We are convinced that our business model is a very sound and time-tested approach to doing business in our market place. The way that we go about establishing a presence in a market is extremely simple. The first step is to identify a market that meets our criteria for automobile dealerships, average household income and lending regulations. (Peter J. Vosotas, Manager  of Corporate Collections - shown  at right) Once we decide to establish our Company in a particular area, we then construct a branch office and build it out to our preset specifications. The branch is initially staffed with a manager and two to three assistants. Gradually assistants are added as needed until we reach a full compliment of five to seven. The manager and his/her staff make all lending and collection decisions for the branch office. The branch personnel are required to comply with strict corporate lending and collection guidelines. All exceptions to these guidelines must be processed through the appropriate levels of management and confirmed in writing. Our internal auditing staff audits all branch offices on a quarterly basis. Our goal is to have each branch generate over $300,000 in pre-tax income, within three years of opening. Many of our branches have met this goal.

As we stated last year, our Loss Recovery Department, based in our Clearwater headquarters, is one of the most important contributors to the success of Nicholas Financial.  Soti Kakalis, a ten-year veteran with the Company leads this organization.   He has a team comprised of former Company Managers and Collectors that are all seasoned veterans. Soti’s staff handles everything from repossessed vehicle logistics through vehicle disposition to loan loss collections. In performing their specialized tasks they interact with judges, attorneys and insurance companies on a daily basis. This team traces skips and collects unpaid balances from former customers. The Loss Recovery Department also supervises our licensing compliance in every branch location. In a pinch, any member of this team can manage a branch that is short handed or faltering. Over the past few years, this very talented team has recovered millions of dollars.

We continue to maintain and support many small businesses with our financial software products through our data processing subsidiary, Nicholas Data Services Inc. (NDS).  NDS also supplies Nicholas Financial with all of its data processing needs ranging from the application software to networking hardware and telecommunications equipment.  (Michael  J. Marika, Chief Information Officer - shown  at right)  Our NDS engineers have developed all web site and Internet facilities internally. We continue to leverage our use of the Internet for e-mail, business-to-business communications and software distribution. Anyone wishing detailed information about our Company may find it by visiting our web site at www.nicholasfinancial.com.

In the next few years we believe that we will require additional financing sources to satisfy our growth. In doing so we will inevitably have to do business with investment bankers who have the means and methods to help us.  To this end we have met and discussed our long- term financing needs with several brokerage firms and expect to continue this process throughout the year.

 As part of our ongoing investor relations program to increase awareness of the Company’s financial performance and attract a larger shareholder base, we recently joined the National Association of Investors Corporation, as a corporate sponsor. The NAIC is a non-profit organization, which is made up of over 500,000 individual investors and investment clubs worldwide.  The NAIC provides investment education to inexperienced and experienced investors, with the goal of increasing the number of individual investors in common stock.   This past February, we presented our Company to a convention of NAIC members in Atlanta, Georgia. Our presentation was extremely well received by the attendees. We plan to continue this method of presenting the “Nicholas Story” in the future.

We look forward with optimism towards the new year. We expect to grow the Company by increasing our existing branch loan portfolios and building new branch offices. We intend to open several new branches over the course of this year and next. We are presently planning to open additional branches in Florida and Ohio.  (Matthew J. Foget, Vice President Marketing - shown at right)  In addition, we are exploring opportunities for new branches in the Southeast and possibly the Midwest. To this end, we promoted Matthew J. Foget to Vice President of Marketing. Matt, formerly Vice President of Sales, has worked very hard over the past 8 years and has developed an excellent branch organization. We believe that Matt possesses the necessary skills to expand our frontiers and establish many new branches during the coming years.

Doug Marohn, a four-year veteran with the Company has been promoted to Vice President of Sales. Doug was the Company’s leading branch manager for three consecutive years. He was promoted to Regional Manager a year ago and excelled in that capacity as well. We are confident that Doug will do an outstanding job in his new position. (Douglas W. Marohn, Vice President Sales -  shown at right)

While we are very pleased and proud of what Nicholas Financial accomplished in a year traumatized by tough economic times and the worst attack of terrorism to ever occur on American soil, we want to express our heartfelt grief and sympathy to all Americans and especially our employees who lost family members in the World Trade Center and Pentagon terrorist attacks. Our carefree American way of life was changed forever on September 11th. However our faith in the United States and all it stands for is unshakeable. The challenge for our Company and all American institutions is to forge ahead and insure the victory of freedom and democracy. We are very proud of our employees, whose dedication, talent and loyalty have made Nicholas an important force in automobile financing in the Southeast. We are grateful for their ongoing efforts and for the support of our customers, bankers, vendors and shareholders. We remain determined to increase the value of our publicly traded stock. To all of you who have invested in Nicholas, we wish to thank you for having continued faith in our Company. On behalf of our Board of Directors and our employees, we thank you for the confidence that you have entrusted in us.