UNOFFICIAL TRANSLATION
The formal official document is in Japanese.

Summary of Consolidated Financial Results for the
Fiscal Year ended September 30, 2016 (Japanese Accounting Standards)
October 31, 2016
Listed Company Name: MTI Ltd.
Listing Exchanges: Tokyo Stock Exchange
Securities Code:9438
URL: http://www.mti.co.jp
Representative:
Toshihiro Maeta, President and Chief Executive Officer
Contact:
Hiroshi Matsumoto, Director
Phone: +81-3-5333-6323
Scheduled date of annual meeting of shareholders: December 23, 2016
Scheduled date to submit the Securities Report (Yuka Shoken Houkokusho): December 26, 2016
Scheduled date of dividend payment: December 26, 2016
Supplementary documents for financial results: Yes
Quarterly results briefing: Yes (for securities analysts and institutional investors)(Figures less than one million of yen are omitted)

1. Consolidated business results for the year ended September 30, 2016
(October 1, 2015 – September 30, 2016)(1) Consolidated operating results(Percentages represent year-on-year changes)
Net sales

Operating income

Millions of yen

For the year ended September 30, 2016
For the year ended September 30, 2015
(Note) Comprehensive income:% Millions of yen

Profit attributable toowners of parent

Ordinary income% Millions of yen% Millions of yen

32,844 (1.8)
5,355 26.1
5,310 28.2
33,461
8.0
4,245 66.0
4,144 64.5
Year ended September 30, 2016: 3,094 million yen (13.4%)
Year months ended September 30, 2015: 2,728 million yen (110.9%)
Net income
Net income
Return on
Return on Assets
per shareper share/diluted
Equity
％

%

27.2
94.9

Net income

％

％

59.54
58.92
19.9
21.3
48.52
47.67
20.6
20.0
Year ended September 30 2016: (44) millions of yen
Year ended September 30 2015: (95)millions of yen

16.3
12.7

Yen

For the year ended September 30, 2016
For the year ended September 30, 2015
(Reference) Equity in earnings (losses) of affiliates:

3,317
2,607

Yen

(2) Consolidated financial position
Total assets

Net assets

Millions of yen

Year ended September 30 ,2016
Year ended September 30 ,2015(Reference) Shareholders’ equity:

Equity ratio

Millions of yen

25,154
17,852
24,738
16,591
Year ended September 30 2016: 17,306 millions of yen
Year ended September 30 2015: 16,034 millions of yen

Net assets per share
%

Yen

68.8
64.8

311.13281.48(3) Consolidated cash flows
Net cash providedby (used in)operating activities

Net cash providedby (used in)investing activities

Net cash providedby(used in)financing
activities

Millions of yen

Millions of yen

Millions of yen

Millions of yen

4,845
4,587

(1,327)(1,707)(2,469)3,921

12,613
11,608For the year ended September 30, 2016
For the year ended September 30, 2015

Cash and cash
equivalent

2. Dividends
Dividend per share
End of
End of
End offirst
third
2nd period
quarterquarter
Yen

Yen

For the year ended September 30, 2015–12.00
For the year ended September 30, 2016–
8.00
Year ending 9/17 (forecast)–
8.00(Note) Revisions to dividend forecasts published most recently: No

Year end

Annual

Yen

Yen

Yen

–
–
–

8.00
8.00
8.00

–
16.00
16.00

Amount ofDividends on
Dividend ratio
equitydividends paid
(Consolidated)(Total)(Consolidated)

794
879

%

%

28.9
26.9
35.6

6.0
5.4

The Company conducted a 2-for-1 common stock split that became effective on April 1, 2015. The dividend per share at the end of the second periodof the fiscal year ended September 30, 2015 is calculated based on the number of shares before the stock split, but the year-end dividend per share is
calculated based on the number of shares after the stock split.

3. Forecast for consolidated business results for the fiscal year ending September 30, 2017
(October 1, 2016 – September 30, 2017)
Net sales
For the first half
Full year(Percentages represent year-on-year changes.)
Profit attributable to
Net income
Ordinary income
owners of parent
per share

Operating income

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen%

Yen

15,50032,000

(8.8)
(2.6)

1,730
4,060

(30.5)(24.2)

1,700
4,000

(30.2)(24.7)

1,100
2,500

(22.8)(24.6)

19.78
44.94

* Notes(1) Important changes of subsidiaries during the term (changes in specified subsidiaries resulting in change in scope of
consolidation): Not applicable
New: –
Exception: –(2) Changes in accounting policies and changes or restatement of accounting estimates(i) Changes in accounting policies due to the modification in accounting methods:(ii) Changes in accounting policies other than (i):(iii) Changes in accounting estimates:(iv) Restatement:Yes
Not applicableNot applicableNot applicable(3) Number of outstanding shares (common shares)(i) Number of outstanding shares at the end of period (including treasury shares):9/16: 60,549,200 shares
9/15: 60,226,800 shares(ii) Number of treasury shares at the end of period
9/16: 4,925,228 shares
9/15: 3,260,928 shares(iii) Average number of shares during the period
9/16: 55,722,667 shares
9/15: 53,734,513 shares(Reference) Summary of financial results
1. Nonconsolidated financial results for the year ended September 30, 2016
(From October 1, 2015 - September 30, 2016)(1) Nonconsolidated operating results
Net sales
For the year ended
September 30, 2016
For the year ended
September 30, 2015

(Percentages are shown as year-on-year changes)
Ordinary income
Net income

Operating income

Millions of yen％

Millions of yen％

Millions of yen％

Millions of yen％

30,915

(1.2)

5,876

42.4

5,873

42.8

3,658

46.4

31,297

7.4

4,125

59.3

4,111

58.6

2,499

143.8

Net income pershare
For the year ended
September 30, 2016
For the year ended
September 30, 2015

Fully diluted net
income per share
Yen

Yen

65.66

64.97

46.52

45.70

(2) Nonconsolidated financial position
Total assets
Millions of yen

For the year ended
24,274September 30, 2016
For the year ended
23,256
September 30, 2015
(Reference) Shareholders’ equity
As of September 30, 2016: 17,440 millions of yen

Net assets

Equity ratio

Net assets per share

Millions of yen％

Yen

17,57371.8

313.55

15,76567.2

274.52As of September 30, 2015: 15,638 millions of yen* Status of review
As of the date of disclosure of this earnings release, an audit of the financial statements is being carried out with the Financial Instruments andExchange Act.

* Cautionary statement with respect to forward-looking statements
The forward-looking statements included in this material are based on the Company’s judgments, assumptions, and convictions based on information
available to the Company at the time of publication of this document and may differ materially from actual results for a range of factors, including

conditions of Japanese and overseas economies, changes in the situation of operations in Japan and overseas, and uncertainties and potential risks
inherent in forward-looking statements. The risks and uncertainties include unforeseeable effects of future events. For the assumptions underlying theforecasts and other notice on the use of earnings forecasts, please refer to “(2) Outlook for the next fiscal year” on page 3 in the accompanying
material.
The Company will hold a briefing on earnings chiefly for securities analysts and institutional investors on Tuesday, November 1, 2016. A video of
the briefing and a document to be used at the briefing will be posted on the Company’s website as soon as the briefing ends.

Accompanying Materials – Contents
1. Operating results and financial conditions.............................................................................

2(1) Analysis of operating results ...........................................................................................................................

2(2) Analysis of financial conditions.......................................................................................................................

4(3) Basic policy regarding profit distribution to shareholders and dividends
for the current fiscal year and the next fiscal year ..........................................................................................

5(4) Business risks...................................................................................................................................................

5

2. Business group..............................................................................................................................

8(1) Description of business. ..................................................................................................................................

8(2) Business distribution diagram..........................................................................................................................

8

3. Management policy............................................................................................................................

9(1) Basic management policy.................................................................................................................................

9(2) Target management indexes.............................................................................................................................

9(3) Medium- to long-term management strategy...................................................................................................

9(4) Issues to address...............................................................................................................................................

9

4. Basic policy for the selection of accounting standards. ..........................................................................................

11

5. Consolidated financial statements...................................................................................................

12(1) Consolidated balance Sheet.............................................................................................................................

12(2) Consolidated statement of income and comprehensive income......................................................................

14(3) Consolidated statement of changes in shareholders’ equity.............................................................................

16(4) Consolidated statement of cash flows..............................................................................................................

18(5) Notes on consolidated financial statements.....................................................................................................

20

6. Nonconsolidated financial statement............................................................................................................................

26(1) Balance sheet....................................................................................................................................................

26(2) Statement of income.........................................................................................................................................

28(3) Statement of changes in shareholder’s equity..................................................................................................

29(4) Notes on financial statements..........................................................................................................................

31

7. Other .......................................................................................................................................................

32(1) Changes in officers...........................................................................................................................................

32

1

1．Operating results and financial conditions(1) Analysis of operating results1) Overview of the fiscal year ended September 30, 2016
(Period from October 1, 2015 to September 30, 2016)
Smartphone unit sales grew temporarily on the strength of a cash refund campaign launched by cellphone carries
before the abolition of the practice of offering cellphones virtually free of charge in February 2016. However,since the abolition of this practice, smartphone unit sales have remained low.
In this environment, the Company focused on efforts to acquire paying subscribers on smartphones to its
content offering high average revenue per user (ARPU) at cellphone shops across Japan and other businesslocations. However, the number of paying subscribers on smartphones came to 5.69 million at the end of
September 2016 (down 0.31 million from the end of September 2015), reflecting the slow pace of acquisition
since the second quarter. As a result, the total number of paying subscribers decreased 0.72 million, to 7.22
million at the end of September 2016.
Although the total number of paying subscribers declined year on year, the ARPU of paying subscribers on
smartphones, primarily subscribers to music.jp, a video distribution service whose product lineup has expanded,
maintained an upward trend. As a result, net sales and gross profit declined only slightly to 32,844 million yen(down 1.8% year on year) and to 27,490 million yen (down 1.9% year on year).
Operating income, ordinary income and profit attributable to owners of parent each hit a record high, standingat ¥5,355 million (up 26.1% year on year), ¥5,310 million (up 28.2% year on year) and ¥3,317 million (up 27.2%
year on year), respectively. These results reflected a decline in selling, general and administrative expenses(SG&A) mainly attributable to a significant year on year drop in advertising expenses associated with the sluggish
pace of the acquisition of paying subscribers.
Consolidated operating results(Period from October 1, 2015 to September 30, 2016)

Fiscal year ended
September 30, 2016

Fiscal year ended
September 30, 2015

ChangeAmountPercentage

Millions of yen

Millions of yen

Millions of yen%

32,84433,461

(617)

(1.8)

5,353

5,439

(85)

(1.6)

Gross profit

27,49028,022

(531)

(1.9)

SG&A

22,13523,776(1,641)(6.9)

Operating income

5,355

4,245

+1,110+26.1

Ordinary income

5,310

4.144

+1,166+28.2

Profit attributable toowners of parent

3,317

2,607

+710

+27.2

Net sales
Cost of sales

Note: Figures are rounded down to the nearest millions of yen.

Breakdown of SG&A

(Period from October 1, 2015 to September 30, 2016)
Fiscal year ended
September 30, 2016

Fiscal year ended
September 30, 2015

ChangeAmountPercentage

Millions of yen

Millions of yen

Millions of yen%

22,13523,776(1,641)(6.9)

Advertising expenses

7,607

9,077

(1,469)(16.2)

Personnel expenses

5,637

5,770

(132)

(2.3)

Commission fee

3,741

3,727

+13

+0.4

Subcontract expenses

1,456

1,326

+129

+9.8

Depreciation

1,272

1,318

(46)

(3.5)

Other

2,420

2,555

(135)

(5.3)

Total

2

2) Outlook for the next fiscal year
(Period from October 1, 2016 to September 30, 2017)
In the fiscal year ending September 2017, the Company will work to maintain the total number of paying
subscribers by continuing to focus on acquiring paying subscribers on smartphones and will strive to increase
average revenue per user (ARPU).
Faced with the ongoing stagnation in sales of smartphones, the Company will continue promoting the sales of
its content offering high ARPU by making the most of its strong sales channels, which consist of cellphone shops
throughout Japan that promote the sales of content to customers. By promoting cooperation with MVNOs (*), theCompany will also work to acquire paying subscribers on smartphones.
In the healthcare-related service business, which the Company is approaching with a medium- to long-term
perspective, the Company will pursue a number of strategies to increase sales. This business has tremendous
potential for future growth and is expected to shift to a stock-type business with long-term support over thevarious life stages of customers.
Specifically, the Company will take the following steps:
The Company will work to increase the number of corporate contracts for CARADA package services forcorporate customers and expand sales of the services by strengthening sales through dealers, or companies
operating cellphone shops nationwide, and the Company’s direct sales.
A Group company provides training management services and will work to increase the number of orders
through aggressive sales to incorporate schools and fitness clubs and the support of exercise management andhealth management in club activities and at sports teams.
The Company will work to expand the number of contracts with local governments nationwide for theelectronic maternal and child health handbook service by strengthening its sales system for local governments andincreasing demand for the service from local governments, expectant and nursing mothers, and families withsmall children through the continuous enhancement of the functions of the service, including the management ofprotective inoculation.
* MVNO is an abbreviation for mobile virtual network operator. An MVNO provides mobile network services, such as cellphones
and PHS, through its own brands. It does not develop or manage wireless communication link facilities.

Earnings forecast for the six months of the fiscal year ending September 30, 2017
(Period from October 1, 2016 to March 31, 2017)

Consolidated profit and loss
Net sales

15,500 millions of yen( an decrease of 8.8% y-o-y)Operating income

1,730 millions of yen( an decrease of 30.5% y-o-y)Ordinary income

1,700 millions of yen( an decrease of 30.2% y-o-y)Profit attributable toowners of parent

1,100 millions of yen( an decrease of 22.8% y-o-y)Earnings forecast for the fiscal year ending September 30, 2017
(Period from October 1, 2016 to September 30, 2017)

Consolidated profit and loss
Net sales

32,000 millions of yen( an decrease of 2.6% y-o-y)Operating income

4,060 millions of yen( an decrease of 24.2% y-o-y)Ordinary income

4,000 millions of yen( an decrease of 24.7% y-o-y)Profit attributable toowners of parent

2,500 millions of yen( an decrease of 24.6% y-o-y)3(2) Analysis of financial conditions
1) Analysis of financial conditions in the current fiscal yeara) Assets, liabilities and net assets
At the end of the fiscal year under review, total assets rose ¥415 million from the end of September 2015, to¥25,154 million.
Current assets decreased ¥159 million, mainly due to falls in notes and accounts receivable-trade and accounts
receivable-other, despite an increase in cash and deposits. Non-current assets increased ¥575 million, chiefly
reflecting rises in software and investment securities.
Current liabilities shrank ¥1,044 million as a result of factors such as falls in the current portion of long-termloans payable and accounts payable-other. Non-current liabilities grew ¥199 million, primarily owing to anincrease in net defined benefit liability.
Net assets increased ¥1,261 million, mainly attributable to the disposal of treasury stock and ¥3,317 million posted as
profit attributable to owners of parent, offsetting the purchase of treasury stock and cash dividends paid.
Total assets

Net assets

Equity ratio

Millions of yen

Millions of yen%

25,154
24,73817,852
16,59168.8
64.8

As of September 30, 2016
As of September 30, 2015b) Cash flows
At the end of the fiscal year under review, cash and cash equivalents were ¥12,613 million, representing an
increase of ¥1,004 million from the end of September 2015. Cash flows by activities and principal factors in thefiscal year under review were as follows.
Net cash provided by operating activities was ¥4,845 million (inflow of ¥4,587 million for the previous fiscal year).
This is mainly a reflection of income before income taxes and depreciation, thereby offsetting income taxes paid.

Net cash used in investing activities stood at ¥1,327 million (outflow of ¥1,707 million for the previous fiscal
year). Principal factors included the purchase of intangible assets (mainly software), which offset proceeds fromsales of investment securities.
Net cash used by financing activities came to ¥2,469 million (inflow of ¥3,921 million for the previous fiscal
year). Principal factors included the purchase of treasury shares and the payment of cash dividends, which offset
proceeds from sales of treasury shares.
(Reference) Cash flows indicators
Fiscal year
ended
September
30, 2012

Fiscal year
ended
September
30, 2013

Fiscal year
ended
September
30, 2014

Fiscal year
ended
September
30, 2015

Fiscal year
ended
September
30, 2016

Equity ratio (%)

61.9

53.7

55.4

64.8

68.8

Equity ratio based on market value (%)

69.5

73.0

161.0

188.6

137.3

Ratio of cash flows to interest-bearing
liabilities (%)

6.0

16.6

13.9

13.0

-

273.6

570.6

616.6

1414.42,223.9

Interest coverage ratio (times)

Equity ratio: Shareholders’ equity / Total assets
Equity ratio based on market value: Market capitalization / Total assets
Ratio of cash flows to interest-bearing liabilities: Interest-bearing liabilities / Net cash provided by operating activities
Interest coverage ratio: Net cash provided by operating activities / Interest payments
Notes:
1. These indicators are calculated based on consolidated financial results.
2. Cash flows refers to net cash provided by operating activities in the consolidated statements of cash flows.
3. Interest-bearing liabilities refer to all liabilities in the consolidated balance sheet for which interest is paid. Interest payment refers to the interest
payment amount in the consolidated cash flows statement.

2) Financial outlook for the next fiscal yeara) Assets, liabilities and net assets
The Company expects assets, liabilities, and net assets at the end of the fiscal year ending September 2017 to begreater than those at the end of the fiscal year under review.
Total assets are expected to increase, mainly reflecting an increase in cash and deposits.
4

Total liabilities are expected to rise chiefly due to an increase in net defined benefit liability.
Total net assets are expected to climb due to the recording of a profit attributable to owners of parent, even thoughdividends will be paid.

b) Cash flows
The Company expects cash and cash equivalents at the end of the fiscal year ending September 2017 to begreater than those at the end of the fiscal year under review.
Net cash is expected to be provided by operating activities. This is mainly a reflection of income before income
taxes and depreciation, thereby offsetting income taxes payable.
Net cash is expected to be used by investing activities, largely because of the purchase of intangible assets(mainly software).
Net cash is expected to be used by financing activities, chiefly for the payment of cash dividends.

(3) Basic policy regarding profit distribution to shareholders and dividends for the current fiscal year
and the next fiscal year
Key issues identified by the Company include enhancing market capitalization through the creation and the
expansion of corporate value, and the continual distribution of dividends.
In distributing profits, the Company aims to provide shareholder returns with a total target payout ratio (*) of
35% in the medium term. To achieve this goal, the Company will remain true to its basic capital policy ofachieving sustainable growth over the medium and long terms in net sales and income while returning profits toshareholders, and will work to secure a sufficient amount of internal reserves to carry out aggressive businessdevelopment in the future.
With respect to the year-end dividend payments for the fiscal year under review, the Company will pay ¥8 yen
per share as forecast. The Company posted record income for the consolidated full-year results but expects adecrease in income in the next consolidated fiscal year. The Company also takes into consideration the purchaseof treasury stock in the fiscal year under review. As a result, annual dividends are expected to be ¥16 per share (anincrease of ¥2 per share over the previous fiscal year).
As for the payment of dividends in the next fiscal year, the Company expects to pay annual dividends of ¥16 pershare, with interim dividends of ¥8 per share and year-end dividends of ¥8.

* The ratio of total dividends paid and purchase of treasury shares to consolidated net income
Total dividends paid

Acquisition of treasury stock

Net income

Total payout ratio

(1)

(2)

(3)

[(1) + (2)] / (3)879 millions of yen

1,078 millions of yen

3,317 millions of yen

59.0%(4) Business risks
We are providing the main items viewed as potential risk factors for our business development. Items that are notnecessarily risk factors for our business development but that are important and useful for making investment
judgments and items important for understanding our business activities are actively disclosed to investors.
We are aware of the possibility of these risks occurring, and we will work to prevent them and will respondpromptly if they should occur. However, decisions on investment in shares in the Company need to be made in
careful consideration of these items and items contained in this report. Furthermore, please keep in mind that theitems mentioned below do not cover all possible risks associated with investing in our shares.
Items regarding the future are based on assessments we have made as of the time of releasing our financial
results (October 31, 2016).
1) Over-reliance on certain individuals
President and Chief Executive Officer Toshihiro Maeta plays a central role in creating new business models andplays an important role in promoting operations. To create a management structure that does not depend
excessively on President Maeta, we are working to cultivate human resources. However if Mr. Maeta is everunable to perform his duties for some reason, our results may be impacted significantly.

52) Unexpected changes in the business environment
In our core mobile content business, actual net sales, cost of sales, selling, general and administrative expenses,
and other results may differ significantly from our current forecasts for the reasons below. In this case, we could
be forced to change our management policy and strategy, which could have a significant impact on our results.
a) Changes in the market environment result in factors of uncertainty that could not be foreseen when making
business plans. Such changes could include the increase in paid subscribers for smartphone services fallingwell below our targets, or the decrease in paid subscribers for feature phone services being much bigger than
expected, or the utilization of paid contents declining and user preferences changing rapidly due to theemergence of free contents.
b) We are unable to differentiate ourselves from competing companies in terms of content material, quality or
price, and therefore are unable to acquire the target number of paid subscribers. Either that, or the competition
for new subscribers with competing firms becomes sharper and price competition intensifies, which causes
subscribers to our services to replace them with services of competitors or makes it harder to maintain costcompetitiveness and secure the target number of paid subscribers.
c) Technical innovations proceed at a rapid pace and there are changes to the development/provision of services
that meet the needs of smartphone users. The form of income and services/technologies become obsolete due
to delays in responding to the advancing technologies. Content production costs increase more than expected,
an efficient development system for content development cannot be maintained and earnings cannot be
secured.
d) Cannot obtain the target number of paid subscribers due to a sudden saturation/reduction of the mobile
contents market, or because advertising could not produce the desired impact on sales due to a drastic change
in the way paid subscribers are gained, among other factors, or obtaining profit becomes difficult due to a
bigger-than-expected increase in cost for acquiring contents.
e) As for the fee-based billing services provided by the Company or those the Company handles for othercompanies, the percentage of subscribers obtained through cellphone shops across Japan, its mainstay sales
channel for mobile devices, is extremely high. As a result, it may become difficult to secure additional new
subscribers if the roles of the sales channel change dramatically for various reasons, such as the introductionof legal restrictions and administrative guidance, the imposition of restrictions by cellphone carriers, andchanges in the business environment.
f) In the fee-based billing services provided by the Company or those the Company handles for other companies,
the number of new subscribers tends to change when cellphone carriers launch new models of mobile devices(sales seasons are usually in March, July, August and December). As a result, it may become difficult tosecure additional new subscribers if the effects of new model launches during sales seasons for mobile
devices are less than expected or if no effects of new model launches are expected.
g) We engage in the healthcare-related information service business, the market for which is expected to expandin the future and which is believed to have high growth potential over the medium to long terms. However, it
is difficult to forecast the impact of the business and an unexpected change may result in our failure toachieve the initial business plan or create the expected effect, with the result that earnings may not justify theprior investment.
h) Laws and regulation that could be relevant to our industry include the Act against Unjustifiable Premiums
and Misleading Representations, Unfair Competition Prevention Act, Consumer Contract Act, Act on theProtection of Personal Information, Act on Specified Commercial Transactions, Medical Care Act,
Pharmaceutical Affairs Act, Act against Delay in Payment of Subcontract Proceeds, Etc. to Subcontractors,
Antimonopoly Act, and Act on Regulation on Soliciting Children by Using Opposite Sex Introducing Service
on Internet.
3) Dependence on specific businesses
As below in the last two consolidated fiscal years, the Company depended heavily on cellphone carriers in termsof sales: The ratio of sales to cellphone carriers accounted for a high percentage of total sales. If cellphone carrierschange their policies on Internet connection services, the Company’s results and future business development
could be seriously impacted.
6Client

Fiscal year ended
September 30, 2015
AmountRatio(％)(thousand yen)

ClientFiscal year ended
September 30, 2016
AmountRatio(％)(thousand yen)

NTT DOCOMO, INC.

18,302,589

54.7

NTT DOCOMO, INC.

18,766,284

57.1

KDDI CORPORATION

8,111,366

24.2

KDDI CORPORATION

7,798,686

23.7

SoftBank Corp.

2,493,734

7.5

SoftBank Corp.

1,937,673

5.9(Note) Consumption tax is not included in the above amounts.

4) Content provided by content holders
Copyright licenses for much digital content, including music, books, video and others, are held exclusively bycontent holders. If copyright license agreements with content holders are amended or terminated and we are nolonger able to provide popular content, we will not be able to obtain the content from other sources and our results
could be seriously impacted.
5) Hiring, retaining, and cultivating human resources
As described in Issues to address, the Company continues to enhance its marketing capacity, quality control
capacity, development capacity, design capacity, and sales capacity to expand operations and achieve sustainablegrowth. If we cannot hire, retain, and cultivate human resources with high skills for enhancing those capacities,
our results could be seriously impacted.
6) Information networks become inoperable
Our operations use communication lines and information systems. If they cannot be used for a long period due tothe disconnection of communication lines caused by natural disasters or accidents, systems going down due to agreater-than-expected surge in access, viruses, or the hacking of computers, we could be forced to suspend
operations, which could seriously impact our results.
7) Personal information leaks
We thoroughly protect personal information by building a tight control system to ensure information security,
developing rules and regulations on the handling of information, and providing education and training for our
employees and business partners. However, if a problem arises due to a personal information leak, our results
could be seriously impacted.
8) Intellectual property right infringement
We are always careful not to infringe on a third party’s intellectual property rights. However, we may infringe on athird party’s intellectual property rights without realizing it. If we have to pay damages or suffer other losses as aresult of a third party’s claim for damages or filing an injunction or other lawsuits, our results could be seriously
impacted.
9) Uncollected charges
We commission chiefly cellphone carriers to collect monthly charges from paid subscribers. If the continuance ofagreements with carriers becomes difficult or fees for the collection of charges change due to changes in theirbusiness strategies, among other reasons, or if uncollected charges increase under some circumstances, our results
could be impacted.
10) Ensuring the security and health of websites
We provide certain services that allow the general public to communicate with each other using the services’
messaging functions. If any major trouble occurs due to a violation of the terms of use, among other reasons, theCompany could be held responsible or the credibility and image of the Company’s services could decline, which
could impact the Company’s results.

7

2．Business group
As of September 30, 2016 our business group consisted of 22 companies made up of MTI and affiliatedcompanies, is primarily involved in the contents business. A general overview of the group is provided
below.
(1) Description of business
Contents distribution
MTI Ltd.
(2) Business distribution diagram

8

3．Management policy(1) Basic management policy
The Company aims to help realize the future society that will be brought about by mobile devices. To this end, it
will continually provide customers with user-friendly services that employ cutting-edge technologies and offer
satisfactory quality and product variety by extensively understanding their views and expectations. The Company
also aims to position itself as lifelong friend that customers can continually call upon by offering emotionallymoving experiences, and become a “mobile dream factory” that produces a series of services which makecustomers’ dreams come true and their lives more convenient and enriching.
(2) Target management indexes
The rate of sales growth and the degree of improvement in operating income ratio are important management
indexes for us here at MTI. We aim to continuously raise corporate value by always improving these indexes. To
achieve sustainable growth, the Company will enhance its capabilities in marketing, quality control, thedevelopment of products and services, design, and sales. By continuing to improve these capabilities that are
essential for business expansion, it seeks to address changes in market environments and customer needs flexibly.
(3) Medium- to long-term management strategy
Our strategy is to use a portion of the stable earnings generated by our content distribution business to invest in
fields with high growth potential with the aim of fostering new fields capable of generating steady earnings. At
the same time, we will invest in fields expected to have large markets and high growth.
We will strive to increase the added value of services as the smartphone service market is becoming mature.
Meanwhile, we aggressively work to create business opportunities by developing new services. We will work torealize sustained sales growth and continuous profit growth.
Medium- to long-term management strategies for each category are explained belowa) Improvement in average revenue per user (ARPU) in the content businessWith the penetration rate of smartphones reaching a high level, the Company will work to provide services thatare easier to use and understand and services that that offer added value that is greater than that of the current
services.
Music, books, comics and video are uniquely popular among customers. That being said, the Company expects
that the video-streaming market will continue to grow. To improve ARPU, it is therefore seeking to enhance thelineup of video content through an increase in the number of Hollywood movie titles.
b) Strengthening of the Real Affiliate (RAF) Network
The sales channel (RAF network), through which cellphone shops encourage customers visiting them to subscribe
to MTI’s own or other companies’ content, enjoys the largest and most overwhelming operation scale among thesame type of businesses owing to the expansion of transactions with cellphone shops nationwide.
The RAF network was established to encourage customers to subscribe to MTI’s content. The Company
successfully launched the business by including other companies’ content in the service. The Company will use
the network as a sales channel to expand its healthcare service.
c) Initiatives in the Healthcare-related business
The Company seeks to operate the healthcare-related service business from a medium-term perspective, given the
sector’s growth potential and the possibility of developing a service that will be used by customers as a “lifetime
friend.”The Company provides an array of services related to healthcare and will work to make each service profitable assoon as possible. At the same time, the Company will strive to establish services convenient for customers byfacilitating collaboration between and the integration of services.
(4) Issues to address
1) Enhancing marketing capacity
Customer needs are continuously changing and becoming more varied due to the evolution of mobile devices andthe expanding base of mobile content users. We realize the importance of constructing a system for continuously
improving our marketing capacity by accurately grasping these trends and delivering contents with a high degreeof customer satisfaction.
To this end we have strengthened organizational systems for our marketing divisions, bolstered personnel withspecialized capacity and promoted the education and training of personnel by enhancing in-house training
systems. These steps are allowing us to make marketing capacity, one of our strengths, even stronger.
92) Enhancing quality control capacity
We are aware that in order to encourage customers to use mobile contents on a continuing basis, customer needs
obtained from marketing research must of course be reflected in the actual sites. We are also aware of theimportance of building a strong quality control system in order to provide a product line up and a level of qualitythat will satisfy these customers.
To this end we have clarified the procedures and quality standards for each step in the production of our content
materials, while conducting thorough management of these steps. At the same time we have made continuous
improvements through the training and education of personnel as well as through PDCA activities, while buildinga system for the efficient production of high-quality content materials.
3) Enhancing development capacity
We will be able to provide mobile content services with even higher added value as mobile handsets become evenmore advanced and as the speed and capacity of communication infrastructures increase. Building a high quality
technical development system will be essential for continuing to win the support of customers well into the future.
To promote development methods that can quickly and flexibly respond to changes in the technologicalenvironment, we are working to acquire and develop skilled personnel, while raising the technical skill levels ofall development personnel. We will also promote offshore development to realize a high-quality and efficientsystem.
4) Enhancing design capacity
Services for smartphones allow for improved contents operability and greater expression. We realize that it isimportant to have a system in place for providing high quality designs, an extremely important point whencustomers select which services they will use.
Therefore, we are researching user interfaces and customer preferences, while working to acquire and develop
highly skilled personnel. In this manner we are building a system capable of providing high quality designs.

5) Enhancing the sales capacity
The acquisition of subscribers through cellphone shops nationwide, the mainstay sales channel of mobile devices,
has proved to be the most efficient method for acquiring paying subscribers on smartphones on a monthly billingbasis. Thus, the Company believes that it is important to develop cellphone shops that promote the sales of theCompany’s own content and the content that it handles for other companies.
For these reasons, the Company will take initiatives to establish a business structure capable of providing more
meticulous support to cellphone shops nationwide. These initiatives include establishing sales offices in major
cities outside the Tokyo metropolitan area which have a large number of cellphone shops, and by focusing on
securing, training, and developing human resources with superior sales skills.

10

4．Basic policy for the selection of accounting standards
The Group intends to compile its consolidated financial statements based on the Japanese accounting standard forthe time being, considering the possibility of comparing the terms of financial statements and performances
between companies. It will adopt the International Financial Reporting Standards (IFRS), factoring in thesituations in Japan and abroad.

11

5．Consolidated financial statements（1） Consolidated balance sheet（Unit: thousands of yen）

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Advance payments-trade
Prepaid expenses
Accounts receivable-other
Income taxes receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets

Previous fiscal year

Current fiscal year

(As of September 30, 2015)(As of September 30, 2016)

11,608,562
6,885,765
101,422
349,083
841,190－358,149
138,341

12,613,012
6,163,789
395,840
396,234
84,672
4,480
316,742
141,967(71,095)(65,095)

20,211,420

Non-current assets
Property, plant and equipment
Facilities attached to Buildings
Accumulated depreciation
Facilities attached to Buildings, net

331,197

327,800(239,325)(251,900)(248,620)(253,924)

2,254,746
336
22,1682,462,449
14,89826,8372,277,251

2,504,185

796,241
501,636
792,649
30,145

1,054,687
494,963
853,155
34,04891,871Tools, furniture and fixtures
Accumulated depreciation

303,237

Tools, furniture and fixtures, net

54,617

Total property, plant and equipment

146,488

Intangible assets
Software
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Lease and guarantee deposits
Deferred tax assets
Other
Allowance for doubtful accounts(17,589)

Total investments and other assets

2,103,083

Total non-current assets
Total assets

12

20,051,644

75,899357,048
103,123
179,023(17,519)

2,419,334

4,526,824

5,102,543

24,738,244

25,154,188

（Unit: thousands of yen）
Previous fiscal year

Current fiscal year

(As of September 30, 2015)(As of September 30, 2016)

1,179,484
518,679
2,571,997
448,157
1,354,619
368,952
234,836
29,673487,313

1,177,351

Total current liabilities

7,193,715

6,148,824

Non-current liabilitie
Long-term loans payables
Net defined benefit liability
Negative goodwill
Other79,925
832,740
40,541141－
1,099,402
31,423
21,587

Total non-current liabilities

953,349

1,152,413

8,147,064

7,301,237

4,947,984
5,469,051
6,300,484

5,012,181
5,834,419
8,727,679(695,491)(2,148,888)

83,69165,027(7,837)(62,969)(42,706)(141,548)

16,591,180

17,852,951

24,738,244

25,154,188

Liabilities
Current liabilities
Accounts payable-trade
Current portion of long-term loans payable
Accounts payable-otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Allowance for coin usage
Provision for directors’ bonuses
Other

Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity

16,022,029

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income

12,884

Subscription rights to shares
Non-controlling interests

127,100
429,165

Total net assets
Total liabilities and net assets

13－
2,290,594
470,641
1,343,684
289,047
188,361
50,824
338,318

17,425,392(119,227)
132,236
414,550

（2）Consolidated statement of income and consolidated comprehensive income
Consolidated statement of income（Unit: thousands of yen）
Previous fiscal year

Current fiscal year

(from October 1, 2014
to September 30, 2015)(from October 1, 2015
to September 30, 2016)

Net sales
Cost of sales

33,461,440
5,439,149

32,844,230
5,353,409

Gross profits

28,022,291

27,490,821

Selling, general and administrative expenses

23,776,605

22,135,122

Operating income

4,245,685

5,355,698

Non-operating income
Interest income
Dividend income
Amortization of negative goodwill
Compensation income
Subsidy income
Other

257
6,060
9,117
12,118
8,983
19,718

187
6,206
9,117

Total non-operating income

56,25525,661

4,689
95,78024,815
8,477
23,912

2,178
44,873
2,240
11,2459,860

Non-operating expenses
Interest expenses
Share of loss of entities accounted for using equity method
Share issuance cost
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on step acquisitions
Gain on sales of non-current assets
Gain on sales of investment securities
Gain on sales of shares of subsidiaries and associates
Gain on reversal of subscription rights to shares
Total extraordinary income
Extraordinary losses
Loss on retirement of noncurrent assets
Impairment loss
Loss on retirement of noncurrent assets
Loss on valuation of investment securities
Amortization of goodwill
Settlement package
Total extraordinary losses

－
1,377
8,772

157,674

70,3984,144,266

5,310,961

33,50915,011
734,287
7,106
17,705－
4,592－－
20,230807,62124,823

5,183
142,579
74,28739,999227,551
15,147－－37,440100,000－－

504,750

137,440

Income before income taxes

4,447,136

5,198,344

Income taxes-current
Income taxes-deferred

1,673,359
78,974

1,931,402
22,728

Total income taxes

1,752,334

1,954,130

Profit2,694,801

3,244,214

87,370(73,520)

Profit (loss) attributable to non-controlling interests
Profit attributable to owners of parent

2,607,431

14

3,317,734

Consolidated statement of comprehensive income（Unit: thousands of yen）

ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income

Previous fiscal year
(from October 1, 2014
to September 30, 2015)
2,694,801

Current fiscal year
(from October 1, 2015
to September 30, 2016)
3,244,214

9,450
15,067
7,010(20,789)(47,475)(78,579)

1,957
33,484(3,124)(149,968)

Comprehensive income

2,728,286(Comprehensive income attributable to)Comprehensive income attributable to ownersof parent
Comprehensive income attributable to non-controllinginterests

2,647,831

3,185,622

80,454(91,376)15

3,094,246

（3） Consolidated statement of changes in equity
Previous fiscal year (from October 1, 2014 to September 30, 2015)(Unit: thousands of yen)
Shareholders’ equity

Balance at beginning of current period

CapitalsurplusRetainedearnings

Treasuryshares2,596,342

3,111,863

4,305,998(695,491)

9,318,712(695,491)

9,358,436

Cumulative effects of changes inaccounting policies
Restated balance

39,7232,596,342

3,111,863

2,351,641

2,351,641

4,345,721

Changes of items during period
Issuance of new shares exercise ofsubscription rights to shares

Total
shareholders’equityCapitalstock

4,703,282(641,261)

Dividends of surplus
Profit attributable to owners ofparent39,723(641,261)

2,607,431

2,607,431－

Purchase of treasury shares－

Disposal of treasury shares(11,406)

Changes of scope of consolidation
Increase (decrease) consolidated
subsidiaries(11,406)
－

5,547

Other

5,547

Net changes of items other thanshareholders’ equity
Total changes of items during period

2,351,641

2,357,188

1,954,763－

6,663,593

Balance at end of current period

4,947,984

5,469,051

6,300,484(695,491)

16,022,029

Accumulated other comprehensive income

Balance at beginning of current period

Valuation

Foreigndifference on

currencyof defined benefit

Total otheraccumulated

Noncontrollinginterests

Total net
assets224,667

9,722,770translation

securities

adjustment

74,198(31,735)(69,979)(27,516)

206,905(31,735)(69,979)(27,516)

206,905

74,198Changes of items during period
Issuance of new shares exercise ofsubscription rights to sharesplanscomprehensive

Subscription
rights tosharesavailable-for-sale

Cumulative effects of changes inaccounting policies
Restated balance

Remeasurements

income39,723
224,667

9,762,493

4,703,282(641,261)

Dividends of surplus
Profit attributable to owners ofparent

2,607,431

Purchase of treasury shares－

Disposal of treasury shares－(11,406)

Changes of scope of consolidation
Increase (decrease) consolidated
subsidiaries

－

5,547

Other
Net changes of items other thanshareholders’ equity

9,492

23,897

7,010

40,400Total changes of items during period

9,492

23,897

7,010

Balance at end of current period

83,691(7,837)(62,969)16

204,497

165,093

40,400(79,805)

204,497

6,828,686

12,884

127,100

429,165

16,591,180(79,805)

Current fiscal year (from October 1, 2015 to September 30, 2016)(Unit: thousands of yen)
Shareholders’ equity

Balance at beginning of current period

CapitalsurplusRetainedearnings

Treasuryshares4,947,984

5,469,051

6,300,484(695,491)

16,022,029(695,491)

16,022,029

Cumulative effects of changes inaccounting policies
Restated balance

4,947,984

5,469,051

64,19764,1976,300,484

Changes of items during period
Issuance of new shares exercise ofsubscription rights to shares

Total
shareholders’equityCapitalstock－

128,394

Dividends of surplus(890,539)(890,539)

Profit attributable to owners ofparent3,317,734

3,317,734(1,955,144)

Purchase of treasury shares
374,552

Disposal of treasury shares

501,747(1,955,144)
876,300－

Changes of scope of consolidation
Increase (decrease) consolidated
subsidiaries(73,381)

Other(73,381)－

Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at end of current period

64,197

365,367

2,427,194

5,012,181

5,834,419

8,727,679(1,453,396)(2,148,888)

1,403,362
17,425,392

Accumulated other comprehensive income

Balance at beginning of current period

Valuation

Foreigndifference on

currency

available-for-saletranslation

securities

adjustments

83,691(7,837)

Remeasurementsof defined benefit
plans(62,969)

Total otheraccumulatedcomprehensive

Subscription
rights toShares

Noncontrollin
g interests

Total net
assets127,100

429,165

16,591,180

income12,884

Cumulative effects of changes inaccounting policies
Restated balance－
83,691(7,837)(62,969)

12,884

127,100

429,165

16,591,180

Changes of items during period
Issuance of new shares exercise ofsubscription rights to shares

128,394(890,539)

Dividends of surplus
Profit attributable to owners ofparent3,317,734(1,955,144)

Purchase of treasury shares

876,300

Disposal of treasury shares
Changes of scope of consolidation－

Increase (decrease) consolidated
subsidiaries(73,381)－Other
Net changes of items other thanshareholders’ equity(18,663)(34,869)

Total changes of items during period(18,663)(34,869)

Balance at end of current period

65,027(42,706)(78,579)(78,579)(141,548)

17(132,112)(132,112)(119,227)

5,135(14,615)(141,591)

132,236

414,550

17,852,951

5,135(14,615)

1,261,771

（4） Consolidated statement of cash flows（Unit: thousands of yen）

Cash flows from operating activities
Income before income taxes
Depreciation
Impairment loss
Amortization of goodwill
Amortization of negative goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in allowance for coin usage
Increase (decrease) in net defined benefit liability
Interest and dividend income
Interest expenses
Loss (gain) on step acquisitions
Share of (profit) loss of entities accounted for using
equity method
Share issuance cost
Settlement package
Loss on retirement of noncurrent assets
Loss (gain) on sales of non-current assets
Loss (gain) on valuation of investment securities
Loss (gain) on sales of investment securities
Loss (gain) on sales of shares of subsidiaries andassociates
Gain on reversal of subscription rights to shares
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in advance payments
Decrease (increase) in prepaid expenses
Decrease (increase) in accounts receivable-other
Increase (decrease) in notes and accounts payable-trade
Increase (decrease) in accounts payable-other
Increase (decrease) in accured expenses
Increase (decrease) in accured consumption taxes
Other, net

Previous fiscal year

Current fiscal year

(from October 1, 2014
to September 30, 2015)(from October 1, 2015
to September 30, 2016)

4,447,136
1,348,744
142,579
286,973(9,117)(42,221)(42,611)
122,687(6,318)
4,689(33,509)

5,198,344
1,369,002

95,78044,87324,815
15,14774,287(9,827)39,999(734,287)－－
37,440(4,592)100,000(7,106)－(17,705)(604,616)
38,356
122,376(775,180)
202,106
206,900
5,887
52,376
609,039(20,230)
709,926(294,418)(48,704)
22,230(2,133)(269,618)
23,125(79,905)(26,966)

Subtotal

5,557,383

6,834,868

Interest and dividend income received
Interest expenses paid
Income taxes (paid) refund

6,318(3,243)(973,267)

6,393(2,178)(1,993,336)

Net cash provided by (used in) operating activities

4,587,190

4,845,747

18

－
1,690
(9,117)(5,169)(46,475)
139,781(6,393)2,178－－

（Unit: thousands of yen）

Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sales property, plant and equipment
Purchase of intangible assets
Proceeds from sales of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Purchase of shares of subsidiaries and associates
Purchase of shares of subsidiaries resulting in change inscope of consolidation
Proceeds from purchase of shares of subsidiaries resulting
in change in scope of consolidation
Payments for sales of shares of subsidiaries resulting inchange in scope of consolidation
Payments for transfer of business
Proceeds from collection of lease and guarantee deposits
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Repayments of long-term loans payable
Proceeds from issuance of common shares
Purchase of treasury shares
Proceeds from sales of treasury shares

Previous fiscal year

Current fiscal year

(from October 1, 2014
to September 30, 2015)(from October 1, 2015
to September 30, 2016)(34,741)
66(1,394,157)(62,957)－(60,867)－(1,754,865)
211,827(223,088)
734,287(213,500)(68,933)

－

987

－

(21,998)－－511(17,500)
1,330(21,516)(2,737)(1,707,341)(1,327,202)(7,762)
4,581,722－－(598,605)
98,600(1,955,144)
876,300－(106,690)

Cash dividends paid

(641,261)(890,539)

Other, net(11,000)(456)

Net cash provided by (used in) financing activities

3,921,698(2,469,846)

24,337(44,247)

Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents

6,825,885

1,004,450

Cash and cash equivalents at beginning of period

4,782,677

11,608,562

Cash and cash equivalents at end of period

11,608,562

12,613,012

19

（5）Notes on consolidated financial statements(Notes relating to going concern assumptions)Not applicable.
(Notes relating to significant items for preparation of consolidated financial statements)
1. Items concerning the scope of consolidation
Our consolidated subsidiaries are the following 17 companies, all of which are consolidated.
TeraMobile, Inc.
FIL Corporation
music.jp, Inc.
comic.jp, Inc.
movile Ltd.
Automagi Inc.
Mediano Ltd.
MShift, Inc.
Mytrax Inc.
EverGene Ltd.
Sonicnaut Co., Ltd.
ZERO-A Co., Ltd.
CLIMB Factory Co., Ltd.
PHARUMO, Inc.
KARADAmedica, Inc.
MTI Healthcare Lab Ltd.
MYTRAX VIETNAM Co.,Ltd
J Bridge Ventures, Inc., which was included in the Company’s consolidated subsidiaries in
the previous consolidated fiscal year, has been liquidated and has been excluded from thescope of consolidation.
MYTRAX VIETNAM Co., Ltd., a newly established company, has been a consolidated
subsidiary from the consolidated fiscal year under review.
In the consolidated fiscal year under review, Jibe Mobile K.K. and LHR Service, Inc.,
consolidated subsidiaries, have been renamed as Automagi Inc. and MTI Healthcare Labo Co.,
Ltd., respectively.
2. Items concerning the application of equity method(1) Number of equity method affiliates: 4
SHANGHAI HYRON MTI CO., LTD.
Video Market Corporation
StaGen Co., Ltd.
Smart Med Co., Ltd.
StaGen Co., Ltd. and Smart Med Co., Ltd. are included in the scope of application of the equity
method following the acquisition of shares in these companies in the consolidated fiscal year underreview.
(2) If an equity method affiliate has its closing date on other than the consolidated closing date, thefinancial statements as of the end of the month preceding the consolidated closing date are used forthe preparation of the consolidated financial statements.
(3) Names of non-equity method affiliates
livepass, Inc.
Reason for not applying the equity method
The company above is not accounted for under the equity method because its effect on such items
as net income and retained earnings of this term is insignificant and also immaterial as a whole.
3. Items concerning the accounting periods of the consolidated subsidiaries and the like
One of the consolidated subsidiaries, MShift, Inc., closes its books as of December 31 each year. With respect
to MShift, Inc., financial statements prepared pursuant to the provisional closing of books conducted as of theend of the month preceding the consolidated closing date are used for the preparation of the consolidated
financial statements. The closing dates of other consolidated subsidiaries are the same as the consolidated
closing date.

20

4. Items concerning accounting standards(1) Valuation standards and methods for significant assets
Securities
Other securities
Other securities with market value
The market value method based on market prices and the like at the closing date is applied.
(Unrealized holding gains and losses are accounted for as a component of net assets, and the costsof sold securities are mainly computed based on the moving average method.)
Other securities without market value
A historical cost method based on the moving average method is applied.
(2) Depreciation methods for significant depreciable assetsa) Property, plant and equipment
The declining-balance method is applied. Their main useful lives are as follows:
Buildings and accompanying facilities: 3 - 18 years
Tools, furniture and fixtures: 3 - 20 yearsb) Intangible assets
Software
Software used in the company
The straight-line method based on the useful lives within the company (2 - 5 years) is applied.
(3) Basis for significant allowancesa) Allowance for doubtful accounts
To prepare for losses on the collection of receivables, the allowance for doubtful accounts
provides an estimated amount of uncollectibles. The amount of the allowance for general
receivables is based on the historical loan loss ratio. As for certain receivables such as doubtful
accounts receivable etc., the recoverability of each receivable is examined individually, and theestimated unrecoverable amounts are recognized as the allowance.
b) Allowance for coin usage
With respect to the cost of sales arising from the use of coins etc. provided to the subscribers to“music.jp” etc. through services provided by the Group including Chakuuta Full® or Chakuuta®,
the Company provides an accrued amount of payment in a future period as of the end of thecurrent consolidated fiscal year.
c) Provision for directors’ bonuses
To prepare for outlays for officers’ bonuses, an amount applicable for the current consolidated
fiscal year is provided based on the estimated amount of payment.
(4) Reserves for retirement benefitsa) Period reversion method
To prepare for the retirement benefits of employees, an actual amount at the end of the current
consolidated fiscal year is provided based on the estimated amount of retirement benefit
obligations as of the end of the current consolidated fiscal year.
b) Expense processing method on actuarial difference
Actuarial gains and losses are amortized from the following consolidated fiscal year ofoccurrence, using the straight-line method over the average remaining service period of
employees at the time of occurrence in each consolidated fiscal year.
(5) Standards for conversion of significant foreign currency-denominated assets and liabilities into
Japanese yen
Receivables and payables denominated in foreign currencies are translated into Japanese yen at
the fiscal year-end spot exchange rates, with the translation difference included in the current
statements of income. The assets, liabilities, earnings, and expenses of overseas subsidiaries, aswell as those of overseas equity method affiliates, have been translated into Japanese yen at theprevailing spot exchange rates at the end of the month preceding the consolidated settlement date,
and the translation difference has been included in foreign currency translation adjustment under
net assets.
(6) Amortization method and period of goodwill
Positive goodwill and negative goodwill from the period on or before September 30, 2010 are
amortized in accordance with the equal installment method over a period of time, which isestimated individually according to the effect of goodwill.
(7) Scope of cash and cash equivalents reported in consolidated statements of cash flows
Cash on hand, readily available deposits and short-term investments, which are highly liquid,
only exposed to small risks for value changes and have maturities of terms not exceeding three21months at the time of purchase, are considered to be cash and cash equivalents.
(8) Other important items
Accounting for consumption taxes
Transactions are recorded at amounts exclusive of taxes such as consumption taxes.
(Change in accounting policies and the like)(Application of the Accounting Standard for Business Combinations, etc.)
From the fiscal year under review, the Company applied the “Accounting Standard for Business
Combinations” (ASBJ statement No. 21, September 13, 2013; hereinafter the “Accounting Standard forBusiness Combinations”), the “Accounting Standard for Consolidated Financial Statements” (ASBJ
statement No. 22, September 13, 2013; hereinafter the “Accounting Standard for Consolidated Financial
Statements”) and the “Accounting Standard for Business Divestitures” (ASBJ statement No. 7, September
13, 2013; hereinafter the “Accounting Standard for Business Divestitures”). The purpose of applying thesestandards was to change the method for recording the difference from changes in the Company’s equity inits subsidiaries that remain controlled by the Company as capital surplus and the expenses related toacquisition as an expense in the consolidated fiscal year in which the expenses are incurred. For businesscombinations implemented after the beginning of the fiscal year under review, the method will be changed
to one that reflects the revision of the distributed amounts of acquisition costs by determining provisional
accounting treatment in the consolidated financial statements for the consolidated accounting period towhich the date of the relevant business combination belongs. In addition, the Company has changed thepresentation of net income and other items and the presentation of minority interests to non-controllinginterests. To reflect these changes, the Company rearranged the consolidated financial statements for theprevious fiscal year.
The Accounting Standard for Business Combinations and other standards are applied in accordance withthe transitional treatment prescribed in Article 58-2 (4) of the Accounting Standard for Business
Combinations, Article 44-5 (4) of the Accounting Standard for Consolidated Financial Statements, andArticle 57-4 (4) of the Accounting Standard for Business Divestitures. These standards have been applied
since the beginning of the fiscal year under review. Their application will continue going forward.
As a result, capital surplus at the end of the fiscal year under review declined ¥73,381 thousand.
In the consolidated statement of cash flows, cash flows related to the acquisition or sale of shares insubsidiaries that do not result in a change in the scope of consolidation are posted in cash flows fromfinancing activities, and cash flows related to expenses related to the acquisition of shares in subsidiaries
that result in a change in the scope of consolidation or cash flows related to expenses incurred inassociation with the acquisition or sale of shares in subsidiaries that do not result in a change in the scopeof consolidation are posted in cash flows from operating activities.
Effects on per share information are described in the per share information section.
(Depreciation method of property, plant and equipment)
Following the revision to the Corporation Tax Act, the Company adopted the “Practical Solution on a
Change in Depreciation Method Due to Tax Reform 2016” (ASBJ PITF No. 32, June 17, 2016), effectivefrom the fiscal year under review. In adopting this solution, it changed the depreciation method used forfacilities attached to buildings acquired on or after April 1, 2016, switching from the declining balancemethod to the straight line method.
As in the fiscal year under review, this change had only a minor impact on the Company’s financial
statements.
(Accounting standards yet to be applied, etc.)
・Implementation Guidance on Recoverability of Deferred Tax Assets (ASBJ Guidance No. 26, March 28,
2016)(1) Overview
The accounting treatments for recoverability of deferred tax assets fundamentally adhere to the frameworkof JICPA Auditing Guidance No. 66, Auditing Treatment for Judgment of Recoverability of Deferred
Assets. The framework stipulates that companies shall be classified into five categories and the amount ofdeferred tax assets to be posted shall be estimated in accordance with the classification. The framework has
been revised as needed in relation to the following items:(i)Treatment of companies that do not meet the requirements for any of the five categories(ii)The requirements for Category 2 and for Category 3(iii)Treatment of unscheduled deductible temporary difference at companies falling under Category 222

(iv)Treatment of the period when the reasonable estimate of taxable income before addition andsubtraction of deductible temporary difference at companies falling under Category 3 is possible(v)Treatment of cases where companies meeting the requirements for Category 4 fall under Category 2 orCategory 3(2) Planned date of application
The Company plans to apply the implementation guidance from the beginning of the fiscal year ending
September 30, 2017.
(3) Impact of applying the implementation guidance
The impact was being assessed when these consolidated financial statements were prepared.
(Segment information)【Segment information】
Consolidated financial results for the year ended September 30, 2016.
Segment information is omitted since the Group consists of a single segment concerning content distribution
for mobile phones (operation of websites) and related services.

23

(Per share information)

Net assets per share
Net income per share

Previous fiscal year

Current fiscal year

(from October 1, 2014
to September 30, 2015)(from October 1, 2015
to September 30, 2016)

Yen
281.48
Yen
48.52

Yen
311.13
Yen
59.54

Yen

Yen

47.67

58.92

Diluted net income per share

Net income per share is calculated on the following basis.
Previous fiscal year

Current fiscal year

(from October 1, 2014
to September 30, 2015)(from October 1, 2015
to September 30, 2016)

Net income per share
Thousand of yen
2,607,431－
Thousand of yen
2,607,431
53,734,513

Thousand of yen
3,317,734－
Thousand of yen
3,317,734
55,722,667－－

Increase in common stock

965,121584,620(Include subscription rights to shares)

965,121584,620

Net income
Amount not attributed to common stockholders
Income applicable to common stock
Average number of shares outstanding to common stock
Diluted net income per share
Net income adjustment

Summary of potential stock not included in the calculationof amount of diluted net income per share since there wasno dilutive effect.

Subscription rights to share
Subscription rights to share
Dates of resolution by the board Dates of resolution by the boardof directorsof directors
May 1, 2015
May 1, 2015
(Numberof the subscription(Number of the subscription
rightstoshare
1,495 rights)
rights to share 1,531 rights)
January 29, 2016
(Number of the subscription
rights to share 3,248 rights)
March 8, 2016
(Number of the subscription
rights to share 238 rights)(Note) 2 We conducted a 2-for-1 share split which became effective as of April 1, 2014. And also we conducted a 2-for-1 effective
as of April 1, 2015. Net assets per share and net income per share are calculated on the assumption that these share splits werecarried out at the beginning of the previous fiscal year.
3 As described in Change in accounting policies, the Company applies the Accounting Standard for Business Combinations,etc. The application added 1.32 yen to net assets per share in the fiscal year under review. The application does not have any
impact on net income per share or diluted net income per share.

24

(Significant subsequent events)(Acquisition of convertible bonds with stock acquisition rights)
At a meeting of the Board of Directors held on October 21, 2016, the Company resolved to acquire the firstseries of unsecured convertible bonds with stock acquisition rights (1,000,000,000 yen) of Shobunsha
Publications, Inc. from Whiz Asia Evolution Fund investment limited partnership and acquired the convertible
bonds. Details are as follows:
1. IssueFirst series of unsecured convertible bonds with stock acquisition rights of Shobunsha Publications, Inc.
2. Transferor
Whiz Asia Evolution Fund investment limited partnership
3. Date of acquisition
October 24, 2016
4. Amount acquired
1,300,000,000 yen
5. Purpose of acquisition
The purpose of the acquisition is to promote collaboration between the Company and Shobunsha
Publications and to increase the corporate value of Shobunsha Publications.
6. Other
Whiz Asia Evolution Fund investment limited partnership requested Shobunsha Publications to approve
the transfer, and Shobunsha Publications approved it at a meeting of the Board of Directors held on
October 21, 2016.
(Purchase of treasury stock)
The Company adopted a resolution made at the Board of Directors’ meeting held on October 31, 2016 topurchase treasury stock in accordance with the provisions of Article 156 of the Companies Act appliedmutatis mutandis pursuant to Paragraph 3, Article 165 of the same Act.
1. Reason
To increase capital efficiency and allow the implementation of flexible capital policies corresponding to
the management environment.
2. Type of shares purchased
Common shares of the Company
3. Number of shares purchased
1,600,000 (maximum)(2.9% of the total number of shares outstanding (excluding treasury stock))4. Total value of shares purchased
1,000,000,000 (one billion) yen (maximum)
5. Period of purchasing treasury stock
From November 2 to December 22, 2016
6. Method of purchase
Purchased on the Tokyo Stock Exchange market(Omission of disclosure)Notes are not presented related to consolidated balance sheets, consolidated statements of operations,consolidated statement of changes in shareholders’ equity and the like, consolidated statements of cash flows,lease transactions, transactions between related parties, tax effect accounting, financial merchandise, securities,
derivatives trading, retirement benefit, stock options and the like, business combination and the like, asset
retirement obligation, real estate for rent and the like since the necessity to disclose those with these financial
results is not considered significant.

25

6．Nonconsolidated financial statement（1）Balance sheet（Unit: thousands of yen）

AssetsCurrent assets
Cash and deposits
Accounts receivable-trade
Merchandise
Supplies
Advance payments-trade
Prepaid expenses
Accounts receivable-other
Deferred tax assets
Other
Allowance for doubtful accounts

Previous fiscal year

Current fiscal year

(As of September 30, 2015)(As of September 30, 2016)

10,160,400
6,615,782
22,353
12,272
28,950307,052
827,652
345,932
49,968

10,942,245
5,873,200
16,235
4,949
352,419
367,491
76,874309,844
71,537(64,942)

Total current assets
Non-current assets
Property, plant and equipment
Buildings and accompanying facilities
Accumulated depreciation
Buildings and accompanying facilities, net

17,957,850

310,666

310,666(229,941)(243,439)(152,530)(170,027)

－

(422)

80,725Tools, furniture and fixtures
Accumulated depreciation

179,488

Tools, furniture and fixtures, net

26,958－

Leased assets
Accumulated depreciation
Leased assets, net
Total property, plant and equipment
Intangible assets
Patent right
Right of trademark
Software
Other
Total intangible assets
Investments and other assets
Investment securities
Shares of subsidiaries and associates
Long-term loans receivable
Long-term loans receivable from employees
Long-term prepaid expenses
Lease and guarantee deposits
Deferred tax assets
Other
Allowance for doubtful accounts

26

25,35024,927

153,549611
17,3052,064,099
1,849

5,702
16,4972,139,454
1,849

2,083,865

2,163,502

472,908
957,344571,506
1,616,161
500,000
452
6,203
469,928
786,318
66,462(17,507)

Total non-current assets

61,394－2,759,202

Total assets

67,227

231,422

107,683

－
351
9,660
477,648760,619
98,177

Total investments and other assets(56,948)

18,305,423(17,519)

3,999,514

4,950,752

6,316,567

23,256,175

24,274,418

（Unit: thousands of yen）

Liabilities
Current liabilities
Accounts payable-trade
Current portion of long-term loans payable
Lease obligations
Accounts payable-otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Deposits received
Allowance for coin usage
Provision for directors’ bonuses
Other
Total current liabilities
Non-current liabilities
Lease obligations
Provision for retirement benefits
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Other capital surplus
Total capital surplus
Retained earnings
Legal retained earnings
Other retained earnings
Retained earnings brought forward
Total retained earnings
Treasury shares
Total shareholders’ equity

Previous fiscal year

Current fiscal year

(As of September 30, 2015)(As of September 30, 2016)

938,172
500,000

921,945－2,548,848
416,332
1,311,022
337,159
347,685
79,472
234,836
28,443
8,914

－
5,475
2,318,919
439,168
1,317,439
266,093
213,02862,456
188,361
44,4507,247

6,750,888

5,784,586－
739,595
141

21,446895,206
141

739,737

916,794

7,490,626

6,701,380

4,947,984

5,012,181

4,753,053
5,242

4,817,250
379,794

4,758,295

5,197,045

7,462

7,462

6,536,434

9,304,451

6,543,897

9,311,913(695,491)(2,148,888)

83,762

68,682

83,762

68,682

15,554,686

Valuation and translation adjustments
Valuation difference on available-for-sale securities
Total valuation and translation adjustments
Subscription rights to shares
Total net assets
Total liabilities and net assets

27

17,372,252

127,100

132,103

15,765,549

17,573,037

23,256,175

24,274,418

（2）Statement of income（Unit: thousands of yen）
Previous fiscal year

Current fiscal year

(from October 1, 2014
to September 30, 2015)(from October 1, 2015
to September 30, 2016)

Net sales
Cost of sales

31,297,953
4,243,618

30,915,227
4,195,682

Gross profits

27,054,334

26,719,544

Selling, general and administrative expenses

22,928,352

20,842,724

Operating income

4,125,982

5,876,819

6,657
24,951

8,723
7,841

31,60916,564

3,889
42,033

1,208
18,83945,922

20,047

4,111,669

5,873,337

3,130

－
4,592

Non-operating income
Interest and dividend income
Other
Total non-operating income
Non-operating expeses
Interest expenses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on extinguishment of tie-in shares
Gain on sales of non-current assets
Gain on sales of investment securities
Gain on liquidation of subsidiaries
Gain on reversal of subscription rights to shares
Total extraordinary income
Extraordinary losses
Loss on sales of non-current assets
Impairment loss
Loss on retirement of non-current assets
Loss on valuation of investment securities
Loss on valuation of shares of subsidiaries and associates
Total extraordinary losses－
734,287
3,166
17,705－－
20,230758,290

24,823

5,183
120,377
58,02539,999441,526－－
32,170100,000
194,682

665,113

326,853

Income before income taxes

4,204,846

5,571,307

Income taxes-current
Income taxes-deferred

1,621,593
83,695

1,892,953
19,798

Total income taxes

1,705,289

1,912,751

Net income

2,499,556

3,658,555

28

（3）Statement of changes in shareholders’ equity
Previous fiscal year (from October 1, 2014to September 30, 2015)(Unit: Thousands of yen)
Shareholders’ equity
Capital surplus

Balance at beginning of current
periodRetained earnings

Capital
stock

Legal
capitalsurplus

OthercapitalsurplusTotal
capitalsurpluses

Legalretainedearnings

2,596,342

2,401,412

5,242

2,406,654

7,462

Cumulative effects ofchanges in accounting
policies
Restated balance

2,596,342

2,401,412

2,351,641

2,351,641

5,242

2,406,654

7,462

Other
retainedearnings

Total
retainedearnings

Treasuryshares4,638,416

4,645,879(695,491)

39,72339,723

4,678,139

4,685,602

Retainedearnings
brughtforwardChanges of items during period
Issuance of new sharesexercise of subscription
rights to shares

Total
shareholders’equity8,953,385

39,723(695,491)

2,351,641

8,993,108

4,703,282(641,261)

Dividends from surplus

2,499,556

Net income(641,261)(641,261)

2,499,556

2,499,556

Purchase of treasury shares－

Disposal of treasury shares－

Net changes of items otherthan shareholders’ equity
Total changes of items during
period

2,351,641

2,351,641－

2,351,641－

1,858,294

1,858,294－

6,561,577

Balance at of current period

4,947,984

4,753,053

5,242

4,758,295

7,462

6,536,434

6,543,897(695,491)

15,554,686

Valuation andtranslation adjustments
Valuationdifference on
available-forsale securities
Balance at beginning of current period

74,198Subscription
Totalrights to
Valuation
sharesandtranslation
adjustments
74,198206,905

Cumulative effects of changes inaccounting policies
Restated balance

Total
net assets

9,234,490
39,72374,19874,198206,905

9,274,213

Changes of items during period
Issuance of new shares-exercise ofsubscription rights to shares

4,703,282(641,261)

Dividends from surplus

2,499,556

Net income
Purchase of treasury shares－

Disposal of treasury shares－

Net changes of items other thanshareholders’ equity
Total changes of items during period

9,563

9,563

(79,805)

Balance at of current perio

83,762

83,762

127,100

9,563

9,563

(79,805)29(70,241)

6,491,336
15,765,549

Current fiscal year (from October 1, 2015 to September 30, 2016)(Unit: thousands of yen)
Shareholders’ equity
Capital surplus

Balance at beginning ofcurrent period

Retained earnings

Capital
stock

Legal
capitalsurplus

OthercapitalsurplusTotal
capitalsurpluses

Legalretainedearnings

4,947,984

4,753,053

5,242

4,758,295

7,462

Other
retainedearnings

Retainedearnings
brughtforward6,536,434

Total
retainedearnings

Treasuryshares6,543,897(695,491)

Cumulative effects ofchanges in accounting
policies
Restated balance

15,554,686－
4,947,984

4,753,053

64,19764,197

5,242

4,758,295

7,462

6,536,434

6,543,897

Changes of items during
periodIssuance of new sharesexercise of subscription
rights to shares

3,658,555

Net income(890,539)

374,552

Total changes of items during
period64,19764,197374,552

438,749－

2,768,016

2,768,016

Balance at of current period

5,012,181

4,817,250

379,794

5,197,045

7,462

9,304,451

9,311,913

Valuation andtranslation adjustments

Balance at beginning of current period
Cumulative effects of changes inaccounting policies
Restated balance

Total
net assets

15,765,549－

83,762

83,762

127,100

15,765,549

Changes of items during period
Issuance of new shares-exercise ofsubscription rights to shares

128,394(890,539)

Dividends from surplus

3,658,555

Net income(1,955,144)

Purchase of treasury shares

876,300

Disposal of treasury shares
Net changes of items other thanshareholders’ equity
Total changes of items during period(15,080)(15,080)

5,002
5,002

1,807,487

68,682

68,682

132,103

17,573,037(15,080)(15,080)30

3,658,555(1,955,144)(1,955,144)(1,453,396)

1,817,566

501,747

Net changes of items otherthan shareholders’ equity

Subscription
Total
Valuationrights to
Valuationdifference onsharesandavailable-fortranslation
sale securities
adjustments
83,762
83,762
127,100(890,539)

3,658,555

Purchase of treasury shares
374,552

15,554,686

128,394(890,539)

Disposal of treasury shares(695,491)

64,197

Dividends from surplus

Balance at of current period

Totalshareholders’equity(10,078)(2,148,888)

876,300

17,372,252

（4） Notes on financial statements(Notes on concerning going concern assumption)
Not applicable.

317．Other（1） Changes in officers
Not applicable.

32