SHAREHOLDERS’ GUIDE 2007
Digital Garage, Inc.
(Period: For the year ended June 30, 2007)(Last Updated: December 17, 2007)

TABLE OF CONTENTS

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Contents

Last Updated

To be Updated

ProfileFinancial Highlights
Management’s Discussion and Analysis ofFinancial Condition and Results of Operations
Financial Summary
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Segment Information
Quarterly Information
Significant Accounting Policies
Stock Information
Corporate History
Corporate Information

December 17, 2007
December 17, 2007
December 17, 2007-

December 17, 2007
December 17, 2007
December 17, 2007
December 17, 2007
December 17, 2007
December 17, 2007
December 17, 2007
December 17, 2007
December 17, 2007
December 17, 2007
December 17, 2007-

Disclaimer:
Please note that the consolidated financial statements presented in English are a translated summary of audited consolidated financial statements
presented in Japanese. The translation of the consolidated financial statements and the related information have NOT been audited by Ernst &Young ShinNihon, the Company’s accounting auditor. The Company provides this translation for reference and convenience purposes only,
without any warranty as to its accuracy or otherwise. In the event of any discrepancy between the translation and the Japanese original, the lattershall prevail. In no event shall the Company be liable for damages of any nature, including but not limited to, direct, indirect, special, punitive,
consequential or incidental damages arising from or in connection with this translation. The final decision and responsibility for investments rests
solely with the reader of this document.
Forward-Looking Statements:
Statements made in this shareholders’ guide with respect to the Company’s current plans, estimates, strategies and beliefs and other statements thatare not historical facts are forward-looking statements about the future performance of the Company. Forward-looking statements include, but are
not limited to, those statements using such words as “believe,” “expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,”“anticipate,” “aim,” “may” or “might” and words of similar meaning in connection with a discussion of future operations, financial performance,
events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public.
These statements are based on management’s assumptions and beliefs in light of the information currently available to it. The Company cautions
you that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking
statements, and therefore the reader should not place undue reliance on them. The reader also should not oblige the Company to update or revise
any forward-looking statements, whether as a result of new information, future events or otherwise. The Company disclaims any such obligation.
Risks and uncertainties that might affect the Company include, but are not limited to, (1) system risk, (2) security risk of customer information, (3)investment in incubation business, (4) possibility of legal regulation, (5) intellectual property right, (6) potential lawsuit, (7) competition, (8)reliance on someone specific, (9) group structures and (10) liquidation and retention of human resources. Risks and uncertainties also include theimpact of any future events with materially adverse impacts.

-1-

PROFILE

The Digital Garage Group consists of Digital Garage, Inc., and its 19 consolidated subsidiaries. The Group’s
major businesses include:(1) “Solutions Business” to provide IT solutions and marketing solutions, etc., focusing on ROI, with fusing
real fields with digital fields, (2) “Portal & Blog Business” to operate portal sites on the Internet and provide
platform contents for mobile terminals, (3) “Finance Business” to conduct settlement/logistic services for
e-commerce, and foreign-exchange margin trading services, and (4) “Incubation Business” to invest into andfoster venture companies as well as provide incubation functions to each company in the Group.
The principal consolidated subsidiaries, business segments and business content are as follows:
Relation to
Business
Company Name
Our
Principal Business Content
Segment
Company
Consolidated Interim holding company of Solutions
DG Solutions Co., Ltd.
subsidiaryBusiness segment
Consolidated Marketing/Promotion support service, IT
DG & Ibex, Inc.
subsidiarysystem design and development
Design and planning of advertising graphics,
Consolidated
Solutions
Creative Garage, Inc.
images and Web, etc., and Creative content
subsidiaryBusinessdevelopment for publication, etc.
Planning/Development/Distribution of Web
Consolidated
DG Media Marketing Inc.
advertising and group media consulting
subsidiaryservice
Consolidated
Sogei Co., Ltd.
Leading real estate advertising agency
subsidiary
Consolidated Planning and operation of price comparison
Kakaku.com, Inc.
subsidiarysite “Kakaku.com,” etc.
Consolidated Planning and operation of travel community
4travel, Inc.
subsidiarysite “4travel,” etc.
Consolidated
Technorati Japan, Inc.
Planning and operation of blog search site
Portal & Blog
subsidiaryBusiness
Consolidated Planning and operation of information-sharing
WEB2.0, Inc.
subsidiarysite “PingKing”
Consolidated Planning and operation of mobile contents and
DG Mobile, Inc.
subsidiarydelivery service, etc.
Consolidated Developing advertising products with CGM,
CGM Marketing, Inc.
subsidiary
Matching service for bloggers and advertisers
Consolidated Settlement and logistics platform for
ECONTEXT, INC.
subsidiary
e-commerce sites, etc.
Consolidated Operation of IR support service business and
Growth Partners, Inc.
FinancesubsidiaryIR portal site “STOCKCAFE”
Business
Consolidated Insurance agency, operations related to life
Kakaku.com Insurance, Inc.
subsidiary
insurance subscription, etc.
Consolidated Foreign-exchange margin trading services,
Kakaku.com Financial, Inc.
subsidiaryetc.
Consolidated Incubation business, investment and
DG Incubation, Inc.
subsidiary
development of new businesses
Incubation
Consolidated Management and operation of venture capital
DG & Partners, Inc.
Businesssubsidiaryfund property
Consolidated Purchase and hold of shares or stock
DG New Context Fundsubsidiaryacquisition rights-2-

FINANCIAL HIGHLIGHTS(As of and for the years ended June 30, 2006 and 2007)
1. Consolidated Performance
2006

2007

(thousands of yen)
(1) Consolidated financial results:
Net sales
Operating income
Ordinary income
Income before income taxes and minority
interests
Net income
Net income, basic per share (yen, U.S. dollars)
Net income, diluted per share (yen, U.S. dollars)
Return on equity (ROE)
Return on assets (ROA)
Operating income to net sales(2) Consolidated financial position:
Total assets
Net assets
Shareholders' equity ratio
Net assets per share (yen, U.S. dollars)(3) Consolidated cash flows:
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Cash and cash equivalents at year-end

2007 / 2006
(percentagechange)2007(thousands of
U.S. dollars)¥12,476,240
1,703,998
1,505,034¥17,338,744
1,613,152
2,475,808

39.0%
-5.3%
64.5%

$140,657
13,08620,084

1,451,863
338,501¥4,294.73
3,971.69
4.9%
5.8%
13.7%

2,606,337
588,633¥3,724.33
3,666.18
8.1%
7.1%
9.3%

79.5%
73.9%
-13.3%-7.7%

21,1434,775$30.21
29.74¥27,774,372
10,668,036
26.1%¥91,745.46¥42,407,669
11,743,684
17.2%¥46,090.88

52.7%
10.1%

$344,023
95,268-49.8%$373.90¥1,898,215(3,305,766)
2,806,777
7,471,888¥779,065
3,355,538(203,196)
11,509,880$6,32027,221(1,648)93,371

2. Dividends
First
Quarter
2006
2007
2008 (Forecast)SecondQuarter-

Dividends per Share
Third
Quarter
(yen)
-

Total
Dividends(Annual)(millions of yen)
-

2006
2007
2008 (Forecast)

FourthQuarter

Year
-

¥0.00
0.00
0.00

PayoutRatio(Consolidated)(%)-

Dividendon NetAssets Ratio(Consolidated)(%)-

3. Consolidated Results Forecast for Year Ending June 30, 2008
2008
Interim
Annual(millions of yen)
¥19,000¥43,000
40
3,000
(100)
2,700
(400)
700
(¥2,527.29)¥4,422.77

Net sales
Operating income
Ordinary income (loss)
Net income (loss)
Net income (loss), basic per share (yen)Notes:
1. U.S. dollar amounts are translated from Japanese yen, for readers' convenience only, at the exchange rate of 123.27 yen
per U.S. dollar, the approximate exchange rate of TTM of Mizuho Bank, Ltd., on June 29, 2007.
2. Return on equity (ROE) = Net income / Average shareholders' equity
3. Return on assets (ROA) = Ordinary income / Average total assets
4. Forecasts stated above disclosed on August 28, 2007 in the Consolidated Kessan Tanshin.

-3-

MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS
1. Summary of Performance(1) Performance
The Japanese economy over the course of the current consolidated fiscal year was generally on a courseof gradual recovery, thanks to private capital investment remaining at a high level sustained by improved
corporate profits, as well as steady personal consumption due to an improved employment market.
Furthermore, the Internet and broadband environment in which the Company focuses its activities showed
positive expansion trends: the number of contracts for broadband service exceeded 26 million as of the endof March 2007, and has continued to expand.
Under such conditions, the Company has continued to form and implement business objectives from theposition of the Group as a pure holding company, and to enhance organic cooperation among the Group’s
companies. The Company in order to strengthen and leverage its core competence in Internet-related
business created the following joint ventures. CGM Marketing Inc. (a consolidated subsidiary), with themission to develop new marketing techniques and strategies using CGM (Consumer Generated Media),
was co-founded with DENTSU INC., cyber communications inc., and ASATSU-DK INC., in August 2006.
In the same month, Growth Partners Inc., a company supporting IR activities using Web2.0 technologies
was established jointly with Asia Securities Printing Co., Ltd. (present PRONEXUS INC.). Furthermore inorder to develop a wide range of businesses, in April 2007 the Company acquired 100% of the shares ofSogei Co., Ltd., a general advertising agency with a long track record in the field of real estate
advertisement.
Solutions BusinessIn the Solutions Business, one-stop solutions in the digital field and the real field were actualized withcorporate separation to make DG Solutions Co., Ltd. (a consolidated subsidiary), an interim holding
company in August 2006 to functionally reconstruct resources within the Group. Consequently, DG & Ibex,
Inc. (former Ibex & rims Corporation), took over the business and performed well, and DG Media
Marketing Inc., established in the previous consolidated fiscal year, is growing steadily.
As a result, in comparison with the previous year, sales increased by 56.1% (¥2,788 million), to ¥7,761
million, and operating income surged by 246.8% (¥306 million), to ¥430 million.
Portal & Blog BusinessIn the Portal & Blog Business, sales and operating income expanded significantly, thanks to a full-year
contribution from the introduction of the pay-as-you-go system to shops from March 2006 in Kakaku.com,
Inc. (a consolidated subsidiary), improvement in ability to attract customers and diversification of profits
with new releases and renewal of contents. Since sales of DG Mobile, Inc., which provides contents
delivery service, etc., for mobile terminals, grew steadily, a full-year surplus was achieved.
As a result, in comparison with the previous year, sales increased by 68.0% (¥1,961 million), to ¥4,847
million, and operating income surged by 216.6% (¥621 million), to ¥907 million.
Finance BusinessIn the Finance Business, the Company emphasized on expansion in sales of settlement/logistics services
provided by ECONTEXT, INC. (a consolidated subsidiary), with new partnerships with leading music andsoftware delivery companies, and enhanced those services with the introduction of “Edy settlement,”
pre-paid electronic money. In Kakaku.com Insurance, Inc., the insurance agency that became ourconsolidated subsidiary from the current consolidated fiscal year, the number of customers and sales
amount are steadily increasing.
As a result, in comparison with the previous year, sales increased by 25.4% (¥550 million), to ¥2,718
million, and operating income decreased by 16.9% (¥102 million), to ¥503 million, absorbing the impact
of initial expenses for newly established subsidiaries.

-4-Incubation BusinessIn the Incubation Business, ALC PRESS INC., which the Company invested in and fostered in previous
years, was listed on the JASDAQ market in August 2006, and CELSYS, Inc., which the Company also
invested in was listed on the Centrex market of the Nagoya Stock Exchange in December 2006. Profits
were ensured not only from the going public of invested companies but also sales of a part of shares ofunlisted companies as a result of incubation.
As a result, in comparison with the previous year, sales decreased by 17.8% (¥437 million), to ¥2,012
million, and operating income decreased by 74.1% (¥814 million), to ¥284 million, with conservatively
posting appraisal losses of a part of shares.
Finally, the Group’s consolidated sales increased by 39.0% (¥4,862 million), to ¥17,338 million, while
operating income decreased by 5.3% (¥90 million), to ¥1,613 million, with posting the above-mentioned
share appraisal losses. Ordinary income increased by 64.5% (¥970 million), to ¥2,475 million, including
dividends from contracts for investment in anonymous associations. Net income in which corporate tax
and minority stockholder income was deducted increased by 73.9% (¥250 million), to ¥588 million.

2. Analysis of Financial Position and Business Results(1) Analysis of Financial Position(Current Assets)
The balance of current assets at the end of the current consolidated fiscal year increased by ¥14,395
million, to ¥31,918 million, over the previous year. This is mainly because of receiving refund money anddividends from investment to anonymous associations aiming at integrating office buildings of majorGroup companies, as well as an increase in cash and deposits of ¥5,923 million due to making Sogei Co.,
Ltd., a consolidated subsidiary. Furthermore, also with making Sogei Co., Ltd., a consolidated subsidiary,
notes receivable and account receivable increased by ¥6,884 million, inventory assets by ¥900 million andoutstanding collections regarding settlement business of ECONTEXT INC., by ¥557 million.
(Fixed Assets)
The balance of fixed assets at the end of the current consolidated fiscal year increased by ¥238 million,to ¥10,489 million, over the previous year.
The major factors of this are as follows:
While investment securities decreased by ¥2,632 million due to refund money from investment toanonymous associations aiming at integrating office buildings of major Group companies, goodwill(consolidated adjustment accounts and business rights at the end of the current consolidated fiscal year)
increased by ¥1,329 million, long-term deposits by ¥600 million and deposit guarantee by ¥795 million.
Furthermore, software increased by ¥89 million due to new acquisition, etc.
(Current Liabilities)
The balance of current liabilities at the end of the current consolidated fiscal year increased by ¥12,599
million to ¥26,384 million over the previous year.
The major factors of this are as follows:
Notes and accounts payable increased by ¥9,401 million, and corporate bonds to be redeemed within
one year by ¥888 million, due in part to making Sogei Co., Ltd., a consolidated subsidiary. Moreover,guarantee deposits received regarding securities loaned to financial institutions, which is indicated in
short-term borrowings from the current consolidated fiscal year, decreased by ¥851 million.
(Long-Term Liabilities)
The balance of fixed liabilities at the end of the current consolidated fiscal year increased by ¥958
million, to ¥4,279 million, over the previous year. This is mainly because corporate bonds increased by¥396 million and allowance for retirement benefits by ¥550 million, due in part to making Sogei Co., Ltd.,a consolidated subsidiary.

-5-

(Net Assets)
The balance of net assets at the end of the current consolidated fiscal year increased by ¥1,075 million,to ¥11,743 million, over the previous year.
The major factors of this are as follows:
Retained earnings increased by ¥579 million due to posting current net income, and minority
shareholders’ interest increased by ¥1,025 million along with an increase in net assets with posting profits
of consolidated subsidiaries. Meanwhile, valuation differences of other marketable securities decreased by¥364 million in accordance with current prices of listed securities.
(2) Analysis of Business Results(Net Sales)
Net sales in the current consolidated fiscal year surged by ¥4,862 million, to ¥17,338 million, from
¥12,476 million in the previous year.
The major factors of this are as follows:
Sales of the Portal & Blog Business increased by ¥1,961 million, to ¥4,847 million, over the previous
year, thanks to a full-year contribution from the introduction of the pay-as-you-go system to stores fromMarch 2006, improvement in ability to attract customers and diversification of profits with new releases
and renewal of contents in Kakaku.com, Inc. (a consolidated subsidiary). Sales of the Solutions Businessalso increased by ¥2,788 million, to ¥7,761 million, over the previous year, as DG & Ibex, Inc. (former
Ibex & rims Corporation), performed well, and DG Media Marketing Inc., established in the previous
consolidated fiscal year, is growing steadily. Furthermore, sales of the Finance Business generally
increased by ¥550 million, to ¥2,718 million, due to the favorable growth in ECONTEXT, INC.
(Operating Income)Operating income in the current consolidated fiscal year slightly decreased by ¥90 million, to ¥1,613
million, from ¥1,703 million in the previous year. This is mainly because operating income in the
Incubation Business decreased by ¥814 million, to ¥284 million, over the previous year, due to aconservatively posted valuation loss on certain stocks, and ones in the Finance Business fell by ¥102
million, to ¥503 million, over the previous year with burdens of initial expenses for a newly establishedsubsidiary. Meanwhile, as the Solutions Business and the Portal & Blog Business performed well as
mentioned above, significant increases in their operating income, respectively, to ¥430 million(year-on-year increase of ¥306 million) and to ¥907 million (year-on-year increase of ¥621 million) offset
the above-mentioned decline.
(Ordinary Income)In the current consolidated fiscal year, ordinary income increased by ¥970 million, to ¥2,475 million,
from ¥1,505 million in the previous year. This is mainly because dividends of ¥999 million regarding
investment in anonymous associations aiming at integrating office buildings of major Group companies
were recorded.
(Net Income)Net income in the current consolidated fiscal year increased by ¥250 million, to ¥588 million, from¥338 million in the previous year.
The major factors of this are as follows:In addition to increases in ordinary income and others, gains on sale of shares of an affiliated companyof ¥122 million and gains on change of equity of ¥113 million were posted as extraordinary gains alongwith sale of shares of 4travel, Inc. (a consolidated subsidiary), and allocation of new shares to a third party.
However, deferred income tax assets regarding amount of loss carried forward were not recorded.
Consequently, the actual corporate tax burden ratio became higher, and the amount of income-taxes
deferred increased by ¥546 million, to ¥256 million, over the previous year.

-6-(3) Analysis of Cash Flows
Cash and cash equivalents in the current consolidated fiscal year increased by ¥4,037 million (54.0%),
to ¥11,509 million, over the previous year.
(Cash Flows from Operating Activities)
Cash flows from operating activities in the current consolidated fiscal year decreased by ¥1,119 million,to ¥779 million, over the previous year. This is mainly because corporate tax of ¥1,223 million was paid,
and funds decreased by ¥1,983 million along with an increase in trade receivable. Meanwhile, net income
before taxes and other adjustment was ¥2,606 million, and funds increased by ¥1,574 million due toincreased deposits regarding the settlement business of ECONTEXT, INC. (a consolidated subsidiary).
(Cash Flows from Investing Activities)
Cash flows from investing activities in the current consolidated fiscal year increased by ¥6,661 million,to ¥3,355 million, over the previous year. This is because of refunds of ¥3,000 million and dividends of¥994 million from the investment to the anonymous association aiming at integrating office buildings ofmajor Group companies, despite expenses to acquire investment securities of business partners, etc., of¥468 million.
(Cash Flows from Financing Activities)
Cash flows from financing activities in the current consolidated fiscal year decreased by ¥3,009 million,
to negative ¥203 million, over the previous year. This is because of the net amount of repayment ofshort-term borrowings of ¥331 million, the one of long-term borrowing of ¥411 million and redemption of
corporate bonds of ¥100 million, despite income from payment by minority shareholders of ¥672 million.

-7-

[THIS PAGE INTENTIONALLY LEFT BLANK]-8-

FINANCIAL SUMMARY(As of and for the years ended June 30, 2003, 2004, 2005, 2006 and 2007)
2003
Consolidated financial indicators:
Net sales
Ordinary income (loss)
Income (loss) before income taxes andminority interests
Net income (loss)
Net assets
Total assets
Net assets per share (yen)Net income (loss), basic per share (yen)Net income, diluted per share (yen)Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Cash and cash equivalents at year-end

Consolidated key ratio:
Shareholders' equity ratio
Return on equity (ROE)
Price earnings ratio (PER)
Consolidated other statistics:
Number of employees

2007¥3,520,266(202,576)¥6,217,588(210,374)¥7,846,467
108,532¥12,476,240
1,505,034¥17,338,744
2,475,808(125,267)(217,423)
2,350,230
6,747,540¥176,914.84(17,168.55)¥558,196(776,990)
1,065,638
1,963,860

929,347
380,636
2,633,026
14,742,000¥36,985.75
5,620.80
5,094.84(¥1,647,427)(3,795,977)
6,850,448
3,369,626

1,426,794
633,235
6,683,788
24,259,792¥85,031.47
8,423.84
7,763.52¥2,295,197(165,735)
573,8816,072,088

1,451,863
338,501
10,668,036
27,774,372¥91,745.46
4,294.73
3,971.69¥1,898,215(3,305,766)
2,806,777
7,471,888

2,606,337
588,633
11,743,684
42,407,669¥46,090.88
3,724.33
3,666.18¥779,065
3,355,538(203,196)
11,509,880

2003
Consolidated financial indicators:
Net sales
Ordinary income (loss)
Income (loss) before income taxes andminority interests
Net income (loss)
Net assets
Total assets
Net assets per share (U.S. dollars)
Net income (loss), basic per share(U.S. dollars)
Net income, diluted per share (U.S. dollars)
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Cash and cash equivalents at year-end

2004
2005
2006
(thousands of yen, except per share amounts)

2004
2005
2006
2007
(thousands of U.S. dollars, except per share amounts)$29,397(1,692)$57,342(1,940)$70,925981$108,263
13,060$140,657
20,084(1,046)(1,816)
19,62656,347$1,477.37

8,571
3,510
24,283
135,959$341.10

12,897
5,724
60,416219,288$768.61

12,5992,937
92,572241,013$796.13

21,143
4,775
95,268344,023$373.90(143.37)$4,661(6,488)
8,899
16,40051.84
46.99($15,193)(35,009)
63,17931,07776.14
70.18$20,747(1,498)5,187
54,88637.27
34.46$16,472(28,686)
24,356
64,83830.21
29.74$6,32027,221(1,648)93,371

2003

2004

2005

2006

34.8%
-8.9%
-

17.9%
15.1%
95.2 times

27.6%
13.6%
51.8 times

26.1%
4.9%
107.3 times

17.2%
8.1%
41.9 times

114

121

247

283

718

2007

Note:
1. U.S. dollar amounts are translated from Japanese yen, for readers' convenience only, at the exchange rate per U.S. dollar
as described below; the approximate exchange rate of TTM of Mizuho Bank, Ltd., on June 30, 2003, June 30, 2004,
June 30, 2005, June 30, 2006, and June 29, 2007, respectively.
2003: U.S. $1.00 = 119.75 yen on June 30, 2003
2004: U.S. $1.00 = 108.43 yen on June 30, 2004
2005: U.S. $1.00 = 110.63 yen on June 30, 2005
2006: U.S. $1.00 = 115.24 yen on June 30, 2006
2007: U.S. $1.00 = 123.27 yen on June 29, 2007

-9-

Net assets per share¥20,000,000¥200,000.00¥16,000,000¥160,000.00¥12,000,000¥120,000.00(yen)(thousands of yen)

Net sales¥8,000,000¥80,000.00¥40,000.00¥4,000,000

¥0.00

¥0
2003

2004

2005

2006

2003

2007

¥1,400,000

2007

¥0.00
(¥6,000.00)

2003

2004

2005

2006

2007

¥700,000(¥12,000.00)¥0(¥700,000)

2003

2004

2005

2006

(¥18,000.00)

2007

Net income (loss), basic per share (yen)Net incom e (loss)¥7,500,000(thousands of yen)

¥600,000¥400,000¥200,000¥0(¥200,000)

Net income, dilut ed per share (yen)Cash flow s¥800,000(thousands of yen)2006

¥6,000.00¥2,100,000(yen)(thousands of yen)

¥2,800,000

2003

2004

2005

2006

2007

¥5,000,000¥2,500,000¥0(¥2,500,000)

2003

2004

Cash flows from op erating activities
Cash flows from financing activities

Net assets
15.0%¥7,500,000

10.0%(percentage)

20.0%¥10,000,000¥5,000,000¥2,500,000

2005

2007

Cash flows from investing activities

5.0%
0.0%
-5.0%

¥0
2004

2006

Return on equity (ROE)¥12,500,000

2003

2005

(¥5,000,000)(¥400,000)(thousands of yen)

2005

Net incom e (loss), basic per share
Net incom e, diluted per share¥12,000.00

Incom e (loss) before incom e taxes andm inority interests

2006

2007

2003

2004

2005

2006

2007

-10.0%

Total assets

Price earnings ratio (PER)¥50,000,000

120.0 times¥40,000,000

96.0 times¥30,000,000

72.0 times(times)(thousands of yen)

2004

¥20,000,000¥10,000,000

48.0 times
24.0 times¥0

0.0 times
2003

2004

2005

2006

2007

2003

- 10 -

2004

2005

2006

2007

CONSOLIDATED BALANCE SHEETS(As of June 30, 2006 and 2007)
2006

2007

2007
(thousands of
U.S. dollars)(thousands of yen)
(Assets)
I Current assets
1 Cash and deposits
2 Notes and accounts receivable
3 Investment securities for sales
4 Allowance for investment loss
5 Inventories
6 Deferred income taxes
7 Other accounts receivable
8 Other
Allowance for doubtful accounts
Total current assets
II Fixed assets
1 Property, plant and equipment(1) Buildings and structures, net(2) Machinery and vehicles, net(3) Furniture and fixtures, net(4) Land(5) Construction in progress
Total property, plant and equipment
2 Intangible fixed assets(1) Software(2) Consolidated adjustment account(3) Goodwill(4) Other
Total intangible fixed assets
3 Investments and other assets(1) Investment securities(2) Long-term receivables(3) Deferred income taxes(4) Other
Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total assets¥7,575,614
2,662,547
4,528,656(508,945)
118,113
175,592
2,542,621
430,572(1,395)
17,523,376¥13,499,476
9,546,686
3,769,005(226,358)
1,018,311
234,996
3,100,575
1,025,356(49,407)
31,918,644$109,511
77,44530,575(1,836)
8,261
1,906
25,1538,318(401)
258,933

107,497

120,2260220,255
2,470
17,281
360,233

975
0
1,787
20
140
2,922

190,3942,470
300,362790,217
5,186,799- 11 -

880,047

7,139
-

-

142,619
6,119,636

6,645,839
17,906
7,543,793

53,913
145
61,1973,168,387
1,665
227,449
434,995(1,502)3,830,996
10,250,995¥27,774,372

536,250
78,412
34,964
1,952,680(17,310)2,584,997
10,489,024¥42,407,669

4,350
636
284
15,841(140)
20,97085,090$344,023

2006

2007

2007
(thousands of
U.S. dollars)(thousands of yen)
(Liabilities)
I Current liabilities
1 Notes and accounts payable
2 Short-term borrowings
3 Current portion of long-term borrowings
4 Current portion of bonds and notes
5 Income taxes payable
6 Deferred tax liabilities
7 Reserve for bonuses
8 Reserve for sales return9 Reserve for business reconstruction
10 Deposits received
11 Other
Total current liabilities
II Long-term liabilities
1 Bonds
2 Long-term borrowings
3 Deferred tax liabilities
4 Reserve for retirement benefits
5 Other
Total long-term liabilities
Total liabilities¥1,238,963
1,130,000
411,770
100,000
819,125
78,41753,838¥10,640,033
5,537,212
332,820
988,000
893,610
-

832
105
1,340
51,912
10,647214,034

22,8079,108
3,321,915
17,106,335

816,000
2,630,000
146,169
573,611
114,201
4,279,982
30,663,984

6,620
21,335
1,186
4,653
926
34,720248,755

1,798,006
4,331,780
913,529(1,932)
7,041,383

1,809,412
4,152,370
1,492,890(1,921)
7,452,752

14,67833,685
12,111(16)
60,459206,801
206,801(157,856)(157,856)
3,198
4,445,589
11,743,684¥42,407,669(1,281)(1,281)
26
36,064
95,268$344,023

9,542,633
409,670
13,784,419
420,000
2,870,000-

3,419,852
10,668,036¥27,774,372- 12 --

102,554
12,972
165,1626,399,144
1,312,492
26,384,002-(Net assets)
I Shareholders' equity
1 Common stock
2 Capital surplus
3 Retained earnings
4 Treasury stock
Total shareholders' equity
II Valuation and translation adjustments
1 Net unrealized gain on available-for-sale securities
Total valuation and translation adjustments
III Stock acquisition rights
IV Minority interests
Total net assets
Total liabilities and net assets$86,315
44,919
2,700
8,015
7,249

CONSOLIDATED STATEMENTS OF INCOME(For the years ended June 30, 2006 and 2007)
2006

2007

2007
(thousands of
U.S. dollars)$140,657
81,50359,154
105
59,04945,962
4,944
10,534
614
1,534
175
27
943
7,290
218
905
475
575
682
2,074
1,534
390
401
2,458
307

(thousands of yen)
I Net sales
II Cost of sales
Gross profit
Provision for reserve for sales return
Gross profit, net
III Selling, general and administrative expenses
1 Directors' and auditors' compensation
2 Salary for employees
3 Bonus for employees
4 Legal welfare expenses
5 Welfare expenses
6 Retirement benefit
7 Sales commission
8 Advertising expenses
9 Entertainment expenses
10 Travel and transportation expenses
11 Communication expenses
12 Office supplies
13 Tax and dues
14 Commissions
15 Business consignment expenses
16 Maintenance expenses
17 Research and development expenses
18 Rent
19 Depreciation
20 Amortization of consolidated adjustment account
21 Amortization of goodwill
22 OtherOperating income¥12,476,240
6,627,105
5,849,135
5,849,135
4,145,136
452,639
1,000,819
44,499146,136
13,9803,253
77,792
501,487
16,75880,174
51,12355,19459,437200,568
132,927
38,726
41,477245,160
27,659526,570-428,747¥1,703,998- 13 -¥17,338,744
10,046,843
7,291,900
12,972
7,278,928
5,665,776
609,457
1,298,472
75,679189,080
21,5803,324
116,214898,629
26,812
111,591
58,55070,86984,062
255,679
189,152
48,05449,479302,976
37,883624,056
594,169¥1,613,152

5,063
4,820
$13,086

2006

2007

2007
(thousands of
U.S. dollars)$8,378128
0(thousands of yen)
IV Non-operating income
1 Interest income
2 Dividend income
3 Gain on investment business association
4 Gain on anonymous association agreements
5 Other
V Non-operating expenses
1 Interest expenses
2 Investment loss under equity method
3 Bond issue expenses
4 OtherOrdinary income
VI Extraordinary gains
1 Gain on changes in equities
2 Gain on sales of investment securities
3 Gain on sales of investments in subsidiaries and affiliates
4 Reversal of allowance for doubtful accounts
5 Other
VII Extraordinary losses
1 Loss on disposal of fixed assets
2 Loss on changes in equities
3 Appraisal loss of investment securities
4 Restoration expense for operating site
5 Other
Income before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Minority interest in net income
Net income- 14 -¥133,157
8,110
128
99,041¥1,032,797
15,835
6-

25,876332,121
131,409
144,579
27,79028,342
1,505,034
7,941

999,150
17,805
170,141
139,396

8,105
144
1,380
1,131

-

-

30,7442,475,808
236,152
113,747-

122,371

5,012

249
20,084
1,916
923

-

2,667
261
61,112
2,045
14,317
41,714
3,033
1,451,863
875,376(290,586)
528,572¥338,501993

33
105,623
10,97950,54037,325

0
857
89
410
303

6,777
2,606,337
1,202,403
256,359
558,940¥588,633

55
21,143
9,754
2,080
4,534
$4,775CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS(For the years ended June 30, 2006 and 2007)
Shareholders' Equity

Balance as of June 30, 2005
Changes in the year
Issue of new shares
Net income
Repurchase of treasury stock
Net changes other than shareholders' equity
Total of changes in the year
Balance as of June 30, 2006
Changes in the year
Issue of new shares
Deferred tax liabilities for unrealized gain
on investments in subsidiaries and affiliates
Decrease of retained earnings from rise in
number of consolidated subsidiaries
Net income
Disposal of treasury stock
Net changes other than shareholders' equity
Total of changes in the year
Balance as of June 30, 2007

CommonStockCapitalSurplus¥1,769,763(thousands of yen)
¥4,303,537¥575,027

28,242Retained
Earnings

TreasuryStock(¥1,662)¥6,646,666(270)

56,485338,501
(270)

(270)
(1,932)394,716
7,041,383

28,242
338,501

338,501
913,529

Total Shareholders'Equity28,242
1,798,006

28,2424,331,780

11,406

11,406

22,812(190,817)(190,817)(9,272)588,633

2
11,406¥1,809,412(179,409)¥4,152,370

579,361¥1,492,890

11(9,272)588,633
13

11(¥1,921)411,369¥7,452,752

Valuation and Translation
Adjustments
Net Unrealized
Total
Gain on
Valuation and
Available-for- Translation
sale Securities Adjustments

Balance as of June 30, 2005
Changes in the year
Issue of new shares
Net income
Repurchase of treasury stock
Net changes other than shareholders' equity
Total of changes in the year
Balance as of June 30, 2006
Changes in the year
Issue of new shares
Deferred tax liabilities for unrealized gain
on investments in subsidiaries and affiliates
Decrease of retained earnings from rise in
number of consolidated subsidiaries
Net income
Disposal of treasury stock
Net changes other than shareholders' equity
Total of changes in the year
Balance as of June 30, 2007

¥37,121

169,679
169,679
206,801

Stock
Acquisition
RightsMinority
Interests

Total Net
Assets(thousands of yen)
¥37,121- ¥2,646,587¥9,330,375

169,679
169,679
206,801

56,485338,501(270)
942,944
1,337,661
10,668,036-

773,264
773,264
3,419,852

22,812(190,817)(364,658)(364,658)(¥157,856)- 15 -(364,658)(364,658)(¥157,856)

3,198
3,198
¥3,1981,025,737
1,025,737¥4,445,589(9,272)588,633
13
664,277
1,075,647¥11,743,684

Shareholders' Equity
CommonStock
Balance as of June 30, 2006
Changes in the year
Issue of new shares
Deferred tax liabilities for unrealized gain
on investments in subsidiaries and affiliates
Decrease of retained earnings from rise in
number of consolidated subsidiaries
Net income
Disposal of treasury stock
Net changes other than shareholders' equity
Total of changes in the year
Balance as of June 30, 2007

$14,586
93

CapitalSurplusRetained
Earnings

Total Shareholders'EquityTreasuryStock(thousands of U.S. dollars)$35,141$7,411

($16)

93

185

(1,548)(1,548)
(75)
4,775
0

(75)
4,775
0

0
($16)

3,337
$60,459

0
93$14,678$57,122(1,455)$33,685

4,700$12,111

Valuation and Translation
Adjustments
Net Unrealized
Total
Gain on
Valuation and
Available-for- Translation
sale Securities Adjustments

Balance as of June 30, 2006
Changes in the year
Issue of new shares
Deferred tax liabilities for unrealized gain
on investments in subsidiaries and affiliates
Decrease of retained earnings from rise in
number of consolidated subsidiaries
Net income
Disposal of treasury stock
Net changes other than shareholders' equity
Total of changes in the year
Balance as of June 30, 2007

$1,678Stock
Acquisition
RightsMinority
Interests

Total Net
Assets(thousands of U.S. dollars)$1,678$27,743$86,542
185(1,548)(2,958)(2,958)($1,281)- 16 -(2,958)(2,958)($1,281)

26
26
$26

8,321
8,321
$36,064

(75)
4,775
0
5,389
8,726
$95,268

CONSOLIDATED STATEMENTS OF CASH FLOWS(For the years ended June 30, 2006 and 2007)
2006

2007

(thousands of yen)
I Cash flows from operating activities:
1 Income before income taxes and minority interests
2 Depreciation and amortization
3 Amortization of software
4 Amortization of consolidation adjustment account5 Amortization of goodwill
6 Interest and dividend income
7 Gain on anonymous association agreements
8 Interest expenses
9 Foreign exchange gains
10 Share issuing expense
11 New share issuing expense
12 Bond issue expenses
13 Gain on sales of investment securities
14 Investment loss under equity method
15 Loss (gain) on changes in equities
16 Gain on sales of investments in subsidiaries and affiliates
17 Increase in notes and accounts receivable
18 Decrease in investment securities for sales
19 Decrease in allowance for investment loss
20 (Increase) decrease in sales deposit
21 (Increase) decrease in inventories
22 (Increase) decrease in accounts receivable
23 Increase in notes and accounts payable
24 Increase in accrued expenses
25 Increase (decrease) in accrued consumption taxes
26 Increase (decrease) in deposits received
27 Other
Subtotal
28 Interest and dividends received
29 Interest paid
30 Income taxes paid
31 Refund of income taxes
Net cash provided by operating activities- 17 -¥1,451,863
83,579125,773526,570(22,686)
131,409(272)
2,158
27,790(5,012)
144,579
14,317(632,092)
136,667(70,000)
50,866
979,715
135,264
55,356(78,681)(598,324)(130,367)
2,328,475
11,354(128,844)(314,808)
2,038¥1,898,215

2007(thousands of
U.S. dollars)¥2,606,337
107,371
269,081$21,143871
2,183

624,056(32,972)(999,150)
139,396(1,279)4,077(63,207)(122,371)(1,983,860)
177,908(282,587)
45,000(1,489)(551,137)
1,112,837
53,569116,585
1,574,759(653,288)
2,139,635(144,595)(1,223,468)
7,494¥779,065

5,063
(267)
(8,105)
1,131
(10)
33
(513)
(993)
(16,094)
1,443(2,292)365(12)(4,471)
9,028
435
946
12,775(5,300)17,357(1,173)(9,925)61$6,320

2006

2007

(thousands of yen)
II Cash flows from investing activities:
1 Deposit into term-deposits
2 Refund from term-deposits
3 Payments for refund of specified deposits
4 Proceeds from refund of specified deposits
5 Payments for purchases of property, plant and equipment
6 Proceeds from sale of property, plant and equipment
7 Payments for purchases of intangible fixed assets
8 Proceeds from additional acquisition of shares of subsidiaries
accompanied by change in scope of consolidation
9 Payments for purchases of investment securities
10 Payments for acquisition of shares of subsidiaries and affiliates
11 Proceeds from sale of investment securities
12 Proceeds from sale of shares of subsidiaries and affiliates
13 Payments for acquisition of investments in equity
14 Proceeds from refund of investments in anonymous associationagreements
15 Proceeds from distribution of anonymous associationagreements
16 Payments for loans
17 Proceeds from collection of loans
18 Payments for security deposits/guarantee deposits
19 Proceeds from refund of security deposits/guarantee deposits
20 Other, net
Net cash (used in) provided by investing activities
III Cash flows from financing activities:
1 Proceeds from short-term borrowings
2 Repayments of short-term borrowings
3 Proceeds from long-term borrowings
4 Repayment of long-term borrowings
5 Proceeds from bond issuance
6 Repayment of bond redemption
7 Proceeds from issue of shares
8 Payments for repurchase of treasury stock
9 Proceeds from payments from minority shareholders
10 Amount of payment of dividends for minority shareholders
11 Proceeds from acceptance of deposits received
12 Repayment of deposits received
13 Payments for listing of stock
14 Other, net
Net cash provided by (used in) financing activities
IV Foreign currency translation adjustments on cash and cash
equivalents
V Net change in cash and cash equivalents
VI Cash and cash equivalents at beginning of year
VII Cash and cash equivalents of newly consolidated subsidiaries
VIII Cash and cash equivalents at end of year

- 18 -

2007(thousands of
U.S. dollars)(¥16,032)
656,981(2,000)902(171,704)
349(692,335)(¥300,019)
360,057
2,437(165,424)
2,693(379,273)($2,434)
2,921
20(1,342)22(3,077)(3,115,024)(500,000)
22,897
489,029(9,800)1,307,465(468,985)(560,589)
3,911
181,125-

10,607(3,805)(4,548)
32
1,469
-

-

3,000,000

24,337(225,312)
389,556(50,096)
4,707(87,883)(3,305,766)

994,615(3,426,850)
2,911,927(79,511)
9,377(37,419)
3,355,538

8,069(27,800)
23,622
(645)
76
(304)
27,2212,520,000(2,250,000)
3,000,000(505,560)
300,000(436,000)
54,327(267)
269,360(25,455)
2,840,157(2,937,062)(22,721)2,806,777

4,842,200(5,174,116)(411,770)(100,000)
18,734
672,604(50,863)13(203,196)

39,281(41,974)(3,340)
(811)
152
5,456
(413)
0
(1,648)573
1,399,799
6,072,088

853
3,932,260
7,471,888
105,731¥11,509,880

7
31,90060,614858$93,371¥7,471,888

SEGMENT INFORMATION(As of and for the years ended June 30, 2006 and 2007)
Business Segment Information
As of and for the year ended June 30, 2007
Solutions
Business

Portal &BlogBusiness

FinanceBusiness

Incubation
Business

Eliminations
and Corporate

Consolidated
Total¥17,338,744-¥17,338,744

Total(thousands of yen)
I Net sales and operating income:Net sales(1) Net sales to external customers(2) Intersegment net sales ortransfer amount
Total
Operating expenses
Operating income
II Assets, depreciation and amortizationand capital expenditures:
AssetsDepreciation and amortization
Capital expenditures¥7,761,000¥4,847,034¥2,718,159¥2,012,550

163,3037,924,303
7,494,168
430,135

155,420
5,002,454
4,094,532
907,921

11,8242,729,983
2,226,903
503,080

2,012,550
1,728,200
284,349

330,548
17,669,292
15,543,805
2,125,487(330,548)(330,548)
181,786(512,334)

17,338,744
15,725,592
1,613,152

20,408,759
28,294¥11,6315,646,439
222,750¥373,385

10,268,756
131,591¥174,955

5,467,190
4,800¥4,477

41,791,144
387,436¥564,449

616,524
23,697¥20,674

42,407,669
411,134¥585,124

Portal &BlogBusiness

FinanceBusiness

Incubation
Business

Total

Eliminations
and Corporate

Consolidated
Total¥12,476,240-¥12,476,240--

As of and for the year ended June 30, 2006
Solutions
Business(thousands of yen)
I Net sales and operating income:Net sales(1) Net sales to external customers(2) Intersegment net sales ortransfer amount
Total
Operating expenses
Operating income
II Assets, depreciation and amortizationand capital expenditures:
AssetsDepreciation and amortization
Capital expenditures¥4,972,751¥2,885,897¥2,167,966¥2,449,625

17,017
4,989,769
4,865,722
124,046

43,3852,929,282
2,642,473
286,809170
2,168,136
1,562,839
605,2972,449,625
1,351,017
1,098,607

60,573
12,536,814
10,422,052
2,114,761(60,573)(60,573)
350,189(410,762)

12,476,240
10,772,242
1,703,998

6,219,176
32,762¥21,978

4,634,317
135,115¥385,488

7,287,065
56,180¥434,340

6,143,837
2,318¥14,819

24,284,397
226,376¥856,626

3,489,974
35,820¥53,965

27,774,372
262,197¥910,592

Portal &BlogBusiness

FinanceBusiness

Incubation
Business

Total

Eliminations
and Corporate

Consolidated
Total$140,657-$140,657--

As of and for the year ended June 30, 2007
Solutions
Business(thousands of U.S. dollars)
I Net sales and operating income:Net sales(1) Net sales to external customers(2) Intersegment net sales ortransfer amount
Total
Operating expenses
Operating income
II Assets, depreciation and amortizationand capital expenditures:
AssetsDepreciation and amortization
Capital expenditures$62,959$39,320$22,050$16,326

1,325
64,28460,795
3,489

1,261
40,581
33,2167,365

96
22,146
18,065
4,081

16,326
14,0202,307

2,681
143,338
126,096
17,243(2,681)(2,681)
1,475(4,156)140,657
127,570
13,086

165,561
230$94

45,805
1,807$3,02983,303
1,068$1,41944,35139$36

339,021
3,143$4,579

5,001
192
$168

344,023
3,335$4,747- 19 ---

Geographical Segment Information
Geographical segment information is omitted because net sales and the amount of assets in the domestic
market account for more than 90% of aggregate segment sales and assets, respectively.

Overseas Sales
Overseas sales is omitted because net sales in the overseas market account for less than 10% of consolidated
net sales.

- 20 -

QUARTERLY INFORMATION(As of and for the years ended June 30, 2006 and 2007)
As of and for the year ended June 30, 2007
First
Quarter(1) Consolidated financial results:
Net sales
Operating income
Ordinary income
Quarterly (net) income(2) Consolidated financial position:
Total assets
Net assets(3) Consolidated cash flows:
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Cash and cash equivalents at quarter-end(4) Per share data (yen) :Quarterly (net) income, basic per share
Quarterly (net) income, diluted per share
Net assets per share

SecondThird
FourthQuarter
Quarter
Quarter(thousands of yen, except per share amounts)¥4,280,065
1,000,230
960,203
431,091¥7,601,510
1,015,339
938,149
68,221¥11,489,774
1,204,992
1,096,662
632¥17,338,744
1,613,152
2,475,808
588,633

27,301,685
11,198,831

29,065,096
11,071,188

28,426,421
11,269,005

42,407,669
11,743,684

497,444674,750(490,655)
8,259,290

1,520,966
511,936(266,761)
9,344,158

750,375
259,445
120,6818,708,446

779,065
3,355,538(203,196)
11,509,880¥5,456.63
5,351.58
94,623.27¥863.48790.2088,299.03¥4.01
43,666.19¥3,724.33
3,666.18
46,090.88

As of and for the year ended June 30, 2006
First
Quarter(1) Consolidated financial results:
Net sales
Operating income (loss)
Ordinary income (loss)
Quarterly (net) income (loss)(2) Consolidated financial position:
Total assets
Net assets (shareholders' equity)(3) Consolidated cash flows:
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Cash and cash equivalents at quarter-end(4) Per share data (yen) :Quarterly (net) income (loss), basic per share
Quarterly (net) income, diluted per share
Net assets (shareholders' equity) per share

SecondThird
FourthQuarter
Quarter
Quarter(thousands of yen, except per share amounts)¥1,862,299(192,574)(327,495)(376,099)¥4,296,433(159,738)(249,985)(433,800)¥8,792,027
1,077,769
968,794
136,064¥12,476,240
1,703,998
1,505,034
338,501

24,132,280
6,698,994

28,578,862
7,849,916

27,202,453
7,883,676

27,774,372
10,668,036

677,373473,947826,664
8,050,359

1,072,308(1,026,959)
2,170,812
8,288,676

1,937,988(2,874,206)
1,475,108
6,611,422

1,898,215(3,305,766)
2,806,777
7,471,888(¥4,783.46)
85,176.16(¥5,514.36)
99,588.90¥1,727.65
1,524.75
99,795.65¥4,294.73
3,971.69
91,745.46- 21 -

As of and for the year ended June 30, 2007
First
SecondThird
FourthQuarter
Quarter
Quarter
Quarter(thousands of U.S. dollars, except per share amounts)(1) Consolidated financial results:
Net sales
Operating income
Ordinary income
Quarterly (net) income(2) Consolidated financial position:
Total assets
Net assets(3) Consolidated cash flows:
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Cash and cash equivalents at quarter-end(4) Per share data (U.S. dollars) :Quarterly (net) income, basic per share
Quarterly (net) income, diluted per share
Net assets per share$36,306
8,484
8,145
3,657

$63,814
8,524
7,876
573

$97,297
10,2049,287
5$140,657
13,08620,084
4,775

231,586
94,994

243,998
92,941

240,718
95,427344,023
95,2684,220
5,724(4,162)70,05912,7684,298(2,239)78,443

6,354
2,197
1,022
73,744

6,320
27,221(1,648)93,371$46.2945.39
802.64$7.25
6.63
741.26$0.03
369.77$30.2129.74
373.90Notes:
1. The Company's fiscal period is made up of the following four quarters:
First Quarter: Three months ended September 30, 2005 and 2006
Second Quarter: Three months ended December 31, 2005 and 2006
Third Quarter: Three months ended March 31, 2006 and 2007
Fourth Quarter: Three months ended June 30, 2006 and 2007
2. U.S. dollar amounts are translated from Japanese yen, for readers' convenience only, at the exchange rate per U.S. dollar
as described below; the approximate exchange rate of TTM of Mizuho Bank, Ltd., on September 29, 2006,
December 29, 2006, March 30, 2007, and June 29, 2007, respectively.
First Quarter: U.S. $1.00 = 117.89 yen on September 29, 2006
Second Quarter: U.S. $1.00 = 119.12 yen on December 29, 2006
Third Quarter: U.S. $1.00 = 118.09 yen on March 30, 2007
Fourth Quarter: U.S. $1.00 = 123.27 yen on June 29, 2007

- 22 -

SIGNIFICANT ACCOUNTING POLICIES(As of and for the year ended June 30, 2007)
1. Scope of Consolidation(1) Number of consolidated subsidiaries:23
2. Significant Accounting Policies(1) Standards and methods of valuation of significant assets
a. Securities
Other securities (including operating investment securities)* Securities with market value:- Stated at fair value determined by the market value at settlement of account. (Unrealized gains orlosses are recorded in shareholders’ equity. Sales cost is determined by the moving-average method.)* Securities without market value:- Stated at cost determined mainly by the moving-average method.
b. Derivatives- Stated at fair value.
c. Inventories
Product in process- Stated at cost determined by specific cost method.
Commodity and stock- Stated at cost determined by the moving-average method.
(2) Depreciation/amortization methods for significant depreciable assets
a. Tangible fixed assets
Computed on declining-balance method.
Depreciation expenses for buildings (other than fixtures) acquired on or after April 1, 1998 arecomputed using the straight-line method.
The period of depreciation for the main tangible fixed assets are as follows:- Buildings and structures
6-22 years- Furniture and fixtures
2-20 years(Changes in accounting policies)
According to the revision of corporate tax law, the method of depreciation of tangible fixed assets
acquired on or after April 1, 2007 was changed based on the revised corporate tax law.
This change slightly influenced operating income, ordinary income and income before income taxes
and minority interests.
b. Intangible fixed assets
Software- Amortization of software costs for internal use is computed using the straight-line method based on
the expected lifespan up to 5 years.
(3) Method of accounting of significant deferred assets
a. Stock issuance expenses- All costs are expensed as incurred.

- 23 -

(4) Standards of accounting for significant allowances and reserves
a. Allowance for investment losses
To provide for investment losses, the estimated amount of losses is recorded in consideration of theactual state of invested companies.
b. Allowance for doubtful accounts
The Company provides for losses on ordinary receivables using the historical default rate andprovides for losses on specific receivables where there is a possibility of default based on the estimatedamount of uncollectible receivables on an individual basis.
c. Accrued bonuses to employees
To provide for the payment of bonuses to employees, a part of consolidated subsidiaries makes
provisions for the amount of future payments incurred in the current consolidated fiscal year.
d. Accrued retirement benefits for employees
To provide for employees’ retirement benefits, the Company records an amount that is recognized asarising at the end of the period based on the estimated retirement benefit obligations and value ofpension assets at the end of the fiscal year.
The Company and a part of consolidated subsidiaries have adopted the simplified method in which
the amount of liability estimated based on voluntary termination at end of term is regarded as retirement
benefit obligations.
Unrecognized actuarial differences are amortized using the straight-line method over the averageremaining service period for employees in service (12 years or less) at the time the liabilities are
incurred. In this case actuarial differences are amortized from the following fiscal year this process has
been applied.
e. Allowance for sales return
For certain consolidated subsidiaries, an allowance is provided for estimated losses on sales returns at
an amount calculated based on historical experience.
f. Allowance for business reconstruction
For certain consolidated subsidiaries, an allowance is provided for unrealized losses on businessreconstruction at a reasonably estimated amount.
(5) Accounting methods for significant lease transactions
The Company accounts for finance leases, other than those in which ownership of the leased property istransferred to the lessee, in accordance with standards for ordinary operating leases.

- 24 -

(6) Significant hedge accounting
a. Hedge accounting trading method
When interest rate swap fulfills certain requirements, special treatment is applied.
b. Means of hedging and hedged item
- Means of hedging
Interest rate swap
- Hedged item
Interest on borrowing
c. Hedging policy
Based on the Group’s policy of derivatives trading, we principally aim to raise funds at a fixed rateand do not conduct speculative trading.
d. Method of assessing the effectiveness of hedges
The Company concludes only interest rate swap contracts that satisfy all of the following conditions,
aimed at hedging interest volatility risks and cash flow volatility risks:a) The notional principal amount of the interest rate swap contract is almost the same as the principal
amount of the relevant long-term borrowing.
b) The term and maturity of the interest rate swap contract are almost the same as those of therelevant long-term borrowing.
c) Both the index of the floating rate received and paid in the interest rate swap contract and the index
of the floating rate of the relevant long term borrowing are based on TIBOR.
d) The term for revision of interest rate of the interest rate swap contract are almost the same as those
stipulated in the relevant long-term borrowing.
e) The receipt-and-payment conditions of the interest rate swap contract are fixed throughout theswap period.
3. Amortization of Goodwill and Negative Goodwill
Goodwill are amortized on a straight-line basis over the period that expenses are effective (5-20 years).
4. Cash and Cash Equivalents on Consolidated Statements of Cash Flows
Cash and cash equivalents on the consolidated statements of cash flows include cash on hand, saving
accounts, current accounts and fixed-period deposits to mature within three months from the date ofacquisition.
5. Changes of Significant Items for Basis of Preparation of Consolidated Financial Statements(Accounting standards for business combinations)
Beginning with this fiscal year under review, the Company has adopted “Accounting Standard for Business
Combinations” (Business Accounting Council, October 31, 2003), “Accounting Standard for Business
Divestitures” (Accounting Standards Board of Japan Statement No. 7, December 27, 2005) and “Guidance on
Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures”(Accounting Standards Board of Japan Guidance No. 10, December 27, 2005).

- 25 -

STOCK INFORMATION(From July 1, 2002 to June 30, 2007)
Stock Price Index Compared with Main Indices
1,200

1,000

800

600

400

200

0
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TOPIX

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Digital Garage

Nikkei 225

Note:
1. One share was split into five shares on December 31, 2003, and one share was split into two shares on
December 31, 2006, respectively. Thus, the Company’s stock price index is computed on adjusted closing
prices of split shares.

- 26 -

CORPORATE HISTORY(From August 17, 1995 to June 30, 2007)
August 1995
October 1996
December 1996

May 1997
April 1999
June 1999

May 2000

October 2000
December 2000
June 2002
December 2002
January 2003
February 2003
May 2003
February 2004
June 2004
December 2004

January 2005

July 2005
September 2005

November 2005

December 2005

* Established Digital Garage, Inc., for the purpose of advertising, planning and production
using the Internet as a medium. (Representatives: Kaoru Hayashi, Joichi Ito)
* Made an exclusive contract for an Internet search engine service with Infoseek in the UnitedStates, and newly set up Infoseek Division.
* Co-founded Digital Advertising Consortium with HAKUHODO INCORPORATED,
Asahi-Tsushin Co., Ltd. (present ASATSU-DK INC.), YOMIKO Advertising Inc., and I&S(present I&SBBDO)* Bought out From Garage, Studio Garage and Eccosys.
* Co-founded Electronic Commerce Institute, Inc., with Communication Science Institute,Inc.
* Transferred business of Infoseek Division to Infoseek in the United States.
* Acquired 60 % of shares of Electric Commerce Institute to make it a subsidiary.
* Acquired 60 % of shares of Creative Garage (later DS Interactive Inc., present Xenlon
Corporation) to make it a subsidiary.
* Co-founded ECONTEXT, INC., with LAWSON INC., Toyo Information System Co., Ltd.
(present TIS, Inc.), and Mitsubishi Corporation, as a company in charge of an e-commerce
platform for logistic/settlement service.
* Co-founded Gift Port as an e-commerce gift company with Shaddy Co., Ltd.
* Listed on over-the-counter market.
* Acquired 45 % of Kakaku.com, Inc., to make it a consolidated subsidiary measured by the
degree of substantial control.
* Liquidated Gift Port.
* Underwrote capital increase of ECONTEXT, INC., through allocation of new shares to athird party to make it a consolidated subsidiary.
* Established Creative Garage, Inc., as a consolidated subsidiary for creative production.
* Sold all shares of DS Interactive Inc. (present Xenlon Corporation), and removed it fromconsolidated subsidiaries.
* Established DG Mobile Inc., as a consolidated subsidiary for contents for mobile terminals.
* Sold all shares of Electronic Commerce Institute, Inc., and removed it from consolidated
subsidiaries.
* Acquired shares of Ibex & rims Corporation, through stock exchange to make it aconsolidated subsidiary.
* Applied to JSDA for cancellation of over-the-counter market registration and listed on
JASDAQ market.
* Established Technorati Japan, Inc., as a consolidated subsidiary to operate a blog searchengine site.
* Kakaku.com, Inc. (a consolidated subsidiary), acquired shares of 4travel, Inc., through stock
exchange, etc., to make it a consolidated subsidiary.
* Established DG Incubation, Inc., as a consolidated subsidiary for incubation business.
* Co-founded DG & Partners, Inc., as a consolidated subsidiary for management andoperation of properties of venture capital fund with DG Incubation, Inc., and Japan Asia
Investment Co., Ltd.
* Co-founded WEB2.0, Inc., as a consolidated subsidiary to operate “PingKing,” aninformation-sharing site that is CGM (Consumer Generated Media) with PIA Corporation.
and Kakaku.com, Inc.
* Kakaku.com, Inc. (a consolidated subsidiary), established Kakaku.com Financial, Inc.

- 27 -

January 2006

March 2006
August 2006

April 2007

* Implemented corporate separation to make DG Solutions Co., Ltd., a newly establishedconsolidated subsidiary, take over solution business, and DG Incubation, Inc. (aconsolidated subsidiary), take over incubation business. Shifted to a pure holding company.
* Established DG Asset Management, Inc., as a consolidated subsidiary for real estate-related
management/operation and investment.
* Established DG Media Marketing Inc., as a consolidated subsidiary for general WEB
advertising business.
* DG Solutions Co., Ltd., for solution business implemented corporate separation to makeIbex & rims Corporation, and DG Media Marketing, Inc., take over its business, andbecame an intermediate holding company.
* Ibex & rims Corporation changed its corporate name to DG & Ibex, Inc.
* Established CGM Marketing, Inc., as a consolidated subsidiary for developing newmarketing techniques and strategies with CGM and matching bloggers and advertisers,
jointly with DENTSU INC., cyber communications inc., and ASATSU-DK INC.
* Established Growth Partners, Inc., as a consolidated subsidiary for IR supporting businesswith Web 2.0 and operation of “STOCKCAFE,” an IR portal site, jointly with Asia
Securities Printing Co., Ltd. (present PRONEXUS INC.).
* DG Solutions Co., Ltd. (a consolidated subsidiary), acquired all shares of Sogei Co., Ltd., tomake it a consolidated subsidiary.
* Bought out DG Asset Management, Inc., and took over its business.

- 28 -

CORPORATE INFORMATION(As of June 30, 2007)
Corporate Name:
Digital Garage, Inc.
Date of Establishment:
August 17, 1995
Paid-in Capital:¥1,809,412,522
Fiscal Year:
July 1 to June 30
Number of Shares Authorized:
480,000
Number of Shares Issued:
158,282
Number of Shareholders:
3,169
Securities Code:4819
Stock Exchange Listing:
JASDAQ Securities Exchange
Number of Employees:
718 (Consolidated)
Number of Subsidiaries:
23
Transfer Agent:
The Chuo Mitsui Trust and Banking Company, Limited.
Accounting Auditor:
Ernst & Young ShinNihon
Headquarters:
Yamazaki Building, 2-43-15 Tomigaya, Shibuya-ku, Tokyo 151-0063, Japan
Investor Relations Contact:- Phone: +81-(0)3-5465-7747- Fax:+81-(0)3-5465-7743- E-mail: ir@garage.co.jp- URL: http://www.garage.co.jp/en/index.html- 29 -

Principal Shareholders (Top 10):
As of June 30, 2007
Number of
Shares Held

Name of Shareholder
Kaoru Hayashi
JP Morgan Chase CREF Jasdec Lending Account(Local Custodian: The Bank of Tokyo-Mitsubishi UFJ, Ltd.)TIS Inc.
The Master Trust Bank of Japan, Ltd. (Trust Account)
K Garage Ltd.
Mitsui Asset Trust and Banking Company, Limited.
(Local Custodian: Japan Trustee Services Bank, Ltd.)
Japan Trustee Services Bank, Ltd. (Trust Account)Yasuyuki Rokuyata
Man and Machine Interface Co., Ltd.
Mixx
(Local Custodian: The Bank of Tokyo-Mitsubishi UFJ, Ltd.)
Total

44,473

Percentage ofTotal Number of
Shares Issued
28.10%

11,731
8,800
6,081
5,360

7.41%
5.56%
3.84%
3.39%

5,300
5,249
4,986
4,701

3.35%
3.32%
3.15%
2.97%

4,189
100,870

2.65%
63.73%

As of June 30, 2006
Number of
Shares Held

Name of Shareholder
Kaoru Hayashi
JP Morgan Chase CREF Jasdec Lending Account(Local Custodian: The Bank of Tokyo-Mitsubishi UFJ, Ltd.)The Master Trust Bank of Japan, Ltd. (Trust Account)
Japan Trustee Services Bank, Ltd. (Trust Account)
TIS Inc.
Man and Machine Interface Co., Ltd.
K Garage Ltd.
Yasuyuki Rokuyata
Mitsui Asset Trust and Banking Company, Limited.
(Local Custodian: Japan Trustee Services Bank, Ltd.)
Narihiko Yoshida
Total
Note:
1. One share was split into two shares on December 31, 2006.

- 30 -

22,234.85

Percentage ofTotal Number of
Shares Issued
28.14%

5,428.00
5,330.00
4,616.00
4,400.00
2,850.96
2,680.00
2,492.70

6.87%
6.75%
5.84%
5.57%
3.61%
3.39%
3.15%

2,000.00
1,430.00
53,462.51

2.53%
1.81%
67.66%

Digital Garage, Inc.
Yamazaki Building, 2-43-15 Tomigaya, Shibuya-ku,
Tokyo 151-0063, Japan
http://www.garage.co.jp/en/index.html- 31 -