8Financial Review

Financial Review

Millions of yen

As of March 31, 2011, the ITHD Group comprised parent company IT Holdings Corporation (“ITHD” or “the Company”)
and 53 consolidated subsidiaries, including principal companies TIS Inc., INTEC Inc., SORUN CORPORATION, UFIT

Cost of sales

Ratio of selling, general and administrative expenses to net sales-0.4 points

59,02918.8%+5.1%+0.4 points

43,033

15.2%

13.7%

12,818+14.4%+1.5 points

15,996

4.0%

5.1%
7,660

1.9%

2.4%

-1.1 points-21.9%-0.5 points

TopicsDisclosed Units
From April 2012

ITHD, consolidated

ITHD, consolidated

TIS Group

IT Infrastructure Services

R&D

Up to March 2011

Other Business
Sales totaled ¥7,604 million ($91 million), an increase of 13.6% year-on-year.

Key Strategies

ITHD has been promoting lateral implementation of administrative practices throughout the Group by
standardizing management and accounting systems at principal companies under the Group umbrella and by
visualizing performance and status at each company. Consequently, the Company will disclose informationaccording to business segment, as presented below, instead of by principal Group company, effective fromthe fiscal 2012 reporting period.

To OurStakeholders

5,985-19.9%

Changes in Segment Information Disclosure

Solution Services
SORUN’s inclusion under the umbrella of consolidation secured an 8.6% year-on-year improvement in segment sales,to ¥27,183 million ($327 million).

INTEC Group
Millions of yen
2010

Net sales¥323,173¥313,856+3.0

Outsourcing and network

124,496

126,164-1.3

Software development

163,889

155,976+5.1

Solution services

27,18325,021+8.6

Other business

7,604

6,693

+13.6

UFIT Group% change

New Segment Business Content
IT Infrastructure Services

Provide self-administered computer utility or system operation services through large IT facilities, including data
centers.

Financial IT Services

Support clients in their efforts to make greater use of IT in their operations and in the execution of their businessactivities with IT expertise and business know-how specific to the finance industry.

Industrial IT Services

Support clients in their efforts to make greater use of IT in their operations and in the execution of their businessactivities with IT expertise and business know-how in areas other than finance, namely industrial and public sectors.

Other Business

Activities other than those described above.

24

Corporate Data

Cost of sales grew 2.5% from fiscal 2010, to ¥261,146 million ($3,140 million), but the cost of sales ratio dipped 0.4
percentage point, to ¥80.8%. Consequently, gross profit rose 5.1%, to ¥62,027 million ($745 million), and the grossprofit ratio edged up 0.4 percentage point, to 19.2%.
Selling, general and administrative (SGA) expenses jumped 14.4%, to ¥49,209 million ($591 million). As apercentage of net sales, SGA expenses expanded 1.5 percentage points, to 15.2%.
As a result, operating income fell 19.9%, to ¥12,818 million ($154 million), and net income retreated 21.9%, to¥5,985 million ($71 million).

Other Business

Financial Section

Costs, Expenses and Earnings

AGREX Group

Financial
Financial Review
Review

2011

Industrial IT
Services

Corporate
Governance

Financial IT
Services

SORUN Group

23

81.2%

Financial
Highlights

Software Development
SORUN’s solid results offset declines elsewhere in the software development business, underpinning a 5.1% year-onyear increase in segment sales, to ¥163,889 million ($1,971 million).

+2.5%

49,209Selling, general and administrative expenses

Return on sales

Outsourcing and Network
Segment sales for fiscal 2011 slipped 1.3% year-on-year, to ¥124,496 million ($1,497 million), as the completion oflarge contracts and continued customer requests for price reductions eroded the positive impact gained from SORUN’s
contribution.

¥254,827

19.2%

Gross profit margin

Net income

Consolidated net sales grew 3.0%, to ¥323,173 million ($3,886 million), buoyed by a full-year contribution fromSORUN, which joined the ITHD Group in December 2009. A breakdown of performance by business segment ispresented below.

¥261,146

62,027Gross profit

Operating income ratio

Net Sales% change

80.8%

Cost of sales ratio

Operating income

Profit and Loss Analysis

2010

ProfileCo., Ltd., AGREX INC., QUALICA INC. and AJS Inc.
New to the ITHD Group in fiscal 2011, ended March 31, 2010, were AC MEDICAL INC., through establishment,
and ASAHI KASEI AGMS CORPORATION, through equity acquisition.
Several mergers took place during fiscal 2011, with the non-surviving companies removed from the scope of
consolidation. On October 1, 2010, Cronova Co., Ltd., was absorbed by AC Medical and es Crew, Inc., was absorbed
by Keyport Solutions, Inc. On January 1, 2011, Huma(n) Corporation was absorbed by KOUSHI INTEC Inc.
In December 2010, all shares in EX Inc., were sold and the company was removed from the scope of
consolidation.

2011

8

Financial Review

Financial Review

Financial Position

Basic Correlation between Old and New Segment Classifications

Software Development

Financial IT
Services

Solution Services

Industrial IT
Services

Other Business

Other Business2010

Total assets¥301,076¥313,077-3.8%

Total liabilities

149,966

158,002-5.1

Total net assets

151,110155,075-2.6

Minority interests

7,434

16,655-55.4

Subscription rights

29

19

+52.6

143,646

138,401+3.8

Equity capital
ITHD ( Consolidated )Net Sales

323,173

Fiscal 2011

Net Sales

323,173

IT Infrastructure
Services

SoftwareDevelopment

50.7% 163,889

Financial IT
Services

22.5%

Solution
Services

8.4%

27,183

Industrial IT
Services

41.5% 134,171

Other Business

2.4%

7,604

Other Business

2.2%

ITHD ( Consolidated )Order Balance*

162,287
47,967

7,203

Fiscal 2011
162,287

Financial IT
Services

65,053

Industrial IT
Services

97,234

Order Balance*

47,967

Financial IT
Services

21,075

Industrial IT
Services

26,892*Software Development portion only

+3.5 points

4.2

5.7

-1.5 points

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 Status
Cash and cash equivalents at the end of fiscal 2011 amounted to ¥36,493 million ($438 million), down 22.3% from theend of fiscal 2010.
Net cash provided by operating activities slipped 13.3%, to ¥27,237 million ($327 million). Major components
contributing to cash flow, aside from income before income taxes and minority interests, at ¥10,145 million ($122
million), were the positive effect of depreciation, at ¥12,308 million ($148 million), a ¥3,173 million ($38 million)
decrease in notes and accounts receivable, and ¥2,199 million ($26 million) associated with the implementation of an
accounting standard for asset retirement obligations. Major cash-limiting components were a ¥3,005 million ($36
million) decrease in gain on negative goodwill and ¥2,998 million ($36 million) in income tax payments.
Net cash used in investing activities dropped 26.3%, to ¥18,957 million ($227 million). This reflects the inflow of¥4,197 million ($50 million) in proceeds from the sale of investments in securities and the outflow of ¥10,510 million($126 million) to purchase property and equipment, ¥6,312 million ($75 million) to acquire intangible assets, and ¥4,313
million ($51 million) to buy shares in companies that became newly consolidated subsidiaries.
Cash flows from financing activities shifted from a net cash provided by position, at ¥6,139 million in fiscal 2010 toa net cash used position in fiscal 2011, at ¥18,756 million ($225 million). The reversal in position is largely because theinflow of ¥25,495 million ($306 million) in proceeds from long-term bank loans was overshadowed by a net decrease of¥21,266 ($255 million) in short-term bank loans, ¥14,681 million ($176 million) applied to repayment of long-term bankloans and ¥4,000 million ($48 million) for redemption of bonds.

Financial Section

Order Volume

44.2%

Return on assets
Return on equity2

72,70047.7%

Financial
Financial Review
Review*Software Development portion only

Equity ratio

Corporate
Governance

Order Volume

ITHD ( Consolidated )Fiscal 201133.8% 109,099

%

1

R&D

38.5% 124,495

Key ratios:

TopicsOutsourcing and
Network

ITHD ( Consolidated )Fiscal 2011

% change

Key Strategies

Comparison of Fiscal 2011 Net Sales and Order Statusunder Old and New Segment Classifications ( Millions of yen )Millions of yen
2011

To OurStakeholders

Key Changes• The execution of business activities that hinge not on company-owned facilities but on human resources—that is, primarily the assignment of essential system operation personnel to the large IT facilities of other companies—will be shifted out of the Outsourcing and
Network segment.
• The Software Development and Solutions segments are closely connected and will be merged, with inherent expertise allocated separately to address financial and non-financial system integration requests.

Financial
Highlights

IT Infrastructure Services
Service

Service

Outsourcing and Network

As of March 31, 2011, total assets were ¥301,076 million ($3,620 million), down 3.8% from a year earlier. Of thisamount, total property and equipment accounted for ¥95,458 million ($1,148 million), up 3.8%, and current assets
represented ¥128,455 million ($1,544 million), down 9.5%. Total liabilities came to ¥149,966 million ($1,803 million),
down 5.1%, and total net assets were ¥151,110 million ($1,817 million), down 2.6%. Equity capital, calculated bysubtracting ¥7,434 million ($89 million) in minority interest in consolidated subsidiaries and ¥29 million ($351 thousand)in subscription rights from net assets, increased 3.8%, to ¥143,646 million, and the equity ratio rebounded 3.5
percentage points, to 47.7%.

ProfileAssetsBusinesses

Corporate Data

25

26

8

Financial Review

Financial Review

Business and Other Risks

Millions of yen% change

Cash and cash equivalents at end of year

¥36,493¥46,988-22.3%Net cash provided by operating activities

27,237

31,401-13.3

Net cash used in investing activities(18,957)(25,727)-26.3

Net cash provided by (used in) financing activities(18,756)

6,139—

Dividend Policy

Key Strategies

Yen
2011

2010

To OurStakeholders

ITHD has made the long-term, comprehensive return of profits to shareholders a management priority and seeks tomaintain stable dividends—targeting a consolidated payout ratio of 30%—while taking into account performancetrends, financial status, and the need to enrich retained earnings to support business growth.
In fiscal 2011, the interim dividend was set at ¥12 per share and the year-end dividend was ¥20 per share.
For fiscal 2012, management does not plan to distribute an interim dividend and will probably reduce the annual
dividend to ¥18 per share.

Risk specific to each business segment may arise. In the software development business, for example, projects
could turn unprofitable, while system malfunctions could interrupt services in the outsourcing business. The
Company applies various measures to prevent the manifestation of such risks.
In the outsourcing business, data centers under the Group umbrella offer services at home and abroad—inTokyo, Osaka, Kanagawa Prefecture, Tochigi Prefecture, Toyama Prefecture and Aichi Prefecture as well as in Tianjin,
China, and other locations—24 hours a day every day of the year. A variety of a installations, such as a baseisolation structure for enhanced earthquake tolerance, an on-site generator to ensure uninterrupted power supply,and crime-prevention systems to thwart unauthorized access, have been incorporated into the buildings to control
foreseeable risk. Nevertheless, if an extraordinarily significant event, such as an extended power failure, a large-scale
natural disaster of inconceivable magnitude, international conflict or an act of terrorism, or major criminal activity,
were to occur and disrupt the smooth execution of data center activities, the Group’s business results and financial
position could be adversely affected.
All forward-looking statements in this document are based on information available to management as of June27, 2011.

Financial
Highlights

2010

Profile2011% change

Per share data:¥68.19¥89.25-23.6%Net assets per share

1,636.56

1,602.77+2.1%

Dividend per share

32.00

32.00

-

Topics

Net income per share

R&D
Corporate
Governance
Financial
Financial Review
Review
Financial Section
Corporate Data

27

28

9

Financial Section

Financial Section

Report of Independent Auditors
The Board of Directors
IT Holdings Corporation

36,72959,040¥47,19362,620$441,724710,046

8,711
301
9,047
7,742
7,085
(200)
128,455

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

104,757
3,624
108,80293,101
85,210(2,403)
1,544,861

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)60,2305,010
2,540
22,46972
5,137
95,45852,332
4,851
2,476
22,631
4,106
5,603
91,999724,354
60,25030,524
270,219873
61,779
1,148,017

Intangible assets:
Goodwill (Note 5)
OthersTotal intangible assets

5,516
13,073
18,5896,741
12,38919,13066,341
157,222
223,563

31,795
8,115
20,996(2,332)58,574¥301,076

34,594
6,995
21,171(2,780)59,980¥313,077

382,381
97,599252,502(28,045)
704,437$3,620,878

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, 2011 and 2010, 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.

¥

Key Strategies

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 (Note 4)
Lease receivables 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

To OurStakeholders

We have audited the accompanying consolidated balance sheets of IT Holdings Corporationand consolidated subsidiaries as of March 31, 2011 and 2010, and the related consolidated
statements of income, changes in net assets, and cash flows for the year then ended andconsolidated statement of comprehensive income for the year ended March 31, 2011, 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.

2011(Thousands of
U.S. dollars)(Note 2)Financial Review

The U.S. dollar amounts in the accompanying consolidated financial statements withrespect to the year ended March 31, 2011 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 2.

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

2 As described in Note 28 to the consolidated financial statements, TIS Inc., SORUNCORPORATION and UFIT Co., Ltd, all consolidated subsidiaries of the Company, weremerged into TIS Inc. on April 1, 2011.

R&D

Supplemental Information
1 As described in Note 1 to the consolidated financial statements, effective April 1, 2010,
IT Holdings Corporation and consolidated subsidiaries have been applying the“Accounting Standard for Asset Retirement Obligations” and “Guidance on AccountingStandard for Asset Retirement Obligations”.

Financial
Highlights

March 31,2010
2011
(Millions of yen)

ProfileIT Holdings Corporation and Consolidated Subsidiaries
Consolidated Balance Sheets

Financial
SectionFinancial Section

June 21, 201129

30

Corporate Data2

9Financial Section

Financial Section

100
55,054
3,982
675
993
11,509244
4,318
76,875
149,966

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

5,757
172,239
90,198
179,725
40,907
132,784
5,589
251,820879,019

19

351

7,434
151,110¥301,076

16,655155,075¥313,077

89,406
1,817,321$3,620,878

609(1,057)
88
302
1,116

7,402
(12,306)
1,041
3,293
21,440(610)(1,074)
(681)
3,005

(634)
(2,083)(175)-(7,339)(12,920)(8,193)36,139(2,199)(2,325)(524)(2,673)
10,145

(-)
(-)
(170)
(2,004)
13,992

26,44927,955(6,301)(32,148)
122,012

4,383
(309)
4,074

2,774
2,977
5,751

52,706(3,714)
48,992

6,071

8,241

73,020

Income taxes (Note 9):
Current
DeferredIncome before minority interests
Minority interests in earnings of consolidated subsidiaries
¥

(86)
5,985

¥

(581)
7,660

$

(1,039)71,981

See accompanying notes to the consolidated financial statements.

Financial
SectionFinancial Section

29

615(1,023)
86
274
1,783

Financial Review

20,802(22,150)(3,655)(5,003)591,811
154,160

Income before income taxes and minority interests

120,279
1,043,753
568,830(295)
1,732,567

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

43,033
15,996

Other income (expenses):
Interest and dividend income
Interest expenses
Amortization of negative goodwill
Real estate rental income
Gain on sales of investments in securities
Loss on disposal and sale of fixed assets(Notes 17 and 18)
Impairment loss (Note 19)
Valuation loss on investments in securities
Gain on negative goodwill
Loss on adjustment for change in accounting for asset
retirement obligations
Merger cost
Others, net

1,203
662,11047,886
8,117
11,944
138,4132,940
51,925924,538
1,803,557

1,730(1,842)
(304)
(416)

49,20912,818Selling, general and administrative expenses (Note 16)
Operating income

Net income

Subscription rights
Minority interests
Total net assets
Total liabilities and net assets

7,600
45,151
3,915
694
993
10,673470
2,250
71,746
158,002$$3,886,632
3,140,661
745,971

Corporate
GovernanceAccumulated other comprehensive income:Net unrealized gains on available-for-sale securities
Revaluation of land (Note 6)
Foreign currency translation adjustments
Total accumulated other comprehensive income

21,58913,3064,000
14,954
2,115
10,820374
19,09886,256¥313,856
254,82759,029R&D

10,00186,78847,298(24)
144,063¥¥323,173
261,146
62,027

TopicsNet 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

479
14,321
7,500
14,944
3,402
11,041
465
20,93973,091

Net sales
Cost of sales (Note 16)
Gross profit

Key Strategies

Non-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¥

2011(Thousands of
U.S. dollars)(Note 2)

To OurStakeholders

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,
2011
2010
2011
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)Financial
Highlights

March 31,2010
2011
(Millions of yen)

ProfileIT Holdings Corporation and Consolidated Subsidiaries
Consolidated Statements of Income

See accompanying notes to the consolidated financial statements.

31

4

32

Corporate Data3

9Financial Section

Financial Section

Shareholders’ equity

Income before minority interests¥6,071

Balance as of March 31, 2010

$73,020

Other comprehensive income:Net unrealized gains on available-for-sale securities
Foreign currency translation adjustments
Share of other comprehensive income accounted for by
the equity method
Total other comprehensive income

3,954

（171）

（2,056）

（8）

（97）

150

1,801

¥6,221$74,821

Minority interests¥6,407$77,056(186)(2,235)

Treasurystock¥10,001¥85,208¥44,088

¥

(58)

1,610
(2,780)
5,985
(4)
38

(30)
5
¥10,001

1,580¥86,7883,210¥47,298

34
(24)

¥

Shareholders’ equity

Total comprehensive income attributable to:Shareholders of IT Holdings Corporation

Retainedearnings

See accompanying notes to the consolidated financial statements.

Additional
paid-in
capitalRetainedearnings

Treasurystock$120,279$1,024,746$530,227$(694)

19,368(33,438)
71,981
(51)
450

(361)
60

$120,279

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

Retainedearnings

Treasurystock¥40,186¥(2,354)(1,114)547
547¥1,730¥(1,842)

(125)
(125)
¥(304)422
422¥ (416)(1,113)¥85,208

3,902¥44,08810
10¥29

Accumulated other comprehensive income
Net
ForeignTotal
unrealized
Total
currency
accumulated
gains (losses)
shareholders’
Revaluationtranslation
comprehensive Subscription
on otherof landadjustments
incomerightssecurities
equity(Thousands of U.S. dollars) (Note 2)$1,674,558$14,222$(22,150)$(2,150)$(10,078)$ 225(9,221)(9,221)¥ 7,434(8,789)(3,965)¥151,110

Minority
interests

Total
net assets$200,300$1,865,005

19,368(33,438)
71,981(51)
89
60

19,368(33,438)
71,981
(51)
89
60
126
126
$ 351

For the year ended March 31, 2010
Accumulated other comprehensive income
Net
ForeignTotal
unrealized
Total
currency
accumulated
gains (losses)
shareholders’
Revaluationtranslation
comprehensive Subscription
on otherof landadjustments
incomerightssecurities
equity(Millions of yen)

(4)
2,300

2,296
¥ (58)

5,086¥139,239¥(1,118)

2,301
2,301
¥ 1,183(110,894)(110,894)$ 89,406(105,693)(47,684)$1,817,321

6

Minority
interests

Total
net assets¥(1,842)¥(139)¥(3,099)¥ 8¥15,154¥146,2162(3,758)
7,660
(4)
1,186

¥(1,842)(40)(40)¥(179)

2,261
2,261¥ (838)

11
11
¥19

1,501
1,501
¥16,655

3,773
8,859
¥155,075

Corporate
Governance1¥10,001

1,610(2,780)
5,985
(4)
8
5

4,824
¥144,063¥134,153
2(3,758)
7,660
(4)
1,186

(3,758)
7,660¥155,075

R&D

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¥16,655

1,610(2,780)
5,985
(4)
8
5

6,580
(1,505)5,075
IT Holdings Corporation and Consolidated
Subsidiaries
19,00738,603399
58,0096,580(1,505)
5,075
Consolidated
StatementsofChangesin
Net
Assets(continued)$1,043,753$568,830$(295)$1,732,567$ 20,802$(22,150)$(3,655)$ (5,003)

Shareholders’ equity

Total
net assets

TopicsBalance as of March 31, 2010
Changes during the year
New stock issue
Dividends from surplus
Net income
Acquisition of treasury stock
Sales of treasury stock
Increase due to merger
Items other than changes inshareholders’ equity
Total change for the year
Balance as of March 31, 2011

Commonstock

Minority
interests

Key Strategies

Comprehensive income

329

Additional
paid-in
capitalTo OurStakeholders

Changes during the year
New stock issue
Dividends from surplus
Net income
Acquisition of treasury stock
Sales of treasury stock
Increase due to merger
Items other than changes inshareholders’ equity
Total change for the year
Balance as of March 31, 2011

Commonstock

Financial
Highlights

Year ended March 31,
2011
2011
(Millions of(Thousands ofyen)
U.S. dollars)(Note 2)For the year ended March 31, 2011
Accumulated other comprehensive income
Net
ForeignTotal
unrealized
Total
currency
accumulated
gains (losses)
shareholders’
Revaluationtranslation
comprehensive Subscription
on otherof landadjustments
incomerightssecurities
equity(Millions of yen)¥139,239¥ 1,183¥(1,842)¥(179)¥ (838)¥19

ProfileIT Holdings Corporation and Consolidated Subsidiaries
Consolidated Statements of Changes in Net Assets

IT Holdings Corporation and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income

See accompanying notes to the consolidated financial statements.

Financial Review
Corporate Data

5

33

Financial
SectionFinancial Section

7

34

9

Financial Section

Financial Section

IT Holdings Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements

Cash flows from investing activities:
Deposit of time deposits
Repayment of time deposits
Acquisition of property and equipment
Acquisition of intangible assets
Acquisition of investments in securities
Proceeds from sale of investments in securities
Payment of guarantee deposits
Acquisition of investments in subsidiaries
Payments on newly consolidated subsidiary (Note 24)
Other, net
Net cash used in investing activities––(10,510)(6,312)–
4,197(2,068)(4,313)–49(18,957)(1,553)
4,374(9,843)(5,003)(4,225)
1,333––(10,917)107(25,727)––(126,395)(75,910)–50,476(24,872)(51,877)–
592(227,986)

Cash flows from financing activities:(Decrease) increase in short-term bank loans, net
Proceeds from long-term bank loans
Repayment of long-term bank loans
Redemption of bonds
Acquisition of treasury stock
Sale of treasury stock
Dividends paid
Dividends paid to minority interests
Other, net
Net cash (used in) provided by financing activities(21,266)
25,495(14,681)(4,000)(4)–(2,781)(459)(1,060)(18,756)

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

(255,758)
306,615(176,557)(48,106)(51)–(33,438)(5,521)(12,747)(225,563)

Effect of exchange rate changes on cash and cash equivalents
Net (decrease) 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)(45)(10,521)46,98826¥ 36,493

11
11,82435,10559¥ 46,988(542)(126,527)
565,097310$ 438,880

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, 2011 and 2010, was 53 and 55,
respectively.
Certain 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.
All significant intercompany balances and transactions among the Group have been
eliminated in consolidation.
All assets and liabilities of consolidated subsidiaries are stated at fair market value on
the date of acquisition of control.
Investments in one nonconsolidated subsidiary (two in 2010) and nine affiliatedcompanies (eleven in 2010) are accounted for by the equity method.
(c) Foreign currency translation
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.
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.

8

35

9

36

Corporate Data

See accompanying notes to the consolidated financial statements.

(b) Principles of consolidation

Financial
SectionFinancial Section

26,449(7,832)368,798
7,549(12,726)(36,057)
327,564

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.

Financial Review–(4,138)35,997606(1,075)(4,127)
31,401

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.

Corporate
Governance

2,199
(651)
30,666627(1,058)(2,998)27,237(a) Basis of Presenting the Consolidated Financial Statements

R&D$ 122,012
148,023
12,9206,712
8,193
22,872
2,531(5,369)10,056(7,402)
12,307
38,161
2,714
12,590(36,139)

Topics¥ 13,992
11,978
2,083
622
175
1,390
535
(74)
852
(609)
1,058
5,908
8,174
(5,949)–Key Strategies¥ 10,145
12,308
1,074
558
681
1,902
211
(446)
836
(615)
1,023
3,173
226
1,047
(3,005)

Summary of Significant Accounting Policies

To OurStakeholders

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
Decrease in allowance for doubtful accounts
Increase in accrued retirement benefits to employees
Interest and dividend income
Interest expenses
Decrease in notes and accounts receivable
Decrease in inventories
Increase (decrease) in notes and accounts payable
Gain on negative goodwill
Loss on adjustment for change in accounting for asset retirement
obligations
Others, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities

1.

Financial
Highlights

Year ended March 31,
2010
2011
2011
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)

ProfileIT Holdings Corporation and Consolidated Subsidiaries
Consolidated Statements of Cash Flows9

Financial Section

Financial Section1.

1.

Summary of Significant Accounting Policies (continued)(i) Intangible assets
Intangible assets are amortized using the straight-line method over their estimateduseful lives, except for computer software.
Expenses related to development activities of computer software, which are included inintangible assets, are amortized as follows:i)(d) Cash equivalentsii) Computer software for internal use
Capitalized costs are amortized by the straight-line method over the estimateduseful life of the software, generally two to five years.
(J)

Leased assets (as lessee)

Derivatives(k) Accounting for leases (as lessee and lessor)

Derivative instruments are stated at market value as assets or liabilities.

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

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.

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

(m) Allowance for doubtful accounts

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

38

Corporate Data

11

10

Financial
SectionFinancial Section

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

Financial Review

Property and equipment(l)Corporate
Governance

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, determined mainly by lastpurchase cost method.

R&D

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.

(g) Inventories

37

TopicsLeased 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.

Key Strategies

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.

(h)

To OurStakeholders(e) Securities(f)Computer software for sale
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.

The Group considers all highly liquid investments with a maturity of three months or
less, when purchased, as cash equivalents in the consolidated statements of cash flows.

Financial
Highlights

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.

Profile(c) Foreign currency translation (continued)

Summary of Significant Accounting Policies (continued)

9Financial Section

Financial Section

1.

Summary of Significant Accounting Policies (continued)

Summary of Significant Accounting Policies (continued)(t)

Amortization of goodwill and negative goodwill

Accrued bonuses to employees are recognized at the estimated amount to be paid forservices rendered prior to the fiscal year-end.

(u) Revenues and costs recognition of producing ordered software
Revenues and costs of construction contracts of which the percentage of completioncan be reliably estimated, are recognized by the percentage-of-completion method.
The percentage of completion is calculated at the cost incurred as a percentage of theestimated total cost. The completed-contract method continues to be applied forcontracts for which the percentage of completion cannot be reliably estimated.

Actuarial gain or loss is amortized from the year following recognition by thestraight-line method within the average remaining service period (mainly five to 15
years) of employees. Prior service costs are mainly charged to income when incurred.
(v)

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.

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

Effective April 1, 2010, the Group adopted “Accounting Standard for Asset Retirement
Obligations” (Accounting Standards Board of Japan (ASBJ) Statement No. 18 issued
on March 31, 2008) and “Guidance on Accounting Standard for Asset Retirement
Obligations” (ASBJ Guidance No. 21 issued on March 31, 2008). The effect of thischange was to decrease operating income and income before income taxes andminority interests for the year ended March 31, 2011 by ¥277 million ($3,336
thousand) and ¥2,477 million ($29,785 thousand), respectively. Adoption of theaccounting standard caused an increase in asset retirement obligations during the yearof ¥2,554 million ($30,721 thousand).

(s) Hedge accounting(x) Presentation of comprehensive income
Effective April 1 , 2010, the Group adopted “Accounting Standard for Presentation ofComprehensive Income” (ASBJ Statement No. 25, issued on June 30, 2010). The
corresponding figures for the year ended March 31, 2010, were as follows:

39

13

40

Corporate Data

12

Financial
SectionFinancial Section

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.

Financial Review

The Group utilizes hedge accounting primarily to manage interest rate risk. Generally,
under deferral hedging, unrealized gains or losses are deferred as a component of net
assets. The Group also utilizes exceptional methods, as permitted when fulfillingcertain conditions for interest rate swaps.

Effective April 1, 2010, the Group adopted the following accounting standards andguidance issued on December 26, 2008: “Accounting Standard for Business
Combinations” (ASBJ Statement No. 21), “Accounting Standard for Consolidated
Financial Statements” (ASBJ Statement No. 22) “Partial Amendments to AccountingStandard for Research and Development Costs” (ASBJ Statement No. 23), “Revised
Accounting Standard for Business Divestitures” (ASBJ Statement No. 7), “Revised
Accounting Standard for Equity Method of Accounting for Investments” (ASBJ
Statement No. 16), “Revised Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures” (ASBJ Guidance
No.10)

Corporate
Governance

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

R&D(w) Adoption of accounting standard for business combinations and other accounting
standards

Distribution of retained earnings

Topics(q) Income taxes

Adoption of accounting standard for asset retirement obligations

Key Strategies(p) Accrued retirement benefits to directors

To OurStakeholders

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.

Financial
Highlights

Goodwill and negative goodwill were amortized by the straight-line method overperiods not exceeding 20 years. As for business combinations completed on and after
April 1, 2010, goodwill is amortized by the straight-line method over a period notexceeding 20 years and negative goodwill is changed to income when incurred.

(o) Accrued retirement benefits to employees(r)Profile(n) Accrued bonuses to employees

1.

9Financial Section

Financial Section

1. Summary of Significant Accounting Policies (continued)

3. Marketable Securities and Investments in Securities (continued)

Shareholders of IT Holdings Corporation¥ 9,921

Minority interests

Description

741
Market exceeding
cost:
SharesCorporate bonds
Other¥10,662

Other comprehensive income:¥ 2,397

Foreign currency translation adjustments
Share of other comprehensive income accounted forby the equity method
Total other comprehensive income

17

Market notexceeding cost:
Shares
Bonds
Other

8
¥ 2,422

March 31, 2011
March 31, 2010
Book value UnrealizedBook value Unrealized
Acquisition (Fair market
Acquisition (Fair market
gains
gains
cost
cost
value)(losses)value)(losses)(Millions of yen)

¥5,49551
5,500¥10,127457¥5,297
7–––

10,584

5,280

5,304

3,068
126
302
3,496
¥12,324

3,485
132
381
3,997
¥7,325

(417)
(6)
(79)
(502)
¥4,999

2,443
210
321
2,974
¥13,558

3,117
228
391
3,736
¥9,016

(674)
(18)
(70)
(762)
¥4,542(d) Impairment loss on available-for-sale securities amounted to ¥663 million ($7,975
thousand) and ¥134 million for the years ended March 31, 2011 and 2010,
respectively.

4.

Financial Instruments(a) Overview of utilization of financial instruments(i)Management policies
The 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.

1542

Corporate Data

14

41

$81,50321,440(316)

Financial
SectionFinancial Section¥3,019
250
59
3,328

¥2,377
1,108(4)

Financial Review¥ 8,513
255
60
8,828

¥6,777
1,783
(26)

2011
(Thousands of
U.S. dollars)

Corporate
Governance

Total

2011
2010
(Millions of yen)

R&D

Market notexceeding cost:
SharesBonds
Other(5,018)(74)(939)(6,031)$60,118

Proceeds from sales ofavailable-for-sale securities
Realized gain
Realized loss(b) Acquisition cost, book value and unrealized gains or losses of available-for-salesecurities with fair value as of March 31, 2011 and 2010, were as follows:¥4,830450

41,913
1,589
4,575
48,077$88,099

Year Ended March 31,(a) The Group held no held-to maturity debt securities as of March 31, 2011 and 2010.

Market exceeding
cost:
SharesCorporate bonds
Other36,895
1,515
3,636
42,046$148,217(c) Available-for-sale securities sold during this fiscal year

3. Marketable Securities and Investments in Securities

Description$66,08359
7
66,149TopicsAmounts in U.S. dollars are included solely for the convenience of non-Japanese readers. A
rate of ¥83.15 = US$1, the approximate rate of exchange prevailing on March 31, 2011, hasbeen used in translation. The inclusion of such amounts is not intended to imply thatJapanese yen have been or could be readily converted, realized or settled in U.S. dollars atthat or at any other rate.

$36,302
3,007
713
40,022

Key Strategies

Total

U.S. Dollar Amounts$102,385
3,066
720
106,171

To OurStakeholders

2.

Net unrealized gains on available-for-sale securities

March 31, 2011
Book value Unrealized
Acquisition (Fair market
gains
cost
value)(losses)(Thousands of U.S. dollars)

Financial
Highlights

Total comprehensive income

ProfileTotal comprehensive income attributable to:9Financial Section

Financial Section

4.

Financial Instruments (continued)

4.

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.
(b) Fair market value of financial instruments
The carrying value of financial instruments on the consolidated balance sheet, fairmarket values, and differences as of March 31, 2011 and 2010, are shown below.
Securities for which it is extremely difficult to determine the fair value are excluded
from the table.

As of March 31, 2011

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.

Cash and deposits¥ 36,729

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

59,040$--441,724$–

710,046(13)
59,02759,021(159)
709,887

(6)

8,711

709,808(79)

104,758

(23)
8,688

8,756

68

(275)
104,483

105,307824

12,985¥117,429

12,767¥117,273(218)¥(156)

156,162$1,412,256

153,545$1,410,384(2,617)$(1,872)¥ 14,944
479
7,600¥-14,944
479
7,598

¥

–
–
(2)

$ 179,725
5,757
91,401$--179,725
5,757
91,383$

69,376¥ 92,399

69,523¥ 92,544

147
¥ 145

834,349$1,111,232

836,114$1,112,979

1,765$ 1,747

¥

¥

¥

$

$

$

–

–

–

-–

–

–
–
(18)

–

Financial
SectionFinancial Section

3.

Derivative transactions$ 441,724* 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.

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.

43

17

44

Corporate Data

16

Financial Review

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.

Notes and accounts
payableShort-term bank loans
Bonds **
Long-term bankloans **
Total liabilities–

Corporate
GovernanceMarket 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.

¥

R&D

Market risk (interest fluctuation risk) control

Notes and accounts
receivable
Allowance for doubtful
accounts
Net amount*
Lease receivables andinvestments in financeleasesLease receivables andallowance for doubtful
accounts
Net amount*Marketable securities
and investments insecurities
Total assets¥-36,729

Difference

TopicsCredit risk (customer default risk) control

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.

Fair
Fair
BalancemarketmarketDifference
sheet
valuesvalues(Millions of yen)(Thousands of U.S. dollars)

Balancesheet

Key Strategies

Risk management for financial instruments

To OurStakeholders

Notes 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 aredescribed in Note 1(s) above.

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
Highlights

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 the Grouphas business relationships.

1.

Profile(iv) Explanation of market fair values(ii) Contents of financial instruments and related risks(iii)

Financial Instruments (continued)

9Financial Section

Financial Section

4.

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

FairmarketDifference
values(Millions of yen)

¥ 47,193¥ 47,193

Liabilities:
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.

¥ –62,620(25)
62,59562,592

Fair 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 credit
risk.

7,591

7,548

(26)

14,273¥131,635

14,304¥131,63731¥ 2¥ 14,954
21,58911,600¥ 14,954
21,58911,601¥ ––
158,457¥106,600

58,577¥106,721

120¥121

Derivative 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 of long-termbank loans, bearing interest at variable rates, is accounted for by interest swap
exceptional treatment. Its fair market values are based on the aggregate ofprincipal 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.

(i)

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.

Derivative transactions:

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

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

Interest swap exceptional treatments
Interest rate swaps: variable receipt/fixed payment
Long-term bank loans

Year ended March 31,

2010
2011
(Millions of yen)

Total contract amountContract amount over one year

¥ 2,566
1,300

45

19

46

Corporate Data

18

¥ 6,690
3,306

2011(Thousands of
U.S. dollars)$ 30,863
15,634

Financial
SectionFinancial 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 the financial
institutions. The details of securities by holding purpose are described in Note 3
above.

Hedge accounting
Transaction typeHedged item

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.

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, 2011 and 2010
were as follows:

Corporate
Governance

Assets:

Topics

Notes and accounts
payableShort-term bank loans
Bonds **
Long-term bankloans **
Total liabilities

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 taking out the loans.

Key Strategies

(17)
7,574

To OurStakeholders(3)Book 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.

Financial
Highlights

Cash and deposits
Notes and accounts
receivable
Allowance for doubtful
accounts
Net amount*
Lease receivables andinvestments in financeleasesAllowance for doubtful
accounts
Net amount*Marketable securities
and investments insecurities
Total assets

Financial Instruments (continued)
ProfileAs of March 31, 2010

Balance
sheet

4.

9

Financial Section

Financial Section

4.

Financial Instruments (continued)

5.

The amount of goodwill in intangible assets is indicated after offsetting goodwill andnegative goodwill. The gross amounts as of March 31, 2011 and 2010, were as follows:

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

Goodwill and Negative Goodwill(ii) Financial instruments without fair market values

Year ended March 31,
Description
Unlisted shares
Equity in investment partnership
Money market funds and other¥ 17,966
814
331

2011
(Thousands of
U.S. dollars)$ 216,072
9,787
3,984

¥ 19,603
893
147

As of March 31, 2011

Within2 to 56 to 10
one year
years
years **
(Thousands of U.S. dollars)¥36,716
58,985¥¥ ––$ 441,566
709,374

$

–
671

$

–
–

2,834

5,747

129

34,082

69,120

1,556––¥98,535

25–¥5,828

250
–
¥379

–
–
$1,185,022

301–$70,092

3,007–$4,563$66,766(425)$66,341

Revaluation of Land

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 of thedifference 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.
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.

R&D

–
56

¥6,863(122)¥6,741

TopicsCash and deposits
Notes and accounts receivable
Lease receivables andinvestments in finance leases
Marketable securities andinvestments in securities*:
Corporate bonds
Other
Total

Within2 to 56 to 10
one year
years
years **
(Millions of yen)

6.

¥5,552(36)¥5,516

Key Strategies(c) Expected maturities of monetary receivables and marketable securities andinvestments in securities with maturities as of March 31, 2010

Goodwill
Negative goodwill
Net amountTo OurStakeholders

2010
2011
(Millions of yen)

2011
(Thousands of
U.S. dollars)

Financial
Highlights

March 31,2011
2010
(Millions of yen)

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, 2011 and2010, are as follows:* These securities are available-for-sale securities with maturity dates.
** There were no amounts to mature after 10 years.
Within2 to 56 to 10
one year
years
years **
(Millions of yen)
¥ 47,177
62,526

¥

¥ –
–

2,312

5,207

72

215
5
¥112,23525
83¥5,408250–¥322

Financial
SectionFinancial Section–
93

Financial Review

Cash and deposits
Notes and accounts receivable
Lease receivables andinvestments in finance leases
Marketable securities andinvestments in securities *:Corporate bonds
Other
Total

Corporate
Governance

As of March 31, 2010

* These securities are available-for-sale securities with maturity dates.
** There were no amounts to mature after 10 years.

20

47

48

Corporate Data21

9Financial Section

Financial Section

7.

Short-Term Bank Loans and Long-Term Bank Loans

8.

479

¥ 21,589

2011(Thousands of
U.S. dollars)$

0.78% Unsecured bonds, due 2012
1.26% Unsecured bonds, due 2010
0.84% Unsecured bonds, due 2012

5,757

Less current portion of long-term debt
¥ 69,376(14,322)¥ 55,054¥ 58,457(13,306)¥ 45,151$ 834,348(172,239)$ 662,110

The aggregate annual maturities of long-term bank loans due within five years subsequent
to March 31, 2011 and 2010, were as follows:Year ending March 31,¥¥ 13,306
16,035
15,161
10,841
3,114–$ 90,198–
1,203
91,401(90,198)$ 1,203

The aggregate future maturities of bonds for the next five years subsequent to March 31,
2011 and 2010, were as follows:
March 31,2011
2010
(Millions of yen)

Year ending March 31,
2011
2012
2013

¥

–
7,500
100

¥4,000
7,500
100

2011
(Thousands of
U.S. dollars)$–
90,198
1,203

R&D

–
14,322
14,781
28,461
9,068
2,745

2011
(Thousands of
U.S. dollars)$–
172,239
177,761
342,284
109,052
33,013¥ 7,500
4,000
100
11,600(4,000)¥ 7,600¥14,23439
3,331–¥17,604

2011(Thousands of
U.S. dollars)$163,486–
40,061
12$203,559

Financial
SectionFinancial Section¥13,594–3,331
1¥16,926

Financial Review

Buildings and structures
Machinery and equipment
Land
Other

Corporate
Governance

The assets pledged as collateral for short-term bank loans and long-term bank loans,amounting to ¥10 million ($120 thousand) and ¥1,271 million ($15,280 thousand),
respectively, as of March 31, 2011, and ¥45 million and ¥1,738 million, respectively, as ofMarch 31, 2010 were as follows:
March 31,2011
2010
(Millions of yen)23

50

Corporate Data

22

49

TopicsMarch 31,2011
2010
(Millions of yen)

2011
2012
2013
2014
2015
2016

¥ 7,500–
100
7,600(7,500)¥ 100

2011(Thousands of
U.S. dollars)

Key Strategies

Long-term bank loans:
Loans principally from banks and otherfinancial institutions, with an averageinterest rate of 1.11% for 2011
Less current portion of long-term debt¥

March 31,2011
2010
(Millions of yen)

To OurStakeholders

Short-term bank loans:
Short-term bank loans, with an averageinterest rate of 0.59% for 2011

Bonds as of March 31, 2011 and 2010, consisted of the following:

Financial
Highlights

March 31,2011
2010
(Millions of yen)

ProfileShort-term bank loans and long-term banks loans as of March 31, 2011 and 2010, consistedof the following:

Bonds

9

Financial Section

Financial Section

9.

Income Taxes

March 31,
2010
2011
2011
(Millions of yen)(Thousands of
U.S. dollars)
¥

271

$

662

9,769

4,465
886
665
5,538
5,547
1,421
805
1,184
1,490
3,001
26,186(6,452)¥ 19,734

4,361
1,241
460
6,476
5,082
1,630
550

53,69810,657
7,995
66,601
66,706
17,092
9,678
14,23917,91536,091
314,921(77,595)$237,326¥--1,072
514
2,482

–
130
4,198
¥14,804(694)¥14,804(8,117)$182,167(a) Outline of retirement benefit plans
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.
Certain consolidated subsidiaries that participate in a mutual aid contract for
retirement allowances are excluded from the calculation of the projected benefit
obligation.
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.
(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, 2011 and 2010,
for the Group’s retirement benefit plans:

$

9,229
8,903
32,144
3,554
1,329
55,159$182,167

March 31
2011
2010
2011
(Millions of yen)(Thousands of
U.S. dollars)¥(43,513)
26,144(17,369)
10,917(2,177)(8,629)(2,044)¥(10,673)$(546,977)
325,977(221,000)
122,596(20,306)(118,710)(19,703)$(138,413)
25

52

Corporate Data

24¥(45,481)
27,105(18,376)
10,194(1,689)(9,871)(1,638)¥(11,509)

Financial
SectionFinancial 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

51

(675)
¥15,147

Financial Review

767
740
2,673
296
111
4,587
¥15,147

97,599(416)

Corporate
Governance

¥

–
1,305
2,219
24,257(5,255)¥ 19,002

6,995
(25)

10. Retirement Benefits

4,480

812

8,115
(34)

R&D

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

372$ 93,101

TopicsLess – Valuation allowance
Total deferred tax assets¥¥ 8,528

Key Strategies

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
Asset retirement obligations
Unrealized gains
Others, net¥ 7,741

To OurStakeholders(b) The significant components of deferred tax assets and liabilities as of March 31, 2011
and 2010, were as follows:

Current assets—Deferred tax assets
Investments and otherassets—Deferred tax assets
Current liabilities—Other
Non-current liabilities—Deferred tax
liabilities
Net deferred tax assets

2011(Thousands of
U.S. dollars)

Financial
Highlights(a) The reconciliations for the years ended March 31, 2011 and 2010, are not presented
herein because the difference between the statutory tax rate and effective tax rate wasless than 5%.

March 31,2011
2010
(Millions of yen)

ProfileIncome 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% for 2011 and2010. Income taxes of the foreign subsidiaries are based generally on the tax rates
applicable in their countries.

9. Income Taxes (continued)
Deferred income taxes as of March 31, 2011 and 2010, are reflected in the consolidatedbalance sheet under the following line items:

9

Financial Section

Financial Section

13.

(c) The components of retirement benefit expenses for the year ended March 31, 2011 and2010, were as follows:

The Group was committed to provide guarantees for bank loans to a nonconsolidated
subsidiary as follows:Year ended March 31,

March 31,2011
2010
(Millions of yen)

2011
(Thousands of
U.S. dollars)¥2,726
990
(584)
1,563
(447)

¥2,261
846
(385)
1,450
(190)

$32,780
11,908(7,025)
18,795(5,373)963

998

11,577

14.

455

443

5,472

4
¥5,6704¥5,427

52$68,186

Accumulated advanced depreciation including national subsidy deducted from acquiredbuildings and structures totaled ¥77 million ($926 thousand) and ¥78 million as of March
31, 2011 and 2010, respectively.

Imizu Cable Network, Co., Ltd.

¥80
¥80

$866
$866

Advanced Depreciation

Key Strategies

15.

¥72
¥72

To OurStakeholders

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

2011(Thousands of
U.S. dollars)

Financial
Highlights

2011
2010
(Millions of yen)

Contingent Liability for Guarantee
Profile10. Retirement Benefits (continued)

Provision for Losses on Contracts(d) Major assumptions used in calculating retirement benefits
2010

1.8 % to 2.5%
1.5% to 3.5%

1.8 % to 2.5%
0.0% to 3.5%

Straight-line basis

Straight-line basis¥2,887
246
169$26,920
3,997
2,905

2011
2010
(Millions of yen)

Employees’ salaries
Accrual of bonuses to employees
Accrual of allowance for doubtful
accounts
Retirement benefits to employees
Accrual of retirement benefits todirectors

2011(Thousands of
U.S. dollars)¥17,601
1,160¥15,089
1,166$211,684
13,948

59
1,155

156
936

709
13,895

44

35

534

Financial Review¥2,238
332
242

2011
(Thousands of
U.S. dollars)Year ended March 31,

Accumulated depreciation of property and equipment totaled ¥71,812 million ($863,647
thousand) and ¥68,858 million as of March 31, 2011 and 2010, respectively.

53

27

54

Corporate Data

26

Financial
SectionFinancial Section

Research and development costs, which are included in cost of sales and selling, generaland administrative expenses, totaled ¥1,602 million ($19,268 thousand) and ¥913 million
for the years ended March 31, 2011 and 2010, respectively.

12. Depreciation of Property and Equipment

Corporate
GovernanceAmounts related to unconsolidated subsidiaries and affiliates as of March 31, 2011 and2010, were as follows:

Investments in securities—stocks
Investments in securities—other
Investments

Selling, General and Administrative Expenses

The main components of sales and selling, general and administrative expenses for theyears ended March 31, 2011 and 2010, respectively, were as follows:

11. Items Related to Unconsolidated Subsidiaries and Affiliates

March 31,2010
2011
(Millions of yen)

16.

R&D

Discount rates
Rate of expected return on plan assets
Method of attributing the projected
benefits to periods of service

A provision for expected operating losses on contract orders amounting to ¥1,045 million($12,565 thousand) and ¥1,011 million was set off from work in process inventories as ofMarch 31, 2011 and 2010, respectively.

2011

TopicsYear ended March 31,

9Financial Section

Financial Section

19.

The composition of loss on sales of property and equipment for the years ended March 31,
2011 and 2010, respectively, was as follows:

Impairment losses of long-lived assets for the years ended March 31, 2011 and 2010,
respectively, were as follows:Year ended March 31,

¥34
11
2
5
¥52

¥12
–
–
0
¥12

$405
133
21
68
$627

For the year ended 2011
PurposeBusiness property
Business property
Business property
Business property

The composition of loss on disposal of property and equipment for the years ended March
31, 2011 and 2010, respectively, was as follows:Year ended March 31,

2011
2010
(Millions of yen)
¥440
67
31
84
¥622

$3,370
1,654
644
1,044
$6,712

Other

Software, buildings andequipment

Other

¥ 388

$ 4,669

Software

293

3,519

Software and telephonerights76

919

Software11

133

Software

124

1,491

Machinery and vehicles

40

477

Goodwill
Land, buildings, telephonerights and other

13

157

129

1,555

¥1,074$12,920Total

For the year ended 2010
PurposeBusiness property
Property for sale

Business property

Other

Amounts(Millions ofyen)

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

Development facilities,
including software andgoodwill¥ 364

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

Software55

Buildings and land
Buildings and land
Buildings and land
Machinery, equipment
and software
Goodwill
Land, buildings, telephonerights and other

199
176
11

Total

99
1,139

Financial Review

Other

Category

Corporate
Governance

Company condominium
Dormitory
Recreation facilities

Location

R&D

¥280
137
54
87
¥558

Business property

Oartech Inc. (Chuo-ku,
Tokyo)TIS Inc.
(Minato-ku, Tokyo)
UFIT Co., Ltd.
(Nishi-ku, Nagoya)SORUN
CORPORATION(Minato-ku, Tokyo)
NEXWAY Co., Ltd.
(Minato-ku, Tokyo)
TISI (Shanghai) Co.,
Ltd.
(China)IT Holdings Corporation

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

TopicsBuildings and structures
Machinery and equipment
Software
Other

2011
(Thousands of
U.S. dollars)

Business property

Category

Key Strategies

18. Loss on Disposal of Property and Equipment

Location

To OurStakeholders

Buildings and structures
Machinery and equipment
Land
Other

2011
(Thousands of
U.S. dollars)

Financial
Highlights

2011
2010
(Millions of yen)

Impairment Losses
Profile17. Loss on Sales of Property and Equipment

40¥2,083Financial
SectionFinancial Section

55

29

56

Corporate Data28

9Financial Section

Financial Section

20. Shareholders’ Equity (continued)

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

(b) Dividends(i) Dividends paid

The Company issues only common stocks. Number of issued shares and treasury stock
were changed during the two years ended March 31, 2011 and 2010 were as follows:(Number of shares)
Increasein theYear

Decreasein during
the Year

86,372,339

1,580

1,337,013

3,097 1,317,297

Shares at
March 31,2010

Increase Decreaseduring the duringYear
the Year– 86,373,919 1,415,179
22,813

3,778

Shares at
March 31,2011

– 87，789，098
11,206

¥32
¥12
¥20
¥12

RecordEffective
Date
Date
March 31,
June 26,2009
2009
September 30, December 10,
2009
2009
March 31,
June 25,2010
2010
September 30, December 10,
2010
2010

(ii) The effective date for dividends with a record date of March 31, 2011, shall be adate after the close of books for the said consolidated period.
Resolution

Type of
Stock

General shareholders’meeting on June 24, 2011

Commonstock

Total
Source ofDividend Record Effective
Dividend Dividendper Share
Date
Date
s
s
March 31, June 27,¥1,755Retained
¥20
2011
2011
millionearnings

15,385Topics

21. Amounts per Share

Notes
Increase in issued stock of 1,580 was due to exercise of stock option.

2.

Increase in issued stock of 1,415,179 was due to share exchanges, effective April
1, 2010, by which the Company issued 0.74 shares of common stock of theCompany for every one share of SORUN CORPORATION’s stock.
Increase in treasury stock by 3,097 and 3,778 shares due to purchase of shares ofless than one standard unit.

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.
Decrease of 11,206 in treasury stock for the year ended March 31, 2011, was dueto the sale of 10,885 shares held by a consolidated subsidiary, and 321 sharesthrough the sale of shares of less than one standard unit.

2011

2010

2011
(U.S. dollars)

89.25–
1,602.77
32.00$ 0.82
–
19.68
0.38

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

¥

68.19
–
1,636.56
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.

30

57

31

58

Corporate Data

Cash 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.

Financial
SectionFinancial Section

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

Financial Review

Diluted 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 figures for the years ended March 31, 2011 and2010, are not represented.

Corporate
Governance3.

Year ended March 31,

R&D

1.

5.

Dividendper Share

Key Strategies

Issued shares(Notes 1 and 2)
Treasury stock(Notes 3 to 5)

Shares at
March 31,
2009

Total
Dividends¥2,763
million¥1,036
million¥1,727
million¥1,053
millionTo OurStakeholders(a) Types of Stock and Number of Shares

General shareholders’meeting on June 25, 2009
Directors’ meeting on
November 10, 2009
General shareholders’meeting on June 24, 2010
Directors’ meeting on
November 2, 2010

Type of
Stock
Commonstock
Commonstock
Commonstock
Commonstock

Financial
Highlights

The Company's basic policy is to distribute dividends twice a year, maintaining a
consolidated payout ratio of around 30%. Resolutions are made at the General
Shareholders’ Meeting for the annual dividend, and the Board of Directors’ meeting for theinterim dividend.

Resolution

Profile20. Shareholders’ Equity

9

Financial Section

Financial Section

22.

Leases22.

(a) As Lessee (continued)(iii) Lease expenses, reversal of impairment loss on lease assets, depreciation, interest
expenses and impairment loss for the years ended March 31, 2011 and 2010
Year ended March 31,

2010
2011
(Millions of yen)

Lease expenses
Reversal of impairment loss on
lease assets
Depreciation
Interest expenses¥1,932¥2,986$23,234

13
1,734
74

14
2,772
154

159
20,853889

Equivalents of acquisition cost, accumulated depreciation and net balance as ofMarch 31, 2011 and 2010

¥1,456
2,022
739¥4,217¥1,235
1,558
428¥3,221

Acquisition
cost

¥221
432
311
¥964

March 31, 2010
Accumulated
Accumulated
depreciation
impairment loss
(Millions of yen)

¥2,932
4,553
1,211¥8,696¥2,217
3,187
732¥6,136(iv)
Balance

¥ –
36
–
¥36

$ –
389
–
$389

March 31,2011
2010
(Millions of yen)
Within one year
Over one year
Total

Balance$ 2,652
5,192
3,745$11,589¥854
345¥ 1,199(i)

Investments in finance leases as of March 31, 2011 and 2010 consisted of thefollowing:$16,799
9,306$26,105

Account balance of impairment
loss on leased assets

¥

¥

$

2

15

¥8,881(522)¥8,359$106,803(6,278)$100,525

25
32

59

¥7,7662(597)¥7,171

33

60

Corporate Data

¥2,8782,351¥5,229Lease receivables
Estimated residual value
Interest portion
Investments in finance leases

2011(Thousands of
U.S. dollars)

Financial
SectionFinancial Section¥1,397774¥2,171March 31,2011
2010
(Millions of yen)

Financial Review

2011(Thousands of
U.S. dollars)Within one year
Over one year
Total

$10,274
4,149$14,423(b) As Lessor(ii) Amount of future lease payments outstanding as of March 31, 2011 and 2010,
including the interest portion, categorized by contractual maturity
March 31,2011
2010
(Millions of yen)

¥1,2191,379¥2,598

2011(Thousands of
U.S. dollars)

Corporate
Governance$14,863
18,733
5,147$38,743

The amounts of future lease payments outstanding on noncancelable operatingleases as of March 31, 2011 and 2010, are summarized as follows:

¥ 715
1,330
479
¥2,524

March 31, 2011
Accumulated
Accumulated
depreciation
impairment loss
(Thousands of U.S. dollars)$17,515
24,314
8,892$50,721

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

R&D

Acquisition
cost
Machinery and vehicles
Equipment
Other

¥ –
32
–
¥32

Topics

Machinery and vehicles
Equipment
Other

Balance

Key Strategies

Machinery and vehicles
Equipment
Other

March 31, 2011
Accumulated
Accumulated
depreciation
impairment loss
(Millions of yen)

To OurStakeholders

Acquisition
cost

2011
(Thousands of
U.S. dollars)

Financial
Highlights

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:(i)Profile(a) As Lessee

Leases (continued)

9Financial Section

Financial Section

23. Stock Options(b) As Lessor (continued)

Costs related to stock options that are included in selling, general and administrative
expenses totaled ¥10 million ($126 thousand) and ¥11 million for the years ended March 31,
2011 and 2010, respectively.

(ii) Lease receivables and expected collections of investments in finance leases as ofMarch 31, 2011 and 2010, are as follows:

March 31,2011
2010
(Millions of yen)
¥124
110
96
61
23
24
¥428

Title and numberof recipients$1,268
1,157
1,090
636
124
5
$4,280Investments in finance leases:¥2,908
2,358
1,650
1,036
434
495
¥8,881¥2,601
2,053
1,609
930
329
244
¥7,766$ 34,974
28,36019,84012,4555,221
5,953$106,803¥1,489April 1, 2008
In principle, theperiod beginning
April 1, 2008, throughMarch 31, 2011
April 1, 2008 throughMarch 31, 2011

R&D

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

2011
(Thousands of
U.S. dollars)

2,370 shares

24. Statement of Cash Flows(a) Cash and cash equivalents

¥ -44
100
¥144

¥24
62
¥86

$--525
1,202$1,727

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

61¥47,193321
47,514$441,724
3,624
445,348

(338)

(306)

(4,063)(200)¥36,493(220)¥46,988(2,405)$438,8803562Corporate Data

34

¥36,730301
37,031

Financial
SectionFinancial Section

Within one year
Over one year
Total

2011
(Thousands of
U.S. dollars)

2011(Thousands of
U.S. dollars)

Financial Review

March 31,2011
2010
(Millions of yen)

Corporate
GovernanceThe components of cash and cash equivalents at March 31, 2011 and 2010, were as
follows:(iii) The amount of future lease payments receivable on operating leases outstanding
as of March 31, 2011 and 2010, are categorized by contractual maturity.
March 31,2011
2010
(Millions of yen)

TopicsMarch 31,2011
2010
(Millions of yen)

Remaining numberof stock options– shares(common stock)
Stock issue price ¥4,014
Date of receipt
April 1, 2008
In principle, theRequisite service period beginning
periodApril 1, 2008, throughDecember 31, 2010
April 1, 2008 throughExercise period
December 31, 2010

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

Key Strategies

¥106
96
91
53
10
0
¥356

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

To OurStakeholders

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

2011
(Thousands of
U.S. dollars)

Financial
Highlights

The following table summarizes activities regarding stock option plans that the Company
has granted to its directors, officers and employees as of March 31, 2011.

Lease receivables:

Profile22. Leases (continued)

9Financial Section

Financial Section

24. Statement of Cash Flows (continued)

25. Segment Information (continued)(a) Outline of reportable segment (continued)

SORUN CORPORATION and its 14 subsidiaries (As of December 31, 2009)(Millions ofyen)

A reportable segment is a component of the Group for which discrete financial
information is available and whose operating results are regularly reviewed by the Boardof Directors to make decisions about resources to be allocated to the segment and assess
its performance

19,181(8,264)¥10,917(i)The Group acquired assets and obligations on finance lease transactions amounting
to ¥1,374 million ($16,529 thousand) and ¥1,380 million during the years ended
March 31, 2011 and 2010, respectively.

Segment performance is evaluated based on operating income or loss.
Intersegment sales are recorded at the same price used in transactions with third
parties.

Segment Information for the year ended March 31, 2010, has been restated inaccordance with such accounting standards for comparative purpose.

63

37

64

Corporate Data

36

Financial
SectionFinancial Section(a) Outline of reportable segment
Effective April 1,2010, the Group adopted “Revised Accounting Standard forDisclosures about Segments of an Enterprise and Related Information” (ASBJ
Statement No. 17 issued on March 27, 2009) and “Guidance on the AccountingStandard for Disclosures about Segments of an Enterprise and Related Information”(Guidance No. 20 issued on March 21, 2008).

Financial Review(b) Calculation of net sales, income (or loss), assets, liabilities and other items byreportable segment
The accounting policies of the segment are substanitially the same as those described in
the significant accounting policies in Note 1.

25. Segment Information

Corporate
Governance(iii) Asset retirement obligations amounting to ¥2,563 million ($30,822 thousand)were newly recorded during the year ended March 31, 2011.

R&D(ii) On April 1, 2010, the Company made SORUN CORPORATION (“SORUN”) into
a wholly-owned subsidiary through share exchange. Due to the transaction
additional paid-in capital increased by ¥1,610 million ($19,368 thousand) andgoodwill was incurred to the amount of ￥458 million ($5,509 thousand).

Topics(c) Significant noncash activities

TIS Group
Six companies, headed by TIS Inc. provide mainly software development in various
areas including finance, production and services, and also provide outsourcing
network and solutions.
INTEC Group
Eleven companies, headed by INTEC Inc., provide mainly software development invarious areas including finance, production, merchandising, medicine and public
services, and also provide outsourcing network, solutions, and renting and managing
real estate.
SORUN Group
Fourteen companies, headed by SORUN CORPORATION, provide mainly softwaredevelopment in areas including finance, production, communication and public
services, and also provide solutions.
UFIT Group
Three companies，headed by UFIT Co., Ltd., provide mainly outsourcing network inareas including credit card and banking, and also provide software development andsolutions.
AGREX Group
Seven companies，headed by AGREX INC., provide mainly outsourcing network as aleading company in BPO (business process outsourcing) business, and also provide
software development and solutions.

Key Strategies¥19,058
7,764
4,408(6,450)(3,886)(1,713)

To OurStakeholders

The Company, which operates purely as a holding company, manages the Group by
strategies planned for each subsidiary group. Each subsidiary group provides
information services including outsourcing network, software development and solutions.
Therefore, reportable segments are composed of subsidiary groups such as “TIS Group,”“INTEC Group,” “SORUN Group,” UFIT Group,” and “AGREX Group.”

Financial
Highlights

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,
2011 and 2010, were as follows:

Current assets
Fixed assets
Goodwill
Current liabilities
Noncurrent liabilities
Minority interests
Acquisition cost of SORUNCORPORATION shares
Cash and cash equivalents of SORUNCORPORATION and its 14 subsidiaries
Net payment for acquisition

Profile(b) Assets and liabilities of newly consolidated subsidiaries

9

Financial Section

Financial Section

25. Segment Information (continued)

25. Segment Information (continued)(d) Reconciliation between total amounts of reportable segments and amounts on the
consolidated financial statements for the years ended March 31, 2011 and 2010 were as
follows.

For the year ended 2011
Reporting segment
TIS

INTEC

SORUN

UFIT

AGREX

Total

Other*

Total

Profile(c) Net sales, income (or loss), assets, liabilities and other items by reportable segment for the years ended March 31, 2011 and 2010 were as follows.

(Millions of yen)

Net sales¥79,447
2,484
81,931¥102,198
979
103,177¥45,117671
45,788¥37,622751
38,373¥26,322906
27,228¥290,706
5,791
296,497¥32,467
7,552
40,019¥323,173
13,343
336,516

4,526

4,423

121

1,420

637

11,127

1,387

12,514

Segment assets

99,647

115,690

29,007

26,511

12,435283,290

30,402

313,692

Segment liabilities

25,50035,801

954－－

62,2552,660

64,915

Other items:
Depreciation

3,370

5,029

630

1,795

527

11,351941

12,292

Amortization of goodwill

8

780

977

－

223

1,988

0

1,988

Investment in companies to which
the equity method is applied

68

389

658

－

－

1,115

－

1,115

10,293

4,345

747

1,075

855

17,315

1,169

18,48425.Increase
Segment
Informationin property& equipment(continued)
and intangibles
assetsTotal on reportable segments
Sales included in other
Elimination of intersegment transactions
Net sales on consolidated financial
statements¥ 296,497
40,019(13,343)¥ 289,084
31,506(6,734)

2011(Thousands of
U.S. dollars)$3,565,812
481,291(160,471)¥ 323,173¥313,856$3,886,632

2010
2011
(Millions of yen)

For the year ended 2011
Reportable segment
TIS

INTEC

SORUN

UFIT

AGREX

Total

Other*(Thousands of U.S.dollars)$1,229,086$542,597$452,462$316,560$3,496,164$390,468

29,878

11,775

8,068

9,030

10,897

69,64890,823$3,886,632
160,471

Total sales

985,337

1,240,861

550,665

461,492

327,457

3,565,812

481,291

4,047,103

Segment income

54,42553,196

1,460

17,074

7,658

133,813

16,681

150,494

Segment assets

1,198,397

1,391,344

348,846

318,839

149,546

3,406,971

365,635

3,772,606

Segment liabilities

306,675

430,559

11,471－－

748,705

31,990780,695

Other items:
Depreciation

60,482

7,574

21,587

6,339

136,515

11,312

147,827

95

9,374

11,751－

2,690

23,9102

23,961

Investment in companies to which
the equity method is applied

821

4,675

7,915

－

－

13,411－

13,411

123,784

52,254

8,980

12,927

10,285208,230

14,062

222,292* “Other” means business segment not included in reporting segments and includes QUALICA Group.

Reportable segment
SORUN

UFIT

AGREX

Total

Other*

Total(Millions of yen)
Net sales
Sales to third parties

2010
2011
(Millions of yen)

¥13,601¥41,822¥25,711¥285,025¥28,832

558

205

884

880

4,059

2,674

6,733

Total sales

90,847

115,134

13,80642,706

26,591

289,084

31,506

320,590

Segment income

5,028

6,666

1,244

1,729

650

15,317789

16,106

Segment assets

97,071

123,169

32,16730,176

12,962295,545

23,764

319,309

Segment liabilities

27,50041,913

1,989

－

230

71,632

2,214

73,846

Other items:
Depreciation

3,299

4,943

145

2,097

547

11,031936

11,967

Amortization of goodwill

－

953

221

－

239

1,413

65

1,478

Investment in companies to which the equity
method is applied

53

959

712

－

3

1,727

－

1,727

5,107

6,647

165

1,814

680

14,413

1,206

15,619¥295,545
23,764(3,398)(2,834)¥301,076¥313,077$3,620,878¥313,857

Total liabilities
2011
2010
(Millions of yen)
62,2552,660
85,051¥ 71,632
2,214
84,156

2011(Thousands of
U.S. dollars)$ 748,705
31,9901,022,862¥149,966¥158,002$1,803,557

39

Total on reportable segments
Sales included in other
Other
Total liabilities on consolidated financial
statements¥* “Other” means business segment not included in reporting segments and includes QUALICA Group.

65

66

Corporate Data

41

Financial
SectionFinancial Section¥114,576

1,532¥283,290
30,402(11,004)(1,612)

2011(Thousands of
U.S. dollars)$3,406,971
365,635(132,341)(19,387)

Financial Review¥89,315Intersegment sales and transfers

Increase in property and equipment, and intangible
assets$154,160

Corporate
GovernanceFor the year ended 2010
INTEC

¥15,996

Total assets

Total on reportable segments
Sales included in other
Elimination of intersegment income
Other
Total assets on consolidated financial
statements

25. Segment Information (continued)

TIS¥12,818

R&D

40,533

Amortization of goodwill

38

Total on reportable segments
Sales included in other
Elimination of intersegment income
Other
Operating income on consolidated
financial statements

Topics$ 955,459

Intersegment sales and transfers

Increase in property and equipment, and intangible
assets¥15,317
788
93
(202)

Total

Net sales
Sales to third parties¥11,127
1,387
(98)
402

2011
(Thousands of
U.S. dollars)$133,813
16,681(1,174)4,840

Key Strategies

Operating income* “Other” means business segment not included in reporting segments and includes QUALICA Group.

To OurStakeholders

Segment income

2010
2011
(Millions of yen)

Financial
Highlights

Net sales
Sales to third parties
Intersegment sales and transfers
Total sales

9Financial Section

Financial Section

25. Segment Information (continued)

25. Segment Information (continued)
Reportable segment

2010
2011
(Millions of yen)
¥ 11,351
941
16¥11,032936
11¥12,308¥11,979$148,023

Impairment loss

¥15,597

AGREX

Other＊

Corporate/elimination

Total$5,433$ 6,161 $ 133

$919

$ 148

$126

$ –

$12,920Goodwill:

2011(Thousands of
U.S. dollars)$208,230
14,062(330)

Amortization

95

9,374

11,751

–

2,691

2

–

23,913Year-end balance852

18,05844,283

–

3,573

0

–

66,766“Other” includes QUALICA Group.

Incurred by business combinations of subsidiaries before April 1, 2010.
Reportable segment
TIS

INTEC

SORUN

UFIT

AGREX

Other＊

Corporate/elimination

Total(Millions of yen)
Negative goodwill:
Amortization¥18,456

UFIT

Key Strategies¥14,413
1,206
(22)

SORUN

$221,962

Year-end balance

¥–

¥4

¥–

¥ 71

¥–

¥ 12

¥–

¥ 87

–

–

–

–

–

35

–

35

(g) For the year ended March 31, 2011, UFIT Group recognized negative goodwill,amounting to ￥2,999 million ($36,069 thousand). This was incurred by making UFIT
Co., Ltd. into a wholly-owned subsidiary in advance of the merger of TIS Inc.,SORUN CORPORATION and UFIT Co., Ltd.

Topics(e) Net sales to external customers by goods or services for the year ended march 31, 2011
was as follows.
2011
2011
(Millions of yen)(Thousands of
U.S. dollars)Outsourcing network¥124,496$1,497,249
Software development
163,890
1,971,011
Solutions27,183326,918
Other
7,604
91,454
Total net sales¥323,173$3,886,632

To OurStakeholders¥17,315
1,169
(28)

INTEC

(Thousands of U.S. dollars)*

Increase in property and equipment, and intangible assets
2011
2010
(Millions of yen)
Total on reportable segments
Other
Adjustment
Total increase in property and equipment,
and intangible assets on consolidated
financial statements

TIS

Financial
Highlights

Total on reportable segments
Other
Adjustment
Total depreciation on consolidated
financial statements

2011(Thousands of
U.S. dollars)$136,515
11,312
196

ProfileDepreciation

R&D
Corporate
Governance(f) Other income (or loss), goodwill and negative goodwill by reportable segment for the year

ended March 31, 2011 was as follows.

TIS

INTEC

SORUN

UFIT

AGREX

Corporate/elimination

Other＊

Financial Review

Reportable segment

Total(Millions of yen)
Impairment loss

¥ 512

Amortization

8

Year-end balance

71

¥

11

¥76

¥ 12

¥11

¥ –

¥1,074

779

977

–

224

0

–

1,988

1,502

3,682

–

297

0

–

5,552

Financial
SectionFinancial Section¥452

Goodwill:

67

43

68

Corporate Data42

9Financial Section

Financial Section

26. Business Combination

For the year ended March 31, 2010:(a) Acquisition of stock in SORUN CORPORATIONName and business line of acquired entity, main reason for business combination,
date of combination, legal form of combination, and acquired ratio of voting rightsi)ii) Main reason for business combination
To expand scale and reinforce services, to develop overseas and innovative
operations and to enhance efficiency of operations
December 22, 2009iv) Legal form of combination:

Stock acquisition by tender offerv) Acquired ratio of voting rights:

91.55%(Calculation method for estimates)
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 theconsolidated statement of income of the acquired entity.

Transactions under common control(a) SORUN CORPORATION
Effective on April 1, 2010, the Company made SORUN CORPORATION (“SORUN”)
a wholly-owned subsidiary through share exchange.

Amount of goodwill incurred: ¥4,408 millioniii) Amortization method and period of amortization
Average amortization over five years.

44

69

45

70

Corporate Data(i) Purpose of making SORUN a wholly-owned subsidiary through share exchange
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 an objective to make SORUN a wholly-owned subsidiary. As a result, theCompany acquired 23,863,314 shares of SORUN stocks. However, the Company and
SORUN decided to conduct the share exchange for the purpose of completing theprocess of making SORUN a wholly-owned subsidiary of the Company, as had beenoriginally planned.

Financial
SectionFinancial Sectionii) Cause
Principally, expected excess profitability generated by business development
of SORUN CORPORATION.

Financial Review(iv) Amount of goodwill incurred, cause, amortization method and period ofamortizationi)

For the year ended March 31, 2011:
Effective Aplil 1, 2010, the Group adopted “Accounting Standard for Business
Combinations” (ASBJ Statement No. 21 issued on December 26, 2008) and “Revised
Guidance on Accounting Standard for Business Combinations and Accounting Standard
for Business Divestitures” (ASBJ Guidance No. 10 issued on December 26, 2008).

Corporate
Governance(iii) Cost of acquisition and components thereofCommon stock acquisition expense: ¥18,852 million
Expenses, including advisory services, directly related to stock acquisition:¥329 million
Total cost of acquisition: ¥19,181 million

This note is unaudited.

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

Topicsiii) Date of combination:(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.
Net sales¥32,951 million
Operating loss
¥ 574 million
Recurring loss
¥ 727 million
Net loss¥ 891 million

Key Strategies

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¥ 6,450 million
3,886 million¥10,336 million

To OurStakeholders(i)(Liabilities)
Current liabilities
Noncurrent liabilities
Total

Financial
Highlights

Application of Purchase Method

ProfileThe Group carried out the following business combinations during the years ended March 31,
2011 and 2010.

26. Business Combination (continued)
Application of Purchase Method (continued)(v) Amount of assets and liabilities assumed on the date of combination and key
components thereof(Assets)
Current assets¥19,058 million
Fixed assets
7,765 million
Total¥26,823 million

9Financial Section

Financial Section

26. Business Combination (continued)

26. Business Combination (continued)

Common stock of theCompany
Advisory fee & other(iii) Amount of negative goodwill incurred, cause, amortization method and period ofamortizationi) Amount of negative goodwill incurred: ¥2,999 million ($36,069 thousand)ii) Cause: net assets at market price attributable to minority interests on thedeemed acquisition date exceeded its acquisition costiii) Amortization method and period of amortization:
average amortization over five years.

Thousands of
U.S. dollars¥1,61055$19,369660¥1,665$20,029
27. Asset Retirement Obligations(iv) Number of shares distributed
1,415,179 shares of common stock of the Company(c) Increase and decrease of asset retirement obligations(a) Detail of asset retirement obligations
Asset retirement obligations of the Company are composed of clean-up site obligationsof lease agreements of the office buildings and clean-up obligations of halogen gas
which is filled in fire extinction facilities at the data center of the Group.

Key Strategies(b) Computation of asset retirement obligations
Useful lives of the assets are estimated between 58 years and five years. Retirement
obligations are computed by using discount rate of 0.8% to 2.4%.

As of April 1, 2010
Increase in liabilities due toacquisition
Accretion expense
Liabilities settled
As of March 31, 2011

¥2,555864(22)¥2,605

Thousands of U.S.
dollars$30,721
101
766
(265)
$31,323

R&D(v) Amount of goodwill incurred, cause, amortization method and period ofamortizationi) Amount of goodwill incurred: ¥458 million ($5,509 thousand)ii) Cause: acquisition for the prospective increase in profitability of the companyiii) Amortization method and period of amortization:
average amortization over five years.

TopicsMillions of yen(b)

To OurStakeholders(iii) Transfer ratio for stock with voting rights and ratio determinationi) Transfer ratio for stock with voting rights:
0.74 share of common stock in the Company : 1 share of common stock in SORUNii) Ratio determination
In the interest of each company’s shareholders, a third-party opinion was
requested to ascertain the fairness of the stock transfer ratio. The Company
named Nomura Securities Co., Ltd., as its financial advisor, and SORUN
named IBS Securities Co., Ltd., as its financial advisor. The two companies
deliberated the respective third-party opinions and agreed that the ratio wasappropriate.

Financial
Highlights

Stock acquisition
expenseDirect cost
Total cost of
acquisition

Profile(ii) Cost of acquisition and components thereof
Description
Millions of yen

Corporate
Governance

UFIT Co., Ltd.
Effective on April 1, 2010, the Company made UFIT Co., Ltd. (“UFIT”) awholly-owned subsidiary through purchase of treasury stock.

(ii) Cost of acquisition
Description

Thousands of
U.S. dollars¥3,792
53$45,604
632¥3,845$46,236

Financial
SectionFinancial Section

Consideration of
acquisition
Direct cost
Total cost of
acquisition

Millions of yen

Financial Review(i) Manner and detail of the share exchange
Effective on February 3, 2011, UFIT acquired all of its treasury stock (excluding
shares owned by the Company) to become a wholly-owned subsidiary of theCompany, in advance of the merger of TIS Inc., SORUN CORPORATION and UFIT
Co., Ltd. on that day.

Cash
Advisory fee and other

71

47

72

Corporate Data46

9Financial Section

Financial Section

28. Subsequent Events
Profile(a) Transactions under common control

Financial
Highlights

TIS Inc., SORUN CORPORATION and UFIT Co., Ltd, all consolidated subsidiaries of
the Company, were merged into TIS Inc. on April 1, 2011.
(i) Name and business line of acquired entity
Surviving company
Name: TIS Inc.(same of after combination)
Business: Services to distribute information
Liquidation company
Name: SORUN CORPORATIONBusiness: Services to distribute information

To OurStakeholders

Name: UFIT Co., Ltd,Business: Services to distribute information

Key Strategies(ii) Date of combination
April 1, 2011(iii) Legal form of combination
Stock acquisition

Topics(iv) During the course of the merger no new stock was issued because it was amerger among the wholly-owned subsidiaries of the Company.
(v) Main reason for business combination
The object of the merger was to expand the area of operation of engineers, toutilize efficiently the resources of the data center and to strengthen financial
structures with an emphasis on building operating systems for financial businessincluding credit card, banking, securities and insurance.

R&D(Thousands of
U.S. dollars)¥1,755$21,112Financial Review

Cash dividends (¥20.00 = $0.24 per share)(Millions ofyen)

Corporate
Governance(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,
2011, were approved at a shareholders’ meeting held on June 24, 2011.

Financial
SectionFinancial Section
Corporate Data

48

7374