Consolidated Financial Results for Fiscal Year Ended December 31, 2016
(Under Japanese GAAP)
February 2, 2017
Company name: SIOS Technology, Inc.
Stock listed on: Tokyo Stock Exchange
Stock code: 3744
URL: http://www.sios.com
Representative: Nobuo Kita, Representative Director and President
Contact person: Tokutaro Kobayashi, Managing Executive Officer
Telephone: +81-3-6401-5111 (from outside Japan)
Scheduled date of the ordinary general meeting of shareholders: March 29, 2017
Scheduled commencement date of dividend payment: Scheduled filing date of securities report: March 30, 2017
Supplementary materials on financial results: Yes
Presentation of financial results: Yes (for institutional investors and analysts)(Fractions less than 1 million yen are rounded down)

1. Consolidated Financial Results for Fiscal Year Ended December 31, 2016
(1) Consolidated Results of Operations(In millions of yen)
(Percentages represent changes from the previous fiscal year)
Net income (loss)
Operating income
Ordinary income (loss) attributable to owners of(loss)
the parent company

Net salesYear ended December 31,
12,0802016
Year ended December 31,
9,362
2015
Note: Comprehensive income (loss)

29.0%

474

-

389

-

254

-

27.4%

(111)

-

(137)

-

(186)

-

Year ended December 31, 2016: 245 million yen (-%)
Year ended December 31, 2015: (181) million yen (-%)
Net income (loss)
Net income perper share
share
Return on equity Return on assets Operating margin(Basic)(Diluted)

Year ended December 31,
29.56 yen
29.52 yen
17.0%
7.2%
3.9%
2016
Year ended December 31,(21.67) yen(12.5%)(3.0%)(1.2%)
2015
Note: Equity in earnings (losses) of affiliates Year ended December 31, 2016: (65) million yen
Year ended December 31, 2015: (46) million yen(In millions of yen, except per-share amounts)(2) Consolidated Financial Position
Total assets

Net assets

As of December 31, 2016
5,256
As of December 31, 2015
5,642
Note: Equity
As of December 31, 2016: 1,619 million yen
As of December 31, 2015: 1,376 million yen

Equity ratio
1,647
1,414

30.8%
24.4%

(3) Consolidated Cash Flows
Cash flows fromoperating activities
Year ended December 31, 2016
Year ended December 31, 2015

188.00 yen
160.02 yen(In millions of yen)
Balance of cash andCash flows fromcash equivalents atfinancing activities
year-end
1,793
(414)
988
2,045

Cash flows frominvesting activities
(123)
(996)

311
168

Net assets per share

2. Dividends
Dividends per share
End of Q1 End of Q2 End of Q3 Year-end
Yen

Year ended December 31, 2015
Year ended December 31, 2016
Year ending December 31, 2017
(Forecasted)

Total

Ratio ofdividends toTotal amount Payout ratio
shareholders'of dividends (Consolidated)
equity(Consolidated)

Yen

Yen

Million yen

-

0.00
0.00

-

0.00
0.00

0.00
0.00

-

-

0.00

-

5.00

5.00

―1―

13.5%

-

3. Consolidated Business Forecasts for Fiscal Year Ending December 31, 2017
(In millions of yen, except per-share amounts)(Percentages represent changes from the previous fiscal year)
Net income
attributable to
Net income
Operating income Ordinary income
owners of the parent per sharecompany

Net salesYear ending December 31,
12,600
4.3%
500
5.4%
480 23.1%
320 25.7%
37.15 yen
2017
Notes:(1) Material changes in subsidiaries during the fiscal year ended December 31, 2016 (Changes in specified subsidiaries resulting in achange in the scope of consolidation): None
(2) Changes in accounting policies, changes in accounting estimates, and restatements(i)

Changes in accounting policies based on revisions of accounting standards : Yes(ii)

Changes in accounting policies other than the above: None(iii)

Changes in accounting estimates: None(iv)

Restatements: None(3) Number of outstanding shares (common stock)(i) Number of outstanding shares at end of the period(including treasury stock)(ii)

Number of treasury stocks at end of the period(iii)

Average number of shares during the period

As ofDecember 31,
2016
As of
December 31,
2016
As of
December 31,
2016

As of
8,874,400 shares December 31,
2015
As of
260,041 shares December 31,
2015
As of
8,609,398 shares December 31,
2015

8,874,400 shares

274,241 shares

8,598,621 shares

Supplementary Information: Unconsolidated Financial Results
1. Unconsolidated Financial Results for Fiscal Year Ended December 31, 2016
(1) Unconsolidated Results of Operations(In millions of yen, except per-share amounts)(Percentage represent changes from the previous fiscal year)

Net salesYear ended December 31,
2016
Year ended December
31, 2015

Year ended December 31,
2016
Year ended December 31,
2015

Operating income (loss)

Ordinary income (loss)

7,950

13.7%

235

-

288

-

(7)

-

6,990

11.7%

(63)

-

(52)

-

(109)

-

Net income (loss)
per share (Basic)

Net income per share(Diluted)(0.83) yen-(12.73) yen-(2) Unconsolidated Financial Position(In millions of yen, except per-share amounts)(Percentage represent changes from the previous fiscal year)

Total assets
As of December 31, 2016
As of December 31, 2015
Note: Equity

Net income (loss)

Net assets
4,629
4,752

Equity ratio
1,789
1,776

38.6%
37.3%

Net assets per share
207.51 yen
206.12 yen

As of December 31, 2016: 1,787 million yen
As of December 31, 2015: 1,772 million yen* Presentation of the status of progress in carrying out annual review proceduresThis summary of consolidated financial results is not subject to a review to be conducted in accordance with the Financial
Instruments and Exchange Law of Japan. At the time of the release of this summary of consolidated financial results, the review
procedures in accordance with the Financial Instruments and Exchange Law of Japan have not yet been completed.

* Proper use of business forecasts and other important matters
Forward-looking statements, such as business forecasts included in this document, are based on currently available information
or assumptions that the Company considers reasonable, and business results may differ significantly from forecasts due tovarious factors. For assumptions used as a basis for making business forecasts and notes on the use of business forecasts, refer
to “Business Forecasts for Fiscal Year Ending December 31, 2017” on Page 3 of the attached document.

―2―

The Company will hold a presentation on its financial results for institutional investors and analysts on Friday, February 3,
2017. Shortly thereafter, the Company will post on its website materials used in the presentation.

―3―

Table of Contents of the Attached Document
1. Qualitative Information on Consolidated Results ...................................................................................................................... 5(1) Results of Operations............................................................................................................................................................ 5(2) Financial Position ................................................................................................................................................................. 6(3) Basic Policy on Distribution of Profits; Payment of Dividends for FY 2016 and FY 2017 .................................................. 8(4) Business Risks ...................................................................................................................................................................... 8
2. The SIOS Group ...................................................................................................................................................................... 11
3. Management Policy ................................................................................................................................................................. 12(1) Basic Management Policy .................................................................................................................................................. 12(2) Key Management Metrics................................................................................................................................................... 12(3) Medium- to Long-Term Management Strategy .................................................................................................................. 12(4) Management Priorities ........................................................................................................................................................ 12
4. Basic Policy on the Selection of Accounting Standards .......................................................................................................... 13
5. Consolidated Financial Statements .......................................................................................................................................... 14(1) Consolidated Balance Sheets .............................................................................................................................................. 14(2) Consolidated Statements of Income and Comprehensive Income ...................................................................................... 16(3) Consolidated Statements of Changes in Equity .................................................................................................................. 19(4) Consolidated Statements of Cash Flows ............................................................................................................................. 21(5) Notes on Consolidated Financial Statements ...................................................................................................................... 23
Going Concern Assumption ............................................................................................................................................... 23
Basis for the Preparation of Consolidated Financial Statements ........................................................................................ 23
Changes in Accounting Policies ......................................................................................................................................... 25
Notes on Consolidated Balance Sheets .............................................................................................................................. 26
Notes on Consolidated Statements of Income .................................................................................................................... 28
Notes on Consolidated Statements of Comprehensive Income .......................................................................................... 28
Notes on Consolidated Statements of Changes in Equity .................................................................................................. 30
Notes on Consolidated Statements of Cash Flows ............................................................................................................. 31
Notes on Business Combination ........................................................................................................................................ 32
Segment Information.......................................................................................................................................................... 32
Per-Share Information ........................................................................................................................................................ 36
Significant Subsequent Events ........................................................................................................................................... 36
6. Unconsolidated Financial Statements ...................................................................................................................................... 37(1) Unconsolidated Balance Sheets .......................................................................................................................................... 37(2) Unconsolidated Statements of Income ................................................................................................................................ 39(3) Unconsolidated Statements of Changes in Equity .............................................................................................................. 40(4) Notes on Unconsolidated Financial Statements .................................................................................................................. 42
Going Concern Assumption ............................................................................................................................................... 42
7. Other........................................................................................................................................................................................ 43(1) Changes in Executives ........................................................................................................................................................ 43―4―

1. Qualitative Information on Consolidated Results(1) Results of Operations
Overview of the consolidated business performance for consolidated fiscal year ended December 31, 2016
The SIOS Group has long been at the forefront of the fast-evolving IT industry and been implementing its strategic initiatives, which
are outlined in the Group's medium-term business strategy, focusing its efforts on expanding into new business segments including
Fintech1, continuing to invest in research and development, and becoming more competitive in its core businesses.
During the fiscal year ended December 31, 2016, as part of efforts to expand into new business segments including Fintech, theGroup launched the SIOS AI Academy and the SIOS AI Consulting Service to assist corporate clients in learning about and adopting
machine-learning and AI solutions.
As part of efforts to invest in research and development, the Group continued to invest in machine-learning technology2 and released
an upgraded version of SIOS iQ3, a software platform for IT operations analytics4, to provide greater versatility.
Moreover, in an effort to become more competitive in the Group's core businesses, the Group upgraded LifeKeeper5, which is one ofits core products, and software applications for multifunction printers6 (MFPs), and expanded services for open-source software7(OSS) for cloud8.
Through the implementation of these initiatives, the Group achieved a 29.0% year-on-year increase in net sales to 12,080 million
yen in the consolidated fiscal year ended December 31, 2016, thanks in part to a 13.7% increase in net sales of the Company resulting
from efforts to become more competitive in its core businesses and in part due to the addition of sales by Keyport Solutions, Inc.
(KPS) and Profit Cube Inc. (PCI), both of which the Company had acquired in the previous fiscal year.
In addition to an increased gross margin resulting from the addition of sales by KPS and PCI, the Group enjoyed a year-on-yearincrease in operating income from existing businesses resulting from efforts to become more competitive in its core businesses, which
comprise sales of LifeKeeper and software applications for MFPs as well as support services for system implementation, as wedelivered these products and services to a growing number of corporate customers. As a result, the Group posted an operating incomeof 474 million yen for the consolidated fiscal year ended December 31, 2016, compared with an operating loss of 111 million yen in
the previous fiscal year, and an ordinary income of 389 million yen, compared with an ordinary loss of 137 million yen a year earlier.
The Group also posted for the year a net income of 254 million yen attributable to owners of the parent company, more than offsetting
expenses incurred related to a retrospective adjustment of 139 million yen recognized as an extraordinary loss in the April-June quarterof 2016, compared with a net loss of 186 million yen attributable to owners of the parent company the year before. The Group’s key
management metrics EBITDA, which is the sum of operating income, depreciation and amortization, and amortization of goodwill,stood at 653 million yen, compared with a negative of 45 million yen a year earlier.
The Company recognized impairment losses on stocks of affiliates accounted for under the equity method and posted a loss of 119
million yen on valuation of stocks of subsidiaries and affiliates under extraordinary loss. This loss on the valuation of stocks ofsubsidiaries and affiliates had no effect on the Group's consolidated financial performance for the year, as it was eliminated inconsolidation.
Business results by segment transpired as follows:
Open System Infrastructure Business Segment
The Group increased sales of LifeKeeper in Japan, Asia/Oceania, Europe, and the Americas. Red Hat Enterprise Linux9 and otherproducts sourced from Red Hat, Inc. also enjoyed robust sales, buoyed by stepped up sales and marketing activities. Support services
for OSS and OSS-related products achieved solid sales growth as well. As a result, net sales in this segment amounted to 6,300 million
yen, up 13.7% year on year with a segment income of 180 million yen, compared with a segment loss of 165 million yen in theprevious fiscal year.
Application Business Segment
Net sales in this segment increased substantially due to the addition of sales by KPS and PCI, both of which the Company had
acquired in the previous fiscal year. The increase in net sales also resulted from the provision of software applications for MFPs andsupport services for system implementation to a growing number of corporate customers. As a result, net sales in this segment soared
51.3% year on year to 5,779 million yen with a segment income of 239 million yen, up 451.8% from a year earlier.

―5―1. Fintech
An emerging technology for facilitating innovations in the financial sector.
2. Machine-learning technology
A technology for giving the computer the same learning ability as a human being and for extracting useful information froma variety of data.
3. SIOS iQ
A software platform that comprehensively monitors, analyzes, and optimizes operations of applications in virtual and cloudenvironments to improve performance and efficiency and to ensure reliability in resolving complex issues.
4. IT operations analytics
Analyzing data generated in IT operations and converting them into practical and easy-to-digest information.
5. LifeKeeper
A failover software product that automatically switches a failed primary server to a backup server.
6. Software applications for multifunction printers
A multifunction printer (MFP) is a piece of office equipment that incorporates print, scan, copy, and fax capabilities into one
unit. SIOS develops, markets, and updates Quick Scan and Speedoc, document management software applications runningon an MFP.
7. Open-source software
Software whose source code, which is the fundamental component of the program, is made available for free and can be used,
modified, and redistributed.
8. CloudA new form of computing that provides computing resources as services over the Internet.
9. Red Hat Enterprise LinuxLinux OS developed by the open solution provider Red Hat, Inc.
Business Forecasts for Fiscal Year Ending December 31, 2017
To achieve sustained growth in the fiscal year ending December 31, 2017, the Group will continue to implement three key mediumterm strategic initiatives: (1) expanding into new business segments including Fintech; (2) continuing to invest in research anddevelopment; and (3) becoming more competitive in core businesses.
On December 26, 2016, the Company announced that the Group would reorganize into a holding-company structure through a
company split in 2017 and would establish a split-preparation subsidiary prior to reorganization. A holding-company structure will
enable the Group to: (1) enhance the effectiveness of its strategic planning as well as that of corporate governance and compliance; (2)ensure that each Group company will achieve sustained growth; and (3) redouble merger and acquisition efforts.
In Japan, financial institutions have been cutting back on their capital expenditures due to profitability concern triggered when the
Bank of Japan introduced a negative interest rate policy in early 2016. This will likely affect PCI's and other Group companies'businesses of providing products and services to financial institutions in the first six months of 2017. Nevertheless, the Group projects
it will achieve the performance outlined below for the year by continuing to implement the three key medium-term strategic initiatives
described earlier.
Consolidated net sales are forecasted at 12.6 billion yen for FY 2017, up 4.3% from a year earlier, which would mark annual growth
for the seventh consecutive year. The projected increase in net sales is expected to result in a higher gross margin, which—combinedwith reduced operating costs predicted from more effective and efficient operations under the planned holding-company structure aswell as from standardizing and consolidating business processes and IT systems across the Group—will lead to an increase in profit for
FY 2017: Operating income is projected at 500 million yen, up 5.4% year on year; and ordinary income and net income attributable toowners of the parent company are projected at 480 million yen (up 23.1%) and 320 million yen (up 25.7%), respectively.

(2) Financial Position
Assets, Liabilities, and Net Assets(i) Assets―6―

Current assets amounted to 3,615 million yen as of December 31, 2016, down 7.3% from the end of the previous fiscal year,
reflecting a decrease of 282 million yen in cash and deposits, a decrease of 58 million yen in work in progress, an increase of 45
million yen in deferred tax assets, and an increase of 21 million yen in advance payments.
Fixed assets were down 5.8% to 1,640 million yen, reflecting a decrease of 85 million yen in goodwill.
As a result, total assets decreased 6.8% to 5,256 million yen for the year.
(ii) Liabilities
Current liabilities amounted to 2,541 million yen as of December 31, 2016, down 11.5% from the end of the previous fiscal
year, reflecting a decrease of 100 million yen in accounts payable and a decrease of 240 million yen in short-term loans payable.
Fixed liabilities were down 21.3% to 1,066 million yen, reflecting a decrease of 161 million yen in long-term loans payable anda decrease of 100 million yen in long-term deposits received.
As a result, total liabilities were down 14.7% to 3,608 million yen for the year.
(iii) Net assets
Total assets amounted to 1,647 million yen as of December 31, 2016, up 16.5% from the end of the previous fiscal year,
reflecting a net income of 254 million yen attributable to owners of the parent company posted for the year.
Cash FlowsThe balance of cash and cash equivalents (hereinafter "cash") amounted to 1,793 million yen as of December 31, 2016, a
decrease of 251 million yen from the end of the previous fiscal year.
Cash flows broken down by segment for the consolidated fiscal year ended December 31, 2016 were as follows:
・ Cash flows from operating activities
Net cash provided by operating activities amounted to 311 million yen for the year, compared with 168 million yen in net cash
provided in the previous fiscal year. This reflected a net income of 225 million yen before income taxes, a decrease of 100
million yen in accounts payable-trade, depreciation and amortization of 93 million yen, amortization of goodwill of 85 million
yen, an increase of 81 million yen in advances received, an investment loss of 65 million yen from application of equity methods,
and a decrease of 58 million yen in accrued consumption taxes.
・ Cash flows from investing activities
Net cash used for investing activities amounted to 123 million yen for the year, compared with 996 million yen in net cashused in the previous fiscal year. This reflected proceeds of 292 million yen from the withdrawal of time deposits, the payment of
261 million yen into time deposits, the payment of 86 million yen for acquisition of tangible fixed assets, and the payment of 49
million yen for guarantee deposits.
・ Cash flows from financing activities
Net cash used for financing activities amounted to 414 million yen for the year, compared with 988 million yen in net cash
provided in the previous fiscal year. This reflected the repayment of 213 million yen of short-term loans payable and therepayment of 181 million yen of long-term loans payable.
Supplementary information: Cash Flow Indicators over the Past 5 Fiscal Years
Year ended
Year ended
Year ended
December 31,
December 31,
December 31,
2012
2013
2014

Year ended
December 31,
2015

Year ended
December 31,
2016

Equity ratio (%)

47.9

51.7

43.9

24.4

30.8

Equity ratio based on market
capitalization (%)

87.2

194.5

120.3

79.7

154.3

Debt service coverage ratio (%)

0.1

0.1

0.0

8.1

3.2

Interest coverage ratio (Times)

742.2

188.6

1,652.8

100.6

50.0

Equity ratio: Total shareholders' equity / Total assets
Equity ratio based on market capitalization: Market capitalization / Total assets
Debt service coverage ratio: Interest-bearing liabilities / Operating cash flow
Interest coverage ratio: Operating cash flow / Interest expenses―7―Notes:1.
All ratios are calculated based on consolidated financial data.
2.
Market capitalization calculated based on the number of total shares outstanding at the end of FY 2016, excluding treasury
stock.
3.
Interest-bearing liabilities refer to all liabilities with interest payable recorded in the Liability section of the Consolidated
Balance Sheets.

(3) Basic Policy on Distribution of Profits; Payment of Dividends for FY 2016 and FY 2017
The Company makes it a policy to continue to issue dividends to shareholders in proportion to its business performance while
maintaining a level of retained earnings determined by the Group's operating results, financial positions, and business outlook.
For the fiscal year ended December 31, 2016, as announced on February 2, 2016, we have chosen, instead of paying dividends, toinvest in research and development to increase our efforts to achieve our medium-term business plan.
For the fiscal year ending December 31, 2017, we project payment of an annual dividend of ¥5.00 per share, based on the business
forecasts for the year, as described elsewhere in this document.

(4) Business Risks
Operational risks facing the Group that may significantly affect decision-making by investors are described below. Matters that areconsidered to not necessarily be risks as such, are included as part of our commitment to transparency as the information may be ofvalue to investors when making investment decisions and understanding the Group's businesses.
The Group, acknowledging that these risks might materialize, takes steps to prevent such risks from occurring and will deal withthem should they occur. Nevertheless, we believe that investors should make decisions to invest in the Company's stock after carefully
weighing the risks described below as well as other information presented in this document. Please note that the risks described below
by no means constitute all risks to be considered when making investment decisions regarding the Company's stock.
(i) Intellectual property rights in software
Some companies claim that publicly available free software applications and OSS applications infringe copyrights and patents
they own and have taken legal actions against such alleged infringements.
The Group will continue to pay close attention to such companies that have filed lawsuits. Should their claims of infringement
be upheld in court, the Group would be compelled to change course in its OSS-related businesses, which in turn could affect theGroup's business performance. The Group has, to date, never faced any liability claims or injunctions filed by other companies
for alleged infringements of intellectual property rights, including copyrights. There is, however, always a risk that othercompanies may own patents and other intellectual property rights the Group is not aware of in the business sectors in which we
operate, as it is almost impossible to track every intellectual property right that others may have. Moreover, there is a possibility
that a third party may establish a patent in the business sectors in which the Group operates and file a liability claim or injunction
against the Group for patent infringement. Should that happen, the Group's business performance might be affected.
(ii) Competition
The IT industry is highly competitive with thousands of small and big system integrators, computer vendors, and software
vendors10 vying for business in commercial and technology fields in which they excel, as well as in industry sectors in which they
have amassed experience and expertise.
The Group will continue to step up research and development efforts and enhance the effectiveness of sales and marketing so as
to maintain an edge in this market. However, if the Group's competitive advantage were to be seriously threatened by existing
competitors and disruptive new entrants, the Group's business performance might be affected.
10. Software vendor
A provider of software applications that does not have any special relationship with specific hardware vendors ordevelopers of operating systems.
(iii) New businesses
The Group operates in the global IT arena, in which new technologies and solutions constantly emerge. To sustain the growth―8―

of the Group's business in this industry, it is imperative to fulfill the ever-changing needs of the market by creating new
businesses, adding new subsidiaries and affiliates, and developing and delivering new products and services. However, if changes
in internal and external business environments should hamper us from pursuing such projects as scheduled, we might reconsider
our research-and-development and marketing plans. If we determine that any of these initiatives would not generate sufficient
return as expected, we might terminate implementation in midcourse.
We sometimes invest upfront when creating new businesses and developing new products and services. If we cannot raise
sufficient capital to invest in such projects, we might not be able to pursue them as planned, which might affect the Group's
financial position and business performance.
(iv) Currency fluctuations
Fluctuations in foreign exchange rates may affect the Group’s profit and loss as well as its financial position, as some of theGroup's products are procured and sold in U.S. dollars, and as the revenues, profits, and assets of our overseas subsidiaries posted
in local currencies are translated into yen in consolidated financial statements. Although the Company takes steps to effectively
alleviate risks associated with transactions denominated in foreign currencies, unforeseen fluctuations in exchange rates beyond
our control might affect the Group’s business performance.
(v) Talent pipeline
1) Talent acquisition, development, and retention
To remain on a solid growth path, the Group must continue to research and develop advanced technologies that will drive ouropen system infrastructure business and application business and to acquire, develop, and retain talent capable of meeting diverse
business needs. The Group has been filling gaps in its talent portfolio by hiring employees with potential for growth.
If talent acquisition, development, and retention should not proceed as planned, our talent pipeline is likely to lose its
robustness, which might affect the Group's business strategy and performance.
2) Dependence on a key person
Nobuo Kita, the Company's Representative Director and President, has been at the helm of driving the growth of the Group'sbusiness by setting long-term management policies and making strategic business decisions. The Group realizes it depends
heavily on his leadership and vision for the success of its business.
To manage the growing business more effectively, the Group has been shoring up the management team by delegating
decision-making authority to lower-level members in the team and bringing in additional members to the team. To acceleratebusiness expansion, the Group has been hiring experts and professionals with experience in the fields into which the Group has
been diversifying. The Executive Committee and the Management Committee, which comprise executive officers and others,
have been established to collectively address day-to-day operational issues without relying too heavily on Kita's leadership andcounsel. In addition, the Company has on its Board of Directors outside members who have years of experiences in the IT
industry, and seeks their professional advice.
The Group will continue to build a stronger management team by bringing in new members internally and externally so as tomake it less dependent solely on Kita's leadership. If, for whatever reason, Kita should become unable to assume his leadershiprole in the Group before the Group makes its management team more robust as planned, it might affect the Group's businessstrategy and performance.
(vi) Subsidiaries and affiliates
The Group has been investing in and acquiring other companies to remain at the forefront of the changes taking place in the IT
industry. The Group will continue to leverage the technical prowess as well as the sales and management expertise provided bysubsidiaries and affiliates so as to develop and market new products and services as well as to maintain growth momentum.
However, poor performance of subsidiaries and affiliates could undermine the Group's business performance. If any of thesubsidiaries and affiliates should fail to deliver on its business plan in the face of unforeseen changes in the market andcompetitive landscape, the Group might be forced to write off remaining goodwill on the underperforming entity, which might
affect the Group's business performance.

―9―

(vii) Acquisitions and strategic partnerships
The Group may continue to acquire all or a portion of other companies as part of its efforts to expand the Group's business. We
routinely conduct a thorough due diligence assessment of the business details, contractual obligations, and financial soundness ofa potential target for acquisition or partnership to identify and avoid risks. This, however, does not preclude the possibility that,after investing in or acquiring the company, the company might be found to have contingent or unidentified liabilities or might
not deliver performance as expected or planned, which might affect the Group's financial position and business performance.
(viii) Stock options
As per resolutions adopted by the Board of Directors on May 13, 2014 and on May 20, 2015, the Company offers a stock
option program that grants stock acquisition rights to officers and employees as an incentive for them to work for and manage thesuccess of the Company.
If officers and employees who are granted incentive stock options exercise them, the Company's stock value per share will be
diluted. Depending on the Company's stock price at the time stock options are exercised, a short-term balance of the stock's
supply and demand might be disrupted, which might affect the stock price.
The Group may continue to offer an incentive stock option program to attract, motivate, and retail talented officers andemployees; however, a continued offer of stock options might dilute the Company's per-share stock value.
(ix) Relationship with Otsuka Corporation
Otsuka Corporation (hereinafter "Otsuka"), which held 18.50% of the voting rights of the Company as of December 31, 2016,is the largest shareholder in the Company and its affiliate company. Although the Company maintains a close commercial
relationship with Otsuka, the Company makes business decisions independently and manages its business for the best interests of
the Group, free from interference from Otsuka in terms of financing and operational decisions. The Company intends to increasebusiness with Otsuka, but if the relationship with Otsuka should deteriorate or if Otsuka's management should decide toreconsider its support for the Company, this might affect the Group's business performance.
(x) Significant business contract
The Company has the following significant business contract. If this contract is not renewed regularly, it might materiallyaffect the Group's business performance.
・ Contract signed between SIOS Technology, Inc. and Red Hat K.K. (a Japanese subsidiary of Red Hat, Inc.)・ Contract period: One year from July 1, 2010, automatically extended thereafter for another year successively after
expiration of the one-year period・ Description: A contract that allows SIOS Technology, Inc. to act as a distributor for products sourced from Red Hat K.K.

―10―

2. The SIOS Group
SIOS Technology, Inc.

Customers

Sales and provision
Life Keeper

Open System Infrastructure Business

Products sourced from Red
Hat, Inc.
Purchase

Consolidated subsidiary

Sales andprovision

SIOS Technology Corp.
SIOS OSS Consulting
Service

Information systems
consulting service and otherservices

Sales andprovision

Purchase andcontract

Distribution partners:
Otsuka Corporation,
Networld Corporation,and others

Consolidated subsidiary

Sales andprovision

Sales andprovision

Gluegent, Inc.
Japan
Americas
Consolidated subsidiary

Asia/Oceania
EuropeGlabio, Inc.

Other regions

Contract development
Equity method affiliate

Software applications for
MFPs

Sales andprovision

BayPOS, Inc.

Application Business

Development and provisionof products and services forfinancial institutions

Consolidated subsidiary

Sales andprovision

Keyport Solutions, Inc.

Information systems
consulting service and otherservices
Consolidated subsidiary

Sales andprovision

Profit Cube Inc.

Sales andprovision

Distribution partners:
Otsuka Corporation and others

Sales andprovision―11―

Sales andprovision

3. Management Policy(1) Basic Management Policy
The Group has been implementing the following three medium-term strategic initiatives to achieve sustained business growth:(i) Expanding into new business segments including Fintech(ii) Continuing to invest in research and development(iii) Becoming more competitive in core businesses(2) Key Management Metrics
The Group strives to achieve sustained business growth in an ever-changing business environment and retain the trust of society. We
use net sales and EBITDA as the key management metrics to measure the achievement of our goals of keeping our business growing
and making our business foundation stronger.

(3) Medium- to Long-Term Management Strategy
As called for by the Group's basic management policy, the Group will continue to invest to achieve medium- and long-term growth.
Specifically, we will step up research and development efforts in such emerging fields as machine-learning technology, artificial
intelligence, and Fintech; continue to invest in improving our core products such as OSS-related products, LifeKeeper, software
applications for MFPs, and software products developed by PCI; and invest in enhancing the effectiveness of marketing and sales
activities.
By implementing these initiatives, the Group aims to achieve net sales of 12.6 billion yen and an EBITDA of 670 million yen for the
fiscal year ending December 31, 2017; net sales of 14 billion yen and an EBITDA of 770 million yen for the fiscal year ending
December 31, 2018; and net sales of 16 billion yen and an EBITDA of 1 billion yen for the fiscal year ending December 31, 2019.

(4) Management Priorities
The Group will focus on the following four management priorities:(i) Achieving greater effectiveness of group management(ii) Enforcing more vigorous compliance policies and practices(ii) Hiring and retaining talented employees(iv) Expanding the Group's presence in the global market(i) Achieving greater effectiveness of group management
The Group will reorganize into a holding-company structure to enable each Group company to make business decisions more
timely in fast-changing markets as well as to enable Group companies to share their specialized knowledge and expertise to
maximize synergy among them. In addition, we will standardize and consolidate business processes and IT systems across theGroup to reduce operating costs and maximize the Group's value.
(ii) Enforcing more vigorous compliance policies and practices
Under a holding-company structure, we will enforce more vigorous compliance policies and practices across the Group to
improve the accountability and transparency of its business operations.
(iii) Hiring and retaining talented employees
The Group operates not just in Japan but also in Asia/Oceania, Europe, and the Americas. To grow our business in each region,
it is imperative for each Group company to have talented employees. The Group will continue to hire and retain diverse talentregardless of their nationalities.
(iv) Expanding the Group's presence in the global market
The Group will expand its sales networks in Asia/Oceania, Europe, and the Americas and become more competitive in the
global market by stepping up U.S.-based research and development efforts.

―12―

4. Basic Policy on the Selection of Accounting Standards
The Group will, for the time being, continue to prepare its consolidated financial statements under the Japanese GAAP inconsideration of comparability of period-to-period operating performance as well as comparability with other Japanese companies.
We will consider adopting IFRS in the preparation of consolidated financial statements if developments in Japan and abroad
warrant it.

―13―

5. Consolidated Financial Statements(1) Consolidated Balance Sheets(In thousands of yen)
As of December 31, 2015

As of December 31, 2016

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade*3 2,206,352*3 1,923,658

1,346,277

1,346,923

Work in progress
Deferred tax assets*1 114,680-

56,00845,866

Advance payment
Other106,473
127,536

128,189
114,951

Allowance for doubtful accounts
Total current assets

(200)

(200)

3,901,120

3,615,398

168,445

178,424(75,604)(69,305)

92,841109,119

Fixed assets
Tangible fixed assets
Buildings
Accumulated depreciation
Buildings (net)
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures (net)
Lease assets
Accumulated depreciation

374,528

279,267(308,406)(203,044)

66,121

76,222

6,089

9,899

(247)

(1,719)Lease assets (net)

5,842

8,180

Total tangible fixed assets

164,805

193,521

Goodwill
Software in progress

838,787
11,425753,414
5,633

Other

237,046

212,298

1,087,259

971,347*2 244,983*2 171,942

26,249216,140

27,674
229,513

Deferred tax assets
Other

7,193

17,421
39,316

Allowance for doubtful accounts(5,071)(9,966)

Intangible fixed assets

Total intangible fixed assets
Investment and other assets
Investment securities
Net defined benefit assets
Guarantee deposits

Total investment and other assets
Total fixed assets
Total assets―14―

489,494475,901

1,741,559

1,640,770

5,642,680

5,256,168

(In thousands of yen)
As of December 31, 2015

As of December 31, 2016

Liabilities
Current liabilities
Accounts payable-trade
Short-term loans payable543,741

Current portion of long-term loans payable
Lease obligations
Income taxes payable
Advance received
Reserve for bonuses
Provision for loss on contracts*3 240,000

443,227*3 -

155,442
1,244

162,283
2,110

28,4501,339,886

65,0181,409,377

26,67824,556-*1 2,515

Other

534,409435,080

Total current liabilities

2,872,367

2,541,654

Fixed liabilities
Long-term loans payable

974,765

812,988

68,814

52,625

Deferred tax liabilities
Provision for surcharge resulting fromrepayment of subsidies
Net defined benefit liabilities

32,267-

158,985

178,589

Lease obligations
Long-term deposits received

5,132
109,955

6,862
9,767

Other

6,359

6,086

1,356,280

1,066,920

4,228,648

3,608,575

Capital stock
Capital surplus

1,481,520
474,415

1,481,520
466,657

Retained earnings
Treasury stock(321,538)(116,194)(67,044)(110,178)

Total shareholders’ equity

1,518,201

1,770,954

1,420

14,008(143,423)(165,485)(142,002)(151,477)

22,281

28,116

Total fixed liabilities
Total liabilities
Net assets
Shareholders’ equity

Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Foreign currency translation adjustment
Total accumulated other comprehensive
incomeStock acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets―15―

15,551-

1,414,031

1,647,593

5,642,680

5,256,168

(2) Consolidated Statements of Income and Comprehensive Income
Consolidated Statements of Income(In thousands of yen)
Fiscal year ended December 31, 2015 Fiscal year ended December 31, 2016
Net sales
Cost of sales

9,362,562
6,011,232

12,080,054
7,712,419

Gross margin

3,351,330

4,367,635

Selling, general and administrative expenses

3,463,132

3,893,021

Operating income (loss)(111,802)

474,613

Non-operating income
Interest income

1,833

1,338

Dividends income
Foreign exchange gain120
21,838729-

Compensation received
Fiduciary obligation fee

10,000-2,490

Settlement received
Other

3,624

5,684
4,054

Total non-operating income

37,416

14,297

1,680

6,238

Foreign exchange loss
Loss on investment of investment partnerships

3,864

8,417
8,151

Equity in losses of affiliates
Provision for surcharge resulting fromrepayment of subsidies
Other

46,461

65,176

10,255

5,668

824

5,399

Total non-operating expenses

63,087

99,052(137,473)

389,858

Non-operating expenses
Interest expenses

Ordinary income (loss)
Extraordinary income
Gain on sale of investment securities

8,169

627

Gain on negative goodwill
Gain on reversal of stock acquisition rights

14,372
1,330

1,289

Gain on change in equity
Gain on sale of fixed assets

3,000
10

-

Total extraordinary income

26,882

1,916

Extraordinary loss
Loss on retirement of fixed assets

678

6,598

2,358

260
1,550

12,968-Loss on sale of fixed assets
Loss on valuation of golf club membership
Loss on withdrawal from employees’ pension
fund
Settlement paid
Loss on valuation of investment securities
Expense related to retrospective adjustment
Other
Total extraordinary loss

29,108--13,886139,212-

4,703

45,113

166,211(155,704)

225,563

Income taxes-current
Income taxes-deferred

27,663-56,030(85,879)

Total income taxes

27,663(29,849)

Net income (loss)(183,367)

255,413

2,996

918

(186,364)

254,494

Net income (loss) before income taxes

Net income attributable to non-controlling interests
Net income (loss) attributable to owners of the―16―(In thousands of yen)
Fiscal year ended December 31, 2015 Fiscal year ended December 31, 2016
parent company―17―

Consolidated Statements of Comprehensive Income(In thousands of yen)
Fiscal year ended December 31,
2015

Fiscal year ended December 31,
2016

Net income (loss)
Other comprehensive income (loss)
Valuation difference on available-for-salesecurities
Foreign currency translation adjustment(183,367)

255,413

1,051

12,587975(22,062)

Total other comprehensive income (loss)

2,027(9,474)(181,340)

245,938(184,310)
2,969

245,019
918

Comprehensive income (loss)
Comprehensive income (loss) attributable to:
Owners of the parent company
Non-controlling interests―18―(3) Consolidated Statements of Changes in Equity
Fiscal year ended December 31, 2015
(In thousands of yen)
Shareholders’ equity

Balance as of January 1,
2015
Amount of changes
during the period
Dividends from surplus
Net income (loss)
attributable to ownersof the parent company
Disposal of treasurystock
Net amount of changes
in items not included inshareholders' equity
Total amount of changes
during the period
Balance as of December
31, 2015

Capital stock

Capital surplus

1,481,520

476,233

Retainedearnings(92,210)

Treasury stock

Total
shareholders’equity(119,329)

1,746,213(42,963)(42,963)(186,364)(186,364)(1,818)

3,135

1,316
-

-

(1,818)(229,328)

3,135(228,011)

1,481,520

474,415(321,538)(116,194)1,518,201

Accumulated other comprehensive income
Total
Valuation
Foreign currency accumulated Stock acquisition Non-controlling
difference onrightsinterests
translation
otheravailable-foradjustment
comprehensive
sale securities
incomeBalance as of January 1,
2015
Amount of changes
during the period
Dividends from surplus
Net income (loss)
attributable to ownersof the parent company
Disposal of treasurystock
Net amount of changes
in items not included inshareholders' equity
Total amount of changes
during the period
Balance as of December
31, 2015

368(144,398)(144,029)

12,992-

Total equity

1,615,176-(42,963)-(186,364)

-

1,316

1,051

975

2,027

9,288

15,551

26,866

1,051

975

2,027

9,288

15,551(201,145)

1,420(143,423)(142,002)

22,281

15,551

1,414,031―19―

Fiscal year ended December 31, 2016
(In thousands of yen)
Shareholders’ equity
CapitalsurplusCapital stock
Balance as of January 1,
2016
Amount of changes
during the period
Net income attributableto owners of the parent
company
Disposal of treasury
stock
Change in equity bypurchase of shares of
consolidated
subsidiaries
Net amount of changes
in items not included inshareholders' equity
Total amount of changes
during the period
Balance as of December
31, 2016

1,481,520

474,415

Retainedearnings

Treasury
stock

Total
shareholders’ equity(321,538)(116,194)1,518,201

254,494
1,664

254,494
6,016(9,422)

7,681(9,422)-(7,757)

254,494

6,016

252,753

1,481,520

466,657(67,044)(110,178)

1,770,954

Accumulated other comprehensive income
Total
Valuation
Foreign currency accumulated Stock acquisition Non-controlling
difference onrightsinterests
translation
otheravailable-foradjustment
comprehensive
sale securities
incomeBalance as of January 1,
2016
Amount of changes
during the period
Net income attributableto owners of the parent
company
Disposal of treasury
stock
Change in equity bypurchase of shares of
consolidated
subsidiaries
Net amount of changes
in items not included inshareholders' equity
Total amount of changes
during the period
Balance as of December
31, 2016

1,420(143,423)(142,002)

22,281

15,551

Total equity

1,414,031-

254,494-

7,681(9,422)

12,587(22,062)(9,474)

5,835(15,551)(19,190)

12,587(22,062)(9,474)

5,835(15,551)

233,562

14,008(165,485)(151,477)

28,116-

1,647,593―20―

(4) Consolidated Statements of Cash Flows(In thousands of yen)
Fiscal year ended December 31,
2015

Fiscal year ended December 31,
2016(155,704)
59,687

225,563

10,255(32,267)

Cash flows from operating activities
Net income (loss) before income taxes
Depreciation and amortization
Provision for surcharge resulting fromrepayment of subsidies
Amortization of goodwill
Interest and dividends income
Interest expenses
Loss (gain) on investment of investment
partnership
Investment loss (gain) on the equity method
Decrease (increase) in notes and accounts
receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts
payable-trade
Increase (decrease) in net defined benefit
liabilities
Increase (decrease) in advance received
Decrease (increase) in advance payment
Increase (decrease) in consumption taxes
payableOther
Sub-totalInterest and dividends income
Interest expenses paid
Compensation received
Settlement paid

6,192

85,372(1,953)
1,680(2,068)
6,238

3,864

8,151

46,461

65,176(40,372)(6,217)(4,954)58,671

99,561(100,488)

20,522

19,60477,30854,583(21,734)

79,729(58,421)88,012(117,788)

344,875

304,833

81,396

1,955

2,068

(1,680)7,000(6,238)-(29,108)-

Income taxes refund
Income taxes paid

93,64339,797(154,090)(28,699)

168,952

311,761

100,000(261,400)
292,400(14,773)(86,705)(29,784)(3,200)2,916-(14,485)(49,592)
45,405(3,958)(27,276)(924,270)-

Proceeds from sales of investment securities
Other(27,552)(670,255)
573,940394(2,205)(7,955)
6,634
386

Cash flows from investing activities(996,543)(123,594)

Cash flows from operating activities
Cash flows from investing activities
Payment into time deposits
Proceeds from withdrawal of time deposits
Purchase of tangible fixed assets
Purchase of intangible fixed assets
Payment of guarantee deposits
Proceeds from collection of guarantee deposits
Payment of asset retirement obligations
Purchase of golf club membership
Purchase of investments in subsidiaries resulting
in change in the scope of consolidation
Purchase of shares of subsidiaries and affiliates
Purchase of investment securities―21―(18,800)

(In thousands of yen)
Fiscal year ended December 31,
2015

Fiscal year ended December 31,
2016(42,846)(54)-(213,040)

1,060,000-

Repayment of long-term loans payable
Purchase of shares of subsidiaries not resulting
in changes in the scope of consolidation
Other(33,888)(181,896)-(25,888)

5,179

6,396

Cash flows from financing activities
Effect of exchange-rate changes on cash and cash
equivalents
Increase (decrease) in cash and cash equivalents

988,444(414,482)

1,678(25,378)

162,531(251,693)

Cash and cash equivalents at beginning of period
Increase in cash and cash equivalents resulting frommerger of subsidiaries
Cash and cash equivalents at end of period

1,882,108

2,045,352

712-

2,045,352

1,793,658

Cash flows from financing activities
Cash dividends paid
Net increase (decrease) in short-term loans
payableProceeds from long-term loans payable―22―(5) Notes on Consolidated Financial Statements
Going Concern Assumption
Not applicable

Basis for the Preparation of Consolidated Financial Statements
1. Scope of Consolidation(1) Number of consolidated subsidiaries: 7
SIOS Technology Corp.
Gluegent, Inc.
SIOS (Beijing) Technology Inc.
My Office Co., Ltd.
Glabio, Inc.
Keyport Solutions, Inc.
Profit Cube Inc.
・ Kanshin! Inc. changed its company name to My Office Co., Ltd. effective November 1, 2016.
・ Agrion Creative Office Co., Ltd., a former consolidated subsidiary, was acquired by Keyport Solutions, Inc. and was excluded
from the scope of consolidation.
(2) Names of unconsolidated subsidiaries
Not applicable
2. Application of the Equity Method(1) Unconsolidated subsidiaries accounted for under the equity method
Not applicable(2) Number of affiliates accounted for under the equity method: 2
BayPOS, Inc.
K-ZONE Corp.
(3) Unconsolidated subsidiaries and affiliates not accounted for under the equity method:
Codyl Technologies Corporation
Reason for not being accounted for under the equity method:
This company was not accounted for under the equity method due to its insignificance in light of its net income or loss (tothe extent of the Company's equity position) and its retained earnings (to the extent of the Company's equity position).
3. Balance Sheet Dates of Consolidated Subsidiaries
Balance sheet dates of all consolidated subsidiaries are the same as the consolidated balance sheet date.
4. Accounting Policies(1) Valuation standards and methods for significant assets:(i) Securities
a. Stocks of subsidiaries and affiliates
Stocks of subsidiaries and affiliates are stated at cost determined by the moving average method.
b. Other securities
Securities with no fair market value:
Other securities with no fair market value are stated at cost determined by the moving average method.
Investments in limited-liability investment partnerships and other partnerships of a similar nature, which are consideredmarketable securities under Article 2, Clause 2 of the Financial Instruments and Exchange Act of Japan, are stated at net
value proportional to the Company's ownership interests and on the basis of the latest financial statements for therespective partnership available on the reporting date stipulated in the respective partnership agreement.

―23―

(ii) Inventories
Inventories held for sale in the ordinary course of business:
Inventories held for sale are valued using the cost method (method of reducing book value when the contribution of
inventories to profitability declines).
a. Finished products
Finished products are valued principally at cost determined by the moving average method. Some consolidated
subsidiaries value finished products at cost determined by the identified cost method.
b. Work in progress
Work in progress is valued at cost determined by the identified cost method.
(2) Depreciation methods for significant depreciable assets(i) Tangible fixed assets (lease assets not included)
The Company and its consolidated subsidiaries in Japan use the declining-balance method to compute depreciation of
tangible fixed assets; however, the straight-line method is applied to buildings and accompanying facilities and to structuresacquired on and after April 1, 2016. The Company's overseas consolidated subsidiaries use the straight-line method under thedomestic accounting standards applied in their respective countries of domicile.
The range of estimated useful lives for principal assets is as follows:
Buildings:

3 to 18 years

Tools, furniture, and fixtures:

3 to 15 years

Tangible fixed assets acquired on and before March 31, 2007 are depreciated uniformly over a five-year period from theyear following the end of their depreciation to the depreciable limit.
(ii) Intangible fixed assets (lease assets not included)
a. Software for sale
Amortization of software for sale is stated at an amortizable amount based on the estimated sales volume during thevalid sales period (less than three years) or an amortizable amount based on a straight-line method over the remaining
valid sales period, whichever is greater.
b. Software for internal use
Software for internal use is amortized using the straight-line method over an estimated useful life of less than five years.
(iii) Lease assets
Lease assets relating to finance lease transactions without the transfer of ownership:
Lease assets relating to finance lease transactions without the transfer of ownership are depreciated using the straight-line
method, with the lease period being the useful life and the residual value being zero.
(iv) Long-term prepaid expenses
Long-term prepaid expenses are amortized using the straight-line method.
(3) Accounting standards for significant allowances(i) Allowance for doubtful accounts
To provide against potential losses from uncollectable notes and accounts receivables, a provision is made on general
receivables based on historical write-off rates, and specific cases of concern are evaluated individually to determine theamount of uncollectable receivables.
(ii) Reserve for bonuses
To facilitate bonus payments to employees, an amount corresponding to the current portion of estimated bonus payments
was recorded.
(iii) Provision for loss on contracts
To provide against possible losses on contracts, estimated losses were recorded for uncompleted contracts that, as ofDecember 31, 2016, were considered highly likely to incur losses in the future whose amount can be reasonably estimated.
(iv) Provision for surcharge resulting from repayment of subsidies―24―

To provide for payment of a surcharge resulting from repayment of subsidies, the amount of surcharge estimated at the endof the fiscal year ended December 31, 2016 was recorded.
(4) Accounting methods for retirement benefits
The Company and some of its consolidated subsidiaries use a simplified method of using the amount payable toemployees on voluntary resignation at year-end to calculate retirement benefit obligations and retirement expenses.
Some consolidated subsidiaries in Japan use a simplified method of using actuarial obligation calculated based on thelatest pension plan finance under a corporate pension plan to record retirement benefit obligations.
(5) Accounting standards for recognizing significant revenues and cost(i) Standards for recognizing sales and cost of sales relating to the development of made-to-order software
a. Contracts whose outcome was deemed certain based on the degree of completion of software development at the end of
the fiscal year ended December 31, 2016:
The percentage-of-completion method was applied (the percentage of completion was estimated based on the percentage
of cost of development incurred by that date compared with the estimated total cost of development).
b. Other contracts:
The completed-contract method was applied.
(6) Primary hedge accounting methods(i) Hedge accounting methods
When financial instruments are used to hedge foreign exchange risks of liabilities denominated in foreign currencies,
appropriation accounting is applied in cases where requirements for appropriation are met. Deferral hedge accounting wasapplied to foreign exchange forward contracts that hedged foreign exchange risks of transactions to be completed by
December 31, 2016.
(ii) Hedging instrument and hedged item
Hedge accounting was applied to the following hedging instrument and hedged item in the consolidated fiscal year ended
December 31, 2016:
・ Hedging instrument: foreign exchange forward contracts
・ Hedged item: Foreign currency denominated payables for imported finished products and raw materials(iii) Hedging policy
The Company uses hedge accounting to mitigate future risks arising from fluctuations in foreign exchange rates related
to foreign currency denominated liabilities and to improve the Company's financial balance.
(iv) Assessing the effectiveness of hedging
The effectiveness of hedging is evaluated by comparing the change in aggregated amount of fair value or cash flows of
the hedging instrument with the change in aggregated amount of fair value or cash flows of the hedged item.
(7) Amortization method and period for goodwill
Goodwill is amortized equally for an estimated period when its effect is generated.
(8) Cash and cash equivalents in the consolidated statements of cash flows
Cash and cash equivalents consist of cash on hand, demand deposits, and short-term investments that mature within threemonths of the acquisition date and that can be easily converted into cash with insignificant risk of volatility.
(9) Other significant matters for the preparation of the consolidated financial statements
Consumption taxes are accounted for using the tax-exclusion method.

Changes in Accounting Policies
Application of Accounting Policies for Business Combinations―25―

Effective at the beginning of the consolidated fiscal year ended December 31, 2016, the Company adopted the “Revised
Accounting Standard for Business Combinations” (ASBJ Statement No. 21, issued on September 13, 2013), the “Revised
Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22, issued on September 13, 2013), and the“Revised Accounting Standard for Business Divestitures” (ASBJ Statement No. 7, issued on September 13, 2013). Under theserevised accounting standards, the Company recognizes as capital surplus any difference arising from changes in the Company's
ownership interests in its subsidiaries over which the Company retains control, and recognizes the acquisition-related costs as
expenses in the fiscal year in which they are incurred. In addition, regarding a business combination conducted at or after the
beginning of the consolidated fiscal year ended December 31, 2016, the Company, when it finalizes its provisional accounting
treatments, revises acquisition cost allocation in the annual consolidated financial statements to which the date of the businesscombination belongs. Furthermore, the Company changed the way its net income is presented, and records minority interests as
non-controlling interests. To reflect these changes in presentation, the consolidated financial statements for the previous
consolidated fiscal year ended December 31, 2015 were reclassified.
In the consolidated statements of cash flows for the consolidated fiscal year ended December 31, 2016, cash flows related tothe acquisition or sale of shares of subsidiaries not resulting in changes in the scope of consolidation are recognized under “cashflows from financing activities,” and cash flows related to the cost associated with the acquisition of shares of subsidiaries
resulting in changes in the scope of consolidation or to the cost associated with the acquisition or sale of shares of subsidiaries not
resulting in changes in the scope of consolidation are recognized under “cash flows from operating activities.”
With respect to the application of the Accounting Standard for Business Combinations and other accounting standards, theCompany has been following the transitional arrangement set forth in Article 58-2 (4) of the Accounting Standard for Business
Combinations, Article 44-5 (4) of the Accounting Standard for Consolidated Financial Statements, and Article 57-4 (4) of the
Accounting Standard for Business Divestitures since the beginning of the consolidated fiscal year ended December 31, 2016.
As a result, capital surplus decreased by 9,422 thousand yen at the end of the consolidated fiscal year ended December 31,
2016, compared with a year earlier. These changes have no significant effect on per-share information for the fiscal year ended
December 31, 2016.
Application of the Practical Solution on a Change in Depreciation Methods due to Tax Reform 2016
In accordance with the revision of the Corporation Tax Act of Japan, the Company adopted the “Practical Solution on a Change
in Depreciation Method due to Tax Reform 2016” (ASBJ Practical Issues Task Force (PITF) No. 32, issued on June 17, 2016) inthe consolidated fiscal year ended December 31, 2016, and changed the depreciation method for buildings and accompanying
facilities and for structures acquired on and after April 1, 2016, from the declining-balance method to the straight-line method.
This change has no significant effect on the consolidated financial statements for the fiscal year ended December 31, 2016.

Notes on Consolidated Balance Sheets*1. Work in progress and provision for loss on contracts related to contracts likely to incur losses are presented as assets and liabilities,
respectively, and are not offset each other.
Work in progress corresponding to provision for loss on contracts(In thousands of yen)

As of December 31, 2015
Work in progress

6,278*2. The total amount of stocks in unconsolidated subsidiaries and affiliates is as follows.
As of December 31, 2015
Investment securities (stocks)

73,529As of December 31, 2016―
(In thousands of yen)
As of December 31, 2016
2,205

*3. Pledged assets and secured liabilities
Assets pledged as collateral are as follows.

(In thousands of yen)
As of December 31, 2015

Time deposit

160,000―26―

As of December 31, 2016
130,000

Total160,000

Liabilities corresponding to the above pledged assets are as follows.

130,000(In thousands of yen)

As of December 31, 2015

As of December 31, 2016

Short-term loans payable

40,00030,000Total

40,00030,000―27―

Notes on Consolidated Statements of Income*1. The amount of provision for loss on contracts included in the cost of sales is as follows.
Fiscal year ended December 31, 2015

(In thousands of yen)

Fiscal year ended December 31, 2016

(6,863)-*2. Selling, general and administrative expenses include the following major items and amounts.

(In thousands of yen)

Fiscal year ended December 31, 2015

Fiscal year ended December 31, 2016

Salaries and allowances

1,100,302

1,358,418

Sales support expenses

125,753

132,878

Amortization of goodwill

6,192

85,372

Rent

106,411

194,195

Bonuses

191,297

199,856

Reserve for bonuses

9,090

13,710Retirement benefits

22,44735,894*3. The total amount of research and development expenses included in selling, general and administrative expenses is as follows.
(In thousands of yen)
Fiscal year ended December 31, 2015

Fiscal year ended December 31, 2016

648,160

553,518*4. Details of loss on sales of fixed assets are as follows.

(In thousands of yen)

Fiscal year ended December 31, 2015

Fiscal year ended December 31, 2016―

Buildings

260*5. Details of loss on retirement of fixed assets are as follows.

(In thousands of yen)

Fiscal year ended December 31, 2015

Fiscal year ended December 31, 2016

Buildings

678

4,290

Tools, furniture and fixtures

―

2,294

Software―13

Notes on Consolidated Statements of Comprehensive Income
The amount of reclassification adjustment and tax effect relating to other comprehensive income
Fiscal year ended December 31, 2015
Valuation difference on available-forsale securities:
Incurred during the period
Reclassification adjustment
Amount before tax effectadjustment
Amount of tax effect
Valuation difference on
available-for-sale securities
Foreign currency translation
adjustment―28―(In thousands of yen)

Fiscal year ended December 31, 2016

1,675

19,055―(65)―

18,990(623)(6,402)

1,051

12,587

Incurred during the period
Total other comprehensive income(loss)―29―975(22,062)2,027(9,474)

Notes on Consolidated Statements of Changes in Equity
Fiscal year ended December 31, 2015
1. Type and total number of outstanding shares and type and number of shares of treasury stock
Number of shares as of
Increased number of
Decreased number of
Number of shares as ofJanuary 1, 2015
shares during the period shared during the period
December 31, 2015
Outstanding shares
Common stock

8,874,400--

8,874,400

Total

8,874,400--

8,874,400

Common stock

281,641-

7,400

274,241

Total

281,641-

7,400

274,241

Treasury stock

Note: The decrease of 7,400 shares of common stock for treasury stock was the result of exercising stock options.
2. Stock acquisition rights and treasury stock acquisition rights
Number of shares subject to unexercised stock Balance as ofType of sharesacquisition rights
subject toDecember 31,
Details of stock acquisition
Classification
unexercised2015 (In
Increase
Decrease
As ofrights
As of January
stock acquisition
during theduring the December 31, thousands of
1, 2015
rightsyen)
periodperiod2015
Share acquisition rights
The Company
3,559
as stock options
Consolidated
18,721
subsidiaries
Total

-

-

-

-

-

22,281

3. Dividends(1) Dividend payments
Resolution

Type of shares

Total amount ofdividends

Ordinary general
meeting ofshareholders held on
March 25, 2015

Common stock

42,963 thousand yen

Dividend per
share
5.00 yen

Record date

Effective date

December 31, 2014

March 26, 2015

(2) Dividends for which the record date fell in the fiscal year ended December 31, 2015 with an effective date falling in thefollowing fiscal year
Not applicable
Fiscal year ended December 31, 2016
1. Type and total number of outstanding shares and type and number of shares of treasury stock
Number of shares as of
Increased number of
Decreased number of
Number of shares as ofJanuary 1, 2016
shares during the period shared during the period
December 31, 2016
Outstanding shares
Common stock

8,874,400--

8,874,400

Total

8,874,400--

8,874,400

Common stock

274,241-

14,200260,041

Total

274,241-

14,200260,041

Treasury stock

Note: The decrease of 14,200 shares of common stock for treasury stock was the result of exercising stock options.

―30―

2. Stock acquisition rights and treasury stock acquisition rights
Type of shares
Number of shares subject to unexercised stock
Balance as ofsubject toacquisition rights
December 31,
Details of stock acquisition unexercisedClassification
2016 (In
Increase
Decrease
As ofrightsstock
As of January
during theduring the December 31, thousands ofacquisition
1, 2016yen)
periodperiod2016
rightsShare acquisition rights
The Company
2,199
as stock options
Consolidated
25,916
subsidiaries
-

Total

-

-

-

28,116

3. Dividends(1) Dividend payments
Not applicable(2) Dividends for which the record date fell in the fiscal year ended December 31, 2016 with an effective date falling in thefollowing fiscal year
Not applicable

Notes on Consolidated Statements of Cash Flows
1. Reconciliation of cash and cash equivalents at the end of the fiscal year with the balance sheet accounts(In thousands of yen)

Cash and cash deposits
Time deposits with a term of three months
or moreCash and cash equivalents at end of period

Fiscal year ended December 31,
2015

Fiscal year ended December 31,
2016

2,206,352

1,923,658(161,000)(130,000)

2,045,352

1,793,658

2. Breakdown of principal assets and liabilities of newly consolidated subsidiaries acquired through purchases of sharesFiscal year ended December 31, 2015
Assets and liabilities of Keyport Solutions, Inc. and Agrion Creative Office Co., Ltd. at time of initial consolidation resulting
from the acquisition of their shares by the Company as well as the relationship between the acquisition price of shares and the net
payment for such acquisition are as follows:(In thousands of yen)
Current assets
Fixed assets
Goodwill
Current liabilities
Non-controlling interests
Gain on negative goodwill
Acquisition price of shares
Cash and cash equivalents
Balance: purchase of investments in
subsidiaries resulting in change in scope of
consolidation

527,396
59,3444,200(134,113)(43,119)(11,386)
402,322(294,907)
107,414

Assets and liabilities of Profit Cube Inc. at time of initial consolidation resulting from the acquisition of its shares by theCompany as well as the relationship between the acquisition price of shares and the net payment for such acquisition are as
follows:(In thousands of yen)
Current assets
Fixed assets
Goodwill
Current liabilities
Fixed liabilities
Acquisition price of shares

651,735
327,946
833,808(579,264)(170,574)
1,063,651―31―

Cash and cash equivalents
Balance: purchase of investments in
subsidiaries resulting in change in scope of
consolidation(246,794)
816,856

Fiscal year ended December 31, 2016
Not applicable

Notes on Business Combination
Not applicable

Segment Information
Segment Information
1. Outline of reportable segments
The Group's reportable segments are components of the Group for which separate financial information is available and thatare subject to periodic reviews by the Company's Board of Directors to determine the allocations of resources and evaluatebusiness performance.
The Company establishes business units and subsidiaries, each of which serves specific markets and customers as well as
specializes in specific technology fields, to provide products and services in the open system infrastructure field, which
includes operating systems and middleware, and the application field, which includes business applications.
Therefore, the Group uses two reportable segments: the open system infrastructure business, and the application business.
The description of each segment is as follows:
・Open system infrastructure businessIn this business, the Group markets LifeKeeper, failover software that automatically switches a failed primary system to a
backup system, and OSS-related products, including products sourced from Red Hat, Inc. and provides OSS support
services as well as consulting services for a wide range of information systems.
・Application businessIn this business, the Group provides software applications for MFPs, products and services for financial institutions, theGluegent series, which is a SaaS product that works with Google Apps, and consulting services for a wide range of
information systems, and develops enterprise information systems on a contract basis.
Note: The segment formerly presented as the "Web application business" was reclassified as the "application business"
effective January 1, 2016. As this was a change in the segment name, it has no effect on the segment information.
2. Basis for calculating net sales, profit or loss, assets, liabilities, and other items by reportable segment
Accounting methods used for the reported business segments are the same as those described in "Basis for the Preparation of
the Consolidated Financial Statements."
Income of reportable segments is based on operating income. Intersegment sales and transfers are calculated based on market
prices.
Please note that the Company does not report assets or liabilities by segment.

―32―

3. Information on net sales, profit or loss, assets, liabilities, and other items by reportable segment
Fiscal year ended December 31, 2015
(In thousands of yen)
Reportable segment
Open systeminfrastructurebusinessAmount on
consolidated
financialstatements*

Adjustments

Application
business

Total

Sales
Sales to external customers
Intersegment sales andtransfers
Total
Segment income (loss)

5,541,881

3,820,681

9,362,562-

9,362,562

569

175

744

(744)

-

5,542,450

3,820,856

9,363,307(744)

9,362,562(165,055)

53,253(111,802)-(111,802)

25,90833,89759,806-59,806

-

6,192

6,192

-

6,192

Other items
Depreciation and amortization
Amortization of goodwill* The total amount of segment loss is the same as the amount of operating loss shown in the consolidated statements of income
for the year.
Fiscal year ended December 31, 2016
(In thousands of yen)
Reportable segment
Open systeminfrastructurebusinessAmount on
consolidated
financialstatements*

Adjustments

Application
business

Total

Sales
Sales to external customers
Intersegment sales andtransfers
Total
Segment income

6,300,865

5,779,189

12,080,054-

12,080,054

343

-

343

(343)

-

6,301,208

5,779,189

12,080,398(343)

12,080,054

180,781

293,831474,613-474,613

19,09274,551

93,643-93,643-85,37285,372-85,372Other items
Depreciation and amortization
Amortization of goodwill* The total amount of segment income is the same as the amount of operating income shown in the consolidated statements ofincome for the year.

―33―

Related Information
Fiscal year ended December 31, 2015
1. Information by product and service
Information is omitted as similar information is disclosed in the Segment Information section.
2. Information by region(1) Sales(In thousands of yen)Japan

Americas8,709,759

425,667

EuropeOther regions

118,176

Total

108,959

9,362,562

Note: Sales are classified by country or region in which customers are located.
(2) Tangible fixed assets(In thousands of yen)Japan

Americas156,388

Other regions

8,416

Total
-

164,805

3. Information by major customer(In thousands of yen)
Name of customer

Sales

Relevant segments

Otsuka Corporation

Open system infrastructure businessand application business

2,604,182

Fiscal year ended December 31, 2016
1. Information by product and service
Information is omitted as similar information is disclosed in the Segment Information section.
2. Information by region(1) Sales(In thousands of yen)Japan

Americas11,349,852

497,767

EuropeOther regions

121,322

111,111

Total
12,080,054

Note: Sales are classified by country or region in which customers are located.
(2) Tangible fixed assets(In thousands of yen)Japan

Americas185,759

Other regions

7,762

Total
-

193,521

3. Information by major customer(In thousands of yen)
Name of customer

Sales

Otsuka Corporation

Relevant segments
3,041,764

Open system infrastructure businessand application businessInformation Regarding Loss on Impairment of Fixed Assets by Reportable Segment―34―

Not applicable

Information Regarding Amortization of Goodwill and Remaining Goodwill Balance by Reportable Segment
Fiscal year ended December 31, 2015
(In thousands of yen)
Reportable segment
Open systeminfrastructurebusiness

Application
business

Other

Adjustment

Total

Total

Balance as ofDecember 31,
838,787
838,787
838,7872015
Note: Information on amortization of goodwill is omitted as similar information is disclosed in the Segment Information section.
Fiscal year ended December 31, 2016
(In thousands of yen)
Reportable segment
Open systeminfrastructurebusiness

Application
business

Other

Adjustment

Total

Total

Balance as ofDecember 31,
753,414753,414753,4142016
Note: Information on amortization of goodwill is omitted as similar information is disclosed in the Segment Information section.

Information Regarding Gain on Negative Goodwill by Reportable Segment
Fiscal year ended December 31, 2015
A gain of 14,372 thousand yen on negative goodwill was posted in the Application Business segment, as a result of including
Keyport Solutions, Inc. in the scope of consolidation in the fiscal year ended December 31, 2015 by acquiring common sharesof Keyport Solutions, Inc.
Fiscal year ended December 31, 2016
Not applicable―35―Per-Share Information
Fiscal year ended December Fiscal year ended December
31, 2015
31, 2016
Net assets per share

160.02 yen

188.00 yen

Net income (loss) per share (Basic)(21.67) yen

29.56 yen-

29.52 yen

Net income per share (Diluted)

Notes:
1. As for net income per share (diluted) for the fiscal year ended December 31, 2015, potential common shares outstanding
existed, but are not stated due to the net loss per share posted for the year.
2. The basis for calculating net income (loss) per share (basic) and net income per share (diluted) is as follows:
Fiscal year ended December Fiscal year ended December
31, 2015
31, 2016
Net income (loss) per share (Basic)
Net income (loss) attributable to owners of the parent company(in thousands of yen)

(186,364)

254,494--

Net income (loss) attributable to owners of the parent company
related to common stock (in thousands of yen)

(186,364)

254,494

Average number of common stock outstanding during theperiod (in shares)

8,598,621

8,609,398

-

-

-

-

Increase in common stock (in shares)-

12,125(Stock acquisition rights included above) (in shares)-(12,125)--

Amounts not attributable to common stock (in thousands ofyen)

Net income per share (Diluted)
Adjustments to net income attributable to owners of the parent
company (in thousands of yen)
(Loss on change in equity included in the above) (in thousandsof yen)Outline of potential common shares outstanding that were notused to calculate net income per share (diluted) because they had
no dilutive effects

Significant Subsequent Events
Not applicable―36―

6. Unconsolidated Financial Statements(1) Unconsolidated Balance Sheets(In thousands of yen)
As of December 31, 2015

As of December 31, 2016

AssetsCurrent assets
Cash and deposits
Accounts receivable-trade

457,033
881,506

267,626
922,074

Work in progress
Deferred tax assets

16,892-

15,054
18,418Advance payment
Prepaid expenses

259,601
38,781

286,773
57,128

Accounts receivable-other
Income taxes receivable

3,297
38,15523,898-

Other
Allowance for doubtful accounts

5,745

635

(5,854)(6,514)

1,695,159

1,585,094

52,68027,69465,79831,940-3,556

80,375

101,294

Trademark rights
Software

2,399
52,4801,571
51,022

Software in progress
Other

11,425
1,028

5,633
1,028

Total intangible fixed assets

67,33359,254

Investment securities
Stocks of subsidiaries and affiliates
Long-term loans receivable fromsubsidiaries and affiliates
Guarantee deposits
Other

242,946
2,506,267

128,9542,534,361

63,00063,000158,867
1,600

196,700
28,406

Allowance for doubtful accounts(63,000)(67,895)

Total investment and other assets

2,909,682

2,883,526

3,057,390

3,044,075

4,752,550

4,629,170

Total current assets
Fixed assets
Tangible fixed assets
Buildings
Tools, furniture and fixtures
Lease assets
Total tangible fixed assets
Intangible fixed assets

Investment and other assets

Total fixed assets
Total assets―37―

(In thousands of yen)
As of December 31, 2015

As of December 31, 2016

Liabilities
Current liabilities
Accounts payable-trade
Short-term loans payable to subsidiaries andaffiliates
Current portion of long-term loans payable
Accounts payable-other429,351

368,083

118,119

100,000

123,120
122,598

123,120
102,144

Accrued expenses
Lease obligations

51,870-49,663
822

Income taxes payable
Accrued consumption taxes

265
118,462

37,04044,922

Advance received
Deposits received

786,276
30,738904,61735,990

Other
Total current liabilities

1,376

1,855

1,782,180

1,768,262

906,100

782,980-

114,160

827
135,922

6,603
153,242

134,981

1,368

-

3,017

Fixed liabilities
Long-term loans payable
Long-term loans payable to subsidiaries andaffiliates
Deferred tax liabilities
Provision for retirement benefits
Provision for loss on business of subsidiaries
and affiliates
Lease obligations
Long-term deposits received

16,2949,767

1,194,126

1,071,139

2,976,307

2,839,401

1,481,520

1,481,520

Other capital surplus

474,415

476,079

Total capital surplus

474,415

476,079(68,730)(75,902)

Total fixed liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus

Retained earnings
Other retained earnings
Retained earnings brought forward(68,730)(75,902)

Treasury stock(116,194)(110,178)

Total shareholders’ equity

Total retained earnings

1,771,010

1,771,519

Valuation and translation adjustments
Valuation difference on available-for-salesecurities
Total valuation and translation adjustments

1,672

16,0491,672

16,049Stock acquisition rights

3,559

2,199

1,776,243

1,789,768

4,752,550

4,629,170

Total net assets
Total liabilities and net assets―38―

(2) Unconsolidated Statements of Income(In thousands of yen)
Fiscal year ended December 31,
2015

Fiscal year ended December 31,
2016

Net sales
Cost of sales

6,990,010
5,051,903

7,950,611
5,735,992

Gross margin

1,938,107

2,214,618

Selling, general and administrative expenses

2,001,442

1,979,312

Operating income (loss)(63,334)

235,306

Non-operating income
Interest income

943

638

Foreign exchange gain
Fiduciary obligation fee

46
5,993

7,518
9,190

Compensation received
Management fee received from subsidiaries andaffiliates
Other

10,000--47,000250

7,379

Total non-operating income

17,23471,726

Interest expenses
Loss on investment of investment partnership

2,125
3,864

5,843
8,151

Provision of allowance for doubtful accounts
Other

310

4,895
-

Non-operating expenses

Total non-operating expenses

6,300

18,890(52,401)

288,142Gain on sale of investment securities
Gain on reversal of stock acquisition rights

8,169
1,330

1,289

Total extraordinary income

9,499

1,289

678

1,299

30,000119,991

14,5338,484-

13,886

11,566-

Ordinary income (loss)
Extraordinary income

Extraordinary loss
Loss on retirement of fixed assets
Loss on valuation of stocks of subsidiaries andaffiliates
Provision for loss on business of subsidiaries
and affiliates
Loss on valuation of investment securities
Loss on withdrawal from employees’ pension
fund
Loss on valuation of golf club membership
Expense related to retrospective adjustment
Other
Total extraordinary loss

2,358

1,550

-

139,212918

59,137285,341(102,038)

4,090

Income taxes-current

7,395

30,162

Income taxes-deferred-(18,898)

Net income (loss) before income taxes

Total income taxes

7,395

11,263

Net income (loss)(109,433)(7,172)―39―

(3) Unconsolidated Statements of Changes in Equity
Fiscal year ended December 31, 2015
(In thousands of yen)
Shareholders’ equity
Capital surplus

Balance as of January 1,
2015
Amount of changes
during the period
Dividends from surplus
Net income (loss)
Disposal of treasury
stock
Transfer from legal
capital surplus to othercapital surplus
Net amount of changes
in items not included inshareholders' equity
Total amount of changes
during the period
Balance as of December
31, 2015

Capital stock

Legal capitalsurplus

Other capitalsurplus

Total capitalsurplus1,481,520

361,305

114,928476,233

83,667

83,667-(42,963)(42,963)-(109,433)(109,433)(1,818)(1,818)-(361,305)

361,305---(361,305)

359,486(1,818)(152,397)(152,397)

1,481,520-

474,415

474,415(68,730)(68,730)

Valuation and translation
adjustments
Stock acquisition
Valuation
Total valuationrightsdifference onand translation
available-foradjustments
sale securities

Total equity

Shareholders’ equity

Balance as of January 1,
2015
Amount of changes
during the period
Dividends from surplus
Net income (loss)
Disposal of treasury
stock
Transfer from legal
capital surplus to othercapital surplus
Net amount of changes
in items not included inshareholders' equity
Total amount of changes
during the period
Balance as of December
31, 2015

Retained earnings
Other retained
earnings
Total retailed
Retainedearnings
earnings brought
forwardTreasury stock

Total
shareholders’equity(119,329)

1,922,091

3,135

368

368

4,028

1,926,488(42,963)(42,963)(109,433)(109,433)

1,316

1,316

-

-

-

1,304

1,304

(468)

835

3,135

(151,080)

1,304

1,304

(468)

(150,245)(116,194)

1,771,010

1,672

1,672

3,559

1,776,243―40―

Fiscal year ended December 31, 2016
(In thousands of yen)
Shareholders’ equity
Capital surplus
Capital stock

Balance as of January 1,
2016
Amount of changes
during the period
Dividends from surplus
Net income (loss)
Disposal of treasury
stock
Transfer from legal
capital surplus to othercapital surplus
Net amount of changes
in items not included inshareholders'' equity
Total amount of changes
during the period
Balance as of December
31, 2016

Legal capitalsurplus1,481,520

Net income (loss)
Disposal of treasury
stock
Transfer from legal
capital surplus to othercapital surplus
Net amount of changes
in items not included inshareholders'' equity
Total amount of changes
during the period
Balance as of December
31, 2016

Other capitalsurplus

Total capitalsurplus474,415

474,415-(68,730)(68,730)

1,664(7,172)(7,172)

1,664

-

-

-

-

-

-

-

1,664

1,664

(7,172)(7,172)

1,481,520-

476,079

476,079(75,902)(75,902)

Valuation and translation
adjustments
Stock acquisition
Valuation
Total valuationrightsdifference onand translation
available-foradjustments
sale securities

Total equity

Shareholders’ equity

Balance as of January 1,
2016
Amount of changes
during the period
Dividends from surplus

Retained earnings
Other retained
earnings
Total retained
Retainedearnings
earnings brought
forwardTreasury stock

Total
shareholders’equity(116,194)

1,771,010

6,016

1,672

1,672

3,559

1,776,243--(7,172)(7,172)

7,681

7,681

-

-

-

14,377

14,377(1,360)13,016

6,016

508

14,377

14,377(1,360)13,525(110,178)

1,771,519

16,04916,0492,199

1,789,768―41―

(4) Notes on Unconsolidated Financial Statements
Going Concern Assumption
Not applicable―42―7. Other(1) Changes in Executives
We will disclose changes in executives under the rule of timely disclosure.

―43―