Profile

Financial
Highlights

To OurStakeholders
Key Strategies

At a Glance

Topics

2 0 1 0R e p o r t
A n n u a lYear Ended March 31, 2010

R&D

Corporate
Governance

Financial Review

Financial Section

Corporate Data

1

ProfileProfileWhat is the IT Holdings Group?

The IT Holdings Group seeks to be a corporate citizen whose activities, namely, the provisioncompanies in Japan. At its core are seven principal operating companies, which underpinof various services utilizing information technology (IT), match its status as a leading corporate

excellent responses to the needs of clients in a wide range of industry sectors. As of Marchgroup, and will strive to raise corporate value, supported in this effort by the high regard of all

31, 2010, the Group comprised 82 companies—55 of which fell under the scope of

Financial
Highlights

Formed in April 2008, the IT Holdings Group is the total information technology (IT)Management Philosophy

ProfileIT Holdings Group

its stakeholders, including clients and shareholders as well as employees and their families.
We will cultivate a vibrant corporate culture that encourages companies and individuals under
the Group umbrella to work toward higher goals and embrace new challenges, and thereby

To OurStakeholders

consolidation—and net sales reached ¥313 billion.

ensure corporate growth.
For year ended March 31:¥126,164

We will always provide our very best to clients by combining Group strengths to foster higher
quality and greater sophistication in our technological capabilities.

million

Sales breakdown by division
40.2%

We will uphold high corporate morals and fulfill our social obligations.

Net Sales

Sales breakdown by division
8.0%

Solution Services

Future Targets
By 2015, the IT Holdings Group will have built a business portfolio geared for higher growth andhigher profit by entrenching core businesses and establishing a presence in new businesses.

For year ended March 31:

Net Sales

Sales breakdown by division
49.7%

Core businesses

Businessplatform
services

Outsourcing
and network

Outsourcing

Other new businesses

Core businesses
For year ended March 31:
SoftwareNet
Sales
development

Solutionsmillion

Sales breakdown by division
2.1%

Softwaredevelopment
Solution
services

Other BusinessOperating income ratio

1

2015

Corporate Data

This segment combines
Fiscal 2009
supplementary services,such asleasing, extended through theprovision of information systems.

Operating income ratio

Financial Section¥6,693New businesses

Financial Review

This segment offers total
system integration services,from information system
planning to configuration.

Consulting

Corporate
Governance

Software Development

Overseasbusinesses

R&D

New, promising and overseas pursuits

millionGrowth rate

¥155,976

Growth rate

This segment concentrates on
the sale of software andhardware.

Core businesses

This segment utilizes data centers toprovide such services as outsourcing,system operations, network
configuration and related services.

Topics¥25,021

millionAt a GlanceOutsourcing and
Network
For year ended March 31:

Key Strategies

Net Sales

2

1

2

ProfileConsolidated Financial Highlights (Year ended March 31, 2010)
Profile2010
Millions of yen

For year ended March 31:
Net sales
Operating income
At year-end:
Total assets
Total net assets
Net cash provided by operating activities

April 2008

Other ¥6 billion (2.1%)

IT Holdings is created through the

Outsourcing and Network¥126 billion (40.2%)

Solution services¥25 billion (8.0%)

management integration of major

Net assets

Equity ratio

Net sales¥313 billion(100.0%)Notes:

Software development¥155 billion (49.7%)

Consolidated Subsidiaries
Domestic

Overseas1

Services 18.4%

SORUN CORPORATION joined the IT
Holdings Group.

Net sales¥313 billion(100.0%)INTEC Inc.

14

Other finance 6.1%
Processing-based
manufacturing 9.4%

¥110.74
110.72
1,541.17
32.00-19.4%
—
+4.0%
—

$0.96
—
17.23
0.34

5.7%
44.2%

7.4%
44.4%

-1.7 points-0.2 points

Fiscal 2010
Net Sales

Business Content¥90 billion(Consolidated)¥93 billion(Non-consolidated)

SORUN
Corporation

11

3

Focuses on clients in finance and manufacturing sectors but
working to achieve good balance of business with orders fromtelecommunications and public service sectors. Also develops
systems for aerospace industry.

UFIT Co., Ltd.

20Strengths in services for clients in credit card and consumer
finance sectors. Focuses on outsourcing services.

¥42 billion

Agrex Inc.

6

0

Leading company in business process outsourcing in Japan.
Listed on the First Section of the Tokyo Stock Exchange (4799)¥26 billion

Qualica Inc.

0

2

Maintains a high profile with services for the manufacturing,
distribution and service industries.

¥13 billion

AJS Inc.

10

Focuses on systems for the manufacturing and medical
services industries.

¥10 billion¥46 billion(Consolidated)(Consolidated)(Consolidated)(Non-consolidated)(Non-consolidated)

Performance estimates and other forward-looking statements in these materials are based on information available to management and certain
reasonable assumptions at the time of publication. Various factors may cause actual figures to differ considerably from estimates.

34

Corporate Data

Cautionary note regarding forward-looking statements

Financial Section

Assembly-based
manufacturing 12.8%¥89.25—
1,602.77
32.00

Financial Review

Distribution 8.0%

3,364,972
1,666,758
337,495
505,0280Banking 7.5%

Insurance 6.7%

+6.0%
+6.1%
-8.5%
+33.8%

Corporate
Governance

December 2009

295,327
146,216
34,311
35,105

Boasts expertise in services for clients over a diverse industry
spectrum, including finance, manufacturing, distribution,
medical services and public services. Provides total solutions,from consultations and system development to outsourcing
and network services.

Public institutions 9.0%
Credit card 18.2%

313,077
155,075
31,401
46,988

3

Others 3.9%

IT Holdings.

$3,373,350
171,931
82,328R&D

subsidiaries under the direct control of

TIS Inc.

Net Sales by Client Sector (Year ended March 31, 2010)-7.2%-32.8%-18.6%

Addresses IT needs of clients in many industries, including
finance, manufacturing and service. Provides one-stop
responses, ranging from platform system development to data
center services.

merging INTEC Holdings into INTEC
Inc., and then putting the surviving¥338,302
23,787
9,407

1. U.S. dollar amounts in this annual report are translated from Japanese yen, for convenience only, at the rate of ¥93.04 = US$1, the approximate rate prevailing on March 31, 2010.
2. Return on equity = Net income/Equity capital [(equity capital at the beginning of the term + equity capital at the end of term)/2] x 100
3. Equity ratio = [Equity capital/Total assets] x 100
4. Equity capital = Net assets – [Subscription rights + Minority interests] = ¥138,401 million for the year ended March 31, 2010.

Principal Operating
Companies

the old TIS Group umbrella and¥313,856
15,996
7,660

Topicsinclude splitting off companies under

ChangeAt a Glance

Key ratios (%):
Return on equity

TIS Inc. and INTEC Holdings, Ltd.

The Group is reorganized. Key events

Net income, diluted
Cash dividends

domestic information service providers

2008-2009

Per share of common stock (¥):
Net income, basic

Millions of yen

Key Strategies

Cash and cash equivalents at end of year

Net Sales by Business Segment (Year ended March 31, 2010)

2010
Thousands of
U.S. dollars

To OurStakeholders

Net income

2009

Financial
Highlights

Progress and Results as a Total
IT Business GroupIT Holdings Corporation and Consolidated Subsidiaries

3

To Our Stakeholders

To O u r S t a k e h o l d e r s

Profilescale system development projects.

Financial
Highlights

investment budgets and took an even more cautious approach toward spending, especially in regard to large-

Against this backdrop, the Group stayed the course outlined in the medium-term management plan,prioritizing technology-driven strategies. A certain degree of success was achieved in reinforcing joint
marketing and proposal activities, substantiated by a four-fold increase in the number of joint orders received.

To OurStakeholders

emphasizing efforts to reinforce joint marketing and proposal activities among Group companies andTechnology-driven strategies hinged on efforts to turn demand for systems into broader business content.
Management also emphasized the establishment of next-generation data centers and an enhanced lineup of

Susumu Okamoto
President

cloud services.
An urgent task within the Group was to push costs down even further, and considerable effort was
directed toward this end. But the absence of large-scale projects and clients’ cautious stance in their IT

opportunity to extend our sincere appreciation to you, our shareholders, for your invaluable support. The

investments adversely impacted results, leading to decreases in sales and profit.

books for fiscal 2010, the year ended March 31, 2010, have been closed and it is time to tell you the results.

Fiscal 2011 is likely to be another tough year. But the Group now includes SORUN CORPORATION, andwe, as the holding company, will strive to leverage excellent synergies in technology and know-how generated
by SORUN and the rest of the Group with the merits of expanded business scale to achieve a sharper

environment was made particularly challenging by a persistent trend among companies to limit IT investmentcompetitive edge. We will also strive to fortify the Group’s management platform, promote steps to boost

to a select few projects while striving to reduce the costs incurred on any projects that funds have been

management efficiency, steadily tap emerging IT investment demand as the recovery takes hold—expected inearmarked for. This budgetary restraint stems from sluggish business conditions and reduced profitability.

the second half—and, ultimately, improve our performance.

The difficulties felt in the industry played out as the Bank of Japan had predicted in its short-term

We ask shareholders for their continued support. Your encouragement of our efforts is always instrumental
to our success.

R&D

economic survey: investment in software would show a steep year-on-year decline in fiscal 2010.
The IT Holdings Group was not immune to the challenges that characterized fiscal 2010. Order activity

June 2010

dropped off significantly as clients, especially in the finance and manufacturing industries, tightened their

Corporate
GovernanceMarket Data in Japan
Anticipated Scale of Japan’s IT Services Market

Fiscal 2010 Net Sales Industry Ranking(%)
5Market size
Growth ratio

10
0.8%

8

1.2%

800

0

600

The IT Holdings Group is among
the top No. 2-ranked companies in Japan

400

338

2

313

200
2008

2009

2010

5

2011

2012

2013

-5

*Compiled by IT Holdings from Gartner’s
projections on Japan’s IT industry byservice segment, released in March 2010.

0

290
152

NTT
Data

NRI

ITHD

61

52

34

CTC NS-SOL ISID

DTS

NSD

6

Rankings determined by IT Holdings using
publicly announced data from each company

Corporate Data

(4.2)%
0

1,000

1.4%

(0.8)%

4(Billions of yen)
1,200 1,142

Financial Section

0.7%

Financial Review(Trillions of yen)
12

6

Topics

The information services industry faced an uphill battle on the profit front in fiscal 2010. The operating

At a Glance

On behalf of senior management and employees throughout the IT Holdings Group, we would like to take thisKey Strategies

Tetsuo Nakao
Chairman4

Update on Key Strategies for Medium-term Growth

Update on Key Strategies for Medium-term GrowthProfileIn April 2009, the IT Holdings Group embarked

Seeking to raise corporate value through synergies

designed to quickly generate results from thegenerated in technology and know-how, IT

April 2008 management integration that createdHoldings brought SORUN under its umbrella in

IT Holdings. It also addresses the paradigm shift

December 2009. The newly consolidated subsid-that characterizes the IT industry and prioritizes

iary was delisted from the First Section of thebusiness model reform, from outsourced devel-

Tokyo Stock Exchange on March 29, 2010.

Efforts to Expand Business
Fiscal 2009

Fiscal 2010

Plan Preparation
Flagship accountstrategy

Investigation

Fiscal 2011 (Planned)

Fiscal 2012
and Beyond

Remarks

First Medium-term Management Plan
Pursuit(3 companies)

To OurStakeholders

agement plan. This three-year blueprint is

Progress through the Medium-term Management Plan 1

Expansion(9 companies)

opment (creation) to service (use), through progress in cloud services over the medium term.

Expand activities throughsynergy fusion

Joint ordering activities, through which Group

have made on key strategies in our second year

companies work together to cultivate client oppor-of operations and outline the activities we willtunities, yielded terrific results. The number of joint

tackle next.

orders soared to 121 in fiscal 2010, with a value of

Existing
Businesses¥5.4 billion, compared with 29 orders worth ¥2.4

approaches to existing and potential clientscompanies to gain greater insight into client

Foster individuality ofGroup companies whileneeds. We also established the Group Solutions

demonstrating
comprehensive strengths

Cultivate corporate culturethat unites the Group.

scope of businessactivities.

Pursue business activities
underpinned by client trust.

Promote measures thatwill fuel corporate growthand motivate employees.

Encourage greater
management efficiency
as a Group.

with an opportunity to showcase respective cor-

Overseas
Businesses

porate resources. Reciprocal knowledge of company strengths can be a valuable tool for securing

Business

Tianjin Binhai high-tech Internet Data GDC
Gotenyama
Center (April)Power and IT
INTEC Manyo Square (July)
Company

Shinsaibashi gDC

Expand business presence,
especially in therest of Asia

Opened represen- Dominant position strategy in China,
specifically, Tianjin and Beijing,tative office inthrough SORUN connection
Vietnam

Support clientsin their globalization efforts

Business alliancewith BT

Solution­business

Combine theknow-how andtechnologies of
TIS and INTEC
into marketable
solutionsjoint orders.
Building the Next-Generation Data Center(121 projects/¥5.4 billion)

New
Businesses

Past efforts to build and expand data centers readyto meet growing demand for services such as cloudcomputing have already been rewarded with theCreate business platformbusiness

Real Cloud
Solution (IUK/INTEC Systems
Institute)

April 2010 opening of a data center in Tianjin, China,
Tianjin Binhai high-tech Internet Data Center. Thiswas followed by the July 2010 opening of a data
Toyama Prefecture. The data center network will
expand further in fiscal 2012 with the anticipatedopening of GDC Gotenyama, a data center in the

IT support for clients’ overseas
bases• Start cloud telephony business•A dd to service menu with solutions
aimed at such targets as the environment business•E stablish department to address
IFRS
Business platform business (cloudbusiness)
Start with three layers of services:
SaaS, PaaS, IaaS

Anticipate solutionand service-format
business trends andhone ability to capitalize on such trends

Corporate Data

Shinagawa district of Tokyo, and a facility underPower and IT Company, which was jointly establishedby Hokuriku Electric Power Company and INTEC.
7• Shift to service-­format business

Financial Section

center, INTEC Manyo Square, in Japan, in Takaoka,• Alliances and shareduse of data centers
by Group companies

Financial Review

Strengthen financial
position of the Group.

Actively reform production
platform and capitalize
on new business opportunities.

tion exchange and provides Group companies(29 projects/¥2.4 billion)

Preliminary discussion (38 projects)

Corporate
GovernanceMedium-termManagement Direction

Forum, an internal structure that supports informa-

Announcement of
results

R&D

7
2
6
3
5 4
afforded by groupstructure, and expand

Preliminary discussion (35 projects)

Topics1

through industry-specific study sessions for Group

Build andexpand nextgeneration data
centers (DC)Finance

At a Glance­client industries, we constantly explored newBusiness Development

To acquire a larger share of orders within

Solution Forum(Joint orderresults)billion in fiscal 2009.

Review meetingsfor cooperative
Manufacturing
approach byclient and solution
theme

Key Strategies

We would like to describe the progress weExtending the Range of Existing Businesses

Financial
Highlights

on IT Evolution 2011, its first medium-term man-

Efforts to Expand Business8

4

Update on Key Strategies for Medium-term Growth

Update on Key Strategies for Medium-term GrowthProfileEfforts to Enhance

Progress through the Medium-term Management Plan 2

Cloud services from the IT Holdings Group utilize

Management Efficiency

Efforts to Enhance Management Efficiency

development for clients in various industries,

On the management efficiency front, IT Holdings

including finance, manufacturing and distribution.

introduced a cash management system to make

The Group has about 30 types of original cloud

procurement and application of funds within theservices in its business arsenal, including industry-

Group more effective.
Visualization

for an employee health and welfare benefits

turing energy-saving technologies—a network ofplatform. To create a groupwide communication

facilities that IT Holdings is steadily expanding—to

platform, the Company embraced social networking

promote wider interest in cloud services.

services*. About 2,500 employees had signed up
as of June 2010, and use the system to exchange
work-related information.
Group companies continue to promote

in Vietnam. From fiscal 2011, IT Holdings Groupmeasures, such as shared back-office operations,plans to enhance its presence in China, withintegrated planning on information systems and

SORUN, a new addition to the Group with bases

optimized group formation, initiated in fiscal 2009,

in Beijing and Tianjin. In addition, the Group aims

and direct energy into building a stronger, more

to pursue full-scale joint marketing activities madeefficient group management platform.

with U.K.-based BT, following the business alli-*Social networking services (SNS): Community-based web service

ance signed in June 2009.

used within the IT Holdings Group as a tool to facilitate

O

L

U

M

Personnel,
Corporate
CultureFirst Medium-term Management Plan

Introduced
hierarchicalmanagement method

Introduce CashManagement System(CMS)

Concentration ofGroup’s headquarter
operations

Established sharedcompany (IT Service
Force Inc.)(Number of companies
and business activities
targeted)(10 companies/35
operations)(15 companies/60
operations)

Cost reduction throughcentralized purchasing

Implemented Grouppurchasing for indirect materials

Expand scope of
products underGroup purchasing
structure as well as
the number of companies involved(Reduction)(¥20 million)(¥60 million)

Effective use of capital

Introduce CMS(Number of companies
targeted)(4 companies)

Set up employee healthand welfare benefits
program

Made preparations
for groupwide healthinsurance plan

Enhance Group communication

Boost number of regIntroduced groupwide
istered users to aboutsocial networking
2,300 in five months
systeminto system activation

Establish groupwide
information system(18 companies)

Establish groupwide
health insurance plan

Consider integrating
SORUN health insurance plan into Groupplan

Corporate
GovernanceCcommunication among employees.

Remarks

R&D

possible through preparations for joint projects

Fiscal 2012 andBeyondTopicsIn fiscal 2010, TIS opened a representative office

Operations,
Assets, Capitaland FinancesGroup presidents
committee, executive
committee and information exchangecommittee

Fiscal 2011
(Planned)

At a Glanceronment-friendly next-generation data centers fea-

Management Efficiency

groupwide health insurance plan as the groundwork

Promoting Business Overseas

Plan Preparation

In April 2010, the Company set up aformats. Moving forward, the Group will use envi-

Fiscal 2010

Key Strategies

and business-specific formats and shared service

Fiscal 2009

To OurStakeholders

results achieved through outsourcing and system

Financial
Highlights

Developing New Businesses

N

Location

Number of employees (Group basis)Tokyo

4,318 (as of March 31, 2010)

Consolidated net sales

President and Representative Director¥46,985 million (as of March 31, 2010)

Masaki Chitose

910

Corporate Data

SORUN Corporation head officeFinancial Section

SORUN CORPORATION traces its roots back to 1970, when the company was established as Matsumoto Keisan Center Co.,
Ltd., in Matsumoto, Nagano Prefecture. Tapping mergers and acquisitions as the strategic route toward growth as anindependent software developer, the company merged with Stat Corporation in 1997. This was followed by a number of equity
investments and mergers with such targets as Nippon Timeshare Co., Ltd., and LTBC Systems Co., Ltd., which underpinned thecreation of today's SORUN Group.
SORUN has clients in many industries, including finance, manufacturing, communications and the public sector. A uniquecomponent of the company's business is its involvement in the development of satellite monitoring and control systems.

Financial Review

What’s SORUN all about?

5

Ratio of Net Sales
At a Glance

At a Glance¥313,856

millionRatio of Net Sales

outsourcing, and system operations and network configuration.
Despite sales-limiting factors, particularly requests from majorclients to lower prices, contributions from NEXWAY and SORUN

Solution Services
FY2010 : net sales total
FY2009 : net sales total% change¥126,164¥125,721+0.4

millionThis segment concentrates on the sale of software and hardware.
Demand for hardware remained sluggish, reflecting poor

million%economic conditions, and sales in the solution services segment
decreased 14.9%, to ¥25,021 million ($268 million).

The main Outsourcing and Network results• Sell hardware, including cloud storage devices• Sector-specific solutions, for anti-money laundering, chemical substanceinformation management (Chemikarte), identity management (Yuito,
Sokuto) and food traceability (i-TRe)¥25,02149.7%¥29,409-14.9
millionmillion%Ratio of Net Sales

8.0
%%
49.7

At a Glance

Ratio of Net Sales

40.2%

FY2009 : net sales total% change

The main Solution Services results

million), up 0.4% from fiscal 2009.

FY2010 : net sales total

Key Strategies

nudged outsourcing and network sales to ¥126,164 million ($1,356• Undertake banking system operation• Undertake insurance business operation• Configure networks linking offices and branches in the securities, credit
card and nonbank sectors• Provide electronic data interchange (EDI) services and SaaS center for
distribution and service sectors• Operate next-generation data centers

Ratio of Net Sales
To OurStakeholders

This segment utilizes data centers to provide such services as

Financial
Highlights

Outsourcing and Network

40.2%

ProfileFY2010 : net sales total

Ratio of Net Sales

Topics8.0%
Ratio of Net Sales

This segment offers total system integration services, frominformation system planning to configuration.
It was a challenge to secure new software development orders,

Ratio of Net Sales¥155,976 million
Ratio of Net Sales

FY2010 : net sales total

FY2009 : net sales total% change¥175,847
49.7%
-11.3
million%situation was compounded by the absence of new large projects
sales by SORUN from the fourth quarter, sales in the software($1,676 million).

8.0%

The other business segment showed an 8.6% decline in sales,to ¥6,693 million ($71 million).

2.1%¥6,693¥7,325-8.6
Ratio of Net Sales

FY2009 : net sales total% change• Services associated with general affairs, bookkeeping and accounting,procurement and purchasing, human resource management and labor
management• Total leasing, including computers and peripheral equipment, industrial
equipment and office equipment

Ratio of Net Sales
Ratio of Net Sales

Ratio of Net Sales

49.7%

million%Corporate Data

8.0%

2.1%

millionFinancial Section

11

extended through the provision of information systems.

FY2010 : net sales total

Financial Review

development segment dropped 11.3%, to ¥155,976 million• Respond to system integration requirements prompted by mergers inthe banking, life insurance and non-life insurance sectors• Configure large-scale information-based systems for securities firms• Configure nonbank main systems for credit card companies• Build customer relationship management systems• Support configuration of basic service systems, including enterprise
resource planning systems

This segment combines supplementary services, such as leasing,

The main Other Business results

to replace completed projects. Therefore, even with the inclusion of

The main Software Development results

Other BusinessCorporate
Governancegiven the trend toward reduced IT investment among clients. This

40.2%

R&D

Software Development

12

6

T o p i c s

TopicsSAP System Upgrade and Migration for Mitsui Chemicals, Inc.

ProfileTIS

INTEC Next-Generation Store Operation System
Yoshinoya is a restaurant chain specializing in a dish called “gyudon,” a bowl of rice topped with beef

and a solid history in the operation of large-scale systems. The company utilizes these strengths toand vegetables. INTEC built a next-generation store operation system that went on line in February

underpin ERP implementation and support, including SAP applications.

2009 throughout the Yoshinoya network, which had 1,174 locations as of July 2010. Yoshinoya

In fiscal 2010, TIS undertook a system upgrade and migration project for Mitsui Chemical, a major
integrated chemicals company headquartered in Japan. The system is used to handle core administrative
control, quality control, sales management, purchasing control and distribution management.
The system went on line in 2001, and seeing that the software and hardware were both due forsupport, from system planning through activation at all stores.
The system has two main functions. One is a store function, which supports integrated businessactivities related to the operation of stores. An example would be automated estimates on ordervolume, based on sales data, to enhance efficiency and accuracy in the ordering process. The other isa business function, with an analytical capability, to support sales predictions and staffing plans, based

reduce operating costs, along with a newer version of software as well as migration to a Windows

on sales and personnel expense data collected from stores. In addition, groupware was installed toenvironment, which has gained rapid popularity in the last few years.

expedite the information transfer between the head office and stores. This effort has successfully

The large-scale mission-critical system required some modification to allow for limited time and budget.
Toward this end, TIS executed a detailed analysis of administrative processes and utilized its wealth of

reduced back office procedures, such as order adjustments and sales reports.
The new system utilizes INTEC’s considerable expertise in electronic data interchange and valueadded networks and enables stable processing

to ensure that the system meetsof hundreds of millions of monthly transactions.

client needs. This commitment to

Looking to the future, INTEC created a highly

client satisfaction ensured ascalable system suitable for up to 1,500 stores.

At a Glance

accumulated SAP-related experience and product knowledge to efficiently perform a suitable level of tests

INTEC will continue to aggressively develop

smooth transition from the old

Key Strategies

maintenance, TIS suggested an upgrade in hardware to raise system reliability and stability and

To OurStakeholders

tasks throughout the client company, namely financial accounting, administrative accounting, productionneeded a new system to support store restructuring efforts, and INTEC provided comprehensive

Financial
Highlights

TIS has extensive knowledge and experience with enterprise resource planning (ERP) software packages

system configuration support services forenvironment to the new one.

companies with large store networks.
TopicsR&D

U F IT

SaaS-Based School Fee Account Transfer Service Begins

was introduced by the city of Kiyosu, Aichi Prefecture, and supports the collection of fees, such as

Service in Use Conceptual Scheme
School fee account transfer service

those for school lunches and educational materials, needed to finance the operation of schools.

Financial
Institutions

This service solves various problems associated with the collection of school fees: eliminates
invoicing and deposits; and ensures school lunch fees are paid.
In its Saas format, Rakuraku Shukin facilitates changes to amounts and makes administration of

School A

transfers more efficient by placing management applications on the Internet. This covers invoice

Account transfer information

management for transferring collected fees, such as those for school lunch and educational materials,
School B

Internet ( SSL) 1*

Bank A
Account transfer information

Bank B

improved related administrative processes. The switch to a SaaS-based service will boost operating

13

Internet ( SSL)1*
Local government

Information on delayed payments
can be identified from local
government terminals

1*. Online communication is encoded toprovide security in data transmission.
2*. Transmission format meets standards
set by the Japanese Bankers
Association.
3*. Utilizes arrears processing.

14

Collection status at schools
can be tracked at any timeon the service screen.

Bank C

Corporate Data

*A service in which specialized software is installed in computers independent of any network and not reliant upon any other equipment to operate.

Local government

Delayed payment information 3*

elementary and junior high schools in its jurisdiction to facilitate school fee collection activities andabout the loss of data.

Makes it possible for all
schools to use the samefinancial institution.

Public lines 2*

In 2005, the city of Kiyosu introduced a stand-alone version* of Rakuraku Shukin to link all

efficiency by realizing additional improvements in invoice-related administration and reducing concerns

Account transfers andreconciliation possible bysimple information entry
on the service screen.

Allows handling by thefinancial institution of theparent/guardian’s choice

Financial Section

to accounts as well as deposit management for tracking account transfers and the recipients of cash.

Allows schools to request
account transfer from existingterminals on site and verify
results (application service
provider format)

Financial Review

concerns over the loss or theft of cash; lightens the growing administrative workload involved in

Schools

Corporate
Governance

Rakuraku Shukin, a Software as a Service, or SaaS, for transferring school fees developed by UFIT,

7

Research and Development

Research and Development

ProfileTIS, INTEC, Intec Systems Institute and Intec NetCore form the core of the Group’s efforts in

Address Exhaustion, Japan—was established by telecommunications and Internet-related associations in Japan, to­leading-edge R&D in the domains described below. In the fourth quarter of fiscal 2010, SORUN

promote smooth transition to IPv6 and to encourage wider deployment of IPv6-oriented hardware, software andjoined the Group and expanded the scope of R&D activities.

(5) Bioinformatics-related systems

16

Corporate Data

15(4) Next-generation IT constituent technology (advanced constituent
technology)

Financial Section

A topic of major interest these days is the fast-approaching end of available IPv4 (Internet Protocol version four)
addresses and the inevitable migration toward IPv6 (Internet Protocol version six). The pool of unallocated IPv4
addresses is expected to dry up sometime between 2011 and 2012. An industry group—Task Force on IPv4

Intec Systems Institute applied for five new patents in fiscal 2010, including the ones described above. For R&D inprogress, the company provides updates through scientific papers, outside lectures and articles in the INTEC
Technical Journal. The company also takes an active role in cultivating the skills of tomorrow’s software and systemengineers with support for a program at the University of Toyama and special lectures at Toyama Prefectural
University.
TIS inaugurated an in-house venture system with the debut of Sonic Garden and launched an in-house social
networking system called Skip that connects all employees horizontally and promotes communication throughout
the organization.
Total R&D expenses reached ¥912 million in fiscal 2010.

Financial Review(6) Other R&D pursuits

Corporate
GovernanceIn life science R&D, progress in testing methods and equipment makes it easier to amass vast amounts of data
in a short period of time. Paralleling this, bioinformatics and information sciences have become increasingly
important to support computer analysis of all the data and underpin new biological discoveries.
In joint research with non-Group partners, Intec System Institute and the Institute of Physical and Chemical
Research, known as RIKEN, achieved results that led to patents on a bioinformation analyzer, analysis method andanalysis program. The objective was to search the genetic switch responsible for life phenomena, and the structural principle that controls the circadian clock in mammals was successfully identified. The next step is to create atechnique that cracks the biomechanisms of diseases and drug side-effects at the genetic level for application ininnovative drug development.
Intec Systems Institute is also participating in the Functional RNA Project—a five-year, strategic R&D
effort launched by the Ministry of Economy, Trade and Industry in 2005—as a member of the Japan Biological
Informatics consortium. The company is responsible for bioinformatic R&D aimed at finding and analyzing
functional RNA. A notable result achieved so far is the expanded scope of a patent for a microRNA analyzer,
analysis method and analysis program overseas. The company will now move forward on research that willturn developments to practical results, such as the capacity to discover biomarkers.

R&D

The Group is keen to tailor next-generation IT constituent technology to the needs of client industries. Therefore,
engineers assigned to this genre of R&D consider available technologies and explore possible applications in eachclient industry.
A concrete example is the Asbestos Automated Measurement System, which delivers instantaneous, on-sitemeasurement of asbestos. In fiscal 2010, engineers ran tests on a number of samples, collected data, and thenmoved into R&D aimed at realizing a marketable system.
The Group also operates a netizen site—an e-learning environment for ordinary citizens to promote lifelong
study—and performed verification tests in collaboration with the University of Toyama on Web Portfolio, which has
potential as a next-generation e-learning system.
Another area of interest is research into the creation of a customized health care services market. The Group
was assigned to investigate an application platform for lifetime health information collected by local governments,
while INTEC and TIS jointly tackled verification tests on business-oriented health support services.

Topics(3) N ext-generation IT constituent technology (industry-specific emphasis)

At a Glance

Platform technology R&D enables the Group to anticipate the market changes that accompany technological innovation and underpins the development of new products and new services.
INTEC emphasized platform R&D to facilitate use of existing web-based application Software as a Service, or
SaaS, and supported the service and planning proposals of operating divisions.
On the local WiMAX (worldwide interoperability for microwave access) technology front, INTEC continued tooffer assistance to a project established jointly with the Keio Research Institute at the Shonan-Fujisawa Campus of
Keio University and undertook R&D on a local signage platform application.
TIS investigated several non-relational databases, including Hadoop, and began applied research on the useof such frameworks in its services. The company also evaluated next-generation Android and iPhone smartphones
and initiated a pilot project using smartphones as a component of mobile enterprise platforms.

Key Strategies(2) Service platform technology

To OurStakeholders

Software development technology is a vital R&D theme for the IT Holdings Group, which approaches the genre
from two angles: high quality and high productivity. Each companies in the Group maintain a steady and aggressive
approach to the realization of valuable R&D results.
A concrete example of this commitment is Virtual Project Room, a type of Platform as a Service, or PaaS, forsoftware developers. This project was a joint effort by INTEC, Intec Systems Institute and TIS, and the results arebeing put to practical use. For TIS, Virtual Project Room has greatly enhanced productivity in offshore development
operations and successfully reduced in-house main system maintenance costs by half.
On its own, INTEC undertook research on knowledge-support systems to make its system integration business more efficient. Results gained through this research have been implemented.
Meanwhile, TIS developed framework prototypes and application infrastructures using leading-edge technologies such as continuous integration and automated testing. In specific domains, the company used domain-specific language development methods that dramatically boost development productivity and achieved high-productivity
product management with agile software development methods.

Financial
Highlights(1) S oftware development technology

support services.
Intec NetCore is tapping into several of the latest trends, but the spotlight is on IPv4/IPv6 coexistence technology, which has become a key topic in an industry characterized by increased migration toward IPv6. In addition,
the company offers consultations based on expertise gained in the delivery of network management systems tothree major communication carriers in Japan.
Intec NetCore is also pursuing R&D on a multihoming technique that will enable users to easily create highly
dependable online networks. Multihoming is a technology that uses several IP addresses to connect a host to theInternet, and it is essential to the realization of highly reliable communication networks. Two Requests forComments—that is, proposals—submitted to the Internet Engineering Task Force on techniques that utilize multihoming were adopted by the Internet standards organization, in April and October 2009.
Having developed a measurement technique that pinpoints the quality of each Internet connection in an IP
network, Intec NetCore continues to analyze and store Internet measurement quality data from Japan and overseas. The company is currently working to commercialize services utilizing this technique as well as its IPv4/IPv6
coexistence technology while exploring methods to optimize network resources.
SORUN prototyped a solution for implementing remote environment tests on applications built into devices
using Android technology. The company achieved a format whereby log data generated during the tests was temporarily transferred to a cloud environment and then transmitted as necessary to a remote environment for analysis.
Meanwhile, Intec NetCore and Intec Systems Institute utilized cloud computing technology in developing amethod that allows companies, primarily, to activate private clouds within their own corporate structures.
Companies can use this method when building in-house systems to configure reliable, scalable application platforms fine-tuned to respective organizational capabilities. Such high-level, decentralized computing technology has
the potential to dramatically cut the cost of building private clouds, and preparations are under way to create afull-fledged business out of this new method.

8

Corporate GovernanceCorporate Governance

ProfileI. Basic Policy
3. Executive Compensation
Compensation for the Company’s directors (excluding outside directors) comprises two portions: a base salary and an
amount linked to performance. Compensation is reviewed annually for each director.
Base salary is a fixed monthly amount reflecting the individual rank of the director. The performance-linked portion is
also a monthly amount specific to rank but tied to performance and must not exceed a fixed upper limit.
Guidelines have also been established that peg contributions into the executive shareholding association according tobase salary and limit the purchase of stock to a fixed amount.

Directors

General Meeting of Shareholders

Appointment, Dismissal

Appointment, Dismissal

Appointment(outside directors’ portion)

Corporate auditors(outside corporate auditors’ portion)
AdviceRisk Management
Council

Board of Directors
Reports

Total basesalaryNumber of
executives¥247 million(¥12 million)

6(2)¥50 million(¥29 million)

5(3)¥298 million(¥41 million)

11(5)

Reports

Board of Discussion
Corporate Auditors

Total

Discussion(outside executives’ portion)

Appointment,
Administration

Group ComplianceCouncilGroup
Compliance
OfficeAuditsReports

Units involved ininternal audits

Accounting
AuditorReports

Group Risk
Management
Committee

Board of Directors and Auditors (As of June 24, 2010)

Executive
Committee

Chairman

Tetsuo Nakao

President

Susumu Okamoto

Director and Senior Advisor

Junji Kitagawa

Directors

Hiroaki Fujimiya
Katsuki Kanaoka
Masaki Chitose* External Director
Group companies

IT Holdings

Norio Maenishi
Koju Takizawa

Corporate Auditors** External Corporate Auditor

Group.
The Company’s corporate structure and internal control systems are illustrated.

The Company has engaged Ernst & Young ShinNihon LLC as independent auditor responsible for accounting audits.
The certified public accountants who conduct audits of the Company’s books are as follows.
Certified public accountant

Osamu Oyama (two years of auditing IT Holdings)

Certified public accountant

Keizo Omura (one year of auditing IT Holdings)

Certified public accountant

Masato Saito (two years of auditing IT Holdings)

Number of assistants involved in accounting operations
					
					

Certified public accountants 6
Other assistants 10

17

18

Corporate Data

During the fiscal year ended March 31, 2010, the Company pays the accounting firm to provide the following services, inaddition to the services covered in Article 2, Paragraph 1 of the Certified Public Accountants Law.
To verify the implementation and utilization status of the internal control system, based on Auditing Standards
Committee Report No. 18 issued by the Japanese Institute of Certified Public Accountants.
The Company has not established a policy regarding compensation for audits executed by certified public accountants.
The Company maintains an appropriate amount in line with the audit plan formed by certified public accountants and determines compensation for audits with the approval of the Board of Corporate Auditors.

Financial Section

5. Compensation to Certified Public Accountants

Financial Review

The Company maintains a corporate auditor system. The Board of Corporate Auditors comprises four auditors, three of whom
are outside auditors. Corporate auditors attend Board of Directors’ meetings, examine important documents, perform audits ofsubsidiaries and, when necessary, seek the opinion of others, including the Company’s accounting firm, the Group Compliance
Office and other units involved in internal audits. They also keep close watch over the execution of duties by directors pertaining
to business and all operating activities.
The Group Internal Audit Office, with a staff of four, is an internal auditing unit under the Compliance Division. This officeexchanges information, as necessary, with units involved in internal audits at Group companies, including corporate auditors
and accounting firms, and strives to ensure effective, high-caliber internal audits on a groupwide basis. In addition, the officeexchanges information with the Group Finance and Accounting Department and the Group Compliance Office, verify
explanations based on the results of implemented audits and any problem points discovered.

4. Accounting Audits
Corporate
Governance

2. C orporate Auditors, Internal Auditing Departments and the Accounting Firm

Tamaki Tsuchiya (standing auditor) **Tadamasa Hayashi (standing auditor)
Jun Ito **Shigekazu Takeuchi **R&D

Executive Vice
Presidents

Shingo Oda *Yoshinobu Ishigaki *TopicsGroup Compliance
Committee

Group Security
Committee

At a Glance

President
Direction

Notes:
1. 	The Company has not introduced a retirement benefits system nor does it
pay out bonuses.
2.	In fiscal 2010, no employee salary portions were paid to employees who
concurrently hold positions as directors.
3.	As of March 31, 2010, the Company had eight directors, two of whomwere outside directors, and four corporate auditors, three of whom wereoutside corporate auditors. The number of directors and the number ofcorporate auditors differs from those presented in the accompanying tablebecause two directors did not receive compensation and one corporate
auditor retired at the end of the 1st General Meeting of Shareholders on
June 25, 2009, but was included in the total.
4.	Total compensation paid to directors and corporate auditors was within¥400 million per year for directors (within ¥50 million for outside directors)
and within ¥85 million for corporate auditors, as approved by shareholders
at the 1st General Meeting of Shareholders on June 25, 2009.
5.	Total Amount of Compensation, Consolidated Basis, to Individual
Executives Receiving Compensation Packages Exceeding ¥100 million:
Not applicable.

Key Strategies

The Company’s Board of Directors comprises no morethan 15 members, as set forth in the Articles ofIncorporation. The Board meets monthly but will also
convene whenever necessary to discuss and finalize
decisions regarding important business activities and legal
matters pertaining to the execution of operations.
To strengthen the supervisory function of the Board of
Directors, two of the 10 directors on the Company’s Boardof Directors are from outside the Company. The
Group
responsibilities of individual directorsComplianceare clearly defined,
Committee
and the term of office is limited to one year to create thebest possible management structure to respond flexibly tochanges in the operating environment.
The Company introduced a groupwide executive
officer system and established an Executive Committee tosupport and expedite decision-making efforts relating to
the execution of duties by representative directors.
The Executive Committee meets as situations require
to monitor progress of the business and affairs of theGroup. This committee also discusses important issues
related to the execution of operations, shares informationand generally underpins enhanced governance of theCategory

To OurStakeholders

1. B oard of Directors, and Executive Officer System

Financial
Highlights

To maintain the trust of all stakeholders, including clients and shareholders, and to be a corporate citizen who meets the
expectations of society, the Company will strive to reinforce corporate governance, not only by raising the transparency andsoundness of management practices but also by paying constant attention to the actions taken in the pursuit of business toensure suitable levels of corporate ethics and legal compliance.
The Company’s governance structure relies on the holding company’s board of directors to achieve flexible and efficientmanagement of the Group while respecting the individuality and independence of each Group company.

Corporate GovernanceCorporate Governance

Profile(Millions of yen)

Year ended March 31, 2009
Compensation for audit
certification

Year ended March 31, 2010

Compensation other thanfor audit certification

Compensation for audit
certification

Compensation other thanfor audit certification

35

14

52

1

Consolidated subsidiaries

223

88

228

53

Total

258

103

280

55

Basic Direction on CSR
The management philosophy that permeates the IT Holdings Group stresses the Group’s

Financial
Highlights

The filing company

IT Holdings Groupdevelopment into a corporate citizen whose activities, hinging on the provision of various
underpins the Group’s efforts to raise corporate value, supported in this effort by the highregard of all its stakeholders, including clients and shareholders as well as employees
and their families. The Group’s stand on corporate social responsibility is evident in its
commitment to cultivate a vibrant corporate culture that encourages the companies andindividuals under the Group umbrella to work toward higher goals and embrace newchallenges, to be honest and fair in business pursuits based on respect of the law, of

Always provide the very best to clients and strive to raisecustomer satisfaction levels through excellent quality andtechnology built on the composite strengths of the Group.

Develop talent

Cultivate an environment in which employees always look ahead,
striving to achieve higher goals and embracing new challenges.
Provide opportunities to grow and realize personal goals, create asafe and productive work environment, and give everyone thefreedom to reach their potential.

Respect the law

Maintain high corporate morals, obey the law and upholdparameters of socially acceptable conduct.
Have absolutely nothing to do with antisocial forces.

Maintain fair business practices

Ensure an appropriate perspective on business transactions,based on fair and open competition.

Protect the environment

Recognize that environmental problems warrant universal
attention and promote efforts to save resources and energy inthe execution of corporate activities. Also, through IT services,support clients’ efforts to enhance operating efficiency andreduce energy consumption, thereby contributing to lower
environmental impact.

Contribute to society

Actively participate in community events as a corporate citizen
whose social standing matches its leading industry status.

Be a part of theinternational community

Naturally, obey internationally recognized rules and local laws in
the execution of cross-border projects, but also contribute tosocial and economic development in the countries where theGroup maintains a presence by recognizing local culture andcustoms.

II. Risk Management System
Management formulated a basic policy on corporate social responsibility, and the president continually conveys the spirit ofthis policy to executives to ensure that the corporate activities are conditioned by compliance with laws and regulations andunderpinned by respect for social morals. The Company has the following structures in place to reinforce compliance and risk
management practices.

1. Group Compliance Department and Group Compliance Committee
The Group Compliance Department underpins the laterally extending compliance structure groupwide and identifies trouble
spots. The Group Compliance Committee, chaired by the president, discusses compliance-oriented issues of importance on agroupwide basis and promotes widespread efforts to address areas in need of improvement.

2. Status of Risk Management System
In the execution of its business activities, the Company is always aware of the various risks that accompany suchactivities. The risks of greatest weight for the Company, as an organization that handles information, are natural
disasters, such as earthquakes, which could damage data centers, and information leaks, particularly unauthorized
disclosure of personal information.
Risk management is practiced at all Group companies, and the Risk Management Committee plays a key rolein directing and supporting the activities undertaken by risk management committees at each Group company. In

Corporate Data

addition, the Company is ready to act quickly with various response teams, if a vulnerability is discovered. This is partof an internal structure to minimize the impact of a risk situation on operations by ensuring sufficient communication
within the Group.
The Group Compliance Committee is a component of the Company’s risk management strategy to reinforce
compliance practices groupwide and thereby enhance risk management.
These groupwide structures will be reviewed as necessary to keep responses current to the changing risks thatmirror the evolution of the Group’s business activities and market conditions.
* Please refer to “Business Risks” on page 24.
19

Financial Section

Provide optimum services

Financial Review

Acknowledge responsibilities as a leading corporate groupin the IT services industry and undertake sound corporate
activities with integrity and clarity of purpose. In addition, be
sincere and fair in dealings with all stakeholders.

Corporate
Governance

Ensure sound, transparent
management practices

R&D(4) Limited Liability Agreements with Outside Directors and Outside Corporate Auditors
In accordance with Article 427, Paragraph 1 of the Company Law, the Company enters into agreements with its outside directors and outside corporate auditors that
limit their liability for compensation under Article 423, Paragraph 1 of the Company Law. The liability amount pursuant to such agreements shall be limited to theminimum stated in Article 425, Paragraph 1 of the Company Law.

Group’s basic direction on CSR.

Topicscourse, as well as high moral standards, and to fulfill social obligations. This is the

At a Glance(3) General Meeting of Shareholders’ Agenda Items that Can Be Resolved by the Board of Directors(i) Seeking to achieve a flexible capital policy geared to the operating environment, the Company provides in its Articles of Incorporation a clause allowing theBoard of Directors to approve the purchase of treasury stock from the market, in accordance with Article 165, Paragraph 2 of the Company Law.
(ii) The Company’s Articles of Incorporation includes a clause that grants the Board of Directors the authority to approve the distribution of retained earnings toregistered shareholders as of September 30 each year, as described in Article 454, Paragraph 5 of the Company Law, to promote the flexible return of profits toshareholders.

Key Strategies(2) Approval Criteria for Special Resolutions at the General Meeting of Shareholders
Special resolutions described under Article 309, Paragraph 2 of the Company Law that are put before the general meeting of shareholders must, in accordance witha clause provided by the Company in its Articles of Incorporation, be passed with a number of votes corresponding to more than two-thirds of voting rights held byshareholders in attendance whose combined shareholdings represent no less than one-third of total voting rights held by shareholders with the power to exercise
such rights. Management believes that this reduced quorum for special resolutions facilitates the execution of the general meeting of shareholders.

services utilizing IT, match its status as a leading corporate group. This philosophy also

To OurStakeholders

Notes:(1) Approval Criteria for Election of Directors
In its Articles of Incorporation, the Company sets forth a clause stating that the appointment of a candidate to the Board of Directors must be approved by a majority
vote of shareholders in attendance whose combined shareholdings represent more than one-third of total voting rights held by shareholders with the ability to
exercise such rights. The Articles of Incorporation include a clause preventing cumulative voting in obtaining approval of appointment for director candidates.

20