SBI E*TRADE SECURITIES Co., Ltd.
Financial Review
Interim Fiscal Year 2006
October 26, 2006
SBI E*TRADE SECURITIES Co., Ltd.
Stock code: 8701
The items in this document are provided by E*TRADE SECURITIES as information related to its business strategy and not as an invitation
to invest 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, Interim FY 2006
(Unit: Million yen, %)Interim FY 2005

Interim FY 2006

(2005/4 to 2005/9)(2006/4 to 2006/9)

Compared tosame period in
previous year

Operating revenue

24,09528,574+18.6

Net operating
revenue

21,984

26,792+21.9

Operating profit

10,798

12,212+13.1

Ordinary profit

10,946

12,468+13.9

Interim net profit

6,062

6,972

+15.0
<3>

Consolidated Performance Highlights, Interim FY 2006
Under harsh market conditions, E*TRADE achieves growth in income and profit
compared to the same period in the previous year.
1) Commission earnings: Up 5.2% compared to the same period in the previous year, expanding to 16.431 billion yen.
• Combined accounts: 1,311,004 (as of September 30, 2006). In 6 months, the number of accounts grew by 143,226 (23,871 accounts per month).
• Individual brokerage trading value showed a decreasing trend. But E*TRADE's share has increased further to 28.8% (as of interim FY 2006).

2) Financial revenue: Up 47.7% compared to the same period in the previous year, expanding to 8.213 billion yen.
• Based on more self-financing, the financial balance increased 86.5% compared to the same period in the previous year, expanding to 6.43 billion
yen.
• Margin trading accounts: 135,163 (as of September 30, 2006). In 6 months, the number of accounts grew by 19,552 (3,258 accounts per month).
• Due to market factors, the margin balance decreased. However, with a smaller decrease compared to other companies, E*TRADE still has the
top margin balance among all online securities companies.

3) Commissions from underwriting, public subscriptions, and secondary offerings: Up 0.7% compared to the same
period in the previous year, expanding to 828 million yen.
• From the first quarter on, E*TRADE continues to have the top IPO underwriting participation rate among securities companies.
• By handling the trading activities of an overwhelming share of the individual investors, E*TRADE has expanded its off-floor distribution share to22.8%.

4) Profit from trading and other earnings: Up 48.2% compared to the same period in the previous year, expanding to
3.1 billion yen.
• Diversified investment expanded due to market factors: The South African rand denominated bond recorded the highest sales ever on a quarterly
basis.

5) Sales and management expenses• Effective cost cutting measures contributed to a big reduction in the variable cost per contract.

6) E*TRADE Korea outlook• E*TRADE Korea achieved higher income and profit compared to the same period in the previous year.

<4>Performance Highlights

1) Consolidated Commission Earnings(Million yen)

17,00016,00016,431
15,6205.2%
increase

15,00014,00013,00012,00011,00010,000(Interim FY 2005)(Interim FY 2006)(2005/4 to 2005/9)(2006/4 to 2006/9)<5>1) Commission Earnings

Growth under Market Decline in Individual Brokerage Trading Value
Trends in Nikkei average and individual brokerage trading value(2005/1 to 2006/9)(Million yen)
Individual brokerage trading value(Yen)
18,000

Nikkei average

40,000,000

17,00016,00030,000,000

15,00014,00020,000,000
13,00012,00010,000,000

11,0000

10,000Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

2005

2006

Source: Tokyo Stock Exchange statistical data, JASDAQ statistical data, and public documents from each company's website.
Note: Individual brokerage trading value is totaled from three exchanges (sections one and two) and JASDAQ.

<6>1) Commission Earnings

Commission Rate Cuts Intensify
Commission rate reductions of main online securities companies(Interim FY 2006)

E*TRADE

June to August
Commission reduction campaign
Minimum commission rate of 100 yen (Standard Plan)
Minimum commission rate of 0 yen (Active Plan)

April
Commission rate revision
Minimum commission rate of 0 yen

Matsui

September
New commission fee schedule
launchSeptember
No commission fee on general margin
trading (Interest rate is increased)

June
Commission rate revision
Minimum commission rate of 450 yen

RakutenMay
Service launch
Minimum commission rate of 100 yen(Campaign rate)

Joinvest
April 2006

August 2006 to February 2007
Commission reduction campaign
Minimum commission rate of 70 yen
June

September
Source: Public documents from each company.
The minimum commission rate is the amount for spot trading.

<7>1) Commission Earnings

Commission Reduction Campaign from June 2006
E*TRADE implemented a commission reduction campaign
from June 1 to August 31.
Spot trading
Active Plan

Standard Plan
Commission is charged on the price of each contract order.

Regardless of the number of trades during one day, the commission
rate is fixed based on the amount of a daily total contract price.

(Including tax)

One contract price

Regular commission Campaign commission

to 200,000 yen

100 yen472 yento 500,000 yen(Including tax)
Total amountof daily contract priceto 100,000 yen

Regular commission Campaign commission

0 yen

to 200,000 yen
400 yen

200 yen315 yento 300,000 yen
to 1 million yen

840 yen

750 yen

to 1.5 million yen

1,050 yen

to 30 million yen

Contract price

1,575 yen

315 yento 500,000 yen

525 yen

450 yen

900 yento 1 million yen

945 yen

800 yen

1,400 yen

to 3 million yen

2,100 yenover 1.5 million yen

over 30 million yen

0 yen+2,100 yen
1,575 yenfor each additional
3 million yen+420 yenfor each additional
1 million yen<8>1) Commission Earnings

New Commission System from September 2006
As the campaign ended, E*TRADE introduced a new commission system
on September 1, 2006.
Spot trading

Active Plan

Standard Plan
Commission is charged on the price of each contract order.

The commission is charged at a fixed rate for the total daily contract
price regardless of how many trades are made during the day.

(Including tax)

One contract price

Regular commission New regular commission
for contract
for contracts
from September 1
up to August 31

to 100,000 yen
to 200,000 yen

472 yento 500,000 yen

to 100,000 yen

250 yento 200,000 yen

450 yen
840 yen

800 yen

to 1.5 million yen

1,050 yen

950 yenCommission price1,500 yenover 1.5 million yen

over 30 million yen

1,575 yen

Total amountof daily contract price

200 yento 1 million yen

to 30 million yen(Including tax)

1,575 yen

Regular commission New regular commission
for contracts
for contract up to
from September 1
August 31

0 yen

0 yen
250 yen315 yento 300,000 yen

315 yento 500,000 yen

525 yen

500 yento 1 million yen

945 yen

900 yento 3 million yen

2,100 yen+420 yen+2,100 yen

for eachadditional
1 million yen

for each additional
3 million yen<9>Note: 7.7% of investors selected the Active Plan as of the end of September 2006.

1) Commission Earnings

Account Comparison for Main Online Securities Companies
Accounts of five main online securities companies(Accounts)(Current from end of 2006/9)

1,400,000

Account trend of five main online
securities companies(Accounts)(2004/4 to 2006/9)

1400000

1,311,004

1300000
1200000

1,200,000

1100000
1000000

1,000,000

900000Account acquisition for theinterim FY 2006 was 1.4
times higher than Matsui
Securities and 2.1 times
higherthan
Rakuten
Securities. The gap withother securities companies
continued to widen.

E*TRADE 1,311,004

800000Monex 700,220

800,000

700000700,220

Matsui 622,319

600000622,319 621,472
600,000

Rakuten 621,472

524,191

500000Kabu.com 524,191

400000300000400,000

200000100000200,000
E*TRADE

Monex

MatsuiRakutenKabu.com

Apr
2004

Jul

Oct

1月
2005

Apr

Jul

Oct

Jan
2006

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

Apr

Jul

<10>

1) Commission Earnings

E*TRADE Account Trend
Average monthly account acquisition(Accounts)

1,400,000

Interim FY 2006
(6-month average)
23,871

FY 2006 (12-month average): 47,919

1,300,000
1,200,000

1,259,163

1,311,004

1,167,778

1,100,000
1,000,000
900,000
800,000

FY 2004(12-month average)
20,066500,000

777,455
683,696700,000
600,000

934,674

FY 2003592,743(12-month average)

8,163

452,493

400,000

351,950
290,558
300,000 253,988

200,000
100,000

Mar Sep Mar Sep Mar

FY 2003 FY 2004 FY 2005

Jun

Sep

Dec

Mar
FY 2006

Jun

Sep

<11>

1) Commission Earnings

Trends in Nikkei Average and E*TRADE Account Acquisition
A drop in the Nikkei average had an impact on the acquisition of new accounts.
Monthly account acquisition and Nikkei average(New accounts)(Yen)(2006/1 to 2006/9)

100,000

17,500Monthly account acquisition
Nikkei average

17,00080,00016,50060,00016,00040,00015,50020,00015,000014,500
Jan

2006

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep
<12>

1) Commission Earnings

Brokerage Trading Value of Main Online Securities Companies
Daily average turnover of five main online securities companies(Million yen)

(2004/1 to 2006/9)
Daily average turnover for 2006/9(Unit: Million yen)

500,000

400,000

E*TRADE 297,245
300,000

200,000
Rakuten 138,196

100,000

Matsui 94,090
Kabu.com 57,376
Monex 56,622

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 Jul Aug Sep

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.

<13>

1) Commission Earnings

Individual Brokerage Trading Value Share of Main Online Securities
Individual brokerage trading value share
Interim FY 2005
(2005/4 to 2005/9)

Interim FY 2004
(2004/4 to 2004/9)

Others41.0%

Five main
onlinesecurities
companies
59.0%

Others41.7%

Interim FY 2006
(2006/4 to 2006/9)

Five main
onlinesecurities
companies
58.3%

Others35.4%

Five main
onlinesecurities
companies
64.6%

E*TRADE

20.2%

E*TRADE

23.2%

E*TRADE

28.8%

Matsui Securities

14.0

Rakuten Securities

10.9

Rakuten Securities

13.7

Rakuten Securities

11.0

Matsui Securities

10.7

Matsui Securities

9.5

Monex

8.6

Monex

8.5

Monex

6.6

Kabu.com

5.3

Kabu.com

5.1

Kabu.com

6.0

Source: Tokyo Stock Exchange statistical data, JASDAQ statistical data, and public documents from each company's website.
Note: Individual brokerage trading value is totaled from three exchanges (sections one and two) and JASDAQ. Monex Securities andNikko Beans are totaled as Monex. Kabu.com Securities merged with MeNet Securities in January 2006.

<14>1) Commission Earnings

Basis Comparison for Main Online Securities Companies
Basis comparison among 5 main online
securities companies(Basis)14.0

Reference: (Brokerage commission / Brokerage turnover)

12.3

Interim FY 2006
Interim FY 2005

12.0

11.3

10.4
10.0

8.4

10.5

8.9

8.0
6.0
4.0

5.6

5.5
3.5

4.8

2.0
0.0
E*TRADE

Kabu.com

MBH

Matsui

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

Rakuten<15>

1) Commission Earnings

Client Asset Trend (Reference)(100 million yen)
40,000Compared toprevious year
+29.2%+865.3 billion yen

38,284End of 2005/9
End of 2006/9

35,00030,00029,631Compared toprevious year +14.1%+247.4 billion yen

25,00020,037
17,56320,000Compared toprevious year +11.3%+170.9 billion yen

16,87615,16615,000Compared toprevious year
+35.0%+329.8 billion yen

12,713
9,415

10,000Compared toprevious year
+62.6%+443.2 billion yen

11,510
7,078

5,000

0

E*TRADE

Monex

Matsui

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

RakutenKabu.com<16>

1) Commission Earnings

Expansion of Trading in Futures and Options
Trading in futures and options is a pillar of earning power and growing
rapidly. We expect further expansion in the future.
(Accounts)

20000

Futures and options accounts
During the current quarter, accounts
increased rapidly.

(1000 yen)
450,000

Futures and options commissions

17,417385,916
367,998

400,000
350,000

15000

302,436

300,000

279,472

250,000

10000

200,000

140,450

150,000

106,669

5000
100,000
50,0000

0
4 5 6 7 8 9 1011121 2 3 4 5 6 7 8 9 1011121 2 3 4 5 6 7 8 9

2004

2005

2006

1Q
FY 2005

2Q

3Q

4Q

1Q
FY 2006

2Q<17>

Performance Highlights

2) Consolidated Financial Revenue(Million yen)

10,000Financial revenue
Financial balance (Revenue - Expenses)

8,000
6,000
4,000

8,213
Financial
revenue
47.7% Up

5,559
3,448

6,430
Financialbalance
86.5% Up

2,000
0Interim FY 2005
(2005/4 to 2005/9)

Interim FY 2006
(2006/4 to 2006/9)<18>2) Financial Revenue

Margin Trading Account Comparison for Main Online Securities Companies(Margin accounts)

140,000

Margin trading accounts of five main
online securities companies

135,163

Margin Account Comparison
with Matsui Securities(Margin accounts)
150,000(Current from end of 2006/9)(2004/3 to 2006/9)

E*TRADE 135,163

120,000

125,000

E*TRADE's share of overall
accounts at the end of
September was 10.3% (13.3%
for Matsui). We expect further
expansion in the future.

100,000
100,000

83,02480,000

Matsui 83,024

66,31975,00060,00048,61642,37040,00050,00020,000

MatsuiRakutenKabu.com

Monex

2004

No
v
Ja
n
M
ar
M
ay
Ju
l
Se
p

E*TRADE

No
v
Ja
n
M
ar
M
ay
Ju
l
Se
p

0

M
ar
M
ay
Ju
l
Se
p

25,000

2005

2006

Source: Public documents from each company's website.

<19>2) Financial Revenue

Margin Open Interest Trend(Million yen)Margin open interest

600,000

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

93,512 83,237

General (unlimited) margin trading

500,000

570,686
519,033
492,093

69,925

System margin trading

64,271
387,891

400,000
321,52967,089307,869

300,000

55,881 65,190
487,449
474,475
449,108
427,821

213,856
210,686

203,499

200,000

164,545
112,925

100,000

78,53278,532

23,751 29,762 35,946

320,801
251,987256,339

108,488

164,545179,747184,093174,739
112,925108,488

0
Jun
2003

Sep

Dec

Mar
2004

Jun

Sep

Dec

Mar
2005

Jun

Sep

Dec

Mar

Jun

Sep

2006
Note: Settlement day base<20>2) Financial Revenue

Margin Trading Comparison with Matsui Securities
The share of individual margin trading value increased by 5.1% o ver the same period in the previous term to 33.9%.
On a contract day base, E*TRADE rose above Matsui Securities at the end of June 2006 and continued to widen the gap.

Share of individual margin trading value(Six months from 2006/4 to 2006/9)

Margin open interest comparison with
Matsui Securities(100 million yen)
8,000
E*TRADE SECURITIESMatsui Securities

7,000

E*TRADE
SECURITIES
33.9%
Others 54.0%

6,000
4,859

5,000

4,473

(28.8% for same periodof previous year)

4,000
3,000

Matsui Securities
12.1%(15.7% for same periodof previous year)

2,000
1,000

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

0
Mar

Jun

Sep

Dec

Mar

Jun

Sep

2005
2006
Source: Public documents from each company's website.
Figures are on a contract day base.

<21>2) Financial Revenue

Expanding Financial Revenue over Expenses
Cutting financial expenses through diversifying channels to raise funds
Diversify fund sources for
margin trading lending• Borrowing from securities financeinstitutions• Issuing straight bonds (2006/3)• Organizing syndicate loans• Increasing capital by issuing newshares (2005/12)• Raising funds through call market• Strengthening cash management(improving fund management)(Million yen)

9,000
8,000

Consolidated financial revenue
and financial expenses
Financial revenue

7,000
6,000

8,213

Financial expenses

5,559

47.7%
increase

5,000
4,000
3,000
2,000

2,111

15.6%
decrease

1,782

1,000

Expand self-financing

0Interim FY 2005

Interim FY 2006

Make use of lending stock operations(New revenue source)
Expand self-financing operations in the future and diversify revenue sources.

<22>2) Financial Revenue

Expanding Revenues from Lending Stock Business
Expand this stable revenue source further in the future.
(Million yen)

55,000Lending stock balance at the end of each month
54,55453,79651,351

Revenue trend from lending stock business(Million yen)

300

280

50,000249

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

Jun

Sep

2006
Note: Calculated using the market price at the end of each month.

1Q
FY 2005

2Q

3Q

4Q

1Q
FY 2006

2Q<23>

Performance Highlights

3) Consolidated Commissions from Underwriting, Public Subscriptions,and Secondary Offerings(Million yen)

1,000

822
800

0.7%
increase

828

600
400
200
0
Interim FY 2005
(2005/4 to 2005/9)

Interim FY 2006
(2006/4 to 2006/9)<24>3) Underwriting and Other Commissions

IPO Underwriting Performance
E*TRADE SECURITIESIPO underwriting ranking

IPO stock underwriting performance(2006/4 to 2006/9)(Underwritings)

94

100

Top among all securities firms

87

90
80

Ra
nk

Name

(Underwritings)

Participation
ratio (%)

70

1

E*TRADE SECURITIES

55 companies

66.3%

60

2

Mitsubishi UFJ Securities

54 companies

65.1%

50

3

Monex Securities

44 companies

53.0%

4

Shinko Securities

43 companies

51.8%

5

Nomura Securities

37 companies

44.6%

5

Daiwa Shoken SMBC

37 companies

44.6%

5

Nikko City Group37 companies

44.6%

38

40

42

38

30

InterimInterim

23

50

20
10

55

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 transaction,and real estate investment trust.

Note: The data was collected as much as possible from public
documents by E*TRADE. Data was collected from 2006/4 until 2006/9
for domestic underwriting of 83 companies (listing date base)undergoing an IPO, not including secondary offerings.

<25>3) Underwriting and Other Commissions

IPO Underwriting Performance
Four main online securities companies(Underwritings)

Underwriting performance for interim FY 2006

60

Four main online securities companies(Underwritings)
450

Underwriting comparison

55
400

385

50
350

44
40

300

301

250

213

30
200

18

20

11

180

150

100

10
50
0

0
E*TRADE

Monex

MatsuiRakutenNote: Figures include over allotment. Listing date base. Dealer agency
not included.

E*TRADE
Monex
MatsuiRakutenSource: Public documents at each company. The data is from the firstday of online trading for each company to September 30, 2007 (Listingdate base). Figures do not include agency transactions and real estate<26>
investment trusts.

3) Underwriting and Other Commissions

IPO Underwriting Performance
Four main online securities companies(10 million yen)

Underwriting amount for interim FY 2006

600

(Public offering price X Number of underwriting shares)

508
500
400
300
200

162

138

100

18
0
E*TRADE

Monex

MatsuiRakutenSource: Public documents at each company.
Note: Figures do not include agency transactions and real estate investment trusts. Figures include overallotment. Dealer agency not included. Until 2007/9/30 (Listing date base).

<27>3) Underwriting and Other Commissions

Off-Floor Distribution Performance (Reference)
Performance on TSE, OSE, and JASDAQ
Interim FY 2006 (2006/4 to 2006/9)
Companies handled: 42 (Interim FY 2006: 93)
Distribution total: 15.3 billion yen (Interim FY 2006: 44.2 billion
yen)
E*TRADE application total: 15.8 billion yen (Interim FY 2006: 87.0
billion yen)Handling total: 3.4 billion yen(Interim FY 2005: 8.3 billion yen)Companies with off-floor
distributions handled by E*TRADE
Interim FY 2006
Date
implemented

Company name

Stock exchange

2006/5/12

GAGA Communications

ＨＣ

2006/6/29

GEO

Tokyo Section 1

2006/8/ １

Met’s Corporation

Tokyo Mothers

2006/8/23

Eighting Co., Ltd.

Tokyo Mothers

E*TRADE handling share: 22.8% (Interim FY 2006: 18.8%)
Note: Earnings from off-floor distributions include commissions.

E*TRADE handling share trend
18.8%

Interim FY 2005
(2005/4 to 2005/9)

22.8%

Interim FY 2006
(2006/4 to 2006/9)<28>

Performance Highlights

4) Consolidated Trading Profits and Other Earnings(Million yen)

Other underwriting commissions, trading profits, and operating revenues

3,500

3,100

3,000
2,500

2,092

48.2%
increase

2,000
1,500
1,000
500
0
Interim FY 2005
(2005/4 to 2005/9)

Interim FY 2006
(2006/4 to 2006/9)<29>4) Trading Profits and Other Earnings

Bond and Other Product Performance
Bond sales (Public and foreign)
Government bonds and foreign bonds for individuals
performed well partially due to the coupon present(Unit: Million yen) campaign. South African rand denominated bondrecorded the highest sales ever on a quarterly basis.

20,00018,08418,00016,000Foreign bonds

16,284

16,651

Yen-denominated bonds

14,00012,325

7,044

6,322

10,0001.9 times greaterthan the same
period in theprevious year

7,101
8,000
6,000

Domestic stocks

Foreign bonds

Flagging markets

Favorable rate of interest,high ranking, monthly
interest payments

Investment
diversity

6,070
9,240

4,000
2,000

With domestic stock markets flagging, individual
investors will begin to diversify their investments into
other products as a risk hedge.

8,744

12,0009,563South African rand-based bond records
highest sales ever (Quarterly basis)

10,329

9,339

5,223

Individual investors

3,493

0
Jul to Sep
2005

Oct to Dec

Jan to Mar
2006

Apr to Jun

Jul to Sep

Note: Earnings from government bonds for individuals includes commissions from underwriting
and secondary offering. Figures include agency transactions.

By offering a wide variety of financial products,
each investor will be able to select the rightproduct for his needs.
<30>4) Trading Profits and Other Earnings

Expansion of FX Margin Trading
Becoming more important as a revenue source, depending on the market,
we expect FX margin trading to contribute more to earnings in the future.
Accounts of FX margin trading(Accounts)
45,000(1000 yen)

Earnings of FX margin trading

44,592454,465

40,000432,109413,598

35,000400,000

356,053335,208

30,00025,00020,000200,000

192,049

15,00010,0005,000
0

0
4 5 6 7 8 9 10111 2 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9

2004

2005

2006

１Q
FY 2005

2Q

3Q

4Q

1Q
FY 2006

2Q<31>

Performance Highlights

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

14,57915,000

Trading expenses

11,185

4,406

Exchange association,
advertising, other expenses

Personnel expenses

10,000

3,500

1,505

Real estate expenses
System lease, other expenses

5,000

0

1,348
1,692
620
2,872
180
972
Interim FY 2005
(2005/4 to 2005/9)

2,542
766
3,521
275
1,561
Interim FY 2006
(2006/4 to 2006/9)

Depreciation expenses
Software depreciation, other expenses

Office expenses
System back office, other expenses

Taxes and public charges
Addition to loan loss reserves
and other expenses
Service information, other expenses<32>5) Sales and General Management Expenses

Variable Cost Trend
The variable cost per contract is reaching a low level
due to cost-cutting measures.
(Yen)

350

Variable cost per contract(Variable cost = Trade expenses + Office expenses)

300
266
250

222
187

200
150
100

16.5%
decrease
15.8%
decrease500Interim FY 2005

1Q FY 2006

2Q FY 2006
Note: Calculated using non-consolidated results.

<33>

Performance Highlights

Interim FY 2006 Performance of E*Trade Korea Co., Ltd.
(Unit: Million yen, %)Interim FY 2005

Interim FY 2006

(2005/4 to 2005/9)(2006/4 to 2006/9)

Compared tosame period
in previous year

Operating revenue

1,991

2,830

+42.1

Net operating
revenue

1,933

2,666

+37.9

Operating profit

235

699

+197.3

Ordinary profit

237

706

+197.4

Interim net profit

224

521

+132.3<34>6) E*TRADE Korea

E*TRADE Korea Outlook
During the interim of FY 2006, stocks markets in Korea were on the decline. As a result, the relative
importance of both individual stock investors and online trading declined. However, E*TRADE Korea's
brokerage trading value share increased.

Outlook (Current from end of 2006/9)

Main business tasks during current interim• Stock capitalization: 56 billion Korean won• Investment ratio: 87%• Accounts: 113,227• Brokerage trading value: 23.7282 trillion won• Launched new trading tool in 2006/9.
• Made tie-ups with banks to increase the numberof accounts (Customers must make new
account application at E*TRADE service counter.
But banks introduce E*TRADE at their own
counters.)• Implemented assertive marketing activities.

(Interim FY 2006)

Main strengths• The lowest online commission rate in
Korea (Stock: 0.024%)• Online investment consulting (video,
audio, chat)

Increasing the share of individual brokerage
trading value

Preparing to become listed on KOSDAQ<35>

2. Lower Stock Commission Rates

2. Lower Stock Commission Rates
E*TRADE SECURITIES Basis Trend
Basis trend from 2Q FY 2005

(Basis)6.0

Loweredcommission
rate from 2005/7/1
Implemented
commission
ratecampaign from 2006/6/1 to 2006/8/31

5.2

Launched new rate systemupon 2006/9/1 completion ofcommission campaign

5.0
4.3

4.4
4.0

4.0

Lowered commission ratefrom 2005/10/3

3.1

3.0

2.0
2Q
FY 2005

3Q

4Q

1Q

2Q

FY 2006(Commission / Brokerage turnover) calculated every three months.

<37>

2. Lower Stock Commission Rates

E*TRADE SECURITIES Basis Trend
Basis trend for interim FY 2006

(Basis)5

Implemented commission ratecampaign from 2006/6/1 to 2006/8/31

4.4

4.4
Launched new rate system upon
2006/9/1 completion of commission
campaign

4
3.3
3.1
2.9

3

3.0

2
Apr
2006

May

Jun

Jul

Aug

Sep

(Brokerage commission / Brokerage turnover)<38>

2. Lower Stock Commission Rates

Individual Brokerage Trading Value Share of Main Online Securities
Individual brokerage trading value share
4Q FY 2005
(2006/1 to 2006/3)

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

2Q FY 2006
(2006/7 to 2006/9)

Five main
onlinesecurities
companies
59.6%

Five main
onlinesecurities
companies
62.8%

Five main
onlinesecurities
companies
66.9%

Others40.4％

Others37.2％

Others33.1％

E*TRADE

24.9％

E*TRADE

27.3％

E*TRADE

30.7％

Rakuten Securities

12.0

Rakuten Securities

13.2

Rakuten Securities

14.3

Matsui Securities

9.6

Matsui Securities

9.5

Matsui Securities

9.6

Monex

7.3

Monex

6.8

Monex

6.2

Kabu.com

5.7

Kabu.com

6.0

Kabu.com

6.1

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

<39>

2. Lower Stock Commission Rates

Share of Individual Margin Trading Value for Main Online Securities
Share of individual margin trading value
4Q FY 2005
(2006/1 to 2006/3)

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

Others29.9％

Others27.0％

Five main
onlinesecurities
companies
70.1%

2Q FY 2006
(2006/7 to 2006/9)

Others24.4％

Five main
onlinesecurities
companies
73.0%

Five main
onlinesecurities
companies
75.6%

E*TRADE

29.0％

E*TRADE

32.2％

E*TRADE

35.8％

Matsui Securities

13.8

Rakuten Securities

14.4

Rakuten Securities

15.1

Rakuten Securities

13.3

Matsui Securities

12.5

Matsui Securities

11.7

Monex

7.1

Kabu.com

7.4

Kabu.com

7.2

Kabu.com

6.9

Monex

6.6

Monex

5.8

Source: Tokyo Stock Exchange statistical data, JASDAQ statistical data, and public documents from each company's website.
Note: Individual margin trading value is totaled from three exchanges (sections one and two) and JASDAQ. Kabu.com Securities
merged with MeNet Securities in January 2006.

<40>

2. Lower Stock Commission Rates

Brokerage Trading Value of Main Online Securities Companies(Index)Brokerage trading value for five main online securities companies(2006/4 as a base index of 100)

E*TRADE
Rakuten110

Kabu.com
Matsui
Monex
Individual brokerage trading value

90

71.7

70

67.3
61.6
59.2
55.8
51.0

50
Apr
2006

May

Jun

Jul

Aug

Sep

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

<41>

3 . Main Business Tasks During
This Interim Period

3. Main Business Tasks During Interim
mark (“•”) indicates a service release and a yellow asterisk
Main Tasks for Interim FY 2007 A("*")bullet
indicates a business decision/alliance.

Month

Task content

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

May• Enhanced the system to handle 1.75 million accounts.
• Launched bond lottery and gift certificate service (Informal name: Happy Choice).
* Cooperated with Kanto Tsukuba Bank in the market promotion business.

June

July

• Lowered the commission rate on stocks traded over the Internet (Active Plan lowest rate: 0yen).
• Launched lower stock commission rate campaign (Until August 31).
• Raised the open interest limit when starting a margin trading account (From 50 to 100
million yen).
• Covered all market making issues.
* Cooperated with Chuo Mitsui Trust Bank in the market promotion business.
• Enhanced the system to handle 2.0 million accounts.
• Launched i-appli trading tool "HYPER MOBILE Lite," which is compatible with FOMA 700i
series and newer models.
* Agreed with Rakuten Securities and SBI Securities to jointly prepare for launch of evening
trading.

August• Lowered commission rate for Nikkei 225 futures trading.
* Acquired additional stock of SBI Benefit Systems Co., Ltd. and made it a subsidiary.

Sep• Implemented large rate reductions on stock commissions and regular commissions.
• Started accepting new account applications from persons under age.
• Launched "Golf Membership Market" service in cooperation with E-Golf Co., Ltd.
• Added news feature "Kabushik Shimbun Update" (10-minute delay).
* ORIX Securities and GMO Internet Securities decided to participate in preparation ofevening trading system.

Indicator trend
Total securities
accounts top 1.2 million

Individual brokerage
trading value shareexceeded 30%
on a monthly basis(See note)

Total securities
accounts
top 1.3 million(Note) Source: Tokyo Stock Exchange statistical data, JASDAQ statistical data, and public documents from each company's website.
Individual brokerage turnover in individual margin trading is totaled from three exchanges (sections one and two) and JASDAQ.

<43>

3. Main Business Tasks During Interim

HYPER MOBILE Lite
Improving the convenience of E*TRADE's mobile trading information tool
July 2006 service launch
HYPER MOBILE Lite (i-appli trading tool) is
now compatible with more mobile devices.
Information is automatically updated as
frequently as every 5 seconds.
Individual share
information

Quotations, current prices, fund information,and more

Registered issues

Up to 80 issues

Market information

Main indices and FX rates from Japan andoverseas

Trading

Domestic stocks (Spot, funds)

Account information

List of issue holdings, buying margin

Compatible devices

FOMA 700i, 701i, 702i, 900i, 901i, and 902i
(Current as of 2006/10/26)

E*TRADE is currently preparing to launch HYPER MOBILE with other mobile carriers.

<44>

3. Main Business Tasks During Interim

Big Reduction in Commission Rate for Nikkei 225 Futures Trading
Influenced by mini Nikkei 225 futures trading, the level ofattention for trading has increased.
Big reduction in commission rate
for Nikkei 225 futures
To 2006/7
1,995 yen per unit (including tax)
For day trading, reverse trade commission is 0
yen.

Futures and options accounts(Accounts)
20,000
New account acquisition
from July to September

4,562
15,000

New account acquisition
from April to June

1,687

From 2006/8
903 yen per unit (including tax)
For day trading, 0-yen commission for reverse
trading was discontinued.
The commission for two-way reverse trading is1,806 yen, which on a daily basis is a reduced rate.
Provide investors with a more convenient environment for
stock price index futures trading.

10,000

5,000

0
Apr

Note: Opening a futures or options account requires a special screening separate
from a general securities account.

May

Jun

Jul

Aug

Sep

2006
<45>

3. Main Business Tasks During Interim

SBI Benefit Systems Becomes Subsidiary
On August 31, 2006, E*TRADE held 87% of SBI Benefit
Systems shares, making the company a subsidiary.
E*TRADE expects contributions to future earnings from expanding 401K services (individual defined
contribution pension plan) and services related to corporate defined contribution pension plans. Service
expansion activities will leverage E*TRADE's extensive corporate customer base.

Trade name: SBI Benefit Systems Co., Ltd.
Stock capitalization: 1.3 billion yen
Establishment: March 29, 2001
Main business: Defined contribution pension
management, system outsourcing, humanresources, and welfare services

Introduce corporate
Contribute to earnings
customers.
(Future performance).
Dispatch executives
to companies.
Manage 401K services.
Strengthen capital
relationship.
Offer enterprise 401K
services to corporate
customers throughindependent sales network.

Through subsidiary relationship, strengthen mutual business ties and expand business even further.

<46>

4. Future Business Development

4. Future Business Development
1) Become a comprehensive online securities company• Maintain our "customer-centric principle“• Expand corporate business as a comprehensive online securities
company• Establish stable earnings structure2) Promote corporate business• Expand IPO operations• Develop multi-faceted business alliance with Sumitomo Trust &Banking3) Other future developments• Prepare launch of evening trading market• Enhance HYPER E*TRADE service• Add stop limit feature• Examine lending stock services<48>1) Become Comprehensive Online Securities Company

Management Philosophy and Basic Policy
Management Philosophy

Total "customer-centric principle"

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 share in the industry.
Customer accounts

Brokerage trading value

Client assets

Capture an overwhelming share of business, expand business opportunities, and achieve stable earnings.
<49>1) Become Comprehensive Online Securities Company

Expand corporate business as a comprehensive online securities company
Build a stable earnings structure by developing corporate businessthat leverages the retail customer base.
Overwhelming customer share: 1,311,004 accounts (Current as of 2006/9/30)
Expanding share of individual brokerage trading value: 30.7% (Current as of 2Q FY 2006)

Retail business
IPO
IPOstock,stock,
subscriptions,subscriptions,off-floor
off-floor
distribution
distribution

Stocks,Stocks,investment
investmenttrusts,
trusts,
bonds
bonds

Corporate business
IR,IR,investment
investment
information
information

Expand market share throughnew services and an attractive
commission system. Broaden
the customer base even further.

FX,
FX,futures,
futures,
options,
options,
coveredcoveredwarrant
warrant

IPO
IPO
underwriting
underwriting

Secondary
SecondaryfinancefinanceExpand corporate businessby leveraging retails sales
power and SBI Group content.

Off-floor
Off-floor
Distribution
Distribution(Main(Mainbroker)
broker)IR
IRsupport
supportSecuritized
Securitized
products
products

M&A
M&A

<50>

1) Become Comprehensive Online Securities Company

Establish Stable Earnings Structure
E*TRADE is building an earnings structure not influenced by market conditions.
Operating revenue comparison of listed securities companies (1Q FY 2006)（%）

Brokerage commission

Financial revenue

Commission from underwriting andsecondary offering
Commission from subscription andsecondary offering

Profit from trading

E*TRADE

61.7

26.0

2.3 4.5 5.5

Matsui58.2

36.4

0.2 5.3

MBH

64.5

Kabu.com

68.2

22.0

25.6

Others

−0.１

0.2
3.7 9.6
0.0
1.3 4.9(Non-consolidated)

Nomura

22.7

19.9

19.6

23.4

14.4

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

<51>2) Promote corporate business

Expand IPO Underwriting Operations
E*TRADE had the top IPO participation rate for the 1Q and interim period.
• Increasing amount and number ofunderwritings.
->Revenue source diversity• Increase distribution of stock to individual
investors.
-> Attractive investment opportunities(Index)150

Comparison of amount and number ofunderwritings(Calculated using interim FY 2005 as a base index of 100)

144

140
Underwriting
amount130(Underwritings)

120
110

Increase underwriting amount in the futureand expand operations.
Become a lead managing underwriter.

110
100

100
90

Interim FY 2005
(2005/4 to 2005/9)

Interim FY 2006
(2006/4 to 2006/9)

2nd case: Netage Group, Inc.
2006/8/30: Listing on Mothers (TSE)
3rd case: Netage Group, Inc.
2006/11/16: Listing on Hercules (OSE)
Act as a bridge for the stock issuing and distribution markets and expand these activities in the future.

<52>2) Promote corporate business

Develop Multi-Faceted Business Alliance with Sumitomo Trust & Banking
Develop the customer introduction business by leveraging E*TRADE's wide customer base.
Develop activities around planned IPOs
Securities agency operations• List of stockholders• Transfer of title• General meeting ofstockholders• Dividend calculation

Corporate customers
Early information
Introduction agreement
Joint visits

Develop activities around corporate
customers/owners
Customer introduction

Testamentary trust

Sumitomo
Sumitomo Trust
Trust&& Banking
Banking• Will preparation/advice• Will announcement/execution

Inheritance planning• Inheritance examination, inventory of property• Tax advice, apportionment of estate

Introduction fee

After forming a tie up in April 2006, E*TRADE and
Sumitomo Trust & Banking have been cooperating
on a customer introduction service as one example
of a multi-faceted business alliance.

Note 1: E*TRADE introduces customers with particular needs to Sumitomo Trust & Banking. All services are provided directly by Sumitomo Trust.
Note 2: All planned business activities are subject to approval by the Financial Service Agency.

<53>3) Other Future Developments

Prepare Launch of Evening Trading Market
Aim to launch the evening trading market next year at the earliest possible time.
Service content under examination

Image of evening trading market
Proprietary trading system (PTS)
Application for approval

Connection

Evening trading system
operator

Connection

Connection

Connection

Connection

E*TRADE plans to apply to the Financial Service Agency for PTS
approval. Each securities company that participates connects to the
trading system operator. Depending on the outcome of ongoing
examinations, E*TRADE may handle settlement of account operations.

Trading launch

February/March 2007

Time frame

20:00 to 23:50 (Plan)

Price determination
methodAuctionType of trading

Domestic stocks (Spot,general funds)

Target stocks

Issues from TSE, OSE,
Nagoya Stock Exchange,
Sapporo Stock Exchange
JASDAQ (Including market
make issues), but details are
undecided

Bid and price limit

Same as stock exchanges

All details about the launch and content of evening trading are subject toapproval by the Financial Service Agency.
<54>3) Other Future Developments

Enhance HYPER E*TRADE Service
Offer an even more convenient trading environment by enhancing
operation features and investment information.
HYPER E*TRADE was released in May 2005 as our company's main trading tool.

Planned tool enhancements
Visibility• Change font and button design

Usability• Change the stock code toolbar to always
reflect the stock under observation

Information• Expand the use of financial analysis indices• Add news from Japan Company Handbook(Toyo Keizai Inc.)• Incorporate information from POWERE*TRADE 2 (Indices, ranking information,
and FX information)(Current HYPER E*TRADE window)

Lower the conditions for free usage and promote use among even more investors.

A new version will be released in December 2006 with lower conditions for free usage.
<55>3) Other Future Developments

Add Stop Limit Feature
Enhance the execution conditions for domestic stock orders.
E*TRADE customer attributes: 57% are company employees (Current as of 2006/9/30)

Enable customers who are outside the office to easily execute orders.
During upward movement

During downward movement

Enable a trader to place a buy order at thedesired price without missing an opportunity
when a stock is rising towards a set price.

Enable a trader to avoid unexpected
losses by placing a sell order before astock passes a set price.

(Yen)

(Yen)

1,050

1,050
Set value

950

Current value

950
Set value

850

850
Current value

750

750

E*TRADE is striving to expand its customer base and enhance theconvenience of existing customers. The new service is scheduled tolaunch at the beginning of 2007.

<56>3) Other Future Developments

Examine Lending Stock Services
Offer more services to individual investors and enhance convenience.
Provide a gateway to the lending stock market for individual investors who own
want to manage their own stock holdings.
-> Through lending stock operations, it is possible to receive interest payments.

Manage the stocks that
individual investors lend out
on the lending stock market.

Lend stocks

Payinterest
toindividual investors

Individual investors

Pay interest
to E*TRADE

Institutional investors

Make efficient use of the stock held by individual investors and offer a
new source of revenue through interest payments on lending stock.

<57>

http://www.etrade.ne.jp