SOFTBANK CORP.
CONSOLIDATED FINANCIAL REPORTFor the six-month period ended September 30, 2006
Tokyo, November 8, 2006

FINANCIAL HIGHLIGHTS
1.

Results of Operations(Millions of yen; amounts less than one million yen are omitted.)

OperatingincomeNet sales
Amount%Six-month period ended
September 30, 2006

¥1,120,173 114.3

Six-month period ended
September 30, 2005

¥522,787

Fiscal year ended
March 31, 2006

¥1,108,665

Ordinary income(loss)Net income (loss)%

Amount%Amount%¥112,552 2,457.8¥62,690-¥14,439-¥(13,483)-¥(4,182)-

Amount72.1¥4,400-¥62,299¥27,492

Net income (loss) per
share— primary (yen)Net income pershare— diluted (yen)Six-month period ended
September 30, 2006

¥13.68¥12.84Six-month period ended
September 30, 2005¥(11.90)-

Fiscal year ended
March 31, 2006

¥54.36¥50.71¥57,550

Notes:
1.

Equity in earnings under the equity method
Six-month period ended September 30, 2006:
Six-month period ended September 30, 2005:
Fiscal year ended March 31, 2006:¥ 8,046 million¥ 4,378 million¥ 9,521 million

2.

Weighted-average number of shares issued and outstanding during each fiscal period (consolidated)
Six-month period ended September 30, 2006:
1,055,140,098 shares
Six-month period ended September 30, 2005:
351,456,370 sharesFiscal year ended March 31, 2006:
1,054,478,501 shares

3.

Changes in accounting methods: No

4.

Percentage changes for net sales, operating income, ordinary income (loss) and net income (loss) are compared with thecorresponding period of the previous fiscal year.

12.

Financial Condition(Millions of yen; amounts less than one million yen are omitted.)

Total assets

Net assets

Equity ratio (%)

Net assets
per share (yen)

As ofSeptember 30, 2006

¥3,986,991¥665,696

6.2¥236.14

As of
September 30, 2005

¥1,578,924¥256,52410.8¥484.67

As ofMarch 31, 2006

¥1,808,398¥347,263

13.4¥229.88

Note: Number of shares outstanding (consolidated)
As of September 30, 2006:
As of September 30, 2005:
As of March 31, 2006:
3.

1,055,170,502 shares
351,457,486 shares
1,055,082,087 shares

Cash Flows(Millions of yen; amounts less than one million yen are omitted.)

Operating activities

Investing activities

Financing activities

Cash and cash equivalents
at the end of the period

Six-month period ended
September 30, 2006

¥187,139¥(1,956,985)¥1,598,773¥272,572

Six-month period ended
September 30, 2005¥(17,981)¥(74,296)¥1,843¥231,408

Fiscal year ended
March 31, 2006

¥57,806¥27,852¥30,078¥446,694

4.

Scope of Consolidation at September 30, 2006
Consolidated subsidiaries:
Equity-method non-consolidated subsidiaries:
Equity-method affiliates:

5.

121
3
68

Changes in Scope of Consolidation
Consolidated subsidiaries:
Newly added:
Excluded:

1244

Equity-method non-consolidated subsidiaries and affiliates:
Newly added:
10
Excluded:26

2

Management Policies
1. Fundamental Management Policies
Since their establishment, SOFTBANK CORP. (hereafter "the Company") and the SOFTBANK Group(hereafter "the Group") have followed the core management philosophy of "Endeavoring to benefit
society and the economy and to maximize enterprise value by fostering the sharing of wisdom andknowledge gained through the IT revolution." The Group is working to facilitate the realization of thetrue ubiquitous society, where broadband will enable anyone to access all kinds of information at any
time and anywhere.
In October 2006, the corporate names of Vodafone K.K. and JAPAN TELECOM CO., LTD., werechanged to SOFTBANK MOBILE Corp. (hereafter "SOFTBANK MOBILE") and SOFTBANKTELECOM Corp. (hereafter "SOFTBANK TELECOM"), respectively. The Group has established afast, efficient management system for the purpose of realizing its management philosophy under a unified
Softbank brand.
As a corporate group based on Internet-related businesses, the Group will not limit itself to its existingrole as a comprehensive telecommunications carrier. Rather, by providing innovative services as acomprehensive digital information company, the Group aims to make people's lifestyles and businessstyles more affluent and enjoyable and to be the global No. 1 corporate group in the broadband era.
2. Policy Regarding Allocation of Earnings
The fundamental policy of the Company is to increase shareholder value by raising the Company’s
enterprise value and providing an appropriate return to shareholders and all other stakeholders.
The Company's policy regarding dividends is to set dividend payments by taking into consideration theneed to maintain the proper balance between bolstering the operating base and preserving a stabledividend from a medium- to long-term perspective. At this point, dividend payments for the current fiscal
year have not yet been determined.
3. Target Management Indices
The Group places great importance on results and rates of change in the principal management
indices—net sales, operating income, ordinary income, net income, cash flows, and EBITDA*1—for eachof our internal management segments. The Group also attaches great importance to indices that trackuser trends, particularly in telecommunications businesses, such as the number of subscribers, market
share, churn rate, and average revenue per user (ARPU).
*1. EBITDA: Operating income/loss + depreciation and loss from disposal of fixed assets(which are included in operating expenses)
4. Medium-and-Long-Term Strategies
As a comprehensive digital information company in the ubiquitous society, the Group aims to achieve
FMC*2 through broadband and to seamlessly develop a range of broadband content over that
infrastructure. In this way, the Group's medium-and-long-term strategies target the maximization ofGroup revenues and enterprise value through the establishment of unique business models for thebroadband era that will generate long-term, stable income from its infrastructure businesses, increasing
returns from its portal businesses, and diversified sources of profit from its content businesses.
*2. FMC: Fixed Mobile Convergence(1)Maximizing cash flow to reduce interest-bearing debt in the mobile communications businessTo fund the acquisition of Vodafone K.K. (currently SOFTBANK MOBILE Corp.), in April 2006, theGroup raised ¥1.28 trillion based on a bridge facility agreement as a non recourse loan from 17 financial
institutions. That agreement is scheduled to be refinanced in November 2006, with the refinancing as anon recourse loan expected to total ¥1.45 trillion. The Group plans to use the structured finance method
known as WBS*4. Under the terms of the WBS transaction, the debt and the cash flow from the mobile
communications business will be separated from the Group, and the cash flow from the business will, as arule, be used for repayment of the debt (except for reinvestment in the business), thereby increasing thecertainty of principal and interest payments. As a result, the refinancing will receive a higher rating, and,in comparison with borrowings using conventional financing methods, it will be possible to reduce3fund-raising costs. For the near future, the Group will try to maximize the cash flow from the mobile
communications business, reduce the interest-bearing debt resulting from the securitization, andstrengthen its financial position. Accordingly the Group will strive to increase the number of subscribers
and raise ARPU.
*3. A type of loan for which, if the borrower is unable to repay the loan, the lender can seize theassets pledged as collateral for the loan, but not any of the borrower's other assets.
*4. WBS = whole business securitization(2) Expanding broadband content
The Group is targeting further expansion of the content available on the broadband infrastructure. The
elimination of areas with no broadband service is an objective of the Ministry of Internal Affairs andCommunications' Next-Generation Broadband Strategy 2010. Along with the growth in the household
penetration rate of fixed-line broadband access services, the realization of broadband capabilities inmobile communications is also expected. The Group believes that it will be important to provide
appealing broadband content, such as video and social networking services (SNS). In November 2006,
the Company came to an agreement with News Corporation Group on the establishment of MySpaceJapan KK, to operate “MySpace Japan” as the Japanese service of the world’s largest SNS site
“MySpace” and started the testing service of MySpace Japan. In addition to substantially improving theservices and content available under the Group's brand, including Yahoo! JAPAN, the Group will strive toexpand broadband content through alliances with leading content providers in Japan and overseas.
(3) Rapidly establishing ubiquitous, seamless broadband infrastructure
To realize a ubiquitous, seamless broadband environment, the Group aims to provide a comprehensive
range of telecommunications modes. In fixed-line broadband infrastructure, the Group's Yahoo! BB ADSL
service has driven the popularization of broadband in Japan. The Group will continue to implement R&D
targeting the commercialization of various new technologies, such as FTTR*5 and high-speed PLC*6. In
the mobile communications business, the Group is making steady progress toward the realization ofmobile broadband, including the ongoing establishment of base stations for Third-Generation (3G)
mobile phones and the start of a HSDPA*7 high-speed data communication service. The Group aims toachieve FMC at an early stage through utilization of next-generation high-speed mobile communications
services and Group wireless LAN networks.
*5. Fiber To The Remote terminal: From NTT central offices to equipment located near the user's
premises, transmission is handled over fiberoptic technology, like that used with FTTH. From
the nearby transmission equipment, which is installed on such structures as telephone poles, tothe user, transmission is handled over metal wire technology, like that used with ADSL.
*6. Power line communications: technology for using power lines in housing and commercial
buildings for communications transmission.
*7. High Speed Downlink Packet Access: A high-speed data transmission protocol for 3G
mobile communications systems.
(4) Providing broadband content developed in-house to customers around the world
The Group aims to be the No. 1 broadband content group in Japan, which has the fixed-line broadband
infrastructure with the lowest cost and highest speed in the world. The Group's strategy is to promote
this broadband content in countries around the world. Following the acquisition of SOFTBANKMOBILE in May 2006, the Group agreed on a strategic alliance with Vodafone PLC, of the U.K., amobile phone operator with one of the largest customer bases in the world. This alliance will include
the establishment of a joint venture that will target global promotions of broadband content. And in
November 2006, the Group started the testing service of MySpace Japan, the Japanese service of theworld’s largest SNS site “MySpace”. As the first step, the Group will extend the unique broadband
business model developed by the Group and expand profit opportunities on a global basis.
5. Important Management Issues(1) Mobile Communications Initiatives
Mobile number portability*8 took effect on October 24, 2006, and competition among carriers in themobile communications market is expected to intensify. In this setting, the Group will need to acquire4new customers by increasing customer satisfaction. In October, the brand of the Group’s mobile
communications business was changed from Vodafone to SOFTBANK, and the Group is implementing
the following four initiatives.
1. 3G Network Enhancement
We are enhancing our network to eliminate areas in which it is difficult to receive 3G mobile phonesignals. Our objective is to increase the number of 3G base stations to 46,000 within the current fiscal
year. As of the end of September 2006, the number of 3G base stations was 24,539. Based on the resultsof a customer survey, we need to improve the 3G mobile phone signal strength in customers’ homes, andaccordingly we are taking steps to enhance our network, such as a campaign featuring free installation ofhome antennas.
2. 3G Handset Lineup Enrichment
We will develop our lineup of 3G handsets that are optimal for the Japanese market. In the second
quarter, the SoftBank 705SH, by Sharp, was the best-selling*9 model in Japan in August and September.
In addition, the SoftBank 905SH, by Sharp, which can receive one-segment*10 broadcasts, was the No. 1
one-segment model for four consecutive months from June to September*9. In September 2006, weannounced a broad product lineup with 13 new 3G handsets available in 54 colors. We are strengthening
our sales initiatives for the third quarter, including the introduction of two handsets available in 11 colors(which have not yet been announced).
3. Content Enhancement
We have started the innovative mobile Internet content, such as the Yahoo! Keitai new mobile Internet
portal site, which links to Yahoo! JAPAN with just a press of the Y! button, and Yahoo! mocoa*11, which
integrates Yahoo JAPAN’s communication tools. In the future, we will generate synergies with Group
companies, such as a business alliance with Yahoo Japan Corporation (hereafter "Yahoo Japan"), andexpand our content lineup for mobile platforms.
4. Enhancement of Sales Structure
Vodafone shops have been renamed Softbank shops, and we are working to bolster our sales structure.
At the same time, we will strengthen the handling of SOFTBANK MOBILE products through masselectronics retailers, one of the SOFTBANK Group's powerful sales channels. In July 2006, the Groupmerged SOFTBANK MOBILE's corporate sales department into SOFTBANK TELECOM to enhance
corporate sales of mobile services.
In October 2006, we introduced new rate plans. Under the Gold Plan*13, SOFTBANK MOBILE
offers free*12 phone calls and mail between SoftBank mobile customers. In addition, under the Softbank
Grand Opening Campaign, which will run until January 15 2007, subscribers will receive 70% off themonthly basic charge when they entered into the Gold Plan, and customers using mobile number
portability to switch from other mobile phone companies will receive a basic monthly charge discountbased on the number of years in their contract with the other mobile phone company.
When SOFTBANK MOBILE experienced problems with its computer systems on October 28 and 29,
it suspended the acceptance of applications, including applications related to mobile number portability.
These suspensions caused inconvenience to customers and other mobile phone companies.
SOFTBANK MOBILE has implemented countermeasures to prevent any reoccurrence of these problems.
In addition to upgrading the processing capacity of its computer systems, SOFTBANK MOBILE hasreevaluated registration system settings and reconsidered the path used to handle information when an
application is received so that application processing can be completed quickly.
*8. A system that allows mobile phone users to switch to another operator without changing theirmobile phone number*9. Source: Research by GfK Japan*10. Terrestrial digital broadcasts for mobile devices*11. Yahoo! mocoa: Yahoo! mobile communication application*12. Applies to voice calls to other SoftBank mobile phones. If the total of calls to other
SoftBank mobile phones between 21:00 and 0:59 exceed 200 minutes in one billing month,
there will be a charge of ¥21 (tax included) for each 30 seconds over 200 minutes. Freephone calls and mail between SoftBank mobile customers do not apply to international
service.
*13. Gold Plan subscribers must subscribe to the New Super Bonus.

5(2) Broadband infrastructure initiatives
The FTTH access service in Japan has spread rapidly. Nonetheless, the cost and speed of the Group’s
Yahoo! BB ADSL service have received broad support from customers, and at this point, we believe that
this service has sufficient functionality for customers to enjoy a wide range of content over broadband.
While the Group will make every effort to acquire new customers to maintain its customer base forYahoo! BB ADSL of over 5 million lines, we will continue our R&D activities targeting thecommercialization of new technologies that will succeed ADSL, such as FTTR access services andhigh-speed PLC services. A fair competitive environment has not been established in the FTTH accessservice market in Japan, not only in costs but also in such areas as procedural requirements. In thissetting, the Group is maintaining a state of readiness that will enable it to start full-fledged operations
once a fair competitive environment is established. For the near future, our basic policy is to develop
operations in line with anticipated revenues.
(3) Fixed-line telecommunications initiatives
In fixed-line telecommunications operations, the consumer market continues to contract due to thepenetration of mobile phones and e-mail, but demand remains firm in the corporate market. In such anenvironment, SOFTBANK TELECOM continues to directly market fixed-line services to corporations,with an emphasis on the Otoku Line direct connection voice service. In addition, SOFTBANKTELECOM has been developing and providing mobile solutions for corporate customers utilizing theservices of SOFTBANK MOBILE, and will work aggressively to provide data services to corporate
customers. With continuous cost reduction through the effective use of the Group’s management
resources, SOFTBANK TELECOM will work to enhance its profitability.
(4) Generation of a synergistic effect among Group companies
The Group will work to generate new synergies between new Group member SOFTBANK MOBILE,
which joined the Group in the period under review, and other Group companies. Through the
integration of the management systems of the Group’s three communications companies (BBTECHNOLOGY, SOFTBANK TELECOM, and SOFTBANK MOBILE) in October 2006, the Groupbuilt a unified system for its communications operations. Moreover, SOFTBANK MOBILE is taking
steps to generate synergies in content and services, such as launching innovative mobile Internet content,
including Yahoo! Keitai and Yahoo! mocoa. In the future, we will continue to pursue a range of Groupsynergies, such as reducing costs through network integration and leveraging sales synergies throughexpansion of our customer base and sales channels.
(5) Becoming a comprehensive digital information company
As a corporate group of Internet-based businesses, the Group will not limit itself to its existing role as acomprehensive communications carrier. Rather, the Group will further enhance its broadband content,
centered on video, such as the Yahoo! Streaming video portal site and MySpace Japan, the Japaneseservice of SNS site “MySpace”. As a comprehensive digital information company in the broadband era,
the Group will work to develop innovative services in infrastructure, portals, and content and strive toclearly differentiate itself from competitors.
(6) Strengthening governance and compliance systems
The Group considers governance and compliance to be important management issues. The Company
revised the SOFTBANK Group Charter, formulated the SOFTBANK Group Code of Conduct for
Officers and Employees, and set up the Group Hotline. In respect to compliance systems, in May 2006,
the Group inaugurated the CCO Committee, which is composed of the Chief Compliance Officers ofGroup companies. In the future, the Group will continue to implement initiatives to bolster its
governance and compliance systems. In addition, the Group will continue working to ensure that all
Group employees strictly observe all applicable laws, regulations, and social norms in corporate andsocial activities and that the Group meets the expectations of all stakeholders, and to that end the Groupwill strive to see that the Group acts in accordance with an even higher level of ethical standards.

6

Results of Operations and Financial Position
1. Consolidated Results of Operations<Overview of Results for the six-month period ended September 30, 2006>
Net sales increased by ¥597,386 million, or 114% on a year-on-year basis, to ¥1,120,173 million. On
April 27, 2006, the Company completed the acquisition of Vodafone K.K. (currently SOFTBANKMOBILE Corp.), which is included in scope of the consolidation from the end of April 2006, and thefinancial results were consolidated from May 2006. As a result, sales in the Mobile Communications
segment, which was newly established in the current fiscal period, amounted to ¥584,459 million. In theInternet Culture segment, sales increased by ¥19,788 million, or 28%, to ¥91,319 million, due to strong
advertising revenues and Yahoo! Auction system usage fees. In addition, the Broadband Infrastructure
and the Fixed-line Telecommunications segments also recorded strong performances.
Operating income was ¥112,552 million, an increase of ¥108,151 million from ¥4,400 million in thesame period of the previous fiscal period. The Mobile Communications segment, which was newly
established in the current fiscal year, recorded operating income of ¥56,635 million. The Broadband
Infrastructure segment became profitable, with operating income of ¥11,668 million, an improvement of¥12,679 million, due to a shift of ADSL subscriber acquisition efforts to more effective channels andimproved results in the FTTH business. The Fixed-line Telecommunications segment became profitable,with operating income of ¥295 million, an improvement of ¥26,595 million, following improved
profitability accompanying a change in the marketing strategy for the Otoku Line service of SOFTBANKTELECOM. In the Internet Culture segment, advertising revenues and Yahoo! Auctions system usage
fees were favorable, resulting in an increase in operating income of ¥10,706 million, or 32%, to ¥44,343
million.
Ordinary income was ¥62,690 million, an improvement of ¥76,174 million from the ordinary loss of¥13,483 million recorded in the same period of the previous fiscal year. In addition to the increase inoperating income, equity in earnings under the equity method*1 increased by ¥3,667 million, to ¥8,046
million, due to higher profit at SBI Holdings, Inc. On the other hand, principally as a result ofborrowings associated with the acquisition of SOFTBANK MOBILE, interest expense rose ¥18,745
million, to ¥32,545 million, and financing-related expenses were ¥19,954 million.
*1: Equity in earnings under the equity method for the period under review includes the Group’s
portion of the profits of SBI Holdings, Inc. through July 2006.
Net income was ¥14,439 million, an improvement of ¥18,621 million from a net loss of ¥4,182 million
recorded in the same period of the previous fiscal year. Due principally to the sale of all shares in SBI
Holdings, Inc., in August 2006, gain on sales of investment securities was ¥69,206 million. As a result,
special income was ¥71,468 million. Special loss was ¥15,260 million, due primarily from a loss onbond redemption of ¥7,386 million following the repurchase and redemption of Euro-denominatedStraight Bonds due 2011. Current income taxes were ¥80,972 million, deferred income taxes were
¥6,041 million, and minority interest was ¥17,444 million. The increase in current income taxes wasprimarily attributable to the gain on sales of investment securities.

7

<Results for the Interim Period Ended September 30, 2006 by Business Segment>
Mobile Communications
This segment, which was newly established in the current fiscal period, is principally comprised of theresults of SOFTBANK MOBILE starting in May. Net sales in the interim period were ¥584,459 million,
and operating income was ¥56,635 million.
(Quartely trends of the Segment)
FY2007
2007/Q2
2007/Q1
Sales

351,991

232,467

Operatingincome29,341

27,293(Millions of yen; amounts less than one million yen are omitted)
FY2006
2006/Q4
2006/Q3
2006/Q2
2006/Q1
Newly established on April 30, 2006

As of the end of September 2006, SOFTBANK MOBILE had a total of 15,307,000 subscribers. The
number of subscribers has risen steadily since June 2005. The number of 3G subscribers reached
4,562,400, or 29.8% of the total number of subscribers.
Following favorable results in the first quarter, sales were favorable in the second quarter as a result ofgrowth in the number of subscribers and higher data transmission charges stemming from the rising
percentage of 3G subscribers. In the second quarter, ARPU (average revenue per user) was ¥5,700, an
increase of ¥110 from the first quarter. In respect to costs, with imminent mobile number portability,
new customer acquisition was limited, and as a result new customer acquisition commissions followed adeclining trend. On the other hand, the aggressive introduction of new handsets led to an increase in thenumber of customers replacing their handsets, and replacement commissions followed an increasing trend.
The churn rate in the second quarter declined to 1.27%, from 1.50% in the first quarter, and the upgrade
rate increased to 2.53%, from 1.99% in the first quarter.
In the future, we will take aggressive steps to control costs, such as reducing network costs and cutting
administrative costs through Group synergies. In addition, with the goal of establishing a frameworkthat is fair for both customers who replace their handsets within short periods of time and customers who
use the same handsets for relatively long periods of time, we introduced the installment sales method forhandsets. We will continue working to acquire customers and to reduce the churn rate by increasing
customer satisfaction.
Broadband Infrastructure
Segment sales increased by ¥3,405 million, or 3% from the same period of the previous fiscal year, to¥129,050 million. Operating income in the interim period was ¥11,668 million, an improvement of¥12,679 million.
(Quartely trends of the Segment)
FY2007
2007/Q2
2007/Q1(Millions of yen; amounts less than one million yen are omitted)
FY2006
2006/Q4
2006/Q3
2006/Q2
2006/Q1

Sales

65,72863,322

71,262

71,54364,43961,205

Operatingincome (loss)

6,189

5,479

12,321

9,361

3,483

(4,494)

The number of Yahoo! BB ADSL lines installed continued to increase steadily, reaching a total of 5.14
million at the end of September 2006. The ARPU of the ADSL business also continued to improve due
to growth in the percentage of users subscribing to high-speed service plans, such as Yahoo! BB 50M.
For subscriber acquisition, the Group’s efforts remain centered on mass electronics retailers. In the
future, the Group will strive to take advantage of synergies, such as cross-selling Yahoo! BB ADSL
services to SOFTBANK MOBILE’s existing mobile phone subscribers.
In FTTH connection service, the Group is maintaining a state of readiness that will enable it to startfull-fledged operations as soon as a fair competitive environment is established, but until that point is8reached, our basic policy is to develop operations in line with anticipated revenues. The profitability of
our FTTH business is improving. We will continue to implement R&D targeting the commercializationof various new technologies, such as FTTR and high-speed PLC.
Modem rental income is declining because BB TECHNOLOGY Corp. (hereafter “BB TECHNOLOGY”)
sold its modem rental business in December 2005. On the other hand, under the terms of a service
agreement with BB Modem Rental Yugen Kaisha (hereafter “BB Modem Rental”), BB TECHNOLOGY
is receiving servicing fees, incentives, and royalties. In the interim period, net sales and operating
income declined substantially from the second half of the fiscal year ended March 31, 2006, due to adecrease in incentives payments from BB Modem Rental. However the ADSL business, excluding this
impact, continues to record strong results.
Fixed-line Telecommunications
Segment sales increased by ¥10,045 million, or 6%, to ¥181,950 million. Operating income in theinterim period was ¥295 million, an improvement of ¥26,595 million.
(Quartely trends of the Segment)
FY2007
2007/Q2
2007/Q1(Millions of yen; amounts less than one million yen are omitted)
FY2006
2006/Q4
2006/Q3
2006/Q2
2006/Q1

Sales

93,276

88,67392,071

90,256

83,30088,604

Operatingincome (loss)

(916)

1,212

2,928

(1,787)(12,209)(14,089)SOFTBANK TELECOM positioned the Otoku Line direct connection voice service as its core voiceservice and continued to focus on marketing the service directly to corporate customers. The number oflines installed reached 1,020 thousand as of the end of September 2006. In June 2006, SOFTBANKTELECOM acquired the telecommunication services (CHOKKA direct connection, My Line, ADSL, ISP
service, etc.) of HEISEI DENDEN CO., LTD., and HDD COMMUNICATIONS CO., LTD. As a result,the number of lines installed for direct connection voice services offered by SOFTBANK TELECOM,
including CHOKKA, reached 1,070 thousand.
In the fiscal year ended March 31, 2006, agency management and other responsibilities related to the
Otoku Line business were transferred to JAPAN TELECOM INVOICE Co., Ltd. As a result, theprofitability of the Otoku Line business is improving. In the second quarter, due to expenses related tooperational integration following the acquisition of services from HEISEI DENDEN and HDD
COMMUNICATIONS, an operating loss was recorded.
In the future, SOFTBANK TELECOM will work to enhance its profitability by reducing costs throughthe effective use of SOFTBANK Group management resources. At the same time, SOFTBANKTELECOM will aggressively focus its management resources on strategic fields, principally mobile
solutions for corporate customers utilizing the services of SOFTBANK MOBILE and data services tocorporate customers.
Internet Culture
Segment sales in the interim period increased by ¥19,788 million, or 28%, to ¥91,319 million, andoperating income increased by ¥10,706million, or 32%, to ¥44,343 million.
(Quartely trends of the Segment)
FY2007
2007/Q2
2007/Q1(Millions of yen; amounts less than one million yen are omitted)
FY2006
2006/Q4
2006/Q3
2006/Q2
2006/Q1

Sales

46,67644,642

42,37442,21436,896

34,635

Operatingincome22,712

21,63021,297

19,256

17,167

16,469Yahoo Japan continued to record strong results in Internet advertising due to the provision of advertising9

products that meet the needs of advertisers and to efforts to secure new demand. In non-advertisingbusiness services, the number of stores registered in Yahoo! Auctions and Yahoo! Shopping increased, andas a result tenant fees and commission revenues were favorable. In consumer services, Yahoo! Auctions
recorded strong system usage revenues, and the number of customer IDs for Yahoo! Premium continued
to increase, reaching 6.43 million at the end of September 2006.
The Yahoo! Keitai Internet portal site, which links SOFTBANK MOBILE customers to Yahoo! JAPANwith just a press of the Y! button, was started in October 2006, marking a major step toward therealization of true mobile Internet services.
e-Commerce
Segment sales in the interim period decreased by ¥3,976 million, or 3%, to ¥124,180 million, while
operating income rose ¥1,316 million, or 85%, to ¥2,860 million.
(Quartely trends of the Segment)
FY2007
2007/Q2
2007/Q1(Millions of yen; amounts less than one million yen are omitted)
FY2006
2006/Q4
2006/Q3
2006/Q2
2006/Q1

Sales

65,03759,142

83,661

71,456

67,68860,469Operatingincome

1,399

1,461

1,843

1,473

817

726

Higher sales and profits were recorded in the distribution business of SOFTBANK BB Corp. (hereafter“SOFTBANK BB”). SOFTBANK BB reinforced its sales system for corporate customers, and as aresult, shipments increased, centered on PC servers and peripherals, and sales of software were alsostrong. In the future, SOFTBANK BB will also focus on mobile services for corporate customers. In
consumer business, wholesaling to EC companies remained favorable. In distribution, from the current
period, a strategy of shifting to e-commerce and service businesses is being implemented. As one facetof that initiative, in April 2006, BB Softservice Corp. was established through the corporate separation of
SOFTBANK BB’s consumer ASP*2 service department and made a full-scale operational start. In the
future, leveraging synergies among SOFTBANK Group companies, services will be further strengthened
and extended to corporate customers.
From the period under review, the Company applied “Practical solution on accounting for revenue
recognition of software” (Financial Accounting Standards Implementation Guideline No.17 issued on
March 30, 2006). As a result, the Company is required to present certain transactions as net sales fromthis fiscal year, and net sales of certain software transactions were recorded at ¥596 million, which would
have been the amount of gross profit if the previous accounting standard had been applied. Due to the
netting with the amounts for goods purchased, net sales and cost of goods sold decreased by ¥16,226
million.
*2. Application Service Provider: A company that rents application software and others tocustomers through the Internet.
Others
The results of this segment include the performance of Broadmedia business (mainly Club iT
Corporation), Technology Services business (mainly SOFTBANK TECHNOLOGY CORP.), Media &Marketing business (mainly SOFTBANK Creative Corp.), and Other Businesses (mainly TV BANK
Corp. and Fukuoka Softbank Hawks related businesses).

10

2. Financial Position<Balance Sheet Analysis>
In the Company’s consolidated balance sheet at the end of the interim period, the new consolidation of
SOFTBANK MOBILE from the end of April 2006 had the effect of increasing current assets by ¥305,944
million, non-current assets by ¥2,008,463 million (including goodwill of ¥1,105,569 million), current
liabilities by ¥277,210 million, and long-term liabilities by ¥153,786 million. In raising funds for theacquisition of SOFTBANK MOBILE, a bridge loan from 17 financial institutions increased current
liabilities by ¥1,173,830 million, subordinated loans by Vodafone International Holdings B.V. increased
long-term liabilities by ¥100,000 million, and the issuance of BB Mobile Corp. preferred stock allocatedto Vodafone International Holdings B.V. raised net assets by ¥300,000 million. In August 2006, as aresult of a share exchange through delivery of cash implemented pursuant to the Law on Special
Measures for Industrial Revitalization, SOFTBANK MOBILE became a wholly owned subsidiary of theCompany. Also, the bridge loan undertaken for the acquisition of SOFTBANK MOBILE is scheduled
to be converted to long-term debt through the securitization of the mobile communications business, witha target date of late November 2006.
Current assets increased by ¥197,153 million from the end of the previous fiscal year, to ¥942,283
million. Principally as a result of the new consolidation of SOFTBANK MOBILE, the Company
recorded increases of ¥160,290 million in notes and accounts receivable-trade, ¥75,667 million in
short-term deferred tax assets, and ¥23,853 million in inventories, such as mobile phone handsets. Other
current assets increased by ¥115,662 million due to the recording of deposits following theimplementation of legal defeasance with respect to Euro-denominated Straight Bonds due 2011. On theother hand, principally as the result of payment for the acquisition of SOFTBANK MOBILE, cash anddeposits declined by ¥173,139 million.
Property and equipment, net increased by ¥554,688 million, to ¥973,293 million. Primarily as a resultof the new consolidation of SOFTBANK MOBILE, the Company recorded increases of ¥448,751 million
in telecommunications equipment, such as base stations and switching equipment, ¥30,607 million inbuildings and structures, such as network centers, and ¥10,712 million in land. In addition,
construction-in-progress increased by ¥45,092 million.
Intangible assets increased by ¥1,268,508 million, to ¥1,370,794 million. Primarily as a result of the
new consolidation of SOFTBANK MOBILE, goodwill increased ¥1,106,529 million and software
increased by ¥133,343 million.
Investments and other assets increased by ¥156,134 million, to ¥697,517 million. Primarily as a resultof the new consolidation of SOFTBANK MOBILE, long-term deferred tax assets increased ¥137,974
million and other assets including long-term prepaid expenses rose ¥42,127 million. Although Yahoo
JAPAN acquired shares in The Japan Net Bank, Limited, investment securities declined ¥24,101 million
due to the sale of all shares in SBI Holdings, Inc..
Current liabilities increased by ¥1,665,175 million, to ¥2,252,078 million. Short-term borrowings rose
¥1,203,894 million, primarily on account of a bridge loan used in the acquisition of SOFTBANKMOBILE. In addition, principally due to the new consolidation of SOFTBANK MOBILE, accounts
payable-other and accrued expenses rose ¥185,434 million and accounts payable-trade rose ¥45,952
million. Due to plans for the repurchase and redemption in October 2006 of Euro-denominated Straight
Bonds due 2011, as well as an increase in the current portion of other existing bonds, current portion of
corporate bonds rose ¥83,137 million and cash receipts as collateral rose ¥50,000 million. In addition,
due primarily to gain on the sales of investment securities, income taxes payable rose ¥53,653 million.
The Company plans to shift from the bridge loan used in the acquisition of SOFTBANK MOBILE tolong-term debt in late November 2006 through the securitization of the mobile communications business.

11

Long-term liabilities increased by ¥194,983 million, to ¥1,069,215 million. Long-term debt rose
¥180,547 million, primarily as a result of fund-raising associated with the acquisition of SOFTBANKMOBILE. The new consolidation of SOFTBANK MOBILE increased corporate bonds by ¥100,000
million, while the shift to current liabilities of Euro-denominated Straight Bonds due 2011 and otherexisting bonds decreased corporate bonds by ¥82,415 million. As a result, corporate bonds rose ¥17,584
million. Accompanying the new consolidation of SOFTBANK MOBILE, an allowance for point
mileage of ¥43,682 million was recorded.
Net assets increased by ¥318,432 million, to ¥665,696 million. Minority interest in consolidated
subsidiaries rose ¥312,033 million, primarily due to the issuance of BB Mobile Corp. preferred stock
allocated to Vodafone International Holdings B.V.
<Cash Flow Analysis>
1.Overview of Interim Period
During the interim period ended September 30, 2006, net cash provided by operating and financing
activities was ¥187,139 million and ¥1,598,773 million, respectively, while net cash used in investing
activities was ¥1,956,985 million. As a result, cash and cash equivalents at the end of the periodamounted to ¥272,572 million, a decrease of ¥174,121 million from the end of the previous fiscal year.
Net cash provided by operating activities was ¥187,139 million. Income before income taxes andminority interest amounted to ¥118,898 million. Non-cash items included depreciation and amortization,
excluding amortization of goodwill totaling ¥84,542 million and amortization of goodwill amounting to¥26,871 million. Adjustments included the subtraction of gain on sales of marketable and investment
securities, net, of ¥69,192 million, which is included in income before income taxes and minority interestand the addition of interest expense of ¥32,545 million. Interest paid was ¥24,551 million and income
taxes paid, for Yahoo Japan and others, was ¥27,436 million.
Net cash used in investing activities was ¥1,956,985 million. This mainly reflected the payment of¥1,844,046 million for acquisition of interests in subsidiaries newly consolidated, net of cash acquired,accompanying the acquisition of SOFTBANK MOBILE. As a result of capital investment, principallyin the Mobile Communications, Broadband Infrastructure, and Fixed-line Telecommunications segments,
purchase of property and equipment and intangibles totaled ¥158,611 million. In addition, purchase of
marketable and investment securities was ¥95,349 million, while proceeds from sales of marketable andinvestment securities, due primarily to the sale of all shares in SBI Holdings, Inc. was ¥145,434 million.
Net cash provided by financing activities was ¥1,598,773 million. Short-term borrowings, net, rose
¥1,183,612 million, and long-term debt increased by ¥220,070 million, principally on account of funds
raised for the acquisition of SOFTBANK MOBILE. Due primarily to the issuance of BB Mobile Corp.
preferred stock that was allocated to Vodafone International Holdings B.V., proceeds from issuance ofshares to minority shareholders was ¥300,203 million.

122. Factors That May Have a Material Impact on Cash Flows in the Following Fiscal Year
(1) Need for Funds to Support Expansion of Services in Mobile Communications
In addition to broadband infrastructure and fixed-line telecommunications, in which the Group hasconcentrated its management resources, the Group made a full-scale entry into mobile communications
operations at the end of April 2006. Since that time, the Group has focused on four priority challenges: (a)3G network enhancement, (b) 3G handset lineup enrichment, (c) content enhancement, (d) enhancement ofsales structure. Capital investment accompanying business expansion in the Company's new mobile
communications business and customer acquisition costs undertaken to strengthen the Group’s customer
base might result in a temporarily negative cash flow in the mobile communications business.
(2) Refinancing of Short-Term Facility Related to the Acquisition of SOFTBANK MOBILEIn April 2006, in order to raise funds for the acquisition of Vodafone K.K. (currently, SOFTBANKMOBILE Corp.), BB Mobile entered into a short-term, one-year bridge facility contract totaling ¥1,280
billion with a group of 17 financial institutions, centered on 7 co-lead managers. As of the end of theinterim period under review, approximately ¥1,173.8 billion had been borrowed under this facility. To
refinance this debt, the Group plans to utilize the whole business securitization (WBS) method. Throughthe use of WBS, under which the cash flow generated by the mobile communications business will be aresource for the repayment of the borrowed funds, the certainty of repayment will be increased, making
possible a high credit rating and lower fund-raising costs in comparison with conventional financing
methods.
(3) Purchase and Redemption of Euro-Denominated Senior Notes Due 2011
The Company offered to purchase any and all of its €400 million in euro-denominated Senior Notes due
2011 through a tender offer outside Japan. The results of the offer were settled on September 29, 2006, andapproximately €396 million of notes were tendered, or approximately 99.93% of the aggregate issue
amount. As a result, on October 3, 2006, the Company purchased and redeemed those notes. After thepurchase and redemption, the balance of the notes was approximately €4 million. On April 3, 2006, theCompany deposited with a trustee cash sufficient for the payment of principal and interest on the notes andimplemented legal defeasance. The purchase of the notes was financed with the cash deposited with thetrustee.
(4) Issue of Euro-Denominated Senior Notes Due 2013
On October 12, 2006, the Company issued an aggregate amount of €500 million in euro-denominatedSenior Notes due 2013.
(See P37 “Significant Subsequent Event” )(5) Commitment-line Contract
When a commitment-line established in the previous fiscal year reached the end of its term, in October
2006 the Company entered into a ¥179 billion, an increase by ¥18 billion from the end of the previous
fiscal year, commitment-line with 37 financial institutions, which was arranged by Mizuho Corporate Bank,
Ltd., and Citibank N.A. As of the end of the interim period, the balance of commitment-line borrowings
totaled ¥131 billion.
<Trends in Cash Flow Indicators>
A summary of trends in cash flow indicators is presented below.
September 2006
March 2006
(27th fiscal year,(26th fiscal year)
interim period)
Equity ratio
6.2%
13.4%
Equity ratio (Market cap.)
64.7%
201.3%
Debt repayment period
6.3 years
15.6 years
Interest coverage ratio
5.7
2.1

September 2005
(26th fiscal year,
interim period)
10.8%
140.2%－－March 2005
(25th fiscal year)

Notes:
1. The above indicators are calculated using the following formulas based on consolidated figures.
Equity ratio: Shareholders’ equity divided by total assets

13

10.4%
91.1%
－
－

Equity ratio (Market cap.): Market capitalization divided by total assets
Debt repayment period: Interest-bearing debt divided by net operating cash inflows(For the interim close, operating cash flow is multiplied by 2 to annualize the figure.)Interest coverage ratio: Net operating cash inflows divided by interest expenses
2. Market capitalization is calculated by multiplying the closing stock price by the number of shares
outstanding, net of treasury stock, as at the end of the period.
3. Interest-bearing debt is the sum of all liabilities on the consolidated balance sheet on which interest ispaid.
4. Net operating cash inflows and interest expenses are the corresponding figures shown on the
consolidated statements of cash flows.
5. Negative figures are indicated by “－”.
(Reference: a summary of trends in cash flow indicators excluding the Mobile Communications Segment
is presented below.)
September 2006
(27th fiscal year,
interim period)
Debt repayment period
10.9 years
Interest coverage ratio
2.9

14

3. Risk Factors
The following is a list of some significant risk factors that may have an effect on the operating results,financial position, and other aspects of the Group’s operations. Furthermore, factors other than thoselisted below could have a significant effect on the Group’s business. The following risks associated withthe business are those apparent to the Company at present and are not intended to be all-inclusive.
(1) Risks Related to Economic Conditions and Market Trends
The Group is active in a broad range of markets, including mobile communications, broadband-related,
fixed-line telecommunications, IT-related distribution, and other markets. Demand for services andproducts supplied by the Group is dependent on economic conditions, trends in these markets, and otherfactors.
In particular, deregulation of the telecommunications industry has facilitated easier market entry,
resulting in extremely tough competition in Japan’s broadband, fixed-line telecommunications, andmobile communications markets. As a result, broadband usage fees in Japan are the lowest in the world,and competition is intensifying in the fixed-line telecommunications and mobile phone markets.
Therefore, it is possible that price competition will continue in each of these markets. Some of theGroup’s competitors boast capital strength, price competitiveness, customer bases, and brand recognition
that exceed those of the Group. As a result of these factors, the Group’s competitiveness could decline.
In the Mobile Communications segment, the introduction of mobile number portability on October 24,
2006, is expected to intensify competition among carriers. If new customer acquisition does not proceed
as planned, ARPU declines, or customer acquisition costs increase, profits could be substantially affected.
Moreover, it is possible that the recognition and acceptance of the Group’s new service brand and newsales practices for mobile handsets, such as installment sales, will require time, that new customer
acquisition will be sluggish, and that the Group will be unable to stem the churn of existing customers,
with an adverse effect on the customer base.
Specifically, in the Broadband Infrastructure segment, the emergence of new market trends may resultin increased customer acquisition costs. In addition, if the market penetration of FTTH access service
exceeds the Group’s projections and the churn rate of the ADSL access service increases, or if Japan’s
broadband market penetration approaches saturation, the growth in this business could be severely
restricted.
In the Fixed-line Telecommunications segment, accompanying the spread of mobile phone and otherservices, specifically the consumer market, the fixed-line voice market has been shrinking each year, andif the ARPU for the MYLINE service offered by SOFTBANK TELECOM declines, or if the churn rate forthe service increases, it is possible that revenues could be significantly influenced. The marketing of
the Otoku Line direct connection voice services to small and medium-sized companies was transferred toJAPAN TELECOM INVOICE Co., Ltd., a joint venture with INVOICE INC. SOFTBANK TELECOM
directly develops the marketing of the Otoku Line for large companies. Generally, the circuits provided
to large companies generate higher profits per circuit than those provided to small and medium-sizedcompanies but require more time for construction work, so it is possible that it will take longer to realize
profits than initially projected.
In the e-Commerce segment, wholesale sales of security-related software and PC peripheral equipment
to corporate clients and mass retailers remain favorable, but if the Group is not able to respond to changes
in the market environment, such as changes in the methods of distribution for products handled by theGroup companies or rapid shifts in consumer preferences, this business could be adversely affected.
In the Internet Culture segment, the Internet advertising business conducted by Yahoo Japan and othercompanies is generally extremely sensitive to economic trends, particularly in sluggish economic
conditions, when the tendency in all industries is to put a high priority on controlling advertising spending.
Furthermore, as the Internet advertising business has a short history, it is also easily affected by overseas
markets that are ahead of Japan in this field, such as the United States.
(2) Risks Related to Technological Innovation
In the telecommunications and IT industries in which the Group is developing business, technologies andindustry standards are changing rapidly on an industry-wide scale, including the fields oftelecommunications networks and telecommunications systems technologies. The industries areundergoing rapid progress and change, and the Group must respond on a daily basis.
However, if the Group is unable to respond appropriately for any of a number of reasons, it is possiblethat the services offered by the Group in the telecommunications and IT industries could become obsolete
or lose competitiveness, accompanied by a loss of the Group’s competitive advantage in these industries.

15

Furthermore, even if the Group is able to respond to such changes, it is possible that the cost of improving
existing equipment and the cost of new development will increase. These trends and the Group’s responseto them could affect the Group’s results.
(3) Risks Related to Rules and Regulations
1. Rules and regulations related to telecommunications operations
A number of laws and regulations—including the Telecommunications Business Law and the Radio
Law—apply to the Group’s telecommunications operations. In the event of changes in these laws andregulations or the implementation of new laws and regulations in the future, the Group might not be able
to develop its business as expected. Furthermore, the Ministry of Internal Affairs and Communications
has set up study groups that have the potential to influence future competition policies in thetelecommunications industry, such as the "Study Group on a Framework for Competition Rules toAddress Progress in the Move to IP" and the "Study Group on a Framework for Telecommunications andBroadcasting." The final reports of these study groups have been delivered. The future competition
policy, in accordance with these reports, could have a significant influence on the development of theGroup’s operations in the future.
2. Rules and regulations related to intellectual property
The Group strives to ensure that the video content handled in the Group’s video distribution operations,
including Yahoo! Streaming, and BBTV, does not infringe on any rights or interests, including theintellectual property rights of holders of various intellectual property rights. However, it is possible that
the Group’s actions will infringe upon various rights and interests, including the intellectual property
rights of intellectual property rights holders, and that the Group will be subject to demands that it stopusing video content or that it pay compensatory damages.
With regard to intellectual property, a number of companies are aggressively promoting thedevelopment of Internet technologies and business models that include broadband technology, and as aresult there is the possibility that the Group might be sued by a third party for compensatory damages forpatent infringement and that, in the future, the Group’s business activities may be restricted in regard to
the provision of content and/or the use of technologies.
In addition, if laws and regulations regarding intellectual property, such as the Copyright Law, arerevised, the Group might not be able to develop its operations as expected.
3. Rules and regulations related to the protection of personal information
In regard to the management of personal information, the Group has implemented measures to prevent
leaks of personal information by significantly strengthening its customer information management system,
establishing handling methods for personal information that it acquires and retains, and restricting accessto databases that contain personal information. In particular, telecommunications carriers of the Groupare handling personal information appropriately in accordance with the "Guidelines on the Protection of
Personal Data in Telecommunications Business" (MPT Notice No. 570 of 1998, revised on April 1, 2005).
Nonetheless, despite the aforementioned policies being implemented by the Group, it is possible that theGroup will not be able to completely prevent leaks of personal information.
(4) Risks Related to Foreign Exchange, Financial, and Stock Markets
The value of investment securities in the Group’s possession depends on economic conditions and trends
in stock and foreign exchange markets in Japan and overseas, and imports of telecommunications
equipment are influenced by trends in the foreign exchange market.
As of September 30, 2006, consolidated interest-bearing debt totaled ¥2,390,057 million, and interest
expense was ¥32,545 million. The Group has a substantial amount of interest-bearing debt and holds
large amounts of assets and liabilities denominated in foreign currencies. The Group considers interest
rate and foreign exchange rate risks to be significant risks. The Group strives to minimize the risks it
faces, utilizing long-term fixed rates to minimize interest rate risks and currency hedges on major assets
and liabilities denominated in foreign currencies.
Investing activities are a primary source of cash flows for the Group, and an overall decline in themarket prices of its investments could adversely affect the Group’s ability to raise funds. Stocks ofInternet-related companies in Japan, the United States, and other countries constitute the majority of theGroup’s investments. Changes in the stock prices of these companies could be extreme, and a decline in
the value of these assets could have a significant effect on the Group’s ability to raise funds for its

16

operations. As of September 30, 2006, the unrealized gain on other marketable securities totaled¥94,523 million. In addition, the Group’s equity in publicly traded consolidated subsidiaries andaffiliates accounted for under the equity-method amounted to ¥1,194,951 million at market value. The
consolidated book value of these securities was ¥84,953 million and the unrealized gain (the difference
between the market value of the portion held by the Group and the consolidated book value) was¥1,110,004 million.
(5) Risks Related to Operational Expansion Based on Investments Accompanying M&A Activities
and Business Alliances
The Group is developing a comprehensive range of operations, from telecommunications infrastructure tocontent and portal businesses. The Group believes that M&A activities and alliances are effectivemeans of rapidly building competitive advantages in these operational fields. In past fiscal years, theGroup has made major acquisitions and investments, such as investing in Yahoo! Inc. (1995), establishing
Yahoo Japan in conjunction with Yahoo! Inc. (1996), and acquiring JAPAN TELECOM (2004),
acquiring Cable & Wireless IDC Inc. (2005) and acquiring Vodafone K.K. (2006) These acquisitions andinvestments have made a major contribution to the establishment of the foundation of a comprehensive
digital information company as well as a major contribution to the establishment of points ofdifferentiation and competitive advantage in regard to other companies, and the Group believes that they
have had a certain level of results. The Group will continue to place importance on mergers with,acquisitions of, and alliances with companies that hold key content in these fields and companies that
hold technologies that will be essential for progress in broadband operations, and the Group will consider
them as necessary.
In the event of an acquisition or alliance, the Group works to avoid risk by conducting due diligence
regarding such matters as the financial position of the other party. However, there is clearly a risk that
unrecognized debts will arise after an acquisition, such as bad debts. Furthermore, due to changes in thebusiness environment or competitive conditions, it is possible that the implementation of initial operatingplans will be hindered. Moreover, there is a risk that the Group will not be able to adequately recoverinvestments already made due to such problems as a failure to realize, for any of a number of reasons, thesynergies with the other company that had been initially anticipated. As a result, the Group might not beable to develop its operations as expected.
(6) Risks Related to Reliance on the Management Resources of Other Companies
In developing its mobile telecommunications, broadband infrastructure, and fixed-line
telecommunications operations, the Group uses telecommunications facilities owned by NIPPONTELEGRAPH AND TELEPHONE EAST CORPORATION and NIPPON TELEGRAPH AND
TELEPHONE WEST CORPORATION (hereafter "NTT East-West"). In building its network, theGroup uses telecommunications facilities including dark fiber and dry copper owned by NTT East-Westand installs telecommunications equipment at NTT East-West central offices.
Under theTelecommunications Business Law, NTT East-West is required to provide access to their dark fiber anddry copper, which are classified as designated telecommunications facilities. Therefore, at this point,
the Group believes that the possibility of its operational development being hindered is low, but in the
future, for any of a number of reasons, if the continued use of these network facilities becomes difficult,or if usage fees are increased, there could be an adverse influence on the Group’s performance.
In addition, the Broadband Infrastructure segment’s primary service, Yahoo! BB, employs the Yahoo!
brand of Yahoo! Inc. Currently, the Group has a good relationship with Yahoo! Inc., but if there is asignificant change in this relationship in the future, it is possible that the Group will not be able todevelop its business as forecast.
(7) Risks Related to Disruption of System Services
To provide comprehensive telecommunications services, the Group has created networks for fixed-line
telephone, mobile phone, FTTH, ADSL, and other modes of telecommunication. To prevent disruptionof services on these networks, the Group pays maximum attention to continuity through internal control
activities, but there is a possibility of disruption due to human error. In addition, it is also possible thatmajor natural and other disasters (such as typhoons, earthquakes, and terrorist incidents) could result in
disruption of services. In such an event, the Group’s ability to provide continuing telecommunication
services may be significantly affected and considerable time might be required to restore these services.
As a result, such circumstances could have an adverse impact on the performance of the Group.

17(8) Risks Related to Unforeseen Situations Concerning Management
The Company’s existing and new businesses are planned and promoted by the Group’s officers andemployees. Unforeseen situations concerning top management— especially the President and Chief
Executive Officer Masayoshi Son—could create an obstacle to smooth operational progress and influence
the Group’s operations.

18

The SOFTBANK GroupAs of September 30, 2006, the SOFTBANK Group included 121 companies with operations in ten business segments asfollows.
Consolidated
subsidiaries

Equity-method
non-consolidated
subsidiaries andaffiliates(Note 1)

5

1

Mobile communication services, and sale of cellular phones accompanying to
its services(Note 2)

6

3

ADSL and fiber-optic high-speed Internet connection service, IP telephonyservice, provision of content and other operations(Note 2)

5-

Fixed-line telecommunications such as voice transmission service, datatransmission service, private leased circuit and data center service

4. Internet Culture(Note 2)19

16

5. e-Commerce(Note 2)

9

3

Broadmedia

9

1

Broadband service such as broadcasting and communications; support for
procurement of content

Technology Services

1-

System solution business and business solution businessMedia & Marketing3-Book and magazine publication in such areas as PCs, the Internet,
entertainment, etc., and development of web content specializing in IT

Overseas Funds

38

39

U.S.- and Asia-focused global venture capital business principally focused on
Internet-related companies

Others26

8

Leisure and service business, holding company functions for overseas
operations, back-office services in Japan, and contents operations

121

71

Business segment

MobileCommunications
Broadband
2.
Infrastructure
Fixed-line
3.
Telecommunications
1.

Principal products and operational content of each business

Internet-based advertising operations, broadband portal business, andInternet-based auction businessDistribution of PC software and such hardware as PCs and peripherals,
enterprise solutions, and diversified e-commerce businesses, including
business transaction platform (B2B) and consumer-related e-commerce (B2C)

6 Others:

Total
Note: 1.
2.

3.

Mobile Communications segment was established in the six-month period ended September 30, 2006 due tothe consolidation of SOFTBANK MOBILE Corp. and its consolidated subsidiaries.
SOFTBANK BB Corp., SOFTBANK TELECOM Corp. and Yahoo Japan Corporation are included in the
consolidated subsidiaries of the e-Commerce, Fixed-line Telecommunications and Internet Culture segments,
respectively, while SOFTBANK BB Corp., SOFTBANK TELECOM Corp. and Yahoo Japan Corporation
operate multiple businesses and their operating results are allocated to multiple business segments.
Due to the consolidation of SOFTBANK MOBILE Corp. and its subsidiaries from the six-month period ended
September 30, 2006, certain subsidiaries were not consolidated as the individual and aggregate amounts were
not considered material in relation to the consolidated total assets, net sales, net income (loss) and retained
earnings (accumulated deficit) of the SOFTBANK consolidated financial statements.

19

Note: 1. Broadmedia, Technology Services, Media & Marketing, Overseas Funds, and other segments are included in“Others” segment.
2. Vodafone K.K. changed its company name to SOFTBANK MOBILE Corp. on October 1, 2006.
3. JAPAN TELECOM CO., LTD. changed its company name to SOFTBANK TELECOM Corp. on October 1,
2006.
4. On August 1, 2006, SBI Holdings, Inc. was excluded from the equity method. Its operational result is reflected
for the four months, from April to July 2006.

SOFTBANK subsidiaries listed on domestic stock exchanges as of September 30, 2006:
Subsidiary

Listed exchange

1.Yahoo Japan Corporation

Tokyo Stock Exchange 1st section

2.SOFTBANK TECHNOLOGY CORP.

Tokyo Stock Exchange 1st section

3.Vector Inc.

Hercules4.Club iT Corporation

Hercules20

CONSOLIDATED BALANCE SHEETS(Millions of yen; amounts less than one million yen are omitted.)
As of September 30, 2006

As of March 31, 2006

AmountAmount%Increase(Decrease)%

As of September 30,
2005
Amount%ASSETS
Current assets:
Cash and deposits
Notes and accounts receivable –tradeMarketable securities¥273,166¥446,306¥(173,139)¥232,490

349,211

188,921160,290

159,443

7,792

4,372

3,419

7,628

Inventories

74,45050,59723,85352,641

Deferred tax assets

89,774

14,10775,667

3,264

Other current assets
Less:
Allowance for doubtful accounts
Total current assets

163,91248,250115,662

61,227(16,024)(7,424)(8,600)(7,224)

197,153

509,472

942,28323.6

745,130

41.2

32.3

Non-current assets:
Property and equipment, net
Buildings and structures

87,91157,30430,60758,284

Telecommunications equipment

643,721

194,970448,751

217,350

Telecommunications service lines

94,20491,724

2,479

95,068Land

30,117

19,404

10,712

19,396

Construction-in-progress

72,96827,87545,09240,197

Others44,37027,32517,04527,171

Total tangible assets

973,293554,688

457,47024.4

418,605

23.1

29.0

Intangible assets, net:
Goodwill

1,152,108

45,5781,106,529

49,225

Software167,015

33,671

133,343

30,893

Other intangibles

51,671

23,03628,63524,511

1,268,508

104,630

Total intangible assets
Investments and other assets:
Investment securities andinvestments in partnerships
Deferred tax assets
Other assets
Less:
Allowance for doubtful accounts
Total investments
and other assets

1,370,794

34.4

102,2865.7

440,549464,650(24,101)

402,871

163,01425,039137,974

43,206

103,369

61,241

42,127

68,827(9,415)(9,548)133(8,965)

6.6

697,51717.5

541,38229.9

156,134

505,939

32.0

Deferred charges

3,101

0.1

993

0.1

2,108

1,411

0.1

Total assets¥3,986,991

100.0¥1,808,398

100.0¥2,178,592¥1,578,924

100.0

21

CONSOLIDATED BALANCE SHEETS(Millions of yen; amounts less than one million yen are omitted.)
As of September 30, 2006

As of March 31, 2006

AmountAmount%%Increase(Decrease)

As of September 30, 2005

AmountLIABILITIES ANDSHAREHOLDERS' EQUITYCurrent liabilities:
Accounts payable - trade¥106,385¥60,432¥45,952¥45,242

Short-term borrowings

1,422,194

218,300

1,203,894

185,070

Commercial paper
Current portionof corporate bonds
Accounts payable - otherand accrued expenses
Income taxes payable

10,00010,400(400)

12,50094,231

11,094

83,137

94

299,557

114,122

185,434

107,60782,791

29,13753,653

21,885

Cash receipts as collateral

150,000

100,000

50,000120,000

Other current liabilities

86,91843,41443,50327,291

Total current liabilities

2,252,078

1,665,175

519,691

56.5

586,902

32.4

%

33.0

Long-term liabilities:
Corporate bonds

473,712456,128

17,584444,488

Long-term debt

389,918

209,370

180,547

208,591

Deferred revenue

33,86541,840(7,974)-

Deferred tax liabilities

44,58848,642(4,054)48,454

Accrued retirement benefits

17,24817,279(31)

17,812

Allowance for point mileage

43,682-

43,682-Other liabilities

66,200100,970(34,770)

83,362

Total long-term liabilities

1,069,215

26.8

874,232

48.4

194,983

802,708

50.8

Total liabilities

3,321,294

83.3

1,461,135

80.8

1,860,159

1,322,400

83.8

162,983

4.1

162,916

9.0

67

162,407

10.3

-

-

5

0.0

(5)

-

-

10.3

40

186,794

11.8

Net assets:
Common stockPre-stock issuance paid-in capital
Additional paid-in capital

187,343

4.7

187,303

Accumulated deficit(206,373)(5.2)(218,561)(12.1)

12,187(280,278)(17.7)

Less: Treasury stock

(179)

(0.0)

(169)

(0.0)

(9)

(126)

(0.0)

143,774

3.6

131,494

7.2

12,28068,796

4.4

94,5232.3

129,051

7.1(34,527)

127,805

8.1(12,427)(0.3)(36,840)(2.0)

24,413(40,619)(2.6)

23,292

0.6

19,062

1.1

4,229

14,3600.9

105,3882.6

111,273

6.2(5,885)

101,546

6.4

3,154

0.1

3,150

0.2

4

3,150

0.2

413,379

10.4

101,346

5.6

312,033

83,032

5.2

665,69616.7

347,26319.2

318,432

256,524

16.2¥3,986,991

100.0¥1,808,398

100.0¥2,178,592¥1,578,924

100.0

Total shareholders’ equity
Net unrealized gain on othersecurities
Deferred losses on hedges
Foreign currency translation
adjustments
Total valuation and translation
adjustments
Stock acquisition right
Minority interestin consolidated subsidiaries
Total net assets
Total liabilities andnet assets

22

CONSOLIDATED STATEMENTS OF OPERATIONS(Millions of yen; amounts less than one million yen are omitted.)Six-month period ended
September 30, 2006

Six-month period ended
September 30, 2005

Amount%Amount%Net sales¥1,120,173

100.0¥522,787

100.0

Cost of sales

615,33954.9

354,250

504,834

45.1

Selling, general and administrative expenses

392,282

Operating income (loss)

112,552

Gross profit

Increase(Decrease)

Fiscal year ended
March 31, 2006

Amount%¥597,386¥1,108,665

100.0

67.8

261,088723,81265.3

168,53632.2

336,297384,853

34.7

35.0

164,13631.4

228,145

322,553

29.1

10.1

4,400

0.8

108,151

62,299

5.6Interest income

2,134

716

1,417

2,136

Equity in earnings under the equity method

8,046

4,378

3,667

9,521

Income from investments in partnerships

1,758

741

1,017

777

Other non-operating income

3,693

1,715

1,978

3,321

8,080

15,756

Non-operating income

15,631

1.4

7,551

1.5

Interest expense

32,545

13,79918,74527,005

Financing related expenses

19,954-

19,954-

Other non-operating expenses

12,992

11,635

1,357

23,5581.4

Non-operating expenses

65,493

5.9

25,435

4.9

40,05750,564

4.5

Ordinary income (loss)

62,690

5.6(13,483)(2.6)

76,17427,492

2.5

Gain on sales of investment securities

69,20652,475

16,730172,306

Other special income

2,261

6,355

(4,093)

26,218

12,637

198,524

Special income

71,468

6.4

58,831

11.3

Valuation loss on investment securities

627

2,088

(1,460)7,188

Loss on redemption of bonds

7,386

-

7,386

-

Loss on office relocation
Loss on contract revision relating to sales
operation change
Impairment loss in fixed-line
telecommunication businessRestructuring charge relating to BBTV
business
Penalty for unfulfilled contract commitment

1,853

-

1,853

-

-

7,608

(7,608)25,495---18,052---

14,749-3,307(3,307)

3,565

-

3,153

(3,153)

3,153

5,393

3,287

2,105

24,326

Refinance arrangement fee
Other special loss
Special loss
Income before income taxes and minority
interest
Income taxes:

17.9

15,2601.4

19,445

3.7(4,185)96,5328.7

118,898

10.6

25,901

5.0

92,996

129,484

11.7

Current

80,972

7.2

19,853

3.8

61,11940,753

3.7

Deferred

6,041

0.5

(2,967)

(0.6)

9,008

1,837

0.2

17,444¥14,439

1.6
1.3

13,197¥(4,182)

2.6
(0.8)

4,246
¥18,621

29,342¥57,550

2.6
5.2

Minority interest
Net income (loss)

23

24

Items other than changes inshareholders’ equity

Balance at September 30, 2005

¥162,407

10-

Bonuses to directors (see Note1)
Decrease due to merger
Net income
Acquisition of treasury stock

Total movement during the period--

Dividend from surplus

10¥162,397

Commonstock

Issuance of new shares

Changes of items during the period

Balance at March 31, 2005

From April 1, 2005 to September 30, 2005:¥162,983

Balance at September 30, 2006

-

-

-

¥-

-

-

-

-

-

¥-

Pre-stockissuance
paid-in
capital¥-¥(206,373)

12,187¥186,794

10

-

-

-

10

¥186,783

Additional
paid-in
Capital-14,439
-

476

(90)

(2,637)¥(218,561)¥(280,278)(6,916)

-

(86)
(187)
(4,182)-(2,460)-¥(273,362)¥(126)

(20)

-

(20)

-

-

¥(106)

Accumulated Treasury
deficitstock¥(179)

(9)

-

(9)

-

-

-

¥(169)

Accumulated Treasury
deficitstock

Shareholders’ equity¥187,343

40

-

-

-

(5)

(26)

-

-

67

-

67
-

¥187,303

Additional
paid-in
capital

-

(5)
-

¥5

Pre-stockissuance
paid-in
capitalShareholders’ equity

-

67
-

¥162,916

Commonstock

Total movement in this period

Bonuses to directors (see Note1)
Net adjustment to additional paid-in
capital and accumulated deficit due tochange in scope of consolidation (seeNote 2)
Net income
Acquisition of treasury stock
Items other than changes inshareholders’ equity

Changes of items during the period
Issuance of new shares
Dividend from surplus

Balance at March 31, 2006

From April 1, 2006 to September 30, 2006:

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS¥68,796(6,916)

-

(86)
(187)
(4,182)(20)(2,460)20¥75,712

Total¥143,774

12,280-14,439
(9)

449

(90)

128
(2,637)¥131,494

Total

-

-

¥127,805(8,856)(8,856)---¥136,662(5,885)¥23,292 ¥105,388

4,229(5,885)---¥111,273

Total

312,033

312,033

-

-

-

-

318,432

306,152

14,439
(9)

449

(90)

128
(2,637)¥3,154 ¥413,379 ¥665,696

4

4

-

-

-

-

-

¥3,150 ¥101,346 ¥347,263

Total net
assets¥(40,619)

436

436

-

-

-

¥(41,056)

(757)

(757)

-

-

-

¥14,360 ¥101,546

7,662

7,662

-

-

-

¥6,697 ¥102,303

Total¥3,150

-

-

-

-

-

¥3,150Total net
assets

6,413

13,330(86)(187)(4,182)(20)(2,460)20¥83,032 ¥256,524

14,08814,088---¥68,943 ¥250,110

Stockacquisition Minority
interests
right(Millions of yen, amounts less than one million yen are omitted)¥ (12,427)

24,413

4,229

-

-

-

¥19,062

Foreign currencytranslation
adjustments

Valuation and translation adjustments
Net
unrealized
Deferred Foreign currency
losses ontranslation
gain (losses)
on other
hedgesadjustments
securities¥94,523(34,527)

24,413--(34,527)-¥(36,840)

Deferred
losses onhedges-¥129,051

Net
unrealized
gain (losses)
on othersecurities

Stockacquisition Minority
interests
right(Millions of yen, amounts less than one million yen are omitted)
Valuation and translation adjustments

25-

Items other than changes inshareholders’ equity¥162,916

¥5

5

-

-

¥187,303

519

-

-

-

-

-

519

¥186,783¥(218,561)

54,801-(215)
57,550-13(86)(2,460)--¥(273,362)

Additional
Accumulated
paid-in
deficitcapitalShareholders’ equity¥(169)

(63)

-

(63)

-

-

-

-

¥(106)

Treasurystock¥131,494

55,781-(215)
57,550
(63)

13

(86)

(2,460)5

1,038¥75,712

Total¥129,051(7,610)(7,610)

-

-

-

-

-

¥136,662¥(36,840)

4,215

4,215

-

-

-

-

-

¥(41,056)¥19,062

12,365

12,365

-

-

-

-

-

¥6,697¥111,273

8,969

8,969

-

-

-

-

-

¥102,303

Valuation and translation adjustments
Net unrealized Deferred gain Foreign
currency
Total
gain (losses) (losses) on
translationon other
hedgesadjustments¥3,150

-

-

-

-

-

-

-

¥3,150¥101,346

32,40232,402

-

-

-

-

-

¥68,943

Stockacquisition Minority
interests
right¥347,263

97,153

41,371(215)
57,550
(63)

13

(86)

(2,460)5

1,038¥250,110

Total net
assets(Millions of yen, amounts less than one million yen are omitted)

additional paid-in capital and accumulated deficit in the consolidated statements of changes in net asset.

Note 2: In accordance with accounting principles generally accepted in Japan, the cumulative effect arising from any changes in the scope of consolidation is treated as an adjustment tomeeting held subsequent to the fiscal year-end, are recorded in the consolidated statements of changes in net asset in the fiscal year in which the resolution was passed.

Note 1: In accordance with accounting principles generally accepted in Japan, bonuses to directors, to be appropriated in accordance with a resolution of the shareholders at an ordinary

Balance at March 31, 2006

519-

Total movement during the period

-

-

-

-

Dividend from surplus

Bonuses to directors (see Note 1)
Net adjustment to accumulated deficit
due to change in scope of
consolidation (see Note 2)
Decrease due to merger
Net income
Acquisition of treasury stock

-

¥-

5

519

¥162,397

Commonstock

Pre-stock
Issuance
paid-in
capital-Cash receipt before stock issuanceIssuance of new shares

Changes of items during the period

Balance at March 31, 2005

From April 1, 2005 to March 31, 2006:- Continued -CONSOLIDATED STATEMENTS OF CASH FLOWS(Millions of yen; amounts less than one million yen are omitted.)Six-month period ended Six-month period ended
September 30, 2006
September 30, 2005

Fiscal year ended
March 31, 2006

Ⅰ. Cash flows from operating activities:
Income before income taxes and minority interest¥118,898¥25,901¥129,484

84,54242,26779,744

Amortization of goodwill

26,871

3,471

6,945

Equity in earnings under the equity method, net(8,046)(4,378)(9,521)

Dilution gain from changes in equity interest, net(960)(4,354)(21,806)

Valuation loss on investment securities

627

2,088

7,188

(69,192)(52,348)(171,864)

Foreign exchange loss, net

1,749

3,266

5,497

Interest and dividend income(2,348)(934)(2,402)

Interest expense

32,545

13,79927,005Decrease (increase) in receivables - trade

5,237

5,915

(23,333)

Increase (decrease) in payables - trade

6,797(12,721)

4,331

Decrease (increase) in other receivables

5,422(5,015)(9,864)

Increase (decrease) in other payables

11,430(16,395)(26,773)

Others, net

21,754

6,117

110,731

235,330

6,680

105,361

3,796

2,298

3,301

Interest paid

(24,551)(11,789)(22,332)

Income taxes paid

(27,436)(18,134)(31,588)

-

2,964

3,064

¥187,139¥(17,981)

57,806

Adjustments to reconcile income before income taxes andminority interest to net cash provided by (used in) operating
activities:
Depreciation and amortization (excludes amortization of
goodwill)

Gain on sales of marketable and investment securities, net

Changes in operating assets, liabilities and others

Sub-totalInterest and dividends received

Refund of income taxes
Net cash provided by (used in) operating activities- Continued -26

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)(Millions of yen; amounts less than one million yen are omitted.)Six-month period ended Six-month period ended
September 30, 2006
September 30, 2005

Fiscal year ended
March 31, 2006

Ⅱ. Cash flows from investing activities:
Purchase of property and equipment and intangibles¥(158,611)¥(157,476)¥(189,490)

Purchase of marketable and investment securities(95,349)(30,718)(88,479)

145,434

98,370178,022(1,844,046)(842)(4,525)91957

39,826

8

5,853

29,232

Increase in loan receivables(9,232)(10,211)(17,425)

Collection of loans

6,534

10,79916,583

Others, net(1,815)8,971

64,107(1,956,985)(74,296)

27,852

1,183,612(18,273)

32,043(400)(3,000)(5,100)

Proceeds from long-term debt

220,070

110,020

125,550

Repayment of long-term debt

(29,822)(119,892)(158,211)-

71,97891,849(26,931)(53,515)(53,547)

134

20

1,038

Proceeds from issuance of shares to minority shareholders

300,203

533

1,619

Cash dividends paid

(2,628)(2,397)(2,456)

Cash dividends paid to minority shareholders(3,045)(2,380)(2,442)

Increase in cash receipt as collateral

50,00020,000-

Others, net(92,418)(1,249)(264)

1,598,773

1,843

30,078Proceeds from sales of marketable and investment securities
Acquisition of interests in subsidiaries newly consolidated,
net of cash acquired
Sales of interests in subsidiaries previously consolidated
Proceeds from sales of interests in consolidated subsidiaries

Net cash (used in) provided by investing activities
Ⅲ. Cash flows from financing activities:
Increase (decrease) in short-term borrowings, net
Decrease in commercial paper, net

Proceeds from issuance of bonds
Redemption of bonds
Proceeds from issuance of shares

Net cash provided by financing activities
Ⅳ. Effect of exchange rate changes on cash and cash
equivalents
Ⅴ. Net (decrease) increase in cash and cash equivalents
Ⅵ. Decrease in cash and cash equivalents due to exclusion ofpreviously consolidated entities

838

1,790

10,905(170,234)(88,643)

126,642(3,886)

(142)

(142)

Ⅶ. Cash and cash equivalents at the beginning of the period

446,694

320,194

320,194

Ⅷ. Cash and cash equivalents at the end of the period¥272,572¥231,408¥446,694

27

CONDENSED QUARTERLY FINANCIAL INFORMATION
Condensed Statement of Operations(Millions of yen; amounts less than one million yen are omitted.)
Second quarter

First quarter

Fourth quarter

Third quarter

Second quarter

First quarter

July 1, 2006 to
September 30, 2006

April 1, 2006 toJune 30, 2006

January 1, 2006 to
March 31, 2006

October 1, 2005 to
December 31, 2005

July 1, 2005 to
September 30, 2005

April 1, 2005 toJune 30, 2005

AmountAmountAmountAmountAmountAmountNet sales¥625,941¥494,231¥298,406¥287,471¥264,149¥258,637
Cost of sales
341,443
273,895
185,010
184,551
178,575
175,674
Gross profit
284,498
220,336
113,395
102,920
85,57382,962
Selling, general and administrative
226,303
165,978
79,00979,407
77,98386,153
expenses
Operating income (loss)
58,19454,35734,386
23,512
7,590(3,190)Non-operating income (Note)
4,540
12,096
6,227
2,784
4,442
3,122
Non-operating expenses (Note)
26,03940,45910,867
15,06812,49912,950Ordinary income (loss)
36,69625,99429,747
11,228(466)(13,017)
Special income
66,795
4,672
40,75898,93435,916
22,914
Special loss
13,895
1,365
26,61050,475
10,309
9,136
Income before income taxes and89,59629,30243,89559,68725,141760
minority interest
Income taxes - Current
70,826
10,146
11,204
9,695
11,623
8,230
Income taxes - Deferred(3,182)
9,224(15,366)
20,171(187)(2,779)Minority interest
8,930
8,514
8,326
7,817
6,734
6,463
Net income (loss)¥13,021¥1,418¥39,730¥22,002¥6,971¥(11,153)
Note: Exchange gain (loss), equity in earnings (loss) under the equity method, and income (expenses) from investments in partnerships were
included in “Non-operating income” and “Non-operating expenses” and were netted on a quarterly basis for presentation purposes.
Condensed Statement of Cash Flows(Millions of yen; amounts less than one million yen are omitted.)

Ⅰ
Ⅱ
Ⅲ
Ⅳ
Ⅴ
Ⅵ
Ⅶ
Ⅷ

Net cash provided by (usedin) operating activities
Net cash provided by (usedin) investing activities
Net cash (used in) provided
by financing activities
Effect of exchange ratechanges on cash and cash
equivalents
Net (decrease) increase in
cash and cash equivalents(Decrease) in cash and cash
equivalents due to exclusionof previously consolidated
entities
Cash and cash equivalents atthe beginning of the period
Cash and cash equivalents at
the end of the period

Note:“Depreciation and amortization”,
and “Amortization of goodwill”
included in net cash provided byoperating activities

Second quarter

First quarter

Fourth quarter

Third quarter

Second quarter

First quarter

July 1, 2006 to
September 30, 2006

April 1, 2006 toJune 30, 2006

January 1, 2006 to
March 31, 2006

October 1, 2005 to
December 31, 2005

July 1, 2005 to
September 30, 2005

April 1, 2005 toJune 30, 2005

AmountAmountAmountAmountAmountAmount¥122,464¥64,675¥13,837¥61,949¥232¥(18,213)

8,847(1,965,832)

15,521

86,627(45,593)(28,703)(144,656)

1,743,429

74,963(46,728)(11,081)

12,925

703

134

5,248

3,866

639

1,150

(12,641)(157,593)

109,571

105,714(55,802)(32,840)-(3,886)

-

-

-

(142)

285,214446,694

337,122

231,408

287,211

320,194¥272,572¥285,214¥446,694¥337,122¥231,408¥287,211¥62,424¥48,989¥19,919¥21,031¥23,195¥22,543

28

Basis of Presentation of Consolidated Financial Statements
1. Changes in scope of consolidation
As of September 30, 2006, SOFTBANK CORP．
（the “Company”）consolidated 121 subsidiaries. 64 subsidiaries were
not consolidated as the individual and aggregate amounts were not considered material in relation to the consolidated total
assets, net sales, net income (loss) and retained earnings (accumulated deficit) of the SOFTBANK consolidated financial
statements.
Changes in scope of consolidation were as follows:<Increase>
12 companies
Significant changes:
SOFTBANK MOBILE Corp.
Newly acquired<Decrease>
44 companies
Insignificant companies were excluded from scope of consolidation from this fiscal period.
2. Changes in scope of equity method
As of September 30, 2006, the Company held three non-consolidated subsidiaries and 68 affiliates, all of which were
accounted for under the equity method. 61 non-consolidated subsidiaries and 22 affiliates were not accounted for under theequity method, as the individual and aggregate amounts were not considered material in relation to the net income (loss) andretained earnings (accumulated deficit) of the SOFTBANK consolidated financial statements.
Main changes in application of equity method were as follows:<Increase>
10 companies<Decrease>
26 companies
Significant changes:
SBI Holdings, Inc.
Sale of shares
Insignificant companies were excluded from scope of equity method from this fiscal period.
3. Fiscal year end
Fiscal year ends of consolidated subsidiaries in terms of domestic and overseas are as follows:<Fiscal year end>
<Domestic><Overseas>
March end (as same as the consolidated balance sheet date)
62
34
June end
1－
December end
3
17
January end
1
1
February end
2－
4. Summary of significant accounting policies[1] Evaluation standards and methods for major assets(1) Marketable securities and investment securities
Held-to-maturity debt securities: Stated at amortized cost
Other securities:
With market quotations:
Stated at fair value, which represents the market prices at the balance sheet date(unrealized gain/loss is included as a separate component in net assets, net of tax, while
cost is primarily determined using the moving-average method)
Without market quotations:
Carried at cost, primarily based on the moving-average method(2) Derivative instruments:
Stated at fair value(3) Inventories:

Carried at cost, primarily based on the moving-average method29

[2] Depreciation and amortization(1) Property and equipment
Buildings and structures:
Telecommunications equipment:
Telecommunications service lines:
Others:(2) Intangible assets:

Computed primarily using the straight line method
Computed using the straight line method
Computed using the straight line method
Computed primarily using the straight line method
Computed using the straight-line method[3] Accounting principles for major allowances and accruals(1) <Allowance for doubtful accounts>
Allowance for doubtful accounts is calculated based on the aggregate amount of estimated credit losses on doubtfulreceivables, plus an amount for receivables other than doubtful receivables calculated using historical write-off
experience ratios from certain prior periods.
(2) <Accrued retirement benefits>
SOFTBANK MOBILE Corp., SOFTBANK TELECOM Corp., and certain other subsidiaries have defined benefit
pension plans for their employees. These companies account for the obligation for retirement benefits based on the
projected benefit obligations as of September 30, 2006.
(3) <Allowance for point mileage>
SOFTBANK MOBILE Corp. has an allowance for point mileage which is accrued based on the estimated future
obligation arising from point service, based on past experience.
[4] Translation of foreign currency transactions and accounts
All assets and liabilities in foreign currencies are translated at the foreign currency exchange rates prevailing at the respectivebalance sheet dates. Foreign currency exchange gains or losses are charged to net income when incurred.
The translation of foreign currency denominated revenues and expenses in the financial statements of foreign consolidated
subsidiaries into Japanese yen is performed by using the average exchange rate for the period. Assets and liabilities aretranslated using the foreign currency exchange rates prevailing at the balance sheet dates, and capital stock is translated using
the historical foreign currency exchange rates. Foreign currency financial statement translation differences are presented asa separate component of “Net assets,” and the portion pertaining to minority shareholders, which is included in “Minority
interest in consolidated subsidiaries.”[5] Capital leases
Under the accounting principles generally accepted in Japan, capital leases, as defined therein, other than those whereby theownership of the assets is transferred to the lessee at the end of the lease term, are permitted to be accounted for as operatingleases with a footnote disclosure of the estimated acquisition cost, estimated accumulated depreciation and future lease
payments or receipts.
[6] Accounting for significant hedge transactions(1) Collar transaction① <Hedge accounting>Unrealized gains and losses, net of tax, on collar transaction that qualifies as an effective cash flow hedge at consolidated
subsidiaries in the United States of America are reported as a separate component of “Net assets” in the Company’s
consolidated balance sheets. As such, unrealized gains and losses associated with the collar transaction will berecognized into earnings in the same period during which the hedged assets and liabilities are recognized in earnings.
② <Derivative instruments for hedging and hedged items>
Derivative instruments for hedging:
Prepaid variable share forward contract (the collar transaction)
Hedged items:
Equity security30

③ <Hedging policy>
The purpose of the collar transaction is to hedge the variability of cash flows associated with the future market price of
the underlying equity security.
(2) Interest rate swap
① <Hedge accounting>
For interest rate swaps whose amounts, index and periods are same as the conditions for hedged items, the “exceptional
method” is adopted. Under this method, a certain domestic consolidated subsidiary does not account for gains and lossesof those interest rate swaps on a fair value basis and recognizes swap interest on an accrual basis.
② <Derivative instruments for hedging and hedged items>
Derivative instruments for hedging:Interest rate swap contracts
Hedged items:
Interest expense on borrowings③ <Hedging policy>
The domestic consolidated subsidiaries use derivative financial instruments to hedge the risk of exposures to fluctuationsin interest rates in accordance with its internal policies, regarding the authorization and credit limit amount.
[7] Accounting method for consumption taxes
Consumption taxes are accounted for using the net method of reporting.
5. Accounting for business combinations
All assets and liabilities of acquired entities are revalued at the respective fair market value at the combination date.
6. Amortization of goodwill"Goodwill" is amortized on a straight-line basis over reasonably estimated periods in which economic benefits are expected tobe realized. Immaterial goodwill is expensed as incurred.
The goodwill resulting from the acquisition of SOFTBANK MOBILE Corp. is amortized over a 20-year-period.
7. Scope of cash and cash equivalents in the consolidated statements of cash flows“Cash and cash equivalents” are comprised of cash on hand, bank deposits withdrawable on demand and highly liquid
investments with initial maturities of three months or less and a low risk of fluctuation in value.
8. Presentation of net assets in the balance sheets
The Company applied “Accounting Standards for presentation of net asset” (Financial Accounting Standards for presentationof net asset in balance sheet Guideline No.5 issued on December 9, 2005 by the Business Accounting Council in Japan), and“Application Guideline for Accounting Standards for presentation of net assets” (Financial Accounting Standards
Implementation Guideline No.8 issued on December 9, 2005) from the six-month period ended on September 30, 2006.
The shareholders’ equity based on the previous presentation of shareholders’ equity in the balance sheet is ¥249,162 million.
The Company disclosed net assets in the balance sheet using the new presentation as of September 30, 2006. Furthermore,
the Company presented its net assets in the balance sheets using the new presentation as of March 31, 2006 and September 30,
2005.
9. Accounting standard for statements of changes in net assets
The Company applied “Accounting Standards for statement of changes in net assets” (Financial Accounting Standards No.6
issued on December 27, 2005) and “Guidance on Accounting Standard for statement of changes in net assets” (Financial
Accounting Standards Implementation Guideline No.9 issued on December 27, 2005) from the six-month period ended
September 30, 2006.
Consolidated statements of changes in net asset is disclosed for the six-month period ended September 30, 2006 under the newstandard. Furthermore, the consolidated statements of changes in net assets for the fiscal year ended March 31, 2006 and for thesix-month period ended September 30, 2005 are presented under the new standard.

31

10. Accounting standard for share-based payment
The Company applied “Share-based Payment” Financial Accounting Standards No.8 issued on December 27, 2005 and“Guidance on Accounting Standard for share-based Payment” (Financial Accounting Standards Implementation Guideline
No.11 issued on December 27, 2005) from the six-month period ended September 30, 2006.
As a result, the effect of the application of this standard and guideline was not considered material in relation to the income
before income taxes and minority interest.
11. Practical solution on accounting for revenue recognition of software
The Company applied “Practical solution on accounting for revenue recognition of software” (Financial Accounting Standards
Implementation Guideline No.17 issued on March 30, 2006) from the six-month period ended September 30, 2006.
As a result, the Company is required to present certain transactions as net sales from this fiscal year, and net sales of certain
software transactions were recorded at ¥596 million, which would have been the amount of gross profit if the previous
accounting standard had been applied. Due to the netting with the amounts for goods purchased, net sales and cost of goods
sold decreased by ¥16,226 million.
12. Presentation of goodwill in the balance sheets and statements of cash flows
The Company applied “Accounting Standard for Business Combinations” (Accounting Standards issued on October 31, 2003
by the Business Accounting Council in Japan), “Accounting Standard for Business Divestitures and the related Implementation
Guidance” (Accounting Standards Statement No.7 issued on December 27, 2005 by the Accounting Standards Board of Japan),“Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures”(Accounting Standards Guidance No. 10 issued on December 27, 2005 by the Accounting Standards Board of Japan) from thesix-month period ended on September 30, 2006.
(Consolidated Balance Sheets)
Goodwill related to business rights included in “Other intangibles” of intangible assets, net and goodwill related toconsolidation goodwill are presented as “Goodwill” as of September 30, 2006. The same presentation has been adopted for its
accounts as of March 31, 2006 and as of September 30, 2005.
(Consolidated Statements of Cash Flows)
Amortization of goodwill related to business rights accounted in “Depreciation and amortization” and amortization of goodwill
related to consolidation goodwill accounted in “Others, net” of cash flows from operating activities is presented as“Amortization of goodwill” for the six-month period ended September 30, 2006. The same presentation has been adopted for
its accounts for the fiscal year ended March 31, 2006 and the six-month period ended September 30, 2005.

32

Notes(Consolidated Balance Sheets)
1. Accumulated depreciation of property and equipment
September 30, 2006
655,520 million yen

March 31, 2006
603,313 million yen

September 30, 2005
609,452 million yen

September 30, 2006

March 31, 2006

September 30, 2005

10,927 million yen-

10,653 million yen-

11,887 million yen
2- million yen- million yen

2 million yen

2. Assets pledged as collateral(1) For future lease liabilities
Assets pledged as collateral:
Notes and accounts receivable - trade
Other current assets (accounts receivable – other)
Secured liabilities:
Notes and accounts payable - trade

Note: The collateral for the future lease liabilities was provided by mortgaging against the aggregate of the current andfuture receivables due from customers of certain consolidated subsidiaries. The future lease liabilities at the end of
the periods are as follows:

Future lease liabilities (including the above“Notes and accounts payable-trade”)

September 30, 2006

March 31, 2006

September 30, 2005

17,300 million yen

23,846 million yen

31,053 million yen(2) For short-term borrowings and long-term debt
All common stocks of BB Mobile Corp., SOFTBANK MOBILE Corp., and subsidiaries of SOFTBANK MOBILE Corp.
are pledged as collateral for short-term borrowings of ¥1,173,830 million resulting from the acquisition of SOFTBANKMOBILE Corp.
Assets pledged as collateral and secured liabilities by consolidated subsidiaries other than the short-term borrowings above areas follows:
September 30, 2006

March 31, 2006

September 30, 2005

Assets pledged as collateral:
Cash and deposits
Notes and accounts receivable - trade
Buildings and structures
Telecommunications equipment
Land
Property and equipment- others
Investment securities
Total

566 million yen
949
499
1,062
5,001
0
158,369
166,450 million yen

336 million yen
1,061
867
1,513
5,001
0
201,293
210,074 million yen

483 million yen
1,060
884
2,113
5,001
0
203,486
213,030 million yen

Secured liabilities:
Notes and accounts payable - trade
Short-term borrowings
Accounts payable – other and accrued expenses
Long-term debt
Other long-term liabilities
Total

854 million yen
7,843
116
119,158
127,973 million yen

975 million yen
8,20925
119,805113
129,128 million yen

407 million yen
15,85921
116,313207
132,809 million yen

33

3. Securities loaned
A portion of investment securities was lent to financial institutions according to stock lending agreements, and the amounts ofapplicable investment securities recorded in the Company’s consolidated balance sheets are as follows:
March 31, 2006
September 30, 2005
September 30, 2006
Investment securities
364 million yen
259 million yen
336 million yen
4. Cash receipts as collateral
Cash receipts as collateral from financial institutions, to whom the Company lent shares of one of its subsidiaries under security
deposit agreements, is presented as follows:
Cash receipts as collateral

September 30, 2006

March 31, 2006

September 30, 2005

150,000 million yen

100,000 million yen

120,000 million yen

According to the security deposit agreements, the Company paid a fixed rate amount as stock bailment fees and other fees totaling ¥ 1,369
million, ¥ 2,859 million and ¥1,482 million for the periods ended September 30, 2006, March 31, 2006 and September 30, 2005, respectively,
and recorded the fees as other non-operating expenses in the consolidated statements of operations.

5. Line of credit as a creditor (not used)
September 30, 2006
15,196 million yen

March 31, 2006
16,097 million yen

September 30, 2005
15,809 million yen

September 30, 2006
- million yen

March 31, 2006
8,477 million yen

September 30, 2005
7,461 million yen

6. Balance of accounts receivable sold7. Notes receivable maturing at period-end
Notes receivable are settled on the date of clearance. Since the interim period end date of September 30, 2006 was a non-business day, thefollowing balance of notes receivable maturing on that date was not settled and was included in the closing balances of “Notes and accounts
receivable-trade”.

September 30, 2006
Notes and accounts receivable-trade

March 31, 2006

September 30, 2005

- million yen

41 million yen- million yen

8. Legal defeasanceIn April, 2006 the Company conducted legal defeasance for SOFTBANK CORP. Euro-denominated Senior Notes due 2011 (Principal amount:
400 million euro, interest rate 9.375%) and deposited 493 million Euro which is sufficient for the payment of principal and interest on the notes
with the trustee.
On October 3, 2006, the repurchase and redemption of 395 million euro (¥59,267 million) of the outstanding 400 million euro has been
finalized. Therefore, 395 million euro (¥59,267 million) was recorded as current portion of corporate bonds in current liabilities.
A 469 million euro (¥70,380 million) deposited with trustee for the redemption of the notes was recorded as “Other current assets” in current
assets. The current portion of corporate bonds in current liabilities and the deposit in current assets were extinguished on October 3, 2006 for theredemption of the notes.

(Consolidated Statements of Operations)
1. Selling, general and administrative expenses
Payroll and bonuses

Six-month period ended
September 30, 2006
¥44,300 million

Six-month period ended
September 30, 2005
¥35,071 million

Fiscal year ended
March 31, 2006
¥69,505 million

Sales promotion expense

60,55029,85559,671

Sales commission

125,794

4,247

9,211

2,502

2,315

4,319

Allowance for doubtful accounts

2. Financing related expenses
It is the financing related expense in order to raise funds for the acquisition of SOFTBANK MOBILE Corp.

34

3. Loss on redemption of bonds
Associated with the repurchase and redemption of SOFTBANK CORP. Euro 9.375% Senior Notes due 2011, the purchase offer was settled on
September 29, 2006 and the loss on the redemption of notes was determined. It is recorded as “Loss on redemption of bonds” in special loss forthe six months period ended September 30, 2006.

4. Loss on office relocation
It is the loss incurred from the headquarter office relocation of SOFTBANK MOBILE Corp. in May, 2006.

(Consolidated Statements of Cash Flows)
1. Reconciliation of cash and cash equivalents to the amounts presented in the accompanying consolidated balance sheets:
September 30, 2006
273,166 million yen
7,792

Cash and deposits
Marketable securities

September 30, 2005
232,490 million yen
7,628

March 31, 2006
446,306 million yen
4,372Time deposits with original maturities
over three months(2,379)(1,489)(1,400)Stocks and bonds with original
maturities over three months(6,006)(7,221)(2,584)

Cash and cash equivalents

272,572 million yen

231,408 million yen

446,694 million yen

2. SOFTBANK MOBILE Corp. and three consolidated subsidiaries acquired in connection with the acquisition of
SOFTBANK MOBILE Corp.
（as of April 30, 2006）
Current assets
Note 1
324,183 million yen
Non-current assets
851,905
Goodwill
1,129,092
Current liabilities
Note 1(453,849)
Long-term liabilities(144,665)
Acquisition cost
Note 2, 3
1,706,666 million yen
Loans made by the Company
Note 4
163,000
Cash and cash equivalents(25,419)of newly consolidated companies
Payments for the acquisition
1,844,246 million yen(Note 1) Amounts are after considering intercompany transactions.
(Note 2) The costs incurred for the acquisition of remaining shares of SOFTBANK MOBILE Corp. in August 2006 are
included. Accordingly, SOFTBANK MOBILE Corp. became a fully-owned subsidiary.
(Note 3) Accompanying costs are included.
(Note 4) Loan amounts until the acquisition date, April 30, 2006
(Statements of changes in stockholders’ equity)
1. Class and number of outstanding shares:
March 31, 2006
Number of common stocks

Increase

1,055,231,478

92,100Decrease

September 30, 2006-

1,055,323,578

Decrease

September 30, 2006-

153,076(Note) Increase resulted from the exercise of stock acquisition rights.
2. Class and number of treasury stocks:
March 31, 2006
Number of common stocks

Increase

149,391

3,685(Note) Increase resulted from the acquisition of the fraction of shares.

35

3. Share warrants:Type

SOFTBANK

Number of shares for stock acquisition rights

Million of yen

Detail of stock acquisitionrightsClass of shares

March 31,2006

Increase

Decrease

September 30,
2006

September 30,
2006

Stock acquisition rights
issued in 2004

Commonstocks

24,000,000--

24,000,000

3,150

Subsidiarycompanies

Total

-

4

-

3,154

4. Dividends:
Resolution
Ordinary general meeting ofshareholders, June 23, 2006

Class ofsharesAmount of dividend(Million of yen)

Commonstocks2,637

36

Dividend per
share
¥2.50

Record date

March 31, 2006

Effective dateJune 26, 2006

Significant Subsequent Event
Issue of Senior Notes
The Company issued Senior Notes based on the resolution of its Board of Directors’ meeting held on September 26, 2006.
1.
2.
3.
4.
5.
6.
7.

Name of Notes: SOFTBANK CORP. 7.75% Senior Notes due 2013.
Aggregate amount of issue: 500 million euro
Price at issue:
99.335% of par
Coupon rate:
7.75%
Payment date: October 12, 2006
Redemption date: October 15, 2013
Use of funds:
Mainly repayment of existing short term borrowings.

37

Segment Information
1. Business segment information(1)

For the six-month period ended September 30, 2006
(Millions of yen; amounts less than one million yen are omitted.)

Communications

Broadband
Infrastructure

Telecommunications

Internet
Culturee-Commerce

Others

Total

MobileFixed-line

Elimination
Consolidated
or Corporate

Net sales¥581,884¥127,473¥166,234¥89,679¥117,080¥37,821¥1,120,173(2) Inter-segment

2,575

1,577

15,715

1,640

7,099

6,253

34,861

Total(1) Customers¥-¥1,120,173(34,861)-

584,459

129,050

181,950

91,319124,180

44,075

1,155,035(34,861)

1,120,173

Operating expenses

527,824

117,382

181,654

46,976

121,319

44,244

1,039,401(31,780)

1,007,621

Operating income (loss)¥56,635¥11,668¥295¥44,343¥2,860¥(169)¥115,633¥ (3,081)¥112,552

Broadband
Infrastructure

Telecommunications

Internet
Culturee-Commerce

OthersTotal¥124,947¥168,963¥71,224¥123,640¥34,011¥522,787(2)

For the six-month period ended September 30, 2005
(Millions of yen; amounts less than one million yen are omitted.)
MobileCommunications

Fixed-line

Elimination
Consolidated
or Corporate

Net sales

Newly(1) Customers¥-¥522,787

Established(2) Inter-segment

697

2,941

307

4,517

6,881

15,344(15,344)-

125,645

171,904

71,531

128,157

40,893538,132(15,344)522,787

126,655

198,204

37,894

126,61341,892531,261(12,874)

518,387¥(1,010)¥(26,299)¥33,636¥1,544¥(999)¥6,871¥ (2,470)¥4,400in this
Total

FiscalOperating expenses

PeriodOperating income (loss)(3) For the fiscal year ended March 31, 2006
(Millions of yen; amounts less than one million yen are omitted.)
MobileCommunications

Broadband
Infrastructure

Telecommunications

Internet
Culturee-Commerce

OthersTotal¥267,272¥347,447¥155,550¥272,739¥65,654¥1,108,665

1,179

6,785

569

10,535

17,41936,489(36,489)-

268,451354,233

156,120

283,275

83,073

1,145,154(36,489)

1,108,665

Fixed-line

Elimination
Consolidated
or Corporate

Net sales

Newly(1) Customers¥-¥1,108,665

Established(2) Inter-segmentin this
Total

FiscalOperating expenses

PeriodOperating income (loss)

247,779

379,392

81,929278,41487,833

1,075,350(28,984)

1,046,366¥20,672¥(25,158)¥74,190¥4,860¥(4,759)¥69,804¥ (7,504)¥62,299

Notes: 1.Business segments are categorized primarily based on the nature of business operations, type of services,similarity of sales channels, etc., which the SOFTBANK Group uses for its internal management purposes.
2. Please refer to the chart of “The SOFTBANK Group” for a description of the main business segments.
3. Unallocated operating expenses for the six-month periods ended September 30, 2006, September 30, 2005 andfor the fiscal year ended March 31, 2006 in the column "Elimination or corporate", which mainly represent
expenses of the corporate division of the Company, were ¥2,826 million, ¥2,305 million and ¥7,841 million,
respectively.
4. The Mobile Communications segment was established in the six-month period ended September 30, 2006 due tothe consolidation of SOFTBANK MOBILE Corp. Net sales and operating expenses of SOFTBANK MOBILE
Corp. and its consolidated subsidiaries are consolidated from May 2006.

38

2. Geographic segment information(1) For the six-month period ended September 30, 2006
(Millions of yen; amounts less than one million yen are omitted.)
North
AmericaJapan

OthersTotal

EliminationorCorporate

Consolidated¥

Net sales

(2)

(1)

Customers(2)

Inter-segment¥1,115,017¥668¥4,487¥1,120,173

262

-

62

325

-

¥1,120,173

(325)

-

Total

1,115,280

668

4,550

1,120,499(325)

1,120,173

Operating expenses

998,253

1,170

4,848

1,004,272

3,348

1,007,621

Operating income (loss)¥117,026¥(501)¥(298)¥116,226¥(3,674)¥112,552

For the six-month period ended September 30, 2005
(Millions of yen; amounts less than one million yen are omitted.)
North
AmericaJapan

OthersEliminationorCorporate

Total

Consolidated

Net sales
(1)
(2)

(3)

Customers¥519,240

Inter-segment¥633¥2,913¥522,787¥-¥522,787

187

308

173

669

(669)

-

Total

519,428

942

3,086

523,457(669)

522,787

Operating expenses

510,543

1,419

4,913

516,875

1,511

518,387

Operating income (loss)¥8,885¥(476)¥(1,826)¥6,581¥(2,181)¥4,400For the fiscal year ended March 31, 2006
(Millions of yen; amounts less than one million yen are omitted.)
Japan

North
America

OthersTotal

EliminationorCorporate

Consolidated¥

Net sales(1)

Customers(2)

Inter-segment¥1,100,446¥1,351¥6,867¥1,108,665-¥1,108,665

3,325

686

412

4,425

(4,425)-

Total

1,103,772

2,038

7,279

1,113,090(4,425)

1,108,665

Operating expenses

1,028,151

2,934

12,2081,043,294

3,071

1,046,366¥75,621¥(896)¥(4,929)¥69,796¥(7,496)¥62,299

Operating income (loss)

Notes:
1. Net sales by geographic region are recognized based on geographic location of the operation.
Significant countries in each region are shown below:
North America: United States of America and Canada
Others: Europe, Korea, China, Hong Kong, Singapore and others
2. Unallocated operating expenses for the six-month periods ended September 30, 2006, and September 30, 2005,
and for the fiscal year ended March 31, 2006 in the column “Elimination or Corporate”, which mainly represent
expenses of the corporate division of the Company, were ¥2,826 million, ¥2,305 million and ¥7,841 million,
respectively.
3. Overseas sales
Disclosure of overseas sales was omitted because the total overseas sales were less than 10% of total consolidated sales.

39Leases
1. Capital leases in which the ownership of leased assets is not transferred to the lessee at the end of lease periods(as a lessee)(1) Amounts equivalent to acquisition costs, accumulated depreciation and net book value at the end of each period are as
follows:
March 31, 2006
September 30, 2005
September 30, 2006
Telecommunications equipment andtelecommunications service lines
Equivalent to acquisition costs
197,727 million yen 212,136 million yen
212,080 million yen
Less:(64,550)(61,532)(81,206)
Amount equivalent to accumulated depreciation
Amount equivalent to accumulated impairment loss
(21,703)(21,703)
Net book value
111,473 million yen 150,604 million yen
109,170 million yen
Buildings and structures
Equivalent to acquisition costs
Less:
Amount equivalent to accumulated depreciation
Amount equivalent to accumulated impairment loss

Net book value
Property and equipment - others
Equivalent to acquisition costs
Less:
Amount equivalent to accumulated depreciation
Amount equivalent to accumulated impairment loss

Net book value
Intangible assets
Equivalent to acquisition costs
Less:
Amount equivalent to accumulated amortization
Amount equivalent to accumulated impairment loss

Net book value
Total
Equivalent to acquisition costs
Less:
Amount equivalent to accumulated depreciation
Amount equivalent to accumulated impairment loss

Net book value

48,237 million yen

46,999 million yen

46,975 million yen(4,804)43,432 million yen(2,674)44,324 million yen(1,485)45,489 million yen

19,998 million yen

13,604 million yen

13,954 million yen(4,996)(1,656)
13,346 million yen(5,700)(1,657)
6,245 million yen(7,263)
6,691 million yen

10,682 million yen

2,624 million yen

2,876 million yen(1,755)(287)
8,639 million yen(1,238)(287)
1,097 million yen(1,311)
1,565 million yen

290,999 million yen

260,955 million yen

275,943 million yen(92,763)(23,647)
174,588 million yen(74,164)(23,648)
163,141 million yen(71,593)
204,350 million yen

Long-term prepaid expense relating mainly to a ten year term lease contract with payment completed in the initial five years
which is included in “Other assets” of “Investments and other assets” in the consolidated balance sheets for the period ended
September 30, 2006 and for the fiscal year ended March 31, 2006 were ¥4,572 million and ¥1,989 million, respectively.
(2) The future lease payments for capital leases at the end of each period are as follows:
March 31, 2006
September 30, 2006

September 30, 2005

Total

34,319 million yen
171,834
206,153 million yen

34,560 million yen
158,800
193,361 million yen

42,355 million yen
168,127
210,483 million yen

Balance of allowance for impairment loss on leased assets

20,673million yen

23,427 million yen- million yen

Due within one year
Due after one year40

(3) Lease payments and amounts equivalent to depreciation and interest expense for each period are as follows:
Six-month period
FY2006Six-month period
ended September 30,
April 2005 throughended September 30,
2006
March 2006
2005
Lease payments
56,517 million yen
28,527 million yen
26,125 million yen
Reversal of allowance for impairment loss on
300
2,753
leased assets
Amount equivalent to depreciation expense
44,59522,55920,255
Amount equivalent to interest expense
15,808
8,141
7,075
23,727
Impairment loss
(4) Calculation method used to determine the amount equivalent to depreciation and interest expense:
The amount equivalent to depreciation is computed using the straight-line method over the period of the capital leases,
assuming no residual value except in cases where the residual value is guaranteed in the lease contract.
The amount equivalent to interest expense is calculated by subtracting acquisition costs from the total lease payments andallocated over the lease periods based on the interest method.

41

1.

Capital leases in which the ownership of leased assets is not transferred to the lessee at the end of lease periods(continued)(as a lessor)(1) Acquisition costs, accumulated depreciation and net book value at the end of each period are as follows:
March 31, 2006
September 30, 2005
September 30, 2006
Property and equipment - others
164 million yen
164 million yen
Acquisition costs
115 million yen
Less: accumulated depreciation
(137)
(117)
(109)
26 million yen
47 million yen
Net book value
6 million yen(2) The future lease receivables for capital leases at the end of each period are as follows:
March 31, 2006
September 30, 2006
29 million yen
Due within one year
6 million yen
Due after one year
Total
29 million yen
6 million yen

September 30, 2005
45 million yen
6
51 million yen(3) Lease income, depreciation and amount equivalent to interest income for each period are as follows:
Six-month period
Six-month period
FY2006
ended September 30,
ended September 30,
April 2005 through
2005
2006
March 2006
Lease income
46 million yen
23 million yen
23 million yen
Depreciation expense
41
20
22
3
2
Amount equivalent to interest income0(4) Calculation method used to determine the amount equivalent to interest income
The amount equivalent to interest income is calculated by subtracting acquisition costs from the total of lease income andestimated residual value and allocated over the lease periods based on the interest method.
2. Non-cancelable operating lease transactions(as a lessee)
The future lease payments for non-cancelable operating leases at the end of each period are as follows:

Due within one year
Due after one year
Total

September 30, 2006
12,776 million yen
6,887
19,663 million yen

March 31, 2006
September 30, 2005
9,904 million yen
9,081 million yen
11,041
11,362
20,946 million yen
20,443 million yen(as a lessor)
The future lease receivables for non-cancelable operating leases at the end of each period are as follows:

Due within one year
Due after one year
Total

September 30, 2006
1,836 million yen
2,897
4,734 million yen

42March 31, 2006
1,305 million yen
1,921
3,227 million yen

September 30, 2005
1,161 million yen
1,864
3,026 million yen

INVESTMENT IN DEBT AND EQUITY SECURITIES
1. Other securities at fair value(Millions of yen; amounts less than one million yen are omitted.)

March 31, 2006

September 30, 2006

1. Equity securities
2. Debt securities:
Corporate bonds andother debt securities
3. Others
Total

Investment

Carrying

costs

amounts

Differences

Investment

Carrying

costs

amounts¥35,449 ¥187,859 ¥152,410
-

-

-

146
146
¥35,596 ¥188,006 ¥152,410

Differences¥34,810 ¥234,319-

September 30, 2005

¥199,509

-

-

59
59
¥34,869 ¥234,379¥199,509

Investment

Carrying

costs

amounts

Differences¥35,709 ¥235,731 ¥200,022
5,060

5,064

3

18
23
4
¥40,788 ¥240,818 ¥200,030

2. Carrying amounts of unlisted investment securities(Millions of yen; amounts less than one million yen are omitted.)

September 30, 2006
Carrying amounts

March 31, 2006
Carrying amounts

September 30, 2005
Carrying amounts

¥772

¥-

¥-

¥112,170
5,694
5,149
2,000
1,000
627
¥127,415¥26,759
2,959
6,494
2,000
1,000
614
¥39,827¥21,482
2,167
5,388
2,000
347
¥31,386

1. Debt securities (held-to-maturity)
Unlisted debt securities
2. Other securities
Unlisted equity securities
Money Management Fund
Investments in limited partnerships (see Note)
Preferred fund certificate
Designated money trust
OthersTotal

Note: Relating to “Investments in limited partnerships,” the difference between cost and fair value of limited partnerships, net of tax, isrecorded in “Net unrealized gain on other securities” in the consolidated balance sheets.

43

Derivative Transactions
1 Currency related derivatives(Millions of yen; amounts less than one million yen are omitted.)
March 31, 2006

September 30, 2006
Contract amounts
Over 1year

Nature of transaction

Fair
value

Unrealized
gain (loss)

Contract amounts
Over 1year

September 30, 2005

Fair
value

Unrealized
gain (loss)

Contract amounts

Fair Unrealized
value gain (loss)

Over 1year

Off-market transactions
Swap transactions to・ Receive Australian dollars and pay
Japanese yen

¥-

¥-

¥-

¥-

¥-

¥-

¥-

¥-

5,873

-

63

63

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

¥1,000

¥-

¥34

¥34

-

237

177

-

(3)

56

15,61014,645

(286)

(286)

Option transactions to・ Purchase U.S. dollar call option andJapanese yen put option
・ Sell U.S. dollar put option andJapanese yen call option-

・ Purchase Japanese yen put option andeuro call option and sell Japanese yencall option and euro put option
Forward exchange contracts to--・ Purchase U.S. dollars andsell Japanese yen
・ Purchase Japanese yen and sell British
pound

5,369
(60)
4,725
(60)

68,753-70,255

1,502

29,132-

29,128(3)

85,040-87,9772,936

50,662-

54,978(4,316)

-

-

-

-

8,347

8,347

8,685

338

Total

¥(3)

¥(2,750)¥3,256

Notes:
1. The amounts in ( ) under “Contract amounts” represents option fees.
2. Fair value is based on information provided by financial institutions.
2 Interest related derivatives(Millions of yen; amounts less than one million yen are omitted.)
March 31, 2006

September 30, 2006
Notional amounts
Over 1Nature of transaction

Notional amounts

Fair

Unrealized

value

gain (loss)

Over 1

Fair

September 30, 2005
Unrealizedvalue

Notional amounts
Over 1

gain (loss)

year

year

Fair

Unrealized

value

gain (loss)year

Off-market transactions
Swap transactions to・Receive floating rate andpay fixed rate

¥-

¥-

¥-

¥-

¥-

¥-

¥-

¥-

¥10,000

¥-

¥(48)

¥(48)

・Receive fixed rate (receipt later)
and pay fixed rate (prepayment)

-

-

-

-

-

-

-

-

1,000

-

35

35

Total

¥-

Notes:
1. Fair value is based on information provided by the financial institutions.
2. Derivative transactions on which the Company applied hedge accounting are excluded.
3 Securities related derivatives
There are no applicable items.
Note:
Derivative transactions on which the Company applied hedge accounting are excluded.

44

¥-

¥(12)

Per Share Data
FY2006Six-month period
Six-month period endedApril 2005 throughended September 30, 2006 September 30, 2005
March 2006

Net assets per share (yen)¥236.14
Net income (loss) per share - primary (yen)
13.68
Net income (loss) per share – diluted*
12.84* Per share for six-month period ended September 30, 2005 was not disclosed due to the loss position.

¥484.67(11.90)-¥229.88
54.36
50.71

The Company conducted a three-for one share split of the Company’s common stock on January 5, 2006. Per
share data for the six-month period ended September 30, 2005 was calculated assuming the share split was
conducted at the beginning of the fiscal year.
FY2006Six-month period
Six-month period endedApril 2005 throughended September 30, 2006 September 30, 2005
March 2006

Net assets per share
Net loss per share-

161.56(3.97)-

Basic data for computation of the per share data
FY2006Six-month period
Six-month period endedApril 2005 throughended September 30, 2006 September 30, 2005
March 2006

Basic data for computation of the per share data
1. Net income (loss) (in millions of yen)
2. Net income (loss) allocated to common stock outstanding(in millions of yen)
3. Amounts not allocated to shareholders(in millions of yen)
4. Weighted average number of common stock outstanding
during each fiscal year (unit: shares)
5. Adjustment for net income used to calculate net income per share –diluted (in millions of yen)
6. Increase of common stock used to calculate net income per share –diluted (unit: shares)

14,439(4,182)57,55014,439(4,182)57,325--224

1,055,140,098

351,456,370

1,054,478,501

191

-

370

84,168,845-

83,390,701

Stock acquisition rights
specially
approved
atshareholders’ meeting on June22, 2005

7. Residual securities which does not dilute net income per share

45

Stock acquisition rights
specially approved atshareholders’ meetingon June 22, 2005