This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy
between this translated document and the Japanese original, the original shall prevail.
SEPTENI HOLDINGS CO., LTD. (“the Company”) assumes no responsibility for this translation or for direct, indirect or
any other forms of damages arising from the translation.

November 30, 2018
Dear Shareholder
Koki Sato,
Representative Director
Group President and Chief Executive Officer

SEPTENI HOLDINGS CO., LTD.
17-1 Nishishinjuku 8-chome, Shinjuku-ku,
Tokyo, JapanCONVOCATION NOTICE FOR THE 28TH ORDINARY
GENERAL MEETING OF SHAREHOLDERS
1. Date and Time:

Wednesday, December 19, 2018, at 10:00 a.m.

2. Place:

B1 Floor, Crystal Room
Hyatt Regency Tokyo
7-2 Nishishinjuku 2-chome, Shinjuku-ku, Tokyo, Japan

3. Meeting Agenda
Matters to be reported:
1. The Business Report and Consolidated Financial Statements for the Company’s 28thterm (from October 1, 2017 to September 30, 2018) and the results of audits of theConsolidated Financial Statements by the Financial Auditor and the Board of Company
Auditors
2. Non-consolidated Financial Statements for the Company’s 28th term (from October 1,
2017 to September 30, 2018)
Matters to be resolved:
Agenda Item No. 1:
Election of Seven Directors
Agenda Item No. 2:
Election of Two Company Auditors
To Institutional Investors

You may use the Electronic Proxy Voting Platform operated by ICJ Inc., as a methodof exercising your voting rights for the General Meetings of Shareholders.

 When you attend the meeting, you are kindly requested to submit the enclosed Voting Rights Exercise Form to thereceptionist at the meeting.
For the purpose of saving resources, please be sure to bring this convocation notice with you.
 The documents to be provided with this convocation notice1) Notes to Consolidated Financial Statements
2) Notes to Non-consolidated Financial Statements
Based on relevant laws and regulations and the Article 19 of the Company’s Articles of Incorporation, the above items areposted on the Company’s website and are therefore not included in the documents accompanying this convocation notice.
The Consolidated Financial Statements and the Non-consolidated Financial Statements audited by the Board of Company
Auditors and the Financial Auditor include Notes to Consolidated Financial Statements and Notes to Non-consolidated
Financial Statements, which are posted on the Company’s website.
If any amendment is made to the Business Report, the Consolidated Financial Statements, the Non-consolidated Financial
Statements and the Reference Documents for the General Meeting of Shareholders, the amended information will be
disclosed on the Company’s website.

The Company’s website: https://www.septeni-holdings.co.jp/en-1-

Reference Documents for the General Meeting of Shareholders
Agenda Items and Reference Matters
Agenda Item No. 1:

Election of Seven Directors

At the close of this General Meeting of Shareholders, all seven directors will retire due to the expiration of
their respective terms of office.
Therefore, the Company hereby proposes the election of seven directors, including four outside directors.
To establish a higher level of corporate governance, maintain sustainable growth, and enhance corporate
value over the medium to long term, the Company delegates as much of the decision-making and execution
relating to business execution as possible to Group Executive Officers, and so the board of directors canperform thorough oversight of the business execution of the Group Executive Officers.
The oversight function of management is continually strengthening under our board of directors whose
composition comprises a majority of outside directors.
The Company nominates candidates for director based on a strong sense of ethics and responsibility, and theextensive knowledge and experience, as well as character, required for the Company’s management decisionmaking, or the track record and insight required to enhance the oversight function of management.
In nominating candidates for director, based on the above policy, the Group President and Chief Executive
Officer creates a proposed list of candidates, and following deliberation by the Nomination Advisory
Committee, composed only of outside directors and the Group President and Chief Executive Officer, thecandidates are nominated at a meeting of the board of directors.
The candidates are as follows:-2-

Candidate
No.

Candidate
No.

Name

Koki Sato

Etsuko Okajima

Reelection
Attendance to theRepresentative director board of directors
meetings:
Group President and
13/13
Chief Executive Officer

Outside director

1

2

Name

5

Reelection
Outside director
Independent officer
Attendance to theboard of directors
meetings:
13/13[Important positions held at other companies]
President, SEPTENI CO., LTD.

[Important positions held at other companies]
CEO, ProNova Inc.
External Director, MARUI GROUP Co., Ltd.
Outside Director, Lancers, Inc.
Outside Director, Link and Motivation Inc.

Isamu Ueno

Seiji Yasubuchi

Director
Group Senior
Executive Officer

Reelection
Attendance to theboard of directors
meetings:
13/13

Outside director

6

Reelection
Outside director
Independent officer
Attendance to theboard of directors
meetings:
9/10[Important positions held at other companies]
President and Representative Director, Visa
Worldwide Japan Co., Ltd.

Tadahiro
MatsudaYusuke Asakura

New candidate

Outside director

3Group Executive
Officer7

Reelection
Outside director
Independent officer
Attendance to theboard of directors
meetings:
10/10[Important positions held at other companies]
Outside director, Raksul, Inc.
Visiting scholar, National Graduate Institute for
Policy Studies

Tatsuya Kimura
Outside director

4

Reelection
Outside director
Independent officer
Attendance to theboard of directors
meetings:
13/13[Important positions held at other companies]
Professor, Waseda University Graduate Schoolof Business and Finance

-3-

1

Koki Sato(Date of birth: March 11, 1975)

Reelection
Number of years in office
17 years
Attendance to the board of directors meetings
13/13
Number of the Company’s common shares held 377,300

Profile and position at the Company
Apr. 1997
Joined the Company
Jul. 2001
Director and General Manager of Internet Operations
Oct. 2003
Managing Director and CMO
Dec. 2004
Senior Managing Director and COO
Oct. 2007
Senior Managing Director
Dec. 2009
Representative Director (current position) and President
Jan. 2017
Group President and Chief Executive Officer (current position)
 Reasons for nomination as candidate for director
Since joining the Company, Mr. Koki Sato established a new field which has become a major pillar of the Group business,always leading from the front. Furthermore, he has led the management of the entire Group over the course of many years,
steadily addressing a range of management challenges to enhance corporate value, and because he is expected to continue toexercise strong leadership, he has been reelected as candidate for director.
 Important positions held at other companies
President, SEPTENI CO., LTD.

2

Isamu Ueno
(Date of birth: June 1, 1968)

Reelection
Number of years in office
14 years
Attendance to the board of directors meetings
13/13
Number of the Company’s common shares held 484,000

Profile and position at the Company
Sep. 1998
Joined the Company
Nov. 2003
Officer and Manager of Personnel and Administration
Dec. 2004
Director (current position) and Manager of Personnel and Administration
Dec. 2005
Managing Director
Dec. 2009
Senior Managing Director
Jan. 2017
Group Senior Executive Officer (current position)
 Reasons for nomination as candidate for director
Mr. Isamu Ueno has extensive experience and results, and considerable insight in the field of personnel and administration,and because he is expected to drive the management of the Group and further enhance and drive corporate governance, he isdeemed necessary to enhance corporate value, and has been reelected as candidate for director.
 Important positions held at other companies
None.

-4-

3

Tadahiro Matsuda(Date of birth: May 7, 1973)

New candidate
Number of years in office– years
Attendance to the board of directors meetings–/–
Number of the Company’s common shares held 162,500

Profile and position at the Company
Apr. 1998
Joined the Company
Oct. 2004
Head of the Osaka BranchJul. 2005
General Manager of Media
Dec. 2005
Director
Aug. 2009
Representative Director, SEPTENI CROSSGATE CO., LTD.
Jan. 2017
Group Executive Officer (current position)
 Reasons for nomination as candidate for director
Mr. Tadahiro Matsuda has extensive experience and results, and considerable insight in the Group’s internet marketingbusiness and new business fields, and because he is expected to further enhance and drive the management of the Group, heis deemed capable of properly carrying out the duties of director, and has been elected as candidate for director.
 Important positions held at other companies
None.

4

Tatsuya Kimura(Date of birth: November 24, 1958)

Reelection
Outside director
Independent officer
Number of years in office
4 years
Attendance to the board of directors meetings
13/13
Number of the Company’s common shares held 4,000

Profile and position at the Company
Apr. 2001
Associate Professor, Nihon University Graduate School of Business
Apr. 2003
Associate Professor, Waseda University Graduate School of Asia-Pacific Studies
Apr. 2006
Professor, Waseda University Graduate School of Asia-Pacific Studies
Dec. 2006
Outside Company Auditor
Apr. 2007
Professor, Waseda University Graduate School of Commerce
Dec. 2014
Outside Director (current position)
Apr. 2016
Professor, Waseda University Graduate School of Business and Finance (current position)
 Reasons for nomination as candidate for outside director
Mr. Tatsuya Kimura is very familiar with the field of corporate management, and because he has provided useful advice on
all aspects of the business administration of the Group based on his extensive knowledge and considerable insight, he isdeemed capable of providing oversight and advice on the Company’s business administration as an outside director, and has
been reelected as candidate for outside director. Although he has never been involved in corporate management other thanserving as an outside officer, he is deemed capable of properly carrying out the duties of an outside director of the Company
for the reasons mentioned above.
 Important positions held at other companies
Professor, Waseda University Graduate School of Business and Finance

-5-

5

Etsuko Okajima(Date of birth: May 16, 1966)

Reelection
Outside director
Independent officer
Number of years in office
3 years
Attendance to the board of directors meetings
13/13
Number of the Company’s common shares held –Profile and position at the Company
Apr. 1989
Joined Mitsubishi Corporation
Jan. 2001

Joined McKinsey & Company Incorporated Japan

Mar. 2002

Joined Globis Management Bank, Inc.

Jul. 2005

President, Globis Management Bank, Inc.

Jun. 2007

CEO, ProNova Inc. (current position)

Jun. 2014

Outside Director, Astellas Pharma Inc.

Jun. 2014

External Director, MARUI GROUP Co., Ltd. (current position)

Nov. 2015

Outside Director, Lancers, Inc. (current position)

Dec. 2015

Outside Director (current position)

Mar. 2016

Outside Director, Link and Motivation Inc. (current position)

 Reasons for nomination as candidate for outside director
Ms. Etsuko Okajima has an abundance of experience and knowledge, and considerable insight of corporate management, andbecause she has provided useful advice on all aspects of the business administration of the Group from an independent andobjective position, she is deemed capable of providing oversight and advice on the Company’s business administration as an
outside director, and has been reelected as candidate for outside director.
 Important positions held at other companies
CEO, ProNova Inc.; External Director, MARUI GROUP Co., Ltd.; Outside Director, Lancers, Inc.; Outside Director, Link
and Motivation Inc.

-6-

6

Seiji Yasubuchi(Date of birth: October 2, 1955)

Reelection
Outside director
Independent officer
Number of years in office
1 yearAttendance to the board of directors meetings
9/10
Number of the Company’s common shares held –Profile and position at the Company
Apr. 1979
Joined Mitsubishi Corporation
Nov. 1999
Joined Ripplewood Japan, Inc.
Executive Director
Apr. 2001
Joined UBS Securities Japan Co., Ltd.
Executive Director in charge of transport and privatization of public organization
Mar. 2005
Managing Director in charge of transport and privatization of public organization,
UBS Securities Japan Co., Ltd.
Jun. 2006
Joined GE Commercial Finance Asia
Executive Vice President in charge of business development
Sep. 2007
President and CEO, GE Commercial Finance Japan
Jan. 2009
President and CEO, GE Capital
Jan. 2010
Director, GE Japan Corp.
President and CEO, GE Capital
Sep. 2016
Representative Director, President and CEO, SMFL Capital Co., Ltd.
Apr. 2017
Joined Visa Worldwide Japan Co., Ltd.
President and Representative Director (current position)
Dec. 2017
Outside Director (current position)
 Reasons for nomination as candidate for outside director
Mr. Seiji Yasubuchi has extensive experience and results, and considerable insight as an executive at global companies, andbecause he has provided useful advice on all aspects of the business administration of the Group, he is deemed capable ofproviding oversight and advice on the Company’s business administration as an outside director, and has been reelected as
candidate for outside director.
 Important positions held at other companies
President and Representative Director, Visa Worldwide Japan Co., Ltd.

7

Yusuke Asakura(Date of birth: July 23, 1982)

Reelection
Outside director
Independent officer
Number of years in office
1 yearAttendance to the board of directors meetings
10/10
Number of the Company’s common shares held –Profile and position at the Company
Apr. 2007
Joined McKinsey & Company
Aug. 2010
Joined Naked Technology Inc.
Oct. 2010
Representative Director, President and CEO, Naked Technology Inc.
Oct. 2011
Joined mixi Inc.
Jun. 2013
Representative Director, President and CEO, mixi Inc.
Nov. 2014
Visiting scholar, Stanford University
May 2015
Outside director, Raksul, Inc. (current position)
Mar. 2016
Outside director, Loco Partners
Mar. 2017
Visiting scholar, National Graduate Institute for Policy Studies (current position)
Dec. 2017
Outside Director (current position)
 Reasons for nomination as candidate for outside director
Mr. Yusuke Asakura has extensive experience and results, and considerable insight as an executive at listed internetcompanies, as a researcher and as an investor, and because he has provided useful advice on all aspects of the businessadministration of the Group, he is deemed capable of providing oversight and advice on the Company’s businessadministration as an outside director, and has been reelected as candidate for outside director.
 Important positions held at other companies
Outside director, Raksul, Inc.; Visiting scholar, National Graduate Institute for Policy Studies-7-

(Notes)
1. The name of Ms. Etsuko Okajima in the family register is Etsuko Mino.
2. Mr. Tatsuya Kimura, Ms. Etsuko Okajima, Mr. Seiji Yasubuchi and Mr. Yusuke Asakura are candidates for outside directors.
3. Ms. Etsuko Okajima is the CEO of ProNova Inc., which has concluded a service contract agreement with SEPTENI CO.,LTD., a subsidiary of the Company, for support in the development of female business executives.
4. Apart from what is mentioned in 3. above, there are no other special relationships between the Company and each of thecandidates.
5. The number of the board of directors meetings included in the scope of attendance for Mr. Seiji Yasubuchi and Mr. Yusuke
Asakura is the 10 meetings held during the time after they were appointed as outside director on December 21, 2017.
6. The Company has established “Independence Standards for Outside Directors” (https://www.septeniholdings.co.jp/ir/pdf/isod.pdf) (in Japanese only). There is no information showing any violations of these standards forcandidates Mr. Tatsuya Kimura, Ms. Etsuko Okajima, Mr. Seiji Yasubuchi, or Mr. Yusuke Asakura, and each candidate isdeemed independent.
7. The Company has designated Mr. Tatsuya Kimura, Ms. Etsuko Okajima, Mr. Seiji Yasubuchi and Mr. Yusuke Asakura as
independent officers in accordance with the rules of Tokyo Stock Exchange, Inc. and has submitted a notice of designation
to the Tokyo Stock Exchange. If the proposed reelection of them is approved, the Company will continue to designate themas independent officers.
8. The Company has entered into a liability limitation agreement with each of Mr. Tatsuya Kimura, Ms. Etsuko Okajima, Mr.
Seiji Yasubuchi and Mr. Yusuke Asakura. According to the aforementioned liability limitation agreement, their liability
under Article 423, paragraph 1 of the Companies Act will not exceed either ¥5 million or the minimum liability amountstipulated in Article 425, paragraph 1 of the same Act, whichever is higher. If the proposed reelection of them is approved,
the Company plans to again enter into the aforementioned liability limitation agreement with them.

-8-Agenda Item No. 2:

Election of Two Company Auditors

At the close of this General Meeting of Shareholders, company auditor Mr. Muneyoshi Nomura will retiredue to the expiration of his term of office, and furthermore, to promote a capital and business alliance with
Dentsu Inc. and enhance and improve the auditing system, the Company hereby proposes the election of two
company auditors, increasing the number thereof by one company auditor designated by Dentsu Inc.
In addition, the consent of the board of company auditors has been obtained for this proposal.
The candidates are as follows:
Candidate No.

Name

Muneyoshi Nomura
1Internal company auditor

Reelection
Attendance to the board of directors meetings:
13/13
Attendance to the board of company auditors meetings:
14/14

2

Nobuo Kojima

New candidate

-9-

1

Muneyoshi Nomura(Date of birth: April 11, 1959)

Reelection
Number of years in officeAttendance to the board of directors meetings
Attendance to the board of company auditors
meetings
Number of the Company’s common shares held

4 years
13/13
14/14
1,040,000

Profile and position at the Company
Mar. 1998
Joined the Company
Dec. 1999
Director and General Manager of Management
Dec. 2000
Managing Director and General Manager of Management
Oct. 2002
Senior Managing Director, General Manager of Management, and CFO
Dec. 2004
Representative Director and President, and CFO
Dec. 2009
Vice-chairman of the Board
Dec. 2014
Internal Company Auditor (current position)
 Reasons for nomination as candidate for company auditor
Because Mr. Muneyoshi Nomura has provided useful advice from a broad perspective and conducted auditing from an
independent position based on his extensive experience in the Group and considerable insight, he is expected to provide suchauditing, and has been reelected as candidate for company auditor.
 Important positions held at other companies
None.

2

Nobuo Kojima(Date of birth: November 1, 1969)

New candidate
Number of years in officeAttendance to the board of directors meetings
Attendance to the board of company auditors
meetings
Number of the Company’s common shares held

– years–/––/––

Profile and position at the Company
Apr. 1993
Joined Dentsu Inc.
May 2013
General Manager of Operations Management Department of TV & Entertainment Division, Dentsu Inc.
May 2014
General Manager of Network 3 Department of Radio & TV Division, Dentsu Inc.
Jun. 2017
Deputy Managing Director of Digital Platform Center and General Manager of Operations Promotion Office,Dentsu Inc.
Apr. 2018
Seconded to Dentsu Digital Inc.
Executive Officer and Head of Account Planning Unit (scheduled to retire in December 2018)
 Reasons for nomination as candidate for company auditor
Mr. Nobuo Kojima has worked in the advertising business, including the digital field, for many years at Dentsu Inc. and
Dentsu Digital Inc., and because he has extensive experience and results, and considerable insight in the advertising businessfield, he is deemed capable of properly carrying out the duties of company auditor, and has been elected as candidate forcompany auditor.
 Important positions held at other companies
None.
(Notes)1. There are no special relationships between the Company and each of the candidates.
2. Mr. Nobuo Kojima currently serves as an executive officer at Dentsu Digital Inc., but plans to retire from this position in
December 2018. If his proposed election is approved at this General Meeting of Shareholders, he plans to assume theposition of internal company auditor.

- 10 -

Business Report (From October 1, 2017 to September 30, 2018)
1. Current status of the SEPTENI Group(1) Business progress and results
Earnings for the business year under review
Individual smartphone ownership in Japan rose to 60.9% in 2017, as the quantitative expansion continued
centered on the millennial generation, with the exceptionally high popularization rate of 80-90% of those in
their teens through 30s now owning a smartphone. At the same time, per-capita smartphone usage time also
increased with the increasing usage rate of SNS (social networking services), meaning we are also seeing a
profound qualitative change in usage (source: “Communications Usage Trend Survey in 2017,” Ministry ofInternal Affairs and Communications). As such, with the smartphone becoming a mainstream device to accessthe Internet, in the market for various services and applications that has expanded thus far centered on games,
expansion into content other than games such as video, music, and e-books is accelerating. Additionally,social media is being used not only for communication, but is also expanding into fields such as payments
and purchases. As its influence is growing even stronger, demand for marketing support utilizing theindividual characteristics of different media is also increasing further.
Amid this business environment, the Group has focused on smartphone advertising and performance-based
advertising and has worked to enhance its sales of video advertising, which is experiencing particularly
dramatic growth, and its development of the brand advertising market. The Group also worked to expand
business overseas and to boost earnings mainly in Southeast Asia, and Greater China.
Moreover, we proactively hired and developed human resources using AI-type personnel systems based onmachine learning. To enhance competitiveness in the medium to long term, we invested in human resources
through the introduction of a new personnel system in October 2017, and in our Media Content Business, wemade upfront investment to expand the media scale mainly of the manga application “GANMA!” and toenhance the Company’s own content.
As a result, revenue increased to ¥15,272 million (up 3.9% year on year), non-GAAP operating profit
decreased to ¥1,011 million (down 56.5% year on year) and profit attributable to owners of parent totaled¥847 million (down 61.7% year on year), with revenue again setting a new record high in substantive terms
for the seventh straight fiscal year.
Concerning year-end dividend for the business year under review, after taking into consideration the abovementioned business performance and the Company’s basic policy on profit distribution, the Company passed
a resolution at the board of directors meeting held on November 20, 2018 to pay a year-end dividend of ¥2.0
per share. Based on this decision, total dividends paid will be ¥256 million.

- 11 -

Adoption of the International Financial Reporting Standards (hereinafter referred to as “IFRS”)
The Group has applied IFRS since the fiscal year ended September 30, 2016 in place of previously used
Japanese GAAP, aiming for better convenience for all of the Group’s stakeholders, including shareholders
and investors in and outside Japan, while promoting actively its global business development.
In line with the above, while voluntary providing previously used “net sales” as a reference, the Group
discloses “revenue” as an indicator based on IFRS. The recording method of the revenue in the sale byadvertising agents, comprising a large part of the Internet Marketing Business, has been changed to record
the net amount, indicating only the margin. As a result, the amount of “revenue” has been reduced
substantially from the amount of “net sales” previously used when the amounts are compared in the sametransaction.
In addition, the Group discloses “non-GAAP operating profit,” an indicator that is not defined in IFRS on a
voluntary basis. Non-GAAP operating profit (or loss) is a profit indicator of constant business performance
determined by adjusting temporary factors such as impairment losses and gains or losses on the sales of noncurrent assets from the IFRS-based operating profit (or loss). The management of the Group deems that the
information is valuable for users of financial statements.
Revenue:

Up 3.9%Non-GAAP operating profit:

Down 56.5%¥15,272 million¥1,011 million

Previous term: ¥14,702 million
Profit attributable to owners
Down 61.7%
of parent:

Previous term: ¥2,325 million
Dividends per share:¥847 million¥2.0

Previous term: ¥2,211 million

Previous term: ¥3.2

- 12 -

The overview of operating results by major business segment is as follows.
From the business year under review, the Group has changed the allocation method to the one where expenses
for operation of the holding company, which were allocated to each business segment, are not allocated toeach business segment, in order to appropriately reflect the actual condition of operations for each businesssegment. The following comparisons with the previous term are calculated using the results for the previous
business year after the changes were made.
Internet Marketing Business Major business
Development of comprehensive marketing support services for companies leveraging the Internet
In Japan and overseas, the Internet Marketing Business engages in the sales of Internet advertising and theoperation of cloud-based CRM services and marketing platforms including affiliate networks.
During the business year under review, transaction volume for video advertising and brand advertising in theInternet Marketing Business expanded steadily. The tailwinds for this were provided not only by the
expansion of the Internet advertising market centering on performance-based advertising for smartphones,
but also by the “digital shift” occurring in advertising budgets, whereby advertisers are moving away fromthe four traditional mass media because their sights are on “brand lift,” which is a performance indicator thatadvertisers use to measure product familiarity and increases in purchasing appetite among users. As thosedemands increased, growth was facilitated by the increasing diversification of advertising products andmarketing methods, as well as the increasing richness of advertising methods. On the other hand, certain
existing large projects were reduced in deliveries. In addition, we conducted proactive human resource
investment aimed at strengthening our organizational foundation to secure competitiveness over the medium
to long term.
Revenue: ¥14,234 million(Up 2.9% year on year)

Non-GAAP operating profit: ¥4,026 million(Down 26.4% year on year)

Media Content Business Major business
Manga Content Business, recruitment platform business, social contribution platform business,
medical platform business, childcare platform business, and other businesses
The Manga Content Business engages in cultivating and supporting manga artists and operates a manga
distribution service through the manga application “GANMA!,” the Company’s own media, for the purposeof planning and developing its own intellectual property (IP).
In the Manga Content Business in the business year under review, while we implemented a certain scale ofonline promotions to expand the media scale of the manga application “GANMA!,” we also invested instrengthening content and products aimed at increasing the active rate of users and increasing time spent in
the application. As a result, the number of “GANMA!” users grew steadily, as cumulative downloads
expanded to 10.98 million as of September 30, 2018. Furthermore, in addition to strong expansion in salesof advertising that appears on “GANMA!,” through growth in in-app billing revenue, application revenue
centered on advertising revenue remained strong.
Non-GAAP operating loss: ¥1,051 million(Operating loss of ¥1,324 million
in the previous term)

Revenue: ¥1,324 million(Up 13.9% year on year)- 13 -

(2) Trends in financial position and profit and loss
 J-GAAP
Category

25th term(ended September 30,
2015)

Net sales (Thousand yen)

64,547,685

Operating profit (Thousand yen)

2,753,969

Ordinary profit (Thousand yen)

3,118,052

Profit attributable to owners of parent(Thousand yen)

2,398,059

Basic earnings per share (Yen)

92.87

Total assets (Thousand yen)

25,387,848

Net assets (Thousand yen)

12,286,188

Dividends per share (Yen)

14.00

Return on equity (ROE) (%) (Note 4)

23.4

 IFRS
25th term(endedSeptember 30,2015) (Note 1, 2)

26th term(endedSeptember 30,2016) (Note 2)

Revenue (Thousand yen)

11,194,804

13,861,870

14,702,191

15,272,040

Non-GAAP operating profit (Thousand yen)

2,900,596

4,146,751

2,324,552

1,011,156

Profit attributable to owners of parent(Thousand yen)

2,351,121

2,519,007

2,210,604

847,410

Total assets (Thousand yen)

25,635,045

29,980,944

32,928,735

33,371,240

Category

27th term(endedSeptember 30,
2017)

28th term(endedSeptember 30,
2018)

Basic earnings per share (Yen) (Note 3)

18.21

19.43

17.38

6.71

Dividends per share (Yen)

14.00

16.00

3.20

2.00

Return on equity (ROE) (%) (Note 4)

23.0

19.8

15.1

5.5

(Notes)1. The Company has applied the IFRS since the 26th term (fiscal year ended September 30, 2016). Figures for the 25th term
(fiscal year ended September 30, 2015) based on IFRS are provided for reference.
2. Following the sale of part of shares of AXEL MARK INC. held by the Company, on November 10, 2016, this company andits subsidiaries have been excluded from the scope of consolidation, and as for the trends in profit and loss for the 25th and26th terms, the comparative periods, the said business was reclassified as discontinued operations and retrospective
adjustments were made.
3. The Company conducted a share split of common share at a ratio of 5 for 1 on October 1, 2016. Basic earnings per sharebased on IFRS above have been calculated on the assumption that the share split was conducted at the beginning of the 25thterm.
4. ROE is calculated as follows:
J-GAAP: (Profit attributable to owners of parent) / (Net assets - Subscription rights to shares - Non-controlling interests)(yearly average)
IFRS: Profit attributable to owners of parent / equity attributable to owners of parent (yearly average)- 14 -

 Adoption of the IFRS: Aiming to achieve rapid growth as a global company
Since the first quarter of the fiscal year ended September 30, 2016, the Group has applied the International
Financial Reporting Standards (IFRS).
What has changed by IFRS?
1. Revenue has changed
How to record revenue (top line)
The conventional recording of the total amount (gross) has been changed to recording of net amounts inthe sale by advertising agents, which comprises a large part of the Internet Marketing Business.
2. The treatment of goodwill has changed
While straight-line amortization was applied to goodwill based on the Japanese GAAP, goodwill is notamortized on IFRS but requires an impairment test every year. This creates an impairment risk.
(3) Issues to be addressed
Aiming to achieve further profit growth and corporate value, the Group has formulated new Midterm
Business Policies for the years from the fiscal year ended September 30, 2017. We present the details
below.


Performance Target
Non-GAAP operating profit: ¥10.0 billion

Basic policies◆ Expand advertising business globally◆ Enhance our own media◆ Invest in what comes after the smartphone
In the mainstay Internet Marketing Business, the Group has up until now focused on the smartphone
advertising market and worked to expand its share. Looking forward, while the domestic market
matures gradually, we expect strong growth to continue in the global market as enhancements are madeto the ecosystem. Therefore, the Group will aim to expand its share and increase its profitability in thedomestic market by further strengthening the position established in the area of smartphones and social
media. At the same time, it will further accelerate the global business development and work to utilize
both organic business growth and M&A as the dual engine for subsequent growth.
In the Media Content Business, we will develop the manga application “GANMA!,” the Company’s
own media content, as a mainstay revenue source of the Group. Through this expansion of theCompany’s own media content, we aim to leverage strengths from inter-segmental synergy with theInternet Marketing Business and improve profitability of the Group.
(4) Capital investments
Nothing noteworthy to report.
(5) Financing
Nothing noteworthy to report.
(6) Business transfers, absorption-type company split or incorporation-type company split
Not applicable.
(7) Business transfers from other companies
Not applicable.

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(8) Succession of rights and obligations relating to other entities’ business as a result of absorption-typemerger or company split
Not applicable.
(9) Acquisition or disposal of shares, other equities or share options of other companies
Nothing noteworthy to report.
(10) Parent and significant subsidiaries (as of September 30, 2018)
1) Relationship with the parent
Not applicable.
2) Significant subsidiaries
Capital or investment in capital(Thousand yen)Company name

Ratio of voting right of theCompany

Major business

SEPTENI CO., LTD.

300,000

100.0%

Internet ad agency

COMICSMART INC.

495,000

100.0%

Manga Content Business(Notes)1. The Company owns a total of 36 consolidated subsidiaries, including the significant subsidiaries described above.
2. The Company does not own any subsidiaries that are specified wholly owned subsidiaries as provided in Article 118, item
4 of the Ordinance for Enforcement of the Companies Act.

(11) Major offices (as of September 30, 2018)
Company name

Office nameLocation

The Company

Headquarters

Shinjuku-ku, TokyoSEPTENI CO., LTD.

Headquarters

Shinjuku-ku, TokyoCOMICSMART INC.

Headquarters

Shinjuku-ku, Tokyo(12) Employees (as of September 30, 2018)
Number of employees

Increase/decrease from the previous term-end

1,189

106 increase(Note) The number of employees indicates the number of working employees.

(13) Major creditors (as of September 30, 2018)
Amount of loans(Million yen)

Creditor
Mizuho Bank, Ltd.

4,400

Sumitomo Mitsui Banking Corporation

1,308(14) Other important matters regarding the current status of the GroupAt the board of directors meeting held on October 30, 2018, the Company approved a resolution toexpress an opinion supporting the tender offer (“Tender Offer”) for common shares of the Company byDentsu Inc. (“Dentsu”), to leave the decision of whether to tender shares in the Tender Offer to thejudgement of the Company’s shareholders, to execute a capital and business alliance agreement with
Dentsu (“Capital and Business Alliance Agreement”), and as a result of the Tender Offer, to issue newshares and dispose of treasury shares through third-party allotment to Dentsu (“Transaction”) pursuant
to the Capital and Business Alliance Agreement.
As a result of the above, the Tender Offer for common shares of the Company by Dentsu is taking place
during the period starting on October 31, 2018 and ending on December 11, 2018 (payment
commencement date: December 18, 2018). The number of shares that have been acquired as a result of
the Tender Offer has not yet been confirmed as of the time of the preparation of this Business Report.
The Transaction will result in Dentsu’s owning 20.99% of the Company’s voting rights, and it isexpected that Dentsu will become a major shareholder in the Company, its largest shareholder as major
shareholder and other affiliate.

- 16 -

2. Status of the Company(1) Matters regarding shares (as of September 30, 2018)
1) Number of shares authorized

370,080,000 shares

2) Number of shares issued

138,856,500 shares (including 10,724,160 treasury shares)

3) Number of shareholders

10,201 (138 increase from the previous business year-end)

4) Major shareholders (top 10 shareholders, excluding treasury shares)
Name of shareholder

Number of shares (shares)

Shareholding ratio (%)

Village seven Co., Ltd.

15,219,000

11.88

Mamoru Nanamura

13,950,500

10.89Japan Trustee Services Bank, Ltd. (Trust Account)

12,695,100

9.91

Yahoo Japan Corporation

7,000,000

5.46

BNP PARIBAS SECURITIES SERVICES LUXEMBOURG/JASDEC/JANUS HENDERSON HORIZON FUND

6,312,400

4.93

The Master Trust Bank of Japan, Ltd. (Trust Account)

6,193,200

4.83

STATE STREET BANK AND TRUST COMPANY 505019

3,811,400

2.97

BNYMSANV RE GCLB RE JP RD LMGC

3,624,700

2.83

Trust & Custody Services Bank, Ltd. (Securities Investment
Trust Account)

2,590,300

2.02Japan Trustee Services Bank, Ltd. (Trust Account 9)2,268,300

1.77(Notes)1. The above shareholding ratios exclude treasury shares (10,724,160 shares).
2. The treasury shares do not include the Company’s shares owned by the officer remuneration BIP (Board Incentive Plan)trust (1,739,200 shares).

5) Other important matters regarding shares
Nothing noteworthy to report.

- 17 -

(2) Matters regarding share options, etc.
1) Status of share options, etc. held by officers of the Company (as of September 30, 2018)
Date of resolution of issue

June 10, 2004

March 10, 2005

Director

Director

Director

Company
AuditorNumber of holders

1

1

2

1

Number of share options

Category

January 25, 2006

60

45

120

10

Number of shares to beissued upon exercise of shareoptions

120,000 shares

90,000 shares

120,000
shares

10,000sharesClass of shares to be issued
upon exercise of shareoptions

Common shares

Common shares

Common shares

Without contribution

Without contribution

Without contribution

¥7

¥7

¥7

From June 29, 2004
to December 18, 2033

From March 16, 2005
to December 16, 2034

From February 1, 2006
to December 20, 2035

Share options in share-based
payment arrangement

Share options in share-based
payment arrangement

Share options in share-based
payment arrangement

January 19, 2007

January 17, 2008

January 15, 2009

Issue priceAmount to be paid per shareupon exercise of shareoptions
Exercise period of shareoptions
Remarks
Date of resolution of issue
Category

Director

Director

Director

Number of holders

1

1

1

Number of share options

20

15

15

Number of shares to beissued upon exercise of shareoptions

20,000 shares

15,000 shares

15,000 sharesClass of shares to be issued
upon exercise of shareoptions

Common shares

Common shares

Common shares

Issue price

¥146

¥160

¥61

Amount to be paid per shareupon exercise of shareoptions

¥7

¥7

¥7

Exercise period of shareoptions

From February 1, 2008
to December 31, 2037

From February 1, 2009
to December 31, 2037

From February 1, 2010
to December 31, 2037

Remarks

Share remuneration-type
share options for officers

Share remuneration-type
share options for officers

Share remuneration-type
share options for officers(Note) As the Company implemented share splits, the number of shares and issue price provided above were adjusted
accordingly.
The share splits for which adjustments were made are listed below.
(1) Share split at a ratio of two shares per common share on May 20, 2005
(2) Share split at a ratio of 200 shares per common share on October 1, 2013(3) Share split at a ratio of five shares per common share on October 1, 20162) Status of share options, etc. delivered to employees, etc. during the business year under review
Not applicable.
3) Other important matters regarding share options, etc.
Not applicable.

- 18 -

(3) Matters regarding company officers (as of September 30, 2018)
1) Directors and company auditors
Position

Name

Representative Director

Koki Sato

Duties and important positions held at other companies
President, SEPTENI CO., LTD.

Director

Isamu Ueno

Director

Kazumi Shimizu

Director

Tatsuya Kimura

Professor, Waseda University Graduate School of Business andFinance

Director

Etsuko Okajima

CEO, ProNova Inc.
Outside Director, Lancers, Inc.
External Director, MARUI GROUP Co., Ltd.
Outside Director, Link and Motivation Inc.

Director

Seiji Yasubuchi

President and Representative Director, Visa Worldwide Japan Co.,Ltd.

Director

Yusuke Asakura

Outside director, Raksul, Inc.
Visiting scholar, National Graduate Institute for Policy Studies

Internal Company Auditor

Muneyoshi Nomura

Company Auditor

Katsuhisa Yanagi

Company Auditor

Mamoru Furushima

Representative, Furushima Law & Accounting OfficeOutside Director (audit and supervisory member), Nippon
Chemical Industrial Co., Ltd.

(Notes)
1. Directors Tatsuya Kimura, Etsuko Okajima, Seiji Yasubuchi and Yusuke Asakura are outside directors as prescribed in
Article 2, item 15 of the Companies Act.
2. Company auditors Katsuhisa Yanagi and Mamoru Furushima are outside company auditors as prescribed in Article 2, item
16 of the Companies Act.
3. Company auditor Mamoru Furushima is a certified public accountant and has a respectable degree of knowledge in financeand accounting.
4. The Company has designated directors Tatsuya Kimura, Etsuko Okajima, Seiji Yasubuchi and Yusuke Asakura as
independent officers in accordance with the rules of Tokyo Stock Exchange, Inc. and has submitted a notice of designation
to the Tokyo Stock Exchange.
5. The Company has entered into agreements with all outside directors and outside company auditors that limit their liability
for damages as set forth in Article 423, paragraph 1 of the Companies Act. The limit on liability for damages under said
agreement is ¥5 million or the minimum liability amount provided for by Article 425, paragraph 1 of the Companies Act,
whichever is higher.

2) Amount of remunerations to directors and company auditors
Number ofpayees

Officers’
remunerations

Director

9¥200,331 thousand

Including ¥24,000 thousand for three outside directors

Company Auditor

4¥38,100 thousand

Including ¥14,100 thousand for three outside company auditors

Category

Remarks(Notes)1. Of all directors, part of remunerations, etc. for serving concurrently as directors of subsidiaries of the Company are borneby the subsidiaries as expenses. Amount of remunerations, etc. to directors, combining the amount borne by the Company
above and the amount borne by the subsidiaries, is ¥255,036 thousand.
2. The number of payees includes three directors and one outside company auditor who retired at the close of the 27th Ordinary
General Meeting of Shareholders held on December 21, 2017. One outside director who serves without remuneration is notincluded in the number of payees.

- 19 -

3) Outside officers(a) Relationships between the Company and other companies where outside officers hold important
positionsCategory
Director

Director

Name
Tatsuya Kimura

Etsuko Okajima

Important positions held at other companies

Relationship with the Company

Professor, Waseda University Graduate
School of Business and Finance

There is no business relationship.

CEO, ProNova Inc.

There is no important business
relationship.

Outside Director, Lancers, Inc.

There is no business relationship.

External Director, MARUI GROUP Co., Ltd. There is no business relationship.

Director

Seiji Yasubuchi

Director

Yusuke Asakura

Company Auditor Mamoru Furushima

Outside Director, Link and Motivation Inc.

There is no business relationship.

President and Representative Director, Visa
Worldwide Japan Co., Ltd.

There is no business relationship.

Outside director, Raksul, Inc.

There is no business relationship.

Visiting scholar, National Graduate Institutefor Policy Studies

There is no business relationship.

Representative, Furushima Law &Accounting Office

There is no business relationship.

Outside Director (audit and supervisory
member), Nippon Chemical Industrial Co.,Ltd.

There is no business relationship.

- 20 -

(b) Major activities in the business year under review
Category

Director

Director

Director

Director

Name

Major activities

Tatsuya Kimura

Mr. Kimura attended all board of directors meetings held during the business year
under review, where he made comments primarily from his professional
viewpoints as an academic. Moreover, he has expressed opinions, etc.
appropriately as a member of the Nomination Advisory Committee, which is avoluntary advisory organization of the Company.

Etsuko Okajima

Ms. Okajima attended all board of directors meetings held during the businessyear under review, where she made comments primarily informed by her
experience and insight as a corporate manager. Furthermore, as the chairperson of
the Nomination Advisory Committee, which is a voluntary advisory organizationof the Company, she has led deliberations on nomination of directors andcompiled proposed recommendations as the committee.

Seiji Yasubuchi

Mr. Yasubuchi attended 9 of 10 board of directors meetings held after he assumed
his position as an outside director, where he made comments primarily from his
professional viewpoints as a corporate manager. Moreover, he has expressed
opinions, etc. appropriately as a member of the Nomination Advisory Committee,
which is a voluntary advisory organization of the Company.

Yusuke Asakura

Mr. Asakura attended 10 of 10 board of directors meetings held after he assumed
his position as an outside director, where he made comments primarily from his
professional viewpoints as a person with experience in corporate management.
Moreover, he has expressed opinions appropriately as a member of theNomination Advisory Committee, which is a voluntary advisory organization of
the Company.

Company Auditor Katsuhisa Yanagi

Mr. Yanagi attended all board of directors meetings and all board of company
auditors meetings held during the business year under review, where he madecomments as required. In addition, he attended other important management
meetings and he performed monitoring of the directors’ performance of theirduties.

Company Auditor Mamoru Furushima

Mr. Furushima attended 12 of 13 board of directors meetings and 12 of 14 boardof company auditors meetings held during the business year under review, where
he made comments primarily from his professional viewpoints as a certified
public accountant and as a lawyer.

- 21 -

(4) Financial auditor (as of September 30, 2018)
1) Name
Deloitte Touche Tohmatsu LLC
2) Amount of remuneration, etc.
(a) Remuneration for audit services set forth in Article 2, paragraph 1 of the Certificated Public
Accountants Act to be paid by the Company¥37,107 thousand(b) Total amount of cash and other economic benefits to be paid to the financial auditor by the Company
and its subsidiaries¥37,607 thousand(Notes)1. The audit contract between the Company and the financial auditor does not distinguish between remuneration paid for theaudit conducted in accordance with the Companies Act and remuneration paid for the audit conducted in accordance with
the Financial Instruments and Exchange Act. Accordingly, the amount above is the aggregate amount.
2. The Company entrusts the financial auditor with advisory and guidance services concerning taxes and internal control,
which are non-audit services other than the services set forth in Article 2, paragraph 1 of the Certificated Public Accountants
Act, and duly pays consideration for such services.
3. The board of company auditors, based upon the “Practical Guidelines for Cooperation with Financial Auditors” released by
the Japan Audit & Supervisory Board Members Association, conducts confirmation of the auditing plans of the financial
auditor, the status of execution of audit, the grounds for calculation of remuneration estimates and other matters, and having
investigated these, gives consent to remuneration, etc. for the financial auditor in accordance with Article 399, paragraph 1of the Companies Act.

3) Details of limited liability agreement
The Company has entered into an agreement with the financial auditor that limits the liability thereof
for damages as set forth in Article 423, paragraph 1 of the Companies Act. The limit on liability fordamages under said agreement is ¥30 million or the minimum liability amount provided for by Article
425, paragraph 1 of the Companies Act, whichever is higher.
4) Policy for determining of the dismissal or non-reappointment of financial auditor
In the event that there is an obstacle to the execution of duties by the financial auditor, or whenotherwise deeming the action necessary, the board of company auditors will determine the content ofan agenda to be proposed to the General Meeting of Shareholders regarding the dismissal or nonreappointment of the financial auditor. In addition, when any of the matters prescribed in the items in
Article 340, paragraph 1 of the Companies Act are applicable to the financial auditor, the board ofcompany auditors will dismiss the financial auditor with the unanimous consent of the company
auditors.
5) Business suspension order to which the financial auditor was subjected during the past two years
Nothing noteworthy to report.

- 22 -

3. Structure and policy of the Company(1) Policy regarding the determination of dividends of surplus, etc.
With regard to the dividends of surplus, we will consider our consolidated earnings performance foreach business year, the need to fortify our financial position, the Group’s forward-looking businessstrategy, and other factors while at the same time endeavoring to maintain a dividend payout ratio ofaround 15% of profit attributable to owners of parent and provide a return of profit within the limit ofthe distributable amount of the Company. Furthermore, taking into consideration the importance ofcontinuity and stability of dividend payments, we have established a general principle to provide aminimum annual dividend of ¥2 per share to follow a basic practice of providing an appropriate levelof profit distribution in accordance with the business growth. In addition, we will endeavor to utilize
our internal reserves for investments in training personnel, optimizing and reinvigorating our existing
businesses, and capturing new business areas that have the potential for high growth and profitability.
Furthermore, as for the acquisition of treasury shares, the Company shall implement it appropriately
while taking into account the financial status, trend of the share price and other factors, in order toincrease shareholder returns through improvement of the capital efficiency as well as to pursue the agile
capital policy that responds to changes in the management environment.
Based on these policies, the Company will pay a year-end dividend of ¥2.0 per share for the businessyear under review.
(2) Systems to ensure the properness of operations
1) Systems to ensure the properness of operations of the corporate group comprised of the Company andits subsidiaries(a) The corporate group comprised of the Company and its subsidiaries (hereinafter referred to as the“Group”) is managed under a holding company structure in which the Company, which is the ultimate
parent company, is a holding company and its subsidiaries are operating companies. By separating
the managerial function from the function of executing its individual businesses, the Group shallwork to facilitate the delegation of authority to its operating subsidiaries and strengthen the
Company’s function of monitoring the Group’s businesses.
(b) The Company’s function of managing the business of its operating subsidiaries shall be implemented
effectively and efficiently based on the execution of its direct and indirect shareholders’ rights andunder the “Basic Agreement on Business Management Services for the Group” entered into with theoperating subsidiaries.
(c) The Company shall establish principles, regulations, guidelines and others common to the Group to
ensure efficient and proper execution of duties by the Group’s directors, Group Executive Officers
and employees (hereinafter referred to as “officers and employees”).
(d) The Company shall clarify a system for reporting any situations concerning execution of duties by
the Group’s officers and employees such as the state of the business and financial results to theCompany’s board of directors or the Group Management Meeting. In cases where certain significant
decisions are made, prior approval of the Company’s board of directors or the Group Management
Meeting shall be required.
(e) The Internal Auditing Office of the Company shall provide assurance operations (auditing andguarantee function) and consulting operations (advisory and guidance function) from an independentand objective position to the Group, and examine and assess the status of ensuring the properness ofoperations of the entire Group.
2) Systems to ensure compliance with laws and regulations and the Articles of Incorporation by directors
and employees when executing their duties(a) Officers and employees of the Group shall recognize compliance with laws and regulations and social
ethics as being one of basic points for the Group to fulfill its corporate social responsibilities (CSR)
and achieve sustainable growth, and practice the compliance through the Group’s CSR activities.
(b) The Group’s corporate philosophy and code of conduct shall call for compliance with laws andregulations and social ethics and adopt it as the Group’s basic policy for the business operation.

- 23 -

(c) Directors and Group Executive Officers of the Group shall practice and encourage the compliancewith laws and regulations and social ethics proactively.
(d) Directors and Group Executive Officers shall assign authorities for execution of duties appropriately
and clearly and execute the duties in accordance with regulations including the regulations of theboard of directors and the regulations of the Executive Officers.
(e) In the event that directors and Group Executive Officers find a violation of laws and regulations orother important facts regarding compliance, they shall report to the Company’s board of directors or
the Group Management Meeting without delay and take corrective measures.
(f) The Company shall conduct regular compliance trainings for the Group’s officers and employees
continuously and have the Internal Auditing Office, which is directly under Group President andChief Executive Officer, perform internal audits of the Group.
(g) In order to respond appropriately to reporting or consultation from the Group’s officers andemployees on organizational or individual violations of laws and regulations, detect and amend
inappropriate actions and others early, and strengthen the compliance, the Company shall establish awhistleblower hotline with external lawyers being as the person who directly receives a report.
3) Systems for the storage and management of information regarding the execution of duties by directors(a) With regard to information security of the Group, the Company shall set the “Basic Policy on
Information Security,” develop internal regulations regarding information security in line with laws
and regulations, and establish the “Security Management Office” to oversee and manage information
security in an integrated and effective manner under the common policy as the Group.
(b) With regard to documents, forms and other records related to duties of the Group’s officers andemployees (including electromagnetic records), the Company shall develop internal regulations
regarding document management in line with laws and regulations, and manage and store such
documents in an integrated and effective manner under the common policy as the Group.
(c) With regard to personal information management of the Group, the Company shall establish “Privacy
Policy,” develop internal regulations regarding personal information security in line with laws andregulations, and manage such information in an integrated and effective manner under the common
policy as the Group.
(d) With regard to documents, forms and other records related to duties of the Group’s officers andemployees (including electromagnetic records), the Company shall establish a system to ensure that
directors and company auditors can have access to these records at any time.
(e) With regard to insider information on shares of listed companies, the Company shall establish the“Group Regulations on Prevention of Insider Trading,” manage such information in an integrated
and effective manner under the common policy as the Group, and communicate it to the division in
charge of information disclosure appropriately.
(f) When storing and managing information through electromagnetic records, the Company shall strive
to gather the up-to-date information on threats for electronic information to build the latest system
for storage and management possible.
4) Regulations and other systems for managing the risk of loss(a) In order to recognize significant events that may affect the business management of the Group,
identify, analyze and assess risks that may harm the development and growth of the business, andmake responses to the risks such as risk aversion, mitigation, transfer and others, the Company shallestablish the “Group Risk Management Regulations” and set up the “Group Risk Management
Committee” as a body to oversee and manage such risks in an integrated and effective manner under
the common policy as the Group.
(b) With regard to usual risk management of the Group, each operating subsidiary or division shall makea risk assessment and response to the risk, and the Group Risk Management Committee shall receivea report from the operating subsidiary or division and oversee the risk management of the Group.
(c) In case of an emergency, the “Crisis Management Headquarters” with the Group President and Chief
Executive Officer as its head shall oversee the risk management of the Group.
- 24 -

(d) Risk management policies of the entire Group as well as assessment of and responses to the risks
related to strategic decision-making such as management strategy and merger and acquisition shallbe treated as the exclusive prerogatives of the Company’s board of directors. In making thesemanagement decisions, the Company shall assess the risks appropriately.
(e) The Company shall establish a reporting system for any event or indication that may affect the Groupsignificantly in cases where risks have become apparent, so that its board of directors can figure out
such an event or indication in advance.
5) Systems to ensure the efficient execution of duties by directors(a) The Company’s board of directors shall make decisions on matters stipulated in laws and regulations
and the Articles of Incorporation and the execution of important operations, and transfer its authority
to Group Executive Officers with regard to the execution of other operations pursuant to the“regulations of the board of directors” and the “Resolution and Entrustment Criteria” to ensureswiftness and efficiency of the execution of duties.
(b) Multiple subsidiary groups that are part of the same chain of command in the Group shall be deemed
as companies without board of directors in terms of institutional design under the Companies Act inorder to promote the swiftness and efficiency of the decision-making process. Their information shallbe consolidated by the Company’s board of directors or the management meeting of the coresubsidiary to uniform the decision-making process.
(c) Directors and Group Executive Officers shall execute duties efficiently based on the Midterm
Business Policies and goals and annual budget set by the Company’s board of directors, as well asreport the progress of these policies and goals and budget to the Company’s board of directors or theGroup Management Meeting and implement necessary improvement measures.
(d) In cases where subsidiaries make significant decisions, approval of the Company’s board of directors
or the Group Management Meeting shall be required, and coordination shall be made for the efficient
resource allocation avoiding overlaps of business activities and capital investments between the
Company and subsidiaries or between subsidiaries.
6) Matters relating to employees that assist the company auditors upon the request of such company
auditors, independence of the relevant employees from directors and effectiveness of directions given
to such employees of the company auditors to be ensured(a) Employees that assist the company auditors shall be assigned at the request of company auditors.
(b) Employees that assist the company auditors shall not concurrently serve other duties and posts.
(c) Matters related to personnel evaluations, personnel transfers, disciplinary actions, etc. for employeesthat assist the company auditors shall be conducted separately from the other employees anddetermined with the consent of the company auditors.
7) Systems for enabling directors and employees to make reports to company auditors and systems for
ensuring that the persons who made such reports shall not be treated disadvantageously on the grounds
that they have submitted the said reports(a) Company auditors of the Company may attend the board of directors meetings of the Company,
Group Management Meeting and other important meetings, and request explanations from officers
and employees as necessary.
(b) In cases where company auditors request reports on operations or inspections of documents such as
minutes, approval documents and accounting books, officers and employees of the Group shall
respond to the request in a prompt and appropriate manner.
(c) In the event that officers and employees of the Group detect any facts or situations that may causesignificant damage to the companies, such officers and employees shall immediately report thematters to company auditors.
(d) The Company shall establish regulations for prohibiting removal from duty, discharge and any otherdisadvantageous treatment to officers and employees of the Group on the grounds that the officers
and employees made a report to company auditors, and make the regulations well known.

- 25 -

(e) All of the internal audit reports conducted by the Internal Auditing Office shall be reported to theboard of company auditors.
8) Matters relating to policies on procedures for prepayment or reimbursement of expenses arising fromthe execution of duties by company auditors and processing of other expenses or obligations arisingfrom the execution of duties by company auditors
Expenses that are considered necessary in the execution of duties of company auditors shall bebudgeted in advance. In cases where company auditors request payment for reasonable expenses forthe execution of their duties, the Company shall accept the request.
9) Systems for ensuring the effective functioning of audits by company auditors(a) The Company shall ensure that it provides its company auditors with opportunities to sufficiently
exchange opinions with the Group President and Chief Executive Officer, outside directors, financial
auditor and internal auditors.
(b) The Company shall establish a system that allows its company auditors to perform audits equivalent
to audits of the Company by the company auditors under individual agreements between the
Company and its subsidiaries, in addition to investigations of subsidiaries under laws and regulations,so that the company auditors can audit the entire Group effectively and efficiently as needed.
(3) Overview of status of management of systems to ensure the properness of operations
1) Information on compliance and risk management
With regard to the status of compliance and risk management among the entire Group, the Company
shall regularly hold the meeting of the Group Risk Management Committee and share the information
relating to the correspondence status, etc.
Regular compliance trainings for officers and employees have been provided to raise the employee’s
awareness on compliance. In addition, the Company established the internal reporting system for theGroup and informed all employees about it.
2) Information on the execution of duties by directors
The board of directors comprises of seven directors, including four outside directors. In addition, threecompany auditors including two outside company auditors also attend the meetings of the board of
directors. During the business year under review, the board of directors held meetings 13 times to ensure
the execution of duties in compliance with laws and regulations and the Articles of Incorporation bymeans of the managerial decision-making through full and thorough discussions and other measures.
3) Information on the execution of duties by company auditors
The board of company auditors comprises of three company auditors, including two outside company
auditors. During the business year under review, the board of company auditors held meetings 14 times
to mainly receive reports from internal company auditor on the status of operations of the Company andexchange opinions mutually among company auditors.
In addition to that, company auditors shall provide supervision of execution of duties by directors byattending the important meetings including the meeting of the board of directors and GroupManagement Meeting, and regularly exchange information with the Group President and Chief
Executive Officer, financial auditor and Internal Auditing Office.
(Note) Figures in this Business Report are rounded down to the units indicated only for the J-GAAP monetary values in “(2)Trends in financial position and profit and loss” on page 14. All other figures are rounded to the units indicated.

- 26 -

Consolidated Financial Statements
Consolidated Statement of Financial Position(Thousand yen)Account
AssetsCurrent assets
Cash and cash equivalents
Trade receivables
Inventories
Other financial assets
Other current assets

28th term(At September
30, 2018)(Reference)

27th term

14,922,272
10,144,715
10,072
119,284
1,027,049

15,519,366
9,988,192
9,794
209,252
545,80926,223,392

26,272,413

Property, plant andequipment

493,547

333,676

Goodwill
Intangible assets

1,831,176
173,666

1,817,632
169,005

Investments accounted forusing equity method

1,827,963

1,943,739

Other financial assets

2,141,378

Other non-current assets
Deferred tax assets
Total non-current assets

Total current assets
Non-current assets

Account(At September
30, 2017)

Liabilities and Equity
Liabilities
Current liabilities
Trade payables
Other financial liabilities
Income taxes payable
Other current liabilities(At September
30, 2018)

27th term(At September
30, 2017)

9,112,773
1,800,640
187,769
1,588,865

9,349,155
1,931,391
309,710
1,796,410

12,690,047

13,386,666

4,624,078
109,455

4,018,845
82,821–

1,140

Deferred tax liabilities

217,626

215,731

1,657,054

Total non-current
liabilities

4,951,159

4,318,537

6,674
673,4447,024
728,192

Total liabilities
Equity17,641,206

17,705,203

7,147,848

6,656,322

Equity attributable toowners of parent
2,120,484
3,663,023(1,691,819)
11,493,305

2,113,611
3,647,815(1,691,818)
11,018,315

87,24484,355

15,672,237

15,172,278

Total current liabilities
Non-current liabilities
Other financial liabilities
Provisions
Other non-current
liabilities

Share capital
Capital surplus
Treasury shares
Retained earnings
Other components ofequityTotal equity attributableto owners of parent
Non-controlling interests
Total assets(Reference)

28th term

33,371,240

32,928,735

57,79751,254

Total equity

15,730,034

15,223,532

Total liabilities and equity

33,371,240

32,928,735(Note) Figures are rounded to the nearest unit.

- 27 -

Consolidated Statement of Profit or Loss(Thousand yen)
(Reference)
27th term(From October 1, 2016
to September 30, 2017)28th term(From October 1, 2017
to September 30, 2018)

Account
Continuing operations
Revenue
Cost of sales

15,272,040
2,597,618

14,702,191
1,713,539

Gross profit
Selling, general and administrative expenses
Other income
Other expenses

12,674,422
11,693,238
32,991
37,387

12,988,652
10,651,666
14,949104,127

976,788
147,786
72,344

2,247,808
277,030
113,963

301,104

36,772

1,353,334
506,732

2,447,647
1,109,365

Profit from continuing operations
Discontinued operations
Profit from discontinued operations

846,602

1,338,282–

868,070

Profit846,6022,206,352

Profit attributable to:
Owners of parent
Non-controlling interests

847,410(808)

2,210,604(4,252)846,6022,206,352

72,443,106

72,375,144

976,788–
34,3682,247,808
960
77,704

1,011,156

2,324,552

Operating profit
Finance income
Finance costs
Share of profit (loss) of investments accounted for using
equity method
Profit before tax
Income tax expense

Total
Net sales (Reference)
Reconciliation from operating profit to non-GAAP operating
profit (Reference)
Operating profit
Other income
Other expenses
Non-GAAP operating profit(Note) Figures are rounded to the nearest unit.

- 28 -

(Reference) Consolidated Statement of Comprehensive Income

Account
ProfitOther comprehensive income
Items that will not be reclassified to profit or loss
Net changes in financial assets measured at fair value
through other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Cash flow hedges
Share of other comprehensive income of entities accounted
for using equity method

28th term(From October 1, 2017
to September 30, 2018)846,602(Thousand yen)
27th term(From October 1, 2016
to September 30, 2017)
2,206,352

11,764

183,71954,822(13,029)

258,466(13,770)

300

1,514

Total other comprehensive income, net of tax

53,857429,929

Total comprehensive income

900,459

2,636,281

Comprehensive income attributable to:
Owners of parent
Non-controlling interests

901,267(808)

2,617,876
18,405Comprehensive income

900,459

2,636,281(Note) Figures are rounded to the nearest unit.

- 29 -

Consolidated Statement of Changes in Equity
28th term (From October 1, 2017 to September 30, 2018)(Thousand yen)
Equity attributable to owners of parent

Noncontrollinginterests

Total equity

15,172,278

51,254

15,223,532–

847,410(808)

846,602–53,85753,857–53,857–

847,41053,857901,267(808)

900,459

6,874

–

–

(13,485)

263

–

263

–

–

–

(409,904)–(409,904)–(409,904)

–

–

(1)

–

–

(1)

–

(1)

–

8,334

–

–

–

8,334

7,482

15,816

–

–

–

–

–

–

–

–

(1)

–

–

37,484(37,483)

–

(131)

(131)

6,873

15,208(1)(372,420)(50,968)(401,308)

7,351(393,957)

2,120,484

3,663,023(1,691,819)

11,493,305

87,244

15,672,237

57,797

15,730,034

TreasurysharesRetainedearnings

2,113,611

3,647,815(1,691,818)

11,018,315

84,355–––

847,410

–

–

–

–

–

6,874

Share capital
Balance at October 1,
2017ProfitOther comprehensive
incomeTotal comprehensive
incomeIssuance of newsharesDividends of surplus
Purchase and disposalof treasury shares
Changes in ownershipinterests in
subsidiaries that do
not result in loss ofcontrolChanges in ownershipinterests in
subsidiaries that resultin loss of control
Other
Total transactions
with owners
Balance at September
30, 2018

Other
componentsof equity

Capitalsurplus(Note) Figures are rounded to the nearest unit.

- 30 -Total

(Reference) 27th term (From October 1, 2016 to September 30, 2017)(Thousand yen)
Equity attributable to owners of parent

Noncontrollinginterests

Total equity

14,155,722

890,147

15,045,869–

2,210,604(4,252)

2,206,352–

407,272

407,272

22,657429,929–

2,210,604

407,272

2,617,876

18,4052,636,281

28,606––(55,970)

1,243

–

1,243

–

–

–

(415,096)–(415,096)–(415,096)––(1,206,133)––(1,206,133)–(1,206,133)

–

1,940

–

–

–

1,940

(218,024)(216,084)

–

–

–

–

(2,873)(2,873)(638,394)(641,267)

TreasurysharesRetainedearnings

2,085,004

3,617,269(485,685)

8,815,259

123,875–––

2,210,604

–

–

–

–

–

28,607

Share capital
Balance at October 1,
2016
ProfitOther comprehensive
incomeTotal comprehensive
incomeIssuance of newsharesDividends of surplus
Purchase and disposalof treasury shares
Changes in ownershipinterests in
subsidiaries that do
not result in loss ofcontrolChanges in ownershipinterests in
subsidiaries that resultin loss of control
Other

Other
componentsof equity

Capitalsurplus

Total

–

–

–

407,548(387,949)

19,599(880)

18,719Total transactions
with owners

28,60730,546(1,206,133)(7,548)(446,792)(1,601,320)(857,298)(2,458,618)

Balance at September
30, 2017

2,113,611

3,647,815(1,691,818)

11,018,315

84,355

15,172,278

51,254

15,223,532(Note) Figures are rounded to the nearest unit.

- 31 -

Non-consolidated Financial Statements
Non-consolidated Balance Sheet(Thousand yen)Account
AssetsCurrent assets
Cash and deposits(Reference)

28th term(At September
30, 2018)

27th term

11,406,694
7,615,197

11,153,521
7,983,157

Accounts receivable trade294,408

283,787

Supplies
Prepaid expenses

1,811
137,5192,130
66,267

Accounts receivable other

3,011,001

2,062,699

Income taxes receivable

317,130

337,933–

400,000

Deferred tax assets

19,102

16,960Other
Non-current assets

10,522
5,372,466

584
4,408,539

Property, plant andequipment

267,457

125,670

Buildings

156,141

45,174Tools, furniture andfixtures111,316

80,495Intangible assets
Software
Software in progress
Other

159,301
158,673–627

152,781
127,154
25,000627

Investments and otherassets4,945,707

4,130,087

Investment securities

946,516

520,330

2,254,627

2,119,340

Short-term loans
receivable fromsubsidiaries andassociates

Shares of subsidiaries andassociates
Lease and guarantee
deposits

788,993753,265

Deferred tax assets
Other944,769
10,800723,379
13,771

Total assets

16,779,161

Account(At September
30, 2017)

Liabilities
Current liabilities
Short-term loans payable

28th term(At September
30, 2018)(Reference)

27th term(At September
30, 2017)

1,062,090
58,335

1,611,114
58,335Current portion of longterm loans payable

600,000

999,996

Accounts payable - otherAccrued expenses
Income taxes payable
Deposits received
Provision for bonuses
Other
Non-current liabilities
Long-term loans payable
Other

275,044
67,83026,87915,60916,1872,205
3,846,836
3,800,000
46,836442,999
26,200
16,23918,696
48,648–3,961,395
3,933,338
28,057

Total liabilities

4,908,926

5,572,509

Net Assets
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Other capital surplus
Retained earnings
Legal retained earnings
Other retained earnings
General reserve

11,896,299
2,120,484
2,719,138
2,532,167
186,9718,748,495
70,867
8,677,628
400,000

9,989,102
2,113,610
2,712,264
2,525,293
186,971
6,855,044
70,867
6,784,177
400,000

8,277,628

6,384,177

Retained earnings
brought forward(1,691,818)(1,691,817)

Valuation and translation
adjustments

Treasury shares(32,309)(19,281)Deferred gains or losses
on hedges(32,309)(19,281)

Share acquisition rights

6,245

19,730Total net assets

11,870,234

9,989,551

Total liabilities andnet assets

16,779,161

15,562,061

15,562,061(Note) Figures are rounded down to the nearest unit.

- 32 -

Non-consolidated Statement of Income
28th term(From October 1, 2017
to September 30, 2018)

Account(Thousand yen)
(Reference) 27th term
(From October 1, 2016
to September 30, 2017)

Operating revenue
Operating expenses

4,441,345
1,974,971

3,800,044
1,785,355

Operating profit
Non-operating income
Interest income
Dividend income
Gain on valuation of investment securities
Other

2,466,374
222,901308
43,614
166,584
12,3942,014,688
331,237
215
32,639297,698683

Non-operating expenses
Interest expenses
Loss on valuation of investment securities
Share listing related expenses
Commission fee
Other97,67434,312
21,74615,084
24,115
2,415

97,9104,227
25,62012,59950,7584,705

2,591,601
315,351
279,351
35,9992,248,015
251,480
248,998
2,481

853,626
785,703
67,923

1,148,182
1,145,849
2,332

Profit before income taxes
Income taxes - current
Income taxes - deferred

2,053,325(32,246)(217,782)

1,351,313
36,465(266,253)

Profit2,303,354

1,581,100

Ordinary profit
Extraordinary income
Gain on sales of shares of subsidiaries and associates
Gain on sales of investment securities
Extraordinary losses
Loss on valuation of shares of subsidiaries and associates
Other(Note) Figures are rounded down to the nearest unit.

- 33 -

Non-consolidated Statement of Changes in Equity
28th term (From October 1, 2017 to September 30, 2018)(Thousand yen)

Capitalstock

Balance at
beginning ofcurrent period
Changes of items
during period
Issuance of newsharesDividends ofsurplusProfitPurchase oftreasury shares
Net changes of
items other thanshareholders’equityTotal changes of
items during
periodBalance at end ofcurrent period

Shareholders’ equity
Capital surplus
Retained earnings
Other retained earnings
Legal
Other
Legal
Retained
Total capital
capitalcapitalretained
Generalearnings
surpluses
surplussurplusearnings
reservebrought
forward2,113,610

2,525,293

6,873

6,873

186,9712,712,264

70,867400,000

6,384,177

Total
retainedearnings

Valuation and translation adjustments
Valuation
Total
Share
difference Deferred
Total sharevaluationacquisition
Treasuryongains orholders’andrightssharesavailable- losses on
equitytranslation
for-salehedgesadjustments
securities

6,855,044 (1,691,817)

6,873

9,989,102–(19,281)(19,281)

19,73013,747

Total net
assets9,989,551

13,747(409,903)(409,903)(409,903)(409,903)

2,303,354

2,303,354

2,303,354

2,303,354

(1)

(1)

(1)

(1)

–

–

(13,028)(13,028)(13,485)(26,513)(13,485)

1,880,683

6,873

6,873

–

6,873

–

–

1,893,451

1,893,451

1,907,197–(13,028)(13,028)

2,120,484

2,532,167

186,9712,719,138

70,867400,000

8,277,628

8,748,495 (1,691,818) 11,896,299–(32,309)(32,309)6,245 11,870,234(Reference) 27th term (From October 1, 2016 to September 30, 2017)(Thousand yen)

Capitalstock

Balance at
beginning ofcurrent period
Changes of items
during period
Issuance of newsharesDividends ofsurplusProfitPurchase oftreasury shares
Net changes of
items other thanshareholders’equityTotal changes of
items during
periodBalance at end ofcurrent period

Shareholders’ equity
Capital surplus
Retained earnings
Other retained earnings
Legal
Other
Legal
Retained
Total capital
capitalcapitalretained
Generalearnings
surpluses
surplussurplusearnings
reservebrought
forward2,085,004

2,496,687

28,60628,606

186,9712,683,658

70,867400,000

5,218,172

Total
retainedearnings
5,689,039

Valuation and translation adjustments
Valuation
Total
Share
difference Deferred
Total sharevaluationacquisition
Treasuryongains orholders’andrightssharesavailable- losses on
equitytranslation
for-salehedgesadjustments
securities(485,684)

28,606

9,972,017

60

–

60

Total net
assets56,102 10,028,179

57,212

57,212(415,095)(415,095)(415,095)(415,095)

1,581,100

1,581,100

1,581,100

1,581,100(1,206,132) (1,206,132)(1,206,132)

–

(60)

(19,281)(19,341)(36,371)(55,713)28,60628,606–28,606––

1,166,005

1,166,005 (1,206,132)

17,084(60)(19,281)(19,341)(36,371)(38,628)

2,113,610

2,525,293

186,9712,712,264

70,867400,000

6,384,177

6,855,044 (1,691,817)

9,989,102–(19,281)(19,281)

19,7309,989,551(Note) Figures are rounded down to the nearest unit.

- 34 -

Board of Company Auditors’ Report

Audit Report
With respect to the directors’ performance of their duties during the 28th business year from October 1, 2017
to September 30, 2018, the board of company auditors has prepared this audit report after deliberations basedon the audit reports prepared by each of the company auditors, and hereby reports as follows:
1. Method and Contents of Audit by the Company Auditors and the Board of Company Auditors(1) The board of company auditors has established the audit policies, allocation of duties, etc. and received
a report from each of the company auditors regarding the status of implementation of their audits andresults thereof. In addition, the board of company auditors has received reports from the directors, etc.,
and the financial auditor regarding the status of performance of their duties, and requested explanations
as necessary.
(2) In conformity with the audit regulations for company auditors established by the board of company
auditors, and in accordance with the audit policies and allocation of duties, etc., each of the company
auditors endeavored to facilitate a mutual understanding with the directors, the Internal Audit Divisionand other employees, etc., endeavored to collect information, maintain and improve the audit
environment, and conducted the audits based on the methods described below.
1) Each of the company auditors has attended the meetings of the board of directors and other important
meetings, received reports on the status of performance of duties from the directors and employees,
etc., and requested explanations as necessary, examined important approval/decision documents, andinspected the status of the corporate affairs and assets. Also, with respect to the subsidiaries, each of
the company auditors endeavored to facilitate a mutual understanding and exchanged information withthe directors and company auditors, etc. of each subsidiary and received from subsidiaries reports on
their respective business as necessary.
2) Each of the company auditors monitored and inspected the status of the establishment and operationof the board of directors’ resolutions regarding the development and maintenance of the system toensure that the directors’ performance of their duties complied with all laws, regulations and the
Articles of Incorporation of the Company and other systems that are set forth in Article 100, paragraphs
1 and 3 of the Ordinance for Enforcement of the Companies Act as being necessary for ensuring theappropriateness of the corporate affairs of the corporate group comprised of a joint stock company andits subsidiaries, and the systems (internal control systems) based on such resolutions. With respect tothe internal control related to the financial report, the board of company auditors received reports
regarding the assessment and status of their audits from the directors, etc. and Deloitte Touche
Tohmatsu LLC, and also requested explanations when necessary.
3) Each of the company auditors monitored and verified whether the financial auditor maintained its
independence and properly conducted its audit, received a report from the financial auditor on thestatus of its performance of duties, and requested explanations as necessary. Each of the company
auditors was notified by the financial auditor that it had established a “system to ensure that the duties
are performed appropriately” (the matters listed in the items of Article 131 of the Ordinance on
Accounting of Companies) in accordance with the “Quality Management Standards Regarding Audits”(Business Accounting Council, October 28, 2005), and requested explanations as necessary.
Based on the above-described methods, each of the company auditors examined the business report and the
supplementary schedules, the Non-consolidated Financial Statements (Non-consolidated Balance Sheet,
Non-consolidated Statement of Income, Non-consolidated Statement of Changes in Equity and Notes to Nonconsolidated Financial Statements) and the supplementary schedules thereof, as well as the Consolidated
Financial Statements (Consolidated Statement of Financial Position, Consolidated Statement of Profit or Loss,
Consolidated Statement of Changes in Equity and Notes to Consolidated Financial Statements, all preparedby omitting some disclosure items required under IFRS as provided for by Article 120, the latter part ofparagraph 1 of the Ordinance on Accounting of Companies), for the business year under review.

- 35 -

2. Results of Audit(1) Results of Audit of Business Report, etc.
1) We acknowledge that the business report and the supplementary schedules thereof fairly present thestatus of the Company in conformity with the applicable laws and regulations and the Articles ofIncorporation of the Company.
2) We acknowledge that no misconduct or material fact constituting a violation of any law or regulationor the Articles of Incorporation of the Company was found with respect to the directors’ performanceof their duties.
3) We acknowledge that the board of directors’ resolutions with respect to the internal control systems
are appropriate. We did not find any matter to be mentioned with respect to the directors’ performanceof their duties concerning the internal control systems including the internal control related to thefinancial report.
(2) Results of Audit of Non-consolidated Financial Statements and their Supplementary Schedules
We acknowledge that the methods and results of audit performed by the financial auditor, Deloitte
Touche Tohmatsu LLC, are appropriate.
(3) Results of Audit of Consolidated Financial Statements
We acknowledge that the methods and results of audit performed by the financial auditor, Deloitte
Touche Tohmatsu LLC, are appropriate.
November 20, 2018
Board of Company Auditors
SEPTENI HOLDINGS CO., LTD.
Internal Company Auditor

Muneyoshi Nomura(Seal)

Company Auditor

Katsuhisa Yanagi(Seal)

Company Auditor

Mamoru Furushima(Seal)(Note)
Company auditor Katsuhisa Yanagi and company auditor Mamoru Furushima are outside company
auditors, as set forth in Article 2, item 16, and Article 335, paragraph 3 of the Companies Act.

- 36 -