Annual Securities Report(Report based on Article 24, Paragraph 1 of the
Financial Instruments and Exchange Act)
Fiscal year
Started October 1, 2014
(49th Term) Ended September 30, 2015

TKC Corporation
1758 Tsurutamachi, Utsunomiya-shi, Tochigi(E04807)
This report (from the Cover onward) is a print out of the (electronic) disclosure document filed with EDINET.

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Contents
Page[Cover]................................................................................................................................................................ 3

Section 1 [Information on the Company] ............................................................................................................... 4
Part 1 [Overview of the Company] ...................................................................................................................... 4
1 [Key Financial Data] .............................................................................................................................. 4
2 [History] ................................................................................................................................................. 6
3 [Description of Business] ....................................................................................................................... 8
4 [Information on Affiliates] ................................................................................................................... 11
5 [Employees] .......................................................................................................................................... 12Part 2 [Business Overview] ............................................................................................................................... 13
1 [Summary of Business Results] ............................................................................................................ 13
2 [Production, Orders Received and Sales] ............................................................................................. 22
3 [Challenges Facing the Company]........................................................................................................ 22
4 [Risk Factors] ....................................................................................................................................... 25
5 [Material Agreements, etc.] .................................................................................................................. 26
6 [Research and Development Activities] ............................................................................................... 26
7 [Analysis of Consolidated Financial Conditions, Operating Results, and Cash Flows] ....................... 26
Part 3 [Property, Plants and Equipment] ........................................................................................................... 28
1 [Summary of Capital Investments] ....................................................................................................... 28
2 [Major Property, Plants and Equipment] .............................................................................................. 29
3 [Plans for Capital Investments, Disposals of Property, Plants and Equipment] ..................................... 30
Part 4 [Information on the Company] ................................................................................................................ 31
1 [Information on the Company’s Stock] ................................................................................................ 31(1) [Total number of shares, etc.] ....................................................................................................... 31(2) [Information on Share Subscription Rights] ................................................................................. 31(3) [Exercise of Bonds with Share Subscription Rights Containing a Clause for Exercise Price
Adjustment] .................................................................................................................................. 36(4) [Rights Plan] ................................................................................................................................. 36(5) [Changes in Total Number of Issued Shares, Common Stock, etc.]............................................. 36(6) [Shareholders Composition] ......................................................................................................... 37(7) [Major Shareholders] .................................................................................................................... 37(8) [Status of Voting Rights] .............................................................................................................. 38(9) [Stock Option Scheme]................................................................................................................. 39
2 [Acquisition, etc. of Treasury Stock] .................................................................................................... 43
3 [Dividend Policy] ................................................................................................................................. 44
4 [Changes in Share Prices] ..................................................................................................................... 44
5 [Board of Directors].............................................................................................................................. 45
6 [Corporate Governance] ....................................................................................................................... 48
Part 5 [Financial Information] .......................................................................................................................... 70
1. [Consolidated Financial Statements] .................................................................................................... 71(1) [Consolidated Financial Statements] ............................................................................................ 71(2) [Other] ........................................................................................................................................ 108
2 [Financial Statements, etc.] ................................................................................................................ 109(1) [Financial Statements] ................................................................................................................ 109(2) [Major Assets and Liabilities] .................................................................................................... 119(3) [Other] ........................................................................................................................................ 119
Part 6 [Stock-related Administration of the Company] ................................................................................... 121
Part 7 [Reference Information on the Company] ............................................................................................. 122
1 [Information on the Parent Company] ................................................................................................ 122
2 [Other Reference Information] ........................................................................................................... 122
Section 2 [Information on Guarantors, etc. of the Company] ............................................................................ 123[Independent Auditor’s Report] [Confirmation Letter] [Internal Control Report]-2-

[Cover][Document filed]Annual Securities Report[Applicable law]

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

Director, Kanto Local Finance Bureau[Date filed]December 25, 2015

[Fiscal year]

49th term (From October 1, 2014 to September 30, 2015)[Company name]

株式会社TKC (Kabushiki Kaisha TKC)[Company name in English]

TKC Corporation[Title and name of representative]

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

028-648-2111[Contact person]

Hitoshi Iwata, Executive Vice President, Chief Director of Business
Administration, Representative Director[Contact address]

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

03-3235-5511[Contact person]

Hitoshi Iwata, Executive Vice President, Chief Director of Business
Administration, Representative Director[Place available for public inspection]

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

Section 1 [Information on the Company]
Part 1 [Overview of the Company]
1 [Key Financial Data](1) Consolidated Financial Data, etc.
Fiscal year

45th Term

46th Term

47th Term

48th Term

49th Term

Year end

September
2011

September
2012

September
2013

September
2014

September
2015

Net Sales(Millions of yen)

53,63553,387

53,11554,502

54,928

Ordinary income(Millions of yen)

5,421

6,431

6,186

6,401

7,042

Net income(Millions of yen)

3,000

3,112

3,685

3,604

4,011

Comprehensive income(Millions of yen)

2,706

3,232

4,674

3,827

4,149

Total net assets(Millions of yen)

51,94553,95857,421

59,906

62,630Total assets(Millions of yen)

67,037

69,58872,72375,266

76,836

Net assets per share(Yen)

1,898.34

1,975.33

2,106.23

2,205.39

2,304.38

Net income per share(Yen)

112.33116.66138.44135.55151.18

Diluted net income per
share

(Yen)

-

116.60138.19135.15150.63Equity ratio

(%)

75.6

75.6

77.1

77.7

79.6

Return on equity

(%)

6.0

6.0

6.8

6.3

6.7

Price earnings ratio(Times)

14.5

13.7

12.2

16.0

20.3

5,236

6,889

3,926

4,402

6,485

(3,293)(2,634)(2,026)(2,873)(4,558)(1,211)(1,324)(1,291)(1,125)(1,333)12,08315,014

15,622

16,025

16,619

2,473

2,558

2,521

2,503

2,500

Cash flows from
(Millions of yen)operating activities
Cash flows from
(Millions of yen)investing activities
Cash flows from
(Millions of yen)financing activities
Cash and cash
(Millions of yen)equivalents at end of year
No. of employees(No. of people)(Notes) 1. Net Sales do not include consumption taxes, (consumption tax and local consumption tax; hereinafter thesame).
2. Diluted net income per share is not stated for the 45th term as there were no dilutive shares.

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(2) Financial Data, etc. of the Company
Fiscal year

45th Term

46th Term

47th Term

48th Term

49th Term

Year end

September
2011

September
2012

September
2013

September
2014

September
2015

Net Sales(Millions of yen)

50,31450,08249,35550,61650,957

Ordinary income(Millions of yen)

5,380

6,352

6,056

6,367

7,032

Net income(Millions of yen)

2,990

3,110

3,626

3,581

4,073

Common stock(Millions of yen)

5,700

5,700

5,700

5,700

5,700

Total number of issued
shares(Thousands ofshares)

26,731

26,731

26,731

26,731

26,731

Total net assets(Millions of yen)

49,14951,11254,47956,934

59,694

Total assets(Millions of yen)

62,50364,76567,81969,882

71,234(Yen)

1,839.96

1,916.60

2,044.87

2,142.76

2,243.29

44

44

44

44

71

(22)

(22)

(22)

(22)

(33)

Net assets per share
Dividends per share(Of the above interim
dividends per share)(Yen)

Net income per share(Yen)

111.96116.57136.22134.68153.50

Diluted net income per
share

(Yen)

-

116.51135.98134.28152.94Equity ratio

(%)

78.6

78.9

80.2

81.3

83.6

Return on equity

(%)

6.2

6.2

6.9

6.4

7.0

Price earnings ratio(Times)

14.5

13.7

12.4

16.1

20.0

Dividend payout ratio

(%)

39.30

37.75

32.30

32.67

46.25

(No. of people)

2,228

2,266

2,231

2,203

2,201

No. of employees(Notes) 1. Net Sales do not include consumption taxes.
2. Dividends per share for the 49th term include a dividend of 5 yen in commemoration of the Company’s 50th
anniversary.
3. Diluted net income per share is not stated for the 45th term as there were no dilutive shares.

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2 [History]
Date

Company History

October 1966

The Company was established in Utsunomiya City, Tochigi Prefecture on October 22, 1966 as adata processing center to defend the business domains and maintain control over the fate ofaccounting firms, and to improve the administrative efficiency of local governments.
Established Kabushiki Kaisha Tochigi-ken Keisan Center.

August 1971

Established TKC Tokyo Keisan Center and deployed data processing centers nationwide.

September 1972

Established TKC Tokyo Yohin Center K.K. (a subsidiary, changed name to TKC Tokyo Supply
Center K.K. in December 1993). [Merged and absorbed into the Company in January 2000]
Established TKC Osaka Keisan Center K.K. (a subsidiary, changed name to TKC Osaka Yohin
Center K.K. in July 1987, and to TKC Osaka Supply Center K.K. in December 1993). [Merged
and absorbed into the Company in January 2000]
Established TKC Okayama Keisan Center K.K. (a subsidiary, changed name to TKC Chushikoku
Yohin Center K.K. in July 1987, and to TKC Chushikoku Supply Center K.K. in December
1993). [Merged and absorbed into the Company in January 2000]

November 1972

Changed corporate name to Kabushiki Kaisha TKC.
Established TKC Tohoku Keisan Center K.K. (a subsidiary, changed name to TKC Tohoku
Yohin Center K.K. in July 1987, and to TKC Tohoku Supply Center K.K. in December 1993).
[Merged and absorbed into the Company in January 2000]

December 1972

Established TKC Nagoya Keisan Center K.K. (a subsidiary, changed name to TKC Chubu Yohin
Center K.K. in July 1987, and to TKC Chubu Supply Center K.K. in December 1993). [Merged
and absorbed into the Company in January 2000]

November 1973

Established TKC Kyushu Keisan Center K.K. (a subsidiary, changed name to TKC Kyushu
Yohin Center K.K. in July 1987, and to TKC Kyushu Supply Center K.K. in December 1993).
[Merged and absorbed into the Company in January 2000]

August 1975

Established Tokyo Line Printer Company K.K. (currently a consolidated subsidiary).

February 1976

Established TKC Saitama Keisan Center K.K. (a subsidiary, changed name to TKC Kanshin
Yohin Center K.K. in July 1987, and to TKC Kanshin Supply Center K.K. in December 1993).
[Merged and absorbed into the Company in January 2000]

January 1978

Opened TKC Systems Development Research Center.

October 1982

Established TKC Security Services K.K. (currently a consolidated subsidiary).

October 1984

Opened TKC Tax Research Center.

February 1985

Established TKC Management Consulting K.K. (a subsidiary).
[Merged and absorbed into the Company in May 2011]

April 1985

Opened TKC Okinawa Information Service Center and deployed information service centers
nationwide.

August 1985

Opened OA Technology Development Center.

December 1986

Changed corporate name in the Articles of Incorporation to TKC Corporation.

June 1987

Changed names of Keisan Centers to Information Centers.

July 1987

Listed on the Second Section of the Tokyo Stock Exchange.

September 1987

Opened TASK Technology Development Center.

March 1990

Integrated the information processing service divisions of TKC Tokyo Second Information
Center, TKC Shinjuku-Minami Information Center and TKC Ikebukuro Information Center toform TKC Tokyo Consolidated Information Center.

April 1990

Established TKC Corporation Strategic Management Research Center. [Merged and absorbed into
the Company in October 2000]

June 1991

Opened TKC Data Entry Center.

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Date

Company History

January 1992

Opened TKC Precedent Retrieval Service Center.

November 1992

Integrated the information processing service divisions of TKC Osaka Information Center, TKC
Kyoto Information Center and TKC Hyogo Information Center to form TKC Kansai Consolidated
Information Center.

February 1994

Opened Systems Development Center.

March 1996

Listed on the First Section of the Tokyo Stock Exchange.

January 1998

Integrated the information processing service divisions of TKC Nagoya Information Center, TKC
Shizuoka Information Center and TKC Nagano Information Center to form TKC Chubu
Consolidated Information Center.

June 1998

Opened New Systems Development Center.

June 1999

Acquired shares in SKYCOM Corporation (currently a consolidated subsidiary).

July 1999

The systems development division obtained ISO9001 quality management systems certification.

March 2001

Integrated the information processing service division of TKC Kyushu Information Center, TKC
Kumamoto Information Center and TKC Kagoshima Information Center to form TKC Kyushu
Consolidated Information Center.

November 2002

Changed the company name in the company registry to TKC Corporation to match the corporatename in the Articles of Incorporation.

March 2003

Tokyo Line Printer Company obtained "PrivacyMark" accreditation from the Japan Information
Processing Development Center (JIPDEC).

July 2003

Integrated the information processing service divisions of TKC Okayama Information Center,
TKC Hiroshima Information Center and TKC Shikoku Information Center to form TKC
Chushikoku Consolidated Information Center.

October 2003

Reorganized the information processing service divisions of TKC Hokkaido Information Center,
TKC Tohoku Information Center, TKC Tochigi Information Center, and TKC Okinawa
Information Center into TKC Consolidated Information Center, and their SCG departments into
TKCSCG Service Center.
Changed the name of TKC Information Service Center (Accounting Firm BD) to TKCSCG
Service Center.
Opened TKC Internet Service Center (TISC).
Became the first private company to pass the LGWAN (Local Government Wide Area Network) ASP connection qualification test.

April 2004

Obtained PrivacyMark accreditation from JIPDEC (Local Governments BD).

June 2005

Obtained PrivacyMark accreditation from JIPDEC (company-wide).

December 2008

Obtained a report on the effectiveness of the implementation and operation of internal controls
related to ASP services prepared by Ernst & Young ShinNihon LLC based on JICPA AuditingStandards Committee Report 18, "Assessment of Control Risks relating to an Entity using Service
Organizations" (currently, Auditing and Assurance Practice Committee Practical Guideline No.
86, "Assurance Reports on Controls at a Service Organization").

September 2010
October 2015

Opened Innovation & Technology Center (I&TC).
Became the first company in Japan to obtain third party accreditation for ISO/IEC 27018:2014,"Code of practice for protection of personally identifiable information (PII) in public cloud acting
as PII processors" (October 12).

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3 [Description of Business]
The TKC Group (TKC Corporation and affiliated companies) consists of the Company, three subsidiaries and two
affiliated companies. The Group is engaged in business activities including accounting firm business (information
processing services, software and consulting services, and sales of office equipment and supplies), local governments
business (information processing services, software and consulting services, and sales of office equipment), andprinting business.
The positioning of each company in each business segment is as follows.
Note that the three business divisions below are the same as the categories in the segment information set forth in theNotes to Consolidated Financial Statements under Part 5 Financial Information, 1. Consolidated Financial Statements,
etc., (1) Consolidated Financial Statements.
1 Accounting Firm Business
Main services/products

Positioning of the Company and affiliated companies

1. Information processing services(1) Computer services by TKC
Consolidated Information
Centers(2) Computer services by the TKCInternet Service Center (TISC)(Services and sales)
The Company provides information processing services, software andconsulting services, and sales of office equipment and office supplies
for computer-based accounting to customers including accounting firms
and their clients.

2. Software and consulting services(1) Development and provision ofsoftware to be installed on
system devices for information
service applications(Manufacturing and production)
1. Tokyo Line Printer Company, a subsidiary of the Company, offers
printed continuous business forms for TKC’s computer-based
accounting for information processing service applications, andmanufacturing of office supplies for use with TKC’s computer-based
accounting systems.
2. SKYCOM Corporation, a subsidiary of the Company, is engaged in
the development and sales of software.
3. TKC Shuppan Corporation, an affiliated company, publishes books
and monthly magazines on business management, taxing andaccounting to provide useful business information to TKC member
accounting firms and their clients.
4. iMobile Inc., an affiliated company, is engaged in the development
and maintenance of website services.

(2) Systems consulting services by (Others)
specialized staff
TKC Security Services K.K., a subsidiary of the Company, provides
security, maintenance and repair services for buildings owned by theCompany.
3. Sales of office equipment
Sales of system devices for use
with TKC information service
applications
4. Sales of supplies
Sales of office supplies forcomputer-based accounting-8-

2 Local Governments Business
Main services/products

Positioning of the Company and affiliated companies

1. Information processing services(1) Computer services by the
TKC Consolidated
Information Center(2) Computer services by the
TKC Internet Service Center(TISC)(Services and sales)
The Company provides information processing services, software andconsulting services, and sales of office equipment and office supplies tolocal governments (local municipalities, etc.).
(Manufacturing)
1. Tokyo Line Printer Company, a subsidiary of the Company, offers
printed continuous business forms for TKC’s computer-based
accounting for information processing service applications.
2. SKYCOM Corporation, a subsidiary of the Company, is engaged in
the development and sales of software.

2. Software and consulting services(1) Development and provision ofsoftware to be installed on
system devices for
information service
applications(2) Systems consulting services
by specialized staff
3. Sales of office equipment
Sales of system devices for
information service applications
3 Printing Business
Main products

Positioning of the Company and affiliated companies

Continuous business forms for PCs,
general office forms, data printing
services, brochures, etc.

(Manufacturing and sales)
Tokyo Line Printer Company, a subsidiary of the Company, is engaged
in the manufacturing and sales of continuous business forms for PCs,
general office forms and data printing services (DPS).

-9-A structural diagram of the Group’s business activities is as follows:

Software andconsulting
services, etc.

Information processing services

TKC

Accounting Firm Business Division

Purchasing of
supplies for TKC
computer-based
accounting systems

Purchasing ofmonthlymagazines,
etc.

Equity method affiliated company:
TKC Shuppan Corporation

Entrustment ofdevelopment/
maintenance ofwebsite services

TKC National
Federation partnercompanies

Sales of monthly
magazines

Clients ofaccounting firms

Law schools, etc.

Sales of supplies for
TKC computer-based
accounting systems

Medium/largesized companies

Clients

Accounting firms

Outsourcing ofsystems
development/maintenance

Equity method
affiliated company:iMobile, Inc.

Accounting Firm Business Division,consolidated subsidiary:
TKC Security Services K.K.

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Local governments(municipalities, etc.)

General companies

Sales of officeequipment

Sales of continuous
business forms for
TKC PC systems

Local Governments
Business Division

Printing Business
Division

Purchasing ofcontinuous business
forms for TKC PC
systems

Consolidated
subsidiary:
SKYCOM
Corporation

Consolidated subsidiary:Tokyo Line Printer Company

4 [Information on Affiliates](1) Consolidated Subsidiaries

Name

Tokyo Line
Printer Company

TKC Security
Services K.K.

SKYCOM
Corporation

Address

Itabashi-ku,
Tokyo

Utsunomiya
City, Tochigi

Taito-ku,
Tokyo

Capital(Millions ofyen)

Principal line ofbusiness

100

Printing business,
manufacture andsales ofcontinuous
business forms
for PCs

10

100

Security,
maintenance &repairs, andcleaning services

Development andsales of systems

Percentage ofvoting rights held
(%)

55.0

Related activities
Purchasing of printed
continuous business
forms for PCs; lease of
office spaces.
Executive positions areheld concurrently.

100.0

Security, maintenance &repairs, packaging andshipping services.
Executive positions areheld concurrently.
Outsourcing of systems
development.

100.0
Executive positions areheld concurrently.

(Notes) 1. Tokyo Line Printer Company is a specified subsidiary.
2. None of the companies currently submit Securities Registration Statements or Annual Securities Reports.

(2) Equity Method Affiliated Companies
Name

AddressTKC Shuppan
Corporation

Chiyoda-ku,
Tokyo

iMobile, Inc.

Chiyoda-ku,
Tokyo

Capital(Millions ofyen)

Principal line ofbusiness

166

Production ofmonthlymagazines, etc.

32.8

Development
and maintenanceof website
services

30.0

262

Percentage of voting
rights(%)

Related activities
Purchasing of monthly
magazines, etc.
Executive positions areheld concurrently.
Outsourcing ofdevelopment andmaintenance of website
services.
Executive positions areheld concurrently.

(Note) None of the companies currently submit Securities Registration Statements or Annual Securities Reports.

- 11 -

5 [Employees](1) Consolidated Basis
As of September 30, 2015
Name of segment

Number of employees

Accounting Firm Business Division

1,575

Local Governments Business Division526

Printing Business Division

172

Corporate (shared)

227
Total

2,500

(Notes) 1. Number of employees represents the number of working persons.
2. Number of employees listed under Corporate (shared) belongs to the management division.

(2) Status of the Company
As of September 30, 2015
Number of employees

Average age (years)

Average years of service(years)Average annual salary
(yen)

38.1

14.9

6,577,048

2,201

Number of employees

Name of segment
Accounting Firm Business Division

1,467

Local Governments Business Division526

Corporate (shared)

208
Total

2,201

(Notes) 1. Number of employees represents the number of working persons.
2. Average annual salary includes bonuses and extra wages.
3. Number of employees listed under Corporate (shared) belongs to the management division.

(3) Status of Labor Unions
There are no labor unions.

- 12 -

Part 2 [Business Overview]
1 [Summary of Business Results]
I.

Operating Results

The consolidated Group comprising of TKC Corporation and its five consolidated subsidiaries recorded a net salesof 54,928 million yen (increased 0.8% year-on-year), operating income of 6,741 million yen (increased 8.9% yearon-year), ordinary income of 7,042 million yen (increased 10.0% year-on-year), and current net income of 4,011
million yen (increased 11.3% year-on-year).
The Group’s net sales, operating income, ordinary income and current net income all exceeded the previous fiscal
year’s performance with record-breaking figures in current sales and net profit.
Major factors include: the steady growth of orders for cloud services received by both the Accounting Firm and Local
Governments Business Divisions (BDs); the Local Governments BD’s release of software compatible with the launchof the new social security/tax number (My Number) system and the revised Basic Resident Register System; and theinstallation of systems to issue official certificates at convenience stores in government-designated cities and corecities. Increase in capitalized software development costs beyond the original budget, planned and efforts to curtailinternal expenses also contributed to the high performance.
Net sales by business division are shown below.
1. Results of Operation of the Group for the Fiscal Year
(1) Net sales of the Accounting Firm Business Division
1) Net sales of the Accounting Firm BD was 39,067 million yen (decreased 1.8% year-on-year); operating
income was 5,579 million yen (increased 2.4% year-on-year).
2) Computer service sales decreased 3.0% year-on-year. While the use of cloud services such as the FX4 Cloud
Integrated Accounting Information System for mid-sized companies grew, the selling prices of computergenerated accounting books were lowered through system function enhancements to enable accounting firms
and their clients to generate accounting books, formerly generated at the TKC Consolidated Information
Center, from their own offices. This effort to increase FX series users lead to reduced sales.
3) Software sales increased by 5.2% year-on-year. This was due to growth in the FX4 Cloud user base andincrease in sales from associated software rental services.
4) Sales from consulting services decreased 15.6% year-on-year. This was due to decrease in revenue fromclient/server system launch support services as a result of growth in FX4 Cloud system, leading users to shift
from client/server systems to cloud services.
(5

Sales in PCs, servers and other hardware decreased 18.4% year-on-year. This was caused by decrease indemands for servers due to the increased transition to cloud services. Another factor was the lack of strong
demand for PC replacements, which increased in the previous fiscal year when Microsoft’s support for
Windows XP ended and consumption tax rate was raised.

(2) Net sales of the Local Governments Business Division
1) Net sales of the Local Governments BD was 12,472 million yen (increased 8.9% year-on-year); operating
income was 1,100 million yen (increased 51.6% year-on-year).
2) Sales from computer services increased 7.8% year-on-year. This was caused by increase in sales brought onby the snap general election of the House of Representatives and nationwide local elections, and increase in
TISC service fees due to the growth of cloud services.

- 13 -

3) Software sales increased by 37.2% year-on-year. This was attributable to the releasing software compatible
with the revised basic resident register system accompanying the launch of the My Number system, and also
to the development and release of systems compatible with the Comprehensive Children and Child-rearing
Support System and the FY2015 Revised Long-term Care Insurance System.
4) Sales from consulting services decreased 28.1% year-on-year. This was due to drop in sales of the local tax
electronic declaration system, which sold well during the previous fiscal year but not in the current year.
(5 Sales in PCs, servers and other hardware decreased 37.7% year-on-year. Reduced orders in the current fiscal
year was a result of growth in cloud system solutions and a drop from the strong PCs/servers/other hardware
sales of the previous fiscal year prior to the consumption tax hike.
(3) Net Sales of the Printing Business Division (Subsidiary: Tokyo Line Printer Company)
1) Net sales of the Printing BU was 3,388 million yen (increased 3.4% year-on-year); operating income was 54
million yen (increased 698.9% year-on-year).
2) Sales of data printing service-related products increased by 9.4% year-on-year. This was attributable toincreases in orders received for articles relating to the snap general election of the House of Representatives,
major government contract projects, and direct mail productions for other client companies.
3) Business form-related sales decreased by 6.5% year-on-year. This was due to declining demands for business
forms despite the increase in regular large lot orders from the previous fiscal year, and also due to lack of large
once-off orders from government offices that the Company enjoyed during the previous fiscal year.
2. Business Activities and Operating Results of the Accounting Firm Business Division
The Accounting Firm BU operates in accordance with the business objectives set forth in the Articles ofIncorporation (Article 2 Item 1: Management of electronic data processing centers to defend the business domain
and maintain control over the fate of accounting firms) and works under close ties with the TKC National Federation(10,900 members as of September 30, 2015), which consists of certified tax accountants and certified public
accountants that are customers of TKC (hereinafter, "TKC Members").
(Note) For more information on the TKC National Federation, see "All About the TKC National Federation" or visit
the TKC Group website (http://www.tkc.jp/).

(1) Activities of the TKC National Federation ("TKCNF")
1) Policy and strategic targets in view of TKCNF’s 50th anniversary (Year 2021)
Under its "Policy and strategic targets of TKCNF in view of its 50th anniversary," the TKC National
Federation has set a strategic target to expand TKC member basis and achieve one million TKC Members’clients, and works proactively towards "providing support for the prosperity of SMEs."
Specific strategic goals are as follows:(a) Number of TKC Member firms: Over 10,000 offices(b) Number of certified public tax accountants at TKC Member firms: 15,000 accountants(c) The "KFS Campaign": 500,000 companies for each project
K: (utilization of Keizoku MAS system)
F: (expansion of TKC’s FX2 Self-accounting systems)
S: (implementation of "Shomen-tempu (tax audit report)" (Article 33-2 of CPTA Act); attachment anddisclosure of "Certificate of Bookkeeping Timeliness" in financial statements; diffusion of "Chusho
Kaikei Yoryo (Guidelines for SME accounting)")(d) Number of TKC auditors conducting Field Audit: 20,000 auditors- 14 -

(e) Number of subscribers of TKC Corporate Defense Plan: 300,000 companies
2) Important activity themes of TKCNF
TKCNF developed a roadmap to achieve these strategic goals under a universal theme, "Chance, Change andChallenge - Creating the Path to the Future. New Growth Strategy 2021 for TKC Accountants." The roadmap
divides the years leading up to the 50th anniversary (2021) into 3 stages, and sets forth the following actionplans for the first stage ending in December 2016:(a) Enhance accounting leadership and contribute to the prosperity and success of companies;(b) Promote the attachment of tax audit reports and strive to deliver flawless tax accounting;(c) Improve the reliability of financial statements and strengthen ties with financial institutions;(d) Participate in activities to expand the membership base and work to vitalize the organization.
Such activities of TKCNF utilize the systems and services provided by the Company. The Company supports
the activities of TKCNF and is actively engaged in the development and provision of computer services andsoftware that are to the benefit of the prosperity and success of SMEs.
(2) TKC Management Strategy 2021
The Company announced the "TKC Management Strategy 2021" in January 2014. The strategy designed tosupport TKCNF achieve their strategic goals includes the Company’s two priority initiatives to achieve over
10,000 TKC Member firms and 500,000 companies using TKC’s self-accounting systems, and describes specificactions to be taken.
1) Support activities to achieve "Over 10,000 TKC Member Firms"
TKCNF initiated its Project 9501 in January 2015 in order to increase TKC membership to 9,501 or more
offices by the end of September 2016.
The Company is working closely with TKCNF in soliciting new members to achieve this goal. During thisfiscal year, we greeted nearly 150 non-member tax accountants at the New Members’ Forum held in Fukuoka
in November 2014 for TKC Members with memberships less than three years, and also hosted several
seminars targeting non-member TAs.
After April 2015, the Company also encouraged non-member TAs to attend the My Number System Training
Seminar for Accounting Firms for TKC Members which was held 142 times across Japan. More than 750
non-member TAs and accounting firm staff participated in the seminar, and was highly acclaimed as being"extremely useful, as the seminar not only provided explanation on the system itself, but also a clear indicationof what accounting firms need to do."
These efforts resulted in the admission of 376 new members, exceeding this year’s target (360 new members)
and achieving a total number of 10,900 TKC Members and 9,200 offices (as of September 30, 2015).
2) Support activities to achieve "500,000 firms using TKC self-accounting systems"(a) Activities to promote the use of self-accounting by SMEs (promotion of FX series)
The Company focuses on promoting the use of its self-accounting systems FX2 and e21-Meister (hereinafter,"the FX series") which provide owners of SMEs the tools to understand the financial conditions of theirbusiness in a timely manner and to review the progress of their business plans.
As part of the effort, we started offering the Legal Financial Accounting Tab method starting October 2014,
which—in addition to the conventional method of printing account records at information centers—now
enables clients of TKC Members to print their account records in-house through the FX series, and the OMS
output method starting January 2015 for TKC Members to print accounting records of FX series user clientsfrom the Tax Accountants Office Management System (OMS Cloud).
- 15 -

These measures are aimed to further enhance the product appeals of the FX series by providing a means todeliver accounting documents to clients in a timely manner, adding to the existing strengths of the system(such as: secure data storage at TKC data centers; benchmark with excellent company models using TKC
management indicators, improved reliability of financial statements with the Certificate of Bookkeeping
Timeliness (timely preparation of account books (Article 432 of the Companies Act), electronic tax filing
certification). Further, the processing fees for these new output methods were set lower than conventional
methods to offer greater advantage to TKC members and to accelerate the promotion of self-accounting
systems.
The Company’s activities during the fiscal year included: making appeals to TKC Members the advantagesof promoting the use of self-accounting with the new output systems; assisting TKC Members in hostingmeetings to promote self-accounting for the screening of target companies; and accompanying TKC Members
on client visits to propose the implementation of FX series.
As a result of these activities, approximately 215,000 companies use the FX series as of September 30, 2015.
(b) Self-accounting promotion activities targeting mid-size companies (Promotion of FX4 Cloud)
The Company offers an integrated accounting information system FX4 Cloud designed for medium-scale
corporation (with annual turnover of 500 million to 5 billion yen) to support TKC Members in their effort toretain good-standing mid-size clients and expand their client base.
During the fiscal year the Company supported TK Members for them to continue autonomous efforts inpromoting the use of FX4 Cloud. Activities included: hosting in-house training sessions at offices of TKC
Members that serve many large-scale clients; assisting TKC Members in hosting meetings to promote selfaccounting; and accompanying TKC Members on client visits.
As a result of these activities, the number of FX4 Cloud users totaled approximately 7,600 companies as of
September 30, 2015.
(c) Promoting participation in "Training on Annual Priority Themes" and follow-up with participants
The TKCNF held a training seminar on the annual priority themes entitled "Creating a Business Model for
TKC Accountants— Learning from the Success of Highly Profitable TKC Members" at 80 venues nationwide
between July and September. Approximately 4,600 firms and 6,800 attendees participated in the seminar.
Top-earning TKC Member Firms center their business operations around promoting FX series self-accounting,and demonstrated how they added value in the services using the FX series.
The Company positioned this training seminar as an opportunity to motivate firms in their initiatives topromote self-accounting, and encouraged the participation of TKC Members as well as offered ideas on
promotional meetings and client visits.
(d) Tie-ups with Internet banking services
The Company plans to develop a new data application service capable of centrally managing transaction dataof over 1,500 financial institutions nationwide, and to add data importing and automatic voucher issuing
functions to the FX series.
This aims to support small businesses (individual business owners) who cannot spare the manpower foraccounting operations to achieve speedy and accurate accounting by reducing the tasks of issuing slips frombank books, receipts, and invoices.
(3) Support activities for the TKCNF 7000 Project
In March 2013, the Japanese government initiated the Support Project for the Drafting of Business Improvement
Plans. Under this project, approved support agencies consisting of TAs and CPAs will provide support informulating business improvement plans to SMEs who are unable to do so on their own. The TKCNF launched
the 7000 Project in April 2014 targeting to provide such support to 7,000 clients, and encouraged TKC Members
to participate in this project. Further in February 2015, application deadlines for the use of support were abolished,- 16 -

and it has become a permanent responsibility of the approved support agencies to provide assistance in theformulation of business improvement plans. The entire TKCNF continues its engagement in such activities in
response to the social expectations of tax accountants.
In order to support these activities, the Company established the TKC 7000 Project Promotion Support
Headquarters in May 2015 as cross-departmental organization, and held the 7000 Project Practical Meetups
throughout Japan and supported strengthening ties with credit guarantee corporations and financial institutions.
On system level, the Company upgraded its Keizoku MAS System to support the formulation of business
improvement plans, and enhanced the functions of the Bank Report Button of the FX series to enable themonitoring of the plans.
On June 18, 2015 the Company, TKCNF and the Organization for Small & Medium Enterprises and Regional
Innovation, JAPAN (SME Support, JAPAN) signed a three-party Memorandum on Business Collaboration andCooperation with the objectives of (1) strengthening ties between the three parties, and (2) enhancing support for
SMEs. Our initiatives with TKCNF to support SMEs have been accepted and born fruit.
The Company intends to cooperate with TKCNF in such activities as promoting information exchanges with SME
Support, JAPAN, dispatching of lecturers and establishing mutual aid schemes.
(4) Activities to "support the preparation of highly reliable financial statements based on timely and accurate
bookkeeping"
The Company issues a Certificate of Bookkeeping Timeliness in an aim to increase reliability of financial
statements prepared by TKC Members and to provide a passport for smooth financing to the clients of TKC
Members. This utilizes the features of the Company’s financial accounting processing at TKC data centers, which
prohibits any retroactive corrections, insertions and deletions to past data, and TKC Corporation proves, as a third
party, that TKC Members have visited clients on a monthly basis to provide guidance on accurate bookkeeping(monthly Field Audits), and that all work processes from monthly settlements to the final settlement of accounts
and electronic tax filings have been completed in a timely manner.
The Certificate of Bookkeeping Timeliness has been highly acclaimed by financial institutions across Japan, andas of September 30, 2015, it is used to assess credibility for financial articles such as "Kiwame" introduced by
The Bank of Tokyo-Mitsubishi UFJ as well as for other loan plans and preferential interest rates at 44 financial
institutions in Japan including the Shoko Chukin Bank.
In the current fiscal year, we conducted aggressive promotional and advertising campaigns in order to increaseawareness among corporate management that these unique features offered by the Company are highly acclaimed
by financial institutions.
(5) Support for the My Number system
With the launch of the My Number system, companies are obliged to obtain the individual numbers of all
employees, including non-regular employees and part-timers as well as their dependents, and implement security
control measures as set forth in the "Act on the Use of Numbers to Identify a Specific Individual in the
Administrative Procedure" and the "Guidelines for the Appropriate Handling of Specific Personal Information(for Business Operators)." The rules equally apply to accounting firms handling application procedures on behalfof these companies, and developing the appropriate management and operation procedures involves great burden
and risk.
Against such backdrop, the Company upgraded the functions of its Office Management System for Tax
Accounting Firms (OMS Cloud) to ensure the safe and appropriate management of My Number information
entrusted to TKC Members from their clients, and is also in the process of developing and promoting PX My
Portal (scheduled for release in November 2015), a cloud service that would provide TKC Members’ clients witha safe, secure and simple solution to collect, store and use My Number information, which will be offered as
optional system to the Strategic Salary Information System (PX series).
Further, on August 24, 2015, TKCNF established a system to certify accounting firms that are well versed in thecontent and corporate practice under the My Number system as My Number System Advisor Firms. Certified- 17 -

advisor firms will use the Company’s PX My Portal, and the Company endeavors to increase awareness on such
firms and supports their operation.
As a result of these activities, the Company received orders for OMS Cloud from more than 450 firms which
greatly exceeded the annual target (300 firms) and as of September 30, 2015, OMS Cloud is used by 6,100 firms.
(6) Support for the expansion of client base of TKC Members serving medium and large-size companies
While more and more medium and large-sized companies including many listed companies are preparing foroverseas expansion as part of their consolidated group’s growth strategies, those that have already expanded
abroad are facing issues on the adequateness, accuracy and timely procurement of financial information from its
overseas subsidiaries, and have a pressing needs to strengthen the group’s global performance management
structures. Further, with the optional exemptions of application of IFRS (International Financial ReportingStandards), there are more companies included listed companies to which the requirements apply. Additionally,
revisions to the Companies Act (effective May 2015) call for companies to exercise tighter internal control
systems within corporate groups that regulate the management of subsidiaries.
For tax-related issues, while the number of companies applying for consolidated tax payment is decreasing,companies are in need of solutions to handle increasingly complex tax effect calculations as a result of the tax
system revisions in FY2015, including the staged reduction of effective statutory corporation tax rates. Moreover,the use of electronic tax filings by medium and large-size companies is increasing rapidly as all local
municipalities now accept electronic filing of local taxes.
In light of these environmental changes, the Company actively promotes the TKC Consolidated Group Solution
package for medium and large-size companies (which includes: the eCA-DRIVER consolidated accounting
system; the eConsoliTax consolidated tax payment system, the eTaxEffect tax effect accounting system, theASP1000R electronic tax filing system for corporations, the FX5 integrated accounting information system, andthe e-TAX series electronic tax filing system, etc.). The Company also released the cloud version of its"FAManager" fixed asset management system on August 26, 2015, which has been adopted by many companies.
During the fiscal year, the Company collaborated with the TKCNF’s Medium and Large-size Support ResearchCommittee (consisting of nearly 1,200 members as of September 30, 2015) in hosting seminars to discuss themes
such as IFRS, revisions to the Companies Act, and revisions to the tax system. We also initiated cross sales
activities targeting user companies by leveraging the advantages of the Company’s systems, which encompass all
aspects of account settlements and tax declaration on corporate group level.
As a result, the Enterprise Information Sales Department in charge of medium and large-size accounts achieved
double-digit growth for the seventh consecutive year, and the number of companies using the TKC Consolidated
Group Solution counted approximately 2,500 corporate groups (or about 16,000 companies) as of September 30,
2015.
(7) Support for overseas expansion
The Company promoted the use of the Overseas Business Monitor, which links overseas accounting systems inorder to provide parent companies with easy-to-understand, real-time highlights on the performance of theiroverseas subsidiaries. The Company also entered into a comprehensive partnership agreement with Seibu Shinkin
Bank on December 5, 2014 to provide overseas expansion support to SMEs, and in June 2015, held an overseas
expansion support seminar to discuss how to manage the performance of Chinese subsidiaries.
(8) Expansion of markets for legal information database services
The LEX/DB Internet legal information database maintains an archive of over 270,000 judicial precedents, etc.
(as of September 30, 2015) covering all legal fields from precedents set in the former Supreme Court dating backto 1875 to those most recently announced. The TKC Law Library is a comprehensive legal information databasewhich uses the LEX/DB Internet as its core content and contains over 876,000 bibliographic informationreferences and 46 databases of professional journals. As of September 30, 2015, the Library is used by over 15,000
institutions, including TKC Member firms, universities, law schools, government offices, law firms, patent offices
and corporate legal departments.

- 18 -

In the current fiscal year, the Company formed a joint sales team with Gyosei Corporation in promoting the salesof the TKC Law Library basic service set along with practical contents on traffic accident-related and businessrelated legal affairs. We successfully hosted practical training seminars for law firms targeting lawyers with five
years or less experience. The Company also began offering "Interpretations on Supreme Court Precedent," "NewBusiness Law" and "References to Commercial-related Judicial Affairs" as new contents starting August 2015.
The Company aims to bolster sales to attorneys, corporate legal offices and other practitioners of the law throughthese activities.
In the academic field, we continued to provide highly cost-efficient TKC Law School Educational Support
System—Law School Package to law schools that are struggling in the tough managing environment. This
package is currently in use at 70 schools. In addition, two new systems—the "Learning Support NAVI" and"Study Drills of Past Exams" were added to the current line of exercise systems included in the package to aid
students in self-study (Basic Skill Tests, Study Drills of Short Answer Questions from Past Exams, and the Essay
Writing Seminar), as well as new functions enabling more students to create study plans, check their progress andstudy the necessary precedents in the lead up to the bar exam.
As for the sales of TKC Law Library (Overseas Edition) through agents, we have received inquiries from courts,
governmental agencies, universities and law firms in South Korea, Taiwan, China and other Asian countries aswell as other countries including Germany, the U.K. and the U.S. As of September 30, 2015, over 60 licenses arein use worldwide, with further growth anticipated in the future, particularly in the Asian regions.
3. Business Activities and Operating Results of the Local Governments Business Division
The Local Governments BD operates in accordance with the business objectives set forth in the Articles ofIncorporation (Article 2 Item 2: "Management of electronic data processing centers to improve the administrative
efficiency of local governments") and offers specialized information services in order to help promote the welfareof residents by improving administrative efficiency.
(1) Development and provision of cloud services designed for local municipalities
The Company provides TKC Government Cloud Service to municipalities with a population of up to about
500,000. This Cloud Service consists of the TASK Cloud Service which supports a range of services for residents,
mission-critical functions and information services within agencies, and the TASK Outsourcing Service, which
supports massive batch output and processing of tax papers and other documents. In particular, the TASK Cloud
Service is a common platform package system operated at TKC data centers and shared by all municipalities
across Japan (offered both for individual use and shared use by multiple organizations), and serves as a model for
local government cloud systems that the Japanese government seeks to establish. According to surveys conductedby the government, only about 30% of local governments, both on individual and shared basis, uses cloud services
for their mission-critical (resident registry, tax affairs, etc.) systems. Meanwhile, of the organizations using TKC’s
systems (180 agencies), almost half of the users, or 90 agencies have implemented cloud-based systems (as of
September 30, 2015), including the Saitama Municipal Information System Standardization Promotion Council(18 municipalities), and the Ibaraki Municipal Cloud-based Mission-critical Task Operation Council (4municipalities).
The Company also released the New Generation TASK Cloud (compatible with My Number system) in March
2015 as successor version to the TASK Cloud Service, offering support for the new social security/tax number(My Number) system and enhanced functionalities to ensure proper processing even by new or temporary staff
who are unfamiliar with the tasks. During the current fiscal year, the Company prepared for the My Number
notifications starting in October, while pursuing full-fledged promotional activities for local governments
nationwide through events like the TASK Cloud Fair 2015 (held in 18 cities across Japan from June 30 to
September 4, 2015). As a result, the Company received orders from about 20 agencies, all to be launched by theend of 2015.
(2) Expansion of cloud services for residents
With the introduction of individual Number (My Number) Cards in January 2016, issuing certificates atconvenience store, and other new opportunities for services promoted by the Ministry of Internal Affairs andCommunications will increase dramatically. In response, the Company provides the TASK Cloud Convenience
Store Certificate Issuing System, eleven municipalities use this platform to provide certificate issuing services atconvenience stores. Our extensive track record as the first cloud service for municipalities across Japan has- 19 -

attracted the interest of many local governments including government ordinance-designated cities, and we havereceived orders from 18 agencies including Kobe and Himeji of Hyogo Prefecture during the current fiscal year.
(3) Support for electronic filing of local taxes
The Company is an authorized contractor of the Council for the Digitization of Local Taxes, and provides cloudbased inspection service for electronic filing of local taxes and the electronic tax payment service offered by theCouncil. We also develop and provide data connection services to connect the individual tax systems of various
municipalities with the Council’s platform. These services are proposed in collaboration with over 40 systemvendors with whom we have signed alliance partner agreements, and the support service for TASK cloud
electronic filing of local taxes is currently used by more than 700 agencies (as of September 30, 2015).
This has also brought attention to our TASK cloud taxation document image management service as means tostreamline taxation-related affairs and reduce associated costs. This service is used by over 30 agencies as of
September 30, 2015.
(4) Compliance with revised laws and systems
1) Support for the My Number system
The Company added new system functions in connection with the introduction of the My Number system.
We also hosted staff training events to support the smooth implementation of the new system at our client
agencies, and presented systemized solutions to ensure information security that local agencies need toestablish to achieve appropriate management of Individual Numbers (security control measures).
2) Support for the development of standardized local public accounting
With the announcement of the "Development and Promotion of Standardized Local Public Accounting (noticeby the Ministry of Internal Affairs and Communications on January 23, 2015)," local governments are
required to prepare financial statements in accordance with a set of uniform standards based on the
introduction of double entry bookkeeping and creation of a fixed assets ledger by FY2017.
During this fiscal year, the Company worked to modified the TASK Cloud Public Accounting System, which
provides support for daily bookkeeping (real-time conversion method), and the associated TASK Cloud Fixed
Assets Control System to comply with the new standards, and proposed the new systems to local governments
nationwide. As a result, the Company received orders from 11 agencies, including Nirasaki City and Hokuto
City in Yamanashi Prefecture and Shimoda City in Shizuoka Prefecture.
3) Support for the joint reform of social security and taxation
Support for the Joint Reform of Social Security and Taxation is becoming a pressing issue for municipalities
across Japan. The Company is working to provide systems that are fully compliant with the reforms in social
security system undertaken in the areas of child birth and rearing, medical and nursing care, pensions, andmeasures to alleviate poverty, wealth disparity and low-income. In this fiscal year, the Company developed
and released systems compatible with the new Comprehensive Children and Child-rearing Support Systemthat started in April 2015 and the FY2015 revisions to the Long-term Care Insurance System.
4. Business Activities and Operating Results of the Printing Business Division
The Group’s Printing BU is engaged in the printing of business forms and manufacturing and sales of service andproducts around its data printing services.
While sales of business form printing continue to decline, the drop was minute in the current fiscal year thanks toregular orders from major clients received from the previous fiscal year. Meanwhile, data printing service sales
increased which was attributable to increases in spot orders received for articles relating to the election, major
government contract projects, and direct mail productions for other client companies, resulting in a 3.4% increasein sales over the previous fiscal year.

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II. Cash flows
The balance of cash and cash equivalents as of the end of the current consolidated fiscal year increased by 593 million
yen from the end of the previous consolidated fiscal year amounting to 16,619 million yen.
The overview of cash flows for the current fiscal year and major factors contributing to the results are as follows:
1. Cash Flows from Operating Activities
Cash flows from operating activities increased by 6,485 million yen (2,082 million yen increase in revenue yearon-year). Major factors include the recognition of 6,962 million yen in net income before taxes and adjustments.
2. Cash Flows from Investing Activities
Cash flows from investing activities decreased by 4,558 million yen (1,684 million yen increase in spending yearon-year). Major factors include the payment of 6,338 million yen for the purchase of investments securities.
3. Cash Flows from Financing Activities
Cash flows from financing activities decreased by 1,333 million yen (207 million yen increase in spending yearon-year). Major factors include payment of 1,459 million yen for year-end dividends as of end of September 2014
and for interim dividends for the period ended September 2015.

- 21 -

2 [Production, Orders Received and Sales](1) Production
Not applicable.
(2) Orders Received
Not applicable.
(3) Sales Results
Sales results by segment for the current consolidated fiscal year were as follows:
Segment nameAmount (Millions of yen)

Year-on-year rate (%)

Accounting Firm Business
Division

39,06798.2

Local Governments Business
Division

12,472108.9

Printing Business Division

3,388

103.4

54,928

100.8

Total
(Notes) 1. Transactions between segments have been offset.
2. Figures shown do not include consumption taxes.

3 [Challenges Facing the Company]
Challenges faced by each division are as follows:
1. Challenges Faced by the Accounting Firm Business Division
The Accounting Firm BD considers contributing to the prosperity of accounting firms and SMEs a vital businesschallenge, and will continue to collaborate closely with the TKCNF on the various TKCNF activities as well as
develop and provide systems and services to support the operation of TKC Members.
(1) PC accounting systems is now a necessity even for small companies, and in many business negotiations theCompany faces competition with other accounting system vendors. We will take the following actions toincrease competitiveness of its systems and differentiate ourselves from other companies by appealing theadvantages of our systems.
1) The strengths of the Company’s systems lie in tax affairs and accounting. The advantage is the capability toprovide a one-stop, full line of accounting, tax affairs and electronic tax filing with links to related tax returns
while maintaining complete compliance with laws, regulations and accounting standards. Looking ahead, theCompany will continue to respond promptly and accurately to revisions of laws/regulations and systemmodifications, and strive to enhance these strengths.
2) The most important feature of the Company’s systems is that they are not mere offering of systems andservices. Our systems come with the meticulous support, from implementation to operation, by TKC Membersthat have extensive experience in tax- and accounting-related practices, to enable clients to perform legitimate
and appropriate tax and accounting. The Company will provide enhanced support for such TKC Members toassist them in offering greater added-value services.
(2) To achieve the strategic targets of the TKCNF, it is essential to increase TKC membership to exceed 10,000
offices as put forth by the TKCNF New Members & Services Committee. The Company will solicit membershipin cooperation with TKC Members to contribute to the achievement of TKCNF’s strategic target.
- 22 -

(3) The Company will provide support to enable clients of TKC Members to implement measures for the My
Number system efficiently and to strengthen the ties between TKC Members and their clients, thus contributeto improving the profitability of TKC Members.
(4) The Company will increase the use base of the TKC Law Library by enhancing the functions of LEX/DB
Internet and other major contents, expanding the databases for law practitioners and creating new databases ofprofessional journals and other useful contents to provide support to law firms.
2. Challenges Faced by the Local Governments Business Division
The Local Governments BD considers providing support for improving resident convenience and improving theadministrative efficiency of local governments a vital business challenge, to be achieve through the development
and provision of innovative products and services that leverage the latest in ICT, and will implement the following
initiatives to this end.
(1) Development of new resident services designed in anticipation of the My Number system
With the introduction of the My Number system in January 2016 and the commencement of information sharingin July 2017, municipalities are expected to provide new resident services using the My Number system to further
improve convenience. The Company will develop new resident-orientated services in close connection with the
New Generation TASK Cloud using the latest ICT found in tablet devices and smartphones while keeping an eye
on government actions.
(2) Realization of optimal business processes
The Company’s strength in the local governments field lies in the accessibility to TKC data centers where local
governments across Japan can share a common system that our data centers operate (offered both for individual
use and shared use by multiple agencies). The Company will leverage on this strength, and continue to develop
systems to deliver optimal business processes at optimal costs by incorporating the benefits of cloud computing
such as flexibility, extensibility and safety.
3. Challenges Faced by the Printing Business Division
The Company’s Printing BU aims to "contribute to the direct communication capabilities of customers" and to"secure outsourcing contracts for back-office operations of customer." We have established our order receiving andproduction systems combining our analog and digital printing technologies to implement the following actions toincrease sales from DPS (data print services) and BPO (business process outsourcing).
(1) We will focus on promoting sales of DPS-related products through the acquisition of new customers.
(2) We will submit proposals combining our analog and digital printing technologies to loyal customers to achieve
direct communication with such customers.
(3) We will handle back-office operations of customers in the form of BPO (business process outsourcing), andcontribute to streamlining the customers’ business operations by enhancing work efficiency and reducing costs
and security risks while maintaining high quality.
(4) We will strengthen ties with existing customers to increase market share.
(5) We will continue to respond to customer needs, submit unique proposals to differentiate ourselves fromcompetitors, and develop new technologies to reduce production costs.
(6) We will strive to improve and maintain consistent quality, and enhance our quality inspections to prevent quality
defects.
(7) We will increase self-manufacturing and reduce the percentage of subcontracting in order to save costs.
(8) As ISO14001 certified, environmentally-friendly company, we will further our efforts to reduce wasted paper,
purify used pastes and switch to using soybean-derived inks.
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4. Challenges Faced by the Entire Company(1) Providing systems in complete compliance with laws and regulations
The business operations of the Company is to provide support for works performed by certified public tax
accountants, certified public accountants and local public officers, all bearing high levels of social accountability,
by engaging deeply into the legal areas related to Tax Code, the Companies Act, the Civil Code, the Financial
Instruments and Exchange Act, and the Local Autonomy Act, and drawing upon the latest ICT. The Company
will continue to pursue system developments that will enable us to promptly respond to revisions to such laws
and regulations.
(2) Establishing the Group governance system
The Company will establish an internal controls system in compliance with the requirements of the Companies
Act as well as the Financial Instruments and Exchange Act, compile the Company’s management philosophy,
various board structures and corporate rules and regulations in a systematic manner to improve the Group
governance system.
(3) Fostering an organizational culture that bolsters job satisfaction
The Company will promote the fostering of an organizational culture that bolsters job satisfaction in accordancewith the Company’s Management Principles, develop a workplace that respects individuals and team work, andactively develop the capabilities of employees necessary to deliver value to our customers.
(4) Ensuring business continuity
The Company will continue to strengthen and expand existing services to ensure the continuity or early recoveryof the business operations of all of our customers in the event of large-scale natural disaster and other unforeseen
circumstances.
(5) Efforts toward information security
As a provider of information services for accounting firms and their clients and local governments through theuse of latest ICT, ensuring information security is our highest priority and also a social responsibility inconducting our business activities.
With the introduction of the My Number System in October 2015, the personal information entrusted to theCompany from our customers now includes individual numbers used to identifying individuals, and reducing therisk of personal information leakage is all the more important.
It is with this awareness that the Group acquired third party accreditations including the Information Security
Management System (ISMS) Conformity Assessment Scheme and JIS Q 15001 Personal Information Protection
Management Systems - Requirements (Privacy Mark) for the cloud services offered by the Company, so that ourcustomers can use our cloud services with a peace of mind. TISC also acquired the Assurance Reports on Controls
at a Service Organization (Audit Report No. 86) based on JICPA Auditing and Assurance Practice Committee
Practical Guideline No. 86.
Additionally, on October 12, 2015 the Company was among the first in Japan to acquire ISO/IEC27018
certification, an international standard specializing in the protection of personal information in relation to public
cloud services. Acquiring this certification shows objectively that the Company uses and manages personal
information — including My Number information of executives and employees of SMEs and residents that theCompany receives from accounting firms and local governments — in a safe and secure manner under systems
that are of the highest international level, and we feel that this will help raise the trust that our customers have inour cloud services.
The Group will continue to strive to provide environments where customers can use cloud services safely,
securely and conveniently.

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4 [Risk Factors]
Major risks pertaining to the business operations of the Company and the Group, in reference to the sections"Business Overview" and "Financial Information" in this Annual Securities Reports, that we consider are worth
informing our investors are described below. It is also our policy to disclose information on other risk factors that
may be deemed material to investors.
The Company is aware of the possibility that these risks may occur and strives to prevent them in advance or respondpromptly should they occur. However, we feel it necessary that investment decisions concerning the Company
securities should be made after thorough review in light of this section and also in reference to the contents of thisentire report. Note that this section does not cover all risk factors related to investment in the Company securities.
Statements with regards the future are based on the Group’s decision made as of the end of the current consolidated
fiscal year (September 30, 2015).
1. Retirement Benefit Obligations
Retirement benefit obligations and related costs for employees of the Group are recognized based on certain
assumptions (base rates) used in actuarial discount rate calculations. Fluctuation in these base rates may affect thefinancial standing and operating results of the Group. While the Group implements measures to minimize the effectsof such fluctuation, for example, moving parts of the retirement plan to a defined contribution pension management
scheme, the impact of these changes cannot be completely eliminated. Base rate changes may affect the financial
standing and operating results of the Group.
2. Decline in value of fixed assets
The Accounting Standard for the Impairment of Fixed Assets has been applicable since the fiscal year started
September 2006 in accordance with the Financial Instruments and Exchange Act.
The application of fixed asset impairment accounting may affect the financial standing and operating results of theGroup.
3. Fluctuations in raw material procurement costs for Printing BD
Direct purchasing of base paper from paper manufacturers’ accounts for the bulk of raw material procurement by
the Printing BD, and the division strives to ensure the stable provision of raw materials and to maintain optimal
pricing. However, there are concerns for possible imbalance in demand and supply due to oil price increases andtightening of supply and demand in international markets. Should such circumstances prevail, the Group will aim
to respond through price negotiations with its customers. However, such circumstances may still affect the financial
standing and operating results of the Group in the event the procurement of raw materials becomes extremely
difficult, or when purchase prices rise significantly.
4. Protection of personal information
The Group is entrusted with a large amount of information on companies and individuals held by our customers(accounting firms, local governments) as well as internal information for the execution of its business.
In order to ensure that such information is managed properly, the Company will review its policies and procedures
related to information management on an on-going basis, and educate its directors and employees, disseminate theimportance of information management and implement system-based security measures.
The Company shall also strengthen its information protection management systems by obtaining accreditations
such as Information Security Management System (ISMS) Conformity Assessment Scheme and JIS Q 15001
Personal Information Protection Management Systems - Requirements (Privacy Mark), and acquiring
ISO/IEC27018 certification, an international standard specializing in the protecting of personal information in
relation to public cloud services.
However, the potential for such information leaking due to unforeseen circumstances cannot be eliminatedcompletely, such an event could have negative impacts on the Company’s social standing and may require- 25 -

enormous costs in response or reduce the brand value which could affect the financial standing and operating resultsof the Group.
5. Contentious Cases
While there are no contentious cases that could affect the financial standing and operating results of the Group,
such contentious cases could occur in the future.
5 [Material Agreements, etc.]
Not applicable.
6 [Research and Development Activities]
The Group conducts research and development of software to provide innovative information and management tools
to accounting firms and their clients, and to promote the streamlining, standardization and networking ofadministrative affairs performed by local governments.
Divisions involved in R&D acquired Quality Management Systems - Model for Quality Assurance in Design,
Development, Production, Installation and Servicing (ISO9001) certification—an international quality assurance
standard—in July 1999 for the purpose of establishing and strengthening quality control and quality assurance
systems within our system development operations. Additionally, the certificate’s scope of application was expanded
in September 2010 to include the system development headquarters of our Local Governments BD.
An amount of 124 million yen was spent on R&D in the current consolidated fiscal year, yielding the following
results:(1) Accounting Firm BD
Software developed by the Company includes FAManager, a cloud-based fixed asset management systemdesigned for listed companies that uses rich data linking feature set to simplify the settling and entering ofaccounts pertaining to fixed assets, and PX My Portal, an optional add-on to the TKC payroll processing system(PX series) that enables users to manage My Numbers (individual numbers) in a safe, secure and easy manner.
Total research and development cost associated with this BU was 123 million yen.
(2)

Local Governments BD

The Company developed the TASK Cloud Welfare Information Entry System, a cloud system used to enter
welfare information.
Total research and development cost associated with this BU was 0 million yen.
7 [Analysis of Consolidated Financial Conditions, Operating Results, and Cash Flows](1) Analysis of Consolidated Financial Conditions
1. Assets
Total assets as of the end of the current consolidated fiscal year amounted to 76,836 million yen, a 1,570 million
yen increase from 75,266 million yen in the previous consolidated fiscal year.
1) Current assets
Current assets as of the end of the current consolidated fiscal year amounted to 31,666 million yen, a 3,277
million yen decrease from 34,944 million yen of the previous consolidated fiscal year.
- 26 -

This was mainly attributable to 1,706 million yen decrease in Cash and deposits, and 1,274 million yen
decrease in Notes and accounts receivable.
2) Non-current assets
Non-current assets as of the end of the current consolidated fiscal year amounted to 45,169 million yen, a4,848 million yen increase compared to 40,321 million yen as of the previous consolidated fiscal year.
This was mainly attributable to an increase of 6,474 million yen in Investment securities, despite a 3,300
million yen decrease in Long-term deposits.
2. Liabilities
1) Current liabilities
Current liabilities as of the end of the current consolidated fiscal year amounted to 11,749 million yen, a 1,531
million yen decrease from13,281 million yen of the previous consolidated fiscal year.
This was mainly attributable to decrease of 755 million yen in Accounts payable, decrease of 268 million yen
in Short-term debts, and decrease of 540 million yen in Income taxes payable.
2) Fixed liabilities
Fixed liabilities as of the end of the current consolidated fiscal year amounted to 2,456 million yen, a 378 million
yen increase from 2,078 million yen of the previous consolidated fiscal year.
This was mainly attributable to a decrease of 340 million yen in Long-term debts payable included under Other,and a decrease of 265 million yen in Retirement benefit liabilities as a result of 800 million yen contribution to
the retirement benefit trust, despite increases of 509 million yen in Lease obligations and 366 million yen in Longterm debts associated with the construction of the DPS Solutions Center for the Group’s subsidiary, Tokyo Line
Printer Company.
3. Net assets
Total net assets as of the end of the current consolidated fiscal year amounted to 62,630 million yen, a 2,723 million
yen increase compared to 59,906 million yen as of the previous consolidated fiscal year.
This was mainly attributable to an increase of 2,507 million yen in Retained earnings.
Capital-to-asset ratio as of the end of the current consolidated fiscal year was 79.6%, a 1.9% increase compared to
the ratio of 77.7% as of the end of the previous consolidated fiscal year.
(2) Analysis of Operating Results
Refer to "Part 2 Business Overview, 1. Summary of Business Results, I. Operating Results."(3) Analysis of Cash Flows
Refer to "Part 2 Business Overview, 1. Summary of Business Results, II. Cash Flows."- 27 -

Part 3 [Property, Plants and Equipment]
1 [Summary of Capital Investments]
The Group (the Company and its consolidated subsidiaries) makes capital investments on an ongoing basis in both
software development and information processing services.
Capital investments (including intangible assets and adjustments) of 5,200 million yen were made in the current
consolidated fiscal year.
(1) Accounting Firm Business Division
Capital investment of 938 million yen was made for reinforcement of the common cloud infrastructure toenhance the cloud environment for the Company’s systems, and in the development of software for sale.
(2) Local Governments Business Division
Capital investment of 2,970 million yen was made for the development of software to provide services overthe cloud system.
(3) Printing Business Division
Capital investment of 1,292 million yen was made for the construction of a new plant specializing in the data
printing service operation.

- 28 -

2 [Major Property, Plants and Equipment](1) The Company
As of September 30, 2015
Book values (millions of yen)
Name of office(Address)

Segments

TKC Tochigi Head Office
TKC Systems Development ResearchCenterTKC Internet Service Center (TISC)
TKC Tochigi Consolidated
Information Center(Utsunomiya City, Tochigi, etc.) *1

Accounting Firm
BD,
Local
Governments BD

Development
facilities,
information
communication
service facilities,
information
processing facilities

TKC Tokyo Head Office
TKC Systems Development ResearchCenter Tokyo Branch(Shinjuku-ku, Tokyo, etc.)

Accounting Firm
BD,
Local
Governments BD

Facilities

Buildings
andstructures

Machinery& vehicles

Land(Area in m2)

Tools,
furniture& fixtures

Other

Total

Number of
employees

3,635

1

2,538
(25,755.02)

699

4,074

10,950

1,064

Office facilities

50

-

-

74

-

124

244

TKC Tokyo Consolidated Information
Accounting Firm
CenterBD(Nerima-ku, Tokyo)

Information
processing facilities

255

-

2,224
(1,447.44)

16

-

2,495

28

TKC Chubu Consolidated Information
Accounting Firm
CenterBD(Kasugai City, Aichi)

Information
processing facilities

60

-

196
(3,017.47)

13

-

271

21

Accounting Firm
TKC Kansai Consolidated Information
BD,
CenterLocal(Ibaraki City, Osaka)
Governments BD

Information
processing
facilities, officefacilities

112

-

-

17

-

129

35

TKC Chushikoku Consolidated
Information Center(Kita-ku, Okayama City, Okayama)

Accounting Firm
BD

Information
processing facilities

21

-

-

6

-

27

11

TKC Kyushu Consolidated
Information Center(Koga City, Fukuoka)

Accounting Firm
BD

Information
processing facilities

193

-

203
(2,341.48)

10

-

407

14

TKC Hokkaido Consolidated
Information Center(Chuo-ku, Sapporo City, Hokkaido)

Accounting Firm
BD

Information
processing facilities

36

-

-

11

-

48

8

TKC Tohoku Consolidated
Information Center
TKC Tohoku SCG Service Center(Aoba-ku, Sendai City, Miyagi)

Accounting Firm
BD

Information
processing facilities

7

-

-

7

-

15

25

TKC Okinawa Consolidated
Information Center
TKC Okinawa SCG Service Center(Naha City, Okinawa)

Accounting Firm
BD

Information
processing facilities

7

-

-

4

-

11

10

TKC Ibaraki SCG Service Center(Tsukuba City, Ibaraki)

Accounting Firm
BD,
Local
Governments BD

Office facilities

34

-

147
(1,120.00)

2

-

184

21

TKC Yamaguchi SCG Service Center Accounting Firm
(Yamaguchi City, Yamaguchi)
BD

Office facilities

24

-

197
(814.00)

1

-

223

6

Accounting Firm
BD,
Local
Governments BD

Welfare facilities

267

-

391
(5,326.69)

0

-

658

-

Dormitories, company housing(Utsunomiya City, Tochigi)- 29 -

(2) Domestic subsidiaries
As of September 30, 2015
Book values (Millions of yen)Company nameTokyo Line
PrinterCompany
Tokyo Line
PrinterCompany

Name of office(Address)

Segments

Hanyu Plant(Hanyu City,
Saitama)
DPS Solutions
Center(Hanyu City,
Saitama)

Facilities

Buildings
Tools,
Land
Machinery &andfurniture &vehicles(Area in m2)
structures
fixtures

Other

Total

Number of
employees

Printing BD

Printing facilities

85

165

145
(7,275.17)

2

40

439

60

Printing BD

Printing facilities

573

363

110
(5,776.00)

13

93

1,152

39

(Notes) 1. The figures above do not include consumption taxes.
2. The status of equipment and facilities held by consolidated companies other than those described above aresmall in scale and have been omitted.
3. The "Other" field under book value represents leased assets and software (including work in progress).
4. *1 includes some of the welfare facilities.
5. Major leased facilities and equipment other than those described above are as follows.
(The Company)
Annual office rent

597 million yen

3 [Plans for Capital Investments, Disposals of Property, Plants and Equipment]
Capital investments of the Group are planned based on comprehensive review of economic forecast, industry trends,
investment efficiencies and other factors.
While, in principle, capital projects are formulated individually by each consolidated company, the Company takes
initiative in making Group-wide adjustments.
Plans for the establishment or disposal of major facilities and equipment as of the end of the current consolidated
fiscal year (September 30, 2015) —excluding routine updates of facilities and equipment —were as follows.
Establishment of major facilities and equipment

Company
nameName ofofficePlanned start and completion
dates

Planned investments
Address

Segment

Facilities

Accounting
TKC
Utsunomiy Firm BD,
Corporation
New officea City,Local
Tochigibuilding
Tochigi
Governments
Head Office
BD

Total
Amount Financing
amountinvested method(Millions of (Millions of
yen)
yen)

1,500

(Note) The figures above do not include consumption taxes.

- 30 -

864

Self-funded

Floor area
Start

Completion

August 2015

April 2016

3,871m2

Part 4 [Information on the Company]
1 [Information on the Company’s Stock](1) [Total number of shares, etc.]
1) [Total number of shares]
Class

Total number shares authorized to be issued (Shares)

Common stock

60,000,000

Total

60,000,0002) [Issued shares]

Class

Number of shares issued asof end of current fiscal year
(Shares)(September 30, 2015)

Number of shares issued
as of the filing date
(Shares)(December 25, 2015)

Common stock

26,731,033

26,731,033

Total

26,731,033

26,731,033

Name of stock exchange on
which the Company is listed,or name of Authorized
Financial Instruments Firms
Association
First Section of the Tokyo
Stock Exchange

Description

Number of sharesconsisting a unit is
100 shares--(2) [Information on Share Subscription Rights]
Share subscription rights issued based on the Companies Act are as follows:
1) First Stock Option (Resolution of the Board of Directors on February 10, 2012)175-

As of the end of the month prior
to the filing date(November 30, 2015)
175-

Common stock

Same as left

17,500 (Note 1)

17,500 (Note 1)

1 yen

Same as left

As of end of current fiscal year
(September 30, 2015)
Number of subscription rights to shares
Number of own subscription rights to sharesClass of shares to be issued upon exercise of subscription
rights to shares
Number of shares to be issued upon exercise of subscription
rights to shares
Amount to be paid in upon exercise of subscription rights tosharesPeriod to exercise subscription rights to shares
Price of issuing shares and amount of capitalization upon
exercise of subscription rights to shares
Conditions for exercise of subscription rights to shares
Matters concerning the transfer of subscription rights tosharesMatters concerning substitute payments
Matters concerning the grant of subscription rights to shares
upon reorganization

From March 13, 2012 to March 12,2047
Price of issuing shares: 1,146 yen
Amount of capitalization: 573 yen(Note 2)
(Note 3)Acquisition of subscription rights toshares through transfers shall be
subject to approval by resolution of
the Board of Directors.
(Note 4)Same as left
Same as left
Same as left
Same as left
Same as left

(Notes) 1. When performing a share split (including gratis allotment of common shares of the Company; the same shall apply to allshare splits described hereinafter) or share consolidation with respect to common shares of the Company after the allotment
date of subscription rights to shares, the number of shares granted will be adjusted using the following formula:- 31 -

Number of shares granted after adjustment = Number of shares granted before adjustment × ratio of share split or shareconsolidation
Fractions of less than one share resulting from the foregoing adjustment shall be disregarded.
In addition, when the number of shares granted needs to be adjusted after the allotment date due to reasons other than thoselisted above, such as when the Company is engaged in a merger, a company split, a share exchange or for any other reason
where such adjustment is required, the Company may adjust the number of shares granted as deemed necessary by the Boardof Directors.
2. The price of issuing shares is the sum of the amount to be paid upon subscription and the amount to be paid in upon exerciseof subscription rights to shares.
3. Conditions for exercise of subscription rights to shares(1) A holder of subscription rights may only exercise the share option rights within 10 days (or the next business day if the10th day falls on a holiday) from the date following the day such holder loses his/her position as a Director or Auditorof the Company.
(2) Notwithstanding (1) above, should a proposal for the approval of a merger agreement where the Company would be
dissolved, a proposal for the approval of a company split agreement or a company split plan where the Company would
become a split company, or a proposal for the approval of a share exchange agreement or a share transfer plan where
the Company would become a wholly owned subsidiary were to be approved at a General Meeting of Shareholders of
the Company (or if a Board of Directors resolution is passed in case a resolution of General Meeting of Shareholders is
not required), subscription rights to shares may be exercised within 30 days from the date following the date of suchapproval or resolution. However, this shall exclude cases where subscription rights to shares of a restructured company
are to be issued in accordance with the matters concerning the issuing of subscription rights to shares uponreorganization.
(3) All other applicable conditions shall be as set forth in the "Stock Option Allocation Agreement" concluded between the
Company and holders of subscription rights to shares.
4. If the Company is to engage in a merger with another (limited to cases where the Company is to be dissolved as a result of
the merger), an absorption-type split or incorporation-type split (both limited to cases where the Company is to be a split
company), or a share exchange or a share transfer (both limited to cases where the Company is to be a wholly owned
subsidiary) (hereafter jointly referred to as a "restructuring transaction"), subscription rights to shares in the entity set forthin Article 236, Paragraph 1, Item 8 (a) to (e) of the Companies Act (hereafter, the "restructured company") shall be issued
to the holders of the subscription rights to shares remaining in effect at a time immediately before the effective date of therestructuring transaction (hereinafter respectively referring to the date an absorption-type merger comes into effect, the date
the new corporation is incorporated following a consolidation-type merger, the date an absorption-type split comes into
effect, the date the new corporation is incorporated following an incorporation-type company split, the date a share exchange
comes into effect, or the date the new joint-stock corporation is incorporated following a share transfer) (hereinafter the"remaining subscription rights to shares"). However, such rights may be granted only if provisions for issuing thesubscription rights to shares of the restructured company in accordance with the items described below are included in anabsorption-type merger agreement, a consolidation-type merger agreement, an absorption-type split agreement, anincorporation-type split plan, a share exchange agreement or a share transfer plan:(1) The number of subscription rights to shares of the restructured company to be issued
The same number of subscription rights to shares as the number of remaining subscription rights to shares held byrespective holders of subscription rights to shares.
(2) Class of shares of the restructured company shares to be issued upon exercise of subscription rights to shares
Common shares of the restructured company.
(3) The number of shares of the restructured company shares to be issued upon exercise of subscription rights to shares
To be determined in proportion to the class and number of shares to be issued upon exercise of subscription rights toshares defined in Note 1 above upon considering the conditions, etc. of the restructuring transactions.
(4) The amount of assets to be contributed upon exercise of subscription rights to shares
The amount shall be obtained by multiplying the amount to be paid in after restructuring as prescribed below by the
number of shares of the restructured company to be issued upon exercise of each subscription right to shares as
determined in accordance with (3) above. The amount to be paid in after restructuring shall be 1 yen per share of therestructured company to be issued upon exercise of each subscription rights to shares to be issued.
(5) Period in which subscription rights to shares can be exercised
The period shall start on the start date of the exercise period listed in the "Period to exercise subscription rights to shares"in the table above, or the date the restructuring transactions come into effect, whichever the later, and shall last until the
expiration date of the period in which subscription rights to shares can be exercised.
(6) Matters concerning increases in capital stock and capital reserve occurring when issuing shares upon exercise ofsubscription rights to shares
To be determined in conformity with the matters concerning increases in capital stock and capital reserve occurring
when issuing shares upon exercise of subscription of rights to shares as set forth in the "Price of issuing shares andamount of capitalization amount upon exercise of subscription rights to shares" in the table above.
(7) Restrictions on the acquisition of subscription rights to shares through transfers
Acquisition of subscription rights to shares through transfers shall require the approval by resolution of the Board of
Directors of the restructured company.
(8) Other conditions for exercise of subscription rights to shares
To be determined in conformity with Note 3 above.

- 32 -

(9) Provisions for the acquisition of subscription rights to shares
Subscription rights to shares may be acquired without compensation on a date separately specified by the Board of
Directors should the following resolutions 1), 2), 3), 4), or 5) be approved at a General Meeting of Shareholders of theCompany (or through a resolution by the Board of Directors of the Company, or upon the decision of an executive
officer entrusted with such a matter pursuant to the provisions set forth in Article 416, Item 4 of the Companies Act incase a resolution of the General Meeting of Shareholders is not required):
1) Resolution approving a merger agreement where the Company would become a dissolved company;
2) Resolution approving a company split agreement or a company split plan where the Company would become a split
company;
3) Resolution approving a share exchange agreement or a share transfer plan where the Company would become awholly owned subsidiary;4) Resolution approving an amendment to the Articles of Incorporation to establish a provision requiring the approvalof the Company for the acquisition of all shares issued by the Company through a transfer;5) Resolution approving an amendment to the Articles of Incorporation to establish a provision requiring the approval of
the Company for the acquisition of the class of shares to be issued upon exercise of subscription rights to shares, or aprovision to acquire all of such class of shares by resolution of the General Meeting of Shareholders of the Company.

2) Second Stock Option (Resolution of the Board of Directors on November 5, 2012)
As of end of current fiscal year
(September 30, 2015)

As of the end of the month prior
to the filing date(November 30, 2015)

Number of subscription rights to shares

267

267

Number of own subscription rights to shares--Class of shares to be issued upon exercise of subscription
rights to shares

Common stock

Same as left

Number of shares to be issued upon exercise ofsubscription rights to shares

26,700 (Note 1)

26,700 (Note 1)

Amount to be paid in upon exercise of subscription rights
to shares

1 yen

Same as left

From December 8, 2012 to
December 7, 2047

Same as left

Price of issuing shares:
1,033 yenAmount of capitalization:
517 yen(Note 2)Same as left

Conditions for exercise of subscription rights to shares(Note 3)Same as left

Matters concerning the transfer of subscription rights tosharesAcquisition of subscription rights toshares through transfers shall be
subject to approval by resolution of
the Board of Directors.

Same as left--

(Note 4)Same as left

Period to exercise subscription rights to shares
Price of issuing shares and amount of capitalization upon
exercise of subscription rights to shares

Matters concerning substitute payments
Matters concerning the grant of subscription rights toshares upon reorganization(Notes) 1. Refer to Note 1 under the section, "First Stock Option."
2. Refer to Note 2 under the section, "First Stock Option."
3. Conditions for exercise of subscription rights to shares(1) A holder of subscription rights may only exercise the share option rights within 10 days (or the next business day if the10th day falls on a holiday) from the date following the day such holder loses his/her position as a Director or Auditor,
or as an Executive Officer of the Company.
(2) Notwithstanding (1) above, should a proposal for the approval of a merger agreement where the Company would become
dissolved, a proposal for the approval of a company split agreement or a company split plan where the Company would
become a split company, or a proposal for the approval of a share exchange agreement or a share transfer plan where
the Company would become a wholly owned subsidiary were to be approved at a General Meeting of Shareholders of
the Company (or if a Board of Directors resolution is passed in case a resolution of General Meeting of Shareholders is
not required), subscription rights to shares may be exercised within 30 days from the date following the date of such an
approval or resolution. However, this shall exclude cases where subscription rights to shares of a restructured company
are to be issued in accordance with the matters concerning the issuing of subscription rights to shares uponreorganization.
(3) All other applicable conditions shall be as set forth in the "Stock Option Allocation Agreement" concluded between the
Company and holders of subscription rights to shares.
4. Refer to Note 4 under the section, "First Stock Option."- 33 -

3) Third Stock Option (Resolution of the Board of Directors on November 12, 2013)308-

As of the end of the month prior
to the filing date(November 30, 2015)308-

Common shares

Same as left

30,800 (Note 1)

30,800 (Note 1)

1 yen

Same as left

From December 10, 2013 to December
9, 2048

Same as left

As of end of current fiscal year
(September 30, 2015)
Number of subscription rights to shares
Number of own subscription rights to sharesClass of shares to be issued upon exercise ofsubscription rights to shares
Number of shares to be issued upon exercise ofsubscription rights to shares
Amount to be paid in upon exercise of subscription
rights to shares
Period to exercise subscription rights to shares

Price of issuing shares: 1,324 yen
Price of issuing shares and amount of capitalization upon
Amount of capitalization: 662 yen
exercise of subscription rights to shares(Note 2)
Conditions for exercise of subscription rights to shares(Note 3)Matters concerning the transfer of subscription rights tosharesMatters concerning substitute payments
Matters concerning the grant of subscription rights toshares upon reorganization

Acquisition of subscription rights toshares through transfers shall be subject
to approval by resolution of the Boardof Directors.
(Note 4)Same as left
Same as left
Same as left
Same as left

(Notes) 1. When performing a share split (including gratis allotment of common shares of the Company; the same shall apply to allshare splits described hereinafter) or share consolidation with respect to common shares of the Company after the allotment
date of subscription rights to shares, the number of shares granted will be adjusted using the following formula:
Number of shares granted after adjustment = Number of shares granted before adjustment × ratio of share split or shareconsolidation
Fractions of less than one share resulting from the foregoing adjustment shall be disregarded.
In addition, when the number of shares granted needs to be adjusted after the allotment date due to reasons other than thoselisted above, such as when the Company is engaged in a merger, a company split, a share exchange, or for any other reason
where such an adjustment is required, the Company may adjust the number of shares granted as deemed necessary by the
Board of Directors.
2. The price of issuing shares is the sum of the amount to be paid upon subscription and the amount to be paid in upon exerciseof subscription rights to shares.
3. Conditions for exercise of subscription rights to shares(1) A holder of subscription rights to shares may only exercise the share option rights within 10 days (or the next business
day if the 10th day falls on a holiday) from the date following the day such holder loses his/her position as a Director or
Auditor or as an employee of the Company. However, if a person who has lost his/her position as Director or Auditor
or as an employee of the Company is appointed Director of the Company or employed by the Company with certain or
specific entrustment within 10 days of having lost his/her original position, such person shall not be entitled to exercise
the subscription rights to shares.
(2) Notwithstanding (1) above, should a proposal for the approval of a merger agreement where the Company would become
dissolved, a proposal for the approval of a company split agreement or a company split plan where the Company would
become a split company, or a proposal for the approval of a share exchange agreement or a share transfer plan where
the Company would become a wholly owned subsidiary were to be approved at a General Meeting of Shareholders of
the Company (or if a Board of Directors resolution is passed in case a resolution of General Meeting of Shareholders is
not required), subscription rights to shares may be exercised within 30 days from the date following the date of suchapproval or resolution.
However, this shall exclude cases where subscription rights to shares of a restructured company are to be issued inaccordance with the matters concerning the issuing of subscription rights to shares upon reorganization.
(3) All other applicable conditions shall be as set forth in the "Stock Option Allocation Agreement" concluded between the
Company and holders of subscription rights to shares.
4. If the Company is to engage in a merger with another (limited to cases where the Company is to be dissolved as a result of
the merger), an absorption-type split or incorporation-type split (both limited to cases where the Company is to be a split
company), or a share exchange or a share transfer (both limited to cases where the Company is to be a wholly owned
subsidiary) (hereafter jointly referred to as a "restructuring transaction"), subscription rights to shares in the entity set forthin Article 236, Paragraph 1, Item 8 (a) to (e) of the Companies Act (hereafter, the "restructured company") shall be issued
to the holders of the subscription rights to shares remaining in effect at a time immediately before the effective date of therestructuring transaction (hereinafter respectively referring to the date an absorption-type merger comes into effect, the date
the new corporation is incorporated following a consolidation-type merger, the date an absorption-type split comes into
effect, the date the new corporation is incorporated following an incorporation-type company split, the date a share exchange- 34 -

comes into effect, or the date the new joint-stock corporation is incorporated following a share transfer) (hereinafter the"remaining subscription rights to shares"). However, such rights may be granted only if provisions for issuing thesubscription rights to shares of the restructured company in accordance with the items described below are included in anabsorption-type merger agreement, a consolidation-type merger agreement, an absorption-type split agreement, anincorporation-type split plan, a share exchange agreement or a share transfer plan.
(1) The number of subscription rights to shares of the restructured company to be issued
The same number of subscription rights to shares as the number of remaining subscription rights to shares held byrespective holders of subscription rights to shares.
(2) Class of shares of the restructured company shares to be issued upon exercise of subscription rights to shares
Common shares of the restructured company.
(3) The number of shares of the restructured company shares to be issued upon exercise of subscription rights to shares
To be determined in proportion to the class and number of shares to be issued upon exercise of subscription rights toshares defined in Note 1 above upon considering the conditions, etc. of the restructuring transactions.
(4) The amount of assets to be contributed upon exercise of subscription rights to shares
The amount shall be obtained by multiplying the amount to be paid in after restructuring as prescribed below by the
number of shares of the restructured company to be issued upon exercise of each subscription right to shares as
determined in accordance with (3) above. The amount to be paid in after restructuring shall be 1 yen per share of therestructured company to be issued upon exercise of each subscription rights to shares to be issued.
(5) Period in which subscription rights to shares can be exercised
The period shall start on the start date of the exercise period listed in the "Period to exercise subscription rights to shares"in the table above, or the date the restructuring transactions come into effect, whichever the later, and shall last until the
expiration date of the period in which subscription rights to shares can be exercised.
(6) Matters concerning increases in capital stock and the capital reserve occurring when issuing shares upon exercise ofsubscription rights to shares:
1) The amount of capital to be increased shall be one half of the amount of the maximum increase in capital calculated
in accordance with the provisions of Article 17, Paragraph 1 of the Ordinance on Company Accounting. Fractions
under 1 yen resulting from these calculations shall be rounded up.
2) The amount of capital reserve to be increased shall be the amount calculated by subtracting the amount of capitalincrease stipulated in 1) above from the amount of maximum increase in capital described in 1) above.
(7) Restrictions on the acquisition of subscription rights to shares through transfers
Acquisition of subscription rights to shares through transfers shall require the approval by resolution of the Board of
Directors of the restructured company.
(8) Other conditions for exercise of subscription rights to shares
To be determined in conformity with Note 3 above.
(9) Provisions for the acquisition of subscription rights to shares
Subscription rights to shares may be acquired without compensation on a date separately specified by the Board of
Directors should the following resolutions, 1), 2), 3), 4), or 5) be approved at a General Meeting of Shareholders of theCompany (or through a resolution of a Meeting of Board of Directors of the Company, or upon the decision of an
executive officer entrusted with such a matter pursuant to the provisions set forth in Article 416 Item 4 of the Companies
Act in case a resolution of a General Meeting of Shareholders of the Company is not required):
1) Resolution approving a merger agreement where the Company would become a dissolved company;
2) Resolution approving a company split agreement or a company split plan where the Company would become a split
company;
3) Resolution approving a share exchange agreement or a share transfer plan where the Company would become awholly owned subsidiary;4) Resolution approving an amendment to the Articles of Incorporation to establish a provision requiring the approvalof the Company for the acquisition of all shares issued by the Company through a transfer;5) Resolution approving an amendment to the Articles of Incorporation to establish a provision requiring the approvalof the Company for the acquisition of the class of shares to be issued upon exercise of subscription rights to shares,
or a provision to acquire all of such class of shares by resolution of the General Meeting of Shareholders of theCompany.

- 35 -

4) Fourth Stock Option (Resolution of the Board of Directors on November 11, 2014)
As of end of current fiscal year
(September 30, 2015)

As of the end of the month prior to
the filing date(November 30, 2015)

Number of subscription rights to shares

251

251

Number of own subscription rights to shares--Class of shares to be issued upon exercise ofsubscription rights to shares

Common shares

Same as left

Number of shares to be issued upon exercise ofsubscription rights to shares

25,100 (Note 1)

25,100 (Note 1)

1 yen

Same as left

From December 13, 2014 toDecember 12, 2049

Same as left

Price of issuing shares and amount of capitalization
upon exercise of subscription rights to shares

Price of issuing shares: 1,896 yen
Amount of capitalization: 948 yen(Note 2)Same as left

Conditions for exercise of subscription rights to shares(Note 3)Same as left

Matters concerning the transfer of subscription rights tosharesAcquisition of subscription rights
to shares through transfers shall be
subject to approval by resolution of
the Board of Directors.

Same as left--

(Note 4)Same as left

Amount to be paid in upon exercise of subscription
rights to shares
Period to exercise subscription rights to shares

Matters concerning substitute payments
Matters concerning the grant of subscription rights toshares upon reorganization(Notes) 1. Refer to Note 1 under the section, "Third Stock Option."
2. Refer to Note 2 under the section, "Third Stock Option."
3. Refer to Note 3 under the section, "Third Stock Option."
4. Refer to Note 4 under the section, "Third Stock Option."(3) [Exercise of Bonds with Share Subscription Rights Containing a Clause for Exercise Price
Adjustment]
Not applicable.
(4) [Rights Plan]
Not applicable.
(5) [Changes in Total Number of Issued Shares, Common Stock, etc.]

Date

Increase or
decrease intotal number ofissued shares(Shares)

Balance of
total number
of issued
shares(Shares)November 30, 2009
(Note)(1,185,800)

26,731,033

Increase or
Balance ofIncrease or
Balance of capitaldecrease incapital stock
decrease inreserve
capital stock
capital reserve(Millions of yen) (Millions of yen) (Millions of yen) (Millions of yen)-

(Note) Decrease caused by cancellation of treasury stock.

- 36 -

5,700

-

5,409

(6) [Shareholders Composition]
As of September 30, 2015

Status of shares (100 shares in one unit of shares)
Classification

Government&
municipaliti
esFinancial
institutions

Financial
instruments
business
operators

Other
corporatebodiesForeign corporate bodies,etc.
Nonindividuals

Individuals

Other
individuals

Total

Number ofshares less than
one unit(Shares)Number ofshareholders

-

30

34

117

99

2

8,871

9,153

-

Number ofshares held
(Units)-80,5233,589

61,85632,8196

88,093

266,886

42,433

Percentage ofshares held
(%)

-

30.2

1.3

23.2

12.3

0.0

33.0

100.0

-

(Notes) 1. Of the 177,653 shares held as treasury stock, 1,776 share units are included in "Other individuals" and 53 shares are included
in "Number of shares less than one unit."
2. Of the shares registered under the name of Japan Securities Depository Center, Inc., 6 units are included in "Other corporate
bodies" and 87 shares are included in "Number of shares less than one unit."(7) [Major Shareholders]Names of shareholders

Address

As of September 30, 2015
Percentage of shares
Number of shares held
held to the total(share units)
number of issued(Thousands of shares)
shares (%)

Iizuka Takeshi ScholarshipFoundation

1758 Tsurutamachi, Utsunomiya-shi, Tochigi

3,652

13.7

Daido Life Insurance Company

1-2-1 Edobori, Nishi-ku, Osaka-shi, Osaka

2,569

9.6

2-1 Ageba-cho, Shinjuku-ku, Tokyo

1,610

6.0

3-45-13 Minamidai, Nakano-ku, Tokyo

1,246

4.7

Utsunomiya-shi, Tochigi

1,128

4.2

3-11-1 Nihonbashi, Chuo-ku, Tokyo

925

3.5

Kamakura-shi, Kanagawa

698

2.6

1-2-1 Marunouchi, Chiyoda-ku, Tokyo

666

2.5

1-28-1 Ebisu, Shibuya-ku, Tokyo

598

2.2

1-26-1 Nishishinjuku, Shinjuku-ku, Tokyo

598

2.2

13,692

51.2

TKC Employee Shareholding
Association
Sozeishiryokan (Institute of Tax
Research and Literature)
Masaharu Iizuka
The Hongkong and Shanghai
Banking Corporation, Tokyo
Branch, standing proxy of the State
Street Bank and Trust Company
Kazuaki Iizuka
Tokio Marine & Nichido Fire
Insurance Co., Ltd.
Aioi Nissay Dowa Insurance Co.,Ltd.
Sompo Japan Nipponkoa Insurance
Inc.
Total

-

- 37 -

(8) [Status of Voting Rights]
1) [Shares Issued]
As of September 30, 2015
Number of shares (Shares)

Number of voting rights(Units)Description

Shares without voting right

-

-

-

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

-

-

-

Shares with restricted voting right (others)

-

-

-

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

Common stock
183,100--

Shares with full voting right (others)

Common stock
26,505,500

265,055-

Shares less than one unit

Common stock
42,433--

26,731,033

-

-

-

265,055-Classification

Total number of shares issued
Total voting rights held by all shareholders(Note) "Shares with full voting right (others)" includes 600 shares registered in the name of Japan Securities Depository Center, Inc.;"Number of voting rights" includes 6 units of voting rights held under the name of Japan Securities Depository Center, Inc.

2) [Treasury Stock, etc.]
As of September 30, 2015
Number of shares
held under own
name (Shares)

Number of shares
held under othernames (Shares)

Total shares held
(Shares)

Percentage of shares
held to the total
number of issued
shares (%)

Name of shareholder

Address of shareholder

TKC Corporation

1758 Tsurutamachi,
Utsunomiya-shi,
Tochigi

177,600-

177,600

0.66

TKC Shuppan
Corporation

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

5,500

-

5,500

0.02

183,100-

183,100

0.68

Total

-

- 38 -

(9) [Stock Option Scheme]
The Company has adopted a stock-based compensation stock option scheme that issues subscription rights toshares in accordance with the provisions of the Companies Act. The contents of the scheme are as follows:First Stock Option (Resolution of the Board of Directors on February 10, 2012)
Date of Resolution

February 10, 2012

Class and number of persons eligible for subscription rights
to shares

9 Directors of the Company (excluding Outside Directors)
2 Auditors of the Company (excluding Outside Auditors)

Class of shares to be issued upon exercise of subscription
rights to shares

As described in (2) Information on Share Subscription Rights

Number of shares

Same as above

Amount to be paid in upon exercise of subscription rights tosharesSame as above

Period for exercise of subscription rights to shares

Same as above

Conditions for exercise of subscription rights to shares

Same as above

Matters concerning acquisition of subscription rights toshares through transfer

Same as above

Matters concerning substitute payments

Same as above

Matters concerning the grant of subscription rights to shares
upon organizational restructuring

Same as above

Second Stock Option (Resolution of the Board of Directors on November 5, 2012)
Date of Resolution

November 5, 2012

Class and number of persons eligible for subscription rights
to shares

10 Directors of the Company (excluding Outside Directors)
2 Auditors of the Company (excluding Outside Auditors)
13 Executive Officers of the Company

Class of shares to be issued upon exercise of subscription
rights to shares

As described in (2) Information on Share Subscription Rights

Number of shares

Same as above

Amount to be paid in upon exercise of subscription rights tosharesSame as above

Period for exercise of subscription rights to shares

Same as above

Conditions for exercise of subscription rights to shares

Same as above

Matters concerning acquisition of subscription rights toshares through transfer

Same as above

Matters concerning substitute payments

Same as above

Matters concerning the grant of subscription rights to shares
upon organizational restructuring

Same as above- 39 -

Third Stock Option (Resolution of the Board of Directors on November 12, 2013)
Date of Resolution

November 12, 2013

Class and number of persons eligible for subscription rights
to shares

10 Directors of the Company (excluding Outside Directors)
2 Auditors of the Company (excluding Outside Auditors)
13 Executive Officers of the Company

Class of shares to be issued upon exercise of subscription
rights to shares

As described in (2) Information on Share Subscription Rights

Number of shares

Same as above

Amount to be paid in upon exercise of subscription rights tosharesSame as above

Period for exercise of subscription rights to shares

Same as above

Conditions for exercise of subscription rights to shares

Same as above

Matters concerning acquisition of subscription rights toshares through transfer

Same as above

Matters concerning substitute payments

Same as above

Matters concerning the grant of subscription rights to shares
upon organizational restructuring

Same as above

Fourth Stock Option (Resolution of the Board of Directors on November 11, 2014)
Date of Resolution

November 11, 2014

Class and number of persons eligible for subscription rights
to shares

11 Directors of the Company (excluding Outside Directors)
2 Auditors of the Company (excluding Outside Auditors)
17 Executive Officers of the Company

Class of shares to be issued upon exercise of subscription
rights to shares

Common stocks

Number of shares

Common stocks: 28,100 shares (Note 1)
The number of shares per one unit of subscription right of shares("number of shares granted") shall be 100 shares.
The number of shares described above is the prescribed number
to be allotted, and if the total number of allotted subscription
rights to shares should decrease due to absence of applications
for subscriptions, the total number of common stocks to be issued
shall be 100 times the total number of subscription rights toshares to be allotted.

Amount to be paid in upon exercise of subscription rights toshares

The amount of assets to be contributed upon exercise ofsubscription rights to shares shall be the amount determined bymultiplying the amount of 1 yen per share to be paid in to havesuch shares issued upon exercise of each subscription right toshares, by the number of shares granted.

Period for exercise of subscription rights to shares

From December 13, 2014
To December 12, 2049

Conditions for exercise of subscription rights to shares(Note 2)Matters concerning acquisition of subscription rights toshares through transfer

The acquisition of subscription rights to shares through transfers
shall require the approval of the Board of Directors of theCompany.

Matters concerning substitute payments-

Matters concerning the grant of subscription rights to shares
upon organizational restructuring(Note 3)- 40 -

Fifth Stock Option (Resolution of the Board of Directors on November 10, 2015)
Date of Resolution

November 10, 2015

Class and number of persons eligible for subscription rights
to shares

9 Directors of the Company (excluding Outside Directors)
2 Auditors of the Company (excluding Outside Auditors)
21 Executive Officers of the Company

Class of shares to be issued upon exercise of subscription
rights to shares

Common stocks

Number of shares

Common stocks: 18,200 shares (Note 1)
The number of shares per one unit of subscription right of shares(hereafter, the "number of shares granted") shall be 100 shares.
The number of shares described above is the prescribed number
to be allotted, and if the total number of allotted subscription
rights to shares should decrease due to absence of applications
for subscriptions, the total number of common stocks to be issued
shall be 100 times the total number of subscription rights toshares to be allotted.

Amount to be paid in upon exercise of subscription rights toshares

The amount of assets to be contributed upon exercise ofsubscription rights to shares shall be the amount determined bymultiplying the amount of 1 yen per share to be paid in to havesuch shares issued upon exercise of each subscription right toshares, by the number of shares granted.

Period for exercise of subscription rights to shares

From December 12, 2015
To December 11, 2050

Conditions for exercise of subscription rights to shares(Note 2)Matters concerning acquisition of subscription rights toshares through transfer

The acquisition of subscription rights to shares through transfers
shall require the approval of the Board of Directors of theCompany.

Matters concerning substitute payments-

Matters concerning the grant of subscription rights to shares
upon organizational restructuring(Note 3)(Notes) 1. When performing a share split (including gratis allotment of common shares of the Company; the same shall apply toall share splits described hereinafter) or share consolidation with respect to common shares of the Company after the
allotment date of subscription rights to shares, the number of shares granted will be adjusted using the following formula:
Number of shares granted after adjustment = Number of shares granted before adjustment × ratio of share split or shareconsolidation
Fractions of less than one share resulting from the foregoing adjustment shall be disregarded.
In addition, when the number of shares granted needs to be adjusted after the allotment date due to reasons other thanthose listed above, such as when the Company is engaged in a merger, a company split, a share exchange, or for any
other reason where such an adjustment is required, the Company may adjust the number of shares granted as deemednecessary by the Board of Directors.
2. Conditions for exercise of subscription rights to shares(1) A holder of subscription rights to shares may only exercise the share option rights within 10 days (or the next business
day if the 10th day falls on a holiday) from the date following the day such holder loses his/her position as a Directoror Auditor or as an employee of the Company. However, if a person who has lost his/her position as Director or
Auditor or as an employee of the Company is appointed Director of the Company or employed by the Company withcertain or specific entrustment within 10 days of having lost his/her original position, such person shall not be entitled
to exercise the subscription rights to shares.
(2) Notwithstanding (1) above, should a proposal for the approval of a merger agreement where the Company would
become dissolved, a proposal for the approval of a company split agreement or a company split plan where theCompany would become a split company, or a proposal for the approval of a share exchange agreement or a sharetransfer plan where the Company would become a wholly owned subsidiary were to be approved at a General
Meeting of Shareholders of the Company (or if a Board of Directors resolution is passed in case a resolution ofGeneral Meeting of Shareholders is not required), subscription rights to shares may be exercised within 30 days fromthe date following the date of such approval or resolution.
However, this shall exclude cases where subscription rights to shares of a restructured company are to be issued inaccordance with the matters concerning the issuing of subscription rights to shares upon reorganization.
(3) All other applicable conditions shall be as set forth in the "Stock Option Allocation Agreement" concluded between
the Company and holders of subscription rights to shares.
3. If the Company is to engage in a merger with another (limited to cases where the Company is to be dissolved as a resultof the merger), an absorption-type split or incorporation-type split (both limited to cases where the Company is to be a
split company), or a share exchange or a share transfer (both limited to cases where the Company is to be a wholly owned
subsidiary) (hereafter jointly referred to as a "restructuring transaction"), subscription rights to shares in the entity set
forth in Article 236, Paragraph 1, Item 8 (a) to (e) of the Companies Act (hereafter, the "restructured company") shall be
issued to the holders of the subscription rights to shares remaining in effect at a time immediately before the effective- 41 -

date of the restructuring transaction (hereinafter respectively referring to the date an absorption-type merger comes into
effect, the date the new corporation is incorporated following a consolidation-type merger, the date an absorption-type
split comes into effect, the date the new corporation is incorporated following an incorporation-type company split, thedate a share exchange comes into effect, or the date the new joint-stock corporation is incorporated following a sharetransfer) (hereinafter the "remaining subscription rights to shares"). However, such rights may be granted only ifprovisions for issuing the subscription rights to shares of the restructured company in accordance with the items described
below are included in an absorption-type merger agreement, a consolidation-type merger agreement, an absorption-type
split agreement, an incorporation-type split plan, a share exchange agreement or a share transfer plan.
(1) The number of subscription rights to shares of the restructured company to be issued
The same number of subscription rights to shares as the number of remaining subscription rights to shares held byrespective holders of subscription rights to shares.
(2) Class of shares of the restructured company shares to be issued upon exercise of subscription rights to shares
Common shares of the restructured company.
(3) The number of shares of the restructured company shares to be issued upon exercise of subscription rights to shares
To be determined in proportion to the class and number of shares to be issued upon exercise of subscription rights
to shares defined in Note 1 above upon considering the conditions, etc. of the restructuring transactions.
(4) The amount of assets to be contributed upon exercise of subscription rights to shares
The amount shall be obtained by multiplying the amount to be paid in after restructuring as prescribed below by the
number of shares of the restructured company to be issued upon exercise of each subscription right to shares as
determined in accordance with (3) above. The amount to be paid in after restructuring shall be 1 yen per share of therestructured company to be issued upon exercise of each subscription rights to shares to be issued.
(5) Period in which subscription rights to shares can be exercised
The period shall start on the start date of the exercise period listed in the "Period to exercise subscription rights toshares" in the table above, or the date the restructuring transactions come into effect, whichever the later, and shalllast until the expiration date of the period in which subscription rights to shares can be exercised.
(6) Matters concerning increases in capital stock and the capital reserve occurring when issuing shares upon exercise ofsubscription rights to shares:
1) The amount of capital to be increased shall be one half of the amount of the maximum increase in capital
calculated in accordance with the provisions of Article 17, Paragraph 1 of the Ordinance on Company
Accounting. Fractions under 1 yen resulting from these calculations shall be rounded up.
2) The amount of capital reserve to be increased shall be the amount calculated by subtracting the amount of capitalincrease stipulated in 1) above from the amount of maximum increase in capital described in 1) above.
(7) Restrictions on the acquisition of subscription rights to shares through transfers
Acquisition of subscription rights to shares through transfers shall require the approval by resolution of the Board of
Directors of the restructured company.
(8) Other conditions for exercise of subscription rights to shares
To be determined in conformity with Note 2 above.
(9) Provisions for the acquisition of subscription rights to shares
Subscription rights to shares may be acquired without compensation on a date separately specified by the Board of
Directors should the following resolutions, 1), 2), 3), 4), or 5) be approved at a General Meeting of Shareholders of
the Company (or through a resolution of a Meeting of Board of Directors of the Company, or upon the decision ofan executive officer entrusted with such a matter pursuant to the provisions set forth in Article 416 Item 4 of theCompanies Act in case a resolution of a General Meeting of Shareholders of the Company is not required):
1) Resolution approving a merger agreement where the Company would become a dissolved company;
2) Resolution approving a company split agreement or a company split plan where the Company would become asplit company;
3) Resolution approving a share exchange agreement or a share transfer plan where the Company would become awholly owned subsidiary;4) Resolution approving an amendment to the Articles of Incorporation to establish a provision requiring theapproval of the Company for the acquisition of all shares issued by the Company through a transfer;5) Resolution approving an amendment to the Articles of Incorporation to establish a provision requiring theapproval of the Company for the acquisition of the class of shares to be issued upon exercise of subscription
rights to shares, or a provision to acquire all of such class of shares by resolution of the General Meeting of
Shareholders of the Company.

- 42 -

2 [Acquisition, etc. of Treasury Stock][Class of shares] Acquisition of shares of common stock under Article 155, Item 7 of the Companies Act(1) [Acquisition of Treasury Stock Based on Resolution at the General Meeting of Shareholders]
Not applicable.
(2) [Acquisition of Treasury Stock Based on Resolution of the Board of Directors]
Not applicable.
(3) [Acquisitions of Treasury Stock not Based on Resolutions of General Meeting of Shareholders or Board of
Directors]
Classification

Number of shares (Shares)

Total amount (Yen)Treasury stock acquired during the current fiscal year

1,162

3,222,891

Treasury stock acquired during the current period for
acquisition

69

215,367(Note) Treasury stock acquired during the current period of acquisition does not include shares constituting less than one unit
purchased during the period from December 1, 2015 up to the date on which this Annual Securities Report was filed.

(4) [Disposition and Holding of Acquired Treasury Stock]
Current fiscal year
Classification

Current period for acquisition

Number ofshares(Shares)

Total amountdisposed(Yen)

Number ofshares(Shares)

Total amountdisposed(Yen)

Acquired treasury stock for which
subscribers were solicited

-

-

-

-

Acquired treasury stock canceled

-

-

-

-

17,35233,804,299--

13,80090

26,817,126
174,939--

177,653-

177,722-

Acquired treasury stock transferred due
to merger, share exchange, or company
split
Other
(Transferred by the exercise ofsubscription rights to shares)(Sold due to demand for sales offractional unit shares)
Number of shares of treasury stock held

(Note) The disposition and holding of treasury stock acquired during the current period does not include shares transferred throughthe exercise of subscription rights to shares, shares obtained through the purchase of shares constituting less than one unit,
and shares sold through demand for sales during the period from December 1, 2015 up to the date on which this Annual
Securities Report was filed.

- 43 -

3 [Dividend Policy]
The basic policy of the Company is to pay out dividends that exceed the industry average in accordance with themedium-term management plan set forth by the Board of Directors while continuing to maintain optimal profit eachfiscal year in order to meet the expectation of our shareholders. With the rapid advancement of ICT and majorchanges in social systems, it is essential to make advance investments in research and development efforts and toactively pursue other capital investments to enhance customer support to accounting firms and local governments
and lead them to success while remaining competitive in the marketplace.
Thus, dividends to be paid to shareholders are determined by taking into full consideration such factors as theCompany’s financial standing, operating results and payout ratios as we seek to maintain a balance between
strengthening our capital base to provide adequate funding in R&D and making funds available for stable dividend
payouts over the long-term.
The basic policy of the Company is to pay two annual dividends of retained earnings, an interim dividend and a yearend dividend. Year-end dividends are resolved at the General Meeting of Shareholders and interim dividends byresolution of the Board of Directors.
Under this policy, our dividend payout ratio is at 50.0% (one half of the current net profit).
The Company provides in its Articles of Incorporation that interim dividends as set forth in Article 454 Item 5 of theCompanies Act as of March 31 may be paid by resolution of the Board of Directors.
The dividends of retained earnings for the current fiscal year were as follows. As a result, the annual payout ratio
was 46.3%.
Date of Resolution

Total dividends amount(Millions of yen)

May 12, 2015
Resolution of the Board of Directors
December 22, 2015
Resolution of the Ordinary General
Meeting of Shareholders

Dividends per share
(Yen)

875

33

1,009

38

4 [Changes in Share Prices](1) [Highest and Lowest Prices for the Past Five Fiscal Years]
Fiscal year

45th Term

46th Term

47th Term

48th Term

49th Term

Year end

September 2011

September 2012

September 2013

September 2014

September 2015

Highest (Yen)

1,868

1,814

1,800

2,359

3,690

Lowest (Yen)

1,451

1,475

1,390

1,576

1,841

(Note) The highest and lowest share prices are based on the market prices on the First Section of the Tokyo Stock Exchange.

(2) [Highest and Lowest Prices by Month for the Past Six Months]
MonthApril 2015

May 2015

June 2015

July 2015

August 2015

September 2015

Highest (Yen)

2,920

3,060

3,490

3,690

3,590

3,195

Lowest (Yen)

2,355

2,697

3,015

3,220

2,663

2,853

(Note) The highest and lowest share prices are based on the market prices on the First Section of the Tokyo Stock Exchange.

- 44 -

5 [Board of Directors]
15 male and 0 female Directors (Percentage of female directors: 0%)

Official title

Director

Position

Name

Chairman of theMasaharu Iizuka
Board

Date of BirthFebruary 5, 1943

Representative
Director

President andExecutive
Officer,
Director of
Accounting
Firm Business
DivisionKazuyuki Sumi

September 28, 1948

Representative
Director

Vice President
and Executive
Officer,
Chief Directorof Business
Administration

Hitoshi Iwata

March 31, 1957

Representative
Director

SeniorManaging
Director andExecutive
Officer,
Chief Directorof Sales,Accounting
Firm Business
Division

Masanori Iizuka

March 12, 1975

Brief biography

April 1968
Joined TKC
December 1971 Director, TKC
December 1977 Representative Director, Senior
Managing Director
December 1983 Representative Director, President
December 2008 Representative Director, Chairman
December 2014 Director, Chairman (current position)
March 1972
Joined TKC
December 1990 Director, Deputy Chief Director of Sales
April 1997
Director, Deputy Director of Local
Governments Business Division
May 1997
Managing Director, Deputy Director of
Local Governments Business DivisionDecember 1998 Managing Director, Director of Local
Governments Business Division
July 2001
Representative Director, President, TKC
Security Services K.K. (current position)
December 2001 Senior Managing Director, Director of
Local Governments Business Division

Term ofofficeNumber ofsharesheld(Hundredsof shares)(Note 5)

11,282(Note 5)214

December 2006 Director, Senior Managing Director andExecutive Officer, Director of Local
Governments Business DivisionDecember 2008 Representative Director, Vice President
and Executive Officer, Director of Local
Governments Business DivisionDecember 2011 Representative Director, President andExecutive Officer, Director of
Accounting Firm Business Division(current position)
June 2012
Representative Director, Chairman,
SKYCOM Corporation (current position)
April 1980
Joined TKC
December 2000 Director, Chief Director of General
Affairs
September 2004 Director, Chief Director of Business
Administration
December 2005 Managing Director, Chief Director of
Business Administration
December 2006 Director, Managing Director andExecutive Officer, Chief Director of the (Note 5)
Business Administration
December 2008 Representative Director, Vice President
and Executive Officer, Chief Director of
Business Administration (current
position)
August 2014
Representative Director, Vice President,
TKC Financial Assurance K.K. (current
position)
April 2002
Joined TKC
December 2010 Director, Executive Officer, Sales ofCorporate Information Systems, Chief
Director of G Project of Sales, Corporate
Information Systems, Accounting Firm
Business Division
October 2012
Director, Executive Officer, Chief
Director of Sales of Corporate
Information Systems, Accounting Firm
Business DivisionDecember 2012 Director, Managing Director and(Note 5)
Executive Officer, Chief Director of
Sales, Corporate Information Systems,
Accounting Firm Business Division
April 2014
Director, Managing Director andExecutive Officer, Chief Director of
Sales, Accounting Firm Business
Division
December 2014 Representative Director, Senior
Managing Director and Executive
Officer, Chief Director of Sales,
Accounting Firm Business Division(current position)- 45 -

59

67

Official title

Position

Name

Date of Birth

Brief biography

Term ofofficeApril 1979
June 2013

Director

Managing
Director andExecutive
Officer,
Chief of the Tax
Research Center

Makoto Ito

September 2, 1956

Director

Managing
Director andExecutive
Officer,
Director of
Local
Governments
Business
Division

Masao Yuzawa

January 16, 1959

Director

Managing
Director andExecutive
Officer,
Chief of
Systems
Development
ResearchCenter,Accounting
Firm Business
Division

Hitoshi Uotani

August 3, 1967

Director

Executive
Officer,
Chief of CloudBusiness
Promotion,
Local
Governments
Business
Division

Satoshi Hitaka

January 19, 1971

Director

Executive
Officer,
Chief Directorof SalesPlanning,
Accounting
Firm Business
Sales Division

Yoshihisa Ito

April 2, 1967

Director-

Yasuyuki Saito

June 21, 1956

Director-

HiroshiAshikawa

October 17, 1960

Joined National Tax Agency
Deputy Commissioner (Collection),
National Tax Agency
July 2014
Resigns from National Tax Agency
September 2014 Joined TKC, Deputy Chief, Tax Research (Note 5)CenterDecember 2014 Director, Managing Director andExecutive Officer, Chief of Tax ResearchCenter (current position)
April 1979
Joined TKC
December 2006 Executive Officer, Chief Director of
Sales Planning, Local Governments
Business DivisionDecember 2011 Director, Executive Officer, Local
Governments Business Division
January 2012
Director, Executive Officer, Director of (Note 5)
Local Governments Business Division

Number ofsharesheld(Hundredsof shares)

December 2014 Director, Managing Director andExecutive Officer, Director of Local
Governments Business Division (current
position)
April 1991
Joined TKC
June 2012
Executive Officer, Chief of Corporate
Information Systems Development
Center, Systems Development ResearchCenterOctober 2012
Executive Officer, Chief of Systems
Development Research Center,Accounting Firm Business Division(Note 5)
December 2012 Director, Executive Officer, Chief ofSystems Development Research Center,Accounting Firm Business DivisionDecember 2014 Director, Managing Director andExecutive Officer, Chief of Systems
Development Research Center,Accounting Firm Business Division(current position)
April 2003
Joined TKC
December 2010 Executive Officer, Director of ASP
Service Promotion, Sales Planning, Local
Governments Business DivisionDecember 2011 Director, Executive Officer, New(Note 5)Business Strategy, Local Governments
Business Division
January 2012
Director, Executive Officer, Chief
Director of Cloud Business Promotion,
Local Governments Business Division(current position)
April 1990
Joined TKC
December 2007 Executive Officer, Chief of User
Interface Design, Systems Development
Research Center
October 2010
Executive Officer, Chief Director of
Sales Planning, Accounting Firm
(Note 5)Business DivisionDecember 2013 Director, Executive Officer, Chief
Director of Sales Planning, Accounting
Firm Business Division
October 2015
Director, Executive Officer, Director of
Sales Planning, Sales, Accounting Firm
Business Division (current position)
February 1985 Registered as certified tax accountant
April 1985
Started business as certified tax
accountant(Note 5)January 2010
Representative Partner of Accounting
Firm TOP (current position)
December 2010 Director, TKC (current position)
July 1986
Registered as certified tax accountant
July 1986
Started business as certified tax
accountant
Chief of Ashikawa Accounting Firm
(Note 5)(current position)
Representative Director, K.K. MACOS(current position)
December 2014 Director, TKC (current position)- 46 -

2

39

19

15

29

25

10

Official title

Auditor (fulltime)

Position-Name

Toshiaki
Sakuraoka

Date of Birth

November 27, 1953

Brief biography

December 1996 Director, TKC
December 2002 Managing Director
Director, Managing Director andDecember 2006
Executive Officer
December 2008 Adviser to TKC

Term ofofficeNumber ofsharesheld(Hundredsof shares)(Note 6)71

December 2012 Full-time Auditor (current position)
April 1979

Joined TKC
Section Chief of Internal Audit
Department
Deputy Director of Internal Audit(Note 7)
October 2005
Department
January 2011
Director of Internal Audit Department
December 2014 Full-time Auditor (current position)
September 1986 Registered as certified tax accountant
September 1986 Started business as certified tax
accountant
November 2010 Representative Partner and Certified Tax (Note 8)
Accountant, Aoyama Accounting Firm
(current position)
December 2015 Auditor (current position)
April 1990
Registered as attorney
January 2003
Partner, Shibata, Yamaguchi &Takashima Law Firm
(Note 6)(current position)
December 2008 Auditor (current position)
September 2015 Outside Auditor, Atomlivintech Co., Ltd.
(current position)
April 2004

Auditor (fulltime)-

Masataka Iida

December 8, 1954

Auditor-Kenji
Matsumoto

March 10, 1947

Auditor-YoshikiTakashima

April 18, 1959

Total

36

10

-

11,883(Notes) 1. Masanori Iizuka, Representative Director and Senior Managing Director & Executive Officer, is the eldest son of Masaharu
Iizuka, Chairman of the Board and Representative Director.
2. Director Satoshi Hitaka is the spouse of Masaharu Iizuka, the eldest daughter of Chairman of the Board and Representative
Director.
3. Directors Yasuyuki Saito and Hiroshi Ashikawa are Outside Directors.
4. Auditors Kenji Matsumoto and Yoshiki Takashima are Outside Auditors.
5. Two years from the close of the Ordinary General Meeting of Shareholders held December 19, 2014.
6. Four years from the close of the Ordinary General Meeting of Shareholders held December 21, 2012.
7. Four years from the close of the Ordinary General Meeting of Shareholders held December 19, 2014.
8. Four years from the close of the Ordinary General Meeting of Shareholders held December 22, 2015.

- 47 -

6 [Corporate Governance](1) [Corporate Governance]I.

Basic Approach to Corporate GovernanceThe core of the Group, TKC Corporation, was established on October 22, 1966 listing the following two charters in
Article 2 of the Articles of Incorporation:
1.

Management of electronic data processing centers to defend the business domains and maintain control over thefate of accounting firms;

2. Management of electronic data processing centers to improve the administrative efficiency of local governments.
While other business objectives were later added as business operations expanded, our management policy offocusing our target on accounting firms and local governments and specializing in the field of ICT (information andcommunication technology) to guide our customers’ business to success remains unchanged, and this has led theGroup to occupy a unique position in Japan’s IT industries.
The Group (excluding the Printing BD) has a unique customer base – the Accounting Firm BD serves certified public
tax accountants, certified public accountants, tax accounting firms and audit corporations while the Local
Governments BD provides services to prefectural and municipal offices and affiliated public service corporations.
So from a compliance perspective, our customers are required by vocation-based laws (Certified Public Tax
Accountant Act or Certified Public Accountants Act) or administrative laws (Local Autonomy Act or the Local
Public Service Act) to follow much stricter levels of compliance than other business categories in performing theirbusiness activities.
Thus, it is our utmost priority to ensure that all software products and services designed, produced and sold by theGroup are in full compliance with the laws and regulations pertaining to our customer’s business, and the Group
strives diligently to ensure total compliance in managing each Group companies as well as the Group as a whole inorder to earn the trust of such customers.
As such, the Group understands corporate governance as follows:1.

in order to achieve the business objectives of the Company in compliance with the laws and regulations, theArticles of Incorporation and the resolutions of the General Meetings of Shareholders,2.

the Group shall formulate strategic medium-term management plans and foster competent human resources thatwill enable us to develop and supply software products and services that can drive our customers' business to
success,3.

strive to earn the gratitude, trust, and hopefully the respect of our customers,

4.

and as a result, secure good operating results and sound financial standing so that we can return the fruits to theoriginal owners of the Group, our shareholders.

Through such corporate governance process, we aim to improve the transparency of our decision-making andbusiness processes, implement effective risk management measures, undertake information disclosure andaccountability in a timely manner to continue enhancing our corporate values.
II. Corporate Governance System
1. Reasons for Selecting the Current Corporate Governance System
The Company implements an auditor system and also appoints Outside Directors. Outside Directors are appointed
and installed from the perspective of improving the transparency of the Board of Directors and enhancing its
supervisory functions. This ensures the legality, appropriateness, and validity of the decision-making processes andresolutions by the Board of Directors.
- 48 -

Outside Auditors primarily give advice and make suggestions in order to ensure the legality, appropriateness, andvalidity of the decision-making processes and resolutions by the Board of Directors by expressing their opinions
on compliance issues and whether the resolutions of the Board of Directors are in violation of laws and regulations.
We also have two Outside Directors and two Outside Auditors who meet the requirements of independent
directors/auditors and are notified to the Tokyo Stock Exchange.
Through the implementation of these measures the Company ensures objectivity and neutrality of the supervision
over the management of the Company.
Therefore, we feel that the functions to supervise the management activities are in place, which enables us toinstitute a highly efficient, highly transparent management system that the Company aims for.
2. Execution of Business, Auditing and Supervision, Nominations, Decisions on Remuneration and Other
Functions (Overview of the Current Corporate Governance System)
1) Execution of business
The Representative Director & President chairs the meetings of the Board of Directors, which are held at least
once a month and attended by other Directors where they share information and make decisions in a prompt
manner.
The Board of Directors currently consists of 11 members and, with the exception of the Chairman and an
Outside Director, each Director represents a business unit as operating officer in charge and participates indeliberations and express their opinions. The Company adopts an executive officer system since December
22, 2006.
2) Supervision
The Board of Directors oversees the operations of the Company and supervises the execution of business byeach Director by receiving monthly business reports from the executive officers and heads of the major
business units of the Head Office.
3) Auditing
Auditors attend monthly meetings of the Board of Directors and other major internal meetings and express
their opinions on general managerial or individual issues. The Board of Auditors audits the performance of
duties by Directors in accordance with the Company’s audit policy and annual audit plans established inreference to the "Code of Kansayaku Auditing Standards" by the Japan Audit & Supervisory Members
Association.
Accounting Auditors perform accounting audits based on the annual audit plan, and report to the Auditors andRepresentative Directors and exchange opinions on methods and results of accounting audit.
4) Nomination
When submitting proposals on the appointment of Directors, a temporary Directors Nomination Committee,
consisting of the Representative Directors and Outside Directors and chaired by the President, shall take into
consideration such factors as the candidates’ records on business planning, contributions to past businessperformances, personalities and depth of knowledge, and propose the promotions and reappointments of
Directors to be resolved at General Meetings of Shareholders.
5) Remuneration
The Company implements a performance-based compensation scheme. Director compensation consists of
two parts: fixed-amount compensation and performance-based compensation. Fixed-amount compensation isdetermined in January each year based on the level of achievement of the Company’s performance goals inprevious fiscal year and the performance targets for the current fiscal year; performance-based compensation
is determined based on the level of achievement of the Company’s performance goals in previous fiscal year,- 49 -

and the level of achievement of performance goals by each business unit that each Director oversaw during
previous fiscal year. Proposals on remuneration are developed at the meeting of Representative Directors andapproved by resolution of the Board of Directors. Compensation for Auditors consists of fixed amountcompensation and is determined by consultation among Auditors.
3. Outline of Limited Liability Agreement
The Company concludes agreements with Outside Directors and Outside Auditors in accordance with theprovisions of Article 427, Paragraph 1 of the Companies Act, limiting their liabilities to the amounts set forth by
law if they are without knowledge and not grossly negligent with regards to their responsibilities set forth in Article
423, Paragraph 1.
4. The Company consults with company attorneys concerning important legal issues and compliancerelated matters, and conducts reviews as necessary. The Company consults with the Accounting Auditors
and reviews important accounting issues from time to time in addition to the regular accounting audits,and hold discussions promptly after quarterly and annual financial settlements.
5. Outline of Resolutions on the Development of Systems to Ensure the Appropriateness of Operations
The Company establishes a basic policy by resolution of the Board of Directors concerning “the development ofsystems necessary to ensure that the execution of duties by directors complies with laws and regulations and thearticles of incorporation, and other systems prescribed by the applicable Ordinance of the Ministry of Justice assystems necessary to ensure the properness of operations of a Stock Company” as stipulated in Article 362,
Paragraph 5 of the Companies Act. The outline of the policy is summarized below.
[1] Basic policy concerning the development of systems necessary to ensure that the execution ofduties by directors complies with laws and regulations and the Articles of Incorporation (in relation to
the first half of Article 362, Paragraph 4(vi) of the Companies Act)
1) Directors must comply with all laws and regulations, the Articles of Incorporation, and the Resolutions ofGeneral Meetings of Shareholders (hereafter “laws and regulations”), keep in mind at all times that thebusiness objectives of the Company are as set forth in Article 2 of our Articles of Incorporation, namely the“management of electronic data processing centers to defend the business domains and maintain control overthe fate of accounting firms,” and the “management of electronic data processing centers to improve theadministrative efficiency of local governments,” and perform their duties to achieve these objectives.
2) Directors must perform their duties based on the Company’s Rules on Administrative Authority and Dividing
Duties of Directors established by the Board of Directors, and cooperate with other Directors in improving
corporate performance.
3) In the event a Director finds that his/her decision (including approvals given to proposals made bysubordinates) may be in violation of the laws and regulations, he/she must, without delay, consult with the
Director in charge of legal affairs and act based on said Director’s decision to prevent the occurrence of any
illegal conduct. If such matter is of significant importance, the Director in charge of legal affairs shallimmediately report to the Representative Director and President (hereafter, the “President”), and full-time
Corporate Auditors and outside company attorneys and receive their guidance as well as report the particulars
to the Board of Directors.
4) In the event a Director finds that an act or a plan of another Director or an employee may be in violation of
the laws and regulations, he/she must, without delay, give warning to such Director or employee as joint bearerof managerial responsibilities. If such matter is of significant importance, said Director must immediately
report to the President and receive guidance.
5) Prior to attending any meetings of the Board of Directors, Directors must review the matters to be deliberated,
reported and/or discussed at the next meeting of the Board of Directors (hereinafter, “matters to bedeliberated”) to make sure that there are no omissions in view of the scope of matters to be deliberated under
the regulations concerning the Duties (Articles 362) and Authority (Articles 363) of Directors as stipulated in
the Companies Act and the Company’s Rules on the Board of Directors. If there are other matters to bedeliberated, they must be brought to the Director(s) in charge of the meetings of the Board of Directors without- 50 -

delay.
6) Directors must attend the meetings of the Board of Directors and voice their opinions and exercise their voting
rights on all matters to be deliberated based on their conscience and responsibility. Directors must give a true
account of the execution of their duties, speak frankly of any anticipated strategic risks and operational risks,and give the opportunity and time for the Board of Directors to review countermeasures for such issues inadvance.
7) The entire process of deliberations at the meetings of the Board of Directors shall be recorded in accordancewith the Company’s Rules on Management of Information Concerning the Decision-making Process of theBoard of Directors. The recordings must be kept in the form of electromagnetic records as specified in Article
371 of the Companies Act along with any materials used for explanations and the minutes of meeting of theBoard of Directors.
8) Directors must attend the General Meeting of Shareholders, and provide answers in a sincere manner to anyquestions pertaining to the execution of their duties when asked by shareholders and instructed by the
Chairman to provide such answers.
9) Upon deliberations at the meetings of the Board of Directors, the Chairman of the Board of Directors mustseek the opinions of Auditors in attendance as to whether any resolution may be in violation of laws andregulations. In the event an Auditor finds in the course of sitting in the meetings of the Board of Directors,
that any resolution may be in violation of the laws and regulations, he/she must, without delay, give warning
to the Chairman of the Board.
10) As the highest authority of the Company, Directors are obliged to be acutely aware of the social responsibilitiesof the Company under the principles set forth in the “TKC Charter of Corporate Code 2006,” work to improvetheir characters and insight, strictly observe all laws and regulations and company rules, eliminate ego and put
aside personal affairs, exhibit discerning judgments to achieve business objectives, take lead in setting good
examples, and strive to gain utmost trust of employees under their charge.
11) It is the basic policy of the Company to have no involvement with antisocial forces, bodies and individuals,
and to not comply with unjust and unlawful requests. The Company shall develop and disseminate this policy
among all Directors and employees, and shall establish systems to share all pertinent information within the
TKC Group and to develop appropriate countermeasures. Further, the Company shall collaborate closely withthe police and other external expert organizations, and with legal advisors and company attorneys.
[2] Basic policy concerning the development of systems ensuring the appropriateness of the Company’s
operations (in relation to the latter half of Article 362 Paragraph 4(vi) of the Companies Act)
(1) Development of systems for the storage and management of information relating to the execution of Directors’
duties of the Company (in relation to Article 100, Paragraph 1, Item 1 of the Ordinance for Enforcement of theCompanies Act)
1) Of the information relating to the execution of duties by Directors (hereafter, “information on Directors’ duty”),
information pertaining to the minutes of General Meetings of Shareholders shall be stored and managed inaccordance with the Company’s Rules on Management of Information Concerning the Minutes of General
Meetings of Shareholders.
2) Of the information on Directors’ duty, information pertaining to deliberations at the meetings of the Board of
Directors shall be stored and managed in accordance with the Company’s Rules on Management ofInformation Concerning Decision-making Processes of the Board of Directors as described in [1] (7) above.
3) Of the information on Directors’ duty, information submitted to or received from government authorities andinformation sent to or received from outside parties in relation to legal affairs shall be stored and managed
based on the Company’s Rules on Management of Information Concerning Legal Affairs.
4) Information on Directors’ duty not included above shall be divided into the following three categories andstored and managed based on the Company’s Rules on Management of Information Concerning the Daily
Operations of Directors:- 51 -

a. of the meetings called by a Director (excluding the General Meetings of Shareholders and meetings of theBoard of Directors), minutes and relevant documents of meetings in which matters that may havesignificant impact on the Company’s operation are deliberated, and meeting in which matters directly
related to the interest of specific customers, clients or employees are deliberated;b. written applications for approval and relevant documents settled by the Directors based on the Company’s
Rules Concerning Requests for Decisions;c. other important information pertaining to the execution of duties by Directors.
5) All information on Directors’ duty set forth in the preceding four items shall be stored in a database so that
their presence or absence and contents are immediately searchable. The operating status of said database shallbe verified and rules shall be revised as necessary and reported to the Board of Directors.
(2) Regulations and other systems for the management of risks of loss for the Company (in relation to Article
100, Paragraph 1, Item 2 of the Ordinance for Enforcement of the Companies Act)
(2-1) Regulations for the management of strategic risks
1) Strategic risks are risks related to business opportunities that arise out of uncertainties of strategic managerial
decision-making. In light of the current situation of the Company, the objective of managing such strategicrisks shall be limited for the time being to “preventing the loss of business opportunities” and to “appointment
of Directors” to be submitted to the General Meetings of Shareholders.
2) In order to prevent the loss of business opportunities, all Directors must actively gather information and retain
unrelenting spirit of inquiry to capture business opportunities that contribute to our customers’ success aheadof others, exhibit outstanding intuition to make the best of such business opportunities, and develop timely
and optimal schematic plans and propose the execution to the President.
3) Upon receiving the such proposals from Directors (including employees) as set forth above, the President
must evaluate the contents from the following perspectives, and if it is determined that a proposal should beexecuted, he/she shall report to the Board of Directors and cause for the Director (including employees) incharge to announce an implementation plan at the meetings of the Board of Directors:
a. Conformances with the management philosophy of the Company;b. Compliances;c. Expected degree of contributions to customers' business;d. Anticipated feedback from customers;e. Technical feasibilities;
f. Funds and costs necessary;g. Other matters, such as principle of good faith with business partners.
4) When submitting proposals on the appointment of Directors, a temporary Directors Nomination Committee,
consisting of the Representative Directors and Outside Directors and chaired by the President, shall take into
consideration such factors as the candidates’ records on the preceding two items, contributions to past businessperformances, personalities and depth of knowledge, and propose the promotions and reappointments of
Directors to be resolved at General Meetings of Shareholders.
5) Promotion of a Director to an executive position of managing director or above or demotion of an executive
director to a Director shall be determined by the President through discussion with other Representative
Directors and finally decided by approval of the Board of Directors.
(2-2) Regulations for the management of operational risks(2-2-1) Regulations for the management of operational risks that may occur across all divisions
1) Operational risks are risks related to the performance of business activities that arise out of uncertainties of
performance of appropriate and efficient operations. These risks shall be divided and controlled under thefollowing two categories:
a. risks that may occur across all divisions (hereinafter, “common risks”);
b. risks that may occur in specific divisions (hereinafter, “division-specific risks”).
- 52 -

This section provides for regulations for the management of common risks.
2) The Board of Directors shall elect a Director in charge of risk management, who shall be in charge ofinvestigating and identifying the following common risks from among all employees of the Company:a. Risks that have high degree of urgency;
b. Risks associated with compliance;c. Risks associated with confidentiality obligations of the Company;
d. Risks associated with the preservation of assets and accounting;e. Risks associated with the preparation of regulations and manuals for operation of business;
f. Risks associated with the workplace environment and labor management;
g. Other risks deemed necessary.
3) In the event the Director in charge finds, as a result of the inspections in the preceding paragraph, that there
are measures to completely eliminate any of the common risks, he/she shall promptly report such findings to
the President and discuss the actions to be taken.
4) The Director in charge shall sort and classify unresolved risks and formulate a basic policy on how to handle
such risks, and submit it to the Board of Directors as Regulations for the Prevention of Operational Risks(hereinafter referred to as “Regulations” in this section) for approval by the Board of Directors. The approved
Regulations shall be announced and distributed to all employees as guidelines from the President.
5) In the event a major risk becomes apparent, the Director in charge shall immediately take actions to preventand minimize the spread of damages in accordance with the Regulations.
6) The Director in charge shall, within one month of completing the actions in the preceding item, investigate
the true cause of the risk and formulate measures to prevent recurrence, and report to the Board of Directors
within two months and undertake any revisions to the Regulations.
7) All heads of business units shall verify the compliance with the Regulations within their own business units
either on a daily or regular basis in accordance with the Regulations and report to the Director in charge.
8) The Director in charge shall submit to the President applications for special award money to those uncoveringmajor common risks that were previously unnoticed or those proposing effective measures to prevent
recurrence of apparent risks.

- 53 -

(2-2-2) Regulations for the management of operational risks that may occur in specific divisions
1) Division-specific risks include cases in which division-specific operational risks need to be controlled andcases in which highly advanced, specialized knowledge is required to control certain common risks. The
following committees (including committees to be newly established) shall be in charge controlling risks
involving multiple divisions, and the relevant division shall be responsible for controlling any risk involving
that single division:a. Systems Development Research Center Operation Improvement Committeeb. Municipality Systems Development & Operations Division Operation Improvement Committeec. Consolidated Information Centers Operation Improvement Committeed. SCG Service Centers Operation Improvement Committee
e. Municipality Sales Division Operation Improvement Committee
f. Supplier Business Operation Improvement Committee
g. Tokyo Head Office Operation Improvement Committee
h. Personnel & Salary Systems Improvement Committee
i. Risk Management Committee
j. Other committees that the Board of Directors deems necessary to establish.
2) The committees listed in the preceding item shall serve as assisting body to the President or the Director in
charge of the division, the executive officer heading each committee with a fixed number of committee
members as determined by the Board of Directors. The Director in charge or the head of committee shallattend the meeting of the Board of Directors and report on the matters to be reported by the committee, andmay request deliberations as necessary by the Board of Directors.
3) Division-specific risks involving an individual committee or a specific division shall be controlled in the samemanner as controlling common risks as prescribed in (2-2-1). Division-specific risks shall be identified byeach committee and reported to the Board of Directors.
(2-2-3) Regulations for the management of hazard and other risks
1) In the event of large-scale earthquakes, flood damages, fire and other disasters, or long power outage, water
stoppage, the disconnection of communication lines and other circumstances that may cause substantial
damage, the Company will immediately set up an emergency response headquarter headed by the President,
and form an information communication team responsible for contacting customers, employees and theirfamilies, shareholders, clients and external press, and an external advisory team including the company
attorneys and to establish a system to respond promptly, prevent and minimize the spread of damages.
2) In the event of any matters that may be in violation of the laws and regulations, the Business Administration
Headquarters under the responsibility of the Director in charge of legal affairs shall become the supervising
division to take actions. Any legal compliance issue of significant importance shall be consulted with outside
attorneys as external legal advisors.
(3) Systems to ensure the efficient execution of Directors’ duties of the Company (in relation to Article 100,
Paragraph 1, Item 3 of the Ordinance for Enforcement of the Companies Act)
1) The Company holds regular meetings of the Board of Directors generally on the 10th day of every month, aswell as ad hoc meetings when necessary. The date and time of meetings of the Board of Directors called forthe disclosure of financial statements or in relation to the General Meetings of Shareholders shall be plannedat least six months in advance.
2) At the meetings of the Board of Directors held at the end of each fiscal year, a management policy for theupcoming fiscal year formulated in light of the management philosophy of the Company and a medium-term
management plan covering the next three years starting from the upcoming fiscal year shall be submitted by
the President, and the Board of Directors shall deliberate upon their strategic rationalities in accordance with
the Company’s Rules on the Board of Directors.
3) At the meetings of the Board of Directors held on the second month of each new fiscal year, the targeted profit
and loss statements and funding plans for the entire company and each business unit for the new fiscal year,
and a proposed list of dividing duties of Directors and strategic goals shall be submitted by the President, and- 54 -

the Board of Directors shall deliberate upon their feasibilities in accordance with the Company’s Rules on the
Board of Directors.
4) At the monthly regular meetings of the Board of Directors, the targeted and actual P/L statements for the entire
company and each business unit as of the end of the previous month shall be reported, and the Board of
Directors shall analyze the differences in target and actual results, and discuss actions to be to taken to achieve
the targeted sales and current profits for the fiscal year.
5) In executing his/her daily duties, the President shall inspect the details of individual projects planned by the
Directors in charge of each business unit and coordinate to maximize the effect the projects in light of thecurrent management policy, and approve the use of president’s strategic reserve funds to the extent approvedby the Board of Director.
6) In executing his/her daily duties, Directors in charge of each business unit shall provide instructions to the
executive officers and managers under his/her immediate control to ensure that they have correct awarenessof the fiscal management policy and strategic goals for their division and that the PDCA cycle is thoroughly
implemented to achieve these goals, and shall monitor the progress and achievements of the entire division at
all times and strive to achieve the sales and profit goals for the fiscal year.
7) In managing the business unit under his/her charge, Directors in charge of each business unit shall strive to
reduce unnecessary expenses, improve work quality and productivity, and keep the workplace organized, andmust exhibit leadership to create a workplace environment in which all employees are safe and comfortable,
inspired and satisfied.
(4) Systems to ensure that performance of duties by employees of the Company is in conformance with laws andregulations and the Articles of Incorporation (in relation to Article 100, Paragraph 1, Item 4 of the Ordinancefor Enforcement of the Companies Act)
1) In order to ensure compliance with laws and regulations by employees, the Internal Audit Department under
the direct control of the President shall prepare drafts of Compliance Regulations and Compliance Manual
based on guidance provided by Auditors and outside company attorneys and, upon obtaining the approval of
the Board of Directors, distribute them to all employees as guidelines from the President.
2) Regular training sessions for all employees of the Company to further understanding on the Compliance
Regulations and Compliance Manual as set forth above shall be conducted in accordance with the plans of theInternal Audit Department.
3) When performing an internal audit on internal business units, the Internal Audit Department must always
inspect the awareness on Compliance Regulations and implementation of Compliance Manual among
employees of the business unit being audited, and submit an Internal Audit Report to the President within one
week after the completion of the audit.
4) Directors in charge of each division shall appoint a compliance manager within each business unit inaccordance with the Compliance Regulations, and conduct training on the Compliance Manual for employees
within the business unit in a timely and appropriate manner.
5) In order to prevent the leaking of customer information and other confidential information, the Company shallconsider storing the body text and attached files of all electronic mails sent from internal PCs to outside theCompany for a certain period of time.
6) In preparation for the unlikely event that a Company employee violates any laws or regulations, the Company
shall establish a system whereby the Internal Audit Department or the employee that first learns of suchinformation gives emergency notification to the President or the Director in charge of legal affairs informing
them of the facts and other relevant information.
(5) Other systems to ensure the appropriateness of operations of the Group consisting of the Company and its
subsidiaries (in relation to Article 100 Paragraph 1(v) of the Ordinance for Enforcement of the Companies Act)(A) Systems concerning reports to the Company on matters pertaining to the execution of duties by directors,
executive officers, employees executing operations, persons performing the duties under Article 598, Paragraph- 55 -

1 of the Companies Act, and those equivalent (hereinafter "Directors, etc." in items (C) and (D) below) of theCompany’s subsidiaries (in relation to Article 100, Paragraph 1, Item 5(a) of the Ordinance for Enforcement of
the Companies Act)
1) In order for the Company to perform quarterly audits on the presence or absence of risk information pertaining
to its subsidiary companies and affiliated companies (hereinafter, "Subsidiaries"), the Company shall conclude
an internal audit agreement with its Subsidiaries and establish a Group Audit Office headed by the chief ofthe Business Administration Headquarters.
2) The Group Audit Office shall establish a system whereby, upon identifying any incidents that may causesignificant damage to the Subsidiaries, the President, the Business Administration Headquarters and the headsof relevant business divisions are notified of the risks causing such incident, the degree of damage expected
and impacts on the Company.
3) The Group Audit Office shall thoroughly exchange information with the Subsidiaries’ divisions in charge ofinternal audits on a regular basis to prevent any inappropriate transactions (including using corporate expenses
for private entertainment purposes) or inappropriate accounting between the Company and Subsidiaries.
4) The Company shall assign Directors or employees of Deputy Manager or higher to the Subsidiaries to server
as Outside Directors in order to communicate the management policy and requests of the Company in writing
to the Subsidiaries’ Board of Directors. The Company shall request the presidents of the subsidiaries to submit
monthly reports on the latest business results, business forecast and risk management issues.
(B) Regulations and other systems for the management of risks of loss for the Subsidiaries (in relation to Article

100, Paragraph 1, Item 5(b) of the Ordinance for Enforcement of the Companies Act)
Efforts shall be made to raise awareness on risks which may impact the Company’s operation, and to promote
early discovery, preventive measures, and prompt and appropriate responses in the event of an emergency inaccordance with the separate Compliance Regulations, Compliance Manual and other internal rules.
(C) Systems to ensure the efficient execution of Directors’ duties of Subsidiaries (in relation to Article 100,

Paragraph 1, Item 5(c) of the Ordinance for Enforcement of the Companies Act)
1) The Board of Directors of Subsidiaries (referred to as “Board of Directors” in this section) shall hold regularmeetings of the Board of Directors generally on a given day of every month, as well as ad hoc meetings whennecessary. The date and time of meetings of the Board of Directors called for the approval of financial
statements or in relation to the General Meetings of Shareholders shall be planned at least six months inadvance.
2) At the meetings of the Board of Directors held at the end of each fiscal year, a management policy for theupcoming fiscal year formulated in light of the management philosophy of the Subsidiaries and a mediumterm management plan covering the next three years starting from the upcoming fiscal year shall be submitted
by the president of the Subsidiaries (referred to as “President” in this section and the next section), and theBoard of Directors shall deliberate upon their strategic rationalities in accordance with the Company’s Ruleson the Board of Directors.
3) At the meetings of the Board of Directors held on the second month of each new fiscal year, the targeted profit
and loss statements for the entire company and each business unit for the new fiscal year, and a proposed listof dividing duties of Directors and strategic goals shall be submitted by the President, and the Board of
Directors shall deliberate upon their feasibilities in accordance with the Company’s Rules on the Board of
Directors.
4) At the monthly regular meetings of the Board of Directors, the targeted and actual P/L statements for the entire
company and each business unit as of the end of the previous month shall be reported, and the Board of
Directors shall analyze the differences in target and actual results, and discuss actions to be to taken to achieve
the targeted sales and current profits for the fiscal year.
5) In executing his/her daily duties, the President shall inspect the details of individual projects planned by the
Directors in charge of each business unit and coordinate to maximize the effect the projects in light of the- 56 -

current management policy.
6) In executing his/her daily duties, Directors in charge of each business unit shall provide instructions to the
executive officers and managers under his/her immediate control to ensure that they have correct awarenessof the fiscal management policy and strategic goals for their division and that the PDCA cycle is thoroughly
implemented to achieve these goals, and shall monitor the progress and achievements of the entire division at
all times and strive to achieve the sales and profit goals for the fiscal year.
7) In managing the business unit under his/her charge, Directors in charge of each business unit shall strive to
reduce unnecessary expenses, improve work quality and productivity, and keep the workplace organized, andmust exhibit leadership to create a workplace environment in which all employees are safe and comfortable,
inspired and satisfied.
(D) Systems to ensure that performance of duties by directors and employees of the Subsidiaries is in conformancewith laws and regulations and the Articles of Incorporation (in relation to Article 100, Paragraph 1, Item 5(d)of the Ordinance for Enforcement of the Companies Act)
1) In order to ensure compliance with laws and regulations by the directors and employees of the Subsidiaries(referred to as "Directors and employees" in this section), the division in charge of internal audit under the
direct control of the President shall develop Compliance Regulations and Compliance Manual based on
guidance provided by Auditors and outside company attorneys.
2) Regular training sessions for all Directors and employees to further understanding on the Compliance
Regulations and Compliance Manual as set forth above shall be conducted in accordance with the plans of thedivision in charge of internal audit.
3) When performing an internal audit on internal business units, the division in charge of internal audit must
always inspect the awareness on Compliance Regulations and implementation of Compliance Manual among
employees of the business unit being audited, and submit an Internal Audit Report to the President within one
week after the completion of the audit.
4) Directors in charge of each division shall appoint a compliance manager within each business unit inaccordance with the Compliance Regulations, and conduct training on the Compliance Manual for employees
within the business unit in a timely and appropriate manner.
5) In order to prevent the leaking of customer information and other confidential information, the body text andattached files of all electronic mails sent from internal PCs to outside the company shall be stored for a certain
period of time.
6) In preparation for the unlikely event that a Director or employee violates any laws or regulations, Subsidiaries
shall establish a system whereby the division in charge of internal audit or the Director or employee that firstlearns of such information gives emergency notification to the President informing him/her of the facts andother relevant information.
(6) Assignment of employees to assist the duties of Corporate Auditors (in relation to Article 100, Paragraph 3,
Item 1 of the Ordinance for Enforcement of the Companies Act)
1) The Company shall establish a new Auditor Office to assist the duties of the Auditors and assign one or more
dedicated employees.
2) In determining the specific details pertaining to the preceding item, the Company shall respect the opinions ofAuditors and take into consideration the opinions of the Director in charge of human resources and otherrelevant personnel.
(7) Independence of employees assisting duties of Corporate Auditors from Directors (in relation to Article 100,
Paragraph 3, Item 2 of the Ordinance for Enforcement of the Companies Act)
1) The appointment, transfer, personnel evaluation and disciplinary punishment of employees assisting
the duties of Auditors shall be subject to prior consent of the Board of Auditors.
- 57 -

2) Employees assisting the duties of Auditors shall not hold concurrent posts that involve the executionof the Company’s business, and shall perform their duties under the direct command of Auditors,
and their performance shall be evaluated by Auditors.
3) Business units executing the Company’s business shall cooperate with employees assisting theduties of Auditors and allow attendance of such employees at the necessary meetings for them toconduct to necessary investigations and gather necessary information.
(8) Ensuring effectiveness of directions to employees assisting duties of Corporate Auditors (in relation to Article
100, Paragraph 3, Item 3 of the Ordinance for Enforcement of the Companies Act)
Employees assisting the duties of Auditors shall report to Auditors as appropriate on the status of duties performedin accordance with the directions and commands given by Auditors.
(9-1) Systems for reporting to Corporate Auditors (Related to the provisions of Article 100 Paragraph 3 Item 4 of
the Ordinance for Enforcement of the Companies Act)(A) Systems for reporting to Corporate Auditors by the Company’s Directors, accounting advisors and employees(in relation to Article 100, Paragraph 3, Item 4(a) of the Ordinance for Enforcement of the Companies Act)
1) All Directors and employees of the Company shall promptly submit the necessary reports and information
requested by Auditors as established by the Board of Auditors.
2) The reports and information to be submitted as set forth in the preceding item shall mainly include thefollowing:a. Status of activities of business units involved in the risk management of the Company;
b. Status of activities pertaining to audits and internal audits of the Subsidiaries of the Company;c. Important accounting policies and accounting standards of the Company and any changes thereto;d. Contents of announcements and important disclosure documents on the Company’s latest business results
and earnings forecasts announcements on both non-consolidated and consolidated basis;e. Circulation of internal approval documents and meeting minutes requested by Auditors.
3) In the event a Director or employee learns of any fact of violations of laws and regulations or any fact that
could cause significant damage to the Company, such Director or employee shall immediately report matterspertaining to such fact to Auditors.
4) Auditors shall attend all the meetings of the Board of Directors and other important meetings, and are expected
to voice their opinions freely without being requested to do so by the chairman or caller of such meetings.
(B) Systems for reporting to Corporate Auditors of the Company by the Subsidiaries’ directors, accounting advisors,
auditors, executive officers, employees executing operations, persons performing the duties under Article 598,
Paragraph 1 of the Companies Act and other persons equivalent to the above, employees or any persons
receiving reports from the above (in relation to Article 100, Paragraph 3, Item 4(b) of the Ordinance for
Enforcement of the Companies Act)
1) All directors, auditors and employees of Subsidiaries shall promptly submit the necessary reports andinformation requested by each Corporate Auditor of the Company as established by the Board of Auditors of
the Company.
2) The reports and information to be submitted as set forth in the preceding item shall mainly include thefollowing:a. Status of activities of business units involved in the risk management of the Subsidiaries;
b. Status of activities pertaining to the audits by auditors of the Subsidiaries;c. Important accounting policies and accounting standards of the Subsidiaries and any changes thereto;d. Circulation of internal approval documents and meeting minutes of Subsidiaries requested by Auditors.
3) In the event a director, auditor or employee learns of any fact of violations of laws and regulations or any factthat could cause significant damage to the Company, such director, auditor or employee shall immediately- 58 -

report matters pertaining to such fact to the Auditors of the Company.
4) The Company’s Auditors shall attend all the meetings of the Board of Directors and other important meetingsof Subsidiaries, and are expected to voice their opinions freely without being requested to do so by thechairman or caller of such meetings.
(9-2) Systems to ensure that persons making reports as stated in the preceding item do not receive disadvantageous
treatment for providing such reports (in relation to Article 100, Paragraph 3, Item 5 of the Ordinance for
Enforcement of the Companies Act)The Company and Subsidiaries must not treat any persons making reports stated in the preceding item in a
disadvantageous manner due to grounds of providing such reports to the Board of Auditors of the Company.
(9-3) Policy on prepayment or reimbursement of expenses arising from the execution of duties of Corporate Auditors
and the processing of expenses or debts arising from the performance of other duties (in relation to Article
100, Paragraph 3, Item 6 of the Ordinance for Enforcement of the Companies Act)The Company shall secure sufficient amounts to cover for the procedures on prepayment or reimbursement ofexpenses arising from the execution of duties of Auditors and for the processing of expenses or debts arising fromthe performance of other duties so as to allow Auditors to sufficiently achieve the execution of the Auditors’
duties.
1) Ordinary auditing expenses shall be budgeted in the current fiscal year based on the business plan of theCompany and the audit plan of the Board of Auditors.
2) Other emergency auditing expenses and contingency expenses shall be estimated in advance by the Board ofAuditors and establish a policy on such expenses. The Board of Directors shall execute the measures undersaid determined policy as notified by the Board of Auditors after deliberation and review of such measures inlight of the status of execution of the budget for the fiscal year.
(10) Other systems to ensure that audits by the Corporate Auditors’ are implemented effectively (in relation to Article
100, Paragraph 3, Item 7 of the Ordinance for Enforcement of the Companies Act)
1) Auditors shall receive advanced explanations on the annual internal auditing plan to be performed by theInternal Audit Department and express their opinions to the President if they deem that the plan needs to becorrected or changed, and the President must respect such opinions.
2) Auditors shall receive reports, as appropriate, on the status of implementation of internal audits, and express
their opinions to the President if they deem necessary that additional audits be implemented or operation
improvement measures be developed. The President must respect such opinions.
3) Auditors shall receive advance explanations on the auditing plans from accounting auditors, and reports on
auditing methods and audit results whenever audits on quarterly settlements and audits on full year settlements
are performed.
4) For the purpose of increasing the effectiveness of the Company’s auditing system by achieving coordination
between the Company’s auditing system and the risk management system, the Company shall establish an
Audit System Improvement Committee headed by the Director in charge of Business Administration
Headquarters and consisting of the head of the Internal Audit Department and deputy managers or higher
nominated by said Director and Auditors. The Committee is expected to prepare reports on the auditing
systems that should be created by the Company in the future, and to submit such reports to the Board of
Directors.
6. Basic Policy on the Control of the Company
The Company has no particular policy on matters concerning the persons controlling the decisions on the financial
and business policies of the Company. A schematic diagram of the Company’s internal control system is shown
below:- 59 -

General Meeting of Shareholders
Appointment/
Dismissal

Board of Directors
11 Directors(Including 2 Outside Directors)

Reports

Appointment/
Dismissal

Reports

Appointment/
Dismissal

Reports

Audit
Board of Auditors
4 Auditors(Including 2 Outside Auditors)

Accounting
Auditors
Approval for Appointment/
Dismissal/Refusal of
Reappointment

Appointment/
Dismissal/
Supervision

Reports
Reports

Instructions
Internal Audit Department

Representative Directors

Business Improvement
Committee

Reports
Instructions,Supervision

Audit

Reports

Requests

Executive Officers (30)Instructions,
OrdersInstructions,
OrdersAll Divisions, Group Companies- 60 -

Instructions,
OrdersIII. Internal Audits and Audits by Auditors
The Company has four Auditors, two of which, Toshiaki Sakuraoka, a full-time Corporate Auditor, and Kenji
Matsumoto, an Outside Auditor, are qualified public tax accountants and have extensive expertise in the areas offinance and accounting. Yoshiki Takashima, an Outside Auditor, is a qualified attorney, and has extensive expertisein the areas of finance and accounting.
The Internal Audit Department, coordinating closely with the Auditors, audits the operation of all business units in asystematic manner to assess the effectiveness of internal controls and the actual business operations, and reports theresults of auditing directly to the President. Highly effective internal audits are implemented by providing thebusiness divisions indication and guidance on items required to be improved based on the auditing results, andrequiring them to report the progress of improvements after the auditing. As a department under the direct control of
the President, the Internal Audit Department audits the operation of each business units within the Company fromthe perspectives of appropriateness of operation and compliance in accordance with the laws and regulations, theArticles of Incorporation, guidelines from the President, and work regulations and other internal rules and regulations.
Auditors receive reports on internal audit plans for the fiscal year and reports on internal audit methods and results
for the first and second half-years from the Internal Audit Department and exchanges opinions on relevant matters.
The Company conducts evaluations on the internal auditing systems to ensure the appropriateness of financial
reporting documents and related information in accordance with Article 24-4, Paragraph 4, Item 1 of the Financial
Instruments and Exchange Act, and holds discussions regularly and as-needed on the three auditing functions—internal audits, audits by Auditors and accounting audits by accounting auditors to improve the reliability of our
financial reporting. Information on the respective audit plans and audit results are shared and closely coordinated toachieve highly efficient and effective auditing.
IV. Basic Approach and Countermeasures to Eliminate Anti-social Forces
1. Basic approach to eliminate anti-social forces
The basic policy of the Company is to have absolutely no engagement with anti-social forces under "Strict
Implementation of Compliance Management" as stated in the TKC Charter of Corporate Code. The Company fully
disseminates that it will maintain a resolute, organization-wide response against any and all unreasonable demands
and approaches from anti-social forces and bodies.
2. Countermeasures to eliminate anti-social forces
1) Establishment of a Response Control Division and appointment of managers
The Company has established a division to control responses to anti-social forces (the Response Control
Division) and appointed managers in charge of preventing unreasonable demands within its Tochigi andTokyo Head Offices.
The Company has also established a system for immediate reporting and consultation with the Response
Control Division on matters concerning unreasonable demands, organized violence, and criminal acts by antisocial forces.
2) Coordination with external expert organizations
The Company maintains close ties with external expert organizations, for example, by taking part in liaisongroups organized by the police and receiving guidance on how to deal with anti-social forces.
3) Collecting and managing information on anti-social forces
The Response Control Division coordinates with experts and the police in sharing the latest information
pertaining to anti-social forces and using such information to give warning to the employees within the
Company.
4) Preparation of response manuals- 61 -

The Company has prepared training materials on compliance-related case studies including topics on how todeal with anti-social forces, which are distributed and used in compliance training sessions.
5) Training activities
The Company promotes activities to prevent damages from anti-social forces before they occur by sharing
information on anti-social forces within the Company and conducting compliance training sessions with theCompany and at Group companies.
V. Outside Directors and Outside Auditors
1. Status and reasons for appointment of Outside Directors and Outside Auditors
Category

Name

Functions, roles and appointment
Mr. Saito is a representative partner of a certified public tax accountants firm TOP, and has been
appointed as Outside Director so that the Company’s Accounting Firm Business can benefit fromhis extensive experience and insights in the management of accounting firms. From an independent
standpoint, he is expected to enhance the supervisory functions of the Board of Directors in order
to increase transparency, and provide valuable input to ensure the legality and validity of decisions
made and resolved by the Board of Directors.

Director

Yasuyuki Saito
While TOP is engaged in a business relationship with the Company, transactions are based on thesame terms and conditions as with other third parties. Therefore, it is not likely that any
conflict of interest shall occur between Mr. Saito and general shareholders, and the Company
deems that this would not affect the independence of Mr. Saito.
Mr. Saito has no special interest in the Company.
Mr. Ashikawa is the head of Ashikawa Accounting Firm and representative director of K.K.
MACOS, and has been appointed as Outside Director so that the Company’s Accounting Firm
Business can benefit from his extensive experience and insights in the management of accounting
firms. From an independent standpoint, he is expected to enhance the supervisory functions of theBoard of Directors in order to increase transparency, and provide valuable input to ensure thelegality and validity of decisions made and resolved by the Board of Directors.

Director

Hiroshi Ashikawa

While Ashikawa Accounting Firm and MACOS are engaged in a business relationship with theCompany, transactions are based on the same terms and conditions as with other third parties.
Therefore, it is not likely that any conflict of interest shall occur between Mr. Ashikawa andgeneral shareholders, and the Company deems that this would not affect the independence of
Mr. Ashikawa.
Mr. Ashikawa has no special interest in the Company.
Mr. Matsumoto has been appointed to enhance the supervisory functions of the Board of Directors
in order to increase transparency, and to give opinions on compliance issues and as to whether the
resolutions of the Board of Directors may be in violation of laws and regulations, and to provide
opinions, advice and suggestions in order to ensure the legality, appropriateness, and validity of thedecisions made and resolved by the Board of Directors.

AuditorKenji Matsumoto

While Mr. Matsumoto and the tax accounting firm, Aoyama Accounting Firm where Mr.
Matsumoto serves as representative partner are engaged in a business relationship with theCompany, transactions are based on the same terms and conditions as with other third parties.
Therefore, it is not likely that any conflict of interest shall occur between Mr. Matsumoto andgeneral shareholders, and the Company deems that this would not affect the independence of
Mr. Matsumoto.
Mr. Matsumoto has no special interest in the Company.

AuditorYoshiki Takashima

Mr. Takashima is a certified attorney and has been appointed to provide compliance-related audits
and advise from a legal perspective on execution of duties by the Directors of the Company.
Mr. Takashima has no special interest in the Company.

2. Support systems for Outside Directors and Outside Auditors
1) The Company appoints the head of the Business Administration Headquarters, General Affairs Department- 62 -

as a point of liaison to provide assistance to Outside Directors and Outside Auditors. The head of General
Affairs Department notifies the Outside Directors and Outside Auditors of the schedule of the meetings of theBoard of Directors or meetings of the Board of Auditors and send any related materials thereto, and if
necessary, provides explanations in advance on such materials.
2) Outside Directors shall attend any major meetings of the TKC National Federation, the customer organizationof the Accounting Firm BD.
3) Once a month, Outside Auditors shall review the approval request documents, accounting books and major
evidence documents, and receive reports from the heads of Departments and give their opinions.
4) Remunerations for Auditors shall be determined each January upon discussion among Auditors based on thebusiness results for the preceding fiscal year.
3. Standards concerning the independence of Outside Directors and Outside Auditors of the Company(1) For the Board of Directors of the Company to recognize the independence of an Outside Director or Outside
Auditors of the Company (hereinafter, "outside executives"), he/she must maintain a neutral stance, independentof the Company’s management without falling under any of the following (independent outside executives shallbe referred to as "independent executives" hereafter):1) executive member of the Company or the Company’s affiliate companies (hereinafter, "the Group");2) an important trade partner of the Group or its executing member;
3) a major shareholder of the Company (holding voting rights in excess of 10% of the total voting rights, directly
or indirectly) or its executing member;
4) an executing member of an entity in which the Group is a major investor (holding voting rights in excess of
10% of the total voting rights, directly or indirectly);5) certified public accountant, certified public tax accountant or other accounting specialist, an attorney or otherlegal specialist receiving large sums of money or other assets from the Group other than director compensation(or, any person affiliated with the corporation, association or other bodies receiving such monies or assets);
6) a person belonging to an audit firm that performs accounting audits for the Company, or a tax accountant or
person belonging to a tax firm that performs tax audits for the Company;7) any person falling under items 1) to 6) within the last three years;8) near relatives of the following:
1. Persons falling under items 2) to 6) above (provided that an "executing member" in items 2) to 4) shall belimited to a person executing important duties, and "person affiliated with the corporation, association orother bodies" in item 5) shall be limited to a person executing important duties, or in case of an audit firm,a tax accounting firm, law firm or other organization of accounting and legal specialists, only certified
public accountants, tax accountants or attorneys and persons with specialized qualifications, and "persons
belonging to an audit firm" and "persons belonging to a tax firm" in item 6) shall be limited to persons
executing important duties and certified public accountants, tax accountants and other persons withspecialized qualifications);
2. Persons executing important duties of the Group;
3. Persons falling under item 2) above within the last three years.
(2) In addition to the criteria in the preceding item, independent executives shall not have any condition that could
be reasonably interpreted as his/her inability to perform the duties of an independent outside executive.
(3) Independent executives shall strive to maintain the independence set forth in these standards until their- 63 -

resignation, and shall immediately notify the Company if said independence as defined in these standards is lost.
Note 1: An Outside Director refers to Outside Directors as defined in Article 2 Item 15 of the Companies Act.
“An Outside Director means a director of any stock company who is neither an executive director (hereinafterreferring to a director of a stock company listed in any item of Article 363(1), and any other director who has
executed operation of such stock company) nor an executive officer, nor an employee, including a manager, ofsuch stock company or any of its subsidiaries, and who has neither ever served in the past as an executive director
nor executive officer, nor as an employee, including a manager, of such sock company or any of its subsidiaries.”
Note 2: An Outside Auditor refers to Outside Company Auditors as defined in Article 2 Item 16 of the Companies Act.
“An Outside Company Auditor means an auditor of any stock company who has neither ever served in the past
as a director, accounting advisor (or, in cases where the accounting advisor is a juridical person, any member
thereof who was in charge of its advisory affairs) or executive officer, nor as an employee, including a manager,of such stock company or any of its Subsidiaries.”
Note 3: An executing member refers to Directors (excluding Outside Directors), executive officers as defined in Article
418 of the Companies Act (hereinafter "executive officers"), and corporate executive officers and employees
executing operation.
Note 4: Persons for which the Group is an important trade partner refers to those falling under either of the following:
1) a trade partner group that provides products or services to the Group (referring to companies belonging toconsolidated groups to which the direct trade partner is affiliated, hereinafter the same) that has received fromthe Group in the immediately preceding fiscal year an amount in excess of 100 million yen or 2% of theconsolidated net sales of said trade partner group, whichever the higher;
2) a trade partner group to which the Group is indebted to and owed in the immediately preceding fiscal year a
total amount in excess of 100 million yen or 2% of the consolidated total assets of the trade partner group,
whichever the higher.
Note 5: Important trade partners for the Group refers to those falling under either of the following:
1) a trade partner group to which the Group provides products and services from which the Group has received
in the immediately preceding fiscal year an amount in excess of 100 million yen or 2% of the consolidated net
sales of said trade partner group, whichever the higher;
2) a trade partner group indebted to the Group, that owed the Group in the immediately preceding fiscal year a
total amount in excess of 100 million yen or 2% of the consolidated total assets of the trade partner group,
whichever the higher;
3) a financial institution group from which the Group is borrowing (referring to companies belonging toconsolidated groups to which the direct lender is affiliated) and borrowed in the immediately preceding fiscal
year a total amount in excess of 2% of the consolidated total assets of the Group.
Note 6: Certified public accountants, public tax accountants or other accounting specialists, and attorneys or other legal
specialists receiving large sums of money or other assets from the Group other than director compensation shallrefer to persons who received from the Group, an amount in excess of 10 million yen or any property in the amountin excess of 2% of said person’s total sales or gross income, whichever the higher, in the immediately preceding
fiscal year in addition to the director compensation.
Note 7: Near relatives shall refer to relatives within the second degree and other interested parties that share living
expenses.
Note 8: Persons executing important duties shall refer to persons executing important business operations, including
Directors (excluding Outside Directors), executive officers, corporate executive officers and heads of business
units.
Note 9: The term "fiscal year" used above can be replaced for individuals to read the year subject to income tax
calculations.

- 64 -

VI. Accounting Audits
1. Accounting Auditors
The Company has an audit agreement with Ernst & Young ShinNihon LLC, and receives accounting audits fromthe firm. The names of certified public accountants that executed the accounting audit for the fiscal year ended
September 2015 are as follows:
Designated Limited Liability Partner, Executing Partner: Atsuo Mori
Designated Limited Liability Partner, Executing Partner: Yuichi Noda
Number of assistants assisting auditing:
Certified public accountants: 8
Others:15
2. Policy for determining the dismissal or refusal to reappoint accounting auditors
It is the policy of the Company for the Board of Auditors to dismiss accounting auditors, with the consent of all
Auditors, should it be deemed that said accounting auditor falls under any of the items prescribed in Article 340
Paragraph 1 of the Companies Act. In such event, an Auditor selected by the Board of Auditors shall report thedismissal of the accounting auditor and the reason for dismissal at the first General Meeting of Shareholders
convened following the dismissal.
If there is a reason or a need to prevent the accounting auditor’s execution of his/her duties, the Board of Auditors
shall develop a proposal on the dismissal or refusal of reappointment of said accounting auditor, and the Board of
Directors shall present such proposal for resolution at the General Meeting of Shareholders.
3. Matters concerning the suspension of operations by accounting auditors
Not applicable.
VII. Other Stipulations
1. Number of Directors
The Articles of Incorporation stipulate that the Company may have a maximum of 15 Directors.
2. Criteria for the election or dismissal of Directors
The Articles of Incorporation stipulate that Directors shall be elected by a majority vote of shareholders at theGeneral Meeting of Shareholders with the attendance of at least one-third of shareholders that can exercise voting
rights, and that election of Directors shall not to be based on cumulative voting.
The Articles of Incorporation further stipulate that Directors shall be dismissed by a vote of two-thirds or more ofshareholders at the meeting with the attendance of at least half of the shareholders that can exercise voting rights.
3. Exemption from liability for Directors and Auditors
In order to limit the responsibilities of Directors and Auditors to a reasonable extent in performing their duties, theCompany stipulates in its Articles of Incorporation that the Company may, by resolution of the Board of Directors,
exempt Directors (including former Directors) and Auditors (including former Auditors) from liabilities to theextent allowed by law in accordance with Article 426 Paragraph 1 of the Companies Act.
4. Interim dividends
In order to maintain flexible redistribution of profits to shareholders, the Company stipulates in its Articles ofIncorporation that the Company may, by resolution of the Board of Directors, pay interim dividends as of March
31 every year pursuant to the provisions of Article 454, Item 5 of the Companies Act.
5. Acquisition of treasury stock- 65 -

In order to allow for flexible implementation of capital policies on improving capital efficiency and shareholderinterest, the Company stipulates in its Articles of Incorporation that treasury stock may be acquired by resolutionof the Board of Directors pursuant to the provisions of Article 165, Paragraph 2 of the Companies Act.
6. Special resolutions
The Company stipulates in its Articles of Incorporation that special resolutions of the General Meetings ofShareholders as specified in Article 309, Paragraph 2 of the Companies Act shall be passed by a vote of two-thirds
or more of shareholders at meetings with the attendance of at one-third of the shareholders that can exercise voting
rights. This has been established to ensure smooth handling of special resolutions at General Meetings ofShareholders by easing the quorum for special resolutions by General Meetings of Shareholders.

- 66 -

VIII.Compensation to Executive Directors
1. Total amount of compensation, total by type, and number of eligible executives, by executive category
Total compensation by type (Millions of yen)

Total amount ofcompensation(Millions of yen)

Basiccompensation

Directors(Excluding Outside
Directors)

276

239

37

Auditors(Excluding Outside
Auditors)

31

28

Outside executives

45

45

Executive category

Retirement
benefits

Number of
eligible
executives

-

105

12

3

-

-

3

-

-

-

4

Stock
options

Executive
bonuses

2. Total consolidated compensation for persons whose total consolidated compensation is in excess of 100
million yen
Total consolidated compensation by type (Millions of yen)Name

Masaharu Iizuka

Executive
category

Company
category

Director

TKC
Corporation

Basiccompensation

Stock
options

Bonuses

Retirement
benefits

Total
consolidated
compensation(Millions of yen)

30

7

-

105

143

3. Policy on determining the amount of executive remuneration or calculation method
Director compensation consists of two parts: fixed-amount compensation and performance-based compensation.
Fixed-amount compensation is determined in January each year based on the level of achievement of theCompany’s performance goals in previous fiscal year and the performance targets for the current fiscal year;
performance-based compensation is determined based on the level of achievement of the Company’s performancegoals in previous fiscal year, and the level of achievement of performance goals by each business unit that each
Director oversaw during previous fiscal year. Proposals on remuneration are developed at the meeting ofRepresentative Directors and approved by resolution of the Board of Directors. Compensation for Auditors consistsof fixed amount compensation and is determined by consultation among Auditors.

- 67 -

IX. Status of shareholdings
1. Equity securities held for purposes other than pure investment and the total amount recorded in thebalance sheet
14 stock names, 4,889 million yen
2. Stock name, number of shares, amount recorded in the balance sheet and purpose of holding of equity
securities held for purposes other than pure investments
Previous fiscal year
Specified investment securities
Number ofshares(shares)Amount recorded inbalance sheet(Millions of yen)

T&D Holdings, Inc.

1,780,000

2,507

Mitsubishi UFJ Financial Group, Inc.

2,322,180

1,440

Joyo Bank, Ltd.

235,321

127

Nippon Paper Industries Co., Ltd.

17,00027

Toyo Securities Co., Ltd.

51,00015

Mito Securities Co., Ltd.

31,46012

To maintain and strengthenbusiness relationshipFujitsu Limited

11,8808

To maintain and strengthenbusiness relationship

Tokai Tokyo Financial Holdings, Inc.

9,187

6

To maintain and strengthenbusiness relationship

Stock namePurpose of holding
To maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationship

Current fiscal year
Specified investment securities
Number ofshares(shares)Amount recorded inbalance sheet(Millions of yen)

T&D Holdings, Inc.

1,780,000

2,500

Mitsubishi UFJ Financial Group, Inc.

2,322,180

1,663

Joyo Bank, Ltd.

235,321

147

Nippon Paper Industries Co., Ltd.

17,00030

Toyo Securities Co., Ltd.

51,00018

Mito Securities Co., Ltd.

31,46012

Tokai Tokyo Financial Holdings, Inc.

9,187

6

Fujitsu Limited

11,8806

Stock name- 68 -

Purpose of holding
To maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationshipTo maintain and strengthenbusiness relationship3. Equity securities held for the pure investment
Not applicable.
(2) [Audit Fees]
1) [Compensation paid to Auditors and certified public accountants]
Previous consolidated fiscal year
Category

Current consolidated fiscal year

Compensation for audit
and attestation services(Millions of yen)Compensation for nonaudit services (Millionsof yen)Compensation for audit
and attestation services(Millions of yen)Compensation for nonaudit services (Millionsof yen)The Company

45

9

44

9

Consolidated
subsidiaries

-

1

-

-

Total

45

11

44

9

2) [Other important fees](For the previous consolidated fiscal year and the current consolidated fiscal year)
Not applicable.
3) [Descriptions on non-audit services performed for the Company by Auditors and certified public accountants](For the previous consolidated fiscal year and the current consolidated fiscal year)
The Company pays its Auditors and certified public accountants compensation for assurance services forinternal controls pertaining to the Company’s ASP service based on the Auditing and Assurance PracticeCommittee Practical Guideline No. 86 "Assurance Reports on Controls at a Service Organization (JapaneseInstitute of Certified Public Accountants dated December 22, 2011)" covering services other than the services
prescribed in Article 2 Paragraph 1 of the Certified Public Accountants Act.
4) [Policy for determining Audit fees]
Auditor compensations paid to Auditors and certified public accountants are determined by discussion basedon the number days of auditing works performed.

- 69 -

Part 5[Financial Information]

1. Method of Preparing Consolidated Financial Statements and Financial Statements(1) The consolidated financial statements of the Company have been prepared in accordance with the Ordinance on
Terminology, Forms, and Preparation Methods of Consolidated Financial Statements (Ordinance of the Ministryof Finance No. 28 of 1976; hereinafter, the "Ordinance on Consolidated Financial Statements").
(2) The financial statements of the Company have been prepared in accordance with the Ordinance on the
Terminology, Forms, and Preparation Methods of Financial Statements (Ordinance of the Ministry of Finance
No. 59 of 1963; hereinafter, the "Ordinance on Financial Statements").
Further, as the Company is a Specified Company Submitting Financial Statements, we have prepared thefinancial statements in accordance with the provisions of Article 127 of the Ordinance on Financial Statements.
2. Auditing and Attestation
The consolidated financial statements for the consolidated fiscal year (from October 1, 2014 to September 30, 2015)
and financial statements for the fiscal year (from October 1, 2014 to September 30, 2015) have been audited by
Ernst & Young ShinNihon LLC pursuant to the first paragraph of Article 193-2 of the Financial Instruments andExchange Act.
3. Special Efforts to Ensure the Appropriateness of its Consolidated Financial Statements
The Company makes exceptional efforts to ensure the appropriateness of our consolidated financial statements.
Specifically, in order to understand the contents of accounting standards correctly and to develop a system thatwould enable us to respond to changes in accounting standards, we maintain membership of the Financial
Accounting Standards Foundation and attend seminars held by the Accounting Standards Board of Japan.

- 70 -

1. [Consolidated Financial Statements](1) [Consolidated Financial Statements]
1) [Consolidated Balance Sheet](Unit: Millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(September 30, 2014)(September 30, 2015)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable
Lease investment assets
Finished good inventory
Work in progress
Raw materials and supplies
Deferred tax assets
Other
Allowance for bad debts
Total current assets
Non-current assets
Property, plants and equipment
Buildings and structures (net amount)
Machinery, equipment and vehicles (netamount)Tools, furniture & fixtures (net amount)Land
Lease assets (net amount)
Construction in progress accountTotal property, plants and equipment
Intangible assets
Software
Software in progress
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans
Deferred tax assets
Long-term deposits
Guarantee deposits
Long-term lease investment assets
Other
Total investments and other assets
Total non-current assets
Total assets*1

23,625
7,685
31
320
428
121
2,130
637
(37)
34,944

21,919
6,411
174
308
189
139
1,894
663
(34)
31,666

5,364

5,561

443

547

1,011
6,334
84
428
13,668

996
6,346
163
880
14,495

*1

835
1,877
31
2,744
*2

- 71 -

6,851
17
2,694
12,700
1,349
100
195
23,90840,321
75,266

2,611
724
30
3,365
*2

13,326
4
2,431
9,400
1,453
547
146
27,30845,16976,836

(Unit: Millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(September 30, 2014)(September 30, 2015)

Liabilities
Current liabilities
Accounts payable – trade
Short-term debts
Current portion of long-term debts
Lease obligations
Accounts payable
Income taxes payable
Consumption taxes payable
Provisions for bonuses
Other
Total current liabilities
Fixed liabilities
Long-term debts
Lease obligations
Retirement benefit liabilities
Other
Total fixed liabilities
Total liabilities
Net assets
Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders' equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Total accumulated other comprehensive income
Subscription rights to shares
Minority interests
Total net assets
Total liabilities and net assets- 72 -

3,296
328
56
3,710
1,783
633
2,708
764
13,281

2,540
60
71
225
3,525
1,243
769
2,450
862
11,749

164
1,084
829
2,078
15,359

366
673
818
598
2,456
14,2065,700
5,409
47,399(406)
58,102

5,700
5,419
49,906(349)
60,676

388

508

388
100
1,315
59,90675,266

508
127
1,317
62,63076,836

2) [Consolidated Statements of Income and Comprehensive Income][Consolidated Statements of Income](Unit: Millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2013;(Started October 1, 2014;
ended September 30, 2014)
ended September 30, 2015)

Net Sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Land & rent received
Compensation received
Equity in earnings of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Treasury stock acquisition expenses
Equity in loss of affiliates
Other
Total non-operating expenses
Ordinary profit
Extraordinary profit
Gains on sale of non-current assets
Subsidy income
Total extraordinary profit
Extraordinary losses
Loss on sale of non-current assets
Loss on disposal of non-current assets
Impairment losses
Loss on valuation of golf club membership
Total extraordinary losses
Net income before taxes and adjustments
Income taxes-current
Income taxes-deferred
Total income taxes
Income before minority interests
Minority interest in income
Net income

54,502
20,38934,112*1, *2 27,920
6,192

54,92819,18035,747*1, *2 29,006
6,741

19
101
35
12
43
212

30
148
38
56
37
310

1
0
0
3
6,401

5
0
4
0
9
7,042

*3

2
2

8
35
*4
*5 21
65
6,338
2,767
(36)
2,731
3,607
3
3,604

- 73 -

*3

1
10
11

83
*4
2
*5
5
91
6,962
2,448
486
2,934
4,027
16
4,011

[Consolidated Statements of Comprehensive Income](Unit: Millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2013;(Started October 1, 2014;
ended September 30, 2014)
ended September 30, 2015)

Income before minority interests
Other comprehensive income
Valuation difference on available-for-sale securities
Share of other comprehensive income of associates
accounted for using the equity method
Total other comprehensive income
Comprehensive income(Comprehensive income attributable to)Comprehensive income attributable to owners of theparentComprehensive income attributable to minority
interests

3,607

4,027

219

121

0

△0

219
3,827

*1

- 74 -

*1

121
4,149

3,820

4,131

7

18

3) [Consolidated Statement of Changes in Equity]
Previous consolidated fiscal year (Started October 1, 2013; ended September 30, 2014)(Unit: Millions of yen)
EquityBalance at beginning of year
Accumulated financial
impact due to changes inaccounting policy
Balance at beginning of year
reflecting changes inaccounting policy

Common stock

Capital surplus

5,700

5,409

Retained earnings
44,966

Treasury stock

Total equity(194)

55,880
-

5,700

5,409

44,966(194)

55,880Changes in equity
Dividends of surplus(1,171)(1,171)

Current net profit

3,604

3,604

Acquisition of treasury stock(211)

Disposal of treasury stock

(211)
-

Changes in items other thanequity (net)Total changes in equity

-

-

2,433

(211)

2,221

Balance at end of year

5,700

5,409

47,399(406)

58,102

Accumulated other comprehensive income
Valuation difference on
Total accumulated otheravailable-for-salecomprehensive income
securities

Balance at beginning of year
Accumulated financial
impact due to changes inaccounting policy
Balance at beginning of year
reflecting changes inaccounting policy

172

172

Subscription
rights to shares
55

Minority interest
1,312

Total equity
57,421
-

172

172

55

1,312

57,421

Changes in equity
Dividends of surplus(1,171)

Current net profit

3,604

Acquisition of treasury stock(211)

Disposal of treasury stock-

Changes in items other thanequity (net)

216

216

45

2

263

Total changes in equity

216

216

45

2

2,484

Balance at end of year

388

388

100

1,315

59,906- 75 -

Current consolidated fiscal year (Started October 1, 2014; ended September 30, 2015)(Unit: Millions of yen)
EquityCommon stock
Balance at beginning of year
Accumulated financial
impact due to changes inaccounting policy
Balance at beginning of year
reflecting changes inaccounting policy

5,700

Capital surplus

Retained earnings

5,409

47,399Treasury stock

Total equity(406)

58,102

(44)
5,700

5,409

(44)

47,354(406)

58,057

Changes in equity
Dividends of surplus(1,459)(1,459)Current net profit

4,011

4,011

Acquisition of treasury stock
Disposal of treasury stock

10

(3)

(3)

60

70

Changes in items other thanequity (net)Total changes in equity

-

10

2,552

57

2,619

Balance at end of year

5,700

5,419

49,906(349)

60,676

Accumulated other comprehensive income
Valuation difference
on available-for-salesecurities
Balance at beginning of year
Accumulated financial
impact due to changes inaccounting policy
Balance at beginning of year
reflecting changes inaccounting policy

Subscription
Total accumulated
Minority interest
other comprehensive rights to sharesincome

388

388

388

388

100

100

Total equity

1,315

59,906

11

(33)

1,326

59,872

Changes in equity
Dividends of surplus(1,459)Current net profit

4,011

Acquisition of treasury stock(3)

Disposal of treasury stock

70

Changes in items other thanequity (net)

119

119

26

(8)

137

Total changes in equity

119

119

26

(8)

2,757

Balance at end of year

508

508

127

1,317

62,630- 76 -

4) [Consolidated Statements of Cash Flows](Unit: Millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2013;(Started October 1, 2014;
ended September 30, 2014)
ended September 30, 2015)

Cash flows from operating activities
Net income before taxes and adjustments
Depreciation
Change in provision for doubtful receivables( ( ) decrease)
Change in provisions for bonuses( ( ) decrease)
Change in provision for retirement benefits( ( ) decrease)
Change in retirement benefit liabilities( ( ) decrease)
Contribution of securities to retirement benefit
trustInterest and dividends received
Interest paid
Share of profits of investments accounted forusing the equity method ( ( ) gain)
Loss on disposal of fixed assets
Gain/loss on sales of fixed assets ( ( ) gain)
Impairment losses
Share-based payment expenses
Change in trade receivables ( ( ) increase)
Change in inventories ( ( ) increase)
Change in other assets ( ( ) increase)
Change in trade payables ( ( ) decrease)
Change in other liabilities ( ( ) decrease)
Change in accrued consumption taxes( ( ) decrease)
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Cash flows from operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Proceeds from redemption of marketablesecurities
Purchase of property, plants and equipment
Proceeds from sales of property, plants andequipment
Payments for retirement of property, plants andequipment
Purchase of intangible assets
Purchase of investment securities
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Collection of loan receivables
Other payments
Other proceeds
Cash flows from investing activities- 77 -

6,338
2,066

6,962
2,239

(14)

(2)

433

(258)

(657)

-

1,084

482

(3,000)

(800)

(121)

(179)

1

5

(12)

4

35
5
21
45
(306)
(308)
(23)
(220)
158

83
(1)
2
44
1,385
233
50
(783)
(370)

482

136

3
6,013
132
(1)
(1,741)
4,402

43
9,278
191
(4)
(2,979)6,485(6,600)(4,000)

7,300

9,600

300

-

(1,060)(1,966)

6

14

-

(59)

(1,829)(1,001)(11)(1,709)(6,338)
(135)

16
12
(6)
0
(2,873)

32
12
(16)
6
(4,558)

(Unit: Millions of yen)Previous consolidated fiscal year Current consolidated fiscal year
(Started October 1, 2013;(Started October 1, 2014;
ended September 30, 2014)
ended September 30, 2015)

Cash flows from financing activities
Increase/decrease in short-term loans payable( ( ) decrease)
Proceeds from long-term loans payable
Repayment of long-term loans payable
Repayment of lease obligations
Purchase of treasury stock
Dividends paid
Dividends paid to minority shareholders
Other
Cash flows from financing activities
Change in cash and cash equivalents (△decrease)
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year*1

- 78 -

300

(268)

(14)
(22)
(212)
(1,171)(4)(1,125)403
15,622
16,025

500
(61)
(40)
(3)
(1,459)0(1,333)593
16,025
16,619*1

[Notes to Consolidated Financial Statements](Basis of Presenting the Consolidated Financial Statements)
1. Scope of Consolidation
Consolidated subsidiaries (3 companies):
Tokyo Line Printer Company
TKC Security Services K.K.
SKYCOM Corporation
All subsidiaries are included in the scope of consolidation.
2. Application of the Equity Method
Affiliated companies under the equity method: (2 companies)
TKC Shuppan Corporation
i-mobile Co., Ltd.
Note that i-mobile Co., Ltd. has become an affiliated company to which the equity method applies from the
4th quarter of the fiscal year as a result of acquisition of additional shares by the Company.
Because the fiscal year-end of i-mobile Co., Ltd. is March 31, a provisional settlement of accounts similar toa final settlement has been performed as of the closing date of the consolidated financial statements.
3. Fiscal Year-ends of Consolidated Subsidiaries
The closing dates of all consolidated subsidiaries are the same as the closing date of the consolidated financial
statements.
4. Accounting Policies(1) Valuation standards and methods for major assets
1) Marketable and investment securities
a. Available-for-sale securitiesa) Available-for-sale securities with market value
Stated at fair market value based on the quoted market price as of the fiscal year-end (related valuationdifferences are directly charged or credited to the shareholders' equity, and cost of securities sold is
calculated by the moving average method)b) Available-for-sale securities without market value
Stated at cost determined by the moving average method
2) Inventory assets
a. Merchandise, raw materials
Cost determined by first-in, first-out method (with balance sheet values reflecting write downs for decreased
profitability)b. Finished goods
Cost determined by cost percentage method and adjusted based on percentage of completion (with balance
sheet values reflecting write downs for decreased profitability)- 79 -

c. Work in progress
Cost determined by cost percentage method or specific identification method and adjusted based on
percentage of completion (with balance sheet values reflecting write downs for decreased profitability)d. Supplies
Last purchase price method (with balance sheet values reflecting write downs for decreased profitability)(2) Depreciation of major depreciable assets
1) Property, plants and equipment (excluding lease assets)
Calculated based on declining balance method, except for buildings acquired after April 1, 1998 (excluding
accompanying facilities), which are calculated based on straight-line method.
Primary useful life figures are as follows:
Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures

10 to 50 years
4 to 10 years
2 to 20 years

2) Intangible assets (excluding lease assets)
a. Softwarea) Software for sale
Software for sale are amortized and stated at the higher of amortization based on estimated sales volume
in the future, and amortization at a constant periodic rate based on remaining effective life (within 3 years).
b) Software for internal use
Amortized using straight-line method with an estimated in-house useful life of five years.
b. Other intangible assets
Amortized using the straight-line method.
3) Leased assets
Leased assets relating to finance lease transactions that do not involve transfer of ownership
Amortized using the straight-line method with useful lives equal to lease terms and residual values at zero.
(3) Standards for recognizing significant provisions
1) Provisions for bad debts
In setting aside provisions for possible losses due to uncollectible receivables, provisions are recognized at
the amounts calculated based on the historical rate of credit loss with respect to normal receivables, and at
the amounts determined in consideration of collectability of individual receivables with respect to doubtful
accounts and certain other receivables.
2) Provisions for bonuses
Provisions for bonuses are recognized based on the estimated amounts of payment.

- 80 -

(4) Accounting procedure for retirement benefits
1) Method of attributing expected benefits to dateIn calculating retirement benefit obligations, expected benefits are attributed to the period up until the endof the consolidated fiscal year based on benefit formula standards.
2) Recognizing actuarial differences as expenses
Actuarial differences are recognized as expense for the consolidated fiscal year in which they occur.
(5) Standards for recognizing significant revenues and expenses
Standards for recognizing revenues and cost of sales of made-to-order software (software development
contracts)
1) Projects for which the progress up to the end of the current consolidated fiscal year can be measured reliably
Accounted for by percentage-of-completion method (whereas, the degree of completion is estimated basedon the construction cost percentage method).
2) Other projects
Accounted for upon conclusion of contracts.
(6) Scope of funds covered by the consolidated statements of cash flows
The scope of funds (cash and cash equivalents) covered by the consolidated statements of cash flows
includes:1) Cash on hand2) Demand deposits3) Short-term investments that mature within three months and are easily convertible to cash and bear very
little value fluctuation risk.
(7) Other important matters regarding the preparation of consolidated financial statements
1) Accounting method for consumption taxes and local consumption taxes
Consumption taxes are accounted for using the tax-exclusion method.
2) Application of the consolidated taxation system
The consolidated taxation system is applied.

- 81 -

(Changes in Accounting Policies)(Application of accounting standards for retirement benefits)
The Accounting Standard for Retirement Benefits (ASBJ Statement No. 26 issued on May 17, 2012; hereinafter,the "Accounting Standard") and the Guidance on Accounting Standard for Retirement Benefits (ASBJ Statement
No. 25 issued on March 26, 2015; hereinafter, the "Implementation Guidance") were applied to the provisions ofParagraph 35 of the Accounting Standard and Paragraph 67 of the Implementation Guidance as of the current
consolidated fiscal year. As a result, the Company revised the calculation method of retirement benefit obligations
and service costs, changed the method to attribute the expected retirement benefit payments from straight-line basis
to benefit formula basis, and amended the method of determining discount rates from a standard based on the
expected average remaining service lives of employees to a standard using a single weighted average discount rate
which reflects the estimated payment periods and amounts of retirement benefits according to the estimated timing.
With the application of the Accounting Standard, the Company recognized the effect of these changes to thecalculation method for retirement benefit obligations and service costs in retained earnings at the beginning of thecurrent fiscal year in accordance with transitional provisions set forth in Paragraph 37 of the Accounting Standard.
As a result, retirement benefit liability increased by 51 million yen and retained earnings decreased by 44 million
yen at the beginning of the current consolidated fiscal year. In addition, the impacts on operating income, ordinary
profit and income before income taxes as well as impacts on net assets per share, net income per share and net
income per dilutive share for the current consolidated fiscal year were minimal.
(Additional Information)(Establishment of retirement benefit trust)
The Company has contributed 800 million yen in cash to the retirement benefit trust for the current fiscal year inorder to ensure the soundness of retirement benefit financing. As a result, the balance of retirement benefit liability
was decreased by the same amount.
(Accounting Standards Not Yet Applied)
•
•
•
•
•

Accounting Standard for Business Combinations (ASBJ Statement No. 21, September 13, 2013)
Accounting Standard for Consolidated Financial Statements (ASBJ Statement No. 22, September 13, 2013)
Accounting Standard for Business Divestitures (ASBJ Statement No. 7, September 13, 2013)
Accounting Standard for Earnings Per Share (ASBJ Statement No. 2, September 13, 2013)
Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business
Divestitures (ASBJ Guidance No. 10, September 13, 2013)• Guidance on Accounting Standard for Earnings Per Share (ASBJ Guidance No. 4, September 13, 2013)(1) Summary
Revisions were made in relation to the additional acquisition of shares in subsidiary companies, including thehandling of change in parent’s ownership interest in its subsidiaries while the parent retains control, the handlingof acquisition costs, presentation of current net income and changes from minority interests to non-controllinginterests and the handling of recognition of provisional accounting treatments.
(2) Planned date of application
Standards shall be applicable from the beginning of the term starting September 2016.The handling of recognitionof provisional accounting treatments shall be applied to business combinations that occur after the beginning of
the term starting September 2016.
(3) Impact of application of said accounting standards
The impacts that the revised Accounting Standard for Business Combinations and other standards will have on
consolidated financial statements are currently under evaluation.
- 82 -

(Notes to Consolidated Balance Sheets)*1. Accumulated depreciation of property, plants and equipment
Previous consolidated fiscal year
(September 30, 2014)

Current consolidated fiscal year
(September 30, 2015)

21,382 million yen

21,369 million yen*2. Items pertaining to affiliated companies are as follows.
Previous consolidated fiscal year
(September 30, 2014)
Investment securities (shares)

Current consolidated fiscal year
(September 30, 2015)

148 million yen

424 million yen(Notes to Consolidated Statements of Income)*1. Major items included in selling, general and administrative expenses are as follows:
Previous consolidated fiscal year
(Started October 1, 2013;
ended September 30, 2014)

Current consolidated fiscal year
(Started October 1, 2014;
ended September 30, 2015)

Salaries

8,757 million yen

9,112 million yen

Provisions for bonuses

2,282

2,134

Retirement benefit expenses

719

867

Depreciation

551

569

Rent expenses

1,990

2,026

130

124

Research and development expenses*2. Total amount of research and development expenses included in general administrative expenses
Previous consolidated fiscal year
(Started October 1, 2013; ended September 30, 2014)

Current consolidated fiscal year
(Started October 1, 2014; ended September 30, 2015)

130 million yen

124 million yen*3. Breakdown of gains on sale of non-current assets is as follows:
Previous consolidated fiscal year
(Started October 1, 2013; ended September 30, 2014)
Machinery, equipment and vehicles
Tools, furniture & fixtures
Total

Current consolidated fiscal year
(Started October 1, 2014; ended September 30, 2015)

1 million yen
1
2- 83 ----

million yen
11

*4. Breakdown of loss on disposal of non-current assets is as follows:
Previous consolidated fiscal year
(Started October 1, 2013; ended September 30, 2014)
Buildings and structures

Current consolidated fiscal year
(Started October 1, 2014; ended September 30, 2015)

23 million yen

15 million yen

Machinery, equipment and vehicles

00Tools, furniture & fixtures

12

8

Other (Investments and other assets)

0

1

Other (Asset retirement expenses)
Total

35

59
83

*5. Impairment losses
Previous consolidated fiscal year (Started October 1, 2013; ended September 30, 2014)
The Group recognized impairment losses on the following group of assets for the consolidated fiscal year ended
September 30, 2014:
Location

Usage

Classification

Impairment loss
(Millions of yen)

Utsunomiya City, Tochigi,
and others

Idle assets

Telephone subscription
rights21

The Group, in principle, groups its business assets based on management accounting units, and idle assets aregrouped by types of asset.
For said current consolidated fiscal year, the book values of idle assets not used for business purposes werereduced to recoverable amounts, and such reduced amounts were recorded as impairment losses (21 million yen)under extraordinary losses.
Recoverable amounts were measured based on the net selling prices. Telephone subscription rights were evaluatedbased on their expected disposal prices.
Current consolidated fiscal year (Started October 1, 2014; ended September 30, 2015)
The Group recorded an impairment loss for the following asset group for the current consolidated fiscal year:
Location

Usage

Classification

Impairment loss
(Millions of yen)

Utsunomiya City, Tochigi, and others

Idle assets

Telephone subscription
rights2

The Group, in principle, groups its business assets based on management accounting units, and idle assets aregrouped by types of asset.
For the current consolidated fiscal year, the book values of idle assets not used for business purposes were reduced
to recoverable amounts, and such reduced amounts were recorded as impairment losses (2 million yen) under
extraordinary losses.
Recoverable amounts were measured based on the net selling prices. Telephone subscription rights were evaluatedbased on their expected disposal prices.

- 84 -

(Notes to Consolidated Statements of Comprehensive Income)*1 Reclassification adjustments and tax expense or benefits on other comprehensive income
Previous consolidated fiscal year
(Started October 1, 2013;
ended September 30, 2014)
Valuation difference on available-for-sale securities:
Increase/decrease during the fiscal year

339 million yen

Current consolidated fiscal year
(Started October 1, 2014;
ended September 30, 2015)
151 million yen

Reclassification adjustments(0)-

Amount before tax
Tax expense ( ) or benefit

339
(119)

151
(30)

Valuation difference on available-for-sale securities

219

121

0

(0)

0

(0)

219

121

Share of other comprehensive income of associates
accounted for using the equity method:
Increase/decrease during the fiscal year
Share of other comprehensive income of associates
accounted for using the equity method
Total other comprehensive income- 85 -

(Notes to Consolidated Statements of Changes in Equity)
Previous consolidated fiscal year (Started October 1, 2013; ended September 30, 2014)
1. Type and number of issued stocks and treasury stock
Number of shares at
beginning of current
consolidated FY(thousands of shares)

Increase in number ofshares during current
consolidated FY(thousands of shares)

Decrease in number ofshares during current
consolidated FY(thousands of shares)

Number of shares at
end of current
consolidated FY(thousands of shares)

Issued shares
Common stock

26,731--

26,731

Total

26,731--

26,731

Common stock(Note)

118

91

-

209

Total

118

91

-

209

Treasury stock(Note) The 91,000 share increase in common treasury stock resulted from a 90,000 share increase of shares through acquisition oftreasury stock based on resolution of the Board of Directors, and a 1,000 share increase due to purchase of fractional unit shares.

2. Subscription rights to shares and treasury subscription rights to shares
Number of shares to be issued upon exercise of rights Balance at(shares)end of
Type of shares
current
Increase
Decreaseto be issued Beginning
End ofconsolidated
duringduringupon exercise of current
current
fiscal year
current
currentof rights
consolidated
consolidated (Millions ofconsolidated consolidated
fiscal year
fiscal year
yen)fiscal year fiscal year

Category

Description ofsubscription rights tosharesThe Company(Parent company)

Subscription rights toshares as stock options

-

-

-

-

-

100

Total

-

-

-

-

-

100

3. Dividends(1) Dividend payments
Resolution

Type ofsharesTotal amount of cash
dividends(Millions of yen)

Dividend per share(Yen)

Record date

Effective date

December 20, 2013
Ordinary General
Meeting of
Shareholders

Common
stock

585

22

September 30, 2013

December 24, 2013

May 12, 2014
Meeting of the Boardof Directors

Common
stock

585

22

March 31, 2014

June 16, 2014

- 86 -

(2) Of the dividends with record dates during this consolidated fiscal year, those with effective dates in thefollowing consolidated fiscal year
Resolution

Type ofsharesTotal amount of cash
dividends(Millions of yen)

Source ofdividends

Dividend pershare (Yen)Record date

Effective date

December 19, 2014
Ordinary General
Meeting of
Shareholders

Commonstock

583

Retainedearnings

22

September 30,
2014

December 22,
2014

Current consolidated fiscal year (Started October 1, 2014; ended September 30, 2015)
1. Type and number of issued stocks and treasury stock
Number of shares at
beginning of current
consolidated FY(thousands of shares)

Increase in number ofshares during current
consolidated FY(thousands of shares)

Decrease in number ofshares during current
consolidated FY(thousands of shares)

Number of shares at endof current consolidated
FY (thousands ofshares)Issued shares
Common stock

26,731--

26,731

Total

26,731--

26,731

209

1

31

179

209

1

31

179

Treasury stock
Common stock(Note)

Total(Note) The 1,000 share increase in common treasury stock resulted from increase due to purchase of fractional unit shares. The 31,000
share decrease in common treasury stock resulted from a 13,000 share decrease due to exercise of stock options, a 17,000 decrease
due to share exchange, and a 0 share decrease due to sale of fractional unit shares.

2. Subscription rights to shares and treasury subscription rights to shares
Number of shares to be issued upon exercise of rights(shares)Category

Balance at
end of
Type of shares
current
Increase
Decrease
Description of subscription to be issued Beginning
End ofconsolidated
duringduringrights to shares
upon exercise of current
current
fiscal year
current
currentof rights
consolidated
consolidated (Millions ofconsolidated consolidated
fiscal year
fiscal year
yen)fiscal year fiscal year

The Company
Subscription rights to shares(Parent company) as stock options

-

-

-

-

-

127

Total

-

-

-

-

-

127

3. Dividends(1) Dividend payments
Resolution

Type ofsharesTotal amount of cash dividends(Millions of yen)

Dividend per share(Yen)

Record date

Effective date

December 19, 2014
Ordinary General
Meeting of Shareholders

Common
stock

583

22

September 30,
2014

December 22,
2014

May 12, 2015
Meeting of the Board of
Directors

Common
stock

875

33

March 31, 2015

June 15, 2015

- 87 -

(2) Of the dividends with record dates during this consolidated fiscal year, those with effective dates in thefollowing consolidated fiscal year
Resolution

Type ofsharesTotal amount ofcash dividends(Millions of yen)

Source ofdividends

Dividend per share(Yen)

Record date

Effective date

December 22, 2015
Ordinary General
Meeting of
Shareholders

Common
stock

1,009

Retainedearnings

38

September 30,
2015

December 24,
2015(Notes to Consolidated Statements of Cash Flows)*1. Relationship between the ending balance of cash and cash equivalents and account items stated in the
consolidated balance sheets
Previous consolidated fiscal year
(Started October 1, 2013;
ended September 30, 2014)

Current consolidated fiscal year
(Started October 1, 2014;
ended September 30, 2015)

Cash and deposits

23,625 million yen

21,919 million yen

Time deposits with deposit period greater than three months
Cash and cash equivalents(7,600)16,025(5,300)16,619- 88 -

(Lease Transactions)1. Finance lease transactions (Lessee)
Finance lease transactions that do not involve transfer of ownership
1) Description of lease assets
Property, plants and equipment
Mainly include machinery and equipment, tools, furniture and fixtures.
2) Depreciation of lease assets
Lease assets are amortized in accordance with 4. Accounting Policies, (2) Depreciation of major depreciable
assets, which describes basis of presenting the consolidated financial statements.
2. Operating lease transactions (Lessee)
Unexpired lease payments for non-cancellable operating lease transactions(Unit: Millions of yen)Previous consolidated fiscal year
(September 30, 2014)

Current consolidated fiscal year
(September 30, 2015)

Within one year

120

141

After one year

163

226

Total

284

367

3. Amounts of sublease transactions that are recorded in the consolidated balance sheets in amounts before
deduction of interests(1) Lease investment assets(Unit: Millions of yen)Previous consolidated fiscal year
(September 30, 2014)

Current consolidated fiscal year
(September 30, 2015)

Current assets

31

174

Investments and other assets

100

547

Previous consolidated fiscal year
(September 30, 2014)

Current consolidated fiscal year
(September 30, 2015)

Current liabilities

31

174

Fixed liabilities

100

547

(2) Lease obligations(Unit: Millions of yen)

- 89 -

(Financial Instruments)
1. Status of financial instruments(1) Policy for the handling of financial instruments
The Group manages its funds in the form of low risk, highly safe financial assets such as bank deposits andbonds. It is the policy of the Group not to enter into derivative transactions for speculative trading purposes.
(2) Description of financial instruments, risks and risk management policies
Notes and accounts receivable resulting from operating activities of the Company are exposed to credit riskof the customers. To reduce credit risk, the Company manages such risk as appropriate based on payment
terms and credit ratings of customers in accordance with internal credit management regulations.
Marketable securities and investment securities are exposed to market fluctuation risk, and the Company
periodically checks the fair values and financial conditions of issuing bodies and conducts reviews of its
holdings on an ongoing basis.
Long-term deposits include deposits with special provisions concerning early termination (callable certificatesof deposit).
The majority of trade payables and accounts payable resulting from operating activities are due within threemonths.
(3) Supplementary information on fair value of financial instruments
The fair value of financial instruments is based on quoted market prices or on reasonable calculations in theabsence of market quotations. Since certain assumptions that contain fluctuation factors were used inestimating the fair value, results may fluctuate when a different set of assumptions is used.
2. Fair value of financial instruments
The book value in consolidated balance sheets, fair value and differences are as follows. Financial instruments
for which the fair value is extremely difficult to measure are not included. (See Note 2.)Previous consolidated fiscal year (September 30, 2014)
Book value in consolidatedbalance sheets(Millions of yen)
(1) Cash and deposits

23,625(2) Notes and accounts receivable

7,685

Allowance for bad debts

(37)
7,648

Fair value(Millions of yen)

Differences(Millions of yen)

23,625

-

7,648

-

(3) Investments in securities

6,248

6,248

-

(4) Long-term deposits

12,70012,702

2

50,22350,226

2(1) Accounts payable – trade

Total assets

3,296

3,296

-

(2) Accounts payable

3,710

3,710

-

7,006

7,006

-

Total liabilities- 90 -

Current consolidated fiscal year (September 30, 2015)
Book value in consolidatedbalance sheets(Millions of yen)

Fair value(Millions of yen)

Differences(Millions of yen)

21,919

-

6,376

6,376

-

(3) Investments in securities

12,397

12,397-(4) Long-term deposits

9,400

9,401

1

50,09350,095

1(1) Accounts payable – trade

2,540

2,540

-

(2) Accounts payable

3,525

3,525

-

Total liabilities

6,066

6,066

-

(1) Cash and deposits

21,919(2) Notes and accounts receivable

6,411

Allowance for bad debts(34)

Total assets(Notes)1. Methods of calculating the fair value of financial instruments and securities transactions
Assets(1) Cash and deposits, (2) Notes and accounts receivable
The book value approximates the fair value because of the short maturity of these instruments.
(3) Investments in securities
The fair value of equity securities is based on quoted market prices on the stock exchange; and the fair valueof bonds is based on the market prices quoted on the stock exchange or provided by financial institutions.
These securities categorized by purpose of holding are described further in the Notes on Securities.
(4) Long-term deposits
The fair value of long-term deposits is estimated based on the present value discounted using the interest rateapplicable to new deposits in the total amount of principal and interest, and on the fair market value provided
by financial institutions for the derivative portions.
Liabilities(1) Accounts payable – trade, (2) Accounts payable
The book value approximates the fair value because of the short maturity of these instruments.
2. Financial instruments for which the fair value is extremely difficult to measure(Unit: Millions of yen)Previous consolidated fiscal year
(September 30, 2014)

Current consolidated fiscal year
(September 30, 2015)

Other securities(unlisted equity securities)

453

503

Investment in affiliate companies

148

424

602

928

Classification

Total

The fair value of these financial instruments are deemed to be extremely difficult to measure since quoted
market value is not available and future cash flows cannot be reliably estimated, and thus the above are notincluded in "(3) Investments in securities" for the previous consolidated fiscal year nor in "(3) Investments
in securities" for the current consolidated fiscal year.

- 91 -

3. Redemption scheduled for monetary claims and securities with maturity dates subsequent to the consolidated
settlement datePrevious consolidated fiscal year (September 30, 2014)
Within one year
(Millions ofyen)Over 1 year andwithin 5 years(Millions of yen)Over 5 years andwithin 10 years(Millions of yen)Over 10 years(Millions of yen)

Cash and deposits

23,622---

Notes and accounts receivable

7,685

-

-

-

Investments in securities
Bonds
Long-term deposits
Total

-

-

2,000

-

-

12,200500-

31,308

12,2002,500-

Current consolidated fiscal year (September 30, 2015)
Within one year
(Millions ofyen)Over 1 year andwithin 5 years(Millions of yen)Over 5 years andwithin 10 years(Millions of yen)Over 10 years(Millions of yen)

Cash and deposits

21,915---

Notes and accounts receivable

6,411

-

-

-

-

9,400

8,000
-

-

28,326

9,400

8,000

-

Investments in securities
Bonds
Long-term deposits
Total- 92 -

(Securities)
1. Other securities
Previous consolidated fiscal year (September 30, 2014)
Classification(1) Shares
Securities for which theamounts in the consolidated (2) Bonds
balance sheets exceeds the
Corporate bonds
original purchase value
Subtotal
Securities for which theamounts in the consolidatedbalance sheets do not
exceed the original
purchase value

Book value in consolidated
Original purchase valuebalance sheets(Millions of yen)
(Millions of yen)

Differences(Millions of yen)

4,253

3,643

609

507

500

7

4,760

4,143

617

Corporate bonds

1,488

1,507

(19)

Subtotal

1,488

1,507

(19)

6,248

5,650

598

Bonds

Total

(Note) Unlisted shares (453 million yen in the consolidated balance sheets) are not included under "Other securities" in the table above
since quoted market value is not available and is deemed to be extremely difficult to measure.

Current consolidated fiscal year (September 30, 2015)

Classification

Book value inconsolidated balance
sheets(Millions of yen)

Original purchase value(Millions of yen)

(1) Shares
Securities for which theamounts in the consolidated (2) Bonds
balance sheets exceeds the
Corporate bonds
original purchase value
Subtotal

4,494
505

500

5

5,000

4,137

862

(1) Shares
Securities for which theamounts in the consolidated (2) Bonds
balance sheets do not
Corporate bonds
exceed the original
purchase value
Subtotal

6

6

(0)

7,391

7,503

(112)

7,397

7,509

(112)

12,397

11,647

750

Total

3,637

Differences(Millions of yen)
857

(Note) Unlisted shares (503 million yen in the consolidated balance sheets) are not included under "Other securities" in the table above
since quoted market value is not available and is deemed to be extremely difficult to measure.

2. Other securities soldNot applicable.
3. Securities for which impairment losses are recognizedNot applicable.

- 93 -

(Derivatives)
1. Derivative transactions for which hedge accounting is not applied
Not applicable.
2. Derivative transactions for which hedge accounting is applied
Not applicable.
(Retirement Benefits)
1. Overview of the retirement benefit system in use
The Company and its two consolidated subsidiaries have contributory and non-contributory defined benefit
retirement plans (retirement lump-sum plan) and a defined contribution pension plan to cover retirement
benefits to employees.
Under the retirement lump-sum plan, the Company pays a lump-sum retirement benefit based on employees’salary and period of service. The Company establishes a retirement benefit trust for the retirement lump-sum
plan.
Although the Company is a member of a multiemployer pension plan called the Japan Computer Information
Service Employees’ Pension Fund, the portion of pension assets that the Company contributes is recognizedsimilar to the defined benefit plan because the amount cannot be reasonably calculated.
2. Defined benefit retirement plan
(1) Adjustment of balance of retirement benefit obligations at the beginning and end of fiscal years
Previous consolidated fiscal year
(Started October 1, 2013;
ended September 30, 2014)
Retirement benefit obligations at beginning of year

Current consolidated fiscal year
(Started October 1, 2014;
ended September 30, 2015)

3,657 million yen

Balance at beginning of year
Accumulated financial impact due to changes in accounting
policyService costs
Interest costs
Actuarial differences
Retirement benefits paid
Balance of retirement benefit obligations at end of year

4,084 million yen

-

51

3,657

4,135

214
54
267
(109)

272
41
314
(144)

4,084

4,619

(2) Adjustment of balance of pension assets at the beginning and end of fiscal years

Balance of pension assets at beginning of year
Expected returns
Actuarial differences
Contributions by employer
Retirement benefits paid
Balance of pension assets at end of year

Previous consolidated fiscal year
(Started October 1, 2013;
ended September 30, 2014)--- million yen
0
3,000
3,000

- 94 -

Current consolidated fiscal year
(Started October 1, 2014;
ended September 30, 2015)
3,000 million yen
0
800
3,801

(3) Adjustment of balance of retirement benefit obligations and pension assets at the end of the fiscal years, andnet retirement benefit obligations and assets recognized in the consolidated balance sheets
Previous consolidated fiscal year
(September 30, 2014)

Current consolidated fiscal year
(September 30, 2015)

Contributory retirement benefit obligations

3,651 million yen

4,209 million yen

Pension assets(3,000)(3,801)

651
432

408
410

Net obligations and assets in the consolidated balance
sheets

1,084

818

Retirement benefit liabilities

1,084

818

Net obligations and assets in the consolidated balance
sheets

1,084

818

Previous consolidated fiscal year
(Started October 1, 2013;
ended September 30, 2014)

Current consolidated fiscal year
(Started October 1, 2014;
ended September 30, 2015)

Non-contributory retirement benefit liabilities(4) Retirement benefit expenses and breakdown

Service costs
Interest costs
Expected returns
Amount of actuarial differences treated as expenses

214 million yen
54267

272 million yen
41
313

Retirement benefit expenses under the defined
retirement benefit plan

536

627

(5) Pension assets
1) Major pension assets
Previous consolidated fiscal year
(September 30, 2014)

Current consolidated fiscal year
(September 30, 2015)

Cash and deposits

100%

100%

Total

100

100

(Note) All pension assets are the retirement benefit trust established for the Company’s defined retirement benefit plan.

2) Basis for expected long-term rate of return on pension assets
The Company has a basic policy to cover the trust expenses with operation profit and does not have an
expected long-term rate of return on pension assets.
(6) Basis for actuarial calculations
Basis for major actuarial calculations

Discount rate
Expected long-term rate of return
Expected increase in salaryPrevious consolidated fiscal year
(September 30, 2014)

Current consolidated fiscal year
(September 30, 2015)

1.00%
-%
1.00 to 2.00%

1.00%
-%
1.00 to 1.85%- 95 -

3. Defined contribution plan
The amount of necessary contributions to the defined contribution plan of the Company and its consolidated
subsidiaries was 221 million yen for the previous consolidated fiscal year, and 227 million yen for the current
consolidated fiscal year.
4. Multiemployer pension plan
The amount of necessary contributions to the employees pension fund plan under the multiemployer pension
plan, which is recognized in the same manner as the defined contribution plan, was 115 million yen.
(1) Reserve fund for multiemployer pension planPrevious consolidated fiscal year
(March 31, 2014)

Current consolidated fiscal year
(March 31, 2015)

Pension assets
Total of actuarial liabilities based on pension plan
finance calculation and minimum policy reserves (Note)

627,857 million yen

735,622 million yen

640,038

729,355

Differences(12,180)(6,266)(Note) Recorded as the "Benefit liabilities based on pension plan finance calculation" for the previous consolidated fiscal year.

(2) Coverage ratio of the Group in the multiemployer pension planPrevious consolidated fiscal year: 1.45% (Started April 1, 2013; ended March 31, 2014)
Current consolidated fiscal year: 1.47% (Started April 1, 2014; ended March 31, 2015)(3) Supplementary information
The ratio in (2) above does not match the actual self-pay ratio of the Company.

- 96 -

(Stock Option Plans)
1. Expenses related to stock options(Unit: Millions of yen)
Current consolidated fiscal year
(Started October 1, 2014;
ended September 30, 2015)

Previous consolidated fiscal year
(Started October 1, 2013;
ended September 30, 2014)
Selling, general and administrative expenses

45

44

2. Description, scale and fluctuation of stock option plans(1) Details of stock options
1st subscription rights
to shares

2nd subscription rights
to shares

3rd subscription rights
to shares

4th subscription rights
to shares

Directors (excluding
Outside Directors): 9
Auditors (excluding
Outside Auditors): 2

Directors (excluding
Outside Directors): 10
Auditors (excluding
Outside Auditors): 2
Executive Officers: 13

Directors (excluding
Outside Directors): 10
Auditors (excluding
Outside Auditors): 2
Executive Officers: 13

Directors (excluding
Outside Directors): 11
Auditors (excluding
Outside Auditors): 2
Executive Officers: 17

Number of stock
options by class (Note)

Common stock:27,000 shares

Common stock:37,600 shares

Common stock:
34,400 shares

Common stock:
28,100 shares

Date of grant

March 12, 2012

December 7, 2012

December 9, 2013

December 12, 2014

Conditions for vesting

n/a

n/a

n/a

n/a

Required period ofserviceNot provided

Not provided

Not provided

Not provided

From Dec. 8, 2012 toDec. 7, 2047

From Dec. 10, 2013 toDec. 9, 2048

From Dec. 13, 2014 toDec. 12, 2049

Position and number ofgrantees

Period stock options can From March 13, 2012 to
be exercised
March 12, 2047

(Note) Number of stock options is exchanged to the number of common stock.

(2) Scale and fluctuation of stock options
The following summarizes the stock options that existed during the current consolidated fiscal year (yearended September 2015). Number of stock options is exchanged to the number of common stock.
1) Number of stock options
1st subscription rights
to shares
Before vesting (shares)
At end of previous
consolidated fiscal year
GrantedForfeited
VestedBalance not vested
After vesting (shares)
At end of previous
consolidated fiscal year
VestedExercised
Forfeited
Balance not vested

2nd subscription rights
to shares

3rd subscription rights
to shares

4th subscription rights
to shares

-

-

-

-

-

-

-

28,100----28,100----20,60030,80034,400----28,100

3,100

4,100

3,600

3,000

-

-

-

-

17,50026,70030,80025,100- 97 -

2) Per unit information
1st subscription rights to 2nd subscription rights
sharesto shares
Exercise price (Yen)
Average market price ofstock at time of exercise(Yen)
Fair value per unit as ofgrant date (Yen)

3rd subscription rights
to shares

4th subscription rights
to shares

1

1

1

1

1,945

1,946

1,945

1,946

1,145

1,032

1,323

1,569

3. Method used to estimate the fair value of stock options
The fair value of the 4th issue of subscription rights to shares (stock options) granted in the current
consolidated fiscal year was measured as follows.
1) Valuation method used
The Black-Scholes model2) Major base figures and estimations
4th subscription rights to shares (stock options)
Expected volatility of stock (Note 1)

21.844%

Expected option life (Note 2)
Expected dividends (Note 3)
Risk-free interest rate (Note 4)

8.2 years
44 yen/share
0.251%(Notes) 1. Expected volatility of stock is calculated based on the actual stock price data over the 8.2-year period (from October
2006 to December 2014).
2. Expected option life is calculated based on the period of time from the allotment date to the date on which the
Directors, Auditors and Executive Officers are expected to lose their status.
3. Expected dividends are based on a total of 44 yen of actual dividends made, consisting of the year-end dividendof 22 yen for the period ended September 2013 and the interim dividend of 22 yen for the period ended September
2014.
4. Risk-free interest rate is calculated based on the yield of government bonds having a remaining life equal to the
expected option life.

4. Method used to estimate the number of stock options to be vested
Because it is difficult to rationally estimate the number of stock options that will be forfeited in the future,
only the actual number of forfeited stock options is used in the estimation.

- 98 -(Tax Effect Accounting)
1. Major factors of deferred tax assets and deferred tax liabilities
Previous consolidated fiscal year
(September 30, 2014)

Current consolidated fiscal year
(September 30, 2015)

2,044 million yen

1,877 million yen

Deferred tax assets
Software development costs
Provisions for bonuses

959

807

Retirement benefit liabilities

389

276

Retirement benefit trust

1,062

1,220

Retirement bonuses for directors payable

149

24

Accrued business tax
Valuation loss on investment securities
Legal welfare expenses corresponding to provisions
for bonuses
Asset retirement obligations
Impairment losses
Other
Subtotal
Valuation allowance

122
56

96
51

138

130

128
148
217
5,418
(359)

112
135
215
4,942
(362)

5,059

4,583

34

29

198

229

1

0

Total deferred tax assets
Deferred tax liabilities
Retirement expenses corresponding to asset retirement
costs
Valuation difference on available-for-sale securities
Other
Total deferred tax liabilities
Net deferred tax assets

235

258

4,824

4,325

(Note) Net deferred tax assets for the previous and current consolidated fiscal years are included in the following items in the
consolidated balance sheets.
Previous consolidated fiscal year
(September 30, 2014)

Current consolidated fiscal year
(September 30, 2015)

Current assets - Deferred tax assets

2,130 million yen

1,894 million yen

Non-current assets - Deferred tax assets
Fixed liabilities - Other

2,694
(0)

2,431
(0)

2. Major items causing significant difference between statutory income tax rate and effective income tax rate
after applying tax effect accounting
Previous consolidated fiscal year
(September 30, 2014)
Statutory income tax rate
(Adjusted)
Inhabitant tax on per capita basis
Entertainment expenses, etc. not deductible for tax
purposes
Tax credits for salary growth
Changes in assessment of year end deferred tax assets due
to changes in tax rate
Other
Income tax rate after applying tax effect accounting- 99 -

Current consolidated fiscal year
(September 30, 2015)

37.8%

35.4%

0.9

0.8

1.9

1.2

-

(1.4)

2.3

5.9

0.2

0.2

43.1

42.2

3. Increase and decrease of deferred tax assets and deferred tax liabilities due to changes in income tax rate
In accordance with the Act for Partial Revision of the Income Tax Act and Other (Act No. 9 of 2015) and the
Act for Partial Revision of the Local Tax Act (Act No. 2 of 2015) promulgated on March 31, 2015, income
tax rates were changed effective from the consolidated fiscal years starting on or after April 1, 2015. In
conjunction with this, the statutory effective tax rate used to calculated deferred tax assets and deferred tax
liabilities was changed from the previous rate of 35.4% to 32.8% for temporary differences expected to bereversed in the consolidated fiscal year starting October 1, 2015. The rate will be 32.1% for temporary
differences expected to be reversed in or after the consolidated fiscal year starting October 1, 2016.
As a result, the amount of deferred tax assets (after deducting deferred tax liabilities) decreased by 388 million
yen, income taxes-deferred increased by 411 million yen, and valuation difference on available-for-salesecurities increased by 22 million yen.
(Asset Retirement Obligations)
Previous consolidated fiscal year (ended September 30, 2014) and current consolidated fiscal year (ended September
30, 2015)
The amount of asset retirement obligations was immaterial.
(Segment information, etc.)[Segment information]
1. Overview of reportable segments
The Group’s reportable segments are components of the Group for which separate financial information isavailable and which are subject to regular review by management for the purpose of determining the allocationof managerial resources and evaluating business performance.
The Group has three reportable segments for each of its business divisions: the Accounting Firm Business
Division, the Local Governments Business Division, and Printing Business Division.
Major services and products of each reportable segment are as follows:[Accounting Firm BD] (Providing services & products to accounting firms and their clients)
Information processing service, software and consulting service, sales of office equipment and supplies.
[Local Governments BD] (Providing services & products to local governments (municipalities, etc.))
Information processing service, software and consulting service, sales of office equipment.
[Printing BD]
Computer-generated business forms, general office forms, data printing services, etc.
2. Methods of calculating net sales, profit or loss, assets and other items by reportable segments
Accounting methods for reported business segments are largely consistent with that methods described in the"Basis of Presenting the Consolidated Financial Statements" section.
Profits by reportable segments are figures of operating income of the segments.
Inter-segment sales and transfers are based on prevailing market values.

- 100 -

3. Information on net sales, profit or loss, assets, and other items by reportable segments
Previous consolidated fiscal year (Started October 1, 2013; ended September 30, 2014)

Reportable segment
Accounting
Firm BD

Local
Governments
BD

Printing BD

39,772

11,453

3,277

22

0

39,794

11,453

Total(Unit: Millions of yen)Amounts inconsolidated
Adjustments
financial(Note 1)statements(Note 2)

Sales
Sales to outside customers
Inter-segment sales or transfers
Total

54,502-54,502

1,947

1,969

(1,969)-5,224

56,472(1,969)54,502

Segment profit

5,446

726

6

6,180

12

6,192

Segment assets

20,358

9,256

5,191

34,80640,45975,266

1,152

718

197

2,067

(1)

2,066

148

-

-

148

-

148

1,336

1,623

628

3,587

-

3,587

Other items
Depreciation (Note 3)
Investments in affiliated company
under the equity method
Increase in property, plants andequipment and intangible assets(Note 3)(Notes) 1. Adjustments are as follows:(1) Adjustments of segment profit of 12 million yen include 7 million yen for elimination of inter-segment
transactions and 3 million yen for adjustments of inventory assets.
(2) Adjustments of segment assets of 40,459 million yen include 40,851 million yen of corporate assets thatare not allocated to specific reportable segments, and -391 million yen for elimination of inter-segment
transactions. Corporate assets are primarily surplus funds of the parent company (cash and cash
equivalents), and long-term investment funds (investments securities).
(3) Adjustments of depreciation of -1 million yen represent to unrealized profits.
2. Segment profit is adjusted with the operating profit presented in the Consolidated Statements of Income.
3. Increases in depreciation, property, plants and equipment and intangible assets include depreciation longterm prepaid expenses and depreciation of such expenses.

- 101 -

Current consolidated fiscal year (Started October 1, 2014; ended September 30, 2015)

Reportable segment

Sales
Sales to outside customers
Inter-segment sales or transfers
Total(Unit: Millions of yen)Amounts inconsolidated
Adjustments
financial(Note 1)statements(Note 2)

Accounting
Firm BD

Local
Governments
BD

Printing BD

39,067
10

12,472
0

3,388
1,986

54,9281,997(1,997)54,928-39,077

12,473

5,374

56,925(1,997)54,928

Total

Segment profit

5,579

1,100

54

6,734

6

6,741

Segment assets
Other items

19,560

9,165

5,547

34,27442,562

76,836

Depreciation (Note 3)

1,075

860

305

2,241

(2)

2,239

424

-

-

424

-

424

938

2,970

1,292

5,200

-

5,200

Investments in affiliated company
under the equity method
Increase in property, plants andequipment and intangible assets(Note 3)(Notes) 1. Adjustments are as follows:(1) Adjustments of segment profit of 6 million yen include 7 million yen for elimination of inter-segment
transactions and 1 million yen for adjustments of inventory assets.
(2) Adjustments of segment assets of 42,562 million yen include 43,013 million yen of corporate assets thatare not allocated to specific reportable segments, and △451 million yen for elimination of inter-segment
transactions. Corporate assets are primarily surplus funds of the parent company (cash and cash
equivalents), and long-term investment funds (investments securities).
(3) Adjustments of depreciation of △2 million yen represent to unrealized profits.
2. Segment profit is adjusted with the operating profit presented in the Consolidated Statements of Income.
3. Increases in depreciation, property, plants and equipment and intangible assets include depreciation longterm prepaid expenses and depreciation of such expenses.

[Related information]
Previous consolidated fiscal year (Started October 1, 2013; ended September 30, 2014)
1. Information by product and service
Information is omitted since the same information is disclosed under the segment information.
2. Information by geographic area
(1) Sales
Information is omitted since more than 90% of sales in the Consolidated Statements of Income are sales tooutside customers in Japan.
(2) Property, plants and equipment
Information is omitted since the Company has no property, plants and equipment in regions outside Japan.
3. Information by major customer
Information is omitted since there are no sales to external customers that account for 10% or more of the sales
in the Consolidated Statements of Income.
Current consolidated fiscal year (Started October 1, 2014; ended September 30, 2015)- 102 -

1. Information by product and service
Information is omitted since the same information is disclosed under the segment information.
2. Information by geographic area
(1) Sales
Information is omitted since more than 90% of sales in the Consolidated Statements of Income are sales tooutside customers in Japan.
(2) Property, plants and equipment
Information is omitted since the Company has no property, plants and equipment in regions outside Japan.
3. Information by major customer
Information is omitted since there are no sales to external customers that account for 10% or more of the sales
in the Consolidated Statements of Income.
[Information on impairment losses of fixed assets by reportable segments]
Previous consolidated fiscal year (Started October 1, 2013; ended September 30, 2014)(Unit: Millions of yen)
Reportable segment
Accounting
Firm BD
Impairment losses

18

Local
Governments
BD
2

Printing BD
-

Total

Adjustments

Amounts inconsolidated
financialstatements

21

-

21

Current consolidated fiscal year (Started October 1, 2014; ended September 30, 2015)(Unit: Millions of yen)
Reportable segment
Accounting
Firm BD
Impairment losses

2

Local
Governments
BD
0

Printing BD
-

Total

Adjustments

Amounts inconsolidated
financialstatements

2

-

2

[Information on amortization of goodwill and balance of goodwill by reportable segments]
Previous consolidated fiscal year (Started October 1, 2013; ended September 30, 2014)
Not applicable.
Current consolidated fiscal year (Started October 1, 2014; ended September 30, 2015)
Information has been omitted as it was immaterial.
[Information on gain on negative goodwill by reportable segments]
Previous consolidated fiscal year (Started October 1, 2013; ended September 30, 2014)
Not applicable.

- 103 -

Current consolidated fiscal year (Started October 1, 2014; ended September 30, 2015)
Not applicable.
[Related Parties Information]
1. Related Parties Transactions(1) Transactions between the Company and related parties
Previous consolidated fiscal year (Started October 1, 2013; ended September 30, 2014)
Directors and major shareholders (individuals only) of the Company

Type

Company nameor name ofindividual

Address

Capital or
Holding (held)
investments Business orRelationship withvoting rights ratio(Millions of occupation
related party
(%)
yen)

Director

Tomohiko
Nagata--Tax
accountant

Nearrelative of
director

Runako Iizuka(Near relativeof Chairman of
the Board andRepresentative
Director,
Masaharu
Iizuka)---Certified public
NumazuCompanies tax accounting City,
firm TOPin which
Shizuoka(Note 3)
directors
and near
Certified public
relatives
tax accounting Miyaginohold
firm Ofujiku, Sendai
majority
AccountingCity,
voting rights OfficeMiyagi(Note 4)6

9Taxaccounting
firm

Tax
accounting
firm(Held)
Direct (0.0)

-

-

-

Details oftransaction

Transaction
amount(Millions ofyen)Account

Year-endbalance(Millions ofyen)

Outsourcing of
information
processing, etc.

Outsourcing of
information
processing, etc.
(Note 2)16

Accounts
receivable1

Leasing ofbuildings

Leasing ofbuildings (Note 2)

98

-

-

Outsourcing of
information
processing, etc.

Outsourcing of
information
processing, etc.
(Note 2)16

Accounts
receivable2

Outsourcing of
information
processing, etc.

Outsourcing of
information
processing, etc.
(Note 2)

14

Accounts
receivable1(Notes) 1. Consumption taxes are not included in the transaction amounts. Consumption taxes are included in the yearend balance.
2. Terms of transaction or policies on determining the terms of transaction(1) Rent expenses have been determined based on the result of survey by real estate agencies on rent expensesof other nearby buildings.
(2) Terms of transaction for the outsourcing of information processing are similar to the terms between othercounterparts.
3. The company was co-founded with Mr. Yasuyuki Saito, Director of the Company.
4. The company was co-founded with a near relative of Mr. Kazuyuki Sumi, Representative Director of theCompany.

- 104 -

Current consolidated fiscal year (Started October 1, 2014; ended September 30, 2015)
Directors and major shareholders (individuals only) of the Company

Type

Company nameor name ofindividual

Director

Tomohiko
NagataCapital orinvestments(Millions ofyen)

Business or
occupation

Holding (held)
voting rights
ratio (%)

Relationship withrelated party

-

-

Tax
accountant(Held)
Direct (0.0)

-

-

-

NumazuCity,
Shizuoka

6

Miyaginoku, Sendai
City,
Miyagi9

Address

Runako Iizuka(Near relative ofRepresentative
Near relative Director andof director
Senior Managing
Executive
Officer,
Masanori Iizuka)
Certified publicCompanies tax accounting
firm TOPin whichdirectors and (Note 3)
near
Certified public
relatives
tax accounting
holdfirm Ofuji
majority
Accounting
voting rights Office(Note 4)Tax
accounting
firm

Tax
accounting
firm

-

-

-

Details oftransaction

Transaction
amount(Millions ofyen)Account

Year-endbalance(Millions ofyen)

Outsourcing of
information
processing, etc.

Outsourcing of
information
processing, etc.
(Note 2)17

Accounts
receivable1

Leasing ofbuildings

Leasing ofbuildings(Note 2)98--

Outsourcing of
information
processing, etc.

Outsourcing of
information
processing, etc.
(Note 2)15

Accounts
receivable1

Outsourcing of
information
processing, etc.

Outsourcing of
information
processing, etc.
(Note 2)15

Accounts
receivable1(Notes) 1. Consumption taxes are not included in the transaction amounts. Consumption taxes are included in the yearend balance.
2. Terms of transaction or policies on determining the terms of transaction(1) Rent expenses have been determined based on the result of survey by real estate agencies on rent expensesof other nearby buildings.
(2) Terms of transaction for the outsourcing of information processing are similar to the terms between othercounterparts.
3. The company was co-founded with Mr. Yasuyuki Saito, Director of the Company.
4. The company was co-founded with a near relative of Mr. Kazuyuki Sumi, Representative Director of theCompany.

(2) Transactions with consolidated subsidiaries and related parties to the Company submitting the consolidated
financial statements
Not applicable.
2. Notes on the parent company and important affiliated companies(1) Information on the parent company
Not applicable.
(2) Summary of financial information of important affiliated companies
Not applicable.

- 105 -

(Earnings Per Share Information)
Previous consolidated fiscal year
(Started October 1, 2013; ended
September 30, 2014)

Current consolidated fiscal year
(Started October 1, 2014; ended
September 30, 2015)

Net assets per share

2,205.39 yen

2,304.38 yen

Net income per share

135.55 yen

151.18 yen

Diluted net income per share

135.15 yen

150.63 yen(Note) The basis for calculating net income per share and diluted net income per share is as follows.
Previous consolidated fiscal year
(Started October 1, 2013; ended
September 30, 2014)

Current consolidated fiscal year
(Started October 1, 2014; ended
September 30, 2015)

3,604

4,011

-

-

3,604

4,011

26,587

26,532

-

-

79

97

(79)

(97)

Net income per share
Net income (Millions of yen)Amount not attributable to common shareholders(Millions of yen)
Net income attributable to common shares (Millionsof yen)Average number of shares outstanding (thousands ofshares)Diluted net income per share
Adjustments to net income (Millions of yen)
Number of common shares increased (thousands ofshares)(Subscription rights to shares (thousands of shares))
Outline of diluted shares not included in the calculationof diluted net income per share for not having dilutive
effect________________________________________(Subsequent Events)
Not applicable.

- 106 -

5) [Supplementary Schedules][Schedule – Corporate Bonds]
Not applicable.
[Schedule – Borrowings]
Category

Balance at
beginning of year
(Millions of yen)

Balance at end ofyear(Millions of yen)

328

60

1.24

-

Short-term debts

Average interest rate
Terms of repayment(%)

Current portion of long-term debts

-

71

0.93

-

Current portion of lease obligations

56

225

-

-

Long-term debts (excluding current
portion of long-term debts)

-

366

0.93

October 5, 2016 to
October 29, 2021

Lease obligations (excluding current
portion of lease obligations)

164

673

-

October 22, 2016 to
May 22, 2020

Accounts payable – installment
purchases

56

200

1.27

October 22, 2015 to
May 22, 2020

Total

605

1,597

-

-

Other interest-bearing debts(Notes) 1. The weighted average interest rates applicable to the year-end balance of borrowings are indicated for averageinterest rates.
2. The average interest rate for lease obligations is not included because the amount of lease obligations in the
consolidated balance sheets represents the total amount of lease payment before deducting interest.
3. Repayment of lease obligations (excluding current portion) and other interest-bearing debts (excluding current
portion) scheduled within 5 years from the consolidated settlement date is as follows.
After 1 year but
within 2 years(Millions of yen)

After 2 years but
within 3 years(Millions of yen)

After 3 years but
within 4 years(Millions of yen)

After 4 years but
within 5 years(Millions of yen)

Lease obligations

221

207

174

62

Other interest-bearing debts

50

38

36

24

[Schedule – Asset Retirement Obligations]
Information has been omitted as it was immaterial.

- 107 -

(2) [Other]
Quarterly financial information for the current consolidated fiscal year
(Cumulative period)
Sales (Millions of yen)
Quarterly net income before income taxes(current FY)(Millions of yen)
Quarterly net income (current FY)(Millions of yen)
Quarterly net income per share (current FY)(Yen)(Accounting period)
Quarterly net income per share(Yen)

Current consolidated
fiscal year

1st quarter2nd quarter3rd quarter

12,17827,753

41,19454,928

1,279

4,858

6,821

6,962

813

2,830

3.955

4,011

30.67

106.70149.10151.18

1st quarter2nd quarter3rd quarter

4th quarter

30.67

76.01

42.39

2.09

- 108 -

2 [Financial Statements, etc.](1) [Financial Statements]
1) [Balance Sheets](Unit: Millions of yen)Previous fiscal year
(September 30, 2014)

Current fiscal year
(September 30, 2015)

21,581*1 6,816
31
110
376
92
314
26
*1
2,045
265
*1
(36)
31,624

19,424*1 5,495
174
117
150
109
252
84
*1
1,822
288
*1
(33)
27,886

5,114
113
3
997
6,091
12,319

4,788
101
1
972
6,091
880
12,834

773
1,856
28
0
2,658

2,497
697
26
0
3,221

6,594
349
100
12
74
2,545
12,2001,294
100
923,28038,25769,882

12,786
690
100
29
2,311
9,400
1,414
547
13
27,292
43,347
71,234

AssetsCurrent assets
Cash and deposits
Accounts receivable
Lease investment assets
MerchandiseWork in progress
Raw materials and stored items
Prepaid expenses
Accounts receivable – other
Deferred tax assets
Other
Allowance for bad debts
Total current assets
Non-current assets
Property, plants and equipment
Buildings
Structures
VehiclesTools, furniture & fixtures
Land
Construction in progress accountTotal property, plants and equipment
Intangible assets
Software
Software in progress
Telephone subscription rights
Other
Total intangible assets
Investments and other assets
Investments securities
Stocks of subsidiaries and affiliates
Investments in capital
Long-term loans
Long-term prepaid expenses
Deferred tax assets
Long-term deposits
Guarantee deposits
Long-term lease investment assets
Other
Total investments and other assets
Total non-current assets
Total assets- 109 -

(Unit: Millions of yen)Previous fiscal year
(September 30, 2014)
Liabilities
Current liabilities
Accounts payable – trade
Lease obligations
Accounts payable – other
Income taxes payable
Accrued business office taxes
Consumption taxes payable
Advances received
Deposits received
Provisions for bonuses
Accounts payable – facilities
Other
Total current liabilities
Fixed liabilities
Lease obligations
Provisions for retirement benefits
Other
Total fixed liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Other capital surplus
Total capital surplus
Retained earnings
Legal retained earnings
Other retained earnings
General reserve
Retained earnings brought forward
Total retained earnings
Treasury stock
Total shareholders’ equity
Valuation and translation adjustments
Valuation difference on available-for-salesecurities
Total valuation and translation adjustments
Subscription rights to shares
Total net assets
Total liabilities and net assets

3,155
31
*1 2,137
1,774
49
577
250
326
2,560
580
11,443*1- 110 -

Current fiscal year
(September 30, 2015)

2,406
174
*1 2,204
1,215
50
753
382
305
2,305
365
*1
15
10,180
*1

100
651
752
1,504
12,948

547
408
403
1,359
11,539

5,700

5,700

5,409
5,409

5,409
10
5,419

688

688

42,057
3,007
45,753(403)
56,45844,457
3,155
48,301(346)
59,074

374

492

374
100
56,93469,882492
127
59,694
71,234

2) [Profit and Loss Statement](Unit: Millions of yen)Previous fiscal year
(Started October 1, 2013,
ended September 30, 2014)

Current fiscal year
(Started October 1, 2014;
ended September 30, 2015)*1 50,616*1 50,957*1 18,120*1 16,836

32,495*1, *2 26,335
6,160*1, *2 27,401

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Land & rent income
Compensations received
Other
Total non-operating income
Non-operating expenses
Foreign exchange losses
Other
Total non-operating expenses
Ordinary profit
Extraordinary profit
Gains on sale of non-current assets
Total extraordinary profit
Extraordinary losses
Losses on sale of non-current assets
Loss on disposal of non-current assets
Impairment losses
Total extraordinary losses
Net income before taxes
Income taxes – current
Income taxes – deferred
Total income taxes
Net income

*1
*1

*1

- 111 -

18
105
40
43
208

34,120
6,719
*1
*1
*1

*1

29
154
38
56
34
313

0
0
1
6,367

0
0
7,032

1
1

1
1

8
34
21
64
6,303
2,746
(23)
2,722
3,581

81
2
83
6,949
2,412
463
2,876
4,073

[Report on cost of sales](a) Cost of sales on information processing, software and consulting services

CategoryNote

48th Term
49th Term(Started October 1, 2013, ended September (Started October 1, 2014; ended September
30, 2014)
30, 2015)
Ratio
Ratio
Amount (Millions of yen)Amount (Millions of yen)(%)(%)

I Materials costs
II Labor costs

*1

3,074

23.5

3,264

27.8

2,271

17.4

2,093

17.8

6,394

54.4

11,752

100.0

III Expenses
1. Computer rental expenses

496

322

2. Maintenance contracts

1,598

1,459

3. Depreciation

792

563

4. Repairs and maintenanceexpenses622

639

5. Supplies expenses

1,762

1,397

6. Other

2,439

Total expenses

7,712

59.1

13,059100.0

Works in progress and inventories
at beginning of year
Transfers from other accounts

126

376

494

788

13,67912,917

376

150

1,718

1,411

11,584

11,356*2

Total
Works in progress and inventories
at end of year
Transfers to other accounts*3

Cost of sales on information
processing, software andconsulting services

2,011(Notes) 1. Labor costs include the following provisions. Figures in (parentheses) denote amounts for the previous fiscal year.
Provision for bonuses:
390 million yen (467 million yen)
Retirement benefit expenses: 79 million yen (105 million yen)
2. Transfers from other accounts represent the transfer of depreciation of software.
3. Transfers to other accounts represent the transfer of software development costs into software and software in progress
accounts.
4. Costs are determined using job order costing by project.

(b) Cost of sales on office equipment and supplies
48th Term(Started October 1, 2013,
ended September 30, 2014)
Category
I Inventories at beginning of year

Note

49th Term(Started October 1, 2014;
ended September 30, 2015)

Amount (Millions of yen)

Ratio
(%)

Amount (Millions of yen)

Ratio
(%)

101

1.5

110

2.0

II Purchases

6,545

98.5

5,488

98.0

Total

6,647

100.0

5,598

100.0

III Inventories at end of year
Cost of sales on office equipment
and supplies

110

117

6,536

5,480

- 112 -

3) [Statement of Changes in Equity]
Previous fiscal year (Started October 1, 2013; ended September 30, 2014)(Unit: Millions of yen)
EquityCapital surplus

Retained earnings
Other retained earnings

Common stock Legal capitalsurplus
Balance at
beginning of year
Accumulated
financial impact
due to changes
in accounting
policyBalance at
beginning of year
reflecting changes
in accounting
policyOther capitalsurplus

Total capitalsurplus

Legal retained
earnings

Generalreserve

Retainedearnings brought
forwardTotal
retainedearnings

5,700

5,409

-

5,409

688

39,557

3,096

43,342

5,700

5,409

-

5,409

688

39,557

3,096

43,3422,500(2,500)-(1,171)(1,171)

3,581

3,581

Changes in equity
General reserve
Dividends ofsurplus
Current net
profitAcquisition oftreasury stock
Disposal oftreasury stock
Changes in
items other thanequity (net)Total changes inequityBalance at end of
year

-

-

-

-

-

-

2,500

(89)

5,700

5,409

-

5,409

688

42,057

3,007

EquityBalance at beginning of year

Balance at beginning of year
reflecting changes in accounting
policyChanges in equity

Total equity(191)

54,260

Subscription
Total equity
Valuation difference on
Total valuation and rights to sharesavailable-for-sale securities translation adjustments

163

163

55

(191)

45,753

Valuation and translation adjustments

Treasury stock

Accumulated financial impact due
to changes in accounting policy

2,410

54,479-54,260

163

163

55

54,479--Dividends of surplus(1,171)(1,171)

Current net profit

3,581

3,581

(211)

(211)

-

-

General reserve

Acquisition of treasury stock(211)

Disposal of treasury stock
Changes in items other than equity
(net)

211

211

45

256

Total changes in equity

(211)

2,198

211

211

45

2,454

Balance at end of year

(403)

56,458

374

374

100

56,934- 113 -

Current fiscal year (Started October 1, 2014; ended September 30, 2015)(Unit: Millions of yen)
EquityCommon stock Legal capitalsurplus
Balance at
beginning of year
Accumulated
financial impact
due to changes
in accounting
policyBalance at
beginning of year
reflecting changes
in accounting
policyChanges in equity
General reserve
Dividends ofsurplus
Current net
profitAcquisition oftreasury stock
Disposal oftreasury stock
Changes in
items other thanequity (net)Total changes inequityBalance at end of
year

5,700

5,700

Capital surplus

Retained earnings

Other capitalsurplus

Other retained earnings
Retained
Generalearnings
reservebrought
forwardTotal
retainedearnings

42,057

3,007

45,753(65)(65)

42,057

2,941

45,6872,400(2,400)-(1,459)(1,459)

4,073

4,073

5,409

-

5,409

-

Total capitalsurplus

5,409

5,409

10

10

Legal retained
earnings

688

688

-

-

10

10

-

2,400

213

2,613

5,700

5,409

10

5,419

688

44,457

3,155

48,301EquityTreasury stock
Balance at beginning of year
Accumulated financial
impact due to changes inaccounting policy
Balance at beginning of year
reflecting changes inaccounting policy
Changes in equity(403)

56,458(65)(403)

General reserve
Dividends of surplus
Current net profit
Acquisition of treasury stock
Disposal of treasury stock

Total equity

Valuation and translation adjustments
Subscription
Valuation difference on
Total valuation and rights to sharesavailable-for-saletranslation adjustments
securities
374
374
100

(3)
60

56,393

Total equity
56,934
(65)

374

374

100

56,868--(1,459)(1,459)

4,073
(3)
70

4,073
(3)
70

Changes in items other thanequity (net)

117

117

26

144

Total changes in equity

57

2,681

117

117

26

2,825

Balance at end of year(346)

59,074

492

492

127

59,694- 114 -

[Notes to Financial Statements](Principal Accounting Policies)
1. Standards and methods used for the valuation of assets(1) Standards and methods used for the valuation of securities
a. Stocks of subsidiaries and affiliates
Cost determined by moving average method.
b. Available-for-sale securitiesa) Available-for-sale securities with market value
Stated at fair market value based on the quoted market price as of the fiscal year-end (related valuationdifferences are directly charged or credited to the shareholders’ equity, and cost of securities sold is
calculated by the moving average method)b) Available-for-sale securities without market value
Stated at cost determined by the moving average method(2) Standards and methods used for the valuation of inventory assets
a. Merchandise, raw materials
Cost determined by first-in, first-out method (with balance sheet values reflecting write downs for decreased
profitability).
b. Work in progress
Cost determined by cost percentage method or specific identification method and adjusted based on
percentage of completion (with balance sheet values reflecting write downs for decreased profitability).
c. Supplies
Last purchase price method (with balance sheet values reflecting write downs for decreased profitability).
2. Depreciation of non-current assets(1) Property, plants and equipment
Calculated based on declining balance method, except for buildings acquired after April 1, 1998 (excluding
accompanying facilities), which are calculated based on straight-line method.
(2) Intangible assets
a. Softwarea) Software for sale
Software for sale are amortized and stated at the higher of amortization based on estimated sales volume
in the future, and amortization at a constant periodic rate based on remaining effective life (within 3 years).
b) Software for internal use
Amortized using straight-line method with an estimated in-house useful life of five years.

- 115 -

b. Other intangible assets
Amortized using the straight-line method.
3. Accounting standards for provisions(1) Provisions for bad debts
In setting aside provisions for possible losses due to uncollectible receivables, provisions are recognized at
the amounts calculated based on the historical rate of credit loss with respect to normal receivables, and at
the amounts determined in consideration of collectability of individual receivables with respect to doubtful
accounts and certain other receivables.
(2) Provisions for bonuses
Provisions for bonuses are recognized based on the estimated amounts of payment.
(3) Provisions for retirement benefits
In setting aside allowances for employees’ retirement benefits, retirement benefit obligations and expectedpension assets payable as of the end of the current fiscal year are recognized.
a. Method of attributing expected benefits to dateIn calculating retirement benefit obligations, expected benefits are attributed to the period up until the endof the fiscal year based on benefit formula standards.
b. Recognizing actuarial differences as expenses
Actuarial differences are recognized as expense for the fiscal year in which they occur.
4. Accounting standards for revenues and expenses
Accounting standards for recognizing revenues and cost of sales of made-to-order software (softwaredevelopment contracts)(1) Projects for which the progress up to the end of the current fiscal year can be measured reliably
Accounted for by percentage-of-completion method (whereas, the degree of completion is estimated basedon the construction cost percentage method)(2) Other projects
Accounted for upon conclusion of contracts.
5. Other important matters regarding the preparation of financial statements(1) Accounting method for consumption taxes and local consumption taxes
Consumption taxes are accounted for using the tax-exclusion method.
(2) Application of the consolidated taxation system
The consolidated taxation system is applied.

- 116 -

(Additional Information)(Establishment of retirement benefit trust)
The Company has contributed 800 million yen in cash to the retirement benefit trust for the current fiscal year
in order to ensure the soundness of retirement benefit financing. As a result, the balance of provisions for
retirement benefits was decreased by the same amount.
(Notes to Balance Sheets)*1. Assets and liabilities on affiliated companies
Previous fiscal year
(September 30, 2014)
Short-term monetary claims on affiliatedcompanies
Short-term monetary liabilities on affiliatedcompanies

Current fiscal year
(September 30, 2015)

18 million yen

33 million yen

499

600

(Notes to Income Statements)*1. Volume of transactions with affiliated companies
Previous fiscal year
(Started October 1, 2013;
ended September 30, 2014)

Current fiscal year
(Started October 1, 2014;
ended September 30, 2015)

Volume of trading transactions
Sales

35 million yen

32 million yen

Purchases

2,102

2,282

Operating expenses

1,387

1,415

14

16

Volume of non-operating transactions*2. The approximate percentages of selling expenses were 56.1% for the previous fiscal year and 57.4% for thecurrent fiscal year; percentages of general and administrative expenses were 43.9% and 42.6%, respectively.
Major items included in selling, general and administrative expenses are as follows.
Previous fiscal year
(Started October 1, 2013;
ended September 30, 2014)

Current fiscal year
(Started October 1, 2014;
ended September 30, 2015)

Salaries

7,949 million yen

8,297 million yen

Provision for bonuses

2,213

2,031

Retirement benefit expenses

672

828

Depreciation

527

546

Rent expenses

1,879

1,919

130

124

Research and development expenses- 117 -

(Notes to Tax Effecting)
1. Major factors of deferred tax assets and deferred tax liabilities
Previous fiscal year
(September 30, 2014)

Current fiscal year
(September 30, 2015)

Deferred tax assets
Software development costs

1,959 million yen

1,774 million yen

Provisions for bonuses

906

756

Provisions for retirement benefits

230

131

Retirement benefit trust

1,062

1,220

Accrued business tax

121

93

Valuation loss on investment securities

101

91

Retirement bonuses for directors payable

144

18

131

122

Asset retirement obligations

115

107

Impairment losses

146

133

Other

204

210

5,122

4,660

Valuation allowance

(316)

(286)

Total deferred tax assets

4,805

4,373

184

213

30

26

215

239

4,590

4,133

Legal welfare expenses corresponding to provisions
for bonuses

Subtotal

Deferred tax liabilities
Valuation difference on available-for-sale securities
Retirement expenses corresponding to asset
retirement costs
Total deferred tax liabilities
Net deferred tax assets

2. Major items causing difference between statutory income tax rate and effective income tax rate after applying
tax effect accounting
Previous fiscal year
(September 30, 2014)37.8%

Current fiscal year
(September 30, 2015)
35.4%

0.9

0.8

1.8

1.2

(0.3)

(0.4)

Tax credits for salary growth

-

(1.4)

Changes in assessment of year end deferred tax
assets due to changes in tax rate

2.2

5.8

Other

0.8

0.0

43.1

41.4

Statutory income tax rate
(Adjusted)
Inhabitant tax on per capita basis
Entertainment expenses, etc. not deductible for tax
purposesDividends received, etc. to be excluded from grossrevenue

Income tax rate after applying tax effect accounting

3. Increase and decrease of deferred tax assets and deferred tax liabilities due to changes in income tax rate
In accordance with the Act for Partial Revision of the Income Tax Act and Other (Act No. 9 of 2015) and the
Act for Partial Revision of the Local Tax Act (Act No. 2 of 2015) promulgated on March 31, 2015, income
tax rates were changed effective from the fiscal years starting on or after April 1, 2015. In conjunction with- 118 -

this, the statutory effective tax rate used to calculated deferred tax assets and deferred tax liabilities waschanged from the previous rate of 35.4% to 32.8% for temporary differences expected to be reversed in thefiscal year starting October 1, 2015. The rate will be 32.1% for temporary differences expected to be reversedin or after the fiscal year starting October 1, 2016.
As a result, the amount of deferred tax assets (after deducting deferred tax liabilities) decreased by 380 million
yen, income taxes-deferred increased by 402 million yen, and valuation difference on available-for-salesecurities increased by 21 million yen.
(Subsequent Events)
Not applicable.
4) [Supplementary Schedules][Schedule – Tangible Assets](Unit: Millions of yen)

Category
Property, Plants & Equipment

Intangible Assets

Increase incurrent year

Decrease incurrent year

5,114
113
3
997
6,091
-

80
1
451
880

13
0
8
-

392
13
1
467
-

4,788
101
1
972
6,091
880

10,181
417
43
5,572
-

12,319

1,413

21

875

12,834

16,214

773
1,856

2,740
628

1,016
-

2,497
697

1,040
-

Telephone subscription rights

28

-

1,787
2
(2)

-

26

-

Other

0

-

-

0

0

0

3,368

1,789
(2)

1,016

3,221

1,041

Type of asset

Buildings
Structures
VehiclesTools, furniture and fixtures
Land
Construction in progress
Total property, plants &equipment
Software
Software in progress

Total intangible assets

Balance at
beginning of year

2,658

Depreciation incurrent year

Balance at
end of year

Accumulated
depreciation(Notes) 1. Figures in (parentheses) under "Decrease in current year" are inclusive figures and recognized as impairment losses.
2. Major increase in tangible assets during the current fiscal year were attributable to the following:
SoftwareConstruction in progress

Development costs of software for sale
Development costs of software for internal use
Deposit for the construction of New SEC Building

447 million yen
2,122 million yen
880 million yen[Schedule – Provisions](Unit: Millions of yen)
Item

Balance at beginningof yearIncrease in current
year

Decrease in current
year

Balance at end of year

Provisions for bad debts

36

33

36

33

Provisions for bonuses

2,560

2,305

2,560

2,305

(2) [Major Assets and Liabilities]
This item is omitted as information has been disclosed in the consolidated financial statements.
(3) [Other]- 119 -

Not applicable.

- 120 -

Part 6 [Stock-related Administration of the Company]
Fiscal year

From October 1 to September 30

Ordinary General Meeting of
Shareholders

December

Record date

September 30

Record dates for dividends ofsurplus

September 30
March 31

Number of shares in one unit

100 shares

Buyback and increase of shares lessthan one unit
Place of handling(Special account)
Sumitomo Mitsui Trust Bank, Limited
1-4-1 Marunouchi, Chiyoda-ku, Tokyo

Administrator of shareholder
registry

Mitsubishi UFJ Trust and Banking Corporation
1-4-5 Marunouchi, Chiyoda-ku, Tokyo

Forwarding office――――――

Handling charges for buyback andincreaseAmount stipulated separately as commission for entrusting sale or purchase ofstock

Method of giving public notice

By means of electronic public notice.
However, in the event that electronic notice is not possible due to incidents orother unavoidable circumstances, public notices will be posted in the Nihon
Keizai Shimbun.
TKC’s website for public notices: http://www.tkc.jp/

Shareholder privileges

Not applicable.

(Note) In accordance with the provisions of TKC Corporation’s Articles of Incorporation, holders of shares less than one
unit shall have no rights other than: rights listed in the items of Article 189, Paragraph 2 of the Companies Act;rights to receive allotment of shares for subscription and subscription rights to shares based on the number ofshares they hold; and rights to request the sale of shares less than one unit.

- 121 -

Part 7 [Reference Information on the Company]

1 [Information on the Parent Company]
TKC Corporation does not have a parent company as defined in Article 24-7, Paragraph 1 of the Financial
Instruments and Exchange Act.
2 [Other Reference Information]
TKC Corporation has filed the following documents between the beginning of the current fiscal year and thefiling date of this Annual Securities Report.
(1) Annual Securities Report, Appendices and Confirmation Letter
Fiscal year (48th term) from October 1, 2013 to September 30, 2014, filed to the Director-General of the Kanto
Local Finance Bureau on December 24, 2014.
(2) Internal Control Report and AppendicesSubmitted to the Director-General of the Kanto Local Finance Bureau on December 24, 2014.
(3) Quarterly Securities Reports and Confirmation Letter
First quarter of 49th term (From October 1, 2014 to December 31, 2014), filed to the Director-General of the
Kanto Local Finance Bureau on February 12, 2015.
Second quarter of 49th term (From January 1, 2015 to March 31, 2015), filed to the Director-General of the Kanto
Local Finance Bureau on May 14, 2015.
Third quarter of 49th term (From April 1, 2015 to June 30, 2015), filed to the Director-General of the Kanto Local
Finance Bureau on August 11, 2015.
(4) Extraordinary Reports
Submitted to the Director-General of the Kanto Local Finance Bureau on December 25, 2014.
Extraordinary Report based on Article 19, Paragraph 2, Item 9-2 (Results of Exercise of Voting Rights at General
Meeting of Shareholders) of the Cabinet Office Ordinance on Disclosure of Corporate Information, etc.
Submitted to the Director-General of the Kanto Local Finance Bureau on December 25, 2015.
Extraordinary Report based on Article 19, Paragraph 2, Item 9-2 (Results of Exercise of Voting Rights at General
Meeting of Shareholders) of the Cabinet Office Ordinance on Disclosure of Corporate Information, etc.

- 122 -

Section 2 [Information on Guarantors, etc. of the Company]
Not applicable.

- 123 -

Independent Auditors’ Audit Report and Internal Control Audit Report
December 22, 2015
TKC Corporation
To: The Board of Directors
Ernst & Young ShinNihon LLC
Designated Limited Liability Partner
Executing Partner,
Certified Public Accountant

Atsuo Mori (Seal)

Designated Limited Liability Partner
Executing Partner,
Certified Public Accountant

Yuichi Noda (Seal)[Audit of financial statements]
Pursuant to Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act, we have audited theconsolidated financial statements included in the Accounting Section, namely, the consolidated statements offinancial position of TKC Corporation and consolidated subsidiaries for the fiscal year from October 1, 2014 toSeptember 30, 2015, which consists of the consolidated balance sheets, consolidated statements of profit or loss,
comprehensive income, change in consolidated equity, consolidated cash flows, and a summary of significant
accounting policies, other related notes and consolidated supplementary schedules.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with accounting principles generally accepted in Japan, and for designing and operating such internal
control as management determines necessary to enable the preparation and fair presentation of the consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. The purpose of an audit of the consolidated financial statements is not to express an opinion on the effectivenessof the entity’s internal control, but in making these risk assessments the auditor considers internal controls relevantto the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.

- 124 -

Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, thefinancial position of TKC Corporation and consolidated subsidiaries as of September 30, 2015, and theirconsolidated financial performance and cash flows for the year then ended in conformity with accounting
principles generally accepted in Japan.

[Audit of internal control]
Pursuant to the second paragraph of Article 193-2, Paragraph 2 of the Financial Instruments and Exchange Act, wehave audited management’s report on internal control over financial reporting of TKC Corporation as of September
30, 2015.
Management’s Responsibility for the Report on Internal Control
The Company’s management is responsible for designing and operating effective internal control over financial
reporting and for the preparation and fair presentation of its report on internal control in conformity with assessment
standards for internal control over financial reporting generally accepted in Japan. There is a possibility thatmisstatements may not be completely prevented or detected by internal control over financial reporting.
Auditors’ Responsibility
Our responsibility is to express an opinion on the management’s report on internal control based on our internal
control audit as independent auditors. We conducted our internal control audit in accordance with auditing standards
for internal control over financial reporting generally accepted in Japan. Those standards require that we plan andperform the internal control audit to obtain reasonable assurance about whether the management’s report on internal
control is free from material misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the result of assessment oninternal control over financial reporting in the management’s report on internal control. The procedures selected
depend on the auditors’ judgment, including the significance of effects on reliability of financial reporting. Aninternal control audit includes, including examining representations on the scope, procedures and results of theassessment of internal control over financial reporting made by management, as well as evaluating the overall
presentation of the management’s report on internal control.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, the management’s report on internal control referred to above, which represents that the internal
control over financial reporting of TKC Corporation as of September 30, 2015 is effectively maintained, and presents
fairly, in all material respects, the result of the assessment of internal control over financial reporting in conformity
with the assessments standards for internal control over financial reporting generally accepted in Japan.

- 125 -

Interest
Our firm and the executing partners have no interest in the Company for which disclosure is required under theprovisions of the Certified Public Accountants Act.
End of document(*) 1. The above is a digitized version of the original copy of the Audit Report which is held in the custody by TKC
Corporation (the Company filing this Annual Securities Report).
2. XBRL data is not included in the scope of audit.

- 126 -

Independent Auditors’ Audit Report
December 22, 2015
TKC Corporation
To: The Board of Directors
Ernst & Young ShinNihon LLC
Designated Limited Liability Partner
Executing Partner,
Certified Public Accountant

Designated Limited Liability Partner
Executing Partner,
Certified Public Accountant

Atsuo Mori (Seal)

Yuichi Noda (Seal)

Pursuant to the first paragraph of Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act, we haveaudited the financial statements included in the Financial Information Section, namely, the statements of financial
position of TKC Corporation for the 49th fiscal year from October 1, 2014 to September 30, 2015, which consists ofthe balance sheets, statements of profit or loss, change in equity, and significant accounting policies, other related
notes and supplementary schedules.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance withaccounting principles generally accepted in Japan and for designing and operating such internal control as
management determines necessary to enable the preparation and fair presentation of the financial statements that are
free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit
in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due to fraud or error. The purpose of an audit of thefinancial statements is not to express an opinion on the effectiveness of the entity’s internal control, but in making
these risk assessments the auditor considers internal controls relevant to the entity’s preparation and fair presentationof the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OpinionIn our opinion, the financial statements referred to above present fairly, in all material respects, the financial position
of TKC Corporation as of September 30, 2015, and its financial performance for the year then ended in conformity
with accounting principles generally accepted in Japan.

- 127 -

Interest
Our firm and the executing partners have no interest in the Company for which disclosure is required under theprovisions of the Certified Public Accountants Act.
End of document(*) 1. The above is a digitized version of the original copy of the Audit Report which is held in the custody by TKC
Corporation (the Company filing this Annual Securities Report).
2. XBRL data is not included in the scope of audit.

- 128 -

[Cover][Document filed]Management’s Report on Internal Control[Applicable laws]

Article 24-4-4, Paragraph 1 of the Financial Instruments andExchange Act[Filed with]

Director, Kanto Local Finance Bureau[Date filed]December 25, 2015

[Company name]

株式会社TKC (Kabushiki Kaisha TKC)[Company name in English]

TKC Corporation[Title and name of representative]

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

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

TKC Corporation Tokyo Head Office(2-1 Ageba-cho, Shinjuku-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1 Nihonbashikabutocho, Chuo-ku, Tokyo)- 129 -

1[Matters concerning the basic framework for internal control over financial reporting]Kazuyuki Sumi, President and Representative Director, and Hitoshi Iwata, Chief Financial Officer of TKC
Corporation (the "Company"), are responsible for designing and operating effective internal control overfinancial reporting of the Company, and have designed and operated internal control over financial reportingin accordance with the basic framework for internal control set forth in "Establishing the Standards andPractice Standards for Management Assessment and Audit Concerning Internal Control Over Financial
Reporting (Council Opinions)" released by the Business Accounting Council.
Internal control, by nature, may not function effectively due to errors in judgment or negligence of those
implementing internal control, or may not respond to unanticipated changes in internal and external
environments. Therefore, there is a possibility that misstatements may not be completely prevented or detectedby internal control over financial reporting.

2[Matters concerning the scope of assessment, assessment date and assessment procedures]
Assessment of internal control over financial reporting was performed as of September 30, 2015, which is theend of this fiscal year, in accordance with assessment standards for internal control over financial reporting
generally accepted in Japan.
In conducting this assessment, we first assessed internal controls which may have material impact on the entire
financial reporting on a consolidated basis (entity-level controls), and based on the results of such assessment,
we selected the business processes to be assessed. In the process-level assessment, we analyzed the selectedbusiness processes, identified key controls that may have material impact on the reliability of the financial
reporting, and assessed the design and operation of these key controls to determine the effectiveness of ourinternal controls.
We determined the required scope of assessment of internal control over financial reporting for the Company
as well as its consolidated subsidiaries and equity-method affiliated companies based on the materiality that
may affect the reliability of the Company’s financial reporting. The materiality that may affect the reliabilityof financial reporting was determined by taking into account the materiality of quantitative and qualitative
impacts on financial reporting. Based on the results of assessment of entity-level controls conducted for theCompany and one of its consolidated subsidiaries, we reasonably determined the scope of assessment ofinternal controls over business processes. The two other consolidated subsidiaries and two equity-method
affiliated companies determined to have insignificant quantitative and qualitative influence on the reliabilityof financial reporting were not included in the scope of assessment of entity-level controls.
For the purpose of determining the scope of assessment of internal control over business processes, weselected locations and business units to be tested based on the fiscal year’s nets sales (after elimination oftransactions between consolidated companies), and companies whose net sales reached two-thirds of total
amount on the Company’s consolidated net sales were selected as "Significant Locations/Business Units." Atsuch Significant Locations/Business Units, we included in the scope of assessment, business processes thatlead to sales, accounts receivable, purchases and inventories that may have material impact on the businessobjectives of the Company. Further, in addition to the selected Significant Locations/Business Units, we also
included in the scope of assessment, certain business processes having greater likelihood of material
misstatements, processes having significant accounts involving estimates and management’s judgment, andprocesses concerning businesses or operations dealing with high-risk transactions, as business processes that
may have material impacts on financial reporting.

3[Matters concerning the results of assessment]
As a result of the above assessments, the Company determined that the internal control over financial reporting
was effective as if the last day of the fiscal year.

4[Supplementary Information]
None.

- 130 -

5 [Special Notes]
None.

- 131 -

[Front cover][Document filed]

Written Confirmation[Applicable laws]

Article 24-4-2, Paragraph 1 of the Financial Instruments and Exchange
Act[Filed with]

Director, Kanto Local Finance Bureau[Date filed]December 25, 2015

[Company name]

株式会社TKC (Kabushiki Kaisha TKC)[Company name in English]

TKC Corporation[Title and name of representative]

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

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

TKC Corporation Tokyo Head Office(2-1 Ageba-cho, Shinjuku-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1 Nihonbashikabutocho, Chuo-ku, Tokyo)- 132 -

1[Matters Related to Adequacy of Statements Contained in the Annual Securities Report]
Kazuyuki Sumi, President and Representative Director of the Company and Hitoshi Iwata, Chief Financial
Officer of the Company hereby confirm that the statements contained in the Annual Securities Report for the49th fiscal year (from October 1, 2014 to September 30, 2015) are adequate under the Financial Instruments
and Exchange Act.

2

[Special Notes]
None.

- 133 -