E*TRADE Securities Co., Ltd.
Financial Review
First Quarter Fiscal Year 2006

July 26, 2006
E*TRADE Securities Co., Ltd.
Stock code: 8701
The items in this document are provided by E*TRADE Securities asinformation related to its business strategy and not as an invitation toinvest in E*TRADE stock or securities. E*TRADE does not guarantee the completeness of this document in terms of information andfuture business strategy. The content of this document is subject to revision or cancellation without warning.

1. Performance Overview

Consolidated Performance, 1Q FY 2006
(Unit: Million yen, %)Compared tosame period
in previous year

1Q FY 2005

1Q FY 2006

(2005/4 to 2005/6)(2006/4 to 2006/6)

Operatingrevenue

10,257

15,691+53.0

Net operating
revenue

9,558

14,886+55.7

Operating profit

4,229

7,168

+69.5

Ordinary profit

4,381

7,391

+68.7

Quarterly net
profit

2,407

4,182

+73.7
<3>

Consolidated Operating Revenue Details(Million yen)

(Million yen)

15,000Brokerage commission

5,000

Financial revenue

Financial revenue

Financial balance (Revenue - Expenses)

4,086

4,000

43% increase

10,000

3,281

9,681
3,000

6,751
2,000

5,000

2,270

80% increase
1,571

1,000

0
(Million yen)

500
450

1Q FY 2006
(2006/4 to 2006/6)

1Q FY 2005
(2005/4 to 2005/6)

Commissions from underwriting, public
subscriptions, and secondary offerings

365

400
350
300

298

250

22%
increase

2000(Million yen)

1,800
1,600

1,200
1,000

100

400

50

200
1Q FY 2006
(2006/4 to 2006/6)

1,558

938 66% increase

800
600

1Q FY 2005
(2005/4 to 2005/6)

Profit from trading and others

1,400

150

0

1Q FY 2006
(2006/4 to 2006/6)

1Q FY 2005
(2005/4 to 2005/6)

0

Other underwriting,profit from trading,and operating
revenue

1Q FY 2005
(2005/4 to 2005/6)

1Q FY 2006
(2006/4 to 2006/6)<4>

Performance of E*TRADE Korea Co., Ltd., 1Q FY 2006
(Unit: Million yen, %)1Q FY 2005

1Q FY 2006

(2005/4 to 2005/6)(2006/4 to 2006/6)

Compared tosame period
in previous year

Operatingrevenue

840

1,502

+78.7

Net operating
revenue

821

1,413

+72.2

Operating profit

28

411

+1,332.2

Ordinary profit

33

417

+1,134.0

Quarterly net
profit33

316+833.6<5>

Consolidated Performance Highlights, 1Q FY 2006
(1) Commission earnings: Up 43% compared to the same period in the previous year, expanding to 9.681 billion yen.
• Combined accounts: 1,259,163 (as of June 30, 2006) In 3 months, the number of accounts grew by 91,385 (30,461 accounts permonth).
• In June 2006, the individual stock brokerage turnover share was 33.5%. This share continues to expand.

(2) Commission earnings: Up 80% compared to the same period in the previous, expanding to 4.086 billion yen.
• Margin trading accounts: 127,485 (as of June 30, 2006) In 3 months, the number of accounts grew by 11,874 (3,958 accounts per month).
• Margin open interest: 519.033 billion yen (as of June 30, 2006), which is 1.6 times larger than the same period in the previous year.

(3) Commissions from underwriting, public subscriptions, and secondary offerings: Up 22% compared to the same
period in the previous year, expanding to 365 million yen.
• E*TRADE has the top IPO underwriting participation rate among securities companies.

(4) Profit from trading and other earnings: Up 66% compared to the same period in the previous year, expanding to
1.558 billion yen.
• Bond sales are increasing steadily. The sale of government bonds for individuals recorded the best performance ever.
• Earnings from foreign exchange guarantee deposit trading grew steadily.

(5) Sales and management expenses• An increasing number of accounts and transactions contributed to a big reduction in the variable cost per contract.

(6) E*TRADE Korea Outlook• E*Trade Korea greatly expanded its market share in private and online markets.

<6>Performance Highlights

1) Consolidated Commission Earnings(Million yen)

12,0009,681

10,000
8,000

6,751

43%
increase

6,000
4,000
2,000
0

1Q FY 2005

1Q FY 2006

(2005/4 to 2005/6)(2006/4 to 2006/6)<7>1) Commission Earnings

Account Comparison for Main Online Securities Companies
Accounts of five main online securities companies(Accounts)(Accounts)(Current from end of 2006/6)

1,259,163

1300000
1200000

1,200,000

1100000
1000000

1,000,000

Account trend of five main online securities
companies(2004/4 to 2006/6)
E*TRADE 1,259,163
Account acquisition for the
1Q FY 2006 was 1.3 times
higher than Matsui Securities
and 2.3 times higher than
Rakuten Securities.

900000800000800,000
700000Monex 675,892

600000

Rakuten 592,209

675,892

Matsui 588,267

592,209 588,267

600,000

500000502,327

Kabu.com 502,327

400000300000400,000

200000100000200,000Apr

E*TRADE

Monex

RakutenMatsuiKabu.com

2004

Jun

Aug

Oct

Dec

Feb

2005

Apr

Jun

Aug

Oct

Dec

Feb

Apr

Jun

2006

Source: Public documents from each company's website.
Note: Monex Securities and Nikko Beans Securities are added together as Monex. On January 1, 2006, Kabu.com Securities merged with MeNet Securities.

<8>1) Commission Earnings

E*TRADE Account Trend
Average monthly account acquisition(Accounts)
1,400,000

FY 2005 (12-month average): 47,919

1,300,000
1,200,000
1,100,000
1,000,000

FY 2004(12-month average)
20,0661Q FY 2006
(3-month average)
30,461
1,259,163
1,235,733
1,201,203
1,167,778

934,674

900,000
800,000
700,000

777,455

FY 2003
683,696(12-month average)

8,163

592,743

600,000
500,000

452,493

400,000

351,950
290,558
300,000253,988

200,000
100,000
Mar Sep Mar Sep Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
FY 2003

FY 2004

FY 2005

FY 2006<9>

1) Commission Earnings

Account Acquisition Comparison for Main Online Securities Companies(New accounts)

600,000

575,467

New accounts from 2005/7 to 2006/6

1Q

1Q (2006/4 to 2006/6)

91,385500,000

4Ｑ (2006/1 to 2006/3)
3Ｑ (2005/10 to 2005/12)

400,000

2Ｑ (2005/7 to 2005/9)

4Q
233,104

292,598

300,000

39,393274,051
70,746200,000

3Q
157,219

98,691240,036
26,902

222,752
44,344

Note

107,755

139,002

88,99389,028100,000
2Q
93,75958,35965,4860
E*TRADE

Rakuten48,43658,59337,191

25,69630,822

MatsuiKabu.com

Monex

Source: Public documents from each company's website.
Note: Kabu.com Securities merged with MeNet Securities in January 2006.

<10>

1) Commission Earnings

Stock Brokerage Turnover Trend
Daily average turnover trend for five main online
securities companies(Million yen)

(2004/1 to 2006/6)

2006/6
Daily average turnover(Million yen)

500,000

400,000

E*TRADE
325,955

300,000

200,000
Rakuten154,462
Matsui106,777

100,000

Monex 78,868
Kabu.com 65,670

0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

2004

2005

2006

Source: Public documents from each company's website.
Note: Monex Securities and Nikko Beans are totaled as Monex. Kabu.com Securities merged with MeNet Securities in January 2006.

<11>

1) Commission Earnings

Individual Stock Brokerage Turnover Share of Main Online Securities Companies
Individual stock brokerage turnover share
3Q FY 2005

4Q FY 2005

1Q FY 2006

(2005/10 to 2005/12)(2006/1 to 2006/3)(2006/4 to 2006/6)

Others45.7％

Five main
onlinesecurities
companies
54.3%

Others40.5％

Five main
onlinesecurities
companies
59.5%

Others37.2％

Five main
onlinesecurities
companies
62.8%

E*TRADE

21.3％

E*TRADE

24.9％

E*TRADE

27.3％

Rakuten Securities

10.3

Rakuten Securities

12.0

Rakuten Securities

13.2

Matsui Securities

9.7

Matsui Securities

9.6

Matsui Securities

9.5

Monex

8.2

Monex

7.3

Monex

6.8

Kabu.com

4.8

Kabu.com

5.7

Kabu.com

6.0

Source: Tokyo Stock Exchange statistical data, JASDAQ statistical data, and public documents from each company’s website.
Note: Individual brokerage turnover is totaled from three exchanges (sections one and two) and JASDAQ. Monex Securities and Nikko Beans aretotaled as Monex. Kabu.com Securities merged with MeNet Securities in January 2006.
<12>1) Commission Earnings

Basis Comparison for Main Online Securities Companies(Basis)Basis comparison
among five main online securities companies

14.0(1Q FY 2006)

12.0

11.0

(Brokerage commission / Brokerage turnover)

9.0

10.0

8.3
8.0

5.2

6.0

4.0
4.0
2.0
0.0
E*TRADE

Kabu.com

MBH

MatsuiRakutenSource: Prepared by E*TRADE using settlement of account documents from each company.

<13>1) Commission Earnings

Client Asset Trend (Reference)(100 million yen)
40,000Compared toprevious year
+49.9%

2005/6 end
2006/6 end

37,56635,00030,00025,00025,062Compared toprevious year
+32.5%

20,44620,00015,427Compared toprevious year
+30.7%

17,412
13,327

15,00010,000Compared toprevious year
+64.7%

12,895
7,828

Compared toprevious year
+92.2%

11,663
6,068

5,000

0
E*TRADE

Monex

MatsuiRakutenKabu.com

Source: Public documents from each company's website.
Note: Monex Securities and Nikko Beans are totaled as Monex. Kabu.com Securities merged with MeNet Securities in January 2006.

<14>1) Commission Earnings

Futures Trading Expansion
Futures trading is a pillar of earning power and growing rapidly.
We expect it to expand even further in the future.
Futures accounts(Accounts)

14000

Futures commissions

Compared to the end of the same period in the previous
year: Increased by 2.2 times

Compared to the end of the same period in the previous(1000 yen)
year: Increased by 3.4 times

385,916
367,998

12,855 400,000

12000

350,000

10000

300,000

279,472

250,000

8000

200,000

6000

140,450

150,000

106,669

4000
100,000

2000

50,0000

0
4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6

2004

2005

2006

1Q
FY 2005

2Q

3Q

4Q

1Q
FY 2006 <15>

Performance Highlights

2) Consolidated Financial Revenue(Million yen)

5,000

Revenue
Financial balance (Revenue - Expenses)

4,086

4,000

3,281
3,000
2,000

Financial revenue
80% increase

2,270
1,571

Financial balance
109% increase

1,000
0
1Q FY 2005

1Q FY 2006

(2005/4 to 2005/6)(2006/4 to 2006/6)<16>2) Financial Revenue

Margin Trading Account Comparison for Main Online Securities Companies
Margin trading accounts of five main online
securities companies(Margin accounts)

140,000(Margin accounts)(2004/3 to 2006/6)(Current from end of 2006/6)

E*TRADE: 127,485

127,485

125,000

120,000

105,000

100,000

77,42980,000Margin account comparison with
Matsui Securities

E*TRADE has 10.1% of
total accounts as of the endof March (Matsui: 13.2%).
With
noviceinvestors
beginning to engage inmargin trading, the numberof accounts is expected toincrease even further.

85,000

Matsui: 77,429

60,99260,00045,85865,00042,15240,00045,00020,000

2004

Ja
n

Ju
l

Ja
n

Ma
r

2005

M
ar
Ma
y

Monex

No
v

Kabu.comSep

RakutenMayMatsuiNo
v

E*TRADE

Ju
l
Se
p

0

Ma
r
Ma
y

25,0002006

Source: Public documents from each company's website.
Note: Monex Securities and Nikko Beans Securities are added together as Monex. On January 1, 2006, Kabu.com Securities merged with MeNet Securities .

<17>2) Financial Revenue

Margin Open Interest Trend(Million yen)Margin open interest by quarter

600,000

567,988(Transaction balance at the end of the quarter)

93,512 83,237

General (unlimited) margin trading

500,000

570,686
519,033

69,925

System margin trading
387,891

400,000

321,529 67,089
307,869

300,000

55,881 65,190
203,499

200,000

164,545 23,751 29,762 35,946

320,801

112,925 108,488

100,000

474,475 487,449
449,108

213,856 210,686

78,53278,532251,987 256,339

164,545 179,747 184,093 174,739
112,925 108,488

0
Jun

2003

Sep

Dec

Mar

2004

Jun

Sep

Dec

Mar

2005

Jun

Sep

Dec

Mar

Jun

2006
Note: Settlement day base<18>2) Financial Revenue

Margin Trading Comparison with Matsui Securities
E*TRADE's turnover share in margin trading is increasing further.
On a contract day base, E*TRADE outstripped Matsui in the number ofoutstanding margin open interest contracts at the end of June 2006.
Brokerage turnover share in individual
margin trading

800,000

Margin open interest comparison with
Matsui Securities

700,000

E*TRADE
Matsui Securities(Million yen)(Three months from 2006/4 to 2006/6)

E*TRADE: 32.2%

600,000

523,600
520,460

500,000

Others:55.3%

400,000
300,000

Matsui Securities
12.5%

200,000
100,000

Source: Tokyo Stock Exchange statistical data, JASDAQ statistical
data, and public documents from each company's website.
Note: Brokerage turnover in individual margin trading is totaled fromthree exchanges (sections one and two) and JASDAQ.

0

Mar

2005

Jun

Sep

Dec

Mar

2006

Jun

Source: Public documents from each company's website.
Note: Figures for Matsui Securities and E*TRADE are recorded from<19>aJune period contract base.

2) Financial Revenue

Expanding Revenues from Stock Loan Business
The stock loan business is a new revenue source that will expand further in the future.
(Million yen) Stock loan balance at the end of each month
53,79655,00051,35150,000(Million yen)

Revenue trend from stock loan business

300

280

250

45,000209

40,000200

35,00030,000150
25,000136

22,60520,000100

15,00010,000
5,000

50

25

4,282

8

2,169

0

0

Jun

2005

Sep

Dec

Mar

2006

Jun

1Q
FY 2005

2Q

Note: Calculated using the market price at the end of each month.

3Q

4Q

1Q
FY 2006 <20>

Performance Highlights
3) Consolidated Commissions from Underwriting, Public Subscriptions, andSecondary Offerings(Million yen)

365

400
350
300

298
22%
increase

250
200
150
100
50
0
1Q FY 2005

1Q FY 2006

(2005/4 to 2005/6)(2006/4 to 2006/6)<21>3) Underwriting and Other Commissions

IPO Underwriting Performance
E*TRADE SECURITIESIPO stock underwriting performance

IPO underwriting ranking(2006/4 to 2006/6)(Underwritings)

100

94
The
current
quarter
exceeds the number of
IPOs for the same period
in the previous year.

90
80

Top among all securities firms

87

Rank

Name

(Underwritings)

Participation
ratio (%)

70
60
50

38

40

23

20
10

E*TRADE SECURITIES

34 companies

69.4%

２

Mitsubishi UFJ Securities

32 companies

65.3%

３

Shinko Securities

26 companies

53.1%

４

Monex Securities

25 companies

51.0%

1Q

５

Daiwa Shoken SMBC

23 companies

46.9%

34

６

Nomura Securities

22 companies

44.9%

７

Nikko City Group

21 companies

42.9%

42

38

30

１

1Q

26

8

0
FY
1999

FY
2000

FY
2001

FY
2002

FY
2003

FY
2004

FY
2005

FY
2006

Note: Figures do not include listing date base, agency transactions,and real estate investment trusts.

Note: The data was collected as much as possible from public
documents by E*TRADE. Data was collected from 2006/4 until 2006/6
for domestic underwriting of 49 companies (listing date base)undergoing an IPO, not including secondary offerings.

<22>3) Underwriting and Other Commissions

IPO Underwriting Performance
Four main online securities companies
Underwriting performance for 1Q FY 2006

(Underwritings)
40

Four main online securities companies
Underwriting comparison(Underwritings)
400

364
35

34

350

30

300

282

25
25

250

20

200

208

15

174

150

12

10

100

6
5

3

0

50

3
0

E*TRADE

Monex

MatsuiRakutenKabu.com

E*TRADE

Monex

MatsuiRakutenKabu.com

Source: Public documents at each company.
Note: Figure includes over allotment. Listing date base. Dealer agency notincluded

Note: The data is from the first day of online trading for each company
to June 30, 2007 (Listing date base). Figures do not include agency<23>
transactions and real estate investment trusts.

3) Underwriting and Other Commissions

Off-Floor Distribution Performance (Reference)
Performance on TSE, OSE, and JASDAQ
1Q FY 2006 (2006/4 to 2006/6)

Companies with off-floor distributions
handled by E*TRADE(1Q FY 2006)

Companies handled: 22 (1Q FY 2005: 40)
Distribution total: 8.3 billion yen (1Q FY 2005: 25.2 billion yen)Dateimplemented

Company name

Stock exchange

2005/5/12

GAGA
Communications

ＨＣ

2005/6/29

GEO

Tokyo Section 1

E*TRADE application total: 8.9 billion yen (1Q FY 2005: 42.4 billion yen)Handling total: 2 billion yen (1Q FY 2005: 4 billion yen)
E*TRADE handling share: 24.9% (1Q FY 2005: 15.9%)

Note: Earnings from off-floor distributions include
commissions.

Due to market conditions, the number ofcompanies
with
off-floor
distributions
decreased. However, E*TRADE's handlingshare steadily increased.

E*TRADE handling share trend

15.9%

1Q FY 2005
(2005/4 to 2005/6)

24.9%

1Q FY 2006
(2006/4 to 2006/6)<24>

Performance Highlights

4) Consolidated Trading Profits and Other Earnings
Other underwriting commissions, trading profits, and operating revenues(Million yen)

1,800

1,558

1,600
1,400
1,200
1,000

938

66%
increase

800
600
400
200
0
1Q FY 2005

1Q FY 2006

(2005/4 to 2005/6)(2006/4 to 2006/6)<25>4) Trading Profits and Other Earnings

Bond and Other Product Performance
Bond sales (Public and foreign)(Unit: Million yen)

For the current quarter, the sale of government
bonds for individuals recorded the the best
performance ever. In spite of market concerns,
sales were bullish.

18,00016,28416,00012,325

7,044

18
6,322

12,00010,000

8,583

7,101
6,070

Two times
greater thansame period in
previous year

6,199
9,240

4,000

41

In June 2006, E*TRADE added 23 commission free
investment trusts, which is the highest level in theindustry.

Private investment trust balance of
E*TRADE SECURITIES

9,563

8,000
6,000

Expand no-load fund

16,651

Foreign bondYen bond

14,000Support long-term asset formation ofindividual investors.

(1Q FY 2006 is taken as a base index of 100)

395

400

405

10,329
300

297

5,223

2,000

2,383

200

3,493

0
Apr to Jun

2005

185
100

Jul to Sep

Oct to Dec

Jan to Mar

2006

Apr to Jun

Note: Earnings from government bonds for individuals includes commissions fromunderwriting and secondary offering.

100
1Q

FY 2005

2Q

3Q

4Q

1Q

FY 2006<26>

4) Consolidated Trading Profits and Other Earnings

Expansion of Foreign Exchange Guarantee Deposit Trading
Growing as a pillar of earning power, we expect it to expand further in the future.
Accounts offoreign exchange guarantee deposit trading(Accounts)
45,000(1000 yen)

Earnings offoreign exchange guarantee deposit trading

41,484454,465

40,00035,000432,109413,598

400,000

335,208

30,00025,00020,000200,000

192,049

15,00010,0005,000
0

0
4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101 112 1 2 3 4 5 6

2004

2005

2006

１Q
FY 2005

2Q

3Q

4Q

1Q
FY 2006 <27>

Performance Highlights

5) Consolidated Sales and General Management Expenses(Million yen)

7,717

8,000
7,000
6,000
5,000

2,382
5,329

1,554

4,000
3,000
2,000
1,000
0

656
861
305

Trading expenses
Exchange association, advertising,other expenses

Personnel expenses

726
1,290
343

Real estate expenses
System lease, other expenses

Depreciation expenses
Software depreciation, otherexpenses

Office expenses

1,915

1,368
69
513

137
922

1Q FY 2005

1Q FY 2006

(2005/4 to 2005/6)(2006/4 to 2006/6)

System backoffice, other expenses

Taxes and public charges
Addition to loan loss reserves
and other expenses
Service information,other expenses<28>5) Sales and General Management Expenses
Operating Revenue, Contracts, Sales Expenses, and General Management Expenses
As trading increases, the cost per trade declines significantly.
(Index)160

Comparison index of operating revenue,
sales expenses, and management expenses

153
140

Operatingrevenue

Variable cost per contract

(Yen)
350

300

(Variable cost = Trade expenses + Office expenses)

295

145

243

250

256

200

120

Sales andmanagement
expenses

175

150

100

100
50

1Q FY 2005
(2005/4 to 2005/6)

1Q FY 2006
(2006/4 to 2006/6)

80

0

1Q FY 2005
Note: Calculated using consolidated results.

April
2006

May

June

Note: Calculated using non-consolidated results<29>6) E*TRADE Korea

E*TRADE Korea Outlook
The relative importance of the online stock market and individual stock traders
declined in the first quarter of FY 2006. Regardless of this trend, E*TRADE Korea's
market share increased.
Outlook (Current from end of 2006/6)
Stock capitalization: 56 billion Korean won

Main strengths• The lowest online commission rate in Korea (Stock: 0.024%)

Investment ratio: 87%• Online investment consulting (video, audio, chat)Accounts: 102,325
Brokerage turnover: 12.4948 trillion won(1Q FY 2006)• There is good potential to acquire new accounts
through greater cooperation with banks and portal
services.

Main trading products• Stocks• Application for publicly offered stocks• Futures• Options• Stock warrants• Japanese stock trading• Investment trusts• Securities-secured loan

Preparing to become listed on KOSDAQ<30>

2. Lower Stock Commission Rates

2. Lower Stock Commission Rates

Maintain the Lowest Commission Rates in the Industry
From June 1, 2006, the Active Plan sets a price range of zero yen.
The commission campaign from June is striving to assure an overwhelming market share.
Spot trading
Active Plan
Regardless of the number of trades during one day,Standard Plan
the commission rate is fixed based on the amount of adaily total contract price.

Commission is charged on the price ofeach contract order.
(Including tax)

One contract price

Regular commission Campaign commission

to 200,000 yen

100 yen472 yento 50,000 yen(Including tax)
Total amount ofdaily contract priceto 100,000 yen

Regular commission Campaign commission

0 yen

to 200,000 yen
400 yen

200 yen315 yento 300,000 yen
to 100,000 yen

840 yen

750 yen

to 150,000 yen

1,050 yen

to 30 million yen
Over 30 million yen

Commission priceover 1.5 million yen
1,575 yen

0 yen

315 yento 50,000 yen

525 yen

450 yen

900 yento 100,000 yen

945 yen

800 yen

1,400 yen

to 3 million yen

2,100 yen

1,575 yen

+2,100 yen
for each additional
3 million yen;420 yenfor each additional
1 million yen<32>
Note: 6.8% of investors selected the Active Plan as of the end of June 2006.

2. Lower Stock Commission Rates

E*TRADE SECURITIES Basis Trend
Basis trend from 2006/4 to 2006/6(Basis)6.0
Contracts from June 1, 2006, thestart of the lower commission
campaign

5.0
4.4

4.4

4.0
3.1

3.0

2.0
2006

April

May

June
(Brokerage commission / Brokerage turnover)<33>

2. Lower Stock Commission Rates

E*TRADE SECURITIES Ordinary Profit Trend (Non-Consolidated)
Ordinary profit from 2006/4 to 2006/6(Million yen)

3,500

Contracts from June 1, 2006, thestart of the lower commission
campaign

2,867

3,000

2,534

2,500
2,000
1,570 Note

1,500
1,000
500
0
2006

April

May

June

Note: Sales and management expenses for June 2006 include loan loss reserveof 171 million yen and donation to SBI Children's Hope Foundation of 161 million
<34>
yen.

2. Lower Stock Commission Rates

Stock Brokerage Turnover Trend(Index)120

Stock brokerage turnover for five main online securities companies(2006/4 as a base index of 100)
E*TRADE
RakutenKabu.com
Matsui
Monex

100

86.4
82.8
78.1
76.9
74.6

80

60

2006

April

May

June
Source: Public documents from each company's website.

<35>

2. Lower Stock Commission Rates

Individual Stock Brokerage Turnover Share of Main Online Securities Companies
Individual stock brokerage turnover share
Full term FY 2005

1Q FY 2006

2006/6(One year from 2005/4 to 2006/3)(Three months from 2006/4 to 2006/6)(One month)

Others42.6％

Five main
onlinesecurities
companies

Others
37.2％

57.4％

Five main
Onlinesecurities
companies

Others24.8％

Five main
Onlinesecurities
companies

75.2％

62.8％

E*TRADE

23.1％

E*TRADE

27.3％

E*TRADE

33.5％

Rakuten
Securities

11.1

Rakuten
Securities

13.2

Rakuten
Securities

15.9

Matsui Securities

10.0

Matsui Securities

9.5

Matsui Securities

11.0

Monex

8.0

Monex

6.8

Monex

8.1

Kabu.com

5.2

Kabu.com

6.0

Kabu.com

6.7

Source: Tokyo Stock Exchange statistical data, JASDAQ statistical data, and public documents from eachcompany's website.
Note: Individual brokerage turnover is totaled from three exchanges (sections one and two) and JASDAQ.
<36>
Kabu.com Securities merged with MeNet Securities in January 2006.

2. Lower Stock Commission Rates

Securities Receipt and Delivery (Reference)Monthly volume of receipt and delivery(100 million yen)350

3 major companies
Others

300

274

269

250

100

200

Receipt

77

200
59

150

56

100

9

168

50

196
140

0

April

May

Delivery

5
17

2
16

46
2006

19

23
June

On a monthly base, receipts exceeded deliveries by a wide margin. In
particular, in June receipts outnumbered deliveries by a wide margin due toNote: Calculated using the current value on the receipt/delivery day.
lower commission rates.
<37>

2. Lower Stock Commission Rates

New Accounts and Receipt/Delivery Comparison with Joinvest Securities
New accounts from 2006/5 to 2006/6

Daily stock brokerage turnover for 2006/6(Million yen)

400,000(Accounts)

60,00050,000

Joinvest
E*TRADE

57,96040,156350,000

Joinvest
E*TRADE

325,955

300,000
250,000

40,000200,000

30,000150,000

20,000100,000

10,00050,000002006/5 to 2006/6
Source: Public documents from each company's website.
Note: Joinvest Securities started accepting new accounts on May 14.

2,496
2006/6
Source: Public documents from each company's website.

<38>

2. Lower Stock Commission Rates

Big cut in commission rates in 2001/2
E*TRADE brokerage turnover after big cut in commission rates in 2001/2(2001/2 to 2004/3)(Brokerage turnover, 1 million yen)

3,000,000(Nikkei average, yen)

14,500Big commission rate cut
implemented in 2001/2

13,5002,500,000

12,500

Nikkei average
E*TRADE brokerage turnover

2,000,000

11,5001,500,000
10,5001,000,000

9,500

500,000

8,500

0

7,500
Feb

2001

May

Aug

Nov

Feb

2002

May

Aug

Nov

Feb

2003

May

Aug

Nov

Feb

2004

<39>

2. Lower Stock Commission Rates

E*TRADE Account Trend
Average monthly account acquisition and Nikkei average
FY 2006(Accounts)

FY 2005

40,000(average from April to June)

30,317(Nikkei average,
index)(Accounts)(average from April to June)

40,00030,461

110

34,53033,42531,34929,821

30,000100
97

29,783110

30,000

100

99

91

99

23,43092
90

94

20,000(Nikkei average,
index)

20,00090

10,00010,00070

0702005 April

May

June

0

2006 April

May

June

<40>
Note: The Nikkei average uses the last price at the end of March as a base index of 100 . Calculated by E*TRADE.

3. E*TRADE SECURITIES Business ModelE*TRADE SECURITIES Business ModelManagement Philosophy and Basic Policy
Management
Philosophy

Total "customer-centric" approach

Offer the lowest commission rate system in the industry and the highest
quality service.

Significantly reducethe cost of investment.

Provide abundant
high-quality investment
information.

Offer attractive
investment products.

Provide a safe andstable trading
environment.

Capture the largest market sharein the industry.
Customer accounts

Stock brokerage turnover

Client Assets<42>

3. E*TRADE SECURITIES Business Model

E*TRADE Management Policy
E*TRADE has a customer base that boasts
an overwhelming market share.
Accounts: 1,259,163 (as of June 30, 2006)

Retail business

IPO
IPOstockstock
Subscriptions
Subscriptions
Off-floor
Off-floor
distribution
distributionIR,IR,investment
investment
information
informationIR
IRsupport
support
Corporate
CorporatefinancefinanceExpandmarketsharethrough new services andStocksan attractive commission
StocksInvestment
Investmenttrusts
trusts system.
Broaden
the
Bonds
Bonds
customerbase
evenfurther.
FX
FX
Futures
FuturesOPOP
CoveredCoveredwarrant
warrant

Corporate business

Securitized
Securitized
products
products

Make use of the retail
sales
power
to
broadencorporateservicessuchasunderwriting and IR
support.

M&A
M&A
MBO
MBO

Underwriting
Underwriting(Stocks,(Stocks,bonds)
bonds)

Asset
Assetliquidity
liquidity<43>

3. E*TRADE SECURITIES Business Model

Establish Stable Earnings Structure
E*TRADE is building an earnings structure not influenced by market conditions.
Operating revenue comparison of listed securities Profit from trading
Commission fromcompanies (FY 2005)
underwriting/secondary offering
Brokerage commission Financial revenue

Commission fromsubscription/secondary offering

Others(%)
E*TRADE

66.7

Matsui

68.7

MBH

69.6

0.3 5.4
−0.4

26.0

17.2

74.6

Kabu.com

3.3 4.4 3.6

22.0

0.2
4.0

20.8

9.0

1.0 3.7−0.1(Non-consolidated)
Nomura

26.0

11.7

16.7

33.6

12.0

Note: Data was compiled by E*TRADE using material on each company's website. E*TRADE, Matsui, and MBH use consolidated data.

<44>

4. Main Business Tasks This Quarter4. Main Business Tasks This Quarter

Main Tasks for 1Q FY 2006
Month

A bullet mark ("•") indicates a service release and an yellow asterisk("*") indicates a business decision/alliance.

Task content

April* Cooperated with Sumitomo Trust Bank in the market promotion business.

May• The system is enhanced to handle 1.75 million accounts.
• Bond lottery and gift certificate service (Informal name: Happy Choice) was
launched.
* Cooperate with Kanto Tsukuba Bank in the market promotion business.

June• Lower the commission rate on stocks traded over the Internet.
(Active Plan lowest commission rate: 0 yen)
• The lower stock commission rate campaign was launched (until August 31). Whenstarting a margin trading account, the open interest limit was raised (from 50 to 100
million yen).
• Cover all market making issues.
* Cooperated with Chuo Mitsui Trust Bank in the market promotion business.

July• The system is enhanced to handle 2 million accounts.
• The i-appli trading tool “HYPER MOBILE Lite” is launched. It is compatible with
FOMA 700i series and newer models.
* Underwrote the allocation of shares to a third party for United World Securities.
* Agreed with Rakuten Securities and SBI Securities to jointly p repare for the launchof evening trading.

Source: Compiled by E*TRADE from public documents such as statistical data of Tokyo Stock Exchange and JASDAQ.
Note: Individual brokerage turnover is totaled from three exchanges (sections one and two) and JASDAQ.

Indicator trend
Total securities
accounts top 1.2
millionIndividual stock
brokerage turnovershare exceeded 30%
on a monthly basis.

<46>

4. Main Business Tasks This Quarter

Open Interest Limit Raised When Starting Margin Trading
To protect investors until now, a limit has been set on open interest.

Until now
up to 50 million yen

Spot and margin ratio of E*TRADE
brokerage turnover

100%
80%

100 million yen

60%

As margin trading increases,
E*TRADE is working toenhance customer
convenience.

40%

Implemented from2006/6/1

20%

56.3 54.6 54.4 54.2 57.4

MarginSpot

43.7 45.4 45.6 45.8 42.6

0%
1Q

2Q

FY 2005

3Q

4Q

1Q
FY 2006

To raise the open interest limit to above 100 million yen, the same rigorous
inspection is implemented.
<47>

4. Main Business Tasks This Quarter

Reinforce Online Securities Trading System
As trading volume expands sharply, strengthen the system even further.
From 2005/12, the system was strengthen to handle 1.5 million accounts.
From 2006/5 the system was strengthen to handle 1.75 million accounts.
From 2006/7 the system was further strengthened to handle 2 million accounts.
Total securities accounts and system capacity(Accounts)
2,000,000
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000

2006/5
1.75-million account capacity
2005/121.5-million
2004/12account capacity
1-million account capacity

1,259,163

777,455

800,000

592,743

600,000
400,000

1,167,778

2006/72-million account capacity

452,493

200,000
Sep

2004

Mar

2005

Sep

Mar

2006

Jun

Sep

<48>

4. Future Business Development

5. Future Business Development
1) Corporate Business Promotion• Strengthen investment banking operations.

2) Other Future Developments• Maintain the lowest commission rates in the industry.
• Launch E*TRADE Elementary.
• Start preparations for the launch of the evening trading market.
• Enhance the HYPER E*TRADE service.

<50>1) Corporate Business Promotion

1) Promote Corporate Business

Strengthen Investment Banking Operations
Strengthen earnings power by making thebest use of the E*TRADE baseHigh IPO underwriting participation rate-> 1Q FY 2006: 69.4%

Integrate underwriting operations with SBI
Securities-> Blend Internet and brick & mortar sales power

SBI Group synergies-> Change the trade name to SBI E*TRADE SECURITIESSecondaryfinance

Capture off-floor
distribution

M&A(main mediation plan)

Build a system that responds to diverse customer needs.

<52>2) Other Future Developments2) Other Future Developments

Maintain the Lowest Commission Rates in the Industry
Continue to pursue low commission rates, which are already thelowest in the industry.

E*TRADE SECURITIES commission strategy
Provide a commission system with the lowest rates in the industry.

Reduce the trading cost for individual investors.

Maintain an overwhelming market share in the online securities industry.
Contracts from June 1, 2006
The Active Plan implemented big reductions and E*TRADE set a zero yen price range for the firsttime.
Contracts from 2006/6/1 to 2006/8/31
The stock commission reduction campaign helps E*TRADE maintain the lowest commission rate system in
the industry.
In the future, while looking at the actions of other securities companies, E*TRADE will either
continue the campaign or review the regular commission system.

<54>2) Other Future Developments

Launch E*TRADE Elementary
SBI is researching whether to launch a special website for beginner stock investors
that will cover everything from stock information to trading.
Current main website

Beginner website"E*TRADE
Elementary"
websiteDevelop services based on investment
experience of individual investors on
separate websites.
Enhancement examples

Investment experience ofcustomers who open an
account with E*TRADE(2006/4 to 2006/6)
Have
experience
36.6%
Have noexperience
63.4%• Simple screen transitions• Easy-to-navigate website• Expand content for novices• Create content with high entertainment value• Use the main website as a backup site

Additional support to help
individual investors participate
in their preferred securities
market<55>

2) Other Future Developments

Prepare to Launch an Evening Trading Market
E*TRADE made a joint preparation agreement with Rakuten Securities and SBI Securities.
Provide individual investors with an attractive investment environment opportunity.

The launch of evening trading by the three companies will create a new active trading environment.
Evening trading market scenario

Connection

Connection

Evening Trading Market
System managementcompany(Established jointly by threecompanies)

Connection

A joint preparation team has been set up to arrange the launch of evening trading.
While researching the market and services, the preparation team is taking account of various conditions.
The evening trading launch is based on the approval of the Financial Service Agency<56>2) Other Future Developments

Enhance HYPER E*TRADE Service
Provide a more convenient tool by enhancing the transaction and information windows.
With the end of the POWER E*TRADE 2 service, broaden the scope ofthe HYPER tool so that diverse classes of individual investors can use it.

Hyper E*TRADE Ver. 2.0
ReputableorderingfeatureEnhanced
information/orderingfeatures
Substantial investment
information

Note: Current HYPER E*TRADE window

Contracts implement
using HYPER E*TRADE
（％）
30
28
26
24
22
20
18
16
14
12
10

29.2

23.1
15.5

11.7
1Q

2Q

FY 2005

Planned for2006/1217.2• HYPER E*TRADE Version 2.0 release• Lower the conditions for free use.

3Q

4Q

1Q

FY 2006<57>

6. Changing the Trade Name

6. Changing the Trade Name

The Purpose of Changing the Trade Name
2006/7/1
E*TRADE is changing its trade name to SBI E*TRADE SECURITIESThe SBI Group
Continue to develop into an innovative and advanced
financial group.
Towards becoming SBI E*TRADE SECURITIES Co., Ltd.
• The purpose of the name change is to use brand value to enhance a sense ofunity as a group.
• Pursue synergies among SBI Group companies and enhance enterprise value.
• Make the best use of SBI Group synergies to promote corporate businesses.
<59>http://www.etrade.ne.jp