summary of consolidated finacial statements for the first ...first quarter of fiscal 2007 381 31 346...

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Summary of Consolidated Finacial Statements For the First Quarter of Fiscal 2007

February 15, 2007 Company Name: FinTech Global Incorporated (Code Number: 8789 TSE Mothers)

(URL: http://www.fgi.co.jp/) Responsible President, Representative Director Name: Nobumitsu Tamai TEL: (03) 5733-2121 for Inquiries: Director, Finance Manager Name: Takeshi Sugimoto

1. Matters concerning the preparation of the quarterly consolidated financial statements, etc. (1) Standars for preparing the quarterly consolidated : Standards for preparing consolidated

financial statements financial statements for the interim period (2) Existence or non-existence of a change in : Yes the accounting method from the latest fiscal year

Changes are shown in “Changes in Significant Items Regarding the Preparation of Quarterly Consolidated Financial Statements.”

(3) Existence or non-existence of a change in the scope of : Yes application of consolidation and the equity method Consolidated companies: (newly included) 6 companies, (excluded from consolidation) 1 company Equiry method companies: (newly included) 4 companies, (excluded) –

(4) Involvement of an accounting auditor : Yes With respect to the quarterly consolidated financial statements, the procedure for the statement of opinions was carried out based on the “Standards for Stating Opinions about Quarterly Financial Statements” which are provided in the attachment to the Handling of Regulations Concerning the Timely Disclosure of Corporate Information on an Issuer of Listed Securities of the Tokyo Stock Exchange.

2. Overview of the financial conditions and business results for the first quarter of fiscal 2007 (October 1, 2006 – December 31, 2006) (1) Business results (Unit: Millions of yen)

Net revenue Operating income Ordinary profit Net income

Million Yen % Million Yen % Million Yen % Million Yen %First quarter of fiscal 2007 2,512 (142.4) 1,158 ( 66.4) 969 ( 44.0) 451 ( 15.2)First quarter of fiscal 2006 1,036 (695.8) 696 (8,244.0) 672 (8,061.7) 391 (9,086.0)

(Reference) Full-fiscal 2006 8,231 (234.1) 5,921 (266.1) 5,581 (255.2) 3,235 (256.1)

Net income per share

Net income per share(diluted)

Yen YenFirst quarter of fiscal 2007 381 31 346 58 First quarter of fiscal 2006 1,905 83 1,694 90

(Reference) Full-fiscal 2006 14,354 40 12,458 52

(Note) (1) Average number of shares outstanting: First quarter of fiscal 2007: 1,183,687 shares First quarter of fiscal 2006: 205,618 shares Full-fiscal 2006: 225,419 shares

The Company conducted a 5-for-1 stock split on October 1, 2006.

Assuming that the share split was effected at the beginning of the previous fiscal year, the per-share information

UNOFFICIAL TRANSLATION The formal press release document is in Japanese.

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can be summarized as follows: First quarter of fiscal 2007: 381.31 Yen

First quarter of fiscal 2006: 381.17 Yen

Full-fiscal 2006: 2870.88 Yen

(2) The percentage in the table indicates YOY changes.

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Pertinent data regarding status of consolidated performance During the first quarter -- October 1, 2006 to December 31, 2006 -- of the current fiscal year, ending September 30, 2007, the Japanese economy remained in a state of gradual recovery, supported by brisk corporate activity. Consumer spending was sluggish but showed indications of improvement, and demand at home and abroad continued to grow. Given these conditions, the domestic economy is likely to stay on a course of slow but steady expansion. Encouraged by better corporate earnings, big business continued to allocate more funds to capital investment, a trend that small and mid-sized companies also embraced despite a wobble here and there. Favorable conditions in the real estate market, underscored by a moderate increase in housing investment and tighter vacancy rates in urban commercial districts, triggered a promising shift in inquiries for FinTech Global’s structured finance arrangements, particularly its core product of real estate securitization. Against this operating backdrop, principal finance operations flourished, with a solid balance in nonrecourse loans -- transactions in which we provide financing. Revenues soared 294.7% over the corresponding period a year earlier, substantiating stable earning performance. Results were also good in arrangement services, with revenues climbing 12.3%. In line with expanding arrangement services, revenues from other investment banking oeprations, which include administration services associated with arrangement transactions, jumped 277.6%. Arrangement services with credit enhancement, a field we reentered in the first half of fiscal 2006, brought in ¥299 million, representing 14.6% of total investment banking revenues in the first quarter of fiscal 2007. The reinsurance/financial guarantee business is handled by Group companies in Switzerland and Bermuda. Operations in this domain are unfolding nicely, demonstrated by first-quarter revenues of ¥444 million. All told, consolidated net revenue jumped 142.4%, to ¥2,512 million. Ordinary profit grew 44.0%, to ¥969 million. Net income rose 15.2%, to ¥451 million. A breakdown of activities by business segment is provided below.

I. Investment Banking Business

1. Arrangement Operations (1) Arrangement services

Demand for real estate securitization, a core product at FinTech Global, remained strong as the Company entered fiscal 2007, leading to an increase in requests for arrangement services.

As a result, first-quarter arrangement service revenues reached ¥931 million, up 12.3% year-on-year. Gross profit came to ¥859 million, up 9.9%.

(2) Arrangement services with credit enhancement

Arrangement services with credit enhancement are provided on schemes designed by FinTech Global to create formats more inviting to the financial institutions that extend the necessary financing. These services are facilitated by Stellar Capital AG, which was established in Switzerland by FinTech Global to underwrite certain financial risks in such forms as guarantees.

In the first quarter, two arrangements were strengthened by credit enhancement, presenting revenues of ¥299 million. Gross profit amounted to ¥290 million. No arrangement services with credit enhancement were undertaken in the first quarter of fiscal 2006, and therefore no year-on-year comparisons can be made.

Overall, first-quarter revenues from arrangement operations climbed 48.4%, to ¥1,230 million, and gross

profit jumped 47.1%, to ¥1,150 million.

2. Principal Finance Operations The principal finance balance, comprising loans receivable, trade and investment into silent partnerships

(tokumei kumiai), stood at ¥32,649 million as of December 31, 2006, and generated stable earnings, primarily interest income.

We successfully extended new loans during the first quarter. Seeking to maintain the momentum achieved in fiscal 2006, FinTech Real Estate, Inc., made additional

partnership investments, based on silent partnerships (tokumei kumiai) agreements. Principal finance operations thus delivered first-quarter revenues of ¥703 million, soaring 294.7% year-on-

year. Gross profit zoomed 302.0%, to ¥602 million.

3. Other Investment Banking Operations Fees from administrative services expanded nicely, paralleling wider arrangement operations during the first

quarter. We also recorded fee-based income derived from the agency activities of FinTech Global Securities, Inc. All told, first-quarter revenues from other investment banking oeprations surged 277.6%, to ¥108 million.

Gross profit mirrored these results.

First-quarter revenues from all operations in the investment banking business segment totaled ¥2,043 million,

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a solid increase of 97.1% over the corresponding period a year earlier. Gross profit reached ¥1,861 million, up 93.7%.

II. Reinsurance/Financial Guarantee Business

Stellar Capital, an insurance company headquartered in Switzerland, provides guarantees on arrangement transactions packaged by FinTech Global with credit enhancement. Crane Reinsurance Limited, the Bermuda-based subsidiary of Stellar Capital, focuses on reinsurance underwriting services, chiefly policies held by major property management companies in Japan that cover the household effects of tenants.

FinTech Global established a subsidiary, Entrust Inc., in March 2006 to extend rent guarantee services to major property management companies in Japan in the event tenants are in arrears. The subsidiary also guarantees restitution costs in the event a tenant is evicted.

Domestic and overseas Group companies involved in the reinsurance and financial guarantee business are showing good results.

First-quarter revenues from operations in this segment reached ¥444 million and gross profit amounted to ¥135 million. This business segment did not bring in any revenues in the first quarter of fiscal 2006, and therefore no year-on-year comparisons can be presented.

III. Other Business Some of the transactions arranged by FinTech Global are for consolidation accounting to warehouse all or a

considerable portion of the arrangement through contributions, such as senior loans, extended to special purpose companies by the Company. Rental income generated during the consolidation period is recorded on FinTech Global’s books, but once the refinancing process is completed, through the sale of loan credits, for example, the warehoused amount is excluded from the scope of consolidation.

First-quarter revenues from other business brought in ¥24 million. The same amount was booked under gross profit. This business segment did not bring in any revenues in the first quarter of fiscal 2006, and therefore no year-on-year comparisons are given here.

(2) Consolidated financial position (Unit: Millions of yen) Total assets Net assets Shareholders’

equity ratio Net assets per share

% YenFirst quarter of fiscal 2007 64,575 24,356 37.5 20,432.32First quarter of fiscal2006 29,427 4,949 16.8 23,871.04

(Reference) Full-fiscal 2006 61,229 24,957 40.7 105,180.27

Note: Assuming that the share split was effected at the beginning of the previous fiscal year, the per-share information can be summarized as follows:

First quarter of fiscal 2007: 20,432.32 Yen

First quarter of fiscal 2006: 4,774.21 Yen

Full-fiscal 2006: 21,036.05 Yen

(3) Consolidated cash flows (Unit: Millions of yen)

Net cash used in

operating activitiesNet cash used in

investing activitiesNet cash provided by financing activities

Cash and cash equivalents

at end of first quarter

First quarter of fiscal 2007 (316) (153) 3,979 21,999 First quarter of fiscal 2006 (8,800) (80) 19,292 12,071

(Reference) Full-fiscal 2006 (24,266) (2,916) 44,247 18,718

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Pertinent data regarding changes in consolidated financial position Total assets amounted to ¥64,575 million on December 31, 2006, up 5.5% from a year earlier. Net assets stood

at ¥24,356 million, down 2.4% year-on-year, leading to a shareholders’ equity ratio of 37.5%. Cash and cash equivalents (hereafter, “cash”) at the end of the first quarter came to ¥21,999 million, an

increase of ¥3,281 million. An analysis of cash flows during the first quarter of fiscal 2007 is presented below. Net cash used in operating activities was ¥316 million, much less than the ¥8,800 million used in operating

activities in the corresponding period a year earlier. The change stems mainly from an improvement of ¥941 million in income before income taxes and minority interests and ¥3,628 million more from the collection of loans receivable, trade, which almost offset ¥2,157 million in income taxes paid and a ¥2,646 million increase on inventory.

Net cash used in investing activities was ¥153 million, up from ¥80 million used in investing activities during the first quarter a year earlier. The change largely reflects the fact that an inflow of ¥492 million in proceeds from the sale of investments in securities was completely offset by an outflow of ¥646 million for payments for purchase of investment in securities and ¥145 million for guaranty money deposited, precipitated by office relocation.

Net cash provided by financing activities was ¥3,979 million, down from ¥19,292 million provided by financing activities in the first quarter of fiscal 2006. The decrease reflects the application of ¥1,031 million for payment of dividends, ¥20,200 million for early redemption of the Company’s third unsecured convertible bond-type bonds with stock acquisition rights, and ¥1,642 million for repayment of long-term debt, which together overshadowed ¥5,941 million in proceeds from long-term debt and a net increase of ¥20,814 million in short-term debt, which includes a bridging loan of ¥20,000 million from Nikko Citigroup Limited.

3. Performance estimates for fiscal 2007 (October 1, 2006 to September 30, 2007)

(Unit: Millions of yen)

Net Revenue Ordinary Profit Net Income

Interim period 6,740 4,095 2,303

Full fiscal year 16,850 9,968 4,603 Reference: Net income per share for the full fiscal year is expected to be ¥3,879.77

Pertinent data regarding performance estimates As of this date, February 15, 2007, on which FinTech Global discloses its first-quarter results, the Company’s

believes full-year estimates for fiscal 2007, ending September 30, 2007, are in line with the revised estimates announced on December 25, 2006, and duly reflect the impact of the Company’s acquisition of stock in FXOnline Japan Co., Ltd., and the inclusion of this company in the scope of consolidation as a subsidiary. First-quarter performance is right on track and therefore no further revisions to full-year estimates are necessary.

Note: Performance estimates are based on data available to management as of February 15, 2007. Actual results may differ from these estimates due to unforeseen factors, including changing economic conditions.

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4. Quarterly consolidated financial statements

(1) Quarterly consolidated balance sheets

End of the first quarter of the previous fiscal year

End of the first quarter of the current fiscal year

Previous consolidated fiscal yearBrief Consolidated Balance Sheets

(December 31, 2005) (December 31, 2006) (September 30, 2006)

Item Note Amount (Thousands of yen) (%) Amount

(Thousands of yen) (%) Amount (Thousands of yen) (%)

(Assets)

Ⅰ Current Assets

1. Cash and time deposits *1 12,260,353 21,999,869 18,907,675

2. Accounts receivable, trade 2,189 23,177 13,525

3. Investment in securities, trade 332,772 451,256 439,512

4. Inventory *1, 6 817 5,047,537 8,586,337

5. Loans receivable, trade *1 16,253,000 32,198,589 29,406,589

6. Other current assets 160,647 1,917,189 1,310,878

Allowance for doubtful accounts ― △107,299 △88,219

Total current assets 29,009,779 98.6 61,530,319 95.3 58,576,299 95.7

Ⅱ Fixed Assets

1. Property, plant and equipment *2

(1) Building 53,584 21,887 48,585

(2) Furniture and equipment 12,379 27,107 19,885

Total property, plant and equipment 65,963 0.2 48,994 0.1 68,471 0.1

2. Intangible fixed assets 4,529 0.0 105,709 0.1 103,735 0.2

3. Investments and other assets

(1) Investments in securities 119,583 2,429,588 2,189,412

(2) Security deposits 131,898 346,835 201,362

(3) Other 99,737 113,711 89,827

Allowance for doubtful accounts △3,690 ― ―

Total investment and other assets 347,528 1.2 2,890,135 4.5 2,480,602 4.0

Total fixed assets 418,021 1.4 3,044,839 4.7 2,652,808 4.3

Total assets 29,427,801 100.0 64,575,158 100.0 61,229,108 100.0

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(Liabilities)

Ⅰ Current Liabilities

1. Accounts payable, trade 40,713 50,484 51,119

2. Short-term debt *1・6 1,597,000 28,144,600 6,330,500

3. Bank loans, trade *1 5,090,500 ― 3,094,325

4. Long-term debt due within one year *1 40,192 987,246 173,056

5. Income taxes payable 305,648 615,787 2,304,894

6. Accrued bonuses 12,004 30,000 80,000

7. Other current liabilities 284,944 2,110,242 1,994,679

Total current liabilities 7,371,002 25.1 31,938,360 49.5 14,028,576 22.9

Ⅱ Long-term Liabilities

1. Bonds with warrants 17,000,000 ― 20,000,000

2. Long-term debt *1 44,174 7,795,538 2,216,492

3. Accrued retirement benefits 2,745 4,310 4,335

4. Other long-term liabilities 22,800 479,975 21,775

Total long-term liabilities 17,069,719 58.0 8,279,824 12.8 22,242,602 36.3

Total liabilites 24,440,721 83.1 40,218,184 62.3 36,271,178 59.2

(Minority Interests)

Minority Interests 37,681 0.1 ― ― ― ―

(Shareholders’ Equity)

Ⅰ Common Stock 2,053,935 7.0 ― ― ― ―

Ⅱ Additional Paid-in Capital 1,851,900 6.3 ― ― ― ―

Ⅲ Retained Earnings 1,044,302 3.5 ― ― ― ―

Ⅳ Treasury Stocks △739 △0.0 ― ― ― ―

Total shareholders’ equity 4,949,398 16.8 ― ― ― ―

Total liabilities, minority interests and shareholders’ equity

29,427,801 100.0 ― ― ― ―

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(Net Assets)

Ⅰ Shareholders’ Equity

1. Common stock ― ― 10,650,771 16.5 10,624,769 17.4

2. Additional paid-in capital ― ― 10,351,900 16.0 10,351,900 16.9

3. Retained earnings ― ― 3,151,218 4.9 3,882,974 6.3

Total shareholders’ equity ― ― 24,153,890 37.4 24,859,644 40.6

Ⅱ Profits or Losses from Appraisals and Effects of Exchange rate, etc.

Other appsaisal profits or losses on marketable securities

― ― 87,219 0.1 28,321 0.1

Total profits or losses from appraisals and effects of exchange rate, etc.

― ― 87,219 0.1 28,321 0.1

Ⅲ Minority Interests ― ― 115,864 0.2 69,963 0.1

Total net assets ― ― 24,356,974 37.7 24,957,929 40.8

Total liabilities and net assets ― ― 64,575,158 100.0 61,229,108 100.0

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(2) Quarterly consolidated statements of income

First quarter of the previous fiscal year

First quarter of the current fiscal year

Previous consolidated fiscal yearBrief Consolidated

Statements of Income

(From October 1, 2005 to December 31, 2005)


(From October 1, 2005 to September 30, 2006)

Item Note Amount (Thousands of yen) (％) Amount

(Thousand of yen) (%) Amount (Thousand of yen) (%)

Ⅰ Net Revenue

1.Investment banking business *1 ― 2,043,132 7,745,562

2.Reinsurance / financial guarantee business *2 ― 444,691 476,277

3. Other business ― 1,036,520 100.0 24,286 2,512,111 100.0 9,873 8,231,713 100.0

Ⅱ Cost of Revenue 75,976 7.3 491,109 19.5 622,716 7.6

Gross profit 960,543 92.7 2,021,001 80.5 7,608,997 92.4

Ⅲ Selling, General and Administrative Expenses *3 264,032 25.5 862,105 34.4 1,687,114 20.5

Operating income 696,510 67.2 1,158,896 46.1 5,921,883 71.9

Ⅳ Other Income

1. Interest income 22 9,548 53,454

2. Profits from effect of exchange rate ― 8,418 ―

3. Profits from money trust ― 49,418 ―

4. Profits from investment securities, trade ― 10,833 ―

5. Profits from managing investment partnership 1,870 65 ―

6. Other 41 1,933 0.2 2,085 80,370 3.2 5,636 59,091 0.7

Ⅴ Other Expenses

1. Interest expenses 3,716 57,766 89,916

2. Stock issue costs 9,645 ― ―

3. Stock distribution costs ― 2,870 112,675

4. Bond issue costs 11,741 ― 18,092

5. Unrealized loss on derivative instruments 403 1 1,341

6. Bond redemption loss of bonds with warrants ― 200,000 50,000

7. Other 69 25,577 2.5 9,499 270,138 10.7 127,856 399,883 4.8

Ordinary profit 672,866 64.9 969,128 38.6 5,581,091 67.8

Ⅵ Extraordinary profit

Equity fluctuation income ― ― ― 11,720 11,720 0.5 ― ― ―

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Previous consolidated fiscal yearBrief Consolidated

Statements of Income




Item Note Amount (Thousands of yen) (％) Amount

(Thousand of yen) (%) Amount (Thousand of yen) (%)

Ⅶ Extraordinary Loss

Head office relocation expenses ― ― ― 39,770 39,770 1.6 ― ― ―

Income before taxes 672,866 64.9 941,078 37.5 5,581,091 67.8

Income taxes *4 292,832 539,042 2,581,258

Income tax adjustment ― 292,832 28.2 ― 539,042 21.5 △196,714 2,384,543 29.0

Loss of minority shareholders（△） △11,838 △1.1 △49,318 △2.0 △39,208 △0.5

Net income 391,873 37.8 451,354 18.0 3,235,755 39.3

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(3) Quarterly consolidated statement of surplus


(From October 1, 2005 to December 31, 2005

Item Note Amount (Thousands of yen)

(Additional Paid-in Capital)

Ⅰ Additional paid-in capital at beginning of year 1,101,900

Ⅱ Net increase in additional paid-in capital

Exercise of warrants issued as stock options 750,000 750,000

Ⅲ Additional paid-in capital (Closing balance) 1,851,900

(Retained Earnings)

Ⅰ Retained earnings at beginning of year 1,021,438

Ⅱ Net increase in retained earnings

Net income 391,873 391,873

Ⅲ Net decrease in retained earnings

Dividends 369,009 369,009

Ⅳ Retained earnings (Closing balance) 1,044,302

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(4) Quarterly consolidated statements of shareholders’ equity

First quarter of the current fiscal year (From October 1, 2006 to December 31, 2006)

Shareholders’ equity

Common stock Additional paid-in capital Retained earnings Total

shareholders’ equity Balance at September 30, 2006 (Thousands of yen) 10,624,769 10,351,900 3,882,974 24,859,644

Amount of changes during the first quarter of fiscal 2006

Issuance of common stock 26,001 ― ― 26,001

Dividends ― ― △1,183,110 △1,183,110

Net income ― ― 451,354 451,354

Amount of changes except for shareholders’ equity during the firstquarter of fiscal 2007 (Net)

― ― ― ―

Total amount of changes during the first quarter of fiscal 2007 (Thousands of yen)

26,001 ― △731,755 △705,754

Balance at December 31, 2006 (Thousands of yen) 10,650,771 10,351,900 3,151,218 24,153,890

Profits or losses from appraisals and effects of exchange

rates, etc.

Other appraisal profits or losses on securities

Total profits or losses from appraisals and effects of

exchange rats, etc.

Minority interests Total net assets

Balance at September 30, 2006 (Thousands of yen) 28,321 28,321 69,963 24,957,929

Amount of changes during the first quarter of fiscal 2006

Issuance of common stock ― ― ― 26,001

Dividends ― ― ― △1,183,110

Net income ― ― ― 451,354

Amount of changes except for shareholders’ equity during the first quarter of fiscal 2007 (Net)

58,897 58,897 45,901 104,798

Total amount of changes during the first quarter of fiscal 2007 (Thousands of yen)

58,897 58,897 45,901 △600,955

Balance at December 31, 2006 (Thousands of yen) 87,219 87,219 115,864 24,356,974

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Previous fiscal year (From October 1, 2005 to September 30, 2006)

Shareholders’equity

Common stock Additional paid-in Capital Retained earnings Treasury stock Total

shareholders’ equityBalance at September 30, 2005 (Thousands of yen) 1,303,735 1,101,900 1,021,438 － 3,427,073

Amount of changes during fiscal 2006

Issuance of common stock 9,321,034 9,250,000 －－ 18,571,034

Dividends －－ △369,009 － △369,009

Net income －－ 3,235,755 － 3,235,755

Purchase of treasury stock －－－ △3,379 △3,379

Extinguishment of treasury stock －－ △3,379 3,379 －

Increase of consolidated subsidiaries －－ △1,831 － △1,831


－－－－－

Total amount of changes during the fiscal 2006 (Thousands of yen) 9,321,034 9,250,000 2,861,536 － 21,432,570

Balance at September 30, 2006 (Thousands of yen) 10,624,769 10,351,900 3,882,974 － 24,859,644

Profits or losses from appraisals and effects of

exchange rates, etc.

Other appraisal profits or

losses on securities

Total profits or losses from appraisals and

effects of exchange rats, etc.

Minority interests Total net assets

Balance at September 30, 2005 (Thousands of yen) －－ 49,520 3,476,593

Amount of changes during the fiscal 2006

Issuance of common stock －－－ 18,571,034

Dividends －－－ △369,009

Net income －－－ 3,235,755

Purchase of treasury stock －－－ △3,379

Extinguishment of treasury stock －－－－

Increase of consolidated subsidiaries －－－ △1,831


28,321 28,321 20,443 48,764

Total amount of changes during the fiscal 2006 (Thousands of yen) 28,321 28,321 20,443 21,481,335

Balance at September 30, 2006 (Thousands of yen) 28,321 28,321 69,963 24,957,929

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(5) Quarterly consolidated statements of cash flows



Previous Consolidated Fiscal Year

Brief Consolidated Cash Flow Statements





Amount (Thousands of yen)


Ⅰ Cash Flows from Operating Activities

Income before income taxes 672,866 941,078 5,581,091

Depreciation and amortization 3,205 4,667 15,172

Increase (decrease) in accrued bonus △3,553 △50,000 64,442

Increase (decrease) in accrued retirement benefits 374 △24 1,964

Amortization of guarantee charges 50 33 149

Interest income △22 △9,548 △53,454

Interest expense 3,716 ― 89,916

Cost of funds and interest expense ― 124,586 ―

Stock issue cost 9,645 ― ―

Stock distribution cost ― 2,870 112,675

Bond issue cost 11,741 ― 18,092

Profits from managing investment partnership △1,870 △65 ―

Increase (decrease) in trade receivable (increase△) △2,175 △9,652 △13,511

Increase (decrease) in investments in securities, trade (increase△) 50,258 △11,743 △56,482

Increase (decrease) in inventory (increase △) △653 △2,646,159 △6,255,562

Increase (decrease) in loans receivable, trade (increase△) △10,889,000 3,628,000 △24,572,589

Increase (decrease) in accounts payable, trade (decrease △) 3,514 △635 13,921

Increase (decrease) in bank loans, trade (decrease △) 2,023,300 ― 27,125

Increase (decrease) in accrued liabilities (decrease △) △17,675 55,620 24,385

Increase (decrease) in accrued expenses (decrease△) 11,265 45,335 87,720

Other △35,985 △134,938 1,649,888

Subtotal △8,160,994 1,939,425 △23,265,052

Interest income received 22 13,563 55,400

Interest expense paid △4,887 △112,455 △63,229

Income taxes paid △635,091 △2,157,458 △993,306

Net cash used in operating activities △8,800,952 △316,924 △24,266,188

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First quarter of

the previous fiscal year First quarter of

the current fiscal year

Previous Consolidated Fiscal Year

Brief Consolidated Cash Flow Statements







Ⅱ Cash Flows from Investment Activities

Proceeds from time deposit payback ― 189,000 ―

Payment for purchase of property, plant and equipment △2,219 △13,044 △28,535

Payment for purchase of investments in securities △67,500 △646,957 △2,144,956

Proceeds from sale of investments insecurities ― 492,000 ―

Cash paid for purchase of newly consolidated subsidiaries ― △3,610 △53,730

Proceeds from acquisition of newly consolidated subsidiaries ― ― 191,807

Payment for acquiring investment in capital △15,000 ― △48,049

Payment for loan receivable ― ― △6,000,000

Proceeds from collection of loan receivable ― ― 6,010,402

Payment of security deposits ― △145,393 △67,550

Refund of security deposits 1,312 ― 4,474

Other 2,947 △25,290 △780,462

Net cash used in investing activities △80,459 △153,296 △2,916,601

Ⅲ Cash Flows from Financing Activities

Increase in short-term debt (net) 1,137,000 20,814,100 3,926,500

Proceeds from long-term debt ― 5,941,800 2,400,000

Repayment of long-term debt △7,682 △1,642,889 △102,500

Proceeds from issuance of common stock 200 23,131 42,674

Proceeds from issuance of bonds 18,498,150 ― 48,481,857

Dividends paid △332,846 △1,031,801 △367,360

Redemption of bonds ― △20,200,000 △10,050,000

Proceeds from issuance of common stock to minor shareholders ― 78,500 ―

Other △1,900 △2,850 △83,949

Net cash provided by financing activities 19,292,921 3,979,991 44,247,222

Ⅳ Effect of Exchange Rate Changes on Cash and Cash Equivalents ― ― △13,139

Ⅴ Net increase (decrease) in Cash and Cash Equivalents (decrease △) 10,411,509 3,509,770 17,051,293

Ⅵ Cash and Cash Equivalents at Beginning of Year 1,659,843 18,718,675 1,659,843

Ⅶ Cash and Cash Equivalents of Newly Consolidated Subsidiaries ― 3,000 7,539

Ⅷ Cash and Cash Equivalents of Eliminated Consolidated Subsidiaries ― △231,576 ―

Ⅸ Cash and Cash Equivalents at December 31, 2006 *1 12,071,353 21,999,869 18,718,675

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Material Items to Form the Basis of Quarterly Consolidated Financial Statements

Item First quarter of fiscal 2006


First quarter of fiscal 2007 (From October 1, 2006 to December 31, 2006)

Full-fiscal 2006 (From October 1, 2005 to September 30, 2006)

1. Scope of Consolidation (1) Number of consolidated subsidiaries: 2 Names of consolidated subsidiaries: FinTech Capital Risk Solutions Incorporated FinTech Global Securities, Inc.

(1) Number of consolidated subsidiaries: 18 Names of consolidated subsidiaries: FinTech Capital Risk Solutions

Incorporated FinTech Global Securities, Inc. FinTech Real Estate, Inc. Stellar Capital AG Crane Reinsurance Limited Entrust, Inc. ASAP Payment System IncorporatedFGI Medical Finance Co., Ltd. FGI Principal Co., Ltd. FGI Investment Two Incorporated TSM Fourteen Incorporated Blenheim Partners One IncorporatedTSM Thirty Incorporated Yugen Kaisya Hibiki Four silent partnerships (tokumei kumiai)

FGI Medical Finance Co., Ltd. has become a consolidated subsidiary through acquisition of voting rights. The accounts of T TSM Thirty incorporated, Yugen Kaisya Hibiki, and two silent partnerships (tokumei kumiai) have also been consolidated due to the fact that the Company substantially assumes the majority of rights and duties as well as the risks associated with profits and losses of said companies. Furthermore, FGI Principal Co., Ltd. has become a principal consolidated subsidiary, in line with medium- and long-term business strategies.

The accounts of TSM Fifteen have been excluded from the scope of consolidation due to the fact that the Company does not assume the majority of rights and duties nor the risks associated with profits and losses of said company.

(1) Number of consolidated subsidiaries: 13 Names of consolidated subsidiaries: FinTech Capital Risk Solutions

Incorporated FinTech Global Securities, Inc. FinTech Real Estate, Inc. Stellar Capital AG Crane Reinsurance Limited Entrust, Inc. ASAP Payment System IncorporatedTSM Fifteen Incorporated FGI Investment Two Incorporated TSM Fourteen Incorporated Blenheim Partners One IncorporatedTwo silent partnerships (tokumei kumiai) Stellar Capital, Crane Reinsurance and Entrust were consolidated upon incorporation. ASAP Payment System has become a consolidated subsidiary due to acquisition of voting rights. The accounts of TSM Fifteen,

FGI Investment Two, TSM Fourteen, Blenheim Partners One and two silent partnerships (tokumei kumiai) have also been consolidated due to the fact that the Company substantially assumes the majority of rights and duties as well as the risks associated with profits and losses of said companies. FinTech Real Estate has been treated as a consolidated subsidiary from the year ended September 30, 2006 due to its growing significance.

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Full- fiscal 2006 (From October 1, 2005 to September 30, 2006)

(2) Name of unconsolidated subsidiary: FinTech Real Estate, Inc. (Reasons for eliminating from the scope of consolidation) The unconsolidated subsidiary is small, and its total assets, sales, quarterly net income and losses, and retained earnings (amount proportionate to equity share) have no material impact on quarterly consolidated financial statements.

(2) Name of unconsolidated subsidiaries: RF Funding One One silent partnership (tokumei-kumiai) FinTech Global Capital, LLC (Reasons for eliminating from the scope of consolidation) The unconsolidated subsidiaries are small, and their total assets, sales, quarterly net income and losses, and retained earnings (amount proportionate to equity share) have no material impact on quarterly consolidated financial statements.

(2) Name of unconsolidated subsidiaries: RF Funding One One silent partnership (tokumei-kumiai) FGI Principal Co., Ltd. FGI Principal changed the Japanese format of its name in November 2006. (Reasons for eliminating from the scope of consolidation) The unconsolidated subsidiaries are small, and their total assets, sales, quarterly net income and losses, and retained earnings (amount proportionate to equity share) have no material impact on quarterly consolidated financial statements.

2 Application of the equity method

(1) Number of unconsolidated subsidiaries and affiliates accounted for by the equity method: ---

(1) Number of unconsolidated subsidiaries and affiliates accounted for by the equity method: 6

Names of unconsolidated subsidiaries and affiliates: RF Funding One TSM Fifteen Incorporated TSM Seventeen Incorporated Three silent partnerships (tokumei kumiai) The accounts of TSM Fifteen, TSM Seventeen, and two silent partnerships (tokumei kumiai) have been accounted for by the equity method due to the fact that the Company substantially assumes the majority of rights and duties as well as the risks associated with the profits and losses of said companies.

(1) Number of unconsolidated subsidiaries and affiliates accounted for by the equity method: 2 Names of unconsolidated subsidiaries and affiliates: RF Funding One One silent partnership (tokumei kumiai)

RF Funding One and one silent partnership (tokumei kumiai) have been accounted for by the equity method due to the fact that the Company retains executive authority over said company and silent partnership (tokumei kumiai).

(Change in Accounting Policy) The “Practical Treatment of Application of Consolidation Policy for Investment Partnership’’ announced on September 8, 2006, has been newly applied from the fiscal year ended September 30, 2006. This change has no impact on the operating results of the Company.

(2) Names of unconsolidated subsidiaries and affiliates which are not subject to equity method accounting: FinTech Real Estate, Inc. (3) Reasons for not applying the equity method The non-equity-method company has a slight influence on quarterly net income and losses and retained earnings (amount corresponding to equity holdings) and is therefore excluded from the application of equity method accounting.

(2) Names of unconsolidated subsidiaries and affiliates which are not subject to equity method accounting: FinTech Global Capital, LLC (3) Reasons for not applying the equity method The non-equity-method company has a slight influence on quarterly net income and losses and on retained earnings, in amounts corresponding to equity holdings in both cases, but its impact is insignificant overall, and the company is therefore excluded from the application of equity method accounting.

(2) Names of unconsolidated subsidiaries and affiliates which are not subject to equity method accounting: JBFinTech Capital FinTech Global Capital, LLC FGI Principal Co., Ltd. (3) Reasons for not applying the equity method The non-equity-method companies have a slight influence on quarterly net income and losses and on retained earnings, in amounts corresponding to respective equity holdings in both cases, but they have an insignificant impact overall, and the companies are therefore excluded from the application of equity method accounting.

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3. Fiscal Year (Term) of Consolidated Subsidiaries 3

The first quarter of accounts for FinTech Capital Risk Solutions Incorporated is from January 1 to March 31, and that of FinTech Global Securities, Inc. is from April 1 to June 30. In preparing quarterly consolidated financial statements, quarterly financial statements based on preliminary results determined as of the quarterly consolidated settlement date are used.

The first quarter of accounts for FinTech Capital Risk Solutions Incorporated and TSM Fourteen Incorporated are from January 1 to March 31, that of Yugen Kaisya Hibiki and one silent partnership (tokumei kumiai) is from February 1 to April 30, and that of FinTech Global Securities, Inc., is from April 1 to June 30. In preparing quarterly consolidated financial statements, quarterly financial statements based on respective preliminary results determined as of December 31 are used. The first quarter of accounts for Blenheim Partners One Incorporated and one silent partnership (tokumei kumiai) are from July 1 to September 30, and that of FGI Investment Two Incorporated, two silent partnerships (tokumei kumiai) and TSM Thirty Incorporated are from August 1 to October 31. Quarterly consolidated financial statements are prepared using quarterly financial statements current as of respective closing dates, with adjustments made for significant transactions between those dates and December 31.

Fiscal years of FinTech Capital Risk Solutions Incorporated and TSM Fourteen Incorporated are from January 1 to December 31, and those of FinTech Global Securities, Inc. and TSM Fifteen Incorporated are from April 1 to March 31. In preparing consolidated financial statements, financial statements based on preliminary results determined as of September 30 are used. Fiscal years of Blenheim Partners One Incorporated are from July 1 to June 30, and those of FGI Investment Two Incorporated and two silent partnerships (tokumei kumiai) are from August 1 to July 31.Consolidated financial statements are prepared using financial statements current as of respective closing dates, with adjustments made for significant transactions between those dates and September 30.

４. Summary of Significant Accounting Policies (1) Bases and methods of valuation of important assets

(1) Securities Marketable securities with fair market value --- Marketable securities with no fair market value are stated at cost. The cost is determined by the moving-average method. However, investments in silent partnerships are based on the actual cost method. Details are shown in “(2) Accounting treatment of investment securities, trade (investments in silent partnerships) of (7) Other material items for preparation of consolidated financial statements.” (2) Derivatives All derivatives are stated at fair value with changes in fair value being charged to net income or loss for the period in which they arise except for derivatives that are designated and qualified as hedging instruments.

(1) Securities Marketable securities with fair market value are stated at fair value. Unrealized holding gains and losses, net of the related tax effect, are recorded as an accumulated comprehensive income until realized. Marketable securities with no fair market value Same as at left

(2) Derivatives Same as at left

(1) Securities Marketable securities with fair market value Same as at left Marketable securities with no fair market value Same as at left

(2) Derivatives Same as at left

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(2) Depreciation

(3) Deferred assets

(4) Allowance for Doubtful Accounts

(3) Inventory Inventories are stated at cost. Cost of work in process and real estate for sale are determined by valuing each item individually. Property, plant and equipment are stated at cost. Depreciation is computed using the declining balance method. Useful lives for major fixed assets are as follows:

Buildings: 8-15 years Tools, furniture and equipment: 4-20 years

Stock issue costs and bond issue costs are recorded as expenses when paid.

(1) Allowance for doubtful accounts In preparation for possible bad debt losses on receivables, the Company records the estimated amount of potentially uncollectible bad debts based on the actual bad debt loss ratio for general debts and considers the individual ease of collecting special debts, such as potentially bad debts (2) Accrued bonus In preparation for bonus payments to employees, the estimated amount of payment is recorded.

(3) Accrued retirement benefits The Company has a defined benefit plan. Accrued retirement benefits are provided at amounts which would be required to be paid if all the eligible employees voluntarily terminated their employment at the balance sheet date. The simple method is applied because the number of employees covered by retirement benefit reserve is less than 300.

(3) Inventory Inventories are stated at cost. Cost of work in process and real estate for sale are determined by valuing each item individually. Property, plant and equipment are stated at cost. Depreciation is computed using the declining balance method. Useful lives for major fixed assets are as follows:

Buildings: 8-15 years Tools, furniture and equipment: 3-20 years

Stock distribution costs are recorded as expenses when paid.

(1) Allowance for doubtful accounts Same as at left

(2) Accrued bonus Same as at left

(3) Accrued retirement benefits

Same as at left

(3) Inventory Same as at left Property, plant and equipment Same as at left

Stock distribution costs and bond issue costs are recorded as expenses when paid.

(1) Allowance for doubtful accounts

Same as at left

(2) Accrued bonus Same as at left

(3) Accrued retirement benefits Same as at left

(5) Leases

Finance leases, except for those leases under which the ownership of the leased assets is considered to be transferred to the lessee, are accounted for in the same manner as operating leases.

Same as at left

Same as at left

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(6) Methods of important hedge accounting

(1) Methods of hedge accounting For interest rate swaps that meet the requirements for special treatment, special accounting treatment is adopted. (2) Hedging vehicles and hedged items a Hedging vehicles Interest rate swaps b Hedged items Borrowings (3) Hedging policy Interest rate swaps are used to avoid fluctuations of market interest rates.(4) Methods of hedge efficacy assessment Efficacy assessment for interest rate swaps is omitted, as they meet the requirements for special treatment.

(1) Methods of hedge Same as at left (2) Hedging vehicles and hedged items Same as at left (3) Hedging policy Same as at left (4) Methods of hedge efficacy assessment Same as at left

(1) Methods of hedge Same as at left (2) Hedging vehicles and hedged items Same as at left (3) Hedging policy Same as at left (4) Methods of hedge efficacy assessment Same as at left

(7) Other material items for the preparation of quarterly consolidated financial statements (consolidated financial statements)

(1) Accounting for consumption tax and others Consumption tax and local consumption tax are accounted for using the tax exclusion method. Suspense consumption tax paid and suspense consumption tax received are balanced out and shown in “othercurrent liabilities” in current liabilities.

(1) Accounting for consumption tax and others Same as at left

(1) Accounting for consumption tax and others Consumption tax and local consumption tax are accounted for using the tax exclusion method.

(2) Investments in securities, trade Investments in the capital of silent partnerships (tokumei kumiai) Investments in securities, trade investments in the capital of silent partnerships (tokumei kumiai) are stated at cost, adjusted for equity in earnings and losses of the partnership. The adjustments are recognized as “Net revenue’’.

(2) Investments in securities, trade Investments in the vapital of silent partnerships (tokumei kumiai)

Same as at left

(2) Investments in securities, trade Investments in the capital of silent partnerships (tokumei kumiai)

Same as at left

(3) Methods for allocating financing costs

__________

(3) Methods for allocating financing costs Financing costs incurred by the Companies involved in the lending business are recorded as either financing costs associated with operating revenues or as other financing costs. In allocating such costs, total assets are split into assets pertaining to business transactions and other assets. Financing costs in proportion to assets pertaining to business transactions are included in cost of revenue and the remaining costs are included in other expenses.

(3) Methods for allocating financing costs

__________

5. Cash and Cash Equivalents

In preparing the quarterly consolidated statement of cash flows, the Company considers all highly liquid investments with an insignificant risk of changes in value and with maturities of three months or less at the time of acquisition to be cash equivalents.

Same as at left

In preparing the consolidated statement of cash flows, the Company considers all highly liquid investments with an insignificant risk of changes in value and with maturities of three months or less at the time of acquisition to be cash equivalents.

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Changes in Significant Items Regarding the Preparation of Quarterly Consolidated Financial Statements




(Impairment Loss on Fixed Assets) On August 9, 2002, the Business Accounting Council of Japan issued ‘‘Accounting Standard for Impairment of Fixed Assets’’ and on October 31, 2003, the Accounting Standards Board of Japan issued “Implementation Guidance for Accounting Standard for Impairment of Fixed Assets’’. These standards require that fixed assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss shall be recognized in the statement of income by reducing the carrying amount of impaired assets or a group of assets to the recoverable amount to be measured as the higher of net selling price or value in use. The Company has applied this new standard for the first quarter ended December 31, 2005. The application of the new standard had no impact on the Company’s results of business.

──── (Impairment Loss on Fixed Assets) On August 9, 2002, the Business Accounting Council of Japan issued “Accounting Standard for Impairment of Fixed Assets’’ and on October 31, 2003, the Accounting Standards Board of Japan issued ‘‘Implementation Guidance for Accounting Standard for Impairment of Fixed Assets’’. These standards require that fixed assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss shall be recognized in the statement of income by reducing the carrying amount of impaired assets or a group of assets to the recoverable amount to be measured as the higher of net selling price or value in use. The Company has applied this new standard for the year ended September 30, 2006. The application of the new standard had no impact on the Company’s results of business.

────

──── (Net Assets of Balance Sheet) The “Accounting Standards for Net Assets of Balance Sheet’’ and the ‘‘Guideline for Application of Accounting Standards for Net Assets of Balance Sheet’’ announced on December 9, 2005, have been applied from the fiscal year ended September 30, 2006. Total amount of shareholders’ equity as of September 30, 2006, would have been ¥24,887,966 thousand if calculated in accordance with the accounting standards applied until the fiscal year ended September 30, 2005.

────

In regard to financing costs, the Company had included procurement costs of funds specific to individual investments or financing in cost of revenue and other procurement costs in other expenses up to and including fiscal 2005. Because the other procurement cost of funds has assumed a larger share of financing costs, the Companies involved in the lending business shall allocate financing costs, effective from the first quarter of fiscal 2007. In allocating such costs, total assets are split into assets pertaining to business transactions and other assets. Financing costs in proportion to assets pertaining to business transactions are included in cost of revenue and the remaining costs are included in other expenses.

────

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────

Paralleling this, the Company divides the former bank loans, trade into short-term debt and long-term debt, depending upon the duration of the repayment period. Due to this change, consolidated operating profit for the first quarter of fiscal 2007 was ¥46,548 thousand less than if the amount had been calculated by the method previously applied. Ordinary profit, however, was not affected. The change caused current liabilities to decrease by ¥790,000 thousand and long-term liabilities to increase by the same amount. Furthermore, on the quarterly consolidated statements of cash flow, net cash provided by operating activities was ¥589,325 thousand higher than if the amount had been calculated by the method previously applied, and net cash used in financing activities was lower by the same amount. Paralleling this change, financing costs are represented as “cost of funds and interest expenses” under cash flows from operating activities.

────

Changes in Disclosure Methods First quarter of fiscal 2006



________

(Note related to quarterly consolidated statements of income)From the first quarter of fiscal 2007, the Company discloses “Stock distribution costs,” the description used in the first quarter of fiscal 2006, as “Stock issue costs”.

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Notes Related to Quarterly Consolidated Balance Sheets At the end of the first quarter of fiscal 2006

(December 31, 2005) At the end of the first quarter of fiscal 2007

(December 31, 2006) At the end of fiscal 2006

(September 30, 2006) *1 Pledged assets and secured debts (1) Hypothecated assets Cash and time deposits ¥189,000 thousand Corresponding debts Bank loans, trade ¥325,500 thousand (2) Assets for pledges are shown as follows: “Creation of pledges”

Class of Asset Book Value

Amount of Corresponding

Debts

Loans receivable,

trade

¥1,455,000 thousand

Bank loans, trade

¥1333,000 thousand

*1 Pledged assets and secured debts (1) Hypothecated assets

Assets for pledges are shown as follows: (Thousands of yen)

Inventory ¥5,046,825Loans receivable,trade ¥815,000

Total ¥5,861,825Liabilities related to pledged assets are shown as follows: Short-term debt ¥2,044,000Long-term debt due within one year

¥495,000

Long-term debt ¥150,000

Total ¥2,689,000

*1 Pledged assets and secured debts (1) Hypothecated assets

Assets for pledges are shown as follows: (Thousands of yen)

Cash and time deposits ¥189,000

Inventory ¥2,399,660Loans receivable, trade ¥815,000

Total ¥3,403,660Liabilities related to pledged assets are shown as follows:

Bank loans, trade ¥961,700Short-term debt ¥1,944,000

Total ¥2,905,700

*2 Accumulated depreciation charges for property, plant and equipment ¥18,800,000



3. Loan Commitment Line Contract In its principal finance operations, the Company is committed to provide loans to a customer. The outstanding balance of this commitment as of December 31, 2005 was as follows:

(Thousands of yen) Total committed loans ¥2, 000,000

Executed amount ---

Unused amount ¥2, 000,000

3. Loan Commitment Line Contract In its principal finance operations, the Company is committed to provide loans to a customer. The outstanding balance of this commitment as of December 31, 2006 was as follows:

(Thousands of yen) Total committed loans ¥2, 120,000

Executed amount 375,000

Unused amount ¥1,745,000

In the above committed loan facility agreements, full amounts are not necessarily loaned because the Company lends out funds by considering the purpose to which the funds are to be put and the credit standing of the prospective borrowers.

3. Loan Commitment Line Contract In its principal finance operations, the Company is committed to provide loans to a customer. The outstanding balance of this commitment as of September 30, 2006 was as follows:

(Thousands of yen) Total committed loans ¥2,000,000

Executed amount 95,000


In the above committed loan facility agreements, full amounts are not necessarily loaned because the Company lends out funds by considering the purpose to which the funds are to be put and the credit standing of the prospective borrowers.

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At the end of the first quarter of fiscal 2006


(December 31, 2006) At the end of fiscal 2006

(September 30, 2006)

4 ____________

4 ____________

4. Investment Commitment Line Contract The Company is committed to provide investments in its principal finance operations. The outstanding balance as of September 30, 2006 was as follows:

(Thousands of yen)Total committed investment ¥5,000,000

Executed amount ―


In the above committed investment agreement, full amounts are not necessarily loaned because the Company lends out funds subject to the purpose for use of funds as well as the credit standing of the prospective borrowers.

5 ____________

5. Contingent Liabilities The Company offered guaranty of liabilities to the following companies as of September 30, 2006:

(Thousands of yen) Duplex Thirty-Sixth Ltd. ¥ 740,000 Duplex Thirty-Third Ltd. 800,000 Duplex Thirty-Fourth Ltd. 600,000 Duplex Forty-First Ltd. 400,000 Duplex Forty-Fourth Ltd. 300,000 Duplex Forty-Seventh Ltd. 450,000 Yokohama Bayside Resort Ltd. 2,000,000 Duplex Forty-Fifth Ltd. 500,000 Duplex Forty-Ninth Ltd. 300,000

5. Contingent Liabilities The Company offered guaranty of liabilities to the following companies as of September 30, 2006:

(Thousands of yen) Duplex Thirty-Sixth Ltd. ¥ 740,000 Duplex Thirty-Third Ltd. 800,000 Duplex Thirty-Fourth Ltd. 600,000 Duplex Forty-First Ltd. 400,000 Duplex Forty-Fourth Ltd. 300,000 Duplex Forty-Seventh Ltd. 450,000 Yokohama Bayside Resort Ltd. 2,000,000

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At the end of the first quarter of fiscal 2006


(December 31, 2006) At the end of Fiscal 2006

(September 30, 2006)

*6 ________

*6. The accounts of TSM Fourteen Incorporated, FGI Investment Two Incorporated, Blenheim Partners One Incorporated, TSM Thirteen Incorporated, Yugen Kaisya Hibiki, and four silent partnerships (tokumei kumiai) have also been consolidated due to the fact that the Company substantially assumes the majority of rights and duties as well as the risks associated with the profits and losses of said companies. The assets and liabilities of the above companies and the silent partnerships (tokumei kumiai) are as follows:

(Thousands of yen) Inventory ¥ 5,046,325 Short-term debt 2,044,000

*6. The accounts of TSM Fifteen Incorporated, FGI Investment Two Incorporated, TSM Fourteen Incorporated, Blenheim Partners One Incorporated and two silent partnerships (tokumei kumiai) have also been consolidated due to the fact that the Company substantially assumes the majority of rights and duties as well as the risks associated with the profits and losses of said companies. The assets and liabilities of the above companies and the silent partnerships (tokumei kumiai) are as follows:

(Thousands of yen) Inventory ¥ 8,584,620 Short-term debt 1,944,000

7. ________

7. Credit-Line Contract The Company has executed a commitment-line contract with its banks to make appropriation for a fund for investments and loans. The credit line under this contract and the unexercised balance are as follows, as of September 30, 2006:

(Thousands of yen)

Credit line ¥4,000,000

Loans payable 1,000,000

Unexercised Balance ¥3,000,000

7. Credit-Line Contract The Company has executed a commitment-line contract with its banks to make appropriation for a fund for investments and loans. The credit line under this contract and the unexercised balance are as follows, as of September 30, 2006:

(Thousands of yen)

Credit line ¥4,000,000

Loans payable ---

Unexercised Balance ¥4,000,000

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Notes Related to Quarterly Consolidated Statements of Income




*1. ________ *2. _________

*1. The following is the breakdown of net revenues from investment banking business: (Thousands of yen)Arrangement operations ¥ 1,230,893 Arrangement services 931,673 Arrangement services with credit enhancement 299,220Principal finance operations 703,807Other investment banking operations 108,431 ¥ 2,043,132

*2. The following is the breakdown of net revenues from the reinsurance/financial guarantee businesses: (Reinsurance Business) (Thousands of yen)Reinsurance premiums assumed ¥ 325,739Reinsurance premiums ceded (5,000) ¥ 320,739(Financial Guarantee Business) (Thousands of yen)Gross guarantee fees ¥ 75,535Unearned guarantee fees (16,531)Guarantee arrangement fees 64,948 ¥ 123,952

*1. The following is the breakdown of net revenues from investment banking business: (Thousands of yen)Arrangement operations ¥ 4,674,212 Arrangement services 3,734,998 Arrangement services with credit enhancement 939,214Principal finance operations 2,796,811Other investment banking operations 274,540 ¥ 7,745,562

*2. The following is the breakdown of net revenues from the reinsurance/financial guarantee businesses: (Reinsurance Business) (Thousands of yen)Reinsurance premiums assumed ¥ 152,923Reinsurance premiums ceded (5,000) ¥ 147,923(Financial Guarantee Business) (Thousands of yen)Gross guarantee fees ¥ 466,583Unearned guarantee fees (354,916)Guarantee arrangement fees 216,687 ¥ 328,354

*3. Major selling, general and administrative expenses

(Thousands of yen) Directors’ bonuses ¥ 31,080 Salaries 60,983 Provision for accrued bonuses 10,776 Retirement benefit expenses 333 Depreciation charges 3,271 Rent 28,006 Commissions paid 51,978


(Thousands of yen) Directors’ bonuses ¥ 72,161 Salaries 106,734 Provision for accrued bonuses 28,450 Retirement benefit expenses 508 Depreciation charges 4,329 Rent 48,990 Commissions paid 382,122


(Thousands of yen) Directors’ bonuses ¥ 194,644 Salaries 324,325 Provision for accrued bonuses 137,651 Retirement benefit expenses 1,749 Depreciation charges 13,550 Rent 120,290 Commissions paid 351,968

*4. Tax effect accounting based on the simple method is applied to tax costs for the first quarter. Therefore, the amount of adjustment of corporation tax, etc, is included in “income taxes.”

*4. Same as at left

*4. ________

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Notes Related to Consolidated Statements of Changes in Shareholders’ Equity

For the first quarter of the fiscal 2007 (From October 1, 2006 to December 31, 2006) 1. Types of Stock and Number of Shares (Thousands of shares)

Number of shares at September 30, 2006

Increase in number of shares during first

quarter

Decrease in number of Shares during first

quarter

Number of shares at December 31, 2006

Number of shares issued

Common stock 236,622 949,788 ― 1,186,410

(Summary of reasons for changes) The increase in number of shares comes from the following: A five-for-one stock split on October 1, 2006 946,488 shares The exercise of stock acquisition rights (stock options) 3,300 shares 2. Subscription Rights and Equity Warrants on Treasury Stock

Number of shares with equity warrants

Item Breakdown of stock acquisition Rights

Type of stock with equity

warrants At September 30, 2006 Increase Decrease At December

31, 2006

Balance as of December 31,

2006 (Thousands of

yen)

Submitting company

Third series of bonds with stock acquisition rights, issued in April 2006

Common stock 22,222.22 ― 22,222.22 ― ―

Notes: 1. The number of shares with equity warrants reflects the maximum number of shares derived through the exercise of stock acquisition rights.

2. Summary of reasons for changes in the number of shares targeted The first-quarter decrease in the third series of bonds with stock acquisition rights, issued in April 2006, is the result of early redemption of bonds with stock acquisition rights.

3. Dividends

Dividends paid

Resolution Type of stock Total dividends (Thousands of

yen)

Dividend per share (Yen) Record date Effective date

General shareholders’ meeting on

December 20, 2006 Common stock ¥1,183,110 ¥5,000 September 30, 2006 December 21, 2006

For the year ended September 30, 2006 (From October 2005 to September 30, 2006) 1. Common Stock (Thousands of shares)


Increase in number of Shares during first

quarter

Decrease in number of Shares during first

quarter

Number of shares at December 31, 2006


Common stock 68,335 168,290.79 3.79 236,622

(Summary of reasons for changes) The increase in number of shares comes from the following: A three-for-one stock split on December 20, 2005 136,710 shares The exercise of stock acquisition rights (stock options) 3,525 shares The exercise of equity warrants on the first series of 28,055.79 shares unsecured convertible bond-type bonds with stock acquisition rights The decrease in number of shares comes from the following: A decrease through retirement of treasury stock 3.79 shares

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2. Treasury Stock (Thousands of shares) Number of shares at

September 30, 2006 Increase in number of

shares during first quarter

Decrease in number of shares during first

quarter



Common stock ― 3.79 3.79 ―

(Summary of reasons for changes) The increase in number of shares comes from the following: Through purchase of odd-lot shares 3.79 shares The decrease in number of shares comes from the following: A decrease through retirement of treasury stock 3.79 shares 3. Subscription Rights and Equity Warrants on Treasury Stock

Number of shares with equity warrants

Item Breakdown of stock

acquisition rights

Type of stock with equity

warrants At September 30, 2006 Increase Decrease At December

31, 2006

Balance as of December 31,

2006 (Thousands of

yen) First series of bonds with stock acquisition rights, issued in December 2005

Common stock － 28,055.79 28,055.79 －－

Second series of bonds with stock acquisition rights, issued in April 2006

Common stock － 11,111.11 11,111.11 －－Submitting company

Third series of bonds with stock acquisition rights, issued in April 2006

Common stock － 22,222.22 － 22,222.22 20,000,000

Total － 61,389.12 39,166.9 22,222.22 20,000,000Notes: 1. The number of shares with equity warrants reflects the maximum number of shares derived through the exercise of

stock acquisition rights. 2. Summary of reasons for changes in the number of shares with equity warrants

The increase in the number of shares with equity warrants during fiscal 2006 stems from the first series of bonds with stock acquisition rights, the second series of bonds with stock acquisition rights and the third series of bonds with stock acquisition rights. The decrease in the number of shares with equity warrants from the first series of bonds with stock acquisition rights, issued in December 2005, reflects the exercise of such rights. The decrease in the number of shares with equity warrants from the second series of bonds with stock acquisition rights, issued in April 2006, reflects the early redemption of these bonds.

3. FinTech Global executed early redemption of all bonds in the third series of bonds with stock acquisition rights, issued in April 2006, on November 6, 2006.

4. Dividends

Dividends paid

Resolution Type of stock Total dividends (Thousands of

yen) Dividend per share

(Yen) Record date Effective date

General shareholders’ meeting on

December 20, 2005 Common stock ¥369,009 ¥5,400 September 30, 2005 December 21, 2005

(2) The effective date for dividends with a record date of September 30, 2005, shall be a date after the close of books for said consolidated period.

Resolution Type of stock Source of dividends

Total dividends(Thousands of

yen) Dividend per share (Yen) Record date Effective date

Board of directors’ meeting on December 20, 2006

Common stock

Retained earnings ¥ 1,183,110 ¥ 5,000 September 30, 2006 December 21, 2006

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Notes Related to Quarterly Consolidated Statements of Cash Flows




*1. Cash and cash equivalents at December 31, 2005 consisted of the following:

(Thousands of yen)Cash and time deposits ¥12,260,353 Less: time deposits which mature more than three months after the date of acquisition (189,000) Cash and cash equivalents ¥12,071,353

*1. Cash and cash equivalents at December 31, 2006 consisted of the following:

(Thousands of yen)Cash and time deposits ¥ 21,999,869 Cash and cash equivalents ¥ 21,999,869

*1. Cash and cash equivalents at September 30, 2006 consisted of the following:

(Thousands of yen)Cash and time deposits ¥ 18,907,675 Less: time deposits which mature more than three months after the date of acquisition (189,000) Cash and cash equivalents ¥ 18,718,675

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Leases




Finance leases, except for those leases under which the ownership of the leased assets is considered to be transferred to the lessee, were accounted for in the same manner as operating leases and were composed of the following as of December 31, 2005: 1. Assumed acquisition costs, assumed accumulated depreciations, and assumed balance

(Thousands of yen) Assumed

acquisition costs

Assumed accumulated depreciations

Assumed balance

Buildings ¥1,938 ¥387 ¥1,550 Furniture and equipment

22,022 3,091 18,930

Other 556 46 510 Total ¥24,518 ¥3,526 ¥20,992

2. The scheduled maturities of future lease payments of such lease contracts as of December 31, 2005, were as follows:

(Thousands of yen) Within one year ¥ 4,592 More than one year 16,752 ¥ 21,345

3. Lease expenses and implied depreciation and interest expense for the year ended September 30, 2006 were as follows: (Thousand of yen) Lease expenses ¥ 1,249 Implied depreciation 1,104 Implied interest expenses 245

Finance leases, except for those leases under which the ownership of the leased assets is considered to be transferred to the lessee, were accounted for in the same manner as operating leases and were composed of the following as of December 31, 2006: 1. Assumed acquisition costs, assumed accumulated depreciations, and assumed balance


acquisitioncosts


Assumed balance

Buildings ¥ 1,938 ¥ 775 ¥ 1,163 Furniture and equipment

22,022 7,496 14,526

Other 556 157 399 Total ¥ 24,518 ¥ 8,429 ¥ 16,088

2. The scheduled maturities of future lease payments of such lease contracts as of December 31, 2006, were as follows:



Finance leases, except for those leases under which the ownership of the leased assets is considered to be transferred to the lessee, were accounted for in the same manner as operating leases and were composed of the following as of September 30, 2006: 1. Assumed acquisition costs, assumed accumulated depreciations, and assumed balance


acquisition costs


Assumed balance

Buildings ¥ 1,938 ¥ 678 ¥ 1,260 Furniture and equipment

22,022 6,395 15,627

Other 556 129 426Total ¥ 24,518 ¥ 7,203 ¥ 17,314

2. The scheduled maturities of future lease payments of such lease contracts as of September 30, 2006 were as follows:



4. Assumed depreciation was calculated using the straight-line method over the lease term with no residual value. 5. Differences between total lease expenses and assumed acquisition costs of the leased assets comprise assumed interest expenses. Assumed interest expenses are allocated to each period using the interest method over the lease term.

4. Same as at left 5. Same as at left

4. Same as at left 5. Same as at left

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Investments in Securities First Qarter of Fiscal 2006 (As of December 31, 2005) 1. The carrying amounts of marketable securities without fair market value as at December 31, 2005, are summarized as follows: (Thousands of yen)

Carrying amounts

Marketable securities without fair market value

Silent partnerships (tokumei kumiai) ¥332,772

Unlisted equity securities 76,700

Investment partnerships 24,067

First Quarter of Fiscal 2007(As of December 31, 2006) 1. The amount of marketable securities with market value at December 31, 2006, is summarized as follows: (Thousands of yen)

Acquisition cost Fair value Unrealized gain (loss)

(1) Equity securities ¥ 9,200 ¥ 25,200 ¥ 16,000

(2) Bonds and debentures ― ― ―

(3) Other 2,205,914 2,310,955 105,040

Total ¥2,215,114 ¥2,336,155 ¥121,040 2. The carrying amounts of marketable securities without fair market value as at December 31, 2006 are summarized as follows: (Thousands of yen)

Carrying amounts




Full-fiscal 2006 (As of September 30, 2006) 1. The amount of marketable securities with market value at September 30, 2006, is summarized as follows: (Thousands of yen)

Acquisition cost Fair value Unrealized gain (loss)

(1) Equity securities ¥ 9,200 ¥ 32,280 ¥ 23,080

(2) Bonds and debentures ― ― ―

(3) Other 2,043,123 2,062,897 19,774

Total ¥2,052,324 ¥2,095,178 ¥42,854

2. The carrying amounts of marketable securities without fair market value as at September 30, 2006, are summarized as follows: (Thousands of yen)

Carrying amounts




Investment partnerships 21,734

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Derivative Transactions First Quarter of Fiscal 2006 (As of December 31, 2005) (Thousands of yen)

Items Contract amounts Fair value Unrealized gains (losses)

Over-the-counter: Interest rate caps bought ¥680,000 ¥938 ¥(403)

Notes: 1.Market price is calculated based on the price presented by the correspondent financial institution, etc. 2 Contract amounts are not the actual transaction values with trading partners, and thus do not show the amount of market

risk regarding derivatives transactions. 3. Derivative transactions to which hedge accounting was applied were excluded.

First Quarter of Fiscal 2007 (As of December 31, 2005) (Thousands of yen)


Over-the-counter: Interest rate caps bought ¥200,000 ¥0 ¥(1)


risk regarding derivatives transactions. 3. Derivative transactions to which hedge accounting was applied were excluded. Full-fiscal 2006 (As of September 30, 2006) (Thousands of yen)


Over- the-counter: Interest rate caps bought ¥200,000 ¥1,258 ¥(1,341)


risk regarding derivatives transactions. 3. Derivative transactions to which hedge accounting was applied were excluded. Stock Options First Quarter of Fiscal 2007 (As of December 31, 2006) There are no applicable amounts. Full-fiscal 2006 (As of September 30, 2006) There are no applicable amounts.

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Segment Information

1. Segment information by business type

First Quaretr of Fiscal 2006 (From October 1, 2005 to December 31, 2005)

Because the Company had only a single business segment, information regarding the industry segments was omitted for the first

quarter ended December 31, 2005.

First Quarter of Fiscal 2007 (From October 1, 2006 to December 31, 2006) (Thousands of yen)

Investment

banking

business

Reinsurance/financial

guarantee business

Other

business

Total Inter-

regional

or corporate

Consolidated

total

Net revenues

(1) Sales for clients 2,043,132 444,691 24,286 2,512,111 ― 2,512,111

(2) Intersegment sales 78,244 ― ― 78,244 (78,244) ―

Total 2,121,377 444,691 24,286 2,590,356 (78,244) 2,512,111

Operating expenses 887,883 421,924 101,971 1,411,779 (58,564) 1,353,214

Operating income (loss) 1,233,494 22,766 (77,684) 1,178,576 (19,680) 1,158,896

Notes: 1. Business segments are grouped according to market similarities.

2. Principal business activities in each segment

(1) Investment banking business: Arrangement operations, principal finance operations, and other investment

banking operations.

(2) Reinsurance/financial guarantee business: Credit enhancement and reinsurance underwriting business.

(3) Other business: Real estate brokerage, and guarantee system for rent payments and commissioned business.


Net revenues and operating profit generated by the investment banking business represents more than 90% of aggregate net

revenues and operating profit, respectively, from all business segments. Therefore, segment information by business has been

omitted for fiscal 2006.

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2. Segment information by geographical location

First Quarter of Fiscal 2006 (From October 1, 2005 to December 31, 2005)

No relevant items are presented because the Company has neither consolidated subsidiaries nor branches outside of Japan.

First Quarter of Fiscal 2007 (From October 1, 2006 to December 31, 2006) (Thousands of yen)

Japan Europe and

Americas

Total Inter-regional

or corporate

Consolidated

total

Net revenues

(1) Sales for clients 2,067,617 444,493 2,512,111 ― 2,512,111

(2) Intersegment sales ― 48 48 (48) ―

Total 2,067,617 444,542 2,512,160 (48) 2,512,111

Operating expenses 964,576 388,686 1,353,263 (48) 1,353,214

Operating income 1,103,041 55,855 1,158,896 ― 1,158,896

Notes: 1. National and regional segments are grouped according to geographical proximity.

2. Countries and regions associated with geographical segments outside of Japan

Europe and Americas: Switzerland and Bermuda


Because net revenues generated by the Company within Japan represent more than 90% of aggregate net revenues from all

geographical locations, segment information by geographical location has been omitted.

3. Overseas Net Revenues

First Quarter of Fiscal 2006 (From October 1, 2005 to December 31, 2005)

No relevant items are presented because the Company has no overseas net revenues.

Fiscal 2007 First Quarter (From October 1, 2006 to December 31, 2006)

Because overseas net revenues represent less than 10% of consolidated net revenues, information regarding overseas net revenue

has been omitted.

Full-fiscal 2006 (From October 1, 2005 to September, 2006)

Because overseas net revenues represent less than 10% of the consolidated net revenues, information regarding the overseas net

revenue has been omitted.

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Per Share Information




(Yen)Net assets per share ¥23,871.04 Net income per share ¥1,905.83 Net income (diluted) ¥1,694.90

(Yen)Net assets per share ¥20,432.32Net income per share ¥381.31Net income (diluted) ¥346.58


The Company executed a stock split at a ratio of 1-for-3 on December 20, 2005. Assuming that the stock split had been executed at the beginning of the year ended September 30, 2005, the per share information for the year ended September 30, 2005 would have been summarized as follows: First quarter of fiscal 2006:

(Yen) Net assets per share ¥3,650.15Net income per share ¥23.33 Full-fiscal 2006:

(Yen) Net assets per share ¥16,717.02Net income per share ¥4,813.25Net income (diluted) ¥4,650.85

The Company executed a stock split at a ratio of 1-for-5 on October 1, 2006. Assuming that the stock split had been executed at the beginning of the year ended September 30, 2006, the per share information for the year ended September 30, 2006 would have been summarized as follows: First quarter of fiscal 2006:

(Yen)Net assets per share ¥4,774.21Net income per share ¥381.17Net income (diluted) ¥338.98 Full-fiscal 2006

(Yen)Net assets per share ¥21,036.05Net income per share ¥2,870.88Net income (diluted) ¥2,491.70

On October 3, 2005, the Board of Directors of the Company approved a stock split at a ratio of 1-for-3 on December 20, 2005. Assuming that the stock split had been executed at the beginning of the year ended September 30, 2005, the per share information for the year ended September 30, 2005 would have been summarized as follows:


Note: Underlying information for calculation of net income per share and net income per share after adjusting for dilution effects was as follows:

Items First quarter of fiscal 2006




Net income (Thousands of yen) ¥391,873 ¥451,354 ¥3,235,755Net income regarding common stock (Thousands of yen) ¥391,873 ¥451,354 ¥3,235,755

Average number of common stock 205,618 shares 1,183,687 shares 225,419 sharesAdjustment of net income ― ― ―

Underlying information for calculation of the net income per share and the net income per share (diluted) for the years ended September 30, 2005 and 2006 was as follows: Subscription rights Warrants Convertible bonds with warrants

1,795 shares15,202 shares

8,594 shares

4,048 shares 69,880 shares 44,686 shares

1,417 shares16,849 shares16,037 shares

Increased number of common stock 25,590 shares 118,614 shares 34,303 shares

Detail of potential common stock excluded for the calculation of the net income (diluted) because of no dilution effect

― Warrants: 650 shares

Common stocks: 3,250 shares

Warrants: 650 shares Common stocks: 650

shares

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Subsequent Events First quarter of fiscal 2006




1. With regard to the first series of unsecured convertible bond-type bonds with stock acquisition rights valued at ¥18,500,000,000 issued on December 19, 2005, all rights have been exercised as of January 18, 2006. As a result, paid-in capital increased to ¥10,553,935,000, and the total number of shares outstanding amounted to 233,120.79 as of January 18, 2006. (1) Class and number of shares issued Common stock of 28,055.79 shares (including the purchase of fractional shares of 3.79) (2) Total issue amount ¥18,500,000,000 (3) Capitalization ¥9,250,000,000 (4) Dividend accrual date of new shares October 1, 2005

１. Based on a resolution approved by the Board of Directors on January 22, 2007, the Company issued Euroyen-denominated convertible bonds with stock acquisition rights due in 2012.

(1) Total bond issuing amount The sum of ¥22,170,000 thousand plus

the principal amount of substitute bonds with stock acquisition rights issued with presentation of appropriate identification and compensation in the event original bond certificates with stock acquisition rights are lost, stolen or go missing.

(2) Principal amount of each bond

¥10,000 thousand

(3) Purchase amount for each bond 100% of principal amount

(4) Issuing price (offer price) for bonds with

stock acquisition rights 102.5% of principal amount

(5) Closing date

February 8, 2007 (London time)

(6) Redemption at maturity The bonds will be redeemed at 100% of their principal amount at the time of maturity, February 8, 2012.

(7) Advanced redemption i) Advanced redemption at the option of the Company or advanced redemption in accordance with the condition pertaining to clean-up redemption

The Company may, having given not less than 30 nor more than 60 days’ prior notice to holders of bonds with stock option rights regarding advance redemption for taxation reasons or in the view of organizational restructuring, redeem all of the bonds outstanding at 100% of their principal amount, if at any time before giving notice of advance redemption, the aggregate principal amount of outstanding bonds falls below 10% of the aggregate principal amount thereof at date of issue.

ii) Redemption at the option of bondholders

Any holder of bonds with stock acquisition rights is entitled, at the bondholder’s option, to request the Company to redeem said bond on February 8, 2010 (the “Bondholders’ Optional Redemption Date”) at 100% of its principal amount. To exercise this option, the bondholder will deposit at the office of the paying agent a proper notice of redemption together with the certificate of said bond with stock acquisition rights. Such notice must be given not less than 30 nor more than 60 days prior to the relevant Bondholders’ Optional Redemption Date.

1. On September 8, 2006, the Board of Directors of the Company approved the a stock split with no compensation, which became effective on October 1, 2006, so as to increase the liquidity of the Company’s stock and to broaden the investors’ base by reducing the equity price per share.

(1) Number of shares to be increased

946,488 shares of common stock

(2) Method of stock split The number of shares held by shareholders in the list of shareholders’ lists as of September 30, 2006 was split using a ratio of 1-for-5. Assuming that the share split was executed at the beginning of the previous fiscal year, the per-share information can be summarized as follows: As of and for the year ended September 30, 2005

Net asset per share ¥3,343.41

Net income per share

¥962.65

Net income (diluted) ¥930.17

As of and for the year ended September 30, 2006

Net assets per share ¥21,036.05

Net income per share ¥2,870.88

Net income (diluted) ¥2,491.70

2. On October 6, 2006, the Board of Directors of the Company approved the redemption before maturity of all the outstanding unsecured convertible bonds with warrants – 3rd at nominal value of ¥20 billion in aggregate in accordance with the redemption clause of the bonds and the subscription agreement.

(1) Reason for redemption before due date

The convertible bonds with warrants have a clause of advanced redemption. After comprehensively considering the balance between the potential dilution of equity value and the enhancement of financial status, the Company decided to redeem all the outstanding of the convertible bonds with warrants.

(2) Redeemed issue of bonds The third issue of unsecured convertible bonds with warrants of FinTech Global Incorporated. (3) Date of notice

On October 6, 2006 Under the subscription agreement, the Company and Goldman Sachs International agreed that the Company would not accept the request for conversion at and after noon on October 10, 2006. The conversion price before that time was ¥180,000.

(4) Date of redemption

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(8) Bond interest rate

The bonds are not interest-bearing.

(9) Type and number of shares to be issued by exercise of stock acquisition rights

i) Type Common stock of the Company

ii) Number The number of shares of common stock of the Company that are newly issued through the exercise of stock acquisition rights or alternatively converted into common stock of Company treasury stock shall be the aggregate principal amount of bonds related to exercised rights divided by the conversion price noted in (10) below.

(10) Conversion price: ¥158,600 The conversion price will be adjusted by the following formula if, after issuing bonds with stock acquisition rights, the Company issues common stock of the Company or sells treasury stock, at a price below market value. In this formula, “number of outstanding shares” is the aggregate number of shares of common stock issued by the Company, excluding treasury stock. In this formula, “number of outstanding shares” is the aggregate number of shares of common stock issued by the Company, excluding shares held by the Company.

Number of shares

to be issued or sold x

Issuing/selling price per share

N +

Market value

NCP = OCP x

N + Number of shares to be issued or sold

where: NCP = conversion price after adjustment OCP = conversion price before adjustment N = number of outstanding shares In addition, if the Company undertakes a stock split, including free distribution of shares, of common stock, or a consolidating shares or issues stock acquisition rights, including those incorporated in bonds with stock acquisition rights, for which holders may request an issue of common stock below the market value of the Company’s common stock, or if any other specified considerations appear, then the conversion price will be adjusted adequately.

November 6, 2006 (5) Redeemed value Total value of the outstanding convertible bonds with warrants as of November 6, 2006. The Company has not converted any of the convertible bonds with warrants issued into shares. (6) Redeemed price Amount of ¥101 for ¥100 face value. (7) Underlying assets Short-term debt will be appropriated for the underlying assets for advanced redemption. (8) Expected decrease in annual interest expense due to decrease in bonds Not applicable. 3. On October 6, 2006, the Board of Directors of the Company approved borrowing funds for appropriation of underlying assets for the advanced redemption of the convertible bonds with warrants issued on April 18, 2006, as follows: Lender: Nikko Citigroup Limited Amount of loan: ¥20,000,000,000 Date of loan : November 2, 2006 Date of repayment: February 28, 2007 Interest rate: 1.17438% (fixed) Method: Loan agreement Security: No security Guarantee: No guarantee Other covenant: Nothing

4. On December 20, 2006, the general meeting of shareholders of the Company approved a stock option plan, under which the board of directors of the Company was authorized, by its resolution, to have the Company issue warrants as follows: (1) Type and number of shares to be issued by the exercise of warrants The shares to be issued by the exercise of warrants shall be up to 5,000 ordinary shares. In case of stock split, the number of the target stock of unexercised warrants shall be calculated by the following formula. Fractions less than one share shall be rounded off.

Number of shares after adjustment = Number of shares before adjustment x Ratio of stock split (or split-down)

(2) Total number of warrants The number of the warrants to be issued shall be up to 5,000 (One share will be granted per warrant, subject to adjustment if necessary as prescribed in (1) above). (3) Issue value of warrants The warrants will be issued without compensation. (4) Paid-in value of exercise of warrants The paid-in value of the exercise of a warrant (‘‘Exercise Value’’) shall be calculated by the following method. The Exercise Value shall be the higher of the average of the closing prices of the Company’s ordinary shares transacted in the regular way at the Tokyo Stock Exchange of a month (excluding the days without transactions) before the month of the allotment day, or the

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(11) Aggregate number of new stock acquisition rights to be granted The sum of 2,217 stock acquisition rights plus the aggregate principal amount of substitute bonds with stock acquisition rights issued with presentation of appropriate identification and compensation in the event original bond certificates with stock acquisition rights are lost, stolen or go missing, divided by ¥10,000 thousand.

(12) Period for exercise of stock acquisition

rights The duration shall be from February 22, 2007, until January 25, 2012, at the end of the business hours of the agent offices where the exercise of stock acquisition rights is accepted.

(13) Conditions for exercise of stock acquisition rights

i) No partial exercise of stock acquisition rights is allowed. ii) Up to and including December 31, 2010, and in accordance with conditions for bonds with stock acquisition rights, respective bondholders may exercise stock acquisition rights only if, during the period from the first day of any calendar quarter and the last day of said quarter, the closing price of shares of the Company’s common stock on any 20 trading days of 30 consecutive trading days ending on the last trading day of the quarter is more than 120% of the conversion price in effect on the last day of the preceding quarter. However, that no such calculation shall be made in the quarter ending December 31, 2010. In accordance with conditions for bonds with stock acquisition rights, respective bondholders may exercise stock acquisition rights at any time on or after January 1, 2011, if the closing price on at least one trading day is more than 120% of the conversion price in effect on said trading day.

(14) Use of proceeds

The net proceeds were to be used for the repayment of a bridging loan of ¥20,000,000 thousand from Nikko Citigroup Limited, with any remaining funds allocated to the Company’s principal finance business.

In fact, the bridging loan from Nikko Citigroup Limited was repaid in full on February 9, 2007.

2. At a meeting of the Company’s Board of

Directors on December 25, 2006, a resolution was made to acquire equity in FXOnline Japan Co., Ltd. (“FXOnline), and on January 16, 2007, the Company entered into a stock purchase agreement. A summary of the purchase of stock is presented below.

closing price of the business day before the allotment day (if there is not such closing price, that of the nearest preceding day shall apply), multiplied by 1.05. Fractions less than 1 yen shall be rounded up. If the Company issues new shares or disposes of treasury stock at a price below the market price (except in the case of issuance of new shares due to the exercise of the warrants), the exercise value shall be adjusted by the following formula. Fractions less than 1 yen shall be rounded up.

(Number of new shares to be issued) x (Paid-in value per share)

(Number of shares

+

(Stock price before issuance of new shares)

(Exercise value after adjustment)

＝

(Exercise value before adjustment)

×(Number of shares outstanding) + (Number of new shares to be issued)

(5) Period for exercise of warrants From January 1, 2009 to November 30, 2016 (6) Conditions for exercise of warrants (i) Those who are entitled to the warrants shall be any of the directors, corporate auditors or employees of the Company or its subsidiaries at the time of the exercise of the warrants unless there are any reasonable grounds such as resignation due to the expiry of the term of duty and mandatory retirement. (ii) The contract for allotment of the warrants will not approve the exercise of the warrants by an heir, assignee, pledgor or anyone who succeeded to the warrants. (iii) The contract for allotment of the warrants may fix the maximum number of exercisable warrants or the maximum amount of the total issue value of the new shares to be issued due to the exercise of the warrants each year (from January 1 to December 31) during the period for the exercise of the warrants. (7) Amounts of common stock and additional paid-in capital to be increased in case of issuance of new shares due to the exercise of warrants (i) The common stock amount to be increased due to the exercise of the warrants shall be half of the limit of the capital amount increase calculated in accordance with Article 40.1 of the Company Account Rules. Fractions less than 1 yen shall be rounded up. (ii) The amount of the additional paid-in capital to be increased in case of issuance of new shares due to the exercise of the warrants shall be the limit of the capital amount increase mentioned in (i) above minus the common stock amount increase calculated as mentioned in (i) above.

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(1) Reason for stock purchase The Company envisions a business future in which it will sell financial products designed by the FinTech Global Group to individual investors through a securities subsidiary and other agents. To extend its sales reach and its subscription base, the Company shall identify a way to access individual investors directly through online trading. However, the Company did not possess sufficient know-how nor the comprehensive technologies required to succeed in this business and planned to reinforce its capabilities through merger and acquisition. Amid a rapidly expanding market for foreign exchange margin trading, FXOnline, as a subsidiary of the Company, extends management know-how and technical expertise vital to information technology-intensive online trading for individual investors. The Company is confident that FXOnline will make a solid contribution to the Company’s business foundation.

(2) Details about new subsidiary (company name, address, representative, capital stock and operations) a) Company name:

FXOnline Japan Co., Ltd. b) Address:

Halifax Onarimon Building 8F 24-10, 3-chome Nishi-Shimbashi Minato-ku, Tokyo

c) Representative: James D. Gow

d) Capital stock: ¥400 million

e) Operations: Foreign exchange margin trading

(3) Primary source of acquired stock

James D. Gow

(4) Number of shares to be acquired, acquisition price and stockholdings before and after acquisition a) Number of shares held before transfer:

0 (Percentage of stockholdings: 0) b) Number of shares to be acquired:

3,499 (Number of shares with voting rights: 3,499; shareholding ratio: 49.99%)

c) Acquisition price: ¥9,356 million

The Company acquired 1,496 shares on January 31, 2007, after which but on the same date 350 shares of the acquired stock were transferred to Mizuho Capital Co., Ltd., and Mizuho Capital No. 2 Limited Partnership at the acquisition price. The Company expects to acquire the remaining 2,003 shares by March 31, 2007. Therefore, the status of stockholdings after transfer will be as follows: Number of shares: 3,149 shares (Number of voting rights: 3,149; shareholding

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ratio: 44.99%; final price after deducting price of transferred shares from acquisition price shown in (c) above: ¥8,420 million.

(5) Methods to procure payment funds and payment thereof

The Company intends to pay for part of the stock acquisition with internally generated funds and procure bank financing for the rest. The payment method will be by bank transfer.

summary of consolidated finacial statements for the first ...first quarter of fiscal 2007 381 31 346...

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