Quarterly Report(53rd Term 3rd Quarter)
Started April 1, 2019
Ended June 30, 2019

TKC Corporation
1758 Tsurutamachi, Utsunomiya-shi, Tochigi－ 1－

Table of Contents[Front Cover] ............................................................................................................................................................................................. 3
Section 1 [Information on the Company] ................................................................................................................................................. 4
Part 1 [Overview of the Company] ................................................................................................................................................... 4
1 [Key Financial Data] ............................................................................................................................................................. 4
2 [Description of Business] ...................................................................................................................................................... 4
Part 2 [Business Overview]............................................................................................................................................................... 5
1 [Risk Factors] ........................................................................................................................................................................ 5
2 [Management Analysis of Consolidated Financial Conditions, Operating Results, and Cash Flows]................................... 5
3 [Material Agreements, etc.]................................................................................................................................................. 12Part 3 [Information on the Company] ............................................................................................................................................. 13
1 [Information on the Company’s Stock] ............................................................................................................................... 13(1) [Total number of shares, etc.] ...................................................................................................................................... 13(2) [Share subscription rights, etc.] ................................................................................................................................... 13(3) [Exercise of bonds with share subscription rights containing a clause for exercise price adjustment, etc.]................. 13(4) [Changes in total number of issued shares, capital stock, etc.] .................................................................................... 13(5) [Major shareholders] ................................................................................................................................................... 13(6) [Voting rights] ............................................................................................................................................................. 13
2 [Officers] ............................................................................................................................................................................. 14
Part 4 [Financial Information] ......................................................................................................................................................... 15
1 [Quarterly Consolidated Financial Statements] ................................................................................................................... 15(1) [Quarterly consolidated balance sheets] ....................................................................................................................... 15(2) [Quarterly consolidated statements of income and quarterly consolidated statements of comprehensive income] ...... 17[Quarterly consolidated statements of income] ............................................................................................................ 17[Quarterly consolidated statements of comprehensive income] ................................................................................... 18
2 [Other]................................................................................................................................................................................. 25
Section 2 [Information on Guarantors, etc. of the Company] ................................................................................................................ 26
Quarterly Review Report of Independent Auditors ................................................................................................................................. 27－ 2－

[Front Cover][Document filed]

Quarterly Report[Applicable law]

Article 24-4-7, Paragraph 1 of the Financial Instruments and Exchange Act of Japan[Filed with]

Director of Kanto Local Finance Bureau[Date filed]

August 13, 2019

[Quarterly accounting period]

53rd Term 3rd Quarter (from April 1, 2019 to June 30, 2019)[Company name]

Kabushiki Kaisha TKC[Company name in English]

TKC Corporation[Title and name of representative]

Kazuyuki Sumi, Representative Director, President and Executive Officer[Address of head office]1758 Tsurutamachi, Utsunomiya-shi, Tochigi[Phone number]

028-648-2111[Contact person]

Hitoshi Iwata, Representative Director, Vice President and Executive Officer[Contact address]

2-1 Ageba-cho, Shinjuku-ku, Tokyo[Phone number]

03-3235-5511[Contact person]

Hitoshi Iwata, Representative Director, Vice President and Executive Officer[Place available for public inspection]

TKC Corporation, Tokyo Head Office(2-1 Ageba-cho, Shinjuku-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1 Nihonbashikabutocho, Chuo-ku, Tokyo)－ 3－

Section 1 [Information on the Company]
Part 1 [Overview of the Company]
1 [Key Financial Data]

Term & Period

52nd Term 3rd Quarter
consolidated cumulative
period53rd Term 3rd Quarter
consolidated cumulative
periodAccounting period

Started October 1, 2017;
ended June 30, 2018

Started October 1, 2018; Started October 1, 2017;
ended June 30, 2019
ended September 30, 2018

Net sales
Ordinary income
Quarterly (current) net income
attributable to owners of parent
Quarterly comprehensive income
or comprehensive income
Net assets
Total assets
Quarterly (current) net income per
share
Quarterly (current) diluted net
income per share
Equity ratio(millions ofyen)(millions ofyen)(millions ofyen)(millions ofyen)(millions ofyen)(millions ofyen)

Fiscal 52nd Term

45,28947,721

61,621

7,725

7,564

8,961

5,069

5,171

6,158

5,114

4,242

6,517

71,14873,03772,55083,97988,922

90,202(yen)

192.17196.46233.46(yen)

191.31

195.94232.41

(%)

82.7

80.4

78.6

Term & Period

52nd Term 3rd Quarter
consolidated accounting period

53rd Term 3rd Quarter
consolidated accounting period

Accounting period

Started April 1, 2018;
ended June 30, 2018

Started April 1, 2019;
ended June 30, 2019

Quarterly net income per share

(yen)

67.11

65.00

(Notes) 1. Changes in key financial data, etc. of the Company are not stated here, as they are included in the Company’s quarterly
consolidated financial statements.
2. Net sales do not include consumption taxes (consumption tax and local consumption tax; hereinafter the same).
3. The Company introduced the Board Incentive Plan (BIP) Trust starting from the 2nd quarter consolidated accounting
period, and recorded the stocks held by said Trust as treasury stocks. Accordingly, for the purpose of calculating thequarterly net income per share, they are included in the treasury stocks to be deducted in calculating the average numberof shares outstanding.

2 [Description of Business]
There are no significant changes in the description of business operated by the TKC Group (TKC Corporation and its affiliatedcompanies) for the current 3rd quarter consolidated cumulative period. There are no changes in the major affiliated companies.

－ 4－

Part 2 [Business Overview]
1 [Risk Factors]
There are no risks pertaining to new business operations, etc. arisen during the current 3rd quarter consolidated cumulative
period. There are no significant changes in risks regarding business operations, etc. described in the Annual Securities Report ofthe previous fiscal year.

2 [Management Analysis of Consolidated Financial Conditions, Operating Results, and Cash Flows]
I. Operating Results
The operating results for the current 3rd quarter consolidated cumulative period (hereinafter, “the current 3rd quarter”) of theconsolidated Group comprising of TKC Corporation and its six consolidated subsidiaries recorded a net sales of 47,721 million
yen (increased 5.4% year-on-year), operating income of 7,280 million yen (decreased 2.6% year-on-year), ordinary income of
7,564 million yen (decreased 2.1% year-on-year), and net income attributable to owners of parent of 5,171 million yen (increased
2.0% year-on-year).
This was attributable to increase in sales from computer services and software sales earned by the Accounting Firm Business
Division due to increase in the number of users of financial accounting systems that meet the requirements of the Electronic Books
Maintenance Act of Japan as well as increase in the number of users of ASP1000R electronic tax filing system for corporations in
response to the electronic filing of income taxes now mandated to large corporations, and to increase in sales from computer
services earned by the Local Governments Business Division due to increase in number of organizations using our mission-criticalsystems.
The reasons for lower operating income and ordinary income compared to the previous fiscal year is due to the absence in thecurrent 3rd quarter of extraordinary sales related to system revision works in response to the amendments to the My Number andNational Health Insurance systems by the Local Governments BD which were recorded in the 3rd quarter of the previous fiscal
year, and also due to the increase in depreciation of software related to the new offering of TASK Cloud Comprehensive Support
System for Persons with Disabilities, etc.
Net sales for the current 3rd quarter by business division are shown below.
1. Results of operation of the Group for the 3rd Quarter(1) Net sales of the Accounting Firm Business Division
Net sales of the Accounting Firm BD was 33,430 million yen (increased 3.8% year-on-year); operating income was 7,088
million yen (increased 3.7% year-on-year). The breakdown is as follows:(i) Sales from computer services increased by 3.9% year-on-year. This was attributable to the growth in number of users of thecloud service-based FX4 Cloud Integrated Accounting Information System for mid-sized companies, Office Management
System (OMS Cloud) for Tax Accounting Firms, and OMS Mobile which provides accounting firms with a highly secureenvironment for mobile works.
(ii) Software sales increased by 3.0% year-on-year. This is the result of increase in the number of users of financial accounting
systems that meet the requirements of the Electronic Books Maintenance Act of Japan as well as increase in the number ofusers of our electronic tax filing system for corporations (ASP1000R) in response to the electronic filing of income taxes
now mandated to large corporations.
(iii) Sales from consulting services decreased 3.7% year-on-year. This was due to decrease in revenues from client/server system
launch support services and hardware maintenance as a result of growth in the number of users of FX4 Cloud, OMS Cloudand other systems.
(iv) Hardware sales increased by 6.7% year-on-year. This was caused by increasing demands for PC replacements in response to
the termination of Windows 7 support in January 2020.
(2) Net sales of the Local Governments Business Division
Net sales of the Local Governments BD was 11,322 million yen (increased 11.4% year-on-year); operating loss was 130 million
yen (operating income of 338 million yen in 3rd quarter of the previous fiscal year). The breakdown is as follows:(i) Sales from computer services increased by 7.9% year-on-year. This was driven by the increased sales from outsourcing
services and the use of TKC data centers generated by users of mission-critical systems newly ordered in the previous fiscal
year, and the increase in the number of users of LGWAN cloud services such as the Convenience Store Certificate Issuing
System and the Taxation Document Image Management System.
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(ii) Software sales decreased 9.2% year-on-year. This was due to the absence in the current 3rd quarter of sales from systemrevision works in response to amendments to the My Number, National Health Insurance and long-term care insurance
systems which existed in the 3rd quarter of the previous fiscal year.
(iii) Sales from consulting services increased 50.8% year-on-year. This was driven by increase of sales from orders for new
systems from mission-critical system users received during the 3rd quarter of the previous fiscal year.
(iv) Hardware sales increased by 115.0% year-on-year. This was derived from increase in the sales of servers and network
devices in relation to the renewal of Registration Network System-related devices.
For the full year operating results, operating income is expected to exceed the previous fiscal year with the net sales from thesystem renewal project of the Local Taxes Electronic Filing Support Service (eLTAX) scheduled in the 4th quarter.
(3) Net sales of the Printing Business Division (Subsidiary: TLP Corporation)
Net sales of the Printing BU was 2,969 million yen (increased 2.2% year-on-year); operating income was 315 million yen(increased 8.5% year-on-year). The breakdown is as follows:(i) Sales of data printing service-related products increased by 9.6% year-on-year. This was attributable to winning of greaterorders for direct mail productions from private enterprises, stable orders for business process outsourcing projects, orders
related to nationwide local elections in April, orders for notice-related services from municipalities, and orders for noticerelated services from extra-governmental organizations.
(ii) Business form-related sales decreased by 0.9% year-on-year. This is due to ongoing decline in demands for business forms.
2. Important matters with respect to the Company as a whole(1) Conclusion of business matching agreement with Joyo Bank, Ltd.
On April 2, 2019, the Company concluded a business matching agreement with Joyo Bank, Ltd. (Head Office: Mito, Ibaraki) in
which the Company will provide the Overseas Business Monitor (hereinafter, “OBM”) for the purpose of supporting overseas
expansion of Joyo Bank’s loan customers. Under this Agreement, Joyo Bank will introduce OBM to loan customers having
business abroad, and the Company will support the implementation and operation.
Going forward, the Company plans to conclude similar agreements with other financial institutions and provide support foroverseas expansion to medium- and small-sized companies through the implementation of OBM.
3. Business activities and operating results of the Accounting Firm Business Division
The Accounting Firm BD operates in accordance with the business objectives set forth in the Articles of Incorporation (Article 2,
Paragraph 1: Management of electronic data processing centers to defend the business domain and maintain control over the fateof accounting firms) and works under close ties with the TKC National Federation, which consists of 11,300 certified public tax
accountants and certified public accountants (as of June 30, 2019) that are customers of TKC (hereinafter, “TKC Members”).
(Note) For more information on the TKC National Federation, visit the TKC Group website (https://www.tkc.jp/).
(1) Activities of the TKC National Federation ("TKCNF")
TKCNF announced its 3-year activity policy from 2019 to 2021 and strategic targets for FY2019 based on the policy agenda inview of its 50th anniversary (in 2021). The content is as follows:[Activity policy to change society with the TKC brand](i) Promote Shomen-tempu (attachment of tax audit reports) by the TKC methods (FY2019 target: Corporate Shomen-tempu by
134,000 companies)(ii) Promote TKC Monitoring Information Service (FY2019 target: 120,000 companies, 240,000 cases)(iii) Promote self-accounting practice by the TKC methods (FY2019 target: 277,000 companies)
In addition, as the initiatives of TKCNF continue to draw attention of financial institutions and local communities, the following
measures have been launched to enhance the managerial infrastructure of TKC Member firms:(i) Understand and practice the Standards of Conduct for TKC Accountants(ii) Increase the numbers of Field Auditors and Assistant Field Auditors(iii) Enhance the managerial advisory services as a Certified Support Agency－ 6－

(2) Activities to achieve the strategic goals of the Accounting Firm Business Division
Based on the activity policy of TKCNF, the Company operates to achieve its strategic targets for FY2019.
(i) Promotion of TKC Monitoring Information Service
During the current 3rd quarter under review, we established the promotion of TKC Monitoring Information Services as our
Accounting Firm BD's most important strategic target, and worked towards diffusing the services to TKC Member firms andfinancial institutions. TKC Monitoring Information Service is a cloud-based service in which the TKC Members, uponrequest by the management of their clients, provide to financial institutions, free of charge, financial information such asmonthly trial balance sheets and financial statements prepared by TKC Member firms after monthly field audits and monthly
settlements. Monthly trial balance sheets will be made available immediately upon completion of the monthly settlement,
and fiscal financial settlements are disclosed immediately after the client electronically files its financial documents to thetax authorities.
During the current 3rd quarter, we communicated to financial institutions that the reliability of financial statements preparedby SMEs can be verified by the following three documents:
1) Supporting documents submitted by TKC Members as provided for under Article 33-2 of the Certified Public Tax
Accountant Act of Japan
2) Certificate of Bookkeeping Timeliness, with which TKC Corporation certifies the timeliness in the preparation of
accounting books as required under Article 432 of the Companies Act of Japan and the connection between the financial
statements and tax returns for the past three years3) The Chusho Kaikei Yoryo checklist developed by the Japan Federation of Certified Public Tax Accountants' Associations
and Japan Federation of Credit Guarantee Corporations
As a result of these activities, the number of financial institutions adopting this Service is increasing rapidly, adopted by
411 financial institutions including all local banks throughout Japan (64 institutions) as of June 30, 2019. Over 110,000
companies provided their financial information to financial institutions through this Service.
(ii) Promotion of self-accounting by the TKC methods (promotion of FX series)
During the current 3rd quarter under review, the Company provided TKC Member firms with seminars on practical issues
that require attention in applying the reduced tax rate upon the enactment of consumption tax changes under the 2016 tax
reform to be effected in October 2019, as well as support for each firm in setting and identifying targets for the promotion ofself-accounting and support for hosting self-accounting promotion meetings to determine specific action plans. As a result of
these activities, the number of FX series users exceeded 270,000 companies as of June 30, 2019.
(iii) Supporting complete compliance with the Electronic Books Maintenance Act of Japan
Under the FY 2018 tax reform, provisions were added in which a tax benefit of 100,000 yen in special reduction for blue
income tax returns shall be offered if the declarer 1) is subject to the Electronic Books Maintenance Act of Japan forbookkeeping, or 2) files the income tax return electronically. This is a groundbreaking revision that offers favorable tax
treatment for business entities that keep the history of revisions and deletions to the book record, which serves as basis of tax
returns in accordance with the Electronic Books Maintenance Act of Japan. We anticipate that the same treatment will beapplied to the filing of corporate taxes in the future.
Also, the Company became the first among its competitors to acquire the certification under the Electronic Books Software
Legal Compliance Certification System by Japan Image and Information Management Association (JIIMA) for its FX series
and other systems. This is a system under which JIIMA checks whether a commercial software for the bookkeeping andrecording for national taxes complies with the requirements of the Electronic Books Maintenance Act of Japan, and issues acertificate for those that meet the legal requirements. Through the promotion of the certified FX series, etc., we supportcomplete compliance with the Electronic Books Maintenance Act of Japan.
(iv) Soliciting new members (promotion of joining TKCNF)
TKCNF is engaged in a project to increase TKC membership to over 10,000 firms by the end of September 2021. The
Company is working closely with the New Members Service Committee of TKCNF in soliciting new members to achieve
this goal.
During the current 3rd quarter, we solicited new members through seminars held for non-members targeting medium- andlarge-sized firms as well as certified public tax accountants and certified public accountants who plan to begin private
practice.
As a result of these activities, the number of TKC Members totaled approximately 9,700 accounting firms and 11,300
accountants as of June 30, 2019. The difference in numbers of firms and accountants are because some firms have multiple
accountants who are members.
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(3) Activities to support the preparation of highly reliable financial statements based on timely and accurate bookkeeping(i) Support activities for diffusion of Chusho Kaikei Yoryo (Guidelines for SME accounting)
The TKCNF recommends the use of Basic Guidelines with Respect to the Accounting Procedures at Small- and Mediumsized Enterprises (hereinafter, “Chusho Kaikei Yoryo” (Guidelines for SME Accounting)) formulated in February 2012 withwhich SME clients should comply. These Guidelines have been formulated based on the following principles: 1) accountingthat helps to grasp the company's business situation; 2) accounting that contributes to providing information to stakeholders(financial institutions, etc.); 3) accounting that complies with the Ordinance on Company Accounting while achieving
harmony between accounting and taxation system; and 4) accounting that does not place excessive burden on SMEs.
In order to support the activities of the TKCNF towards the diffusion and utilization of the Guidelines, the Company
continues to promote the development of training materials and to strengthen collaboration with other organizations
supporting SMEs.
(ii) Issuance of Certificate of Bookkeeping Timeliness
The Company utilizes the processing log data and historical time series data that are automatically logged at the TKCInternet Service Center when TKC Members access our accounting system to issue a Certificate of Bookkeeping Timelinessfree of charge. This Certificate serves as reference for financial institutions and other third parties to objectively evaluate thebusiness performance of TKC Member firms.
This service was developed in an aim to improve reliability of financial statements and tax returns prepared by TKC
Members and to provide a passport for smooth financing to the clients of TKC Members. This utilizes the features of theCompany's financial accounting processing at TKC data centers, which prohibits any retroactive insertions, deletions andcorrections to past data, and TKC Corporation proves, as a third party, that TKC Members have visited clients on a monthly
basis to provide guidance on accurate bookkeeping (monthly Field Audits), and that all work processes from monthly
settlements to the final settlement of accounts and electronic tax filings have been completed by a one-stop, full line process
in a timely manner.
(4) Expansion into large-scale enterprise market
By utilizing the TKC systems, the Company contributes to the rationalization of tax and accounting operations of large
enterprises, mainly of listed companies, and are actively working to solicit these companies and their affiliates to become clientsof TKC Members.
As systems to supplement these activities, the Company provide the TKC Consolidated Group Solution package (which
includes: the eCA-DRIVER consolidated accounting system, the eConsoliTax consolidated tax payment system, the eTaxEffecttax effect accounting system, the ASP1000R electronic tax filing system for corporations, the FX5 integrated accounting
information system, the e-TAX series electronic tax filing system, the FAManager non-current asset management system, theTDS documented evidence storage service, and the OBMonitor overseas business monitoring system, etc.).
In the current 3rd quarter, the Company held seminars in collaboration with the TKCNF's Medium and Large-size Support
Research Committee (consisting of approximately 1,325 members as of June 30, 2019) and the TKCNF's Overseas Deployment
Support Research Committee (consisting of approximately 625 members as of June 30, 2019), in order to enhance theawareness and brand power of system offered by the Company. Seminars on responses to electronic filing mandated to large
enterprises with a capital of 100 million yen or greater under the FY2018 tax reforms, as well as on accounting standards withrespect to the recognition of revenue and how to deal with non-compliance risks of foreign subsidiaries were held to support thepromotional activities.
As a result of these activities, the number of corporate groups using the TKC Consolidated Group Solution counted
approximately 3,550 corporate groups as of June 30, 2019. Our systems are adopted by approximately 90% of the 100 largest
Japanese listed companies by sales amount.
(5) Expansion of markets for legal information database services
The LEX/DB Internet legal information database, developed originally by the Company, maintains an archive of over 299,000
judicial precedents and decisions as of June 30, 2019, covering all legal fields from precedents, etc. set in the former Supreme
Court dating back to 1875 to those most recently published, being the largest database of its kind in Japan.
The TKC Law Library is a comprehensive legal information database which uses the LEX/DB Internet as its core content andcontains over 940,000 bibliographic information references with links to 57 of the legal information databases operated by 18
specialized legal publishers (including Gyosei Corporation, Nippon Hyoron-Sha Co., Ltd., Yuhikaku Publishing Co., Ltd.,
Chuokeizai-Sha Holdings, Inc., and Hanrei Times Holdings Co., Ltd.) with accessible number of information now exceeding
2,620,000 items.

－ 8－(i) Increase of user base of TKC Law Library
The Company engaged in sales promotions for the TKC Law Library, highlighting its usefulness in business operations andputting the contents that are useful for business practices into customer-specific packages (Law Firm Package for law firms,
Corporate Legal Package for corporate legal departments).
In the current 3rd quarter, as a result of active promotional activities towards TCK Member firms, universities, law schools,
government offices, law firms, patent offices and corporate legal departments, the number of users exceeded 50,000 IDs andthe Library is used by over 21,500 institutions as of June 30, 2019.
(ii) Promotion in the academic market ]The Company proposes the implementation of system-based early learning support programs to 54 law schools using the
TKC Law School Educational and Research Support System and supports such schools in applying for the Public Support
Program for Law Schools Concerning the Revision of Budget Distribution initiative by the Ministry of Education, Culture,
Sports, Science and Technology.
Also, starting the current 3rd quarter, we made a full-scale launch of the promotional activities for Civil Service Examination
Study Tool for undergraduates and concluded contracts with 25 universities as of June 30, 2019. The Company will continue
to expand the number of monitor user universities and promote switching to full use.
4. Business activities and operating results of the Local Governments Business Division
The Local Governments BD operates in accordance with the business objectives set forth in the Articles of Incorporation(Article 2 Item 2: "Management of electronic data processing centers to improve the administrative efficiency of local
governments") and offers specialized information services in order to help promote the welfare of residents by improving
administrative efficiency.
(1) Development and provision of cloud services designed for local municipalities
Under the Declaration to be the World's Most Advanced IT Nation: Basic Plan for the Advancement of Public and Private
Sector Data Utilization (approved by the Japanese cabinet on June 15, 2018), the Japanese government is accelerating its
actions to promote the implementation of cloud systems, setting a target to have approximately 1,600 institutions using cloud(of which, approximately 1,100 institutions to be users of local government cloud systems) by the end of 2023.
The Company provides TKC Government Cloud Service to municipalities (mainly for cities, wards, towns and villages)
nationwide. This Cloud Service consists of the TASK Cloud Service which supports mission-critical functions and information
services within agencies, and the TASK Outsourcing Service which supports massive batch output and processing of tax papers
and other documents.
In particular, the TASK Cloud Service is a common platform package system operated at TKC data centers and shared by all
municipalities across Japan, attracting attention from the perspective of a local government cloud system promoted by the
Ministry of Internal Affairs and Communications and adopted by eight groups for shared use as of June 30, 2019.
In the current 3rd quarter, we supported municipalities that newly implemented our services and are scheduled for a full-scalelaunch after autumn of 2019 in enabling smooth system transition, while enhancing the functions of various systems, including
compliance with the change of the era name and revisions to the consumption tax law. As a result of the aggressive promotional
activities, our mission-critical systems are adopted by over 150 municipalities nationwide as of June 30, 2019.
(2) Expansion of cloud services for residents
To promote the utilization of My Number Cards, there has been an increase in the number of municipalities introducing or
considering adopting the services of Issuance of Certificates at Convenience Store.
In response, the Company provides the TASK Cloud Convenience Store Certificate Issuing System as the system to realize thisservice. The System has an extensive track record as the first cloud service for municipalities across Japan and has been adopted
in over 80 municipalities nationwide including government ordinance-designated cities such as Kobe and Kitakyushu as of June30, 2019.
The TASK Cloud Easy Counter Service System that uses the features of the System is attracting greater attention from theperspective of enhanced resident services and counter service reforms, and is adopted by approximately 20 municipalities as ofJune 30, 2019.
In the current 3rd quarter, we worked to enhance the functions of the Easy Counter Service System and conducted active
promotional activities for the Convenience Store Certificate Issuing System.

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(3) Support for cloud-based electronic filing of local taxes
The Company is an authorized contractor of the Local Tax Agency, and provides a cloud-based service for the standard systems
such as inspection system for eLTAX (local tax portal system) offered by the Agency. We also develop and provide Data
Connection Services as our own functionality to connect the individual tax systems with the Agency’s platform.
These services are proposed in collaboration with 47 companies nationwide with whom we have on-going alliance partner
agreements. As a result, our core system TASK Cloud Local Taxes Electronic Filing Support Service is currently used by morethan 770 agencies which account for more than 40% of all municipalities as of June 30, 2019.
In the current 3rd quarter, we supported the preparation to implement the Common Tax Payment System for Local Taxes
scheduled to be launched nationwide in October 2019, and engaged in the enhancement of functionalities and active
promotional activities for data connection services and other services.
(4) Support for the development of standardized local public accounting
Municipalities are required to adopt the system of accrual basis accounting (double entry bookkeeping) to replace the current
cash basis accounting (single entry bookkeeping), and to prepare and disclose their financial documents as well as to utilize
such data for administrative operations.
In order to support this, the Company provides the TASK Cloud Public Accounting System, which is compatible with the daily
journalizing method encouraged by the Japanese government, and its related systems TASK Cloud Non-current Assets Control
System and TASK Cloud Consolidated Financial Statement Preparing System.
In the current 3rd quarter, we engaged in the development and enhancement of various functions to support the visualization
and utilization of local public accounting in line with the report by the Study Group on the Promotion of Local Public
Accounting of the Ministry of Internal Affairs and Communications. As a result of the aggressive promotional activities, ourpublic accounting systems are adopted by approximately 250 municipalities as of June 30, 2019.
(5) Compliance with other revised laws and systems
In May 2019, the Law for Partial Revision to the Act on Use of Information and Communications Technology in Administrative
Procedure, etc. for the Improvement of Convenience of Related Parties Engaged in Administrative Procedure Using Information
and Communications Technology and for the Promotion of Simplifying and Streamlining Administrative Operations (Digital
Administrative Procedures Act) was enacted, which allows administrative procedures in general to be conducted on-line.
In light of these circumstances, we underwent major organizational reform as of October 1, 2018 including the new
establishment of the System Planning Department, and strive to further accelerate the planning and development of new
products and services as well as to strengthen customer support including the collection and communication of the latest
information.
In the current 3rd quarter, our sales, development and operation divisions collaborated under the leadership of the System
Planning Department in gathering and communicating information related to the digitalization of administrative services, aswell as conducting surveys, research and development of next generation systems and services which support efforts ofimproving resident services and improving administrative efficiency and standardization.
5. Business activities and operating results of the Printing Business Division
The Group’s Printing BD operates with the main focus on data print services (hereinafter, “DPS”) and business form printing.
Net sales in the area of DPS increased 9.6% year-on-year, due to winning of greater orders for direct mail productions fromprivate enterprises, stable orders for business process outsourcing projects, orders related to nationwide local elections, orders
for notice-related services from municipalities and extra-governmental organizations.
In the area of business form printing, net sales decreased by 0.9% year-on-year due to continuing decline in demands forbusiness forms despite stable orders from large accounts.

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－

II. Financial Conditions
Assets, liabilities and net assets at the end of the current 3rd quarter consolidated accounting period are stated below.
1. Assets
Total assets as of the end of the current 3rd quarter consolidated accounting period amounted to 88,922 million yen, a 1,279
million yen decrease compared to 90,202 million yen as of the end of the previous consolidated fiscal year.
(1) Current assets
Current assets as of the end of the current 3rd quarter consolidated accounting period amounted to 30,752 million yen, a 995
million yen decrease compared to 31,747 million yen as of the end of the previous consolidated fiscal year.
This was mainly attributable to a 1,206 million yen decrease in Cash and Deposits, despite a 204 million yen increase inInventories.
(2) Non-current assets
Non-current assets as of the end of the current 3rd quarter consolidated accounting period amounted to 58,170 million yen, a
283 million yen decrease compared to 58,454 million yen as of the end of the previous consolidated fiscal year.
This was attributable to a 1,554 million yen decrease in Investment Securities, a 412 million yen decrease in Intangible Assets,
and a 240 million yen decrease in Construction in Progress, despite a 484 million yen increase in Buildings and Structures (netamount), a 500 million yen increase in Long-term Time Deposits, a 240 million yen increase in Tools, Furniture & Fixtures
included in Other (net amount) of Property, Plant & Equipment, and a 761 million yen increase in Long-term Lease Investment
Assets included in Other of Investments and Other Assets.
2. Liabilities
Total liabilities as of the end of the current 3rd quarter consolidated accounting period amounted to 15,885 million yen, a 1,765
million yen decrease compared to 17,651 million yen as of the end of the previous consolidated fiscal year.
(1) Current liabilities
Current liabilities as of the end of the current 3rd quarter consolidated accounting period amounted to 10,771 million yen, a3,183 million yen decrease compared to 13,955 million yen as of the end of the previous consolidated fiscal year.
This was mainly attributable to a 988 million yen decrease in Accounts Payable-Trade, a 1,020 million yen decrease in Income
Taxes Payable, and a 1,801 million yen decrease in Provisions for Bonuses.
(2) Non-current liabilities
Non-current liabilities as of the end of the current 3rd quarter consolidated accounting period amounted to 5,114 million yen, a
1,418 million yen increase compared to 3,696 million yen as of the end of the previous consolidated fiscal year.
This was mainly attributable to a 761 million yen increase in Long-term Lease Obligations (sublease) and a 527 million yen
increase in Provisions for Stocks Payment included in Other of Non-current liabilities.
3. Net assets
Total net assets as of the end of the current 3rd quarter consolidated accounting period amounted to 73,037 million yen, a 486
million yen increase compared to 72,550 million yen as of the end of the previous consolidated fiscal year.
This was attributable to a 2,267 million yen increase in Retained Earnings and a 228 million yen increase in Capital Surplus,
despite a 235 million yen decrease in Subscription Rights to Shares, a 1,025 million yen decrease in Valuation Difference on
Available-for-sale Securities, and a 828 million yen decrease in Purchase of Treasury Stock.
Equity ratio as of the end of the current 3rd quarter consolidated accounting period was 80.4%, a 1.9 percentage point increase
compared to the ratio of 78.6% as of the end of the previous consolidated fiscal year.
III. Operational and Financial Challenges Facing the TKC Group
There are no significant changes in challenges faced by the TKC Group during the current 3rd quarter consolidated cumulative
period.

－ 11－

IV. Research and Development Activities
There were no research and development expenses spent by the TKC Group during the current 3rd quarter consolidated
cumulative period.
There are no significant changes in the status of research and development activities of the TKC Group during the current 3rdquarter consolidated cumulative period.

3 [Material Agreements, etc.]
There has been no decision or conclusion of material agreements, etc., during the current 3rd quarter consolidated accounting
period.
Based on the resolution at the meeting of the Board of Directors held on August 9, 2019, the Company concluded a Share
Exchange Agreement between TKC Shuppan Corporation as of August 13, 2019.
Details are described in Part 4 [Financial Information], 1. Quarterly Consolidated Financial Statements, [Notes to Financial
Statements] (Material Subsequent Events).

－ 12

－

Part 3 [Information on the Company]
1 [Information on the Company’s Stock](1) [Total number of shares, etc.](i) [Total number of shares]
Class

Total number of shares authorized to be issued (shares)

Common stock

60,000,000

Total

60,000,000(ii) [Issued shares]

Class

Number of shares issued asof the end of 3rd quarteraccounting period (shares)(June 30, 2019)

Number of shares issued asof the filing date (shares)(August 13, 2019)

Name of stock exchange
on which the Company islisted, or name of
Authorized Financial
Instruments Firms
Association

Description

Common stock

26,731,033

26,731,033

First Section of theTokyo Stock Exchange

Number of sharesconsisting a unit:
100 shares

Total

26,731,033

26,731,033－－(2) [Share subscription rights, etc.](i) [Stock option scheme]
Not applicable.
(ii) [Other share subscription rights, etc.]
Not applicable.
(3) [Exercise of bonds with share subscription rights containing a clause for exercise price adjustment, etc.]
Not applicable.
(4) [Changes in total number of issued shares, capital stock, etc.]

Date

From April 1, 2019
To June 30, 2019

Increase or
decrease intotal number
of issued
shares(shares)

Balance of
total number
of issued
shares(shares)－

26,731,033

Increase or
decrease incapital stock(millions ofyen)－

Balance ofcapital stock(millions ofyen)

Increase or
decrease incapital reserve(millions ofyen)

Balance ofcapital reserve(millions of
yen)

5,700

－

5,409

(5) [Major shareholders]
There is nothing applicable to be disclosed as the current quarter is the 3rd quarter accounting period.
(6) [Voting rights]
The status of voting rights as of the end of the current 3rd quarter accounting period indicated hereunder are based on theshareholders registry as of the most recent record date (March 31, 2019) because the content of the shareholders registry as ofthe end of the current 3rd quarter cannot be confirmed.

－ 13

－

(i) [Issued shares]
As of March 31, 2019
Classification

Number of shares (shares)

Number of voting rights

Description(units)Shares without voting right

－

－

－

Shares with restricted voting right (treasury
stock, etc.)

－

－

－

Shares with restricted voting right (others)

－

－

－

313,800－－

26,380,200

263,802－

37,033－－

26,731,033

－

－

－

263,802－

Shares with full voting right (treasury stock,etc.)
Shares with full voting right (others)

Commonstock
Commonstock
CommonShares less than one share unit

stock

Total number of issued shares
Total voting rights held by all shareholders(Note) Shares with full voting right (others) includes 600 shares (6 units of voting rights) registered in the name of Japan
Securities Depository Center, Inc., and 190,500 shares (1,905 units of voting rights) owned by the BIP Trust.
(ii) [Treasury stock, etc.]
As of March 31, 2019

Name of shareholder

Address ofshareholder

Number of shares

Number of shares

held under own
name (shares)

held under othernames (shares)

Total shares held
(shares)

Percentage ofshares held to thetotal number ofissued shares (%)

1758 Tsurutamachi,
308,300－

308,300

1.15

4-8-8 Kudanminami,
Chiyoda-ku, Tokyo

5,500

－

5,500

0.02

－

313,800－

313,800

1.17

TKC Corporation

Utsunomiya-shi,
Tochigi

TKC Shuppan
Corporation
Total(Note) In addition to the above, the 190,500 shares owned by the BIP Trust are recorded as treasury stocks in the quarterly
consolidated financial statements.

2 [Officers]
There has been no change in the officers during the current quarter cumulative period since the date of submission of the Annual
Securities Report for the previous fiscal year.

－ 14

－

Part 4 [Financial Information]
1. Method of Preparing Quarterly Consolidated Financial Statements
The quarterly consolidated financial statements of the Company have been prepared in accordance with the Ordinance on
Terminology, Forms, and Preparation Methods of Quarterly Consolidated Financial Statements (Cabinet Office Ordinance No.64
of 2007).
2. Auditing and Attestation
The quarterly consolidated financial statements of the Company for the 3rd quarter consolidated accounting period (from April 1,
2019 to June 30, 2019) and the 3rd quarter consolidated cumulative period (from October 1, 2018 to June 30, 2019) have been
audited by Ernst & Young ShinNihon LLC pursuant to the provision of Article 193-2, Paragraph 1 of the Financial Instruments
and Exchange Act of Japan.

1 [Quarterly Consolidated Financial Statements](1) [Quarterly consolidated balance sheets]
Previous consolidated fiscal year
(September 30, 2018)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Inventories
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures (net amount)
Land
Other (net amount)
Total property, plant and equipment
Intangible assets
Investments and other assets
Investment securities
Long-term time deposits
Guarantee deposits
Other
Total investments and other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Accounts payable - trade
Electronically recorded obligations - operating
Short-term loans payable
Accounts payable - other
Income taxes payable
Provisions for bonuses
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Retirement benefit liabilities
Provisions for stocks payment
Other
Total non-current liabilities
Total liabilities－ 15－(Unit: millions of yen)
Current 3rd quarter consolidated
accounting period(June 30, 2019)22,268
7,690
619
1,204
(35)
31,74721,062
7,577
823
1,314
(25)
30,752

7,991
6,922
2,550
17,464
3,707

8,476
6,892
2,598
17,967
3,294

24,026
6,000
1,318
5,937
37,28258,45490,202

22,471
6,500
1,310
6,625
36,907
58,17088,922

2,824
1,080
142
3,661
1,689
3,169
1,387
13,955

1,835
1,098
212
2,716
668
1,367
2,870
10,771

580
2,036
－
1,078
3,696
17,651

491
2,196
527
1,897
5,114
15,885

(Unit: millions of yen)
Current 3rd quarter consolidated
Previous consolidated fiscal year
accounting period(September 30, 2018)(June 30, 2019)
Net assets
Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders' equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Total accumulated other comprehensive income
Subscription rights to shares
Non-controlling interests
Total net assets
Total liabilities and net assets

－ 16

－

5,700
5,409
59,806(971)
69,944

5,700
5,637
62,073(1,799)71,611

917

(108)

917
235
1,453
72,55090,202

(108)
－
1,534
73,03788,922

(2) [Quarterly consolidated statements of income and quarterly consolidated statements of comprehensive income][Quarterly consolidated statements of income][3rd quarter consolidated cumulative period]

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends income
Insurance dividends income
Land and house rent received
Equity in earnings of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Gain on reversal of subscription rights to shares
Other
Total extraordinary income
Extraordinary loss
Loss on sale of non-current assets
Loss on retirement of non-current assets
Loss on valuation of investment securities
Other
Total extraordinary loss
Quarterly net income before taxes and adjustments
Income taxes - current
Income taxes - deferred
Total income taxes
Quarterly net income
Quarterly net profit (loss) attributable to non-controllinginterests
Quarterly net profit (loss) attributable to owners of parent(Unit: millions of yen)Previous 3rd quarter consolidated Current 3rd quarter consolidated
cumulative period
cumulative period(Started October 1, 2017;(Started October 1, 2018;
ended June 30, 2018)
ended June 30, 2019)45,28947,721
14,874
16,18730,414
31,53422,941
24,254
7,472
7,280

－ 17

－

23
122
5
34
11
58
255

23
135
6
43
18
58
286

2
0
0
2
7,725

1
0
0
2
7,564

0
－
－
0

1
274
8
283

－
4
53
－
58
7,667
2,057
451
2,508
5,158

10
5
－
0
16
7,832
2,112
450
2,563
5,269

89

97

5,069

5,171

[Quarterly consolidated statements of comprehensive income][3rd quarter consolidated cumulative period](Unit: millions of yen)Previous 3rd quarter consolidated Current 3rd quarter consolidated
cumulative period
cumulative period(Started October 1, 2017;(Started October 1, 2018;
ended June 30, 2018)
ended June 30, 2019)
Quarterly net income

5,158

5,269

Other comprehensive income
Valuation difference on available-for-sale securities(44)(1,026)

0

(0)

(44)

(1,026)

5,114

4,242

5,021

4,145

92

96

Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income
Quarterly comprehensive income(Breakdown)
Quarterly comprehensive income attributable toowners of parent
Quarterly comprehensive income attributable to noncontrolling interests

－ 18

－

[Notes to Financial Statements](Additional Information)(Stock-based compensation plan for officers)
The Company introduced a stock-based compensation plan for its Directors (excluding Outside Directors and expatriates),
Auditors (excluding Outside Auditors and expatriates), and Executive Officers (excluding expatriates; hereinafter referred tocollectively as “Directors, etc.”).
1. Outline of Transaction
Based on the resolution of the Board of Directors’ Meeting held on October 31, 2018 followed by approval at the Ordinary
General Meeting of Shareholders held on December 21, 2018, the Company introduced a stock-based compensation plan called“BIP Trust.” The objectives of the plan are to clarify the linkage between the Company’s shareholder value and the remuneration
for Directors, etc. and to motivate Directors, etc. to contribute more to enhancing the medium- to long-term corporate value by
sharing common interest with shareholders, including not only the merit derived from the rising share price, but also the risk
associated with the decline in share price.
2. Stocks of the Company remaining in trust
The stocks of the Company remaining in trust are recorded as treasury stock under Net Assets with the book values in the trust(not including expenses attributable thereto). The book value of said treasury stocks was 753 million yen for 190,500 shares asof the end of this current 3rd quarter consolidated accounting period.

(Implementation of the “Partial Amendments to Accounting Standard for Tax Effect Accounting,” etc.)
The Company applies the partially amended Accounting Standard for Tax Effect Accounting (ASBJ Standard No. 28, February
16, 2018), etc. as of the beginning of the 1st quarter consolidated accounting period. Accordingly, deferred tax assets areindicated under the investments and other assets category, and deferred tax liabilities are indicated under the non-current
liabilities category.
(Notes to the quarterly consolidated statements of cash flows)
The Company does not prepare the quarterly consolidated statements of cash flows for the current 3rd quarter consolidated
cumulative period. The depreciation (including depreciation of intangible assets) for the current 3rd quarter consolidated
cumulative period is as follows:

Depreciation

Previous 3rd quarter consolidated

Current 3rd quarter consolidated cumulative

cumulative period(Started October 1, 2017;

period(Started October 1, 2018;

ended June 30, 2018)

ended June 30, 2019)

1,982 million yen

－ 19

－

2,280 million yen

(Notes to shareholders’ equity, etc.)
I.

Previous 3rd quarter consolidated cumulative period (started October 1, 2017; ended June 30, 2018)
Dividend payments

Resolution
December 22, 2017
Ordinary General
Meeting of
Shareholders
May 2, 2018
Meeting of theBoard of Directors

Total amount of Dividend perClass of shares cash dividends share (yen)(millions of yen)

Record date

Effective date

Source ofdividends

Common stock

1,582

60

September 30, 2017

December 25, 2017

Retainedearnings

Common stock

1,319

50

March 31, 2018

June 11, 2018

Retainedearnings

II. Current 3rd quarter consolidated cumulative period (started October 1, 2018; ended June 30, 2019)
Dividend payments
Resolution
December 21, 2018
Ordinary General
Meeting of
Shareholders
May 8, 2019
Meeting of theBoard of Directors

Total amount of Dividend perClass of shares cash dividends share (yen)(millions of yen)

Record date

Effective date

Source ofdividends

Common stock

1,450

55

September 30, 2018

December 25, 2018

Retainedearnings

Common stock

1,453

55

March 31, 2019

June 10, 2019

Retainedearnings(Note) The total amount of cash dividends determined by resolution of the Board of Directors on May 8, 2019 includes a cash
dividend of 10 million yen to the stocks of the Company owned by the BIP Trust.
(Segment information, etc.)[Segment information]
I.

Previous 3rd quarter consolidated cumulative period (started October 1, 2017; ended June 30, 2018)
Information on net sales and profit or loss for each reportable segment
Reportable segment(Unit: millions of yen)Amounts inquarterly
Adjustments consolidated(Note 1)statements
of income(Note 2)

Accounting
Firm BD

Local
Governmen
ts BD

32,215

10,1682,905

45,289－45,289

3

－

1,427

1,431

(1,431)－

Total

32,219

10,1684,333

46,720(1,431)45,289Segment profit

6,836

338

291

7,466

6

7,472

Printing BD

Total

Net sales(1) Sales to outside customers(2) Inter-segment sales ortransfers(Notes) 1. Adjustments of segment profit of 6 million yen include amounts for elimination of inter-segment transactions andfor adjustments of inventory assets, etc.
2. Segment profit is adjusted with the operating profit presented in the Quarterly Consolidated Statements of Income.

－ 20

－

II. Current 3rd quarter consolidated cumulative period (started October 1, 2018; ended June 30, 2019)
Information on net sales and profit or loss for each reportable segment
Reportable segment(Unit: millions of yen)Amounts inquarterly
Adjustment
consolidatedsstatements(Note 1)of income(Note 2)

Accounting
Firm BD

Local
Governmen
ts BD

33,43011,322

2,969

47,721－47,721

8

0

1,613

1,622

(1,622)－

Total

33,438

11,322

4,583

49,343(1,622)47,721

Segment profit (loss)

7,088

(130)

315

7,273

6

7,280

Printing BD

Total

Net sales(1) Sales to outside customers(2) Inter-segment sales ortransfers(Notes) 1. Adjustments of segment profit of 6 million yen include amounts for elimination of inter-segment transactions andfor adjustments of inventory assets, etc.
2. Segment profit is adjusted with the operating profit presented in the Quarterly Consolidated Statements of Income.
(Earnings per share information)
The amount of quarterly net income per share and the basis for the calculation thereof as well as the amount of quarterly diluted net
income per share and the basis for the calculation thereof are as follows:
Previous 3rd quarter consolidated
cumulative period(Started October 1, 2017;
ended June 30, 2018)

Current 3rd quarter consolidated
cumulative period(Started October 1, 2018;
ended June 30, 2019)

192.17 yen

196.46 yen

5,069

5,171

－

－

5,069

5,171

263,789

263,221191.31 yen

195.94 yen

－

－

1,180

710

－

－

(1) Quarterly net income per share(Basis for calculation)
Quarterly net income attributable to owners ofparent (millions of yen)Amount not attributable to common shareholders(millions of yen)
Quarterly net income from common stocks
attributable to owners of parent (millions of yen)
Average number of common stocks outstanding(hundreds of shares)(2) Quarterly diluted net income per share(Basis for calculation)
Adjustments to quarterly net income attributable toowners of parent (millions of yen)
Number of common stocks increased (hundredsof shares)
Outline of the diluted shares not included in thecalculation of quarterly diluted net income per sharefor not having dilutive effect, but having significant
changes since the end of the previous consolidated
fiscal year

(Note) The average number of stocks outstanding used in the calculation of earnings per share information has been
determined by including the stocks of the Company owned by the BIP Trust (which has been established with theintroduction of the BIP Trust plan) as deductible treasury stocks.
The average number of said treasury stocks deducted for the calculation of quarterly net income per share was 85,829
shares for the current 3rd quarter consolidated cumulative period.

－ 21

－

(Material subsequent events)
TKC Corporation (hereinafter, “TKC”) and TKC Shuppan Corporation (hereinafter, “TKC Shuppan”) have resolved at their respective
meetings of the Board of Directors held on August 9, 2019 to conduct a share exchange in which TKC Shuppan will become wholly
owned subsidiary of TKC (hereinafter, the “Share Exchange”), and have concluded the share exchange agreement between thecompanies.
1. Purpose of the Share Exchange(1) TKC Shuppan was established in 1972 through contributions from TKC Members and TKC for the purpose of engaging in the
public relations and publishing activities in order to communicate information to TKC Members and contribute to therationalization of operations of Member firms and improvement of trust by clients.
(2) Through its publishing activities, TKC Shuppan has publicized the activities of the TKC National Federation (“TKCNF”) which
consists of TKC Members, as well as provided TKC Members with operational know-how on tax accounting, financial
accounting, managerial advice and guarantee held by fellow TKC Members.
(3) TKCNF has announced its 3-year activity policy from 2019 to 2021 and strategic targets for FY2019 based on the policy agenda
in view of its 50th anniversary (in 2021), and works to achieve these targets. To support these activities, there is a need tostrengthen the provision of information to TKC Member firms and their clients. Making TKC Shuppan a wholly owned
subsidiary of TKC is expected to contribute greatly to this end.
(4) The Company also expects that, by making TKC Shuppan its wholly owned subsidiary, it can leverage TKC Shuppan’s
accumulated publishing know-how, and combining them with the Company’s business activities and projects, greatly enhance
public relations and publishing activities towards its customers.
2. Outline of the Share Exchange(1) Timeline for the Share Exchange
Meetings of the Board of Directors for the resolution of Share Exchange (both companies)

August 9, 2019Conclusion of the Share Exchange Agreement (both companies)

August 13, 2019

Extraordinary General Meeting of Shareholders for the approval of the Share Exchange(TKC Shuppan Corporation)

August 26, 2019 (tentative)

Effective date of the Share Exchange

September 24, 2019 (tentative)(2) Method of the Share Exchange
The Share Exchange will be conducted with TKC as the wholly owning parent company and TCK Shuppan as the wholly
owned subsidiary company. TKC is to conduct a simplified share exchange that does not require the approval of a general
meeting of shareholders in accordance with Article 796, Paragraph 2 of the Companies Act of Japan; TKC Shuppan is toconduct the Share Exchange subject to the approval of the extraordinary general meeting of shareholders scheduled to be heldon August 26, 2019.
(3) Allocation of shares for the Share Exchange
Company name

TKC Corporation(Wholly owning parent company inshare exchange)

TKC Shuppan Corporation(Wholly owned subsidiary company inshare exchange)

Exchange ratio

15(i) Allocation ratio of shares
TKC shall allocate and deliver five (5) ordinary shares for each ordinary share of TKC Shuppan. This is provided, however,that there will be no allocation of shares in the Share Exchange for the 5,170 ordinary shares of TKC Shuppan already held
by TKC (as of July 31, 2019).
(ii) Number of shares to be delivered in the Share Exchange
TKC plans to deliver 57,150 of its ordinary shares.
In this case, TKC plans to allocate the required number of shares using its treasury shares possessed (308,540 shares as ofJuly 31, 2019) instead of issuing new shares.

－ 22

－

(iii) Treatment of shares less than one unit
As a result of the Share Exchange, it is anticipated that there will be shareholders possessing TKC shares less than one unit
(shares less than 100). However, shares less than one unit cannot be sold in markets established by the financial instruments
exchange.
Shareholders who own TKC shares less than one unit may use the additional purchase system to request TKC to purchasetheir shares that are less than one unit in accordance with Article 192, Paragraph 1 of the Companies Act of Japan.
(iv) Treatment of fractions of less than one share
For shareholders currently owning TKC Shuppan’s shares who will be alloted fractions of TKC’s ordinary shares less than
one share as a result of the Share Exchange, the Company will pay an amount equivalent to the fractions of less than one
share in accordance with Article 234 of the Companies Act of Japan.
(4) Treatment of subscription rights to shares and bonds with subscription rights to shares of the wholly owned subsidiarycompany in Share Exchange
Not applicable.
3. Basis of allocation calculations for the Share Exchange(1) In order to ensure fairness and validity in determining the allocation ratio for the Share Exchange, the stock values of TKC andTKC Shuppan were calculated by Business Valuation & Consulting Japan (hereinafter, “BVCJ”), a third party independent fromboth companies.
(2) BVCJ calculated the stock values based on the respective medium-term management plans prepared each year by TKC andTKC Shuppan, and using the discounted cash flow (DCF), a valuation method accepted as an essential valuation model forappraising corporate value in recent years.
In addition, since a market value is available for TKC as a listed company, the stock value of TKC was calculated using themarket share price method.
In the market share price method, the closing price of the record date (July 31, 2019) and simple average closing prices for the
1-month period preceding the record date, 3-month period preceding the record date, and 6-month period preceding the record
date were used as basis for the calculation.
Taking into consideration that TKC Shuppan is a non-listed company, the average of three types of approach (the book value pershare method, comparable peer company multiple method, and DCF method) was used in calculating TKC Shuppan’s stock
value.
Stock value calculation is based on the assumption that there will be no major increase or decrease in profit in TKC or TKC
Shuppan, nor will there be major changes to the amount of debts and assets compared to the most recent financial statements.
TKC Shuppan’s stock value per share, shown as a multiple of TKC’s stock value per share derived by each valuation method
are as shown below:
Results of allocation ratio
calculation

Adopted methods
TKC(Wholly owning parent company
in the Share Exchange)

TKC Shuppan(Wholly owned subsidiary company
in the Share Exchange)

DCF method

DCF method

3.21 - 4.80

Market share price method

Average of three methods (Note)

5.71 - 6.68

(Note) Book value per share method, comparable peer company multiple method, and DCF method(3) The Company referred to the calculation results, and decided to use the calculation result derived from the DCF method as
reference in light of the fact that both TKC and TKC Shuppan formulate their medium-term management plans each year inview of the changes in management environment and based on the business strategies developed to respond to such changes.
However, because the stock value derived from the calculation results of the average of three methods was higher than thatderived from the DCF method, the companies deliberated and decided to use the intermediate value of the DCF method and theaverage of three methods, and agreed upon the share exchange ratio as set forth in 2. (3) above. In the event that there ismaterial change to the presumptions of the calculation, the share exchange ratio may be changed through deliberation between
the companies.
(4) The calculating institution BVCJ does not fall under a related party to either TKC or TKC Shuppan, and does not have any
material interest in the Share Exchange to be disclosed.

－ 23

－

4. Overview of the parties to the Share Exchange (as of July 31, 2019)(i)Company name(ii)

Location of head
office(iii) Name and title of
the representative(iv) Description ofbusiness(v)

TKC Corporation(Wholly owning parent company in the Share
Exchange)

TKC Shuppan Corporation(Wholly owned subsidiary company in Share
Exchange)
Japan YWCA Bldg. 4F, 4-8-8 Kudan-minami,
1758 Tsurutamachi, Utsunomiya-shi, Tochigi
Chiyoda-ku, Tokyo
Kazuyuki Sumi, President and Representative
Yoichi Tase, President and Representative
Director
Director
1. Management of electronic data processing
1. Publishing business to defend the businesscenters to defend the business domain anddomain and maintain control over the fate ofmaintain control over the fate of accounting
accounting firms
firms
2. Production and sales of periodical
2. Management of electronic data processing
subscriptions, publications and audiovisual
centers to improve the administrative
software for Member firms
efficiency
3. Production and sales of periodicalof local governments
subscriptions, publications and audiovisual
3. Development, maintenance and sales of legal
software for clients of Member firms
information database services
4. Publication and sales of books, etc. for wider
4. Development, maintenance and sales ofdiffusion of activities of TKC Members andcomputer softwarethe
5. Internet service provider business
TKC National Federation
6. Cloud computing service provider business
5. Hosting of training and seminars
7. Development, maintenance and sales of office 6. Production and sales of e-publications andequipment and supplies
digital contents
8. Collection of bills and administrative tasks on 7. Any business incidental to each of thebehalf of accounting firms and their client
foregoing
companies
9. Provision of monetary loans and monetaryloanarrangements for accounting firms and theirclient companies
10. Consulting on business successions, etc., foraccounting firms and their client companies
11. Liability insurance agency
12. Banking agency
13. Any business incidental to the foregoing

Capital stock(vi) Date ofincorporation(vii) Number of sharesissued(viii) Fiscal year-end

5,700 million yen

83 million yen

October 22, 1966

October 6, 1972

26,731,033 shares

16,600 shares

September 30

September 30(i)(ix) Major shareholders
and shareholding
ratio

Iizuka Takeshi Scholarship(i)Foundation
14.0% (ii)(ii) Daido Life Insurance Company
9.6%(iii) TKC Employee Shareholding(iii)
Association
5.9%(iv) Sozeishiryokan (Institute ofTax Research and Literature)
5.7%(v) The Master Trust Bank of Japan, Ltd.
(Trust account)
3.9%(vi) Masaharu Iizuka
3.2%(vii) Japan Trustee Services Bank, Ltd.
(Trust account)
2.8%(viii) SSBTC Client Omnibus Account
2.8%(ix) Tokio Marine & Nichido Fire
Insurance Co., Ltd.
2.4%(x) Aioi Nissay Dowa Insurance Co., Ltd.
2.2%

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TKC Corporation
TKC Shuppan Employee
Shareholding Association
TKC Chubu Local Association

31.1%
10.1%
1.9%

(x)

Financial conditions and operating results for the immediately preceding fiscal year

Fiscal Year

Fiscal Year ended September 2018(consolidated)

Fiscal Year ended September 2018 (nonconsolidated)

Net assets

72,550 million yen

619 million yen

Total assets

90,202 million yen

1,120 million yen

2,686.32 yen

37,321.34 yen

Net sales

61,621 million yen

1,541 million yen

Operating income

8,679 million yen

81 million yen

Ordinary income

8,961 million yen

84 million yen

Net income

6,158 million yen

56 million yen

233.46 yen

3,380.37 yen

Net assets per share

Net income per share(Note) The information in the column for TKC Corporation under “(ix) Major shareholders and shareholding ratio” is as ofMarch 31, 2019.
5. Condition after the Share Exchange
There are no current plans to change the company name, location of head office, name and title of the representative, descriptionof business, capital stock, date of incorporation, number of shares issued, or fiscal year-end of either company from what is set
forth in 4. Overview of the Parties to the Share Exchange (as of July 31, 2019) above.
6. Overview of the accounting process
The Company expects to apply the accounting process for acquisition under the Accounting Standard for Business Combinations
to the Share Exchange. While the amount of goodwill arising in relation to the Share Exchange is currently undetermined, theimpact to TKC’s consolidated financial results is expected to be minimal.

2 [Other]
The resolution regarding the current interim dividends was adopted at the Board of Directors' meeting held on May 8, 2019,stated as follows.
(a) Total amount of cash dividends to be paid as interim dividends

1,453 million yen(b) Dividend per share

55.00 yen(c) Effective date for payment claim and commencement date for payment

June 10, 2019

(Note) Dividends are payable to the shareholders listed or recorded on the Register of Shareholders as of March 31, 2019.

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Section 2 [Information on Guarantors, etc. of the Company]
None to be disclosed.

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－

Quarterly Review Report of
Independent Auditors
August 13, 2019

To: The Board of Directors, TKC Corporation

Ernst & Young ShinNihon LLC
Designated Limited Liability Partner
Executing Partner

Certified Public Accountant

Kanji Tako

(seal)

Designated Limited Liability Partner
Executing Partner

Certified Public Accountant

Yuichi Noda

(seal)

Pursuant to the provision of Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act of Japan, we have conducted areview of the quarterly consolidated financial statements of the consolidated fiscal year of the Company (started from October 1, 2018
and ending September 30, 2019) for the 3rd quarter consolidated accounting period (from April 1, 2019 to June 30, 2019) and for the
3rd quarter consolidated cumulative period (from October 1, 2018 to June 30, 2019) stated in [Financial Information], namely, thequarterly consolidated balance sheet, quarterly consolidated statements of income, quarterly consolidated statements of comprehensive
income, and notes.
Management's Responsibility for the Quarterly Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the quarterly consolidated financial statements in accordancewith principles setting forth the preparation and properly presentation of the quarterly consolidated financial statements generally
accepted in Japan. Responsibilities include those for designing and operating an internal control system as the management deems
necessary in order to prepare and properly present the quarterly consolidated financial statements that are free from material
misstatement due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an independent conclusion regarding the quarterly consolidated financial statements based on ourquarterly review. We conducted our quarterly review in accordance with quarterly review standards generally accepted in Japan.
A quarterly review consists principally of making inquiries, performing analytical procedures and other quarterly review procedures ofthe management and persons responsible for financial and accounting matters. The quarterly review procedure is a limited procedurecompared to the procedure of annual financial statements performed in accordance with auditing standards generally accepted in Japan.
We believe that we have obtained evidences to support the basis for our conclusion.
Auditor's Conclusion
Based on our quarterly review, nothing has come to our attention that causes us to believe that the quarterly consolidated financial
statements referred to above does not properly represent, in all material respects, the financial conditions of TKC Corporation and its
consolidated subsidiaries as of June 30, 2019 and their operating results for the 3rd quarter consolidated cumulative period ending on
the same date in accordance with accounting principles of quarterly consolidated financial statements generally accepted in Japan.
Interest
Our firm and the executing partners have no interest in the Company for which disclosure is required under the provisions of theCertified Public Accountants Act of Japan.
End of document(Notes) 1. The above is a digitized version of the original copy of the quarterly review report, the original of which is stored by TKC
Corporation (the Company filing this quarterly report).
2. XBRL data is not included in the scope of this quarterly review.
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[Front Cover][Document filed]

Confirmation letter[Applicable law]

Article 24-4-8, Paragraph 1 of the Financial Instruments and Exchange Act of Japan[Filed with]

Director of Kanto Local Finance Bureau[Date filed]

August 13, 2019

[Company name]

Kabushiki Kaisha TKC[Company name in English]

TKC Corporation[Title and name of representative]

Kazuyuki Sumi, Representative Director, President and Executive Officer[Title and name of Chief Financial Officer]

Hitoshi Iwata, Representative Director, Vice President and Executive Officer[Address of head office]1758 Tsurutamachi, Utsunomiya-shi, Tochigi[Place available for public inspection]

TKC Corporation, Tokyo Head Office(2-1 Ageba-cho, Shinjuku-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1 Nihonbashikabutocho, Chuo-ku, Tokyo)

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－

1 [Matters Related to Adequacy of Statements Contained in the Quarterly Report]
Kazuyuki Sumi, Representative Director, President and Executive Officer of the Company and Hitoshi Iwata, Chief Financial
Officer of the Company hereby confirm that the statements contained in the quarterly report for the 3rd quarter of the 53rd term(started April 1, 2019; ended June 30, 2019) are adequate under the Financial Instruments and Exchange Act of Japan.

2 [Special Notes]
None to be disclosed.

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