Board, Executive Officer, Deputy Head
of Strategy & Operations Control and General Manager
of Strategic Planning Development (current position)
(December 25, 1950)
Director of the
Board and Executive
Officer
(Head of Risk
Management)
April 1975
Joined The Industrial Bank of Japan, Ltd. (currently
Mizuho Bank, Ltd.)
September 2004
Joined Koken Boring Machine Co., Ltd.
Executive Officer and Deputy Director of Groundwater
Usage Department
September 2005
Joined the Company
Assistant General Manager, Assistant to Head of
Operations Control
February 2006
General Manager, Assistant to Head of Operations
Control
February 2006
General Manager of Internal Control Department
June 2006
Concurrently Executive Officer
April 2007
Executive Officer and Head of Risk Management
June 2007
Director of the Board (current position)
Director of the
Board
(Outside)
April 1992
Registered with Daiichi Tokyo Bar
Association,
Joined the Law Offices of Nagashima & Ohno (currently
the Law Offices of Nagashima Ohno & Tsunematsu)
September 1999
Joined Merrill Lynch Securities Inc. (currently
Merrill Lynch Japan Securities Co., Ltd.)
June 2004
Joined TMI Associates
Partner of TMI Associates (current position)
June 2005
Special Committee Member of Marusan Securities Co.,
Ltd. (current position)
June 2006
Director of the Board of the Company (current position)
Table of Contents
Name
Position
(Date of Birth)
(Executive Officer Position)
Business
Career
Standing Statutory
Auditor
November 1983
Joined the Company
March 1994
General Manager of Accounting Department and
Finance Department
June 1994
Director of the Board and General Manager of
General Affairs
May 1995
Director of the Board, General Manager of
Corporate Planning Department and Accounting
Department
June 1996
Director of the Board, Advice to Accounting
Department and General Manager of Corporate
Planning Department
June 2000
Executive Director of the Board and General
Manager of Corporate Planning Department
April 2003
Executive Director of the Board and Head of
Operations Control
July 2004
Concurrently General Manager of Corporate Planning
Department
August 2004
Statutory Auditor of Venture Link Co., Ltd.
(current position)
July 2005
Senior Executive Director of the Board and
Executive Officer
June 2006
Concurrently Head of Group Strategy
April 2007
Senior Executive Director of the Board and
Executive Officer
June 2007
Retired from Director of the Board
Standing Statutory Auditor (current position)
Standing Statutory
Auditor
April 1971
Joined the Company
January 1976
Manager of Takamatsu Branch Office
April 1984
Director of the Board
July 1994
Executive Director of the Board and General
Manager of Tokyo Office
October 1996
Executive Director of the Board and General
Manager of Finance Department
October 2000
Executive Director of the Board, Advice to
Business Audit Department
June 2002
Retired from Director of the Board
Standing Statutory Auditor (current position)
Statutory Auditor
(Outside)
April 1968
Joined Ministry of Finance
July 1996
Deputy Director of National Tax Tribunal
July 1997
Senior Executive Director of Japan Finance
Corporation for Municipal Enterprises
June 2001
Chairman of Promise Co., Ltd.
June 2007
Statutory Auditor of the Company (current position)
(February 10, 1955)
Statutory Auditor
(Outside)
October 1979
Joined Arthur Andersen Co., Tokyo Office
(currently KPMG AZSA & Co.)
September 1985
Opened Katsuhiko Asada Certified
Public Accountant Firm
December 2001
Opened Konishi Asada Certified
Public Accountant Firm
June 2004
Statutory Auditor of the Company (current position)
(1)
Kunihiko Sakioka is the second son of Hideo Sakioka.
(2)
Pursuant to a resolution of the Board of Directors adopted on
September 25, 2007, effective October 1, 2007, Kunihiko
Sakioka will become Chairman, Representative Director of the Board,
President and CEO (Head of Investment Banking, Sales &
Marketing), Shinsuke Amiya will become Vice-Chairman of the Board
and Executive Officer and Toshioki Otani will become Senior Executive
Director of the Board and Executive Officer.
(3)
Hidenori Nakagawa is an outside director pursuant to Article 2-15 of the Corporate Law.
(4)
Akio Sakioka is the nephew of Hideo Sakioka.
(5)
Masaaki Uchino and Katsuhiko Asada are each an outside statutory auditor pursuant to
Article 2-16 of the Corporate Law.
Table of Contents
B.
Compensation.
C.
Board Practices.
Start of
Expiration of
Name
Start of first term
current term
current term
March 1989
June 2007
June 2008
June 2006
June 2007
June 2008
May 1960
June 2007
June 2008
June 2002
June 2007
June 2008
June 2004
June 2007
June 2008
June 2003
June 2007
June 2008
June 2006
June 2007
June 2008
June 2002
June 2007
June 2008
June 2006
June 2007
June 2008
June 2007
June 2007
June 2008
June 2006
June 2007
June 2008
June 2007
June 2007
June 2011
June 2002
June 2005
June 2009
June 2007
June 2007
June 2011
June 2004
June 2004
June 2008
(1)
Outside director pursuant to the Article 2-15 of the Corporate Law.
(2)
Outside statutory auditors pursuant to the Article 2-16 of the Corporate Law.
Table of Contents
Table of Contents
Corporate Governance Practices Followed
by NYSE-listed
U.S. Companies
Corporate Governance Practices Followed
by Us
Under the Corporate Law, Japanese joint stock
corporations are permitted to choose between the
traditional corporate governance system based on
a board of statutory auditors (the statutory
auditor system) and a corporate governance
system based on committees (the committee
system). The vast majority of Japanese
companies employ the statutory auditor system.
For Japanese companies with the statutory
auditor system, including us, the Corporate Law
of Japan has no independence requirement with
respect to directors. The statutory auditors,
who are separate from the companys management,
monitor performance of directors and oversee
accounting firms and have separate staff to
assist them in completing their tasks. Pursuant
to the Corporate Law, Japanese companies with a
board of statutory auditors, including us, are
required to have at least 50% of the statutory
auditors to be outside statutory auditors as
defined in the Corporate Law and who must meet
independence requirements under the Corporate
Law. Statutory auditors must not have served as
a director, accounting officer (kaikei-sanyo),
executive officer, manager or any other employee
of the company or any of its subsidiaries.
Currently, we have two outside Statutory
Auditors.
As discussed above, we employ the statutory
auditor system. Under this system, our Board of
Statutory Auditors is a legally separate and
independent body from our Board of Directors.
The function of our Board of Statutory Auditors
is similar to that of independent directors,
including those who are members of the audit
committee, of a U.S. company. In particular,
their function is to monitor the performance of
our Directors, and review and express an opinion
on the method of auditing by our independent
public accounting firm and on such accounting
firms audit reports, for the protection of our
shareholders.
Japanese companies with a board of statutory
auditors, including us, are required to have at
least three statutory auditors. Currently, we
have four Statutory Auditors. The term of each
Statutory Auditor is four years. In contrast,
the term of each of our Directors is one year.
Since July 31, 2005, when the requirements of
Rule 10A-3 under the U.S. Securities Exchange
Act of 1934 relating to listed company audit
committees become applicable to foreign private
issuers, we have relied on an exemption under
that rule available to foreign private issuers
with boards of auditors (or similar bodies), or statutory auditors meeting
certain criteria. We make disclosure regarding
such reliance in Item 16.D to our annual report
on Form 20-F.
Table of Contents
Corporate Governance Practices Followed
by NYSE-listed U.S. Companies
Corporate Governance Practices Followed
by Us
Directors are elected at a meeting of
shareholders. The Board of Directors does not
have the power to fill vacancies in the board.
Statutory Auditors are also elected at a meeting
of shareholders. Under the Corporate Law,
before our Board of Directors submits a proposal
to a meeting of our shareholders to elect a
Statutory Auditor, the proposal must be approved
by a resolution of our Board of Statutory
Auditors. Our Board of Statutory Auditors is
empowered to adopt resolutions requesting that
our Directors submit a proposal for the election
of Statutory Auditors to a meeting of our
shareholders. Statutory Auditors have the right
to state their opinion concerning the election
or resignation of Statutory Auditors at meetings
of our shareholders.
Under the statutory auditor system, unless
otherwise provided in our Articles of
Incorporation, total amounts of compensation for
our Directors and Statutory Auditors are
respectively proposed to, and voted on by, a
meeting of our shareholders. Our Articles of
Incorporation do not provide for any such total
amounts. Once the proposals for the total
amounts of compensation are approved at a
meeting of our shareholders, our Board of
Directors allocates the total amount for the
Directors among its members in its discretion
and our Statutory Auditors allocate the total
amount for the Statutory Auditors among
themselves in their discretion, unless there is
a resolution at the shareholders meeting or a
provision in the Articles of Incorporation
relating to the allocation of compensation.
Under the Corporate Law, our Board of Directors
is authorized to issue stock acquisition rights
unless the issuance is made under specially favorable conditions. The issuance of stock
acquisition rights to our Directors, Statutory
Auditors and employees as stock options would
not be deemed to be an issuance under
specially favorable conditions, even if the
stock options are issued at no charge, since we
would receive benefits corresponding to the
value of such stock options in the form of
services from the recipients. However, because
the Corporate Law provides that compensation for
our Directors and Statutory Auditors shall be
determined at a meeting of our shareholders
unless otherwise provided in our Articles of
Incorporation, we must obtain shareholders
approval for the issuance of stock options if
the options are to be issued as compensation for
our Directors and Statutory Auditors.
As discussed above, we employ the statutory
auditor system under which our Statutory
Auditors monitor the performance of our
Directors. In addition, in order to enhance our
internal audit function, we voluntarily
established a Group Audit Department, which
checks our internal audit function regularly.
Our Group Audit Department is different from our
Board of Statutory Auditors, and reports
directly to our president.
Table of Contents
D.
Employees.
As of March 31,
2005
2006
2007
726
901
1,042
59
74
85
3
13
16
30
10
23
818
998
1,166
89
101
90
181
198
186
1,088
1,297
1,442
(1)
The average number of part-time employees was 85 for the year ended March 31, 2005, 100
for the year ended March 31, 2006 and 90 for the year ended March 31, 2007.
(2)
Temporary employees are employees dispatched from personnel agencies.
Table of Contents
E.
Share Ownership.
Number of Shares
Percentage of
Beneficially
Common Stock
Owned as of
Outstanding as of
Name
Position
Date of Birth
March 31, 2007
(1)
March
31, 2007
(2)
Chairman, Representative
Director
of the Board and Co-CEO
January 10, 1962
37,631,210
(4)
26.4
%
(4)
President, Representative
Director of the Board and
Co-CEO
October 3, 1957
50,000
*
Director of the Board and
Advisor
May 14, 1928
37,084,700
(5)
26.0
(5)
Senior Executive Director of
the Board and Executive Officer
December 22, 1970
183,945
*
Senior Executive Director of
the Board and Executive Officer
November 15, 1968
34,936
*
Senior Executive Director of
the Board and Executive Officer
January 16, 1969
175,800
*
Executive Director of the Board
and Executive Officer
April 9, 1954
9,600
*
Director of the Board and
Executive Officer
April 3, 1971
150,988
*
Director of the Board and
Executive Officer
February 15, 1949
4,000
*
Director of the Board and
Executive Officer
December 25, 1950
Director of the Board (Outside)
November 20, 1967
Statutory Auditor (Standing)
December 14, 1959
392,981
*
Statutory Auditor (Standing)
September 22, 1950
1,231,826
*
Statutory Auditor (Outside)
April 1, 1945
Statutory Auditor (Outside)
February 10, 1955
7,200
*
(1)
As adjusted for our August 2007 reverse stock split.
(2)
Asterisks indicate beneficial ownership of less than 1%.
(3)
Pursuant to a resolution of the Board of Directors adopted on
September 25, 2007, effective October 1, 2007, Kunihiko
Sakioka will become Chairman, Representative Director of the Board,
President and CEO (Head of Investment Banking, Sales &
Marketing), Shinsuke Amiya will become Vice-Chairman of the Board
and Executive Officer and Toshioki Otani will become Senior Executive
Director of the Board and Executive Officer.
(4)
Comprised of 4,481,347 shares over which Kunihiko Sakioka has sole voting and dispositive
power; 16,785,100 shares held by Nissin Building Co., Ltd. (Nissin Building) over which
Kunihiko Sakioka may be deemed to share voting or dispositive power with Hideo Sakioka,
Michimasa Sakioka and Midori Moriyama; and 16,364,763 shares held by Shuho, Ltd. (Shuho)
over which Kunihiko Sakioka may be deemed to share voting or dispositive power with Hideo
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
51,328,261 shares, or 36.0%, of our outstanding shares of common stock, as of March 31, 2007.
Table of Contents
(5)
Comprised of 3,934,837 shares over which Hideo Sakioka has sole voting and dispositive power;
16,785,100 shares held by Nissin Building over which Hideo Sakioka may be deemed to share
voting or dispositive power with Kunihiko Sakioka, Michimasa Sakioka and Midori Moriyama; and
16,364,763 shares held by Shuho over which Hideo Sakioka may be deemed to share voting or
dispositive power with Kunihiko 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 51,328,261 shares, or 36.0%, of our outstanding shares of
common stock, as of March 31, 2007.
(6)
During the period beginning April 1, 2007, through the date of this annual report on Form
20-F, the number of shares beneficially owned by certain of our Directors increased due to
exercises of stock acquisition rights or purchases either in the open market or through
negotiated transactions, as follows:
Shinsuke Amiyas shareholding increased by 50,000 shares through an acquisition of shares from
Shuho. As a result, the number of shares beneficially owned by Kunihiko Sakioka and Hideo
Sakioka by virtue of their interests in Shuho decreased by 50,000 shares, respectively.
Akihiro Nojiris shareholding increased by 19,200 shares.
Katsutoshi Shimizus shareholding increased by 19,200 shares.
Akio Sakiokas shareholding increased (net of sales) by 5,000 shares.
Yunwei Chens shareholding increased by 17,500 shares.
March 2006 Stock Option Plan
. We granted stock acquisition rights exercisable for a
total of 96,000 shares at a purchase price per share of ¥2,620 to 28 of our Directors
and employees and those of our subsidiaries and affiliates on March 23, 2006. These
are exercisable until March 31, 2009.
July 2005 Stock Option Plan
. We granted stock acquisition rights exercisable for a
total of 720,000 shares at a purchase price per share of ¥1,160 to 251 of our Directors
and employees and those of our subsidiaries and affiliates on July 15, 2005. These are
exercisable until July 31, 2008.
April 2005 Stock Option Plan
. We granted stock acquisition rights exercisable for a
total of 357,120 shares at a purchase price per share of ¥1,340 to 120 of our employees
and those of our subsidiaries and affiliates on April 21, 2005. These are exercisable
until April 30, 2008.
January 2005 Stock Option Plan
. We granted stock acquisition rights exercisable for
a total of 38,400 shares at a purchase price per share of ¥1,100 to 9 of our employees
on January 20, 2005. These are exercisable until January 31, 2008.
July 2004 Stock Option Plan
. We granted stock acquisition rights exercisable for a
total of 3,196,800 shares at a purchase price per share of ¥1,060 to 1,149 of our
Directors and employees and those of our subsidiaries and affiliates on July 15, 2004.
These are exercisable until July 31, 2007.
Table of Contents
Number of shares
issuable upon exercise of
stock acquisition rights
Name
Position
as of March 31, 2007
Chairman, Representative Director of the Board and
Co-CEO
8,000
President, Representative Director of the Board and
Co-CEO
Director of the Board and Advisor
Senior Executive Director of the Board and Executive
Officer
8,000
Senior Executive Director of the Board and Executive
Officer
27,200
Senior Executive Director of the Board and Executive
Officer
27,200
Executive Director of the Board and Executive Officer
21,200
Director of the Board and Executive Officer
Director of the Board and Executive Officer
6,000
Director of the Board and Executive Officer
Director of the Board (Outside)
Statutory Auditor (Standing)
Statutory Auditor (Standing)
Statutory Auditor (Outside)
Statutory Auditor (Outside)
22,400
120,000
(1)
Pursuant to a resolution of the Board of Directors adopted on
September 25, 2007, effective October 1, 2007, Kunihiko
Sakioka will become Chairman, Representative Director of the Board,
President and CEO (Head of Investment Banking, Sales &
Marketing), Shinsuke Amiya will become Vice-Chairman of the Board
and Executive Officer and Toshioki Otani will become Senior Executive
Director of the Board and Executive Officer.
(2)
During the period beginning April 1, 2007 through the date of this annual report on Form 20-F,
stock acquisition rights exercised by Directors and Statutory
Auditors were as follows:
Akihiro Nojiri exercised stock acquisition rights to acquire 19,200 shares.
Katsutoshi Shimizu exercised stock acquisition rights to acquire 19,200 shares.
Table of Contents
Number of Shares
Percentage of
of Common Stock
Common Stock
Owned as of
Outstanding as of
Shareholders
March 31, 2007
(5)
March 31, 2007
(5)
37,631,210
26.4
%
37,084,700
26.0
18,801,305
13.2
18,640,341
13.1
(1)
Comprised of 4,481,347 shares over which Kunihiko Sakioka has sole voting and dispositive
power; 16,785,100 shares held by Nissin Building over which Kunihiko Sakioka may be deemed to
share voting and dispositive power with Hideo Sakioka, Michimasa Sakioka and Midori Moriyama;
and 16,364,763 shares held by Shuho, over which Kunihiko Sakioka may be deemed to share voting
and dispositive power with Hideo Sakioka.
(2)
Comprised of 3,934,837 shares over which Hideo Sakioka has sole voting and dispositive power;
16,785,100 shares held by Nissin Building over which Hideo Sakioka may be deemed to share
voting and dispositive power with Kunihiko Sakioka, Michimasa Sakioka and Midori Moriyama; and
16,364,763 shares held by Shuho, over which Hideo Sakioka may be deemed to share voting and
dispositive power with Kunihiko Sakioka.
(3)
Comprised of 2,016,205 shares over which Midori Moriyama has sole voting and dispositive
power; and 16,785,100 shares held by Nissin Building over which Midori Moriyama may be deemed
to share voting and dispositive power with Hideo Sakioka, Kunihiko Sakioka and Michimasa
Sakioka.
(4)
Comprised of 1,855,241 shares over which Michimasa Sakioka has sole voting and dispositive
power; and 16,785,100 shares held by Nissin Building over which Michimasa Sakioka may be
deemed to share voting and dispositive power with Hideo Sakioka, Kunihiko Sakioka and Midori
Moriyama.
(5)
Excludes shareholding of other Sakioka family members. Members of the Sakioka family,
including the ones listed above, directly and indirectly held an aggregate of 51,328,261
shares, or 36.0%, of our outstanding shares of common stock, as of March 31, 2007.
(6)
In June 2007, Shinsuke Amiya, our President, Representative Director of the Board and
Co-CEO, acquired 50,000 shares from Shuho. As a result, the number of shares beneficially
owned by Kunihiko Sakioka and Hideo Sakioka by virtue of their interests in Shuho decreased
by 50,000 shares, respectively.
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any enterprise that directly or indirectly controls, is
controlled by, or is in common control with us or any of our
subsidiaries;
any director, officer, statutory auditor or family member of any
of the preceding or any enterprise over which such person
directly or indirectly is able to exercise significant influence;
any individual shareholder directly or indirectly having
significant influence over us or any of our subsidiaries or a
family member of such individual or any enterprise over which
such person directly or indirectly is able to exercise
significant influence, or their respective family members or
enterprises over which they exercise significant influence; or
any unconsolidated enterprise in which we have a significant
influence or which has a significant influence over us.
Year Ended March 31,
2005
2006
2007
(In millions)
¥
1
¥
1
¥
1
Year Ended March 31,
2005
2006
2007
(In millions)
¥
2
¥
1
¥
2
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Year Ended March 31,
2005
2006
2007
(In millions)
¥
32
¥
13
¥
1
13
4
36
316
467
34
9
Year Ended March 31,
2005
2006
2007
(In millions)
¥
205
¥
151
¥
175
518
1
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Year Ended March 31,
2005
2006
2007
(In millions)
¥
¥
9
¥
11
26
89
11
41
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Dividends per
Dividends per
share
share
Record Date
(Actual)
(As adjusted)
¥
6.50
¥
3.40
8.50
4.40
3.75
4.00
4.75
5.00
1.375
(1)
5.80
2.50
10.40
1.00
(2)
10.00
1.10
11.00
0.16
3.20
(1)
Adjusted to reflect the 2-for-1 stock split that took effect on November 19, 2004. The
actual interim dividend payment per share was ¥2.75.
(2)
Adjusted to reflect the 2-for-1 stock split that took effect on November 18, 2005. The
actual interim dividend payment per share was ¥2.00.
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Number of
Aggregate
Number of
Net aggregate
repurchased
repurchase
Number of
Aggregate
repurchased
purchase
Year
Ended/Ending March 31,
shares
price
shares sold
sale price
shares, net
price
(In millions)
(In millions)
(In millions)
5,185,509
¥2,493
38,400
¥ 20
5,147,109
¥ 2,473
2,883,560
1,209
643,392
338
2,240,168
871
1,404
1
1,514,592
909
(1,513,188
)
(908
)
1,875
2
2,641,688
2,209
(2,639,813
)
(2,207
)
203
587,864
496
(587,611
)
(496
)
3,000,054
2,394
163,536
75
2,836,518
2,319
(1)
On June 23, 2007, the Board of Directors approved the repurchase of shares of the Companys
common stock up to 3,000,000 shares for an aggregate amount of up to ¥3 billion. We completed
all stock repurchases to be made under this stock repurchase program during the period from
June 25, 2007 to August 24, 2007.
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Average Daily
Trading
Price Per Share
Volume
Year Ended/Ending March 31,
High
Low
(In shares)
¥
600
¥
380
241,938
960
400
334,608
1,380
680
474,470
3,080
1,000
1,552,872
1,280
1,000
426,966
1,660
1,040
766,150
3,080
1,400
3,124,108
2,900
2,000
1,920,059
2,620
960
969,460
2,620
1,540
965,599
1,820
1,040
1,300,966
1,500
960
692,215
1,460
1,080
910,879
1,400
960
438,379
1,400
960
438,379
Average Daily
Trading
Price Per Share
Volume
Calendar Month
High
Low
(In shares)
¥
1,420
¥
1,080
738,055
1,460
1,220
1,396,778
1,420
1,240
627,621
1,400
1,180
334,308
1,300
1,060
506,498
1,100
960
469,375
1,040
660
692,542
960
560
1,048,961
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Maximum daily
Previous
days closing price or special quote
price
movement
¥100
Less than
¥ 200
¥ 50
200
Less than
500
80
500
Less than
1,000
100
Average Daily
New York Stock Exchange price
Trading
Volume of
per ADS
ADSs
Year Ended/Ending March 31,
High
Low
$
1.89
$
1.56
14,089
4.76
1.66
6,202
4.33
3.03
4,629
14.69
4.50
10,345
5.74
4.51
2,555
7.50
4.50
2,971
14.69
6.13
15,596
12.72
8.69
20,661
11.00
4.30
23,205
11.00
6.64
5,679
7.39
4.88
8,981
6.29
4.30
14,411
6.36
4.60
54,119
6.02
3.99
32,823
6.02
3.99
32,823
New York Stock Exchange price
Average
Daily
Trading
Volume of
per ADS
ADSs
Calendar Month
High
Low
$
5.73
$
4.60
13,010
5.83
5.05
107,184
6.36
5.48
47,532
6.02
5.10
33,025
5.46
4.43
27,725
4.61
3.99
37,971
4.31
3.00
45,200
4.50
2.61
59,622
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Consumer credit business, enterprise credit business, and financial mediation,
guarantee and agency of these;
Credit management and collection business;
The business of leasing, rental, buying and purchasing (including buying and
purchasing by installments), and managing all types of movable estates;
The buying and selling, exchange, rental, mediation, appraisement, management,
possession and operation of real estate;
Civil engineering, building work and contracting business;
The buying and selling, mediation, commissioning or agency of securities;
Non-life insurance agent business, business related to the offering of life
insurance, and insurance agent business based on the Automobile Liability Security Law;
Investment and management consultancy business for enterprises;
Business agency for rental contracts for corporate housing, offices and parking
space and sales contracts;
The business of supplying temporary labor;
Importing and exporting products and distribution business;
Collection agency business;
Computing work agency business;
Contracting for advertising and publicity;
Factoring business;
Development and distribution of computer software;
Distribution of computers and peripherals devices;
Management and rental of sports facilities;
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Office work agency business such as enterprise accounting or
labor services;
Internet provider business;
Internet advertising and publicity business;
Mediation of money borrowing and lending using the Internet;
Business related to the planning and development of Internet software and the
commissioning of its production, as well as consulting business related to these;
Business related to agency and contract for sales of products and services;
Business related to the planning, management and coordination of all types of events;
Business related to all types of training and courses for the acquisition of all types of licenses;
Planning and production of advertising and publicity, as well as advertising agency business;
Business of offering automobile inspection services;
Trust business;
Other businesses that a trust company is permitted to conduct under law;
Research, planning, intermediary and consulting services for M&A, alliances and
transfers of businesses, etc.;
Type 1 financial instruments business defined under the Financial Instruments and
Exchange Law of Japan (the FIEL);
Type 2 financial instruments business defined under the FIEL;
Investment advisory and agency businesses defined under the FIEL;
Investment management business defined under the FIEL;
Financial instruments intermediation business defined under the FIEL; and
All business that is ancillary to each of the preceding items.
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(a)
the company employs an independent certified public accountant and a corporate
governance system based on a board of statutory auditor system or the committee system
under the Corporate Law, and the normal term of office of Directors is not longer than
one year; and
(b)
non-consolidated annual financial statements and certain documents for the last
fiscal year present fairly the companys assets and profit or
losses, as required by the
ordinances of the Ministry of Justice.
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A =
the total amount of other additional paid-in capital (other than general
additional paid-in capital) and other retained earnings (other than legal reserve),
each such amount being that appearing on our non-consolidated balance sheet as of the
end of the last fiscal year;
B =
if we have disposed of our treasury stock after the end of the last fiscal
year, the amount of the consideration for such treasury stock received by us less the
book value thereof;
C =
if we have reduced our common stock (share capital) after the end of the
last fiscal year, the amount of such reduction less the portion thereof that has been
transferred to general additional paid-in capital or legal reserve (if any);
D =
if we have reduced our general additional paid-in capital or legal reserve
after the end of the last fiscal year, the amount of such reduction less the portion
thereof that has been transferred to common stock (share capital) (if any);
E =
if we have retired any of our treasury stock after the end of the last
fiscal year, the book value of such treasury stock;
F =
if we have distributed Surplus to our shareholders after the end of the
last fiscal year, the total book value of the Surplus so distributed;
G =
certain other amounts set forth in the ordinances of the Ministry of
Justice, including, if we have reduced Surplus and increased our common stock (share
capital), general additional paid-in capital or legal reserve after the end of the
last fiscal year, the amount of such reduction, and, if we have distributed Surplus to
our shareholders after the end of the last fiscal year, the amount set aside in our
general additional paid-in capital or legal reserve (if any), as required by
ordinances of the Ministry of Justice.
(a)
the book value of our treasury stock;
(b)
the amount of consideration for our treasury stock disposed of by us after
the end of the last fiscal year; and
(c)
certain other amounts set forth in ordinances of the Ministry of Justice,
including, if the sum of one-half of goodwill and the deferred assets exceeds the
total of common stock (share capital), general additional paid-in capital and legal
reserve (each such amount being that appearing on our non-consolidated balance sheet as of the end of the last fiscal year), all or a
certain part of such excess amount as calculated in accordance with the ordinances
of the Ministry of Justice.
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by way of purchase on any Japanese stock exchange on which our shares are listed or
by way of takeover bids (TOB);
by soliciting all our shareholders to offer to sell our shares held by them (on a
pro-rata basis); or
from any of our subsidiaries.
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repurchasing those that constitute less than one unit upon the request of their holder;
redeeming redeemable shares (
shutoku jyo-kou-tsuki kabusiki
) or shares with
redemption right (
shutoku seikyu-ken-tsuki kabushiki
); or
a business transfer, merger or spin-off.
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a reduction of the common stock (share capital);
amendment of the Articles of Incorporation (except amendments that the Board of
Directors is authorized to make under the Corporate Law);
the removal of a Statutory Auditor;
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 spin-off 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;
purchase of shares of common stock by us from a specific shareholder other than our
subsidiary;
any issuance of new shares or transfer of existing shares as treasury stock to
persons other than the shareholders at a specially favorable price; and
any issuance of stock acquisition rights (as defined in
Stock Acquisition Rights
below, including those incorporated in bonds with stock acquisition rights) to persons
other than the shareholders under specially favorable conditions.
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to receive distributions of Surplus;
to receive cash or other assets in case of a consolidation or split of shares,
exchange or transfer of shares or corporate merger;
to be allotted rights to subscribe for free for new shares and stock acquisition
rights when such rights are granted to shareholders; and
to participate in any distribution of surplus assets upon liquidation.
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acquires shares of a Japanese company listed on a Japanese stock exchange; 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,
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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.
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 trusts
administration and one or more U.S. persons are authorized to control all substantial
decisions of the trust.
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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 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).
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.
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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.
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 general additional paid-in capital, and retained earnings
portion on a non-consolidated basis under Article 24 (1) (v) of the Japanese Corporation
Tax Law; and
capital gains or losses computed as a difference between the basis of shares subject to
the tender offer at the shareholder level and the amount of the consideration for the
tender offer, deducting the amount corresponding to the deemed dividend computed as (i)
above under Article 61-2 (1) of the same law.
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7% for dividends to be paid between January 1, 2004 and
March 31, 2009 (a one-year
extension is promulgated under the 2007 Japanese tax legislation) as a temporary
measurement; and
15% thereafter, except for dividends paid to any individual shareholder who holds 5%
or more of our issued shares, in which case the applicable rate is 20%.
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As of March 31,
2005
2006
2007
(Years)
1.6
1.5
1.4
4.0
3.9
3.7
4.9
4.9
5.0
3.5
4.3
4.1
(1)
The average maturity of revolving loans included in each of SME loans and consumer loans is
3.0 years based on the three-year term of the loan contract, which is automatically renewable.
Year Ended March 31,
2005
2006
2007
9.6
%
7.3
%
6.8
%
21.0
19.5
18.8
21.5
(1)
19.7
19.0
12.0
10.7
12.4
(1)
Reflecting the sale of most of the outstanding balance of our consumer loans to NETCARD, Inc.
(formerly known as Orient Credit Co., Ltd.) in June 2004.
Assumed average actual interest rate per year
12.5%
12.0%
11.5%
(In millions)
¥
(1,610
)
¥
(1,610
)
¥
(1,610
)
(2,474
)
(3,235
)
(3,996
)
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As of
March 31,
Year Ending March 31,
2007
2008
2009
2010
2011
2012
Thereafter
Total
Fair value
(In millions except
percentages)
¥
8,460
¥
28,030
¥
5,250
¥
¥
¥
¥
41,740
¥
41,524
1.60
%
1.42
%
2.63
%
1.59
%
53,336
31,125
6,826
34,902
521
372
127,082
127,082
1.64
%
1.71
%
1.71
%
0.97
%
0.17
%
1.62
%
46,679
21,397
22,034
1,875
10
91,995
89,090
2.53
%
3.32
%
3.25
%
1.89
%
2.86
%
(1)
Variable interest rate borrowings include asset-backed securities.
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Assumed weighted-average interest rate
2%
3%
4%
(In millions)
¥
(1,610
)
¥
(1,610
)
¥
(1,610
)
(1,688
)
(2,622
)
(3,556
)
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-125-
-126-
-127-
-128-
Table of Contents
Year Ended March 31,
2005
2006
2007
(In millions)
¥
45
¥
54
¥
92
17
6
3
(1)
These are the aggregate fees billed for each of the fiscal years for professional services
rendered by our principal accountants for the audit of our annual financial statements and
services that are normally provided in connection with statutory and regulatory filings or
engagements for those fiscal years.
(2)
These are the aggregate fees billed for each of the fiscal years for assurance and related
services by our principal accountants that are reasonably related to the performance of the
audit of our financial statements other than those reported under Audit Fees above. These
services include due diligence and preparation of comfort letters in connection with bond
offerings.
(3)
These are the aggregate fees billed for each of the fiscal years for professional services
rendered by our principle accountants for tax compliance, tax advice and tax planning.
(4)
These are the aggregate fees billed for the fiscal year for products and services provided
by our principle accountants other than those included above.
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The board of statutory auditors must be established, and its members must be
selected, pursuant to Japanese law expressly requiring such a board for Japanese
companies that elect to have a corporate governance system with corporate auditors;
Japanese law must and does require the board of statutory auditors to be separate
from the board of directors;
None of the members of the board of statutory auditors may be elected by management,
and none of the listed companys executive officers may be a member of the board of
statutory auditors;
Japanese law must and does set forth standards for the independence of the members
of the board of statutory auditors from the listed company or its management;
The board of statutory auditors, in accordance with Japanese law or the registrants
governing documents, must be responsible, to the extent permitted by Japanese law, for
the appointment, retention and oversight of the work of any registered public
accounting firm engaged (including, to the extent permitted by Japanese law, the
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 listed company, including its principal
accountant which audits its consolidated financial statements included in its annual
reports on Form 20-F; and
To the extent permitted by Japanese law:
the board of statutory auditors must establish procedures for (i) the
receipt, retention and treatment of complaints received by the listed company
regarding accounting, internal accounting controls, or auditing matters, and
(ii) the confidential, anonymous submission by the listed companys employees of concerns regarding questionable
accounting or auditing matters;
the board of statutory auditors must have the authority to engage
independent counsel and other advisers, as it determines necessary to carry
out its duties; and
the listed company must provide for appropriate funding, as determined by
its board of statutory auditors, for payment of (i) compensation to any
registered public accounting firm engaged for the purpose of preparing or
issuing an audit report or performing other audit, review or attest services
for the listed company, (ii) compensation to any advisers employed by the
board of statutory auditors, and (iii) ordinary administrative expenses of
the board of statutory auditors that are necessary or appropriate in carrying
out its duties.
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Total Number of
Maximum Number
Shares Purchased as
of Shares that May
Part of Publicly
Yet Be Purchased
Total Number of
Average Price Paid
Announced Plans or
Under the Plans or
Calendar Month
Shares Purchased
per Share
Program
Programs
20
¥2,342
N/A
N/A
4
2,468
N/A
N/A
10
1,805
N/A
N/A
10
1,233
N/A
N/A
18
1,593
N/A
N/A
83
1,558
N/A
N/A
21
1,491
N/A
N/A
14
1,202
N/A
N/A
8
1,419
N/A
N/A
9
1,303
N/A
N/A
3
1,400
N/A
N/A
3
1,293
N/A
N/A
203
¥1,598
N/A
N/A
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-129-
Exhibit
Number
Description
1.1
1.2
1.3
1.4
2.1
2.2
8.1
11.1
12.1
12.2
12.3
13.1
13.2
13.3
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S-1
F-1
NIS GROUP CO., LTD.
By
/s/ Shinsuke Amiya
Name:
Shinsuke Amiya
Title:
President,
Representative Director of the Board and
Co-Chief Executive Officer
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F-2
NIS Group Co., Ltd.
Tokyo, Japan
Osaka, Japan
September 27, 2007
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F-3
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Osaka, Japan
September 27, 2007
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Thousands of | ||||||||||||||||
Millions of Yen | U.S. Dollars (Note 1) | |||||||||||||||
2006 | 2007 | 2007 | ||||||||||||||
Assets
|
||||||||||||||||
Cash and cash equivalents
|
¥ | 22,860 | ¥ | 28,344 | $ 240,102 | |||||||||||
Restricted cash
|
3,417 | 10,331 | 87,514 | |||||||||||||
Loans receivable, net
|
225,947 | 250,780 | 2,124,354 | |||||||||||||
Purchased loans receivable, net
|
24,155 | 28,910 | 244,896 | |||||||||||||
Interest receivable
|
1,021 | 1,117 | 9,462 | |||||||||||||
Investment securities
|
42,071 | 38,384 | 325,150 | |||||||||||||
Real estate for sale
|
20,792 | 67,327 | 570,326 | |||||||||||||
Property and equipment, net
|
11,169 | 8,448 | 71,563 | |||||||||||||
Investment in affiliates
|
617 | 2,833 | 23,998 | |||||||||||||
Deferred income taxes
|
721 | 6,488 | 54,960 | |||||||||||||
Other assets
|
7,173 | 11,115 | 94,156 | |||||||||||||
|
||||||||||||||||
Total assets
|
¥ | 359,943 | ¥ | 454,077 | $3,846,481 | |||||||||||
|
||||||||||||||||
|
||||||||||||||||
Liabilities and Shareholders Equity
|
||||||||||||||||
Short-term borrowings
|
¥ | 60,411 | ¥ | 84,258 | $ 713,748 | |||||||||||
Accrued income taxes
|
6,089 | 3,714 | 31,461 | |||||||||||||
Accrued expenses
|
702 | 915 | 7,751 | |||||||||||||
Long-term borrowings
|
198,924 | 260,817 | 2,209,377 | |||||||||||||
Capital lease obligations
|
1,337 | 859 | 7,277 | |||||||||||||
Accrued retirement benefits
|
647 | 380 | 3,219 | |||||||||||||
Deferred income taxes
|
1,382 | 256 | 2,169 | |||||||||||||
Other liabilities
|
7,514 | 16,123 | 136,578 | |||||||||||||
|
||||||||||||||||
Total liabilities
|
277,006 | 367,322 | 3,111,580 | |||||||||||||
|
||||||||||||||||
Minority interests
|
2,433 | 4,192 | 35,510 | |||||||||||||
|
||||||||||||||||
Commitments and contingencies (Notes 12, 13 and 16)
|
||||||||||||||||
|
||||||||||||||||
Shareholders equity (Note 17):
|
||||||||||||||||
Common stock designated value
|
||||||||||||||||
Authorized 384,000,000 shares as of
March 31, 2006 and 2007 |
||||||||||||||||
Issued 140,647,064 and 145,894,350 shares as of
March 31, 2006 and 2007, respectively |
11,849 | 16,289 | 137,984 | |||||||||||||
Additional paid-in capital
|
14,808 | 19,490 | 165,100 | |||||||||||||
Retained earnings
|
50,197 | 46,629 | 394,994 | |||||||||||||
Cumulative other comprehensive income
|
5,485 | 1,721 | 14,579 | |||||||||||||
Less treasury stock, at cost:
|
||||||||||||||||
4,005,104 shares and 3,417,449 shares at March 31, 2006
and 2007, respectively
|
(1,835 | ) | (1,566 | ) | (13,266 | ) | ||||||||||
|
||||||||||||||||
Total shareholders equity
|
80,504 | 82,563 | 699,391 | |||||||||||||
|
||||||||||||||||
Total liabilities and shareholders equity
|
¥ | 359,943 | ¥ | 454,077 | $3,846,481 | |||||||||||
|
F-4
Thousands of | |||||||||||||||||
Millions of Yen | U.S. Dollars (Note 1) | ||||||||||||||||
2005 | 2006 | 2007 | 2007 | ||||||||||||||
Interest income
|
¥29,488 | ¥29,826 | ¥33,706 | $ | 285,523 | ||||||||||||
Provision for losses on excess interest repayments
|
2,132 | 3,331 | 12,664 | 107,276 | |||||||||||||
|
|||||||||||||||||
Net interest income
|
27,356 | 26,495 | 21,042 | 178,247 | |||||||||||||
|
|||||||||||||||||
Interest expense
|
2,971 | 2,602 | 3,870 | 32,783 | |||||||||||||
|
|||||||||||||||||
Net interest income before provision for loan losses
|
24,385 | 23,893 | 17,172 | 145,464 | |||||||||||||
|
|||||||||||||||||
Provision for loan losses
|
5,817 | 5,923 | 10,853 | 91,936 | |||||||||||||
|
|||||||||||||||||
Net interest income from lending activities
|
18,568 | 17,970 | 6,319 | 53,528 | |||||||||||||
|
|||||||||||||||||
Other revenue:
|
|||||||||||||||||
Interest income from purchased loans
|
3,255 | 4,960 | 5,989 | 50,733 | |||||||||||||
Gain on sales of real estate, net
|
477 | 1,584 | 5,379 | 45,565 | |||||||||||||
Guarantee fees received, net
|
317 | 508 | 588 | 4,981 | |||||||||||||
Rents, dividends and other
|
954 | 4,393 | 5,629 | 47,683 | |||||||||||||
|
|||||||||||||||||
Total other revenue
|
5,003 | 11,445 | 17,585 | 148,962 | |||||||||||||
|
|||||||||||||||||
Operating expense:
|
|||||||||||||||||
Interest expense
|
188 | 503 | 1,037 | 8,784 | |||||||||||||
Salaries and employee benefits
|
6,521 | 7,181 | 8,534 | 72,291 | |||||||||||||
Occupancy, furniture and equipment
|
2,395 | 2,654 | 3,196 | 27,073 | |||||||||||||
Advertising
|
333 | 629 | 264 | 2,236 | |||||||||||||
Other general and administrative expenses
|
6,001 | 6,765 | 9,552 | 80,916 | |||||||||||||
|
|||||||||||||||||
Total operating expense
|
15,438 | 17,732 | 22,583 | 191,300 | |||||||||||||
|
|||||||||||||||||
Operating income
|
8,133 | 11,683 | 1,321 | 11,190 | |||||||||||||
|
|||||||||||||||||
Other income:
|
|||||||||||||||||
Gains on sale of loans receivable
|
3,327 | | | | |||||||||||||
(Losses) gains on sales and impairment of investment
securities, net
|
(513 | ) | 3,708 | (1,168 | ) | (9,894 | ) | ||||||||||
Gains (losses) on sales of subsidiaries and affiliates, net
|
1,339 | (43 | ) | 295 | 2,499 | ||||||||||||
Equity losses in affiliates, net
|
(92 | ) | (61 | ) | (8 | ) | (68 | ) | |||||||||
|
|||||||||||||||||
Total other income (losses)
|
4,061 | 3,604 | (881 | ) | (7,463 | ) | |||||||||||
|
|||||||||||||||||
Other expense:
|
|||||||||||||||||
Losses on sale, disposal and impairment of long-lived
assets, net
|
94 | 16 | 189 | 1,601 | |||||||||||||
Minority interests
|
192 | 602 | 264 | 2,236 | |||||||||||||
|
|||||||||||||||||
Total other expense
|
286 | 618 | 453 | 3,837 | |||||||||||||
|
|||||||||||||||||
Income (losses) before income taxes
|
11,908 | 14,669 | (13 | ) | (110 | ) | |||||||||||
|
|||||||||||||||||
Income taxes
|
4,646 | 6,214 | 1,597 | 13,528 | |||||||||||||
|
|||||||||||||||||
Net income (losses)
|
¥ 7,262 | ¥ 8,455 | ¥(1,610 | ) | $ (13,638 | ) | |||||||||||
|
|||||||||||||||||
U.S. Dollars | |||||||||||||||||
Per share data | Yen | (Note 1) | |||||||||||||||
Net income (losses) basic
|
¥59.60 | ¥65.40 | ¥(11.42 | ) | $(0.097 | ) | |||||||||||
diluted
|
54.00 | 61.60 | (11.42 | ) | (0.097 | ) | |||||||||||
Weighted-average shares outstanding | Thousands of Shares | ||||||||||||||||
Basic
|
122,083 | 129,247 | 140,924 | ||||||||||||||
Diluted
|
135,193 | 137,942 | 140,924 |
F-5
Number of Shares | Millions of Yen | |||||||||||||||||||||||||||
of Common Stock | Cumulative Other | Total | ||||||||||||||||||||||||||
Issued | Common | Additional | Retained | Comprehensive | Treasury Stock, | Shareholders | ||||||||||||||||||||||
(Thousands) | Stock | Paid-in Capital | Earnings | Income | at Cost | Equity | ||||||||||||||||||||||
Balance as of March 31, 2004
|
129,337 | ¥ | 7,218 | ¥ | 9,092 | ¥ | 38,351 | ¥ | 3,371 | ¥ | (3,735 | ) | ¥ | 54,297 | ||||||||||||||
Exercise of stock warrants and
convertible bonds
|
1,383 | 561 | 551 | 1,112 | ||||||||||||||||||||||||
Stock issuance costs
|
(23 | ) | (23 | ) | ||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||
Net income
|
7,262 | 7,262 | ||||||||||||||||||||||||||
Other comprehensive income,
net of tax
|
||||||||||||||||||||||||||||
Change in net unrealized
gains on investment
securities
|
4,725 | 4,725 | ||||||||||||||||||||||||||
Change in net unrealized
losses on derivative
instruments
|
(1 | ) | (1 | ) | ||||||||||||||||||||||||
Change in foreign
currency adjustments
|
(9 | ) | (9 | ) | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total comprehensive income
|
11,977 | |||||||||||||||||||||||||||
Cash dividends paid
|
(1,300 | ) | (1,300 | ) | ||||||||||||||||||||||||
Purchases of treasury stock
|
(1 | ) | (1 | ) | ||||||||||||||||||||||||
Sales of treasury stock
|
216 | 693 | 909 | |||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Balance as of March 31, 2005
|
130,720 | 7,779 | 9,836 | 44,313 | 8,086 | (3,043 | ) | 66,971 | ||||||||||||||||||||
Conversion of convertible bonds
|
9,927 | 4,070 | 4,050 | 8,120 | ||||||||||||||||||||||||
Stock issuance costs
|
(77 | ) | (77 | ) | ||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||
Net income
|
8,455 | 8,455 | ||||||||||||||||||||||||||
Other comprehensive income,
net of tax
|
||||||||||||||||||||||||||||
Change in net unrealized
gains on investment
securities
|
(2,765 | ) | (2,765 | ) | ||||||||||||||||||||||||
Change in net unrealized
losses on derivative
instruments
|
4 | 4 | ||||||||||||||||||||||||||
Change in foreign
currency adjustments
|
160 | 160 | ||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total comprehensive income
|
5,854 | |||||||||||||||||||||||||||
Cash dividends paid
|
(2,571 | ) | (2,571 | ) | ||||||||||||||||||||||||
Purchases of treasury stock
|
(2 | ) | (2 | ) | ||||||||||||||||||||||||
Sales of treasury stock
|
999 | 1,210 | 2,209 | |||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Balance as of March 31, 2006
|
140,647 | ¥ | 11,849 | ¥ | 14,808 | ¥ | 50,197 | ¥ | 5,485 | ¥ | (1,835 | ) | ¥ | 80,504 | ||||||||||||||
|
F-6
Number of Shares | Millions of Yen | |||||||||||||||||||||||||||
of Common Stock | Cumulative Other | Total | ||||||||||||||||||||||||||
Issued | Common | Additional | Retained | Comprehensive | Treasury Stock, | Shareholders | ||||||||||||||||||||||
(Thousands) | Stock | Paid-in Capital | Earnings | Income | at Cost | Equity | ||||||||||||||||||||||
(Continued)
|
||||||||||||||||||||||||||||
Balance as of March 31, 2006
|
140,647 | 11,849 | 14,808 | 50,197 | 5,485 | (1,835 | ) | 80,504 | ||||||||||||||||||||
Conversion of convertible bonds
|
946 | 397 | 377 | 774 | ||||||||||||||||||||||||
Sale of new
shares to a third-party
|
4,301 | 4,043 | 3,957 | 8,000 | ||||||||||||||||||||||||
Stock compensation costs
|
220 | 220 | ||||||||||||||||||||||||||
Stock issuance costs
|
(99 | ) | (99 | ) | ||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||
Net income
(losses)
|
(1,610 | ) | (1,610 | ) | ||||||||||||||||||||||||
Other
comprehensive income,
net of tax |
||||||||||||||||||||||||||||
Change in net unrealized
gains on investment
securities
|
(3,974 | ) | (3,974 | ) | ||||||||||||||||||||||||
Change in
foreign currency
adjustments |
210 | 210 | ||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total
comprehensive income (losses)
|
(5,374 | ) | ||||||||||||||||||||||||||
Cash dividends paid
|
(1,958 | ) | (1,958 | ) | ||||||||||||||||||||||||
Purchases of treasury stock
|
||||||||||||||||||||||||||||
Sales of treasury stock
|
227 | 269 | 496 | |||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Balance as of March 31, 2007
|
145,894 | ¥16,289 | ¥19,490 | ¥46,629 | ¥1,721 | ¥(1,566 | ) | ¥82,563 | ||||||||||||||||||||
|
Number of Shares | Thousands of U.S. Dollars (Note 1) | |||||||||||||||||||||||||||
of Common Stock | Cumulative Other | Total | ||||||||||||||||||||||||||
Issued | Common | Additional | Retained | Comprehensive | Treasury Stock, | Shareholders | ||||||||||||||||||||||
(Thousands) | Stock | Paid-in Capital | Earnings | Income | at Cost | Equity | ||||||||||||||||||||||
Balance as of March 31, 2006
|
140,647 | $100,373 | $125,438 | $425,218 | $ 46,463 | $(15,544 | ) | $681,948 | ||||||||||||||||||||
Conversion of convertible bonds
|
946 | 3,363 | 3,194 | 6,557 | ||||||||||||||||||||||||
Sale of new
shares to a third-party
|
4,301 | 34,248 | 33,520 | 67,768 | ||||||||||||||||||||||||
Stock compensation costs
|
1,864 | 1,864 | ||||||||||||||||||||||||||
Stock issuance costs
|
(839 | ) | (839 | ) | ||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||
Net income (losses)
|
(13,638 | ) | (13,638 | ) | ||||||||||||||||||||||||
Other
comprehensive income,
net of tax |
||||||||||||||||||||||||||||
Change in net unrealized
gains on investment
securities
|
(33,664 | ) | (33,664 | ) | ||||||||||||||||||||||||
Change in
foreign currency
adjustments |
1,780 | 1,780 | ||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total
comprehensive income (losses)
|
(45,522 | ) | ||||||||||||||||||||||||||
Cash dividends paid
|
(16,586 | ) | (16,586 | ) | ||||||||||||||||||||||||
Purchases of treasury stock
|
||||||||||||||||||||||||||||
Sales of treasury stock
|
1,923 | 2,278 | 4,201 | |||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Balance as of March 31, 2007
|
145,894 | $137,984 | $165,100 | $394,994 | $ 14,579 | $(13,266 | ) | $699,391 | ||||||||||||||||||||
|
F-7
Thousands of | ||||||||||||||||
Millions of Yen | U.S. Dollars (Note 1) | |||||||||||||||
2005 | 2006 | 2007 | 2007 | |||||||||||||
Operating Activities
|
||||||||||||||||
Net income (losses)
|
¥ | 7,262 | ¥ | 8,455 | ¥ | (1,610 | ) | $ | (13,638 | ) | ||||||
Adjustments
to reconcile net income (losses) to net cash provided by
operating activities:
|
||||||||||||||||
Provision for losses on excess interest repayments
|
2,132 | 3,331 | 12,664 | 107,276 | ||||||||||||
Provision for loan losses
|
5,817 | 5,923 | 10,853 | 91,936 | ||||||||||||
Depreciation and amortization
|
1,175 | 1,333 | 1,678 | 14,214 | ||||||||||||
Amortization of debt issuance costs
|
239 | 184 | 193 | 1,635 | ||||||||||||
Amortization of loan origination costs (income)
|
540 | 431 | (280 | ) | (2,372 | ) | ||||||||||
Stock compensation costs
|
| | 383 | 3,244 | ||||||||||||
Gain on sale of loans receivable
|
(3,327 | ) | | | | |||||||||||
Losses (gains) on sale and impairment of investment
securities, net
|
513 | (3,708 | ) | 1,168 | 9,894 | |||||||||||
Losses on sale, disposal and impairment of long-lived
assets, net
|
94 | 16 | 189 | 1,601 | ||||||||||||
(Gains) losses on sale of subsidiaries and affiliates, net
|
(1,339 | ) | 43 | (295 | ) | (2,499 | ) | |||||||||
Equity losses in affiliates, net
|
92 | 61 | 8 | 68 | ||||||||||||
Deferred income taxes
|
1,427 | (1,460 | ) | (4,180 | ) | (35,409 | ) | |||||||||
Minority interests
|
192 | 602 | 264 | 2,236 | ||||||||||||
Changes in assets and liabilities:
|
||||||||||||||||
Interest receivable
|
229 | (166 | ) | (95 | ) | (805 | ) | |||||||||
Accrued income taxes and expenses
|
(2,181 | ) | 5,521 | (2,161 | ) | (18,306 | ) | |||||||||
Other liabilities
|
1,821 | 3,704 | 4,897 | 41,484 | ||||||||||||
|
||||||||||||||||
Net cash provided by operating activities
|
14,686 | 24,270 | 23,676 | 200,559 | ||||||||||||
|
||||||||||||||||
Investing Activities
|
||||||||||||||||
Proceeds from sales of loans receivable
|
32,697 | | | | ||||||||||||
Loans receivable, net of principal collections
|
(17,615 | ) | (82,347 | ) | (40,581 | ) | (343,761 | ) | ||||||||
Purchases of distressed loans
|
(16,896 | ) | (19,779 | ) | (19,579 | ) | (165,853 | ) | ||||||||
Proceeds from principal collections of distressed loans
|
6,840 | 6,956 | 12,872 | 109,039 | ||||||||||||
Proceeds from sales of distressed loans
|
| 711 | | | ||||||||||||
Purchases of investment securities
|
(16,508 | ) | (26,794 | ) | (12,207 | ) | (103,405 | ) | ||||||||
Proceeds from sales of investment securities
|
5,125 | 12,707 | 10,323 | 87,446 | ||||||||||||
Purchases of real estate for sale
|
(1,958 | ) | (24,699 | ) | (55,209 | ) | (467,675 | ) | ||||||||
Proceeds from sales of real estate
|
974 | 5,395 | 13,411 | 113,604 | ||||||||||||
Purchases of property and equipment
|
(1,754 | ) | (6,368 | ) | (5,270 | ) | (44,642 | ) | ||||||||
Proceeds from sales of property and equipment
|
16 | 3 | 13 | 110 | ||||||||||||
Investment in affiliates
|
(160 | ) | (46 | ) | (3,732 | ) | (31,614 | ) | ||||||||
Acquisition of a new subsidiary, net of cash acquired
|
(764 | ) | (554 | ) | | | ||||||||||
Other changes in other assets
|
(2,543 | ) | (1,161 | ) | 116 | 983 | ||||||||||
|
||||||||||||||||
Net cash used in investing activities
|
(12,546 | ) | (135,976 | ) | (99,843 | ) | (845,768 | ) | ||||||||
|
||||||||||||||||
|
(Continued) |
F-8
Thousands of | ||||||||||||||||
Millions of Yen | U.S. Dollars (Note 1) | |||||||||||||||
2005 | 2006 | 2007 | 2007 | |||||||||||||
(Continued)
|
||||||||||||||||
Financing Activities
|
||||||||||||||||
Deposit of restricted cash
|
(411 | ) | (2,571 | ) | (6,914 | ) | (58,568 | ) | ||||||||
Issuance of commercial paper
|
15,100 | 65,900 | 123,600 | 1,047,014 | ||||||||||||
Repayments of commercial paper
|
(14,800 | ) | (39,400 | ) | (126,500 | ) | (1,071,580 | ) | ||||||||
Proceeds from short-term borrowings
|
20,851 | 107,472 | 278,600 | 2,360,017 | ||||||||||||
Repayments of short-term borrowings
|
(13,483 | ) | (87,144 | ) | (251,860 | ) | (2,133,503 | ) | ||||||||
Proceeds from long-term borrowings
|
83,685 | 141,918 | 130,888 | 1,108,751 | ||||||||||||
Repayments of long-term borrowings
|
(88,555 | ) | (76,425 | ) | (73,508 | ) | (622,685 | ) | ||||||||
Payments of capital lease obligations
|
(823 | ) | (614 | ) | (641 | ) | (5,430 | ) | ||||||||
Proceeds from sale of stock
|
54 | | 8,000 | 67,768 | ||||||||||||
Stock issuance costs
|
(23 | ) | (77 | ) | (99 | ) | (839 | ) | ||||||||
Purchases of treasury stock
|
(1 | ) | (2 | ) | | | ||||||||||
Proceeds from sales of treasury stock
|
909 | 2,209 | 496 | 4,201 | ||||||||||||
Dividends paid
|
(1,300 | ) | (2,571 | ) | (1,958 | ) | (16,586 | ) | ||||||||
Dividends paid to minority interests
|
| (99 | ) | (214 | ) | (1,813 | ) | |||||||||
Proceeds from issuance of new shares by subsidiaries
|
2,132 | 79 | 1,548 | 13,113 | ||||||||||||
|
||||||||||||||||
Net cash provided by financing activities
|
3,335 | 108,675 | 81,438 | 689,860 | ||||||||||||
|
||||||||||||||||
Effect of exchange rate changes on cash and cash
equivalents
|
(9 | ) | 182 | 213 | 1,804 | |||||||||||
Net increase (decrease) in cash and cash equivalents
|
5,466 | (2,849 | ) | 5,484 | 46,455 | |||||||||||
Cash and cash equivalents at beginning of year
|
20,243 | 25,709 | 22,860 | 193,647 | ||||||||||||
|
||||||||||||||||
Cash and cash equivalents at end of year
|
¥ | 25,709 | ¥ | 22,860 | ¥ | 28,344 | $ | 240,102 | ||||||||
|
F-9
F-10
F-11
F-12
F-13
F-14
F-15
F-16
F-17
F-18
F-19
F-20
F-21
F-22
F-23
F-24
F-25
F-26
F-27
F-28
F-29
F-30
F-31
F-32
F-33
F-34
F-35
F-36
F-37
F-38
F-39
F-40
F-41
F-42
F-43
F-44
F-45
F-46
F-47
F-48
F-49
F-50
F-51
F-52
F-53
F-54
F-55
F-56
F-57
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
2005
2006
2007
2007
¥
1,254
¥
1,932
¥
2,731
$ 23,134
1,942
2,354
6,528
55,299
190
977
6,136
51,978
(1,264
)
(2,145
)
(3,456
)
(29,276
)
(190
)
(387
)
(1,774
)
(15,028
)
¥
1,932
¥
2,731
¥
10,165
$ 86,107
Table of Contents
Table of Contents
Table of Contents
Thousands of
Million of Yen
U.S. Dollars
2006
2007
2007
¥
1,136
¥ 20,792
$ 176,129
24,771
55,347
468,844
(5,458
)
(13,308
)
(112,732
)
343
4,496
38,085
¥
20,792
¥ 67,327
$ 570,326
FIN No. 46(R).
Table of Contents
Table of Contents
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
2005
2006
2007
2007
¥
7,262
¥
8,455
¥
(1,610
)
$
(13,638
)
129
346
¥
7,133
¥
8,109
¥
$
Yen
U.S. Dollars
2005
2006
2007
2007
¥
59.60
¥
65.40
¥
(11.42
)
$
(0.097
)
54.00
61.60
(11.42
)
(0.097
)
Yen
U.S. Dollars
2005
2006
2007
2007
¥
58.40
¥
62.80
¥
$
52.80
58.80
Table of Contents
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
2006
2007
2007
¥
91,610
¥
139,691
$
1,183,321
90,729
81,688
691,978
44,158
34,959
296,137
10,681
14,605
123,719
237,178
270,943
2,295,155
(11,003
)
(18,537
)
(157,027
)
(228
)
(1,626
)
(13,774
)
¥
225,947
¥
250,780
$
2,124,354
Thousands of
Millions of Yen
U.S. Dollars
2005
2006
2007
2007
¥
13,528
¥
10,034
¥
11,003
$
93,206
(3,327
)
5,817
5,923
10,853
91,936
1,942
2,354
6,528
55,298
(7,926
)
(7,308
)
(9,847
)
(83,413
)
¥
10,034
¥
11,003
¥
18,537
$
157,027
Thousands of
Millions of Yen
U.S. Dollars
2005
2006
2007
2007
¥
8,102
¥
8,862
¥
13,324
$112,868
1,932
2,141
5,213
44,159
¥
10,034
¥
11,003
¥
18,537
$157,027
Table of Contents
Millions of Yen
2006
Secured Loans
SME Loans
Consumer Loans
Other Loans
Total
¥90,905
¥80,107
¥37,151
¥10,375
¥218,538
665
7,696
6,037
12
14,410
91,570
87,803
43,188
10,387
232,948
532
4,743
1,694
197
7,166
2
339
83
87
511
2
238
58
61
359
73
32
141
246
73
32
141
246
15
1,452
499
16
1,982
15
1,452
499
16
1,982
91,587
89,667
43,802
10,631
235,687
549
6,506
2,283
415
9,753
19
833
264
40
1,156
7
785
256
36
1,084
4
229
92
10
335
2
114
46
4
166
23
1,062
356
50
1,491
9
899
302
40
1,250
¥91,610
¥90,729
¥44,158
¥10,681
¥237,178
558
7,405
2,585
455
11,003
Table of Contents
Millions of Yen
2007
Secured Loans
SME Loans
Consumer Loans
Other Loans
Total
¥133,939
¥67,556
¥28,533
¥13,958
¥243,986
5,108
8,528
5,138
12
18,786
139,047
76,084
33,671
13,970
262,772
78
8,072
2,558
326
11,034
447
114
44
605
313
80
26
419
164
84
474
722
164
84
474
722
541
2,578
686
7
3,812
518
2,568
686
5
3,777
139,588
79,273
34,555
14,495
267,911
596
11,117
3,408
831
15,952
7
1,824
293
51
2,175
7
1,783
287
50
2,127
96
591
111
59
857
21
350
55
32
458
103
2,415
404
110
3,032
28
2,133
342
82
2,585
¥139,691
¥81,688
¥34,959
¥14,605
¥270,943
624
13,250
3,750
913
18,537
Table of Contents
Thousands of U.S. Dollars
2007
Secured Loans
SME Loans
Consumer Loans
Other Loans
Total
$1,134,595
$572,266
$241,703
$118,238
$2,066,802
43,270
72,241
43,524
102
159,137
1,177,865
644,507
285,227
118,340
2,225,939
661
68,378
21,668
2,762
93,469
3,787
965
373
5,125
2,651
678
220
3,549
1,389
712
4,015
6,116
1,389
712
4,015
6,116
4,583
21,838
5,811
59
32,291
4,388
21,754
5,811
42
31,995
1,182,448
671,521
292,715
122,787
2,269,471
5,049
94,172
28,869
7,039
135,129
59
15,451
2,482
432
18,424
59
15,104
2,431
424
18,018
814
5,006
940
500
7,260
178
2,965
466
271
3,880
873
20,457
3,422
932
25,684
237
18,069
2,897
695
21,898
$1,183,321
$691,978
$296,137
$123,719
$2,295,155
5,286
112,241
31,766
7,734
157,027
(1)
a component estimated based on historical loss by payment status;
(2)
components based on legal status including bankruptcy or death; and
(3)
other components based on loan attributes.
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
¥
176,181
$
1,492,427
39,223
332,258
33,502
283,795
13,688
115,951
8,349
70,724
¥
270,943
$
2,295,155
Thousands of
Millions of Yen
U.S. Dollars
2006
2007
2007
¥
4,002
¥
4,700
$
39,814
(901
)
(945
)
(8,005
)
3,101
3,755
31,809
(122
)
(257
)
(2,177
)
¥
2,979
¥
3,498
$
29,632
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
2006
2007
2007
¥25,947
¥31,565
$267,386
(1,792
)
(2,655
)
(22,490
)
¥24,155
¥28,910
$244,896
Thousands of
Millions of Yen
U.S. Dollars
2005
2006
2007
2007
¥ 5,059
¥14,863
¥25,947
$ 219,797
16,896
19,779
19,565
165,735
(6,840
)
(7,308
)
(13,087
)
(110,860
)
(711
)
(252
)
(676
)
(833
)
(7,057
)
(27
)
(229
)
14,863
25,947
31,565
267,386
717
1,282
1,792
15,180
817
1,186
1,696
14,367
(252
)
(676
)
(833
)
(7,057
)
1,282
1,792
2,655
22,490
¥13,581
¥24,155
¥28,910
$244,896
(A)
Including non-cash payments such as foreclosed property of
¥352 million and ¥218 million ($1,847 thousand) for
the year ended March 31, 2006 and 2007, respectively.
(B)
Sold to an affiliate accounted for under equity method at cost which approximated fair value.
The Group did not recognize any gains or losses from this transaction.
(C)
Since ¥12,745 million, ¥23,228 million
and ¥27,626 million ($234,019 thousand) of the net purchased loans were accounted for under the cost
recovery method as of March 31, 2005, 2006 and 2007,
respectively, the amounts of accretable yield were not
considered significant.
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
2006
2007
2007
¥
23,396
¥
16,938
$
143,482
114
1,035
8,767
18,561
20,411
172,901
¥
42,071
¥
38,384
$
325,150
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
2006
2007
2007
¥ 4,070
¥ 1,920
$
16,264
4,043
4,023
34,079
6,587
7,576
64,176
14,700
13,519
114,519
(3,531
)
(5,071
)
(42,956
)
¥ 11,169
¥ 8,448
$
71,563
Table of Contents
Millions of Yen
¥
3,133
9
4
181
600
3,927
(116
)
¥
3,811
Millions of Yen
¥
7,896
619
16
196
8,727
(6,624
)
(657
)
¥
1,446
Table of Contents
Table of Contents
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
2006
2007
2007
¥201
¥
$
600
600
5,083
¥801
¥600
$5,083
Thousands of
Millions of Yen
U.S. Dollars
2005
2006
2007
2007
¥201
¥801
¥ 801
$ 6,785
600
(201
)
(1,702
)
¥801
¥801
¥ 600
$ 5,083
Thousands of
Millions of Yen
U.S. Dollars
2006
2007
2007
¥30,283
¥57,037
$483,159
30,000
27,100
229,564
128
121
1,025
¥60,411
¥84,258
$713,748
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
2006
2007
2007
¥
500
¥
$
500
500
500
500
4,235
7,500
7,500
63,532
150
90
762
7,500
7,500
63,532
10,000
10,000
84,710
450
3,812
1,000
700
5,930
5,000
42,355
10,000
84,710
822
28,972
41,740
353,578
14,352
25,630
217,112
39,382
70,597
598,026
70,806
66,365
562,177
45,412
56,485
478,484
169,952
219,077
1,855,799
¥
198,924
¥
260,817
$
2,209,377
(A)
On September 13, 2001, the Company issued ¥10 billion of 1.7% unsecured convertible bonds
issued at par and redeemable on September 29, 2006. The conversion price was ¥818.00 ($6.93)
per share of common stock which was the market value plus 30% premium at the time of issuance.
For the years ended March 31, 2006 and 2007, convertible bonds totaling ¥8,120 million and
¥774 million ($6,557 thousand) were converted to 9,927 thousand shares of common stock and 946
thousand shares of common stock, respectively.
(B)
The Company entrusted certain loans outstanding to a trust bank. In order to raise
funds, the Company sold its senior beneficiary interest in these loans outstanding in trust to
a third-party. These transactions constitute a legal sale under Japanese law. 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. As of March 31, 2006 and 2007,
entrusted loans outstanding included in loans receivable were ¥30,907 million and ¥36,778
million ($311,546 thousand), respectively. The related long-term liability recorded in loans
from banks and other financial institutions were ¥21,670 million and ¥26,957 million ($228,352
thousand), respectively. In addition, the Company is required to deposit certain amounts with
banks as restricted cash for the purpose of settlement of account. As of March 31, 2006 and
2007, deposits of restricted cash in banks related to the above borrowings were ¥491 million
and ¥493 million ($4,176 thousand), respectively.
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
¥108,475
$
918,890
80,552
682,355
34,110
288,945
36,777
311,538
903
7,649
¥260,817
$
2,209,377
As of March 31, 2007, the following assets were pledged for short and long-term borrowings as
collateral:
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
¥
961
$
8,141
379
3,210
21
178
¥
1,361
$
11,529
Thousands of
Millions of Yen
U.S. Dollars
2006
2007
2007
¥
2,875
¥
2,954
$
25,023
(1,563
)
(2,121
)
(17,967
)
¥
1,312
¥
833
$
7,056
Thousands of
Millions of Yen
U.S. Dollars
¥
468
$
3,964
250
2,118
104
881
49
415
11
93
882
7,471
(23
)
(194
)
859
7,277
(455
)
(3,855
)
¥
404
$
3,422
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
Change in benefit obligation
2006
2007
2007
¥330
¥ 647
$ 5,481
310
6
4
34
1
1
8
(272
)
(2,304
)
¥647
¥ 380
$ 3,219
Thousands of
Millions of Yen
U.S. Dollars
Total recognized liabilities in the balance sheets
2006
2007
2007
¥265
¥
$
382
380
3,219
¥647
¥380
$3,219
Table of Contents
Millions of Yen
Millions of Yen
Number of
Notional
Interest Rate
Ultimate
Fair
Agreements
Principal
Pay
Receive
Maturity
Value
¥97
Fixed at 2.190%
TIBOR+1.250%
August 2006
¥()
Millions of Yen
Millions of Yen
Number of
Notional
Interest Rate
Ultimate
Fair
Agreements
Principal
Pay
Receive
Maturity
Value
¥263
Fixed at 2.200%
TIBOR+0.950%
December 2008
¥(1)
Thousands of
Thousands of
U.S. Dollars
U.S. Dollars
Number of
Notional
Interest Rate
Ultimate
Fair
Agreements
Principal
Pay
Receive
Maturity
Value
$2,228
Fixed at 2.200%
TIBOR+0.950%
December 2008
$(8)
Applicable interest rate as of March 31, 2006 is as follows:
0.128
%
Applicable interest rate as of March 31, 2007 is as follows:
0.664
%
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
2006
2007
2007
¥ 9,642
¥ 7,398
$
62,668
48,037
46,110
390,598
¥57,679
¥53,508
$
453,266
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
2006
2007
2007
¥
11,886
¥
17,555
$
148,708
964
908
7,692
1,920
629
1,066
9,030
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
2005
2006
2007
2007
¥
845
¥
1,386
¥
1,880
$ 15,926
34
20
45
381
879
1,406
1,925
16,307
(562
)
(898
)
(1,337
)
(11,326
)
¥
317
¥
508
¥
588
$ 4,981
Table of Contents
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
2005
2006
2007
2007
¥
32
¥
13
¥
1
$
8
13
4
36
305
316
467
34
9
Table of Contents
Thousands of
Millions of Yen
U.S. Dollars
2005
2006
2007
2007
¥
205
¥
151
¥
$
175
518
1
8
Thousands of
Millions of Yen
U.S. Dollars
2005
2006
2007
2007
¥
¥
9
¥
11
$
93
26
89
754
11
41
347
Thousands of
Millions of Yen
U.S. Dollars
2005
2006
2007
2007
¥2,132
¥ 5,211
¥ 3,867
$ 32,757
1,087
2,463
1,910
16,180
3,219
7,674
5,777
48,937
945
(991
)
(2,798
)
(23,702
)
482
(469
)
(1,382
)
(11,707
)
1,427
(1,460
)
(4,180
)
(35,409
)
¥4,646
¥ 6,214
¥ 1,597
$ 13,528
Table of Contents
Table of Contents
2005
2006
2007
40.5
%
40.5
%
40.5
%
0.3
0.3
37.6
0.4
0.3
22.7
(1.9
)
(0.1
)
502.0
31.2
(0.9
)
(0.3
)
3.1
38.4
%
40.7
%
637.1
%
Thousands of
Millions of Yen
U.S. Dollars
2005
2006
2007
2007
¥7,262
¥8,455
¥(1,610
)
$(13,638
)
100
57
(53
)
(28
)
(6
)
(51
)
¥7,309
¥8,484
¥(1,616
)
$(13,689
)
Thousands of Shares
2005
2006
2007
122,083
129,247
140,924
997
1,794
12,113
6,901
135,193
137,942
140,924
Yen
U.S. Dollars
2005
2006
2007
2007
¥
59.60
¥
65.40
¥
(11.42
)
$(0.097
)
54.00
61.60
(11.42
)
(0.097
)
Table of Contents
Table of Contents
Number of Shares
Number of Shares
Exercise Prices
Granted
Outstanding
Yen
U.S. Dollars
Date Granted
(Thousands)
Exercise Period
(Thousands)
$
8.98
July 15, 2004
3,197
From August 1, 2004 to July 31, 2007
1,120
$
9.32
January 20, 2005
38
From February 1, 2005 to January
31, 2008
23
$
11.35
April 21, 2005
357
From May 1, 2005 to April 30, 2008
173
$
9.83
July 15, 2005
720
From August 1, 2005 to July 31, 2008
413
$
22.19
March 23, 2006
96
From April 1, 2006 to March 31, 2009
79
Number of
Weighted-average
Weighted-average Exercise
Aggregate Intrinsic Value
Shares
Remaining Life
Price Per Share
Thousands of
(Thousands)
(Years)
Yen
U.S. Dollars
Millions of Yen
U.S. Dollars
2,483
¥1,108
$ 9.39
588
845
7.16
87
1,412
11.96
1,808
0.72
1,179
9.99
¥497
$4,210
1,808
0.72
¥1,179
9.99
¥497
$4,210
Table of Contents
2005
2006
2007
(A)
0.3
%
1.5
%
%
3.0
years
3.0
years
years
33.3
%
28.9
%
%
1.1
%
1.4
%
%
¥124.2
¥130.0
¥
Table of Contents
Number of Shares
Number of Shares
Exercise Prices
Granted
Outstanding
Yen
U.S. Dollars
Date Granted
(Shares)
Exercise Period
(Shares)
$
5.29
September 26, 2002
80,000
From October 1, 2004 to September
30, 2007
1,600
$
52.94
March 30, 2004
14,960
From April 1, 2006 to March 31, 2009
2,000
$
436.67
August 9, 2005
2,620
From July 1, 2007 to June 30, 2010
2,340
$
570.62
August 23, 2006
1,400
From September 1, 2006 to August 6,
2011
1,400
$
494.54
August 23, 2006
4,530
From September 1, 2006 to August 6,
2011
4,250
Number of
Weighted-average
Weighted-average Exercise
Aggregate Intrinsic Value
Shares
Remaining Life
Price Per Share
Thousands of
(Shares)
(Years)
Yen
U.S. Dollars
Millions of Yen
U.S. Dollars
17,620
¥
11,961
$101.32
5,930
60,501
512.50
11,520
6,250
52.94
440
47,660
403.73
11,590
3.20
41,118
348.31
¥135
$1,144
9,250
3.18
¥
38,479
$325.96
¥135
$1,144
2005
(A)
2006
2007
%
1.6
%
0.8
%
years
4.9
years
2.5
years
%
57.5
%
74.3
%
%
0.8
%
1.0
%
¥
¥11,522
¥20,258
Table of Contents
Number of Shares
Number of Shares
Exercise Prices
Granted
Outstanding
Yen
U.S. Dollars
Date Granted
(Shares)
Exercise Period
(Shares)
$
6.27
April 28, 2006
175,000
From May 1, 2006 to April 30, 2009
166,000
2005
(A)
2006
(A)
2007
%
%
2.5
%
years
years
3.0
years
%
%
47.2
%
%
%
0.7
%
¥
¥
¥196.0
(A)
No share was granted for the years ended March 31, 2005 and 2006.
Table of Contents
Millions of Yen
Other
Cumulative
Comprehensive
Other
Income
Tax (Expense)
Comprehensive
Before Tax
or Benefit
Income
¥ 5,657
¥ (2,286
)
¥ 3,371
7,428
(3,008
)
4,420
513
(208
)
305
7,941
(3,216
)
4,725
(2
)
1
(1
)
(9
)
(9
)
13,587
(5,501
)
8,086
(864
)
336
(528
)
(3,760
)
1,523
(2,237
)
(4,624
)
1,859
(2,765
)
7
(3
)
4
160
160
9,130
(3,645
)
5,485
(6,701
)
2,713
(3,988
)
23
(9
)
14
(6,678
)
2,704
(3,974
)
(1
)
1
210
210
¥ 2,661
¥ (940
)
¥ 1,721
Table of Contents
Thousands of U.S. Dollars
Other
Cumulative
Comprehensive
Other
Income
Tax (Expense)
Comprehensive
Before Tax
or Benefit
Income
$ 77,340
$(30,877
)
$ 46,463
(56,765
)
22,982
(33,783
)
195
(76
)
119
(56,570
)
22,906
(33,664
)
(8
)
8
1,780
1,780
$ 22,542
$ (7,963
)
$ 14,579
Thousands of
Millions of Yen
U.S. Dollars
2005
2006
2007
2007
¥
2,999
¥
2,779
¥
4,206
$
35,629
5,266
2,302
8,119
68,776
Thousands of
Millions of Yen
U.S. Dollars
2005
2006
2007
2007
¥
792
¥
278
¥
163
$
1,381
1,058
8,120
774
6,557
Table of Contents
Millions of Yen
Thousands of U.S. Dollars
2006
2007
2007
Carrying
Carrying
Carrying
Amount
Fair Value
Amount
Fair Value
Amount
Fair Value
¥
22,860
¥
22,860
¥
28,344
¥
28,344
$
240,102
$
240,102
225,947
220,502
250,780
249,700
2,124,354
2,115,205
24,155
24,155
28,910
28,910
244,896
244,896
42,071
42,071
38,384
38,384
325,150
325,150
60,411
60,411
84,258
84,258
713,748
713,748
198,924
200,487
260,817
257,696
2,209,377
2,182,939
1
1
8
8
629
629
1,066
1,066
9,030
9,030
a)
Cash and Cash Equivalents:
Cash and cash equivalents are carried at an amount that
approximates fair value.
b)
Loans Receivable:
The Group maintains an allowance for loan losses at a level that is
adequate in managements judgment to provide for estimated probable uncollectible loan losses
from known and inherent risks in the Groups loan portfolios. In addition, the Group provides
a reserve for losses on excess interest repayments derived from current loans receivable and
loans previously paid-off or charged-off. (See Note 2 for a summary of significant accounting
policies.) Accordingly, the Group believes the carrying value of its loans receivable, net of
reserve for losses on excess interest repayments derived from the current loans, approximates
fair value.
c)
Purchased Loans Receivable:
The carrying value of purchased loans receivable is estimated
based on either the market value or the discounted amounts of future cash flows. The Group
believes the carrying value of its purchased loans receivable approximates fair value.
d)
Investment Securities:
The fair value of marketable equity securities is based on quoted
market prices. The Group also holds ¥18,675 million and ¥20,446 million ($173,198 thousand)
in debt securities and other investments, including non-marketable equity securities as of
March 31, 2006 and 2007, respectively. The fair value of these investments is assumed to
estimate cost until such time as new equity or financing or significant changes operations
demonstrate a new fair value.
e)
Short-term Borrowings:
Short-term borrowings are carried at an amount that approximates fair
value.
f)
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 are currently available to the Group 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.
g)
Interest Rate Swaps:
The fair value of interest rate swaps (used for hedging purpose)
reflects the estimated amounts that the Group 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 Groups derivatives.
h)
Guarantee of Loans:
The fair value of the Groups guarantees generally reflects the probable
and estimable amounts that the Group would pay for the delinquent payments of borrowings under
guarantees.
Table of Contents
Millions of Yen
Integrated
Servicing
Real Estate
Other
Financial Services
Business
Business
Businesses
Eliminations
Consolidated
¥
27,356
¥
¥
¥
¥
¥
27,356
1,107
3,893
18
210
(225
)
5,003
3,012
153
90
9
(105
)
3,159
5,817
5,817
123
821
40
984
12,969
1,181
58
180
(122
)
14,266
6,542
1,738
(130
)
(19
)
2
8,133
208,493
21,818
2,643
572
(5,125
)
228,401
Millions of Yen
Integrated
Servicing
Real Estate
Other
Financial Services
Business
Business
Businesses
Eliminations
Consolidated
¥
26,495
¥
¥
¥
¥
¥
26,495
3,251
7,918
901
279
(904
)
11,445
2,656
408
311
11
(281
)
3,105
5,923
5,923
122
1,186
26
1,334
13,619
1,676
340
577
(317
)
15,895
7,426
4,648
250
(335
)
(306
)
11,683
313,127
43,000
25,074
244
(21,502
)
359,943
Table of Contents
Millions of Yen
Integrated
Servicing
Real Estate
Other
Financial Services
Business
Business
Businesses
Eliminations
Consolidated
¥
21,215
¥
¥
¥
¥
(173
)
¥
21,042
5,610
10,375
5,307
319
(4,026
)
17,585
3,892
933
981
116
(1,015
)
4,907
10,853
10,853
530
1,696
3
2,229
15,658
2,548
824
626
(339
)
19,317
(4,108
)
5,198
3,499
(423
)
(2,845
)
1,321
370,481
62,649
56,466
8,599
(44,118
)
454,077
Thousands of U.S. Dollars
Integrated
Servicing
Real Estate
Other
Financial Services
Business
Business
Businesses
Eliminations
Consolidated
$
179,713
$
$
$
$
(1,466
)
$
178,247
47,522
87,886
44,955
2,703
(34,104
)
148,962
32,969
7,903
8,310
983
(8,598
)
41,567
91,936
91,936
4,490
14,367
25
18,882
132,639
21,584
6,980
5,303
(2,872
)
163,634
(34,799
)
44,032
29,640
(3,583
)
(24,100
)
11,190
3,138,340
530,699
478,323
72,842
(373,723
)
3,846,481
Table of Contents
1)
On June 23, 2007, the shareholders of the Company authorized the following at the Annual
Shareholders Meeting:
(1)
Implementation of a 1-for-20 reverse stock split effective on August 31, 2007. The
effect of this reverse stock split has been retroactively reflected in these consolidated
financial statements.
(2)
Changes of the annual upper limit on the total number of
stock acquisition rights issuable to the Companys directors as
stock-based compensation and shares allotted to these rights from 300,000
units and 1,500,000 shares to 500,000 units and 2,500,000 shares, respectively.
(3)
Partial amendments of the Articles of Incorporation
Reduction of the total number of authorized shares from 7,680 million shares to 384
million shares. This shall go into effect on the effective date of the reverse stock
split approved at the Annual Shareholders Meeting.
2)
On June 23, 2007, the Board of Directors approved the repurchase of shares of the
Companys common stock of up to 3,000,000 shares for an aggregate amount of up to ¥3 billion.
The company completed all stock repurchases to be made under this stock repurchase program
during the period from June 25, 2007 to August 24, 2007.
3)
On July 18, 2007, the Board of Directors approved that the number of shares of the
Companys common stock represented by each American Depositary Share (ADS) be changed from
the current ratio of one ADS for 10 shares of common stock to two
ADSs for one share of common
stock. This change became effective on August 31, 2007, in accordance with the 1-for-20
reverse stock split approved at the Annual Shareholders Meeting.
Table of Contents
Exhibit
Number
Description
1.1
1.2
1.3
1.4
2.1
2.2
8.1
11.1
12.1
12.2
12.3
13.1
13.2
13.3
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