9Financial Review

Financial Review

Company”) and 55 consolidated subsidiaries, including principal subsidiaries TIS Inc., INTEC Inc., SORUN

At results, operating income was ¥15,996 million ($171 million), down 32.8% over fiscal 2009, and net income

ProfileAs of March 31, 2010, the IT Holdings Group comprised parent company IT Holdings Corporation (“IT Holdings” or “theamounted ¥7,660 million ($82 million), down 18.6% year-on-year.
Millions of yen

Cost of sales

Rate of return

65,357
19.3%
41,57015,996

12.3%
23,787

5.1%

Operating income ratio

7,660

7.0%
9,407

2.4%

2.7%

-6.6%
+0.5 points-9.7%-0.5 points+3.5%+1.4 points-32.8%-1.9 points-18.6%-0.3 points

At a Glance

Financial Position
AssetsSoftware Development
It was a challenge to secure new software development orders, given the trend toward reduced IT investment amongclients. This situation was compounded by the absence of new large projects to replace completed projects. Therefore,
even with the inclusion of sales by SORUN from the fourth quarter, sales in the software development segment
dropped 11.3%, to ¥155,976 million ($1,676 million).

At March 31, 2010, total assets stood at ¥313,077 million ($3,364 million), up 6.0% from a year earlier. Of this amount,total property and equipment accounted for ¥91,999 million ($988 million), up 3.3%, and current assets, ¥141,968
million ($1,525 million), down 0.8%. Total liabilities reached ¥158,002 million ($1,698 million), up 6.0%, and net assets
settled at ¥155,075 million ($1,666 million), up 6.1%. Equity capital, calculated by subtracting ¥16,655 million ($179
million) in minority interest in consolidated subsidiaries and ¥19 million ($201 thousand) in subscription rights from net
assets, increased 5.6%, to ¥138,401 million, and equity ratio slipped 0.2 percentage point, to 44.2%.

% change2009% change

Total assets

313,077

295,327+6.0%

Total liabilities

158,002

149,111+6.0

Total net assets

155,075

146,216+6.1

Minority interests

16,65515,154+9.9

Subscription rights

19

8+137.5

138,401

131,054

+5.6

2009

Net sales

313,856

338,302-7.2

Equity capital

Outsourcing and network

126,164

125,721+0.4

Key ratios:

Software development

155,976

175,847-11.3

Equity ratio (*1)

44.2%

44.4%

-0.2 points

Solution services

25,021

29,409-14.9Return on equity (*2)

5.7

7.4

-1.7 points

Other

6,693

7,325

-8.6

Notes: 1. Equity ratio = (Equity capital / Total assets) x 100
2. Return on equity = Net income /Equity capital [(equity capital at the beginning of the term + equity capital at the end of term)/2] x 100

Cash Flow
Cash and cash equivalents at the end of fiscal 2010 amounted to ¥46,988 million ($505 million), up 33.8% from theend of fiscal 2009.
Net cash provided by operating activities slipped 8.5%, to ¥31,401 million ($337 million). Major components of thischange on the assets side were income before income taxes and minority interests, at ¥13,992 million ($150 million),
as well as depreciation, at ¥11,978 million ($128 million), impairment loss, at ¥2,083 million ($22 million), and a ¥5,908

21

22

Corporate Data

Cost of sales decreased 6.6% from fiscal 2009, to ¥254,827 million ($2,738 million), but the cost of sales ratio rose,
albeit 0.5 percentage point, to 81.2%, because the drop in cost of sales was smaller than the drop in net sales. Grossprofit retreated 9.7%, to ¥59,029 million ($634 million), and the gross profit ratio dipped 0.5 percentage point, to18.8%.
Selling, general and administrative expenses edged up 3.5% from a year earlier, to ¥43,033 million ($462 million).
As a percentage of net sales, SGA expenses grew 1.4 percentage points, to 13.7%.

Financial Section

Costs, Expenses and Earnings%

Financial Review

2010

Corporate
GovernanceMillions of yen

2010

R&D

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

Millions of yen

TopicsOutsourcing and Network
Despite sales-limiting factors, particularly requests from major clients to lower prices, contributions from NEXWAY andSORUN nudged outsourcing and network sales to ¥126,164 million ($1,356 million), up 0.4% from fiscal 2009.

Solution Services
Demand for hardware remained sluggish, reflecting poor economic conditions, and sales in the solution services
segment decreased 14.9%, to ¥25,021 million ($268 million)

Key Strategies

Net income

80.7%

13.7%

Selling, general and administrative expenses ratio% change

To OurStakeholders

43,033

Selling, general and administrative expenses

Net sales benefited from the inclusion of business results posted by newly consolidated SORUN from the fourth
quarter. However, this was not enough to offset the impact of fewer large projects to replace those completed in fiscal
2009 and tighter investment budgets among clients. Consequently, net sales fell 7.2%, to ¥313,856 million ($3,373
million). A breakdown of performance according to business segment is provided below.

272,945

18.8%

Gross profit ratio

Net Sales

254,82759,029Gross profit

Operating income

2009

81.2%

Cost of sales ratio

Performance Summary

2010

Financial
Highlights

CORPORATION, UFIT Co., Ltd., Agrex Inc., Qualica Inc. and AJS Inc.
New to the IT Holdings Group in fiscal 2010, ended March 31, 2010, were IT Service Force Inc., throughestablishment, and SORUN, through equity acquisition.
Several subsidiaries have been excluded from the scope of consolidation, effective from fiscal 2010. On July 1,
2009, TIS Solution Business Co., Ltd., was merged into System Engineering Laboratory Co., Ltd., which thenunderwent a name change, to NEOAXIS Co., Ltd., and TIS Solution Business was removed from the scope of
consolidation. On October 2009, INTEC Holdings, Ltd., was absorbed by INTEC, and on February 2, 2010, Bit Cruise,
Inc., was absorbed by es Crew, Inc., with the two non-surviving companies effectively removed from the scope of
consolidation. In December 2009, all shares in LANSA Japan Ltd. were sold, and the company was removed from thescope of consolidation.

Financial Review

Financial Review

Profilemillion ($63 million) decrease in notes and accounts receivable. On the liabilities side, the major components were a

Risks specific to each business segment may arise. In software development, for example, projects could turn unprofitable,
while outsourcing, system malfunctions could interrupt services. The Group applies various measures to prevent the
manifestation of such risks.
Management recognizes that natural disasters or major changes in the operating environment having a similarly destructive
force could also adversely affect the Group and its activities. Measures have been drawn up as a precaution to minimize
damage to or loss of business assets in the event a serious situation develops and to ensure that operations will not be criticallydisrupted.
Two scenarios that could significantly influence the decisions of investors are presented below. Please note that thesescenarios are possible—not certain—events that may take place in the future and are based on management’s assumptions asof June 25, 2010.

2009(1) Large-Scale Natural Disasters% change

46,98835,105+33.8%Net cash provided by operating activities

31,401

34,311-8.5

Net cash used in investing activities(25,727)(20,080)

+28.1

6,139

(6,878)—Net cash provided by (used in) financing activities

Dividend Policy

2010

2009

% change

89.25

110.74-19.4%Net assets per share

1,602.77

1,541.17+4.0%

Dividends per share

32.00

32.00

-

Financial Review

In the IT services industry, competition among providers is fierce, and the potential for intense price wars grows higher withthe entry of new players from other industries and the rising profile of foreign companies in Japan. In addition, the possibility
exists for discontinuous business models and technologies could be superseded and made obsolete by innovative developments within the industry.
Therefore, IT Holdings considers new business models and pursues various leading-edge information technologies, andformulates a variety of strategies to ensure that the products and services offered by the Group meet evolving market needs.
However, if technology progresses more rapidly or in a different direction than anticipated and the Group is unable torespond quickly and precisely to emerging demand, the delay could erode business results and financial standing.
The industry’s business model is undergoing a major transformation, fueled by the market’s embrace of cloud computing. Anticipating wider demand for services, IT Holdings has emphasized expansion of its network of next-generation data
centers as key points in the provision of high-value-added services. This emphasis led to the construction of data centersoverseas, in Tianjin, China, and in Japan, in Takaoka, Toyama Prefecture. These facilities, which went into operation in April
and July 2010, respectively, will be joined by the opening of data centers in the Gotenyama area of Tokyo and in the city of
Toyama, Toyama Prefecture, in fiscal 2012.
In addition, the Company aims to reinforce its cloud service platform by utilizing the specialized capabilities of Group
companies and accumulated know-how to expand the service lineup. This will give the Group a sharp competitive edge overits competition.

Corporate
Governance

Net income per share(2) Operating Environment

R&D

Yen

Per share data:

TopicsIT Holdings has made the long-term, comprehensive return of profits to shareholders a management priority and seeks
to maintain stable dividends while taking into account performance trends, financial status, and the need to enrichretained earnings to support business growth.
In fiscal 2010, the interim dividend was at ¥12 per share and the year-end dividend was ¥20 per share.
Management expects to maintain this dividend schedule in fiscal 2011, with an annual dividend of ¥32 per share, with
the interim component at ¥12 per share.

Outsourcing services continue around the clock every day of the year at data centers in Japan, in metropolitan Tokyo andOsaka as well as locations in Kanagawa Prefecture, Tochigi Prefecture, Toyama Prefecture and Aichi Prefecture, as well as
overseas, in Tianjin, China. Every conceivable safeguard has been taken to establish a secure environment. The
structures were designed to withstand earthquakes and feature on-site generators that kick in to run equipment in theevent of a power failure as well as systems that thwart unauthorized entry.
However, if situations, particularly large-scale natural disasters, health crises such as highly virulent strains ofinfluenza, international disputes, terrorism and serious criminal activity, manifest with repercussions more pervasive
than expected, the operating efficiency of data centers might deteriorate. The inability to provide uninterrupted services
could influence the fiscal performance and financial standing of Group companies involved in outsourcing services andby extension the Company as well.

At a Glance

Cash and cash equivalents at end of year

Key Strategies

Millions of yen
2010

To OurStakeholders

Business Risks

Net cash used in investing activities jumped 28.1%, to ¥25,727 million ($276 million). This change is primarily the
result of ¥1,333 million ($14 million) in proceeds from the sale and redemption of investments in securities on theassets side and ¥9,843 million ($105 million) in acquisitions of property and equipment, ¥5,003 million ($53 million) in
acquisitions of intangible assets, and ¥10,917 million ($117 million) in payments on newly consolidated subsidiaries on
the liabilities side.
Cash flows from financing activities shifted from a net cash used position in fiscal 2009, at ¥6,878 million, to a
net cash provided by position, at ¥6,139 million ($65 million) in fiscal 2010. The reversal in position is mainly due
to ¥15,800 million ($169 million) in proceeds from long-term bank loans and a ¥15,505 million ($166 million)
increase in short-term bank loans, net, on the assets side. On the liabilities side, the major components of change
were ¥15,942 million ($171 million) in repayment of long-term bank loans and ¥5,100 million ($54 million) for
redemption of bonds.

Financial
Highlights¥5,949 million ($63 million) decrease in notes and accounts payable and ¥4,127 million ($44 million) in income tax paid.

Financial Section
Corporate Data

23

24

10

Financial Section

Financial Section

ProfileIT Holdings Corporation and Consolidated Subsidiaries
Consolidated Balance Sheets
Financial
Highlights

As of March 31, 2010 and 2009

Report of Independent Auditors
The Board of Directors
IT Holdings Corporation.

$ 507,231
673,040

7,591
322
9,263
8,528
6,649
(198)
141,968

7,275
1,502
14,613
11,076
6,203(255)
140,800

81,586
3,456
99,56591,65871,464(2,126)
1,525,874

Property and equipment:
Buildings and structures (Note 7)
Machinery and vehicles (Note 7)
Leased assets (Note 22)
Land (Notes 6 and 7)
Construction in progress
OthersTotal property and equipment (Note 12)52,332
4,851
2,476
22,631
4,106
5,603
91,99953,2795,799
1,236
21,925–
6,810
89,049562,467
52,142
26,614
243,234
44,13560,221
988,813

Intangible assets:
Goodwill (Note 5)
OthersTotal intangible assets

6,741
12,38919,130

4,839
10,162
15,001

72,456133,156
205,61234,594
6,995
21,171(2,780)59,980¥313,077

26,904
6,762
19,489(2,678)50,477¥295,327

371,816
75,181
227,550(29,874)
644,673$3,364,972

R&D

June 21, 2010

Financial Review

Investments and other assets:
Investments in securities (Notes 3 and 4)
Deferred tax assets (Note 9)
OthersAllowance for doubtful accounts
Total investments and other assets
Total assets

Corporate
Governance

The U.S. dollar amounts in the accompanying consolidated financial statements withrespect to the year ended March 31, 2010 are presented solely for convenience. Our audit
also included the translation of yen amounts into U.S. dollar amounts and, in our opinion,such translation has been made on the basis described in Note 1.

¥ 37,524
62,862

TopicsIn our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of IT Holdings Corporation and consolidated
subsidiaries at March 31, 2010 and 2009, and the consolidated results of their operations
and their cash flows for the year then ended in conformity with accounting principles
generally accepted in Japan.

¥ 47,193
62,620

At a Glance

We conducted our audits in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

AssetsCurrent assets:
Cash and deposits (Notes 4 and 24)
Notes and accounts receivable (Notes 4 and 7)
Lease receivable and investments in finance leases(Notes 4 and 22)
Marketable securities (Notes 3, 4 and 24)
Inventories (Note 15)
Deferred tax assets (Note 9)
Prepaid expenses and other current assets
Allowance for doubtful accounts
Total current assets

Key Strategies

We have audited the accompanying consolidated balance sheets of IT Holdings Corporationand consolidated subsidiaries as of March 31, 2010 and 2009, and the related consolidated
statements of income, changes in net assets, and cash flows for the year then ended, allexpressed in yen. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements
based on our audits.

2010(Thousands of
U.S. dollars)(Note 2)

To OurStakeholders

March 31,2010
2009
(Millions of yen)

Financial Section
Corporate Data

25

26

Financial Section

Financial Section

ProfileIT Holdings Corporation and Consolidated Subsidiaries
Consolidated Statements of Income
Financial
Highlights

For the years ended March 31, 2010 and 2009

10,001
85,20844,088(58)
139,239

Subscription rights

10,00086,32140,186(2,354)
134,153

107,493915,817473,865(620)
1,496,555

1,183(1,842)
(179)
(838)

(1,118)(1,842)(139)(3,099)12,710(19,795)(1,921)(9,006)

19

8

201

16,655155,075¥313,077

15,154
146,216¥295,327

179,008
1,666,758$3,364,972¥338,302
272,945
65,357$3,373,350
2,738,899
634,451

43,033
15,996

41,57023,787

462,520
171,931609(1,057)
88
302
1,116

608
(1,131)
958
297
–

6,540
(11,369)
946
3,248
11,999(634)(2,083)(175)(170)(2,004)
13,992(855)(897)(2,199)(1,284)(4,503)
19,284(6,812)(22,388)(1,887)(1,826)(21,549)
150,382

2,774
2,977
5,751

4,911
3,380
8,291

29,82031,992
61,812

8,241

10,99388,570

Selling, general and administrative expenses (Note 16)
Operating income
Other income (expenses):
Interest and dividends income
Interest expenses
Amortization of negative goodwill
Real estate rental income
Gain on sales of investments in securities
Loss on disposal and sales of fixed assets(Notes 17 and 18)
Impairment loss (Note 19)
Valuation loss on investments in securities
Others, net
Income before income taxes and minority interests
Income taxes (Note 9):
Current
DeferredIncome before minority interests
Minority interests in earnings of consolidated
subsidiaries
Net income

¥

(581)
7,660

See accompanying notes to the consolidated financial statements.

¥(1,586)
9,407$(6,242)82,328Financial Section

Minority interests
Total net assets
Total liabilities and net assets

81,686
485,287
42,075
7,459
10,674
114,713
5,053
24,187771,134
1,698,214¥313,856
254,82759,029Financial Review

Revaluation and translation adjustments:
Net unrealized gains (losses) on available-for-salesecurities
Revaluation of land (Note 6)
Foreign currency translation adjustments
Total revaluation and translation adjustments

11,50041,014
2,549
682
993
8,114
249
1,958
67,059149,111Net sales
Cost of sales (Note 16)
Gross profit

Corporate
GovernanceNet assets:
Shareholders’ equity (Notes 20, 21 and 23):
Common stock, without par value:
Additional paid-in capital
Retained earnings
Less treasury stock, at cost
Total shareholders’ equity$ 232,045
143,01142,992
160,722
22,732
116,297
4,024
205,257
927,080

R&D

7,600
45,151
3,915
694
993
10,673470
2,250
71,746
158,002

7,734
15,186
5,100
18,627
3,391
9,831
71
22,112
82,052

TopicsNon-current liabilities:
Bonds (Notes 4 and 8)
Long-term bank loans (Notes 4 and 7)
Lease obligations
Deferred tax liabilities (Note 9)
Deferred tax liabilities for land revaluation (Note 6)
Accrued retirement benefits to employees (Note 10)
Accrued retirement benefits to directors
OthersTotal non-current liabilities
Total liabilities¥

At a Glance¥ 21,589
13,3064,000
14,954
2,115
10,820374
19,09886,256

Key Strategies

Liabilities and net assets
Current liabilities:
Short-term bank loans (Notes 4 and 7)
Current portion of long-term bank loans(Notes 4 and 7)
Current portion of bonds (Notes 4 and 8)
Notes and accounts payable (Note 4)
Income taxes payable
Accrued bonuses to employees
Other allowances
Others (Note 9)
Total current liabilities

Year ended March 31,
2010
2009
2010
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)

2010
(Thousands of
U.S. dollars)(Note 2)

To OurStakeholders

March 31,2010
2009
(Millions of yen)

See accompanying notes to the consolidated financial statements.

Corporate Data

27

28

Financial Section

Financial Section

ProfileIT Holdings Corporation and Consolidated Subsidiaries

IT Holdings Corporation and Consolidated Subsidiaries

Consolidated Statements of Changes in Net Assets

Consolidated Statements of Cash Flows
Financial
Highlights

For the years ended March 31, 2010 and 2009

For the years ended March 31, 2010 and 2009
Shareholders’ equity

Additional
paid-in
capital¥10,000
1¥86,321
1

Retainedearnings

Treasurystock¥40,186¥(2,354)

2,296¥ (58)

5,086¥139,239(1,114)
1¥10,001(1,113)¥85,208

3,902¥44,088

Shareholders’ equity

Additional
paid-in
capital$107,481
12$927,786
13

Retainedearnings

Treasurystock$431,922$(25,303)¥(1,842)¥(139)(40)(40)¥(179)¥(3,099)

2,261
2,261
¥ (838)

Revaluation and translation adjustments
Net
Total
unrealized
revaluation
Foreign
Total
gains (losses)
currency
andshareholders’on othertranslation
Revaluationtranslation
equitysecuritiesof landadjustments
adjustments(Thousands of U.S. dollars ) (Note 2)$1,441,886
25(40,385)
82,328(44)
12,745$(12,018)$(19,795)$(1,495)$(33,308)¥ 8¥15,154¥146,2162(3,758)
7,660
(4)
1,186

11
11
¥19

1,501
1,501
¥16,655

3,773
8,859
¥155,075

Subscription
rightsMinority
interests

Total
net assets$ 88$162,878$1,571,544
25(40,385)
82,328(44)
12,745

113
113
$201

16,13016,130$179,008

40,545
95,214$1,666,758

IT Holdings Corporation and Consolidated Subsidiaries(40,385)
82,328(44)(11,982)
24,727
Consolidated
Statementsof Changes in Net Assets (continued)
12$107,493(11,969)$915,817

41,943$473,865

24,683$ (620)Additional
paid-in
capital¥10,000¥86,332

Retainedearnings

Treasurystock¥33,082(1,220)9,407¥(2,827)

(20)
493

(11)

0
¥10,000(11)¥86,3217,104¥40,186$(19,795)

(426)
(426)
$(1,921)24,302
24,302$ (9,006)

For the year ended March 31, 2009
Revaluation and translation adjustments
Net
unrealized
Total
gains
Foreignrevaluation
Total(losses) on
currency
andshareholders’
other
Revaluation translation translation Subscription
equitysecurities
adjustments adjustmentsof landrights(Millions of yen)
¥126,587(1,220)
9,407
(20)
482

¥ 1,151¥(2,923)¥ (19)¥(1,791)¥0Minority
interests

Total
net assets¥14,165¥138,961(1,220)
9,407
(20)
482

(2)
(1,081)473¥(2,354)7,566¥134,153(2,269)(2,269)¥(1,118)

1,081
1,081
¥(1,842)

(120)
(120)
¥(139)(1,308)(1,308)¥(3,099)

8
8
¥8

989
989
¥15,154

(311)
7,255
¥146,216

Cash flows from investing activities:
Deposit of time deposits
Repayment of time deposits
Acquisitions of property and equipment
Acquisition of intangible assets
Acquisitions of investments in securities
Proceeds from sale of investments in securities
Payments on newly consolidated subsidiary (Note 24)
Proceeds from newly consolidated subsidiary (Note 24)
Other, net
Net cash used in investing activities(1,553)
4,374(9,843)(5,003)(4,225)
1,333(10,917)–107(25,727)(2,433)–(9,974)(3,489)(1,193)
1,191(3,147)458(1,493)(20,080)(16,694)
47,017(105,797)(53,768)(45,416)
14,332(117,341)–
1,153(276,514)

Cash flows from financing activities:
Increase (decrease) in short-term bank loans, net
Proceeds from long-term bank loans
Repayments of long-term bank loans
Redemptions of bonds
Acquisitions of treasury stock
Sales of treasury stock
Dividends paid
Dividends paid to minority interests
Other, net
Net cash provided by (used in) financing activities

15,50515,800(15,942)(5,100)(4)
1,186(3,757)
(970)
(579)
6,139

(3,990)21,788(17,018)(7,050)(20)
483(1,220)(335)
484(6,878)

166,656
169,820(171,342)(54,815)(44)
12,742(40,384)(10,424)(6,222)
65,987

Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase due to merger
Cash and cash equivalents at end of year (Note 24)

1111,82435,10559¥ 46,988

(243)
7,110
27,995–¥ 35,105120
127,088
377,308632$ 505,028

See accompanying notes to the consolidated financial statements.

Financial Section$ 150,382
128,747
22,3886,682
1,887
14,937
5,749
(799)
9,156
(6,540)11,36963,50387,854(63,942)(44,480)
386,893
6,509(11,553)(44,354)
337,495

Financial Review

See accompanying notes to the consolidated financial statements.

(2)(1,081)¥ 19,284
10,996
897
433
2,229
1,149
2,643
449
636
(608)
1,131
2,294
1,222
(3,070)2,369
42,054616(1,132)(7,227)34,311

Corporate
Governance(2)(1,081)

24,72824,728$ 12,710¥ 13,992
11,978
2,083
622
175
1,390
535
(74)
852
(609)
1,058
5,908
8,174
(5,949)(4,138)35,997606(1,075)(4,127)
31,401

R&D

Commonstock

54,669$1,496,555

Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation
Impairment loss
Loss on disposal of fixed assets
Valuation loss on investments in securities
Amortization of goodwill
Increase in accrued bonuses to employees
Increase (decrease) in allowance for doubtful accounts
Increase in accrued retirement benefits to employees
Interest and dividends income
Interest expenses
Decrease in notes and accounts receivable
Decrease in inventories
Decrease in notes and accounts payable
Others, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities

TopicsShareholders’ equity

Balance as of March 31, 2008
Dividends from surplus
Net income
Acquisition of treasury stock
Sales of treasury stock
Exclusion from equity method
application
Reversal of revaluation of land
Items other than changes inshareholders’ equity
Total change for the year
Balance as of March 31, 2009

2,301
2,301
¥ 1,183¥(1,842)Total
net assets

At a Glance

Balance as of March 31, 2009
New stock issue
Dividends from surplus
Net income
Acquisition of treasury stock
Sales of treasury stock
Items other than changes inshareholders’ equity
Total change for the year
Balance as of March 31, 2010

Commonstock¥(1,118)

Minority
interests

Key Strategies

(4)
2.300

¥134,153
2(3,758)
7,660
(4)
1,186

(3,758)
7,660

Subscription
rightsYear ended March 31,
2010
2009
2010
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)

To OurStakeholders

Balance as of March 31, 2009
New stock issue
Dividends from surplus
Net income
Acquisition of treasury stock
Sales of treasury stock
Items other than changes inshareholders’ equity
Total change for the year
Balance as of March 31, 2010

Commonstock

For the year ended March 31, 2010
Revaluation and translation adjustments
Net
Total
unrealized
revaluation
Foreign
Total
gains (losses)
currency
andshareholders’on othertranslation
Revaluationtranslation
equitysecuritiesof landadjustments
adjustments(Millions of yen)

Corporate Data

29

30

Financial Section

Financial Section

ProfileIT Holdings Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements(c) Foreign currency translation (continued)
Assets and liabilities of the foreign consolidated subsidiaries are translated into yen at
the rates of exchange in effect at the balance sheet date, and differences arising fromthe translation are included in foreign currency translation adjustments or in minority
interests of net assets.

Summary of Significant Accounting Policies

The Group considers all highly liquid investments with a maturity of three months or
less, when purchased, as cash equivalents on the consolidated statements of cash
flows.
(e) Securities(b) Principles of consolidation(Accounting change)
Effective from the year ended March 31, 2010, the Group adopted “AccountingStandard for Financial Instruments” (ASBJ Statement No. 10, March 10, 2008) as wellas the “Implementation Guidance on Disclosures about Fair Value of Financial
Instruments”(ASBJ Guidance No. 19, March 10, 2008).

All significant intercompany balances and transactions among the Group have been
eliminated in consolidation.

The effect of these changes was immaterial to the consolidated financial statements forthe year ended March 31, 2010.

Investments in two non-consolidated subsidiaries (two in 2009) and eleven affiliatedcompanies (six in 2009) are accounted for by the equity method.

(f)Derivatives
Derivative instruments are stated at market value as assets or liabilities.

Corporate
GovernanceAll assets and liabilities of consolidated subsidiaries are stated at fair market value on
the date of acquisition of control.

R&D

Overseas subsidiaries are consolidated using their financial statements as of December
31, their fiscal year-end, and necessary adjustments have been made for any materialtransactions during the period from January 1 to March 31.

Topics

The accompanying consolidated financial statements include the accounts of theCompany and its wholly or majority-owned subsidiaries (together, the “Group”). The
number of consolidated subsidiaries as of March 31, 2010 and 2009, is 55 and 43,
respectively.

At a Glance

Securities held by the Group are classified into two categories: held-to-maturity oravailable-for-sale securities. Held-to-maturity securities are carried at amortized cost.
Available-for-sale securities with a determinable market value are stated at fair value
with any changes in unrealized holding gain or loss, net of the applicable income taxes,
included directly in net assets. Available-for-sale securities without a determinable
market value are stated at cost. Cost of securities sold is determined by themoving-average method.

Key Strategies

The accompanying consolidated financial statements have been compiled from theconsolidated financial statements prepared by the Company as required under the
Financial Instruments and Exchange Act of Japan, and have been prepared inaccordance with accounting principles generally accepted in Japan, which are different
in certain respects as to the application and disclosure requirements of International
Financial Reporting Standards.

(d) Cash equivalents

To OurStakeholders(a) Basis of Presenting the Consolidated Financial Statements
IT Holdings Corporation (the “Company”) and its domestic subsidiaries maintain theirbooks of account in conformity with the financial accounting standards of Japan; its
foreign subsidiaries maintain their books of account in conformity with those of theircountries of domicile.

Summary of Significant Accounting Policies (continued)

Financial
Highlights

1.

1.

(g) Inventories

Monetary assets and liabilities denominated in foreign currencies are translated into
yen at the rates of exchange in effect at the balance sheet date, except for assets andliabilities hedged by forward foreign exchange contracts.

However, the Group provides inventory write-downs determined primarily by their
future collectability.

Financial Section

All revenues and expenses in foreign currencies are translated at the rate of exchange
when such transactions were made, and differences arising from the translation are
credited or charged to income.

Merchandise and finished goods are stated at cost, determined mainly by the first-in,
first-out method. Work in process is stated at cost, determined by the specific-cost
method. Raw materials and supplies are stated at cost, mainly determined by lastpurchase cost method.

Financial Review(c) Foreign currency translation

Corporate Data

31

32

Financial Section

Financial Section

Profile1.

Summary of Significant Accounting Policies (continued)

1.

(h)

Property and equipment(m) Allowance for doubtful accounts

Intangible assets
Intangible assets are amortized using the straight-line method over their estimateduseful lives, except for computer software.

(n) Accrued bonuses to employees
Accrued bonuses to employees are recognized at the estimated amount to be paid forservices rendered prior to the fiscal year-end.
(o) Accrued retirement benefits to employees
Accrued retirement benefits for employees are recorded at an amount calculated basedon the retirement benefit obligation and the fair value of the pension plan assets as of
the balance sheet date.

Computer software for sale

Actuarial gain or loss is amortized from the year following recognition by thestraight-line method within the average remaining service period (mainly 5 to 18
years) of employees. Prior service costs are mainly charged to income whenincurred.

ii) Computer software for internal use(J)(Accounting change)
Effective from the year ended March 31, 2010, the Group adopted “Partial
Amendments to Accounting Standard for Retirement Benefits (Part 3)” (ASBJ
Statement No. 19, July 31, 2008). The effect of this change was immaterial to theconsolidated financial statements for the year ended March 31, 2010.

Leased assets (as lessee)(p) Accrued retirement benefits to directors

Deferred income taxes are recognized for the temporary differences between financial
reporting and tax bases of assets and liabilities. These deferred taxes are measured
by applying the enacted tax rates and laws, which will be in effect when the
differences are expected to reverse.

Impairment losses of long-lived assets

The Group bases its grouping for assessing impairment losses on long-lived assets on
their business segments, area and service descriptions. However, lease properties andassets for specified projects are grouped separately.

(r)

Distribution of retained earnings
Dividends and other distributions of retained earnings are resolved by the General
Shareholders’ Meeting held subsequent to the end of the fiscal year. Distributions
are reflected in the consolidated financial statements for the following fiscal year.

Financial Section

The Group reviews long-lived assets for impairment whenever events or changes incircumstances indicate the carrying amount of an asset may not be recoverable. Any
decrease in the book value of long-lived assets is recorded under other expenses as an
impairment loss.

Financial Review(l)(q) Income taxes

Corporate
Governance

Certain domestic consolidated subsidiaries set aside a provision to cover payment of
directors’ retirement benefits. The estimated amount to be paid is recorded based oninternal regulations.

(k) Accounting for leases (as lessee and lessor)
Finance lease transactions other than those in which ownership is fully transferred to
the lessee are accounted for in a similar manner to ordinary sales and purchasetransactions.

R&D

Leased assets on finance lease transactions that do not transfer ownership are
depreciated over the useful life of assets, which equals the lease term, by thestraight-line method. Finance lease transactions which were contracted before April
1, 2008, are accounted for as operating leases.

TopicsCapitalized costs are amortized by the straight-line method over the estimateduseful life of the software, generally two to five years (three to five years in2009).

At a Glance

Capitalized costs are amortized at the higher of the amount based on the ratio of
the current year sales quantity to the total of estimated sales quantity over theestimated sales period (three years) or the amount calculated by the straight-line
method over the remaining economic life.

Key Strategies

Expenses related to development activities of computer software, which are included
in intangible assets, are amortized as follows:i)

To OurStakeholders

The allowance is determined based on known troubled accounts, historical experience,and other currently available evidence.

Financial
Highlights

An allowance for doubtful accounts reflects the appropriate estimate of probablelosses inherent in the accounts receivable balance.

Buildings and structures are depreciated principally by the straight-line method;machinery and equipment are depreciated principally by the declining-balancemethod; and both methods are based on the estimated useful lives of the assets.
(i)

Summary of Significant Accounting Policies (continued)

Corporate Data

33

34

Financial Section

Financial Section

Profile1.

Summary of Significant Accounting Policies (continued)

3.

Marketable Securities and Investments in Securities

The Group utilizes hedge accounting primarily to manage interest rate risk.
Generally, under deferral hedging, unrealized gains or losses are deferred as acomponent of net assets. The Group also utilizes exceptional methods, as permitted
when fulfilling certain conditions for interest rate swaps.
With fair market value exceeding theamount on consolidated balance sheet
With fair market value not exceeding theamount on consolidated balance sheet
Total

Amortization of goodwill and negative goodwill

The Group held no held-to maturity debt securities as of March 31, 2010.

Description

(0)
¥(0)

Total

Total

¥4,830450
5,280¥5,297
7
5,304¥1,641–
1,641¥3,218–3,218¥ 1,577
–
1,577

2,443
210
321
2,974
¥13,558

3,117
228
391
3,736
¥9,016

(674)
(18)
(70)
(762)
¥4,542

5,748
305
401
6,454
¥8,095

4,664
304
306
5,274
¥8,492(1,084)(1)(95)(1,180)¥ 397

March 31, 2010
Book value Unrealized
Acquisition (Fair market
gains
cost
value)(losses)(Thousands of U.S. dollars)$108,850
4,913
113,763$51,919
4,836
56,755$56,93177
57,00826,2642,256
3,449
31,969$145,732

33,5062,446
4,199
40,151$96,906(7,242)(190)(750)(8,182)$48,826

Financial Section

Market notexceeding cost:
SharesBonds
Other¥10,127457
10,584

Financial Review

Market exceeding
cost:
SharesCorporate bonds

March 31, 2010
March 31, 2009
Book value UnrealizedBook value Unrealized
Acquisition (Fair market
gains
Acquisition (Fair market
gains
cost
value)(losses)
costvalue)(losses)(Millions of yen)

Corporate
GovernanceAmounts in U.S. dollars are included solely for the convenience of the non-Japanesereaders. A rate of ¥93.04 = US$1, the approximate rate of exchange prevailing on March
31, 2010, has been used in translation. The inclusion of such amounts is not intended to
imply that Japanese yen have been or could be readily converted, realized or settled in U.S.
dollars at that or at any other rate.

1,001¥1,301

R&D

Market notexceeding cost:
SharesBonds
Other

Description

U.S. Dollar Amounts

1,001¥1,301

TopicsMarket exceeding
cost:
SharesCorporate bonds

The effect of this change was immaterial to the consolidated financial statements forthe year ended March 31, 2010.

2.

¥0

At a Glance

Under the new accounting standard and guidance, revenues and costs of construction
contracts that commenced on or after April 1, 2009, of which the percentage ofcompletion can be reliably estimated, are recognized by the percentage-of-completion
method. The percentage of completion is calculated at the cost incurred as apercentage of the estimated total cost. The completed-contract method continues tobe applied for contracts for which the percentage of completion cannot be reliably
estimated.

¥ 300(b) Acquisition cost, book value and unrealized gains or losses of available-for-salesecurities with fair value as of March 31, 2010 and 2009, were as follows:(u) Revenues and costs recognition of producing ordered software
Until the year ended March 31, 2009, revenues and costs of construction contracts
were recognized by the completed-contract method. Effective April 1, 2009, theGroup has applied the new accounting standard and related implementation guidancefor construction contracts.

¥ 300

Key Strategies

A formal assessment is made periodically on an ongoing basis to determine whether
the derivative used in hedging activities is effective by comparing cumulative cash
flow fluctuations of both the hedge method and target, except for interest rate swaps
accounted for by exceptional methods.

Goodwill and negative goodwill are amortized by the straight-line method overperiods not exceeding 20 years. However, immaterial goodwill or negative goodwill
are charged or credited to income when incurred.

Government
bonds
Government
bonds

Fair market
value
Difference(Millions of yen)
To OurStakeholders

(t)

Type

Amount on
consolidatedbalance sheet

Financial
Highlights(a) The amount on the consolidated balance sheet, fair market value and difference for
held-to-maturity debt securities with fair value as of March 31, 2009, were as follows:(s) Hedge accounting

Corporate Data

35

36

Financial Section

Financial Section

Profile3.

Marketable Securities and Investments in Securities (continued)

4.

(a) Overview of utilization of financial instruments (continued)

2010
2009
(Millions of yen)

¥2,3771,108(4)¥2,4018(46)(iii) Risk management for financial instruments
1.

In accordance with the internal policies of the Group for managing credit
risk arising from receivables, the Group monitors the creditworthiness ofcustomers periodically, tracking due dates and outstanding balances in orderto recognize and reduce doubtful accounts in a timely manner.

$25,557
11,909(44)

Financial Instruments

The Group also believes that the credit risk of derivatives is insignificant as
it enters into derivative transactions only with financial institutions that havea sound credit profile.
2.

Management policies

Market prices of investments in securities and the financial position ofissuers are reviewed periodically. In addition, the Group continuously
evaluates the adequacy of withholding those securities, considering therelationship with the issuers.
Controls and execution of derivative transactions are carried under theauthorization of the boards of directors and in conformity with the internal
rules of each company of the Group. The performance of transactions isreported semiannually to the boards of directors.

(ii) Contents of financial instruments and related risks

Liquidity risk on fund procurement (nonfulfillment risk on due date)
Based on the report from each division, the Group prepares and updates its
cash flow plans on a timely basis to manage liquidity risk.

(iv) Explanation of market fair values
The fair value of financial instruments is based on their quoted market price, if
available. If there is no market price, fair value is estimated reasonably.

Financial Review

In addition, the notional amounts of derivatives in the following “fair market
values” of derivative transactions are not necessarily indicative of the actual
market risk involved in derivative transactions.

Corporate
GovernanceNotes and accounts payable are mainly due within one year. Short-term bankloans are procured mainly for operations. Long-term bank loans are procured
mainly for capital investments and to secure a stable fund position. A portion of
long-term bank loans, bearing interest at variable rates, is exposed to interest rate
fluctuation risk. However, to reduce such risk, certain subsidiaries utilize
interest rate swap transactions as a hedging instrument. Details of interest rate
swaps are described in Note 1(r) above.

3.

R&D

Notes and accounts receivable are exposed to credit risks in relation to theGroup's customers. Investments in securities are exposed to market risk.
Those securities are mainly equity shares issued by companies with which theGroup has business relationships.

TopicsThe Group procures necessary funds, principally from banks, under its capital
investment plans. The Group invests excess funds mainly in secure financial
assets. Further, the Group raises short-term capital through bank borrowings.
Derivatives are utilized for hedging interest rate fluctuation risks, not for tradingor speculative purposes.

At a Glance

Certain consolidated subsidiaries utilize interest rate swap transactions tohedge interest fluctuation risks on long-term bank loans.

(a) Overview of utilization of financial instruments(i)Market risk (interest fluctuation risk) control

Key Strategies

Impairment loss on available-for-sale securities amounted to ¥134 million ($1,442
thousand) for the year ended March 31, 2010.

4.

Credit risk (customer default risk) control
To OurStakeholders

Proceeds from sales ofavailable-for-sale securities
Realized gain
Realized loss

2010
(Thousands of
U.S. dollars)

Financial
Highlights(c) Available-for-sale securities sold during this fiscal year
Year Ended March 31,

Financial Instruments (continued)

Financial Section
Corporate Data

37

38

Financial Section

Financial Section

Profile4.

Financial Instruments (continued)

4.

(b) Fair market value of financial instruments(b) Fair market value of financial instruments (continued)¥ 47,193¥ 47,193

¥

–

(25)
62,595$62,592(3)(267)
672,773

672,743(30)

81,586(26)

14,304¥131,637¥ 14,954
21,59011,600¥ 14,954
21,59011,601¥58,457¥106,600¥–

58,577¥106,721¥–

81,122

(287)

31
2

153,407$1,414,820

153,746$1,414,842––
1$ 160,722
232,045
124,678$ 160,722
232,045
124,686

$

120
¥121
¥ –

628,298$1,145,743$–

629,594$1,147,047
$
–

1,296
$1,304
$
–

¥

$

339
22
–
–
8

(i)

Assets:Book values of cash and deposits approximates fair market values as they aresettled in a short period of time.

Fair market values of derivatives accounted for by interest swap exceptional
treatments are included in fair market values of long-term bank loans, as those areaccounted for inclusively in long-term bank loans. Interest-related derivativetransactions accounted for by hedge accounting as of March 31, 2010 were as
follows:
Hedge accounting
Transaction typeHedged item
Contract amount *Contract over 1 year

Interest swap exceptional treatments
Interest rate swaps: variable receipt/fixed payment
Long-term bank loans¥6,690 million ($71,899 thousand)¥3,306 million ($35,537 thousand)Fair market values of derivatives are included in long-term bank loans as
described above.

Financial Section

As for marketable securities and investments in securities, fair market values of
equity shares are based on quoted market prices. The fair values of debt
securities are based on either quoted market prices or prices provided by thefinancial institutions. The details of securities by holding purpose are describedin Note 3 above.

Financial Review

Fair market values of notes and accounts receivable, investments in finance leases
and leased assets are recorded as present values based on the sum of face values
that have been categorized according to length of term, discounted by an interest
rate determined taking into account the length of maturity and credit risk.

Derivative transactions:

Corporate
Governance

Computation of fair market values of financial instruments, securities andderivative transactions

Fair market values of long-term bank loans with fixed interest rates are based on
the present values of the total of principal and interest discounted by an interest
rate to be applied if similar new borrowings were to be made. A part oflong-term bank loans, bearing interest at variable rates, is accounted for byinterest swap exceptional treatment. Its fair market values are based on theaggregate of principal and interest in conjunction with the exceptional treatment
as a package, discounted by an interest rate to be applied if similar new
borrowings were to be made.

R&D* The amounts do not include the allowance provided for the individual receivables.
** The amounts include a current portion of bonds or long-term bank loans.

Book values of long-term bank loans with variable interest rates approximate fairmarket values since the market interest rate is reflected on a timely basis and thecredit rating of the Group has not changed significantly since borrowing theloans.

Topics

14,273¥131,635(177)
81,409Fair market values of bonds with fixed interest are recorded as present values
based on the aggregate of principal and interest discounted by an interest rate
determined taking into account the length of maturity of each bond and creditrisk.

At a Glance

7,548Book values of bonds with variable interest approximate fair market values since
the market interest rate is reflected on a timely basis and the credit rating of theGroup has not changed significantly since issuing the bonds.

–

673,040

7,591
(17)
7,574

$ 507,231

Book values of notes and accounts payable and short-term bank loans
approximate fair market values as they are settled in a short period of time.

Key Strategies

62,620$ 507,231

Liabilities:

To OurStakeholders

Cash and deposits
Notes and accounts
receivable
Allowance for doubtful
accounts *Net amount
Lease receivable andinvestments in financeleasesAllowance for doubtful
accounts *Net amountMarketable securities
and investments insecurities
Total assets
Notes and accounts
payableShort-term bank loans
Bonds **
Long-term bankloans **
Total liabilities
Derivative transactions

Fair
BalanceFairmarketDifference
sheetmarketDifference(Millions of yen)(Thousands of U.S. dollars)

Financial
Highlights

The carrying value of financial instruments on the consolidated balance sheet, fairmarket values, and differences as of March 31, 2010, are shown below. Securities
for which it is extremely difficult to determine the fair value are excluded from thetable.
Balancesheet

Financial Instruments (continued)

Corporate Data

39

40

Financial Section

Financial Section

Profile4.

Financial Instruments (continued)

6.

(b) Fair market value of financial instruments (continued)

Description(Thousands of
U.S. dollars)¥19,603893
147$210,695
9,596
1,575

7.

(c) Expected maturities of monetary receivables and marketable securities andinvestments in securities with maturities as of March 31, 2010
within2 to 56 to 10
one year
years
years **
(Millions of yen)

2 to 56 to 10in 1 year
years
years **
(Thousands of U.S. dollars)¥ 47,177
62,526––$ 507,056
672,038

¥

–
93

¥

$

–
1,002

$

–
–

5,207

72

24,85055,958778215
5¥112,23525
83¥5,408

250
–
¥322

2,314
53
$1,206,311

269
893$58,122

2,687–$3,465

5.

March 31,2010
2009
(Millions of yen)
Short-term bank loans:
Short-term bank loans, with an averageinterest rate of 0.78% for 2010
Long-term bank loans:
Loans principally from banks and otherfinancial institutions, with an averageinterest rate of 1.31% for 2010
Less: current portion of long-term debt

2010
(Thousands of
U.S. dollars)¥ 21,589¥ 7,734$ 232,045¥ 58,457(13,306)¥ 45,151¥ 56,200(15,186)¥ 41,014$ 628,298(143,011)$ 485,287

The amount of goodwill in intangible assets is indicated after offsetting goodwill andnegative goodwill. The gross amounts as of March 31, 2010 and 2009, were as follows:¥6,863(122)¥6,741¥5,054(215)¥4,8392010(Thousands of
U.S. dollars)$73,767(1,311)$72,456

2010
2011
2012
2013
2014
2015

¥

–
13,306
16,035
15,161
10,841
3,114¥15,186
12,157
8,851
10,102
8,502
–

2010
(Thousands of
U.S. dollars)$–
143,011
172,345
162,950
116,519
33,473Financial Section

Goodwill
Negative goodwill
Net amountYear ending March 31,

Financial Review

March 31,2010
2009
(Millions of yen)March 31,2010
2009
(Millions of yen)

Corporate
Governance

The aggregate annual maturities of long-term bank loans due within five years subsequent
to March 31, 2010 and 2009 were as follows:

Goodwill and Negative Goodwill

R&D* These securities are available-for-sale securities with maturity dates.
** There were no amounts to be matured after 10 years.

Short-term bank loans and long-term banks loans as of March 31, 2010 and 2009 consistedof the following:

Topics2,312

Short-Term Bank Loans and Long-Term Bank Loans

At a Glance

Cash and deposits
Notes & accounts receivable
Investments in finance leases& leased assets
Marketable securities andinvestments in securities *:Corporate bonds
Other
Total

Revaluation of land was determined based on the official prices published by theCommissioner of the National Tax Authorities in accordance with Paragraph 4, Article 2 of
the “Enforcement Ordinance Concerning Land Revaluation,” with certain necessary
adjustments.

Key Strategies

Unlisted shares
Equity in investment partnership
Money Market Fund & other(Millions ofyen)

To OurStakeholders

The table below does not include financial instruments for which it is extremely
difficult to determine the fair value. Their book values as of March 31, 2010, is
as follows:

Pursuant to the “Law Concerning the Revaluation of Land” (the “Law”), land used for theGroup’s business operations was revalued on March 31, 2002. The income tax effect ofthe difference between the book value and the revalued amount has been presented underliabilities as “deferred tax liabilities for land revaluation” and the remaining balance
presented under net assets as “revaluation of land” in the accompanying consolidatedbalance sheet.

Financial
Highlights(ii) Financial instruments without fair market values

Revaluation of Land

Corporate Data

41

42

Financial Section

Financial Section

Profile7.

Short-Term Bank Loans and Long-Term Bank Loans (continued)

9.

8.

¥

–
14,23439
3,331¥17,604¥

15
15,92047
3,339¥19,321$–
152,984424
35,803$189,211

Bonds(a) The reconciliation between the statutory tax rate and the Group’s effective tax rate asof March 31, 2009, were as follows:2009
Statutory tax rate
Non-deductible expenses (such as entertainment expenses)
Non-taxable income (such as dividend income)Inhabitants’ taxes per capita
Unrealized gains and losses
Amortization of goodwill (negative goodwill)
Others, net
Effective tax rates*

March 31,2010
2009
(Millions of yen)

Less: current portion of long–term debt

¥ 7,500
1,000
4,000
4,000
100
–
16,600(5,100)¥11,500$ 80,611––
42,992–
1,075
124,678(42,992)$ 81,686

Year ending March 31,

¥

–
4,000
7,500
100
–
–

¥5,100
4,000
7,500
–
–
–

$

–
42,99280,611
1,075
–
–

271

¥

373

$ 2,917

662

706

7,114

Less – Valuation allowance
Total deferred tax assets

4,361
1,241
460
6,476
5,082
1,630
550
1,305
2,219
24,257(5,255)19,002

4,027
545
572
7,049
3,573
1,995
2,934
1,392
2,974
26,140(6,130)20,01046,871
13,3394,943
69,60754,622
17,516
5,906
14,02923,854
260,718(56,482)
204,236

Deferred tax liabilities:
Gain on contribution of securities to pension
fund
Prepaid pension expenses
Unrealized gain on available-for-sale securities
Others, net
Total deferred tax liabilities
Net deferred tax assets

1,072
514
2,482
130
4,198
¥14,804

306
1,419
1,125
30
2,880
¥17,130

11,5205,521
26,677
1,399
45,117$159,119Financial Section

2010
2011
2012
2013
2014
2015

2010
(Thousands of
U.S. dollars)¥

Financial Review

March 31,2010
2009
(Millions of yen)

Deferred tax assets:
Accrued enterprise tax
Non-deductible portion of allowance for
doubtful accounts
Non-deductible portion of accrued bonuses
to employees
Non-deductible portion of depreciation
Impairment losses
Tax loss carried forward
Accrued retirement benefits to employees
Write down of investments in shares
Write down of inventories
Unrealized gains
Others, net

Corporate
Governance

The aggregate future maturities of bonds for the next five years subsequent to March 31,
2010 and 2009 were as follows:

March 31,
2010
2009
2010
(Millions of yen)(Thousands of
U.S. dollars)

R&D¥ 7,500
–
–
4,000
–
100
11,600(4,000)¥ 7,600(b) The significant components of deferred tax assets and liabilities as of March 31, 2010
and 2009 were as follows:

Topics

0.78% Unsecured bonds, due 2012
1.17% Unsecured bonds, due 2009
1.50% Unsecured bonds, due 2010
1.26% Unsecured bonds, due 2010
0.79% Unsecured bonds, due 2009
0.84% Unsecured bonds, due 20122010
(Thousands of
U.S. dollars)

The reconciliation for the year ended March 31, 2010, is not presented hereinbecause the difference between the statutory tax rate and effective tax rate was
immaterial.

At a Glance

Bonds as of March 31, 2010 and 2009, consisted of the following:

40.7%
1.3
(0.6)
0.8
0.4
0.4
(0.0)
43.0%

Key Strategies

Accounts receivable
Buildings and structures
Machinery and equipment
Land

2010
(Thousands of
U.S. dollars)

To OurStakeholders

March 31,2010
2009
(Millions of yen)

Income taxes applicable to the Group comprised corporation tax, inhabitants’ taxes, andenterprise tax which, in the aggregate, resulted in a statutory tax rate of 40.7 percent for2010 and 2009. Income taxes of the foreign subsidiaries are based generally on the tax
rates applicable in their countries.

Financial
Highlights

The assets pledged as collateral for short-term bank loans and long-term bank loans,amounting to ¥45 million ($484 thousand) and ¥1,738 million ($18,675 thousand),
respectively, as of March 31, 2010, and ¥70 million and ¥2,252 million, respectively, as ofMarch 31, 2009 were as follows:

Income Taxes

Corporate Data

43

44

Financial Section

Financial Section

Profile9.

Income Taxes (continued)

10. Retirement Benefits (continued)

March 31,2010
2009
(Millions of yen)
¥11,076$ 91,658

6,995
(25)

6,762
(26)

75,181(268)(694)¥14,804(682)¥17,130(7,459)$159,112

10. Retirement Benefits

The Company and certain of its consolidated subsidiaries have pension plans,
including a corporation pension plan based on the defined benefit pension law, adefined contribution pension plan, a tax-qualified pension plan, and an unfunded
defined benefit plan with lump-sum payment.

¥(43,513)
26,144(17,369)
10,917(2,177)(8,629)(2,044)¥(10,673)¥(35,015)
18,642(16,373)
11,987(909)(5,295)(2,819)¥ (8,114)$(467,679)
280,994(186,685)
117,333(23,397)(92,749)(21,964)$(114,713)

723

10,725

443

366

4,762

4
¥5,427

5¥4,01345$58,333(d) Major assumptions used in calculating retirement benefits
Year Ended March 31,
Discount rates
Rate of expected return on plan assets
Method of attributing the projected
benefits to periods of service

2010

2009

1.8 % to 2.5%
0.0% to 3.5%

1.8 % to 2.5%
2.5% to 3.5 %Straight-line basis

Straight-line basis

11. Items Related to Unconsolidated Subsidiaries and Affiliates
Amounts related to unconsolidated subsidiaries and affiliates as of March 31, 2010 and2009, were as follows:
March 31,2010
2009
(Millions of yen)
Investments in securities – stocks
Investments in securities – other
Investments¥2,887246
169¥1,097
178
172

2010
(Thousands of
U.S. dollars)$31,030
2,644
1,819

12. Depreciation of Property and Equipment
Accumulated depreciation of property and equipment totaled ¥68,858 million ($740,086
thousand) and ¥63,432 million as of March 31, 2010 and 2009, respectively.

Financial Section

Projected benefit obligation
Plan assets
Unfunded retirement benefits
Unrecognized net actuarial differences
Unrecognized net prior service costs
Net amountPrepaid pension costs
Accrued retirement benefits to employees

998

Financial Review

March 31,
2010
2009
2010
(Millions of yen)(Thousands of
U.S. dollars)$24,301
9,099(4,138)15,586(2,047)

Corporate
Governance(b) The following tables set forth the funded and accrued status of the plans, and theamounts recognized in the consolidated balance sheet as of March 31, 2010 and 2009,
for the Group’s retirement benefit plans:¥2,094
765
(575)
805
(170)

R&D

In addition, certain consolidated subsidiaries that participate in a welfare pension fundplan involving other affiliates are excluded from the calculation of the projected
obligation because it is extremely difficult to make a reasonable estimate.

¥2,261
846
(385)
1,450
(190)

Topics

Certain consolidated subsidiaries that participate in a mutual aid contract for
retirement allowances are excluded from the calculation of the projected benefit
obligation.

Service costs
Interest costs
Expected investment return
Recognition of actuarial differences
Recognition of prior service costs
Contribution to defined contribution
pension plan
Contribution to welfare pension
fund plan
Contribution to smaller enterpriseretirement allowance mutual aid
Net periodic pension expense

2010(Thousands of
U.S. dollars)

At a Glance(a) Outline of retirement benefit plans

2010
2009
(Millions of yen)

Key Strategies¥ 8,528

Year ended March 31,

To OurStakeholders

Current assets – Deferred tax assets
Investments and other assets –Deferred tax assets
Current liabilities – Other
Non-current liabilities – Deferred tax
liabilities
Net deferred tax assets

2010(Thousands of
U.S. dollars)(c) The components of retirement benefit expenses for the year ended March 31, 2010 and2009 were as follows:

Financial
Highlights

Deferred income taxes as of March 31, 2010 and 2009 are reflected in the consolidatedbalance sheet under the following line items:

Corporate Data

45

46

Financial Section

Financial Section

Profile13.

Contingent Liability for Guarantee

17.

March 31,2010
2009
(Millions of yen)
¥88
¥88

$860
$860

Buildings and structures
Machinery and equipment
Land
Other

¥12
–
–
0
¥12

$127
–
–
3
$130

Loss on Disposal of Property and Equipment

The composition of loss on disposal of property and equipment for the years ended March
31, 2010 and 2009, respectively, was as follows:
2010
2009
(Millions of yen)

Buildings and structures
Machinery and equipment
Software
Long-term prepaid expenses
Other

¥440
67
31
–
84
¥622

Selling, General and Administrative Expenses

The main component of sales and selling, general and administrative expenses for the years ended March
31, 2010 and 2009, respectively, were as follows:

2010
2009
(Millions of yen)

2010
(Thousands of
U.S. dollars)¥13,311
1,114$162,173
12,529

156
936

547
354

1,681
10,062

35

67

374

Financial Review¥15,089
1,166

Corporate
Governance

Employees’ salaryAccrual of bonuses to employees
Accrual of allowance for doubtful
accounts
Retirement benefits to employees
Accrual of retirement benefits todirectors$4,728
719
334
–
901
$6,682

R&D

Year ended March 31,

¥200
66
49
80
39
¥434

2010
(Thousands of
U.S. dollars)

TopicsYear ended March 31,

At a Glance

Provision for Losses on Contracts

18.

A provision for expected operating losses on contract orders amounting to ¥1,011 million($10,868 thousand) was set off from work in process inventories as of March 31, 2010.

16.

¥ 25
31
351
15
¥422

2010
(Thousands of
U.S. dollars)

Advanced Depreciation

Accumulated advanced depreciation including national subsidy deducted from acquired
amount of buildings and structures totaled ¥78 million ($840 thousand) and ¥76 million asof March 31, 2010 and 2009, respectively.

15.

2010
2009
(Millions of yen)

Key Strategies

14.

¥80
¥80

Year ended March 31,
2010(Thousands of
U.S. dollars)

To OurStakeholders

Imizu Cable Network, Co., Ltd.

The composition of loss on sales of property and equipment for the years ended March 31,
2010 and 2009, respectively, was as follows:

Financial
Highlights

The Company was committed to provide guarantees for bank loans to a non-consolidated
subsidiary as follows:

Loss on Sales of Property and Equipment

Research and development costs, which are included in cost of sales and selling, generaland administrative expenses, totaled ¥913 million ($9,811 thousand) and ¥947 million forthe years ended March 31, 2010 and 2009, respectively.

Financial Section
Corporate Data

47

48

Financial Section

Financial Section

Profile19.

Impairment Loss

20. Shareholders’ Equity

For the year ended 2010

The Company's basic policy is to distribute dividends twice a year. Resolutions are madeat the general shareholders' meeting for the annual dividend, and the Board of Directors'
meeting for the interim dividend.

PurposeBusiness property
Property for sale

Business property
Other

Category

Keyport Solutions, Inc.
(Chiyoda-ku, Tokyo)

Development facilities
including software andgoodwill

NEOAXIS Co., Ltd.
(Koto-ku, Tokyo)
Chiba
Chiba
Shizuoka
NEXWAY Co., Ltd.
(Chiyoda-ku, Tokyo)
IT Holdings Corporation$ 3,914

Software55

585

Buildings and land
Buildings and land
Buildings and land
Machinery, equipment
and software
Goodwill
Land, buildings andtelephone rights and other

199
176
11

2,142
1,892
121

99

1,065

1,139

12,23940

430¥2,083$22,388

Total

The Company issues only common stocks. Number of issued shares and treasury
stock were changed during the two years ended March 31, 2010 as follows:(Number of shares)
Shares at
Increase in
March 31,
the Year
2008
Issued shares
86,372,339(Note 1)
Treasury stock
1,608,662(Notes 2 to 4)

Decreasein theYear

Shares at
Increase in
March 31,
the Year2009

Decreasein theYear

Shares at
March 31,
2010

–

–

86,372,339

1,580

–

86,373,919

10,456282,105

1,337,013

3,097

1,317,297

22,813Notes
For the year ended 2009

Company condominium
Dormitory

Business property
Business property

In-house system
Medical system
Business property

Unutilized line
Unutilized line

Machinery, software andequipment
Buildings and structures,
machinery and equipment

182
34

4.

Decrease of 1,317,297 in treasury stock for the year ended March 31, 2010, wasdue to the sale of 1,316,941 shares held by a consolidated subsidiary, and 356
shares through the sale of shares of less than one standard unit.

(b) Dividends

239(1) Dividend paid

Software43

Leased assets

4

Telephone subscription
right

2

Total

Decrease of 282,105 in treasury stock for the year ended March 31, 2009, was dueto the sale of 280,836 shares held by a consolidated subsidiary, and 1,269 sharesthrough the sale of shares of less than one standard unit.

224

33

Telephone subscription
right

3.

¥121

Leased assets

Telephone subscription
rightTelephone subscription
rightIncrease in treasury stock by 10,456 and 3,097 shares due to purchase of shares ofless than one standard unit.

6
6
2
¥896

Resolution
General shareholders’meeting on June 20, 2008
Director’s meeting on
June 25, 2008
General shareholders’meeting on June 25, 2009
Director’s meeting on
November 10, 2009

Type ofstock
Commonstock
Commonstock
Commonstock
Commonstock

Total
Dividends¥770
million¥449
million¥2,763
million¥1,036
millionDividendper Share
¥17
¥ 9
¥32
¥12

RecordEffective
Date
Date
March 31,
June 23,
2008
2008
March 31,
June 26,
2008
2008
March 31,
June 26,2009
2009
September 30, December 10,
2009
2009

Note: The Company was established on April 1, 2008, as a joint holding
company through transfer of shares. Total dividends indicate figures
based on the resolution at the general shareholders meeting of TIS Inc. on
June 20, 2008, and at the general shareholders meeting of INTEC
Holdings, Ltd. on June 25, 2008.

Financial Section

Unutilized line

Buildings, and equipment

2.

Financial Review

Unutilized line

Land, buildings andequipment
Land, buildings andequipment

Amounts(Millions ofyen)

Corporate
GovernanceBusiness property

TIS condominium(Yachiyo-shi, Chiba)
TIS dormitory(Chiba-shi, Chiba)
TIS dormitory(Yokohama-shi,
Kanagawa)
TIS Tokyo Head Office(Minato-ku, Tokyo)
TIS Osaka Head Office(Suita-shi, Osaka)
Qualica Head Office(Koto-ku, Tokyo)
TIS Tokyo Head Office(Minato-ku, Tokyo)
AJS Head Office(Sumida-ku, Tokyo)
TIS Solution Business
Head Office(Koto-ku, Tokyo)
AJS Head Office(Sumida-ku, Tokyo)
Ufit Head Office(Naka-ku, Nagoya-shi)
Systems Engineering
Laboratory Head Office(Koto-ku, Tokyo)

Category

R&D

Dormitory

Location

Increase in issued stock due to exercise of stock option.

TopicsPurpose1.

At a Glance

Other(a) Types of Stock and Number of Shares¥ 364

Key Strategies

Company condominium
Dormitory
Recreation facilities

Location

Amounts(Millions of (Thousands ofyen)
U.S. dollars)

To OurStakeholders

The Company realizes the importance of sustaining a comprehensive and solid distributionof earnings to our shareholders through earnings growth, capital efficiency and financial
soundness.

Financial
Highlights

Impairment losses of long-lived assets for the years ended March 31, 2010 and 2009,
respectively, were as follows:

Corporate Data

49

50

Financial Section

Financial Section

Profile20. Shareholders’ Equity (continued)

22. Leases(b) Dividends (continued)(a) As Lessee

Resolution

Effective
Date
June 25,2010(i)Equivalents of acquisition cost, accumulated depreciation and net balance as ofMarch 31, 2010 and 2009
March 31, 2010
Accumulated
Accumulated
depreciation
impairment loss
(Millions of yen)

Acquisitioncost

21. Amounts per Share
2010

2010
(U.S. dollars)¥ 110.74
110.72
1,541.17
32.00$ 0.96
–
17.23
0.34

(Yen)
Net income:
Basic
DilutedNet assets
Cash dividends applicable to the year

¥

89.25
–
1,602.77
32.00

Basic net income per share is computed based on the net income available for distribution
to shareholders of common stock and the weighted-average number of shares of common
stock outstanding during each year.

¥ 3,897
5,905
1,865¥11,667¥2,505
3,286
1,121¥6,912

Balance

¥ –
36
–
¥36

¥1,392
2,583
744¥4,719March 31, 2010
Accumulated
Accumulated
depreciation
impairment loss
(Thousands of U.S. dollars)

Acquisition
cost
Machinery and vehicles
Equipment
Other

¥ 715
1,330
479
¥2,524

March 31, 2009
Accumulated
Accumulated
depreciation
impairment loss
(Millions of yen)

Acquisition
cost
Machinery and vehicles
Equipment
Other

¥ –
36
–
¥36

$31,51048,93313,018$93,461$23,830
34,257
7,865$65,952

$

–
382
–
$382

Balance$ 7,680
14,294
5,153$27,127(ii) Amount of future lease payments outstanding as of March 31, 2010 and 2009,
including the interest portion, categorized by contractual maturity
2010(Thousands of
U.S. dollars)¥2,8782,351¥5,229¥3,960
5,242¥9,202$30,929
25,274$56,203

Account balance of impairment
loss on leased assets

¥

¥

$

15

29

164

Financial Section

Within one year
Over one year
Total

Financial Review

March 31,2010
2009
(Millions of yen)

Corporate
GovernanceCash dividends per share represent the cash dividends resolved by the general shareholders’meeting as applicable to that year, together with any interim cash dividends paid.

¥2,217
3,187
732¥6,136

R&D

Amounts per share of net assets are computed based on shareholders’ equity and thenumber of shares of common stock outstanding at the year-end.

¥2,932
4,553
1,211¥8,696

TopicsDiluted net income per share is computed based on the net income available for distribution
to shareholders and the weighted-average number of shares of common stock outstanding
during each year after giving effect to the dilutive potential of shares of common stock to
be issued upon the conversion of convertible bonds and the exercise of stock options.
Since no dilutive potential of shares existed, the figure for the year ended March 31, 2010,is not represented.

Machinery and vehicles
Equipment
Other

At a Glance

2009

Balance
Key Strategies

Year ended March 31,

To OurStakeholders

General shareholders’meeting on June 24, 2010

Type of
Total
Source of DividendRecordStock
Dividends Dividends per share
Date
Common¥1,727
EarnedMarch 31,
¥20
stock
millionsurplus2010

As described in Note 1 (i) finance lease transactions that were contracted before April
1, 2008, were accounted for as operating leases. The following summarizes
information concerning such finance leases if capitalized:

Financial
Highlights(2) The effective date for dividends with a record date of March 31, 2010, shall be adate after the close of books for the said consolidated period.

Corporate Data

51

52

Financial Section

Financial Section

Profile22. Leases (continued)

22. Leases (continued)(a) As Lessee (continued)(b) As Lessor (continued)

Year ended March 31,¥2,986¥3,815$32,097

14
2,772
154
–

7
3,513
251
33

146
29,796
1,651
–

(iv)

The amounts of future lease payments outstanding on noncancelable operatingleases as of March 31, 2010 and 2009, are summarized as follows:¥1,2191,379¥2,598

¥ 83
89
¥172

(iii) The amount of future lease payments receivable on operating leases outstanding
as of March 31, 2010 and 2009, are categorized by contractual maturity.
March 31,2010
2009
(Millions of yen)

2010
(Thousands of
U.S. dollars)$13,105
14,816$27,921$27,949
22,06917,294
9,997
3,536
2,624
$83,469

Within one year
Over one year
Total

¥24
62
¥86

¥32
13
¥45

2010
(Thousands of
U.S. dollars)
$261
663
$924

R&D

Within one year
Over one year
Total

¥2,754
1,999
1,528
1,080
413
163
¥7,937

TopicsMarch 31,2010
2009
(Millions of yen)

¥2,601
2,053
1,609
930
329
244
¥7,766

At a Glance

Depreciation is calculated by the straight-line method under the condition that theuseful life equals the lease term with no residual value.

Within one year
One to two years
Two to three years
Three to four years
Four to five years
Over five years
Total

2010
(Thousands of
U.S. dollars)

Key Strategies

Lease expenses
Reversal of impairment loss on
lease assets
Depreciation
Interest expenses
Impairment loss

March 31,2010
2009
(Millions of yen)

2010
(Thousands of
U.S. dollars)

To OurStakeholders

2010
2009
(Millions of yen)(ii) Expected collections of investments in finance leases as of March 31, 2010 and2009, are as follows:

Financial
Highlights(iii) Lease expenses, reversal of impairment loss on lease assets, depreciation, interest
expenses and impairment loss for the years ended March 31, 2010 and 2009(b) As Lessor
Investments in finance leases as of March 31, 2010 and 2009 consisted of thefollowing:¥7,7662(597)¥7,171¥8,081–(806)¥7,275$83,469
23(6,420)$77,072

Financial Section

Lease receivables
Estimated residual value
Interest portion
Investments in finance leases

2010(Thousands of
U.S. dollars)

Financial Review

March 31,2010
2009
(Millions of yen)

Corporate
Governance(i)

Corporate Data

53

54

Financial Section

Financial Section

Profile24. Statement of Cash Flows (continued)

Costs related to stock options that are included in selling, general and administrative
expenses totaled ¥11 million ($115 thousand) and ¥7 million for the years ended March 31,
2010 and 2009, respectively.

(b) Assets and liabilities of new consolidated subsidiaries

The following table summarizes activities regarding stock option plans that the Company
has granted to its directors, officers and employees as of March 31, 2010.

52,930 shares¥4,014
April 1, 2008
In principle, theperiod beginning
April 1, 2008, throughDecember 31, 2010
April 1, 2008 throughDecember 31, 2010

¥1,489April 1, 2008
In principle, theperiod beginning
April 1, 2008, throughMarch 31, 2011
April 1, 2008 throughMarch 31, 201124. Statement of Cash FlowsThe components of cash and cash equivalents at March 31, 2010 and 2009, were as
follows:¥37,524
1,502
39,026$507,231
3,456
510,687(306)(2,520)(3,291)(220)¥46,988(1,401)¥35,105(2,368)$505,028(88,823)$117,341

NEXWAY Co., Ltd. (As of June 30, 2008)(Millions ofyen)
Current assets
Fixed assets
Goodwill
Current liabilities
Non-current liabilities
Acquisition cost of NEXWAY shares
Cash and cash equivalents of NEXWAY
Net payment for acquisition¥ 1,673
3,376
2,896(4,525)
(214)
3,206
(59)
¥ 3,147

CRONOVA Co., Ltd. (As of September 30, 2008)(Millions ofyen)
Current assets
Fixed assets
Goodwill
Current liabilities
Non-current liabilities
Minority interests
Acquired shares before consolidation
Acquisition cost of CRONOVA shares
Cash and cash equivalents of CRONOVANet receipt from acquisition¥1,073
182
99
(520)
(34)
(305)
(206)
289
(747)
¥ (458)Financial Section¥47,193321
47,514(8,264)¥10,917

Financial Review

Cash and deposits
Marketable securities
Total
Time deposits with original maturity
over three months
Securities with original maturity overthree months
Cash and cash equivalents

2010(Thousands of
U.S. dollars)$ 204,837
83,45447,381(69,325)(41,770)(18,413)206,164

Corporate
GovernanceMarch 31,2010
2009
(Millions of yen)

¥ 19,058
7,764
4,408
(6,450)(3,886)(1,713)
19,181R&D(a) Cash and cash equivalents(Thousands of
U.S. dollars)

Topics343,400 shares

Current assets
Fixed assets
Goodwill
Current liabilities
Non-current liabilities
Minority interests
Acquisition cost of SORUNCORPORATION shares
Cash and cash equivalents of SORUNCORPORATION and its 14 subsidiaries
Net payment for acquisition(Millions ofyen)

At a Glance

4th
The Company:
Officer 1
Subsidiaries:
Directors 2
Officers 3
Employees 67

Key Strategies

Remaining numberof stock options– shares(common stock)
Stock issue price¥4,750Date of receipt
April 1, 2008
In principle, theRequisite service period beginning
periodApril 1, 2008, throughDecember 31, 2009
April 1, 2008 throughExercise period
December 31, 2009

3rd
The Company:
Directors 2
Subsidiaries:
Directors 7
Officers 16
Employees 535

SORUN CORPORATION and its 14 subsidiaries (As of December 31, 2009)
To OurStakeholders

Title and numberof recipients

2nd
The Company:
Directors 2
Subsidiaries:
Directors 7
Officers 16
Employees 492

The composition of assets and liabilities, acquisition cost, and net profits and losses
due to the acquisition of newly consolidated companies for the year ended March 31,
2010 and 2009 were as follows:

Financial
Highlights

23. Stock Options

Corporate Data

55

56

Financial Section

Financial Section

Profile26. Business Combination(c) Significant noncash activities

The Group carried out the following business combinations during the years ended March
31, 2010 and 2009.

The Group acquired assets and obligations on finance lease transactions amounting to¥1,380 ($14,829 thousand) and ¥1,528 million during the years ended March 31, 2010
and 2009, respectively.

For the year ended March 31, 2009:

Financial
Highlights

24. Statement of Cash Flows (continued)(a) Business Combination through Establishment of Joint Holding Company(a) Industry segment information

Since both the domestic share of net income and total assets for all segments exceed
90%, geographic segment information is not disclosed separately.
(c) Overseas sales

Outline of holding company
Company name:

IT Holdings Corporationii

Location of Head Office:Toyama Prefectureiii

Representatives of company:

Tetsuo Nakao, Chairman
Susumu Okamoto, President

iv

Capital stock:¥10 billionv

Business activities:

Administrative control over its subsidiaries
and the affiliated groups and execution ofrelated business activities.

Since the overseas share of consolidated net sales was less than 10%, overseas sales
information is not disclosed separately.

Topicsi

At a Glance(b) Geographic segment information(i)

Key Strategies

The Group responds to customer needs through the supply of a comprehensive extent
of information services ranging from information system planning through softwaredevelopment, hardware selection, and system operations. As the Group’s marketing
policies do not separate these operations into industry segment classifications, industry
segment information is not disclosed.

Seeking to fulfill corporate social responsibility issues and contribute to the realizationof a better IT society, while improving group corporate value as leading companies in
the information services industry, TIS Inc.(TIS) and INTEC Holdings, Ltd.,(INTEC)
established the joint holding company, IT Holdings Corporation, on April 1, 2008,
through stock transfer. Consequently, TIS Inc. and INTEC Holdings became wholly
owned subsidiaries of IT Holdings Corporation.

To OurStakeholders

25. Segment Information(ii) Transfer ratio for stock with voting rights and ratio determinationi)

Transfer ratio for stock with voting rights

Ratio determinationiii) Voting rights after business combination
53.8%
46.2%

The ratios represent the equities in IT Holdings Corporation held byshareholders of each company.

Financial Section

TIS Inc.
INTEC Holdings, Ltd.

Financial Review

In the interest of each company’s shareholders, a third-party opinion was
requested to ascertain the fairness of the stock transfer ratio. TIS Inc.
named Nomura Securities Co., Ltd., as its financial advisor, and INTEC
Holdings, Ltd. named Mitsubishi UFJ Securities Co., Ltd., as its financial
advisor. The two companies deliberated the respective third-party opinions
and agreed that the ratio was appropriate.

Corporate
Governance

ii)

R&D

One share of common stock in the holding company was allotted anddelivered for each share of common stock in TIS Inc., while 0.79 share ofcommon stock in the holding company was allotted and delivered for eachshare of common stock in INTEC Holdings, Ltd.

Corporate Data

57

58

Financial Section

Financial Section

Profile26. Business Combination (continued)

26. Business Combination (continued)(a) Business Combination through Establishment of Joint Holding Company (continued)(b) Application of Purchase Method (continued)v)

Assets and liabilities succeeded from both companies¥ 48,337
75,768¥124,105¥ 2,351
62,320¥64,671

Current liabilities
Non-current liabilities
Total liabilities¥ 27,165
21,807¥ 48,972¥ 8,58510¥ 8,595

Net assets¥ 75,133¥56,076

Not applicable.
(v) Amount of goodwill incurred, cause, amortization method and period ofamortization

Name and business line of acquired entity
Name:
Nexway Co., Ltd. (same after combination)
Business: Services to distribute informationiv) Legal form of combination
Stock acquisition(vi) Amount of assets and liabilities assumed on the date of combination and key
components thereof(Assets)
Current assets
Fixed assets
Total¥1,672 million¥3,376 million¥5,049 million(Liabilities)
Current liabilities
Fixed liabilities
Total¥4,524 million¥ 214 million¥4,738 million

Financial Sectionv) acquired ratio of voting rights
100%

Financial Reviewiii) Date of combination
July 11, 2008iii) Amortization method and period of amortization
Average amortization over five years.

Corporate
Governanceii) Main reason for business combination
To expand scale and reinforce services in the outsourcing and network
segment.

ii) Cause
Active return expected, primarily through effective application of funds, as
Nexway expands its information distribution services.
R&D

Name and business line of acquired entity, main reason for business combination,
date of combination, legal form of combination, and acquired ratio of voting
rightsAmount of goodwill incurred¥2,896 million

TopicsAcquisition of stock in NEXWAY Co., Ltd.

i)(iv) Conversion rate by type of stock and calculation method used as well as numberof allotted shares and assessed valuei)(b) Application of Purchase Method(i)

Stock acquisition expense: ¥3,120 million
Expenses, including advisory services, directly related to stock acquisition:¥86 million
Total cost of acquisition:¥3,206 million
All expenses were paid in cash.

At a Glance

Current assets
Non-current assets
Total assets(iii) Cost of acquisition and components thereof

Key Strategies

TIS
INTEC
(Millions of yen)

July 1, 2008 to March 31, 2009
To OurStakeholders

Judging from considerations given to shareholders, voting rights ratio andnonexistence of controlling relationship other than voting rights, thebusiness combination was accounted for as a pooling of interests not as an
acquisition, in conformity with Japanese Accounting Standards for Business
Combinations.

(ii) Term of business performance, included in consolidated financial statements, forthe acquired entity

Financial
Highlightsiv) Accounting for business combination

Corporate Data

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Financial Section

Financial Section

Profile26. Business Combination (continued)

26. Business Combination (continued)(b) Application of Purchase Method (continued)

For the year ended March 31, 2010:¥2,304 million¥ 471 million¥ 378 million¥ 390 million(a) Application of Purchase Method
Acquisition of stock in SORUN CORPORATION(i)

Name and business line of acquired entity, main reason for business combination,
date of combination, legal form of combination, and acquired ratio of voting
rightsi)(Calculation method for estimates)

This note is unaudited.

iii) Date of combination:

December 22, 2009

Absorption-type split with TISiv) Legal form of combination:

Stock acquisition by tender offer(i)v) Acquired ratio of voting rights:

91.55%Name and business line of the spinoff combining entity, legal form of
combination, and summary of transaction, including purpose
Name and business line of the spinoff combining entity
Name: TIS, a consolidated subsidiary of IT Holdings
Business that was split from TIS and absorbed by IT Holdings: Subsidiarymanagement operations

Amount of goodwill incurred: ¥4,408 million ($47,381 thousand)ii) Cause
Principally, expected excess profitability generated by business development
of SORUN CORPORATION.
iii) Amortization method and period of amortization
Average amortization over five years.

Financial Section

IT Holdings treated the spinoff event as a transaction under joint control, in
accordance with “Accounting Standards for Business Combinations,” issued by
the Business Accounting Council on October 31, 2003, and ASBJ GuidanceNo. 10 “Guidance on Accounting Standards for Business Combinations andAccounting Standards for Business Divestitures,” issued by the AccountingStandards Board of Japan on November 11, 2007.

i)

Financial Review(ii) Summary of applied accounting treatment(iv) Amount of goodwill incurred, cause, amortization method and period ofamortization

Corporate
Governanceiii) Summary of transaction, including purpose
Seeking to make business practices within the IT Holdings Group stronger
and more efficient, management redefined the Group structure and decided
to shift control of nine subsidiaries in the TIS Group under the direct controlof IT Holdings.
In this transaction, an absorption-type split was agreed upon between TIS
and IT Holdings, wherein all shares in the nine subsidiaries held by TIS
would be transferred to IT Holdings.

(iii) Cost of acquisition and components thereofCommon stock acquisition expense: ¥18,852 million ($202,623 thousand)Expenses, including advisory services, directly related to stock acquisition:¥329 million ($3,541 thousand)Total cost of acquisition: ¥19,181 million ($206,164 thousand)R&Dii) Legal form of combination
Absorption-type split, wherein TIS is the splitting company and IT Holdings
is the successor company.

(ii) Term of business performance, included in consolidated financial statements, forthe acquired entity
January 1, 2010 to March 31, 2010

Topicsi)

At a Glance(c) Transaction under Joint Controlii) Main reason for business combination
To expand scale and reinforce services, to develop overseas and innovative
operations and to enhance efficiency of operations

Key Strategies

The estimated impact would be the difference between sales and profit
information calculated as if the business combination had been completed at the
beginning of the consolidated year and sales and profit information recorded on
the consolidated statement of income of the acquired entity.

Name and business line of acquired entity
Name: SORUN CORPORATION (both before and after combination)
Business: Systems consulting, engineering services, outsourcing services,e-business support, information security services and package sales

To OurStakeholders

Net sales
Operating income
Recurring profit
Net income

Financial
Highlights(vii) Estimated impact on the consolidated statement of income for the consolidated
fiscal year under review if the business combination had been completed at the
beginning of the consolidated fiscal year.

Corporate Data

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Financial Section

Financial Section

Profile26. Business Combination (continued)

27. Subsequent Events (continued)(a) Application of Purchase Method (continued)(ii) Manner and detail of the share exchange(Liabilities)
Current liabilities
Non-current liabilities
Total¥ 6,450 million ($ 69,325 thousand)¥ 3,886 million ($ 41,770 thousand)¥10,336 million ($111,095 thousand)(vi) Estimated impact on the consolidated statement of income for the year ended
March 31, 2010, under the assumption that the business combination had been
completed at the beginning of the year.
¥32,951 million ($354,158 thousand)¥ 574 million ($ 6,173 thousand)¥ 727 million ($ 7,811 thousand)¥ 891 million ($ 9,579 thousand)(b) The following appropriations of retained earnings of the Company, which have notbeen reflected in the consolidated financial statements for the year ended March 31,
2010, were approved at a shareholders’ meeting held on June 24, 2010.

Cash dividends (¥20.00 = $0.21 per share)(Thousands of
U.S. dollars)¥1,727$18,564

Topics(Calculation method for estimates)(Millions ofyen)

At a Glance

Net sales
Operating loss
Recurring loss
Net loss

In conformity with the share change contract concluded on January 12, 2010, theCompany issued 0.74 shares of common stock of the Company for every one
share of SORUN's stock, to shareholders listed on the shareholders' record(except for the Company itself), immediately before acquiring SORUN shares,
effective April 1, 2010.

Key Strategies¥19,058 million ($204,837 thousand)¥ 7,765 million ($ 83,454 thousand)¥26,823 million ($288,291 thousand)To OurStakeholders(Assets)
Current assets
Fixed assets
Total

As for the Company, the share exchange was conducted according to thesimplified share exchange procedure under Article 796 (3) of the Companies Act.
As for SORUN, according to the summary share exchange procedure under
Article 784 (1) of the Companies Act.

Financial
Highlights(v) Amount of assets and liabilities assumed on the date of combination and key
components thereof

The estimated impact is the difference between sales and income summary
calculated under the assumption that the business combination had been
completed at the beginning of the consolidated year to the sales and income
summary of the consolidated statement of income of the acquired entity.

R&D

This note is unaudited.
27. Subsequent Events(i)

Corporate
Governance(a) Effective on April 1, 2010, the Company made SORUN CORPORATION(“SORUN”) into a wholly-owned subsidiary through share exchange.
Purpose of making SORUN into a wholly-owned subsidiary through shareexchange

Financial Review
Financial Section

As mentioned in Note 26(a):for the year ended March 31, 2010, the Company
conducted the tender offer targeting shares of SORUN (excluding treasury shares
owned by SORUN) from November 13, 2009 to December 15, 2009, with anobjective to make SORUN into a wholly-owned subsidiary. As a result, theCompany acquired 23,863,314 shares of SORUN stocks. However, theCompany and SORUN decided to conduct the share exchange for the purpose ofcompleting the process of making SORUN into a wholly-owned subsidiary of
ITHD, as had been originally planned.

Corporate Data

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