SOFTBANK CORP.
CONSOLIDATED FINANCIAL REPORTFor the fiscal year ended March 31, 2006
Tokyo, May 10, 2006

FINANCIAL HIGHLIGHTS
1.

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

Operatingincome(loss)

Net sales

FY 2006
April 2005 throughMarch 2006
FY 2005
April 2004 throughMarch 2005

FY 2006
April 2005 throughMarch 2006
FY 2005
April 2004 throughMarch 2005

Ordinary
income(loss)

Net income(loss)

Amount%Amount%Amount%Amount%¥1,108,665

32.5¥62,299-¥27,492-¥57,550-¥837,018

61.7¥(25,359)-¥(45,248)-¥(59,871)-

Net income(loss) per
share— primary (yen)Net income pershare— diluted(yen)¥54.36¥50.71¥(171.03)-

Ordinary
income(loss) / Total
assets (%)

Ordinary
income(loss) /Net sales (%)

27.4

1.6

2.5

(28.9)

(2.9)

(5.4)

Return on Equity
(%)

Note:
1.

2.

Equity in earnings under the equity method, net:
Fiscal Year ended March 31, 2006:¥ 9,521million
Fiscal Year ended March 31, 2005:¥ 5,425 million
Weighted average number of shares issued and outstanding during the year (consolidated)
Fiscal Year ended March 31, 2006:
1,054,478,501 sharesFiscal Year ended March 31, 2005:
351,418,709 shares
Weighted average number of shares issued and outstanding during 2006 was calculated supposing the share split was conducted at the beginning of
the fiscal year.

3. There are changes in accounting policies for the fiscal year ended March 31, 2006.
4. Percentage changes for net sales, operating income (loss), ordinary income (loss) and net income (loss) are compared with the corresponding periodof the previous fiscal year.

12.

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

Total assets

Shareholders'equityEquity ratio (%)

Shareholders' equity
per share (yen)FY 2006
March 31, 2006

¥1,808,398¥242,767

13.4¥229.88

FY 2005
March 31, 2005

¥1,704,853¥178,016

10.4¥505.86

Note: Number of shares outstanding (consolidated)
As of March 31, 2006:
1,055,082,087 shares
As of March 31, 2005:
351,457,170 shares

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

FY 2006
April 2005 throughMarch 2006
FY 2005
April 2004 throughMarch 2005

4.

Operating activities

Investing activities

Financing activities

Cash and cash equivalents
at the end of the period¥57,806¥27,852¥30,078¥446,694¥(45,989)¥(242,944)¥277,770¥320,194

Scope of Consolidation at March 31, 2006
Consolidated subsidiaries:
Equity-method non-consolidated subsidiaries:
Equity-method affiliates:

5.

153
3
84

Changes in Scope of Consolidation
Consolidated subsidiaries:
Newly added:
Excluded:23
23

Equity-method non-consolidated subsidiaries and affiliates:
Newly added:
15
Excluded:362Management Policies
1. Fundamental Management Policies
The core management philosophy of SOFTBANK CORP. (hereafter "the Company") and the SOFTBANK Group(hereafter "the Group") is "Endeavoring to benefit society and the economy and to maximize enterprise value by
fostering the sharing of wisdom and knowledge gained through the IT revolution." By conducting business activities
in a creative manner, the Group focuses its energy on both enhancing its enterprise value and contributing to thedevelopment of society. In accordance with its management philosophy, the Group is working to facilitate therealization of the ubiquitous society, where broadband will enable anyone to access all kinds of information at any timeand place.
Since the Company established Yahoo Japan Corporation (hereafter "Yahoo Japan") in January 1996, the Group has
worked to increase the penetration of commercial Internet services in Japan. In addition, the Yahoo! BB ADSL,
comprehensive broadband service which began commercial services in September 2001, has surpassed 5 million
cumulative lines installed. In these ways, the Group has contributed to the development of the world’s lowest costhigh-speed broadband environment. In July 2004, the Group acquired fixed-line telecommunications carrier JAPANTELECOM CO., LTD. (hereafter "JAPAN TELECOM"), securing a nationwide fiberoptic network and a customer
base of about 6 million lines, principally corporate customers. In April 2006, the Group acquired 99.54% of the stockof Vodafone K.K., a mobile telecommunications carrier with about 15 million subscribers, through take-over bid andthe acquisition of Metrophone Service Co., Ltd., a Vodafone K.K. shareholder. At the same time, the Company
agreed upon an alliance in mobile phone operations with Yahoo Japan, which operates Yahoo! JAPAN, the largest
Internet portal site in Japan.
These acquisitions and alliance have made the Group a comprehensive
telecommunications carrier with about 26 million lines in fixed-line and mobile operations. At the same time, theGroup’s operations also extend beyond that framework, and these acquisitions and alliance will significantly advancethe Group, as a comprehensive digital information company that is also developing content and services for delivery
over broadband infrastructure, toward the realization of the true ubiquitous society.
In Japan, along with the rapid penetration of broadband infrastructure, video is taking over text as the mainstream
Internet content, and Internet video portals will play a major role in the years ahead. To build a competitive advantage
in video portal services, in October 2005, the Group began a trial service of TV Bank, an Internet-based video service.
Furthermore, in December 2005, the Company established TV Bank Corp. (hereafter "TV Bank") a joint venture with
Yahoo Japan. In TV Bank, the Group has brought together its human resources and know-how related toInternet-based video content delivery services. TV Bank has redoubled its efforts to aggregate content and provide
distribution technology to Yahoo! Streaming, a video portal site operated by Yahoo Japan, and is working to enhance
the usability of services in general.
In corporate businesses, the Group is developing a range of solutions that meet business needs in the ubiquitous society
through utilization of the latest ICT*1 of Group companies and business partners. In December 2005, JAPANTELECOM launched ULTINA—a new brand for an ICT platform service integrating network technologies andcontent/application—and began to provide KeyPlat (ULTINA on-Demand Platform) on-demand Web system platform
services. In the future, the Group will accelerate the development of FMC*2 solutions which integrate fixed-line andmobile telecommunications for corporate customers.
As a 21st century lifestyle company that uses broadband technologies to make people's lifestyles more affluent andenjoyable, and as a comprehensive digital information company that provides broadband infrastructure as well as theinnovative content deployed over such infrastructure, the Group aims to be the global No. 1 corporate group in the
broadband era.

3

*1. ICT: Information & Communications Technology*2. Fixed Mobile Convergence: the convergence of fixed-line telephony and mobile telephony
2. Policy Regarding Allocation of Earnings
The fundamental policy of the Company is to increase shareholder value by raising the Company’s enterprise value andproviding an appropriate return to shareholders and all other stakeholders.
The Company's policy regarding dividends is to set dividend payments while taking into consideration the need tomaintain the proper balance between bolstering the operating base and preserving a stable dividend from a medium- tolong-term perspective. The Company has proposed a dividend of ¥2.5 per share for the fiscal year 2006. Although
the year-end dividend for the previous fiscal year was ¥7 per share, in January 2006 the Company implemented a share
split (three-for-one), and as a result the year-end dividend for the fiscal year 2006 is an increase of ¥0.5 per share fromthe previous fiscal year.
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*3, for each of our internal management
segments.
The Group also attaches great importance to indices that track user trends, particularly intelecommunications businesses, such as the number of subscribers, market share, churn rate, and average revenue peruser (ARPU).
*3. EBITDA: Operating income/loss + depreciation and loss from disposal of fixed assets (which are included inoperating expenses)
4. Medium- and Long-Term Strategies
As a comprehensive digital information company in the ubiquitous society, the Group aims to achieve fixed mobile
convergence (FMC) 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 of Group revenues and enterprisevalue through the establishment of a unique business model for the broadband era that will generate long-term, stable
income from its infrastructure businesses, increasing returns from its portal businesses, and diversify sources of profit fromits content businesses.
(1) Expanding broadband content
The Group is taking steps to further expand the content available on the broadband infrastructure. Along with thegrowth in the household penetration rate of access to fixed-line broadband services, the use of broadband in mobile
telecommunications is also expected to grow. The Group believes that the provision of video and a wide range ofother attractive broadband content will be important in the years ahead. In addition to substantially improving theservices and content available under the Group's brand including Yahoo! Japan, the Group will strive to expand
broadband content through alliances with leading content providers in Japan and overseas.
(2) Rapidly establishing ubiquitous, seamless broadband infrastructure
To realize a ubiquitous, seamless broadband environment, the Group aims to provide a comprehensive range oftelecommunications modes. In fixed-line broadband infrastructure, the Group's Yahoo! BB ADSL service has driven the
popularization of broadband in Japan. The Group is working to achieve further increases in the speed of ADSL service
through technical innovation, and at the same time the Group is engaged in R&D targeting the commercialization of newtechnologies, such as FTTR*4. In mobile phone operations, the Group made a full-scale entry into the mobile phonemarket in April 2006 with the acquisition of Vodafone K.K. Targeting the use of broadband and rich content in mobile
phone operations, the Group aims to achieve fixed mobile convergence (FMC) through utilization of next-generation4

high-speed mobile telecommunications services and Group wireless LAN networks at an early stage.
*4. 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, to the user, transmission is handled overmetal wire technology, like that used with ADSL.
(3) 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 lowest cost high-speed, fixed-line
broadband infrastructure base in the world. The Group is also implementing a range of broadband content initiatives
in other Asian countries that have advanced broadband environments like that in Japan, and in the future, the Groupintends to extend this broadband content business model to countries around the world. In parallel with thenegotiations for the recent acquisition of Vodafone K.K., the Group also agreed to pursue discussions concerning
alliances and joint ventures with Vodafone Group PLC (hereafter "Vodafone PLC") in the area of Internet portals andcontent. Over the medium to long term, the Group will work to expand profit opportunities on a global basis byproviding its abundant broadband content to potential customers among Vodafone PLC's 510 million subscribers aroundthe world.
5. Important Management Issues(1) Taking steps in response to mobile number portability*5
With the acquisition of Vodafone K.K. in April 2006, the Group has made a full-scale entry into the mobile phonemarket, which is expected to undergo intensified competition among service providers with the introduction of mobile
number portability this fall. In response to the introduction of mobile number portability, the Group will consider thefollowing measures, work to acquire new customers, and strive to reduce the churn rate.
1. Enhance 3G*6 network
2. Enhance 3G terminals
3. Enhance sales and marketing structure
4. Expand content for mobile platforms*5. A system that allows mobile phone users to switch to another mobile phone company without changing theirmobile phone number*6. Third-generation mobile phone(2) Rapidly creating group synergies
With the acquisition of Vodafone K.K., the Group has reached a scale of about ¥2.5 trillion*7 in net sales andapproximately 17 thousand*8 employees on a consolidated basis. The Group will work to build a group system thatcan move as rapidly as possible to create new synergies among Vodafone K.K. and Group companies. Anticipatedsynergies with JAPAN TELECOM, which offers fixed-line telecommunications services; BB TECHNOLOGY Corp.,
which offers broadband operations; and Yahoo Japan, which conducts Internet operations, include the following:
1. Synergies from network integration
2. Synergies from expansion of customer bases and sales channels
3. Synergies from organizational integration and increased efficiency
4. Synergies involving content services, such as Yahoo! JAPAN*7. Total of consolidated net sales of the Group in fiscal 2006 and of Vodafone K.K. in fiscal 2005.
*8. Total of employees on a consolidated basis of the Group in fiscal 2006 and of Vodafone K.K. in the first half offiscal 2006.

5

(3) Becoming a comprehensive digital information company
As a corporate group based on the Internet-related businesses, the Group will not limit itself to its existing role as acomprehensive telecommunications carrier. Rather, 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 to clearly
differentiate itself from competitors.
(4) Strengthening governance and compliance systems
In December 2005, the Company revised the SOFTBANK Group Charter in order to improve the governance andcompliance systems of the Group as a whole. Along with this revision, the Company prepared guidelines containing
specific compliance items that must be observed by SOFTBANK Group companies and is working to strengthen
governance within the Group. In addition, the Company prepared the SOFTBANK Group Officers & Employees
Code of Conduct comprising 10 items that Group officers and employees are expected to comply with at all times.
Furthermore, the Group established a Group Hotline so that Group officers and employees can receive advice aboutcompliance matters. With such developments as the April 2006 acquisition of Vodafone K.K., the Group continues topost rapid growth in operational scale and number of employees. In this environment, by ensuring thoroughGroup-wide knowledge of the SOFTBANK Group Charter, the Group will strengthen its governance and compliancesystems and ensure thorough risk management.

6

Results of Operations and Financial Position
1. Consolidated Results of Operations<Overview of Fiscal Year Results>
Net sales increased ¥271,646 million, or 32% from the previous fiscal year, to ¥1,108,665 million, surpassing ¥1 trillion
for the first time in the Company’s history. In the Broadband Infrastructure segment, the number of paying customers and
ARPU (average revenue per user) for the Yahoo! BB ADSL service remained strong, and as a result, sales increased¥63,145 million, or 31%, to ¥268,451 million. In the Fixed-line Telecommunications segment, the financial results ofJAPAN TELECOM were consolidated for the entire fiscal 2006 but only for the second half of the previous fiscal year.
As a result, the segment sales were ¥354,233 million, compared with ¥166,878 million in the second half of the previous
fiscal year. In the e-Commerce segment, sales of PC software to large appliance discount stores were strong, and segment
sales totaled ¥283,275 million, an increase of ¥28,353 million, or 11%. The Internet Culture segment benefited fromstrong advertising revenues, and sales rose ¥53,671 million, or 52%, to ¥156,120 million. On March 31, 2005,
SOFTBANK INVESTMENT CORPORATION*1 was changed from a consolidated subsidiary to an equity-method
affiliate. As a result, sales were not recorded in the e-Finance segment in fiscal 2006, compared with ¥78,797 million
recorded in the previous fiscal year.
Operating income was ¥62,299 million, an improvement of ¥87,658 million in comparison with the operating loss of¥25,359 million recorded in the previous fiscal year. These results marked the Company’s first full-year operating profit
in five years. In the Broadband Infrastructure segment, gains in number of paying customers and in ARPU led to higher
sales, and customer acquisition costs were reduced. As a result, the segment’s operating income was ¥20,672 million, an
improvement of ¥74,419 million. In the Internet Culture segment, operating income increased ¥24,110 million, or 48%,
to ¥74,190 million, due to strong advertising revenues. The Fixed-line Telecommunications segment reported an
operating loss of ¥25,158 million due to a delay in the installation of lines for the Otoku Line service of JAPANTELECOM. However, accompanying a change in marketing strategy in this service from the second half of the fiscal year,
profitability improved rapidly, and in the fourth quarter, following such temporary factors as access charge adjustments, thesegment recorded operating income of ¥2,928 million. Operating income was not recorded in the e-Finance segment,
compared with operating income of ¥19,714 million in the previous fiscal year.
Ordinary income was ¥27,492 million, an improvement of ¥72,740 million from the ordinary loss of ¥45,248 million
recorded in the previous fiscal year. This income is attributable to an improvement in operating income and to equity inearnings under the equity method of ¥9,521 million, which increased ¥4,096 million due to the transition of SOFTBANKINVESTMENT CORPORATION from a consolidated subsidiary to an equity-method affiliate. On the other hand, interest
expense increased by ¥4,033 million to ¥27,005 million due to the reflection of the financial results in the Fixed-line
Telecommunications segment on a full-year basis. In addition, foreign exchange loss amounted to ¥6,320 million.
Net income was ¥57,550 million, an improvement of ¥117,422 million from the net loss of ¥59,871 million recorded in
the previous fiscal year. In special income, the Company recorded gain on sales of investment securities of ¥172,306
million on the sale of shares in four Yahoo group companies in Europe and Korea, Tao Bao Holding Limited, Yahoo
Japan and others. Dilution gain from changes in equity interest, mainly SBI Holdings, Inc., and Alibaba.com Corporation,
was ¥21,846 million. In special loss, the Company recorded ¥25,495 million in loss on contract revision relating to sales
operation change for the Otoku Line service, ¥18,052 million in impairment loss in fixed-line telecommunication business,¥14,749 million in restructuring charge relating to BBTV business and ¥7,188 million in valuation loss on investment
securities.
Current income taxes of ¥40,753 million and minority interest of ¥29,342 million were mainly attributable to Yahoo Japan.
*1. Currently SBI Holdings, Inc.

7

<Fiscal Year Results by Business Segment>
Broadband Infrastructure
Segment sales increased ¥63,145 million, or 31%, from the previous fiscal year, to ¥268,451 million. Operating income
was ¥20,672 million, an improvement of ¥74,419 million from the previous fiscal year’s operating loss of ¥53,747
million.
(Quartely trends of the Segment)
2006/Q4

FY2006
2006/Q3
2006/Q2(Millions of yen; amounts less than one million yen are omitted)
FY2005
2006/Q1
2005/Q4
2005/Q3
2005/Q2
2005/Q1

Sales

71,262

71,54364,43961,20556,86152,45049,81946,175

Operating income(loss)

12,321

9,361

3,483

(4,494)(6,594)(12,474)(16,340)(18,337)ADSL Business
The Yahoo! BB ADSL, the driving force for expanding the usage of broadband Internet services, reported 5.04 million
cumulative lines installed as of March 31, 2006. Since its launch, the Yahoo! BB ADSL has maintained consecutive netincreases in the number of paying customers. Moreover, with the exception of temporary factors, such as customer relocations,the churn rate has remained stable at a low of slightly more than 1%.
ARPU of the ADSL business continued to increase as a result of a growth in the number of users of high-value-added
services such as higher-speed service plans and in-house wireless LAN services. The percentage of Yahoo! BB 50M users
continued to increase, over 20% of the total number of subscribers. The number of in-house wireless LAN users exceeded
1.33 million and surpassed 26% of the total number of subscribers. BB Phone, IP telephony service maintained its No.1
share of the market in Japan, with cumulative lines installed totaling 4.81 million as of March 31, 2006. Customer
acquisition costs have been substantially reduced through a shift to more efficient customer acquisition channels,
principally large appliance discount stores.
With ADSL connections, upload speeds have been more challenging than download speeds. However, we will maintainour competitiveness and improve ARPU with the introduction of services such as Yahoo! BB 50M Revo, the industry’s
fastest speed new ADSL service resolving this technical challenge. Moreover, the acquisition of Vodafone K.K. presents
the Company with the opportunity to leverage synergies by cross-selling Yahoo! BB ADSL services to Vodafone K.K.’s
existing mobile phone customers and others.
With the objective of restructuring its broadband business, in December 2005, SOFTBANK BB Corp. (hereafter“SOFTBANK BB”) was split into BB TECHNOLOGY Corp. (hereafter “BB TECHNOLOGY”), which focuses on the
ADSL business, and (New) SOFTBANK BB Corp., which assumes the businesses other than ADSL. Furthermore, withthe aim of concentrating management resources on its core broadband business, BB TECHNOLOGY sold its modem
rental business. Under the terms of a service agreement, after the sale of the business BB TECHNOLOGY will receive
incentives, royalties, and subcontracting fees based on the performance of the business as measured by key factors in the
ADSL business, such as the number of paying subscribers. Accompanying the sale, BB TECHNOLOGY received a totalof ¥85,000 million, ¥45,000 million for the sale of modem rental business and ¥40,000 million in an advance royalty.
(See chart on the next page for details.)
FTTH BusinessIn the FTTH business, the Group has concluded that the opportunities for fair competition are limited in the current
market environment and has opted to follow a strategy focusing on cost efficiency. Although the Group has now
restrained aggressive customer acquisition activities, it is taking steps to expand its service lineup in preparation forfully-fledged services, offering Yahoo! BB hikari TV Package and Wireless TVBOX, which enable users to watch TV
broadcasts from terrestrial stations on their PCs, and the BB Phone hikari, a fiber optic telephony service. The Group ismaking progress in FTTR research and development. Furthermore, the Group is actively sharing its opinion regarding8

necessary conditions for fair competition in the broadband era in such forums as study groups set up by the Ministry ofInternal Affairs and Communications.
Video Content Delivery BusinessIn October 2005, the Group began the demonstration experiments of TV Bank, an Internet-based video service, and in
December 2005, TV Bank Corp. was established as a joint venture between the Company and Yahoo Japan. In TV Bank,
the Group has brought together its human resources and know-how in the field of Internet video content delivery services.
In addition to the procurement of video content and the provision of distribution technologies to Yahoo! Streaming, TV
Bank will work to improve the usability of video search services overall. The objective of these initiatives is to secure adominant position as the No. 1 video portal site. In fiscal 2006, TV Bank’s results are included in the Other segment.
In broadband TV broadcasting service BBTV, the Yahoo! BB hikari TV Package and Yahoo! BB ADSL services areoffered nationwide. The Group will continue to aggressively develop these services. However, following the start-up of
new video content services, such as TV Bank and Yahoo! Streaming, the Company reexamined the level of future revenue
to be generated from the assets solely used in the BBTV business and revalued those assets. As a result, a restructuring
charge of ¥14,749 million relating to the BBTV business was recognized as a special loss in the third quarter of fiscal
2006.
This segment includes the results of the Broadband Infrastructure operations of Yahoo Japan and JAPAN TELECOM,
such as ISP revenues.

Broadband Business Restructuring
Post-Spin-Off

Pre-Spin off

SOFTBANK GROUPSOFTBANK GROUPSOFTBANK CORP.

SOFTBANK CORP.

Wholly Owned

Wholly Owned

Wholly Owned(NEW)
SOFTBANK BBSOFTBANK BB

OtherBusinesses

ADSL
Business(newly established)

BB TECHNOLOGY(surviving company)

Other
Businesses

ADSL
Business

Modem
RentalBusiness

Sold to Outside

Commission Contract

BB Modem Rental(newly established)
Modem Rental
Business

9

Incentives,
Loyalties,
Subcontracting fees etc.

Fixed-line Telecommunications
Segment sales were ¥354,233 million and operating loss was ¥25,158 million.
(Quartely trends of the Segment)
2006/Q4

FY2006
2006/Q3
2006/Q2(Millions of yen; amounts less than one million yen are omitted)
FY2005
2006/Q1
2005/Q4
2005/Q3
2005/Q2
2005/Q1

Sales

92,071

90,256

83,30088,60484,80382,075

Operating income(loss)

2,928(1,787)(12,209)(14,089)(21,767)(14,297)

Newly established on
September 30,2004

The cumulative number of lines installed for JAPAN TELECOM’s Otoku Line, direct connection voice service, reached
840 thousand as of March 31, 2006. Due to such factors as the initial investment and others required for the start-up of
Otoku Line service, the Fixed-line Telecommunications segment has recorded substantial operating losses, but as a resultof improved profitability in the Otoku Line service, and following such temporary factors as access charge adjustments,
the segment recorded its first operating profit in the fourth quarter of fiscal 2006. There were two major reasons for thisimprovement. (1) Following the start-up of JAPAN TELECOM INVOICE Co., Ltd. (hereafter “JAPAN TELECOM
INVOICE”), a joint venture with INVOICE INC., in October 2005, agency management and other responsibilities related
to the Otoku Line business, which had previously been handled by JAPAN TELECOM, were transferred to JAPANTELECOM INVOICE, which resulted in a substantial reduction in agency administration expenses. (2) JAPANTELECOM, which has taken steps to reinforce its marketing to corporate customers, is focusing on providing its
voice-network solutions using Otoku Line to corporate customers with high revenue-generating potential.
This segment recorded special losses of ¥25,495 million in loss on contract revision relating to sales operation change for
the Otoku Line service and ¥18,052 million as an impairment loss from fixed-line telecommunications business.
JAPAN TELECOM is using the latest ICT of Group companies and business partners to develop a range of solutions thatmeet business needs in the ubiquitous society. In December 2005, JAPAN TELECOM launched ULTINA—a new brandfor an ICT platform service integrating network technologies and content/application—and, in partnership with Oracle
Corporation Japan, began to provide KeyPlat (ULTINA on Demand Platform) on-demand Web system platform services.
Also in December, Microsoft Japan, JAPAN TELECOM, and SOFTBANK BB agreed on a strategic partnershiptargeting the development and provision of integrated messaging services for corporate customers. Further, through theacquisition of Vodafone K.K., the Group will accelerate the development of fixed mobile convergence (FMC) solutions
targeting corporations and integrating fixed-line and mobile telecommunications.
e-Commerce
Segment sales increased ¥28,353 million, or 11%, to ¥283,275 million, while operating income decreased ¥379 million,
or 8%, to ¥4,860 million.
(Quartely trends of the Segment)
2006/Q4

FY2006
2006/Q3
2006/Q2(Millions of yen; amounts less than one million yen are omitted)
FY2005
2006/Q1
2005/Q4
2005/Q3
2005/Q2
2005/Q1

Sales

83,661

71,456

67,68860,46971,922

63,38861,57458,035

Operating income

1,843

1,473

817

726

1,168

1,491

1,039

1,540

Sales of PC software and peripheral equipment through large appliance discount stores were strong, including during theyear-end holiday sales season. In addition, the marketing of PC servers and software to corporate customers was enhanced.
As a result, strong sales were recorded, and operating income improved in the second half of the fiscal year. As a result of
initial investment in e-commerce related business, operating income for the segment as a whole registered a small decline
from the previous fiscal year.

10Internet Culture
Segment sales increased ¥53,671 million, or 52%, to ¥156,120 million. Operating income increased ¥24,110 million, or
48%, to ¥74,190 million.
(Quartely trends of the Segment)
2006/Q4(Millions of yen; amounts less than one million yen are omitted)
FY2005
2006/Q1
2005/Q4
2005/Q3
2005/Q2
2005/Q1

FY2006
2006/Q3
2006/Q2

Sales

42,37442,21436,896

34,63531,663

26,98922,72521,070Operating income

21,297

19,256

17,167

16,46915,033

12,849

11,093

11,103The Internet advertising market continued to post strong growth, and Yahoo Japan conducted aggressive sales activities,
especially to national clients, for mainstay advertisements, such as top page brand panel ads. As a result, Yahoo Japan
continued to record favorable advertising sales. In non-advertising business services, the Yahoo! Rikunabi employment
information service recorded a strong performance accompanying a pickup in business conditions, and in consumer
services, steady gains were made in the transaction volumes at Yahoo! Auctions and in the number of Yahoo! Premium
members.
Others
The results of this segment include the performance of Broadmedia businesses (mainly Club iT Corporation), Technology
Services businesses (mainly SOFTBANK TECHNOLOGY CORP.), Media & Marketing Businesses (mainly
SOFTBANK Creative Corp.), and Other Businesses (mainly Fukuoka Softbank Hawks Corp.).
Mobile Telecommunications
In fiscal 2006, BB Mobile Corp. (hereafter “BB Mobile”) took steps towards its entry into mobile telecommunications,principally R&D activities. BB Mobile’s results for the year are included in the Broadband Infrastructure segment. In
April 2006, the Group is to make a full-scale entry into the mobile telecommunication market with the acquisition ofVodafone K.K. (Please refer to the following chart.) For the fiscal year ending March 2007 and thereafter, the Company
plans to establish the Mobile Telecommunications segment, which will include the operations of companies involved in
mobile communications, such as BB Mobile and Vodafone K.K. The Company plans to include Vodafone K.K.’s
consolidated results of operations in the Company’s consolidated financial statements from May 2006.
Structure of the acquisition of Vodafone K.K.
SOFTBANK CORP.
・¥200.8 billion（common shares, retaining 100% of voting rights）

Mobiletech Corp.

・¥200 billion（common shares, retaining 100% of voting rights）

BB Mobile Corp.

・¥32.2 billion

・¥1,661.2 billion（acquisition of 100％ of common shares issued
from Vodafone Group ）（Through a take-over bid, acquisition of 97.64%
of common shares issued）

Metrophone Service Co., Ltd
・Holding 1.9％ of common shares of Vodafone K.K.

Vodafone K.K.
Through a take-over bid of Vodafone K.K. and acquisition of 100%of common shares,
Acquisition of 99.54% of common shares of Vodafone K.K.

11

2. Consolidated Financial Position<Balance Sheet Analysis>
Current assets increased ¥139,012 million from the end of the previous fiscal year, to ¥745,130 million. The principal
reasons were an increase in cash and deposits of ¥158,327 million due to borrowing and a decrease in marketablesecurities of ¥35,031 million as a result of sales.
Property and equipment decreased ¥33,111 million, to ¥418,605 million. This was primarily due to both depreciation and thedivestiture and sale of the modem rental business in the Broadband Infrastructure segment.
Intangible assets decreased ¥1,254 million, to ¥102,286 million. Other intangibles, such as software, increased ¥2,922
million, while goodwill decreased ¥4,176 million due to amortization.
Investments and other assets decreased ¥590 million, to ¥541,382 million. The Company recorded ¥37,560 million
from the acquisition of convertible bonds and dilution gain from changes in equity interest for Alibaba.com Corporation;¥22,125 million in equity in earnings under the equity method and dilution gain from changes in equity interest for SBI
Holdings, Inc.; ¥10,149 million following Yahoo Japan’s acquisition of ValueCommerce Co., Ltd.; and ¥7,299 million
resulting from the increase in the market value of Yahoo! Inc. On the other hand, the sale of IT Fund*2 reduced
investment securities by ¥52,041 million. As a result, investment securities and investments in partnerships increased by¥30,209 million from the end of the previous fiscal year. Principally as the result of the Company’s receipt of dividends
from consolidated subsidiaries, non-current deferred tax assets declined ¥15,432 million.
Current liabilities decreased ¥100,743 million, to ¥590,052 million. At the end of the previous fiscal year, accounts
payable—other and accrued expenses reflected a temporary increase in accounts payable stemming from the initialinvestment required to start-up new businesses, such as FTTH and Otoku Line. At the end of fiscal 2006, however,accounts payable—other and accrued expenses fell by ¥114,141 million due to the completion of these payments.
Long-term liabilities increased ¥107,135 million, to ¥874,232 million. The principal reasons were an increase of¥77,880 million in corporate bonds as a result of the Company’s issuance of domestic straight bonds (20th-23rd
unsecured bonds) and long-term deferred revenue of ¥41,840 million resulting from the sale of the modem rental
business.
Shareholders’ equity increased ¥64,751 million, to ¥242,767 million. This mainly reflected a decrease in accumulated
deficit of ¥54,801 million from recognition of net income and an increase in foreign currency translation adjustments of¥12,365 million. As a result, the equity ratio was 13.4%, compared to 10.4% at March 31, 2005.
*2. SOFTBANK INTERNET TECHNOLOGY FUND, No.1 and No.2.
<Cash Flow Analysis>
1. Overview of Fiscal Year Results
During the fiscal 2006, net cash provided by operating activities was ¥57,806 million, net cash provided by investing
activities was ¥27,852 million, and net cash provided by financing activities amounted to ¥30,078 million. As a result,cash and cash equivalents at the end of the period totaled ¥446,694 million, an increase of ¥126,499 million from March
31, 2005.
Net cash provided by operating activities was ¥57,806 million. Income before income taxes and minority interest
amounted to ¥129,484 million, depreciation and amortization totaled ¥80,417 million, and royalties received in advancefollowing the sale of the modem rental business came to ¥40,000 million. However, cash outflows included ¥171,864
million of gain on sales of marketable and investment securities, net, and ¥21,806 million in dilution gain from changes inequity interest, net, which were recorded as adjustment items (affecting special income and loss in the consolidated

12

statements of operations). Other factors affecting net cash used in operating activities were interest paid of ¥22,332
million and payments of ¥31,588 million in corporate income taxes by Yahoo Japan and others.
Net cash provided by investing activities was ¥27,852 million. The Company recorded ¥178,022 million in proceedsfrom sales of marketable and investment securities following the sale of shares in four Yahoo group companies in Europe
and Korea; ¥45,000 million in proceeds from sale of modem rental business; ¥39,826 million in sales of interests in
subsidiaries previously consolidated, principally following the sale of shares in Tao Bao Holding Limited; and ¥29,232
million in proceeds from sales of interests in consolidated subsidiaries, principally Yahoo Japan. However, cash outflows
included ¥189,490 million for the purchase of property and equipment, mainly in connection with the Broadband
Infrastructure and Fixed-line Telecommunications segments, and ¥88,479 million for the purchase of marketable andinvestment securities.
Net cash provided by financing activities was ¥30,078 million. Proceeds from long-term debt were ¥125,550 million,
proceeds from the issuance of bonds totaled ¥91,849 million, and increase in short-term borrowings, net, was ¥32,043
million, while repayment of long-term debt was ¥158,211 million and redemption of bonds totaled ¥53,547 million.
2. Factors That May Have a Material Impact on Cash Flows in the Following Fiscal Year
Need for Funds to Support Growth in the Group’s Telecommunications BusinessIn addition to broadband infrastructure and fixed-line telecommunications, in which the Group has concentrated its
management resources, the Group has made a full-scale entry into mobile telephony operations with the acquisition ofVodafone K.K. The capital investment accompanying this business expansion and customer acquisition costs undertaken
to strengthen the Group’s customer base might have a temporary negative effect on the Group’s cash flows.
Acquisition of Vodafone K.K. and Fund-Raising Accompanying the Acquisition
In April 2006, BB Mobile, a wholly-owned consolidated subsidiary acquired 99.54% of the stock of Vodafone K.K.
through take-over bid and the acquisition of Metrophone Service Co., Ltd, at a cost of approximately ¥1,690 billion.
In order to raise funds for the acquisition of Vodafone K.K., BB Mobile entered into one year bridge facility contract*3,
totaling ¥1,280 billion with a group of 17 financial institutions, centered on 7 co-lead managers. This bridge facility
contract was structured as a non-recourse loan. Including this contract, BB Mobile’s financing structure is as follows:¥1,160 billion
1. Loan based on bridge facility contract(Including consideration of Vodafone, repayment of inter-company loan toVodafone group, and other expenses)
2. Subordinated loans by Vodafone International Holdings B.V.
¥100 billion
3. Preferred shares subscribed by Vodafone International Holdings B.V.
¥300 billion
4. Preferred shares subscribed by Yahoo Japan¥120 billion
5. Common shares subscribed by Mobiletech Corporation¥200 billion(The Company subscribed common stock of Mobiletech Corporation, thecompany’s wholly-owned subsidiary for ¥200.8 billion in advance.)*3. This bridge facility contract includes the amount to be used for the working capital of ¥100 billion of Vodafone K.K.
Commitment-line Contract
In October 2005, when a commitment-line established in the previous fiscal year reached the end of its term, the Company
entered into a ¥109 billion commitment-line with 8 financial institutions, which was arranged by Mizuho Corporate Bank,
Ltd. In November 2005, the Company expanded the commitment line to 24 participating financial institutions and an
amount ¥161 billion. As of March 31, 2006, the balance of commitment-line borrowings totaled ¥100 billion.
Legal Defeasance for Euro-Denominated Senior Notes
On April 3, 2006, in regard to Euro-denominated Senior Notes due 2011 with aggregate principal of €400 million, theCompany deposited with the trustee cash sufficient for the payment of principal and interest on the notes and implemented
legal defeasance. As a result, the Company has been released from most of the debt covenants included under the terms ofindenture, but the Company will continue to be responsible for payments on the notes until they reach maturity. Also, the13notes continue to be recorded as “corporate bonds” in its consolidated and stand-alone financial statements of theCompany until maturity or redemption of the notes.
<Trends in Cash Flow Indicators>
A summary of trends in cash flow indicators is presented below.
FY2006 ended
FY2005 ended
March 31, 2006
March 31, 2005
Equity ratio
13.4%
10.4%
Equity ratio (Market cap.)
201.3%
91.1%
Debt repayment period
15.6 year－
Interest coverage ratio
2.1－

FY2004 ended
March 31, 2004
16.8%
120.4%－－

Notes:
1. The above indicators are calculated using the following formulas based on consolidated figures.
Equity ratio
Shareholders’ equity divided by total assets
Equity ratio (Market Market capitalization divided by total assets
cap.)
Debt repayment period
Interest-bearing debt divided by net operating cash inflows
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 oftreasury stock, as at March 31, 2006.
3. Interest-bearing debt is the sum of all liabilities on the consolidated balance sheet on which interest is paid.
4. Net operating cash inflows and interest expenses are the corresponding figures shown on the consolidated statements ofcash flows.
5. Negative figures are indicated by “－”.
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 those listed below could have a significant
effect on the Group’s business. The following risks associated with the business are those apparent to the Company atpresent 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 broadband-related markets, fixed-line telecommunications
markets, IT-related distribution markets, and other markets. Moreover, the Group will enter the mobile phone market in
the fiscal year ending March 2007 following the acquisition of Vodafone K.K. Demand for services and products
supplied by the Group is dependent on economic conditions, trends in these markets, and other factors.
In particular, deregulation of the telecommunications industry has facilitated easier market entry, resulting in extremely
tough competition in Japan’s broadband, fixed-line telecommunications, and mobile phone 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. Nonetheless, it is possible that price competition will continue in each ofthese markets. Some of the Group’s competitors boast capital strength, price competitiveness, customer bases, and brandrecognition that exceeds those of the Group. As a result of these factors, the Group’s competitiveness could decline.
Specifically, in the Broadband Infrastructure segment, the emergence of new market trends may result in increased
customer acquisition costs. In addition, if the market penetration of FTTH connection service exceeds the Group’s
projections and the churn rate of the ADSL connection service increases, or if Japan’s broadband market penetration
approaches saturation, the growth in this business could be severely restricted.

14

In the Fixed-line Telecommunications segment, accompanying the growing penetration of mobile phone and otherservices, the fixed-line telephony market has been shrinking each year, and if the ARPU for the MYLINE service offeredby JAPAN TELECOM declines, or if the churn rate for the service increases, it is possible that revenues could besignificantly influenced. The marketing of Otoku Line direct connection voice services to small and medium-sizedcompanies was transferred to JAPAN TELECOM INVOICE Co., Ltd., a joint venture with INVOICE INC. Otoku Lineservices are directly marketed to large companies by JAPAN TELECOM. Generally, the circuits provided to large
companies generate higher profits per circuit than those provided to small and medium-sized companies but require moretime 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 large appliancediscount stores remain favorable, but if the Group is not able to respond to changes in the market environment, such aschanges in the methods of distribution for products handled by the Group 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 other companies, isgenerally extremely sensitive to economic trends, particularly in sluggish economic conditions, when the tendency in allindustries is to put a high priority on controlling advertising spending. Furthermore, as the Internet advertising businesshas a short history, it is also easily affected by overseas markets that are ahead of Japan in this field, such as the UnitedStates.
In the mobile telecommunications segment that the Group plans to establish in the fiscal year ending March 2007, prior to
the implementation of mobile number portability, scheduled this fall, it is possible that competition among companies will
intensify and customer acquisition will not proceed as planned, or that customer acquisition costs will rise and revenues
will be significantly affected. Also, for the Group, it is possible that time will be required to achieve recognition as a new
brand and new customer acquisition will be sluggish, while on the other hand the Group will not be able to stop the loss ofexisting customers, and as a result that the customer base will be affected. Moreover, due to price competition stemmingfrom intensified competition, ARPU might fall below the Group's projections, with a major influence on revenues in thissegment.
(2) Risks Related to Technological Innovation
In the telecommunications and IT industries in which the Group is developing business, technologies and industry
standards are changing rapidly on an industry-wide scale, including the fields of telecommunications networks andtelecommunications systems technologies. The industries are undergoing 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 possible that 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.
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 response to them could affect theGroup’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 theGroup’s telecommunications operations. In the event of changes in these laws and regulations or the implementation of
new laws and regulations in the future, the Group might not be able to develop its business as expected. Furthermore, theMinistry of Internal Affairs and Communications has set up study groups that have the potential to influence futurecompetition policies in the telecommunications industry, such as the "Study Group on a Framework for Competition

15

Rules to Address Progress in the Move to IP" and the "Study Group on a Framework for Telecommunications andBroadcasting." The final reports of these study groups are scheduled for delivery in June and September, respectively, anddepending on the results of the deliberations, they could have a significant influence on the development of the Group’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 TV
Bank, Yahoo! Streaming, and BBTV, does not infringe on any rights or interests, including the intellectual property rights
of holders of various intellectual property rights. However, it is possible that the Group’s actions will infringe uponvarious rights and interests, including the intellectual property rights of intellectual property rights holders, and that theGroup will be subject to demands that it stop using video content or that it pay compensatory damages.
With regard to intellectual property, a number of companies are aggressively promoting the development of Internet
technologies and business models that include broadband technology, and as a result there is the possibility that the Groupmight be sued by a third party for compensatory damages for patent infringement and that, in the future, the Group’sbusiness 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, are revised, the Groupmight 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 access to databases that contain personal information.
In particular, telecommunications carriers of the Group are handling personal information appropriately in accordancewith 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 ispossible that the Group 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 andforeign exchange markets in Japan and overseas, and imports of telecommunications equipment are influenced by trends
in the foreign exchange market.
As of March 31, 2006, consolidated interest-bearing debt totaled ¥905,293 million, and interest expense was ¥27,005
million. In April 2006, in order to raise funds for the acquisition of Vodafone K.K., the Group borrowed ¥1,280 billion.
The Group has a substantial amount of interest-bearing debt and holds large amounts of assets and liabilities denominated inforeign 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 the market prices of its
investments could adversely affect the Group’s ability to raise funds. Stocks of Internet-related companies in Japan, theUnited States, and other countries constitute the majority of the Group’s investments. Changes in the stock prices of thesecompanies 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 operations. As of March 31, 2006, the unrealized gain on other marketable securities totaled¥129,051 million. In addition, the Group’s equity in publicly traded consolidated subsidiaries and affiliates accounted forunder the equity-method amounted to ¥2,203,143 million at market value. The consolidated book value of these16

securities was ¥140,769 million and the unrealized gain (the difference between the market value of the portion held by
the Group and the consolidated book value) was ¥2,062,373 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 to content andportal businesses. The Group believes that M&A activities and alliances are effective means of rapidly building
competitive advantages in these operational fields. In past fiscal years, the Group has made major acquisitions andinvestments, such as investing in Yahoo! Inc. (1995), establishing Yahoo Japan in conjunction with Yahoo! Inc. (1996),
acquiring JAPAN TELECOM (2004), and acquiring Cable & Wireless IDC Inc. (2005). 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 of differentiation and competitive
advantage in regard to other companies, and the Group believes that they have had a certain level of results. Also, inregard to the recent acquisition of Vodafone K.K., the Company believes that similar results can be expected. The Groupwill continue to place importance on mergers with, acquisitions of, and alliances with companies that hold key content inthese fields and companies that hold technologies that will be essential for progress in broadband operations, and theGroup will consider them as necessary.
In the event of an acquisition or alliance, the Group works to avoid risk by conducting due diligence regarding suchmatters as the financial position of the other party. However, there is clearly a risk that unrecognized debts will arise afteran acquisition, such as bad debts. Furthermore, due to changes in the business environment or competitive conditions, it
is possible that the implementation of initial operating plans will be hindered. Moreover, there is a risk that the Group will
not be able to adequately recover investments already made due to such problems as a failure to realize, for any of anumber of reasons, the synergies with the other company that had been initially anticipated. As a result, the Group might
not be able to develop its operations as expected.
(6) Risks Related to Reliance on the Management Resources of Other Companies
In developing its broadband infrastructure, fixed-line telecommunications, and mobile telecommunications operations,
the Group uses telecommunications facilities owned by NIPPON TELEGRAPH AND TELEPHONE EASTCORPORATION and NIPPON TELEGRAPH AND TELEPHONE WEST CORPORATION (hereafter "NTTEast-West"). In building its network, the Group uses telecommunications facilities including dark fiber and dry copper
owned by NTT East-West and installs telecommunications equipment at NTT East-West central offices. Under the
Telecommunications Business Law, NTT East-West are required to provide access to their dark fiber and dry copper,
which are classified as designated telecommunications facilities. Therefore, at this point, the Group believes that thepossibility of its operational development being hindered is low, but in the future, for any of a number of reasons, if thecontinued 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 a significant change in this relationshipin the future, it is possible that the Group will not be able to develop 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 disruption of services on these networks, theGroup 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 that major natural and other disasters (such as typhoons, earthquakes, andterrorist 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 and employees.
Unforeseen situations concerning top management— especially 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 March 31, 2006, the SOFTBANK Group included 153 companies with operations in nine business segments asfollows.
Consolidated
subsidiaries

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

16

7

ADSL and fiber-optic high-speed Internet connection service, IP telephonyservice, provision of content and other operations(Note 2)13

2

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

3. e-Commerce(Note 2)18

11

4. Internet Culture(Note 2)25

9

Broadmedia

10

3

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

Technology Services

73

System solution business and business solution businessMedia & Marketing7

5Book and magazine publication in such areas as PCs, the Internet,
entertainment, etc., and development of web content specializing in IT

Overseas Funds

33

40

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

Others24

7

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

153

87

Business segment

Broadband
Infrastructure
Fixed-line
2.
Telecommunications
1.

Principal products and operational content of each 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)
Internet-based advertising operations, broadband portal business, andInternet-based auction business

5 Others:

Total

Note: 1. On December 1, 2005, SOFTBANK BB Corp. was split into BB TECHNOLOGY Corp., (the surviving
company; the name of SOFTBANK BB Corp. was changed to this name.), which focuses on ADSL business and
SOFTBANK BB Corp. (newly established company; hereafter “New SOFTBANK BB Corp.”), which assumes
the businesses other than ADSL business such as FTTH business and e-Commerce business. BB
TECHNOLOGY Corp. is included in Broadband Infrastructure segment.
2. New SOFTBANK BB Corp., JAPAN TELECOM CO., LTD. and Yahoo Japan Corporation are included in the
consolidated subsidiaries of the e-Commerce, Fixed-line Telecommunications and Internet Culture segments,
respectively, while New SOFTBANK BB Corp., JAPAN TELECOM CO., LTD. and Yahoo Japan Corporation
operate multiple businesses and their operating results are allocated to multiple business segments.
3. The former e-Finance business segment ended since SOFTBANK INVESTMENT CORPORATION (current SBI
Holdings, Inc.) changed to an equity-method affiliate from a consolidated subsidiary on March 31, 2005.

19

Broadband Infrastructure
Broadband Infrastructure
BB TECHNOLOGY Corp.
SOFTBANK BB Corp. (Note 1)

Fixed-line
Fixed-line
Telecommunications
Telecommunications

Internet Culture
Internet Culture

BB Cable Corporation

Yahoo Japan Corporation (Note 2)JAPAN TELECOM CO., LTD. (Note 2)

CREO CO., LTD.

SOFTBANK IDC Corp.

All About, Inc.
Alibaba.com Corporation

e-Commercee-Commerce

SOFTBANKSOFTBANKCORP.
CORP.
(Pure Holding Company)(Pure Holding Company)

SOFTBANK BB Corp. (Note 1)
Vector Inc.

Media & Marketing
Media & Marketing
SOFTBANK Creative Corp.

Carview Corporation

ITmedia Inc.

GungHo Online Entertainment Inc.

cyber communications inc.

Broadmedia
Broadmedia

Overseas Funds
Overseas Funds

Club iT Corporation

SOFTBANK Holdings Inc.

Technology Services
Technology Services

OthersOthersFukuoka Softbank Hawks
Marketing Corp.

SOFTBANKTECHNOLOGY CORP.

TV Bank Corporation

・・・・ Segment・・・・ Consolidated subsidiary
・・・・

SBI Holdings, Inc.

Equity-method subsidiaryor affiliates

Broadmedia, Technology Services, Media & Marketing, Overseas Funds, and others segments are included in“Others” segment. From April 1, 2006, Mobile Telecommunications segment is to be established.

SOFTBANK subsidiaries listed on domestic stock exchanges as of March 31, 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.)
March 31, 2006
AmountMarch 31, 2005%

Amount%Increase(Decrease)

ASSETS
Current assets:
Cash and deposits¥446,306¥287,978

Notes and accounts receivable - trade¥158,327

188,921

168,262

20,658Marketable securities

4,372

39,403(35,031)

Inventories

50,59747,224

3,372

Deferred tax assets

14,107

3,025

11,082Other current assets
Less:
Allowance for doubtful accounts
Total current assets

48,25067,542(19,292)(7,424)(7,319)(104)745,13041.2

606,11735.5

139,012

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

57,30456,860444

Telecommunications equipment

194,970

198,598(3,628)

Telecommunications service lines

91,724

99,133(7,408)Land

19,404

19,396

7

Construction-in-progress

27,87549,354(21,479)

Others27,32528,373(1,048)

Total tangible assets

418,605

23.1

451,71726.5(33,111)

Intangible assets, net:
Goodwill

44,13648,313(4,176)

Other intangibles

58,14955,227

2,922

Total intangible assets

102,286

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

5.7

103,540

6.1(1,254)

464,650

434,441

30,20925,03940,472(15,432)

61,24175,728(14,487)(9,548)(8,669)(879)

541,38229.9

541,972

31.8

(590)

Deferred charges

993

0.1

1,504

0.1

(510)

Total assets¥1,808,398

100.0¥1,704,853

100.0¥103,545

21

CONSOLIDATED BALANCE SHEETS(Millions of yen; amounts less than one million yen are omitted.)
March 31, 2006

AmountLIABILITIES ANDSHAREHOLDERS' EQUITYCurrent liabilities:
Notes and accounts payable - trade

March 31, 2005%

AmountIncrease(Decrease)%¥60,432¥63,684¥(3,251)

Short-term borrowings

218,300

181,186

37,113

Commercial paper

10,40015,500(5,100)Current portion of corporate bonds
Accounts payable – otherand accrued expenses
Income taxes payable

11,094

48,145(37,051)

114,112228,264(114,141)

29,137

21,600

7,536

-

527

(527)

Deferred tax liabilities
Cash receipts as collateral

100,000

100,000-

Other current liabilities

46,56431,887

14,677

Total current liabilities

590,052

32.6

690,79640.5(100,743)

Long-term liabilities:
Corporate bonds

456,128

378,248

77,880Long-term debt

209,370

230,837(21,466)

Deferred revenue

41,840-41,840

Deferred tax liabilities

48,642

57,419(8,777)

Accrued retirement benefits

17,27917,359(79)

Other liabilities

100,970

83,232

17,738

Total long-term liabilities

874,23248.4

767,09645.1

107,135

Total liabilities
Minority interestin consolidated subsidiaries
Shareholders' equity:

1,464,285

81.0

1,457,893

85.6

6,391

101,346

5.6

68,9434.0

32,402

162,9169.0

162,397

9.5

519

5

0.0

-

-

5

Common stockPre-stock issuance paid-in capital
Additional paid-in capital

187,303

10.3

186,783

10.9

519

Accumulated deficit(218,561)(12.1)(273,362)(16.0)

54,801

Net unrealized gain on other securities

129,051

7.1

136,662

8.0(7,610)Net unrealized loss on derivative instruments(36,840)(2.0)(41,056)

(2.4)

4,215

Foreign currency translation adjustments

19,062

1.1

6,697

0.4

12,365

Less: Treasury stock

(169)

(0.0)

(106)

(0.0)

(63)

242,767

13.4

178,016

10.4

64,751¥1,808,398

100.0¥1,704,853

100.0¥103,545

Total shareholders' equity
Total liabilities andshareholders' equity

22

CONSOLIDATED STATEMENTS OF OPERATIONS(Millions of yen; amounts less than one million yen are omitted.)

FY 2006
April 2005 through March 2006
AmountNet sales
Cost of sales
Gross Profit%

AmountIncrease(Decrease)

%

100.0
65.3

¥837,018
547,402384,853

34.7

322,553

29.1

Operating income (loss)

62,299

5.6Interest income
Equity in earnings under the equity method
Income from investments in partnerships, net

2,136
9,521

2,398
5,425

(262)
4,096

777

3,711

(2,934)

Other non-operating income

3,321

4,931

(1,609)Non-operating income
Interest expense
Foreign exchange loss
Other non-operating expenses

15,75627,005
6,320
17,237

1.4

16,46622,971
4,040
9,343

2.0

(709)
4,033
2,279
7,894

Non-operating expenses

50,5644.5

36,356

4.4(14,207)

Ordinary income (loss)

27,492

2.5(45,248)(5.4)

72,740Gain on sale of investment securities
Dilution gain from changes in equity interest
Other special income

172,306
21,846
4,371

Selling, general and administrative expenses

Special income
Valuation loss on investment securities
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
Refinance arrangement fee
Other special losses
Special loss
Income (loss) before income taxes
and minority interest
Income taxes:
Current¥1,108,665
723,812FY 2005
April 2004 through March 2005

198,524

100.0
65.4

¥271,646
176,409289,615

34.6

95,237

314,975

37.6

7,578

(25,359)(3.0)

87,65859,121
26,2693,969
17.989,360113,184(4,423)401
10.7(109,163)

7,188

7,161

26

25,495-25,49518,052-

18,052

14,749-14,7493,565
3,153
24,326
96,532

8.7

6,147
40,35153,660

6.4(2,582)
3,153(16,024)(42,871)

129,484

11.7(9,548)(1.1)

139,032

40,753

3.7

34,740

4.2

6,013

Refunded

-

-

2,897

0.3

(2,897)

Deferred

1,837

0.2

(21,963)(2.6)

23,801

29,342¥57,550

2.6
5.2

40,444¥(59,871)

4.8
(7.2)

(11,101)¥117,422

Minority interest
Net income (loss)

23

CONSOLIDATED STATEMENTS OF ADDITIONAL PAID-IN CAPITALAND RETAINED EARNINGS(Millions of yen; amounts less than one million yen are omitted.)

FY 2006
April 2005 throughMarch 2006

FY 2005
April 2004 throughMarch 2005

ADDITIONAL PAID-IN CAPITAL
Additional paid-in capitalat the beginning of the year
Increase due to issuance of shares
Additional paid-in capitalat the end of the year

¥186,783¥186,690

519

93¥187,303¥186,783(Millions of yen; amounts less than one million yen are omitted.)

FY 2006
April 2005 throughMarch 2006

FY 2005
April 2004 throughMarch 2005

ACCUMULATED DEFICIT
Accumulated deficit
at the beginning of the year
Net income (loss)
Cash dividends
Bonuses to directors
Net adjustments to retained earnings due tochange in scope of the consolidation
Increase due to merger
Decrease due to merger
Accumulated deficit
at the end of the year¥(273,362)¥(210,625)

57,550(59,871)(2,460)(2,459)

(86)

(176)

13

(98)

-

17

(215)

(147)

¥(218,561)¥(273,362)

Note: In accordance with the accounting principles generally accepted in Japan, the cumulative effect arising from any changes in the scope of
consolidation is treated as an adjustment to retained earnings in the consolidated statements of additional paid-in capital and retained earnings.

24

CONSOLIDATED STATEMENTS OF CASH FLOWS(Millions of yen; amounts less than one million yen are omitted.)

FY 2006
April 2005 through March 2006

FY 2005
April 2004 through March 2005

¥129,484¥(9,548)

80,41766,417

Impairment loss

36,478-Equity in earnings under the equity method, net(9,521)(5,425)

Dilution gain from changes in equity interest, net(21,806)(25,200)

7,188

7,161

(171,864)(56,049)

Foreign exchange loss, net

5,497

5,324

Interest and dividend income(2,402)(2,862)

Interest expense

27,00522,971(23,333)(15,840)

Increase in payables - trade

4,331

2,371

Increase in deferred revenue

40,000-(Increase) in other receivables(9,864)(70,813)(Decrease) increase in other payables(26,773)

97,095

Other, net

40,524(17,519)

105,361

(251)

3,301

2,506

Interest paid

(22,332)(17,924)

Income taxes paid

(31,588)(31,533)

3,064

1,213

57,806(45,989)

Ⅰ Cash flows from operating activities:

Income (loss) before income taxes and minority interest
Adjustments to reconcile income (loss) before income taxes
and minority interest to net cash provided by (used in)operating activities:
Depreciation and amortization

Valuation loss on investment securities
Gain on sale of marketable and investment securities, net

Changes in operating assets, liabilities and others(Increase) in receivables – trade

Sub-totalInterest and dividends received

Refund of income taxes
Net cash provided by (used in) operating activities- Continued -25

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)(Millions of yen; amounts less than one million yen are omitted.)

FY2006
April 2005 through March 2006

FY2005
April 2004 through March 2005

Purchase of property and equipment and intangibles¥(189,490)¥(90,943)

Purchase of marketable and investment securities(88,479)(29,582)

Proceeds from sale of marketable and investment securities
Acquisition of interests in subsidiaries newly consolidated,
net of cash acquired
Sale of interests in subsidiaries previously consolidated, net

178,02257,099(4,525)(172,320)

39,826

34,840

Proceeds from sales of interests in consolidated subsidiaries

29,232

8,110

Increase in loan receivables(17,425)(21,387)

Collection of loans

16,583

9,105-(13,113)

Ⅱ Cash flows from investing activities:

Purchase of business rights and others
Proceeds from sale of modem rental business

45,000-

Other, net

19,107(24,753)

Net cash provided by (used in) investing activities

27,852(242,944)

Increase in short-term borrowings, net

32,04353,468(Decrease) increase in commercial paper(5,100)4,500

Proceeds from long-term debt

125,550

166,400

Repayment of long-term debt

(158,211)(192,836)

Proceeds from issuance of bonds

91,849153,378

Redemption of bonds(53,547)(36,124)

Proceeds from issuance of shares

1,038

187

Proceeds from issuance of shares to minority shareholders
Proceeds from issuance of shares through public offeringand allocation to a third party in SOFTBANKINVESTMENT CORPORATION
Redemption of preferred shares held by minority
shareholder
Cash dividends paid

1,619

30,298-51,362-(33,908)(2,456)(2,457)

Cash dividends paid to minority shareholders(2,442)(2,160)-90,000

Other, net(264)(4,336)

Net cash provided by financing activities

30,078

277,770

10,905

1,474

126,642(9,688)

-

12

(142)

(107,529)-

267

320,194

437,132¥446,694¥320,194

Ⅲ Cash flows from financing activities:

Increase in cash receipts as collateral, net

Ⅳ Effect of exchange rate changes
on cash and cash equivalents
Ⅴ Net increase (decrease) increase in cash and cash
equivalents
Ⅵ Increase in cash and cash equivalents due to
newly consolidated companies
Ⅶ Decrease in cash and cash equivalents due to exclusion ofpreviously consolidated entities
Ⅷ Increase in cash and cash equivalents due to merger
Ⅸ Cash and cash equivalents at the beginning of the year
Ⅹ Cash and cash equivalents at the end of the year

26

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

Net sales
Cost of sales
Gross profit
Selling, general andadministrative expenses
Operating income (loss)
Non-operating income (Note)
Non-operating expenses (Note)
Ordinary income (loss)
Special income
Special loss
Income (loss) before income taxes
and minority interest
Income taxes - Current
Income taxes - Refunded
Income taxes - Deferred
Minority interest

Fourth quarter

Third quarter

Second quarter

First quarter

Fourth quarter

Third quarter

Second quarter

First quarter

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

January 1, 2005 to
March 31, 2005

October 1, 2004 to
December 31, 2004

July 1, 2004 to
September 30, 2004

April 1, 2004 toJune 30, 2004

AmountAmountAmountAmountAmountAmountAmountAmount¥298,406
185,010
113,395¥287,471
184,551
102,920¥264,149
178,575
85,573¥258,637
175,674
82,962¥275,224
184,434
90,789¥258,087
170,489
87,597¥156,395
99,70756,687¥147,311
92,77054,54079,00979,407

77,98386,153

101,822

95,13459,65858,35934,386
6,227
10,86729,74740,75826,61023,512
2,784
15,068
11,22898,93450,475

7,590
4,442
12,499(466)
35,916
10,309(3,190)3,122
12,950(13,017)
22,9149,136(11,032)
10,704
10,978(11,306)
22,24024,496(7,536)
10,465
10,963(8,034)
16,665
18,272(2,970)1,846
13,114(14,239)
40,6908,526(3,819)3,068
10,918(11,669)
9,763
2,365

43,89559,68725,141760(13,561)(9,641)

17,925(4,271)

11,204
9,695
11,6238,230
12,470
9,524
3,817
8,927
2,897
(15,366)
20,171(187)(2,779)(6,022)(7,449)(4,542)(3,949)
8,326
7,817
6,734
6,463
10,153
14,8436,819
8,626¥39,730¥22,002¥6,971¥(11,153)¥(27,266)¥(26,560)¥11,830¥(17,876)
Net income (loss)
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 quarterly basis for presentation purposes.
Condensed Statements of Cash Flows(Millions of yen; amounts less than one million yen are omitted.)Ⅰ

Net cash provided by (usedin)operating activities
Ⅱ Net cash provided by (usedin) investing activities
Ⅲ Net cash provided by (usedin) financing activities
Ⅳ Effect of exchange ratechanges on cash and cash
equivalents
Ⅴ Net increase (decrease) incash and cash equivalents
Ⅵ Increase in cash and cash
equivalents due to newly
consolidated companies
Ⅶ Decrease in cash and cash
equivalents due to
exclusion of previously
consolidated entities
Ⅷ Increase in cash and cash
equivalents due to merger
Ⅸ Cash and cash equivalents
at the beginning of theperiodⅩ Cash and cash equivalents
at the end of the period
Note:
Depreciation and amortization
included in net cash provided byoperating activities

Fourth quarter

Third quarter

Second quarter

First quarter

Fourth quarter

Third quarter

Second quarter

First quarter

January 1, 2006 to
March 31, 2006

October 1, 2005 toJuly 1, 2005 to
December 31, 2005 September 30, 2005

April 1, 2005 toJune 30, 2005

January 1, 2005 to
March 31, 2005

October 1, 2004 to
December 31, 2004

July 1, 2004 to
September 30, 2004

April 1, 2004 toJune 30, 2004

AmountAmountAmountAmountAmountAmountAmountAmount¥13,837¥61,949¥232¥(18,213)¥(15,280)¥(25,416)¥6,644¥(11,937)

15,521

86,627(45,593)(28,703)(65,379)¥(17,352)¥(136,910)(23,301)

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

12,925

124,046

34,503

20,46998,752

5,248

3,866

639

1,150

2,082

(7,364)

2,977

3,778

109,571

105,714(55,802)(32,840)

45,468(15,630)(106,819)

67,291

-

-

-

-

-

-

1

10

-

-

-

(142)

(107,483)

-

-

(45)

-

-

-

-

261

-

-

6

337,122

231,408

287,211

320,194

381,948397,578

504,395

437,132¥446,694¥337,122¥231,408¥287,211¥320,194¥381,948¥397,578¥504,395¥18,311¥19,519¥21,643¥20,942¥24,763¥22,847¥8,956¥9,85027

Basis of Presentation of Consolidated Financial Statements
1. Changes in scope of consolidation
As of March 31, 2006, SOFTBANK CORP．
（the “Company”）consolidated 153 subsidiaries. Seven subsidiaries were notconsolidated 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 the scope of the consolidation were as follows:<Increase>
Softbank Media Marketing Holdings Corp.
Newly established
SOFTBANK BB Corp.
Newly established due to spin-off
Please refer to Note.1 of the business segment chart (Page 19)
Twenty-one other companies<Decrease>
Tao Bao Holding Limited
Sale of shares
SOFTBANK Publishing Inc.
MergerTwenty-one other companies
2. Changes in scope of equity method
As of March 31, 2006, the Company held three non-consolidated subsidiaries and 84 affiliates, all of which were accounted
for under the equity method.
Main changes in application of the equity method were as follows:<Increase>
ValueCommerce Co., Ltd.
Newly acquired
Fourteen other companies<Decrease>
Sale of shares
Morningstar, Inc.
Yahoo! UK Limited
Yahoo! France, SAS
Yahoo! Deutschland GmbHYahoo! Korea Corporation
Thirty-one other companies

Sale of shares
Sale of shares
Sale of shares
Sale of shares

3. Fiscal year end
Fiscal year ends of consolidated subsidiaries for both domestic and overseas entities are as follows:<Fiscal year end>
March end
(as same as the consolidated balance sheet date)
May endJune end
December end
January end
February end<Domestic><Overseas>
87
1
1
5
1
3

28

31
23
1
-

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 shareholders' equity, net oftax, 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[2] Depreciation and amortization(1) Property and equipment
Buildings and structures:
Telecommunications equipment:
Telecommunications service lines:
Others: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 for Broadband Infrastructure andFixed-line Telecommunications segments and Corporate and computed primarily using
the declining balance method for other segments<Additional information for change of estimated useful life>
Transmitters, exchangers and power supply facilities of JAPAN TELECOM CO., LTD. had primarily been depreciatedover a period of six years. Effective from April 1, 2005, the Company changed the estimated useful life of a portion of
the equipment, which is included in “Telecommunications equipment” in the Company’s consolidated balance sheets, toten years based on a reassessment of the assets’ operational lives taking into consideration of years of service provided by
the equipment, technological innovation cycles in the telecommunications industry and other relevant factors.
As a result, the depreciation expense included in cost of sales decreased by ¥14,125 million. Operating income,ordinary income, and income before income taxes and minority interest increased by the same amount for the fiscal year
ended March 31, 2006 as compared with the amounts which would have been recognized if the previous estimateduseful life had not been changed.
<Change in method of depreciation>
The depreciation method of assets used internally by the Company and SOFTBANK BB Corp. and another subsidiary(mainly fixtures and equipment presented as “Buildings and structures” and “others” in “Property and equipment, net”)
has been changed from the declining balance method to the straight-line method.
The Company relocated its headquarters to the Tokyo Shiodome Building in fiscal year 2005 and purchased a large
number of assets internally used in the Company, SOFTBANK BB Corp. and other subsidiaries. Based on areassessment of expense allocation, the change of the depreciation method has been made because the straight line
method represents a more appropriate allocation of expenses, while equally recording the depreciation expense for eachperiod to reflect the decline in usefulness of property and equipment from period to period.
As a result, for the fiscal year ended March 31, 2006, cost of goods sold and selling, general and administrative expensedecreased by ¥317 million and ¥705 million, respectively. Operating income, ordinary income, and income before
income taxes and minority interest increased by ¥1,023 million as compared to the amounts that would have beenrecognized if the declining balance method had been applied.
(2) Intangible assets:

Computed using the straight-line method

29

<Change in accounting policy for network line construction expenses>
Beginning April 1, 2005, the accounting policy for network line construction expenses has been changed to capitalize theexpenses as non-current assets which were previously recognized as selling, general and administrative expense. The
capitalized network line construction expenses relate to cost incurred for each individual network set up prior to network
activation. This change in accounting policy is considered a more appropriate way to reflect the allocation of suchnetwork line construction costs over the period of future economic benefit.
As a result, for the fiscal year ended March 31, 2006, cost of goods sold decreased by ¥28 million and selling, generaland administrative expense decreased by ¥3,269 million. Operating income, ordinary income, and income before
income taxes and minority interest increased by ¥3,240 million as compared to the amounts that would have beenrecognized under the original 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>
JAPAN TELECOM CO., LTD. and certain other subsidiaries have defined benefit pension plans for their employees.
Those companies account for the obligation for retirement benefits based on the projected benefit obligations as ofMarch 31, 2006.
[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 “Shareholders' equity,” except for the portion pertaining to minority shareholders, which is includedin “Minority interest in consolidated subsidiaries.”[5] Capital lease
Under the Japanese accounting standards, capital leases, as defined therein, other than those whereby the ownership of theassets is transferred to the lessee at the end of the lease term, are permitted to be accounted for as operating leases with afootnote disclosure of the estimated acquisition cost, estimated accumulated depreciation and future lease payments orreceipts.
[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 “Shareholders’ equity”
in the Company’s consolidated balance sheets. As such, unrealized gains and losses associated with the collartransaction will be recognized into earnings in the same period during which the hedged assets and liabilities arerecognized 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 an 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.
7. Appropriation of retained earnings
The consolidated statement of retained earnings reflects the appropriation of retained earnings approved during the fiscal year.
8. 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.

31

Additional Information
1. Sale of modem rental business relating to reorganization of the broadband business
On November 1, 2005, the Company’s wholly-owned subsidiary, SOFTBANK BB Corp. (hereafter "SOFTBANK BB"), spun off
its modem rental business and established BB Modem Rental Yugen Kaisha. (hereafter "BB Modem Rental"). Furthermore, on
December 1, 2005, SOFTBANK BB was split into BB TECHNOLOGY Corp. (the surviving company; the name of SOFTBANK
BB was changed to this name; hereafter "BB TECHNOLOGY") to focus on the ADSL business while all other businesses
remained with SOFTBANK BB Corp. (newly established company; hereafter "(new) SOFTBANK BB"), such as the FTTH
business and the e-Commerce business.
On December 8, 2005, BB TECHNOLOGY sold its modem rental business for cash (the sale of all BB Modem Rental’s whole
ownership interest) to Yugen Kaisha Gemini BB for ¥45,000 million and recognized a gain on the sale of the business of ¥21,559
million. The gain was deferred and will be amortized over five years, which is the estimated economic useful life of modem
equipment, which was the revenue source of the modem rental operations. For the six-month period ended March 31, 2006,
revenue earned and attributed to recognition of deferred revenue were ¥1,437 million (a).
At the time of the sale, BB TECHNOLOGY also entered into a service agreement with Yugen Kaisha Gemini BB to receive
royalties relating to future revenue from the modem rental business. An advance payment for future royalties was made by Yugen
Kaisha Gemini BB totaling ¥40,000 million and was recorded as deferred revenue. The deferred revenue will be recognized infuture periods in proportion to the actual business performance of the ADSL business, such as the number of paying customers.
For the fiscal year ended March 31, 2006, royalty fees totaling ¥3,985 million (b) were recorded as revenue.
The current portion of the total amount of the deferred gain on the sale of the modem rental business and advance royalty amounting
to ¥14,096 million was included in “Other current liabilities” and the non-current portion of the total amount amounting to ¥41,840
million was reported as “Deferred revenue” in the consolidated balance sheet as of March 31, 2006.
BB TECHNOLOGY received ¥45,000 million on the sale of the modem rental business and ¥40,000 million in advance royalties,
totaling ¥85,000 million. In the consolidated cash flow statement, those amounts are presented as “Proceeds from sale of modem
rental business” and “Increase in deferred revenue,” respectively.
BB TECHNOLOGY will continue to offer services to Yugen Kaisha Gemini BB in accordance with the service agreement
following the sale of the modem rental business. For the fiscal year ended March 31, 2006, servicing fees of ¥4,207 million (c),incentive fees of ¥11,838 million for retaining ADSL service users (d), and incentive fees of ¥9,523 million for new subscribers
based on applications for new subscription, the subscription ratio of Wireless LAN card applicants, and the number of paying
customers (e) were recognized as revenue. As a result, BB TECHNOLOGY recorded revenue of ¥30,993 million (the sum of (a)through (e)) relating to the modem rental business after its sale and incidental expenses relating to the sale of ¥500 million are
included in selling, general and administrative expenses for the fiscal year ended March 31, 2006.

32

Notes
1. Accumulated depreciation of property and equipment
As of March 31, 2006
603,313

million yen

As of March 31, 2005
625,280

million yen

2. Number of treasury stock held by the Company and its subsidiaries
Held by the Company

common stock

Number of shares issued

common stock

As of March 31, 2006

As of March 31, 2005

149,391 shares

40,956 shares
351,498,126

1,055,231,478

3. Investments in non-consolidated subsidiaries and affiliates
As of March 31, 2006
Investment securities and investments in partnerships

194,816

million yen

As of March 31, 2005
120,897

million yen

4. Assets pledged as collateral(1) For future lease liabilities
As of March 31, 2006

As of March 31, 2005

Assets pledged as collateral:
Notes and accounts receivable - trade

10,653

Other current assets (accounts receivable – other)million yen

11,247

million yen

7-

Secured liabilities:
Notes and accounts payable - trade-

million yen

5million yen

Note: The collateral for future lease liabilities was provided by mortgaging the aggregate of the current and future receivables due from
customers of certain consolidated subsidiaries and a broadcasting company, based on marketing agreements, etc. The future leaseliabilities at the end of years are as follows:
As of March 31, 2006
Future lease liabilities

23,846(including the above “Notes and accounts payable-trade”)

million yen

As of March 31, 2005
37,263

million yen(2) For short-term borrowings and long-term debt
As of March 31, 2006

As of March 31, 2005

Cash and deposits

336

446

Notes and accounts receivable - trade

1,061

Assets pledged as collateral:million yen

million yen

1,120

Buildings and structures

867

6,660

Telecommunications equipment

1,513

14,172

Telecommunications service lines-

13,689

5,001

5,582

0

0

201,293

193,398

210,074 million yen

235,070 million yen

Notes and accounts payable - trade

975 million yen

493 million yen

Short-term borrowings

8,209

25,88225

18

119,805

212,119Land
Property and equipment- others
Investment securities
Total
Secured liabilities:

Accounts payable – other and accrued expenses
Long-term debt
Other long-term liabilities

113

Total

129,128 million yen

289
238,804 million yen

Note: In connection with JAPAN TELECOM CO., LTD’s loan refinancing on April 27, 2005, assets pledged as factory foundation

collateral and investment securities in JAPAN TELECOM CO., LTD. held by the Company and three consolidated subsidiaries ofJAPAN TELECOM CO., LTD. as of March 31, 2005 were released.

33

5. Securities loaned
Certain consolidated subsidiaries lent a portion of investment securities to financial institutions according to stock lending
agreements. The amounts of applicable investment securities recorded in the Company’s consolidated balance sheets are as
follows:
Investment securities

As of March 31, 2006

As of March 31, 2005

364-

million yen

million yen

6. Cash receipts as collateral
Cash receipts as collateral from financial institutions, to whom the Company has lent shares in its subsidiary under security
deposit agreements, are presented as follows:
As of March 31, 2006
Cash receipts as collateral

100,000 million yen

As of March 31, 2005
100,000 million yen

According to the security deposit agreements, the Company paid a fixed rate amount as stock bailment fees and other fees
totaling ¥2,859 million, and ¥1,692 million for the fiscal year ended March 31, 2006 and March 31, 2005, respectively, andrecorded the fees as other non-operating expenses in the consolidated statements of operations.
7. Pre-stock issuance paid-in capitalPre-stock issuance paid-in capital represents amounts paid at the exercise of warrants, but the shares were not issued. At theissuance of 3,900 new shares in April 2006, pre-stock issuance paid-in capital was converted into common stock of ¥2 million
and additional paid-in capital of ¥2 million.
8. Net unrealized gains/losses on derivative instruments
Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities”(“SFAS 133”) is adopted on derivative instruments which the Company’s consolidated subsidiary in the United States ofAmerica utilized.
The consolidated subsidiary in the United States of America has entered into a variable share prepaid forward contract (“collartransaction”) utilizing its shares in an equity security. The purpose of this collar transaction is to hedge the variability of cash
flows associated with the future market price of the underlying security, which is used for the settlement of the loans.
According to SFAS 133, unrealized gains and losses, net of tax, on the effective portion of the cash flow hedge as defined arereported as a separate component of “Shareholders’ equity”, until gains and losses on the hedged item are recognized inearnings.
9. Line of credit as a creditor (not used)
As of March 31, 2006
16,097

million yen

As of March 31, 2005
200 million yen

10. Balance of accounts receivable sold
As of March 31, 2006
8,477

million yen

As of March 31, 2005
7,855 million yen

11. Selling, general and administrative expenses
The main components of “Selling, general and administrative expenses” for the fiscal years ended March 31, 2006 and 2005 were as follows:
FY 2005 ended March 31, 2005
FY2006 ended March 31, 2006
Payroll and bonuses
45,550 million yen
69,505
million yen
Sales promotion expenses
95,131
59,671Fees for outsourced services
37,66538,045
Allowance for doubtful accounts
3,720
4,319

12. Research and development costs included in selling, general and administrative expenses and cost of sales
FY 2006 ended March 31, 2006
3,697

34

million yen

FY 2005 ended March 31, 2005
4,098

million yen

13. Consolidated statements of cash flows
Reconciliation of cash and cash equivalents to the amounts presented in the accompanying consolidated balance sheets
As of March 31, 2006

As of March 31, 2005

Cash and deposits

446,306

Marketable securities

4,372

39,403Time deposits with original maturity over three months(1,400)(1,455)

Stocks and bonds with original maturity over three months(2,584)(5,732)

Cash and cash equivalents

446,69435

million yen

million yen

287,978 million yen

320,194 million yen

Significant Subsequent Events
1. Acquisition of Vodafone K. K.
The Company’s wholly-owned subsidiary, BB Mobile Corp. (hereafter “BB Mobile”) agreed on its commencement of a take-overbid for Vodafone K.K. at its Board of Directors’ meeting held on April 3, 2006. Based on this agreement, BB Mobile conducted atake-over bid from April 4, 2006 to April 24, 2006 and acquired 5,299,814 shares (ownership: 97.64%) of common stock
outstanding for approximately ¥1,661.2 billion on April 27, 2006.
Moreover, BB Mobile agreed on the acquisition of the entire common stock of Metrophone Service Co., Ltd. (hereafter“Metrophone”) a wholly-owned subsidiary of Vodafone International Holdings B.V. , for ¥32.2 billion and Metrophone became aconsolidated subsidiary of BB Mobile. Through the acquisition of Metrophone, BB Mobile acquired 1.90% of the common stock
outstanding of Vodafone K.K. held in Metrophone.
As a result, BB Mobile acquired 99.54% of common stock outstanding of Vodafone K.K. for ¥1,693.5 billion.
(1) Purpose of the acquisition
By acquiring Vodafone K.K., the third largest mobile communication company in Japan, SOFTBANK Group will take a large step
towards its goal of offering ubiquitous communications.
(2) About Vodafone K.K.
Head office: 1-9-1 Higashi-shimbashi, Minato-ku, Tokyo
Paid-in capital: ¥177.2 billion
Main business: Mobile communication business through cellular phone service and sale of mobile terminals associated withthe service.
Revenue for the fiscal year ended March 31, 2005: ¥1,470 billion(3) Summary of the acquisition
Number of shares acquired and purchase price:・ 5,299,814 (97.64%) shares of the issued and outstanding common stock of Vodafone K.K. by take-over bid for ¥1,661.2
billion・ 103,099 (1.90%) shares of the issued and outstanding common stock of Vodafone K.K. through the acquisition of
Metrophone for ¥32.2 billion.
Seller: Vodafone International Holdings B.V. and other Vodafone group companies
Date of acquisition: April 27, 2006
(4) Financing structure
In order to raise funds for the acquisition of Vodafone K.K., BB Mobile entered into approximately one year bridge facility
contract*, totaling ¥1,280 billion with a group of 17 financial institutions, centered on 7 co-lead managers. This bridge facility
contract was structured as a non-recourse loan. Including this contract, BB Mobile’s financing structure is as follows:
1. Loan based on bridge facility contract¥1,160 billion(Including consideration of Vodafone K.K., repayment of inter-company loan to Vodafone group,and other expenses)
2. Subordinated loans by Vodafone International Holdings B.V.
¥100 billion
3. Preferred shares subscribed by Vodafone International Holdings B.V.
¥300 billion
4. Preferred shares subscribed by Yahoo Japan¥120 billion
5. Common shares subscribed by Mobiletech Corporation¥200 billion(The Company subscribed common stock of Mobiletech Corporation, the company’s
wholly-owned subsidiary for ¥200.8 billion in advance.)*This ¥1,280 billion bridge facility contract includes the amount to be used for the working capital of ¥100 billion of Vodafone K.K.
Overview of fund raising
Loan based on bridge facility contract
1. Name:2. Principal amount:
3. Interest rate:

7 co-lead financial institutions and others syndications¥1,166 billion
TIBOR +2.5% (from April 27, 2006 to September 30, 2006)
TIBOR +3.0% (from October 1, 2006 to December 31, 2006)

36

TIBOR +3.5% (from January 1, 2007 to March 31, 2007)
4. Period:
From April 27, 2006 to March 31, 2007
5. Assets pledged as collateral:
Acquired Vodafone K.K. shares
Vodafone International Holdings B.V. subordinated loans
1. Name:Vodafone International Holdings B.V.
2. Principal amount:¥100 billion
3. Interest rate:
5.0%
4. Period:
From April 27, 2006 to September 30, 2013
Interest rate and period addressed above may change under the condition of bridge facility refinancing.
Preferred shares subscribed by Vodafone International Holdings B.V.
1. Amount:¥300 billion
Loan conducted by Yahoo Japan for preferred shares subscription
1. Name:
Mainly Mizuho Corporate Bank and others syndications
2. Principal amount:¥80 billion
3. Interest rate:
TIBOR +0.3%
4. Period:
From April 25, 2006 to May 25, 2010 (repayment in installments)(5) Issuance of stock acquisition rights of BB Mobile
BB Mobile allotted stock options under following conditions
1. Class and Shares:
343,000 shares of common stock
2. Total number of stock acquisition rights:
343 stocks
3. Issuance price:
Charge free issue
4. Subscription date / issuance date:
April 27, 2006
5. Exercise price:¥95,098
6. Exercisable period:
From April 1, 2013 to April 27, 2018
7. Condition for exercise:
Accumulated EBITDA of Vodafone K.K. exceeds ¥3,350 billion
from April 1, 2006 to March 31, 2013.
8. Allotment:
Vodafone International Holdings B.V.: 245 stocks
Yahoo Japan: 98 stocks37

2. Loan relating to legal defeasance
The Company conducted the unsecured loan of ¥60 billion on April 28, 2006 based on the agreement of its Board of Directors’
meeting held on April 26, 2006.
1. Purpose:
2. Terms of loan:(1) Name:(2) Interest rate:(3) Period of loan:
3. Details of legal defeasance:(1) Implemented date:(2) Overview of Bond:
1. Name:Financing working capital to cover deposited amount for the implementation of legal
defeasance on April 3, 2006
Deutsche Bank AG, Tokyo Branch
1. LIBOR+3.0% (¥30 billion)
2. LIBOR+3.5% (¥30 billion)
1. From April 28, 2006 to March 15, 2007 (¥30 billion)
2. From April 28, 2006 to April 15, 2008 (¥30 billion)
April 3, 2006

SOFTBANK CORP. Euro-denominated Senior Notes due 2011
(hereafter "the Notes")
2. Interest Rate:
9.375%
3. Issue Date:
March 8, 2004
4. Maturity Date:
March 15, 2011 (with optional redemption which is expected to become effective on andafter March 15, 2008)
5. Aggregate principal amount:€400 million (translated amount in yen: approx. ¥57.1 billion; exchange rate as of April 3,
2006: €1=¥142.89)
6. Outstanding Amount:€400 million (translated amount in yen: same as above)(3) Purpose and effect of implementation of legal defeasance:
The legal defeasance was implemented in order to facilitate the implementation of group business and financial strategies, including the mobile
business. Along with this transaction, the Company deposited €493 million, which is sufficient for the payment of principal and interest on theNotes, with the trustee. Under the terms of the indenture, the Company will continue to be responsible for payments on the Notes until maturity orredemption. The Notes continue to be recorded as “Corporate bonds” in its consolidated and stand-alone financial statements of the Company until
maturity or redemption of the Notes.

3. Financing through securities lending transaction
Based on the agreement made at the Board of Directors’ meeting held on April 12, 2006, the Company lent common stocks of its
affiliate company, which are held by SOFTBANK AM CORPORATION and received ¥64 billion on April 19, 2006 and April 21,
2006. Financing amount may change in conjunction with the fluctuation of the market price of the stock.
1. Purpose:
2. Terms of financing:(1) Name:(2) Interest rate:(3) Period:
3. Amount of securities to be lent:
Investment securities

Financing working capital for the Group companies
Nikko Citigroup Limited
2.5%
1. From April 19, 2006 to April 19, 2007 (¥50 billion)
2. From April 21, 2006 to April 19, 2008 (¥14 billion)¥37,226 million

4. Financing through secured loan agreement
The Company’s consolidated subsidiary, SOFTBANK AM CORPORATION financed ¥50 billion on April 17, 2006 based on theagreement of the Board of Directors’ meeting held on April 12, 2006.
1. Purpose:
2. Terms of financing:(1) Name:(2) Interest rate:

Investment in securities
Deutsche Bank AG, Tokyo Branch
LIBOR +3.0% from April 17, 2006 to October 17, 2006
LIBOR +4.0% from October 17, 2006 to April 17, 2007
From April 17, 2006 to April 17, 2007

(3) Period:
3. Assets pledged as collateral
Following assets are pledged as collateral relating to this transaction
Shares of consolidated subsidiaries eliminated¥667 million
in consolidation - at cost
Investment securities¥5,862 million

38

Segment Information
1. Business segment information(1) For the fiscal year ended March 31, 2006
(Millions of yen; amounts less than one million yen are omitted.)
Broadband

Fixed-line

Infrastructure

Telecommunications

e-Commerce

Internet
Culturee-Finance

OthersTotal

Elimination
or Corporate

Consolidated（Note 5）Net sales(1) Customers¥267,272¥347,447¥272,739¥155,550¥-¥65,654¥1,108,665¥-¥1,108,665(2) Inter-segment

1,179

6,785

10,535569-

17,41936,489(36,489)-

268,451354,233

283,275

156,120-

83,073

1,145,154(36,489)

1,108,665

Operating expenses

Total

247,779

379,392

278,414

81,929-87,833

1,075,350(28,984)

1,046,366

Operating income (loss)¥20,672¥(25,158)¥4,860¥74,190¥-¥(4,759)¥69,804¥(7,504)¥62,299

Identifiable assets

247,592

517,974

72,136439,178

291,172

1,568,054

240,344

1,808,398

28,48546,282

1,121

7,461

4,211

87,561

958

88,51926,25662,254

2,169

16,3383,416

110,436913

111,349

Depreciation

andamortization
Capital expenditures(2) For the fiscal year ended March 31, 2005
(Millions of yen; amounts less than one million yen are omitted.)
Broadband

Fixed-line

Infrastructure

Telecommunications¥204,974¥165,969

e-Commerce

Internet
Culturee-Finance

OthersTotal¥73,235¥45,954¥837,018

Elimination

Consolidated

or Corporate

Net sales(1) Customers(2) Inter-segment
Total¥244,971¥101,913¥-¥837,018

331

909

9,950

534

5,562

18,22135,510(35,510)-205,306

166,878

254,921

102,448

78,79764,175872,528(35,510)

837,018

Operating expenses

259,054

202,944249,681

52,36859,08370,060893,192(30,815)

862,377

Operating (loss) income¥(53,747)¥(36,065)¥5,240¥50,079¥19,714¥(5,885)¥(20,663)¥ (4,695)¥(25,359)

Identifiable assets¥250,807¥583,487¥76,408¥345,737¥115,507¥231,193¥1,603,141¥101,712¥1,704,853

26,79628,250

1,333

4,720

5,900

3,785

70,786(1,245)69,54069,691

115,410

5,234

12,512

4,175

24,640231,665595

232,261

Depreciation

andamortization
Capital expenditures

Notes:
1. Business segments are categorized primarily based on the nature of business operations, type of services, and similarity of sales
channels, etc. which the SOFTBANK Group uses for its internal management purpose.
2. Please refer to the chart of “The SOFTBANK Group” for the main businesses segments.
3. Unallocated operating expenses for the fiscal year ended March 31, 2006 and 2005 in the column "Elimination or Corporate", mainly
represents expenses of the corporate division of the Company, totaling ¥7,841 million, and ¥6,867 million, respectively.
4. The “Fixed-line Telecommunications” business segment was established as of September 30, 2004, consequently, this segment
included only six-month results for the fiscal year ended March 31, 2005.
5. The former “e-Finance” business segment ended, since SOFTBANK INVESTMENT CORPORATION (current SBI Holdings,Inc.) changed to an equity-method affiliate from a consolidated subsidiary on March 31, 2005.
6. Corporate assets at March 31, 2006 and 2005 in the column “Elimination or corporate” were ¥275,510 million and ¥151,910 million,
respectively. Corporate assets represent mainly surplus operating funds (cash and marketable securities), long-term investment
securities of the Company and assets held by the corporate division of the Company.
7. “Capital expenditures” include the acquisition of long-term prepaid expenses and deferred charges. “Depreciation and amortization”
included the amortization of long-term prepaid expenses and deferred charges.
<Change in presentation>
In fiscal year ended March 31, 2005, segment information for net sales and operating income (loss) of Broadmedia, Technology
Services, Media & Marketing, and Overseas Funds segments were presented although the portions of net sales and operating
income (loss) were less than 10% of consolidated net sales and operating income (loss). Due to the relative significance of thesebusinesses, beginning with the fiscal year ended March 31, 2006, they are included in the “Others” segment. This change inpresentation of business segment information is due to increase in importance on the Broadband Infrastructure, Fixed-line
Telecommunications, e-Commerce, and Internet Culture operations.

39

2. Geographic segment information(1) FY 2006 (as of and for the year ended March 31, 2006)(Millions of yen; amounts less than one million yen are omitted.)
North

Japan

OthersAmerica

Total

Elimination

Consolidated

or corporate

Net sales(1)Customers(2)Inter-segment
Total¥1,100,446¥1,351¥6,867¥1,108,665¥-¥1,108,665

3,325

686

412

4,425

(4,425)-

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

Operating income (loss)¥75,621¥(896)¥(4,929)¥69,796¥(7,496)¥62,299¥1,179,017¥261,177¥110,864¥1,551,058¥257,339¥1,808,398

Identifiable assets(1) FY 2005 (as of and for the year ended March 31, 2005)(Millions of yen; amounts less than one million yen are omitted.)
North

Japan

OthersAmerica

Total

Elimination

Consolidated

or corporate

Net sales(1)Customers(2)Inter-segment
Total¥828,768¥1,910¥6,339¥837,018¥-¥837,018

464

371

223

1,060

(1,060)-829,233

2,281

6,563

838,078(1,060)837,018

Operating expenses

845,650

3,220

9,742

858,613

3,763

862,377

Operating loss¥(16,417)¥(938)¥(3,178)¥(20,535)¥(4,823)¥(25,359)

Identifiable assets¥1,184,086¥270,988¥102,832¥1,557,907¥146,945¥1,704,853

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 and Singapore
2. Unallocated operating expenses for the fiscal years ended March 31, 2006 and 2005 in the column "Elimination or corporate",
which mainly represent expenses of the corporate division of the Company, were ¥7,841 million and ¥6,867 million,
respectively.
3. Corporate assets at March 31, 2006 and 2005 in the column "Elimination or corporate" were ¥275,510 million and ¥151,910
million, respectively. Corporate assets represent mainly surplus operating funds (cash and marketable securities), long-term
investment securities of the Company and assets held by the corporate division of the Company..
3. Overseas sales
Disclosure of overseas sales was omitted because the total overseas sales were less than 10% of total consolidated sales.

40Leases
1. Capital leases in which the ownership of leased assets is not transferred to lessees 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 fiscal year are as follows:
As of March 31, 2006

Telecommunications equipment andtelecommunications service lines
Equivalent to acquisition costs
Less:
Amount equivalent to accumulated depreciation
Amount equivalent to accumulated impairment loss

Net book value
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

As of March 31, 2005

197,727

195,681(64,550)(21,703)
111,473 million yen(45,685)
149,996 million yen

46,99947,056(2,674)44,324 million yen(349)
46,706 million yen

13,604

15,938(5,700)(1,657)
6,245 million yen(10,293)5,644 million yen

2,624

2,727

(1,238)(287)
1,097 million yen(1,076)
1,651 million yen

260,955

261,404(57,404)(74,164)
Amount equivalent to accumulated impairment loss
(23,648)
Net book value
203,999 million yen
163,141 million yen
Long-term prepaid expense of ¥1,989 million relating to ten year term lease contract with payment completed in initial five years
is included in “other assets” of investments and other assets.

(2) The future lease payments for capital lease at the end of the periods
As of March 31, 2006

Due within one year
Due after one year
Total
Balance of allowance for impairment loss on leased assets

34,560158,800
193,361 million yen
23,427 million yen

41

As of March 31, 2005

40,342
167,676
208,018 million yen- million yen

(3) Lease payments, amounts equivalent to depreciation and interest expense for each fiscal year are as follows.
FY 2006
ended March 31, 2006

FY 2005
ended March 31, 2005

Lease payments

27,366 million yen
56,517 million yen
300
24,209Amount equivalent to depreciation expense
44,595
5,179
Amount equivalent to interest expense
15,808
Impairment loss
23,727
Note: Impairment losses above mentioned are included in “Impairment loss in fixed-line telecommunication business”“Restructuring charge relating to BBTV business” and “Other special loss.”

Reversal of allowance for impairment loss on leased assets(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.
(as a lessor)(1) Acquisition costs, accumulated depreciation and net book value at the end of the periods
As of March 31, 2006
As of March 31, 2005
Property and equipment - others
Acquisition costs
2,644
164
Less: accumulated depreciation(2,576)(137)
67 million yen
Net book value
26 million yen(2) The future lease receivables for capital leases at the end of the periods
As of March 31, 2006

Due within one year
Due after one year
Total

29
29 million yen

As of March 31, 2005
43
29
73 million yen(3) Lease income, depreciation and amount equivalent to interest income
FY 2006
April 2005 throughMarch 2006

Lease income
Depreciation expense
Amount equivalent to interest income

46 million yen
41
3

FY 2005
April 2004 throughMarch 2005

349 million yen
2113(4) Calculation method of amount equivalent to interest income
The amount equivalent to interest income is calculated by subtracting acquisition costs from total lease income and estimatedresidual 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
As of March 31, 2006

Due within one year
Due after one year
Total

9,904
11,041
20,946 million yen

As of March 31, 2005
6,264
15,551
21,815 million yen(as a lessor)
The future lease receivables for non-cancelable operating leases
As of March 31, 2006

Due within one year
Due after one year
Total

1,305
1,921
3,227 million yen

42

As of March 31, 2005
972
1,816
2,789 million yen

RELATED PARTY TRANSACTIONS WITH THE COMPANY
1. Parent Company and Major Corporate Shareholders
N/A
2. Directors and Major Individual Shareholders

Category

Director andshareholder

Name

Masayoshi
Son

Address―

Amount ofcapital―Nature ofbusiness or
occupation

Son Assets
Management,
Inc.

Proportionate
interest

Relationship
Concurrent
directors

31%―

Businessrelationship―

Nature of transaction

Amount oftransaction

Account

Balance at
March 31,2006

Cash paid on behalfof Son Assets
Management Inc.
Facility use fee

185
5

Other current
asset

27

Transfer of fixed
assets626

Accounts
payable657

Deposits received

142

Deposits received

142

President

Note: Consumption taxes are included in the amount of the transaction and year end balance.
3. Subsidiaries
N/A
4. Affiliates
N/A

43

Tax effect accounting
FY 2005 (For the year ended March 31, 2005)

FY 2006 (For the year ended March 31, 2006)
1.

1. Significant components of deferred tax assets and liabilities

Significant components of deferred tax assets and liabilities(Million yen)

(Million yen)
Deferred tax assets

Deferred tax assets
Loss carry-forwards

Loss carry-forwards¥181,802

Valuation loss on investment securities

63,777

Valuation loss on investment securities

Depreciation / Amortization

52,759Depreciation / Amortization

41,511

Unrealized loss on derivative instruments

19,665

Unrealized loss on derivative instruments

21,94976,288

Allowances for doubtful accounts

17,686

Allowances for doubtful accounts

16,789Accrued expenses

17,531

Accrued expenses

9,697

Exchange gain on affiliates’ stock

11,429Valuation loss on inventories

6,451

Deferred revenue

8,656Enterprise tax payable

2,409

Valuation loss on inventories

3,855

Unrealized gain

1,305

Enterprise tax payable

2,897

Others

Unrealized gain

897

Gross deferred tax assets

379,764

8,210

4,825

Less: valuation allowance(305,824)

Gross deferred tax assets

385,784

Total deferred tax assets

73,939Less: valuation allowance(318,184)

Total deferred tax assets

67,599OthersDeferred tax liabilities

Deferred tax liabilities
Unrealized gains on other securities(70,264)

Unrealized gains on other securities

Valuation gain on investment securities(6,371)

Valuation gain on investment securities(6,077)(227)

Foreign currency exchange gains on long-term receivables(2,092)(232)

OthersForeign currency exchange gains on long-term receivables

Others2.

¥195,151(79,676)(542)

Total deferred tax liabilities(77,095)

Total deferred tax liabilities(88,389)

Net deferred tax liabilities¥(9,495)

Net deferred tax liabilities¥(14,449)

2.

Reconciliation between the statutory income tax rateand effective income tax rate:and effective income tax rate:
Statutory tax rate

Reconciliation between the statutory income tax rate

40.69 %

Statutory tax rate
(Reconciliation)(Reconciliation)

Dilution gain (loss) from changes in equity interest

Dilution gain (loss) from changes in equity interest(3.71) %Differences related to investments in affiliates(4.35)Tax rate differential(2.17)

Differences related to investments in affiliates

Tax reserve reversal in the Company’s subsidiary in the
United States of America

Tax deduction for IT industry and others development(1.27)Tax rate differential

Change in valuation allowance

4.21

Change in valuation allowance

Others(0.50)

OthersIncome tax rate per statements of operations

40.69 %

32.89 %

44

Income tax rate per statements of operations

111.94 %
46.05
33.81
17.68
(354.40)0.78(103.45) %Investment in Debt and Equity Securities
FY 2006 (as of March 31, 2006)(1) Available-for-sale and other securities at fair value(Millions of yen; amounts less than one million yen are omitted.)
FY 2006 (as of March 31, 2006)
Investment Cost

Carrying Amount

Differences¥18,532¥220,845¥202,313

18,532

220,845

202,313

16,277

13,473(2,804)

Carrying Amount > Investment Cost
Equity securities
Sub-total
Carrying Amount≦Investment Cost
(1)Equity securities(2)Others

59

59

-

Sub-total

16,337

13,533(2,804)

Total¥34,869¥234,379¥199,509(2) Available-for-sale and other securities sold during the fiscal year ended March 31, 2006
(Millions of yen; amounts less than one million yen are omitted.)
Sales Price(1)Equity securities

Gain on sales¥33,103

Loss on sales¥27,951¥173(2)Debt securities

7,044

839

-

(3)Others

61,152

13,2292¥101,300¥42,020

¥175

Total

(3) The carrying amounts of the unlisted investment securities(Millions of yen; amounts less than one million yen are omitted.)
Carrying Amounts
Available-for-sale and other securities
Unlisted equity securities, excluding over-the-counter stocks¥26,759

Investments in limited partnerships (seeNote)

6,494

Money Management Fund

2,959

Preferred fund certificate

2,000

Designated Money Trust

1,000

Mid-term government bond funds

191

Unlisted foreign debt securities

94

Others329

Total¥39,827

Note: With respect to “Investment in limited partnerships,” the difference between cost and fair value of limited
partnerships, net of tax, is recorded in “Net unrealized gain on other securities” in the consolidated balance sheets.
(4) The redemption schedule for "held-to-maturity securities" and "available-for-sale and other securities" withmaturity date subsequent to the consolidated balance sheet date(Millions of yen; amounts less than one million yen are omitted.)
April 1, 2006 to

April 1, 2007 to

April 1, 2011 toApril 1, 2016

March 31, 2007

March 31, 2011

March 31, 2016

and thereafter

Government bonds

¥-

¥-

¥-

¥-

Corporate bonds

-

94

-

-

Others

-

-

-

-

¥-

¥94

¥-

¥-

Available-for-sale and other securities
Debt securities

Total

45

FY 2005 (as of March 31, 2005)
1. Non-trading securities(1) Available-for-sale and other securities at fair value(Millions of yen; amounts less than one million yen are omitted.)
FY2005 (as of March 31, 2005)
Investment Cost Carrying Amount
Differences
Carrying Amount > Investment Cost
(1)Equity securities¥29,522¥229,035¥199,513(2)Debt securities: Government bonds
5,134
5,141
7
(3)Others
18
18
0
Sub-total
34,675
234,195
199,520
Carrying Amount≦Investment Cost
(1)Equity securities
402
377
(24)
Sub-total
402
377
(24)
Total
¥35,077¥234,572¥199,495(2) Available-for-sale and other securities sold during the fiscal year ended March 31, 2005
(Millions of yen; amounts less than one million yen are omitted.)
Sales Price
Gain on sales
Loss on sales(1)Equity securities¥26,864¥5,157¥1,864(2)Debt securities
20(3)Others
3,739
26
855
Total
¥30,606¥5,184¥2,719(3) The carrying amounts of the unlisted investment securities(Millions of yen; amounts less than one million yen are omitted.)
Carrying Amounts
Available-for-sale and other securities
Investment in limited partnerships (see Note)¥63,373
Investment trust without market quotations
30,388Unlisted equity securities, excluding over-the-counter stocks
16,466Preferred fund certificate
2,000
Money Management Fund
1,836
Unlisted foreign debt securities
1,108
Mid-term government bond funds
191
Others3,010
Total¥118,374
Note: With respect to “Investment in limited partnerships,” the difference between cost and fair value of limited partnerships, net oftax, is recorded in “Net unrealized gain on other securities” in the consolidated balance sheets.
(4) Redemption schedule for "held-to-maturity securities" and "available-for-sale and other securities" with maturity date
subsequent to the consolidated balance sheet date(Millions of yen; amounts less than one million yen are omitted.)
April 1, 2005 toApril 1, 2006 to
April 1, 2010 toApril 1, 2015
March 31, 2006
March 31, 2010
March 31, 2015
and thereafter
Available-for-sale and other securities
Debt securities
Government bonds¥¥0¥¥Corporate bonds
3,373
Others892
Total¥¥3,373
¥892
¥-

46

DERIVATIVE TRANSACTIONS
1. Currency Related(Millions of yen; amounts less than one million yen are omitted.)
March 31, 2005
March 31, 2006
Contract amounts
Contract amounts
Fair Unrealized
Fair UnrealizedOver 1
Over 1value gain (loss)
value
gain
year
year

Nature of transaction
Swap transactions to¥12
・Receive Australia dollars and pay¥¥- ¥1,000¥Japanese yen
Off-market
transactions Forward exchange contracts to3,193
3,249
・Purchase U.S. dollars and sell Japanese 29,132
29,128
(3)
yen
Total
¥(3)
Notes: 1. The amounts in ( ) under "Contract amounts" represents option fees.
2. Fair value is based on information provided by financial institutions at the end of each fiscal year.
3. Derivative transactions based on forward purchases of foreign currency exchange are basically utilized to prevent
fluctuation risks on foreign assets and liabilities. This transaction is disclosed since hedge accounting is not applied to it.

2. Interest Related

¥12

56
¥68

(Millions of yen; amounts less than one million yen are omitted.)
March 31, 2005
March 31, 2006
Contract amounts
Contract amounts
Fair Unrealized
Fair UnrealizedOver 1
Over 1value gain (loss)
value gain (loss)
year
year

Nature of transaction
Swap transactions to・Receive fixed rate and¥¥¥- ¥1,142
pay floating rate
Off-market
・Receive floating rate andtransactions- 11,571
pay fixed rate
・Receive fixed rate (receipt later)
1,000
and pay fixed rate (prepayment)
Total¥Notes: 1. Fair value is based on the information provided by the financial institutions at the end of each fiscal year.
2. Derivative transactions to which the Company applied hedge accounting are excluded.
3. Securities related
There are no applicable items.
Note: Derivative transactions to which the Company applied hedge accounting are excluded.

47

¥39

¥39

(149)

(149)

35

35
¥(73)

PENSION AND SEVERANCE PLANS
1. Pension Plans
Employees of the Company and most of its domestic consolidated subsidiaries participate in defined contribution pension plans and thecontributory defined benefit welfare pension plans. Certain domestic consolidated subsidiaries, mainly Japan Telecom, have defined
benefit pension plans. On April 1, 2006, Japan Telecom amended its pension plan by suspending the current defined benefit plan andimplementing a new defined contribution plan. The severance payment existed and calculated under current plan as of March 31,
2006 was fixed and will be paid at the retirement of applicable employees. As the result of this amendment, Japan Telecom expects
the projected benefit obligation to decrease ¥2,575 million.
Projected Benefit Obligation2.

Projected benefit obligation (PBO)
Plan assets at fair value

March 31, 2006
17,279 million yen-

March 31, 2005
17,202 million yen-

Unfunded PBO

17,27917,202

Unrecognized actuarial losses
Net liability for retirement benefits
Prepaid pension costs

17,279-157
17,359-Accrued retirement benefits

17,279 million yen

17,359 million yen

March 31, 2006
2,600 million yen
330
(645)
592
2,878 million yen

March 31, 2005
1,714 million yen
212
42
212
510
138
2,745 million yen

Pension and Severance Costsa)Service costs(Notes 1 and 2)b)Interest costsc)Expected return on plan assetsd)Recognized actuarial lossese)Contributionsf)Losses on transfer of pension plansg)Net pension and severance costs

Notes:
1. Service costs include ¥998 million for FY2006 and ¥657 million for FY2005 of contributions to multi-employer contributory
defined benefit welfare pension plans.
2. Service costs include the pension costs of subsidiaries adopting the simplified pension accounting method.

48

PER SHARE DATAFY 2005

FY 2006
Shareholders’ equity per share (yen)Net income (loss) per share - primary (yen)Net income (loss) per share – diluted** Per share in FY2005 was not disclosed due to the loss position.

¥229.88
54.36
50.71

¥505.86(171.03)-

The Company conducted the three-for one share split of the Company’s common stock on January 5, 2006. Per sharedata for the FY2006 were calculated supposing the share split as conducted at the beginning of the fiscal year.
Per share data for the FY2005, supposing that the share split as conducted at the beginning of the FY2005.

Shareholders’ equity per share
Net income (loss) per share
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)
7. Residual securities which does not dilute net income per share:49

168.62(57.01)-

57,550(59,871)

57,325(60,101)

224

229

1,054,478,501

351,418,709

370-

83,390,701-

Stock acquisition rights
Due to net loss,
Agreement on June 22, 2005 no residual securities