Manabu Miyasaka – President and CEO

Keiichi Yoneshima – Barclays Security Taro Ishihara – Daiwa Securities Yoshitaka Nagao – Nomura Securities Yosuke Tomimatsu – Merrill Lynch

Thank you very much for coming to the meeting to announce the business results of Yahoo Japan Corporation. Now, we would like to start the fiscal 2012 full-year and fourth quarter business results announcement.

We will be broadcasting this meeting online and also recorded images will be broadcasted on demand basis. I’d like to introduce the gentlemen on the stage.

To your right, the representative Director, CEO, Mr. Manabu Miyasaka; to the left, the CFO, Toshiki Oya.

And today’s agenda, Miyasaka will be giving a presentation to you first. Then, entertain questions from the floor.

We are planning to conclude this meeting around 18:00. Okay then, without further adieu I would like to introduce Miyasaka.

Now, I would like to introduce fiscal year 2012 full-year and also fourth business – fourth quarter business results and I would like to take about 30 minutes for this. First of all, this is the highlight of the 2012.

The revenue is the 13.5% increase ¥342.9 billion and also operating income are less. So, the double-digit year-on-year growth was achieved for both revenue and also the quarterly net income.

This is the first time in six years and I’m happy to announce this. With respect to the revenue we have worked on the promotion advertisement which increased and also we reinforced the Yahoo!

Premium membership. And also we have the Carview and then Cyber and also the few other subsidiaries ValueCommerce, CyberAgent FX and then Carview.

And about the same time last year that we changed the management structure and first year was the – try to make sure that the new management will be functioning fully and we made the commitment of a double profit by 21x and we have to achieve around 11% or so. And for the first year, I think that we exceeded the target.

So I’m very happy to report that to you. As for the annual revenue, ¥342.9 billion we recorded a very high number.

Then what about the annual profit? This is the graph to explain that.

So that’s about the 2012 business. So now, I would like to go into the Q4 results.

2012 of 4Q financial highlights the ¥97.9 billion and 22.6% increase. As for the third quarter, the revenue operating income, ordinary income and also quarterly net income.

So, I explain that it was a 4.5 years since we recorded a double-digit year-on-year growth. But I’m so happy to report again that the two consecutive quarters we achieved the double-digit year-on-year growth.

So I would like to highlight some of the points of the first quarter. As for the revenue, it’s recorded a very good numbers and this is the growth ratio, 22.6% growth.

So, 2008 the second quarter, we recorded the over 20% year-on-year growth and this is the first time since then. And now moving on to the quarterly revenue breakdown, so what are the breakdowns of them, ¥18.0 billion, a 22.6% increase and the marketing solution businesses contributed 25% and consumer business 9.9%, other businesses 111% contribution.

And as for each item, I would like to go into the detail. As for the quarterly advertising related revenue, ¥9.2 billion over 20%, the breakdown of them is that the promotion advertisement 22.8% and also the premium advertisement 14.6%.

However, as for the sponsored search that the next year is going to be the one year past since we changed the system. So that the revenue may be impacted by that.

But we will do our best to go beyond that area. And as for the overall advertisement, the sales activities were very active and also we sent the images and then videos and then so forth.

We improved the advertisement. So, we improved the performance by twofold.

And lastly, as for the premium advertisement revenue, almost one year we had a difficulty, but as for the fourth quarter, as for the new product development especially for the top pages, we put emphasis on the rich ads, so that we can make a memorable advertisement for the users. So, that we worked on the new product development significantly.

And other than that, the advertisement agent, we worked even harder to get advertisement agent. And external reasons we have overall positive prospects for the future economy and also the overall good shopping activities helped us.

Now, moving on to the mobile phone advertisement, ¥8.5 billion are in this area, and smartphone and then feature phone, so it was like a – ¥1.3 billion. But this year, feature phones percentage was so limited, so that the mobile advertisement is almost equal to the smartphone advertisement.

And smartphone advertisement shared 15.6%. So it is almost at 12 that of the last year.

Now moving on to the next one, this is the year-over-year growth strength of advertisement related revenue. Page 12, 22% increase in promotion advertisements.

And then these are the breakdowns for that. In all sectors, we achieved the increase.

Now, page 13, the premium advertisement revenue and HD print industry contributing to that. We couldn’t achieve the growth in everything.

However, thanks to the rich ad and others, we increased by ¥2.0 billion. And then as for the quarterly e-commerce transaction value, in total in comparison to the last year, it was plus ¥2.6 billion.

And we worked on the profitability very hard last four consecutive quarters. We worked on it and we tried to contain the cross-point campaigns and also special campaigns.

Last year, we contained all of them and as a result of that, the transaction value was a little bit of a negative number. However, I think that we hardened the sales capability.

So that the – this year’s challenge for us is the e-commerce and then other related areas. Last year advertisement and also premium memberships and also we introduced gaming programs and also finance programs.

We diversified our businesses, and some of them are successful. As for e-commerce, the market is tough.

If you look at the overall market, then I think our growth rate is a little bit behind that of the average. So this year’s challenge would be like this.

But having said that, the competitors of the e-commerce are huge, so that if we compare us to the competitors, then that is not going to be really a comparison. So we really have to work as Yahoo Japan as one company.

So, we have several challenges for this year, but all Yahoo Japan work in campaign for the e-commerce. So we made a new commitment for the e-commerce businesses.

Now as for the quarterly profit, so for your information. So in terms of the operating profit growth, this is the quarterly growth trend.

So fiscal year 2012, if you look at business outlook, in all of the items, we have been able to exceed the upper line of the forecast ranges. So next is fiscal year 2013 first half business outlook.

So these are the figures that we are presenting. So from this time, we are offering the outlook not by a range, but a single figure.

So I hope that we’d be able to exceed these outlooks and be able to gain your confidence. And this is the cash dividend.

So we are trying to double our profits, so we will be a proactive in investment. So per share dividend payout will be 20% of the consolidating net income.

That will be our target. And of course we will be able – returning our profit to our shareholders in line with the growth of the profit.

So this page shows – this – there was a meeting, we call it Yahoo meeting. This is all hands meeting with the all employees present, and with this Yahoo meeting, this is a commitment that I made to the employees.

So the operating profit, I want to double the operating profit. We have very high target.

So if the company grows by double, but the employees were not happy, I think that’s rather strange. So because we have set this height hurdle, I think the company, if the performance improves, their employees should become happier.

So the company’s performance and the employees’ happiness should be linked. So for this one year, I think the employees, we would like to set in environments and systems, so that the employees can work happier.

So this is some specifics that I want to introduce to you. Yahoo Japan, we have this – the issue-solving engine is our commitment.

So using information technology, so the individuals, societies, these challenges can be – should be solved by IT. So this is a mission of Yahoo.

So we want to make this society happy, and this is our company mission. On the other hand to be able to make the society happy and want to make the people working at our company become happier, so there are some measures that we are taking.

First of all, so basically people who work hard, we want to increase their remuneration. And one way to think about it is that, that per capita operating income should be growing.

So if that grows, it means that we will be increasing the return to our employees. So simply put, the employees of course we want to minimize the number of staff, but we want to optimize the return.

For instance last year, maybe five people doing some type of job. This year if it’s the same type of job through the work improvement, through utilizing IT, using software for instance maybe reducing the people engaged in that work to four people, that will be improvement.

And it means that one other person who can be engaged in other business. So I think basically this will be leading to the improvement of our profitability per person.

So we have to look at the purpose in operating income maybe able to get good results with this smaller team. So we have a 6,000 number of people working at our company including consolidated companies.

And the – we have just – the new guys just coming into our company and some people actually have to take care of – using person’s parents. But basically, we have young staff and there’s a lot of people who are our staff, who are raising their family.

So, depending on the conditions of the employees, we want to build a labor environment so that this will match the various conditions of the employees. For instance, in terms of child care, in terms of the shorter work times for child care.

So, it is up to nine years. If a child is up to nine years, this is allowed.

But we have changed that so. This will be raised to 12 years until the child graduates from elementary school.

So if the child is going to elementary school, we hope that the mom or dad will be at home to welcome the child when they come home. So, this reflects both time of working.

We have shortened that. So the engineers, so that they can use their PC of their choice.

So we used to give from the company the PC, so whether it Mac or windows notebook or windows desktop, also depending on the engineers or depending for the staff of Yahoo. This is a weapon that they have to work with.

So, we have asked them to choose their favorite PC. So, for instance, we have trying to introduce the sabbaticals.

So, this is not sabbatical in the strict meaning. But I think the person’s life is longer than working in the company.

So, people who have worked long in a company maybe they should take time off for six months or so. For instance, studying overseas or doing some things that they want to do, some time to reflect on what they have been doing.

When you’re working at the company, you’re very busy, just tend to do your work that’s just before you. So I think maybe that you have to have some time to reflect on what you’ve been doing?

Do you want to continue working with us? Would you like to have a – be an entrepreneur?

I hope that will be able to give the employee some time to reflect on themselves. So, this will be the meaning for the sabbatical holiday.

So, there are other measures that we are planning to do and another thing is that we are planning to open a café and dinning for the employees. I think the IT companies basically offer these type of amenities.

But Yahoo Japan did not have this up to this point. By summer this year, we hope to complete these cafes and canteens.

So this is not only to provide healthy food and for the employees work better and not only that, but going forward for Yahoo to be – have a sustainable growth. We have to improve our operation.

Of course, that’s important. But creation – we have to create something, we have to be innovative.

That’s very, very important. To be able to achieve that, I think the meeting rooms will be good for operations, but the – to come up with a completely new innovation or creation.

Is it okay to just work in this office environment, this conditional office environment? So that was a question that I had.

So we have to have a kind of space that have more dialogue than the meeting rooms. So this will be kind of a cafeteria or diner.

But the intention is that the people working or working for this company or external people can be casually – will drop in here so that we can exchange meetings. And through this exchange, maybe new ideas can be created.

So this is a space for creating ideas or conduct innovation. So this is an experiment base, except the diner for employees.

But we want to open it up to other people as well. So these are the things that we want to achieve.

And from a commitment to the market, we want to double operating income, so this will be in terms of double-digit growth. I think we have been able to achieve that this year.

We will continue to conduct this level of growth. So by 201x we’ll be doubling our operating income.

That’s our commitment. And to be able to achieve this, what are our strategies?

So this is same as last year. There are three pillars to this.

One is, of course, I would like to recap these. Number one is the Only 1 Strategy.

So Yahoo Japan, when it was born – since it was born has been a portal site. So, it has been the gateway for the Internet and will be continued to be a portal site.

We want to be proud as a portal site. And portal sites will have to be – has a link for the most excellent service on the Internet.

So, of course, all the services done I think should be a Yahoo services, but that’s ideal. But if it’s equivalent to that level of service, we will be linked to that.

If our services are not number one, then we have to have a collaboration with a number one company and so that we could provide a link. So, we would like to maintain and pick the role of the portal site.

That’s the Only 1 Strategy. Number two is The Most Powerful Tag Teams.

Well, the Internet has a lot of potential in terms of people in the society and again to solve these challenges. So it’s a very excellent technology.

So, the Webs and applications of what we’re focusing on in terms of their business, but with the other people working in these other areas. So, for this – for the collaborations of those non-IT type of companies, generating new value and new strength is the second strategy.

The number three, well this is going into Unexplored Frontiers that was – has not been provided by the number one and number two strategy. So, just to highlight some of the things that we are taking in this strategy.

This is Only 1 Strategy. So, we have a lot of services in Yahoo and the measures taken for the top 20 service for the daily unique browsers or the page views, 80% or 90% will be 90% more is through this top 20 services with the growth of this company.

These top 20 companies should be growing very steadily. So we can see if that is growing actually.

And among these, I would like to give you some examples. So this is the monetizing service.

Number one is the promotion advertising. This is the paid search advertising.

Sponsored search is strong. Well, the promotion advertising for us is a very profitable business.

It is for monetizing. But for the companies placing the advertisements for their businesses, this is their lifeline.

And so, this is the service that helps their challenges. So this promotion advertising, this sponsored search type of advertisement – the companies or how they use it is becoming broad based.

So it’s very difficult to see, but this is the most new novel by Haruki Murakami, the publishing company. So, they offered an advertisement so that they can make reservations for this new book.

So, right now, they’re doing some news. Next page.

The sales side itself is rather limited, but this is very good example for the promotion ad, which is very critical for some of the businesses. This is an example of the Hot Spring Inn in Izu.

They used various types of advertisement to attract the people to Izu Hot Spring Inn. However, they were not so successful.

So they decided to move to online advertisement. However, it is very difficult to make full use of the sponsored search.

So for the newcomers, for the sponsored search, we have a special supporting plan. As they use this supporting plan and now they can operate this sponsored search.

And now they are fully utilizing it. So, the 50% of the new bookings of this inn actually came in from the – are coming from the Internet so that the Yahoo display network and then sponsored search on this functionality will be the supporting tools for the small and the medium size companies and also hotels and inns in rural areas.

And the second example is very similar. I’m not going into the detail.

But this is Kyo Mizuhiki, which is a Kyoto-style Japanese decorative wrapping and they used the sponsored search to contribute to the increase in the growth. So, the local accounts are now making use of the sponsored search.

And then, they are actually encouraging us to come up new services. As for the YDN, the revenue itself increased significantly.

The matching precision has been improved and at the same time, we added images and image distributions are contributing greatly to this increase that stimulates the distribution channels and it increased by 2.4 times in one year. As for premium ad, well, one time we had difficulty in premium advertisement, but we didn’t blame the bad economy.

We just wanted to create a good product. Unless it is the advertisement which can live in the people’s memory, then we cannot really be successful.

So, we worked on this very hard and when we come up with new product and we try to promote it to the client, but we decided to use in our company. The Yahoo Japan itself is one of the biggest client in the Internet advertisement.

So, we call it wild YAFUOKU!, which means that we try the new product in our company and we try to make it useful for the external users. And this has reached out for the 2020 Olympic and the Paralympics campaign.

But I’d like you to see the video. (Foreign Language) You can use mouse to just see the spinning of the athletes.

And this is the end of the video. Well, the creation of this ad is rather difficult, but may be you can make interest out of it.

And even in the social network or in medias, people talked about it very much. So if we can show that what we can do with this type of technologies, then people will be aware of the great possibility of the Internet ads.

As for the brand panel, we have very high ratio of our rich ad at 21% and also the normal banners, 1.4 times. And as for the recognition rates, it’s case by case, but usually the effects is almost the twice that of the regular one.

So when we work on the good product, then we can make difference. Now moving on to Yahoo!

Auction YAFUOKU!. The YAFUOKU!

services started September 1999 and people enjoyed the programs for a long time, but we decided to change to a different stage and we changed the name form Yahoo! Auction to YAFUOKU!.

But it’s not just a change of a name but we started new services. First one is to enhance the smartphone application.

So, with using the bar code, you can submit the product. You do not have to write down each product names and other relevant information, just scan the bar code.

And Yahoo! Auction was used for people who wanted to make a little money by selling the product.

But rather than selling the product, we changed the concept for the reuse of the product. Because people wanted to just organize their products in house.

And sometimes cumbersome process of the putting or submitting the product was a hindrance. So, we made in such a way that if you sell the product to a certain place, then the transportation cost, the courier cost can be shouldered by us.

So, continuously people who want to make money out of it, then they can do it. But the people who just want to organize the product like, organizing some old clothes or old books, then, they can submit their old things.

Up to now, there’s many people that tends to throw things away. But rather than just to throw them away, by submitting the product to this program, people can reuse them.

And the auction, the reuse services, Yahoo Japan is a leading company in this area. So, we started YAFUOKU!

Dome, a physical area for Fukuoka Prefecture. So, Fukuoka resident can bring their own products to the YAFUOKU!

Dome, so that these products can be sold on the Internet. And I think that leading companies’ mission is to expand the basic market itself.

So the people who cannot really use – full use of the online can also submit the old unused product to the Internet services. We have several shopping businesses.

So I’d like to give you some portfolio. As for Yahoo!

Shopping, this is going to be the shopping platform for retail stores and we will start selling a second hand items. The LOHACO with ASKUL, we sell good in kitchens and also the product which are used in the cabinet under the sink.

And also Smart Kitchens are the products, which are in the freezers and also refrigerators. So we started providing a new services based on daily use.

And mission of the company or itself is to how to solve the problems of the people in the daily lives. So the – one of the big challenges is the suffering from the East Japan earthquake.

And we must recreate and rebuild that regions. So March 11, we used start-up page to talk about this earthquake and also tried to talk to the people who work on this campaign.

And I think that this was very innovative display and I think that you can use this for the future services and we got the very positive comments from the SNS services. So we would like to make sure that we can fulfill that mission in the future.

So those are the things about the Only 1 Strategies. And of course, we work on the Yahoo News, Yahoo Finance and in Research and then so forth.

But we just share with you some of the major activities. Other than that, we have the partnerships with other companies so that the Internet services would be number one and also want to regain the number one position as the voter site, as I would give you some examples.

First one is the NAVER MATOME partnership. The data of the NAVER MATOME can be combined with the research results of Yahoo!.

And NAVER MATOME’s search engine is provided by Yahoo Japan. On the Internet, the map – I think, that the Yahoo was the first company who created the mapping in 1996 in Japan as the professional made a map as a link product in Yahoo!

and then Google came up with the systems. And they tried to create the map out of the technologies.

But now, we are in the year of the smartphone, I think we are on the third stage for the map. So, that in the future, people and in system can create a hybrid map so that the map itself would be much more precise.

So, NAVER MATOME product and also informations are combined for the creation of mapping starts from summer this year. Next is the collaboration with CyberAgent FX.

So, this is – we have announced that we’re going to be engaged in the financial service. So, we can see the transaction value has soared.

In terms of games. We’ve already this initiative.

This is a collaboration with GREE. This is a company called GxYz.

So, this is a smartphone and social games company. We are developing the games right now.

So, this has been the introduction of the One 1 Strategy. The next is The Most Powerful Tag Teams.

So this is the most powerful tag team, like the thing about this strategy. One is the SoftBank alliance with SoftBank.

So, with the SoftBank at the storefront, we are targeting to acquire premium memberships. So, October, November, and December because they have a new iPhone has been launched, they – clearly a lot number of people went to these counters.

But we thought maybe there was the market in January to March, but basically have been able to maintain number of new subscribers. In terms of the churn, this is basically in line with our expectations.

As a result, number of premium members, so because we have this very powerful tag and this growth has been stagnant these last couple of years, we have been able to re-accelerate. We have 919,000 members right now.

So, this is effective customer leads platform. So, this is a thing that we are doing with SoftBank.

We’re already using the unique terminals with convenience stores and at the 42,000 stores and convenience stores, actually, we do have the platforms, so this can be conducted. So, this is some specific examples that I’m showing you.

So, with Aeon or the Daiwa House, Nissan, these are the list of companies representing Japan. So this is not on the website, but at the counters.

They want people to come to the stores, the physical stores. So, this is a type of a solution that we have started to provide.

Next is a tag team with ASKUL. So, the LOHACO service that has started from October accumulated transaction value at the end of February that is.

So this would be ¥740 million. And by May, our target is just to reach ¥2 billion.

Well, we have been having a ¥18.0 billion target, but of course this will be a very low target that we have to rise downwards, but we would like to achieve this ¥2 billion target. So LOHACO, how is LOHACO going?

So I think the positive point is there’s a high user satisfaction in light of attracting customers. In terms of delivery, there’s no issue there.

These three are the good points. And especially what we are putting attention is the very high repeat ratio.

Once people shop at LOHACO, is about 30% of people will come repeat customers, a very high repeat ratio. So, once the people use it, I think basically they’re very satisfied with the service.

I think this was the good point. In terms of the repeat ratio, so in the normal ecommerce world, so you just measure it within one year, whether people repeat it or not.

So that’s the measurement that it used. But in terms of LOHACO, so within 60 days of the purchase 30% people will actually use this service.

So this is a very bright signs that we’re seeing for the service. I hope that we’ll be able to grow this area.

Conversely, so what are the challenges that we have for LOHACO, these are the three points I think are the challenges, one is the product line up, pricing and settlement. So if these three – we have to improve this three, especially what we are focusing on is a product line up.

So in July, at the at the site demo there was – we have set up – the logistics warehouses started operation. It means that we are able to increase the product line up.

So, we only have 30,000 that we can deliver on the same day, but I want to increase this to 17,000 SKUs. So, with the setup of this warehouse, so this will be daily usage points or water related items or tissues, these heavy ones or with these bulky ones.

So these will be the basic platforms once enhanced. So, for instance, physical convenience stores, they have about 30 million SKUs for these type of daily usage items with supermarkets will be 20,000.

So, the home markets has 35,000 SKUs and that’s the data that we have. So, this was the daily usage items.

I think we want to have the overwhelming extensive product line-up. So, it’s 24 hours – open 24 hours and as long as you buy it, it will be delivered on that day or the next day.

So, that’s the shopping site that we offer. So, we hope that is – will serve as – to serve to grow business.

So, I think at the end of the March, we started this tag team with Lawson as well. Our goal was with daily goods.

So – but basically in the cabinets of the kitchens, et cetera, et cetera. LOHACO is the company that has the lowest type of products.

For Smart Kitchen, we’re basically – this is a consumer business that sells the contents of the refrigerator. So we have opened this at the end of March with the, for instance, aligned with for instance alliance with ABC Cooking Studio, DAICHI WO MAMORU KAI, and Tanita Shokudo, we have a collaboration with these.

So, we are starting to service that offers unique product line-ups. So, this is the progress with the smartphone growth initiatives.

So, the smartphones DUB, you see that this is growing very steadily. And especially the – the, basically the smartphone internet is basically more focused on apps rather than the browsers.

So, Yahoo Japan, we have to offer apps that people will download. The accumulated download of the smartphone applications is more than 80 million that compared to the previous year.

We will be able grow the number of – app downloads. So to show you some examples, so Yahoo Japan apps we have renewed this, fully renewed this.

So this is number one in terms of the free downloads. I guess we have been able to higher evaluation than before.

This is a completely new app. This is a test app called PassMarket.

This is a new coupon ticket, a site that anybody can sell their coupons of tickets. Yahoo!

Box, and this is a new app. The users exceeded 10 million.

And again, this is a different type of service. This is Duda Mobile.

So some people have the PC sites, but some people do not have the smartphones, so this has a lot of complaints there out in Japan. So this can easily compare to the PC sites to the smartphone sites.

So we have a collaboration with company. So maximum one minute just input the URL, the PC site can be converted to the smartphone sites.

So we operate as a smartphone site builder. Smartphone Site Builder, that is the name that we are granted.

So for the people who are – spend more than ¥10,000 for the EDU, this is a type of service that we offer. To be able to grow the smartphone ad market, you have to offer these type of sites even more.

So if it’s a major company, they have their own unique smartphone apps, so they can – build their own websites. But some smaller companies cannot do so.

So we want to focus more on the peripheral type of services. So this additional second point.

This is the tie-up with User Local Inc. So User Local – so, this is a company that conducts access analysis.

It’s a very unique company in Japan. So with the tie-up with this company, we offer Yahoo!

Access Analysis basically for free of charge. So through this analysis, it means that you’ll be able to analyze the demographics or the attributes of the viewers.

So, the advertisers will be able to analyze what type of people actually viewing their sites. And we will actually be able to know – if you can able to know what type of viewers are going to the client’s site, we’ll be able to do – show ads in a more effective way.

In the advertising business there are a lot of the smartphone related initiatives that we are conducting. So this is a chart of site associates, monitor smartphone site builder.

This means that the client can create a smartphone site. So, then we have the access analysis, Yahoo!

Access Analysis. It means the client can analyze the access data and the Yahoo!

Tag Manager. So, this is the integration of the data between PC and smartphone.

So, the tag management of the client is ready to sell to the client. So, by using one tag, it means that we basically can do various things.

So these three will be – these services that we’re going to introduce. So another thing, we have the KAKAO TALK focusing this one where we have 10 million downloads in Japan.

So actually, this is the progress of the growth strategy. Of course, besides this, we have various other initiatives.

So this is some highlight that we have highlighted in this metrics. So I hope that you will be able to refer to this.

Lastly, just one point, I’d like to report in April, we had the fraud access for the users’ informations. And we are – we have a very strong security technology so that – the fact is that the information itself was not leaked to the external world.

However, we still enhance the production of the information even more. So, that was it – or the information that I had from myself.

Thank you. (Foreign Language) Now, let’s entertain questions from the floor.

If you have any question, please indicate it by raising your hand so that microphone will be brought to you. Please state your name and also affiliation before you ask questions.

If you have several questions, please ask question one-by-one. Okay then, please raise your hand if you have any question.

Barclays Security, my name is Yoneshima. Thank you very much for your presentation.

I have three questions, but I would like to ask you one-by-one. First one is about the outlook for the first half of this year.

Well, the business result itself was excellent, but as for the outlook ¥92.0 billion operating profit, 7.7%, why didn’t you make it ¥95.0 billion so that it was a two-digit increase? Third and the fourth quarter, the operating income was ¥50.0 billion so – but as for the first half, it is less than ¥40.0 billion.

It could be the seasonal reasons, but do you have any reason for that? Because I think this was the first time since the East Japan earthquake, this much drop.

I think it – there are some special reasons for the drop. So first question first.

First of all, the context, we made it as a one full-year – excuse me, we made it as the pinpoint number rather than the range outlook. So, in the past that we set the range of the outlook, so it was okay to be in that range.

But simply put, we can make it as one number. So, it is easy to understand but we try to be – not too conservative, but we are very conscious about making the very bullish numbers.

And for the special reasons, each business we put focus on, but SS, the sponsored search, we changed the engine and that effect of that changing the engine gave the influence to all the business lines. So I think that that is one reason.

And as for the premium advertisement, the 2012 first quarter, it shows the very high increase, over 10%, but because of that we don’t think that the growth rate will not reach that level. So, having thinking of these two points, we came up with these numbers.

As for as the cost, we hired 370 new graduates, so that the HR cost increased. And also, the e-commerce and then smartphones that we tried to be very offensive, so that the sales distribution cost will increase.

So even for the cost, we tried to be a little bit more conservative.

So, compared to the past, I think basically you are offering the lower range, that lower side of the range, is that the way to think of it?

Well, that’s a difficult question to answer. So, we are cautious, but we’re not ultra conservative in terms of our outlook.

The second question is that this is the confirmation of the numbers. This is the 76 – page 76 of the presentation material in terms of the labor cost.

So, for the fourth quarter it means that, it’s ¥11.5 billion, it seems to go up. Of course, there is a lot of more consolidation subsidiaries, but the increase of the labor cost excluding the new graduates.

So, the fourth quarter is it a special factor or in terms of the composition of the labor costs, is this – or the personnel expenses, is this what we should expect? Another, in the 919,000 of premium memberships are all paid memberships or some free memberships included?

In terms of the increase of the personnel expenses, of course, there is impact come from the increase of a number of consolidated companies in the fourth quarter. The personnel operating income with the growth of that, we are seeing that we want to reward our employees based on the increase of their operating income.

So, based on that idea, we have paid out some level of special bonuses. So, that’s some special factors.

And what was the other part of your question? So, 919,000 premium members, of course, there are some free memberships.

So, how many are free members?

Well, so for the SBM – through from, they have two months free period. So, it will be difficult to calculate backwards even if that’s the case.

So, lastly about auctions. I would like to ask about auctions.

So when the economy recovers, the unit price of the auctions tend to go up. I think in the past that was the trend.

Of course, you have apps for auctions and it’s more convenient to perform external conditions. Do you think that you’re going to see more growth in auctions or is it that really the case?

So, the past year – well, the past year, so, e-commerce I think will be able to show the minimum level, but the e-commerce – basically e-commerce should be a challenge that Yahoo! overall should address.

So Yahoo Japan comprehensively how are we going to revitalize the EC business. And within that the auction business?

Well, I think it has been – I think the worst is over, but to be able to reaccelerate the business I think that the company overall will have to seriously think we can support this business as a company as a whole. So I hope that we’ll be able to implement that measure.

So more specifically when or how are we going to do that? We haven’t been able – it’s not in the stage that we can publicly announce this.

So the second year, the e-commerce, this will be a company – all company mission. So I think basically the EC has been flat basically in terms of the – in terms of growth.

But I think we want to bring this to the in line with the market. So in some cases may be below the year, but we want to bring this business so that this will not be below the previous year then bring it back to the flat year-on-year in the second stage.

So the market is growing by 5% or 10% at the market. So we want to bring the growth in line with the market.

And if we look at the rival companies – the bigger companies, we want to catch up with the growth of those bigger companies and exceed them. So this – we have this fourth step that we have to conduct.

To be able to implement this, auctions, shoppings, overall this would be a challenge that the company overall has to address. So when?

We can’t say, but we are determined to do that.

Any other question?

Daiwa Securities. My name is Ishihara.

Thank you for your presentation. First question, for the first half outlook budget.

Well, the revenue is ¥25.0 billion and operating profit is ¥7.0 billion or so. And you’ll – when I think of the overall limit of – and 50% about the ¥15.0 billion or so, I think that could be the maximum limit.

So what’s the difference? The difference is – is that for the SG&A or human resources expenses?

So the difference is used as expenses or you included some buffers in this number? So, would you share with us about the expenses of the first half?

Well, as for the expenses. Yes, the expenses is one reason.

But the newly added subsidiaries, ValueCommerce, Carview, Cyber FX, these companies, the profitability that’s different from the Yahoo Japan. So that we have more sales but yet that we have more expenses because of these additional subsidiaries.

But I would like to repeat one more time for the expenses, the human resource expenses and also the sales marketing expenses. So the number itself is conservative.

And the second question is about the brand panel premium advertisements are doing well. The reason for the success is that because that higher unit price is contributing to the success, then this coming year that you will be improving the overall advertisement mix, so that I think we can have a high expectation for the premium advertisement.

Would you tell us the reason for the growth reasons? Is that because of the unit price increase?

Okay. Let me introduce Malakani, and also we have Arikami who is in charge of the advertisement.

Premium advertisement that you’re talking about, right. I think that the portion of the brand panel is very high.

And there are two reasons for that. The sales and marketing activities that even more stronger.

So, we try to look at the short comings of the sales activities. And we changed the way of working on the advertisement agencies and also try to start the marketing activities much earlier.

So this is a physical type of the improvement. And second one, I show you the example of the Olympic banner videos, make the product as the rich ad and so that the marketing capability and also new product capability.

I think these two produce the synergies for that. And also I think we have the external positive economy helping us.

And from April, Arikami became the Director of the Advertisement. So, you want to add something?

Marketing solution company. My name is Arikami.

As Miyasaka said, I can add one more reason. Last year, April to June, it was not really a special reason, but we received great big order from one client.

And as Malakani, said that numbers are not really conservative but we gave solid numbers for the first half.

Understood. Well.

lastly, my question will be a more long-term one. So the tablet is becoming more popular from October last year, the 7-inch tab has been released.

So the expectation is that tablet proportion is going to increase. So with the dissemination of the tablet PCs in terms of your advertisements, shopping related services, what type of impact do – are you anticipating.

So this is a more longer-term perspective question including the cost side of this. What are your thoughts about this?

So, in terms of a number of accesses that we give as a service, I think the access coming from the tablet PCs are increasing. But in terms of advertisement and e-commerce, how much of an impact, the change is going to happen, it’s very difficult to say.

But I think basically, it’s not about them because people will be using Internet even more. So how the look will be, the service will be, we have to change the product maybe a bit, but the usage of Internet growing with the Internet company, that’s a positive trend.

I think we are quite positive about this change. So if you look at their theme at the top page for e-commerce business, the tablet PCs or maybe is a very a good match.

So we don’t know – it’s just started – the trend has just started. We don’t know what’s going to happen.

But basically we think that the trend going to more tablet PCs is not a bad thing for us. Thank you.

Any other questions?

Thank you very much for the presentation. I’m Nagao from Nomura Securities.

So this is a question about your shopping business. Two questions, one is for shopping.

So compared to your competitors Yahoo! Shopping is not that vibrant, is not that strong, definitely the e-commerce in terms of the merchandising size, the product line-up and in terms of the delivery.

And how are the incentives given, the settlement side? I think these three were the key for the shopping services in Japan.

Yahoo’s shopping compared to your competitors, where is your weakest point? And where do you have to solve – where your focus will be in terms of solving these issues?

I would like to ask about the shopping business first of all.

Well as you have pointed out, product line-up, there’s the merchandising and delivery, the logistic side and the point services and settlement services, these are the three important points. And of course, the profitability is on the point of that we are focusing on.

So this composition that supports e-commerce. So these are the important points.

If you look at the current status, Yahoo! Shopping compared to the leading competitors, what are we lacking?

So basically we are a bit behind all of these four components. So, in selling things on the Internet, we have been – this has been there for the 10 or more years.

If you consider the retail business overall, it has a long history. But it’s not a thing that one specific thing can solve everything.

You don’t have a silver bullet right that. You have to improve this a bit by bit for these four items.

If you can improve a bit on these four items, I think we’ll be able to improve our business. So it’s not the case that we’re focusing on one specific area.

I think it’s a comprehensive approach that we are considering. But the Yahoo!

Shopping, the shopping mall business format or less I have thought. But for LOHACO, this new type of services that I think in terms of logistics, I think basically we are equivalent to other companies.

Of course, in terms of SKUs, still small, but to be able to launch this type of delivery of networks, maybe we will face some troubles. But at least we haven’t faced any serious issues about delivery for LOHACO.

I think we have a good potential in terms of improving delivery.

Thank you very much. Second point.

You mentioned a little bit about the LOHACO, but the condition of plan was to have a sizeable revenue. But I think that you revised it in the downward.

Maybe the reason itself should be asked to the ASKUL, but what were the reasons for the downward revision? And 2014 and in so forth, that how are you planning to include that into your future numbers?

Well, more than our expectation, the merchandising – well, number of the merchandisings are limited and that’s – really cannot attract people. So, merchandising and attraction of the customers and I think we had a very optimistic expectation.

So now, we are putting more efforts in there. So, around the July or so, SKU would be increasing to 70,000 or so.

So, when we achieve that and I think that we can attract more customers to the LAHACO. So, merchandise poor merchandise and also the attraction of the customers were not enough.

Any other questions?

So, I’m from Merrill Lynch. I have four questions.

For the premium advertisement, in January to March, I think the higher unit price products were good. But what are the feedback from the advertisers?

So, if the results will come out, you don’t know whether they’ll be continuing to use this highly priced products? So, just don’t know what’s the feedback coming from the advertisers.

And how is the sustainability of this? So, maybe I don’t think that – hope that this is not frankly too conservative outlook, but from the negative feedback from the advertisement – advertisers?

Mr. Dinami is going to answer your question.

Thank you for your question. Well, the feedback coming from the advertisers is very good.

For instance, for the retailers, the people working on the floor, the staff is saying that it’s very good. They are saying that they want to continue this.

For instance, the manufacturers are hearing that. We get a lot of this positive feedback.

I think that we get a good feedback on this. Second question is that KAKAO, digitalization of KAKAO, so monetization of the game businesses.

I think this is what you’re talking about. So, what will be the timing, so whether this will be profitable or not once as I think that either question, but how are we going to utilize KAKAO?

So, I think basically we’ve been able to increase a number of downloads, but you haven’t seen the next step so...

What about KAKAO?

So, Mr. Malakani is going to answer your question.

Thank you. So, Yosuke, for KAKAO TALK, so the competitors, we have strong competitors.

So, we are maintaining the number two position. Currently, we are in the stage of increasing the number of users.

Of course, we have games, we have stems, we have these paid services. But rather than that, we want to increase number of users and how are we going to increase the number of active users.

So that will be a focus of our measures for KAKAO. Which means that the you are not planning to monetizing this business including games and others.

We have a few more other priorities than that.

And then third question, the sponsored search – well, the search engine itself is based on the Google Technologies. I think you have a partnership and your contract will be expired in the – in two years or so.

I think that you need to renew the contract. So for this particular partnership what type of risk do you have?

Google and also for you, I think that the advertisement revenue itself are increasing. So, I think there is some risk about the – renewing the technology with Google.

So, is there any risks that you have to share with the shareholders? And Google, this coming summer, they will be changing the mechanism of the advertisement.

They integrate the PC and then smartphones into one system. And what about the smartphones programs, small scale programs?

So when they change that scheme are you planning to change the search the same way? Or are you planning to use it as it is?

So, please tell us about your partnership with Google.

The search engine deal with Google, our partnership has been very good. I would say win-win relation between the two.

So, based on that relation, we continue having a dialogue. So at this moment, we don’t have any particular point and I don’t think it’s a good timing to talk about what type of risk or anything.

So far, we are enjoying very good partnerships. As for the advertisement system, Yahoo!

already started – Yahoo! will be responding to that change of the mechanism.

We call it the unified system – excuse me, unified campaign. So, regardless of the terminals and then types of devices, we can provide the advertisement.

And fourth question, I think you have some cash so that you have more cash in the deposit. For the future Yahoo America, what would be the timings whether you maintain the cash or you are actively using some M&F or the cash?

Before returning the cash, I think the parent company was – challenged the mobile devices and I think you did same so with the parent company may challenge new businesses. So, you’re planning to invest into a new challenge or – so you have great cash in the deposit.

So, what type of usage are you thinking of? Please, make a comment about it.

Well, it is rather a mediocre answer, but we need to maintain a two-digit growth rate. It is very challenging target for us.

So, that we need – the priority is to invest into the growth businesses. The relation with the Yahoo America at this moment, we are enjoying very good relationships.

So, for the businesses, we are always talking about the concept. As for the buyback of the shares, we’re looking for some chain movement there.

¥400.0 billion is a cash amount, so that we should be think about the returning for the shareholders and so forth. But at this moment, we haven’t decided anything yet.

So again, I have to ask how about your relations with your parent company. So, I think basically you’re trying to strengthen your tag with the parent company.

So from the investors’ point of view, the cash may be shifted to SoftBank, to the parent company. Maybe it’s a positive way to think about it.

Well, some people will take it as a risk. So, how should we think about this in terms of relationship with your parent company.

Well basically, we are a separate company, both listed companies. So even though they are a parent company, we will just consider case-by-case in terms of the merits and the de-merits.

And I think basically information exchange is conducted, but in terms of decision for investment, we will – this will be a case-by-case decision.

Any other questions? No more questions?

This brings us to the end of our presentation. Thank you very much for your participation.